Note 6. Other Investments, Including Variable Interest Entities

12 Months Ended

Dec. 31, 2016

Notes

Note 6. Other Investments, Including Variable Interest Entities

Note 6.                        Other Investments, Including Variable Interest Entities

            Other investments consist of the following for the periods indicated (in thousands):

		December 31,
		2016		2015
Equity method investments	$	19,747	$	18,944
Cost method investments		3,750		500
Other investments and securities, at cost		37		2,094
	$	23,534	$	21,538

Included in equity method investments above is our investment in Ebix Health Exchange. Ebix Health Exchange administers various lines of health insurance for IHC’s insurance subsidiaries. Effective July 1, 2016, Ebix exercised its right to increase its ownership in Ebix Health Exchange by purchasing an additional 11% of Ebix Health Exchange for $2,000,000. As a result of the transaction, the Company’s ownership interest in Ebix Health Exchange decreased to 49%. In accordance with the terms of the original sale and joint venture agreement, IHC was obligated to fund any negative cash flow through December 31, 2016 in the form of a loan to the joint venture. The remaining balance of the loan at December 31, 2016 was converted to capital. The carrying value of the Company’s equity investment in Ebix Health Exchange amounted to $8,770,000 and $9,838,000 at December 31, 2016 and 2015, respectively. Ebix Health Exchange reported a net loss of $1,781,000 and $1,007,000 for the year ended December 31, 2016 and the period ended December 31, 2015, respectively. The Company recorded $743,000 and $271,000 of the losses for 2016 and 2015 in earnings and reduced the contingent liability, previously recognized on the acquisition date (see Note 7), by $1,038,000 and $736,000 in 2016 and 2015 for cash operating losses for the period.

At December 31, 2016 and 2015, the Company’s Consolidated Balance Sheets includes $570,000 and $1,397,000, respectively, of notes and other amounts receivable from Ebix Health Exchange, and include $938,000 and $405,000, respectively, of administrative fees and other expenses payable to Ebix Health Exchange, which are included in other assets and accounts payable, accruals and other liabilities, respectively.  For the years ended December 31, 2016 and 2015, the Company’s Consolidated Statements of Income include $366,000 and $80,000, respectively, in fee income from Ebix Health Exchange, and include $5,937,000 and $1,477,000, respectively, of administrative fee expenses to Ebix Health Exchange, which are included in fee income and selling, general and administrative expenses, respectively.

During 2016, the Company acquired several other investments, including an equity method investment and certain cost method investments, for an aggregate $5,250,000.

Other investments in unconsolidated trust subsidiaries were liquidated in connection with the Company’s redemption of its junior subordinated debt in 2016 (see Note 11).

Variable Interest Entities

Other investments at December 31, 2016 and 2015 include $8,961,000 and $9,106,000, respectively, of noncontrolling interests in certain limited partnerships that we have determined to be Variable Interest Entities (“VIEs”).  The aforementioned VIEs are not required to be consolidated in the Company’s consolidated financial statements as we are not the primary beneficiary since we do not have the power to direct the activities that most significantly impact the VIEs’ economic performance.

The Company will periodically reassess whether we are the primary beneficiary in any of these investments. The reassessment process will consider whether we have acquired the power to direct the most significant activities of the VIEs through changes in governing documents or other circumstances. Our maximum loss exposure is limited to our combined $8,961,000 carrying value in these equity investments and we have no future funding obligations to them.