UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q

(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020March 31, 2021.
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________

Commission File Number: 1-11917
fbl-20210331_g1.jpg
FBL FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Iowa42-1411715
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
5400 University Avenue,West Des Moines,Iowa50266-5997
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, without par valueFFGNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 Title of each classOutstanding at November 2, 2020May 4, 2021
Class A Common Stock, without par value24,383,11024,385,109
Class B Common Stock, without par value11,413


















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FBL FINANCIAL GROUP, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020MARCH 31, 2021
TABLE OF CONTENTS

PART I.FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II.OTHER INFORMATION
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits
SIGNATURES
    


1


ITEM 1. FINANCIAL STATEMENTS

FBL FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
September 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
AssetsAssetsAssets
Investments:Investments:Investments:
Fixed maturities - available for sale, at fair value (amortized cost 2020 - $7,256,832, 2019 - $7,015,269; and allowance for credit losses 2020 - 12,095, 2019 - $0)$8,244,477 $7,702,628 
Equity securities at fair value (cost: 2020 - $95,409, 2019 - $95,269)93,269 100,228 
Mortgage loans (net of allowance for credit losses 2020 - 1,924, 2019 - $0)972,210 1,011,678 
Fixed maturities - available for sale, at fair value (amortized cost 2021 - $7,322,930, 2020 - $7,179,303; and allowance for credit losses 2021 - $3,737, 2020 -$4,882)Fixed maturities - available for sale, at fair value (amortized cost 2021 - $7,322,930, 2020 - $7,179,303; and allowance for credit losses 2021 - $3,737, 2020 -$4,882)$8,028,083 $8,283,687 
Equity securities at fair value (cost: 2021 - $83,432, 2020 - $82,999)Equity securities at fair value (cost: 2021 - $83,432, 2020 - $82,999)88,564 88,281 
Mortgage loans, net of allowance for credit losses (2021 - $1,585, 2020 - $1,553)Mortgage loans, net of allowance for credit losses (2021 - $1,585, 2020 - $1,553)992,938 994,101 
Real estateReal estate955 955 Real estate955 955 
Policy loansPolicy loans197,009 201,589 Policy loans191,580 195,666 
Short-term investmentsShort-term investments18,434 11,865 Short-term investments42,252 63,062 
Other investments55,639 62,680 
Other investments, net of allowance for credit losses (2021 - $929, 2020 - $929)Other investments, net of allowance for credit losses (2021 - $929, 2020 - $929)68,424 58,258 
Total investmentsTotal investments9,581,993 9,091,623 Total investments9,412,796 9,684,010 
Cash and cash equivalentsCash and cash equivalents15,030 17,277 Cash and cash equivalents70,854 12,882 
Securities and indebtedness of related partiesSecurities and indebtedness of related parties80,494 74,791 Securities and indebtedness of related parties90,722 88,445 
Accrued investment incomeAccrued investment income76,164 72,332 Accrued investment income74,997 70,278 
Amounts receivable from affiliatesAmounts receivable from affiliates2,421 4,357 Amounts receivable from affiliates2,677 3,257 
Reinsurance recoverableReinsurance recoverable112,382 107,498 Reinsurance recoverable108,640 115,168 
Deferred acquisition costsDeferred acquisition costs201,022 289,456 Deferred acquisition costs282,682 176,085 
Value of insurance in force acquiredValue of insurance in force acquired2,384 2,624 Value of insurance in force acquired2,239 2,304 
Current income taxes recoverableCurrent income taxes recoverable4,786 6,427 Current income taxes recoverable12,232 16,732 
Other assetsOther assets159,824 167,940 Other assets155,996 152,929 
Assets held in separate accountsAssets held in separate accounts616,381 645,881 Assets held in separate accounts686,968 674,182 
Total assetsTotal assets$10,852,881 $10,480,206 Total assets$10,900,803 $10,996,272 


2




FBL FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
September 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
Liabilities and stockholders’ equityLiabilities and stockholders’ equityLiabilities and stockholders’ equity
Liabilities:Liabilities:Liabilities:
Future policy benefits:Future policy benefits:Future policy benefits:
Interest sensitive productsInterest sensitive products$5,747,604 $5,548,212 Interest sensitive products$5,874,009 $5,725,725 
Traditional life insurance and accident and health productsTraditional life insurance and accident and health products1,881,838 1,845,337 Traditional life insurance and accident and health products1,899,626 1,890,547 
Other policy claims and benefitsOther policy claims and benefits49,409 46,883 Other policy claims and benefits49,969 57,438 
Supplementary contracts without life contingenciesSupplementary contracts without life contingencies282,715 296,915 Supplementary contracts without life contingencies266,905 274,469 
Advance premiums and other depositsAdvance premiums and other deposits258,165 253,458 Advance premiums and other deposits285,569 271,082 
Amounts payable to affiliatesAmounts payable to affiliates609 1,218 Amounts payable to affiliates203 406 
Long-term debtLong-term debt97,000 97,000 Long-term debt97,000 97,000 
Deferred income taxesDeferred income taxes187,161 152,373 Deferred income taxes150,654 211,180 
Other liabilitiesOther liabilities113,744 107,013 Other liabilities100,012 102,127 
Liabilities related to separate accountsLiabilities related to separate accounts616,381 645,881 Liabilities related to separate accounts686,968 674,182 
Total liabilitiesTotal liabilities9,234,626 8,994,290 Total liabilities9,410,915 9,304,156 
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
FBL Financial Group, Inc. stockholders’ equity:FBL Financial Group, Inc. 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 sharesPreferred stock, without par value, at liquidation value - authorized 10,000,000 shares, issued and outstanding 5,000,000 Series B shares3,000 3,000 Preferred stock, without par value, at liquidation value - authorized 10,000,000 shares, issued and outstanding 5,000,000 Series B shares3,000 3,000 
Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,383,110 shares in 2020 and 24,652,802 shares in 2019150,990 152,661 
Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2020 and 201972 72 
Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,385,109 shares in 2021 and 24,384,109 shares in 2020Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,385,109 shares in 2021 and 24,384,109 shares in 2020151,134 151,061 
Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2021 and 2020Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2021 and 202072 72 
Accumulated other comprehensive incomeAccumulated other comprehensive income529,087 354,764 Accumulated other comprehensive income370,060 587,279 
Retained earningsRetained earnings935,080 975,260 Retained earnings965,643 950,687 
Total FBL Financial Group, Inc. stockholders’ equityTotal FBL Financial Group, Inc. stockholders’ equity1,618,229 1,485,757 Total FBL Financial Group, Inc. stockholders’ equity1,489,909 1,692,099 
Noncontrolling interestNoncontrolling interest26 159 Noncontrolling interest(21)17 
Total stockholders’ equityTotal stockholders’ equity1,618,255 1,485,916 Total stockholders’ equity1,489,888 1,692,116 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$10,852,881 $10,480,206 Total liabilities and stockholders’ equity$10,900,803 $10,996,272 

See accompanying notes.

3



FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in thousands, except per share data)
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
Revenues:Revenues:Revenues:
Interest sensitive product chargesInterest sensitive product charges$35,420 $31,135 $100,049 $94,935 Interest sensitive product charges$32,741 $31,720 
Traditional life insurance premiumsTraditional life insurance premiums47,792 46,982 147,429 147,361 Traditional life insurance premiums52,010 49,308 
Net investment incomeNet investment income105,856 101,478 291,208 316,012 Net investment income100,111 74,917 
Net realized capital gains (losses)1,991 696 (8,657)11,230 
Net realized capital lossesNet realized capital losses(869)(13,401)
Change in allowance for credit losses on investmentsChange in allowance for credit losses on investments1,903 (10,855)Change in allowance for credit losses on investments1,113 (12,261)
Other-than-temporary impairment losses(50)(919)
Other incomeOther income4,883 4,417 14,647 12,501 Other income6,320 4,980 
Total revenuesTotal revenues197,845 184,658 533,821 581,120 Total revenues191,426 135,263 
Benefits and expenses:Benefits and expenses:Benefits and expenses:
Interest sensitive product benefitsInterest sensitive product benefits79,803 67,147 203,257 202,966 Interest sensitive product benefits60,503 44,351 
Traditional life insurance benefitsTraditional life insurance benefits45,529 42,877 136,849 131,512 Traditional life insurance benefits49,848 46,208 
Policyholder dividendsPolicyholder dividends1,733 2,441 5,879 7,539 Policyholder dividends1,605 2,529 
Underwriting, acquisition and insurance expensesUnderwriting, acquisition and insurance expenses38,131 39,197 111,044 114,334 Underwriting, acquisition and insurance expenses38,274 39,421 
Interest expenseInterest expense1,212 1,213 3,638 3,637 Interest expense1,213 1,213 
Other expensesOther expenses7,878 5,764 22,524 18,649 Other expenses12,463 7,421 
Total benefits and expensesTotal benefits and expenses174,286 158,639 483,191 478,637 Total benefits and expenses163,906 141,143 
23,559 26,019 50,630 102,483 27,520 (5,880)
Income tax(2,883)(1,642)(5,887)(13,429)
Equity income (loss), net of related income taxes277 799 (238)2,423 
Net income20,953 25,176 44,505 91,477 
Net (income) loss attributable to noncontrolling interest21 (47)165 (7)
Net income attributable to FBL Financial Group, Inc.$20,974 $25,129 $44,670 $91,470 
Income tax (expense) benefitIncome tax (expense) benefit(3,687)3,081 
Equity income, net of related income taxesEquity income, net of related income taxes3,780 228 
Net income (loss)Net income (loss)27,613 (2,571)
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest67 56 
Net income (loss) attributable to FBL Financial Group, Inc.Net income (loss) attributable to FBL Financial Group, Inc.$27,680 $(2,515)
Earnings per common share$0.85 $1.01 $1.81 $3.69 
Earnings per common share - assuming dilution$0.85 $1.01 $1.81 $3.69 
Earnings (loss) per common shareEarnings (loss) per common share$1.13 $(0.10)
Earnings (loss) per common share - assuming dilutionEarnings (loss) per common share - assuming dilution$1.13 $(0.10)

See accompanying notes.

4




FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in thousands)
Three months ended September 30,Nine months ended September 30,
2020201920202019
Net income$20,953 $25,176 $44,505 $91,477 
Other comprehensive income (1)
Change in net unrealized investment gains/losses47,211 103,172 173,577 314,228 
Change in underfunded status of postretirement benefit plans250 210 746 629 
Total other comprehensive income, net of tax47,461 103,382 174,323 314,857 
Total comprehensive income, net of tax68,414 128,558 218,828 406,334 
Comprehensive (income) loss attributable to noncontrolling interest21 (47)165 (7)
Total comprehensive income applicable to FBL Financial Group, Inc.$68,435 $128,511 $218,993 $406,327 
Three months ended March 31,
20212020
Net income (loss)$27,613 $(2,571)
Other comprehensive loss (1)
Change in net unrealized investment gains/losses(217,486)(96,589)
Change in underfunded status of postretirement benefit plans267 247 
Total other comprehensive loss, net of tax(217,219)(96,342)
Total comprehensive loss, net of tax(189,606)(98,913)
Comprehensive loss attributable to noncontrolling interest67 56 
Total comprehensive loss applicable to FBL Financial Group, Inc.$(189,539)$(98,857)

(1)Other comprehensive incomeloss is recorded net of deferred income taxes and other adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities.


FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(Dollars in thousands)
FBL Financial Group, Inc. Stockholders’ Equity
Series B Preferred StockClass A and Class B Common StockAccumulated Other Comprehensive IncomeRetained EarningsNon-
controlling Interest
Total Stockholders’ Equity
Balance at July 1, 2019$3,000$152,526 $302,793 $939,143 $80 $1,397,542 
Net income - three months ended September 30, 2019— — — 25,129 47 25,176 
Other comprehensive income— — 103,382 — — 103,382 
Stock-based compensation— 112 — — — 112 
Dividends on preferred stock— — — (37)— (37)
Dividends on common stock— — — (11,838)— (11,838)
Balance at September 30, 2019$3,000$152,638$406,175 $952,397 $127 $1,514,337 
Balance at July 1, 2020$3,000 $152,240 $481,626 $930,937 $(42)$1,567,761 
Net income - three months ended September 30, 2020— — — 20,974 (21)20,953 
Other comprehensive income— — 47,461 — — 47,461 
Stock-based compensation— (184)— — — (184)
Purchase of common stock— (994)— (4,597)— (5,591)
Dividends on preferred stock— — — (37)— (37)
Dividends on common stock— — — (12,197)— (12,197)
Receipt related to noncontrolling interest— — — — 89 89 
Balance at September 30, 2020$3,000$151,062$529,087 $935,080 $26 $1,618,255 
FBL Financial Group, Inc. Stockholders’ Equity
Series B Preferred StockClass A and Class B Common StockAccumulated Other Comprehensive IncomeRetained EarningsNon-
controlling Interest
Total Stockholders’ Equity
Balance at January 1, 2020$3,000$152,733 $354,764 $975,260 $159 $1,485,916 
Cumulative effect of change in accounting principle related to current expected credit loss— — — (2,685)— (2,685)
Net loss - three months ended March 31, 2020— — — (2,515)(56)(2,571)
Other comprehensive loss— — (96,342)— — (96,342)
Stock-based compensation— 245 — — — 245 
Purchase of common stock— (152)— (657)— (809)
Dividends on preferred stock— — — (38)— (38)
Dividends on common stock— — — (49,333)— (49,333)
Disbursements related to noncontrolling interest— — — — (61)(61)
Balance at March 31, 2020$3,000$152,826$258,422 $920,032 $42 $1,334,322 
Balance at January 1, 2021$3,000 $151,133 $587,279 $950,687 $17 $1,692,116 
Net income - three months ended March 31, 2021— — — 27,680 (67)27,613 
Other comprehensive loss— — (217,219)— — (217,219)
Stock-based compensation— 73 — — — 73 
Dividends on preferred stock— — — (38)— (38)
Dividends on common stock— — — (12,686)— (12,686)
Receipts related to noncontrolling interest— — — — 29 29 
Balance at March 31, 2021$3,000$151,206$370,060 $965,643 $(21)$1,489,888 


5




FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
(Dollars in thousands)
FBL Financial Group, Inc. Stockholders’ Equity
Series B Preferred StockClass A and Class B Common StockAccumulated Other Comprehensive IncomeRetained EarningsNon-
controlling Interest
Total Stockholders’ Equity
Balance at January 1, 2019$3,000$152,724 $91,318 $937,097 $120 $1,184,259 
Cumulative effect of change in accounting principle related to leases— — — 595 — 595 
Net income - nine months ended September 30, 2019— — — 91,470 91,477 
Other comprehensive income— — 314,857 — — 314,857 
Stock-based compensation— 324 — — — 324 
Purchase of common stock— (410)— (4,167)— (4,577)
Dividends on preferred stock— — — (112)— (112)
Dividends on common stock— — — (72,486)— (72,486)
Balance at September 30, 2019$3,000$152,638$406,175$952,397$127$1,514,337
Balance at January 1, 2020$3,000 $152,733 $354,764 $975,260 $159 $1,485,916 
Cumulative effect of change in accounting principle related to current expected credit loss— — — (2,685)— (2,685)
Net income - nine months ended September 30, 2020— — — 44,670 (165)44,505 
Other comprehensive income— — 174,323 — — 174,323 
Stock-based compensation— 126 — — — 126 
Purchase of common stock— (1,797)— (8,203)— (10,000)
Dividends on preferred stock— — — (112)— (112)
Dividends on common stock— — — (73,850)— (73,850)
Receipt related to noncontrolling interest— — — — 32 32 
Balance at September 30, 2020$3,000 $151,062 $529,087 $935,080 $26 $1,618,255 

See accompanying notes.


65




FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Nine months ended September 30,Three months ended March 31,
2020201920212020
Operating activitiesOperating activitiesOperating activities
Net income$44,505 $91,477 
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)Net income (loss)$27,613 $(2,571)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Interest credited to account balancesInterest credited to account balances126,343 119,250 Interest credited to account balances42,561 40,980 
Charges for mortality, surrenders and administrationCharges for mortality, surrenders and administration(98,882)(94,277)Charges for mortality, surrenders and administration(33,564)(33,127)
Net realized (gains) losses on investmentsNet realized (gains) losses on investments19,512 (10,311)Net realized (gains) losses on investments(244)25,662 
Change in fair value of derivativesChange in fair value of derivatives2,804 2,239 Change in fair value of derivatives(12,901)1,567 
Increase in liabilities for life insurance and other future policy benefitsIncrease in liabilities for life insurance and other future policy benefits60,304 49,307 Increase in liabilities for life insurance and other future policy benefits17,728 21,183 
Deferral of acquisition costsDeferral of acquisition costs(25,462)(31,908)Deferral of acquisition costs(9,166)(9,155)
Amortization of deferred acquisition costs and value of insurance in forceAmortization of deferred acquisition costs and value of insurance in force28,606 27,589 Amortization of deferred acquisition costs and value of insurance in force8,554 9,597 
Change in reinsurance recoverableChange in reinsurance recoverable(4,096)(994)Change in reinsurance recoverable5,902 688 
Provision for deferred income taxesProvision for deferred income taxes(10,838)6,051 Provision for deferred income taxes(2,785)(6,958)
OtherOther15,269 (7,130)Other(7,244)(20,186)
Net cash provided by operating activitiesNet cash provided by operating activities158,065 151,293 Net cash provided by operating activities36,454 27,680 
Investing activitiesInvesting activitiesInvesting activities
Sales, maturities or repayments:Sales, maturities or repayments:Sales, maturities or repayments:
Fixed maturities - available for saleFixed maturities - available for sale416,454 489,597 Fixed maturities - available for sale175,847 120,845 
Equity securitiesEquity securities2,661 15,109 Equity securities1,366 699 
Mortgage loansMortgage loans82,394 74,970 Mortgage loans41,331 35,295 
Derivative instrumentsDerivative instruments14,316 9,201 Derivative instruments4,753 9,451 
Policy loansPolicy loans29,651 27,436 Policy loans11,992 9,913 
Securities and indebtedness of related partiesSecurities and indebtedness of related parties5,158 6,941 Securities and indebtedness of related parties10,458 841 
Other long-term investmentsOther long-term investments4,144 3,686 Other long-term investments482 1,333 
Acquisitions:Acquisitions:Acquisitions:
Fixed maturities - available for saleFixed maturities - available for sale(635,002)(577,634)Fixed maturities - available for sale(312,081)(203,333)
Equity securitiesEquity securities(2,708)(14,545)Equity securities(1,608)(2,149)
Mortgage loansMortgage loans(44,850)(35,202)Mortgage loans(40,200)(15,750)
Derivative instrumentsDerivative instruments(2,401)(14,325)Derivative instruments(4,669)(5,804)
Policy loansPolicy loans(25,071)(30,424)Policy loans(7,906)(10,551)
Securities and indebtedness of related partiesSecurities and indebtedness of related parties(13,657)(16,189)Securities and indebtedness of related parties(10,766)(3,990)
Other long-term investmentsOther long-term investments(9,671)(4,397)Other long-term investments(6,114)(6,100)
Short-term investments, net changeShort-term investments, net change(6,569)(7,030)Short-term investments, net change20,810 (17,715)
Purchases and disposals of property and equipment, netPurchases and disposals of property and equipment, net(8,135)(11,886)Purchases and disposals of property and equipment, net(3,768)(1,763)
Net cash used in investing activitiesNet cash used in investing activities(193,286)(84,692)Net cash used in investing activities(120,073)(88,778)



76




FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
Nine months ended September 30,Three months ended March 31,
2020201920212020
Financing activitiesFinancing activitiesFinancing activities
Contract holder account depositsContract holder account deposits$545,238 $438,573 Contract holder account deposits$259,492 $271,542 
Contract holder account withdrawalsContract holder account withdrawals(428,170)(449,211)Contract holder account withdrawals(105,235)(170,003)
Dividends paidDividends paid(73,962)(72,598)Dividends paid(12,724)(49,371)
Proceeds from issuance of short-term debtProceeds from issuance of short-term debt10,000 20,000 Proceeds from issuance of short-term debt10,000 
Repayments of short-term debt(10,000)(4,000)
Issuance or repurchase of common stock, netIssuance or repurchase of common stock, net(10,163)(5,393)Issuance or repurchase of common stock, net29 (762)
Other financing activitiesOther financing activities31 Other financing activities29 (61)
Net cash provided by (used in) financing activities32,974 (72,629)
Decrease in cash and cash equivalents(2,247)(6,028)
Net cash provided by financing activitiesNet cash provided by financing activities141,591 61,345 
Increase in cash and cash equivalentsIncrease in cash and cash equivalents57,972 247 
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period17,277 19,035 Cash and cash equivalents at beginning of period12,882 17,277 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$15,030 $13,007 Cash and cash equivalents at end of period$70,854 $17,524 
Supplemental disclosures of cash flow informationSupplemental disclosures of cash flow informationSupplemental disclosures of cash flow information
Cash paid during the period for:Cash paid during the period for:Cash paid during the period for:
InterestInterest$(3,650)$(3,641)Interest$(1,213)$(1,213)
Income taxesIncome taxes(5,556)(30)Income taxes(37)(1,915)

See accompanying notes.

87


FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 2020March 31, 2021

1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of FBL Financial Group, Inc. (we or the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Our financial statements include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of our financial position and results of operations.

Operating results for the three months ended September 30, 2020March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020,2021, especially when considering the risks and uncertainties associated with the novel coronavirus ("COVID-19") and the impact it may have on our business, results of operations and financial condition. We encourage you to refer to the notes to our consolidated financial statements included in Item 8 of our Form 10-K for the year ended December 31, 20192020 for a complete description of our material accounting policies. Also included in the Form 10-K is a description of areas of judgments and estimates and other information necessary to understand our financial position and results of operations. Our estimates and assumptions could change in the future as more information becomes known about the impact of COVID-19. Our results of operations and financial condition may also be impacted by evolving regulatory, legislative and accounting interpretations and guidance.

Subsequent Event – Amendment to Merger Agreement – Proposed Transaction - StockAffiliate Acquisition of Outstanding Shares

On September 4, 2020,May 2, 2021, the Company announced receiptentered into an amendment (the Merger Agreement Amendment) to the Agreement and Plan of a non-binding proposal fromMerger, dated as of January 11, 2021 (the Original Agreement and, the Original Agreement as amended by the Merger Agreement Amendment, the Merger Agreement), by and among the Company, Farm Bureau Property & Casualty Insurance Company, an Iowa domiciled stock property and casualty insurance company (FBPCIC) and 5400 Merger Sub, Inc., an affiliate,Iowa corporation (Merger Sub). Pursuant to the Merger Agreement, FBPCIC will acquire all of the outstanding shares of Class A common stockshares, without par value, and Class B common stockshares, without par value (collectively, the Common Shares), of the Company that are not currently owned or controlled by FBPCIC or the Iowa Farm Bureau Federation, an Iowa non-profit corporation (IFBF) at a purchase price of $47.00, for $61.00 per share in cash. The Iowa Farm Bureau Federation ownsMerger Agreement Amendment provided for an increase in the consideration to be received in exchange for the Common Shares in the amount of $5.00 per share, from $56.00 per share under the Original Agreement. IFBF and FBPCIC currently own approximately 60%61% of the Company's Class A common stockoutstanding Common Shares. The Merger Agreement provides for the merger of Merger Sub with and approximately 67% ofinto the Company's Class B common stock.Company, with the Company surviving the merger (the Merger).

Consummation of the Merger is subject to certain specified closing conditions, including approval by the Company’s shareholders. The Company’s boardadjourned special meeting of directors has appointed a special committee comprised of independent directorsshareholders to considerapprove the proposal.This committee has retained its own legal counsel and financial advisorproposal to assist in its review, evaluation and responseadopt the Merger Agreement is expected to the proposal. There can be no assurance that any agreement with respect to the proposed transaction will be executed or that this or any other transaction will be approved or consummated.re-convene on May 21, 2021.

See Note 9Also on May 2, 2021, FBPCIC, IFBF and Merger Sub entered into an amendment (the Rollover Agreement Amendment) to our consolidated financial statements includedthe Rollover Agreement, dated as of January 11, 2021 (as amended by the Rollover Agreement Amendment, the Rollover Agreement) by and among the same parties. Pursuant to the Rollover Agreement, FBPCIC and IFBF will contribute to Merger Sub all of their Common Shares in Item 8 of our Form 10-Kexchange for the year ended December 31, 2019number of shares of common stock of Merger Sub set forth therein, and to fund the Merger consideration, FBPCIC will contribute approximately $528 million in cash to Merger Sub in exchange for information regarding managementshares of common stock of Merger Sub and other agreements betweenIFBF will contribute approximately $47 million in cash to Merger Sub in exchange for shares of preferred stock of Merger Sub.

With respect to Merger Sub, under the terms of the Merger Agreement, at the effective time of the Merger, the Common Shares held by Merger Sub will automatically be cancelled and will cease to exist, each common share of Merger Sub will be converted into one common share of the surviving corporation and each preferred share of Merger Sub will be converted into one share of newly-designated Series C Cumulative Non-Voting Preferred Stock of the surviving corporation. At the effective time of the Merger, the Common Shares that are not currently controlled by FBPCIC or IFBF (other than shares held by the Company and FBPCIC.in treasury or by any wholly-owned Company subsidiary, or held by Merger Sub or FBPCIC, or held by holders who have properly exercised dissenters’ rights under applicable Iowa law) will be converted into the right to receive the Merger

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consideration. Each share of Series B Cumulative Voting Preferred Stock of the Company will remain outstanding in accordance with its terms following the effective time of the Merger.

New Accounting Pronouncements
DescriptionDate of adoptionEffect on our consolidated financial statements or other significant matters
Standards adopted:
Leases
In February 2016, the FASB issued guidance amending the accounting for leases, which, for most lessees, results in a gross-up of the balance sheet. Under the new standard, lessees recognize the leased assets on the balance sheet and recognize a corresponding liability for the present value of lease payments over the lease term. The new standard requires the application of judgment and estimates. Also, there are accounting policy elections that may be taken both at transition and for the accounting post-transition, including whether to adopt a short-term lease recognition exemption.
January 1, 2019Upon adoption using the modified retrospective approach, a cumulative effect adjustment of $0.6 million was recorded to retained earnings, representing the elimination of a deferred gain on a sale-leaseback transaction, and both other assets and other liabilities increased by $7.2 million. We elected the practical expedients provided for under the guidance but did not use hindsight in determining lease term. We have no finance leases and have elected to treat leases with terms of twelve months or less as short-term leases.


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DescriptionDate of adoptionEffect on our consolidated financial statements or other significant matters
Standards adopted:
Financial instruments - credit impairment
In June 2016, the FASB issued guidance amending the accounting for the credit impairment of certain financial instruments. Under the new guidance, credit losses are estimated using an expected loss model under which an allowance for credit losses is established and reflected as a charge to earnings. The allowance is based on the probability of loss over the life of the instrument, considering historical, current and forecast information. The new guidance differs significantly from the incurred loss model used historically, and results in the earlier recognition of credit losses. Since changes in the allowance are reflected in earnings, the new guidance may increase the volatility of earnings as the assumptions used in estimating the allowance are revised. Our available-for-sale fixed maturities will continue to apply the incurred loss model; however, such losses will also be in the form of an allowance for credit losses rather than an adjustment to the cost basis of the security. The new guidance permits entities to recognize improvements in credit loss estimates on fixed maturity available-for-sale securities by immediately reducing the allowance through earnings.
January 1, 2020Upon adoption using the modified retrospective approach, a cumulative effect adjustment of $2.7 million after offsets was recorded to retained earnings as of the first reporting period in which the new guidance was effective. The cumulative effect adjustment arose from the establishment of an allowance for credit losses on our mortgage loan investments totaling $3.1 million and reinsurance recoverable totaling $0.9 million, before offsets. See the discussion that follows for further information. Application of this guidance resulted in an increase to net income of $1.6 million ($0.06 per basic and diluted share) during the nine months ended September 30, 2020 and $2.2 million ($0.09 per basic and diluted earnings per share) during the third quarter of 2020. Prior periods were not restated.
Standards not yet adopted:
Targeted improvements: long-duration contracts
In August 2018, the FASB issued guidance that will change the accounting for long-duration insurance contracts. The new guidance impacts several facets of the accounting for such contracts including the accounting for future policy benefits associated with traditional non-participating and limited payment insurance contracts as well as for guaranteed minimum benefits and the amortization model used for deferred acquisition costs. Disclosures as well as presentation of financial results will also change under the new guidance.
During the third quarter 2020, the FASB extended the date of adoption one year to January 1, 2023
We are currently evaluating the impact of this guidance on our consolidated financial statements but expect the impact to the timing of profit emergence for the impacted insurance contracts to be significant. Adoption of certain portions of the guidance may be applied on a modified retrospective basis and others on a full retrospective basis.

