UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from ________ to ________
Commission file number 1-11716
BANKERS LIFE
HOLDING CORPORATION
Delaware No. 51-0342500
---------------------- -------------------------------
State of Incorporation IRS Employer Identification No.
222 Merchandise Mart Plaza
Chicago, Illinois 60654 (312) 396-6000
- --------------------------------------- --------------
Address of principal executive offices Telephone
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ]
Shares of common stock outstanding as of November 1, 1996: 49,425,590
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<CAPTION>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions, except per share amount)
September 30, December 31,
1996 1995
---- ----
(unaudited) (audited)
ASSETS
<S> <C> <C>
Investments:
Actively managed fixed maturity securities at fair value (amortized cost:
1996 - $3,303.8; 1995 - $3,176.4)............................................... $3,204.7 $3,252.3
Mortgage loans.................................................................... 4.7 5.2
Credit-tenant loans .............................................................. 106.9 88.9
Policy loans...................................................................... 47.8 47.3
Short-term investments............................................................ 36.9 42.8
Investments in American Life Holdings, Inc........................................ 194.8 68.0
Other invested assets............................................................. 43.0 10.4
-------- --------
Total investments............................................................. 3,638.8 3,514.9
Accrued investment income............................................................ 51.2 49.5
Accounts receivable and uncollected premiums......................................... 47.7 43.9
Reinsurance receivables.............................................................. 34.7 29.9
Cost of policies purchased........................................................... 532.1 515.6
Cost of policies produced............................................................ 335.4 244.2
Goodwill (net of accumulated amortization: 1996 - $25.1; 1995 - $17.5)............... 373.6 369.3
Other assets......................................................................... 19.8 17.9
-------- --------
Total assets.................................................................... $5,033.3 $4,785.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Insurance liabilities............................................................. $3,374.7 $3,265.7
Income tax liabilities............................................................ 23.1 59.8
Investment borrowings............................................................. 112.8 28.1
Notes payable..................................................................... 418.1 301.5
Other liabilities................................................................. 90.9 98.2
-------- --------
Total liabilities............................................................. 4,019.6 3,753.3
-------- --------
Shareholders' equity:
Common stock and additional paid-in capital (par value $.001; 500,000,000
shares authorized; shares issued and outstanding: 1996 - 49,425,210;
1995 - 50,597,758).............................................................. 734.0 748.8
Unrealized appreciation (depreciation) of securities:
Fixed maturity securities (net of applicable deferred income taxes:
1996 - $(16.4); 1995 - $13.1)................................................. (27.9) 46.7
Other invested assets (net of applicable deferred income taxes:
1996 - $.3; 1995 - ($.1))..................................................... .6 (.2)
Retained earnings................................................................. 307.0 236.6
-------- --------
Total shareholders' equity.................................................... 1,013.7 1,031.9
-------- --------
Total liabilities and shareholders' equity.................................... $5,033.3 $4,785.2
======== ========
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share amounts)
(unaudited)
Three months ended Nine months Six months
September 30, ended ended
------------------- September 30, June 30,
1996 1995 1996 1995
---- ---- ------------- ---------
(prior basis)
<S> <C> <C> <C> <C>
Revenues:
Insurance policy income.................................. $317.8 $316.4 $ 961.8 $620.9
Investment activity:
Net investment income ................................. 65.3 62.0 191.0 126.3
Net trading income (losses)............................ .6 (.3) (1.4) 2.5
Net realized gains..................................... .6 1.1 5.9 13.2
Restructuring income..................................... - - 16.0 -
Equity in earnings of American Life Holdings, Inc........ 1.8 1.4 5.9 1.6
Other income (loss)...................................... (1.6) (4.6) (3.0) 2.4
------ ------ -------- ------
Total revenues......................................... 384.5 376.0 1,176.2 766.9
------ ------ -------- ------
Benefits and expenses:
Insurance policy benefits ............................... 229.4 231.3 715.2 477.8
Amortization related to operations....................... 34.4 31.4 90.0 61.0
Amortization related to realized gains................... .2 .1 5.6 7.0
Interest expense on annuities and financial products..... 20.6 19.0 60.8 38.0
Interest expense on notes payable........................ 5.4 7.5 18.1 16.1
Interest expense on investment borrowings................ 1.8 1.0 4.1 3.4
Other operating costs and expenses....................... 41.1 37.5 115.8 69.7
------- ------ -------- ------
Total benefits and expenses............................ 332.9 327.8 1,009.6 673.0
------- ------ -------- ------
Income before income tax and extraordinary charge...... 51.6 48.2 166.6 93.9
Income tax expense.......................................... 19.4 17.5 62.2 33.7
------- ------ -------- ------
Income before extraordinary charge..................... 32.2 30.7 104.4 60.2
Extraordinary charge on extinguishment of debt, net
of income tax benefit.................................... .1 - 10.1 -
------- ------ ------- ------
Net income............................................. $ 32.1 $ 30.7 $ 94.3 $60.2
======= ====== ======= ======
Earnings per common share:
Weighted average common shares outstanding............. 49,495,683 52,296,461 49,526,405 52,819,415
========== ========== ========== ==========
Income per share before extraordinary charge........... $.65 $.59 $2.11 $1.14
Extraordinary charge................................... - - .20 -
---- ---- ----- -----
Net income ............................................ $.65 $.59 $1.91 $1.14
==== ==== ===== =====
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in millions)
(unaudited)
Nine months Three months Six months
ended ended ended
September 30, September 30, June 30,
1996 1995 1995
---- ---- ----
(prior basis)
<S> <C> <C> <C>
Common stock and additional paid-in capital:
Balance, beginning of period........................................ $ 748.8 $773.5 $ 371.1
Cost of shares acquired and effectively retired................. (27.7) (25.8) -
Amounts related to stock options and employee benefit plans..... 2.2 - 1.1
Adjustment of balance due to push down accounting............... 10.7 9.8 401.3
--------- ------ -------
Balance, end of period.............................................. $ 734.0 $757.5 $ 773.5 (a)
========= ====== =======
Net unrealized appreciation (depreciation) of securities:
Fixed maturity securities:
Balance, beginning of period.................................... $ 46.7 $ (7.6) $(121.8)
Change in net unrealized appreciation (depreciation)......... (74.4) 22.9 121.7
Adjustment of balance due to push down accounting............ (.2) (.1) (7.5)
--------- ------ -------
Balance, end of period.......................................... $ (27.9) $ 15.2 $ (7.6) (a)
========= ====== =======
Other invested assets:
Balance, beginning of period.................................... $ (.2) $ 9.9 $ 1.3
Change in net unrealized appreciation ....................... .8 (9.1) 8.5
Adjustment of balance due to push down accounting............ - - .1
--------- ------ -------
Balance, end of period.......................................... $ .6 $ .8 $ 9.9 (a)
========= ====== =======
Retained earnings:
Balance, beginning of period........................................ $ 236.6 $188.4 $ 227.6
Net income...................................................... 94.3 30.7 60.2
Dividends on common stock....................................... (22.3) (8.0) (15.8)
Adjustment of balance due to push down accounting............... (1.6) (1.3) (83.6)
--------- ------ -------
Balance, end of period.............................................. $ 307.0 $209.8 $ 188.4 (a)
========= ====== =======
Total shareholders' equity................................... $ 1,013.7 $983.3 $ 964.2 (a)
========= ====== =======
<FN>
(a) Period end balances reflect the adoption of a new accounting basis.
