Company Quick10K Filing
Independence Holding
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 15 $570
10-Q 2019-11-08 Quarter: 2019-09-30
10-Q 2019-08-08 Quarter: 2019-06-30
10-Q 2019-05-08 Quarter: 2019-03-31
10-K 2019-03-15 Annual: 2018-12-31
10-Q 2018-11-08 Quarter: 2018-09-30
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-10 Quarter: 2018-03-31
10-K 2018-03-26 Annual: 2017-12-31
10-Q 2017-11-09 Quarter: 2017-09-30
10-Q 2017-08-09 Quarter: 2017-06-30
10-Q 2017-06-16 Quarter: 2017-03-31
10-K 2017-05-22 Annual: 2016-12-31
10-Q 2016-11-09 Quarter: 2016-09-30
10-Q 2016-08-15 Quarter: 2016-06-30
10-Q 2016-08-01 Quarter: 2016-03-31
10-K 2016-06-06 Annual: 2015-12-31
10-Q 2015-11-09 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-08 Quarter: 2015-03-31
10-K 2015-03-16 Annual: 2014-12-31
10-Q 2014-11-07 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-09 Quarter: 2014-03-31
10-K 2014-03-14 Annual: 2013-12-31
10-Q 2013-11-07 Quarter: 2013-09-30
10-Q 2013-08-08 Quarter: 2013-06-30
10-Q 2013-05-09 Quarter: 2013-03-31
10-K 2013-03-15 Annual: 2012-12-31
10-Q 2012-08-09 Quarter: 2012-06-30
10-Q 2012-05-10 Quarter: 2012-03-31
10-K 2012-03-15 Annual: 2011-12-31
10-Q 2011-11-10 Quarter: 2011-09-30
10-Q 2011-08-11 Quarter: 2011-06-30
10-Q 2011-05-12 Quarter: 2011-03-31
10-K 2011-03-17 Annual: 2010-12-31
10-Q 2010-11-09 Quarter: 2010-09-30
10-Q 2010-08-12 Quarter: 2010-06-30
10-Q 2010-05-17 Quarter: 2010-03-31
10-K 2010-03-25 Annual: 2009-12-31
8-K 2019-11-12 Regulation FD, Exhibits
8-K 2019-11-12 Shareholder Vote
8-K 2019-11-07 Earnings, Exhibits
8-K 2019-08-06 Earnings, Exhibits
8-K 2019-05-07 Earnings, Exhibits
8-K 2019-03-18 Regulation FD, Exhibits
8-K 2018-11-13
8-K 2018-11-12 Regulation FD, Exhibits
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-09-24
8-K 2018-08-07
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-03-16 Regulation FD, Exhibits
8-K 2018-03-16
8-K 2018-03-12 Earnings, Exhibits
IHC 2019-09-30
Part I - Financial Information
Item 1.Financial Statements
Note 1.Organization, Consolidation, Basis of Presentation and Accounting Policies
Note 2.Income per Common Share
Note 3.Cash, Cash Equivalents and Restricted Cash
Note 4.Investment Securities
Note 5.Fair Value Disclosures
Note 6.Other Investments, Including Variable Interest Entities
Note 7.Acquisitions
Note 8.Goodwill and Other Intangible Assets
Note 9.Income Taxes
Note 10. Leases
Note 11.Policy Benefits and Claims
Note 12.Stockholders' Equity
Note 13.Share-Based Compensation
Note 14.Supplemental Disclosures of Cash Flow Information
Note 15.Contingencies
Note 16.Segment Reporting
Item 2.Management's Discussion and Analysis of Financial
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ihc3q2019_ex31z1.htm
EX-31.2 ihc3q2019_ex31z2.htm
EX-32.1 ihc2q2019_ex32z1.htm
EX-32.2 ihc3q2019_ex32z2.htm

Independence Holding Earnings 2019-09-30

IHC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
PRS 909 586 641 -110 0 -119 -115 994 -0% -8.6 -20%
IHC 570 1,071 601 367 0 31 40 552 0% 13.8 3%
GWGH 214 1,541 1,308 19 0 -146 -34 138 0% -4.0 -9%
AAME 57 372 259 194 0 1 4 46 0% 12.4 0%
FLF 45 287 230 5 0 -0 -0 16 0% -111.3 -0%
NSEC 27 152 101 67 0 0 2 34 0% 20.4 0%
MFC
AEB
SLF
GL

INDEPENDENCE HOLDING COMPANY - Form 10-Q SEC filing
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q

 

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

For the quarterly period ended September 30, 2019.

 

  Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from: ________ to _________  

 

Commission File Number: 001-32244

 

INDEPENDENCE HOLDING COMPANY

(Exact name of registrant as specified in its charter)

 

Delaware

 

58-1407235

(State or other jurisdiction of incorporation or organization) 

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

 

96 CUMMINGS POINT ROAD, STAMFORD, CT                      06902

                                        (Address of principal executive offices)                                          (Zip Code)

 

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

 

NOT APPLICABLE

Former name, former address and former fiscal year, if changed since last report.

