For the Quarterly Period Ended: SEPTEMBER 30, 2002

Commission File Number: 0-10306

(Exact name of registrant as specified in its charter)

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (203)358-8000

Former name, former address and former fiscal year, if changed since last report.

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.

Common stock outstanding as of November 11, 2002

3

(B) PRINCIPLES OF CONSOLIDATION AND PREPARATION OF

For the three and nine months ended September 30, 2001, a reconciliation of reported net earnings to adjusted net income before amortization of goodwill is as follows (dollars in thousands, except per share data):

Three Months Ended Nine Months Ended

September 30, September 30,___

During the second quarter of 2002, the Company purchased the remaining minority interest in RAS. Prior to this purchase, RAS was a majority owned MGU of Madison Life. The purchase was paid for with both cash and the issuance of 46,600 shares of common stock (the "Shares"). The Shares were issued at a fair value of $20.00 per share in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), as a private placement of unregistered securities under Section 4(2) thereof. Accordingly, the Shares will be "restricted securities", subject to a legend and will not be freely tradable in the United States until the Shares are registered for resale under the Securities Act, or to the extent they are tradable under Rule 144 promulgated under the Securities Act or any other available exemption. Any resale or other disposition of the securities in the United States must be made either under a registration statement filed by IHC with the Securities and Exchange Commission or under an exemption from the registration requirements of the Securities Act.

On September 17, 2002 a subsidiary of the Company entered into an agreement to sell its remaining real estate holdings for cash of $1,350,000. A deposit of $250,000 was made in escrow. Such sale is subject to certain conditions which have not yet been fulfilled. The sale of such property is expected to result in a gain and close in the fourth quarter of 2002.

On July 30, 2002, the Company announced that it had purchased a 19.9% interest in SoftNet Systems, Inc. ("SoftNet") for $15,000,000. In addition, the Company announced that it had entered into an agreement to sell its subsidiary, First Standard Holdings Corp. ("FSHC"), for $31,920,000 cash to SoftNet subject to certain conditions including SoftNet shareholder approval. FSHC owns First Standard, RAS and IndependenceCare. A special meeting of the shareholders of SoftNet to vote on such transaction is scheduled to be held on November 14, 2002. Two representatives of IHC have become directors of SoftNet and, upon consummation of the sale of FSHC, SoftNet's operations will be directed by the management of IHC. Prior to closing of such transaction, IHC will contribute additional capital to FSHC, such that it will have a book value of $21,300,000 as of the closing. After closing of the sale of FSHC, which is expected to result in a gain, the Company will make a cash tender offer at $3. 00 per share for at least an additional 3,000,000 (or 12%) of SoftNet's outstanding shares, subject to certain limitations.

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"), Risk Assessment Strategies, Inc. ("RAS"), 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 expenses and income, principally income from parent company liquidity, are included in Corporate.

The Company's operating income was $6.7 million for the three months ended September 30, 2002 compared to $4.5 million for the same period of 2001. The Company had net realized and unrealized gains of $.1 million in 2002 and $1.1 million in 2001. Decisions to sell securities are based on cash flow needs, investment opportunities and economic and market conditions, thus creating fluctuations in gains (losses) from year to year. Excluding net realized and unrealized gains, operating income increased to $6.6 million in 2002 as compared to $3.4 million in 2001 (see Note 6 of Notes to Consolidated Financial Statements). Net income was $4.3 million, or $.53 per share, diluted, for the quarter ended September 30, 2002 versus $3.0 million, or $.37 per share, diluted, in 2001.

The Insurance Group's operating income increased $1.7 million to $7.8 million in 2002 from $6.1 million in 2001. Operating income includes net realized and unrealized gains of $.2 million in 2002 compared to $1.1 million in 2001. Operating income excluding net realized and unrealized gains was $7.6 million in 2002 compared to $5.0 million in 2001.

Premium revenues increased $10.1 million to $36.9 million in 2002 from $26.8 million in 2001; premium revenues increased $.8 million at Madison Life and $9.3 million at Standard Life. The change at Madison Life is comprised of: a $.3 million increase in long-term disability ("LTD") premiums primarily due to rate increases in 2002, a $.2 million increase in the stop-loss line of business due to the introduction of this line of business at Madison Life, a $.2 million increase in ordinary life and individual accident and health premiums and a $.1 million increase in group term life. The increase at Standard Life is comprised of: a $4.2 million increase in stop-loss premiums due to higher retention and increased volume in 2002; a $1.7 million increase in provider excess premiums due to the assumption of a block of business and an increase in direct writings and a $3.9 million increase in individual annuity premiums due to assumption certificates issued; such increases were partially offset by a $.5 million decrease in all other lines.

Total net investment income increased $.8 million. The annualized return on investments of the Insurance Group in the third quarter of 2002 was 6.5% compared to 6.3% in the third quarter of 2001. Total net investment income includes a loss of $.6 million from the Company's 19.9% equity interest in SoftNet Systems, Inc. ("SoftNet") representing the Company's pro-rata share under the equity method of accounting of SoftNet's loss for the period for which it was held. This loss was anticipated to occur in connection with the winding down of SoftNet's previous operations.