</FN>
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
(unaudited)
Nine months Three months Six months
ended ended ended
September 30, September 30, June 30,
1996 1995 1995
---- ---- ----
(prior basis)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 94.3 $ 30.7 $ 60.2
Adjustments to reconcile net income to net cash provided by operating
activities:
Extraordinary charge on extinguishment of debt (before income tax) 15.5 - -
Amortization and depreciation..................................... 97.1 32.0 69.4
Income taxes...................................................... (6.9) (14.9) (5.1)
Insurance liabilities............................................. 32.2 3.7 23.9
Interest credited to insurance liabilities........................ 60.8 19.0 38.0
Fees charged to insurance liabilities............................. (17.2) (5.9) (10.7)
Accrual and amortization of investment income..................... (.4) (3.8) (12.4)
Deferral of cost of policies produced............................. (110.0) (35.2) (79.2)
Other liabilities................................................. (21.6) (9.1) 10.5
Realized (gains) and trading (income) losses on investments....... (4.5) (.8) (15.7)
Other, net........................................................ 1.7 6.2 3.1
---------- ------- --------
Net cash provided by operating activities....................... 141.0 21.9 82.0
---------- ------- --------
Cash flows from investing activities:
Sales of investments.................................................. 1,851.7 248.5 472.3
Maturities and redemptions............................................ 84.6 26.7 34.9
Purchase of additional common shares of American Life
Holdings, Inc. ..................................................... (140.0) - -
Purchases of investments.............................................. (2,113.8) (279.3) (678.7)
Other .............................................................. (.7) (.5) 4.3
---------- ------- --------
Net cash used by investing activities........................... (318.2) (4.6) (167.2)
---------- ------- --------
Cash flows from financing activities:
Issuance of common stock.............................................. 2.2 - 1.1
Issuance of notes payable............................................. 459.1 - -
Payments on notes payable............................................. (358.3) - (16.0)
Repurchase of common stock............................................ (27.7) (25.8) -
Dividends paid on common stock........................................ (22.3) (8.0) (15.8)
Deposits to insurance liabilities..................................... 175.9 58.6 156.8
Withdrawals from insurance liabilities................................ (142.3) (41.1) (89.1)
Investment borrowings................................................. 84.7 (17.5) 56.3
---------- ------- --------
Net cash provided (used) by financing activities................ 171.3 (33.8) 93.3
---------- ------- --------
Net increase (decrease) in short-term investments............... (5.9) (16.5) 8.1
Short-term investments, beginning of period.............................. 42.8 96.8 88.7
---------- ------- --------
Short-term investments, end of period.................................... $ 36.9 $ 80.3 $ 96.8
========== ======= =======
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
5
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following notes should be read in conjunction with the notes to the
consolidated financial statements contained in the 1995 Form 10-K of Bankers
Life Holding Corporation.
SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
The consolidated financial statements include Bankers Life Holding
Corporation ("we" or "BLH") and its direct and indirect wholly owned insurance
subsidiaries, all of which are collectively referred to hereinafter as
"Bankers." Insurance subsidiaries include: Bankers Life and Casualty Company and
its wholly owned subsidiary, Certified Life Insurance Company (collectively
"BLC") and their parent, Bankers Life Insurance Company of Illinois ("BLI").
Bankers markets health and life insurance and annuity products primarily to
senior citizens through approximately 200 branch offices and 3,200 career
agents. Intercompany transactions have been eliminated in consolidation. The
unaudited consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and, therefore, do not include all
disclosures required by generally accepted accounting principles. However, these
statements include all adjustments (consisting only of normal recurring items)
necessary to present fairly the Company's financial position and the results of
operations on a basis consistent with that of prior audited financial
statements.
In preparing financial statements in conformity with generally accepted
accounting principles, we are required to make estimates and assumptions that
significantly affect various reported amounts. For example, we use significant
estimates and assumptions in calculating the cost of policies produced, the cost
of policies purchased, goodwill, insurance liabilities, liabilities related to
litigation, guaranty fund assessment accruals and deferred income taxes. If our
future experience differs materially from these estimates and assumptions, our
financial statements could be affected.
On August 26, 1996, Conseco, Inc. ("Conseco") announced its intention to
merge with BLH, in a transaction under which Conseco will acquire the
outstanding shares of BLH that Conseco does not already own. In the intended
merger, each of the 4.7 million outstanding shares of BLH common stock not
already owned by Conseco would be converted into the right to receive $25 in
Conseco common stock. BLH would be merged into Conseco. Completion of the
transaction, which is subject to review by the Securities and Exchange
Commission of the information to be submitted to shareholders of BLH describing
the terms of the merger and their appraisal rights, is expected to occur in
early 1997.
During the first six months of 1995, Conseco purchased 12.8 million shares
of BLH representing 24 percent of the then outstanding shares of BLH, increasing
its ownership in BLH to 85 percent. During the last six months of 1995, BLH
repurchased 2.2 million shares of its common stock at a cost of $42.1 million.
