AmerUs Group Reports 86% Increase in First Quarter Results; Net Income

    Business Editors

    DES MOINES, Iowa--(BUSINESS WIRE)--April 26, 2005--AmerUs Group Co. (NYSE:AMH), a leading producer of life insurance and annuity products, today reported first quarter 2005 net income of $61.5 million, or $1.43 per diluted share, compared with $33.1 million, or $0.82 per diluted share in the first quarter of 2004. Adjusted net operating income for the first quarter of 2005 was $46.7 million, or $1.09 per diluted share, compared with $40.2 million, or $0.99 per diluted share a year ago.(1)
    Commenting on the company's first quarter results, chairman and chief executive officer Roger K. Brooks said, "We are very pleased with the 86 percent increase in net income and the 16 percent increase in operating income as they reflect the strong results achieved from our focus on competitive, profitable products that meet our customers' needs."
    The primary item causing the favorable difference between net income and adjusted net operating income was the release of a $19.9 million tax provision originally established for potential tax adjustments that have been settled or eliminated.

    Accumulation Product Sales(2) and Results

    Sales of fixed annuity products for the quarter increased 51 percent to $572 million compared to $379 million in the first quarter of 2004. Sales of indexed annuities, AmerUs Group's most profitable annuity product, comprised 88 percent of first quarter sales compared to 78 percent a year ago. AmerUs Group continued its leadership position in the indexed annuity market, remaining among the top five writers of indexed annuities in the United States for the 15th consecutive quarter. The company plans to generate total fixed annuity sales in excess of $2.2 billion in 2005, with indexed annuity products representing 85 percent of those sales.
    Pre-tax segment earnings grew to $40.7 million for the first quarter of 2005, a 10 percent increase over first quarter 2004 results.

    Protection Product Sales(2) and Results

    First quarter fixed life sales were $26.1 million, compared to $31.8 million in the first quarter of 2004. Sales of indexed products, AmerUs Group's most profitable products, amounted to 69 percent of total fixed life sales during the first quarter of 2005 compared to 54 percent a year ago. AmerUs Group remains the number one writer of indexed life insurance products in the United States for the 15th consecutive quarter. Life insurance margins continue to expand as the company's business mix continues to shift to higher margin products.
    Pre-tax segment earnings increased nearly 33 percent to $44 million compared to $33.1 million in the first quarter of 2004.

    Net Investment Income

    Net investment income was $269 million in the first quarter of 2005 compared to $257 million in the first quarter of 2004. Growth in invested assets and higher yields on new investments contributed to the increase in net investment income. The average rate on new investments in the first quarter was 5.53 percent, 21 basis points higher than a year ago. The portfolio earned rate for the first quarter was 5.68 percent.

    Earnings Guidance(3)

    "Our strong business fundamentals, competitive, profitable products and investment management results are key contributors to our excellent first quarter results, and I am pleased to reaffirm our 2005 adjusted net operating income guidance of $4.45 to $4.57 per diluted share," said Brooks.

    Corporate Actions

    At the end of the first quarter of 2005, the company repurchased 414,000 shares of its common stock.
    The company will hold its annual meeting of shareholders at 2 p.m. (CDT) on Thursday, April 28, 2005, in Des Moines, Iowa. Shareholders of record who wish to attend the annual meeting should contact the company's corporate secretary at (515) 362-3695 for more information.

    Webcast, Conference Call, Audio Replay and Additional Financial Information

    Interested parties may listen to a webcast or conference call with AmerUs Group's management discussing first quarter 2005 results. The webcast may be accessed through AmerUs Group's website at www.amerus.com under the "For Investors" section of the home page. The conference call may be accessed by calling (toll free) 888-809-8965 (international 712-257-2022) at 10 a.m. EDT on Wednesday, April 27, 2005. An audio replay of AmerUs Group's call will be available at 12 p.m. EDT, April 27, 2005, through May 6, 2005. The replay can be accessed by dialing 800-756-0409 (international 402-998-0763).
    Further detailed financial information, including operating segment income, investment composition, operating expenses 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 department.