 

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

IHC

NYSE

 

Indicate by check mark whether the registrant (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 whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   [X]   No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer [    ]

Accelerated Filer  [X]

Non-Accelerated Filer   [    ]

Smaller Reporting Company  

Emerging Growth Company   

 

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   

Yes      No   [X]

 

As of November 5, 2019, the registrant had 14,849,707 shares of Common Stock outstanding.



 

INDEPENDENCE HOLDING COMPANY

 

INDEX

 

PART I – FINANCIAL INFORMATION

PAGE

 

 

NO.

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets

4

 

 

 

Condensed Consolidated Statements of Income

5

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

6

 

 

 

Condensed Consolidated Statement of Changes in Equity

7

 

 

 

Condensed Consolidated Statements of Cash Flows

9

 

 

 

Notes to Condensed Consolidated Financial Statements

10

 

 

 

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

 

 

and Results of Operations

30

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

42

 

 

 

Item 4. Controls and Procedures

42

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.    Legal Proceedings

42

 

 

 

 

Item 1A. Risk Factors

44

 

 

 

 

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

44

 

 

 

 

Item 3.   Defaults Upon Senior Securities

44

 

 

 

 

Item 4.    Mine Safety Disclosures

44

 

 

 

 

Item 5.    Other Information

44

 

 

 

Item 6.    Exhibits

45

 

 

 

Signatures

47

 

 

 

 

 

 

Copies of the Company’s SEC filings can be found on its website at www.ihcgroup.com.


2


 

Forward-Looking Statements

 

This report on Form 10−Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. We have based our forward-looking statements on our current expectations and projections about future events. Our forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as the growth of our business and operations, our business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probably” or similar expressions, we are making forward-looking statements.

 

Numerous risks and uncertainties may impact the matters addressed by our forward-looking statements, any of which could negatively and materially affect our future financial results and performance.  We describe some of these risks and uncertainties in greater detail in Item 1A, Risk Factors, of IHC’s Annual Report on Form 10-K as filed with Securities and Exchange Commission.

 

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this report, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved. Our forward-looking statements speak only as of the date made, and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, any forward-looking event discussed in this report may not occur.


3


PART I - FINANCIAL INFORMATION

Item 1.Financial Statements     

 

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)

 

 

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

(Unaudited)

 

 

 

ASSETS:

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Short-term investments

 

$

50  

 

$

1,050  

Securities purchased under agreements to resell

 

 

56,878  

 

 

12,063  

Fixed maturities, available-for-sale

 

 

440,289  

 

 

453,464  

Equity securities

 

 

5,577  

 

 

5,166  

Other investments

 

 

13,889  

 

 

13,192  

Total investments

 

 

516,683  

 

 

484,935  

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

17,824  

 

 

26,173  

Due and unpaid premiums

 

 

24,523  

 

 

24,412  

Due from reinsurers

 

 

364,673  

 

 

368,731  

Goodwill

 

 

60,205  

 

 

50,697  

Other assets

 

 

79,730  

 

 

82,568  

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,063,638  

 

$

1,037,516  

 

 

 

 

 

 

 

LIABILITIES AND  EQUITY:

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Policy benefits and claims

 

$

161,429  

 

$

160,115  

Future policy benefits

 

 

204,155  

 

 

208,910  

Funds on deposit

 

 

140,724  

 

 

141,635  

Unearned premiums

 

 

9,899  

 

 

5,557  

Other policyholders' funds

 

 

12,042  

 

 

10,939  

Due to reinsurers

 

 

4,655  

 

 

3,613  

Accounts payable, accruals and other liabilities

 

 

54,501  

 

 

53,133  

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

587,405  

 

 

583,902  

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

2,315  

 

 

2,183  

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock $1.00 par value, 100,000 shares authorized;

 

 

 

 

 

 

none issued or outstanding

 

 

-  

 

 

-  

Common stock $1.00 par value, 23,000,000 shares authorized;

 

 

 

 

 

 

18,625,458 shares issued; and 14,853,244 and

 

 

 

 

 

 

14,878,248 shares outstanding

 

 

18,625  

 

 

18,625  

Paid-in capital

 

 

122,221  

 

 

124,395  

Accumulated other comprehensive income (loss)

 

 

3,587  

 

 

(8,310) 

Treasury stock, at cost; 3,772,214 and 3,747,210 shares

 

 

(69,704) 

 

 

(66,392) 

Retained earnings

 

 

399,160  

 

 

380,431  

 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

 

473,889  

 

 

448,749  

NONREDEEMABLE NONCONTROLLING INTERESTS

 

 

29  

 

 

2,682  

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

473,918  

 

 

451,431  

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

$

1,063,638  

 

$

1,037,516  

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.


