Annual Report (Form 10-K), fiscal year 1994

ITEM 1. BUSINESS -------- THE COMPANY
Independence Holding Company ("the Company" or "IHC"), a Delaware corporation, is a diversified financial company engaged primarily in insurance activities and in the manufacturing of commercial signs. Through its wholly-owned subsidiaries, Madison National Life Insurance Company, Inc. ("Madison Life"), Standard Security Life Insurance Company of New York ("Standard Life"), and First Standard Security Insurance Company ("First Standard"), IHC sells and reinsures accident and health, life and annuity insurance products, and is actively exploring opportunities in the managed care market. Through its majority owned subsidiary, Zimmerman Sign Company ("Zimmerman"), IHC operates a commercial sign manufacturing business. The Company has 440 employees. Unless the context requires otherwise, the term "the Company" includes IHC and its subsidiaries, and the term "Insurance Subsidiaries" includes Standard Life, Madison Life and First Standard.
For information pertaining to IHC's business segments, reference is made to Note 18 of Notes to Consolidated Financial Statements.
INSURANCE GROUP
GENERAL
Standard Life is incorporated and domiciled in New York and licensed to sell insurance in all 50 states, the District of Columbia and Puerto Rico. Standard Life, which has an A (Excellent) rating from A.M. Best & Company, Inc. ("Best"), underwrites specific and aggregate excess medical insurance coverage ("stop loss") sold to employers who self-fund their employees' health benefits, as well as short-term statutory disability benefits law business ("DBL") which it markets in New York, and group life insurance. Standard Life has existing business in-force in the following lines of business which are in runoff status: individual accident and health, individual life, single premium immediate annuities, and miscellaneous business. In addition, Standard Life actively seeks opportunities to enter into cooperative underwriting and reinsurance arrangements with other life insurers, reinsurers, and managed care companies.
Madison Life is incorporated and domiciled in Wisconsin
and licensed to sell insurance products in 39 states, the District of Columbia and the Virgin Islands. Madison Life, which has a B+ (Very Good) rating from Best, markets group long-term and short-term disability and group life products along with credit life and credit accident and health products. Its existing blocks of individual ordinary life, individual accident and health, and annual and single premium deferred annuity business are in runoff status.
Madison Life historically has purchased, on an assumption reinsurance basis, blocks of group credit life and credit disability insurance and individual ordinary life insurance business to increase overall profitability. In December 1993, Madison Life received $15,000,000 of additional capital in consideration of issuing a Contribution Note to its parent corporation. Madison Life believes that this new capital has enhanced its ability to acquire blocks of business and take advantage of other opportunities in the marketplace.
First Standard is incorporated in Delaware and is domiciled and licensed to write and reinsure property and casualty insurance in Delaware and New York. In addition to its reinsurance business, First Standard began, in the fourth quarter of 1993, to perform auditing and marketing services in connection with Standard Life's stop loss business.
SALES
Standard Life and Madison Life are both "direct writers" that issue policies directly to insureds. Standard Life, and to a lesser degree Madison Life, are also "reinsurers" that share in the insurance risks of other underwriters through reinsurance of such risks. First Standard acts as a reinsurer and not a direct writer.
As direct writers, Standard Life and Madison Life sell policies through general agents, soliciting agents, and managing general underwriters who are non-salaried independent contractors compensated on a commission or fee basis. General agents and agents are paid commissions based upon the amount of premiums they produce. Managing general underwriters receive administrative fees.
Standard Life intends to continue selling stop loss and DBL business. Currently, Standard Life is developing occupational and provider excess products which it expects to begin selling in 1995. Madison Life intends to continue marketing group long-term and short-term disability insurance, group term life insurance, credit life and credit disability insurance, group dental health insurance and family life/accidental death and dismemberment ("AD&D")
insurance. Standard Life and Madison Life may sell other insurance products in the future. It is intended that the sale of such other products would not involve material reductions in the capital and surplus of either company.
GROUP INSURANCE
Approximately 32% of the group insurance premiums in 1994 was obtained from stop loss policies as compared to 33% in 1993. Approximately 60% of the group insurance premiums in 1994 was obtained from DBL policies while 63% was obtained from DBL policies in 1993. In 1994, group insurance premiums related to Standard Life's stop loss, DBL, and other miscellaneous group insurance coverage represented approximately 90% of Standard Life's total premiums compared to approximately 86% in 1993.
Madison Life increased its group insurance premiums $740,000 from 1993, and earned approximately $1,317,000 of group long-term and short-term disability premiums during 1994. Group term life premiums amounted to approximately $1,894,000, an increase of 37%. Other group life premiums, primarily family life/AD&D premiums, amounted to approximately $979,000 in 1994 as compared to $1,016,000 in 1993.
INDIVIDUAL INSURANCE AND ANNUITIES
At December 31, 1994, approximately 18% of Standard Life's individual life insurance in-force consisted of participating ordinary life insurance, and substandard risks represented less than 3% of individual life insurance in- force. Approximately 2% of Standard Life's premiums consisted of individual accident and health insurance contracts, primarily non-cancelable, guaranteed renewable disability income, and business and professional overhead insurance. Standard Life no longer markets individual insurance and annuity products. Effective December 31, 1993 Standard Life reinsured a 60% quota share of its lotto annuity business on a modified coinsurance basis.
At December 31, 1994, individual life insurance of various types comprised approximately 11% of Madison Life's aggregate life insurance in-force. At that same date, the group life in-force had increased to comprise approximately 78% of the aggregate life insurance in-force, up from approximately 50% as of December 31, 1993. Approximately 3% of the total individual life insurance in-force was participating. At December 31, 1994, Madison Life had 3,361 individual annuity policies in-force. Reserves for future annuity benefits amounted to approximately $9,925,000. Madison Life is no longer marketing traditional individual
insurance and annuity products, but commenced writing substandard ordinary and substandard long-term disability in late 1992.
