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 March 31, 2006



[   ]

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

For the transition period from: ________ to _________



Commission File Number: 0-10306



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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|                                                                                                                             
|-----------------------------------------------------------------------------------------------------------------------------
|Large Accelerated Filer [    ]                    Accelerated Filer [ X ]                      Non-Accelerated Filer   [    ]



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 May  9, 2006
|Common stock, $ 1.00  par value | 14,791,139 Shares          













INDEPENDENCE HOLDING COMPANY



INDEX





|                               |                                                                        |                                                        |   |  |  | 
|------------------------------ | ---------------------------------------------------------------------- | ------------------------------------------------------ | - |  |  | 
|PART I  FINANCIAL INFORMATION | PAGE                                                                  
|                               |                                                                        | NO.                                                   
|                               |                                                                       
|                               | Item 1. Financial Statements                                           |                                                       
|                               |                                                                        |                                                       
|                               |                                                                        | Consolidated Balance Sheets -                          |  
|                               |                                                                        | March 31, 2006 (unaudited) and December 31, 2005       | 3
|                               |                                                                       
|                               |                                                                        | Consolidated Statements of Operations -                |  
|                               |                                                                        | Three Months Ended March 31, 2006 and 2005 (unaudited) | 4
|                               |                                                                        |                                                       
|                               |                                                                        | Consolidated Statements of Cash Flows -                |  
|                               |                                                                        | Three Months Ended March 31, 2006 and 2005 (unaudited) | 5
|                               |                                                                       
|                               | Notes to Consolidated Financial Statements (unaudited)                 | 6                                                     
|                               |                                                                       
|                               | Item 2. Management's Discussion and Analysis of Financial Condition    | 14                                                    
|                               |                                                                        | and Results of Operations                              |  
|                               |                                                                       
|                               | Item 3. Quantitative and Qualitative Disclosures about Market Risk     | 22                                                    
|                               |                                                                       
|                               | Item 4. Controls and Procedures                                        | 22                                                    
|                               |                                                                       
|PART II - OTHER INFORMATION    |                                                                       
|                               |                                                                       
|                               | Item 1.    Legal Proceedings                                           | 23                                                    
|                               |                                                                        |                                                       
|                               | Item 1A. Risk Factors                                                  | 23                                                    
|                               |                                                                        |                                                       
|                               | Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds | 23                                                    
|                               |                                                                        |                                                       
|                               | Item 3.    Defaults Upon Senior Securities                             | 23                                                    
|                               |                                                                        |                                                       
|                               | Item 4.    Submission of Matters to a Vote of Security Holders         | 23                                                    
|                               |                                                                        |                                                       
|                               | Item 5.    Other Information                                           | 23                                                    
|                               |                                                                       
|                               | Item 6.    Exhibits                                                    | 24                                                    
|                               |                                                                       
|                               | Signatures                                                             | 25                                                    
|                               |                                                                        |                                                        |  



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



2







PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements



|                                             
|---------------------------------------------
|INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
|CONSOLIDATED BALANCE SHEETS                  
|(In thousands, except share data)            



|                                      |                                                             |              |  |             |           |         |  |              |           |         |  | 
|------------------------------------- | ----------------------------------------------------------- | ------------ |  | ----------- | --------- | ------- |  | ------------ | --------- | ------- |  | 
|                                      |                                                             |              |  | March 31,   |           |         |  | December 31,
|                                      |                                                             |              |  | 2006        |           |         |  | 2005        
|                                      |                                                             |              |  | (unaudited) |           |         |  |             
|ASSETS:                               |                                                             |              |  |             |           |         |  |             
|                                      | Investments:                                                |              |  |             |           |         |  |              |          
|                                      | Short-term investments                                      |              |  | $           | 638       |         |  | $            | 8,810    
|                                      | Securities purchased under agreements to resell             |              |  |             | 6,052     |         |  |              | 44,399   
|                                      | Fixed maturities                                            |              |  |             | 679,902   |         |  |              | 683,008  
|                                      | Equity securities                                           |              |  |             | 70,613    |         |  |              | 62,300   
|                                      | Other investments                                           |              |  |             | 57,297    |         |  |              | 57,287   
|                                      |                                                             |              |  |             |           |         |  |             
|                                      | Total investments                                           |              |  |             | 814,502   |         |  |              | 855,804  
|                                      |                                                             |              |  |             |           |         |  |             
|                                      | Cash and cash equivalents                                   |              |  |             | 17,837    |         |  |              | 12,659   
|                                      | Due from securities brokers                                 |              |  |             | 16        |         |  |              | 1,951    
|                                      | Investment in American Independence Corp. ("AMIC")          |              |  |             | 38,975    |         |  |              | 39,167   
|                                      | Deferred acquisition costs                                  |              |  |             | 61,625    |         |  |              | 62,000   
|                                      | Due and unpaid premiums                                     |              |  |             | 11,234    |         |  |              | 12,230   
|                                      | Due from reinsurers                                         |              |  |             | 108,107   |         |  |              | 111,135  
|                                      | Notes and other receivables                                 |              |  |             | 13,502    |         |  |              | 12,102   
|                                      | Goodwill                                                    |              |  |             | 45,958    |         |  |              | 16,110   
|                                      | Other assets                                                |              |  |             | 42,313    |         |  |              | 27,765   
|                                      |                                                             |              |  |             |           |         |  |             
|                                      | Total assets                                                |              |  | $           | 1,154,069 |         |  | $            | 1,150,923
|                                      |                                                             |              |  |             |           |         |  |             
|LIABILITIES AND STOCKHOLDERS' EQUITY: |                                                             |              |  |             |           |         |  |             
|LIABILITIES:                          |                                                             |              |  |             |           |         |  |             
|                                      | Insurance reserves-health                                   |              |  | $           | 156,201   |         |  | $            | 159,600  
|                                      | Insurance reserves-life and annuity                         |              |  |             | 272,394   |         |  |              | 273,449  
|                                      | Funds on deposit                                            |              |  |             | 376,064   |         |  |              | 370,701  
|                                      | Unearned premiums                                           |              |  |             | 20,170    |         |  |              | 18,524   
|                                      | Policy claims-life                                          |              |  |             | 7,909     |         |  |              | 8,742    
|                                      | Policy claims-health                                        |              |  |             | 5,825     |         |  |              | 4,839    
|                                      | Other policyholders' funds                                  |              |  |             | 17,630    |         |  |              | 18,350   
|                                      | Due to securities brokers                                   |              |  |             | -         |         |  |              | 4,856    
|                                      | Due to reinsurers                                           |              |  |             | 10,381    |         |  |              | 11,667   
|                                      | Accounts payable, accruals and other liabilities            |              |  |             | 28,682    |         |  |              | 30,798   
|                                      | Debt                                                        |              |  |             | 12,500    |         |  |              | 12,500   
|                                      | Junior subordinated debt securities                         |              |  |             | 38,146    |         |  |              | 38,146   
|                                      |                                                             |              |  |             |           |         |  |             
|                                      | Total liabilities                                           |              |  |             | 945,902   |         |  |              | 952,172  
|                                      |                                                             |              |  |             |           |         |  |             
|STOCKHOLDERS' EQUITY:                 |                                                             |              |  |             |           |         |  |             
|                                      | Preferred stock (none issued)                               |              |  |             | -         |         |  |              | -        
|                                      | Common stock $1.00 par value, 20,000,000 shares authorized; |              |  |             |           |         |  |              |          
|                                      | 14,852,979 and 14,235,066 shares issued, respectively;      |              |  |             |           |         |  |              |          
|                                      | 14,766,482  and 14,132,149 shares outstanding, respectively |              |  |             | 14,853    |         |  |              | 14,235   
|                                      | Paid-in capital                                             |              |  |             | 91,575    |         |  |              | 78,554   
|                                      | Accumulated other comprehensive loss                        |              |  |             | (16,742)  |         |  |              | (8,414)  
|                                      | Treasury stock, at cost; 86,497 and 102,917 shares,         |              |  |             |           |         |  |              |          
|                                      |                                                             | respectively |  |             |           | (1,532) |  |              |           | (1,829)
|                                      | Retained earnings                                           |              |  |             | 120,013   |         |  |              | 116,205  
|                                      |                                                             |              |  |             |           |         |  |             
|                                      | Total stockholders' equity                                  |              |  |             | 208,167   |         |  |              | 198,751  
|                                      |                                                             |              |  |             |           |         |  |              |          
|                                      | Total liabilities and stockholders' equity                  |              |  | $           | 1,154,069 |         |  | $            | 1,150,923





The accompanying notes are an integral part of these consolidated financial statements.



