<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 27, 2000
ReliaStar Financial Corp.
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-10640 41-1620373
------------------------ ------------------------ -------------------
(State of Incorporation) (Commission file number) (I.R.S. Employer
Identification No.)
20 Washington Avenue South
Minneapolis, Minnesota 55401
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(612) 372-5432
-------------------------------
(Registrant's telephone number)
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<PAGE>
Item 5. Other Events
On April 27, 2000, ReliaStar Financial Corp. announced its earnings for the
three months ending March 31, 2000. A copy of the press release and letter to
the investment community which discuss these matters are filed as exhibits to,
and incorporated by reference in, this report.
Item 7. Financial Statements and Exhibits.
Exhibit
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99 (a) Press Release, dated April 27, 2000.
99 (b) Letter to the Investment Community, dated April 27, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RELIASTAR FINANCIAL CORP.
Date: April 28, 2000 By: /s/ Richard R. Crowl
---------------------------------------
Richard R. Crowl, Senior Vice President,
General Counsel, and Secretary
<PAGE>
EXHIBIT 99(A)
FINAL
For Immediate Release
Media Contact: Arlene Wheaton April 27, 2000
(612) 372-5784
Investor Contact: Karin E. Glasgow
(612) 342-3979
RELIASTAR ANNOUNCES FIRST QUARTER EARNINGS
------------------------------------------
MINNEAPOLIS - ReliaStar Financial Corp. (NYSE: RLR) announced today that
operating income per common share on a diluted basis was $.82 in the first
quarter, an increase of 17 percent from $.70 in the same period last year. This
exceeds analysts' consensus estimate of $.81 of operating income per share for
the first quarter.
Total operating income for the first quarter was $73.6 million, an increase
of 17 percent from $62.8 million in the first quarter of 1999.
Net income per common share on a diluted basis was also $.82 in the first
quarter, an increase of 15 percent from $.71 in the same period last year. Total
net income in the first quarter was $74.1 million, an increase of 15 percent
from $64.4 million in the first quarter of 1999.
"First quarter sales were strong and continue the momentum that we built in
1999," said John G. Turner, ReliaStar chairman and CEO. "Our earnings results
reflect a particularly strong performance by our mutual fund operation, a line
of business which is growing quickly and becoming an increasingly important
source of earnings for ReliaStar."
Revenue measures
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Total statutory premiums and deposits, and fee revenues for first quarter of
2000 were $1.2 billion, an increase of 20 percent from $974.8 million for the
first quarter of 1999. For the 12 months ended March 31, 2000, total statutory
premiums and deposits, and fee revenues were $4.4 billion, an increase of 19
percent from $3.7 billion for the 12 months ended March 31, 1999.
-more-
<PAGE>
RELIASTAR REPORTS FIRST QUARTER EARNINGS, pg 2 of 5
Operations
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Total insurance product sales for the first quarter were $585.4 million, an
increase of 13 percent from $519.5 million in the same period last year.
"In addition to very strong performance by our mutual fund operations, we
saw continued strong sales growth within the RLA and WFS segments with
individual life sales up 42 percent, individual annuity sales up 30 percent, and
group products sales up 28 percent," said Bob Salipante, ReliaStar president and
COO. "In the second quarter, we expect to gain further sales momentum as we
incorporate Pilgrim-managed funds into our variable products. This move will
create a ReliaStar cross-sell win and drive profitable growth by allowing the
company to manage a greater portion of the assets we gather."
During the first quarter of 2000, cross-selling efforts generated $267.5
million in enterprise sales, up 114 percent from $124.8 million in the first
quarter of 1999.
Sales of products sold through the company's ReliaStar Life and Annuity
(RLA) segment totaled $302.9 million in the first quarter of 2000, up 31 percent
from the same period last year. Sales of individual life insurance totaled $35.5
million in the first quarter, up 32 percent from first quarter 1999, reflecting
strong growth in sales of variable universal life (up 49 percent) and term life
insurance (up 77 percent). Sales of individual annuities in the first quarter
totaled $267.4 million, up 30 percent from the same period in 1999. Variable
annuity sales totaled $153.0 million, or 33 percent higher than first quarter
1999. Fixed annuity sales totaled $114.4 million in the first quarter of 2000,
or 27 percent higher than in the same period last year.
