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Section 1: 8-K (8-K)

Document
false0001012771 0001012771 2020-05-07 2020-05-07 0001012771 2020-02-06 2020-02-06


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 7, 2020

Commission File Number: 1-11917

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FBL Financial Group, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
Iowa
42-1411715
(State or other jurisdiction of incorporation or organization)
(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))

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

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 7, 2020, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended March 31, 2020 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 7, 2020
99.2
Financial Supplement of FBL Financial Group, Inc. for the quarter ended March 31, 2020
104
Cover page Interactive Data File formatted as iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

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 7, 2020                    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 7, 2020
Exhibit 99.2 Financial Supplement of FBL Financial Group, Inc. for the quarter ended March 31, 2020



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit











FBL Financial Group Reports First Quarter 2020 Results

Company Highlights
First quarter 2020 net loss attributable to FBL Financial Group of $2.5 million, or $0.10 per common diluted share.
First quarter 2020 adjusted operating income(1) of $19.6 million, or $0.79 per diluted common share.
Capital returned to shareholders of $50 million year-to-date in 2020

West Des Moines, Iowa - May 7, 2020 - FBL Financial Group, Inc. (NYSE: FFG) today reported a net loss attributable to FBL Financial Group for the first quarter of 2020 of $2.5 million, or $0.10 per diluted common share, compared to net income of $34.0 million, or $1.37 per diluted common share, for the first quarter of 2019. Adjusted operating income(1) totaled $19.6 million, or $0.79 per common share, for the first quarter of 2020, compared to $25.9 million, or $1.04 per common share, for the first quarter of 2019. First quarter 2020 earnings reflect:
Higher amortization of acquisition costs in the Corporate and Other segment due to the negative impact of equity markets on separate account performance
An increase in reserves associated with Guaranteed Living Withdrawal Benefits (GLWB) due to the unfavorable impact of market performance
Better than expected mortality experience
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, which includes the change in fair value of equity securities and the change in allowances for credit losses on investments, and the change in fair value of derivatives. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.
"To provide for the health and safety of our employees during the COVID-19 pandemic, we transitioned to a mostly work-from-home environment in a matter of days. The transformation was carried out with minimal interruption to supporting our agents, advisors and client/members," said Daniel D. Pitcher, Chief Executive Officer of FBL Financial Group, Inc. "FBL Financial Group’s first quarter financial results were negatively impacted by financial market performance related to the COVID-19 pandemic. At the same time, we returned $50 million to shareholders via repurchases and the payment of a special dividend of $1.50 per share and our increased quarterly dividend of $0.50 per share. While we had a negative impact to earnings this quarter, we entered this challenging time from a position of financial strength. I am confident that we will navigate these difficult financial markets given our high-quality, diversified investment portfolio and strong capital position. Farm Bureau Life Insurance Company is strong and has successfully charted rough waters in its 75-year history. Today we are as committed as ever to meeting the needs of our employees, agents and advisors and protecting the livelihoods and futures of our client/members."

Product Revenues
Premiums and product charges for the first quarter of 2020 totaled $81.0 million compared to $80.7 million in the first quarter of 2019. Interest sensitive product charges increased one percent while traditional life insurance premiums were flat during the quarter. Premiums collected(2) in the first quarter of 2020 totaled $154.0 million compared to $160.7 million in the first quarter of 2019. Total life insurance premiums collected increased six percent while annuity premiums collected decreased 16%.




