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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 2, 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)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, without par value
FFG
New York Stock Exchange


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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]







Item 2.02. Results of Operations and Financial Condition

On May 2, 2019, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended March 31, 2019 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 2, 2019
99.2            Financial Supplement of FBL Financial Group, Inc. for the quarter ended March 31, 2019

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 2, 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 May 2, 2019
Exhibit 99.2 Financial Supplement of FBL Financial Group, Inc. for the quarter ended March 31, 2019




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit










FOR IMMEDIATE RELEASE
CONTACT:
Thursday, May 2, 2019
Kathleen Till Stange, V.P. Corporate & Investor Relations
 
(515) 226-6780, Kathleen.TillStange@FBLFinancial.com

FBL Financial Group Reports First Quarter 2019 Results

West Des Moines, Iowa, May 2, 2019 -

Financial Highlights
(Dollars in thousands, except per share data)
 
Three months ended March 31,
 
2019
 
2018
Net income attributable to FBL Financial Group
$
34,043

 
$
23,565

Adjusted operating income(1)  
25,902

 
26,297

Earnings per common share (assuming dilution):
 
 
 
Net income
1.37

 
0.94

Adjusted operating income(1) 
1.04

 
1.05

    

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the first quarter of 2019 of $34.0 million, or $1.37 per diluted common share, compared to $23.6 million, or $0.94 per diluted common share, for the first quarter of 2018. Adjusted operating income(1) totaled $25.9 million, or $1.04 per common share, for the first quarter of 2019, compared to $26.3 million, or $1.05 per common share, for the first quarter of 2018. First quarter 2019 earnings per share reflects:
Lower amortization of acquisition costs in the Corporate and Other segment due to the positive impact of equity markets on separate account performance
The benefit of other investment-related income of $0.04 per share
Lower spread income in the Annuity segment
Unfavorable mortality results in the Life segment
Net realized gains on investments

Adjusted operating income differs from the GAAP measure, net income attributable to FBL Financial Group, in that it excludes 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 delivered solid first quarter 2019 earnings with net income of $1.37 per share and adjusted operating income of $1.04 per share," said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "In the first quarter of 2019 we also returned more than $48 million to shareholders




with the payment of a special dividend of $1.50 per share and our increased quarterly dividend of $0.48 per share. As we move forward in 2019, we remain focused on the fundamentals: serving the needs of the Farm Bureau niche market with products and services to protect livelihoods and futures."

Product Revenues Increase from 2018. Premiums and product charges for the first quarter of 2019 increased to $80.7 million compared to $79.6 million in the first quarter of 2018. Interest sensitive product charges increased 4 percent while traditional life insurance premiums were flat during the quarter. Premiums collected(2) in the first quarter of 2019 totaled $160.7 million compared to $169.7 million in the first quarter of 2018.

Investment Income of $110 Million in First Quarter. Net investment income in the first quarter of 2019 totaled $109.6 million, compared to $101.0 million in the first quarter of 2018. This increase reflects a change in the fair value of derivatives and 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 4.97 percent for the three months ended March 31, 2019 compared to 5.21 percent for the three months ended March 31, 2018. At March 31, 2019, 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 $163.5 million in the first quarter of 2019, compared to $155.7 million in the first quarter of 2018. Death benefits, net of reinsurance and reserves released, totaled $33.9 million in the first quarter of 2019, compared to $32.6 million in the first quarter of 2018. By its nature, mortality experience can fluctuate from quarter to quarter.

Net Realized Gains in the First Quarter. In the first quarter of 2019, FBL Financial Group recognized net realized gains on investments of $9.3 million. This is attributable to realized gains of $5.8 million, unrealized gains on equity securities of $4.4 million and other-than-temporary impairments of $0.9 million.

Stock Repurchases. During the first quarter of 2019, FBL Financial Group repurchased 66,475 shares of its Class A common stock. FBL Financial Group has $36.3 million remaining under its current stock repurchase program.

