SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

COMMISSION FILE NUMBER 0-10306

INDEPENDENCE HOLDING COMPANY

(Exact name of Registrant as specified in its charter)

DELAWARE	58- 1407235
(State of Incorporation)	(I.R.S.Employer Identification No.)

96 CUMMINGS POINT ROAD, STAMFORD, CONNECTICUT	06902
(Address of Principal Executive Offices)	(Zip Code)

(203) 358-8000

(Telephone Number)

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

NONE

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

COMMON STOCK, $1.00 PAR VALUE

SHARE PURCHASE WARRANTS

(Title of Class)

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

7,876,513 shares of common stock were outstanding as of March 26, 2001.

The aggregate market value of the common stock held by non-affiliates of the Registrant computed by reference to the average bid and asked prices of such stock, as of March 26, 2001 was $40,438,849.

The Exhibit Index is located on page 76 of this filing.

Documents Incorporated by Reference

Portions of the Proxy Statement for the Annual Meeting of Stockholders scheduled for June 22, 2001 are incorporated by reference into Part III of this filing.

PART I

ITEM 1. BUSINESS

Independence Holding Company, a Delaware corporation ("IHC"), is a holding company engaged principally in the life and health insurance business through its wholly-owned subsidiaries, Standard Security Life Insurance Company of New York ("Standard Life"), Madison National Life Insurance Company, Inc. ("Madison Life"), First Standard Security Insurance Company ("First Standard"), IndependenceCare Holdings L.L.C. ("IndependenceCare") and their subsidiaries (collectively, the "Insurance Group"). IHC and its subsidiaries (including the Insurance Group) are collectively referred to as the "Company."

Standard Life, which has an A (Excellent) rating from A.M. Best & Company, Inc. ("Best"), is domiciled in New York and licensed as an insurance company in all 50 states, the District of Columbia, the Virgin Islands and Puerto Rico. Madison Life, which is domiciled in Wisconsin and licensed to sell insurance products in 46 states, the District of Columbia and the Virgin Islands and is an accredited reinsurer in New York, has a B++ (Very Good) rating from Best. First Standard is domiciled in Delaware and licensed to write and reinsure property and/or casualty insurance in five other states. Based on information provided by Best, a Best's rating is assigned after an extensive quantitative and qualitative evaluation of a company's financial condition and operating performance. Best ratings are based upon factors relevant to policyholders, agents, and intermediaries, and are not directed toward protection of investors. Best ratings are not recommendations to buy, sell or hold securities of IHC.

On August 28, 2000, the Company paid a 10% special stock dividend to shareholders of record as of August 14, 2000. Accordingly, the number of shares of common stock outstanding, common stock options, the number of shares issuable pursuant to the Warrants, all per share calculations and exercise prices included in the accompanying schedules, exhibits, Consolidated Financial Statements and Notes thereto, reflect the 10% stock dividend and its retroactive effect.

For information pertaining to the Company's business segments, reference is made to Note 18 of Notes to Consolidated Financial Statements.

PRINCIPAL PRODUCTS AND SERVICES

Medical Stop-Loss

Standard Life markets, throughout the United States, stop-loss insurance for self-insured group medical plans. Medical stop-loss insurance allows self-insured employers to manage the risk of excessive health insurance exposures by limiting aggregate and specific losses to a predetermined amount. Self-insured plans permit employers flexibility in designing employee health coverages at a cost that may be lower than that available through other health care plans.

Medical stop-loss coverage is available on either a specific or a specific and aggregate basis, although the majority of the policies issued by Standard Life cover both specific and aggregate claims. Standard Life designs plans to fit the identified needs of the self-insured employer by offering a variety of attachment points with respect to aggregate coverage (i.e., the level of claims after which the medical stop-loss benefits become payable) and, with respect to specific coverage, various deductible options.

Standard Life markets its medical stop-loss products through a network of managing general underwriters ("MGUs") who are non-salaried contractors that receive administrative fees. During 2000, Standard Life marketed through thirteen MGUs, including four in which IHC has equity interests. The MGUs are responsible for underwriting accounts in accordance with guidelines formulated and approved by Standard Life, billing and collecting premiums from the employers, paying commissions to third party administrators ("TPAs") and/or brokers, and adjudicating claims. Standard Life is responsible for selecting MGUs, establishing underwriting guidelines and reviewing employers' claims for reimbursement, as well as establishing appropriate accounting procedures and reserves. Standard Life also markets this product through its Health Maintenance Organization ("HMO") relationships, as further described below under "Managed Health Care."

Individuals who obtain health coverage through such self-insured plans cannot currently sue their employer in state court for punitive or compensatory damages, but can seek legal recourse in federal court where an employer can be ordered to cover and deliver a wrongfully-denied benefit. In the continuing debate over health care reform, certain federal and state legislation has been proposed which could have the effect of making plan sponsors, administrators, or certain other parties liable for punitive damages in state court. While the Company cannot predict whether any of these proposals will be adopted or what, if any, impact enactment of any of these (or any similar state legislation) would have on its medical stop-loss business, the number of employers offering health benefits or choosing self-insured plans could be reduced, plans could increase the portion paid by employees (thereby reducing participation), the Company's pricing could be affected, and the Company could be faced with greater liability exposures. As with past initiatives which were not enacted, the Company believes that any such initiatives that could ultimately be implemented should continue to recognize employer's self-insurance of health care benefits as a viable and cost-effective method of financing health care for employees and their families.

The medical stop-loss industry has experienced a down cycle for the past several years. Although Standard Life's underwriting losses were partially offset by administration fees earned by Standard Life as the issuing carrier, such results were not acceptable to the Company. In order to improve its experience, Standard Life terminated certain MGUs and producers, increased its underwriting and claims audits, tightened its underwriting guidelines and the Company hired an experienced senior underwriting officer and a medical manager. As a result of these measures and a tightening of rates in the industry, Standard Life expects to experience improved results for the 2000 and 2001 underwriting years.

New York Short-Term Disability

Standard Life markets a short-term statutory disability benefit product in New York State ("DBL"). All companies with more than one employee in New York State are required to provide DBL insurance for their employees. DBL coverage provides temporary cash payments to replace wages lost as a result of disability due to non- occupational injury or illness. The DBL policy provides for (i) payment of 50% of salary to a maximum of $170 per week; (ii) a maximum of 26 weeks in a consecutive 52 week period; and (iii) benefit commencement on the eighth consecutive day of disability. Policies covering fewer than 50 employees have fixed rates approved by the New York State Insurance Department. Policies covering 50 or more employees are individually underwritten. The DBL business is marketed primarily through independent general agents who are paid commissions based upon the amount of premiums produced. During 2000, Standard Life expanded its website to include an interactive component which allows its DBL general agents to access detailed information for each of their in force policies. The Company feels that this enhancement gives Standard Life a competitive advantage in this service-driven market. Standard Life anticipates continuing to expand its DBL business through the addition of general agents, strategic marketing alliances and the acquisition of blocks of business.

Group Term Disability; Group Term Life and Annuities

Group Long-Term and Short-Term Disability

Madison Life and Standard Life sell group long- term disability ("LTD") products to employers that wish to provide this benefit to their employees. Depending on an employer's requirements, LTD policies (i) cover between 50% and 70% of insurable salary; (ii) have elimination periods (i.e., the period between the commencement of the disability and the start of benefit payments) of between 30 and 730 days; and (iii) terminate after two, five or ten years or extend to age 65. Optional benefits are available to employees, including coverage for partial or residual disabilities, survivor benefits and cost of living adjustments. Madison Life also markets short-term disability ("STD") policies that provide a weekly benefit to disabled employees until they are eligible for long-term disability benefits or they are no longer disabled.

Madison Life's disability products are sold primarily in the Midwest to school districts, municipalities and hospital employer groups through a managing general agent ("MGA") that specializes in these target markets. This MGA has also begun marketing Standard Life's LTD product when a carrier with a higher rating is required. This MGA assists in the billing and administration of the business, and is paid commissions based upon the amount of premiums produced. Madison Life has expanded its marketing to non-governmental businesses through non-salaried independent general agents and agents who are paid commissions based upon the amount of premiums produced. Madison Life also sells group LTD through another insurer in markets in which Madison Life is not currently established. Under the agreement, the other insurer issues policies as to which the underwriting, claims processing and related services are performed by Madison Life for a fee; Madison Life has retained 35% of the risk on this business.

The Company intends to increase sales by targeting non-governmental business, maximizing its traditionally strong sales to school districts, municipalities and hospital employer groups, and marketing Standard Life's LTD product through this distribution system.

Group Term Life; Annuities

Madison Life and Standard Life sell group term life products which are marketed primarily to the same customers that purchase its group LTD and STD products. These products include group term life, accidental death and dismemberment ("AD&D"), supplemental life and supplemental AD&D and dependent life. In order to enhance its marketing and retention of this line of business, Madison Life also offers a paid-up life benefit for eligible employees of schools and municipalities beginning at age 65, subject to a vesting schedule. Madison Life's group term life products are distributed by the same MGA and independent general agents and agents that distribute its group disability products, with compensation based upon the amount of premiums produced. This MGA has also begun marketing Standard Life's group term life products when a carrier with a higher rating is required. As with its group disability business, the Company intends to expand its sales of these group term life products through this distribution source.

Standard Life distributes group term life insurance products through MGUs (including its medical stop-loss and managed care MGUs), HMOs, general agents, brokers and strategic alliances with other carriers. The independent general agents and agents or brokers who market these products are paid commissions, and the MGUs and HMOs who market these products receive administrative fees.

Standard Life has begun marketing specialized defined benefit and defined contribution service award programs, together with separate group life coverage, to volunteer firefighters in 15 states. These products are distributed through independent general agents who are paid commissions. Standard Life entered this line of business as a result of an acquisition of a block of business in 1999 and, based on its "A" rating and broad licensing, Standard Life intends to increase sales in its core markets and expand into other areas.

Credit Life and Disability

Madison Life sells credit life and disability products that insure a debtor for a value and duration not to exceed the amount and repayment term of the indebtedness. Credit insurance is composed of two basic types of coverage: (i) credit life insurance provides for a lump sum benefit paid to the creditor upon the death of the insured debtor to extinguish or reduce the balance of indebtedness; and (ii) credit disability insurance provides a monthly benefit/indemnity (usually a sum equal to the scheduled monthly loan payment) paid to the creditor in the event of the insured debtor's total disability until the debtor recovers, or is able to return to gainful employment or until the scheduled expiration of the insurance coverage, whichever first occurs.

Generally, Madison Life's credit insurance coverage parameters are: (i) at inception of coverage, insureds must be under age 70 for life and under age 66 for disability; (ii) life coverage until the insured attains the age of 71 and disability coverage until the insured attains the age of 66; (iii) maximum life benefit of $110,000 and maximum aggregate disability benefit of $55,000; (iv) maximum monthly disability indemnity/benefit of $1,000; and (v) maximum term of coverage of 120 months.

Over 90% of Madison Life's credit insurance premium is derived from financial institutions (banks, thrifts, credit unions and finance companies). Madison Life also markets through entities that arrange for the extension of credit (e.g., automobile, marine and furniture dealerships). Its credit insurance products are marketed and distributed by non-salaried general agents and brokers who receive commissions or service fees as compensation for services rendered.

Madison Life is expanding its share of the credit insurance market through geographical diversification (with active producers in 29 continental states plus the Virgin Islands and Hawaii), strategic marketing alliances with other insurance companies, and acquisitions of existing general agencies. Madison Life is improving the utilization of its credit insurance resources and reducing unit-operating expenses by performing contract credit insurance third-party administration services for other insurance companies.

Managed Health Care

In 1998, the Company formed IndependenceCare as a managing general underwriter for Standard Life's managed care products. During the first quarter of 2001, IndependenceCare acquired the business and employees of two other managed care MGUs, thereby quadrupling its block of business. IndependenceCare has formed three operating subsidiaries, IndependenceCare Underwriting Services - Minneapolis L.L.C., IndependenceCare Underwriting Services - Tennessee LLC, and IndependenceCare Underwriting Services - Illinois L.L.C. In addition to marketing Standard Security's products, IndependenceCare has agreements with three other carriers to write business on its behalf in the event of marketing conflicts or regulatory requirements. IndependenceCare's experienced staff is responsible for marketing, underwriting, billing and collecting premiums, medical management and administering and adjudicating reinsurance claims. Final authority for all financial decisions remains with Standard Life; financial reviews of each HMO are performed on behalf of Standard Life by IndependenceCare.

Provider Excess Loss

Standard Life markets provider excess loss products to providers, managed care organizations, including provider hospital organizations, hospital groups, physician groups and individual practice associations (collectively, "MCO's") that have assumed risk (through capitation by an HMO or otherwise) and desire to reduce their risk assumption and/or are required to purchase coverage by contract or regulation. In addition, First Standard is attempting to broaden its licensing so that it will be able to offer provider excess loss in states in which life and health companies are not permitted to write this coverage. Standard Life writes these products through IndependenceCare and another MGU in which IHC has an equity interest which specializes in provider excess loss insurance. IndependenceCare and this MGU are responsible for marketing, underwriting, billing and collecting premium, medical management and administering and adjudicating claims.

HMO Reinsurance

Standard Life markets, throughout the United States, reinsurance for HMOs that desire to reduce their risk assumption and/or are required to purchase coverage by regulation. A majority of state regulatory authorities responsible for HMO oversight require such coverage. This coverage allows HMOs to manage the risk of excessive exposures by limiting specific losses to a pre-determined amount. Standard Life markets HMO reinsurance through IndependenceCare.

HMO Point-of-Service ("POS")

Standard Life has capitalized on the competitive pressures in the HMO market by marketing POS coverage throughout the United States through its HMO relationships. A POS product allows a member greater freedom of choice of providers and/or the ability to access care without a gatekeeper or primary care physician referral; both mature and start-up HMOs are experiencing difficulty in attracting and retaining members unless they are able to offer such options. Most states require that HMOs desiring to offer a POS product do so by partnering with an indemnity carrier (such as Standard Life). With respect to the POS product, Standard Life retains final responsibility for underwriting, issuing policies, billing and collecting of premiums and servicing claims.

HMO Employer Medical Stop-Loss

Standard Life markets its employer medical stop- loss products and other ancillary group products (including group term life, AD&D, LTD, STD, vision and dental) through its HMO distribution network, IndependenceCare and another managed care MGU in which IHC has an equity interest. Like Standard Life's other medical stop-loss product, these plans allow self-insured employers to manage the risk of excessive health insurance exposures by limiting aggregate and specific losses to a predetermined amount, as well as utilizing the managed care expertise of the HMOs to manage losses.

Through equity investments, IHC participates in seven entities that market provider excess loss, HMO reinsurance and employer medical stop-loss products through their proprietary market databases and alliances with various partners. The Company believes that these interests will enable it to control a substantial portion of Standard Life's distribution network for its core products, as well as ancillary group products which Standard Life has available or may develop and/or market in the future.

As a result of these initiatives, Standard Life anticipates an increase in its managed care premiums in 2001.

Special Disability

Standard Life provides disability income, accident medical, accidental death, and AD&D insurance to athletes, executives and entertainers. The coverage is written for a limited term (5 years or less) and is optionally renewable by Standard Life. The principal benefits offered are permanent total disability ("PTD") and temporary total disability ("TTD"). PTD is paid as a lump sum if caused by either an injury or sickness which is career ending. TTD covers the same risks as PTD, but is paid in installments until the maximum limit of insurance is exhausted or the insured no longer has a total disability. For these special risks, Standard Life has delegated marketing and underwriting authority to a specialized MGU which has concentrated its efforts in these markets for more than 15 years. Currently, Standard Life insures no more than half of the value of the individual's contract, thereby sharing the risk with another party (e.g., a team or a corporate sponsor). In addition, Standard Life has minimized its risk on such business by obtaining reinsurance on a quota share or facultative basis. Standard Life has determined to decrease its involvement in this line of business as reflected in the decrease in premiums in each of 1999 and 2000. Standard Life expects this trend to continue in 2001.

Individual Life and Annuities

This category includes: (i) individual insurance products that are in runoff as a result of the Insurance Group's decision to discontinue writing such products; (ii) blocks of individual and annuity business that were acquired from other insurance companies and (iii) individual life and annuities written through Madison Life's military and civilian government employee division.

The following lines of Standard Life's in-force business are in runoff: individual accident and health, individual life, single premium immediate annuities, and miscellaneous insurance business. Madison Life's runoff in this category consists of existing blocks of individual life (including pre-need (i.e., funeral expense coverage), traditional and interest-sensitive life blocks which were acquired in 1997, 1998 and 1999), individual accident and health products, annual and single premium deferred annuity contracts and individual annuity contracts. Madison Life began marketing in 2000 an individual life product (with annuity and accumulation fund riders) to military and civilian government employees, primarily through payroll deduction. This strategic initiative arises from Madison Life's acquisition of a block of $78,000,000 of this business in 1999 - - see Acquisitions. This business is being distributed through independent general agents and brokers who receive commissions.