    Caution Regarding Forward-Looking Statements

    This press release contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Additionally, forward-looking statements are subject to assumptions, risks and uncertainties. Statements such as "expect," "anticipate," "believe," "goal," "objective," "target," "may," "should," "estimate," "projects," or similar words as well as specific projections of future results qualify as forward-looking statements. Factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements can be found in the company's 10-K, filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statement was made and AmerUs Group undertakes no obligation to update such forward-looking statements. There can be no assurance that other factors not currently anticipated by the company will not materially and adversely affect our results of operations. Investors are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf.
    AmerUs Group Co. is located in Des Moines, Iowa, and is engaged through its subsidiaries in the business of marketing individual life insurance and annuity products in the United States. Its major subsidiaries include: AmerUs Life Insurance Company, American Investors Life Insurance Company, Inc., Bankers Life Insurance Company of New York and Indianapolis Life Insurance Company.
    As of March 31, 2005, AmerUs Group's total assets were $23.5 billion and shareholders' equity totaled $1.6 billion, including accumulated other comprehensive income.

    (1) The company views adjusted net operating income, a non-GAAP financial measure, as an important indicator of financial performance. When presented with net income, the combined presentation can enhance an investor's understanding of AmerUs Group's underlying profitability and normalized results from operations. The definition of adjusted net operating earnings, as presented in this press release, excludes, on an after-tax basis, from net income items such as open block realized gains and losses, deferred policy acquisition costs associated with open block realized gains and losses, non-insurance operations, the impact of derivative related market value adjustments, the release of income tax provisions, discontinued operations and the cumulative effect of change in accounting. Non-GAAP measures are also used for goal setting, determining employee and management compensation and evaluating our performance on a basis comparable to that used by security analysts. A reconciliation of net income to adjusted net operating income has been included as part of this press release.

    (2) Sales for an insurance company are a performance measure. Sales are presented in accordance with industry practice and represent the amount of new business sold during the period. We believe sales are a measure of the productivity of our distribution networks. Sales are also a leading indicator of future revenue trends. However, revenues are driven by prior period sales as well as current period sales.

    (3) Adjusted net operating income per share is a non-GAAP financial measure. Due to the unpredictability of the timing and recognition of gains and losses, especially items such as credit impairments, trading gains and losses, derivative related market value adjustments as well as the unpredictable nature of certain other items that management believes are not indicative of ongoing operational performance, guidance on GAAP net income cannot readily be estimated. Accordingly, the company is unable to provide guidance with respect to, or a reconciliation of guidance on, adjusted net operating income per share to GAAP net income per share.

AMERUS GROUP CO. ADJUSTED NET OPERATING INCOME ($ in thousands, except share data)

Adjusted net operating income reflects net income adjusted to eliminate certain items, such as open block realized/unrealized gains and losses; DAC and VOBA associated with the open block realized/unrealized gains and losses; non-insurance operations; derivative related market value adjustments; the release of income tax provisions; discontinued operations and the cumulative effect of change in accounting. Adjusted net operating income shown below does not constitute our net income computed in accordance with GAAP. The adjustments are presented net of income taxes.

For The Three Months Ended March 31, 2005 2004 --------------------------

Net Income $61,488 $33,129

Realized/unrealized (gains) losses on open block assets (A) (70) 16,088

Net amortization of DAC and VOBA due to open block gains or losses (B) (195) 910

Net effect of derivative related market value adjustments (C) 5,201 (1,482)

Other (income) loss from non-insurance operations (D) 226 119

Income tax items (E) (19,927) (5,182)

Income from discontinued operations (F) - (3,899)

Cumulative effect of change in accounting (G) - 510

------------------------- Adjusted Net Operating Income $46,723 $40,193 =========================

Adjusted Net Operating Income per common share: Basic $1.18 $1.02 ========================= Diluted $1.09 $0.99 =========================

Weighted average common shares outstanding: Basic 39,575,696 39,263,367 ========================= Diluted 42,930,905 40,434,902 =========================

AMERUS GROUP CO. NOTES TO ADJUSTED NET OPERATING INCOME

(A) Represents total open block realized/unrealized gains or losses on assets. Open block 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. The first quarter of 2004 includes a $7.9 million loss on the Indianapolis Life office building, which was an asset classified as held for sale and carried at fair value. The office building was sold in the third quarter of 2004.