Allowance for Credit Losses
As discussed above, effective January 1, 2020, we were required to apply new accounting guidance for the treatment of potential credit losses within certain financial instruments. Our accounting policies and practices as they pertain to the financial instruments impacted by this new guidance are as follows:
Fixed Maturities
When the fair value of a fixed maturity security is below its amortized cost, an impairment has occurred. To the extent we decide to sell the security or are required to sell the security prior to its recovery of fair value, a charge is taken to realized investment losses as reported within the Consolidated Statement of Operations, and the amortized cost basis of the security is adjusted for the loss. Under the accounting guidance we followed prior to January 1, 2020, to the extent we had no plan or requirement to sell an impaired security, but believed the impairment was other-than-temporary, we similarly recorded a charge to realized investment losses and the amortized cost basis of the security was adjusted for the loss. Beginning in 2020, to the extent an unrealized loss is due to credit, an allowance for credit loss is recognized within the Consolidated Statement of Operations. While fixed maturities are reported net of the allowance for credit losses in our Consolidated Balance Sheet, the allowance is not considered an adjustment to the amortized cost of the security. Accordingly the allowance may increase or decrease over the life of the security based on changes in the assumptions used to determine the allowance, with such changes reported as “Change in allowance for credit losses on investments” within the Consolidated Statement of Operations. Fixed maturity securities are written-off to realized investment losses if we determine that no additional payments of principal or interest will be received. The factors considered in determining whether an allowance for credit losses is required are consistent with those considered in determining whether an other-than-temporary impairment loss had occurred under the accounting guidance we followed prior to January 1, 2020 as discussed in Item 8 of our Form 10-K for the year ended December 31, 2019. We have elected the policy to exclude accrued interest receivable from our allowance calculation since uncollectible accrued interest will continue to be evaluated for collectability and written off as warranted.

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Mortgage Loans
The allowance for credit losses on our mortgage loan investments is based on an estimate of credit losses that may occur over the life of the loans, which differs from the accounting guidance we followed prior to January 1, 2020, which was based on incurred losses of individual loans. In determining the allowance, we segregate our mortgage loans with a similar risk profile based on an internal loan rating. Loss factors based on the potential frequency and severity of credit losses at different points in time of the portfolio life are applied to future cash flows to estimate the allowance for credit losses. In determining the loss factors, we consider the potential severity and likelihood of loss based on our historical loan loss experience along with that of other similar organizations as well as economic forecasts. We have elected the policy to exclude accrued interest receivable from our allowance calculation since uncollectible accrued interest will continue to be evaluated for collectability and written off as warranted. Mortgage loans are reported in our Consolidated Balance Sheet net of the allowance for credit losses. Changes in the allowance are reported within the Consolidated Statement of Operations as “Changes in allowance for credit losses on investments.” See Note 2 for further information.
Reinsurance Recoverable
The allowance for credit losses on our reinsurance recoverable is based on an estimate of credit losses that may occur over the life of the underlying ceded insurance business, which differs from the accounting guidance we followed prior to January 1, 2020, which was based on incurred losses.business. We develop loss factors that are applied to the amounts due from each reinsurer, which considers the potential severity and likelihood of loss based on the relative risk profile of each reinsurer, our internal loss history and those of other organizations, along with economic forecasts. We also consider other sources of information regarding individual reinsurers, as applicable, including amounts past-due according to the terms of the reinsurance contracts. Reinsurance recoverable assets are reported in our Consolidated Balance Sheetconsolidated balance sheets net of the allowance for credit losses. Amounts deemed to be uncollectible are written off against the allowance. Changes in the allowance are reported within the Consolidated Statementconsolidated statement of Operationsoperations as “Underwriting, acquisition and insurance expenses.”
Allowance on Reinsurance Recoverables
Three months ended September 30, 2020Nine months ended September 30, 2020
(Dollars in thousands)
Beginning balance of the allowance for credit losses$857 $868 
Change in allowance for credit losses(9)
Ending balance of the allowance for credit losses$859 $859 
Allowance on Reinsurance Recoverables
Three months ended March 31, 2021
(Dollars in thousands)
Beginning balance of the allowance for credit losses$857 
Change in allowance for credit losses(2)
Ending balance of the allowance for credit losses$855 

No reinsurance recoverables were considered past due as of September 30, 2020.




March 31, 2021.

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2. Investment Operations

Fixed Maturity Securities
Available-For-Sale Fixed Maturity Securities by Investment CategoryAvailable-For-Sale Fixed Maturity Securities by Investment CategoryAvailable-For-Sale Fixed Maturity Securities by Investment Category
September 30, 2020March 31, 2021
Amortized
Cost
Gross
Unrealized
Gains (1)
Gross
Unrealized
Losses (1)
Allowance for Credit LossesFair
Value
Amortized
Cost
Gross
Unrealized
Gains (1)
Gross
Unrealized
Losses (1)
Allowance for Credit LossesFair
Value
(Dollars in thousands)(Dollars in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
CorporateCorporate$3,557,835 $602,632 $(14,971)$(11,497)$4,133,999 Corporate$3,653,387 $461,509 $(20,335)$(2,953)$4,091,608 
Residential mortgage-backedResidential mortgage-backed661,906 64,389 (1,183)725,112 Residential mortgage-backed655,275 47,433 (4,430)698,278 
Commercial mortgage-backedCommercial mortgage-backed996,794 153,295 (658)1,149,431 Commercial mortgage-backed1,014,949 74,024 (9,146)1,079,827 
Other asset-backedOther asset-backed740,677 22,502 (8,590)(598)753,991 Other asset-backed729,904 23,360 (2,693)(784)749,787 
United States Government and agenciesUnited States Government and agencies35,086 2,962 (453)37,595 United States Government and agencies44,351 1,716 (6,822)39,245 
States and political subdivisionsStates and political subdivisions1,264,534 181,171 (1,356)1,444,349 States and political subdivisions1,225,064 147,496 (3,222)1,369,338 
Total fixed maturitiesTotal fixed maturities$7,256,832 $1,026,951 $(27,211)$(12,095)$8,244,477 Total fixed maturities$7,322,930 $755,538 $(46,648)$(3,737)$8,028,083 

December 31, 2019December 31, 2020
Amortized
Cost
Gross
Unrealized
Gains (1)
Gross
Unrealized
Losses (1)
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains (1)
Gross
Unrealized
Losses (1)
Allowance for Credit LossesFair
Value
(Dollars in thousands)(Dollars in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
CorporateCorporate$3,376,432 $418,049 $(15,531)$3,778,950 Corporate$3,542,136 $704,586 $(4,242)$(4,213)$4,238,267 
Residential mortgage-backedResidential mortgage-backed626,663 47,654 (1,929)672,388 Residential mortgage-backed645,503 58,058 (1,442)702,119 
Commercial mortgage-backedCommercial mortgage-backed969,453 77,433 (1,413)1,045,473 Commercial mortgage-backed991,944 145,549 (1,160)1,136,333 
Other asset-backedOther asset-backed697,390 19,745 (2,614)714,521 Other asset-backed736,338 23,593 (4,511)(669)754,751 
United States Government and agenciesUnited States Government and agencies12,417 1,711 (5)14,123 United States Government and agencies35,174 2,887 (1,809)36,252 
States and political subdivisionsStates and political subdivisions1,332,914 145,125 (866)1,477,173 States and political subdivisions1,228,208 188,542 (785)1,415,965 
Total fixed maturitiesTotal fixed maturities$7,015,269 $709,717 $(22,358)$7,702,628 Total fixed maturities$7,179,303 $1,123,215 $(13,949)$(4,882)$8,283,687 

(1)Includes $2.2$2.0 million and $2.5$1.7 million as of September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, of net unrealized gains on impaired fixed maturities related to changes in fair value subsequent to the impairment date, which are included in AOCI.

The amount of accrued interest excluded from the amortized cost basis of fixed maturities and included in accrued investment income on the balance sheet totaled $71.4$70.5 million at September 30, 2020.March 31, 2021. Any fixed maturity delinquent on contractual payments over 90 days past due is placed on non-accrual status. If the fixed maturity is placed on non-accrual status the prior accrued interest income is reversed through net investment income. Interest income received on non-performing fixed maturities is generally recognized on a cash basis. Once fixed maturities are classified as non-accrual, the resumption of the interest accrual would commence only after all past due interest has been collected. The amount of interest reversed during the nine months ended September 30, 2020 was $0.2 million on corporate fixed maturity securities. There was no interest reversed during the three months ended September 30,March 31, 2021 or March 31, 2020.
Available-For-Sale Fixed Maturities by Maturity Date
March 31, 2021
Amortized
Cost

Fair Value
(Dollars in thousands)
Due in one year or less$138,639 $141,454 
Due after one year through five years555,409 597,245 
Due after five years through ten years741,256 825,787 
Due after ten years3,487,498 3,935,705 
4,922,802 5,500,191 
Mortgage-backed and other asset-backed2,400,128 2,527,892 
Total fixed maturities$7,322,930 $8,028,083 


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Available-For-Sale Fixed Maturities by Maturity Date
September 30, 2020
Amortized
Cost

Fair Value
(Dollars in thousands)
Due in one year or less$111,399 $113,532 
Due after one year through five years596,286 632,356 
Due after five years through ten years755,949 853,418 
Due after ten years3,393,821 4,016,637 
4,857,455 5,615,943 
Mortgage-backed and other asset-backed2,399,377 2,628,534 
Total fixed maturities$7,256,832 $8,244,477 

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Fixed maturities not due at a single maturity date have been included in the above table in the year of final contractual maturity.
Net Unrealized Gains on Investments in Accumulated Other Comprehensive IncomeNet Unrealized Gains on Investments in Accumulated Other Comprehensive IncomeNet Unrealized Gains on Investments in Accumulated Other Comprehensive Income
September 30,
2020
December 31,
2019
March 31,
2021
December 31,
2020
(Dollars in thousands)(Dollars in thousands)
Net unrealized appreciation on:Net unrealized appreciation on:Net unrealized appreciation on:
Fixed maturities - available for saleFixed maturities - available for sale$999,740 $687,359 Fixed maturities - available for sale$708,890 $1,109,266 
Adjustments for assumed changes in amortization pattern of:Adjustments for assumed changes in amortization pattern of:Adjustments for assumed changes in amortization pattern of:
Deferred acquisition costsDeferred acquisition costs(288,239)(200,227)Deferred acquisition costs(215,329)(320,489)
Value of insurance in force acquiredValue of insurance in force acquired(11,102)(12,498)Value of insurance in force acquired(10,196)(10,647)
Unearned revenue reserveUnearned revenue reserve27,496 18,025 Unearned revenue reserve27,261 29,393 
Adjustments for assumed changes in policyholder liabilitiesAdjustments for assumed changes in policyholder liabilities(46,160)(30,642)Adjustments for assumed changes in policyholder liabilities(29,402)(51,001)
Provision for deferred income taxesProvision for deferred income taxes(143,164)(97,023)Provision for deferred income taxes(101,057)(158,869)
Net unrealized investment gainsNet unrealized investment gains$538,571 $364,994 Net unrealized investment gains$380,167 $597,653 

Net unrealized investment gains exclude the allowance for credit losses.

Fixed Maturity Securities with Unrealized Losses by Length of Time without an Allowance for Credit LossesFixed Maturity Securities with Unrealized Losses by Length of Time without an Allowance for Credit LossesFixed Maturity Securities with Unrealized Losses by Length of Time without an Allowance for Credit Losses
September 30, 2020March 31, 2021
Less than one yearOne year or moreTotalLess than one yearOne year or moreTotal
Description of SecuritiesDescription of Securities
Fair Value
Unrealized Losses (1)
Fair Value
Unrealized Losses (1) Fair ValueUnrealized Losses (1)Percent of TotalDescription of Securities
Fair Value
Unrealized Losses (1)
Fair Value
Unrealized Losses (1) Fair ValueUnrealized Losses (1)Percent of Total
(Dollars in thousands)(Dollars in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
CorporateCorporate$144,426 $(8,045)$52,160 $(6,926)$196,586 $(14,971)55.0 %Corporate$315,148 $(17,622)$25,290 $(2,713)$340,438 $(20,335)43.6 %
Residential mortgage-backedResidential mortgage-backed52,098 (301)15,449 (882)67,547 (1,183)4.3 Residential mortgage-backed109,483 (3,404)16,521 (1,026)126,004 (4,430)9.5 
Commercial mortgage-backedCommercial mortgage-backed30,712 (658)30,712 (658)2.4 Commercial mortgage-backed104,637 (9,146)104,637 (9,146)19.6 
Other asset-backedOther asset-backed119,596 (4,507)70,915 (4,083)190,511 (8,590)31.6 Other asset-backed79,581 (939)88,468 (1,754)168,049 (2,693)5.8 
United States Government and agenciesUnited States Government and agencies24,894 (453)24,894 (453)1.7 United States Government and agencies28,876 (6,822)28,876 (6,822)14.6 
States and political subdivisionsStates and political subdivisions31,084 (736)2,360 (620)33,444 (1,356)5.0 States and political subdivisions79,155 (2,774)2,553 (448)81,708 (3,222)6.9 
Total fixed maturitiesTotal fixed maturities$402,810 $(14,700)$140,884 $(12,511)$543,694 $(27,211)100.0 %Total fixed maturities$716,880 $(40,707)$132,832 $(5,941)$849,712 $(46,648)100.0 %


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Fixed Maturity Securities with Unrealized Losses by Length of Time
December 31, 2019December 31, 2020
Less than one yearOne year or moreTotalLess than one yearOne year or moreTotal
Description of SecuritiesDescription of SecuritiesFair ValueUnrealized Losses (1)Fair ValueUnrealized Losses (1)Fair ValueUnrealized Losses (1)Percent of TotalDescription of SecuritiesFair ValueUnrealized Losses (1)Fair ValueUnrealized Losses (1)Fair ValueUnrealized Losses (1)Percent of Total
(Dollars in thousands)(Dollars in thousands)
Fixed maturities:Fixed maturities:Fixed maturities:
CorporateCorporate$114,520 $(2,476)$84,719 $(13,055)$199,239 $(15,531)69.5 %Corporate$39,363 $(1,716)$22,677 $(2,526)$62,040 $(4,242)30.5 %
Residential mortgage-backedResidential mortgage-backed68,743 (1,435)6,941 (494)75,684 (1,929)8.6 Residential mortgage-backed45,059 (520)16,918 (922)61,977 (1,442)10.3 
Commercial mortgage-backedCommercial mortgage-backed46,537 (1,266)2,610 (147)49,147 (1,413)6.3 Commercial mortgage-backed26,829 (1,160)26,829 (1,160)8.3 
Other asset-backedOther asset-backed112,462 (519)102,439 (2,095)214,901 (2,614)11.7 Other asset-backed113,439 (1,741)67,128 (2,770)180,567 (4,511)32.3 
United States Government and agenciesUnited States Government and agencies2,494 (5)2,494 (5)United States Government and agencies23,630 (1,809)23,630 (1,809)13.0 
States and political subdivisionsStates and political subdivisions19,367 (379)5,936 (487)25,303 (866)3.9 States and political subdivisions12,577 (372)2,568 (413)15,145 (785)5.6 
Total fixed maturitiesTotal fixed maturities$361,629 $(6,075)$205,139 $(16,283)$566,768 $(22,358)100.0 %Total fixed maturities$260,897 $(7,318)$109,291 $(6,631)$370,188 $(13,949)100.0 %

(1)Non-credit losses reported in AOCI are included with gross unrealized losses resulting in total gross unrealized losses for fixed maturities, available-for-sale being reported in the table.

Fixed maturities in the above tables include 217381 securities from 178303 issuers at September 30, 2020March 31, 2021 and 189119 securities from 14595 issuers at December 31, 2019.2020. Unrealized losses increased during the ninethree months ended September 30, 2020March 31, 2021 primarily due to wider credit spreads.an

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increase in U.S. treasury rates. We do not consider securities declines in fair value below amortized cost to be due to a credit loss when the market decline is attributable to factors such as interest rate movements, market volatility, liquidity or spread widening when recovery of all amounts due under the contractual terms of the security is anticipated. Based on our intent not to sell and our belief that we will not be required to sell these securities before recovery of their amortized cost basis, we do not consider these investments to have a credit loss allowance, and they do not require a loss allowance established at September 30, 2020.March 31, 2021. The following summarizes the more significant unrealized losses on fixed maturity securities by investment category as of September 30, 2020.March 31, 2021.

Corporate securities: The largest unrealized losses were in the energyutilities sector ($73.294.8 million fair value and $8.1$5.4 million unrealized loss) and in the consumer non-cyclicalenergy sector ($24.942.1 million fair value and $1.6$3.3 million unrealized loss). The majority of losses is attributed to a general rise in treasury interest rates. The energy sector losses were attributable to credit spread widening across the energy sectorspreads that remain wide which is associated with sharp declinesthe decline in crude oil prices. The price of crude oil has decreased from $61.06 per barrel at December 31, 2019 to $40.22 per barrel at September 30, 2020. Energy-related companies have been negatively impacted by the decline in oil prices due to a decrease in demand brought on by COVID-19.

Residential mortgage-backed securities: The unrealized losses on residential mortgage-backed securities were primarily due to price declines on legacy and newer issue bonds. The legacy bonds are still at an unrealized gain overall, but some individual securities remain at an unrealized loss. We purchased many of these investments at a discount to their face amount and the contractual cash flows of these investments are based on mortgages and other assets backing the securities. The newer issue residential mortgage-backed securities are comprised of bonds issued during and after 2013 with strong underwriting and collateral characteristics. Primarily, losses were attributable to credit spread widening which led to lower prices on some securities. The wider spreads were caused by continued market uncertainty brought on by the COVID-19 virus. These securities tend to have higher credit scores with higher credit enhancement and lower loan-to-value ratios which position them favorably against default during economic disruptions such as those caused by COVID-19.

Commercial mortgage-backed securities: The unrealized losses on commercial mortgage-backed securities were primarily due to spread widening. The wider spreads were caused by continued market uncertainty brought on by the COVID-19 virus for some securities. The contractual cash flows of these investments are based on mortgages backing the securities.

Other asset-backed securities: securitiesThe: The unrealized losses on asset-backed securities (ABS) were primarily due to concerns regarding COVID-19 and the resulting impact on consumer and commercial loans. Spreads have tightened and prices have recovered over the previous six months as the actions taken by the U.S. Federal Reserve Bank helped stabilize the markets.are generally back to pre-COVID levels. The majority of our ABS have a sequential-pay structure that increases credit support as the pool amortizes. The average life of our ABS is 3.22.7 years, down from 5.25.4 years at purchase. Average credit support for the portfolio has increased from 10%9% at time of purchase to 22% as of September 30, 2020. The18%. Our ABS portfolio is rated nearly 70% NAIC-1.approximately 72% NAIC-1.


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The unrealized losses on collateralized loan obligations (CLO) are due to concerns regarding COVID-19 and the resulting impact on leveraged loans. The CLO market is also benefiting from the programs that the U.S. Federal Reserve Bank is providing to the market. Our CLO portfolio is of high quality, with all of the securities100% rated NAIC-1. Internal stress testing has indicated that the weighted average constant default rate (CDR) of our portfolio without suffering a loss is 17 percent.17%. The CDR is the constant default rate (annually) that a CLO must suffer before our tranche takes its first dollar loss.

State, municipal and other governments: The unrealized losses on state, municipal and other government securities were primarily due to general spread widening relative to spreads at which we acquired the bonds.bonds, and uncertainty related to pandemic impacts on revenues in select sectors.

Our allowance for credit losses at September 30, 2020March 31, 2021 includes an energy sector bond, two financial sector bonds and a consumer non-cyclical bond experiencing ongoing weakness in operating performance. The allowance for these bonds was established as the difference between the fair value of the securities and their amortized cost and was consideredpresent value of expected cash flows, which is equal to be entirely credit related.fair value. Our allowance for credit losses also includes an asset backed security due to the difference between the amortized cost and the present value of the expected cash flows.
Available-For-Sale Fixed Maturities Allowance for Credit Losses
Three months ended September 30, 2020
CorporateOther ABSTotal
(Dollars in thousands)
Beginning balance$12,902 $317 $13,219 
Additions for credit losses not previously recorded281 281 
Net decrease to previously recorded allowance(1,405)(1,405)
Ending balance$11,497 $598 $12,095 

We also continue to hold an allowance of $0.9 million on a promissory note held in other investments due to the possibility of not collecting the full balance of the note.

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Available-For-Sale Fixed Maturities Allowance for Credit Losses
Three months ended March 31, 2021
CorporateOther ABSTotal
(Dollars in thousands)
Beginning balance$4,213 $669 $4,882 
Additions for credit losses not previously recorded115 115 
Net decrease to previously recorded allowance(1,260)(1,260)
Ending balance$2,953 $784 $3,737 

Nine months ended September 30, 2020
CorporateOther ABSTotal
(Dollars in thousands)
Beginning balance$$$
Additions for credit losses not previously recorded13,118 598 13,716 
Net decrease to previously recorded allowance(1,621)(1,621)
Ending balance$11,497 $598 $12,095 
Three months ended March 31, 2020
Corporate
(Dollars in thousands)
Beginning balance$
Additions for credit losses not previously recorded12,146 
Net decrease to previously recorded allowance
Ending balance$12,146 

Mortgage Loans

Our mortgage loan portfolio consists of commercial mortgage loans that we have originated. Our lending policies require that the loans be collateralized by the value of the related property, establish limits on the amount that can be loaned to one borrower and require diversification by geographic location and collateral type. We originate loans with an initial loan-to-value ratio that provides sufficient collateral to absorb losses should we be required to foreclose and take possession of the collateral.

The amount of accrued interest excluded from the cost basis of the mortgage loans and included in accrued investment income on the balance sheet totaled $3.6$3.4 million at September 30, 2020.March 31, 2021. Any loan delinquent on contractual payments is considered non-performing. Mortgage loans are placed on non-accrual status if the loan is over 90 days past due. If the loan is placed on non-accrual status the prior accrued interest income is reversed through net investment income. Interest income received on non-performing loans is generally recognized on a cash basis. Once mortgage loans are classified as non-accrual loans, the resumption of the interest accrual would commence only after all past due interest has been collected or the mortgage loan has been restructured such that the collection of interest is considered likely. At September 30, 2020March 31, 2021 and December 31, 2019,2020, there were no non-performing loans over 30 days past due on contractual payments. At September 30, 2020,March 31, 2021, we had committed to provide additional funding for mortgage loans totaling $21.8$21.6 million. These commitments arose in the normal course of business at terms that are comparable to similar investments.
Mortgage Loans by Collateral Type
March 31, 2021December 31, 2020
Collateral TypeAmortized CostPercent of TotalAmortized CostPercent of Total
(Dollars in thousands)
Office$352,408 35.4 %$375,622 37.7 %
Retail308,647 31.1    320,575 32.2    
Industrial258,478 26.0    227,424 22.9    
Apartment62,696 6.3    59,626 6.0    
Other12,294 1.2    12,407 1.2    
Total$994,523 100.0 %$995,654 100.0 %


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Mortgage Loans by Collateral Type
September 30, 2020December 31, 2019
Collateral TypeAmortized CostPercent of TotalAmortized CostPercent of Total
(Dollars in thousands)
Office$378,177 38.8 %$417,746 41.3 %
Retail325,305 33.4345,870 34.2
Industrial233,410 24.0235,274 23.2
Apartment24,731 2.5— 
Other12,511 1.312,788 1.3
Total$974,134 100.0 %$1,011,678 100.0 %
Mortgage Loans by Geographic Location within the United States
March 31, 2021December 31, 2020
Region of the United StatesAmortized CostPercent of TotalAmortized CostPercent of Total
(Dollars in thousands)
South Atlantic$249,858 25.1 %$252,964 25.4 %
Pacific183,490 18.5    181,743 18.3    
East North Central158,576 15.9    147,342 14.8    
Mountain114,998 11.6    107,833 10.8    
West North Central95,361 9.6    94,044 9.4    
East South Central61,879 6.2    75,540 7.6    
West South Central60,719 6.1    65,808 6.6    
Middle Atlantic52,093 5.2    52,512 5.3    
New England17,549 1.8    17,868 1.8    
Total$994,523 100.0 %$995,654 100.0 %

Mortgage Loans by Geographic Location within the United States
September 30, 2020December 31, 2019
Region of the United StatesAmortized CostPercent of TotalAmortized CostPercent of Total
(Dollars in thousands)
South Atlantic$261,291 26.8 %$288,299 28.5 %
Pacific165,281 17.0164,996 16.3
East North Central137,241 14.1117,053 11.6
Mountain104,658 10.796,857 9.6
West North Central98,505 10.1108,942 10.8
East South Central78,983 8.181,275 8.0
West South Central65,374 6.776,650 7.6
Middle Atlantic44,625 4.645,687 4.5
New England18,176 1.931,919 3.1
Total$974,134 100.0 %$1,011,678 100.0 %

Mortgage Loans by Loan-to-Value RatioMortgage Loans by Loan-to-Value RatioMortgage Loans by Loan-to-Value Ratio
September 30, 2020December 31, 2019March 31, 2021December 31, 2020
Loan-to-Value RatioLoan-to-Value RatioAmortized CostPercent of TotalAmortized CostPercent of TotalLoan-to-Value RatioAmortized CostPercent of TotalAmortized CostPercent of Total
(Dollars in thousands)(Dollars in thousands)
0% - 50%0% - 50%$442,913 45.5 %$412,973 40.8 %0% - 50%$468,274 47.1 %$463,130 46.5 %
51% - 60%51% - 60%309,726 31.8310,869 30.751% - 60%305,305 30.7    309,477 31.1    
61% - 70%61% - 70%204,359 21.0256,280 25.461% - 70%200,132 20.1    202,114 20.3    
71% - 80%71% - 80%17,136 1.731,556 3.171% - 80%20,812 2.1    20,933 2.1    
TotalTotal$974,134 100.0 %$1,011,678 100.0 %Total$994,523 100.0 %$995,654 100.0 %

The loan-to-value ratio is determined using the most recent appraised value. Appraisals are updated periodically when there is indication of a possible significant collateral decline or there are loan modifications or refinance requests.

Mortgage loans are rated internally to provide a current qualitative rating of each loan. We review the capital structure, collateral strength, physical occupancy, financial stability of the operating income stream, debt service coverage ratio, outstanding loan balance to estimated value of the collateral, property improvements and the financial strength of the borrower when determining the internal loan rating. Loans of high quality, low risk and with little concern of default or extension risk are rated an A; loans of moderate quality and moderate risk are rated a B; loans of low quality and high risk are rated a C, and loans for which there is concern of credit default are rated a W.
Mortgage Loans by Internal Rating and Year of Origination
March 31, 2021
202120202019201820172016 & priorTotal
Internal RatingAmortized Cost
(Dollars in thousands)
A$40,200 $103,159 $56,005 $117,268 $181,445 $465,423 $963,500 
B— — 11,735 1,866 3,420 1,502 18,523 
C— — — 4,408 — 3,907 8,315 
W— — — — — 4,185 4,185 
Total$40,200 $103,159 $67,740 $123,542 $184,865 $475,017 $994,523 

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Mortgage Loans by Internal Rating and Year of Origination
September 30, 2020
202020192018201720162015 & priorTotal
Internal RatingAmortized Cost
(Dollars in thousands)
A$44,643 $56,567 $119,248 $191,141 $136,503 $386,219 $934,321 
B— 11,842 1,900 3,497 — 5,336 22,575 
C— — 4,495 — 3,975 4,535 13,005 
W— — — — — 4,233 4,233 
Total$44,643 $68,409 $125,643 $194,638 $140,478 $400,323 $974,134 
Mortgage Loans by Internal Rating and Year of OriginationMortgage Loans by Internal Rating and Year of Origination
December 31, 2019December 31, 2020
201920182017201620152014 & priorTotal202020192018201720162015 & priorTotal
Internal RatingInternal RatingAmortized CostInternal RatingAmortized Cost
(Dollars in thousands)(Dollars in thousands)
AA$69,319 $128,334 $200,283 $144,311 $119,724 $316,079 $978,050 A$103,781 $56,288 $118,283 $189,257 $130,070 $362,346 $960,025 
BB— — — — — 7,512 7,512 B— 11,789 1,883 3,459 — 1,516 18,647 
CC— — — — — 21,812 21,812 C— — 4,456 — 3,945 4,372 12,773 
WW— — — — — 4,304 4,304 W— — — — — 4,209 4,209 
TotalTotal$69,319 $128,334 $200,283 $144,311 $119,724 $349,707 $1,011,678 Total$103,781 $68,077 $124,622 $192,716 $134,015 $372,443 $995,654 

Our allowance for credit losses on mortgage loans was estimated by incorporating historical internal information, historical industry averages, current conditions as well as conditions for a reasonable and supportable forecast that includes an estimated recessionary period. The loans are segmented by an internal risk rating as well as geographic region with an estimated loss ratio applied against each segment. For the years after our reasonable and supportable forecast period we graded the expected loss ratio over the estimated remaining recessionary period to our actual loss history. During the quarter ended September 30,March 31, 2021, our allowance did not change significantly from December 31, 2020 positive trends inas the historical industry averages, a decrease in the estimated recessionary period and a decrease in our mortgage loanaggregate principal balance more than offseton our negative internal rating migrations forloans and other inputs into the quarter which led to a decrease in our allowance.model remained relatively stable. Amounts on mortgage loans deemed to be uncollectible are charged off and removed from the valuation allowance.
Allowance for Credit Losses on Mortgage Loans Allowance for Credit Losses on Mortgage Loans Allowance for Credit Losses on Mortgage Loans
Three months endedNine months endedThree months ended March 31,
 September 30, 2020 September 30, 2020 2021 2020
(Dollars in thousands)(Dollars in thousands)
Beginning balanceBeginning balance$2,703 $3,164 Beginning balance$1,553 $3,165 
Current period provision for expected credit lossesCurrent period provision for expected credit losses(779)(1,240)Current period provision for expected credit losses32 114 
Ending balanceEnding balance$1,924 $1,924 Ending balance$1,585 $3,279 

Mortgage Loan Modifications

Our commercial mortgage loan portfolio can include loans that have been modified. We assess loan modifications on a loan-by-loan basis to evaluate whether a troubled debt restructuring has occurred. Generally, the types of concessions include reduction of the contractual interest rate to a below-market rate, extension of the maturity date and/or a reduction of accrued interest. The amount, timing and extent of the concession granted is considered in determining if an impairment loss is needed for the restructuring. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows lenders to make loan modifications under certain circumstances without triggering troubled debt restructuring status, including extension of the maturity date and payment of interest only. Other than those modifications intended to comply with these provisions of the CARES Act, thereThere were no loan modifications during the ninethree months ended September 30, 2020March 31, 2021 or September 30, 2019.March 31, 2020.

