Add
AMIC to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| AMIC > SEC Filings for AMIC > Form 10-Q on 9-Aug-2012 | All Recent SEC Filings |
9-Aug-2012
Quarterly Report
The following discussion of the financial condition and results of operations of American Independence Corp. ("AMIC") and its subsidiaries (collectively, the "Company") should be read in conjunction with, and is qualified in its entirety by reference to, the consolidated financial statements of the Company and the related Notes thereto appearing in our annual report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission, and our condensed consolidated financial statements and related Notes thereto appearing elsewhere in this quarterly report.
Overview
We are an insurance holding company engaged in the insurance and reinsurance business through our wholly owned insurance company, Independence American Insurance Company ("Independence American"), our wholly owned business development and program management company, IHC Specialty Benefits, Inc. ("Specialty Benefits"), our full service direct writer of medical-stop insurance for self-insured employer groups IHC Risk Solutions, LLC ("Risk Solutions"), and our two insurance and marketing agencies, Independent Producers of America, LLC ("IPA") and HealthInsurance.org ("HIO"). Since November 2002, AMIC has been affiliated with Independence Holding Company ("IHC"), which owned 78.6% of AMIC's stock as of June 30, 2012. The senior management of IHC provides direction to the Company through a service agreement between the Company and IHC. As of June 30, 2012, a significant amount of Independence American's revenue was from reinsurance premiums. The majority of these premiums are ceded to Independence American from IHC under reinsurance treaties to cede its gross medical stop-loss premiums written to Independence American. In addition, Independence American assumes fully insured health and short-term statutory disability benefit product in New York State ("DBL") premiums from IHC, and assumes medical stop-loss premiums from unaffiliated carriers. Independence American began writing group major medical, medical stop-loss, major medical plans for individuals and families, and short-term medical in 2007, added dental in 2009, and pet insurance in 2012. Given its broad licensing, A- (Excellent) rating from A.M. Best, and that it is the only property and casualty company in IHC, Independence American expects to expand the distribution of its health and pet insurance products.
While management considers a wide range of factors in its strategic planning,
the overriding consideration is underwriting profitability. Management's
assessment of trends in health and pet insurance markets play a significant role
in determining whether to expand Independence American's insurance premiums.
Since Independence American reinsures a portion of all of the business produced
by Risk Solutions, and since it is also eligible to earn profit sharing
commissions based on the profitability of the business it places, Risk Solutions
also emphasizes underwriting profitability. In addition, management focuses on
controlling operating costs. By sharing employees with IHC and sharing
resources among our subsidiaries, we strive to maximize our earnings.
Independence American Insurance Company
Independence American, which is domiciled in Delaware, is licensed to write property and/or casualty insurance in 49 states and the District of Columbia, and has an A- (Excellent) rating from A.M. Best. An A.M. Best rating is assigned after an extensive quantitative and qualitative evaluation of a company's financial condition and operating performance, and is also based upon factors relevant to policyholders, agents, and intermediaries, and is not directed toward protection of investors. A.M. Best's ratings are not recommendations to buy, sell or hold securities of the Company. Independence American's unaudited statutory capital and surplus as of June 30, 2012 was $53,120,000.
Risk Solutions
Risk Solutions has offices near Hartford, Connecticut, Philadelphia, Pennsylvania and Chicago, Illinois, and markets and underwrites employer medical stop-loss and group life primarily for Standard Security Life Insurance Company of New York ("Standard Security Life"). It also writes, to a much lesser extent, for four other carriers, including Madison National Life Insurance Company, Inc. ("Madison National Life") and Independence American.