Investment Income
Net investment income in the first quarter of 2020 totaled $74.9 million, compared to $109.6 million in the first quarter of 2019. This decrease reflects a change in the fair value of derivatives and a lower investment yield partially offset by an increase in average invested assets. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties, was 4.72 percent for the three months ended March 31, 2020 compared to 4.97 percent for the three months ended March 31, 2019. At March 31, 2020, 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 $141.1 million in the first quarter of 2020, compared to $163.5 million in the first quarter of 2019.
The change in fair value of the embedded derivatives on our index products is included in interest sensitive product benefits. This change decreased benefits by $21.1 million in the first quarter of 2020 and increased benefits by $9.3 million in the first quarter of 2019.
Death benefits, net of reinsurance and reserves released, totaled $29.8 million in the first quarter of 2020, compared to $33.9 million in the first quarter of 2019. By its nature, mortality experience can fluctuate from quarter to quarter.
Amortization of acquisition costs includes an additional $3.7 million in the first quarter of 2020 due to the negative impact of equity markets on separate account performance. This compares to $2.4 million less amortization in the first quarter of 2019 due to the positive impact of equity markets on separate account performance.

Net Realized Losses
In the first quarter of 2020, FBL Financial Group recognized net realized losses on investments of $13.4 million. This is attributable to realized losses on sales of $0.2 million and a net loss from equity securities held at quarter end of $13.2 million. We adopted new accounting rules on January 1, 2020, for the accounting for credit losses associated with certain financial instruments. The initial impact from adoption of $2.7 million, net of offsets, was reported as a direct adjustment to Stockholders' equity. During the first quarter of 2020 additional credit losses of $12.3 million were recorded as an increase to the allowances for credit losses and reported in earnings. This consisted of a $12.2 million allowance for fixed maturities and a $0.1 million allowance for commercial mortgage loans.

Stock Repurchases
During the first quarter of 2020, FBL Financial Group repurchased 24,525 shares of its Class A common stock. FBL Financial Group has $35.5 million remaining under its current stock repurchase program.

Capital and Book Value
As of March 31, 2020, the book value per share of FBL Financial Group common stock totaled $54.02, compared to $60.12 at December 31, 2019. Book value per share, excluding accumulated other comprehensive income(3), totaled $43.54 at March 31, 2020, compared to $45.73 at December 31, 2019. The March 31, 2020 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 525 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 8, 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 and the impact of the COVID-19 pandemic and any future pandemics. 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.

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

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.

- 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,
 
2020
 
2019
Revenues:
 
 
 
Interest sensitive product charges
$
31,720

 
$
31,266

Traditional life insurance premiums
49,308

 
49,392

Net investment income
74,917

 
109,640

Net realized capital gains (losses)
(13,401
)
 
10,157

Change in allowance for credit losses on investments
(12,261
)
 

Other-than-temporary impairment losses

 
(869
)
Other income
4,980

 
3,970

Total revenues
135,263

 
204,425

 
 
 
 
Benefits and expenses:
 
 
 
Interest sensitive product benefits
44,351

 
70,596

Traditional life insurance benefits
46,208

 
46,675

Policyholder dividends
2,529

 
2,534

Underwriting, acquisition and insurance expenses
39,421

 
36,189

Interest expense
1,213

 
1,212

Other expenses
7,421

 
6,250

Total benefits and expenses
141,143

 
163,456

 
(5,880
)
 
40,969

Income tax benefit (expense)
3,081

 
(6,276
)
Equity income, net of related income taxes
228

 
220

Net income (loss)
(2,571
)
 
34,913

Net (income) loss attributable to noncontrolling interest
56

 
(1
)
Net income (loss) attributable to FBL Financial Group, Inc.
$
(2,515
)
 
$
34,912

 
 
 
 
Earnings (loss) per common share
$
(0.10
)
 
$
1.37

 
 
 
 
Weighted average shares - basic
24,762,820

 
24,765,277

Effect of dilutive securities - stock-based compensation

 
11,176

Weighted average shares - diluted
24,762,820

 
24,776,453

 
 
 
 





(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, which includes the change in fair value of equity securities and the change in allowances for credit losses on investments, and the change in fair value of derivatives, 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,
 
2020
 
2019
 
(Dollars in thousands,
except per share data)
Net income (loss) attributable to FBL Financial Group
$
(2,515
)
 
$
34,043

Adjustments:
 
 
 