Capital and Book Value. As of March 31, 2019, the book value per share of FBL Financial Group common stock totaled $51.13, compared to $47.78 at December 31, 2018. Book value per share, excluding accumulated other comprehensive income(3), totaled $43.45 at March 31, 2019, compared to $44.09 at December 31, 2018. The March 31, 2019 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 517 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 3, 2019, 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
 
March 31,
 
2019
 
2018
Revenues:
 
 
 
Interest sensitive product charges
$
31,266

 
$
30,098

Traditional life insurance premiums
49,392

 
49,497

Net investment income
109,640

 
101,022

Net realized capital gains (losses)
10,157

 
(1,747
)
Net other-than-temporary impairment losses recognized in earnings
(869
)
 
(1,040
)
Other income
3,970

 
4,600

Total revenues
203,556

 
182,430

 
 
 
 
Benefits and expenses:
 
 
 
Interest sensitive product benefits
70,596

 
61,345

Traditional life insurance benefits
46,675

 
45,456

Policyholder dividends
2,534

 
2,551

Underwriting, acquisition and insurance expenses
36,189

 
39,577

Interest expense
1,212

 
1,213

Other expenses
6,250

 
5,593

Total benefits and expenses
163,456

 
155,735

 
40,100

 
26,695

Income taxes
(6,276
)
 
(3,813
)
Equity income, net of related income taxes
220

 
660

Net income
34,044

 
23,542

Net loss (income) attributable to noncontrolling interest
(1
)
 
23

Net income attributable to FBL Financial Group, Inc.
$
34,043

 
$
23,565

 
 
 
 
Earnings per common share - assuming dilution
$
1.37

 
$
0.94

 
 
 
 
Weighted average common shares
24,765,277

 
25,003,691

Effect of dilutive securities
11,176

 
15,818

Weighted average common shares - diluted
24,776,453

 
25,019,509

 
 
 
 





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

FBL Financial Group consistently utilizes adjusted 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. Adjusted operating income consists of net income attributable to FBL Financial Group adjusted to exclude realized gains and losses on investments, and the change in fair value of 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 presentation and evaluation of adjusted operating 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,
 
2019
 
2018
 
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group
$
34,043

 
$
23,565

Adjustments:
 
 
 
Net realized gains/losses on investments(a)
(7,230
)
 
2,223

Change in net unrealized gains/losses on derivatives(a)
(911
)
 
509

Adjusted operating income
$
25,902

 
$
26,297

 
 
 
 
Adjusted operating income per common share - assuming dilution
$
1.04

 
$
1.05

 
 
 

(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.

(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,
2019
 
December 31,
2018
Book value per share
$
51.13

 
$
47.78

Less: Per share impact of accumulated other comprehensive income
7.68

 
3.69

Book value per share, excluding accumulated other comprehensive income
$
43.45

 
$
44.09


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $189.2 million at March 31, 2019 and $91.3 million at December 31, 2018. 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,
2019
 
December 31,
2018
Assets
 
 
 
Investments
$
8,620,715

 
$
8,414,118

Cash and cash equivalents
6,057

 
19,035

Deferred acquisition costs
373,711

 
418,802

Other assets
433,564

 
420,394

Assets held in separate accounts
614,121

 
561,281

Total assets
$
10,048,168

 
$
9,833,630

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
7,241,831

 
$
7,205,471

Other policy funds, claims and benefits
612,733

 
615,177

Debt
101,000

 
97,000

Other liabilities
214,962

 
170,442

Liabilities related to separate accounts
614,121

 
561,281

Total liabilities
8,784,647

 
8,649,371

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

 
3,000

Class A common stock
152,444

 
152,652

Class B common stock
72

 
72

Accumulated other comprehensive income
189,166

 
91,318

Retained earnings
918,718

 
937,097

Total FBL Financial Group, Inc. stockholders' equity
1,263,400

 
1,184,139

Noncontrolling interest
121

 
120

Total stockholders' equity
1,263,521

 
1,184,259

Total liabilities and stockholders' equity
$
10,048,168

 
$
9,833,630

 
 