3









|                                             
|---------------------------------------------
|INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
|CONSOLIDATED STATEMENTS OF OPERATIONS        
|(In thousands, except per share data)        
|(Unaudited)                                  



|                                            |                                              |                    |        |        |        |  | 
|------------------------------------------- | -------------------------------------------- | ------------------ | ------ | ------ | ------ |  | 
|                                            |                                              | Three Months Ended
|                                            |                                              | March 31,         
|                                            |                                              | 2006               |        | 2005  
|                                            |                                              |                    |        |       
|REVENUES:                                   |                                              |                    |        |       
|                                            | Premiums earned:                             |                    |        |        |       
|                                            | Health                                       | $                  | 55,373 | $      | 39,708
|                                            | Life and annuity                             |                    | 10,915 |        | 9,720 
|                                            | Net investment income                        |                    | 11,931 |        | 9,499 
|                                            | Fee income                                   |                    | 7,411  |        | 2,117 
|                                            | Net realized and unrealized gains            |                    | 417    |        | 248   
|                                            | Equity income from AMIC                      |                    | 176    |        | 477   
|                                            | Other income                                 |                    | 617    |        | 3,904 
|                                            |                                              | 86,840             |        | 65,673
|                                            |                                              |                    |        |       
|                                            |                                              |                    |        |       
|EXPENSES:                                   |                                              |                    |        |       
|                                            | Insurance benefits, claims and reserves:     |                    |        |        |       
|                                            | Health                                       |                    | 37,296 |        | 25,757
|                                            | Life and annuity                             |                    | 12,884 |        | 10,904
|                                            | Selling, general and administrative expenses |                    | 27,149 |        | 16,508
|                                            | Amortization of deferred acquisition  costs  |                    | 2,518  |        | 2,651 
|                                            | Interest expense on debt                     |                    | 903    |        | 845   
|                                            |                                              |                    |        |       
|                                            |                                              | 80,750             |        | 56,665
|                                            |                                              |                    |        |       
|                                            | Income before income taxes                   |                    | 6,090  |        | 9,008 
|                                            | Income tax expense                           |                    | 2,061  |        | 3,256 
|                                            |                                              |                    |        |       
|                                            | Net income                                   | $                  | 4,029  | $      | 5,752 
|                                            |                                              |                    |        |       
|Basic income per common share               | $                                            | .28                | $      | .41   
|                                            |                                              |                    |        |       
|Weighted average shares outstanding         |                                              | 14,495             |        | 14,009
|                                            |                                              |                    |        |       
|Diluted income per common share             | $                                            | .27                | $      | .40   
|                                            |                                              |                    |        |       
|Weighted average diluted shares outstanding |                                              | 14,869             |        | 14,332





















The accompanying notes are an integral part of these consolidated financial statements.



4





|                                             
|---------------------------------------------
|INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
|CONSOLIDATED STATEMENTS OF CASH FLOWS        
|(In thousands)                               
|(Unaudited)                                  



|                                                        |                                                                   |                    |           |   |        |           |  |  | 
|------------------------------------------------------- | ----------------------------------------------------------------- | ------------------ | --------- | - | ------ | --------- |  |  | 
|                                                        |                                                                   | Three Months Ended
|                                                        |                                                                   | March 31,         
|                                                        |                                                                   | 2006               |           |   | 2005  
|CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:  |                                                                   |                    |           |   |       
|                                                        | Net income                                                        | $                  | 4,029     |   | $      | 5,752    
|                                                        | Adjustments to reconcile net income to net change in cash from    |                    |           |   |        |          
|                                                        | operating  activities:                                            |                    |           |   |        |          
|                                                        | Amortization of deferred acquisition costs                        |                    | 2,518     |   |        | 2,651    
|                                                        | Net realized and unrealized gains                                 |                    | (417)     |   |        | (248)    
|                                                        | Equity income from AMIC and other equity method investments       |                    | (342)     |   |        | (1,327)  
|                                                        | Depreciation and amortization                                     |                    | 577       |   |        | 378      
|                                                        | Share-based compensation expenses                                 |                    | 336       |   |        | -        
|                                                        | Deferred tax expense                                              |                    | 71        |   |        | 2,261    
|                                                        | Other                                                             |                    | 288       |   |        | 379      
|Changes in assets and liabilities:                      |                                                                   |                    |           |   |       
|                                                        | Net sales of trading securities                                   |                    | 163       |   |        | 201      
|                                                        | Change in insurance liabilities                                   |                    | (3,983)   |   |        | 3,692    
|                                                        | Deductions from (additions to) deferred acquisition costs         |                    | 801       |   |        | (6,565)  
|                                                        | Change in net amounts due from and to reinsurers                  |                    | 1,743     |   |        | 2,208    
|                                                        | Change in income tax liability                                    |                    | 178       |   |        | (504)    
|                                                        | Change in due and unpaid premiums                                 |                    | 997       |   |        | (685)    
|                                                        | Other                                                             |                    | (9,163)   |   |        | (8,917)  
|                                                        |                                                                   |                    |           |   |       
|                                                        | Net change in cash from operating activities                      |                    | (2,204)   |   |        | (724)    
|                                                        |                                                                   |                    |           |   |       
|CASH FLOWS PROVIDED BY (USED BY) INVESTING ACTIVITIES:  |                                                                   |                    |           |   |       
|                                                        | Change in net amount due from and to securities brokers           |                    | (2,922)   |   |        | (3,598)  
|                                                        | Net proceeds of short-term investments                            |                    | 8,180     |   |        | 36       
|                                                        | Net sales of securities under resale and repurchase agreements    |                    | 38,347    |   |        | 37,107   
|                                                        | Sales of equity securities                                        |                    | 7,282     |   |        | 3,229    
|                                                        | Purchases of equity securities                                    |                    | (14,930)  |   |        | (14,400) 
|                                                        | Sales of fixed maturities                                         |                    | 97,441    |   |        | 143,918  
|                                                        | Maturities of fixed maturities                                    |                    | -         |   |        | 3,915    
|                                                        | Purchases of fixed maturities                                     |                    | (110,210) |   |        | (166,984)
|                                                        | Proceeds of sales of other investments                            |                    | -         |   |        | 4,214    
|                                                        | Additional investments in other investments, net of distributions |                    | (220)     |   |        | (976)    
|                                                        | Cash paid in acquisitions of companies, net of cash acquired      |                    | (20,950)  |   |        | (10,200) 
|                                                        | Investment in AMIC                                                |                    | -         |   |        | (69)     
|                                                        | Cash paid for acquisition of policy blocks                        |                    | (224)     |   |        | -        
|                                                        | Change in notes and other receivables                             |                    | (1,639)   |   |        | (1,927)  
|                                                        | Other                                                             |                    | (1,011)   |   |        | 586      
|                                                        |                                                                   |                    |           |   |       
|                                                        | Net change in cash from investing activities                      |                    | (856)     |   |        | (5,149)  
|                                                        |                                                                   |                    |           |   |       
|CASH FLOWS PROVIDED BY (USED BY)  FINANCING ACTIVITIES: |                                                                   |                    |           |   |       
|                                                        | Proceeds from issuance of common stock                            |                    | 2,500     |   |        | -        
|                                                        | Repurchases of common stock                                       |                    | -         |   |        | (2,656)  
|                                                        | Exercises of common stock options                                 |                    | 77        |   |        | 92       
|                                                        | Excess tax benefits from exercise of stock options                |                    | 96        |   |        | -        
|                                                        | Proceeds of investment-type insurance contracts                   |                    | 5,918     |   |        | 8,645    
|                                                        | Dividends paid                                                    |                    | (353)     |   |        | (353)    
|                                                        |                                                                   |                    |           |   |       
|                                                        | Net change in cash from financing activities                      |                    | 8,238     |   |        | 5,728    
|                                                        |                                                                   |                    |           |   |       
|Net change in cash and cash equivalents                 |                                                                   | 5,178              |           |   | (145) 
|Cash and cash equivalents, beginning of year            |                                                                   | 12,659             |           |   | 13,196
|                                                        |                                                                   |                    |           |   |       
|Cash and cash equivalents, end of period                | $                                                                 | 17,837             |           | $ | 13,051





The accompanying notes are an integral part of these consolidated financial statements.



5







INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)



Note 1.

Significant Accounting Policies and Practices



(A)

Business and Organization



Independence Holding Company, a Delaware corporation (NYSE: IHC), is a holding company principally engaged in the life and health insurance business through: (i) its wholly-owned insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life") and Madison National Life Insurance Company, Inc. ("Madison National Life"); and (ii) its marketing and administrative companies, including Insurers Administrative Corporation (IAC), managing general underwriter (MGU) affiliates, Health Plan Administrators (HPA), GroupLink Inc. (GroupLink) and Community America Insurance Services Inc. (CAIS, formerly CA Insurance Services LLC).  These companies are sometimes collectively referred to as the "Insurance Group," and IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company."  The Company also owns a 48% equity interest in American Independence Corp. (NASDAQ:AMIC), which owns Independence American Insurance Company (Independence American) and several MGUs.



