Form 8-K FBL FINANCIAL GROUP INC For: Feb 06

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February 6, 2020 4:18 PM EST











FBL Financial Group Reports Fourth Quarter and Full Year 2019 Results

Company Highlights
•
Fourth quarter 2019 net income attributable to FBL Financial Group of $34.7 million, or $1.40 per common diluted share. Full year 2019 net income attributable to FBL Financial Group of $126.2 million, or $5.09 per diluted common share
•
Record fourth quarter 2019 adjusted operating income(1) of $34.8 million, or $1.41 per diluted common share. Record full year 2019 adjusted operating income of $117.7 million, or $4.75 per diluted common share
•
Capital returned to shareholders of $88.9 million in 2019
•
Book value per share of $60.12 at year-end 2019, an increase of 26% compared to year-end 2018

West Des Moines, Iowa - February 6, 2020 - FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the fourth quarter of 2019 of $34.7 million, or $1.40 per diluted common share, compared to $6.4 million, or $0.26 per diluted common share, for the fourth quarter of 2018. Adjusted operating income(1) totaled $34.8 million, or $1.41 per common share, for the fourth quarter of 2019, compared to $18.8 million, or $0.75 per common share, for the fourth quarter of 2018. Fourth quarter 2019 earnings per share reflects:
•
The benefit of $0.32 per share from unlocking an actuarial assumption
•
Unfavorable mortality results in the Corporate & Other segment
•
Lower spread income in the Annuity segment
•
The benefit of other investment-related income of $0.07 per share
•
Continued investment in the Wealth Management business

Adjusted operating income differs from the GAAP measure, net income attributable to FBL Financial Group, in that it excludes realized gains and losses on investments and the change in net unrealized gains and losses on derivatives and equity securities, as well as the initial impact of changes in federal statutory income tax rates and tax laws. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.
"FBL Financial Group reported excellent earnings for the fourth quarter, achieving net income of $1.40 per share and record adjusted operating income of $1.41 per share driven in part by a benefit from unlocking an actuarial assumption," said Daniel D. Pitcher, Chief Executive Officer of FBL Financial Group, Inc. "I'm also pleased to report that we achieved record full year adjusted operating income of $4.75 per share. These results reflect steady growth in our business and a consistent, robust capital position. As we look forward, our focus is to maintain financial strength, support our Farm Bureau Financial Services agents and serve our clients' diverse needs. This builds on our history of proven success, grounded in our purpose to protect livelihoods and futures."


Product Revenues
Premiums and product charges for the fourth quarter of 2019 totaled $82.7 million compared to $80.2 million in the fourth quarter of 2018. Interest sensitive product charges increased five percent while traditional life insurance premiums increased two percent during the quarter. Premiums collected(2) in the fourth quarter of 2019 totaled $156.0 million compared to $157.4 million in the fourth quarter of 2018. Total life insurance premiums collected increased three percent while annuity premiums collected decreased five percent, impacted by the low market interest rate environment.



Investment Income
Net investment income in the fourth quarter of 2019 totaled $109.0 million, compared to $83.9 million in the fourth quarter of 2018. This increase is due to a change in the fair value of derivatives and an increase in average invested assets, partially offset by lower investment yields. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties, was 4.95 percent for the year ended December 31, 2019 compared to 5.13 percent for the year ended December 31, 2018. At December 31, 2019, 98 percent of the fixed maturity securities in FBL Financial Group's investment portfolio were investment grade debt securities.

Benefits and Expenses
Benefits and expenses totaled $153.3 million in the fourth quarter of 2019, compared to $156.0 million in the fourth quarter of 2018. Death benefits, net of reinsurance and reserves released, totaled $33.9 million in the fourth quarter of 2019, compared to $30.4 million in the fourth quarter of 2018. By its nature, mortality experience can fluctuate from quarter to quarter.

Unlocking
During the fourth quarter of 2019, FBL Financial Group extended the deferred acquisition cost amortization period for its participating whole life insurance block based on an experience analysis demonstrating an increase in persistency rates. This unlocking resulted in a pre-tax favorable impact of $10.0 million, or $0.32 per share after-tax.

Net Realized Losses
In the fourth quarter of 2019, FBL Financial Group recognized net realized losses on investments of $2.7 million. This is attributable to realized losses on sales of $3.5 million, realized gains on sales of $0.2 million and a gain from the increase in fair value of equity securities of $0.6 million.

Stock Repurchases
During the fourth quarter of 2019, FBL Financial Group did not repurchase any shares of its Class A or Class B common stock. FBL Financial Group has $36.3 million remaining under its current stock repurchase program.

Capital and Book Value
As of December 31, 2019, the book value per share of FBL Financial Group common stock totaled $60.12, compared to $47.78 at December 31, 2018. Book value per share, excluding accumulated other comprehensive income(3), totaled $45.73 at December 31, 2019, compared to $44.09 at December 31, 2018. The December 31, 2019 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 562 percent.

Further Financial Information
Further information on FBL Financial Group's financial results, including results by segment, may be found in FBL Financial Group's financial supplement, available on its website, www.fblfinancial.com.

Conference Call
FBL Financial Group will hold a conference call with investors tomorrow, February 7, 2020, at 11:00 a.m. Eastern Time. The call will be webcast and a replay will be available on FBL Financial Group's website.

Forward-Looking Statements
Certain statements in this release concerning FBL Financial Group's prospects for the future are forward-looking statements intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act. These statements generally can be identified by their context, including terms such as “believes,” “anticipates,” “expects,” or similar words. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statement. These risks and uncertainties are detailed in FBL Financial Group's reports filed with the Securities and Exchange Commission and include, but are not limited to, changes in interest rates, difficult conditions in financial markets and the economy, lack of liquidity and access to capital, investment valuations, competitive factors, a decrease in ratings, changes in laws and regulations, differences between actual claims experience and underwriting assumptions, relationships with Farm Bureau organizations, the ability to attract and retain sales agents and adverse results from litigation. These forward-looking statements are based on assumptions which FBL Financial Group believes to be reasonable; however, no assurance can be given that the assumptions will prove to be correct. FBL Financial Group undertakes no obligation to update any forward-looking statements.




Investor Relations Contact
Kathleen Till Stange, Vice President Corporate & Investor Relations
(515) 226-6780, [email protected]

About FBL Financial Group
FBL Financial Group is a holding company with the purpose to protect livelihoods and futures. Operating under the consumer brand name Farm Bureau Financial Services, its affiliates offer a broad range of life insurance, annuity and investment products distributed by multiline exclusive Farm Bureau agents. Helping complete the financial services offering, advisors offer wealth management and financial planning services. In addition, FBL Financial Group manages all aspects of two Farm Bureau affiliated property-casualty insurance companies for a management fee. Headquartered in West Des Moines, Iowa, FBL Financial Group is traded on the New York Stock Exchange under the symbol FFG. For more information, please visit www.fblfinancial.com and www.fbfs.com.