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Realized Gains (Losses) - Recorded in Income
Realized Gains (Losses) - Recorded in Income
Realized Gains (Losses) - Recorded in Income
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Realized gains (losses) on investmentsRealized gains (losses) on investmentsRealized gains (losses) on investments
Fixed maturities:Fixed maturities:Fixed maturities:
Gross gainsGross gains$237 $534 $431 $3,671 Gross gains$148 $12 
Gross lossesGross losses(11)(1,730)(304)Gross losses(868)(159)
Mortgage loans2,778 
OtherOther(49)(58)(4)Other(9)
177 534 (1,357)6,141 (720)(156)
Net gains (losses) recognized during the period on equity securities held at the end of the period1,814 165 (7,099)5,047 
Net gains (losses) recognized during the period on equity securities sold during the period(3)(201)42 
Net gains (losses) recognized during the period on equity securities1,814 162 (7,300)5,089 
Net realized gains (losses)1,991 696 (8,657)11,230 
Net gains and (losses) recognized during the period on equity securities held at the end of the periodNet gains and (losses) recognized during the period on equity securities held at the end of the period(149)(13,231)
Net gains and (losses) recognized during the period on equity securities sold during the periodNet gains and (losses) recognized during the period on equity securities sold during the period(14)
Net losses recognized during the period on equity securitiesNet losses recognized during the period on equity securities(149)(13,245)
Net realized lossesNet realized losses(869)(13,401)
Credit losses recognized in earnings:
Other-than-temporary impairment losses(50)(919)
Allowance for credit losses on fixed maturity securities1,124 (12,095)
Allowance for credit losses on mortgage loans779 1,240 
Decrease (increase) in allowances for credit losses:Decrease (increase) in allowances for credit losses:
Fixed maturity securitiesFixed maturity securities1,145 (12,146)
Mortgage loansMortgage loans(32)(115)
Net realized gains (losses) on investments recorded in incomeNet realized gains (losses) on investments recorded in income$3,894 $646 $(19,512)$10,311 Net realized gains (losses) on investments recorded in income$244 $(25,662)

Proceeds from sales of fixed maturities totaled $14.5$4.7 million during the ninethree months ended September 30, 2020March 31, 2021 and $27.7$5.8 million during the ninethree months ended September 30, 2019.March 31, 2020.

Realized gains and losses on sales of investments are determined based on specific identification.

Variable Interest Entities

We evaluate our variable interest entity (VIE) investees to determine whether the level of our direct ownership interest, our rights to manage operations, or our obligation to provide ongoing financial support are such that we are the primary beneficiary of the entity, and would therefore be required to consolidate it for financial reporting purposes. After determining that we have a variable interest, we review our involvement in the VIE to determine whether we have both the power to direct activities that most significantly impact the economic performance of the VIE, and the obligation to absorb losses or the rights to receive benefits that could be potentially significant to the VIE. This analysis includes a review of the purpose and design of the VIE as well as the role that we played in the formation of the entity and how that role could impact our ability to control the VIE. We also review the activities and decisions considered significant to the economic performance of the VIE and assess what power we have in directing those activities and decisions. Finally, we review the agreements in place to determine if there are any guarantees that would affect our maximum exposure to loss.

We have reviewed the circumstances surrounding our investments in VIEs, which consist of (i) limited partnerships or limited liability companies accounted for under the equity method included in securities and indebtedness of related parties and (ii) non-guaranteed federal low income housing tax credit (LIHTC) investments included in other assets. In addition, we have reviewed the ownership interests in our VIEs and determined that we do not hold direct majority ownership or have other contractual rights (such as kick out rights) that give us effective control over these entities resulting in us having both the power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The maximum loss exposure relative to our VIEs is limited to the carrying value and any unfunded commitments that exist for each particular VIE. We also have not provided additional support or other guarantees that were not previously contractually required (financial or otherwise) to any of the VIEs as of September 30, 2020March 31, 2021 or December 31, 2019.2020. Based on this analysis, none of our VIEs were required to be consolidated at September 30, 2020March 31, 2021 or December 31, 2019.2020.

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LIHTC investments take the form of limited partnerships or limited liability companies, which in turn invest in a number of low income housing projects. We use the proportional amortization method of accounting for these investments. The proportional amortization method amortizes the cost of the investment over the period in which the investor expects to receive tax credits and other tax benefits, and the resulting amortization is recognized along with the tax benefit as a component of federal income tax expense on our consolidated statements of operations.
VIE Investments by CategoryVIE Investments by CategoryVIE Investments by Category
September 30, 2020December 31, 2019March 31, 2021December 31, 2020
Carrying ValueMaximum Exposure to LossCarrying ValueMaximum Exposure to LossCarrying ValueMaximum Exposure to LossCarrying ValueMaximum Exposure to Loss
(Dollars in thousands)(Dollars in thousands)
LIHTC investmentsLIHTC investments$34,273 $35,200 $42,907 $43,834 LIHTC investments$28,761 $29,602 $31,382 $32,263 
Investment companiesInvestment companies59,661 111,179 53,388 103,125 Investment companies69,064 149,559 66,326 138,413 
Real estate limited partnershipsReal estate limited partnerships9,888 15,002 9,565 15,527 Real estate limited partnerships15,109 14,727 13,398 14,869 
OtherOther490 490 492 492 Other482 482 491 491 
TotalTotal$104,312 $161,871 $106,352 $162,978 Total$113,416 $194,370 $111,597 $186,036 

In addition, we make passive investments in the normal course of business in structured securities issued by VIEs for which we are not the investment manager. These structured securities include all of the residential mortgage-backed securities, commercial mortgage-backed securities and other asset-backed securities included in our fixed maturity securities. Our maximum exposure to loss on these securities is limited to our carrying value of the investment. We have determined that we are not the primary beneficiary of these structured securities because we do not have the power to direct the activities that most significantly impact the entities’ economic performance.

Derivative Instruments

Our primary derivative exposure relates to purchased call options, which provide an economic hedge against the embedded derivatives in our indexed products. We also have embedded derivatives within our modified coinsurance agreements as well as an interest-only fixed maturity investment. We do not apply hedge accounting to any of our derivative positions, and they are held at fair value.
Derivatives Instruments by TypeDerivatives Instruments by TypeDerivatives Instruments by Type
September 30, 2020December 31, 2019March 31, 2021December 31, 2020
(Dollars in thousands)(Dollars in thousands)
AssetsAssetsAssets
Freestanding derivatives:Freestanding derivatives:Freestanding derivatives:
Call options (reported in other investments)Call options (reported in other investments)$18,376 $31,469 Call options (reported in other investments)$28,111 $23,576 
Embedded derivatives:Embedded derivatives:Embedded derivatives:
Modified coinsurance (reported in reinsurance recoverable)Modified coinsurance (reported in reinsurance recoverable)4,054 2,327 Modified coinsurance (reported in reinsurance recoverable)3,724 4,373 
Interest-only security (reported in fixed maturities)Interest-only security (reported in fixed maturities)97 385 Interest-only security (reported in fixed maturities)25 
Total assetsTotal assets$22,527 $34,181 Total assets$31,835 $27,974 
LiabilitiesLiabilitiesLiabilities
Embedded derivatives:Embedded derivatives:Embedded derivatives:
Indexed products (reported in liability for future policy benefits)Indexed products (reported in liability for future policy benefits)$95,079 $76,346 Indexed products (reported in liability for future policy benefits)$101,051 $106,852 
Modified coinsurance (reported in other liabilities)Modified coinsurance (reported in other liabilities)326 254 Modified coinsurance (reported in other liabilities)296 320 
Total liabilitiesTotal liabilities$95,405 $76,600 Total liabilities$101,347 $107,172 

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Derivative Income (Loss)Derivative Income (Loss)Derivative Income (Loss)
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Freestanding derivatives:Freestanding derivatives:Freestanding derivatives:
Call optionsCall options$7,495 $1,590 $(1,073)$14,092 Call options$4,570 $(22,163)
Embedded derivatives:Embedded derivatives:Embedded derivatives:
Modified coinsuranceModified coinsurance1,452 859 1,655 2,112 Modified coinsurance(626)(504)
Interest-only securityInterest-only security44 (99)85 17 Interest-only security24 
Indexed productsIndexed products(9,890)(5,831)(3,471)(18,460)Indexed products8,950 21,076 
Total loss from derivatives$(899)$(3,481)$(2,804)$(2,239)
Total income (loss) from derivativesTotal income (loss) from derivatives$12,901 $(1,567)

Derivative income (loss) is reported in net investment income except for the change in fair value of the embedded derivatives on our indexed products, which is reported in interest sensitive product benefits.

We are exposed to credit losses on our call options in the event of nonperformance of the derivative counterparties. This credit risk is minimized by purchasing such agreements from financial institutions with high credit ratings (currently rated A or better by nationally recognized statistical rating organizations). We have also entered into credit support agreements with the counterparties requiring them to post collateral when net exposures exceed pre-determined thresholds that vary by counterparty. The net amount of such exposure is essentially the market value less collateral held for such agreements with each counterparty. The call options are supported by securities collateral received of $15.8$22.5 million at September 30, 2020,March 31, 2021, which is held in a separate custodial account. Subject to certain constraints, we are permitted to sell or re-pledge this collateral, but do not have legal rights to the collateral; accordingly, it has not been recorded on our balance sheet. We have elected to present our derivative receivables netted with the obligation to return cash collateral received on our balance sheet in other investments. We received cash collateral of $8.9$8.5 million included in cash and cash equivalents on our balance sheet as of September 30, 2020.March 31, 2021. At September 30, 2020,March 31, 2021, none of the collateral had been sold or re-pledged. As of September 30, 2020,March 31, 2021, our net derivative exposure recorded on the balance sheet without the off balance sheet collateral was $18.4$28.1 million.


3. Fair Values

Fair value is based on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As not all financial instruments are actively traded, various valuation methods may be used to estimate fair value. These methods rely on observable market data, or, if observable market data is not available, the best information available. Significant judgment may be required to interpret the data and select the assumptions used in the valuation estimates, particularly when observable market data is not available.

In the discussion that follows, we have ranked our financial instruments by the level of judgment used in the determination of the fair values presented above. The levels are defined as follows:

Level 1 - Fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Fair values are based on inputs, other than quoted prices from active markets, that are observable for the asset or liability, either directly or indirectly.

Level 3 - Fair values are based on significant unobservable inputs for the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. From time to time there may be movements between levels as inputs become more or less observable, which may depend on several factors including the activity of the market for the specific security, the activity of the market for similar securities, the level of risk spreads and the source from which we obtain the information.


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The following methods and assumptions were used in estimating the fair value of our financial instruments measured at fair value on a recurring basis:

Fixed maturities:

Level 1 fixed maturities consist of U.S. Treasury issues that are actively traded, allowing us to use current market prices as an estimate of their fair value.

Level 2 fixed maturities consist of corporate, mortgage- and asset-backed, United States Government agencies, state and political subdivisions and private placement corporate securities with observable market data, and in some circumstances recent trade activity. When quoted prices of identical assets in active markets are not available, we obtain prices from third-party pricing vendors. We have regular interaction with these vendors to ensure we understand their pricing methodologies and to confirm they are utilizing observable market information. Their methodologies vary by asset class and include inputs such as estimated cash flows, benchmark yields, reported trades, credit quality, industry events and economic events. Fixed maturities with validated prices from pricing services, which includes the majority of our public fixed maturities in all asset classes, are generally reflected in Level 2.

Also included in Level 2 are private placement corporate bonds with no quoted market prices available, for which an internal model using substantially all observable inputs or a matrix pricing valuation approach is used. In the matrix approach, securities are grouped into pricing categories that vary by sector, rating and average life. Each pricing category is assigned a risk spread based on studies of observable public market data. The expected cash flows of the security are then discounted back at the current Treasury curve plus the appropriate risk spread.

Level 3 fixed maturities include corporate, mortgage- and asset-backed and private placement corporate securities for which there is little or no current market data available. We use external pricing sources, or if prices are not available, we will estimate fair value internally. Fair values of private corporate investments in Level 3 are determined by reference to the public market, private transactions or valuations for comparable companies or assets in the relevant asset class when such amounts are available. For other securities for which an exit price based on relevant observable inputs is not obtained, the fair value is determined using a matrix calculation. Fair values estimated using matrix pricing methods rely on an estimate of credit spreads to a risk-free U.S. Treasury yield. Selecting the credit spread requires judgment based on an understanding of the security and may include a market liquidity premium. Our selection of comparable companies as well as the level of spread requires significant judgment. Increases in spreads used in our matrix models, or those used to value comparable companies, will result in a decrease in discounted cash flows used, and accordingly in the estimated fair value of the security.

We obtain fixed maturity fair values from a variety of external independent pricing services, including brokers, with access to observable data including recent trade information, if available. In certain circumstances in which an external price is not available for a Level 3 security, we will internally estimate its fair value. Our process for evaluation and selection of the fair values includes:

We follow a “pricing waterfall” policy, which establishes the pricing source preference for a particular security or security type. The order of preference is based on our evaluation of the valuation methods used, the source’s knowledge of the instrument and the reliability of the prices we have received from the source in the past. Our valuation policy dictates that fair values are initially sought from third-party pricing services. If our review of the prices received from our preferred source indicates an inaccurate price, we will use an alternative source within the waterfall and document the decision. In the event that fair values are not available from one of our external pricing services or upon review of the fair values provided it is determined that they may not be reflective of market conditions, those securities are submitted to brokers familiar with the security to obtain non-binding price quotes. Broker quotes tend to be used in limited circumstances such as for newly issued, private placement corporate bonds and other instruments that are not widely traded. For those securities for which an externally provided fair value is not available, we use cash flow modeling techniques to estimate fair value.

We evaluate third-party pricing source estimation methodologies to assess whether they will provide a fair value that approximates a market exit price.

We perform an overall analysis of portfolio fair value movement against general movements in interest rates and spreads.


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We compare period-to-period price trends to detect unexpected price fluctuations based on our knowledge of the market and the particular instrument. As fluctuations are noted, we will perform further research that may include discussions with the original pricing source or other external sources to ensure we agree with the valuation.

We compare prices between different pricing sources for unusual disparity.

We meet at least quarterly with our Investment Committee, the group that oversees our valuation process, to discuss valuation practices and observations during the pricing process.

Equity securities:

Level 1 equity securities consist of mutual funds and common stocks that are actively traded, allowing us to use current market prices as an estimate of their fair value.

Level 2 equity securities consist of non-redeemable preferred stock. Estimated fair value for the non-redeemable preferred stock is obtained from external pricing sources using a matrix pricing approach.

Level 3 equity securities consist of non-redeemable preferred stock for which fair value estimates are based on the value of comparable securities that are actively traded. Increases in spreads used to value comparable companies, will result in a decrease in discounted cash flows used, and accordingly in the estimated fair value of the security.

In the case that external pricing services are used for certain Level 1 and Level 2 equity securities, our review process is consistent with the process used to determine the fair value of fixed maturities discussed above.

Other investments:

Level 2 other investments measured at fair value include call options with fair values based on counterparty market prices adjusted for a credit component of the counterparty, net of collateral received.

Cash, cash equivalents and short-term investments:

Level 1 cash, cash equivalents and short-term investments are highly liquid instruments for which historical cost approximates fair value.

Reinsurance recoverable:

Level 2 reinsurance recoverable includes embedded derivatives in our modified coinsurance contracts under which we cede or assume business. Fair values of these embedded derivatives are based on the difference between the fair value and the cost basis of the underlying fixed maturities, which are valued consistent with the discussion of fixed maturities above.

Assets held in separate accounts:

Level 1 assets held in separate accounts consist of mutual funds that are actively traded, allowing us to use current market prices as an estimate of their fair value.

Future policy benefits - indexed product embedded derivatives:

Indexed product contracts include embedded derivatives that are measured at fair value on a recurring basis. These embedded derivatives are a Level 3 measurement. The fair value of the embedded derivatives is based on the discounted excess of projected account values (including a risk margin) over projected guaranteed account values. The key unobservable inputs required in the projection of future values that require management judgment include the risk margin as well as our credit risk. Should the risk margin increase or the credit risk decrease, the discounted cash flows and the estimated fair value of the obligation will increase.


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Other liabilities:

Level 2 other liabilities include the embedded derivatives in our modified coinsurance contracts under which we cede business. Fair values for the embedded derivatives are based on the difference between the fair value and the cost basis of the underlying fixed maturities.
Valuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy LevelsValuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy LevelsValuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy Levels
September 30, 2020March 31, 2021
Quoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair ValueQuoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair Value
(Dollars in thousands)(Dollars in thousands)
AssetsAssetsAssets
Fixed maturities:Fixed maturities:Fixed maturities:
Corporate securitiesCorporate securities$$4,129,701 $4,298 $4,133,999 Corporate securities$$4,088,091 $3,517 $4,091,608 
Residential mortgage-backed securitiesResidential mortgage-backed securities717,719 7,393 725,112 Residential mortgage-backed securities676,535 21,743 698,278 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities1,141,289 8,142 1,149,431 Commercial mortgage-backed securities1,071,985 7,842 1,079,827 
Other asset-backed securitiesOther asset-backed securities727,998 25,993 753,991 Other asset-backed securities744,117 5,670 749,787 
United States Government and agenciesUnited States Government and agencies27,188 10,407 37,595 United States Government and agencies30,135 9,110 39,245 
States and political subdivisionsStates and political subdivisions1,444,349 1,444,349 States and political subdivisions1,369,338 1,369,338 
Total fixed maturitiesTotal fixed maturities27,188 8,171,463 45,826 8,244,477 Total fixed maturities30,135 7,959,176 38,772 8,028,083 
Non-redeemable preferred stocksNon-redeemable preferred stocks65,261 6,816 72,077 Non-redeemable preferred stocks64,951 6,676 71,627 
Common stocks (1)Common stocks (1)12,084 12,084 Common stocks (1)6,823 6,823 
Other investmentsOther investments18,376 18,376 Other investments28,111 28,111 
Cash, cash equivalents and short-term investmentsCash, cash equivalents and short-term investments33,464 33,464 Cash, cash equivalents and short-term investments113,106 113,106 
Reinsurance recoverableReinsurance recoverable4,054 4,054 Reinsurance recoverable3,724 3,724 
Assets held in separate accountsAssets held in separate accounts616,381 616,381 Assets held in separate accounts686,968 686,968 
Total assetsTotal assets$689,117 $8,259,154 $52,642 $9,000,913 Total assets$837,032 $8,055,962 $45,448 $8,938,442 
LiabilitiesLiabilitiesLiabilities
Future policy benefits - indexed product embedded derivativesFuture policy benefits - indexed product embedded derivatives$$$95,079 $95,079 Future policy benefits - indexed product embedded derivatives$$$101,051 $101,051 
Other liabilitiesOther liabilities326 326 Other liabilities296 296 
Total liabilitiesTotal liabilities$$326 $95,079 $95,405 Total liabilities$$296 $101,051 $101,347 


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Valuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy LevelsValuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy LevelsValuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy Levels
December 31, 2019December 31, 2020
Quoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair ValueQuoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair Value
(Dollars in thousands)(Dollars in thousands)
AssetsAssetsAssets
Fixed maturities:Fixed maturities:Fixed maturities:
Corporate securitiesCorporate securities$$3,772,362 $6,588 $3,778,950 Corporate securities$$4,235,226 $3,041 $4,238,267 
Residential mortgage-backed securitiesResidential mortgage-backed securities672,388 672,388 Residential mortgage-backed securities702,119 702,119 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities1,032,693 12,780 1,045,473 Commercial mortgage-backed securities1,128,199 8,134 1,136,333 
Other asset-backed securitiesOther asset-backed securities704,766 9,755 714,521 Other asset-backed securities733,561 21,190 754,751 
United States Government and agenciesUnited States Government and agencies4,821 9,302 14,123 United States Government and agencies25,901 10,351 36,252 
States and political subdivisionsStates and political subdivisions1,477,173 1,477,173 States and political subdivisions1,415,965 1,415,965 
Total fixed maturitiesTotal fixed maturities4,821 7,668,684 29,123 7,702,628 Total fixed maturities25,901 8,225,421 32,365 8,283,687 
Non-redeemable preferred stocksNon-redeemable preferred stocks67,873 6,927 74,800 Non-redeemable preferred stocks65,870 6,612 72,482 
Common stocks (1)Common stocks (1)17,027 17,027 Common stocks (1)6,510 6,510 
Other investmentsOther investments31,469 31,469 Other investments23,576 23,576 
Cash, cash equivalents and short-term investmentsCash, cash equivalents and short-term investments29,142 29,142 Cash, cash equivalents and short-term investments75,944 75,944 
Reinsurance recoverableReinsurance recoverable2,327 2,327 Reinsurance recoverable4,373 4,373 
Assets held in separate accountsAssets held in separate accounts645,881 645,881 Assets held in separate accounts674,182 674,182 
Total assetsTotal assets$696,871 $7,770,353 $36,050 $8,503,274 Total assets$782,537 $8,319,240 $38,977 $9,140,754 
LiabilitiesLiabilitiesLiabilities
Future policy benefits - indexed product embedded derivativesFuture policy benefits - indexed product embedded derivatives$$$76,346 $76,346 Future policy benefits - indexed product embedded derivatives$$$106,852 $106,852 
Other liabilitiesOther liabilities254 254 Other liabilities320 320 
Total liabilitiesTotal liabilities$$254 $76,346 $76,600 Total liabilities$$320 $106,852 $107,172 

(1)    A private equity fund with a fair value estimate of $9.1$10.1 million at September 30, 2020March 31, 2021 and $8.4$9.3 million at December 31, 20192020 using net asset value per share as a practical expedient, has not been classified in the fair value hierarchy above in accordance with fair value reporting guidance. This fund invests in senior secured middle market loans and had no remaining unfunded commitments at March 31, 2021 and unfunded commitments totaling $0.8 million at September 30, 2020 and $1.7 million at December 31, 2019.2020. The investment is not currently eligible for redemption.

Level 3 Assets by Valuation Source - Recurring BasisLevel 3 Assets by Valuation Source - Recurring BasisLevel 3 Assets by Valuation Source - Recurring Basis
September 30, 2020March 31, 2021
Third-party vendorsPriced
internally
Fair ValueThird-party vendorsPriced
internally
Fair Value
(Dollars in thousands)(Dollars in thousands)
Corporate securitiesCorporate securities$$4,298 $4,298 Corporate securities$991 $2,526 $3,517 
Residential mortgage-backed securitiesResidential mortgage-backed securities7,393 7,393 Residential mortgage-backed securities19,800 1,943 21,743 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities8,142 8,142 Commercial mortgage-backed securities7,842 7,842 
Other asset-backed securitiesOther asset-backed securities25,993 25,993 Other asset-backed securities4,295 1,375 5,670 
Non-redeemable preferred stocksNon-redeemable preferred stocks6,816 6,816 Non-redeemable preferred stocks6,676 6,676 
Total assetsTotal assets$41,528 $11,114 $52,642 Total assets$32,928 $12,520 $45,448 
Percent of totalPercent of total78.9 %21.1 %100.0 %Percent of total72.5 %27.5 %100.0 %

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Level 3 Assets by Valuation Source - Recurring BasisLevel 3 Assets by Valuation Source - Recurring BasisLevel 3 Assets by Valuation Source - Recurring Basis
December 31, 2019December 31, 2020
Third-party vendorsPriced
internally
Fair ValueThird-party vendorsPriced
internally
Fair Value
(Dollars in thousands)(Dollars in thousands)
Corporate securitiesCorporate securities$$6,588 $6,588 Corporate securities$$3,041 $3,041 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities12,780 12,780 Commercial mortgage-backed securities8,134 8,134 
Other asset-backed securitiesOther asset-backed securities8,000 1,755 9,755 Other asset-backed securities17,876 3,314 21,190 
Non-redeemable preferred stocksNon-redeemable preferred stocks6,927 6,927 Non-redeemable preferred stocks6,612 6,612 
Total assetsTotal assets$20,780 $15,270 $36,050 Total assets$26,010 $12,967 $38,977 
Percent of totalPercent of total57.6 %42.4 %100.0 %Percent of total66.7 %33.3 %100.0 %

Quantitative Information about Level 3 Fair Value Measurements - Recurring Basis
September 30,March 31, 2021
Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
(Dollars in thousands)
Assets
Corporate securities$3,517 Discounted cash flowCredit spread0.55% - 3.94% (2.72%)
Commercial mortgage-backed securities7,842 Discounted cash flowCredit spread1.83% - 1.91% (1.87%)
Other asset-backed securities4,251 Discounted cash flowCredit spread2.80% - 7.25% (6.01%)
Residential mortgage-backed securities19,800 Discounted cash flowCredit spread0.88% - 1.00% (0.93%)
Non-redeemable preferred stocks6,676 Discounted cash flowCredit spread3.28% (3.28%)
Total assets$42,086 
Liabilities
Future policy benefits - indexed product embedded derivatives$101,051 Discounted cash flowCredit risk
Risk margin
0.40% - 1.30% (0.80%) 0.15% - 0.40% (0.25%)

December 31, 2020
Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
(Dollars in thousands)
Assets
Corporate securities$4,2983,041 Discounted cash flowCredit spread7.50%5.95% - 16.49% (12.32%19.41% (14.52%)
Commercial mortgage-backed securities8,1428,134 Discounted cash flowCredit spread1.97%1.86% - 2.77% (2.44%2.42% (2.18%)
Other asset-backed securities18,20013,564 Discounted cash flowCredit spread2.40%2.10% - 3.50% (2.94%9.75% (5.70%)
Residential mortgage-backed securitiesNon-redeemable preferred stocks7,3936,612 Discounted cash flowCredit spread1.65% (1.65%)
Non-redeemable preferred stocks6,816 Discounted cash flowCredit spread4.51% (4.51%3.57% (3.57%)
Total assets$44,84931,351 
Liabilities
Future policy benefits - indexed product embedded derivatives$95,079106,852 Discounted cash flowCredit risk
Risk margin
0.50%0.35% - 2.00% (1.15%1.45% (0.80%) 0.15% - 0.40% (0.25%)

December 31, 2019
Fair ValueValuation TechniqueUnobservable InputRange (Weighted Average)
(Dollars in thousands)
Assets
Corporate securities$6,588 Discounted cash flowCredit spread2.11% - 5.85% (4.33%)
Commercial mortgage-backed securities12,780 Discounted cash flowCredit spread1.18% - 2.22% (1.92%)
Other asset-backed securities6,000 Discounted cash flowCredit spread2.15% - 2.30% (2.23%)
Non-redeemable preferred stocks6,927 Discounted cash flowCredit spread2.72% (2.72%)
Total assets$32,295 
Liabilities
Future policy benefits - indexed product embedded derivatives$76,346 Discounted cash flowCredit risk
Risk margin
0.40% - 1.35% (0.80%) 0.15% -0.40% (0.25%)

The tables above exclude certain securities with the fair value based on non-binding broker quotes for which we could not reasonably obtain the quantitative unobservable inputs.

