FBL Financial (FFG) 10-K 2020 FY Annual report

P68YP68Y421411715001P0Y0M14DP0Y0M14DP0Y0M14DP2Y1M20D0001012771--12-312020FYfalseus-gaap:OtherLiabilitiesus-gaap:OtherLiabilitiesQuarterly Financial Information (Unaudited)

Unaudited Quarterly Results of Operations

	2020
Quarter ended	March 31,		June 30,		September 30,		December 31,
	(Dollars in thousands, except per share data)
Premiums and product charges	$	81,028	$	83,238	$	83,212	$	83,793
Net investment income	74,917		110,435		105,856		106,023
Realized gains (losses) on investments	(25,662)		2,256		3,894		3,228
Total revenues	135,263		200,713		197,845		198,444
Net income attributable to FBL Financial Group, Inc.	(2,515)		26,211		20,974		27,843
Earnings per common share	$	(0.10)	$	1.06	$	0.85	$	1.14
Earnings per common share - assuming dilution	$	(0.10)	$	1.06	$	0.85	$	1.14

	2019
Quarter ended	March 31,		June 30,		September 30,		December 31,
	(Dollars in thousands, except per share data)
Premiums and product charges	$	80,658	$	83,521	$	78,117	$	82,680
Net investment income	109,640		104,894		101,478		108,986
Realized gains (losses) on investments	9,288		377		646		(2,707)
Total revenues	203,556		192,906		184,658		193,561
Net income attributable to FBL Financial Group, Inc.	34,043		32,298		25,129		34,739
Earnings per common share	$	1.37	$	1.30	$	1.01	$	1.40
Earnings per common share - assuming dilution	$	1.37	$	1.30	$	1.01	$	1.40

Unaudited Quarterly Results of Operations

	2020
Quarter ended	March 31,		June 30,		September 30,		December 31,
	(Dollars in thousands, except per share data)
Premiums and product charges	$	81,028	$	83,238	$	83,212	$	83,793
Net investment income	74,917		110,435		105,856		106,023
Realized gains (losses) on investments	(25,662)		2,256		3,894		3,228
Total revenues	135,263		200,713		197,845		198,444
Net income attributable to FBL Financial Group, Inc.	(2,515)		26,211		20,974		27,843
Earnings per common share	$	(0.10)	$	1.06	$	0.85	$	1.14
Earnings per common share - assuming dilution	$	(0.10)	$	1.06	$	0.85	$	1.14

	2019
Quarter ended	March 31,		June 30,		September 30,		December 31,
	(Dollars in thousands, except per share data)
Premiums and product charges	$	80,658	$	83,521	$	78,117	$	82,680
Net investment income	109,640		104,894		101,478		108,986
Realized gains (losses) on investments	9,288		377		646		(2,707)
Total revenues	203,556		192,906		184,658		193,561
Net income attributable to FBL Financial Group, Inc.	34,043		32,298		25,129		34,739
Earnings per common share	$	1.37	$	1.30	$	1.01	$	1.40
Earnings per common share - assuming dilution	$	1.37	$	1.30	$	1.01	$	1.40

81,02883,23883,21283,79374,917110,435105,856106,02325,6622,2563,8943,228135,263200,713197,845198,4442,51526,21120,97427,8430.101.060.851.140.101.060.851.1480,65883,52178,11782,680109,640104,894101,478108,9869,2883776462,707203,556192,906184,658193,56134,04332,29825,12934,7391.371.301.011.401.371.301.011.40

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

(Mark one)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020.

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 FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Iowa			42-1411715
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
5400 University Avenue,	West Des Moines,	Iowa	50266-5997
(Address of principal executive offices)			(Zip Code)
		(515)	225-5400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, without par value	FFG	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

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 (§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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes ☐ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of June 30, 2020, the aggregate market value of the registrant’s Class A Common Stock and Class B Common Stock held by non-affiliates of the registrant was $342,140,375 based on the closing sale price as reported on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
Title of each class	Outstanding at February 22, 2021
Class A Common Stock, without par value	24,385,109
Class B Common Stock, without par value	11,413
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report is incorporated by reference to portions of the definitive proxy statement of the registrant for its 2021 annual shareholders meeting, or such information will be set forth in an amendment to this Annual Report on Form 10-K.

FBL FINANCIAL GROUP, INC.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
PART I.
	Cautionary Statement Regarding Forward Looking Information	1
Item 1.	Business	3
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	24
Item 2.	Properties	25
Item 3.	Legal Proceedings	25
Item 4.	Mine Safety Disclosures	25
PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Not Applicable
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 8.	Consolidated Financial Statements and Supplementary Data	60
	Management's Report on Internal Control Over Financial Reporting	60
	Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	60
	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	61
	Consolidated Balance Sheets	64
	Consolidated Statements of Operations	66
	Consolidated Statements of Comprehensive Income	67
	Consolidated Statements of Changes in Stockholders' Equity	68
	Consolidated Statements of Cash Flows	69
	Notes to Consolidated Financial Statements	71
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	117
Item 9A.	Controls and Procedures	118
Item 9B.	Other Information	118
PART III.
	The information required by Part III, Items 10 through 14, will be set forth in an amendment to this Annual Report on Form 10-K or is incorporated by reference to our definitive proxy statement for our 2021 annual shareholders meeting to be filed pursuant to Regulation 14A within 120 days after December 31, 2020.
PART IV.
Item 15.	Exhibits and Financial Statement Schedules	120
	SIGNATURES	122
	Schedule I - Summary of Investments - Other than Investments in Related Parties	123
	Schedule II - Condensed Financial Information of Registrant	124
	Schedule III - Supplementary Insurance Information	128
	Schedule IV - Reinsurance	130

(This page has been left blank intentionally.)

Cautionary Statement Regarding Forward Looking Information

This Form 10-K includes 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. These forward-looking statements are based on assumptions that we believe to be reasonable; however, no assurance can be given that the assumptions will prove to be correct. We undertake no obligation to update any forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of our business include but are not limited to the following.

•The proposed Merger (as defined below in Part I, Item 1) may not be completed within the expected timeframe, or at all, and the failure to complete the Merger could adversely affect our business and the market price of our common stock.

•The Merger Agreement (as defined below in Part I, Item 1) contains provisions that could discourage or make it difficult for a third party to acquire us prior to the completion of the proposed Merger.

•The announcement of the proposed Merger could adversely affect our business and results and operations.

•Changing interest rates, market volatility and general economic conditions affect the risks and the returns on both our products and our investment portfolio.

•Difficult conditions in the financial markets and the economy may materially adversely affect our business and results of operations.

•Adverse financial market conditions may significantly affect our liquidity, access to capital and cost of capital.

•Our investment portfolio is subject to credit quality risks that may diminish the value of our invested assets and affect our profitability and reported book value per share.

•Our valuation of fixed maturity securities may include methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may materially adversely affect our results of operations or financial condition.

•Actual experience that differs from our assumptions regarding future persistency, mortality, interest rates and benefit utilization used in pricing our products and calculating reserve amounts and deferred acquisition costs could have a material adverse impact on our financial results.

•Actual experience that differs from assumptions may require us to accelerate the amortization of deferred acquisition costs, which could adversely affect our results of operations or financial condition.

•Our earnings are influenced by our claims experience, which is difficult to estimate for future periods. If our future claims experience does not match our pricing assumptions or past results, our earnings could be materially adversely affected.

•As a holding company, we depend on our subsidiaries for funds to meet our obligations, but our life insurance subsidiaries’ ability to make distributions to us is limited by law, and could be affected by minimum risk-based capital requirements.

•All segments of our business are highly regulated and these regulations or changes in them could affect our profitability.

•A significant change in accounting guidance could have a material effect on our financial condition or results of operations.

•Changes in federal tax laws may affect sales of our products and profitability.

•We face risks relating to litigation, including the costs of such litigation, management distraction and the potential for damage awards, which may adversely impact our business.

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

•We face competition from companies having greater financial resources, more advanced technology systems, broader arrays of products, higher ratings and stronger financial performance, which may impair our ability to retain existing customers, attract new customers and maintain our profitability and financial strength.

•A significant ratings downgrade may have a material adverse effect on our business.

•Cyber attacks, system security risks, data protection breaches and other technology failures could adversely affect our business and results of operations.

•Success of our business depends in part on effective information technology systems and on continuing to develop and implement improvements.

•Our reinsurance program involves risks because we remain liable with respect to the liabilities ceded to reinsurers if the reinsurers fail to meet the obligations assumed by them.

•Our ability to maintain competitive costs is dependent upon the level of new sales and persistency of existing business.

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•If we are unable to attract and retain agents, sales of our products and services may be reduced.

•Attracting and retaining employees who are key to our business is critical to our growth and success.

•Our business is highly dependent on our relationships with Farm Bureau organizations and could be adversely affected if those relationships became impaired.

•Our relationship with Farm Bureau organizations could result in conflicts of interests.

See Part 1A, Risk Factors, for additional information.

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PART I

ITEM 1. BUSINESS

General

FBL Financial Group, Inc. (we or the Company), majority owned by the Iowa Farm Bureau Federation, an Iowa non-profit corporation (IFBF), primarily sells individual life insurance and annuity products through its subsidiary, Farm Bureau Life Insurance Company (Farm Bureau Life). Farm Bureau Life’s distribution force markets under the consumer brand name Farm Bureau Financial Services. In addition, in the state of Colorado, we offer life and annuity products through Greenfields Life Insurance Company (Greenfields). As of December 31, 2020, these distribution channels consisted of 1,614 exclusive agents and agency managers, who sell our products in the Midwestern and Western sections of the United States. Helping complete the financial services offering, advisors offer wealth management and financial planning services.

The Company was incorporated in Iowa in October 1993. Its life insurance subsidiary, Farm Bureau Life, began operations in 1945 and Greenfields, a subsidiary of Farm Bureau Life, was launched in 2013. FBL Wealth Management, LLC began operations in 2019. Other subsidiaries provide support services to our affiliated companies. In addition, we manage all aspects of two Farm Bureau affiliated property-casualty insurance companies (Farm Bureau Property & Casualty Insurance Company and Western Agricultural Insurance Company), which operate predominately in eight states in the Midwest and West.

Merger Agreement

On January 11, 2021, the Company announced that it reached an agreement with Farm Bureau Property & Casualty Insurance Company, an Iowa domiciled stock property and casualty insurance company (FBPCIC), pursuant to which FBPCIC will acquire all of the outstanding Class A common shares, without par value, and Class B common shares, without par value (collectively, the Common Shares), of the Company that are not currently owned or controlled by FBPCIC or IFBF, pursuant to the terms of the Agreement and Plan of Merger (the Merger Agreement), by and among the Company, FBPCIC, and 5400 Merger Sub, Inc., an Iowa corporation (Merger Sub). IFBF and FBPCIC currently own approximately 61% of the outstanding Common Shares. The Merger Agreement provides for the merger of Merger Sub with and into the Company, with the Company surviving the merger (the Merger). Pursuant to the transactions contemplated by the Merger Agreement, each outstanding Common Share of the 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 $56.00 per Common Share in cash, without interest and less any required withholding taxes.

Consummation of the Merger is subject to certain specified closing conditions, including approval by the Company’s shareholders as described below, expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, clearance by the Insurance Commissioner of the State of Iowa and approval by the Financial Industry Regulatory Authority. The obtaining of financing is not a condition to the obligations of FBPCIC or Merger Sub to effect the Merger. The closing of the Merger is subject to 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. In addition, FBPCIC’s obligation to consummate the Merger is subject to the condition that no more than 7% 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.

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FBL Financial Group, Inc. Business and Distribution Channels

FBL Financial Group, Inc.

COMPANY	Farm Bureau Life Insurance Company	Greenfields Life Insurance Company	FBL Wealth Management, LLC
RELATIONSHIP	Wholly-owned subsidiary	Subsidiary of Farm Bureau Life (Wholly-owned)	Wholly-owned subsidiary
BRAND
DISTRIBUTION	1,601 exclusive Farm Bureau Financial Services agents and agency managers	13 exclusive agents and agency managers	36 wealth management advisors, 70 agent financial advisors, 939 agent registered representatives
PRODUCTS	A comprehensive line of life insurance, annuity and investment products	A comprehensive line of life insurance, annuity and investment products	Wealth management services and a comprehensive suite of investment solutions
TERRITORY	14 Midwestern and Western states	Colorado	14 Midwestern and Western states

In addition to the distribution above, FBL Financial Group manages two property casualty insurance companies: FBPCIC and Western Agricultural Insurance Company. Underwriting results of these two companies do not impact FBL Financial Group’s results. These property casualty companies distribute a full line of personal and commercial property-casualty insurance products through 953 exclusive Farm Bureau Financial Services agents and agency managers (included under the 1,601 Farm Bureau Life agents) in Arizona, Iowa, Kansas, Minnesota, Nebraska, New Mexico, South Dakota and Utah.

Investor information, including electronic versions of periodic reports filed on Forms 10-K, 10-Q and 8-K, and proxy material, are available free of charge through the Investor Relations section of our website at www.fblfinancial.com. These documents are posted to our website immediately after they are filed. The EDGAR filings of such reports are also available at the SEC’s website, www.sec.gov. Also available on our website are many corporate governance documents including codes of ethics, board committee charters, corporate governance guidelines, director profiles and more. Product information may be found on our consumer websites, www.fbfs.com and www.greenfieldslife.com.

Business Strategy

Our core business strategies leverage areas where we have competitive advantages. Our exclusive agent distribution channel enables deep customer engagement and long-term customer relationships. We benefit from close ties to the unique needs of the agricultural market and affinity with the Farm Bureau brand, and our cross-sell culture results in industry leading cross-sell rates.

Our agents sell property-casualty, life insurance and investment products. Having multi-line agents enhances our ability to develop a more comprehensive relationship with our customers and increases our ability to cross-sell our life insurance, annuity products and wealth management services to the pool of Farm Bureau property-casualty customers.

Our multi-line exclusive agent distribution channel is our foundation and we are defined by our service to the Farm Bureau niche marketplace. We capitalize on the Farm Bureau brand to grow our business and build upon our agricultural and rural market leadership. We focus on consistently improving customer experience and needs-based selling, including a branded review program called SuperCheck. This review program is a free service that helps our customers identify gaps in their insurance coverages and financial needs. We have a broad portfolio of life insurance, annuity and wealth management products so that we have products available to satisfy the needs of our agents and customers.

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Because of their multi-line nature, our agents focus on cross-selling life insurance products to customers who already own a property-casualty policy issued by our property-casualty company partners. For example, in the eight-state region where we manage the affiliated property-casualty insurance companies and related field force (Arizona, Iowa, Kansas, Minnesota, Nebraska, New Mexico, South Dakota and Utah), 24% of Farm Bureau Financial Services property-casualty policyholders also own a Farm Bureau Life annuity or life product. We are considered among the best-in-industry in cross-sell rates. This percentage is and has historically been higher than the industry average for multi-line exclusive agents, which is 12% according to the most recent research by the Life Insurance and Market Research Association (LIMRA). We believe there is further opportunity for growth from cross-selling as 72% of Farm Bureau members in the eight-state region have a Farm Bureau Financial Services property-casualty insurance product, while only 21% of Farm Bureau members in the eight-state region have a life insurance product with us.

We provide our agents with marketing and sales materials, training and a high level of field management and sales support. Additionally, the field sales support team includes Regional Financial Consultants who work as a resource to help agents with life and annuity sales.

Our sales model is designed so that our agents are entrepreneurial business owners with a retail financial services business. Under this model, our agents have sales and service associates who assist them and provide a variety of support for insurance sales and client/members.

This business strategy and sales model results in deep customer engagement and long-term customer relationships. Our agents are often viewed as the go-to person for all the insurance needs of their customers. As a result, while we underwrite the majority of the life and annuity products available for sale by our agents, we broker products sold by other carriers when we do not have the expertise, ratings or scale to compete efficiently in the marketplace. Examples of brokered products include long-term care insurance, health insurance and last survivor life policies. We earn fees from the sale of brokered products, a portion of which is passed on to the agents as commissions for the underlying sales.

