INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

                                             

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________________________


FORM 10-Q


[X]

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2015.


[   ]

Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from: ________ to _________  


Commission File Number: 001-32244


INDEPENDENCE HOLDING COMPANY

(Exact name of registrant as specified in its charter)


Delaware

 

58-1407235

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)


96 CUMMINGS POINT ROAD, STAMFORD, CONNECTICUT                      06902

                                  (Address of principal executive offices)                                              (Zip Code)


Registrant's telephone number, including area code: (203) 358-8000


NOT APPLICABLE

Former name, former address and former fiscal year, if changed since last report.


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   [X]   No [  ]


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   [X]   No [  ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer [    ]

Accelerated Filer   [ X  ]

Non-Accelerated Filer   [  ]

Smaller Reporting Company   [     ]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   [  ]   No   [X]


Class

Outstanding at August 1, 2015

Common stock, $ 1.00  par value

17,299,351 Shares






INDEPENDENCE HOLDING COMPANY


INDEX


PART I – FINANCIAL INFORMATION

PAGE

 

 

NO.

 

 

 

Item 1. Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets

4

 

 

 

Condensed Consolidated Statements of Income

5

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

6

 

 

 

Condensed Consolidated Statement of Changes in Equity

7

 

 

 

Condensed Consolidated Statements of Cash Flows

8

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

Item 2. Management's Discussion and Analysis of Financial Condition

 

 

and Results of Operations

29

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

42

 

 

 

Item 4. Controls and Procedures

43

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1.    Legal Proceedings

43

 

 

 

 

Item 1A. Risk Factors

43

 

 

 

 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

44

 

 

 

 

Item 3.    Defaults Upon Senior Securities

44

 

 

 

 

Item 4.    Mine Safety Disclosures

44

 

 

 

 

Item 5.    Other Information

44

 

 

 

Item 6.    Exhibits

44

 

 

 

Signatures

46

 

 

 

 



Copies of the Company’s SEC filings can be found on its website at www.ihcgroup.com.



2



Forward-Looking Statements


This report on Form 10Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. We have based our forward-looking statements on our current expectations and projections about future events. Our forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as the growth of our business and operations, our business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probably” or similar expressions, we are making forward-looking statements.


Numerous risks and uncertainties may impact the matters addressed by our forward-looking statements, any of which could negatively and materially affect our future financial results and performance.  We describe some of these risks and uncertainties in greater detail in Item 1A, Risk Factors, of IHC’s annual report on Form 10-K as filed with Securities and Exchange Commission.


Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, also the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this report, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved. Our forward-looking statements speak only as of the date made, and we will not update these forward-looking statements unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, any forward-looking event discussed in this report may not occur.




3


PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

    


INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

(Unaudited)

 

 

 

ASSETS:

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Short-term investments

$

50

 

$

50 

 

Securities purchased under agreements to resell

 

23,429

 

 

16,790 

 

Trading securities

 

9,242

 

 

11,095 

 

Fixed maturities, available-for-sale

 

608,256

 

 

583,880 

 

Equity securities, available-for-sale

 

9,051

 

 

13,895 

 

Other investments

 

23,745

 

 

25,251 

 

Total investments

 

673,773

 

 

650,961 

 

 

 

 

 

 

 

Cash and cash equivalents

 

23,547

 

 

25,083 

 

Deferred acquisition costs

 

31,767

 

 

30,806 

 

Due and unpaid premiums

 

66,473

 

 

62,628 

 

Due from reinsurers

 

266,597

 

 

278,242 

 

Premium and claim funds

 

33,061

 

 

32,553 

 

Goodwill

 

56,452

 

 

50,318 

 

Other assets

 

51,533

 

 

57,126 

 

 

 

 

 

 

 

TOTAL ASSETS

$

1,203,203

 

$

1,187,717 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Policy benefits and claims

$

249,556 

 

$

236,803 

 

Future policy benefits

 

275,501 

 

 

277,041 

 

Funds on deposit

 

181,307 

 

 

186,782 

 

Unearned premiums

 

12,176 

 

 

9,455 

 

Other policyholders' funds

 

17,637 

 

 

18,802 

 

Due to reinsurers

 

49,067 

 

 

47,945 

 

Accounts payable, accruals and other liabilities

 

66,516 

 

 

67,641 

 

Debt

 

7,326 

 

 

4,000 

 

Junior subordinated debt securities

 

38,146 

 

 

38,146 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

897,232 

 

 

886,615 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

IHC STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

Preferred stock (none issued)

 

 

 

 

Common stock $1.00 par value, 23,000,000 shares authorized;

 

 

 

 

 

 

18,553,183 and 18,531,158 shares issued; 17,333,307 and

 

 

 

 

 

 

17,371,040 shares outstanding

 

18,553 

 

 

18,531 

 

Paid-in capital

 

127,451 

 

 

127,098 

 

Accumulated other comprehensive income (loss)

 

(3,217)

 

 

22 

 

Treasury stock, at cost; 1,219,876 and 1,160,118 shares

 

(12,880)

 

 

(12,141)

 

Retained earnings

 

167,092 

 

 

157,667 

 

 

 

 

 

 

TOTAL IHC STOCKHOLDERS’ EQUITY

 

296,999 

 

 

291,177 

NONCONTROLLING INTERESTS IN SUBSIDIARIES

 

8,972 

 

 

9,925 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

305,971 

 

 

301,102 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

$

1,203,203 

 

$

1,187,717 



See the accompanying Notes to Condensed Consolidated Financial Statements.



