In this report, the terms "Hooper Holmes," "Company," "we," "us" and "our" refer to Hooper Holmes, Inc. and its subsidiaries.

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, including, but not limited to, statements about our plans, strategies and prospects. When used in this Report, the words "expects," "anticipates," "believes," "estimates," "plans," "intends," "could," "will," "may" and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include statements as to our operating results, revenues, sources of revenues, cost of revenues, gross margins, net and operating losses, our new IT system, our new imaging platform, our expansion of managed scheduling, and the expansion of certain business units. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expected.

The section of our 2008 annual report on Form 10-K entitled "Risk Factors" discusses some of these and other important risks that may affect our business, results of operations, cash flows and financial condition. The risks described above and the risks described in the "Risk Factors" section and similar discussions in our other filings with the Securities and Exchange Commission ("SEC") include, but are not limited to risks related to customer concerns about our financial health, our limited cash flows, our liquidity, future claims arising from the sale of certain of our businesses, declines in our business and revenues, our competitive disadvantage, and our ability to successfully implement cost reduction initiatives. Investors should consider these factors before deciding to make or maintain an investment in our securities. The forward-looking statements included in this quarterly report are based on information available to us as of the date of this report. We expressly disclaim any intent or obligation to update any forward-looking statements including, without limitation, to reflect subsequent events or circumstances.

We currently engage in several service lines that are managed as one division:
the Health Information Division.

Our Health Information Division (HID) consists of the following service lines. In July 2009, we combined our service lines formerly referred to as Underwriting Solutions and Infolink, and now refer to these operations as Hooper Holmes Services.

· Portamedic - performs paramedical and medical examinations of individuals on behalf of insurance companies in connection with the offering or rating of insurance coverage (mainly life insurance), or payment or reimbursement of insurance;

· Heritage Labs - performs tests of blood, urine and/or oral fluid specimens, primarily generated in connection with the paramedical exams and wellness screenings performed by our Portamedic and Health & Wellness services, and assembles and sells specimen collection kits;

· Health & Wellness - conducts wellness screenings for health management companies, including wellness companies, disease management organizations and health plans; and

· Hooper Holmes Services (formerly Underwriting Solutions and Infolink) - conducts telephone interviews of individuals seeking life insurance coverage, retrieves medical records, and conducts inspections. It also provides risk management solutions and underwriting services to reinsurance companies and insurance carriers in the life, health and annuity insurance industry.

Our core Portamedic paramedical examination services accounted for 74.1% and 71.5% of revenues for the three month periods ended September 30, 2009 and 2008, respectively, and 74.3% and 71.3% of revenues for the nine month periods ended September 30, 2009 and 2008, respectively. As a provider of health risk assessment services to the insurance industry, our business is subject to seasonality, with third quarter sales typically dropping below the other quarters due to the decline in activity typically experienced by the insurance industry during the summer months.

Financial Results for the Three Month Period Ended September 30, 2009

For the three months ended September 30, 2009, consolidated revenues totaled $43.8 million, a 7.2% decline from the corresponding prior year period. Our gross profit totaled $11.5 million for the third quarter of 2009 vs. $11.2 million in the comparable prior year quarter. Our gross profit percentage was 26.3% for the third quarter of 2009, which represents an improvement from our gross profit percentage of 23.8% in the third quarter of 2008. SG&A expenses were $11.9 million in the third quarter of 2009 compared to $13.2 million in the third quarter of 2008, a decrease of approximately 9.9%. As detailed below in the Portamedic highlights, included in SG&A expense is increased depreciation expense (non-cash) of approximately $0.6 million for the three months ended September 30, 2009, related to the reduction of the estimated useful life of our current information technology ("IT") systems. For the third quarter of 2009, we incurred a loss from continuing operations of $0.7 million, or $(0.01) per share, compared to a loss from continuing operations of $2.0 million, or $(0.03) per share in the third quarter of 2008. Our loss from continuing operations for the third quarter of 2009 includes $(0.3) million of restructuring and other charges consisting primarily of office closure costs and severance.

