Allied Group: Reports 1996 Results Contact: Jim Shaffer President (Financial) (515) 280-4326 ALLIED GROUP, INC. REPORTS 1996 RESULTS Des Moines, Iowa, February 4, 1997 -- ALLIED Group, Inc. (Nasdaq symbol ALGR) today released earnings for the fourth quarter and the full year of 1996. Operating earnings for the quarter were $0.70 per share, up 14.8% from $0.61 for the same quarter of 1995. Chairman John Evans gave these reasons for the improvement: "We increased revenues and invested assets, reduced the property-casualty underwriting expense ratio, and had better results from our excess & surplus lines company and noninsurance subsidiaries." Operating earnings for the full year were $2.30 per share, down slightly from $2.33 for 1995. "Wind and hail losses reached their highest level ever in 1996," said Evans. "They totaled $39.1 million, costing the Company $1.23 per share compared with $0.90 last year." The storm losses were the primary cause of a higher combined ratio and a lower underwriting profit. The Company's statutory combined ratio (after policyholder dividends) was 97.7 for 1996 compared with 95.7 for 1995. The GAAP underwriting profit fell to $9.9 million from $17.7 million a year ago. Consolidated revenues for 1996 were up 7.9% to $596.3 million from $552.8 million for 1995. At year-end 1996, the Company's invested assets were $819.6 million, up $47.3 million from the previous year-end. Investment income was up 4.2% to $49.2 million from $47.2 million. The pretax investment yield was down 30 basis points to 6.3%. Management set three major goals for 1996: to achieve double-digit premium growth, to reduce the underwriting expense ratio 50 basis points, and to earn a return on equity of 15%. "Our most exceptional accomplishment was our top-line growth," said Doug Andersen, President (Property-casualty). "Our pooled net written premiums increased 10.8% to $767.2 million from $692.6 million for 1995; the industry's growth rate is estimated to be 3.1%. As we grew, we lowered the underwriting expense ratio 45 basis points. The storm losses put our ROE goal just out of reach, but the 14% we earned was better than most of our competitors' returns. We'll retain the same three goals for 1997, and meeting them will stretch everyone at ALLIED Group." Shareholders were rewarded with a combination of stock appreciation, dividend growth, and total return on investment. The ALLIED Group, Inc. stock price, adjusted for the fourth quarter 3-for-2 split, rose 35.9% to $32-5/8 on December 31, 1996 from $24 at year-end 1995. The Board of Directors increased the quarterly dividend 29.4% in March of 1996 and 2.3% more in December, bringing the total dividend for 1996 to $0.59 per common share. The 38.4% total return was 15.4 points better than the S&P 500 Index. Jim Shaffer, President (Financial), reminded investors of an imminent change: "On February 11, ALLIED Group, Inc.'s common shares will begin trading on the New York Stock Exchange. Look for us under the new ticker symbol GRP." ALLIED Group, Inc. is a regional property-casualty insurance holding company specializing in personal lines. The Company's property-casualty subsidiaries use independent agencies, exclusive agencies, and direct response marketing to offer products in central and western states. Information on ALLIED Group, Inc. is available at http://www.cprofiles.com and at http://www.cfonews.com/algr. ALLIED GROUP, INC. SUMMARIZED CONSOLIDATED FINANCIAL HIGHLIGHTS Three Months Ended December 31, -------------------------------- 1996 1995 --------------- --------------- Premiums earned $ 129,295,125 $ 118,667,216 Investment income 12,614,223 11,906,600 Realized investment gains(losses) (15,573) 267,242 Other income 13,821,151 14,802,578 --------------- --------------- Revenues 155,714,926 145,643,636 Losses and expenses 135,010,330 125,986,124 --------------- --------------- Income before income taxes 20,704,596 19,657,512 Income taxes 5,575,739 5,826,333 --------------- --------------- Net income $ 15,128,857 $ 13,831,179 =============== =============== Dividends paid per common share $ 0.15 $ 0.11 =============== =============== Fully diluted earnings per share: Net operating income $ 0.70 $ 0.61 Realized investment gains(losses), after tax (0.00) 0.01 --------------- --------------- Net income $ 0.70 $ 0.62 =============== =============== Weighted average shares outstanding 20,344,496 20,839,386 =============== =============== Wind and hail losses per share $ 0.12 $ 0.13 =============== =============== Primary earnings per share Net operating income $ 0.70 $ 0.85 =============== =============== Net income $ 0.70 $ 0.86 =============== =============== Weighted average shares outstanding 20,344,496 14,023,538 =============== =============== ALLIED GROUP, INC. SUMMARIZED CONSOLIDATED FINANCIAL HIGHLIGHTS Twelve Months Ended December 31, -------------------------------- 1996 1995 --------------- --------------- Premiums earned $ 493,524,578 $ 455,499,059 Investment income 49,221,905 47,241,808 Realized investment gains 49,398 505,363 Other income 53,558,391 49,518,172 --------------- --------------- Revenues 596,354,272 552,764,402 Losses and expenses 525,043,301 478,916,757 --------------- --------------- Income before income taxes 71,310,971 73,847,645 Income taxes 20,226,758 21,470,816 --------------- --------------- Net income $ 51,084,213 $ 52,376,829 =============== =============== Dividends paid per common share $ 0.59 $ 0.45 =============== =============== Fully diluted earnings per share: Net operating income $ 2.30 $ 2.33 Realized investment gains, after tax 0.01 0.02 --------------- --------------- Net income $ 2.31 $ 2.35 =============== =============== Weighted average shares outstanding 20,633,175 20,751,737 =============== =============== Wind and hail losses per share $ 1.23 $ 0.90 =============== =============== Primary earnings per share Net operating income $ 2.42 $ 3.25 =============== =============== Net income $ 2.42 $ 3.27 =============== =============== Weighted average shares outstanding 19,408,096 13,806,482 =============== =============== ALLIED Group, Inc. SUMMARIZED CONSOLIDATED BALANCE SHEET December 31, December 31, 1996 1995 --------------- --------------- Assets Invested assets $ 819,644,636 $ 772,298,617 Accounts receivable 84,706,290 76,117,832 Mortgage loans held for sale 12,054,171 13,672,690 Deferred policy acquisition costs 46,671,432 41,688,318 Reinsurance receivables for losses and loss adjusting expenses 18,182,520 19,293,217 Other assets 96,400,017 87,527,222 --------------- --------------- Total assets $1,077,659,066 $1,010,597,896 =============== =============== Liabilities Losses and loss adjusting expenses $ 362,191,014 $ 341,864,094 Unearned premiums 220,596,194 196,460,768 Notes payable to nonaffiliates 31,744,468 35,964,598 Notes payable to affiliates 2,350,000 3,500,000 Guarantee of ESOP obligations 24,370,000 26,270,000 Other liabilites 65,815,908 54,952,962 --------------- --------------- Total liabilities 707,067,584 659,012,422 Stockholders' equity 370,591,482 351,585,474 --------------- --------------- Total liabilities and $1,077,659,066 $1,010,597,896 stockholders' equity =============== =============== Number of shares outstanding Nonconvertible preferred stock 1,827,222 1,827,222 ESOP convertible preferred stock * --- 2,992,710 Common stock 20,382,954 9,444,646 --------------- --------------- Total shares outstanding 22,210,176 14,264,578 =============== =============== Book value per share $ 17.39 $ 16.16 =============== =============== Pretax investment yield 6.3% 6.6% =============== =============== * Converted to common stock on March 7, 1996. ALLIED Group, Inc. SEGMENT INFORMATION Three Months Ended December 31, -------------------------------- 1996 1995 --------------- --------------- Revenues* Property-casualty $ 133,991,480 $ 122,783,769 Excess & surplus lines 9,134,214 9,170,700 Eliminations and other 12,589,232 13,689,167 --------------- --------------- Total $ 155,714,926 $ 145,643,636 =============== =============== Income before income taxes* Property-casualty $ 18,002,520 $ 15,897,798 Excess & surplus lines 2,779,251 1,472,299 Eliminations and other (77,175) 2,287,415 --------------- --------------- Total $ 20,704,596 $ 19,657,512 =============== =============== Twelve Months Ended December 31, -------------------------------- 1996 1995 --------------- --------------- Revenues* $ 515,706,148 $ 472,034,429 Property-casualty 33,557,101 35,356,100 Excess & surplus lines 47,091,023 45,373,873 Eliminations and other --------------- --------------- $ 596,354,272 $ 552,764,402 Total =============== =============== Income before income taxes* $ 59,434,869 $ 63,882,761 Property-casualty 8,053,072 4,839,881 Excess & surplus lines 3,823,030 5,125,003 Eliminations and other --------------- --------------- $ 71,310,971 $ 73,847,645 Total =============== =============== December 31, December 31, 1996 1995 Assets --------------- --------------- Property-casualty $ 917,537,303 $ 847,400,885 Excess & surplus lines 131,404,681 122,200,257 Eliminations and other 28,717,082 40,996,754 --------------- --------------- Total $1,077,659,066 $1,010,597,896 =============== =============== * Including realized investment gains or losses. ALLIED