Allied Group: First Quarter Earnings CONTACT: Jim Shaffer, CFO (515) 280-4326 ALLIED GROUP, INC. REPORTS DOUBLE-DIGIT PREMIUM GROWTH Des Moines, Iowa, April 22, 1997 -- ALLIED Group, Inc. (NYSE symbol GRP) today reported results for the quarter ended March 31. Operating earnings increased 19.4% to $0.74 per share from $0.62 for the first quarter of 1996. Consolidated revenues grew to $158.7 million from $143.3 million, consolidated pretax operating profit climbed to $22.6 million from $19.8 million, and consolidated net income rose to $15.9 million from $13.9 million. "One of management's annual goals is achieving double-digit growth in our net written property-casualty premiums," said Doug Andersen, President and CEO. "The first quarter's 12% increase certainly put the Company on track." Earned premiums for the property-casualty segment increased to $123.9 million from $111.7 million. Management monitors these leading indicators: contracts for transfer business, premiums from emerging territories, appointments to AIDCO, and enrollment in Service Plus. In the first quarter, the Company had $19.5 million in transfer agreements. Premiums from the nine states entered since 1990 grew at 29%. The number of AIDCO agencies contracted to sell ALLIED personal lines exclusively increased to 269 from 257, and the volume of personal lines business handled through the Company's centralized service center rose to 32% of the total. Andersen explained another means of tying agents to the Company: "We're now offering ASPEN, a software system that allows agents to make proposals and submit applications for private passenger auto and homeowners insurance, in all our marketing territories." Counting those using ASPEN and those on line, 77% of the total independent agency force of 2,287 is linked electronically to the Company. The property-casualty segment's first-quarter statutory combined ratio improved to 92.5 from 95.2 reported for the same quarter of 1996; the effect of wind and hail losses on earnings per share was $0.09 versus $0.11. The GAAP underwriting gain was up to $9.1 million from $5.3 million. Speaking on behalf of the Board of Directors, Chairman John Evans reiterated two actions the Board approved at its March meeting: "Because of confidence in the Company's fundamentals, the Directors raised the common stock dividend 13.3% to $0.17 per share and authorized a stock repurchase program to acquire 250,000 shares of common stock over the next two years." In the first quarter, the Company repurchased 197,200 shares on the open market at an average price per share of $35.56. Of the shares repurchased, 57,000 completed a buyback program authorized in July of 1996; 109,800 shares remain under the new repurchase program. The cost of the stock buybacks, the effect of higher interest rates on the investment portfolio, and the increase in the dividend held the book value to $17.39--the same as at year-end 1996. 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. ALLIED GROUP, INC. SUMMARIZED CONSOLIDATED FINANCIAL HIGHLIGHTS Three Months Ended March 31, -------------------------------- 1997 1996 -------------- -------------- Earned premiums $ 131,867,028 $ 118,870,205 Investment income 12,651,529 12,118,879 Realized investment gains (losses) (7,184) 8,483 Other income 14,233,072 12,337,907 -------------- -------------- Revenues 158,744,445 143,335,474 Losses and expenses 136,167,610 123,551,080 -------------- -------------- Income before income taxes 22,576,835 19,784,394 Income taxes 6,533,673 5,836,130 Minority interest in net income of consolidated subsidiaries 101,662 --- -------------- -------------- Net income $ 15,941,500 $ 13,948,264 ============== ============== Dividends paid per common share $ 0.17 $ 0.1467 ============== ============== Fully diluted earnings per share: Net operating income $ 0.74 $ 0.62 Realized investment gains (losses), after tax (0.00) 0.01 -------------- -------------- Net income $ 0.74 $ 0.63 ============== ============== Weighted average shares outstanding 20,360,003 20,911,113 ============== ============== Wind and hail losses per share $ 0.09 $ 0.11 ============== ============== Primary earnings per share Net operating income $ 0.74 $ 0.78 ============== ============== Net income $ 0.74 $ 0.78 ============== ============== Weighted average shares outstanding 20,360,003 15,983,871 ============== ============== ALLIED Group, Inc. SUMMARIZED CONSOLIDATED BALANCE SHEET March 31, December 31, 1997 1996 --------------- --------------- Assets Invested assets $ 823,020,886 $ 819,644,636 Accounts receivable 93,707,242 84,706,290 Mortgage loans held for sale 11,080,879 12,054,171 Deferred policy acquisition costs 47,331,169 46,671,432 Reinsurance receivables for losses and loss adjusting expenses 19,207,102 18,182,520 Other