Operating income in the RLA segment was $48.1 million for the first quarter
2000, up 7 percent over the first quarter 1999. The RLA segment includes the
operations of individual life insurance, where earnings totaled $23.2 million in
the first quarter, up 27 percent from first quarter 1999, and the operations of
individual annuities, which totaled $24.9 million, down 7 percent from first
quarter 1999.
-more-
<PAGE>
RELIASTAR REPORTS FIRST QUARTER EARNINGS, pg 3 of 5
In the Worksite Financial Services (WFS) segment, which specializes in the
sales of group life, 401(k) plans and voluntary life insurance products at the
worksite, sales totaled $232.6 million for the first quarter, an increase of 13
percent over the first quarter of 1999. The increase in sales in 2000 reflects
strong growth in the sales of group non-medical health insurance (up 129
percent) and payroll deduction individual life insurance (up 105 percent).
WFS operating income in the first quarter totaled $15.6 million, an
increase of 5 percent over the same period in 1999. Results for the employee
benefits unit, which accounts for about two-thirds of the WFS segment, were 9
percent higher in the first quarter of 2000 than in the same period of 1999.
In the mutual funds segment, sales in the first quarter 2000 totaled $2.3
billion, compared with $211 million in the first quarter of 1999. On a
same-stores basis (including Pilgrim sales on a pro forma basis), mutual fund
sales in the first quarter of 1999 were $456 million. Mutual fund assets under
management rose from $4.1 billion at March 31, 1999, to $16.7 billion at March
31, 2000. The mutual fund operation contributed $6.6 million to operating
earnings in the first quarter of 2000, compared with $1.7 million in the first
quarter of 1999.
In the Reinsurance segment, sales for the first quarter were $49.9 million,
down 39 percent from the first quarter of 1999. The current environment is
difficult for this business, and the company has decided to maintain a high
level of underwriting discipline on both new and renewing business.
Operating income from the Reinsurance segment in the first quarter was $7.0
million, up 4 percent from first quarter 1999.
As of March 31, 2000, ReliaStar had $38.4 billion in assets under
management compared with $23.2 billion as of March 31, 1999. ReliaStar had 89.5
million common shares outstanding as of March 31, 2000.
-more-
<PAGE>
RELIASTAR REPORTS FIRST QUARTER EARNINGS, pg 4 of 5
Chairman's discussion of results
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An audio-recorded message with a discussion of ReliaStar's first quarter
results by John Turner, ReliaStar chairman and CEO, will be available at
approximately 4:00 p.m. EDT, April 27. To access this recorded message, dial
800-405-2236, passcode 708019#. This recording will be available through
Saturday, May 6.
Other developments
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Mutual fund company acquisition announced. On Feb. 29, 2000, ReliaStar
Financial announced that it has signed a definitive agreement to acquire
Lexington Global Asset Managers, a New Jersey-based asset management and mutual
fund company in a stock-and-cash transaction valued at $47.5 million. Lexington
has 13 mutual funds, including several international equity funds, and $3.6
billion in assets under management. The transaction is expected to close in July
2000.
New retail Web site launched. On April 15, 2000, ReliaStar launched a new
Web site called IHateFinancialPlanning.com. The site is designed to appeal to
millions of middle- to upper-income Internet users who understand that financial
planning is important, but who do not have a trusted financial advisor and have
not yet developed a financial plan. As the name suggests, the site uses humor to
attract and educate consumers on a broad array of financial planning topics.
Fulfillment options include referral to an independent financial professional or
direct purchase of investment products.
ReliaStar Financial Corp. is a Minneapolis-based holding company whose
subsidiaries offer individuals and institutions life insurance and annuities,
employee benefits products and services, retirement plans, life and health
reinsurance, mutual funds, and bank and trust products. ReliaStar Financial, a
Fortune 500 company, is the eighth largest publicly held life insurance holding
company in the United States based on 1999 revenues, and has $38.4 billion in
assets under management and its subsidiaries have life insurance in force of
$369.4 billion.
