Allied Life: Fourth Quarter Earnings ALLIED LIFE REPORTS 40% INCREASE IN 1997 NET EARNINGS Contact Jeff Roling 800-532-1436, ext. 4454 Des Moines, Iowa, February 12, 1998--ALLIED Life Financial Corporation (NASDAQ symbol ALFC) today reported results for the fourth quarter and the twelve months ended December 31, 1997. Net income for the fourth quarter was $0.54 per share versus $0.09 for the same quarter of 1996; on an annual basis, it was $1.94 versus $1.39. Fourth-quarter operating earnings per share were $0.47 compared with $0.04; for the year, they were $1.82 per share compared with the 1996 total of $1.35. The 1997 net income figures include $0.07 per share in net realized investment gains for the fourth quarter and $0.12 for the year. In the fourth quarter, the Company sold all of its publicly traded common stock investments to take advantage of market conditions; the proceeds were reinvested in bonds. The quarterly and annual 1996 earnings reflect an aftertax charge taken at year-end to adjust deferred policy acquisition costs. The fourth-quarter effect was a $0.41 per share reduction; for the year, the effect was a $0.40 reduction. All reported earnings per share have been adjusted to reflect SFAS 128. Chief Financial Officer Wendell Crosser explained, "The Financial Accounting Standards Board changed the method for calculating EPS. In the past, stock options were considered immaterial as long as they had less than a 3% effect. Now, options must be taken into account regardless of materiality. The change diluted 1997 and 1996 operating earnings $0.04 per share." Other factors affecting earnings were death claims and investment spread. Death claims totaled $2.1 million for the fourth quarter of 1997 compared with $1.8 million for the same quarter of 1996; for all of 1997, they came to $8.2 million versus $6.9 million for 1996. The investment spreads for the fourth quarter and the full year of 1997 were 1.89% and 1.86%; the spreads for the fourth quarter and the full year of 1996 were 1.79% and 1.80%. Chairman John Evans reminded investors, "In the second quarter of 1997, the Board of Directors authorized a stock buyback of 150,000 shares. The Company completed the repurchase at an average cost of $16.52 per share. The market value of our common stock increased 25% during 1997, closing at $21.88." A highly competitive term life insurance market, the mandated implementation of the Life Illustration regulation, and falling interest rates were cited as reasons the Company fell short of reaching its management goals. President Sam Wells elaborated:"We increased life insurance in force sold by agents 8% to $9.2 billion, the annuity account balance 10% to $514.9 million, and invested assets 6% to $755.6 million. Our fourth-quarter insurance revenues were up 13% to $8.8 million from $7.8 for the last three months of 1996; for the year they were up 9% to $34.1 million from $31.3 million. Given the environment, we made good progress." There were many production positives. The traditional distribution system's universal life insurance sales were up 105% for the year and the property-casualty distribution system's 10%--for a combined 40% increase. Term insurance sales for both distribution systems were down 13% for the year but rebounded to grow 16% in the fourth quarter. Though not strong enough to offset slower sales of fixed annuities in a time of low interest rates, ALLIED Life's indexed annuities reached the expected production level and contributed to a 5% growth of overall first-year annuity sales. It was also a good year for agent recruitment: the Company contracted 2,057 net new agents, over 90% of them for the traditional sales force. Management announced these goals for 1998, expressing belief that they are reasonable measures of what can be achieved: Increase invested assets at amortized cost 12% to $850 million Grow life insurance in force sold directly by agents 10% to $10.2 billion Raise operating revenues 10% to $97 million Increase the total annuity account balance 12% to $575 million ALLIED Life Financial Corporation is a holding company that, through its principal subsidiary, ALLIED Life Insurance Company, underwrites, markets, and distributes life insurance and annuity products in rural and suburban areas of the midwestern and western United States. 