Server: Netscape-FastTrack/2.0 Date: Thu, 18 Dec 1997 10:00:56 GMT Accept-ranges: bytes Last-modified: Wed, 17 Dec 1997 20:14:31 GMT Content-length: 11543 Content-type: text/html Liberty Financial Press Release









Liberty Financial Reports Second Quarter Financial Results

Six-month net operating income of $1.77 per share, up 17.2 % over last year

BOSTON, July 29, 1997 - Liberty Financial Companies, Inc. (NYSE: L) today reported its financial results for the second quarter of 1997.

For the quarter ended June 30, 1997, net operating income was a record $27.8 million or $0.90 per share, compared to $24.0 million or $0.80 per share for the same period in 1996. For the first six months of the year, net operating income was $54.5 million or $1.77 per share, compared to $44.9 million, or $1.51 per share for the same period in 1996. Net operating income excludes net realized investment gains or losses.

Assets under management totaled a record $50.0 billion, up from $44.7 billion at the end of the second quarter of 1996. Book value on June 30, 1997 was $38.42 per share, compared to $33.85 at the end of the same period a year ago.

"Liberty Financial made progress on all major fronts during the second quarter," said Kenneth R. Leibler, President and Chief Executive Officer. "We set records during the quarter for profits, book value and assets under management. Our increase in earnings primarily came from the growth and improved profitability of our annuity business. Additionally, our asset management business benefited from rising stock and bond prices.

"We also announced during the quarter that we would conduct a secondary offering of 2.5 million shares of Liberty Financial common stock," Mr. Leibler said. "Liberty Financial and Liberty Mutual Insurance Company, our majority shareholder, conducted the secondary offering in order to increase the public float and liquidity of our stock and to expand the research coverage of Liberty Financial."

The 2.5 million shares were sold on July 17 at $52.50 a share.

Net income for the second quarter was $30.0 million or $0.97 per share, compared to $23.1 million or $0.77 per share for the same period one year ago. Net income for the first six months of 1997 was $65.0 million, or $2.11 per share, compared with $46.9 million and $1.58 per share for the same period a year ago. Net income reflects realized investment gains and losses.

Quarterly highlights

"We took a number of steps to strengthen Liberty Financial and to broaden its reach during the quarter," Mr. Leibler said. "We introduced a number of new annuity and mutual fund products, and we launched a number of new initiatives to expand our sales, marketing and distribution capabilities."

In order to expand distribution through intermediaries, both Keyport and Colonial are increasing and reorganizing their wholesaler forces. Keyport plans to double its number of wholesalers by year end, and Colonial has added wholesalers and other resources to increase and support sales from broker-dealers, banks and financial planners.

Stein Roe has launched a new series of funds for sale by intermediaries. The Stein Roe Advisor Funds will use both Stein Roe's and Colonial's distribution capabilities. Distribution initially will be focused on the rapidly growing fee-based financial planner channel.

"Integration is a key element of our strategy," said Mr. Leibler. "We are always looking for ways to use one company's strengths to assist other companies. Colonial's distribution network should provide a strong platform to assist Stein Roe in launching these new funds."

Independent Financial Marketing Group, one of the industry's leading marketers of investment products and services to financial institutions, recently signed an agreement to market and sell annuities to Quick & Reilly's discount brokerage clients.

"This marks a broadening of the client universe for Independent Financial," Mr. Leibler said. "Independent Financial, which we acquired in March of 1996, has done an excellent job for us. The company has steadily increased sales, and their sales of Liberty products were 17 percent higher than in the first quarter."

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, variable and indexed annuities.

Keyport's book of business consists primarily of single premium fixed and indexed annuities and a $2.0 billion closed block of single premium whole life policies. On June 30, 1997, Keyport's fixed and indexed annuity policyholder balances totaled $9.9 billion, compared to $8.4 billion on June 30, 1996. Keyport is rated A+ (Superior) by A.M. Best and AA- (Excellent) by Standard & Poor's.

