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Exhibit 99.1
ARM FINANCIAL GROUP, INC.
SUMMARY FINANCIAL INFORMATION
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Three Months Ended March 31,
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1998 1997
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EARNINGS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Segment Summary
Retail spread products $ 10,517 $ 8,726
Institutional spread products 4,182 1,345
Retail variable products 1,601 878
Corporate and other (1,415) (1,892)
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Pretax operating earnings (before preferred
stock dividends) 14,885 9,057
Federal income taxes on operations (3,691) (2,033)
Preferred stock dividends (1,188) (1,188)
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Operating earnings (a) 10,006 5,836
Pro forma adjustment for earnings on IPO proceeds (b) -- 1,140
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Pro forma operating earnings 10,006 6,976
Realized investment gains, net of tax 3,357 1,450
Non-recurring charges (3,570) (1,445)
Income from defined benefit pension plan
asset management operations -- 581
Eliminate pro forma adjustment -- (1,140)
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Net income applicable to common shareholders $ 9,793 $ 6,422
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Pro forma weighted average shares outstanding 24,352 23,798
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Pro forma operating earnings per share $ 0.41 $ 0.29
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Dividend rate per share $ 0.02 $ 0.02
Operating payout ratio 4.87% 6.87%
RETURNS ANALYSIS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Beginning common equity (excluding SFAS No. 115) $ 237,245 $ 128,273
Issuance of common stock through the IPO (pro forma) -- 78,813
Other changes (dividends, exercise of stock options) (307) --
Net income applicable to common shareholders 9,793 6,422
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Ending common equity (excluding SFAS No. 115) $ 246,731 $ 213,508
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Return on average common equity (pro forma) (c) 16.5% 13.3%
Book value per share (excluding SFAS No. 115) (diluted) $ 10.10 $ 8.96
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(a) Operating earnings is defined as net income applicable to common
shareholders, excluding, net of tax, realized investment gains and losses,
non-recurring charges and for 1997, income from defined benefit pension
plan asset management operations which were sold.
(b) The pro forma adjustment reflects investment income on the net proceeds of
the Company's June 1997 initial public offering ("IPO") of common stock
assuming it occurred on January 1, 1997.
(c) Annualized.
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ARM FINANCIAL GROUP, INC.
SUMMARY FINANCIAL INFORMATION (CONTINUED)
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Three Months Ended March 31,
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1998 1997
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SALES (IN MILLIONS)
RETAIL:
Spread products $ 38.0 $ 68.8
Variable products 83.5 36.3
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Total retail 121.5 105.1
INSTITUTIONAL:
Spread products 447.2 248.6
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Total sales $ 568.7 $ 353.7
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March 31, December 31,
BALANCE SHEET DATA (IN THOUSANDS) 1998 1997
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Total cash and investments $4,935,049 $4,467,477
Assets held in separate accounts:
Spread products (guaranteed) 1,292,589 1,266,796
Variable products (nonguaranteed) 1,345,118 1,173,088
Total assets 7,858,736 7,138,424
Customer deposits (general and separate
accounts) 7,265,518 6,657,974
Long-term debt 38,000 38,000
Total liabilities 7,561,179 6,830,879
Shareholders' equity:
Carrying amount 297,557 307,545
Excluding the effects of SFAS No. 115 296,731 287,245
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ARM FINANCIAL GROUP, INC.
RETAIL SPREAD PRODUCTS EARNINGS
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(Dollars in thousands)
Three Months Ended March 31,
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1998 1997
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NET INVESTMENT SPREAD
Investment income $ 55,508 $ 51,959
Interest credited (40,360) (36,879)
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Net investment spread 15,148 15,080
OTHER INCOME AND EXPENSES
Surrender fees 836 569
Commissions (3,455) (4,281)
Operating expenses (2,564) (2,778)
Deferrals of policy acquisition costs
(commissions and operating expenses) 3,487 4,209
Amortization:
Deferred policy acquisition costs (943) (836)
Value of insurance in force (1,531) (2,241)
Other expenses, net (461) (996)
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Total other income and expenses (4,631) (6,354)
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Pretax operating earnings $ 10,517 $ 8,726
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CUSTOMER DEPOSITS
Beginning balance $ 2,820,518 2,620,004
Premiums and annuity considerations (a) 48,001 71,739
Surrenders (a) (60,758) (66,402)
Benefits (25,327) (21,904)
Policy charges (63) (31)
Interest credited 40,360 36,683
Other changes (primarily interfund transfers) (7,326) 5,683
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Ending balance $ 2,815,405 $ 2,645,772
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Increase (decrease) in customer deposits $ (5,113) $ 25,768
Average customer deposits $ 2,817,846 $ 2,632,888
SPREAD ANALYSIS
Investment income/Average customer deposits (b) 7.88% 7.89%
Interest credited/Average customer deposits (c) (5.81%) (5.68%)
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Calculated spread 2.07% 2.21%
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(a) Include internal exchanges and rollovers.
