10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q

☒   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2021.

☐   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, CT                      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.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	IHC	NYSE

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, if any, every Interactive Data File required to be submitted 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 such files).   Yes   [X]   No [  ]

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

Large Accelerated Filer [    ]	Accelerated Filer  [X]
Non-Accelerated Filer   [    ]	Smaller Reporting Company  ☒
Emerging Growth Company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   

Yes   ☐   No  [X]

As of August 7, 2021, the registrant had 14,644,389 shares of Common Stock outstanding.

1

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 Statements of Changes in Equity	7
			Condensed Consolidated Statements of Cash Flows	9
			Notes to Condensed Consolidated Financial Statements	10
		Item 2. Management's Discussion and Analysis of Financial Condition
			and Results of Operations	36
		Item 3. Quantitative and Qualitative Disclosures about Market Risk		50
		Item 4. Controls and Procedures		50
PART II - OTHER INFORMATION
		Item 1.    Legal Proceedings		51
		Item 1A. Risk Factors		52
		Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds		52
		Item 3.   Defaults Upon Senior Securities		52
		Item 4.    Mine Safety Disclosures		52
		Item 5.    Other Information		52
		Item 6.    Exhibits		53
	Signatures			56

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,” “project”, “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, 2021		December 31, 2020
		(Unaudited)
ASSETS:
Investments:
Short-term investments	$	1,550	$	1,568
Securities purchased under agreements to resell		70,323		33,038
Fixed maturities, available-for-sale		183,709		210,719
Equity securities		-		1,753
Other investments		2,022		1,928
Total investments		257,604		249,006
Cash and cash equivalents		22,834		31,923
Investment in Iguana Capital, Inc. (“Iguana Capital”) (Note 2)		33,762		-
Due and unpaid premiums		10,950		9,981
Due from reinsurers		354,735		357,237
Goodwill		12,486		12,486
Funds held in escrow		78,779		-
Other assets		29,864		46,832
Assets attributable to discontinued operations (Note 2)		416,162		375,691
TOTAL ASSETS	$	1,217,176	$	1,083,156
LIABILITIES AND  EQUITY:
LIABILITIES:
Policy benefits and claims	$	127,815	$	132,957
Future policy benefits		196,026		198,086
Funds on deposit		142,155		141,376
Unearned premiums		1,763		1,952
Other policyholders' funds		11,988		12,001
Due to reinsurers		2,242		3,872
Accounts payable, accruals and other liabilities		66,519		44,855
Liabilities attributable to discontinued operations (Note 2)		120,180		75,939
TOTAL LIABILITIES		668,688		611,038
Commitments and contingencies (Note 15)
Redeemable noncontrolling interest		-		2,312
STOCKHOLDERS’ EQUITY:
Preferred stock $1.00 par value, 100,000 shares authorized;
none issued or outstanding		-		-
Common stock $1.00 par value, 23,000,000 shares authorized;
18,625,458 shares issued; and 14,644,389 and
14,643,047 shares outstanding		18,625		18,625
Paid-in capital		125,653		124,757
Accumulated other comprehensive income		3,220		4,197
Treasury stock, at cost; 3,981,069 and 3,982,411 shares		(77,189)		(77,088)
Retained earnings		478,139		399,273
TOTAL IHC STOCKHOLDERS’ EQUITY		548,448		469,764
NONREDEEMABLE NONCONTROLLING INTERESTS		40		42
TOTAL EQUITY		548,488		469,806
TOTAL LIABILITIES AND EQUITY	$	1,217,176	$	1,083,156

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,
		2021		2020		2021		2020
REVENUES:
Premiums earned	$	42,451	$	49,138	$	86,023	$	99,804
Net investment income		1,651		2,329		3,452		4,828
Fee income		4,944		3,907		11,079		7,341
Other income		410		807		1,026		1,432
Net investment gains (losses)		(126)		274		91		117
		49,330		56,455		101,671		113,522
EXPENSES:
Insurance benefits, claims and reserves		17,192		21,339		39,113		47,628
Selling, general and administrative expenses		32,842		37,974		63,602		69,034
		50,034		59,313		102,715		116,662
Loss from continuing operations before income taxes		(704)		(2,858)		(1,044)		(3,140)
Income tax benefits		(267)		(1,066)		(430)		(1,187)
Loss from continuing operations, net of tax		(437)		(1,792)		(614)		(1,953)
Discontinued operations (Note 2):
Total pretax income from discontinued operations		92,375		3,594		99,574		9,243
Income tax expense on discontinued operations		15,570		1,264		17,026		2,430
Income from discontinued operations, net of tax		76,805		2,330		82,548		6,813
Net income		76,368		538		81,934		4,860
(Income) loss from nonredeemable noncontrolling interests		1		(43)		2		(34)
(Income) loss from redeemable noncontrolling interests		102		(74)		156		(127)
NET INCOME ATTRIBUTABLE TO IHC	$	76,471	$	421	$	82,092	$	4,699
Basic income per common share
Loss from continuing operations	$	(0.03)	$	(0.12)	$	(0.04)	$	(0.13)
Income from discontinued operations		5.25		0.15		5.65		0.45
Basic income per common share	$	5.22	$	0.03	$	5.61	$	0.32
WEIGHTED AVERAGE SHARES OUTSTANDING		14,642		14,765		14,641		14,811
Diluted income per common share
Loss from continuing operations	$	(0.03)	$	(0.12)	$	(0.04)	$	(0.13)
Income from discontinued operations		5.25		0.15		5.65		0.45
Diluted income per common share	$	5.22	$	0.03	$	5.61	$	0.32
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING		14,642		14,765		14,641		14,811

See the accompanying Notes to Condensed Consolidated Financial Statements.

5

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands)
		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2021
Net income	$	76,368	$	538	$	81,934	$	4,860
Other comprehensive income:
Available-for-sale securities:
Unrealized gains (losses) on available-for-sale securities, pre-tax		1,212		2,227		(1,248)		2,093
Tax expense (benefit) on unrealized gains (losses) on available-for-sale securities		260		474		(271)		451
Unrealized gains (losses) on available-for-sale securities, net of taxes		952		1,753		(977)		1,642
Other comprehensive income (loss), net of tax		952		1,753		(977)		1,642
COMPREHENSIVE INCOME, NET OF TAX		77,320		2,291		80,957		6,502
Comprehensive (income) loss, net of tax, attributable to noncontrolling interests:
(Income) loss from noncontrolling interests in subsidiaries		103		(117)		158		(161)
Other comprehensive (income) loss, net of tax, attributable to
noncontrolling interests		-		-		-		-
COMPREHENSIVE (INCOME) LOSS, NET OF TAX,
ATTRIBUTABLE TO NONCONTROLLING INTERESTS		103		(117)		158		(161)
COMPREHENSIVE INCOME, NET OF TAX,
ATTRIBUTABLE TO IHC	$	77,423	$	2,174	$	81,115	$	6,341

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)
Three Months Ended June 30, 2021 and 2020
						ACCUMULATED
						OTHER		TREASURY				TOTAL IHC		NONREDEEMABLE
		COMMON		PAID-IN		COMPREHENSIVE		STOCK,		RETAINED		STOCKHOLDERS'		NONCONTROLLING		TOTAL
		STOCK		CAPITAL		INCOME		AT COST		EARNINGS		EQUITY		INTERESTS		EQUITY
BALANCE AT
MARCH 31, 2021	$	18,625	$	125,189	$	2,268	$	(77,228)	$	404,894	$	473,748	$	41	$	473,789
Net income										76,471		76,471		(1)		76,470
Other comprehensive
loss, net of tax						952						952		-		952
Common stock dividends
($0.22 per share)										(3,226)		(3,226)		-		(3,226)
Share-based compensation				464				39				503		-		503
BALANCE AT
JUNE 30, 2021	$	18,625	$	125,653	$	3,220	$	(77,189)	$	478,139	$	548,448	$	40	$	548,488
BALANCE AT
MARCH 31, 2020	$	18,625	$	123,260	$	1,101	$	(71,196)	$	388,102	$	459,892	$	6	$	459,898
Net income										421		421		43		464
Other comprehensive
income, net of tax						1,753						1,753		-		1,753
Repurchases of common stock								(3,129)				(3,129)		-		(3,129)
Common stock dividends
($0.22 per share)										(206)		(206)		-		(206)
Share-based compensation				544								544		-		544
BALANCE AT
JUNE 30, 2020	$	18,625	$	123,804	$	2,854	$	(74,325)	$	388,317	$	459,275	$	49	$	459,324

7

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) (In thousands)
Six Months Ended June 30, 2021 and 2020
						ACCUMULATED
						OTHER		TREASURY				TOTAL IHC		NONREDEEMABLE
		COMMON		PAID-IN		COMPREHENSIVE		STOCK,		RETAINED		STOCKHOLDERS'		NONCONTROLLING		TOTAL
		STOCK		CAPITAL		INCOME (LOSS)		AT COST		EARNINGS		EQUITY		INTERESTS		EQUITY
BALANCE AT
DECEMBER 31, 2020	$	18,625	$	124,757	$	4,197	$	(77,088)	$	399,273	$	469,764	$	42	$	469,806
Net income										82,092		82,092		(2)		82,090
Other comprehensive
loss, net of tax						(977)						(977)		-		(977)
Repurchases of common stock								(140)				(140)		-		(140)
Common stock dividends
($0.22 per share)										(3,226)		(3,226)		-		(3,226)
Share-based compensation				896				39				935		-		935
BALANCE AT
JUNE 30, 2021	$	18,625	$	125,653	$	3,220	$	(77,189)	$	478,139	$	548,448	$	40	$	548,488
BALANCE AT
DECEMBER 31, 2019	$	18,625	$	122,717	$	1,212	$	(69,724)	$	386,864	$	459,694	$	18	$	459,712
Net income										4,699		4,699		34		4,733
Other comprehensive
income, net of tax						1,642						1,642		-		1,642
Repurchases of common stock								(4,601)				(4,601)		-		(4,601)
Distributions to noncontrolling
interests												-		(3)		(3)
Common stock dividends
($0.22 per share)										(3,246)		(3,246)		-		(3,246)
Share-based compensation				1,087								1,087		-		1,087
BALANCE AT
JUNE 30, 2020	$	18,625	$	123,804	$	2,854	$	(74,325)	$	388,317	$	459,275	$	49	$	459,324

See the accompanying Notes to Condensed Consolidated Financial Statements.

8

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
		Six Months Ended June 30,
		2021		2020
CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:
Net income	$	81,934	$	4,860
Adjustments to reconcile net income to net change in cash from
operating  activities:
Gain on disposal of discontinued operations		(74,534)		-
Pretax provision for loss on disposal		812		-
Amortization of deferred acquisition costs		425		166
Net amortization of purchased premium and discount in net investment income		1,139		1,218
Net investment (gains)		(91)		(117)
Depreciation and amortization		908		759
Other		17,107		2,393
Changes in assets and liabilities:
Change in insurance liabilities		37,333		27,057
Change in  amounts due from reinsurers		2,663		3,725
Change in claim fund balances		(1,022)		574
Change in due and unpaid premiums		(15,141)		(8,253)
Change in contract asset		(1,006)		-
Other operating activities		3,008		(4,135)
Net change in cash from operating activities		53,535		28,247
CASH FLOWS PROVIDED BY (USED BY) INVESTING ACTIVITIES:
Net (purchases) sales and maturities of short-term investments		1,060		(1,049)
Net (purchases) sales of securities under resale agreements		(139,647)		5,740
Sales of equity securities		3,494		-
Sales of fixed maturities		10,366		36,413
Maturities and other repayments of fixed maturities		44,520		55,936
Purchases of fixed maturities		(8,343)		(96,353)
Cash divested from deconsolidation of subsidiary		(4,878)		-
Payments to acquire business, net of cash acquired		-		(13,707)
Payments to acquire other investments		(2,500)		(1,250)
Other investing activities		(1,870)		(3,372)
Net change in cash from investing activities		(97,798)		(17,642)
CASH FLOWS PROVIDED BY (USED BY)  FINANCING ACTIVITIES:
Repurchases of common stock		(140)		(4,489)
Withdrawals of investment-type insurance contracts		(112)		(326)
Dividends paid		(3,221)		(6,215)
Other financing activities		(32)		(3)
Net change in cash from financing activities		(3,505)		(11,033)
Net change in cash, cash equivalents and restricted cash		(47,768)		(428)
Cash, cash equivalents and restricted cash, beginning of year, including discontinued operations		74,793		24,631
Cash, cash equivalents and restricted cash, end of period, including discontinued operations	$	27,025	$	24,203
NON-CASH ACTIVITY:
Proceeds from sale of subsidiary – funds held in escrow	$	78,779	$	-

See the accompanying Notes to Condensed Consolidated Financial Statements.

9

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 underwriting, administering and/or distributing group and individual specialty benefit products, including disability, supplemental health, pet, and group life insurance 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"), and Independence American Insurance Company; and (ii) its marketing and administrative companies, including IHC Specialty Benefits Inc. (“IHCSB”), IHC Brokerage Group, Inc. (“IBG”), INSXCloud, Inc. (“INSXCloud”) (formerly My1HR, Inc.), collectively the “IHC Agencies” and its lead generation company, Torchlight Technology Group LLC., (“Torchlight”). On June 30, 2021, the Company sold its majority interest in PetPartners, Inc. (“PetPartners”), a major distributor and administrator of pet insurance underwritten by Independence American Insurance Company and an unaffiliated insurer. Standard Security Life, Madison National Life and Independence American Insurance Company 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 financial holding company, and its affiliated entities, held approximately 62% of IHC's outstanding common stock at June 30, 2021.  

(B)     Basis of Presentation 

The unaudited 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 information and footnotes required by U.S. GAAP for complete financial statements. The unaudited Condensed Consolidated Financial Statements 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 unaudited Condensed Consolidated Financial Statements.

During the second quarter of 2021, the Board of Directors committed to various plans for the disposal of several business operations (see Note 2). Each plan represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, they each qualify for reporting as discontinued operations in the second quarter 2021. The assets, liabilities, and related income and expenses associated with each disposal group are presented as discontinued operations in the accompanying condensed consolidated financial statements and Notes thereto for all periods presented.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global health pandemic and the United States declared a national health emergency. COVID-19 has led to largescale disruption in the global economy, market instability and widespread unemployment in the United States. The COVID-19 outbreak continues to be a fluid situation and as it evolves, the duration of COVID-19 and its potential effects on our business cannot be certain. Regulatory mandates have affected, and we anticipate will continue to impact, the insurance industry. We currently cannot predict if there will be a material impact to

10

our business, results of operations or financial condition in future reporting periods. Consequently, future changes in market conditions may impact estimates used in the preparation of our financial statements associated with evaluations of goodwill and other intangible assets for impairment, estimates associated with the determination of valuation allowances related to net operating loss carryforwards, and estimates of certain losses under insurance contracts. These estimates may all be subject to substantial adjustments in future periods.  In addition, volatile market conditions may result in declines in the fair value of our investment portfolio and possible impairments of certain securities.

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, 2021 are not necessarily indicative of the results to be anticipated for the entire year.

(C)  Reclassifications 

Certain amounts in prior year’s condensed consolidated financial statements and Notes thereto have been reclassified to conform to the 2021 presentation, primarily for the effects of discontinued operations.

(D)   Recent Accounting Pronouncements 

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standard Board (“FASB”) issued guidance to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes, the requirement to allocate current and deferred tax expense to legal entities not subject to tax in its separate financial statements, enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted 

In August 2018, the FASB issued guidance to improve existing measurements, presentation and disclosure requirements for long-duration contracts issued by insurance entities. The amendments in this guidance requires an entity to (1) review and update assumptions used to measure cash flows at least annually as well as update the discount rate assumption at each reporting date; (2) measure market risk benefits associated with deposit contracts at fair value; (3) disclose liability rollforwards and information about significant inputs, judgements assumptions, and methods used in measurement. Additionally, it simplifies the amortization of deferred acquisition costs and other balances on a constant level basis over the expected term of the related contracts. In 2019, the FASB delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Upon adoption, the amendments in this guidance should be applied to contracts in-force as of the beginning of the earliest period presented with a cumulative adjustment to beginning retained earnings. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

In June 2016, the FASB issued guidance requiring financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. An allowance for credit losses will be deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected with changes in the allowance recorded in earnings. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than the currently applied U.S. GAAP method

11

of taking a permanent impairment of the security, which would be limited to the amount by which fair value is below the amortized cost. Certain existing requirements used to evaluate credit losses have been removed. In 2019, the FASB provided transition relief by providing entities with an option to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible instruments upon adoption and delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The amendments in this guidance should be applied through a cumulative effect adjustment to retained earnings upon adoption as of the beginning of the first reporting period in which the guidance is effective. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

Note 2.Discontinued Operations 

(A)Sale of Standard Security Life 

On April 14, 2021, IHC and its wholly owned subsidiary, Independence Capital Corp. (“ICC”), entered into a Stock Purchase Agreement (the “SSL Purchase Agreement”) with Reliance Standard Life Insurance Company (“Reliance Standard”) to sell all of the issued and outstanding capital stock of Standard Security Life, a wholly owned subsidiary of ICC, for an aggregate purchase price of $180,000,000 in cash.  In addition, at closing, the Company will receive a dividend from Standard Security Life equal to the excess of aggregate statutory capital and surplus over $53,000,000 as of the closing date. Standard Security Life had statutory capital and surplus of $82,091,000 at June 30, 2021.  The closing of the transaction, the closing dividend and certain other items are subject to customary closing conditions including applicable regulatory approvals, one of which is the approval of the New York State Department of Financial Services. Standard Security Life currently cedes a portion of its New York short-term disability (“DBL”) and paid family leave rider (“PFL”) business to Independence American Insurance Company. We filed notice to cancel this reinsurance contract in accordance with the terms of the SSL Purchase Agreement. Under the terms of the SSL Purchase Agreement, the sale transaction will include all of Standard Security Life’s DBL and PFL business (including the DBL and PFL business previously ceded to Independence American Insurance Company) and will exclude other lines of business which will be reinsured prior to the closing. The DBL and PFL business being sold was part of the Company’s Group disability, life, DBL and PFL segment. The aforementioned transaction, consisting of the sale of Standard Security Life, the closing dividend and other closing conditions, is collectively referred to as the “SSL Sale” transaction or disposal group. DBL and PFL are major product lines for the Company. The sale of Standard Security Life and resulting exit from DBL and PFL business represents a strategic shift that will have a major effect on the Company’s operations and financial results. The SSL Sale transaction qualified for reporting as discontinued operations in the second quarter of 2021 upon the Board of Director’s commitment to a plan for its disposal in April 2021, and the subsequent execution of the SSL Purchase Agreement. Provided that all regulatory approvals and other closing conditions are met, the Company expects to complete the SSL Sale transaction by the end of 2021.

On July 29, 2021, the SSL Purchase Agreement was amended and restated to: (i) include in the disposal group, the business lines that were previously excluded from the transaction; (ii) remove the reinsurance requirement for the previously excluded business lines; and (iii) increase the target statutory capital and surplus to $57,000,000. As a result of this change in the disposal plan, the Company will include the assets, liabilities and results of operations for those business lines affected in discontinued operations for all periods presented, beginning in the third quarter of 2021.

Aside from customary transition services, there will be no continuing involvement with Standard Security Life after its disposal.

(B)Sale of Pet Division and Independence American Insurance Company (“Pets Sale”) 

On May 17, 2021, IHC and certain subsidiaries entered into agreements to sell a 70% controlling interest in its pet division, including all of the issued and outstanding capital stock of Independence American

12

Insurance Company to a subsidiary of Iguana Capital, Inc. (“Iguana Capital”), an investment company specifically formed to facilitate this transaction as follows:  

(i)IHC and its wholly owned subsidiary, IHC SB Holdings LLC (“SBH”), entered into a Stock Purchase Agreement (the “PPI Purchase Agreement”) with Iguana Capital to sell its 85% interest in PetPartners for $77,000,000 in cash (subject to working capital adjustments);  

(ii)IHC and its wholly owned subsidiary, AMIC Holdings, Inc. (“AMIC”), entered into a Stock Purchase Agreement (the “IAHC Purchase Agreement”) with Iguana Capital to sell all of the stock of Independence American Holdings Corp. (“IAHC”), which owns all of the stock of Independence American Insurance Company and other pet assets, for $190,400,000 in cash (subject to adjustments for targeted statutory capital and surplus): and  

(iii)Following each of the above, IHC will retain a 30% interest in the form of an equity investment in Iguana Capital. 

Both agreements are subject to customary closing conditions. The closing of the IAHC Purchase Agreement however is also subject to certain regulatory approvals, one of which is the approval of the Delaware Insurance Department.  For this reason, the transaction was structured as two agreements such that the sale of PetPartners occurred on June 30, 2021, and the closing of the transactions contemplated in the IAHC Purchase Agreement will follow at a later date upon receipt of applicable regulatory approvals. Provided that all regulatory approvals and other closing conditions are met, the Company expects to complete the IAHC sale transaction by the end of 2021.

Under the terms of the IAHC Purchase Agreement, the transaction includes the sale of all Independence American Insurance Company’s pet business and excludes other business lines. These excluded business lines will be retained by the Company through a reinsurance agreement with Madison National Life prior to closing. The reinsurance agreement will remain in effect until the underlying business is either transferred to Madison National Life or the business runs out. The aforementioned transaction, consisting of the sale of PetPartners, IAHC and Independence American Insurance Company, and other closing conditions, is collectively referred to as the “Pets Sale” transaction or disposal group. The pet business being sold was part of the Company’s Specialty Health segment. Because the pet business is a major product line for the Company, and the Company will no longer actively engage in the sales and marketing of pet insurance, the Pets Sale transaction represents a strategic shift that will have a major effect on the Company’s operations and financial results. The Pets Sale transaction qualified for reporting as discontinued operations in the second quarter of 2021 as a result of the Board of Directors’ commitment to a plan for the disposal of a controlling interest in its pet business in May 2021, and the execution of both the PPI Purchase Agreement and the IAHC Purchase Agreement on May 17, 2021.

On June 30, 2021, the Company completed the sale of its majority interest in PetPartners and, as a result, the Company ceased to have a controlling financial interest in PetPartners. Upon closing, the Company received proceeds of $78,779,000 (consisting of the purchase price and certain initial working capital adjustments), recognized an initial equity investment in Iguana Capital valued at $33,762,000, and recorded a $62,693,000 gain on the disposal, net of transaction costs and income taxes. Transaction costs consisting of transaction bonuses, legal expenses and financial advisor expenses amounted to an aggregate of $6,070,000. The PPI Purchase Agreement includes a waiver and consent to offer The American Kennel Club (“AKC”), PetPartners’ minority shareholder, until December 31, 2021, the right to sell their shares at the same price and terms as in the PPI Purchase Agreement. In the event AKC desires to sell such its shares, Iguana Capital and SBH will equally finance the cash payment to AKC. In connection with the PPI Sale transaction, the Company recorded a $6,800,000 contingent liability (the maximum amount required) based on its belief that AKC will exercise this right. If for any reason the IAHC Purchase Agreement is terminated, then at the option of either SBH or an affiliate of Iguana Capital, IAHC may reacquire the Company’s interest in PetPartners (the “PPI Put/Call Option”). The value of the PPI Put/Call Option was deemed to be negligible due to the structure of the put and call features, the short time horizon and the Company’s belief that there is a low probability that the deal would be terminated. The proceeds received from the sale of PetPartners were deposited into an escrow

13

account owned by SBH and treated as a security deposit. The funds will be released from escrow upon either the consummation of the IAHC sale transaction or upon the exercise of the PPI Put/Call Option. At June 30, 2021, the security deposit is presented as funds held in escrow on the Condensed Consolidated Balance Sheet.

Continuing involvement with the Pets Sale disposal group will consist of customary transition services, the reinsurance of retained business lines, the PPI Put/Call Option, and the equity investment in Iguana Capital.

The following is a reconciliation, by disposal group, of the carrying amounts of major classes of assets and liabilities included in discontinued operations on the Condensed Consolidated Balance Sheets for the periods indicated (in thousands):

		June 30, 2021
		SSL Sale		Pets Sale		Total
Major classes of assets:
Investments and cash	$	164,346	$	144,688	$	309,034
Goodwill		-		41,716		41,716
Other assets		30,020		35,392		65,412
Assets attributable to discontinued operations	$	194,366	$	221,796	$	416,162
Major classes of liabilities:
Policy benefits and claims	$	56,987	$	12,743	$	69,730
Unearned premiums		26,778		6,080		32,858
Other liabilities		12,500		5,092		17,592
Liabilities attributable to discontinued operations	$	96,265	$	23,915	$	120,180

		December 31, 2020
		SSL Sale		Pets Sale		Total
Major classes of assets included in discontinued operations:
Investments and cash	$	114,916	$	149,844	$	264,760
Goodwill		-		62,414		62,414
Other assets		18,787		29,730		48,517
Assets attributable to discontinued operations	$	133,703	$	241,988	$	375,691
Major classes of liabilities included in discontinued operations:
Policy benefits and claims	$	34,500	$	11,775	$	46,275
Unearned premiums		5,208		5,629		10,837
Other liabilities		9,316		9,511		18,827
Liabilities attributable to discontinued operations	$	49,024	$	26,915	$	75,939

14

The following is a reconciliation, by disposal group, of the major line items constituting the pretax profit of discontinued operations to the income from discontinued operations, net of tax, as shown on the Condensed Consolidated Statements of Income for the periods indicated (in thousands):

		For the Three Months Ended June 30, 2021
		SSL Sale		Pets Sale		Total
Revenues	$	50,342	$	33,080	$	83,422
Expenses:
Insurance benefits, claims and reserves		24,341		18,442		42,783
Selling, general and administrative expenses		7,394		14,592		21,986
Pretax income of discontinued operations during phase-out		18,607		46		18,653
Pretax provision for loss on disposal		(402)		(410)		(812)
Pretax gain on disposal of discontinued operations		-		74,534		74,534
Total pretax income from discontinued operations		18,205		74,170		92,375
Income tax expense on discontinued operations		3,836		11,734		15,570
Income from discontinued operations, net of tax	$	14,369	$	62,436	$	76,805

		For the Three Months Ended June 30, 2020
		SSL Sale		Pets Sale		Total
Revenues	$	30,442	$	20,407	$	50,849
Expenses:
Insurance benefits, claims and reserves		22,152		11,098		33,250
Selling, general and administrative expenses		6,150		7,855		14,005
Pretax income of discontinued operations during phase-out		2,140		1,454		3,594
Pretax provision for loss on disposal		-		-		-
Pretax gain on disposal of discontinued operations		-		-		-
Total pretax income from discontinued operations		2,140		1,454		3,594
Income tax expense on discontinued operations		822		442		1,264
Income from discontinued operations, net of tax	$	1,318	$	1,012	$	2,330

		For the Six Months Ended June 30, 2021
		SSL Sale		Pets Sale		Total
Revenues	$	93,738	$	61,999	$	155,737
Expenses:
Insurance benefits, claims and reserves		53,865		34,374		88,239
Selling, general and administrative expenses		14,850		26,796		41,646
Pretax income of discontinued operations during phase-out		25,023		829		25,852
Pretax provision for loss on disposal		(402)		(410)		(812)
Pretax gain on disposal of discontinued operations		-		74,534		74,534
Total pretax income from discontinued operations		24,621		74,953		99,574
Income tax expense on discontinued operations		5,151		11,875		17,026
Income from discontinued operations, net of tax	$	19,470	$	63,078	$	82,548

15

		For the Six Months Ended June 30, 2020
		SSL Sale		Pets Sale		Total
Revenue	$	59,943	$	37,838	$	97,781
Expenses:
Insurance benefits, claims and reserves		40,560		20,459		61,019
Selling, general and administrative expenses		13,004		14,515		27,519
Pretax income of discontinued operations during phase-out		6,379		2,864		9,243
Pretax provision for loss on disposal		-		-		-
Pretax gain on disposal of discontinued operations		-		-		-
Total pretax income from discontinued operations		6,379		2,864		9,243
Income tax expense on discontinued operations		1,689		741		2,430
Income from discontinued operations, net of tax	$	4,690	$	2,123	$	6,813

The assets and liabilities in discontinued operations are measured at the lower of their carry value or fair value less cost to sell. During the three months and six months ended June 30, 2021, it was not necessary to write-down any assets or liabilities attributable to the disposal groups in discontinued operations to fair value, less costs to sell. The Company expects to recognize gains from the sales of these disposal groups, therefore, any costs to sell the disposal groups, primarily legal expenses, incurred prior to the actual disposal of the discontinued operation, are expensed when incurred and presented in pretax provision for loss on disposal in the tables above.

Pretax income (loss) from discontinued operations during phase-out attributable to IHC was $18,653,000 and $25,852,000 for the three and six months ended June 30, 2021, respectively, and was $3,594,000 and $9,243,000 for the three and six months ended June 30, 2020, respectively.

Total cash flows from operating activities of discontinued operations were $45,917,000 and $26,813,000 for the six months ended June 30, 2021 and 2020, respectively. Total cash flows from investing activities of discontinued operations were $(88,501,000) and $(29,753,000) for the six months ended June 30, 2021 and 2020, respectively.

On a consolidated basis, the Company recorded $15,570,000 and $1,264,000 of income taxes related to pretax income from discontinued operations for the three months ended June 30, 2021 and 2020, respectively, and $17,026,000 and $2,430,000 for the six months ended June 30, 2021 and 2020, respectively. In 2021, these amounts include $11,841,000 of income taxes related to the pretax gain on disposal of discontinued operations. In connection with the sale of PetPartners, AMIC decreased its valuation allowance on existing deferred tax assets by $8,281,000 and utilized approximately $46,116,000 of its outstanding Federal net operating loss carryforwards (See Note 11). Differences between the Federal statutory income tax rate on discontinued operations and the Company’s effective income tax rate on pretax income from discontinued operations are primarily the result of AMIC’s decrease in its valuation allowance, state and local income taxes, nondeductible goodwill and other expenses.

16

Note 3.Income Per Common Share 

Diluted income per share was computed using the treasury stock method. As a result of losses from continuing operations for the three months and six months ended June 30, 2021 and 2020, such shares were deemed anti-dilutive.

The following is a reconciliation of income available to common shareholders used to calculate income per share for the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Income from continuing operations attributable to IHC	$	(436)	$	(1,835)	$	(612)	$	(1,987)
Income from discontinued operations attributable to IHC	$	76,907	$	2,256	$	82,704	$	6,686
Net income attributable to IHC	$	76,471	$	421	$	82,092	$	4,699

Note 4.Cash, Cash Equivalents and Restricted Cash 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods indicated (in thousands): 

		June 30,
		2021		2020
Cash and cash equivalents	$	22,834	$	11,655
Restricted cash in other assets		418		985
Cash, cash equivalents and restricted cash in discontinued operations		3,773		11,563
Total cash, cash equivalents and restricted cash including discontinued operations	$	27,025	$	24,203

Restricted cash includes insurance premiums collected from insureds that are pending remittance to insurance carriers and/or payment of insurance claims and commissions to third party administrators. These amounts are required to be set aside by contractual agreements with the insurance carriers and are included in other assets on the Condensed Consolidated Balance Sheets.

17

Note 5.Investment Securities 

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

		June 30, 2021
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	75,245	$	1,583	$	(779)	$	76,049
CMOs – residential (1)		3,071		118		(5)		3,184
U.S. Government obligations		23,029		273		-		23,302
Agency MBS - residential (2)		35		-		(4)		31
GSEs (3)		2,969		-		(84)		2,885
States and political subdivisions		74,086		1,261		(384)		74,963
Foreign government obligations		3,144		151		-		3,295
Total fixed maturities	$	181,579	$	3,386	$	(1,256)	$	183,709

		December 31, 2020
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	91,802	$	2,174	$	(1,302)	$	92,674
CMOs – residential (1)		3,439		146		(2)		3,583
U.S. Government obligations		23,397		414		-		23,811
Agency MBS - residential (2)		39		-		(5)		34
GSEs (3)		3,055		-		(81)		2,974
States and political subdivisions		82,910		1,768		(452)		84,226
Foreign government obligations		3,211		206		-		3,417
Total fixed maturities	$	207,853	$	4,708	$	(1,842)	$	210,719

(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, 2021, 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 prepayment penalties.

		AMORTIZED		FAIR
		COST		VALUE
Due in one year or less	$	36,481	$	36,938
Due after one year through five years		87,377		89,128
Due after five years through ten years		20,124		20,292
Due after ten years		31,522		31,252
Fixed maturities with no single maturity date		6,075		6,099
	$	181,579	$	183,709

18

The following tables summarize, for all fixed maturities available-for-sale 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, 2021
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	19,962	$	740	$	4,503	$	39	$	24,465	$	779
CMOs-residential		707		5		-		-		707		5
Agency MBS - residential		31		4		-		-		31		4
GSEs		-		-		2,886		84		2,886		84
States and political subdivisions		10,319		76		8,813		308		19,132		384
Fixed maturities in an
unrealized loss position	$	31,019	$	825	$	16,202	$	431	$	47,221	$	1,256
Number of fixed maturities in an
unrealized loss position		9				14				23

		December 31, 2020
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	23,591	$	458	$	8,845	$	844	$	32,436	$	1,302
CMOs-residential		748		2		-		-		748		2
Agency MBS - residential		34		5		-		-		34		5
GSEs		-		-		2,974		81		2,974		81
States and political subdivisions		16,983		150		6,108		302		23,091		452
Fixed maturities in an
unrealized loss position	$	41,356	$	615	$	17,927	$	1,227	$	59,283	$	1,842
Number of fixed maturities in an
unrealized loss position		20				13				33

Substantially all of the unrealized losses on fixed maturities available-for-sale at June 30, 2021 and December 31, 2020 relate to investment grade securities. Management does not intend to sell, and it is likely that management will not be required to sell these securities prior to their anticipated recovery. The unrealized losses on the Company's fixed maturity securities are related to general market changes in interest rates, and/or the levels of credit spreads largely due to current market conditions relating to the COVID-19 pandemic rather than specific concerns with the issuer's ability to pay interest and repay principal. We have evaluated each corporate security’s credit rating as well as industry risk factors associated with the securities. The fair value of these securities is expected to recover as they approach maturity and therefore the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2021.

19

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Realized gains (losses):
Fixed maturities available-for-sale	$	(126)	$	50	$	46	$	284
Equity securities		-		-		292		-
Total realized gains (losses) on debt and equity securities		(126)		50		338		284
Unrealized gains (losses) on equity securities		-		214		(247)		(184)
Gains (losses) on debt and equity securities		(126)		264		91		100
Gains (losses) on other investments		-		10		-		17
Net investment gains	$	(126)	$	274	$	91	$	117

For the three months and six months ended June 30, 2021, the Company realized gross gains of $61,000 and $254,000, respectively, and gross losses of $187,000 and $206,000, respectively, from sales, maturities and prepayments of fixed maturities available-for-sale. For the three months and six months ended June 30, 2020, the Company realized gross gains of $97,000 and $346,000, respectively, and gross losses of $47,000 and $62,000, respectively, from sales, maturities and prepayments of fixed maturities available-for-sale.

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(v) to the Consolidated Financial Statements in the 2020 Annual Report on Form 10-K for further discussion of the factors considered by management in its regular review to identify and recognize other-than-temporary impairments on fixed maturities available-for-sale.  The Company did not recognize any other-than-temporary impairments on available-for-sale securities in the first six months of 2021 or 2020.

Note 6.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.

20

Fixed maturities available-for-sale:

Fixed maturities available-for-sale included in Level 2 are comprised of our portfolio of government securities, agency mortgage-backed securities, corporate fixed income securities, foreign government obligations, collateralized mortgage obligations, municipals and GSEs that were priced with observable market inputs. Level 3 debt securities consist of municipal tax credit strips.  The valuation method used to determine the fair value of municipal tax credit strips is the present value of the remaining future tax credits (at the original issue discount rate) as presented in the redemption tables in the Municipal Prospectuses.   This original issue discount is accreted into income on a constant yield basis over the term of the debt instrument. Further, we retain independent pricing vendors to assist in valuing certain instruments.

Equity securities:

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

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

		June 30, 2021
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	76,049	$	-	$	76,049
CMOs - residential		-		3,184		-		3,184
US Government obligations		-		23,302		-		23,302
Agency MBS - residential		-		31		-		31
GSEs		-		2,885		-		2,885
States and political subdivisions		-		73,949		1,014		74,963
Foreign government obligations		-		3,295		-		3,295
Total fixed maturities		-		182,695		1,014		183,709
Total Financial Assets	$	-	$	182,695	$	1,014	$	183,709

		December 31, 2020
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	92,674	$	-	$	92,674
CMOs - residential		-		3,583		-		3,583
US Government obligations		-		23,811		-		23,811
Agency MBS - residential		-		34		-		34
GSEs		-		2,974		-		2,974
States and political subdivisions		-		83,130		1,096		84,226
Foreign government obligations		-		3,417		-		3,417
Total fixed maturities		-		209,623		1,096		210,719
Equity securities:
Common stocks		1,753		-		-		1,753
Total equity securities		1,753		-		-		1,753
Total Financial Assets	$	1,753	$	209,623	$	1,096	$	212,472

21

The following table presents the changes in fair value of our Level 3 financial assets for the periods indicated (in thousands):

		Three Months Ended June 30,
		2021				2020
		States and		Total		States and		Total
		Political		Level 3		Political		Level 3
		Subdivisions		Assets		Subdivisions		Assets
Beginning balance	$	1,055	$	1,055	$	1,214	$	1,214
Increases (decreases) recognized in earnings:
Net investment gains		-		-		-		-
Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		(4)		(4)		(5)		(5)
Repayments and amortization of
fixed maturities		(37)		(37)		(34)		(34)
Balance at end of period	$	1,014	$	1,014	$	1,175	$	1,175

		Six Months Ended June 30,
		2021				2020
		States and		Total		States and		Total
		Political		Level 3		Political		Level 3
		Subdivisions		Assets		Subdivisions		Assets
Beginning balance	$	1,096	$	1,096	$	1,251	$	1,251
Increases (decreases) recognized in earnings:
Net investment gains		-		-		-		-
Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		(8)		(8)		(9)		(9)
Repayments and amortization of
fixed maturities		(74)		(74)		(67)		(67)
Balance at end of period	$	1,014	$	1,014	$	1,175	$	1,175

Included in unrealized gains (losses) on available-for-sale securities, pre-tax, on the Condensed Consolidated Statement of Comprehensive Income for the three months and six months ended June 30, 2021 are $(4,000) and $(8,000) of unrealized gains (losses) attributable to the change in unrealized gains (losses) related to Level 3 securities held at June 30, 2021.

22

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

		June 30, 2021						December 31, 2020
		Level 1		Level 2				Level 1		Level 2
		Fair		Fair		Carrying		Fair		Fair		Carrying
		Value		Value		Value		Value		Value		Value
FINANCIAL ASSETS:
Short-term investments	$	1,550	$	-	$	1,550	$	1,568	$	-	$	1,568
Securities purchased under
agreements to resell		70,323		-		70,323		33,038		-		33,038
FINANCIAL LIABILITIES:
Funds on deposit	$	-	$	142,155	$	142,155	$	-	$	141,376	$	141,376
Other policyholders’ funds		-		11,988		11,988		-		12,001		12,001

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:

Securities purchased under agreements to resell

Securities purchased under agreements to resell are carried at the amounts at which the securities will be subsequently resold, which approximates fair value.

Short-term Investments

Investments with original maturities of 91 days to one year are considered short-term investments and are carried at cost, which approximates fair value.

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 interest rates 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.

Other Policyholders’ Funds

Other policyholders’ funds are primarily credited with current market interest rates resulting in a fair value which approximates the carrying amount.

Note 7.Other Investments, Including Variable Interest Entities 

Equity Method Investments

Equity income (loss) from equity method investments for the three months and six months ended June 30, 2021 was $4,000 and $64,000 respectively; and was $(356,000) and $(28,000) for the three months and six months ended June 30, 2020, respectively.

23

Variable Interest Entities

The Company has a minority interest in certain limited partnerships that we have determined to be Variable Interest Entities (“VIEs”).  The aforementioned VIEs are not required to be consolidated in the Company’s condensed consolidated financial statements as we are not the primary beneficiary since we do not have the power to direct the activities that most significantly impact the VIEs’ economic performance.

The Company will periodically reassess whether we are the primary beneficiary in any of these investments. The reassessment process will consider whether we have acquired the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. Our maximum loss exposure is limited to our combined $2,022,000 carrying value in these equity investments which is included in other investments in the Condensed Consolidated Balance Sheet as of June 30, 2021.

Related Party Transactions

At June 30, 2021 and December 31, 2020, the Company’s Condensed Consolidated Balance Sheets include $94,000 and $163,000, respectively, of administrative fees and other expenses payable to Ebix Health Exchange Holdings, LLC (“Ebix Health Exchange”), which are included in other assets and accounts payable, accruals and other liabilities, respectively. The Company’s Condensed Consolidated Statements of Income include administrative fee expenses to Ebix Health Exchange, which are included in selling, general and administrative expenses, of $361,000 and $762,000, respectively, for the three months and six months ended June 30, 2021; and include $423,000 and $899,000, respectively, for the same periods in 2020.

Selling, general and administrative expense for the three months ended March 31, 2020 includes approximately $1,507,000 of expense related to the purchase of leads from an affiliated lead generation company, Torchlight, which was acquired in April of 2020. Lead costs subsequent to acquisition are eliminated in consolidation. 

Note 8.Acquisitions 

The Abacus Group, LLC.

On January 1, 2020 (the "Abacus Acquisition Date"), the Company acquired the remaining 56% membership units of The Abacus Group, LLC, (“Abacus”) for a purchase price of $2,599,000, Abacus is an agency group that writes worksite business for Madison National Life and other carriers and receives commissions and other fees. The Company acquired Abacus to further the Company’s position in the worksite marketplace. The Company accounted for its prior ownership interest using the equity method. Immediately preceding the transaction, the Company determined the fair value of its equity interest to be $1,838,000 using a market approach and, as a result, recorded a loss of $163,000, which is included in other income on the Condensed Consolidated Statement of Income.

24

Upon the acquisition, the Company consolidated the assets and liabilities of Abacus. The following table presents the identifiable assets acquired and liabilities assumed in the acquisition of Abacus on the Abacus Acquisition Date based on their respective fair values (in thousands):

Other assets	$	350
Total identifiable assets		350
Other liabilities		575
Total liabilities		575
Net identifiable assets (liabilities) acquired	$	(225)

In connection with the acquisition, the Company recorded $4,662,000 of goodwill of which $2,725,000 is deductible for income tax purposes.

Goodwill represents the synergies with our insurance carriers. Abacus has an existing distribution network and offers increased distribution sources for IHC carriers’ existing products and developing products through its enrollment platform designed specifically for producers in the worksite marketplace. Goodwill was calculated as the sum of (i) the acquisition date fair value of total cash consideration transferred of $2,599,000, (ii) the aggregate acquisition-date fair value of equity interests immediately before the acquisition of $1,838,000, and (iii) the net identifiable liabilities of $225,000 that were assumed. The enterprise value of Abacus was determined by a market approach net of any control premium. Acquisition-related costs, primarily legal and consulting fees, were not material and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Income.

Revenue and net income from Abacus for the period from the Abacus Acquisition Date to June 30, 2020, is not material as most of their agency fee income is derived from Madison National Life and is now eliminated in consolidation. The amount of fee income earned from other carriers in 2020 is not material and will reduce over time as the business either runs-off or is transitioned to Madison National Life.

Pro forma adjustments to present the Company’s consolidated revenues and net income as if the acquisition date was January 1, 2019 are not material and accordingly are omitted.

Torchlight Technology Group LLC.

On April 15, 2020 (the "Torchlight Acquisition Date"), the Company acquired the remaining 77% membership units of Torchlight Technology Group LLC, (“Torchlight”) for a purchase price of $11,443,000 in cash and other consideration valued at $185,000. In accordance with the purchase and sale agreement, the Company will also make future incentive payments to the former owners based on the future market appreciation of IHC. These payments will be accounted for as compensation for post-combination services. The Company purchased Torchlight for its marketing technology (“MarTech”), artificial data intelligence, and consumer lead generation capabilities. In an effort to further expand our InsureTech division (comprised of Torchlight, our call centers, field and career agents, and web domains), the Company wants to be able to internally develop and deliver lead traffic opportunities in an affordable and controlled environment. The Company accounted for its prior ownership interest using the equity method. Immediately preceding the transaction, the Company determined the fair value of its equity interest to be $3,432,000 using the income approach and, as a result, recorded a gain of $519,000, which is included in other income on the Condensed Consolidated Statement of Income.

Upon the acquisition, the Company consolidated the assets and liabilities of Torchlight. The following

25

table presents the identifiable assets acquired and liabilities assumed in the acquisition of Torchlight on the Torchlight Acquisition Date based on their respective fair values (in thousands):

Cash	$	333
Intangible assets		2,700
Other assets		2,132
Total identifiable assets		5,165
Other liabilities		1,227
Total liabilities		1,227
Net identifiable assets acquired	$	3,938

In connection with the acquisition, the Company recorded $11,122,000 of goodwill, of which $7,976,000 is deductible for income tax purposes, and $2,700,000 of intangible assets. In 2021, a portion of this goodwill was allocated to the Pets Sale disposal group presented in discontinued operations.

Goodwill represents the synergies with our agencies. With a significant dependence on consumer and small business opportunities, our agencies require a consistent and predictable flow of lead traffic, and as a result, have meaningful synergies with the functions and deliverables that are developed at Torchlight. Before the acquisition of Torchlight, our agency was fully dependent on market traffic, which was both unpredictable in price and availability. Such restrictions would not allow for coordinated or scheduled growth. Goodwill was calculated as the sum of (i) the acquisition date fair value of total aggregate consideration transferred of $11,628,000; and (ii) the aggregate acquisition-date fair value of equity interests immediately before the acquisition of $3,432,000; over (iii) the net identifiable assets of $3,938,000 that were acquired. The enterprise value of Torchlight was determined by an independent appraisal using a discounted cash flow model. Acquisition-related costs, primarily legal and consulting fees, were not material and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Income.

Revenue and net loss from Torchlight for the period from the Torchlight Acquisition Date to June 30, 2020 is $1,828,000 and $(564,000), respectively. The net loss is primarily related to the integration of Torchlight with the Company’s other operations.

Pro forma adjustments to present the Company’s consolidated revenues and net income as if the acquisition date was January 1, 2019 are not material and accordingly are omitted.

Note 9.Goodwill and Other Intangible Assets 

The carrying amount of goodwill is $12,486,000 at June 30, 2021 and December 31, 2020, of which $8,263,000 is attributable to the Specialty Health Segment at both June 30, 2021 and December 31, 2020, and $4,223,000 is attributable to the Group disability and life segment for the same periods.

The Company has net other intangible assets of $3,667,000 and $4,008,000 at June 30, 2021 and December 31, 2020, 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):

26

		June 30, 2021				December 31, 2020
		Gross				Gross
		Carrying		Accumulated		Carrying		Accumulated
		Amount		Amortization		Amount		Amortization
Finite-lived Intangible Assets:
Agent and broker relationships	$	6,583	$	4,599	$	7,583	$	5,385
Software systems		1,500		294		1,500		167
Total finite-lived	$	8,083	$	4,893	$	9,083	$	5,552

		June 30,		December 31,
		2021		2020
Indefinite-lived Intangible Assets:
Insurance licenses	$	477	$	477
Total indefinite-lived	$	477	$	477

Amortization expense was $179,000 and $341,000 for the three months and six months ended June 30, 2021, respectively; and was $171,000 and $224,000 for the three months and six months ended June 30, 2020, respectively. 

Note 10.Fee Income 

Substantially all of the fee income recorded by the IHC Agencies and lead generation company relate to our Specialty Health segment. The following table presents fee income disaggregated by type for the periods indicated (in thousands).

		Three Months Ended		Six Months Ended
		June 30,		June 30,
		2021	2020	2021		2020
Commissions	$	1,416	1,932	4,297	$	3,672
Administrative Fees		80	581	177		1,069
Marketing Fees		254	292	559		643
Enrollment Platform Fees		529	455	1,029		973
Lead and Referral Fees		2,633	588	4,945		854
Payment Plan, Application and Other Fees		32	59	72		130
Total Fee Income	$	4,944	3,907	11,079	$	7,341

Commission Revenues

Commission revenues result from the sales of certain policies by the IHC Agencies on behalf of multiple unaffiliated insurance carriers. Increased sales of products to these unaffiliated insurance carriers began in 2020 as a result of new contracts with the carriers and increased distribution channels. These policies primarily consist of senior products, such as Medicare Advantage, Medicare Part D prescription drug plans and Medicare Supplement plans, as well as Affordable Care Act (“ACA”) plans. A significant portion of our commission revenues are recorded at a point in time upon the issuance of a policy by the unaffiliated insurance carrier based on expected constrained lifetime value (“LTV”). Constrained LTV represents expected commissions to be received over the lifetime of the policies sold. The Company analyzes various factors, such as commission rates, carrier mix, contract amendments and terminations, estimated average plan durations, cancellations and non-renewals, to estimate the LTV. Constraints are applied to help ensure that the total estimated lifetime commissions expected to be collected are recognized as revenue only to the extent that it is

27

probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

We evaluate the appropriateness of our constraints on a quarterly basis and update the LTV assumptions if we observe evidence that suggests a change in the underlying long-term expectations. In doing this, we apply significant judgement in assessing historical cash collections and changes in circumstances that would impact future cash collections such as, but not limited to, commission rates, carrier mix, plan durations, plan cancellations and non-renewals. Changes in LTV result in an increase or decrease to fee income revenue and a corresponding increase or decrease to contract assets. Any significant impact due to changes in the LTV assumptions are recognized in revenue (i) in the period of the change; and (ii) to the extent we do not believe a significant reversal is probable.

Costs to Fulfill a Contract

Costs to fulfill a contract include commissions owed to independent licensed agents or affinity partners that are contracted by the IHC Agencies. Upon the submission of a completed insurance application, the sales and marketing performance obligation is complete and the resultant estimated lifetime commission costs incurred are expensed and a corresponding commission liability is recorded on the Condensed Consolidated Balance Sheet. As policyholders continue their policy and remit monthly premium payments, the Company receives its commissions from the insurance carrier. Commissions owed to the agent or affinity partner are then paid and the corresponding liability is reduced. Judgement is required to estimate total expected lifetime commissions based on policy duration assumptions. At June 30, 2021 and December 31, 2020, the aforementioned commission liability was $2,858,000 and $2,362,000, respectively, and is included in accounts payable, accruals and other liabilities on the Condensed Consolidated Balance Sheet.

Contract Asset

Contract assets primarily relate to our commission revenues for the sales of senior products, such as Medicare Advantage and Medicare Supplement plans and ACA plans, which began in 2020. When commission revenue for the sales of these products is recognized, a corresponding contract asset is recorded in other assets on the Condensed Consolidated Balance Sheet. The timing of revenue differs from the collection of commissions. As policyholders continue their policy and remit monthly premium payments, the Company receives its commissions from the insurance carrier and the contract asset is reduced.

The following table summarizes the contract asset activity for the period indicated (in thousands).

		Six Months Ended
		June 30, 2021
Beginning Balance	$	7,760
Commissions recognized during the period		4,708
Commission adjustments related to prior periods		(418)
Cash receipts		(3,251)
Ending Balance	$	8,799

Remaining Performance Obligations

Deferred revenues are recorded in connection with certain terminable contracts and the right to use our INSX enrollment platform. At June 30, 2021 and December 31, 2020, deferred revenues are immaterial and expected to be fully recognized within the next 12 months.

28

Note 11.Income Taxes 

The provisions for income taxes shown in the Condensed Consolidated Statements of Income were computed by applying the effective tax rate expected to be applicable for the reporting periods. Differences between the Federal statutory income tax rate and the Company’s effective income tax rate are principally from the dividends received deduction and tax-exempt interest income, state and local income taxes, and compensation related tax provisions.

December 31, 2020, AMIC had Federal net operating loss carryforwards of approximately $46,116,000 and a corresponding valuation allowance of $8,281,000 related to those net operating loss carryforwards that, in the judgment of management, were not considered realizable. On June 30, 2021, the Company sold PetPartners and recorded a pretax gain of $74,534,000 (See Note 2). As a result, AMIC decreased its valuation allowance by $8,281,000 and utilized the $46,116,000 of its outstanding Federal net operating loss carryforwards. Total income tax expense related to the pretax gain on disposal of discontinued operations was $11,841,000. The primary differences between the Federal statutory income tax rate and the Company’s effective income tax rate related to the gain on disposal of discontinued operations are the result of AMIC’s decrease in its valuation allowance, partially offset by the non-deductibility of goodwill and other expenses related to the disposal.

The effective income tax rates related to losses from continuing operations in 2021 were impacted by tax benefits from exercises of share-based compensation and state and local income tax benefits on certain subsidiaries. In 2020, the effective income tax rates related to losses from continuing operations reflect a benefit from capital losses attributable to the sale of a subsidiary, partially offset by certain non-deductible expenses recorded in connection with a Regulatory Settlement Agreement.

On March 27, 2020, as part of the business stimulus package in response to the COVID-19 pandemic, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.  The CARES Act established new tax provisions including, but not limited to: (1) five-year carryback of net operating losses ("NOLs") generated in 2018, 2019 and 2020; (2) accelerated refund of alternative minimum tax (AMT) credit carryforwards; and (3) retroactive changes to allow accelerated depreciation for certain depreciable property. At this time, the legislation does not have a material impact on the Company due to the lack of taxable losses in the stated carryback eligible tax years and the fact that the Company was already expecting to receive a cash benefit for the remaining AMT credits in the fiscal 2018 tax year return.

The New York State Department of Taxation and Finance has selected the Company’s 2015 and 2016 NYS returns for audit.

29

Note 12.Policy Benefits and Claims 

Policy benefits and claims is the liability for unpaid loss and loss adjustment expenses. It is comprised of unpaid claims and estimated incurred but not reported (“IBNR”) reserves. Summarized below are the changes in the total liability for policy benefits and claims for the periods indicated (in thousands). Amounts incurred below do not include expenses for policy benefits and costs incurred for the Company’s life, annuity and other long-duration contracts. In addition, certain loss adjustment expenses related to short-duration contracts that are included in amounts incurred below are classified as selling general and administrative expenses on the Condensed Consolidated Statements of Income.

		For the Six Months Ended June 30, 2021
		Specialty		Group		All Other
		Health		Disability		Lines		Total
Balance at beginning of year	$	31,680	$	80,976	$	20,301	$	132,957
Less: reinsurance recoverable		1,776		22,472		11,878		36,126
Net balance at beginning of year		29,904		58,504		8,423		96,831
Amount incurred, related to:
Current year		16,631		20,031		11,947		48,609
Prior years		(4,634)		(4,033)		(1,132)		(9,799)
Total incurred		11,997		15,998		10,815		38,810
Amount paid, related to:
Current year		4,461		3,922		6,885		15,268
Prior years		12,080		11,488		3,667		27,235
Total paid		16,541		15,410		10,552		42,503
Net balance at end of period		25,360		59,092		8,686		93,138
Plus:  reinsurance recoverable		1,161		22,492		11,024		34,677
Balance at end of period	$	26,521	$	81,584	$	19,710	$	127,815

30

		For the Six Months Ended June 30, 2020
		Specialty		Group		All Other
		Health		Disability		Lines		Total
Balance at beginning of year	$	35,530	$	80,079	$	19,874	$	135,483
Less: reinsurance recoverable		1,717		23,322		11,954		36,993
Net balance at beginning of year		33,813		56,757		7,920		98,490
Amount incurred, related to:
Current year		24,522		19,093		11,182		54,797
Prior years		(1,972)		(1,553)		(3,201)		(6,726)
Total incurred		22,550		17,540		7,981		48,071
Amount paid, related to:
Current year		7,064		4,010		4,979		16,053
Prior years		17,530		12,125		2,155		31,810
Total paid		24,594		16,135		7,134		47,863
Net balance at end of period		31,769		58,162		8,767		98,698
Plus:  reinsurance recoverable		1,802		22,463		11,074		35,339
Balance at end of period	$	33,571	$	80,625	$	19,841	$	134,037

Since unpaid loss and loss adjustment expenses are estimates, actual losses incurred may be more or less than the Company’s previously developed estimates and is referred to as either unfavorable or favorable development, respectively.

Net favorable (unfavorable) development in the Specialty Health segment, as depicted in the tables above, is comprised of the following lines of business for the years indicated (in thousands):

		Six Months Ended
		June 30,
Specialty Health segment:		2021		2020
Short-term Medical (“STM”)	$	1,676	$	286
Occupational Accident		963		798
Fixed Indemnity Limited Benefit		862		(736)
Limited Medical		197		241
Critical Illness		196		397
Group Gap		356		513
All other specialty health lines		384		473
Total Specialty Health segment	$	4,634	$	1,972

In both 2021 and 2020, net favorable development in the various lines of the Specialty Health segment shown above are primarily due to better than expected claim development. In 2021, experience in STM continues to be better than expected and severity has been relatively low.

In 2021, favorable development of $4,033,000 in the group disability business is primarily due to lower frequency and severity in both the short-term disability (“STD”) and the long-term disability (“LTD”) lines. In 2020, favorable development in the group disability business is primarily due to a reduction in open claims, specifically new claims, in the LTD line, partially offset by an increase in the overall frequency and

31

severity of claims in the STD line.

All other lines, primarily life and other individual health products and including our medical stop-loss business in run-off, experienced favorable development in 2021 and 2020. The favorable development in 2020 is primarily related to the group term life business due to continued improvements in experience and updated assumptions for the Paid-Up Life business.

Included in the preceding rollforward of the Company’s liability for policy benefits and claims are the policy benefits and claims activity associated with the Company’s health insurance lines. These are embedded within the Specialty Health segment. The table below summarizes the components of the change in the liability for policy benefits and claims that are specific to health insurance claims for the periods indicated (in thousands).

