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Section 1: 8-K (8-K)

Document


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (date of earliest event reported): November 2, 2017

FBL Financial Group, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Iowa
1-11917
42-1411715
(State of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
5400 University Avenue, West Des Moines, Iowa
50266-5997
(Address of principal executive offices)
 
(Zip Code)
(515) 225-5400
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a.12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02. Results of Operations and Financial Condition

On November 2, 2017, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended September 30, 2017 and a related financial supplement. The news release is furnished as Exhibit 99.1 hereto and the Financial Supplement is furnished as Exhibit 99.2 hereto.

The information contained in this Form 8-K including the exhibits attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits.

Exhibit No.        Description

99.1            News release of FBL Financial Group, Inc. dated November 2, 2017

99.2            Financial Supplement of FBL Financial Group, Inc. for the quarter ended September 30,
2017

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 2, 2017                    FBL FINANCIAL GROUP, INC.

By    /s/ Donald J. Seibel
Donald J. Seibel
Chief Financial Officer


EXHIBIT INDEX

Exhibit No:    Description
Exhibit 99.1 News release of FBL Financial Group, Inc. dated November 2, 2017
Exhibit 99.2 Financial Supplement of FBL Financial Group, Inc. for the quarter ended September 30, 2017





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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit












FOR IMMEDIATE RELEASE
CONTACT:
Thursday, November 2, 2017
Kathleen Till Stange, V.P. Corporate & Investor Relations
 
(515) 226-6780, Kathleen.TillStange@FBLFinancial.com

FBL Financial Group Reports Third Quarter 2017 Results

West Des Moines, Iowa, November 2, 2017 -

Financial Highlights
(Dollars in thousands, except per share data)
 
Three months ended September 30,
 
2017
 
2016
Net income attributable to FBL Financial Group
$
27,104

 
$
30,017

Operating income(1)  
25,753

 
28,882

Earnings per common share (assuming dilution):
 
 
 
Net income
1.08

 
1.20

Operating income(1) 
1.03

 
1.15

    

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the third quarter of 2017 of $27.1 million, or $1.08 per diluted common share, compared to $30.0 million, or $1.20 per diluted common share, for the third quarter of 2016. Operating income(1) totaled $25.8 million, or $1.03 per common share, for the third quarter of 2017, compared to $28.9 million, or $1.15 per common share, for the third quarter of 2016. Third quarter 2017 earnings per share reflects:
A growing book of profitable business
The benefit of other investment-related income of $0.03 per share
The favorable impact of $0.03 per share from unlocking assumptions used in the calculation of deferred acquisition costs, unearned revenue reserves and certain reserves on interest sensitive products
Unfavorable mortality results, primarily in the Corporate & Other segment

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 and the change in net unrealized gains and losses on derivatives. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.






“FBL Financial Group’s third quarter 2017 earnings results were solid, but below our expectations. This was due primarily to mortality experience, which can fluctuate on a quarterly basis," said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "With the first nine months of the year completed, I am pleased with our year-to-date results. As we look ahead toward the close of 2017, we’re focused on financial discipline and supporting our Farm Bureau Financial Services agents as they serve clients, all to fulfill our purpose of protecting livelihoods and futures.”

Product Revenues. Premiums and product charges for the third quarter of 2017 totaled $75.1 million compared to $73.5 million in the third quarter of 2016. Interest sensitive product charges increased eight percent while traditional life insurance premiums decreased one percent during the quarter. Premiums collected(2) in the third quarter of 2017 totaled $141.6 million compared to $156.4 million in the third quarter of 2016. Annuity premiums collected decreased 24 percent while life insurance premiums collected increased six percent.

Investment Income. Net investment income in the third quarter of 2017 totaled $103.0 million, compared to $103.5 million in the third quarter of 2016. The decrease is due to lower investment yields and a decline in other investment-related income. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties,was 5.31 percent for the nine months ended September 30, 2017, compared to 5.46 percent for the nine months ended September 30, 2016. At September 30, 2017, 96 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 $146.0 million in the third quarter of 2017, compared to $141.3 million in the third quarter of 2016. Death benefits, net of reinsurance and reserves released, totaled $29.1 million in the third quarter of 2017, compared to $27.4 million in the third quarter of 2016. By its nature, mortality experience can fluctuate from quarter to quarter.

