Note 15. Dividend Payment Restrictions and Statutory Information

12 Months Ended

Dec. 31, 2013

Notes

Note 15. Dividend Payment Restrictions and Statutory Information

Note 15.          Dividend Payment Restrictions and Statutory Information

Our insurance subsidiaries are restricted by state laws and regulations as to the amount of dividends they may pay to their parent without regulatory approval in any year. Any dividends in excess of limits are deemed “extraordinary” and require approval. Based on statutory results as of December 31, 2013, in accordance with applicable dividend restrictions, our insurance subsidiaries could pay dividends of approximately $22,837,000 in 2014 without obtaining regulatory approval. There are no regulatory restrictions on the ability of our holding company, IHC, to pay dividends. 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. Dividends to shareholders are paid from funds available at the corporate holding company level.

In the fourth quarter of 2011, upon approval by the Wisconsin Insurance Commissioner, Madison National Life transferred to its parent, a subsidiary of IHC, all of the outstanding common stock of its wholly owned subsidiary, Standard Security Life, representing an “extraordinary” dividend with a statutory value of $106,314,000. Non-“extraordinary” dividend payments were as follows:  (i) Madison National Life declared and paid cash dividends of $3,950,000, $3,450,000 and $2,000,000 to its parent in 2013, 2012 and 2011, respectively; (ii) Standard Security Life declared and paid dividends of $8,000,000, $7,980,000 and $4,950,000 to its parent in 2013, 2012 and 2011, respectively; and (iii)  Independence American declared and paid dividends of $0, $2,000,000 and $1,000,000 to its parent in 2013, 2012 and 2011, respectively. In February 2012, IHC announced a special 10% stock dividend payable to shareholders. See Note 11 for more information regarding the stock dividend. IHC declared cash dividends of $1,241,000 in 2013, $1,271,000 in 2012 and $807,000 in 2011.

The Company’s insurance subsidiaries are required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of their state of domicile. Statutory accounting practices differ from U.S. GAAP in several respects causing differences in reported net income and stockholder’s equity. The Company’s insurance subsidiaries have no permitted accounting practices, which encompass all accounting practices not so prescribed that have been specifically allowed by the state insurance authorities.

The statutory net income and statutory capital and surplus for each of the Company’s insurance subsidiaries are as follows for the periods indicated (in thousands):

		Years Ended December 31,
		2013		2012		2011
Statutory net income:
Madison National Life	$	11,704	$	11,903	$	15,080
Standard Security Life		9,180		15,805		7,709
Independence American		3,176		3,271		4,542

		December 31,
		2013		2012
Statutory capital and surplus:
Madison National Life	$	77,969	$	72,304
Standard Security Life		113,972		116,282
Independence American		57,875		54,427

The insurance subsidiaries are also required to maintain certain minimum amounts of statutory surplus to satisfy their various state insurance departments of domicile. Risk-based capital (“RBC”) requirements are designed to assess capital adequacy and to raise the level of protection that statutory surplus provides for policyholders. At December 31, 2013 and 2012, the statutory capital of our insurance subsidiaries is significantly in excess of their regulatory RBC requirements.