• FFG: $37.57

Press Release

FBL Financial Group Reports Fourth Quarter and Full Year 2019 Results

Company Release - 2/6/2020 4:15 PM ET

Company Highlights

  • Fourth quarter 2019 net incomeattributable to FBL Financial Group of $34.7 million, or $1.40 per common diluted share. Full year 2019 net income attributable to FBL Financial Group of $126.2 million, or $5.09 per diluted common share
  • Record fourth quarter 2019 adjusted operating income(1) of $34.8 million, or $1.41 per diluted common share. Record full year 2019 adjusted operating income of $117.7 million, or $4.75 per diluted common share
  • Capital returned to shareholders of $88.9 million in 2019
  • Book value per share of $60.12 at year-end 2019, an increase of 26% compared to year-end 2018

 

WEST DES MOINES, Iowa--(BUSINESS WIRE)-- FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the fourth quarter of 2019 of $34.7 million, or $1.40 per diluted common share, compared to $6.4 million, or $0.26 per diluted common share, for the fourth quarter of 2018. Adjusted operating income(1) totaled $34.8 million, or $1.41 per common share, for the fourth quarter of 2019, compared to $18.8 million, or $0.75 per common share, for the fourth quarter of 2018. Fourth quarter 2019 earnings per share reflects:

  • The benefit of $0.32 per share from unlocking an actuarial assumption
  • Unfavorable mortality results in the Corporate & Other segment
  • Lower spread income in the Annuity segment
  • The benefit of other investment-related income of $0.07 per share
  • Continued investment in the Wealth Management business

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, as well as the initial impact of changes in federal statutory income tax rates and tax laws. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.

"FBL Financial Group reported excellent earnings for the fourth quarter, achieving net income of $1.40 per share and record adjusted operating income of $1.41 per share driven in part by a benefit from unlocking an actuarial assumption," said Daniel D. Pitcher, Chief Executive Officer of FBL Financial Group, Inc. "I'm also pleased to report that we achieved record full year adjusted operating income of $4.75 per share. These results reflect steady growth in our business and a consistent, robust capital position. As we look forward, our focus is to maintain financial strength, support our Farm Bureau Financial Services agents and serve our clients' diverse needs. This builds on our history of proven success, grounded in our purpose to protect livelihoods and futures."

Product Revenues
Premiums and product charges for the fourth quarter of 2019 totaled $82.7 million compared to $80.2 million in the fourth quarter of 2018. Interest sensitive product charges increased five percent while traditional life insurance premiums increased two percent during the quarter. Premiums collected(2) in the fourth quarter of 2019 totaled $156.0 million compared to $157.4 million in the fourth quarter of 2018. Total life insurance premiums collected increased three percent while annuity premiums collected decreased five percent, impacted by the low market interest rate environment.

Investment Income
Net investment income in the fourth quarter of 2019 totaled $109.0 million, compared to $83.9 million in the fourth quarter of 2018. This increase is due to 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 4.95 percent for the year ended December 31, 2019 compared to 5.13 percent for the year ended December 31, 2018. At December 31, 2019, 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 $153.3 million in the fourth quarter of 2019, compared to $156.0 million in the fourth quarter of 2018. Death benefits, net of reinsurance and reserves released, totaled $33.9 million in the fourth quarter of 2019, compared to $30.4 million in the fourth quarter of 2018. By its nature, mortality experience can fluctuate from quarter to quarter.

Unlocking
During the fourth quarter of 2019, FBL Financial Group extended the deferred acquisition cost amortization period for its participating whole life insurance block based on an experience analysis demonstrating an increase in persistency rates. This unlocking resulted in a pre-tax favorable impact of $10.0 million, or $0.32 per share after-tax.

Net Realized Losses
In the fourth quarter of 2019, FBL Financial Group recognized net realized losses on investments of $2.7 million. This is attributable to realized losses on sales of $3.5 million, realized gains on sales of $0.2 million and a gain from the increase in fair value of equity securities of $0.6 million.

