AmerUs Group Reports Record Second Quarter Operating Income of $36.1 Million; $0.89 Per Share.Business Editors DES MOINES Des Moines, city, United States Des Moines (dĭ moin`), city (1990 pop. 193,187), state capital and seat of Polk co., S central Iowa, at the junction of the Des Moines and Raccoon rivers; inc. , Iowa--(BUSINESS WIRE)--Aug. 6, 2002 AmerUs Group Co. (NYSE NYSE See: New York Stock Exchange :AMH AMH Abington Memorial Hospital (Abington, PA) AMH Anti-Müllerian Hormone AMH Australian Medicines Handbook AMH Automated Material Handling AMH Aviation Structural Mechanic (Hydraulics) US Navy Rating ), a leading producer of life insurance and annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. products, today announced record second quarter adjusted net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $36.1 million, or $0.89 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $27.8 million, or $0.80 per diluted share ($0.75 per diluted share including goodwill amortization) in the second quarter of 2001. Adjusted net operating income for the first six months of 2002 was $72.2 million, or $1.75 per diluted share, compared with $52.5 million, or $1.62 per diluted share ($1.50 per diluted share including goodwill amortization) a year ago. Adjusted net operating income excludes items such as open block realized capital gains and losses, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and the cumulative effect of accounting changes. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Statement of Financial Accounting Standard 142, "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ," AmerUs Group stopped amortizing goodwill on January January: see month. 1, 2002. "I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in pleased with our second quarter results because they reflect the strength of our core businesses, even during a very difficult credit environment," said Roger K. Brooks Brooks , Gwendolyn Elizabeth 1917-2000. American poet known for her verse detailing the dreams and struggles of African Americans. An early volume of poems, Annie Allen (1949), was awarded a Pulitzer Prize. Noun 1. , chairman, president and chief executive officer of AmerUs Group. "Our protection and accumulation Accumulation 1) In the context of individual investing, it is the process of contributing cash to invest in securities over a period of time in order to build a portfolio of desired value. Dividends and capital gains are also reinvested during this process. product businesses remain on track and continue to deliver solid results." Net Income Net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the declined to $3.7 million for the second quarter of 2002, or $0.09 per diluted share. The decline in net income was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to $23 million (after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ) of credit-related write-downs and losses in the investment portfolio, including $21 million (after-tax) of World Com, Inc. and related entities as previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). . Net income from continuing operations in the second quarter of 2001 was $21.7 million, or $0.63 per diluted share ($0.57 per diluted share including goodwill amortization). Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. net income from continuing operations was $28.2 million, or $0.68 per diluted share, compared with $43.1 million, or $1.33 per diluted share ($1.21 per diluted share including goodwill amortization) a year ago. Higher Accumulation Product Sales Sales of accumulation products, which include fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. sales and funding agreements Funding Agreement Illiquid insurance contracts that provide guaranteed principal repayment and interest payments for a predetermined period of time. Notes: Funding agreements are marketed to mutual fund companies and municipal reinvestments. , increased 10 percent for the second quarter to $480 million, compared with $438 million for the second quarter of 2001. Year-to-date accumulation product sales increased 20 percent to $1,152 million, compared to $960 million in the same period in 2001. The key drivers of growth during the quarter were increased sales of equity-indexed annuity equity-indexed annuity A contract with an insurance company that promises periodic payments keyed in a specified manner to a stock market index. Unlike variable annuities, equity-indexed annuities specify a guaranteed minimum return that is typically 3%. products and the issuance of $75 million in funding agreements. The investment spread on fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. increased 10 basis points during the second quarter of 2002, to 205 basis points from 195 basis points in the first quarter of 2002. The investment spread in the second quarter of 2001 was 200 basis points. AmerUs Group targets an investment spread of 200 basis points on its fixed annuity products. Year-to-date, investment spreads increased four basis points to 199 basis points. The year-to-date investment spread in the second quarter of 2001 was 207 basis points. Strong Protection Product Sales Second quarter fixed life sales more than doubled to $36.9 million, compared to $15.3 million in the second quarter of 2001. Year-to-date fixed life sales increased 164% to $67.7 million compared to $25.7 million during the same period of 2001. "The results we've we've Contraction of we have. we've have seen from our core distribution sources, including