1 ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Three Months Ended December Percent 1997 1996 Change Summarized income statement data Insurance revenues $8,854,177 $7,810,728 13% Investment income 13,438,627 12,668,430 6% Realized investment gains 1,748,837 315,103 455% Other income 418,501 251,000 67% Revenues 24,460,142 21,045,261 16% Benefits and expenses 20,206,046 19,829,534 2% Income before income taxes 4,254,096 1,215,727 250% Income taxes 1,413,271 409,966 245% Net income $2,840,825 $805,761 253% Net income applicable to common stock $2,428,121 $419,777 478% Earnings per share Net operating earnings $0.47 $0.45 4% Additional DPAC Adjustments $0.00 ($0.41) 100% Realized investment gains net of related DPAC amortization and taxes 0.07 0.05 40% Net income $0.54 $0.09 500% Weighted average shares 4,538,460 4,620,855 -2% Dividends paid per common share $0.07 $0.06 17% Interest rate analysis Net investment yield- investment portfolio 7.24% 7.43% -3% Total interest-credited rate 5.35% 5.64% -5% Net interest margin 1.89% 1.79% 6% 2 ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Twelve Months Ended December Percent 1997 1996 Change Summarized income statement data Insurance revenues $34,142,556 $31,349,686 9% Investment income 52,196,708 48,181,831 8% Realized investment gains 2,353,965 122,097 1828% Other income 1,558,852 1,056,498 48% Revenues 90,252,081 80,710,112 12% Benefits and expenses 74,553,578 68,700,389 9% Income before income taxes 15,698,503 12,009,723 31% Income taxes 5,225,949 3,937,132 33% Net income $10,472,554 $8,072,591 30% Net income applicable to common stock $8,862,377 $6,566,665 35% Earnings per share Net operating earnings $1.82 $1.75 4% Additional DPAC Adjustments $0.00 ($0.40) -100% Realized investment gains net of related DPAC amortization and taxes 0.12 0.04 -200% Net income $1.94 $1.39 40% Weighted average shares 4,571,673 4,712,256 -3% Dividends paid per common share $0.25 $0.21 19% Interest rate analysis Net investment yield- investment portfolio 7.26% 7.37% -1% Total interest-credited rate 5.40% 5.57% -3% Net interest margin 1.86% 1.80% 4% 3 ALLIED Life Financial Corporation Summarized Consolidated Balance Sheets Percent 1997 1996 Change Assets Investments Fixed maturities Held to maturity at amortized cost $0 $199,208,835 -100% Available for sale at fair value 766,028,463 500,289,070 53% Other investments 21,956,749 22,841,066 -4% Total investments 787,985,212 722,338,971 9% Deferred acquisition costs- operating 102,626,995 96,410,860 6% Deferred acquisition costs- 'SFAS 115 (18,439,211) (3,993,272) 362% Other assets 32,283,874 20,843,164 55% Total assets $904,456,870 $835,599,723 8% Liabilities Policy liabilities Policyholder account balances Annuity contracts $514,908,099 $467,504,991 10% Universal life contracts 196,708,702 182,726,695 8% Other policy liabilities 51,736,086 47,631,332 9% Total policy liabilities 763,352,887 697,863,018 9% Deferred income taxes 10,552,777 8,008,946 32% Note payable 6,360,000 20,470,000 -69% Other liabilities 10,033,989 9,316,138 8% Total liabilities 790,299,653 735,658,102 7% Stockholders' equity Preferred stock 26,335,907 24,586,232 7% Common stock 4,397,692 4,497,238 -2% Additional paid-in capital 44,963,963 46,596,171 -4% Retained earnings 29,403,775 21,751,088 35% Unrealized appreciation on investments 9,055,880 2,510,892 261% Total stockholders' equity 114,157,217 99,941,621 14% Total liabilities and stockholders' equity $904,456,870 $835,599,723 8% Shares outstanding 6.75% Series preferred stock 2,292,093 2,143,691 7% ESOP Series convertible 100,732 93,982 7% preferred stock Common stock 4,397,692 4,497,238 -2% Total shares outstanding 6,790,517 6,734,911 1% Book value per common share $19.85 $16.70 19% Book value per common share excluding net unrealized investment gains $17.84 $16.16 10% End