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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): February 7, 2019

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 February 7, 2019, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended December 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 February 7, 2019
99.2            Financial Supplement of FBL Financial Group, Inc. for the quarter ended December 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: February 7, 2019                    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 February 7, 2019
Exhibit 99.2 Financial Supplement of FBL Financial Group, Inc. for the quarter ended December 31, 2018




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit










FOR IMMEDIATE RELEASE
CONTACT:
Thursday, February 7, 2019
Kathleen Till Stange, V.P. Corporate & Investor Relations
 
(515) 226-6780, Kathleen.TillStange@FBLFinancial.com

FBL Financial Group Reports Fourth Quarter 2018 Results

West Des Moines, Iowa, February 7, 2019 -

Financial Highlights
(Dollars in thousands, except per share data)
 
Three months ended December 31,
 
2018
 
2017
Net income attributable to FBL Financial Group
$
6,415

 
$
103,980

Non-GAAP operating income(1)  
18,826

 
23,003

Earnings per common share (assuming dilution):
 
 
 
Net income
0.26

 
4.15

Non-GAAP operating income(1) 
0.75

 
0.92

    

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the fourth quarter of 2018 of $6.4 million, or $0.26 per diluted common share, compared to $104.0 million, or $4.15 per diluted common share, for the fourth quarter of 2017. Fourth quarter 2017 net income included a one-time benefit from the Tax Cuts and Jobs Act of 2017 of $81.2 million ($3.24 per share). Non-GAAP operating income(1) totaled $18.8 million, or $0.75 per common share, for the fourth quarter of 2018, compared to $23.0 million, or $0.92 per common share, for the fourth quarter of 2017. Full year 2018 net income totaled $4.15 per share and full year 2018 non-GAAP operating income totaled $4.36 per share. Fourth quarter 2018 earnings per share reflects:
Net realized losses on investments primarily due to a change in the fair value of equity securities and other-than-temporary impairments
Lower investment income due to a change in the fair value of derivatives
Negative impact of $0.24 per share from the offering of a voluntary early retirement program; this program supports ongoing expense savings efforts while providing eligible employees with enhanced retirement benefits
Increased benefit expenses totaling $0.17 per share due to updating the estimate of an immaterial error related to a closed block of life insurance business along with accrued interest associated with remediating the error
Higher amortization of acquisition costs in the Corporate and Other segment due to the negative impact of equity markets on separate account performance
Favorable mortality results in the Life Segment
The benefit of other investment-related income of $0.02 per share





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 fourth quarter net income of $0.26 per share and operating income of $0.75 per share reflect the impact of several items, including volatile equity markets and a charge related to ongoing expense savings. Even so, we reported a record $4.36 per share in full year non-GAAP operating income,” said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "Sales in the fourth quarter were strong, resulting in a five percent increase in life insurance premiums collected and a three percent increase in annuity premiums collected compared to the prior year quarter. We have a positive outlook in 2019 based on financial strength, a robust Farm Bureau Financial Services agent force, and enhanced distribution through the addition of Farm Bureau wealth management advisors. These factors empower us to fulfill our purpose of protecting livelihoods and futures."

Product Revenues Increase from 2017. Premiums and product charges for the fourth quarter of 2018 totaled $80.2 million compared to $75.8 million in the fourth quarter of 2017. Interest sensitive product charges increased 17 percent while traditional life insurance premiums were flat during the quarter. Premiums collected(2) in the fourth quarter of 2018 totaled $157.4 million compared to $153.7 million in the fourth quarter of 2017.

Investment Income of $84 Million in Fourth Quarter. Net investment income in the fourth quarter of 2018 totaled $83.9 million, compared to $107.3 million in the fourth quarter of 2017. This decrease is due to a change in the fair value of derivatives as well as 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 5.13 percent for the year ended December 31, 2018 compared to 5.28 percent for the year ended December 31, 2017. At December 31, 2018, 98 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 $156.0 million in the fourth quarter of 2018, compared to $153.4 million in the fourth quarter of 2017. Death benefits, net of reinsurance and reserves released, totaled $30.4 million in the fourth quarter of 2018, compared to $29.2 million in the fourth quarter of 2017. By its nature, mortality experience can fluctuate from quarter to quarter.

