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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): May 3, 2018

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 May 3, 2018, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended March 31, 2018 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 May 3, 2018

99.2            Financial Supplement of FBL Financial Group, Inc. for the quarter ended March 31,
2018

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: May 3, 2018                    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 May 3, 2018
Exhibit 99.2 Financial Supplement of FBL Financial Group, Inc. for the quarter ended March 31, 2018




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit












FOR IMMEDIATE RELEASE
CONTACT:
Thursday, May 3, 2018
Kathleen Till Stange, V.P. Corporate & Investor Relations
 
(515) 226-6780, Kathleen.TillStange@FBLFinancial.com

FBL Financial Group Reports First Quarter 2018 Results

West Des Moines, Iowa, May 3, 2018 -

Financial Highlights
(Dollars in thousands, except per share data)
 
Three months ended March 31,
 
2018
 
2017
Net income attributable to FBL Financial Group
$
23,631

 
$
26,433

Non-GAAP operating income(1)  
27,633

 
26,988

Earnings per common share (assuming dilution):
 
 
 
Net income
0.94

 
1.05

Non-GAAP operating income(1) 
1.10

 
1.08

    

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the first quarter of 2018 of $23.6 million, or $0.94 per diluted common share, compared to $26.4 million, or $1.05 per diluted common share, for the first quarter of 2017. Non-GAAP operating income(1) totaled $27.6 million, or $1.10 per common share, for the first quarter of 2018, compared to $27.0 million, or $1.08 per common share, for the first quarter of 2017. First quarter 2018 earnings per share reflects:
The benefit of other investment-related income of $0.11 per share
Unfavorable mortality results in the Life Insurance segment
A lower effective tax rate due to the Tax Cuts and Jobs Act of 2017

Non-GAAP operating income differs from the GAAP measure, net income attributable to FBL Financial Group, in that it excludes the initial impact of changes in federal statutory income tax rates and tax laws, realized gains and losses on investments, and the change in net unrealized gains and losses on derivatives and equity securities. 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 first quarter 2018 earnings were strong with net income of $0.94 per share and record first quarter non-GAAP operating income of $1.10 per share," said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "We've had success with life sales, resulting in a four percent increase in life insurance premiums collected in the first quarter of 2018 compared to the prior year. In addition to increased non-GAAP operating income, we returned $49 million of capital to shareholders in the first quarter of 2018 via a $1.50 per share special dividend and an increased regular quarterly dividend of $0.46 per share."

Product Revenues. Premiums and product charges for the first quarter of 2018 totaled $79.6 million compared to $77.6 million in the first quarter of 2017. Interest sensitive product charges increased three percent while traditional life insurance premiums increased two percent during the quarter. Premiums collected(2) in the first quarter of 2018 totaled $169.7 million compared to $169.9 million in the first quarter of 2017. Annuity premiums collected decreased three percent while life insurance premiums collected increased four percent.

Investment Income. Net investment income in the first quarter of 2018 totaled $101.0 million, compared to $101.0 million in the first quarter of 2017. This reflects an increase in average invested assets 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 5.19 percent for the three months ended March 31, 2018, compared to 5.30 percent for the three months ended March 31, 2017. At March 31, 2018, 97 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 $155.7 million in the first quarter of 2018, compared to $148.0 million in the first quarter of 2017. Death benefits, net of reinsurance and reserves released, totaled $32.6 million in the first quarter of 2018, compared to $29.6 million in the first quarter of 2017. By its nature, mortality experience can fluctuate from quarter to quarter.

Net Realized Gains/Losses. In the first quarter of 2018, FBL Financial Group recognized net realized losses on investments of $1.7 million. This is attributable to realized gains on sales of $0.1 million and change in unrealized gains/losses on equity securities of $1.8 million. In addition, other-than-temporary impairments totaled $1.3 million.