Unlocking. During the third quarter of 2017, FBL Financial Group unlocked the assumptions used in the calculation of deferred acquisition costs, unearned revenue reserves and certain reserves on interest sensitive products. This unlocking resulted in a pre-tax favorable impact of $1.0 million, or $0.03 per share after-tax.

Net Realized Gains/Losses on Investments. In the third quarter of 2017, FBL Financial Group recognized net realized gains on investments of less than $0.1 million. The net realized gain on investments of less than $0.1 million is attributable to realized gains on sales of $0.2 million, realized losses on sales of $0.1 million and impairments of $0.1 million.

Stock Repurchases. During the third quarter of 2017, FBL Financial Group did not repurchase any of its Class A or Class B common stock. FBL Financial Group has $49.5 million remaining under its current stock repurchase program.

Capital and Book Value. As of September 30, 2017, the book value per share of FBL Financial Group common stock totaled $51.16, compared to $47.61 at December 31, 2016. Book value per share, excluding accumulated other comprehensive income(3), totaled $42.18 at September 30, 2017, compared to $41.60 at December 31, 2016. The September 30, 2017 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 575 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, November 3, 2017, at 9:00 a.m. Eastern Time. The call will be webcast and a replay will be available on FBL Financial Group's website.

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.

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.

- FINANCIAL INFORMATION AND NOTES FOLLOW -




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

 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
28,004

 
$
25,851

 
$
86,661

 
$
82,989

Traditional life insurance premiums
47,087

 
47,682

 
145,783

 
147,425

Net investment income
102,950

 
103,514

 
307,852

 
302,621

Net realized capital gains (losses) on sales of investments
81

 
646

 
599

 
(33
)
 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(67
)
 
(25
)
 
(133
)
 
(3,769
)
Non-credit portion in other comprehensive income

 

 

 
1,522

Net impairment losses recognized in earnings
(67
)
 
(25
)
 
(133
)
 
(2,247
)
 
 
 
 
 
 
 
 
Other income
3,501

 
3,616

 
11,711

 
11,480

Total revenues
181,556

 
181,284

 
552,473

 
542,235

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
67,206

 
65,882

 
188,217

 
178,860

Traditional life insurance benefits
42,633

 
42,121

 
128,197

 
130,059

Policyholder dividends
2,487

 
2,459

 
7,597

 
8,014

Underwriting, acquisition and insurance expenses
27,535

 
25,785

 
98,229

 
102,437

Interest expense
1,213

 
1,213

 
3,638

 
3,638

Other expenses
4,971

 
3,854

 
13,862

 
12,647

Total benefits and expenses
146,045

 
141,314

 
439,740

 
435,655

 
35,511

 
39,970

 
112,733

 
106,580

Income taxes
(11,220
)
 
(13,091
)
 
(35,844
)
 
(34,637
)
Equity income, net of related income taxes
2,804

 
3,128

 
8,959

 
8,393

Net income
27,095

 
30,007

 
85,848

 
80,336

Net loss (income) attributable to noncontrolling interest
9

 
10

 
(20
)
 
7

Net income attributable to FBL Financial Group, Inc.
$
27,104

 
$
30,017

 
$
85,828

 
$
80,343

 
 
 
 
 
 
 
 
Earnings per common share - assuming dilution
$
1.08

 
$
1.20

 
$
3.42

 
$
3.21

 
 
 
 
 
 
 
 
Weighted average common shares
25,037,020

 
24,990,441

 
25,036,258

 
24,977,342

Effect of dilutive securities
17,530

 
39,075

 
19,703

 
46,757

Weighted average common shares - diluted
25,054,550

 
25,029,516

 
25,055,961

 
25,024,099

 
 
 
 
 
 
 
 





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

In addition to net income, FBL Financial Group has consistently utilized operating income, a non-GAAP financial measure common in the life insurance industry, as a primary economic measure to evaluate its financial performance. Operating income equals net income attributable to FBL Financial Group adjusted to exclude the impact of realized gains and losses on investments and the change in net unrealized gains and losses on derivatives, which can fluctuate greatly from period to period. 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 annuities 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 combined presentation and evaluation of operating income, together with net 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
 
Nine months ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
 
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group
$
27,104

 
$
30,017

 
$
85,828

 
$
80,343

Adjustments:
 
 
 
 
 
 
 
Net realized gains/losses on investments (a)
38

 
(402
)
 
(196
)
 
1,142

Change in net unrealized gains/losses on derivatives (a)
(1,389
)
 
(733
)
 
(2,074
)
 
(609
)
Operating income
$
25,753

 
$
28,882

 
$
83,558

 
$
80,876

 
 
 
 
 
 
 
 
Operating income per common share - assuming dilution
$
1.03

 
$
1.15

 
$
3.33

 
$
3.23

 
 
 
 
 
 
 
 
 
(a) 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.