- FINANCIAL INFORMATION AND NOTES FOLLOW -



FBL Financial Group, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)

 
Three months ended
 
Year ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
32,178

 
$
30,624

 
$
127,113

 
$
122,789

Traditional life insurance premiums
50,502

 
49,600

 
197,863

 
198,312

Net investment income
108,986

 
83,865

 
424,998

 
394,618

Net realized capital gains (losses)
(2,707
)
 
(5,661
)
 
8,523

 
(7,276
)
Net other-than-temporary impairment losses recognized in earnings
—

 
(3,908
)
 
(919
)
 
(4,998
)
Other income
4,602

 
4,116

 
17,103

 
16,181

Total revenues
193,561

 
158,636

 
774,681

 
719,626

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
73,507

 
59,626

 
276,473

 
253,753

Traditional life insurance benefits
43,142

 
41,860

 
174,654

 
175,209

Policyholder dividends
2,514

 
2,539

 
10,053

 
10,130

Underwriting, acquisition and insurance expenses
26,290

 
44,434

 
140,624

 
152,055

Interest expense
1,213

 
1,213

 
4,850

 
4,851

Other expenses
6,597

 
6,314

 
25,246

 
22,595

Total benefits and expenses
153,263

 
155,986

 
631,900

 
618,593

 
40,298

 
2,650

 
142,781

 
101,033

Income taxes
(6,500
)
 
2,812

 
(19,929
)
 
(11,650
)
Equity income, net of related income taxes
1,033

 
998

 
3,456

 
4,439

Net income
34,831

 
6,460

 
126,308

 
93,822

Net income attributable to noncontrolling interest
(92
)
 
(45
)
 
(99
)
 
(29
)
Net income attributable to FBL Financial Group, Inc.
$
34,739

 
$
6,415

 
$
126,209

 
$
93,793

 
 
 
 
 
 
 
 
Earnings per common share - assuming dilution
$
1.40

 
$
0.26

 
$
5.09

 
$
3.75

 
 
 
 
 
 
 
 
Weighted average common shares
24,761,224

 
24,887,779

 
24,760,541

 
24,932,189

Effect of dilutive securities
8,238

 
9,762

 
10,134

 
12,412

Weighted average common shares - diluted
24,769,462

 
24,897,541

 
24,770,675

 
24,944,601

 
 
 
 
 
 
 
 




(1) Reconciliation of Net Income Attributable to FBL Financial Group to Adjusted Operating Income - Unaudited

FBL Financial Group consistently utilizes adjusted operating income, a financial measure common in the life insurance industry that is not prepared in accordance with U.S. generally accepted accounting principles (GAAP), as a primary economic measure to evaluate its financial performance. Adjusted operating income consists of net income attributable to FBL Financial Group adjusted to exclude realized gains and losses on investments and the change in fair value of derivatives and equity securities, which can fluctuate greatly from period to period, as well as the initial impact of changes in federal statutory income tax rates and tax laws. These fluctuations make it difficult to analyze core operating trends. In addition, for derivatives not designated as hedges, there is a mismatch between the valuation of the asset and liability when deriving net income (loss). Specifically, call options relating to indexed business are one-year assets while the embedded derivatives in the indexed contracts represent the rights of the contract holder to receive index credits over the entire period the indexed products are expected to be in force. This non-GAAP measure is used for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community. FBL Financial Group believes the presentation and evaluation of adjusted operating income provides information that may enhance an investor's understanding of FBL Financial Group's underlying results and profitability. A reconciliation is provided in the following table:
 
Three months ended
 
Year ended
 
December 31,
 
December 31,
 
2019
 
2018
 
2019
 
2018
 
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group
$
34,739

 
$
6,415

 
$
126,209

 
$
93,793

Adjustments:
 
 
 
 
 
 
 
Initial impact of the Tax Act(a)
—

 
—

 
—

 
(617
)
Net realized gains/losses on investments(b)
2,147

 
7,414

 
(5,813
)
 
9,546

Change in net unrealized gains/losses on derivatives(b)
(2,047
)
 
4,997

 
(2,703
)
 
6,188

Adjusted operating income
$
34,839

 
$
18,826

 
$
117,693

 
$
108,910

 
 
 
 
 
 
 
 
Adjusted operating income per common share - assuming dilution
$
1.41

 
$
0.75

 
$
4.75

 
$
4.36

 
 
 
 
 

(a) Amount represents a change in the provisional estimate of the impact of the Tax Cuts and Jobs Act of 2017 on deferred tax assets and liabilities as of December 31, 2017.

(b) Net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, value of insurance in force acquired, interest sensitive policy reserves and income taxes attributable to these items.

(2) Premiums Collected - Net statutory premiums collected is a non-GAAP measure and includes premiums collected from annuities and universal life-type products. It is a useful metric for investors as it is a measure of sales production.
For GAAP reporting, these premiums received are not reported as revenues.

(3) Reconciliation of Book Value Per Share Excluding Accumulated Other Comprehensive Income - Unaudited
 
December 31,
2019
 
December 31,
2018
Book value per share
$
60.12

 
$
47.78

Less: Per share impact of accumulated other comprehensive income
14.39

 
3.69

Book value per share, excluding accumulated other comprehensive income
$
45.73

 
$
44.09


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $354.8 million at December 31, 2019 and $91.3 million at December 31, 2018. Since accumulated other comprehensive income fluctuates from quarter to quarter due to unrealized changes in the fair value of investments caused principally by changes in market interest rates, FBL Financial Group believes this non-GAAP financial measure provides useful supplemental information.



FBL Financial Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)

 
December 31,
2019
 
December 31,
2018
Assets
 
 
 
Investments
$
9,091,623

 
$
8,414,118

Cash and cash equivalents
17,277

 
19,035

Deferred acquisition costs
289,456

 
418,802

Other assets
435,969

 
420,394

Assets held in separate accounts
645,881

 
561,281

Total assets
$
10,480,206

 
$
9,833,630

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
7,393,549

 
$
7,205,471

Other policy funds, claims and benefits
597,256

 
615,177

Debt
97,000

 
97,000

Other liabilities
260,604

 
170,442

Liabilities related to separate accounts
645,881

 
561,281

Total liabilities
8,994,290

 
8,649,371

 
 
 
 
Stockholders' equity
 
 
 
FBL Financial Group, Inc. stockholders' equity:
 
 
 
Preferred stock
3,000

 
3,000

Class A common stock
152,661

 
152,652

Class B common stock
72

 
72

Accumulated other comprehensive income
354,764

 
91,318

Retained earnings
975,260

 
937,097

Total FBL Financial Group, Inc. stockholders' equity
1,485,757

 
1,184,139

Noncontrolling interest
159

 
120

Total stockholders' equity
1,485,916

 
1,184,259

Total liabilities and stockholders' equity
$
10,480,206

 
$
9,833,630

 
 
 
 
Common shares outstanding
24,664,215

 
24,718,815


####










FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
2019 Fourth Quarter





invsuppcover2019.jpg






fblfgrgb960pxa02.jpg







 
 
Corporate Headquarters
FBL Financial Group, Inc.
 
5400 University Avenue
 
West Des Moines, Iowa 50266-5997
 
(515) 225-5400
Financial Inquiries
For more information contact:
 
Kathleen Till Stange
 
Vice President Corporate & Investor Relations
 
 
(515) 226-6780
Internet Information
FBL Financial Group, Inc.
 
www.fblfinancial.com
Stock Symbol
NYSE: FFG
Transfer Agent
American Stock Transfer & Trust Company, LLC
 
6201 15th Avenue
 
Brooklyn, NY 11219
 
http://www.astfinancial.com
 
 

















FBL Financial Group, Inc.
 