4



INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2015

 

2014

 

2015

 

2014

REVENUES:

 

 

 

 

 

 

 

 

 

Premiums earned

$

120,443 

$

121,135 

$

242,557 

$

244,405

 

Net investment income

 

4,505 

 

5,434 

 

9,946 

 

11,235

 

Fee income

 

4,487 

 

3,861 

 

8,203 

 

13,200

 

Other income

 

1,570 

 

1,070 

 

2,564 

 

2,181

 

Net realized investment gains

 

2,100 

 

4,519 

 

4,100 

 

6,070

 

 

 

 

 

 

 

 

 

 

 

133,105 

 

136,019 

 

267,370 

 

277,091

EXPENSES:

 

 

 

 

 

 

 

 

 

Insurance benefits, claims and reserves

 

79,380 

 

83,263 

 

159,000 

 

168,572 

 

Selling, general and administrative expenses

 

43,702 

 

44,947 

 

87,851 

 

93,082 

 

Amortization of deferred acquisitions costs

 

1,424 

 

1,189 

 

2,888 

 

2,471 

 

Interest expense on debt

 

478 

 

337 

 

910 

 

818 

 

 

 

 

 

 

 

 

 

 

 

124,984 

 

129,736 

 

250,649 

 

264,943

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

8,121 

 

6,283 

 

16,721 

 

12,148 

 

Income taxes

 

2,965 

 

2,403 

 

6,234 

 

4,263 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

5,156 

 

3,880 

 

10,487 

 

7,885 

 

Less: Income from noncontrolling interests in subsidiaries

 

(124)

 

(32)

 

(236)

 

(336)

 

 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO IHC

$

5,032 

$

3,848 

$

10,251 

$

7,549

 

 

 

 

 

 

 

 

 

Basic income per common share

$

.29 

$

.22 

$

.59 

$

.43

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

17,338 

 

17,485

 

17,351 

 

17,553

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

.29 

$

.22

$

.59 

$

.43

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING

 

17,501 

 

17,657 

 

17,516 

 

17,709












See the accompanying Notes to Condensed Consolidated Financial Statements.



5




INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Net income

$

5,156 

$

3,880

$

10,487 

$

7,885

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available-for-sale securities, pre-tax

 

(6,445)

 

5,003

 

(5,140)

 

13,020

 

Tax expense (benefit) on unrealized gains (losses) on available-for-sale

 

 

 

 

 

 

 

 

 

securities

 

(2,286)

 

1,499

 

(1,889)

 

3,877

 

Unrealized gains (losses) on available-for-sale securities, net of taxes

 

(4,159)

 

3,504

 

(3,251)

 

9,143

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedge:

 

 

 

 

 

 

 

 

 

Unrealized gains on cash flow hedge, pre-tax

 

13 

 

21

 

28 

 

38

 

Tax expense on unrealized gains on cash flow hedge

 

 

8

 

11 

 

15

 

Unrealized gains on cash flow hedge, net of taxes

 

 

13

 

17 

 

23

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

(4,151)

 

3,517

 

(3,234)

 

9,166

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS), NET OF TAX

 

1,005 

 

7,397

 

7,253 

 

17,051

 

 

 

 

 

 

 

 

 

Comprehensive income, net of tax, attributable to noncontrolling

 

 

 

 

 

 

 

 

 

 

interests:

 

 

 

 

 

 

 

 

Income from noncontrolling interests in subsidiaries

 

(124)

 

(32)

 

(236)

 

(336)

Other comprehensive (income) loss, net of tax, attributable to

 

 

 

 

 

 

 

 

 

noncontrolling interests:

 

 

 

 

 

 

 

 

 

Unrealized (gain) loss on available-for-sale securities, net of tax

 

33 

 

(82)

 

(10)

 

(213)

 

Other comprehensive (income) loss, net of tax, attributable to

 

 

 

 

 

 

 

 

 

noncontrolling interests

 

33 

 

(82)

 

(10)

 

(213)

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME, NET OF TAX,

 

 

 

 

 

 

 

 

 

ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

(91)

 

(114)

 

(246)

 

(549)

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS), NET OF TAX,

 

 

 

 

 

 

 

 

 

ATTRIBUTABLE TO IHC

$

914 

$

7,283 

$

7,007 

$

16,502 















See the accompanying Notes to Condensed Consolidated Financial Statements.




