Independence Holding (IHC) 10-Q 2015 Q2 Quarterly report

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 endedJune 30, 2015.

[   ]

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

For the transition period from: ________ to _________  

Commission File Number:001-32244

INDEPENDENCE HOLDING COMPANY

(Exact name of registrant as specified in its charter)

Delaware		58-1407235
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

96 CUMMINGS POINT ROAD, STAMFORD, CONNECTICUT                      06902

                                  (Address of principal executive offices)                                              (Zip Code)

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

NOT APPLICABLE

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

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

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

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

Large Accelerated Filer [    ]	Accelerated Filer   [ X  ]
Non-Accelerated Filer   [  ]	Smaller Reporting Company   [     ]

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

Class	Outstanding at August 1, 2015
Common stock, $ 1.00  par value	17,299,351 Shares

INDEPENDENCE HOLDING COMPANY

INDEX

PART I – FINANCIAL INFORMATION				PAGE
					NO.
		Item 1. Financial Statements
			Condensed Consolidated Balance Sheets	4
			Condensed Consolidated Statements of Income	5
			Condensed Consolidated Statements of Comprehensive Income (Loss)	6
			Condensed Consolidated Statement of Changes in Equity	7
			Condensed Consolidated Statements of Cash Flows	8
			Notes to Condensed Consolidated Financial Statements	9
		Item 2. Management's Discussion and Analysis of Financial Condition
			and Results of Operations	29
		Item 3. Quantitative and Qualitative Disclosures about Market Risk		42
		Item 4. Controls and Procedures		43
PART II - OTHER INFORMATION
		Item 1.    Legal Proceedings		43
		Item 1A. Risk Factors		43
		Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds		44
		Item 3.    Defaults Upon Senior Securities		44
		Item 4.    Mine Safety Disclosures		44
		Item 5.    Other Information		44
		Item 6.    Exhibits		44
	Signatures			46

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

2

Forward-Looking Statements

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

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

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

3

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
						June 30, 2015		December 31, 2014
						(Unaudited)
ASSETS:
	Investments:
		Short-term investments			$	50	$	50
		Securities purchased under agreements to resell				23,429		16,790
		Trading securities				9,242		11,095
		Fixed maturities, available-for-sale				608,256		583,880
		Equity securities, available-for-sale				9,051		13,895
		Other investments				23,745		25,251
				Total investments		673,773		650,961
	Cash and cash equivalents					23,547		25,083
	Deferred acquisition costs					31,767		30,806
	Due and unpaid premiums					66,473		62,628
	Due from reinsurers					266,597		278,242
	Premium and claim funds					33,061		32,553
	Goodwill					56,452		50,318
	Other assets					51,533		57,126
				TOTAL ASSETS	$	1,203,203	$	1,187,717
LIABILITIES AND STOCKHOLDERS’ EQUITY:
LIABILITIES:
	Policy benefits and claims				$	249,556	$	236,803
	Future policy benefits					275,501		277,041
	Funds on deposit					181,307		186,782
	Unearned premiums					12,176		9,455
	Other policyholders' funds					17,637		18,802
	Due to reinsurers					49,067		47,945
	Accounts payable, accruals and other liabilities					66,516		67,641
	Debt					7,326		4,000
	Junior subordinated debt securities					38,146		38,146
				TOTAL LIABILITIES		897,232		886,615
STOCKHOLDERS’ EQUITY:
IHC STOCKHOLDERS' EQUITY:
	Preferred stock (none issued)					-		-
	Common stock $1.00 par value, 23,000,000 shares authorized;
			18,553,183 and 18,531,158 shares issued; 17,333,307 and
			17,371,040 shares outstanding			18,553		18,531
	Paid-in capital					127,451		127,098
	Accumulated other comprehensive income (loss)					(3,217)		22
	Treasury stock, at cost; 1,219,876 and 1,160,118 shares					(12,880)		(12,141)
	Retained earnings					167,092		157,667
TOTAL IHC STOCKHOLDERS’ EQUITY						296,999		291,177
NONCONTROLLING INTERESTS IN SUBSIDIARIES						8,972		9,925
				TOTAL EQUITY		305,971		301,102
				TOTAL LIABILITIES AND EQUITY	$	1,203,203	$	1,187,717

See the accompanying Notes to Condensed Consolidated Financial Statements.

4

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
				Three Months Ended				Six Months Ended
				June 30,				June 30,
				2015		2014		2015		2014
REVENUES:
	Premiums earned		$	120,443	$	121,135	$	242,557	$	244,405
	Net investment income			4,505		5,434		9,946		11,235
	Fee income			4,487		3,861		8,203		13,200
	Other income			1,570		1,070		2,564		2,181
	Net realized investment gains			2,100		4,519		4,100		6,070
				133,105		136,019		267,370		277,091
EXPENSES:
	Insurance benefits, claims and reserves			79,380		83,263		159,000		168,572
	Selling, general and administrative expenses			43,702		44,947		87,851		93,082
	Amortization of deferred acquisitions costs			1,424		1,189		2,888		2,471
	Interest expense on debt			478		337		910		818
				124,984		129,736		250,649		264,943
	Income before income taxes			8,121		6,283		16,721		12,148
	Income taxes			2,965		2,403		6,234		4,263
	Net income			5,156		3,880		10,487		7,885
	Less: Income from noncontrolling interests in subsidiaries			(124)		(32)		(236)		(336)
		NET INCOME ATTRIBUTABLE TO IHC	$	5,032	$	3,848	$	10,251	$	7,549
Basic income per common share			$	.29	$	.22	$	.59	$	.43
WEIGHTED AVERAGE SHARES OUTSTANDING				17,338		17,485		17,351		17,553
Diluted income per common share			$	.29	$	.22	$	.59	$	.43
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING				17,501		17,657		17,516		17,709

See the accompanying Notes to Condensed Consolidated Financial Statements.

5

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands)
						Three Months Ended				Six Months Ended
						June 30,				June 30,
						2015		2014		2015		2014
Net income					$	5,156	$	3,880	$	10,487	$	7,885
Other comprehensive income (loss):
	Available-for-sale securities:
	Unrealized gains (losses) on available-for-sale securities, pre-tax					(6,445)		5,003		(5,140)		13,020
	Tax expense (benefit) on unrealized gains (losses) on available-for-sale
		securities				(2,286)		1,499		(1,889)		3,877
	Unrealized gains (losses) on available-for-sale securities, net of taxes					(4,159)		3,504		(3,251)		9,143
	Cash flow hedge:
	Unrealized gains on cash flow hedge, pre-tax					13		21		28		38
	Tax expense on unrealized gains on cash flow hedge					5		8		11		15
	Unrealized gains on cash flow hedge, net of taxes					8		13		17		23
	Other comprehensive income (loss), net of tax					(4,151)		3,517		(3,234)		9,166
		COMPREHENSIVE INCOME (LOSS), NET OF TAX				1,005		7,397		7,253		17,051
Comprehensive income, net of tax, attributable to noncontrolling
			interests:
Income from noncontrolling interests in subsidiaries						(124)		(32)		(236)		(336)
Other comprehensive (income) loss, net of tax, attributable to
		noncontrolling interests:
	Unrealized (gain) loss on available-for-sale securities, net of tax					33		(82)		(10)		(213)
	Other comprehensive (income) loss, net of tax, attributable to
		noncontrolling interests				33		(82)		(10)		(213)
		COMPREHENSIVE INCOME, NET OF TAX,
				ATTRIBUTABLE TO NONCONTROLLING INTERESTS		(91)		(114)		(246)		(549)
		COMPREHENSIVE INCOME (LOSS), NET OF TAX,
				ATTRIBUTABLE TO IHC	$	914	$	7,283	$	7,007	$	16,502

See the accompanying Notes to Condensed Consolidated Financial Statements.

6

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (In thousands)
									ACCUMULATED								NON-
									OTHER		TREASURY				TOTAL IHC		CONTROLLING
					COMMON		PAID-IN		COMPREHENSIVE		STOCK,		RETAINED		STOCKHOLDERS'		INTERESTS IN		TOTAL
					STOCK		CAPITAL		INCOME		AT COST		EARNINGS		EQUITY		SUBSIDIARIES		EQUITY
BALANCE AT
	DECEMBER 31, 2014			$	18,531	$	127,098	$	22	$	(12,141)	$	157,667	$	291,177	$	9,925	$	301,102
Net income													10,251		10,251		236		10,487
Other comprehensive
	income, net of tax								(3,244)						(3,244)		10		(3,234)
Repurchases of common stock											(739)				(739)		-		(739)
Common stock dividend
		($.045 per share)											(783)		(783)		-		(783)
Acquisition of subsidiary															-		608		608
Purchases of noncontrolling
		interests					112		5						117		(1,851)		(1,734)
Share-based compensation
	expenses and related
			tax benefits		22		221								243		-		243
Other capital transactions							20						(43)		(23)		44		21
BALANCE AT
	JUNE 30, 2015			$	18,553	$	127,451	$	(3,217)	$	(12,880)	$	167,092	$	296,999	$	8,972	$	305,971

See the accompanying Notes to Condensed Consolidated Financial Statements.