Indianapolis Indianapolis (ĭn'dēənă`pəlĭs), city (1990 pop. 731,327), state capital and seat of Marion co., central Ind., on the White River; selected 1820 as the site of the state capital (which was moved there in 1825), inc. 1847. Life, have been outstanding and we expect this sales volume to continue throughout the rest of 2002," said Brooks. Net Investment Income Net investment income was $252 million for the second quarter of 2002 compared with $207 million for the same period in 2001. The increase was primarily attributable to the acquisition of Indianapolis Life and higher invested assets. The portfolio yield during the second quarter was 6.53 percent, compared to 6.72 percent in the second quarter of 2001. The year-to-date portfolio yield was 6.42 percent, compared to 7.00 percent in the comparable period of 2001. While continued low reinvestment rates Reinvestment Rate The rate at which cash flows from fixed-income securities may be reinvested. Notes: Because of the additional interest income, bondholders can make larger investment returns if they reinvest received coupon payments. contributed to the lower yields, the primary reason for the decline in yield was the acquisition of Indianapolis Life and its subsidiaries, which hold a significant amount of convertible securities. Excluding Indianapolis Life's convertible securities, the portfolio yield was 6.94 percent for the quarter. 2002 Earnings Guidance The company has lowered its 2002 net adjusted operating income guidance to $3.53-$3.59 per share, a nine to eleven percent increase over its 2001 results. The revision (programming) revision - A release of a piece of software which is not a major release or a bugfix, but only introduces small changes or new features. is due to several factors, including: the current credit and interest rate environment, the impact of the equity markets on the variable products joint venture and higher than planned life sales, which have a slightly negative impact on first year profitability. "Although the current economic environment will affect us in the second half of the year, our second quarter results demonstrate that our core operations are very strong," said Brooks. Corporate Actions During the second quarter, the company purchased 735,300 shares of its common stock at an average price of $35.67 per share. AmerUs Group currently has board authorization The right or permission to use a system resource; the process of granting access. See access control. to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 500,000 additional shares. Additionally, the company completed a commission-free sale and purchase program, available to shareholders owning fewer than 100 shares of AmerUs Group common stock. As a result of the program, AmerUs Group reduced its shareholder base by nearly 29 percent, or 34,000 accounts. Conference Call, Audio Replay and Additional Financial Information Interested parties may listen to a conference call with AmerUs Group's management discussing second quarter 2002 results by calling (toll free) 888-820-4341 (international 706-679-8569) at 9:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on August 7, 2002. An audio replay of AmerUs Group's call will be available at 12 p.m. EDT, August 7, 2002, through August 15, 2002. The replay can be accessed by dialing 800-642-1687 (international: 706-645-9291), Conference ID 4620680. Further detailed financial information, including operating segment income, investment composition, operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and product distribution by channel, can be found in AmerUs Group's Financial Supplement, which is available by accessing the company's web site at www.amerus.com or by contacting the company's investor relations Investor relations The process by which the corporation communicates with its investors. department. AmerUs Group Co. is located in Des Moines, Iowa “Des Moines” redirects here. For other uses, see Des Moines (disambiguation). Des Moines (pronounced /dɪˈmɔɪn/ in English, , and is engaged through its subsidiaries in the business of marketing and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. individual life insurance and annuity products in 50 states, the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). and the U.S. Virgin Islands. Its major subsidiaries include: AmerUs Life Insurance Company, American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Investors Life Insurance Company, Inc., Bankers Life Insurance Company of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Delta Life and Annuity Company, IL Annuity and Insurance Company, and Indianapolis Life Insurance Company. As of June June: see month. 30, 2002, AmerUs Group's total assets were $18.9 billion and shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. totaled $1,198.2 million, including accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as . Certain statements made by the company which are not historical facts may be considered forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including, without limitation, statements as to sales targets, sales and earnings trends, management's beliefs, expectations, earnings guidance and goals and opinions, which are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. For further information which could cause actual results to differ from the company's expectations as well as other factors which could affect the company's financial statements, please refer to the company's filings with the Securities and Exchange Commission.