 
 
Common shares outstanding
24,652,340

 
24,718,815


####






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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit




FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
2019 First Quarter





397779019_invsuppcover2019.jpg






397779019_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)
 
 
March 31, 2019
 
 
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 Adjusted Operating Income Reconciliation and Pre-tax Adjusted Operating Income by Segment, last five quarters
 
Financial Information by Segment:
 
 
Segment Information
 
Statements of Pre-tax Adjusted 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 Adjusted 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 adjusted 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. Adjusted 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 adjusted 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 adjusted operating performance without the impact of these items enhances the analysis of our results. We use adjusted 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.

We analyze our segment results based on pre-tax adjusted operating income, which excludes the impact of certain items that are included in pre-tax net income. Pre-tax adjusted operating income is a basis allowed for segment reporting under U.S. generally accounting principles (GAAP). See Note 9 to our consolidated financial statements in Form 10-Q for further information regarding how we define our segments and pre-tax adjusted operating income.
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,
2019
 
December 31,
2018
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost: 2019 - $6,873,217; 2018 - $6,856,277)
$
7,231,584

 
$
7,033,045

Equity securities - at fair value (cost: 2019 - $104,814; 2018 - $93,564)
108,525

 
92,857

Mortgage loans
1,023,655

 
1,039,829

Real estate
1,543

 
1,543

Policy loans
199,230

 
197,366

Short-term investments
11,515

 
15,713

Other investments
44,663

 
33,765

Total investments
8,620,715

 
8,414,118

 
 
 
 
Cash and cash equivalents
6,057

 
19,035

Securities and indebtedness of related parties
64,377

 
60,962

Accrued investment income
80,102

 
74,524

Amounts receivable from affiliates
5,735

 
3,812

Reinsurance recoverable
103,825

 
102,386

Deferred acquisition costs
373,711

 
418,802

Value of insurance in force acquired
6,259

 
10,385

Current income taxes recoverable
3,510

 
4,807

Other assets
169,756

 
163,518

Assets held in separate accounts
614,121

 
561,281

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
10,048,168

 
$
9,833,630




2




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

 
March 31,
2019
 
December 31,
2018
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,426,491

 
$
5,403,125

Traditional life insurance and accident and health products
1,815,340

 
1,802,346

Other policy claims and benefits
44,418

 
51,298

Supplementary contracts without life contingencies
303,771

 
303,627

Advance premiums and other deposits
264,544

 
260,252

Amounts payable to affiliates
953

 
1,461

Short-term debt payable to non-affiliates
4,000

 

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

 
97,000

Deferred income taxes
103,300

 
75,449

Other liabilities
110,709

 
93,532

Liabilities related to separate accounts
614,121

 
561,281

Total liabilities
8,784,647

 
8,649,371

 
 
 
 
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 24,640,927 in 2019 and 24,707,402 shares in 2018
152,444

 
152,652

Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2019 and 2018
72

 
72

Accumulated other comprehensive income
189,166

 
91,318

Retained earnings
918,718

 
937,097

Total FBL Financial Group, Inc. stockholders' equity
1,263,400

 
1,184,139

Noncontrolling interest
121

 
120

Total stockholders' equity
1,263,521

 
1,184,259

Total liabilities and stockholders' equity
$
10,048,168

 
$
9,833,630




3




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

 
 
Three months ended March 31,
 
 
2019
 
2018
Revenues:
 
 
 
 
Interest sensitive product charges
 
$
31,266

 
$
30,098

Traditional life insurance premiums
 
49,392

 
49,497

Net investment income
 
109,640

 
101,022

Net realized capital gains (losses)
 
10,157

 
(1,747
)
Net impairment losses recognized in earnings
 
(869
)
 
(1,040
)
Other income
 
3,970

 
4,600

Total revenues
 
203,556

 
182,430

 
 
 
 
 
Benefits and expenses:
 
 
 