Geneve Corporation, a diversified financial holding company, and its affiliated entities held approximately 55% of IHC's outstanding common stock at March 31, 2006.



(B)

Basis of Presentation



The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles 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. generally accepted accounting principles requires management to make estimates and assumptions that affect:  (i) the reported amounts of assets and liabilities; (ii) the disclosure of contingent assets and liabilities at the date of the financial statements; and (iii) 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 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 consolidated results of operations for the three months ended March 31, 2006 are not necessarily indicative of the results to be anticipated for the entire year.



(C)

Reclassifications



Certain amounts in prior years' Consolidated Financial Statements and notes thereto have been reclassified to conform to the 2006 presentation.



(D)

Share-Based Compensation



Effective January 1, 2006, under the modified prospective method, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123R, "Share-Based Payment" ("SFAS 123R"), which revises SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123) and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and its related



6



interpretations (APB 25). SFAS 123R applies to all awards granted after its effective date and to modifications, repurchases or cancellations of existing awards after that date. Results for prior periods have not been restated. Additionally, under the modified prospective method of adoption, the Company recognizes compensation expense for the portion of outstanding awards on the adoption date for which the requisite service period has not yet been rendered based on the grant-date fair value of those awards calculated under SFAS 123 for purposes of pro forma disclosures.



In the first quarter of 2006, total share-based compensation expense was $336,000, including $288,000 of incremental share-based compensation expense resulting from the adoption of SFAS 123R.  This incremental expense resulted in a decrease of $173,000 to net income, after income tax benefits of $115,000, for the quarter ended March 31, 2006.  On a per share basis, the expensing of share-based compensation resulted in decreases of $.01 per share in both basic and diluted earnings per share for the quarter ended March 31, 2006.



Prior to the adoption of SFAS 123R, the Company accounted for its share-based awards under APB 25.  The following table details the effect on net income and earnings per share had compensation expense for employee share-based awards been recorded in the first quarter of 2005 based on the fair value method under SFAS 123 (in thousands, except per share data):



|                                                         |                                                                          |              |       |      
|-------------------------------------------------------- | ------------------------------------------------------------------------ | ------------ | ----- | -----
|                                                         |                                                                          | Three Months
|                                                         |                                                                          | Ended       
|                                                         |                                                                          | March 31,   
|                                                         |                                                                          | 2005        
|Net income, as reported                                  | $                                                                        |              | 5,752
|Add stock-based employee compensation expense included   |                                                                          |             
|                                                         | in reported net income, net of related tax effects                       |              | -    
|Deduct total stock-based compensation expense determined |                                                                          |             
|                                                         | under fair value based method for all awards, net of related tax effects |              |       | (175)
|Proforma net income                                      | $                                                                        |              | 5,577
|Basic earnings per share:                                |                                                                          |             
|                                                         | As reported                                                              | $            | .41  
|                                                         | Proforma                                                                 | $            | .40  
|                                                         |                                                                          |             
|Diluted earnings per share:                              |                                                                          |             
|                                                         | As reported                                                              | $            | .40  
|                                                         | Proforma                                                                 | $            | .39  



Under the terms of the Companys stock-based compensation plans, option exercise prices are equal to the quoted market price of the shares at the date of grant; option terms range from five to ten years; and vesting periods are three years for employee options and six months for director options.  The Company may also grant shares of restricted stock.  These shares are valued at the quoted market price of the shares at the date of grant, and have a three year vesting period.  There were 2,515 shares available for future option or restricted-stock grants under the shareholder-approved plans at March 31, 2006.



The total intrinsic value of options exercised during the three month periods ended March 31, 2006 and 2005 was $304,000 and $173,000, respectively.  Cash proceeds received from options exercised for the three months ended March 31, 2006 and 2005 were $77,000 and $92,000, respectively.









7



The Companys stock option activity for the three months ended March 31, 2006 is as follows:



|                  |  |              |   |                 
|----------------- |  | ------------ | - | ----------------
|                  |  | Shares       |   | Weighted-Average
|                  |  | Under Option |   | Exercise Price  
|December 31, 2005 |  | 1,108,371    | $ | 11.89           
|Granted           |  | 70,000       |   | 22.55           
|Exercised         |  | (16,420)     |   | 4.68            
|Expired           |  | (1,800)      |   | 20.89           
|March 31, 2006    |  | 1,160,151    | $ | 12.62           



The following table summarizes information regarding outstanding and exercisable options as of March 31, 2006:



|                                            |   |             |   |            
|------------------------------------------- | - | ----------- | - | -----------
|                                            |   | Outstanding |   | Exercisable
|Number of options                           |   | 1,160,151   |   | 816,281    
|Weighted average exercise price per share   | $ | 12.62       | $ | 10.03      
|Aggregate intrinsic value for all options   | $ | 12,112,000  | $ | 10,636,000 
|Weighted average contractual term remaining |   | 2.0 years   |   | 1.5 years  



The fair value of each option award is estimated on the date of grant using the Black Scholes option valuation model. The weighted average grant-date fair-value of options granted during the three months ended March 31, 2006 was $7.14.  The Company issued 37,075 restricted stock awards during the quarter ended March 31, 2006, with a weighted-average grant-date fair value of $22.56 per share. No stock options or restricted stock awards were granted in the three month period ended March 31, 2005. The assumptions set forth in the table below were used to value the stock options granted during the three month period ended March 31, 2006.



|                                                                 |   |          
|---------------------------------------------------------------- | - | ---------
|Weighted-average risk-free interest rate                         |   | 4.48%    
|Annual dividend rate per share                                   | $ | .05      
|Weighted-average volatility factor of the Company's common stock |   | 32.4%    
|Weighted-average expected term of options                        |   | 4.4 years



As of March 31, 2006, there was $1,244,000 and $823,000 of total unrecognized compensation expense related to non-vested options and non-vested restricted stock awards, respectively, which will be recognized over the remaining requisite weighted-average service periods of 1.1 years and 2.8 years, respectively.



Prior to the adoption of SFAS 123R, the Company presented the tax benefit resulting from the exercise of stock options and restricted stock awards as operating cash flows in the Consolidated Statements of Cash Flows. SFAS 123R requires such benefits to be reported as a financing cash flow, rather than as an operating cash flow. Excess tax benefits of $96,000 were classified as a financing cash inflow in the first quarter of 2006 and $44,000 were classified as an operating cash inflow in the first quarter of 2005.



Note 2.



American Independence Corp.



AMIC is an insurance holding company engaged in the insurance and reinsurance business as a result of its acquisition of First Standard Holdings Corp. ("FSHC") from the Company in November 2002. AMIC does business with the Insurance Group, including reinsurance treaties under which, in 2005, Standard Security Life and Madison National Life ceded to Independence American Insurance Company an average of 22% of their medical stop-loss business, 10% of their fully-insured health



8



business and 20% of their New York Statutory Disability business.  IHC owns 48% of AMIC's outstanding common stock at March 31, 2006 and December 31, 2005 which was purchased in various transactions beginning in 2002. IHC accounts for its investment in AMIC under the equity method. At March 31, 2006 and December 31, 2005, IHC's investment in AMIC had a total carrying value of $43,445,000 and $43,637,000, respectively, including goodwill of $4,470,000 at both dates.  At March 31, 2006 and December 31, 2005, based on the closing market price of AMIC's common stock, the fair value of the AMIC shares owned by IHC was approximately $48,740,000 and $46,668,000, respectively.



For the quarters ended March 31, 2006 and 2005, IHC recorded $176,000 and $477,000, respectively, of equity income from its investment in AMIC, representing IHC's proportionate share of income based on its ownership interests during those periods. AMIC paid no dividends on its common stock in the three month periods ended March 31, 2006 and 2005.



IHC and its subsidiaries earned $139,000 and $168,000 for the quarters ended March 31, 2006 and 2005, respectively, from service agreements with AMIC and its subsidiaries. These are reimbursements to IHC and its subsidiaries, at agreed upon rates including an overhead factor, for management services provided by IHC and its subsidiaries, including accounting, legal, compliance, underwriting and claims. The Company also contracts for several types of insurance (e.g. directors and officers and professional liability) jointly with AMIC. The cost of this coverage is allocated between the Company and AMIC according to the type of risk, and IHCs portion is recorded in Selling, General and Administrative Expenses. The Company ceded premiums to AMIC of $13,674,000 and $13,059,000 for the quarters ended March 31, 2006 and 2005, respectively.



