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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): August 2, 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 August 2, 2018, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended June 30, 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 August 2, 2018

99.2            Financial Supplement of FBL Financial Group, Inc. for the quarter ended June 30,
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: August 2, 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 August 2, 2018
Exhibit 99.2 Financial Supplement of FBL Financial Group, Inc. for the quarter ended August 2, 2018




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit












FOR IMMEDIATE RELEASE
CONTACT:
Thursday, August 2, 2018
Kathleen Till Stange, V.P. Corporate & Investor Relations
 
(515) 226-6780, Kathleen.TillStange@FBLFinancial.com

FBL Financial Group Reports Second Quarter 2018 Results

West Des Moines, Iowa, August 2, 2018 -

Financial Highlights
(Dollars in thousands, except per share data)
 
Three months ended June 30,
 
2018
 
2017
Net income attributable to FBL Financial Group
$
32,428

 
$
32,291

Non-GAAP operating income(1)  
32,693

 
30,817

Earnings per common share (assuming dilution):
 
 
 
Net income
1.30

 
1.29

Non-GAAP operating income(1) 
1.31

 
1.23

    

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the second quarter of 2018 of $32.4 million, or $1.30 per diluted common share, compared to $32.3 million, or $1.29 per diluted common share, for the second quarter of 2017. Non-GAAP operating income(1) totaled $32.7 million, or $1.31 per common share, for the second quarter of 2018, compared to $30.8 million, or $1.23 per common share, for the second quarter of 2017. Second quarter 2018 earnings per share reflects:
A growing book of profitable business
The benefit of other investment-related income of $0.05 per share
Mortality results better than expectations in the Corporate and Other 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 second quarter 2018 earnings results were outstanding with net income of $1.30 per share and record non-GAAP operating income of $1.31 per share,” said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "Our success builds on the strong financial results achieved in the first quarter and reflects increased sales in both annuities and life insurance. This positive momentum drives our strategic focus: to serve our Farm Bureau market niche, manage spreads, capital and expenses, and to support our exclusive Farm Bureau agents and FBL employees who deliver on our purpose to protect livelihoods and futures."

Product Revenues Increase from 2017. Premiums and product charges for the second quarter of 2018 totaled $82.0 million compared to $79.7 million in the second quarter of 2017. Interest sensitive product charges increased five percent while traditional life insurance premiums increased two percent during the quarter. Premiums collected(2) in the second quarter of 2018 totaled $171.4 million compared to $165.9 million in the second quarter of 2017. Annuity premiums collected increased four percent and life insurance premiums collected also increased four percent.

Investment Income of $104 Million in Second Quarter. Net investment income in the second quarter of 2018 totaled $104.0 million, compared to $103.9 million in the second quarter of 2017. This increase reflects an increase in average invested assets partially offset by lower investment yields. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties, was 5.15 percent for the six months ended June 30, 2018, compared to 5.35 percent for the six months ended June 30, 2017. At June 30, 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 $153.0 million in the second quarter of 2018, compared to $145.7 million in the second quarter of 2017. Death benefits, net of reinsurance and reserves released, totaled $26.6 million in the second quarter of 2018, compared to $25.8 million in the second quarter of 2017. By its nature, mortality experience can fluctuate from quarter to quarter.

Net Realized Gains in the Second Quarter. In the second quarter of 2018, FBL Financial Group recognized net realized gains on investments of $0.8 million. This is attributable to realized gains on sales of $1.7 million and unrealized losses on equity securities of $0.9 million. In addition, other-than-temporary impairments totaled $0.5 million.

Stock Repurchases. During the second quarter of 2018, FBL Financial Group repurchased 29,699 shares of its Class A common stock. FBL Financial Group has $48.0 million remaining under its current stock repurchase program.

Capital and Book Value. As of June 30, 2018, the book value per share of FBL Financial Group common stock totaled $49.35, compared to $55.59 at December 31, 2017. Book value per share, excluding accumulated other comprehensive income(3), totaled $44.06 at June 30, 2018, compared to $44.16 at December 31, 2017. The June 30, 2018 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 541 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, August 3, 2018, at 11:00 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 Financial Group is traded on the New York Stock Exchange under the symbol FFG. For more information, please visit www.fblfinancial.com and www.fbfs.com.