Other Business

This category includes: (i) group insurance products that are in runoff as a result of the Insurance Group's decision to discontinue writing such products; (ii) blocks of business that were acquired from other insurance companies written by the Insurance Group (acquired blocks of business of the type currently being written are included within the specified product group); and (iii) certain miscellaneous insurance products.

___________________________

The following table sets forth gross direct and assumed earned premiums and premiums earned of the Insurance Group by principal product for the years indicated (in thousands):

		GROSS DIRECT AND ASSUMED EARNED PREMIUMS
			2000		1999		1998
Medical Stop- Loss			$	125,252	$	109,153	$	92,549
DBL			19,120		19,529		20,912
Group Term Disability;			38,616		34,846		26,292
	Term Life and Annuities
Credit Life and Disability			17,603		20,239		22,696
Managed Health Care			34,305		41,848		41,978
Special Disability			18,177		19,764		24,922
Individual Life and Annuities			17,263		12,225		6,225
Other Business				2,573		8,190		7,325
	TOTAL		$	272,909	$	265,794	$	242,899

PREMIUMS EARNED
			2000		1999		1998
Medical Stop-Loss			$	19,496	$	17,204	$	19,614
DBL			19,120		19,529		20,912
Group Term Disability;
	Term Life and Annuities		15,394		13,498		9,435
Credit Life and Disability			14,274		17,552		20,288
Managed Health Care			4,895		4,680		1,034
Special Disability			279		239		196
Individual Life and Annuities			15,749		14,548		5,347
Other business				1,082		3,143		3,832
		TOTAL	$	90,289	$	90,393	$	80,658

The following table summarizes the aggregate life insurance in-force of the Insurance Group (in thousands):

						2000		1999		1998
LIFE INSURANCE IN- FORCE:
	Group					$	6,661,800	$	5,846,322	$	5,078,640
	Individual term					238,207		584,732		347,253
	Individual permanent					1,276,403		852,496		482,210
	Credit						737,110		708,938		832,486
TOTAL LIFE INSURANCE
IN-FORCE (1), (2)						$	8,913,520	$	7,992,488	$	6,740,589
NEW LIFE INSURANCE:
	Group					$	907,583	$	1,119,979	$	942,001
	Individual term					-		-		-
	Individual permanent					22,547		38,314		-
	Credit						175,669		171,654		302,426
TOTAL NEW LIFE INSURANCE						$	1,105,799	$	1,329,947	$	1,244,427
NOTES:
(1)			Includes participating participating
				Insurance		$	148,397	$	142,072	$	91,998
(2)			Includes ceded
				Reinsurance of:
					Group	$	3,635,801	$	2,929,559	$	2,526,261
					Individual	274,236		262,510		246,102
					Credit		92,063		157,967		51,320
		Total ceded reinsurance				$	4,002,100	$	3,350,036	$	2,823,683

ACQUISITIONS

The Company has assembled a team of senior executives who are responsible for identifying, analyzing, negotiating, acquiring and administering acquisitions of blocks of insurance business. The team members, who have been involved with numerous acquisitions, focus primarily on transactions involving the purchase of blocks of policies, but also evaluate acquisitions of entire companies. The Company's management information systems ("MIS") and policyholder services departments are experienced in converting the acquired policies and assuming the daily servicing requirements related to the acquisition of substantial blocks of policies. We believe that Madison Life's track record of quickly and efficiently converting large numbers of policies (e.g., over 115,000 policies were converted in a two month period at the end of 1999) provides Madison Life with a competitive advantage in many acquisitions. The Company continually upgrades its systems so as to efficiently handle sophisticated policies and contracts.

The Company believes that current trends in the life and health insurance industry provide excellent opportunities for more acquisitions and consolidations. Some companies are reducing administrative costs by divesting of divisions, insurance subsidiaries and blocks of business which do not fit their overall strategies, or are disposing of non-core businesses in order to focus capital on their primary lines. Other companies are experiencing increased difficulty in remaining competitive due to more stringent regulatory requirements, downgrades by rating agencies, the increased cost of sophisticated information processing systems and the inaccessibility to capital markets. Mutual companies and non-profit entities, in particular, may have difficulty accessing sources of capital. Additionally, there are many small to medium sized closely held insurance companies which are exploring divestiture options; the Company believes that it is well positioned to compete for these opportunities.

Historical

Madison Life acquired two blocks of business with effective dates in 2000. One was a small credit insurance block purchased from a company that was voluntarily liquidating. The other was a block of universal life policies with reserves of $14,700,000 purchased from a company that was exiting this line of business.

During 1999, Madison Life acquired seven blocks of business with total reserves of $143,500,000. $135,400,000 of these reserves were acquired from the receivers of four liquidated companies. Madison Life was selected by the National Organization of Life and Health Insurance Guaranty Associations ("NOLHGA") to be the assuming company for these blocks in part because of Madison Life's reputation for quickly converting large numbers of policies with minimal disruption to policyholders. One of these blocks, with reserves of $78,000,000, was comprised of individual life and annuity policies. Two of these blocks, totalling $43,800,000 of reserves, were composed of pre- need and burial policies, and the fourth block, with reserves of $13,600,000, encompassed individual life, annuity and disability income policies. Three other blocks, comprised of individual life, annuities and disability income policies, with reserves totalling $8,100,000, were acquired from three insurance companies exiting these lines of business.

Madison Life acquired four individual life insurance blocks during 1998 with total reserves of $41,500,000. One of the blocks, with reserves of $250,000, was purchased from the receiver of a liquidated company. A second block, with reserves of $250,000, was purchased from a state insurance guaranty fund. A third block, with reserves of $30,000,000, was purchased from another state insurance guarantee fund. The fourth life block, with reserves of $11,000,000 was purchased from an active company exiting the individual life market. In connection with the purchase of the credit insurance agency, Madison Life acquired a block of credit life and disability policies with reserves of $2,000,000.

Madison Life acquired two single premium credit insurance blocks and two individual life insurance blocks during 1997 with aggregate reserves of $58,300,000. The two credit insurance blocks had aggregate reserves of $31,600,000. One of the individual life blocks was purchased from a company under court-ordered liquidation and contained $23,000,000 of life/annuity reserves and $300,000 of annual premiums. The other life block was a single premium book of business with $3,400,000 of reserves and was acquired from a company being merged into its parent company.

Madison Life acquired three blocks of business in 1996, with aggregate reserves of $41,000,000, including a block of pre-need individual ordinary life insurance and annuity policies with reserves of $33,000,000 from a large insurer, and a block of interest- sensitive whole life insurance with reserves of $7,500,000 from NOLHGA.

Standard Life acquired a block of annuities and group life sold to volunteer firefighters in 1999. This block, with annuity reserves of $32,700,000 and life reserves of $400,000, was acquired from a mutual company exiting this market. Also in 1999, Standard Life acquired the life insurance policies of a non-profit entity with reserves of $4,000,000. This business is administered through Madison Life's systems, and is partially reinsured to Madison Life.

Standard Life actively seeks acquisition opportunities with other insurance companies (i) whose DBL business no longer fits their marketing strategy or (ii) that cannot administer their in-force DBL block profitably. As a result, Standard Life has reduced its administration costs on a per policy basis and gained access to new general agents and brokers. During 1997, Standard Life acquired a DBL block of business with total annualized premiums of $3,500,000. In 1996, Standard Life acquired two DBL blocks from two insurers with total annualized premiums of $3,500,000.

Outlook

To facilitate its acquisition activity, IHC has contributed $35,000,000 to Madison Life since 1993. These contributions served to further enhance the Insurance Group's already good capital ratios, broad licensing and excellent asset quality. The Company currently has corporate liquidity of $12,819,000. The Company also has $15,000,000 available under its $30,000,000 credit facility (further described in Note 11 of the Notes to Consolidated Financial Statements). The Company anticipates that it can use its current liquidity, its available line of credit and/or raise additional capital in the public or private markets to the extent determined necessary or desirable in order to pursue acquisitions.

The Company is particularly interested in acquiring the following types of policies: traditional and group life, interest-sensitive life, credit life and health, limited benefit health (e.g., cancer or hospital indemnity), medical stop-loss, DBL, certain other disability and certain annuities. As demonstrated by the magnitude of the transactions the Company has successfully completed with NOLHGA, state guaranty funds and associated receivers the Company believes that it will continue to be a leader in the acquisition of blocks of business from insolvent companies. In addition, the Company expects that additional opportunities may develop with non-profit entities that are having difficulty administering their insurance policies in an economically efficient manner, such as the block acquired by Standard Life in 1999.

REINSURANCE AND POLICY RETENTION LIMITS

Although the Company has more than sufficient capital to retain greater risk, it has maintained a conservative risk profile on its insurance products. The Company's conservative risk profile dictates purchasing quota share reinsurance and excess reinsurance. The Company monitors its retention amounts by product line, and has the ability to adjust its retention as appropriate.

Reinsurance is used to reduce the potentially adverse financial impact of large individual or group risks, and to reduce the strain on statutory income and surplus related to new business. By using reinsurance, the Insurance Group is able to write policies in amounts larger than it could otherwise accept. The amount reinsured is the portion of each policy in excess of the retention limit on a particular policy. Net retention limits for Standard Life at December 31, 2000 were: (i) $210,000 per life on individual life and corresponding disability waiver of premium; (ii) no retention on accidental death benefits provided by rider to individual life policies; (iii) $200,000 on any one medical stop-loss claim; (iv) $2,500 of monthly benefits on disability income policies; and (v) $25,000 on its special disability business. Standard Life also maintains stop-loss and catastrophe reinsurance in order to protect against particularly adverse mortality which might occur with respect to its overall life business.

At December 31, 2000, net retention limits for Madison Life were: (i) $4,764 per month on group long-term and short- term disability insurance; (ii) $1,400 per month on group short-term disability insurance; (iii) $175,000 on group term life, accidental death beneifts, and supplemental coverages issued to group term life holders; (iv) $60,000 on substandard ordinary life, group credit single premium life, group family life and individual ordinary life; (v) $1,000 per month on individual substandard long-term disability insurance; (vi) $1,000 per month on credit single premium disability insurance; and (vii) $1,000 monthly benefit on individual accident and health insurance. In addition, Madison Life has purchased additional reinsurance on the portion of risks which it retains, limiting its exposure on a catastrophic (aggregate) loss.

The following reinsurers represent 53.7% of the total ceded premium for the year ended December 31, 2000:

General Reinsurance Corp.	18.8%
Sirius International Insurance Co.	15.3%
ReliaStar Life Insurance Co., Inc.	15.1%
London Life Reinsurance Co.	4.5%
	53.7%

The Insurance Group remains liable with respect to the insurance in-force which has been reinsured in the unlikely event that the assuming reinsurers are unable to satisfy their obligations. The Insurance Group cedes business (i) to individual reinsurance companies and reinsurance pools comprised of companies that are primarily rated A or better by Best or (ii) upon provision of adequate security. The ceding of reinsurance does not discharge the primary liability of the original insurer to the insured. Since the risks under the Insurance Group's business are primarily short-term, there would be limited exposure as a result of a change in a reinsurer's creditworthiness during the term of the reinsurance. At December 31, 2000 and 1999, the Insurance Group's ceded reinsurance in- force was $4.0 billion and $3.4 billion, respectively.

For further information pertaining to reinsurance, reference is made to Note 17 of Notes to Consolidated Financial Statements.

RESERVES AND INVESTMENTS

More than 89% of IHC's securities portfolio is managed by employees of IHC and its affiliates, and ultimate investment authority rests with IHC's in-house investment group. As a result of the nature of IHC's insurance liabilities, IHC endeavors to maintain a significant percentage of its assets in investment grade securities, cash and cash equivalents. At December 31, 2000, approximately 98% of the fixed maturities were investment grade. The internal investment group provides a summary of the investment portfolio and the results thereof at the meetings of the Board of Directors.

As required by insurance laws and regulations, the Insurance Group establishes reserves to meet obligations on policies in-force. These reserves are amounts which, with additions from premiums expected to be received and with interest on such reserves at certain assumed rates, are calculated to be sufficient to meet anticipated future policy obligations. Premiums and reserves are based upon certain assumptions with respect to mortality, morbidity on health insurance, lapses and interest rates effective at the time the polices are issued. The Insurance Group also establishes appropriate reserves for substandard business, annuities and additional policy benefits, such as waiver of premium and accidental death. Standard Life and Madison Life are also required by law to periodically have a cash flow adequacy analysis, which projects the amount and timing of cash flows to the estimated maturity date of liabilities, prepared by the certifying actuary for each insurance company. Standard Life, Madison Life and First Standard invest their respective assets, which support the reserves and other funds in accordance with applicable insurance law, under the supervision of their respective Boards of Directors. The Company manages interest rate risk seeking to maintain a portfolio with a duration and average life that falls within the band of the duration and average life of the applicable liabilities. The Company utilizes options to modify the duration and average life of the assets. Such investment strategies are further described in Note 1(F)(iv) of the Notes to Consolidated Financial Statements.

Under Wisconsin insurance law, there are restrictions relating to the percentage of an insurer's admitted assets that may be invested in a specific issuer or in the aggregate in a particular type of investment. With respect to the portion of an insurer's assets equal to its liabilities plus a statutorily-determined security surplus amount, a Wisconsin insurer cannot, for example, invest more than a certain percentage of its assets in non-amortizable evidences of indebtedness, securities of any one person (other than its subsidiary and the United States government), or common stock of any corporation and its affiliates (other than its subsidiary).

Under New York insurance law, there are restrictions relating to the amount of an insurer's admitted assets that may be invested in a specific issuer or in the aggregate in a particular type of investment. For example, a New York insurer cannot invest more than a certain percentage of its admitted assets in common or preferred shares of any one institution, obligations secured by any one property (other than those issued, guaranteed or insured by the United States or any state government or agency thereof), or medium and lower grade obligations. In addition, there are certain qualitative investment restrictions.

Under Delaware insurance law, there are restrictions relating to the percentage of an insurer's admitted assets that may be invested in a specific issuer or in the aggregate in a particular type of investment. In addition, there are qualitative investment restrictions.

The following table reflects the asset value in dollars (in thousands) and as a percentage of total investments of the Company as at December 31, 2000:

INVESTMENTS BY TYPE
				CARRYING			% OF TOTAL INVESTMENTS
				VALUE			INVESTMENTS
Fixed maturities:
		Bonds:
		United States Government
			and authorities	$		168,779	34.4%
		States, municipalities and
			political subdivisions	1,317			0.3%
		Public utilities		13,602			2.8%
		All other corporate securities			195,047			39.7%
		Total fixed income securities			378,745			77.2%
Equity securities:
		Common stocks:
		Industrial, miscellaneous
			and other	12,146			2.5%
		Non-redeemable preferred stock		6,441			1.3%
		Options			183			0.1%
		Total equity securities			18,770			3.9%
Securities purchased under
	agreements to resell			22,253			4.5%
Partnership interests				45,679			9.3%
Policy loans				18,518			3.8%
Other				1,087			0.2%
Short-term investments					5,455			1.1%
		Total investments		$	490,507			100.0%

At December 31, 2000, 98% of the Company's fixed maturities were investment grade. The composition of the Company's fixed maturities at December 31, 2000, utilizing Standard and Poor's rating categories, was as follows:

GRADE	% INVESTED
AAA		68.0%
AA		9.0%
A		8.3%
BBB		12.7%
BB or lower		2.0%
		100.0%

The Company's total pre-tax investment results for each of the last three years were as follows:

Consolidated Statement of Operations			2000		1999		1998
	Net investment		$	35,038,000	$	29,815,000	$	21,782,000
		income
	Net realized and
	unrealized (losses)
	gains		(228,000)		(1,165,000)		2,013,000
Consolidated Balance Sheet
	Net unrealized
	gains (losses)			15,435,000		(17,520,000)		1,761,000
	Total pretax
	investment results		$	50,245,000	$	11,130,000	$	25,556,000

COMPETITION AND REGULATION

The Company competes with many larger insurance companies, HMOs and other managed care organizations. Although most life insurance companies are stock companies, mutual companies also write life insurance in the United States. Mutual companies may have certain competitive advantages since profits inure directly to the benefit of the policyholders. HMOs may also have certain competitive advantages since they are subject to different regulations than insurance companies. As more companies enter the acquisition field, the Company faces increased competition for future acquisitions.

IHC is an insurance holding company; as such, IHC and the Insurance Group are subject to regulation and supervision by the insurance supervisory agencies of New York in the case of Standard Life, Wisconsin in the case of Madison Life, and Delaware in the case of First Standard. Each of Standard Life, Madison Life and First Standard is also subject to regulation and supervision in all jurisdictions in which it is licensed to transact business. These supervisory agencies have broad administrative powers with respect to the granting and revocation of licenses to transact business, the licensing of agents, the approval of policy forms, the approval of commission rates, the form and content of mandatory financial statements, reserve requirements and the types and maximum amounts of investments which may be made. Such regulation is designed primarily for the benefit of policyholders rather than the stockholders of an insurance company or holding company.