Included in the Companys Consolidated Balance Sheets at March 31, 2006 and December 31, 2005, respectively, are the following balances arising from transactions in the normal course of business with AMIC and its subsidiaries: Due from reinsurers $12,744,000 and $14,122,000; Other assets $9,012,000 and $10,565,000; and Other liabilities $66,000 and $249,000.



Note 3.

Income Per Common Share



Included in the diluted income per share calculations are 374,000 and 323,000 shares for the three months ended March 31, 2006 and 2005, respectively, from the assumed exercise of options and vesting of restricted stock, using the treasury stock method. Net income does not change as a result of the assumed dilution.



Note 4.

Acquisitions



The Company completed the following acquisitions in the first quarter of 2006. The results of operations of the acquired companies are included in IHC's Consolidated Financial Statements from the respective acquisition dates. None of the goodwill recognized in these acquisitions is deductible for income tax purposes. Pro forma results of operations for the quarters ended March 31, 2006 and 2005, as though these acquisitions had been completed at the beginning of those periods, have not been presented since the effect of the acquisitions was not material.



IAC Acquisition



In January 2006, the Company entered into a stock purchase agreement to purchase all of the voting and non-voting shares of the common stock of Insurers Administrative Corporation ("IAC") and Interlock Corporation for a total purchase price of $21,360,000 in cash and 446,663 shares of IHC common stock, which were issued at a value of $21.54 per share or $9,622,000. The Company recorded goodwill of $25,562,000 and other intangible assets consisting of $7,000,000 for the value of agent



9



relationships and $1,800,000 for the value of computer software.  The relationship intangible and the capitalized software are being amortized over periods of 13 years and 8.7 years, respectively (a weighted-average period of 12.1 years).  Prior to entering into this agreement, IAC owned the minority interest in Strategic Health Associates (SHA) and administered IHCs block of fully-insured group health insurance.  As a consequence of IHCs acquisition of the minority interest in SHA through the IAC purchase, IHC owns 100% of SHA and therefore recognized additional goodwill and other intangibles, and eliminated the minority interest previously reported.



IAC, which is based in Phoenix, Arizona, is a leading administrator, manager and distributor of Consumer Driven Health Plans (CDHPs). It currently administers approximately $220 million of individual and group health and life premiums and premium-equivalents. Of this business, approximately 30% is currently insured by Standard Security Life and Madison National Life.  IAC, in combination with IHCs other fully-insured subsidiaries (HPA and GroupLink) administers, manages and distributes a full range of health products, including CDHPs, short-term medical, limited medical, dental and vision.



IHC issued a stock put on 194,443 of the IHC shares issued in the acquisition which vests on January 31, 2007 at a price of $17.00 per share and expires on January 31, 2008. The put was recorded at a fair value of $228,000 at the acquisition date. For the three months ended March 31, 2006, IHC recorded an unrealized gain of $59,000 in the Consolidated Statement of Operations, representing the net change in fair value of the put.



CAIS Acquisition



On March 1, 2006, IHC acquired the remaining 55% membership interest in CA Insurance Services, LLC (CAIS) by merging CAIS into Community America Insurance Services, Inc., a newly created and wholly-owned direct subsidiary of IHC.   The 55% interest was acquired for 46,250 shares of IHC common stock, which were issued at a value of $22.87 per share or $1,058,000.  The Company recorded goodwill of $1,163,000 and other intangible assets of $370,000 for the value of agent relationships in connection with the acquisition.  The other intangible assets are being amortized over a period of 9 years.



On March 31, 2006, CAIS entered into a definitive agreement to acquire a block of approximately $50 million of fully-insured group major medical business (including CDHPs) and the key personnel of a marketing and administration company for $750,000, which is recorded as an intangible asset.  It is anticipated that the acquired block of group major medical business will be transitioned to Madison National Life as of August 1, 2006.



Goodwill and Other Intangible Assets



At March 31, 2006 and December 31, 2005, the Company had goodwill of $45,958,000 and $16,110,000, respectively, and other intangible assets (included in Other assets in the Consolidated Balance Sheets) of $13,996,000 and $3,838,000, respectively.  The change in the carrying amount of goodwill and other intangible assets for the first quarter of 2006 is as follows (in thousands):



|                                     |   |          |   |                        
|------------------------------------ | - | -------- | - | -----------------------
|                                     |   | Goodwill |   | Other Intangible Assets
|Balance at December 31, 2005         | $ | 16,110   | $ | 3,838                  
|IAC acquisition                      |   | 25,562   |   | 8,800                  
|SHA minority interest                |   | 1,840    |   | 644                    
|CAIS acquisition and other additions |   | 2,446    |   | 1,120                  
|Amortization expense                 |   | -        |   | (406)                  
|Balance at March 31, 2006            | $ | 45,958   | $ | 13,996                 



10



Note 5.

Investments



The following tables summarize, for all securities in an unrealized loss position at March 31, 2006  and December 31, 2005, respectively, the aggregate fair value and gross unrealized loss by length of time those securities had continuously been in an unrealized loss position:



|                     |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |         |            |        |  |  | 
|-------------------- | ------------------- | - | ------------------- | ------- | - | ------------------- | ------ | - | ------ | ------- | - | ---------- | ----- | - | ------- | ------- | ---------- | ------ |  |  | 
|                     |                     |   | Less than 12 Months |         |   | 12 Months or Longer |        |   | Total 
|                     |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|                     |                     |   | Fair                |         |   | Unrealized          |        |   | Fair   |         |   | Unrealized |       |   | Fair    |         | Unrealized
|March 31, 2006       |                     |   | Value               |         |   | Losses              |        |   | Value  |         |   | Losses     |       |   | Value   |         | Losses    
|                     |                     |   | (In thousands)     
|                     |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|Corporate securities |                     | $ | 315,133             |         | $ | 17,671              |        | $ | 40,516 |         | $ | 3,302      |       | $ | 355,649 | $       | 20,973    
|CMOs and ABS (1)     |                     |   | 67,032              |         |   | 1,736               |        |   | 46,136 |         |   | 2,068      |       |   | 113,168 | 3,804  
|U.S. Government and  |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|                     | agencies            |   |                     | 39,239  |   |                     | 1,812  |   |        | 20,614  |   |            | 1,444 |   |         | 59,853  | 3,256     
|Agency MBS (2)       |                     |   | 15,399              |         |   | 472                 |        |   | 7,054  |         |   | 220        |       |   | 22,453  | 692    
|GSE (3)              |                     |   | 31,037              |         |   | 1,423               |        |   | 20,379 |         |   | 923        |       |   | 51,416  |         | 2,346     
|States and political |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |         |           
|                     | subdivisions        |   |                     | 56,808  |   |                     | 1,341  |   |        | -       |   |            | -     |   |         | 56,808  |            | 1,341 
|Total fixed          |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |         |           
|                     | maturities          |   |                     | 524,648 |   |                     | 24,455 |   |        | 134,699 |   |            | 7,957 |   |         | 659,347 | 32,412    
|Common stock         |                     |   | 1,710               |         |   | 128                 |        |   | 72     |         |   | 82         |       |   | 1,782   | 210    
|Preferred stock      |                     |   | 15,425              |         |   | 457                 |        |   | 1,482  |         |   | 17         |       |   | 16,907  |         | 474       
|Total temporarily    |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|                     | impaired securities |   | $                   | 541,783 |   | $                   | 25,040 |   | $      | 136,253 |   | $          | 8,056 |   | $       | 678,036 | $          | 33,096





|                     |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |         |            |        |  | 
|-------------------- | ------------------- | - | ------------------- | ------- | - | ------------------- | ------ | - | ------ | ------- | - | ---------- | ----- | - | ------- | ------- | ---------- | ------ |  | 
|                     |                     |   | Less than 12 Months |         |   | 12 Months or Longer |        |   | Total 
|                     |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|                     |                     |   | Fair                |         |   | Unrealized          |        |   | Fair   |         |   | Unrealized |       |   | Fair    |         | Unrealized
|December 31, 2005    |                     |   | Value               |         |   | Losses              |        |   | Value  |         |   | Losses     |       |   | Value   |         | Losses    
|                     |                     |   | (In thousands)     
|                     |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|Corporate securities |                     | $ | 232,488             |         | $ | 8,085               |        | $ | 45,608 |         | $ | 3,159      |       | $ | 278,096 | $       | 11,244    
|CMOs and ABS (1)     |                     |   | 50,118              |         |   | 984                 |        |   | 38,495 |         |   | 1,358      |       |   | 88,613  | 2,342  
|U.S. Government and  |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|                     | agencies            |   |                     | 40,250  |   |                     | 842    |   |        | 21,266  |   |            | 798   |   |         | 61,516  | 1,640     
|Agency MBS (2)       |                     |   | 16,534              |         |   | 239                 |        |   | 7,761  |         |   | 117        |       |   | 24,295  | 356    
|GSE (3)              |                     |   | 51,655              |         |   | 1,024               |        |   | 14,647 |         |   | 664        |       |   | 66,302  |         | 1,688     
|States and political |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |         |           
|                     | subdivisions        |   |                     | 75,821  |   |                     | 888    |   |        | -       |   |            | -     |   |         | 75,821  |            | 888   
|Total fixed          |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |         |           
|                     | maturities          |   |                     | 466,866 |   |                     | 12,062 |   |        | 127,777 |   |            | 6,096 |   |         | 594,643 | 18,158    
|Common stock         |                     |   | 1,137               |         |   | 76                  |        |   | 96     |         |   | 58         |       |   | 1,233   | 134    
|Preferred stock      |                     |   | 6,979               |         |   | 245                 |        |   | 1,445  |         |   | 55         |       |   | 8,424   |         | 300       
|Total temporarily    |                     |   |                     |         |   |                     |        |   |        |         |   |            |       |   |         |        
|                     | impaired securities |   | $                   | 474,982 |   | $                   | 12,383 |   | $      | 129,318 |   | $          | 6,209 |   | $       | 604,300 | $          | 18,592



(1)

Collateralized mortgage obligations (CMOs) and asset-backed securities (ABS).

