FBL Financial 8K Group Reports Third Quarter 2019 Results | FFG 31 Oct 19

FBL FINANCIAL GROUP, INC.

INVESTOR SUPPLEMENT

2019 Third Quarter




Corporate Headquarters	FBL Financial Group, Inc.
	5400 University Avenue
	West Des Moines, Iowa 50266-5997
	(515) 225-5400
Financial Inquiries	For more information contact:
	Kathleen Till Stange
	Vice President Corporate & Investor Relations
	Kathleen.TillStange@FBLFinancial.com
	(515) 226-6780
Internet Information	FBL Financial Group, Inc.
	www.fblfinancial.com
Stock Symbol	NYSE: FFG
Transfer Agent	American Stock Transfer & Trust Company, LLC
	6201 15th Avenue
	Brooklyn, NY 11219
	http://www.astfinancial.com



FBL Financial Group, Inc.
Financial Supplement (Unaudited)
September 30, 2019
Table of Contents/Notes

Consolidated Financial Statements:
Consolidated Balance Sheets		2
Consolidated Statements of Comprehensive Income		4
Consolidated Statements of Comprehensive Income, last five quarters		5
Net Income to Adjusted Operating Income Reconciliation and Pre-tax Adjusted Operating Income by Segment, last five quarters		6
Financial Information by Segment:
Segment Information		7
Statements of Pre-tax Adjusted Operating Income, last five quarters:
Annuity Segment		8
Life Insurance Segment		9
Corporate and Other Segment		11
Deferred Acquisition Costs by Segment		12
Impact of Unlocking on Pre-tax Adjusted Operating Income		14
Collected Premiums, last five quarters		15
Other Information		16

NOTE 1: In addition to net income as determined using U.S. Generally Accepted Accounting Principles (GAAP), we have consistently used adjusted operating income (a measure of earnings not recognized under GAAP), a financial measure common in the life insurance industry, as a primary economic measure to evaluate our financial performance. Adjusted operating income for the periods presented consists of net income adjusted to exclude the initial impact of changes in federal statutory income tax rates and tax laws, realized gains and losses on investments and the change in net unrealized gains and losses on derivatives and equity securities.

We use adjusted operating income, in addition to net income, to measure our performance since realized gains and losses on investments and the change in net unrealized gains and losses on derivatives and equities can fluctuate greatly from quarter to quarter. These fluctuations make it difficult to analyze core operating trends. A view of our adjusted operating performance without the impact of these items enhances the analysis of our results. We use adjusted operating income for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community.

We analyze our segment results based on pre-tax adjusted operating income, which excludes the impact of certain items that are included in pre-tax net income. Pre-tax adjusted operating income is a basis allowed for segment reporting under U.S. generally accounting principles (GAAP). See Note 9 to our consolidated financial statements in Form 10-Q for further information regarding how we define our segments and pre-tax adjusted operating income.

NOTE 2: Certain financial information presented herein may not add due to rounding.

FBL Financial Group, Inc.

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)



	September 30, 2019		December 31, 2018
Assets
Investments:
Fixed maturities - available for sale, at fair value (amortized cost: 2019 - $6,956,353; 2018 - $6,856,277)	$	7,729,814	$	7,033,045
Equity securities - at fair value (cost: 2019 - $93,365; 2018 - $93,564)	97,705		92,857
Mortgage loans	1,002,839		1,039,829
Real estate	1,543		1,543
Policy loans	200,354		197,366
Short-term investments	22,743		15,713
Other investments	54,127		33,765
Total investments	9,109,125		8,414,118

Cash and cash equivalents	13,007		19,035
Securities and indebtedness of related parties	71,278		60,962
Accrued investment income	78,962		74,524
Amounts receivable from affiliates	3,334		3,812
Reinsurance recoverable	105,493		102,386
Deferred acquisition costs	253,112		418,802
Value of insurance in force acquired	2,694		10,385
Current income taxes recoverable	6,448		4,807
Other assets	172,930		163,518
Assets held in separate accounts	612,338		561,281








Total assets	$	10,428,721	$	9,833,630

FBL Financial Group, Inc.

Consolidated Balance Sheets (Continued)

(Dollars in thousands)



	September 30, 2019		December 31, 2018
Liabilities and stockholders' equity
Liabilities:
Future policy benefits:
Interest sensitive products	$	5,491,250	$	5,403,125
Traditional life insurance and accident and health products	1,834,544		1,802,346
Other policy claims and benefits	39,846		51,298
Supplementary contracts without life contingencies	298,499		303,627
Advance premiums and other deposits	257,108		260,252
Amounts payable to affiliates	1,422		1,461
Short-term debt payable to non-affiliates	16,000		—
Long-term debt payable to non-affiliates	97,000		97,000
Deferred income taxes	165,215		75,449
Other liabilities	101,162		93,532
Liabilities related to separate accounts	612,338		561,281
Total liabilities	8,914,384		8,649,371