AMERUS GROUP CO.
ADJUSTED NET OPERATING INCOME
($ in thousands, except share data)
(Unaudited)
Adjusted net operating income reflects net income adjusted to
eliminate certain items, such as open block realized gains and losses,
restructuring costs and discontinued operations. Adjusted net
operating income shown below does not constitute our net income
computed in accordance with GAAP.
For The Three Months For The Six Months
Ended Ended
June 30, June 30,
2002 2001 2002 2001
----------------------- ------------------------
Net Income $4,262 $20,227 $29,176 $31,863
Realized losses
on open block
investments (A) 23,155 4,677 29,575 9,494
Net amortization
of deferred policy
acquisition costs
due to open block
gains or losses (B) (3,668) (1,317) (5,166) (2,823)
Net effect of
accounting
differences from
the adoption of
SFAS 133 (C) 8,801 2,541 14,123 2,541
Demutualization
costs (D) 179 202 464 202
Restructuring
costs (E) 3,937 -- 5,054 --
Discontinued
operations (F) (540) (532) (996) (946)
Cumulative effect of
change in
accounting for
derivatives (G) -- -- -- 8,236
----------------------- ------------------------
Adjusted Net
Operating Income $36,126 $25,798 $72,230 $48,567
======================= ========================
Adjusted Net
Operating Income
per common share:
Basic $0.90 $0.75 $1.77 $1.51
======================= ========================
Diluted $0.89 $0.75 $1.75 $1.50
======================= ========================
Weighted average
common shares
outstanding:
Basic 40,155,276 34,364,932 40,749,054 32,181,646
======================= ========================
Diluted 40,661,337 34,528,541 41,311,695 32,325,847
======================= ========================
AMERUS GROUP CO.
NOTES TO ADJUSTED NET OPERATING INCOME
(A) Represents total open block realized gains or losses on
investments adjusted for income taxes. Open block realized gains
or losses may vary widely between periods. Such amounts are
determined by management's timing of individual transactions or
current market conditions and do not necessarily correspond to the
underlying operating trends.
(B) Represents amortization of deferred policy acquisition costs and
VOBA on the open block realized gains or losses that are included
in our product margins, adjusted for income taxes on such amounts.
(C) Represents the net effect of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," related accounting
entries, adjusted for income taxes. The accounting entries consist
of cash flow hedge amortization, market value adjustments on
trading securities, derivatives, certain annuity contracts, and
the associated change in amortization of deferred acquisition
costs and VOBA resulting from such adjustments.
(D) Represents costs directly related to ILIC's demutualization. The
costs consist primarily of legal, actuarial and consulting
expenses.
(E) Represents costs of restructuring our operations to eliminate
duplicative functions, adjusted for income taxes. The costs
consist primarily of systems conversion, relocation of employees
and severance and termination benefits.
(F) Represents the net income from our discontinued operations.
(G) Represents the cumulative effect of change in accounting for
derivatives, net of income taxes, as of January 1, 2001, resulting
from the Company's adoption of SFAS No. 133.