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Level 3 Financial Instruments Changes in Fair Value - Recurring BasisLevel 3 Financial Instruments Changes in Fair Value - Recurring BasisLevel 3 Financial Instruments Changes in Fair Value - Recurring Basis
September 30, 2020March 31, 2021
Realized and unrealized gains (losses), netRealized and unrealized gains (losses), net
Balance, December 31, 2019PurchasesDisposalsIncluded in net incomeIncluded in other compre-hensive incomeTransfers into
Level 3
Transfers
out of
Level 3 (1)
Amort-ization included in net incomeBalance, September 30, 2020Balance, December 31, 2020PurchasesDisposalsIncluded in net incomeIncluded in other compre-hensive incomeTransfers into
Level 3 (1)
Transfers
out of
Level 3 (1)
Amort-ization included in net incomeBalance, March 31, 2021
(Dollars in thousands)(Dollars in thousands)
AssetsAssetsAssets
Corporate securitiesCorporate securities$6,588 $7,042 $(825)$$(1,198)$3,283 $(10,592)$$4,298 Corporate securities$3,041 $1,001 $(2,547)$(859)$604 $2,280 $$(3)$3,517 
Residential mortgage-backed securitiesResidential mortgage-backed securities12,629 (1)(5,235)7,393 Residential mortgage-backed securities21,868 (125)21,743 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities12,780 (299)217 (4,556)8,142 Commercial mortgage-backed securities8,134 (105)(187)7,842 
Other asset-backed securitiesOther asset-backed securities9,755 30,504 (138)(633)761 (14,255)(1)25,993 Other asset-backed securities21,190 3,000 (89)(142)(18,289)5,670 
Non-redeemable preferred stocksNon-redeemable preferred stocks6,927 (111)6,816 Non-redeemable preferred stocks6,612 64 6,676 
Total assetsTotal assets$36,050 $50,175 $(1,262)$$(1,726)$4,044 $(34,638)$(1)$52,642 Total assets$38,977 $25,869 $(2,741)$(859)$214 $2,280 $(18,289)$(3)$45,448 
LiabilitiesLiabilitiesLiabilities
Future policy benefits - indexed product embedded derivativesFuture policy benefits - indexed product embedded derivatives$76,346 $11,411 $(6,778)$14,100 $$$$— $95,079 Future policy benefits - indexed product embedded derivatives$106,852 $3,211 $(4,868)$(4,144)$$$$— $101,051 

September 30, 2019March 31, 2020
Realized and unrealized gains (losses), netRealized and unrealized gains (losses), net
Balance, December 31, 2018PurchasesDisposalsIncluded in net incomeIncluded in other compre-hensive incomeTransfers into
Level 3
Transfers
out of
Level 3 (1)
Amort-ization included in net incomeBalance,
September 30, 2019
Balance, December 31, 2019PurchasesDisposalsIncluded in net incomeIncluded in other compre-hensive incomeTransfers into
Level 3
Transfers
out of
Level 3 (1)
Amort-ization included in net incomeBalance, March 31, 2020
(Dollars in thousands)(Dollars in thousands)
AssetsAssetsAssets
Corporate securitiesCorporate securities$22,011 $6,000 $(3,172)$$465 $$(15,230)$(23)$10,051 Corporate securities$6,588 $6,983 $(352)$$(154)$$(3,609)$$9,456 
Residential mortgage-backed securities18,378 (2,124)16,254 
Commercial mortgage-backed securitiesCommercial mortgage-backed securities67,940 2,984 (280)571 (59,918)11,297 Commercial mortgage-backed securities12,780 (98)(920)(4,556)7,206 
Other asset-backed securitiesOther asset-backed securities3,601 20,710 (977)(869)(16,710)5,755 Other asset-backed securities9,755 3,054 (49)(27)(8,000)(1)4,732 
Non-redeemable preferred stocksNon-redeemable preferred stocks6,862 222 7,084 Non-redeemable preferred stocks6,927 (70)6,857 
Total assetsTotal assets$100,414 $48,072 $(4,429)$$389 $$(93,982)$(23)$50,441 Total assets$36,050 $10,037 $(499)$$(1,171)$$(16,165)$(1)$28,251 
LiabilitiesLiabilitiesLiabilities
Future policy benefits - indexed product embedded derivativesFuture policy benefits - indexed product embedded derivatives$40,028 $10,956 $(4,848)$20,710 $$$$— $66,846 Future policy benefits - indexed product embedded derivatives$76,346 $4,891 $(997)$(19,169)$$$$— $61,071 

(1)Transfers into Level 3 represent assets previously priced using an external pricing service with access to observable inputs no longer available and therefore, were priced using unobservable inputs. Transfers out of Level 3 include those assets that we are now able to obtain pricing from a third-party pricing vendor that uses observable inputs. The fair values of newly issued securities often require additional estimation until a market is created, which is generally within a few months after issuance. Once a market is created, as was the case for the majority of the security transfers out of the Level 3 category above, Level 2 valuation sources become available.

The Company has other financial assets and financial liabilities that are not carried at fair value but for which fair value disclosure is required. The following table presents the carrying value, fair value and fair value hierarchy level of these financial assets and financial liabilities.

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Valuation of our Financial Instruments Not Reported at Fair Value by Hierarchy LevelsValuation of our Financial Instruments Not Reported at Fair Value by Hierarchy LevelsValuation of our Financial Instruments Not Reported at Fair Value by Hierarchy Levels
September 30, 2020March 31, 2021
Quoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair ValueCarrying ValueQuoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair ValueCarrying Value
(Dollars in thousands)(Dollars in thousands)
AssetsAssetsAssets
Mortgage loansMortgage loans$$$1,053,591 $1,053,591 $972,210 Mortgage loans$$$1,057,936 $1,057,936 $992,938 
Policy loansPolicy loans278,105 278,105 197,009 Policy loans249,453 249,453 191,580 
Other investmentsOther investments35,061 2,404 37,465 37,263 Other investments39,041 1,273 40,314 40,314 
Total assetsTotal assets$$35,061 $1,334,100 $1,369,161 $1,206,482 Total assets$$39,041 $1,308,662 $1,347,703 $1,224,832 
LiabilitiesLiabilitiesLiabilities
Future policy benefitsFuture policy benefits$$$4,706,931 $4,706,931 $4,400,006 Future policy benefits$$$4,633,288 $4,633,288 $4,496,309 
Supplementary contracts without life contingenciesSupplementary contracts without life contingencies303,166 303,166 282,715 Supplementary contracts without life contingencies280,318 280,318 266,905 
Advance premiums and other depositsAdvance premiums and other deposits251,444 251,444 251,444 Advance premiums and other deposits276,848 276,848 276,848 
Long-term debtLong-term debt77,764 77,764 97,000 Long-term debt82,139 82,139 97,000 
Liabilities related to separate accountsLiabilities related to separate accounts615,361 615,361 616,381 Liabilities related to separate accounts685,970 685,970 686,968 
Total liabilitiesTotal liabilities$$$5,954,666 $5,954,666 $5,647,546 Total liabilities$$$5,958,563 $5,958,563 $5,824,030 

December 31, 2019December 31, 2020
Quoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair ValueCarrying ValueQuoted prices in active markets
for identical assets (Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Fair ValueCarrying Value
(Dollars in thousands)(Dollars in thousands)
AssetsAssetsAssets
Mortgage loansMortgage loans$$$1,059,073 $1,059,073 $1,011,678 Mortgage loans$$$1,074,939 $1,074,939 $994,101 
Policy loansPolicy loans256,787 256,787 201,589 Policy loans271,963 271,963 195,666 
Other investmentsOther investments29,534 2,215 31,749 31,211 Other investments33,409 1,273 34,682 34,682 
Total assetsTotal assets$$29,534 $1,318,075 $1,347,609 $1,244,478 Total assets$$33,409 $1,348,175 $1,381,584 $1,224,449 
LiabilitiesLiabilitiesLiabilities
Future policy benefitsFuture policy benefits$$$4,381,863 $4,381,863 $4,270,073 Future policy benefits$$$4,739,739 $4,739,739 $4,348,539 
Supplementary contracts without life contingenciesSupplementary contracts without life contingencies309,601 309,601 296,915 Supplementary contracts without life contingencies297,351 297,351 274,469 
Advance premiums and other depositsAdvance premiums and other deposits245,480 245,480 245,480 Advance premiums and other deposits264,192 264,192 264,192 
Long-term debtLong-term debt84,438 84,438 97,000 Long-term debt80,975 80,975 97,000 
Liabilities related to separate accountsLiabilities related to separate accounts644,691 644,691 645,881 Liabilities related to separate accounts673,181 673,181 674,182 
Total liabilitiesTotal liabilities$$$5,666,073 $5,666,073 $5,555,349 Total liabilities$$$6,055,438 $6,055,438 $5,658,382 

Level 3 Financial Instruments Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis, generally mortgage loans or real estate that have been deemed to be impaired during the reporting period. There were no mortgage loans or real estate impaired to fair value during the ninethree months ended September 30, 2020March 31, 2021 or September 30, 2019.March 31, 2020.


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4. Defined Benefit Plan

We participate with affiliates and an unaffiliated organization in defined benefit pension plans, including a multiemployer plan. Our share of net periodic pension cost for the plans is recorded as expense in our consolidated statements of operations.
Components of Net Periodic Pension Cost for FBL and Affiliates Combined - Multiemployer PlanComponents of Net Periodic Pension Cost for FBL and Affiliates Combined - Multiemployer PlanComponents of Net Periodic Pension Cost for FBL and Affiliates Combined - Multiemployer Plan
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Service costService cost$1,304 $1,138 $3,911 $3,412 Service cost$1,457 $1,304 
Interest costInterest cost3,142 3,318 9,425 9,955 Interest cost2,860 3,142 
Expected return on assetsExpected return on assets(5,262)(4,707)(15,785)(14,121)Expected return on assets(5,647)(5,262)
Amortization of actuarial lossAmortization of actuarial loss2,789 2,228 8,368 6,685 Amortization of actuarial loss3,720 2,789 
Net periodic pension costNet periodic pension cost$1,973 $1,977 $5,919 $5,931 Net periodic pension cost$2,390 $1,973 
FBL Financial Group, Inc. share of net periodic pension costsFBL Financial Group, Inc. share of net periodic pension costs$629 $634 $1,887 $1,900 FBL Financial Group, Inc. share of net periodic pension costs$689 $629 

Components of Net Periodic Pension Cost for FBL and Affiliates Combined - Other PlansComponents of Net Periodic Pension Cost for FBL and Affiliates Combined - Other PlansComponents of Net Periodic Pension Cost for FBL and Affiliates Combined - Other Plans
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Service costService cost$79 $117 $237 $350 Service cost$88 $79 
Interest costInterest cost220 248 660 744 Interest cost165 220 
Amortization of actuarial lossAmortization of actuarial loss317 267 951 800 Amortization of actuarial loss340 317 
Net periodic pension costNet periodic pension cost$616 $632 $1,848 $1,894 Net periodic pension cost$593 $616 
FBL Financial Group, Inc. share of net periodic pension costsFBL Financial Group, Inc. share of net periodic pension costs$392 $362 $1,177 $1,087 FBL Financial Group, Inc. share of net periodic pension costs$362 $392 

5. Commitments and Contingencies

Legal Proceedings

In the normal course of business, we may be involved in litigation in which damages are alleged that are substantially in excess of contractual policy benefits or certain other agreements. We are not aware of any claims threatened or pending against FBL Financial Group, Inc. or any of its subsidiaries for which a material loss is reasonably possible.

Commitments for Partnership Investments and Private Corporate Bond Investments

At September 30, 2020,March 31, 2021, we have unfunded investment commitments to limited partnerships and limited liability companies of $57.6$95.8 million and privately placed corporate securities commitments of $12.2$11.3 million.


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6. Stockholders’ Equity

Share Repurchases

We periodically repurchase our Class A common stock under programs approved by our Board of Directors. These repurchase programs authorize us to make repurchases in the open market or through privately negotiated transactions, with the timing and terms of the purchases to be determined by management based on market conditions. Under these programs, we repurchased 290,144had no repurchases during the three months ended March 31, 2021 and 24,525 shares of stock for $10.0$0.8 million during the ninethree months ended September 30, 2020 and 66,475 shares of stock for $4.6 million during the nine months ended September 30, 2019.March 31, 2020. Completion of this program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice. At September 30, 2020,March 31, 2021, $26.3 million remains available for repurchase under the active repurchase program. Under the Merger Agreement, we have agreed not to repurchase any additional shares of our capital stock from the date of the Merger Agreement through the closing of the Merger, subject to certain exceptions, including pursuant to our equity awards plans.
DividendsDividendsDividends
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
Class A and B common stock:Class A and B common stock:Class A and B common stock:
Cash dividends per common shareCash dividends per common share$0.50 $0.48 $1.50 $1.44 Cash dividends per common share$0.52 $0.50 
Special cash dividend per common shareSpecial cash dividend per common share1.50 1.50 Special cash dividend per common share1.50 
Total common stock dividends per shareTotal common stock dividends per share$0.50 $0.48 $3.00 $2.94 Total common stock dividends per share$0.52 $2.00 
Series B preferred stock dividends per shareSeries B preferred stock dividends per share$0.0075 $0.0075 $0.0225 $0.0225 Series B preferred stock dividends per share$0.0075 $0.0075 

Special cash dividends paid to our Class A and Class B common shareholders totaled $37.0 million for the ninethree months ended September 30, 2020 and September 30, 2019.March 31, 2020.

Reconciliation of Outstanding Common StockReconciliation of Outstanding Common StockReconciliation of Outstanding Common Stock
Class AClass BTotalClass AClass BTotal
SharesDollarsSharesDollarsSharesDollarsSharesDollarsSharesDollarsSharesDollars
(Dollars in thousands)(Dollars in thousands)
Outstanding at January 1, 201924,707,402 $152,652 11,413 $72 24,718,815 $152,724 
Stock-based compensation9,968 324 9,968 324 
Purchase of common stock(66,475)(410)(66,475)(410)
Outstanding at September 30, 201924,650,895 $152,566 11,413 $72 24,662,308 $152,638 
Outstanding at January 1, 2020Outstanding at January 1, 202024,652,802 $152,661 11,413 $72 24,664,215 $152,733 Outstanding at January 1, 202024,652,802 $152,661 11,413 $72 24,664,215 $152,733 
Stock-based compensationStock-based compensation20,452 126 20,452 126 Stock-based compensation2,500 245 2,500 245 
Purchase of common stockPurchase of common stock(290,144)(1,797)(290,144)(1,797)Purchase of common stock(24,525)(152)(24,525)(152)
Outstanding at September 30, 202024,383,110 $150,990 11,413 $72 24,394,523 $151,062 
Outstanding at March 31, 2020Outstanding at March 31, 202024,630,777 $152,754 11,413 $72 24,642,190 $152,826 
Outstanding at January 1, 2021Outstanding at January 1, 202124,384,109 $151,061 11,413 $72 24,395,522 $151,133 
Stock-based compensationStock-based compensation1,000 73 1,000 73 
Outstanding at March 31, 2021Outstanding at March 31, 202124,385,109 $151,134 11,413 $72 24,396,522 $151,206 


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Accumulated Other Comprehensive Income, Net of Tax and Other OffsetsAccumulated Other Comprehensive Income, Net of Tax and Other OffsetsAccumulated Other Comprehensive Income, Net of Tax and Other Offsets
Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)Underfunded Status of Postretirement Benefit PlansUnrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)Underfunded Status of Postretirement Benefit Plans
Without Non-Credit Impairment LossesWith Non-Credit Impairment LossesTotalWithout Non-Credit Impairment LossesWith Non-Credit Impairment LossesTotal
(Dollars in thousands)(Dollars in thousands)
Balance at January 1, 2019$96,921 $3,133 $(8,736)$91,318 
Balance at January 1, 2020Balance at January 1, 2020$363,020 $1,974 $(10,230)$354,764 
Other comprehensive loss before reclassificationsOther comprehensive loss before reclassifications(104,594)(1,550)(106,144)
Reclassification adjustmentsReclassification adjustments9,555 247 9,802 
Balance at March 31, 2020Balance at March 31, 2020$267,981 $424 $(9,983)$258,422 
Balance at January 1, 2021Balance at January 1, 2021$596,335 $1,318 $(10,374)$587,279 
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications317,677 (972)316,705 Other comprehensive income (loss) before reclassifications(217,378)291 (217,087)
Reclassification adjustmentsReclassification adjustments(2,477)629 (1,848)Reclassification adjustments(399)267 (132)
Balance at September 30, 2019$412,121 $2,161 $(8,107)$406,175 
Balance at January 1, 2020$363,020 $1,974 $(10,230)$354,764 
Other comprehensive income (loss) before reclassifications163,585 (275)(2)163,308 
Reclassification adjustments10,267 748 11,015 
Balance at September 30, 2020$536,872 $1,699 $(9,484)$529,087 
Balance at March 31, 2021Balance at March 31, 2021$378,558 $1,609 $(10,107)$370,060 

(1)Includes the impact of taxes, deferred acquisition costs, value of insurance in force acquired, unearned revenue reserves and policyholder liabilities. See Note 2 to our consolidated financial statements for further information.
Accumulated Other Comprehensive Income Reclassification AdjustmentsAccumulated Other Comprehensive Income Reclassification AdjustmentsAccumulated Other Comprehensive Income Reclassification Adjustments
Nine months ended September 30, 2020Three months ended March 31, 2021
Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)Underfunded Status of Postretirement Benefit PlansUnrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)Underfunded Status of Postretirement Benefit Plans
Without Non-Credit Impairment LossesWith Non-Credit Impairment LossesTotalWithout Non-Credit Impairment LossesWith Non-Credit Impairment LossesTotal
(Dollars in thousands)(Dollars in thousands)
Realized capital losses on sales of fixed maturity securitiesRealized capital losses on sales of fixed maturity securities$1,299 $$$1,299 Realized capital losses on sales of fixed maturity securities$720 $$$720 
Change in allowance for credit losses on fixed maturity securitiesChange in allowance for credit losses on fixed maturity securities12,095 — — 12,095 Change in allowance for credit losses on fixed maturity securities(1,145)— — (1,145)
Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilitiesAdjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities(398)(398)Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities(80)(80)
Change in unrecognized postretirement items for net actuarial loss947 947 
Net actuarial lossNet actuarial loss338 338 
Reclassifications before income taxesReclassifications before income taxes12,996 947 13,943 Reclassifications before income taxes(505)338 (167)
Income taxesIncome taxes(2,729)(199)(2,928)Income taxes106 (71)35 
Reclassification adjustmentsReclassification adjustments$10,267 $$748 $11,015 Reclassification adjustments$(399)$$267 $(132)

Nine months ended September 30, 2019Three months ended March 31, 2020
Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)Underfunded Status of Postretirement Benefit PlansUnrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)Underfunded Status of Postretirement Benefit Plans
Without Non-Credit Impairment LossesWith Non-Credit Impairment LossesTotalWithout Non-Credit Impairment LossesWith Non-Credit Impairment LossesTotal
(Dollars in thousands)(Dollars in thousands)
Realized capital gains on sales of fixed maturity securities$(3,367)$$$(3,367)
Realized capital losses on sales of fixed maturity securitiesRealized capital losses on sales of fixed maturity securities$147 $$$147 
Change in allowance for credit losses on fixed maturity securitiesChange in allowance for credit losses on fixed maturity securities12,146 — — 12,146 
Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilitiesAdjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities232 232 Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities(198)(198)
Change in unrecognized postretirement items for net actuarial loss797 797 
Net actuarial lossNet actuarial loss313 313 
Reclassifications before income taxesReclassifications before income taxes(3,135)797 (2,338)Reclassifications before income taxes12,095 313 12,408 
Income taxesIncome taxes658 (168)490 Income taxes(2,540)(66)(2,606)
Reclassification adjustmentsReclassification adjustments$(2,477)$$629 $(1,848)Reclassification adjustments$9,555 $$247 $9,802 

(1)See Note 2 to our consolidated financial statements for further information.

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7. Earnings per Share

Computation of Earnings per Common Share
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands, except per share data)(Dollars in thousands, except per share data)
Numerator:Numerator:Numerator:
Net income attributable to FBL Financial Group, Inc.Net income attributable to FBL Financial Group, Inc.$20,974 $25,129 $44,670 $91,470 Net income attributable to FBL Financial Group, Inc.$27,680 $(2,515)
Less: Dividends on Series B preferred stockLess: Dividends on Series B preferred stock37 37 112 112 Less: Dividends on Series B preferred stock38 38 
Income available to common stockholdersIncome available to common stockholders$20,937 $25,092 $44,558 $91,358 Income available to common stockholders$27,642 $(2,553)
Denominator:Denominator:Denominator:
Weighted average shares - basicWeighted average shares - basic24,497,140 24,758,639 24,660,576 24,760,311 Weighted average shares - basic24,480,106 24,762,820 
Effect of dilutive securities - stock-based compensationEffect of dilutive securities - stock-based compensation3,171 10,035 3,862 10,773 Effect of dilutive securities - stock-based compensation44 
Weighted average shares - dilutedWeighted average shares - diluted24,500,311 24,768,674 24,664,438 24,771,084 Weighted average shares - diluted24,480,150 24,762,820 
Earnings per common shareEarnings per common share$0.85 $1.01 $1.81 $3.69 Earnings per common share$1.13 $(0.10)
Earnings per common share - assuming dilutionEarnings per common share - assuming dilution$0.85 $1.01 $1.81 $3.69 Earnings per common share - assuming dilution$1.13 $(0.10)
There were no antidilutive stock options outstanding in any of the periods presented.


8. Segment Information

We analyze operations by reviewing financial information regarding our primary products that are aggregated into the Annuity and Life Insurance product segments. Our Corporate and Other segment consists of less significant business activities.
Our chief operating decision makers use pre-tax adjusted operating income to evaluate segment performance and allocate resources. Pre-tax adjusted operating income consists of pre-tax net income adjusted to exclude realized gains and losses on investments including the change in fair value of equity securities, the change in allowances for credit losses on investments, and the change in fair value of derivatives as the impact of these items 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. For example, certain call options relating to our indexed annuity 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. We also exclude from pre-tax adjusted operating income, expenses related to the proposed merger discussed in Note 1 to the consolidated financial statements, as these expenses are not incurred in the normal course of our operations. Adjustments to pre-tax net income are net of amortization of unearned revenue reserves and deferred acquisition costs, as well as changes in interest sensitive product reserves. While not applicable for the periods reported herein, in determining pre-tax adjusted operating income we will also remove the impact of settlements or judgments arising from lawsuits, net of any recoveries from third parties, the cumulative effect of changes in accounting principles and discontinued operations.
Segment results are reported net of inter-segment transactions.

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Financial Information Concerning our Operating SegmentsFinancial Information Concerning our Operating SegmentsFinancial Information Concerning our Operating Segments
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Pre-tax adjusted operating income:Pre-tax adjusted operating income:Pre-tax adjusted operating income:
AnnuityAnnuity$18,916 $8,121 $45,852 $38,420 Annuity$14,016 $12,019 
Life InsuranceLife Insurance2,641 14,032 25,168 42,363 Life Insurance10,886 10,267 
Corporate and OtherCorporate and Other829 4,939 4,754 13,853 Corporate and Other1,431 219 
Total pre-tax adjusted operating incomeTotal pre-tax adjusted operating income22,386 27,092 75,774 94,636 Total pre-tax adjusted operating income26,333 22,505 
Adjustments to pre-tax adjusted operating income:Adjustments to pre-tax adjusted operating income:Adjustments to pre-tax adjusted operating income:
Proposed acquisition transaction expenseProposed acquisition transaction expense(2,577)— 
Net realized gains/losses on investments (1)Net realized gains/losses on investments (1)4,177 557 (19,118)10,075 Net realized gains/losses on investments (1)340 (25,458)
Change in fair value of derivatives (1)Change in fair value of derivatives (1)(2,632)(666)(6,161)832 Change in fair value of derivatives (1)8,276 (2,582)
Pre-tax net income attributable to FBL Financial Group, Inc.23,931 26,983 50,495 105,543 
Income tax expense(2,883)(1,642)(5,887)(13,429)
Pre-tax net income (loss) attributable to FBL Financial Group, Inc.Pre-tax net income (loss) attributable to FBL Financial Group, Inc.32,372 (5,535)
Income tax (expense) benefitIncome tax (expense) benefit(3,687)3,081 
Tax on equity incomeTax on equity income(74)(212)62 (644)Tax on equity income(1,005)(61)
Net income attributable to FBL Financial Group, Inc.$20,974 $25,129 $44,670 $91,470 
Net income (loss) attributable to FBL Financial Group, Inc.Net income (loss) attributable to FBL Financial Group, Inc.$27,680 $(2,515)
Adjusted operating revenues:Adjusted operating revenues:Adjusted operating revenues:
AnnuityAnnuity$53,352 $51,241 $161,543 $158,186 Annuity$52,981 $54,654 
Life InsuranceLife Insurance111,170 104,595 327,877 322,791 Life Insurance112,404 107,215 
Corporate and OtherCorporate and Other22,498 23,233 68,560 69,915 Corporate and Other24,308 24,040 
187,020 179,069 557,980 550,892 189,693 185,909 
Net realized gains/losses on investments (1)Net realized gains/losses on investments (1)3,894 647 (19,513)10,313 Net realized gains/losses on investments (1)240 (25,666)
Change in fair value of derivatives (1)Change in fair value of derivatives (1)6,931 4,942 (4,646)19,915 Change in fair value of derivatives (1)1,493 (24,980)
Consolidated revenuesConsolidated revenues$197,845 $184,658 $533,821 $581,120 Consolidated revenues$191,426 $135,263 

(1)Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, value of insurance in force acquired and interest sensitive policyproduct reserves and income taxes attributable to these items.

Interest expense is attributable to the Corporate and Other segment. Expenditures for long-lived assets were not significant during the periods presented above. Goodwill at September 30, 2020March 31, 2021 and December 31, 20192020 was allocated among the segments as follows: Annuity ($3.9 million) and Life Insurance ($6.1 million).

Equity income (loss) related to securities and indebtedness of related parties is attributable to the Life Insurance and Corporate and Other segments. The following chart provides the related equity income (loss) by segment.
Equity Income (Loss) by Operating Segment
Three months ended September 30,Nine months ended September 30,
2020201920202019
(Dollars in thousands)
Pre-tax equity income (loss):
Life Insurance$299 $821 $(309)$2,199 
Corporate and Other52 190 868 
Total pre-tax equity income (loss)351 1,011 (300)3,067 
Income taxes(74)(212)62 (644)
Equity income (loss), net of related income taxes$277 $799 $(238)$2,423 
Equity Income by Operating Segment
Three months ended March 31,
20212020
(Dollars in thousands)
Pre-tax equity income:
Life Insurance$4,524 $375 
Corporate and Other261 (86)
Total pre-tax equity income4,785 289 
Income taxes(1,005)(61)
Equity income, net of related income taxes$3,780 $228 

Premiums collected, which is not a measure used in financial statements prepared according to GAAP, includes premiums received on life insurance policies and deposits on annuities and universal life-type products. Premiums collected is a common life insurance industry measure of agent productivity. Net premiums collected totaled $133.2$153.0 million for the quarter ended September 30, 2020March 31, 2021 and $142.1$154.0 million for the same period in 2019. Net premiums collected totaled $413.1 million for the nine months ended September 30, 2020, and $455.1 million for the same period in 2019.2020.

