Allied Life: 2nd Quarter Earnings Release ALLIED LIFE FINANCIAL CORPORATION REPORTS 11% INCREASE IN OPERATING EARNINGS Contact Jeff Roling 800-532-1436 ext. 4454 Des Moines, Iowa, July 23, 1997--ALLIED Life Financial Corporation (NASDAQ symbol ALFC) today reported results for the quarter and the six months ended June 30. Operating earnings for the second quarter of 1997 were $0.50 per share compared with $0.45 for the same quarter of 1996; for the first six months of the year, operating earnings totaled $0.90 per share-down from $0.96 for the same period of the prior year. Death claims were higher for the quarter, $2 million versus $1.4 million, and for the year to date were $4.3 million versus $2.9 million. The face amount of life insurance sold directly by agents in both the traditional and the property-casualty distribution systems totaled $934.5 million in the first half of the year, up 10% from $850 million for the same period of 1996. President Sam Wells credited the traditional system's 168% increase and the p-c system's 11% increase in universal life sales for the bulk of the improvement. Wells said, "Our UL production is going as we planned and is definitely counter to the current industry trend for this line of business." Annuity sales were also up; year to date the overall increase was 22%. The traditional distribution system's increase was 18%; property-casualty's was 29%. "I'm particularly pleased with the annuity activity in the p-c system; it's a sign our Life Professional program, through which we assign experienced producers to p-c agencies to help them generate sales, is having an impact," Wells stated. Management has taken several steps to stimulate further production growth. Year to date they have signed 854 net new producer contracts, a 134% increase over 1996's year-to-date total. They continued to expand the number of states in which ALLIED Life is licensed to do business and gained product approvals in more states. They hired a new marketing vice president to be responsible for sales through the property-casualty system. Midyear is the opportune time to check progress toward the annual goals of increasing invested assets at amortized cost 15% to $820 million, growing insurance revenues 12% to $35 million, raising life insurance in force sold directly by agents 12% to $9.6 billion, and raising the total annuity account balance 15% to $535 million. At midyear, compared to June 30, 1996, invested assets were up 10% to $733.5 million, insurance revenues were up 12% to $16.8 million, life insurance in force was up 12% to $9 billion, and the annuity account balance was up 12% to $484.6 million. John Evans, Chairman, reported on an action taken by the Board of Directors that had a positive effect on earnings per share. "In the second quarter, we authorized a stock buy back of 150,000 shares. The Company completed the purchase at an average cost of $16.52 per share. Currently the stock is trading in a range of $19 to $20 a share on the open market." 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. 1 ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Three Months Ended June 30, Percent 1997 1996 Change Summarized income statement data Insurance revenues $8,587,387 $7,549,907 14% Investment income 12,851,595 $11,936,957 8% Realized investment gains $140,436 ($60,290) 333% Other income 338,873 270,109 25% Revenues 21,918,291 19,696,683 11% Benefits and expenses 17,901,425 16,055,781 11% Income before income taxes 4,016,866 3,640,902 10% Income taxes 1,337,922 1,176,807 14% Net income $2,678,944 $2,464,095 9% Net income applicable to common stock $2,252,448 $2,066,844 9% Earnings per share Net operating earnings $0.50 $0.45 10% Realized investment gains (losses) net of related DPAC amortization and taxes 0.01 0.00 100% Net income $0.51 $0.45 12% Weighted average common shares outstanding 4,446,153 4,635,778 -4% Dividends paid per common share $0.06 $0.05 20% Interest rate analysis Net investment yield- investment portfolio 7.26% 7.43% -2% Total interest-credited rate 5.34% 5.59% -5% Net interest margin 1.92% 1.84% 5% 2 ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Six Months Ended June 30, Percent 1997 1996 Change Summarized income statement data Insurance revenues $16,761,968 $14,920,262 12% Investment income 25,534,722 $23,686,874 8% Realized investment losses ($252,319) ($144,474) -75% Other income 662,014 558,095 19% Revenues 42,706,385 39,020,757 9% Benefits and expenses 35,498,772 31,335,475 13% Income before income taxes 7,207,613 7,685,282 -6% Income taxes 2,401,867 2,523,887 -5% Net income $4,805,746 $5,161,395 -7% Net income applicable to common stock $3,959,753 $4,372,859 -9% Earnings per share Net operating earnings $0.90 $0.96 -6% Realized investment losses