7

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
						Six Months Ended June 30,
						2015		2014
CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:
	Net income				$	10,487	$	7,885
	Adjustments to reconcile net income to net change in cash from
		operating  activities:
			Amortization of deferred acquisition costs			2,888		2,471
			Net realized investment gains			(4,100)		(6,070)
			Equity income from equity method investments			(577)		(741)
			Depreciation and amortization			1,572		2,013
			Share-based compensation expenses			64		683
			Deferred tax  expense			1,370		1,885
			Other			2,218		2,411
Changes in assets and liabilities:
			Net (purchases) sales of trading securities			2,173		(3,603)
			Change in insurance liabilities			9,603		(48,149)
			Additions to deferred acquisition costs			(3,939)		(2,974)
			Change in  amounts due from reinsurers			11,646		48,580
			Change in premium and claim funds			47		(1,882)
			Change in current income tax liability			3,890		4,702
			Change in due and unpaid premiums			(3,845)		153
			Change in other assets			1,084		6,310
			Change in other liabilities			(2,031)		(6,303)
				Net change in cash from operating activities		32,550		7,371
CASH FLOWS PROVIDED BY (USED BY) INVESTING ACTIVITIES:
	Net (purchases) sales of securities under resale and repurchase agreements					(6,639)		3,334
	Sales of equity securities					9,187		288
	Purchases of equity securities					(4,423)		(998)
	Sales of fixed maturities					377,835		222,627
	Maturities and other repayments of fixed maturities					32,019		28,007
	Purchases of fixed maturities					(437,826)		(254,891)
	Acquisition of subsidiary, net of cash acquired					511		-
	Other investing activities					(693)		2,082
				Net change in cash from investing activities		(30,029)		449
CASH FLOWS PROVIDED BY (USED BY)  FINANCING ACTIVITIES:
		Repurchases of common stock				(667)		(2,810)
		Cash paid in acquisitions of noncontrolling interests				(1,734)		-
		Withdrawals of investment-type insurance contracts				(1,191)		(1,555)
		Dividends paid				(609)		(620)
		Proceeds from exercise of stock options				133		-
		Other financing activities				11		(433)
				Net change in cash from financing activities		(4,057)		(5,418)
Net change in cash and cash equivalents						(1,536)		2,402
Cash and cash equivalents, beginning of year						25,083		24,229
Cash and cash equivalents, end of period					$	23,547	$	26,631

See the accompanying Notes to Condensed Consolidated Financial Statements.

8

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1.  

Organization, Consolidation, Basis of Presentation and Accounting Policies

(A)

Business and Organization

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

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

(B)

Consolidation

American Independence Corp.

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

Effects of Ownership Changes in Subsidiaries

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Changes in IHC’s paid-in capital:
Purchase of AMIC shares	$	-	$	-	$	(199)	$	-
Purchase remaining IPA Family, LLC interests		311		-		311		-
Net transfers from noncontrolling interests	$	311	$	-	$	112	$	-

 (C)

Basis of Presentation

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

9

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

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

(D)

Reclassifications

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

(E)

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

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

Recently Issued Accounting Standards Not Yet Adopted

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

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

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

10

statements.

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

Note 2.

Income Per Common Share

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

Note  3.

Investment Securities

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

		June 30, 2015
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	168,186	$	423	$	(5,256)	$	163,353
CMOs - residential(1)		3,385		4		(19)		3,370
CMOs - commercial		975		258		-		1,233
U.S. Government obligations		221,768		415		(25)		222,158
Agency MBS - residential(2)		50		2		-		52
GSEs(3)		12,086		18		(64)		12,040
States and political subdivisions		200,708		1,887		(2,633)		199,962
Foreign government obligations		1,847		9		-		1,856
Redeemable preferred stocks		4,036		196		-		4,232
Total fixed maturities	$	613,041	$	3,212	$	(7,997)	$	608,256

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Common stocks	$	5,154	$	-	$	(263)	$	4,891
Nonredeemable preferred stocks		4,004		156		-		4,160
Total equity securities	$	9,158	$	156	$	(263)	$	9,051

11

		December 31, 2014
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	264,162	$	1,076	$	(3,314)	$	261,924
CMOs - residential(1)		5,073		55		(22)		5,106
CMOs - commercial		975		-		(22)		953
U.S. Government obligations		22,766		126		-		22,892
Agency MBS - residential(2)		65		4		-		69
GSEs(3)		14,706		36		(86)		14,656
States and political subdivisions		238,514		3,253		(2,386)		239,381
Foreign government obligations		34,863		136		(299)		34,700
Redeemable preferred stocks		4,036		163		-		4,199
Total fixed maturities	$	585,160	$	4,849	$	(6,129)	$	583,880

EQUITY SECURITIES
AVAILABLE-FOR-SALE:
Common stocks	$	8,452	$	1,452	$	(147)	$	9,757
Nonredeemable preferred stocks		4,004		134		-		4,138
Total equity securities	$	12,456	$	1,586	$	(147)	$	13,895

(1)

Collateralized mortgage obligations (“CMOs”).

(2)

Mortgage-backed securities (“MBS”).

(3)

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

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

		AMORTIZED		FAIR
		COST		VALUE
Due in one year or less	$	3,881	$	3,893
Due after one year through five years		275,912		275,874
Due after five years through ten years		97,880		96,774
Due after ten years		219,879		216,042
CMOs and MBSs		15,489		15,673
	$	613,041	$	608,256

12

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

		June 30, 2015
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	98,506	$	3,527	$	32,146	$	1,729	$	130,652	$	5,256
CMOs - residential		2,030		19		-		-		2,030		19
U.S. Government obligations		196,800		25		-		-		196,800		25
GSEs		7,853		30		3,133		34		10,986		64
States and political subdivisions		87,890		1,081		42,539		1,552		130,429		2,633
Total fixed maturities		393,079		4,682		77,818		3,315		470,897		7,997
Common stocks		4,891		263		-		-		4,891		263
Total equity securities		4,891		263		-		-		4,891		263
Total temporarily impaired
securities	$	397,970	$	4,945	$	77,818	$	3,315	$	475,788	$	8,260
Number of securities in an
unrealized loss position		80				26				106

		December 31, 2014
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	77,868	$	1,473	$	69,498	$	1,841	$	147,366	$	3,314
CMO’s  - residential		2,062		16		1,562		6		3,624		22
CMOs - commercial		-		-		953		22		953		22
GSEs		-		-		9,581		86		9,581		86
States and political subdivisions		58,819		744		67,318		1,642		126,137		2,386
Foreign government obligations		21,148		171		12,229		128		33,377		299
Total fixed maturities		159,897		2,404		161,141		3,725		321,038		6,129
Common stocks		2,007		136		348		11		2,355		147
Total equity securities		2,007		136		348		11		2,355		147
Total temporarily impaired
securities	$	161,904	$	2,540	$	161,489	$	3,736	$	323,393	$	6,276
Number of securities in an
unrealized loss position		70				46				116

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

13

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Available-for-sale securities:
Fixed maturities	$	2,114	$	4,014	$	3,414	$	5,491
Common stocks		-		-		1,465		-
Preferred stocks		-		(5)		-		(5)
Total  available-for-sale securities		2,114		4,009		4,879		5,486
Trading securities		86		25		(421)		30
Total realized gains (losses)		2,200		4,034		4,458		5,516
Unrealized gains (losses) on trading securities:
Change in unrealized gains (losses) on trading securities		(101)		483		(352)		552
Total unrealized gains (losses)  on trading securities		(101)		483		(352)		552
Gain (losses) on other investments		1		2		(6)		2
Net realized investment gains	$	2,100	$	4,519	$	4,100	$	6,070

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

Other-Than-Temporary Impairment Evaluations

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

14

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Balance at beginning of year	$	473	$	473	$	473	$	473
Additional credit losses for which an other-than-
temporary loss was previously recognized		-		-		-		-
Securities sold		-		-		-		-
Balance at end of period	$	473	$	473	$	473	$	473

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

Note 4.

Cash Flow Hedge

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

Note 5.

Fair Value Disclosures

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

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

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

Level 3- Instruments where significant value drivers are unobservable.

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

Investments in fixed maturities and equity securities:

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

15

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

Trading securities:

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

Interest rate swap:

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

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

		June 30, 2015
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	163,353	$	-	$	163,353
CMOs - residential		-		3,370		-		3,370
CMOs - commercial		-		-		1,233		1,233
US Government obligations		-		222,158		-		222,158
Agency MBS - residential		-		52		-		52
GSEs		-		12,040		-		12,040
States and political subdivisions		-		197,714		2,248		199,962
Foreign government obligations		-		1,856		-		1,856
Redeemable preferred stocks		4,232		-		-		4,232
Total fixed maturities		4,232		600,543		3,481		608,256
Equity securities available-for-sale:
Common stocks		4,891		-		-		4,891
Nonredeemable preferred stocks		4,160		-		-		4,160
Total equity securities		9,051		-		-		9,051
Trading securities - equities		9,242		-		-		9,242
Total trading securities		9,242		-		-		9,242
Total Financial Assets	$	22,525	$	600,543	$	3,481	$	626,549
FINANCIAL LIABILITIES:
Interest rate swap	$	-	$	55	$	-	$	55

16

		December 31, 2014
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	261,924	$	-	$	261,924
CMOs – residential		-		5,106		-		5,106
CMOs – commercial		-		-		953		953
US Government obligations		-		22,892		-		22,892
Agency MBS - residential		-		69		-		69
GSEs		-		14,656		-		14,656
States and political subdivisions		-		237,067		2,314		239,381
Foreign government		-		34,700		-		34,700
Redeemable preferred stocks		4,199		-		-		4,199
Total fixed maturities		4,199		576,414		3,267		583,880
Equity securities available-for-sale:
Common stocks		9,757		-		-		9,757
Nonredeemable preferred stocks		4,138		-		-		4,138
Total equity securities		13,895		-		-		13,895
Trading securities - equities		11,095		-		-		11,095
Total trading securities		11,095		-		-		11,095
Total Financial Assets	$	29,189	$	576,414	$	3,267	$	608,870
FINANCIAL LIABILITIES:
Interest rate swap	$	-	$	83	$	-	$	83