 
Financial Supplement (Unaudited)
 
 
December 31, 2019
 
 
Table of Contents/Notes
 
 
 
 
 
Consolidated Financial Statements:
 
 
Consolidated Balance Sheets
 
Consolidated Statements of Comprehensive Income
 
Consolidated Statements of Comprehensive Income, last five quarters
 
Net Income to Adjusted Operating Income Reconciliation and Pre-tax Adjusted Operating Income by Segment, last five quarters
 
Financial Information by Segment:
 
 
Segment Information
 
Statements of Pre-tax Adjusted Operating Income, last five quarters:
 
 
Annuity Segment
 
Life Insurance Segment
 
Corporate and Other Segment
 
Deferred Acquisition Costs by Segment
 
Impact of Unlocking on Pre-tax Adjusted Operating Income
 
Collected Premiums, last five quarters
 
Other Information
 

NOTE 1: In addition to net income as determined using U.S. Generally Accepted Accounting Principles (GAAP), we have consistently used adjusted operating income (a measure of earnings not recognized under GAAP), a financial measure common in the life insurance industry, as a primary economic measure to evaluate our financial performance. Adjusted operating income for the periods presented consists of net income adjusted primarily to exclude realized gains and losses on investments and the change in fair value of derivatives and equity securities.

We use adjusted operating income, in addition to net income, to measure our performance since realized gains and losses on investments and the change in fair value of derivatives and equities can fluctuate greatly from quarter to quarter. These fluctuations make it difficult to analyze core operating trends. A view of our adjusted operating performance without the impact of these items enhances the analysis of our results. We use adjusted operating income for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community.

We analyze our segment results based on pre-tax adjusted operating income, which excludes the impact of certain items that are included in pre-tax net income. Pre-tax adjusted operating income is a basis allowed for segment reporting under U.S. generally accounting principles (GAAP). See Note 13 to our consolidated financial statements in Form 10-K for the year ended December 31, 2018 for further information regarding how we define our segments and pre-tax adjusted operating income.
NOTE 2: Certain financial information presented herein may not add due to rounding.

1



FBL Financial Group, Inc.
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)

 
December 31,
2019
 
December 31,
2018
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost: 2019 - $7,015,269; 2018 - $6,856,277)
$
7,702,628

 
$
7,033,045

Equity securities - at fair value (cost: 2019 - $95,269; 2018 - $93,564)
100,228

 
92,857

Mortgage loans
1,011,678

 
1,039,829

Real estate
955

 
1,543

Policy loans
201,589

 
197,366

Short-term investments
11,865

 
15,713

Other investments
62,680

 
33,765

Total investments
9,091,623

 
8,414,118

 
 
 
 
Cash and cash equivalents
17,277

 
19,035

Securities and indebtedness of related parties
74,791

 
60,962

Accrued investment income
72,332

 
74,524

Amounts receivable from affiliates
4,357

 
3,812

Reinsurance recoverable
107,498

 
102,386

Deferred acquisition costs
289,456

 
418,802

Value of insurance in force acquired
2,624

 
10,385

Current income taxes recoverable
6,427

 
4,807

Other assets
167,940

 
163,518

Assets held in separate accounts
645,881

 
561,281

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
10,480,206

 
$
9,833,630




2



FBL Financial Group, Inc.
Consolidated Balance Sheets (Continued)
(Dollars in thousands)

 
December 31,
2019
 
December 31,
2018
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,548,212

 
$
5,403,125

Traditional life insurance and accident and health products
1,845,337

 
1,802,346

Other policy claims and benefits
46,883

 
51,298

Supplementary contracts without life contingencies
296,915

 
303,627

Advance premiums and other deposits
253,458

 
260,252

Amounts payable to affiliates
1,218

 
1,461

Long-term debt payable to non-affiliates
97,000

 
97,000

Deferred income taxes
152,373

 
75,449

Other liabilities
107,013

 
93,532

Liabilities related to separate accounts
645,881

 
561,281

Total liabilities
8,994,290

 
8,649,371

 
 
 
 
Stockholders' equity:
 
 
 
FBL Financial Group, Inc. stockholders' equity:
 
 
 
Preferred stock, without par value, at liquidation value - authorized 10,000,000 shares, issued and outstanding 5,000,000 Series B shares
3,000

 
3,000

Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,652,802 in 2019 and 24,707,402 shares in 2018
152,661

 
152,652

Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2019 and 2018
72

 
72

Accumulated other comprehensive income
354,764

 
91,318

Retained earnings
975,260

 
937,097

Total FBL Financial Group, Inc. stockholders' equity
1,485,757

 
1,184,139

Noncontrolling interest
159

 
120

Total stockholders' equity
1,485,916

 
1,184,259

Total liabilities and stockholders' equity
$
10,480,206

 
$
9,833,630




3



FBL Financial Group, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in thousands, except per share data)

 
Three months ended December 31,
 
Year ended December 31,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
32,178

 
$
30,624

 
$
127,113

 
$
122,789

Traditional life insurance premiums
50,502

 
49,600

 
197,863

 
198,312

Net investment income
108,986

 
83,865

 
424,998

 
394,618

Net realized capital gains (losses)
(2,707
)
 
(5,661
)
 
8,523

 
(7,276
)
 

 

 
 
 
 
Total other-than-temporary impairment losses
—

 
(3,982
)
 
(919
)
 
(5,072
)
Non-credit portion in other comprehensive income (loss)
—

 
74

 
—

 
74

Net other-than-temporary impairment losses recognized in earnings
—

 
(3,908
)
 
(919
)
 
(4,998
)
Other income
4,602

 
4,116

 
17,103

 
16,181

Total revenues
193,561

 
158,636

 
774,681

 
719,626

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
73,507

 
59,626

 
276,473

 
253,753

Traditional life insurance benefits
43,142

 
41,860

 
174,654

 
175,209

Policyholder dividends
2,514

 
2,539

 
10,053

 
10,130

Underwriting, acquisition and insurance expenses
26,290

 
44,434

 
140,624

 
152,055

Interest expense
1,213

 
1,213

 
4,850

 
4,851

Other expenses
6,597

 
6,314

 
25,246

 
22,595

Total benefits and expenses
153,263

 
155,986

 
631,900

 
618,593

 
40,298

 
2,650

 
142,781

 
101,033

Income tax benefit (expense)
(6,500
)
 
2,812

 
(19,929
)
 
(11,650
)
Equity income, net of related income taxes
1,033

 
998

 
3,456

 
4,439

Net income
34,831

 
6,460

 
126,308

 
93,822

Net income attributable to noncontrolling interest
(92
)
 
(45
)
 
(99
)
 
(29
)
Net income attributable to FBL Financial Group, Inc.
$
34,739

 
$
6,415

 
$
126,209

 
$
93,793

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
(16,672
)
 
$
8,772

 
$
389,655

 
$
(94,392
)
 
 
 
 
 
 
 