Agencies
The Company has a 51% interest in HIO, which is headquartered in Minneapolis, Minnesota. HIO is an insurance and marketing agency through its well-established internet domain address: www.healthinsurance.org. This domain generates hundreds of daily leads from individuals and small employers seeking affordable health insurance solutions. The Company owns Specialty Benefits, which is headquartered in Minneapolis, Minnesota. Specialty Benefits is a business development and program management company. The Company has a 89.6% interest in IPA which is headquartered in Tampa, Florida. IPA is a national, career agent marketing organization which operates under a controlled career agent distribution model in which independent producers sell products approved by IPA and AMIC. The Company increased its ownership interest in IPA from 51% to 79% at September 30, 2011, and from 79% to 89.6% at December 31, 2011.
The following is a summary of key performance information and events:
The results of operations for the three months and six months ended June 30, 2012 and 2011 are summarized as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Revenues $ 23,475 $ 21,970 $ 45,709 $ 43,692
Expenses 22,728 21,475 43,057 41,645
Income before income tax 747 495 2,652 2,047
Provision for income taxes 196 71 804 566
Net income 551 424 1,848 1,481
Less: Net income attributable to the
non-controlling interest (242) (287) (420) (407)
Net income attributable to American
Independence Corp. $ 309 $ 137 $ 1,428 $ 1,074
|
·
The book value of the Company increased to $11.59 per share at June 30, 2012 compared to $11.36 per share at December 31, 2011.
·
Net income per share increased to $.04 per share, diluted, or $0.3 million, for the three months ended June 30, 2012, compared to $.02 per share, diluted, or $0.1 million for the three months ended June 30, 2011. Net income per share increased to $.17 per share, diluted, or $1.4 million, for six three months ended June 30, 2012, compared to $.13 per share, diluted, or $1.1 million for the six months ended June 30, 2011
·
At June 30, 2012, 98.9% of the Company's fixed maturities were investment grade.
·
Consolidated investment yields were 3.1% and 3.4% for the six months ended June 30, 2012 and 2011, respectively. The lower yield is primarily due to a decrease in investments in higher yield municipal bonds.
·
Premiums earned increased 7% to $37.8 million for the six months ended June 30, 2012 compared to $35.4 million for the six months ended June 30, 2011, primarily due to higher direct and assumed medical stop-loss premiums, offset by lower direct group major medical premiums written.
·
For the six months ended June 30, 2012 and 2011, Independence American wrote $5.1 million and $6.8 million, respectively, of individual health business produced by our marketing organization IPA.
·
For the six months ended June 30, 2012, Risk Solutions and our Agencies generated revenues of $7.0 million compared to $7.2 million for the six months ended June 30, 2011 primarily due to a decrease in profit commissions earned.
·
Underwriting experience, as indicated by GAAP Combined Ratios on our three lines of business for the three months and six months ended June 30, 2012 and 2011, are as follows (in thousands):
§
Medical Stop-Loss Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Premiums Earned $ 11,620 $ 9,317 $ 22,671 $ 18,499
Insurance Benefits Claims and Reserves 9,191 6,424 15,833 12,804
Profit Commission Expense (Recovery) (647) 249 (397) 696
Expenses 3,173 2,548 6,180 5,052
Loss Ratio(A) 79.1% 68.9% 69.8% 69.2%
Profit Commission Expense Ratio (B) -5.6% 2.7% -1.8% 3.8%
Expense Ratio (C) 27.3% 27.3% 27.3% 27.3%
Combined Ratio (D) 100.8% 98.9% 95.3% 100.3%
|
§
Fully Insured Health Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Premiums Earned $ 6,952 $ 7,630 $ 13,596 $ 15,456
Insurance Benefits Claims and Reserves 4,608 6,090 9,202 10,265
Profit Commission Expense (Recovery) 125 (514) 122 (561)
Expenses 1,512 1,852 2,979 3,863
Loss Ratio(A) 66.3% 79.8% 67.7% 66.4%
Profit Commission Expense Ratio (B) 1.8% -6.7% 0.9% -3.6%
Expense Ratio (C) 21.7% 24.3% 21.9% 25.0%
Combined Ratio (D) 89.8% 97.4% 90.5% 87.8%
§
DBL Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Premiums Earned $ 762 $ 719 $ 1,524 $ 1,480
Insurance Benefits Claims and Reserves 467 404 922 897
Expenses 263 222 510 471
Loss Ratio(A) 61.3% 56.2% 60.5% 60.6%
Expense Ratio (C) 34.5% 30.9% 33.5% 31.8%
Combined Ratio (D) 95.8% 87.1% 94.0% 92.4%
|
(A)
Loss ratio represents insurance benefits, claims and reserves divided by premiums earned.