Net Realized Losses in the Fourth Quarter. In the fourth quarter of 2018, FBL Financial Group recognized net realized losses on investments of $9.6 million. This is attributable to realized gains on sales of $0.4 million, realized losses on sales of $1.3 million and unrealized losses on equity securities of $4.7 million. In addition, other-than-temporary impairments totaled $3.9 million.

Stock Repurchases. During the fourth quarter of 2018, FBL Financial Group repurchased 103,826 shares of its Class A common stock. FBL Financial Group has $40.9 million remaining under its current stock repurchase program.

Capital and Book Value. As of December 31, 2018, the book value per share of FBL Financial Group common stock totaled $47.78, compared to $55.12 at December 31, 2017. Book value per share, excluding accumulated other comprehensive income(3), totaled $44.09 at December 31, 2018, compared to




$43.68 at December 31, 2017. The December 31, 2018 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 552 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, February 8, 2019, 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 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
 
Year ended
 
December 31,
 
December 31,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
30,624

 
$
26,275

 
$
122,789

 
$
112,936

Traditional life insurance premiums
49,600

 
49,547

 
198,312

 
195,330

Net investment income
83,865

 
107,347

 
394,618

 
415,199

Net realized capital gains (losses)
(5,661
)
 

 
(7,276
)
 
599

Net other-than-temporary impairment losses recognized in earnings
(3,908
)
 
(1,420
)
 
(4,998
)
 
(1,553
)
Other income
4,116

 
3,689

 
16,181

 
15,400

Total revenues
158,636

 
185,438

 
719,626

 
737,911

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
59,626

 
63,661

 
253,753

 
251,878

Traditional life insurance benefits
41,860

 
44,826

 
175,209

 
173,023

Policyholder dividends
2,539

 
2,543

 
10,130

 
10,140

Underwriting, acquisition and insurance expenses
44,434

 
36,649

 
152,055

 
134,878

Interest expense
1,213

 
1,212

 
4,851

 
4,850

Other expenses
6,314

 
4,520

 
22,595

 
18,382

Total benefits and expenses
155,986

 
153,411

 
618,593

 
593,151

 
2,650

 
32,027

 
101,033

 
144,760

Income taxes
2,812

 
72,000

 
(11,650
)
 
39,983

Equity income (loss), net of related income taxes
998

 
(39
)
 
4,439

 
2,590

Net income
6,460

 
103,988

 
93,822

 
187,333

Net income attributable to noncontrolling interest
(45
)
 
(8
)
 
(29
)
 
(28
)
Net income attributable to FBL Financial Group, Inc.
$
6,415

 
$
103,980

 
$
93,793

 
$
187,305

 
 
 
 
 
 
 
 
Earnings per common share - assuming dilution
$
0.26

 
$
4.15

 
$
3.75

 
$
7.47

 
 
 
 
 
 
 
 
Weighted average common shares
24,887,779

 
25,039,449

 
24,932,189

 
25,038,334

Effect of dilutive securities
9,762

 
17,087

 
12,412

 
19,111

Weighted average common shares - diluted
24,897,541

 
25,056,536

 
24,944,601

 
25,057,445

 
 
 
 
 
 
 
 





(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
 
Year ended
 
December 31,
 
December 31,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group
$
6,415

 
$
103,980

 
$
93,793

 
$
187,305

Adjustments:
 
 
 
 
 
 
 
Initial impact of the Tax Act(a)

 
(81,157
)
 
(617
)
 
(81,157
)
Net realized gains/losses on investments(b) (c)
7,414

 
656

 
9,546

 
459

Change in net unrealized gains/losses on derivatives(b)
4,997

 
(476
)
 
6,188

 
(2,549
)
Non-GAAP operating income
$
18,826

 
$
23,003

 
$
108,910

 
$
104,058

 
 
 
 
 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$
0.75

 
$
0.92

 
$
4.36

 
$
4.15

 
 