(2)

Mortgage-backed securities (MBS).

(3)

Government-sponsored enterprises (GSEs) which are the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Federal Home Loan Banks. GSEs are private enterprises established and chartered by the Federal Government.











11



Substantially all of the unrealized losses at March 31, 2006 and December 31, 2005 relate to investment grade securities and are attributable to changes in market interest rates subsequent to purchase.  There were no securities with unrealized losses that were individually significantdollar amounts at March 31, 2006 and December 31, 2005. At March 31, 2006 and December 31, 2005, a total of 134 and 121 securities,respectively, were in a continuous unrealized loss position for less than 12 months and 22 and 22 securities, respectively, had continuous unrealized losses for 12 months or longer. For fixed maturities, there are no securities past due or securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the investment.  Because the Company has the ability to hold securities with unrealized losses until a market price recovery (which, for fixed maturities, may be until maturity) the Company did not consider these investments to be other-than-temporarily impaired at March 31, 2006 and December 31, 2005.



Note 6.

Income Taxes



The provision for income taxes shown in the Consolidated Statements of Operations was computed based on the Company's estimate of the effective tax rate expected to be applicable for the current tax year.



The deferred income tax benefit for the three months ended March 31, 2006 allocated to stockholders' equity (principally for net unrealized losses on investment securities) was $4,617,000, representing the increase in the related net deferred tax asset to $9,298,000 at March 31, 2006 from $4,681,000 at December 31, 2005.



Note 7.

Supplemental Disclosures of Cash Flow Information



Cash payments for income taxes were $1,695,000 and $1,501,000 for the three months ended March 31, 2006 and 2005, respectively. Cash payments for interest were $847,000 and $933,000 for the three months ended March 31, 2006 and 2005, respectively.  Common stock issued in acquisitions (a non-cash financing activity) amounted to $10,679,000 during the three months ended March 31, 2006.  Non-cash assets acquired (other than intangibles) and liabilities assumed in these transactions were not significant.



Note 8.

Comprehensive Income (Loss)



The components of comprehensive income (loss) include (i) net income or loss reported in the Consolidated Statements of Operations, and (ii) certain amounts reported directly in stockholders equity, principally the after-tax net unrealized gains and losses on securities available for sale (net of deferred acquisition costs). The comprehensive (loss) income for the three months ended March 31, 2006 and 2005 is summarized as follows:



|                                            |   |                    |   |        
|------------------------------------------- | - | ------------------ | - | -------
|                                            |   | Three Months Ended
|                                            |   | March 31,         
|                                            |   | 2006               |   | 2005   
|                                            |   | (In thousands)    
|                                            |   |                    |   |        
|Net income                                  | $ | 4,029              | $ | 5,752  
|Unrealized losses arising during the period |   | (8,328)            |   | (5,357)
|Comprehensive (loss) income                 | $ | (4,299)            | $ | 395    





12



Note 9.

Segment Reporting



The Insurance Group principally engages in the life and health insurance business. Certain allocations of items within segments have been reclassified in the 2005 information to reflect how management analyzes these segments currently. Information by business segment for the three months ended March 31, 2006 and 2005 is presented below:





|                                          |   |                    |   |       
|----------------------------------------- | - | ------------------ | - | ------
|                                          |   | Three Months Ended
|                                          |   | March 31,         
|                                          |   | 2006               |   | 2005  
|                                          |   | (In thousands)    
|                                          |   |                    |   |       
|Revenues:                                 |   |                    |   |       
|Medical stop-loss                         | $ | 37,089             | $ | 31,428
|Fully-insured health                      |   | 14,258             |   | 4,347 
|Group disability, life, annuities and DBL |   | 13,113             |   | 11,778
|Individual life, annuities and other      |   | 15,393             |   | 12,197
|Credit life and disability                |   | 5,462              |   | 5,365 
|Corporate                                 |   | 1,108              |   | 310   
|                                          |   | 86,423             |   | 65,425
|Net realized and unrealized gains         |   | 417                |   | 248   
|                                          | $ | 86,840             | $ | 65,673
|                                          |   |                    |   |       
|Income (loss) before income taxes:        |   |                    |   |       
|Medical stop-loss                         | $ | 3,766              | $ | 9,523 
|Fully-insured health                      |   | 505                |   | (928) 
|Group disability, life, annuities and DBL |   | 502                |   | 395   
|Individual life, annuities and other      |   | 2,122              |   | 935   
|Credit life and disability                |   | (148)              |   | 233   
|Corporate                                 |   | (171)              |   | (553) 
|                                          |   | 6,576              |   | 9,605 
|Interest expense                          |   | (903)              |   | (845) 
|Net realized and unrealized gains         |   | 417                |   | 248   
|                                          | $ | 6,090              | $ | 9,008 









13



ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS



This Form 10-Q contains forward-looking statements that involve risks and uncertainties.  The actual consolidated results of Independence Holding Company. (IHC) and Subsidiaries (collectively referred to as the "Company") could differ significantly from those set forth herein.  Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors " as set forth in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission, as well as those discussed here in Item 2 and elsewhere in this quarterly report.  Statements contained herein that are not historical facts are forward-looking statements that are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995.  Words such as "believes", "anticipates", "expects", "intends", estimates, "likelihood", unlikelihood, assessment, and foreseeable and other similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.  A number of important factors could cause the Company's actual results for the year ending December 31, 2006, and beyond to differ materially from past results and those expressed or implied in any forward-looking statements made by the Company, or on its behalf.  The Company undertakes no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



The following discussion of the financial condition and results of operations of 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 fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission, and our Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.



Overview





Independence Holding Company, a Delaware corporation (NYSE: IHC), is a holding company principally engaged in the life and health insurance business through: (i) its wholly-owned insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life") and Madison National Life Insurance Company, Inc. ("Madison National Life"); and (ii) its marketing and administrative companies, including Insurers Administrative Corporation (IAC), managing general underwriter (MGU) affiliates, Health Plan Administrators (HPA), GroupLink Inc. (GroupLink) and Community America Insurance Services Inc. (CAIS, formerly CA Insurance Services LLC).  These companies are sometimes collectively referred to as the "Insurance Group," and IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company."  The Company also owns a 48% equity interest in American Independence Corp. (NASDAQ:AMIC), which owns Independence American Insurance Company (Independence American) and several MGUs.



While management considers a wide range of factors in its strategic planning and decision-making, underwriting profit is consistently emphasized as the primary goal in all decisions as to whether or not to increase our retention in a core line, expand into new products, acquire an entity or a block of business, or otherwise change our business model.  Management's assessment of trends in healthcare and morbidity, with respect to medical stop-loss, major medical, STM, dental, vision, disability and DBL; mortality rates with respect to life insurance; and changes in market conditions in general play a significant role in determining the rates charged, deductibles and attachment points quoted, and the percentage of business retained. Management has always focused on managing costs of operations, and the Company believes that the acquisition of IAC in January 2006 affords it an opportunity to affect



14



further cost efficiencies.