###
<PAGE>
RELIASTAR REPORTS FIRST QUARTER EARNINGS, pg 5 of 5
All statements contained in the report relative to markets for the Company's
products and trends in the Company's operations or financial results, as well as
other statements including words such as "anticipate," "believe," "expect," and
other similar expressions, constitute forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to known and unknown risks, uncertainties and other
factors that may cause actual results to be materially different from those
contemplated by the forward-looking statements. Such factors include, among
other things: general economic conditions and other factors, including
prevailing interest rate levels and stock market performance, which may affect
the Company's ability to sell its products, the market value of the Company's
investments and the lapse rate and profitability of the Company's policies; the
Company's ability to achieve anticipated levels of operating efficiencies;
mortality and morbidity; changes in federal income tax laws that may affect the
relative tax advantages of some of the Company's products; and regulatory
changes or actions, including those relating to regulation of financial services
affecting bank sales and underwriting of insurance products and regulation of
the sale, underwriting and pricing of insurance products.
<PAGE>
EXHIBIT 99(B)
April 27, 2000
To the Investment Community:
Operating income in the first quarter of 2000 totaled $73.6 million, up 17
percent from $62.8 million in the first quarter of 1999. On a diluted basis,
first quarter 2000 operating income per share was $0.82, or 17 percent higher
than the $0.70 earned in the first quarter of 1999. Operating earnings for the
first quarter of 2000 were slightly higher than the First Call analysts'
consensus estimate of $0.81 per share.
The first quarter of 2000 was characterized by very strong sales of life
insurance, individual annuities and mutual funds. Individual life insurance
sales in the first quarter of 2000 were up 42 percent and group insurance sales
were up 28 percent, compared with the first quarter of 1999. Individual annuity
sales in the first quarter were up 30 percent, over the same period in 1999,
reflecting growth of 33 percent in variable annuity sales and 27 percent in
fixed annuity sales. Mutual fund sales in the first quarter of 2000 reached $2.3
billion, compared with $211 million in the first quarter of 1999. Note that on a
`same stores' basis (including Pilgrim sales, on a pro forma basis), mutual fund
sales in the first quarter of 1999 were $456 million.
The Pilgrim acquisition, which closed in the fourth quarter of 1999, continues
to outperform, with sales and earnings exceeding our expectations. The strong
sales are translating into increased assets under management. Mutual fund assets
under management rose from $4.1 billion at March 31, 1999 to $16.7 billion at
March 31, 2000. Mutual fund operations contributed $6.6 million to operating
earnings in the first quarter, compared with $1.7 million in mutual fund
earnings in the first quarter of 1999.
During the first quarter of 2000, each of our other business segments also
reported growth in operating earnings from the first quarter of 1999, including
ReliaStar Life & Annuity, Worksite Financial Services, and Reinsurance.
<PAGE>
Financial Highlights Summary
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($ in millions, except
per-share data) Percent
1Q00 1Q99 Change
---------------------------------------
Operating income $73.6 $62.8 17
Net realized investment
gains (losses) 0.5 1.6
--------------------------
Net income $74.1 $64.4 15
==========================
Per diluted share:
Operating income $0.82 $0.70 17
Net realized investment
gains (losses) -- 0.01
--------------------------
Net income $0.82 $0.71 15
==========================
Operating income-based
return on equity 14.6% 15.1%
Return on equity, based on
operating income before
3Q99 reinsurance charge 15.7% 15.1%
Book value per common share $23.62 $21.38
Operating income
per diluted share before
amortization of goodwill $0.86 $0.72 19
Notes:
1) ROE calculatons are for the 12 months ended March 31 and exclude special
items and the accumulated other comprehensive income component of
shareholders' equity.
2) Book values per common share exclude the accumulated other comprehensive
income component of shareholders' equity.
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SALES RESULTS
In the first quarter of 2000, insurance product sales totaled $585.4 million, up
13 percent from the first quarter of 1999, reflecting strong sales growth in
individual life insurance, individual annuities, and group health insurance.