Earnings Outlook. While subject to volatility from mortality experience, investment prepayment fee income and the impact of unlocking actuarial assumptions, non-GAAP operating income for the final nine months of 2018 is expected to compare favorably to the non-GAAP operating income for the final nine months of 2017, due primarily to the impact of the Tax Act on FBL Financial Group’s effective tax rate.  The benefit of the lower effective tax rate is expected to be partially offset by decreases in non-GAAP pre-tax operating income in the Corporate segment. The Corporate segment results in the final nine months of 2018 are expected to be negatively impacted, relative to the comparable period in 2017, by the impact of less favorable equity market performance on the closed-block variable business and lower equity income from low income housing tax credit (LIHTC) investments. The expected decrease in income from LIHTC investments is driven primarily by the lower effective tax benefit, due to the Tax Act, on future investment partnership losses.

Stock Repurchases. During the first quarter of 2018, FBL Financial Group repurchased 99,312 shares of its Class A common stock. In March 2018, FBL Financial Group announced the authorization of a new stock repurchase program for up to $50.0 million.





Capital and Book Value. As of March 31, 2018, the book value per share of FBL Financial Group common stock totaled $50.78, compared to $55.59 at December 31, 2017. Book value per share, excluding accumulated other comprehensive income(3), totaled $43.28 at March 31, 2018, compared to $44.16 at December 31, 2017. The March 31, 2018 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 543 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, May 4, 2018, 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. Operating under the consumer brand name Farm Bureau Financial Services, it offers a broad range of life insurance and annuity products 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. Headquartered in West Des Moines, Iowa, FBL 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
 
March 31,
 
2018
 
2017
Revenues:
 
 
 
Interest sensitive product charges
$
30,098

 
$
29,201

Traditional life insurance premiums
49,497

 
48,434

Net investment income
101,022

 
100,994

Net realized capital losses
(1,747
)
 
(403
)
Net other-than-temporary impairment losses recognized in earnings
(1,295
)
 
(66
)
Other income
4,600

 
3,760

Total revenues
182,175

 
181,920

 
 
 
 
Benefits and expenses:
 
 
 
Interest sensitive product benefits
61,345

 
62,760

Traditional life insurance benefits
45,456

 
42,954

Policyholder dividends
2,551

 
2,553

Underwriting, acquisition and insurance expenses
39,577

 
34,353

Interest expense
1,213

 
1,212

Other expenses
5,593

 
4,151

Total benefits and expenses
155,735

 
147,983

 
26,440

 
33,937

Income taxes
(4,687
)
 
(10,733
)
Equity income, net of related income taxes
1,855

 
3,231

Net income
23,608

 
26,435

Net loss (income) attributable to noncontrolling interest
23

 
(2
)
Net income attributable to FBL Financial Group, Inc.
$
23,631

 
$
26,433

 
 
 
 
Earnings per common share - assuming dilution
$
0.94

 
$
1.05

 
 
 
 
Weighted average common shares
25,003,691

 
25,030,462

Effect of dilutive securities
15,818

 
21,914

Weighted average common shares - diluted
25,019,509

 
25,052,376

 
 
 
 





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

In addition to net income, FBL Financial Group has consistently utilized non-GAAP 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. Non-GAAP operating income equals net income attributable to FBL Financial Group adjusted to exclude the initial impact of changes in federal statutory income tax rates and tax laws, realized gains and losses on investments, and the change in net unrealized gains and losses on derivatives and equity securities, 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 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 combined presentation and evaluation of non-GAAP 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
 
March 31,
 
2018
 
2017
 
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group
$
23,631

 
$
26,433

Adjustments:
 
 
 
Initial impact of the Tax Act
1,069

 

Net realized gains/losses on investments (a) (b)
2,424

 
554

Change in net unrealized gains/losses on derivatives(a)
509

 
1

Non-GAAP operating income
$
27,633

 
$
26,988

 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$
1.10

 
$
1.08

 
 
 
 
 
(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.
(b) Beginning in 2018, the change in net unrealized gains/losses on equity securities is included as an adjustment to net income.