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

		Three Months Ended June  30, 2015
				States and
		CMOs		Political
		Commercial		Subdivisions		Total
Beginning balance	$	1,016	$	2,281	$	3,297
Gains (losses) included in other comprehensive income (loss):
Net unrealized gains (losses)		217		(12)		205
Repayments and amortization of fixed maturities		-		(21)		(21)
Balance at end of period	$	1,233	$	2,248	$	3,481

17

		Three Months Ended June 30, 2014
				States and
		CMOs		Political
		Commercial		Subdivisions		Total
Beginning balance	$	869	$	2,410	$	3,279
Gains (losses) included in other comprehensive income (loss):
Net unrealized gains (losses)		37		(15)		22
Repayments and amortization of fixed maturities		-		(16)		(16)
Balance at end of period	$	906	$	2,379	$	3,285

		Six Months Ended June 30, 2015
				States and
		CMOs		Political
		Commercial		Subdivisions		Total
Beginning balance	$	953	$	2,314	$	3,267
Gains (losses) included in other comprehensive income (loss):
Net unrealized gains (losses)		280		(25)		255
Repayments and amortization of fixed maturities		-		(41)		(41)
Balance at end of period	$	1,233	$	2,248	$	3,481

		Six Months Ended June 30, 2014
				States and
		CMOs		Political
		Commercial		Subdivisions		Total
Beginning balance	$	593	$	2,441	$	3,034
Gains (losses) included in other comprehensive income (loss):
Net unrealized gains (losses)		313		(31)		282
Repayments and amortization of fixed maturities		-		(31)		(31)
Balance at end of period	$	906	$	2,379	$	3,285

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

		June 30, 2015				December 31, 2014
		Level 2				Level 2
		Fair		Carrying		Fair		Carrying
		Value		Value		Value		Value
FINANCIAL ASSETS:
Policy loans	$	13,139	$	10,492	$	13,356	$	10,667
FINANCIAL LIABILITIES:
Funds on deposit	$	181,719	$	181,307	$	187,213	$	186,782
Debt and junior subordinated
debt securities	$	46,472	$	46,472	$	42,146	$	42,146

18

The following methods and assumptions were used to estimate the fair value of the financial instruments that are not carried at fair value in the Condensed Consolidated Financial Statements:

(A)

Policy Loans

The fair value of policy loans included in Level 2 of the fair value hierarchy is estimated by projecting aggregate loan cash flows to the end of the expected lifetime period of the life insurance business at the average policy loan rates, and discounting them at a current market interest rate.

(B)

Funds on Deposit

The Company has two types of funds on deposit. The first type is credited with a current market interest rate, resulting in a fair value which approximates the carrying amount. The second type carries fixed interestrates which are higher than current market interest rates. The fair value of these deposits was estimated by discounting the payments using current market interest rates. The Company's universal life policies are also credited with current market interest rates, resulting in a fair value which approximates the carrying amount. Both types of funds on deposit are included in Level 2 of the fair value hierarchy.

(C)

Debt

The fair value of debt with fixed and variable interest rates approximates its carrying amount and is included in Level 2 of the fair value hierarchy.

Note 6.

Acquisition

On April 30, 2015 (the "Acquisition Date"), through a settlement with a former owner, AMIC increased its ownership in Global Accident Facilities, LLC (“GAF) from 40% to 80%, in order to obtain control of the business it produces for Independence American. GAF and its subsidiaries are principally engaged in the marketing, underwriting and administration of specialty risk insurance, referred to as Occupational Accident and Injury on Duty for Independence American, which are offered exclusively in Texas and Massachusetts, respectively. The consideration transferred in exchange for the additional 40% voting interest consisted of: (i) $325,000 in cash; and (ii) non-monetary consideration, primarily consisting of the settlement of a pre-existing relationship with a former owner, with a fair value of $1,195,000 at the Acquisition Date.  The fair value of the settlement of the pre-exiting relationship was based on projected future underwriting results discounted for collectability. The acquisition resulted in AMIC obtaining control of GAF.  Immediately preceding the transaction, AMIC’s carrying value of its investment in GAF was $1,908,000.

As a result of AMIC obtaining control, the Company has included GAF’s consolidated assets and liabilities and results of operations, subsequent to the Acquisition Date, in its condensed consolidated financial results as of and for the periods ended June 30, 2015. Accordingly, the individual line items on the Condensed Consolidated Statements of Income for 2015 reflect approximately two months of the operations of GAF with no corresponding amounts for 2014.

On the Acquisition Date, the Company recognized a net pre-tax gain of $503,000 as follows: (i) a loss of $692,000 was recognized by AMIC as a result of re-measuring its equity interest in GAF to its fair value of $1,216,000 immediately before the acquisition; and (ii) a gain of $1,195,000 was recognized by AMIC as a result of settling the pre-existing relationship with the former owner. The net pre-tax gain of $503,000 is included in the “Other income” line in the Condensed Consolidated Statements of Income.

19

Upon the acquisition of a controlling interest, the Company consolidated the assets and liabilities of GAF.  Accordingly, the Company determined the fair value of the identifiable assets acquired and liabilities assumed from GAF on the Acquisition Date. The following table presents the identifiable assets acquired and liabilities assumed in the acquisition of GAF on the Acquisition Date based on their respective fair values (in thousands):

Cash	$	836
Intangible assets		5,500
Other assets		1,249
Total identifiable assets		7,585
Other liabilities		4,849
Deferred tax liability		2,200
Debt		3,326
Total liabilities		10,375
Net identifiable liabilities assumed	$	2,790

Included in other liabilities assumed is a $1,000,000 contingent liability recorded in connection with an earn-out agreement with a former owner of a subsidiary of GAF. In accordance with this agreement, payments are required in 2016 and 2019 based on certain earnings targets. The fair value of the contingent liability is estimated based on projected income. The significant inputs are not observable and thus represent a fair value measurement categorized within Level 3 of the fair value hierarchy.

In connection with the acquisition, the Company recorded $6,134,000 of goodwill and $5,500,000 of intangible assets (see Note 7). Goodwill reflects the synergies between GAF and Independence American as GAF is the primary writer of Occupational Accident and Injury on Duty business for Independence American. Goodwill was calculated as the excess of the sum of: (i) the acquisition date fair value of total consideration transferred of $1,520,000; (ii) the acquisition date fair value of the equity interest in GAF immediately preceding the acquisition of $1,216,000; and (iii) the fair value of the noncontrolling interest in GAF of $608,000 on the acquisition date; over (iv) the net liabilities of $2,790,000 that were assumed. The enterprise value of GAF was determined by an independent appraisal using a discounted cash flow model based upon the projected future earnings of GAF including a control premium.  The fair value of the non-controlling interest was determined based upon their percentage of the GAF enterprise value discounted for a lack of control. The fair value of the acquired identifiable intangible assets and deferred taxes are provisional pending receipt of the final valuations for those assets and liabilities.  The Company expects to finalize the preliminary estimates of the fair value of the intangible assets and deferred taxes by the end of this year.

For the period from the Acquisition Date to June 30, 2015, the Company’s Condensed Consolidated Statement of Income includes revenues and net income of $1,741,000 and $300,000, respectively, from GAF.

Note 7.

Goodwill and Other Intangible Assets

The carrying amount of goodwill was $56,452,000 and $50,318,000 at June 30, 2015 and December 31, 2014, respectively.

20

The Company has net other intangible assets of $16,706,000 and $12,135,000 at June 30, 2015 and December 31, 2014, respectively, which are included in other assets in the Condensed Consolidated Balance Sheets. These intangible assets consist of: (i) finite-lived intangible assets, principally the fair value of acquired agent and broker relationships, which are subject to amortization; and (ii) indefinite-lived intangible assets which consist of the estimated fair value of insurance licenses that are not subject to amortization. The gross carrying amounts of these other intangible assets are as follows for the periods indicated (in thousands):

		June 30, 2015				December 31, 2014
		Gross				Gross
		Carrying		Accumulated		Carrying		Accumulated
		Amount		Amortization		Amount		Amortization
Finite-lived Intangible Assets:
Agent and broker relationships	$	27,225	$	19,475	$	22,725	$	18,567
Trademarks		1,000		21		-		-
Total finite-lived	$	28,225	$	19,496	$	22,725	$	18,567

		June 30,		December 31,
		2015		2014
Indefinite-lived Intangible Assets:
Insurance licenses	$	7,977	$	7,977
Total indefinite-lived	$	7,977	$	7,977

In connection with the acquisition of a controlling interest in GAF during the second quarter of 2015 discussed in Note 6, the Company recorded $6,134,000 of goodwill and $5,500,000 of intangible assets associated with the Fully Insured Health segment. None of the goodwill is deductible for income tax purposes. Of the $5,500,000 of intangible assets recorded, $1,000,000 represents the fair value of trademarks, which is being amortized over a period of 8 years, and $4,500,000 represents the fair value of customer relationships being amortized over a period of 9 years.  

Amortization expense was $525,000 and $929,000 for the three months and six months ended June 30, 2015, respectively, and was $679,000 and $1,358,000 for the three months and six months ended June 30, 2014.

Note 8.

Debt

In connection with the acquisition of a controlling interest in GAF discussed in Note 6, the Company assumed $3,326,000 of GAF’s debt. This debt is comprised of: (i) various term loans with former owners of a subsidiary of GAF, aggregating $3,026,000, with various maturities throughJanuary 2, 2019 and bearing a fixed interest rate of 2.5%;  and (ii) a $300,000 line of credit with a commercial bank bearing interest at 4%.

21

Note 9.