		Specialty Health Segment
		Health Insurance Claims
		Six Months Ended
		June 30,
		2021		2020
Balance at beginning of year	$	28,295	$	31,259
Less: reinsurance recoverable		1,766		1,113
Net balance at beginning of year		26,529		30,146
Amount incurred, related to:
Current year		15,818		23,627
Prior years		(3,658)		(1,184)
Total incurred		12,160		22,443
Amount paid, related to:
Current year		4,319		8,260
Prior years		11,992		16,382
Total paid		16,311		24,642
Net balance at end of period		22,378		27,947
Plus:  reinsurance recoverable		1,158		1,406
Balance at end of period	$	23,536	$	29,353

The liability for the IBNR plus expected development on reported claims associated with the Company’s health insurance claims is $22,378,000 at June 30, 2021.

32

Note 13.Stockholders’ Equity 

Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) includes 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.

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Beginning balance	$	2,268	$	1,101	$	4,197	$	1,212
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications		784		1,810		(1,013)		2,544
Amounts reclassified from accumulated OCI		168		(57)		36		(902)
Net other comprehensive income (loss)		952		1,753		(977)		1,642
Ending balance	$	3,220	$	2,854	$	3,220	$	2,854

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,
		2021		2020		2021		2020
Unrealized gains (losses) on available-for-sale securities
reclassified during the period to the following income
statement line items:
Net investment gains (losses)	$	(125)	$	47	$	47	$	284
Income (loss) from continuing operations before income taxes		(125)		47		47		284
Income tax expense (benefit)		(28)		10		9		60
Income (loss) from continuing operations, net of tax		(97)		37		38		224
Total pretax income (loss) from discontinued operations		(90)		25		(94)		858
Income tax expense (benefit) on discontinued operations		(19)		5		(20)		180
Income from discontinued operations, net of tax		(71)		20		(74)		678
Net income (loss)	$	(168)	$	57	$	(36)	$	902

Note 14.Supplemental Disclosures of Cash Flow Information 

Net cash payments for income taxes were $59,000 and $55,000 during the six months ended June 30, 2021 and 2020, respectively.

33

Note 15.Contingencies 

Third Party Administrator 

A third party administrator with whom we formerly did business (“Plaintiff” or “TPA”) commenced an action on May 17, 2017 in the United States District Court, Northern District of Texas, Dallas Division (the “Texas Action”), naming IHC, Madison National Life, Standard Security Life, and Independence Brokerage Group, Inc. (formerly IHC Carrier Solutions, Inc.) as defendants (“Defendants”). The Plaintiff seeks contractual payments allegedly owed by the Defendants totaling at least $3,082,000 through 2014, plus additional amounts for 2015 and 2016, and exemplary and punitive damages as allowed by law and fees and costs.  The court had previously stayed the proceedings during the pendency of two arbitrations.  The first arbitration resulted in a judicially-confirmed award in favor of Standard Security Life and Madison National Life in the amount of $5,641,000, which the Plaintiff has satisfied.  The Company received payment on September 9, 2020 and recorded it in other income on the Consolidated Statement of Income in the third quarter of 2020. The second arbitration resulted in no monetary obligations owed by any of the parties. The Plaintiff has filed a motion for leave to file a Second Amended Complaint.  The Defendants have until August 9, 2021 to file an opposition to the motion for leave to amend.

Multistate Market Conduct Examination (“MCE”)

As previously disclosed, our subsidiaries Standard Security Life, Madison National Life and Independence American Insurance Company were selected for MCE related to our short-term medical (“STM”), limited medical and fixed indemnity limited health insurance products for the period of January 1, 2014 through September 30, 2017. The insurance departments of five jurisdictions (Delaware, Wisconsin, District of Columbia, Kansas and South Dakota) served as lead states, and the District of Columbia Department of Insurance, Securities and Banking and the Delaware Department of Insurance served as the managing lead states of the MCE. In addition to the five lead states, 37 other states participated in the MCE. Each of Standard Security Life, Madison National Life and Independence American Insurance Company responded to inquiries and document production requests in the MCE and proactively communicated and cooperated with the applicable regulatory agencies for the MCE. Each of these subsidiaries also provided a detailed action plan to regulators that summarized its enhanced compliance and control mechanisms.

In an effort to avoid long‐term litigation and/or administrative proceedings that would be required to resolve disputes between Standard Security Life, Madison National Life and Independence American Insurance Company and the states involved in the MCE, the Lead States and Standard Security Life, Madison National Life and Independence American Insurance Company entered into separate RSAs on July 14, 2020. The RSAs require the implementation of a compliance plan, impose certain requirements related to specified business practices and monetary payments.  The thirty-seven participating states adopted the RSAs. The Company accrued $3,660,000 in accounts payable, accruals and other liabilities on the Consolidated Balance Sheet in the second quarter of 2020 and processed payment in October 2020. As set forth in the RSAs, Standard Security Life, Madison National Life and Independence American Insurance Company deny any wrongdoing or violation of any applicable laws or regulations, and the entry into the RSAs is not an admission or acknowledgment of any wrongdoing or liability. In accordance with the RSAs, the Monitoring Period commenced and Standard Security Life, Madison National Life and Independence American Insurance Company continue to comply.

Note 16.Segment Reporting 

The Insurance Group principally engages in the life and health insurance business.  Taxes and general expenses associated with parent company activities are included in Corporate. Identifiable assets by segment are those assets that are utilized in each segment and are allocated based upon the mean reserves and liabilities of each such segment. Corporate assets are composed principally of cash equivalents, resale agreements, fixed maturities, equity securities, partnership interests and certain other investments.  

34

Information by business segment is presented below for the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Revenues:
Specialty Health	$	23,862	$	30,718	$	50,133	$	62,924
Group disability and life		25,143		24,076		50,264		48,161
Individual life, annuities and other (A)		183		490		392		808
Corporate		268		897		791		1,512
		49,456		56,181		101,580		113,405
Net investment gains (losses)		(126)		274		91		117
Total revenues	$	49,330	$	56,455	$	101,671	$	113,522
Income before income taxes
Specialty Health (C)	$	(841)	$	(5,329)	$	(2,732)	$	(5,935)
Group disability and life		3,770		4,353		6,900		6,190
Individual life, annuities and other  (A) (B)		(263)		(140)		(247)		(283)
Corporate		(3,244)		(2,016)		(5,056)		(3,229)
		(578)		(3,132)		(1,135)		(3,257)
Net investment gains (losses)		(126)		274		91		117
Loss from continuing operations before income taxes	$	(704)	$	(2,858)	$	(1,044)	$	(3,140)

(A)Substantially all of the business in the segment is coinsured. Activity in this segment primarily reflects income or expenses related to the coinsurance and the run-off of any remaining blocks that were not coinsured.  

(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 $153,000 and $176,000, for the three months ended June 30, 2021 and 2020, respectively, and $310,000 and $364,000, for the six months ended June 30, 2021 and 2020, respectively. 

(C)In both 2021 and 2020, significant costs associated with hiring, training and licensing a significant number of new agents, as well as costs for system development in our marketing and administrative companies. 

Note 17.Subsequent Events 

On July 14, 2021, IHC and its wholly owned subsidiary ICC entered into a Stock Purchase Agreement with Horace Mann Educators Corporation to sell all of the issued and outstanding capital stock of Madison National Life, a Wisconsin insurance company wholly owned by ICC, for an aggregate purchase price of $172,500,000 in cash. In addition, if Madison National Life reaches specified financial targets in 2023, IHC will receive an additional purchase price of up to $12,500,000. The transaction has been approved by the Board of Directors of IHC, and IHC’s majority stockholders have entered into a voting agreement under which such majority stockholders agreed to approve the transaction. The closing is expected no earlier than January 1, 2022. The transaction is subject to customary closing conditions, including applicable regulatory approvals, one of which is the approval by the Wisconsin Office of the Commissioner of Insurance. The aforementioned disposal plan represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, will qualify for reporting as discontinued operations in the third quarter 2021.

35

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, 2020, 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, is a holding company principally engaged in underwriting, administering and/or distributing group and individual specialty benefit products, including disability, supplemental health, pet, and group life insurance through: (i) its insurance companies, Standard Security Life, Madison National Life, and Independence American Insurance Company; and (ii) its marketing and administrative companies consisting of IHCSB, IBG, INSXCloud (collectively the “IHC Agencies”) and its lead generation company, Torchlight. On June 30, 2021, the Company sold its majority interest in PetPartners, a major distributor and administrator of pet insurance underwritten by Independence American Insurance Company and an unaffiliated insurer. Standard Security Life, Madison National Life and Independence American Insurance Company 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”.   

During the second quarter of 2021, the Board of Directors committed to the following plans for the disposal of several business operations. Each disposal plan below represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, they each qualify for reporting as discontinued operations in the second quarter 2021.

(A)On April 14, 2021, IHC and its wholly owned subsidiary ICC entered into a purchase agreement with Reliance Standard (“SSL Purchase Agreement”) to sell all of the issued and outstanding capital stock of Standard Security Life, a wholly owned subsidiary of ICC, for an aggregate purchase price of $180 million in cash.  In addition, at closing, the Company will receive a dividend from Standard Security Life equal to the excess of aggregate statutory capital and surplus over $53 million as of the closing date.  Standard Security Life had statutory capital and surplus of $82.1 million at June 30, 2021. The closing of the transaction, the closing dividend and certain other items are subject to customary closing conditions including applicable regulatory approvals, one of which is the approval of the New York State Department of Financial Services. Under the terms of the SSL Purchase Agreement, the transaction includes all of Standard Security Life’s DBL and PFL business and excluded all other lines of business, which will be reinsured prior to the closing. The aforementioned transaction, consisting of the sale of Standard Security Life, the closing dividend, the reinsurance of excluded business and other closing conditions, is collectively referred to as the “Standard Security Life Sale Transaction”.  

On July 29, 2021, the SSL Purchase Agreement was amended and restated to: (i) include in the disposal group, the business lines that were previously excluded from the transaction; (ii) remove the reinsurance requirement for the previously excluded business lines; and (iii) increase the target statutory capital and surplus to $57 million. As a result of this change in the disposal plan, the Company will include the assets, liabilities and results of operations for those business lines affected in discontinued operations for all periods presented, beginning in the third quarter of 2021.

(B)On May 17, 2021, IHC and its wholly owned subsidiary SBH entered into a stock purchase  

36

agreement with a subsidiary of Iguana Capital to sell its 85% interest in PetPartners, a major distributor and administrator of pet insurance underwritten by Independence American Insurance Company and an unaffiliated insurer.  In addition, IHC and its wholly owned subsidiary, AMIC, entered into a stock purchase agreement with Iguana Capital to sell all of the issued and outstanding capital stock of IAHC (“IAHC Purchase Agreement”), which owns all of the issued and outstanding common stock of Independence American Insurance Company and other pet assets including the Company’s equity investments in FIGO Pet Insurance, LLC and Pet Assistant Holdings, LLC. Under the terms of the IAHC Purchase Agreement, the transaction includes all of Independence American Insurance Company’s pet business and excludes all other lines of business which will be reinsured prior to the closing. The impact of these two agreements, taken in the aggregate, represents the sale of 70% of the Company’s pet business. The Company will retain a 30% interest in the form of an equity investment in the buyer, Iguana Capital. On June 30, 2021, the sale of PetPartners closed and in exchange for its shares of PetPartners, the Company received $78.8 million in cash, retained a 30% equity investment valued at $33.7 million and recorded a $74.5 million pretax gain on sale of discontinued operations, net of transaction costs. The cash is held in escrow until such time as the IAHC sale transaction closes.  In connection with the pending sale of IAHC, the Company will receive approximately $190.4 million in cash and retain a 30% equity investment valued at approximately $81.6 million. The closing of the transactions contemplated by the IAHC Purchase Agreement is subject to customary closing conditions, including applicable regulatory approvals, one of which is the approval of the Delaware Insurance Department. The aforementioned transaction, consisting of the sale of PetPartners, IAHC and Independence American Insurance Company, the reinsurance of excluded business, and other closing conditions, is collectively referred to as the “Pets Sale Transaction”.

On July 14, 2021, IHC and its wholly owned subsidiary Independence Capital Corp. (“ICC”) entered into a Stock Purchase Agreement with Horace Mann Educators Corporation to sell all of the issued and outstanding capital stock of Madison National Life, a Wisconsin insurance company wholly owned by ICC, for an aggregate purchase price of $172.5 million in cash; in addition, if Madison National Life reaches specified financial targets in 2023, IHC will receive an additional purchase price of up to $12.5 million. The transaction has been approved by the Board of Directors of IHC, and IHC’s majority stockholders have entered into a voting agreement under which such majority shareholders agreed to approve the transaction. The closing is expected no earlier than January 1, 2022; and the transaction is subject to customary closing conditions, including applicable regulatory approvals, one of which is the approval by the Wisconsin Office of the Commissioner of Insurance. The aforementioned transaction is referred to as the “MNL Sale” transaction or disposal group.

The MNL Sale transaction also represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, will qualify for reporting as discontinued operations in the third quarter 2021.

37

COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19, a global health pandemic, and the United States declared a national health emergency. COVID-19 has led to large scale disruption in the global economy, market instability and widespread unemployment in the United States.

The COVID-19 outbreak continues to be a fluid situation. The business continuity and emergency response plans we implemented during 2020 continue to ensure we provide a high level of service to our customers and support our everyday business needs. To help protect the safety and wellbeing of our employees and mitigate the spread of COVID-19, we have limited travel and directed our employees to work remotely whenever possible. As the COVID-19 outbreak continues to evolve, the duration of COVID-19 and its potential effects on our business cannot be certain. Regulatory mandates have affected, and we anticipate will continue to impact, the insurance industry. We currently cannot predict if there will be a material impact to our business, results of operations or financial condition in future reporting periods. For more information, see the risk factor under the heading “We continue to face risks related to the ongoing Coronavirus (COVID-19) pandemic that could impact our sales, operating results and financial condition” in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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

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

		For the Three Months Ended				For the Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Revenues	$	49,330	$	56,455	$	101,671	$	113,522
Expenses		50,034		59,313		102,715		116,662
Loss from continuing operations before income taxes		(704)		(2,858)		(1,044)		(3,140)
Income tax benefit		(267)		(1,066)		(430)		(1,187)
Loss from continuing operations		(437)		(1,792)		(614)		(1,953)
Income from discontinued operations		76,805		2,330		82,548		6,813
Net income		76,368		538		81,934		4,860
(Income) loss from noncontrolling interests		103		(117)		158		(161)
Net income attributable to IHC	$	76,471	$	421	$	82,092	$	4,699

·Loss from continuing operations of $.03 per share, diluted, for the three months ended June 30, 2021 compared to $.12 per share, diluted, for the same period in 2020. Loss from continuing operations of $.04 per share, diluted, for the six months ended June 30, 2021 compared to $.13 per share, diluted, for the same period in 2020.  

oNet income for the for the three and six months ended June 30, 2020 includes $3.7 million in expenses for compliance with the MCE related to our STM, limited medical and fixed indemnity limited benefit health insurance products for the period of January 1, 2014 through September 30, 2017, as discussed in Note 15. 

·Consolidated investment yields (on an annualized basis) of 2.0% for both the three and six months ended June 30, 2021, respectively, compared to 2.4% and 2.5% for the three month and six month periods, respectively, in 2020; 

38

·Book value of $37.45 per common share at June 30, 2021 compared to $32.08 at December 31, 2020.  

·Income from discontinued operations for both the three and six months ended June 30, 2021 includes an after tax gain of $62.7 million on the sale of PetPartners.  Excluding this gain, income from discontinued operations for the three months and six months ended June 30, 2021 and 2020 were $14.1 million and $19.8 million, respectively compared with income of $2.3 million and $6.8 million in the comparable 2020 periods, respectively.  

·Results for the first half of 2021 were both positively and negatively impacted by COVID-19. 

oSales at our agency were lower than expected in the first half of 2021, impacted by lower short-term medical (“STM”) sales, as consumers, especially those over the age of 50 who often purchased STM coverage took advantage of Special Enrollment Periods for ACA coverage and the increased Advanced Premium Tax Credits, also known as subsidies, as well as employers continuing to offer employer sponsored coverage to furloughed workers. The agency is seeing an increase in fee and commission income from the sale of ACA plans. Certain lines of business that are sold with ACA coverage, such as dental and accident plans exceeded expectations but due to lower commission on these products did not fully offset the commission lost through lower STM sales. We are shifting our call center focus to the ACA market for this period.  

oEvolving regulatory mandates for testing and treatment coverage, the length and severity of the outbreak, claims activity, and impacts on payment of premiums have not had a significant impact on the 2021 results to date, however, we may incur additional expenses in the future relating to possible COVID-19 related claims activity and possible non-payment of premiums as the full effects of the outbreak continue to unfold. To date, we have experienced lower utilization related to the deferral of services which more than offset the extra incurred costs mentioned previously. It is still unpredictable how this level of deferred utilization will reverse or not in the future but emerging results will continue to be monitored.   

oResults for the Group disability and life segment were not materially impacted by COVID-19 from an aggregate claims standpoint.  The life incidence rate was higher than expected in the first half of 2021 partially due to COVID-19 reported deaths.  

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

oThe Specialty Health segment reported $0.8 million of losses before taxes for the three months ended June 30, 2021 compared to $5.3 million of losses before taxes for the comparable period in 2020; and reported $2.7 million in losses before taxes for the six-month period ended June 30, 2021 compared to $5.9 million of losses for the same period in 2020. The three and six months ended June 30, 2020 includes $3.7 million in expenses for compliance with the MCE related to our STM, limited medical and fixed indemnity limited benefit health insurance products for the period of January 1, 2014 through September 30, 2017. Excluding the MCE compliance expense, losses in the three and six months of 2020 were $1.6 million and $2.2 million, respectively. 

oPremiums earned for the three months and six months ended June 30, 2021 decreased $7.8 million and $15.9 million, respectively, as compared to the same periods in 2020. Decreases in premiums occurred in the STM, fixed indemnity limited benefit and group gap lines.   

39

oIHC’s agencies produced operating losses of $4.8 million and $8.7 million for the three and six months ended June 30, 2021 compared with operating losses of $4.2 million and $7.2 million for the three and six months ended June 30, 2020. These amounts exclude purchase related incentive compensation and intangible asset amortization. 

oUnderwriting experience, as indicated by its U.S. GAAP Combined Ratios, for the Specialty Health segment are as follows for the periods indicated (in thousands): 

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Premiums Earned	$	18,639	$	26,440	$	38,465	$	54,413
Insurance Benefits, Claims & Reserves		4,036		10,468		11,906		21,798
Expenses		9,306		16,675		18,862		30,812
Loss Ratio (A)		21.7%		39.6%		31.0%		40.1%
Expense Ratio (B)		49.9%		63.1%		49.0%		56.6%
Combined Ratio (C)		71.6%		102.7%		80.0%		96.7%

(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. 

oThe lower loss ratio in 2021 is primarily due to favorable reserve experience in the short term medical and fixed indemnity lines. The lower expense ratio in 2021 is primarily due to the change in product lines which have a lower expense structure. 

·Income before taxes from the Group disability and life segment decreased $.6 million for the three months ended June 30, 2021 compared to the same period in 2020 and increased $.7 million for the six months ended June 30, 2021 compared with the comparable period in 2020. The decrease in second quarter 2021 income was primarily due to higher loss ratios in the group term life business. The increased income in the six-month period of 2021 was as a result of lower loss ratios in the STD line of business; partially offset by higher loss ratios in the LTD line and higher loss ratios in the group term life business partially due to Covid-19 related claims. 

·Income and loss before taxes from the Individual life, annuities and other segment in run-off were not significant for the three or six months ended June 30, 2021 and 2020;   

·The Corporate segment reported losses before taxes of $3.2 million and $5.1 million for the three months and six months ended June 30, 2021, respectively, compared to losses of $2.0 million and $3.2 million in the comparable periods in 2020, primarily due to higher share-based and incentive compensation expenses; and 

40

·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:		2021		2020		2021		2020
Specialty Health		$	19,734	$	28,185	$	40,623	$	57,731
Group disability and life			29,887		28,954		59,687		57,934
Individual life, annuities and other			4,090		4,788		8,857		9,630
		$	53,711	$	61,927	$	109,167	$	125,295

			Three Months Ended		Six Months Ended
			June 30,		June 30,
Net Direct and Assumed
	Earned Premiums:		2021	2020	2021		2020
Specialty Health		$	18,639	26,440	38,465	$	54,413
Group disability and life			23,808	22,685	47,542		45,370
Individual life, annuities and other			4	13	16		21
		$	42,451	49,138	86,023	$	99,804

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Company conform to U.S. 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, 2020. Management has identified the accounting policies related to Insurance Premium Revenue Recognition and Policy Charges, Fee Income Revenue Recognition, Insurance Liabilities, Investments, Goodwill and Other Intangible Assets, and Deferred Income Taxes as 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, 2020. During the six months ended June 30, 2021, there were no additions to or changes in the critical accounting policies disclosed in the 2020 Form 10-K except for the recently adopted accounting standards discussed in Note 1(D) of the Notes to Condensed Consolidated Financial Statements. 

41

Results of Operations for the Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

Information by business segment for the periods indicated is as follows:

							Benefits,		Selling,
			Net		Fee and		Claims		General
June 30, 2021	Premiums		Investment		Other		and		and
(In thousands)	Earned		Income		Income		Reserves		Administrative		Total
Specialty Health	$	18,639		295		4,928		4,036		20,667	$	(841)
Group disability and life		23,808		1,085		250		13,010		8,363		3,770
Individual life,
annuities and other		4		122		57		146		300		(263)
Corporate		-		149		119		-		3,512		(3,244)
Sub total	$	42,451	$	1,651	$	5,354	$	17,192	$	32,842		(578)
Net investment gains (losses)												(126)
Loss from continuing operations before income taxes												(704)
Income taxes (benefits)												(267)
Loss from continuing operations, net of tax											$	(437)

								Benefits,		Selling,
				Net		Fee and		Claims		General
June 30, 2020	Premiums			Investment		Other		and		and
(In thousands)	Earned			Income		Income		Reserves		Administrative		Total
Specialty Health	$		26,440		550		3,728		10,468		25,579	$	(5,329)
Group disability and life			22,685		1,254		137		10,713		9,010		4,353
Individual life,
annuities and other			13		202		275		158		472		(140)
Corporate			-		323		574		-		2,913		(2,016)
Sub total	$	49,138		$	2,329	$	4,714	$	21,339	$	37,974		(3,132)
Net investment gains													274
Loss from continuing operations before income taxes													(2,858)
Income taxes (benefits)													(1,066)
Loss from continuing operations, net of tax												$	(1,792)

Premiums Earned

In the second quarter of 2021, premiums earned decreased $6.7 million over the comparable period in 2020. The decrease is primarily due to a $7.8 million decrease in earned premiums from the Specialty Health segment primarily as a result of decreases of $4.3 million in STM premiums, $2.6 million in the fixed indemnity limited benefit line, and $1.4 million in group gap business; partially offset by an increase in dental premiums of $.4 million. Earned premiums in the Group disability and life segment increased $1.1 million primarily in the STD/LTD lines. 

Net Investment Income

Total net investment income decreased $.7 million. The overall annualized investment yields were 2.0% and 2.4% in the second quarter of 2021 and 2020, respectively. 

Net Investment Gains

The Company had net investment losses of $.1 million in 2021 compared to net investment gains of $.3 million in 2020.  These amounts include gains and losses from sales of fixed maturities available-for-sale, equity securities 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.

42

Fee Income and Other Income

Fee income increased $1.0 million for the three-month period ended June 30, 2021 compared to the three-month period ended June 30, 2020 primarily due to an increase in lead generating fees partially offset by decreases in lifetime value commission accruals principally on Medicare advantage products by the IHC Agencies for multiple unaffiliated insurance carriers. 

Other income in the second quarter of both 2021 and 2020 was not significant.

Insurance Benefits, Claims and Reserves

In the second quarter of 2021, insurance benefits, claims and reserves decreased $4.1 million over the comparable period in 2020. The decrease is primarily attributable to: (i) a decrease of $6.4 million in reserves in the Specialty Health segment primarily due to a decrease of $3.8 million in the STM line and $1.8 million in the fixed indemnity limited benefit line due to lower premium volume and lower loss ratios, and $.9 million in the group gap line on lower premium volume; partially offset by (ii) an increase of $2.3 million in the Group disability and life segment primarily due higher loss ratios on group term life business partially due to COVID-19 related claims.

Selling, General and Administrative Expenses

Total selling, general and administrative expenses decreased $5.1 million over the comparable period in 2020. The decrease is principally due to: (i) a decrease of $4.9 million in the Specialty Health line of business primarily due to the second quarter of 2020 results including $3.7 million of expenses accrued for compliance with the MCE related to our STM, limited benefit and fixed indemnity limited benefit products with no comparable expenses in 2021, as well as decreases in commission and administrative expenses related to decreased volume in the fixed indemnity limited benefit, STM and group gap lines partially offset by increased lead generation expenses, compensation and system development related expenses in our marketing and administrative companies; (ii) a decrease of $.7 million in the Group disability and life segment primarily due to increased commission expenses and other general expenses on group term life and LTD/STD lines of business on increased premium volume; and (iii) an increase of $.6 million in the Corporate segment primarily due to compensation related expenses. 

Income Taxes

The effective tax rate for the three months ended June 30, 2021 was (37.9)% compared to (37.3)% for the three months ended June 30, 2020. The effective income tax rates related to losses from continuing operations in 2021 were impacted by tax benefits from exercises of share-based compensation and state and local income tax benefits on certain subsidiaries. In 2020, the effective income tax rates related to losses from continuing operations reflect a benefit from capital losses attributable to the sale of a subsidiary, partially offset by certain non-deductible expenses recorded in connection with a Regulatory Settlement Agreement.  

43

Results of Operations for the Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

Information by business segment for the periods indicated is as follows:

							Benefits,		Selling,
			Net		Fee and		Claims		General
June 30, 2021	Premiums		Investment		Other		and		and
(In thousands)	Earned		Income		Income		Reserves		Administrative		Total
Specialty Health	$	38,465		638		11,030		11,906		40,959	$	(2,732)
Group disability and life		47,542		2,208		514		26,901		16,463		6,900
Individual life,
annuities and other		16		257		119		306		333		(247)
Corporate		-		349		442		-		5,847		(5,056)
Sub total	$	86,023	$	3,452	$	12,105	$	39,113	$	63,602		(1,135)
Net investment gains												91
Loss from continuing operations before income taxes												(1,044)
Income taxes (benefit)												(430)
Loss from continuing operations, net of tax											$	(614)

								Benefits,		Selling,
				Net		Fee and		Claims		General
June 30, 2020	Premiums			Investment		Other		and		and
(In thousands)	Earned			Income		Income		Reserves		Administrative		Total
Specialty Health	$		54,413		1,122		7,389		21,798		47,061	$	(5,935)
Group disability and life			45,370		2,505		286		25,534		16,437		6,190
Individual life,
annuities and other			21		411		376		296		795		(283)
Corporate			-		790		722		-		4,741		(3,229)
Sub total	$	99,804		$	4,828	$	8,773	$	47,628	$	69,034		(3,257)
Net investment gains													117
Loss from continuing operations before income taxes													(3,140)
Income taxes (benefit)													(1,187)
Loss from continuing operations, net of tax												$	(1,953)

Premiums Earned

In the first six months of 2021, premiums earned decreased $13.8 million over the comparable period in 2020. The decrease is primarily due to a $15.9 million decrease in earned premiums from the Specialty Health segment principally as result of decreased premiums of $7.1 million in STM, $6.2 million in the fixed indemnity limited benefit line and $2.9 million in group gap business, partially offset by increased premium of $.4 million in the dental line. Earned premiums in the Group disability and life segment increased $2.1 million primarily as a result of $1.5 million on increased premiums in both STD and LTD business, as well as $.5 million in higher premiums on group term life business. 

Net Investment Income

Total net investment income decreased $1.4 million. The overall annualized investment yields were 2.0% and 2.5% in the first six months of 2021 and 2020, respectively. 

Net Investment Gains

The Company had net investment gains of $.1 million in both 2021 and 2020.  These amounts include gains and losses from sales of fixed maturities available-for-sale, equity securities 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.

44

Fee Income and Other Income

Fee income increased $3.7 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 primarily due an increase in lead generating fees partially offset by decreases in lifetime value commission accruals principally on Medicare advantage products by the IHC Agencies for multiple unaffiliated insurance carriers as well as lower commissions on lower STM policy sales for IHC carriers. 

Other income in the first six months of both 2021 and 2020 was not significant.

Insurance Benefits, Claims and Reserves

In the first six months of 2021, insurance benefits, claims and reserves decreased $8.5 million over the comparable period in 2020. The decrease is primarily attributable to: (i) a decrease of $9.9 million in the Specialty Health segment primarily due to a decrease of $4.4 million in the STM line and $2.9 million in the fixed indemnity limited benefit line due to lower premium volume and lower loss ratios, $1.9 million in the group gap line on lower premium volume, $.5 million in the occupational accident line on favorable claim development and $.3 million on dental lines due to lower loss ratios; partially offset by (ii) an increase of $1.4 million in the Group disability and life segment primarily as a result of a $2.8 million increase in group term life benefits and claims as result of higher loss ratios partially due to COVID-19 related claims; partially offset by a $1.4 million decrease in LTD/STD benefits and claims as a result of lower loss ratios due in part to favorable loss development in the STD line, partially offset by higher loss ratios in the LTD line.

Selling, General and Administrative Expenses

Total selling, general and administrative expenses decreased $5.4 million over the comparable period in 2020. The decrease is principally due to: (i) a decrease of $6.1 million in the Specialty Health line of business primarily due to 2020 results including $3.7 million of expenses accrued for compliance with the MCE related to our STM, limited benefit and fixed indemnity limited benefit products with no comparable expenses in 2021, as well as decreases in commission and administrative expenses related to decreased volume in the fixed indemnity limited benefit, STM and group gap lines partially offset by increased lead generation expenses, compensation and system development related expenses in our marketing and administrative companies; partially offset by (ii) an increase of $1.1 million in the Corporate segment primarily due to compensation related expenses. 

Income Taxes

The effective tax rate for the six months ended June 30, 2021 was (41.2)% compared to (37.8)% for the six months ended June 30, 2020. The effective income tax rates related to losses from continuing operations in 2021 were impacted by tax benefits from exercises of share-based compensation and state and local income tax benefits on certain subsidiaries. In 2020, the effective income tax rates related to losses from continuing operations reflect a benefit from capital losses attributable to the sale of a subsidiary, partially offset by certain non-deductible expenses recorded in connection with a Regulatory Settlement Agreement.  

45

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, 2021 or 2020.  

It is anticipated that cash flows to be received upon the close of the disposal transactions will provide sources of corporate liquidity to offset the loss of cash flows previously derived from the insurance operations currently held in discontinued operations. The Company is evaluating the best use of liquidity derived from the disposal transactions.

The proceeds received from the sale of PetPartners were deposited into an escrow account owned by SBH and treated as a security deposit. The funds will be released from escrow upon either the consummation of the IAHC purchase or upon the exercise of the PPI Put/Call Option. At June 30, 2021, the security deposit is presented as funds held in escrow on the Condensed Consolidated Balance Sheet.

Cash Flows

The Company had $27.0 million and $74.8 million of cash, cash equivalents and restricted cash from continuing and discontinued operations as of June 30, 2021 and December 31, 2020, respectively.

For the six months ended June 30, 2021, operating activities provided $53.5 million of cash and investment activities utilized $97.8 million of cash, primarily the result of the investment of cash and cash equivalents in resale agreements. Financing activities utilized $3.5 million of cash, of which $3.2 million was utilized to pay common stock dividends. For the six months ended June 30, 2021, cash flows from the operating and investing activities of discontinued operations were $45.9 million and $(88.5) million, respectively. 

The Company had $328.8 million of liabilities for future policy benefits and policy benefits and claims as of June 30, 2021 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, 2021, cash received from the maturities and other repayments of fixed maturities was $44.5 million. 

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.  

There were no material negative impacts on the Company’s cash flows or liquidity with regards to COVID-19 during the first six months of 2021. Depending on the length and severity of the outbreak, it is possible that cash flows may be negatively impacted due to increased claim activity as a result of mandated testing and treatment coverage, as well as delayed policy payments or an increase in cancelled policies due to non- payment in the future.

46

BALANCE SHEET

The Company had receivables due from reinsurers of $354.7 million at June 30, 2021 compared to $357.2 million at December 31, 2020. All of such reinsurance receivables are from highly rated companies or are adequately secured. No allowance for doubtful accounts was necessary at June 30, 2021.  

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

		Policy Benefits and Claims
		June 30,		December 31,
		2021		2020
Specialty Health	$	26,521	$	31,680
Group Disability		90,790		89,902
Individual A&H and Other		10,504		11,375
	$	127,815	$	132,957

For the Specialty Health business, incurred but not reported (“IBNR”) claims liabilities plus expected development on reported claims are calculated using standard actuarial methods and practices. The “primary” assumption in the determination of Specialty Health reserves is that historical Claim Development Patterns are representative of future Claim Development Patterns. Factors that may affect this assumption include changes in claim payment processing times and procedures, changes in time delay in submission of claims, and the incidence of unusually large claims. Liabilities for policy benefits and claims for specialty health medical and disability coverage are computed using completion factors and expected Net Loss Ratios derived from actual historical premium and claim data.  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 not material. The Company has business that is serviced by third-party administrators.  From time to time, there are changes in the timing of claims processing due to any number of factors including, but not limited to, system conversions and staffing changes during the year.  These changes are monitored by the Company and the effects of these changes are taken into consideration during the claim reserving process.  Other than these considerations, there have been no significant changes to methodologies and assumptions from the prior year.

While these calculations are based on standard methodologies, they are estimates based on historical patterns.  To the extent that actual claim payment patterns differ from historical patterns, such estimated reserves may be redundant or inadequate.  The effects of such deviations are evaluated by considering claim backlog statistics and reviewing the reasonableness of projected claim ratios.  Other factors which may affect the accuracy of policy benefits and claim estimates include the proportion of large claims which may take longer to adjudicate, changes in billing patterns by providers and changes in claim management practices such as hospital bill audits.

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.

The Company’s disability business is comprised of group disability.  The two “primary” assumptions on which disability policy benefits and claims are based are: (i) morbidity levels; and (ii) recovery rates. If morbidity levels increase, for example due to an epidemic or a recessionary environment, the Company would increase reserves because there would be more new claims than expected.  In regard to the assumed recovery rate, if disabled lives recover more quickly than anticipated then the existing claims reserves would be reduced; if less quickly, the existing claims reserves would be increased. Advancements in medical treatments could affect future recovery, termination, and mortality rates.

The $78.7 million increase in IHC’s stockholders' equity in the first six months of 2021 is primarily due to $82.5 million of net income attributable to IHC from discontinued operations, primarily $62.7 million in after tax gains on the sale of PetPartners; reduced by $3.2 million of common stock dividends.

47

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. The Company has gross unrealized gains of $3.4 million and gross unrealized losses of $1.3 million on its fixed maturities available-for-sale securities at June 30, 2021. All of the Company’s fixed maturities were investment grade and continue to be rated on average AA. The Company marks all of its fixed maturities available-for-sale to fair value through accumulated 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. The Company did not have any non-performing fixed maturities at June 30, 2021.  

The Company reviews its investments regularly and monitors its investments continually for impairments. The Company did not record any other-than-temporary impairment losses in the six months ended June 30, 2021 or 2020.

The following table summarizes the carrying value of securities with fair values less than 80% of their amortized cost at June 30, 2021 by the length of time the fair values of those securities were below 80% of their amortized cost (in thousands):

				Greater than		Greater than
				3 months,		6 months,
		Less than		less than		less than		Greater than
		3 months		6 months		12 months		12 months		Total
Fixed maturities	$	-	$	-	$	-	$	641	$	641

The unrealized losses on fixed maturities available-for-sale were evaluated in accordance with the Company's impairment policy and were determined to be temporary in nature at June 30, 2021. 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, imbalances in liquidity that exist in the marketplace, a worsening of the current economic recession, or 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 which may cause the Company to 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 with its current activities. It is anticipated that any future acquisitions or other expansion of operations at the remaining entities of IHC 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.

48

OUTLOOK

For the remainder of 2021, and continuing in 2022, the Company anticipates that it will:

·Close on the sale of all of the issued and outstanding capital stock of Standard Security Life to Reliance Standard pursuant to the SSL Purchase Agreement signed on April 14, 2021 and amended on July 29, 2021.  Reliance Standard believes that this transaction, which is subject to various regulatory approvals, will close in the second half of this year.  Standard Security Life will dividend statutory surplus in excess of $57 million to its parent at closing so earnings prior to closing will be retained by IHC.  

·Close on the sale of all of the issued and outstanding capital stock of IAHC to Iguana Capital pursuant to the IAHC Purchase Agreement signed on May 17, 2021.  We believe this transaction, which is subject to various regulatory approvals, will close in the second half of this year.  

·Close on the sale of the stock of Madison National Life to Horace Mann Educators Corporation pursuant to the MNL Purchase Agreement signed on July 14, 2021.  This transaction, subject to various regulatory approvals, is expected to close no earlier than January 1, 2022.  

·Focus on the transition and consummation of all transactions entered into in 2021. The consummation of these transactions shall be the entire focus of the Company for the remainder of 2021. After all the transactions are consummated, IHC projects that it will hold approximately $560 million in cash and investments, net of liabilities; a 30% interest in Iguana Capital with a carrying value of approximately $115 million; and our health insurance agency and other assets with an aggregate carrying value of approximately $20 million, resulting in an estimated book value of approximately $47.00 per share which is calculated assuming the transactions occurred on June 30, 2021.  These projections are based on information currently known to management and include the use of estimates and assumptions with regards to anticipated transaction costs, estimated tax rates and other potential changes.   

·Improve the profitability and better integrate all of our agencies. IHC has experienced many changes in its agency model in 2021 as a result of a changing market and due to the decision to sell all three of IHC’s carriers. Although we continue to record losses in our agency business, we expect that to improve in the future. IHC has re-evaluated and made significant changes to the direction of the Company.   As we progress, our agency operations will be centered around INSXcloud.com (INSX), our CMS approved Web Broker. INSX provides an agent with the ability to quote, directly enroll and track applications on the Federally Facilitated Marketplace, plus much more. Specifically, brokers can quickly generate quotes, create PDF’s of plan comparisons, enroll customers in plans, and invite customers to enroll themselves – all through an easy-to-use cloud-based web portal. IHC is expanding INSX to directly serve the consumer and partner market, as well as expanding product offerings on the platform. 

·Continue to expand on our IHCSB agency. The balance of IHCSB includes our W-2 Call Centers and our captive independent Advisors unit, both of which sell into the under/over age 65 health insurance markets, as well as our Independence Brokerage Group (IBG) which recruits independent agents and agencies to sell via our platforms and contracts. We are refocusing a portion of our over 65 division into the under 65 market in order to take advantage of the positioning of INSX, IHCSB, our lead generation capabilities, and the market growth resulting from the American Rescue Plan Act. 

·Continue to focus on administrative efficiencies and the transition of the three insurance carriers as we progress towards closing on all three sales in the next few quarters 

49

·Continue to monitor the COVID-19 outbreak as it evolves. The duration of COVID-19 and its potential effects on our business cannot be certain, so we currently cannot predict if there will be a material impact to our business, results of operations or financial condition in 2021. During the COVID-19 pandemic, we have fully transitioned our existing sales teams to work from home. Our customer facing agents have transitioned to a full-time work at home model, and although we have implemented enhanced technology solutions, sales may be impacted as COVID-19 continues to develop. 

Subject to making additional repurchases of IHC common stock, dividends to shareholders and various investments, the Company will maintain a highly liquid and high quality portfolio.

Our financial results in the future will depend on: (i) our ability to execute on our revised agency model and develop the agencies into a much larger and profitable operation; and (ii) any increase in the value of our minority interest in Iguana Capital where we participate on the board of directors.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Not required for smaller reporting companies. 

ITEM 4.   CONTROLS AND PROCEDURES 

Evaluation of Disclosure Controls and procedures

IHC’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) 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 CEO and CFO concluded that IHC’s disclosure controls and procedures were effective.

Management, including the CEO and CFO, identified no change in our internal control over financial reporting that occurred during our fiscal quarter ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

50

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.

Third Party Administrator

A third party administrator with whom we formerly did business (“Plaintiff” or “TPA”) commenced an action on May 17, 2017 in the United States District Court, Northern District of Texas, Dallas Division (the “Texas Action”), naming IHC, Madison National Life, Standard Security Life, and Independence Brokerage Group, Inc. (formerly IHC Carrier Solutions, Inc.) as defendants (“Defendants”). The Plaintiff seeks contractual payments allegedly owed by the Defendants totaling at least $3,082,000 through 2014, plus additional amounts for 2015 and 2016, and exemplary and punitive damages as allowed by law and fees and costs.  The court had previously stayed the proceedings during the pendency of two arbitrations.  The first arbitration resulted in a judicially-confirmed award in favor of Standard Security Life and Madison National Life in the amount of $5,641,000, which the Plaintiff has satisfied.  The Company received payment on September 9, 2020 and recorded it in other income on the Consolidated Statement of Income in the third quarter of 2020.  The second arbitration resulted in no monetary obligations owed by any of the parties. The Plaintiff has filed a motion for leave to file a Second Amended Complaint.  The Defendants have until August 9, 2021 to file an opposition to the motion for leave to amend.    

Multistate Market Conduct Examination

As previously disclosed, our subsidiaries Standard Security Life, Madison National Life and Independence American Insurance Company were selected for MCE related to our STM, limited medical and fixed indemnity limited health insurance products for the period of January 1, 2014 through September 30, 2017. The insurance departments of five jurisdictions (Delaware, Wisconsin, District of Columbia, Kansas and South Dakota) served as lead states, and the District of Columbia Department of Insurance, Securities and Banking and the Delaware Department of Insurance served as the managing lead states of the MCE. In addition to the five lead states, 37 other states participated in the MCE. Each of Standard Security Life, Madison National Life and Independence American Insurance Company responded to inquiries and document production requests in the MCE and proactively communicated and cooperated with the applicable regulatory agencies for the MCE. Each of these subsidiaries also provided a detailed action plan to regulators that summarized its enhanced compliance and control mechanisms.

In an effort to avoid long‐term litigation and/or administrative proceedings that would be required to resolve disputes between Standard Security Life, Madison National Life and Independence American Insurance Company and the states involved in the MCE, the Lead States and Standard Security Life, Madison National Life and Independence American Insurance Company entered into separate RSAs on July 14, 2020. The RSAs require the implementation of a compliance plan, impose certain requirements related to specified business practices and monetary payments.  The thirty-seven participating states adopted the RSAs. The Company accrued $3,660,000 in accounts payable, accruals and other liabilities on the Consolidated Balance Sheet in the second quarter of 2020 and processed payment in October 2020. As set forth in the RSAs, Standard Security Life, Madison National Life and Independence American Insurance Company deny any wrongdoing or violation of any applicable laws or regulations, and the entry into the RSAs is not an admission or acknowledgment of any wrongdoing or liability. In accordance with the RSAs, the Monitoring Period commenced and Standard Security Life, Madison National Life and Independence American Insurance Company continue to comply.

51

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, 2020 in Item 1A to Part 1 of Form 10-K.  

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 2016, the Board of Directors increased the number of shares that can be repurchased to 3,000,000 shares of IHC common stock. As of June 30, 2021, 1,535,393 shares were still authorized to be repurchased.

Share repurchases during the second quarter of 2021 are summarized as follows:

2021
					Maximum Number
			Average Price		of Shares Which
Month of	Shares		of Repurchased		Can be
Repurchase		Repurchased		Shares		Repurchased
April	-		$	-	1,535,393
May	-		$	-	1,535,393
June	-		$	-	1,535,393

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES 

Not applicable.

ITEM 4.   MINE SAFETY DISCLOSURES 

Not applicable.

ITEM 5.   OTHER INFORMATION 

Not applicable.  

52

ITEM 6.   EXHIBITS  

Exhibit Number

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). 

4.1   Description of the registrant’s securities registered pursuant to Section 12 of the Securities and Exchange Act of 1934, as amended (Filed as Exhibit 4.1 to our Annual Report on Form 10-K for the year ended December 31, 2020 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 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 filed with the SEC on May 12, 2011, and incorporated herein by reference). 

10.5 Retirement Benefit Agreement, dated as of September 30, 1991, between Independence Holding Company and Mr. Roy T.K. Thung, as amended. (Filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference; Amendment No. 1 filed as Exhibit 10(iii)(A)(4a) to our Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference; Amendment No. 2 filed as Exhibit 10(iii)(4)(b) to our Current Report on Form 8-K filed with the SEC on June 22, 2005 and incorporated herein by reference; Amendment No. 3 filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 7, 2009 and incorporated herein by reference.) 

10.6  Purchase Agreement, made and entered into on June 15, 2015, by and among Madison National Life Insurance Company, Inc., Standard Security Life Insurance Company of New York and National Guardian Life Insurance Company (Filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on June 16, 2015, and incorporated herein by reference). 

53

10.7  Sale Bonus Agreement, dated November 7, 2016, by and between Independence American Holdings Corp. and David T. Kettig (Filed as Exhibit 10.8 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 and incorporated herein by reference). 

10.8  Officer Employment Agreement, made as of May 25, 2011, by and among Independence Holding Company, Standard Security Life and Mr. Gary J. Balzofiore (Filed as Exhibit 10.9 to our Annual Report on Form 10-K for the year ended December 31, 2016 and incorporated herein by reference).  

10.9Officer Employment Agreement, made as of June 22, 2015, by and among Independence Holding Company, Standard Security Life and Mr. Vincent Furfaro, as amended by the Assignment and Assumption with Novation and Amendment of Officer Employment Agreement dated January 1, 2017 by and among Standard Security Life, AMIC Holdings, Inc. and Mr. Vincent Furfaro (Filed as Exhibit 10.9 to our Annual Report on Form 10-K for the year ended December 31, 2018 and incorporated herein by reference).  

10.10Amended and Restated Officer Employment Agreement, dated as of March 24, 2020, by and between AMIC Holdings, Inc. and Vincent Furfaro (filed as Exhibit 10.1 to our Current Report on Form 8-K/A filed with the SEC on April 9, 2020 and incorporated herein by reference). 

10.11Sale Bonus Agreement, dated July 25, 2018, by and between Independence American Holdings Corp. and Vincent Furfaro (Filed as Exhibit 10.10 to our Annual Report on Form 10-K for the year ended December 31, 2018 and incorporated herein by reference).  

10.12Assignment and Assumption with Novation and Amendment of Officer Employment Agreement dated January 1, 2017 by and among Standard Security Life, AMIC Holdings, Inc. and Mr. David T. Kettig (Filed as Exhibit 10.11 to our Annual Report on Form 10-K for the year ended December 31, 2018 and incorporated herein by reference). 

10.13Sale Bonus Agreement, dated October 15, 2019, by and between Independence American Holdings Corp. and Gary J. Balzofiore (Filed as Exhibit 10.12 to our Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference). 

10.14Stock Purchase Agreement, dated April 14, 2021, by and among Reliance Standard Life Insurance Company, Independence Capital Corp. and Independence Holding Company (Filed as Exhibit 10.14 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and incorporated herein by reference).  

10.15Stock Purchase Agreement, dated as of May 17, 2021, by and among Independence American Holdings Corp., IHC SB Holdings, LLC, Iguana PP Holdings, Inc., Iguana Capital, Inc. and JAB Holdings B.V.* 

10.16Stock Purchase Agreement, dated as of May 17, 2021, by and among Independence Holding Company, Madison Investors Corp., AMIC Holdings Inc., Iguana Acquisition LLC, and JAB Holdings B.V.* 

10.17Transaction Bonus Agreement, made and entered into effective as of June 30, 2021, by and among AMIC Holdings Inc., Independence Holding Company, Independence American Holdings Corp., and David T. Kettig.* 

10.18Officer Employment Agreement, made as of May 20, 2011, by and between Independence Holding Company and Colleen P. Maggi.* 

54

10.19First Amendment to the Stock Purchase Agreement, dated as of June 28, 2021, by and among Independence American Holdings Corp., IHC SB Holdings, LLC, Iguana PP Holdings, Inc., Iguana Capital, Inc., and JAB Holdings B.V.* 

10.20Stockholders Agreement, made and entered into as of June 30, 2021, by and among Iguana Capital, Inc., Iguana Holdings Ltd., Iguana Acquisition, LLC and IHC SB Holdings, LLC.* 

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. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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. * 

104Cover page formatted as inline XBRL and contained in Exhibit 101. 

* Filed herewith.

55

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 9, 2021      

Roy T.K. Thung

Chief Executive Officer, and Chairman

 of the Board of Directors

By:/s/Colleen P. Maggi                                    Date:August 9, 2021   

            Colleen P. Maggi

Corporate Vice President and

    Chief Financial Officer 

56

EX-10.15

EXECUTION VERSION

EXHIBIT 10.15

STOCK PURCHASE AGREEMENT

by and among

INDEPENDENCE AMERICAN HOLDINGS CORP.,

IHC SB HOLDINGS, LLC,

and

IGUANA PP HOLDINGS, INC.,

IGUANA CAPITAL, INC.,

and

JAB HOLDINGS B.V.

(solely for purposes of Section 9.12 and the other provisions of Article IX)

Dated as of May 17, 2021

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND TERMS

Section 1.01Definitions2 

Section 1.02Interpretations.17 

ARTICLE II

THE PURCHASE AND SALE; CLOSING; CLOSING DELIVERABLES

Section 2.01Purchase and Sale of Sale Shares19 

Section 2.02The Closing19 

Section 2.03Deliveries at Closing.20 

Section 2.04Estimated Closing Date Balance Sheet; Estimated Closing Consideration20 

Section 2.05Post-Closing Adjustments to the Estimated Closing Consideration.21 

Section 2.06Withholding Taxes24 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

Section 3.01Organization, Standing and Power.25 

Section 3.02Authorization25 

Section 3.03Noncontravention.26 

Section 3.04Governmental Approvals26 

Section 3.05Capital Stock of the Company.26 

Section 3.06Subsidiaries28 

Section 3.07Financial Statements; No Undisclosed Liabilities.28 

Section 3.08Absence of Certain Changes.29 

Section 3.09Legal Proceedings.29 

Section 3.10Compliance with Laws; Permits.29 

Section 3.11Insurance Policies30 

Section 3.12Material Contracts.30 

Section 3.13Intellectual Property; IT Assets; Privacy.33 

Section 3.14Employee Benefits Matters.35 

Section 3.15Labor.37 

Section 3.16Tax Matters.38 

Section 3.17Real Property39 

Section 3.18Environmental Matters40 

Section 3.19Interested Party Transactions40 

Section 3.20IAIC Production40 

Section 3.21Sufficiency of Assets40 

Section 3.22Brokers and Other Advisors40 

Section 3.23CARES Act40 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER PARTIES

Section 4.01Organization, Standing and Power41 

Section 4.02Authorization41 

Section 4.03Noncontravention.41 

Section 4.04Governmental Approvals42 

Section 4.05Legal Proceedings42 

Section 4.06Financial Capacity42 

Section 4.07Investment Representation42 

Section 4.08Brokers and Other Advisors42 

Section 4.09No Prior Activities and Agreements42 

Section 4.10Capitalization of Purchaser Parent, Valid Issuance of Purchaser Parent Shares43 

ARTICLE V

COVENANTS

Section 5.01Conduct of the Business Pending the Closing.43 

Section 5.02Access to Information.48 

Section 5.03Reasonable Best Efforts.49 

Section 5.04Publicity50 

Section 5.05Employment and Employee Benefits.50 

Section 5.06Insurance.52 

Section 5.07IHC Marks.53 

Section 5.08Tax Matters.53 

Section 5.09Third-Party Consents57 

Section 5.10Confidentiality.57 

Section 5.11Further Assurances58 

Section 5.12D&O Insurance.58 

Section 5.13Certain Other Covenants.59 

Section 5.14AKC Interest in the Company61 

Section 5.15Escrow Agreement62 

Section 5.16Transition Services Agreement62 

Section 5.17Rollover Agreement62 

Section 5.18Intercompany Accounts62 

Section 5.19Purchaser Release63 

Section 5.20Seller Release63 

Section 5.21Resignations63 

ARTICLE VI

CONDITIONS TO CLOSING

Section 6.01Conditions Precedent to Obligations of Each Party64 

Section 6.02Conditions Precedent to Obligations of Purchaser Parties64 

Section 6.03Conditions Precedent to Obligations of Parent and Seller65 

Section 6.04Frustration of Closing Conditions66 

ARTICLE VII

TERMINATION

Section 7.01Termination of Agreement66 

Section 7.02Procedure upon Termination67 

Section 7.03Effect of Termination67 

ARTICLE VIII

INDEMNIFICATION

Section 8.01Indemnification Obligations.67 

Section 8.02Survival68 

Section 8.03Indemnification Limitations.69 

Section 8.04Notification of Claims.70 

Section 8.05Payment72 

Section 8.06Exclusive Remedies72 

Section 8.07Additional Indemnification Provisions72 

Section 8.08Mitigation73 

ARTICLE IX

MISCELLANEOUS

Section 9.01Entire Agreement; Amendments and Waivers73 

Section 9.02Binding Effect; Assignment.74 

Section 9.03Governing Law; Jurisdiction.74 

Section 9.04Specific Enforcement.75 

Section 9.05Waiver of Jury Trial.75 

Section 9.06Remedies76 

Section 9.07Notices76 

Section 9.08Severability77 

Section 9.09Expenses77 

Section 9.10Non-Recourse77 

Section 9.11Counterparts78 

Section 9.12JAB Holdings Obligation78 

i

EXHIBITS

Exhibit AKey Employees 

Exhibit BTransition Services Agreement 

Exhibit CStockholders Agreement 

Exhibit DIllustrative Closing Net Working Capital Calculation 

ii

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of May 17, 2021, by and among Independence American Holdings Corp., a Delaware corporation (“Parent”), IHC SB Holdings, LLC, a Delaware limited liability company (“Seller”), Iguana PP Holdings, Inc., a Delaware corporation (“Purchaser”), Iguana Capital, Inc., a Delaware corporation (“Purchaser Parent” and together with Purchaser, the “Purchaser Parties”, each a “Purchaser Party”), and JAB Holdings B.V., a private limited liability company incorporated under the laws of the Netherlands (“JAB Holdings”) (solely for purposes of Section 9.12 and the other provisions of Article IX).  JAB Holdings, Purchaser, Purchaser Parent, Parent and Seller are collectively referred to herein as the “Parties” and each, a “Party”).

W I T N E S E T H:

WHEREAS, as of the date hereof, Seller, a wholly-owned direct Subsidiary of Parent, owns 340 of the 400 issued and outstanding shares of capital stock (each, a “Share”, and collectively, the “Shares”) of PetPartners, Inc., a Delaware corporation (the “Company”);

WHEREAS, as promptly as practicable following the date hereof, Purchaser Parent and Seller shall enter into the Rollover Agreement;

WHEREAS, immediately prior to the Closing (as hereinafter defined), (a) Seller shall contribute to Purchaser Parent 30% of its Shares (the “Rollover Shares”) in exchange for common stock of Purchaser Parent (“Rollover Contribution” and such shares of Purchaser Parent, the “Purchaser Parent Shares”), (b) an Affiliate of Purchaser Parent will make a contribution of cash to Purchaser Parent in exchange for common stock of Purchaser Parent (“Cash Contribution”), and (c) the contributions in clauses (a) and (b) are intended to be characterized by Seller, Parent, JAB Holdings and Purchaser Parent as a single interrelated transaction that is treated as an exchange described in Section 351(a) of the Code;

WHEREAS, immediately after the Rollover Contribution and immediately before the purchase of Shares (other than the Rollover Shares) by Purchaser from Seller pursuant to this Agreement, Purchaser Parent shall contribute the Rollover Shares to Purchaser;

WHEREAS, Seller desires to, and Parent desires to cause Seller to, transfer to Purchaser, and Purchaser desires to acquire from Seller, 70% of Seller’s Shares (the “Sale Shares”) in exchange for cash in a transaction governed by Section 1001 of the Code, upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, pursuant to a separate Stock Purchase Agreement dated as of even date herewith (the “IAHC Purchase Agreement”), Parent and its other subsidiaries party thereto are agreeing to sell and an Affiliate of Parent Purchaser is agreeing to acquire indirectly 100% of Parent’s shares in Independence American Insurance Company, a Delaware corporation (“IAIC”), and certain other minority equity interests and certain other assets held by such sellers on such terms and subject to such conditions as set forth therein;

WHEREAS, immediately following the consummation of the transactions contemplated by this Agreement, (i) an Affiliate of Purchaser Parent will own 70% of the common shares of Purchaser Parent, (ii) Parent and Seller together will own 30% of the common shares of Purchaser Parent, (iii) Purchaser Parent will own 100% of the common stock of Purchaser, (iv) Purchaser Parent will indirectly wholly own IAIC, and (v) Purchaser Parent will indirectly own those minority interests and other assets acquired from Parent pursuant to the IAHC Purchase Agreement;

WHEREAS, each of (a) the board of directors of Purchaser, (b) the board of directors of Purchaser Parent, (c) the board of directors of Parent and (d) the board of directors of Seller has approved this Agreement and the Transactions, upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with the Transactions and also to prescribe various conditions thereto;

WHEREAS, contemporaneously with the Closing, Purchaser intends to cause the Company to enter into employment agreements with each of the employees set forth on Exhibit A (the “Key Employees”);

WHEREAS, in connection with this Agreement and upon the terms and subject to the conditions set forth herein: Seller or another Affiliate of the Company and the Company will enter into a transition services agreement in substantially the form attached hereto as Exhibit B (the “Transition Services Agreement”), under which certain transition services will be provided to the Company on the terms and subject to the conditions set forth therein; and

WHEREAS, contemporaneously with the Closing, Seller and an Affiliate of Purchaser Parent will enter into a Stockholders Agreement in substantially the form attached hereto as Exhibit C (the “Stockholders Agreement”), which shall provide for Seller and such Affiliate having certain rights and restrictions in respect of their ownership of shares of common stock of Purchaser Parent following the completion of the Rollover Contribution.