Stockholders' equity:
FBL Financial Group, Inc. stockholders' equity:
Preferred stock, without par value, at liquidation value - authorized 10,000,000 shares, issued and outstanding 5,000,000 Series B shares	3,000		3,000
Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,650,895 in 2019 and 24,707,402 shares in 2018	152,566		152,652
Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2019 and 2018	72		72
Accumulated other comprehensive income	406,175		91,318
Retained earnings	952,397		937,097
Total FBL Financial Group, Inc. stockholders' equity	1,514,210		1,184,139
Noncontrolling interest	127		120
Total stockholders' equity	1,514,337		1,184,259
Total liabilities and stockholders' equity	$	10,428,721	$	9,833,630

FBL Financial Group, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands, except per share data)



	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Revenues:
Interest sensitive product charges	$	31,135		$	31,161		$	94,935		$	92,165
Traditional life insurance premiums	46,982			48,124			147,361			148,712
Net investment income	101,478			105,757			316,012			310,753
Net realized capital gains (losses)	696			(709		)	11,230			(1,615		)
Net other-than-temporary impairment losses recognized in earnings	(50		)	(50		)	(919		)	(1,090		)
Other income	4,417			3,828			12,501			12,065
Total revenues	184,658			188,111			581,120			560,990

Benefits and expenses:
Interest sensitive product benefits	67,147			70,145			202,966			194,127
Traditional life insurance benefits	42,877			44,168			131,512			133,349
Policyholder dividends	2,441			2,480			7,539			7,591
Underwriting, acquisition and insurance expenses	39,197			30,834			114,334			107,621
Interest expense	1,213			1,212			3,637			3,638
Other expenses	5,764			5,061			18,649			16,281
Total benefits and expenses	158,639			153,900			478,637			462,607
	26,019			34,211			102,483			98,383
Income tax expense	(1,642		)	(4,818		)	(13,429		)	(14,462		)
Equity income, net of related income taxes	799			1,642			2,423			3,441
Net income	25,176			31,035			91,477			87,362
Net (income) loss attributable to noncontrolling interest	(47		)	(25		)	(7		)	16
Net income attributable to FBL Financial Group, Inc.	$	25,129		$	31,010		$	91,470		$	87,378

Comprehensive income (loss) attributable to FBL Financial Group, Inc.	$	128,511		$	(11,110	)	$	406,327		$	(103,164	)

Earnings per common share	$	1.01		$	1.24		$	3.69		$	3.50
Earnings per common share - assuming dilution	$	1.01		$	1.24		$	3.69		$	3.50

Cash dividends per common share	$	0.48		$	0.46		$	1.44		$	1.38
Special cash dividend per common share	$	—		$	—		$	1.50		$	1.50

FBL Financial Group, Inc.

Consolidated Statements of Comprehensive Income (Unaudited) - Quarterly

(Dollars in thousands, except per share data)



	Q3 2018			Q4 2018			Q1 2019			Q2 2019			Q3 2019
Revenues:
Interest sensitive product charges	$	31,161		$	30,624		$	31,266		$	32,534		$	31,135
Traditional life insurance premiums	48,124			49,600			49,392			50,987			46,982
Net investment income	105,757			83,865			109,640			104,894			101,478
Net realized capital gains (losses)	(709		)	(5,661		)	10,157			377			696

Total other-than-temporary impairment losses	(50		)	(3,982		)	(869		)	—			(50		)
Non-credit portion in other comprehensive income	—			74			—			—			—
Net impairment losses recognized in earnings	(50		)	(3,908		)	(869		)	—			(50		)
Other income	3,828			4,116			3,970			4,114			4,417
Total revenues	188,111			158,636			203,556			192,906			184,658

Benefits and expenses:
Interest sensitive product benefits	70,145			59,626			70,596			65,223			67,147
Traditional life insurance benefits	44,168			41,860			46,675			41,960			42,877
Policyholder dividends	2,480			2,539			2,534			2,564			2,441
Underwriting, acquisition and insurance expenses	30,834			44,434			36,189			38,948			39,197
Interest expense	1,212			1,213			1,212			1,212			1,213
Other expenses	5,061			6,314			6,250			6,635			5,764
Total benefits and expenses	153,900			155,986			163,456			156,542			158,639
	34,211			2,650			40,100			36,364			26,019
Income tax benefit (expense)	(4,818		)	2,812			(6,276		)	(5,511		)	(1,642		)
Equity income, net of related income taxes	1,642			998			220			1,404			799
Net income	31,035			6,460			34,044			32,257			25,176
Net loss (income) attributable to noncontrolling interest	(25		)	(45		)	(1		)	41			(47		)
Net income attributable to FBL Financial Group, Inc.	$	31,010		$	6,415		$	34,043		$	32,298		$	25,129

Comprehensive income (loss) attributable to FBL Financial Group, Inc.	$	(11,110	)	$	8,772		$	131,891		$	145,925		$	128,511