(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
 
March 31,
2018
 
December 31,
2017
Book value per share
$
50.78

 
$
55.59

Less: Per share impact of accumulated other comprehensive income
7.50

 
11.43

Book value per share, excluding accumulated other comprehensive income
$
43.28

 
$
44.16


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $186.2 million at March 31, 2018 and $285.0 million at December 31, 2017. 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)

 
March 31,
2018
 
December 31,
2017
Assets
 
 
 
Investments
$
8,589,500

 
$
8,620,243

Cash and cash equivalents
13,653

 
52,696

Deferred acquisition costs
357,861

 
302,611

Other assets
439,028

 
439,100

Assets held in separate accounts
638,751

 
651,963

Total assets
$
10,038,793

 
$
10,066,613

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
7,208,510

 
$
7,050,465

Other policy funds, claims and benefits
634,169

 
634,128

Debt
97,000

 
97,000

Other liabilities
196,176

 
244,207

Liabilities related to separate accounts
638,751

 
651,963

Total liabilities
8,774,606

 
8,677,763

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

 
3,000

Class A common stock
153,195

 
153,589

Class B common stock
72

 
72

Accumulated other comprehensive income
186,222

 
284,983

Retained earnings
921,663

 
947,148

Total FBL Financial Group, Inc. stockholders' equity
1,264,152

 
1,388,792

Noncontrolling interest
35

 
58

Total stockholders' equity
1,264,187

 
1,388,850

Total liabilities and stockholders' equity
$
10,038,793

 
$
10,066,613

 
 
 
 
Common shares outstanding
24,837,976

 
24,930,526


####






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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit




FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
2018 First Quarter



393330860_invsuppcover19.jpg



393330860_fblfgrgb960px.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
 
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.astfinancial.com
 
 


















FBL Financial Group, Inc.
 
 
Financial Supplement (Unaudited)
 
 
March 31, 2018
 
 
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 Non-GAAP Operating Income Reconciliation and Pre-tax Non-GAAP Operating Income by Segment, last five quarters
 
Financial Information by Segment:
 
 
Segment Information
 
Statements of Pre-tax Non-GAAP 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 Non-GAAP 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 non-GAAP 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. Non-GAAP operating income for the periods presented consists of net income adjusted to exclude the initial impact of changes in federal statutory income tax rates and tax laws, realized gains and losses on investments and the change in net unrealized gains and losses on derivatives and equity securities.

We use non-GAAP 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 and equities can fluctuate greatly from quarter to quarter. These fluctuations make it difficult to analyze core operating trends. A view of our non-GAAP operating performance without the impact of these items enhances the analysis of our results. We use non-GAAP 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.

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)

 
March 31,
2018
 
December 31,
2017
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost: 2018 - $6,891,191; 2017 - $6,757,250)
$
7,246,912

 
$
7,291,967

Equity securities - available for sale, at fair value (cost: 2018 - $98,307; 2017 - $96,715)
103,920

 
104,145

Mortgage loans
968,664

 
971,812

Real estate
1,543

 
1,543

Policy loans
193,413

 
191,398

Short-term investments
30,075

 
17,007

Other investments
44,973

 
42,371

Total investments
8,589,500

 
8,620,243

 
 
 
 
Cash and cash equivalents
13,653

 
52,696

Securities and indebtedness of related parties
130,451

 
130,240

Accrued investment income
82,403

 
76,468

Amounts receivable from affiliates
5,117

 
3,561

Reinsurance recoverable
105,551

 
108,948

Deferred acquisition costs
357,861

 
302,611

Value of insurance in force acquired
7,169

 
4,560

Current income taxes recoverable
44

 
3,269

Other assets
108,293

 
112,054

Assets held in separate accounts
638,751

 
651,963

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
10,038,793

 
$
10,066,613




2




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

 
March 31,
2018
 
December 31,
2017
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,446,094

 
$
5,299,961

Traditional life insurance and accident and health products
1,762,416

 
1,750,504

Other policy claims and benefits
47,250

 
44,475

Supplementary contracts without life contingencies
317,541

 
322,630

Advance premiums and other deposits
269,378

 
267,023

Amounts payable to affiliates
1,272

 
1,164

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

 
97,000

Deferred income taxes
104,372

 
131,912

Other liabilities
90,532

 
111,131

Liabilities related to separate accounts
638,751

 
651,963

Total liabilities
8,774,606

 
8,677,763

 
 
 
 
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 24,826,563 in 2018 and 24,919,113 shares in 2017
153,195