Certain transactions within the holding company system are also subject to regulation and supervision by such regulatory agencies. All such transactions must be fair and equitable. Notice to or prior approval by the insurance department is required with respect to transactions affecting the ownership or control of an insurer and of certain material transactions, including dividend declarations, between an insurer and any person in its holding company system. Under Delaware, New York and Wisconsin insurance laws, "control" is defined as the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person. Under Delaware and New York laws, control is presumed to exist if any person, directly or indirectly, owns, controls or holds with the power to vote ten percent or more of the voting securities of any other person; in Wisconsin, the presumption relates to more than ten percent of the voting securities of another person. Under Delaware and New York laws, an agreement to acquire control of an insurer domiciled in one of those states must be approved by the Commissioner of Insurance of that state. Under Wisconsin law, the Commissioner of Insurance has the right to disapprove an agreement to acquire control of a Wisconsin-domiciled insurer. In addition, periodic disclosure is required concerning the operations, management and financial condition of the insurer within the holding company system. An insurer is also required to file detailed annual statements with each supervisory agency, and its affairs and financial conditions are subject to periodic examination. See Note 19 of Notes to Consolidated Financial Statements for information as to restrictions on the ability of IHC's insurance subsidiaries to pay dividends.

Risk-based capital requirements are imposed on life and property and casualty insurance companies. The risk-based capital ratio is determined by dividing an insurance company's total adjusted capital, as defined, by its authorized control level risk- based capital. Companies that do not meet certain minimum standards require specified corrective action. The risk-based capital ratios for each of Standard Life, Madison Life and First Standard exceed such minimum ratios.

On December 31, 1996, IHC consummated the distribution of the common stock of its majority-owned sign manufacturing subsidiary, Zimmerman Sign Company ("Zimmerman"), on a pro rata basis to the holders of record of IHC common stock as of December 20, 1996. Since December 1995, the Consolidated Financial Statements of the Company have presented Zimmerman as discontinued operations (see Note 10 of Notes to Consolidated Financial Statements).

EMPLOYEES

The Company has 187 employees.

ITEM 2. PROPERTIES

IHC

IHC has entered into a renewable short-term arrangement with Geneve Corporation for the use of 6,750 square feet of office space as its corporate headquarters in Stamford, Connecticut.

Standard Life

Standard Life leases 13,500 square feet of office space in New York, New York as its corporate headquarters, 3,000 square feet of office space in Farmington, New York for its DBL claims processing center and 1,650 square feet of office space in Heathrow, Florida for a marketing office.

Madison Life

Madison Life leases 16,800 square feet of office space in Middleton, Wisconsin as its corporate headquarters, 3,900 square feet in Birmingham, Alabama for its military and government individual life and annuity division, 1,300 square feet in Austin, Texas for executive office space, 2,400 square feet in Wilkesboro, North Carolina for its credit agency, and 4,200 square feet in South Windsor, Connecticut for its MGU.

IndependenceCare

IndependenceCare - Minneapolis L.L.C. leases 3,000 square feet of office space in Minneapolis, Minnesota, IndependenceCare - Illinois L.L.C. leases 3,800 square feet in Vernon Hills, Illinois and IndependenceCare - Tennessee LLC leases 2,500 square feet in Franklin, Tennessee.

ITEM 3. LEGAL PROCEEDINGS

The Company knows of no material pending legal proceedings to which it is a party or of which any of its property is the subject.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED

STOCKHOLDER MATTERS

IHC's common stock and share purchase warrants expiring June 30, 2001 ("Warrants") are traded over-the-counter. The common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol INHO. Warrant prices are quoted on the OTC Bulletin Board. The following tabulation shows the high and low sales prices for IHC's common stock and the high and low bid prices for the Warrants. The Warrant information was obtained from the National Quotation Bureau.

					COMMON STOCK						WARRANTS
					HIGH		LOW	HIGH				LOW
QUARTER ENDED:
		December 31, 2000	$	14.000		$	10.000		$	.625		$	.375
		September 30, 2000	14.000			6.000			.688			.500
		June 30, 2000	11.932			9.091			.656			.438
		March 31, 2000	12.614			9.318			.563			.375
QUARTER ENDED:
	December 31, 1999		10.796			9.773			.625			.375
	September 30, 1999		11.080			10.227			.750			.625
	June 30, 1999		11.477			9.773			1.250			.750
	March 31, 1999		12.955			11.307			1.250			1.250

The foregoing prices for the Warrants do not necessarily represent actual transactions, but rather the quoted prices between dealers, excluding retail markup, markdown or commission.

At March 23, 2001, the number of record holders of IHC's (i) common stock was 2,560 and (ii) Warrants was 1,211.

IHC declared a cash dividend of $.05 per share on its common stock on each of November 14, 2000 and November 16, 1999.

ITEM 6. SELECTED FINANCIAL DATA

The following is a summary of selected consolidated financial data of the Company for each of the last five years.

							YEAR ENDED DECEMBER 31,
			2000		1999			1998				1997			1996
					(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME DATA:
Total revenues			$	130,417	$	126,714			$	110,614	$		106,757	$		89,344
Operating income (excluding
	net realized and
	unrealized gains and losses)		17,062		15,725				12,397		11,7031			6,630
Net income from continuing
	operations (excluding net
	securities gains and losses)		11,486		11,240				9,529		9,7381			6,498
Net income applicable to
	common shares from
	continuing operations		11,352		10,404				11,057		11,187			6,710
BALANCE SHEET DATA:
Total investments			490,507		441,252				326,156		309,013			249,008
Total assets			724,628		678,351				500,312		454,738			336,401
Insurance liabilities			526,192		509,258				328,491		278,092			202,278
Long-term debt			15,000		15,000				-		-			-
Common stockholders' equity			126,533		103,551				109,527		91,005			76,856
PER SHARE DATA:
Cash dividends declared
		per common share	.05		.05				.05		.05			.05
Diluted income per
		common share from
		continuing operations
		(excluding net securities
		gains and losses)	1.44		1.39				1.15		1.181			.79
Basic income per common
		share from continuing
		operations	1.44		1.30				1.36		1.37			.82
Diluted income per
		common share from
		continuing operations	1.42		1.29				1.33		1.35			.81
Book value per common share			16.06		13.11				13.52		11.14			9.40

1 Also excludes the $1,046,000 gain from the sale of real estate in 1997.

The Selected Financial Data should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto. All per share data has been retroactively restated to reflect the 10% stock dividend on August 28, 2000.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Independence Holding Company, a Delaware corporation ("IHC"), is a holding company engaged principally in the life and health insurance business through its wholly-owned subsidiaries, Standard Security Life Insurance Company of New York ("Standard Life"), Madison National Life Insurance Company, Inc. ("Madison Life"), First Standard Security Insurance Company ("First Standard"), IndependenceCare Holdings L.L.C. ("IndependenceCare") and their subsidiaries (collectively, the "Insurance Group"). IHC and its subsidiaries (including the Insurance Group) are collectively referred to as the "Company." All remaining income, principally income from parent company liquidity and expense items associated with parent company activities (including the Company's remaining real estate holdings) are included in Corporate (see Item 1 for a discussion of the business).

Additional information pertaining to the Company's business segments is provided in Note 18 of Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

2000 COMPARED TO 1999

The Company's operating income increased $2.2 million to $16.8 million for the year ended December 31, 2000 from $14.6 million for the same period in 1999. Net income was $11.4 million, or $1.42 per share, diluted, for the year ended December 31, 2000 compared to $10.4 million, or $1.29 per share, diluted, for the year ended December 31, 1999. The Company had net realized and unrealized losses of $.2 million in 2000 and $1.2 million in 1999. Decisions to sell securities are based on cash flow needs, investment opportunities and economic and market conditions, thus creating fluctuations in gains from year to year. Excluding net realized and unrealized gains, the Company had operating income of $17.0 million in 2000 as compared to $15.7 million in 1999, an increase of $1.3 million, which approximately consists of: an increase in profitability from the stop-loss line of business, an increase in income from the blocks of business acquired in 1999 by Madison Life ("1999 acquisitions"), and an increase in investment income due to the increase in investable assets slightly offset by a decrease in other lines of business. Income tax expense increased $1.3 million to $5.5 million in 2000 from $4.2 million in 1999 reflecting the increase in income and a higher effective income tax rate in 2000, principally due to the phase out of the small life insurance company deductions (see Capital Resources).

Insurance Group

The Insurance Group's operating income increased $3.6 million to $19.5 million in 2000 from $15.9 million in 1999. Operating income includes net realized and unrealized losses of $.2 million in 2000 compared to $1.2 million in 1999. Operating income excluding net realized and unrealized losses was $19.7 million in 2000 compared to $17.0 million in 1999, an increase of 16%.

Premium revenues decreased $.1 million to $90.3 million in 2000 from $90.4 million in 1999; premium revenues decreased $1.5 million at Madison Life and increased $1.4 million at Standard Life. The decrease at Madison Life is comprised of: a $3.3 million decrease in the credit line of business, primarily due to the runoff of acquisitions of two single premium blocks of business effective in 1997; a $1.7 million decrease in dental premiums due to the runoff of this block; and a $.5 million decrease in other life and health lines of business; such decreases were offset by: a $2.3 million increase in long-term disability ("LTD") and $.3 million in group life, both as a result of an increase in premiums written in 2000; and a $1.4 million increase in ordinary life and individual accident and health premiums due to Madison Life's 1999 acquisitions. The increase at Standard Life is comprised of: a $.8 million increase in its provider excess line due to increased retention and a new distribution channel in 2000; a $2.2 million increase in the stop-loss line due to an increase in premium volume and rates; a $.4 million increase in the point of service line and a $.4 million increase in the behavioral health line both due to an increase in production; such increases are offset by: a $.4 million decrease in short-term statutory disability ("DBL") due to a rate reduction, a $1.5 million decrease in the HMO reinsurance line due to the loss of a distribution channel and a $.5 million decrease in other runoff lines.

Total net investment income increased $6.0 million primarily due to an increase in assets due to the acquisitions in 1999. The annualized return on investments of the Insurance Group was 7.1% for both years ended 2000 and 1999.

Other income decreased $2.2 million due to $1.4 million less fee income earned by Madison Life's majority owned managing general underwriter and a $1.4 million decrease at Standard Life due primarily to an increase in coinsurance reserves due to the surrender by a large group of policyholders in a modified coinsurance treaty; partially offset by an increase of $.6 million in fee income earned at IndependenceCare.

Insurance benefits, claims and reserves decreased $1.5 million, reflecting an increase of $.4 million at Madison Life and a decrease of $1.9 million at Standard Life. Madison Life's increase resulted from: a $.2 million increase in ordinary life and individual accident and health reserves, claims and surrenders and a $.8 million increase in interest on annuity policies, resulting from the 1999 acquisitions; a $.3 increase in group term life benefits; and a $2.8 million increase in LTD claims and reserves due to the increase in premium volume and an increase in loss ratios; such increases were offset by: a $1.4 million decrease in the credit line of business due to the runoff of acquisitions slightly offset by higher loss ratios in this line; a $1.2 million decrease in dental reserves due to the runoff of this line; a $.6 million decrease in dividends paid to policyholders; and a $.5 million decrease in claims and reserves in other life and health lines of business. The change at Standard Life is comprised of: a $3.3 million decrease in stop-loss reserves due to lower loss ratios; a $.9 million decrease in the HMO reinsurance line due to the decrease in volume; and a $1.3 million decrease in the closed block of ordinary life business due to the surrender by a large group of policyholders; such decreases were offset by: a $1.8 million increase in DBL claims and reserves due to higher loss ratios; a $.4 million increase in interest expense and group annuity and life reserves due to an acquisition in 1999; a $.9 million increase in the personal accident assumed line of business due to higher loss ratios and a $.5 million increase in point of service claims due to the increase in premiums.

Amortization of deferred acquisition costs and general and administrative expenses for the Insurance Group increased $2.5 million. Madison Life's expenses increased $2.1 million representing an increase in net commission expense of $1.6 million and an increase of $.5 million in salaries, related benefits and administrative fees all arising from the 1999 acquisitions. Standard Life's expenses increased $.3 million due to an increase in commission expense and consulting fees. IndependenceCare's expenses increased $.1 million.

Corporate

Operating income for the year ended December 31, 2000 decreased by $1.4 million to a loss of $2.7 million in 2000 from a loss of $1.3 in 1999. This decrease in income is due to an increase in interest expense of $1.1 million attributable to the borrowing of $15.0 million during the fourth quarter of 1999, a decrease of $.9 million in investment income due to lower returns on certain equity investments partially offset by a decrease of $.6 million in general and administrative expenses due to a reduction in salary related expenses.

1999 COMPARED TO 1998

The Company's operating income increased $.2 million to $14.6 million for the year ended December 31, 1999 from $14.4 million for the same period in 1998. Net income was $10.4 million, or $1.29 per share, diluted, for the year ended December 31, 1999 compared to $11.1 million, or $1.33 per share, diluted, for the year ended December 31, 1998. The Company had net realized and unrealized losses of $1.2 million in 1999 and gains of $2.0 million in 1998. Excluding net realized and unrealized gains, the Company had operating income of $15.7 million in 1999 as compared to $12.4 million in 1998, an increase of $3.3 million, which approximately consists of: an increase in acquisitions at Madison Life partially offset by a decrease due to other lines of business, and an increase in yields on investable assets. Income tax expense increased $.8 million to $4.2 million in 1999 from $3.4 million in 1998 reflecting a higher effective income tax rate in 1999, principally due to the loss of tax benefits associated with the utilization of net operating loss carryforwards which are no longer available and the phase out of the small life insurance company deductions.

Insurance Group

The Insurance Group's operating income increased $.9 million to $15.9 million in 1999 from $15.0 million in 1998. Operating income includes net realized and unrealized losses of $1.2 million in 1999 compared to gains of $2.1 million in 1998. Operating income (excluding net realized and unrealized gains) was $17.0 million in 1999 compared to $12.9 million in 1998, an increase of 32%.

Premiums earned increased $9.7 million to $90.4 million in 1999 from $80.7 million in 1998; premiums earned increased $9.5 million at Madison Life and $.2 million at Standard Life. The increase at Madison Life is comprised of: a $2.6 million increase in LTD premiums due to an increase in retention on this line of business and an increase in premiums written in 1999; a $9.4 million increase in ordinary life and individual accident and health premiums primarily due to the acquisition of several blocks of business effective June 30, 1999 and May 1, 1999; and a $.8 million increase in group term life premiums due to an increase in retention; such increases were offset by: a $2.7 million decrease in the credit line of business primarily due to the runoff of acquisitions from 1997; a $.3 million decrease in family group term life and a $.3 million decrease in all other lines of business. The increase at Standard Life is comprised of: an increase of $.8 million in group life due to the acquisition of the volunteer firefighters block of business effective April 1, 1999; an increase of $2.6 million in HMO reinsurance due to an increase in retention in 1999; an increase of $.5 million in POS also due to higher retention; an increase of $.4 million in the provider excess line of business due to increased production; and a $.3 million increase in group term life due to increased production; such increases were offset by: a $1.4 million decrease in its DBL line due to terminations in 1998 resulting in a lower premium base in 1999; a $.8 million decrease in an accident and health reinsurance facility assumed due to the runoff of this line; and a $2.2 million decrease in stop-loss health premiums due to an overall reduction in retention in 1999.

Total net investment income increased $7.6 million primarily due to the increase in assets at Madison Life related to acquisitions, higher returns on certain limited partnership investments in 1999 ($3.0 million) and an increase in interest income earned from assumption reinsurance transactions ($3.4 million). The annualized return on investments of the Insurance Group in 1999 was 7.1% compared to 6.4% in 1998.

Other income increased $1.7 million. Madison Life had an increase of $1.4 million due to fee income earned by the managing general underwriter; such fee income was offset by expenses described below in general and administrative expenses. Other income at Standard Life increased $.3 million due to an increase in fees earned from higher gross stop loss premiums.

Insurance benefits, claims and reserves increased $10.1 million reflecting an increase of $8.5 million at Madison Life and an increase of $1.6 million at Standard Life. Madison Life's increase resulted from: a $6.8 million increase in ordinary life and individual accident and health reserves and claims due to acquisitions of new blocks of business ($6.4 million) and other existing ordinary life and individual accident and health business ($.4 million); a $.7 million increase in group term life claims due to the increase in retention and the increase in premiums written; an increase of $3.2 million in interest credited to universal life and annuity policies due to the acquisitions effective June 30, 1999; and an increase of $2.1 million in LTD claims due to the increase in retention and the increase in premiums written; such increases were partially offset by: a $.5 million decrease in surrenders on ordinary life policies; a $3.3 million decrease in the credit line of business due to the runoff of acquisitions and a reduction in the overall credit life loss ratio; and a $.5 million decrease in dental claims due to the runoff of this line. The change at Standard Life is comprised of: a $.4 million increase in provider excess reserves due to increased volume; increases of $1.4 million and $.6 million in group annuity and group life reserves, respectively, due to the acquisition of the volunteer firefighters block of business effective April 1, 1999; and a $1.6 million increase in reserves in HMO reinsurance due to the increase in retention in this line; such increases were offset by: a $1.0 million decrease in reserves on the accident and health reinsurance facility due to the runoff of this line; and a $1.4 million decrease in DBL claims and reserves due to decreased volume. Although loss ratios have significantly worsened in 1999 in the stop-loss line of business, benefits, claims and reserves on this line have remained constant due to Standard Life's decrease in retention resulting in a reduction in net stop-loss premiums as mentioned above.