Earnings per common share	$	1.24		$	0.26		$	1.37		$	1.30		$	1.01
Earnings per common share - assuming dilution	$	1.24		$	0.26		$	1.37		$	1.30		$	1.01

Cash dividends per common share	$	0.46		$	0.46		$	0.48		$	0.48		$	0.48
Special cash dividend per common share	$	—		$	—		$	1.50		$	—		$	—

Weighted average common shares outstanding (in thousands):
Basic	24,919			24,888			24,765			24,757			24,759
Effect of dilutive securities	11			10			11			11			10
Diluted	24,930			24,898			24,776			24,768			24,769



FBL Financial Group, Inc.
Net Income to Adjusted Operating Income Reconciliation and Pre-tax Adjusted Operating Income by Segment
(Dollars in thousands, except per share data)


	Q3 2018			Q4 2018			Q1 2019			Q2 2019			Q3 2019

Net income attributable to FBL Financial Group, Inc.	$	31,010		$	6,415		$	34,043		$	32,298		$	25,129
Net income adjustments:
Impact of change in federal tax rate (1)	(617		)	—			—			—			—
Realized gains/losses on investments (2)	603			7,414			(7,230		)	(289		)	(440		)
Change in net unrealized gains/losses on derivatives (2)	876			4,997			(911		)	(272		)	526
Adjusted operating income (3)	$	31,872		$	18,826		$	25,902		$	31,737		$	25,215

Adjusted operating income per common share - assuming dilution (3)	$1.28			$0.75			$1.04			$1.28			$1.02

Adjusted operating return on equity, excluding AOCI - last twelve months	10.5%			10.0%			10.0%			9.9%			9.3%
Adjusted operating return on equity, including AOCI - last twelve months	9.0%			8.8%			8.9%			8.7%			7.8%

	Q3 2018			Q4 2018			Q1 2019			Q2 2019			Q3 2019
Impact of Adjustments on FBL Net Income
Initial impact of the Tax Act (1)	$	617		$	—		$	—		$	—		$	—
Realized gains (losses) on investments and change in net unrealized gains/losses on equity securities and derivatives	(2,658		)	(19,216		)	10,846			444			(198		)
Offsets: (4)
Change in amortization	725			945			(256		)	(48		)	(343		)
Reserve change on interest sensitive products	60			2,561			(285		)	315			432
Income tax	394			3,299			(2,164		)	(150		)	23
Net impact of net income adjustments	$	(862	)	$	(12,411	)	$	8,141		$	561		$	(86	)

	Q3 2018			Q4 2018			Q1 2019			Q2 2019			Q3 2019
Pre-tax adjusted operating income by segment:
Annuity segment	$	18,179		$	12,087		$	15,662		$	14,637		$	8,121
Life Insurance segment	11,958			8,444			10,092			18,239			14,032
Corporate and Other segment	7,999			(953		)	4,319			4,595			4,939
Total pre-tax adjusted operating income	38,136			19,578			30,073			37,471			27,092
Income taxes on adjusted operating income	(6,264		)	(752		)	(4,171		)	(5,734		)	(1,877		)
Adjusted operating income (3)	$	31,872		$	18,826		$	25,902		$	31,737		$	25,215


(1)	During the third quarter of 2018, we adjusted the provisional estimate of the initial impact of the Tax Act on our deferred tax assets and liabilities as of December 31, 2017. See Note 5 to our consolidated financial statements in Form 10-Q for the quarter ended September 30, 2018 for additional information.

(2) Amounts are net of offsets related to changes in amortization of unearned revenue reserves, deferred sales inducements and deferred acquisition costs, as well as changes in interest sensitive product reserves and income taxes attributable to these items.


(3)	Adjusted operating income is a non-GAAP measure of earnings, see Note 1 on page 1 for additional information.

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

FBL Financial Group, Inc.

Segment Information

We analyze operations by reviewing financial information regarding our primary products that are aggregated into the Annuity and Life Insurance product segments. In addition, our Corporate and Other segment includes various support operations, corporate capital and other product lines that are not currently underwritten by the Company.

The Annuity segment primarily consists of fixed rate and indexed annuities and supplementary contracts (some of which involve life contingencies). Fixed rate and indexed annuities provide for tax-deferred savings and supplementary contracts provide for the systematic repayment of funds that accumulate interest. Fixed rate annuities consist primarily of flexible premium deferred annuities, but also include single premium deferred and immediate contracts. With fixed rate annuities, we bear the underlying investment risk and credit interest to the contracts at rates we determine, subject to interest rate guarantees. With indexed annuity products, we bear the underlying investment risk and credit interest in an amount equal to a percentage of the gain in a specified market index, subject to minimum guarantees.

The Life Insurance segment consists of whole life, term life and universal life policies, including indexed universal life. These policies provide benefits upon the death of the insured and may also allow the customer to build cash value on a tax-deferred basis.