(B)
Profit commission expense ratio represents profit commissions divided by premiums earned.
(C)
Expense ratio represents commissions, administrative fees, premium taxes and other underwriting expenses divided by premiums earned.
(D)
The combined ratio is equal to the sum of the loss ratio, profit commission expense ratio and the expense ratio.
·
The Company recorded an increase in the loss ratio in the medical stop-loss line of business for the three months and six months ended June 30, 2012 due to the poor performance on business written through one program. This increase was partially offset by the reversal of profit commissions as evidenced by the profit commission ratio.
·
The Company recorded a decrease in the loss ratio in the fully insured health
line of business for the three months ended June 30, 2012 due to the improved
performance in direct group major medical business compared to the prior year.
The Company recorded an increase in the loss ratio in the fully insured health
line of business for the six months ended June 30, 2012 due to higher direct
individual health claims, offset by the improved performance in direct group
major medical business.
·
The Company experienced an increase in the loss ratio for DBL for the three months and six months ended June 30, 2012 as a result of higher claims.
The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires the Company's management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. A summary of the Company's significant accounting policies and practices is provided in Note 1 of the Notes to the Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2011. Management has identified the accounting policies related to Insurance Reserves, Premium and Fee income Revenue Recognition, Reinsurance, Income Taxes, Investments, Goodwill and Other Intangibles as those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's condensed consolidated financial statements and this Management's Discussion and Analysis. A full discussion of these policies is included
under Critical Accounting Policies in Item 7 of the Annual Report on Form 10-K for the year ended December 31, 2011. During the six months ended June 30, 2012, there were no additions to or changes in the critical accounting policies disclosed in the Form 10-K for the year ended December 31, 2011 except for the recently adopted accounting standards discussed in Note 1(C) of the Notes to the Condensed Consolidated Financial Statements.
Results of Operations for the Three Months Ended June 30, 2012, Compared to the
Three Months Ended June 30, 2011.
Benefits, Selling,
Fees and Net Claims General Amortization
June 30, Premiums Other Investment and and and
2012 Earned Income Income Reserves Admin Depreciation Total
(In thousands)
Independence
American:
Medical stop-loss $ 11,620 - 337 9,191 2,526 - $ 240
Fully Insured Health 6,952 - 94 4,608 1,637 - 801
DBL 762 - 14 467 263 - 46
Total Independence
American 19,334 - 445 14,266 4,426 - 1,087
Risk Solutions
And Agencies - 3,786 42 - 3,580 45 203
Corporate - - 13 - 411 - (398)
Subtotal $ 19,334 3,786 500 14,266 8,417 45 892
Net realized investment gains 44
Other-than-temporary impairment losses (189)
Income before income taxes 747
Income taxes (196)
Net income 551
Less: Net income attributable to the
non-controlling interest (242)
Net income attributable to American Independence Corp. $ 309
Benefits, Selling,
Fees and Net Claims General Amortization
June 30, Premiums Other Investment and and and
2011 Earned Income Income Reserves Admin Depreciation Total
(In thousands)
Independence
American:
Medical stop-loss $ 9,317 - 360 6,424 2,760 37 $ 456
Fully Insured Health 7,630 - 132 6,090 1,213 125 334
DBL 719 - 16 404 222 - 109
Total Independence
American 17,666 - 508 12,918 4,195 162 899
Risk Solutions
and Agencies - 3,668 36 - 3,621 55 28
Corporate - - 12 - 524 - (512)
Subtotal $ 17,666 3,668 556 12,918 8,340 217 415
Net realized investment gains 100
Other-than-temporary impairment losses (20)
Income before income taxes 495
Income taxes (71)
Net income 424
Less: Net income attributable to the
non-controlling interest (287)
Net income attributable to American Independence Corp. $ 137
|
Premiums Earned. Premiums earned increased 9%, or $1,688,000 from 2011 to 2012.
