Allied Life: 4th Quarter Earnings release ALLIED LIFE FINANCIAL CORPORATION REPORTS 1996 RESULTS Contact Jeff Roling 800-532-1436 ext.4454 Des Moines, Iowa, February 10, 1997 -- ALLIED Life Financial Corporation (NASDAQ symbol ALFC) today reported fourth-quarter and annual results for the year ended December 31, 1996. Adjusted operating earnings were down 7% to $0.46 per share for the fourth quarter from $0.49 for the same quarter of 1996; for all of 1996 they were down 5% to $1.79 per share from $1.88 a year ago. Adjusted operating earnings for the quarter and the year exclude a special aftertax charge of $1.9 million ($0.42 per share) taken in the fourth quarter to adjust deferred policy acquisition costs. Wendell Crosser, Chief Financial Officer, explained, "Our 1996 deferred policy acquisition cost (DPAC) study suggested refinements in assumptions of future policy persistency and interest spread used to estimate future profits on our annuities were necessary. While we will continue to reevaluate the DPAC assumptions, we don't anticipate making any additional material adjustments to our annuity DPAC amortization schedule in the foreseeable future." The special charge lowered net income for the fourth quarter to $0.09 per share, down from $0.48 in 1995. Net income per share for the year was $1.41 versus $1.78 in 1995. Realized investment gains in the fourth quarter amounted to $0.05 per share and for the year were $0.04. In 1995, losses from disposals of investments amounted to $0.01 for the quarter and $0.10 for the year. The Company had aggressive growth goals for 1996: achieve 15% increases in key categories while limiting the increase in insurance operating expenses (excluding premium taxes) to no more than 7.5%. Total assets rose 10% to $835.6 million, and insurance revenues were up 5% to $31.3 million. Life insurance in force sold directly by agents increased 12% to $8.6 billion, and the total annuity account balance grew 13% to $467.5 million. Insurance operating expenses increased 9%. "The main reason for being under goals was disappointing production, particularly our universal life insurance sales," said President Sam Wells. "At midyear, we hired a new marketing vice president to take responsibility for traditional distribution. We are optimistic that we can increase universal life insurance and annuity sales through that distribution system as we continue steady growth on the property-casualty side. The production trends in the third and fourth quarters were positive, and building on those trends is our priority for the year ahead." Management has set four goals for 1997: Increase invested assets at amortized cost 15% to $820 million Grow insurance revenues 12% to $35 million Raise life insurance in force sold directly by agents 12% to $9.6 billion Raise the total annuity account balance 15% to $535 million To increase production, management intends to revitalize sales on the traditional side by forming more relationships with large marketing organizations while expanding service features that simplify the sale of life products for independent property-casualty agents affiliated with ALLIED Mutual Insurance Company and ALLIED Group, Inc. "ALLIED Life has an array of products that appeal to producers in each distribution system and to the consumers in their markets," said Board Chairman John Evans. "The real challenge for management is to increase growth and to do so profitably." 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 rural and suburban areas of the midwestern and western United States. ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Three Months Ended December 31, Percent 1996 1995 Change Summarized income statement data Insurance revenues $7,810,728 $8,104,630 -4% Investment income 12,668,430 11,859,927 7% Realized investment gains (losses) 315,103 (39,671) 894% Other income 251,000 209,289 20% Revenues 21,045,261 20,134,175 5% Benefits and expenses 19,829,534 16,300,854 22% Income before income taxes 1,215,727 3,833,321 -68% Income taxes 409,966 1,222,680 -66% Net income $805,761 $2,610,641 -69% Net income applicable to common stock $396,034 $2,229,161 82% Earnings per share Adusted operating earnings excluding DPAC unlocking $0.46 $0.49 -6% DPAC unlocking ($0.42) $0.00 100% Realized investment gains(losses) net of related DPAC amortization and taxes 0.05 (0.01) 600% Net income $0.09 $0.48 -81% Weighted average common shares outstanding 4,493,534 4,629,286 -3% Dividends paid per common share $0.06 $0.05 20% Interest rate analysis Net investment yield- investment portfolio 7.43% 7.73% -4% Total interest-credited rate 5.64% 5.88% -4% Net interest margin 1.79% 1.85% -3% ALLIED Life Financial Corporation Summarized Consolidated Financial Highlights Twelve Months Ended December 31, Percent 1996 1995 Change Summarized income statement data Insurance revenues $31,349,686 $29,934,341 5% Investment income 48,181,831 45,411,109 6% Realized investment gains (losses) 122,097 (722,299) 117% Other income 1,056,498 687,500 54% Revenues 80,710,112 75,310,651 7% Benefits and expenses 68,700,389 61,041,955 13% Income before income taxes 12,009,723 14,268,696 -16% Income taxes 3,937,132 4,556,214 -14% Net income $8,072,591 $9,712,482 -17% Net income applicable to common stock $6,470,750 $8,219,233 -21% Earnings per share Adusted operating earnings excluding DPAC unlocking $1.79 $1.88 -5% DPAC unlocking ($0.42) $0.00 100% Realized investment gains (losses) net of related DPAC amortization and taxes 0.04 (0.10) 140% Net income $1.41 $1.78 -21% Weighted average common shares outstanding 4,580,148 4,613,207 -1% Dividends paid per common share $0.21 $0.17 24% Interest rate analysis Net investment yield-- investment portfolio 7.37% 7.78% -5% Total interest-credited rate 5.57% 5.87% -5% Net interest margin 1.80% 1.91% -6% ALLIED Life Financial Corporation Summarized Consolidated Balance Sheets December 31, December 31, Percent 1996 1995 Change Assets Investments Fixed maturities Held to maturity at amortized cost $199,208,835 $219,418,225 -9% Available for sale at fair value 500,289,070 425,098,718 18% Other investments 22,841,066 16,409,202 39% Total investments 722,338,971 660,926,145 9% Deferred acquisition costs- operating 96,410,860 89,295,711 8% Deferred acquisition costs- SFAS 115 (3,993,272) (9,578,182) -58% Other assets 20,843,164 19,303,585 8% Total assets $835,599,723 $759,947,259 10% Liabilities Policy liabilities Policyholder account balances Annuity contracts $467,504,991 $412,216,412 13% Universal life contracts 182,726,695 168,654,188 8% Other policy liabilities 47,631,332 41,478,697 15% Total policy liabilities 697,863,018 622,349,297 12% Deferred income taxes 8,008,946 13,452,845 -40% Note payable 20,470,000 16,605,000 23% Other liabilities 9,316,138 5,858,297 59% Total liabilities 735,658,102 658,265,439 12% Stockholders' equity Preferred stock 24,586,232 22,870,923 7% Common stock 4,497,238 4,632,559 -3% Additional paid-in capital 46,596,171 48,773,783 -4% Retained earnings 21,751,088 16,237,501 34% Unrealized appreciation on investments 2,510,892 9,167,054 -73% Total stockholders' equity 99,941,621 101,681,820 -2% Total liabilities and stockholders' equity $835,599,723 $759,947,259 10% Shares outstanding 6.75% Series preferred stock 2,143,691 2,004,898 7% ESOP Series convertible 93,982 82,029 15% preferred stock Common stock 4,497,238 4,632,559 -3% Total shares outstanding 6,734,911 6,719,486 0% Book value per common share $16.70 $16.95 -1% Book value per common share excluding net unrealized investment gains and losses $16.16 $15.01 8% ALLIED Life Financial