 
 
 
(a) Amount represents the change in deferred tax assets and liabilities due to the enactment of the Tax Cuts and Jobs Act of 2017.
(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
 
December 31,
2018
 
December 31,
2017
Book value per share
$
47.78

 
$
55.12

Less: Per share impact of accumulated other comprehensive income
3.69

 
11.44

Book value per share, excluding accumulated other comprehensive income
$
44.09

 
$
43.68


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $91.3 million at December 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)

 
December 31,
2018
 
December 31,
2017
Assets
 
 
 
Investments
$
8,414,118

 
$
8,620,243

Cash and cash equivalents
19,035

 
52,696

Deferred acquisition costs
418,802

 
302,611

Other assets
420,394

 
425,888

Assets held in separate accounts
561,281

 
651,963

Total assets
$
9,833,630

 
$
10,053,401

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
7,205,471

 
$
7,050,465

Other policy funds, claims and benefits
615,177

 
634,128

Debt
97,000

 
97,000

Other liabilities
170,442

 
242,720

Liabilities related to separate accounts
561,281

 
651,963

Total liabilities
8,649,371

 
8,676,276

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

 
3,000

Class A common stock
152,652

 
153,589

Class B common stock
72

 
72

Accumulated other comprehensive income
91,318

 
284,983

Retained earnings
937,097

 
935,423

Total FBL Financial Group, Inc. stockholders' equity
1,184,139

 
1,377,067

Noncontrolling interest
120

 
58

Total stockholders' equity
1,184,259

 
1,377,125

Total liabilities and stockholders' equity
$
9,833,630

 
$
10,053,401

 
 
 
 
Common shares outstanding
24,718,815

 
24,930,526


####






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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit




FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
2018 Fourth Quarter



396662775_invsuppcover23.jpg



396662775_fblfgrgb960pxa02.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)
 
 
December 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: During the third quarter of 2018, we voluntarily changed our accounting policy for low income housing tax credit (LIHTC) investments. The accounting change is applied retrospectively to our financial statements and all prior financial information in this exhibit has been adjusted to reflect this change. For further details on the accounting change, see Note 1 to our consolidated financial statements in our Form 10-Q for the quarter ended September 30, 2018.

NOTE 3: Certain financial information presented herein may not add due to rounding.

1




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

 
December 31,
2018
 
December 31,
2017
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost: 2018 - $6,856,277; 2017 - $6,757,250)
$
7,033,045

 
$
7,291,967

Equity securities - at fair value (cost: 2018 - $93,564; 2017 - $96,715)
92,857

 
104,145

Mortgage loans
1,039,829

 
971,812

Real estate
1,543

 
1,543

Policy loans
197,366

 
191,398

Short-term investments
15,713

 
17,007

Other investments
33,765

 
42,371

Total investments
8,414,118

 
8,620,243

 
 
 
 
Cash and cash equivalents
19,035

 
52,696

Securities and indebtedness of related parties
60,962

 
47,823

Accrued investment income
74,524

 
76,468

Amounts receivable from affiliates
3,812

 
3,561

Reinsurance recoverable
102,386

 
108,948

Deferred acquisition costs
418,802

 
302,611

Value of insurance in force acquired
10,385

 
4,560

Current income taxes recoverable
4,807

 
6,764

Other assets
163,518

 
177,764

Assets held in separate accounts
561,281

 
651,963

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
9,833,630

 
$
10,053,401




2




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

 
December 31,
2018
 
December 31,
2017
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,403,125

 
$
5,299,961

Traditional life insurance and accident and health products
1,802,346

 
1,750,504

Other policy claims and benefits
51,298

 
44,475

Supplementary contracts without life contingencies
303,627

 
322,630

Advance premiums and other deposits
260,252

 
267,023

Amounts payable to affiliates
1,461

 
1,164

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

 
97,000

Deferred income taxes
75,449

 
130,425

Other liabilities
93,532

 
111,131

Liabilities related to separate accounts
561,281

 
651,963

Total liabilities
8,649,371

 
8,676,276

 
 
 
 