(b) Annualized based on the number of months in the quarter.
(c) Annualized based on the remaining days of the year.
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ARM FINANCIAL GROUP, INC.
INSTITUTIONAL SPREAD PRODUCTS EARNINGS
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(Dollars in thousands )
Three Months Ended March 31,
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1998 1997
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NET INVESTMENT SPREAD
Investment income $ 46,966 $ 16,036
Interest credited (41,320) (14,098)
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Net investment spread 5,646 1,938
OTHER INCOME AND EXPENSES
Operating expenses (1,388) (500)
Other expenses, net (76) (93)
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Total other income and expenses (1,464) (593)
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Pretax operating insurance in force $ 4,182 $ 1,345
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CUSTOMER DEPOSITS
Beginning balance $ 2,542,350 $ 891,935
Premiums 447,246 248,560
Interest credited 41,320 14,098
Surrenders (5,000) --
Interest paid (36,288) (13,244)
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Ending balance $ 2,989,628 $ 1,141,349
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Increase in customer deposits $ 447,278 $ 249,414
Average customer deposits (daily) $ 2,804,178 $ 999,502
SPREAD ANALYSIS
Investment income/Average customer deposits (a) 6.70% 6.42%
Interest credited/Average customer deposits (b) (5.98%) (5.72%)
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Calculated spread 0.72% 0.70%
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(a) Annualized based on the number of months in the quarter.
(b) Annualized based on the number of days in the quarter.
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ARM FINANCIAL GROUP, INC.
RETAIL VARIABLE PRODUCTS EARNINGS
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(Dollars in thousands)
Three Months Ended March 31,
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1998 1997
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VARIABLE ANNUITY FEES $ 4,426 $ 3,239
OTHER INCOME AND EXPENSES
Surrender fees 498 313
Commissions (5,089) (2,600)
Operating expenses (1,332) (689)
Deferrals of policy acquisition costs
(commissions and operating expenses) 5,712 2,838
Amortization of deferred policy acquisition costs (1,781) (1,339)
Other expenses, net (833) (884)
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Total other income and expenses (2,825) (2,361)
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Pretax operating earnings $ 1,601 $ 878
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CUSTOMER DEPOSITS
Beginning balance $ 1,129,064 $ 839,512
Premiums and annuity considerations (*) 72,044 37,619
Surrenders (21,549) (13,475)
Benefits (2,176) (2,467)
Policy charges (4,076) (2,972)
Investment performance 117,675 (1,831)
Other changes (primarily interfund transfers) 11,078 (128)
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Ending balance $ 1,302,060 $ 856,258
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Increase in customer deposits $ 172,996 $ 16,746
Average customer deposits $ 1,197,450 $ 847,885
(*) Premiums and annuity considerations include internal exchanges and
rollovers.
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ARM FINANCIAL GROUP, INC.
CORPORATE AND OTHER EARNINGS
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(In thousands)
Three Months Ended March 31,
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1998 1997
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NET INVESTMENT SPREAD AND FEE INCOME
Earnings on insurance subsidiaries surplus and
holding company cash and investments $ 1,932 $ 1,585
Marketing partnership fee income 113 103
Broker-dealer fee income 119 155
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Total net investment spread and fee income 2,164 1,843
EXPENSES
Interest expense (617) (686)
Amortization:
Acquisition-related deferred charges (126) (126)
Goodwill (94) (122)
Commissions -- --
Operating expenses (3,519) (3,389)
Other income 777 578
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Total other income and expenses (3,579) (3,745)
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Pretax operating earnings (loss) $(1,415) $(1,902)
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