 
Earnings per common share
$
1.40

 
$
0.26

 
$
5.09

 
$
3.76

Earnings per common share - assuming dilution
$
1.40

 
$
0.26

 
$
5.09

 
$
3.75

 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.48

 
$
0.46

 
$
1.92

 
$
1.84

Special cash dividend per common share
$
—

 
$
—

 
$
1.50

 
$
1.50



4



FBL Financial Group, Inc.
Consolidated Statements of Comprehensive Income (Unaudited) - Quarterly
(Dollars in thousands, except per share data)

 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
30,624

 
$
31,266

 
$
32,534

 
$
31,135

 
$
32,178

Traditional life insurance premiums
49,600

 
49,392

 
50,987

 
46,982

 
50,502

Net investment income
83,865

 
109,640

 
104,894

 
101,478

 
108,986

Net realized capital gains (losses)
(5,661
)
 
10,157

 
377

 
696

 
(2,707
)
 

 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(3,982
)
 
(869
)
 
—

 
(50
)
 
—

Non-credit portion in other comprehensive income (loss)
74

 
—

 
—

 
—

 
—

Net impairment losses recognized in earnings
(3,908
)
 
(869
)
 
—

 
(50
)
 
—

Other income
4,116

 
3,970

 
4,114

 
4,417

 
4,602

Total revenues
158,636

 
203,556

 
192,906

 
184,658

 
193,561

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
59,626

 
70,596

 
65,223

 
67,147

 
73,507

Traditional life insurance benefits
41,860

 
46,675

 
41,960

 
42,877

 
43,142

Policyholder dividends
2,539

 
2,534

 
2,564

 
2,441

 
2,514

Underwriting, acquisition and insurance expenses
44,434

 
36,189

 
38,948

 
39,197

 
26,290

Interest expense
1,213

 
1,212

 
1,212

 
1,213

 
1,213

Other expenses
6,314

 
6,250

 
6,635

 
5,764

 
6,597

Total benefits and expenses
155,986

 
163,456

 
156,542

 
158,639

 
153,263

 
2,650

 
40,100

 
36,364

 
26,019

 
40,298

Income tax benefit (expense)
2,812

 
(6,276
)
 
(5,511
)
 
(1,642
)
 
(6,500
)
Equity income, net of related income taxes
998

 
220

 
1,404

 
799

 
1,033

Net income
6,460

 
34,044

 
32,257

 
25,176

 
34,831

Net (income) loss attributable to noncontrolling interest
(45
)
 
(1
)
 
41

 
(47
)
 
(92
)
Net income attributable to FBL Financial Group, Inc.
$
6,415

 
$
34,043

 
$
32,298

 
$
25,129

 
$
34,739

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
8,772

 
$
131,891

 
$
145,925

 
$
128,511

 
$
(16,672
)
 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
0.26

 
$
1.37

 
$
1.30

 
$
1.01

 
$
1.40

Earnings per common share - assuming dilution
$
0.26

 
$
1.37

 
$
1.30

 
$
1.01

 
$
1.40

 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.46

 
$
0.48

 
$
0.48

 
$
0.48

 
$
0.48

Special cash dividend per common share
$
—

 
$
1.50

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
24,888

 
24,765

 
24,757

 
24,759

 
24,761

Effect of dilutive securities
10

 
11

 
11

 
10

 
8

Diluted
24,898

 
24,776

 
24,768

 
24,769

 
24,769



5



FBL Financial Group, Inc.
Net Income to Adjusted Operating Income Reconciliation and Pre-tax Adjusted Operating Income by Segment
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
 
 
 
 
 
 
 
 
Net income attributable to FBL Financial Group, Inc.
$
6,415

 
$
34,043

 
$
32,298

 
$
25,129

 
$
34,739

Net income adjustments:
 
 
 
 
 
 
 
 
 
Realized gains/losses on investments (1)
7,414

 
(7,230
)
 
(289
)
 
(440
)
 
2,147

Change in net unrealized gains/losses on derivatives (1)
4,997

 
(911
)
 
(272
)
 
526

 
(2,047
)
Adjusted operating income (2)
$
18,826

 
$
25,902

 
$
31,737

 
$
25,215

 
$
34,839

 
 
 
 
 
 
 
 
 
 
Adjusted operating income per common share - assuming dilution (2)
$0.75
 
$1.04
 
$1.28
 
$1.02
 
$1.41
 
 
 
 
 
 
 
 
 
 
Adjusted operating return on equity, excluding AOCI - last twelve months
10.0%
 
10.0%
 
9.9%
 
9.3%
 
10.7%
Adjusted operating return on equity, including AOCI - last twelve months
8.8%
 
8.9%
 
8.7%
 
7.8%
 
8.6%
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Impact of Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Realized gains (losses) on investments and change in net unrealized gains/losses on equity securities and derivatives
$
(19,216
)
 
$
10,846

 
$
444

 
$
(198
)
 
$
70

Offsets: (3)
 
 
 
 
 
 
 
 
 
Change in amortization
945

 
(256
)
 
(48
)
 
(343
)
 
61

Reserve change on interest sensitive products
2,561

 
(285
)
 
315

 
432

 
(258
)
Income tax
3,299

 
(2,164
)
 
(150
)
 
23

 
27

Net impact of net income adjustments
$
(12,411
)
 
$
8,141

 
$
561

 
$
(86
)
 
$
(100
)
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Pre-tax adjusted operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
12,087

 
$
15,662

 
$
14,637

 
$
8,121

 
$
14,414

Life Insurance segment
8,444

 
10,092

 
18,239

 
14,032

 
24,771

Corporate and Other segment
(953
)
 
4,319

 
4,595

 
4,939

 
2,456

Total pre-tax adjusted operating income
19,578

 
30,073

 
37,471

 
27,092

 
41,641

Income taxes on adjusted operating income
(752
)
 
(4,171
)
 
(5,734
)
 
(1,877
)
 
(6,802
)
Adjusted operating income (2)
$
18,826

 
$
25,902

 
$
31,737

 
$
25,215

 
$
34,839


(1) Amounts are net of offsets related to changes in amortization of unearned revenue reserves, deferred sales inducements and deferred acquisition costs, as well as changes in interest sensitive product reserves and income taxes attributable to these items.
(2)
Adjusted operating income is a non-GAAP measure of earnings, see Note 1 on page 1 for additional information.
(3) The items excluded from adjusted operating income impact the amortization of deferred acquisition costs, value of business acquired and unearned revenue reserve. Certain interest sensitive reserves as well as income taxes are also impacted.

6



FBL Financial Group, Inc.
Segment Information

We analyze operations by reviewing financial information regarding our primary products that are aggregated into the Annuity and Life Insurance product segments. In addition, our Corporate and Other segment includes various support operations, corporate capital and other product lines that are not currently underwritten by the Company.

The Annuity segment primarily consists of fixed rate and indexed annuities and supplementary contracts (some of which involve life contingencies). Fixed rate and indexed annuities provide for tax-deferred savings and supplementary contracts provide for the systematic repayment of funds that accumulate interest. Fixed rate annuities consist primarily of flexible premium deferred annuities, but also include single premium deferred and immediate contracts. With fixed rate annuities, we bear the underlying investment risk and credit interest to the contracts at rates we determine, subject to interest rate guarantees. With indexed annuity products, we bear the underlying investment risk and credit interest in an amount equal to a percentage of the gain in a specified market index, subject to minimum guarantees.