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the Parties agree as follows:

Article IDEFINITIONS AND TERMS

Section 1.01Definitions.  For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.01: 

“Acquired Competitive Business” has the meaning specified in Section 5.13(b).

“Action” means any judicial (civil or criminal) or administrative actions, Claims, suits, demands, complaints, litigation, investigations, review, audits, proceedings, arbitration, hearing or other similar disputes by or before a Governmental Authority.

2

“Adjusted Closing Date Balance Sheet” has the meaning specified in Section 2.05(b).

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“Affiliate Agreements” has the meaning specified in Section 3.19.

“Agreement” has the meaning specified in the Preamble.

“AKC” means American Kennel Club, Inc.

“AKC Maximum Contribution Amount” means $6,800,000.

“AKC Purchase Agreement” has the meaning specified in Section 5.14(b).

“AKC Shares” means the 60 shares of the issued and outstanding shares of capital stock of the Company owned by AKC.

“AKC Waiver and Consent” means that certain waiver and consent letter agreement executed by AKC and the Company dated May 14, 2021.

“Ancillary Agreements” means, collectively, the Confidentiality Agreement, the Transition Services Agreement, the Stockholders Agreement, the Rollover Agreement and the Escrow Agreement.

“Bankruptcy and Equity Exception” has the meaning specified in Section 3.02.

“Benefit Plan” has the meaning specified in Section 3.14(a).

“Business Day” means any day of the year other than a Saturday, Sunday or any day on which national banking institutions in New York, New York are authorized or required by applicable Law to be closed for business.

“Business Licenses” has the meaning specified in Section 3.10(a)(iii).

“CARES Act” means the Coronavirus Aid, Relief and Economic Security Act, as signed into law by the President of the United States on March 27, 2020, and the Continuing Appropriations Act, 2021 and Other Extensions Act, as signed into law by the President of the United States on December 27, 2020.

“Cash” means, as of any given time of determination, all cash and cash equivalents held on a consolidated basis by the Company at such time determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and

3

estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end (excluding for clarification any security, customer or other deposits), plus (a) any deposits in transit, and minus (b) any checks written (but not yet cashed) by the Company; provided, however, that the definition of “Cash” (i) shall exclude restricted cash in respect of fiduciary liability obligations and (ii) if any amounts that would constitute Transaction Expenses are paid by the Company after the Effective Time but prior to Closing, such amounts paid shall be deemed to reduce Cash on a dollar for dollar basis.

“Cash Contribution” has the meaning specified in the Recitals.

“Claims” means any and all manner of claims, suits, damages, demands and liabilities whatsoever in law or equity, whether known or unknown, liquidated or unliquidated, fixed, contingent, direct or indirect.

“Closing” has the meaning specified in Section 2.01.

“Closing Cash” means the Cash as of the Effective Time.

“Closing Consideration” means (a) $77,000,000 (b) plus (0.595 * Closing Cash) (c) plus or minus, as applicable, (0.595 * the Closing Net Working Capital Adjustment), (d) minus (0.595 * the Closing Indebtedness) and (e) minus the Transaction Expenses.

“Closing Date” has the meaning specified in Section 2.02.

“Closing Indebtedness” means the Indebtedness of the Company as of the Effective Time, which amount, for the avoidance of doubt, is to be expressed as a positive number.

“Closing Net Working Capital” means (a) the Current Assets of the Company, less (b) the Current Liabilities of the Company, in each case calculated as of immediately prior to the Closing.  For illustrative purposes only, an example calculation of Closing Net Working Capital as of March 31, 2021 is attached hereto as Exhibit D, depicting Closing Net Working Capital as it may have been calculated on such date. Such example is not determinative as to the calculation of Closing Net Working Capital in accordance with this Agreement.

“Closing Net Working Capital Adjustment” means an amount equal to the Closing Net Working Capital minus the Target Working Capital.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” has the meaning specified in the Recitals.

“Company Confidential Information” has the meaning specified in Section 5.10(b).

“Company Employee” means any individual employed by or providing services to Parent or any of its Affiliates (including the Company) that provide services primarily with respect to, or is otherwise necessary to the operations of, the Company, including each of those employees as set forth on Section 3.15(a) of the of the Seller Disclosure Schedule.

4

“Company Intellectual Property” means all Intellectual Property owned by or purported to be owned by the Company.

“Company IT Assets” means all IT Assets owned by or purported to be owned by the Company.

“Company Shareholders Agreement” means the Amended and Restated Shareholders Agreement of the Company, dated as of March 24, 2017, by and among AKC, Seller, Parent and the Company.

“Competitive Business” has the meaning specified in Section 5.13(a)(i).

“Confidentiality Agreement” has the meaning specified in Section 5.02(f).

“Consent” means, with respect to a Person, any written or documentary consent, approval, authorization, waiver, grant, concession, license, permit, certificate of need, variance, exemption or order of, registration, certificate, declaration, or filing with, or report or notice to such Person.

“Continuation Period” has the meaning specified in Section 5.05(b).

“Continuing Employee” has the meaning specified in Section 5.05(b).

“Contract” means any contract, indenture, note, bond, lease, commitment or other legally binding agreement.

“Contracting Parties” has the meaning specified in Section 9.10.

“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions thereof or related or associated epidemics, pandemic or disease outbreaks.

“COVID-19 Measures” means any quarantine, “shelter in place”, “stay at home”, workforce reduction, social distancing, shutdown, closure, sequester, safety or similar Law, directive or binding guidelines promulgated by any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including the CARES Act and the Families First Act.

“Current Assets” means accounts receivable, inventory and prepaid expenses, but excluding (a) Tax assets, current and deferred and (b) receivables from any of the Company’s Affiliates and Representatives or any of their respective Affiliates, determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end.

5

“Current Liabilities” means accounts payable and accrued expenses, but excluding payables to any of the Company’s Affiliates and Representatives and, directors, their respective Affiliates, Tax liabilities, and the current portion of long term debt, determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end; provided, that, for the avoidance of doubt, in no event shall any amount or item that constitutes Indebtedness or a Transaction Expense be deemed to be a Current Liability for purposes of this Agreement.

“Data Room” means the electronic data room maintained by an Affiliate of Parent and Seller, made available to Purchaser Parties and their Affiliates and hosted by Box Inc., titled “Project Gecko”.

“Dispute Notice” has the meaning specified in Section 2.05(b).

“Disputed Items” has the meaning specified in Section 2.05(b).

“Divested Portion” has the meaning specified in Section 5.13(b).

“Effective Time” has the meaning specified in Section 2.02.

“Eligible Insurance Proceeds” means, with respect to Losses to be reimbursed by the Indemnifying Party that may be covered, in whole or in part, by third-party insurance coverage, the maximum amount of insurance proceeds actually received in cash under such third-party insurance coverage with respect to such Losses, net of the costs (including any premium increases) in seeking such collection.

“Employee Census” means a complete and accurate census of the Company Employees detailing, to the extent permitted by applicable Law, (i) name or employee identification number, (ii) the date of hire, (iii) title or position, (iv) employing entity, (v) work location, (vi) classification, (vii) full-time or part time status, (viii) leave status and (ix) such employee’s annualized compensation as of the date of such census, including base salary, vacation and paid time off accrual amounts, bonus and commission potential, severance pay potential and any other compensation forms, if applicable.

“Environmental Law” means any law, regulation, order, decree, agency requirement or common law standard of conduct relating to pollution, contamination, waste, hazardous substance exposure or the protection of the health, safety or the environment.

“ERISA” has the meaning specified in Section 3.14(a).

“Escrow Account” means the escrow account established pursuant to the terms of the Escrow Agreement for deposit and distribution of (i) the Purchase Price Adjustment Holdback Amount and (ii) the Purchase Price Escrow Amount, in each case, in accordance with this Agreement.

6

“Escrow Agent” means Citibank, N.A.

“Escrow Agreement” means an escrow agreement to be entered into by and among Purchaser, Seller and the Escrow Agent on the Closing Date, in customary form reasonably satisfactory to the parties thereto.

“Estimated Closing Consideration” has the meaning specified in Section 2.04.

“Estimated Closing Date Balance Sheet” has the meaning specified in Section 2.04.

“Estimated Closing Statement” has the meaning specified in Section 2.04.

“Exchange Act” means the Securities Exchange Act of 1934.

“Existing Policy” has the meaning specified in Section 5.12(b).

“Final Balance Sheet” has the meaning specified in Section 2.05(f).

“Final Closing Consideration” means the Closing Consideration as set forth in the Final Closing Statement.

“Final Closing Statement” has the meaning specified in Section 2.05(e).

“Financial Statements” has the meaning specified in Section 3.07(a).

“Fundamental Parent and Seller Representations” means the representations and warranties set forth in Section 3.01 (Organization, Standing and Power), Section 3.02 (Authorization), Section 3.03(a)(i), Section 3.03(b) (Noncontravention), Section 3.05 (Capital Stock of the Company), Section 3.16 (Tax Matters) and Section 3.22 (Brokers and Other Advisors).

“GAAP” means generally accepted accounting principles in the United States.

“Government Contracts” means any Contract with any Governmental Authority.

“Governmental Authority” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, European Union, multinational or other supranational, national, federal, regional, state or local or any agency, instrumentality, authority, department, commission, board or bureau thereof or other legislative, executive or judicial governmental entity or semi-governmental or self-regulatory organization, including the National Association of Insurance Commissioners, or any court or similar judicial or arbitral body.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“IAIC” has the meaning specified in the Recitals.

“IAHC Purchase Agreement” has the meaning specified in the Recitals.

“IHC” means Independence Holding Company.

7

“IHC Marks” means any and all Trademarks owned by Parent, Seller or any of their Affiliates (other than the Company and IAIC), including all Trademarks comprising, using or containing “IHC,” “Independence American Holdings Corp.”, “Independence Holding Company” or “The IHC Group,” whether in logo form or otherwise, whether alone or in combination with other words or elements, and including all combinations thereof and any Trademarks embodying any of the foregoing either alone or in combination with other words or elements.

“Indebtedness” means, with respect to any Person, without duplication, (a) the principal amount of and accrued interest, premiums, penalties, breakage costs, make-whole payments or obligations or other similar costs, fees or expenses (if any), that would be required to be paid by the borrower pursuant to a customary payoff letter (or otherwise as required by the terms of the underlying instrument), in each case, in respect of (i) any indebtedness of such Person or any of its Subsidiaries for money borrowed and (ii) any indebtedness or other liabilities of such Person or any of its Subsidiaries evidenced by a note, bond, debenture, loan stock or other similar instrument or security, (b) all obligations of the type referred to in clause (a) of third parties for the payment of which such Person or its Subsidiaries is responsible or liable, as obligor, guarantor, surety or otherwise, including any guarantee of such obligations, (c) all obligations of such Person or any of its Subsidiaries as lessee, (d) all obligations with respect to borrowings from any bank, financial institution or other entity, including loans and bank overdrafts, (e) all obligations in respect of letters of credit, bankers’ acceptances and similar facilities issued for the account of such Person or any of its Subsidiaries and all obligations under any performance bonds (but, in each case with respect to this clause (e), solely to the extent drawn and not paid), (f) the net obligations, which may be positive or negative, under all interest rate and exchange rate derivatives, swaps or similar agreements of such Person and its Subsidiaries, (g) all obligations of such Person or any of its Subsidiaries in respect of deferred purchase price with respect to the acquisition by such Person or any of its Subsidiaries of any business, division or product line or portion thereof (whether by merger, sale of stock, sale of assets or otherwise), (h) all indebtedness secured by a Lien to secure all or part of the purchase price of the property subject to such mortgage or Lien, (i) all obligations with respect to the net current Tax liabilities of the Company that are allocable to any taxable year (or portion thereof) ending on (and including), or prior to, the Closing Date (treating for purposes of this Agreement the taxable year of the Company that includes the Closing Date as closing on (and including) the Closing Date), and including any Taxes deferred in accordance with Section 2302 of the CARES Act, (j) all liabilities under any currency or interest swap or other interest or currency protection, hedging or financial futures transaction or arrangement, (k) deferred revenue (including the related service obligation for American Pet Insurance Company), (l) self-insurance accruals, (m) all Liabilities with respect to accrued but unpaid bonus payments, accrued or owed by the Company as of the Closing in respect of any performance period (or portion thereof) prior to and up to the Closing, together with the employer portion of any Taxes arising therefrom, related to each Continuing Employee (for the avoidance of doubt, the unpaid bonus amount will include the pre-Closing portion of any bonus payable to a Continuing Employee for their employment with the Company or any Affiliate for the year in which the Closing occurs except for those employees who are paid a pro-rata share of an annual bonus in connection with the termination of their employment agreement), (n) all Liabilities with respect to accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Company Employee immediately prior to the Closing, (o) all Liabilities with respect to

8

accrued but unpaid severance amounts accrued or owed by the Company as of the Closing, together with the employer portion of any Taxes arising therefrom, (p) all guarantees by such Person or any of its Subsidiaries of any of the foregoing obligations of any third party, (q) cancellation reserves, (r) accrued but unpaid dividends and (s) fiduciary liability obligations of the Company, net of any restricted cash held in respect thereof, in each case determined in accordance with GAAP and applied using, to the extent in accordance with GAAP, the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Financial Statements for the most recent fiscal year end as if such accounts were being prepared and audited as of a fiscal year end.  For the avoidance of doubt, “Indebtedness” shall not include: (i) any liabilities taken into account in the calculation of Closing Net Working Capital included in the Estimated Closing Statement or Post-Closing Statement; or (ii) any amounts included in the Transaction Expenses.

“Indemnified Party” means the Purchaser Indemnified Party and/or the Seller Indemnified Party, as applicable.

“Indemnified Taxes” means, except to the extent taken into account in determining the Closing Consideration as finally determined pursuant to Section 2.05, (a) any and all Taxes imposed on or with respect to the Company or any of its Subsidiaries for any Pre-Closing Tax Period, (b) Taxes of any other Person for which the Company or any of its Subsidiaries becomes liable (i) as the result of being a member of an affiliated, combined, unitary, consolidated or similar group, (ii) as a transferee or successor, by contract or otherwise or (iii) under any Tax allocation, Tax sharing, Tax indemnity or similar agreement (excluding any commercial agreement entered into in the ordinary course of business and not primarily relating to Taxes), in each case of clauses (i)-(iii), as a result of a relationship or arrangement in existence prior to the Closing Date, and (c) Transfer Taxes for which Seller is responsible under Section 5.08(c); provided, that Indemnified Taxes shall not include any Taxes that (i) are included as a Current Liability in determining Closing Net Working Capital, Indebtedness or Transaction Expenses, in each case as finally determined, or (ii) are imposed with respect to actions taken by the Purchaser or any Affiliate thereof (including the Company and any of its Subsidiaries) on the Closing Date after the Closing that are outside of the ordinary course of business.  For purposes of this Agreement, whenever it is necessary to determine the portion of any Taxes imposed on or with respect to the Company for the Straddle Period, the amount of any real property, personal property or similar ad valorem Taxes which are imposed on a periodic basis shall be determined ratably on a per diem basis, and the amount of any other Taxes that are allocable to the Pre-Closing Tax Period shall be determined based on an interim closing of the books of the Company as of the Closing Date and, to the extent relevant, in accordance with the provisions of Treasury Regulations Section 1.1502-76(b)(1)(ii)(A) and (B) (and similar provisions of state, local or non-U.S. Law).

“Indemnifying Party” means the Purchaser Indemnifying Party and/or the Seller Indemnifying Party, as applicable.

“Independent Accountant” has the meaning specified in Section 2.05(c).

“Insurance Cap” has the meaning specified in Section 5.12(b).

9

“Intellectual Property” means all intellectual property or other proprietary rights arising under the Laws of any jurisdiction, including all rights in any of the following: (a) patents and patent applications, including continuations, divisionals, continuations-in-part, reissues or reexaminations and patents issuing thereon; (b) trademarks, service marks, trade dress, logos, corporate names, trade names, symbols, logos, Internet domain names and other similar identifiers of origin, in each case, whether or not registered, together with the goodwill associated with any of the foregoing and symbolized thereby (collectively, “Trademarks”); (c) copyrights, copyright registrations and applications, published and unpublished works of authorship, whether or not copyrightable, copyrights in and to the foregoing, together with all common law rights and moral rights therein, and any applications and registrations therefor; (d) Software; and (e) trade secrets, know-how, confidential or proprietary information, methods, formulae, inventions (whether or not patentable), processes, techniques, source code, algorithms, models, designs, drawings, specifications, data and databases, and proprietary customer or similar data (collectively, “Trade Secrets”).

“Interested Party” has the meaning specified in Section 3.19.

“Interim Financial Statements” has the meaning specified in Section 3.07(a).

“IRS” means the Internal Revenue Service.

“IT Assets” means technology devices, computers, computer systems, Software, hardware, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipment and all data stored therein or processed thereby and all associated documentation.

“JAB Holdings” has the meaning specified in the Preamble.

“Joint Direction” means a joint written instruction of Purchaser and Seller instructing the Escrow Agent to make a payment out of the Escrow Account.

“Key Employees” has the meaning specified in the Recitals.

“Knowledge” means (a) in the case of Parent or Seller, the actual knowledge after due inquiry of any of the individuals identified in Section 1.01(a) of the Seller Disclosure Schedule, and (b) in the case of Purchaser, the actual knowledge after due inquiry of any of the individuals identified in Section 1.01(a) of the Purchaser Disclosure Schedule.

“Law” means any local or foreign law, statute, ordinance, code, treaty, rule, regulation, decree or Order.

“Leased Real Property” has the meaning specified in Section 3.17.

“Liability” means, with respect to any Person, any debt, liability or obligation of such Person (whether direct or indirect, known or unknown, asserted or unasserted, determined, determinable or otherwise, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due and whether or not required under GAAP to be reflected on the financial statements of such Person).

10

“Lien” means any lien, pledge, mortgage, deed of trust, security interest, easement, servitude, preemptive right, right of first refusal, transfer restriction or other similar encumbrance.  Solely for purposes of Section 3.13, it is understood that “Lien” does not include any license or similar right granted with respect to any Intellectual Property.

“Losses” means any and all losses, damages, costs, expenses, Liabilities, settlement payments, awards, judgments, fines, obligations, claims penalties, interest and penalties, deficiency related to any of the foregoing (including reasonable and documented legal fees (including court and attorneys’ and other professionals’ fees) and expenses and out-of-pocket costs of investigation, collection or enforcement of any provision of this Agreement or Ancillary Agreement), in each case, whether known or unknown, whether asserted or unasserted, and whether accrued or unaccrued.

“Material Adverse Effect” means an effect, event, development, circumstance, fact or change that, individually or in the aggregate, has or would reasonably be expected to (a) have a material adverse effect on the business, results of operations or financial condition of the Company; provided, however, that no effect, event, development, circumstance, fact or change arising out of or resulting from any of the following, either alone or in combination, shall be deemed to constitute or be taken into account in determining whether there has been a Material Adverse Effect:  (i) any conditions generally affecting the U.S. pet insurance and related brokerage industry or other industries in which the Company currently operates; (ii) general economic conditions, including changes in the credit, debt, financial, currency or capital markets (including changes in interest or exchange rates), in each case, in the United States; (iii) earthquakes, floods, fires, hurricanes, tropical storms, tornadoes, wind storms, tsunamis, volcanic eruptions, natural disasters or other acts of nature; (iv) any epidemic, pandemic or disease outbreaks (including COVID-19) or any COVID-19 Measures or any change in such COVID-19 Measures or interpretations thereof or any other public health event; (v) global, national or regional political conditions or unrest, including hostilities, acts of war, sabotage or terrorism or military actions or any escalation, worsening or diminution of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway; (vi) the negotiation, execution, announcement, pendency or performance of this Agreement or the consummation of the Transactions (including compliance with the terms of this Agreement); (vii) any change or proposed change in Laws or GAAP or other applicable accounting rules, or the interpretation or enforcement thereof or other legal or regulatory conditions or actions; (viii) that the prospective owner of the Company is Purchaser or any Affiliate of Purchaser; (ix) any failure by the Company to meet any projections, forecasts or estimates (provided, however, that any effect, event or change that caused or contributed to such failure to meet any projections, forecasts or estimates shall not be excluded under this clause (ix)); (x) any change or announcement of a potential change, in and of itself, in the credit, financial strength or claims paying ratings of the Company (provided, however, that any effect, event, development, circumstance, fact or change that caused or contributed to such change in such rating shall not be excluded under this clause (x)); and (xi) any action taken or omitted to be taken by the Company at the request or with the prior consent of Purchaser; provided that in the case of clauses (i), (ii), (iii), (iv), (v) and (vii), any such effect, event, development, circumstance, fact or change that is not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect to the extent such effect, event, development, circumstance, fact or change adversely affects the Company in a disproportionate manner

11

relative to the other participants in the insurance lines in which the Company operates, considered as a whole; or (b) prevent, materially delay or materially impair the consummation of the Transactions.

“Material Contracts” has the meaning specified in Section 3.12(a).  

“Material Distribution Partner Contracts” means any contract between the Company, on the one hand, and a distribution partner of the Company, on the other hand, representing premiums of at least $500,000 during the twelve (12) month period ended December 31, 2020.

“Material Vendor Contracts” means the top ten (10) agreements, as measured by the total expenditures incurred by the Company and its Subsidiaries under each such Contract during the twelve (12) month period ended December 31, 2020, by and between the Company or its Subsidiaries, on the one hand, and a supplier, vendor, agent, distributor or other service provider, on the other hand.

“Net After-Tax Basis” means, with respect to the calculation of any indemnification payment owed to any Party pursuant to Article VIII, calculation thereof by (a) increasing such indemnification payment by an amount equal to the sum of the amount of any cash Tax liability paid or payable by the Indemnified Party as a result of receipt or accrual of the indemnity payment in the year of such receipt or accrual and (b) decreasing such indemnification payment by an amount equal to any savings in Taxes actually realized in the form of a reduction in cash Tax liability by treating any such Loss (or other Tax benefit attributable thereto) as the last item that is taken into account in determining the amount in this clause (b) paid by the Indemnified Party as a result of the indemnified liability in the year of the incurrence of such liability.

“New Benefit Plans” has the meaning specified in Section 5.05(d).

“New York Courts” has the meaning specified in Section 9.03(b).

“Non-Compete Restricted Period” means a period commencing on the Closing Date and ending three (3) years following the date of the closing of the transactions contemplated by the IAHC Purchase Agreement.

“Non-Solicit Restricted Period” means a period commencing on the Closing Date and ending two (2) years following the date of the closing of the transactions contemplated by the IAHC Purchase Agreement.

“Nonparty Affiliates” has the meaning specified in Section 9.10.

“Notice of Insurance” has the meaning specified in Section 8.07(d).

“Open Source License” means any license that requires, as a condition of modification, licensing, conveyance or distribution of Software subject to such license, that such Software or other Software combined, linked or distributed with or derived from such Software (or any modifications or derivative works thereof) be disclosed, licensed, conveyed, distributed or made available in source code form or on a royalty-free basis (including for the purpose of making additional copies or derivative works).

12

“Order” means any order, final award, injunction, judgment, decree (including any consent decree or similar agreed order or judgment), ruling, writ, directive, settlement, stipulation, ruling, determination or assessment, whether civil, criminal or administrative, entered, issued, made or rendered by any Governmental Authority of competent jurisdiction.

“Organizational Documents” means any corporate, partnership or limited liability organizational documents, including certificates or articles of incorporation, bylaws, certificates of formation, operating agreements, certificates of limited partnership, partnership agreements, shareholder agreements and certificates of existence, as applicable.

“Outside Date” has the meaning specified in Section 7.01(a).

“Parent” has the meaning set forth in the Preamble.

“Parties” has the meaning specified in the Preamble.

“Permits” means any license, franchise, permit, certificate, approval or authorization from any Governmental Authority.

“Permitted Liens” means (a) Liens for Taxes, assessments or other governmental charges not yet due or payable or that are being contested in good faith through appropriate proceedings and for which adequate reserves have been established in the accounting books and records prior to the date hereof, (b) mechanics’, carriers’, workers’, repairers’, construction contractors’, landlords’ and similar Liens arising or incurred in the ordinary course of business consistent with past practice that are not yet delinquent and which are not, in the aggregate, material to either the Company, or the amount or validity of which is being contested in good faith by appropriate proceedings, and which are reflected on or specifically reserved against or otherwise disclosed in the consolidated balance sheets included in the Financial Statements, (c) zoning, building codes, entitlement and other land use and environmental regulations by any Governmental Authority, none of which materially and adversely impact the current use of the affected property, (d) Liens securing Indebtedness arising or incurred in the ordinary course of business consistent with past practice and disclosed in the Financial Statements, subject to the terms and limitations under this Agreement, (e) with respect to leasehold interests, mortgages and other Liens incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the Leased Real Property, (f) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation arising or incurred in the ordinary course of business consistent with past practice, (g) any Liens reflected with specificity in the Financial Statements and (h) restrictions on transfers of securities under applicable securities Laws or the Company’s Organizational Documents.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity.

“Personal Information” means (a) any information in the possession or under the control of the Company or any of its Subsidiaries that identifies or could reasonably be used to identify an individual, device, browser or household, or (b) any other information or data protected under Privacy Laws that are applicable to the Company or any of its Subsidiaries.

13

“Post-Closing Statement” has the meaning specified in Section 2.05(b).

“Pre-Closing Tax Period” means (i) any Tax period ending on or before the Closing Date and (ii) the portion of any Straddle Period ending on the Closing Date.

“Privacy Laws” means all applicable foreign or domestic (federal, state or local) Laws or industry requirements concerning the privacy, security or Processing of information or data, and all rules and regulations promulgated thereunder, including the Federal Trade Commission Act; the Privacy Act of 1974; the CAN-SPAM Act; the Telephone Consumer Protection Act; the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801, et seq.; the New York Department of Financial Services Cybersecurity Regulation, 23 NYCRR § 500, et seq.; N.Y. Gen. Bus. Law § 899-aa, et seq.; N.Y. Gen. Bus. Law § 899-bb, et seq.; 11 NYCRR 420 et seq.; 11 NYCRR 421 et seq.; the Telemarketing and Consumer Fraud and Abuse Prevention Act; data breach notification Laws; the California Consumer Privacy Act; and the European General Data Protection Regulation.  

“Privacy Policies” means all public statements and policies of the Company and its Subsidiaries with respect to privacy, security or Processing of information or data.

“Process” or “Processing” means any operation or set of operations that is performed upon data or information, whether or not by automatic means, including collection, access, acquisition, creation, storage, adaptation, alteration, correction, retrieval, maintenance, use, disclosure, transmission, transfer (including cross-border transfers), combination, storage, deletion, destruction or the design, implementation or other use of artificial intelligence, machine learning and/or deep learning and the insights, input, output, outcomes, predictions, analysis, visualizations and other results therefrom.

“Purchase Price Adjustment Holdback Amount” means an aggregate amount equal to $1,000,000 to be held by the Escrow Agent solely to satisfy any amounts payable to Purchaser pursuant to Section 2.05, plus any interest or other amounts earned thereon.

“Purchase Price Escrow Amount” means an aggregate amount equal to the Estimated Closing Consideration less the Purchase Price Adjustment Holdback Amount to be held by the Escrow Agent, which shall be released (i) to Seller within two (2) Business Days upon the consummation of the IAHC Purchase Agreement or (ii) to such Affiliate of Purchaser Parent that is a party to the Stockholders Agreement within two (2) Business Days upon the exercise of its rights pursuant to Section 9 thereof.

“Purchaser” has the meaning specified in the Preamble.

“Purchaser Parent” has the meaning specified in the Preamble.

“Purchaser Disclosure Schedule” has the meaning specified in Article IV.

“Purchaser Indemnified Parties” has the meaning specified in Section 8.01(a).

“Purchaser Losses” has the meaning specified in Section 8.01(a).

14

“Purchaser Parent Shares” has the meaning specified in the Recitals.

“Purchaser Parties” and a “Purchaser Party” have the meaning specified in the Preamble.

“Purchaser Released Parties” shall have the meaning set forth in Section 5.20.

“Purchaser Releasing Parties” shall have the meaning set forth in Section 5.19.

“Registered” means, with respect to Intellectual Property, issued by, registered with or the subject of a pending application before any Governmental Authority or Internet domain name registrar.

“Representative” means with respect to any Person, any officer, director, principal, partner, manager, member, attorney, accountant, agent, employee, consultant, financial advisor, financing source or other authorized representative of such Person.

“Resolution Period” has the meaning specified in Section 2.05(c).

“Resolved Matters” has the meaning specified in Section 2.05(c).

“Restricted Contract” has the meaning specified in Section 3.12(a)(xii).

“Review Period” has the meaning specified in Section 2.05(b).

“Rollover Agreement” means an agreement to be entered into by and between Purchaser Parent and Seller in connection with the Rollover Contribution, in customary form reasonably satisfactory to the parties thereto, which shall include customary accredited investor representations from Seller.

“Rollover Contribution” has the meaning specified in the Recitals.

“Rollover Shares” has the meaning specified in the Recitals.

“Sale Shares” has the meaning set forth in the Recitals.

“Securities” has the meaning specified in Section 3.05(d).

“Securities Act” means the Securities Act of 1933.

“Security Breach” means any actual, suspected, reported or claimed (a) loss or misuse (by any means) of Personal Information; (b) unauthorized access to any IT Assets; (c) inadvertent, unauthorized and/or unlawful Processing of Personal Information; or (d) other act or omission that compromises or may compromise the security, confidentiality or integrity of Personal Information or the security or operation of any IT Assets.

“Seller” has the meaning specified in the Preamble.

“Seller Confidential Information” has the meaning specified in Section 5.10(c).

15

“Seller Disclosure Schedule” has the meaning specified in Article III.

“Seller Indemnified Parties” has the meaning specified in Section 8.01(b).

“Seller Losses” has the meaning specified in Section 8.01(b).

“Seller Pension Plan” has the meaning specified in Section 3.14(d).

“Seller Released Parties” shall have the meaning set forth in Section 5.19.

“Seller Releasing Parties” shall have the meaning set forth in Section 5.20.

“Seller Tax Returns” shall have the meaning set forth in Section 5.08(a).

“Share” and “Shares” have the meaning specified in the Recitals.

“Software” means all (a) computer programs, including algorithms, models and methodologies, whether in source code or object code, (b) databases and other compilations and collections of data or information and (c) documentation, including user manuals and other training documentation, related to clauses (a) or (b).

“Stockholders Agreement” has the meaning specified in the Recitals.

“Straddle Period” means any Tax period beginning before or on the Closing Date and ending after the Closing Date.

“Subsidiary” of any Person (for purposes of this definition, the “Controlling Company”) means any other Person (a) of which a majority of the outstanding voting securities or other voting equity interests, or a majority of any other interests having the power to direct or cause the direction of the management and policies of such other Person, are owned, directly or indirectly, by the Controlling Company or (b) with respect to which the Controlling Company or its Subsidiaries is a general partner or managing member.

“Substantial Detriment” has the meaning specified in Section 5.03(c).

“Target Working Capital” means $$1,417,000.

“Tax Contest” has the meaning specified in Section 5.08(e).

“Tax Return” means any return, report, claim for refund, estimate, information return, declarations, disclosures or statement or other similar document relating to or required to be filed with any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Taxes” means all federal, state, local or non-U.S. taxes or charges in the nature of taxes, including all income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, premium, escheat, unemployment, excise, severance, stamp, occupation, property and

16

estimated taxes, all interest, penalties, fines and additions to tax imposed by any Governmental Authority in connection with any of the foregoing.

“Third-Party Claim” has the meaning specified in Section 8.04(a).

“Trade Secrets” has the meaning specified in the definition of Intellectual Property.

“Trademarks” has the meaning specified in the definition of Intellectual Property.

“Transaction Expenses” means the sum, without duplication, of the following: (i) all fees and expenses incurred or payable by or on behalf of the Company or any of its Affiliates for which the Company or any of its Subsidiaries is liable and which remains unpaid as of the Closing, including all legal, accounting, financial advisory, consulting, finders and all other fees and expenses (in each case whether or not billed or invoiced prior to the Closing); (ii) any bonus, retention, change-in-control, transaction or similar payment obligations of the Company or any of its Subsidiaries to any Person resulting from, or in connection with, the Transactions or any commitment made prior to the Closing by the Company or any of its Subsidiaries to make any bonus, retention, change-in-control, transaction or similar payments to any Person (regardless of when payment is due); and (iii) all Transaction Payroll Taxes related to the payment Transaction Expenses described in clause (ii) above.  For purposes of clarity, “Transaction Expenses” shall be calculated prior to giving effect to any payment of such amounts by or on behalf of Parent, Seller, the Company or any of its Subsidiaries or Purchaser in connection with or following the Closing.

“Transaction Payroll Taxes” means the employer portion of any payroll or similar Taxes, including employment insurance contributions and premiums incurred by the Company prior to the Closing in connection with any bonuses, retention, change-in-control or similar payments in connection with the Transactions.

“Transactions” means the transactions contemplated by this Agreement and the Ancillary Agreements.

“Transfer Taxes” means all sales, use, transfer, valued added, goods and services, gross receipts, excise, conveyance, documentary, stamp duty, recording, registration and other similar Taxes, charges and fees (including any penalties, interest and additions to Tax) incurred in connection with the Transactions, whether payable by Parent, Seller, the Company or Purchaser.

“Transition Services Agreement” has the meaning set forth in the Recitals.

“Unresolved Matters” has the meaning specified in Section 2.05(c).

“Year-End Financial Statements” has the meaning specified in Section 3.07(a).

Section 1.02Interpretations. 

(a)As used in this Agreement, references to the following terms have the meanings indicated: 

17

(i)to the Preamble or to the Recitals, Sections, Articles, Exhibits or Schedules are to the Preamble or a Recital, Section or Article of, or an Exhibit or Schedule to, this Agreement unless otherwise clearly indicated to the contrary; 

(ii)to any Law are to such Law as amended, modified, supplemented or replaced from time to time and any rules or regulations promulgated thereunder and to any section of any Law including any successor to such section;  

(iii)to any Governmental Authority include any successor to the Governmental Authority and to any Affiliate include any successor to the Affiliate;  

(iv)to any “copy” of any Contract or other document or instrument are to a true, correct and complete copy thereof;  

(v)to “hereof”, “herein”, “hereunder”, “hereby”, “herewith” and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or clause of this Agreement, unless otherwise clearly indicated to the contrary;  

(vi)to the “date of this Agreement”, “the date hereof” and words of similar import refer to the date set forth in the Preamble; and 

(vii)to “this Agreement” includes the Exhibits and Schedules (including the Seller Disclosure Schedule and the Purchaser Disclosure Schedule) to this Agreement. 

(b)Any documents and agreements referred to herein shall be deemed to have been “delivered”, “provided” or “made available” (or any phrase of similar import) to Purchaser Parties for purposes of this Agreement if they have been posted to the Data Room at least five (5) Business Days prior to the date of this Agreement. 

(c)Whenever the word “include”, “includes” or “including” is used in this Agreement, it will be deemed to be followed by the words “without limitation”.  The word “or” shall not be exclusive.  Any singular term in this Agreement will be deemed to include the plural, and any plural term the singular.  All pronouns and variations of pronouns will be deemed to refer to the feminine, masculine or neuter, singular or plural, as the identity of the Person referred to may require.  Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. 

(d)Whenever the last day for the exercise of any right or the discharge of any duty under this Agreement falls on a day other than a Business Day, the Party having such right or duty shall have until the next Business Day to exercise such right or discharge such duty.  Unless otherwise indicated, the word “day” shall be interpreted as a calendar day.  With respect to any determination of any period of time, unless otherwise set forth herein, the word “from” means “from and including” and the word “to” means “to but excluding”. 

(e)The table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. 

18

(f)References to “dollars” or “$” mean United States dollars, unless otherwise clearly indicated to the contrary. 

(g)The Parties have participated jointly in the negotiation and drafting of this Agreement; consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement. 

(h)No summary of this Agreement prepared by or on behalf of any Party shall affect the meaning or interpretation of this Agreement. 

(i)All capitalized terms used without definition in the Exhibits and Schedules (including the Seller Disclosure Schedule and the Purchaser Disclosure Schedule) to this Agreement shall have the meanings ascribed to such terms in this Agreement. 

(j)For purposes of determining whether any asset, liability or other amount was specifically recorded, identified, reserved for or accrued in the Final Balance Sheet, such asset, liability or other amount will be deemed specifically recorded, identified, reserved for or accrued in the Final Balance Sheet to the extent that (i) such asset, liability or other amount is specifically recorded, identified, reserved for or accrued in the underlying detail supporting the amounts set forth on the Final Closing Statement, including, to the extent applicable, the accounting work papers of the Company, Parent, Seller or Purchaser, as applicable, or (ii) such asset, liability or other amount was specifically recorded, identified, reserved for or accrued directly in the Final Balance Sheet. 

Article IITHE PURCHASE AND SALE; CLOSING; CLOSING DELIVERABLES

Section 2.01Purchase and Sale of Sale Shares.  Upon the terms and subject to the conditions set forth in this Agreement, and in reliance on the representations, warranties and covenants contained herein, at the closing of the Transaction (the “Closing”), Seller agrees to, and Parent agrees to cause Seller to, sell, assign, convey, transfer and deliver to Purchaser, and Purchaser agrees to purchase and accept from Seller, all Sale Shares held by Seller, free and clear of any Liens, for a cash amount equal to the Final Closing Consideration.   

Section 2.02The Closing.  Subject to the satisfaction of the conditions set forth in Article VI (or, to the extent permitted by applicable Law, the written waiver thereof by the Party entitled to waive any such condition), the Closing will take place remotely via the exchange of documents and signatures at 9:00 a.m., New York time on the later of (i) the third (3rd) Business Day after satisfaction or waiver of each condition to the Closing set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) and (ii) June 30, 2021, unless another time, date or place is agreed to in writing by the Parties.  The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.  The Closing will be effective as of 12:01 a.m. (Eastern U.S. Time) on the Closing Date (the “Effective Time”). 

19

Section 2.03Deliveries at Closing. 

(a)By Parent.  Upon the terms and subject to the conditions set forth in this Agreement, at or prior to the Closing, Parent shall deliver or cause to be delivered: 

(i)to Purchaser, counterparts of each of the Ancillary Agreements (other than the Confidentiality Agreement) to which Parent or any of its Affiliates is a party, duly executed by all parties thereto other than Purchaser or its applicable Affiliates; 

(ii)to Purchaser, on behalf of Parent, the certificate contemplated by Section 6.03(c); 

(iii)to Purchaser, the certificate or certificates representing the Sale Shares and the Rollover Shares, in accordance with the terms of the Rollover Agreement, in each case, duly endorsed in blank by the record holder thereof or accompanied by duly executed stock power(s) endorsed in blank by the record holder thereof or other appropriate instrument of sale, assignment and transfer with respect to the Shares; and 

(iv)to Purchaser, a duly executed IRS Forms W-9, and a certificate on a form reasonably acceptable to Purchaser, a that complies with the requirements of Treasury Regulations Section 1.1445-2(b) (“FIRPTA Certificate”). 

(b)By Purchaser.  Upon the terms and subject to the conditions set forth in this Agreement, at or prior to the Closing, Purchaser shall deliver or cause to be delivered: 

(i)to Escrow Agent, the Purchase Price Escrow Amount by wire transfer of immediately available funds to the account designated to Purchaser by Escrow Agent on or prior to the Closing Date; 

(ii)to the Escrow Agent (to the Escrow Account), the Purchase Price Adjustment Holdback Amount; 

(iii)to Seller, shares of common stock of Purchaser Parent in accordance with the terms of the Rollover Agreement; and 

(iv)to Parent, counterparts of each of the Ancillary Agreements (other than the Confidentiality Agreement) to which Purchaser or any of its Affiliates is a party, duly executed by Purchaser or its applicable Affiliates party thereto; and 

(v)to Parent, the certificate contemplated by Section 6.03(c). 

Section 2.04Estimated Closing Date Balance Sheet; Estimated Closing Consideration.  No later than five (5) Business Days before the Closing Date, Parent shall deliver to Purchaser (i) an estimated unaudited balance sheet of the Company, as of the Closing, which shall be prepared in accordance with GAAP consistently applied (except that such balance sheet will not be required to include footnotes) (the “Estimated Closing Date Balance Sheet”), and (ii) based on the Estimated Closing Date Balance Sheet, a statement (the “Estimated Closing Statement”) accompanied by documentation reasonably satisfactory to Purchaser in support of  

20

the calculation of information set forth therein, setting forth Parent’s calculation of the Closing Consideration (the “Estimated Closing Consideration”) and each element of the definition thereof.  The Estimated Closing Statement shall be prepared by Parent in a manner consistent with the terms of (including the definitions contained in) this Agreement.

Section 2.05Post-Closing Adjustments to the Estimated Closing Consideration. 

(a)From and after the Closing Date until the determination of the Final Closing Statement and Final Balance Sheet pursuant to this Section 2.05, Purchaser shall, and shall cause its Affiliates (including the Company) to, permit Parent and its Representatives reasonable access to the personnel, accountants and properties of the Company, and provide reasonable access (with the right to make copies), during normal business hours upon reasonable advance notice, to all of the books, records, Contracts and other documents (including auditor’s work papers) of the Company that are or could reasonably be relevant to the calculations set forth in the Final Closing Statement and Adjusted Closing Date Balance Sheet, any Dispute Notice or otherwise related to the negotiation or resolution of the Estimated Closing Statement or Estimated Closing Date Balance Sheet.  Parent and its Representatives shall use their reasonable best efforts to minimize any disruption to the Company or Purchaser in connection with such access. 

(b)Following the Closing, Purchaser shall prepare (i) an unaudited consolidated balance sheet of the Company as of the Closing prepared in accordance with GAAP consistently applied (except that such balance sheet will not be required to include footnotes) (the “Adjusted Closing Date Balance Sheet”) and (ii) a statement (“Post-Closing Statement”) setting forth Purchaser’s good-faith calculation of the Closing Consideration and each element of the definition thereof, based on the Adjusted Closing Date Balance Sheet.  Purchaser shall deliver the Post-Closing Statement, together with reasonable supporting detail as to each of the calculations set forth in the Post-Closing Statement and Adjusted Closing Date Balance Sheet to Parent no later than one hundred twenty (120) days following the Closing Date.  Notwithstanding anything herein to the contrary, the Parties agree that the Post-Closing Statement and Adjusted Closing Date Balance Sheet, and the component items and calculations therein, shall be prepared by Purchaser in accordance with the terms of (including the definitions contained in) this Agreement.  The Post-Closing Statement and Adjusted Closing Date Balance Sheet shall be conclusive, final and binding on all Parties absent manifest error unless Parent provides Purchaser written notice (a “Dispute Notice”) of any disputes or objections thereto (collectively, the “Disputed Items”) with reasonable supporting detail as to such Disputed Items, within sixty (60) days after receipt of the Post-Closing Statement and Adjusted Closing Date Balance Sheet (such period, the “Review Period”).   

(c)Purchaser and Parent shall, for a period of thirty (30) days (or such longer period as Purchaser and Parent may agree in writing) following delivery of a Dispute Notice to Purchaser (the “Resolution Period”), attempt in good faith to resolve their differences (all such discussions and communications related thereto shall (unless otherwise agreed by Purchaser and Parent in writing) be governed by Rule 408 of the Federal Rules of Evidence and any applicable similar state rule).  Any Disputed Items whose resolutions are agreed to by Purchaser and Parent in writing, together with any items or calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet not disputed or objected to by Parent in the Dispute  

21

Notice, are collectively referred to herein as the “Resolved Matters”.  Any Resolved Matters shall be conclusive, final and binding on all Parties absent manifest error, except to the extent such component could be affected by other components of the calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet that are the subject of a Dispute Notice.  If at the end of the Resolution Period, Purchaser and Parent have been unable to resolve all of the differences that they may have with respect to the matters specified in the Dispute Notice, either of Purchaser or Parent may, upon written notice to the other, refer all matters that remain in dispute with respect to the Dispute Notice (the “Unresolved Matters”) for resolution to a partner of KPMG US LLP (the “Independent Accountant”).  If KPMG US LLP notifies the Parties that it is unwilling or unable to serve as the Independent Accountant, within thirty (30) days thereafter, the Parties will jointly select and retain a partner or senior employee of a nationally recognized accounting firm that is not the auditor or independent accounting firm of any of the Parties, who is a certified public accountant and is independent of the Parties and impartial, to serve as the Independent Accountant, and such accounting firm shall be deemed the Independent Accountant for the purposes of the immediately preceding sentence.  If, during such thirty (30) day period, the Parties cannot mutually agree on an alternate Independent Accountant, any Party may request the American Arbitration Association to appoint as the Independent Accountant, within fifteen (15) days from the date of such request or as soon as practicable thereafter, a partner in a nationally recognized accounting firm that is not the auditor or independent accounting firm of any of the Parties, who is a certified public accountant and who is independent of the Parties and impartial.  If one or more Unresolved Matters are submitted to the Independent Accountant for resolution, Purchaser and Parent shall enter into a customary engagement letter with, and to the extent necessary each Party will waive and cause its controlling Affiliates to waive any conflicts with, the Independent Accountant at the time such dispute is submitted to the Independent Accountant and shall cooperate with the Independent Accountant in connection with its determination pursuant to this Section 2.05.  Within ten (10) days after the Independent Accountant has been retained, each of Purchaser and Parent shall furnish, at their own expense, to the Independent Accountant and substantially simultaneously to the other a written statement of its position with respect to each Unresolved Matter.  Within five (5) Business Days after the expiration of such ten (10) day period, each of Purchaser and Parent may deliver to the Independent Accountant its response to the other’s position on each Unresolved Matter; provided that it delivers a copy thereof substantially simultaneously to the other.  With each submission, each of Purchaser and Parent may also furnish to the Independent Accountant such other information and documents as it deems relevant or such information and documents as may be requested by the Independent Accountant; provided that it delivers a copy thereof substantially simultaneously to the other.  The Independent Accountant may, at its discretion, conduct one or more conferences (whether in person or by teleconference) concerning the disagreement and each of Purchaser and Parent shall have the right to present additional documents, materials and other information and to have present its Representatives at each of such conferences.

(d)The Independent Accountant shall be directed to promptly, and in any event within thirty (30) days after its appointment pursuant to Section 2.05(c), render its decision on the Unresolved Matters (and not on any other matter or calculation set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet).  The Independent Accountant’s determination as to each Unresolved Matter shall be set forth in a written statement delivered to each of Purchaser and Parent, which shall include the Independent Accountant’s (i)  

22

determination as to the calculation of each of the Unresolved Matters and (ii) the corresponding corrective calculations set forth in the Post-Closing Statement or Adjusted Closing Date Balance Sheet that are derived from its determination as to the calculations of the Unresolved Matters, all of which shall be conclusive, final and binding on all Parties absent manifest error.  In resolving any Unresolved Matter, the Independent Accountant may not assign a value to such item greater than the greatest value for such item claimed by Purchaser in the Post-Closing Statement or Adjusted Closing Date Balance Sheet or by Parent in the Dispute Notice or less than the lower value for such item claimed by Purchaser in the Post-Closing Statement or Adjusted Closing Date Balance Sheet or by Parent in the Dispute Notice.  The Independent Accountant shall also determine the proportion of its fees and expenses to be paid by each of Purchaser and Parent based on the relative extent (as determined by the Independent Accountant) to which the Independent Accountant has accepted the positions of Purchaser and Parent in its determination as to each Unresolved Matter.

(e)For purposes of this Agreement, subject to the third sentence of Section 2.05(b), the “Final Closing Statement” shall be (i) in the event that no Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), (ii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, and Purchaser and Parent are able to agree on all matters set forth in such Dispute Notice, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted pursuant to the agreement of Purchaser and Parent in writing, or (iii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period and Purchaser and Parent are unable to agree on all matters set forth in such Dispute Notice, the Post-Closing Statement delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted by the Independent Accountant to be consistent with (A) the Resolved Matters and (B) the Independent Accountant’s determination as to the calculation of the Unresolved Matters in accordance with Section 2.05(c). 

(f)For purposes of this Agreement, subject to the third sentence of Section 2.05(b), the “Final Balance Sheet” shall be (i) in the event that no Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), (ii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period, Purchaser and Parent are able to agree on all matters set forth in such Dispute Notice, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted pursuant to the agreement of Purchaser and Parent in writing or (iii) in the event that a Dispute Notice is delivered by Parent to Purchaser prior to the expiration of the Review Period and Purchaser and Parent are unable to agree on all matters set forth in such Dispute Notice, the Adjusted Closing Date Balance Sheet delivered by Purchaser to Parent pursuant to Section 2.05(b), as adjusted by the Independent Accountant to be consistent with (A) the Resolved Matters and (B) the Independent Accountant’s determination as to the calculation of the Unresolved Matters in accordance with Section 2.05(c). 

23

(g)Payment of the Post-Closing Adjustment. 

(i)If the Final Closing Consideration exceeds the Estimated Closing Consideration, then within two (2) Business Days after the final determination of the Final Closing Statement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account to Seller an aggregate amount equal to the Purchase Price Adjustment Holdback Amount.  Contemporaneously with that delivery, Purchaser shall pay to Seller by wire transfer of immediately available funds to an account designated by Seller the full amount by which the Final Closing Consideration exceeds the Estimated Closing Consideration (if any).  In the case of this Section 2.05(g)(i), Seller’s sole and exclusive remedy shall be to seek payment from Purchaser of the amount determined pursuant to this Section 2.05(g)(i). 

(ii)If the Final Closing Consideration is less than or equal to the Estimated Closing Consideration, then within two (2) Business Days after the final determination of the Final Closing Statement, Purchaser and Seller shall deliver a Joint Direction instructing the Escrow Agent to release from the Escrow Account: (i) to the Purchaser, the lesser of (A) the Purchase Price Adjustment Holdback Amount and (B) the absolute value of the dollar amount by which the Estimated Closing Consideration exceeds the Final Closing Consideration, by wire transfer of immediately available funds to the account or accounts designated in writing by Purchaser; and (ii) to Seller, any remaining amount of the Purchase Price Adjustment Holdback Amount, if any, following the payment to the Company made pursuant to this Section 2.05(g)(ii); provided, that if the absolute value of the difference between the Estimated Closing Consideration and the Final Closing Consideration is greater than the Purchase Price Adjustment Holdback Amount, then Seller shall pay to Purchaser the difference between the absolute value of such difference and the Purchase Price Adjustment Holdback Amount by wire transfer or delivery of other immediately available funds.  In the case of this Section 2.05(g)(ii), Purchaser’s sole and exclusive remedy shall be to seek payment from Seller of the amount determined pursuant to this Section 2.05(g)(ii). 

(h)All payments pursuant to this Section 2.05 shall be treated as an adjustment to the Closing Consideration for all non-U.S., federal, state and local income Tax purposes. 

Section 2.06Withholding Taxes.  Notwithstanding anything to the contrary contained in this Agreement, Purchaser and the Company shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as may be required to be deducted and withheld under the Code, or under any provision of state, local or foreign Tax Law.  Purchaser, Parent and Seller shall cooperate, and Parent and Seller shall cause the Company to cooperate, as reasonably requested by another Party to establish any applicable exemption or reduction to such deduction or withholding, including by providing any applicable withholding forms or certificates.  Amounts deducted and withheld pursuant to this Agreement will be treated as having been paid to the Person in respect of which such deduction or withholding was made. 

24

Article IIIREPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

Except as set forth in the disclosure schedule delivered by Parent and Seller to Purchaser Parties concurrently with the execution of this Agreement (the “Seller Disclosure Schedule”) (it being understood and agreed by the Parties that disclosure of any item in any section or subsection of the Seller Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Seller Disclosure Schedule to which the relevance of such item is reasonably apparent on its face), Parent and Seller hereby jointly and severally represent and warrant to Purchaser Parties as of the date hereof and as of the Closing Date as follows:

Section 3.01Organization, Standing and Power.   

(a)Each of Parent and Seller is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, this Agreement and the Ancillary Agreements to which it will be a party. Each Affiliate of Parent (other than Seller and the Company) that will be a party to any Ancillary Agreement is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, the Ancillary Agreements to which such Person will be a party. 

(b)Each of the Company and its Subsidiaries are duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to own or lease and operate all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and its Subsidiaries are duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned, leased or operated by it makes such licensing or qualification required by Law. Parent has made available to Purchaser Parties true, correct and complete copies of the Organizational Documents of each of the Company and its Subsidiaries. Neither the Company nor any of its Subsidiaries are not in violation of any of its Organizational Documents. 

Section 3.02Authorization.  The execution, delivery and performance by Parent and Seller of this Agreement and each Ancillary Agreement to which it is or will be party, and the consummation by Parent and Seller of the Transactions, have been duly and validly authorized by all requisite action of each of Parent and Seller. This Agreement has been, and each applicable Ancillary Agreement will be, at or prior to the Closing, duly executed and delivered by each of Parent and Seller, as applicable, and, assuming due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitutes a legal, valid and binding obligation of each of Parent and Seller, as applicable, enforceable against each of Parent and Seller, as applicable, in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar Laws of general  

25

application affecting or relating to the enforcement of creditors’ rights generally or general principles of equity, whether considered in a proceeding at Law or in equity (the “Bankruptcy and Equity Exception”).

Section 3.03Noncontravention.  

(a)None of the execution and delivery of this Agreement or any applicable Ancillary Agreement by Parent, Seller or the Company, as applicable, the consummation by Parent, Seller or the Company, as applicable, of the Transactions, or compliance by Parent, Seller or the Company, as applicable, with any of the terms or provisions hereof or thereof will (i) conflict with or violate any provision of their respective Organizational Documents or (ii) (A) assuming that the authorizations, consents and approvals referred to in Section 3.04 are obtained and the filings referred to in Section 3.04 are made, violate any Law applicable to Parent, Seller or the Company, (B) with or without notice, lapse of time or both, violate, breach or constitute a default under any of the terms, conditions or provisions of any Material Contract or accelerate or give rise to a right of termination, cancellation or acceleration of any of the Company’s obligations under any such Material Contract or to the loss or diminution of any of the Company’s rights or benefits under a Material Contract, (C) assuming that the authorizations, consents and approvals referred to in Section 3.04 are obtained and the filings referred to in Section 3.04 are made, with or without notice, lapse of time or both, violate, breach or constitute a default under any Permit held by the Company or by which the Company or any of its assets or properties are bound or (D) result in the creation of any Lien (other than any Permitted Lien) on any properties, rights or assets of the Company, except, in the case of clause (ii), for such violations, defaults, accelerations, rights, losses and Liens as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 

(b)No vote or consent of the holders of any class or series of capital stock or other equity interest of Parent, Seller or the Company or any Affiliate of the foregoing (including IHC) is necessary to approve this Agreement, any Ancillary Agreement or the Transactions. 

Section 3.04Governmental Approvals.  Except for (a) filings required under, and compliance with other applicable requirements of, the HSR Act and (b) Consents set forth in Section 3.04 of the Seller Disclosure Schedule and any filings that may be made by or on behalf of Purchaser Parties or their Affiliates, no consents, authorizations or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution, delivery and performance of this Agreement or any applicable Ancillary Agreement by Parent, Seller or the Company, as applicable, or the consummation by Parent, Seller or the Company, as applicable, of the Transactions, other than such other consents, authorizations, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions.  

Section 3.05Capital Stock of the Company. 

(a)As of the date hereof, four hundred (400) Shares are issued and outstanding.  Section 3.05(a) of the Seller Disclosure Schedule sets forth a list, as of the date hereof, of all holders of outstanding Shares. 

26

(b)Seller is the sole record and beneficial owner of three hundred and forty (340) issued and outstanding Shares.  Seller has good and valid title to all such Shares, free and clear of all Liens (other than any transfer restrictions imposed by federal and state securities and insurance laws), and upon delivery by Seller of such Shares at the Closing, good and valid title to such Shares will pass to Purchaser. 

(c)Except for this Agreement, Seller is not a party to any Contracts with respect to the voting, purchase, dividend rights, disposition or transfer of the capital stock of the Company. 

(d)There are (i) no outstanding shares of capital stock of, or other equity or voting interest in, the Company, (ii) no outstanding securities of the Company convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company, (iii) no outstanding options, warrants, rights or other commitments or agreements to acquire from the Company, or that obligate the Company to issue or register, or that restrict the transfer or voting of, any capital stock of, or other equity or voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company, (iv) no obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any capital stock of, or other equity or voting interest (including any voting debt) in, the Company (the items in clauses (i), (ii), (iii) and (iv)), together with the capital stock of the Company, being referred to collectively as “Securities”), (v) no calls, subscriptions, preemptive rights or Contracts for the purchase or issuance of Securities, (vi) no “phantom stock” or similar obligations of the Company, (vii) no Contracts requiring the Company to acquire any equity interest of any other Person and (viii) no other obligations by the Company to make any payments based on the price or value of any Securities or dividends paid thereon or revenues, earnings or financial performance or any other attribute of the Company. 

(e)There are no outstanding agreements of any kind which (i) obligate the Company to repurchase, redeem or otherwise acquire any Securities, (ii) obligate the Company to preempt the sale of any Securities to Purchaser, (iii) obligate the Company to sell, or grant any Person a right to acquire, or in any way dispose of, any Securities or obligations exercisable or exchangeable for, or convertible into, Securities or (iv) obligate the Company to grant, extend or enter into any such agreements, and the Company does not have any outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote with the holders of the Shares on any matter.  All Shares have been duly authorized and validly issued and are fully paid, nonassessable, issued in compliance with all applicable Law concerning the issuance of securities and the Company’s Organizational Documents and have not been issued in violation of any preemptive or other similar rights. 

(f)The Securities of each Subsidiary of the Company issued and outstanding as of the date hereof: (i) have been duly authorized and validly issued; (ii) are, to the extent applicable, fully paid and non-assessable; and (iii) has not been issued in violation of and is not subject to, any preemptive or subscription rights, rights of first refusal or other similar rights, except, in each case, where the (A) failure to be so duly authorized, validly issued, fully paid or non-assessable, or (B) issuance in violation of or subject to such rights, is not material to the Company and its Subsidiaries, taken as a whole.  As of the date hereof, neither the Company nor any of its Subsidiaries has any Subsidiaries or owns any Securities in any other Person.  