Income Taxes

The provisions for income taxes shown in the Condensed Consolidated Statements of Income were computed based on the Company's actual results, which approximate the effective tax rate expected to be applicable for the balance of the current fiscal year in accordance with consolidated life/non-life group income tax regulations. Such regulations adopt a subgroup method in determining consolidated taxable income, whereby taxable income is determined separately for the life insurance company group and the non-life insurance company group.

In connection with the acquisition of GAF discussed in Note 6, the Company assumed $2,200,000 of deferred tax liabilities.

At June 30, 2015, AMIC had net operating loss carryforwards of approximately $262,189,000 for federal income tax purposes, which expire in varying amounts through the year 2028, with a significant portion expiring in 2020. The net deferred tax asset relative to AMIC included in other assets on IHC’s Condensed Consolidated Balance Sheets was $8,386,000 and $11,517,000 at June 30, 2015 and December 31, 2014, respectively.

Note10.

Accumulated Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) include (i) the after-tax net unrealized gains and losses on investment securities available-for-sale, including the subsequent increases and decreases in fair value of available-for-sale securities previously impaired and the non-credit related component of other-than-temporary impairments of fixed maturities and (ii) the after-tax unrealized gains and losses on a cash flow hedge.

Changes in the balances for each component of accumulated other comprehensive income, shown net of taxes, for the periods indicated were as follows (in thousands):

		Three Months Ended June 30, 2015
		Unrealized
		Gains (Losses) on
		Available-for Sale		Cash Flow
		Securities		Hedge		Total
Beginning balance	$	942	$	(41)	$	901
Other comprehensive income (loss) before reclassifications		(2,791)		8		(2,783)
Amounts reclassified from accumulated OCI		(1,368)		-		(1,368)
Net other comprehensive income (loss)		(4,159)		8		(4,151)
Less: Other comprehensive income attributable
to noncontrolling interests		33		-		33
Ending balance	$	(3,184)	$	(33)	$	(3,217)

22

		Three Months Ended June 30, 2014
		Unrealized
		Gains (Losses) on
		Available-for Sale		Cash Flow
		Securities		Hedge		Total
Beginning balance	$	(4,842)	$	(112)	$	(4,954)
Other comprehensive income (loss) before reclassifications		6,145		13		6,158
Amounts reclassified from accumulated OCI		(2,641)		-		(2,641)
Net other comprehensive income (loss)		3,504		13		3,517
Less: Other comprehensive income attributable
to noncontrolling interests		(82)		-		(82)
Ending balance	$	(1,420)	$	(99)	$	(1,519)

		Six Months Ended June 30, 2015
		Unrealized
		Gains (Losses) on
		Available-for Sale		Cash Flow
		Securities		Hedge		Total
Beginning balance	$	72	$	(50)	$	22
Other comprehensive income (loss) before reclassifications		(106)		17		(89)
Amounts reclassified from accumulated OCI		(3,145)		-		(3,145)
Net other comprehensive income (loss)		(3,251)		17		(3,234)
Less: Other comprehensive income attributable
to noncontrolling interests		(10)		-		(10)
Acquired from noncontrolling interests		5		-		5
Ending balance	$	(3,184)	$	(33)	$	(3,217)

		Six Months Ended June 30, 2014
		Unrealized
		Gains (Losses) on
		Available-for Sale		Cash Flow
		Securities		Hedge		Total
Beginning balance	$	(10,350)	$	(122)	$	(10,472)
Other comprehensive income (loss) before reclassifications		12,763		23		12,786
Amounts reclassified from accumulated OCI		(3,620)		-		(3,620)
Net other comprehensive income (loss)		9,143		23		9,166
Less: Other comprehensive income attributable
to noncontrolling interests		(213)		-		(213)
Ending balance	$	(1,420)	$	(99)	$	(1,519)

23

Presented below are the amounts reclassified out of accumulated other comprehensive income (loss) and recognized in earnings for each of the periods indicated (in thousands):

		Three Months Ended				Six months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Unrealized gains (losses) on available-for-sale securities
reclassified during the period to the following income
statement line items:
Net realized investment gains	$	2,114	$	4,009	$	4,879	$	5,486
Income before income tax		2,114		4,009		4,879		5,486
Tax effect		746		1,368		1,734		1,866
Net income	$	1,368	$	2,641	$	3,145	$	3,620

Note 11.

Share-Based Compensation

IHC and AMIC each have share-based compensation plans. The following is a summary of the activity pertaining to each of these plans.

A)  IHC Share-Based Compensation Plans

Under the terms of IHC’s stock-based compensation plans, option exercise prices are more than or equal to the quoted market price of the shares at the date of grant; option terms are generally five years; and vesting periods are generally three years. The fair value of an option award is estimated on the date of grant using the Black-Scholes option valuation model. In addition to stock options, the Company has also granted restricted stock units, share appreciation rights (“SARs”) and share-based performance awards under the plans. Restricted share units are valued at the quoted market price of the shares at the date of grant and have a three year vesting period. Compensation costs for options and restricted share units are recognized over the stated vesting periods on a straight-line basis. Exercise prices of SARs are more than or equal to the quoted market price of IHC shares at the date of the grant and have three year vesting periods. The fair value of SARs is calculated using the Black-Scholes valuation model at the grant date and each subsequent reporting period until settlement. Compensation cost is based on the proportionate amount of the requisite service that has been rendered to date. Once fully vested, changes in fair value of the SARs continue to be recognized as compensation expense in the period of the change until settlement.

24

At June 30, 2015, there were 369,861 shares available for future stock-based compensation grants under IHC’s stock incentive plans. The following table summarizes share-based compensation expense, which is included in selling, general and administrative expenses on the Condensed Consolidated Statements of Income, applicable to the IHC plans, by award type for each of the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
IHC’s Share-based Compensation Plan:
Stock options	$	-	$	471	$	55	$	537
Restricted stock units		23		23		44		42
SARs		(28)		158		(57)		77
Share-based compensation expense, pre-tax		(5)		652		42		656
Tax benefits		(2)		260		17		262
Share-based compensation expense, net	$	(3)	$	392	$	25	$	394

Stock Options

The IHC’s stock option activity during 2015 was as follows:

	Shares	Weighted- Average
	Under Option	Exercise Price
December 31, 2014	614,680	$	9.33
Exercised	(14,600)		9.09
June 30, 2015	600,080	$	9.34

In 2015, IHC received $133,000 in cash from the exercise of stock options with an aggregate intrinsic value of $63,000 and realized $10,000 of tax benefits.

The following table summarizes information regarding IHC’s outstanding and exercisable options:

		June 30, 2015
		Outstanding		Exercisable
Number of options		600,080		600,080
Weighted average exercise price per share	$	9.34	$	9.34
Aggregate intrinsic value for all options (in thousands)	$	2,311	$	2,311
Weighted average contractual term remaining		1.8 years		1.8 years

At June 30, 2015, all of IHC’s outstanding stock options are fully vested and all of the related compensation costs have been recognized.

25

Restricted Stock

The following table summarizes restricted stock activity for the six months ended June 30, 2015:

	No. of	Weighted-Average
	Non-vested	Grant-Date
	Shares	Fair Value
December 31, 2014	14,850	$	12.09
Granted	7,425		11.78
Vested	(7,425)		11.44
June 30, 2015	14,850	$	12.26

IHC granted 7,425 shares of restricted stock awards during each of the six months ended June 30, 2015 and 2014 with weighted average grant-date fair values of $11.78 and $13.27, respectively, per share. The total fair value of restricted stock that vested during each of the first six months of 2015 and 2014 was $89,000 and $68,000, respectively.

As of June 30, 2015, the total unrecognized compensation expense related to non-vested restricted stock unit awards was $174,000 which is expected to be recognized over the remaining requisite weighted-average service period of 2.2 years.

SARs

IHC had 129,150 and 136,850 of SAR awards outstanding at June 30, 2015 and December 31, 2014, respectively. In 2015, 7,700 SARs were exercised with an aggregate intrinsic value of $38,000.  Included in Other Liabilities in the Company’s Condensed Consolidated Balance Sheets at June 30, 2015 and December 31, 2014 are liabilities of $696,000 and $791,000, respectively, pertaining to SARs.

B)  AMIC Share-Based Compensation Plans

Under the terms of the AMIC’s stock-based compensation plan, option exercise prices are equal to the quoted market price of the shares at the date of grant; option terms are ten years; and vesting periods range from three to four years.  The Company may also grant shares of restricted stock, stock appreciation rights and share-based performance awards.

The following table summarizes share-based compensation expense, which is included in selling, general and administrative expenses on the Condensed Consolidated Statements of Income, applicable to the AMIC share-based compensation plans, by award type for each of the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
AMIC’s Share-based Compensation Plans:
Stock options	$	11	$	16	$	22	$	27
Share-based compensation expense, pre-tax		11		16		22		27
Tax benefits		4		5		8		10
Share-based compensation expense, net	$	7	$	11	$	14	$	17

26

Stock Options

AMIC’s stock option activity for the six months ended June 30, 2015 is as follows:

	Shares	Weighted- Average
	Under Option	Exercise Price
December 31, 2014	166,616	$	10.50
Expired	(53,500)		13.92
June 30, 2015	113,116	$	8.88

The following table summarizes information regarding AMIC’s outstanding and exercisable options as of June 30, 2015:

		June 30, 2015
		Outstanding		Exercisable
Number of options		113,116		99,782
Weighted average exercise price per share	$	8.88	$	8.79
Aggregate intrinsic value for all options (in thousands)	$	201	$	188
Weighted average contractual term remaining		4.10 years		3.50 years

As of June 30, 2015, the total unrecognized compensation expense related to AMIC’s non-vested options was $62,000 which will be recognized over the remaining requisite service periods.

