FBL Financial Group Reports Third Quarter 2012 Results

  FBL Financial Group Reports Third Quarter 2012 Results

Business Wire

WEST DES MOINES, Iowa -- November 01, 2012

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

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


                                           Three months ended September 30,
                                             2012               2011
Net income attributable to FBL                $   20,476         $   27,069
Net income from continuing operations             20,487               15,714
Operating income                                  18,746               16,250
Earnings per common share (assuming
dilution):
Net income                                        0.76                 0.86
Net income from continuing operations             0.76                 0.50
Operating income                                  0.70                 0.52


FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable
to FBL for the third quarter of 2012 of $20.5 million, or $0.76 per diluted
common share compared to $27.1 million, or $0.86 per diluted common share, for
the third quarter of 2011. Net income from continuing operations for the third
quarter of 2012 was $20.5 million, or $0.76 per diluted common share compared
to $15.7 million, or $0.50 per diluted common share, for the third quarter of
2011.

Operating Income^(1). Operating income totaled $18.7 million, or $0.70 per
common share, for the third quarter of 2012, compared to $16.3 million, or
$0.52 per common share, for the third quarter of 2011. Third quarter 2012
operating income reflects strong underlying results, increased investment fee
income and the unfavorable impact of $0.13 per share from unlocking
assumptions used in the calculation of deferred acquisition costs, value of
insurance in force acquired and unearned revenue reserves. 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 another quarter of strong financial results with net
income of $0.76 per share and operating income of $0.70 per share. This
reflects the sound fundamentals of Farm Bureau Life Insurance Company and the
execution of our capital management plans. Given the challenges of the
macroeconomic environment, we continue to maintain a strong capital position,
prudently manage expenses and emphasize life insurance sales, which were up 11
percent during the quarter," said James P. Brannen, Chief Executive Officer of
FBL Financial Group, Inc. "The ongoing repurchase of FBL Financial Group
stock, with 0.9 million shares repurchased during the third quarter, results
in year-to-date repurchases of 5.0 million shares. This is significant as it
is 16 percent of our total common shares outstanding as of the beginning of
the year."

Product Revenues. Premiums and product charges for the third quarter of 2012
totaled $67.5 million compared to $65.1 million in the third quarter of 2011.
Traditional life insurance premiums increased four percent while interest
sensitive product charges increased three percent during the quarter. Premiums
collected^(2) in the third quarter of 2012 totaled $139.1 million compared to
$150.5 million in the third quarter of 2011. Life insurance premiums collected
increased 11 percent, while annuity premiums collected declined 18 percent,
reflecting the focus on life insurance sales and the suspension of certain
annuity products due to the low interest rate environment.

Investment Income. Net investment income in the third quarter of 2012 totaled
$93.5 million compared to $85.5 million in the third quarter of 2011. The
increase is due to an increase in average invested assets and an increase in
investment fee income, partially offset by lower investment yields. The
annualized yield earned on average invested assets, with securities at cost,
was 5.92 percent for the nine months ended September 30, 2012, compared to
6.02 percent for the nine months ended September 30, 2011. At September 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 third quarter of 2012, FBL
Financial Group recognized net realized gains on investments of $1.5 million.
The net realized gain on investments of $1.5 million is attributable to gains
on sales of $5.4 million and impairments of $3.9 million.

Unlocking. During the third quarter of 2012, FBL Financial Group unlocked the
assumptions used in the calculation of deferred acquisition costs, value of
insurance in force acquired and unearned revenue reserves to better reflect a
continuation of the low interest rate environment. This unlocking resulted in
the unfavorable impact of $0.13 per share after-tax.

Capital and Book Value Increase. As of September 30, 2012, the book value per
share of FBL Financial Group common stock totaled $46.40, an increase from
$39.13 at December 31, 2011. This reflects positive operating results,
continued improvement in the valuation of FBL Financial Group's investment
portfolio and repurchasing shares at a discount to book value. Book value per
share, excluding accumulated other comprehensive income^(3), increased to
$35.28 at September 30, 2012 from $33.33 at December 31, 2011. The September
30, 2012 company action level risk based capital ratio of Farm Bureau Life
Insurance Company increased during the quarter to approximately 511 percent.

Stock Repurchases. During the quarter, FBL repurchased 888,416 shares for a
cost of $27.7 million, including expenses, via open market repurchases. Year
to date, FBL has repurchased 5.0 million shares for a cost of $164.2 million,
via open market and block trade repurchases. The year to date repurchases
represent 16 percent of the total common shares outstanding as of December 31,
2011. FBL has approximately $22.2 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, November 2, 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 September 30,    Nine months ended September 30,
                         2012             2011               2012             2011
Revenues:
Interest sensitive       $ 25,638           $ 24,789           $ 75,060           $ 72,964
product charges
Traditional life           41,886             40,342             130,917            125,868
insurance premiums
Net investment             93,482             85,451             269,793            257,302
income
Net realized capital
gains on sales of          5,379              279                10,669             4,610
investments
                                                                                  