 
153,589

Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2018 and 2017
72

 
72

Accumulated other comprehensive income
186,222

 
284,983

Retained earnings
921,663

 
947,148

Total FBL Financial Group, Inc. stockholders' equity
1,264,152

 
1,388,792

Noncontrolling interest
35

 
58

Total stockholders' equity
1,264,187

 
1,388,850

Total liabilities and stockholders' equity
$
10,038,793

 
$
10,066,613




3




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

 
Three months ended March 31,
 
2018
 
2017
Revenues:
 
 
 
Interest sensitive product charges
$
30,098

 
$
29,201

Traditional life insurance premiums
49,497

 
48,434

Net investment income
101,022

 
100,994

Net realized capital losses on sales of investments
(1,747
)
 
(403
)
Net impairment losses recognized in earnings
(1,295
)
 
(66
)
Other income
4,600

 
3,760

Total revenues
182,175

 
181,920

 
 
 
 
Benefits and expenses:
 
 
 
Interest sensitive product benefits
61,345

 
62,760

Traditional life insurance benefits
45,456

 
42,954

Policyholder dividends
2,551

 
2,553

Underwriting, acquisition and insurance expenses
39,577

 
34,353

Interest expense
1,213

 
1,212

Other expenses
5,593

 
4,151

Total benefits and expenses
155,735

 
147,983

 
26,440

 
33,937

Income tax expense
(4,687
)
 
(10,733
)
Equity income, net of related income taxes
1,855

 
3,231

Net income
23,608

 
26,435

Net loss (income) attributable to noncontrolling interest
23

 
(2
)
Net income attributable to FBL Financial Group, Inc.
$
23,631

 
$
26,433

 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
(69,261
)
 
$
42,476

 
 
 
 
Earnings per common share
$
0.94

 
$
1.05

Earnings per common share - assuming dilution
$
0.94

 
$
1.05

 
 
 
 
Cash dividends per common share
$
0.46

 
$
0.44

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)

 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
29,201

 
$
29,456

 
$
28,004

 
$
26,275

 
$
30,098

Traditional life insurance premiums
48,434

 
50,262

 
47,087

 
49,547

 
49,497

Net investment income
100,994

 
103,908

 
102,950

 
107,347

 
101,022

Net realized capital gains (losses) on sales of investments
(403
)
 
921

 
81

 

 
(1,747
)
Net impairment losses recognized in earnings
(66
)
 

 
(67
)
 
(3,853
)
 
(1,295
)
Other income
3,760

 
4,450

 
3,501

 
3,689

 
4,600

Total revenues
181,920

 
188,997

 
181,556

 
183,005

 
182,175

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
62,760

 
58,251

 
67,206

 
63,661

 
61,345

Traditional life insurance benefits
42,954

 
42,610

 
42,633

 
44,826

 
45,456

Policyholder dividends
2,553

 
2,557

 
2,487

 
2,543

 
2,551

Underwriting, acquisition and insurance expenses
34,353

 
36,341

 
27,535

 
36,649

 
39,577

Interest expense
1,212

 
1,213

 
1,213

 
1,212

 
1,213

Other expenses
4,151

 
4,740

 
4,971

 
4,520

 
5,593

Total benefits and expenses
147,983

 
145,712

 
146,045

 
153,411

 
155,735

 
33,937

 
43,285

 
35,511

 
29,594

 
26,440

Income tax benefit (expense)
(10,733
)
 
(13,891
)
 
(11,220
)
 
76,573

 
(4,687
)
Equity income, net of related income taxes
3,231

 
2,924

 
2,804

 
2,340

 
1,855

Net income
26,435

 
32,318

 
27,095

 
108,507

 
23,608

Net loss (income) attributable to noncontrolling interest
(2
)
 
(27
)
 
9

 
(8
)
 
23

Net income attributable to FBL Financial Group, Inc.
$
26,433

 
$
32,291

 
$
27,104

 
$
108,499

 
$
23,631

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
42,476

 
$
79,050

 
$
38,616

 
$
121,387

 
$
(69,261
)
 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.05

 
$
1.29

 
$
1.08

 
$
4.33

 
$
0.94

Earnings per common share - assuming dilution
$
1.05

 
$
1.29

 
$
1.08

 
$
4.33

 
$
0.94

 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.44

 
$
0.44

 
$
0.44

 
$
0.44

 
$
0.46

Special cash dividend per common share
$
1.50

 
$

 
$

 
$

 
$
1.50

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
25,030

 
25,031

 
25,037

 
25,039

 
25,004

Effect of dilutive securities
22

 
20

 
18

 
18

 
16

Diluted
25,052

 
25,051

 
25,055

 
25,057

 
25,020



5




FBL Financial Group, Inc.
Net Income to Non-GAAP Operating Income Reconciliation and Pre-tax Non-GAAP Operating Income by Segment
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018
 