4


 

 

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

REVENUES:

 

 

 

 

 

 

 

 

Premiums earned

$

86,453  

$

81,757  

$

254,189  

$

238,583  

Net investment income

 

3,964  

 

3,822  

 

12,094  

 

11,190  

Fee income

 

2,938  

 

4,397  

 

10,833  

 

14,193  

Other income (loss)

 

880  

 

(58) 

 

5,443  

 

(504) 

Net investment gains (losses)

 

930  

 

17  

 

2,556  

 

(335) 

Other-than-temporary impairment losses, available-for-sale securities:

 

 

 

 

 

 

 

 

Total other-than-temporary impairment losses

 

-  

 

-  

 

(646) 

 

-  

Portion of losses recognized in other comprehensive income (loss)

 

-  

 

-  

 

-  

 

-  

Net impairment losses recognized in earnings

 

-  

 

-  

 

(646) 

 

-  

 

 

 

 

 

 

 

 

 

 

 

95,165  

 

89,935  

 

284,469  

 

263,127  

 

 

 

 

 

 

 

 

 

EXPENSES:

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

41,398  

 

36,011  

 

128,927  

 

105,619  

Selling, general and administrative expenses

 

44,348  

 

41,021  

 

127,083  

 

126,057  

 

 

 

 

 

 

 

 

 

 

 

85,746  

 

77,032  

 

256,010  

 

231,676  

 

 

 

 

 

 

 

 

 

Income before income taxes

 

9,419  

 

12,903  

 

28,459  

 

31,451  

Income taxes

 

3,248  

 

2,860  

 

6,482  

 

7,518  

 

 

 

 

 

 

 

 

 

Net income

 

6,171  

 

10,043  

 

21,977  

 

23,933  

(Income) loss from nonredeemable noncontrolling interests

 

14  

 

(59) 

 

(130) 

 

(99) 

(Income) from redeemable noncontrolling interests

 

(43) 

 

(49) 

 

(131) 

 

(181) 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

6,142  

$

9,935  

$

21,716  

$

23,653  

 

 

 

 

 

 

 

 

 

Basic income per common share

$

0.41 

$

0.67 

$

1.46  

$

1.60  

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

14,879  

 

14,795 

 

14,919  

 

14,808  

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

0.41 

$

0.66 

$

1.45  

$

10.57  

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING

 

14,941  

 

15,109 

 

14,985  

 

15,104  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.


5


 

 

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

Net income

$

6,171  

$

10,043  

$

21,977 

$

23,933  

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available-for-sale securities, pre-tax

 

1,636  

 

(925) 

 

15,080 

 

(8,908) 

Tax expense (benefit) on unrealized gains on available-for-sale securities

 

347  

 

(199) 

 

3,183 

 

(1,893) 

Unrealized gains (losses) on available-for-sale securities, net of taxes

 

1,289  

 

(726) 

 

11,897 

 

(7,015) 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

1,289  

 

(726) 

 

11,897 

 

(7,015) 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME, NET OF TAX

 

7,460  

 

9,317  

 

33,874 

 

16,918  

 

 

 

 

 

 

 

 

 

Comprehensive income, net of tax, attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

(Income) from noncontrolling interests in subsidiaries

 

(29) 

 

(108) 

 

(261)

 

(280) 

Other comprehensive income, net of tax, attributable to

 

 

 

 

 

 

 

 

noncontrolling interests

 

-  

 

-  

 

- 

 

-  

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME, NET OF TAX,

 

 

 

 

 

 

 

 

   ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

(29) 

 

(108) 

 

(261)

 

(280) 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME, NET OF TAX,

 

 

 

 

 

 

 

 

   ATTRIBUTABLE TO IHC

$

7,431  

$

9,209  

$

33,613 

$

16,638  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.


6


 

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (In thousands)

Three Months Ended September 30, 2019 and 2018

 

 

 

 

 

 

 

 

 

ACCUMULATED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER

 

TREASURY

 

 

 

TOTAL IHC

 

NONREDEEMABLE

 

 

 

 

COMMON

 

PAID-IN

 

COMPREHENSIVE

 

STOCK,

 

RETAINED

 

STOCKHOLDERS'

 

NONCONTROLLING

 

TOTAL

 

 

STOCK

 

CAPITAL

 

LOSS

 

AT COST

 

EARNINGS

 

EQUITY

 

INTERESTS

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUNE 30, 2019

$

18,625 

$

121,586  

$

2,298 

$

(67,428) 

$

393,018  

$

468,099  

$

43  

$

468,142  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

6,142  

 

6,142  

 

(14) 

 

6,128  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income, net of tax

 

 

 

 

 

1,289  

 

 

 

 

 

1,289  

 

-  

 

1,289  

Repurchases of common stock

 

 

 

 

 

 

 

(2,318) 

 

 

 

(2,318) 

 

-  

 

(2,318) 

Share-based compensation

 

 

 

635  

 

 

 

42  

 

 

 

677  

 

-  

 

677  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEPTEMBER 30, 2019

$

18,625 

$

122,221  

$

3,587  

$

(69,704) 

$

399,160  

$

473,889  

$

29  

$

473,918  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUNE 30, 2018

$

18,625 

$

125,018  

$

(11,237) 

$

(66,440) 

$

367,913  

$

433,879  

$

2,617  

$

436,496  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

9,935  

 

9,935  

 

59  

 

9,994  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  loss, net of tax

 

 

 

 

 

(726) 

 

 

 

 

 

(726) 

 

-  

 

(726) 

Repurchases of common stock

 

 

 

 

 

 

 

(670) 

 

 

 

(670) 

 

-  

 

(670) 

Distributions to noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interests

 

 

 

 

 

 

 

 

 

 

 

- 

 

(147) 

 

(147) 

Share-based compensation

 