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Under GAAP, premiums on whole life and term life policies are recognized as revenues over the premium-paying period and reported in the Life Insurance segment. The following chart provides a reconciliation of life insurance premiums collected to those reported in the GAAP financial statements.
Reconciliation of Traditional Life Insurance Premiums, Net of ReinsuranceReconciliation of Traditional Life Insurance Premiums, Net of ReinsuranceReconciliation of Traditional Life Insurance Premiums, Net of Reinsurance
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Traditional and universal life insurance premiums collectedTraditional and universal life insurance premiums collected$77,666 $75,043 $238,774 $232,442 Traditional and universal life insurance premiums collected$85,505 $82,635 
Premiums collected on interest sensitive productsPremiums collected on interest sensitive products(29,882)(27,488)(91,057)(85,384)Premiums collected on interest sensitive products(31,746)(31,996)
Traditional life insurance premiums collectedTraditional life insurance premiums collected47,784 47,555 147,717 147,058 Traditional life insurance premiums collected53,759 50,639 
Change in due premiums and otherChange in due premiums and other(573)(288)303 Change in due premiums and other(1,749)(1,331)
Traditional life insurance premiums as included in the Consolidated Statements of Operations$47,792 $46,982 $147,429 $147,361 
Traditional life insurance premiums as included in the consolidated statements of operationsTraditional life insurance premiums as included in the consolidated statements of operations$52,010 $49,308 

There is no comparable GAAP financial measure for premiums collected on annuities and universal life-type products. GAAP revenues for those interest sensitive and variable products consist of various policy charges and fees assessed on those contracts, as summarized in the chart below.
Interest Sensitive Product Charges by SegmentInterest Sensitive Product Charges by SegmentInterest Sensitive Product Charges by Segment
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
AnnuityAnnuityAnnuity
Rider and other product chargesRider and other product charges$1,481 $1,248 $4,696 $3,881 Rider and other product charges$1,841 $1,530 
Surrender chargesSurrender charges295 360 1,045 1,066 Surrender charges273 356 
TotalTotal1,776 1,608 5,741 4,947 Total2,114 1,886 
Life InsuranceLife InsuranceLife Insurance
Administration chargesAdministration charges5,278 4,570 16,134 14,163 Administration charges5,715 5,443 
Cost of insurance chargesCost of insurance charges13,565 13,415 40,281 38,861 Cost of insurance charges13,345 13,379 
Surrender chargesSurrender charges611 698 1,942 2,037 Surrender charges638 705 
Amortization of policy initiation feesAmortization of policy initiation fees3,789 480 5,234 2,725 Amortization of policy initiation fees573 852 
TotalTotal23,243 19,163 63,591 57,786 Total20,271 20,379 
Corporate and OtherCorporate and OtherCorporate and Other
Administration chargesAdministration charges1,062 1,118 3,398 3,586 Administration charges1,147 1,184 
Cost of insurance chargesCost of insurance charges7,082 6,952 21,384 21,338 Cost of insurance charges6,881 7,160 
Surrender chargesSurrender charges17 46 78 Surrender charges10 32 
Separate account chargesSeparate account charges2,025 2,115 5,947 6,067 Separate account charges2,228 2,031 
Amortization of policy initiation feesAmortization of policy initiation fees71 206 709 458 Amortization of policy initiation fees152 549 
TotalTotal10,246 10,408 31,484 31,527 Total10,418 10,956 
Impact of net realized gains/losses on investments and change in fair value of derivatives on amortization of unearned revenue reservesImpact of net realized gains/losses on investments and change in fair value of derivatives on amortization of unearned revenue reserves155 (44)(767)675 Impact of net realized gains/losses on investments and change in fair value of derivatives on amortization of unearned revenue reserves(62)(1,501)
Interest sensitive product charges as included in the Consolidated Statements of Operations$35,420 $31,135 $100,049 $94,935 
Interest sensitive product charges as included in the consolidated statements of operationsInterest sensitive product charges as included in the consolidated statements of operations$32,741 $31,720 


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section includes a summary of FBL Financial Group, Inc.’s consolidated results of operations, financial condition and where appropriate, factors that management believes may affect future performance. Unless noted otherwise, all references to FBL Financial Group, Inc. (we or the Company) include all of its direct and indirect subsidiaries, including insurance subsidiaries Farm Bureau Life Insurance Company (Farm Bureau Life) and Greenfields Life Insurance Company (Greenfields Life).Company. Please read this discussion in conjunction with the accompanying consolidated financial statements and related notes. In addition, we encourage you to refer to our Form 10-K for the year ended December 31, 20192020 for a complete description of our significant accounting policies and estimates. Familiarity with this information is important in understanding our financial position and results of operations.

This Form 10-Q may include statements relating to anticipated financial performance, business prospects, new products and similar matters. These statements and others, which include words such as “expect,” “anticipate,” “believe,” “intend” and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. A variety of factors could cause our actual results and experiences to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. See Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2019,2020, and Part II within this report for additional information on the risks and uncertainties that may affect the operations, performance, development and results of our business.

Overview

We operate predominantly in the life insurance industry through our principal subsidiary, Farm Bureau Life. Farm Bureau Life markets individual life insurance policies and annuity contracts to Farm Bureau members and other individuals and businesses in the Midwestern and Western sections of the United States through an exclusive agency force. Other subsidiaries provide external wealth management services as well as investment management and other support services to our affiliated insurance companies. In addition, we manage two Farm Bureau-affiliatedBureau affiliated property-casualty companies.

We analyze operations by reviewing financial information regarding our primary products that are aggregated in Annuity and Life Insurance product segments. In addition, our Corporate and Other segment includes our wealth management business, various support operations, corporate capital and other product lines that are not currently underwritten by the Company. 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 the same basis used for segment reporting under U.S. generally accepted accounting principles (GAAP). We also analyze operations using adjusted operating income on a post-tax basis. Adjusted operating income on a post-tax basis is not a measure used in financial statements prepared in accordance with GAAP, but is a common life insurance industry measure of performance. We have included a reconciliation to the comparable GAAP measure herein. See Note 8 to our consolidated financial statements for further information regarding how we define our segments and pre-tax adjusted operating income.

We also include within our analysis “premiums collected,” another measure that is not used in financial statements prepared in accordance with GAAP, but is a common life insurance industry measure of agent productivity. See Note 8 to our consolidated financial statements for further information regarding this measure and its relationship to GAAP revenues.

We periodically revise key assumptions used in the calculation of the amortization of deferred acquisition costs, value of insurance in force acquired, deferred sales inducements, unearned revenue reserve for participating life insurance and interest sensitive products, as applicable, through an “unlocking” process. These assumptions typically consist of withdrawal and lapse rates, rider utilization, earned spreads and mortality with revisions based on historical results and our best estimate of future experience. The impact of unlocking is recorded in the current period as an increase or decrease to amortization of the respective balances. While the unlocking process can take place at any time, as needs dictate, the process typically takes place during the third quarter. See the discussion that follows for further details of the unlocking impact on our results in 2020 and 2019.Merger Agreement

On September 4, 2020,May 2, 2021, the Company announced receiptentered into an amendment (the Merger Agreement Amendment) to the Agreement and Plan of a non-binding proposal fromMerger, dated as of January 11, 2021 (the Original Agreement and, the Original Agreement as amended by the Merger Agreement Amendment, the Merger Agreement), by and among the Company, Farm Bureau Property & Casualty Insurance Company, an Iowa domiciled stock property and casualty insurance company (FBPCIC) and 5400 Merger Sub, Inc., an Iowa corporation (Merger Sub). Pursuant to the Merger Agreement, FBPCIC will acquire all of the outstanding shares of Class A common stockshares, without par value, and Class B common stockshares, without par value (collectively, the Common Shares), of the Company that are not currently owned or controlled by FBPCIC or the Iowa Farm Bureau Federation, (IFBF) at a purchase price of $47.00 per share in cash. Thean Iowa Farm Bureau Federation ownsnon-profit corporation (IFBF). IFBF and FBPCIC currently own approximately 60%61% of the Company's Class A common stock and approximately 67%outstanding Common Shares. Pursuant to the transactions contemplated by the Merger Agreement, each outstanding Common Share of the Company's Class B common stock.Company (other than shares held by the Company in treasury or by any wholly-owned Company subsidiary, or held by Merger Sub or FBPCIC, or held by holders who have properly exercised dissenters’ rights under applicable Iowa law) will be converted into the right to receive $61.00 per

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Common Share in cash, without interest and less any required withholding taxes. The Company’s boardMerger Agreement Amendment provided for an increase in the consideration to be received in exchange for the Common Shares in the amount of directors has appointed a special committee comprised of independent directors to consider$5.00 per share, from $56.00 per share under the proposal.This committee has retained its own legal counsel and financial advisor to assist in its review, evaluation and response to the proposal. There can be no assurance that any agreement with respect to the proposed transaction will be executed or that this or any other transaction will be approved or consummated.Original Agreement.

Consummation of the Merger is subject to certain specified closing conditions, including a non-waivable condition that the Merger Agreement be adopted by the affirmative vote of (i) holders of at least a majority of all outstanding Class A common shares and Series B preferred shares, voting together as a single class, (ii) holders of at least a majority of all outstanding Class B common shares and (iii) holders of at least a majority of all outstanding Common Shares held by all of the holders of outstanding Common Shares (excluding IFBF and its affiliates, FBPCIC and its affiliates, and the directors and officers of IFBF, FBPCIC and each of their respective affiliates), in each case, entitled to vote on such matter at a meeting of shareholders duly called and held for such purpose. The Company’s adjourned special meeting of shareholders to approve the proposal to adopt the Merger Agreement is expected to reconvene on May 21, 2021.

In addition, FBPCIC’s obligation to consummate the Merger is subject to the condition that no more than 5% of the Common Shares outstanding as of the effective time of the Merger (other than the Common Shares held by FBPCIC, IFBF, certain of their affiliates, their respective subsidiaries, the directors and officers of the foregoing persons and any holders of Common Shares which have failed to perfect, have effectively withdrawn or which otherwise have lost their rights to appraisal under Iowa law) shall have properly demanded and not withdrawn appraisal rights under Iowa law in connection with the Merger, as further described in the Merger Agreement. The obtaining of financing is not a condition to the obligations of FBPCIC or Merger Sub to effect the Merger.

Also on May 2, 2021, FBPCIC, IFBF and Merger Sub entered into an amendment (the Rollover Agreement Amendment) to the Rollover Agreement, dated as of January 11, 2021 (as amended by the Rollover Agreement Amendment, the Rollover Agreement) by and among the same parties. Pursuant to the Rollover Agreement, FBPCIC and IFBF will contribute to Merger Sub all of their Common Shares in exchange for the number of shares of common stock of Merger Sub set forth therein, and to fund the Merger consideration, FBPCIC will contribute approximately $528 million in cash to Merger Sub in exchange for shares of common stock of Merger Sub and IFBF will contribute approximately $47 million in cash to Merger Sub in exchange for shares of preferred stock of Merger Sub.

With respect to Merger Sub, under the terms of the Merger Agreement, at the effective time of the Merger, the Common Shares held by Merger Sub will automatically be cancelled and will cease to exist, each common share of Merger Sub will be converted into one common share of the surviving corporation and each preferred share of Merger Sub will be converted into one share of newly-designated Series C Cumulative Non-Voting Preferred Stock of the surviving corporation. At the effective time of the Merger, the Common Shares that are not currently controlled by FBPCIC or IFBF (other than shares held by the Company in treasury or by any wholly-owned Company subsidiary, or held by Merger Sub or FBPCIC, or held by holders who have properly exercised dissenters’ rights under applicable Iowa law) will be converted into the right to receive the Merger consideration. Each share of Series B Cumulative Voting Preferred Stock of the Company will remain outstanding in accordance with its terms following the effective time of the Merger.


Impact of COVID-19 and Recent Business Environment
The COVID-19 pandemic has hadOur business generally benefits from moderate to strong economic expansion. Conversely, a significantlackluster economy characterized by higher unemployment, lower family income, lower consumer spending, muted corporate earnings growth and lower business investment could adversely impact the demand for our products in the future. We also may experience a higher incidence of claims, lapses or surrenders of policies during such times. We cannot predict whether or when such actions may occur, or what impact, if any, such actions could have on our business, results of operations, cash flows or financial condition.
During the first quarter of 2021, the U.S. economy during 2020. Beginning latecontinued its recovery (S&P 500 was up +80% since March 23, 2020), driven by massive amounts of monetary and fiscal stimulus, optimism on vaccines and the reopening of the economy. This recovery follows the significant impact to the U.S. economy from COVID-19 beginning in the first quarter of 2020, resulting in slowed economic growth, elevated unemployment and business interruption, particularly in the United States experienced significant economic disruption as businesses closedhospitality and consumer accesstravel sectors. Interest rates, which particularly impact our business declined significantly and continue to goods and services became limited due to regulated or voluntary quarantine measures. As a result,fluctuate. The following are key measures which partially illustrate the financial markets reacted negatively, impacting corporate liquidity and market interest rates. During the second and third quartersstate of 2020, the U.S. economy improved with the aid of significant economic stimulus measures, resulting in the stabilization of financial markets. However, unemployment remains high and market interest rates remain low as the impact of COVID-19 continues, resulting in economic uncertainty for the remainder of 2020.
The impact of COVID-19 on the United States’ economy has been significant.economy:
U.S. gross domestic product is estimated to have increased at an estimated annual rate of 33.1% during the third quarter of 2020, compared to decreases of 31.4% during the second quarter of 2020 and 5.0% during6.4% in the first quarter of 2021, compared to a 3.5% decrease during 2020. During 2019, U.S. gross domestic product increased 2.2%.

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U.S. unemployment increaseddecreased to 7.9%6.0% at September 30, 2020,March 31, 2021, compared to 3.5%6.7% at December 31, 2019.
The energy sector has come under significant pressure as the price of crude oil remains low at $40.22 per barrel at September 30, 2020, compared to $61.06 per barrel at December 31, 2019.2020.
The yield on the 10-year U.S. Treasury Note decreasedincreased to 0.69%1.74% at September 30, 2020March 31, 2021, from 1.92%0.93% at December 31, 2019.
Corporate credit spreads increased 39 basis points through September 30, 2020 to 135 basis points, compared to 96 basis points at December 31, 2019.2020.

The impact of COVID-19 pandemic, and related economic uncertainty, has had the following impactsconditions on our company.Company includes:

FBL Operations

As the COVID-19 outbreak began in the United States, we formed an incident management work group in accordance with our business continuity plan. This work group, acting in conjunction with the executive management team, monitored business developments, identified issues, recommended solutions and developed communications with employees, agents and client/members.

To provide for the health and safety of our employees, during the first quarter of 2020 we transitioned to a mostly work-from-home environment. This transformation was carried out with minimal interruption to supporting our agents, advisors and client/members. We remain vigilant in practicing social distancing and have severely restricted company travel. While our employees continue to predominately work from home, during June 2020 we offered additional flexibility for employees to work at our business locations, subject to social distancing requirements and a capped in-office capacity of 50%. We anticipate limited home office capacity until there is resolution of the COVID-19 health risk. Our agents continue to serve our client/members, utilizing communication technology to service existing business and solicit new business, while maintaining social distancing in situations where the customer and agent are comfortable meeting face-to-face.

Our ability to onboard new agents and wealth management advisors has been temporarily slowed due to closures of governmental offices that issue required licenses. Furthermore, restrictions during 2020 have limited in-person training and the ability to have face-to-face meetings with clients in certain geographic areas.

We launched an accelerated underwriting process duringhave provided flexibility for our workforce by allowing up to 50% of our employees to return to work in our facilities. However, our workforce continues to work predominantly from their homes. For those that choose to work in our facilities, proper social distancing and other safeguards have been put in place to provide for the third quarter 2020, which allows for an exam-freesafety of our workforce and fluid-free underwriting process for eligible client/members. Accelerated underwriting serves several purposes:

It enhances the client/member and agent experience for purchase of life insurance.
It allows eligible client/members a less invasive risk selection process.
It streamlines the application process to be primarily electronic.
It incorporates new tools and techniques inminimize the risk selection process.


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The recent launch led to some processing delays with a third-party provider during the last week of September and into early October, which the vendor attributed to be partially due to COVID-19. As a result, there was a delay in the completion of certain life product sales. We have taken action to address the processing back-log and are working with the vendor to remediate the accelerated underwriting process. We do not currently expect processing delays will have a material effect on our results of operations going forward, but we continue to monitor the impacts of any sales delays beyond our anticipated timeframes.business interruption.

Financial results

There were significant economic headwinds brought on by COVID-19 beginningWhile mortality experience was in line with expectations for the first quarter of 2020 which caused a significant downturn in our earnings. As the markets and economy stabilized during the second and third quarters of 2020, our results have improved although remain down from 2019. The economic impact of COVID-19 on our financial results follows:

Net realized capital gains/losses and the change in allowance for credit losses totaled $19.5 million for the nine months ended September 30, 2020, including $25.7 million of losses incurred during the first quarter 2020.
The change in the value of equity investments included in net investment income declined $7.1 for the nine months ended September 30, 2020. During the third quarter of 2020,2021, we experienced $1.8 million of recovery in the value of equity securities as markets improved.
Equity earnings from limited liability partnerships and limited liability companies resulted in a pre-tax loss of $0.3 million for the nine months ended September 30, 2020, comparedcontinue to pre-tax income of $3.1 million for the nine months ended September 30, 2019. Pre-tax equity earnings were $0.4 million during the third quarter of 2020, compared to $1.0 million for the third quarter of 2019.
During the third quarter of 2020, we incurred a pre-tax unlocking charge of $6.7 million, driven largely by a $13.1 million pre-tax chargesee elevated death claims associated with a change in our outlook for lower investment yields. Additional details regarding the impact of unlocking are included in the discussion of our segments that follows.
As summarized in the “Results of Operations” section that follows, we experienced a decline in annuity premiums collected during the three- and nine-month periods ended September 30, 2020, compared to the prior year periods, as sales were negatively impacted by crediting rate and cap reductions in response to declining market interest rates.

The impact of COVID-19 on our mortality experience has been modest, with 33 reported claims during the third quarter of 2020 totaling $0.8 million inCOVID-19. We incurred death benefits, incurred net of reinsurance and reserves released, and 70with COVID-19 reported claimsas a cause of death totaling $4.1 million during the nine months ended September 30, 2020 totaling $3.0 million in death benefits incurred netfirst quarter of reserves released.

As a result2021. We do not have an estimate of how many of these items, our earningsdeath claims would have decreased during the third quarter of 2020 and the nine months ended September 30, 2020 compared to the prior year periods, as discussedbeen reported in the “Resultsquarter regardless of Operations” discussion that follows. The U.S. federal government has taken actions to support the economy, including those unemployed during the crisis, and is presently considering further actions. To the extent the economic downturn caused by COVID-19 continues for an extended period, or worsens, it is uncertain how that will impact our operations, including sales and the value of our assets and liabilities although we expect the impact would be negative.COVID-19.

Financial position

LowerHigher U.S. Treasury interest rates resulted in an increasedecrease in the fair value of our fixed maturity securities during the nine-monththree-month period ended September 30, 2020.March 31, 2021. The increasedecrease in fair value of our fixed maturity securities at September 30, 2020, compared with December 31, 2019, resulted in an increasedecrease in our book value per common share to $66.21$60.95 at September 30, 2020March 31, 2021 from $60.12$69.24 at December 31, 2019.2020.

Our capital position remains strong, with Farm Bureau Life’s company action level risk-based capital ratio estimated to be 525%531% at September 30, 2020.March 31, 2021.

Liquidity

Our liquidity position remains strong with cash being generated by operations and financing activities. In addition, a significant portion of our liquid fixed maturity securities are in an unrealized gain position. See the “Investments” and “Liquidity and Capital Resources” discussions that follow.



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Risk Factors

See “Part II, Item 1A, Risk Factors,” for additional discussion.


Results of Operations for the Periods Ended September 30,March 31, 2021 and 2020 and 2019
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
20202019Change20202019Change20212020Change
(Dollars in thousands, except per share data)(Dollars in thousands, except per share data)
Net income attributable to FBL Financial Group, Inc.$20,974 $25,129 (17)%$44,670 $91,470 (51)%
Net income (loss) attributable to FBL Financial Group, Inc.Net income (loss) attributable to FBL Financial Group, Inc.$27,680 $(2,515)(1,201)%
Net income adjustments:Net income adjustments:Net income adjustments:
Proposed acquisition transaction expensesProposed acquisition transaction expenses2,577 — — %
Net realized gains/losses on investments (1)Net realized gains/losses on investments (1)(3,300)(440)650 %15,103 (7,960)(290)%Net realized gains/losses on investments (1)(269)20,112 (101)%
Change in fair value of derivatives (1)Change in fair value of derivatives (1)2,079 526 295 %4,867 (657)(841)%Change in fair value of derivatives (1)(6,537)2,039 (421)%
Adjusted operating income (2)Adjusted operating income (2)$19,753 $25,215 (22)%$64,640 $82,853 (22)%Adjusted operating income (2)$23,451 $19,636 19 %
Pre-tax adjusted operating income:Pre-tax adjusted operating income:Pre-tax adjusted operating income:
Annuity segmentAnnuity segment$18,916 $8,121 133 %$45,852 $38,420 19 %Annuity segment$14,016 $12,019 17 %
Life Insurance segmentLife Insurance segment2,641 14,032 (81)%25,168 42,363 (41)%Life Insurance segment10,886 10,267 %
Corporate and Other segmentCorporate and Other segment829 4,939 (83)%4,754 13,853 (66)%Corporate and Other segment1,431 219 553 %
Total pre-tax adjusted operating incomeTotal pre-tax adjusted operating income22,386 27,092 (17)%75,774 94,636 (20)%Total pre-tax adjusted operating income26,333 22,505 17 %
Income taxes on adjusted operating incomeIncome taxes on adjusted operating income(2,633)(1,877)40 %(11,134)(11,783)(6)%Income taxes on adjusted operating income(2,882)(2,869)— %
Adjusted operating income (2)Adjusted operating income (2)$19,753 $25,215 (22)%$64,640 $82,853 (22)%Adjusted operating income (2)$23,451 $19,636 19 %
Earnings per common share - assuming dilutionEarnings per common share - assuming dilution$0.85 $1.01 (16)%$1.81 $3.69 (51)%Earnings per common share - assuming dilution$1.13 $(0.10)(1,230)%
Adjusted operating income per common share - assuming dilution (2)Adjusted operating income per common share - assuming dilution (2)0.80 1.02 (22)%2.62 3.34 (22)%Adjusted operating income per common share - assuming dilution (2)0.96 0.79 22 %
Effective tax rate on adjusted operating incomeEffective tax rate on adjusted operating income12 %%15 %12 %Effective tax rate on adjusted operating income11 %13 %
Average invested assets, at amortized cost net of allowance for credit losses (3)Average invested assets, at amortized cost net of allowance for credit losses (3)$8,546,717 $8,323,273 %Average invested assets, at amortized cost net of allowance for credit losses (3)$8,708,466 $8,479,853 %
Annualized yield on average invested assets (4)Annualized yield on average invested assets (4)4.64 %4.97 %Annualized yield on average invested assets (4)4.75 %4.72 %
Other dataOther dataOther data
Death benefits, net of reinsurance and reserves released, net of taxDeath benefits, net of reinsurance and reserves released, net of tax$26,854 $23,822 13 %$74,852 $70,407 %Death benefits, net of reinsurance and reserves released, net of tax$27,577 $23,550 17 %
Impact on adjusted operating income of unlocking deferred acquisition costs, deferred sales inducements, unearned revenue reserve and certain interest sensitive product reserves, net of tax(5,306)(2,109)152(5,306)(2,109)152
Estimated impact from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve, net of tax (5)Estimated impact from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve, net of tax (5)1,185 (158)(850)%(40)2,054 (102)%Estimated impact from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve, net of tax (5)711 (2,686)(126)%
Other investment-related income included in net investment income (1)(6)Other investment-related income included in net investment income (1)(6)860 567 52 %1,729 2,837 (39)%Other investment-related income included in net investment income (1)(6)1,572 454 246 %

(1)Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves and deferred acquisition costs, as well as changes in interest sensitive product reserves and income taxes attributable to these items.

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(2)Adjusted operating income is a non-GAAP measure of earnings, see the Overview section above for additional information.
(3)Average invested assets, including investments held as securities and indebtedness of related parties and cash equivalents, is the average of investment balances at the beginning of the reporting period and as of the end of each quarter throughout the reporting period. Average invested assets are used in the calculation of the annualized investment yield.
(4)Annualized yield is the actual annualized investment earnings during the reporting period divided by average invested assets. Annualized yield is used as a measure of investment performance during the reporting periods.
(5)Amounts represent the estimated effect of market performance of policyholder funds invested in the separate accounts on the value of deferred acquisition costs, deferred sales inducements and unearned revenue reserve, net of tax.
(6)Includes prepayment fee income and adjustments to the amortization of premium or discounts from changes in our payment speed assumptions on mortgage and other asset-backed securities.

Net income and pre-tax adjusted operating income decreasedincreased in the thirdfirst quarter of 2020,2021, compared to the prior year period, primarily due to increases from changes in realized gains and losses on investments and fair value of derivatives. In addition, net income and pre-tax adjusted operating income increased in the first quarter of 2021, compared to the prior year period, due to an increase in death benefitsequity income and the impact of unlocking actuarial assumptions, partially offset by the impact of market performance on variable product deferred acquisition cost amortization. Net incomeamortization and pre-tax adjusted operating income decreased in the nine months ended September 30, 2020, compared to the prior year period, due to decreases in net investment income from lower yields on invested assets and equity income, the impact of market performance on reserves associated with guaranteed living withdrawal benefits,benefits. These increases in death benefits and the impact of unlocking actuarial assumptions. These decreases were partially offset by a decrease in amortization of deferred acquisition costs primarily due to changes in actual and expected profits on the underlying business. Net income also decreased in the nine months ended September 30, 2020, compared to the prior year period, due to net realized capital losses from the change in fair value of equity securities, an increase in allowances for credit losses on investments and a change in fair value on our derivatives.death benefits. See the discussion that follows for details regarding pre-tax adjusted operating income by segment. See the “Impact of COVID-19 and Recent Business Environment” section above for additional information on market performance.



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Footnotes applicable to the segment discussion that follows are summarized below:
(1)Premiums collected is a non-GAAP measure of sales production, see Note 8 to our consolidated financial statements for additional information.
(2)Average invested assets, including applicable investments held as securities and indebtedness of related parties and cash equivalents, is the average of investment balances at the beginning of the reporting period and as of the end of each quarter throughout the reporting period. Average invested assets are used in the calculation of the annualized investment yield.
(3)Includes prepayment fee income and adjustments to the amortization of premium or discounts from changes in our payment speed assumptions on mortgage and other asset-backed securities.
(4)Average aggregate individual annuity account value is a measure used to monitor business growth in our individual fixed and indexed annuity product lines and is calculated using a simple average of policyholder account values as of the beginning and end of the reporting period.
(5)Annualized yield is the actual annualized investment earnings during the reporting period divided by average invested assets. Annualized yield is used as a measure of investment performance during the reporting periods.
(5)(6)Annualized average crediting rates consist of annualized interest credited and index credits applied to policyholders during the reporting period, along with amortization of call option costs and proceeds from sales or maturing call options associated with the call options that back our indexed products as a percentage of the simple average of policyholder account values as of the beginning of the reporting period and end of the reporting period, adjusted for interest credited during the period. Annualized average crediting rates along with annualized average investment yields provides a view of spread margin earned on the underlying products.
(6)Average aggregate individual annuity account value is a measure used to monitor business growth in our individual fixed and indexed annuity product lines and is calculated using a simple average of policyholder account values as of the beginning and end of the reporting period.
(7)Individual annuity withdrawal rate represents annualized withdrawal benefits incurred during the reporting period, excluding internal exchanges, as a percent of the simple average of related policy reserves at the beginning and end of the reporting period. The individual annuity withdrawal rate is a measure of customer retention.
(8)Average aggregate interest sensitive life account value is a measure used to monitor business growth in our universal life product lines and is calculated using a simple average of policyholder account values as of the beginning and end of the reporting period.
(9)Life insurance lapse and surrender rate represents the annualized face amount of policyholder lapses and surrenders, incurred during the reporting period, as a percent of the simple average of related insurance in force at the beginning and end of the reporting period. The life insurance lapse and surrender rate is a measure of customer retention.
(10)Average aggregate interest sensitive account value is a measure used to monitor business volume of our variable universal life and variable annuity product lines and is calculated using a simple average of policyholder account values allocated to the declared interest option as of the beginning and end of the reporting period.
(11)Amounts represent the estimated effect of market performance of policyholder funds invested in the separate accounts on actual and expected profits and the related impact on the value of deferred acquisition costs, deferred sales inducements and unearned revenue reserve.