The Corporate and Other segment consists of the following corporate items and products/services that do not meet the quantitative threshold for separate segment reporting:



•		investments and related investment income not specifically allocated to our product segments;
•		interest expense;
•		closed blocks of variable annuity, variable universal life insurance and accident and health insurance products;
•		advisory services for the management of investments and other companies;
•		marketing and distribution services for the sale of mutual funds and insurance products not issued by us; and
•		leasing services, primarily with affiliates.

We analyze our segment results based on pre-tax adjusted operating income. Accordingly, income taxes are not allocated to the segments. In addition, adjusted operating results are reported net of transactions between the segments.



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Annuity Segment

	Q3 2018				Q4 2018			Q1 2019			Q2 2019			Q3 2019
Pre-tax Adjusted Operating Income				(Dollars in thousands)

Adjusted operating revenues:
Interest sensitive product charges	$	1,280			$	1,474		$	1,567		$	1,772		$	1,608
Net investment income (1)	54,144				53,248			51,115			52,491			49,633
Total adjusted operating revenues	55,424				54,722			52,682			54,263			51,241

Adjusted operating benefits and expenses:
Interest sensitive product benefits	29,037				32,299			28,070			30,450			28,585
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	374				631			514			482			405
Amortization of deferred acquisition costs	2,319				2,789			2,679			2,917			8,015
Amortization of value of insurance in force acquired	165				165			163			163			164
Other underwriting expenses (1)	5,350				6,751			5,594			5,614			5,951
Total underwriting, acquisition and insurance expenses	8,208				10,336			8,950			9,176			14,535
Total adjusted operating benefits and expenses	37,245				42,635			37,020			39,626			43,120
Pre-tax adjusted operating income	$	18,179			$	12,087		$	15,662		$	14,637		$	8,121

Selected balance sheet data, securities at amortized cost:
Assets:
Investments	$	4,596,422			$	4,489,765		$	4,497,715		$	4,525,458		$	4,521,789
Deferred acquisition costs	92,442				93,819			94,164			93,898			88,266
Value of insurance in force acquired	3,017				2,852			2,689			2,525			2,361

Liabilities and equity:
Liabilities:
Interest sensitive product reserves	$	4,096,314			$	4,036,152		$	4,038,052		$	4,060,032		$	4,054,299
Other insurance reserves	344,963				338,646			341,506			340,896			338,585
Allocated equity, excluding AOCI	270,918				266,863			249,635			250,853			250,934

Other data:
Number of direct contracts	52,925				52,911			52,519			52,461			52,914

Portfolio yield net of assumed defaults	4.43		%		4.48		%	4.46		%	4.42		%	4.38		%
Credited rate	2.57				2.58			2.60			2.61			2.61
Spread on individual annuities at end of quarter (2)	1.86		%		1.90		%	1.86		%	1.81		%	1.77		%

Interest sensitive reserve activity:
Individual annuity reserve:
Balance, beginning of period	$	3,171,359			$	3,176,881		$	3,194,307		$	3,207,285		$	3,214,755
Deposits	53,584				67,075			63,784			56,643			53,972
Withdrawals, surrenders and death benefits	(62,234		)		(59,661		)	(63,379		)	(62,808		)	(79,157		)
Net flows	(8,650		)		7,414			405			(6,165		)	(25,185		)

Policyholder interest	20,524				20,824			18,543			21,128			18,352
Annuitizations and other	(6,352		)		(10,812		)	(5,970		)	(7,493		)	(3,422		)
Balance, end of period	3,176,881				3,194,307			3,207,285			3,214,755			3,204,500
Other interest sensitive reserves	919,433				841,845			830,767			845,277			849,799
Total interest sensitive product reserves	$	4,096,314			$	4,036,152		$	4,038,052		$	4,060,032		$	4,054,299


(1)	During the fourth quarter of 2018 we offered a voluntary early retirement program resulting in a decrease in net investment income from increased investment expenses ($0.6 million) and an increase in other underwriting expenses ($1.9 million).


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



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Life Insurance Segment

	Q3 2018				Q4 2018			Q1 2019			Q2 2019			Q3 2019
Pre-tax Adjusted Operating Income				(Dollars in thousands)

Adjusted operating revenues:
Interest sensitive product charges	$	18,876			$	18,471		$	18,988		$	19,635		$	19,163
Traditional life insurance premiums	48,124				49,600			49,392			50,987			46,982
Net investment income (1)	39,654				38,335			38,991			40,454			38,581
Other income	(108		)		(66		)	(113		)	(138		)	(131		)
Total adjusted operating revenues	106,546				106,340			107,258			110,938			104,595