Net realized gains/losses on investments(a)
20,112

 
(7,230
)
Change in fair value of derivatives(a)
2,039

 
(911
)
Adjusted operating income
$
19,636

 
$
25,902

 
 
 
 
Adjusted operating income per common share - assuming dilution
$
0.79

 
$
1.04

 
 
 


(a) Net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, 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,
2020
 
December 31,
2019
Book value per share
$
54.02

 
$
60.12

Less: Per share impact of accumulated other comprehensive income
10.48

 
14.39

Book value per share, excluding accumulated other comprehensive income
$
43.54

 
$
45.73


Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $258.4 million at March 31, 2020 and $354.8 million at December 31, 2019. 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,
2020
 
December 31,
2019
Assets
 
 
 
Investments
$
8,969,168

 
$
9,091,623

Cash and cash equivalents
17,524

 
17,277

Deferred acquisition costs
337,972

 
289,456

Other assets
442,702

 
435,969

Assets held in separate accounts
525,582

 
645,881

Total assets
$
10,292,948

 
$
10,480,206

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Liabilities
 
 
 
Future policy benefits
$
7,502,843

 
$
7,393,549

Other policy funds, claims and benefits
595,252

 
597,256

Debt
107,000

 
97,000

Other liabilities
227,949

 
260,604

Liabilities related to separate accounts
525,582

 
645,881

Total liabilities
8,958,626

 
8,994,290

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

 
3,000

Class A common stock
152,754

 
152,661

Class B common stock
72

 
72

Accumulated other comprehensive income
258,422

 
354,764

Retained earnings
920,032

 
975,260

Total FBL Financial Group, Inc. stockholders' equity
1,334,280

 
1,485,757

Noncontrolling interest
42

 
159

Total stockholders' equity
1,334,322

 
1,485,916

Total liabilities and stockholders' equity
$
10,292,948

 
$
10,480,206

 
 
 
 
Common shares outstanding
24,642,190

 
24,664,215


####






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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit




FBL FINANCIAL GROUP, INC.
INVESTOR SUPPLEMENT
2020 First Quarter



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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
 
 
(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, 2020
 
 
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 primarily to exclude realized gains and losses on investments, which includes the change in fair value of equity securities and the change in allowances on investments, and the change in fair value of derivatives.

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 fair value of 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 the three months ended March, 31, 2020 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,
2020
 
December 31,
2019
Assets
 
 
 
Investments:
 
 
 
Fixed maturities - available for sale, at fair value (amortized cost 2020 - $7,115,265; 2019 - $7,015,269; and allowance for credit losses 2020 - $12,146, 2019 - $0)
$
7,617,165

 
$
7,702,628

Equity securities - at fair value (cost: 2020 - $96,882; 2019 - $95,269)
88,610

 
100,228

Mortgage loans (net of allowance for credit losses 2020 - $3,279, 2019 - $0)
988,854

 
1,011,678

Real estate
955

 
955

Policy loans
202,227

 
201,589

Short-term investments
29,580

 
11,865

Other investments
41,777

 
62,680

Total investments
8,969,168

 
9,091,623

 
 
 
 
Cash and cash equivalents
17,524

 
17,277

Securities and indebtedness of related parties
77,641

 
74,791

Accrued investment income
77,263

 
72,332

Amounts receivable from affiliates
3,916

 
4,357

Reinsurance recoverable
105,438

 
107,498

Deferred acquisition costs
337,972

 
289,456

Value of insurance in force acquired
2,829

 
2,624

Current income taxes recoverable
7,570

 
6,427

Other assets
168,045

 
167,940

Assets held in separate accounts
525,582

 
645,881

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
10,292,948

 
$
10,480,206




2




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

 
March 31,
2020
 
December 31,
2019
Liabilities and stockholders' equity
 
 
 
Liabilities:
 
 
 
Future policy benefits:
 
 
 