Conseco's ownership in BLH was 88 percent at December 31, 1995. During the first
quarter of 1996, BLH repurchased 1.3 million shares at a cost of $27.7 million,
increasing Conseco's ownership in BLH to 90.5 percent.
As a result of Conseco's significant ownership interest in Bankers, a new
basis of accounting under the "push down" method was adopted effective June 30,
1995. Under this method, our assets and liabilities were revalued to reflect
Conseco's cost basis, which is based on the fair values of such assets and
liabilities on the dates Conseco's ownership interests were acquired. The new
accounting basis was reflected in the consolidated balance sheet and statement
of shareholders' equity at June 30, 1995, and is reflected in the statements of
operations and cash flows for periods subsequent to June 30, 1995. As a result,
our assets and liabilities included in the September 30, 1996, consolidated
balance sheet represent the following combination of values: (i) the portion of
our net assets acquired by Conseco in the November 1992 acquisition is valued as
of that acquisition date; (ii) the portion acquired in September 1993 is valued
as of that date; (iii) the portion acquired during 1995 and 1996 (including the
increase in Conseco's ownership as a result of BLH's common stock repurchases)
is valued as of the date of their purchases; and (iv) the portion owned by
minority interests is valued based on a combination of (i) above and the
historical bases of net assets acquired in the November 1992 acquisition.
6
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The effect of the use of push down accounting as a result of our common
stock repurchases during the first quarter of 1996 is as follows (dollars in
millions):
<TABLE>
<CAPTION>
Debit
(Credit)
--------
<S> <C>
Cost of policies purchased........................................ $ 9.0
Cost of policies produced......................................... (5.0)
Goodwill.......................................................... 7.2
Insurance liabilities............................................. (1.4)
Income tax liabilities............................................ (1.1)
Notes payable..................................................... (.5)
Other liabilities................................................. .7
Common stock and additional paid-in capital....................... (10.7)
Net unrealized appreciation of securities......................... .2
Retained earnings................................................. 1.6
</TABLE>
Certain amounts in the 1995 financial statements were reclassified to
conform with the 1996 presentation.
ADJUSTMENT TO ACTIVELY MANAGED FIXED MATURITIES
At September 30, 1996, we adjusted several balance sheet accounts to carry
actively managed fixed maturity securities at fair value as follows:
<TABLE>
<CAPTION>
Effect of fair value
Balance adjustment on actively
before managed fixed Reported
adjustment maturity securities amount
---------- ------------------- ------
(Dollars in millions)
<S> <C> <C> <C>
Actively managed fixed maturity securities....................... $3,303.8 $(99.1) $3,204.7
Investments in American Life Holdings, Inc....................... 192.4 2.4 194.8
Cost of policies purchased....................................... 497.4 34.7 532.1
Cost of policies produced........................................ 319.1 16.3 335.4
Income tax liabilities .......................................... 40.9 (17.8) 23.1
Unrealized depreciation of fixed maturity securities............. - (27.9) (27.9)
</TABLE>
CHANGES IN NOTES PAYABLE
We can borrow up to $400 million under our revolving credit facility
(including a competitive bid facility in the aggregate principal amount of up to
$100 million). Any borrowings are due in 2001 and accrue interest at a rate of
LIBOR plus an applicable margin of 50 or 75 basis points, depending on the ratio
of our debt to our consolidated net worth. The actual weighted average rate at
September 30, 1996, was 6.0 percent, and the total principal balance borrowed
under the revolving credit agreement was $388.0 million. The revolving credit
agreement contains a number of covenants, including prohibitions or limitations
on indebtedness, liens, mergers, acquisitions, sales of assets outside of the
normal course of our business and certain transactions with affiliates. In
connection with entering into the new credit facility in February 1996, we
repaid the existing $110.0 million principal balance due under the bridge loan
facility.
On September 30, 1996, borrowings under the credit facility were increased
to finance Bankers' additional investment in American Life Holdings, Inc.
("ALH"). See "Investments in American Life Holdings, Inc."
7
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
In March 1996, we completed a tender offer pursuant to which $148.3 million
principal balance of our 13 percent senior subordinated notes were repurchased
for $173.2 million. The repurchased notes had a carrying value of $157.8
million. In the first quarter of 1996, we reported an extraordinary charge of
$10.0 million (net of applicable income tax) as a result of the repurchase. The
repurchase was made using the proceeds from the revolving credit facility. In
conjunction with the tender offer, holders of the senior subordinated notes
consented to amendments to the indenture for such notes which eliminated
substantially all restrictive covenants, including covenants which limited our
ability to pay dividends, incur additional indebtedness, repurchase common stock
and make certain investments. During the second quarter of 1996, we repurchased
$.1 million par value of our 13 percent senior subordinated notes, with no
material loss realized.
CHANGES IN CAPITAL STOCK
In January 1996, we completed the share repurchase program originally
announced in April 1994 and expanded in August 1995. During 1995, we repurchased
2,240,000 shares for $42.1 million. During the first quarter of 1996, we
repurchased 1,272,248 shares for $27.7 million.
See "Organization and Basis of Presentation" above for a discussion of the
change in basis resulting from Conseco's increased ownership of Bankers and the
adoption of the "push down" method of accounting.
During the first nine months of 1996, we issued 99,700 shares of common
stock upon the exercise of stock options.
INVESTMENTS IN AMERICAN LIFE HOLDINGS, INC.
We participated in Conseco Capital Partners II, L.P. ("Partnership II"), an
investment partnership formed by Conseco. In conjunction with Partnership II's
September 29, 1994 acquisition of ALH, we: (i) indirectly acquired 3.2 percent
of ALH's common stock ("ALH stock") through a $1.8 million limited partner
capital contribution to Partnership II; (ii) directly acquired 9.1 percent of
ALH stock for $5.1 million; and (iii) directly acquired 25,926 shares of ALH's
1994 Series PIK Preferred Stock (stated value $1,000 per share) ("ALH PIK
Preferred") for $20.8 million. On November 30, 1995, we: (i) indirectly acquired
additional shares of ALH stock through a $1.0 million limited partner capital
contribution to Partnership II; and (ii) directly acquired additional shares of
ALH stock for $3.0 million. After the November 1995 transactions, we had a 12.5
percent direct and indirect common equity interest in ALH.
