FBL Financial Group Reports Second Quarter 2012 Results

  FBL Financial Group Reports Second Quarter 2012 Results

Business Wire

WEST DES MOINES, Iowa -- August 02, 2012

FBL Financial Group, Inc. (NYSE: FFG):

Financial Highlights
(Dollars in thousands, except per share data)

 
                                                   Three months ended June 30,
                                                   2012             2011
Net income attributable to FBL                     $  20,291        $  36,239
Net income from continuing operations                 20,277           24,224
Operating income                                      19,917           23,406
Earnings per common share (assuming dilution):
Net income                                            0.73             1.16
Net income from continuing operations                 0.73             0.78
Operating income                                      0.72             0.75
 

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable
to FBL for the second quarter of 2012 of $20.3 million, or $0.73 per diluted
common share compared to $36.2 million, or $1.16 per diluted common share, for
the second quarter of 2011. Net income from continuing operations for the
second quarter of 2012 was $20.3 million, or $0.73 per diluted common share
compared to $24.2 million, or $0.78 per diluted common share, for the second
quarter of 2011.

Operating Income^(1). Operating income totaled $19.9 million, or $0.72 per
common share, for the second quarter of 2012, compared to $23.4 million, or
$0.75 per common share, for the second quarter of 2011. Second quarter 2011
operating income included the one-time benefit of $0.15 per share from
refinements to actuarial estimates. Operating income differs from the GAAP
measure, net income attributable to FBL Financial Group, in that it excludes
the impact of realized gains and losses on investments, the change in net
unrealized gains and losses on derivatives, the net impact of discontinued
operations and the loss on debt redemption. For further information on this
non-GAAP financial measure, please refer to Note (1) and the reconciliation
provided within this release.

"I am pleased to report a solid quarter with net income of $0.73 per share and
operating income of $0.72 per share. We've been addressing the challenges of
the low interest rate environment from several aspects, including emphasizing
life insurance sales while deliberately reducing annuity sales. Our exclusive
Farm Bureau agency force is receptive to the changes this environment brings,
as they have a wide portfolio of products with which to meet the needs of
their customers. In addition, our balanced life and annuity product mix and in
force business provides earnings stability in these challenging times," said
James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "The
valuation of FBL Financial Group stock continues to be compelling, so we
repurchased 0.9 million shares of FBL stock during the quarter, making
additional progress in deploying excess capital. Year to date we have
repurchased thirteen percent of total common shares outstanding as of the
beginning of the year."

Product Revenues. Premiums and product charges for the second quarter of 2012
totaled $70.1 million compared to $68.2 million in the second quarter of 2011.
Traditional life insurance premiums increased four percent while interest
sensitive product charges were flat during the quarter.

Premiums collected^(2) in the second quarter of 2012 totaled $171.7 million
compared to $185.4 million in the second quarter of 2011. Life insurance
premiums collected increased three percent, while annuity premiums collected
declined seventeen percent, reflecting the suspension of certain annuity
products due to the low interest rate environment.

Investment Income. Net investment income in the second quarter of 2012 totaled
$89.4 million compared to $88.1 million in the second quarter of 2011. The
increase is primarily due to an increase in average invested assets, partially
offset by lower investment yields. The annualized yield earned on average
invested assets, with securities at cost, was 5.85 percent for the six months
ended June 30, 2012, compared to 6.05 percent for the six months ended June
30, 2011. At June 30, 2012, 95 percent of the fixed maturity securities in FBL
Financial Group's investment portfolio were investment grade debt securities.

Net Realized Gains/Losses on Investments. In the second quarter of 2012, FBL
Financial Group recognized net realized gains on investments of $0.7 million.
The net realized gain on investments of $0.7 million is attributable to gains
on sales of $4.4 million and impairments of $3.7 million.

Benefits and Expenses. Benefits and expenses totaled $136.1 million in the
second quarter of 2012, an increase from $125.7 million in the second quarter
of 2011, primarily reflecting an increase in underwriting, acquisition and
insurance expenses and an increase in traditional life insurance benefits. In
the second quarter of 2011, refinements were made to actuarial estimates which
decreased benefits and expenses by $7.4 million.