27

(g)As of the date hereof, the Company is the record and beneficial owner of a majority of the Securities and voting power of each of its Subsidiaries, in each case free and clear of any Liens, except for Permitted Liens.  There are no outstanding (i) options, warrants, purchase rights, subscription rights, preemptive rights, conversion rights, exchange rights, calls, puts, rights of first refusal or other contracts that require the Company to issue, sell or otherwise cause to become outstanding or to acquire, repurchase or redeem Securities of any Subsidiary, (ii) stock appreciation, phantom stock, profit participation or similar rights with respect to such Subsidiaries or (iii) bonds, debentures, notes, or other Indebtedness that entitles the holders to vote (or that is convertible or exercisable for or exchangeable into securities that entitle the holders to vote) with holders of securities of any Subsidiary on any matter. 

Section 3.06Subsidiaries.  Except for Subsidiaries set forth on Section 3.06 of the Seller Disclosure Schedule, the Company has (and in the last four (4) years has had) no Subsidiaries. 

Section 3.07Financial Statements; No Undisclosed Liabilities. 

(a)True, complete and correct copies of (i) the audited financial statements of the Company for the years ended December 31, 2019 and 2020, and the related statements of operations, stockholders’ equity and cash flows for the fiscal years ended December 31, 2019 and 2020 (collectively, the “Year-End Financial Statements”), and (ii) unaudited financial statements of the Company for the period ended March 31, 2021 and the related statements of operations, stockholders’ equity and cash flows for the three-month period then ended (the “Interim Financial Statements” and together with the Year-End Financial Statements, the “Financial Statements”), have been made available to Purchaser.  The Financial Statements were prepared from the books of account and other financial records of the Company and its Subsidiaries, as applicable, and were prepared in accordance with GAAP consistently applied during the periods involved except as otherwise noted therein.  The Financial Statements fairly present, in all material respects, the financial position and the results of operations of the Company and its Subsidiaries, at the dates, and for the periods, presented therein (subject, in the case of Interim Financial Statements, to changes resulting from normal year-end audit adjustments and to the absence of certain notes).  As of their respective filing dates, the Financial Statements complied in all material respects with all requirements of applicable Law. 

(b)Except as otherwise set forth at Section 3.07(b) of the Seller Disclosure Schedule, neither the Company nor any of its Subsidiaries have any Liabilities which would be required to be reflected on, reserved against or otherwise described on a financial statement of the Company prepared in accordance with GAAP or the notes thereto, and were not so reflected on, reserved against or described, except Liabilities (i) reflected on, reserved against or described on the Financial Statements of the Company as at December 31, 2020 (including the notes thereto), (ii) incurred after December 31, 2020 in the ordinary course of business consistent with past practice or (iii) required or reasonably contemplated pursuant to this Agreement or the Ancillary Agreements to be incurred by the Company in connection with the Transactions. 

(c)The books, records and accounts of the Company and its Subsidiaries have been maintained in all material respects in compliance with all applicable Law and reasonable business practices. The Company maintains a system of internal accounting controls sufficient to  

28

provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP.

Section 3.08Absence of Certain Changes.  

(a)Since December 31, 2020, except for the Transactions, the business of the Company has been conducted in all material respects in the ordinary course of business consistent with past practice and  

(b)Since December 31, 2020, there has not been any change, occurrence or development in the financial condition, properties, assets, liabilities, business or results of operations or any other change, occurrence or development, which has had, or would, individually or in the aggregate, reasonably be expected to have, a Material Adverse Effect. 

Section 3.09Legal Proceedings.   

(a)There is no pending or, to the Knowledge of Parent or Seller, threatened Action  against the Company or any of its Subsidiaries (other than ordinary course claims under insurance policies within the applicable limited thereof), which, if adversely determined, would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. 

(b)Neither the Company nor any of its Subsidiaries are not subject to any cease-and-desist or other Order issued by, or is a party to any written agreement, consent agreement, memorandum of understanding, commitment letter or similar undertaking between the Company or its Subsidiaries, on the one hand, and any Governmental Authority, on the other hand, or is subject to any Order by, or is a recipient of any extraordinary supervisory letter from, or has adopted any policy, procedure or board resolutions at the request of, any Governmental Authority, that materially restricts the conduct of its business, nor, since December 31, 2018, have Parent, Seller, the Company or any of the Company’s Subsidiaries been advised in writing by any Governmental Authority that it is considering issuing or requesting any of the foregoing. 

Section 3.10Compliance with Laws; Permits. 

(a) The Company and each of its Subsidiaries are, and have been since December 31, 2018, in compliance in all material respects with all Laws applicable to the Company, its respective business operations or its Subsidiaries; 

(ii)Since December 31, 2018, none of Parent, Seller, the Company or any of the Company’s Subsidiaries have received any written notice from any Governmental Authority of any material violation of any Laws by the Company or any of its Subsidiaries; and 

(iii)The Company or one of its Subsidiaries holds all Permits required by Law for the lawful conduct of its respective businesses as presently conducted (but, for the avoidance of doubt, excluding any Permits and Contracts relating to Intellectual Property) (the “Business Licenses”), (iv) all Business Licenses are valid and in good standing and are in full force and effect, (v) the Company or its Subsidiary, as applicable, is in compliance in all material respects with the terms of all of the Business Licenses and (vi)  

29

the Company and its Affiliates have not received any written communication alleging any material noncompliance on the part of the Company or any of its Subsidiaries with respect to any Law that has not been cured as of the date hereof.

(b)Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions, Parent and Seller are in compliance with all Laws applicable to Parent and Seller, respectively.  As of the date hereof, neither the Company nor any of its Subsidiaries are not a party to any Government Contracts. 

Section 3.11Insurance Policies.  Section 3.11 of the Seller Disclosure Schedule sets forth a list of all in-force property and liability insurance policies and fidelity or financial institution bonds that are maintained by or for the benefit of the Company and its Subsidiaries, including enterprise-wide insurance policies that cover (a) the Company on the one hand and (b) one or more of Parent or its Affiliates on the other hand. All current property and liability insurance policies covering the Company and its Subsidiaries are in full force and effect (and all premiums due and payable thereon have been paid in full on a timely basis), and no written notice of cancellation, termination or revocation or other written notice that any such insurance policy is no longer in full force or effect or that the issuer of any such insurance policy is not willing or able to perform its obligations thereunder has been received as of the date hereof by Parent or its Affiliates. None of Parent, Seller, the Company or its Subsidiaries, nor, to the Knowledge of Parent, any insurer under such property and liability insurance policies, is in violation or breach of, or default under, any provision thereof. There are no claims by or on behalf of the Company or its Subsidiaries pending under any such insurance policies as to which coverage has been denied by the insurer or as to which, after reviewing the information provided with respect to such claim, the insurer has advised in writing that it intends to deny. 

Section 3.12Material Contracts. 

(a)Section 3.12(a) of the Seller Disclosure Schedule sets forth a list of all the following Contracts  to which the Company or its Subsidiaries are a party as of the date hereof (the “Material Contracts”): 

(i)Material Distribution Partner Contracts; 

(ii)Material Vendor Contracts; 

(iii)Contracts that involved the expenditure of more than $100,000 in the aggregate during (A) the twelve (12) month period ended as of December 31, 2020 or (B) the twelve (12) month period ended as of December 31, 2019; 

(iv)joint venture, investment, partnership, stockholder, limited liability or other similar Contracts (other than distribution agreements and reseller agreements entered into in the ordinary course of business consistent with past practice); 

(v)Contracts providing for the direct or indirect acquisition or disposition by the Company or any of its Subsidiaries of any business, division or product line (whether  

30

by merger, sale of stock, sale of assets or otherwise), or capital stock of any other Person since December 31, 2015;

(vi)Contracts providing for the incurrence of any Indebtedness having an outstanding principal amount of more than $50,000 or the making of any loans (other than loans made to employees in the ordinary course of business consistent with past practice); 

(vii)Contracts that prohibit the payment of dividends or distribution in respect of the capital stock of the Company or any of its Subsidiaries, the pledging of the capital stock of the Company or any of its Subsidiaries or the incurrence of Indebtedness by the Company or any of its Subsidiaries; 

(viii)Contracts under which the Company or any of its Subsidiaries has directly or indirectly guaranteed or otherwise agreed to be responsible for Indebtedness of more than $100,000 for borrowed money or other obligations or liabilities of any Person (except for Indebtedness for borrowed money or other obligations or liabilities); 

(ix)Contracts containing covenants requiring capital expenditures in excess of $75,000 on an annual basis or in excess of $150,000 in the aggregate; 

(x)Contracts creating any Lien (other than Permitted Liens) upon any material assets of the Company or any of its Subsidiaries, other than purchase money security interests in connection with the acquisition of equipment in the ordinary course of business consistent with past practice; 

(xi)Contracts pursuant to which (A) any license or other rights with respect to material Intellectual Property is granted by a third party to, or granted to a third party by, the Company or any of its Subsidiaries, other than agreements for unmodified, generally commercially available “off-the-shelf” Software that have been granted on standardized, generally available terms, (B) the Company or any of its Subsidiaries has assigned or transferred or agreed to assign or transfer any material Intellectual Property to any third party or (C) the Company or any of its Subsidiaries is subject to any obligation or covenant with respect to the use, licensing, enforcement, prosecution or other exploitation of any material Intellectual Property, including standstills, settlements and trademark co-existence or consent Contracts; 

(xii)(A) Contracts containing provisions or covenants that (1) expressly limit or purport to limit the ability of the Company or any of its Subsidiaries (or, after the Closing, Purchaser or any of its Affiliates) to engage in any line of business or with any Person or engage in any business activity in any geographic area or (2) other than in the ordinary course of business, restrict, directly or indirectly, the Company’s or any of its Subsidiaries’ (or, after the Closing, Purchaser’s or its Affiliates) ability to solicit or hire any Person or solicit business from any Person, (B) Contracts that could require the disposition of any material assets or line of business of the Company or any of its Subsidiaries (or, after the Closing, Purchaser or its Affiliates) and (C) Contracts that contain a “most favored nation” provision or, following the Closing, would reasonably be  

31

expected to obligate Purchaser or any of its Affiliates to conduct business with any third party on a preferential or exclusive basis (each such Contract as specified in clauses (A), (B) and (C), a “Restricted Contract”);

(xiii)Contracts between, on the one hand, the Company, and, on the other hand, any Affiliates of the Company, and any Affiliate Agreements; 

(xiv)leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) under which the Company or any of its Subsidiaries leases or occupies Leased Real Property; 

(xv)Contracts with AKC; 

(xvi)any Government Contract;  

(xvii)Contracts that contain a put, call, right of first refusal, right of first offer or similar right pursuant to which the Company or any of its Subsidiaries could be required to, directly or indirectly, purchase or sell, as applicable, any securities, capital stock or other interests, assets or business of any Person; 

(xviii)Contracts related to any settlement of any material Actions;  

(xix)Contracts as to which the consequences of its existence or a default, a non-renewal or a termination thereof would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; 

(xx)any collective bargaining agreement or any Contract with any labor or trade union, works council or any other employee representative body that relates to any Company Employee or any group of Company Employees; 

(xxi)any employment, retention, severance Contract or similar agreement (other than standard offer letters provided by Parent or ones of its Affiliates not containing any severance or retention provisions) with any Company Employee, other than an employment agreement that is for an at-will employee who makes less than $100,000; and 

(xxii)Except for contracts that are terminable within ninety (90) days, Contracts that require the consent of, or grant a termination right to, any party thereto in connection with the consummation of the Transactions.   

(b)Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each Material Contract is valid and binding on the Company or its Subsidiaries and is in full force and effect and enforceable in accordance with its terms, (ii) the Company or its Subsidiaries and, to the Knowledge of Parent or Seller, each of the other parties thereto are not in breach of, default or violation under any of such Material Contracts and, to the Knowledge of Parent or Seller, no event has occurred that with notice or lapse of time, or both, would constitute such a breach, default or violation, and (iii) none of Parent or its Affiliates has received written notice of the existence of any event or condition which constitutes, or, after  

32

notice or lapse of time or both, will constitute, a breach on the part of the Company of any such Material Contract.  A copy of each Material Contract has previously been made available to Purchaser.

Section 3.13Intellectual Property; IT Assets; Privacy. 

(a)Section 3.13(a) of the Seller Disclosure Schedule sets forth a list, as of the date hereof, of all Registered Company Intellectual Property.  Each item of Registered Company Intellectual Property that is material to the business of the Company is subsisting, valid and enforceable.  There are no Actions pending or, to the Knowledge of Parent or Seller, threatened with respect to any material Registered Company Intellectual Property, including with respect to the validity or enforceability thereof, except as may reasonably be expected during the ordinary course of prosecution of applications for Intellectual Property with a Governmental Authority. 

(b)The Company is the sole and exclusive owner and possesses all right, title and interest in and to the Company Intellectual Property (free and clear of any Liens other than Permitted Liens), and otherwise has a valid, written and enforceable right to use each item of material Intellectual Property used or held for use by the Company in its business as currently conducted, and all such ownership or other rights to use such material Intellectual Property shall survive the consummation of the Transactions without modification, cancellation, termination or suspension, or acceleration of any right, obligation or payment with respect to any such material Intellectual Property.  No material Company Intellectual Property is subject to any outstanding Order or agreement adversely affecting the Company’s ownership or use of, or any rights in or to, any such material Company Intellectual Property.  

(c)Since December 31, 2018, the operation of the business of the Company and the making, using, importing, selling or offering for sale, disposition or any other exploitation of any product or service of the Company have not infringed, misappropriated or otherwise violated any Intellectual Property of any third party in any material respect.  Except as set forth on Section 3.13(c)  the Seller Disclosure Schedules, since December 31, 2018, there has not been any pending or threatened Actions (including any “cease and desist” letter or invitation to take a license) against the Company alleging that the operation of the business of the Company or the making, using, importing, selling or offering for sale, disposition or any other exploitation of any product or service of the Company infringes, misappropriates or otherwise violates any Intellectual Property of any third party.  

(d)Since December 31, 2018, to the Knowledge of Parent or Seller, no third party has infringed, misappropriated or otherwise violated any Company Intellectual Property in any material respect, and the Company has not asserted any claim (including any “cease and desist” letter or invitation to take a license) or commenced any Action against any Person alleging any such infringement, misappropriation or violation. 

(e)The Company has taken all reasonable measures to maintain, protect and enforce its rights in the material Company Intellectual Property, including the confidentiality of all material Trade Secrets that are included therein, and no such material Trade Secret has been used or discovered by or disclosed to any Person except pursuant to written, valid and enforceable  

33

non-disclosure agreements protecting the confidentiality thereof, which such agreements have not been breached in any material respect.

(f)All of the Company’s current and former employees, contractors, consultants and other personnel who have been involved in development or creation of any material Intellectual Property for or on behalf of the Company have executed a written agreement containing a valid, enforceable and irrevocable present assignment of all right, title and interest in and to such Intellectual Property to the Company. 

(g)No Software (or products containing Software) sold, licensed, conveyed or distributed by the Company contains, is derived from, or links to any Software that is governed by an Open Source License.  The Company is in material compliance with all Open Source Licenses to which any such Software used by the Company is subject. 

(h)Except as otherwise set forth on Section 3.13(h) of the Seller Disclosure Schedule, the Company is the sole and exclusive owner of, and possesses all right, title and interest in and to, the Company IT Assets (free and clear of any Liens other than Permitted Liens), or otherwise has a valid, written and enforceable right to use each material IT Asset used or held for use by the Company as currently conducted and as intended to be conducted, and all such ownership or other rights to use such IT Assets shall survive the consummation of the Transactions without modification, cancellation, termination or suspension, or acceleration of any right, obligation or payment with respect to any such IT Assets.  All of the IT Assets used or held for use by the Company: (i) operate and perform in all material respects as required by the Company for the operation of its business as currently conducted or intended to be conducted; (ii) since December 31, 2018, have not materially malfunctioned or failed, or suffered a material Security Breach or material unscheduled downtime; and (iii) are free from any viruses, worms and other malware.  

(i)With respect to the IT Assets used or held for use by the Company, the Company has, within the past twelve (12) months, conducted reasonable penetration testing, risk assessments and data backup, data storage, data processing (including the Processing of Personal Information), system redundancy and disaster avoidance and recovery testing consistent with industry best practices for similarly situated insurance companies.  The Company has resolved in all material respects each material deficiency identified in any such testing or assessment. True, correct and complete copies of the results and reports of any such testing or assessment have been made available to Purchaser. 

(j)The Company has at all times complied in all material respects with all Privacy Laws relating to data privacy, protection and security (including with respect to Processing of any Personal Information), including the Privacy Policies.  Since December 31, 2018, the Company has not been under investigation by any Governmental Authority for a violation of any applicable Privacy Law and no claims have been asserted or threatened in writing against the Company by any Person or Governmental Authority alleging any violation of Privacy Laws or the Privacy Policies. 

(k)The Company (i) maintains a comprehensive and written information privacy and security protocol that complies with all applicable Privacy Laws and Privacy Policies, and (ii)  

34

maintains reasonable measures to protect the privacy, operation, confidentiality, integrity and security of all Personal Information against any Security Breach.  To the Knowledge of Parent or Seller, the Company has not suffered a material Security Breach, been required to notify any Person or Governmental Authority of any material Security Breach or been adversely affected by any viruses, worms or other malware or denial-of-service attacks on any IT Assets.  All Company Employees, contractors, consultants and other personnel of the Company who have access to or have a role in the Processing of Personal Information have been informed of and trained regarding Privacy Laws and the Privacy Policies.

Section 3.14Employee Benefits Matters. 

(a)Section 3.14(a) of the Seller Disclosure Schedule sets forth a list of each material Benefit Plan and separately identifies each Benefit Plan that is sponsored by the Company (each, a “Company Benefit Plan”).  For purposes of this Agreement, “Benefit Plan” means any “employee benefit plan” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”)) and any other compensation or employee benefit plan, policy, program, arrangement or agreement, whether or not covered by ERISA, for the benefit of any Company Employee or any individual service provider who primarily provides services to the Company, including any incentive compensation, equity or equity-based compensation, profit-sharing, retirement, post-retirement, severance or termination pay, employment, individual consulting, paid time off, fringe benefit, welfare, bonus, gross-up, retention, change-in-control or deferred compensation plan, policy, program, arrangement or agreement that is sponsored or maintained by, or contributed to by Parent or any Affiliate thereof (including Seller and the Company) or to which Parent or any Affiliate thereof (including Seller and the Company) is obligated to contribute or pursuant to which Parent or any Affiliate thereof (including Seller and the Company) has any potential liability, other than, in each case, any such plan, policy, program, arrangement or agreement that is sponsored by a Governmental Authority. 

(b)With respect to each Benefit Plan, Parent has made available to Purchaser Parties copies of (in each case, only if applicable) (i) each plan document, including any amendments thereto, (ii) a written description of such benefit Plan if such plan is not set forth in writing, (iii) the most recent annual report on Form 5500 required to be filed with the IRS, and (iv) the most recent summary plan descriptions, including any summary of material modifications thereto. 

(c)(i) Each Benefit Plan has been established and administered in all material respects in compliance with its terms and applicable Law, (ii) none of Parent, any Affiliate of Parent (including Seller and the Company) nor, to the Knowledge of Parent and Seller, any third party has engaged in any non-exempt “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA), with respect to any Benefit Plan that could reasonably be expected to result in the imposition of any liability to the Company, (iii) there are no pending or, to the Knowledge of Parent or Seller, threatened claims (other than routine claims for benefits), audits, actions or proceedings with respect to any Benefit Plans, and (iv) all contributions or other amounts payable by the Company with respect to each Benefit Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP in all material respects. 

35

(d)All Benefit Plans that are “employee pension plans” (as defined in Section 3(2) of ERISA) that are intended to be tax-qualified under Section 401(a) of the Code (each, a “Seller Pension Plan”) have received a favorable opinion letter from the IRS or are entitled to rely on a favorable determination letter from the IRS, or have filed a timely application therefor and, to the Knowledge of Parent or Seller, no event has occurred since the date of the most recent determination letter that has not been revoked or application therefor relating to any such Seller Pension Plan that would reasonably be likely to cause the loss of such qualification status of such Seller Pension Plan.  Parent has made available to Purchaser Parties a copy of the most recent determination or opinion letter received with respect to each Seller Pension Plan, as well as a copy of each pending application for a determination letter (if any). 

(e)None of Parent, any Affiliate of Parent (including Seller and the Company) nor any trade or business, whether or not incorporated, that, together with Parent or any Affiliate thereof would be treated as a single employer under Section 414 of the Code, (i) has contributed (or has any obligation of any sort) in the last six (6) years to a plan that is subject to Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code (or similar provision under non-U.S. law) or (ii) has maintained, established, participated in or contributed to, or is or has been obligated to contribute to, or has otherwise incurred any obligation or liability (including any contingent liability) under any “multiemployer pension plan” (as defined in Section 3(37) of ERISA).  No Benefit Plan is a “multiple employer plan” (within the meaning of Section 4063 of ERISA). 

(f)No Benefit Plan provides health, medical, dental or life insurance benefits following retirement or other termination of employment, except as required under Section 4980B of the Code or any other similar applicable Law or for coverage through the end of the calendar month in which a termination of employment occurs. 

(g)Neither the execution of this Agreement, nor any stockholder or other approval of this Agreement, nor the consummation of the Transactions (whether alone or in connection with any other event(s)) could (i) entitle any Company Employee to severance pay or any increase in severance pay, (ii) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise), or increase the amount, of compensation due to any Company Employee, (iii) cause Parent or any Affiliate thereof (including Seller and the Company) to transfer or set aside any assets to fund any benefits under any Benefit Plan, or (iv) limit or restrict the right to merge, amend, terminate or transfer the assets of any Benefit Plan on or following the Closing. 

(h)Neither the execution of this Agreement, nor any stockholder or other approval of this Agreement, nor the consummation of the Transactions (whether alone or in connection with any other event(s)) could result in the payment of any amount that could, individually or in combination with any other such payment, constitute an “excess parachute payment”, as defined in Section 280G(b)(1) of the Code. 

(i)Neither Parent nor any Affiliate thereof (including Seller and the Company) has  an obligation to provide, and no Benefit Plan provides any Company Employee with the right to, a “gross-up”, indemnification reimbursement or similar payment in respect of any Taxes that may become payable under Section 409A or 4999 of the Code. 

36

(j)No Benefit Plan is maintained outside the jurisdiction of the United States or covers any Company Employees who reside or work outside the United States. 

(w)Section 3.14(j) of the Seller Disclosure Schedule sets forth, with respect to each Company Employee, (1) an estimate of the amount (or value if such payment is not made in cash) of the payments to be made to such employee by Parent or any Affiliate thereof (including Seller and the Company) in connection with the consummation of the Transactions (for example, co-invest interests, management promote interests, transaction bonuses or severance), and (2) whether such Company Employee is a party to or is bound by any employment agreement or restrictive covenants (for example, non-competition, non-solicitation or confidentiality covenants) with Parent, Seller or any other parent entity of the Company.  Any agreement triggering payment of the type described in Section 3.14(k)(1) or listed in Section 3.14(k)(2) of the Seller Disclosure Schedule has been provided by Parent to Purchaser. 

Section 3.15Labor. 

(a)Section 3.15(a) of the Seller Disclosure Schedules, sets forth a true, complete and correct list of the Employee Census as such list may be updated in accordance with Section 5.05(a). 

(b)No Company Employee is covered by any collective bargaining agreement, contract or other arrangement or understanding with a labor union or a labor organization, and, to the Knowledge of Parent or Seller, there are no activities or proceedings by any individual or group of individuals, including representatives of any labor organizations or labor unions, to organize any Company Employees.  There are no (a) strikes, work stoppages, work slowdowns, lockouts or other labor disputes pending or, to the Knowledge of Parent or Seller, threatened against the Company by the Company Employees and no such disputes have occurred since December 31, 2018, or (b) unfair labor practice charges or complaints pending or, to the Knowledge of Parent or Seller, threatened against the Company by or on behalf of any Company Employees or group of Company Employees. 

(c)With respect to the Company Employees, Parent and its Affiliates (including Seller and the Company) are, and for the past three (3) years have been, in compliance in all material respects with all applicable Law respecting labor, employment, fair employment practices (including equal employment opportunity laws), terms and conditions of employment, workers’ compensation, occupational safety and health, affirmative action, employee privacy, workplace discrimination and harassment, sexual harassment, immigration, employee leave issues, plant closings, employee classification and wages and hours.  With respect to the Company Employees, neither Parent nor any Affiliate thereof (including Seller and the Company) has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or any similar state or local Law that remains unsatisfied. 

(d)To the Knowledge of Parent or Seller, in the last five (5) years, no allegations of harassment, discrimination or sexual misconduct have been made against any Company Employee who is an officer or any Key Employee in his or her capacity as a director, employee or other service provider of Parent or any Affiliate thereof (including Seller and the Company). 

37

Section 3.16Tax Matters. 

(a)(i) The Company has timely filed with the appropriate Governmental Authority, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all income Tax Returns and other material Tax Returns required by Law to be filed by it, and all such filed Tax Returns were prepared in material compliance with applicable Law and are true, correct and complete in all material respects, and (ii) all Taxes payable by or on behalf of the Company (whether or not shown on any Tax Return)have been timely paid.  As of the date hereof, the Company is not the beneficiary of an extension of time within which to file any Tax Return. 

(b)No deficiency with respect to Taxes has been proposed, asserted or assessed in writing against the Company which has not been fully paid or adequately reflected on the Financial Statements. 

(c)No audits, investigations or other administrative proceedings or court proceedings are presently pending, or to the Knowledge of Parent or Seller have been threatened or proposed, in each case with regard to Taxes of the Company. 

(d)The Company does not have any liability for Taxes of any Person (other than the Company and any of its Subsidiaries) arising from the application of Treasury Regulations Section 1.1502-6 or any analogous provision of state, local or non-U.S. Law, or as transferee or successor, by Contract or otherwise. 

(e)The Company will not be a party to, is bound by or has any obligation under any Tax sharing, Tax allocation or Tax indemnity Contract (other than any commercial Contracts entered into in the ordinary course of business consistent with past practice that do not relate primarily to Taxes), other than any such Contracts that terminate with respect to the Company effective as of the Closing Date. 

(f)All material Taxes required by Law to be withheld with respect to the Company have been withheld, and, to the extent required by Law, have been remitted to the relevant Governmental Authority. 

(g)The Company has not participated in a “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2) 

(h)There are no Liens upon any of the assets or properties of the Company, other than Permitted Liens. 

(i)No written claim has been made by a Governmental Authority in a jurisdiction where the Company does not file a Tax Return that the Company is or may be subject to taxation by that jurisdiction in respect of Taxes that would be covered by or the subject of such Tax Return, which claim has not been fully resolved. 

(j)The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of (i) any installment sale or open transaction entered into prior to  

38

the Closing, (ii) any accounting method change, (iii) closing agreement executed prior to the Closing, (iv) any prepaid amount received or deferred revenue accrued prior to the Closing, (v) any intercompany transaction or excess loss account described in Section 1502 of the Code (or any corresponding provision of state, local or non-U.S. Law) existing prior to the Closing, (vi) any election under Section 108(i) of the Code (or any corresponding provision of state, local or foreign Law), or (vii) the application of Section 965 of the Code (including as the result of any election under Section 965(h) of the Code).

(k)The Company is not, has not been, or will not be, a “United States real property holding corporation” within the meaning of Section 897 of the Code during the five (5) year period ending on the Closing Date. 

(l)The Company has never been a member of an affiliated, consolidated, combined or unitary group for income Tax purposes, other than an affiliated, consolidated, combined or unitary group where Independence Holding Company is the common parent in the last five (5) years. 

(m)The Company is not a “life insurance company” taxed pursuant to Section 816 of the Code.  None of the insurance policies issued or sold by the Company provide “health insurance coverage” as defined by Section 9832 of the Code. 

(n)Within the last two (2) years, the Company has not been a “distributing corporation” or a “controlled corporation” within the meaning of Section 355 of the Code in a transaction intended to qualify under Section 355 of the Code. 

(o)The Company has not delayed the payment of any payroll or other employment-related Taxes pursuant to Section 2302 of the CARES Act. 

(p)The Company is not engaged in and has never been engaged in a trade or business through a “permanent establishment” within the meaning of an applicable income Tax treaty in any country other than the United States. 

(q)Notwithstanding anything to the contrary set forth herein: (i) the representations and warranties set forth in this Section 3.16 (Tax Matters) and Section 3.14 (Employee Benefits Matters) constitute the sole and exclusive representations and warranties of or with respect to Tax matters; and (ii) such representations and warranties (and any claims based thereon) (other than the representations and warranties set forth in Section 3.16(j) or (o) shall be limited to Taxes attributable to Tax periods (or portions thereof) ending on or before the Closing Date. 

Section 3.17Real Property.  Neither the Company nor any of its Subsidiaries own any real property. Section 3.17 of the Seller Disclosure Schedule sets forth all property leased or subleased by the Company or its Subsidiaries (the “Leased Real Property”). The Company or its Subsidiaries have valid, legally binding, enforceable leases or subleases, as applicable, for each Leased Real Property that are in full force and effect, and the Company is not in material breach of or default under any such lease or sublease, and all Leased Real Property is free and clear of all Liens (except for Permitted Liens). 

39

Section 3.18Environmental Matters.  The Company and its Subsidiaries have complied at all times in all material respects with applicable Environmental Laws and has not leased, owned or operated any property which could be expected to require investigation or remediation and none of Parent or its Affiliates has received any claim or notice regarding potential liability of the Company in connection with any Environmental Law, and there are no other circumstances or conditions involving the Company or any of its Subsidiaries that could be expected to result in any claim, liability, cost or restriction on the ownership, use or transfer of any property in connection with any Environmental Law.  

Section 3.19Interested Party Transactions.  As of the date hereof, no employee or director of the Company or any Person owning directly or indirectly one percent (1%) or more of the Shares as of the date hereof (any such person or entity, an “Interested Party”) or, to the Knowledge of Parent or Seller, any Affiliate or family member of any such Interested Party, is a party to any Contract with or binding upon the Company or any of its Subsidiaries or has any material interest in any property or assets owned by the Company or any of its Subsidiaries or has engaged in any material transaction with the Company or any of its Subsidiaries (in each case, other than those related to a Benefit Plan or other ordinary course employment, compensation or incentive arrangements (all such Contracts, the “Affiliate Agreements”)). 

Section 3.20IAIC Production.  The Company, at the time the Company solicited, negotiated, sold or produced business for IAIC, to the extent required by Law, was duly and appropriately appointed by IAIC to act as a producer and, to the Knowledge of Parent and Seller, was duly and appropriately licensed as a producer (for the type of business solicited, negotiated, sold or produced by the Company), in each case, in the particular jurisdiction in which the Company solicited, negotiated, sold or produced such business. Since December 31, 2018, the Company was appointed and compensated by IAIC in compliance in all material respects with applicable Law. 

Section 3.21Sufficiency of Assets.  As of the Closing, the assets, properties and rights of the Company and taking in consideration transactions contemplated under IAHC Purchase Agreement, together with the services provided pursuant to the Transition Services Agreement, will comprise all of the assets, Permits, properties and rights reasonably required to permit Purchaser Parties to conduct the Company’s business immediately following the Closing Date in all material respects in substantially the same manner as such business is being conducted as of the date hereof and as of December 31, 2020. 

Section 3.22Brokers and Other Advisors.    Except for Raymond James Ltd., no broker, investment banker, financial advisor, intermediary, finder or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, directly or indirectly, in connection with the Transactions.  Parent is solely responsible for the payment of the fees and expenses of any broker, investment banker, financial advisor, intermediary, finder or other Person acting in a similar capacity in connection with the Transactions based upon arrangements made by or on behalf of Parent or any of its Affiliates. 

Section 3.23CARES Act.  The Company has not either (a) submitted any application which has not been rescinded, terminated or withdrawn in writing or (b) received any funds  

40

under or incurred any Indebtedness pursuant to the CARES Act or any other economic relief or stimulus legislation or program passed by the United States Congress or any state legislature in 2020.  

Article IVREPRESENTATIONS AND WARRANTIES OF PURCHASER PARTIES

Except as set forth in the disclosure schedule delivered by Purchaser to Parent concurrently with the execution of this Agreement (the “Purchaser Disclosure Schedule”) (it being understood and agreed by the Parties that disclosure of any item in any section or subsection of the Purchaser Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Purchaser Disclosure Schedule to which the relevance of such item is reasonably apparent on its face), Purchaser Parties hereby represent and warrant to Seller, as of the date hereof and as of the Closing Date, as follows:

Section 4.01Organization, Standing and Power.  Purchaser Party is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and the jurisdictions under which it conducts business and has all requisite corporate power and authority to enter into, consummate the Transactions, and carry out its obligations under, this Agreement and the Ancillary Agreements to which such Purchaser Party is or will be a party. 

Section 4.02Authorization.  The execution, delivery and performance by Purchaser Parties of this Agreement and each Ancillary Agreement to which any Purchaser Party is a party, and the consummation of the Transactions, have been duly and validly authorized by all requisite action of such Purchaser Party.  This Agreement has been, and each Ancillary Agreement to be executed by any Purchaser Party will be, at or prior to the Closing, duly executed and delivered by such Purchaser Party and, assuming due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitutes a legal, valid and binding obligation of such Purchaser Party, enforceable against such Purchaser Party in accordance with its terms, subject to the Bankruptcy and Equity Exception. 

Section 4.03Noncontravention. 

(a)None of the execution and delivery of this Agreement or any Ancillary Agreement to be executed by any Purchaser Party, the consummation by such Purchaser Party of the Transactions, or compliance by such Purchaser Party with any of the terms or provisions hereof or thereof will  conflict with or violate any provision of the Organizational Documents of Purchaser Party or  assuming that the authorizations, consents and approvals referred to in Section 4.04 are obtained and the filings referred to in Section 4.04 are made, violate any Law applicable to such Purchaser Party, except, in the case of clause (ii), for such violations as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions. 

(b)No vote or consent of the holders of any class or series of capital stock or other equity interest of any Purchaser Party is necessary to approve this Agreement, any Ancillary Agreement to be executed by such Purchaser Party or the Transactions. 

41

Section 4.04Governmental Approvals.  Except for (a) filings required under, and compliance with other applicable requirements of, the HSR Act, and (b) Consents set forth in Section 4.04 of the Purchaser Disclosure Schedule, no consents, authorizations or approvals of, or filings, declarations or registrations with, any Person or Governmental Authority are necessary for the execution, delivery and performance of this Agreement and any Ancillary Agreement to be executed by any Purchaser Party and the consummation by Purchaser Parties of the Transactions, other than such other consents, authorizations, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions. 

Section 4.05Legal Proceedings.  Except as would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions, (a) there is no pending or, to the Knowledge of Purchaser Parties, threatened in writing Action against any Purchaser Party or any of its respective properties, assets or businesses, and (b) no Purchaser Party is subject to any outstanding Order. 

Section 4.06Financial Capacity.  Purchaser will have at the Closing immediately available and unencumbered funds to enable Purchaser to pay the full Closing Consideration and consummate the Transactions and satisfy all of its obligations under this Agreement when required to do so pursuant to the terms hereof. 

Section 4.07Investment Representation.  Purchaser is acquiring the Sale Shares for its own account with the present intention of holding such securities for investment purposes and not with a view to, or for sale in connection with, any distribution of such securities in violation of any federal or state securities laws.  Purchaser acknowledges that it is informed as to the risks of the Transactions and of ownership of the Sale Shares.  Purchaser acknowledges that the Sale Shares have not been registered under the Securities Act, or any state or foreign securities laws and that the Sale Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the Securities Act and the Sale Shares are registered under any applicable state or foreign securities laws or sold pursuant to an exemption from registration under the Securities Act and any applicable state or foreign securities laws. 

Section 4.08Brokers and Other Advisors.  Except for Goldman Sachs & Co. LLC, no broker, investment banker, financial advisor, intermediary, finder or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses, directly or indirectly, in connection with the Transactions based upon arrangements made by or on behalf of Purchaser Parties. 

Section 4.09No Prior Activities and Agreements.  There will be at or prior to the Closing no Contracts between any of Purchaser Parties, on the one hand, and any member of the management or directors of the Company, on the other hand, that relate in any way to the Company or the Transactions. 

42

Section 4.10Capitalization of Purchaser Parent, Valid Issuance of Purchaser Parent Shares. The Purchaser Parent Shares, when issued and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Stockholders Agreement and applicable state and federal securities laws. The Purchaser Parent Shares will be issued in compliance with all applicable federal and state securities laws. 

Article VCOVENANTS

Section 5.01Conduct of the Business Pending the Closing. 

(a)During the period from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance with Article VII, except (i) as required by applicable Law, (ii) as instructed or required by a Governmental Authority, (iii) as expressly required or contemplated by the terms of this Agreement, (iv) for the transactions contemplated by or related to IAHC Purchase Agreement, or (iv) to the extent Purchaser otherwise provides its prior consent in writing (such consent not to be unreasonably withheld, delayed or conditioned), Parent and Seller shall cause the Company to comply with this Agreement, and otherwise ensure that (x) the Company shall conduct its business in the ordinary course of business consistent with past practice and, to the extent consistent therewith, use its reasonable best efforts to preserve its business organization intact and maintain existing relations and goodwill with Governmental Authorities, rating agencies, customers, reinsurers, producers, insureds, suppliers, service providers and employees, and (y) except as set forth in Section 5.01(a) of the Seller Disclosure Schedule, the Company shall not and shall cause its Subsidiaries not to (it being understood that no act or omission with respect to the matters specifically addressed by any provision of this clause (y) shall be deemed to be a breach of clause (x)):  

(i)(A) authorize for issuance, issue, sell, grant or subject to any Lien any shares of capital stock, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of capital stock, or any rights, warrants or options to purchase any shares of capital stock or (B) redeem, purchase or otherwise acquire any of its shares of capital stock, or any rights, warrants or options to acquire any shares of capital stock; 

(ii)split, combine, subdivide, reclassify, redeem, purchase or otherwise acquire, directly or indirectly, any shares of capital stock; 

(iii)other than this Agreement and any Ancillary Agreements, adopt a plan or agreement of complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries; 

(iv)(A)  declare, make, set aside, authorize or pay any dividends or make any distribution with respect to its outstanding shares of capital stock (whether in cash, assets, stock or other securities or otherwise) or (B) incur, issue, assume, guarantee or otherwise  

43

become liable for any Indebtedness (other than (1) all obligations with respect to the net current Tax liabilities of the Company that are allocable to any taxable year (or portion thereof) ending on (and including), or prior to, the Closing Date (treating for purposes of this Agreement the taxable year of the Company that includes the Closing Date as closing on (and including) the Closing Date); (2) all Liabilities with respect to accrued but unpaid bonus payments, accrued or owed by the Company as of the Closing in respect of any performance period (or portion thereof) prior to and up to the Closing, together with the employer portion of any Taxes arising therefrom; and (3) all Liabilities with respect to accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Company Employee immediately prior to the Closing) or issue or sell any debt securities or warrants or other rights to acquire any debt security of the Company;

(v)amend, restate, supplement or otherwise modify its Organizational Documents; 

(vi)(A) other than in the ordinary course of business consistent with past practice, amend, modify, extend, cancel, rescind, waive any rights under, assign, fail to renew or terminate any leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) under which the Company or any of its Subsidiaries leases or occupies Leased Real Property or (B) enter into any new leases or subleases (or group of related leases or subleases with respect to a single transaction or series of related transactions) for leased real property;  

(vii)sell, lease, license or otherwise dispose of any of its material properties (other than Intellectual Property), rights, licenses, operations, product lines, businesses or assets, except (A) sales and licenses of products and services of the Company in the ordinary course of business consistent with past practice, (B) sales and dispositions of investment assets by the Company in the ordinary course of business consistent with past practice, (C) pursuant to any insurance or reinsurance Contracts in the ordinary course of business consistent with past practice, or (D) pursuant to Material Contracts in force on the date hereof; 

(viii)make any loan, advance, guarantee or capital contribution to or investment in any Person, except advances to employees for expenses not to exceed $1,000 in any single instance or in excess of $20,000 in the aggregate in the ordinary course of business consistent with past practice; 

(ix)engage in any transactions with respect to investment assets by the Company or any of its Subsidiaries outside the ordinary course of business consistent with past practice, other than to the extent otherwise agreed by Purchaser in writing as to any particular investment asset; 

(x)make or authorize any capital expenditures in excess of $10,000 in any single instance or in excess of $100,000 in the aggregate during any twelve (12) month period; 

44

(xi)sell, transfer, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon or allow to lapse or expire or otherwise dispose of any material Company Intellectual Property or material Company IT Assets, other than (A) in the ordinary course of business consistent with past practice, (B) pursuant to Contracts in force on the date hereof and made available to Purchaser on or prior to the date hereof, and (C) dispositions of obsolete or worn-out IT Assets; 

(xii)make any changes to how the Company processes Personal Information, other than non-material changes made in the ordinary course of business consistent with past practice; 

(xiii)make any acquisitions of (including by merger, consolidation or acquisition of stock or assets or any other business combination) assets, any corporation, partnership, other business organization or any division thereof or equity interests therein or a substantial portion of the assets thereof; 

(xiv)pay, discharge, settle or compromise any pending or threatened Action which (A) requires payment to or by the Company or any of its Subsidiaries (exclusive of attorneys’ fees) in excess of $20,000 in any single instance or in excess of $200,000 in the aggregate (other than ordinary course payments or settlements under insurance or reinsurance Contracts that are within the applicable policy limits under such insurance or reinsurance Contract) or (B) imposes any obligations (other than for the payment of money, a release of claims, confidentiality and other obligations customarily included in monetary settlements) or material restrictions on the operations of the Company or any of its Subsidiaries, except for any payment, discharge or settlement the amount of which (1) is explicitly reflected on the Financial Statements (including the notes thereto) or (2) does not exceed the proceeds received from any insurance policies in connection with such payment, discharge or settlement;  

(xv)(A) increase the compensation or consulting fees, bonus, pension, welfare, fringe or other benefits of any Company Employee, other than increases in annual base salary or wage rate in the ordinary course of business consistent with past practice that do not exceed three percent (3%) individually or three percent (3%) in the aggregate, (B) increase or grant any additional rights to severance, termination, retention or change-in-control, bonus or long-term incentive pay to any Company Employee (other than any amounts for which Parent or its Affiliates (other than the Company) will retain sole responsibility after the Closing), (C) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund or in any other way secure the payment, of compensation or benefits under any Benefit Plan in respect of any Company Employee, (D) establish, adopt, enter into, amend, commence participation in or terminate any Benefit Plan or any plan, policy, program, arrangement or agreement that would be a Benefit Plan if it were in existence as of the date hereof, or (E) hire any employee or engage any independent contractor (who is a natural person) or terminate any Company Employee other than, in each case, in the ordinary course of business for individuals with an annual salary or wage rate or consulting fees not in excess of $100,000;   

45

(xvi)with respect to the Company Employees, become a party to, establish, adopt, amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization; 

(xvii)transfer internally (including in response to a request for transfer by a Company Employee), or otherwise materially alter the duties and responsibilities of, any Company Employee in a manner that would (A) materially affect the proportion of his or her work hours allocated to the Company during the twelve (12) months prior to Closing (or such shorter period as such Company Employee has worked for the Company) and/or (B) otherwise cause such individual to cease being characterized as a Company Employee under this Agreement; 

(xviii)take any action that would constitute a “mass layoff” or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification Act of 1988 or would otherwise trigger notice requirements or liability under any foreign, state or local plant closing notice law; 

(xix)in each case, in any action or series of related actions, place any more Company Employees on unpaid leave or furlough, or reduce the hours or weekly pay of any Company Employee;   

(xx) make any material changes in financial or Tax accounting methods, principles, practices or procedures (or change an annual accounting period), except as may be required under GAAP; 

(xxi)make or change any material Tax election, file any amendment to any Tax Return with respect to any material Taxes, settle or compromise any material Tax Liability, audit or other Action, agree to any extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of Taxes, file any material voluntary Tax disclosure, amnesty or similar filing, enter into any closing agreement with respect to a material amount of Tax, enter into a Tax allocation, sharing indemnity or similar agreement, assume any Liability for Taxes of any other Person (whether by contract or otherwise) or take any action to surrender any right to claim a material Tax refund; 

(xxii)make any material change to the investment guidelines of the Company or any of its Subsidiaries in effect as of the date hereof or acquire or dispose of any investment assets in any manner inconsistent with such investment guidelines; 

(xxiii)(A) enter into any Contract that would have been a Restricted Contract had it been entered into prior to this Agreement; (B) other than in the ordinary course of business consistent with past practice, enter into any Contract that would have been a Material Contract had it been entered into prior to this Agreement; (C) other than in the ordinary course of business consistent with past practice, amend, modify, extend, cancel, rescind, waive any rights under, assign, fail to renew or terminate any Material Contract; (D) other than Benefit Plans, any action with respect to changes in compensation and benefits permitted pursuant to Section 5.01(a)(xv), any ordinary course insurance policies  

46

between the Company or any of its Subsidiaries and an individual person, or in the ordinary course of business consistent with past practice, enter into or modify any Contract with Parent (or an Affiliate thereof) or Sellers, or (E) engage in any transaction with any Interested Party or any Affiliate or family member of an Interested Party;

(xxiv)other than in the ordinary course of business consistent with past practice, alter or amend in any material respect any existing underwriting, reserving, hedging, marketing, pricing, risk management, reinsurance, claim handling, loss control, investment, actuarial practice guideline or policy of the Company or any of its Subsidiaries, or any material assumption underlying an actuarial practice or policy, except as may be required by (or, in the reasonable good faith judgment of the Company, advisable due to) a change in GAAP, any Governmental Authority or applicable Law occurring after the date of this Agreement; 

(xxv)(A) make any filings with any Governmental Authority relating to the withdrawal or surrender of any Permits held by the Company or any of its Subsidiaries, or the withdrawal by the Company or any of its Subsidiaries from any lines of business, (B) fail to keep current and in full force and effect, or to apply for or renew, any Permit, consent, or registration of the Company or any of its Subsidiaries issued by any Governmental Authority or (C) enter into any Government Contract;  

(xxvi)enter into or engage in (through acquisition, product extension or otherwise) the business of selling any products or services materially different from the products or services of the Company or any of its Subsidiaries as of the date of this Agreement or enter into or engage in new lines of business;  

(xxvii) permit or allow any assets of the Company to become subject to any Lien, except Permitted Liens; 

(xxviii) fail to pay or satisfy when due any material account payable or other material liability, other than any such liability that is being contested in good faith by the Company or any of its Subsidiaries; 

(xxix)subject the Company or any of its Subsidiaries to any bankruptcy, receivership, insolvency or similar proceeding; 

(xxx)take any actions or omit to take any actions that would, individually or in the aggregate, reasonably be expected to (A) prevent, materially delay or materially impair the consummation of the Transactions or (B) result in any of the conditions set forth in Article VI not being satisfied; or 

(xxxi)agree in writing or otherwise to take any of the foregoing actions prohibited by this Section 5.01(a). 

(b)Purchaser Parties acknowledge and agree that (i) nothing contained in this Agreement shall give Purchaser or any other Purchaser Party, directly or indirectly, the right to control or direct the operations of the Company prior to the Effective Time, (ii) prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this  

47

Agreement, complete control and supervision over its operations and (iii) notwithstanding anything to the contrary set forth in this Agreement, no consent of Purchaser shall be required with respect to any matter set forth in this Section 5.01 or elsewhere in this Agreement to the extent the requirement of such consent would violate any applicable Law.

Section 5.02Access to Information. 

(a)During the period from the date hereof until the earlier of the Effective Time and the termination of this Agreement in accordance with Article VII and subject to applicable Law, Purchaser shall be entitled, through its Representatives, to have such access to the Company Employees, properties, businesses and operations of the Company and its Subsidiaries and such examination of the books and records of the Company and its Subsidiaries, including books and records of the Company and its Subsidiaries held by Parent or Seller, as Purchaser reasonably requests in connection with Purchaser’s efforts to consummate the Transactions.  Parent and Seller agree to deliver to Purchaser at the Closing any books or records of the Company and its Subsidiaries that are held by Parent or Seller and copies of any books or records of Parent, Seller or their Affiliates that relate primarily to the Company and its Subsidiaries.  

(b)For sixty (60) months following the Closing, Parent shall use reasonable best efforts to grant Purchaser and its Representatives reasonable access during Parent’s normal business hours to any of Parent’s then-current employees, the properties, businesses and operations of the Company and its Subsidiaries and such examination of the books and records of Parent that primarily relate to the Company and its Subsidiaries (including documentation relating to a Security Breach), including books and records of the Company held by Parent or Seller, as Purchaser reasonably requests and upon reasonable prior notice if such access is reasonably deemed necessary by Purchaser or any of its Affiliates in connection with its tax, regulatory, litigation, contractual or other legitimate, non-competitive matters; provided, however, that Parent shall not be required to provide access to any such employees or books and records to the extent that such access:  (i) would violate applicable Law or would adversely impact any legal privilege; or (ii) would result in the disclosure of any trade secrets or any competitively sensitive information of Parent or of a third party to whom Parent has confidentiality obligations.  All requests for access to such employees or books and records shall be made to such representatives of Parent as Parent shall designate, who shall be solely responsible for coordinating all requests and all access permitted hereunder.  Nothing in the foregoing will prevent Purchaser or any of its Affiliates (at its sole cost and expense) from seeking to make such employees available via subpoena or other legal or similar process, and Parent shall reasonably cooperate in making employees available for such purposes. 

(c)Any such access and examination shall be conducted on reasonable advance written notice, during regular business hours and under reasonable circumstances and shall be subject to (i) restrictions under applicable Law and (ii) reasonable restrictions imposed by Parent and Seller to protect the confidentiality of books and records of Parent, Seller or any of their respective Affiliates (other than the Company) that do not relate, directly or indirectly, to the Company. 

(d)Parent and Seller, respectively, shall use their reasonable best efforts to cause the officers, employees, consultants, agents, accountants, attorneys and other Representatives of the  

48

Company to reasonably cooperate with Purchaser and Purchaser’s Representatives in connection with such access and examination, and Purchaser and its Representatives shall reasonably cooperate with the Company and its officers, employees, consultants, agents, accountants, attorneys and other Representatives and shall use their reasonable best efforts to minimize any disruption to the business.  

(e)Notwithstanding anything herein to the contrary, no such access or examination shall be permitted to the extent that it would (i) unreasonably disrupt the operations of the Company or its Subsidiaries or (ii) reasonably be likely to cause the Company or its Subsidiaries to lose the benefit of attorney-client privilege or conflict with any confidentiality obligations to which the Company or its Subsidiaries is bound, whether pursuant to a Contract or imposed by an Order or other directive or restriction by a Governmental Authority, in each case with respect to information to be disclosed; provided, however, that Parent and Seller shall cause the Company to request, but the Company shall not be required to obtain, a waiver of any such confidentiality obligations upon Purchaser’s reasonable prior written request; and provided, further, that Parent and Seller shall cause the Company to use reasonable best efforts to seek alternative means to disclose such information as nearly as possible without affecting attorney-client privilege or conflicting with such confidentiality obligations (it being understood that such reasonable best efforts shall not require the Company to pay any consideration or amend or modify any Contract). 

(f)Purchaser acknowledges that the information provided to Purchaser Parties in connection with this Agreement, the Ancillary Agreements and the Transactions is subject to the terms of that certain Mutual Non-Disclosure Agreement by and between Seller, JAB Investments S.á r.l. and Double Oak Partners, LLC dated March 8, 2021 (the “Confidentiality Agreement”). 

Section 5.03Reasonable Best Efforts. 

(a)Upon the terms and subject to the conditions set forth in this Agreement, each of Purchaser Parties, on the one hand, and Parent and Seller, on the other hand, shall, and shall cause their Affiliates (including, in the case of Parent and Seller, the Company) to, use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things reasonably necessary, proper or advisable to fulfill all conditions to Closing applicable to such Party pursuant to this Agreement and to consummate and make effective, as promptly as reasonably practicable, the Transactions, including (i) preparing and filing as soon as practicable after the date hereof all forms, registrations and notices required to be filed to consummate the Transactions and the taking of such actions as are reasonably necessary to obtain any requisite approvals, Consents, Orders, exemptions or waivers by any Governmental Authority, including filings pursuant to the HSR Act and (ii) executing and delivering any additional agreements, documents or instruments reasonably necessary, proper or advisable to consummate the Transactions and to fully carry out the purposes of this Agreement. 

(b)In furtherance of and without limiting the foregoing, (i) each of Purchaser and Parent shall file, or cause to be filed, a notification and report form pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice with respect to the Transactions and requesting early termination of the waiting period  

49

under the HSR Act as promptly as practicable after the date hereof, and (ii) Purchaser, on the one hand, and Parent and Seller, on the other hand, as applicable, shall make, or cause to be made, any other registrations, filings and notices with Governmental Authorities required to consummate the Transactions as promptly as practicable after the date hereof.  Purchaser shall have responsibility for the filing fees associated with filings it is required to make under any applicable antitrust or competition Laws, including the filings associated with the HSR Act.

(c)Notwithstanding anything to the contrary contained in this Agreement, including this Section 5.03 or the “reasonable best efforts” standard, Purchaser shall not be obligated to take or refrain from taking, or to agree to it, its Affiliates or the Company or any of its Subsidiaries taking or refraining from taking, any action or to suffer to exist any restriction, condition or requirement imposed by a Governmental Authority which, individually or together with all other such actions, restrictions, conditions or requirements, would, or would reasonably be expected to (i) have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of Purchaser or any of its Affiliates, (ii) impose any material limitations on Purchaser’s or its Affiliates’ ownership or operation of all or any portion of its or any of its Affiliates’ businesses, operations or assets or compel Purchaser or any of its Affiliates to dispose of or hold separate all or any portion of its or any of its Affiliates’ businesses, operations or assets or (iii) would reasonably be expected to substantially impair the benefits to Purchaser reasonably likely, as of the date hereof, to be realized from the consummation of the Transactions (any action having the effects described in clause (i), (ii) or (iii) above being referred to herein as a “Substantial Detriment”); provided, however, that no actual or proposed change in Law applicable to Purchaser or its Affiliates after the date hereof shall be taken into account in determining whether a Substantial Detriment has occurred or exists. 

(d)Notwithstanding anything to the contrary contained in this Agreement, in no event shall a Party or any of its Affiliates be required by a Governmental Authority to agree to take or enter into any action, which action is not conditioned upon the Closing. 

Section 5.04Publicity.  None of the Parties or any of their Affiliates shall issue any press release or public announcement or comment concerning this Agreement or the Ancillary Agreements or the Transactions without obtaining the prior written approval of Purchaser and Parent; provided that the Parties and their Affiliates may, without such prior written approval, issue such press release, or make such public announcement or comment to the extent, in the judgment of such Party upon the advice of its outside counsel, disclosure is required by applicable Law (including the periodic reporting requirements under the Exchange Act) or under the rules of any securities exchange on which the securities of such Party or any of its Affiliates are listed (provided that, to the extent so required by applicable Law, the Party intending to make such release shall use its reasonable best efforts consistent with applicable Law to consult with the other Parties in advance of such release with respect to the text thereof).  None of the Parties shall make any disclosure to third parties regarding the Transactions without the prior written consent of the other Party. 

Section 5.05Employment and Employee Benefits. 

(a)Parent and Seller shall, and shall cause its Affiliates to, cause (i) the employment of each Company Employee to transfer to the Company prior to the Effective Time; and (ii) the  

50

employment of any employee employed by the Company who is not a Company Employee to transfer out of the Company, no later than five (5) Business Days prior to the Effective Time.  No later than seven (7) Business Days prior to the Effective Time, Parent shall provide Purchaser with an update to the Employee Census, listing only the employees employed by the Company.  Parent shall provide an updated Employee Census as soon as possible after the execution of this Agreement listing all Company Employees as of the date of this Agreement.

(b)For at least one (1) year following the Effective Time (the “Continuation Period”), Purchaser shall provide, or shall cause its Affiliates to provide, each Company Employee who is employed immediately prior to the Effective Time (each, a “Continuing Employee”) with (i) an annual base salary or hourly wage rate and, where applicable, a target annual cash bonus opportunity that is substantially similar, in the aggregate, to those provided to such Continuing Employee immediately prior to the Effective Time, and (ii) an employee defined contribution plan and welfare benefits that are substantially comparable in the aggregate to those that are generally made available to similarly situated employees of Purchaser; provided, that the obligation to provide the defined contribution plan and welfare benefits referenced in clause (ii) hereof shall commence no sooner than on the date on which Purchaser completes the various administrative actions in order to effectuate the participation of the Continuing Employees in such plan and benefits with Purchaser. For the avoidance of doubt, Purchaser is under no obligation to provide such plan and benefits beyond the first anniversary of the Effective Time.   

(c)With respect to any accrued but unused vacation time, flexible time-off and sick pay to which any Company Employee is entitled pursuant to the policies applicable to such Continuing Employee immediately prior to the Closing Date, (i) Purchaser shall assume such liability to the extent reflected in the Indebtedness, and (ii) Purchaser shall allow such Continuing Employee to use such accrued vacation, flexible time-off and sick pay accrued and unused by such Continuing Employees as of the Closing Date pursuant to Purchaser’s applicable policies in effect from time to time. 

(d)With respect to all employee benefit plans of Purchaser and its Affiliates in which Continuing Employees are eligible to participate following the Effective Time (the “New Benefit Plans”), for purposes of determining eligibility to participate, level of benefits and vesting, each Continuing Employee’s service with Parent, Seller or any Affiliate thereof (including the Company) (as well as service with any predecessor employer of Parent, Seller or any Affiliate thereof (including the Company), to the extent service with the predecessor employer was recognized by Parent, Seller or any Affiliate thereof (including the Company)) shall be treated as service with Purchaser or its Affiliates; provided that no such crediting of service shall (i) result in any duplication of benefits for the same period of service or (ii) apply for purposes of benefit accrual under any New Benefit Plan that is a defined benefit pension or retiree medical plan. 