 
Interest sensitive product benefits
 
70,596

 
61,345

Traditional life insurance benefits
 
46,675

 
45,456

Policyholder dividends
 
2,534

 
2,551

Underwriting, acquisition and insurance expenses
 
36,189

 
39,577

Interest expense
 
1,212

 
1,213

Other expenses
 
6,250

 
5,593

Total benefits and expenses
 
163,456

 
155,735

 
 
40,100

 
26,695

Income tax expense
 
(6,276
)
 
(3,813
)
Equity income, net of related income taxes
 
220

 
660

Net income
 
34,044

 
23,542

Net loss (income) attributable to noncontrolling interest
 
(1
)
 
23

Net income attributable to FBL Financial Group, Inc.
 
$
34,043

 
$
23,565

 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
 
$
131,891

 
$
(69,327
)
 
 
 
 
 
Earnings per common share
 
$
1.37

 
$
0.94

Earnings per common share - assuming dilution
 
$
1.37

 
$
0.94

 
 
 
 
 
Cash dividends per common share
 
$
0.48

 
$
0.46

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 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
30,098

 
$
30,906

 
$
31,161

 
$
30,624

 
$
31,266

Traditional life insurance premiums
49,497

 
51,091

 
48,124

 
49,600

 
49,392

Net investment income
101,022

 
103,974

 
105,757

 
83,865

 
109,640

Net realized capital gains (losses)
(1,747
)
 
841

 
(709
)
 
(5,661
)
 
10,157

 

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

 
(50
)
 
(3,982
)
 
(869
)
Non-credit portion in other comprehensive income

 

 

 
74

 

Net impairment losses recognized in earnings
(1,040
)
 

 
(50
)
 
(3,908
)
 
(869
)
Other income
4,600

 
3,637

 
3,828

 
4,116

 
3,970

Total revenues
182,430

 
190,449

 
188,111

 
158,636

 
203,556

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
61,345

 
62,637

 
70,145

 
59,626

 
70,596

Traditional life insurance benefits
45,456

 
43,725

 
44,168

 
41,860

 
46,675

Policyholder dividends
2,551

 
2,560

 
2,480

 
2,539

 
2,534

Underwriting, acquisition and insurance expenses
39,577

 
37,210

 
30,834

 
44,434

 
36,189

Interest expense
1,213

 
1,213

 
1,212

 
1,213

 
1,212

Other expenses
5,593

 
5,627

 
5,061

 
6,314

 
6,250

Total benefits and expenses
155,735

 
152,972

 
153,900

 
155,986

 
163,456

 
26,695

 
37,477

 
34,211

 
2,650

 
40,100

Income tax benefit (expense)
(3,813
)
 
(5,831
)
 
(4,818
)
 
2,812

 
(6,276
)
Equity income, net of related income taxes
660

 
1,139

 
1,642

 
998

 
220

Net income
23,542

 
32,785

 
31,035

 
6,460

 
34,044

Net loss (income) attributable to noncontrolling interest
23

 
18

 
(25
)
 
(45
)
 
(1
)
Net income attributable to FBL Financial Group, Inc.
$
23,565

 
$
32,803

 
$
31,010

 
$
6,415

 
$
34,043

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
(69,327
)
 
$
(22,727
)
 
$
(11,110
)
 
$
8,772

 
$
131,891

 
 
 
 
 
 
 
 
 
 
Earnings per common share
$
0.94

 
$
1.31

 
$
1.24

 
$
0.26

 
$
1.37

Earnings per common share - assuming dilution
$
0.94

 
$
1.31

 
$
1.24

 
$
0.26

 
$
1.37

 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.46

 
$
0.46

 
$
0.46

 
$
0.46

 
$
0.48

Special cash dividend per common share
$
1.50

 
$

 
$

 
$

 
$
1.50

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
25,004

 
24,917

 
24,919

 
24,888

 
24,765

Effect of dilutive securities
16

 
13

 
11

 
10

 
11

Diluted
25,020

 
24,930

 
24,930

 
24,898

 
24,776



5




FBL Financial Group, Inc.
Net Income to Adjusted Operating Income Reconciliation and Pre-tax Adjusted Operating Income by Segment
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
 