CREDIT LIFE AND CREDIT HEALTH INSURANCE
Credit insurance was a less significant part of the new business written by Madison Life during 1994 than in previous years. Credit life and credit health premiums earned amounted to approximately $4,069,000 and $6,622,000, respectively, in 1994 as compared to $4,949,000 and $7,274,000, respectively, during 1993. Total credit premiums represented approximately 54% of the aggregate premiums earned by Madison Life in 1994 as compared to 62% during 1993.
REINSURANCE AND POLICY RETENTION LIMITS
Reinsurance is used to reduce the potentially adverse financial impact of large individual risks and to reduce the drain on statutory income and surplus related to new business. By using reinsurance, the Insurance Subsidiaries are able to write policies in amounts larger than they could otherwise accept. The amount reinsured is the portion of each policy in excess of the retention limit on a particular policy. Retention limits for Standard Life at December 31, 1994 were: (1) $210,000 per life on individual life and corresponding disability waiver of premium; (2) no retention on accidental death benefits provided by rider to individual life policies; (3) 10% to 20% of the risk on its stop loss business; and (4) a maximum of $2,500 of monthly benefits on disability income policies. In addition, Standard Life has purchased additional reinsurance for its stop loss business on the portion of risks which it retains, limiting its exposure on a catastrophic (aggregate) loss or any unusual individual (specific) loss. Further, Standard Life has stop loss and catastrophe reinsurance to protect against particularly adverse mortality which might occur with respect to its overall life business.
Maximum retention limits for Madison Life at the present time are: (1) 10% to 50% of the risk on group long-term and short-term disability insurance, group term life, group AD&D insurance and substandard ordinary life and substandard long- term disability insurance - maximum net retention for life coverage under these contracts is $25,000 and the maximum retained disability benefit is $1,875 per month; (2) $25,000 per life on group credit life and on group family life; (3) $1,000 on credit disability insurance per month; (4) $25,000 on any one life on individual ordinary life; and (5) $600 maximum monthly benefit per life on individual accident and health insurance. In addition, Madison Life has purchased additional reinsurance on the portion of risks which it
retains, limiting its exposure on a catastrophic (aggregate) loss.
At December 31, 1994, the total amount of ceded reinsurance in-force for the Insurance Subsidiaries was approximately $2,875,688,000. The Insurance Subsidiaries remain contingently liable with respect to the insurance in- force which has been reinsured against the unlikely event that the assuming reinsurers are unable to satisfy their obligations.
For further information pertaining to Reinsurance, reference is made to Note 17 of Notes to Consolidated Financial Statements.
RESERVES AND INVESTMENTS
As required by insurance laws and regulations, the Insurance Subsidiaries establish reserves to meet obligations on policies in-force. These reserves are amounts which, with additions from premiums expected to be received and with interest on such reserves at certain assumed rates, are calculated to be sufficient to meet anticipated future policy obligations. Premiums and reserves are based upon certain assumptions with respect to mortality, lapses and interest rates effective at the time the policies are issued. The Insurance Subsidiaries also establish appropriate reserves for substandard business, annuities and additional policy benefits, such as waiver of premium and accidental death. The Insurance Subsidiaries have invested and will continue to invest their respective assets which support the reserves and other funds in accordance with applicable insurance law. The Insurance Subsidiaries' investments are supervised by their respective Boards of Directors.
COMPETITION AND REGULATION
The Insurance Subsidiaries compete with many larger insurance companies. Although most life insurance companies are stock companies, mutual companies also write life insurance in the United States. Mutual companies may have certain competitive advantages since profits inure directly to the benefit of the policyholders.
IHC is an insurance holding company. As such, IHC and the Insurance Subsidiaries are subject to regulation and supervision by the insurance supervisory agencies of New York, in the case of Standard Life, Wisconsin, in the case of Madison Life, and Delaware in the case of First Standard. The Insurance Subsidiaries are also subject to regulation and supervision in all states in which they are licensed to sell insurance. These supervisory agencies have broad
administrative powers with respect to the granting and revocation of licenses to transact business, the licensing of agents, the approval of policy forms, the fixing of commission rates, the form and content of mandatory financial statements, reserve requirements and the types of investments which may be made. Such regulation is designed primarily for the benefit of policyholders rather than the stockholders of an insurance company.
Certain transactions within the holding company system are also subject to regulation and supervision by such regulatory agencies. All such transactions must be fair and equitable. Notice to or prior approval by the insurance commissioner is required with respect to transactions affecting the ownership or control of an insurer and of certain material transactions, including dividend declarations, between an insurer and any person in its holding company system. In addition, periodic disclosure is required concerning the operations, management and financial condition of the insurer within the holding company system. The insurer is also required to file detailed annual statements with each supervisory agency, and its affairs and financial conditions are subject to periodic examination.
Beginning in 1993, risk based capital requirements were imposed on life and property and casualty insurance companies. The risk-based capital ratio is determined by dividing a company's total adjusted capital, as defined, by its authorized control level risk-based capital. Companies that do not meet certain minimum standards require specified corrective action. The risk-based capital ratios for the Company's insurance subsidiaries significantly exceed such minimum ratios.