6



INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCUMULATED

 

 

 

 

 

 

 

NON-

 

 

 

 

 

 

 

 

OTHER

 

TREASURY

 

 

 

TOTAL IHC

 

CONTROLLING

 

 

 

 

COMMON

 

PAID-IN

 

COMPREHENSIVE

 

STOCK,

 

RETAINED

 

STOCKHOLDERS'

 

INTERESTS IN

 

TOTAL

 

 

STOCK

 

CAPITAL

 

INCOME

 

AT COST

 

EARNINGS

 

EQUITY

 

SUBSIDIARIES

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DECEMBER 31, 2014

$

18,531

$

127,098

$

22 

$

(12,141)

$

157,667 

$

291,177 

$

9,925 

$

301,102 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

10,251 

 

10,251 

 

236 

 

10,487 

Other comprehensive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

income, net of tax

 

 

 

 

 

(3,244)

 

 

 

 

 

(3,244)

 

10 

 

(3,234)

Repurchases of common stock

 

 

 

 

 

 

 

(739)

 

 

 

(739)

 

 

(739)

Common stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($.045 per share)

 

 

 

 

 

 

 

 

 

(783)

 

(783)

 

 

(783)

Acquisition of subsidiary

 

 

 

 

 

 

 

 

 

 

 

 

608 

 

608 

Purchases of noncontrolling

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

interests

 

 

 

112

 

 

 

 

 

 

117 

 

(1,851)

 

(1,734)

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses and related

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

tax benefits

 

22

 

221

 

 

 

 

 

 

 

243 

 

 

243 

Other capital transactions

 

 

 

20

 

 

 

 

 

(43)

 

(23)

 

44 

 

21 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JUNE 30, 2015

$

18,553

$

127,451

$

(3,217)

$

(12,880)

$

167,092 

$

296,999 

$

8,972 

$

305,971 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 













See the accompanying Notes to Condensed Consolidated Financial Statements.



7




INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 (In thousands)

 

 

 

Six Months Ended June 30,

 

 

2015

 

 

2014

CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

$

10,487 

 

$

7,885 

 

Adjustments to reconcile net income to net change in cash from

 

 

 

 

 

 

 operating  activities:

 

 

 

 

 

 

Amortization of deferred acquisition costs

 

2,888 

 

 

2,471 

 

Net realized investment gains

 

(4,100)

 

 

(6,070)

 

Equity income from equity method investments

 

(577)

 

 

(741)

 

Depreciation and amortization

 

1,572 

 

 

2,013 

 

Share-based compensation expenses

 

64 

 

 

683 

 

Deferred tax  expense

 

1,370 

 

 

1,885 

 

Other

 

2,218 

 

 

2,411 

  Changes in assets and liabilities:

 

 

 

 

 

 

Net (purchases) sales of trading securities

 

2,173 

 

 

(3,603)

 

Change in insurance liabilities

 

9,603 

 

 

(48,149)

 

Additions to deferred acquisition costs

 

(3,939)

 

 

(2,974)

 

Change in  amounts due from reinsurers

 

11,646 

 

 

48,580 

 

Change in premium and claim funds

 

47 

 

 

(1,882)

 

Change in current income tax liability

 

3,890 

 

 

4,702 

 

Change in due and unpaid premiums

 

(3,845)

 

 

153 

 

Change in other assets

 

1,084 

 

 

6,310 

 

Change in other liabilities

 

(2,031)

 

 

(6,303)

 

 

 

 

 

 

 

 

Net change in cash from operating activities

 

32,550 

 

 

7,371 

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED BY) INVESTING ACTIVITIES:

 

 

 

 

 

 

Net (purchases) sales of securities under resale and repurchase agreements

 

(6,639)

 

 

3,334 

 

Sales of equity securities

 

9,187 

 

 

288 

 

Purchases of equity securities

 

(4,423)

 

 

(998)

 

Sales of fixed maturities

 

377,835 

 

 

222,627 

 

Maturities and other repayments of fixed maturities

 

32,019 

 

 

28,007 

 

Purchases of fixed maturities

 

(437,826)

 

 

(254,891)

 

Acquisition of subsidiary, net of cash acquired

 

511 

 

 

 

Other investing activities

 

(693)

 

 

2,082 

 

 

 

 

 

 

 

Net change in cash from investing activities

 

(30,029)

 

 

449 

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED BY)  FINANCING ACTIVITIES:

 

 

 

 

 

 

Repurchases of common stock

 

(667)

 

 

(2,810)

 

Cash paid in acquisitions of noncontrolling interests

 

(1,734)

 

 

 

Withdrawals of investment-type insurance contracts

 

(1,191)

 

 

(1,555)

 

Dividends paid

 

(609)

 

 

(620)

 

Proceeds from exercise of stock options

 

133 

 

 

 

Other financing activities

 

11 

 

 

(433)

 

 

 

 

 

 

 

Net change in cash from financing activities

 

(4,057)

 

 

(5,418)

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(1,536)

 

 

2,402 

Cash and cash equivalents, beginning of year

 

25,083 

 

 

24,229 

 

 

 

 

 

 

Cash and cash equivalents, end of period

$

23,547 

 

$

26,631 







See the accompanying Notes to Condensed Consolidated Financial Statements.