 
 
 
 
 
 
 
 
 
Net income attributable to FBL Financial Group, Inc.
$
26,433

 
$
32,291

 
$
27,104

 
$
108,499

 
$
23,631

Net income adjustments:
 
 
 
 
 
 
 
 
 
Impact of change in federal tax rate (1)

 

 

 
(85,797
)
 
1,069

Realized gains/losses on investments (2)(3)
554

 
(788
)
 
38

 
2,578

 
2,424

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

 
(686
)
 
(1,389
)
 
(476
)
 
509

Non-GAAP operating income
$
26,988

 
$
30,817

 
$
25,753

 
$
24,804

 
$
27,633

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$1.08
 
$1.23
 
$1.03
 
$0.99
 
$1.10
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating return on equity, excluding AOCI - last twelve months
10.6%
 
11.0%
 
10.6%
 
10.3%
 
10.3%
Non-GAAP operating return on equity, including AOCI - last twelve months
8.7%
 
9.0%
 
8.8%
 
8.6%
 
8.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018
Impact of Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Impact of change in federal tax rate (1)
$

 
$

 
$

 
$
85,797

 
$
(1,069
)
Realized gains/losses on investments
(469
)
 
921

 
14

 
(3,853
)
 
(1,225
)
Change in net unrealized gains/losses on equity securities

 

 

 

 
(1,817
)
Change in net unrealized gains/losses on derivatives
(49
)
 
107

 
1,897

 
629

 
(1,208
)
Offsets:
 
 
 
 
 
 
 
 
 
Change in amortization
253

 
222

 
(20
)
 
(90
)
 
338

Reserve change on interest sensitive products
(590
)
 
1,018

 
187

 
79

 
199

Income tax
300

 
(794
)
 
(727
)
 
1,133

 
780

Net impact of net income adjustments
$
(555
)
 
$
1,474

 
$
1,351

 
$
83,695

 
$
(4,002
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018
Pre-tax non-GAAP operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
16,421

 
$
18,174

 
$
17,015

 
$
17,211

 
$
16,582

Life Insurance segment
13,749

 
17,631

 
12,620

 
9,856

 
10,897

Corporate and Other segment
4,162

 
4,195

 
2,638

 
3,866

 
1,881

Total pre-tax non-GAAP operating income
34,332

 
40,000

 
32,273

 
30,933

 
29,360

Income taxes on non-GAAP operating income
(7,344
)
 
(9,183
)
 
(6,520
)
 
(6,129
)
 
(1,727
)
Non-GAAP operating income
$
26,988

 
$
30,817

 
$
25,753

 
$
24,804

 
$
27,633


(1)
Q1 2018 amount represents low income housing income tax credit (LIHTC) investment equity losses related to changes in federal tax rates. Such investments are accounted for under the equity method of accounting with income/loss recorded in arrears.
(2)
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.
(3)
Beginning in 2018, amount includes changes in net unrealized gains/losses on equity securities.


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 and index 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 non-GAAP operating income. Accordingly, income taxes are not allocated to the segments. In addition, non-GAAP operating results are reported net of transactions between the segments.