The Life Insurance segment consists of whole life, term life and universal life policies, including indexed universal life. These policies provide benefits upon the death of the insured and may also allow the customer to build cash value on a tax-deferred basis.

The Corporate and Other segment includes (i) wealth management services; (ii) advisory services for the management of investments and other companies; (iii) marketing and distribution services for the sale of insurance products not issued by us; (iv) leasing services with affiliates; (v) closed blocks of variable annuity, variable life and accident and health products; (vi) interest expense and (vii) investments and related investment income not specifically allocated to our product segments.

We analyze our segment results based on pre-tax adjusted operating income. Accordingly, income taxes are not allocated to the segments. In addition, adjusted operating results are reported net of transactions between the segments.

7



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Annuity Segment
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Pre-tax Adjusted Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
1,474

 
$
1,567

 
$
1,772

 
$
1,608

 
$
1,734

Net investment income (1)
53,248

 
51,115

 
52,491

 
49,633

 
52,618

Total adjusted operating revenues
54,722

 
52,682

 
54,263

 
51,241

 
54,352

 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
32,299

 
28,070

 
30,450

 
28,585

 
30,980

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
631

 
514

 
482

 
405

 
662

Amortization of deferred acquisition costs
2,789

 
2,679

 
2,917

 
8,015

 
2,763

Amortization of value of insurance in force acquired
165

 
163

 
163

 
164

 
164

Other underwriting expenses (1)
6,751

 
5,594

 
5,614

 
5,951

 
5,369

Total underwriting, acquisition and insurance expenses
10,336

 
8,950

 
9,176

 
14,535

 
8,958

Total adjusted operating benefits and expenses
42,635

 
37,020

 
39,626

 
43,120

 
39,938

Pre-tax adjusted operating income
$
12,087

 
$
15,662

 
$
14,637

 
$
8,121

 
$
14,414

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,489,765

 
$
4,497,715

 
$
4,525,458

 
$
4,521,789

 
$
4,541,355

Deferred acquisition costs
93,819

 
94,164

 
93,898

 
88,266

 
88,295

Value of insurance in force acquired
2,852

 
2,689

 
2,525

 
2,361

 
2,198

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
4,036,152

 
$
4,038,052

 
$
4,060,032

 
$
4,054,299

 
$
4,105,054

Other insurance reserves
338,646

 
341,506

 
340,896

 
338,585

 
335,222

Allocated equity, excluding AOCI
266,863

 
249,635

 
250,853

 
250,934

 
253,096

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
52,911

 
52,519

 
52,461

 
52,914

 
51,536

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.48
%
 
4.46
%
 
4.42
%
 
4.38
%
 
4.35
%
Credited rate
2.58

 
2.60

 
2.61

 
2.61

 
2.60

Spread on individual annuities at end of quarter (2)
1.90
%
 
1.86
%
 
1.81
%
 
1.77
%
 
1.75
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
3,176,881

 
$
3,194,307

 
$
3,207,285

 
$
3,214,755

 
$
3,204,500

Deposits
67,075

 
63,784

 
56,643

 
53,972

 
63,532

Withdrawals, surrenders and death benefits
(59,661
)
 
(63,379
)
 
(62,808
)
 
(79,157
)
 
(63,065
)
Net flows
7,414

 
405

 
(6,165
)
 
(25,185
)
 
467

 
 
 
 
 
 
 
 
 
 
Policyholder interest
20,824

 
18,543

 
21,128

 
18,352

 
21,207

Annuitizations and other
(10,812
)
 
(5,970
)
 
(7,493
)
 
(3,422
)
 
(4,789
)
Balance, end of period
3,194,307

 
3,207,285

 
3,214,755

 
3,204,500

 
3,221,385

Other interest sensitive reserves
841,845

 
830,767

 
845,277

 
849,799

 
883,669

Total interest sensitive product reserves
$
4,036,152

 
$
4,038,052

 
$
4,060,032

 
$
4,054,299

 
$
4,105,054


(1)
During the fourth quarter of 2018 we offered a voluntary early retirement program resulting in a decrease in net investment income from increased investment expenses ($0.6 million) and an increase in other underwriting expenses ($1.9 million).
(2)
Point-in-time spread at the balance sheet date used by management for decision making, which differs from the spread earned during the reporting period disclosed in the Form 10Q or 10K.

8



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Life Insurance Segment
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Pre-tax Adjusted Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
18,471

 
$
18,988

 
$
19,635

 
$
19,163

 
$
18,956

Traditional life insurance premiums
49,600

 
49,392

 
50,987

 
46,982

 
50,502

Net investment income (1)
38,335

 
38,991

 
40,454

 
38,581

 
40,204

Other income
(66
)
 
(113
)
 
(138
)
 
(131
)
 
(159
)
Total adjusted operating revenues
106,340

 
107,258

 
110,938

 
104,595

 
109,503

 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest and index credits (2)
10,103

 
8,051

 
9,018

 
8,326

 
9,803

Death benefits and other (2)
16,661

 
14,466

 
13,892

 
17,198

 
15,513

Total interest sensitive product benefits
26,764

 
22,517

 
22,910

 
25,524

 
25,316

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
20,001

 
24,416

 
20,577

 
25,233

 
22,878

Surrender and other benefits
9,196

 
9,723

 
10,092

 
9,435

 
9,548

Increase in traditional life future policy benefits (2)
12,666

 
12,534

 
11,291

 
8,206

 
10,716

Total traditional life insurance benefits
41,863

 
46,673

 
41,960

 
42,874

 
43,142

Policyholder dividends
2,539

 
2,534

 
2,564

 
2,441

 
2,514

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
5,275

 
4,639

 
5,179

 
4,487

 
5,195

Amortization of deferred acquisition costs
4,182

 
4,799

 
4,344

 
(592
)
 
(5,732
)
Amortization of value of insurance in force acquired
373

 
372

 
372

 
372

 
372

Other underwriting expenses (1)
17,893

 
16,002

 
16,378

 
16,278

 
14,950

Total underwriting, acquisition and insurance expenses
27,723

 
25,812

 
26,273

 
20,545

 
14,785

Total adjusted operating benefits and expenses
98,889

 
97,536

 
93,707

 
91,384

 
85,757

 
$
7,451

 
$
9,722

 
$
17,231

 
$
13,211

 
$
23,746

Equity income, before tax
993

 
370

 
1,008

 
821

 
1,025

Pre-tax adjusted operating income
$
8,444

 
$
10,092

 
$
18,239

 
$
14,032

 
$
24,771

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
3,060,235

 
$
3,073,086

 
$
3,110,890

 
$
3,123,239

 
$
3,155,216

Deferred acquisition costs
308,937

 
312,664

 
316,309

 
323,609

 
341,143

Value of insurance in force acquired
14,411

 
14,039

 
13,668

 
13,296

 
12,924

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (3)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
989,513

 
$
1,001,865

 
$
1,013,247

 
$
1,024,103

 
$
1,039,335

Other insurance reserves
2,001,449

 
2,013,886

 
2,019,588

 
2,033,080

 
2,043,029

Allocated equity, excluding AOCI
452,274

 
468,983

 
471,279

 
476,443

 
480,489


 

9



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
(Dollars in thousands)
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct policies - traditional life
365,909