Interest sensitive products
$
5,646,263

 
$
5,548,212

Traditional life insurance and accident and health products
1,856,580

 
1,845,337

Other policy claims and benefits
47,713

 
46,883

Supplementary contracts without life contingencies
293,016

 
296,915

Advance premiums and other deposits
254,523

 
253,458

Amounts payable to affiliates
1,015

 
1,218

Short-term debt payable to non-affiliates
10,000

 

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

 
97,000

Deferred income taxes
119,093

 
152,373

Other liabilities
107,841

 
107,013

Liabilities related to separate accounts
525,582

 
645,881

Total liabilities
8,958,626

 
8,994,290

 
 
 
 
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 24,630,777 in 2020 and 24,652,802 shares in 2019
152,754

 
152,661

Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2020 and 2019
72

 
72

Accumulated other comprehensive income
258,422

 
354,764

Retained earnings
920,032

 
975,260

Total FBL Financial Group, Inc. stockholders' equity
1,334,280

 
1,485,757

Noncontrolling interest
42

 
159

Total stockholders' equity
1,334,322

 
1,485,916

Total liabilities and stockholders' equity
$
10,292,948

 
$
10,480,206




3




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

 
Three months ended March 31,
 
2020
 
2019
Revenues:
 
 
 
Interest sensitive product charges
$
31,720

 
$
31,266

Traditional life insurance premiums
49,308

 
49,392

Net investment income
74,917

 
109,640

Net realized capital gains (losses)
(13,401
)
 
10,157

Change in allowance for credit losses on investments
(12,261
)
 

Other-than-temporary impairment losses

 
(869
)
Other income
4,980

 
3,970

Total revenues
135,263

 
203,556

 
 
 
 
Benefits and expenses:
 
 
 
Interest sensitive product benefits
44,351

 
70,596

Traditional life insurance benefits
46,208

 
46,675

Policyholder dividends
2,529

 
2,534

Underwriting, acquisition and insurance expenses
39,421

 
36,189

Interest expense
1,213

 
1,212

Other expenses
7,421

 
6,250

Total benefits and expenses
141,143

 
163,456

 
(5,880
)
 
40,100

Income tax benefit (expense)
3,081

 
(6,276
)
Equity income, net of related income taxes
228

 
220

Net income (loss)
(2,571
)
 
34,044

Net (income) loss attributable to noncontrolling interest
56

 
(1
)
Net income (loss) attributable to FBL Financial Group, Inc.
$
(2,515
)
 
$
34,043

 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
(98,857
)
 
$
131,891

 
 
 
 
Earnings (loss) per common share
$
(0.10
)
 
$
1.37

Earnings (loss) per common share - assuming dilution
$
(0.10
)
 
$
1.37

 
 
 
 
Cash dividends per common share
$
0.50

 
$
0.48

Special cash dividend per common share
$
1.50

 
$
1.50



4




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

 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
Revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
31,266

 
$
32,534

 
$
31,135

 
$
32,178

 
$
31,720

Traditional life insurance premiums
49,392

 
50,987

 
46,982

 
50,502

 
49,308

Net investment income
109,640

 
104,894

 
101,478

 
108,986

 
74,917

Net realized capital gains (losses)
10,157

 
377

 
696

 
(2,707
)
 
(13,401
)
Change in allowance for credit losses on investments

 

 

 

 
(12,261
)
Other-than-temporary impairment losses
(869
)
 

 
(50
)
 

 

Other income
3,970

 
4,114

 
4,417

 
4,602

 
4,980

Total revenues
203,556

 
192,906

 
184,658

 
193,561

 
135,263

 
 
 
 
 
 
 
 
 
 
Benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
70,596

 
65,223

 
67,147

 
73,507

 
44,351

Traditional life insurance benefits
46,675

 
41,960

 
42,877

 
43,142

 
46,208

Policyholder dividends
2,534

 
2,564

 
2,441

 
2,514

 
2,529

Underwriting, acquisition and insurance expenses
36,189

 
38,948

 
39,197

 
26,290

 
39,421

Interest expense
1,212

 
1,212

 
1,213

 
1,213

 
1,213

Other expenses
6,250

 
6,635

 
5,764

 
6,597

 
7,421

Total benefits and expenses
163,456

 
156,542

 
158,639

 
153,263

 
141,143

 
40,100

 
36,364

 
26,019

 
40,298

 
(5,880
)
Income tax benefit (expense)
(6,276
)
 
(5,511
)
 
(1,642
)
 
(6,500
)
 
3,081

Equity income, net of related income taxes
220

 
1,404

 
799

 
1,033

 
228

Net income (loss)
34,044

 
32,257

 
25,176

 
34,831

 
(2,571
)
Net (income) loss attributable to noncontrolling interest
(1
)
 
41

 
(47
)
 
(92
)
 
56

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

 
$
32,298

 
$
25,129

 
$
34,739

 
$
(2,515
)
 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to FBL Financial Group, Inc.
$
131,891

 
$
145,925

 
$
128,511

 
$
(16,672
)
 
$
(98,857
)
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share
$
1.37

 
$
1.30

 
$
1.01

 
$
1.40

 
$
(0.10
)
Earnings (loss) per common share - assuming dilution
$
1.37

 
$
1.30

 
$
1.01

 
$
1.40

 
$
(0.10
)
 
 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.48

 
$
0.48

 
$
0.48

 
$
0.48

 
$
0.50

Special cash dividend per common share
$
1.50

 
$

 
$

 
$

 
$
1.50

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (in thousands):
 
 
 
 
 
 
 
 
 
Basic
24,765

 
24,757

 
24,759

 
24,761

 
24,763

Effect of dilutive securities
11

 
11

 
10

 
8

 

Diluted
24,776

 
24,768

 
24,769

 
24,769

 
24,763



5




FBL Financial Group, Inc.
Net Income (Loss) to Adjusted Operating Income Reconciliation and Pre-tax Adjusted Operating Income by Segment
(Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to FBL Financial Group, Inc.
$
34,043

 
$
32,298

 
$
25,129

 
$
34,739

 
$
(2,515
)
Net income adjustments:
 
 
 
 
 
 
 
 
 
Realized gains/losses on investments (1)
(7,230
)
 
(289
)
 
(440
)
 
2,147

 
20,112

Change in net unrealized gains/losses on derivatives (1)
(911
)
 
(272
)
 
526

 
(2,047
)
 
2,039

Adjusted operating income (2)
$
25,902

 
$
31,737

 
$
25,215

 
$
34,839

 
$
19,636

 
 
 
 
 
 
 
 
 
 
Adjusted operating income per common share - assuming dilution (2)
$1.04
 
$1.28
 
$1.02
 
$1.41
 
$0.79
 
 
 
 
 
 
 
 
 
 
Adjusted operating return on equity, excluding AOCI - last twelve months
10.0%
 
9.9%
 
9.3%
 
10.7%
 
10.2%
Adjusted operating return on equity, including AOCI - last twelve months
8.9%
 
8.7%
 
7.8%
 
8.6%
 
8.0%
 
 
 
 
 
 
 
 
 
 
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
Impact of Adjustments on FBL Net Income
 
 
 
 
 
 
 
 
 
Realized gains (losses) on investments and change in net unrealized gains/losses on equity securities and derivatives
$
10,846

 
$
444

 
$
(198
)
 
$
70

 
$
(28,069
)
Offsets: (3)
 
 
 
 
 
 
 
 
 
Change in amortization
(256
)
 
(48
)
 
(343
)
 
61

 
(176
)
Reserve change on interest sensitive products
(285
)
 
315

 
432

 
(258
)
 
205

Income tax
(2,164
)
 
(150
)
 
23

 
27

 
5,889

Net impact of net income adjustments
$
8,141

 
$
561

 
$
(86
)
 
$
(100
)
 