net of related DPAC amortization and taxes (0.01) (0.01) 0% Net income $0.89 $0.95 -6% Weighted average common shares outstanding 4,473,721 4,634,490 -3% Dividends paid per common share $0.12 $0.10 20% Interest rate analysis Net investment yield- investment portfolio 7.26% 7.46% -3% Total interest-credited rate 5.38% 5.57% -4% Net interest margin 1.88% 1.89% -0% 3 ALLIED Life Financial Corporation Summarized Consolidated Balance Sheets June 30, December 31, 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 720,280,862 500,289,070 44% Other investments 26,335,547 22,841,066 15% Total investment 746,616,409 722,338,971 3% Deferred acquisition costs- operating 99,951,782 96,410,860 4% Deferred acquisition costs- SFAS 115 (6,534,233) (3,993,272) 64% Other assets 25,219,342 20,843,164 21% Total assets $865,253,300 $835,599,723 4% Liabilities Policy liabilities Policyholder account balances Annuity $484,568,954 $467,504,991 4% Universal life 189,825,970 182,726,695 4% Other policy 48,957,330 47,631,332 3% Total 723,352,254 697,863,018 4% Deferred income taxes 4,529,434 8,008,946 -43% Note payable 18,880,000 20,470,000 -8% Other liabilities 9,871,474 9,316,138 6% Total liabilities 765,633,162 735,658,102 3% Stockholders' equity Preferred stock 25,620,206 24,586,232 4% Common stock 4,368,832 4,497,238 -3% Additional paid-in 44,559,376 46,596,171 -4% Retained earnings 25,178,711 21,751,088 16% Unrealized appreciation on investments 8,893,013 2,510,892 254% Total stockholders equity 108,620,138 99,941,621 9% Total liabilities and stockholders' equity $865,253,300 $835,599,723 4% Shares outstanding 6.75% Series preferred 2,216,650 2,143,691 3% ESOP Series convertible 107,329 93,982 14% preferred stoc and stockholders' equity $865,253,300 $835,599,723 4% Shares outstanding 6.75% Series preferred 2,216,650 2,143,691 3% ESOP Series convertible 107,329 93,982 14% preferred stock Common stock 4,368,832 4,497,238 -3% Total shares outstanding 6,692,811 6,734,911 -1% Book value per common share $18.89 $16.70 13% Book value per common share excluding net unrealized investment gains $16.91 $16.16 5% 4 ALLIED Life Financial Corporation Summary of Life Insurance Operations Three Months Ended June 30, Percent 1997 1996 Change Life insurance profitability Investment income $12,839,790 $11,924,146 8% Interest credited on Annuities 6,437,051 6,056,648 6% Universal life 2,487,882 2,348,317 6% Other 89,299 87,572 2% Total interest expense 9,014,232 8,492,537 6% Investment spread 3,825,558 3,431,609 11% Fee income Universal life 5,831,325 5,500,122 6% Annuity surrender charges 204,107 154,397 32% Total fee income 6,035,432 5,654,519 7% Other insurance income Life premiums,net 1,759,929 1,487,356 18% SPIA with life 228,026 30,644 644% Ceded reinsurance commissions 564,001 377,388 49% Other insurance income 2,551,956 1,895,388 35% Adjusted insurance revenue 12,412,946 10,981,516 13% Other expenses Amortization of DPAC 2,485,891 2,131,390 17% Renewal commissions 804,882 591,096 36% Other operating expenses 1,730,715 1,530,094 13% LTC administration expense 126,547 133,483 -5% Total acquisition and operating expenses 5,148,035 4,386,063 17% Death benefits, net 1,967,587 1,370,890 44% Other policyholder benefit 1,353,809 1,581,653 -14% Total other expenses 8,469,431 7,338,606 15% Income before taxes and realized gains (losses) from insurance operations 3,943,515 3,642,910 8% Realized investment gains 140,436 (60,290) 333% DPAC amortization on realized gains (losses) (71,101) 21,704 -428% Income before tax from other operations 4,016 36,578 -89% Income before income taxes 4,016,866 3,640,902 10% Income taxes 1,337,922 1,176,807 14% Net income $2,678,944 $2,464,095 9% DPAC amortization ratio 38.7% 36.9% 5 ALLIED Life Financial Corporation Summary of Life Insurance Operations Six Months Ended June30, Percent 1997 1996 Change Life insurance profitability Investment income $25,511,944 $23,663,458 8% Interest credited on Annuities 12,857,894 11,857,101 8% Universal life 4,944,085 4,723,579 5% Other 215,430 171,769 25% Total interest expense 18,017,409 16,752,449 8% Investment spread 7,494,535 6,911,009 8% Fee income Universal life 11,668,927 11,184,768 4% Annuity surrender charges 369,037 265,511 39% Total fee income 12,037,964 11,450,279 5% Other insurance income Life premiums,net 3,300,200 2,599,491 27% SPIA with life 365,275 133,285 174% Ceded reinsurance commissions 1,058,530 737,207 44% Other insurance income 4,724,005 3,469,983 36% Adjusted insurance revenues 24,256,504 21,831,271 11% Other expenses Amortization of DPAC 4,921,592 3,893,427 26% Renewal commissions 1,493,129 1,158,995 29% Other operating expenses 3,321,875 3,035,144 9% LTC administration expense 247,289 225,734 10% Total acquisition and operating expenses 