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.
Net income per common share...............$ .54 $ .27 $ .31 $ .25 $ .24
Book value per common share.$ 4.82 $ 3.59 $ 3.92 $ 3.56 $ 3.10
1995 COMPARED TO 1994 - --------------------- The Company's net income applicable to common shares was $8.2 million or $.54 per share for the year ended December 31, 1995 as compared to $4.2 million or $.27 per share for the year ended December 31, 1994, while operating income from continuing operations increased to $4.8 million for the year ended December 31, 1995 from $1.7 million for the year ended December 31, 1994. The Company had net realized and unrealized losses of $1.9 million in 1994. Excluding net realized and unrealized gains, the Company had operating income from continuing operations of $4.8 million in 1995 as compared to $3.6 million for 1994. Income from discontinued operations, net was $2.0 million for the year ended December 31, 1995 as compared to $1.8 million for the year ended December 31, 1994.
Insurance Group --------------- Standard Life's core businesses are: (i) underwriting specific and aggregate excess medical insurance coverage ("stop loss") sold to employers that self-insure their employees' health benefits, (ii) short-term statutory disability benefits law business in New York ("DBL") and (iii) group life insurance marketed to employers who self insure or enroll in health maintenance organizations ("HMO's"). Standard Life has also developed ancillary products, including reinsurance on, and risk- sharing and other alliances with, HMO's and provider health care organizations that desire to reduce their risk assumption and/or are required to purchase this coverage by regulation; point-of- service ("POS") insurance coverage sold to employers who are participating in an HMO health benefit plan and want to purchase a health insurance product that will provide their employees with a choice of providers; a behavioral health carve-out POS policy that is sold to employers that wish to provide a supplemental mental health insurance product to their employees; and reinsurance coverage for life and health insurance sold in South and Central America. In addition, Standard Life has existing business in-force in the following lines of business which are in runoff: individual accident and health, individual life, single premium immediate annuities, and miscellaneous insurance business. Standard Life also actively seeks opportunities to enter into cooperative underwriting and reinsurance arrangements with other life and health insurers, reinsurers, HMO's and managed care companies, that it believes would augment its existing businesses. Standard Life also performs auditing and marketing services in connection with its stop loss business. Madison Life markets group long-term and short-term disability and group life products as well as credit life and credit disability products. The group long-term and short-term disability and group life products are marketed to school districts, municipalities and hospitals, primarily in the Midwest. This business is sold through two marketing agencies that specialize in these target markets and assist in the billing and administration of the business. Approximately 80% of the credit insurance premiums are written through credit unions. Other sources of credit insurance premiums include automobile dealers, banks and finance companies. Its existing blocks of individual ordinary life, individual accident and health, and annual and single premium deferred annuity business are in runoff. 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 March 1996, Madison Life entered into an agreement to purchase, subject to certain conditions, a block of pre-need individual ordinary life insurance and annuity policies with reserves of approximately $33 million. Madison Life, through an investment subsidiary, has also entered into several joint venture investments involved in managed health care
million, and a $.8 million increase in claims from the ordinary life annuity, individual and group accident and health lines of business primarily from higher than anticipated claims on this closed block of business; the foregoing was partially offset by a decrease in DBL reserves of $.8 million due to favorable experience and reduced premium volume on this block of business. Amortization of deferred acquisition costs and general and administrative expenses for the Insurance Group increased $2.2 million. Standard Life's expenses increased by $2.4 million resulting from an increase in commissions of $.9 million, and an increase in insurance taxes of $.3 million from higher premiums and an increase in general expenses of $1.2 million. Madison Life's general expenses decreased by $.2 million. A decrease of $1.2 million in net commission expense due primarily from the credit blocks of business was offset by a $1.0 million increase in general expenses. The increase in general expenses for both Standard Life and Madison Life resulted from an increase in employee costs, consulting fees and premium taxes related to the growth and development of new business.
Discontinued Operations ----------------------- Operating income of Zimmerman increased $.3 million to $3.3 million for the year ended December 31, 1995 as compared to 1994. Sales increased $5.2 million while cost of sales increased $4.3 million, resulting in a gross profit margin of 22.5% in 1995 versus 23.2% in 1994. The gross profit margin for the year ended December 31, 1994 was favorably impacted by a non-recurring fixed price freight contract. Interest expense increased $.4 million due to higher borrowings supporting the increase in sales. Selling, general and administrative expenses increased $.2 million due to the higher sales volume in 1995.
Corporate --------- Corporate derives its funds principally from (i) dividends and interest income from the Insurance 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.
Discontinued Operations ----------------------- For the year ended December 31, 1995, $1.5 million of cash was used by Zimmerman's operations reflecting an increase in receivables and inventories due to higher sales volume. This use of cash was financed by income generated during the year and a $1.7 million net increase in bank borrowings. Zimmerman has a $10.0 million bank line of credit of which $8.6 million was outstanding at December 31, 1995. The Company believes that Zimmerman has sufficient funds to meet its obligations.