8


INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)


Note 1.  

Organization, Consolidation, Basis of Presentation and Accounting Policies


(A)

Business and Organization


Independence Holding Company, a Delaware corporation (“IHC”), is a holding company principally engaged in the life and health insurance business through: (i) its insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life"),  Madison National Life Insurance Company, Inc. ("Madison National Life"), Independence American Insurance Company (“Independence American”); and (ii) its marketing and administrative companies, including IHC Risk Solutions, LLC, IHC Health Solutions, Inc., IHC Specialty Benefits Inc. and IHC Carrier Solutions, Inc.  IHC also owns a significant equity interest in a managing general underwriter (“MGU”) that writes medical stop-loss. Standard Security Life, Madison National Life and Independence American are sometimes collectively referred to as the “Insurance Group”. IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company", or “IHC”, or are implicit in the terms “we”, “us” and “our”.  


Geneve Corporation, a diversified financial holding company, and its affiliated entities, held 52.8% of IHC's outstanding common stock at June 30, 2015.

 

(B)

Consolidation


American Independence Corp.


American Independence Corp. (“AMIC”) is an insurance holding company engaged in the insurance and reinsurance business. During the first six months of 2015, IHC purchased shares of AMIC common stock thereby increasing its ownership interest in AMIC to approximately 92% as of June 30, 2015. At December 31, 2014, the Company owned approximately 90% of the outstanding common stock of AMIC. In the second quarter of 2015, AMIC acquired Global Accident Facilities, LLC (“GAF”). See Note 6 for more information regarding the acquisition of GAF.


Effects of Ownership Changes in Subsidiaries


The following table summarizes the effects of changes in the Company’s ownership interests in its subsidiaries on IHC’s equity for periods indicated (in thousands):


 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

Changes in IHC’s paid-in capital:

 

 

 

 

 

 

 

 

 

 

 

    Purchase of AMIC shares

$

-

 

$

-

 

$

(199)

 

$

-

    Purchase remaining IPA Family, LLC interests

 

311

 

 

-

 

 

311 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

    Net transfers from noncontrolling interests

$

311

 

$

-

 

$

112 

 

$

-


 (C)

Basis of Presentation


The Condensed Consolidated Financial Statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the



9


information and footnotes required by U.S. GAAP for complete financial statements. The Condensed Consolidated Financial Statements are unaudited and include the accounts of IHC and its consolidated subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect:  (i) the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and (ii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. IHC’s annual report on Form 10-K as filed with the Securities and Exchange Commission should be read in conjunction with the accompanying Condensed Consolidated Financial Statements.


In the opinion of management, all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods have been included. The condensed consolidated results of operations for the three months and six months ended June 30, 2015 are not necessarily indicative of the results to be anticipated for the entire year.


(D)

Reclassifications


Certain amounts in prior year’s Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2015 presentation.


(E)

Recent Accounting Pronouncements


Recently Adopted Accounting Standards


In April 2014, the FASB issued guidance: (i) improving the definition of discontinued operations by limiting the reporting of discontinued operations to disposals of components that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results; and (ii) requiring expanded disclosures for discontinued operations. The adoption of this guidance did not have any effect on the Company’s consolidated financial statements.


Recently Issued Accounting Standards Not Yet Adopted


In May 2015, the FASB issued guidance requiring additional disclosures for short-duration contracts regarding the liability for unpaid claims and claim adjustment expenses. For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. The adoption of this guidance is not expected to have a significant effect on the Company’s consolidated financial statements.


In February 2015, the FASB issued guidance that modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities for the purpose of consolidation. For public entities, this guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. Early adoption is permitted. Management has not yet determined the impact that the adoption of this guidance will have on the Company’s consolidated financial statements.


In June 2014, the FASB issued explicit guidance for entities that grant their employees share-based payments in which the terms of the award include a performance target that affects vesting and could be achieved after the requisite service period.  This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Earlier adoption is permitted. The guidance may be applied either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial



10


statements.


In May 2014, the FASB issued revenue recognition guidance for entities that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards such as insurance contracts or lease contracts. The amendment provides specific steps that an entity should apply in order to achieve its main objective which is recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities, this guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and requires one of two specified retrospective methods of application. Early application is prohibited. Management has not yet determined the impact that the adoption of this guidance will have on the Company’s consolidated financial statements.


Note 2.

Income Per Common Share


Diluted earnings per share was computed using the treasury stock method and includes incremental common shares, primarily from the dilutive effect of share-based payment awards, amounting to 163,000 and 165,000 shares for the three months and six months ended June 30, 2015, respectively; and 172,000 and 156,000 shares for the three months and six months ended June 30, 2014, respectively.


Note  3.