 
 
 
 
 
 
 
 
Net income attributable to FBL Financial Group, Inc.
$
23,565

 
$
32,803

 
$
31,010

 
$
6,415

 
$
34,043

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

 

 
(617
)
 

 

Realized gains/losses on investments (2)
2,223

 
(694
)
 
603

 
7,414

 
(7,230
)
Change in net unrealized gains/losses on derivatives (2)
509

 
(194
)
 
876

 
4,997

 
(911
)
Adjusted operating income (3)
$
26,297

 
$
31,915

 
$
31,872

 
$
18,826

 
$
25,902

 
 
 
 
 
 
 
 
 
 
Adjusted operating income per common share - assuming dilution (3)
$1.05
 
$1.28
 
$1.28
 
$0.75
 
$1.04
 
 
 
 
 
 
 
 
 
 
Adjusted operating return on equity, excluding AOCI - last twelve months
10.0%
 
9.7%
 
10.5%
 
10.0%
 
10.0%
Adjusted operating return on equity, including AOCI - last twelve months
8.3%
 
8.1%
 
9.0%
 
8.8%
 
8.9%
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
Impact of Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Initial impact of the Tax Act (1)
$

 
$

 
$
617

 
$

 
$

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

 
(2,658
)
 
(19,216
)
 
10,846

Offsets: (4)
 
 
 
 
 
 
 
 
 
Change in amortization
338

 
(226
)
 
725

 
945

 
(256
)
Reserve change on interest sensitive products
199

 
(7
)
 
60

 
2,561

 
(285
)
Income tax
726

 
(236
)
 
394

 
3,299

 
(2,164
)
Net impact of net income adjustments
$
(2,732
)
 
$
888

 
$
(862
)
 
$
(12,411
)
 
$
8,141

 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
Pre-tax adjusted operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
16,582

 
$
15,998

 
$
18,179

 
$
12,087

 
$
15,662

Life Insurance segment
10,897

 
16,381

 
11,958

 
8,444

 
10,092

Corporate and Other segment
3,533

 
5,434

 
7,999

 
(953
)
 
4,319

Total pre-tax adjusted operating income
31,012

 
37,813

 
38,136

 
19,578

 
30,073

Income taxes on adjusted operating income
(4,715
)
 
(5,898
)
 
(6,264
)
 
(752
)
 
(4,171
)
Adjusted operating income (3)
$
26,297

 
$
31,915

 
$
31,872

 
$
18,826

 
$
25,902


(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)
Adjusted operating income is a non-GAAP measure of earnings, see Note 1 on page 1 for additional information.
(4) The items excluded from adjusted 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 indexed annuities and supplementary contracts (some of which involve life contingencies). Fixed rate and indexed 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 indexed 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, including indexed universal life. 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 adjusted operating income. Accordingly, income taxes are not allocated to the segments. In addition, adjusted operating results are reported net of transactions between the segments.

7




FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Annuity Segment
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
Pre-tax Adjusted Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
1,202

