Compensation and Employee Benefit Plans [Text Block]

12 Months Ended

Dec. 31, 2019

Notes

Compensation and Employee Benefit Plans

Note 14.Share-Based Compensation     In November 2016, the stockholders approved the Independence Holding Company 2016 Stock Incentive Plan (the “2016 Plan"). The 2016 Plan permits grants of options, SARs, restricted shares, restricted share units, unrestricted shares, deferred share units and performance awards. Under the terms of the 2016 Plan: (i) the exercise price of an option may not be less than the fair market value of an IHC share on the grant date and the terms of an option may not exceed 10 years from the grant date; and (ii) the exercise price of a SAR may not be less than the fair market value of an IHC share on the grant date and SAR terms may not exceed 10 years from the date of grant.   The fair value of an option award is estimated on the date of grant using the Black-Scholes option valuation model. In general, the vesting period for an option grant is 3 years. Restricted share units are valued at the quoted market price of the shares at the date of grant and generally vest over 3 years. Compensation costs for options and restricted share units are recognized over the stated vesting periods on a straight-line basis. The fair value of a SAR is calculated using the Black-Scholes valuation model at the grant date and each subsequent reporting period until settlement. Compensation cost is based on the proportionate amount of the requisite service that has been rendered to date. Once fully vested, changes in the fair value of a SAR continue to be recognized as compensation expense in the period of the change until settlement. The Company accounts for forfeitures of share-based compensation awards in the period that they occur.   At December 31, 2019, there were 391,120 shares available for future stock-based compensation grants under the 2016 Plan. The following table summarizes share-based compensation expense, which is included in selling, general and administrative expenses on the Consolidated Statements of Income, applicable to the IHC plans (by award type) for each of the years indicated (in thousands):

		2019		2018
IHC’s Share-based Compensation Plan:
Stock options	$	1,940	$	754
Restricted stock units		292		184
SARs		442		253
Share-based compensation expense, pre-tax		2,674		1,191
Tax benefits		720		358
Share-based compensation expense, net	$	1,954	$	833

Stock Options

The Company’s stock option activity during 2019 was as follows:

	Shares	Weighted- Average
	Under Option	Exercise Price
December 31, 2018	567,384	$	19.40
Granted	424,380		37.38
Exercised	(202,717)		9.96
Forfeited	(4,000)		22.20
December 31, 2019	785,047	$	31.54

The weighted average grant-date fair-values of options granted during the years ended December 31, 2019 and 2018 were $8.31 and $9.05, respectively. The assumptions set forth in the table below were used to value the stock options granted during the periods indicated:

	2019	2018
Weighted-average risk-free interest rate	2.32%	2.86%
Expected annual dividend rate per share	1.22%	1.04%
Expected volatility factor of the Company's common stock	28.97%	32.42%
Weighted-average expected term of options	3.5 years	4.0 years

In 2019, IHC received $269,000 in cash from the exercise of stock options with an aggregate intrinsic value of $5,207,000 and recognized $970,000 of tax benefits. Cash outflows in 2019 to satisfy employees’ income tax withholding obligations amounted to $2,397,000 for option exercises that were net settled in IHC shares. In 2018, IHC received $856,000 in cash from the exercise of stock options with an aggregate intrinsic value of $4,275,000 and recognized $810,000 of tax benefits. Cash outflows in 2018 to satisfy employees’ income tax withholding obligations amounted to $905,000 for option exercises that were net settled in IHC shares.

The following table summarizes information regarding options outstanding and exercisable:

		December 31, 2019
		Outstanding		Exercisable
Number of options		785,047		277,665
Weighted average exercise price per share	$	31.54	$	23.57
Aggregate intrinsic value for all options (in thousands)	$	8,272	$	5,140
Weighted average contractual term remaining		2.5 years		2.4 years

At December 31, 2019, the total unrecognized compensation cost related to IHC’s non-vested stock options was $2,962,000 and it is expected to be recognized as compensation expense over a weighted average period of 1.6 years.

Restricted Stock

The Company’s restricted stock activity during 2019 was as follows:

	No. of	Weighted-Average
	Non-vested	Grant-Date
	Shares	Fair Value
December 31, 2018	19,800	$	31.84
Granted	9,900		40.01
Vested	(9,900)		28.61
December 31, 2019	19,800	$	37.54

IHC granted 9,900 restricted stock units during each of the years ended December 31, 2019 and 2018 with weighted-average grant-date fair values of $40.01 and $38.49 per share, respectively. The total fair value of restricted stock units that vested in 2019 and 2018 was $389,000 and $350,000, respectively.

At December 31, 2019, the total unrecognized compensation cost related to non-vested restricted stock unit awards was $699,000 which is expected to be recognized as compensation expense over a weighted average period of 2.2 years.

SARs and Share-Based Performance Awards

IHC had 64,900 SAR awards outstanding at both December 31, 2019 and 2018. No SAR awards were granted or exercised in either 2019 or 2018. Included in Other Liabilities in the Company’s Consolidated Balance Sheets at December 31, 2019 and December 31, 2018 are liabilities of $717,000 and $275,000, respectively, pertaining to SARs.