 
365,650

 
365,340

 
365,099

 
365,399

Number of direct policies - universal life
69,832

 
70,494

 
71,049

 
71,367

 
72,972

Direct face amounts - traditional life
$
52,191,204

 
$
52,352,065

 
$
52,729,936

 
$
53,005,016

 
$
53,320,484

Direct face amounts - universal life
$
7,777,370

 
$
7,888,196

 
$
7,978,929

 
$
8,020,444

 
$
8,245,749

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
5.02
%
 
5.00
%
 
4.97
%
 
4.91
%
 
4.85
%
Credited rate
3.78

 
3.77

 
3.79

 
3.80

 
3.81

Spread on universal life at end of quarter (4)
1.24
%
 
1.23
%
 
1.18
%
 
1.11
%
 
1.04
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity: (3)
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
979,858

 
$
989,513

 
$
1,001,865

 
$
1,013,247

 
$
1,024,103

Deposits
29,660

 
29,632

 
31,271

 
28,110

 
30,962

Withdrawals and surrenders
(7,778
)
 
(5,703
)
 
(9,081
)
 
(8,455
)
 
(6,915
)
Net flows
21,882

 
23,929

 
22,190

 
19,655

 
24,047

 
 
 
 
 
 
 
 
 
 
Policyholder interest
7,297

 
7,423

 
8,349

 
7,774

 
9,165

Policy charges
(19,736
)
 
(20,017
)
 
(20,287
)
 
(20,129
)
 
(20,603
)
Benefits and other
212

 
1,017

 
1,130

 
3,556

 
2,623

Balance, end of period
$
989,513

 
$
1,001,865

 
$
1,013,247

 
$
1,024,103

 
$
1,039,335


(1)
During the fourth quarter of 2018 we offered a voluntary early retirement program resulting in a decrease in net investment income from increased investment expenses ($0.4 million) and an increase in other underwriting expenses ($3.6 million).
(2)
During the fourth quarter of 2018 we incurred additional charges due to updating the estimate of the impact of an immaterial error related to policy benefits on a closed block of interest sensitive whole life business. The correction, along with accrued interest, resulted in increases to interest credited ($2.0 million), interest sensitive death benefits ($3.3 million) and traditional life future policy benefits ($0.2 million).
(3)
Reserves on riders in interest sensitive life insurance products are included in Other insurance reserves.
(4)
Point-in-time spread at the balance sheet date used by management for decision making with universal life (excluding products with a secondary guarantee) differs from the spread earned during the reporting period disclosed in the Form 10Q or 10K.

10



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Corporate and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
Pre-tax Adjusted Operating Income (Loss)
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
 
$
11,005

 
$
10,405

 
$
10,714

 
$
10,408

 
$
10,757

Net investment income (1)
 
7,735

 
8,640

 
8,588

 
8,277

 
8,797

Other income
 
4,182

 
4,083

 
4,252

 
4,548

 
4,761

Total adjusted operating revenues
 
22,922

 
23,128

 
23,554

 
23,233

 
24,315

 
 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
 
8,944

 
10,365

 
8,858

 
7,642

 
12,315

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
 
631

 
704

 
746

 
720

 
685

Amortization of deferred acquisition costs
 
5,629

 
(967
)
 
905

 
1,854

 
9

Other underwriting expenses
 
1,369

 
1,153

 
1,413

 
1,244

 
1,231

Total underwriting, acquisition and insurance expenses
 
7,629

 
890

 
3,064

 
3,818

 
1,925

Interest expense
 
1,213

 
1,212

 
1,212

 
1,213

 
1,213

Other expenses (1)
 
6,314

 
6,250

 
6,635

 
5,764

 
6,597

Total adjusted operating benefits and expenses
 
24,100

 
18,717

 
19,769

 
18,437

 
22,050

 
 
(1,178
)
 
4,411

 
3,785

 
4,796

 
2,265

Net (income) loss attributable to noncontrolling interest
 
(45
)
 
(1
)
 
41

 
(47
)
 
(92
)
Equity income (loss), before tax
 
270

 
(91
)
 
769

 
190

 
283

Pre-tax adjusted operating income (loss)
 
$
(953
)
 
$
4,319

 
$
4,595

 
$
4,939

 
$
2,456

 
 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Investments
 
$
688,057

 
$
687,836

 
$
654,750

 
$
686,296

 
$
702,734

Deferred acquisition costs
 
62,778

 
63,593

 
62,499

 
60,346

 
60,245

Separate account assets
 
561,281

 
614,121

 
625,177

 
612,338

 
645,881

 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
 
$
372,056

 
$
370,668

 
$
370,238

 
$
372,492

 
$
369,454

Other insurance reserves
 
86,324

 
87,644

 
85,842

 
81,706

 
86,094

Separate account liabilities
 
561,281

 
614,121

 
625,177

 
612,338

 
645,881

Allocated equity, excluding AOCI
 
370,684

 
352,616

 
369,536

 
378,198

 
394,408

 
 
 
 
 
 
 
 
 
 
 
Rollforward of separate account balances:
 
 
 
 
 
 
 
 
 
 
Beginning separate account balance
 
$
651,797

 
$
561,281

 
$
614,121

 
$
625,177

 
$
612,338

Net premiums and transfers
 
3,518

 
5,277

 
5,115

 
1,208

 
3,502

Net investment income (loss)
 
(77,872
)
 
63,914

 
22,611

 
1,721

 
44,460

Charges, benefits and surrenders
 
(16,162
)
 
(16,351
)
 
(16,670
)
 
(15,768
)
 
(14,419
)
Ending separate account balance
 
$
561,281

 
$
614,121

 
$
625,177

 
$
612,338

 
$
645,881

 
 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
 
Number of direct contracts - variable annuity
 
9,217

 
9,071

 
8,938

 
8,810

 
8,676

Number of direct policies - variable universal life
 
35,160

 
34,675

 
34,236

 
33,787

 
33,383

Direct face amounts - variable universal life
 
$
4,321,462

 
$
4,267,891

 
$
4,217,491

 
$
4,158,021

 
$
4,117,248


(1)
During the fourth quarter of 2018 we offered a voluntary early retirement program resulting in a decrease in net investment income from increased investment expenses ($0.1 million) and an increase in other expenses ($1.0 million).