Financial Results for the Nine Month Period Ended September 30, 2009

For the nine months ended September 30, 2009, consolidated revenues totaled $137.4 million, a 8.9% decline from the corresponding prior year period. Our gross profit totaled $36.8 million for the nine month period ended September 30, 2009 vs. $38.5 million in the comparable period of the prior year. Our gross profit percentage was 26.8% for the nine month period ended September 30, 2009, which represents an improvement over our gross profit percentage of 25.5% for the nine month period ended September 30, 2008. SG&A expenses were $38.4 million in the nine month period ended September 30, 2009, a decline of $1.4 million in comparison to the nine month period ended September 30, 2008. Included in SG&A expense for the nine month period ended September 30, 2009 is increased depreciation expense (non-cash) of approximately $2.1 million related to the reduction of the estimated useful life of our current IT systems. For the nine month periods ended September 30, 2009 and 2008, we incurred losses from continuing operations of $3.0 million, or $(0.04) per share. Our loss from continuing operations for the nine month period ended September 30, 2009 included restructuring and other charges totaling $1.1 million, consisting primarily of severance, office closure costs and legal and other costs related to the 2009 Board of Director election proxy contest. The loss from continuing operations for the nine month period ended September 30, 2008 included restructuring and other charges totaling $1.7 million related to the resignation of the previous CEO, charges pertaining to the early termination of an agreement with outside consultants utilized in our 2006 strategic review and restructuring charges related to office closures and severance.

In the quarter ended September 30, 2009, Portamedic revenues decreased 3.9% in comparison to the prior year period, a slight improvement from the 5.6% decline that we experienced in the first half of 2009. We continue to believe that achieving acceptable profitability levels will require top-line revenue growth, including the reversal of past revenue declines. Revenue is generated from a two-part sales process, completed at both the insurance carrier level and at the local sales level. Although we have approvals from over 90% of the insurance carriers in the marketplace, the number of paramedical examinations we complete on life insurance applicants continues to decline. We must achieve greater success in turning carrier approvals into unit sales at the local agent, corporate and brokerage levels. The rate of decline in the number of paramedical examinations completed per day approximated 9% in both the second and third quarters of 2009 compared to the number of examinations completed per day in the corresponding period of 2008. The second and third quarter 2009 rate of decline represents a slight improvement from the 10% rate of decline in the average number of paramedical examinations completed per day experienced in the first quarter of 2009 compared to the first quarter of 2008, and the 12% rate of decline experienced in the fourth quarter of 2008 compared to the fourth quarter of 2007.

The market for the life insurance-related services offered by our Portamedic unit has steadily declined. For example, according to the MIB Life Index, in 2008 there were approximately nine million applications for life insurance completed in the United States, compared to approximately 17 million applications in 1985. The current economic downturn has also negatively impacted the market for the sale of life insurance products. Notwithstanding the rate of decline in applications submitted, we believe that the market continues to offer attractive opportunities to a company that can sell its services effectively and distinguish itself from its competitors.

We are taking the following steps to increase our market share and improve top-line revenue:

· In the third quarter of 2009, we introduced a new appointment scheduling option called Instant Scheduling. It allows insurance agents, while completing the policy application with the applicant, to schedule the examination utilizing our centralized scheduling center. The new process significantly reduces the cycle time of policy application to policy issuance, which benefits the applicant, agent/broker and insurance carrier.

· The Company has introduced its National Broker & General Agency service program which includes specialized training of our field sales representatives to market to this growing distribution channel. To serve these customers, we have implemented new case management services which link our ordering and imaging systems to many agency management tools.

· In January 2009, we instituted a pricing increase for Portamedic examinations of approximately 6% for non-contract customers. As a result of this pricing increase, and increases received from other Portamedic customers under contract, average revenue per exam increased approximately 4% in the nine month period ended September 30, 2009 in comparison to the corresponding prior year period.