2
<PAGE>
Sales (Annualized New Premiums and Deposits)
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($ in millions)
Percent
1Q00 1Q99 Change
---------------------------------------
ReliaStar Life & Annuity:
Individual life insurance $ 35.5 $ 26.8 32%
Variable annuities 153.0 114.7 33
Fixed annuities 114.4 90.4 27
--------------------------
Total annuities 267.4 205.1 30
--------------------------
Total RLA 302.9 231.9 31
Worksite Financial Services:
Group life insurance 35.7 37.7 (5)
Group health insurance 28.2 12.3 129
401(k) plans 160.3 152.1 5
Individual life insurance 8.4 4.1 105
--------------------------
Total WFS 232.6 206.2 13
--------------------------
Total Life&Annuity and Worksite 535.5 438.1 22
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Reinsurance 49.9 81.4 (39)
Total insurance product sales $585.4 $519.5 13
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Pilgrim mutual funds $2,347.5 $211.3 1,011
Broker/dealer revenues $ 63.4 $ 36.7 73
Notes:
1) Beginning in 2Q99, individual life insurance sales include lump-sum deposits
reported on a weighted basis, for all periods presented.
2) Beginning in 1Q00, mutual fund sales include Pilgrim deposits received from
sales of proprietary individual variable products, for all periods presented.
- --------------------------------------------------------------------------------
Cross-selling efforts generated $267.5 million in enterprise sales for the first
quarter of 2000, up from $124.8 million in the first quarter of 1999.
o ReliaStar Life and Annuity sales totaled $302.9 million in the first
quarter of 2000, or 31 percent higher than in the first quarter of 1999.
With a wide offering of fixed and variable products, we are well positioned
to meet consumer needs in a variety of different interest rate and equity
market environments.
3
<PAGE>
Individual life insurance sales totaled $35.5 million in the first quarter of
2000, up 32 percent from the first quarter of 1999, reflecting strong growth in
sales of variable universal life (up 49 percent) and term life insurance (up 77
percent). Strong life insurance sales were partly a result of carryover from the
Triple X regulation, which boosted sales of some fixed life insurance products
at year-end. However, the count of new applications received in every week of
2000 has been higher than the application count in the corresponding week of
1999, signaling strength in sales across all life insurance product lines. By
distribution channel, the ReliaStar Life personal producing general agents'
(PPGAs) sales of individual life insurance were up 40 percent in the first
quarter of 2000, compared with the same period last year; and sales of
individual life insurance by the Security-Connecticut brokerage general agents
(BGAs) were up 43 percent.
Sales of individual annuities in the current quarter totaled $267.4 million, up
30 percent from the same period in 1999. Variable annuity sales totaled $153.0
million, or 33 percent higher than in the first quarter of 1999, reflecting
tremendous growth in VA sales by the registered reps of our broker/dealer
operations. Fixed annuity sales totaled $114.4 million in the first quarter of
2000, or 27 percent higher than in the same period last year, primarily as a
result of sharply increased selling activity in our brokerage annuity operation.
We expect that sales of individual variable annuities will benefit from the
addition of Pilgrim mutual funds to our variable account fund choices and the
introduction of a new VA product, which are both scheduled to occur in May of
2000.
o The Worksite Financial Services segment reported total sales of $232.6
million in the first quarter of 2000, up 13 percent from the first quarter
of 1999. The increase in 2000 reflected strong growth in sales of group
non-medical health insurance (up 129 percent) and payroll deduction
individual life insurance (up 105 percent).
o Reinsurance segment sales in the first quarter of 2000 were $49.9 million,
down 39 percent from the first quarter of 1999. The current environment is
difficult for this business and ReliaStar has chosen to maintain a high
level of underwriting discipline on both new and renewing business. As a
result, sales in the first quarter of 2000 were lower than expected.
o Mutual fund sales in the first quarter were $2.3 billion, up from $211
million in the first quarter of 1999, as a result of the acquisition of
Pilgrim. Sales of mutual
4
<PAGE>
funds were up from $456 million in the first quarter of 1999, including the
sales results of Pilgrim in both periods, on a pro forma basis. These
outstanding sales results reflect a strong equity market, the superior
track record of the Pilgrim funds' performance and the effectiveness of
Pilgrim's wholesaling efforts.
o Transactions conducted through the broker/dealer operations of Washington
Square Securities, Inc. (supporting our personal producing general agents)
and PRIMEVEST (our bank marketing operation) generated revenues of $63.4
million in the current quarter, up 73 percent from the first quarter of
1999. Through our various independent distribution channels, ReliaStar is
focused on gathering consumer assets. Building ReliaStar assets under
management through the accumulation of our registered reps' client assets
into ReliaStar products will be a key driver of future earnings growth.