In 2018 we began investing in a wealth management strategy which allows us to offer an open architecture mutual fund platform, a fee based investment management platform and financial planning. Prior to that time, we had a limited number of agents who were Investment Advisor Representatives (IARs) and offered fee-based financial planning. We have expanded the advisory services offered by our IARs and added a new role known as the Farm Bureau wealth management advisor. These wealth management advisors have the unique opportunity to partner with our Farm Bureau Financial Services agents for referrals to serve our existing client/members with financial advisory services. Our wealth management services allow our agents to add more value, enhance the customer experience and further strengthen the agent/customer relationship. As of December 31, 2020, we had 36 Farm Bureau wealth management advisors appointed. We intend to continue to add Farm Bureau wealth management advisors who fit our culture and service orientation. We expect that this will ultimately add a diversified earnings stream to FBL Financial Group given the fee-based nature of wealth management. This is a long-term strategy that we expect to invest in and grow over time.

Marketing and Distribution

Market Area

Sales through our distribution channels are currently conducted in 15 states, which we characterize as follows: multi-line states (we own the Farm Bureau affiliated life company and manage the Farm Bureau affiliated property-casualty companies) - Arizona, Iowa, Kansas, Minnesota, Nebraska, New Mexico, South Dakota and Utah; and life partner states (we own the Farm Bureau affiliated life company but non-owned/non-managed Farm Bureau affiliated property-casualty companies manage the exclusive multi-line agents) - Colorado, Idaho, Montana, North Dakota, Oklahoma, Wisconsin and Wyoming.

Our target market is Farm Bureau members and “Middle America.” We traditionally have been very strong in rural and small-town markets and also have a presence in small and mid-metro markets. This target market represents a relatively financially conservative and stable customer base. The financial needs of our target market tend to focus on security, insurance needs and retirement savings.

Affiliation with Farm Bureau Organizations

Many of our customers are members of Farm Bureau organizations affiliated with the American Farm Bureau Federation (American Farm Bureau). The American Farm Bureau is the nation’s largest grassroots farm and ranch organization and has a current membership of 5.8 million member families. In order to market insurance products in a given state using the “Farm

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Bureau” and “FB” designations, related trademarks and service marks, a company must have an agreement with the state’s Farm Bureau organization. Generally, these marketing rights have only been granted to companies owned by or closely affiliated with Farm Bureau organizations. For each of the states in our Farm Bureau marketing territory, which excludes Colorado, we have the right to use the “Farm Bureau” name and “FB” logo for marketing life insurance and investment products. There are approximately 712,000 member families in the states where we have rights to use the Farm Bureau name, brand and logo.

All of the state Farm Bureau organizations in our marketing area are associated with the American Farm Bureau. The primary goal of the American Farm Bureau is to be the unified national voice of agriculture, working through its grassroots organization to enhance and strengthen the lives of rural Americans and to build strong, prosperous agricultural communities. There are currently Farm Bureau organizations in all 50 states and Puerto Rico, each with their own distinctive mission and goals. Within each state, Farm Bureau is organized at the county level. Farm Bureau programs may include policy development, government relations activities, leadership development and training, communications outreach and training, market education, commodity conferences and young farmer activities. Member services provided by Farm Bureau vary by state but often include programs such as risk management, alternative energy development, farm transition workshops, rural entrepreneurial seminars, scholarships and grants and guidance on enhancing profitability. Other benefits of membership include newspaper and magazine subscriptions, as well as savings in areas such as health care, travel, entertainment, farm equipment and automobile rebates. In addition, members have access to accidental death insurance, banking services, computerized farm accounting services, electronic information networks, health care insurance or benefit plans, property-casualty insurance and financial services.

The American Farm Bureau may terminate our right to use the “Farm Bureau” and “FB” designations in our states (i) in the event of a material breach of the trademark license that we do not cure within 60 days, (ii) immediately in the event of termination by the American Farm Bureau of the state Farm Bureau’s membership in the American Farm Bureau or (iii) in the event of a material breach of the state Farm Bureau organization’s membership agreement with the American Farm Bureau, including by reason of the failure of the state Farm Bureau to cause us to adhere to the American Farm Bureau’s policies.

We have royalty agreements with each state Farm Bureau organization in our Farm Bureau marketing territory giving us the right to use the Farm Bureau and FB designations in that particular state. Each state Farm Bureau organization in our Farm Bureau territory could terminate our right to use the Farm Bureau designations in that particular state without cause at the conclusion of the royalty agreements. The royalties paid to a particular state Farm Bureau organization are based on the sale of our products in the respective state. For 2020, royalty expense totaled approximately $2.3 million.

Our relationship with Farm Bureau organizations provides a number of advantages. Farm Bureau organizations in our marketing territory tend to be well known and long established, have active memberships and provide a number of member benefits other than financial services. The strength of these organizations provides enhanced prestige and brand awareness for our products and increased access to Farm Bureau members, which results in a competitive advantage for us.

Our life insurance and investment products are available for sale to both Farm Bureau members and non-members. Property-casualty products sold by the property-casualty insurance companies affiliated with Farm Bureau are available for sale to Farm Bureau members. Annual Farm Bureau memberships in our marketing territory average $58 and are available to individuals, families, partnerships and corporations.

We have service agreements with all of our property-casualty company partners in our marketing area, pursuant to which the property-casualty companies provide certain services, which include recruiting and training the shared agency force that sells both property-casualty products for that company and life products for us. The service agreements have expiration dates through December 31, 2029. In 2020, we paid $8.4 million for the services provided under these agreements.

Our Advisory Committee, which consists of executives of the property-casualty insurance company partners in our marketing territory, assists us in our relationships with the property-casualty organizations and the Farm Bureau organization leaders in their respective states. The Advisory Committee meets on a regular basis to coordinate efforts and issues involving the agency force and other matters. The Advisory Committee is an important contributor to our success in marketing products through our distribution system.

Royalty and property-casualty service agreements vary in term and expiration date as shown below.

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Royalty and Property-Casualty Service Agreements by State
State	Property-Casualty Service Agreement Expiration Date	Royalty Agreement Expiration Date	Percent of 2020 First Year Premiums Collected
Iowa	December 31, 2024	December 31, 2033	30.1	%
Kansas	December 31, 2024	December 31, 2033	15.0
Nebraska	December 31, 2024	December 31, 2033	8.9
Oklahoma	December 31, 2022	December 31, 2022	8.8
Wyoming	December 31, 2021	December 31, 2021	5.3
Arizona	December 31, 2024	December 31, 2033	5.0
Utah	December 31, 2024	December 31, 2033	4.8
Montana	December 31, 2021	December 31, 2021	4.5
Wisconsin	December 31, 2029	December 31, 2029	4.2
Idaho	December 31, 2021	December 31, 2021	3.8
Minnesota	December 31, 2024	December 31, 2033	3.7
New Mexico	December 31, 2024	December 31, 2033	2.8
North Dakota	December 31, 2021	December 31, 2021	1.5
South Dakota	December 31, 2024	December 31, 2033	0.7
Colorado	December 31, 2021	Not Applicable	0.7
Other	Not Applicable	Not Applicable	0.2
			100.0	%

Agency Force

Our agency force is one of our most important competitive advantages as the agents are able to develop long term personal relationships through a deep understanding of their customers’ needs. Our priority is to ensure that we have best-in-class distribution systems and support, including agent recruiting and retention, training and leadership. Our agents are independent contractors and exclusive agents. We have a written contract with each member of our agency force. The contract covers a number of topics including privacy, compensation payments and reserving our ownership of customer lists.

In the multi-line states where we manage the Farm Bureau affiliated property-casualty companies, our agents are supervised by agency managers employed by FBPCIC. There are 953 agents and managers in our multi-line states. These agents market a full range of our life insurance and annuity products. They also market products for the property-casualty companies that we manage. These agents are supported by 1,185 sales associates who assist them and provide a variety of support in the sales process. We are responsible for product and sales training for all lines of business in our multi-line states.

In our life partner states, our life insurance and annuity products are marketed by agents that we share with our property-casualty company partners in that state. There are 661 agents and managers in our life partner states. These agents market our life and annuity products and market the property-casualty products of that state’s affiliated property-casualty company. We are responsible for training the agency force in life insurance products and sales methods in our life partner states.

Sales activities of our agents focus on personal contact and on cross-selling life and annuity products to the existing property-casualty customers. The Farm Bureau name recognition and access to Farm Bureau membership provides opportunities for additional customers, cross-selling of additional insurance products and increased retention.

The focus of agency managers is to recruit, train, supervise and retain agents to achieve high production levels of profitable business. Agency manager compensation is comprised of 1) overwrite commissions, which vary according to the productivity level and persistency of business of the agents managed and 2) a reward related to the attainment of sales goals. In some growth markets where the agent population is small, we have a compensation program comprised of salary and overwrite commissions. These managers are expected to transition to full overwrite commissions as the agency grows population. This compensation structure aligns with the requirements of the agency manager role and offers a financial incentive that aligns with the strategic priorities of growing both agency scale and productivity.

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We structure our agents’ life products compensation system to encourage production and persistency. Agents receive commissions for new life insurance and annuity sales and service fees on premium payments in subsequent years. Production bonuses are paid based on the premium level of new life business written in the prior 12 months and the persistency of the business written by the agent. Persistency is a common measure used in life insurance, which measures the quality and the consistent payment of premiums and is included in calculating the bonus to either increase or decrease (or even eliminate) the agent’s production bonus. We are willing to pay added incentives for higher volumes of business only as long as the business is profitable. Production bonuses allow agents to increase their compensation significantly.

We have a variety of incentives and recognition programs to focus agents on production of quality life insurance business. Some recognition programs and incentives are jointly conducted with the property-casualty companies. These programs provide significant incentives for the most productive agents. Approximately 12% of our agents and agency managers qualify for our primary annual incentive trip. Agent recruiting, training, financing and compensation programs are designed to develop a productive agent for the long term.

In order to increase an agent’s opportunity for success and increase retention, we offer a developing agent program in which the agent completes a training program that can take up to four months and achieves certain production minimums on a part-time basis before being contracted as a full-time agent. This program gives us and the agent an opportunity to assess whether the candidate is expected to have a successful long-term career as our agent. The developing agent program, along with new agent financing, centralized training, a quality recruiting/selection process and a strong field leadership team are designed to strengthen our distribution and improve agent retention. Our four-year agency force retention rate for 2020 was approximately 20%.

Business Segments

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 our developing wealth management business along with various support operations, corporate capital, brokered insurance and investment products and closed blocks of variable insurance products no longer underwritten by the Company.

See Note 13 to our consolidated financial statements included in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Segment Information” included in Item 7 for additional information regarding our financial results by operating segment. Included in the following discussion of our segments are details regarding premiums. We use premiums collected to measure the productivity of our exclusive agents. Premiums collected is not a measure used in financial statements prepared according to U.S. generally accepted accounting principles (GAAP). Note 13 to our consolidated financial statements also includes a discussion of the most comparable GAAP financial measures and, as applicable, a reconciliation to such GAAP measures.

Annuity Segment

We sell a variety of traditional annuity products through our exclusive agency force. The Annuity segment primarily consists of fixed rate and indexed annuities and supplementary contracts (some of which involve life contingencies). Traditional annuities provide for tax-deferred savings and supplementary contracts provide for the systematic repayment of funds that accumulate interest.

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Premiums Collected - Annuity Segment
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Individual fixed rate
First year	$	32,044	$	60,895	$	75,917
Renewal	50,718		57,720		63,053
Individual indexed	93,248		128,188		137,627
Group	6,307		5,168		8,841
Total Annuity	$	182,317	$	251,971	$	285,438

Annuity premiums collected decreased in 2020 and 2019, compared to prior periods, due to decreased sales of our fixed rate deferred and indexed annuity products, as sales were negatively impacted by crediting and cap rate reductions in response to declining market and portfolio yields. The amount of traditional annuity premiums collected is highly dependent upon the relationship between the current crediting rates on our products and the perceived security of our products compared to those of competing products. Traditional annuity premiums collected in our Farm Bureau market territory in 2020 were concentrated primarily in the states of Iowa (31%), Kansas (23%) and Nebraska (8%).

Fixed Rate Annuities

We offer annuities that are marketed to individuals in anticipation of retirement. We offer traditional annuities in the form of flexible premium deferred annuities (FPDA) that allow policyholders to make contributions over a number of periods. For traditional annuity products, policyholder account balances are credited interest at rates that we determine subject to a guaranteed minimum. The annuitant may elect to take the proceeds of the annuity either in a single payment or in a series of payments for life, for a fixed number of years, for a fixed amount, or a combination of these options.

In addition to FPDAs, we also market single premium deferred annuities (SPDA) and single premium immediate annuity (SPIA) products, which feature a single premium paid when the contract is issued. Benefit payments and the surrender charge structure on SPDA contracts are similar to other fixed rate annuities. Benefit payments on SPIAs begin immediately after the issuance of the contract.

Approximately 45% of our existing individual traditional annuity business, based on account balances, is held in qualified retirement plans. For deferred annuity products, in order to encourage persistency, a surrender charge is imposed against the policyholder’s account balance for early termination of the annuity contract within a specified period after its effective date. The surrender charge structure varies by product, but typically starts at 6% to 10% and decreases 1% to 2% per year until it reaches 0%.

We invest the premiums we receive from fixed rate annuities. The assets reside in our general account. Acquisition costs are paid from the general account as they arise. The difference between the yield we earn on our investment portfolio and the interest we credit on our fixed rate annuities is known as the spread. The spread is a major driver of the profitability for all of our traditional annuity products.

Interest Crediting Policy

We have a rate setting committee that meets monthly, or more frequently if required, to review and establish current period interest rates based upon existing and anticipated investment opportunities. This applies to new sales and to annuity products after an initial guaranteed period. We examine earnings on assets by portfolio. We then establish rates based on each product’s target spread and competitive market conditions at the time. Most of our annuity contracts have guaranteed minimum crediting rates. These rates range from 1.00% to 5.50%, with a weighted average guaranteed crediting rate of 2.09% at December 31, 2020 and 2.11% at December 31, 2019. The average interest rate guarantees on annuity contracts issued during 2020 was 1.00%.

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Indexed Annuities

With an indexed annuity, the policyholder may choose from a traditional fixed rate strategy or an indexed strategy, with the underlying index being the S&P 500®. The product requires crediting of interest and a reset of the index annually. The computation of the index credit is based upon either a point-to-point calculation (i.e., the gain in the index from the beginning of the contract year to the next reset date) or a monthly averaging of the index during the period, subject to a cap. This product allows contract holders to re-allocate funds among the indexed accounts and a traditional fixed rate strategy at the end of each reset period. It includes a guaranteed lifetime withdrawal benefit rider. If activated by the policyholder, the rider provides a minimum amount that is available for withdrawal at specified withdrawal rates even if the accumulated value goes to zero. There is an additional annual charge for the activated rider.

A new indexed annuity was introduced in 2020. This new product is a single premium deferred indexed annuity featuring a 2-year point-to-point strategy and a fixed rate interest account with a 6-year schedule of surrender charges. Initial premium goes into the fixed account until the initial sweep date. During the surrender charge period, all of the account value is allocated

to the 2-year point-to-point indexed strategy, which offers capped returns linked to the S&P 500 index. The product credits interest and resets the index biennially. This product has a bailout withdrawal feature under which the contract holder may elect to surrender the contract without surrender charges if renewal cap rates are set below a bailout cap rate established at issue.

The indexed annuity contract value is equal to the premiums paid less partial withdrawals and rider charges taken from the contract plus interest credited to the fixed portion of the contract and index credits on the indexed portion of the contract. The minimum guaranteed contract values are equal to 87.5% of the premium collected, adjusted for withdrawals and rider charges, plus interest credited annually at the standard nonforfeiture rate, which is currently 1.0%. If there were little or no indexed credits over the life of an indexed annuity, we would incur expenses to increase the account value to the minimum guaranteed contract values. 

Indexed annuity premiums are invested in our general account similar to fixed rate annuities. A portion of the investments are used to purchase call options on the S&P 500 to fund the index credits on the accounts. New call options are purchased at each reset date. The cost of the call options is managed through the terms of the indexed annuities, which permit changes to caps, subject to minimum guarantees. Our spread is also influenced by the aggregate call option costs. Additionally, if we are not successful in matching the terms of the call options with the terms of the indexed annuities, the call option proceeds could vary from the indexed credits, thus increasing or reducing aggregate call option costs and causing spreads to widen or tighten.

Withdrawal Rates

Withdrawal rates (excluding death benefits) for our individual deferred annuities were 4.6% for 2020, 5.7% for 2019 and 5.3% for 2018. The individual annuity withdrawal rate decreased in 2020, compared to 2019, partially due to the suspension of required minimum distributions by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The individual annuity withdrawal rate increased in 2019, compared to 2018, due to certain policies reaching the end of their interest rate guarantee period and the competitiveness of our current crediting rates relative to other financial institutions.