Keyport Life has continued to maintain a high-quality investment portfolio, with average credit quality of A+ and an effective duration of approximately 2.8 years, one of the shortest durations in the annuity industry. More than 92 percent of the portfolio's investments are investment grade.

Substantially all of Keyport's net operating income is generated from investment spread, which is the excess of the investment earnings of Keyport's investment portfolio over interest credited to policyholders. For the second quarter of 1997, Keyport's average portfolio yield was 6.97 percent, and the average interest credited to policyholders was 4.99 percent, producing an investment spread percentage of 1.98. For the same period in 1996, Keyport's investment spread percentage was 1.90.

Annuity sales in the quarter ended June 30, 1997 totaled $327 million, 47 percent higher than the previous quarter's $222 million. Keyport had $288 million in sales of fixed and indexed annuities, up from $191 million in the previous quarter, while variable annuity sales totaled $39 million, compared with $31 million for the first quarter of this year.

Keyport introduced the Premier 5 Annuity, a new fixed annuity product, during the second quarter. The product, which has a five-year interest rate guarantee, is designed for the Master General Agent channel. Keyport has built a strong network of relationships with Master General Agents over the past year, and the new product is designed to strengthen those relationships.

Asset Management Overview

Asset management businesses earn fees for managing and administering the assets of retail and institutional investors. Liberty Financial's products and services include open-end mutual funds, closed-end funds, wealth management, and institutional asset management. Liberty Financial's asset management business is conducted through The Colonial Group, Stein Roe & Farnham, Newport Pacific Management and Liberty Asset Management.

Mutual fund assets under management totaled $26.5 billion at the end of the second quarter, compared to $24.6 billion at the same point a year ago. Equity fund assets accounted for 50 percent of mutual fund assets at June 30, up from 44 percent a year ago.

The Stein Roe Growth Opportunities Fund, which Stein Roe introduced through a subscription period in May, had more than $40 million under management after its first two weeks of operation, making it one of the most successful fund launches in Stein Roe's history. Mutual Fund OneSource, Charles Schwab's mutual fund supermarket, teamed up with Stein Roe for cooperative marketing of this offering.

"We are continually seeking out new alliances that strengthen Liberty Financial and its operating companies," Mr. Leibler said. "Our cooperative marketing campaign, which marks the first time Charles Schwab & Co. has made a new fund available to its entire OneSource customer base, is an excellent example of that type of alliance."

The innovative Stein Roe Young Investor Fund also earned a coveted five-star rating from Morningstar, the independent evaluator of mutual funds. Young Investor, which now has more than $400 million in assets and is the only mutual fund that helps educate youngsters and their parents about investing, celebrated its third birthday April 29, which qualified it to receive a Morningstar rating.

Colonial and Newport Pacific launched the Newport Greater China Fund in June to focus on the growth potential of the Chinese economy as China assimilates Hong Kong. The fund will concentrate on investment opportunities in Hong Kong, Taiwan and mainland China. The fund was launched through a subscription rights offering which allowed shareholders of certain other Liberty Financial sponsored funds to purchase shares of the fund at net asset value. The rights offering, which was managed by a group of major national brokerage firms, was completed in July with over $120 million in subscriptions.

"The handover of Hong Kong to mainland China on July 1 is causing more and more investors to focus their attention on this developing area," said Mr. Leibler. "We feel Newport Pacific, with its proven track record in Asian investing, is ideally suited to offer a fund that will seek investment opportunities in this fast-growing region."

Company Overview

Liberty Financial Companies is an integrated asset accumulation and management organization. It manages over $50 billion of assets on behalf of 1.5 million investors worldwide through an array of fixed, indexed and variable annuities, private and institutional accounts, and 74 mutual funds. Its operating companies include Keyport Life Insurance Company, The Colonial Group, Inc., Stein Roe & Farnham Incorporated, Newport Pacific Management, Inc., Independent Financial Marketing Group, Inc., and Liberty Asset Management Company.

(Financial information is available upon request)

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For more information, please contact William Rice at (617)371-2357 or Email
wrice@lib.com


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