Allied Group: Increases Earnings Per Share Contact: Jim Shaffer 515-280-4326 ALLIED GROUP, INC. INCREASES EARNINGS PER SHARE Des Moines, Iowa, October 22, 1997 -- ALLIED Group, Inc. (NYSE symbol GRP) today reported increases in operating earnings per share for the quarter ended September 30, 1997 and for the year to date: $0.75 compared with $0.66 for the third quarter of 1996 and $2.22 compared with $1.61 for the first nine months of 1996. The pretax operating profit year to date was $67.2 million, up 32.8% from $50.6 million for the same period of 1996. "A 9% growth of premiums contributed to our year-to-date results," said President and Chief Executive Officer Doug Andersen. Net written premiums for the property- casualty pool, which includes ALLIED Mutual, totaled $628 million versus $576.4 million. Earned premiums for the property-casualty segment came to $380.8 million versus $344.4 million. Andersen elaborated, "One of our annual goals is to achieve double-digit growth of net written premiums. At the nine-month mark, we were falling short of goal due to a soft commercial market; our commercial lines growth was 3.7%. Our personal lines growth was 11.6%. We're maintaining the double-digit growth goal for personal lines in the fourth quarter and acknowledging the unlikelihood of that level of growth in commercial lines. We're hopeful fourth-quarter premium growth overall will improve from third quarter's because of our increasing emphasis on nonstandard auto coverages and the rollover of transfer business." Four key indicators management monitors to track progress were all positive at September 30, 1997. Since year-end 1996, the property-casualty pool had signed agreements for $64.2 million in transfer business--$28.7 million in the third quarter alone, increased the number of AIDCO agencies that sell ALLIED personal lines exclusively to 291 from 257, and raised the number of agencies taking advantage of the centralized Service Plus program to 532 from 433. The premiums from the nine newest states in the Company's marketing territories grew 20.7% in the three quarters of this year compared with the same period of last year. Less severe weather had an impact on year-to-date profitability. Wind and hail losses were $26.2 million ($0.84 per share) compared with $35.3 million ($1.11 per share) for the first nine months of 1996. The statutory combined ratio (after policyholder dividends) improved to 94.0 from 98.5. The GAAP underwriting gain rose to $21.8 million from $4.1 million. Andersen also gave some credit to control of underwriting costs: "Another of our annual goals is to reduce the underwriting expense ratio 50 basis points; as of September 30, it was down 49 basis points." On the same date, consolidated invested assets were $878 million compared with $819.6 million at year-end 1996. Investment income for the first nine months of 1997 was $38.5 million compared with $36.6 million for the nine months ended September 30, 1996. Nine-month consolidated revenues were up 10.9% to $488.6 million from $440.6 million a year ago. Consolidated net income was $47.7 million compared with $36 million. Chairman John Evans talked about the Company's third annual goal of achieving at least a 15% return on equity. "Our shareholders are certainly interested in the ROE; for the trailing four quarters, it was 16.4%." At September 30, 1997, book value was up to $19.33 per share from $17.39 at December 31, 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 September 30, -------------------------------- 1997 1996 --------------- --------------- Earmed premiums $ 137,815,730 $ 124,245,729 Investment income 12,967,946 12,444,593 Realized investment gains 17,077 25,977 Other income 15,365,249 14,003,165 --------------- --------------- Revenues 166,166,002 150,719,464 Losses and expenses 143,429,317 130,438,307 --------------- --------------- Income before income taxes and minority interest 22,736,685 20,281,157 Income taxes 6,522,012 5,822,131 Minority interest in income of consolidated subsidiary 147,717 --- --------------- --------------- Net income $ 16,066,956 $ 14,459,026 =============== =============== Dividends paid per common share $ 0.170 $ 0.147 =============== =============== Fully diluted earnings per share: Net operating income $ 0.75 $ 0.66 Realized investment gains, after tax 0.00 0.01 --------------- --------------- Net income $ 0.75 $ 0.67 =============== =============== Weighted average shares outstanding 20,314,160 20,416,929 =============== =============== Wind and hail losses per share $ 0.34 $ 0.37 =============== =============== Primary earnings per share Net operating income $ 0.75 $ 0.66 =============== =============== Net