Corporation Summary of Life Insurance Operations Three Months Ended December 31, Percent 1996 1995 Change Life insurance profitability Investment income $12,663,340 $11,837,335 7% Interest credited on Annuities 6,550,502 6,079,631 8% Universal life 2,408,919 2,347,537 3% Other 190,471 128,688 48% Total interest expense 9,149,892 8,555,856 7% Investment spread 3,513,448 3,281,479 7% Fee income Universal life 5,622,154 5,376,784 5% Annuity surrender charges 125,432 95,262 32% Total fee income 5,747,586 5,472,046 5% Other insurance income Life premiums,net 1,446,955 1,021,244 42% SPIA with life 71,237 1,152,427 -94% Ceded reinsurance commission 544,950 458,913 19% Other insurance income 2,063,142 2,632,584 -22% Adjusted insurance revenues 11,324,176 11,386,109 -1% Other expenses Amortization of DPAC 2,181,201 1,327,972 64% Renewal commissions 773,534 653,823 18% Other operating expenses 1,296,328 1,363,467 -5% LTC administration expense 150,622 126,010 20% Total acquisition and operating expenses 4,401,685 3,471,272 27% Death benefits, net 1,816,632 1,861,566 -2% Other policyholder benefits,net 1,375,242 2,170,780 -37% Total other expenses 7,593,559 7,503,618 1% Income before taxes, realized gains (losses), and DPAC unlocking from insurance operations 3,730,617 3,882,491 -4% DPAC Unlocking (2,828,502) 0 100% Realized investment gains (losses) 315,103 (69,807) 551% DPAC amortization on realized gains (losses) 58,854 (14,345) 510% Income before tax from other operations (60,345) 34,982 -273% Income before income taxes 1,215,727 3,833,321 -68% Income taxes 409,966 1,222,680 -66% Net income $805,761 $2,610,641 -69% DPAC amortization ratio 36.9% 25.5% ALLIED Life Financial Corporation Summary of Life Insurance Operations Twelve Months Ended December 31, Percent 1996 1995 Change Life insurance profitability Investment income $48,144,538 $45,214,515 6% Interest credited on Annuities 24,612,427 22,613,092 9% Universal life 9,490,024 9,529,783 0% Other 463,095 323,836 43% Total interest expense 34,565,546 32,466,711 6% Investment spread 13,578,992 12,747,804 7% Fee income Universal life 22,409,767 21,585,773 4% Annuity surrender charges 495,085 662,427 -25% Total fee income 22,904,852 22,248,200 3% Other insurance income Life premiums,net 6,267,446 4,735,292 32% SPIA with life 460,665 1,440,158 -68% Ceded reinsurance commission 1,716,723 1,510,691 14% Other insurance income 8,444,834 7,686,141 10% Adjusted insurance revenues 44,928,678 42,682,145 5% Other expenses Amortization of DPAC 8,021,079 6,036,463 33% Renewal commissions 2,674,559 2,436,511 10% Other operating expenses 5,847,093 5,501,091 6% LTC administration expenses 508,210 308,635 65% Total acquisition and operating expenses 17,050,941 14,282,700 19% Death benefits, net 6,944,978 6,893,799 1% Other policyholder benefits,ne 6,357,495 6,702,322 -5% Total other expenses 30,353,414 27,878,821 9% Income before taxes, realized gains (losses), and DPAC unlocking from insurance operations 14,575,264 14,803,324 -2% DPAC Unlocking (2,828,502) 0 100% Realized investment gains (losses) 122,097 (787,506) 116% DPAC amortization on realized gains (losses) 134,686 95,467 41% Income before tax from other operations 6,178 157,411 -96% Income before income taxes 12,009,723 14,268,696 -16% Income taxes 3,937,132 4,556,214 -14% Net income $8,072,591 $9,712,482 -17% DPAC amortization ratio 35.5% 29.0% ALLIED Life Financial Corporation New Production Information (000s) Three Months Ended December 31, Percent 1996 1995 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 $136,877 $144,773 -5% Term life 303,189 377,674 -20% Whole life 847 1,087 -22% Subtotal 440,913 523,534 -16% Life insurance-other 1,047 2,225 -53% Total $441,960 $525,759 -16% Annuities $20,861 $11,407 83% Policyholder assessments collected on universal life