PRODUCT LINES
The following table shows the aggregate results of Standard Life, First Standard and Madison Life by product line for the periods indicated:
INVESTMENT CURRENT COMMISSIONS OPERATING AND AND AND INCOME (LOSS) PREMIUM OTHER OTHER OTHER BEFORE INCOME INCOME BENEFITS EXPENSES INCOME TAXES -------------------------------------------------------- (DOLLARS IN THOUSANDS) ---- Group, Individual and Credit A&H......$39,205 $ 4,784 $23,975 $15,708 $ 4,306
Group, Individual and Credit Life..... 11,379 3,718 8,322 6,202 573
Group and Individual Annuity............. 39 651 520 513 (343) ------ ------ ------ ------ ------ TOTAL..............$50,623 $ 9,153 $32,817 $22,423 $ 4,536 ====== ====== ====== ====== ====== ---- Group, Individual and Credit A&H......$35,071 $ 7,016 $21,929 $14,586 $ 5,572
Group, Individual and Credit Life..... 12,411 7,499 8,509 6,434 4,967
Group and Individual Annuity............. 56 2,189 3,562 450 (1,767) ------ ------ ------ ------ ------ TOTAL..............$47,538 $16,704 $34,000 $21,470 $ 8,772 ====== ====== ====== ====== ====== ---- Group, Individual and Credit A&H......$34,242 $ 5,102 $22,486 $15,066 $ 1,792
Group, Individual and Credit Life..... 13,314 6,966 8,627 7,047 4,606
Group and Individual Annuity............. 86 5,826 4,015 230 1,667 ------ ------ ------ ------ ------ TOTAL..............$47,642 $17,894 $35,128 $22,343 $ 8,065 ====== ====== ====== ====== ======
INSURANCE IN-FORCE AND GROWTH OF BUSINESS
The following table summarizes the aggregate insurance activities of Standard Life, First Standard and Madison Life: 1994 1993 1992 ---------------------------------------- (DOLLARS IN THOUSANDS)
LIFE INSURANCE IN-FORCE: Group...........................$3,935,091 $1,802,952 $1,542,372 Individual term................. 474,824 443,451 722,341 Individual permanent............ 502,940 445,597 235,337 Credit.......................... 539,990 614,658 270,814 --------- --------- --------- TOTAL LIFE INSURANCE IN-FORCE (1), (2).............$5,452,845 $3,306,658 $2,770,864 ========= ========= ========= NEW LIFE INSURANCE: Group...........................$1,385,637 $ 367,012 $ 457,011 Individual term................. 133 459 - Individual permanent............ 328 4,338 200 Credit.......................... 249,831 365,046 148,621 --------- --------- --------- TOTAL NEW LIFE INSURANCE.......$1,635,929 $ 736,855 $ 605,832 ========= ========= ========= PREMIUM INCOME: Health: ------- Group..........................$ 31,210 $ 26,161 $ 23,868 Individual..................... 1,373 1,633 984 Credit......................... 6,622 7,277 9,390
Life: ----- Individual..................... 4,411 5,038 4,436 Individual and group annuity... 39 57 86 Credit......................... 4,069 4,950 6,580 Group.......................... 2,899 2,422 2,298 --------- --------- --------- TOTAL PREMIUM INCOME (3).......$ 50,623 $ 47,538 $ 47,642 ========= ========= ========= ------------------------------------------------------------------------- NOTES: (1) Includes participating insurance...................$ 38,494 $ 42,726 $ 45,362 ========= ========= ========= (2) Includes ceded reinsurance of: Group.......................$2,325,929 $ 980,905 $ 689,222 Individual.................. 473,507 378,281 470,341 Credit...................... 76,252 129,028 81,435 --------- --------- --------- Total ceded reinsurance....$2,875,688 $1,488,214 $1,240,998 ========= ========= ========= (3) After deducting ceded reinsurance premiums of.....$ 71,827 $ 59,788 $ 49,283 ========= ========= =========
MANUFACTURING GROUP
GENERAL
Zimmerman is a major producer of exterior site and product identification displays for national and regional marketing organizations. Zimmerman offers a full range of product design, engineering, manufacturing and site installation services. Production facilities are located in Longview and Jacksonville, Texas. Zimmerman is headquartered in Tyler, Texas.
PRODUCTS
Zimmerman's primary product is exterior site identification signage consisting of double or single plastic faced signs housed in aluminum or metal skinned and steel framed cabinets. In general, the signs are internally illuminated. Zimmerman also produces a variety of architectural signage utilizing routed faces, individual letters and related products.
PRINCIPAL CUSTOMERS AND MARKETING
Zimmerman sells directly to large multiple location retailers on a regional and national basis. Its products are also sold to customers located in Mexico and Canada. Zimmerman's customers include major participants in the petroleum marketing, convenience store, restaurant, automotive and financial services industries. Petroleum marketing constitutes Zimmerman's single largest market segment.
PRODUCTION, RAW MATERIALS AND PRODUCT BACKLOG
Zimmerman designs and engineers products to customer specifications. Manufacturing operations typically consist of screening and molding acrylic or polycarbonate faces, constructing sign cabinets from customer specific aluminum extrusion or building steel framed and metal skinned cabinets and assembling the product together with electrical components.
Zimmerman provides sign installation for many of its customers. In those cases, preparation of site surveys, compliance with local zoning ordinances, and on site installation of the sign are managed by Zimmerman.
Zimmerman's principal raw materials are plastic, aluminum, and electrical components. It has multiple sources for its raw materials and has not experienced material supply problems.
Zimmerman had $17,700,000 in backlog orders at December 31, 1994 as compared to $13,200,000 at December 31, 1993. These orders are expected to be shipped within the current year.
COMPETITION
Zimmerman competes with several other sign companies for high volume sign users which it considers its primary market. Competition is conducted on the basis of price and a wide variety of services, including design, production, installation, and financial capabilities.
ITEM 2.



ITEM 2. PROPERTIES ---------- IHC
IHC has entered into a renewable short-term arrangement with Geneve Corporation for the use of 7,500 square feet of office space as its corporate headquarters in Stamford, Connecticut.
Standard Life
Standard Life leases approximately 13,500 square feet of floor space for its offices in New York, New York as its corporate headquarters.