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 24,707,402 in 2018 and 24,919,113 shares in 2017
152,652

 
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
91,318

 
284,983

Retained earnings
937,097

 
935,423

Total FBL Financial Group, Inc. stockholders' equity
1,184,139

 
1,377,067

Noncontrolling interest
120

 
58

Total stockholders' equity
1,184,259

 
1,377,125

Total liabilities and stockholders' equity
$
9,833,630

 
$
10,053,401




3




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

 
Three months ended December 31,
 
Year ended December 31,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Interest sensitive product charges
$
30,624

 
$
26,275

 
$
122,789

 
$
112,936

Traditional life insurance premiums
49,600

 
49,547

 
198,312

 
195,330

Net investment income
83,865

 
107,347

 
394,618

 
415,199

Net realized capital gains (losses)
(5,661
)
 

 
(7,276
)
 
599

 

 

 
 
 
 
Total other-than-temporary impairment losses
(3,982
)
 
(1,420
)
 
(5,072
)
 
(1,553
)
Non-credit portion in other comprehensive income
74

 

 
74

 

Net impairment losses recognized in earnings
(3,908
)
 
(1,420
)
 
(4,998
)
 
(1,553
)
Other income
4,116

 
3,689

 
16,181

 
15,400

Total revenues
158,636

 
185,438

 
719,626

 
737,911

 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
Interest sensitive product benefits
59,626

 
63,661

 
253,753

 
251,878

Traditional life insurance benefits
41,860

 
44,826

 
175,209

 
173,023

Policyholder dividends
2,539

 
2,543

 
10,130

 
10,140

Underwriting, acquisition and insurance expenses
44,434

 
36,649

 
152,055

 
134,878

Interest expense
1,213

 
1,212

 
4,851

 
4,850

Other expenses
6,314

 
4,520

 
22,595

 
18,382

Total benefits and expenses
155,986

 
153,411

 
618,593

 
593,151

 
2,650

 
32,027

 
101,033

 
144,760

Income tax benefit (expense)
2,812

 
72,000

 
(11,650
)
 
39,983

Equity income (loss), net of related income taxes
998

 
(39
)
 
4,439

 
2,590

Net income
6,460

 
103,988

 
93,822

 
187,333

Net income attributable to noncontrolling interest
(45
)
 
(8
)
 
(29
)
 
(28
)
Net income attributable to FBL Financial Group, Inc.
$
6,415

 
$
103,980

 
$
93,793

 
$
187,305

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
8,772

 
$
116,868

 
$
(94,392
)
 
$
274,507

 
 
 
 
 
 
 
 
Earnings per common share
$
0.26

 
$
4.15

 
$
3.76

 
$
7.47

Earnings per common share - assuming dilution
$
0.26

 
$
4.15

 
$
3.75

 
$
7.47

 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.46

 
$
0.44

 
$
1.84

 
$
1.76

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)

 
Q4 2017
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
26,275

 
$
30,098

 
$
30,906

 
$
31,161

 
$
30,624

Traditional life insurance premiums
49,547

 
49,497

 
51,091

 
48,124

 
49,600

Net investment income
107,347

 
101,022

 
103,974

 
105,757

 
83,865

Net realized capital gains (losses)

 
(1,747
)
 
841

 
(709
)
 
(5,661
)
 

 
 
 
 
 
 
 
 
Total other-than-temporary impairment losses
(1,420
)
 
(1,040
)
 

 
(50
)
 
(3,982
)
Non-credit portion in other comprehensive income

 

 

 

 
74

Net impairment losses recognized in earnings
(1,420
)
 
(1,040
)
 

 
(50
)
 