· In early 2009, we engaged Leerink Swann, a healthcare strategic advisor, to assess our short and long-term strategy, including assistance in creating new sources of revenue in adjacent markets (such as healthcare) by utilizing existing core capabilities in our operations, including Portamedic. Leerink Swann's analysis also identified areas of opportunity to automate current manual processes in ordering and completing paramedical exams. This effort is expected to reduce costs and errors, and increase efficiency and speed. Leerink Swann's analysis will also assist us in expanding the range of services and products offered by our Health & Wellness and Heritage Labs service lines, with a specific focus on high value opportunities.

†† We continue to take steps to strengthen our local sales force: including hiring additional sales representatives, streamlining our sales tracking systems, improving sales training, and focusing sales incentives on increases in paramedical exams completed (i.e. unit goals).

†† We have established a quality/imaging platform for all paramedical exam reports on a trial basis. This platform allows us to review the accuracy and legibility of examination reports. This imaging platform, which we plan to extend throughout Portamedic, is expected to improve our quality of service to customers.

†† In an effort to improve the speed, accuracy and consistency of services provided to our Portamedic customers, we decided in December 2008 to begin the development of a new customer service order tracking IT system. In utilizing our current IT system, we license the software and, as such, have difficulties in quickly implementing improvements and enhancements to the software. Our new IT system is expected to eliminate these difficulties and is expected to operate at a significantly lower cost and cash outlay in the future relative to our existing system. Our new customer service system is expected to cost approximately $1.1 million and is scheduled for completion in mid-2010. As a result of the development of this new system, we have reduced the estimated useful life of our current IT systems to terminate in mid-2010. This reduction in useful life will increase depreciation expense (non-cash charge) in 2009 by approximately $2.7 million and in 2010 by approximately $1.2 million. We believe that our investment in this new customer service system will enhance the quality of service to our customers, while improving productivity and decreasing future cash outlay.

††† In September 2008, we appointed a new President of Portamedic who has more than 25 years experience as a senior executive in the insurance industry.

While we intend for these measures to increase our market share and revenues, there can be no assurance we will achieve those results. Although the number of paramedical examinations Portamedic performs continues to decline, we believe that we are a market leader in the industry. However, in 2009 market conditions are expected to remain difficult for our Portamedic services, particularly in light of the weakened U.S. economy and its negative impact on the market for life insurance, along with the related impact on our customers.

Heritage Labs

Heritage Labs' principal services consist of performing tests of blood, urine and/or oral fluid specimens and the assembly and sale of kits used in the collection and transportation of such specimens to its lab facility. In the third quarter of 2009, approximately 58.2% of Heritage Labs revenue came from lab testing and 41.8% came from the sale of specimen kits.

Because much of Heritage Labs revenue originates from paramedical exam companies (including Portamedic), Heritage Labs is affected by the same negative market trends affecting Portamedic, namely the decline in the number of life insurance applications. In response, Heritage Labs has taken the following steps to expand its market share and increase revenues:

· In January 2009, Heritage Labs moved its lab facilities to a new, larger location which is expected to increase productivity and enable new service/product offerings, including offerings focusing outside the paramedical exam marketplace.

· Heritage Labs has added a Medical Director to its organization to better serve our clients with lab and mortality related issues. This reflects our strategy to deliver research and statistical analyses to improve our customers' underwriting performance.

· Heritage Labs is marketing a line of self-collected finger stick test kits directly to customers, under the trade name "Appraise." These kits test hemoglobin A1c. The hemoglobin A1c test is particularly important for diabetics, who must regularly monitor their hemoglobin A1c levels. Heritage Labs uses two blood testing methods for hemoglobin A1c, one for testing whole blood specimens and the other for testing dried blood spots. Heritage Labs is the only laboratory worldwide which has been certified by the National Glycohemoglobin Standardization Program for A1c testing using dried blood spot specimens. The test kits are currently available in retail locations including Wal-Mart, Rite Aid, Walgreens and other locations nationwide.