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Interest Crediting Rates Compared to Guarantees - Annuity Segment
	Liabilities at
	December 31, 2020
	(Dollars in thousands)
Fixed rate annuities:
Greater than or equal to 100 basis points over guarantee	$	15,893
50 basis points to 99 basis points over guarantee	2,270
1 basis point to 49 basis points over guarantee	178,684
At guaranteed rate	2,365,190
Indexed annuities	842,117
Non-discretionary rate setting products	810,214
Total interest sensitive product liabilities	$	4,214,368
Impact of unrealized gains and losses	(22,875)
Interest sensitive reserves	$	4,191,493

In Force - Annuity Segment
	December 31,
	2020		2019		2018
	(Dollars in thousands)
Number of contracts	49,895		51,536		52,911
Interest sensitive reserves	$	4,191,493	$	4,105,054	$	4,036,152
Other insurance reserves	317,933		335,222		338,646

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Life Insurance Segment

We sell a variety of traditional and universal life insurance products through our exclusive agency force. The Life Insurance segment consists of whole life, term life and universal life policies. 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.

Premiums Collected - Life Insurance Segment
	For the year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Universal life:
First year	$	27,018	$	27,453	$	28,884
Renewal	98,537		88,770		80,101
Total	125,555		116,223		108,985
Whole life:
First year	9,069		9,450		12,139
Renewal	90,156		92,698		94,555
Total	99,225		102,148		106,694
Term life and other:
First year	11,569		11,001		10,843
Renewal	113,569		108,992		105,809
Total	125,138		119,993		116,652
Total Life Insurance	349,918		338,364		332,331
Reinsurance ceded	(27,699)		(27,637)		(28,102)
Total Life Insurance, net of reinsurance	$	322,219	$	310,727	$	304,229

Life premiums collected were higher in 2020 and 2019 compared to the prior years due to increased sales of universal life and term life policies. These increases were partially offset by a decline in sales of whole life. Life insurance premiums collected in our market territory in 2020 were concentrated primarily in the states of Iowa (24%), Kansas (14%) and Oklahoma (9%).

Traditional Life Insurance

We offer whole life insurance, which provides benefits for the life of the insured. Whole life insurance provides level premiums and a level death benefit and requires payments in excess of mortality costs in early years to offset increasing mortality costs in later years. We currently offer a non-participating whole life insurance product. Prior to May 2019, we offered participating whole life insurance. Under the terms of the participating whole life policies, policyholders have a right to participate in the overall performance of the participating life block to the extent determined by Farm Bureau Life, generally through annual dividends. Participating business accounted for 24% of direct life premiums collected from policyholders during 2020 and represented 9% of life insurance in force at December 31, 2020.

We also market nonparticipating term insurance policies that provide life insurance protection for a specified period. Term insurance is mortality based and generally has no cash value. However, we also offer a return of premium term product, which returns a percentage of premiums after a set number of years. For a portion of our business, we may change the premium scales at any time but may not increase rates above guaranteed levels. In addition to our level face amount term products, we also offer an increasing face amount term product. Our increasing term life insurance product allows for scheduled increases of 20% of the initial face amount on the first five anniversaries. Premiums during the specified period increase as the face amount of the policy increases.

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Universal Life Insurance

Our universal life policies provide permanent life insurance protection which allows the customer to pre-fund future insurance costs and accumulate savings on a tax-deferred basis. Premiums received, less policy assessments for administration expenses and mortality costs, are credited to the policyholder’s account balance. Interest is credited to the cash value at rates that we periodically set.

Our indexed universal life insurance product provides life insurance protection with flexible premium payments and provides a death benefit with cash accumulation. The premium is paid into a holding account and once it is fully funded with a year’s worth of policy charges, the excess value is transferred into an indexed segment or a fixed account, according to the selected allocation. The fixed and holding accounts are credited interest at a rate declared by the Company. The value in the indexed segment earns interest based on the percentage change in the S&P 500. A quarterly review is conducted to determine whether the holding account contains 12 months’ worth of policy charges. We purchase one-year call options on the S&P 500 to fund the indexed segment credits. Interest on each of the indexed segments is credited annually on a point-to-point basis. After any annual earned interest is credited to an indexed segment, the money is transferred back to the holding account where it can become eligible for a new indexed segment. Positive interest credit is subject to a cap. If the ending index value is less than the initial index value, the interest credit will be zero.

At the end of 2020 we discontinued new sales of a universal life with secondary guarantee product that provided life insurance protection with flexible premium payments and fully guaranteed interest, cost of insurance charges and other expenses. The policy was structured to remain in force for the guaranteed period even if the surrender value of the policy was zero, as long as the planned premiums were paid on time.

Underwriting

We follow formal underwriting standards and procedures designed to properly assess and quantify life insurance risks before issuing policies to individuals. To implement these procedures, we employ an underwriting staff of 9 underwriters who have an average of 15 years of experience in the insurance industry. We also utilize technology and automation to provide additional data to improve future risk selection.

Our underwriters review each application, which is prepared under the supervision of our agents, and supported by any required testing and records: blood or urine testing, paramedical/physicians’ examinations, motor vehicle, pharmacological reports, inspection reports, data elements and medical records. We generally begin employing paramedical exams, blood and urine testing (including HIV antibody testing) whenever the applicant is at least 18 and at face amounts of at least $500,000. Additional underwriting requirements and inspection reports are required as either the face amount or the age of the proposed insured increases. Based on available information, we may adjust the mortality charge or decline coverage completely.

In 2017, we began an accelerated underwriting program on a pilot basis. This program was a non-medical underwriting approach that included a variety of data sources as part of the evaluation process. This pilot program was available only for ages 18 to 59 and for face amounts of $100,000 to $250,000. Based on what we learned from this pilot program, we made various refinements to this process and in September of 2020, we introduced a formal accelerated underwriting program. This program is available for ages 18-60 and for face amounts of $100,000 to $500,000. This process incorporates application information and motor vehicle, pharmacological and other data elements.

Generally, tobacco use by a life insurance applicant within the preceding one-year period results in a substantially higher mortality charge. In accordance with industry practice, material misrepresentation on a policy application can result in the cancellation of the policy upon the return of any premiums paid. In 2018, we introduced a new life insurance underwriting rating for smokeless tobacco users. Previously, customers who used chewing tobacco were classified under the smokers’ rate.

During 2020, we adjusted and refined our underwriting guidelines due to the COVID-19 pandemic. These include the expansion of requirements for policy delivery, allowance of video conferencing, scrutiny of recent travel and restrictions on underwriting policies involving applicants with a positive COVID-19 test. We continue to review and update these guidelines as appropriate.

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Interest Crediting and Participating Dividend Policy

The interest crediting policy for our life insurance products is the same as for our traditional annuity products in the Annuity segment. See “Interest Crediting Policy” under the Annuity Segment discussion. We pay dividends, credit interest and determine other nonguaranteed elements on the individual insurance policies depending on the type of product. Some elements, such as dividends, are generally declared for a year at a time. Interest rates and other nonguaranteed elements are determined based on experience as it emerges and with regard to competitive factors. Weighted average contractual credited rates on our universal life contracts were 3.18% in 2020, 3.31% in 2019 and 3.38% in 2018. Our universal life contracts have guaranteed minimum crediting rates that range from 1.00% to 4.50%, with a weighted average guaranteed crediting rate of 3.36% at December 31, 2020 and 3.42% at December 31, 2019.

Interest Crediting Rates of Interest Sensitive Life Products Compared to Guarantees - Life Insurance Segment
	Liabilities at
	December 31, 2020
	(Dollars in thousands)
Discretionary rate setting products with minimum guarantees:
Greater than or equal to 100 basis points over guarantee	$	156,572
At guaranteed rate	768,993
Non-discretionary rate setting products	205,247
Total interest sensitive product liabilities	$	1,130,812
Impact of unrealized gains and losses	(27,146)
Interest sensitive reserves	$	1,103,666

Policyholder dividends are paid as declared on participating policies. Policyholder dividend scales are generally established annually and are based on the performance of assets supporting these policies, the mortality experience of the policies, expense levels and other factors. Our participating business does not have minimum guaranteed dividend rates.

In Force - Life Insurance Segment
	December 31,
	2020		2019		2018
	(Dollars in thousands, except face amounts in millions)
Number of policies - traditional life	364,729		365,399		365,909
Number of policies - universal life	75,612		72,972		69,832
Face amounts - traditional life	$	54,732	$	53,320	$	52,191
Face amounts - universal life	8,674		8,246		7,777
Traditional insurance reserves	2,123,108		2,043,029		2,001,449
Interest sensitive reserves	1,103,666		1,039,335		989,513

Corporate and Other Segment

The Corporate and Other segment includes (i) wealth management services; (ii) advisory services for the management of investments for other companies; (iii) a management fee for managing the affiliated property-casualty companies; (iv) marketing and distribution services for the sale of mutual funds and insurance products not issued by us; (v) leasing services with affiliates; (vi) closed blocks of variable annuity, variable life and accident and health products; (vii) interest expense and (viii) investments and related investment income not specifically allocated to our product segments.

Wealth management services include the offering of financial planning, investment advisory and full-service brokerage services. We offer a personal and comprehensive approach to wealth management and have access to a broad selection of investment products and retail mutual funds. Revenues are primarily derived from fee-based advisory services and commissions from sales of mutual funds, debt and equity securities.

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We previously issued our own variable products, but in 2010 discontinued underwriting new sales. The existing in force business remains on our books and we continue to administer this business. Variable premiums collected from prior sales were $45.0 million in 2020, $48.0 million in 2019 and $50.0 million in 2018.

Reinsurance

We reinsure a portion of our life insurance exposure with unaffiliated insurance companies under traditional indemnity reinsurance agreements. New sales of life products are reinsured above prescribed limits and do not require the reinsurer’s prior approval within certain guidelines. We do not use financial or surplus relief reinsurance. We enter into indemnity reinsurance arrangements to assist in diversifying our risks and to limit our maximum loss on risks that exceed our policy retention limits. Our current maximum retention limit on an insured life is $1.0 million.

Reinsurance contracts do not fully discharge our obligation to pay claims on the reinsured business. As the ceding insurer, we remain responsible for policy claims to the extent the reinsurer fails to pay claims. No reinsurer of business ceded by us has failed to pay any material policy claims (either individually or in the aggregate) with respect to our ceded business. We continually evaluate the financial strength of our reinsurers and monitor concentrations of credit risk. If for any reason reinsurance coverages would need to be replaced, we believe that replacement coverages from financially responsible reinsurers would be available.

Primary Reinsurers as of December 31, 2020

Reinsurer	A.M. Best Rating	Amount of In Force Ceded		Reserve Credit
		(Dollars in millions)
Swiss Re Life & Health America Inc.	A+	$	5,747.7	$	31.2
RGA Reinsurance Company	A+	4,128.5		31.0
SCOR Global Life USA Reinsurance Company	A+	2,064.5		11.2
All other (11 reinsurers)*	A to A++	1,645.4		7.9
Total		$	13,586.1	$	81.3

*All other includes Scottish Re and Employers Reassurance, which are not rated by A.M. Best. New business with Scottish Re was terminated in 2007 and with Employers Reassurance in 2004. As of December 31, 2020, $168.4 million of in force and $0.2 million of reserves were ceded to these two reinsurers.

In addition, we have an annual 100% quota share accidental death reinsurance agreement. Coverage includes all acts of terrorism including those of a nuclear, chemical or biological origin. Coverage is subject to an annual aggregate retention by us of $17.0 million.

Ratings and Competition

Financial strength ratings are an important factor in establishing the competitive position of insurance companies. Insurer financial strength ratings represent the opinions of rating agencies regarding the ability of an insurance company to meet its financial obligations to policyholders and contract holders. Credit ratings represent the opinions of rating agencies regarding an issuer’s ability to repay its indebtedness. Ratings are subject to revision or withdrawal at any time by the rating agency, and therefore, no assurance can be given that a rating will be maintained.

As of the date of this filing, Farm Bureau Life’s A.M. Best financial strength rating is “A” (Excellent) with a stable outlook and its long-term issuer credit rating is “a+” with a stable outlook. FBL Financial Group’s A.M. Best long-term issuer credit rating is “bbb+” with a stable outlook.

A.M. Best has 16 financial strength ratings assigned to insurance companies, which currently range from A++ (Superior) to S (Suspended). A.M. Best’s issuer credit ratings range from aaa (exceptional) to d (in default). A “+” or “-“ may be appended to ratings from aa to ccc to indicate relative position within a category. A rating of bbb- or above is considered investment grade. As of the date of this filing, A.M. Best has the life/annuity industry on a negative rating outlook.

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We operate in a highly competitive industry. Insurers compete based primarily upon price, service level and the financial strength of the company. The operating results of companies in the insurance industry historically have been subject to significant fluctuations due to competition, economic conditions, interest rates, investment performance, maintenance of insurance ratings from rating agencies and other factors. We believe our ability to compete with other insurance companies is dependent upon, among other things, our ability to attract and retain agents to market our insurance products, our ability to develop competitive and profitable products and our ability to maintain good or better ratings from rating agencies. In connection with the development and sale of our products, we encounter significant competition from other insurance companies and other financial institutions, such as banks and broker/dealers, many of which have financial resources substantially greater than ours.

Regulation

All segments of our business are highly regulated. See Item 1A. Risk Factors.

Human Capital Resources

At December 31, 2020, FBL Financial Group had 1,754 full-time employees. They, along with approximately 135 part-time and temporary staff, work from ten corporate offices in eight states. A majority of our employees, including the executive officers, also provide services to FBPCIC and other affiliates pursuant to management agreements. None of our employees are members of a collective bargaining unit.

FBL’s ability to attract, develop, and retain employees is critical to our growth and success. The stated purpose of our organization is: “We protect livelihoods and futures.” Six corporate values ― integrity, accountability, service, teamwork, leadership, and passion ― are foundational to this purpose.

We offer comprehensive benefits to our employees, including maternity, paternity and adoption leave, adoption assistance, health, dental, vision and disability insurance, company-paid life insurance, a company match 401(k) retirement savings plan and paid volunteer time off (VTO).

We also provide opportunities for personal and professional advancement: education and training, tuition reimbursement, mentorship, leadership development, and health and wellness programs. Our corporate headquarters includes a wellness facility, medical clinic, cafeteria and childcare center. To assess and improve employee retention and engagement, we annually survey employees and take actions to address areas of employee concern.

The health and safety of our employees is our highest priority. In response to the COVID-19 pandemic, in 2020 we transitioned to a mostly work-from-home environment, increased cleaning protocols in all locations, initiated regular communication reminders about health and safety procedures and established new physical distancing procedures for employees working onsite.

For information regarding our agency force, please see the discussion above under the heading “Marketing and Distribution - Agency Force.”

ITEM 1A. RISK FACTORS

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.

Risks relating to the proposed Merger

The proposed Merger may not be completed within the expected timeframe, or at all, and the failure to complete the Merger could adversely affect our business and the market price of our common stock.

On January 11, 2021, we entered into the Merger Agreement. The Merger Agreement is an executory contract subject to closing conditions beyond our control, and there is no guarantee that these conditions will be satisfied in a timely manner or at all.

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Completion 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, and the receipt of regulatory approvals, 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 and the market price of our common stock in a number 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 $56.00 per share or higher, on terms acceptable to us, our stock price will likely decline as our stock has recently traded at prices based on the proposed per share consideration for the Merger.

•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 $18,477,300.

The Merger Agreement contains provisions that could discourage or make it difficult for a third party to acquire us prior to the completion of the proposed Merger.

The Merger Agreement contains provisions that restrict our ability to entertain a third party proposal to acquire us. These provisions include the general prohibition on initiating, soliciting, or knowingly facilitating or assisting any inquiries or the making of any proposal or offer that is, or would reasonably be expected to lead to, any acquisition proposal, subject to certain exceptions. We are also required to pay a termination fee of up to $18,477,300 if the Merger Agreement is terminated in specified circumstances, including if our board of directors takes certain actions recommending against the Merger. These provisions might discourage an otherwise-interested third party from proposing an acquisition proposal, even one that may be deemed of greater value than the proposed Merger to our shareholders. Furthermore, even if a third party elects to propose an acquisition, our obligation to pay a termination fee may result in that third party offering a lower value to our shareholders than such party might otherwise have offered.

The announcement of the proposed Merger could adversely affect our business and results and operations.