Madison Life
Madison Life owns its home office building in Middleton, Wisconsin. The building consists of approximately 23,000 square feet of office space, of which approximately 10,600 square feet are occupied by Madison Life and the remaining space is leased to other tenants pursuant to short-term arrangements.
Zimmerman
Zimmerman owns a 76,000 square foot manufacturing facility in Longview, Texas and owns a 10,000 square foot manufacturing facility adjacent to its 102,000 square foot leased plant in Jacksonville, Texas. In Dallas, Texas, 28,000 square feet of leased manufacturing space is sublet to a third party. Zimmerman owns 20 acres of industrial zoned land in Jacksonville, Texas. In 1994, Zimmerman leased 12,000 square feet of office space which serves as its Tyler, Texas headquarters. It also leases 1,200 square feet of office space in Dallas, Texas.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS ----------------- No material litigation.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- Not applicable.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. ------------------------------------------------- IHC common stock and share purchase warrants expiring June 30, 2001 ("Warrants") are traded over-the-counter. The common stock trades on the National Association of Securities Dealers Automated Quotation System (NASDAQ) under the symbol INHO. Warrant prices are quoted on the National Association of Securities Dealers, Inc. Over the Counter Bulletin Board. The following tabulation shows the high and low sales prices for IHC's common stock and the high and low bid prices for the Warrants. The Warrant information was obtained from the National Quotation Bureau.
COMMON STOCK WARRANTS ------------- ----------- HIGH LOW HIGH LOW --------------------------
QUARTER ENDED: December 31, 1994.............. 3 1/4 3 3/16 1/100 September 30, 1994............. 3 3/8 2 7/8 1/50 1/100 June 30, 1994.................. 3 1/8 2 7/8 1/100 1/100 March 31, 1994................. 3 3/4 2 7/8 1/20 1/100
QUARTER ENDED: December 31, 1993.............. 3 3/4 2 7/8 1/20 1/100 September 30, 1993............. 3 1/8 2 5/8 1/20 1/20 June 30, 1993.................. 3 2 3/8 1/20 1/20 March 31, 1993................. 3 2 1/4 1/20 1/20
The foregoing prices for the Warrants do not necessarily represent actual transactions, but rather the quoted prices between dealers, excluding retail markup, markdown or commission.
At March 24, 1995, the number of record holders of IHC's (i) common stock was 3,762 and (ii) Warrants was 1,285.
IHC declared a dividend of $.02 per share on its common stock on November 10, 1994 and December 2, 1993.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA ----------------------- The following is a summary of selected consolidated financial data with respect to the Company for each of the last five years.
YEAR ENDED DECEMBER 31, 1994 1993 1992 1991 1990 ----------------------------------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME DATA: Total revenues..............$ 98,390 $ 98,773 $ 91,358 $ 94,349 $ 83,788 ======= ======= ======= ======= ======= Income (loss) applicable to common shares from continuing operations......$ 4,235 $ 5,419 $ 3,139 $ 4,372 $ (6,309) ======= ======= ======= ======= ======= BALANCE SHEET DATA:
Total assets................$303,689 $309,054 $273,166 $288,810 $282,708 Insurance policy benefits, claims and other policy liabilities................ 150,988 159,090 149,083 159,483 140,929 Long-term debt.............. 21,258 20,026 4,302 11,457 11,527
Redeemable preferred stock.. - - - - 30,501
Common stockholders' equity..................... 55,694 62,051 57,205 55,730 48,125
PER SHARE DATA:
Cash dividends declared per common share...............$ .02 $ .02 $ .02 $ .02 $ .02
Income (loss) per common share from continuing operations before cumulative effect of accounting changes.........$ .27 $ .33 $ .18 $ .24 $ (.35)
Net income (loss) per common share...............$ .27 $ .31 $ .25 $ .24 $ (2.11)
Book value per common share.$ 3.59 $ 3.92 $ 3.56 $ 3.10 $ 2.64
The above table has been restated to reflect the adoption of Statement of Financial Accounting Standards No. 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" in 1993 and for the sale of the Company's investment banking group and certain other operations in 1990.
The Selected Financial Data should be read in conjunction with the accompanying consolidated financial statements and notes thereto.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------- RESULTS OF OPERATIONS --------------------- Independence Holding Company and subsidiaries ("the Company" or "IHC") has two operating segments: the Insurance Group and the Manufacturing Group. The Insurance Group consists of the Company's wholly-owned insurance subsidiaries, Madison National Life Insurance Company, Inc. ("Madison Life") and its subsidiaries, and Standard Security Life Insurance Company of New York and its subsidiaries, including First Standard Security Insurance Company ("Standard Life"). The Manufacturing Group consists of the Company's majority owned sign manufacturing subsidiary, Zimmerman Sign Company ("Zimmerman"). All remaining income, principally income from parent company liquidity (cash, cash equivalents, resale agreements and marketable securities) and expense items associated with parent company activities, the Company's remaining real estate operations and certain other investments of the Company are included in Corporate. Additional information regarding the Company's segments is provided in Note 18 of Notes to Consolidated Financial Statements.
1994 COMPARED TO 1993 --------------------- The Company's net income applicable to common shares was $4.2 million or $.27 per share for the year ended December 31, 1994 as compared to $5.1 million or $.31 per share for the comparable period of 1993. Operating income decreased to $4.6 million in the year ended December 31, 1994 from $7.8 million in the year ended December 31, 1993.