While we intend for these measures to increase our market share and revenues, there can be no assurance we will achieve those results. Heritage Labs revenues in the third quarter 2009 of $3.6 million were relatively flat in comparison to the prior year period. We believe that, through increased test kit sales and Portamedic revenue improvements, we may begin to show growth at Heritage Labs.

Hooper Holmes Services (formerly Underwriting Solutions and Infolink)

In July 2009, we combined our product and service offerings formerly delivered by our Underwriting Solutions and Infolink divisions, into a new service line, Hooper Holmes Services. We combined these services in order to eliminate duplicate operations, reduce our expenses to a level commensurate with current revenues, and better position us to expand our services to new and existing customers. Hooper Holmes Services' principal place of operations is in Lenexa, KS, and we also maintain an office in Omaha, NE. Hooper Holmes Services operates in three primary markets - insurance, Medicare and healthcare.

Hooper Holmes Services provides underwriting services (including full underwriting, simplified issue underwriting, trial application analysis and telephone interviewing services), retrieves and summarizes attending physician statements (APSs), retrieves prescription drug histories, and performs underwriting audits.

In the third quarter of 2009, Hooper Holmes Services revenue declined 34.6% to $5.9 million as compared to the same period in the prior year. A significant contributing factor to this decrease was reduced underwriting service revenues from three of our largest insurance company customers. These customers experienced a substantial slowdown in their business, which resulted in a significant amount of underwriting services previously outsourced to us being greatly reduced or taken back in-house by customers. A decline in our tele-underwriting and attending physician statement (APS) retrieval, the latter representing the larger of the two revenue components, also significantly contributed to the decrease in Hooper Holmes Services revenues in the third quarter of 2009, as compared to the prior year period. This decline is attributable to the overall decrease in life insurance application activity. As a result of this revenue decline, we implemented cost reduction initiatives in the second and third quarter of 2009, which included headcount reductions and office closures. These cost reduction initiatives have generated, and are expected to continue to generate significant cost savings in 2009.

In December 2008, we appointed a new President of Underwriting Solutions with over 20 years of experience and industry knowledge in the life and reinsurance markets. He was appointed President of Hooper Holmes Services in July 2009. We also hired a new Senior VP of Business Development for Hooper Holmes Services in April 2009 to identify new sources of revenue, while expanding current revenue sources.

Health & Wellness

Health and Wellness (H&W), established in 2007, recorded revenues of approximately $2.5 million for the third quarter of 2009, an increase of $1.1 million, or approximately 76.8%, from the prior year period. In the third quarter of 2009, we completed approximately 45,000 health screenings compared to 32,000 screenings in the prior year period. Health and Wellness has 42 customers, with four new customers signed in the third quarter 2009. We have conducted screening events in every state in the U.S. as well as the District of Columbia and Puerto Rico. To date, we have certified approximately 2,330 of the examiners in our network to be "wellness certified" examiners.

We believe that we are well-positioned to capture a significant share of the health and care management market. However, the success of H&W will depend in part upon the proven success of health and care management and health and wellness initiatives. If the return on investment in these initiatives is not sufficiently high, H&W may not reach its full potential. Notwithstanding, we believe we are well positioned to capitalize on this opportunity given our unique set of assets, including our own laboratory (Heritage Labs), systems and personnel and access to our network of paramedical examiners.

Key Financial and Other Metrics Monitored by Management

In our periodic reports filed with the SEC, we provide certain financial information and metrics about our service lines, and information that our management uses in evaluating our performance and financial condition. Our objective in providing this information is to help our shareholders and investors generally understand our overall performance and assess the profitability of our service lines, and our prospects for future net cash flows.

In the third quarter of 2009, we monitored the following metrics:

· the number of paramedical examinations performed by Portamedic;

· the average revenue per paramedical examination;

· time service performance, from examination order to completion;

· the MIB Life Index data, which represents an indicator of the level of life insurance application activity;

· the number of health screenings completed by Health & Wellness;

· the number of tele-interviewing/underwriting reports we generate;

· the number of specimens tested by Heritage Labs;

· the average revenue per specimen tested;

· budget to actual performance at the branch level as well as in the aggregate; and

· customer and product line profitability.

