Allied Life: Earnings News Release ALLIED LIFE FINANCIAL CORPORATION CONTINUES HIGHER EARNINGS TREND Contact Jeff Roling 800-532-1436 ext 4454 Des Moines, Iowa, October 23, 1997--ALLIED Life Financial Corporation (NASDAQ symbol ALFC) today reported results for the third quarter and the nine months ended September 30. Operating earnings per share for the quarter were up 26% to $0.48 from $0.38 for the previous third quarter. Year-to-date operating earnings per share rose to $1.37 from $1.34 as of September 30, 1996.Year-to-date net income per share increased 8% to $1.43 from $1.32. "Death claims for the quarter were $1.8 million; year to date, they totaled $6.1 million versus $5.1 million for the first nine months of 1996," said Chief Financial Officer Wendell Crosser. "Our year-to-date investment spread improved slightly to 1.85% compared with 1.80% for the same period a year ago." Universal life insurance sales in the nine-month period were up 57% from a year ago, with solid third-quarter increases coming from independent agents in both the traditional and the property-casualty distribution systems. Year-to-date annuity sales were up 15% from the same period of 1996, with the growth coming from the traditional system. "Industry trends to the contrary, our UL sales have been gaining momentum throughout the year and our annuity sales are moving in a positive direction," said President Sam Wells. "These profitable lines are the focus of our growth strategies, and our results show the strategies are working. Our recent addition of a national annuity sales manager should further improve production." The Company again assessed progress toward four annual goals: to achieve 15% growth in invested assets at cost, 12% growth in both insurance revenues and life insurance in force sold directly by agents, and a 15% increase in the total annuity account balance. From September 30, 1996 to September 30, 1997, invested assets at cost increased 10% to $751.6 million and insurance revenues rose 7% to $25.3 million. Life insurance in force sold directly by agents grew 8% to $9 billion, and the total annuity account balance increased 12% to $503.1 million. Management believes the difficult environment for annuity and term life insurance sales may limit annual increases in invested assets, insurance revenues, and the annuity account balance. The Company will strive for double-digit growth in all three. Wells added, "We remain committed to achieving our annual goal of raising life insurance in force sold directly by agents 12% to $9.6 billion. We expect fourth-quarter growth to be driven by UL sales." The Company's progress is being acknowledged. Duff and Phelps Credit Rating Company recently upgraded the "A" claims-paying ability rating for ALLIED Life Insurance Company to "A+" in recognition of its sound fundamentals and improved operating trends. 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. --MORE-- ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Three Months Ended September 30, Percent 1997 1996 Change Summarized income statement data Insurance revenues $8,526,411 $8,618,696 -1% Investment income 13,223,359 11,826,527 12% Realized investment gains (losses) 857,447 (48,532) 1867% Other income 478,337 247,403 93% Revenues 23,085,554 20,644,094 12% Benefits and expenses 18,848,760 17,535,380 7% Income before income taxes 4,236,794 3,108,714 36% Income taxes 1,410,811 1,003,279 41% Net income $2,825,983 $2,105,435 34% Net income applicable to common stock $2,393,128 $1,701,857 41% Earnings per share Net operating earnings $0.48 $0.38 26% Realized investment gains (losses) net of related DPAC amortization and taxes 0.07 (0.01) -800% Net income $0.55 $0.37 49% Weighted average common shares outstanding 4,380,847 4,559,259 -4% Dividends paid per common share $0.06 $0.05 20% Interest rate analysis Net investment yield- investment portfolio 7.29% 7.16% 2% Total interest-credited rate 5.50% 5.53% -1% Net interest margin 1.79% 1.63% 10% 2 ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Nine Months Ended September 30, Percent 1997 1996 Change Summarized income statement data Insurance revenues $25,288,379 $23,538,958 7% Investment income 38,758,081 35,513,401 9% Realized investment gains (losses) 605,128 (193,006) 414% Other income 1,140,351 805,498 42% Revenues 65,791,939 59,664,851 10% Benefits and expenses 54,347,532 48,870,855 11% Income before income taxes 11,444,407 10,793,996 6% Income taxes 3,812,678 3,527,166 8% Net income $7,631,729 $7,266,830 5% Net income applicable to common stock $6,352,881 $6,074,716 5% Earnings per share Net operating earnings $1.37 $1.34 3% Realized investment losses net of related DPAC amortization and taxes 0.06 (0.02) 400% Net income $1.43 $1.32 