IHC Independence Holding Company

November 8, 2012. Independence Holding Company (NYSE:IHC) today reported 2012 third-quarter and nine-month results. As previously reported, IHC paid a special 10% stock dividend to shareholders of record on February 17, 2012. All per share amounts reflect such stock dividend. This press release contains both GAAP and non-GAAP financial information for which reconciliations can be found at the end of this release. 

Financial Results

Net income per share attributable to IHC increased to $.22 per share, diluted, or $3,918,000, for the three months ended September 30, 2012 compared to $.20 per share, diluted, or $3,554,000, for the three months ended September 30, 2011. Revenues increased to $111,502,000 for the three months ended September 30, 2012 compared to revenues for the comparable period in 2011 of $103,659,000, primarily as a result of an increase in premiums.

Net income per share attributable to IHC increased to $.63 per share, diluted, or $11,371,000, for the nine months ended September 30, 2012 compared to $.56 per share, diluted, or $9,778,000, for the nine months ended September 30, 2011. This increase was achieved despite not receiving a benefit this period comparable to the credit of $2,319,000 of deferred income taxes relative to the Company's investment in AMIC that we recorded in the first quarter of 2011. Revenues increased to $315,101,000 for the nine months ended September 30, 2012 compared to revenues for the nine months ended September 30, 2011 of $313,503,000, primarily due to an increase in premiums.

IHC reported operating income1 per share of $.18 per share, diluted, or $3,250,000, for the three months ended September 30, 2012, compared to $.17 per share, diluted, or $3,033,000, for the three months ended September 30, 2011. IHC reported operating income per share of $.51 per share, diluted, or $9,221,000, for the nine months ended September 30, 2012, compared to $.49 per share, diluted, or $8,486,000, for the nine months ended September 30, 2011. The operating income for the first nine months ended September 30, 2011 benefited from the tax credit of $2,319,000 as described above whereas the operating income for the nine months ended September 30, 2012 had no such benefit.

Chief Executive Officer's Comments

Roy Thung, Chief Executive Officer, commented, "We continue to be encouraged by the significant increase in profitability and growth of our stop-loss segment, which we attribute to the more efficient and controlled model of writing the majority of our medical stop-loss on a direct basis. At present, all indicators point to a continuation of this higher level of profitability. We are also encouraged by the performance of all our other lines of business, and our continuing efforts to introduce new products to our fully insured mix of business. Our overall investment portfolio continues to be very highly rated (on average, AA), and has a duration of approximately five years. Our book value has increased to $15.59 per share at September 30, 2012 from $14.46 per share at December 31, 2011."

Non-GAAP Financial Measures

The Company provides non-GAAP financial measures to complement its consolidated financial statements presented in accordance with GAAP: (i) Operating income is net income attributable to IHC excluding net realized gains or losses and other-than-temporary impairment losses; and (ii) Operating income per share is operating income (loss) on a per share basis. These non-GAAP financial measures are intended to supplement the user's overall understanding of the Company's current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding realized gains or losses, net of taxes, that, when excluded from the GAAP results, may provide additional understanding of the Company's core operating results or business performance. However, these non-GAAP financial measures are not intended to supersede or replace the Company's GAAP results. A reconciliation of the non-GAAP results to the GAAP results is provided in the "Reconciliation of GAAP Net Income Attributable to IHC to Non-GAAP Income from Operations" schedule below.  

About Independence Holding Company

IHC is a holding company principally engaged in the life and health insurance business and the acquisition of blocks of policies through its insurance company subsidiaries (Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company) and its marketing and administrative affiliates. Standard Security Life markets medical stop-loss, small group major medical, short-term medical, major medical for individuals and families, limited medical, group long and short-term disability and life, dental, vision and managed health care products. Madison Life sells group life and disability, employer medical stop-loss, small group major medical, major medical for individuals and families, short-term medical, dental, vision, and individual life insurance. Independence American offers major medical for individuals and families, medical stop-loss, small group major medical, short-term medical and pet insurance. IHC owns certain subsidiaries through its majority ownership of American Independence Corp. (Nasdaq:AMIC), which is a holding company principally engaged in the insurance and reinsurance business.

Certain statements and information contained in this release may be considered "forward-looking statements," such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the markets in which IHC operates, new federal or state governmental regulation, IHC's ability to effectively operate, integrate and leverage any past or future strategic acquisition, and other factors which can be found in IHC's other news releases and filings with the Securities and Exchange Commission. IHC expressly disclaims any duty to update its forward-looking statements or earnings guidance, and does not undertake to provide any such guidance in the future.

1 Operating income is a non-GAAP measure representing net income attributable to IHC excluding net realized investment gains (losses) and other-than-temporary impairment losses, net of applicable income tax. The Company believes that the presentation of operating income may offer a better understanding of the core operating results of the Company. A reconciliation of net income attributable to IHC to operating income is included in this press release.

INDEPENDENCE HOLDING COMPANY
THIRD QUARTER REPORT
September 30, 2012
(In Thousands, Except Per Share Data)
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2012	2011	2012	2011
REVENUES:
Premiums earned	$ 92,236	$ 85,230	$ 261,479	$ 255,104
Net investment income	9,346	9,235	25,706	28,984
Fee income	7,754	7,118	21,064	22,823
Other income	1,155	1,259	3,558	4,562
Net realized investment gains	1,011	924	3,998	2,605
Net impairment losses recognized in earnings	--	(107)	(704)	(575)
	111,502	103,659	315,101	313,503
EXPENSES:
Insurance benefits, claims and reserves	63,034	56,654	180,434	183,060
Selling, general and administrative expenses	39,791	38,958	109,594	111,275
Amortization of deferred acquisitions costs	1,587	1,844	4,812	5,293
Interest expense on debt	509	516	1,588	1,433
	104,921	97,972	296,428	301,061
Income before income taxes	6,581	5,687	18,673	12,442
Income taxes	2,191	1,676	6,123	1,167
Net income	4,390	4,011	12,550	11,275
Less: income from noncontrolling interests in subsidiaries
	(472)	(457)	(1179)	(1497)
NET INCOME ATTRIBUTABLE TO IHC	$ 3,918	$ 3,554	$ 11,371	$ 9,778
Basic income per common share	.22	.20	.63	.56
WEIGHTED AVERAGE SHARES OUTSTANDING	17,957	17,790	17,991	17,414
Diluted income per common share	$ .22	$ .20	$ .63	$ .56
WEIGHTED AVERAGE DILUTED SHARES
	18,028	17,795	18,076	17,422
As of November 6, 2012, there were 17,947,330 common shares outstanding, net of treasury shares.

RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO IHC TO NON-GAAP INCOME FROM OPERATIONS
(In Thousands, Except Per Share Data)
	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2012	2011	2012	2011
Net income attributable to IHC	$ 3,918	$ 3,554	$ 11,371	$ 9,778
Realized gains, net of taxes	(668)	(597)	(2,597)	(1,670)
Net impairment losses recognized in earnings, net of taxes	--	76	447	378
Operating income from operations	$ 3,250	3,033	$ 9,221	8,486
Non - GAAP basic income per common share	$ .18	.17	$ .51	.49
Non - GAAP diluted income per common share	$ .18	.17	$ .51	.49
The other-than-temporary-impairment losses are primarily due to the write down in value of certain Alt-A mortgage fixed maturities.

CONTACT: DAVID T. KETTIG
         (212) 355-4141 Ext. 3047
         www.IHCGroup.com