In the fourth quarter of 2016, due to changes in product offerings since the last amendment to its policy for calculating operating income, FBL Financial Group refined its calculation of operating income to include offsets related to changes in interest sensitive product reserves. These offsets, net of tax, decreased operating income $0.1 million in the third quarter of 2017 and $0.4 million in the nine months ended September 30, 2017. These offsets, net of tax, not taken into account in the computation of operating income for the third quarter of 2016 would have increased operating income by $0.1 million and increased operating income for the nine months ended September 30, 2016 by $0.3 million.

(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
 
September 30,
2017
 
December 31,
2016
Book value per share
$
51.16

 
$
47.61

Less: Per share impact of accumulated other comprehensive income
8.98

 
6.01

Book value per share, excluding accumulated other comprehensive income
$
42.18

 
$
41.60


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $223.9 million at September 30, 2017 and $149.6 million at December 31, 2016. 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)

 
September 30,
2017
 
December 31,
2016
Assets
 
 
 
Investments
$
8,489,456

 
$
8,174,660

Cash and cash equivalents
28,713

 
33,583

Deferred acquisition costs
302,847

 
330,324

Other assets
433,033

 
430,495

Assets held in separate accounts
637,746

 
597,072

Total assets
$
9,891,795

 
$
9,566,134

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
6,941,687

 
$
6,799,417

Other policy funds, claims and benefits
634,470

 
638,848

Debt
97,000

 
97,000

Other liabilities
302,254

 
245,539

Liabilities related to separate accounts
637,746

 
597,072

Total liabilities
8,613,157

 
8,377,876

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

 
3,000

Class A common stock
153,547

 
152,903

Class B common stock
72

 
72

Accumulated other comprehensive income
223,869

 
149,555

Retained earnings
898,108

 
882,672

Total FBL Financial Group, Inc. stockholders' equity
1,278,596

 
1,188,202

Noncontrolling interest
42

 
56

Total stockholders' equity
1,278,638

 
1,188,258

Total liabilities and stockholders' equity
$
9,891,795

 
$
9,566,134

 
 
 
 
Common shares outstanding
24,933,510

 
24,893,955


####






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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit




FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
Third Quarter









390921462_armainimagesupplementa01.jpg






390921462_ffglogoa01.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:
 
Don Seibel
 
Chief Financial Officer
 
Don.Seibel@FBLFinancial.com
 
(515) 226-6399
 
 
 
Kathleen Till Stange
 
Vice President Corporate & Investor Relations
 
Kathleen.TillStange@FBLFinancial.com
 
(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.amstock.com
 
 


















FBL Financial Group, Inc.
 
 
Financial Supplement (Unaudited)
 
 
September 30, 2017
 
 
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 Operating Income Reconciliation and Pre-tax Operating Income by Segment, last five quarters
 
Financial Information by Segment:
 
 
Segment Information
 
Statements of Pre-tax 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 Operating Income
 
Collected Premiums, last five quarters
 
Other Information
 

NOTE 1: In addition to net income, we have consistently used operating income, a non-GAAP financial measure common in the life insurance industry, as a primary economic measure to evaluate our financial performance. Operating income for the periods presented equals net income adjusted to eliminate the impact of realized gains and losses on investments and changes in net unrealized gains and losses on derivatives.

We use operating income, in addition to net income, to measure our 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. These fluctuations make it difficult to analyze core operating trends. A view of our operating performance without the impact of these items enhances the analysis of our results. We use 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.

FBL Financial Group’s policy for calculating operating income is intended to accurately reflect offsets resulting from the adjustments to net income used to calculate operating income. Due to changes in product offerings since the last amendment to this policy, in the fourth quarter of 2016 FBL Financial Group refined its calculation of operating income to include offsets relating to interest sensitive product reserves. These offsets to interest sensitive product reserves, net of tax, increased operating income $0.9 million for the full year 2016 and were recorded in the fourth quarter. These offsets, net of tax, decreased operating income $0.1 million in the third quarter of 2017 and $0.4 million in the nine months ended September 30, 2017. These offsets, net of tax, not taken into account in the computation of operating income for the third quarter of 2016 would have increased operating income by $0.1 million and increased operating income for the nine months ended September 30, 2016 by $0.3 million.

