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USLICO REPORTS ACCOUNTING CHARGES, DECLARES REDUCED CASH DIVIDEND

 ARLINGTON, Va., Jan. 25 /PRNewswire/ -- USLICO Corporation (NYSE: USC) announced today that it will take charges for various one-time, mostly non-cash items aggregating approximately $71.9 million, or $6.68 per share (net of tax). These charges will result in a loss for the fourth quarter of 1992 and the full year. Substantially all of these items only affect USLICO's financial statements prepared in accordance with generally accepted accounting principles (GAAP). Because only $6.9 million of the total charges affect the statutory financial statements of its insurance subsidiaries, management expects their insurance company ratings to be unaffected. USLICO also announced that its shareholder dividend to be paid in the first quarter of 1993 will be reduced from 25 cents per share to 6 cents per share.
 Daniel J. Callahan III, chairman, said that, "These actions are a result of the thorough review of the Company's strategy and operations that were undertaken by its new management team during the fourth quarter. This review has emphasized the company's markets, products, cost structure and profitability in order to establish the basis for the Company's new focus and direction and position the Company for future profitable growth." Callahan further stated that "management continues to carefully review strategic and capital alternatives and has been working with Merrill Lynch & Co. as its financial advisor."
 Charges (subject to audit) to be taken by the company are as follows (in millions):
 1. Adoption of new GAAP accounting standard
 for deferred income taxes $ 6.4
 2. Write-off of investment in discontinued
 property-casualty reinsurance subsidiary 10.0
 3. Write-off of goodwill associated with two
 former life insurance subsidiaries 20.6
 4. Reduction in deferred policy acquisition
 costs 22.5
 5. Miscellaneous reserve increases and other
 items 12.4
 Total (net of tax) $ 71.9
 The Company reported that its two life insurance subsidiaries, United Services Life Insurance Company and Bankers Security Life Insurance Society, continue to be strongly capitalized. Both companies carry A+ ratings of their claims-paying ability from Standard & Poor's Corporation. United Services is rated A-plus (Superior) by A.M. Best and Bankers Security is rated A-minus (Excellent). Both subsidiaries expect to report Risk-Based Capital ratios, a new capital adequacy standard recently adopted by the National Association of Insurance Commissioners, in excess of 200 percent as of Dec. 31, 1992.
 NEW ACCOUNTING STANDARDS. Retroactive to Jan. 1, 1992, the Company will adopt Financial Accounting Standards Board (FASB) Statement 109 to comply with new accounting standards for deferred income taxes. The cumulative effect of this change in accounting principles represents a charge of $6.4 million. Management believes the adoption of this new tax rule will have no effect on earnings for the first three quarters of 1992 as previously reported, other than recording the cumulative effect of the change as of Jan. 1. Additionally, USLICO reported that FASB Statement 106, which established new accounting standards for retiree benefits costs, will not affect USLICO's financial statements since the company's portion of the cost of post-retirement benefits is insignificant.
 FOURTH QUARTER CHARGES. Fourth quarter results will be adversely affected by the following charges:
 -- The company will write off its remaining investment in
 Northeastern Insurance Company of Hartford, which
 amounted to $15.1 million at Sept. 30, 1992 ($10.0
 million net of tax). Northeastern, a property-
 casualty reinsurer, has been a discontinued operation
 since 1986. Based on recent developments, actuarial
 estimates of the ultimate claim costs and length of
 the payout period for the run-off of Northeastern's
 long-tail, environmental and asbestosis claims have
 worsened. Insurance regulators have indicated an
 unwillingness to permit Northeastern to record its
 reserves at their current estimated discounted present
 value. If Northeastern's reserves are stated based on
 the ultimate projection, it will become statutorily
 insolvent. While USLICO believes that Northeastern
 has sufficient assets to meet its liabilities as they
 come due over time, USLICO has determined that it is
 probable that its investment in Northeastern will not
 be recoverable after taking into account uncertainties
 regarding future investment rates of return, loss
 payment patterns and possible regulatory action.
 USLICO does not intend to contribute additional
 capital to Northeastern or to guarantee any of
 Northeastern's obligations.
 -- The company will write off $20.6 million of
 unamortized goodwill related to the acquisitions of
 United Olympic Life Insurance Company and Provident