$
(22,151
)
 
 
 
 
 
 
 
 
 
 
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
Pre-tax adjusted operating income by segment:
 
 
 
 
 
 
 
 
 
Annuity segment
$
15,662

 
$
14,637

 
$
8,121

 
$
14,414

 
$
12,019

Life Insurance segment
10,092

 
18,239

 
14,032

 
24,771

 
10,267

Corporate and Other segment
4,319

 
4,595

 
4,939

 
2,456

 
219

Total pre-tax adjusted operating income
30,073

 
37,471

 
27,092

 
41,641

 
22,505

Income taxes on adjusted operating income
(4,171
)
 
(5,734
)
 
(1,877
)
 
(6,802
)
 
(2,869
)
Adjusted operating income (2)
$
25,902

 
$
31,737

 
$
25,215

 
$
34,839

 
$
19,636


(1) 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.
(2)
Adjusted operating income is a non-GAAP measure of earnings, see Note 1 on page 1 for additional information.
(3) 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 includes (i) wealth management services; (ii) advisory services for the management of investments and other companies; (iii) marketing and distribution services for the sale of insurance products not issued by us; (iv) leasing services with affiliates; (v) closed blocks of variable annuity, variable life and accident and health products; (vi) interest expense and (vii) investments and related investment income not specifically allocated to our product segments.

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 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
Pre-tax Adjusted Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
1,567

 
$
1,772

 
$
1,608

 
$
1,734

 
$
1,886

Net investment income
51,115

 
52,491

 
49,633

 
52,618

 
52,768

Total adjusted operating revenues
52,682

 
54,263

 
51,241

 
54,352

 
54,654

 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
28,070

 
30,450

 
28,585

 
30,980

 
33,883

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
514

 
482

 
405

 
662

 
421

Amortization of deferred acquisition costs
2,679

 
2,917

 
8,015

 
2,763

 
2,646

Amortization of value of insurance in force acquired
163

 
163

 
164

 
164

 
175

Other underwriting expenses
5,594

 
5,614

 
5,951

 
5,369

 
5,510

Total underwriting, acquisition and insurance expenses
8,950

 
9,176

 
14,535

 
8,958

 
8,752

Total adjusted operating benefits and expenses
37,020

 
39,626

 
43,120

 
39,938

 
42,635

Pre-tax adjusted operating income
$
15,662

 
$
14,637

 
$
8,121

 
$
14,414

 
$
12,019

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
4,497,715

 
$
4,525,458

 
$
4,521,789

 
$
4,541,355

 
$
4,635,897

Deferred acquisition costs
94,164

 
93,898

 
88,266

 
88,295

 
88,257

Value of insurance in force acquired
2,689

 
2,525

 
2,361

 
2,198

 
2,022

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest sensitive product reserves
$
4,038,052

 
$
4,060,032

 
$
4,054,299

 
$
4,105,054

 
$
4,195,802

Other insurance reserves
341,506

 
340,896

 
338,585

 
335,222

 
332,478

Allocated equity, excluding AOCI
249,635

 
250,853

 
250,934

 
253,096

 
239,999

 
 
 
 
 
 
 
 
 
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct contracts
52,519

 
52,461

 
52,914

 
51,536

 
50,948

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
4.46
%
 
4.42
%
 
4.38
%
 
4.35
%
 
4.32
%
Credited rate
2.60

 
2.61

 
2.61

 
2.60

 
2.55

Spread on individual annuities at end of quarter (1)
1.86
%
 
1.81
%
 
1.77
%
 
1.75
%
 
1.77
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity:
 
 
 
 
 
 
 
 
 
Individual annuity reserve:
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
3,194,307

 
$
3,207,285

 
$
3,214,755

 
$
3,204,500

 
$
3,221,385

Deposits
63,784

 
56,643

 
53,972

 
63,532

 
55,266

Withdrawals, surrenders and death benefits
(63,379
)
 
(62,808
)
 