 
$
1,217

 
$
1,280

 
$
1,474

 
$
1,567

Net investment income (1)
56,233

 
55,198

 
54,144

 
53,248

 
51,115

Total adjusted operating revenues
57,435

 
56,415

 
55,424

 
54,722

 
52,682

 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
31,286

 
31,393

 
29,037

 
32,299

 
28,070

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
504

 
518

 
374

 
631

 
514

Amortization of deferred acquisition costs
3,065

 
3,070

 
2,319

 
2,789

 
2,679

Amortization of value of insurance in force acquired
172

 
172

 
165

 
165

 
163

Other underwriting expenses (1)
5,826

 
5,264

 
5,350

 
6,751

 
5,594

Total underwriting, acquisition and insurance expenses
9,567

 
9,024

 
8,208

 
10,336

 
8,950

Total adjusted operating benefits and expenses
40,853

 
40,417

 
37,245

 
42,635

 
37,020

Pre-tax adjusted operating income
$
16,582

 
$
15,998

 
$
18,179

 
$
12,087

 
$
15,662

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,586,256

 
$
4,576,410

 
$
4,596,422

 
$
4,489,765

 
$
4,497,715

Deferred acquisition costs
92,400

 
92,377

 
92,442

 
93,819

 
94,164

Value of insurance in force acquired
3,354

 
3,182

 
3,017

 
2,852

 
2,689

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
4,110,232

 
$
4,075,995

 
$
4,096,314

 
$
4,036,152

 
$
4,038,052

Other insurance reserves
352,747

 
346,270

 
344,963

 
338,646

 
341,506

Allocated equity, excluding AOCI
272,242

 
269,758

 
270,918

 
266,863

 
249,635

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
52,991

 
53,184

 
52,925

 
52,911

 
52,519

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.47
%
 
4.44
%
 
4.43
%
 
4.48
%
 
4.46
%
Credited rate
2.56

 
2.56

 
2.57

 
2.58

 
2.60

Spread on individual annuities at end of quarter (2)
1.91
%
 
1.88
%
 
1.86
%
 
1.90
%
 
1.86
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
3,109,789

 
$
3,134,862

 
$
3,171,359

 
$
3,176,881

 
$
3,194,307

Deposits
76,067

 
76,725

 
53,584

 
67,075

 
63,784

Withdrawals, surrenders and death benefits
(60,623
)
 
(53,788
)
 
(62,234
)
 
(59,661
)
 
(63,379
)
Net flows
15,444

 
22,937

 
(8,650
)
 
7,414

 
405

 
 
 
 
 
 
 
 
 
 
Policyholder interest
20,363

 
20,787

 
20,524

 
20,824

 
18,543

Annuitizations and other
(10,734
)
 
(7,227
)
 
(6,352
)
 
(10,812
)
 
(5,970
)
Balance, end of period
3,134,862

 
3,171,359

 
3,176,881

 
3,194,307

 
3,207,285

Other interest sensitive reserves
975,370

 
904,636

 
919,433

 
841,845

 
830,767

Total interest sensitive product reserves
$
4,110,232

 
$
4,075,995

 
$
4,096,314

 
$
4,036,152

 
$
4,038,052


(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 Adjusted Operating Income
Life Insurance Segment
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
Pre-tax Adjusted Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
18,059

 
$
19,079

 
$
18,876

 
$
18,471

 
$
18,988

Traditional life insurance premiums
49,497

 
51,091

 
48,124

 
49,600

 
49,392

Net investment income (1)
40,250

 
39,764

 
39,654

 
38,335

 
38,991

Other income
(79
)
 
(353
)
 
(108
)
 
(66
)
 
(113
)
Total adjusted operating revenues
107,727

 
109,581

 
106,546

 
106,340

 
107,258

 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest and index credits (2)
8,393