Other income increased $.1 million due to a $.1 million increase in fee income at IndependenceCare, and a $.4 million increase in fee income and profit commissions earned by RAS; such increases were offset by a decrease in other income of $.4 million at Standard Life.

Insurance benefits, claims and reserves increased $7.0 million, reflecting an increase of $.3 million at Madison Life and an increase of $6.7 million at Standard Life. Madison Life's increase resulted from: a $.1 million increase in stop-loss reserves, a $.3 million increase in claims and reserves in the group term life lines of business, a $.2 million increase in the credit line of business due to the increase in volume and a $.4 million increase in LTD claims: such increases were offset by a $.7 million decrease in ordinary life and individual accident and health reserves and claims. The change at Standard Life is comprised of: a $2.1 million increase in stop-loss reserves due to the increase in premiums, slightly offset by lower loss ratios, a $3.9 million increase in individual annuity reserves due to the increase in premiums and a $1.7 million increase in the provider excess block due to the increase in volume; such increases were offset by a $1.0 million decrease in all other lin es.

Amortization of deferred acquisition costs and general and administrative expenses for the Insurance Group increased $1.4 million. Madison Life's expenses remained constant. Standard Life's expenses increased $1.3 million, comprised of a $1.2 million increase in commissions and a $.1 million increase in state insurance taxes, licenses and fees, both due to the higher level of premiums. IndependenceCare's expenses increased $.1 million.

Operating loss for the quarter ended September 30, 2002 decreased by $.5 million from 2001 to a loss of $1.1 million. Excluding a realized loss of $.1 million in 2002, Corporate had a $.6 million decrease in loss due to an increase in investment income of $.1 million, lower general expenses of $.4 million and lower interest expense of $.1 million.

The Company's operating income was $19.2 million for the nine month period ended September 30, 2002 compared to $17.1 million for the same period of 2001. The Company had net realized and unrealized gains of $.5 million in 2002 and $3.5 million in 2001. Excluding net realized and unrealized gains, operating income increased to $18.7 million in 2002 as compared to $13.6 million in 2001 (see Note 6 of Notes to Consolidated Financial Statements). Net income was $12.3 million, or $1.54 per share, diluted, in the nine months ended September 30, 2002 versus $11.0 million, or $1.37 per share, diluted, for the nine months ended September 30, 2001.

The Insurance Group's operating income increased $2.5 million to $22.5 million in 2002 from $20.0 million in 2001. Operating income includes net realized and unrealized gains of $.6 million in 2002 compared to $3.5 million in 2001. Operating income excluding net realized and unrealized gains was $21.9 million in 2002 compared to $16.5 million in 2001.

Premium revenues increased $20.4 million to $99.4 million in 2002 from $79.1 million in 2001; premium revenues increased $.9 million at Madison Life and $19.5 million at Standard Life. The change at Madison Life is comprised of: a $1.0 million increase in LTD premiums primarily due to rate increases in 2002; a $.2 million increase in stop-loss premiums due to the introduction of this business at Madison Life, a $.2 million increase in other lines of business and a $.4 million increase in the credit lines of business, primarily due to increased retention resulting from the cancellation of a reinsurance treaty; such increases were offset by: a $.9 million decrease in ordinary life and individual accident and health premiums due to the runoff of acquisitions. The increase at Standard Life is comprised of: a $12.9 million increase in stop-loss premiums due to higher retention and increased volume in 2002; a $3.3 million increase in provider excess premiums due to an assumed block of business a nd an increase in direct writings and a $4.3 million increase in the individual annuity line due to assumption certificates issued; such increase was partially offset by a $1.0 million decrease in all other lines.

Total net investment income increased $1.8 million due to a slight increase in the annualized return. The annualized return on investments of the Insurance Group in 2002 was 7.1% compared to 7.0% in 2001. Total net investment income includes a loss of $.6 million from the Company's 19.9% equity interest in SoftNet representing the Company's pro-rata share under the equity method of accounting of SoftNet's loss for the period for which it was held. This loss was anticipated to occur in connection with the winding down of SoftNet's previous operations.

Other income increased $1.4 million due to a $.6 million increase in fee income at IndependenceCare due to an increase in premiums written in 2002 and a $.8 million increase in fee income and profit commissions from RAS.

Insurance benefits, claims and reserves increased $13.1 million, reflecting a decrease of $.1 million at Madison Life and an increase of $13.2 million at Standard Life. Madison Life's decrease resulted from: a $.5 million decrease in interest to annuity policies due to the drop in interest rates and a lower asset base; such decrease was offset by a $.3 million increase in ordinary life and individual accident and health reserves, claims and surrenders and a $.1 million increase in stop-loss reserves. The change at Standard Life is comprised of: a $7.7 million increase in stop-loss reserves due to the increase in premiums slightly offset by lower loss ratios; a $1.1 million increase in provider excess reserves due to the increase in volume; and a $4.5 million increase in the individual annuity line due to the increase in premiums; such increases were partially offset by a $.1 million decrease in all other lines.