9,983,885 8,313,300 20% Death benefits, net 4,293,679 2,874,310 49% Other policyholder benefit 2,750,970 2,938,913 -6% Total other expenses 17,028,534 14,126,523 21% Income before taxes and realized losses from insurance operations 7,227,970 7,704,748 -6% Realized investment losses (252,319) (144,474) -75% DPAC amortization on realized losses 208,669 51,147 308% Income before tax from other operations 23,293 73,861 -68% Income before income taxes 7,207,613 7,685,282 -6% Income taxes 2,401,867 2,523,887 -5% Net income $4,805,746 $5,161,395 -7% DPAC amortization ratio 40.5% 33.6% 6 ALLIED Life Financial Corporation New Production Information (000s) Three Months Ended June 30, Percent 1997 1996 Change 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 $141,707 $88,742 60% Term life 358,491 366,919 -2% Whole life 2,723 1,182 130% Subtotal 502,921 456,843 10% Life insurance-other 1,475 6,858 -78% Total $504,396 $463,701 9% Annuities $18,933 $16,830 12% Policyholder assessments collected on universal life First-year $669 $668 0% Renewal 4,716 4,388 7% Total $5,385 $5,057 6% Statutory information Premiums and annuity considerations, net Universal life insurance $7,578 $7,010 8% Term life insurance 2,456 2,153 14% Annuities 20,064 18,218 10% Other 381 40 853% Total $30,479 $27,422 11% 7 ALLIED Life Financial Corporation New Production Information (000s) Six Months Ended June 30, Percent 1997 1996 Change Life insurance face amount in force Directly produced by agents Universal life $4,485,388 $4,244,770 6% Term life 4,468,907 3,758,407 19% Whole life 50,630 49,392 3% Total 9,004,925 8,052,569 12% Other 378,839 386,416 -2% Total $9,383,764 $8,438,985 11% 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 $299,346 $187,068 60% Term life 630,678 660,752 -5% Whole life 4,479 2,159 107% Subtotal 934,503 849,979 10% Life insurance-other 3,249 11,205 -71% Total $937,752 $861,184 9% Annuities $32,957 $26,097 26% Policyholder assessments collected on universal life First-year $1,364 $1,438 -5% Renewal 9,408 8,771 7% Total $10,772 $10,209 6% Statutory information Premiums and annuity considerations, net Universal life insurance $15,959 $14,658 9% Term life insurance 4,527 4,010 13% Annuities 34,921 28,642 22% Other 649 182 256% Total $56,057 $47,492 18% 8 ALLIED Life Financial Corporation New Production by Distribution System (000s) Three Months Ended June 30, Percent 1997 1996 Change Life insurance face amount sold Directly produced by agents Property--casualty agencies Universal life $70,495 $62,303 13% Term life 246,009 267,322 -8% Whole life 1,856 1,063 75% Subtotal 318,360 330,688 -4% Traditional agencies Universal life $71,212 $26,439 169% Term life 112,482 99,597 13% Whole life 867 119 627%/f Subtotal 184,561 126,155 46% Total produced by agents 502,921 456,843 10% Other 1,475 6,858 -78% Total $504,396 $463,701 9% Life insurance policies sold Property--casualty agencies Universal life 496 525 -6% Term life 1,316 1,582 -17% Total 1,812 2,107 -14% Traditional agencies Universal life 425 195 118% Term life 390 452 -14% Total 815 647 26% Annuity premiums Deferred annuities Property--casualty age $7,793 $6,227 25% Traditional agencies 11,917 11,951 0% Subtotal 19,709 18,178 8% Immediate annuities 355 40 787% Total $20,064 $18,218 10% 9 ALLIED Life Financial Corporation New Production by Distribution System (000s) Six Months Ended June 30, Percent 1997 1996 Change Life insurance face amount in force Directly produced by agents Property--casualty agencies Universal life $2,802,229 $2,696,566 4% Term life 3,398,722 2,791,485 22% Whole life 35,416 34,182 4% Total 6,236,368 5,522,232 13% Traditional agencies Universal life 1,683,159 1,548,204 9% Term life 1,070,185 966,922 11% Whole life 15,214 15,210 0% Total 2,768,557 2,530,337 9% Total produced by agents 9,004,925 8,052,569 12% Other 378,839 386,416 -2% Total 9,383,764 $8,438,985 11% Life insurance face amount sold Directly produced by agents Property--casualty agencies Universal life $142,862 $128,586 11% Term life 458,134 486,674 -6% Whole life 3,159 1,713 84% Subtotal 604,155 616,973 2% Traditional agencies Universal life $156,484 $58,482 168% Term life 172,544 174,078 -1% Whole life 1,320 446 196% Subtotal 330,348 233,006 42% Total produced by agents 934,503 849,979 10% Other 3,249 11,205 -71% Total $937,752 $861,184 9% Life insurance policies sold Property--casualty agencies Universal life 976 1,027 -5% Term life 2,423 2,657 -9% Total 3,399 3,684 -8% Traditional agencies Universal life 804 404 99% Term life 638 753 -15% Total 1,442 1,157 25% Annuity premiums Deferred annuities Property--casualty agencies $13,864 $10,754 29% Traditional agencies 20,226 17,150 18% Subtotal 34,091 27,904 22% Immediate annuities 830 738 12% Total $34,921 $28,642 22% 10 Ends.