(79,157
)
 
(63,065
)
 
(66,299
)
Net flows
405

 
(6,165
)
 
(25,185
)
 
467

 
(11,033
)
 
 
 
 
 
 
 
 
 
 
Policyholder interest
18,543

 
21,128

 
18,352

 
21,207

 
21,479

Annuitizations and other
(5,970
)
 
(7,493
)
 
(3,422
)
 
(4,789
)
 
(28,233
)
Balance, end of period
3,207,285

 
3,214,755

 
3,204,500

 
3,221,385

 
3,203,598

Other interest sensitive reserves
830,767

 
845,277

 
849,799

 
883,669

 
992,204

Total interest sensitive product reserves
$
4,038,052

 
$
4,060,032

 
$
4,054,299

 
$
4,105,054

 
$
4,195,802


(1)
Point-in-time spread at the balance sheet date used by management for decision making, which differs from the spread earned during the reporting period disclosed in the Form 10Q or 10K.

8




FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Life Insurance Segment
 
 
 
 
 
 
 
 
 
 
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
Pre-tax Adjusted Operating Income
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
$
18,988

 
$
19,635

 
$
19,163

 
$
18,956

 
$
20,379

Traditional life insurance premiums
49,392

 
50,987

 
46,982

 
50,502

 
49,308

Net investment income
38,991

 
40,454

 
38,581

 
40,204

 
37,575

Other income
(113
)
 
(138
)
 
(131
)
 
(159
)
 
(47
)
Total adjusted operating revenues
107,258

 
110,938

 
104,595

 
109,503

 
107,215

 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits:
 
 
 
 
 
 
 
 
 
Interest and index credits
8,051

 
9,018

 
8,326

 
9,803

 
7,843

Death benefits and other
14,466

 
13,892

 
17,198

 
15,513

 
16,371

Total interest sensitive product benefits
22,517

 
22,910

 
25,524

 
25,316

 
24,214

Traditional life insurance benefits:
 
 
 
 
 
 
 
 
 
Death benefits
24,416

 
20,577

 
25,233

 
22,878

 
26,098

Surrender and other benefits
9,723

 
10,092

 
9,435

 
9,548

 
10,142

Increase in traditional life future policy benefits
12,534

 
11,291

 
8,206

 
10,716

 
9,970

Total traditional life insurance benefits
46,673

 
41,960

 
42,874

 
43,142

 
46,210

Policyholder dividends
2,534

 
2,564

 
2,441

 
2,514

 
2,529

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
4,639

 
5,179

 
4,487

 
5,195

 
4,832

Amortization of deferred acquisition costs
4,799

 
4,344

 
(592
)
 
(5,732
)
 
2,419

Amortization of value of insurance in force acquired
372

 
372

 
372

 
372

 
370

Other underwriting expenses
16,002

 
16,378

 
16,278

 
14,950

 
16,749

Total underwriting, acquisition and insurance expenses
25,812

 
26,273

 
20,545

 
14,785

 
24,370

Total adjusted operating benefits and expenses
97,536

 
93,707

 
91,384

 
85,757

 
97,323

 
$
9,722

 
$
17,231

 
$
13,211

 
$
23,746

 
$
9,892

Equity income, before tax
370

 
1,008

 
821

 
1,025

 
375

Pre-tax adjusted operating income
$
10,092

 
$
18,239

 
$
14,032

 
$
24,771

 
$
10,267

 
 
 
 
 
 
 
 
 
 
Selected balance sheet data, securities at amortized cost:
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Investments
$
3,073,086

 
$
3,110,890

 
$
3,123,239

 
$
3,155,216

 
$
3,174,890

Deferred acquisition costs
312,664

 
316,309

 
323,609

 
341,143

 
346,585

Value of insurance in force acquired
14,039

 
13,668

 
13,296

 
12,924

 
12,554

 
 
 
 
 
 
 
 
 
 
Liabilities and equity:
 
 
 
