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John Alden reports operating loss of $0.95 per share for 1995 fourth quarter compared with operating income of $0.43 for 1994 fourth quarter.

MIAMI--(BUSINESS WIRE)--March 7, 1996--John Alden Financial Corp. (NYSE:JA) reported an operating loss for the 1995 fourth quarter of $0.95 per share, or $24.5 million, compared with operating income of $0.43 per share, or $11.6 million, for the fourth quarter of 1994.

The 1995 fourth quarter earnings were adversely impacted by losses in the company's HealthCare segment. In addition, the fourth quarter 1995 results were adversely impacted by significant adjustments of $0.57 per share, or $14.9 million, relating to actions pursuant to the company's strategic evaluation of its operations and from changes in prior estimates resulting from new events or information.

The company has recently identified specific blocks of its group business that have generated inadequate risk adjusted returns. These blocks approximate 30% of the total group business and generated a hindsighted loss ratio of 82.0% for 1995 versus 70.4% for the remaining 70% of the business. The company will continue to take corrective action on this higher risk business as discussed below.

"While 70% of our group health business is performing within reasonable expectations, the results on the remaining 30% are unacceptable," said Glendon E. Johnson, Chairman of the Board, Chief Executive Officer and President. "We are the taking actions we believe are necessary to significantly improve this segment's performance."

As part of the company's ongoing strategic evaluation of the potential long-term risk adjusted returns on its major product lines, management believes that it may best maximize shareholder value by focusing on the HealthCare segment in the future and by separately realizing the value of its Asset Accumulation business. Accordingly, the Board of Directors has retained CS First Boston Corp. to review the advisability and feasibility of strategic alternatives with respect to the Asset Accumulation business which includes the company's annuity business. In addition, as previously announced, certain of the company's non-core product lines may be sold, discontinued or their financial exposure significantly reduced.

"We believe that our current stock price does not fully reflect the combined value of our separate major product lines," said Johnson. "We expect to utilize the capital generated from the sale of any or all of these businesses in a way that best maximizes shareholder value based on the opportunities and market conditions at that time. In addition, by focusing our efforts on the healthcare business, we hope to increase the potential for future success."

Operating income for the full year 1995 was $0.16 per share, or $4.1 million, compared with $3.28 per share, or $83.3 million for 1994. The 1995 results were adversely impacted by significant adjustments of $1.13 per share, or $29.0 million, which includes the adjustments referred to above and similar charges announced in prior quarters.


Gross group insurance premiums and contract charges earned by this segment were $413.4 million compared to $417.8 million for the 1994 fourth quarter. Fourth quarter results for the group product line reflect higher medical claim experience and the impact of state-mandated healthcare reform. In general, state small group healthcare reform in recent years has increased the risk on business written by the company.

This is due, in part, to the reduced ability of the company to effectively apply its underwriting procedures to the risk it is taking. While the company adjusted its pricing to reflect this increased risk, it initially had no historical experience to assist it in such pricing. As the actual experience in this regulatory environment unfolded throughout 1995, it became more apparent that, in certain areas, the claims activity was higher than had been assumed when the products were initially priced.

As a result, the loss ratio is higher than had been expected on such business. The 1995 fourth quarter combined ratio for the company's group business increased to 106.4% compared with 99.7% for the 1994 fourth quarter. The 1995 fourth quarter results were also impacted by a $4.5 million pre-tax loss in the Provider Excess Stop Loss product line, resulting primarily from $3.0 million of additional reserve strengthening.

The company has taken a number of steps designed to more fully identify the problem areas in its group book of business and to allow the company to take corrective action. In this connection, the company has increased its ability to identify claims experience for each of the following characteristics: initial as well as current group size, duration of the policy, geographic location, level of deductibles and utilization of particular types of benefits.

The company has significantly increased rates on its new and renewal business, with larger increases targeted to the higher risk business. Additional actions that will continue to be taken, where appropriate and available, include improving discounts from providers, redesigning benefits, improving underwriting techniques, implementing a lower commission structure and discontinuing portions of such business.