11



FBL Financial Group, Inc.
Deferred Acquisition Costs by Segment
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
 (Dollars in thousands)
 
Annuity
 
 
 
 
 
 
 
 
 
Balance - beginning of period
$
92,442

 
$
93,819

 
$
94,164

 
$
93,898

 
$
88,266

Capitalization:
 
 
 
 
 
 
 
 
 
    Commissions
2,994

 
2,872

 
2,319

 
2,291

 
2,729

    Expenses
433

 
263

 
306

 
302

 
247

         Total capitalization
3,427

 
3,135

 
2,625

 
2,593

 
2,976

Amortization - adjusted operating basis, before impact of unlocking
(2,857
)
 
(2,723
)
 
(2,974
)
 
(3,471
)
 
(2,844
)
Amortization - unlocking, adjusted operating basis
—

 
—

 
—

 
(4,863
)
 
—

Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities
807

 
(67
)
 
83

 
109

 
(103
)
Balance - end of period
$
93,819

 
$
94,164

 
$
93,898

 
$
88,266

 
$
88,295

 
 
 
 
 
 
 
 
 
 
Life Insurance
 
 
 
 
 
 
 
 
 
Balance - beginning of period
$
298,368

 
$
308,937

 
$
312,664

 
$
316,309

 
$
323,609

Capitalization:
 
 
 
 
 
 
 
 
 
    Commissions
9,724

 
6,141

 
5,451

 
4,243

 
8,160

    Expenses
3,230

 
2,349

 
2,709

 
2,367

 
2,494

    Deferral of sales inducements
1,746

 
384

 
263

 
111

 
1,517

         Total capitalization
14,700

 
8,874

 
8,423

 
6,721

 
12,171

Amortization - adjusted operating basis, before impact of unlocking
(4,360
)
 
(4,917
)
 
(4,519
)
 
(3,206
)
 
(4,226
)
Amortization - unlocking, adjusted operating basis
—

 
—

 
—

 
3,842

 
10,000

Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities
229

 
(230
)
 
(259
)
 
(57
)
 
(411
)
Balance - end of period
$
308,937

 
$
312,664

 
$
316,309

 
$
323,609

 
$
341,143

 
 
 
 
 
 
 
 
 
 
Corporate and Other
 
 
 
 
 
 
 
 
 
Balance - beginning of period
$
68,101

 
$
62,778

 
$
63,593

 
$
62,499

 
$
60,346

Capitalization:
 
 
 
 
 
 
 
 
 
    Commissions
114

 
113

 
105

 
77

 
39

    Deferral of sales inducements
15

 
1

 
—

 
2

 
25

         Total capitalization
129

 
114

 
105

 
79

 
64

Amortization - adjusted operating basis, before impact of unlocking
(5,687
)
 
966

 
(913
)
 
(1,771
)
 
(9
)
Amortization - unlocking, adjusted operating basis
—

 
—

 
—

 
(109
)
 
—

Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities
235

 
(265
)
 
(286
)
 
(352
)
 
(156
)
Balance - end of period
$
62,778

 
$
63,593

 
$
62,499

 
$
60,346

 
$
60,245





12



FBL Financial Group, Inc.
Deferred Acquisition Costs by Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
 (Dollars in thousands)
 
Total
 
 
 
 
 
 
 
 
 
Balance - beginning of period
$
458,911

 
$
465,534

 
$
470,421

 
$
472,706

 
$
472,221

Capitalization:
 
 
 
 
 
 
 
 
 
    Commissions
12,832

 
9,126

 
7,875

 
6,611

 
10,928

    Expenses
3,663

 
2,612

 
3,015

 
2,669

 
2,741

    Deferral of sales inducements
1,761

 
385

 
263

 
113

 
1,542

         Total capitalization
18,256

 
12,123

 
11,153

 
9,393

 
15,211

Amortization - adjusted operating basis, before impact of unlocking
(12,904
)
 
(6,674
)
 
(8,406
)
 
(8,448
)
 
(7,079
)
Amortization - unlocking, adjusted operating basis
—

 
—

 
—

 
(1,130
)
 
10,000

Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities
1,271

 
(562
)
 
(462
)
 
(300
)
 
(670
)
Balance - end of period
465,534

 
470,421

 
472,706

 
472,221

 
489,683

Impact of unrealized gains in AOCI
(46,732
)
 
(96,710
)
 
(158,405
)
 
(219,109
)
 
(200,227
)
Deferred acquisition costs
$
418,802

 
$
373,711

 
$
314,301

 
$
253,112

 
$
289,456




13



FBL Financial Group, Inc.
Impact of Unlocking on Pre-tax Adjusted Operating Income
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
 (Dollars in thousands)
 
Annuity Segment
 
 
 
 
 
 
 
 
 
Amortization of deferred sales inducements reported in interest sensitive product benefits
$
—

 
$
—

 
$
—

 
$
(195
)
 
$
—

Amortization of deferred acquisition costs
—

 
—

 
—

 
(4,668
)
 
—

Decrease to pre-tax adjusted operating income
$
—

 
$
—

 
$
—

 
$
(4,863
)
 
$
—

 
 
 
 
 
 
 
 
 
 
Life Segment
 
 
 
 
 
 
 
 
 
Amortization of unearned revenue reserve reported in interest sensitive product charges and other income
$
—

 
$
—

 
$
—

 
$
(386
)
 
$
—

Amortization of deferred sales inducements reported in interest sensitive product benefits
—

 
—

 
—

 
45

 
—

Amortization of deferred sales inducements reported in traditional life insurance benefits
—

 
—

 
—

 
69

 
183

Amortization of deferred acquisition costs
—

 
—

 
—

 
3,728

 
9,817

Changes in reserves reported in interest sensitive product benefits
—

 
—

 
—

 
(1,062
)
 
—

Increase to pre-tax adjusted operating income
$
—

 
$
—

 
$
—

 
$
2,394

 
$
10,000

 
 
 
 
 
 
 
 
 
 
Corporate and Other Segment
 
 
 
 
 
 
 
 
 
Amortization of unearned revenue reserve reported in interest sensitive product charges
$
—

 
$
—

 
$
—

 
$
(94
)
 
$
—

Amortization of deferred sales inducements reported in interest sensitive product benefits
—

 
—

 
—

 
26

 
—

Amortization of deferred acquisition costs
—

 
—

 
—

 
(135
)
 
—

Changes in reserves reported in interest sensitive product benefits
—

 
—

 
—

 
2

 
—

Decrease to pre-tax adjusted operating income
$
—

 
$
—

 
$
—

 
$
(201
)
 
$
—

 
 
 
 
 
 
 
 
 
 
Total impact of unlocking on pre-tax adjusted operating income
$
—

 
$
—

 
$
—

 
$
(2,670
)
 
$
10,000



14



FBL Financial Group, Inc.
Collected Premiums (1)
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
 (Dollars in thousands)
 
Annuity
 
 
 
 
 
 
 
 
 
Individual:
 
 
 
 
 
 
 
 
 
Fixed rate:
 
 
 
 
 
 
 
 
 
First year
$
21,256

 
$
22,785

 
$
14,308

 
$
13,313

 
$
10,489

Renewal
14,361

 
16,631

 
16,017

 
11,644

 
13,428

Total fixed rate
35,617

 
39,416

 
30,325

 
24,957

 
23,917

Index annuity
33,337

 
28,301

 
28,417

 
30,293

 
41,177

Total individual
68,954

 
67,717

 
58,742

 
55,250

 
65,094

Group
1,503

 
1,789

 
910

 
826

 
1,643

Total Annuity
70,457

 
69,506

 
59,652

 
56,076

 
66,737

 
 
 
 
 
 
 
 
 
 
Life Insurance
 
 
 
 
 
 
 
 
 
Direct:
 
 
 
 
 
 
 
 
 
Universal life:
 
 
 
 
 
 
 
 
 
First year
6,625

 
5,786

 
7,967

 
6,571

 
7,129

Renewal
20,764

 
23,051

 
22,332

 
21,214

 
22,173

Total universal life
27,389

 
28,837

 
30,299

 
27,785

 
29,302

Whole life:
 
 
 
 
 
 
 
 
 