Investment Securities


The cost (amortized cost with respect to certain fixed maturities), gross unrealized gains, gross unrealized losses and fair value of investment securities are as follows for the periods indicated (in thousands):


 

 

June 30, 2015

 

 

 

 

GROSS

 

GROSS

 

 

 

 

AMORTIZED

 

UNREALIZED

 

UNREALIZED

 

FAIR

 

 

COST

 

GAINS

 

LOSSES

 

VALUE

 

 

 

 

 

 

 

 

 

FIXED MATURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Corporate securities

$

168,186

$

423

$

(5,256)

$

163,353

CMOs - residential (1)

 

3,385

 

4

 

(19)

 

3,370

CMOs - commercial

 

975

 

258

 

 

1,233

U.S. Government obligations

 

221,768

 

415

 

(25)

 

222,158

Agency MBS - residential (2)

 

50

 

2

 

 

52

GSEs (3)

 

12,086

 

18

 

(64)

 

12,040

States and political subdivisions

 

200,708

 

1,887

 

(2,633)

 

199,962

Foreign government obligations

 

1,847

 

9

 

 

1,856

Redeemable preferred stocks

 

4,036

 

196

 

 

4,232

 

 

 

 

 

 

 

 

 

Total fixed maturities

$

613,041

$

3,212

$

(7,997)

$

608,256


EQUITY SECURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Common stocks

$

5,154

$

-

$

(263)

$

4,891

Nonredeemable preferred stocks

 

4,004

 

156

 

 

4,160

 

 

 

 

 

 

 

 

 

Total equity securities

$

9,158

$

156

$

(263)

$

9,051




11



 

 

December 31, 2014

 

 

 

 

GROSS

 

GROSS

 

 

 

 

AMORTIZED

 

UNREALIZED

 

UNREALIZED

 

FAIR

 

 

COST

 

GAINS

 

LOSSES

 

VALUE

 

 

 

 

 

 

 

 

 

FIXED MATURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Corporate securities

$

264,162

$

1,076

$

(3,314)

$

261,924

CMOs - residential (1)

 

5,073

 

55

 

(22)

 

5,106

CMOs - commercial

 

975

 

-

 

(22)

 

953

U.S. Government obligations

 

22,766

 

126

 

 

22,892

Agency MBS - residential (2)

 

65

 

4

 

 

69

GSEs (3)

 

14,706

 

36

 

(86)

 

14,656

States and political subdivisions

 

238,514

 

3,253

 

(2,386)

 

239,381

Foreign government obligations

 

34,863

 

136

 

(299)

 

34,700

Redeemable preferred stocks

 

4,036

 

163

 

 

4,199

 

 

 

 

 

 

 

 

 

Total fixed maturities

$

585,160

$

4,849

$

(6,129)

$

583,880


EQUITY SECURITIES

 

 

 

 

 

 

 

 

AVAILABLE-FOR-SALE:

 

 

 

 

 

 

 

 

Common stocks

$

8,452

$

1,452

$

(147)

$

9,757

Nonredeemable preferred stocks

 

4,004

 

134

 

 

4,138

 

 

 

 

 

 

 

 

 

Total equity securities

$

12,456

$

1,586

$

(147)

$

13,895


(1)

Collateralized mortgage obligations (“CMOs”).

(2)

Mortgage-backed securities (“MBS”).

(3)

Government-sponsored enterprises (“GSEs”) are private enterprises established and chartered by the Federal Government or its various insurance and lease programs which carry the full faith and credit obligation of the U.S. Government.


The amortized cost and fair value of fixed maturities available-for-sale at June 30, 2015, by contractual maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or repayment penalties. CMOs and MBSs are shown separately, as they are not due at a single maturity.


 

 

 

AMORTIZED

 

 

FAIR

 

 

 

COST

 

 

VALUE

 

 

 

 

 

 

 

Due in one year or less

 

$

3,881

 

$

3,893

Due after one year through five years

 

 

275,912

 

 

275,874

Due after five years through ten years

 

 

97,880

 

 

96,774

Due after ten years

 

 

219,879

 

 

216,042

CMOs and MBSs

 

 

15,489

 

 

15,673

 

 

 

 

 

 

 

 

 

$

613,041

 

$

608,256




12


The following tables summarize, for all available-for-sale securities in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time those securities that have continuously been in an unrealized loss position for the periods indicated (in thousands):


 

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

Unrealized

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

$

98,506

 

$

3,527

 

$

32,146

 

$

1,729

 

$

130,652

$

5,256

CMOs - residential

 

2,030

 

 

19

 

 

-

 

 

-

 

 

2,030

 

19

U.S. Government obligations

 

196,800

 

 

25

 

 

-

 

 

-

 

 

196,800

 

25

GSEs

 

7,853

 

 

30

 

 

3,133

 

 

34

 

 

10,986

 

64

States and political subdivisions

 

87,890

 

 

1,081

 

 

42,539

 

 

1,552

 

 

130,429

 

2,633

   Total fixed maturities

 

393,079

 

 

4,682

 

 

77,818

 

 

3,315

 

 

470,897

 

7,997

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

4,891

 

 

263

 

 

-

 

 

-

 

 

4,891

 

263

   Total equity securities

 

