Liberty Financial reports earnings

Business Wire, April 29, 1997

BOSTON--(BUSINESS WIRE)--April 29, 1997--

Liberty Financial Reports First Quarter Financial Results; Operating

income of $0.87 per share, up 11.5 % over last year

Liberty Financial Companies, Inc. (NYSE: L) today reported its financial results for the first quarter of 1997.

For the quarter ended March 31, 1997, operating income was a record $26.7 million or $0.87 per share, compared to $23.0 million or $0.78 per share for the same period in 1996, for an 11.5 percent increase on a per share basis. Operating income excludes net realized investment gains or losses and certain non-operating items. Net income for the first quarter was $35.0 million or $1.14 per share, compared to $23.8 million or $0.81 per share for the same period one year ago. Book value on March 31, 1997 was $36.08 per share, compared to $33.78 on the same date a year earlier, and assets under management totaled $47.0 billion, up from $43.3 billion at the end of the first quarter of 1996.

"Our record results for the first quarter of 1997 are all the more noteworthy when considered against the backdrop of volatility in the stock and bond markets during this period," said Kenneth R. Leibler, President and Chief Executive Officer of Liberty Financial Companies. "While sales of our equity mutual funds were down, as were those of many mutual fund companies during the quarter, we saw a rise in sales of our annuity and wealth management businesses from the same period one year ago. We have worked hard in recent years to build a company that is highly diversified to withstand the inevitable ups and downs of individual markets.

"Our diversification is also helping us maintain our earnings momentum," Mr. Leibler said. "Last year, our asset management business accounted for much of our earnings growth. In the first quarter of 1997, our annuity business accounted for most of the increase in earnings."

Annuity business overview

Liberty Financial's annuity business is conducted by Keyport Life Insurance Company. In this business, the Company raises assets through the sale of annuity products and, through the management of those assets, earns a profit on the excess of the returns earned on the assets over the returns credited to policyholders. Keyport's products include fixed, indexed and variable annuities distributed through brokerage firms, banks, financial planners, and insurance agents. Keyport is rated A (Superior) by A.M. Best and AA- (Excellent) by Standard & Poor's.

Keyport's book of business consists primarily of single premium deferred annuities and a $2 billion closed block of single premium whole life policies. On March 31, 1997, Keyport's core fixed and indexed annuity policyholder balances totaled $9.7 billion, a 19.7 percent increase over $8.1 billion on March 31, 1996. The increase in policyholder balances is attributable to new sales and the acquisition of a block of annuities from F&G Life in August 1996.

Keyport Life has continued to maintain a high-quality investment portfolio, with average credit quality of A and an effective duration of approximately 2.75 years, one of the shortest durations in the annuity industry. Over 92 percent of the portfolio's investments are investment grade.

Substantially all of Keyport's operating income is generated from investment spread, which is the excess of the investment earnings of Keyport's portfolio over interest credited to policyholders. For the first three months of 1997, Keyport's average portfolio yield was 6.94 percent, and the average interest credited to policyholders was 5.04 percent, producing an investment spread of 190 basis points. For the same period in 1996, Keyport's investment spread was 182 basis points.

Annuity sales in the quarter ended March 31, 1997 totaled $222 million, compared with $215 million in the first quarter of 1996.

During the quarter Keyport introduced a number of new annuity products. Its new variable annuity product, Keyport Advisor, has been well received by distributors.

"We have long been a leader in the fixed annuity market but we need to improve our position in the variable annuity market," said Mr. Leibler. "Our new product, combined with a more focused marketing effort, is helping us meet that objective. Our variable annuity sales during the quarter were up more than 35 percent over the same period one year ago."

In response to customer demand, several new versions of KeyIndex, the Company's innovative equity indexed annuity, were also launched in the first quarter.

"Keyport is also starting to benefit from our acquisition of Independent Financial," continued Mr. Leibler. "Independent Financial has successfully introduced Keyport annuity products into a number of their bank marketing programs and sales are beginning to accelerate."

Independent Financial Marketing Group was acquired by Liberty Financial in March 1996. Over the past year, Liberty Financial has been consolidating its existing bank marketing business into Independent Financial. The consolidation was completed at the end of the first quarter.