8% Weighted average common shares outstanding 4,442,423 4,609,230 -4% Dividends paid per common share $0.18 $0.15 20% Interest rate analysis Net investment yield- investment portfolio 7.26% 7.35% -1% Total interest-credited rate 5.41% 5.55% -3% Net interest margin 1.85% 1.80% 3% 3 ALLIED Life Financial Corporation Summarized Consolidated Balance Sheets September 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 746,302,390 500,289,070 49% Other investments 30,581,710 22,841,066 34% Total investments 776,884,100 722,338,971 8% Deferred acquisition costs- operating 101,146,294 96,410,860 5% Deferred acquisition costs- 'SFAS 115 (12,323,840) (3,993,272) 209% Other assets 28,305,628 20,843,164 36% Total assets $894,012,182 $835,599,723 7% Liabilities Policy liabilities Policyholder account balances Annuity contracts $503,092,581 $467,504,991 8% Universal life contracts 193,246,785 182,726,695 6% Other policy liabilities 50,106,999 47,631,332 5% Total policy liabilities 746,446,365 697,863,018 7% Deferred income taxes 10,472,755 8,008,946 31% Note payable 15,340,000 20,470,000 -25% Other liabilities 10,768,273 9,316,138 16% Total liabilities 783,027,393 735,658,102 6% Stockholders' equity Preferred stock 26,011,527 24,586,232 6% Common stock 4,389,958 4,497,238 -2% Additional paid-in capital 44,847,974 46,596,171 -4% Retained earnings 27,308,547 21,751,088 26% Unrealized appreciation on investments 8,426,783 2,510,892 236% Total stockholders' equity 110,984,789 99,941,621 11% Total liabilities and stockholders' equity $894,012,182 $835,599,723 7% Shares outstanding 6.75% Series preferred stock 2,254,056 2,143,691 5% ESOP Series convertible 106,332 93,982 13% preferred stock Common stock 4,389,958 4,497,238 -2% Total shares outstanding 6,750,346 6,734,911 0% Book value per common share $19.24 $16.70 15% Book value per common share excluding net unrealized investment gains $17.37 $16.16 8% 4 ALLIED Life Financial Corporation Summary of Life Insurance Operations Three Months Ended September 30, Percent 1997 1996 Change Life insurance profitability Investment income $13,203,620 $11,817,740 12% Interest credited on Annuities 6,821,863 6,204,824 10% Universal life 2,568,016 2,357,526 9% Other 138,058 100,855 37% Total interest expense 9,527,937 8,663,205 10% Investment spread 3,675,683 3,154,535 17% Fee income Universal life 6,098,608 5,602,845 9% Annuity surrender charges 181,215 104,142 74% Total fee income 6,279,823 5,706,987 10% Other insurance income Life premiums,net 1,618,127 2,221,001 -27% SPIA with life 74,966 256,143 -71% Ceded reinsurance commissions 553,494 434,565 27% Other insurance income 2,246,587 2,911,709 -23% Adjusted insurance revenues 12,202,093 11,773,231 4% Other expenses Amortization of DPAC 2,707,525 1,946,451 39% Renewal commissions 738,754 742,030 0% Other operating expenses 1,547,683 1,515,621 2% LTC administration expense 139,058 131,854 5% Total acquisition and operating expenses 5,133,020 4,335,956 18% Death benefits, net 1,773,269 2,254,036 -21% Other policyholder benefits,net 1,478,238 2,043,340 -28% Total other expenses 8,384,527 8,633,332 -3% Income before taxes and realized gains (losses) from insurance operations 3,817,566 3,139,899 22% Realized investment gains (losses) 857,447 (48,532) 1867% DPAC amortization on realized gains (losses) (438,548) 24,685 -1877% Income before tax from other operations 329 (7,338) 104% Income before income taxes 4,236,794 3,108,714 36% Income taxes 1,410,811 1,003,279 41% Net income $2,825,983 $2,105,435 34% DPAC amortization ratio 41.5% 38.3% 5 ALLIED Life Financial Corporation Summary of Life Insurance Operations Nine Months Ended September 30, Percent 1997 1996 Change Life insurance profitability Investment income $38,715,564 $35,481,198 9% Interest credited on Annuities 19,679,757 18,061,925 9% Universal life 7,512,101 7,081,105 6% Other 353,488 272,624 30% Total interest expense 27,545,346 25,415,654 8% Investment spread 11,170,218 10,065,544 11% Fee income Universal life 17,767,535 16,787,613 6% Annuity surrender charges 550,252 369,653 49% Total fee income 18,317,787 17,157,266 7% Other insurance income Life premiums,net 4,918,327 4,820,492 2% SPIA with life 440,241 389,428 13% Ceded reinsurance commissions 1,612,024 1,171,772 38% Other insurance income 6,970,592 6,381,692 9% Adjusted insurance revenues 36,458,597 33,604,502 8% Other expenses Amortization of DPAC 7,629,117 5,839,878 31% Renewal commissions 2,231,883 1,901,025 17% Other operating expenses 4,869,558 4,550,765 7% LTC administration expense 386,347 357,588 8% Total acquisition and operating expenses 15,116,905 12,649,256 20% Death benefits, net 6,066,948 5,128,346 18% Other policyholder benefits,net 4,229,208 4,982,253 -15% Total other