(3,908
)
Other income
3,689

 
4,600

 
3,637

 
3,828

 
4,116

Total revenues
185,438

 
182,430

 
190,449

 
188,111

 
158,636

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
63,661

 
61,345

 
62,637

 
70,145

 
59,626

Traditional life insurance benefits
44,826

 
45,456

 
43,725

 
44,168

 
41,860

Policyholder dividends
2,543

 
2,551

 
2,560

 
2,480

 
2,539

Underwriting, acquisition and insurance expenses
36,649

 
39,577

 
37,210

 
30,834

 
44,434

Interest expense
1,212

 
1,213

 
1,213

 
1,212

 
1,213

Other expenses
4,520

 
5,593

 
5,627

 
5,061

 
6,314

Total benefits and expenses
153,411

 
155,735

 
152,972

 
153,900

 
155,986

 
32,027

 
26,695

 
37,477

 
34,211

 
2,650

Income tax benefit (expense)
72,000

 
(3,813
)
 
(5,831
)
 
(4,818
)
 
2,812

Equity income (loss), net of related income taxes
(39
)
 
660

 
1,139

 
1,642

 
998

Net income
103,988

 
23,542

 
32,785

 
31,035

 
6,460

Net loss (income) attributable to noncontrolling interest
(8
)
 
23

 
18

 
(25
)
 
(45
)
Net income attributable to FBL Financial Group, Inc.
$
103,980

 
$
23,565

 
$
32,803

 
$
31,010

 
$
6,415

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
116,868

 
$
(69,327
)
 
$
(22,727
)
 
$
(11,110
)
 
$
8,772

 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
4.15

 
$
0.94

 
$
1.31

 
$
1.24

 
$
0.26

Earnings per common share - assuming dilution
$
4.15

 
$
0.94

 
$
1.31

 
$
1.24

 
$
0.26

 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.44

 
$
0.46

 
$
0.46

 
$
0.46

 
$
0.46

Special cash dividend per common share
$

 
$
1.50

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
25,039

 
25,004

 
24,917

 
24,919

 
24,888

Effect of dilutive securities
18

 
16

 
13

 
11

 
10

Diluted
25,057

 
25,020

 
24,930

 
24,930

 
24,898



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)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4 2017
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
 
 
 
 
 
 
 
 
 
Net income attributable to FBL Financial Group, Inc.
$
103,980

 
$
23,565

 
$
32,803

 
$
31,010

 
$
6,415

Net income adjustments:
 
 
 
 
 
 
 
 
 
Impact of change in federal tax rate (1)
(81,157
)
 

 

 
(617
)
 

Realized gains/losses on investments (2)(3)
656

 
2,223

 
(694
)
 
603

 
7,414

Change in net unrealized gains/losses on derivatives (2)
(476
)
 
509

 
(194
)
 
876

 
4,997

Non-GAAP operating income
$
23,003

 
$
26,297

 
$
31,915

 
$
31,872

 
$
18,826

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating income per common share - assuming dilution
$0.92
 
$1.05
 
$1.28
 
$1.28
 
$0.75
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating return on equity, excluding AOCI - last twelve months
10.0%
 
10.0%
 
9.7%
 
10.5%
 
10.0%
Non-GAAP operating return on equity, including AOCI - last twelve months
8.3%
 
8.3%
 
8.1%
 
9.0%
 
8.8%
 
 
 
 
 
 
 
 
 
 
 
Q4 2017
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
Impact of Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Initial impact of the Tax Act (1)
$
81,157

 
$

 
$

 
$
617

 
$

Realized gains (losses) on investments and change in net unrealized gains/losses on equity securities and derivatives
(791
)
 
(3,995
)
 
1,357

 
(2,658
)
 
(19,216
)
Offsets: (4)
 
 
 
 
 
 
 
 
 
Change in amortization
(90
)
 
338

 
(226
)
 
725

 
945

Reserve change on interest sensitive products
79

 
199

 
(7
)
 
60

 
2,561

Income tax
622

 
726

 
(236
)
 
394

 
3,299

Net impact of net income adjustments
$
80,977

 
$
(2,732
)
 
$
888

 
$
(862
)
 
$
(12,411
)
 
 
 
 
 
 
 
 
 
 
 
Q4 2017
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
Pre-tax non-GAAP operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
17,211

