Independence Holding Company Announces 2020 Third-Quarter and Nine-Month Results

Rhea-AI Summary

Independence Holding Company (NYSE: IHC) reported strong financial results for the third quarter and nine months ended September 30, 2020. Net income rose to $8.7 million ($0.59 per share) for Q3 2020, up from $6.1 million ($0.41 per share) in Q3 2019. Year-to-date net income decreased to $13.4 million ($0.90 per share) from $21.7 million ($1.45). Revenues increased to $113.2 million for Q3 2020, and $324.5 million year-to-date, driven by growth in Paid Family Leave and pet insurance. CEO Roy T. K. Thung highlighted promising prospects in pet insurance, anticipating significant revenue growth in 2021.

Positive

• Net income rose 41% in Q3 2020 compared to Q3 2019.
• Total revenues increased 19% year-over-year in Q3 2020.
• Anticipated revenue growth in the pet insurance division, with a 48% CAGR from 2018 to 2020.
• Expected increase in premiums due to a 89% rate hike on Paid Family Leave in New York.

Negative

• Year-to-date net income decreased 38% compared to the same period in 2019.

STAMFORD, Conn., Nov. 05, 2020 (GLOBE NEWSWIRE) -- Independence Holding Company (NYSE: IHC) today reported 2020 third-quarter and nine-month results.   

Financial Results

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

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

Chief Executive Officer’s Comments

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

We are very excited by the progress we have made in, and the prospects for, our pet insurance division. Pet insurance is one of the fastest growing types of coverage, yet there remains tremendous growth potential as less than 2% of pets are insured in the United States, compared to 25% or more in many European countries. Pet insurance is now one of the most requested employee benefits, and work-site insurers are taking note. This is demonstrated by the acquisition last year by MetLife, Inc. (“MetLife”) of PetFirst Healthcare, LLC (which uses IAIC its underwriter) and the recent purchase by Aflac Incorporated of an approximate 9% stake in one of the largest pet insurers in the United States for $200 million. We believe that IHC is very well-positioned to take advantage of this trend as a result of our product expertise and the TailTrax app. We currently have agreements in place to partner with well-known insurers to offer PetPartners’ pet insurance through their work-site distribution, and we are in discussions with several more. In order to prepare for this potentially material growth, we are making significant investments in our pet infrastructure in order to handle the expected volume.

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

Finally, we have invested heavily to ramp up our stand-alone InsureTech agencies by deploying cutting-edge technology systems, marketing and data science initiatives, online portals, and robust agent training platforms that help match consumers with the healthcare policy and carrier that best fits their needs. Collectively, our agencies have approximately 13,000 contracted agents that utilize our platforms to quote and enroll products from both IHC and major third party carriers. This division is comprised of: (i) our senior sales agents and career advisors who harvest mostly proprietary leads generated by our marketing technology, (ii) our health call center agents who focus on serving the needs of consumers under the age of 65, including USAA and other affinity group members and their families; this unit provides Affordable Care Act (“ACA”) coverage, Short Term Medical, Hospital Indemnity, and many other ancillary health policies, and (iii) our Independence Brokerage Group agency (“IBG”) and web-based entity (WBE) that provide a platform for independent agents to sell ACA and ancillary health plans to individual consumers and small groups. Our call center has grown from 57 licensed agents at the end of 2019 to 170 agents at the start of open enrollment in 2

FAQ

What were Independence Holding Company's Q3 2020 financial results?

Independence Holding Company reported a net income of $8.7 million ($0.59 per share) for Q3 2020, an increase from $6.1 million ($0.41 per share) in Q3 2019.

How did Independence Holding Company's revenues perform in Q3 2020?

The company reported revenues of $113.2 million for Q3 2020, up from $95.2 million in Q3 2019.

What factors contributed to the increase in revenues for IHC in 2020?

Revenue growth was primarily driven by the Paid Family Leave business and higher premium volume in the pet insurance segment.

What is the outlook for Independence Holding Company's pet insurance division?

The pet insurance division is expected to realize significant growth, with a 48% CAGR from 2018 to 2020, and plans for further expansion in 2021.

How has the Paid Family Leave insurance rate changed for 2021?

The New York Department of Financial Services raised rates on Paid Family Leave by 89% for 2021.