Adjusted operating benefits and expenses:
Interest sensitive product benefits:
Interest and index credits (2)	8,697				10,103			8,051			9,018			8,326
Death benefits and other (2)	18,475				16,661			14,466			13,892			17,198
Total interest sensitive product benefits	27,172				26,764			22,517			22,910			25,524
Traditional life insurance benefits:
Death benefits	21,888				20,001			24,416			20,577			25,233
Surrender and other benefits	8,110				9,196			9,723			10,092			9,435
Increase in traditional life future policy benefits (2)	14,170				12,666			12,534			11,291			8,206
Total traditional life insurance benefits	44,168				41,863			46,673			41,960			42,874
Policyholder dividends	2,480				2,539			2,534			2,564			2,441
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	4,200				5,275			4,639			5,179			4,487
Amortization of deferred acquisition costs	2,148				4,182			4,799			4,344			(592		)
Amortization of value of insurance in force acquired	373				373			372			372			372
Other underwriting expenses (1)	14,907				17,893			16,002			16,378			16,278
Total underwriting, acquisition and insurance expenses	21,628				27,723			25,812			26,273			20,545
Total adjusted operating benefits and expenses	95,448				98,889			97,536			93,707			91,384
	$	11,098			$	7,451		$	9,722		$	17,231		$	13,211
Equity income, before tax	860				993			370			1,008			821
Pre-tax adjusted operating income	$	11,958			$	8,444		$	10,092		$	18,239		$	14,032

Selected balance sheet data, securities at amortized cost:
Assets:
Investments	$	3,031,624			$	3,060,235		$	3,073,086		$	3,110,890		$	3,123,239
Deferred acquisition costs	298,368				308,937			312,664			316,309			323,609
Value of insurance in force acquired	14,784				14,411			14,039			13,668			13,296

Liabilities and equity:
Liabilities: (3)
Interest sensitive reserves	$	979,858			$	989,513		$	1,001,865		$	1,013,247		$	1,024,103
Other insurance reserves	1,995,675				2,001,449			2,013,886			2,019,588			2,033,080
Allocated equity, excluding AOCI	450,927				452,274			468,983			471,279			476,443



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Life Insurance Segment (Continued)

	Q3 2018				Q4 2018			Q1 2019			Q2 2019			Q3 2019
				(Dollars in thousands)
Other data:
Number of direct policies - traditional life	364,412				365,909			365,650			365,340			365,099
Number of direct policies - universal life	67,951				69,832			70,494			71,049			71,367
Direct face amounts - traditional life	$	51,833,952			$	52,191,204		$	52,352,065		$	52,729,936		$	53,005,016
Direct face amounts - universal life	$	7,539,216			$	7,777,370		$	7,888,196		$	7,978,929		$	8,020,444

Portfolio yield net of assumed defaults	4.98		%		5.02		%	5.00		%	4.97		%	4.91		%
Credited rate	3.76				3.78			3.77			3.79			3.80
Spread on universal life at end of quarter (4)	1.22		%		1.24		%	1.23		%	1.18		%	1.11		%

Interest sensitive reserve activity: (3)
Balance, beginning of period	$	966,032			$	979,858		$	989,513		$	1,001,865		$	1,013,247
Deposits	26,617				29,660			29,632			31,271			28,110
Withdrawals and surrenders	(7,577		)		(7,778		)	(5,703		)	(9,081		)	(8,455		)
Net flows	19,040				21,882			23,929			22,190			19,655

Policyholder interest	7,827				7,297			7,423			8,349			7,774
Policy charges	(19,129		)		(19,736		)	(20,017		)	(20,287		)	(20,129		)
Benefits and other	6,088				212			1,017			1,130			3,556
Balance, end of period	$	979,858			$	989,513		$	1,001,865		$	1,013,247		$	1,024,103


(1)	During the fourth quarter of 2018 we offered a voluntary early retirement program resulting in a decrease in net investment income from increased investment expenses ($0.4 million) and an increase in other underwriting expenses ($3.6 million).

(2)

During the fourth quarter of 2018 we incurred additional charges due to updating the estimate of the impact of an immaterial error related to policy benefits on a closed block of interest sensitive whole life business. The correction, along with accrued interest, resulted in increases to interest credited ($2.0 million), interest sensitive death benefits ($3.3 million) and traditional life future policy benefits ($0.2 million).


(3)	Reserves on riders in interest sensitive life insurance products are included in Other insurance reserves.


(4)	Point-in-time spread at the balance sheet date used by management for decision making with universal life (excluding products with a secondary guarantee) differs from the spread earned during the reporting period disclosed in the Form 10Q or 10K.