Stock Repurchases
During the fourth quarter of 2019, FBL Financial Group did not repurchase any shares of its Class A or Class B common stock. FBL Financial Group has $36.3 million remaining under its current stock repurchase program.

Capital and Book Value
As of December 31, 2019, the book value per share of FBL Financial Group common stock totaled $60.12, compared to $47.78 at December 31, 2018. Book value per share, excluding accumulated other comprehensive income(3),totaled $45.73 at December 31, 2019, compared to $44.09 at December 31, 2018. The December 31, 2019 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 562 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 7, 2020, at 11:00 a.m. Eastern Time. The call will be webcast and a replay will be available on FBL Financial Group's website.

Forward-Looking Statements
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.

About FBL Financial Group
FBL Financial Group is a holding company with the purpose to protect livelihoods and futures. Operating under the consumer brand name Farm Bureau Financial Services, its affiliates offer a broad range of life insurance, annuity and investment products distributed by multiline exclusive Farm Bureau agents. Helping complete the financial services offering, advisors offer wealth management and financial planning services. 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

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,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Interest sensitive product charges

 

$

32,178

 

 

$

30,624

 

 

$

127,113

 

 

$

122,789

 

Traditional life insurance premiums

 

 

50,502

 

 

 

49,600

 

 

 

197,863

 

 

 

198,312

 

Net investment income

 

 

108,986

 

 

 

83,865

 

 

 

424,998

 

 

 

394,618

 

Net realized capital gains (losses)

 

 

(2,707

)

 

 

(5,661

)

 

 

8,523

 

 

 

(7,276

)

Net other-than-temporary impairment losses recognized in earnings

 

 

 

 

(3,908

)

 

 

(919

)

 

 

(4,998

)

Other income

 

 

4,602

 

 

 

4,116

 

 

 

17,103

 

 

 

16,181

 

Total revenues

 

 

193,561

 

 

 

158,636

 

 

 

774,681

 

 

 

719,626

 

 

 

 

 

 

 

 

 

 

Benefits and expenses:

 

 

 

 

 

 

 

 

Interest sensitive product benefits

 

 

73,507

 

 

 

59,626

 

 

 

276,473

 

 

 

253,753

 

Traditional life insurance benefits

 

 

43,142

 

 

 

41,860

 

 

 

174,654

 

 

 

175,209

 

Policyholder dividends

 

 

2,514

 

 

 

2,539

 

 

 

10,053

 

 

 

10,130

 

Underwriting, acquisition and insurance expenses

 

 

26,290

 

 

 

44,434

 

 

 

140,624

 

 

 

152,055

 

Interest expense

 

 

1,213

 

 

 

1,213

 

 

 

4,850

 

 

 

4,851

 

Other expenses

 

 

6,597

 

 

 

6,314

 

 

 

25,246

 

 

 

22,595

 

Total benefits and expenses

 

 

153,263

 

 

 

155,986

 

 

 

631,900

 

 

 

618,593

 

 

 

 

40,298

 

 

 

2,650

 

 

 

142,781

 

 

 

101,033

 

Income taxes

 

 

(6,500

)

 

 

2,812

 

 

 

(19,929

)

 

 

(11,650

)

Equity income, net of related income taxes

 

 

1,033

 

 

 

998

 

 

 

3,456

 

 

 

4,439

 

Net income

 

 

34,831

 

 

 

6,460

 

 

 

126,308

 

 

 

93,822

 

Net income attributable to noncontrolling interest

 

 

(92

)

 

 

(45

)

 

 

(99

)

 

 

(29

)

Net income attributable to FBL Financial Group, Inc.