On September 30, 1996: (i) Conseco and its subsidiaries completed the
purchase of all of the shares of ALH stock not previously owned by Conseco and
its subsidiaries (including the purchase of 6,086,957 shares of ALH stock by
Bankers for $140.0 million); (ii) Partnership II distributed ALH shares to
Conseco and its subsidiaries, representing their ownership interest in ALH
through Partnership II (including the distribution of 376,021 shares to
Bankers); and (iii) Conseco purchased additional newly issued shares of ALH
stock. After the September 30, 1996 transactions, we own 7,707,799 shares of ALH
stock, representing 40.8 percent of all outstanding common stock of ALH. Such
common shares held by us had a cost of $150.9 million and a carrying value of
$165.5 million at September 30, 1996.
Effective September 30, 1996, ALH repaid the $125.0 million principal
amount outstanding under its senior credit facility using the proceeds from its
sale of newly issued shares to Conseco. This repayment resulted in an
extraordinary charge ($.1 million was our share) in the third quarter of 1996.
ALH's PIK Preferred pays annual dividends of 13 percent in additional
shares of like-kind stock through 2006. Thereafter, dividends will be paid in
cash at an annual rate of 15 percent. Our investment in ALH's PIK Preferred had
a cost (including the value of dividends paid in like-kind stock) of $24.2
million and a carrying value of $29.3 million at September 30, 1996.
8
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
RELATED PARTY TRANSACTIONS
Effective January 1, 1996, the home office employees of Bankers became
employees of Conseco. The services formerly provided by such employees are now
provided by Conseco. Fees for these services and services provided by Conseco in
1996 and prior periods (including data processing, executive management and
investment management services) are based on negotiated rates or Conseco's
direct and directly allocable costs plus a 10 percent margin. Total fees paid to
Conseco were $90.4 million and $12.0 million during the first nine months of
1996 and 1995, respectively.
9
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Financial data for periods subsequent to June 30, 1995 reflect the adoption
of a new basis of accounting under the "push down" method and, accordingly, data
for the 1995 period may not be comparable with data for the 1996 period.
Significant accounting adjustments recorded as a result of the adoption of the
new basis are described in the notes to the consolidated financial statements in
our 1995 Form 10-K. Additional adjustments as a result of our common stock
purchases during the first quarter of 1996 are described in the notes to the
consolidated financial statements included in this Form 10-Q. These adjustments
affect the comparability of operating data principally by replacing a portion of
amortization expense for the cost of policies produced with amortization expense
for the cost of policies purchased and goodwill, which have different
amortization assumptions and bases.
Nine months Ended September 30, 1996 Compared to the 1995 Periods Combined
(Six Months Ended June 30, 1995, and Three Months Ended September 30, 1995)
Insurance policy income increased 2.6 percent, to $961.8 million, in the
first nine months of 1996 as a result of increases in Medicare supplement and
long-term care premiums, which were largely offset by the anticipated decrease
in comprehensive major medical product premiums resulting from prior steps taken
to improve the profitability of this product.
Net investment income increased 1.4 percent, to $191.0 million, in the
first nine months of 1996. Average invested assets (amortized cost basis)
increased to $3.5 billion in 1996 from $3.4 billion in 1995 while the yield
earned on average invested assets declined to 7.3 percent in 1996 from 7.5
percent in 1995. Cash flows received during 1995 and the first nine months of
1996 (including cash flows from the sales of investments) were invested in
lower-yielding securities due to the general decline in interest rates. Invested
assets grew as a result of operations.
Restructuring income in 1996 represents the gain realized as a result of
the sale of Bankers' investment in Noble Broadcast Group, Inc., a private
company that owns and operates 12 radio stations.
Net realized gains and net trading income (losses) often fluctuate from
period to period. Bankers sold $1.9 billion of investments (principally fixed
maturity securities) in the first nine months of 1996, compared to $720.8
million in 1995 generating net realized gains of $5.9 million and trading losses
of $1.4 million in 1996, compared to net realized gains of $20.3 million and
trading income of $2.2 million in 1995. Net realized gains in the first nine
months of 1995 also included: (i) a $2.2 million writedown of certain
exchange-rate-linked securities as a result of foreign currency fluctuations;
and (ii) a $3.8 million writedown of a corporate security as a result of changes
in conditions which caused Bankers to conclude that a decline in the fair value
of the security was other than temporary. There were no such writedowns in the
first nine months of 1996.
Selling securities at a gain and reinvesting the proceeds at lower yields
may, absent other management action, tend to decrease future investment yields.
We believe, however, that the following factors would mitigate the adverse
effect of such decreases on net income: (i) Bankers recognizes additional
amortization of the cost of policies purchased and the cost of policies produced
in the same period as the gain in order to reflect reduced future yields thereby
reducing such amortization in future periods (see amortization related to
realized gains below); (ii) Bankers can reduce interest rates credited to some
products thereby diminishing the effect of the yield decrease on the investment
spread; and (iii) the investment portfolio grows as a result of reinvesting the
realized gains.
Other income (loss) is comprised primarily of experience rating refunds
related to certain blocks of business which fluctuate based on the experience
realized on such contracts.
Insurance policy benefits increased .9 percent, to $715.2 million, in the
first nine months of 1996. Such increase reflects improved experience in
comparison to 1995 on increased business on which benefits are incurred.
10
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
Amortization related to operations (consisting of amortization of the cost
of policies purchased, the cost of policies produced and goodwill) decreased 2.6
percent, to $90.0 million, in the first nine months of 1996. Amortization
related to operations in 1996 reflects the different amortization assumptions
and bases as a result of adopting a new basis of accounting.
Cost of policies produced represents the cost (primarily commissions and
certain costs of policy issuance and underwriting) which varies with and is
primarily related to the production of new business. Costs deferred may
represent amounts paid in the period the new business is written (such as
underwriting costs and first-year commissions) or in periods after the business
is written (such as commissions paid in subsequent years in excess of the lowest
ultimate commission paid each period the policy is in force, (the "ultimate
commission rate")). Cost of policies purchased represents the portion of
Conseco's cost to acquire Bankers that is attributable to the right to receive
cash flows from insurance contracts in force at the acquisition dates.
