Independence Holding Co. :IHC-US: Earnings Analysis: Q4, 2016 By the Numbers : May 25, 2017

Independence Holding Co. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Independence Holding Co. – Genworth Financial, Inc. Class A, MetLife, Inc., Lincoln National Corporation, CNO Financial Group, Inc., Kansas City Life Insurance Company, Prudential Financial, Inc. and Assurant, Inc. (GNW-US, MET-US, LNC-US, CNO-US, KCLI-US, PRU-US and AIZ-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 78.87 million, Net Earnings of USD 7.64 million.
  • Year-on-year change in operating cash flow of -322.91% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from unusual items

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 78.87 81.02 77.59 75.9 124.62
Revenue Growth (%YOY) -36.71 -37.91 -41.71 -43.47 -1.94
Earnings (mil) 7.64 4.32 4.3 -3.76 4.93
Earnings Growth (%YOY) 54.94 -70.71 -14.63 -172.04 22.29
Net Margin (%) 9.69 5.34 5.54 -4.95 3.96
EPS 0.49 0.25 0.25 6.08 0.28
Return on Equity (%) 6.94 3.84 3.78 -3.84 6.03
Return on Assets (%) 2.55 1.36 1.28 -1.16 1.64

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Market Share Versus Profits

Revenues History
Earnings History

IHC-US‘s change in revenue this period compared to the same period last year of -36.71% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that IHC-US is holding onto its market share. Also, for comparison purposes, revenues changed by -2.65% and earnings by 76.80% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

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Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

Premiums Earned Percent History
Loss Ratio History

The company’s premiums earned as a percent of total revenues showed no year-on-year improvement and went from 94.64% to 85.18%. In spite of this, the company’s earnings went up – influenced primarily by the improvement in loss ratio from 62.71% to 53.19%. For comparison, premiums earned as a percent of revenues were 83.11% and the loss ratio 56.85% in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

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Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

IHC-US‘s change in operating cash flow of -322.91% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins after interest from 6.61% to 11.30% and (2) One-time items. The company’s pretax margins are now 11.08% compared to 6.62% for the same period last year.

EBIT Margin Versus PreTax Margin

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Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Independence Holding Co.

Company Profile

Independence Holding Co. engages in underwriting, administering and/or distributing group and individual specialty products, including disability, supplemental health, pet, and group life insurance through its subsidiaries. It operates through the following segments: Medical Stop-Loss, Fully Insured Health, Group Disability, and Individual Accident and Health, and Other. The Medical Stop-Loss segment are short-duration and accounted for based on actuarial estimates of the amount of loss inherent in that period’s claims or open claims for prior periods, including losses incurred for claims that have not been reported. The Fully Insured Health segment is the liability for policy benefits and claims for fully insured medical and dental business and are established using historical claim development patterns. The Group Disability segment is comprised of long term disability and disability benefits law. The Individual Accident and Health and Other segment is a combination of closed lines of business as well as certain small existing lines. The company was founded in 1980 and is headquartered in Stamford, CT.

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