Independence Holding Co. – Value Analysis (NYSE:IHC) : August 30, 2017

Capitalcube gives Independence Holding Co. a score of 54.

Our analysis is based on comparing Independence Holding Co. with the following peers – 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).

Fundamental Overview

Independence Holding Co. has a fundamental score of 54 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It’s current Price/Book of 0.76 is about median in its peer group.
  • The market expects IHC-US to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • IHC-US has relatively high profit margins while operating with median capital turns.
  • Changes in annual earnings are in line with its chosen peers but lags in terms of revenue, implying the company is cost conscious and selective about spending for growth.
  • IHC-US‘s return on equity currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • While IHC-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company is likely overinvesting in a business with only median returns.
  • IHC-US currently does not have any debt.

Drivers of Margin

  • Relatively high underwriting margin suggests a disciplined strategy in writing policies.
  • The company’s comparatively high underwriting margin (i.e. premiums earned minus insurance losses, expressed as a percentage of premiums earned) of 46.71% versus a peer median of -22.27% suggests that IHC-US follows either a differentiated strategy with pricing advantages and/or a disciplined strategy in writing policies versus peers. However, IHC-US‘s pre-tax margin of 8.67% is around the peer median which, combined with underwriting margin, suggests higher operating costs relative to peers.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

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.