 

$

34,739

 

 

$

6,415

 

 

$

126,209

 

 

$

93,793

 

 

 

 

 

 

 

 

 

 

Earnings per common share - assuming dilution

 

$

1.40

 

 

$

0.26

 

 

$

5.09

 

 

$

3.75

 

 

 

 

 

 

 

 

 

 

Weighted average common shares

 

 

24,761,224

 

 

 

24,887,779

 

 

 

24,760,541

 

 

 

24,932,189

 

Effect of dilutive securities

 

 

8,238

 

 

 

9,762

 

 

 

10,134

 

 

 

12,412

 

Weighted average common shares - diluted

 

 

24,769,462

 

 

 

24,897,541

 

 

 

24,770,675

 

 

 

24,944,601

 

 

 

 

 

 

 

 

 

 

(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, as well as the initial impact of changes in federal statutory income tax rates and tax laws. 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

 

Year ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(Dollars in thousands,

 

except per share data)

Net income attributable to FBL Financial Group

 

$

34,739

 

 

$

6,415

 

 

$

126,209

 

 

$

93,793

 

Adjustments:

 

 

 

 

 

 

 

 

Initial impact of the Tax Act(a)

 

 

 

 

 

 

 

(617

)

Net realized gains/losses on investments(b)

 

2,147

 

 

7,414

 

 

(5,813

)

 

9,546

 

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

 

(2,047

)

 

4,997

 

 

(2,703

)

 

6,188

 

Adjusted operating income

 

$

34,839

 

 

$

18,826

 

 

$

117,693

 

 

$

108,910

 

 

 

 

 

 

 

 

 

 

Adjusted operating income per common share - assuming dilution

 

$

1.41

 

 

$

0.75

 

 

$

4.75

 

 

$

4.36

 

 

 

 

 

 

(a) Amount represents a change in the provisional estimate of the impact of the Tax Cuts and Jobs Act of 2017 on deferred tax assets and liabilities as of December 31, 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.

(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,

 

December 31,

  
  

2019

2018

  
  

Book value per share

 

$

60.12

 

$

47.78

  
  

Less: Per share impact of accumulated other comprehensive income

 

14.39

 

3.69

  
  

Book value per share, excluding accumulated other comprehensive income

 

$

45.73

 

$

44.09

  

Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $354.8 million at December 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)

  
  

 

 

December 31,

 

December 31,

2019

2018

Assets

 

 

 

 

Investments

 

$

9,091,623

 

 

$

8,414,118

 

Cash and cash equivalents

 

17,277

 

 

19,035

 

Deferred acquisition costs

 

289,456

 

 

418,802

 

Other assets

 

435,969

 

 

420,394

 

Assets held in separate accounts

 

645,881

 

 

561,281

 

Total assets

 

$

10,480,206

 

 

$

9,833,630

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

Liabilities

 

 

 

 

Future policy benefits

 

$

7,393,549

 

 

$

7,205,471

 

Other policy funds, claims and benefits

 

597,256

 

 

615,177

 

Debt

 

97,000

 

 

97,000

 

Other liabilities

 

260,604

 

 

170,442

 

Liabilities related to separate accounts

 

645,881

 

 

561,281

 

Total liabilities

 

8,994,290

 

 

8,649,371

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

FBL Financial Group, Inc. stockholders' equity:

 

 

 

 

Preferred stock

 

3,000

 

 

3,000

 

Class A common stock

 

152,661

 

 

152,652

 

Class B common stock

 

72

 

 

72

 

Accumulated other comprehensive income

 

354,764

 

 

91,318

 

Retained earnings

 

975,260

 

 

937,097

 

Total FBL Financial Group, Inc. stockholders' equity

 

1,485,757

 

 

1,184,139

 

Noncontrolling interest

 

159

 

 

120

 

Total stockholders' equity

 

1,485,916

 

 

1,184,259

 

Total liabilities and stockholders' equity

 

$

10,480,206

 

 

$

9,833,630

 

 

 

 

 

 

Common shares outstanding

 

24,664,215

 

 

24,718,815

 

Investor Relations Contact
Kathleen Till Stange, Vice President Corporate & Investor Relations
(515) 226-6780, [email protected]

Source: FBL Financial Group, Inc.