- FINANCIAL INFORMATION AND NOTES FOLLOW -




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

 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
30,906

 
$
29,456

 
$
61,004

 
$
58,657

Traditional life insurance premiums
51,091

 
50,262

 
100,588

 
98,696

Net investment income
103,974

 
103,908

 
204,996

 
204,902

Net realized capital gains (losses)
841

 
921

 
(906
)
 
518

Net other-than-temporary impairment losses recognized in earnings
(504
)
 

 
(1,799
)
 
(66
)
Other income
3,637

 
4,450

 
8,237

 
8,210

Total revenues
189,945

 
188,997

 
372,120

 
370,917

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
62,637

 
58,251

 
123,982

 
121,011

Traditional life insurance benefits
43,725

 
42,610

 
89,181

 
85,564

Policyholder dividends
2,560

 
2,557

 
5,111

 
5,110

Underwriting, acquisition and insurance expenses
37,210

 
36,341

 
76,787

 
70,694

Interest expense
1,213

 
1,213

 
2,426

 
2,425

Other expenses
5,627

 
4,740

 
11,220

 
8,891

Total benefits and expenses
152,972

 
145,712

 
308,707

 
293,695

 
36,973

 
43,285

 
63,413

 
77,222

Income taxes
(6,650
)
 
(13,891
)
 
(11,337
)
 
(24,624
)
Equity income, net of related income taxes
2,087

 
2,924

 
3,942

 
6,155

Net income
32,410

 
32,318

 
56,018

 
58,753

Net loss (income) attributable to noncontrolling interest
18

 
(27
)
 
41

 
(29
)
Net income attributable to FBL Financial Group, Inc.
$
32,428

 
$
32,291

 
$
56,059

 
$
58,724

 
 
 
 
 
 
 
 
Earnings per common share - assuming dilution
$
1.30

 
$
1.29

 
$
2.24

 
$
2.34

 
 
 
 
 
 
 
 
Weighted average common shares
24,916,597

 
25,031,312

 
24,960,391

 
25,033,307

Effect of dilutive securities
12,903

 
19,663

 
14,405

 
20,777

Weighted average common shares - diluted
24,929,500

 
25,050,975

 
24,974,796

 
25,054,084

 
 
 
 
 
 
 
 





(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
 
Six months ended
 
June 30,
 
June 30,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group
$
32,428

 
$
32,291

 
$
56,059

 
$
58,724

Adjustments:
 
 
 
 
 
 
 
Initial impact of the Tax Act(a)
754

 

 
1,823

 

Net realized gains/losses on investments(b) (c)
(295
)
 
(788
)
 
2,129

 
(234
)
Change in net unrealized gains/losses on derivatives(b)
(194
)
 
(686
)
 
315

 
(685
)
Non-GAAP operating income
$
32,693

 
$
30,817

 
$
60,326

 
$
57,805

 
 
 
 
 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$
1.31

 
$
1.23

 
$
2.41

 
$
2.30

 
 
 
 
 
(a) Amount represents low income housing tax credit investments (LIHTC) equity losses related to changes in tax rates under the Tax Act.
(b) Net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, value of insurance in force acquired, interest sensitive policy reserves and income taxes attributable to these items.
(c) 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
 
June 30,
2018
 
December 31,
2017
Book value per share
$
49.35

 
$
55.59

Less: Per share impact of accumulated other comprehensive income
5.29

 
11.43

Book value per share, excluding accumulated other comprehensive income
$
44.06

 
$
44.16


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $131.1 million at June 30, 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)

 
June 30,
2018
 
December 31,
2017
Assets
 
 
 
Investments
$
8,516,674

 
$
8,620,243

Cash and cash equivalents
23,705

 
52,696

Deferred acquisition costs
387,527

 
302,611

Other assets
429,754

 
439,100

Assets held in separate accounts
638,061

 
651,963

Total assets
$
9,995,721

 
$
10,066,613

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
7,193,923

 
$
7,050,465

Other policy funds, claims and benefits
624,843

 
634,128

Debt
124,000

 
97,000

Other liabilities
187,206

 
244,207

Liabilities related to separate accounts
638,061

 
651,963

Total liabilities
8,768,033

 
8,677,763

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

 
3,000

Class A common stock
153,114

 
153,589

Class B common stock
72

 
72

Accumulated other comprehensive income
131,081

 
284,983

Retained earnings
940,389

 
947,148

Total FBL Financial Group, Inc. stockholders' equity
1,227,656

 
1,388,792

Noncontrolling interest
32

 
58

Total stockholders' equity
1,227,688

 
1,388,850

Total liabilities and stockholders' equity
$
9,995,721

 
$
10,066,613

 
 