 
9,093

 
8,697

 
10,103

 
8,051

Death benefits and other (2)
15,241

 
14,709

 
18,475

 
16,661

 
14,466

Total interest sensitive product benefits
23,634

 
23,802

 
27,172

 
26,764

 
22,517

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
23,735

 
19,297

 
21,888

 
20,001

 
24,416

Surrender and other benefits
10,144

 
10,392

 
8,110

 
9,196

 
9,723

Increase in traditional life future policy benefits (2)
11,578

 
14,022

 
14,170

 
12,666

 
12,534

Total traditional life insurance benefits
45,457

 
43,711

 
44,168

 
41,863

 
46,673

Policyholder dividends
2,551

 
2,560

 
2,480

 
2,539

 
2,534

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
4,923

 
4,715

 
4,200

 
5,275

 
4,639

Amortization of deferred acquisition costs
4,436

 
4,498

 
2,148

 
4,182

 
4,799

Amortization of value of insurance in force acquired
373

 
373

 
373

 
373

 
372

Other underwriting expenses (1)
16,151

 
14,833

 
14,907

 
17,893

 
16,002

Total underwriting, acquisition and insurance expenses
25,883

 
24,419

 
21,628

 
27,723

 
25,812

Total adjusted operating benefits and expenses
97,525

 
94,492

 
95,448

 
98,889

 
97,536

 
$
10,202

 
$
15,089

 
$
11,098

 
$
7,451

 
$
9,722

Equity income, before tax
695

 
1,292

 
860

 
993

 
370

Pre-tax adjusted operating income
$
10,897

 
$
16,381

 
$
11,958

 
$
8,444

 
$
10,092

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
2,967,238

 
$
3,006,593

 
$
3,031,624

 
$
3,060,235

 
$
3,073,086

Deferred acquisition costs
291,212

 
294,365

 
298,368

 
308,937

 
312,664

Value of insurance in force acquired
15,531

 
15,157

 
14,784

 
14,411

 
14,039

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (3)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
953,635

 
$
966,032

 
$
979,858

 
$
989,513

 
$
1,001,865

Other insurance reserves
1,964,649

 
1,976,014

 
1,995,675

 
2,001,449

 
2,013,886

Allocated equity, excluding AOCI
439,031

 
442,808

 
450,927

 
452,274

 
468,983


 

9




FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
 
(Dollars in thousands)
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct policies - traditional life
364,757

 
364,339

 
364,412

 
365,909

 
365,650

Number of direct policies - universal life
66,939

 
67,466

 
67,951

 
69,832

 
70,494

Direct face amounts - traditional life
$
51,159,302

 
$
51,524,879

 
$
51,833,952

 
$
52,191,204

 
$
52,352,065

Direct face amounts - universal life
$
7,383,996

 
$
7,483,427

 
$
7,539,216

 
$
7,777,370

 
$
7,888,196

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
5.04
%
 
4.99
%
 
4.98
%
 
5.02
%
 
5.00
%
Credited rate
3.70

 
3.73

 
3.76

 
3.78

 
3.77

Spread on universal life at end of quarter (4)
1.34
%
 
1.26
%
 
1.22
%
 
1.24
%
 
1.23
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity: (3)
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
944,690

 
$
953,635

 
$
966,032

 
$
979,858

 
$
989,513

Deposits
27,847

 
29,415

 
26,617

 
29,660

 
29,632

Withdrawals and surrenders
(8,110
)
 
(7,708
)
 
(7,577
)
 
(7,778
)
 
(5,703
)
Net flows
19,737

 
21,707

 
19,040

 
21,882

 
23,929

 
 
 
 
 
 
 
 
 
 
Policyholder interest
7,752

 
8,386

 
7,827

 
7,297

 
7,423

Policy charges
(18,807
)
 
(19,248
)
 
(19,129
)
 
(19,736
)
 
(20,017
)
Benefits and other
263

 
1,552

 
6,088

 
212

 
1,017

Balance, end of period
$
953,635

 
$
966,032

 
$
979,858

 
$
989,513

 
$
1,001,865


(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 ($0.4 million) and an increase in other underwriting expenses ($3.6 million).
(2)
During the fourth quarter of 2018 we incurred additional charges due to updating the estimate of the impact of an immaterial error related to policy benefits on a closed block of interest sensitive whole life business. The correction, along with accrued interest, resulted in increases to interest credited ($2.0 million), interest sensitive death benefits ($3.3 million) and traditional life future policy benefits ($0.2 million).
(3)
Reserves on riders in interest sensitive life insurance products are included in Other insurance reserves.
(4)
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 Adjusted Operating Income
Corporate and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
Pre-tax Adjusted Operating Income (Loss)
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
 
$
11,021

 
$
11,102

 
$
10,494

 
$
11,005

 
$
10,405

Net investment income (1)
 
8,411

 
8,777

 
8,349

 
7,735

 
8,640

Other income
 
4,679

 
3,990

 
3,936

 
4,182

 
4,083

Total adjusted operating revenues
 
24,111

 
23,869

 
22,779

 
22,922

 
23,128

 
 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
 
9,342

 
7,714

 
8,465

 
8,944

 
10,365

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