4,891

 

 

263

 

 

-

 

 

-

 

 

4,891

 

263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Total temporarily impaired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       securities

$

397,970

 

$

4,945

 

$

77,818

 

$

3,315

 

$

475,788

$

8,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of securities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   unrealized loss position

 

80

 

 

 

 

 

26

 

 

 

 

 

106

 

 


 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

Less than 12 Months

 

 

12 Months or Longer

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair

 

 

Unrealized

 

 

Fair

 

 

Unrealized

 

 

Fair

 

Unrealized

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

$

77,868

 

$

1,473

 

$

69,498

 

$

1,841

 

$

147,366

$

3,314

CMO’s  - residential

 

2,062

 

 

16

 

 

1,562

 

 

6

 

 

3,624

 

22

CMOs - commercial

 

-

 

 

-

 

 

953

 

 

22

 

 

953

 

22

GSEs

 

-

 

 

-

 

 

9,581

 

 

86

 

 

9,581

 

86

States and political subdivisions

 

58,819

 

 

744

 

 

67,318

 

 

1,642

 

 

126,137

 

2,386

Foreign government obligations

 

21,148

 

 

171

 

 

12,229

 

 

128

 

 

33,377

 

299

   Total fixed maturities

 

159,897

 

 

2,404

 

 

161,141

 

 

3,725

 

 

321,038

 

6,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stocks

 

2,007

 

 

136

 

 

348

 

 

11

 

 

2,355

 

147

   Total equity securities

 

2,007

 

 

136

 

 

348

 

 

11

 

 

2,355

 

147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Total temporarily impaired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

       securities

$

161,904

 

$

2,540

 

$

161,489

 

$

3,736

 

$

323,393

$

6,276

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of securities in an

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   unrealized loss position

 

70

 

 

 

 

 

46

 

 

 

 

 

116

 

 


Substantially all of the unrealized losses on fixed maturities available-for-sale at June 30, 2015 and December 31, 2014 relate to investment grade securities and are attributable to changes in market interest rates. Because the Company does not intend to sell, nor is it more likely than not that the Company will have to sell such investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2015.




13


Net realized investment gains (losses) are as follows for periods indicated (in thousands):


 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

   Fixed maturities

$

2,114 

$

4,014 

$

3,414 

$

5,491 

   Common stocks

 

 

 

1,465 

 

   Preferred stocks

 

 

(5)

 

 

(5)

      Total  available-for-sale securities

 

2,114 

 

4,009 

 

4,879 

 

5,486 

 

 

 

 

 

 

 

 

 

Trading securities

 

86

 

25 

 

(421)

 

30 

      Total realized gains (losses)

 

2,200 

 

4,034 

 

4,458 

 

5,516 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on trading securities:

 

 

 

 

 

 

 

 

   Change in unrealized gains (losses) on trading securities

 

(101)

 

483 

 

(352)

 

552 

      Total unrealized gains (losses)  on trading securities

 

(101)

 

483 

 

(352)

 

552 

 

 

 

 

 

 

 

 

 

Gain (losses) on other investments

 

1

 

 

(6)

 

 

 

 

 

 

 

 

 

 

Net realized investment gains

$

2,100 

$

4,519 

$

4,100 

$

6,070 


For the three months and six months ended June 30, 2015, proceeds from sales of available-for-sale securities were $279,598,000 and $386,013,000, respectively, and the Company realized gross gains of $2,659,000 and $5,773,000, respectively, and gross losses of $460,000 and $642,000, respectively, as a result of those sales. For the three months and six months ended June 30, 2014, proceeds from sales of available-for-sale securities were $127,977,000 and $225,527,000, respectively, and the Company realized gross gains of $3,999,000 and $6,604,000, respectively, and gross losses of $122,000 and $541,000, respectively, as a result of those sales.


Other-Than-Temporary Impairment Evaluations


We recognize other-than-temporary impairment losses in earnings in the period that we determine: 1) we intend to sell the security; 2) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis; or 3) the security has a credit loss. Any non-credit portion of the other-than-temporary impairment loss is recognized in other comprehensive income (loss). See Note 1G(iv) to the Consolidated Financial Statements in the 2014 Annual Report for further discussion of the factors considered by management in its regular review to identify and recognize other-than-temporary impairments on available-for-sale securities. The Company did not recognize any other-than-temporary impairments on available-for-sale securities in 2015 or 2014.




14


Credit losses were recognized on certain fixed maturities for which each security also had an impairment loss recognized in other comprehensive income (loss). The rollforward of these credit losses were as follows for the periods indicated (in thousands):


 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

Balance at beginning of year

$

473

$

473

$

473

$

473

Additional credit losses for which an other-than-

 

 

 

 

 

 

 

 

    temporary loss was previously recognized

 

-

 

-

 

-

 

-

Securities sold

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

Balance at end of period

$

473

$

473

$

473

$

473


The after-tax portion of other-than-temporary impairments included in accumulated other comprehensive income (loss) at both June 30, 2015 and December 31, 2014 consists of $335,000 related to CMO securities.