expenses 25,413,061 22,759,855 12% Income before taxes and realized losses from insurance operations 11,045,536 10,844,647 2% Realized investment losses 605,128 (193,006) 414% DPAC amortization on realized losses (229,879) 75,832 -403% Income before tax from other operations 23,622 66,523 -64% Income before income taxes 11,444,407 10,793,996 6% Income taxes 3,812,678 3,527,166 8% Net income $7,631,729 $7,266,830 5% DPAC amortization ratio 40.9% 35.0% 6 ALLIED Life Financial Corporation New Production Information (000s) Three Months Ended September 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 $131,121 $86,690 51% Term life 303,756 512,036 -41% Whole life 1,248 1,233 1% Subtotal 436,125 599,959 -27% Life insurance-other 1,050 (2,821) 137% Total $437,175 $597,138 -27% Annuities $22,268 $21,105 6% Policyholder assessments collected on universal life First-year $723 $691 5% Renewal 4,788 4,505 6% Total $5,511 $5,196 6% Statutory information Premiums and annuity considerations, net Universal life insurance $7,631 $7,136 7% Term life insurance 2,440 2,278 7% Annuities 23,162 21,800 6% Other 218 274 -21% Total $33,451 $31,488 6% 7 ALLIED Life Financial Corporation New Production Information (000s) Nine Months Ended September 30, Percent 1997 1996 Change Life insurance face amount in force Directly produced by agents Universal life $4,527,752 $4,263,599 6% Term life 4,464,484 4,090,843 9% Whole life 50,945 49,621 3% Total produced by agents 9,043,181 8,404,063 8% Other 380,282 376,255 1% Total $9,423,463 $8,780,318 7% 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 $430,467 $273,758 57% Term life 934,434 1,172,788 -20% Whole life 5,727 3,392 69% Subtotal 1,370,628 1,449,938 -5% Life insurance-other 4,299 8,384 -49% Total $1,374,927 $1,458,322 -6% Annuities $55,225 $47,203 17% Policyholder assessments collected on universal life First-year $2,087 $2,129 -2% Renewal 14,196 13,276 7% Total $16,283 $15,405 6% Statutory information Premiums and annuity considerations, net Universal life insurance $23,591 $21,793 8% Term life insurance 6,968 6,289 11% Annuities 58,083 50,442 15% Other 867 456 90% Total $89,508 $78,981 13% 8 ALLIED Life Financial Corporation New Production by Distribution System (000s) Three Months Ended September 30, Percent 1997 1996 Change Life insurance face amount sold Directly produced by agents Property--casualty agencies Universal life $84,212 $60,181 40% Term life 222,999 390,033 -43% Whole life 707 456 55% Subtotal 307,918 450,671 -32% Traditional agencies Universal life $46,909 $26,509 77% Term life 80,757 122,003 -34% Whole life 541 777 -30% Subtotal 128,207 149,288 -14% Total produced by agents 436,125 599,959 -27% Other 1,050 (2,821) 137% Total $437,175 $597,138 -27% Life insurance policies sold Property--casualty agencies Universal life 682 480 42% Term life 1,120 2,637 -58% Total 1,802 3,117 -42% Traditional agencies Universal life 252 190 33% Term life 391 696 -44% Total 643 886 -27% Annuity premiums Deferred annuities Property--casualty agencies $7,911 $12,434 -36% Traditional agencies 14,581 9,010 62% Subtotal 22,492 21,444 5% Immediate annuities 670 357 88% Total $23,162 $21,800 6% 9 ALLIED Life Financial Corporation New Production by Distribution System (000s) Nine Months Ended September 30, Percent 1997 1996 Change Life insurance face amount in force Directly produced by agents Property--casualty agencies Universal life $2,833,519 $2,726,291 4% Term life 3,407,235 3,067,908 11% Whole life 35,132 33,402 5% Subtotal 6,275,886 5,827,601 8% Traditional agencies Universal life 1,694,233 1,537,308 10% Term life 1,057,249 1,022,935 3% Whole life 15,813 16,219 -3% Subtotal 2,767,295 2,576,462 7% Total produced by agents 9,043,181 8,404,063 8% Other 380,282 376,255 1% Total $9,423,463 $8,780,318 7% Life insurance face amount sold Directly produced by agents Property--casualty agencies Universal life $227,075 $188,768 20% Term life 681,133 876,707 -22% Whole life 3,866 2,169 78% Subtotal 912,073 1,067,644 -15% Traditional agencies Universal life $203,392 $84,990 139% Term life 253,301 296,081 -14% Whole life 1,861 1,223 52% Subtotal 458,555 382,294 20% Total produced by agents 1,370,628 1,449,938 -5% Other 4,299 8,384 -49% Total $1,374,927 $1,458,322 -6% Life insurance policies sold Property--casualty agencies Universal life 1,658 1,507 10% Term life 3,543 5,294 -33% Total 5,201 6,801 -24% Traditional agencies Universal life 1,056 594 78% Term life 1,029 1,449 -29% Total 2,085 2,043 2% Annuity premiums Deferred annuities Property--casualty agencies $21,776 $23,188 -6% Traditional agencies 34,807 26,160 33% Subtotal 56,582 49,348 15% Immediate annuities 1,500 1,094 37% Total $58,083 $50,442 15% 10 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