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)

 
September 30,
2017
 
December 31,
2016
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost: 2017 - $6,694,051; 2016 - $6,661,711)
$
7,203,335

 
$
7,008,790

Equity securities - available for sale, at fair value (cost: 2017 - $122,435; 2016 - $130,479)
130,890

 
132,968

Mortgage loans
923,938

 
816,471

Real estate
1,543

 
1,955

Policy loans
190,252

 
188,254

Short-term investments
25,399

 
16,348

Other investments
14,099

 
9,874

Total investments
8,489,456

 
8,174,660

 
 
 
 
Cash and cash equivalents
28,713

 
33,583

Securities and indebtedness of related parties
133,786

 
137,422

Accrued investment income
84,960

 
78,437

Amounts receivable from affiliates
5,050

 
3,790

Reinsurance recoverable
104,270

 
105,290

Deferred acquisition costs
302,847

 
330,324

Value of insurance in force acquired
5,536

 
9,226

Current income taxes recoverable

 
4,309

Other assets
99,431

 
92,021

Assets held in separate accounts
637,746

 
597,072

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
9,891,795

 
$
9,566,134




2




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

 
September 30,
2017
 
December 31,
2016
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,204,910

 
$
5,100,625

Traditional life insurance and accident and health products
1,736,777

 
1,698,792

Other policy claims and benefits
44,157

 
43,395

Supplementary contracts without life contingencies
324,475

 
330,232

Advance premiums and other deposits
265,838

 
265,221

Amounts payable to affiliates
1,108

 
862

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

 
97,000

Current income taxes
5,819

 

Deferred income taxes
206,515

 
163,495

Other liabilities
88,812

 
81,182

Liabilities related to separate accounts
637,746

 
597,072

Total liabilities
8,613,157

 
8,377,876

 
 
 
 
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 24,922,097 in 2017 and 24,882,542 shares in 2016
153,547

 
152,903

Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2017 and 2016
72

 
72

Accumulated other comprehensive income
223,869

 
149,555

Retained earnings
898,108

 
882,672

Total FBL Financial Group, Inc. stockholders' equity
1,278,596

 
1,188,202

Noncontrolling interest
42

 
56

Total stockholders' equity
1,278,638

 
1,188,258

Total liabilities and stockholders' equity
$
9,891,795

 
$
9,566,134




3




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

 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
28,004

 
$
25,851

 
$
86,661

 
$
82,989

Traditional life insurance premiums
47,087

 
47,682

 
145,783

 
147,425

Net investment income
102,950

 
103,514

 
307,852

 
302,621

Net realized capital gains (losses) on sales of investments
81

 
646

 
599

 
(33
)
 

 

 
 
 
 
Total other-than-temporary impairment losses
(67
)
 
(25
)
 
(133
)
 
(3,769
)
Non-credit portion in other comprehensive income

 

 

 
1,522

Net impairment losses recognized in earnings
(67
)
 
(25
)
 
(133
)
 
(2,247
)
Other income
3,501

 
3,616

 
11,711

 
11,480

Total revenues
181,556

 
181,284

 
552,473

 
542,235

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
67,206

 
65,882

 
188,217

 
178,860

Traditional life insurance benefits
42,633

 
42,121

 
128,197

 
130,059

Policyholder dividends
2,487

 
2,459

 
7,597

 
8,014

Underwriting, acquisition and insurance expenses
27,535

 
25,785

 
98,229

 
102,437

Interest expense
1,213

 
1,213

 
3,638

 
3,638

Other expenses
4,971

 
3,854

 
13,862

 
12,647

Total benefits and expenses
146,045

 
141,314

 
439,740

 
435,655

 
35,511

 
39,970

 
112,733

 
106,580

Income taxes
(11,220
)
 
(13,091
)
 
(35,844
)
 
(34,637
)
Equity income, net of related income taxes
2,804

 
3,128

 
8,959

 
8,393

Net income
27,095

 
30,007

 
85,848

 
80,336

Net loss (income) attributable to noncontrolling interest
9

 
10

 
(20
)
 
7

Net income attributable to FBL Financial Group, Inc.
$
27,104

 
$
30,017

 
$
85,828

 
$
80,343

 
 
 
 
 
 
 
 