The announcement and pendency of the proposed Merger could cause disruptions in and create uncertainty surrounding our business, which could have an adverse effect on our business, financial condition, and results and operations, regardless of whether the Merger is completed. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the Merger:

•the diversion of significant management time and resources towards the completion of the Merger;

•difficulties maintaining relationships with our business partners;

•the inability to pursue alternative business opportunities or make appropriate changes to our business because of requirements in the Merger Agreement that we conduct our business in the ordinary and usual course consistent with past practice and not engage in certain kinds of transactions prior to the completion of the proposed Merger; and

•litigation relating to the Merger and the costs related thereto.

Risks relating to economic conditions, market conditions and investments

Changing interest rates, market volatility and general economic conditions affect the risks and the returns on both our products and our investment portfolio.

The fair value of our investments and our investment performance, including yields and realization of gains or losses, may vary depending on economic and market conditions. The shape of the yield curve and the level of interest rates can impact the profitability of our products. Interest rate risk is our primary market risk exposure. Substantial and sustained increases and

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decreases in market interest rates can materially affect the profitability of our products, the fair value of our investments and the reported value of stockholders’ equity.

In addition, advances on our funding agreements with the Federal Home Loan Bank (FHLB) are secured by collateral, the fair value of which can be significantly impacted by general market conditions. If the fair value of pledged collateral falls below specific levels, we would be required to pledge additional eligible collateral or repay all or a portion of our advances.

A key component of our financial results is the spread earned (the investment yield we earn less the crediting rates we pay to our policyholders). A narrowing of spreads would adversely affect operating results. Although we have the right to adjust interest crediting rates on a portion of our business in force, changes to crediting rates may not be sufficient to maintain targeted investment spreads in all economic and market environments. Our ability to lower crediting rates is subject to contractual minimum crediting rate guarantees. In addition, competition and other factors, including the potential for increases in surrenders and withdrawals, may limit our ability to adjust or maintain crediting rates at levels necessary to avoid the narrowing of spreads under certain market conditions.

Conversely, in periods of rapidly increasing interest rates, surrenders and withdrawals may increase as policyholders seek financial instruments with higher investment returns, commonly referred to as disintermediation. This may lead to net cash outflows and the resulting liquidity demands may require us to sell investments when the prices of those assets are adversely affected by the increase in interest rates, which may result in realized investment losses.

The London Interbank Offered Rate (LIBOR) benchmark rate is to be phased out by June 30, 2023. Uncertainty regarding replacement reference rates may adversely impact our investments that reference LIBOR. We continue to monitor developments regarding this change.

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risks of Financial Instruments for further discussion of our interest rate risk exposure and information regarding our asset-liability management program.

Difficult conditions in the financial markets and the economy may materially adversely affect our business and results of operations.

Our results of operations are materially affected by conditions in the economy and financial markets, both of which were impacted in 2020 by the global COVID-19 pandemic. The U.S. economy experienced a significant reduction in output in 2020, with gross domestic product (GDP) falling an estimated 3.5 % compared to 2019. Following the onset of the pandemic, financial markets dislocated as widespread restrictions on movement effectively shuttered the global economy. U.S. Treasury yields declined while credit spreads rose sharply.

Financial market functioning subsequently improved as a result of the Federal Reserve stepping in to support markets, while U.S. and global GDP rebounded as economies reopened through mid-2020. Additionally, fiscal programs enacted by the U.S. government partially replaced incomes lost due to constraints on business activity. Now, the widening distribution of COVID-19 vaccines, along with likely continued government support, suggest the potential for economic growth in 2021, particularly in the second half of the year. Treasury yields have generally risen on expectations for this outcome, but market yields remain below portfolio yields. Consequently, portfolio investment yields continue to decline, for us and across the life insurance and annuity industry.

Our business generally benefits from moderate to strong economic expansion. Conversely, a lackluster 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. In addition, a significant portion of our customer base operates in the agricultural industry; accordingly, fluctuations in commodity prices, federal subsidies, the impact of tariffs and the value of farm land may impact our customers’ demand for our insurance and investment products. We also may experience a higher incidence of claims, lapses or surrenders of policies following such fluctuations. We cannot predict with certainty whether or when such actions may occur, or what impact such actions could have on our business, results of operations, cash flows or financial condition.

Adverse financial market conditions may significantly affect our liquidity, access to capital and cost of capital.

Capital requirements depend on factors including the rate of sales growth of our products, aggregate reserve levels and the levels of risks in our insurance products and invested assets. In order to meet these capital requirements, we may need to

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increase or maintain Farm Bureau Life’s statutory capital and surplus through additional financings, which could include debt, equity or other transactions.

Adverse capital market conditions may affect the availability and cost of additional financing, thereby ultimately impacting our profitability, liquidity and ability to support or grow our businesses. Without sufficient capital and liquidity, we could be forced to curtail certain of our operations, and our business could suffer. Actions we might take to access financing may in turn cause rating agencies to reevaluate our ratings.

We manage our capital level to be consistent with statutory and rating agency requirements. As of December 31, 2020, we estimate that Farm Bureau Life has sufficient capital to meet our rating objectives. However, this capital may not be sufficient if significant future losses are incurred and access to additional capital is limited.

Our investment portfolio is subject to credit quality risks that may diminish the value of our invested assets and affect our profitability and reported book value per share.

During a major downturn in the economy, we are subject to the risk that issuers of fixed maturity securities, other debt securities and commercial mortgage borrowers, will default on principal and interest payments. As of December 31, 2020, we held $8.3 billion of fixed income securities, $0.3 billion of which represented below-investment grade holdings. An increase in defaults on our fixed maturity securities and commercial mortgage loans could harm our financial strength and reduce our profitability.

Although we seek to diversify the investment portfolio across multiple asset classes, industries and geographies, the concentration of our investment portfolio in any particular industry, group of related industries or geographic sector could have an adverse effect on our investment portfolios and, consequently, on our results of operations and financial position.

Risks relating to estimates, assumptions and valuations

Our valuation of fixed maturity securities may include methodologies, estimations and assumptions that are subject to differing interpretations and could result in changes to investment valuations that may materially adversely affect our results of operations or financial condition.

During periods of market disruption, it may be difficult to value certain securities if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the financial environment or market conditions.

Certain market sectors may become dislocated during and after periods of volatile and illiquid market conditions, increasing the difficulty in valuing certain instruments, as trading becomes less frequent and/or market data less observable. As a result, certain valuations may require greater estimation and judgment as well as more complex valuation methods. These values may not ultimately be realizable in a market transaction, and such values may change rapidly as market conditions change and valuation assumptions are modified.

Whether to record an other-than-temporary impairment is determined in part by our assessment of the financial condition and prospects of a particular issuer, projections of future cash flows and recoverability of the particular security as well as an evaluation of our intent to sell and whether it is more likely than not that we would be required to sell prior to recovery. Our conclusions regarding the recoverability of a particular security’s fair value may ultimately prove to be incorrect.

Actual experience that differs from our assumptions regarding future persistency, mortality, interest rates and benefit utilization used in pricing our products and calculating reserve amounts and deferred acquisition costs could have a material adverse impact on our financial results.

The process of pricing products and calculating reserve amounts and deferred acquisition costs for an insurance organization involves the use of a number of assumptions including those related to persistency (how long a contract stays with the company), mortality (the relative incidence of death in a given time), interest rates (the rates expected to be paid or received on financial instruments, including insurance or investment contracts) and benefit utilization (the amount and timing of withdrawal benefits). Actual results could differ significantly from those assumed. Actual experience, which differs from one or more of these assumptions, could have a material adverse impact on our results of operations.

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Actual experience that differs from assumptions may require us to accelerate the amortization of deferred acquisition costs, which could adversely affect our results of operations or financial condition.

Deferred acquisition costs (DAC) include certain direct costs of successfully acquiring new insurance business, including commissions and other expenses related to the production of new business, to the extent recoverable from future policy revenues and gross profits. We amortize these costs over the expected lives of the contracts. We test the DAC recorded on our consolidated balance sheets to determine if these amounts are recoverable under current assumptions. In addition, we regularly review the estimates and assumptions underlying DAC for those products for which we amortize DAC in proportion to gross profits. Given changes in facts and circumstances, these tests and reviews could lead to reductions in DAC that could have an adverse effect on the results of our operations and our financial condition. Increases in actual or expected future withdrawals or surrenders or decreases in expected future investment returns, which are more likely in a severe economic recession, would result in an acceleration of DAC amortization. In addition, significant or sustained equity and bond market declines could result in an acceleration of DAC amortization related to our closed block of variable annuity and variable universal life contracts.

Our earnings are influenced by our claims experience, which is difficult to estimate for future periods. If our future claims experience does not match our pricing assumptions or past results, our earnings could be materially adversely affected.

Our earnings are significantly influenced by the claims paid under our insurance contracts and will vary from period to period depending upon the amount of claims incurred and any corresponding reinsurance offset. We are exposed to the risk of catastrophic mortality, such as a pandemic or other event that causes a large number of deaths. There is only limited predictability of claims experience within any given quarter or year. The liability that we have established for future insurance and annuity policy benefits is based on assumptions concerning a number of factors, including interest rates, expected claims, persistency and expenses. In the event our future experience does not match our pricing assumptions or our past results, our operating results could be materially adversely affected.

Legal, regulatory and tax risks

As a holding company, we depend on our subsidiaries for funds to meet our obligations, but our life insurance subsidiaries’ ability to make distributions to us is limited by law, and could be affected by minimum risk-based capital requirements.

As a holding company, we rely on dividends from subsidiaries to assist in meeting our obligations. The ability of our subsidiaries to pay dividends or to make other cash payments in the future may materially affect our ability to satisfy our parent company payment obligations, including debt service and dividends on our common stock.

The amount of dividends we have available to pay our common shareholders is limited to a certain extent by the amount of dividends our primary operating subsidiary, Farm Bureau Life, is able to pay to its parent, FBL Financial Group, Inc. Farm Bureau Life’s ability to pay dividends to FBL Financial Group, Inc. 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, 2020, Farm Bureau Life’s statutory unassigned surplus was $494.6 million. There are certain additional limits to 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 (the Iowa Insurance Division) as discussed in Note 7 to our consolidated financial statements included in Item 8. During 2021, the maximum amount available for distribution to FBL Financial Group, Inc. from Farm Bureau Life without regulatory approval is $87.4 million.

In addition, Farm Bureau Life is subject to the risk-based capital (RBC) requirement of the National Association of Insurance Commissioners (NAIC) set forth in the Risk-Based Capital for Insurers Model Act (the Model Act). The main purpose of the Model Act is to provide insurance regulators a method of measuring the minimum amount of capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. U.S. insurers and reinsurers are required to report the results of their RBC calculations as part of the statutory annual statements filed with state insurance regulatory authorities. State laws specify regulatory actions if an insurer’s risk-based capital ratio, a measure of solvency, falls below certain levels. The NAIC has a standard formula for annually assessing RBC based on various risk factors related to an insurance company’s capital and surplus, including insurance, business, asset and interest rate risks. The insurance regulators impose regulatory actions when a company’s total adjusted capital is equal to or lower than 200% of its authorized control level risk-based capital. The severity of regulatory actions increases until the point at which regulators assume control of an insurance company when its total adjusted capital is equal to or less than 70% of its authorized control level risk-based capital.

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Failure to maintain adequate capital levels could lead to ratings downgrades and liquidity issues that could adversely affect our business and financial condition.

All segments of our business are highly regulated and these regulations or changes in them could affect our profitability.

We are subject to statutes and regulations in various states in which our life insurance subsidiaries operate. Insurance regulation is different in each state, but is similar in that it is intended to provide safeguards for policyholders, agents, insurance companies and their holding companies. State insurance regulators oversee matters relating to the business of life insurance and annuities, such as sales practices, policy forms, claims practices, types and amounts of investments, reserve adequacy, insurer solvency, minimum amounts of capital and surplus, transactions with related parties, changes in control and payment of dividends. They continually examine existing laws and regulations, and may recommend or make changes as they see appropriate.

Our variable insurance products, investment advisers, broker/dealer and certain licensed agents and employees who are also registered representatives and investment adviser representatives are subject to regulation by the Securities and Exchange Commission (SEC), state securities regulators (in most states where they are authorized to do business) and the Financial Industry Regulatory Authority (FINRA).

As noted above, through adoption by law in states where we do business, our life insurance subsidiaries are subject to the NAIC’s RBC requirements. These guidelines are used by state insurance regulators as an early warning tool to identify deteriorating or weakly capitalized insurance companies for the purpose of initiating regulatory action. Our life insurance subsidiaries also may be required under solvency or guaranty laws of most states in which they do business, to pay assessments up to certain prescribed limits to fund policyholder losses for insolvent insurance companies.

Although the federal government does not directly regulate the business of insurance, our company is subject to many of the same federal laws and regulations as other corporations, including, but not limited to pension regulation, employment laws, financial services regulation, securities regulation and federal taxation. Each of these laws and regulations can significantly affect the insurance business. In addition, various forms of direct and indirect federal regulation of insurance have been proposed from time to time. The Dodd-Frank Act of 2010 established the Federal Insurance Office (FIO) within the Department of Treasury to collect information about the insurance industry, recommend prudential standards and represent the U.S. in dealings with foreign insurance regulators.

We actively monitor state and federal laws and regulations for changes applicable to our business and our products. Changes could affect the design of our products, our ability to offer certain products and services and the way in which we conduct business; and thus could materially and adversely affect our business, financial condition or results of operations.

Our investment management subsidiaries are SEC-registered investment advisers. One of these investment advisers manages the investment portfolios for certain non-affiliated organizations, while the other oversees financial advisory services provided by certain employees and agents.

Our registered separate accounts are regulated under the Investment Company Act. In addition, our broker-dealer subsidiary is registered with the SEC and is subject to regulation under the Exchange Act and various state securities laws, and is a member of and subject to regulation by FINRA. Registered representatives sell mutual funds through our broker/dealer subsidiary and are regulated by FINRA and state securities regulators. The failure of our broker-dealer subsidiary and registered representatives to acquire and maintain required securities registrations and comply with SEC and FINRA regulations could materially impact our business reputation and subject the company to financial penalties.

Regulations imposing new suitability or fiduciary obligations on our agents and registered representatives could increase our operations, regulatory and litigation risks. In recent years, the SEC, the Department of Labor (DOL), and the NAIC have all proposed or enacted regulations addressing these obligations. As additional regulations are adopted, our companies and representatives may be held to a higher standard of care and additional compliance requirements such as further disclosures, reporting and record keeping may be necessary.

A significant change in accounting guidance could have a material effect on our financial condition or results of operations.

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles. From time to time, we are required to adopt new or revised accounting standards. Future accounting standards we are required to adopt will change the

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accounting treatment that we apply to our consolidated financial statements and such changes could have a material adverse effect on our financial condition and results of operations. The impact of accounting pronouncements that have been issued but not yet implemented, including a pending change regarding the accounting for insurance contracts and related acquisition costs, is discussed in Note 1 to our consolidated financial statements included in Item 8. In addition, our insurance subsidiaries are subject to statutory accounting principles. Certain changes in these accounting principles may materially impact our statutory capital levels and our view on capital adequacy.

Changes in federal tax laws may affect sales of our products and profitability.

The annuity and life insurance products that we market generally offer income tax advantages to policyholders as compared to other savings instruments, such as certificates of deposit and taxable bonds. Current federal income tax law allows for the deferral of income tax on the earnings during the accumulation period of certain annuity or insurance policies, as opposed to the current taxation of other savings instruments. In addition, life insurance death benefits are generally exempt from income tax. Future legislation could eliminate the tax deferral or tax exemption, or reduce the taxation of competing products which would adversely affect our financial position and results of operations.

Congress has also from time to time considered legislation that would increase the amount of income tax expense incurred by insurance companies. To the extent legislation were enacted that increases corporate income tax rates or that reduces or eliminates tax credits, we would incur additional income tax expense, thereby reducing earnings. Additionally, the amount of tax currently due could be accelerated significantly by provisions that further modify the tax treatment of life insurance reserves, policy acquisition costs, depreciation or investment securities. The likelihood of enactment of any of these proposals and any adverse consequences they may cause us is uncertain, though under the new Administration and Congress, the possibility of such legislation being enacted in the near future may be higher than in recent years.

We face risks relating to litigation, including the costs of such litigation, management distraction and the potential for damage awards, which may adversely impact our business.