Total client assets of the registered reps of our two broker/dealers
reached an estimated $20.4 billion at March 31, 2000, up 31 percent from
March 31, 1999.
[Sales results will fluctuate from quarter to quarter due to a variety of
factors, including volatility in market interest rates, the popularity of
equity-based investment products, and the incidence of large single employer or
single treaty sales in the group, 401(k), and reinsurance business lines. Sales
figures are reported on a `gross of retrocession' basis; ReliaStar uses
retrocession to cede a portion of the risk underwritten in most lines of its
insurance and reinsurance business.]
5
<PAGE>
Operating Earnings by Segment
- --------------------------------------------------------------------------------
($ in millions)
Percent
1Q00 1Q99 Change
---------------------------------------
RLA: Life insurance $23.2 $18.2 27%
RLA: Annuities 24.9 26.9 (7)
--------------------------
Total ReliaStar Life & Annuity 48.1 45.1 7
Worksite Financial Services 15.6 14.9 5
Reinsurance 7.0 6.7 4
Mutual Funds 6.6 1.7 288
Other Business Units 2.3 1.4 64
Corporate (6.0) (7.0) nm
--------------------------
$73.6 $62.8 17
==========================
Notes:
1) Operating income excludes net realized investment gains and losses.
2) Prior period segment financial data have been restated to reflect the
1Q00 realignment of business segments, for all periods presented.
- --------------------------------------------------------------------------------
SEGMENT EARNINGS
Beginning in the first quarter of 2000, business segment results have been
realigned to reflect changes in the management of the business segments; see
"Note" regarding restatement of historical results (below).
o ReliaStar Life & Annuity (RLA) operating income was $48.1 million in the
first quarter of 2000, up 7 percent over the first quarter of 1999,
reflecting increased assets under management and lower operating expense
levels, offset in part by lower interest spreads and higher surrender
rates. The RLA segment includes the operations of individual life insurance
(RLA-Life), which totaled $23.2 million in operating income in the first
quarter of 2000 (up 27 percent from 1999), and the operations of individual
annuities (RLA-Annuity), which totaled $24.9 million in operating income
(down 7 percent from 1999).
RLA-Life assets under management increased to $4.9 billion at March 31,
2000, from $4.5 billion at March 31, 1999. RLA-Life general account assets
totaled $3.7 billion at March 31, 2000, compared with $3.7 billion at March
31, 1999.
6
<PAGE>
The interest spread in the first quarter of 2000 was 229 basis points, down
from 237 basis points in the first quarter of 1999, reflecting a
13-basis-point decrease in the portfolio yield and a five-basis-point
decrease in the average crediting rate. RLA-Life separate account assets
increased to $1.2 billion at March 31, 2000, up 54 percent from $778
million at March 31, 1999.
Compared with the first quarter of 1999, lower operating expenses
(reflecting both continued expense management and strong sales growth in
the quarter) increased RLA-Life operating earnings in the first quarter of
2000. Operating earnings in the first quarter of 2000 also benefited from
increased levels of fee-based revenues on interest-sensitive products. The
effect of mortality experience on operating earnings was essentially the
same in the first quarters of 2000 and 1999.
RLA-Annuity assets under management increased to $11.3 billion at March 31,
2000, from $10.3 billion at March 31, 1999. RLA-Annuity general account
assets totaled $8.4 billion at March 31, 2000, compared with $8.4 billion
at March 31, 1999. The interest spread in the first quarter of 2000 was 281
basis points, down from 287 basis points in the first quarter of 1999,
reflecting a 7-basis-point decrease in the portfolio yield and a
one-basis-point decrease in the average crediting rate. RLA-Annuity
separate account assets increased to $2.8 billion at March 31, 2000, up 49
percent from $1.9 billion at March 31, 1999.