Comprehensive income attributable to FBL Financial Group, Inc.
$
38,616

 
$
46,723

 
$
160,142

 
$
258,639

 
 
 
 
 
 
 
 
Earnings per common share
$
1.08

 
$
1.20

 
$
3.42

 
$
3.21

Earnings per common share - assuming dilution
$
1.08

 
$
1.20

 
$
3.42

 
$
3.21

 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.44

 
$
0.42

 
$
1.32

 
$
1.26

Special cash dividend per common share
$

 
$

 
$
1.50

 
$
2.00



4




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

 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
25,851

 
$
28,939

 
$
29,201

 
$
29,456

 
$
28,004

Traditional life insurance premiums
47,682

 
49,489

 
48,434

 
50,262

 
47,087

Net investment income
103,514

 
101,549

 
100,994

 
103,908

 
102,950

Net realized capital gains (losses) on sales of investments
646

 
3,139

 
(403
)
 
921

 
81

 

 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(25
)
 
(3,551
)
 
(66
)
 

 
(67
)
Non-credit portion in other comprehensive income

 
929

 

 

 

Net impairment losses recognized in earnings
(25
)
 
(2,622
)
 
(66
)
 

 
(67
)
Other income
3,616

 
3,685

 
3,760

 
4,450

 
3,501

Total revenues
181,284

 
184,179

 
181,920

 
188,997

 
181,556

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
65,882

 
59,726

 
62,760

 
58,251

 
67,206

Traditional life insurance benefits
42,121

 
47,623

 
42,954

 
42,610

 
42,633

Policyholder dividends
2,459

 
2,560

 
2,553

 
2,557

 
2,487

Underwriting, acquisition and insurance expenses
25,785

 
33,530

 
34,353

 
36,341

 
27,535

Interest expense
1,213

 
1,212

 
1,212

 
1,213

 
1,213

Other expenses
3,854

 
4,319

 
4,151

 
4,740

 
4,971

Total benefits and expenses
141,314

 
148,970

 
147,983

 
145,712

 
146,045

 
39,970

 
35,209

 
33,937

 
43,285

 
35,511

Income taxes
(13,091
)
 
(11,373
)
 
(10,733
)
 
(13,891
)
 
(11,220
)
Equity income, net of related income taxes
3,128

 
3,047

 
3,231

 
2,924

 
2,804

Net income
30,007

 
26,883

 
26,435

 
32,318

 
27,095

Net loss (income) attributable to noncontrolling interest
10

 
(3
)
 
(2
)
 
(27
)
 
9

Net income attributable to FBL Financial Group, Inc.
$
30,017

 
$
26,880

 
$
26,433

 
$
32,291

 
$
27,104

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
46,723

 
$
(116,393
)
 
$
42,476

 
$
79,050

 
$
38,616

 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.20

 
$
1.07

 
$
1.05

 
$
1.29

 
$
1.08

Earnings per common share - assuming dilution
$
1.20

 
$
1.07

 
$
1.05

 
$
1.29

 
$
1.08

 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.42

 
$
0.42

 
$
0.44

 
$
0.44

 
$
0.44

Special cash dividend per common share
$

 
$

 
$
1.50

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
24,990

 
25,007

 
25,030

 
25,031

 
25,037

Effect of dilutive securities
40

 
33

 
22

 
20

 
18

Diluted
25,030

 
25,040

 
25,052

 
25,051

 
25,055



5




FBL Financial Group, Inc.
Net Income to Operating Income Reconciliation and Pre-tax Operating Income by Segment (1)
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017
 
 
 
 
 
 
 
 
 
 
Net income attributable to FBL Financial Group, Inc.
$
30,017

 
$
26,880

 
$
26,433

 
$
32,291

 
$
27,104

Operating income adjustments:
 
 
 
 
 
 
 
 
 
Realized gains/losses on investments (2)
(402
)
 
(429
)
 
554

 
(788
)
 
38

Change in net unrealized gains/losses on derivatives (2)
(733
)
 
(876
)
 
1

 
(686
)
 
(1,389
)
Operating income
$
28,882

 
$
25,575

 
$
26,988

 
$
30,817

 
$
25,753

 
 
 
 
 
 
 
 
 
 
Operating income per common share - assuming dilution
$1.15
 
$1.02
 
$1.08
 
$1.23
 
$1.03
 
 
 
 
 
 
 
 
 