 
 
Common shares outstanding
24,818,209

 
24,930,526


####






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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit




FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
2018 Second Quarter



394491638_invsuppcover19.jpg



394491638_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)
 
 
June 30, 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)

 
June 30,
2018
 
December 31,
2017
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost: 2018 - $6,922,505; 2017 - $6,757,250)
$
7,173,415

 
$
7,291,967

Equity securities - available for sale, at fair value (cost: 2018 - $99,279; 2017 - $96,715)
104,026

 
104,145

Mortgage loans
982,987

 
971,812

Real estate
1,543

 
1,543

Policy loans
194,838

 
191,398

Short-term investments
15,141

 
17,007

Other investments
44,724

 
42,371

Total investments
8,516,674

 
8,620,243

 
 
 
 
Cash and cash equivalents
23,705

 
52,696

Securities and indebtedness of related parties
127,876

 
130,240

Accrued investment income
75,044

 
76,468

Amounts receivable from affiliates
8,200

 
3,561

Reinsurance recoverable
103,032

 
108,948

Deferred acquisition costs
387,527

 
302,611

Value of insurance in force acquired
8,880

 
4,560

Current income taxes recoverable

 
3,269

Other assets
106,722

 
112,054

Assets held in separate accounts
638,061

 
651,963

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
9,995,721

 
$
10,066,613




2




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

 
June 30,
2018
 
December 31,
2017
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,417,955

 
$
5,299,961

Traditional life insurance and accident and health products
1,775,968

 
1,750,504

Other policy claims and benefits
46,681

 
44,475

Supplementary contracts without life contingencies
312,399

 
322,630

Advance premiums and other deposits
265,763

 
267,023

Amounts payable to affiliates
1,299

 
1,164

Short-term debt payable to non-affiliates
27,000

 

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

 
97,000

Current income taxes payable
2,984

 

Deferred income taxes
88,993

 
131,912

Other liabilities
93,930

 
111,131

Liabilities related to separate accounts
638,061

 
651,963

Total liabilities
8,768,033

 
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 24,806,796 in 2018 and 24,919,113 shares in 2017
153,114

 
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
131,081

 
284,983

Retained earnings
940,389

 
947,148

Total FBL Financial Group, Inc. stockholders' equity
1,227,656

 
1,388,792

Noncontrolling interest
32

 
58

Total stockholders' equity
1,227,688

 
1,388,850

Total liabilities and stockholders' equity
$
9,995,721

 
$
10,066,613




3




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

 
Three months ended June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
30,906

 
$
29,456

 
$
61,004

 
$
58,657

Traditional life insurance premiums
51,091

 
50,262

 
100,588

 
98,696

Net investment income
103,974

 
103,908

 
204,996

 
204,902

Net realized capital gains (losses)
841

 
921

 
(906
)
 
518

Net impairment losses recognized in earnings
(504
)
 

 
(1,799
)
 
(66
)
Other income
3,637

 
4,450

 
8,237

 
8,210

Total revenues
189,945

 
188,997

 
372,120

 
370,917

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
62,637

 
58,251

 
123,982

 
121,011

Traditional life insurance benefits
43,725

 
42,610

 
89,181

 
85,564

Policyholder dividends
2,560

 
2,557

 
5,111

 
5,110

Underwriting, acquisition and insurance expenses
37,210

 
36,341

 
76,787

 
70,694

Interest expense
1,213

 
1,213

 
2,426

 
2,425

Other expenses
5,627

 
4,740

 
11,220

 
8,891

Total benefits and expenses
152,972

 
145,712

 
308,707

 
293,695

 
36,973

 
43,285

 
63,413

 
77,222

Income tax expense
(6,650
)
 
(13,891
)
 
(11,337
)
 
(24,624
)
Equity income, net of related income taxes
2,087

 
2,924

 
3,942

 
6,155

Net income
32,410

 
32,318

 
56,018

 
58,753

Net loss (income) attributable to noncontrolling interest
18

 
(27
)
 