Annuity Segment
Three months ended March 31,
20212020Change
(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges$2,114 $1,886 12 %
Net investment income50,867 52,768 (4)%
Total adjusted operating revenues52,981 54,654 (3)%
Adjusted operating benefits and expenses:
Interest sensitive product benefits30,667 33,883 (9)%
Underwriting, acquisition and insurance expenses:
Commissions net of deferrals201 421 (52)%
Amortization of deferred acquisition costs2,415 2,646 (9)%
Amortization of value of insurance in force147 175 (16)%
Other underwriting expenses5,535 5,510 — %
Total underwriting, acquisition and insurance expenses8,298 8,752 (5)%
Total adjusted operating benefits and expenses38,965 42,635 (9)%
Pre-tax adjusted operating income$14,016 $12,019 17 %

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Annuity Segment
Three months ended September 30,Nine months ended September 30,
20202019Change20202019Change
(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges$1,776 $1,608 10 %$5,741 $4,947 16 %
Net investment income51,576 49,633 %155,802 153,239 %
Total adjusted operating revenues53,352 51,241 %161,543 158,186 %
Adjusted operating benefits and expenses:
Interest sensitive product benefits25,652 28,585 (10)%90,053 87,105 %
Underwriting, acquisition and insurance expenses:
Commissions net of deferrals320 405 (21)%1,056 1,401 (25)%
Amortization of deferred acquisition costs3,384 8,015 (58)%8,427 13,611 (38)%
Amortization of value of insurance in force175 164 %525 490 %
Other underwriting expenses4,905 5,951 (18)%15,630 17,159 (9)%
Total underwriting, acquisition and insurance expenses8,784 14,535 (40)%25,638 32,661 (22)%
Total adjusted operating benefits and expenses34,436 43,120 (20)%115,691 119,766 (3)%
Pre-tax adjusted operating income$18,916 $8,121 133 %$45,852 $38,420 19 %
Annuity Segment - continuedAnnuity Segment - continued
Three months ended March 31,
20212020Change
(Dollars in thousands)
Other dataOther dataOther data
Annuity premiums collected, direct (1)Annuity premiums collected, direct (1)$45,263 $56,076 (19)%$139,167 $185,234 (25)%Annuity premiums collected, direct (1)$55,666 $58,099 (4)%
Policy liabilities and accruals, end of periodPolicy liabilities and accruals, end of period4,561,434 4,392,884 %Policy liabilities and accruals, end of period4,657,666 4,528,280 %
Average invested assets, at amortized cost net of allowance for credit losses (2)Average invested assets, at amortized cost net of allowance for credit losses (2)4,613,118 4,489,981 %Average invested assets, at amortized cost net of allowance for credit losses (2)4,659,253 4,564,600 %
Other investment-related income included in net investment income (3)Other investment-related income included in net investment income (3)1,541 699 120 %2,840 2,245 27 %Other investment-related income included in net investment income (3)1,984 705 181 %
Average aggregate individual annuity account value (6)(4)Average aggregate individual annuity account value (6)(4)3,180,883 3,173,145 — %Average aggregate individual annuity account value (6)(4)3,178,941 3,179,639 — %
Earned spread on individual annuity products:Earned spread on individual annuity products:Earned spread on individual annuity products:
Annualized yield on average invested assets (4)(5)Annualized yield on average invested assets (4)(5)4.52 %4.72 %Annualized yield on average invested assets (4)(5)4.49 %4.59 %
Annualized average crediting rate (5)(6)Annualized average crediting rate (5)(6)2.49 %2.57 %Annualized average crediting rate (5)(6)2.48 %2.47 %
SpreadSpread2.03 %2.15 %Spread2.01 %2.12 %
Individual annuity withdrawal rate (7)Individual annuity withdrawal rate (7)4.4 %5.7 %Individual annuity withdrawal rate (7)3.8 %5.2 %

Pre-tax adjusted operating income for the Annuity segment increased in the thirdfirst quarter of 2020 and the nine months ended September 30, 2020,2021, compared to the prior year periods,period, primarily due to the impact of unlockingmarket performance on reserves associated with guaranteed living withdrawal benefits and a decreasean increase in other underwriting expenses,investment-related income, partially offset by reduced spread income earned from lower yields on invested assets. The change in the nine-month period was also negatively impacted by market performance on reserves associated with the guaranteed living withdrawal benefits. See the “Impact of COVID-19 and Recent Business Environment” section above for additional information on market performance.

The average aggregate account value for individual annuity contracts in force increasedat March 31, 2021 remained level with the prior year period as continued sales and the crediting of interest were largely offset by product benefits and withdrawals. Premiums collected were lower in the nine months ended September 30, 2020,first quarter of 2021, compared to the prior year period, due to continueddecreased sales and the crediting of interest. Premiums collected were lower in

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the third quarter of 2020 and the nine months ended September 30, 2020, compared to the prior year periods, due to decreasedindexed annuity products, partially offset by increased sales of fixed rate deferred annuity and indexed annuity products, as sales were negatively impacted by crediting rate and cap reductions in response to declining portfolio yields.products. Individual fixed rate deferred annuity collected premiums were $22.8$29.1 million in the thirdfirst quarter of 2020 and $64.12021, compared to $22.9 million in the nine months ended September 30, 2020, compared to $25.0 million in the thirdfirst quarter of 2019 and $94.7 million in the nine months ended September 30, 2019.2020. Indexed annuity collected premiums were $20.6$24.9 million in the thirdfirst quarter of 2020 and $69.72021, compared to $32.6 million in the nine months ended September 30, 2020, compared to $30.3 million in the thirdfirst quarter of 2019 and $87.0 million in the nine months ended September 30, 2019.2020. To increase spread income given lower fixed and indexed annuity sales, we have increased the issuance of funding agreements with the Federal Home Loan Bank of Des Moines (FHLB) during 2020.the three months ended March 31, 2021. Outstanding funding agreements with FHLB total $626.5totaled $726.0 million at September 30, 2020,March 31, 2021, compared with $448.8to $585.2 million at September 30, 2019.

Amortization of deferred acquisition costs decreased during the third quarter ofDecember 31, 2020 and nine months ended September 30, 2020, compared to the prior year periods, due to unlocking actuarial assumptions and changes in actual and expected income earned on the underlying business. Unlocking generally reflects changes in our projected earned spreads, policy lapses, withdrawals and mortality assumptions. The impact of unlocking on pre-tax operating income for the quarter and nine months ended September 30, 2020 and 2019 was as follows:
Impact of Unlocking on Pre-tax Adjusted Operating Income
Three months ended September 30,Nine months ended September 30,
2020201920202019
(Dollars in thousands)
Amortization of deferred sales inducements reported in interest sensitive product benefits$57 $(195)$57 $(195)
Amortization of deferred acquisition costs(1,189)(4,668)(1,189)(4,668)
Changes in reserves reported in interest sensitive product benefits5,358 — 5,358 — 
Increase (decrease) to pre-tax adjusted operating income$4,226 $(4,863)$4,226 $(4,863)

The unlocking impact on the changes in reserves in 2020 is due primarily to updating the expected policyholder utilization of the guaranteed living withdrawal benefit rider on index annuities.

Other underwriting expenses decreased in the third quarter of 2020 and in the nine months ended September 30, 2020, compared to the prior year periods, due to various expense management actions including deferral of projects, reduction in the use of consultants and limiting replacement of employees that leave the company. In addition, travel expenses are lower due to COVID-related travel restrictions.$597.5 million at March 31, 2020.

The annualized average yield on invested assets for individual annuities decreased in the ninethree months ended September 30, 2020,March 31, 2021, compared to the prior year period, primarily due to lower yields on new investment acquisitions from premium receipts and reinvestment of the proceeds from maturing investments, compared with the average existing portfolio yield. The annualized average yield decrease was partially offset by higher other investment-related income. See the “Financial Condition” section for additional information regarding the yields obtained on investment acquisitions. Annualized average crediting rates on our individual annuity products decreasedincreased slightly in the ninethree months ended September 30, 2020,March 31, 2021, compared to the prior year period, primarily due to crediting and cap rate actions takenincreased amortization of call option costs supporting our indexed annuity products, partially offset by a decrease in 2020 in responseinterest credited due to a declining portfolio yield and a changechanges in our mix of business in force, partially offset by increased amortization of call option costs.force.


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Life Insurance SegmentLife Insurance SegmentLife Insurance Segment
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
20202019Change20202019Change20212020Change
(Dollars in thousands)(Dollars in thousands)
Adjusted operating revenues:Adjusted operating revenues:Adjusted operating revenues:
Interest sensitive product charges and other incomeInterest sensitive product charges and other income$23,180 $19,032 22 %$63,404 $57,404 10 %Interest sensitive product charges and other income$20,195 $20,332 (1)%
Traditional life insurance premiumsTraditional life insurance premiums47,792 46,982 %147,429 147,361 — %Traditional life insurance premiums52,010 49,308 %
Net investment incomeNet investment income40,198 38,581 %117,044 118,026 (1)%Net investment income40,199 37,575 %
Total adjusted operating revenuesTotal adjusted operating revenues111,170 104,595 %327,877 322,791 %Total adjusted operating revenues112,404 107,215 %
Adjusted operating benefits and expenses:Adjusted operating benefits and expenses:Adjusted operating benefits and expenses:
Interest sensitive product benefits:Interest sensitive product benefits:Interest sensitive product benefits:
Interest and index creditsInterest and index credits11,110 8,326 33 %28,453 25,395 12 %Interest and index credits11,095 7,843 41 %
Death benefits and otherDeath benefits and other22,958 17,198 33 %56,175 45,556 23 %Death benefits and other17,156 16,371 %
Total interest sensitive product benefitsTotal interest sensitive product benefits34,068 25,524 33 %84,628 70,951 19 %Total interest sensitive product benefits28,251 24,214 17 %
Traditional life insurance benefits:Traditional life insurance benefits:Traditional life insurance benefits:
Death benefitsDeath benefits25,579 25,233 %75,261 70,226 %Death benefits29,798 26,098 14 %
Surrender and other benefitsSurrender and other benefits7,835 9,435 (17)%25,360 29,250 (13)%Surrender and other benefits11,120 10,142 10 %
Increase in traditional life future policy benefitsIncrease in traditional life future policy benefits12,113 8,206 48 %36,227 32,031 13 %Increase in traditional life future policy benefits8,932 9,970 (10)%
Total traditional life insurance benefitsTotal traditional life insurance benefits45,527 42,874 %136,848 131,507 %Total traditional life insurance benefits49,850 46,210 %
Distributions to participating policyholdersDistributions to participating policyholders1,733 2,441 (29)%5,879 7,539 (22)%Distributions to participating policyholders1,605 2,529 (37)%
Underwriting, acquisition and insurance expenses:Underwriting, acquisition and insurance expenses:Underwriting, acquisition and insurance expenses:
Commission expense, net of deferralsCommission expense, net of deferrals4,547 4,487 %14,041 14,305 (2)%Commission expense, net of deferrals5,184 4,832 %
Amortization of deferred acquisition costsAmortization of deferred acquisition costs8,404 (592)(1,520)%13,888 8,551 62 %Amortization of deferred acquisition costs4,066 2,419 68 %
Amortization of value of insurance in forceAmortization of value of insurance in force370 372 (1)%1,110 1,116 (1)%Amortization of value of insurance in force369 370 — %
Other underwriting expensesOther underwriting expenses14,179 16,278 (13)%46,006 48,658 (5)%Other underwriting expenses16,717 16,749 — %
Total underwriting, acquisition and insurance expensesTotal underwriting, acquisition and insurance expenses27,500 20,545 34 %75,045 72,630 %Total underwriting, acquisition and insurance expenses26,336 24,370 %
Total adjusted operating benefits and expensesTotal adjusted operating benefits and expenses108,828 91,384 19 %302,400 282,627 %Total adjusted operating benefits and expenses106,042 97,323 %
2,342 13,211 (82)%25,477 40,164 (37)%6,362 9,892 (36)%
Equity income (loss), before tax299 821 (64)%(309)2,199 (114)%
Equity income, before taxEquity income, before tax4,524 375 1,106 %
Pre-tax adjusted operating incomePre-tax adjusted operating income$2,641 $14,032 (81)%$25,168 $42,363 (41)%Pre-tax adjusted operating income$10,886 $10,267 %

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Life Insurance Segment - continued
Three months ended September 30,Nine months ended September 30,
20202019Change20202019Change
(Dollars in thousands)
Other data
Life premiums collected, net of reinsurance (1)$77,666 $75,043 %$238,774 $232,442 %
Policy liabilities and accruals, end of period3,184,095 3,057,183 %
Life insurance in force, end of period62,695,650 61,025,460 %
Average invested assets, at amortized cost net of allowance for credit losses (2)3,237,690 3,132,734 %
Other investment-related income included in net investment income (3)103 70 47 %275 1,353 (80)%
Average aggregate interest sensitive life account value (8)903,703 874,574 %
Interest sensitive life insurance spread:
Annualized yield on average invested assets (4)4.96 %5.25 %
Annualized average crediting rate (5)3.88 %3.77 %
Spread1.08 %1.48 %
Life insurance lapse and surrender rates (9)3.8 %4.6 %
Death benefits, net of reinsurance and reserves released$26,930$25,846%$78,337 $72,385 %

Other data
Life premiums collected, net of reinsurance (1)$85,505 $82,635 %
Policy liabilities and accruals, end of period3,253,413 3,106,864 %
Life insurance in force, end of period64,040,179 61,852,616 %
Average invested assets, at amortized cost net of allowance for credit losses (2)3,281,314 3,213,376 %
Other investment-related income included in net investment income (3)283 59 380 %
Average aggregate interest sensitive life account value (8)930,418 896,688 %
Interest sensitive life insurance spread:
Annualized yield on average invested assets (5)5.26 %4.99 %
Annualized average crediting rate (6)3.99 %3.87 %
Spread1.27 %1.12 %
Life insurance lapse and surrender rates (9)4.3 %4.5 %
Death benefits, net of reinsurance and reserves released$28,751 $25,668 12 %

Pre-tax adjusted operating income for the Life Insurance segment decreasedincreased in the thirdfirst quarter of 2020 and in the nine months ended September 30, 2020,2021, compared to the prior year periods,period, primarily due to the impact of unlocking actuarial assumptions,increases in equity income and growth in business in force, partially offset by increases in death benefits, net of reinsurance and reserves released, partially offset by decreases in other underwriting expenses. The nine-month period, compared to the prior year period, was also impacted by decreases in equity income and amortization of deferred acquisition costs, excluding the impact of unlocking, due to changes in actual and expected profits which included increased mortality expense and less equity income.costs.

Equity income can fluctuate from period to period, see ‘Equity Income’ section as follows for additional information.

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Amortization of deferred acquisition costs increased during the thirdfirst quarter of 2020 and the nine months ended September 30, 2020,2021, compared to the prior year periods,period, due to unlocking actuarial assumptions and changes in actual and expected profits on the underlying business, which included increased mortality expense and less equity income. Amortization of unearned revenue reserves, as well as reserves held on certain interest sensitive products, were also impacted by unlocking. Unlocking generally reflects changes in our projected earned spreads, policy lapses, premium persistency and mortality assumptions. Unlocking in 2020 included changes in our projected modal premium factors. The impact of unlocking on pre-tax operating income for the quarter and nine months ended September 30, 2020 and 2019 was as follows:business.

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Impact of Unlocking on Pre-tax Adjusted Operating Income
Three months ended September 30,Nine months ended September 30,
2020201920202019
(Dollars in thousands)
Amortization of unearned revenue reserve reported in interest sensitive product charges and other income$3,772 $(386)$3,772 $(386)
Amortization of deferred sales inducements reported in interest sensitive product benefits(1,207)45 (1,207)45 
Amortization of deferred sales inducements reported in traditional life insurance benefits138 69 138 69 
Amortization of deferred acquisition costs(5,556)3,728 (5,556)3,728 
Changes in reserves reported in interest sensitive product benefits(7,270)(1,062)(7,270)(1,062)
Increase (decrease) to pre-tax adjusted operating income$(10,123)$2,394 $(10,123)$2,394 
Death benefits, net of reinsurance and reserves released, increased in the thirdfirst quarter of 2020,2021, compared to the prior year period, due to an increase in average claim amounts, net of reinsurance and reserves released. In the nine-month period ending September 30, 2020, compared to the prior year period, death benefits, net of reinsurance and reserves released, increased due to increases in the number of claims and average claim amounts, net of reinsurance and reserves released.claims. Death benefits in the Life Insurance segment include COVID-19 related claims, net of reinsurance and reserves released, totaling $0.7$3.4 million for the thirdfirst quarter of 20202021 and $2.6$0.3 million for the nine months ended September 30, 2020.

Other underwriting expenses decreased in the thirdfirst quarter of 2020 and in the nine months ended September 30, 2020, compared to the prior year periods, due to various expense management actions including deferral of projects, reduction in the use of consultants and limiting replacement of employees that leave the company. In addition, travel expenses are lower due to COVID-related travel restrictions.2020.

The annualized average yield on invested assets for interest sensitive life insurance products decreasedincreased in the ninethree months ended September 30, 2020,March 31, 2021, compared to the prior year period, due to higher equity income, partially offset by lower yields on new investment acquisitions from premium receipts and reinvestment of the proceeds from maturing investments and decreases in other investment-related income.investments. See the “Financial Condition” section for additional information regarding the yields obtained on investment acquisitions. Annualized average crediting rates on our interest sensitive life insurance products increased in the ninethree months ended September 30, 2020,March 31, 2021, compared to the prior year period, primarily due to a change in the mix of business and increased amortization of call option costs.costs supporting our indexed universal life products.


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Corporate and Other Segment
Three months ended March 31,
20212020Change
(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges$10,418 $10,956 (5)%
Net investment income7,494 8,057 (7)%
Other income6,396 5,027 27 %
Total adjusted operating revenues24,308 24,040 %
Adjusted operating benefits and expenses:
Interest sensitive product benefits9,303 7,626 22 %
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals658 699 (6)%
Amortization of deferred acquisition costs526 5,055 (90)%
Other underwriting expenses1,619 1,777 (9)%
Total underwriting, acquisition and insurance expenses2,803 7,531 (63)%
Interest expense1,213 1,213 — %
Other expenses9,886 7,421 33 %
Total adjusted operating benefits and expenses23,205 23,791 (2)%
1,103 249 343 %
Net loss attributable to noncontrolling interest67 56 20 %
Equity income (loss), before tax261 (86)(403)%
Pre-tax adjusted operating income$1,431 $219 553 %

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Corporate and Other Segment
Three months ended September 30,Nine months ended September 30,
20202019Change20202019Change
(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges$10,246 $10,408 (2)%$31,484 $31,527 — %
Net investment income7,306 8,277 (12)%22,242 25,505 (13)%
Other income4,946 4,548 %14,834 12,883 15 %
Total adjusted operating revenues22,498 23,233 (3)%68,560 69,915 (2)%
Adjusted operating benefits and expenses:
Interest sensitive product benefits10,310 7,642 35 %26,141 26,865 (3)%
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals669 720 (7)%2,003 2,170 (8)%
Amortization of deferred acquisition costs111 1,854 (94)%4,533 1,792 153 %
Other underwriting expenses1,562 1,244 26 %5,141 3,810 35 %
Total underwriting, acquisition and insurance expenses2,342 3,818 (39)%11,677 7,772 50 %
Interest expense1,212 1,213 — %3,638 3,637 — %
Other expenses7,878 5,764 37 %22,524 18,649 21 %
Total adjusted operating benefits and expenses21,742 18,437 18 %63,980 56,923 12 %
756 4,796 (84)%4,580 12,992 (65)%
Net (income) loss attributable to noncontrolling interest21 (47)(145)%165 (7)(2,457)%
Equity income, before tax52 190 (73)%868 (99)%
Pre-tax adjusted operating income$829 $4,939 (83)%$4,754 $13,853 (66)%
Other dataOther dataOther data
Average invested assets, at amortized cost net of allowance for credit losses (2)Average invested assets, at amortized cost net of allowance for credit losses (2)$695,909 $700,558 (1)%Average invested assets, at amortized cost net of allowance for credit losses (2)$767,899 $701,876 %
Other investment-related income (loss) included in net investment income (3)$(39)$116 (134)%(13)604 (102)%
Other investment-related income included in net investment income (3)Other investment-related income included in net investment income (3)136 3,300 %
Average aggregate interest sensitive account value (10)Average aggregate interest sensitive account value (10)360,332 362,565 (1)%Average aggregate interest sensitive account value (10)365,836 358,936 %
Death benefits, net of reinsurance and reserves releasedDeath benefits, net of reinsurance and reserves released6,643 4,261 56 %15,838 16,783 (6)%Death benefits, net of reinsurance and reserves released5,903 4,343 36 %
Estimated impact on pre-tax adjusted operating income from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve (11)Estimated impact on pre-tax adjusted operating income from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve (11)1,500 (200)(850)%(50)2,600 (102)%Estimated impact on pre-tax adjusted operating income from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve (11)900 (3,400)(126)%

Pre-tax adjusted operating income decreasedincreased for the Corporate and Other segment in the thirdfirst quarter of 2020,2021, compared to the prior year period, primarily due to an increase in death benefits and other expenses, partially offset by a decrease in amortization of deferred acquisition costs resulting from the impact of market performance on our variable business. Pre-tax adjusted operating income decreased in the nine months ended September 30, 2020, compared to the prior year period, primarily due tobusiness, partially offset by increases in death benefits and other expenses and amortization of deferred acquisition costs resulting from the impact of market performance on our variable business and a decrease in corporate investment income from lower yielding securities.expenses.

Death benefits, net of reinsurance and reserves released, increased in the thirdfirst quarter of 2020,2021, compared to the prior year period, primarily due to an increase in the number of claims. Death benefits net of reinsurance and reserves released, decreased in the nine months ended September 30, 2020, compared to the prior year period, due primarily to a decrease in the average

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claim amounts, net of reinsurance and reserves released, partially offset by an increase in the number of claims. Death benefits in the Corporate and Other segment include

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COVID-19 related claims, net of reinsurance and reserves released, totaling $0.2$0.7 million for the thirdfirst quarter of 20202021 and $0.4 million forno noted impact in the nine months ended September 30,first quarter of 2020.

Amortization of deferred acquisition costs changed during the third quarter of 2020 and the nine months ended September 30, 2020, compared to the prior year periods, primarily due to the impact of market performance on our variable business and unlocking of actuarial assumptions. See the “Impact of COVID-19 and Recent Business Environment” section above for additional information on market performance. Unlocking generally reflects changes in projected earned spreads, separate account performance, premium persistency and withdrawal and mortality assumptions. The impact of unlocking on pre-tax operating income for the quarter and nine months ended September 30, 2020 and 2019 was as follows:
Impact of Unlocking on Pre-tax Adjusted Operating Income
Three months ended September 30,Nine months ended September 30,
2020201920202019
(Dollars in thousands)
Amortization of unearned revenue reserve reported in interest sensitive product charges$(62)$(94)$(62)$(94)
Amortization of deferred sales inducements reported in interest sensitive product benefits51 26 51 26 
Amortization of deferred acquisition costs(150)(135)(150)(135)
Changes in reserves reported in interest sensitive product benefits(659)(659)
Decrease to pre-tax adjusted operating income$(820)$(201)$(820)$(201)
— — 
Other income and other expenses include fees and expenses from sales of brokered products and operating results of our non-insurance subsidiaries, which include wealth management services, advisory, management and leasing activities. Other income and other expenses increased in the thirdfirst quarter of 2020 and nine months ended September 30, 2020,2021, compared to the prior year periods,period, primarily due to expanding our wealth management business. The expansion of our wealth management business has increased administrative costs along with the costs of implementing a new delivery platform to allow for additional product offerings and an enhanced customer experience. Revenues associated with our wealth management expansionbusiness increased modestly as we continue to develop this business, increasing $0.7$1.2 million in the thirdfirst quarter of 2020 and $1.9 million during the nine months ended September 30, 2020,2021, compared to the prior year periods.period. Expenses, including commissions, associated with our wealth management expansion have increased $1.2$1.5 million in the thirdfirst quarter of 2020 and $3.1 million during the nine months ended September 30, 2020,2021, compared to the prior year periods.period.

Equity Income (Loss)

Equity income (loss) includes our proportionate share of gains and losses attributable to our ownership interest in partnerships, joint ventures and certain companies over which we exhibit some control but have a minority ownership interest. We consistently use the most recent financial information available generally for periods not to exceed three months prior to the ending date of the period for which we are reporting, to account for equity income. Notably, one of our alternative investments reports earnings two quarters in arrears as it is a fund of funds, which increases the reporting timeline. Several of these entities are investment companies whose operating results are derived primarily from unrealized and realized gains and losses generated by their investment portfolios.

The level of gains and losses for these entities normally fluctuates from period to period depending on the prevailing economic environment, changes in the value of underlying investments held by the investment partnerships, the timing and success of initial public offerings or exit strategies, and the timing of the sale of investments held by the partnerships and joint ventures.

Equity income, (loss), net of related taxes, for the third quarter of 2020 was $0.3 million compared with $0.8$3.8 million for the thirdfirst quarter of 2019,2021 and ($0.2)$0.2 million for the nine months ended September 30, 2020 compared with $2.4 million for the nine months ended September 30, 2019.same period in 2020. See Note 8 to our consolidated financial statements for further information.

Income Taxes on Adjusted Operating Income

The effective tax rate on adjusted operating income was 11.8%10.9% for the thirdfirst quarter of 2020 and 14.7%2021, compared with 12.7% for the nine months ended September 30, 2020, compared with 6.9% for the thirdfirst quarter of 2019 and 12.5% for the nine months ended September 30, 2019.2020. The effective tax rates differ from the federal statutory rate of 21% primarily due to the impact of LIHTC

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investments and tax-exempt investment income. In addition, effective rates for 2019 benefited from non-recurring tax benefits totaling $2.5 million resulting from the execution of a tax planning strategy in the third quarter of 2019.
Components of income taxComponents of income taxComponents of income tax
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Income tax expense$(2,883)$(1,642)$(5,887)$(13,429)
Income tax benefit (expense) on equity income(74)(212)62 (644)
Income tax benefit (expense)Income tax benefit (expense)$(3,687)$3,081 
Income tax expense on equity incomeIncome tax expense on equity income(1,005)(61)
Income tax offset on net income adjustmentsIncome tax offset on net income adjustments324 (23)(5,309)2,290 Income tax offset on net income adjustments1,810 (5,889)
Income taxes on adjusted operating incomeIncome taxes on adjusted operating income$(2,633)$(1,877)$(11,134)$(11,783)Income taxes on adjusted operating income$(2,882)$(2,869)
Income taxes on adjusted operating income before benefits of LIHTC investmentsIncome taxes on adjusted operating income before benefits of LIHTC investments$(3,493)$(2,727)$(13,801)$(14,437)Income taxes on adjusted operating income before benefits of LIHTC investments$(3,640)$(3,752)
Amounts related to LIHTC investmentsAmounts related to LIHTC investments860 850 2,667 2,654 Amounts related to LIHTC investments758 883 
Income taxes on adjusted operating incomeIncome taxes on adjusted operating income$(2,633)$(1,877)$(11,134)$(11,783)Income taxes on adjusted operating income$(2,882)$(2,869)


Impact of Adjustments to Net Income Attributable to FBL
Three months ended September 30,Nine months ended September 30,
2020201920202019
(Dollars in thousands)
Realized gains (losses) on investments and change in fair value of equity securities and derivatives$780 $(198)$(26,863)$11,092 
Offsets: (1)
Change in amortization639 (343)597 (647)
Reserve change on interest sensitive products126 432 987 462 
Income tax(324)23 5,309 (2,290)
Net impact of adjustments to net income$1,221 $(86)$(19,970)$8,617 
Net impact per common share - basic and assuming dilution$0.05 $(0.01)$(0.81)$0.35 
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Impact of Adjustments to Net Income (Loss) Attributable to FBL
Three months ended March 31,
20212020
(Dollars in thousands)
Realized gains (losses) on investments and change in fair value of equity securities and derivatives$10,745 $(28,069)
Proposed acquisition transaction expenses(2,577)— 
Offsets: (1)
Change in amortization(890)(176)
Reserve change on interest sensitive products(1,239)205 
Income tax(1,810)5,889 
Net impact of adjustments to net income (loss)$4,229 $(22,151)
Net impact per common share - basic and assuming dilution$0.17 $(0.89)

(1)The items excluded from adjusted operating income impact the amortization of deferred acquisition costs and unearned revenue reserve. Certain interest sensitive reserves as well as income taxes are also impacted.

Realized Gains (Losses) on InvestmentsRealized Gains (Losses) on InvestmentsRealized Gains (Losses) on Investments
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Realized gains (losses) on investments:Realized gains (losses) on investments:Realized gains (losses) on investments:
Realized gainsRealized gains$237 $534 $431 $6,524 Realized gains$148 $12 
Realized lossesRealized losses(60)(3)(1,989)(341)Realized losses(868)(182)
Change in unrealized gains/losses on equity securitiesChange in unrealized gains/losses on equity securities1,814 165 (7,099)5,047 Change in unrealized gains/losses on equity securities(149)(13,231)
Total other-than-temporary impairment losses— (50)— (919)
Total allowance for credit lossesTotal allowance for credit losses1,903 — (10,855)— Total allowance for credit losses1,113 (12,261)
Net realized investment gains (losses)Net realized investment gains (losses)$3,894 $646 $(19,512)$10,311 Net realized investment gains (losses)$244 $(25,662)

The level of realized gains (losses) is subject to fluctuation from period to period due to movements in credit spreads and prevailing interest rates, changes in the economic environment, the timing of the sales of the investments generating the realized gains and losses, as well as the timing of allowances, impairments, recovery of allowances and unrealized gains and losses on equity securities. See “Financial Condition - Investments” and Note 2 to our consolidated financial statements for details regarding our unrealized gains and losses on available-for-sale securities at September 30, 2020March 31, 2021 and December 31, 2019.2020.