The following is a summary of key performance information and events:



·

Net income of $4.0 million in the first three months of 2006 ($.27 per share, diluted), as compared to $5.8 million in the first three months of 2005 ($.40 per share, diluted);



·

Consolidated investment yield of 5.4% in the three months ended March 31, 2006, as compared to 5.1% in the comparable period in 2005;



·

Income before taxes from the Medical Stop-Loss segment decreased $5.8 million:



o

The Net Loss Ratio (defined as insurance benefits, claims and reserves divided by (premiums earned less underwriting expenses)) for the Medical Stop-Loss line of business for the quarter ended March 31, 2006 was 92.0%.  Although this Net Loss Ratio was higher than the 87.2% Net Loss Ratio applicable to the quarter ended March 31, 2005, it was lower than the Net Loss Ratio of 93.2% for the year ended December 31, 2005;



o

Included in the Medical Stop-Loss segment for the first quarter of 2005 was $3.5 million of income from a commutation agreement and a loss cover that did not repeat in the first quarter of 2006;



·

Fully-Insured segment reported income before taxes of $.5 million for the three months ended March 31, 2006 as compared to a loss of $.9 million for the three months ended March 31, 2005;



·

Revenues of $86.8 million, a 32.2% increase from 2005 primarily due to an increase in revenues from the fully-insured health segment, an increase in net retention of the medical stop-loss line to 51.4% in 2006 from 40.0% in 2005 (retention refers to net earned premiums after reinsurance) and the life and annuity acquisition in June 2005;



·

Book value of $14.10 per common share; a 0.3% increase from December 31, 2005, reflecting net unrealized losses on securities offset by net income and stock issuance and exercises;



·

As of January 31, 2006,  acquired IAC, a leading producer and administrator of group and individual major medical insurance (including Consumer Driven Health Plans (CDHPs)) and other life and health policies;



·

As of March 1, 2006, acquired the remaining 55% of CAIS to further the marketing reach for CDHPs and other products; as of March 31, 2006, CAIS acquired a block of $50 million of fully-insured group major medical business, which is anticipated to be transitioned to Madison National Life as of August 1, 2006; and



·

Approved to write a variety of fully-insured medical products in a majority of states.















15





|                            
|----------------------------
|CRITICAL ACCOUNTING POLICIES



The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles ("GAAP"). The preparation of the Consolidated Financial Statements in conformity with 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 fiscal year ended December 31, 2005. Management has identified the accounting policies related to Insurance Premium Revenue Recognition and Policy Charges, Insurance Reserves, Deferred Acquisition Costs and Investmentsas those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's Consolidated Financial Statements and this Management's Discussion and Analysis. A full discussion of these policies is included under the heading, Critical Accounting Policies in Item 7 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2005.  During the first quarter of 2006, there were no additions to or changes in the critical accounting policies disclosed in the 2005 Form 10-K.



Results of Operations for the Three Months Ended March 31, 2006 Compared to the Three Months Ended March 31, 2005



Net income was $4.0 million or $.27 per share, diluted, for the three months ended March 31, 2006, a decrease of $1.8 million compared to net income of $5.8 million, or $.40 per share, diluted, for the three months ended March 31, 2005. The Company's income before taxes decreased $2.9 million to $6.1 million for the three months ended March 31, 2006 from $9.0 million for the three months ended March 31, 2005.  Information by business segment for the three months ended March 31, 2006 and 2005 is as follows:

|                  |                  |            |        |         |           |              |          |                |         |        |       |       |       |        |       |       |       |  | 
|----------------- | ---------------- | ---------- | ------ | ------- | --------- | ------------ | -------- | -------------- | ------- | ------ | ----- | ----- | ----- | ------ | ----- | ----- | ----- |  | 
|                  |                  |            | Equity |         | Benefits, | Amortization | Selling, |               
|                  |                  | Net        | Income | Fee and | Claims    | of  Deferred | General  |               
|March 31,         | Premiums         | Investment | From   | Other   | and       | Acquisition  | and      |               
|                  | 2006             | Earned     | Income | AMIC    | Income    | Reserves     | Costs    | Administrative | Total  
|(In thousands)    |                  |            |        |         |           |              |          |               
|                  |                  |            |        |         |           |              |          |               
|Medical stop-loss | $                | 35,363     | 770    | 176     | 780       | 24,120       | -        | 9,203          | $       | 3,766 
|Fully-Insured     | 7,444            | 30         | -      | 6,784   | 4,507     | 63           | 9,183    | 505           
|Group disability, |                  |            |        |         |           |              |          |               
|                  | life, annuities  |            |        |         |           |              |          |                |        
|                  | and DBL          | 10,865     | 2,135  | -       | 113       | 9,221        | 39       | 3,351          | 502    
|Individual life,  |                  |            |        |         |           |              |          |               
|                  | annuities        |            |        |         |           |              |          |                |        
|                  | and other        | 7,340      | 7,725  | -       | 328       | 9,817        | 1,231    | 2,223          | 2,122  
|Credit life and   |                  |            |        |         |           |              |          |               
|                  | disability       |            | 5,276  |         | 171       |              | -        |                | 15      |        | 2,515 |       | 1,185 |        | 1,910 |       | (148)
|Corporate         |                  | -          |        | 1,100   |           | -            |          | 8              |         | -      |       | -     |       | 1,279  |       | (171)
|Sub total         | $                | 66,288     |        | 11,931  |           | 176          |          | 8,028          |         | 50,180 |       | 2,518 |       | 27,149 |       | 6,576
|Net realized and  |                  |            |        |         |           |              |          |               
|                  | unrealized gains |            |        |         |           |              |          |                | 417    
|Interest expense  |                  |            |        |         |           |              |          |                | (903)  
|Income before     |                  |            |        |         |           |              |          |               
|                  | income taxes     |            |        |         |           |              |          |                | 6,090  
|Income taxes      |                  |            |        |         |           |              |          |                | (2,061)
|Net income        |                  |            |        |         |           |              |          | $              | 4,029  















16





|                  |                  |            |        |         |           |              |          |                |       |        |       |       |       |        |       |         |       |  |  |  |  |  |  |  |  |  |  | 
|----------------- | ---------------- | ---------- | ------ | ------- | --------- | ------------ | -------- | -------------- | ----- | ------ | ----- | ----- | ----- | ------ | ----- | ------- | ----- |  |  |  |  |  |  |  |  |  |  | 
|                  |                  |            | Equity |         | Benefits, | Amortization | Selling, |               
|                  |                  | Net        | Income | Fee and | Claims    | of  Deferred | General  |               
|March  31,        | Premiums         | Investment | From   | Other   | and       | Acquisition  | and      |               
|                  | 2005             | Earned     | Income | AMIC    | Income    | Reserves     | Costs    | Administrative | Total
|(In thousands)    |                  |            |        |         |           |              |          |               
|                  |                  |            |        |         |           |              |          |               
|Medical stop-loss | $                | 25,290     | 1,412  | 477     | 4,249     | 16,148       | -        | 5,757          | $     | 9,523 
|Fully-Insured     | 2,964            | 8          | -      | 1,375   | 2,173     | 150          | 2,952    | (928)         
|Group disability, |                  |            |        |         |           |              |          |               
|                  | life, annuities  |            |        |         |           |              |          |                |      
|                  | and DBL          | 9,648      | 2,013  | -       | 117       | 7,733        | 36       | 3,614          | 395  
|Individual life,  |                  |            |        |         |           |              |          |               
|                  | annuities and    |            |        |         |           |              |          |                |      
|                  | other            | 6,426      | 5,586  | -       | 185       | 8,400        | 1,317    | 1,545          | 935  
|Credit life and   |                  |            |        |         |           |              |          |               
|                  | disability       |            | 5,100  |         | 220       |              | -        |                | 45    |        | 2,207 |       | 1,148 |        | 1,777 | 233    
|Corporate         |                  | -          |        | 260     |           | -            |          | 50             |       | -      |       | -     |       | 863    |       | (553)  
|Sub total         | $                | 49,428     |        | 9,499   |           | 477          |          | 6,021          |       | 36,661 |       | 2,651 |       | 16,508 |       | 9,605  
|Net realized and  |                  |            |        |         |           |              |          |               
|                  | unrealized gains |            |        |         |           |              |          |                | 248  
|Interest expense  |                  |            |        |         |           |              |          |                | (845)
|Income before     |                  |            |        |         |           |              |          |               
|                  | income taxes     |            |        |         |           |              |          |                |       |        |       |       |       |        |       |         | 9,008
|Income taxes      |                  |            |        |         |           |              |          |                |       |        |       |       |       |        |       | (3,256)
|Net income        |                  |            |        |         |           |              |          |                |       |        |       |       |       |        | $     | 5,752  





Premiums Earned



Total premiums earned grew $16.9 million to $66.3 million in the first quarter of 2006 from $49.4 million in the comparable period of 2005. The increase is due to: (i) the Medical Stop-Loss segment which increased $10.1 million primarily due to increased retentions; (ii) the Fully-Insured segment which had a $4.5 million increase in premiums from the first quarter of 2005 to the first quarter of 2006, comprised of a $2.0 million increase in dental premiums, a $.9 million increase in short-term medical and a $1.6 million increase in group major medical primarily due to new business that did not exist during the first quarter of 2005; (iii) the Individual and Other segment which increased $.9 million, primarily from a $.8 million increase in ordinary life due to acquisitions of policy blocks after the first quarter of 2005 and a $.2 million increase in blanket accident and sickness policy premiums, partially offset by a $.1 million decrease in all other lines; (iv) an increase of $1.2 million in the Group segment primarily due to a $1.2 million increase in point of service, a $.2 million increase in group term life, and a $.2 million increase in LTD, partially offset by a $.4 million decrease in DBL caused by a reduction in statutory rates; and (v) a $.2 million increase in the Credit Life and Disability segment due to new business.