Higher surrenders reduced operating earnings of RLA-Annuity in the first
quarter of 2000, compared with the first quarter of 1999. Higher operating
expenses also affected operating earnings in the first quarter of 2000.
o Worksite Financial Services (WFS) operating income in the first quarter of
2000 totaled $15.6 million, or 5 percent higher than in the same period of
last year. Results for the employee benefits unit, totaling $9.8 million,
or 63 percent of WFS operating earnings, were 9 percent higher in the first
quarter of 2000 than in the same period of 1999, reflecting higher volume
of group life business. Operating earnings from the payroll deduction
products unit (16% of total WFS) were essentially unchanged from the first
quarter of 1999.
The retirement plans unit contributed 22% of WFS operating earnings in the
first quarter of 2000. Within this unit, growth in 401(k) plan operating
earnings in the first quarter of 2000 was essentially offset by the effect
of decreased earnings from the closed block of pension business, which is
in run-off. At March 31,
7
<PAGE>
2000, 401(k) assets under management totaled $2.9 billion, up 45 percent
from $2.0 billion a year ago.
o Operating income from the Reinsurance segment in the first quarter was $7.0
million, up 4 percent from the same quarter of last year. The current
environment is difficult for this business and ReliaStar has chosen to
maintain a high level of underwriting discipline on both new and renewing
business. As a result, premiums and earnings were lower than expected in
the first quarter of 2000. Overall claims experience in the first quarter
of 2000 was essentially in line with expectations; the aggregate claims
ratio was 65.2 percent, compared with 66.8 percent in the first quarter of
1999 and 70.0 percent in the fourth quarter of 1999.
In the third quarter of 1999, ReliaStar recorded an operating charge to
accrue for all incurred and prospective losses on all reinsurance business
written by two independent reinsurance managing underwriters, with whom
ReliaStar has terminated its relationships. The claims development through
the first quarter of 2000 on the terminated business has been consistent
with the assumptions underlying the loss accrual recorded in the third
quarter, and the terminated business had no impact on earnings in the first
quarter of 2000.
Claims experience and overall profitability of workers compensation
carve-out reinsurance (including ReliaStar's 5 percent participation in the
Unicover pool in its final underwriting year) in the first quarter of 2000
were consistent with those of the same period in 1999 and in line with
expectations. There has been no change in the status of the AIG lawsuit
against ReliaStar, which is expected to go to trial later in 2000;
ReliaStar believes that AIG's case is without merit and has filed a motion
for summary judgment.
o Mutual Funds (Pilgrim) operating earnings totaled $6.6 million in the first
quarter of 2000, up from $1.7 million in the first quarter of 1999. The
Pilgrim acquisition, which closed in the fourth quarter of 1999, continues
to outperform, with sales and earnings exceeding our expectations. The
strong sales are translating into increased assets under management. Mutual
fund assets under management rose from $4.1 billion at March 31, 1999 to
$16.7 billion at March 31, 2000.
"Other Business Units" includes our broker/dealer operations and banking and
trust operations. Together, these units reported operating income of $2.3
million in
8
<PAGE>
the first quarter of 2000, up from $1.4 million in the same period of last year,
primarily as a result of increased broker/dealer volume.
"Corporate" includes financing costs, amortization of goodwill, other
unallocated expenses, and inter-segment eliminations and adjustments. Corporate
posted operating losses of $6.0 million in the first quarter of 2000 and $7.0
million in the first quarter of 1999. Compared with the same period in 1999,
Corporate results in the first quarter of 2000 reflected higher interest expense
relating to increased borrowings and additional goodwill amortization expense,
offset by increased earnings on corporate invested assets and lower expenses.
RESTATEMENT OF HISTORICAL FINANCIAL DATA
ReliaStar has realigned its reporting segments to conform to changes in
responsibility for the management of certain business operations. Most notable
among these changes is the combination of the Personal Financial Services and
Tax-Sheltered and Fixed Annuity segments into a new segment, ReliaStar Life &
Annuity (RLA). RLA life and annuity operations will be reported separately. We
have restated previously reported segment financial data to reflect these
changes. Consolidated operating earnings and net income are not affected by
these business segment restatements.
In connection with combining the management responsibility of the RLA segment
and ongoing initiatives to implement best practices, we have changed the way we
classify certain transactions within our income statements. While the
reclassification amounts are not material to previously reported results, we
believe that they improve reporting overall, and will facilitate analysis of our
business results. We have restated previously reported income statements to
reflect the income statement line item reclassifications. These
reclassifications have no impact on operating earnings or net income.