The Company currently has three lines of business. Premiums relating to
medical stop-loss business increased $2,303,000. This is due to an increase in
medical stop-loss premiums assumed by Independence American $1,471,000 and an
increase in medical stop-loss premiums written by Independence American
($831,000). Premiums relating to fully insured health consisting of group major
medical, limited medical, short-term medical, dental, vision, hospital
indemnity, and individual health decreased ($678,000). The decrease is
primarily due to a decrease in group major medical premiums written by
Independence American ($1,104,000). Premiums relating to DBL increased $43,000.
For the three months ended June 30, 2012, Independence American assumed 10% of
IHC's short-term medical business, approximately 8% of certain of IHC's group
major medical business, 20% of IHC's DBL business and approximately 23% of IHC's
medical stop-loss business. There were no significant changes to these
percentages from the prior year.
Fee and Agency Income. Fee and agency income increased $156,000 from 2011 to
2012. Risk Solutions fee income-administration decreased $70,000 to $1,190,000
for 2012, compared to $1,260,000 for 2011. Risk Solutions fee income-profit
commission increased $32,000 to $401,000 for 2012, compared to $369,000 for
2011. Profit commissions for a given year are based primarily on the
performance of business written during portions of the three preceding years.
Therefore, profit commissions for 2012 are based on business written during
portions of 2009, 2010 and 2011. In 2012, income from our Agencies consisted of
commission income and other fees of $1,113,000 from IPA and revenue of $809,000
and $226,000 from HIO and Specialty Benefits, respectively. In 2011, income
from our Agencies consisted of commission income and other fees of $1,420,000
from IPA and revenue of $534,000 from HIO.
Net Investment Income. Net investment income decreased $56,000 from 2011 to 2012. The investment yields were 3.1% for the three months ended June 30, 2012 and 3.4% for the three months ended June 30, 2011. The lower yield is primarily due to the current interest rate environment.
Net Realized Investment Gains and Other-Than-Temporary Impairment Losses. The Company recorded a net realized investment gain of $44,000 for the three months ended June 30, 2012, compared to a gain of $100,000 for the three months ended June 30, 2011. The Company's decision as to whether to sell securities is based on management's ongoing evaluation of investment opportunities and economic market conditions, thus creating fluctuations in realized gains or losses from period to period. For the three months ended June 30, 2012 and 2011, the Company recorded $189,000 and $20,000, respectively, of other-than-temporary-impairment losses. These credit losses were a result of the expected cash flows of a debt security being less than the debt security's amortized cost.
Other Income. Other income decreased $38,000 from 2011 to 2012 due to lower consulting fees earned by Risk Solutions for the three months ended June 30, 2012, compared to the three months ended June 30, 2011.
Insurance Benefits, Claims and Reserves. Insurance benefits claims and reserves increased 10%, or $1,348,000 from 2011 to 2012. The increase is primarily comprised of an increase in direct medical stop-loss of $2,105,000 due to higher premiums written and a higher loss ratio, an increase in assumed medical stop-loss of $662,000 due to higher premiums written offset by a lower loss ratio, offset by a decrease in direct fully insured of $1,351,000 due to lower loss ratios.