(e)Purchaser shall use reasonable best efforts, or shall cause its Affiliates to use reasonable best efforts, to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any New Benefit Plan that is a welfare benefit plan in which Continuing Employees (and their eligible dependents) will be eligible to participate from and after the Effective Time, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods  

51

would not have been satisfied or waived under the comparable Benefit Plan immediately prior to the Effective Time.

(f)As of the Effective Time, Purchaser shall cause the Company to assume all unpaid obligations of Parent, Seller and any of their Affiliates to each Continuing Employee pursuant to any sales commission, annual bonus, special bonus set forth in Section 5.05(f) of the Seller Disclosure Schedule or other cash incentive programs or arrangements, in each case in respect of any performance period that includes the Closing Date and solely to the extent reflected in the Indebtedness.  

(g)Prior to making any written or oral communications to the Company Employees pertaining to compensation or benefit matters that are affected by the Transactions, Parent or Seller shall provide Purchaser with a copy of the intended communication, Purchaser shall have a reasonable period of time to review and comment on the communication, and Parent or Seller, as applicable, shall consider any such comments in good faith. 

(h)Parent shall retain all Liability, and Purchaser and its Affiliates shall have no Liability, with respect to any Benefit Plans or other employee benefit plans, policies or programs sponsored or maintained by Parent or any of its Affiliates (other than the Company), including, but not limited to, any pension plans, deferred compensation plans, post-retirement plans, incentive plans, bonus plans, equity-based compensation plans, severance and fringe benefit plans, unless such Liabilities are reflected in Indebtedness, Transaction Expenses or Closing Net Working Capital. 

(i)This Section 5.05 shall be binding upon and shall inure solely to the benefit of each of the Parties and nothing in this Section 5.05 or any other provision of this Agreement or any other related Contract, express or implied (i) shall be construed to establish, amend or modify any Benefit Plan or any other benefit plan, program, agreement or arrangement, (ii) shall alter or limit the ability of Purchaser or any of its Affiliates to amend, modify or terminate any benefit plan, program, agreement or arrangement or, after the Effective Time, any Benefit Plan in accordance with their terms, without limiting or altering the terms set forth in this Section 5.05, (iii) shall prevent Purchaser or any of its Affiliates, after the Effective Time, from terminating the employment of any Continuing Employee or (iv) is intended to or shall confer upon any Company Employee or any other Person any third-party beneficiary or other right to employment or continued employment or service for any period of time by reason of this Agreement or any other related agreement, or any right to a particular term or condition of employment. 

Section 5.06Insurance. 

(a)Effective at the time of the Closing, with respect to occurrences taking place from and after the Closing Date, Parent shall cause Company and its Subsidiaries to cease to be insured by any insurance policies of Parent, Seller or any of their Affiliates (other than any policies held directly by the Company) or by any of their self-insured programs.  

(b)With respect to events or circumstances relating to the Company or its Subsidiaries that occurred or existed prior to the Closing Date that are covered by occurrence- 

52

based third-party liability insurance policies of Parent, Seller or their Affiliates (other than the Company) and any workers’ compensation insurance policies or comparable workers’ compensation self-insurance programs sponsored by Parent, Seller or their Affiliates and that apply to the locations at which the Company or its Subsidiaries operates their respective businesses, Purchaser may, and may cause the Company to, make claims under such policies and programs.  Parent, Seller and their Affiliates will provide reasonable cooperation and assistance in the pursuit of such claims.

(c)With respect to any open claims against the insurance policies of Parent, Seller or their Affiliates (other than the Company) relating to losses or damages suffered by the Company or any of its Subsidiaries prior to the Closing, Parent or Seller shall reasonably assist and cooperate with Purchaser in the pursuit and collection of such claims and remit any net proceeds they realize from such claims to Purchaser upon full and final settlement of such claims.  

(d)Parent, Seller or their Affiliates may amend any insurance policies in the manner they deem appropriate to give effect to this Section 5.06.  

Section 5.07IHC Marks. 

(a)Prior to the Closing, Parent and Seller shall, and shall cause the Company to, completely remove or permanently obscure the IHC Marks from the Company’s premises, website and all internal and external tangible, electronic and other documents or materials. 

(b)Conditioned on Seller’s and the Company’s compliance with Section 5.07, Purchaser agrees that, after the Closing, Purchaser will not, and will cause the Company not to, use any of the IHC Marks in connection with the operations of the Company, and will not, and will cause the Company not to, expressly do business as or represent itself as affiliated in any way with Seller or their Affiliates (other than the Company), except that (i) Purchaser, the Company and their respective Affiliates may reference the historic relationship between the Company and Seller, and (ii) the foregoing shall not preclude Purchaser, the Company or any of their respective Affiliates from any uses that would be permissible under applicable Law, including as nominative or descriptive fair use.   

Section 5.08Tax Matters. 

(a)Tax Returns.  Parent, Seller or Affiliate thereof shall prepare and timely file (taking into account any extension of time to file under applicable Law), or cause to be prepared and timely filed, all Tax Returns of the Company or any of its Subsidiaries for all taxable periods ending on or prior to the Closing Date (“Company Tax Returns”) and any Tax Returns for which the Company or any of its Subsidiaries is required to be in the U.S. federal, state or local consolidated, combined or unitary group of IHC (“Seller Tax Returns”).  Seller Tax Returns and Company Tax Returns shall be prepared in a manner consistent with past practice of the applicable entity, unless otherwise required by applicable Law or as specified in this Agreement.  In the case of Company Tax Returns, Seller shall permit Purchaser to review and comment on each such Company Tax Return prior to filing and shall make such revisions as are reasonably requested by Purchaser.  Parent (or Affiliate thereof, as applicable) shall timely remit or cause to be remitted to the applicable Governmental Authority any Taxes due in respect of such Seller  

53

Tax Returns or Company Tax Returns to the extent that such Taxes are Indemnified Taxes for which Seller would be required to indemnify the Purchaser pursuant to Article VIII (and subject to, for the avoidance of doubt, any limitations on such indemnity obligations set forth in Article VIII).  Purchaser shall be responsible for preparing and filing all Tax Returns of the Company that are not Seller Tax Returns; provided that in the case of any such Tax Return with respect to a Straddle Period (“Seller Reviewed Return”), such Tax Returns shall be prepared in a manner consistent with the most recent past practice of the Company unless otherwise required by applicable Law or as specified in this Agreement.  Purchaser shall permit Parent to review and comment on each such Tax Return with respect to a Pre-Closing Tax Period prior to filing and shall make such revisions as are reasonably requested by Parent.  To the extent that the Tax Returns described in this Section 5.08(a) indicate that the Company or Subsidiary has made an overpayment of Taxes for any Pre-Closing Taxable Period or Straddle Period (taking into account all Taxes taken into account as Indebtedness or estimated Tax payments that have been made with respect to such Taxes prior to the Closing Date), the Purchaser shall, concurrently with the filing of the relevant Tax Return for the Tax year in which such overpayment is reflected, pay or cause to be paid such overpayment to the Seller, in immediately available funds using wire transfer instructions as designated in writing by the Seller.

(b)Tax Sharing Agreements.  Parent and Seller shall cause the Company and its Affiliates to terminate any Tax sharing, Tax allocation or Tax indemnity Contract among the Company and its Affiliates at or prior to Closing. 

(c)Unless Purchaser provides written consent to the contrary, upon the consummation of the transactions contemplated hereby, Seller shall make an election pursuant to Treasury Regulation Section 1.1502-36(d)(6)(i)(A) to reduce Seller’s tax basis in the Shares to the extent necessary to avoid a stepdown in any of the tax basis assets or attributes acquired by the Purchaser. 

(d)Transfer Taxes.  Purchaser and Seller shall each pay fifty percent (50%) of the Transfer Taxes arising out of or in connection with the transactions contemplated by this Agreement (including any expenses attributable thereto, penalties and interest).  The Party required by Law to file a Tax Return with respect to such Transfer Taxes shall do so in the time and manner prescribed by Law, and the non-filing Party shall promptly reimburse the filing Party for its share of any Transfer Taxes upon receipt of evidence reasonably satisfactory to the non-filing party of the amount of such Transfer Taxes. 

(e)Tax Contests. 

(i)Purchaser or Seller, as the case may be, shall notify the other Party within twenty (20) Business Days after receipt by such Party or any of its Affiliates of written notice of any pending federal, state, local or foreign Tax audit or examination or notice of deficiency or other adjustment, assessment or redetermination relating to Taxes (“Tax Contest”) for which such other Party or its Affiliates may reasonably be expected to be responsible under this Agreement, provided, that the failure to deliver any such notice promptly will not relieve the other Party of their obligations under this Agreement, except to the extent such Party is materially prejudiced as a result thereof 

54

(ii)At its election, Parent (or Affiliate thereof) shall control any Tax Contests related to Taxes with respect to a Pre-Closing Tax Period (other than Straddle Periods).  Parent shall keep Purchaser fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Parent shall, in good faith, allow Purchaser to make comments to Parent regarding the conduct of or positions taken in any such proceeding.  Purchaser shall be entitled to fully participate in any such Tax Contest.  Purchaser shall have the right to consent to any settlement with respect to (or abandonment of ) any such Tax Contest (provided such consent shall not be unreasonably withheld, conditioned or delayed). In the case that Purchaser controls such Tax Contest because Parent conceded right to control such Tax Contest, Purchaser shall keep Parent fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Purchaser shall, in good faith, allow Parent to make comments to Purchaser regarding the conduct of or positions taken in any such proceeding.  Parent shall be entitled to fully participate in any such Tax Contest.  Purchaser (or an Affiliate thereof) shall control in good faith any other Tax Contest solely related to Taxes of the Company or any Subsidiary thereof.  In the case of a Tax Contest in respect of a Straddle Period, the Purchaser shall keep Parent fully and timely informed with respect to the commencement, status and nature of any such Tax Contest.  Purchaser shall, in good faith, allow Parent  to make comments to Purchaser regarding the conduct of or positions taken in any such proceeding.  Parent shall be entitled to participate fully in any such Tax Contest.  Purchaser shall not settle such Tax Contest without Parent’s prior written consent (not to be unreasonably withheld, conditioned or delayed).  Notwithstanding anything to the contrary in this Agreement, Parent (or Affiliate thereof) shall have the exclusive right to control in all respects, and neither Purchaser nor any of its Affiliates shall be entitled to participate in, any Tax Contest with respect to any Tax Return of a combined, consolidated, affiliated, aggregated or unitary group of Parent (or Affiliate thereof) that includes the Company or any Subsidiary thereof. 

(iii)To the extent of any inconsistencies between any provision of this Section 5.08(e) and Section 8.04 in a matter principally involving Taxes, the provisions of this Section 5.08(e)) shall control. 

(f)Tax Refunds.  Any refunds (or credits for overpayments) of Taxes paid by the Company (including interest thereon) for any taxable period ending on or before the Closing Date that are received by Purchaser or any of its Affiliates (including, following the Closing, for the avoidance of doubt, the Company or Affiliate thereof), shall be for the account of Seller, except to the extent any such refunds or credits are included as a Current Asset in determining Closing Net Working Capital, as  finally determined (excluding any refund or credit attributable to any loss in a taxable period beginning after the Closing Date applied (e.g., as a carryback) to income in a taxable year.  Purchaser shall pay over to Seller, as additional purchase price for the Sale Shares, any such refund received in cash or the amount of any such credit within fifteen (15) days after entitlement thereto, in each case, net of any Taxes and reasonable out-of-pocket expenses incurred in connection with such refund or credit.  Notwithstanding anything in this Agreement to the contrary, in the event that any such refund or credit is subsequently determined by any Governmental Authority to be less than the amount paid by Purchaser to Seller, Seller shall promptly return any such disallowed amounts (plus any interest in respect of such disallowed refund or credit owed to a Governmental Authority) to Purchaser. 

55

(g)Prohibited Tax Actions.  Purchaser shall not, and shall not permit any of its Affiliates (including, after the Closing for the avoidance of doubt, the Company or any Affiliate thereof) to, (i) except upon the Parent’s written request pursuant to Section 5.08(f) (Tax Refunds) or Section 5.08(e) (Tax Contests) file, re-file, supplement, or amend any Tax Return of the Company or any Affiliate thereof for any taxable period ending on or before the Closing Date, (ii) make an election under Sections 336 or 338 of the Code (or any comparable applicable provision of state, local or non-U.S. Tax Law) with respect to the transactions contemplated by this Agreement, (iii) make any Tax election for the Company or Affiliate thereof effective with respect to any taxable period ending on or before the Closing Date, (iv) take any action that is outside the ordinary course of business after the Closing Date relating to Taxes that creates a Tax liability on or prior to the Closing Date, or (v) enter into or file any voluntary Tax disclosure, amnesty or similar filing or agreement in each case, without the consent of Seller, not to be unreasonably withheld, conditioned, or delayed; provided withholding consent with respect to an action required by applicable Law as agreed to by the Parties or the Independent Accountant shall be unreasonable. 

(h)Cooperation on Tax Matters.  Seller and Purchaser shall (and Purchaser shall cause the Company to) take commercially reasonable efforts to (i) assist in the preparation and timely filing of any Tax Return of the Company for a Pre-Closing Tax Period, including access during regular business hours to the offices and employees of the Company; (ii) assist in any Tax Contests with respect to the Tax Returns or Taxes of the Company for a Pre-Closing Tax Period; (iii) make available any information, records (including books and records), or other documents relating to any Taxes or Tax Returns of the Company for a Pre-Closing Tax Period, including with respect to Tax Contests related thereto; (iv) provide any information required to allow Seller, Parent and the Company, or Purchaser or any Affiliates thereof to comply with any information reporting contained in the Code or other applicable Laws for a Pre-Closing Tax Period; and (v) provide certificates or forms, and timely execute any Tax Returns, that are necessary or appropriate to establish an exemption for (or reduction in) any Transfer Tax.   

(i)Tax Treatment.   

(i)For U.S. federal income Tax purposes (and state and local Tax purposes where applicable), Parent, Seller, JAB Holdings, the Company and Purchaser Parent intend that (i) the Cash Contribution and (ii) the Rollover Contribution, be collectively treated as a single interrelated transaction that qualifies as an exchange described in Section 351(a) of the Code. Parent, Seller, JAB Holdings, the Company and Purchaser Parent and their Affiliates:  (y) shall neither take nor allow to be taken any action that, to their knowledge, would reasonably be expected to adversely affect the treatment of the Rollover Continuation (or any portion thereof) as tax deferred under Section 351(a) of the Code and (z) shall act in accordance with the treatment of the Rollover Contribution as a transaction which, together with the Cash Contribution, qualifies as an exchange described in Section 351(a) of the Code in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code.  The appropriate Parties (and applicable Affiliates thereof) shall prepare all applicable books, records, and Tax filings, including any applicable statements required by Treasury Regulation Section 1.351-3(a). 

56

(ii)Parent, Seller, Purchaser, the Company and Affiliates thereof intend that the transfer of the Sale Shares pursuant to this Agreement, excluding for the avoidance of doubt the Rollover Shares, shall be treated as a transaction described by Section 1001 of the Code.  Parent, Seller, JAB Holdings, the Company and Purchaser Parent and their Affiliates:  (y) shall neither take nor allow to be taken any action that, to their knowledge, would reasonably be expected to adversely affects the treatment of the purchase and sale of the Sale Shares as a taxable transaction described in Section 1001 of the Code and (z) shall act in accordance with the treatment of the purchase and sale of the Sale Shares as a transaction described in Section 1001 of the Code in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code.  

(iii)Parent, Seller, Purchaser, the Company and Affiliates thereof intend that JAB Holdings or an Affiliate thereof shall be treated, for U.S. federal (and applicable state and local) income tax purposes, as the owner of the common stock of Purchaser Parent acquired by JAB Holdings or an Affiliate thereof in connection with the transactions contemplated by this Agreement at all times from the Closing until a subsequent disposition of such shares of common stock, and each Party shall act in accordance with such treatment in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code. 

Section 5.09Third-Party Consents.  Upon the terms and subject to the conditions set forth in this Agreement, Parent or Seller shall use (and shall cause the Company to use) their reasonable best efforts to obtain any Consents required under any Contracts to which the Company is a party from third parties in connection with the consummation of the Transactions at or prior to the Closing.  In connection therewith, Parent and Seller shall not, and shall cause the Company not to, without the prior written consent of Purchaser, (a) make any payment of a Consent fee, “profit sharing” payment or other consideration (including increased or accelerated payments) or concede anything of value, (b) materially amend, supplement or otherwise modify any such Contract or (c) agree or commit to do any of the foregoing, in each case, for the purposes of giving, obtaining and/or effecting any third-party Consents; provided, however, that Purchaser may compel Parent or Seller to cause the Company to take any of the actions referred to in this sentence if such actions are only effective after the Closing. Parent and Seller shall (and shall cause the Company to) keep Purchaser reasonably informed regarding the process of obtaining such third-party Consents. 

Section 5.10Confidentiality.   

(a)The Confidentiality Agreement shall continue in full force and effect until the Closing pursuant to the IAHC Purchase Agreement, at which time the confidentiality obligations under the Confidentiality Agreement shall terminate.  If, for any reason, the transactions contemplated by this Agreement are not consummated, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms. 

57

(b)From and after the Closing, Parent and Seller shall keep confidential any and all information concerning the Company and its Subsidiaries in their possession or retained by Parent and Seller hereunder and the terms of this Agreement (collectively, “Company Confidential Information”); provided that, for the purposes of this Section 5.10, Company Confidential Information shall not include, with respect to Parent and Seller, any information which (i) is generally available to or known by the public (other than as a result of an act or omission by Parent or Seller in breach of this Section 5.10(b)), (ii) is made available to Parent or Seller by any other Person; provided that such Person is not known to the recipient to be bound by a duty of confidentiality with respect thereto or (iii) has been or is subsequently developed by Parent or Seller without use of or reference to Company Confidential Information.  Notwithstanding the foregoing or anything in this Agreement to the contrary, following the Closing, Parent and Seller shall be permitted to disclose Company Confidential Information as required by Law or to directors, officers, employees or advisors of Parent or Seller who have a need to know such information, provided that such Persons are themselves obligated to keep such Company Confidential Information confidential. 

(c)Notwithstanding Section 5.10(c) of the IAHC Purchase Agreement, for a period of twenty-four (24) months following the Closing, Purchaser and its Affiliates shall keep confidential any and all information concerning Parent, Seller or any of their respective Affiliates (other than the Company) in their possession or retained by Purchaser and its Affiliates (including, for the avoidance of doubt, by the Company) hereunder and the terms of this Agreement (collectively, “Seller Confidential Information”); provided that, for the purposes of this Section 5.10, Seller Confidential Information shall not include, with respect to Purchaser and its Affiliates, any information which (i) is generally available to or known by the public (other than as a result of an act or omission by Purchaser and its Affiliates in breach of this Section 5.10(b)), (ii) is made available to Purchaser and its Affiliates by any other Person; provided that such Person is not known to the recipient to be bound by a duty of confidentiality with respect thereto or (iii) has been or is subsequently developed by Purchaser and its Affiliates without use of or reference to Seller Confidential Information.  Notwithstanding the foregoing or anything in this Agreement to the contrary, following the Closing, Purchaser and its Affiliates shall be permitted to disclose Seller Confidential Information as required by Law or to directors, officers, employees or advisors of Purchaser and its Affiliates who have a need to know such information, provided that such Persons are themselves obligated to keep such Seller Confidential Information confidential. 

Section 5.11Further Assurances.  The Parties shall execute and deliver, or shall cause to be executed and delivered, such documents and other instruments and shall take, or shall cause to be taken, such further actions as may be reasonably required to carry out the provisions of this Agreement and give effect to the Transactions. 

Section 5.12D&O Insurance. 

(a)Purchaser agrees that all rights to indemnification, advancement of expenses and exculpation by the Company now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing Date, an officer or director of the Company, shall survive the Closing Date and shall continue in full force and effect in accordance with their respective terms. 

58

(b)The Company shall, and Purchaser shall cause the Company to (i) maintain in effect for a period of six (6) years after the Closing Date, if available, the current policies of directors’ and officers’ liability insurance maintained by the Company immediately prior to the Closing Date (the “Existing Policy”) (provided that the Company may substitute therefor policies, of at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors and officers of the Company when compared to the insurance maintained by the Company as of the date hereof under the Existing Policy; further, provided that if such “run-off” or other coverage is not available at a cost not greater than two hundred and fifty percent (250%) of the annual premiums paid as of the date of this Agreement under the Existing Policy (the “Insurance Cap”), then the Company shall be required to obtain as much coverage as is reasonably possible under substantially similar policies for such annual premiums as do not exceed the Insurance Cap); or (ii) obtain as of the Closing Date “tail” insurance policies with a claims period of six (6) years from the Closing Date with at least the same coverage and amounts, and containing terms and conditions that are not less advantageous to the directors and officers of the Company, in each case with respect to claims arising out of or relating to events which occurred on or prior to the Closing Date (including in connection with the transactions contemplated by this Agreement); provided, however, that the Company does not pay more than the aggregate Insurance Cap. 

(c)The obligations of Purchaser and the Company under this Section 5.12 shall not be terminated or modified in such a manner as to adversely affect any director or officer to whom this Section 5.12 applies without the consent of such affected director or officer (it being expressly agreed that the directors and officers to whom this Section 5.12 applies shall be third-party beneficiaries of this Section 5.12, each of whom may enforce the provisions of this Section 5.12. 

(d)In the event Purchaser, the Company or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in either such case, proper provision shall be made so that the successors and assigns of Purchaser or the Company, as the case may be, shall assume all of the obligations set forth in this Section 5.12. 

Section 5.13Certain Other Covenants. 

(a)As consideration for and to induce Purchaser to pay the consideration set forth in this Agreement, during the Non-Compete Restricted Period (provided that such period shall be extended by any period in which any Person is in material violation of the covenants of this Section 5.13; provided, further, that, notwithstanding the foregoing proviso, such period of tolling shall not be extended (x) for greater than twelve (12) months in the case of any single or continuing violation or (y) from and after such time as Purchaser or its Affiliates have actual knowledge of such violation) Parent and Seller shall not, and Parent and Seller shall cause each of their Subsidiaries and shall use reasonable best efforts to cause each of its Affiliates not to, directly or indirectly: 

(i)engage in or own any interest in, or control, manage or operate any Person or business division that is primarily engaged in the underwriting, distribution, sale,  

59

marketing or administration of pet insurance policies or the provision of pet insurance brokerage services (a “Competitive Business”) in any country in which the Company (including its Subsidiaries) then does business;

(ii)use the Company Confidential Information (A) in connection with or with the purpose of pursuing or impairing any Competitive Business or (B) for any purpose other than risk management or modeling; or 

(iii)solicit or assist in the solicitation of any supplier, licensee or service provider with whom the Company or any of its Subsidiaries has a commercial relationship, whether by contract or otherwise, for the purpose of causing such supplier, licensee or service provider to reduce, discontinue or alter, in a manner adverse to the Company or its Subsidiaries, such commercial relationship. 

(b)Notwithstanding anything to the contrary in this Agreement, nothing in Section 5.13(a) shall preclude Parent, Seller or any of their Affiliates from (i) acquiring (by asset purchase, stock purchase, merger, reinsurance, consolidation or otherwise), directly or indirectly, the stock, business or assets of any Person that at the time of such acquisition is engaged in, or owns any interest in or controls, manages or operates any Person that is engaged in, a Competitive Business that would otherwise be prohibited by Section 5.13(a) (such Competitive Business being referred to herein as an “Acquired Competitive Business”); provided, that within twelve (12) months of the closing of the acquisition of such Acquired Competitive Business, Seller shall sell, spin-off or otherwise divest itself (or enter into an agreement to sell, spin-off or otherwise divest itself) of the portion of such Acquired Competitive Business that engages in the Acquired Competitive Business (the “Divested Portion”); provided, further that Purchaser shall have a right of first refusal to purchase the Divested Portion from Seller); or (ii) owning, directly or indirectly, as a passive, non-controlling investor (without any membership on the board of directors or similar governing body of such Person), up to an aggregate of five percent (5%) of any class of securities of a Person that is a Competitive Business that are registered under the Exchange Act, or an equivalent Law in a foreign jurisdiction. 

(c)During the Non-Solicit Restricted Period, Parent and Seller shall not, and  Parent and Seller shall cause each of their Subsidiaries and shall use reasonable best efforts to cause each of their Affiliates not to, directly or indirectly, solicit or assist in the solicitation of any individual who on the Closing Date is an employee of the Company or any of its Subsidiaries or Purchaser without the prior written approval of Purchaser, unless such individual (i) was terminated by the Company or any of its Subsidiaries or Purchaser, as applicable, (ii) has not been in the employ of the Company or any of its Subsidiaries or Purchaser during the six (6) month period prior to such solicitation or (iii) is contacted or solicited through general non-targeted solicitation or advertisement in a newspaper, online or through an employment agency. 

(d)Each of the Parties has carefully read this Section 5.13 and considered the restraints imposed upon Parent, Seller and their Affiliates, and is in full accord as to the necessity of such restrictive covenants for the reasonable and proper protection of Purchaser and its Affiliates, and agrees that each restraint imposed by the provisions of this Section 5.13 is fair and reasonable with respect to subject matter, geographic scope and time period.  It is expressly understood and agreed that although Parent, Seller and Purchaser consider such covenants to be  

60

fair and reasonable, if a judicial determination is made by a court of competent jurisdiction that the time or any other restriction contained in this Section 5.13 is an invalid or unenforceable restriction against Parent, Seller or any of their Affiliates, the provisions of this Section 5.13 shall not be rendered void but shall be deemed amended to apply to such maximum time and to such maximum extent as such court may judicially determine or indicate to be enforceable.  Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is invalid or unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein, which shall be given full force and effect without regard to such finding.

(e)Each of Parent and Seller represents, stipulates and acknowledges on behalf of itself and its Affiliates that:  (i) the restrictive covenants contained in this Section 5.13 are a material inducement to Purchaser to enter into this Agreement and consummate the Transactions, for which each of Parent and Seller will receive a substantial financial benefit, and (ii) it would impair the goodwill acquired by Purchaser and reduce the value of the Company if Parent or Seller were to breach its obligations contained in this Section 5.13. 

(f)The Company shall use, and shall cause its Affiliates to use, its reasonable best efforts, at Purchaser’s expense, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and obtain third-party debt financing in connection with the transactions contemplated hereby.   

Section 5.14AKC Interest in the Company. 

(a)In connection with the AKC Waiver and Consent, Purchaser agrees to offer to AKC until December 31, 2021 the right to sell up to 70% of the AKC Shares to Purchaser at the same price and terms upon which Seller proposes to sell its Shares to Purchaser pursuant to this Agreement, subject to the AKC Purchase Agreement.  

(b)In the event AKC desires to sell the AKC Shares during the period provided in the AKC Waiver and Consent, Parent, Seller and Purchaser shall each use their reasonable best efforts to negotiate with AKC to (i) enter into an agreement with Purchaser pursuant to which AKC shall agree to sell up to 70% of its Shares to Purchaser at the same price and terms upon which Seller proposes to sell its Shares to Purchaser pursuant to this Agreement (such agreement, the “AKC Purchase Agreement”) and (ii) enter into an amendment to the Company Shareholders Agreement that (A) eliminates the right of first refusal provisions benefitting AKC from Section 2 of the Company Shareholders Agreement in their entirety and (B) designates the use of a valuation report prepared by Bank of America Merrill Lynch for Affiliates of Purchaser Parent (instead of American Appraisal Associates) as the valuation methodology for purposes of the “Put and Call Right” provisions in Section 3 of the Company Shareholders Agreement. The Parties hereto agree that the purchase price payable to AKC pursuant to the AKC Purchase Agreement shall reflect adjustments for a multiple of 0.105 times Cash, Indebtedness and Closing Net Working Capital. 

(c)At the closing of the Transactions contemplated by the AKC Purchase Agreement, Seller and Purchaser agree that each of Seller and Purchaser shall contribute by wire transfer of immediately available funds an amount equal to 50% of the total amount of cash  

61

being paid by the Company pursuant to the AKC Purchase Agreement; provided, however, that in no event shall the amount of cash being contributed by Purchaser to the Company in order to finance the Company’s purchase of the AKC Shares pursuant to the AKC Purchase Agreement be greater than the AKC Maximum Contribution Amount.

Section 5.15Escrow Agreement.   

(a)Prior to Closing, Purchaser and Seller shall use reasonable best efforts to negotiate the terms of the Escrow Agreement and such parties shall enter into such Escrow Agreement at the Closing.  

(b)For U.S. federal income tax purposes, Purchaser and Seller intend that the purchase and sale of the Sale Shares be treated as a completed purchase and sale of such shares occurring on or prior to the Closing Date, and each Party shall act in accordance with such treatment in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code.  Purchaser and Seller shall use reasonable best efforts to provide terms in the Escrow Agreement as it relates to the Purchase Price Escrow Amount that provide (as described below or in substantially similar form): 

(i)Seller shall be treated as the owner of the Escrow Account; 

(ii)Seller shall be treated as having received or “constructively received” the Purchase Price Escrow Amount; 

(iii)Seller shall be treated as voluntarily setting aside the Purchase Price Escrow Amount into the Escrow Account; 

(iv)the Escrow Account, as it relates to the Purchase Price Escrow Amount, shall be treated as a security arrangement rather than the sole source of cash payments; and 

(v)each Party shall act in accordance with such treatment in the filing of all Tax Returns and in the course of any Tax Contest relating thereto and shall take no position inconsistent with such treatment, unless otherwise required by a determination pursuant to Section 1313 of the Code. 

Section 5.16Transition Services Agreement.  Prior to Closing, Purchaser and Seller agree to negotiate in good faith and reasonably cooperate in preparing and finalizing the schedules to the Transition Services Agreement. 

Section 5.17Rollover Agreement.  Following the date hereof, Purchaser Parent and Seller shall use reasonable best efforts to negotiate the terms of the Rollover Agreement and such parties shall enter into such Rollover Agreement as promptly as practicable following the date hereof. 

Section 5.18Intercompany Accounts.  All intercompany accounts and agreements between Seller or any of its Affiliates, on the one hand, and the Company or any of its  

62

Subsidiaries, on the other hand, that exist as of the Closing shall be terminated at or prior to the Closing with no liability to the Company or any Subsidiary.

Section 5.19Purchaser Release.  Effective as of the Closing, except as otherwise set forth herein, the IAHC Purchase Agreement or the Ancillary Agreements, Purchaser on behalf of itself and each of its Subsidiaries and Affiliates, including after the Closing, the Company, and each of its and their current and former officers, managers, directors, employees, partners, members, advisors, successors and assigns (collectively, the “Purchaser Releasing Parties”), hereby irrevocably and unconditionally releases and forever discharges Seller, its Affiliates and each of their respective current and former officers, managers, directors, employees, partners, members, advisors, attorneys, financial advisors, lenders, successors and assigns (collectively, the “Seller Released Parties”) of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which the Purchaser Releasing Parties may have against each of the Seller Released Parties, now or in the future, in each case in respect of any cause, matter or thing relating to any of the Seller Released Parties occurring or arising on or prior to the date of this Agreement. 

Section 5.20Seller Release.  Effective as of the Closing, except as otherwise set forth herein, the IAHC Purchase Agreement or the Ancillary Agreements, Seller on behalf of itself and each of its Subsidiaries and Affiliates, and each of its and their current and former officers, managers, directors, employees, partners, members, advisors, successors and assigns (collectively, the “Seller Releasing Parties”), hereby irrevocably and unconditionally releases and forever discharges Purchaser, its Affiliates (including the Company) and each of their respective current and former officers, managers, directors, employees, partners, members, advisors, attorneys, financial advisors, lenders, successors and assigns (collectively, the “Purchaser Released Parties”) of and from any and all actions, causes of action, suits, proceedings, executions, judgments, duties, debts, dues, accounts, bonds, contracts and covenants (whether express or implied), and claims and demands whatsoever whether in law or in equity which the Seller Releasing Parties may have against each of the Purchaser Released Parties, now or in the future, in each case in respect of any cause, matter or thing relating to any of the Purchaser Released Parties occurring or arising on or prior to the date of this Agreement. 

Section 5.21Resignations. Seller and the Company shall deliver to Purchaser duly signed resignations, or if such resignation cannot reasonably be obtained, reasonable evidence of removal, effective as of and upon the Closing Date, of each of those directors and/or managers of the Company and its Subsidiaries identified by Purchaser in writing to the Company at least ten (10) Business Days prior to the Closing Date.  For the avoidance of doubt, the Parties acknowledge and agree that the resignations will be for the resignation from the director and/or manager positions held by such signatories at the Company and/or its Subsidiaries but will not be a resignation from employment with the Company and/or its Subsidiaries.  

63

Article VICONDITIONS TO CLOSING

Section 6.01Conditions Precedent to Obligations of Each Party.  The obligations of each Party to consummate the Transactions are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by the Party to whose benefit such condition exists, in whole or in part, to the extent permitted by applicable Law): 

(a)no injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining or otherwise making illegal or prohibiting consummation of the Transactions; 

(b)the waiting period or required approval applicable to the Transactions under the HSR Act shall have expired (or early termination shall have been granted) or been received; and 

(c)delivery to the applicable Party of all items required pursuant to Section 2.03. 

Section 6.02Conditions Precedent to Obligations of Purchaser Parties.  In addition, the obligations of Purchaser Parties to consummate the Transactions are subject to the satisfaction, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Purchaser, in whole or in part, to the extent permitted by applicable Law): 

(a)(i) (A) the representations and warranties of Parent and Seller set forth in Article III (other than (1) the Fundamental Parent and Seller Representations, (2) the representations and warranties set forth in Section 3.08(b) and (3) those other representations and warranties that address matters as of a specified date) shall be true and correct as of the Closing Date as though then made at and as of the Closing Date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties) and (B) the representations and warranties of Parent and Seller set forth in Article III that address matters as of a specified date (other than the Fundamental Parent and Seller Representations and Section 3.08(b)) shall be true and correct as of such specified date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties), except where the failure of such representations and warranties referenced in the immediately preceding clauses (A) and (B) to be so true and correct would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (ii) the Fundamental Parent and Seller Representations shall be true and correct in all material respects as of the Closing Date as though then made at and as of the Closing Date except for such Fundamental Parent and Seller Representations which address matters only as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date (in each case, without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties); and (iii) the representations and warranties set forth in Section 3.08(b) shall be true and correct in all respects as of the Closing Date as though then made; 

64

(b)Parent and Seller shall have performed and complied in all material respects with all covenants required pursuant to the terms of this Agreement to be performed or complied with by them on or prior to the Closing Date;  

(c)Purchaser shall have received from Parent a certificate signed by a senior officer of Parent, dated as of the Closing Date, to the effect that the conditions specified in Section 6.02(a) and Section 6.02(b) are satisfied; 

(d)the waiting period or required approval applicable to the Transactions under the HSR Act shall have expired (or early termination shall have been granted) or been received without the imposition of any term, condition or consequence the acceptance of which would constitute a Substantial Detriment; and 

(e)None of the Key Employees shall (i) have failed to deliver an executed employment agreement with Purchaser, (ii) have terminated employment with the Company, (iii) other than as a result of death or disability, be unable to commence employment under his or her employment agreement with Purchaser upon the Closing or (iv) have notified the Company, Parent, Seller or Purchaser that he or she is terminating (or currently intends to terminate) employment with the Company. 

Section 6.03Conditions Precedent to Obligations of Parent and Seller.  In addition, the obligations of Parent and Seller to consummate the Transactions are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Parent or Seller, in whole or in part, to the extent permitted by applicable Law): 

(a)(i) (A) the representations and warranties of Purchaser Parties set forth in Article IV (other than (1) Section 4.02 and (2) those other representations and warranties that address matters as of a specified date) shall be true and correct as of the Closing Date as though then made at and as of the Closing Date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties) and (B) the representations and warranties of Purchaser set forth in Article IV of this Agreement that address matters as of a specified date (other than Section 4.02) shall be true and correct as of such specified date (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties), except where the failure of such representations and warranties referenced in the immediately preceding clauses (A) and (B) to be so true and correct would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the consummation of the Transactions; and (ii) the representations and warranties set forth in Section 4.02 shall be true and correct in all material respects as of the Closing Date as though made at and as of the Closing Date except for representations and warranties set forth in Section 4.02 which address matters only as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date (in each case, without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties); 

65

(b)Purchaser shall have performed and complied in all material respects with all covenants required pursuant to the terms of this Agreement to be performed or complied with by it on or prior to the Closing Date; and 

(c)Parent shall have received a certificate signed by a senior officer of Purchaser, dated as of the Closing Date, to the effect that the conditions specified in Section 6.03(a) and Section 6.03(b) are satisfied. 

Section 6.04Frustration of Closing Conditions.  A Party may not rely on the failure of any condition set forth in Section 6.01, Section 6.02 or Section 6.03, as the case may be, to be satisfied if such failure was due to the failure of such Party to perform any of its obligations under this Agreement. 

Article VIITERMINATION

Section 7.01Termination of Agreement.  Subject to Section 9.04, this Agreement may be terminated at any time prior to the Effective Time as follows: 

(a)by Parent and Seller, on the one hand, or Purchaser Parties, on the other hand, on or after November 17, 2021 (as it may be extended pursuant to this Section 7.01(a) or the last sentence of Section 9.04, the “Outside Date”), if the Transactions shall not have occurred by 5:00 p.m., New York City time, on the Outside Date; provided that if, on the Outside Date, all of the conditions to the Closing set forth in Article VI (other than the conditions that by their nature can be satisfied only at the Closing) have been satisfied or waived, as applicable, except for the conditions set forth in Section 6.01(b), either Parent or Seller, on the one hand, or Purchaser Parties, on the other hand may, prior to 5:00 p.m., New York City time, on the Outside Date, extend the Outside Date to February 17, 2021 (such later date being the Outside Date); provided, further, that neither Parent or Seller, on the one hand, nor Purchaser Parties, on the other hand, may terminate this Agreement or extend the Outside Date pursuant to this Section 7.01(a) if it (or in the case of Parent or Seller, the Company) is in material breach of any of its obligations hereunder and such material breach causes, or results in, either (i) the failure to satisfy the conditions to the obligations of the terminating Party to consummate the Transactions set forth in Article VI prior to the Outside Date or (ii) the failure of the Effective Time to have occurred prior to the Outside Date; 

(b)by mutual written consent of Parent or Seller, on the one hand, and Purchaser Parties, on the other hand; 

(c)by Parent and Seller or by Purchaser Parties if an injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority shall be in effect enjoining, restraining or otherwise making illegal or prohibiting consummation of the Transactions and shall have become final and nonappealable; provided that neither Parent and Seller, on the one hand, nor Purchaser Parties, on the other hand, may terminate this Agreement pursuant to this Section 7.01(c) if it (or in the case of Parent or Seller, the Company)  

66

is in material breach of any of its obligations hereunder and such material breach causes, or results in, the failure of the Closing to occur on or prior to the date of such termination;

(d)by Purchaser Parties if (i) no Purchaser Party is in material breach of any of its obligations hereunder and (ii) Parent, Seller or the Company is in material breach of any of its representations, warranties or obligations hereunder that renders or would render the conditions set forth in Section 6.02(a) or Section 6.02(b) incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (x) twenty (20) Business Days after the giving of written notice by Purchaser to Parent or Seller and (y) two (2) Business Days prior to the Outside Date; 

(e)by Parent or Seller if (i) none of Parent, Seller or the Company is in material breach of any of its obligations hereunder and (ii) any Purchaser Party is in material breach of any of its representations, warranties or obligations hereunder that renders or would render the conditions set forth in Section 6.03(a) or Section 6.03(b) incapable of being satisfied on the Outside Date, and such breach is either (A) not capable of being cured prior to the Outside Date or (B) if curable, is not cured within the earlier of (1) twenty (20) Business Days after the giving of written notice by Parent or Seller to Purchaser and (2) two (2) Business Days prior to the Outside Date; or 

(f)by Parent or Seller, if the IAHC Purchase Agreement is terminated for any reason. 

Section 7.02Procedure upon Termination.  In the event of termination and abandonment by any Party or Parties pursuant to Section 7.01, written notice thereof shall forthwith be given to the other Parties, and this Agreement shall terminate, and the Transactions shall be abandoned, without further action by any Party. 

Section 7.03Effect of Termination. In the event that this Agreement is validly terminated in accordance with Section 7.01, then each of the Parties shall be relieved of its duties and obligations arising under this Agreement after the date of such termination and such termination shall be without Liability to any of the Parties; provided, however, that, subject to the terms, conditions and limitations of this Section 7.03, (a) no such termination shall relieve any Party from Liability for any willful and material breach (it being acknowledged and agreed by the Parties that the failure to close the Transactions by any Party that was otherwise obligated to do so under the terms of this Agreement shall be deemed to be a willful and material breach) or fraud by that Party prior to such termination and (b) the provisions of this Section 7.03, Section 5.02(f), the last sentence of Section 5.03(b), Section 5.04 and Article IX shall remain in full force and effect and survive any termination of this Agreement in accordance with its terms. 

Article VIIIINDEMNIFICATION

Section 8.01Indemnification Obligations. 

(a)Indemnification Obligations of Parent and Seller.  From and after the Closing, Parent and Seller, in accordance with and subject to the provisions and limitations set forth in  

67

this Article VIII, shall jointly and severally indemnify, defend and hold harmless Purchaser Parties and their respective Affiliates (including, after the Closing, the Company and its Subsidiaries), and each of their respective Representatives (the “Purchaser Indemnified Parties”) from and against any and all Losses actually incurred, suffered or sustained by any Purchaser Indemnified Party arising out of, or resulting from:

(i)any breach of or inaccuracy in any representation or warranty made in this Agreement by Parent or Seller in Article III (or in the closing certificate delivered by Parent in accordance with Section 6.02(c)); 

(ii)any breach of any covenant, agreement or undertaking made by or to be performed by Parent or Seller or, with respect to the period on or prior to the Closing Date, the Company or any of its Subsidiaries, in this Agreement;  

(iii)Transaction Expenses or Closing Indebtedness unpaid following the Closing;  

(iv)the VDA (as defined in the Seller Disclosure Schedules); and 

(v)any Indemnified Taxes. 

The Losses of the Purchaser Indemnified Parties described in Section 8.01(a) as to which the Purchaser Indemnified Parties are entitled to indemnification are collectively referred to as “Purchaser Losses”.

(b)Indemnification Obligations of Purchaser Parties.  From and after the Closing, Purchaser Parties and the Company, in accordance with and subject to the provisions and limitations set forth in this Article VIII, shall jointly and severally indemnify, defend, and hold harmless each of Parent and Seller and their respective Affiliates, and each of their respective Representatives (the “Seller Indemnified Parties”) from and against any and all Losses actually incurred, suffered or sustained by any Seller Indemnified Party arising out of, or resulting from: 

(i)any breach of or inaccuracy in any representation or warranty made in this Agreement by any Purchaser Party in Article IV (or in the closing certificate delivered by any Purchaser Party in accordance with Section 6.03(c)); or 

(ii)any breach of any covenant, agreement or undertaking made by or to be performed by any Purchaser Party in this Agreement. 

The Losses of the Seller Indemnified Parties described in this Section 8.01(b) as to which the Seller Indemnified Parties are entitled to indemnification are collectively referred to as “Seller Losses”.

Section 8.02Survival.  The representations, warranties, covenants and agreements of the Parties contained in this Agreement will survive the Closing but only to the extent specified in this Section 8.02.  Subject to the last proviso of Section 8.04(a), all representations and warranties in Article III and Article IV of this Agreement and all covenants and agreements to be performed prior to the Closing shall survive the Closing for a period of eighteen (18) months  

68

after the Closing Date, or such other date as specifically provided in this Agreement, at which time they shall terminate (and no claims shall be made for indemnification under this Article VIII), except: (a) the Fundamental Parent and Seller Representations shall survive for the maximum period of time allowable under Law; (b) the representations and warranties in Section 3.16 (Tax Matters) and the specified indemnities set forth in Section 8.01(a)(v) shall survive until sixty (60) days after the expiration of the applicable statute of limitations; and (c) the covenants and agreements to be performed after the Closing shall survive indefinitely until fully performed or terminated, except as otherwise specifically provided in this Agreement.  Notwithstanding the survival periods set forth in this Section 8.02, no right to indemnification for Losses identified in a notice of a Claim for indemnity properly asserted in writing in accordance with Section 8.04 prior to the expiration of the applicable survival period set forth above will be affected by the expiration of such survival period, and instead, with respect to such claims, shall survive until the final resolution of the asserted right to indemnification specified in such notice in accordance with Section 8.04.  

Section 8.03Indemnification Limitations. 

(a)Purchaser Basket.  Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation or from breach of, or inaccuracy in, the Fundamental Parent and Seller Representations, no Purchaser Indemnified Party shall be entitled to assert any claim for indemnification under Section 8.01(a)(i):  (i) unless and until, individually or in the aggregate, all Purchaser Losses in respect of indemnification under such Sections (together in the aggregate with any Purchaser Losses under Section 8.01(a)(i) IAHC Purchase Agreement) exceed $4,000,000, after which Seller shall be obligated only for the excess of Purchaser Losses over such amount for which the Purchaser Indemnified Parties are finally determined to be otherwise entitled to indemnification, or (ii) for any Claim that individually results in Purchaser Losses in an amount that does not exceed $250,000. 

(b)Purchaser Caps.  

(i) Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, or from breach of, or inaccuracy in, the Fundamental Parent and Seller Representations, the maximum aggregate liability of Parent and Seller under Section 8.01(a)(i) (together in the aggregate with any Purchaser Losses under Section 8.01(a)(i) of the IAHC Purchase Agreement) shall not exceed an amount equal to $40,000,000 (such maximum amount, the “Cap”). 

(ii)Other than for Purchaser Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, but subject to the limitations set forth in Section 8.03(b)(i) immediately above, the maximum aggregate liability of Parent and Seller under Section 8.01(a) shall not exceed the aggregate Final Closing Consideration. 

(c)Seller Basket.  Other than for Seller Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, no Seller Indemnified Party shall be entitled to assert any claim for indemnification under Section 8.01(a)(i):  (i) unless and until, individually or in the aggregate, all Seller Losses in respect of indemnification under such Sections (together in the aggregate with any Seller Losses under Section 8.01(a)(i) of the IAHC  

69

Purchase Agreement) exceed $4,000,000, after which Purchaser shall be obligated only for the excess of Seller Losses over such amount for which the Seller Indemnified Parties are finally determined to be otherwise entitled to indemnification, or (ii) for any Claim that individually results in Seller Losses in an amount that does not exceed $250,000.

(d)Seller Caps.  Other than for Seller Losses resulting from Claims brought on the basis of fraud, willful misconduct or intentional misrepresentation, (i) the maximum aggregate liability of Purchaser Parties to any Seller Indemnified Party under Section 8.01(b)(i)  (together in the aggregate with any Seller Losses under Section 8.01(b)(i) of the IAHC Purchase Agreement) shall not exceed the Cap, and (ii) subject to the limitations set forth in the immediately preceding clause (i), the maximum aggregate liability of Purchaser under Section 8.01(b) shall not exceed the Final Closing Consideration. 

Section 8.04Notification of Claims. 

(a)An Indemnified Party shall promptly notify the Indemnifying Party in writing of any Claim in respect of which indemnity may be sought under this Article VIII, including any pending or threatened Claim or demand by a third party that the Indemnified Party has determined has given or could reasonably give rise to a right of indemnification under this Agreement (including a pending or threatened Claim or demand asserted or unasserted, known or unknown or accrued or unaccrued, by a third party against the Indemnified Party) (each, a “Third-Party Claim”), describing in reasonable detail the facts and circumstances (to the extent known based on the then available information) with respect to the subject matter of such Claim or demand; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VIII except to the extent that the Indemnifying Party is materially prejudiced by such failure.  The Parties agree that (i) in this Article VIII they intend to shorten (in the case of the limited survival periods specified in Section 8.02) and lengthen (in the case of the indefinite survival periods specified in Section 8.02) (as the case may be) the applicable statute of limitations period with respect to certain Claims; (ii) notices for Claims in respect of a breach of a representation, warranty, covenant or agreement must be delivered prior to the expiration of any applicable survival period specified in Section 8.02 for such representation, warranty, covenant or agreement; and (iii) any Claims for indemnification for which notice is not timely delivered in accordance with this Section 8.04(a) shall be expressly barred and are hereby waived; provided, that, if, prior to such applicable date, a Party shall have notified the other Party in accordance with the requirements of this Section 8.04(a) of a claim for indemnification under this Article VIII (whether or not formal legal action shall have been commenced based upon such claim), such Claim shall continue to be subject to indemnification in accordance with this Article VIII notwithstanding the passing of such applicable date. 

(b)Upon receipt of a notice of a Claim for indemnity from an Indemnified Party pursuant to Section 8.04(a) in respect of a Third-Party Claim, the Indemnifying Party may, by notice to the Indemnified Party delivered within twenty (20) Business Days of the receipt of notice of such Third-Party Claim (and, for the avoidance of doubt, any failure to deliver any such notice within such time period shall be deemed an election not to assume any such defense and control), assume the defense and control of any Third-Party Claim, with its own counsel and at its own expense, but shall allow the Indemnified Party an opportunity to participate in the  

70

defense of such Third-Party Claim with its own counsel and at its own expense; provided, however, that the Indemnifying Party shall bear the reasonable fees, costs and expenses of one (1) such separate counsel if (i) the Indemnified Party shall have determined in good faith that an actual or potential conflict of interest makes representation by the same counsel inappropriate or (ii) the Indemnifying Party shall have authorized the Indemnified Party to employ separate counsel at the Indemnifying Party’s expense.  The Indemnified Party shall take any actions reasonably necessary to defend such Third-Party Claim prior to the time that it receives a notice from the Indemnifying Party as contemplated by the immediately preceding sentence.  Parent and Seller, on the one hand, or Purchaser Parties, on the other hand, (as the case may be) shall, and shall cause each of its Affiliates and Representatives to, cooperate fully with the Indemnifying Party in the defense of any Third-Party Claim, which cooperation shall include designating a liaison counsel to whom the Indemnifying Party may direct notices and other communications, and upon the reasonable request of the Indemnifying Party, use reasonable efforts to make witnesses available, and provide records and documents.  If the Indemnifying Party has assumed the defense of a Third-Party Claim and is in compliance with its obligations under this Section 8.04(b) (or if the twenty (20) Business Day period has not yet elapsed), then the Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed), consent to a settlement, compromise or discharge of, or the entry of any judgment arising from, any Third-Party Claim, unless such settlement, compromise, discharge or entry of any judgment (1) does not involve any finding or admission of any violation of Law or admission of any wrongdoing by any Person, (2) provides solely for the payment of money and (3) does not affect any other claims that may be made against the Indemnified Party in a manner adverse to such Indemnified Party, and the Indemnifying Party shall (x) pay or cause to be paid all amounts arising out of such settlement or judgment pursuant to the terms of such settlement or judgment, (y) not encumber any of the material assets of any Indemnified Party or agree to any restriction or condition that would apply to or materially adversely affect any Indemnified Party or the conduct of any Indemnified Party’s business and (z) obtain, as a condition of any settlement, compromise, discharge, entry of judgment (if applicable) or other resolution, a complete and unconditional release of, or dismissal with prejudice of claims against,  Indemnified Party from all matters that were asserted in connection with such claims and any and all liabilities in respect of such Third-Party Claim.  The Indemnified Party shall not settle, compromise or consent to the entry of any judgment with respect to any claim or demand for which it is seeking indemnification from the Indemnifying Party or admit to any liability with respect to such claim or demand without the prior written consent of the Indemnifying Party (which shall not be unreasonably withheld, conditioned or delayed).

(c)Notwithstanding anything to the contrary contained in this Article VIII, no Indemnifying Party shall have any liability under this Article VIII for any Losses arising out of or in connection with any Third-Party Claim that is settled or compromised by an Indemnified Party without the consent of such Indemnifying Party (which shall not be unreasonably withheld, conditioned or delayed). 

(d)In the event any Indemnifying Party receives a notice of a claim for indemnity from an Indemnified Party pursuant to Section 8.04(a) that does not involve a Third-Party Claim, the Indemnifying Party shall notify the Indemnified Party within twenty (20) Business Days following its receipt of such notice whether the Indemnifying Party disputes its liability to the  

71

Indemnified Party under this Article VIII.  The Indemnified Party shall reasonably cooperate with and assist the Indemnifying Party in determining the validity of any such claim for indemnity by the Indemnified Party.

Section 8.05Payment.  In the event a Claim or any Action for indemnification under this Article VIII has been finally determined against Parent or Seller, the amount of such final determination shall be paid by the applicable Indemnifying Party to the Indemnified Party on demand by wire transfer of immediately available funds to the applicable account designated by the Indemnified Party in writing.  A Claim or an Action, and the liability for and amount of damages therefor, shall be deemed to be “finally determined” for purposes of this Article VIII when the Parties have so determined by mutual written agreement or, if disputed, when a final non-appealable Order has been entered into with respect to such Claim or Action. 

Section 8.06Exclusive Remedies.  Each Party acknowledges and agrees that: 

(a)prior to the Closing, other than in the case of intentional breach, willful misconduct or fraud by Parent, Seller or their Affiliates or Representatives, the sole and exclusive remedy of Purchaser for any breach or inaccuracy of any representation or warranty contained in this Agreement or any certificate or instrument delivered hereunder shall be, in the event that (i) each of the conditions set forth in Article VI has not been satisfied or waived as a result of such breach or inaccuracy and (ii) such breach or inaccuracy is incapable of being cured or, if capable of being cured, is not cured within thirty (30) days after Purchaser has notified Parent and Seller of intent to refuse to close the purchase and sale of the Sale Shares hereunder, refusal to close the purchase and sale of the Sale Shares hereunder; 

(b)following the Closing, other than in the case of intentional breach, willful misconduct or fraud, (i) the indemnification provisions of this Article VIII shall be the sole and exclusive remedies of the Parties for any breach of the representations or warranties contained in this Agreement and (ii) notwithstanding anything to the contrary contained herein, no breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right (other than any right specifically contemplated by the terms of Section 10 of the Stockholders Agreement) on the part of any Party to rescind this Agreement or any of the transactions contemplated by this Agreement; and 

(c)following the Closing, the indemnification provisions of this Article VIII shall be the sole and exclusive monetary remedies of the Parties for any breach of any covenant, but without prejudice to any remedies available under any of the Ancillary Agreements or Section 9.04. 

Section 8.07Additional Indemnification Provisions. 

(a)Parent, Seller and Purchaser agree, for themselves and on behalf of their respective Affiliates and Representatives, that with respect to each indemnification obligation set forth in this Article VIII, any Ancillary Agreement or any other document executed or delivered in connection with the Closing: each such obligation shall be calculated (i) on a Net After-Tax Basis and (ii) net of any Eligible Insurance Proceeds. 

72

(b)Any amount payable by the Indemnifying Party pursuant to this Article VIII shall be paid promptly and payment shall not be delayed pending any determination of Eligible Insurance Proceeds.  In any case where an Indemnified Party recovers from a third party any Eligible Insurance Proceeds or any other amount in respect of any Loss for which the Indemnifying Party has actually reimbursed it pursuant to this Article VIII, such Indemnified Party shall promptly pay over to the Indemnifying Party the amount of such Eligible Insurance Proceeds, but not in excess of the sum of (i) any amount previously paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such claim and (ii) any amount expended by the Indemnifying Party in pursuing or defending any claim arising out of such matter. 

(c)The Parties shall treat any indemnification payment made under this Agreement as an adjustment to the Closing Consideration. 

(d)If any portion of Losses to be reimbursed by the applicable Indemnifying Party may be covered, in whole or in part, by third-party insurance coverage, the Indemnified Party shall promptly give notice thereof to the Indemnifying Party (a “Notice of Insurance”).  If the Indemnifying Party so requests within one hundred eighty (180) days after receipt of a Notice of Insurance, the Indemnified Party shall use its reasonable best efforts to collect (at the Indemnifying Party’s expense) the Eligible Insurance Proceeds. 

(e)The Parties acknowledge and agree that the same Loss may be subject to indemnification under more than one subsection of Section 8.01; provided, however, that in no event shall an Indemnified Party be entitled to duplicative recoveries for the same underlying Loss under this Article VIII or under any Ancillary Agreement. 

(f)For purposes of this Article VIII, in respect of the representations and warranties set forth in Article III (except for Section 3.08(b)) and Article IV, and the covenants set forth in this Agreement, any and all “Material Adverse Effect”, “material adverse effect”, “materiality” and similar exceptions and qualifiers and any similar thresholds set forth in such representations, warranties and covenants shall be disregarded (or, in the case of “Material Adverse Effect”, be read as “adverse effect”) for purposes of determining whether any such representation or warranty has been breached or determining the amount of Losses resulting therefrom. 

Section 8.08Mitigation.  Each Indemnified Party agrees to take reasonable steps as required under applicable law upon and after becoming aware of any event or condition which would reasonably be expected to give rise to any Losses that are indemnifiable hereunder. 

Article IXMISCELLANEOUS

Section 9.01Entire Agreement; Amendments and Waivers.  This Agreement and the Ancillary Agreements represent the entire understanding and agreement, and supersede all other prior agreements and understandings, both written and oral, among the Parties and their Affiliates, or any of them, with respect to the subject matter hereof.  This Agreement may be amended, supplemented or changed only by a written instrument signed by each of the Parties.   

73

Each provision in this Agreement may be waived only by a written instrument making specific reference to this Agreement signed by the Party against whom enforcement of any such provision so waived is sought.  No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.  The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.  No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

Section 9.02Binding Effect; Assignment. 

(a)This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.  Nothing in this Agreement shall create or be deemed to create any third-party beneficiary rights in any Person that is not a Party, except
Section 9.10 shall be for the benefit of, and enforceable by, the Nonparty Affiliates of the Parties. 