assets 94,845,461 96,400,017 -------------- -------------- Total assets $1,089,192,739 $1,077,659,066 ============== ============== Liabilities Losses and loss adjusting expenses $ 367,887,981 $ 362,191,014 Unearned premiums 223,848,596 220,596,194 Notes payable to nonaffiliates 36,193,103 31,744,468 Notes payable to affiliates 5,500,000 2,350,000 Guarantee of ESOP obligations 24,370,000 24,370,000 Other liabilities 63,085,432 65,815,908 -------------- -------------- Total liabilities 720,885,112 707,067,584 Stockholders' equity 368,307,627 370,591,482 -------------- -------------- Total liabilities and $1,089,192,739 $1,077,659,066 stockholders' equity ============== ============== Number of shares outstanding Nonconvertible preferred stock 1,827,222 1,827,222 Common stock 20,210,864 20,382,954 -------------- -------------- Total shares outstanding 22,038,086 22,210,176 ============== ============== Book value per share $ 17.39 $ 17.39 ============== ============== Pretax investment yield 6.2% 6.3% ============== ============== ALLIED Group, Inc. SEGMENT INFORMATION Three Months Ended March 31, -------------------------------- 1997 1996 --------------- --------------- Revenues* $ 135,838,297 $ 123,874,276 Property-casualty 9,615,173 8,681,603 Excess & surplus lines 13,290,975 10,779,595 Eliminations and other -------------- -------------- $ 158,744,445 $ 143,335,474 Total ============== ============== Income before income taxes* $ 21,041,196 $ 17,450,123 Property-casualty 2,064,867 1,747,947 Excess & surplus lines (529,228) 586,324 Eliminations and other -------------- -------------- $ 22,576,835 $ 19,784,394 Total ============== ============== March 31, December 31, 1997 1996 Assets --------------- --------------- Property-casualty $ 937,697,081 $ 917,537,303 Excess & surplus lines 135,692,534 131,404,681 Eliminations and other 15,803,124 28,717,082 -------------- -------------- Total $1,089,192,739 $1,077,659,066 ============== ============== * Including realized investment gains or losses. ALLIED Group, Inc. SUPPLEMENTAL INSURANCE INFORMATION Three Months Ended March 31, -------------------------------- 1997 1996 --------------- --------------- Property-casualty segment results Net written premiums $ 126,910,733 $ 113,170,547 ============== ============== Premiums earned $ 123,920,626 $ 111,689,531 Losses & loss adjusting expenses 82,552,724 76,090,224 Underwriting expenses 32,425,830 30,406,890 -------------- -------------- Statutory underwriting gain 8,942,072 5,192,417 GAAP adjustments 181,453 72,961 -------------- -------------- GAAP underwriting gain 9,123,525 5,265,378 Investment income 10,926,537 10,325,755 Realized investment gains (losses) (5,863) 7,787 Other income 996,997 1,851,203 -------------- -------------- Income before income taxes $ 21,041,196 $ 17,450,123 ============== ============== GAAP combined ratio 92.6 95.3 ============== ============== Wind and hail losses $ 2,705,129 $ 3,584,793 ============== ============== Impact of wind and hail losses on combined ratio 2.2 3.2 ============== ============== Excess & Surplus lines segment results Net written premiums $ 7,928,362 $ 6,437,529 ============== ============== Premiums earned $ 7,946,402 $ 7,180,674 Losses & loss adjusting expenses 5,337,978 4,891,601 Underwriting expenses 2,208,489 1,943,132 -------------- -------------- Statutory underwriting gain 399,935 345,941 GAAP adjustments (3,839) (98,923) -------------- -------------- GAAP underwriting gain 396,096 247,018 Investment income 1,671,106 1,500,929 Realized investment gains (losses) (2,335) --- -------------- -------------- Income before income taxes $ 2,064,867 $ 1,747,947 ============== ============== GAAP combined ratio 95.0 96.6 ============== ============== ALLIED Group, Inc. PROPERTY-CASUALTY STATUTORY INFORMATION Three Months Ended March 31, ---------------------------------------- 1997 1996 ------------------- ------------------- Premiums Comb. Premiums Comb. Earned Ratio Earned Ratio ------------ ------ ------------ ------ Statutory results by line Personal automobile $ 61,504,774 95.4 $ 54,809,909 98.2 Homeowners 22,580,551 90.1 19,453,308 97.2 ----------- ----------- Personal lines 84,085,325 93.9 74,263,217 97.9 ----------- ----------- Commercial automobile 6,396,153 105.3 6,144,050 100.5 Workers' compensation 5,802,421 85.8 6,698,665 69.0 Other property/liab. 27,048,742 87.1 24,014,060 93.2 Other lines 587,985 61.3 569,539 56.7 ----------- ----------- Commercial lines 39,835,301 89.4 37,396,314 89.7 ----------- ----------- Total $ 123,920,626 92.5 $111,689,531 95.2 =========== =========== Statutory ratios Loss ratio 57.2 58.0 Loss adjustment expense ratio 9.4 10.1 Underwriting expense ratio 25.6 26.9 Dividend ratio 0.3 0.2 ----- ----- Statutory combined ratio 92.5 95.2 ===== ===== - - END - -