Note 12.

Supplemental Disclosures of Cash Flow Information

Net cash payments (receipts) for income taxes were $571,000 and $(2,763,000) during the six months ended June 30, 2015 and 2014.

Cash payments for interest were $881,000 and $922,000 during the six months ended June 30, 2015 and 2014, respectively.

27

Note 13.

 Segment Reporting

The Insurance Group principally engages in the life and health insurance business. Information by business segment is presented below for the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30
		2015		2014		2015		2014
Revenues:
Medical Stop-Loss	$	52,228	$	45,499	$	108,240	$	93,087
Fully  Insured Health		49,631		60,888		96,163		127,427
Group disability, life, annuities and DBL		20,727		16,716		41,475		33,143
Individual life, annuities and other		8,376		8,347		17,300		17,285
Corporate		43		50		92		79
		131,005		131,500		263,270		271,021
Net realized investment gains		2,100		4,519		4,100		6,070
Total revenues	$	133,105	$	136,019	$	267,370	$	277,091
Income before income taxes:
Medical Stop-Loss	$	4,554	$	4,653	$	9,907	$	9,391
Fully Insured Health(A)		1,555		47		2,832		1,955
Group disability, life, annuities and DBL		3,159		2,003		6,374		3,180
Individual life, annuities and other(B)		(1,332)		(2,111)		(2,385)		(3,220)
Corporate		(1,437)		(2,491)		(3,197)		(4,410)
		6,499		2,101		13,531		6,896
Net realized investment gains		2,100		4,519		4,100		6,070
Interest expense		(478)		(337)		(910)		(818)
Income before income taxes	$	8,121	$	6,283	$	16,721	$	12,148

(A)

The Fully Insured Health segment includes amortization of intangible assets. Total amortization expense was $382,000 and $492,000 for the three months ended June 30, 2015 and 2014, respectively, and was $645,000 and $984,000, respectively, for the six months ended June 30, 2015 and 2014. Amortization expense for the other segments is not material to their operating results.

(B)

The Individual life, annuities and other segment includes amortization of deferred charges in connection with the assumptions of certain ceded life and annuity policies amounting to $62,000 and $1,128,000 for the three months ended June 30, 2015 and 2014, respectively, and $416,000 and $1,239,000 for the six months ended June 30, 2015 and 2014, respectively.

Note 14.

Subsequent Event

On July 31, 2015, Madison National Life and Standard Security Life together entered into a coinsurance and sale agreement with an unaffiliated reinsurer, National Guardian Life Insurance Company (“NGL”), to: (i) cede substantially all of their individual life and annuity policy blocks currently in run-off; and (ii) sell the related infrastructure associated with the administration of such policies. The Company transferred $206,953,000 of cash to NGL, net of the aggregate purchase price of $42,000,000 for the coinsurance and sale transaction.

As a result of this transaction, approximately $76,000,000 of the aforementioned life and annuity reserves were assigned and transferred to the reinsurer, contractually relieving the Company of the liability with regards to those policies. For the remaining life and annuity reserves ceded to the reinsurer, the Company recorded corresponding amounts as due from reinsurers. The ceding of reinsurance does not discharge the primary liability of the original insurer to the insured.

28

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of Independence Holding Company ("IHC") and its subsidiaries (collectively, 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, 2014, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

Overview

Independence Holding Company, a Delaware corporation (“IHC”), is a holding company principally engaged in the life and health insurance business through: (i) its insurance companies, Standard Security Life Insurance Company of New York ("Standard Security Life"), Madison National Life Insurance Company, Inc. ("Madison National Life"), Independence American Insurance Company (“Independence American”); and (ii) its marketing and administrative companies, including IHC Risk Solutions, LLC, IHC Health Solutions, Inc., IHC Specialty Benefits Inc. and IHC Carrier Solutions, Inc.  IHC also owns a significant equity interest in a managing general underwriter (“MGU”) that writes medical stop-loss. Standard Security Life, Madison National Life and Independence American are sometimes collectively referred to as the “Insurance Group”. IHC and its subsidiaries (including the Insurance Group) are sometimes collectively referred to as the "Company", or “IHC”, or are implicit in the terms “we”, “us” and “our”.   At June 30, 2015, the Company also owned approximately a 92% interest in American Independence Corp. ("AMIC").

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, fully insured medical, 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. IHC also seeks transactions that permit it to leverage its vertically integrated organizational structure by generating fee income from production and administrative operating companies as well as risk income for its carriers and profit commissions.  .

29

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

The results of operations are summarized as follows for the periods indicated (in thousands):

			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2015		2014		2015		2014
Revenues		$	133,105	$	136,019	$	267,370	$	277,091
Expenses			124,984		129,736		250,649		264,943
Income before income taxes			8,121		6,283		16,721		12,148
Income taxes			2,965		2,403		6,234		4,263
Net income			5,156		3,880		10,487		7,885
Less: Income from noncontrolling interests in subsidiaries			(124)		(32)		(236)		(336)
	Net income attributable to IHC	$	5,032	$	3,848	$	10,251	$	7,549

o

Net income of $.29 per share, diluted, for the three months ended June 30, 2015 compared to $.22 per share, diluted, for the same period in 2014. Net income of $.59 per share, diluted, for the six months ended June 30, 2015 compared to $.43 per share, diluted, for the same period in 2014.

o

Consolidated investment yields (on an annualized basis) of 2.5% and 2.8% for the three months and six months ended June 30, 2015 compared to 3.3%  and 3.4% for the comparable period in 2014;

o

Book value of $17.13 per common share at June 30, 2015 compared to $16.76 at December 31, 2014.

The following is a summary of key performance information by segment:

o

The Medical Stop-Loss segment reported income before taxes of $4.6 million and $4.7 million for the three months ended 2015 and 2014, respectively, and for the six months ended June 30, 2015 and 2014, reported income before taxes of $9.9 million and $9.4 million, respectively.

o

Premiums earned increased $7.4 million and $15.6 million for the three months and six months ended June 30, 2015, respectively, when compared to the same periods in 2014. The increase in premiums earned is primarily due to increased volume of business produced by IHC Risk Solutions.

o

Underwriting experience for the Medical Stop-Loss segment, as indicated by its U.S. GAAP Combined Ratios, is as follows for the periods indicated (in thousands):

30

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Premiums Earned	$	51,231	$	43,790	$	104,989	$	89,376
Insurance Benefits, Claims & Reserves		38,242		29,971		77,663		61,796
Expenses		9,501		10,170		20,420		20,452
Loss Ratio(A)		74.6%		68.4%		74.0%		69.1%
Expense Ratio(B)		18.6%		23.2%		19.4%		22.9%
Combined Ratio(C)		93.2%		91.6%		93.4%		92.0%

(A)

Loss ratio represents insurance benefits, claims and reserves divided by premiums earned.

(B)

Expense ratio represents commissions, administrative fees, premium taxes and other underwriting expenses divided by premiums earned.

(C)

The combined ratio is equal to the sum of the loss ratio and the expense ratio.

o

Loss ratios increased in both the direct and assumed lines of medical stop-loss business due to higher claims experience while expense ratios decreased due to lower commission expenses.

·

The Fully Insured Health segment reported $1.5 million of income before taxes for the three months ended June 30, 2015as compared to break-even results for the comparable period in 2014, and reported $2.8 million of income before taxes for the six months ended June 30, 2015 compared to $2.0 million for the comparable period in 2014.  The increase in profitability is largely due to lower loss ratios and lower combined ratios in 2015 primarily as a result of exiting the market for major medical health plans for individuals and families and small group major medical (collectively “Major Medical”) and a $0.5 million gain recorded upon the acquisition of a controlling interest in Global Accident Facilities, LLC (“GAF”);

o

For the three months and six months ended June 30, 2015, premiums earned in the Fully Insured Health segment decreased by $12.9 million and $26.9 million, respectively, over the comparable periods in 2014. Decreases in the premiums earned from Major Medical for the three months and six months ended June 30, 2015 of $12.9 million and $31.7 million, respectively, are largely the result of the strategic decision to focus on specialty health products. The decrease in Major Medical premiums was partially offset by increases in the specialty health business as a result of new product launches and broader marketing of our short-term medical plans, and by growth in pet insurance and occupational accident lines of business.

o

Underwriting experience, as indicated by its U.S. GAAP Combined Ratios, for the Fully Insured segment are as follows for the periods indicated (in thousands):

31

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2015		2014		2015		2014
Premiums Earned	$	44,159	$	57,015	$	87,451	$	114,324
Insurance Benefits, Claims & Reserves		24,768		38,137		48,925		75,558
Expenses		17,123		19,238		33,854		38,247
Loss Ratio		56.1%		66.9%		55.9%		66.1%
Expense Ratio		38.8%		33.7%		38.7%		33.4%
Combined Ratio		94.9%		100.6%		94.6%		99.5%

o

The lower loss ratios in 2015 are primarily attributable to the effects of exiting Major Medical.  In 2014, we began to adjust our mix of business from Major Medical to specialty health insurance lines of business and, as a result, loss ratios have improved although expense ratios associated with these types of products are somewhat higher.