income $ 0.75 $ 0.67 =============== =============== Weighted average shares outstanding 20,314,160 20,416,929 =============== =============== ALLIED GROUP, INC. SUMMARIZED CONSOLIDATED FINANCIAL HIGHLIGHTS Nine Months Ended September 30, -------------------------------- 1997 1996 --------------- --------------- Earned premiums $ 405,559,002 $ 364,229,453 Investment income 38,493,700 36,607,682 Realized investment gains 17,277 64,971 Other income 44,547,331 39,737,240 --------------- --------------- Revenues 488,617,310 440,639,346 Losses and expenses 421,418,780 390,032,971 --------------- --------------- Income before income taxes and minority interest 67,198,530 50,606,375 Income taxes 19,160,100 14,651,019 Minority interest in income of consolidated subsidiary 374,393 --- --------------- --------------- Net income $ 47,664,037 $ 35,955,356 =============== =============== Dividends paid per common share $ 0.5100 $ 0.4400 =============== =============== Fully diluted earnings per share: Net operating income $ 2.22 $ 1.61 Realized investment gains, after tax 0.00 0.00 --------------- --------------- Net income $ 2.22 $ 1.61 =============== =============== Weighted average shares outstanding 20,316,125 20,730,104 =============== =============== Wind and hail losses per share $ 0.84 $ 1.11 =============== =============== Primary earnings per share Net operating income $ 2.22 $ 1.71 =============== =============== Net income $ 2.22 $ 1.71 =============== =============== Weighted average shares outstanding 20,316,125 19,093,685 =============== =============== ALLIED Group, Inc. SUMMARIZED CONSOLIDATED BALANCE SHEET September 30, December 31, 1997 1996 --------------- --------------- Assets Invested assets $ 878,022,633 $ 819,644,636 Accounts receivable 92,612,429 84,706,290 Mortgage loans held for sale 24,119,257 12,054,171 Deferred policy acquisition costs 51,055,500 46,671,432 Reinsurance receivables for losses and loss adjusting expenses 26,837,871 18,182,520 Other assets 92,918,783 96,400,017 --------------- --------------- Total assets $1,165,566,473 $1,077,659,066 =============== =============== Liabilities Losses and loss adjusting expenses $ 373,338,193 $ 362,191,014 Unearned premiums 241,559,172 220,596,194 Notes payable to nonaffiliates 42,293,384 31,744,468 Notes payable to affiliates 4,475,000 2,350,000 Guarantee of ESOP obligations 24,180,000 24,370,000 Other liabilites 68,202,517 65,815,908 --------------- --------------- Total liabilities 754,048,266 707,067,584 Stockholders' equity 411,518,207 370,591,482 --------------- --------------- Total liabilities and stockholders' equity $1,165,566,473 $1,077,659,066 =============== =============== Number of shares outstanding Nonconvertible preferred stock 1,827,222 1,827,222 Common stock 20,326,703 20,382,954 --------------- --------------- Total shares outstanding 22,153,925 22,210,176 =============== =============== Book value per share $ 19.33 $ 17.39 =============== =============== Pretax investment yield 6.1% 6.3% =============== =============== ALLIED Group, Inc. SEGMENT INFORMATION Three Months Ended September 30, -------------------------------- 1997 1996 --------------- --------------- Revenues* Property-casualty $ 142,669,885 $ 131,754,786 Excess & surplus lines 10,177,456 6,980,286 Eliminations and other 13,318,661 11,984,392 --------------- --------------- Total $ 166,166,002 $ 150,719,464 =============== =============== Income before income taxes and minority interest* Property-casualty $ 20,001,218 $ 16,338,174 Excess & surplus lines 2,618,796 1,696,001 Eliminations and other 116,671 2,246,982 --------------- --------------- Total $ 22,736,685 $ 20,281,157 =============== =============== Nine Months Ended September 30, -------------------------------- 1997 1996 --------------- --------------- Revenues* $ 418,505,841 $ 381,714,668 Property-casualty 29,901,433 24,422,887 Excess & surplus lines 40,210,036 34,501,791 Eliminations and other --------------- --------------- $ 488,617,310 $ 440,639,346 Total =============== =============== Income before income taxes* $ 59,543,007 $ 41,432,349 Property-casualty 7,358,756 5,273,821 Excess & surplus lines 296,767 3,900,205 Eliminations and other --------------- --------------- $ 67,198,530 $ 50,606,375 Total =============== =============== September 30, December 31, 1997 1996 Assets --------------- --------------- Property-casualty $ 989,410,364 $ 917,537,303 Excess & surplus lines 142,535,731 131,404,681 Eliminations and other 33,620,378 28,717,082 --------------- --------------- Total $1,165,566,473 $1,077,659,066 =============== =============== * Including realized investment gains or losses. ALLIED Group, Inc. SUPPLEMENTAL