FBL Financial Group, Inc.
Statements of Pre-tax Adjusted Operating Income
Corporate and Other

	Q3 2018				Q4 2018			Q1 2019			Q2 2019			Q3 2019
Pre-tax Adjusted Operating Income (Loss)				(Dollars in thousands)

Adjusted operating revenues:
Interest sensitive product charges	$	10,494			$	11,005		$	10,405		$	10,714		$	10,408
Net investment income (1)	8,349				7,735			8,640			8,588			8,277
Other income	3,936				4,182			4,083			4,252			4,548
Total adjusted operating revenues	22,779				22,922			23,128			23,554			23,233

Adjusted operating benefits and expenses:
Interest sensitive product benefits	8,465				8,944			10,365			8,858			7,642
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	684				631			704			746			720
Amortization of deferred acquisition costs	(1,148		)		5,629			(967		)	905			1,854
Other underwriting expenses	1,698				1,369			1,153			1,413			1,244
Total underwriting, acquisition and insurance expenses	1,234				7,629			890			3,064			3,818
Interest expense	1,212				1,213			1,212			1,212			1,213
Other expenses (1)	5,061				6,314			6,250			6,635			5,764
Total adjusted operating benefits and expenses	15,972				24,100			18,717			19,769			18,437
	6,807				(1,178		)	4,411			3,785			4,796
Net loss (income) attributable to noncontrolling interest	(25		)		(45		)	(1		)	41			(47		)
Equity income (loss), before tax	1,217				270			(91		)	769			190
Pre-tax non-GAAP operating income (loss)	$	7,999			$	(953	)	$	4,319		$	4,595		$	4,939

Selected balance sheet data, securities at amortized cost:
Assets:
Investments	$	684,541			$	688,057		$	687,836		$	654,750		$	686,296
Deferred acquisition costs	69,887				62,778			63,593			62,499			60,346
Separate account assets	651,797				561,281			614,121			625,177			612,338

Liabilities and equity:
Liabilities:
Interest sensitive reserves	$	371,502			$	372,056		$	370,668		$	370,238		$	372,492
Other insurance reserves	89,389				86,324			87,644			85,842			81,706
Separate account liabilities	651,797				561,281			614,121			625,177			612,338
Allocated equity, excluding AOCI	379,918				370,684			352,616			369,536			378,198

Rollforward of separate account balances:
Beginning separate account balance	$	638,061			$	651,797		$	561,281		$	614,121		$	625,177
Net premiums and transfers	836				3,518			5,277			5,115			1,208
Net investment income (loss)	28,717				(77,872		)	63,914			22,611			1,721
Charges, benefits and surrenders	(15,817		)		(16,162		)	(16,351		)	(16,670		)	(15,768		)
Ending separate account balance	$	651,797			$	561,281		$	614,121		$	625,177		$	612,338

Other data:
Number of direct contracts - variable annuity	9,343				9,217			9,071			8,938			8,810
Number of direct policies - variable universal life	35,613				35,160			34,675			34,236			33,787
Direct face amounts - variable universal life	$	4,388,771			$	4,321,462		$	4,267,891		$	4,217,491		$	4,158,021


(1)	During the fourth quarter of 2018 we offered a voluntary early retirement program resulting in a decrease in net investment income from increased investment expenses ($0.1 million) and an increase in other expenses ($1.0 million).



FBL Financial Group, Inc.
Deferred Acquisition Costs by Segment

	Q3 2018				Q4 2018			Q1 2019			Q2 2019			Q3 2019
				(Dollars in thousands)
Annuity
Balance - beginning of period	$	92,377			$	92,442		$	93,819		$	94,164		$	93,898
Capitalization:
Commissions	2,119				2,994			2,872			2,319			2,291
Expenses	291				433			263			306			302
Total capitalization	2,410				3,427			3,135			2,625			2,593
Amortization - adjusted operating basis, before impact of unlocking	(2,616		)		(2,857		)	(2,723		)	(2,974		)	(3,471		)
Amortization - unlocking, adjusted operating basis	249				—			—			—			(4,863		)
Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities	22				807			(67		)	83			109
Balance - end of period	$	92,442			$	93,819		$	94,164		$	93,898		$	88,266

Life Insurance
Balance - beginning of period	$	294,365			$	298,368		$	308,937		$	312,664		$	316,309
Capitalization:
Commissions	4,279				9,724			6,141			5,451			4,243
Expenses	2,257				3,230			2,349			2,709			2,367
Deferral of sales inducements	163				1,746			384			263			111
Total capitalization	6,699				14,700			8,874			8,423			6,721
Amortization - adjusted operating basis, before impact of unlocking	(4,416		)		(4,360		)	(4,917		)	(4,519		)	(3,206		)
Amortization - unlocking, adjusted operating basis	2,009				—			—			—			3,842
Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities	(289		)		229			(230		)	(259		)	(57		)
Balance - end of period	$	298,368			$	308,937		$	312,664		$	316,309		$	323,609

Corporate and Other
Balance - beginning of period	$	66,315			$	68,101		$	62,778		$	63,593		$	62,499
Capitalization:
Commissions	86				114			113			105			77
Deferral of sales inducements	2				15			1			—			2
Total capitalization	88				129			114			105			79
Amortization - adjusted operating basis, before impact of unlocking	(1,240		)		(5,687		)	966			(913		)	(1,771		)
Amortization - unlocking, adjusted operating basis	2,458				—			—			—			(109		)
Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities	480				235			(265		)	(286		)	(352		)
Balance - end of period	$	68,101			$	62,778		$	63,593		$	62,499		$	60,346