 

 

261  

 

 

 

192  

 

 

 

453  

 

-  

 

453  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEPTEMBER 30, 2018

$

18,625 

$

125,279  

$

(11,963) 

$

(66,918) 

$

377,848  

$

442,871  

$

2,529  

$

445,400  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


7


 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (In thousands)

Nine Months Ended September 30, 2019 and 2018

 

 

 

 

 

 

 

 

 

ACCUMULATED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER

 

TREASURY

 

 

 

TOTAL IHC

 

NONREDEEMABLE

 

 

 

 

COMMON

 

PAID-IN

 

COMPREHENSIVE

 

STOCK,

 

RETAINED

 

STOCKHOLDERS'

 

NONCONTROLLING

 

TOTAL

 

 

STOCK

 

CAPITAL

 

INCOME (LOSS)

 

AT COST

 

EARNINGS

 

EQUITY

 

INTERESTS

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DECEMBER 31, 2018

$

18,625 

$

124,395  

$

(8,310) 

$

(66,392) 

$

380,431  

$

448,749  

$

2,682  

$

451,431  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

21,716  

 

21,716  

 

130  

 

21,846  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income, net of tax

 

 

 

 

 

11,897  

 

 

 

 

 

11,897  

 

-  

 

11,897  

Repurchases of common stock

 

 

 

 

 

 

 

(3,917) 

 

 

 

(3,917) 

 

-  

 

(3,917) 

Purchase noncontrolling interests

 

 

 

(1,012) 

 

 

 

 

 

 

 

(1,012) 

 

(2,380) 

 

(3,392) 

Distributions to noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interests

 

 

 

 

 

 

 

 

 

 

 

-  

 

(403) 

 

(403) 

Common stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    ($0.20 per share)

 

 

 

 

 

 

 

 

 

(2,987) 

 

(2,987) 

 

-  

 

(2,987) 

Share-based compensation

 

 

 

(1,162) 

 

 

 

605  

 

 

 

(557) 

 

-  

 

(557) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEPTEMBER 30, 2019

$

18,625 

$

122,221  

$

3,587 

$

(69,704) 

$

399,160  

$

473,889  

$

29  

$

473,918  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DECEMBER 31, 2017

$

18,625 

$

124,538  

$

(4,598) 

$

(63,404) 

$

356,383 

$

431,544  

$

2,699  

$

434,243  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effects of new

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

accounting principles

 

 

 

 

 

(350) 

 

 

 

34 

 

(316) 

 

(97) 

 

(413) 

Net income

 

 

 

 

 

 

 

 

 

23,653 

 

23,653  

 

99  

 

23,752  

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

loss, net of tax

 

 

 

 

 

(7,015) 

 

 

 

 

 

(7,015) 

 

-  

 

(7,015) 

Repurchases of common stock

 

 

 

 

 

 

 

(3,817) 

 

 

 

(3,817) 

 

-  

 

(3,817) 

Distributions to noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interests

 

 

 

 

 

 

 

 

 

 

 

-  

 

(172) 

 

(172) 

Common stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    ($0.15 per share)

 

 

 

 

 

 

 

 

 

(2,222) 

 

(2,222) 

 

-  

 

(2,222) 

Share-based compensation

 

 

 

741  

 

 

 

303  

 

 

 

1,044  

 

-  

 

1,044  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEPTEMBER 30, 2018

$

18,625 

$

125,279  

$

(11,963) 

$

(66,918) 

$

377,848 

$

442,871  

$

2,529  

$

445,400  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.


8


 

 

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:

 

 

 

 

 

Net income

$

21,977  

 

$

23,933  

Adjustments to reconcile net income to net change in cash from

 

 

 

 

 

operating  activities:

 

 

 

 

 

Amortization of deferred acquisition costs

 

894  

 

 

681  

Net investment (gains) losses

 

(2,556) 

 

 

335  

(Gain) on sale of investment

 

(3,589) 

 

 

-  

Other than-temporary-impairment losses, net

 

646  

 

 

-  

Equity (income) loss from equity method investments

 

(1,171) 

 

 

976  

Depreciation and amortization

 

2,386  

 

 

1,953  

Provision for bad debt on note receivable

 

1,214  

 

 

-  

Other

 

9,387  

 

 

8,343  

 Changes in assets and liabilities:

 

 

 

 

 

Change in insurance liabilities

 

3,511  

 

 

(12,181) 

Change in  amounts due from reinsurers

 

4,058  

 

 

9,053  

Change in claim fund balances

 

1,577  

 

 

294  

Change in due and unpaid premiums

 

(111) 

 

 

(7,150) 

Other operating activities

 

(6,816) 

 

 

(5,599) 

 

 

 

 

 

 

Net change in cash from operating activities

 

31,407  

 

 

20,638  

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED BY) INVESTING ACTIVITIES:

 

 

 

 

 

Net (purchases) sales and maturities of short-term investments

 

1,000  

 

 

(999 

Net (purchases) of securities under resale agreements

 

(44,815) 

 

 

(7,756) 

Sales of equity securities

 

-  

 

 

698  

Sales of fixed maturities

 

111,695  

 

 

55,338  

Maturities and other repayments of fixed maturities

 