Note 4.

Cash Flow Hedge


In connection with its outstanding amortizing term loan, a subsidiary of IHC entered into an interest rate swap on July 1, 2011 with the commercial bank lender, for a notional amount equal to the debt principal amount ($4,000,000 at both June 30, 2015 and December 31, 2014), under which the Company receives a variable rate equal to the rate on the debt and pays a fixed rate (1.60%) in order to manage the risk in overall changes in cash flows attributable to forecasted interest payments. As a result of the interest rate swap, interest payments on this debt are fixed at 4.95%. There was no hedge ineffectiveness on this interest rate swap which was accounted for as a cash flow hedge. At June 30, 2015 and December 31, 2014, the fair value of interest rate swap was $55,000 and $83,000, respectively, which is included in other liabilities on the accompanying Condensed Consolidated Balance Sheets. See Note 5 for further discussion on the valuation techniques utilized to determine the fair value of the interest rate swap.


Note 5.

Fair Value Disclosures


For all financial and non-financial assets and liabilities accounted for at fair value on a recurring basis, the Company utilizes valuation techniques based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market expectations. These two types of inputs create the following fair value hierarchy:


Level 1 - Quoted prices for identical instruments in active markets.


Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.


Level 3 - Instruments where significant value drivers are unobservable.


The following section describes the valuation methodologies we use to measure different assets at fair value.

  

Investments in fixed maturities and equity securities:

  

Available-for-sale securities included in Level 1 are equities with quoted market prices. Level 2 is primarily comprised of our portfolio of government securities, agency mortgage-backed securities,



15


corporate fixed income securities, foreign government obligations, collateralized mortgage obligations, municipals and GSEs that were priced with observable market inputs. Level 3 securities consist primarily of CMO securities backed by commercial mortgages and municipal tax credit strips.  For these securities, we use industry-standard pricing methodologies, including discounted cash flow models, whose inputs are based on management’s assumptions and available market information. Significant unobservable inputs used in the fair value measurement of CMO’s are prepayment rates, probability of default, and loss severity in the event of default. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for loss severity and a directionally opposite change in the assumption used for prepayment rates. Further we retain independent pricing vendors to assist in valuing certain instruments.


Trading securities:


Trading securities included in Level 1 are equity securities with quoted market prices.


Interest rate swap:

  

The financial liability included in Level 2 consists of an interest rate swap on IHC debt.  It is valued using market observable inputs including market price, interest rate, and volatility within a Black Scholes model.


The following tables present our financial assets and liabilities measured at fair value on a recurring basis for the periods indicated (in thousands):


 

 

June 30, 2015

 

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

 

 

 

 

 

FINANCIAL ASSETS:

 

 

 

 

 

 

 

 

 

Fixed maturities available-for-sale:

 

 

 

 

 

 

 

 

 

   Corporate securities

$

-

 

$

163,353

$

-

$

163,353

   CMOs - residential

 

-

 

 

3,370

 

-

 

3,370

   CMOs - commercial

 

-

 

 

-

 

1,233

 

1,233

   US Government obligations

 

-

 

 

222,158

 

-

 

222,158

   Agency MBS - residential

 

-

 

 

52

 

-

 

52

   GSEs

 

-

 

 

12,040

 

-

 

12,040

   States and political subdivisions

 

-

 

 

197,714

 

2,248

 

199,962

   Foreign government obligations

 

-

 

 

1,856

 

-

 

1,856

   Redeemable preferred stocks

 

4,232

 

 

-

 

-

 

4,232

      Total fixed maturities

 

4,232

 

 

600,543

 

3,481

 

608,256

 

 

 

 

 

 

 

 

 

 

Equity securities available-for-sale:

 

 

 

 

 

 

 

 

 

   Common stocks

 

4,891

 

 

-

 

-

 

4,891

   Nonredeemable preferred stocks

 

4,160

 

 

-

 

-

 

4,160

      Total equity securities

 

9,051

 

 

-

 

-

 

9,051

 

 

 

 

 

 

 

 

 

 

Trading securities - equities

 

9,242

 

 

-

 

-

 

9,242

       Total trading securities

 

9,242

 

 

-

 

-

 

9,242

 

 

 

 

 

 

 

 

 

 

Total Financial Assets

$

22,525

 

$

600,543

$

3,481

$

626,549

 

 

 

 

 

 

 

 

 

 

FINANCIAL LIABILITIES:

 

 

 

 

 

 

 

 

 

   Interest rate swap

$

-

 

$

55

$

-

$

55




16



 

 

December 31, 2014

 

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

 

 

 

 

 

 

 

 

 

FINANCIAL ASSETS:

 

 

 

 

 

 

 

 

 

Fixed maturities available-for-sale:

 

 

 

 

 

 

 

 

 

   Corporate securities

$

-

 

$

261,924

$

-

$

261,924

   CMOs – residential

 

-

 

 

5,106

 

-

 

5,106

   CMOs – commercial

 

-

 

 

-

 

953

 

953

   US Government obligations

 