Capital and Book Value Increase. As of June 30, 2012, the book value per share
of FBL Financial Group common stock totaled $43.20, an increase from $39.13 at
December 31, 2011. This reflects continued improvement in the valuation of FBL
Financial Group's investment portfolio. Book value per share, excluding
accumulated other comprehensive income^(3), ^ increased to $34.49 at June 30,
2012 from $33.33 at December 31, 2011. The June 30, 2012 company action level
risk based capital ratio of Farm Bureau Life Insurance Company increased
during the quarter to approximately 494 percent.

Stock Repurchases. During the quarter, FBL repurchased 905,542 shares for a
cost of $23.7 million, including expenses, via open market repurchases. Year
to date, FBL has repurchased 4.1 million shares for a cost of $136.5 million,
via open market repurchases, a modified dutch auction and a private
repurchase. The year to date repurchases represent thirteen percent of the
total common shares outstanding as of December 31, 2011. FBL has approximately
$49.9 million availability remaining under its stock repurchase program.

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, August 3, 2012, at 11:00 a.m. Eastern Time. The call will
be webcast over the Internet, and a replay will be available on FBL Financial
Group's website, www.fblfinancial.com.

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, difficult conditions in
financial markets and the economy, lack of liquidity and access to capital,
investment valuations, interest rate changes, competitive factors, the ability
to attract and retain sales agents and a decrease in ratings. 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 is a holding company whose purpose is to protect
livelihoods and futures. Its primary operating subsidiary, Farm Bureau Life
Insurance Company, underwrites and markets a broad range of life insurance and
annuities to individuals and businesses, which are distributed by multiline
exclusive Farm Bureau agents. In addition, FBL Financial Group manages all
aspects of two Farm Bureau affiliated property-casualty insurance companies
for a management fee. FBL Financial Group, headquartered in West Des Moines,
Iowa, is traded on the New York Stock Exchange under the symbol FFG. For more
information, please visit www.fblfinancial.com.

 
FBL Financial Group, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
 
                         Three months ended June 30,       Six months ended June 30,
                         2012             2011             2012             2011
Revenues:
Interest sensitive       $  24,190        $  24,046        $  49,422        $  48,175
product charges
Traditional life         45,908           44,139           89,031           85,526
insurance premiums
Net investment           89,423           88,066           176,311          171,851
income
Net realized capital
gains on sales of        4,411            2,071            5,290            4,331
investments
                                                                             
Total
other-than-temporary     (3,679     )     (7,192     )     (14,980    )     (12,919    )
impairment losses
Non-credit portion
in other                 —                5,111            9,779            8,686       
comprehensive income
Net impairment loss
recognized in            (3,679     )     (2,081     )     (5,201     )     (4,233     )
earnings
                                                                             
Other income             5,729            3,980            10,734           8,979       
Total revenues           165,982          160,221          325,587          314,629
                                                                             
Benefits and
expenses:
Interest sensitive       49,328           48,220           98,410           94,841
product benefits
Traditional life         40,341           37,717           79,452           74,315
insurance benefits
Policyholder             3,370            4,356            7,614            8,656
dividends
Underwriting,
acquisition and          34,374           27,252           67,101           60,503
insurance expenses
Interest expense         1,983            2,153            3,965            4,541
Loss on debt             —                —                33               —
redemption
Other expenses           6,683            6,001            12,473           10,882      
Total benefits and       136,079          125,699          269,048          253,738     
expenses
                         29,903           34,522           56,539           60,891
Income taxes             (10,256    )     (10,355    )     (19,014    )     (18,673    )
Equity income, net
of related income        630              57               2,251            788         
taxes
Net income from
continuing               20,277           24,224           39,776           43,006
operations
Discontinued
operations:
Loss on sale of
subsidiary, net of       —                —                (2,252     )     —
tax benefit
Income (loss) from
discontinued             (84        )     11,997           (764       )     18,264      
operations, net of
tax
Total income (loss)
from discontinued        (84        )     11,997           (3,016     )     18,264
operations
Net income               20,193           36,221           36,760           61,270
Net loss
attributable to          98               18               118              20          
noncontrolling
interest
Net income
attributable to FBL      $  20,291        $  36,239        $  36,878        $  61,290   
Financial Group,
Inc.
                                                                             
Earnings per common
share - assuming         $  0.73          $  1.16          $  1.25          $  1.96     
dilution
                                                                             