·

Income before taxes from the Group disability, life, annuities and DBL segment increased $1.2 million and $3.2 million for the three months and six months ended June 30, 2015, respectively, compared to the same periods in 2014. The increase in 2015 results is primarily the result of increased volume and retentions in the LTD line combined with lower loss ratios;

·

Losses before income taxes from the Individual life, annuities and other segment decreased $0.8 million for both the three months and six months ended June 30, 2015 over the same periods in 2014 primarily due to less amortization of deferred costs in correlation to the assumptions of certain ceded life and annuity policies;

·

Losses before income taxes from the Corporate segment decreased $1.1 million and $1.2 million for the three months and six months ended June 30, 2015 over the same periods in 2014 primarily as a result of lower share-based compensation expenses in 2015; and

·

Premiums by principal product for the periods indicated are as follows (in thousands):

			Three Months Ended				Six Months Ended
			June 30,				June 30,
Gross Direct and Assumed
	Earned Premiums:		2015		2014		2015		2014
Medical Stop-Loss		$	73,090	$	58,761	$	147,570	$	116,155
Fully Insured Health			47,092		62,292		95,085		125,962
Group disability, life, annuities and DBL			28,872		26,717		57,568		53,068
Individual, life, annuities and other			6,054		6,622		12,412		13,640
		$	155,108	$	154,392	$	312,635	$	308,825

32

			Three Months Ended				Six Months Ended
			June 30,				June 30,
Net Direct and Assumed
	Earned Premiums:		2015		2014		2015		2014
Medical Stop-Loss		$	51,231	$	43,790	$	104,989	$	89,376
Fully Insured Health			44,159		57,015		87,451		114,324
Group disability, life, annuities and DBL			20,064		15,875		40,000		31,436
Individual, life, annuities and other			4,989		4,455		10,117		9,269
		$	120,443	$	121,135	$	242,557	$	244,405

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles ("GAAP"). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. 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, 2014. Management has identified the accounting policies related toInsurance Premium Revenue Recognition and Policy Charges, Insurance Liabilities, Deferred Acquisition Costs, Investments, Goodwill and Other Intangible Assets, and Deferred Income Taxesas 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, 2014.  During the six months ended June 30, 2015, there were no additions to or changes in the critical accounting policies disclosed in the 2014 Form 10-K except for the recently adopted accounting standards discussed in Note 1(D) of the Notes to Condensed Consolidated Financial Statements.

33

Results of Operations for the Three Months Ended June 30, 2015 Compared to the Three Months Ended June 30, 2014

Information by business segment for the three months ended June 30, 2015and 2014 is as follows:

								Benefits,		Amortization			Selling,
				Net		Fee and		Claims		of  Deferred			General
June 30, 2015		Premiums		Investment		Other		and		Acquisition			and
(In thousands)		Earned		Income		Income		Reserves		Costs			Administrative			Total
Medical Stop-Loss		$	51,231	925		72		38,242		-			9,432			$	4,554
Fully Insured Health		44,159		532		4,940		24,768		108			23,200				1,555
Group disability,
	life, annuities
	and DBL	20,064		630		33		11,491		-			6,077				3,159
Individual life,
	annuities and other	4,989		2,375		1,012		4,879		1,316			3,513				(1,332)
Corporate		-		43		-		-		-			1,480				(1,437)
Sub total		$	120,443	$	4,505	$	6,057	$	79,380		$	1,424		$	43,702		6,499
Net realized investment gains																	2,100
Interest expense on debt																	(478)
Income before income taxes																	8,121
Income taxes																	2,965
Net income																$	5,156

										Benefits,		Amortization		Selling,
				Net			Fee and			Claims		of  Deferred		General
June 30, 2014		Premiums		Investment			Other			and		Acquisition		and
(In thousands)		Earned		Income			Income			Reserves		Costs		Administrative		Total
Medical Stop-Loss		$	43,790	998			711		29,971			-		10,875		$	4,653
Fully Insured Health		57,015		649			3,224			38,137		57		22,647			47
Group disability,
	life, annuities
	and DBL	15,875		805			36			10,151		-		4,562			2,003
Individual life,
	annuities and other	4,455		2,932			960			5,004		1,132		4,322			(2,111)
Corporate		-		50			-			-		-		2,541			(2,491)
Sub total		$	121,135	$	5,434	$		4,931		$	83,263	$	1,189	$	44,947		2,101
Net realized investment gains																	4,519
Interest expense on debt																	(337)
Income before income taxes																	6,283
Income taxes																	2,403
Net income																$	3,880

Premiums Earned

In the second quarter of 2015, premiums earned decreased $0.7 million over the comparable period of 2014. The decrease is primarily due to: (i) a decrease of $12.9 million in the Fully Insured Health segment primarily as a result of a $12.9 million decrease in Major Medical premiums. Premium increases in the pet and occupational accident lines of $1.1 million and $1.2 million, respectively, were offset by an aggregate decrease of $2.1 million in other fully insured lines; partially offset by (ii) a $7.4 million increase in earned premiums from the Medical Stop-Loss segment as a result of higher volume; and (iii) a $4.2 million increase in the Group disability, life, annuities and DBL segment primarily due to increased volume and retentions in the group term life and LTD lines.

Net Investment Income

Total net investment income decreased $0.9 million.  The overall annualized investment yields were 2.5% and 3.3% in the second quarter of 2015 and 2014, respectively. The overall decrease was primarily a result of a decrease in investment income on bonds, equities and short-term investments as the Company moved approximately $207.0 million of invested assets to short term duration in anticipation of

34

the settlement of the coinsurance and sale transaction on July 31, 2015 (see Note 14). The annualized investment yields on bonds, equities and short-term investments were 2.5% and 3.1% in the second quarter of 2015 and 2014, respectively. IHC has approximately $321.0 million in highly rated shorter duration securities earning on average 0.9%. A portfolio that is shorter in duration enables us, if we deem prudent, the flexibility to reinvest in much higher yielding longer-term securities, which would significantly increase investment income.

Net Realized Investment Gains

The Company had net realized investment gains of $2.1 million in 2015 compared to $4.5 million in 2014. These amounts include gains and losses from sales of fixed maturities and equity securities available-for-sale and other investments. Decisions to sell securities are based on management's ongoing evaluation of investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period.

Fee Income and Other Income

Fee income increased $0.6 million for the three-month period ended June 30, 2015compared to the three-month period ended June 30, 2014 primarily as a result of increased volume in the Medical Stop-Loss segment.  

In the second quarter of 2015, other income includes a $0.5 million gain recorded in connection with the acquisition of a controlling interest in GAF with no comparable amount in the second quarter of 2014.

Insurance Benefits, Claims and Reserves

In the second quarter of 2015, insurance benefits, claims and reserves decreased $3.9 million over the comparable period in 2014. The decrease is primarily attributable to: (i) a decrease of $13.4 million in the Fully Insured Health segment, primarily due to lower loss ratios in 2015 and a decrease of $12.0 million in benefits, claims and reserves related to the run-off of Major Medical; offset in part by increases in the volume of the pet and occupational accident lines of business; partially offset by (ii) an increase of $8.3 million inbenefits, claims and reserves in the Medical Stop-Loss segment as a result of an increase in premium volume and higher loss ratios; and (iii) an increase of $1.3 million in the group disability, life, annuities and DBL segment, primarily due to increased volume and retention in the group term life and LTD lines partially offset by lower loss ratios.

Selling, General and Administrative Expenses

Total selling, general and administrative expenses decreased $1.2 million over the comparable period in 2014. The decrease is primarily attributable to: (i) a decrease of $1.4 million in the Medical Stop-Loss segment as a result of increased volume offset by lower commission expenses; (ii) a $1.0 million decrease in Corporate  primarily due to a reduction in employee share-based compensation expenses; and (iii) a decrease of $0.8 million in Individual life, annuity and other segment primarily due to a decrease in the amortization of deferred costs in correlation with the assumptions of certain ceded life and annuity policies; partially offset by (iv) an increase of $1.5 million in the group disability, life, annuities and DBL segment primarily due to increased commission expense in the LTD line as a result of new business and changes in retention levels; and (v) an increase of $0.5 million in the Fully Insured Health segment largely due to increases in general expenses as a result of the higher volume of pet business, an increase in ancillary lines (primarily short term medical and fixed indemnity limited benefit) and the inclusion of GAF expenses in 2015, partially offset by decreases in expenses due to the run-off of Major Medical.

35

Income Taxes

The effective tax rate for the three months ended June 30, 2015 and 2014 was 36.5% and 38.2%, respectively.  The lower effective tax rate in 2015 was primarily due to a lower amount of non-deductible expenses as a result of the Affordable Care Act in the second quarter of 2015 compared to 2014, partially offset by a decrease in benefits from tax-advantaged securities as a percentage of income.