(B) Represents amortization of deferred acquisition costs (DAC) and value of business acquired (VOBA) on the open block realized gains and losses that are included in our product margins.

(C) Represents the net effect of derivative related market value adjustments. The accounting entries consist of cash flow hedge amortization; market value adjustments on trading securities, derivatives, and indexed contracts; and the associated change in amortization of DAC and VOBA resulting from such adjustments.

(D) Represents the net income from our property operations which is not part of our insurance operations.

(E) Represents a reduction in the income tax accrual for the release of provisions originally established for potential tax adjustments which have been settled or eliminated.

(F) Represents the net income from our discontinued operations.

(G) Represents the cumulative effect of change in accounting, net of income taxes, as of January 1, 2004, resulting from the Company's adoption of SOP 03-1.

AMERUS GROUP CO. CONSOLIDATED STATEMENTS OF INCOME ($ in thousands, except share data)

For The Three Months Ended March 31, 2005 2004 -----------------------

Revenues: Insurance premiums $62,546 $70,737 Product charges 59,033 49,562 Net investment income 268,711 256,875 Realized/unrealized capital losses (48,944) (85) Other income 12,556 11,702 -----------------------

353,902 388,791 -----------------------

Benefits and expenses: Policyowner benefits 169,583 238,429 Underwriting, acquisition and other expenses 40,608 32,700 Amortization of deferred policy acquisition costs and value of business acquired 52,743 47,911 Dividends to policyowners 20,003 25,484 -----------------------

282,937 344,524 -----------------------

Income from continuing operations 70,965 44,267

Interest expense 7,780 8,398 -----------------------

Income before income tax expense 63,185 35,869

Income tax expense 1,697 6,129 -----------------------

Net income from continuing operations 61,488 29,740

Income from discontinued operations, net of tax - 3,899 -----------------------

Net income before cumulative effect of change in accounting 61,488 33,639

Cumulative effect of change in accounting, net of tax - (510) -----------------------

Net income $61,488 $33,129 =======================

Net income from continuing operations per common share: Basic $1.55 $0.76 ======================= Diluted $1.43 $0.74 =======================

Net income per common share: Basic $1.55 $0.84 ======================= Diluted $1.43 $0.82 =======================

Weighted average common shares outstanding: Basic 39,575,696 39,263,367 ======================= Diluted 42,930,905 40,434,902 =======================

AMERUS GROUP CO. CONSOLIDATED BALANCE SHEETS ($ in thousands)

March 31, December 31, 2005 2004 -------------------------

Assets Investments: Securities available-for-sale at fair value: Fixed maturity securities $15,740,652 $15,646,653 Equity securities 76,438 77,024 Short-term investments 2,927 2,979 Securities held for trading purposes: Fixed maturity securities 1,602,262 1,718,125 Equity securities 534 15,468 Mortgage loans 874,650 865,733 Policy loans 487,915 486,071 Other investments 367,231 374,240 -------------------------

Total investments 19,152,609 19,186,293

Cash and cash equivalents 572,185 478,441 Accrued investment income 227,182 222,294 Premiums, fees and other receivables 38,363 39,688 Income taxes receivable 3,473 - Reinsurance receivables 680,488 666,493 Deferred policy acquisition costs 1,446,716 1,248,009 Deferred sales inducements 168,630 137,538 Value of business acquired 369,232 374,792 Goodwill 228,869 226,291 Property and equipment 45,777 46,114 Other assets 302,819 296,409 Separate account assets 233,533 248,507 -------------------------

Total assets $23,469,876 $23,170,869 =========================

AMERUS GROUP CO. CONSOLIDATED BALANCE SHEETS ($ in thousands)