Amortization of deferred policy acquisition costs and general and administrative expenses for the Insurance Group increased $4.8 million. Madison Life's expenses increased $3.8 million. Standard Life's expenses increased $.6 million and IndependenceCare's expenses increased $.4 million due to start-up costs. The increase at Madison Life is primarily due to $.9 million in general expenses from the MGU in which Madison Life acquired a controlling interest effective December 31, 1997 and an increase in net commission expense of $2.3 million due to acquisitions; a $.1 million increase in general expenses; and an increase of $.5 million in premium taxes due to the increase in premiums. The increase at Standard Life is primarily due to: a $.2 million increase in net commission expense; and a $.7 million increase in general expenses due to an increase in salary and consulting expense as a result of expansion into new products. Such decreases were partially offset by: a $.3 million reduction in premium taxes due to lower rates and a reduction in premiums.

Corporate

Operating income for the year ended December 31, 1999 decreased $.7 million to a loss of $1.3 million as compared to a loss of $.6 million for the year ended December 31, 1998. Operating income includes realized and unrealized losses of $.1 million in 1998. Excluding realized and unrealized losses, Corporate had a loss of $1.3 million in 1999 and $.5 million in 1998. Investment income increased $.4 million from 1998 due to higher returns on certain limited partnership investments in 1999. Other income decreased $.3 million as a result of fee income earned from the termination of the guarantee of certain subordinated indebtedness of Zimmerman in 1998 for which no similar amount was recorded in 1999. Selling, general and administrative expenses increased $.8 million due to an increase in compensation expense from the termination of options in 1999 and an increase in consulting expenses in 1999. Interest expense increased $.1 million due to the Company's draw down on its revolving line of credit in December 1999.

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 income securities; and (iii) earnings on investments. Such cash flow is used partially to finance liabilities for insurance policy benefits. These liabilities represent long-term and short-term obligations which are calculated using certain assumed interest rates.

Asset Quality

The nature and quality of insurance company investments must comply with all applicable statutes and regulations which have been promulgated primarily for the protection of policyholders. Of the aggregate carrying value of the Insurance Group's investment assets, approximately 87% was invested in investment grade fixed income securities, resale agreements, policy loans and cash and cash equivalents at December 31, 2000. Also at such date, approximately 98% of the Company's fixed maturities were investment grade. These investments carry less risk and, therefore, lower interest rates than other types of fixed maturity investments. At December 31, 2000, approximately 2% of the carrying value of fixed maturities was invested in diversified non-investment grade fixed income securities (investments in such securities have different risks than investment grade securities, including greater risk of loss upon default, and thinner trading markets). Less than .1% of the Company's total investments were in real estate and mortgage loans. The Company has no non-performing fixed maturities.

Risk Management

The Company manages interest rate risk by seeking to maintain a portfolio with a duration and average life that falls within the band of the duration and average life of the applicable liabilities, and may utilize options to modify the duration and average life of such assets; see Note 1(F)(iv) of Notes to Consolidated Financial Statements.

The following summarizes the estimated pre-tax change in fair value (based upon hypothetical parallel shifts in the U.S. Treasury yield curve) of the fixed income portfolio assuming immediate changes in interest rates at specified levels at December 31, 2000:

	Estimated			Estimated Change in
Change in Interest Rates	Fair Value			Fair Value
			(in millions)
300 basis point rise	$	323.3			$	(55.4)
200 basis point rise	340.4					(38.3)
100 basis point rise	359.3					(19.4)
Base scenario	378.7					-
100 basis point decline	397.8					19.1
200 basis point decline	415.5					36.8
300 basis point decline	433.6					54.9

The Company monitors its investment portfolio on a continuous basis and believes that the liquidity of the Insurance Group will not be adversely affected by its current investments. This monitoring includes the maintenance of an asset-liability model that matches current insurance liability cash flows with current investment cash flows. This is accomplished by first creating an insurance model of the Company's in-force policies using current assumptions on mortality, lapses and expenses. Then, current investments are assigned to specific insurance blocks in the model using appropriate prepayment schedules and future reinvestment patterns. The results of the model specify whether the investments and their related cash flows can support the related current insurance cash flows. Additionally, various scenarios are developed changing interest rates and other related assumptions. These scenarios help evaluate the market risk due to changing interest rates in relation to the business of the Insurance Group.

In the Company's analysis of the asset-liability model, a 100 to 300 basis point change in interest rates on the Insurance Group's liabilities would not be expected to have a material adverse effect on the Company. With respect to its liabilities, if interest rates were to increase, the risk to the Company is that policies would be surrendered and assets would need to be sold. This is not a material exposure to the Company since a large portion of the Insurance Group's interest sensitive policies are burial policies that are not subject to the typical surrender patterns of other interest sensitive policies, and many of the Insurance Group's universal life and annuity policies come from liquidated companies which tend to exhibit lower surrender rates than such policies of continuing companies. Additionally, there are charges to help offset the benefits being surrendered. If interest rates were to decrease substantially, the risk to the Company is that some of its investment assets would be subject to early redemption. This is not a material exposure because the Company would have additional gains in its portfolio to help offset the future reduction of investment income. With respect to its investments, the Company employs (from time to time as warranted) investment strategies to mitigate interest rate and other market exposures.

Balance Sheet

The increase in cash is offset by the increase in due to brokers due to the timing of a securities trade. The increase in total investments is due to the increase in unrealized gains on such securities and the decrease in notes receivable that were paid off and subsequently reinvested in fixed maturities.

The Company had net receivables from reinsurers of $144.0 million at December 31, 2000. Substantially all of the business ceded to such reinsurers is of short duration. All of such receivables are either due from highly rated companies or are adequately secured. Accordingly, no allowance for doubtful accounts was necessary at December 31, 2000.

Corporate

Corporate derives its funds principally from: (i) dividends and interest income 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.

Total Corporate liquidity (cash, cash equivalents, resale agreements, fixed maturities, equity securities and partnership interests) amounted to $12.8 million at December 31, 2000. During 2000, IHC repurchased 20,582 shares of common stock for $.2 million under a repurchase program initiated in 1991.

CAPITAL RESOURCES

Due to its good capital ratios, broad licensing and excellent asset quality and credit-worthiness, the Insurance Group remains well positioned to increase or diversify its current activities. It is anticipated that future acquisitions or other expansion of operations will be funded internally from existing capital and surplus and parent company liquidity, including the remaining $15.0 million availability under its credit facility. 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.

In accordance with SFAS No. 115, the Company may carry its portfolio of fixed income securities either as held to maturity (carried at amortized cost), as trading securities (carried at fair market value) or as available-for-sale (carried at fair market value); the Company has chosen to carry all of its debt securities as available-for-sale. The Company experienced a change in unrealized gains of $12.3 million, net of deferred taxes of $.8 million and net of deferred policy acquisition costs of $2.3 million in total stockholders' equity, reflecting net unrealized gains of $1.2 million at December 31, 2000 versus net unrealized losses of $11.0 million at December 31, 1999. From time to time, as warranted, the Company employs investment strategies to mitigate interest rate and other market exposures.

The results of 2000 reflect a higher effective tax rate than in 1999 due to the phase out of the small life insurance company deduction. As previously reported, the Company expects that its future results will continue to reflect higher effective tax rates.

OUTLOOK

Managing General Underwriters

Subsequent to December 31, 2000, IndependenceCare acquired all of the assets of two managed care managing general underwriters ("MGU") based in Nashville and Chicago writing Provider Excess Loss and HMO Reinsurance. IHC also acquired a significant equity stake in Standard Life's largest health care MGU. These investments, together with the Company's equity stakes in four other MGUs, should enable IHC to control a substantial portion of Standard Life's distribution network for its core health care products, as well as providing an outlet for our other group benefits products, including group life, statutory short-term disability, long- term disability, vision and dental marketed to employers through brokers, producers and HMO's.

December 1999 Assumption Reinsurance Transactions

To facilitate its acquisition activity, IHC has contributed $35.0 million to Madison Life since 1993. These contributions served to further enhance the Insurance Group's already good capital ratios, broad licensing and excellent asset quality. The Company currently has corporate liquidity of $12.8 million. The Company also has $15.0 million available under its $30.0 million credit facility (further described in Note 11 of the Notes to Consolidated Financial Statements). The Company anticipates that it can use its current liquidity, its available line of credit and/or raise additional capital in the public or private markets to the extent determined necessary or desirable in order to pursue acquisitions.

Business

The Company anticipates increasing its premium volume through: (i) investments in affiliated marketing subsidiaries; (ii) expansion of its network of MGUs, MGAs, HMOs, general agents and agents; (iii) acquisitions of blocks of business; (iv) greater geographical diversity; and (v) strategic marketing alliances. The Company is particularly interested in acquiring the following types of policies: traditional and group life, interest sensitive life, credit life and health, limited benefit health (e.g., cancer or hospital indemnity), medical stop-loss, DBL blocks, and certain other disability. In anticipation of increased acquisition opportunities, the Company has significantly improved its administration systems which has enabled it to more efficiently convert and manage acquired blocks.

Although federal and state legislative and regulatory bodies have proposed various health care and insurance reform initiatives in recent years (see Item 1. Business), the Company anticipates that its insurance products will continue to be viable in any such changed environment.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and in June 2000 issued SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities." The requirements for SFAS No. 133 were delayed by SFAS No. 137, "Deferral of the Effective Date of SFAS Statement No. 133." Both SFAS No. 133 and 138 are effective for financial statements for periods beginning after June 15, 2000. SFAS No. 133 establishes standards for accounting and reporting for derivative instruments and for hedging activities. It requires that an entity recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. The Company has evaluated the impact of SFAS No. 133 and 138 and would have recorded an additional loss of $66,000 before tax in the income statement had they been adopted at December 31, 2000.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The statement requires the Company to reclassify certain financial assets pledged as collateral and to disclose certain information about its collateral activities at December 31, 2000. There was no impact on the financial statements of the Company at December 31, 2000. The Company is currently evaluating the impact of SFAS No. 140 for those provisions effective March 31, 2001, but does not expect it to have a material impact on the Company.

This report and other reports and statements filed by the Company with the Securities and Exchange Commission contain or may contain certain forward looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995) which are subject to certain risks and uncertainties. Among those factors which could cause the actual results to differ materially from those suggested by such statements are the following: catastrophic losses in the Company's insurance lines or a material aggregation of losses; changes in federal or state law affecting the Company's insurance products; availability of adequate retrocessional insurance coverage at appropriate prices; stock and bond market volatility; the effect of changes required by generally accepted accounting practices or statutory accounting practices; and other risks which are described from time to time in the Company's filings with the Securities and Exchange Commission.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 7.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Consolidated Financial Statements and Schedules on page 32.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this Item is incorporated by reference to "Election of Directors" and "Executive Officers" in the Company's Proxy Statement for its 2001 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this Item is incorporated by reference to "Executive Compensation" in the Company's Proxy Statement for its 2001 Annual Meeting of Stockholders, except that the information required by paragraphs (i), (k) and (l) of Item 402 Regulation S-K (§ 229.402) and set forth in such Proxy Statement is specifically not incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT

Information required by this Item is incorporated by reference to "Principal Stockholders" in the Company's Proxy Statement for its 2001 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item is incorporated by reference to "Principal Stockholders" in the Company's Proxy Statement for its 2001 Annual Meeting of Stockholders.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON

FORM 8-K

(a) (1) and (2) See Index to Consolidated Financial Statements

and Schedules on page 32.

(b) (3) EXHIBITS See Index to Exhibits on page 76.

No reports were filed on Form 8-K during 2000.

SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 29th, 2001.

INDEPENDENCE HOLDING COMPANY

(REGISTRANT)

By:/s/ Roy T.K. Thung

Roy T.K. Thung

Director, President,

and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of the 29th day of March, 2001.

/s/ Larry R. Graber

Larry R. Graber

Director

/s/ Harold E. Johnson

Harold E. Johnson

Director

/s/ Allan C. Kirkman

Allan C. Kirkman

Director

/s/ Steven B. Lapin

Steven B. Lapin

Director and Vice Chairman

/s/ Edward Netter

Edward Netter

Director and Chairman

/s/ Robert P. Ross, Jr.

Robert P. Ross, Jr.

Director

/s/ Edward J. Scheider

Edward J. Scheider

Director

/s/ James G. Tatum

James G. Tatum

Director

/s/ Roy T.K. Thung

Roy T.K. Thung

Director, President,

and Chief Executive Officer

(Principal Executive Officer)

/s/ Teresa A. Herbert

Teresa A. Herbert

Vice President

and Chief Financial Officer

(Principal Financial and Accounting Officer)

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

		PAGES
INDEPENDENT AUDITORS' REPORT		33
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets at December 31, 2000
	and 1999	34
Consolidated Statements of Operations for the years ended
	December 31, 2000, 1999 and 1998	35
Consolidated Statements of Changes in Stockholders' Equity
	for the years ended December 31, 2000, 1999 and 1998	36
Consolidated Statements of Cash Flows for the years ended
	December 31, 2000, 1999 and 1998	37 - 38
Notes to Consolidated Financial Statements		39 - 68
SCHEDULES:*
Summary of investments - other than investments in
	affiliates at December 31, 2000 (Schedule I)	69
Condensed financial information of parent company
	(Schedule III)	70 - 74
Supplementary insurance information (Schedule V)		75
EXHIBIT INDEX		76
*All other schedules have been omitted as they are not applicable or not required, or the information is given in the consolidated financial statements, notes thereto in other schedules.

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND STOCKHOLDERS

INDEPENDENCE HOLDING COMPANY:

We have audited the consolidated financial statements of Independence Holding Company and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independence Holding Company and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG LLP

New York, New York

March 20, 2001

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,							2000		1999
ASSETS:
	Investments:
		Short-term investments					$	5,455,000	$	9,668,000
		Securities purchased under agreements
					to resell (Note 3)		22,253,000		14,952,000
		Fixed maturities (Note 4)					378,745,000		339,646,000
		Equity securities (Note 4)					18,770,000		15,613,000
		Other investments (Note 8)						65,284,000		61,373,000
					Total investments		490,507,000		441,252,000
	Cash and cash equivalents						18,024,000		6,689,000
	Due from brokers						2,187,000		416,000
	Deferred acquisition costs (Note 1)						26,731,000		32,537.000
	Due and unpaid premiums						7,977,000		14,645,000
	Due from reinsurers						152,872,000		134,764,000
	Notes and other receivables						15,601,000		37, 548,000
	Other assets (Note 1)							10,729,000		10,500,000
					TOTAL ASSETS		$	724,628,000	$	678,351,000
LIABILITIES AND STOCKHOLDERS' EQUITY:
	LIABILITIES:
	Future insurance policy benefits (Note 1)						$	322,868,000	$	289,689,000
	Funds on deposit						170,973,000		185,936,000
	Unearned premiums						20,485,000		21,557,000
	Policy claims (Note 9)						7,224,000		7,062,000
	Other policyholders' funds						4,642,000		5,014,000
	Due to brokers						24,597,000		9,593,000
	Due to reinsurers						8,853,000		16,012,000
	Accounts payable, accruals and other
			liabilities				20,311,000		20,424,000
	Income taxes (Note 15)						3,142,000		4,513,000
	Debt (Note 11)							15,000,000		15,000,000
				TOTAL LIABILITIES				598,095,000		574,800,000
STOCKHOLDERS' EQUITY: (Notes 12, 13 and 14)
	Preferred stock (none issued)						-		-
	Common stock, 7,878,813 and 7,898,110
		shares issued and outstanding,
		respectively, net of 1,784,906 and
		1,766,524 shares in treasury, respectively					7,879,000		7,898,000
	Paid-in- capital						80,099,000		80,308,000
	Accumulated other comprehensive
		income (loss):
	Unrealized gains (losses) on investments, net						1,237,000		(11,028,000)
	Retained earnings							37,318,000		26,373,000
		TOTAL STOCKHOLDERS' EQUITY						126,533,000		103,551,000
				TOTAL LIABILITIES AND
						STOCKHOLDERS' EQUITY	$	724,628,000	$	678,351,000