Results of Operations for the Six Months Ended June 30, 2015 Compared to the Six Months Ended June 30, 2014

Information by business segment for the six months ended June 30, 2015and 2014 is as follows:

									Benefits,		Amortization		Selling,
					Net		Fee and		Claims		of  Deferred		General
		Premiums			Investment		Other		and		Acquisition		And
June 30, 2014		Earned			Income		Income		Reserves		Costs		Administrative		Total
(In thousands)
Medical Stop-Loss		$	104,989	2,037			1,214		77,663		-		20,670		$	9,907
Fully Insured Health		87,451		1,137			7,575		48,925		229		44,177			2,832
Group disability,
	life, annuities
	and DBL	40,000		1,401			74		22,836		-		12,265			6,374
Individual life,
	annuities and other	10,117		5,279			1,904		9,576		2,659		7,450			(2,385)
Corporate		-		92			-		-		-		3,289			(3,197)
Sub total		$	242,557	$		9,946	$	10,767	$	159,000	$	2,888	$	87,851		13,531
Net realized investment gains																4,100
Interest expense on debt																(910)
Income before income taxes																16,721
Income taxes																6,234
Net income															$	10,487

									Benefits,		Amortization		Selling,
					Net		Fee and		Claims		of  Deferred		General
		Premiums			Investment		Other		and		Acquisition		And
June 30, 2014		Earned			Income		Income		Reserves		Costs		Administrative		Total
(In thousands)
Medical Stop-Loss		$	89,376	2,213			1,498		61,796		-		21,900		$	9,391
Fully Insured Health		114,324		1,295			11,808		75,558		269		49,645			1,955
Group disability,
	life, annuities
	and DBL	31,436		1,639			68		20,786		-		9,177			3,180
Individual life,
	annuities and other	9,269		6,009			2,007		10,432		2,202		7,871			(3,220)
Corporate		-		79			-		-		-		4,489			(4,410)
Sub total		$	244,405	$		11,235	$	15,381	$	168,572	$	2,471	$	93,082		6,896
Net realized investment gains																6,070
Interest expense on debt																(818)
Income before income taxes																12,148
Income taxes																4,263
Net income															$	7,885

Premiums Earned

In the first six months of 2015, premiums earned decreased $1.8 million over the comparable period of 2014. The decrease is primarily due to: (i) a decrease of $26.9 million in the Fully Insured Health segment as a result of a $31.7 million decrease in premiums from exiting Major Medical, partially offset by premium increases in the ancillary lines (primarily short-term medical), pet, international and occupational accident lines of business as a result of higher volume; offset in part by (ii) a $15.6 million increase in earned premiums from the Medical Stop-Loss segment as a result of higher volume; and (iii) an $8.6 million increase in the Group disability, life, annuities and DBL segment primarily due to increased volume

36

and retentions in the group term life and LTD lines.

Net Investment Income

Total net investment income decreased $1.3 million.  The overall annualized investment yields were 2.8% and 3.4% in the first six months of 2015 and 2014, respectively. The overall decrease was primarily a result of a decrease in investment income on bonds, equities and short-term investments as the Company moved approximately $207.0 million to short term duration in anticipation of the settlement of the coinsurance and sale transaction on July 31, 2015 (see Note 14). The annualized investment yields on bonds, equities and short-term investments were 2.7% and 3.3% in the first six months of 2015 and 2014, respectively. IHC has approximately $321.0 million in highly rated shorter duration securities earning on average 0.9%. A portfolio that is shorter in duration enables us, if we deem prudent, the flexibility to reinvest in much higher yielding longer-term securities, which would significantly increase investment income.

Net Realized Investment Gains

The Company had net realized investment gains of $4.1 million in 2015 compared to $6.1 million in 2014. These amounts include gains and losses from sales of fixed maturities and equity securities available-for-sale and other investments. Decisions to sell securities are based on management's ongoing evaluation of investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period.

Fee Income and Other Income

Fee income decreased $5.0 million for the six-month period ended June 30, 2015compared to the six-month period ended June 30, 2014 primarily as a result of decreased Major Medical volume in the Fully Insured Health segment partially offset by increased volume in the Medical Stop-Loss segment.  

In 2015, other income includes a $0.5 million gain on the acquisition of a controlling interest in GAF with no comparable amount in 2014.

Insurance Benefits, Claims and Reserves

In the first six months of 2015, insurance benefits, claims and reserves decreased $9.6 million over the comparable period in 2014. The decrease is primarily attributable to: (i) a decrease of $26.6 million in the Fully Insured Health segment, primarily due to lower loss ratios in 2015 and a decrease of $27.6 million in benefits, claims and reserves related to the run-off of the Major Medical; offset in part by increases in the volume of ancillary products, pet, international and occupational accident lines of business; partially offset by (ii) an increase of $15.9 million inbenefits, claims and reserves in the Medical Stop-Loss segment as a result of an increase in premium volume and higher loss ratios; and (iii) an increase of $2.1 million in the group disability, life, annuities and DBL segment, primarily due to increased volume and retention in the group term life and LTD lines partially offset by lower loss ratios.

Selling, General and Administrative Expenses

Total selling, general and administrative expenses decreased $5.2 million over the comparable period in 2014. The decrease is primarily attributable to: (i) a decrease of $5.5 million in the Fully Insured Health segment largely due to the run-off of the Major Medical partially offset by increases in general expenses as a result of the higher volume of ancillary, pet, international and occupational accident business, which tends to have a higher expense structure than major medical; (ii) a decrease of $1.2 million in the Medical Stop-Loss segment as a result of increased volume more than offset by lower commission expenses; and (iii) a $1.2 million decrease in Corporate primarily due to a reduction in employee share-based compensation expenses; partially offset by (iii) an increase of $3.1 million in the group disability,

37

life, annuities and DBL segment primarily due to increased commission expense in the LTD line as a result of new business and changes in retention levels.  

Income Taxes

The effective tax rate for the six months ended June 30, 2015 and 2014 was 37.3% and 35.1%, respectively.  The higher effective tax rate in 2015 was primarily due to a decrease in benefits from tax-advantaged securities as a percentage of income in 2015.

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. No dividends were declared or paid by the Insurance Group during the six months ended June 30, 2015. The Insurance Group declared and paid $10.0 million of dividends to Corporate during the six months ended June 30, 2014.

Cash Flows

The Company had $23.5 million and $25.1 million of cash and cash equivalents as of June 30, 2015 and December 31, 2014, respectively.

For the six months ended June 30, 2015, operating activities of the Company provided $32.6 million of cash, $30.0 million was utilized for the settlement of investment activities and $4.1 million of cash was utilized for financing activities. Financing activities include $1.7 million utilized for the purchase of AMIC shares and remaining IPA interests from noncontrolling interests, $0.6 million for the payment of dividends and $0.7 million for treasury share purchases.

The Company has $525.1 million of liabilities for future policy benefits and policy benefits and claims that it expects to ultimately pay out of current assets and cash flows from future business. If necessary, the Company could utilize the cash received from maturities and repayments of its fixed maturity investments if the timing of claim payments associated with the Company's insurance resources does not coincide with future cash flows. For the six months ended June 30, 2015, cash received from the maturities and other repayments of fixed maturities was $32.0 million.

In accordance with the terms of the coinsurance and sale transaction (see Note 14), the Company transferred approximately $207.0 million subsequent to June 30, 2015.  

The Company believes it has sufficient cash to meet its currently anticipated business requirements over the next twelve months including working capital requirements and capital investments.  

38

BALANCE SHEET

The Company had net receivables from reinsurers of $217.5 million at June 30, 2015 compared to $230.3 million at December 31, 2014. All of such reinsurance receivables are from highly rated companies or are adequately secured. No allowance for doubtful accounts was necessary at June 30, 2015.

In connection with the acquisition of a controlling interest in GAF during the second quarter of 2015, the Company recorded $6.1 million of goodwill, $5.5 million of intangible assets, $2.2 million of deferred tax liabilities and $3.3 million of long term debt.

The Company's liability for policy benefits and claims by segment are as follows (in thousands):

		Policy Benefits and Claims
		June 30,		December 31,
		2015		2014
Medical Stop-Loss	$	95,294	$	80,128
Fully Insured Health		49,373		50,285
Group Disability		98,282		99,310
Individual A&H and Other		6,607		7,080
	$	249,556	$	236,803

Major factors that affect the Projected Net Loss Ratio assumption in reserving for medical stop-loss relate to: (i) frequency and severity of claims; (ii) changes in medical trend resulting from the influences of underlying cost inflation, changes in utilization and demand for medical services, the impact of new medical technology and changes in medical treatment protocols; and (ii) the adherence to the Company's underwriting guidelines. Changes in these underlying factors are what determine the reasonably likely changes in the Projected Net Loss Ratio.

The primary assumption in the determination of fully insured reserves is that historical claim development patterns tend to be representative of future claim development patterns. Factors which may affect this assumption include changes in claim payment processing times and procedures, changes in product design, changes in time delay in submission of claims, and the incidence of unusually large claims. The reserving analysis includes a review of claim processing statistical measures and large claim early notifications; the potential impacts of any changes in these factors are minimal. The time delay in submission of claims tends to be stable over time and not subject to significant volatility. Since our analysis considered a variety of outcomes related to these factors, the Company does not believe that any reasonably likely change in these factors will have a material effect on the Company’s financial condition, results of operations, or liquidity.

The $5.8 million increase in IHC’s stockholders' equity in the first six months of 2015 is primarily due to $10.3 million of net income attributable to IHC partially offset by $3.2 million of other comprehensive losses attributable to IHC, $0.7 million of treasury stock purchases and a $0.8 million common stock dividend declared.

Asset Quality and Investment Impairments

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. Although the Company's gross unrealized losses on available-for-sale securities totaled $8.3 million at June 30, 2015, approximately 99.8% of the Company’s fixed maturities were investment grade and continue to be rated on average AA. The Company marks all of its available-for-sale securities to fair value through accumulated

39

other comprehensive income or loss. These investments tend to carry less default risk and, therefore, lower interest rates than other types of fixed maturity investments. At June 30, 2015, approximately 0.2% (or $1.2 million) of the carrying value of fixed maturities was invested in non-investment grade fixed maturities, primarily mortgage securities. 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 non-performing fixed maturities at June 30, 2015.

The Company reviews its investments regularly and monitors its investments continually for impairments. There were no securities with fair values less than 80% of their amortized cost at June 30, 2015 and the Company did not record any other-than-temporary impairment losses in the six months ended June 30, 2015 or 2014.

The unrealized losses on all available-for-sale securities have been evaluated in accordance with the Company's impairment policy and were determined to be temporary in nature at June 30, 2015. In 2015, the Company recorded $0.2 million of net unrealized losses on available-for sale securities, pre-tax, in other comprehensive income (loss) prior to DAC and reclassification adjustments. From time to time, as warranted, the Company may employ investment strategies to mitigate interest rate and other market exposures. Further deterioration in credit quality of the companies backing the securities, further deterioration in the condition of the financial services industry, a continuation of the current imbalances in liquidity that exist in the marketplace, a continuation or worsening of the current economic recession, or additional declines in real estate values may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as other-than-temporary in future periods and the Company may incur additional write-downs.