INSURANCE GROUP --------------- Standard Life underwrites specific and aggregate excess medical insurance coverage ("stop loss") sold to employers who self-fund their employees' health benefits, short-term statutory disability benefits law business ("DBL") and group life insurance. Standard Life also performs auditing and marketing services in connection with its stop loss business. Standard Life has existing business in-force in the following lines of business which are in runoff status: individual accident and health, individual life, single premium immediate annuities, and miscellaneous business. In addition, Standard Life actively seeks opportunities to enter into cooperative underwriting and reinsurance arrangements with other life insurers, reinsurers and managed care companies. Madison Life markets group long-term and short-term disability and group life products as well as credit life and credit accident and health products. Its existing blocks of individual ordinary life, individual accident and health, and annual and single premium deferred annuity business are in runoff status. Madison Life historically has purchased, on an assumption
reinsurance basis, blocks of group credit life and credit disability insurance and individual ordinary life insurance business to increase overall profitability. The Insurance Group had operating income of $4.6 million for the year ended December 31, 1994 versus $8.8 million for the year ended December 31, 1993. Operating income includes realized and unrealized losses of $2.0 million in 1994 compared to realized and unrealized gains of $.9 million in 1993. The Company makes decisions to sell securities based on cash flow needs, investment opportunities, and the condition of the market, thus creating fluctuations in gains from one year to the next. Operating income excluding net securities gains or losses was $6.6 million in 1994 versus $7.9 million in 1993. Premium revenues increased $3.1 million. Madison Life had a decrease of $1.1 million primarily from the credit lines of business due to the run-off status of the purchased credit blocks of business from 1991. Premium revenues at Standard Life increased $4.2 million due to an increase in stop loss premiums of $1.9 million and an increase in DBL premiums of $2.1 million reflecting Standard Life's continued growth in these lines of business. Standard Life also had a $.9 million increase in premiums due to the assumption of a group accident and health block of business, offset by a $.7 million decrease due to the continued runoff of the Company's closed blocks of life, annuity and individual and group accident and health lines of business. Net investment income decreased $.4 million. Interest income increased $.2 million, investment expenses increased $.1 million and dividend income decreased $.5 million. Equity income decreased $.8 million due to lower returns on certain partnership investments in 1994. Madison Life reported other income of $2.3 million in 1993 related to the anticipated recovery from a reinsurer on a stop loss treaty for credit business. During 1994, the estimated recovery was reduced to $1.0 million. Other income at Standard Life increased $.3 million as a result of an increase in stop loss fees of $.5 million, offset by a reduction in reinsurance recoveries of $.2 million due to the partial disposal of lotto annuity business at the end of 1993 and a reduction in reinsurance recoveries on its closed block of ordinary life business. Insurance benefits, claims and reserves decreased by $1.2 million for the year ended December 31, 1994 compared to 1993. Madison Life's and Standard Life's expenses decreased by $.2 million and $1.0 million, respectively. Standard Life's decrease was related to a $1.3 million reduction in claims and reserves connected with the ordinary life, group life and individual accident and health lines of business which is in runoff status and a $3.0 million decrease in payments and reserves on the lotto annuity contracts due to the partial disposal of this business in 1993. These decreases were offset by an increase in stop loss claims and reserves of $2.1 million resulting from the increase in premiums, an increase of $.5 million relating to the increase in DBL business and a $.7 million increase in claims due to the assumed group accident and health block of business.
Amortization of deferred acquisition costs and general and administrative expenses for the Insurance Group increased $1.0 million: Standard Life's expenses increased by $1.0 million resulting from an increase in commissions of $.8 million from higher premiums and an increase in general expenses of $.2 million, while Madison Life remained constant.
MANUFACTURING GROUP ------------------- Operating income increased $.7 million to $3.0 million for the year ended December 31, 1994 as compared to 1993. Sales increased $3.4 million while cost of sales increased $2.1 million, resulting in a gross profit margin of 23.2% in 1994 versus 21.6% in 1993. Interest expense and selling, general and administrative expenses increased by $.6 million primarily due to the higher sales volume.
CORPORATE --------- Operating losses decreased $.3 million from 1993 levels. Investment income increased $.5 million primarily due to a reduction in realized losses of $.4 million on a corporate investment. Other income increased $.2 million from the sale of a real estate investment. Interest expense increased $.9 million due to a $15.0 million credit agreement entered into in late 1993 by a corporate subsidiary. At the end of 1994, $14.0 million remained outstanding under this credit agreement. Selling, general and administrative expenses decreased $.5 million due to a reduction in consulting expenses in 1994 compared to 1993, and the write down of certain real estate investments in 1993.
1993 COMPARED TO 1992 --------------------- The Company's net income applicable to common shares was $5.1 million or $.31 per share for the year ended December 31, 1993 as compared to $4.3 million or $.25 per share for the year ended December 31, 1992. The year ended December 31, 1993 includes a loss of $.3 million or $.02 per share net of applicable income taxes for the cumulative effect of an accounting change for investment securities [see Note 4 of Notes to Consolidated Financial Statements]. The year ended December 31, 1992 includes a benefit of $1.2 million or $.07 per share for the cumulative effect of an accounting change for income taxes [see Note 15 of Notes to Consolidated Financial Statements]. Operating income increased $2.2 million to $7.8 million for the year ended December 31, 1993.