57,087  

 

 

21,992  

Purchases of fixed maturities

 

(139,531) 

 

 

(79,374) 

Payments to acquire business, net of cash acquired

 

(7,952) 

 

 

-  

Proceeds from sales, distributions and returns of capital from investments

 

5,117  

 

 

-  

Payments to acquire other investments

 

(3,000) 

 

 

-  

Other investing activities

 

(2,393) 

 

 

(3,709) 

 

 

 

 

 

 

Net change in cash from investing activities

 

(22,792) 

 

 

(13,810) 

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED BY)  FINANCING ACTIVITIES:

 

 

 

 

 

Repurchases of common stock

 

(3,923) 

 

 

(3,943) 

Withdrawals of investment-type insurance contracts

 

(1,376) 

 

 

(1,033) 

Dividends paid

 

(5,225) 

 

 

(3,710) 

Purchase of noncontrolling interest

 

(4,400) 

 

 

-  

Proceeds from stock options exercised

 

163  

 

 

357  

Payments related to tax withholdings for sharebased compensation

 

(2,397) 

 

 

-  

Other financing activities

 

(403) 

 

 

(285) 

 

 

 

 

 

 

Net change in cash from financing activities

 

(17,561) 

 

 

(8,614) 

 

 

 

 

 

 

Net change in cash, cash equivalents and restricted cash

 

(8,946) 

 

 

(1,786) 

Cash, cash equivalents and restricted cash, beginning of year

 

30,807  

 

 

32,197  

 

 

 

 

 

 

Cash, cash equivalents and restricted cash, end of period

$

21,861  

 

$

30,411  

 

 

 

 

 

 

 

 

 

 

 

 

 

See the accompanying Notes to Condensed Consolidated Financial Statements.


9


INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

Note 1.Organization, Consolidation, Basis of Presentation and Accounting Policies 

 

(A)    Business and Organization 

 

Independence Holding Company, a Delaware corporation (“IHC”), is a holding company principally engaged in the life and health insurance business through: (i) its insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life"),  Madison National Life Insurance Company, Inc. ("Madison National Life"), and Independence American Insurance Company (“Independence American”); and (ii) its marketing and administrative companies, including IHC Specialty Benefits Inc., IHC Carrier Solutions, Inc., My1HR, Inc. (“My1HR”) and a majority interest in PetPartners, Inc. IHC also owns a significant equity interest in Ebix Health Exchange Holdings, LLC (“Ebix Health Exchange”), an administration exchange for health insurance. Standard Security Life, Madison National Life and Independence American are sometimes collectively referred to as the “Insurance Group”. IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company", or “IHC”, or are implicit in the terms “we”, “us” and “our”. 

 

Geneve Corporation, a diversified financial holding company, and its affiliated entities, held approximately 62% of IHC's outstanding common stock at September 30, 2019.  

 

(B)     Consolidation 

 

In May 2019, IHC purchased the remaining issued and outstanding units of HealthInsurance.org, LLC (“HIO”) from noncontrolling interests for total consideration valued at $4,700,000 making HIO a wholly owned subsidiary. The carrying value of the noncontrolling interest on the transaction date was $2,380,000. As a result of the equity transaction, $1,012,000 was charged to paid-in capital representing the difference between the fair value of the consideration paid and the carrying amount of noncontrolling interest on the transaction date, net of a deferred tax benefit.

 

(C)     Basis of Presentation 

 

The unaudited Condensed Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited Condensed Consolidated Financial Statements include the accounts of IHC and its consolidated subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect: (i) the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and (ii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. IHC’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements.

 

In the opinion of management, all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods have been included. The condensed consolidated results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results to be anticipated for the entire year.


10


 

 

(D)   Reclassifications 

 

Certain amounts in prior year’s consolidated financial statements and Notes thereto have been reclassified to conform to the 2019 presentation.

 

(E)   Revenue Recognition 

 

Insurance premiums are recognized as revenue over the period insurance protection is provided. For additional information about our policies regarding the recognition of premium revenues, see Note 1 of the Notes to Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

 

Fee income includes fees and commissions for various sales, marketing and administrative services provided by our marketing and administrative companies. Revenue is recognized as these services are performed. For these administrative service and other contracts, we have no material contract assets or contract liabilities on our consolidated balance sheet at September 30, 2019. Revenue recognized from performance obligations related to prior periods, and revenue expected to be recognized in future periods related to unfulfilled contractual performance obligations and contracts with variable consideration, is not material.

 

 

(F)   Recent Accounting Pronouncements 

 

Recently Adopted Accounting Standards

 

In July 2018, the FASB issued guidance to simplify several aspects of accounting for nonemployee share-based compensation. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

 

In March 2017, the FASB issued guidance requiring premium amortization on callable debt securities to be amortized to the earliest call date to more closely align the amortization period with expectations incorporated in market pricing of the underlying securities. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued guidance that requires lessees to recognize the assets and liabilities that arise from leases, including operating leases, on the statement of financial position. The Company elected the following practical expedients permitted within the new standard:

an accounting policy election to recognize the lease payments for short-term leases in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred; 

practical expedients for leases that commenced before the effective date to not reassess: (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases; 

a practical expedient to use hindsight in determining the lease term and in assessing impairment of the entity’s right-of-use assets. 

an accounting policy election to not separate non-lease components from lease components and instead to account for them together as a single lease component. 