We expensed some costs incurred after the adoption of the new accounting
basis on policies issued prior to such date, which otherwise would have been
deferred had it not been for the change in accounting basis (because they vary
with and are primarily related to the production of the acquired interests in
policies). Such costs are primarily comprised of certain commissions paid in
excess of the ultimate commission rate which totaled approximately $5.3 million
and have been included in operating expenses in the nine months ended September
30, 1996. However, such amounts were considered in determining the cost of
policies purchased and related amortization.
Amortization related to realized gains fluctuates as a result of the change
in realized gains discussed above.
Interest expense on annuities and financial products increased 6.7 percent,
to $60.8 million in the first nine months of 1996 primarily due to the increase
in annuity liabilities. The weighted average crediting rate for Bankers' annuity
liabilities, excluding interest bonuses guaranteed for the first year of the
annuity contract, was 5.5 percent at September 30, 1996 and 1995.
Interest expense on notes payable decreased 23 percent, to $18.1 million in
the first nine months of 1996 due to the reduction in interest expense resulting
from the repurchase of $148.3 million principal balance of BLH's 13 percent
senior subordinated notes in March 1996 using the proceeds from our revolving
credit facility. The weighted average interest rate on borrowings under the
revolving credit facility for the first nine months of 1996 was 6.0 percent.
Interest expense on investment borrowings did not fluctuate materially in
the 1996 and 1995 periods. Bankers' average investment borrowings were $102.7
million and $106.3 million in the first nine months of 1996 and 1995,
respectively, and interest rates paid on such borrowings during these periods
were comparable.
Income tax expense increased 21 percent, to $62.2 million in the first nine
months of 1996 primarily due to the increase in pretax income. The effective tax
rates of 37 percent for 1996 and 36 percent for 1995 exceeded the statutory
corporate income tax rate (35 percent) primarily because goodwill amortization
is not deductible for federal income tax purposes.
Extraordinary charge in the first nine months of 1996 represents: (i) the
$10.0 million loss recognized on the early extinguishment of $148.3 million
principal balance of BLH's 13 percent senior subordinated notes and (ii) the $.1
million loss recognized on the early extinguishment by ALH of borrowings under
its senior credit facility.
Third Quarter of 1996 Compared to the Third Quarter of 1995
Insurance policy income increased .4 percent, to $317.8 million in the
third quarter of 1996 consistent with the explanation above for the nine month
periods.
Net investment income increased 5.3 percent, to $65.3 million in the third
quarter of 1996. Average invested assets (amortized cost basis) increased to
$3.7 billion in 1996 from $3.4 billion in 1995 while the yield earned on average
invested assets declined to 7.4 percent in 1996 from 7.5 percent in 1995. The
reduction in the yield earned and the increase in invested assets are consistent
with the explanation above for the nine month periods.
11
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
Net realized gains and net trading income (losses) often fluctuate from
period to period. Bankers sold $722.6 million of investments (principally fixed
maturity securities) in the third quarter of 1996, compared to $248.5 million in
1995 generating net realized gains of $.6 million and trading gains of $.6
million in 1996, compared to net realized gains of $4.9 million and trading
losses of $.3 million in 1995. Net realized gains in the third quarter of 1995
also included a $3.8 million writedown of a corporate security as a result of
changes in conditions which caused the Company to conclude that a decline in the
fair value of the security was other than temporary. There were no such
writedowns in the third quarter of 1996.
Other income (loss) is comprised primarily of experience rating refunds
related to certain blocks of business which fluctuate based on the experience
realized on such contracts.
Insurance policy benefits decreased .8 percent, to $229.4 million in the
third quarter of 1996, reflecting slightly improved experience in comparison to
1995 on increased business in force on which benefits are incurred.
Amortization related to operations increased 9.6 percent, to $34.4 million
in the third quarter of 1996. Amortization related to operations primarily
reflects an increase in business inforce.
Amortization related to realized gains fluctuates as a result of the change
in realized gains discussed above.
Interest expense on annuities and financial products increased 8.4 percent,
to $20.6 million in the third quarter of 1996 primarily due to the increase in
annuity liabilities consistent with the explanation for the nine month periods.
Interest expense on notes payable decreased 28 percent, to $5.4 million in
the third quarter of 1996. Such decrease is consistent with the explanation
above for the nine month periods.
Interest expense on investment borrowings in the third quarters of 1996 and
1995 primarily reflects changes in investment borrowing activities. Bankers'
average investment borrowings were $121.6 million and $67.2 million in the third
quarters of 1996 and 1995, respectively.
Income tax expense increased 11 percent to $19.4 million in the third
quarter of 1996 primarily due to the increase in pretax income. The effective
tax rates of 38 percent for 1996 and 36 percent for 1995 exceeded the statutory
corporate income tax rate (35 percent) primarily because goodwill amortization
is not deductible for federal income tax purposes.
Extraordinary charge in the third quarter of 1996 represents the loss
recognized on the early extinguishment by ALH of borrowings under its senior
credit facility.
SALES
In accordance with generally accepted accounting principles, the insurance
policy income shown on our consolidated statement of operations consists
primarily of premiums we receive on policies which have life contingencies or
morbidity features. For annuity contracts without such features, accounting
rules dictate that premiums collected are not reported as revenues, but rather
as deposits to insurance liabilities. We recognize revenues for these products
in the form of investment income and surrender or other charges.