 
Operating return on equity, excluding AOCI - last twelve months
10.6%
 
10.5%
 
10.6%
 
11.0%
 
10.6%
Operating return on equity, including AOCI - last twelve months
8.8%
 
8.8%
 
8.7%
 
9.0%
 
8.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017
Impact of Operating Income Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Realized gains (losses) on investments
$
621

 
$
517

 
$
(469
)
 
$
921

 
$
14

Change in net unrealized gains/losses on derivatives
1,512

 
2,685

 
(49
)
 
107

 
1,897

Change in amortization of:

 

 

 

 
 
Deferred acquisition costs
(341
)
 
115

 
265

 
349

 
117

Unearned revenue reserve
(46
)
 
5

 
(12
)
 
(127
)
 
(137
)
Reserve change offset on interest sensitive products

 
(1,314
)
 
(590
)
 
1,018

 
187

Income tax offset
(611
)
 
(703
)
 
300

 
(794
)
 
(727
)
Net impact of operating income adjustments
$
1,135

 
$
1,305

 
$
(555
)
 
$
1,474

 
$
1,351

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017
Pre-tax operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
17,075

 
$
15,454

 
$
16,421

 
$
18,174

 
$
17,015

Life Insurance segment
15,245

 
12,188

 
13,749

 
17,631

 
12,620

Corporate and Other segment
5,219

 
4,868

 
4,162

 
4,195

 
2,638

Total pre-tax operating income
37,539

 
32,510

 
34,332

 
40,000

 
32,273

Income taxes on operating income
(8,657
)
 
(6,935
)
 
(7,344
)
 
(9,183
)
 
(6,520
)
Operating income
$
28,882

 
$
25,575

 
$
26,988

 
$
30,817

 
$
25,753


(1)
Operating income is a non-GAAP measure of earnings.
(2)
Amounts are net of adjustments, as applicable, to 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.


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 index annuities and supplementary contracts (some of which involve life contingencies). Fixed rate 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 index 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. 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 consists of the following corporate items and products/services that do not meet the quantitative threshold for separate segment reporting:
 
investments and related investment income not specifically allocated to our product segments;
 
interest expense;
 
closed blocks of variable annuity, variable universal life insurance and accident and health insurance products;
 
advisory services for the management of investments and other companies;
 
marketing and distribution services for the sale of mutual funds and insurance products not issued by us; and
 
leasing services, primarily with affiliates.

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

7




FBL Financial Group, Inc.
Statements of Pre-tax Operating Income (1)
Annuity Segment
 
 
 
 
 
 
 
 
 
 
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
Pre-tax Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
894

 
$
1,039

 
$
1,135

 
$
1,202

 
$
1,115

Net investment income
53,945

 
52,475

 
53,916

 
55,631

 
53,878

Total operating revenues
54,839

 
53,514

 
55,051

 
56,833

 
54,993

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
29,637

 
29,829

 
29,878

 
29,865

 
31,385

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
507

 
614

 
531

 
483

 
537

Amortization of deferred acquisition costs
2,231

 
2,711

 
2,528

 
2,783

 
505

Amortization of value of insurance in force acquired
170

 
169

 
170

 
170

 
169

Other underwriting expenses
5,219

 
4,737

 
5,523

 
5,358

 
5,382

Total underwriting, acquisition and insurance expenses
8,127

 
8,231

 
8,752

 
8,794

 
6,593

Total benefits and expenses
37,764

 
38,060

 
38,630

 
38,659

 
37,978

Pre-tax operating income
$
17,075

 
$
15,454

 
$
16,421

 
$
18,174

 
$
17,015

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,248,096

 
$
4,316,806

 
$
4,357,562

 
$
4,395,757

 
$
4,382,218

Deferred acquisition costs
88,342

 
88,762

 
89,108

 
89,752

 
91,802

Value of insurance in force acquired
4,374

 
4,204

 
4,034

 
3,864

 
3,695

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
3,744,876

 
$
3,827,295

 
$
3,863,647

 
$
3,872,179

 
$
3,884,541

Other insurance reserves
366,899

 
364,966

 
368,378

 
364,368

 
358,691

Allocated equity, excluding AOCI
259,042

 
264,112

 
266,618

 
266,902

 
267,324

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
53,410

 
53,676

 
53,528

 
53,390

 
53,218

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.74
%
 
4.71
%
 
4.67
%
 
4.60
%
 
4.58
%
Credited rate
2.72

 
2.70

 
2.69

 
2.64

 
2.63

Spread on individual annuities at end of quarter (2)
2.02
%
 
2.01
%
 
1.98
%
 
1.96
%
 
1.95
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
2,895,799

 
$
2,936,817

 
$
2,984,644

 
$
3,022,180

 
$
3,057,952

Deposits
73,240

 
84,125

 
80,219

 
75,439

 
55,383

Withdrawals, surrenders and death benefits
(43,587
)
 