Group, Inc. SUPPLEMENTAL INSURANCE INFORMATION Three Months Ended December 31, -------------------------------- 1996 1995 --------------- --------------- Property-casualty segment results Net written premiums $ 121,606,059 $ 110,135,233 =============== =============== Premiums earned $ 121,815,152 $ 110,872,319 Losses & loss adjusting expenses 83,678,065 77,984,889 Underwriting expenses 32,076,863 28,956,669 --------------- --------------- Statutory underwriting gain 6,060,224 3,930,761 GAAP adjustments (234,032) 55,587 --------------- --------------- GAAP underwriting gain 5,826,192 3,986,348 Investment income 10,917,802 10,165,081 Realized investment gains (losses) (16,867) (9,616) Other income 1,275,393 1,755,985 --------------- --------------- Income before income taxes $ 18,002,520 $ 15,897,798 =============== =============== GAAP combined ratio 95.2 96.4 =============== =============== Wind and hail losses $ 3,778,243 $ 4,024,797 =============== =============== Impact of wind and hail losses on combined ratio 3.1 3.6 =============== =============== Excess & Surplus lines segment results Net written premiums $ 8,226,685 $ 7,591,226 =============== =============== Premiums earned $ 7,479,973 $ 7,794,897 Losses & loss adjusting expenses 4,105,818 5,530,188 Underwriting expenses 2,320,398 2,076,657 --------------- --------------- Statutory underwriting gain 1,053,757 188,052 GAAP adjustments 71,253 (91,556) --------------- --------------- GAAP underwriting gain 1,125,010 96,496 Investment income 1,654,241 1,514,589 Realized investment gains (losses) --- (138,786) --------------- --------------- Income before income taxes $ 2,779,251 $ 1,472,299 =============== =============== GAAP combined ratio 85.0 98.8 =============== =============== ALLIED Group, Inc. SUPPLEMENTAL INSURANCE INFORMATION Twelve Months Ended December 31, -------------------------------- 1996 1995 --------------- --------------- Property-casualty segment results Net written premiums $ 488,189,368 $ 440,838,308 =============== =============== Premiums earned $ 466,210,505 $ 425,837,511 Losses & loss adjusting expenses 335,614,689 295,583,262 Underwriting expenses 124,621,421 114,511,287 --------------- --------------- Statutory underwriting gain 5,974,395 15,742,962 GAAP adjustments 3,964,831 1,942,881 --------------- --------------- GAAP underwriting gain 9,939,226 17,685,843 Investment income 42,295,692 39,110,394 Realized investment gains 179,955 235,556 Other income 7,019,996 6,850,968 --------------- --------------- Income before income taxes $ 59,434,869 $ 63,882,761 =============== =============== GAAP combined ratio 97.9 95.8 =============== =============== Wind and hail losses $ 39,110,682 $ 28,663,589 =============== =============== Impact of wind and hail losses on combined ratio 8.4 6.7 =============== =============== Excess & Surplus lines segment results Net written premiums $ 28,416,851 $ 30,605,847 =============== =============== Premiums earned $ 27,314,073 $ 29,661,548 Losses & loss adjusting expenses 17,483,520 22,356,879 Underwriting expenses 8,016,571 8,201,978 --------------- --------------- Statutory underwriting gain (loss) 1,813,982 (897,309) GAAP adjustments (3,938) 42,638 --------------- --------------- GAAP underwriting gain (loss) 1,810,044 (854,671) Investment income 6,240,848 5,830,399 Realized investment gains (losses) 2,180 (135,847) --------------- --------------- Income before income taxes $ 8,053,072 $ 4,839,881 =============== =============== GAAP combined ratio 93.4 102.9 =============== =============== ALLIED Group, Inc. PROPERTY-CASUALTY STATUTORY INFORMATION Twelve Months Ended December 31, ---------------------------------------- 1996 1995 ------------------- ------------------- Premiums Comb. Premiums Comb. Earned Ratio Earned Ratio ------------ ------ ------------ ------ Statutory results by line Personal automobile $ 229,894,152 98.9 $208,873,086 96.5 Homeowners 81,616,679 102.4 71,034,452 99.2 ------------ ------------ Personal lines 311,510,831 99.8 279,907,538 97.2 ------------ ------------ Commercial automobile 25,272,196 98.8 23,872,565 95.2 Workers' compensation 25,498,587 76.5 29,443,326 70.2 Other property/liab. 101,590,617 97.3 90,301,684 100.2 Other lines 2,338,274 45.7 2,312,398 50.2 ------------ ------------ Commercial lines 154,699,674 93.5 145,929,973 92.7 ------------ ------------ Total $ 466,210,505 97.7 $425,837,511 95.7 ============ ============ Statutory ratios Loss ratio 62.6 59.1 Loss adjustment expense ratio 9.4 9.4 Underwriting expense ratio 25.5 26.3 Dividend ratio 0.2 0.5 ------ ------ Statutory combined ratio 97.7 95.3 ====== ====== - - END - -