Weighted average         27,437,027       30,732,936       28,982,937       30,673,184
common shares
Effect of dilutive       267,446          473,995          372,929          492,221     
securities
Weighted average
common shares -          27,704,473       31,206,931       29,355,866       31,165,405  
diluted
                                                                                        

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

In addition to net income, FBL Financial Group has consistently utilized
operating income, a non-GAAP financial measure commonly used in the life
insurance industry, as a primary economic measure to evaluate its financial
performance. Operating income equals net income attributable to FBL adjusted
to eliminate the impact of realized gains and losses on investments, the
change in net unrealized gains and losses on derivatives, the impact of
discontinued operations and loss on debt redemption. FBL uses operating
income, in addition to net income, to measure its performance since realized
gains and losses on investments and the change in net unrealized gains and
losses on derivatives can fluctuate greatly from quarter to quarter. Also, the
discontinued operations and loss on debt redemption are nonrecurring items.
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
attributable to FBL. 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
believes the combined presentation and evaluation of operating income,
together with net income, provides information that may enhance an investor's
understanding of FBL's underlying results and profitability. A reconciliation
is provided in the following table:

 
                     Three months ended June 30,     Six months ended June 30,
                     2012             2011           2012           2011
                     (Dollars in thousands, except per share data)
Net income
attributable to      $  20,291        $ 36,239       $ 36,878       $ 61,290
FBL
Adjustments:
Loss on debt         —                —              22             —
redemption (a)
Net impact of
discontinued         84               (11,997  )     3,016          (18,264  )
operations (a)
Net realized
gains/losses on      (222       )     (111     )     27             132
investments (a)
Change in net
unrealized           (236       )     (725     )     (110     )     (928     )
gains/losses on
derivatives (a)
Operating income     $  19,917        $ 23,406       $ 39,833       $ 42,230  
                                                                     
Operating income
per common share     $  0.72          $ 0.75         $ 1.36         $ 1.35    
- assuming
dilution
 

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

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

(3) Reconciliation of Book Value Per Share Excluding Accumulated Other
Comprehensive Income - Unaudited

 
                                                    June 30,      December 31,
                                                    2012          2011
Book value per share                                $ 43.20       $    39.13
Less: Per share impact of accumulated other         8.71          5.80
comprehensive income
Book value per share,
excluding accumulated other comprehensive           $ 34.49       $    33.33
income
 

Book value per share excluding accumulated other comprehensive income is a
non-GAAP financial measure. Accumulated other comprehensive income totaled
$233.1 million at June 30, 2012 and $177.8 million at December 31, 2011. 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 believes this non-GAAP financial measure
provides useful supplemental information.

 
FBL Financial Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
 
                                                June 30,          December 31,
                                                2012              2011
Assets
Investments                                     $ 6,840,282       $  6,397,195
Cash and cash equivalents                       168,688           296,339
Deferred acquisition costs                      226,180           260,256
Other assets                                    339,314           340,048
Restricted debt defeasance trust assets         —                 211,627
Assets held in separate accounts                617,538           603,903
Total assets                                    $ 8,192,002       $  8,109,368
                                                                   
Liabilities and stockholders' equity
Liabilities
Future policy benefits                          $ 5,419,531       $  5,146,852
Other policy funds, claims and benefits         619,110           611,724
Debt                                            146,973           321,226
Other liabilities                               230,061           223,234
Liabilities related to separate accounts        617,538           603,903
Total liabilities                               7,033,213         6,906,939
                                                                   
Stockholders' equity
FBL Financial Group, Inc. stockholders'
equity:
Preferred stock                                 3,000             3,000
Class A common stock                            118,060           129,684
Class B common stock                            7,522             7,522
Accumulated other comprehensive income          233,110           177,845
Retained earnings                               797,100           884,263
Total FBL Financial Group, Inc.                 1,158,792         1,202,314
stockholders' equity
Noncontrolling interest                         (3          )     115
Total stockholders' equity                      1,158,789         1,202,429
Total liabilities and stockholders' equity      $ 8,192,002       $  8,109,368
                                                                   
Common shares outstanding                       26,752,871        30,650,634
                                                                   

Contact:

FBL Financial Group, Inc.
Kathleen Till Stange, 515-226-6780
Investor Relations Vice President
Kathleen.TillStange@FBLFinancial.com