First-year $758 $834 -9% Renewal 4,528 4,166 9% $5,286 $5,000 6% Statutory information Premiums and annuity considerations, net Universal life insurance $7,577 $7,105 7% Term life insurance 2,122 1,967 8% Annuities 21,788 12,142 79% Other 207 (117) 277% $31,694 $21,097 50% ALLIED Life Financial Corporation New Production Information (000s) Twelve Months Ended December 31, Percent 1996 1995 Change Life insurance face amount in force Directly produced by agents Universal life $4,340,601 $4,215,564 3% Term life 4,198,504 3,415,536 23% Whole life 49,079 50,180 -2% Subtotal 8,588,184 7,681,280 12% Other 371,130 433,236 -14% $8,959,314 $8,114,516 10% 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 $410,635 $609,700 -33% Term life 1,475,977 1,223,544 21% Whole life 4,239 4,511 -6% Subtotal 1,890,851 1,837,755 3% Life insurance-other 9,431 21,549 -56% Total $1,900,282 $1,859,304 2% Annuities $68,063 $75,944 -10% Policyholder assessments collected on universal life First-year $2,886 $3,904 -26% Renewal 17,805 15,993 11% $20,691 $19,897 4% Statutory information Premiums and annuity considerations, net Universal life insurance $29,371 $27,055 9% Term life insurance 8,411 6,903 22% Annuities 72,231 78,639 -8% Other 662 598 11% $110,675 $113,195 -2% ALLIED Life Financial Corporation New Production by Distribution System (000s) Three Months Ended December 31, Percent 1996 1995 Change Life insurance face amount sold Directly produced by agents Property--casualty agencies Universal life $93,620 $107,746 -13% Term life 250,353 291,146 -14% Whole life 946 949 0% Subtotal 344,919 399,841 -14% Traditional agencies Universal life $43,257 $37,027 17% Term life 52,836 86,528 -39% Whole life (99) 138 -172% Subtotal 95,994 123,693 -22% Total produced by agents 440,913 523,534 -16% Other 1,047 2,225 -53% Total $441,960 $525,759 -16% Life insurance policies sold Property--casualty agencies Universal life 655 728 -10% Term life 1,170 1,266 -8% Total 1,825 1,994 -8% Traditional agencies Universal life 175 199 -12% Term life 234 315 -26% Total 409 514 -20% Annuity premiums Deferred annuities Property--casualty agencies $7,628 $4,846 57% Traditional agencies 14,028 5,968 135% Subtotal 21,656 10,814 100% Immediate annuities 132 1,328 -90% Total $21,788 $12,142 79% ALLIED Life Financial Corporation New Production by Distribution System (000s) Twelve Months Ended December 31, Percent 1996 1995 Change Life insurance face amount in force Directly produced by agents Property--casualty agencies Universal life $2,809,270 $2,627,447 7% Term life 3,200,793 2,506,889 28% Whole life 34,521 34,403 0% Subtotal 6,044,584 5,168,739 17% Traditional agencies Universal life 1,531,331 1,588,116 -4% Term life 997,711 908,647 10% Whole life 14,558 15,778 -8% Subtotal 2,543,600 2,512,541 1% Total produced by agents 8,588,184 7,681,280 12% Other 371,130 433,236 -14% Total $8,959,314 $8,114,516 10% Life insurance face amount sold Directly produced by agents Property--casualty agencies Universal life $282,388 $384,763 -27% Term life 1,127,060 889,624 27% Whole life 3,115 2,775 12% Subtotal 1,412,563 1,277,162 11% Traditional agencies Universal life 128,247 224,937 -43% Term life 348,917 333,920 4% Whole life 1,124 1,736 -35% Subtotal 478,288 560,593 -15% Total produced by agents 1,890,851 1,837,755 3% Other 9,431 21,549 -56% Total $1,900,282 $1,859,304 2% Life insurance policies sold Property--casualty agencies Universal life 2,162 2,820 -23% Term life 6,464 4,203 54% Total 8,626 7,023 23% Traditional agencies Universal life 769 1,264 -39% Term life 1,683 1,260 34% Total 2,452 2,524 -3% Annuity premiums Deferred annuities Property--casualty agencies $30,816 $30,321 2% Traditional agencies 40,188 45,956 -13% Subtotal 71,004 76,277 -7% Immediate annuities 1,227 2,362 -48% Total $72,231 $78,639 -8% Ends.