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Change in Allowance/Credit Impairment Losses Recognized in Net Income
Change in Allowances Recognized in Net IncomeChange in Allowances Recognized in Net Income
Three months ended September 30,Nine months ended September 30,Three months ended March 31,
202020192020201920212020
(Dollars in thousands)(Dollars in thousands)
Corporate securities:Corporate securities:Corporate securities:
Consumer Products$850 $— $(122)$— 
FinancialFinancial730 — (4,315)— Financial$(1,260)$5,430 
EnergyEnergy(175)— (7,060)— Energy— 6,716 
Other asset-backedOther asset-backed(281)— (598)(869)Other asset-backed115 — 
Securities and indebtedness of related parties— (50)— (50)
Mortgage loansMortgage loans779 — 1,240 — Mortgage loans32 115 
Total allowance for credit losses (2020); other-than-temporary impairment losses (2019) reported in net income$1,903 $(50)$(10,855)$(919)
Total allowance for credit (gains) losses reported in net incomeTotal allowance for credit (gains) losses reported in net income$(1,113)$12,261 

Allowance for credit losses for the nine months ended September 30, 2020 include an energy sector bond, a consumer products bond, and two financial sector bonds impaired to fair value caused by ongoing weakness in operating performance in addition to an asset backed bond due to a decline in expected cash flows. Improvements in the allowance results in recoveries recognized as realized gains. See Note 2 “Investment Operations” to our consolidated financial statements for more detail on the allowance for credit losses. Other-than-temporary credit impairment losses for the nine months ended September 30, 2019 include an asset-backed bond due to a decline in expected cash flows.


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Financial Condition

Investments

Our investment portfolio increased 5.4%decreased 2.8% to $9,582.0$9,412.8 million at September 30, 2020March 31, 2021 compared to $9,091.6$9,684.0 million at December 31, 2019.2020. The portfolio increasedecrease is primarily due in part to a $312.4$400.4 million increasedecrease in the net unrealized appreciation of fixed maturities. The increasedecrease in unrealized appreciation is the result of a decreaseprimarily due to an increase in market interest rates driven by a decrease in Treasury rates.yields during the first quarter of 2021. Additional details regarding securities in an unrealized gain or loss position at September 30, 2020March 31, 2021 are included in the discussion that follows and in Note 2 to our consolidated financial statements. Details regarding investment impairments are discussed above in the “Realized Gains (Losses) on Investments” section under “Results of Operations.”
We manage the investment portfolio to optimize risk-adjusted yield within the context of prudent asset-liability management. We evaluate multiple cash flow testing scenarios as part of this process. The Company’s investment policy calls for investing primarily in high quality fixed maturities and commercial mortgage loans.

Fixed Maturity Acquisitions Selected Information
Nine months ended September 30,
20202019
(Dollars in thousands)
Cost of acquisitions:
Corporate$287,347 $301,717 
Mortgage- and asset-backed285,243 248,185 
United States Government and agencies25,212 — 
Tax-exempt municipals55,381 27,715 
Total$653,183 $582,617 
Effective annual yield3.20 %3.90 %
Credit quality
NAIC 1 designation73.9 %68.9 %
NAIC 2 designation19.7 %31.1 %
Non-investment grade6.4 %— %
Weighted-average life in years11.016.0

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Fixed Maturity Acquisitions Selected Information
Three months ended March 31,
20212020
(Dollars in thousands)
Cost of acquisitions:
Corporate$186,536 $123,877 
Mortgage- and asset-backed106,187 95,381 
United States Government and agencies10,165 — 
Tax-exempt municipals14,285 — 
Total$317,173 $219,258 
Effective annual yield2.91 %3.50 %
Credit quality
NAIC 1 designation62.8 %66.1 %
NAIC 2 designation33.4 %24.8 %
Non-investment grade3.8 %9.1 %
Weighted-average life in years21.07.0
The table above summarizes selected information for fixed maturity purchases. The effective annual yield shown is the yield calculated to the “first-call” date. For non-callable bonds, the first-call date is the maturity date. The weighted-average life is calculated using scheduled pay-downs and expected prepayments for amortizing securities. For non-amortizing securities, the weighted-average life is equal to the stated maturity date.

A portion of the securities acquired during the ninethree months ended September 30,March 31, 2021 and March 31, 2020 and September 30, 2019 were acquired with the proceeds from advances on our funding agreements with the FHLB. The securities acquired to support these funding agreements often carry a lower average yield than securities acquired to support our other insurance products, due to the shorter maturity and relatively low interest rate paid on those advances. In addition, certain municipal securities acquired are exempt from federal income taxes, and accordingly have a higher actual return than reflected in the yields stated above. The average yield of the securities acquired, excluding the securities supporting the funding agreements and using a tax-adjusted yield for the municipal securities, was 3.34%3.13% during the ninethree months ended September 30, 2020March 31, 2021 and was 3.95%4.73% during the ninethree months ended September 30, 2019.March 31, 2020.
Investment Portfolio Summary
September 30, 2020December 31, 2019
Carrying ValuePercentCarrying ValuePercent
(Dollars in thousands)
Fixed maturities - available for sale:
Public$6,111,775 63.8 %$5,763,570 63.4 %
144A private placement1,837,248 19.2 1,699,924 18.7 
Private placement295,454 3.1 239,134 2.6 
Total fixed maturities - available for sale8,244,477 86.1 7,702,628 84.7 
Equity securities93,269 1.0 100,228 1.1 
Mortgage loans972,210 10.1 1,011,678 11.2 
Real estate955 — 955 — 
Policy loans197,009 2.1 201,589 2.2 
Short-term investments18,434 0.2 11,865 0.1 
Other investments55,639 0.5 62,680 0.7 
Total investments$9,581,993 100.0 %$9,091,623 100.0 %

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Investment Portfolio Summary
March 31, 2021December 31, 2020
Carrying ValuePercentCarrying ValuePercent
(Dollars in thousands)
Fixed maturities - available for sale:
Public$5,920,167 62.9 %$6,139,811 63.4 %
144A private placement1,809,025 19.2 1,823,768 18.8 
Private placement298,891 3.2 320,108 3.3 
Total fixed maturities - available for sale8,028,083 85.3 8,283,687 85.5 
Equity securities88,564 0.9 88,281 0.9 
Mortgage loans992,938 10.6 994,101 10.4 
Real estate955 — 955 — 
Policy loans191,580 2.0 195,666 2.0 
Short-term investments42,252 0.5 63,062 0.7 
Other investments68,424 0.7 58,258 0.5 
Total investments$9,412,796 100.0 %$9,684,010 100.0 %

As of September 30, 2020,March 31, 2021, 96.495.8% (based on carrying value) of the available-for-sale fixed maturities were investment grade debt securities, defined as being in the highest two National Association of Insurance Commissioners (NAIC) designations. Non-investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. We regularly review the percentage of our portfolio that is invested in non-investment grade debt securities (NAIC designations 3 through 6). As of September 30, 2020,March 31, 2021, no single non-investment grade holding exceeded 0.2% of total investments.

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Credit Quality by NAIC Designation and Equivalent RatingCredit Quality by NAIC Designation and Equivalent RatingCredit Quality by NAIC Designation and Equivalent Rating
September 30, 2020December 31, 2019March 31, 2021December 31, 2020
NAIC DesignationNAIC DesignationEquivalent Rating (1)Carrying ValuePercentCarrying ValuePercentNAIC DesignationEquivalent Rating (1)Carrying ValuePercentCarrying ValuePercent
(Dollars in thousands)(Dollars in thousands)
11AAA, AA, A$5,572,781 67.6 %$5,255,079 68.2 %1AAA, AA, A$5,163,977 64.3 %$5,440,737 65.7 %
22BBB2,372,784 28.8 2,268,920 29.5 2BBB2,532,172 31.5 2,516,020 30.4 
Total investment grade7,945,565 96.4 7,523,999 97.7 Total investment grade7,696,149 95.8 7,956,757 96.1 
33BB229,223 2.7 123,120 1.6 3BB261,219 3.3 256,122 3.1 
44B57,560 0.7 38,272 0.5 4B56,382 0.7 57,746 0.7 
55CCC6,097 0.1 17,231 0.2 5CCC10,046 0.1 10,036 0.1 
66In or near default6,032 0.1 — 6In or near default4,287 0.1 3,026 — 
Total below investment grade298,912 3.6 178,629 2.3 Total below investment grade331,934 4.2 326,930 3.9 
Total fixed maturities - available for sale$8,244,477 100.0 %$7,702,628 100.0 %Total fixed maturities - available for sale$8,028,083 100.0 %$8,283,687 100.0 %

(1)Equivalent ratings are based on those provided by nationally recognized rating agencies with some exceptions for certain residential mortgage, commercial mortgage- and asset-backed securities that are based on the expected loss of the security rather than the probability of default. This may result in a final designation being higher or lower than the equivalent credit rating.
See Note 2 to our consolidated financial statements for a summary of fixed maturities by contractual maturity date.
Gross Unrealized Gains and Gross Unrealized Losses by Internal Industry Classification
September 30, 2020
Total Carrying ValueCarrying Value of Securities
with Gross Unrealized Gains
Gross Unrealized GainsCarrying Value of Securities
with Gross Unrealized Losses
Gross Unrealized Losses
(Dollars in thousands)
Corporate securities:
Basic industrial$352,188 $333,951 $48,876 $18,237 $(800)
Capital goods335,959 326,008 46,445 9,951 (431)
Communications159,573 154,115 27,448 5,458 (160)
Consumer cyclical189,828 180,396 22,076 9,432 (1,562)
Consumer non-cyclical696,098 671,180 117,952 24,918 (1,631)
Energy428,390 355,180 41,031 73,210 (8,136)
Finance750,292 718,757 78,703 31,535 (1,451)
Transportation139,720 129,571 17,157 10,149 (237)
Utilities176,811 174,535 23,975 2,276 (15)
Technology884,298 872,878 176,413 11,420 (548)
Other20,842 20,842 2,556 — — 
Total corporate securities4,133,999 3,937,413 602,632 196,586 (14,971)
Mortgage- and asset-backed securities2,628,534 2,339,764 240,186 288,770 (10,431)
United States Government and agencies37,595 12,701 2,962 24,894 (453)
States and political subdivisions1,444,349 1,410,905 181,171 33,444 (1,356)
Total$8,244,477 $7,700,783 $1,026,951 $543,694 $(27,211)

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Gross Unrealized Gains and Gross Unrealized Losses by Internal Industry Classification
March 31, 2021
Total Carrying ValueCarrying Value of Securities
with Gross Unrealized Gains
Gross Unrealized GainsCarrying Value of Securities
with Gross Unrealized Losses
Gross Unrealized Losses
(Dollars in thousands)
Corporate securities:
Basic industrial$351,378 $338,552 $44,589 $12,826 $(1,110)
Capital goods337,515 296,289 33,807 41,226 (1,167)
Communications164,341 150,376 20,528 13,965 (809)
Consumer cyclical190,240 178,485 15,337 11,755 (806)
Consumer non-cyclical666,542 639,653 84,771 26,889 (2,803)
Energy434,097 391,989 41,336 42,108 (3,268)
Finance748,046 697,013 67,869 51,033 (2,659)
Transportation141,417 124,199 12,194 17,218 (669)
Utilities851,939 757,159 121,353 94,780 (5,414)
Technology175,294 156,795 17,164 18,499 (839)
Other30,799 20,660 2,561 10,139 (791)
Total corporate securities4,091,608 3,751,170 461,509 340,438 (20,335)
Mortgage- and asset-backed securities2,527,892 2,129,202 144,817 398,690 (16,269)
United States Government and agencies39,245 10,369 1,716 28,876 (6,822)
States and political subdivisions1,369,338 1,287,650 147,496 81,688 (3,222)
Total$8,028,083 $7,178,391 $755,538 $849,692 $(46,648)

December 31, 2020
Total Carrying ValueCarrying Value of Securities
with Gross Unrealized Gains
Gross Unrealized GainsCarrying Value of Securities
with Gross Unrealized Losses
Gross Unrealized Losses
(Dollars in thousands)
Corporate securities:
Basic industrial$361,658 $358,786 $63,739 $2,872 $(102)
Capital goods343,285 341,328 55,049 1,957 (43)
Communications165,105 160,706 29,896 4,399 (78)
Consumer cyclical193,800 189,287 24,883 4,513 (473)
Consumer non-cyclical710,628 704,598 136,956 6,030 (905)
Energy442,603 419,114 56,920 23,489 (1,724)
Finance773,430 764,564 96,649 8,866 (693)
Transportation144,760 144,621 22,195 139 (5)
Utilities902,980 893,310 188,764 9,670 (219)
Technology178,839 178,734 26,636 105 — 
Other21,179 21,179 2,899 — — 
Total corporate securities4,238,267 4,176,227 704,586 62,040 (4,242)
Mortgage- and asset-backed securities2,593,203 2,323,830 227,200 269,373 (7,113)
United States Government and agencies36,252 12,622 2,887 23,630 (1,809)
States and political subdivisions1,415,965 1,400,820 188,542 15,145 (785)
Total$8,283,687 $7,913,499 $1,123,215 $370,188 $(13,949)


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Gross Unrealized Gains and Gross Unrealized Losses by Internal Industry Classification
December 31, 2019
Total Carrying ValueCarrying Value of Securities
with Gross Unrealized Gains
Gross Unrealized GainsCarrying Value of Securities
with Gross Unrealized Losses
Gross Unrealized Losses
(Dollars in thousands)
Corporate securities:
Basic industrial$337,004 $330,254 $33,472 $6,750 $(259)
Capital goods302,566 292,480 28,427 10,086 (278)
Communications143,907 139,092 17,900 4,815 (453)
Consumer cyclical154,744 145,584 12,971 9,160 (357)
Consumer non-cyclical611,618 554,145 68,658 57,473 (4,057)
Energy420,805 384,898 42,177 35,907 (6,637)
Finance692,341 667,173 62,295 25,168 (2,287)
Transportation129,421 116,659 11,186 12,762 (415)
Utilities158,073 155,105 15,617 2,968 (23)
Technology804,317 770,167 123,232 34,150 (765)
Other24,154 24,154 2,114 — — 
Total corporate securities3,778,950 3,579,711 418,049 199,239 (15,531)
Mortgage- and asset-backed securities2,432,382 2,092,650 144,832 339,732 (5,956)
United States Government and agencies14,123 11,629 1,711 2,494 (5)
States and political subdivisions1,477,173 1,451,870 145,125 25,303 (866)
Total$7,702,628 $7,135,860 $709,717 $566,768 $(22,358)
Credit Quality of Available-for-Sale Fixed Maturities with Unrealized Losses
March 31, 2021
NAIC DesignationEquivalent RatingCarrying Value of Securities with Gross Unrealized LossesPercent of TotalGross Unrealized LossesPercent of Total
(Dollars in thousands)
1AAA, AA, A$624,584 73.5 %$(32,814)70.4 %
2BBB160,731 18.9 (8,689)18.6 
Total investment grade785,315 92.4 (41,503)89.0 
3BB50,937 6.0 (3,797)8.1 
4B13,437 1.6 (1,348)2.9 
6In or near default— — — 
Total below investment grade64,377 7.6 (5,145)11.0 
Total$849,692 100.0 %$(46,648)100.0 %

Credit Quality of Available-for-Sale Fixed Maturities with Unrealized Losses
September 30, 2020December 31, 2020
NAIC DesignationNAIC DesignationEquivalent RatingCarrying Value of Securities with Gross Unrealized LossesPercent of TotalGross Unrealized LossesPercent of TotalNAIC DesignationEquivalent RatingCarrying Value of Securities with Gross Unrealized LossesPercent of TotalGross Unrealized LossesPercent of Total
(Dollars in thousands)(Dollars in thousands)
11AAA, AA, A$326,561 60.1 %$(9,017)33.1 %1AAA, AA, A$269,478 72.8 %$(6,871)49.3 %
22BBB97,069 17.8 (5,980)22.0 2BBB43,988 11.9 (1,397)10.0 
Total investment grade423,630 77.9 (14,997)55.1 Total investment grade313,466 84.7 (8,268)59.3 
33BB100,117 18.4 (9,436)34.7 3BB41,906 11.3 (3,317)23.8 
44B19,942 3.7 (2,778)10.2 4B14,812 4.0 (2,364)16.9 
66In or near default— — — 6In or near default— — — 
Total below investment grade120,064 22.1 (12,214)44.9 Total below investment grade56,722 15.3 (5,681)40.7 
Total$543,694 100.0 %$(27,211)100.0 %Total$370,188 100.0 %$(13,949)100.0 %

Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
March 31, 2021
Amortized CostGross Unrealized Losses
Fair Value
is Less than 75% of Cost
Fair Value is
75% or Greater
than Cost
Fair Value is Less than 75% of CostFair Value is
75% or Greater
than Cost
(Dollars in thousands)
Three months or less$— $601,885 $— $(26,429)
Greater than three months to six months— 49,978 — (2,045)
Greater than six months to nine months25,532 80,015 (6,507)(5,725)
Greater than nine months to twelve months— 177 — (1)
Greater than twelve months— 138,753 — (5,941)
Total$25,532 $870,808 $(6,507)$(40,141)


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Credit Quality of Available-for-Sale Fixed Maturities with Unrealized Losses
December 31, 2019
NAIC DesignationEquivalent RatingCarrying Value of Securities with Gross Unrealized LossesPercent of TotalGross Unrealized LossesPercent of Total
(Dollars in thousands)
1AAA, AA, A$394,099 69.5 %$(6,932)31.0 %
2BBB103,400 18.2 (3,093)13.8 
Total investment grade497,499 87.7 (10,025)44.8 
3BB37,184 6.6 (5,096)22.9 
4B22,928 4.1 (1,616)7.2 
5CCC9,150 1.6 (5,621)25.1 
6In or near default— — — 
Total below investment grade69,269 12.3 (12,333)55.2 
Total$566,768 100.0 %$(22,358)100.0 %
Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
December 31, 2020
Amortized CostGross Unrealized Losses
Fair Value
is Less than 75% of Cost
Fair Value is 75% or Greater than CostFair Value is Less than 75% of CostFair Value is
75% or Greater
than Cost
(Dollars in thousands)
Three months or less$— $63,287 $— $(1,338)
Greater than three months to six months— 112,343 — (3,572)
Greater than six months to nine months— 11,786 — (180)
Greater than nine months to twelve months— 80,799 — (2,228)
Greater than twelve months— 115,922 — (6,631)
Total$— $384,137 $— $(13,949)

Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
September 30, 2020
Amortized CostGross Unrealized Losses
Fair Value
is Less than 75% of Cost
Fair Value is
75% or Greater
than Cost
Fair Value is Less than 75% of CostFair Value is
75% or Greater
than Cost
(Dollars in thousands)
Three months or less$3,059 $218,364 $(918)$(3,878)
Greater than three months to six months— 21,955 — (290)
Greater than six months to nine months2,836 166,438 (1,101)(8,362)
Greater than nine months to twelve months— 4,858 — (151)
Greater than twelve months5,942 147,453 (2,121)(10,390)
Total$11,837 $559,068 $(4,140)$(23,071)

December 31, 2019
Amortized CostGross Unrealized Losses
Fair Value
is Less than 75% of Cost
Fair Value is 75% or Greater than CostFair Value is Less than 75% of CostFair Value is
75% or Greater
than Cost
(Dollars in thousands)
Three months or less$— $255,507 $— $(3,518)
Greater than three months to six months— 98,253 — (2,093)
Greater than six months to nine months— 13,944 — (464)
Greater than nine months to twelve months— — — — 
Greater than twelve months25,805 195,617 (8,444)(7,839)
Total$25,805 $563,321 $(8,444)$(13,914)


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Available-For-Sale Fixed Maturities with Unrealized Losses by Maturity DateAvailable-For-Sale Fixed Maturities with Unrealized Losses by Maturity DateAvailable-For-Sale Fixed Maturities with Unrealized Losses by Maturity Date
September 30, 2020December 31, 2019March 31, 2021December 31, 2020
Carrying Value of Securities with Gross Unrealized LossesGross
Unrealized
Losses
Carrying Value of Securities with Gross Unrealized LossesGross
Unrealized
Losses
Carrying Value of Securities with Gross Unrealized LossesGross
Unrealized
Losses
Carrying Value of Securities with Gross Unrealized LossesGross
Unrealized
Losses
(Dollars in thousands)(Dollars in thousands)
Due in one year or lessDue in one year or less$8,038 $(32)$1,498 $(2)Due in one year or less$3,260 $(65)$3,200 $(133)
Due after one year through five yearsDue after one year through five years31,053 (1,597)17,902 (3,340)Due after one year through five years7,124 (55)9,224 (21)
Due after five years through ten yearsDue after five years through ten years42,100 (3,294)32,003 (478)Due after five years through ten years52,595 (1,811)14,260 (1,349)
Due after ten yearsDue after ten years173,733 (11,857)175,633 (12,582)Due after ten years388,023 (28,448)74,131 (5,333)
254,924 (16,780)227,036 (16,402)451,002 (30,379)100,815 (6,836)
Mortgage- and asset-backedMortgage- and asset-backed288,770 (10,431)339,732 (5,956)Mortgage- and asset-backed398,690 (16,269)269,373 (7,113)
TotalTotal$543,694 $(27,211)$566,768 $(22,358)Total$849,692 $(46,648)$370,188 $(13,949)

See Note 2 to our consolidated financial statements for additional analysis of these unrealized losses.

Mortgage- and Asset-Backed Securities

Mortgage-backed and other asset-backed securities are purchased when we believe these types of investments provide superior risk-adjusted returns compared to returns of more conventional investments such as corporate bonds and mortgage loans. These securities are diversified as to collateral types, cash flow characteristics and maturity.

The repayment pattern on mortgage and other asset-backed securities is more variable than that of more traditional fixed maturity securities because the repayment terms are tied to underlying debt obligations that are subject to prepayments. The prepayment speeds (e.g., the rate of individuals refinancing their home mortgages) can vary based on a number of economic factors that cannot be predicted with certainty. These factors include the prevailing interest rate environment and general status of the economy.

At each balance sheet date, we review and update our expectation of future prepayment speeds and the book value of the mortgage and other asset-backed securities purchased at a premium or discount is reset, if needed. See Note 1 to our consolidated financial statements included in Item 8 of our Form 10-K for the year ended December 31, 20192020 for more detail on accounting for the amortization of premium and accrual of discount on mortgage-backed and asset-backed securities.

Our direct exposure to the Alt-A home equity and subprime first-lien sectors is limited to investments in structured securities collateralized by senior tranches of residential mortgage loans. We also have a partnership interest in one fund at September 30, 2020March 31, 2021 and December 31, 2019,2020, that owns securities backed by Alt-A home equity, subprime first-lien and adjustable rate mortgage collateral. The fund is reported as securities and indebtedness of related parties in our consolidated balance sheets with a fair value of $0.9$0.8 million at September 30, 2020March 31, 2021 and $1.4 million at December 31, 2019.2020. We do not own any direct investments in subprime lenders.
Mortgage- and Asset-Backed Securities by Collateral Type
September 30, 2020December 31, 2019
Amortized CostCarrying ValuePercent
of Fixed Maturities
Amortized CostCarrying ValuePercent
of Fixed Maturities
(Dollars in thousands)
Government agency$213,720 $244,546 3.0 %$220,209 $236,734 3.1 %
Prime387,451 411,217 5.0 338,795 357,769 4.6 
Alt-A59,959 69,997 0.8 68,483 80,732 1.0 
Subprime122,109 130,323 1.6 133,410 144,485 1.9 
Commercial mortgage996,794 1,149,431 13.9 969,453 1,045,473 13.6 
Collateralized loan obligation227,791 223,890 2.7 186,671 185,427 2.4 
Non-mortgage391,553 399,130 4.8 376,485 381,762 5.0 
Total$2,399,377 $2,628,534 31.8 %$2,293,506 $2,432,382 31.6 %


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Mortgage- and Asset-Backed Securities by Collateral Type
March 31, 2021December 31, 2020
Amortized CostCarrying ValuePercent
of Fixed Maturities
Amortized CostCarrying ValuePercent
of Fixed Maturities
(Dollars in thousands)
Government agency$213,806 $233,951 2.9 %$202,989 $231,161 2.8 %
Prime385,235 399,332 5.0 384,638 405,016 4.9 
Alt-A54,758 64,722 0.8 56,717 66,139 0.8 
Subprime115,684 124,862 1.6 118,705 127,302 1.5 
Commercial mortgage1,014,949 1,079,827 13.5 991,944 1,136,333 13.7 
Collateralized loan obligation223,861 222,582 2.8 219,481 217,162 2.6 
Non-mortgage391,835 402,616 5.0 399,311 410,090 5.0 
Total$2,400,128 $2,527,892 31.6 %$2,373,785 $2,593,203 31.3 %

The mortgage- and asset-backed securities can be summarized into three broad categories: residential, commercial and other asset-backed securities.

The residential mortgage-backed portfolio includes government agency pass-through and collateralized mortgage obligation (CMO) securities. With a government agency pass-through security, we receive a pro rata share of principal payments as payments are made on the underlying mortgage loans. CMOs consist of pools of mortgages divided into sections or “tranches” with varying stated maturities that provide sequential retirement of the bonds. While each tranche receives monthly interest payments, a subsequent tranche is not entitled to receive payment of principal until the entire principal of the preceding tranche is paid off. We primarily invest in sequential tranches, which allow us to manage cash flow stability and prepayment risk by the level of tranche in which we invest. In addition, to provide call protection and more stable average lives, we invest in CMOs such as planned amortization class (PAC) and targeted amortization class (TAC) securities. PAC bonds provide more predictable cash flows within a range of prepayment speeds and provide some protection against prepayment risk. TAC bonds provide protection from a rise in the prepayment rate due to falling interest rates. We generally do not purchase certain types of CMOs that we believe would subject the investment portfolio to excessive prepayment risk.
Residential Mortgage-Backed Securities by NAIC Designation and Origination YearResidential Mortgage-Backed Securities by NAIC Designation and Origination YearResidential Mortgage-Backed Securities by NAIC Designation and Origination Year
September 30, 2020March 31, 2021
2004 & Prior2005 to 20082009 & AfterTotal2004 & Prior2005 to 20082009 & AfterTotal
NAIC DesignationNAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
NAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
(Dollars in thousands)(Dollars in thousands)
11$52,706 $54,539 $56,491 $70,340 $545,156 $591,043 $654,353 $715,922 1$35,890 $37,586 $48,721 $63,544 $552,379 $578,002 $636,990 $679,132 
223,436 3,429 — — — — 3,436 3,429 
33214 220 156 171 — — 370 391 3583 566 123 121 2,370 2,410 3,076 3,097 
44— — 4,123 4,789 — — 4,123 4,789 44,403 3,781 491 389 — — 4,894 4,170 
55— — 3,055 4,005 — — 3,055 4,005 5— — 6,876 8,447 — — 6,876 8,447 
66— — — — 6— — — — 
TotalTotal$52,925 $54,764 $63,825 $79,305 $545,156 $591,043 $661,906 $725,112 Total$44,315 $45,365 $56,211 $72,501 $554,749 $580,412 $655,275 $698,278 

December 31, 2019December 31, 2020
2004 & Prior2005 to 20082009 & AfterTotal2004 & Prior2005 to 20082009 & AfterTotal
NAIC DesignationNAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
NAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
(Dollars in thousands)(Dollars in thousands)
11$60,698 $62,145 $61,993 $80,465 $495,061 $519,147 $617,752 $661,757 1$37,892 $40,008 $53,930 $67,889 $537,274 $577,319 $629,096 $685,216 
223,659 3,667 — — — — 3,659 3,667 
33279 275 1,113 1,080 — — 1,392 1,355 3591 567 139 136 — — 730 703 
44— — 4,297 5,372 — — 4,297 5,372 44,457 3,885 549 447 — — 5,006 4,332 
55— — 3,216 3,898 — — 3,216 3,898 5— — 7,008 8,197 — — 7,008 8,197 
66— — — — 6— — — — 
TotalTotal$60,983 $62,426 $70,619 $90,815 $495,061 $519,147 $626,663 $672,388 Total$46,603 $48,131 $61,626 $76,669 $537,274 $577,319 $645,503 $702,119 

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The commercial mortgage-backed securities (CMBS) are primarily sequential securities. CMBS typically have cash flows that are less subject to refinance risk than residential mortgage-backed securities principally due to prepayment restrictions on many of the underlying commercial mortgage loans.
Commercial Mortgage-Backed Securities by NAIC Designation and Origination YearCommercial Mortgage-Backed Securities by NAIC Designation and Origination YearCommercial Mortgage-Backed Securities by NAIC Designation and Origination Year
September 30, 2020March 31, 2021
2004 & Prior2005 to 20082009 & AfterTotal2004 & Prior2005 to 20082009 & AfterTotal
NAIC DesignationNAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
NAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
(Dollars in thousands)(Dollars in thousands)
11$7,527 $8,753 $92,419 $115,186 $855,731 $977,631 $955,677 $1,101,570 1$7,262 $8,046 $91,567 $106,622 $846,498 $890,599 $945,327 $1,005,267 
22— — 41,117 47,861 — — 41,117 47,861 2— — 40,875 45,032 21,521 22,129 62,396 67,161 
33— — — — 7,226 7,399 7,226 7,399 
Total (1)Total (1)$7,527 $8,753 $133,536 $163,047 $855,731 $977,631 $996,794 $1,149,431 Total (1)$7,262 $8,046 $132,442 $151,654 $875,245 $920,127 $1,014,949 $1,079,827 


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Commercial Mortgage-Backed Securities by NAIC Designation and Origination Year
December 31, 2019December 31, 2020
2004 & Prior2005 to 20082009 & AfterTotal2004 & Prior2005 to 20082009 & AfterTotal
NAIC DesignationNAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
NAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
(Dollars in thousands)(Dollars in thousands)
11$7,908 $8,851 $93,249 $110,805 $826,744 $880,702 $927,901 $1,000,358 1$7,396 $8,453 $91,675 $113,610 $823,004 $934,637 $922,075 $1,056,700 
22— — 41,552 45,115 — — 41,552 45,115 2— — 41,084 49,229 21,544 22,987 62,628 72,216 
33— — — — 7,242 7,417 7,242 7,417 
Total (1)Total (1)$7,908 $8,851 $134,801 $155,920 $826,744 $880,702 $969,453 $1,045,473 Total (1)$7,396 $8,453 $132,759 $162,839 $851,790 $965,041 $991,945 $1,136,333 

(1)    The CMBS portfolio included government agency-backed securities with a carrying value of $923.4$849.7 million at September 30, 2020March 31, 2021 and $845.5$911.4 million at December 31, 2019.2020. Also included in the CMBS portfolio are military housing bonds totaling $170.5$157.6 million at September 30, 2020March 31, 2021 and $163.9$170.0 million at December 31, 2019.2020. These bonds are used to fund the construction of multi-family homes on United States military bases. The bonds are backed by a first mortgage lien on residential military housing projects.