First year
2,658

 
2,622

 
2,659

 
1,834

 
2,335

Renewal
23,761

 
23,725

 
23,684

 
22,016

 
23,273

Total whole life
26,419

 
26,347

 
26,343

 
23,850

 
25,608

Term life and other:
 
 
 
 
 
 
 
 
 
First year
2,861

 
2,636

 
2,898

 
2,656

 
2,811

Renewal
26,656

 
27,430

 
27,382

 
26,798

 
27,382

Total term life and other
29,517

 
30,066

 
30,280

 
29,454

 
30,193

Total direct life insurance
83,325

 
85,250

 
86,922

 
81,089

 
85,103

Reinsurance
(7,126
)
 
(7,249
)
 
(7,524
)
 
(6,046
)
 
(6,818
)
Total Life Insurance
76,199

 
78,001

 
79,398

 
75,043

 
78,285

 
 
 
 
 
 
 
 
 
 
Corporate and Other
 
 
 
 
 
 
 
 
 
Variable, net of reinsurance
10,447

 
13,167

 
13,065

 
10,982

 
10,824

Accident and health, net of reinsurance
271

 
75

 
45

 
41

 
179

Total Corporate and Other
10,718

 
13,242

 
13,110

 
11,023

 
11,003

 
 
 
 
 
 
 
 
 
 
Total collected premiums
$
157,374

 
$
160,749

 
$
152,160

 
$
142,142

 
$
156,025


(1)
Collected premiums is a measure of sales production not recognized under GAAP.



15




FBL Financial Group, Inc.
Other Information
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
2018
 
2019
 
2019
 
2019
 
2019
 
 
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Capitalization:
 
 
 
 
 
 
 
 
 
Short-term debt
$
—

 
$
4,000

 
$
—

 
$
16,000

 
$
—

Trust preferred securities, due 2047
97,000

 
97,000

 
97,000

 
97,000

 
97,000

Total debt
97,000

 
101,000

 
97,000

 
113,000

 
97,000

 
 
 
 
 
 
 
 
 
 
Preferred stock
3,000

 
3,000

 
3,000

 
3,000

 
3,000

Common stockholders' equity, excluding AOCI
1,089,821

 
1,071,234

 
1,091,669

 
1,105,035

 
1,127,993

Total capitalization, excluding AOCI
1,189,821

 
1,175,234

 
1,191,669

 
1,221,035

 
1,227,993

 
 
 
 
 
 
 
 
 
 
Accumulated other comprehensive income
91,318

 
189,166

 
302,793

 
406,175

 
354,764

Total capitalization, including AOCI
$
1,281,139

 
$
1,364,400

 
$
1,494,462

 
$
1,627,210

 
$
1,582,757

 
 
 
 
 
 
 
 
 
 
Common shares outstanding
24,718,815

 
24,652,340

 
24,659,885

 
24,662,308

 
24,664,215

 
 
 
 
 
 
 
 
 
 
Book Value per Share:
 
 
 
 
 
 
 
 
 
Excluding AOCI
$
44.09

 
$
43.45

 
$
44.27

 
$
44.81

 
$
45.73

Including AOCI
47.78

 
51.13

 
56.55

 
61.28

 
60.12

 
 
 
 
 
 
 
 
 
 
Debt-to-Capital Ratio:
 
 
 
 
 
 
 
 
 
Excluding AOCI
8.2
%
 
8.6
%
 
8.1
%
 
9.3
%
 
7.9
%
Including AOCI
7.6

 
7.4

 
6.5

 
6.9

 
6.1

 
 
 
 
 
 
 
 
 
 
Debt-to-Capital Ratio with 50% Credit for Trust Preferred Securities:
 
 
 
 
 
 
 
 
 
Excluding AOCI
4.1
%
 
4.5
%
 
4.1
%
 
5.3
%
 
3.9
%
Including AOCI
3.8

 
3.8

 
3.2

 
4.0

 
3.1

 
 
 
 
 
 
 
 
 
 
Class A Common Ownership:
 
 
 
 
 
 
 
 
 
Iowa Farm Bureau Federation
59.7
%
 
59.9
%
 
59.9
%
 
59.9
%
 
59.9
%
Public
40.3

 
40.1

 
40.1

 
40.1

 
40.1

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 



16



FBL Financial Group, Inc.
Other Information (Continued)
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
2018
 
2019
 
2019
 
2019
 
2019
 
 
 
 
 
 
 
 
 
 
Investment by Type:
 
 
 
 
 
 
 
 
 
Fixed maturity securities
57.5
%
 
57.9
%
 
58.2
%
 
58.2
%
 
57.9
%
Residential mortgage-backed
7.2

 
7.2

 
7.1

 
7.4

 
7.4

Commercial mortgage-backed
10.4

 
10.6

 
11.3

 
11.6

 
11.5

Other asset-backed
8.4

 
8.1

 
7.8

 
7.6

 
7.9

Mortgage loans
12.4

 
11.9

 
11.5

 
11.1

 
11.2

Equity securities
1.1

 
1.3

 
1.2

 
1.1

 
1.1

Other
3.0

 
3.0

 
2.9

 
3.0

 
3.0

 
 
 
 
 
 
 
 
 
 
Quality of Fixed Maturity Securities:
 
 
 
 
 
 
 
 
 
AAA, AA, A
68.3
%
 
68.3
%
 
68.0
%
 
68.3
%
 
68.2
%
BBB
29.3

 
29.0

 
29.7

 
29.5

 
29.5

BB
1.5

 
1.7

 
1.6

 
1.5

 
1.6

<BB
0.9

 
1.0

 
0.7

 
0.7

 
0.7

 
 
 
 
 
 
 
 
 
 
Agent Strength Totals:
 
 
 
 
 
 
 
 
 
Full time agents and agency managers:
 
 
 
 
 
 
 
 
 
8-state Farm Bureau Property & Casualty channel
1,190

 
1,180

 
1,185

 
1,200

 
1,197

6 life partner states and Colorado
649

 
650

 
649

 
655

 
661

 
1,839

 
1,830

 
1,834

 
1,855

 
1,858


FBL Financial Group, Inc.
Income Taxes
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
 
 
 
 
 
 
 
 
Income tax benefit (expense)
$
2,812

 
$
(6,276
)
 
$
(5,511
)
 
$
(1,642
)
 
$
(6,500
)
Tax on equity income
(265
)
 
(59
)
 
(373
)
 
(212
)
 
(275
)
Net income adjustments:
 
 
 
 
 
 
 
 
 
Income tax offset on net income adjustments
(3,299
)
 
2,164

 
150

 
(23
)
 
(27
)
Income taxes on adjusted operating income
$
(752
)
 
$
(4,171
)
 
$
(5,734
)
 
$
(1,877
)
 
$
(6,802
)
 
 
 
 
 
 
 
 
 
 
Income taxes on adjusted operating income before benefits of LIHTC investments
$
(1,841
)
 
$
(5,076
)
 
$
(6,633
)
 
$
(2,727
)
 
$
(7,653
)
Amounts related to LIHTC investments
1,089

 
905

 
899

 
850

 
851

Income taxes on adjusted operating income
$
(752
)
 
$
(4,171
)
 
$
(5,734
)
 
$
(1,877
)
 
$
(6,802
)


17


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