AMERUS GROUP CO.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share data)
For The Three Months For The Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
----------------------- -----------------------
(unaudited)
Revenues:
Insurance premiums $93,247 $71,712 $185,355 $128,879
Universal life and
annuity product
charges 39,314 34,847 82,185 59,113
Net investment
income 251,897 207,093 491,667 388,221
Realized (losses)
on investments (41,133) (7,459) (46,387) (14,004)
Unrealized (losses)
on investments (34,778) (4,366) (54,236) (37,656)
Other income 19,925 11,952 31,937 22,284
----------------------- -----------------------
328,472 313,779 690,521 546,837
----------------------- -----------------------
Benefits and expenses:
Policyowner benefits 220,376 189,363 433,932 309,847
Underwriting,
acquisition and
other expenses 43,201 35,121 79,454 66,455
Demutualization costs 179 202 464 202
Restructuring costs 6,416 -- 8,211 --
Amortization of
deferred policy
acquisition costs and
value of business
acquired 28,324 29,971 68,164 55,242
Dividends to
policyowners 19,221 23,067 47,624 42,225
----------------------- -----------------------
317,717 277,724 637,849 473,971
----------------------- -----------------------
Income from continuing
operations 10,755 36,055 52,672 72,866
Interest expense 6,337 7,410 12,364 14,742
----------------------- -----------------------
Income before income
tax expense 4,418 28,645 40,308 58,124
Income tax expense 696 8,950 12,128 18,971
----------------------- -----------------------
Net income from
continuing operations 3,722 19,695 28,180 39,153
Discontinued operations
(net of tax):
Income from
discontinued
operations 540 532 996 946
----------------------- -----------------------
Net income before
cumulative effect of
change in accounting
for derivatives 4,262 20,227 29,176 40,099
Cumulative effect of
change in accounting
for derivatives, net
of tax -- -- -- (8,236)
----------------------- -----------------------
Net income $4,262 $20,227 $29,176 $31,863
======================= =======================
Net income from
continuing operations
per common share:
Basic $0.09 $0.57 $0.69 $1.22
======================= =======================
Diluted $0.09 $0.57 $0.68 $1.21
======================= =======================
Net income from
discontinued
operations per common
share:
Basic $0.01 $0.02 $0.02 $0.03
======================= =======================
Diluted $0.01 $0.02 $0.02 $0.03
======================= =======================
Net income per common
share:
Basic $0.11 $0.59 $0.72 $0.99
======================= =======================
Diluted $0.10 $0.59 $0.71 $0.99
======================= =======================
Weighted average
common shares
outstanding:
Basic 40,155,276 34,364,932 40,749,054 32,181,646
======================= =======================
Diluted 40,661,337 34,528,541 41,311,695 32,325,847
======================= =======================
AMERUS GROUP CO.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
June 30, December 31,
2002 2001
------------------------------
(unaudited)
Assets
Investments:
Securities available-for-sale at
fair value:
Fixed maturity securities $11,850,297 $11,037,425
Equity securities 45,562 11,362
Short-term investments 15,149 14,881
Securities held for trading purposes:
Fixed maturity securities 1,941,177 2,175,106
Equity securities -- 12,013
Short-term investments 7,985 4,212
Mortgage loans 926,903 944,532
Real estate 1,287 1,405
Policy loans 500,273 506,318
Other investments 307,495 345,179
------------------------------
Total investments 15,596,128 15,052,433
Cash and cash equivalents 102,272 179,376
Accrued investment income 182,467 174,238
Premiums, fees and other receivables 7,502 9,920
Reinsurance receivables 805,130 732,030
Deferred policy acquisition costs 788,190 642,680
Value of business acquired 546,131 583,829
Goodwill 217,632 195,484
Property and equipment 77,900 83,221
Deferred income taxes -- 12,140
Other assets 293,023 270,888
Separate account assets 283,975 328,385
Assets of discontinued operations 30,152 34,528
------------------------------
Total assets $18,930,502 $18,299,152
==============================
AMERUS GROUP CO.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
June 30, December 31,
2002 2001
--------------------------------
(unaudited)
Liabilities and Stockholders' Equity
Liabilities:
Policy reserves and policyowner funds:
Future life and annuity policy
benefits $15,581,845 $15,102,001
Policyowner funds 785,759 432,941
--------------------------------