(b)No assignment of this Agreement or of any rights or obligations hereunder may be made, directly or indirectly (by operation of law or otherwise), by any Party without the prior written consent of the other Parties, except that Purchaser may assign any and all of its rights or obligations under this Agreement or any Ancillary Agreement to any of its Affiliates.  Subject to the immediately preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.  Any purported assignment not permitted under this Section 9.02(b) shall be null and void. 

Section 9.03Governing Law; Jurisdiction. 

(a)This Agreement, and all claims or causes of action (whether in contract, tort or otherwise) based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement), shall be governed by and construed in accordance with the Laws of the State of New York, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws. 

(b)Each of the Parties hereby irrevocably and unconditionally (i) submits, for itself and its property, to the exclusive jurisdiction of each federal court or state court within the County of New York in the State of New York having jurisdiction over that matter (“New York Courts”), and any appellate court from any decision thereof, in any Action based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement), or for recognition or enforcement of any judgment, and agrees that all claims in respect of any such Action shall be heard and determined in the New York Courts, (ii) waives, to the fullest extent it may legally and  

74

effectively do so, any objection which it may now or hereafter have to the laying of venue of any Action based upon, arising out of or relating to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or relating to any representation or warranty made in or in connection with this Agreement) in the New York Courts, (iii) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such Action in any such court and (iv) agrees that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.  Each of the Parties agrees that service of process, summons, notice or document by registered mail addressed to it at the applicable address set forth in Section 9.07 shall be effective service of process for any Action brought in any such court.

Section 9.04Specific Enforcement. 

The Parties agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, including if the Parties fail to take any action required of them hereunder to consummate this Agreement, subject to the terms and conditions of this Agreement.  The Parties acknowledge and agree that (a) the Parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof (including, for the avoidance of doubt, the right of Parent and Seller, on the one hand, or Purchaser, on the other hand, to cause the Transactions to be consummated on the terms and subject to the conditions set forth in this Agreement) in the courts described in Section 9.03(b) without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement, and (b) the right of specific enforcement is an integral part of the Transactions and without that right, the Parties would not have entered into this Agreement.  The Parties agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the Parties otherwise have an adequate remedy at law.  The Parties acknowledge and agree that any Party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 9.04 shall not be required to provide any bond or other security in connection with any such order or injunction.  If, prior to the Outside Date, any Party brings any Action, in each case, in accordance with this Section 9.04, to enforce specifically the performance of the terms and provisions hereof by any other Party, the Outside Date shall automatically be extended (x) for the period during which such Action is pending, plus ten (10) Business Days or (y) by such other time period established by the court presiding over such Action, as the case may be.

Section 9.05Waiver of Jury Trial. 

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY

75

IN RESPECT OF ANY LITIGATION THAT MAY BE DIRECTLY OR INDIRECTLY BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE ANCILLARY AGREEMENTS IN CONNECTION HEREWITH OR THE TRANSACTIONS.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.05.

Section 9.06Remedies.  Any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise at any time of any other remedy, except to the extent expressly limited hereby. 

Section 9.07Notices.  All notices and other communications under this Agreement shall be in writing and shall be deemed given (a) when delivered personally by hand (with written confirmation of receipt by other than automatic means, whether electronic or otherwise), (b) when sent by facsimile or email (unless, in the case of email, an automatic response has been received indicating that the recipient did not receive such email) with written confirmation of transmission or (c) one (1) Business Day following the day sent by an internationally recognized overnight courier (with written confirmation of receipt), in each case, at the following addresses, facsimile numbers and email addresses (or to such other address, facsimile number or email address as a Party may have specified by notice given to the other Party pursuant to this provision): 

If to Parent, Seller or, prior to Closing, the Company:

96 Cummings Point Road
Stamford, CT 06902
Attn: Marla Di Resta
Email: mdiresta@sslicny.com

with a copy to (which shall not constitute notice):

Dentons US LLP
1221 Avenue of the Americas 

New York, NY 10020-1089 

Attn:Nicholas Williams 

Kristina Beirne  

Email:n.williams@dentons.com 

kristina.beirne@dentons.com 

76

If to Purchaser Parties, or following the Closing, the Company:

1701 Pennsylvania Avenue NW, Suite 801

Washington, DC 20006

Attn:Joachim Creus 

Email:Joachim.Creus@jabse.eu 

with a copy to (which shall not constitute notice):

Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West
New York, NY 10001
Attn:  Paul T. Schnell  

Sean C. Doyle
          Jon A. Hlafter
Email: paul.schnell@skadden.com  

sean.doyle@skadden.com
           jon.hlafter@skadden.com 

Any Party from time to time may change its address, facsimile number or other information for the purpose of notices to that Party by giving notice, in accordance with this Section 9.07, specifying such change to the other Parties.

Section 9.08Severability.  If any condition, term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other conditions, terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the Transactions are consummated as originally contemplated to the greatest extent possible.  Notwithstanding the foregoing, the Parties intend that the provisions of Article VII and Article VIII, including the remedies (and limitations thereon) and the limitations on representations, warranties and covenants, be construed as integral provisions of this Agreement and that such provisions, remedies and limitations shall not be severable in any manner that diminishes a Party’s rights hereunder or increases a Party’s Liability or obligations hereunder. 

Section 9.09Expenses.  Except as otherwise provided in this Agreement, each Party shall bear its own expenses incurred in connection with the negotiation, execution and performance of this Agreement, each Ancillary Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the Transactions. 

Section 9.10Non-Recourse.  All Actions, Liabilities or causes of action (whether in contract or in tort, in law or in equity or granted by statute) that may be based upon, in respect of, arise under, out of or by reason of, be connected with or relate in any manner to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or  

77

warranty made in, in connection with, or as an inducement to, this Agreement), may be made against only (and such representations and warranties are those solely of) the Persons that are expressly identified as Parties to this Agreement (the “Contracting Parties”).  Other than in the case of fraud, no Person who is not a Contracting Party, including any current, former or future director, officer, employee, consultant, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, representative or assignee of, and any financial advisor or lender to, any Contracting Party, or any current, former or future director, officer, employee, consultant, incorporator, member, partner, manager, stockholder, Affiliate, agent, attorney, representative or assignee of, and any financial advisor or lender to, any of the foregoing (collectively, the “Nonparty Affiliates”), shall have any Liability (whether in contract or in tort, in law or in equity, or granted by statute) for any claims, causes of action or Liabilities arising under, out of, in connection with, or related in any manner to this Agreement or based on, in respect of, or by reason of this Agreement or its negotiation, execution, performance or breach, and, to the maximum extent permitted by Law, each Contracting Party hereby waives and releases all such Liabilities, claims, causes of action and obligations against any such Nonparty Affiliates.  Without limiting the foregoing, to the maximum extent permitted by Law, (a) other than in the case of fraud, each Contracting Party hereby waives and releases any and all rights, claims, demands or causes of action that may otherwise be available at law or in equity, or granted by statute, to avoid or disregard the entity form of a Contracting Party or otherwise impose Liability of a Contracting Party on any Nonparty Affiliate, whether granted by statute or based on theories of equity, agency, control, instrumentality, alter ego, domination, sham, single business enterprise, piercing the veil, unfairness, undercapitalization or otherwise and (b) each Contracting Party disclaims any reliance upon any Nonparty Affiliates with respect to the performance of this Agreement or any representation or warranty made in, in connection with or as an inducement to this Agreement.

Section 9.11Counterparts.  This Agreement may be executed in any number of counterparts (including by means of facsimile or email in .pdf format), each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 

Section 9.12JAB Holdings Obligation.   

(a)To induce Parent and Seller to enter into this Agreement, JAB Holdings hereby irrevocably and unconditionally guarantees, as a primary obligor and not as a surety, to Parent and Seller the full and timely payment and performance by Purchaser, Purchaser Parent and JAB Holdings of all of the Purchaser, Purchaser Parent and JAB Holdings’ respective covenants, obligations, undertakings and liabilities under this Agreement, including any indemnity obligations hereunder or thereunder (collectively, the “Guaranteed Obligations”).  JAB Holdings acknowledges that it is receiving benefits in connection with providing this Guaranty pursuant to this Section 9.12 (this “Guaranty”).  The liability of JAB Holdings under this Guaranty shall be absolute, unconditional and irrevocable.  

(b)JAB Holdings hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by Parent and Seller upon this Guaranty or acceptance of this Guaranty.  When pursuing its rights and remedies under this Guaranty against JAB Holdings, Parent and Seller shall be under no  

78

obligation to pursue such rights and remedies it may have against Purchaser, Purchaser Parent or any other Person with respect to the Guaranteed Obligations or any right of offset with respect thereto, and any failure by Parent or Seller to pursue such other rights or remedies or to collect any payments from Purchaser, Purchaser Parent or any such other Person or to realize upon or to exercise any such right of offset, and any release by Parent or Seller of Purchaser, Purchaser Parent or any such other Person or any right of offset, shall not relieve JAB Holdings of any liability under this Guaranty, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of Parent and Seller. Furthermore, JAB Holdings waives diligence, notice of the acceptance of this Guaranty and of the Guaranteed Obligations, presentment, demand for payment, protest, promptness, obligation to protect, secure or perfect any security interest, notice of non-performance, default, dishonor and protest, all defenses that may be available by virtue of any valuation, stay, moratorium Law or other similar Law now or hereafter in effect, any right to require the marshaling of assets of Purchaser, Purchaser Parent or any other Person interested in the transactions contemplated by this Agreement, and all suretyship defenses generally (in each case, other than any defense that Purchaser or Purchaser Parent may have that payment of all applicable Guaranteed Obligations has been made and all other applicable Guaranteed Obligations have been performed and satisfied, in each case in accordance with the terms of this Agreement).

(c)JAB Holdings hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against Parent and Seller or any other Person liable with respect to any of the Guaranteed Obligations that arise from the existence, payment, performance or enforcement of JAB Holdings’ obligations under or in respect of this Agreement, including this Guaranty, or any other agreement in connection therewith, including any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of Parent or Seller against the Purchaser or Purchaser Parent or any other Person liable with respect to any of the Guaranteed Obligations, whether or not such claim, remedy or right arises in equity or under contract, statute or common Law, including the right to take or receive from the Purchaser or Purchaser Parent or any other Person liable with respect to any of the Guaranteed Obligations, directly or indirectly, in cash or other property or by set off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been irrevocably paid in full in cash and all other Guaranteed Obligations have been performed and satisfied in accordance with the terms of this Agreement. If any amount shall be paid to JAB Holdings in violation of the immediately preceding sentence at any time prior to the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, such amount shall be segregated from other property and funds of JAB Holdings, and such amount shall forthwith be paid or delivered to Parent or Seller in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, in accordance with the terms of this Agreement, whether matured or unmatured, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. 

(d)JAB Holdings shall pay Seller within thirty (30) days of demand by Seller from time to time, the amount of all expenses, including reasonable attorneys’ fees and expenses, paid or incurred by Seller in enforcing any of its rights under this Guaranty against JAB Holdings. 

79

(e)JAB Holdings has the financial capacity to pay and perform its obligations under this Guaranty, and all funds necessary for JAB Holdings to fulfill its obligations under this Guaranty shall be available to JAB Holdings for this Section 9.12. The obligations of JAB Holdings hereunder shall not be discharged other than by complete performance. The parties hereto hereby agree that JAB Holdings is a party to this Agreement solely for purposes of this Section 9.12 and the other provisions of this Article IX. 

[The remainder of this page is intentionally left blank.]

80

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above.

SELLER PARTIES:

IHC SB HOLDINGS, LLC 

By: /s/ Vincent Furfaro  

Name:Vincent Furfaro  

Title:    President  

INDEPENDENCE AMERICAN HOLDINGS CORP. 

By:  /s/ Teresa Herbert  

Name:Teresa Herbert  

Title:Vice President, Finance  

[Signature Page to Stock Purchase Agreement]

PURCHASER PARTIES:

IGUANA CAPITAL, INC. 

By: /s/ Joachim Creus  

Name: Joachim Creus  

Title President  

IGUANA PP HOLDINGS, INC. 

By: /s/ Joachim Creus  

Name:Joachim Creus  

Title:President  

JAB HOLDINGS B.V. 

By: /s/ Joachim Creus  

Name:Joachim Creus  

Title:Managing Director  

By:  /s/ Frank Engelen  

Name:Frank Engelen  

Title:Managing Director  

[Signature Page to Stock Purchase Agreement]

EX-10.17

EXHIBIT 10.17 

DAVID T. KETTIG

TRANSACTION BONUS AGREEMENT

This Transaction Bonus Agreement (the “Agreement”) is made and entered into effective as of June 30, 2021, by and among AMIC Holdings Inc., a Delaware corporation (“AMIC”), Independence Holding Company, a Delaware corporation (“IHC”), Independence American Holdings Corp., a Delaware corporation (“IAHC”), and David T. Kettig (“Employee”).

RECITALS

Standard Security Life Insurance Company of New York, a New York corporation (“SSL”), IHC, as guarantor, and Employee entered into an Officer Employment Agreement, dated as of April 18, 2011 (the “Officer Employment Agreement”), which SSL subsequently assigned its obligations to AMIC pursuant to the Assignment and Assumption with Novation and Amendment of Officer Employment Agreement dated January 1, 2017 by and among SSL, AMIC and Employee.

IAHC and Employee entered into a Sale Bonus Agreement, dated as of November 7, 2016 (the “Sale Bonus Agreement”).

On May 17, 2021, IHC's subsidiaries IAHC and IHC SB Holdings, LLC (“SBH”) entered into a Stock Purchase Agreement with Iguana Capital, Inc. (“Iguana Capital”) and certain affiliates of Iguana Capital, including Iguana PP Holdings, Inc. (“Iguana Holdings”), a subsidiary of Iguana Capital, pursuant to which SBH will sell its entire 85% interest in PetPartners, Inc. to Iguana Holdings (“PetPartners Sale”).

On May 17, 2021, IHC, AMIC, IHC’s subsidiary Madison Investors Corp., Iguana Acquisition LLC (“Iguana Acquisition”) and its affiliate entered into a Stock Purchase Agreement, pursuant to which AMIC will sell its entire 100% interest in IAHC, which includes IAHC’s wholly owned subsidiary Independence American Insurance Company, an insurance company domiciled in the State of Delaware (“IAIC”), and certain other pet assets  to Iguana Acquisition (the “IAHC Sale” and together with the PetPartners Sale, the “Pet Business Sale”).

AMIC, IHC and Employee have mutually agreed that Employee will terminate his employment with AMIC, which will then permit him to become an employee of Iguana Capital and/or its affiliates.

IAHC and Employee have mutually agreed to cancel and terminate the Sale Bonus Agreement subject to the terms and conditions set forth herein.

IHC and Employee have agreed that Employee shall be eligible to receive a transaction bonus in recognition of Employee's efforts in connection with the Pet Business Sale provided that (i) the Sale Bonus Agreement is cancelled and terminated and Employee does

QB\68609588._

not receive any payments pursuant to it, and (ii) Employee waives any severance or any other monetary obligations he is entitled or eligible to receive under the Officer Employment Agreement.

IHC and Employee are parties to a Stock Option Award Agreement granted on January 4, 2019 (“Grant Date”) pursuant to which Employee received a non-incentive stock option exercisable for 52,800 shares of common stock of IHC (the “2019 Stock Option”), which vests 1/3 on each of the first three annual anniversaries of the Grant Date.  Of the 52,800 shares, 35,200 have vested and 17,600 shares are unvested (“Unvested Options”).

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.Incorporation by Reference.  The Recitals above are hereby incorporated by reference as if set forth hereinafter. 

2.Transaction Bonus.  Effective upon, and only upon, the consummation of the IAHC Sale, IHC shall pay Employee a lump sum payment of three million dollars ($3,000,000) within thirty (30) days of the consummation of the IAHC Sale (the “Transaction Bonus”).     

3.Stock Options/Stock Appreciation Rights.  IHC has granted stock options and stock appreciation rights to Employee, including the 2019 Stock Option.  IHC shall accelerate the vesting date of the Unvested Options to June 30, 2021 subject to the terms and conditions of this Agreement.   

4.Waiver and Release.  The parties agree that the Officer Employment Agreement shall terminate effective upon Employee's employment with Iguana Capital and/or its affiliates and that Employee's termination of employment with AMIC shall be treated as a “Disqualifying Termination” under the Officer Employment Agreement; provided that nothing in this Agreement shall supersede or cancel Employee's covenants under Section 4 of the Officer Employment Agreement.  The parties further agree that the Sale Bonus Agreement shall be cancelled and terminated effective upon the consummation of the IAHC Sale.  Following cancellation and termination of the respective agreements, Employee agrees to release IAHC, IHC, AMIC, SSL and their respective parents, subsidiaries, affiliates, and related entities from any and all, known and unknown, claims, obligations, and causes of actions under or related to (a) the Sale Bonus Agreement, (b) the Officer Employment Agreement, or (c) his employment with AMIC and its affiliates.  Employee specifically acknowledges that in consideration of receipt of the Transaction Bonus, he shall not be entitled to and shall not receive any payments, including bonuses or severance, under either the Sale Bonus Agreement or the Employment Agreement and that, except for the acceleration of the Unvested Options described in Section 3 above, his termination shall not result in the vesting of any benefits.   

2 

QB\68609588._

5.Miscellaneous. 

(a)Governing Law.  The laws of the State of New York (without giving effect to its conflict of laws principles) will govern all matters arising out of or relating to this Agreement including, without limitation, its interpretation, construction, performance and enforcement.   

(b)Arbitration.  All controversies and claims arising under or relating to this Agreement, or the relationships or transactions contemplated hereby, are to be resolved by arbitration in accordance with the rules of the American Arbitration Association before a panel of three (3) arbitrators selected in accordance with those rules.  Any such arbitration is to be conducted in New York, New York.  Such arbitrators are to apply the laws of the State of New York, without regard to its conflict of laws principles. Each party shall submit to any court of competent jurisdiction for purposes of enforcing any award, order or judgment.  Any award, order or judgment pursuant to the arbitration is final and may be entered and enforced exclusively in any New York state or federal court of competent jurisdiction.  The arbitration specified in this Section 4(b) is intended to be the exclusive remedy available to each such party to this Agreement, 

(c)Tax Withholding.  IHC may deduct from the payment hereunder any taxes or withholdings it is required to deduct pursuant to state, federal or other laws.  Employee will complete any documents, including tax forms, necessary to process payments under this Agreement.  Failure to timely do so at the request of IHC may delay payments under this Agreement. 

(d)Amendments.  The parties hereto may amend this Agreement only by a written agreement of all the parties hereto that identifies itself as an amendment to this Agreement. 

(e)Entire Agreement.  This Agreement constitutes the final agreement among the parties hereto relating to the matters contained herein and it is the complete and exclusive expression of the parties’ agreement on the matters contained in this Agreement.  All prior and contemporaneous negotiations and agreements among and between the parties on the matters contained in this Agreement are hereby expressly superseded and replaced by this Agreement.  In entering into this Agreement, neither party hereto has relied upon any statement, representation, warranty or agreement of the other party.  

(f)Counterparts.  The parties hereto may execute this Agreement in multiple counterparts, each of which constitutes an original, and all of which, collectively, constitute only one agreement.  The signatures of all of the parties need not appear on the same counterpart, and delivery of an executed counterpart signature page by facsimile or email is as effective as executing and delivering this Agreement in the presence of the other parties to this Agreement.  This Agreement is effective upon delivery of one executed counterpart from each party hereto to each other party.  

(g)Successors.  This Agreement shall be binding upon, and shall inure to the benefit of, Employee and Employee’s estate.   Employee may not assign or pledge  

3 

QB\68609588._

this Agreement or any rights arising hereunder. Each of IHC, AMIC and IAHC may assign this Agreement to a parent, subsidiary, or affiliated company.  Each of IHC, AMIC and IAHC also may assign this Agreement without Employee’s consent to any successor to its business that agrees in writing to be bound by this Agreement, after which assignment any reference to “IHC,” “AMIC,” or “IAHC,” as applicable, in this Agreement shall be deemed to be a reference to such successor, and IHC, AMIC or IAHC, as applicable, thereafter shall have no further primary, secondary or other responsibilities, obligations or liabilities under this Agreement of any kind.

(h)All notices, requests, consents, claims, demands, waivers and other communications hereunder (each, a “Notice”) shall be in writing and sent to the parties at the addresses, facsimile numbers and email addresses set forth on the signature page of Agreement (or to such other address, facsimile number or email address that may be designated by the receiving party from time to time in accordance with this section). All Notices shall be deemed delivered: (i) upon delivery if delivered by hand; (ii) after one business day if delivered by a nationally recognized overnight courier (with all fees pre-paid); (iii) upon receipt if delivered by facsimile or e-mail of a PDF document (with confirmation of transmission); and (iv) after three (3) business days if delivered by certified or registered mail (in each case, return receipt requested, postage prepaid). 

(i)409A. It is intended that the payments hereunder shall comply with Section 409A of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder so as not to subject Employee to payment of interest or any additional tax under Section 409A.  All terms of this Agreement which are undefined or ambiguous must be interpreted in a manner that is consistent with Section 409A if necessary to comply with Section 409A.  This Agreement will be construed and administered to preserve the exemption from Section 409A of payments that qualify as short-term deferrals pursuant to Treas. Reg. § 1.409A-1(b)(4).  In furtherance thereof, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit will be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax.  

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of IAHC, IHC and AMIC by a duly authorized officer, as of the day and year first above written.

[Signature Page Follows]

4 

QB\68609588._

IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of immediately following the Effective Time.

AMIC Holdings, Inc., a Delaware  corporation	David T. Kettig
By: /s/ Vincent Furfaro	By: /s/ David T. Kettig
Name:Vincent Furfaro	Name:David T. Kettig
Title:Senior Vice President
	Facsimile:  ________________
Independence Holding Company,  a Delaware corporation	Email:  ___________________
By:/s/ Larry R. Graber
Name:Larry R. Graber
Title:Chief Life and Annuity Actuary
and Senior Vice President
Independence American Holdings Corp.,
a Delaware corporation
By:/s/ Teresa A. Herbert
Name:Teresa A. Herbert
Title:Vice President – Finance

The following shall be used for each of AMIC Holdings, Inc., Independence Holding Company and Independence American Holdings Corp.

96 Cummings Point Road

Stamford, CT  06902

Attn:  Teresa A. Herbert

Facsimile:  ______________

Email:  therbert@ihc-geneve.com

5 

QB\68609588._

EX-10.18

OFFICER EMPLOYMENT AGREEMENT                        EXHIBIT 10.18 

This Officer Employment Agreement (this "Agreement"), by and between Independence Holding Company, a Delaware corporation (the "Company"), and Ms. Colleen Maggi, an individual resident in the State of New York (the "Employee"), is made as of May 20, 201 1.

Recitals

A.The Employee is the Vice President and Controller of the Company. 

B.The Company wishes to employ the Employee, and the Employee wishes to be employed by the Company, i n the capacity and on the terms and conditions set forth herein. 

Terms and Conditions

In consideration of the mutual covenants contained herein, along with other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.Employment 

1.1.Term of Employment. The initial term of the employment agreed to hereunder shall commence on the date hereof and shall end at 1 1:59 p.m., New York City local time, on the date that is two (2) years after the date hereof (the "Initial Term"); provided, however, that such term of employment shall be automatically extended for successive two-year (2) year periods thereafter (each, a "Renewal Period" ), unless the Company or the Employee shall, at least one hundred twenty (120) days prior to the expiration of the then-applicable term, have given written notice (a "Non-Renewal Notice") to the other party that such employment term shall not be so extended, in which case no such extension shall occur. The Initial Term together with each Renewal Period, if any, are collectively referred to herein as the "Covered Employment Term." 

1.2.Term of Agreement. The term of this Agreement shall commence on the date hereof and shall continue until any and all obligations of any party hereto to any other party hereto shall have been performed in-full or validly waived pursuant to the applicable provisions hereof (the "Agreement Term"). 

1.3.Nature of Duties. The Employee shall be employed by the Company as its Vice President and Controller. Except as provided herein, the Employee shall work exclusively for the Company and its corporate affiliates and shall, at each moment i n time, have the actual authority, powers and duties (the "Duties") with the Company customarily associated with the officer positions the Employee then holds. The Employee shall devote her full business time and effort to the performance of her duties for the Company and its corporate affiliates, which she shall perform faithfully and to the best of her ability. At all times during which the Employee remains an employee of the Company, the Employee shall, if elected, serve as a member of the Company's board of directors and, at the request of the Company's corporate Secretary, as an officer or director of any other affiliate or subsidiary of the Company, i n each case without additional remuneration therefor. The Employee shall be subject to the Company's policies, procedures and approval practices, as generally in effect and as the same may be modified from time-to-time. 

1.4.Place of Performance. The Employee shall, at all times, be based only in the Company's offices maintained within fifty (50) miles of Stamford, Connecticut, and shall be capable of  

1 of 11

performing all duties of the Employee that the Company shall require of her (in accordance with the other terms hereof) in such office, except for required travel in the ordinary course of business of frequency not greater than is reasonable, equitable and customary within the applicable industry for executives of similar responsibility, under the circumstances.

2.Compensation 

2.1.Base Salary. The Company and its affiliates shall pay the Employee a base salary at the annual rate in effect as of the date hereof (as the same may be adjusted upward from time to time in the Company's sole and absolute discretion, the "Base Salary"). The Base Salary shall be paid in conformity with the Company's usual salary payment practices, as then generally i n effect. 

2.2.Bonus. In addition, the Employee may, in the Company's sole and absolute discretion, receive a periodic bonus. Any such bonus shall be payable pursuant to the Company's customary practice. For purposes of clarity: the bon us referenced in this Section 2.2 is purely discretionary, may or may not be paid in respect of any particular time period, and the payment of any such bon us shall not be construed or interpreted as guaranteeing or otherwise affecting the payment of any subsequent bon us. 

2.3.Benefits. In addition, the Employee shall be entitled to participate i n all employee benefit plans and programs, including paid vacations, to the same extent generally available to, and then in effect for, the Company's other officers, in accordance with the terms of those plans and programs, as the same may be modified, from time to time. 

2.4.Expenses. In addition, the Employee shall be entitled to receive prompt reimbursement for all reasonable and customary travel and business expenses incurred in connection with her employment, but must incur and shall account for those expenses in accordance with the policies and procedures established by the Company. 

2.5.Additional Compensation. In addition, the Employee shall continue to receive such perquisites incident to employment (if any) as have been provided to the Employee during the one (I) year preceding the entering into of this Agreement (collectively, the "Additional Compensation" ). 

3.Termination; Change in Control 

3.1.Rights and Duties. If the Employee's employment by the Company is terminated, she shall be entitled to the amounts or benefits shown below, subject to the balance of this Section 3. Any provision of Section 2 hereof to the contrary notwithstanding, in the event of such a termination, the Company and the Employee shall have no further obligations to each other under this Agreement, except (i) as set forth in this Section 3, (ii) the Employee's obligations under Section 4 and (ii i ) the mutual arbitration obligations and other rights and obligations set forth under Section 5, al l of which shall survive any such termination. 

3.2.Qualifying Terminations. Any of the following events resulting in a cessation of the Employee's employment by the Company during the Covered Employment Term shall constitute a "Qualifying Termination": (i) discharge by the Company without Cause (as hereinafter defined); or (ii) the Employee's resignation with Good Reason. 

3.3.Disqualifying Terminations. Any of the following events resulting in a cessation of the Employee's employment by the Company during the Agreement Term shall constitute a "Disqualifying Termination": (i) discharge by the Company with Cause; (ii) the Employee's resignation without Good Reason; (iii) the Employee's death; or (iv) the Employee's Permanent Disability. 

2 of 11

3.4.Definitions. For purposes of this Agreement, the following terms shall have the following meanings: 

(A)"Cause" exists upon any of the following: 

(i)the Employee’s refusal to perform the Duties, as the Duties exist as of the Date hereof (other than by reason of physical or mental illness, injury, or condition), after the Employee has been given notice by the Company of such default and a reasonable opportunity to cure same; 

(ii)the Employee's material failure to comply with applicable, material Company policies in effect as of the date hereof, after the Employee has been given notice of such failure and a reasonable opportunity to cure same; 

(iii)the Employee's breach of any of her obligations under Section 4 of this Agreement; or 

(iv)the Employee's conviction of a felony or the Employee's commission of any crime involving financial or accounting fraud upon the Company, its corporate affiliates or their respective clients or policyholders. 

(B)"Change in Control” means, with respect to an entity: (i) the purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (or any comparable successor provision, the "Exchange Act" ), other than stockholders (or affiliates thereof) of such entity as of the date hereof, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of either (A) the outstanding shares of common stock (on a fully diluted basis) of such entity or (B) the combined voting power of the entity's then-outstanding voting securities entitled to vote generally in the election of directors of such entity; (ii) the consummation of a reorganization, merger or consolidation of such entity, in each case, with respect to which persons who were stockholders of such entity immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated entity; (iii) a liquidation or dissolution of such entity; (iv) the sale of all or substantially all of such entity's assets; or (v) any other transaction,  the intent of which may reasonably and equitably be construed to be to effect a result substantially 

equivalent to that of any of the foregoing (i) through (iv).

(C)"Diminution in Responsibility" means any of the following: 

(i)a material diminution in the Employee's authority, duties and responsibilities or the assignation to the Employee of duties and responsibilities that are materially inconsistent with the Employee's apparent authority or title with the Company, considered equitably under the circumstances and with reference to officers with similar titles at companies within the Company's industry; or 

(ii)other circumstances that would constitute "constructive termination" under applicable employment law. 

(D)"Good Reason" means any of the following: 

3 of 11

(i)the Company's breach of any material provision of this Agreement, after the Company has been given notice of such breach and a reasonable opportunity to cure such breach; 

(ii)) the occurrence of a Diminution of Responsibility; 

(iii)) the Employee's receipt of a Non-Renewal Notice; or 

(iv)the occurrence of a Non-Qualifying Change in Control Event. 

(E)"Monthly Severance" means an amount equal to the result of dividing (i) the average aggregate cash compensation (i.e., Base Salary plus any bonuses paid by the Company to the Employee plus the cash cost of the Additional Compensation) received by the Employee from the Company during the then-applicable preceding five (5) completed calendar years, by (i i) twelve (12); provided, however, that if the number of such total completed calendar years during which the Employee has been employed by the Company and its affiliates is less than five (5), such average shall be obtained with respect to the number of actual completed calendar years during such period of employment, 

adjusting the denominator accordingly.

(F)"Non-Qualifying Change in Control Event" means the public announcement of, or the entering into of a binding agreement, by the Company, in respect of, a Change in Control of the Company i n which either (i) the proposed or intended acquirer in such a Change i n Control does not agree to assume this Agreement and continue the Employee's employment on the terms and conditions set forth herein, and (ii) the ultimate parent of such acquirer does not guarantee, on an unconditional and full recourse basis, such obligations to the Employee. 

(G)"Permanent Disability" means Employee's inability substantially to perform her duties and responsibilities under this Agreement by reason of any physical or mental incapacity for a period of one-hundred-eighty ( 180) consecutive days, or two or more periods of ninety (90) consecutive days each in any seven hundred twenty (720) day period. 

(H)"Severance Period' means a number of months equal to the greater of: (i) twelve (12); and (i i) the aggregate number (not necessarily continuous) of completed years of service as an employee of the Company or of any of its corporate affiliates, provided_, however, that i n no event shall the Severance Period exceed twenty-four (24) months. 

3.5.Severance Payments. 

(A)Qualifying Termination. In the event of a Qualifying Termination, the Employee, subject to the Employee's continued and uninterrupted adherence to the provisions of Section 4 hereof (for such duration as stated in Section 4) and the Employee's execution of a release i n form and substance reasonably acceptable to the Company, shall be entitled to receive the Monthly Severance for a duration equal to the Severance Period, in all cases payable (with respect to timing) i n accordance with the Company's customary payroll practices. In addition, any provision hereof or in any other document to the contrary notwithstanding, immediately upon any Qualifying Termination, each and every equity or equity-based compensation award then held by the Employee shall be fully and completely vested and exercisable, and any condition or restriction upon the Employee's full right and title thereto (subject to the payment of any exercise price required pursuant to such award's terms) shall lapse and terminate. 

(B)Disqualifying Termination. In the event of a Disqualifying Termination, the Employee shall not be entitled to any payments or benefits after the date of such termination, except for  

4 of 11

(i) payments or extensions of benefits required under applicable laws and (ii) payments of compensation and reimbursement of expenses (in accordance with the terms hereof and the Company's customary and reasonable practices) properly accrued as of such date.

4.Covenants of Employee 

4.1.Non-Compete. The Employee agrees that, during the Covered Employment Term plus the longer of any Severance Period and one (I) year following any termination of the Employee's employment by the Company, the Employee (including any entity controlled by the Employee, and any agent or employee of the Employee) shall not, directly or indirectly, as an owner, employee or otherwise, compete with either the business of the Company as then conducted (collectively, the "Prohibited Field'' ), or, directly or indirectly, own, manage or control, or participate in the ownership, management, or control of any corporation, partnership, proprietorship, firm, association or other business entity which so competes. For purposes of clarity, this Section 4.1 prohibits actual competition with the Company within the Prohibited Field and/or employment with a competitor of the Company i n any position or consulting arrangement i n which the Employee's duties relate in any material way to business activities i n competition with the Company in the Prohibited Field. The restrictions set forth in this paragraph extend to the entire United States of America. 

4.2.Non-Solicit. The Employee agrees that, during the Covered Employment Term plus the longer of any Severance Period and one (1) year following any termination of the Employee's employment by the Company, the Employee shall not solicit for employment (or assist with such solicitation) any employee or former employee of the Company or any of its subsidiaries. The restrictions set forth in the foregoing sentence apply to the solicitation of any person who is or, within one ( I ) year before the termination of the Employee's employment by the Company, was an employee of the Company or its subsidiary (as the case may be). Additionally, the Employee agrees, during any Severance Period, not to solicit (or assist with such solicitation) any customer or client of the Company or of its subsidiaries, if such solicitation or assistance could reasonably be expected to result in diversion of revenues from the business of the Company its subsidiary (as the case may be). For the purpose of the restrictions set forth in the foregoing sentence, the terms "customer" and "client" include any person, private entity or governmental entity (or employee or agent thereof), within or outside the United States of America, with whom the Company its subsidiaries does or has done business within the one (1) year preceding the termination of the Employee's employment by the Company. 

4.3.Confidentiality. During the Covered Employment Term and thereafter, (i) the Employee will not divulge, transmit or otherwise disclose (except as legally compelled by court order, and then only to the extent required, after prompt notice to the Company of any such order), directly or indirectly, other than in the regular and proper course of business of the Company, any confidential knowledge or information with respect to the operations, finances, organization or employees of the Company or its subsidiaries or affiliates, or with respect to confidential or secret processes, services, techniques, customers or plans with respect to the Company or its subsidiaries or its affiliates, including, but not limited to, producer lists, pricing information and customer lists; and (ii) the Employee will not use, directly or indirectly, any confidential information for the benefit of anyone other than the Company; provided, however, that the Employee has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the public other than through disclosure by the Employee. All new processes, techniques, know-how, inventions, plans, products, patents and devices developed, made or invented by the Employee, alone or with others, while an employee of the Company which are related to the business of the Company, shall be and become the sole property of the Company, unless released in writing by the Company, and the Employee hereby assigns any and all rights therein or thereto to the Company. 

5 of 11

4.4.Proprietary Rights. All files, records, correspondence, memoranda, notes or other documents (including, without limitation, those in computer-readable form) or property relating or belonging to the Company or its subsidiaries and affiliates, whether prepared by the Employee or otherwise coming into her possession in the course of the performance of her services under this Agreement, shall be the exclusive property of Company and shall be delivered to Company and not retained by the Employee (including, without limitations, any copies thereof) upon termination of the Employee's employment by the Company for any reason whatsoever. 

4.5.Equitable Relief. The Employee acknowledges that a breach of the covenants contained in this Section 4 may cause irreparable damage to the Company and its subsidiaries and its affiliates, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Employee agrees that i f he breaches any of the covenants contained in this Section 4, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief. The parties agree that venue and jurisdiction for any civil action seeking any of the remedies provided in this Section 4.5 shall be exclusively in the state or federal courts located in Connecticut, and that any such action shall be governed by and adjudicated under Connecticut law. 

4.6.Acknowledgements. The Company and the Employee further acknowledge that the time, scope, geographic area and other provisions of this Section 4 have been specifically negotiated by sophisticated commercial parties and agree that all such provisions are reasonable under the circumstances of the activities contemplated by this Agreement. In the event that the agreements in this Section 4 shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive i n any other respect, they shall be interpreted to extend on l y over the maximum period of time for which they may be enforceable and/or over the maximum geographical area as to 

which they may be enforceable and/or to the maximum extent in all other respects as to which they may be enforceable, all as determined by such court i n such action.

4.7.Further Assurances. The Employee agrees to cooperate with the Company, during the Covered Employment Term and thereafter (including following the Employee's term i nation of employment for any reason), by making herself reasonably available to testify on behalf of the Company or any of its subsidiaries or  affiliates in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist the Company or any affiliate or subsidiary thereof, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Company's Board of Directors or its representatives or counsel, or representatives or counsel to the Company or any subsidiary or affiliate thereof as reasonably requested; provided, however that the same does not materially interfere with her then-current professional activities and is not contrary to the best interests of the Employee. The Company agrees to reimburse the Employee, on an after-tax basis, for all expenses actually incurred in connection with her provision of testimony or assistance. 

4.8.Non-Disparagement. The Employee agrees that, during the Covered Employment  

Term and thereafter, (including following the Employee's term i nation of employment for any reason) she will not make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any of its subsidiaries or affiliates or their respective officers, directors, employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Employee from making truthful statements or disclosures that are required by applicable law, regulation or legal process.

6 of 11

5.General Provisions 

5.1.Governing Law. The laws of the State of Connecticut (without giving effect to its conflict of laws principles) will govern all matters arising out of or relating to this Agreement and the transactions it contemplates, including, without l imitation, its interpretation, construction, performance and enforcement. 

5.2.Notices 

(A)Requirement of a Writing: Permitted Methods of Delivery. Each party giving or making any notice, request, demand or other communication (each, a "Notice") pursuant to this Agreement shall give such Notice in writing and use one of the following methods of delivery: (i) personal delivery; (i i) registered or certified mail (in each case, return receipt requested and postage prepaid); (ii i) nationally recognized overnight courier (with all fees prepaid); or (iv) facsimile. 

(B)Addressees and Addresses. Any party giving a Notice shall address the Notice to the appropriate person at the receiving party (the "Addressee") at the address listed on the signature page of this Agreement or to another Addressee or another address as designated by a party i n a Notice given pursuant to this Section 5.2. 

(C)Effectiveness of a Notice. A Notice is effective only if the party giving the Notice has complied with Sections 5.2 (A) and (B) of this Agreement and if the Addressee has received the Notice. A Notice shall be deemed to have been received as follows: 

(i)if a Notice is delivered in person, then upon delivery to the recipient's address; 

(ii) if a Notice is sent by registered or certified U.S. Mail or nationally recognized overnight courier, three (3) business days after being mailed or delivered to such courier;

(ii i) if a Notice is sent by facsimile, upon receipt by the party giving the Notice of an acknowledgment or transmission report generated by the machine from which the facsimile was sent indicating that the facsimile was sent i n its entirety to the Addressee's facsimile number; or

(iv) if the Addressee rejects or otherwise refuses to accept the Notice, or if the Notice cannot be delivered because of a change in address for which no Notice was given, then upon the rejection, refusal or inability to deliver the Notice.

5.3.Arbitration. All controversies and claims arising under or relating to this Agreement, or the relationships or transactions contemplated hereby, are to be resolved by arbitration in accordance with the rules of the American Arbitration Association before a panel of three (3) arbitrators selected in accordance with those rules. Any such arbitration is to be conducted in Stamford, Connecticut. Such arbitrators are to apply the laws of the State of Connecticut, without regard to its conflict of laws principles. Each party shall submit to any court of competent jurisdiction for purposes of enforcing any award, order or judgment. Any award, order or judgment pursuant to the arbitration is final and may be entered and enforced exclusively in any Connecticut state or federal court of competent jurisdiction. The arbitration specified in this Section 5.3 is intended to be the exclusive remedy available to each such party to this Agreement, except as set forth in Section 4.5. 

7 of 11

5.4.Amendments. The parties hereto may amend this Agreement only a written agreement of all the parties hereto that identifies itself as an amendment to this Agreement. 

5.5.Waivers 

(A)No Oral Waivers. The parties hereto may waive this Agreement or any part hereof only by a writing executed by the party or parties against whom the waiver is sought to be enforced. 

(B)Effect of Failure, Delay or Course of Dealing. No fai\lure or delay (i) in exercising any right or remedy, or (ii) in requiring the satisfaction of any condition, under this Agreement, and no act, omission or course of dealing between the parties shall operate as a waiver or estoppel of any right, remedy or condition. 

(C)Each Waiver for a Specific Purpose. A waiver made in writing on one occasion shall be effective only in that instance and only for the purpose stated therein. A waiver once given shall not be construed as a waiver of any future occasion. 

5.6.Severability. If any provision of this Agreement is determined to be invalid, illegal or  

unenforceable, the remaining provisions of this Agreement shall remain in full force and effect, so long as the essential terms and conditions of this Agreement for each party hereto remain valid, binding and enforceable.

5.7.Entire Agreement. Except as expressly stated i n this Agreement: (i) this Agreement constitutes the final agreement among the parties hereto; (i i) it is the complete and exclusive expression of the parties' agreement on the matters contained in this Agreement; (ii i) all prior and contemporaneous negotiations and agreements among and between the parties on the matters contained in this Agreement  are hereby expressly merged into and superseded by this Agreement; (iv) the provisions of this Agreement may not be explained, supplemented or qualified through evidence of trade usage or a prior course of dealings; (v) in entering into this Agreement, neither party hereto has relied upon any statement, representation, warranty or agreement of the other party; and (vi) there are no conditions precedent to the effectiveness of this Agreement. 

5.8.Counterparts. The parties hereto may execute this Agreement in multiple counterparts, each of which constitutes an original, and all of which, collectively, constitute only one agreement. The signatures of all of the parties need not appear on the same counterpart, and delivery of an executed counterpart signature page by facsimile is as effective as executing and delivering this Agreement in the presence of the other parties to this Agreement. This Agreement is effective upon delivery of one executed counterpart from each party hereto to each other party. 

5.9.Third-Party Beneficiaries.   Other than as expressly stated herein, this Agreement does not, and is not intended to, confer any rights or remedies upon any person other than the signatories. 

5.10.Successors. This Agreement shall be binding upon, and shall inure to the benefit of,  

the Employee and the Employee's estate.   The Employee may not assign or pledge this Agreement or any rights arising hereunder, except to the extent permitted under the terms of the benefit plans in which the Employee participates. The Company may assign this Agreement without the Employee's consent to any successor to its business that agrees in writing to be bound by this Agreement, after which assignment any reference to the "Company" in this Agreement shall be deemed to be a reference to such successor, and the Company thereafter shall have no further primary, secondary or other responsibilities, obligations or liabilities under this Agreement of any kind.

8 of 11

5.11.Additional Acknowledgements 

(A)THE EMPLOYEE ACKNOWLEDGES THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND THE EMPLOYEE RELATING TO THE SUBJECTS COVERED BY THIS AGREEMENT ARE CONTAINED IN IT AND THAT THE EMPLOYEE HAS ENTERED INTO THIS AGREEMENT VOLUNTARILY AN D NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT. 

(B)THE EMPLOYEE FURTHER ACKNOWLEDGES  THAT THE EMPLOYEE HAS CAREFULLY READ THIS AGREEMENT, THAT THE EMPLOYEE UNDERSTANDS ALL OF IT, AND THAT THE EMPLOYEE HAS BEEN GIVEN THE OPPORTUNITY TO DISCUSS TH IS AGREEMENT WITH THE EMPLOYEE'S PRIVATE LEGAL COUNSEL AND HAS AVAILED HERSELF OF THAT OPPORTUNITY TO THE EXTENT THE EMPLOYEE WISHES TO DO SO. THE EMPLOYEE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT THE EMPLOYEE IS GIVING U P HER RIGHT TO A JURY TRIAL AS TO CLAIMS ASSERTED PURSUANT TO SECTION 5.3. 

5.12.409A Tax Liability. 

(A)This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A") or an exemption thereunder and shall be construed and administered in accordance with Section 409A.  Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maxim um extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a "separation from service" under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Employee on account of non-compliance with Section 409A. 

(B)Notwithstanding any other provision of this Agreement, if at the time of the Employee's termination of employment, he or she is a "specified employee," determined in accordance with Section 409A, any payments and benefits provided under this Agreement that constitute "nonqualified deferred compensation" subject to Section 409A that are provided to the Employee on account of his or her separation from service shall be delayed for six (6) months. Any payments that Would otherwise have been made during such six-month period shall be paid in a lump sum within fifteen (15) days after the end of such six-month period without interest. If the Employee dies during such six­ month period, any delayed payment shall be paid to the Employee's estate i n a lump sum within fifteen ( 15) days following the Employee's death. 

(C)To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following: 

9 of 11

(i)the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; 

(ii)any reimbursement of an eligible expense shall be paid to the Employee on or before the last day of the calendar year following the calendar year in which the expense was incurred; and 

(iii)) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit. 

(D)   Any tax gross-up payments provided under this Agreement shall be paid to the Employee on or before December 31st of the calendar year immediately following the calendar year i n which the Employee remits the related taxes.

[Signature page follows.]

10 of 11

THE PARTIES HERETO, INTENDING TO BE LEGALLY BOUND, have executed this

Agreement as of the date first set forth above.

Independence Holding Company,	Ms. Colleen Maggi,
a Delaware limited liability company	an individual resident in the State of
	New York
By:  /s/ Teresa A. Herbert	/s/ Colleen Maggi
Name:Ms. Teresa A. Herbert
Title:Chief Financial Officer and Senior
Vice President
96 Cummings Point Road	3 Bisbee Lane
Stamford, CT 06902	South Salem, NY 10590
Telephone No.:  (203) 358-8000	Telephone No.:  (914) 763-9062

11 of 11

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Roy T. K. Thung certify that:

1. I have reviewed this quarterly report on Form 10-Q of Independence Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 9, 2021

/s/ Roy T. K. Thung

Roy T. K. Thung

Chief Executive Officer and Chairman of the Board of Directors

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Colleen P. Maggi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Independence Holding Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 9, 2021

/s/ Colleen P. Maggi

Colleen P. Maggi

Corporate Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Independence Holding Company (the "Company") on Form 10-Q for the quarter ended June 30, 2021 as filed with the Securities and Exchange Commission (the "SEC") on the date hereof (the "Report"), I, Roy T. K. Thung, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

August 9, 2021

/s/ Roy T. K. Thung   *

Roy T. K. Thung

Chief Executive Officer and Chairman of the Board of Directors

* A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Independence Holding Company (the "Company") on Form 10-Q for the quarter ended June 30, 2021 as filed with the Securities and Exchange Commission (the "SEC") on the date hereof (the "Report"), I, Colleen P. Maggi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

August 9, 2021

/s/ Colleen P. Maggi   *

Colleen P. Maggi

Corporate Vice President and Chief Financial Officer

* A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Aug. 07, 2021
Details
Registrant CIK	0000701869
Fiscal Year End	--12-31
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	001-32244
Entity Registrant Name	INDEPENDENCE HOLDING COMPANY
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	58-1407235
Entity Address, Address Line One	96 CUMMINGS POINT ROAD
Entity Address, City or Town	STAMFORD
Entity Address, State or Province	CT
Entity Address, Postal Zip Code	06902
City Area Code	203
Local Phone Number	358-8000
Title of 12(b) Security	Common Stock, $1.00 par value
Trading Symbol	IHC
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		14,644,389
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Investments
Short-term Investments	$ 1,550	$ 1,568
Securities Purchased under Agreements to Resell	70,323	33,038
Debt Securities, Available-for-sale	183,709	210,719
Equity Securities, FV-NI, Current	0	1,753
Other Investments	2,022	1,928
Investments	257,604	249,006
Cash and Cash Equivalents, at Carrying Value	22,834	31,923
Equity Method Investments	33,762	0
Premiums Receivable, Net	10,950	9,981
Reinsurance Recoverables, Including Reinsurance Premium Paid	354,735	357,237
Goodwill	12,486	12,486
Escrow Deposit	78,779	0
Other Assets	29,864	46,832
Disposal Group, Including Discontinued Operation, Assets	416,162	375,691
Assets, Total	1,217,176	1,083,156
Liabilities
Liability for Claims and Claims Adjustment Expense	127,815	132,957
Liability for Future Policy Benefit, before Reinsurance	196,026	198,086
Deposit Contracts, Liabilities	142,155	141,376
Unearned Premiums	1,763	1,952
Policyholder Account Balance	11,988	12,001
Reinsurance Payable	2,242	3,872
Other Liabilities	66,519	44,855
Disposal Group, Including Discontinued Operation, Liabilities	120,180	75,939
Liabilities	668,688	611,038
Redeemable Noncontrolling Interest, Equity, Common, Carrying Amount	0	2,312
TOTAL LIABILITIES AND EQUITY	1,217,176	1,083,156
STOCKHOLDERS' EQUITY:
Preferred Stock, Value, Issued	0	0
Common Stock, Value, Issued	18,625	18,625
Additional Paid in Capital, Common Stock	125,653	124,757
Accumulated Other Comprehensive Income (Loss), Net of Tax	3,220	4,197
Treasury stock, at cost; 3,981,069 and 3,982,411 shares	77,189	77,088
Retained Earnings (Accumulated Deficit)	478,139	399,273
TOTAL IHC STOCKHOLDERS' EQUITY	548,448	469,764
Stockholders' Equity Attributable to Noncontrolling Interest	40	42
TOTAL EQUITY	$ 548,488	$ 469,806

XML

Consolidated Balance Sheets - Parenthetical - $ / shares	Jun. 30, 2021	Dec. 31, 2020
Details
Preferred Stock, Par or Stated Value Per Share	$ 1.00	$ 1.00
Preferred Stock, Shares Authorized	100,000	100,000
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 1.00	$ 1.00
Common Stock, Shares Authorized	23,000,000	23,000,000
Common Stock, Shares, Issued	18,625,458	18,625,458
Common Stock, Shares, Outstanding	14,644,389	14,643,047
Treasury Stock, Shares	3,981,069	3,982,411

XML

Consolidated Income Statement - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues
Premiums Earned, Net	$ 42,451	$ 49,138	$ 86,023	$ 99,804
Net Investment Income	1,651	2,329	3,452	4,828
Insurance Commissions and Fees	4,944	3,907	11,079	7,341
Other Income	410	807	1,026	1,432
Gain (Loss) on Investments	(126)	274	91	117
Revenues	49,330	56,455	101,671	113,522
Operating Expenses
Policyholder Benefits and Claims Incurred, Net	17,192	21,339	39,113	47,628
Selling, General and Administrative Expense	32,842	37,974	63,602	69,034
Benefits, Losses and Expenses	50,034	59,313	102,715	116,662
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(704)	(2,858)	(1,044)	(3,140)
Income Tax Expense (Benefit)	(267)	(1,066)	(430)	(1,187)
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	(437)	(1,792)	(614)	(1,953)
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	92,375	3,594	99,574	9,243
Discontinued Operation, Tax Effect of Discontinued Operation	15,570	1,264	17,026	2,430
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	76,805	2,330	82,548	6,813
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	76,368	538	81,934	4,860
Net Income (Loss) Attributable to Nonredeemable Noncontrolling Interest	(1)	43	(2)	34
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest	(102)	74	(156)	127
Net Income (Loss) Attributable to Parent	$ 76,471	$ 421	$ 82,092	$ 4,699
Earnings Per Share, Basic
Income (Loss) from Continuing Operations, Per Basic Share	$ (0.03)	$ (0.12)	$ (0.04)	$ (0.13)
Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Basic Share	5.25	0.15	5.65	0.45
Earnings Per Share, Basic	$ 5.22	$ 0.03	$ 5.61	$ 0.32
Weighted Average Number of Shares Outstanding, Basic	14,642	14,765	14,641	14,811
Earnings Per Share, Diluted
Income (Loss) from Continuing Operations, Per Diluted Share	$ (0.03)	$ (0.12)	$ (0.04)	$ (0.13)
Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Diluted Share	5.25	0.15	5.65	0.45
Earnings Per Share, Diluted	$ 5.22	$ 0.03	$ 5.61	$ 0.32
Weighted Average Number of Shares Outstanding, Diluted	14,642	14,765	14,641	14,811

XML

Condensed Consolidated Statement of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Details
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ 76,368	$ 538	$ 81,934	$ 4,860
OCI, Debt Securities, Available-for-Sale, Gain (Loss), after Adjustment and Tax
OCI, Debt Securities, Available-for-Sale, Gain (Loss), after Adjustment, before Tax	1,212	2,227	(1,248)	2,093
OCI, Debt Securities, Available-for-Sale, Gain (Loss), after Adjustment, Tax	260	474	(271)	451
OCI, Debt Securities, Available-for-Sale, Gain (Loss), after Adjustment and Tax	952	1,753	(977)	1,642
Other Comprehensive Income (Loss), Net of Tax	952	1,753	(977)	1,642
Comprehensive Income (Loss), Net of Tax, Including Portion Attributable to Noncontrolling Interest	77,320	2,291	80,957	6,502
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest
Net Income (Loss) Attributable to Noncontrolling Interest	(103)	117	(158)	161
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest	0	0	0	0
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest	(103)	117	(158)	161
Comprehensive Income (Loss), Net of Tax, Attributable to Parent	$ 77,423	$ 2,174	$ 81,115	$ 6,341

XML

Condensed Consolidated Statement of Stockholders' Equity - USD ($) $ in Thousands	Total	COMMON STOCK, AMOUNT	Additional Paid-in Capital	AOCI Attributable to Parent	Treasury Stock	Retained Earnings	Parent	Noncontrolling Interest
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Dec. 31, 2019	$ 459,712	$ 18,625	$ 122,717	$ 1,212	$ (69,724)	$ 386,864	$ 459,694	$ 18
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest	4,733					4,699	4,699	34
Other Comprehensive Income (Loss), Net of Tax	1,642			1,642			1,642	0
Dividends, Common Stock, Cash	3,246					3,246	3,246	0
Sharebased Compensation Effect On Stockholders Equity	1,087		1,087				1,087	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jun. 30, 2020	459,324	18,625	123,804	2,854	(74,325)	388,317	459,275	49
Treasury Stock, Value, Acquired, Cost Method	4,601				4,601		4,601	0
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders	3						0	3
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Mar. 31, 2020	459,898	18,625	123,260	1,101	(71,196)	388,102	459,892	6
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest	464					421	421	43
Other Comprehensive Income (Loss), Net of Tax	1,753			1,753			1,753	0
Dividends, Common Stock, Cash	206					206	206	0
Sharebased Compensation Effect On Stockholders Equity	544		544				544	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jun. 30, 2020	459,324	18,625	123,804	2,854	(74,325)	388,317	459,275	49
Treasury Stock, Value, Acquired, Cost Method	3,129				3,129		3,129	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Dec. 31, 2020	469,806	18,625	124,757	4,197	(77,088)	399,273	469,764	42
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest	82,090					82,092	82,092	(2)
Other Comprehensive Income (Loss), Net of Tax	(977)			(977)			(977)	0
Dividends, Common Stock, Cash	3,226					3,226	3,226	0
Sharebased Compensation Effect On Stockholders Equity	935		896		39		935	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jun. 30, 2021	548,488	18,625	125,653	3,220	(77,189)	478,139	548,448	40
Treasury Stock, Value, Acquired, Cost Method	140				140		140	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Mar. 31, 2021	473,789	18,625	125,189	2,268	(77,228)	404,894	473,748	41
Net Income (Loss), Including Portion Attributable to Nonredeemable Noncontrolling Interest	76,470					76,471	76,471	(1)
Other Comprehensive Income (Loss), Net of Tax	952			952			952	0
Dividends, Common Stock, Cash	3,226					3,226	3,226	0
Sharebased Compensation Effect On Stockholders Equity	503		464		39		503	0
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Jun. 30, 2021	$ 548,488	$ 18,625	$ 125,653	$ 3,220	$ (77,189)	$ 478,139	$ 548,448	$ 40

XML

Condensed Consolidated Statement of Stockholders' Equity - Parenthetical - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Details
Common Stock, Dividends, Per Share, Declared	$ 0.22	$ 0.22	$ 0.22	$ 0.22

XML

Consolidated Statement of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
CASH FLOWS PROVIDED BY (USED BY) OPERATING ACTIVITIES:
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ 81,934	$ 4,860
Net Cash Provided by (Used in) Operating Activities	53,535	28,247
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Excluding Exchange Rate Effect	(47,768)	(428)
Adjustments to reconcile net income to net change in cash from
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax	(74,534)	0
Discontinued Operation, Provision for Loss (Gain) on Disposal, before Income Tax	812	0
Deferred Policy Acquisition Costs, Amortization Expense	425	166
Investment Income, Net, Amortization of Discount and Premium	(1,139)	(1,218)
Gain (Loss) on Investments	91	117
Depreciation, Depletion and Amortization, Nonproduction	908	759
Other Noncash Income (Expense)	(17,107)	(2,393)
Increase (Decrease) in Operating Capital
Increase (Decrease) in Insurance Liabilities	37,333	27,057
Increase (Decrease) in Premiums Receivable	15,141	8,253
Increase (Decrease) in Contract with Customer, Asset	1,006	0
Increase (Decrease) in Reinsurance Recoverable	(2,663)	(3,725)
Change in Claim Fund Balances	(1,022)	574
Increase (Decrease) in Other Operating Assets and Liabilities, Net	(3,008)	4,135
Net Cash Provided by (Used in) Investing Activities
Payments for (Proceeds from) Short-term Investments	(1,060)	1,049
Proceeds from (Payments for) Securities Purchased under Agreements to Resell	(139,647)	5,740
Proceeds from Sale of Debt and Equity Securities, FV-NI, Held-for-investment	3,494	0
Proceeds from Sale of Debt Securities, Available-for-sale	10,366	36,413
Proceeds from Maturities, Prepayments and Calls of Debt Securities, Available-for-sale	44,520	55,936
Payments to Acquire Debt Securities, Available-for-sale	8,343	96,353
Cash Divested from Deconsolidation	4,878	0
Payments to Acquire Businesses, Net of Cash Acquired	0	13,707
Payments to Acquire Other Investments	2,500	1,250
Other investing activities	1,870	3,372
Net Cash Provided by (Used in) Investing Activities	(97,798)	(17,642)
Net Cash Provided by (Used in) Financing Activities
Payments for Repurchase of Common Stock	140	4,489
Net Change Annuities and Investment Certificates	(112)	(326)
Payments of Ordinary Dividends, Common Stock	3,221	6,215
Proceeds from (Payments for) Other Financing Activities	(32)	(3)
Net Cash Provided by (Used in) Financing Activities	(3,505)	(11,033)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Including Disposal Group and Discontinued Operations, Beginning Balance	74,793	24,631
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Including Disposal Group and Discontinued Operations, Ending Balance	27,025	24,203
Noncash or Part Noncash Divestiture, Amount of Consideration Received	$ 78,779	$ 0

XML

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies

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 underwriting, administering and/or distributing group and individual specialty benefit products, including disability, supplemental health, pet, and group life insurance 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"), and Independence American Insurance Company; and (ii) its marketing and administrative companies, including IHC Specialty Benefits Inc. (“IHCSB”), IHC Brokerage Group, Inc. (“IBG”), INSXCloud, Inc. (“INSXCloud”) (formerly My1HR, Inc.), collectively the “IHC Agencies” and its lead generation company, Torchlight Technology Group LLC., (“Torchlight”). On June 30, 2021, the Company sold its majority interest in PetPartners, Inc. (“PetPartners”), a major distributor and administrator of pet insurance underwritten by Independence American Insurance Company and an unaffiliated insurer. Standard Security Life, Madison National Life and Independence American Insurance Company 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 financial holding company, and its affiliated entities, held approximately 62% of IHC's outstanding common stock at June 30, 2021.  