See accompanying notes to consolidated financial statements.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,				2000			1999			1998
REVENUES
	Premiums earned (Note 17)			$	90,289,000		$		90,393,000	$		80,658,000
	Net investment income (Note 6)			35,038,000			29,815,000			21,782,000
	Net realized and unrealized
			(losses) gains (Note 7)	(228,000)			(1,165,000)			2,013,000
	Other income				5,318,000			7,671,000			6,161,000
					130,417,000			126,714,000			110,614,000
EXPENSES:
	Insurance benefits, claims and
		reserves		68,315,000			69,773,000			59,631,000
	Amortization of deferred
			acquisition costs (Note 1)	6,447,000			6,561,000			5,306,000
	Interest expense on long- term
			debt (Note 11)	1,258,000			122,000			-
	Selling, general and
			administrative expenses		37,563,000			35,698,000			31,267,000
					113,583,000			112,154,000			96,204,000
	Operating income before income
			taxes	16,834,000			14,560,000			14,410,000
	Income tax expense (Note 15)				5,482,000			4,156,000				3,353,000
	NET INCOME			$	11,352,000		$		10,404,000	$		11,057,000
	Basic Income per common share			$		1.44	$		1.30	$		1.36
WEIGHTED AVERAGE COMMON SHARES
	OUTSTANDING				7,896,000			7,979,000				8,157,000
	Diluted Income per common share			$	1.42		$		1.29	$		1.33
WEIGHTED AVERAGE DILUTIVE
	SHARES OUTSTANDING				7,984,000			8,058,000			8,292,000

See accompanying notes to consolidated financial statements.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

														ACCUMULATED
																	OTHER						TOTAL
					COMMON STOCK								PAID-IN	COMPREHENSIVE						RETAINED	STOCKHOLDERS'
						SHARES		AMOUNT					CAPITAL	INCOME (LOSS)						EARNINGS			EQUITY
BALANCE AT DECEMBER 31, 1997					8,173,186		$		8,173,000	$		75,303,000		$		1,892,000		$	5,637,000		$	91,005,000
		COMPREHENSIVE INCOME:
			Net income															11,057,000				11,057,000
			Net change in unrealized gains											751,000								751,000
		TOTAL COMPREHENSIVE INCOME																				11,808,000
			Purchase of common stock
				and warrants	(75,536)		(76,000)			(802,000)											(878,000)
			Exercise of common stock options		6,050		7,000			48,000											55,000
			Credit for liability of business
				transferred						7,905,000											7,905,000
			Common stock dividend																(368,000)			(368,000)
BALANCE AT DECEMBER 31, 1998					8,103,700				8,104,000		82,454,000					2,643,000			16,326,000			109,527,000
	COMPREHENSIVE INCOME:
			Net income															10,404,000			10,404,000
			Net change in unrealized gains											(13,671,000)								(13,671,000)
	TOTAL COMPREHENSIVE LOSS																					(3,267,000)
			Purchase of common stock
				and warrants	(255,750)		(256,000)			(2,478,000)											(2,734,000)
			Exercise of common stock options		50,160		50,000			258,000											308,000
			Tax benefit on option exercise							74,000											74,000
			Common stock dividend																(357,000)			(357,000)
BALANCE AT DECEMBER 31, 1999					7,898,110				7,898,000			80,308,000			(11,028,000)				26,373,000			103,551,000
	COMPREHENSIVE INCOME:
			Net income															11,352,000				11,352,000
			Net change in unrealized gains											12,265,000								12,265,000
	TOTAL COMPREHENSIVE INCOME																					23,617,000
			Purchase of common stock
				and warrants	(20,582)		(20,000)			(211,000)											(231,000)
			Exercise of common stock options		2,200		2,000			2,000											4,000
			Fractional shares from 10% stock
				dividend	(915)				(1,000)										(12,000)			(13,000)
			Common stock dividend																(395,000)			(395,000)
BALANCE AT DECEMBER 31, 2000					7,878, 813		$		7,879,000	$		80,099,000		$	1,237,000			$	37,318,000		$	126,533,000

See accompanying notes to consolidated financial statements.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,						2000		1999			1998
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income					$	11,352,000	$		10,404,000	$	11, 057,000
		Adjustments to reconcile net income to net
			cash provided by operating activities:
		Amortization of deferred acquisition costs				6,447,000		6,561,000			5,306,000
		Realized losses (gains) on sales of
			investment securities			432,000		1,119,000			(2,111,000)
		Unrealized (gains) losses on
			trading securities			(204,000)		46,000			98,000
		Equity income				(360,000)		(423,000)			(158,000)
		Depreciation and amortization				957,000		599,000			542,000
		Deferred tax benefits				(660,000)		(414,000)			(512,000)
		Income taxes credited to paid in capital				-		74,000			-
		Other				(650,000)		(1,164,000)			(274,000)
	Change in assets and liabilities:
		Net sales of trading securities				466,000		493,000			483,000
		Increase in insurance liabilities				8,250,000		50,016,000			23,884,000
		Additions to deferred acquisition costs				(2,971,000)		(22,575,000)			(4,682,000)
		Change in net amounts due
			from and to reinsurers			(25,267,000)		8,404,000			(25,051,000)
		Change in income tax liability				(1,551,000)		(847,000)			667,000
		Change in due and unpaid premiums				6,668,000		(4,332,000)			(3,865,000)
		Other					(528,000)		(2,118,000)			(5,237,000)
				Net cash provided by
					operating activities		2,381,000		45,843,000			147,000

(CONTINUED)

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

			YEAR ENDED DECEMBER 31,						2000		1999		1998
CASH FLOWS FROM INVESTING ACTIVITIES:
	Change in net amount due from
			and to brokers						13,233,000		(9,497,000)		(24,635,000)
	Net purchases of short- term investments								(62,340,000)		(67,294,000)		(78,418,000)
	Sales and maturities of
			short-term investments						66,740,000		83,015,000		73,251,000
	Net (purchases) sales of resale and								000
			repurchase agreements						(7,301,000)		(3,271,000)		13,788,000
	Sales of equity securities								80,396,000		55,456,000		53,390,000
	Purchases of equity securities								(83,404,000)		(54,344,000)		(56,246,000)
	Sales and maturities of fixed maturities								649,699,000		445,395,000		174,459,000
	Purchases of fixed maturities								(673,739,000)		(583,486,000)		(188,907,000)
	Proceeds on sales of other investments								8,609,000		4,846,000		11,105,000
	Additional investments in other investments,
			net of distributions						(12,107,000)		(13,686,000)		(12,677,000)
	Cash received on coinsurance/assumption
			reinsurance transactions						12,715,000		121,728,000		28,127,000
	Acquisition of company								-		-		(2,188,000)
	Change in notes receivable									28,261,000		(26,474,000)		(997,000)
	Other									(7,182,000)		(7,608,000)		(47,000)
							Net cash provided (used) by
								investing activities		13,580,000		(55,220,000)		(9,995,000)
CASH FLOWS FROM FINANCING
	ACTIVITIES:
	Repurchase of common stock and warrants								(231,000)		(2,734,000)		(878,000)
	Exercise of common stock options								4,000		308,000		55,000
	Payments of investment- type
				insurance contracts					(4,029,000)		(4,029,000)		(4,096,000)
	Increase in long-term debt								-		15,000,000		-
	Dividends paid									(370,000)		(368,000)		(372,000)
						Net cash (used) provided
								by financing activities		(4,626,000)		8,177,000		(5,291,000)
		Increase (decrease) in cash
				and cash equivalents					11,335,000		(1,200,000)		(15,139,000)
		Cash and cash equivalents,
					beginning of year					6,689,000		7,889,000		23,028,000
		Cash and cash equivalents, end of year							$	18,024,000	$	6,689,000	$	7,889,000

See accompanying notes to consolidated financial statements.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_______________________________________________________ ____________________

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

(A) BUSINESS AND ORGANIZATION

Independence Holding Company ("IHC") is a holding company engaged principally in the life and health insurance business through its wholly-owned subsidiaries, Standard Security Life Insurance Company of New York ("Standard Life"), Madison National Life Insurance Company, Inc. ("Madison Life"), First Standard Security Insurance Company ("First Standard"), IndependenceCare Holdings L.L.C. ("IndependenceCare") and their subsidiaries (collectively, the "Insurance Group"). IHC and its subsidiaries (including the Insurance Group) are collectively referred to as the "Company."

Geneve Corporation, a diversified financial holding company, and its affiliated entities (collectively, "Geneve") held approximately 57% of IHC's outstanding common stock at December 31, 2000.

(B) PRINCIPLES OF CONSOLIDATION AND PREPARATION OF FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of IHC and its subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect: (i) the reported amounts of assets and liabilities; (ii) the disclosure of contingent assets and liabilities at the date of the financial statements; and (iii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(C) RECLASSIFICATION

Certain amounts in prior years' consolidated financial statements and notes thereto have been reclassified to conform to the 2000 presentation.

(D) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents are carried at cost which approximates fair value and include principally interest-bearing deposits at brokers, money market instruments and U.S. Treasury securities with original maturities of less than 91-days. Investments with original maturities of 91-days to 1 year are considered short-term investments and are carried at cost which approximates fair value.

(E) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities purchased under agreements to resell ("resale agreements") and securities sold under agreements to repurchase ("repurchase agreements") are treated as financing

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_______________________________________________________ ____________________

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

transactions and are carried at the amounts at which the securities will be subsequently resold or repurchased as specified in the agreements.

(F) INVESTMENTS IN SECURITIES

(i) Investments in fixed income securities, notes and redeemable preferred stock, equity securities, and derivatives (options and options on future contracts) are valued as follows:

(a) Securities which are held for trading purposes are carried at estimated fair value ("fair value"). Unrealized gains or losses are credited or charged, as appropriate, to the Consolidated Statements of Operations.

(b) Securities which may or may not be held to maturity ("available-for-sale") are carried at fair value. Unrealized gains or losses, net of deferred income taxes and adjustments to deferred policy acquisition costs, are credited or charged, as appropriate, directly to other comprehensive income. Realized gains and losses on sales of available-for-sale securities, and unrealized losses considered to be other than temporary, are credited or charged to the Consolidated Statements of Operations.

(ii) Financial instruments sold, but not yet purchased, represent obligations to replace borrowed securities that have been sold. Such transactions occur in anticipation of declines in the fair value of the securities. The Company's risk is an increase in the fair value of the securities sold in excess of the consideration received, but that risk is mitigated as a result of relationships to certain securities owned. Unrealized gains or losses on open transactions are credited or charged, as appropriate, to the Consolidated Statement of Operations. While the transaction is open, the Company will also incur an expense for any accrued dividends or interest payable to the lender of the securities. When the transaction is closed, the Company realizes a gain or loss in an amount equal to the difference between the price at which the securities were sold and the cost of replacing the borrowed securities.

(iii) Gains or losses on sales of securities are determined on the basis of specific identification.

(iv) The Company enters into derivative financial instruments, such as put and call option contracts on interest rate futures contracts, to minimize losses on portions of the Company's fixed income portfolio in a rapidly changing interest rate environment and equity index options to offset fluctuations in the equity markets. The derivative financial instruments are all readily marketable and are carried on the Consolidated Balance Sheets at their current fair value with changes in unrealized gains or losses, net of deferred income taxes, credited or charged, as appropriate, directly to other comprehensive income for investments classified as available-for- sale or to the Consolidated Statements of Income for investments classified as trading. All realized gains and losses are reflected currently in the Consolidated Statements of Income. As of December 31, 2000, the Company held US Treasury put options that expire in 2001.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_______________________________________________________ ____________________

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(v) Fair value is determined by quoted market prices, where available, or by independent pricing services.

1. PARTNERSHIP INTERESTS

Partnership interests primarily consist of investments in partnerships that have relatively "market neutral" arbitrage strategies, or strategies which are relatively insensitive to interest rates and all securities held by these partnerships are carried at fair value. All partnership investments are carried on the equity method, which approximates the Company's equity in their underlying net book value.

2. MORTGAGE LOANS AND POLICY LOANS

Mortgage loans and policy loans are stated at their aggregate unpaid balances.

3. DEFERRED ACQUISITION COSTS

The costs of acquiring new insurance business, principally commissions and certain variable underwriting, agency and policy issuance expenses, have been deferred and are being amortized, with interest, over the premium paying period of the related insurance policies in proportion to the ratio of the annual premium revenue to the total anticipated premium revenue. Anticipated premium revenue was estimated using assumptions as to mortality (morbidity on health insurance) and withdrawals consistent with those used in calculating future insurance policy benefits. Credit life and credit accident and health deferred insurance acquisition costs are amortized proportionally over the period during which the premium is earned. Deferred acquisition costs are periodically reviewed to determine recoverability from future income, including investment income, and, if not recoverable, are charged to expense. Deferred acquisition costs have been decreased (increased) by $2,330,000 and ($2,276,000) in 2000 and 1999, respectively, representing the portion of unrealized (losses) gains in stockholders' equity that have been allocated to deferred acquisition costs on interest sensitive products rather than as a component of other comprehensive income.

4. PROPERTY AND EQUIPMENT

Property and equipment included in other assets are stated at cost of $1,865,000 and $1,951,000 which is net of accumulated depreciation and amortization of $3,045,000 and $2,568,000 in 2000 and 1999, respectively. Improvements are capitalized while repair and maintenance costs are charged to operations as incurred. Depreciation of property and equipment has been provided on the straight-line method over the estimated useful lives of the respective assets. Amortization of leasehold improvements has been provided on the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(K) FUTURE INSURANCE POLICY BENEFITS

Liabilities for future insurance policy benefits, including future dividends on participating policies, have been computed primarily using the net level premium method based on anticipated investment yield, mortality (morbidity on health insurance) and withdrawals. Life

reserve interest rates are generally graded and range from 2% to 9% per annum. Withdrawals are based on experience.

Future insurance policy benefits consist of the following at December 31, 2000 and 1999:

	2000			1999
			(IN THOUSANDS)
Life	$	168,120		$	158,300
Accident and health		154,748			131,389
	$	322,868		$	289,689

(L) FUNDS ON DEPOSIT

Funds received for certain long-duration contracts (principally, annuities and universal life policies) are credited directly to a policyholder liability account-funds on deposit. Withdrawals are recorded directly as a reduction of respective policyholders' funds on deposit. Amounts on deposit were credited at an annual rate of 2.5% to 13.9% in 2000 and 1999. The average credited rate was 6.1% and in both of 2000 and 1999 respectively.

(M) INSURANCE PREMIUM REVENUE RECOGNITION

Premiums from short-duration contracts ordinarily will be recognized as revenue over the period of the contracts in proportion to the amount of insurance protection provided. Premiums from long-duration contracts are recognized as revenue when due from policyholders.

(N) PARTICIPATING POLICIES

Participating policies represent 18.4%, 12.1% and 15.8% of the individual life insurance in-force and 1.2%, 1.2% and 1.4% of the net premiums earned, as of and for the years ended December 31, 2000, 1999 and 1998, respectively, and provide for the payment of dividends. Dividends to policyholders are determined annually and are payable only upon declaration by the Board of Directors of the insurance companies. With respect to Standard Life, New York State Insurance Department requirements limit the amount of profit on participating policies which can inure to stockholders to 10% of such profits or $.50 per year

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

per $1,000 of such insurance in-force, whichever is greater. A significant portion of the participating business is comprised of non-dividend paying policies. With regard to the remaining policies, dividends are either paid or earned on participating policies based on guaranteed contract dividend amounts, by a flat percentage of premiums, or by the same dollar amount paid in prior years as long as the policy is premium paying. Because of the methods described above, no allocation method of earnings is required. At December 31, 2000, none of the insurance companies' stockholders' equity was restricted because of participating policyholders' surplus.

(O) DEFERRED INCOME TAXES

The provision for deferred income taxes is based on the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to temporary differences related to amounts included in the Consolidated Statement of Operations and the Consolidated Statement of Changes in Stockholders' Equity arising from differences between amounts reported in the Consolidated Financial Statements and the tax bases of existing assets and liabilities. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

(P) INCOME PER COMMON SHARE

Included in the diluted earnings per share calculation for 2000, 1999 and 1998, respectively, are 88,000, 79,000 and 135,000 incremental shares from the assumed exercise of options using the treasury stock method. Net income does not change as a result of the assumed dilution of options. Warrants to purchase 2,074,058 shares of common stock at $14.89 per share were not included in the computation of diluted earnings per share because the warrants' strike price was greater than the average market price of the common shares during 2000, 1999 and 1998.

(Q) REINSURANCE

Amounts paid for or recoverable under reinsurance contracts are included in total assets or total liabilities as due from reinsurers or due to reinsurers. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

(R) STOCK BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock-based compensation plan. Since stock options under the plan are issued at fair value on date of grant, no compensation cost has been recognized in the Consolidated Statement of Operations. Accordingly, the Company follows the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."

(S) NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and in June 2000 issued SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities." The requirements for SFAS No. 133 were delayed by SFAS No. 137, "Deferral of the Effective Date of SFAS Statement No. 133." Both SFAS No. 133 and 138 are effective for financial statements for periods beginning after June 15, 2000. SFAS No. 133 establishes standards for accounting and reporting for derivative instruments and for hedging activities. It requires that an entity recognizes all derivatives as either assets or liabilities in the balance sheet and measures those instruments at fair value. The Company has evaluated the impact of SFAS No. 133 and 138 and would have recorded an additional loss of $66,000 before tax in the income statement had they been adopted at December 31, 2000.