 
 
 
 
 
 
Liabilities: (1)
 
 
 
 
 
 
 
 
 
Interest sensitive reserves
$
1,001,865

 
$
1,013,247

 
$
1,024,103

 
$
1,039,335

 
$
1,050,311

Other insurance reserves
2,013,886

 
2,019,588

 
2,033,080

 
2,043,029

 
2,056,553

Allocated equity, excluding AOCI
468,983

 
471,279

 
476,443

 
480,489

 
504,451


 

9




FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Life Insurance Segment (Continued)
 
 
 
 
 
 
 
 
 
 
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
 
 
(Dollars in thousands)
 
Other data:
 
 
 
 
 
 
 
 
 
Number of direct policies - traditional life
365,650

 
365,340

 
365,099

 
365,399

 
364,286

Number of direct policies - universal life
70,494

 
71,049

 
71,367

 
72,972

 
73,508

Direct face amounts - traditional life
$
52,352,065

 
$
52,729,936

 
$
53,005,016

 
$
53,320,484

 
$
53,509,739

Direct face amounts - universal life
$
7,888,196

 
$
7,978,929

 
$
8,020,444

 
$
8,245,749

 
$
8,342,877

 
 
 
 
 
 
 
 
 
 
Portfolio yield net of assumed defaults
5.00
%
 
4.97
%
 
4.91
%
 
4.85
%
 
4.84
%
Credited rate
3.77

 
3.79

 
3.80

 
3.81

 
3.85

Spread on universal life at end of quarter (2)
1.23
%
 
1.18
%
 
1.11
%
 
1.04
%
 
0.99
%
 
 
 
 
 
 
 
 
 
 
Interest sensitive reserve activity: (1)
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
989,513

 
$
1,001,865

 
$
1,013,247

 
$
1,024,103

 
$
1,039,335

Deposits
29,632

 
31,271

 
28,110

 
30,962

 
33,118

Withdrawals and surrenders
(5,703
)
 
(9,081
)
 
(8,455
)
 
(6,915
)
 
(7,205
)
Net flows
23,929

 
22,190

 
19,655

 
24,047

 
25,913

 
 
 
 
 
 
 
 
 
 
Policyholder interest
7,423

 
8,349

 
7,774

 
9,165

 
7,156

Policy charges
(20,017
)
 
(20,287
)
 
(20,129
)
 
(20,603
)
 
(21,774
)
Benefits and other
1,017

 
1,130

 
3,556

 
2,623

 
(319
)
Balance, end of period
$
1,001,865

 
$
1,013,247

 
$
1,024,103

 
$
1,039,335

 
$
1,050,311


(1)
Reserves on riders in interest sensitive life insurance products are included in Other insurance reserves.
(2)
Point-in-time spread at the balance sheet date used by management for decision making with universal life (excluding products with a secondary guarantee) differs from the spread earned during the reporting period disclosed in the Form 10Q or 10K.

10




FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Corporate and Other
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
Q1 2020
Pre-tax Adjusted Operating Income
 
 
(Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating revenues:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product charges
 
$
10,405

 
$
10,714

 
$
10,408

 
$
10,757

 
$
10,956

Net investment income
 
8,640

 
8,588

 
8,277

 
8,797

 
8,057

Other income
 
4,083

 
4,252

 
4,548

 
4,761

 
5,027

Total adjusted operating revenues
 
23,128

 
23,554

 
23,233

 
24,315

 
24,040

 
 
 
 
 
 
 
 
 
 
 
Adjusted operating benefits and expenses:
 
 
 
 
 
 
 
 
 
 
Interest sensitive product benefits
 
10,365

 
8,858

 
7,642

 
12,315

 
7,626

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
 
Commission expense, net of deferrals
 
704

 
746

 
720

 
685

 
699

Amortization of deferred acquisition costs
 
(967
)
 
905

 
1,854

 
9

 
5,055

Other underwriting expenses
 
1,153