We are occasionally involved in litigation, both as a defendant and as a plaintiff. Some lawsuits naming us as defendants may be, or purport to be, class actions. In addition, state regulators such as the Iowa Insurance Division, and federal regulators such as the SEC, FINRA, DOL and the Internal Revenue Service, are entitled to make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, tax laws, the Employee Retirement Income Security Act (ERISA) and laws governing the activities of broker-dealers and investment advisers. Moreover, we are subject to the risks of errors and misconduct by our exclusive agents and other representatives, such as fraud, non-compliance with policies and recommending transactions that are not suitable for particular customers. While we are currently not a party to any lawsuit that we believe will have a material adverse effect on our business, financial condition or results of operations, there can be no assurance that any litigation will not have such an effect, whether financially, through distraction of our management or otherwise.

Risks relating to our business environment and operations

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

The COVID-19 pandemic experienced across the United States during 2020 negatively impacted the U.S. economy and caused significant societal disruption, as businesses experienced sales declines or mandated closures, and individuals were asked to practice social distancing. The COVID-19 pandemic has adversely affected 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 sales 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.

Pandemics also have the effect of heightening many of the other risks described in this Risk Factors section.

We face competition from companies having greater financial resources, more advanced technology systems, broader arrays of products, higher ratings and stronger financial performance, which may impair our ability to retain existing customers, attract new customers and maintain our profitability and financial strength.

See Item 1. Business - Ratings and Competition for information regarding risks relating to competition.

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A significant ratings downgrade may have a material adverse effect on our business.

Ratings are an important factor in establishing the competitive position of insurance companies. If our ratings were lowered, our ability to access reinsurance and market products to new customers could be harmed and existing policyholders might cancel their policies or withdraw the cash values of their policies. These events, in turn, could have a material adverse effect on our financial results and liquidity. Our ratings reflect the agency’s opinions as to our financial strength, operating performance and ability to meet obligations to Farm Bureau Life’s policyholders. There is no assurance that a rating will remain in effect for any given period of time or that a rating will not be reduced, suspended or withdrawn entirely by the rating agency, if in the rating agency’s judgment, circumstances so warrant. See Item 1. Business - Ratings and Competition for a summary of our current ratings.

Cyber attacks, system security risks, data protection breaches and other technology failures could adversely affect our business and results of operations.

A technology failure could occur and potentially disrupt our business, damage our reputation and adversely affect our profitability. Our information technology systems are subject to computer viruses or other malicious codes, unauthorized access and cyber attacks. The administrative and technical controls and other preventive actions we take to reduce the risk of cyber incidents and protect our information technology systems may be insufficient to prevent physical and electronic break-ins, cyber attacks or other security breaches to our computer systems. In addition, disruptions or breaches could occur as a result of natural disasters, man-made disasters, industrial accident, blackout, criminal activity, technological changes or events, terrorism or other unanticipated events beyond our control. Any compromise of the security of our technology systems could damage our reputation, expose us to losses and litigation and require us to incur significant technical, legal and other expenses. While the company has insurance intended to provide coverage from certain losses related to such incidents and a variety of preventative security measures such as risk management, information protection, disaster recovery and business continuity plans, we cannot predict the method or outcome of every possible cyber incident. Unanticipated problems with our systems or recovery plans could have a material adverse impact on our ability to conduct business, our results of operations and our financial position.

Success of our business depends in part on effective information technology systems and on continuing to develop and implement improvements.

Our business is dependent upon effective technology for interacting with employees, agents, policyholders, vendors, third parties and investors. It is crucial to our business to reach a large number of people and secure, store and provide sizable amounts of information. If we do not maintain adequate systems to reflect technological advancements, we could experience adverse consequences including inadequate pricing, underwriting and reserving decisions, regulatory problems, security breaches or litigation exposure. This could adversely affect our relationships and ability to do business with our client/members and make it difficult to attract new customers.

Our business strategy involves providing customers with easy-to-use products and systems to meet their needs, and our information systems require an ongoing commitment of resources to maintain current standards. We are continuously enhancing and updating our systems to keep pace with changes in information processing technology, evolving industry and regulatory standards, threats and customer demands. A failure to provide customers with the information systems they need to conduct business with us could negatively impact relationships with our customers.

Our business is dependent, in part, upon third-party software and services for some of the above-listed technology needs. If one of our third-party vendors is unable to provide the service we require, there could be an adverse impact on our ability to meet our customer, agent, reporting, regulatory and other operational needs.

Our success is dependent on protecting, maintaining and enhancing the effectiveness of existing systems, as well as continuing to buy or build information systems that support our business processes in a cost-effective manner. An inability to provide and maintain effective information technology systems could adversely impact our results of operations and financial condition.

Our reinsurance program involves risks because we remain liable with respect to the liabilities ceded to reinsurers if the reinsurers fail to meet the obligations assumed by them.

We reinsure a portion of our life insurance exposure with unaffiliated insurance companies under traditional indemnity reinsurance agreements. New sales of life products are reinsured above prescribed limits and do not require the reinsurer’s prior approval within certain guidelines. We enter into indemnity reinsurance arrangements to assist in diversifying our risks and to limit our maximum loss on risks that exceed our policy retention limits. Our current maximum retention limit on an insured life is $1.0 million.

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Indemnity reinsurance does not fully discharge our obligation to pay claims on the reinsured business. As the ceding insurer, we remain responsible for policy claims to the extent the reinsurer fails to pay claims. Should any reinsurer fail to meet the obligations assumed under such reinsurance, we remain liable, and payment of these obligations could result in losses.

Our ability to maintain competitive costs is dependent upon the level of new sales and persistency of existing business.

Maintaining competitive costs depends upon numerous factors, including the level of new sales, persistency of existing business and expense management. A decrease in sales or persistency without a corresponding reduction in expenses could affect our business and results of operations.

If we are unable to attract and retain agents, sales of our products and services may be reduced.

We compete to attract and retain exclusive agents for Farm Bureau Life. Intense competition exists for persons with demonstrated ability. We compete primarily on the basis of our reputation, products, compensation, support services, rating agency ratings and financial position. Sales and our results of operations and financial condition could be materially adversely affected if we are unsuccessful in attracting and retaining agents.

Attracting and retaining employees who are key to our business is critical to our growth and success.

The success of our business and the ability to reach our goals is dependent, to a large extent, on our ability to attract and retain key employees. Competition is intense in the job market for certain positions, such as actuaries and other insurance professionals with demonstrated ability. It can be particularly challenging with our headquarters being located in central Iowa, a hub of insurance company and financial institution home offices.

Our employees are not subject to employment contracts. There can be no certainty regarding the length of time any of our executive officers will remain with us. Our inability to retain our key employees, or attract and retain additional qualified employees, could materially adversely affect our sales, results of operations and financial condition.

Risks related to our continuing relationships with Farm Bureau organizations

Our business is highly dependent on our relationships with Farm Bureau organizations and could be adversely affected if those relationships became impaired.

Farm Bureau Life’s business relies significantly upon the maintenance of our right to use the Farm Bureau and FB trade names and related trademarks and service marks, which are controlled by the American Farm Bureau Federation and state Farm Bureau organizations. See discussion under “Item 1. Business - Marketing and Distribution - Affiliation with Farm Bureau Organizations” for information regarding these relationships and circumstances under which our access to the Farm Bureau membership base and use of the “Farm Bureau” and “FB” designations could be terminated. The loss of the right to use these designations in a key state or states could have a material adverse effect on operating results.

Our relationship with Farm Bureau organizations could result in conflicts of interests.

Our business and operations are interrelated to a degree with that of the American Farm Bureau Federation and its affiliates, and state Farm Bureau organizations and their affiliates. The Company and its wholly-owned subsidiary, Farm Bureau Life, share common directors with the American Farm Bureau Federation and certain state Farm Bureau organizations and their affiliates. Farm Bureau Life has written agreements with certain state Farm Bureau organizations, which cover the use of the Farm Bureau name and logo in their respective states. Farm Bureau Life also has written service agreements with affiliates of these state Farm Bureau organizations covering the management of our shared distribution in those states. Negotiation and approval of those agreements may give rise to conflicts of interest for those who serve on the boards of directors of both parties to such agreements. Conflicts could also arise with respect to other business dealings among the parties.

The Company and its wholly-owned subsidiary, Farm Bureau Life, have comparable service agreements with FBPCIC. With respect to those agreements, in addition to individuals who serve as directors on the boards of both companies, the Company, Farm Bureau Life and FBPCIC have common executive management, which may give rise to conflicts of interest for those executives.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

Our principal operations are conducted from property leased from a subsidiary of the Iowa Farm Bureau Federation under a 10 year operating lease that expires in 2021, with automatic five-year extensions unless terminated by one of the parties at least six months prior to the expiration date. Currently, the property leased primarily consists of approximately 138,000 square feet of a 400,000 square foot office building in West Des Moines, Iowa. In addition to our home office building, we lease additional space in West Des Moines, Iowa, to meet our business needs.

ITEM 3. LEGAL PROCEEDINGS

Information required for Item 3 is incorporated by reference from the discussion in Note 10 to our consolidated financial statements included in Item 8.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stock Market Information

The Class A common stock of FBL Financial Group, Inc. is traded on the New York Stock Exchange under the symbol FFG.

There is no established market for purchasing our Class B common stock, although it is convertible upon demand into Class A common stock on a share for share basis. As of January 19, 2021, there were approximately 5,400 holders of Class A common stock and 20 holders of record of Class B common stock.

Class B common stockholders receive dividends at the same rate as that declared on Class A common stock. We intend to declare regular quarterly cash dividends in the future, subject to the discretion of the Board of Directors, which depends in part upon general business conditions, legal restrictions and other factors the Board of Directors deems relevant. Under the Merger Agreement, the Company is permitted to declare and pay, and has agreed to declare and pay, quarterly cash dividends of $0.52 per share of common stock.

For restrictions on dividends, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources” included in Item 7.

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Comparison of Five-Year Total Return

	Period ended
		12/31/2015		12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020
FBL Financial Group, Inc.		$	100.00	$	130.32	$	121.93	$	120.26	$	113.79	$	110.43
S&P 500 Index		100.00		111.96		136.40		130.42		171.49		203.04
S&P 500 Life & Health Insurance Index		100.00		124.86		145.37		115.17		141.88		128.43

Source: S&P Global Market Intelligence

The performance graph shows a comparison of the cumulative total return over the past five years of our Class A common stock, the S&P 500 Index and the S&P 500 Life and Health Insurance Index. The graph plots the changes in value of an initial $100 investment, assuming reinvestment of dividends.

Issuer Purchases of Equity Securities

We had no issuer repurchases of equity securities for the quarter ended December 31, 2020. 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 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

When reading the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, please refer to our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data,” of this report. Unless noted otherwise, all references to FBL Financial Group, Inc. (we or the Company) include all of its direct and indirect subsidiaries, including its insurance subsidiaries Farm Bureau Life Insurance Company (Farm Bureau Life) and Greenfields Life Insurance Company.

In this discussion and analysis, we explain our consolidated results of operations, financial condition and where appropriate, factors that management believes may affect future performance, including:

•our revenues and expenses in the periods presented,

•changes in revenues and expenses between periods,

•sources of earnings and changes in stockholders’ equity,

•impact of these items on our overall financial condition and

•expected sources and uses of cash.

We have organized our discussion and analysis as follows:

•First, we discuss our business and drivers of profitability.

•We then describe the business environment in which we operate including factors that affect operating results.

•We highlight significant events that are important to understanding our results of operations and financial condition.

•We then review the results of operations beginning with an overview of the total Company results, followed by a more detailed review of those results by operating segment.

•Finally, we discuss critical accounting policies and recently issued accounting standards. The critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult or complex judgment.

Merger Agreement

As discussed in “Part I, Item 1. Business, Merger Agreement,” on January 11, 2021, the Company announced that it entered into the Merger Agreement. Subject to the terms and conditions of the Merger Agreement, which has been unanimously approved by our board of directors, FBPCIC will acquire all of the outstanding Common Shares that are not currently owned or controlled by FBPCIC or IFBF, for $56.00 per Common Share in cash, without interest and less any required withholding taxes. Consummation of the Merger is subject to certain specified closing conditions, including approval by the Company’s shareholders as described in Part I, Item 1, expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, clearance by the Insurance Commissioner of the State of Iowa and approval by the Financial Industry Regulatory Authority. The obtaining of financing is not a condition to the obligations of FBPCIC or Merger Sub to effect the Merger.

Overview and Profitability

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 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, which excludes the initial impact from tax law changes. 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 13 to our consolidated

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financial statements included in Item 8 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 13 to our consolidated financial statements included in Item 8 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, 2019 and 2018.

Our profitability is primarily a factor of:

•The volume of our life insurance and annuity business in force, which is driven by the level of our sales and the persistency of the business written.

•The amount of spread (excess of net investment income earned over interest credited) we earn on contract holders’ general account balances.

•Our ability to price our life insurance products to earn acceptable margins over the cost of providing benefits and the expenses of acquiring and administering the products. Competitive conditions, mortality experience, persistency, benefit utilization, investment results and our ability to maintain expenses in accordance with pricing assumptions drive our margins on the life products. On many products, we have the ability to mitigate adverse experience through adjustments to credited interest rates, policyholder dividends or cost of insurance charges.

•Our ability to manage our investment portfolio to maximize investment returns while providing adequate liquidity for obligations to policyholders and minimizing the risk of defaults or impairments of invested assets.

•Our ability to manage the level of our operating expenses.

•Actual experience and changes in assumptions for expected surrender and withdrawal rates, mortality and spreads used in the amortization of deferred acquisition costs.

Our profitability is also impacted by changes in accounting guidance that affect the timing of profit recognition. See Note 1 to our consolidated financial statements included in Item 8 for details on adopted and pending accounting pronouncements.

Impact of Recent Business Environment

Our business generally benefits from moderate to strong economic expansion. Conversely, a lackluster 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.

The COVID-19 pandemic had a significant impact on the U.S. economy during 2020. Beginning late in the first quarter of 2020 the United States experienced significant economic disruption as businesses closed and consumer access to goods and services became limited due to regulated or voluntary quarantine measures. As a result, the financial markets reacted negatively, impacting corporate liquidity and market interest rates. After the initial shock, the U.S. economy improved with the aid of significant economic stimulus measures, resulting in the stabilization of financial markets.

The following are key measures which partially illustrate the impact from COVID-19 on the economy:

•U.S. gross domestic product decreased at an annual rate of 3.5% during 2020, compared to an increase of 2.2% during 2019 based on estimates.

•U.S. unemployment increased to 6.7% at December 31, 2020 based on estimates, compared to 3.5% at December 31, 2019.

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•The yield on the 10-year U.S. Treasury Note decreased to 0.93% at December 31, 2020 from 1.92% at December 31, 2019.

FBL Operations

The COVID-19 pandemic created several operational challenges during 2020. Our initial focus was to quickly transition to working at home, safeguarding employees and reducing the risk of business interruption. Social distancing impacted our sales process between our agents and client/members. The launch of our accelerated underwriting process during the third quarter 2020, led to some processing delays with a third-party provider, which the vendor attributed to be partially due to COVID-19. We took action to address the delays for our client/members and worked with the vendor to remediate the accelerated underwriting process.

Financial results

We believe COVID-19 and the impact it had on our economy contributed to the following financial results during 2020:

•As the economic downturn and lack of consumer mobility put strain on certain issuers, net realized capital losses and the change in allowance for credit losses totaled $16.3 million during 2020 compared to net realized capital gains including other-than-temporary impairment losses of $7.6 million during 2019. The majority of these losses were incurred during the first quarter 2020.

•We incurred death benefits, net of reinsurance and reserves released, with COVID-19 reported as a cause of death totaling $11.2 million during 2020.

•We incurred a pre-tax unlocking charge of $6.7 million during 2020, driven largely by a $13.1 million pre-tax charge associated with an expectation of lower future investment portfolio interest rates.

•Collected annuity premium decreased to $182.3 million during 2020, compared to $252.0 million collected during 2019. These decreases were attributable to COVID-19 through fewer sales opportunities, decreased interest crediting rates and economic uncertainty.

Management took several actions to address these challenges.

•Expense management was a focus, which partially offset the pandemic’s financial impact.

•We conducted tactical sales of investments to reduce exposure to certain industries impacted by the economic downturn.

•Product actions were taken to improve profitability.

Financial position

Lower fixed maturity interest rates driven by lower U.S. Treasury interest rates resulted in an increase in the fair value of our fixed maturity securities during 2020. The increase in fair value of our fixed maturity securities at December 31, 2020, compared with December 31, 2019, resulted in an increase in our book value per common share to $69.24 at December 31, 2020 from $60.12 at December 31, 2019.