41

 
(29
)
Net income attributable to FBL Financial Group, Inc.
$
32,428

 
$
32,291

 
$
56,059

 
$
58,724

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
(23,102
)
 
$
79,050

 
$
(92,363
)
 
$
121,526

 
 
 
 
 
 
 
 
Earnings per common share
$
1.30

 
$
1.29

 
$
2.24

 
$
2.34

Earnings per common share - assuming dilution
$
1.30

 
$
1.29

 
$
2.24

 
$
2.34

 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.46

 
$
0.44

 
$
0.92

 
$
0.88

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)

 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
 
Q2 2018
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
29,456

 
$
28,004

 
$
26,275

 
$
30,098

 
$
30,906

Traditional life insurance premiums
50,262

 
47,087

 
49,547

 
49,497

 
51,091

Net investment income
103,908

 
102,950

 
107,347

 
101,022

 
103,974

Net realized capital gains (losses)
921

 
81

 

 
(1,747
)
 
841

Net impairment losses recognized in earnings

 
(67
)
 
(3,853
)
 
(1,295
)
 
(504
)
Other income
4,450

 
3,501

 
3,689

 
4,600

 
3,637

Total revenues
188,997

 
181,556

 
183,005

 
182,175

 
189,945

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
58,251

 
67,206

 
63,661

 
61,345

 
62,637

Traditional life insurance benefits
42,610

 
42,633

 
44,826

 
45,456

 
43,725

Policyholder dividends
2,557

 
2,487

 
2,543

 
2,551

 
2,560

Underwriting, acquisition and insurance expenses
36,341

 
27,535

 
36,649

 
39,577

 
37,210

Interest expense
1,213

 
1,213

 
1,212

 
1,213

 
1,213

Other expenses
4,740

 
4,971

 
4,520

 
5,593

 
5,627

Total benefits and expenses
145,712

 
146,045

 
153,411

 
155,735

 
152,972

 
43,285

 
35,511

 
29,594

 
26,440

 
36,973

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

 
(4,687
)
 
(6,650
)
Equity income, net of related income taxes
2,924

 
2,804

 
2,340

 
1,855

 
2,087

Net income
32,318

 
27,095

 
108,507

 
23,608

 
32,410

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

 
(8
)
 
23

 
18

Net income attributable to FBL Financial Group, Inc.
$
32,291

 
$
27,104

 
$
108,499

 
$
23,631

 
$
32,428

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
79,050

 
$
38,616

 
$
121,387

 
$
(69,261
)
 
$
(23,102
)
 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
1.29

 
$
1.08

 
$
4.33

 
$
0.94

 
$
1.30

Earnings per common share - assuming dilution
$
1.29

 
$
1.08

 
$
4.33

 
$
0.94

 
$
1.30

 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.44

 
$
0.44

 
$
0.44

 
$
0.46

 
$
0.46

Special cash dividend per common share
$

 
$

 
$

 
$
1.50

 
$

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
25,031

 
25,037

 
25,039

 
25,004

 
24,917

Effect of dilutive securities
20

 
18

 
18

 
16

 
13

Diluted
25,051

 
25,055

 
25,057

 
25,020

 
24,930



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)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018
 
 
 
 
 
 
 
 
 
 
Net income attributable to FBL Financial Group, Inc.
$
32,291

 
$
27,104

 
$
108,499

 
$
23,631

 
$
32,428

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

 

 
(85,797
)
 
1,069

 
754

Realized gains/losses on investments (2)(3)
(788
)
 
38

 
2,578

 
2,424

 
(295
)
Change in net unrealized gains/losses on derivatives (2)
(686
)
 
(1,389
)
 
(476
)
 
509

 
(194
)
Non-GAAP operating income
$
30,817

 
$
25,753

 
$
24,804

 
$
27,633

 
$
32,693

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$1.23
 
$1.03
 
$0.99
 
$1.10
 
$1.31
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating return on equity, excluding AOCI - last twelve months
11.0%
 
10.6%
 
10.3%
 
10.3%
 
10.3%
Non-GAAP operating return on equity, including AOCI - last twelve months
9.0%
 
8.8%
 
8.6%
 
8.6%
 
8.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018
Impact of Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Impact of change in federal tax rate (1)
$