The Company selected the new transition method by applying the new lease requirements on January 1, 2019, without adjustment to the financial statements for periods prior to adoption. As a result, on January 1, 2019, the Company recognized right-of-use assets of $7,010,000 for operating leases, reduced other liabilities by $687,000 to reclassify the unamortized balances of previously deferred operating lease incentives, and recognized operating lease liabilities of $7,697,000 in its Condensed Consolidated Balance Sheet. The adoption of this guidance did not have a material effect on the Company’s consolidated results of operations or cash flows.

 


11


Recently Issued Accounting Standards Not Yet Adopted 

 

In October 2018, the FASB issued guidance for determining whether a decision making fee is a variable interest and requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest. The amendments in this guidance are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments in this guidance should be applied retrospectively through a cumulative effect adjustment to retained earnings at the beginning of the earliest period presented. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued guidance to improve existing measurements, presentation and disclosure requirements for long-duration contracts issued by insurance entities. The amendments in this guidance requires an entity to (1) review and update assumptions used to measure cash flows at least annually as well as update the discount rate assumption at each reporting date; (2) measure market risk benefits associated with deposit contracts at fair value; (3) disclose liability rollforwards and information about significant inputs, judgements assumptions, and methods used in measurement. Additionally, it simplifies the amortization of deferred acquisition costs and other balances on a constant level basis over the expected term of the related contracts. The amendments in this guidance are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. Upon adoption, the amendments in this guidance should be applied to contracts in-force as of the beginning of the earliest period presented with a cumulative adjustment to beginning retained earnings. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued guidance to improve the effectiveness of disclosures in the notes to financial statements regarding fair value measurements. The amendments in this guidance are effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Certain amendments should be applied prospectively for the most recent interim or annual period presented in the initial fiscal year of adoption while other amendments should be applied retrospectively to all periods presented upon the effective date. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

 

In January 2017, the FASB issued guidance to simplify the test for goodwill impairment by eliminating Step 2 in the goodwill impairment test. Instead, under the amendments in this guidance, an entity should perform its annual or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this guidance are effective for public business entities for annual, or any interim, goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued guidance requiring financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. An allowance for credit losses will be deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected with changes in the allowance recorded in earnings. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than the currently applied U.S. GAAP method of taking a permanent impairment of the security, which would be limited to the amount by which fair value is below the amortized cost. Certain existing requirements used to evaluate credit losses have been removed. In 2019, the FASB provided transition relief by providing entities with an option to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible instruments upon adoption. For public entities that are SEC filers, the amendments in this guidance are effective for fiscal years beginning after December


12


15, 2019, including interim periods within those years. Early adoption is permitted for fiscal years beginning after December 15, 2018. The amendments in this guidance should be applied through a cumulative effect adjustment to retained earnings upon adoption as of the beginning of the first reporting period in which the guidance is effective. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

 

Note 2.Income Per Common Share 

 

Diluted income per share was computed using the treasury stock method and includes incremental common shares, primarily from the dilutive effect of share-based payment awards, amounting to 62,000 and 66,000 shares for the three and nine months ended September 30, 2019, respectively, and 314,000 and 296,000 shares for the three and nine months ended September 30, 2018, respectively.

 

Note 3.Cash, Cash Equivalents and Restricted Cash 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods indicated (in thousands): 

 

 

 

September 30,

 

 

2019

 

2018

 

 

 

 

 

Cash and cash equivalents

$

17,824 

$

25,620 

Restricted cash included in other assets

 

4,037 

 

4,791 

 

 

 

 

 

Total cash, cash equivalents and restricted cash

$

21,861 

$

30,411 

 

 

 

 

 

 

Restricted cash includes insurance premiums collected from insureds that are pending remittance to insurance carriers and/or payment of insurance claims and commissions to third party administrators. These amounts are required to be set aside by contractual agreements with the insurance carriers and are included in other assets on the Condensed Consolidated Balance Sheets.

 

Note 4.Investment Securities 

 

The cost (amortized cost with respect to certain fixed maturities), gross unrealized gains, gross unrealized losses and fair value of fixed maturities available-for-sale are as follows for the periods indicated (in thousands):

 

 

 

September 30, 2019 

 

 

 

 

GROSS 

 

GROSS 

 

 

 

 

AMORTIZED

 

UNREALIZED

 

UNREALIZED

 

FAIR 

 

 

COST 

 

GAINS 

 

LOSSES 

 

VALUE 

 

 

 

 

 

 

 

 

 

FIXED MATURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Corporate securities

$

205,770 

$

3,326 

$

(1,107) 

$

207,989 

CMOs – residential (1)

 

5,522 

 

49 

 

- 

 

5,571 

U.S. Government obligations

 

39,852 

 

294 

 

(69) 

 

40,077 

GSEs (3)

 

6,323 

 

- 

 

(114) 

 

6,209 

States and political subdivisions

 

165,493 

 

2,552 

 

(731) 

 

167,314 

Foreign government obligations

 