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 June 30, 2015, is not materially different from that reported in the schedule of such obligations at December 31, 2014 which was included in Item7of the Company’s Annual Report on Form 10-K.  

OUTLOOK

For 2015, we anticipate:

·

Continued growth in our medical stop-loss segment as the demand for this product continues to grow and Risk Solutions continues to build its reputation as a direct writer and provider of captive solutions.

·

Continued significant decrease in Major Medical premiums in 2015 as we have exited individual major medical and significantly reduced our block of small group major medical, however, we had negative underwriting results on this line of business in 2014 so less premium is improving our underwriting margins although generating decreases in administrative revenues.  This reduction in premium will be partially offset by continuing to increase sales of short-term and supplemental

40

health products, such as dental, accidental medical, gap and critical illness products partially offset by a decrease in fixed indemnity limited benefit plans due to a change in the law.

·

Increasing emphasis on direct-to-consumer and career advisor distribution initiatives as we believe this will be a growing means for selling health insurance in the coming years, and accompanying start-up costs of expanding our sales through our call center, career model (including our newly launched Aspira A Mas outreach to the Hispanic community) and transactional websites.

·

Increasing retention in our group life and disability lines of business. In 2015, we expect a continuation of the increase in group long-term and short-term disability products driven by higher retention amounts and a full year of premiums generated by a relatively new distribution partnership.

·

Continued evaluation of strategic transactions and responses to inquiries regarding the sale of certain assets and joint venture opportunities that could unlock shareholder value.

·

Continued focus on administrative efficiencies.

The Company will remain highly liquid in 2015 as a result of the continuing shorter duration of the portfolio. As a result, the yields on our investment portfolio were, and continue to remain, lower than in prior years and investment income may continue to be depressed for 2015. IHC has approximately $321.0 million in highly rated shorter maturity securities earning on average 0.9%; our portfolio as a whole is rated, on average, AA. The low duration of our portfolio enables us, if we deem prudent, the flexibility to reinvest in much higher yielding longer-term securities, which would significantly increase investment income in the future.  A low duration portfolio such as ours also mitigates the adverse impact of potential inflation.  IHC will continue to monitor the financial markets and invest accordingly.

In 2015, we expect to continue to achieve significant growth in our controlled direct written stop-loss business through Risk Solutions while maintaining underwriting profitability consistent with the prior year.  The favorable results of Risk Solutions are a direct result of their positioning to take advantage of market trends, including consolidation of relationships by producers and increased interest in stop-loss as a result of health care reform.  We see these trends continuing and strengthening in 2015 and beyond.  Risk Solutions has established a reputation in the market for delivering innovative solutions for small to medium sized employer groups looking for self-funded alternatives.  Risk Solutions has also established a reputation in the market for fair and responsible pricing and superior service levels.  We foresee continued growth and favorable underwriting results as more of our stop-loss business comes through the Risk Solutions platform.

We will continue to focus on our strategic objectives, including expanding our distribution network.  However, the success of a portion of our Fully Insured Health business has been affected by the passage of the Patient Protection and Affordable Care Act of 2010, as amended, and its subsequent interpretations by state and federal regulators. While the law has influenced our decision, and that of many other insurers, to exit or reduce their presence in Major Medical plans in the small employer and individual markets, non-Major Medical lines of business and medical stop-loss have been impacted by health care reform minimally or not at all.

Our results depend on the adequacy of our product pricing, our underwriting, the accuracy of our reserving methodology, returns on our invested assets, and our ability to manage expenses.  We will also need to be diligent with the increased rate review scrutiny to effect timely rate changes and will need to stay focused on the management of medical cost drivers as medical trend levels cause margin pressures.  Therefore, factors affecting these items, as well as unemployment and global financial markets, may have a material adverse effect on our results of operations and financial condition.

41

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

The following summarizes the estimated pre-tax change in fair value (based upon hypothetical parallel shifts in the U.S. Treasury yield curve) of the fixed income portfolio (excluding redeemable preferred stocks) assuming immediate changes in interest rates at specified levels at June 30, 2015:

		Change in Interest Rates
		200 basis point rise		100 basis point rise		Base scenario		100 basis point decline		200 basis point decline
Corporate securities	$	147,197	$	154,973	$	163,353	$	172,729	$	181,942
CMO’s		4,190		4,388		4,603		4,840		5,059
U.S. Government obligations		214,427		218,248		222,158		225,557		225,735
Agency MBSs		50		51		52		53		53
GSEs		10,475		11,219		12,040		12,940		13,843
State & Political Subdivisions		170,027		184,485		199,962		214,319		225,857
Foreign governments		1,601		1,722		1,856		2,002		2,153
Total estimated fair value	$	547,967	$	575,086	$	604,024	$	632,440	$	654,642
Estimated change in value	$	(56,057)	$	(28,938)			$	28,416	$	50,618

In the second quarter of 2015, the Company moved approximately $207.0 million of assets to short term duration in anticipation of the settlement of the coinsurance and sale transaction discussed in Note 14 of the Notes to the Condensed Consolidated Financial Statements. This resulted in a decrease in the expected change in fair value as a percentage of the Company’s fixed income portfolio given a 100 to 200 basis point rise or decline in interest rates compared to the expected change at December 31, 2014. It is anticipated that after the transfer of $207.0 million of cash to an unaffiliated reinsurer in July 2015, per the terms of the aforementioned coinsurance and sale transaction, the expected change in fair value as a percentage of the Company’s fixed income portfolio should return to levels similar to those disclosed at December 31, 2014 in the Company’s Annual Report on Form 10-K.

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. This is accomplished by first creating an insurance model of the Company's in-force policies using current assumptions on mortality, lapses and expenses. Then, current investments are assigned to specific insurance blocks in the model using appropriate prepayment schedules and future reinvestment patterns.

The results of the model specify whether the investments and their related cash flows can support the related current insurance cash flows. Additionally, various scenarios are developed changing interest rates and other related assumptions. These scenarios help evaluate the market risk due to changing interest rates in relation to the business of the Insurance Group.

 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

42

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 acquired from 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 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 six months ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect, IHC's internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are involved in legal proceedings and claims that arise in the ordinary course of our businesses. We have established reserves that we believe are sufficient given information presently available related to our outstanding legal proceedings and claims. We do not anticipate that the result of any pending legal proceeding or claim will have a material adverse effect on our financial condition or cash flows, although there could be such an effect on our results of operations for any 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, 2014 in Item 1A to Part 1 of Form 10-K.

43

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchase Program

IHC has a program, initiated in 1991, under which it repurchases shares of its common stock. In August 2014, the Board of Directors authorized the repurchase of up to 500,000 shares of IHC’s common stock, in addition to prior authorizations, under the 1991 plan. As of June 30, 2015, 408,460 shares were still authorized to be repurchased under the plan. Share repurchases during the second quarter of 2015 are summarized as follows:

2015
						Maximum Number
				Average Price		Of Shares Which
	Month of	Shares		of Repurchased		Can be
	Repurchase		Repurchased		Shares		Repurchased
	April	-		$	-	419,394
	May	-		$	-	419,394
	June	10,934		$	12.99	408,460

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS

3.1

Restated Certificate of Incorporation of Independence Holding Company (Filed as Exhibit 3(i) to our Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference).

3.2

Certificate of Amendment of Restated Certificate of Incorporation of Independence Holding Company (Filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on July 29, 2004 and incorporated herein by reference).

3.3

By-Laws of Independence Holding Company (Filed as Exhibit 3.3 to our Annual Report on Form 10-K for the year ended December 31, 2006 and incorporated herein by reference), as amended by Amendment to By-Laws of Independence Holding Company (Filed as Exhibit 3.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 and incorporated herein by reference).

10.1

Officer Employment Agreement, made as of April 18, 2011, by and among Independence Holding Company, Standard Security Life Insurance Company of New York and Mr. David T. Kettig (Filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on April 22, 2011 and incorporated herein by reference).

10.2

Officer Employment Agreement, made as of April 18, 2011, by and among Independence Holding

44

Company, Madison National Life Insurance Company, Inc. and Mr. Larry R. Graber (Filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on April 22, 2011 and incorporated herein by reference).

10.3

Officer Employment Agreement, made as of April 18, 2011, by and between Independence Holding Company and Ms. Teresa A. Herbert (Filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on April 22, 2011 and incorporated herein by reference).

10.4

Officer Employment Agreement, made as of May 11, 2011, by and between Independence Holding Company and Mr. Roy T.K. Thung (Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended March 31, 2011 that was filed with the SEC on May 12, 2011, and incorporated herein by reference).

10.5   Officer Employment Agreement, by and among Independence Holding Company, IHC Risk Solutions, LLC and Mr. Michael A. Kemp, dated as of May 22, 2012 (Filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on May 29, 2012, and incorporated herein by reference).

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. *

101.INS

XBRL Instance Document. *

101.SCH

XBRL Taxonomy Extension Schema Document. *

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document. *

101.LAB

XBRL Taxonomy Extension Label Linkbase Document. *

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document. *

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document. *

* Filed herewith.

45

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:

August 7, 2015

Roy T.K. Thung

Chief Executive Officer, President

and Chairman

 By:

/s/Teresa A. Herbert                                    

Date:

August 7, 2015

             Teresa A. Herbert

Senior Vice President and

Chief Financial Officer

46