Allied Life: First Quarter Earnings Release ALLIED LIFE INCREASES CORE EARNINGS 23% Contact Jeff Roling 800-532-1436 ext.4454 Des Moines, Iowa, April 23, 1998--ALLIED Life Financial Corporation (NASDAQ symbol ALFC) today released earnings for the quarter ended March 31, 1998. Core operating earnings,prior to a charge for potential litigation costs, were $0.48 per share compared with $0.39 for the first quarter of 1997. The 23% increase was in line with the Company's expectations. Total revenues increased 16% to $24.2 million from $20.8 million. Death claims for the quarter were $2 million net of reinsurance, down 15% from those reported in the same period of the prior year. The first-quarter 1998 net investment spread was 175 basis points compared with 186 basis points for the first quarter of 1997. President Sam Wells was pleased with the 224 net new agent contracts signed in the first quarter and with the production from both distribution systems. "Overall, term life insurance face amount was up 10% for the quarter, led by the property-casualty system's 13% increase, and the term life policy count was up 35%," said Wells. Second-quarter term life insurance sales should be aided by the Provider, a term policy that pays a beneficiary a specified monthly income stream for fifteen, twenty, or thirty years rather than a lump sum death benefit. Wells explained, "We just introduced the Provider in mid-February, and already agents are reporting enthusiastic customer response." Annuity sales were up 36% for the quarter. The traditional system increased sales by 40%, the property-casualty side by 29%. "At year-end 1997, we were increasing weekly sales of our equity indexed annuities," said Wells. "Those products remained popular in the first quarter of 1998 because buyers expected further gains in the stock market." In its 1997 annual report, the Company published goals for 1998: to increase invested assets at amortized cost 12% to $850 million, to grow life insurance in force sold directly by agents 10% to $10.2 billion, to raise operating revenues 10% to $97 million, and to increase the total annuity account balance 12% to $575 million. Chairman John Evans commented on the first-quarter progress toward goals: "As of March 31, 1998 compared with the same date in 1997, invested assets were up 9% to $791.4 million, in force was up 6% to $9.3 billion, operating revenues were up 13% to $24 million, and the annuity balance was up 12% to $530.1 million. The aggressive marketing approaches are working." Earlier this month, the Company announced it would establish an after tax reserve of $1.3 million during the first quarter (reducing earnings $0.29 per share) to cover potential expenses (estimated to be between $700,000 and $1.5 million on an after tax basis) related to a universal life insurance policy DAC tax lawsuit filed in January of 1998. Net earnings were $0.20 per share compared with $0.37 for first quarter 1997. Chief Financial Officer Wendell Crosser elaborated, "The case is in the early stages with several motions pending. While the ultimate resolution of the lawsuit cannot be determined, it is appropriate for the Company to take the conservative position of establishing a reserve for potential costs. The outcome of the lawsuit is not expected to affect ongoing operating revenues." Recognizing ALLIED Life Insurance Company's sound fundamentals, A.M. Best reconfirmed its "A" (excellent) rating on April 20, 1998. ______________________________________________________________________________ The Company's goals,estimates, and expectations discussed in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). These forward-looking statements are made pursuant to the safe harbor provisions of the Reform Act. Investors are cautioned that there are important factors that could cause actual results to differ materially from those