Net Realized and Unrealized Gains



Net realized and unrealized gains increased by $.2 million compared to the first quarter of 2005. Decisions to sell securities are based on cash flow needs, investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period.



Net Investment Income



Total net investment income increased $2.4 million primarily due to the maintenance of a higher level of invested assets due to the acquisitions of policy blocks in 2005.  In addition, the Companys investments in limited partnerships generated higher returns in the three months ended March 31, 2006 than in the comparable period of 2005.  The annualized return on total investments was 5.4% in the first quarter of 2006 versus 5.1% in the first quarter of 2005.





17



Equity Income



Equity income from AMIC decreased $.3 million, or 63.1%, from the first quarter of 2005, as lower income earned by AMIC was slightly offset by an increase in IHC's ownership which was approximately 48% during the first quarter of 2006 compared to 40% in the first quarter of 2005.



Fee Income and Other Income



Fee income increased $5.3 million to $7.4 million from $2.1 million in the three months ended March 31, 2005, primarily due to fees of $4.9 million earned by IAC, and $.5 million earned by GroupLink, which are subsidiaries that were not part of the Company during the first quarter of 2005; partially offset by a $.1 million decrease in other fee income.



Total other income decreased $3.3 million to $.6 million from $3.9 million in the three months ended March 31, 2005.  This was primarily due to the inclusion of $3.5 million of other income in the first quarter of 2005 from a  commutation agreement and a loss ratio cover with a reinsurer that have no equivalent in the first quarter of 2006, slightly offset by a $.2 million increase in all other income.



Insurance Benefits, Claims and Reserves



Benefits, claims and reserves increased $13.5 million. The increase is due to: (i) $8.0 million in the Medical Stop-Loss segment resulting from an increase in retention and an increase in Net Loss Ratios to 92.0% as compared to 87.2% for the first quarter of 2005; (ii) an increase of $2.3 million in the Fully-Insured segment due to new business; (iii) a $1.4 million increase in the Individual and Other segment due to higher losses on an assumed block of annuity and life business in run-off status, and surrenders and interest credited on policies due to acquisitions made in 2005; (iv) an increase of $1.5 million in the Group segment primarily due to a $1.3 million increase related to new business written for group A&H in point of service, a $.2 million increase in group term life losses, and a $.2 million increase in interest credited in group annuities, partially offset by a $.2 million decrease in LTD; and (v) a $.3 million increase in the Credit Life and Disability segment caused by higher loss ratios and new business.



Amortization of Deferred Acquisition Costs



Amortization of deferred acquisition costs decreased $.1 million, primarily due to slower amortization on the interest sensitive products of approximately $.4 million, which was partially offset by amortization on the prior year acquisitions of $.2 million, which have no comparable amounts in the first quarter of 2005, and other small increases of $.1 million.



Interest Expense on Debt



Interest expense increased $.1 million, primarily due to an increase in the interest rate on $12.4 million of floating rate junior subordinated debt to 8.4% in the first quarter of 2006 as compared to 6.5% in the first quarter of 2005.



Selling, General and Administrative Expenses



Total selling, general and administrative expenses increased $10.6 million in the first quarter of 2006 as compared to the first quarter of 2005. The increase is primarily due to (i) a $6.2 million increase in expenses associated with the operation of the Fully-Insured segment, primarily due to the acquisition of IAC; (ii) a $3.4 million increase in commissions and other general expenses in the Medical Stop-Loss segment due to a higher level of premiums earned; (iii) a $.3 million decrease in the Group segment due



18



to reduced commissions caused by changes in the product mix in DBL; (iv) a $.7 million increase in the Individual and Other segment due to the block acquisitions in 2005; (v) a $.2 million increase in the Credit Life and Disability segment due to new business; and (vi) a $.4 million increase in other corporate expenses, including $.3 million of expenses related to share-based compensation due to the adoption of a new accounting standard in the first quarter of 2006.



Income Taxes



Income tax expense decreased $1.2 million to $2.1 million for the quarter ended March 31, 2006 from $3.3 million for the first quarter of 2005.  This results in effective rates of 33.8% for the first quarter of 2006 and 36.2% for the first quarter of 2005, primarily related to higher levels of income from tax-exempt securities in 2006.



LIQUIDITY



Insurance Group



The Insurance Group normally provides cash flow from: (i) operations; (ii) the receipt of scheduled principal payments on its portfolio of fixed maturities; and (iii) earnings on investments. Such cash flow is partially used to fund liabilities for insurance policy benefits. These liabilities represent long-term and short-term obligations.





Corporate



Corporate derives its funds principally from: (i) dividends from the Insurance Group; (ii) management fees from its subsidiaries; and (iii) investment income from Corporate liquidity. Regulatory constraints historically have not affected the Company's consolidated liquidity, although state insurance laws have provisions relating to the ability of the parent company to use cash generated by the Insurance Group.



Total Corporate liquidity (cash, cash equivalents, resale agreements, short-term investments, fixed maturities, equity securities, partnership interests and certain other current assets, net of current liabilities) amounted to $32.0 million at March 31, 2006. Corporate liquidity excludes the repayment of $12.5 million of debt due September 2006, as such debt is in the process of renewal.  The Company issued 125,000 shares of common stock for $2,500,000 in the first quarter of 2006.  (See also Item 2. Unregistered Sales of Equity Securities and Use of Proceeds in Part II. Other Information, for more information.)





|             
|-------------
|BALANCE SHEET



Total investments and cash and cash equivalents decreased $36.1 million during the three months ended March 31, 2006 largely due to net cash of $2.2 million used by operating activities and $21.0 million in cash used for acquisitions.



The $9.4 million increase in total stockholders' equity is primarily due to $4.0 million in net income generated in the quarter ended March 31, 2006, a $13.7 million increase in common stock and paid-in capital mostly from issuances of common shares in acquisitions, partially offset by an $8.3 million increase in net unrealized losses on investments.





19



The Company had net receivables from reinsurers of $97.7 million at March 31, 2006. Substantially all of the business ceded to such reinsurers is of short duration. All of such receivables are either due from the Company's affiliate, Independence American, highly rated companies or are adequately secured. No allowance for doubtful accounts was necessary at March 31, 2006.



|             
|-------------
|Asset Quality



The nature and quality of insurance company investments must comply with all applicable statutes and regulations, which have been promulgated primarily for the protection of policyholders. Of the aggregate carrying value of the Insurance Group's investment assets, approximately 87.2% was invested in investment grade fixed maturities, resale agreements, policy loans and cash and cash equivalents at March 31, 2006. Also at such date, approximately 96.2% of the Insurance Group's fixed maturities were investment grade. These investments carry less risk and, therefore, lower interest rates than other types of fixed maturity investments. At March 31, 2006, approximately 3.8% of the carrying value of fixed maturities was invested in diversified non-investment grade fixed maturities (investments in such securities have different risks than investment grade securities, including greater risk of loss upon default, and thinner trading markets). The Company does not have any mortgage loans or non-performing fixed maturities at March 31, 2006.



The Company reviews its investments regularly and monitors its investments continually for impairments. For the three month periods ended March 31, 2006 and 2005, the Company did not record any losses for other-temporary impairments.



The Company's gross unrealized losses on fixed maturities totaled $32.4 million at March 31, 2006. Substantially all of these securities were investment grade. The Company holds all fixed maturities as available-for-sale securities and, accordingly, marks all of its fixed maturities to market through accumulated other comprehensive income or loss. The unrealized losses on all available-for-sale securities have been evaluated in accordance with the Company's policy and were determined to be temporary in nature at March 31, 2006.

.





|                 
|-----------------
|CAPITAL RESOURCES



Due to its strong capital ratios, broad licensing and excellent asset quality and credit-worthiness, the Insurance Group remains well positioned to increase or diversify its current activities. It is anticipated that future acquisitions or other expansion of operations will be funded internally from existing capital and surplus and parent company liquidity. In the event additional funds are required, it is expected that they would be borrowed or raised in the public or private capital markets to the extent determined to be necessary or desirable.