INSURANCE GROUP --------------- The Insurance Group had operating income of $8.8 million for the year ended December 31, 1993 versus $8.1 million for the year ended 1992. Premium revenues decreased $.1 million. Madison Life
had a decrease in premiums of $1.7 million resulting from the runoff of credit blocks of business purchased in the fourth quarter of 1991 partially offset by an increase in ordinary life and individual accident and health premiums. Premium revenues at Standard Life increased $1.6 million due to an increase in group health stop loss premiums of $1.7 million and an increase of $.4 million in DBL premiums, reflecting the continued growth of these lines of business, and a $.4 million increase for assumed group accident and health premiums, reduced by a $.8 million decrease in the runoff blocks of life, annuity and individual and group accident and health lines of business. Net investment income decreased $1.5 million. Interest and dividend income added $1.1 million due to increased investable assets, a higher interest yielding portfolio and a special dividend earned on a corporate investment, while investment expenses decreased $.1 million, and realized and unrealized gains decreased $2.7 million. Equity income increased $.2 million. Other income at Madison Life increased $2.3 million in the fourth quarter of 1993 due to the recovery from a stop loss treaty for credit life, accident and health business, while other income at Standard Life decreased $2.2 million. Standard Life incurred a $2.5 million loss, as a result of the partial disposal of its closed block of lotto annuity business in the fourth quarter of 1993. A $.8 million increase in fees earned in the 1993 period from Standard Life's stop loss business due to increased sales was partially offset by a $.5 million decrease in non-recurring other income earned in 1992 as a result of the termination of Standard Life's pension plan. Madison Life's benefits and claims decreased $1.7 million, while the amortization of deferred acquisition costs decreased by $2.6 million due primarily to the runoff of the purchased blocks of credit business. Standard Life's insurance expenses increased $.6 million and its deferred insurance acquisition costs decreased $.2 million. General and administrative expenses increased $1.9 million for the Insurance Group. Included in these expenses are premium taxes which rose $.4 million due to an increase in certain lines of business, an increase in commission expense of $1.1 million due to an increase in commissions for Standard Life's stop loss line of business, an increase due to the purchase of an ordinary life block of business at Madison Life, the runoff of favorable commission rates on reinsurance treaties assumed in 1991, and an increase of $.4 million in general expenses due to additional costs on the acquired blocks of business.
MANUFACTURING GROUP ------------------- The year ended December 31, 1993 reflected a significant improvement in the results of Zimmerman. Operating income was $2.2 million for the year ended December 31, 1993 as compared to income of $.1 million for the year ended December 31, 1992. Sales increased $9.1 million while cost of sales increased $6.2 million, resulting in an improvement in gross profit margins to 21.6% in 1993 from 18.0% in 1992. Borrowings at Zimmerman increased from
the prior year, while interest expense decreased $.1 million due to lower interest rates. Selling, general and administrative expenses increased $.9 million reflecting an increase in minority interest of $.3 million due to higher net income and an increase of $.6 million in general expenses due to the higher sales volume.
CORPORATE --------- Operating losses increased $.6 million from 1992 levels. Investment income decreased $.3 million due to lower returns on certain hedged equity positions. Interest expense decreased $.4 million due to the redemption of a subsidiary's indebtedness. Interest expense will increase in 1994 as a result of the $15.0 million credit facility of a corporate subsidiary incurred at the end of 1993, although such interest expense should be offset by additional income generated by the Insurance Group. General and administrative costs increased $.7 million due primarily to an increase in losses on certain real estate investments and an increase in minority interests in a partnership investment.
LIQUIDITY --------- CASH FLOWS - GENERAL -------------------- The net cash provided amounted to $10.2 million from operating activities, while investing activities used $1.7 million of cash. Cash used by financing activities of $4.9 million primarily resulted from the repurchase of $1.0 million of the Company's common stock, the repayment of long-term debt of $1.2 million, the payment of investment type insurance contracts of $4.8 million and the payment of a dividend on common stock of $.3 million declared in 1993 and paid in February 1994, offset by an increase in long-term debt of $2.4 million.
INSURANCE GROUP --------------- The Insurance Group normally provides cash flow from operations, from the receipt of scheduled principal payments on its portfolio of fixed income securities and from earnings on short-term investments. Such cash flow is used partially to finance liabilities for insurance policy benefits. These liabilities represent long-term obligations which are calculated using certain assumed interest rates. 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 81% was invested in investment grade fixed income securities, resale agreements and cash and cash equivalents at December 31, 1994. These investments carry less risk and therefore lower interest rates than other types of fixed maturity investments. At December 31, 1994, approximately 4.7% of the carrying value of investable
assets was invested in diversified non-investment grade fixed income securities (investments in such securities have different risks than investment grade securities, including greater risk of loss upon default, and thinner trading markets).
Commensurate with the dramatic and rapid rise in interest rates during 1994, the Company employed a strategy of hedging portions of its intermediate term and long term fixed income securities against principal changes. This strategy utilized readily marketable short term put and call options on interest rate futures contracts. The value of these put and call options varies depending upon the change in the underlying futures contract, which principally varies with interest rate movements on applicable U.S. Treasury securities. This strategy was successful in 1994 in reducing loss of principal on the Company's fixed income portfolio on a mark-to-market basis. The Company will employ this strategy and other appropriate hedging strategies in considering the duration of its fixed income portfolio and insurance liabilities as well as its interest rate outlook.
The Company monitors its investment portfolio on a continuous basis and believes the liquidity of the Insurance Group will not be adversely affected by its current investments.
MANUFACTURING GROUP ------------------- For the year ended December 31, 1994, $1.4 million of cash was provided by Zimmerman's operations, and $3.1 million was provided by an increase in bank debt. This cash was partially used to purchase property, plant and equipment of $1.0 million to update manufacturing and corporate facilities and to finance a dividend of $2.9 million to its parent and minority shareholders. Zimmerman has an $8.0 million bank line of credit as to which $6.5 million was outstanding at December 31, 1994. The Company believes that Zimmerman has sufficient funds to meet its obligations.
CORPORATE --------- Corporate derives its funds principally from (i) dividends and interest income from its Insurance Group and its Manufacturing Group, (ii) tax payments and management fees from its subsidiaries and (iii) investment income from Corporate liquidity.
State insurance laws restrict the Insurance Group's ability to make dividend payments to the parent company [see Note 19 of Notes to Consolidated Financial Statements]. Regulatory constraints have historically not affected IHC's consolidated liquidity, although they have limited the ability of the parent company to use cash generated by the Insurance Group to fund operating expenses, interest and dividend payments at Corporate.