In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after Mach 31, 2001. The statement requires the Company to reclassify certain financial assets pledged as collateral and to disclose certain information about its collateral activities at December 31, 2000. There was no impact on the financial statements of the Company at December 31, 2000. The Company is currently evaluating the impact of SFAS No. 140 for those provisions effective March 31, 2001, but does not expect it to have a material impact on the Company.

1. 10% STOCK DIVIDEND

On August 28, 2000, the Company paid a 10% special stock dividend to shareholders of record as of August 14, 2000. Fractional shares were paid in cash in lieu of stock. Accordingly, the number of shares of common stock outstanding, common stock options, the number of shares issuable pursuant to the Warrants, all per share calculations and exercise prices included in the accompanying Consolidated Financial Statements and Notes thereto, reflect the 10% stock dividend and its retroactive effect.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. ASSUMPTION REINSURANCE TRANSACTIONS

On December 9, 1999, Madison Life closed four assumption reinsurance transactions to assume approximately 115,000 life and annuity policies from companies that were in liquidation. A summary of the assets acquired and liabilities assumed as of the effective dates is as follows:

		(IN THOUSANDS)
Cash		$	82,127
Notes receivable			28,311
Deferred acquisition costs			17,061
Due and unpaid premiums			585
Other assets			3,391
Policy loans			4,045
	Total assets	$	135,520
Future policy liabilities - life		$	65,326
Funds on deposit			69,984
Other policyholders funds			210
	Total liabilities	$	135,520

The notes receivable represented obligations of the Mississippi Guaranty Association ($26,295,000) and South Carolina Guaranty Association ($2,016,000), accrued interest at the rate of 7.25% per annum and matured on December 9, 2000. All of such notes have been repaid. The policy loans bear an average interest rate of 7.0%.

NOTE 3. RESALE AGREEMENTS

Resale agreements are utilized to invest excess funds on a short-term basis. At December 31, 2000, the Company had $22,253,000 in resale agreements outstanding, all of which settled on January 2, 2001 and were subsequently reinvested. The Company maintains control of securities purchased under resale agreements and values the collateral on a daily basis and obtains additional collateral, if necessary, to protect the Company in the event of default by the counterparties.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. INVESTMENT SECURITIES

The cost, (amortized cost with respect to certain fixed maturities) gross unrealized gains, gross unrealized losses and fair value of investments in securities are as follows:

								DECEMBER 31, 2000
									GROSS				GROSS
					AMORTIZED			UNREALIZED			UNREALIZED							FAIR
							COST		GAINS			(LOSSES)					VALUE
									(IN THOUSANDS)
FIXED MATURITIES
	AVAILABLE-FOR- SALE:
		Corporate securities			$	105,978		$	749	$	(3,700)			$		103,027
		Collateralized mortgage
				obligations ("CMO's")
				and asset backed
				securities	103,950			3,394		(1,722)				105,622
		U.S. Government and
				agencies obligations	95,038			2,995		(73)				97,960
		Agency mortgage backed
			security pass throughs		70,180			722		(83)				70,819
		Obligations of states
				and political
				subdivisions		1,297			27		(7)				1,317
		Total fixed maturities			$	376,443		$	7,887	$	(5,585)			$	378,745
EQUITY SECURITIES
		AVAILABLE-FOR- SALE:
				Common stock	$	11,436		$	1,963	$	(1,253)			$	12,146
				Preferred stock		6,673			-		(232)				6,441
				Options		249			-		(66)				183
		Total equity securities			$	18,358		$	1,963	$	(1,551)			$	18,770

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. INVESTMENT SECURITIES (CONTINUED)

								DECEMBER 31, 1999
									GROSS				GROSS
					AMORTIZED			UNREALIZED			UNREALIZED							FAIR
							COST		GAINS			(LOSSES)					VALUE
									(IN THOUSANDS)
FIXED MATURITIES
	AVAILABLE-FOR- SALE:
		Corporate securities			$	78,503		$	6	$	(3,385)			$		75,124
		Collateralized mortgage
				obligations ("CMO's")
				and asset backed
				securities	85,450			278		(2,308)				83,420
		U.S. Government and
				agencies obligations	100,129			67		(4,239)				95,957
		Agency mortgage backed
			security pass throughs		85,033			8		(2,252)				82,789
		Obligations of states
				and political
				subdivisions		2,542			26		(212)				2,356
		Total fixed maturities			$	351,657		$	385	$	(12,396)			$	339,646

EQUITY SECURITIES
	AVAILABLE-FOR- SALE:
		Common stock	$	9,834	$	534	$	(840)	$	9,528
		Preferred stock		6,289		83		(574)		5,798
				16,123		617		(1,414)		15,326
	TRADING:
		Common stock		495		1		(209)		287
	Total equity securities		$	16,618	$	618	$	(1,623)	$	15,613
FINANCIAL INSTRUMENTS SOLD,
BUT NOT YET PURCHASED
	TRADING:
		Common stock	$	(4)	$	4	$	-	$	-

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. INVESTMENT SECURITIES (CONTINUED)

The amortized cost and fair value of fixed maturities at December 31, 2000, by contractual maturity, are shown below. 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. Excluding extraordinary paydowns, the average life of mortgage backed securities is materially less than the original stated maturity.

			AMORTIZED		FAIR			% OF
			COST		VALUE			FAIR VALUE
					(IN THOUSANDS)
Due in one year or less		$		3,134	$	3,137	.8%
Due after one year through
	five years	77,799			77,945		20.6%
Due after five years through
	ten years	87,425			88,257		23.3%
Due after ten years				33,950		32,965			8.8%
		202,308			202,304		53.5%
Mortgage Backed Securities
	15 year	109,439			111,122		29.3%
	20 year	17,034			17,157		4.5%
	30 year			47,662		48,162			12.7%
		$		376,443	$	378,745			100.0%

The average fair value of trading options and futures contracts sold, but not yet purchased was $353,000 and $51,000 for 2000 and 1999, respectively.

Gross gains of $11,098,000 and gross losses of $11,572,000 were realized on sales of available-for-sale securities for the year ended December 31, 2000.

Gross gains of $7,733,000 and gross losses of $8,696,000 were realized on sales of available-for-sale securities for the year ended December 31, 1999.

At December 31, 2000 the Company had derivative instruments with a cost at $249,000 and a fair value at $183,000. The Company had no investments in derivative financial instruments at December 31, 1999.

NOTE 5. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of financial instruments not disclosed elsewhere in the notes:

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

(CONTINUED)

(A) POLICY LOANS

The fair value of policy loans is calculated by projecting the current policy loans in the aggregate to the end of the expected lifetime period of the life insurance business at the average policy loan rates and discounting them at a current market policy loan interest rate.

(B) FUNDS ON DEPOSIT

The Company has two types of funds on deposit. The first type is credited with a current market interest rate, resulting in a carrying value which approximates fair value. The second type carries fixed interest rates which are currently higher than current market interest rates. The fair value of these deposits was determined 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 carrying value which approximates fair value.

(C) DEBT

The fair value of long- term debt is determined to equal carrying value as all debt outstanding carries interest rates which are based on approximate current interest rates.

The estimated fair values of financial instruments are as follows:

		DECEMBER 31, 2000				DECEMBER 31, 1999
		CARRYING		FAIR		CARRYING		FAIR
		AMOUNT		VALUE		AMOUNT		VALUE
					(IN THOUSANDS)
FINANCIAL ASSETS:
	Fixed maturities	$	378,745	$	378,745	$	339,646	$	339,646
	Equity securities	18,770		18,770		15,613		15,613
	Policy loans	18,518		19,361		16,922		16,454
FINANCIAL LIABILITIES:
	Funds on deposit	170,973		171,781		185,936		187,017
	Long-term debt	15,000		15,000		15,000		15,000

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. NET INVESTMENT INCOME

Major categories of net investment income for the years ended December 31, 2000, 1999 and 1998 are summarized as follows:

		2000			1999		1998
				(IN THOUSANDS)
Fixed maturities		$	24,972		$	16,037	$	14,563
Equity securities		992			914		850
Short-term investments		5,280			1,912		1,050
Policy loans		864			721		964
Other		361			49		197
Interest income earned from
	assumption reinsurance
	agreements	316			4,498		1,072
Investment income from
	partnerships		4,667			6,297		3,086
Equity income from
	partnerships		363			423		158
Interest expense			(2,550)			(819)		-
Investment expenses			(227)			(217)		(158)
		$	35,038		$	29,815	$	21,782

Interest income earned from assumption reinsurance agreements represents the interest earned on the assets transferred from the effective date until the closing date.

NOTE 7. NET REALIZED AND UNREALIZED GAINS (LOSSES)

Net realized and unrealized gains (losses) on investments for the years ended December 31, 2000, 1999 and 1998 are as follows:

			2000			1999		1998
					(IN THOUSANDS)
	Fixed maturities		$	368		$	(3,308)	$	1,488
	Equity securities		(1,461)			2,935		974
	Financial instruments sold,
		but not yet purchased	1,529			(340)		(319)
	Options		(869)			(404)		(43)
	Other			1			(3)		11
Net realized (losses) gains			(432)			(1,120)		2,111
Net unrealized gains (losses)				204			(45)		(98)
			$	(228)		$	(1,165)	$	2,013

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. OTHER INVESTMENTS

Other investments consist of the following at December 31, 2000 and 1999:

	2000			1999
			(IN THOUSANDS)
Partnership interests	$	45,679		$	43,521
Policy loans	18,518			16,922
Mortgage loans	26			26
Other		1,061			904
	$	65,284		$	61,373

Included in partnership interests are the following significant investments:

A) Dolphin Limited Partnership-A

The Company had invested $22,215,000 and $21,227,000 at December 31, 2000 and 1999, respectively, in Dolphin Limited Partnership-A ("DLP-A"), a limited partnership which primarily invests in relatively "market neutral" strategies, such as merger arbitrage, convertible arbitrage and distressed situations.

Relatively "market neutral" strategies generally may be less affected by movements in the equity and fixed income markets than traditional investments. "Merger arbitrage" is an investment strategy primarily designed to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buy-outs, recapitalizations and spin-offs. "Convertible arbitrage" is a strategy principally designed to capitalize on discrepancies in the pricing of convertible securities and their underlying common stock or equivalents. "Distressed situations" principally means entities which are in bankruptcy proceedings or are otherwise financially distressed. While these strategies are considered relatively "market neutral," there are also risks associated with the underlying transactions.

Effective January 2000, substantially all of the assets of DLP-A and Dolphin International Fund, Ltd. (the "Fund"), a newly formed corporation, were invested in Dolphin Limited Partnership-I, L.P. ("DLP-I"). DLP-I has investment objectives and restrictions similar to those of DLP-A, and under normal circumstances is expected to apply those objectives and restrictions as if those investments were made directly by DLP-A. DLP-A and the Fund share in the profits and losses of DLP-I proportionately, with their losses being limited to the amount of their investments. The general partner of DLP-A and DLP-I currently has available another investment vehicle, and under the partnership agreements may form others.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. OTHER INVESTMENTS (CONTINUED)

The condensed balance sheets of DLP-A at December 31, 2000 and 1999 are as follows:

						2000			1999
								(IN THOUSANDS)
Investment in DLP- I						$	83,973		$	-
Investments at fair value							-			60,329
Due from brokers							-			28,677
			Total assets			$	83,973		$	89,006
Financial instruments sold, but not
	yet purchased					$	-		$	25,869
Other liabilities							37			1,137
		Total liabilities					37			27,006
Partners' capital:
	IHC					22,215			21,227
	Other partners						61,721			40,773
				Total liabilities and
					partners' capital	$	83,973		$	89,006

The condensed statements of operations for DLP-A for the years ended December 31, 2000, 1999 and 1998 are as follows:

		2000			1999		1998
				(IN THOUSANDS)
Net realized and unrealized
	gains	$	-		$	9,922	$	6,101
Net investment income			12,479			2,548		1,825
	Total revenues	12,479			12,470		7,926
Operating expenses			1,140			2,324		1,629
Net income		$	11,339		$	10,146	$	6,297
IHC's share of net income		$	2,988		$	3,067	$	2,102

1. Incopoint Limited Partnership

The Company had invested $12,957,000 and $13,408,000 at December 31, 2000 and 1999, respectively, in Incopoint Limited Partnership ("Incopoint"), a limited partnership which principally invests in relatively "market neutral" strategies and other investment partnerships.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. OTHER INVESTMENTS (CONTINUED)

The condensed balance sheets of Incopoint at December 31, 2000 and 1999 are as follows:

					2000			1999
							(IN THOUSANDS)
Cash and investments at fair value					$	19,368		$2	19,360
Investments in partnerships at equity					5,421			15,104
Other assets						87			26
			Total assets		$	24,876		$	34,490
Financial instruments sold, but not
	yet purchased				$	3,659		$	8,594
Other liabilities						369			227
			Total liabilities			4,028			8,821
Partners' capital:
	IHC				12,957			13,408
	Other partners					7,891			12,261
Partners' capital						20,848			25,669
		Total liabilities and
				partners' capital	$	24,876		$	34,490

The condensed statements of operations for Incopoint for the years ended December 31, 2000, 1999 and 1998 are as follows:

		2000				1999			1998
				(IN THOUSANDS)
Net realized and unrealized
	gains	$	944		$		734	$		4,554
Net investment income (expense)			(40)				4,492			(1,010)
	Total revenues	904			5,226			3,544
Expenses			25				25			25
Net income		$	879		$		5,201	$		3,519
IHC's share of net income		$	660		$		2,576	$		1,666

NOTE 9. INSURANCE POLICY CLAIMS

The liability for unpaid claims and claim adjustment expenses represents amounts needed to provide for the estimated cost of settling claims relating to insured events that have been incurred prior to the balance sheet date which have not yet been settled.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. INSURANCE POLICY CLAIMS (CONTINUED)

The change in the liability for unpaid claims and claim adjustment expenses for the Insurance Group's health and disability coverages for December 31, 2000, 1999 and 1998 is as follows:

			2000			1999			1998
					(IN THOUSANDS)
Balance at beginning of year			$	2,454		$		2,683	$	2,814
Less: reinsurance recoverables				193				186		274
Net balance at beginning
	of year			2,261			2,497			2,540
Amount incurred:
Current year			27,528			32,454			36,840
Prior years				12,015			7,729			6,679
		Total		39,543			40,183			43,519
Amount paid, related to:
Current year			21,273			24,805			27,570
Prior years				18,635				15,614		15,992
		Total		39,908			40,419			43,562
Net balance end of year			1,896			2,261			2,497
Plus: reinsurance recoverables				428				193		186
Balance at end of year			2,324			2,454			2,683
Unpaid life claims				4,900				4,608		2,697
			$	7,224		$		7,062	$	5,380

The preceding schedule reflects the due and unpaid, in the course of settlement and estimated incurred but not reported components of the unpaid claims reserves for the Insurance Group's health and disability coverages. Unpaid claims reserves recorded in future policy liabilities, which represent the present value of amounts not yet due on claims, are not reflected in the preceding schedule which accounts for a significant portion of the incurred amounts related to prior years. There is a significant amount of loss incurred in prior years in the Insurance Policy Claims Schedule due to the reclassification from "Future Policy Liabilities" discussed above. The incurred and paid data above reflects all activity for the year.

NOTE 10. LIABILITY OF BUSINESS TRANSFERRED

On December 31, 1996, IHC consummated the distribution of the common stock of Zimmerman Sign Company ("Zimmerman") on a pro rata basis to holders of record of IHC's common stock as of December 26, 1996.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. LIABILITY OF BUSINESS TRANSFERRED (CONTINUED)

In connection with the distribution of Zimmerman, a subsidiary of the Company guaranteed $10,000,000 of subordinated debt of Zimmerman (the "Guarantee"). Accordingly, the credit to stockholders' equity of $7,905,000 or $1.06 per share that would have been recorded upon consummation of the distribution of Zimmerman was deferred until such time as the subordinated debt was repaid or the Guarantee was eliminated. On September 30, 1998 the Guarantee was terminated; accordingly, the deferred credit of $7,905,000, or $1.06 per share, was credited to stockholders' equity as of September 30, 1998.

NOTE 11. DEBT

A subsidiary of IHC entered into a $30,000,000 line of credit on June 14, 1999. As to such subsidiary, the line of credit (i) contains restrictions with respect to, among other things, the creation of additional indebtedness, the consolidation or merger with or into certain corporations, the payment of dividends and the retirement of capital stock, (ii) requires the maintenance of minimum amounts of net worth, as defined, certain financial ratios, and certain investment restrictions, (iii) is secured by the stock of Madison Life and its immediate parent company and contribution notes of Madison Life aggregating $25,000,000 and (iv) expires on June 14, 2001. The Company is currently negotiating an extension of this expiration date. At December 31, 2000 and 1999, there was $15,000,000 outstanding under the line of credit at an interest rate of 8.26% and 7.58%, respectively.

Cash payments for interest were $1,218,000 and $30,000 for the years ended December 31, 2000 and 1999.