NEW RETAIL MARKETING WEB SITE LAUNCHED
On April 15, 2000, ReliaStar launched a new Web site, IhateFinancialPlanning.com
(IHFP). The site is designed to appeal to the millions of middle-income internet
users who understand that financial planning is important, but who do not have a
trusted financial advisor and have not yet developed a financial plan. As the
name suggests, the IHFP site uses humor to attract and educate consumers on a
broad array of financial planning topics. Immediate fulfillment options include
direct
9
<PAGE>
contact by e-mail or phone with an IHFP financial planner, direct
purchase of investment products, or referral to an independent financial
professional. Additional enhancements, including the ability to purchase
insurance and banking products on the site are planned in upcoming months.
MONEY MANAGER ACQUISITION ANNOUNCED
On February 29, 2000, ReliaStar announced that it had signed an agreement to
acquire Lexington Global Asset Managers in a stock-and-cash transaction valued
at $47.5 million. Lexington has 13 mutual funds, including several international
equity funds, and $3.6 billion in assets under management. The transaction is
expected to close in July of 2000.
SUPPLEMENTAL FINANCIAL DATA
Average common shares, on a diluted basis, for the first quarters of 2000 and
1999 totaled 90.2 million and 90.1 million, respectively. At March 31, 2000,
there were 89.5 million common shares outstanding. Book value per common share,
excluding the FAS 115 adjustment for unrealized investment gains and losses,
increased during the first quarter to $23.62 from $23.10 at December 31, 1999.
Book value per common share, including the FAS 115 adjustment, increased during
the first quarter to $22.10 from $21.89 at December 31, 1999.
FINANCIAL GOALS
ReliaStar is focused on three key financial goals for long-term growth and
profitability. The objective behind these goals is to deliver top quartile
performance within our life insurance peer group. Our goals are to:
(1) Maintain an average annual growth rate of at least 13 percent in statutory
premiums and deposits and fee revenues.
Statutory premiums and deposits and fee revenues totaled $1.2 billion in
the first quarter of 2000, which was 20 percent higher than the total in
the first quarter of 1999. Statutory premiums and deposits and fee revenues
for the twelve months ended March 31, 2000 were up 19 percent over the
total for the twelve months ended March 31, 1999.
(2) Maintain an annual growth rate of at least 12 to 14 percent in operating
10
<PAGE>
income per share.
Operating earnings per share in the first quarter of 2000 were up 17
percent from operating earnings per share in the first quarter of 1999.
Excluding special charges in both periods, operating earnings per share for
the twelve months ended March 31, 2000 were one percent higher than
operating earnings per share for the twelve months ended March 31, 1999,
reflecting the $21.3 million after-tax reinsurance charge taken in the
third quarter of 1999.
(3) Maintain an operating income-based return on equity of 16 percent.
Excluding special items in both periods, operating income-based ROE was
14.6 percent for the twelve months ended March 31, 2000, compared with 15.1
percent for the twelve months ended March 31, 1999.
Management remains committed to achieving ReliaStar's stated financial goals in
2000 and beyond.
EARNINGS GUIDANCE FOR 2000
Earnings from the Reinsurance unit are now expected to be lower in 2000 than the
$40-44 million, originally projected. However, operating earnings from mutual
fund operations and investment income in 2000 are both expected to exceed
planned levels. This combination causes management to be very confident in the
company's ability to meet its financial objectives in 2000 and to reaffirm the
earnings guidance issued at the beginning of the year. Current analyst estimates
for ReliaStar operating earnings per share in 2000 range from $3.35 to $3.55,
with a First Call consensus of $3.46. Management is comfortable with estimates
near the middle of this range.
CHAIRMAN'S MESSAGE
An audio recorded message from John G. Turner, Chairman and Chief Executive
Officer, discussing the results of the quarter will be available for playback
beginning at approximately 4:00 p.m. (EDT). To access this recorded message,
please dial 800-405-2236, passcode 708019#. The recording will be available
through 5 p.m. (EDT) on Saturday, May 6.