INSURANCE INFORMATION Three Months Ended September 30, -------------------------------- 1997 1996 --------------- --------------- Property-casualty segment results Net written premiums $ 137,450,634 $ 130,254,459 =============== =============== Earned premiums $ 129,361,511 $ 118,823,375 Losses & loss adjusting expenses 89,645,594 85,613,477 Underwriting expenses 34,427,804 32,090,802 --------------- --------------- Statutory underwriting gain 5,288,113 1,119,096 GAAP adjustments 1,404,731 2,287,667 --------------- --------------- GAAP underwriting gain 6,692,844 3,406,763 Investment income excluding realized gains 11,231,116 10,786,885 Realized investment gains 18,444 161,129 Other income 2,058,814 1,983,397 --------------- --------------- Income before income taxes $ 20,001,218 $ 16,338,174 =============== =============== GAAP combined ratio 94.8 97.1 =============== =============== Wind and hail losses $ 10,628,916 $ 11,673,222 =============== =============== Impact of wind and hail losses on combined ratio 8.2 9.8 =============== =============== Excess & Surplus lines segment results Net written premiums $ 8,388,556 $ 5,583,903 =============== =============== Earned premiums $ 8,454,219 $ 5,422,354 Losses & loss adjusting expenses 5,079,015 3,664,669 Underwriting expenses 2,525,627 1,469,515 --------------- --------------- Statutory underwriting gain 849,577 288,170 GAAP adjustments 45,982 (150,101) --------------- --------------- GAAP underwriting gain 895,559 138,069 Investment income excluding realized gains 1,724,645 1,555,752 Realized investment gains (losses) (1,408) 2,180 --------------- --------------- Income before income taxes $ 2,618,796 $ 1,696,001 =============== =============== GAAP combined ratio 89.4 97.5 =============== =============== ALLIED Group, Inc. SUPPLEMENTAL INSURANCE INFORMATION Nine Months Ended September 30, -------------------------------- 1997 1996 --------------- --------------- Property-casualty segment results Net written premiums $ 399,696,125 $ 366,583,309 =============== =============== Earned premiums $ 380,766,948 $ 344,395,353 Losses & loss adjusting expenses 261,877,920 251,936,624 Underwriting expenses 100,084,242 92,544,558 --------------- --------------- Statutory underwriting gain (loss) 18,804,786 (85,829) GAAP adjustments 2,999,328 4,198,863 --------------- --------------- GAAP underwriting gain 21,804,114 4,113,034 Investment income excluding realized gains 33,324,335 31,377,890 Realized investment gains 16,413 196,822 Other income 4,398,145 5,744,603 --------------- --------------- Income before income taxes $ 59,543,007 $ 41,432,349 =============== =============== GAAP combined ratio 94.3 98.8 =============== =============== Wind and hail losses $ 26,238,905 $ 35,332,439 =============== =============== Impact of wind and hail losses on combined ratio 6.9 10.3 =============== =============== Excess & Surplus lines segment results Net written premiums $ 25,798,136 $ 20,190,166 =============== =============== Earned premiums $ 24,792,054 $ 19,834,100 Losses & loss adjusting expenses 15,535,713 13,377,702 Underwriting expenses 7,200,097 5,696,173 --------------- --------------- Statutory underwriting gain 2,056,244 760,225 GAAP adjustments 193,133 (75,191) --------------- --------------- GAAP underwriting gain 2,249,377 685,034 Investment income excluding realized gains 5,113,122 4,586,607 Realized investment gains (losses) (3,743) 2,180 --------------- --------------- Income before income taxes $ 7,358,756 $ 5,273,821 =============== =============== GAAP combined ratio 90.9 96.5 =============== =============== ALLIED Group, Inc. PROPERTY-CASUALTY STATUTORY INFORMATION Nine Months Ended September 30, ---------------------------------------- 1997 1996 ------------------- ------------------- Earned Comb. Earned Comb. Premiums Ratio Premiums Ratio ------------ ------ ------------ ------ Statutory results by line Personal automobile $ 189,985,603 92.9 $169,615,977 98.0 Homeowners 69,284,611 99.8 59,771,081 108.1 ------------ ------------ Personal lines 259,270,214 94.8 229,387,058 100.7 ------------ ------------ Commercial automobile 19,390,192 89.9 18,816,599 98.5 Workers' compensation 17,941,309 89.0 19,511,676 75.1 Other property/liab. 82,400,041 94.5 74,974,239 99.1 Other lines 1,765,192 61.0 1,705,781 46.9 ------------ ------------ Commercial lines 121,496,734 92.5 115,008,295 94.3 ------------ ------------ Total $ 380,766,948 94.0 $344,395,353 98.5 ============ ============ Statutory ratios Loss ratio 59.1 63.5 Loss adjustment expense ratio 9.7 9.7 Underwriting expense ratio 25.0 25.2 Dividend ratio 0.2 0.1 ------ ------ Statutory combined ratio 94.0 98.5 ====== ====== - - END - -