in these forward-looking statements. Such factors include, without limitation, risks and uncertainties inherent in any litigation and specifically those uncertainties in predicting how the universal life policy referred to above may be interpreted by the judge or the jury hearing the lawsuit allegations and the legal standards found to be applicable. Investors are referred to Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 1997 Annual Report on Form 10-K for a discussion of additional factors that could cause actual results to differ from these forward-looking statements. 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 the United States. Company financial information is on the Internet at http://www.cfonews.com/alfc. ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Three Months Ended March Percent 1998 1997 Change Summarized income statement data Insurance revenues $9,832,481 $8,174,581 20% Investment income 13,742,930 12,683,127 8% Realized investment gains(losses) 165,032 (392,755) 142% Other income 416,891 323,141 29% Revenues 24,157,334 20,788,094 16% Benefits and expenses 22,124,343 17,597,347 26% Income before income taxes 2,032,991 3,190,747 -36% Income taxes 691,390 1,063,945 -35% Net income $1,341,601 $2,126,802 -37% Net income applicable to common stock $921,933 $1,734,305 -47% Diluted earnings per share Adjusted operating earnings excluding litigation reseserve $0.48 $0.39 23% Litigation reserve ($0.29) ($0.00) N/A Realized investment gains(losses) net of related DPAC amortization and taxes 0.01 (0.02) 150% Net income $0.20 $0.37 -46% Weighted average shares 4,545,437 4,644,088 -2% Dividends paid per common share $0.07 $0.06 17% Interest rate analysis Net investment yield- investment portfolio 7.22% 7.28% -1% Total interest-credited rate 5.47% 5.42% 1% Net interest margin 1.75% 1.86% -6% 2 ALLIED Life Financial Corporation Summarized Consolidated Balance Sheets March 31, December 31, Percent 1998 1997 Change Assets Investments Fixed maturities Available for sale at fair value 802,514,172 766,028,463 5% Other investments 19,097,095 21,956,749 -13% Total investments 821,611,267 787,985,212 4% Deferred acquisition costs- operating 104,432,338 102,626,995 2% Deferred acquisition costs- 'SFAS 115 (16,967,128) (18,439,211) -8% Other assets 33,925,054 32,283,874 5% Total assets $943,001,531 $904,456,870 4% Liabilities Policy liabilities Policyholder account balances Annuity contracts $530,131,242 $514,908,099 3% Universal life contracts 200,408,585 196,708,702 2% Other policy liabilities 56,027,582 51,736,086 8% Total policy liabilities 786,567,409 763,352,887 3% Deferred income taxes 10,195,678 10,552,777 -3% Note payable 17,800,000 6,360,000 180% Other liabilities 13,289,475 10,033,989 32% Total liabilities 827,852,562 790,299,653 5% Stockholders' equity Preferred stock 26,897,879 26,335,907 2% Common stock 4,415,280 4,397,692 0% Additional paid-in capital 45,214,254 44,963,963 1% Retained earnings 29,989,939 29,403,775 2% Unrealized appreciation on investments 8,631,617 9,055,880 -5% Total stockholders' equity 115,148,969 114,157,217 1% Total liabilities and stockholders' equity $943,001,531 $904,456,870 4% Shares outstanding 6.75% Series preferred stock 2,330,772 2,292,093 2% ESOP Series convertible 104,726 100,732 4% preferred stock Common stock 4,415,280 4,397,692 0% Total shares outstanding 6,850,778 6,790,517 1% Book value per common share $19.88 $19.85 0% Book value per common share excluding net unrealized investment gains $17.97 $17.84 1% 3 ALLIED Life Financial Corporation Summary of Life Insurance Operations Three Months Ended March Percent 1998 1997 Change Life insurance profitability Investment income $13,723,590 $12,672,154 8% Interest credited on Annuities 7,281,634 6,420,843 13% Universal life 2,618,631 2,456,203 7% Other 72,939 126,131 -42% Total interest expense 9,973,204 9,003,177 