Our capital position remains strong, with Farm Bureau Life’s company action level risk-based capital ratio was 528% at December 31, 2020.

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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Results of Operations for the Three Years Ended December 31, 2020

	Year ended December 31,									Change over prior year
	2020			2019			2018			2020		2019
	(Dollars in thousands, except per share data)
Net income attributable to FBL Financial Group, Inc.	$	72,513		$	126,209		$	93,793		(43)	%	35	%
Net income adjustments:
Initial impact of the Tax Act (1)	—			—			(617)			—	%	(100)	%
Proposed acquisition transaction expenses (2)	2,147			—			—			100	%	—	%
Net realized gains/losses on investments (3)	12,295			(5,813)			9,546			(312)	%	(161)	%
Change in fair value of derivatives (3)	4,957			(2,703)			6,188			(283)	%	(144)	%
Adjusted operating income (4)	$	91,912		$	117,693		$	108,910		(22)	%	8	%
Pre-tax adjusted operating income:
Annuity segment	$	61,033		$	52,834		$	62,846		16	%	(16)	%
Life Insurance segment	36,658			67,134			47,680			(45)	%	41	%
Corporate and Other segment	8,867			16,309			16,013			(46)	%	2	%
Total pre-tax adjusted operating income	106,558			136,277			126,539			(22)	%	8	%
Income taxes on adjusted operating income	(14,646)			(18,584)			(17,629)			(21)	%	5	%
Adjusted operating income (4)	$	91,912		$	117,693		$	108,910		(22)	%	8	%
Earnings per common share - assuming dilution	$	2.94		$	5.09		$	3.75		(42)	%	36	%
Adjusted operating income per common share - assuming dilution (4)	$	3.73		$	4.75		$	4.36		(21)	%	9	%
Effective tax rate on adjusted operating income	14		%	14		%	14		%
Average invested assets, at amortized cost net of allowance for credit losses (5)	$	8,562,059		$	8,347,559		$	8,260,499		3	%	1	%
Annualized yield on average invested assets (6)	4.73		%	4.95		%	5.13		%
Other data:
Death benefits, net of reinsurance and reserves released, net of tax	$	(107,432)		$	(97,202)		$	(93,941)		11	%	3	%
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)		$	5,791		$	(227)		(192)	%	(2,651)	%
Estimated impact from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve, net of tax (7)	$	1,462		$	2,923		$	(3,646)		(50)	%	(180)	%
Other investment-related income included in net investment income (3)(8)	$	3,034		$	4,487		$	4,810		(32)	%	(7)	%
Voluntary early retirement program expense	$	—		$	—		$	(6,056)		—	%	100	%

(1)Amount represents a change in our deferred tax assets and liabilities due to the initial impact of the enactment of the Tax Cuts and Jobs Act of 2017 (Tax Act). See Note 5 to our consolidated financial statements included in Item 8 for additional information.

(2)Amount represents the transaction expenses relating to FBL Financial Group's proposed merger transaction.

(3)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.

(4)Adjusted operating income is a non-GAAP measure of earnings, see Overview section above for additional information.

(5)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.

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(6)Annualized yield is the actual investment earnings during the year divided by average invested assets. Annualized yield is used as a measure of investment performance during the reporting periods.

(7)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.

(8)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 in 2020, compared to 2019, was negatively impacted by changes in net realized gains/losses from investments, the change in fair value of derivatives and expenses incurred during 2020 related to the proposed Merger. Net income and adjusted operating income decreased in 2020, compared to 2019, due to an increase in death benefits, net of reinsurance and reserves released, primarily due to COVID-19, the impact of unlocking actuarial assumptions and less spread income earned from lower yields on invested assets. These decreases in net income and adjusted operating income were partially offset by an increase in equity income and a reduction in other underwriting expenses and a benefit from an increase in the volume of business in force.

Net income increased in 2019, compared to 2018, primarily due to changes in net realized gains/losses from investments and changes in fair value of derivatives. Net income and adjusted operating income increased in 2019, compared to 2018, due to the impact of unlocking actuarial assumptions, a decrease in amortization of deferred acquisition costs from the impact of market performance on our variable business and increased earnings from an increase in the volume of business in force. These increases in net income and adjusted operating income were partially offset by increases in death benefits and less spread income earned from lower yields on invested assets.

Footnotes applicable to the segment discussion that follows are as follows:

(1)Premiums collected is a non-GAAP measure of sales production, see Note 13 to our consolidated financial statements included in Item 8 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)Annualized yield is the actual investment earnings during the year divided by average invested assets. Annualized yield is used as a measure of investment performance during the reporting periods.

(5)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 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 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 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 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.

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Annuity Segment
	Year ended December 31,						Change over prior year
	2020		2019		2018		2020		2019
	(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges	$	7,978	$	6,681	$	5,173	19	%	29	%
Net investment income	207,736		205,857		218,823		1	%	(6)	%
Total adjusted operating revenues	215,714		212,538		223,996		1	%	(5)	%
Adjusted operating benefits and expenses:
Interest sensitive product benefits	120,991		118,085		124,015		2	%	(5)	%
Underwriting, acquisition and insurance expenses:
Commissions net of deferrals	1,353		2,063		2,027		(34)	%	2	%
Amortization of deferred acquisition costs	10,866		16,374		11,243		(34)	%	46	%
Amortization of value of insurance in force	691		654		674		6	%	(3)	%
Other underwriting expenses	20,780		22,528		23,191		(8)	%	(3)	%
Total underwriting, acquisition and insurance expenses	33,690		41,619		37,135		(19)	%	12	%
Total adjusted operating benefits and expenses	154,681		159,704		161,150		(3)	%	(1)	%
Pre-tax adjusted operating income	$	61,033	$	52,834	$	62,846	16	%	(16)	%

Other data
Annuity premiums collected, direct (1)	$	182,317		$	251,971		$	285,438		(28)	%	(12)	%
Policy liabilities and accruals, end of period	4,509,426			4,440,276			4,374,798			2	%	1	%
Average invested assets, at amortized cost net of allowance for credit losses (2)	4,610,860			4,494,934			4,523,665			3	%	(1)	%
Other investment-related income included in net investment income (3)	4,828			3,823			5,576			26	%	(31)	%
Average aggregate individual annuity account value (6)	3,177,524			3,179,197			3,135,247			—	%	1	%
Earned spread on individual annuity products:
Annualized yield on average invested assets (4)	4.52		%	4.73		%	4.87		%
Annualized average crediting rate (5)	2.50		%	2.56		%	2.51		%
Spread	2.02		%	2.17		%	2.36		%
Individual annuity withdrawal rate (7)	4.6		%	5.7		%	5.3		%

Pre-tax adjusted operating income for the Annuity segment increased in 2020, compared to 2019, primarily due to the impact of unlocking actuarial assumptions and a decrease in other underwriting expenses, partially offset by lower spread income earned. Pre-tax adjusted operating income decreased in 2019, compared to 2018, primarily due to lower spread income earned and the impact of unlocking actuarial assumptions.

The average aggregate account value for individual annuity contracts in force decreased slightly in 2020, compared to 2019, as withdrawals and surrenders exceeded annuity premiums. The average aggregate account value for individual annuity contracts in force increased in 2019, compared to 2018, due to continued sales and the crediting of interest. Growth in our indexed annuity business in force continues to drive increases in interest sensitive product charges. Premiums collected decreased in 2020 and 2019, compared to prior periods, due to decreased sales of our fixed rate deferred and indexed annuity products, as sales were negatively impacted by crediting and cap rate reductions in response to declining portfolio yields. Individual fixed rate deferred annuity collected premiums were $82.8 million in 2020, $118.6 million in 2019 and $139.0 million in 2018. Indexed annuity collected premiums were $93.2 million in 2020, $128.2 million in 2019 and $137.6 million in 2018. To increase spread income given lower fixed and indexed annuity sales, we increased the issuance of funding agreements with the Federal Home Loan Bank of Des Moines (FHLB) during 2020. Outstanding funding agreements with FHLB, which are included in policyholder liabilities, totaled $585.2 million at December 31, 2020, $488.4 million at December 31, 2019 and $446.0 million at December 31, 2018.

The individual annuity withdrawal rate decreased in 2020, compared to 2019, partially due to the suspension of required minimum distributions by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The individual annuity

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withdrawal rate increased in 2019, compared to 2018, due to certain policies reaching the end of their interest rate guarantee period and the competitiveness of our current crediting rates relative to other financial products.

Amortization of deferred acquisition costs and deferred sales inducements changed in 2020 and 2019, compared to prior 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 and mortality assumptions. The impact of improved persistency also resulted in less amortization during 2020, compared with 2019. Unlocking in 2019 was driven by a change in our withdrawal rate assumptions. The impact of unlocking interest sensitive benefit reserve assumptions during 2020, was due primarily to a revision of our expectation of policyholder utilization of the guaranteed living withdrawal benefit rider on index annuities. No unlocking was considered to be necessary for interest sensitive benefit reserves during 2019 or 2018.

Impact of Unlocking on Pre-tax Adjusted Operating Income
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Amortization of deferred sales inducements reported in interest sensitive product benefits	$	57	$	(195)	$	13
Amortization of deferred acquisition costs	(1,189)		(4,668)		236
Changes in reserves reported in interest sensitive product benefits	5,358		—		—
Increase (decrease) to pre-tax adjusted operating income	$	4,226	$	(4,863)	$	249

Other underwriting expenses decreased in 2020, compared to 2019, due to various expense management actions including deferral of projects, reduction in the use of consultants and limiting replacement of employees that left the company. In addition, travel expenses were lower due to COVID-related travel restrictions. In 2018, we offered a voluntary early retirement program to certain employees. The impact of the program to the Annuity segment was a $1.9 million increase in other underwriting expenses and a $0.6 million increase in investment expenses, which lowered net investment income.

The annualized yield on average invested assets for individual annuities decreased in 2020 and 2019, compared to the prior periods, 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 decrease in 2020, compared to 2019, was partially offset by higher other investment-related income while we recognized a decrease in other investment-related income in 2019 compared to 2018. See the “Financial Condition” section that follows for additional information regarding the yields obtained on investment acquisitions. Annualized average crediting rates on our individual annuity products decreased in 2020, compared to 2019, due to crediting and cap rate actions taken in 2020 in response to a declining portfolio yield and a change in our mix of business in force, partially offset by increased amortization of call option costs supporting our index annuity products. Annualized average crediting rates on our individual annuity products increased in 2019, compared to 2018, primarily due to increased amortization of call option costs.

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Life Insurance Segment
	Year ended December 31,						Change over prior year
	2020		2019		2018		2020		2019
	(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges and other income	$	83,453	$	76,201	$	73,879	10	%	3	%
Traditional life insurance premiums	198,749		197,863		198,312		—	%	—	%
Net investment income	157,498		158,230		158,003		—	%	—	%
Total adjusted operating revenues	439,700		432,294		430,194		2	%	—	%
Adjusted operating benefits and expenses:
Interest sensitive product benefits:
Interest and index credits	38,979		35,198		36,286		11	%	(3)	%
Death benefits and other	73,426		61,069		65,086		20	%	(6)	%
Total interest sensitive product benefits	112,405		96,267		101,372		17	%	(5)	%
Traditional life insurance benefits:
Death benefits	107,259		93,104		84,921		15	%	10	%
Surrender and other benefits	33,740		38,798		37,842		(13)	%	3	%
Increase in traditional life future policy benefits	45,441		42,747		52,436		6	%	(18)	%
Total traditional life insurance benefits	186,440		174,649		175,199		7	%	—	%
Distributions to participating policyholders	7,538		10,053		10,130		(25)	%	(1)	%
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	18,823		19,500		19,113		(3)	%	2	%
Amortization of deferred acquisition costs	17,175		2,819		15,264		509	%	(82)	%
Amortization of value of insurance in force	1,480		1,488		1,492		(1)	%	—	%
Other underwriting expenses	61,223		63,608		63,784		(4)	%	—	%
Total underwriting, acquisition and insurance expenses	98,701		87,415		99,653		13	%	(12)	%
Total adjusted operating benefits and expenses	405,084		368,384		386,354		10	%	(5)	%
	34,616		63,910		43,840		(46)	%	46	%
Equity income, before tax	2,042		3,224		3,840		(37)	%	(16)	%
Pre-tax adjusted operating income	$	36,658	$	67,134	$	47,680	(45)	%	41	%

Other data
Life premiums collected, net of reinsurance (1)	$	322,219		$	310,727		$	304,229		4	%	2	%
Policy liabilities and accruals, end of period	3,226,774			3,082,364			2,990,962			5	%	3	%
Life insurance in force, end of period	63,406,042			61,566,233			59,968,574			3	%	3	%
Average invested assets, at amortized cost net of allowance for credit losses (2)	3,244,989			3,146,631			3,033,978			3	%	4	%
Other investment-related income included in net investment income (3)	489			1,915			2,320			(74)	%	(17)	%
Average aggregate interest sensitive life account value (8)	908,813			879,263			853,993			3	%	3	%
Interest sensitive life insurance spread:
Annualized yield on average invested assets (4)	4.99		%	5.17		%	5.33		%
Annualized average crediting rate (5)	3.84		%	3.77		%	3.66		%
Spread	1.15		%	1.40		%	1.67		%
Life insurance lapse and surrender rates (9)	3.9		%	4.6		%	4.6		%
Death benefits, net of reinsurance and reserves released	$	109,023		$	96,724		$	97,477		13	%	(1)	%

Pre-tax adjusted operating income for the Life Insurance segment decreased in 2020, compared to 2019, primarily due to increases in death benefits, net of reinsurance and reserves released, and the impact of unlocking actuarial assumptions, partially offset by reduced other underwriting expenses and a benefit from the impact of an increase in the volume of business

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in force. Pre-tax adjusted operating income for the Life Insurance segment increased in 2019, compared to 2018, primarily due to the impact of unlocking actuarial assumptions and the impact from an increase in the volume of business in force.

Results for 2018 were unfavorably impacted by the correction of an immaterial error related to a closed block of interest sensitive whole life business. The immaterial error arose and accumulated over several years, with none of those previous years being materially impacted. Remediation required an adjustment to existing in force business account values as well as adjustment to benefit payments for terminated business. The correction resulted in a pre-tax charge of $5.5 million, consisting of $3.5 million related to delayed benefit payments and $2.0 million of accrued interest. The change in estimate and accrued interest resulted in an increase to 2018 interest sensitive product benefits interest credited of $2.0 million, interest sensitive death benefits of $3.3 million and traditional life future policy benefits of $0.2 million.

Death benefits, net of reinsurance and reserves released, vary from year-to-year due to changes in claim counts and average claim size. In 2020, death benefits in the Life Insurance segment include COVID-19 related claims, net of reinsurance and reserves released, totaling $8.8 million.

Amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserves changed in 2020 and 2019, compared to prior periods, due to unlocking actuarial assumptions and changes in actual and expected profits on the underlying business, which included increased mortality in 2020. Amortization, as well as reserves held on certain interest sensitive products, also changed due to the impact of unlocking. Unlocking generally reflects changes in our projected earned spreads, policy lapses, premium persistency and mortality assumptions. The 2020 unlocking charge was primarily due to updating our assumptions related to spread income, with the expectation of lower market interest rates than previously assumed. During 2019, unlocking also included the extension of the deferred acquisition cost amortization period for our participating whole life insurance business based on an increase in persistency rates.

Impact of Unlocking on Pre-tax Adjusted Operating Income
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Amortization of unearned revenue reserve reported in interest sensitive product charges and other income	$	3,772	$	(386)	$	420
Amortization of deferred sales inducements reported in interest sensitive product benefits	(1,207)		45		(209)
Amortization of deferred sales inducements reported in traditional life insurance benefits	138		252		65
Amortization of deferred acquisition costs	(5,556)		13,545		2,152
Changes in reserves reported in interest sensitive product benefits	(7,270)		(1,062)		(4,755)
Increase (decrease) to pre-tax adjusted operating income	$	(10,123)	$	12,394	$	(2,327)

Other underwriting expenses decreased in 2020, compared to prior periods, due to various expense management actions including deferral of projects, reduction in the use of consultants and limiting replacement of employees that left the company. In addition, travel expenses were lower due to COVID-related travel restrictions. In 2018, we offered a voluntary early retirement program to certain employees. The impact of the program to the Life Insurance segment was a $3.6 million increase in other underwriting expenses and a $0.4 million increase in investment expenses, which lowered net investment income. Excluding the impact of the voluntary early retirement program in 2018, other underwriting expenses increased in 2019, compared to 2018, due to expenses associated with system enhancements and various other general expense increases associated with the growth of our business.