While these corrective actions are designed to reduce the medical loss ratio, they may also reduce new sales and increase policy lapses from 1995 levels. As a result of various factors including competition and a changing regulatory environment, there can be no assurance that these actions will restore profit margins to acceptable levels.

With respect to the company's HMO operations, Neighborhood Health Partnership, John Alden's joint venture HMO, covered lives grew to 43,000 lives at year-end 1995 compared with 16,000 at year-end 1994. The company intends to focus on HMO establishment and development principally in Florida where potential markets include Orlando and Tampa. The company continues to evaluate its HMO expansion plans outside of the state of Florida.

"We plan to build on our historical strengths, continuing to expand managed care options in our products," said Johnson. "In doing this, we will utilize our exceptionally strong marketing capabilities, remain focused on our core healthcare business and further enhance the management tools that allow us to effectively manage the specific factors impacting our products."

Asset Accumulation

The company achieved targeted spreads in 1995 compared to the historically high spreads achieved in 1994. The net spread earned in the fourth quarter 1995, after adjusting for two significant charges, was $10.3 million versus $13.6 million in the fourth quarter of 1994. The two significant charges in the 1995 fourth quarter were $4.4 million of accelerated amortization of deferred policy acquisition costs and an additional $3.8 million charge above the company's normal provision for guaranty fund assessments relating to revised industry-related estimates.

The $4.4 million charge was offset by $13.8 million of net capital gains relating to a previously announced annuity reinsurance agreement. Account values, net of reinsurance, increased to $5.5 billion at Dec. 31, 1995 compared to $5.3 billion at Dec. 31, 1994.

"Excluding the two charges, our 1995 net spread was in line with a 15% after tax return on equity capital required to support this line of business," said Johnson. "We feel we are well positioned to maintain our targeted spreads."

John Alden Financial Corp. is an insurance holding company that, through its subsidiaries, is principally engaged in providing group life and health insurance and managed care services. John Alden is one of the largest providers of group insurance in this market. The company also markets annuities, health-related reinsurance products and risk management services, life insurance to individuals and automobile credit life and health insurance. -0-
 Quarterly Earnings Release

 As of or For the As of or For the
 Three Months Ended Twelve Months Ended
 Dec. 31, Dec. 31,
Dollars in millions,
except per share data 1995 1994 1995 1994

Per Share Summary
Operating income (Loss)
 Applicable to Common
 Stock $ (0.95) $ 0.43 $ 0.16 $ 3.28
Net Realized
 Investment Gains
 (Losses) 0.22 (0.09) 0.02 (0.15)
Change in Trading
 Portfolio Unrealized
 Gain (Loss) 0.01 -- 0.02 (0.18)
Cumulative Effect of
 Accounting Change -- -- -- (0.02)

Net Income (Loss)
 Applicable to
 Common Stock $ (0.72) $ 0.34 $ 0.20 $ 2.93

Average Outstanding
 Shares (000's
 omitted) 25,866 25,987 25,721 25,388

Gross Premiums and
 Fees Earned $ 488.0 $ 459.4 $1,916.3 $1,746.5
Investment Income 3.7 2.7 12.2 7.7
Pre-tax Operating
 Income (Loss) (22.7) 7.7 10.4 98.9
Group Key Performance
 Gross Premiums, Fees
 and Other Income 413.4 417.8 1,676.4 1,594.6
 Gross Loss Ratio 81.5% 75.4% 75.0% 69.7%
 Gross Expense Ratio 24.9% 24.3% 25.2% 25.1%
 Gross Combined Ratio 106.4% 99.7% 100.2% 94.8%
 Employer Groups 235,000 243,000 235,000 243,000
 Employees 620,000 658,000 620,000 658,000
Group Covered Lives 1,190,000 1,274,000 1,190,000 1,274,000
HMO Covered Lives 43,000 16,000 43,000 16,000
 Total covered
 lives 1,233,000 1,290,000 1,233,000 1,290,000
Large Group
 services only) 79,000 88,000 79,000 88,000
Self-Funded, ARMS 899,000 733,000 899,000 733,000
Claims Received Per
 Life 1.36 1.20 5.16 4.81