During 1994, the Company repurchased 291,787 shares of common stock at a cost of $.9 million under its stock and warrant repurchase program. Through December 31, 1994, 3,596,251 shares of common stock have been repurchased under this program at a cost of approximately $8.7 million. At the end of 1994, the Company purchased 384,741 of its outstanding share purchase warrants at an aggregate cost of approximately $.1 million. The Company may purchase additional shares of common stock and warrants in the open market or otherwise from time to time.
Total corporate liquidity (cash, cash equivalents, resale agreements and marketable securities) amounted to $14.3 million at December 31, 1994. At the present time, the Company is not in need of any additional long-term financing.
CAPITAL RESOURCES ----------------- The Company continues to explore actively new opportunities which it perceives exist in the health, life, and property and casualty insurance and reinsurance businesses. With the infusion in 1993 of $15.0 million of additional capital, which enhanced the Insurance Group's already superior capital ratios, together with its broad licensing and excellent asset quality and credit- worthiness, the Insurance Group remains well positioned to increase or diversify its current activities.
At the same time, the Company recognizes that health care reform initiatives are continuing to be discussed at various levels of government. Depending upon the scope and timing of any such legislation that becomes law, the manner in which health insurance business is conducted in the future could be impacted. The Insurance Group continuously monitors these initiatives in an effort to best take advantage of a changing health care environment.
In accordance with SFAS No. 115, the Company may carry its portfolio of fixed income securities either as held to maturity (carried as 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. Primarily as a result of the rise in interest rates, the cost of the Company's investment portfolio exceeded the market value at December 31, 1994; consequently, an unrealized loss of $9.2 million, net of a $.9 million tax benefit, was charged to total stockholders' equity. The Company employs investment strategies to mitigate interest rate and other market exposures.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- See Index to Consolidated Financial Statements and Schedules on page 24.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ------------------------------------------------ None
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- Information required by this Item is incorporated by reference to "Election of Directors" and "Executive Officers" in the Company's Proxy Statement for its 1995 Annual Meeting of Stockholders.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION ---------------------- Information required by this Item is incorporated by reference to "Executive Compensation" in the Company's Proxy Statement for its 1995 Annual Meeting of Stockholders, except that the information required by paragraphs (i), (k) and (l) of Item 402 Regulation S-K (section 229.402) and set forth in such Proxy Statement is specifically not incorporated by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT --------------------------------------------------- Information required by this Item is incorporated by reference to "Principal Stockholders" in the Company's Proxy Statement for its 1995 Annual Meeting of Stockholders.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- Information required by this Item is incorporated by reference to "Principal Stockholders" in the Company's Proxy Statement for its 1995 Annual Meeting of Stockholders.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ------------------------------------------------------- (a) (1) and (2) See Index to Consolidated Financial Statements and Schedules on page 24. (3) EXHIBITS See Index to Exhibits on page 60. (b) No report on Form 8-K was filed during the quarter ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) 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, on March 28, 1995.
INDEPENDENCE HOLDING COMPANY (REGISTRANT)
By/s/Edward Netter ----------------------- Edward Netter Chairman of the Board Chief Executive Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of the 28th day of March, 1995.
/s/ Harold E. Johnson ------------------------- Harold E. Johnson Director
/s/ Allan C. Kirkman ------------------------ Allan C. Kirkman Director
/s/ Steven B. Lapin ------------------------- Steven B. Lapin Director, President and Chief Operating Officer
/s/ Donald T. Netter ------------------------ Donald T. Netter Director, Senior Vice President - Investments
/s/ Edward Netter ------------------------- Edward Netter Director, Chairman of the Board, and Chief Executive Officer (Principal Executive Officer)
/s/ Edward J. Scheider -------------------------- Edward J. Scheider Director
/s/ F. Peter Zoch, III -------------------------- F. Peter Zoch, III Director
/s/ Roy T. K. Thung -------------------------- Roy T. K. Thung Director, Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
/s/ Teresa A. Herbert ------------------------- Teresa A. Herbert Vice President and Controller (Principal Accounting Officer)
INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
PAGES ----- INDEPENDENT AUDITORS' REPORT.............................. 25
CONSOLIDATED FINANCIAL STATEMENTS: ---------------------------------- Consolidated Balance Sheets at December 31, 1994 and 1993................................................. 26
Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992......................... 27
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992..... 28
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992......................... 29-30
Notes to Consolidated Financial Statements................ 31-54
SCHEDULES:* ---------- Summary of investments - other than investments in affiliates at December 31, 1994 (Schedule I)............. 55-56
Condensed financial information of parent company (Schedule III)........................................... 57-59
Supplementary insurance information (Schedule V).......... 60
EXHIBIT INDEX............................................. 61
*All other schedules have been omitted as they are not applicable or not required, or the information is given in the financial statements, notes thereto or in other schedules.
INDEPENDENT AUDITORS' REPORT ---------------------------- THE BOARD OF DIRECTORS AND STOCKHOLDERS INDEPENDENCE HOLDING COMPANY:
We have audited the consolidated financial statements of Independence Holding Company and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independence Holding Company and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
As discussed in notes 1 and 4, respectively, to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards ("SFAS") No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" and No. 115, "Accounting for Certain Investments in Debt and Equity Securities" in 1993. As discussed in note 15 to the consolidated financial statements, the Company adopted SFAS No. 109, "Accounting for Income Taxes" in 1992.