The annualized yield on average invested assets for interest sensitive life insurance products decreased in 2020 and 2019, compared to prior periods, 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 and lower other investment-related income. See the “Financial Condition” section that follows for additional information regarding the yields obtained on investment acquisitions. Annualized average crediting rates on our interest sensitive life insurance products increased in 2020 and 2019, compared to prior periods, primarily due to increased amortization of call option costs supporting our indexed universal life products and a change in the mix of business.

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Corporate and Other Segment
	Year ended December 31,						Change over prior year
	2020		2019		2018		2020		2019
	(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges	$	41,512	$	42,284	$	43,622	(2)	%	(3)	%
Net investment income	29,540		34,302		33,272		(14)	%	3	%
Other income	20,301		17,644		16,787		15	%	5	%
Total adjusted operating revenues	91,353		94,230		93,681		(3)	%	1	%
Adjusted operating benefits and expenses:
Interest sensitive product benefits	40,062		39,180		34,465		2	%	14	%
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	2,586		2,855		2,662		(9)	%	7	%
Amortization of deferred acquisition costs	3,165		1,801		8,869		76	%	(80)	%
Other underwriting expenses	6,725		5,041		5,975		33	%	(16)	%
Total underwriting, acquisition and insurance expenses	12,476		9,697		17,506		29	%	(45)	%
Interest expense	5,015		4,850		4,851		3	%	—	%
Other expenses	30,564		25,246		22,595		21	%	12	%
Total adjusted operating benefits and expenses	88,117		78,973		79,417		12	%	(1)	%
	3,236		15,257		14,264		(79)	%	7	%
Net (income) loss attributable to noncontrolling interest	196		(99)		(29)		(298)	%	241	%
Equity income, before tax	5,435		1,151		1,778		372	%	(35)	%
Pre-tax adjusted operating income	$	8,867	$	16,309	$	16,013	(46)	%	2	%

Other data
Average invested assets, at amortized cost net of allowance for credit losses (2)	$	706,211	$	705,994	$	702,856	—	%	—	%
Other investment-related income (loss) included in net investment income (3)	61		1,009		157		(94)	%	543	%
Average aggregate interest sensitive account value (10)	362,046		360,892		361,827		—	%	—	%
Death benefits, net of reinsurance and reserves released	26,650		25,841		21,043		3	%	23	%
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)	1,850		3,700		(4,615)		(50)	%	(180)	%

Pre-tax adjusted operating income for the Corporate and Other segment decreased in 2020, compared to 2019, primarily due to increases in expenses and amortization of deferred acquisition costs driven by the impact of market performance on our variable business and a decrease in net investment income, partially offset by an increase in equity income. Pre-tax adjusted operating income for the Corporate and Other segment decreased in 2019, compared to 2018, primarily due to a decrease in amortization of deferred acquisition costs driven by the impact of market performance on our variable business, partially offset by the impact of unlocking actuarial assumptions and increases in expenses and death benefits.

Death benefits, net of reinsurance and reserves released, vary from year-to-year due to changes in claim counts and average claim size. In 2020, death benefits in the Corporate and Other segment include COVID-19 related claims, net of reinsurance and reserves released, totaling $2.4 million.

Amortization of deferred acquisition costs increased in 2020, compared to 2019, primarily due to the impact of market performance on our variable business. Amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserves decreased in 2019, compared to 2018, primarily due to favorable market performance on our variable

37

business, partially offset by the impact of unlocking. Unlocking generally reflects changes in projected earned spreads, separate account performance and withdrawal and mortality assumptions.

Impact of Unlocking on Pre-tax Adjusted Operating Income
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Amortization of unearned revenue reserve reported in interest sensitive product charges	$	(62)	$	(94)	$	(667)
Amortization of deferred sales inducements reported in interest sensitive product benefits	51		26		76
Amortization of deferred acquisition costs	(150)		(135)		2,382
Changes in reserves reported in interest sensitive product benefits	(659)		2		—
Increase (decrease) to pre-tax adjusted operating income	$	(820)	$	(201)	$	1,791

Other income and other expenses include fees and expenses from sales of brokered products and operating results of our non-insurance subsidiaries, including wealth management services, advisory, management and leasing activities. Other income and other expenses increased in 2020 and 2019, compared to the prior year periods, 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 expansion have increased modestly as we continue to expand this business increasing to $4.6 million in 2020 compared to $2.2 million in 2019 and $0.5 million in 2018. Expenses, including commissions, associated with our wealth management expansion have increased to $11.1 million during 2020 compared to $7.1 million in 2019 and $3.4 million in 2018. In 2018, we offered a voluntary early retirement program to certain employees resulting in a $1.1 million increase in other expenses in the Corporate and Other segment.

Equity Income

Equity income 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 to account for equity income. 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, net of related taxes was $5.9 million in 2020, $3.5 million in 2019 and $4.4 million in 2018. Equity income included in the Corporate segment in 2020 includes a pre-tax gain of $5.5 million from one transaction in an investment partnership. See Note 2 to our consolidated financial statements included in Item 8 for further information.

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Income Taxes on Adjusted Operating Income

The effective tax rate on adjusted operating income was 13.7% for 2020, 13.6% for 2019 and 13.9% for 2018. The effective tax rates differ from the federal statutory rate of 21% primarily due to the impact of low income housing tax credit (LIHTC) investments and tax-exempt investment income. The effective rate for 2019 also differs from the federal statutory rate due to non-recurring tax benefits of $2.5 million resulting from the execution of a tax planning strategy to adjust our tax-basis policy reserves. See Note 5 to our consolidated financial statements included in Item 8 for additional information on income taxes.

Components of income tax
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Income tax expense	$	(8,061)	$	(19,929)	$	(11,650)
Income tax expense on equity income	(1,571)		(919)		(1,179)
Net income adjustments:
Impact of change in federal tax rate (1)	—		—		(617)
Income tax offset on net income adjustments	(5,014)		2,264		(4,183)
Income taxes on adjusted operating income	$	(14,646)	$	(18,584)	$	(17,629)
Income taxes on adjusted operating income before benefits of LIHTC investments	$	(18,181)	$	(22,088)	$	(21,455)
Amounts related to LIHTC investments	3,535		3,504		3,826
Income taxes on adjusted operating income	$	(14,646)	$	(18,584)	$	(17,629)

(1)Amount represents a change in our deferred tax assets and liabilities and other items impacted by the enactment of the Tax Act. See Note 5 to our consolidated financial statements included in Item 8 for additional information.

Impact of Adjustments to Net Income Attributable to FBL
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Initial impact of the Tax Act (1)	$	—	$	—	$	617
Proposed acquisition transaction expenses (2)	(2,147)		—		—
Realized gains (losses) on investments and change in fair value of equity securities and derivatives	(23,687)		11,162		(24,512)
Offsets: (3)
Change in amortization	350		(586)		1,782
Reserve change on interest sensitive products	1,071		204		2,813
Income tax	5,014		(2,264)		4,183
Net impact of adjustments to net income	$	(19,399)	$	8,516	$	(15,117)
Net impact per common share - basic and assuming dilution	$	(0.79)	$	0.34	$	(0.61)

(1)Amount represents a change in our deferred tax assets and liabilities and other items impacted by the enactment of the Tax Act. See Note 5 to our consolidated financial statements included in Item 8 for additional information.

(2)Amount represents the transaction expenses relating to FBL Financial Group's proposed merger transaction.

(3)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.

Income taxes on adjustments to net income have been recorded at 21% in 2019 and 2018 as there are no permanent differences between book and taxable income relating to these adjustments. In 2020, there is no income tax offset attributable to the proposed acquisition transaction expenses, as they are not deductible for income tax purposes. Also in 2020, the income tax offset attributable to realized gains (losses) includes an additional tax benefit of $0.3 million related to capital losses expected to be carried back to 2017 when the income tax rate was 35%. Income taxes on all other 2020 adjustments to net income have been recorded at 21%.

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Realized Gains (Losses) on Investments
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Realized gains (losses) on investments:
Realized gains	$	595	$	6,686	$	2,215
Realized losses	(13,003)		(3,829)		(1,354)
Change in unrealized gains/losses on equity securities	323		5,666		(8,137)
Total other-than-temporary impairment charges	—		(919)		(5,072)
Total allowance for credit losses	(4,199)		—		—
Net realized investment gains (losses)	(16,284)		7,604		(12,348)
Non-credit losses included in other comprehensive income (loss)	—		—		74
Total reported in statements of operations	$	(16,284)	$	7,604	$	(12,274)

The level of realized gains (losses) is subject to fluctuation from period to period due to the timing of investment sales and credit losses, changes in the carrying value of investments held at fair value as well as changes in allowances for credit losses. See “Financial Condition - Investments” and Note 2 to our consolidated financial statements included in Item 8 for details regarding our unrealized gains and losses on available-for-sale securities at December 31, 2020 and 2019.

We monitor the financial condition and operations of the issuers of securities rated below investment grade and of the issuers of certain investment grade securities for which we have concerns regarding credit quality that could potentially require a credit allowance. See additional details regarding write downs and our methodology for evaluating investments for credit allowance in Notes 1 and 2 to our consolidated financial statements included in Item 8.

Change in Allowance/Credit Impairment Losses Recognized in Net Income
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Corporate securities:
Construction	$	—	$	—	$	(308)
Energy	—		—		(1,014)
Finance	(4,213)		—		(26)
Residential mortgage-backed	—		—		(62)
Other asset-backed	(669)		(869)		(760)
Mortgage loans	1,612		—		(2,778)
Securities and indebtedness of related parties	—		(50)		(50)
Other investments	(929)		—		—
Total allowance for credit losses (2020); other-than-temporary impairment losses (2019 & 2018) reported in net income	$	(4,199)	$	(919)	$	(4,998)

The change in allowance for credit losses in the finance sector reflects two fixed maturity securities with an allowance established as the difference of the investments’ amortized cost and fair value. The improvement in the mortgage loan allowance for credit losses primarily reflects a reduction in mortgage loan investments since December 31, 2019, as well as improvement in the loss factors used to estimate the allowance. See Note 2 “Investment Operations” to our consolidated financial statements for more detail on the allowance for credit losses.

Fixed maturity other-than-temporary credit losses for 2019 included an asset-backed bond due to a decline in expected cash flows.

Fixed maturity other-than-temporary credit losses for 2018 included an energy sector bond due to the commencement of bankruptcy proceedings, an asset backed security due to concerns regarding the company’s recovery plan, and a construction sector bond due to a missed bond payment. We also increased our valuation allowance on a mortgage loan due to the commencement of bankruptcy proceedings.

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Financial Condition

Investments

Our investment portfolio increased 6.5% to $9,684.0 million at December 31, 2020, compared to $9,091.6 million at December 31, 2019. The portfolio increase is primarily due to a $421.9 million increase in the net unrealized appreciation of fixed maturities. The increase in unrealized appreciation is the result of a decrease in market interest rates driven by a decrease in U.S. Treasury rates. Additional details regarding securities in an unrealized gain or loss position at December 31, 2020 are included in the discussion that follows and in Note 2 to our consolidated financial statements included in Item 8. Details regarding investment allowances/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
	Year ended December 31,
	2020			2019
	(Dollars in thousands)
Cost of acquisitions:
Corporate	$	320,027		$	376,637
Mortgage- and asset-backed	318,368			361,674
United States Government and agencies	25,212			—
Tax-exempt municipals	71,943			71,630
Taxable municipals	—			8,820
Total	$	735,550		$	818,761
Effective annual yield	3.20		%	3.74		%
Credit quality
NAIC 1 designation	73.6		%	71.7		%
NAIC 2 designation	20.2		%	28.3		%
Non-investment grade	6.2		%	—		%
Weighted-average life in years	11.0			15.0

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 always 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 2020 and 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 3.39% in 2020 and 3.84% in 2019.

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Investment Portfolio Summary
	December 31, 2020				December 31, 2019
	Carrying Value		Percent		Carrying Value		Percent
	(Dollars in thousands)
Fixed maturities - available for sale:
Public	$	6,139,811	63.4	%	$	5,763,570	63.4	%
144A private placement	1,823,768		18.8		1,699,924		18.7
Private placement	320,108		3.3		239,134		2.6
Total fixed maturities - available for sale	8,283,687		85.5		7,702,628		84.7
Equity securities	88,281		0.9		100,228		1.1
Mortgage loans	994,101		10.4		1,011,678		11.2
Real estate	955		—		955		—
Policy loans	195,666		2.0		201,589		2.2
Short-term investments	63,062		0.7		11,865		0.1
Other investments	58,258		0.5		62,680		0.7
Total investments	$	9,684,010	100.0	%	$	9,091,623	100.0	%

As of December 31, 2020, 96.1% (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 December 31, 2020, no single non-investment grade holding exceeded 0.2% of total investments.

Credit Quality by NAIC Designation and Equivalent Rating
		December 31, 2020				December 31, 2019
NAIC Designation	Equivalent Rating (1)	Carrying Value		Percent		Carrying Value		Percent
		(Dollars in thousands)
1	AAA, AA, A	$	5,440,737	65.7	%	$	5,255,079	68.2	%
2	BBB	2,516,020		30.4		2,268,920		29.5
	Total investment grade	7,956,757		96.1		7,523,999		97.7
3	BB	256,122		3.1		123,120		1.6
4	B	57,746		0.7		38,272		0.5
5	CCC	10,036		0.1		17,231		0.2
6	In or near default	3,026		—		6		—
	Total below investment grade	326,930		3.9		178,629		2.3
	Total fixed maturities - available for sale	$	8,283,687	100.0	%	$	7,702,628	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 included in Item 8 for a summary of fixed maturities by contractual maturity date.

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Gross Unrealized Gains and Gross Unrealized Losses by Internal Industry Classification
	December 31, 2020
	Total Carrying Value		Carrying Value of Securities with Gross Unrealized Gains		Gross Unrealized Gains		Carrying 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 goods	343,285		341,328		55,049		1,957		(43)
Communications	165,105		160,706		29,896		4,399		(78)
Consumer cyclical	193,800		189,287		24,883		4,513		(473)
Consumer non-cyclical	710,628		704,598		136,956		6,030		(905)
Energy	442,603		419,114		56,920		23,489		(1,724)
Finance	773,430		764,564		96,649		8,866		(693)
Transportation	144,760		144,621		22,195		139		(5)
Utilities	178,839		178,734		26,636		105		—
Technology	902,980		893,310		188,764		9,670		(219)
Other	21,179		21,179		2,899		—		—
Total corporate securities	4,238,267		4,176,227		704,586		62,040		(4,242)
Mortgage- and asset-backed securities	2,593,203		2,323,830		227,200		269,373		(7,113)
United States Government and agencies	36,252		12,622		2,887		23,630		(1,809)
States and political subdivisions	1,415,965		1,400,820		188,542		15,145		(785)
Total	$	8,283,687	$	7,913,499	$	1,123,215	$	370,188	$	(13,949)

	December 31, 2019
	Total Carrying Value		Carrying Value of Securities with Gross Unrealized Gains		Gross Unrealized Gains		Carrying 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 goods	302,566		292,480		28,427		10,086		(278)
Communications	143,907		139,092		17,900		4,815		(453)
Consumer cyclical	154,744		145,584		12,971		9,160		(357)
Consumer non-cyclical	611,618		554,145		68,658		57,473		(4,057)
Energy	420,805		384,898		42,177		35,907		(6,637)
Finance	692,341		667,173		62,295		25,168		(2,287)
Transportation	129,421		116,659		11,186		12,762		(415)
Utilities	158,073		155,105		15,617		2,968		(23)
Technology	804,317		770,167		123,232		34,150		(765)
Other	24,154		24,154		2,114		—		—
Total corporate securities	3,778,950		3,579,711		418,049		199,239		(15,531)
Mortgage- and asset-backed securities	2,432,382		2,092,650		144,832		339,732		(5,956)
United States Government and agencies	14,123		11,629		1,711		2,494		(5)
States and political subdivisions	1,477,173		1,451,870		145,125		25,303		(866)
Total	$	7,702,628	$	7,135,860	$	709,717	$	566,768	$	(22,358)

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Credit Quality of Available-for-Sale Fixed Maturities with Unrealized Losses
		December 31, 2020
NAIC Designation	Equivalent Rating	Carrying Value of Securities with Gross Unrealized Losses		Percent of Total		Gross Unrealized Losses		Percent of Total
		(Dollars in thousands)
1	AAA, AA, A	$	269,478	72.8	%	$	(6,871)	49.3	%
2	BBB	43,988		11.9		(1,397)		10.0
	Total investment grade	313,466		84.7		(8,268)		59.3
3	BB	41,906		11.3		(3,317)		23.8
4	B	14,812		4.0		(2,364)		16.9
6	In or near default	4		—		—		—
	Total below investment grade	56,722		15.3		(5,681)		40.7
	Total	$	370,188	100.0	%	$	(13,949)	100.0	%

		December 31, 2019
NAIC Designation	Equivalent Rating	Carrying Value of Securities with Gross Unrealized Losses		Percent of Total		Gross Unrealized Losses		Percent of Total
		(Dollars in thousands)
1	AAA, AA, A	$	394,099	69.5	%	$	(6,932)	31.0	%
2	BBB	103,400		18.2		(3,093)		13.8
	Total investment grade	497,499		87.7		(10,025)		44.8
3	BB	37,184		6.6		(5,096)		22.9
4	B	22,928		4.1		(1,616)		7.2
5	CCC	9,150		1.6		(5,621)		25.1
6	In or near default	7		—		—		—
	Total below investment grade	69,269		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 Cost				Gross 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 Cost		Fair 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)

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Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
	December 31, 2019
	Amortized Cost				Gross 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 Cost		Fair 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 months	25,805		195,617		(8,444)		(7,839)
Total	$	25,805	$	563,321	$	(8,444)	$	(13,914)

Available-For-Sale Fixed Maturities with Unrealized Losses by Maturity Date
	December 31, 2020				December 31, 2019
	Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses		Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses
	(Dollars in thousands)
Due in one year or less	$	3,200	$	(133)	$	1,498	$	(2)
Due after one year through five years	9,224		(21)		17,902		(3,340)
Due after five years through ten years	14,260		(1,349)		32,003		(478)
Due after ten years	74,131		(5,333)		175,633		(12,582)
	100,815		(6,836)		227,036		(16,402)
Mortgage- and asset-backed	269,373		(7,113)		339,732		(5,956)
Total	$	370,188	$	(13,949)	$	566,768	$	(22,358)

See Note 2 to our consolidated financial statements included in Item 8 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 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 December 31, 2020 and December 31, 2019, 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 $0.8 million at December 31, 2020 and $1.4 million at December 31, 2019. We do not own any direct investments in subprime lenders.