IHC enters into a variety of contractual obligations with third-parties in the ordinary course of its operations, including liabilities for insurance reserves, funds on deposit, debt and operating lease obligations.  However, IHC does not believe that its cash flow requirements can be fully assessed based solely upon an analysis of these obligations.  Future cash outflows, whether they are contractual obligations or not, also will vary based upon IHCs future needs.  Although some outflows are fixed, others depend on future events. The maturity distribution of the Companys obligations, as of March 31, 2006, is not materially different from that reported in the schedule of such obligations at December 31, 2005 which was included in Item 7 of the Companys Annual Report on Form 10-K.







20



In accordance with SFAS No. 115, the Company may carry its portfolio of fixed maturities either as held to maturity (carried at amortized cost), as trading securities (carried at fair market value) or as available-for-sale (carried at fair market value). The Company has chosen to carry all of its debt securities as available-for-sale. In the first quarter of 2006, the Company experienced an increase in net unrealized losses of $15.6 million which, net of deferred tax benefits of $4.6 million and net of deferred policy acquisition costs of $2.7 million, decreased stockholders' equity by $8.3 million (reflecting net unrealized losses of $16.7 million at March 31, 2006 compared to net unrealized losses of $8.4 million at December 31, 2005). From time to time, as warranted, the Company employs investment strategies to mitigate interest rate and other market exposures.



|       
|-------
|OUTLOOK



IHC has historically been a life and health insurance holding company for two insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life") and Madison National Life Insurance Company, Inc. ("Madison National Life"), which relied on independent general agents, managing general underwriters (MGUs) and administrators to perform the majority of all marketing, underwriting, claims and administrative functions for its two primary product
segments (
M edical
S top-
L oss and
G roup
Disability, L ife,
 Annuities and DBL).  For 2006, IHCs business plan is to: (i) improve the profitability of its core lines of business, in particular Medical Stop-Loss, while expanding distribution, (ii) diversify its product mix
by accelerating its expansion into the Fully-Insured health insurance sector, and thereby reduce the volatility of its portfolio and reduce its exposure to market cycles
, and (iii) continue to acquire blocks
of life and annuity business
, and blocks of fully-insured health and dental .  The following summarizes what IHC has accomplish
ed and the outlook for
the remainder of 2006 and beyond by segment.



The Company's operating results have been heavily dependent on the results of its Medical Stop-Loss line of business, particularly as IHC
h as increased its risk retention in recent years. The Company emphasizes underwriting profits and not top line growth.  While still profitable
 in 2005 , the Company
 increased rates and made changes
in its underwriting guidelines in response to the results of its underwriting audits .



Through
the acquisitions of HPA  and  GroupLink, which is 75% owned by IHC, in 2005 and IAC in
January 2006, IHC has expanded into multiple new
Fully-Insured Health
product s, including short-term medical (ST
M ), group major medical (including Consumer Driven Health Plans (CDHPs)),
limited medical, dental and vision (the 
Fully-Insured Health Products).  IHC will further expand its
F ully-
I nsured
H ealth
P roducts in 2006
to include major medical for individuals and families including CDHPs
 and limited medical .
  The Company believes that in the next several years, its Fully-Insured
Health premiums may exceed its Medical Stop-Loss premiums.   The
F ully-
I nsured
H ealth market is a much larger market than the excess market, estimated at $500 billion compared to a Medical Stop-Loss market of approximately $4 billion. As a result of its multiple product filings, distribution sources, and the sheer size of the market, the Company is optimistic that its
F ully-
I nsured
Health business will grow rapidly while yielding profitable results, which will help balance the more volatile and cyclical
M edical
S top-
L oss business.



IHC will continue to look for financially viable life and annuity acquisitions during 2006. Although the source and timing of new acquisitions is unpredictable, the Company believes that there exists an ample supply of acquisition prospects for the remainder of 2006. The addition of GroupLink has now made it possible to acquire blocks of dental business, and the Company made its first such acquisition in the first quarter of 2006.







21



ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The Company manages interest rate risk by seeking to maintain a portfolio with a duration and average life that falls within the band of the duration and average life of the applicable liabilities. Options may be utilized to modify the duration and average life of such assets.



The Company monitors its investment portfolio on a continuous basis and believes that the liquidity of the Insurance Group will not be adversely affected by its current investments. This monitoring includes the maintenance of an asset-liability model that matches current insurance liability cash flows with current investment cash flows.



The expected change in fair value as a percentage of the Company's fixed income portfolio at March 31, 2006 given a 100 to 200 basis point rise or decline in interest rates is not materially different than the expected change at December 31, 2005 included in Item 7A of the Companys Annual Report on Form 10-K. In the Company's analysis of the asset-liability model, a 100 to 200 basis point change in interest rates on the Insurance Group's liabilities would not be expected to have a material adverse effect on the Company. With respect to its liabilities, if interest rates were to increase, the risk to the Company is that policies would be surrendered and assets would need to be sold. This is not a material exposure to the Company since a large portion of the Insurance Group's interest sensitive policies are burial policies that are not subject to the typical surrender patterns of other interest sensitive policies, and many of the Insurance Group's universal life and annuity policies were issued by liquidated companies which tend to exhibit lower surrender rates than such policies of continuing companies. Additionally, there are charges to help offset the benefits being surrendered. If interest rates were to decrease substantially, the risk to the Company is that some of its investment assets would be subject to early redemption. This is not a material exposure because the Company would have additional unrealized gains in its investment portfolio to help offset the future reduction of investment income. With respect to its investments, the Company employs (from time to time as warranted) investment strategies to mitigate interest rate and other market exposures.





ITEM 4.

CONTROLS AND PROCEDURES



IHCs Chief Executive Officer and the Chief Financial Officer supervised and participated in IHCs evaluation of its disclosure controls and procedures as of the end of the period covered by this report.  Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in IHCs periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.  Based upon that evaluation, IHCS Chief Executive Officer and Chief Financial Officer concluded that IHCs disclosure controls and procedures are effective.



There has been no change in IHCs internal control over financial reporting during the fiscal quarter ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect, IHC's internal control over financial reporting.

















22



PART II.  OTHER INFORMATION



ITEM 1.

LEGAL PROCEEDINGS



The Company is involved in legal proceedings and claims which arise in the ordinary course of its businesses. The Company has established reserves that it believes are sufficient given information presently available related to its outstanding legal proceedings and claims. The Company believes the results of pending legal proceedings and claims are not expected to have a material adverse effect on its financial condition or cash flows, although there could be such an effect on its results of operations for a particular period.



ITEM 1A.

RISK FACTORS



There were no material changes from the risk factors previously disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2005 in Item 1A to Part 1 of Form 10-K.



ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



In connection with the acquisition of the 55% interest in CAIS, on March 1, 2006, IHC issued 46,250 shares of IHC common stock, par value $1.00 per share, to the shareholder of CAIS at a fair value of $22.87 per share. The issuance of these securities was made pursuant to an exemption from registration provided by Regulation D and Section 4(2) of the Securities Act of 1933, as amended.



Effective February 22, 2006, IHC issued 125,000 shares of IHC common stock, par value $1.00 per share, to First Integrated Health, Inc. (a.k.a. Employees Direct Health) at $20.00 per share. The issuance of these securities was made pursuant to an exemption from registration provided by Regulation D and Section 4(2) of the Securities Act of 1933, as amended.



Share Repurchase Program



IHC has a program, initiated in 1991, under which it repurchases shares of its common stock. As of March 31, 2006, 109,837 shares were still authorized to be repurchased under the plan.  Share repurchases during 2006 are summarized as follows:



|           |  |  |             |  |                |   |                |  |  |  |                
|---------- |  |  | ----------- |  | -------------- | - | -------------- |  |  |  | ---------------
|2006       |  |  |             |  | Maximum Number
|           |  |  | Number of   |  |                |   | Average Price  |  |  |  | of Shares Which
|Month of   |  |  | Shares      |  |                |   | of Repurchased |  |  |  | Can be         
|Repurchase |  |  | Repurchased |  |                |   | Shares         |  |  |  | Repurchased    
|           |  |  |             |  |                |   |                |  |  |  |                
|January    |  |  | -           |  |                | $ | -              |  |  |  | 109,837        
|February   |  |  | -           |  |                |   | -              |  |  |  | 109,837        
|March      |  |  | -           |  |                |   | -              |  |  |  | 109,837        



ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable



ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable



ITEM 5.

OTHER INFORMATION

Not applicable



23





ITEM 6.

EXHIBITS



31.1

Certification of the Chief Executive Officer and President Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



31.2

Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



32.1

Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



32.2

Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002







24



SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





INDEPENDENCE HOLDING COMPANY

(REGISTRANT)







By:

/s/Roy T. K. Thung

Date:

May  9, 2006

Roy T.K. Thung

Chief Executive Officer and President









By:

/s/Teresa A. Herbert

Date:

May 9, 2006

Teresa A. Herbert

Senior Vice President and



Chief Financial Officer











25