 
$

 
$
85,797

 
$
(1,069
)
 
$
(754
)
Realized gains/losses on investments
921

 
14

 
(3,853
)
 
(1,225
)
 
1,203

Change in net unrealized gains/losses on equity securities

 

 

 
(1,817
)
 
(866
)
Change in net unrealized gains/losses on derivatives
107

 
1,897

 
629

 
(1,208
)
 
516

Offsets:
 
 
 
 
 
 
 
 
 
Change in amortization
222

 
(20
)
 
(90
)
 
338

 
(226
)
Reserve change on interest sensitive products
1,018

 
187

 
79

 
199

 
(7
)
Income tax
(794
)
 
(727
)
 
1,133

 
780

 
(131
)
Net impact of net income adjustments
$
1,474

 
$
1,351

 
$
83,695

 
$
(4,002
)
 
$
(265
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018
Pre-tax non-GAAP operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
18,174

 
$
17,015

 
$
17,211

 
$
16,582

 
$
15,998

Life Insurance segment
17,631

 
12,620

 
9,856

 
10,897

 
16,381

Corporate and Other segment
4,195

 
2,638

 
3,866

 
1,881

 
3,084

Total pre-tax non-GAAP operating income
40,000

 
32,273

 
30,933

 
29,360

 
35,463

Income taxes on non-GAAP operating income
(9,183
)
 
(6,520
)
 
(6,129
)
 
(1,727
)
 
(2,770
)
Non-GAAP operating income
$
30,817

 
$
25,753

 
$
24,804

 
$
27,633

 
$
32,693


(1)
2018 amounts represent 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
 
 
 
 
 
 
 
 
 
 
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
 
Q2 2018
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
1,202

 
$
1,115

 
$
1,032

 
$
1,202

 
$
1,217

Net investment income
55,631

 
53,878

 
56,275

 
56,233

 
55,198

Total non-GAAP operating revenues
56,833

 
54,993

 
57,307

 
57,435

 
56,415

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
29,865

 
31,385

 
31,096

 
31,286

 
31,393

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
483

 
537

 
611

 
504

 
518

Amortization of deferred acquisition costs
2,783

 
505

 
2,690

 
3,065

 
3,070

Amortization of value of insurance in force acquired
170

 
169

 
169

 
172

 
172

Other underwriting expenses
5,358

 
5,382

 
5,530

 
5,826

 
5,264

Total underwriting, acquisition and insurance expenses
8,794

 
6,593

 
9,000

 
9,567

 
9,024

Total non-GAAP operating benefits and expenses
38,659

 
37,978

 
40,096

 
40,853

 
40,417

Pre-tax non-GAAP operating income
$
18,174

 
$
17,015

 
$
17,211

 
$
16,582

 
$
15,998

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,395,757

 
$
4,382,218

 
$
4,470,721

 
$
4,586,256

 
$
4,576,410

Deferred acquisition costs
89,752

 
91,802

 
92,116

 
92,400

 
92,377

Value of insurance in force acquired
3,864

 
3,695

 
3,526

 
3,354

 
3,182

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
3,872,179

 
$
3,884,541

 
$
3,963,187

 
$
4,110,232

 
$
4,075,995

Other insurance reserves
364,368

 
358,691

 
355,877

 
352,747

 
346,270

Allocated equity, excluding AOCI
266,902

 
267,324

 
272,101

 
272,242

 
269,758

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
53,390

 
53,218

 
53,250

 
52,991

 
53,184

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.60
%
 
4.58
%
 
4.50
%
 
4.47
%
 
4.44
%
Credited rate
2.64

 
2.63

 
2.56

 
2.56

 
2.56

Spread on individual annuities at end of quarter (1)
1.96
%
 
1.95
%
 
1.94
%
 
1.91
%
 
1.88
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
3,022,180

 
$
3,057,952

 
$
3,082,310

 
$
3,109,789

 
$
3,134,862

Deposits
75,439

 
55,383

 
66,097

 
76,067

 
76,725

Withdrawals, surrenders and death benefits
(46,700
)
 
(45,450
)
 
(49,428
)
 
(60,623
)
 
(53,788
)
Net flows
28,739

 
9,933

 
16,669

 
15,444

 
22,937

 
 
 
 
 
 
 
 
 
 