KPMG PEAT MARWICK LLP New York, New York March 21, 1995
INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 1993 ---------------------------------------------------------------------------- ASSETS: Cash and cash equivalents......................$ 37,862,000 $ 34,267,000 Short-term investments......................... 708,000 5,239,000 Securities purchased under agreements to resell (Note 2)...................................... 18,660,000 21,687,000 Fixed maturities (Note 4)...................... 129,817,000 123,470,000 Equity securities (Note 4)..................... 23,171,000 26,520,000 Other investments (Note 7)..................... 12,142,000 13,195,000 Trade accounts, notes and other receivables.... 10,688,000 7,175,000 Inventories (Note 8)........................... 10,497,000 8,337,000 Deferred insurance acquisition costs........... 10,979,000 13,934,000 Property, plant and equipment, net (Note 9).... 4,447,000 3,876,000 Due from reinsurers............................ 39,336,000 43,209,000 Due from brokers............................... 596,000 3,285,000 Other assets................................... 4,786,000 4,860,000 ----------- ----------- TOTAL ASSETS...............................$303,689,000 $309,054,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY: LIABILITIES: Future insurance policy benefits...............$ 95,277,000 $ 99,433,000 Unearned Premiums.............................. 14,680,000 16,945,000 Future annuity policy benefits................. 34,436,000 36,357,000 Insurance policy claims........................ 4,434,000 4,404,000 Other policyholders' funds..................... 2,161,000 1,951,000 Financial instruments sold, but not yet purchased (Note 4)............................ 17,525,000 16,568,000 Due to brokers................................. 22,006,000 18,528,000 Due to reinsurers.............................. 4,225,000 3,748,000 Accounts payable, accruals and other liabilities................................... 26,213,000 22,277,000 Income taxes, principally deferred (Note 15)... 5,780,000 6,766,000 Long-term debt (Note 11)....................... 21,258,000 20,026,000 ----------- ----------- TOTAL LIABILITIES.......................... 247,995,000 247,003,000 ----------- ----------- STOCKHOLDERS' EQUITY: (Note 13) Common stock, par value $1 per share (50,000,000 shares authorized; 15,528,730 and 15,820,517 shares issued and outstanding, respectively net of 4,377,900 shares in treasury)........... 15,529,000 15,821,000 Paid-in capital................................. 69,800,000 70,154,000 Unrealized gains (losses) on investments, net of deferred taxes (tax benefits) of ($906,000) and $285,000 respectively.......................... (9,168,000) 467,000 Accumulated deficit............................. (20,467,000) (24,391,000) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY................. 55,694,000 62,051,000 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.$303,689,000 $309,054,000 =========== ===========
See accompanying notes to consolidated financial statements.
INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1994 1993 1992 ---------------------------------------------------------------------------- REVENUES: Insurance premiums...............$ 50,623,000 $ 47,538,000 $ 47,642,000 Net investment income (Note 6)... 11,230,000 14,171,000 15,930,000 Sales............................ 36,427,000 33,001,000 23,941,000 Equity income.................... 453,000 1,288,000 1,085,000 Other (loss) income.............. (343,000) 2,775,000 2,760,000 ---------- ---------- ---------- 98,390,000 98,773,000 91,358,000 ---------- ---------- ---------- EXPENSES: Insurance benefits, claims and reserves........................ 32,817,000 34,000,000 35,127,000 Amortization of deferred insurance acquisition costs..... 5,573,000 6,444,000 9,216,000 Cost of sales.................... 27,985,000 25,866,000 19,638,000 Interest expense................. 1,345,000 383,000 906,000 Selling, general and administra- tive expenses................... 26,039,000 24,233,000 20,842,000 ---------- ---------- ---------- 93,759,000 90,926,000 85,729,000 ---------- ---------- ---------- Operating income before income taxes............................ 4,631,000 7,847,000 5,629,000 Income tax expense (Note 15)........................ 396,000 2,428,000 2,490,000 ---------- ---------- ---------- Income before cumulative effect of accounting changes............ 4,235,000 5,419,000 3,139,000 Cumulative effect of accounting changes.......................... - (340,000) 1,199,000 ----------- ----------- ----------- Net income........................$ 4,235,000 $ 5,079,000 $ 4,338,000 =========== =========== =========== INCOME PER COMMON SHARE: Income before cumulative effect of accounting changes...........$ .27 $ .33 $ .18 Cumulative effect of accounting changes......................... - (.02) .07 ----------- ----------- ----------- Net income.......................$ .27 $ .31 $ .25 =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING...................... 15,717,000 16,148,000 17,574,000 =========== =========== ===========
See accompanying notes to consolidated financial statements.
EXHIBIT INDEX ------------- Exhibit Number -------- 3 (i)(1) Restated Certificate of Incorporation of Independence Holding Company.*
3 (i)(2) Certificate of Amendment of Restated Certificate of Incorporation of Independence Holding Company.**
3 (ii) By-laws of Independence Holding Company.*
4 (i) Form of Warrant Certificate to purchase shares of Common Stock of Independence Holding Company, expiring June 30, 2001.*
10(iii)(A) Executive Compensation Plans and Agreements (1) Independence Holding Company 1988 Stock Incentive Plan*** (2) Form of Independence Holding Company Stock Option Agreement**** (3) Deferred Compensation Agreement***** (4) Retirement Benefit Agreements*****
11 Statement re: computation of per share earnings for the years ended December 31, 1994, 1993 and 1992.
21 Principal subsidiaries of Independence Holding Company, as of March 24, 1995.
23 Consent of KPMG Peat Marwick LLP.
*Such exhibits are incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1987, as amended, of Independence Holding Company.
**Such exhibit is incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1990, as amended, of Independence Holding Company.
***Such exhibit is incorporated by reference to the Proxy Statement for the Annual Meeting of Stockholders held on May 25, 1988 of Independence Holding Company.
**** Such exhibit is incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1988 of Independence Holding Company.
***** Such exhibit is incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1993 of Independence Holding Company.
Exhibits will be furnished upon request for a reasonable fee.