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CERTAIN FORWARD-LOOKING INFORMATION
This report and earlier filings contain forward-looking information, including
information under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which discuss earnings guidance, known
trends and uncertainties, interest, reinsurance claims experience, withdrawal
and surrender activity, direction of new investment cash flow, impacts of
changes in interest rates on the Insurers' investment portfolio and strategies
to mitigate such effects. The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for forward- looking information to encourage companies
to provide prospective information about themselves without fear of litigation
so long as such information is identified as forward-looking and is accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in the
information. Forward-looking information is indicated by the use of such words
as "anticipates," "expects," "believes," "should," "could," "intends,"
"estimates," and "may," or other comparable language. ReliaStar identifies the
following important factors that could cause ReliaStar's actual results to
differ materially from any results that might be projected by ReliaStar in
forward-looking information. All of these factors are difficult to predict, and
many are beyond the control of the Company. Accordingly, although ReliaStar
believes that the assumptions underlying the forward-looking information are
reasonable, there can be no assurances that those assumptions will approximate
actual experience.
The important factors include the following:
o General economic conditions, including prevailing interest rates and the
performance of the stock market which may affect the Company's ability to
sell its products;
o The market value of the Company's investments;
o The lapse rate and profitability of the insurance policies issued by
ReliaStar;
o Mortality and morbidity factors in ReliaStar's insurance business
(including the effect of the Company's reinsurance and retrocession risk
management programs);
o Changes in federal tax laws, which could adversely affect the tax
advantages of certain of the Company's products;
o Legislative or regulatory changes affecting financial institutions,
including those affecting bank sales and underwriting of insurance products
12
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and regulation of the sale, underwriting and pricing of insurance products;
o Industry consolidation and competition; and
o Retention of key employees.
You should also consider other risks and uncertainties discussed in documents
filed by ReliaStar with the Securities and Exchange Commission. ReliaStar has no
obligation to update forward-looking information.
Investor Contacts: Karin E. Glasgow,
AVP, Investor Relations
612-342-3979
Chris Daniels
612-342-7288
Ruth Strauss
612-342-7190
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ReliaStar Financial Corp.
Financial Highlights (Unaudited)
(In Millions, Except Per Share Data)
- --------------------------------------------------------------------------------
Three Months
Ended March 31
-------------------------
2000 1999
------- -------
Premium Revenues $301.9 $286.1
Total Revenues 800.6 718.8
Operating Income $73.6 $62.8
Net Realized Investment Gains (After-Tax) 0.5 1.6
--------- ---------
Net Income $74.1 $64.4
========= =========
Per Common Share:
Basic:
Operating Income $0.82 $0.71
Net Realized Investment Gains (After-Tax) 0.01 0.02
--------- ---------
Net Income $0.83 $0.73
========= =========
Diluted:
Operating Income $0.82 $0.70
Net Realized Investment Gains (After-Tax) 0.00 0.01
--------- ---------
Net Income $0.82 $0.71
========= =========
Weighted Average Common Shares:
Basic 89.3 88.8
Diluted 90.2 90.1
- --------------------------------------------------------------------------------
Revenue Measures
Statutory Premiums and Deposits (Statutory
Accounting Basis)
ReliaStar Life and Annuities Segment
Life $202.7 $181.3
Annuities 351.1 287.5
--------- ---------
Total 553.8 468.8
Worksite Financial Services Segment 407.8 340.6
Reinsurance Segment 97.4 107.5
--------- ---------
Total Statutory Premiums and Deposits 1,059.0 916.9
Fee Revenues (GAAP Accounting Basis) 108.2 57.9
--------- ---------
Total Statutory Premiums and Deposits
and Fee Revenues $1,167.2 $974.8
========= =========
Assets Under Management (End of Period)
Invested Assets $14,924.9 $14,476.0
Managed Assets 23,463.7 8,678.2
--------- ---------
Total Assets Under Management $38,388.6 $23,154.2
========= =========
- --------------------------------------------------------------------------------
Notes:
Premium revenues are determined in accordance with generally accepted accounting
principles and do not recognize premiums and deposits received on interest
sensitive products.
Invested assets exclude unrealized investment gains and losses recorded in
accordance with SFAS No. 115. The amounts excluded were an unrealized loss of
$247.1 million at March 31, 2000, and an unrealized gain of $314.3 million at
March 31, 1999.
Certain prior period financial data has been restated to conform to current
period presentation.