Selling, General and Administrative. Selling, general and administrative
expenses increased $77,000 from 2011 to 2012. This increase is primarily due to
(i) higher expenses of $352,000 due to the formation of Specialty Benefits in
May 2012, (ii) higher commission expense of $309,000 at Independence American
primarily due to higher medical stop-loss premiums written, (iii) higher
expenses at HIO of $191,000 due to higher referral and management fees, (iv)
higher administration expense of $118,000 at Independence American due to higher
fees in direct medical stop-loss due to higher premiums written, (v) higher
underwriting expenses of $60,000 at Independence American, offset by (vi) lower
expenses at IPA of $370,000 primarily due to lower professional fees and lower
agent commission expense, (vii) lower profit commission expense of $257,000 at
Independence American primarily for the medical stop-loss business, (viii) lower
expenses at Risk Solutions of $212,000 primarily due to lower salary expense and
lower professional fees, and (ix) lower legal and consulting expenses of
$146,000.
Amortization and Depreciation. Amortization and depreciation expense decreased $172,000 from 2011 to 2012.
Income Taxes. The provision for income taxes increased $125,000 to $196,000, an
effective rate of 38.8%, for the three months ended June 30, 2012, compared to
$71,000, an effective rate of 34.1%, for the three months ended June 30, 2011.
Net income for the three months ended June 30, 2012 and 2011 includes a
non-cash provision for federal income taxes of $152,000 and $52,000,
respectively. The state tax effective rate decreased to 7.5% for the three
months ended June 30, 2012, compared to 11.1% for the three months ended June
30, 2011. For as long as AMIC utilizes its NOL carryforwards, it will not pay
any income taxes, except for federal alternative minimum taxes and state income
taxes.
Net Income attributable to the non-controlling interest. Net income
attributable to the non-controlling interest decreased $45,000 from 2011 to
2012. The net income for the three months ended June 30, 2012 relates to the
49% non-controlling interest in HIO and the 10% non-controlling interest in IPA.
The net income for the three months ended June 30, 2011 relates to the 49%
non-controlling interest in HIO and the 49% non-controlling interest in IPA.
Net Income attributable to American Independence Corp. The net income attributable to the Company increased to $309,000, or $.04 per share, diluted, for the three months ended June 30, 2012, compared to $137,000, or $.02 per share, diluted, for the three months ended June 30, 2011.
Results of Operations for the Six Months Ended June 30, 2012, Compared to the
Six Months Ended June 30, 2011.
Benefits, Selling,
Fees and Net Claims General Amortization
June 30, Premiums Other Investment and and and
2012 Earned Income Income Reserves Admin Depreciation Total
(In thousands)
Independence
American:
Medical stop-loss $ 22,671 - 650 15,833 5,783 - $ 1,705
Fully Insured Health 13,596 - 204 9,202 3,101 - 1,497
DBL 1,524 - 29 922 510 - 121
Total Independence
American 37,791 - 883 25,957 9,394 - 3,323
Risk Solutions
And Agencies - 6,941 84 - 6,819 90 116
Corporate - - 29 - 797 - (768)
Subtotal $ 37,791 6,941 996 25,957 17,010 90 2,671
Net realized investment gains 170
Other-than-temporary impairment losses (189)
Income before income taxes 2,652
Income taxes (804)
Net income 1,848
Less: Net income attributable to the
non-controlling interest (420)
Net income attributable to American Independence Corp. $ 1,428
Benefits, Selling,
Fees and Net Claims General Amortization
June 30, Premiums Other Investment and and and
2011 Earned Income Income Reserves Admin Depreciation Total
(In thousands)
Independence
American:
Medical stop-loss $ 18,499 - 736 12,804 5,675 73 $ 683
Fully Insured Health 15,456 - 243 10,265 3,051 251 2,132
DBL 1,480 - 34 897 471 - 146
Total Independence
American 35,435 - 1,013 23,966 9,197 324 2,961
Risk Solutions
and Agencies - 7,077 77 - 7,147 107 (100)
Corporate - - 25 - 904 - (879)
Subtotal $ 35,435 7,077 1,115 23,966 17,248 431 1,982
. . .
|
|
|