FBL Financial Group, Inc.
Deferred Acquisition Costs by Segment (Continued)

	Q3 2018				Q4 2018			Q1 2019			Q2 2019			Q3 2019
				(Dollars in thousands)
Total
Balance - beginning of period	$	453,057			$	458,911		$	465,534		$	470,421		$	472,706
Capitalization:
Commissions	6,484				12,832			9,126			7,875			6,611
Expenses	2,548				3,663			2,612			3,015			2,669
Deferral of sales inducements	165				1,761			385			263			113
Total capitalization	9,197				18,256			12,123			11,153			9,393
Amortization - adjusted operating basis, before impact of unlocking	(8,272		)		(12,904		)	(6,674		)	(8,406		)	(8,448		)
Amortization - unlocking, adjusted operating basis	4,716				—			—			—			(1,130		)
Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives and equities	213				1,271			(562		)	(462		)	(300		)
Balance - end of period	458,911				465,534			470,421			472,706			472,221
Impact of unrealized gains in AOCI	(46,865		)		(46,732		)	(96,710		)	(158,405		)	(219,109		)
Deferred acquisition costs	$	412,046			$	418,802		$	373,711		$	314,301		$	253,112



FBL Financial Group, Inc.
Impact of Unlocking on Pre-tax Adjusted Operating Income

	Q3 2018				Q4 2018		Q1 2019		Q2 2019		Q3 2019
				(Dollars in thousands)
Annuity Segment
Amortization of deferred sales inducements reported in interest sensitive product benefits	$	13			$	—	$	—	$	—	$	(195	)
Amortization of deferred acquisition costs	236				—		—		—		(4,668		)
Increase (decrease) to pre-tax adjusted operating income	$	249			$	—	$	—	$	—	$	(4,863	)

Life Segment
Amortization of unearned revenue reserve reported in interest sensitive product charges and other income	$	420			$	—	$	—	$	—	$	(386	)
Amortization of deferred sales inducements reported in interest sensitive product benefits	(209		)		—		—		—		45
Amortization of deferred sales inducements reported in traditional life insurance benefits	65				—		—		—		69
Amortization of deferred acquisition costs	2,152				—		—		—		3,728
Changes in reserves reported in interest sensitive product benefits	(4,755		)		—		—		—		(1,062		)
Increase (decrease) to pre-tax adjusted operating income	$	(2,327	)		$	—	$	—	$	—	$	2,394

Corporate and Other Segment
Amortization of unearned revenue reserve reported in interest sensitive product charges	$	(667	)		$	—	$	—	$	—	$	(94	)
Amortization of deferred sales inducements reported in interest sensitive product benefits	76				—		—		—		26
Amortization of deferred acquisition costs	2,382				—		—		—		(135		)
Changes in reserves reported in interest sensitive product benefits	—				—		—		—		2
Increase (decrease) to pre-tax adjusted operating income	$	1,791			$	—	$	—	$	—	$	(201	)

Total impact of unlocking on pre-tax adjusted operating income	$	(287	)		$	—	$	—	$	—	$	(2,670	)



FBL Financial Group, Inc.
Collected Premiums (1)

	Q3 2018				Q4 2018			Q1 2019			Q2 2019			Q3 2019
				(Dollars in thousands)
Annuity
Individual:
Fixed rate:
First year	$	14,593			$	21,256		$	22,785		$	14,308		$	13,313
Renewal	11,371				14,361			16,631			16,017			11,644
Total fixed rate	25,964				35,617			39,416			30,325			24,957
Index annuity	29,183				33,337			28,301			28,417			30,293
Total individual	55,147				68,954			67,717			58,742			55,250
Group	1,186				1,503			1,789			910			826
Total Annuity	56,333				70,457			69,506			59,652			56,076

Life Insurance
Direct:
Universal life:
First year	7,140				6,625			5,786			7,967			6,571
Renewal	18,887				20,764			23,051			22,332			21,214
Total universal life	26,027				27,389			28,837			30,299			27,785
Participating whole life:
First year	3,249				2,658			2,622			2,659			1,834
Renewal	22,269				23,761			23,725			23,684			22,016
Total participating whole life	25,518				26,419			26,347			26,343			23,850
Term life and other:
First year	2,513				2,861			2,636			2,898			2,656
Renewal	25,995				26,656			27,430			27,382			26,798
Total term life and other	28,508				29,517			30,066			30,280			29,454
Total direct life insurance	80,053				83,325			85,250			86,922			81,089
Reinsurance	(6,186		)		(7,126		)	(7,249		)	(7,524		)	(6,046		)
Total Life Insurance	73,867				76,199			78,001			79,398			75,043

Corporate and Other
Variable, net of reinsurance	11,424				10,447			13,167			13,065			10,982
Accident and health, net of reinsurance	43				271			75			45			41
Total Corporate and Other	11,467				10,718			13,242			13,110			11,023

Total collected premiums	$	141,667			$	157,374		$	160,749		$	152,160		$	142,142


(1)	Collected premiums is a measure of sales production not recognized under GAAP.