12
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
Premiums collected for the third quarter of 1996 were $378.6 million, of
which $64.8 million were recorded as deposits to policy liability accounts. This
compares to $357.7 million collected and $58.6 million recorded as deposits to
policy liability accounts in the third quarter of 1995. Premiums collected for
the nine months of 1996 were $1,136.5 million, of which $175.9 million were
recorded as deposits to policy liability accounts. This compares to $1,143.7
million collected and $215.4 million recorded as deposits to liability accounts
in the first nine months of 1995. Collected premiums by premium type were as
follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
(Dollars in millions)
<S> <C> <C> <C> <C>
Individual health
Medicare supplement...................................... $150.3 $135.3 $ 463.0 $ 441.2
Long-term care........................................... 49.3 39.7 142.2 116.8
Other.................................................... 18.9 21.8 59.1 71.9
------ ------ --------- ---------
Total individual health.............................. 218.5 196.8 664.3 629.9
Annuities................................................... 60.4 57.6 169.0 208.3
Individual life............................................. 24.8 23.2 73.3 71.5
Group and other............................................. 74.9 80.1 229.9 234.0
------ ------ --------- ---------
Total................................................ $378.6 $357.7 $1,136.5 $1,143.7
====== ====== ======== ========
</TABLE>
Medicare supplement premiums increased 11 percent in the third quarter of
1996 and increased 4.9 percent in the first nine months of 1996, compared to the
same periods in 1995. Such premiums accounted for 41 percent of total collected
premiums in 1996, compared to 39 percent in 1995. The number of new Medicare
supplement policies sold in the first nine months of 1996 totaled 33,777, down
30 percent compared to the first nine months of 1995. Annualized new business
premiums from such new sales totaled $32.8 million in the first nine months of
1996, compared to $43.4 million in the first nine months of 1995. The decline in
new Medicare supplement premiums reflects continued price competition and the
efforts of Bankers' agents to conserve existing policies.
Long-term care premiums increased 24 percent in the third quarter of 1996
and increased 22 percent in the first nine months of 1996, compared to the same
periods in 1995. Such premiums accounted for 13 percent of total collected
premiums in 1996, compared to 10 percent in 1995. The continued growth in this
product line reflects new product introductions, the competitiveness of Bankers'
products, the success of agent cross-selling activities, increased consumer
awareness and demand and improved persistency on a larger basis of renewal
premiums. Annualized premiums from new sales were $32.1 million in the first
nine months of 1996, up 9.2 percent over the same period in 1995.
Annuity premiums increased 4.9 percent in the third quarter of 1996 and
decreased 19 percent in the first nine months of 1996, compared to the same
periods in 1995. Industry wide annuity sales have been negatively affected
during 1996 and the last half of 1995 by lower interest rates, which have made
competing products relatively more attractive.
Collected premiums for other individual health policies decreased 13
percent in the third quarter of 1996 and decreased 18 percent in the first nine
months of 1996, compared to the same periods in 1995. The decrease, which was
anticipated, follows steps taken previously to improve the profitability of the
comprehensive major medical product included in this category.
LIQUIDITY AND CAPITAL RESOURCES
Changes in the consolidated balance sheet between December 31, 1995, and
September 30, 1996, reflect: (i) the growth in Bankers' assets and liabilities
from operating activities; (ii) the additional investment in ALH ; (iii) the
notes payable and capital stock transactions; (iv) the increase in investment
borrowings; (v) the change in the net unrealized appreciation (depreciation) of
fixed maturity securities; and (vi) the change in basis resulting from the
increase in Conseco's ownership of Bankers during the first quarter of 1996 and
the use of the "push down" method of accounting.
Excluding the mark-to-market adjustment, the book value per share of common
stock was $21.07 at September 30, 1996, and $19.47 at December 31, 1995; and the
ratio of debt to shareholders' equity was 40 percent at September 30, 1996, and
31
13
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
percent at December 31, 1995. Including the mark-to-market adjustment, the book
value per share of common stock was $20.51 at September 30, 1996, and $20.39 at
December 31, 1995; and the ratio of debt to shareholders' equity was 41 percent
at September 30, 1996, and 29 percent at December 31, 1995.
Dividends declared on common stock for the nine months ended September 30,
1996 were $0.45 per share.
INVESTMENTS
At September 30, 1996, the amortized cost and estimated fair value of fixed
maturity securities (all of which were actively managed) were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -----
(Dollars in millions)
<S> <C> <C> <C> <C>
United States Treasury securities and obligations of
United States government corporations and agencies.. $ 41.3 $ .1 $ 1.2 $ 40.2
Obligations of states and political subdivisions....... 9.6 .1 .1 9.6
Debt securities issued by foreign governments.......... 28.6 .1 1.3 27.4
Public utility securities.............................. 467.5 .7 30.5 437.7
Other corporate securities............................. 1,742.6 10.5 46.7 1,706.4
Mortgage-backed securities............................. 1,014.2 .8 31.6 983.4
-------- ----- ------ --------
Total........................................... $3,303.8 $12.3 $111.4 $3,204.7
======== ===== ====== ========
</TABLE>
The following table sets forth the investment ratings of fixed maturity
securities at September 30, 1996 (designated categories include securities with
"+" or "-" modifiers). The category assigned is the highest rating by a
nationally recognized statistical rating organization or, as to $34.2 million
fair value of fixed maturity securities not rated by such firms, the rating
assigned by the National Association of Insurance Commissioners ("NAIC"). For
the purposes of this table, NAIC Class 1 securities are included in the "A"
rating; Class 2, "BBB"; Class 3, "BB"; and Classes 4-6, "B and below":
<TABLE>
<CAPTION>
Percent of
---------------------------
Fixed Total
Investment rating maturities investments
----------------- ---------- -----------
<S> <C> <C>
AAA............................... 37% 32%
AA................................ 10 9
A ............................... 21 19
BBB............................... 25 22
--- ---
Investment-grade............... 93 82
--- ---
BB................................ 6 5
B and below....................... 1 1
--- ---
Below investment-grade......... 7 6
--- ---
Total actively managed
fixed maturities............... 100% 88%
=== ==
</TABLE>
At September 30, 1996, our below investment grade fixed maturities had an
amortized cost of $211.6 million and estimated fair value of $209.8 million.
The Company's investment portfolio is subject to the risk of declines in
realizable value. We attempt to mitigate this risk through the diversification
and active management of our portfolio. As of September 30, 1996, there were no
fixed maturity securities about which we had serious doubts as to the ability of
the issuer to comply with the contractual terms of its obligations on a timely
basis.