March 31, December 31, 2005 2004 --------------------------

Liabilities and Stockholders' Equity Liabilities: Policy reserves and policyowner funds: Future life and annuity policy benefits $18,239,450 $17,923,329 Policyowner funds 1,443,814 1,419,762 -------------------------- 19,683,264 19,343,091

Accrued expenses and other liabilities 965,390 837,514 Dividends payable to policyowners 287,415 322,037 Policy and contract claims 69,149 70,465 Income taxes payable - 9,299 Deferred income taxes 68,666 145,332 Notes payable 571,385 571,155 Separate account liabilities 233,533 248,507 --------------------------

Total liabilities 21,878,802 21,547,400

Stockholders' equity: Preferred Stock, no par value, 20,000,000 shares authorized, none issued - - Common Stock, no par value, 230,000,000 shares authorized; 44,529,858 shares issued and 39,162,518 shares outstanding in 2005; 44,225,902 shares issued and 39,400,663 shares outstanding in 2004 44,530 44,226 Additional paid-in capital 1,204,360 1,198,379 Accumulated other comprehensive income 34,546 114,670 Unearned compensation (2,700) (1,238) Retained earnings 493,399 431,911 Treasury stock, at cost (5,367,340 shares in 2005 and 4,825,239 shares in 2004) (183,061) (164,479) --------------------------

Total stockholders' equity 1,591,074 1,623,469 --------------------------

Total liabilities and stockholders' equity $23,469,876 $23,170,869 ==========================

AMERUS GROUP CO. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Three Months Ended March 31, 2005 and the Year Ended December 31, 2004 ($ in thousands)

Accumulated Additional Other Common Paid-In Comprehensive Unearned Stock Capital Income (Loss) Compensation -------- ----------- ------------- ------------

Balance at December 31, 2003 $43,836 $1,184,237 $84,519 $(1,361)

2004: Net income - - - - Net unrealized gain on securities - - 33,959 - Net unrealized gain on derivatives designated as cash flow hedges - - 420 - Stock issued under various incentive plans, net of forfeitures 390 14,142 - 123 Purchase of treasury stock - - - - Dividends declared on common stock - - - - Minimum pension liability adjustment - - (4,228) -

-------- ----------- ------------- ------------ Balance at December 31, 2004 44,226 1,198,379 114,670 (1,238)

2005: Net income - - - - Net unrealized loss on securities - - (80,018) - Net unrealized loss on derivatives designated as cash flow hedges - - (106) - Stock issued under various incentive plans, net of forfeitures 304 5,981 - (1,462) Purchase of treasury stock - - - -

-------- ----------- ------------- ------------ Balance at March 31, 2005 $44,530 $1,204,360 $34,546 $(2,700) ======== =========== ============= ============

Total Retained Treasury Stockholders' Earnings Stock Equity --------- ---------- --------------

Balance at December 31, 2003 $255,006 $(156,426) $1,409,811

2004: Net income 192,642 - 192,642 Net unrealized gain on securities - - 33,959 Net unrealized gain on derivatives designated as cash flow hedges - - 420 Stock issued under various incentive plans, net of forfeitures - 1,100 15,755 Purchase of treasury stock - (9,153) (9,153) Dividends declared on common stock (15,737) - (15,737) Minimum pension liability adjustment - - (4,228)

--------- ---------- -------------- Balance at December 31, 2004 431,911 (164,479) 1,623,469

2005: Net income 61,488 - 61,488 Net unrealized loss on securities - - (80,018) Net unrealized loss on derivatives designated as cash flow hedges - - (106) Stock issued under various incentive plans, net of forfeitures - 996 5,819 Purchase of treasury stock - (19,578) (19,578)

--------- ---------- -------------- Balance at March 31, 2005 $493,399 $(183,061) $1,591,074 ========= ========== ==============

--30--HB/ms*

CONTACT: AmerUs Group Co., Des Moines Investor Relations: Marty Ketelaar, 515-362-3693

KEYWORD: IOWA INDUSTRY KEYWORD: INSURANCE BANKING EARNINGS CONFERENCE CALLS SOURCE: AmerUs Group Co.

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