16,367,604 15,534,942
Accrued expenses and other
liabilities 281,146 488,949
Dividends payable to policyowners 246,615 221,224
Policy and contract claims 42,994 33,147
Income taxes payable 12,534 45,809
Deferred income taxes 10,044 --
Notes payable 419,617 315,574
Separate account liabilities 283,975 328,385
Liabilities of discontinued
operations 19,484 23,551
--------------------------------
Total liabilities 17,684,013 16,991,581
Company-obligated mandatorily
redeemable preferred capital
securities of subsidiary trusts
holding solely junior subordinated
debentures of the Company 48,249 69,054
Stockholders' equity:
Preferred Stock, no par value,
20,000,000 shares authorized, none
issued -- --
Common Stock, no par value,
230,000,000 shares authorized;
39,721,666 shares issued and
outstanding in 2002 (net of
3,916,622 treasury shares) and
41,759,450 shares issued and
outstanding in 2001 (net of
1,746,548 treasury shares) 39,722 41,759
Additional paid-in capital 1,048,979 1,122,853
Accumulated other comprehensive
income 18,910 12,669
Unearned compensation (510) (727)
Unallocated ESOP shares (224) (224)
Retained earnings 91,363 62,187
--------------------------------
Total stockholders' equity 1,198,240 1,238,517
--------------------------------
Total liabilities and
stockholders' equity $18,930,502 $18,299,152
================================
AMERUS GROUP CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
June 30, 2002
($ in thousands)
Accumulated
Other
Compre-
Additional hensive
Common Paid-In Income Unearned
Stock Capital (Loss) Compensation
---------- ------------ ---------- -----------
Balance at December 31,
2000 $30,011 $809,894 $(17,188) $(146)
2001:
Net income -- -- -- --
Change in accounting
for derivatives -- -- 2,661 --
Transfer related to
unrealized gain on
available-for-sale
securities reclassified
to trading -- -- (430) --
Net unrealized gain
(loss) on securities -- -- 35,891 --
Net unrealized gain
(loss) on derivatives
designated as cash
flow hedges -- -- (5,933) --
Stock issued under
various incentive plans,
net of forfeitures 338 8,921 -- (581)
Dividends declared on
common stock -- -- -- --
Purchase of treasury
stock (1,406) (43,579) -- --
Acquisition of IL
Holdings 9,047 223,358 -- --
Conversion of company-
obligated mandatorily
redeemable preferred
capital securities 3,769 123,779 -- --
Allocation of shares
in leveraged ESOP -- 480 -- --
Minimum pension
liability adjustment -- -- (2,332) --
---------- ------------ ---------- -----------
Balance at December 31,
2001 $41,759 $1,122,853 $12,669 $(727)
2002 (unaudited):
Net income -- -- -- --
Net unrealized gain
on securities -- -- 5,955 --
Net unrealized gain on
derivatives designated
as cash flow hedges -- -- 286 --
Stock issued under
various incentive
plans, net of
forfeitures 477 12,864 -- 217
Purchase of treasury
stock (2,514) (86,738) -- --
Other -- -- -- --
---------- ------------ ---------- -----------
Balance at June 30,
2002 $39,722 $1,048,979 $18,910 $(510)
========== ============ ========== ===========
Unallocated Total
ESOP Retained Stockholders'
Shares Earnings Equity
----------- ------------ ---------------
Balance at December 31, 2000 $(683) $6,067 827,955
2001:
Net income -- 72,907 72,907
Change in accounting for
derivatives -- -- 2,661
Transfer related to unrealized
gain on available-for-sale
securities reclassified to
trading -- -- (430)
Net unrealized gain (loss)
on securities -- -- 35,891
Net unrealized gain (loss)
on derivatives designated
as cash flow hedges -- -- (5,933)
Stock issued under various
incentive plans, net of
forfeitures -- -- 8,678
Dividends declared on
common stock -- (16,787) (16,787)
Purchase of treasury stock -- -- (44,985)
Acquisition of IL Holdings -- -- 232,405
Conversion of company-
obligated mandatorily
redeemable preferred
capital securities -- -- 127,548
Allocation of shares in
leveraged ESOP 459 -- 939
Minimum pension liability
adjustment -- -- (2,332)
----------- ------------ ---------------
Balance at December 31, 2001 $(224) $62,187 $1,238,517
2002 (unaudited):
Net income -- 29,176 29,176
Net unrealized gain on
securities -- -- 5,955
Net unrealized gain on
derivatives designated
as cash flow hedges -- -- 286
Stock issued under various
incentive plans, net of
forfeitures -- -- 13,558
Purchase of treasury stock -- -- (89,252)
Other -- -- --
----------- ------------ ---------------
Balance at June 30, 2002 $(224) $91,363 $1,198,240
=========== ============ ===============
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