Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

3 Months Ended

Mar. 31, 2017

Notes

Disposal Groups, Including Discontinued Operations, Disclosure

Note 3.    Discontinued Operations 

On March 31, 2016, IHC and its subsidiary Independence American sold the stock of Risk Solutions to Swiss Re Corporate Solutions, a division of Swiss Re (“Swiss Re”).  In addition, under the purchase and sale agreement, all of the in-force stop-loss business of Standard Security Life and Independence American produced by Risk Solutions is co-insured by Westport Insurance Corporation (“Westport”), Swiss Re’s largest US carrier, as of January 1, 2016.  The aggregate purchase price was $152,500,000 in cash, subject to adjustments and settlements. Approximately 89% of the purchase price was allocated to AMIC, with the balance being paid to Standard Security Life and other IHC subsidiaries. In the three months ended March 31, 2016, the Company recorded a gain of $99,793,000, net of taxes and amounts attributable to noncontrolling interests, as a result of the transaction. The aforementioned transaction, which includes the sale of Risk Solutions and the corresponding coinsurance agreement, is collectively referred to as the “Risk Solutions Sale and Coinsurance Transaction”.  IHC’s block of Medical Stop-Loss business is in run-off. The sale of Risk Solutions and exit from the medical stop-loss business represented a strategic shift that has had a major effect on the Company’s operations and financial results. The disposal transaction qualified for reporting as a discontinued operation in the first quarter of 2016 as a result of the Board of Directors commitment to a plan for its disposal in January 2016. Aside from reinsurance and marketing of Westport small group stop-loss, there has been no further involvement with the discontinued operation.

The following is a reconciliation of the major line items constituting the pretax profit of discontinued operations included in the Condensed Consolidated Statement of Income for the three months ended March 31, 2016 (in thousands):

		2016
Revenue	$	6,406
Selling, general and administrative expenses		5,689
Pretax profit of discontinued operations		717
Gain on disposal of discontinued operations, pretax		116,919
Income from discontinued operations, before income taxes		117,636
Income taxes on discontinued operations		7,866
Income from discontinued operations	$	109,770

Liabilities attributable to discontinued operations at March 31, 2017 and December 31, 2016 consist of $38,000 and $68,000, respectively, of accounts payable and accrued liabilities.

 Total operating cash flows from discontinued operations for the three months ended March 31, 2016 amounted to $339,000. The Company elected to classify the proceeds received from the sale of discontinued operations in the investing activities section of Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2016. 

In connection with the Risk Solutions Sale and Coinsurance Transaction in March 2016, AMIC utilized a significant amount of its Federal NOL carryforwards and made a corresponding adjustment to its valuation allowance. On a consolidated basis, the Company recorded income taxes on discontinued operations of $7,866,000 for the three months ended March 31, 2016, consisting of $5,799,000 of state taxes and $2,067,000 of Federal taxes, net of a $38,565,000 decrease in AMIC’s valuation allowance.