-

 

 

22,892

 

-

 

22,892

   Agency MBS - residential

 

-

 

 

69

 

-

 

69

   GSEs

 

-

 

 

14,656

 

-

 

14,656

   States and political subdivisions

 

-

 

 

237,067

 

2,314

 

239,381

   Foreign government

 

-

 

 

34,700

 

-

 

34,700

   Redeemable preferred stocks

 

4,199

 

 

-

 

-

 

4,199

      Total fixed maturities

 

4,199

 

 

576,414

 

3,267

 

583,880

 

 

 

 

 

 

 

 

 

 

Equity securities available-for-sale:

 

 

 

 

 

 

 

 

 

   Common stocks

 

9,757

 

 

-

 

-

 

9,757

   Nonredeemable preferred stocks

 

4,138

 

 

-

 

-

 

4,138

      Total equity securities

 

13,895

 

 

-

 

-

 

13,895

 

 

 

 

 

 

 

 

 

 

Trading securities - equities

 

11,095

 

 

-

 

-

 

11,095

       Total trading securities

 

11,095

 

 

-

 

-

 

11,095

 

 

 

 

 

 

 

 

 

 

Total Financial Assets

$

29,189

 

$

576,414

$

3,267

$

608,870

 

 

 

 

 

 

 

 

 

 

FINANCIAL LIABILITIES:

 

 

 

 

 

 

 

 

 

   Interest rate swap

$

-

 

$

83

$

-

$

83


It is the Company’s policy to recognize transfers of assets and liabilities between levels of the fair value hierarchy at the end of a reporting period. The Company does not transfer out of Level 3 and into Level 2 until such time as observable inputs become available and reliable or the range of available independent prices narrow. The Company did not transfer any securities between Level 1, Level 2 or Level 3 in either 2015 or 2014. The following table presents the changes in fair value of our Level 3 financial instruments for the periods indicated (in thousands):


 

 

Three Months Ended June  30, 2015

 

 

 

 

States and

 

 

 

 

CMOs

 

Political

 

 

 

 

Commercial

 

Subdivisions

 

Total

 

 

 

 

 

 

 

Beginning balance

$

1,016

$

2,281 

$

3,297 

 

 

 

 

 

 

 

Gains (losses) included in other comprehensive income (loss):

 

 

 

 

 

 

    Net unrealized gains (losses)

 

217

 

(12)

 

205 

 

 

 

 

 

 

 

Repayments and amortization of fixed maturities

 

-

 

(21)

 

(21)

 

 

 

 

 

 

 

Balance at end of period

$

1,233

$

2,248 

$

3,481 




17



 

 

Three Months Ended June 30, 2014

 

 

 

 

States and

 

 

 

 

CMOs

 

Political

 

 

 

 

Commercial

 

Subdivisions

 

Total

 

 

 

 

 

 

 

Beginning balance

$

869

$

2,410 

$

3,279 

 

 

 

 

 

 

 

Gains (losses) included in other comprehensive income (loss):

 

 

 

 

 

 

    Net unrealized gains (losses)

 

37

 

(15)

 

22 

 

 

 

 

 

 

 

Repayments and amortization of fixed maturities

 

-

 

(16)

 

(16)

 

 

 

 

 

 

 

Balance at end of period

$

906

$

2,379 

$

3,285 


 

 

Six Months Ended June 30, 2015

 

 

 

 

States and

 

 

 

 

CMOs

 

Political

 

 

 

 

Commercial

 

Subdivisions

 

Total

 

 

 

 

 

 

 

Beginning balance

$

953

$

2,314 

$

3,267 

 

 

 

 

 

 

 

Gains (losses) included in other comprehensive income (loss):

 

 

 

 

 

 

    Net unrealized gains (losses)

 

280

 

(25)

 

255 

 

 

 

 

 

 

 

Repayments and amortization of fixed maturities

 

-

 

(41)

 

(41)

 

 

 

 

 

 

 

Balance at end of period

$

1,233

$

2,248 

$

3,481 


 

 

Six Months Ended June 30, 2014

 

 

 

 

States and

 

 

 

 

CMOs

 

Political

 

 

 

 

Commercial

 

Subdivisions

 

Total

 

 

 

 

 

 

 

Beginning balance

$

593

$

2,441 

$

3,034 

 

 

 

 

 

 

 

Gains (losses) included in other comprehensive income (loss):

 

 

 

 

 

 

    Net unrealized gains (losses)

 

313

 

(31)

 

282 

 

 

 

 

 

 

 

Repayments and amortization of fixed maturities

 

-

 

(31)

 

(31)

 

 

 

 

 

 

 

Balance at end of period

$

906

$

2,379 

$

3,285 


The following table provides carrying values, fair values and classification in the fair value hierarchy of the Company’s financial instruments, for the periods indicated, that are not carried at fair value but are subject to fair value disclosure requirements, for the periods indicated (in thousands):

 

 

 

June 30, 2015

 

December 31, 2014

 

 

Level 2

 

 

 

 

Level 2