 
$
16,582

 
$
15,998

 
$
18,179

 
$
12,087

Life Insurance segment
9,856

 
10,897

 
16,381

 
11,958

 
8,444

Corporate and Other segment
5,694

 
3,533

 
5,434

 
7,999

 
(953
)
Total pre-tax non-GAAP operating income
32,761

 
31,012

 
37,813

 
38,136

 
19,578

Income taxes on non-GAAP operating income
(9,758
)
 
(4,715
)
 
(5,898
)
 
(6,264
)
 
(752
)
Non-GAAP operating income
$
23,003

 
$
26,297

 
$
31,915

 
$
31,872

 
$
18,826


(1)
During the third quarter of 2018, we adjusted the provisional estimate of the impact of the Tax Act on our deferred tax assets and liabilities as of December 31, 2017. See Note 5 to our consolidated financial statements in Form 10-Q for the quarter ended September 30, 2018 for additional information.
(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.
(4) The items excluded from non-GAAP operating income impact the amortization of deferred acquisition costs, value of business acquired and unearned revenue reserve. Certain interest sensitive reserves as well as income taxes are also impacted.

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
 
 
 
 
 
 
 
 
 
 
 
Q4 2017
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
1,032

 
$
1,202

 
$
1,217

 
$
1,280

 
$
1,474

Net investment income (1)
56,275

 
56,233

 
55,198

 
54,144

 
53,248

Total non-GAAP operating revenues
57,307

 
57,435

 
56,415

 
55,424

 
54,722

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
31,096

 
31,286

 
31,393

 
29,037

 
32,299

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
611

 
504

 
518

 
374

 
631

Amortization of deferred acquisition costs
2,690

 
3,065

 
3,070

 
2,319

 
2,789

Amortization of value of insurance in force acquired
169

 
172

 
172

 
165

 
165

Other underwriting expenses (1)
5,530

 
5,826

 
5,264

 
5,350

 
6,751

Total underwriting, acquisition and insurance expenses
9,000

 
9,567

 
9,024

 
8,208

 
10,336

Total non-GAAP operating benefits and expenses
40,096

 
40,853

 
40,417

 
37,245

 
42,635

Pre-tax non-GAAP operating income
$
17,211

 
$
16,582

 
$
15,998

 
$
18,179

 
$
12,087

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,470,721

 
$
4,586,256

 
$
4,576,410

 
$
4,596,422

 
$
4,489,765

Deferred acquisition costs
92,116

 
92,400

 
92,377

 
92,442

 
93,819

Value of insurance in force acquired
3,526

 
3,354

 
3,182

 
3,017

 
2,852

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
3,963,187

 
$
4,110,232

 
$
4,075,995

 
$
4,096,314

 
$
4,036,152

Other insurance reserves
355,877

 
352,747

 
346,270

 
344,963

 
338,646

Allocated equity, excluding AOCI
272,101

 
272,242

 
269,758

 
270,918

 
266,863

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
53,250

 
52,991

 
53,184

 
52,925

 
52,911

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.50
%
 
4.47
%
 
4.44
%
 
4.43
%
 
4.48
%
Credited rate
2.56

 
2.56

 
2.56

 
2.57

 
2.58

Spread on individual annuities at end of quarter (2)
1.94
%
 
1.91
%
 
1.88
%
 
1.86
%
 
1.90
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
3,082,310

 
$
3,109,789

 
$
3,134,862

 
$
3,171,359

 
$
3,176,881

Deposits
66,097

 
76,067

 
76,725

 
53,584

 
67,075

Withdrawals, surrenders and death benefits
(49,428
)
 
(60,623
)
 
(53,788
)
 
(62,234
)
 
(59,661
)
Net flows
16,669

 
15,444

 
22,937

 
(8,650
)
 
7,414

 
 
 
 
 
 
 
 
 
 
Policyholder interest
20,817

 
20,363

 
20,787

 
20,524

 
20,824

Annuitizations and other
(10,007
)
 
(10,734
)
 
(7,227
)
 
(6,352
)
 