6,800 

 

165 

 

(3) 

 

6,962 

Redeemable preferred stocks

 

5,970 

 

197 

 

- 

 

6,167 

 

 

 

 

 

 

 

 

 

Total fixed maturities

$

435,730 

$

6,583 

$

(2,024) 

$

440,289 

 


13


 

 

 

 

December 31, 2018 

 

 

 

 

GROSS 

 

GROSS 

 

 

 

 

AMORTIZED

 

UNREALIZED

 

UNREALIZED

 

FAIR 

 

 

COST 

 

GAINS 

 

LOSSES 

 

VALUE 

 

 

 

 

 

 

 

 

 

FIXED MATURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Corporate securities

$

202,194 

$

701 

$

(5,406) 

$

197,489 

CMOs - residential (1)

 

6,092 

 

- 

 

(252) 

 

5,840 

U.S. Government obligations

 

63,231 

 

1 

 

(423) 

 

62,809 

Agency MBS - residential (2)

 

3 

 

- 

 

-  

 

3 

GSEs (3)

 

6,596 

 

- 

 

(110) 

 

6,486 

States and political subdivisions

 

172,860 

 

302 

 

(5,228) 

 

167,934 

Foreign government obligations

 

7,039 

 

51 

 

(46) 

 

7,044 

Redeemable preferred stocks

 

5,970 

 

- 

 

(111) 

 

5,859 

 

 

 

 

 

 

 

 

 

Total fixed maturities

$

463,985 

$

1,055 

$

(11,576) 

$

453,464 

 

(1)Collateralized mortgage obligations (“CMOs”). 

(2) Mortgage-backed securities (“MBS”). 

(3)Government-sponsored enterprises (“GSEs”) are private enterprises established and chartered by the Federal Government or its various insurance and lease programs which carry the full faith and credit obligation of the U.S. Government. 

 

The amortized cost and fair value of fixed maturities available-for-sale at September 30, 2019, by contractual maturity, are shown below (in thousands). 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.

 

 

 

 

 

AMORTIZED

 

 

FAIR

 

 

 

COST

 

 

VALUE

 

 

 

 

 

 

 

Due in one year or less

 

$

33,408

 

$

33,481

Due after one year through five years

 

 

173,009

 

 

175,175

Due after five years through ten years

 

 

139,594

 

 

142,102

Due after ten years

 

 

77,874

 

 

77,751

Fixed maturities with no single maturity date

 

 

11,845

 

 

11,780

 

 

 

 

 

 

 

 

 

$

435,730

 

$

440,289

 

 


14


 

The following tables summarize, for all fixed maturities available-for-sale in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time those securities that have continuously been in an unrealized loss position for the periods indicated (in thousands):

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

Unrealized

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

$

7,050

 

$

13 

 

$

44,766

 

$

1,094 

 

$

51,816

$

1,107 

CMOs - residential

 

-

 

 

- 

 

 

5

 

 

- 

 

 

5

 

- 

U.S. Government obligations

 

-

 

 

- 

 

 

23,621

 

 

69 

 

 

23,621

 

69 

GSEs

 

-

 

 

- 

 

 

6,203

 

 

114 

 

 

6,203

 

114 

States and political subdivisions

 

14,789

 

 

47 

 

 

36,544

 

 

684 

 

 

51,333

 

731 

Foreign government obligations

 

-

 

 

- 

 

 

1,632

 

 

3 

 

 

1,632

 

3 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      unrealized loss position

$

21,839

 

$

60 

 

$

112,771

 

$

1,964 

 

$

134,610

$

2,024 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  unrealized loss position

 

14

 

 

 

 

 

48

 

 

 

 

 

62

 

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

Unrealized

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

$

46,988

 

$

1,045 

 

$

108,738

 

$

4,361 

 

$

155,726

$

5,406 

CMOs - residential

 

847

 

 

37 

 

 

4,993

 

 

215 

 

 

5,840

 

252 

U.S. Government obligations

 

6,138

 

 

15 

 

 

31,693

 

 

408 

 

 

37,831

 

423 

GSEs

 

-

 

 

- 

 

 

6,478

 

 

110 

 

 

6,478

 

110 

States and political subdivisions

 

33,021

 

 

522 

 

 

113,297

 

 

4,706 

 

 

146,318

 

5,228 

Foreign government obligations

 

-

 

 

- 

 

 

2,835

 

 

46 

 

 

2,835

 

46 

Redeemable preferred stocks

 

5,859

 

 

111 

 

 

-

 

 

- 

 

 

5,859

 

111 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      unrealized loss position

$

92,853

 

$

1,730 

 

$

268,034

 

$

9,846 

 

$

360,887

$

11,576 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of fixed maturities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  unrealized loss position

 

47

 

 

 

 

 

115

 

 

 

 

 

162

 

 

 

Substantially all of the unrealized losses on fixed maturities available-for-sale at September 30, 2019 and December 31, 2018 relate to investment grade securities and are attributable to changes in market interest rates. Because the Company does not intend to sell, nor is it more likely than not that the Company will have to sell such investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2019.