7




FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Annuity Segment
 
 
 
 
 
 
 
 
 
 
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
1,135

 
$
1,202

 
$
1,115

 
$
1,032

 
$
1,202

Net investment income
53,916

 
55,631

 
53,878

 
56,275

 
56,233

Total non-GAAP operating revenues
55,051

 
56,833

 
54,993

 
57,307

 
57,435

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
29,878

 
29,865

 
31,385

 
31,096

 
31,286

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
531

 
483

 
537

 
611

 
504

Amortization of deferred acquisition costs
2,528

 
2,783

 
505

 
2,690

 
3,065

Amortization of value of insurance in force acquired
170

 
170

 
169

 
169

 
172

Other underwriting expenses
5,523

 
5,358

 
5,382

 
5,530

 
5,826

Total underwriting, acquisition and insurance expenses
8,752

 
8,794

 
6,593

 
9,000

 
9,567

Total non-GAAP operating benefits and expenses
38,630

 
38,659

 
37,978

 
40,096

 
40,853

Pre-tax non-GAAP operating income
$
16,421

 
$
18,174

 
$
17,015

 
$
17,211

 
$
16,582

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,357,562

 
$
4,395,757

 
$
4,382,218

 
$
4,470,721

 
$
4,586,256

Deferred acquisition costs
89,108

 
89,752

 
91,802

 
92,116

 
92,400

Value of insurance in force acquired
4,034

 
3,864

 
3,695

 
3,526

 
3,354

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
3,863,647

 
$
3,872,179

 
$
3,884,541

 
$
3,963,187

 
$
4,110,232

Other insurance reserves
368,378

 
364,368

 
358,691

 
355,877

 
352,747

Allocated equity, excluding AOCI
266,618

 
266,902

 
267,324

 
272,101

 
272,242

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
53,528

 
53,390

 
53,218

 
53,250

 
52,991

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.67
%
 
4.60
%
 
4.58
%
 
4.50
%
 
4.47
%
Credited rate
2.69

 
2.64

 
2.63

 
2.56

 
2.56

Spread on individual annuities at end of quarter (1)
1.98
%
 
1.96
%
 
1.95
%
 
1.94
%
 
1.91
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
2,984,644

 
$
3,022,180

 
$
3,057,952

 
$
3,082,310

 
$
3,109,789

Deposits
80,219

 
75,439

 
55,383

 
66,097

 
76,067

Withdrawals, surrenders and death benefits
(46,610
)
 
(46,700
)
 
(45,450
)
 
(49,428
)
 
(60,623
)
Net flows
33,609

 
28,739

 
9,933

 
16,669

 
15,444

 
 
 
 
 
 
 
 
 
 
Policyholder interest
20,710

 
20,826

 
21,041

 
20,817

 
20,363

Annuitizations and other
(16,783
)
 
(13,793
)
 
(6,616
)
 
(10,007
)
 
(10,734
)
Balance, end of period
3,022,180

 
3,057,952

 
3,082,310

 
3,109,789

 
3,134,862

Other interest sensitive reserves
841,467

 
814,227

 
802,231

 
853,398

 
975,370

Total interest sensitive product reserves
$
3,863,647

 
$
3,872,179

 
$
3,884,541

 
$
3,963,187

 
$
4,110,232


(1)
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 Non-GAAP Operating Income
Life Insurance Segment
 
 
 
 
 
 
 
 
 
 
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
17,100

 
$
17,487

 
$
16,633

 
$
14,230

 
$
18,059

Traditional life insurance premiums
48,434

 
50,262

 
47,087

 
49,547

 
49,497

Net investment income
38,769

 
39,436

 
38,995

 
41,118

 
40,250

Other income
(160
)
 
(117
)
 
(88
)
 
(140
)
 
(79
)
Total non-GAAP operating revenues
104,143

 
107,068

 
102,627

 
104,755

 
107,727

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest and index credits
8,385

 
8,267

 
8,289

 
9,506

 
8,393

Death benefits and other
14,074

 
13,338

 
16,569

 
13,204

 
15,241

Total interest sensitive product benefits
22,459

 
21,605

 
24,858

 
22,710

 
23,634

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
21,667

 
19,997

 
21,530

 
23,707

 
23,735

Surrender and other benefits
10,429

 
8,936

 
7,409

 
8,642

 
10,144

Increase in traditional life future policy benefits
10,859

 
13,678

 
13,694

 
12,477

 
11,578

Total traditional life insurance benefits
42,955

 
42,611

 
42,633

 
44,826

 
45,457

Policyholder dividends
2,553

 
2,557

 
2,487

 
2,543

 
2,551

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
4,903

 
4,874

 
4,544

 
4,919

 
4,923

Amortization of deferred acquisition costs
3,911

 
4,519

 
1,122

 
4,816

 
4,436

Amortization of value of insurance in force acquired
375

 
375

 
375

 
375

 
373

Other underwriting expenses
14,404

 
14,185

 
14,536

 
14,448

 
16,151

Total underwriting, acquisition and insurance expenses
23,593

 
23,953

 
20,577

 
24,558

 
25,883

Total non-GAAP operating benefits and expenses
91,560

 
90,726

 
90,555

 
94,637

 
97,525

 
$
12,583

 
$
16,342

 
$
12,072

 
$
10,118

 
$
10,202

Equity income (loss), before tax
1,166

 
1,289

 
548

 
(262
)
 