(10,812
)
Balance, end of period
3,109,789

 
3,134,862

 
3,171,359

 
3,176,881

 
3,194,307

Other interest sensitive reserves
853,398

 
975,370

 
904,636

 
919,433

 
841,845

Total interest sensitive product reserves
$
3,963,187

 
$
4,110,232

 
$
4,075,995

 
$
4,096,314

 
$
4,036,152


(1)
During the fourth quarter of 2018 we offered a voluntary early retirement program resulting in a decrease in net investment income from increased investment expenses ($0.6 million) and an increase in other underwriting expenses ($1.9 million).
(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 Non-GAAP Operating Income
Life Insurance Segment
 
 
 
 
 
 
 
 
 
 
 
Q4 2017
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
Pre-tax Non-GAAP Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
14,230

 
$
18,059

 
$
19,079

 
$
18,876

 
$
18,471

Traditional life insurance premiums
49,547

 
49,497

 
51,091

 
48,124

 
49,600

Net investment income (1)
41,118

 
40,250

 
39,764

 
39,654

 
38,335

Other income
(140
)
 
(79
)
 
(353
)
 
(108
)
 
(66
)
Total non-GAAP operating revenues
104,755

 
107,727

 
109,581

 
106,546

 
106,340

 
 
 
 
 
 
 
 
 
 
Non-GAAP operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest and index credits (2)
9,506

 
8,393

 
9,093

 
8,697

 
10,103

Death benefits and other (2)
13,204

 
15,241

 
14,709

 
18,475

 
16,661

Total interest sensitive product benefits
22,710

 
23,634

 
23,802

 
27,172

 
26,764

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
23,707

 
23,735

 
19,297

 
21,888

 
20,001

Surrender and other benefits
8,642

 
10,144

 
10,392

 
8,110

 
9,196

Increase in traditional life future policy benefits (2)
12,477

 
11,578

 
14,022

 
14,170

 
12,666

Total traditional life insurance benefits
44,826

 
45,457

 
43,711

 
44,168

 
41,863

Policyholder dividends
2,543

 
2,551

 
2,560

 
2,480

 
2,539

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
4,919

 
4,923

 
4,715

 
4,200

 
5,275

Amortization of deferred acquisition costs
4,816

 
4,436

 
4,498

 
2,148

 
4,182

Amortization of value of insurance in force acquired
375

 
373

 
373

 
373

 
373

Other underwriting expenses (1)
14,448

 
16,151

 
14,833

 
14,907

 
17,893

Total underwriting, acquisition and insurance expenses
24,558

 
25,883

 
24,419

 
21,628

 
27,723

Total non-GAAP operating benefits and expenses
94,637

 
97,525

 
94,492

 
95,448

 
98,889

 
$
10,118

 
$
10,202

 
$
15,089

 
$
11,098

 
$
7,451

Equity income (loss), before tax
(262
)
 
695

 
1,292

 
860

 
993

Pre-tax non-GAAP operating income
$
9,856

 
$
10,897

 
$
16,381

 
$
11,958

 
$
8,444

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
2,935,517

 
$
2,967,238

 
$
3,006,593

 
$
3,031,624

 
$
3,060,235

Deferred acquisition costs
287,421

 
291,212

 
294,365

 
298,368

 
308,937

Value of insurance in force acquired
15,904

 
15,531

 
15,157

 
14,784

 
14,411

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (3)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
944,690

 
$
953,635

 
$
966,032

 
$
979,858

 
$
989,513

Other insurance reserves
1,951,565

 
1,964,649

 
1,976,014

 
1,995,675

 
2,001,449

Allocated equity, excluding AOCI
396,571

 
439,031

 
442,808

 
450,927

 
452,274


 

9




FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q4 2017
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
 
(Dollars in thousands)
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct policies - traditional life
365,382

 
364,757

 
364,339

 
364,412

 
365,909

Number of direct policies - universal life
66,382

 
66,939

 
67,466

 
67,951

 
69,832

Direct face amounts - traditional life
$
50,841,581

 
$
51,159,302

 
$
51,524,879

 
$
51,833,952

 
$
52,191,204

Direct face amounts - universal life
$
7,275,994

 
$
7,383,996

 
$
7,483,427

 
$
7,539,216

 
$
7,777,370

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
5.07