 Life Insurance Company, which were acquired in 1984
 and 1982, respectively. Both of these companies were
 merged into United Services Life Insurance Company,
 USLICO's primary insurance subsidiary, during the
 fourth quarter of 1992. In the opinion of management,
 the remaining goodwill has no continuing value due to
 the elimination of their separate insurance company
 charters and licenses and their independent status.
 -- The company will write off deferred policy acquisition
 costs resulting in a charge of approximately $22.5
 million (net of tax). Consistent with a new internal
 management structure instituted at the end of 1992, an
 increased number of separate product lines were used
 for recoverability testing and certain actuarial
 assumptions regarding future experience were modified
 to reflect the results of product profitability
 studies completed in the latter part of 1992. These
 changes resulted in amortization adjustments and non-
 recoverable deferred costs for certain product lines
 that are recognized for reporting purposes by a
 reduction in deferred acquisition costs.
 -- Other charges aggregating $12.4 million (net of tax)
 result primarily from the following: (a) increased
 reserves for participating life insurance business;
 (b) increased reserves for conversions from term
 policies to permanent insurance policies; (c) the
 establishment of a reserve for expected future
 assessments by state insurance guaranty funds; (d)
 increased reserves for litigation associated with
 terminated group health business; and (e) changes to
 the estimated useful lives used to amortize
 capitalized computer software.
 USLICO expects to report final full-year results for 1992 on March 1, following USLICO's regularly-scheduled first quarter board meeting on Feb. 26, 1993. Excluding the items discussed above, management expects earnings will be positive for the fourth quarter and the full year.
 SHAREHOLDER DIVIDEND. While all of the above charges affect USLICO Corporation's GAAP financial statements, only charges aggregating $6.9 million have an effect on the statutory statements of the company's two life insurance subsidiaries. USLICO Corporation receives its funding for dividends and other expenses primarily from these two subsidiaries, which are restricted by the statutory requirements of their domiciliary states as to the amount they may pay in dividends, loans or advances to affiliates. Moreover, recent statutory and GAAP results from operations do not support the current level of USLICO dividends. Accordingly, the board of directors voted to reduce USLICO's 25 cents per share quarterly dividend to 6 cents per share, which will be paid on March 15, 1993, to shareholders of record on March 5, 1993. The board and management believe that this action is necessary to meet the insurance subsidiaries' need to retain a strong capital base to support future business growth and to more closely align dividend payments with recent statutory and GAAP results from operations.
 BUSINESS PLANS. USLICO's recently completed business plans for 1993 emphasize the need to improve future statutory and GAAP earnings, while maintaining the subsidiaries' strong investment quality and capital adequacy. Based on the product profitability studies performed during 1992, products not meeting the company's new profitability objectives are systematically being eliminated. New products are being designed to meet the new targets. In-force business is being aggressively managed to improve gross margins.
 The operating expense budget for 1993 has been planned at a level 3 percent below 1992 expenses. Included within this reduced budget are increases totalling $2.4 million, or 4.6 percent of the total expense budget, for investments in such items as information systems technology, employee training, product development and financial analysis.
 Senior officers' salaries have been frozen at 1992 levels. No management bonuses were paid in 1992, and there will be no bonuses paid in 1993 for 1992 performance. Wage increases for all other personnel for 1993 have been limited to 3 percent in the aggregate.
 An insurance holding company, USLICO Corporation is headquartered in Arlington. Its life insurance subsidiaries focus on selected market niches, including U.S. military personnel, individual annuities and life insurance, and the payroll deduction market and have more than $50 billion of life insurance in force with assets over $3 billion.
 -0- 1/25/93
 /CONTACT: Daniel J. Callahan, III, chairman & chief executive officer, 703-875-3410, or Glenn H. Gettier Jr., executive vice president & chief financial officer, 703-875-3417, both of USLICO Corporation/
 (USC)


CO: USLICO Corporation ST: Virginia IN: INS SU: ACC DIV

KD -- DC030 -- 8744 01/25/93 16:58 EST
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Date:Jan 25, 1993
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