11% Investment spread 3,750,386 3,668,977 2% Fee income Universal life 6,498,013 5,837,602 11% Annuity surrender charges 159,289 164,930 -3% Total fee income 6,657,302 6,002,532 11% Other insurance income Life premiums,net 1,612,506 1,540,272 5% SPIA with life 708,859 137,249 416% Ceded reinsurance commission 853,814 494,529 73% Other insurance income 3,175,179 2,172,050 46% Adjusted insurance revenues 13,582,867 11,843,559 15% Other expenses Amortization of DPAC 2,385,471 2,435,701 -2% Renewal commissions 1,034,812 688,247 50% Other operating expenses 1,364,267 1,134,446 20% Premium and other taxes 537,467 456,714 18% LTC administration expense 182,330 120,742 51% Total acquisition and operating expenses 5,504,347 4,835,850 14% Death benefits, net 1,982,735 2,326,092 -15% Other policyholder benefits,net 2,144,548 1,397,161 53% Total other expenses 9,631,630 8,559,103 13% Income before taxes and other 3,951,237 3,284,456 20% Litigation reserve (2,000,000) 0 N/A Realized investment gains(losses) 165,032 (392,755) 142% DPAC amortization on realized gains (losses) (85,817) 279,770 -131% Income before tax from other operations 2,539 19,276 -87% Income before income taxes 2,032,991 3,190,747 -36% Income taxes 691,390 1,063,945 -35% Net income $1,341,601 $2,126,802 -37% DPAC amortization ratio 37.6% 42.6% 4 ALLIED Life Financial Corporation New Production Information (000s) Three Months Ended March Percent 1998 1997 Change Life insurance face amount in force Directly produced by agents Universal life $4,535,419 $4,419,829 3% Term life 4,721,498 4,287,625 10% Whole life 51,892 49,198 5% Subtotal 9,308,809 8,756,652 6% Other 416,177 383,770 8% Total $9,724,986 $9,140,422 6% New production information Face amount of new life insurance sold and first-year annuity premiums collected during the period Life insurance sold directly by agents Universal life $89,535 $157,639 -43% Term life 298,754 272,187 10% Whole life 2,300 1,756 31% Subtotal 390,589 431,582 -9% Life insurance-other 1,807 1,774 2% Total $392,396 $433,356 -9% Annuities $19,693 $14,024 40% Policyholder assessments collected on universal life First-year $667 $695 -4% Renewal 4,979 4,692 6% $5,646 $5,388 5% Statutory information Premiums and annuity considerations, net Universal life insurance $8,968 $8,381 7% Term life insurance 2,112 2,071 2% Annuities 20,608 14,856 39% Other 248 269 -8% $31,936 $25,578 25% 5 ALLIED Life Financial Corporation New Production by Distribution System (000s) Three Months Ended March Percent 1998 1997 Change Life insurance face amount in force Directly produced by agents Property--casualty agencies Universal life $2,843,477 $2,769,876 3% Term life 3,653,307 3,275,134 12% Whole life 34,828 34,509 1% Subtotal 6,531,613 6,079,520 7% Traditional agencies Universal life 1,691,942 1,649,953 3% Term life 1,068,191 1,012,491 6% Whole life 17,064 14,689 16% Subtotal 2,777,196 2,677,132 4% Total produced by agents 9,308,809 8,756,652 6% Other 416,177 383,770 8% $9,724,986 $9,140,422 6% Life insurance face amount sold Directly produced by agents Property--casualty agencies Universal life $45,807 $72,367 -37% Term life 239,861 212,125 13% Whole life 851 1,303 35% Subtotal 286,519 285,795 -0% Traditional agencies Universal life $45,563 $85,272 -47% Term life 58,893 60,062 -2% Whole life 1,449 453 220% Subtotal 105,905 145,787 -27% Total produced by agents 392,424 431,582 -9% Other 1,807 1,774 2% Total $394,231 $433,356 -9% Life insurance policies sold Property--casualty agencies Universal life 349 480 -27% Term life 1,484 1,107 34% Total 1,833 1,587 16% Traditional agencies Universal life 361 379 -5% Term life 343 248 38% Total 704 627 12% Annuity premiums Deferred annuities Property--casualty agencie $7,861 $6,072 29% Traditional agencies 11,666 8,310 40% Subtotal 19,528 14,381 36% Immediate annuities 1,080 475 127% Total $20,608 $14,856 39% 6 END