(B)     Basis of Presentation 

The unaudited 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 information and footnotes required by U.S. GAAP for complete financial statements. The unaudited Condensed Consolidated Financial Statements 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 unaudited Condensed Consolidated Financial Statements.

During the second quarter of 2021, the Board of Directors committed to various plans for the disposal of several business operations (see Note 2). Each plan represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, they each qualify for reporting as discontinued operations in the second quarter 2021. The assets, liabilities, and related income and expenses associated with each disposal group are presented as discontinued operations in the accompanying condensed consolidated financial statements and Notes thereto for all periods presented.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global health pandemic and the United States declared a national health emergency. COVID-19 has led to largescale disruption in the global economy, market instability and widespread unemployment in the United States. The COVID-19 outbreak continues to be a fluid situation and as it evolves, the duration of COVID-19 and its potential effects on our business cannot be certain. Regulatory mandates have affected, and we anticipate will continue to impact, the insurance industry. We currently cannot predict if there will be a material impact to

our business, results of operations or financial condition in future reporting periods. Consequently, future changes in market conditions may impact estimates used in the preparation of our financial statements associated with evaluations of goodwill and other intangible assets for impairment, estimates associated with the determination of valuation allowances related to net operating loss carryforwards, and estimates of certain losses under insurance contracts. These estimates may all be subject to substantial adjustments in future periods.  In addition, volatile market conditions may result in declines in the fair value of our investment portfolio and possible impairments of certain securities.

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, 2021 are not necessarily indicative of the results to be anticipated for the entire year.

(C)  Reclassifications 

Certain amounts in prior year’s condensed consolidated financial statements and Notes thereto have been reclassified to conform to the 2021 presentation, primarily for the effects of discontinued operations.

(D)   Recent Accounting Pronouncements 

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standard Board (“FASB”) issued guidance to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes, the requirement to allocate current and deferred tax expense to legal entities not subject to tax in its separate financial statements, enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted 

In August 2018, the FASB issued guidance to improve existing measurements, presentation and disclosure requirements for long-duration contracts issued by insurance entities. The amendments in this guidance requires an entity to (1) review and update assumptions used to measure cash flows at least annually as well as update the discount rate assumption at each reporting date; (2) measure market risk benefits associated with deposit contracts at fair value; (3) disclose liability rollforwards and information about significant inputs, judgements assumptions, and methods used in measurement. Additionally, it simplifies the amortization of deferred acquisition costs and other balances on a constant level basis over the expected term of the related contracts. In 2019, the FASB delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Upon adoption, the amendments in this guidance should be applied to contracts in-force as of the beginning of the earliest period presented with a cumulative adjustment to beginning retained earnings. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

In June 2016, the FASB issued guidance requiring financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. An allowance for credit losses will be deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected with changes in the allowance recorded in earnings. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than the currently applied U.S. GAAP method

of taking a permanent impairment of the security, which would be limited to the amount by which fair value is below the amortized cost. Certain existing requirements used to evaluate credit losses have been removed. In 2019, the FASB provided transition relief by providing entities with an option to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible instruments upon adoption and delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The amendments in this guidance should be applied through a cumulative effect adjustment to retained earnings upon adoption as of the beginning of the first reporting period in which the guidance is effective. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

XML

Disposal Groups, Including Discontinued Operations, Disclosure

6 Months Ended

Jun. 30, 2021

Notes

Disposal Groups, Including Discontinued Operations, Disclosure

Note 2.Discontinued Operations 

(A)Sale of Standard Security Life 

On April 14, 2021, IHC and its wholly owned subsidiary, Independence Capital Corp. (“ICC”), entered into a Stock Purchase Agreement (the “SSL Purchase Agreement”) with Reliance Standard Life Insurance Company (“Reliance Standard”) to sell all of the issued and outstanding capital stock of Standard Security Life, a wholly owned subsidiary of ICC, for an aggregate purchase price of $180,000,000 in cash.  In addition, at closing, the Company will receive a dividend from Standard Security Life equal to the excess of aggregate statutory capital and surplus over $53,000,000 as of the closing date. Standard Security Life had statutory capital and surplus of $82,091,000 at June 30, 2021.  The closing of the transaction, the closing dividend and certain other items are subject to customary closing conditions including applicable regulatory approvals, one of which is the approval of the New York State Department of Financial Services. Standard Security Life currently cedes a portion of its New York short-term disability (“DBL”) and paid family leave rider (“PFL”) business to Independence American Insurance Company. We filed notice to cancel this reinsurance contract in accordance with the terms of the SSL Purchase Agreement. Under the terms of the SSL Purchase Agreement, the sale transaction will include all of Standard Security Life’s DBL and PFL business (including the DBL and PFL business previously ceded to Independence American Insurance Company) and will exclude other lines of business which will be reinsured prior to the closing. The DBL and PFL business being sold was part of the Company’s Group disability, life, DBL and PFL segment. The aforementioned transaction, consisting of the sale of Standard Security Life, the closing dividend and other closing conditions, is collectively referred to as the “SSL Sale” transaction or disposal group. DBL and PFL are major product lines for the Company. The sale of Standard Security Life and resulting exit from DBL and PFL business represents a strategic shift that will have a major effect on the Company’s operations and financial results. The SSL Sale transaction qualified for reporting as discontinued operations in the second quarter of 2021 upon the Board of Director’s commitment to a plan for its disposal in April 2021, and the subsequent execution of the SSL Purchase Agreement. Provided that all regulatory approvals and other closing conditions are met, the Company expects to complete the SSL Sale transaction by the end of 2021.

On July 29, 2021, the SSL Purchase Agreement was amended and restated to: (i) include in the disposal group, the business lines that were previously excluded from the transaction; (ii) remove the reinsurance requirement for the previously excluded business lines; and (iii) increase the target statutory capital and surplus to $57,000,000. As a result of this change in the disposal plan, the Company will include the assets, liabilities and results of operations for those business lines affected in discontinued operations for all periods presented, beginning in the third quarter of 2021.

Aside from customary transition services, there will be no continuing involvement with Standard Security Life after its disposal.

(B)Sale of Pet Division and Independence American Insurance Company (“Pets Sale”) 

On May 17, 2021, IHC and certain subsidiaries entered into agreements to sell a 70% controlling interest in its pet division, including all of the issued and outstanding capital stock of Independence American

Insurance Company to a subsidiary of Iguana Capital, Inc. (“Iguana Capital”), an investment company specifically formed to facilitate this transaction as follows:  

(i)IHC and its wholly owned subsidiary, IHC SB Holdings LLC (“SBH”), entered into a Stock Purchase Agreement (the “PPI Purchase Agreement”) with Iguana Capital to sell its 85% interest in PetPartners for $77,000,000 in cash (subject to working capital adjustments);  

(ii)IHC and its wholly owned subsidiary, AMIC Holdings, Inc. (“AMIC”), entered into a Stock Purchase Agreement (the “IAHC Purchase Agreement”) with Iguana Capital to sell all of the stock of Independence American Holdings Corp. (“IAHC”), which owns all of the stock of Independence American Insurance Company and other pet assets, for $190,400,000 in cash (subject to adjustments for targeted statutory capital and surplus): and  

(iii)Following each of the above, IHC will retain a 30% interest in the form of an equity investment in Iguana Capital. 

Both agreements are subject to customary closing conditions. The closing of the IAHC Purchase Agreement however is also subject to certain regulatory approvals, one of which is the approval of the Delaware Insurance Department.  For this reason, the transaction was structured as two agreements such that the sale of PetPartners occurred on June 30, 2021, and the closing of the transactions contemplated in the IAHC Purchase Agreement will follow at a later date upon receipt of applicable regulatory approvals. Provided that all regulatory approvals and other closing conditions are met, the Company expects to complete the IAHC sale transaction by the end of 2021.

Under the terms of the IAHC Purchase Agreement, the transaction includes the sale of all Independence American Insurance Company’s pet business and excludes other business lines. These excluded business lines will be retained by the Company through a reinsurance agreement with Madison National Life prior to closing. The reinsurance agreement will remain in effect until the underlying business is either transferred to Madison National Life or the business runs out. The aforementioned transaction, consisting of the sale of PetPartners, IAHC and Independence American Insurance Company, and other closing conditions, is collectively referred to as the “Pets Sale” transaction or disposal group. The pet business being sold was part of the Company’s Specialty Health segment. Because the pet business is a major product line for the Company, and the Company will no longer actively engage in the sales and marketing of pet insurance, the Pets Sale transaction represents a strategic shift that will have a major effect on the Company’s operations and financial results. The Pets Sale transaction qualified for reporting as discontinued operations in the second quarter of 2021 as a result of the Board of Directors’ commitment to a plan for the disposal of a controlling interest in its pet business in May 2021, and the execution of both the PPI Purchase Agreement and the IAHC Purchase Agreement on May 17, 2021.

On June 30, 2021, the Company completed the sale of its majority interest in PetPartners and, as a result, the Company ceased to have a controlling financial interest in PetPartners. Upon closing, the Company received proceeds of $78,779,000 (consisting of the purchase price and certain initial working capital adjustments), recognized an initial equity investment in Iguana Capital valued at $33,762,000, and recorded a $62,693,000 gain on the disposal, net of transaction costs and income taxes. Transaction costs consisting of transaction bonuses, legal expenses and financial advisor expenses amounted to an aggregate of $6,070,000. The PPI Purchase Agreement includes a waiver and consent to offer The American Kennel Club (“AKC”), PetPartners’ minority shareholder, until December 31, 2021, the right to sell their shares at the same price and terms as in the PPI Purchase Agreement. In the event AKC desires to sell such its shares, Iguana Capital and SBH will equally finance the cash payment to AKC. In connection with the PPI Sale transaction, the Company recorded a $6,800,000 contingent liability (the maximum amount required) based on its belief that AKC will exercise this right. If for any reason the IAHC Purchase Agreement is terminated, then at the option of either SBH or an affiliate of Iguana Capital, IAHC may reacquire the Company’s interest in PetPartners (the “PPI Put/Call Option”). The value of the PPI Put/Call Option was deemed to be negligible due to the structure of the put and call features, the short time horizon and the Company’s belief that there is a low probability that the deal would be terminated. The proceeds received from the sale of PetPartners were deposited into an escrow

account owned by SBH and treated as a security deposit. The funds will be released from escrow upon either the consummation of the IAHC sale transaction or upon the exercise of the PPI Put/Call Option. At June 30, 2021, the security deposit is presented as funds held in escrow on the Condensed Consolidated Balance Sheet.

Continuing involvement with the Pets Sale disposal group will consist of customary transition services, the reinsurance of retained business lines, the PPI Put/Call Option, and the equity investment in Iguana Capital.

The following is a reconciliation, by disposal group, of the carrying amounts of major classes of assets and liabilities included in discontinued operations on the Condensed Consolidated Balance Sheets for the periods indicated (in thousands):

		June 30, 2021
		SSL Sale		Pets Sale		Total
Major classes of assets:
Investments and cash	$	164,346	$	144,688	$	309,034
Goodwill		-		41,716		41,716
Other assets		30,020		35,392		65,412
Assets attributable to discontinued operations	$	194,366	$	221,796	$	416,162
Major classes of liabilities:
Policy benefits and claims	$	56,987	$	12,743	$	69,730
Unearned premiums		26,778		6,080		32,858
Other liabilities		12,500		5,092		17,592
Liabilities attributable to discontinued operations	$	96,265	$	23,915	$	120,180

		December 31, 2020
		SSL Sale		Pets Sale		Total
Major classes of assets included in discontinued operations:
Investments and cash	$	114,916	$	149,844	$	264,760
Goodwill		-		62,414		62,414
Other assets		18,787		29,730		48,517
Assets attributable to discontinued operations	$	133,703	$	241,988	$	375,691
Major classes of liabilities included in discontinued operations:
Policy benefits and claims	$	34,500	$	11,775	$	46,275
Unearned premiums		5,208		5,629		10,837
Other liabilities		9,316		9,511		18,827
Liabilities attributable to discontinued operations	$	49,024	$	26,915	$	75,939

The following is a reconciliation, by disposal group, of the major line items constituting the pretax profit of discontinued operations to the income from discontinued operations, net of tax, as shown on the Condensed Consolidated Statements of Income for the periods indicated (in thousands):

		For the Three Months Ended June 30, 2021
		SSL Sale		Pets Sale		Total
Revenues	$	50,342	$	33,080	$	83,422
Expenses:
Insurance benefits, claims and reserves		24,341		18,442		42,783
Selling, general and administrative expenses		7,394		14,592		21,986
Pretax income of discontinued operations during phase-out		18,607		46		18,653
Pretax provision for loss on disposal		(402)		(410)		(812)
Pretax gain on disposal of discontinued operations		-		74,534		74,534
Total pretax income from discontinued operations		18,205		74,170		92,375
Income tax expense on discontinued operations		3,836		11,734		15,570
Income from discontinued operations, net of tax	$	14,369	$	62,436	$	76,805

		For the Three Months Ended June 30, 2020
		SSL Sale		Pets Sale		Total
Revenues	$	30,442	$	20,407	$	50,849
Expenses:
Insurance benefits, claims and reserves		22,152		11,098		33,250
Selling, general and administrative expenses		6,150		7,855		14,005
Pretax income of discontinued operations during phase-out		2,140		1,454		3,594
Pretax provision for loss on disposal		-		-		-
Pretax gain on disposal of discontinued operations		-		-		-
Total pretax income from discontinued operations		2,140		1,454		3,594
Income tax expense on discontinued operations		822		442		1,264
Income from discontinued operations, net of tax	$	1,318	$	1,012	$	2,330

		For the Six Months Ended June 30, 2021
		SSL Sale		Pets Sale		Total
Revenues	$	93,738	$	61,999	$	155,737
Expenses:
Insurance benefits, claims and reserves		53,865		34,374		88,239
Selling, general and administrative expenses		14,850		26,796		41,646
Pretax income of discontinued operations during phase-out		25,023		829		25,852
Pretax provision for loss on disposal		(402)		(410)		(812)
Pretax gain on disposal of discontinued operations		-		74,534		74,534
Total pretax income from discontinued operations		24,621		74,953		99,574
Income tax expense on discontinued operations		5,151		11,875		17,026
Income from discontinued operations, net of tax	$	19,470	$	63,078	$	82,548

		For the Six Months Ended June 30, 2020
		SSL Sale		Pets Sale		Total
Revenue	$	59,943	$	37,838	$	97,781
Expenses:
Insurance benefits, claims and reserves		40,560		20,459		61,019
Selling, general and administrative expenses		13,004		14,515		27,519
Pretax income of discontinued operations during phase-out		6,379		2,864		9,243
Pretax provision for loss on disposal		-		-		-
Pretax gain on disposal of discontinued operations		-		-		-
Total pretax income from discontinued operations		6,379		2,864		9,243
Income tax expense on discontinued operations		1,689		741		2,430
Income from discontinued operations, net of tax	$	4,690	$	2,123	$	6,813

The assets and liabilities in discontinued operations are measured at the lower of their carry value or fair value less cost to sell. During the three months and six months ended June 30, 2021, it was not necessary to write-down any assets or liabilities attributable to the disposal groups in discontinued operations to fair value, less costs to sell. The Company expects to recognize gains from the sales of these disposal groups, therefore, any costs to sell the disposal groups, primarily legal expenses, incurred prior to the actual disposal of the discontinued operation, are expensed when incurred and presented in pretax provision for loss on disposal in the tables above.

Pretax income (loss) from discontinued operations during phase-out attributable to IHC was $18,653,000 and $25,852,000 for the three and six months ended June 30, 2021, respectively, and was $3,594,000 and $9,243,000 for the three and six months ended June 30, 2020, respectively.

Total cash flows from operating activities of discontinued operations were $45,917,000 and $26,813,000 for the six months ended June 30, 2021 and 2020, respectively. Total cash flows from investing activities of discontinued operations were $(88,501,000) and $(29,753,000) for the six months ended June 30, 2021 and 2020, respectively.

On a consolidated basis, the Company recorded $15,570,000 and $1,264,000 of income taxes related to pretax income from discontinued operations for the three months ended June 30, 2021 and 2020, respectively, and $17,026,000 and $2,430,000 for the six months ended June 30, 2021 and 2020, respectively. In 2021, these amounts include $11,841,000 of income taxes related to the pretax gain on disposal of discontinued operations. In connection with the sale of PetPartners, AMIC decreased its valuation allowance on existing deferred tax assets by $8,281,000 and utilized approximately $46,116,000 of its outstanding Federal net operating loss carryforwards (See Note 11). Differences between the Federal statutory income tax rate on discontinued operations and the Company’s effective income tax rate on pretax income from discontinued operations are primarily the result of AMIC’s decrease in its valuation allowance, state and local income taxes, nondeductible goodwill and other expenses.

XML

Earnings Per Share [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Earnings Per Share

Note 3.Income Per Common Share 

Diluted income per share was computed using the treasury stock method. As a result of losses from continuing operations for the three months and six months ended June 30, 2021 and 2020, such shares were deemed anti-dilutive.

The following is a reconciliation of income available to common shareholders used to calculate income per share for the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Income from continuing operations attributable to IHC	$	(436)	$	(1,835)	$	(612)	$	(1,987)
Income from discontinued operations attributable to IHC	$	76,907	$	2,256	$	82,704	$	6,686
Net income attributable to IHC	$	76,471	$	421	$	82,092	$	4,699

XML

Cash and Cash Equivalents Disclosure

6 Months Ended

Jun. 30, 2021

Notes

Cash and Cash Equivalents Disclosure

Note 4.Cash, Cash Equivalents and Restricted Cash 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods indicated (in thousands): 

		June 30,
		2021		2020
Cash and cash equivalents	$	22,834	$	11,655
Restricted cash in other assets		418		985
Cash, cash equivalents and restricted cash in discontinued operations		3,773		11,563
Total cash, cash equivalents and restricted cash including discontinued operations	$	27,025	$	24,203

Restricted cash includes insurance premiums collected from insureds that are pending remittance to insurance carriers and/or payment of insurance claims and commissions to third party administrators. These amounts are required to be set aside by contractual agreements with the insurance carriers and are included in other assets on the Condensed Consolidated Balance Sheets.

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure

Note 5.Investment Securities 

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

		June 30, 2021
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	75,245	$	1,583	$	(779)	$	76,049
CMOs – residential (1)		3,071		118		(5)		3,184
U.S. Government obligations		23,029		273		-		23,302
Agency MBS - residential (2)		35		-		(4)		31
GSEs (3)		2,969		-		(84)		2,885
States and political subdivisions		74,086		1,261		(384)		74,963
Foreign government obligations		3,144		151		-		3,295
Total fixed maturities	$	181,579	$	3,386	$	(1,256)	$	183,709

		December 31, 2020
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	91,802	$	2,174	$	(1,302)	$	92,674
CMOs – residential (1)		3,439		146		(2)		3,583
U.S. Government obligations		23,397		414		-		23,811
Agency MBS - residential (2)		39		-		(5)		34
GSEs (3)		3,055		-		(81)		2,974
States and political subdivisions		82,910		1,768		(452)		84,226
Foreign government obligations		3,211		206		-		3,417
Total fixed maturities	$	207,853	$	4,708	$	(1,842)	$	210,719

(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, 2021, 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 prepayment penalties.

		AMORTIZED		FAIR
		COST		VALUE
Due in one year or less	$	36,481	$	36,938
Due after one year through five years		87,377		89,128
Due after five years through ten years		20,124		20,292
Due after ten years		31,522		31,252
Fixed maturities with no single maturity date		6,075		6,099
	$	181,579	$	183,709

The following tables summarize, for all fixed maturities available-for-sale 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, 2021
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	19,962	$	740	$	4,503	$	39	$	24,465	$	779
CMOs-residential		707		5		-		-		707		5
Agency MBS - residential		31		4		-		-		31		4
GSEs		-		-		2,886		84		2,886		84
States and political subdivisions		10,319		76		8,813		308		19,132		384
Fixed maturities in an
unrealized loss position	$	31,019	$	825	$	16,202	$	431	$	47,221	$	1,256
Number of fixed maturities in an
unrealized loss position		9				14				23

		December 31, 2020
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	23,591	$	458	$	8,845	$	844	$	32,436	$	1,302
CMOs-residential		748		2		-		-		748		2
Agency MBS - residential		34		5		-		-		34		5
GSEs		-		-		2,974		81		2,974		81
States and political subdivisions		16,983		150		6,108		302		23,091		452
Fixed maturities in an
unrealized loss position	$	41,356	$	615	$	17,927	$	1,227	$	59,283	$	1,842
Number of fixed maturities in an
unrealized loss position		20				13				33

Substantially all of the unrealized losses on fixed maturities available-for-sale at June 30, 2021 and December 31, 2020 relate to investment grade securities. Management does not intend to sell, and it is likely that management will not be required to sell these securities prior to their anticipated recovery. The unrealized losses on the Company's fixed maturity securities are related to general market changes in interest rates, and/or the levels of credit spreads largely due to current market conditions relating to the COVID-19 pandemic rather than specific concerns with the issuer's ability to pay interest and repay principal. We have evaluated each corporate security’s credit rating as well as industry risk factors associated with the securities. The fair value of these securities is expected to recover as they approach maturity and therefore the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2021.

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Realized gains (losses):
Fixed maturities available-for-sale	$	(126)	$	50	$	46	$	284
Equity securities		-		-		292		-
Total realized gains (losses) on debt and equity securities		(126)		50		338		284
Unrealized gains (losses) on equity securities		-		214		(247)		(184)
Gains (losses) on debt and equity securities		(126)		264		91		100
Gains (losses) on other investments		-		10		-		17
Net investment gains	$	(126)	$	274	$	91	$	117

For the three months and six months ended June 30, 2021, the Company realized gross gains of $61,000 and $254,000, respectively, and gross losses of $187,000 and $206,000, respectively, from sales, maturities and prepayments of fixed maturities available-for-sale. For the three months and six months ended June 30, 2020, the Company realized gross gains of $97,000 and $346,000, respectively, and gross losses of $47,000 and $62,000, respectively, from sales, maturities and prepayments of fixed maturities available-for-sale.

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(v) to the Consolidated Financial Statements in the 2020 Annual Report on Form 10-K for further discussion of the factors considered by management in its regular review to identify and recognize other-than-temporary impairments on fixed maturities available-for-sale.  The Company did not recognize any other-than-temporary impairments on available-for-sale securities in the first six months of 2021 or 2020.

XML

Fair Value Disclosures [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Fair Value Disclosures

Note 6.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.

Fixed maturities available-for-sale:

Fixed maturities available-for-sale included in Level 2 are comprised of our portfolio of government securities, agency mortgage-backed securities, corporate fixed income securities, foreign government obligations, collateralized mortgage obligations, municipals and GSEs that were priced with observable market inputs. Level 3 debt securities consist of municipal tax credit strips.  The valuation method used to determine the fair value of municipal tax credit strips is the present value of the remaining future tax credits (at the original issue discount rate) as presented in the redemption tables in the Municipal Prospectuses.   This original issue discount is accreted into income on a constant yield basis over the term of the debt instrument. Further, we retain independent pricing vendors to assist in valuing certain instruments.

Equity securities:

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

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

		June 30, 2021
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	76,049	$	-	$	76,049
CMOs - residential		-		3,184		-		3,184
US Government obligations		-		23,302		-		23,302
Agency MBS - residential		-		31		-		31
GSEs		-		2,885		-		2,885
States and political subdivisions		-		73,949		1,014		74,963
Foreign government obligations		-		3,295		-		3,295
Total fixed maturities		-		182,695		1,014		183,709
Total Financial Assets	$	-	$	182,695	$	1,014	$	183,709

		December 31, 2020
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	92,674	$	-	$	92,674
CMOs - residential		-		3,583		-		3,583
US Government obligations		-		23,811		-		23,811
Agency MBS - residential		-		34		-		34
GSEs		-		2,974		-		2,974
States and political subdivisions		-		83,130		1,096		84,226
Foreign government obligations		-		3,417		-		3,417
Total fixed maturities		-		209,623		1,096		210,719
Equity securities:
Common stocks		1,753		-		-		1,753
Total equity securities		1,753		-		-		1,753
Total Financial Assets	$	1,753	$	209,623	$	1,096	$	212,472

The following table presents the changes in fair value of our Level 3 financial assets for the periods indicated (in thousands):

		Three Months Ended June 30,
		2021				2020
		States and		Total		States and		Total
		Political		Level 3		Political		Level 3
		Subdivisions		Assets		Subdivisions		Assets
Beginning balance	$	1,055	$	1,055	$	1,214	$	1,214
Increases (decreases) recognized in earnings:
Net investment gains		-		-		-		-
Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		(4)		(4)		(5)		(5)
Repayments and amortization of
fixed maturities		(37)		(37)		(34)		(34)
Balance at end of period	$	1,014	$	1,014	$	1,175	$	1,175

		Six Months Ended June 30,
		2021				2020
		States and		Total		States and		Total
		Political		Level 3		Political		Level 3
		Subdivisions		Assets		Subdivisions		Assets
Beginning balance	$	1,096	$	1,096	$	1,251	$	1,251
Increases (decreases) recognized in earnings:
Net investment gains		-		-		-		-
Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		(8)		(8)		(9)		(9)
Repayments and amortization of
fixed maturities		(74)		(74)		(67)		(67)
Balance at end of period	$	1,014	$	1,014	$	1,175	$	1,175

Included in unrealized gains (losses) on available-for-sale securities, pre-tax, on the Condensed Consolidated Statement of Comprehensive Income for the three months and six months ended June 30, 2021 are $(4,000) and $(8,000) of unrealized gains (losses) attributable to the change in unrealized gains (losses) related to Level 3 securities held at June 30, 2021.

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

		June 30, 2021						December 31, 2020
		Level 1		Level 2				Level 1		Level 2
		Fair		Fair		Carrying		Fair		Fair		Carrying
		Value		Value		Value		Value		Value		Value
FINANCIAL ASSETS:
Short-term investments	$	1,550	$	-	$	1,550	$	1,568	$	-	$	1,568
Securities purchased under
agreements to resell		70,323		-		70,323		33,038		-		33,038
FINANCIAL LIABILITIES:
Funds on deposit	$	-	$	142,155	$	142,155	$	-	$	141,376	$	141,376
Other policyholders’ funds		-		11,988		11,988		-		12,001		12,001

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:

Securities purchased under agreements to resell

Securities purchased under agreements to resell are carried at the amounts at which the securities will be subsequently resold, which approximates fair value.

Short-term Investments

Investments with original maturities of 91 days to one year are considered short-term investments and are carried at cost, which approximates fair value.

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 interest rates 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.

Other Policyholders’ Funds

Other policyholders’ funds are primarily credited with current market interest rates resulting in a fair value which approximates the carrying amount.

XML

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Investments in and Advances to Affiliates, Schedule of Investments

Note 7.Other Investments, Including Variable Interest Entities 

Equity Method Investments

Equity income (loss) from equity method investments for the three months and six months ended June 30, 2021 was $4,000 and $64,000 respectively; and was $(356,000) and $(28,000) for the three months and six months ended June 30, 2020, respectively.

Variable Interest Entities

The Company has a minority interest in certain limited partnerships that we have determined to be Variable Interest Entities (“VIEs”).  The aforementioned VIEs are not required to be consolidated in the Company’s condensed consolidated financial statements as we are not the primary beneficiary since we do not have the power to direct the activities that most significantly impact the VIEs’ economic performance.

The Company will periodically reassess whether we are the primary beneficiary in any of these investments. The reassessment process will consider whether we have acquired the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. Our maximum loss exposure is limited to our combined $2,022,000 carrying value in these equity investments which is included in other investments in the Condensed Consolidated Balance Sheet as of June 30, 2021.

Related Party Transactions

At June 30, 2021 and December 31, 2020, the Company’s Condensed Consolidated Balance Sheets include $94,000 and $163,000, respectively, of administrative fees and other expenses payable to Ebix Health Exchange Holdings, LLC (“Ebix Health Exchange”), which are included in other assets and accounts payable, accruals and other liabilities, respectively. The Company’s Condensed Consolidated Statements of Income include administrative fee expenses to Ebix Health Exchange, which are included in selling, general and administrative expenses, of $361,000 and $762,000, respectively, for the three months and six months ended June 30, 2021; and include $423,000 and $899,000, respectively, for the same periods in 2020.

Selling, general and administrative expense for the three months ended March 31, 2020 includes approximately $1,507,000 of expense related to the purchase of leads from an affiliated lead generation company, Torchlight, which was acquired in April of 2020. Lead costs subsequent to acquisition are eliminated in consolidation. 

XML

Business Combination Disclosure

6 Months Ended

Jun. 30, 2021

Notes

Business Combination Disclosure

Note 8.Acquisitions 

The Abacus Group, LLC.

On January 1, 2020 (the "Abacus Acquisition Date"), the Company acquired the remaining 56% membership units of The Abacus Group, LLC, (“Abacus”) for a purchase price of $2,599,000, Abacus is an agency group that writes worksite business for Madison National Life and other carriers and receives commissions and other fees. The Company acquired Abacus to further the Company’s position in the worksite marketplace. The Company accounted for its prior ownership interest using the equity method. Immediately preceding the transaction, the Company determined the fair value of its equity interest to be $1,838,000 using a market approach and, as a result, recorded a loss of $163,000, which is included in other income on the Condensed Consolidated Statement of Income.

Upon the acquisition, the Company consolidated the assets and liabilities of Abacus. The following table presents the identifiable assets acquired and liabilities assumed in the acquisition of Abacus on the Abacus Acquisition Date based on their respective fair values (in thousands):

Other assets	$	350
Total identifiable assets		350
Other liabilities		575
Total liabilities		575
Net identifiable assets (liabilities) acquired	$	(225)

In connection with the acquisition, the Company recorded $4,662,000 of goodwill of which $2,725,000 is deductible for income tax purposes.

Goodwill represents the synergies with our insurance carriers. Abacus has an existing distribution network and offers increased distribution sources for IHC carriers’ existing products and developing products through its enrollment platform designed specifically for producers in the worksite marketplace. Goodwill was calculated as the sum of (i) the acquisition date fair value of total cash consideration transferred of $2,599,000, (ii) the aggregate acquisition-date fair value of equity interests immediately before the acquisition of $1,838,000, and (iii) the net identifiable liabilities of $225,000 that were assumed. The enterprise value of Abacus was determined by a market approach net of any control premium. Acquisition-related costs, primarily legal and consulting fees, were not material and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Income.

Revenue and net income from Abacus for the period from the Abacus Acquisition Date to June 30, 2020, is not material as most of their agency fee income is derived from Madison National Life and is now eliminated in consolidation. The amount of fee income earned from other carriers in 2020 is not material and will reduce over time as the business either runs-off or is transitioned to Madison National Life.

Pro forma adjustments to present the Company’s consolidated revenues and net income as if the acquisition date was January 1, 2019 are not material and accordingly are omitted.

Torchlight Technology Group LLC.

On April 15, 2020 (the "Torchlight Acquisition Date"), the Company acquired the remaining 77% membership units of Torchlight Technology Group LLC, (“Torchlight”) for a purchase price of $11,443,000 in cash and other consideration valued at $185,000. In accordance with the purchase and sale agreement, the Company will also make future incentive payments to the former owners based on the future market appreciation of IHC. These payments will be accounted for as compensation for post-combination services. The Company purchased Torchlight for its marketing technology (“MarTech”), artificial data intelligence, and consumer lead generation capabilities. In an effort to further expand our InsureTech division (comprised of Torchlight, our call centers, field and career agents, and web domains), the Company wants to be able to internally develop and deliver lead traffic opportunities in an affordable and controlled environment. The Company accounted for its prior ownership interest using the equity method. Immediately preceding the transaction, the Company determined the fair value of its equity interest to be $3,432,000 using the income approach and, as a result, recorded a gain of $519,000, which is included in other income on the Condensed Consolidated Statement of Income.

Upon the acquisition, the Company consolidated the assets and liabilities of Torchlight. The following

table presents the identifiable assets acquired and liabilities assumed in the acquisition of Torchlight on the Torchlight Acquisition Date based on their respective fair values (in thousands):

Cash	$	333
Intangible assets		2,700
Other assets		2,132
Total identifiable assets		5,165
Other liabilities		1,227
Total liabilities		1,227
Net identifiable assets acquired	$	3,938

In connection with the acquisition, the Company recorded $11,122,000 of goodwill, of which $7,976,000 is deductible for income tax purposes, and $2,700,000 of intangible assets. In 2021, a portion of this goodwill was allocated to the Pets Sale disposal group presented in discontinued operations.

Goodwill represents the synergies with our agencies. With a significant dependence on consumer and small business opportunities, our agencies require a consistent and predictable flow of lead traffic, and as a result, have meaningful synergies with the functions and deliverables that are developed at Torchlight. Before the acquisition of Torchlight, our agency was fully dependent on market traffic, which was both unpredictable in price and availability. Such restrictions would not allow for coordinated or scheduled growth. Goodwill was calculated as the sum of (i) the acquisition date fair value of total aggregate consideration transferred of $11,628,000; and (ii) the aggregate acquisition-date fair value of equity interests immediately before the acquisition of $3,432,000; over (iii) the net identifiable assets of $3,938,000 that were acquired. The enterprise value of Torchlight was determined by an independent appraisal using a discounted cash flow model. Acquisition-related costs, primarily legal and consulting fees, were not material and are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Income.

Revenue and net loss from Torchlight for the period from the Torchlight Acquisition Date to June 30, 2020 is $1,828,000 and $(564,000), respectively. The net loss is primarily related to the integration of Torchlight with the Company’s other operations.

Pro forma adjustments to present the Company’s consolidated revenues and net income as if the acquisition date was January 1, 2019 are not material and accordingly are omitted.

XML

Goodwill and Intangible Assets Disclosure [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Goodwill and Intangible Assets Disclosure

Note 9.Goodwill and Other Intangible Assets 

The carrying amount of goodwill is $12,486,000 at June 30, 2021 and December 31, 2020, of which $8,263,000 is attributable to the Specialty Health Segment at both June 30, 2021 and December 31, 2020, and $4,223,000 is attributable to the Group disability and life segment for the same periods.

The Company has net other intangible assets of $3,667,000 and $4,008,000 at June 30, 2021 and December 31, 2020, 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, 2021				December 31, 2020
		Gross				Gross
		Carrying		Accumulated		Carrying		Accumulated
		Amount		Amortization		Amount		Amortization
Finite-lived Intangible Assets:
Agent and broker relationships	$	6,583	$	4,599	$	7,583	$	5,385
Software systems		1,500		294		1,500		167
Total finite-lived	$	8,083	$	4,893	$	9,083	$	5,552

		June 30,		December 31,
		2021		2020
Indefinite-lived Intangible Assets:
Insurance licenses	$	477	$	477
Total indefinite-lived	$	477	$	477

Amortization expense was $179,000 and $341,000 for the three months and six months ended June 30, 2021, respectively; and was $171,000 and $224,000 for the three months and six months ended June 30, 2020, respectively. 

XML

Revenue from Contract with Customer

6 Months Ended

Jun. 30, 2021

Notes

Revenue from Contract with Customer

Note 10.Fee Income 

Substantially all of the fee income recorded by the IHC Agencies and lead generation company relate to our Specialty Health segment. The following table presents fee income disaggregated by type for the periods indicated (in thousands).

		Three Months Ended		Six Months Ended
		June 30,		June 30,
		2021	2020	2021		2020
Commissions	$	1,416	1,932	4,297	$	3,672
Administrative Fees		80	581	177		1,069
Marketing Fees		254	292	559		643
Enrollment Platform Fees		529	455	1,029		973
Lead and Referral Fees		2,633	588	4,945		854
Payment Plan, Application and Other Fees		32	59	72		130
Total Fee Income	$	4,944	3,907	11,079	$	7,341

Commission Revenues

Commission revenues result from the sales of certain policies by the IHC Agencies on behalf of multiple unaffiliated insurance carriers. Increased sales of products to these unaffiliated insurance carriers began in 2020 as a result of new contracts with the carriers and increased distribution channels. These policies primarily consist of senior products, such as Medicare Advantage, Medicare Part D prescription drug plans and Medicare Supplement plans, as well as Affordable Care Act (“ACA”) plans. A significant portion of our commission revenues are recorded at a point in time upon the issuance of a policy by the unaffiliated insurance carrier based on expected constrained lifetime value (“LTV”). Constrained LTV represents expected commissions to be received over the lifetime of the policies sold. The Company analyzes various factors, such as commission rates, carrier mix, contract amendments and terminations, estimated average plan durations, cancellations and non-renewals, to estimate the LTV. Constraints are applied to help ensure that the total estimated lifetime commissions expected to be collected are recognized as revenue only to the extent that it is

probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

We evaluate the appropriateness of our constraints on a quarterly basis and update the LTV assumptions if we observe evidence that suggests a change in the underlying long-term expectations. In doing this, we apply significant judgement in assessing historical cash collections and changes in circumstances that would impact future cash collections such as, but not limited to, commission rates, carrier mix, plan durations, plan cancellations and non-renewals. Changes in LTV result in an increase or decrease to fee income revenue and a corresponding increase or decrease to contract assets. Any significant impact due to changes in the LTV assumptions are recognized in revenue (i) in the period of the change; and (ii) to the extent we do not believe a significant reversal is probable.

Costs to Fulfill a Contract

Costs to fulfill a contract include commissions owed to independent licensed agents or affinity partners that are contracted by the IHC Agencies. Upon the submission of a completed insurance application, the sales and marketing performance obligation is complete and the resultant estimated lifetime commission costs incurred are expensed and a corresponding commission liability is recorded on the Condensed Consolidated Balance Sheet. As policyholders continue their policy and remit monthly premium payments, the Company receives its commissions from the insurance carrier. Commissions owed to the agent or affinity partner are then paid and the corresponding liability is reduced. Judgement is required to estimate total expected lifetime commissions based on policy duration assumptions. At June 30, 2021 and December 31, 2020, the aforementioned commission liability was $2,858,000 and $2,362,000, respectively, and is included in accounts payable, accruals and other liabilities on the Condensed Consolidated Balance Sheet.

Contract Asset

Contract assets primarily relate to our commission revenues for the sales of senior products, such as Medicare Advantage and Medicare Supplement plans and ACA plans, which began in 2020. When commission revenue for the sales of these products is recognized, a corresponding contract asset is recorded in other assets on the Condensed Consolidated Balance Sheet. The timing of revenue differs from the collection of commissions. As policyholders continue their policy and remit monthly premium payments, the Company receives its commissions from the insurance carrier and the contract asset is reduced.

The following table summarizes the contract asset activity for the period indicated (in thousands).

		Six Months Ended
		June 30, 2021
Beginning Balance	$	7,760
Commissions recognized during the period		4,708
Commission adjustments related to prior periods		(418)
Cash receipts		(3,251)
Ending Balance	$	8,799

Remaining Performance Obligations

Deferred revenues are recorded in connection with certain terminable contracts and the right to use our INSX enrollment platform. At June 30, 2021 and December 31, 2020, deferred revenues are immaterial and expected to be fully recognized within the next 12 months.

XML

Income Tax Disclosure [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Income Tax Disclosure

Note 11.Income Taxes 

The provisions for income taxes shown in the Condensed Consolidated Statements of Income were computed by applying the effective tax rate expected to be applicable for the reporting periods. Differences between the Federal statutory income tax rate and the Company’s effective income tax rate are principally from the dividends received deduction and tax-exempt interest income, state and local income taxes, and compensation related tax provisions.

December 31, 2020, AMIC had Federal net operating loss carryforwards of approximately $46,116,000 and a corresponding valuation allowance of $8,281,000 related to those net operating loss carryforwards that, in the judgment of management, were not considered realizable. On June 30, 2021, the Company sold PetPartners and recorded a pretax gain of $74,534,000 (See Note 2). As a result, AMIC decreased its valuation allowance by $8,281,000 and utilized the $46,116,000 of its outstanding Federal net operating loss carryforwards. Total income tax expense related to the pretax gain on disposal of discontinued operations was $11,841,000. The primary differences between the Federal statutory income tax rate and the Company’s effective income tax rate related to the gain on disposal of discontinued operations are the result of AMIC’s decrease in its valuation allowance, partially offset by the non-deductibility of goodwill and other expenses related to the disposal.

The effective income tax rates related to losses from continuing operations in 2021 were impacted by tax benefits from exercises of share-based compensation and state and local income tax benefits on certain subsidiaries. In 2020, the effective income tax rates related to losses from continuing operations reflect a benefit from capital losses attributable to the sale of a subsidiary, partially offset by certain non-deductible expenses recorded in connection with a Regulatory Settlement Agreement.

On March 27, 2020, as part of the business stimulus package in response to the COVID-19 pandemic, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act.  The CARES Act established new tax provisions including, but not limited to: (1) five-year carryback of net operating losses ("NOLs") generated in 2018, 2019 and 2020; (2) accelerated refund of alternative minimum tax (AMT) credit carryforwards; and (3) retroactive changes to allow accelerated depreciation for certain depreciable property. At this time, the legislation does not have a material impact on the Company due to the lack of taxable losses in the stated carryback eligible tax years and the fact that the Company was already expecting to receive a cash benefit for the remaining AMT credits in the fiscal 2018 tax year return.

The New York State Department of Taxation and Finance has selected the Company’s 2015 and 2016 NYS returns for audit.

XML

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Liability for Future Policy Benefits and Unpaid Claims Disclosure

Note 12.Policy Benefits and Claims 

Policy benefits and claims is the liability for unpaid loss and loss adjustment expenses. It is comprised of unpaid claims and estimated incurred but not reported (“IBNR”) reserves. Summarized below are the changes in the total liability for policy benefits and claims for the periods indicated (in thousands). Amounts incurred below do not include expenses for policy benefits and costs incurred for the Company’s life, annuity and other long-duration contracts. In addition, certain loss adjustment expenses related to short-duration contracts that are included in amounts incurred below are classified as selling general and administrative expenses on the Condensed Consolidated Statements of Income.

		For the Six Months Ended June 30, 2021
		Specialty		Group		All Other
		Health		Disability		Lines		Total
Balance at beginning of year	$	31,680	$	80,976	$	20,301	$	132,957
Less: reinsurance recoverable		1,776		22,472		11,878		36,126
Net balance at beginning of year		29,904		58,504		8,423		96,831
Amount incurred, related to:
Current year		16,631		20,031		11,947		48,609
Prior years		(4,634)		(4,033)		(1,132)		(9,799)
Total incurred		11,997		15,998		10,815		38,810
Amount paid, related to:
Current year		4,461		3,922		6,885		15,268
Prior years		12,080		11,488		3,667		27,235
Total paid		16,541		15,410		10,552		42,503
Net balance at end of period		25,360		59,092		8,686		93,138
Plus:  reinsurance recoverable		1,161		22,492		11,024		34,677
Balance at end of period	$	26,521	$	81,584	$	19,710	$	127,815

		For the Six Months Ended June 30, 2020
		Specialty		Group		All Other
		Health		Disability		Lines		Total
Balance at beginning of year	$	35,530	$	80,079	$	19,874	$	135,483
Less: reinsurance recoverable		1,717		23,322		11,954		36,993
Net balance at beginning of year		33,813		56,757		7,920		98,490
Amount incurred, related to:
Current year		24,522		19,093		11,182		54,797
Prior years		(1,972)		(1,553)		(3,201)		(6,726)
Total incurred		22,550		17,540		7,981		48,071
Amount paid, related to:
Current year		7,064		4,010		4,979		16,053
Prior years		17,530		12,125		2,155		31,810
Total paid		24,594		16,135		7,134		47,863
Net balance at end of period		31,769		58,162		8,767		98,698
Plus:  reinsurance recoverable		1,802		22,463		11,074		35,339
Balance at end of period	$	33,571	$	80,625	$	19,841	$	134,037

Since unpaid loss and loss adjustment expenses are estimates, actual losses incurred may be more or less than the Company’s previously developed estimates and is referred to as either unfavorable or favorable development, respectively.

Net favorable (unfavorable) development in the Specialty Health segment, as depicted in the tables above, is comprised of the following lines of business for the years indicated (in thousands):

		Six Months Ended
		June 30,
Specialty Health segment:		2021		2020
Short-term Medical (“STM”)	$	1,676	$	286
Occupational Accident		963		798
Fixed Indemnity Limited Benefit		862		(736)
Limited Medical		197		241
Critical Illness		196		397
Group Gap		356		513
All other specialty health lines		384		473
Total Specialty Health segment	$	4,634	$	1,972

In both 2021 and 2020, net favorable development in the various lines of the Specialty Health segment shown above are primarily due to better than expected claim development. In 2021, experience in STM continues to be better than expected and severity has been relatively low.

In 2021, favorable development of $4,033,000 in the group disability business is primarily due to lower frequency and severity in both the short-term disability (“STD”) and the long-term disability (“LTD”) lines. In 2020, favorable development in the group disability business is primarily due to a reduction in open claims, specifically new claims, in the LTD line, partially offset by an increase in the overall frequency and

severity of claims in the STD line.

All other lines, primarily life and other individual health products and including our medical stop-loss business in run-off, experienced favorable development in 2021 and 2020. The favorable development in 2020 is primarily related to the group term life business due to continued improvements in experience and updated assumptions for the Paid-Up Life business.

Included in the preceding rollforward of the Company’s liability for policy benefits and claims are the policy benefits and claims activity associated with the Company’s health insurance lines. These are embedded within the Specialty Health segment. The table below summarizes the components of the change in the liability for policy benefits and claims that are specific to health insurance claims for the periods indicated (in thousands).

		Specialty Health Segment
		Health Insurance Claims
		Six Months Ended
		June 30,
		2021		2020
Balance at beginning of year	$	28,295	$	31,259
Less: reinsurance recoverable		1,766		1,113
Net balance at beginning of year		26,529		30,146
Amount incurred, related to:
Current year		15,818		23,627
Prior years		(3,658)		(1,184)
Total incurred		12,160		22,443
Amount paid, related to:
Current year		4,319		8,260
Prior years		11,992		16,382
Total paid		16,311		24,642
Net balance at end of period		22,378		27,947
Plus:  reinsurance recoverable		1,158		1,406
Balance at end of period	$	23,536	$	29,353

The liability for the IBNR plus expected development on reported claims associated with the Company’s health insurance claims is $22,378,000 at June 30, 2021.

XML

Stockholders' Equity Note Disclosure [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Stockholders' Equity Note Disclosure

Note 13.Stockholders’ Equity 

Accumulated Other Comprehensive Income (Loss)

Other comprehensive income (loss) includes 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.

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

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Beginning balance	$	2,268	$	1,101	$	4,197	$	1,212
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications		784		1,810		(1,013)		2,544
Amounts reclassified from accumulated OCI		168		(57)		36		(902)
Net other comprehensive income (loss)		952		1,753		(977)		1,642
Ending balance	$	3,220	$	2,854	$	3,220	$	2,854

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,
		2021		2020		2021		2020
Unrealized gains (losses) on available-for-sale securities
reclassified during the period to the following income
statement line items:
Net investment gains (losses)	$	(125)	$	47	$	47	$	284
Income (loss) from continuing operations before income taxes		(125)		47		47		284
Income tax expense (benefit)		(28)		10		9		60
Income (loss) from continuing operations, net of tax		(97)		37		38		224
Total pretax income (loss) from discontinued operations		(90)		25		(94)		858
Income tax expense (benefit) on discontinued operations		(19)		5		(20)		180
Income from discontinued operations, net of tax		(71)		20		(74)		678
Net income (loss)	$	(168)	$	57	$	(36)	$	902

XML

Cash Flow, Supplemental Disclosures [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Cash Flow, Supplemental Disclosures

Note 14.Supplemental Disclosures of Cash Flow Information 

Net cash payments for income taxes were $59,000 and $55,000 during the six months ended June 30, 2021 and 2020, respectively.

XML

Commitments and Contingencies Disclosure [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Commitments and Contingencies Disclosure

Note 15.Contingencies 

Third Party Administrator 

A third party administrator with whom we formerly did business (“Plaintiff” or “TPA”) commenced an action on May 17, 2017 in the United States District Court, Northern District of Texas, Dallas Division (the “Texas Action”), naming IHC, Madison National Life, Standard Security Life, and Independence Brokerage Group, Inc. (formerly IHC Carrier Solutions, Inc.) as defendants (“Defendants”). The Plaintiff seeks contractual payments allegedly owed by the Defendants totaling at least $3,082,000 through 2014, plus additional amounts for 2015 and 2016, and exemplary and punitive damages as allowed by law and fees and costs.  The court had previously stayed the proceedings during the pendency of two arbitrations.  The first arbitration resulted in a judicially-confirmed award in favor of Standard Security Life and Madison National Life in the amount of $5,641,000, which the Plaintiff has satisfied.  The Company received payment on September 9, 2020 and recorded it in other income on the Consolidated Statement of Income in the third quarter of 2020. The second arbitration resulted in no monetary obligations owed by any of the parties. The Plaintiff has filed a motion for leave to file a Second Amended Complaint.  The Defendants have until August 9, 2021 to file an opposition to the motion for leave to amend.

Multistate Market Conduct Examination (“MCE”)

As previously disclosed, our subsidiaries Standard Security Life, Madison National Life and Independence American Insurance Company were selected for MCE related to our short-term medical (“STM”), limited medical and fixed indemnity limited health insurance products for the period of January 1, 2014 through September 30, 2017. The insurance departments of five jurisdictions (Delaware, Wisconsin, District of Columbia, Kansas and South Dakota) served as lead states, and the District of Columbia Department of Insurance, Securities and Banking and the Delaware Department of Insurance served as the managing lead states of the MCE. In addition to the five lead states, 37 other states participated in the MCE. Each of Standard Security Life, Madison National Life and Independence American Insurance Company responded to inquiries and document production requests in the MCE and proactively communicated and cooperated with the applicable regulatory agencies for the MCE. Each of these subsidiaries also provided a detailed action plan to regulators that summarized its enhanced compliance and control mechanisms.

In an effort to avoid long‐term litigation and/or administrative proceedings that would be required to resolve disputes between Standard Security Life, Madison National Life and Independence American Insurance Company and the states involved in the MCE, the Lead States and Standard Security Life, Madison National Life and Independence American Insurance Company entered into separate RSAs on July 14, 2020. The RSAs require the implementation of a compliance plan, impose certain requirements related to specified business practices and monetary payments.  The thirty-seven participating states adopted the RSAs. The Company accrued $3,660,000 in accounts payable, accruals and other liabilities on the Consolidated Balance Sheet in the second quarter of 2020 and processed payment in October 2020. As set forth in the RSAs, Standard Security Life, Madison National Life and Independence American Insurance Company deny any wrongdoing or violation of any applicable laws or regulations, and the entry into the RSAs is not an admission or acknowledgment of any wrongdoing or liability. In accordance with the RSAs, the Monitoring Period commenced and Standard Security Life, Madison National Life and Independence American Insurance Company continue to comply.

XML

Segment Reporting Disclosure [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Segment Reporting Disclosure

Note 16.Segment Reporting 

The Insurance Group principally engages in the life and health insurance business.  Taxes and general expenses associated with parent company activities are included in Corporate. Identifiable assets by segment are those assets that are utilized in each segment and are allocated based upon the mean reserves and liabilities of each such segment. Corporate assets are composed principally of cash equivalents, resale agreements, fixed maturities, equity securities, partnership interests and certain other investments.  

Information by business segment is presented below for the periods indicated (in thousands):

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Revenues:
Specialty Health	$	23,862	$	30,718	$	50,133	$	62,924
Group disability and life		25,143		24,076		50,264		48,161
Individual life, annuities and other (A)		183		490		392		808
Corporate		268		897		791		1,512
		49,456		56,181		101,580		113,405
Net investment gains (losses)		(126)		274		91		117
Total revenues	$	49,330	$	56,455	$	101,671	$	113,522
Income before income taxes
Specialty Health (C)	$	(841)	$	(5,329)	$	(2,732)	$	(5,935)
Group disability and life		3,770		4,353		6,900		6,190
Individual life, annuities and other  (A) (B)		(263)		(140)		(247)		(283)
Corporate		(3,244)		(2,016)		(5,056)		(3,229)
		(578)		(3,132)		(1,135)		(3,257)
Net investment gains (losses)		(126)		274		91		117
Loss from continuing operations before income taxes	$	(704)	$	(2,858)	$	(1,044)	$	(3,140)

(A)Substantially all of the business in the segment is coinsured. Activity in this segment primarily reflects income or expenses related to the coinsurance and the run-off of any remaining blocks that were not coinsured.  

(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 $153,000 and $176,000, for the three months ended June 30, 2021 and 2020, respectively, and $310,000 and $364,000, for the six months ended June 30, 2021 and 2020, respectively. 

(C)In both 2021 and 2020, significant costs associated with hiring, training and licensing a significant number of new agents, as well as costs for system development in our marketing and administrative companies. 

XML

Subsequent Events [Text Block]

6 Months Ended

Jun. 30, 2021

Notes

Subsequent Events

Note 17.Subsequent Events 

On July 14, 2021, IHC and its wholly owned subsidiary ICC entered into a Stock Purchase Agreement with Horace Mann Educators Corporation to sell all of the issued and outstanding capital stock of Madison National Life, a Wisconsin insurance company wholly owned by ICC, for an aggregate purchase price of $172,500,000 in cash. In addition, if Madison National Life reaches specified financial targets in 2023, IHC will receive an additional purchase price of up to $12,500,000. The transaction has been approved by the Board of Directors of IHC, and IHC’s majority stockholders have entered into a voting agreement under which such majority stockholders agreed to approve the transaction. The closing is expected no earlier than January 1, 2022. The transaction is subject to customary closing conditions, including applicable regulatory approvals, one of which is the approval by the Wisconsin Office of the Commissioner of Insurance. The aforementioned disposal plan represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, will qualify for reporting as discontinued operations in the third quarter 2021.

XML

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]: Basis of Accounting, Policy [Policy Text Block] (Policies)

6 Months Ended

Jun. 30, 2021

Policies

Basis of Accounting, Policy

The unaudited 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 information and footnotes required by U.S. GAAP for complete financial statements. The unaudited Condensed Consolidated Financial Statements 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 unaudited Condensed Consolidated Financial Statements.

During the second quarter of 2021, the Board of Directors committed to various plans for the disposal of several business operations (see Note 2). Each plan represents a strategic shift that will have a major effect on the Company’s operations and financial results and as such, they each qualify for reporting as discontinued operations in the second quarter 2021. The assets, liabilities, and related income and expenses associated with each disposal group are presented as discontinued operations in the accompanying condensed consolidated financial statements and Notes thereto for all periods presented.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global health pandemic and the United States declared a national health emergency. COVID-19 has led to largescale disruption in the global economy, market instability and widespread unemployment in the United States. The COVID-19 outbreak continues to be a fluid situation and as it evolves, the duration of COVID-19 and its potential effects on our business cannot be certain. Regulatory mandates have affected, and we anticipate will continue to impact, the insurance industry. We currently cannot predict if there will be a material impact to

our business, results of operations or financial condition in future reporting periods. Consequently, future changes in market conditions may impact estimates used in the preparation of our financial statements associated with evaluations of goodwill and other intangible assets for impairment, estimates associated with the determination of valuation allowances related to net operating loss carryforwards, and estimates of certain losses under insurance contracts. These estimates may all be subject to substantial adjustments in future periods.  In addition, volatile market conditions may result in declines in the fair value of our investment portfolio and possible impairments of certain securities.

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, 2021 are not necessarily indicative of the results to be anticipated for the entire year.

XML

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]: Reclassification, Policy [Policy Text Block] (Policies)

6 Months Ended

Jun. 30, 2021

Policies

Reclassification, Policy

Certain amounts in prior year’s condensed consolidated financial statements and Notes thereto have been reclassified to conform to the 2021 presentation, primarily for the effects of discontinued operations.