Certain of the above-cited metrics are discussed in the comparative discussion and analysis of our results of operations that follows.

Results of Operations

Comparative Discussion and Analysis of Results of Operations for the three and
nine month periods ended September 30, 2009 and 2008

The table below sets forth our revenue by service line for the periods
indicated.



                              For the Three Months Ended                  For the Nine Months Ended
                                     September 30,                              September 30,

 (in thousands)            2009          2008         % Change        2009          2008         % Change

Portamedic              $   32,432     $  33,748           -3.9 %   $ 102,072     $ 107,529           -5.1 %
Heritage Labs                3,571         3,603           -0.9 %      11,318        12,222           -7.4 %
Health and Wellness          2,486         1,406           76.8 %       6,837         4,629           47.7 %
Hooper Holmes
Services                     5,925         9,058          -34.6 %      19,187        28,663          -33.1 %
  Subtotal                  44,414        47,815              -       139,414       153,043              -
Intercompany
eliminations(a)               (624 )        (619 )            -        (1,977 )      (2,251 )            -
  Total                 $   43,790     $  47,196           -7.2 %   $ 137,437     $ 150,792           -8.9 %

(a) represents intercompany sales from Heritage Labs to Portamedic

Revenues

Consolidated revenues for the three month period ended September 30, 2009 were $43.8 million, a decline of $3.4 million or 7.2% from the prior year period. For the nine month period ended September 30, 2009, our consolidated revenues were $137.4 million compared to $150.8 million in the corresponding period of the prior year, a decrease of $13.4 million or 8.9%. As explained in greater detail below, similar market forces influenced the revenues and operating results of our service lines throughout the nine month period ended September 30, 2009.

Portamedic

Portamedic revenues declined 3.9% for the three month period ended September 30, 2009 compared to the same period of the prior year. For the nine month period ended September 30, 2009, revenues decreased to $102.1 million compared to $107.5 million for the same period of the prior year, or 5.1%. The decline in Portamedic revenues reflects the net impact of:

· fewer paramedical examinations performed in the third quarter 2009 (365,000 in the third quarter 2009, or 5,699 per day vs. 403,000 in the third quarter of 2008, or 6,289 per day), and in the nine month period ended September 30, 2009 (1,154,000 in the nine month period ended September 30, 2009, or 6,041 per day vs. 1,281,000 in the nine month period ended September 30, 2008, or 6,672 per day);

· higher average revenue per paramedical examination in the third quarter of 2009 of approximately 3% ($89.93 in the third quarter of 2009 vs. $87.27 in the third quarter of 2008), and in the nine month period ended September 30, 2009 a higher average revenue per paramedical examination of approximately 4% ($89.65 in the nine month period ended September 30, 2009 vs. $86.52 in the nine month period ended September 30, 2008).

We attribute the reduction in the number of paramedical examinations and related services performed in the first nine months of 2009 to the continued decline in life insurance application activity in the United States (as reported by the MIB Life Index) and the continued weakness of the U.S. economy.

Heritage Labs

Heritage Labs revenues in each of the third quarters ending September 30, 2009 and 2008 were approximately $3.6 million. For the nine month period ended September 30, 2009, revenues decreased to $11.3 million compared to $12.2 million for the same period of the prior year, or 7.4%.

During the third quarter of 2009, Heritage Labs tested 2.8% more insurance specimens compared to the prior year period (141,000 in the third quarter 2009 vs. 137,000 in the third quarter 2008) and tested fewer insurance specimens in the nine months ended September 30, 2009 compared to the same period in 2008 (422,000 vs. 472,000). Heritage Labs average revenue per insurance specimen tested decreased in the third quarter 2009 compared to the prior year period . . .