Total
other-than-temporary       (6,208     )       21                 (21,188    )       (12,898    )
impairment losses
Non-credit portion
in other                  2,291            (1,167     )      12,070           7,519      
comprehensive income
Net impairment loss
recognized in              (3,917     )       (1,146     )       (9,118     )       (5,379     )
earnings
                                                                                  
Other income              2,891            4,856            13,625           13,835     
Total revenues             165,359            154,571            490,946            469,200
                                                                                  
Benefits and
expenses:
Interest sensitive         48,640             49,410             147,050            144,251
product benefits
Traditional life           37,473             35,598             116,925            109,913
insurance benefits
Policyholder               3,279              4,109              10,893             12,765
dividends
Underwriting,
acquisition and            39,939             35,267             107,040            95,770
insurance expenses
Interest expense           2,007              1,983              5,972              6,524
Loss on debt             —                  —                    33               —
redemption
Other expenses            3,986            4,886            16,459           15,768     
Total benefits and        135,324          131,253          404,372          384,991    
expenses
                           30,035             23,318             86,574             84,209
Income taxes               (10,606    )       (7,835     )       (29,620    )       (26,508    )
Equity income, net
of related income         1,058            231              3,309            1,019      
taxes
Net income from
continuing                 20,487             15,714             60,263             58,720
operations
Discontinued
operations:
Loss on sale of
subsidiary, net of       —                  —                    (2,252     )     —
tax benefit
Income (loss) from
discontinued              55               11,354           (709       )      29,618     
operations, net of
tax
Total income (loss)
from discontinued          55                 11,354             (2,961     )       29,618
operations
Net income                 20,542             27,068             57,302             88,338
Net loss (gain)
attributable to           (66        )     1                  52               21         
noncontrolling
interest
Net income
attributable to FBL      $ 20,476          $ 27,069          $ 57,354          $ 88,359     
Financial Group,
Inc.
                                                                                  
Earnings per common
share - assuming         $ 0.76            $ 0.86            $ 2.01            $ 2.83       
dilution
                                                                                  
Weighted average           26,562,068         30,803,109         28,072,997         30,717,388
common shares
Effect of dilutive        304,593          463,315          350,150          482,585    
securities
Weighted average
common shares -           26,866,661       31,266,424       28,423,147       31,199,973 
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           Nine months ended
                    September 30,                  September 30,
                     2012         2011            2012         2011
                     (Dollars in thousands, except per share data)
Net income
attributable         $ 20,476       $ 27,069        $ 57,354       $ 88,359
to FBL
Adjustments:
Loss on debt         —              —                 22           —
redemption (a)
Net impact of
discontinued           (55    )       (11,354 )       2,961          (29,618 )
operations (a)
Net realized
gains/losses           (1,324 )       820             (1,297 )       952
on investments
(a)
Change in net
unrealized
gains/losses          (351   )      (285    )      (461   )      (1,213  )
on derivatives
(a)
Operating            $ 18,746      $ 16,250       $ 58,579      $ 58,480  
income

Operating
income per
common share -       $ 0.70        $ 0.52         $ 2.06        $ 1.87    
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


                                              September 30,   December 31,
                                                2012              2011
Book value per share                            $    46.40        $    39.13
Less: Per share impact of accumulated other         11.12            5.80
comprehensive income
Book value per share,
excluding accumulated other comprehensive       $    35.28        $    33.33
income


Book value per share excluding accumulated other comprehensive income is a
non-GAAP financial measure. Accumulated other comprehensive income totaled
$288.4 million at September 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)
                                                             
                                                September 30,     December 31,
                                                2012              2011
Assets
Investments                                     $ 7,021,161       $  6,397,195
Cash and cash equivalents                       129,259           296,339
Deferred acquisition costs                      203,298           260,256
Other assets                                    386,068           340,048
Restricted debt defeasance trust assets         —                 211,627
Assets held in separate accounts                634,402          603,903
Total assets                                    $ 8,374,188      $  8,109,368
                                                                  
Liabilities and stockholders' equity
Liabilities
Future policy benefits                          $ 5,477,882       $  5,146,852
Other policy funds, claims and benefits         620,972           611,724
Debt                                            147,000           321,226
Other liabilities                               287,520           223,234
Liabilities related to separate accounts        634,402          603,903
Total liabilities                               7,167,776         6,906,939
                                                                  
Stockholders' equity
FBL Financial Group, Inc. stockholders'
equity:
Preferred stock                                 3,000             3,000
Class A common stock                            116,043           129,684
Class B common stock                            7,522             7,522
Accumulated other comprehensive income          288,432           177,845
Retained earnings                               791,352          884,263
Total FBL Financial Group, Inc.                 1,206,349         1,202,314
stockholders' equity
Noncontrolling interest                         63               115
Total stockholders' equity                      1,206,412        1,202,429
Total liabilities and stockholders' equity      $ 8,374,188      $  8,109,368
                                                                  
Common shares outstanding                       25,933,271       30,650,634


Contact:

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