Amortization of deferred acquisition costs and general and administrative expenses for the Insurance Group increased $5.1 million. Madison Life's expenses decreased $.1 million, Standard Life's increased $5.0 million and IndependenceCare's expenses increased $.2 million. The decrease at Madison Life is primarily due to a decrease in deferred acquisition costs related to the ordinary life line of business of $.6 million, offset by an increase of $.5 million in commission expense on the credit lines of business. The increase at Standard Life is comprised of a $3.1 million increase in commissions and a $.7 million increase in state insurance taxes,

licenses and fees, both due to the increase in premium volume and a $1.2 million increase in general expenses due to higher salary and related expenses.

Operating loss for the period ended September 30, 2002 increased by $.4 million from 2001 to a loss of $3.3 million. This increase is due to a realized loss of $.1 million in 2002, lower investment income from partnerships in 2002 of $.4 million, and an increase in general expenses of $.3 million, slightly offset by a decrease in interest expense of $.4 million.

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 to partially finance liabilities for insurance policy benefits. These liabilities represent long-term and short-term obligations which are calculated using certain assumed interest rates.

In the first quarter of 2002, IndependenceCare purchased all of the assets of an employer stop-loss MGU in Austin, TX. In the second quarter of 2002, the Company acquired the remaining interest in RAS. Prior to this purchase, RAS was a majority owned MGU at Madison Life. The purchase of this minority interest was paid for with cash and the issuance of 46,600 shares of the Company's common stock.

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 82% was invested in investment grade fixed income securities, resale agreements, policy loans and cash and cash equivalents at September 30, 2002. Also at such date, approximately 97.6% of the Insurance Group's fixed maturities were investment grade. These investments carry less risk and, therefore, lower interest rates than other types of fixed maturity investments. At September 30, 2002, approximately 2.4% 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 carrying va lue of the Company's total investments were represented by real estate and mortgage loans. Less than .1% of the Company's total investments were in non-performing fixed maturities.

Balance Sheet

The increase in securities purchased under agreements to resell during the first nine months of 2002 was offset by a decrease in fixed maturities. This change in investment mix was made in light of current market conditions.

The Company had net receivables from reinsurers of $123.7 million at September 30, 2002. 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 September 30, 2002.

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 and marketable securities) amounted to $3.1 million at September 30, 2002.

Due to its favorable 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. 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 Statement of Financial Accounting Standards 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 decrease in unrealized gains of $1.3 million, net of deferred taxes and deferred policy acquisition costs, in total stockholders' equity, reflecting unrealized gains of $.1 million at December 31, 2001 versus unrealized losses of $1.2 million at September 30, 2002. For the three months and nine months ended September 30, 2002, the Company recorded $1.2 million and $1.7 million, respectively, of losses on securities with declines in fair value that the Company considered to be other than temporary. From time to time, as warranted, the Company employs investment strategies to mitigate inter est rate and other market exposures.

On July 30, 2002, the Company announced that it had purchased a 19.9% interest in SoftNet Systems, Inc. ("SoftNet") for $15 million. In addition, the Company announced that it had entered into an agreement to sell its subsidiary, First Standard Holdings Corp. ("FSHC"), for $31,920,000 cash to SoftNet subject to certain conditions including SoftNet shareholder approval. FSHC owns First Standard, RAS and IndependenceCare. A special meeting of the shareholders of SoftNet to vote on such transaction is scheduled to be held on November 14, 2002. Two representatives of IHC have become directors of SoftNet and, upon consummation of the sale of FSHC, SoftNet's operations will be directed by the management of IHC. Prior to closing of such transaction, IHC will contribute additional capital to FSHC, which is expected to result in a gain, such that it will have a book value of $21,300,000 as of the closing. After closing of the sale of FSHC, the Company will make a cash tender offer at $3.0 0 per share for at least an additional 3,000,000 (or 12%) of SoftNet's outstanding shares, subject to certain limitations.

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.

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.

The expected change in fair value as a percentage of the Company's fixed income portfolio at September 30, 2002 given a 100 to 300 basis point rise or decline in interest rates is not materially different than the expected change at December 31, 2001. 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 surrende r 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.

Independence Holding Company's management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.

Some of the statements included within Management's Discussion and Analysis may be considered to be forward looking statements which are subject to certain risks and uncertainties. Factors which could cause the actual results to differ materially from those suggested by such statements are described from time to time in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.

Pursuant to the requirements 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.

                                                                                INDEPENDENCE HOLDING COMPANY

                                                                                                         (THE REGISTRANT)

Dated: November 11, 2002                                 By: /s/ Teresa A. Herbert

I, Roy T.K. Thung, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Independence Holding Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 11, 2002

Roy T.K. Thung

Chief Executive Officer

I, Teresa A. Herbert, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Independence Holding Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 11, 2002

Teresa A. Herbert

Chief Financial Officer