(47,417
)
 
(46,610
)
 
(46,700
)
 
(45,450
)
Net flows
29,653

 
36,708

 
33,609

 
28,739

 
9,933

 
 
 
 
 
 
 
 
 
 
Policyholder interest
19,083

 
19,770

 
20,710

 
20,826

 
21,041

Annuitizations and other
(7,718
)
 
(8,651
)
 
(16,783
)
 
(13,793
)
 
(6,616
)
Balance, end of period
2,936,817

 
2,984,644

 
3,022,180

 
3,057,952

 
3,082,310

Other interest sensitive reserves
808,059

 
842,651

 
841,467

 
814,227

 
802,231

Total interest sensitive product reserves
$
3,744,876

 
$
3,827,295

 
$
3,863,647

 
$
3,872,179

 
$
3,884,541


(1)
Operating income is a non-GAAP measure of earnings.
(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 Operating Income (1)
Life Insurance Segment
 
 
 
 
 
 
 
 
 
 
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
Pre-tax Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
14,210

 
$
16,797

 
$
17,100

 
$
17,487

 
$
16,633

Traditional life insurance premiums
47,682

 
49,489

 
48,434

 
50,262

 
47,087

Net investment income
39,227

 
38,876

 
38,769

 
39,436

 
38,995

Other income
(89
)
 
(73
)
 
(160
)
 
(117
)
 
(88
)
Total operating revenues
101,030

 
105,089

 
104,143

 
107,068

 
102,627

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest credited
7,886

 
8,225

 
8,187

 
7,983

 
7,913

Death benefits and other
17,459

 
13,119

 
14,272

 
13,622

 
16,945

Total interest sensitive product benefits
25,345

 
21,344

 
22,459

 
21,605

 
24,858

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
19,259

 
25,229

 
21,667

 
19,997

 
21,530

Surrender and other benefits
8,234

 
7,574

 
10,429

 
8,936

 
7,409

Increase in traditional life future policy benefits
14,628

 
14,817

 
10,859

 
13,678

 
13,694

Total traditional life insurance benefits
42,121

 
47,620

 
42,955

 
42,611

 
42,633

Policyholder dividends
2,459

 
2,560

 
2,553

 
2,557

 
2,487

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
4,229

 
4,577

 
4,903

 
4,874

 
4,544

Amortization of deferred acquisition costs
(2,788
)
 
3,724

 
3,911

 
4,519

 
1,122

Amortization of value of insurance in force acquired
377

 
377

 
375

 
375

 
375

Other underwriting expenses
14,042

 
12,699

 
14,404

 
14,185

 
14,536

Total underwriting, acquisition and insurance expenses
15,860

 
21,377

 
23,593

 
23,953

 
20,577

Total benefits and expenses
85,785

 
92,901

 
91,560

 
90,726

 
90,555

 
$
15,245

 
$
12,188

 
$
12,583

 
$
16,342

 
$
12,072

Equity income, before tax (2)

 

 
1,166

 
1,289

 
548

Pre-tax operating income
$
15,245

 
$
12,188

 
$
13,749

 
$
17,631

 
$
12,620

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
2,825,458

 
$
2,876,555

 
$
2,878,865

 
$
2,913,608

 
$
2,942,395

Deferred acquisition costs
262,803

 
267,545

 
271,454

 
275,356

 
282,116

Value of insurance in force acquired
17,781

 
17,404

 
17,029

 
16,654

 
16,279

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (3)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
889,645

 
$
899,207

 
$
905,454

 
$
916,067

 
$
930,850

Other insurance reserves
1,864,521

 
1,887,539

 
1,902,738

 
1,917,124

 
1,933,051

Allocated equity, excluding AOCI
379,540

 
386,315

 
382,319

 
386,413

 
391,464


 

9




FBL Financial Group, Inc.
Statements of Pre-tax Operating Income (1)
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q3 2016
 
Q4 2016
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
 
(Dollars in thousands)
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct policies - traditional life
364,132

 
364,698

 
364,173

 
364,122