Asset Accumulation
Revenues $ 131.3 $ 108.4 $ 479.1 $ 405.7
 Received 160.6 250.9 886.3 859.4
Average Account
 Balance, Net of
 Reinsurance 5,469.4 5,240.2 5,613.7 4,986.1
Pre-tax Operating
 Income 2.1 13.6 32.3 53.1
Pre-tax Net Realized
 Investment Gains
 (Losses) 11.3 (2.2) 2.5 (9.5)
Annualized Annuity
 Lapse Rate 9.9% 6.9% 10.1% 6.5%

Credit & Other
Net Premiums, Fees
 and Other Income $ 12.7 $ 18.3 $ 56.5 $ 81.0
Net Investment Income 0.5 2.3 8.2 8.6
Pre-tax Operating
 Income (Loss) (2.0) (4.1) (2.8) (10.4)

Investment Income $ 6.4 $ 6.0 $ 28.4 $ 17.9
Corporate Expenses (16.6) (4.6) (43.0) (18.2)
Pre-tax Operating
 Income Before Interest
 and Amortization (10.2) 1.4 (14.6) (0.3)
Pre-tax Net Realized
 Investment Losses (2.4) (1.5) (1.0) (3.3)
Pre-tax Income (Loss)
 Before Interest and
 Amortization $ (12.6) $ (0.1) $ (15.6) $ (3.6)

 Quarterly Earnings Release

 Three Months Ended Twelve Months Ended
 Dec. 31, Dec. 31,
Dollars in millions,
except per share data 1995 1994 1995 1994

Consolidated Income
Data & Per Share
Gross Premiums, Fees
 and Other Income $ 525.5 $ 499.3 $ 2,070.3 $ 1,908.9
Reinsurance Ceded (227.7) (208.2) (861.7) (785.9)
Net Investment
 Income 112.8 107.4 460.9 395.5
Net Realized
 Investment Gains
 (Losses) 8.7 (3.6) 0.8 (6.0)
Change in Trading
 Portfolio Unrealized
 Gain (Loss) 0.1 -- 0.7 (6.8)
 Total Revenues 419.4 394.9 1,671.0 1,505.7
Gross Benefits and Other
 Expenses (679.9) (585.8) (2,513.0) (2,154.9)
Reinsurance Ceded 236.5 206.0 868.8 777.8
 Pre-tax income
 Before Interest
 and Amortization (24.0) 15.1 26.8 128.6
Amortization of
 Purchased Intangibles (1.8) (2.1) (6.2) (7.7)
Interest Expense (2.0) (1.6) (8.4) (6.1)
 Pre-tax Income (27.8) 11.4 12.2 114.8
Income Tax Benefit
 (Expense) 9.4 (1.8) (5.7) (38.5)
Cumulative Effect of
 Accounting Change -- -- -- (0.5)
Preferred Stock
 Dividends (0.4) (0.4) (1.4) (1.4)
 Net Income Applicable
 to Common Stock $ (18.8) $ 9.2 $ 5.1 $ 74.4

Balance Sheet Dec. 31, Dec, 31
------------- 1995 1994
 Securities $ 584 $ 3,057
 Securities 3,812 1,078
Trading Account
 Securities 6 11
Mortgage Loans,
 Commercial 1,107 1,069
Mortgage Loans,
 Residential 400 253
Real Estate Owned 12 10
Equity Securities 83 110
Cash & Short Term
 Investments 106 63
Reinsurance Receivables
 & Investment Deposits
 Recoverable 970 558
Other Assets 616 753
 Total Assets $ 7,696 $ 6,962

Group Claim Reserves $ 282 $ 249
Other Reserves and
 Liabilities 6,811 6,161
Total Debt 107 125
Redeemable Securities 19 20
Stockholders' Equity 477 407
Book Value per Share,
 including effects of
 SFAS No. 115 19.05 16.19
Book Value per Share,
 excluding effects of
 SFAS No. 115 16.99 16.96
Outstanding Shares
 (000's omitted) 25,249 25,323

CONTACT: John Alden Financial Corp., Miami

Mark Schoder, 305/715-3767
COPYRIGHT 1996 Business Wire
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Publication:Business Wire
Date:Mar 7, 1996
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