During the first nine months of 1995, Bankers recorded realized losses for
investment writedowns as follows: (i) a $2.2 million writedown of certain
exchange-rate-linked securities as a result of foreign currency fluctuations;
and (ii) a $3.8 million
14
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
writedown of a corporate security as a result of changes in conditions which
caused Bankers to conclude that a decline was other than temporary. Bankers had
no exchange-rate-linked securities at September 30, 1996.
Sales of investments (principally fixed maturity securities) during the
first nine months of 1996, generated proceeds of $1.9 billion and net realized
gains of $5.9 million and trading losses of $1.4 million. Sales of investments
during the first nine months of 1995 generated proceeds of $.7 billion and net
realized gains of $20.3 million and trading income of $2.2 million.
Investments in mortgage-backed securities at September 30, 1996, included
collateralized mortgage obligations ("CMOs") of $464.8 million and
mortgage-backed pass-through securities of $518.6 million. CMOs are securities
backed by pools of pass-through securities and/or mortgages that are segregated
into sections or "tranches". These securities provide for sequential retirement
of principal, rather than the retirement of principal on a pro rata basis, which
return occurs on pass-through securities through regular monthly principal
payments.
The yield characteristics of mortgage-backed securities differ from those
of traditional fixed income securities. Interest and principal payments occur
more frequently, often monthly, and mortgage-backed securities are subject to
risks associated with variable prepayments. Prepayment rates are influenced by a
number of factors which cannot be predicted with certainty, including the
relative sensitivity of the mortgages backing the assets to changes in interest
rates, a variety of economic, geographic and other factors and the repayment
priority of the securities in the overall securitization structures.
In general, prepayments on the underlying mortgage loans, and on the
securities backed by these loans, increase when prevailing interest rates
decline significantly below the interest rates on such loans. Mortgage-backed
securities purchased at a discount to par will experience an increase in yield
when the underlying mortgages prepay faster than expected. Mortgage-backed
securities purchased at a premium to par that prepay faster than expected will
incur a reduction in yield. When interest rates decline, the proceeds from
prepayments are likely to be reinvested at lower rates than the Company was
earning on the prepaid securities. As interest rates rise, prepayments decrease
because fewer underlying mortgages are refinanced. When this occurs, the average
maturity and duration of the mortgage-backed securities increase. This lowers
the yield on mortgage-backed securities purchased at a discount, since the
discount is realized as income at a slower rate, and increases the yield on
those purchased at a premium, as a result of a decrease in the annual
amortization of the premium.
The following table sets forth the par value, amortized cost and estimated
fair value of investments in mortgage-backed securities including CMOs at
September 30, 1996, summarized by interest rates on the underlying collateral:
<TABLE>
<CAPTION>
Par Amortized Estimated
value cost fair value
----- ---- ----------
(Dollars in millions)
<S> <C> <C> <C>
Below 7 percent............................................... $ 524.1 $ 512.5 $491.9
7 percent - 8 percent......................................... 420.5 416.8 407.8
8 percent - 9 percent......................................... 66.0 66.7 66.2
9 percent and above........................................... 17.9 18.2 17.5
-------- -------- ------
Total mortgage-backed securities......................... $1,028.5 $1,014.2 $983.4
======== ======== ======
</TABLE>
15
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
The amortized cost and estimated fair value of mortgage-backed securities
including CMOs at September 30, 1996, summarized by type of security, were as
follows:
<TABLE>
<CAPTION>
Estimated fair value
------------------------
Percent of
Amortized fixed maturity
Type cost Amount securities
- ---- ---- ------ ----------
(Dollars in millions)
<S> <C> <C> <C>
Pass-throughs and sequential and targeted amortization classes $ 642.3 $620.7 19%
Planned amortization classes and accretion directed bonds..... 328.4 319.5 10
Subordinated classes.......................................... 43.5 43.2 1
-------- ------ ---
$1,014.2 $983.4 30%
======== ====== ==
</TABLE>
Pass-throughs and sequential and targeted amortization classes have similar
prepayment variability. Pass-throughs have historically provided the best
liquidity in the mortgage-backed securities market and the best
price/performance ratio when interest rates are volatile. This type of security
is also frequently used as collateral in the dollar-roll market. Sequential
classes pay in a strict sequence; all principal payments received by the CMO are
paid to the sequential tranches in order of priority. Targeted amortization
classes provide a modest amount of prepayment protection when prepayments on the
underlying collateral increase from those assumed at pricing; they thus offer
slightly better call protection than sequential classes or pass-throughs.
Planned amortization and targeted amortization classes are protected from
prepayment risk; the risk is absorbed by subordinated classes. Subordinated CMO
classes have both prepayment and credit risk. The subordinated classes are used
to lend credit enhancement to the senior securities and as such, both prepayment
and credit risk associated with this class are generally higher than that of
the senior securities. The credit risk of subordinated classes is derived from
the negative leverage of owning a small percentage of the underlying mortgage
loan collateral while bearing a majority of the risk of loss due to homeowners'
defaults.
Reverse repurchase agreements and dollar-roll transactions are entered into
to increase return on investments and improve liquidity. These transactions
generally terminate after 30 days and are accounted for as short-term borrowings
collateralized by pledged securities with book values approximately equal to the
loan value. Such borrowings averaged approximately $102.7 million during the
first nine months of 1996, compared to approximately $106.3 million during the
same period of 1995.
STATUTORY INFORMATION
Bankers' life insurance subsidiaries are required to follow statutory
accounting practices ("SAP") prescribed or permitted by state insurance
regulators. SAP differs in many respects from generally accepted accounting
principles. After appropriate eliminations of intercompany accounts, Bankers'
life insurance subsidiaries reported combined statutory net income of $50.3
million for the nine months ended September 30, 1996, and the following amounts
on their combined balance sheet at that date (dollars in millions):
<TABLE>
<S> <C>
Statutory capital and surplus (a).......................................... $339.3
Asset valuation reserve ("AVR") (b)........................................ 31.4
Interest maintenance reserve ("IMR") (b)................................... 62.2
------
Total................................................................. $432.9
======
<FN>
(a) In connection with the acquisition of its life insurance subsidiaries,
BLH increased the capital of BLI by providing $500.0 million of cash in
exchange for a surplus debenture. As required by the regulatory
authorities, the remaining unpaid principal of $400.0 million at
September 30, 1996 ($430.0 million at December 31, 1995), is considered
a part of statutory capital and surplus of BLI. BLI made a scheduled
principal payment of $30.0 million plus accrued interest on the surplus
debenture on March 29, 1996.