The aggregate maturities of debt at December 31, 2000 are as follows:

		(IN THOUSANDS)
2001		$	2,813
2002			3,750
2003			3,750
2004			3,750
2005			937
	TOTAL	$	15,000

NOTE 12. PREFERRED STOCK

IHC has 100,000 authorized shares of preferred stock, par value $1.00 per share.

NOTE 13. COMMON STOCK

(A) IHC has reserved 2,873,858 shares of common stock for issuance under its stock option plan and outstanding warrants at December 31, 2000.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. COMMON STOCK (CONTINUED)

(B) In 1991, IHC initiated a program of repurchasing shares of its common stock and warrants. During 2000, IHC repurchased 20,582 common shares at a cost of $231,000. From January 1, 1991 through December 31, 2000, 2,454,073 common shares, or 26.9% of the amount outstanding on January 1, 1991, have been repurchased at a cost of $15,011,000. All of such repurchased shares have either been retired, reissued, or become treasury shares. Since the inception of IHC's repurchase plan through December 31, 2000, 462,681 warrants have been repurchased at a cost of $155,000. All of such repurchased warrants have been retired.

(C) IHC has 15,000,000 authorized shares of common stock, par value $1.00 per share.

NOTE 14. STOCK-BASED COMPENSATION AND SHARE PURCHASE WARRANTS

(A) STOCK-BASED COMPENSATION

On May 25, 1988, the stockholders approved the amended and restated Stock Option and Incentive Stock Option Plan (the "Plan") under which 800,000 shares of common stock were reserved for options and other common stock awards to be granted under the Plan. On March 25, 1998, the Company's Board of Directors approved certain amendments to the Plan, including eliminating the prohibition on granting options after May 25, 1998. Under the terms of the Plan, exercise prices are equal to the quoted market value of the shares at the date of grant. Further, the options will expire in a range of five to ten years from the date of grant; with regard to employees, options will vest ratably over a three year period beginning on the first or second anniversary of the date of grant, and with regard to directors, options will vest six months from the date of grant. At December 31, 2000, options to purchase 255,300 shares were available for future grants under the Plan.

During 1999, the Company granted 24,750 Stock Appreciation Rights with a base price of $11.51. At the date of grant, the base price equaled the quoted market value of the shares. 50% of the rights vest on the fourth anniversary of the date of grant, with the remaining 50% vesting one year later. The rights will expire five years from the date of grant. At December 31, 2000, these rights had a remaining weighted average contract life of 3.4 years, and no rights were exercisable.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. STOCK-BASED COMPENSATION AND SHARE PURCHASE WARRANTS

(CONTINUED)

The following table summarizes information with respect to stock options granted under the Plan for the years ended December 31, 2000, 1999 and 1998:

			2000			1999			1998
			Weighted			Weighted			Weighted
			Average			Average			Average
			Exercise			Exercise			Exercise
		Shares	Price		Shares	Price		Shares	Price
Outstanding
	beginning
	of year	482,900	$	8.24	416,350	$	6.27	423,775	$	6.12
Granted		63,800		12.12	214,500		10.70	11,550		13.58
Exercised		(2,200)		1.73	(50,160)		6.13	(6,050)		9.15
Forfeited		-		-	(97,790)		6.32	(12,925)		6.66
Outstanding,
	end of year	544,500	$	8.72	482,900	$	8.24	416,350	$	6.27
Exercisable
	at year end	343,017			249,150			344,117

The following table is a summary of stock options outstanding at December 31, 2000:

					Options Outstanding					Options Exercisable
							Remaining
							Weighted	Weighted				Weighted
Range of							Average	Average				Average
Exercise					Number		Contractual	Exercise		Number		Exercise
Prices					Outstanding		Life	Price		Exercisable		Price
							(In Years)
$	1.73	-	$	2.98	2,750		1.2	$	2.48	2,750		$	2.48
	4.69	-		5.43	127,325		4.2		5.41	127,325			5.41
	6.45	-		9.32	133,375		5.6		6.99	133,375			6.99
	10.17	-		11.19	228,250		3.7		10.71	70,767			10.71
	11.36	-		13.75		52,800	4.4		12.82		8,800		12.78
	1.73	-		13.75		544,500	3.9		8.72		343,017		7.28

The Company applies APB Opinion No. 25 and related interpretations in accounting for the Plan. Since stock-based compensation awards under the Plan are issued at fair market value on date of the grant, no compensation cost has been recognized in the Consolidated Statement of Operations.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. STOCK-BASED COMPENSATION AND SHARE PURCHASE WARRANTS

(CONTINUED)

SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a fair value based method of accounting for stock-based compensation plans as an alternative to APB Opinion No. 25 whereby the compensation cost for options is measured at the grant date based on the value of the award, and such cost is recognized over the vesting period of the options. The compensation cost for stock appreciation rights are recognized over the service period of the award. Had the Company applied SFAS No. 123 in accounting for stock- based compensation awards, net income and net income per share, diluted, for the years ended December 31, 2000, 1999 and 1998 would have been as follows:

		2000				1999				1998
		In		Per		In		Per		In		Per
		Thousands		Share		Thousands		Share		Thousands		Share
Net income,
	as reported	$	11,352	$	1.42	$	10,404	$	1.29	$	11,057	$	1.33
SFAS No. 123
	pro forma
	adjustments		(211)		(.02)		(85)		(.01)		(217)		(.02)
Net income,
	pro forma	$	11,141	$	1.40	$	10,319	$	1.28	$	10,840	$	1.31

A tax benefit of $109,000 and $44,000 was provided for the years ended December 31, 2000 and 1999 respectively on the calculation of SFAS No. 123. For the year ended December 31, 1998, no tax benefit was provided because a valuation allowance would have been provided for this temporary difference.

The pro forma adjustments relate to stock appreciation rights granted during 2000 for which compensation cost was recognized as the increase, if any, of the Company's stock price over the base price specified in the award, and options granted during 2000, 1999 and 1998 for which a fair value on the date of the grant was determined using the Black-Scholes model of theoretical options pricing, and were based on the following assumptions: (i) expected volatility is based on the one year period, calculated weekly, preceding the date of grant; (ii) the risk-free rate of return is based on the 10-year U.S. Treasury Note yield to maturity as at the date of grant; (iii) dividend yield assumes that the current dividend rate paid on the Common Stock continues unchanged until the expiration date of the options; (iv) an expected life that coincides with the term of the option; and (v) a three year phased-in vesting period that averages two years.

The weighted average fair value of options granted during 2000, 1999 and 1998 was $4.33, $2.99 and $1.97 per share, respectively. Valuation and related assumption information are presented below:

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. STOCK-BASED COMPENSATION AND SHARE PURCHASE WARRANTS

(CONTINUED)

		Weighted averages for
		options issued during
		2000		1999		1998
Valuation assumptions:
Expected life, in years		5.0		5.0		4.0
Expected volatility		27.3%		15.0%		16.9%
Risk free interest rate		6.1%		6.2%		5.6%
Expected annual
	dividends per share	$	.05	$	.05	$	.05

(B) SHARE PURCHASE WARRANTS

At December 31, 2000, 1,235,294 share purchase warrants were outstanding. The warrants are exercisable through June 30, 2001 for a maximum of 2,074,058 shares of common stock at $25.00 for 1.679 shares of common stock (which equates to an exercise price of $14.89 per share).

NOTE 15. INCOME TAXES

The Company and its subsidiaries file a consolidated Federal income tax return on a June 30 fiscal year. The provision for income tax expense (benefit) for the years ended December 31, 2000, 1999 and 1998 is as follows:

		2000				1999			1998
					(IN THOUSANDS)
CURRENT:
	U.S. Federal		$	5,770			$	4,219		$	3,448
	State and Local			372				351			417
				6,142				4,570			3,865
DEFERRED:
	U.S. Federal		(701)				(371)			(542)
	State and Local			41				(43)			30
				(660)				(414)			(512)
	Income tax expense		$	5,482			$	4,156		$	3,353

The Federal statutory rate of 34% in 2000, 1999 and 1998 is reconciled to the Company's effective income tax rate as follows:

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

_______________________________________________________ ____________________

NOTE 15. INCOME TAXES (CONTINUED)

		2000			1999			1998
				(IN THOUSANDS)
Tax computed at the
	statutory rate	$	5,723		$	4,950	$		4,900
Dividends received
	deduction and tax
	exempt interest	(165)			(160)		(217)
Special life insurance
	statutory deductions	-			(71)		(493)
State income taxes, net
	of Federal effect	273			203		295
Tax loss carryforwards
	recognized for financial
	reporting purposes	-			-		(982)
Valuation allowance		(470)			(1,236)		(508)
Other, net			121			470			358
Income tax expense			5,482		$	4,156	$		3,353

The income tax expense for the year ended December 31, 2000 allocated to stockholders' equity for unrealized gains on investment securities was $841,000, representing the change in the deferred tax liability of $733,000 at December 31, 2000 from the deferred tax asset of $108,000 at December 31, 1999.

Temporary differences between the Consolidated Financial Statement carrying amounts and tax bases of assets and liabilities that give rise to the deferred tax assets and liabilities included in income taxes on the Consolidated Balance Sheets at December 31, 2000 and 1999 relate to the following:

			2000		1999
			(IN THOUSANDS)
DEFERRED TAX ASSETS:
	Unrealized losses on
		investment securities	$	22		$	3,866
	Deferred insurance policy
		acquisition costs	10,864			10,973
	Future insurance policy
		benefits	925			1,075
	Other			3,967			4,575
	Total gross deferred
		tax assets	15,778			20,489
	Less valuation allowance			(64)			(4,455)
	Net deferred tax assets			15,714			16,034

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. INCOME TAXES (CONTINUED)

					2000		1999
					(IN THOUSANDS)
DEFERRED TAX LIABILITIES:
	Other investments				(973)			(1,441)
	Unrealized gains on
		investment securities			(744)			(20)
	Deferred insurance policy
		acquisition costs			(9,207)			(10,275)
	Future insurance policy
		benefits			(5,884)			(5,198)
	Other					(882)			(882)
			Total gross deferred
				tax liabilities		(17,690)			(17,816)
	Net deferred tax liability				$	(1,976)		$	(1,782)

The $4,391,000 decrease in the valuation allowance for the year ended December 31, 2000 is attributable to a $3,921,000 decrease that was allocated to stockholders' equity for unrealized gains on investment securities and a $470,000 decrease that was allocated to operations.

Under provisions of the Life Insurance Company Tax Act of 1959, certain special deductions were allowed life insurance companies for Federal income tax purposes and were accumulated in a memorandum tax account designated as "policyholders' surplus." Distributions of the untaxed amounts in this account will result in the Company incurring an additional tax. The Company has provided through its income tax provision on operations a tax expense of $1,122,000 in 1992 and prior years for this additional tax related to the policyholders' surplus account. A deferred tax liability of $936,000, related to the $2,753,000 remaining balance of the policyholders' surplus account, has not been recognized. This liability will be recognized when the Company expects that a transaction will occur which will give rise to a tax on the remaining balance of the policyholders' surplus account.

Net cash payments for income taxes were $7,749,000, $5,179,000 and $3,405,000 in 2000, 1999 and 1998, respectively.

NOTE 16. COMMITMENTS AND CONCENTRATION OF CREDIT RISK

Certain subsidiaries of the Company are obligated under non-cancelable operating lease agreements for office space. Total rental expense for the years 2000, 1999 and 1998 for operating leases was $899,000, $881,000 and $804,000, respectively.

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. COMMITMENTS AND CONCENTRATION OF CREDIT RISK (CONTINUED)

The approximate minimum annual rental expense for operating leases that have remaining non-cancelable lease terms in excess of one year at December 31, 2000 are as follows (in thousands):

2001		$	906
2002		747
2003		447
2004			271
2005 and thereafter			27
	Total	$	2,398

At December 31, 2000, the Company had no investment securities of any one issuer or in any one industry which exceeded 10% of stockholders' equity, except for investments in obligations of the U.S. Government and its agencies.

Fixed maturities with a carrying value of $5,314,000 and $5,362,000 were on deposit with various state insurance departments at December 31, 2000 and 1999, respectively.

The Company knows of no material pending legal proceedings to which the Company is a party or of which any of its property is the subject.

NOTE 17. REINSURANCE

Standard Life and Madison Life reinsure portions of certain business in order to limit the assumption of disproportionate risks. Standard Life and Madison Life retain varying amounts of individual life or group life insurance up to a maximum on any one life of $210,000 and $60,000, respectively. Amounts not retained are ceded to other companies on an automatic or facultative basis. Standard Life and Madison Life are contingently liable with respect to reinsurance in the unlikely event that the assuming reinsurers are unable to meet their obligations. In addition, Standard Life and Madison Life participate in various coinsurance treaties. The ceding of reinsurance does not discharge the primary liability of the original insurer to the insured.

The Company had total net receivables of $14,455,000 from one reinsurer which is rated A++ by A.M. Best and net receivables of $35,573,000 from one reinsurer which is rated A+ by A.M. Best at December 31, 2000. These are the only reinsurers with receivables that individually exceed 10% of the equity of the Company. The Company believes that these receivables are fully collectible.

The effect of reinsurance on life insurance in-force, benefits to policyholders and premiums earned is as follows:

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. REINSURANCE (CONTINUED)

						ASSUMED			CEDED
					DIRECT	FROM OTHER			TO OTHER				NET	ASSUMED
					AMOUNT	COMPANIES			COMPANIES				AMOUNT	TO NET
					(IN THOUSANDS)
LIFE INSURANCE IN- FORCE:
DECEMBER 31, 2000			$	8,105,465		$	808,055	$		4,002,100	$	4,911,420			16.5%
DECEMBER 31, 1999			7,514,665			477,823		3,350,036			4,642,452				10.3%
DECEMBER 31, 1998			6,155,863			584,726		2,823,683			3,916,906				14.9%
BENEFITS TO POLICYHOLDERS:
DECEMBER 31, 2000			$	158,013		$	37,911	$		149,085	$	46,839			80.9%
DECEMBER 31, 1999			154,170			31,822		126,735			59,257				54.5%
DECEMBER 31, 1998			134,484			32,104		106,092			60,496				53.1%
PREMIUMS EARNED:
DECEMBER 31, 2000
	Life and
		annuity	$	36,803		$	4,519	$		11,894	$	29,428			15.4%
	Health			218,905			12,682			170,726		60,861			20.8%
			$	255,708		$	17,201	$		182,620	$	90,289			19.1%
DECEMBER 31, 1999
	Life and
		annuity	$	32,730		$	7,087	$		9,846	$	29,971			29.3%
	Health			201,277			22,292			163,147		60,422			36.9%
			$	234,007		$	29,379	$1		172,993	$	90,393			34.3%
DECEMBER 31, 1998
	Life and
		annuity	$	22,929		$	5,347	$		8,332	$	19,944			26.8%
	Health			180,593			34,041			153,920		60,714			56.1%
			$	203,522		$	39,388	$		162,252	$	80,658			48.8%

NOTE 18. SEGMENT REPORTING

The Insurance Group engages principally in the life and health insurance business. Interest expense, 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 of each such segment. Corporate assets are composed principally of cash equivalents, resale agreements, fixed maturities, equity securities, partnership interests, the Company's remaining real estate holdings and certain other investments. Information by business segment for the years ended December 31, 2000, 1999 and 1998 is as follows:

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18. SEGMENT REPORTING (CONTINUED)

		2000		1999		1998
		(IN THOUSANDS)
REVENUES:
Medical Stop- Loss		$	28,030	$	26,630	$	26,879
DBL		19,673		20,155		21,439
Group Term Disability; Term Life
	and Annuities	21,299		17,068		10,212
Credit Life and Disability		15,873		19,662		22,198
Managed Health Care		6,137		4,961		2,058
Special Disability		401		325		235
Individual Life and Annuities		35,716		32,023		17,456
Other Business		1,806		4,282		5,408
Corporate		1,710		2,773		2,716
Net Realized and Unrealized
	(Losses) Gains		(228)		(1,165)		2,013
		$	130,417	$	126,714	$	110,614
OPERATING INCOME FROM CONTINUING OPERATIONS:
Medical Stop- Loss		$	4,679	$	(935)	$	106
DBL		3,649		5,072		4,200
Group Term Disability; Term Life
	and Annuities	1,644		1,205		1,041
Credit Life and Disability		873		3,182		1,458
Managed Health Care		335		597		989
Special Disability		410		541		742
Individual Life and Annuities		7,878		6,324		4,281
Other business		269		1,085		(63)
Corporate			(1,417)		(1,224)		(357)
		18,320		15,847		12,397
Interest Expense		(1,258)		(122)		-
Net Realized and Unrealized
	(Losses) Gains		(228)		(1,165)		2,013
		$	16,834	$	14,560	$	14,410

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18. SEGMENT REPORTING (CONTINUED)

		2000		1999
		(IN THOUSANDS)
IDENTIFIABLE ASSETS AT YEAR- END:
Medical Stop- Loss		$	15,683	$	16,048
DBL		13,664		15,979
Group Term Disability; Term Life
	and Annuities	129,647		81,622
Credit Life and Disability		24,358		23,469
Managed Health Care		9,835		9,575
Special Disability		3,003		2,213
Individual Life and Annuities		436,529		435,392
Other Business		76,802		78,415
Corporate			15,107		15,638
		$	724,628	$	678,351

NOTE 19. DIVIDEND RESTRICTIONS ON INSURANCE SUBSIDIARIES

Dividends from Madison Life are subject to the prior notification to the Wisconsin Insurance Commissioner if such dividend distribution exceeds 115% of the distribution for the corresponding period of the previous year. In addition, if such dividends, together with the fair market value of other dividends paid or credited and distributions made within the preceding twelve months, exceed the lesser of (i) total net gain from operations for the preceding calendar year minus realized capital gains for that calendar year and (ii) 10% of surplus with regard to policyholders as of December 31 of the preceding year, such dividends may be paid so long as such dividends have not been disapproved by the Wisconsin Insurance Commissioner within 30 days of its receipt of notice thereof. No dividends were paid by Madison Life in 2000 or 1999. The payment of dividends by Standard Life to its parent, Madison Life, is subject to the prior notification to the New York State Insurance Department if such dividends, together with other dividends, in such calendar year exceed the lesser of (i) 10% of surplus as regards policyholders as of the immediately preceding calendar year; and (ii) net gain from operations for the immediately preceding calendar year, not including realized capital gains. Such dividends may be paid so long as they have not been disapproved by the New York State Department of Insurance within 30 days of its receipt of notice thereof. No dividends were declared or paid in 2000 or 1999. Dividends from First Standard to its parent, a subsidiary of Standard Life, are subject to the prior notification to the Delaware Insurance Commissioner. If such dividends, together with the fair market value of other dividends or distributions made within the preceding twelve months, exceed the greater of (i) 10% of surplus as regards policyholders as of the preceding December 31 and (ii) net income, not including realized capital gains, for the twelve-month period ending the 31st day of December next preceding, such dividends may be paid so long as they have not been disapproved by the Delaware Insurance Commissioner within 30 days of its receipt of notice thereof. First Standard declared and paid dividends of $2,600,000 and $2,336,000 in 2000

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19. DIVIDEND RESTRICTIONS ON INSURANCE SUBSIDIARIES (CONTINUED)

and 1999, respectively. Under Delaware law, IHC is permitted to pay dividends from surplus or net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. IHC declared cash dividends of $395,000, $357,000 and $368,000 in 2000, 1999 and 1998, respectively and paid a 10% stock dividend on August 28, 2000.