XML

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]: New Accounting Pronouncements, Policy [Policy Text Block] (Policies)

6 Months Ended

Jun. 30, 2021

Policies

New Accounting Pronouncements, Policy

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standard Board (“FASB”) issued guidance to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes, the requirement to allocate current and deferred tax expense to legal entities not subject to tax in its separate financial statements, enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted 

In August 2018, the FASB issued guidance to improve existing measurements, presentation and disclosure requirements for long-duration contracts issued by insurance entities. The amendments in this guidance requires an entity to (1) review and update assumptions used to measure cash flows at least annually as well as update the discount rate assumption at each reporting date; (2) measure market risk benefits associated with deposit contracts at fair value; (3) disclose liability rollforwards and information about significant inputs, judgements assumptions, and methods used in measurement. Additionally, it simplifies the amortization of deferred acquisition costs and other balances on a constant level basis over the expected term of the related contracts. In 2019, the FASB delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Upon adoption, the amendments in this guidance should be applied to contracts in-force as of the beginning of the earliest period presented with a cumulative adjustment to beginning retained earnings. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

In June 2016, the FASB issued guidance requiring financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. An allowance for credit losses will be deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected with changes in the allowance recorded in earnings. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than the currently applied U.S. GAAP method

of taking a permanent impairment of the security, which would be limited to the amount by which fair value is below the amortized cost. Certain existing requirements used to evaluate credit losses have been removed. In 2019, the FASB provided transition relief by providing entities with an option to irrevocably elect the fair value option on an instrument-by-instrument basis for eligible instruments upon adoption and delayed the original effective dates. For smaller reporting companies, the amendments in this guidance are now effective for fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The amendments in this guidance should be applied through a cumulative effect adjustment to retained earnings upon adoption as of the beginning of the first reporting period in which the guidance is effective. Management is evaluating the requirements and potential impact that the adoption of this guidance will have on the Company’s consolidated financial statements.

XML

Disposal Groups, Including Discontinued Operations, Disclosure: Disposal Groups, Including Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Disposal Groups, Including Discontinued Operations

The following is a reconciliation, by disposal group, of the carrying amounts of major classes of assets and liabilities included in discontinued operations on the Condensed Consolidated Balance Sheets for the periods indicated (in thousands):

		June 30, 2021
		SSL Sale		Pets Sale		Total
Major classes of assets:
Investments and cash	$	164,346	$	144,688	$	309,034
Goodwill		-		41,716		41,716
Other assets		30,020		35,392		65,412
Assets attributable to discontinued operations	$	194,366	$	221,796	$	416,162
Major classes of liabilities:
Policy benefits and claims	$	56,987	$	12,743	$	69,730
Unearned premiums		26,778		6,080		32,858
Other liabilities		12,500		5,092		17,592
Liabilities attributable to discontinued operations	$	96,265	$	23,915	$	120,180

		December 31, 2020
		SSL Sale		Pets Sale		Total
Major classes of assets included in discontinued operations:
Investments and cash	$	114,916	$	149,844	$	264,760
Goodwill		-		62,414		62,414
Other assets		18,787		29,730		48,517
Assets attributable to discontinued operations	$	133,703	$	241,988	$	375,691
Major classes of liabilities included in discontinued operations:
Policy benefits and claims	$	34,500	$	11,775	$	46,275
Unearned premiums		5,208		5,629		10,837
Other liabilities		9,316		9,511		18,827
Liabilities attributable to discontinued operations	$	49,024	$	26,915	$	75,939

The following is a reconciliation, by disposal group, of the major line items constituting the pretax profit of discontinued operations to the income from discontinued operations, net of tax, as shown on the Condensed Consolidated Statements of Income for the periods indicated (in thousands):

		For the Three Months Ended June 30, 2021
		SSL Sale		Pets Sale		Total
Revenues	$	50,342	$	33,080	$	83,422
Expenses:
Insurance benefits, claims and reserves		24,341		18,442		42,783
Selling, general and administrative expenses		7,394		14,592		21,986
Pretax income of discontinued operations during phase-out		18,607		46		18,653
Pretax provision for loss on disposal		(402)		(410)		(812)
Pretax gain on disposal of discontinued operations		-		74,534		74,534
Total pretax income from discontinued operations		18,205		74,170		92,375
Income tax expense on discontinued operations		3,836		11,734		15,570
Income from discontinued operations, net of tax	$	14,369	$	62,436	$	76,805

		For the Three Months Ended June 30, 2020
		SSL Sale		Pets Sale		Total
Revenues	$	30,442	$	20,407	$	50,849
Expenses:
Insurance benefits, claims and reserves		22,152		11,098		33,250
Selling, general and administrative expenses		6,150		7,855		14,005
Pretax income of discontinued operations during phase-out		2,140		1,454		3,594
Pretax provision for loss on disposal		-		-		-
Pretax gain on disposal of discontinued operations		-		-		-
Total pretax income from discontinued operations		2,140		1,454		3,594
Income tax expense on discontinued operations		822		442		1,264
Income from discontinued operations, net of tax	$	1,318	$	1,012	$	2,330

		For the Six Months Ended June 30, 2021
		SSL Sale		Pets Sale		Total
Revenues	$	93,738	$	61,999	$	155,737
Expenses:
Insurance benefits, claims and reserves		53,865		34,374		88,239
Selling, general and administrative expenses		14,850		26,796		41,646
Pretax income of discontinued operations during phase-out		25,023		829		25,852
Pretax provision for loss on disposal		(402)		(410)		(812)
Pretax gain on disposal of discontinued operations		-		74,534		74,534
Total pretax income from discontinued operations		24,621		74,953		99,574
Income tax expense on discontinued operations		5,151		11,875		17,026
Income from discontinued operations, net of tax	$	19,470	$	63,078	$	82,548

		For the Six Months Ended June 30, 2020
		SSL Sale		Pets Sale		Total
Revenue	$	59,943	$	37,838	$	97,781
Expenses:
Insurance benefits, claims and reserves		40,560		20,459		61,019
Selling, general and administrative expenses		13,004		14,515		27,519
Pretax income of discontinued operations during phase-out		6,379		2,864		9,243
Pretax provision for loss on disposal		-		-		-
Pretax gain on disposal of discontinued operations		-		-		-
Total pretax income from discontinued operations		6,379		2,864		9,243
Income tax expense on discontinued operations		1,689		741		2,430
Income from discontinued operations, net of tax	$	4,690	$	2,123	$	6,813

XML

Earnings Per Share [Text Block]: Earnings Per Share, Schedule Of Net Income Attributable To Parent (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Earnings Per Share, Schedule Of Net Income Attributable To Parent

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Income from continuing operations attributable to IHC	$	(436)	$	(1,835)	$	(612)	$	(1,987)
Income from discontinued operations attributable to IHC	$	76,907	$	2,256	$	82,704	$	6,686
Net income attributable to IHC	$	76,471	$	421	$	82,092	$	4,699

XML

Cash and Cash Equivalents Disclosure: Schedule of Cash and Cash Equivalents (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Schedule of Cash and Cash Equivalents

		June 30,
		2021		2020
Cash and cash equivalents	$	22,834	$	11,655
Restricted cash in other assets		418		985
Cash, cash equivalents and restricted cash in discontinued operations		3,773		11,563
Total cash, cash equivalents and restricted cash including discontinued operations	$	27,025	$	24,203

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Debt Securities, Available-for-sale [Table Text Block] (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Debt Securities, Available-for-sale

		June 30, 2021
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	75,245	$	1,583	$	(779)	$	76,049
CMOs – residential (1)		3,071		118		(5)		3,184
U.S. Government obligations		23,029		273		-		23,302
Agency MBS - residential (2)		35		-		(4)		31
GSEs (3)		2,969		-		(84)		2,885
States and political subdivisions		74,086		1,261		(384)		74,963
Foreign government obligations		3,144		151		-		3,295
Total fixed maturities	$	181,579	$	3,386	$	(1,256)	$	183,709

		December 31, 2020
				GROSS		GROSS
		AMORTIZED		UNREALIZED		UNREALIZED		FAIR
		COST		GAINS		LOSSES		VALUE
FIXED MATURITIES
AVAILABLE-FOR-SALE:
Corporate securities	$	91,802	$	2,174	$	(1,302)	$	92,674
CMOs – residential (1)		3,439		146		(2)		3,583
U.S. Government obligations		23,397		414		-		23,811
Agency MBS - residential (2)		39		-		(5)		34
GSEs (3)		3,055		-		(81)		2,974
States and political subdivisions		82,910		1,768		(452)		84,226
Foreign government obligations		3,211		206		-		3,417
Total fixed maturities	$	207,853	$	4,708	$	(1,842)	$	210,719

(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. 

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Investments Classified by Contractual Maturity Date (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Investments Classified by Contractual Maturity Date

		AMORTIZED		FAIR
		COST		VALUE
Due in one year or less	$	36,481	$	36,938
Due after one year through five years		87,377		89,128
Due after five years through ten years		20,124		20,292
Due after ten years		31,522		31,252
Fixed maturities with no single maturity date		6,075		6,099
	$	181,579	$	183,709

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value

		June 30, 2021
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	19,962	$	740	$	4,503	$	39	$	24,465	$	779
CMOs-residential		707		5		-		-		707		5
Agency MBS - residential		31		4		-		-		31		4
GSEs		-		-		2,886		84		2,886		84
States and political subdivisions		10,319		76		8,813		308		19,132		384
Fixed maturities in an
unrealized loss position	$	31,019	$	825	$	16,202	$	431	$	47,221	$	1,256
Number of fixed maturities in an
unrealized loss position		9				14				23

		December 31, 2020
		Less than 12 Months				12 Months or Longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	23,591	$	458	$	8,845	$	844	$	32,436	$	1,302
CMOs-residential		748		2		-		-		748		2
Agency MBS - residential		34		5		-		-		34		5
GSEs		-		-		2,974		81		2,974		81
States and political subdivisions		16,983		150		6,108		302		23,091		452
Fixed maturities in an
unrealized loss position	$	41,356	$	615	$	17,927	$	1,227	$	59,283	$	1,842
Number of fixed maturities in an
unrealized loss position		20				13				33

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Realized Gain (Loss) on Investments (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Realized Gain (Loss) on Investments

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Realized gains (losses):
Fixed maturities available-for-sale	$	(126)	$	50	$	46	$	284
Equity securities		-		-		292		-
Total realized gains (losses) on debt and equity securities		(126)		50		338		284
Unrealized gains (losses) on equity securities		-		214		(247)		(184)
Gains (losses) on debt and equity securities		(126)		264		91		100
Gains (losses) on other investments		-		10		-		17
Net investment gains	$	(126)	$	274	$	91	$	117

XML

Fair Value Disclosures [Text Block]: Fair Value, Assets Measured on Recurring Basis (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Fair Value, Assets Measured on Recurring Basis

		June 30, 2021
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	76,049	$	-	$	76,049
CMOs - residential		-		3,184		-		3,184
US Government obligations		-		23,302		-		23,302
Agency MBS - residential		-		31		-		31
GSEs		-		2,885		-		2,885
States and political subdivisions		-		73,949		1,014		74,963
Foreign government obligations		-		3,295		-		3,295
Total fixed maturities		-		182,695		1,014		183,709
Total Financial Assets	$	-	$	182,695	$	1,014	$	183,709

		December 31, 2020
		Level 1		Level 2		Level 3		Total
FINANCIAL ASSETS:
Fixed maturities available-for-sale:
Corporate securities	$	-	$	92,674	$	-	$	92,674
CMOs - residential		-		3,583		-		3,583
US Government obligations		-		23,811		-		23,811
Agency MBS - residential		-		34		-		34
GSEs		-		2,974		-		2,974
States and political subdivisions		-		83,130		1,096		84,226
Foreign government obligations		-		3,417		-		3,417
Total fixed maturities		-		209,623		1,096		210,719
Equity securities:
Common stocks		1,753		-		-		1,753
Total equity securities		1,753		-		-		1,753
Total Financial Assets	$	1,753	$	209,623	$	1,096	$	212,472

XML

Fair Value Disclosures [Text Block]: Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

		Three Months Ended June 30,
		2021				2020
		States and		Total		States and		Total
		Political		Level 3		Political		Level 3
		Subdivisions		Assets		Subdivisions		Assets
Beginning balance	$	1,055	$	1,055	$	1,214	$	1,214
Increases (decreases) recognized in earnings:
Net investment gains		-		-		-		-
Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		(4)		(4)		(5)		(5)
Repayments and amortization of
fixed maturities		(37)		(37)		(34)		(34)
Balance at end of period	$	1,014	$	1,014	$	1,175	$	1,175

		Six Months Ended June 30,
		2021				2020
		States and		Total		States and		Total
		Political		Level 3		Political		Level 3
		Subdivisions		Assets		Subdivisions		Assets
Beginning balance	$	1,096	$	1,096	$	1,251	$	1,251
Increases (decreases) recognized in earnings:
Net investment gains		-		-		-		-
Gains (losses) included in other
comprehensive income (loss):
Net unrealized gains (losses)		(8)		(8)		(9)		(9)
Repayments and amortization of
fixed maturities		(74)		(74)		(67)		(67)
Balance at end of period	$	1,014	$	1,014	$	1,175	$	1,175

XML

Fair Value Disclosures [Text Block]: Fair Value, by Balance Sheet Grouping (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Fair Value, by Balance Sheet Grouping

		June 30, 2021						December 31, 2020
		Level 1		Level 2				Level 1		Level 2
		Fair		Fair		Carrying		Fair		Fair		Carrying
		Value		Value		Value		Value		Value		Value
FINANCIAL ASSETS:
Short-term investments	$	1,550	$	-	$	1,550	$	1,568	$	-	$	1,568
Securities purchased under
agreements to resell		70,323		-		70,323		33,038		-		33,038
FINANCIAL LIABILITIES:
Funds on deposit	$	-	$	142,155	$	142,155	$	-	$	141,376	$	141,376
Other policyholders’ funds		-		11,988		11,988		-		12,001		12,001

XML

Business Combination Disclosure: Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Tables)

6 Months Ended

Jun. 30, 2021

Abacus

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

Other assets	$	350
Total identifiable assets		350
Other liabilities		575
Total liabilities		575
Net identifiable assets (liabilities) acquired	$	(225)

Torchlight Technology Group Acquisition Member

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

Cash	$	333
Intangible assets		2,700
Other assets		2,132
Total identifiable assets		5,165
Other liabilities		1,227
Total liabilities		1,227
Net identifiable assets acquired	$	3,938

XML

Goodwill and Intangible Assets Disclosure [Text Block]: Schedule of Finite-Lived Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Schedule of Finite-Lived Intangible Assets

		June 30, 2021				December 31, 2020
		Gross				Gross
		Carrying		Accumulated		Carrying		Accumulated
		Amount		Amortization		Amount		Amortization
Finite-lived Intangible Assets:
Agent and broker relationships	$	6,583	$	4,599	$	7,583	$	5,385
Software systems		1,500		294		1,500		167
Total finite-lived	$	8,083	$	4,893	$	9,083	$	5,552

XML

Goodwill and Intangible Assets Disclosure [Text Block]: Schedule of Indefinite-Lived Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Schedule of Indefinite-Lived Intangible Assets

		June 30,		December 31,
		2021		2020
Indefinite-lived Intangible Assets:
Insurance licenses	$	477	$	477
Total indefinite-lived	$	477	$	477

XML

Revenue from Contract with Customer: Disaggregation of Revenue (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Disaggregation of Revenue

		Three Months Ended		Six Months Ended
		June 30,		June 30,
		2021	2020	2021		2020
Commissions	$	1,416	1,932	4,297	$	3,672
Administrative Fees		80	581	177		1,069
Marketing Fees		254	292	559		643
Enrollment Platform Fees		529	455	1,029		973
Lead and Referral Fees		2,633	588	4,945		854
Payment Plan, Application and Other Fees		32	59	72		130
Total Fee Income	$	4,944	3,907	11,079	$	7,341

XML

Revenue from Contract with Customer: Contract with Customer, Contract Asset, Contract Liability, and Receivable (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Contract with Customer, Contract Asset, Contract Liability, and Receivable

		Six Months Ended
		June 30, 2021
Beginning Balance	$	7,760
Commissions recognized during the period		4,708
Commission adjustments related to prior periods		(418)
Cash receipts		(3,251)
Ending Balance	$	8,799

XML

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]: Schedule of Liability for Unpaid Claims and Claims Adjustment Expense (Tables)

6 Months Ended

Jun. 30, 2021

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense

		For the Six Months Ended June 30, 2021
		Specialty		Group		All Other
		Health		Disability		Lines		Total
Balance at beginning of year	$	31,680	$	80,976	$	20,301	$	132,957
Less: reinsurance recoverable		1,776		22,472		11,878		36,126
Net balance at beginning of year		29,904		58,504		8,423		96,831
Amount incurred, related to:
Current year		16,631		20,031		11,947		48,609
Prior years		(4,634)		(4,033)		(1,132)		(9,799)
Total incurred		11,997		15,998		10,815		38,810
Amount paid, related to:
Current year		4,461		3,922		6,885		15,268
Prior years		12,080		11,488		3,667		27,235
Total paid		16,541		15,410		10,552		42,503
Net balance at end of period		25,360		59,092		8,686		93,138
Plus:  reinsurance recoverable		1,161		22,492		11,024		34,677
Balance at end of period	$	26,521	$	81,584	$	19,710	$	127,815

		For the Six Months Ended June 30, 2020
		Specialty		Group		All Other
		Health		Disability		Lines		Total
Balance at beginning of year	$	35,530	$	80,079	$	19,874	$	135,483
Less: reinsurance recoverable		1,717		23,322		11,954		36,993
Net balance at beginning of year		33,813		56,757		7,920		98,490
Amount incurred, related to:
Current year		24,522		19,093		11,182		54,797
Prior years		(1,972)		(1,553)		(3,201)		(6,726)
Total incurred		22,550		17,540		7,981		48,071
Amount paid, related to:
Current year		7,064		4,010		4,979		16,053
Prior years		17,530		12,125		2,155		31,810
Total paid		24,594		16,135		7,134		47,863
Net balance at end of period		31,769		58,162		8,767		98,698
Plus:  reinsurance recoverable		1,802		22,463		11,074		35,339
Balance at end of period	$	33,571	$	80,625	$	19,841	$	134,037

Specialty Health Segment Member | Health Insurance Product Line

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense

		Specialty Health Segment
		Health Insurance Claims
		Six Months Ended
		June 30,
		2021		2020
Balance at beginning of year	$	28,295	$	31,259
Less: reinsurance recoverable		1,766		1,113
Net balance at beginning of year		26,529		30,146
Amount incurred, related to:
Current year		15,818		23,627
Prior years		(3,658)		(1,184)
Total incurred		12,160		22,443
Amount paid, related to:
Current year		4,319		8,260
Prior years		11,992		16,382
Total paid		16,311		24,642
Net balance at end of period		22,378		27,947
Plus:  reinsurance recoverable		1,158		1,406
Balance at end of period	$	23,536	$	29,353

XML

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]: Schedule Of Prior Year Claims And Claims Adjustment Expense Disclosure (Tables)

6 Months Ended

Jun. 30, 2021

Specialty Health Segment, All Product Lines

Schedule Of Prior Year Claims And Claims Adjustment Expense Disclosure

		Six Months Ended
		June 30,
Specialty Health segment:		2021		2020
Short-term Medical (“STM”)	$	1,676	$	286
Occupational Accident		963		798
Fixed Indemnity Limited Benefit		862		(736)
Limited Medical		197		241
Critical Illness		196		397
Group Gap		356		513
All other specialty health lines		384		473
Total Specialty Health segment	$	4,634	$	1,972

XML

Stockholders' Equity Note Disclosure [Text Block]: Schedule of Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Schedule of Accumulated Other Comprehensive Income (Loss)

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Beginning balance	$	2,268	$	1,101	$	4,197	$	1,212
Other comprehensive income (loss):
Other comprehensive income (loss) before reclassifications		784		1,810		(1,013)		2,544
Amounts reclassified from accumulated OCI		168		(57)		36		(902)
Net other comprehensive income (loss)		952		1,753		(977)		1,642
Ending balance	$	3,220	$	2,854	$	3,220	$	2,854

XML

Stockholders' Equity Note Disclosure [Text Block]: Reclassification out of Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Reclassification out of Accumulated Other Comprehensive Income

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Unrealized gains (losses) on available-for-sale securities
reclassified during the period to the following income
statement line items:
Net investment gains (losses)	$	(125)	$	47	$	47	$	284
Income (loss) from continuing operations before income taxes		(125)		47		47		284
Income tax expense (benefit)		(28)		10		9		60
Income (loss) from continuing operations, net of tax		(97)		37		38		224
Total pretax income (loss) from discontinued operations		(90)		25		(94)		858
Income tax expense (benefit) on discontinued operations		(19)		5		(20)		180
Income from discontinued operations, net of tax		(71)		20		(74)		678
Net income (loss)	$	(168)	$	57	$	(36)	$	902

XML

Segment Reporting Disclosure [Text Block]: Schedule of Segment Reporting Information, by Segment (Tables)

6 Months Ended

Jun. 30, 2021

Tables/Schedules

Schedule of Segment Reporting Information, by Segment

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2021		2020		2021		2020
Revenues:
Specialty Health	$	23,862	$	30,718	$	50,133	$	62,924
Group disability and life		25,143		24,076		50,264		48,161
Individual life, annuities and other (A)		183		490		392		808
Corporate		268		897		791		1,512
		49,456		56,181		101,580		113,405
Net investment gains (losses)		(126)		274		91		117
Total revenues	$	49,330	$	56,455	$	101,671	$	113,522
Income before income taxes
Specialty Health (C)	$	(841)	$	(5,329)	$	(2,732)	$	(5,935)
Group disability and life		3,770		4,353		6,900		6,190
Individual life, annuities and other  (A) (B)		(263)		(140)		(247)		(283)
Corporate		(3,244)		(2,016)		(5,056)		(3,229)
		(578)		(3,132)		(1,135)		(3,257)
Net investment gains (losses)		(126)		274		91		117
Loss from continuing operations before income taxes	$	(704)	$	(2,858)	$	(1,044)	$	(3,140)

(A)Substantially all of the business in the segment is coinsured. Activity in this segment primarily reflects income or expenses related to the coinsurance and the run-off of any remaining blocks that were not coinsured.  

(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 $153,000 and $176,000, for the three months ended June 30, 2021 and 2020, respectively, and $310,000 and $364,000, for the six months ended June 30, 2021 and 2020, respectively. 

(C)In both 2021 and 2020, significant costs associated with hiring, training and licensing a significant number of new agents, as well as costs for system development in our marketing and administrative companies. 

XML

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] (Details)	Jun. 30, 2021
GeneveAffiliatedEntityMember
EntityCommonStockOutstandingOwnershipPercent	62.00%

XML

Disposal Groups, Including Discontinued Operations, Disclosure (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Jul. 29, 2021	May 17, 2021	Apr. 14, 2021	Dec. 31, 2020
Equity Method Investments	$ 33,762	$ 33,762		$ 33,762					$ 0
Discontinued Operation, Tax Effect of Discontinued Operation		15,570	$ 1,264	17,026	$ 2,430
AMICSubsidiariesMember
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount				8,281
Operating Loss Carryforwards									$ 46,116
Discontinued Operations
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, before Income Tax		18,653	3,594	25,852	9,243
Cash Provided by (Used in) Operating Activities, Discontinued Operations				45,917	26,813
Cash Provided by (Used in) Investing Activities, Discontinued Operations				(88,501)	(29,753)
Discontinued Operation, Tax Effect of Discontinued Operation		15,570	1,264	17,026	2,430
Discontinued Operation, Tax Effect of Gain (Loss) from Disposal of Discontinued Operation				11,841
SSL Sale Member | Discontinued Operations
Disposal Group Including Discontinued Operation, Transaction Price								$ 180,000
Sale Transaction, Statutory Capital And Surplus Target								$ 53,000
Statutory Accounting Practices, Statutory Capital and Surplus, Balance	$ 82,091	82,091		82,091
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, before Income Tax		18,607	2,140	25,023	6,379
Discontinued Operation, Tax Effect of Discontinued Operation		3,836	822	5,151	1,689
SSL Sale Member | Discontinued Operations | Subsequent Event
Sale Transaction, Statutory Capital And Surplus Target						$ 57,000
Pets Sale Member | Discontinued Operations
Discontinued Operation, Equity Method Investment Retained after Disposal, Ownership Interest Prior to Disposal	70.00%
Discontinued Operation, Equity Method Investment Retained after Disposal, Ownership Interest after Disposal	30.00%
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, before Income Tax		46	1,454	829	2,864
Discontinued Operation, Tax Effect of Discontinued Operation		11,734	$ 442	11,875	$ 741
Pets Sale, PetPartners Transaction | AMICSubsidiariesMember
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount				8,281
Pets Sale, PetPartners Transaction | Discontinued Operations
Disposal Group Including Discontinued Operation, Transaction Price							$ 77,000
Disposal Group, Including Discontinued Operation, Consideration	$ 78,779	78,779		78,779
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax				62,693
Disposal Of Discontinued Operation, Transaction Costs				6,070
Loss Contingency Accrual	6,800	6,800		6,800
Pets Sale, PetPartners Transaction | Discontinued Operations | Iguana Capital, Inc Member
Equity Method Investments	$ 33,762	$ 33,762		$ 33,762
Pets Sale, IAHC Transaction | Discontinued Operations
Disposal Group Including Discontinued Operation, Transaction Price							$ 190,400

XML

Disposal Groups, Including Discontinued Operations, Disclosure: Disposal Groups, Including Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020	Dec. 31, 2019
Disposal Group, Including Discontinued Operation, Assets
Disposal Group, Including Discontinued Operation, Assets	$ 416,162		$ 416,162		$ 375,691
Disposal Group, Including Discontinued Operation, Liabilities
Disposal Group, Including Discontinued Operation, Liabilities	120,180		120,180		$ 75,939
Discontinued Operation, Provision for Loss (Gain) on Disposal, before Income Tax			812	$ 0
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax			(74,534)	0
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	92,375	$ 3,594	99,574	9,243
Discontinued Operation, Tax Effect of Discontinued Operation	15,570	1,264	17,026	2,430
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	76,805	2,330	82,548	6,813
Discontinued Operations
Disposal Group, Including Discontinued Operation, Assets
Disposal Group, Including Discontinued Operation, Cash And Invesments	309,034		309,034			$ 264,760
Disposal Group, Including Discontinued Operation, Goodwill, Noncurrent	41,716		41,716			62,414
Disposal Group, Including Discontinued Operation, Other Assets	65,412		65,412			48,517
Disposal Group, Including Discontinued Operation, Assets	416,162		416,162			375,691
Disposal Group, Including Discontinued Operation, Liabilities
Disposal Group, Including Discontinued Operation, Policy Benefits And Claims	69,730		69,730			46,275
Disposal Group, Including Discontinued Operation,Unearned Premiums	32,858		32,858			10,837
Disposal Group, Including Discontinued Operation, Other Liabilities	17,592		17,592			18,827
Disposal Group, Including Discontinued Operation, Liabilities	120,180		120,180			75,939
Disposal Group, Including Discontinued Operation, Revenue	83,422	50,849	155,737	97,781
Disposal Group, Including Discontinued Operation,Insurance Benefits, Claims And Reserves	42,783	33,250	88,239	61,019
Disposal Group, Including Discontinued Operation, General and Administrative Expense	21,986	14,005	41,646	27,519
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, before Income Tax	18,653	3,594	25,852	9,243
Discontinued Operation, Provision for Loss (Gain) on Disposal, before Income Tax	812	0	812	0
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax	74,534	0	74,534	0
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	92,375	3,594	99,574	9,243
Discontinued Operation, Tax Effect of Discontinued Operation	15,570	1,264	17,026	2,430
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	76,805	2,330	82,548	6,813
SSL Sale Member | Discontinued Operations
Disposal Group, Including Discontinued Operation, Assets
Disposal Group, Including Discontinued Operation, Cash And Invesments	164,346		164,346			114,916
Disposal Group, Including Discontinued Operation, Goodwill, Noncurrent	0		0			0
Disposal Group, Including Discontinued Operation, Other Assets	30,020		30,020			18,787
Disposal Group, Including Discontinued Operation, Assets	194,366		194,366			133,703
Disposal Group, Including Discontinued Operation, Liabilities
Disposal Group, Including Discontinued Operation, Policy Benefits And Claims	56,987		56,987			34,500
Disposal Group, Including Discontinued Operation,Unearned Premiums	26,778		26,778			5,208
Disposal Group, Including Discontinued Operation, Other Liabilities	12,500		12,500			9,316
Disposal Group, Including Discontinued Operation, Liabilities	96,265		96,265			49,024
Disposal Group, Including Discontinued Operation, Revenue	50,342	30,442	93,738	59,943
Disposal Group, Including Discontinued Operation,Insurance Benefits, Claims And Reserves	24,341	22,152	53,865	40,560
Disposal Group, Including Discontinued Operation, General and Administrative Expense	7,394	6,150	14,850	13,004
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, before Income Tax	18,607	2,140	25,023	6,379
Discontinued Operation, Provision for Loss (Gain) on Disposal, before Income Tax	402	0	402	0
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax	0	0	0	0
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	18,205	2,140	24,621	6,379
Discontinued Operation, Tax Effect of Discontinued Operation	3,836	822	5,151	1,689
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	14,369	1,318	19,470	4,690
Pets Sale Member | Discontinued Operations
Disposal Group, Including Discontinued Operation, Assets
Disposal Group, Including Discontinued Operation, Cash And Invesments	144,688		144,688			149,844
Disposal Group, Including Discontinued Operation, Goodwill, Noncurrent	41,716		41,716			62,414
Disposal Group, Including Discontinued Operation, Other Assets	35,392		35,392			29,730
Disposal Group, Including Discontinued Operation, Assets	221,796		221,796			241,988
Disposal Group, Including Discontinued Operation, Liabilities
Disposal Group, Including Discontinued Operation, Policy Benefits And Claims	12,743		12,743			11,775
Disposal Group, Including Discontinued Operation,Unearned Premiums	6,080		6,080			5,629
Disposal Group, Including Discontinued Operation, Other Liabilities	5,092		5,092			9,511
Disposal Group, Including Discontinued Operation, Liabilities	23,915		23,915			$ 26,915
Disposal Group, Including Discontinued Operation, Revenue	33,080	20,407	61,999	37,838
Disposal Group, Including Discontinued Operation,Insurance Benefits, Claims And Reserves	18,442	11,098	34,374	20,459
Disposal Group, Including Discontinued Operation, General and Administrative Expense	14,592	7,855	26,796	14,515
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, before Income Tax	46	1,454	829	2,864
Discontinued Operation, Provision for Loss (Gain) on Disposal, before Income Tax	410	0	410	0
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax	74,534	0	74,534	0
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	74,170	1,454	74,953	2,864
Discontinued Operation, Tax Effect of Discontinued Operation	11,734	442	11,875	741
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	$ 62,436	$ 1,012	$ 63,078	$ 2,123

XML

Earnings Per Share [Text Block]: Earnings Per Share, Schedule Of Net Income Attributable To Parent (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Details
Income from continuing operations attributable to IHC	$ (436)	$ (1,835)	$ (612)	$ (1,987)
Income from discontinued operations attributable to IHC	76,907	2,256	82,704	6,686
Net Income (Loss) Attributable to Parent	$ 76,471	$ 421	$ 82,092	$ 4,699

XML

Cash and Cash Equivalents Disclosure: Schedule of Cash and Cash Equivalents (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020	Jun. 30, 2020	Dec. 31, 2019
Details
Cash and Cash Equivalents, at Carrying Value	$ 22,834	$ 31,923	$ 11,655
Restricted Cash	418		985
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Disposal Group, Including Discontinued Operations	3,773		11,563
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Including Disposal Group and Discontinued Operations	$ 27,025	$ 74,793	$ 24,203	$ 24,631

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Debt Securities, Available-for-sale [Table Text Block] (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Debt Securities, Available-for-sale, Amortized Cost	$ 181,579	$ 207,853
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	3,386	4,708
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	1,256	1,842
Debt Securities, Available-for-sale	183,709	210,719
Corporate Debt Securities
Debt Securities, Available-for-sale, Amortized Cost	75,245	91,802
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	1,583	2,174
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	779	1,302
Debt Securities, Available-for-sale	76,049	92,674
Collateralized Mortgage Backed Securities
Debt Securities, Available-for-sale, Amortized Cost	3,071	3,439
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	118	146
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	5	2
Debt Securities, Available-for-sale	3,184	3,583
US Treasury Securities
Debt Securities, Available-for-sale, Amortized Cost	23,029	23,397
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	273	414
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Debt Securities, Available-for-sale	23,302	23,811
US Government Agencies Debt Securities
Debt Securities, Available-for-sale, Amortized Cost	35	39
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	4	5
Debt Securities, Available-for-sale	31	34
US Government-sponsored Enterprises Debt Securities
Debt Securities, Available-for-sale, Amortized Cost	2,969	3,055
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	84	81
Debt Securities, Available-for-sale	2,885	2,974
US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale, Amortized Cost	74,086	82,910
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	1,261	1,768
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	384	452
Debt Securities, Available-for-sale	74,963	84,226
Debt Security, Government, Non-US
Debt Securities, Available-for-sale, Amortized Cost	3,144	3,211
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	151	206
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Debt Securities, Available-for-sale	$ 3,295	$ 3,417

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Investments Classified by Contractual Maturity Date (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Details
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Rolling within One Year, Amortized Cost	$ 36,481
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Rolling within One Year, Fair Value	36,938
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Rolling after One Through Five Years, Amortized Cost	87,377
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Rolling after One Through Five Years, Fair Value	89,128
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Rolling after Five Through Ten Years, Amortized Cost	20,124
Debt Securities, Available-for-sale, Maturity, Allocated and Single Maturity Date, Rolling after Five Through Ten Years, Fair Value	20,292
Debt Securities, Available-for-Sale, Amortized Cost, Maturity, Allocated and Single Maturity Date, after Year 10	31,522
Debt Securities, Available-for-Sale, Fair Value, Maturity, Allocated and Single Maturity Date, after Year 10	31,252
Debt Securities, Available-for-sale, Maturity, without Single Maturity Date, Amortized Cost	6,075
Debt Securities, Available-for-sale, Maturity, without Single Maturity Date, Fair Value	6,099
Debt Securities, Available-for-sale, Amortized Cost	181,579	$ 207,853
Debt Securities, Available-for-sale	$ 183,709	$ 210,719

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value (Details) $ in Thousands	Jun. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	$ 31,019	$ 41,356
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	825	615
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	16,202	17,927
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	431	1,227
Debt Securities, Available-for-sale, Unrealized Loss Position	47,221	59,283
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss	$ 1,256	$ 1,842
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Number of Positions	9	20
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Number of Positions	14	13
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	23	33
Corporate Debt Securities
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	$ 19,962	$ 23,591
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	740	458
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	4,503	8,845
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	39	844
Debt Securities, Available-for-sale, Unrealized Loss Position	24,465	32,436
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss	779	1,302
Collateralized Mortgage Backed Securities
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	707	748
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	5	2
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	707	748
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss	5	2
US Government Agencies Debt Securities
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	31	34
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	4	5
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	31	34
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss	4	5
US Government-sponsored Enterprises Debt Securities
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	2,886	2,974
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	84	81
Debt Securities, Available-for-sale, Unrealized Loss Position	2,886	2,974
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss	84	81
US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	10,319	16,983
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	76	150
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	8,813	6,108
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	308	302
Debt Securities, Available-for-sale, Unrealized Loss Position	19,132	23,091
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss	$ 384	$ 452

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]: Realized Gain (Loss) on Investments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Details
Debt Securities, Available-for-sale, Realized Gain (Loss), Excluding Other-than-temporary Impairment	$ (126)	$ 50	$ 46	$ 284
Equity Securities, FV-NI, Realized Gain (Loss)	0	0	292	0
Debt and Equity Securities, Realized Gain (Loss), Excluding Other-than-temporary Impairment	(126)	50	338	284
Equity Securities, FV-NI, Unrealized Gain (Loss)	0	214	(247)	(184)
Debt and Equity Securities, Gain (Loss)	(126)	264	91	100
Gain (Loss) on Sale of Other Investments	0	10	0	17
Gain (Loss) on Investments	$ (126)	$ 274	$ 91	$ 117

XML

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Details
Available-for-sale Securities, Gross Realized Gains	$ 61	$ 97	$ 254	$ 346
Available-for-sale Securities, Gross Realized Losses	$ 187	$ 47	206	62
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities			$ 0	$ 0

XML

Fair Value Disclosures [Text Block]: Fair Value, Assets Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Debt Securities, Available-for-sale	$ 183,709	$ 210,719
Equity Securities, FV-NI, Current	0	1,753
Corporate Debt Securities
Debt Securities, Available-for-sale	76,049	92,674
Collateralized Mortgage Backed Securities
Debt Securities, Available-for-sale	3,184	3,583
US Treasury Securities
Debt Securities, Available-for-sale	23,302	23,811
US Government Agencies Debt Securities
Debt Securities, Available-for-sale	31	34
US Government-sponsored Enterprises Debt Securities
Debt Securities, Available-for-sale	2,885	2,974
US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale	74,963	84,226
Debt Security, Government, Non-US
Debt Securities, Available-for-sale	3,295	3,417
Fair Value, Recurring
Debt Securities, Available-for-sale	183,709	210,719
Assets, Fair Value Disclosure	183,709	212,472
Equity Securities, FV-NI, Current		1,753
Fair Value, Recurring | Corporate Debt Securities
Debt Securities, Available-for-sale	76,049	92,674
Fair Value, Recurring | Collateralized Mortgage Backed Securities
Debt Securities, Available-for-sale	3,184	3,583
Fair Value, Recurring | US Treasury Securities
Debt Securities, Available-for-sale	23,302	23,811
Fair Value, Recurring | US Government Agencies Debt Securities
Debt Securities, Available-for-sale	31	34
Fair Value, Recurring | US Government-sponsored Enterprises Debt Securities
Debt Securities, Available-for-sale	2,885	2,974
Fair Value, Recurring | US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale	74,963	84,226
Fair Value, Recurring | Debt Security, Government, Non-US
Debt Securities, Available-for-sale	3,295	3,417
Fair Value, Recurring | COMMON STOCK, AMOUNT
Equity Securities, FV-NI, Current		1,753
Fair Value, Inputs, Level 1 | Fair Value, Recurring
Debt Securities, Available-for-sale	0	0
Assets, Fair Value Disclosure	0	1,753
Equity Securities, FV-NI, Current		1,753
Fair Value, Inputs, Level 1 | Fair Value, Recurring | Corporate Debt Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 1 | Fair Value, Recurring | Collateralized Mortgage Backed Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 1 | Fair Value, Recurring | US Treasury Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 1 | Fair Value, Recurring | US Government Agencies Debt Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 1 | Fair Value, Recurring | US Government-sponsored Enterprises Debt Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 1 | Fair Value, Recurring | US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 1 | Fair Value, Recurring | Debt Security, Government, Non-US
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 1 | Fair Value, Recurring | COMMON STOCK, AMOUNT
Equity Securities, FV-NI, Current		1,753
Fair Value, Inputs, Level 2 | Fair Value, Recurring
Debt Securities, Available-for-sale	182,695	209,623
Assets, Fair Value Disclosure	182,695	209,623
Equity Securities, FV-NI, Current		0
Fair Value, Inputs, Level 2 | Fair Value, Recurring | Corporate Debt Securities
Debt Securities, Available-for-sale	76,049	92,674
Fair Value, Inputs, Level 2 | Fair Value, Recurring | Collateralized Mortgage Backed Securities
Debt Securities, Available-for-sale	3,184	3,583
Fair Value, Inputs, Level 2 | Fair Value, Recurring | US Treasury Securities
Debt Securities, Available-for-sale	23,302	23,811
Fair Value, Inputs, Level 2 | Fair Value, Recurring | US Government Agencies Debt Securities
Debt Securities, Available-for-sale	31	34
Fair Value, Inputs, Level 2 | Fair Value, Recurring | US Government-sponsored Enterprises Debt Securities
Debt Securities, Available-for-sale	2,885	2,974
Fair Value, Inputs, Level 2 | Fair Value, Recurring | US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale	73,949	83,130
Fair Value, Inputs, Level 2 | Fair Value, Recurring | Debt Security, Government, Non-US
Debt Securities, Available-for-sale	3,295	3,417
Fair Value, Inputs, Level 2 | Fair Value, Recurring | COMMON STOCK, AMOUNT
Equity Securities, FV-NI, Current		0
Fair Value, Inputs, Level 3 | Fair Value, Recurring
Debt Securities, Available-for-sale	1,014	1,096
Assets, Fair Value Disclosure	1,014	1,096
Equity Securities, FV-NI, Current		0
Fair Value, Inputs, Level 3 | Fair Value, Recurring | Corporate Debt Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 3 | Fair Value, Recurring | Collateralized Mortgage Backed Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 3 | Fair Value, Recurring | US Treasury Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 3 | Fair Value, Recurring | US Government Agencies Debt Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 3 | Fair Value, Recurring | US Government-sponsored Enterprises Debt Securities
Debt Securities, Available-for-sale	0	0
Fair Value, Inputs, Level 3 | Fair Value, Recurring | US States and Political Subdivisions Debt Securities
Debt Securities, Available-for-sale	1,014	1,096
Fair Value, Inputs, Level 3 | Fair Value, Recurring | Debt Security, Government, Non-US
Debt Securities, Available-for-sale	$ 0	0
Fair Value, Inputs, Level 3 | Fair Value, Recurring | COMMON STOCK, AMOUNT
Equity Securities, FV-NI, Current		$ 0

XML

Fair Value Disclosures [Text Block]: Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Beginning Balance	$ 1,055	$ 1,214	$ 1,096	$ 1,251
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Other Comprehensive Income (Loss)	(4)	(5)	(8)	(9)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	(37)	(34)	(74)	(67)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Ending Balance	1,014	1,175	1,014	1,175
Gain (Loss) on Investments
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Earnings	0	0	0	0
US States and Political Subdivisions Debt Securities
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Beginning Balance	1,055	1,214	1,096	1,251
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Other Comprehensive Income (Loss)	(4)	(5)	(8)	(9)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	(37)	(34)	(74)	(67)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value, Ending Balance	1,014	1,175	1,014	1,175
US States and Political Subdivisions Debt Securities | Gain (Loss) on Investments
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Earnings	$ 0	$ 0	$ 0	$ 0

XML

Fair Value Disclosures [Text Block] (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Details
Fair Value, Asset, Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	$ (4)	$ (8)

XML

Fair Value Disclosures [Text Block]: Fair Value, by Balance Sheet Grouping (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Short-term Investments	$ 1,550	$ 1,568
Securities Purchased under Agreements to Resell	70,323	33,038
Deposit Contracts, Liabilities	142,155	141,376
Policyholder Account Balance	11,988	12,001
Estimate of Fair Value Measurement | Fair Value, Inputs, Level 1
Short-term Investments	1,550	1,568
Securities Purchased under Agreements to Resell	70,323	33,038
Deposit Contracts, Liabilities	0	0
Policyholder Account Balance	0	0
Estimate of Fair Value Measurement | Fair Value, Inputs, Level 2
Short-term Investments	0	0
Securities Purchased under Agreements to Resell	0	0
Deposit Contracts, Liabilities	142,155	141,376
Policyholder Account Balance	11,988	12,001
Reported Value Measurement
Short-term Investments	1,550	1,568
Securities Purchased under Agreements to Resell	70,323	33,038
Deposit Contracts, Liabilities	142,155	141,376
Policyholder Account Balance	$ 11,988	$ 12,001

XML

Investments in and Advances to Affiliates, Schedule of Investments [Text Block] (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Income (Loss) from Equity Method Investments	$ 4	$ (356)	$ 64	$ (28)
Ebix Health Exchange Member | Selling, General and Administrative Expenses
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party	361	$ 423	762	899
Lead Generation Company Member | Selling, General and Administrative Expenses
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party				$ 1,507
Other Investments
Variable Interest Entity, Reporting Entity Involvement, Maximum Loss Exposure, Amount	2,022		2,022
Accounts Payable and Accrued Liabilities | Ebix Health Exchange Member
Due to Related Parties	$ 94		$ 94		$ 163

XML

Business Combination Disclosure (Details) - USD ($) $ in Thousands			1 Months Ended		3 Months Ended		6 Months Ended
	Apr. 30, 2020	Jan. 31, 2020	Apr. 30, 2020	Jan. 31, 2020	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues					$ 49,330	$ 56,455	$ 101,671	$ 113,522
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest					$ 76,368	$ 538	$ 81,934	4,860
Abacus
Business Acquisition, Percentage of Voting Interests Acquired		56.00%		56.00%
Business Combination, Consideration Transferred		$ 2,599
Business Combination, Step Acquisition, Equity Interest in Acquiree, Fair Value				$ 1,838
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Loss				163
Goodwill, Acquired During Period				4,662
Business Acquisition, Goodwill, Expected Tax Deductible Amount		2,725		2,725
Payments to Acquire Businesses, Gross				2,599
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net		$ (225)		$ (225)
Torchlight Technology Group Acquisition Member
Business Acquisition, Percentage of Voting Interests Acquired	77.00%		77.00%
Business Combination, Consideration Transferred			$ 11,628
Business Combination, Step Acquisition, Equity Interest in Acquiree, Fair Value			3,432
Goodwill, Acquired During Period			11,122
Business Acquisition, Goodwill, Expected Tax Deductible Amount	$ 7,976		7,976
Payments to Acquire Businesses, Gross	11,443
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net	3,938		3,938
Business Combination, Consideration Transferred, Liabilities Incurred	$ 185
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Gain			519
Finite-lived Intangible Assets Acquired			$ 2,700
Revenues								1,828
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest								$ (564)

XML

Business Combination Disclosure: Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Jan. 31, 2020
Abacus
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Other		$ 350
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets		350
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Other		575
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities		575
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net		$ (225)
Torchlight Technology Group Acquisition Member
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Other	$ 2,132
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets	5,165
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities	1,227
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net	3,938
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Cash and Equivalents	333
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	2,700
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Other	$ 1,227

XML

Goodwill and Intangible Assets Disclosure [Text Block] (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Goodwill	$ 12,486		$ 12,486		$ 12,486
Intangible Assets, Net (Excluding Goodwill)	3,667		3,667		4,008
Amortization of Intangible Assets	179	$ 171	341	$ 224
Specialty Health Segment Member
Goodwill	$ 8,263		$ 8,263		8,263
Group Disability And Life Member
Goodwill					$ 4,223

XML

Goodwill and Intangible Assets Disclosure [Text Block]: Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets, Gross	$ 8,083	$ 9,083
Finite-Lived Intangible Assets, Accumulated Amortization	4,893	5,552
Customer Relationships
Finite-Lived Intangible Assets, Gross	6,583	7,583
Finite-Lived Intangible Assets, Accumulated Amortization	4,599	5,385
Computer Software, Intangible Asset
Finite-Lived Intangible Assets, Gross	1,500	1,500
Finite-Lived Intangible Assets, Accumulated Amortization	$ 294	$ 167

XML

Goodwill and Intangible Assets Disclosure [Text Block]: Schedule of Indefinite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Indefinite-lived Intangible Assets (Excluding Goodwill)	$ 477	$ 477
Licensing Agreements
Indefinite-lived Intangible Assets (Excluding Goodwill)	$ 477	$ 477

XML

Revenue from Contract with Customer: Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Insurance Commissions and Fees	$ 4,944	$ 3,907	$ 11,079	$ 7,341
Commissions
Insurance Commissions and Fees	1,416	1,932	4,297	3,672
Administrative Fees
Insurance Commissions and Fees	80	581	177	1,069
Marketing Fees
Insurance Commissions and Fees	254	292	559	643
Enrollment Platform Fees
Insurance Commissions and Fees	529	455	1,029	973
Lead and Referral Fees
Insurance Commissions and Fees	2,633	588	4,945	854
Payment Plan, Application and Other Fees
Insurance Commissions and Fees	$ 32	$ 59	$ 72	$ 130

XML

Revenue from Contract with Customer (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounts Payable and Accrued Liabilities
Accrued Sales Commission, Estimated Expected Lifetime Commissions	$ 2,858	$ 2,362

XML

Revenue from Contract with Customer: Contract with Customer, Contract Asset, Contract Liability, and Receivable (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Details
Contract with Customer, Asset, after Allowance for Credit Loss	$ 7,760
Contract with Customer, Asset, Increase (Decrease) for Revenues Recognized During the Year	4,708
Contract With Customer Asset Increase (Decrease) For Revenue Recognized From Prior Periods	(418)
Contract with Customer, Asset, Decrease for Cash Received During the Year	(3,251)
Contract with Customer, Asset, after Allowance for Credit Loss	$ 8,799

XML

Income Tax Disclosure [Text Block] (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax			$ (74,534)	$ 0
Discontinued Operations
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax	$ 74,534	$ 0	74,534	$ 0
Discontinued Operation, Tax Effect of Gain (Loss) from Disposal of Discontinued Operation			11,841
Pets Sale, PetPartners Transaction | Discontinued Operations
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax			74,534
AMICSubsidiariesMember
Operating Loss Carryforwards					$ 46,116
Deferred Tax Assets, Valuation Allowance					8,281
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount			8,281
AMICSubsidiariesMember | Pets Sale, PetPartners Transaction
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount			$ 8,281
AMIC Holdiings | Domestic Tax Authority
Operating Loss Carryforwards					$ 46,116

XML

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]: Schedule of Liability for Unpaid Claims and Claims Adjustment Expense (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Liability for Claims and Claims Adjustment Expense, Beginning Balance	$ 132,957	$ 135,483
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Beginning Balance	36,126	36,993
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Beginning Balance	96,831	98,490
Current Year Claims and Claims Adjustment Expense	48,609	54,797
Prior Year Claims and Claims Adjustment Expense	(9,799)	(6,726)
Liability for Unpaid Claims and Claims Adjustment Expense, Incurred Claims	38,810	48,071
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Current Year	15,268	16,053
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Prior Years	27,235	31,810
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid	42,503	47,863
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Ending Balance	93,138	98,698
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Ending Balance	34,677	35,339
Liability for Claims and Claims Adjustment Expense, Ending Balance	127,815	134,037
Specialty Health Segment, All Product Lines
Liability for Claims and Claims Adjustment Expense, Beginning Balance	31,680	35,530
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Beginning Balance	1,776	1,717
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Beginning Balance	29,904	33,813
Current Year Claims and Claims Adjustment Expense	16,631	24,522
Prior Year Claims and Claims Adjustment Expense	(4,634)	(1,972)
Liability for Unpaid Claims and Claims Adjustment Expense, Incurred Claims	11,997	22,550
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Current Year	4,461	7,064
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Prior Years	12,080	17,530
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid	16,541	24,594
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Ending Balance	25,360	31,769
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Ending Balance	1,161	1,802
Liability for Claims and Claims Adjustment Expense, Ending Balance	26,521	33,571
Group Disability Product Line
Liability for Claims and Claims Adjustment Expense, Beginning Balance	80,976	80,079
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Beginning Balance	22,472	23,322
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Beginning Balance	58,504	56,757
Current Year Claims and Claims Adjustment Expense	20,031	19,093
Prior Year Claims and Claims Adjustment Expense	(4,033)	(1,553)
Liability for Unpaid Claims and Claims Adjustment Expense, Incurred Claims	15,998	17,540
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Current Year	3,922	4,010
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Prior Years	11,488	12,125
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid	15,410	16,135
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Ending Balance	59,092	58,162
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Ending Balance	22,492	22,463
Liability for Claims and Claims Adjustment Expense, Ending Balance	81,584	80,625
Other Short Duration Contract Product Lines
Liability for Claims and Claims Adjustment Expense, Beginning Balance	20,301	19,874
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Beginning Balance	11,878	11,954
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Beginning Balance	8,423	7,920
Current Year Claims and Claims Adjustment Expense	11,947	11,182
Prior Year Claims and Claims Adjustment Expense	(1,132)	(3,201)
Liability for Unpaid Claims and Claims Adjustment Expense, Incurred Claims	10,815	7,981
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Current Year	6,885	4,979
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Prior Years	3,667	2,155
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid	10,552	7,134
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Ending Balance	8,686	8,767
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Ending Balance	11,024	11,074
Liability for Claims and Claims Adjustment Expense, Ending Balance	19,710	19,841
Health Insurance Product Line | Specialty Health Segment Member
Liability for Claims and Claims Adjustment Expense, Beginning Balance	28,295	31,259
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Beginning Balance	1,766	1,113
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Beginning Balance	26,529	30,146
Current Year Claims and Claims Adjustment Expense	15,818	23,627
Prior Year Claims and Claims Adjustment Expense	(3,658)	(1,184)
Liability for Unpaid Claims and Claims Adjustment Expense, Incurred Claims	12,160	22,443
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Current Year	4,319	8,260
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid, Prior Years	11,992	16,382
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid	16,311	24,642
Liability for Unpaid Claims and Claims Adjustment Expense, Net, Ending Balance	22,378	27,947
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments, Ending Balance	1,158	1,406
Liability for Claims and Claims Adjustment Expense, Ending Balance	$ 23,536	$ 29,353

XML

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]: Schedule Of Prior Year Claims And Claims Adjustment Expense Disclosure (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Prior Year Claims and Claims Adjustment Expense	$ (9,799)	$ (6,726)
Specialty Health, Short-Term Medical Product Line
Prior Year Claims and Claims Adjustment Expense	(1,676)	(286)
Specialty Health, Occupational Accident Product Line
Prior Year Claims and Claims Adjustment Expense	(963)	(798)
Specialty Health, Fixed Indemnity Limited Benefit Product Line
Prior Year Claims and Claims Adjustment Expense	(862)	736
Specialty Health, Limited Medical Product Line
Prior Year Claims and Claims Adjustment Expense	(197)	(241)
Specialty Health, Critical Illness Product Line
Prior Year Claims and Claims Adjustment Expense	(196)	(397)
Specialty Health, Group Gap Product Line
Prior Year Claims and Claims Adjustment Expense	(356)	(513)
Specialty Health, Other Specialty Health Product Lines
Prior Year Claims and Claims Adjustment Expense	(384)	(473)
Specialty Health Segment, All Product Lines
Prior Year Claims and Claims Adjustment Expense	$ (4,634)	$ (1,972)

XML

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block] (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Prior Year Claims and Claims Adjustment Expense	$ (9,799)	$ (6,726)
Group Disability Product Line
Prior Year Claims and Claims Adjustment Expense	(4,033)	(1,553)
Health Insurance Product Line | Specialty Health Segment Member
Prior Year Claims and Claims Adjustment Expense	(3,658)	$ (1,184)
Short-duration Insurance Contracts, Incurred but Not Reported (IBNR) Claims Liability, Net	$ 22,378

XML

Stockholders' Equity Note Disclosure [Text Block]: Schedule of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Accumulated other comprehensive income (loss)			$ 4,197
Other Comprehensive Income (Loss), Net of Tax	$ 952	$ 1,753	(977)	$ 1,642
Accumulated other comprehensive income (loss)	3,220		3,220
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent
Accumulated other comprehensive income (loss)	2,268	1,101	4,197	1,212
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax	784	1,810	(1,013)	2,544
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	(168)	57	(36)	902
Other Comprehensive Income (Loss), Net of Tax	952	1,753	(977)	1,642
Accumulated other comprehensive income (loss)	$ 3,220	$ 2,854	$ 3,220	$ 2,854

XML

Stockholders' Equity Note Disclosure [Text Block]: Reclassification out of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Gain (Loss) on Investments	$ (126)	$ 274	$ 91	$ 117
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(704)	(2,858)	(1,044)	(3,140)
Income Tax Expense (Benefit)	(267)	(1,066)	(430)	(1,187)
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	(437)	(1,792)	(614)	(1,953)
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	92,375	3,594	99,574	9,243
Discontinued Operation, Tax Effect of Discontinued Operation	15,570	1,264	17,026	2,430
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	76,805	2,330	82,548	6,813
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	76,368	538	81,934	4,860
Reclassification out of Accumulated Other Comprehensive Income | AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent
Gain (Loss) on Investments	(125)	47	47	284
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(125)	47	47	284
Income Tax Expense (Benefit)	(28)	10	9	60
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	(97)	37	38	224
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	(90)	25	(94)	858
Discontinued Operation, Tax Effect of Discontinued Operation	(19)	5	(20)	180
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	(71)	20	(74)	678
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (168)	$ 57	$ (36)	$ 902

XML

Cash Flow, Supplemental Disclosures [Text Block] (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Details
Income Taxes Paid (Refunds), Net	$ 59	$ 55

XML

Commitments and Contingencies Disclosure [Text Block] (Details) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended
	Oct. 31, 2020	Sep. 30, 2020	May 31, 2017	Sep. 30, 2020
Accounts Payable and Accrued Liabilities
Loss Contingency Accrual, Provision				$ 3,660
Loss Contingency Accrual, Payments	$ 3,660
Other Income
Gain (Loss) Related to Litigation Settlement		$ 5,641
Pending Litigation | Loss Contingency, Nature, Amounts Allegedly Owed To Plaintiff Member
Loss Contingency, Damages Sought, Value			$ 3,082

XML

Segment Reporting Disclosure [Text Block]: Schedule of Segment Reporting Information, by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues	$ 49,330	$ 56,455	$ 101,671	$ 113,522
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(704)	(2,858)	(1,044)	(3,140)
Operating Segments
Revenues	49,456	56,181	101,580	113,405
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(578)	(3,132)	(1,135)	(3,257)
Segment Reconciling Items | Gain (Loss) on Investments
Revenues	(126)	274	91	117
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(126)	274	91	117
Specialty Health Segment Member
Revenues	23,862	30,718	50,133	62,924
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(841)	(5,329)	(2,732)	(5,935)
Group Disability And Life Member
Revenues	25,143	24,076	50,264	48,161
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	3,770	4,353	6,900	6,190
Individual life annuities and other Segment Member
Revenues	183	490	392	808
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(263)	(140)	(247)	(283)
Amortization of Other Deferred Charges	153	176	310	364
Corporate Segment
Revenues	268	897	791	1,512
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	$ (3,244)	$ (2,016)	$ (5,056)	$ (3,229)

XML

Subsequent Events [Text Block] (Details) - MNL Sale - Discontinued Operations $ in Thousands	Jul. 14, 2021 USD ($)
Disposal Group Including Discontinued Operation, Transaction Price	$ 172,500
Disposal Group Including Discontinued Operation, Transaction Price, Potential Earn Out	$ 12,500