The other asset-backed securities are backed by both residential and non-residential collateral. The collateral for residential asset-backed securities primarily consists of second lien fixed-rate home equity loans. The cash flows of these securities are less subject to prepayment risk than residential mortgage-backed securities as the borrowers are less likely to refinance than those with only a first lien mortgage. The collateral for non-residential asset-backed securities primarily includes securities backed by credit card receivables, auto dealer receivables, auto installment loans, aircraft leases, middle market and syndicated business loans, timeshare receivables and trade and account receivables. The majority of these securities are high quality, short-duration assets with limited cash flow variability.

Our CLO portfolio included in other asset-backed securities is high quality, with all of the securities rated NAIC-1. Internal stress testing has indicated that the weighted average constant default rate (CDR) of our portfolio without suffering loss is 17%. The CDR is the constant default rate (annually) that a CLO must suffer before our tranche takes its first dollar loss.
Other Asset-Backed Securities by NAIC Designation and Origination YearOther Asset-Backed Securities by NAIC Designation and Origination YearOther Asset-Backed Securities by NAIC Designation and Origination Year
September 30, 2020March 31, 2021
2004 & Prior2005 to 20082009 & AfterTotal2004 & Prior2005 to 20082009 & AfterTotal
NAIC DesignationNAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
NAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
(Dollars in thousands)(Dollars in thousands)
11$5,466 $5,194 $122,061 $132,948 $486,476 $488,522 $614,003 $626,664 1$2,940 $2,906 $115,494 $126,588 $467,101 $471,695 $585,535 $601,189 
22— — — — 110,216 111,540 110,216 111,540 2— — — — 124,602 129,932 124,602 129,932 
33152 153 — — 11,939 11,951 12,091 12,104 32,092 1,951 — — 11,994 12,054 14,086 14,005 
441,237 1,320 — — 1,403 1,234 2,640 2,554 41,116 1,185 — — 2,838 2,533 3,954 3,718 
55— — — — 1,727 1,129 1,727 1,129 5— — — — 1,727 943 1,727 943 
TotalTotal$6,855 $6,667 $122,061 $132,948 $611,761 $614,376 $740,677 $753,991 Total$6,148 $6,042 $115,494 $126,588 $608,262 $617,157 $729,904 $749,787 

December 31, 2019
2004 & Prior2005 to 20082009 & AfterTotal
NAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
(Dollars in thousands)
1$6,188 $5,981 $134,272 $147,913 $435,077 $435,779 $575,537 $589,673 
21,396 1,488 1,547 1,608 113,762 116,354 116,705 119,450 
3163 160 — — 3,230 3,483 3,393 3,643 
5— — — — 1,755 1,755 1,755 1,755 
Total$7,747 $7,629 $135,819 $149,521 $553,824 $557,371 $697,390 $714,521 

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Other Asset-Backed Securities by NAIC Designation and Origination Year
December 31, 2020
2004 & Prior2005 to 20082009 & AfterTotal
NAIC DesignationAmortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
(Dollars in thousands)
1$3,196 $3,120 $118,478 $129,822 $471,367 $475,762 $593,041 $608,704 
2— — — — 123,376 127,292 123,376 127,292 
32,204 2,045 — — 11,965 11,995 14,169 14,040 
41,179 1,256 — — 2,846 2,401 4,025 3,657 
5— — — — 1,727 1,058 1,727 1,058 
Total$6,579 $6,421 $118,478 $129,822 $611,281 $618,508 $736,338 $754,751 

State and Political Subdivision Securities

State and political subdivision securities totaled $1,444.3$1,369.3 million, or 17.5%17.1% of total fixed maturities, at September 30, 2020,March 31, 2021, and $1,477.2$1,416.0 million, or 19.2% of total fixed maturities at December 31, 20192020 and include investments in general obligation, revenue and municipal housing bonds. Our investment strategy is to utilize municipal bonds in addition to corporate bonds, as

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we believe they provide additional diversification and have historically low default rates compared with similarly rated corporate bonds. We evaluate the credit strength of the underlying issues on both a quantitative and qualitative basis, excluding insurance, prior to acquisition. The majority of the municipal bonds we hold are investment grade credits without consideration of insurance. Our municipal bonds are well diversified by type and geography with the top exposure being water and sewer revenue bonds. Our municipal bond holdings were trading at 114.2%111.8% of amortized cost at September 30, 2020.March 31, 2021. We do not hold any Puerto Rico-related bonds. Exposure to the state of Illinois and municipalities within the state accounted for 1.1% of our total fixed maturities at September 30, 2020.March 31, 2021. As of September 30, 2020,March 31, 2021, our Illinois-related portfolio holdings were rated investment grade and were trading at 118.9%117.6% of amortized cost.

Mortgage Loans

Mortgage loans totaled $972.2$992.9 million at September 30, 2020March 31, 2021 and $1,011.7$994.1 million at December 31, 2019.2020. Our mortgage loans are diversified as to property type, location and loan size, and are collateralized by the related properties. The total number of commercial mortgage loans outstanding was 212213 at September 30, 2020March 31, 2021 and 209212 at December 31, 2019.2020. In the first ninethree months of 2020,2021, new loans ranged from $3.3$2.9 million to $7.9$14.7 million in size, with an average loan size of $5.6$6.7 million, an average loan term of 1413 years and an average net yield of 3.54%3.26%. Our mortgage lending policies establish limits on the amount that can be loaned to one borrower and require diversification by geographic location and collateral type. The majority of our mortgage loans amortize principal, with 3.1%4.3% that are interest-only loans as of September 30, 2020.March 31, 2021. At September 30, 2020,March 31, 2021, the average loan-to-value of the current outstanding principal balance using the most recent appraised value was 50.7%49.9% and the weighted average debt service coverage ratio was 1.7 based on the results of our 2019 annual study. See Note 2 to our consolidated financial statements for further discussion regarding our mortgage loans.


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Other Assets and Liabilities
September 30,
2020
December 31,
2019
Percentage changeMarch 31,
2021
December 31,
2020
Percentage change
Selected other assets:Selected other assets:Selected other assets:
Cash and cash equivalentsCash and cash equivalents15,030 17,277 (13.0)%Cash and cash equivalents70,854 12,882 450.0 %
Reinsurance recoverableReinsurance recoverable112,382 107,498 4.5 %Reinsurance recoverable108,640 115,168 (5.7)%
Deferred acquisition costsDeferred acquisition costs201,022 289,456 (30.6)%Deferred acquisition costs282,682 176,085 60.5 %
Other assetsOther assets159,824 167,940 (4.8)%Other assets155,996 152,929 2.0 %
Assets held in separate accountsAssets held in separate accounts616,381 645,881 (4.6)%Assets held in separate accounts686,968 674,182 1.9 %
Selected other liabilities:Selected other liabilities:Selected other liabilities:
Future policy benefitsFuture policy benefits7,629,442 7,393,549 3.2 %Future policy benefits7,773,635 7,616,272 2.1 %
Other policyholder fundsOther policyholder funds590,289 597,256 (1.2)%Other policyholder funds602,443 602,989 (0.1)%
Deferred income taxesDeferred income taxes187,161 152,373 22.8 %Deferred income taxes150,654 211,180 (28.7)%
Other liabilitiesOther liabilities113,744 107,013 6.3 %Other liabilities100,012 102,127 (2.1)%
Liabilities held in separate accountsLiabilities held in separate accounts616,381 645,881 (4.6)%Liabilities held in separate accounts686,968 674,182 1.9 %

Cash and cash equivalents increased primarily due to normal fluctuations in timing of payments made and received. Deferred acquisition costs decreasedincreased compared to the prior year end primarily due to a $88.0$105.2 million increasedecrease in the impact of the change in net unrealized appreciation on fixed maturity securities during the period. Assets and liabilities held in separate accounts decreasedincreased due to surrenders exceeding inflows from premiums and investment earnings, partially offset by charges, surrenders and benefits on this closed block of business as well as a decrease in market performance on the underlying investment portfolios.business.

Future policy benefits increased primarily due to increases in our funding agreements with the FHLB. Deferred income taxes increaseddecreased primarily due to the tax impact of the change in unrealized appreciation/depreciation on investments. Other liabilities increased due to an increase in our liability for unsettled security trades.




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Stockholders’ Equity

As discussed in Note 6 to our consolidated financial statements, stockholders’ equity was impacted by capital deployment actions during the nine months ended September 30, 2020, which included a special cash dividend of $1.50 per share on Class A and Class B common stock and an increase in our regular quarterly dividend by 4.2% to $0.50 per share.
September 30,
2020
December 31,
2019
Percentage changeMarch 31,
2021
December 31,
2020
Percentage change
(dollars in thousands, except per share data)(dollars in thousands, except per share data)
Total FBL Financial Group, Inc. stockholders’ equityTotal FBL Financial Group, Inc. stockholders’ equity$1,618,229 $1,485,757 8.9 %Total FBL Financial Group, Inc. stockholders’ equity$1,489,909 $1,692,099 (11.9)%
Common stockholders’ equityCommon stockholders’ equity1,615,229 1,482,757 8.9 %Common stockholders’ equity1,486,909 1,689,099 (12.0)%
Book value per shareBook value per share$66.21 $60.12 10.1 %Book value per share$60.95 $69.24 (12.0)%
Less: Per share impact of accumulated other comprehensive incomeLess: Per share impact of accumulated other comprehensive income21.69 14.39 50.7 %Less: Per share impact of accumulated other comprehensive income15.17 24.08 (37.0)%
Book value per share, excluding accumulated other comprehensive income (1)Book value per share, excluding accumulated other comprehensive income (1)$44.52 $45.73 (2.6)%Book value per share, excluding accumulated other comprehensive income (1)$45.78 $45.16 1.4 %

(1)Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. 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, we believe this non-GAAP financial measure provides useful supplemental information.

Our stockholders’ equity increaseddecreased compared to the prior year end primarily due to the change in unrealized appreciation on fixed maturity securities during the period and dividends paid, partially offset by dividends paid.net income.



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Liquidity and Capital Resources

Cash Flows

During the first ninethree months of 2020,2021, our operating activities generated cash flows totaling $158.1$36.5 million, consisting of net income of $44.5$27.6 million adjusted for non-cash operating revenues and expenses netting to $113.6$8.9 million. We used cash of $193.3$120.1 million in our investing activities during the 20202021 period. The primary uses were $733.4$383.3 million of investment acquisitions, mostly in fixed maturity securities, partially offset by $554.8$246.2 million in sales, maturities and repayments of investments. Our financing activities provided cash of $33.0$141.6 million during the 20202021 period. The primary financing source was $545.2$259.5 million in receipts from interest sensitive products credited to policyholder account balances, which was offset by $428.2$105.2 million for return of policyholder account balances on interest sensitive products and $74.0$12.7 million for dividends paid to stockholders. The change in policyholder account balances includes a net increase of $138.1$140.8 million in funding agreements with the FHLB during the first ninethree months of 2020.2021.

Sources and Uses of Capital Resources

Parent company cash inflows from operations consist primarily of fees that it charges various subsidiaries and affiliates for management of their operations, expense reimbursements and tax settlements from subsidiaries and affiliates, investment income, and dividends from subsidiaries, if declared and paid. Revenue sources for the parent company during the ninethree months ended September 30, 2020March 31, 2021 included management fees from subsidiaries and affiliates totaling $6.3$2.0 million and dividends of $86.0$12.5 million. Cash outflows are principally for salaries, taxes and other expenses related to providing management services, contributions to non-insurance subsidiaries, dividends on outstanding stock, stock repurchases and interest on our parent company debt. During the first quarter 2021, our parent company also incurred $2.6 million in expenses related to the proposed merger transaction discussed in Note 1 to our consolidated financial statements.

We paid regular cash dividends on our common and preferred stock during the nine-monththree-month period ended September 30March 31 totaling $37.0$12.7 million in 20202021 and $35.6$12.4 million in 2019.2020. In addition, we paid a special $1.50 per common share cash dividend totaling $37.0 million in March 20202020. Under the Merger Agreement, the Company is permitted to declare and March 2019. It is anticipated thatpay, and has agreed to declare and pay, quarterly cash dividend requirements for 2020 will be $0.0075dividends of $0.52 per Series B redeemable preferred share and $0.50 perof common share.stock. Common stock dividend rates are analyzed quarterly and are dependent upon our capital and liquidity positions. In addition, alternative uses of excess capital may impact future dividend levels. Assuming these quarterly dividend rates, the common and preferred dividends would total approximately $12.2$38.2 million for the remainder of 2020.2021. The parent company expects to have sufficient resources and cash flows

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to meet its interest and dividend payments throughout 2020.2021. The parent company had available cash and investments totaling $34.5$28.1 million at September 30, 2020.March 31, 2021. The parent company expects to rely on available cash resources, dividends from Farm Bureau Life and management fee income to make dividend payments to its stockholders, interest payments on its debt and to fund any capital initiatives such as stock repurchases. In addition, our parent company and Farm Bureau Life have entered into a reciprocal line of credit arrangement, which provides additional liquidity for either entity up to $20.0 million. We had no material commitments for capital expenditures as of September 30, 2020.March 31, 2021.

As discussed in Note 6 to our consolidated financial statements, we have periodically taken advantage of opportunities to repurchase our outstanding Class A common stock through Class A common stock repurchase programs approved by our Board of Directors. At September 30, 2020,March 31, 2021, $26.3 million remains available for repurchase under the current Class A common stock repurchase program. Under this program, we repurchased 290,144 shares for $10.0 millionhad no repurchases during the ninethree months ended September 30, 2020.March 31, 2021. Completion of this program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice. Under the Merger Agreement, we have agreed not to repurchase any additional shares of our capital stock from the date of the Merger Agreement through the closing of the Merger, subject to certain exceptions, including pursuant to our equity awards plans.

Interest payments on our debt totaled $3.6$1.2 million for the ninethree months ended September 30, 2020March 31, 2021 and September 30, 2019.March 31, 2020. Interest payments on our debt outstanding at September 30, 2020March 31, 2021 are estimated to be $1.2$3.6 million for the remainder of 2020.2021.

Farm Bureau Life’s cash inflows primarily consist of premiums; deposits to policyholder account balances; income from investments; sales, maturities and calls of investments; and repayments of investment principal. Farm Bureau Life’s cash outflows are primarily related to withdrawals of policyholder account balances, investment purchases, payment of policy acquisition costs, policyholder benefits, income taxes, current operating expenses and dividends. Life insurance companies generally produce a positive cash flow that may be measured by the degree to which cash inflows are adequate to meet benefit

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obligations to policyholders and normal operating expenses as they are incurred. The remaining cash flow is generally used to increase the asset base to provide funds to meet the need for future policy benefit payments and for writing new business. Continuing operations and financing activities from Farm Bureau Life relating to interest sensitive products provided funds totaling $275.0$199.8 million for the ninethree months ended September 30, 2020March 31, 2021 and $136.9$135.8 million for the prior year period.

Farm Bureau Life’s ability to pay dividends to the parent company is limited by law to earned profits (statutory unassigned surplus) as of the date the dividend is paid, as determined in accordance with accounting practices prescribed by insurance regulatory authorities of the State of Iowa. At December 31, 2019,2020, Farm Bureau Life’s statutory unassigned surplus was $508.9$494.6 million. There are certain additional limits on the amount of dividends that may be paid within a year without approval of the Insurance Division, Department of Commerce of the State of Iowa as discussed in Note 7 to our consolidated financial statements included in Item 8 of our Form 10-K for the year ended December 31, 2019.2020. During the remainder of 2020,2021, the maximum amount legally available for distribution to the parent company without further regulatory approval is $12.5$74.9 million.

We manage the amount of capital held by our insurance subsidiaries to ensure they meet regulatory requirements. State laws specify regulatory actions if an insurer’s risk-based capital (RBC) ratio, a measure of solvency, falls below certain levels. The NAIC has a standard formula for annually assessing RBC based on the various risk factors related to an insurance company’s capital and surplus, including insurance, business, asset and interest rate risks. The insurance regulators monitor the level of RBC against a statutory “authorized control level” RBC at which point regulators have the option to assume control of the insurance company. The company action level RBC is 200% of the authorized control level and is the first point at which any action would be triggered. Our adjusted capital and RBC is reported to our insurance regulators annually based on formulas that may be revised throughout the year. We estimate our adjusted capital and RBC quarterly; however, these estimates may differ from actual results. As of September 30, 2020,March 31, 2021, Farm Bureau Life’s statutory total adjusted capital is estimated at $696.6$721.5 million, resulting in an RBC ratio of 525%531%, based on company action level capital of $132.6$135.9 million.

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On a consolidated basis, we anticipate that funds to meet our short-term and long-term capital expenditures, cash dividends to stockholders and operating cash needs will come from existing capital and internally generated funds. However, there can be no assurance that future experience regarding benefits and surrenders will be similar to historic experience since benefits and surrender levels are influenced by such factors as the interest rate environment, our financial strength ratings, the economy and other factors that impact policyholder behavior. COVID-19 hadcontinues to have a significant impact to the U.S. economy during the first quarter of 2020, followed by signs of economic recovery in the second and third quarters of 2020.economy. Although there have been economic impacts associated with COVID-19, we expect to continue generating sufficient funds from operations to maintain sufficient liquidity. Our investment portfolio at September 30, 2020,March 31, 2021, included $18.4$42.3 million of short-term investments, $15.0$70.9 million of cash and cash equivalents and $1,880.4$1,861.6 million in carrying value of U.S. Government and U.S. Government agency backed securities that could be readily converted to cash at or near carrying value. In addition, Farm Bureau Life is a member of the FHLB, which provides a source for additional liquidity, if needed. This membership allows us to utilize fixed or floating rate advances offered by the FHLB and secured by qualifying collateral. Our total capacity to utilize such advances is impacted by multiple factors including the market value of eligible collateral, our level of statutory admitted assets and excess reserves and our willingness or capacity to hold activity-based FHLB common stock.

Contractual ObligationsMerger Agreement

InUnder the normal courseMerger Agreement, we are required to pay a termination fee of business, we enter into insurance contracts, financing transactions, lease agreements or other commitments that are necessary or beneficialup to our operations. These commitments may obligate us$20.1 million, if the Merger Agreement is terminated in specified circumstances, and reimburse the out-of-pocket expenses of FBPCIC, Merger Sub and their respective affiliates up to certain cash flows during future periods. There have been no material changes to our total contractual obligations since December 31, 2019.a maximum of $5.3 million, if the Merger Agreement is terminated in specified circumstances.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks of Financial Instruments
 
There have been no material changes in the market risks from the information provided in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Form 10-K for the fiscal year ended December 31, 2019.2020.

The COVID-19 pandemic presents additional uncertainty to financial markets. See Item II, Management’s Discussion and Analysis, “Impact of COVID-19 and Recent Business Environment” and Part II, Item 1A, “Risk Factors.Environment.



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ITEM 4. CONTROLS AND PROCEDURES

At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities and Exchange Act of 1934 (the Act) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Our internal control over financial reporting changes from time-to-time as we modify and enhance our systems and processes to meet our dynamic needs. Changes are also made as we strive to be more efficient in how we conduct our business. In addition, minor modifications regarding how control procedures are executed and documented have been made with the operational changes required in response to COVID-19. While changes have taken place in our internal controls during the quarter ended September 30, 2020,March 31, 2021, there have been no changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

The performance of our company is subject to a variety of risks that you should review. Occurrence of these risks could materially affect our business, results of operations or financial condition, cause the trading price of our common stock to decline materially or cause our actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the Company. Please refer to Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. 2020.

We are supplementing the risk factors previously disclosed in such report as follows:

Our business, including our results of operations and financial condition, has been and is expectedRisks relating to continue to be adversely affected by the COVID-19 pandemic and may be adversely affected by any future pandemics.proposed Merger

The COVID-19 pandemic experienced acrossproposed Merger may not be completed within the United States during 2020 negatively impactedexpected timeframe, or at all, and the U.S. economy and caused significant societal disruption, as businesses experienced sales declines or mandated closures, and individuals were askedfailure to practice social distancing. The COVID-19 pandemic hascomplete the Merger could adversely affectedaffect our business and we expect it will continue to do so for an uncertain period of time. The future impact of COVID-19 or any other pandemic on our business cannot be predicted with certainty, but may include, without limitation, decreases in demand for or salesthe market price of our products, operational difficulties, increases in death benefits and other expenses, decreases in the value of our investment portfolio and/or decreases in our stockholders’ equity.common stock.

On May 2, 2021, we entered into the Merger Agreement Amendment, which amended the Original Agreement. The COVID-19 pandemic has also had the effect of heightening many of the other risks disclosedMerger Agreement is an executory contract subject to closing conditions beyond our control, and there is no guarantee that these conditions will be satisfied in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.a timely manner or at all.

Our financial conditionCompletion of the Merger is subject to various conditions, including the adoption of the Merger Agreement by the affirmative vote of (i) holders of at least a majority of all outstanding Class A common shares and Series B preferred shares, voting together as a single class, (ii) holders of at least a majority of all outstanding Class B common shares and (iii) holders of at least a majority of all outstanding Common Shares held by all of the holders of outstanding Common Shares (excluding IFBF and its affiliates, FBPCIC and its affiliates, and the directors and officers of IFBF, FBPCIC and each of their respective affiliates), in each case, entitled to vote on such matter at a meeting of shareholders duly called and held for such purpose (the Required Shareholder Vote), among other things. If any of the conditions to the proposed Merger are not satisfied (or waived by the other party), the Merger may not be completed. In addition, the Merger Agreement may be terminated under certain specified circumstances, including if the Merger has not been consummated on or prior to July 11, 2021 (unless automatically extended to September 11, 2021 if all closing conditions are satisfied other than receipt of the required regulatory consents). Failure to complete the Merger could adversely affect our business operations may be negatively impacted as a result of the proposal received from Farm Bureau Property & Casualty Insurance Company to acquire the Company’s common stock not currently owned by it or the Iowa Farm Bureau Federation, and the tradingmarket price of our common stock could decline significantly ifin a transactionnumber of ways, including the following:

If the Merger is not completed, and there are no other parties willing and able to acquire the Company at a price of $61.00 per share or higher, on terms acceptable to us, our stock price may decline as our stock has recently traded at prices based on the proposed per share consideration for the Merger.

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We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, for which we will have received little or no benefit if the Merger is not completed. Many of these fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger.
A failed Merger may result in negative publicity and a negative impression of us in the investment community.
Upon termination of the Merger Agreement by FBPCIC under specified circumstances, we would be required to pay a termination fee of $20,127,059.
Upon termination of the Merger Agreement by the Company or FBPCIC because the Required Shareholder Vote is not obtained, we would be required to pay FBPCIC $5,279,229 as a reimbursement of expenses.

The Company receivedMerger Agreement contains provisions that could discourage or make it difficult for a proposal dated September 4, 2020 from Farm Bureau Property & Casualty Insurance Company (FBPCIC)third party to acquire allus prior to the completion of the outstanding shares of Class A common stock and Class B common stock ofproposed Merger.

The Merger Agreement contains provisions that restrict our ability to entertain a third party proposal to acquire us. These provisions include the Company that are not currently owned by FBPCICgeneral prohibition on initiating, soliciting, or knowingly facilitating or assisting any inquiries or the Iowa Farm Bureau Federation at a purchase pricemaking of $47.00 per share in cash. Theany proposal or offer that is, or would reasonably be expected to lead to, any acquisition proposal, subject to certain conditions. The Company’s Boardexceptions. We are also required to pay a termination fee of Directors has established a Special Committee comprisedup to $20,127,059 if the Merger Agreement is terminated in specified circumstances, including if our board of independent directors to considertakes certain actions recommending against the Merger. These provisions might discourage an otherwise-interested third party from proposing an acquisition proposal, and the Special Committee has retained legal counsel and a financial advisor in connection with its review, evaluation and response to the proposal. To date, no decision has been made with respect to the Company’s response to the proposal and there caneven one that may be no assurance that any agreement with respect todeemed of greater value than the proposed transaction will be executed or that this or any other transaction will be approved or consummated. We anticipate incurring expenses associated with the proposal which could be significant, including those for the advisors and any other service providers retained by the Special Committee. Additionally, any actions taken by the Company in responseMerger to the proposal could result in litigation against the Company. Any such litigationour shareholders. Furthermore, even if a third party elects to propose an acquisition, our obligation to pay a termination fee may result in significant costs and may bethat third party offering a significant distractionlower value to our Board of Directors and our management. Additionally, if a transaction is not completed, the trading price of our common stock could decline, and that decline could be significant.shareholders than such party might otherwise have offered.




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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Issuer Repurchases of Equity Securities

The following table sets forthWe had no issuer purchasesrepurchases of equity securities for the quarter ended September 30, 2020.
Period (a) Total Number of Shares (or Units) Purchased(b) Average Price Paid per Share (or Unit)(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1, 2020 through July 31, 2020160,556 $34.82 160,556$26,321,519
August 1, 2020 through August 31, 2020— — $26,321,519
September 1, 2020 through September 30, 2020— — $26,321,519
Total160,556 $34.82 

March 31, 2021. We have $26.3 million available under the repurchase program announced on March 1, 2018, which will expire March 31, 2022. The program authorizes us to make repurchases of Class A common stock in the open market or through privately negotiated transactions, with the timing and terms of the purchases to be determined by management based on market conditions. Completion of the program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares, if any, that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice. Under the Merger Agreement, we have agreed not to repurchase any additional shares of our capital stock from the date of the Merger Agreement through the closing of the Merger, subject to certain exceptions, including pursuant to our equity awards plans.


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ITEM 6. EXHIBITS

(a) Exhibits:
2.1
2.1(a)
2.2
2.2(a)
10.1*+
10.2*+
10.3
31.1+
31.2+
32+
101+Interactive Data Files formatted in iXBRL (Inline eXtensible Business Reporting Language) from FBL Financial Group, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2020March 31, 2021 as follows: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Financial Statements
104Cover Page Interactive Data File formatted as iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.
+Filed herewith
*Exhibit relates to a compensatory plan for management or directors.

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SIGNATURES

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 thereunto duly authorized.


Date: November 5, 2020May 6, 2021                

FBL FINANCIAL GROUP, INC.
By/s/ Daniel D. Pitcher
Daniel D. Pitcher
Chief Executive Officer (Principal Executive Officer)
By/s/ Donald J. Seibel
Donald J. Seibel
Chief Financial Officer and Treasurer (Principal Financial Officer)
By/s/ Anthony J. Aldridge
Anthony J. Aldridge
Chief Accounting Officer (Principal Accounting Officer)


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