Policyholder interest
20,826

 
21,041

 
20,817

 
20,363

 
20,787

Annuitizations and other
(13,793
)
 
(6,616
)
 
(10,007
)
 
(10,734
)
 
(7,227
)
Balance, end of period
3,057,952

 
3,082,310

 
3,109,789

 
3,134,862

 
3,171,359

Other interest sensitive reserves
814,227

 
802,231

 
853,398

 
975,370

 
904,636

Total interest sensitive product reserves
$
3,872,179

 
$
3,884,541

 
$
3,963,187

 
$
4,110,232

 
$
4,075,995


(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
 
 
 
 
 
 
 
 
 
 
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
 
Q2 2018
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
17,487

 
$
16,633

 
$
14,230

 
$
18,059

 
$
19,079

Traditional life insurance premiums
50,262

 
47,087

 
49,547

 
49,497

 
51,091

Net investment income
39,436

 
38,995

 
41,118

 
40,250

 
39,764

Other income
(117
)
 
(88
)
 
(140
)
 
(79
)
 
(353
)
Total non-GAAP operating revenues
107,068

 
102,627

 
104,755

 
107,727

 
109,581

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest and index credits
8,267

 
8,289

 
9,506

 
8,393

 
9,093

Death benefits and other
13,338

 
16,569

 
13,204

 
15,241

 
14,709

Total interest sensitive product benefits
21,605

 
24,858

 
22,710

 
23,634

 
23,802

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
19,997

 
21,530

 
23,707

 
23,735

 
19,297

Surrender and other benefits
8,936

 
7,409

 
8,642

 
10,144

 
10,392

Increase in traditional life future policy benefits
13,678

 
13,694

 
12,477

 
11,578

 
14,022

Total traditional life insurance benefits
42,611

 
42,633

 
44,826

 
45,457

 
43,711

Policyholder dividends
2,557

 
2,487

 
2,543

 
2,551

 
2,560

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
4,874

 
4,544

 
4,919

 
4,923

 
4,715

Amortization of deferred acquisition costs
4,519

 
1,122

 
4,816

 
4,436

 
4,498

Amortization of value of insurance in force acquired
375

 
375

 
375

 
373

 
373

Other underwriting expenses
14,185

 
14,536

 
14,448

 
16,151

 
14,833

Total underwriting, acquisition and insurance expenses
23,953

 
20,577

 
24,558

 
25,883

 
24,419

Total non-GAAP operating benefits and expenses
90,726

 
90,555

 
94,637

 
97,525

 
94,492

 
$
16,342

 
$
12,072

 
$
10,118

 
$
10,202

 
$
15,089

Equity income (loss), before tax
1,289

 
548

 
(262
)
 
695

 
1,292

Pre-tax non-GAAP operating income
$
17,631

 
$
12,620

 
$
9,856

 
$
10,897

 
$
16,381

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
2,913,608

 
$
2,942,395

 
$
2,935,517

 
$
2,967,238

 
$
3,006,593

Deferred acquisition costs
275,356

 
282,116

 
287,421

 
291,212

 
294,365

Value of insurance in force acquired
16,654

 
16,279

 
15,904

 
15,531

 
15,157

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (1)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
916,067

 
$
930,850

 
$
944,690

 
$
953,635

 
$
966,032

Other insurance reserves
1,917,124

 
1,933,051

 
1,951,565

 
1,964,649

 
1,976,014

Allocated equity, excluding AOCI
386,413

 
391,464

 
396,571

 
439,031

 
442,808


 

9




FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q2 2017
 
Q3 2017
 
Q4 2017
 
Q1 2018
 
Q2 2018
 
 
(Dollars in thousands)
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct policies - traditional life
364,122

 
364,445

 
365,382

 
364,757

 
364,339

Number of direct policies - universal life
64,979

 
65,301

 
66,382

 
66,939

 
67,466

Direct face amounts - traditional life
$
49,919,358

 
$
50,435,353

 
$
50,841,581

 
$
51,159,302

 
$
51,524,879

Direct face amounts - universal life
$
7,048,021

 
$
7,124,265

 
$
7,275,994

 
$
7,383,996

 
$
7,483,427

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
5.12
%
 
5.12
%
 
5.07
%
 
5.04
%
 
4.99
%
Credited rate
3.74

 
3.74

 
3.69

 
3.70