Combined net income of the Insurance Group, as determined in accordance with statutory accounting practices, was $11,764,000, $10,769,000 and $381,000 for 2000, 1999 and 1998, respectively. Statutory capital and surplus for the Insurance Group was $62,351,000 and $54,689,000 at December 31, 2000 and 1999, respectively.

Effective January 1, 2001, the National Association of Insurance Commissioners ("NAIC") codified statutory accounting principles ("SAP") shall be adopted by all U.S. insurance companies. The purpose of such codification is to provide a comprehensive basis of accounting and reporting to insurance departments. Although codification is expected to be the foundation of a state's statutory accounting practice, it may be subject to modification by practices prescribed or permitted by a state's insurance commissioner. Therefore, statutory financial statements will continue to be prepared on the basis of accounting practices prescribed or permitted by the insurance department of the state of domicile. The Company is currently assessing the impact of the NAIC codification on its statutory financial statements.

NOTE 20. COMPREHENSIVE INCOME

The components of comprehensive income include net income and certain amounts previously reported directly in equity.

Reclassifications related to comprehensive income for the years ended December 31, 2000, 1999 and 1998 are as follows:

		Before			Tax Expense				Net of
		Tax				(Benefit)		Tax
				(in thousands)
2000
Unrealized holding gains,
	arising during the year	$	15,003			$	676	$		14,327
Less:
	Realized losses included in net income	(432)				(164)		(268)
	Deferred acquisitions costs		2,330				-			2,330
Unrealized gains on securities,
	net	$	13,105			$	840	$		12,265

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20. COMPREHENSIVE INCOME (CONTINUED)

		Before			Tax Expense				Net of
		Tax				(Benefit)		Tax
				(in thousands)
1999
Unrealized holding gains, arising during
	the year	$	(18,640)			$	(1,887)	$		(16,753)
Less:
	Realized losses included in net income	(1,119)				(313)		(806)
	Deferred acquisition costs		(2,276)				-			(2,276)
Unrealized gains on securities,
	net	$	(15,245)			$	(1,574)	$		(13,671)
1998
Unrealized holding gains,
	arising during the year	$	3,872			$	940	$		2,932
Less:
	Realized gains included in net income	2,111				518		1,593
	Deferred acquisition costs		588				-			588
Unrealized gains on securities,
	net	$	1,173			$	422	$		751

NOTE 21. QUARTERLY DATA (UNAUDITED)

The quarterly results of operations for the years ended December 31, 2000 and 1999 are summarized below:

		FIRST		SECOND		THIRD		FOURTH
		QUARTER		QUARTER		QUARTER		QUARTER
			(IN THOUSANDS, EXCEPT PER SHARE DATA)
2000
Total Revenues		$	30,396	$	31,084	$	34,735	$	34,202
Net income		$	2,358	$	3,457	$	3,315	$	2,222
Net Income Per Common
	Share - Basic	$	.30	$	.44	$	.42	$	.28
Net Income Per Common
	Share - Diluted	$	.30	$	.43	$	.41	$	.28

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21. QUARTERLY DATA UNAUDITED (CONTINUED)

		FIRST		SECOND		THIRD		FOURTH
		QUARTER		QUARTER		QUARTER		QUARTER
			(IN THOUSANDS, EXCEPT PER SHARE DATA)
1999
Total Revenues		$	28,494	$	27,327	$	29,926	$	40,967
Net income		$	2,443	$	2,712	$	2,520	$	2,729
Net Income Per Common
	Share - Basic	$	.30	$	.34	$	.32	$	.35
Net Income Per Common
	Share - Diluted	$	.30	$	.33	$	.31	$	.34

SCHEDULE I

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN AFFILIATES

DECEMBER 31, 2000

					COLUMN A			COLUMN B			COLUMN C			COLUMN D
													AMOUNT
													SHOWN ON
													BALANCE
TYPE OF INVESTMENT									COST			VALUE			SHEET
FIXED MATURITIES:
	BONDS:
		United States
			Government and
			authorities			$		165,218,000		$	168,779,000		$	168,779,000
		States,
			municipalities
			and political
			subdivisions			1,297,000				1,317,000			1,317,000
		Public utilities				13,922,000				13,602,000			13,602,000
		All other
			corporate
			securities				196,006,000				195,047,000			195,047,000
			TOTAL FIXED
				MATURITIES			376,443,000				378,745,000			378,745,000
EQUITY SECURITIES:
	COMMON STOCKS:
		Industrial,
			miscellaneous
			other			11,685,000				12,329,000			12,329,000
NON- REDEEMABLE
	PREFERRED STOCK						6,673,000				6,441,000			6,441,000
TOTAL EQUITY
	SECURITIES						18,358,000				18,770,000			18,770,000
Securities purchased
	under agreements to
	resell					22,253,000				22,253,000			22,253,000
Partnership interests						45,679,000				45,679,000			45,679,000
Policy loans						18,518,000				18, 518,000			18,518,000
Other						1,087,000				1,087,000			1,087,000
Short-term investments								5,455,000			5,455,000			5,455,000
				TOTAL INVESTMENTS		$		487,793,000		$	490,507,000		$	490,507,000

SCHEDULE III

INDEPENDENCE HOLDING COMPANY

BALANCE SHEETS

(PARENT COMPANY ONLY)

										DECEMBER 31,
								2000			1999
ASSETS:
		Cash and cash equivalents						$	1,865,000		$	579,000
		Equity securities						247,000			192,000
		Other investments						7,064,000			7,944 000
		Investments in consolidated subsidiaries						94,807,000			74,302,000
		Amounts due from consolidated
			subsidiaries					28,387,000			29,672,000
		Other assets							74,000			475,000
					TOTAL ASSETS			$	132,444,000		$	113,164,000
LIABILITIES AND STOCKHOLDERS' EQUITY:
	LIABILITIES:
			Accounts payable and other liabilities					$	3,893,000		$	4,773,000
			Income taxes payable					1,624,000			2,534,000
			Amounts due to consolidated
					subsidiaries						1,949,000
			Dividends payable						394,000			357,000
				TOTAL LIABILITIES					5,911,000			9,613,000
STOCKHOLDERS' EQUITY:
	Preferred stock (none issued)							-			-
	Common stock, 7,878,813 and 77shares___________
			7,898,110 shares, issued and
			outstanding, respectively, net of
			1,784,906 and 1,766,524 shares
			in treasury, respectively					7,879,000			7,898,000
	Paid-in- capital							80,099,000			80,308,000
	Accumulated other comprehensive income (loss):
	Unrealized gains (losses) on investments, net							1,237,000			(11,028,000)
	Retained earnings								37,318,000			26,373,000
						TOTAL STOCKHOLDERS' EQUITY			126,533,000			103,551,000
						TOTAL LIABILITIES AND
							STOCKHOLDERS' EQUITY	$	132,444,000		$	113,164,000

See Notes to Parent Company Only Financial Statements.

(CONTINUED)

SCHEDULE III

(CONTINUED)

INDEPENDENCE HOLDING COMPANY

STATEMENTS OF OPERATIONS

(PARENT COMPANY ONLY)

						YEAR ENDED DECEMBER 31,
				2000			1999		1998
REVENUES:
	Net investment
			income	$	3,895,000		$	3,869,000	$	4,245,000
	Realized gains (losses)				1,000			(105,000)		-
	Other income				1,145,000			854,000		782,000
					5,041,000			4,618,000		5,027,000
EXPENSES:
	General and adminis-
		trative expenses			2,023,000			2,801,000		890,000
Income before income
	tax expense			3,018,000			1,817,000		4,137,000
Income tax expense					910,000			143,000		176,000
Income before
	equity in net income
	of subsidiaries			2,108,000			1,674,000		3,961,000
Equity in net income
	of subsidiaries				9,244,000			8,730,000		7,096,000
Net income				$	11,352,000		$	10,404,000	$	11,057,000

See Notes to Parent Company Only Financial Statements.

(CONTINUED)

SCHEDULE III

(CONTINUED)

INDEPENDENCE HOLDING COMPANY

STATEMENTS OF CASH FLOWS

(PARENT COMPANY ONLY)

						2000		1999		1998
CASH FLOWS FROM OPERATING
	ACTIVITIES:
	Net income					$	11,352,000	$	10,404,000	$	11,057,000
		Adjustments to reconcile
		net income to net cash
		activities:
		Equity in net income
					of subsidiaries	(9,244,000)		(8,730,000)		(7,096,000)
		Realized (gains) losses on
					sales of investment
					securities	(1,000)		105,000		-
		Change in other assets
				and liabilities			(7,896,000)		(3,392,000)		(31,572,000)
		Net cash used by
				operating activities			(5,789,000)		(1,613,000)		(27,611,000)
CASH FLOWS FROM INVESTING
	ACTIVITIES:
	Increase (decrease) in
			investment in and
			advances to consolidated
			subsidiaries			4,660,000		(2,403,000)		5,039,000
	Purchases of equity
			securities			-		(200,000)		(433,000)
	Sale of equity
			securities			-		1,153,000		-
	Additional investments
			in other investments,
			net of distributions				3,012,000		5,174,000		24,679,000
	Net cash provided by
			investing activities				7,672,000		3,724,000		29,285,000
CASH FLOWS FROM
	FINANCING ACTIVITIES:
	Repurchase of common
				stock and warrants		(231,000)		(2,734,000)		(878,000)
	Exercise of common
				stock options		4,000		308,000		55,000
	Dividends paid						(370,000)		(368,000)		(372,000)
	Net cash used by
				financing activities			(597,000)		(2,794,000)		(1,195,000)

(CONTINUED)

SCHEDULE III

(CONTINUED)

INDEPENDENCE HOLDING COMPANY

STATEMENTS OF CASH FLOWS

(PARENT COMPANY ONLY)

						YEAR ENDED DECEMBER 31,
				2000			1999		1998
Increase (decrease) in
		cash and cash
		equivalents		1,286,000			(683,000)		479,000
	Cash and cash
		equivalents, beginning
			of year		579,000			1,262,000		783,000
	Cash and cash
		equivalents, end of
		year		$	1,865,000		$	579,000	$	1,262,000

See Notes to Parent Company Only Financial Statements.

INDEPENDENCE HOLDING COMPANY

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS

NOTES:

(A) Cash payments for taxes were $7,127,000, $4,273,000 and $3,007,000 in 2000, 1999 and 1998, respectively.

(B) The financial information of Independence Holding Company (Parent Company Only) should be read in conjunction with the Consolidated Financial Statements and Notes thereto.

SCHEDULE V

INDEPENDENCE HOLDING COMPANY AND SUBSIDIARIES

SUPPLEMENTARY INSURANCE INFORMATION

(IN THOUSANDS)

					FUTURE
					POLICY						NET				AMORTIZ-
					LIABILITIES						INVESTMENT				ATION OF
					CLAIMS						INCOME AND				DEFERRED
		DEFERRED			& OTHER						GAINS,				INSURANCE		OTHER
		INSURANCE			POLICY						AND OTHER		BENEFITS		ACQUIS-		OPERATING
		ACQUISITION			HOLDERS'		UNEARNED		PREMIUMS		INCOME		AND		ITION		EXPENSES		PREMIUMS
		COSTS			FUNDS		PREMIUMS		EARNED		(1)		CLAIMS		COSTS		(2)		WRITTEN
DECEMBER 31, 2000:
Life and
	annuity	$		23,928	$	348,636	$	6,663	$	29,428	$	23,539	$	24,884	$	4,932	$	17,135	$	28,080
Health			2,803			157,071		13,822		60,861		13,431		43,431		1,515		21,631		60,245
		$	26,731		$	505,707	$	20,485	$	90,289	$	36,970	$	68,315	$	6,447	$	38,766	$	88,325
DECEMBER 31, 1999:
Life and
	annuity	$		29,195	$	346,960	$	7,360	$	29,971	$	21,459	$	28,608	$	4,336	$	11,632	$	32,872
Health			3,342			133,519		8,368		60,422		12,944		41,165		2,225		20,273		58,151
		$	32,537		$	480,479	$	15,728	$	90,393	$	33,403	$	69,773	$	6,561	$	31,905	$	91,023
DECEMBER 31, 1998:
Life and
	annuity	$		9,607	$	167,715	$	10,162	$	19,944	$	15,852	$	18,028	$	2,646	$	7,066	$	17,548
Health			4,640			139,747		10,867		60,714		11,583		41,603		2,660		21,131		57,264
		$	14,247		$	307,462	$	21,029	$	80,658	$	27,435	$	59,631	$	5,306	$	28,197	$	74,812

(1) Net investment income is allocated between product lines based on the mean reserve method.

2. Direct operating expenses are specifically identified and charged to product lines. Indirect expenses are allocated based on time studies, however, other

acceptable methods of allocation might produce different results.

75

EXHIBIT INDEX

Exhibit

Number

3(i) Restated Certificate of Incorporation of Independence Holding Company.(b)

3(ii) By-laws of Independence Holding Company.(a)

4(i) Form of Warrant Certificate to purchase shares of Common Stock of

Independence Holding Company, expiring June 30, 2001.(a)

10(i) Assumption Reinsurance Agreements

(iii)(A) Executive Compensation Plans and Agreements

(1) Independence Holding Company 1988 Stock Incentive Plan (c)

(2) Form of Independence Holding Company Stock Option Agreement (d)

(3) Deferred Compensation Agreement (e)

(4) Retirement Benefit Agreements (e)

(5) Amendment No. 1 to 1988 Stock Incentive Plan (f)

(6) Stock Appreciation Rights Agreement (g)

11 Statement re: computation of per share earnings for the years ended December 31,

2000, 1999 and 1998.

21 Principal subsidiaries of Independence Holding Company, as of March 15, 2001.

23 Consent of KPMG LLP.

27 Financial Data Schedule. For submission in electronic filing only.

(a) Such exhibit is incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1987, as amended, of Independence Holding Company.

(b) Such exhibit is incorporated by reference to the Report on Form 10-Q for the quarter ended June 30, 1996 of Independence Holding Company.

(c) Such exhibit is incorporated by reference to the Proxy Statement for the Annual Meeting of Stockholders held on May 25, 1989 of Independence Holding Company.

(d) Such exhibit is incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1988 of Independence Holding Company.

(e) Such exhibit is incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1993 of Independence Holding Company.

(f) Such exhibit is incorporated by reference to the Report on Form 10-K for the fiscal year ended December 31, 1997 of Independence Holding Company.

(g) Such exhibit is incorporated by reference to the Report on Form 10-Q for the quarter ended June 30, 2000 of Independence Holding Company.

Exhibits will be furnished upon request for a reasonable fee.