 


15


 

Net investment gains (losses) are as follows for periods indicated (in thousands):

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018  

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Realized gains (losses):

 

 

 

 

 

 

 

 

  Fixed maturities available-for-sale

$

895 

$

(247) 

$

2,144 

$

(442) 

  Equity securities

 

- 

 

(2) 

 

- 

 

(7) 

 

 

 

 

 

 

 

 

 

     Total realized gains (losses) on debt and equity securities

 

895 

 

(249) 

 

2,144 

 

(449) 

Unrealized gains (losses) on equity securities

 

35 

 

266  

 

412 

 

114  

 

 

 

 

 

 

 

 

 

Gains (losses) on debt and equity securities

 

930 

 

17  

 

2,556 

 

(335) 

Gains (losses) on other investments

 

- 

 

-  

 

- 

 

-  

 

 

 

 

 

 

 

 

 

Net investment gains (losses)

$

930 

$

17  

$

2,556 

$

(335) 

 

 

For the three and nine months ended September 30, 2019, the Company realized gross gains of $1,143,000 and $3,035,000, respectively, and gross losses of $248,000 and $891,000, respectively, from sales, maturities and prepayments of fixed maturities available-for-sale. For the three months and nine months ended September 30, 2018, the company realized gross gains of $130,000 and $449,000, respectively, and gross losses of $377,000 and $891,000, respectively, from sales, maturities and prepayments of fixed maturities available for sale.

 

Other-Than-Temporary Impairment Evaluations

 

We recognize other-than-temporary impairment losses in earnings in the period that we determine: 1) we intend to sell the security; 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in other comprehensive income (loss). See Note 1F(v) to the Consolidated Financial Statements in the 2018 Annual Report on Form 10-K for further discussion of the factors considered by management in its regular review to identify and recognize other-than-temporary impairments on fixed maturities available-for-sale. The Company recognized other-than-temporary impairment losses of $0 and $646,000 on certain fixed maturities available-for-sale securities in the three months and nine months ended September 30, 2019, respectively. The Company determined that it was more likely than not that we would sell the securities before the recovery of their amortized cost basis. The Company did not recognize any other-than-temporary impairments on available for sale securities in the first nine months of 2018.

 

 

Note 5.Fair Value Disclosures  

 

 

For all financial and non-financial assets and liabilities accounted for at fair value on a recurring basis, the Company utilizes valuation techniques based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market expectations. These two types of inputs create the following fair value hierarchy:

 

Level 1 - Quoted prices for identical instruments in active markets.

 

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 - Instruments where significant value drivers are unobservable.


16


 

The following section describes the valuation methodologies we use to measure different assets at fair value.

 

Fixed maturities available-for-sale:

 

Fixed maturities available-for-sale included in Level 2 are comprised of our portfolio of government securities, agency mortgage-backed securities, corporate fixed income securities, foreign government obligations, collateralized mortgage obligations, municipals and GSEs that were priced with observable market inputs. Level 3 debt securities consist of municipal tax credit strips.  The valuation method used to determine the fair value of municipal tax credit strips is the present value of the remaining future tax credits (at the original issue discount rate) as presented in the redemption tables in the Municipal Prospectuses.   This original issue discount is accreted into income on a constant yield basis over the term of the debt instrument. Further, we retain independent pricing vendors to assist in valuing certain instruments.

 

Equity securities:

 

Equity securities included in Level 1 are equity securities with quoted market prices. 

 

The following tables present our financial assets measured at fair value on a recurring basis for the periods indicated (in thousands):

 

 

 

September 30, 2019

 

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

 

 

 

 

 

FINANCIAL ASSETS:

 

 

 

 

 

 

 

 

 

Fixed maturities available-for-sale:

 

 

 

 

 

 

 

 

 

  Corporate securities

$

- 

 

$

207,989 

$

- 

$

207,989 

  CMOs - residential

 

- 

 

 

5,571 

 

- 

 

5,571 

  US Government obligations

 

- 

 

 

40,077 

 

- 

 

40,077 

  GSEs

 

- 

 

 

6,209 

 

- 

 

6,209 

  States and political subdivisions

 

- 

 

 

165,739 

 

1,575 

 

167,314 

  Foreign government obligations

 

- 

 

 

6,962 

 

- 

 

6,962 

  Redeemable preferred stocks

 

6,167 

 

 

- 

 

- 

 

6,167 

     Total fixed maturities

 

6,167 

 

 

432,547 

 

1,575 

 

440,289 

 

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

  Common stocks

 

2,633 

 

 

- 

 

- 

 

2,633 

  Nonredeemable preferred stocks

 

2,944 

 

 

- 

 

- 

 

2,944 

     Total equity securities

 

5,577 

 

 

- 

 

- 

 

5,577 

 

 

 

 

 

 

 

 

 

 

Total Financial Assets

$

11,744 

 

$

432,547 

$

1,575 

$

445,866 

 


17


 

 

 

 

December 31, 2018

 

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

 

 

 

 

 

FINANCIAL ASSETS:

 

 

 

 

 

 

 

 

 

Fixed maturities available-for-sale:

 

 

 

 

 

 

 

 

 

  Corporate securities

$

- 

 

$

197,489 

$

- 

$

197,489 

  CMOs - residential

 

- 

 

 

5,840 

 

-