FBL Financial Group, Inc.
Other Information

	September 30,				December 31,			March 31,			June 30,			September 30,
	2018				2018			2019			2019			2019
				(Dollars in thousands, except per share data)

Capitalization:
Short-term debt	$	—			$	—		$	4,000		$	—		$	16,000
Trust preferred securities, due 2047	97,000				97,000			97,000			97,000			97,000
Total debt	97,000				97,000			101,000			97,000			113,000

Preferred stock	3,000				3,000			3,000			3,000			3,000
Common stockholders' equity, excluding AOCI	1,101,762				1,089,821			1,071,234			1,091,669			1,105,035
Total capitalization, excluding AOCI	1,201,762				1,189,821			1,175,234			1,191,669			1,221,035

Accumulated other comprehensive income	88,961				91,318			189,166			302,793			406,175
Total capitalization, including AOCI	$	1,290,723			$	1,281,139		$	1,364,400		$	1,494,462		$	1,627,210

Common shares outstanding	24,818,209				24,718,815			24,652,340			24,659,885			24,662,308

Book Value per Share:
Excluding AOCI	$	44.39			$	44.09		$	43.45		$	44.27		$	44.81
Including AOCI	47.98				47.78			51.13			56.55			61.28

Debt-to-Capital Ratio:
Excluding AOCI	8.1		%		8.2		%	8.6		%	8.1		%	9.3		%
Including AOCI	7.5				7.6			7.4			6.5			6.9

Debt-to-Capital Ratio with 50% Credit for Trust Preferred Securities:
Excluding AOCI	4.0		%		4.1		%	4.5		%	4.1		%	5.3		%
Including AOCI	3.8				3.8			3.8			3.2			4.0

Class A Common Ownership:
Iowa Farm Bureau Federation	59.5		%		59.7		%	59.9		%	59.9		%	59.9		%
Public	40.5				40.3			40.1			40.1			40.1
	100.0		%		100.0		%	100.0		%	100.0		%	100.0		%



FBL Financial Group, Inc.
Other Information (Continued)

	September 30,		December 31,		March 31,		June 30,		September 30,
	2018		2018		2019		2019		2019

Investment by Type:
Fixed maturity securities	57.2	%	57.5	%	57.9	%	58.2	%	58.2	%
Residential mortgage-backed	7.2		7.2		7.2		7.1		7.4
Commercial mortgage-backed	10.2		10.4		10.6		11.3		11.6
Other asset-backed	9.0		8.4		8.1		7.8		7.6
Mortgage loans	12.0		12.4		11.9		11.5		11.1
Equity securities	1.2		1.1		1.3		1.2		1.1
Other	3.2		3.0		3.0		2.9		3.0

Quality of Fixed Maturity Securities:
AAA, AA, A	68.0	%	68.3	%	68.3	%	68.0	%	68.3	%
BBB	29.2		29.3		29.0		29.7		29.5
BB	1.8		1.5		1.7		1.6		1.5
<BB	1.0		0.9		1.0		0.7		0.7

Agent Strength Totals:
Full time agents and agency managers:
8-state Farm Bureau Property & Casualty channel	1,145		1,190		1,180		1,185		1,200
6 life partner states and Colorado	665		649		650		649		655
	1,810		1,839		1,830		1,834		1,855



FBL Financial Group, Inc.
Income Taxes
(Dollars in thousands)

	Q3 2018			Q4 2018			Q1 2019			Q2 2019			Q3 2019

Income tax benefit (expense)	$	(4,818	)	$	2,812		$	(6,276	)	$	(5,511	)	$	(1,642	)
Tax on equity income	(435		)	(265		)	(59		)	(373		)	(212		)
Net income adjustments:
Impact of change in federal tax rate	(617		)	—			—			—			—
Income tax offset on net income adjustments	(394		)	(3,299		)	2,164			150			(23		)
Income taxes on adjusted operating income	$	(6,264	)	$	(752	)	$	(4,171	)	$	(5,734	)	$	(1,877	)

Income taxes on adjusted operating income before benefits of LIHTC investments	$	(7,148	)	$	(1,841	)	$	(5,076	)	$	(6,633	)	$	(2,727	)
Amounts related to LIHTC investments	884			1,089			905			899			850
Income taxes on adjusted operating income	$	(6,264	)	$	(752	)	$	(4,171	)	$	(5,734	)	$	(1,877	)

FBL Financial (FFG) 8-KFBL Financial Group Reports Third Quarter 2019 Results