695

Pre-tax non-GAAP operating income
$
13,749

 
$
17,631

 
$
12,620

 
$
9,856

 
$
10,897

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
2,878,865

 
$
2,913,608

 
$
2,942,395

 
$
2,935,517

 
$
2,967,238

Deferred acquisition costs
271,454

 
275,356

 
282,116

 
287,421

 
291,212

Value of insurance in force acquired
17,029

 
16,654

 
16,279

 
15,904

 
15,531

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (1)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
905,454

 
$
916,067

 
$
930,850

 
$
944,690

 
$
953,635

Other insurance reserves
1,902,738

 
1,917,124

 
1,933,051

 
1,951,565

 
1,964,649

Allocated equity, excluding AOCI
382,319

 
386,413

 
391,464

 
396,571

 
439,031


 

9




FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
 
 
(Dollars in thousands)
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct policies - traditional life
364,173

 
364,122

 
364,445

 
365,382

 
364,757

Number of direct policies - universal life
64,490

 
64,979

 
65,301

 
66,382

 
66,939

Direct face amounts - traditional life
$
49,473,291

 
$
49,919,358

 
$
50,435,353

 
$
50,841,581

 
$
51,159,302

Direct face amounts - universal life
$
6,943,248

 
$
7,048,021

 
$
7,124,265

 
$
7,275,994

 
$
7,383,996

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
5.14
%
 
5.12
%
 
5.12
%
 
5.07
%
 
5.04
%
Credited rate
3.76

 
3.71

 
3.71

 
3.64

 
3.64

Spread on universal life at end of quarter (2)
1.38
%
 
1.41
%
 
1.41
%
 
1.43
%
 
1.40
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity: (1)
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
899,207

 
$
905,454

 
$
916,067

 
$
930,850

 
$
944,690

Deposits
25,604

 
27,292

 
24,708

 
26,267

 
27,847

Withdrawals and surrenders
(8,212
)
 
(7,130
)
 
(6,668
)
 
(5,672
)
 
(8,110
)
Net flows
17,392

 
20,162

 
18,040

 
20,595

 
19,737

 
 
 
 
 
 
 
 
 
 
Policyholder interest
7,687

 
7,570

 
7,997

 
8,806

 
7,752

Policy charges
(17,833
)
 
(18,166
)
 
(18,149
)
 
(15,008
)
 
(18,807
)
Benefits and other
(999
)
 
1,047

 
6,895

 
(553
)
 
263

Balance, end of period
$
905,454

 
$
916,067

 
$
930,850

 
$
944,690

 
$
953,635


(1)
Reserves on riders in interest sensitive life insurance products are included in Other insurance reserves.
(2)
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 Non-GAAP Operating Income
Corporate and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
Pre-tax Non-GAAP Operating Income
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
 
$
10,978

 
$
10,894

 
$
10,393

 
$
11,252

 
$
11,021

Net investment income
 
8,768

 
8,643

 
8,719

 
8,788

 
8,411

Other income
 
3,920

 
4,567

 
3,589

 
3,829

 
4,679

Total non-GAAP operating revenues
 
23,666

 
24,104

 
22,701

 
23,869

 
24,111

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
 
10,059

 
7,894

 
11,697

 
9,410

 
9,342

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
 
721

 
812

 
705

 
716

 
680

Amortization of deferred acquisition costs
 
637

 
1,223

 
(2,276
)
 
904

 
2,512

Other underwriting expenses
 
1,098

 
1,721

 
2,045

 
1,607

 
1,402

Total underwriting, acquisition and insurance expenses
 
2,456