16
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
(b) Statutory accounting practices classify certain segregated portions of
surplus, called AVR and IMR, as liabilities. The purpose of these
accounts is to stabilize statutory net income and surplus against
fluctuations in the market value and creditworthiness of investments.
The IMR captures all realized investment gains and losses resulting
from changes in interest rates and provides for subsequent
amortization of such amounts into statutory net income on a basis
reflecting the remaining life of the assets sold. The AVR captures
investment gains and losses related to changes in creditworthiness
and is also adjusted each year based on a formula related to the
quality and loss experience of the investment portfolio.
</FN>
</TABLE>
Statutory regulations restrict the amount of capital and surplus of life
insurance subsidiaries that may be transferred to the parent in the form of
dividends, loans or advances. Payments to BLH by BLI of principal and interest
on the surplus debenture may be made by BLI from its available funds only when
the Illinois Department of Insurance ("DOI") is satisfied that the financial
condition of BLI warrants that action. Such approval may not be withheld
provided the surplus of BLI exceeds, after such payment, approximately $128.0
million. BLI's statutory surplus at September 30, 1996, was $339.3 million. All
dividend payments by BLI are subject to prior written approval of the DOI.
During the nine months ended September 30, 1996, BLI paid extraordinary
dividends of $35.0 million to BLH.
BLI's ability to service its obligation under the surplus debenture is
dependent upon its ability to receive dividends and tax sharing payments from
BLC. BLC may, upon prior notice to the DOI, pay dividends in any twelve-month
period up to the greater of: (i) statutory net income for the prior year; or
(ii) 10 percent of statutory capital and surplus at the end of the prior year.
Additionally, as a condition to its 1992 acquisition, BLC agreed not to pay
dividends if, immediately after such payment, BLC's ratio of adjusted capital to
risk-based capital ("RBC") would be less than 100 percent. Calculations using
the RBC formula indicate that BLC's adjusted capital was greater than twice its
total RBC at September 30, 1996. Dividends in excess of maximum amounts
prescribed by the state statutes may not be paid without DOI approval. BLC paid
regular dividends to BLI of $59.6 million during the first nine months of 1996.
During the remainder of 1996, BLC may pay additional dividends up to $26.4
million without DOI approval.
17
<PAGE>
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
11 Computation of Earnings Per Share
27 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
September 30, 1996.
18
<PAGE>
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 thereunto duly authorized.
BANKERS LIFE HOLDING CORPORATION
Dated: November 13, 1996 By: /s/ ROLLIN M. DICK
------------------
Rollin M. Dick
Executive Vice President and
Chief Financial Officer
(authorized officer and principal
financial officer)
<TABLE>
<CAPTION>
EXHIBIT 11
BANKERS LIFE HOLDING CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
(unaudited)
Three months ended Nine months Six months
September 30, ended ended
------------------ September 30, June 30,
1996 1995 1996 1995
---- ---- ------------- -----------
(prior basis)
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period...................... 49,326,340 52,837,326 50,597,758 52,782,700
Weighted average shares issued (retired) during the period:
Employee defined contribution plan......................... 357 36,715
Exercise of stock options (1).............................. 41,653 - 14,591 -
Shares acquired and effectively retired (2)................ - (541,222) (1,213,634) -
Common stock equivalents related to stock options.......... 80,058 - 24,297 -
----------- ----------- ----------- -----------
Weighted average shares outstanding ................... 49,448,051 52,296,461 49,423,012 52,819,415
=========== =========== =========== ===========
Net income ................................................ $32,096,563 $30,693,000 $94,342,768 $60,241,000
=========== =========== =========== ===========
Net income per common share............................ $.65 $.59 $1.91 $1.14
==== ==== ===== =====
<FN>
(1) Bankers issued 99,700 shares during the nine months ended September 30, 1996 upon the exercise of stock options.
(2) Bankers purchased 1,272,248 common shares during the nine months ended September 30, 1996.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10-Q FOR BANKERS LIFE HOLDING
CORPORATION, DATED SEPTEMBER 30, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 3,204,700
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 111,600 <F1>
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,638,800
<CASH> 0
<RECOVER-REINSURE> 34,700
<DEFERRED-ACQUISITION> 867,500 <F2>
<TOTAL-ASSETS> 5,033,300
<POLICY-LOSSES> 2,850,900
<UNEARNED-PREMIUMS> 202,400
<POLICY-OTHER> 189,300
<POLICY-HOLDER-FUNDS> 132,100
<NOTES-PAYABLE> 418,100
0
0
<COMMON> 734,000
<OTHER-SE> 279,700 <F3>
<TOTAL-LIABILITY-AND-EQUITY> 5,033,300
961,800
<INVESTMENT-INCOME> 191,000
<INVESTMENT-GAINS> 4,500 <F4>
<OTHER-INCOME> 13,000 <F5>
<BENEFITS> 776,000 <F6>
<UNDERWRITING-AMORTIZATION> 88,000 <F7>
<UNDERWRITING-OTHER> 115,800
<INCOME-PRETAX> 166,600
<INCOME-TAX> 62,200
<INCOME-CONTINUING> 104,400
<DISCONTINUED> 0
<EXTRAORDINARY> (10,100)
<CHANGES> 0
<NET-INCOME> 94,300
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.91
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Includes $106,900 of credit-tenant loans.
<F2> Includes $532,100 of cost of policies purchased.
<F3> Includes retained earnings of $307,000, offset by net
unrealized depreciation of securities of $27,300.
<F4> Includes net realized gains of $5,900 and a net trading loss of $1,400.
<F5> Includes restructuring income of $16,000 and other losses of $3,000.
<F6> Includes insurance policy benefits of $715,200 and interest expense on
annuities and financial products of $60,800.
<F7> Includes amortization of cost of policies purchased of $41,300 and
cost of policies produced of $41,100 and amortization related to
realized gains of $5,600.
</FN>
</TABLE>