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Mortgage and Asset-Backed Securities by Collateral Type
	December 31, 2020						December 31, 2019
	Amortized Cost		Carrying Value		Percent of Fixed Maturities		Amortized Cost		Carrying Value		Percent of Fixed Maturities
	(Dollars in thousands)
Government agency	$	202,989	$	231,161	2.8	%	$	220,209	$	236,734	3.1	%
Prime	384,638		405,016		4.9		338,795		357,769		4.6
Alt-A	56,717		66,139		0.8		68,483		80,732		1.0
Subprime	118,705		127,302		1.5		133,410		144,485		1.9
Commercial mortgage	991,944		1,136,333		13.7		969,453		1,045,473		13.6
Collateralized loan obligation	219,481		217,162		2.6		186,671		185,427		2.4
Non-mortgage	399,311		410,090		5.0		376,485		381,762		5.0
Total	$	2,373,785	$	2,593,203	31.3	%	$	2,293,506	$	2,432,382	31.6	%

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 Year
	December 31, 2020
	2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
	(Dollars in thousands)
1	$	37,892	$	40,008	$	53,930	$	67,889	$	537,274	$	577,319	$	629,096	$	685,216
2	3,659		3,667		—		—		—		—		3,659		3,667
3	591		567		139		136		—		—		730		703
4	4,457		3,885		549		447		—		—		5,006		4,332
5	—		—		7,008		8,197		—		—		7,008		8,197
6	4		4		—		—		—		—		4		4
Total	$	46,603	$	48,131	$	61,626	$	76,669	$	537,274	$	577,319	$	645,503	$	702,119

	December 31, 2019
	2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
	(Dollars in thousands)
1	$	60,698	$	62,145	$	61,993	$	80,465	$	495,061	$	519,147	$	617,752	$	661,757
3	279		275		1,113		1,080		—		—		1,392		1,355
4	—		—		4,297		5,372		—		—		4,297		5,372
5	—		—		3,216		3,898		—		—		3,216		3,898
6	6		6		—		—		—		—		6		6
Total	$	60,983	$	62,426	$	70,619	$	90,815	$	495,061	$	519,147	$	626,663	$	672,388

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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 Year
	December 31, 2020
	2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
	(Dollars in thousands)
1	$	7,396	$	8,453	$	91,675	$	113,610	$	823,004	$	934,637	$	922,075	$	1,056,700
2	—		—		41,084		49,229		21,544		22,987		62,628		72,216
3	—		—		—		—		7,242		7,417		7,242		7,417
Total (1)	$	7,396	$	8,453	$	132,759	$	162,839	$	851,790	$	965,041	$	991,945	$	1,136,333

	December 31, 2019
	2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
	(Dollars in thousands)
1	$	7,908	$	8,851	$	93,249	$	110,805	$	826,744	$	880,702	$	927,901	$	1,000,358
2	—		—		41,552		45,115		—		—		41,552		45,115
Total (1)	$	7,908	$	8,851	$	134,801	$	155,920	$	826,744	$	880,702	$	969,453	$	1,045,473

(1)    The CMBS portfolio included government agency-backed securities with a carrying value of $911.4 million at December 31, 2020 and $845.5 million at December 31, 2019. Also included in the CMBS portfolio are military housing bonds totaling $170.0 million at December 31, 2020 and $163.9 million at December 31, 2019. 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 Year
	December 31, 2020
	2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized 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	—		—		—		1		123,376		127,292		123,376		127,293
3	2,204		2,046		—		—		11,965		11,995		14,169		14,041
4	1,179		1,257		—		—		2,846		2,401		4,025		3,658
5	—		—		—		—		1,727		1,058		1,727		1,058
Total	$	6,579	$	6,423	$	118,478	$	129,823	$	611,281	$	618,508	$	736,338	$	754,754

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Other Asset-Backed Securities by NAIC Designation and Origination Year
	December 31, 2019
	2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized 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
2	1,396		1,488		1,547		1,608		113,762		116,354		116,705		119,450
3	163		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

State and Political Subdivision Securities

State and political subdivision securities totaled $1,416.0 million, or 17.1% of total fixed maturities at December 31, 2020, and $1,477.2 million, or 19.2% of total fixed maturities at December 31, 2019, 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 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 115.3% of amortized cost at December 31, 2020. 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 December 31, 2020. As of December 31, 2020, our Illinois-related portfolio holdings were rated investment grade and were valued at 119.4% of amortized cost.

Mortgage Loans

Mortgage loans totaled $994.1 million at December 31, 2020 and $1,011.7 million at December 31, 2019. 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 212 at December 31, 2020 and 209 at December 31, 2019. In 2020, new loans ranged from $2.8 million to $15.0 million in size, with an average loan size of $6.1 million, an average loan term of 15 years and an average net yield of 3.37%. 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 2.1% that are interest-only loans at December 31, 2020. At December 31, 2020, the average loan-to-value of the current outstanding principal balance using the most recent appraised value was 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 included in Item 8 for further discussion regarding our mortgage loans.

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Other Assets and Liabilities

	December 31, 2020	December 31, 2019	Percentage change
Selected other assets:
Cash and cash equivalents	12,882	17,277	(25.4)	%
Reinsurance recoverable	115,168	107,498	7.1	%
Deferred acquisition costs	176,085	289,456	(39.2)	%
Other assets	152,929	167,940	(8.9)	%
Assets held in separate accounts	674,182	645,881	4.4	%
Selected other liabilities:
Future policy benefits	7,616,272	7,393,549	3.0	%
Other policyholder funds	602,989	597,256	1.0	%
Deferred income taxes	211,180	152,373	38.6	%
Other liabilities	102,127	107,013	(4.6)	%
Liabilities held in separate accounts	674,182	645,881	4.4	%

Cash and cash equivalents decreased at December 31, 2020 compared to the prior year end primarily due to normal fluctuations in timing of payments made and received. Deferred acquisition costs decreased during the same period primarily due to a $120.2 million increase in the impact of the change in net unrealized appreciation on fixed maturity securities during the period. Other assets decreased during the same period primarily due to the impact of amortization of LIHTC investments. Assets and liabilities held in separate accounts increased during the same period due to market performance on the underlying investment portfolios.

Future policy benefits increased at December 31, 2020 compared to the prior year end primarily due to an increase in the volume of life business in force. Deferred income taxes increased during the same period primarily due to the tax impact of the change in unrealized appreciation/depreciation on investments.

Stockholders’ Equity

As discussed in Note 7 to our consolidated financial statements included in Item 8, stockholders’ equity was impacted by capital deployment actions during 2020. We paid a special cash dividend of $1.50 per share on our common stock and increased our regular quarterly common stock dividend by 4.2% to $0.50 per share.

	December 31, 2020		December 31, 2019		Percentage change
	(dollars in thousands, except per share data)
Total FBL Financial Group, Inc. stockholders’ equity	$	1,692,099	$	1,485,757	13.9	%
Common stockholders’ equity	1,689,099		1,482,757		13.9	%
Book value per share	$	69.24	$	60.12	15.2	%
Less: Per share impact of accumulated other comprehensive income	24.08		14.39		67.3	%
Book value per share, excluding accumulated other comprehensive income (1)	$	45.16	$	45.73	(1.2)	%

(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 increased at December 31, 2020 compared to the prior year end primarily due to the change in unrealized appreciation of fixed maturity securities during the period and net income, partially offset by dividends paid.

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Market Risks of Financial Instruments

Interest Rate Risk

Interest rate risk is our primary market risk exposure. Substantial and sustained increases and decreases in market interest rates can affect the profitability of insurance products and fair value of investments. The yield realized on new investments generally increases or decreases in direct relationship with interest rate changes. The fair value of our fixed maturity and mortgage loan portfolios generally increases when interest rates decrease and decreases when interest rates increase.

A majority of our insurance liabilities are backed by fixed maturity securities and mortgage loans. The weighted average life of the fixed maturity and mortgage loan portfolio, based on fair values, was approximately 11.0 years at December 31, 2020 and 11.3 years at December 31, 2019. Accordingly, the earned rate on the portfolio lags behind changes in market yields. The extent that the portfolio yield lags behind changes in market yields generally depends upon the following factors:

•The average life of the portfolio.

•The amount and speed at which market interest rates rise or fall.

•The amount by which bond calls, mortgage loan prepayments and paydowns on mortgage- and asset-backed securities accelerate during periods of declining interest rates or decelerate during periods of increasing interest rates.

Expected Cash Flows from Investments
	Amortized Cost December 31, 2020		2021		2022		2023		2024		2025		2026 and Thereafter
	(Dollars in thousands)
Fixed maturity securities	$	7,179,303	$	347,293	$	417,723	$	430,198	$	387,992	$	440,839	$	5,155,258
Mortgage loans	995,654		53,265		67,471		70,021		71,495		78,446		654,956
Total	$	8,174,957	$	400,558	$	485,194	$	500,219	$	459,487	$	519,285	$	5,810,214

The table above summarizes cash inflows from the maturity or prepayment of fixed maturity securities and mortgage loans that will be available for benefits or reinvestment. These cash flow estimates are based on our existing investment holdings and do not anticipate the effect of new acquisitions or voluntary sales of these securities. The estimates include assumptions for the timing of paydowns on asset-backed and other securities, and accordingly, may not represent actual amounts that will be received during the periods presented or changes to these assumptions during the year. In a declining or low interest rate environment, prepayments and redemptions affecting our fixed maturity securities and mortgage loan investments may increase as issuers and borrowers seek to refinance at a lower rate. 

For a majority of our products, profitability is significantly affected by the spreads between interest yields on investments and interest crediting rates on our insurance liabilities. For index products, profitability on the portion of the policyholders’ account balance allocated to an index option is generally determined as the difference between interest yields on investments and the cost of call options. For variable annuities and variable universal life policies, profitability on the portion of the policyholder’s account balance invested in the fixed general account option, if any, is also affected by the spreads earned. For the variable products, the policyholder assumes essentially all the investment earnings risk for the portion of the account balance invested in the separate accounts.

For a portion of our business in force, we have the ability to adjust interest or dividend crediting rates in response to changes in portfolio yield. However, the ability to adjust these rates is limited by competitive factors and contractual guarantees. Surrender rates could increase and new sales could be negatively impacted if the crediting rates are not competitive with the rates on similar products offered by other insurance companies and financial services institutions. In addition, if market rates were to stay at a low level for an extended period of time, our spread earnings could be lowered due to interest rate guarantees on many of our interest sensitive products. See Part 1, Item 1 - Business, Business Segments for the ranges of guaranteed rates and where our products fall within those ranges.

A prolonged period of low interest rates may result in increased downward pressure on average earned yields for the investment portfolios supporting our annuity and universal life business as higher-yielding fixed maturity securities and mortgages are sold, mature or are prepaid and replaced with lower-yielding investments. Lower investment income may cause us to lower crediting rates on our spread-based annuity and life insurance products, which in turn may reduce their attractiveness to potential customers. Failure to lower crediting rates as portfolio investment yields decline, either by choice, to ensure our spread-based

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insurance products are competitive within the marketplace or for contractual reasons in the case of products earning guaranteed rates, will result in lower earnings.

Interest Crediting Rates Compared to Guarantees
	Liabilities at December 31, 2020		Percent Above Minimum Guarantee
	(Dollars in thousands)
Discretionary rate setting products with minimum guarantees:
Fixed rate annuities	$	2,562,037	7.7	%
Indexed annuities	842,117		98.1
Universal life insurance	925,565		16.9
Variable annuities and variable universal life insurance	364,861		—
Total discretionary products	4,694,580
Non-discretionary products	1,031,145
Total interest sensitive product liabilities	$	5,725,725

Non-discretionary products primarily represent funding agreements, guaranteed investment contracts and supplementary contracts involving life contingencies for which we do not have the ability to adjust crediting rates.

We design our products to encourage persistency and manage our investment portfolio in a manner to help ensure targeted spreads are earned. In addition to the ability to change interest crediting rates on our products, certain interest sensitive contracts have surrender and withdrawal penalty provisions. Products such as supplementary contracts with life contingencies are not subject to surrender or discretionary withdrawal. Depending on the product, surrender charge rates on annuity contracts range up to 10.0% and surrender charge periods range up to 10 years and typically decrease 1.0% to 2.0% for every year the contract is in force.

Surrender and Discretionary Withdrawal Characteristics of Interest Sensitive Products and Supplementary Contracts Without Life Contingencies
	Liabilities at December 31, 2020
	(Dollars in thousands)
Surrender charge rate:
Greater than or equal to 5%	$	1,158,284
Less than 5%, but still subject to surrender charge	930,096
Not subject to surrender charge	3,482,338
Not subject to surrender or discretionary withdrawal	429,476
Total	$	6,000,194

A major component of our asset-liability management program is structuring the investment portfolio with cash flow characteristics consistent with the expected cash flow characteristics of our insurance liabilities. We use models to perform simulations of the cash flows generated from existing insurance policies under various interest rate scenarios. Information from these models is used in the determination of investment strategies. Effective duration is a common measure for price sensitivity to changes in interest rates. It measures the approximate percentage change in the fair value of a portfolio when interest rates change by 100 basis points at all points on the curve. Key rate duration is a bifurcation of the effective duration that measures the price sensitivity to changes in interest rates within two points on a curve. These measures include the impact of estimated changes in portfolio cash flows from features such as bond calls and prepayments. When the estimated effective durations of assets and liabilities are similar, exposure to interest rate risk is reduced because a change in the value of assets should be largely offset by a change in the value of liabilities.

Our exposure to interest rate risk stems from both the longevity of our life block and the interest rate sensitivity of our annuity products. We actively manage the projected cash flows, duration and key rate duration of these assets and liabilities by minimizing the difference between them. While it can be difficult to maintain asset and liability durations that are perfectly matched in a dynamic environment, we have identified various strategies that can be implemented if effective duration or key rate duration mismatches exceed acceptable tolerances.

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If interest rates had increased 10% from levels at December 31, 2020 and 2019, the fair value of our fixed maturity securities and short-term investments would have decreased approximately $75.9 million at December 31, 2020 and $123.2 million at December 31, 2019. These hypothetical changes in value do not take into account any offsetting change in the value of insurance liabilities for investment contracts since we estimate such value to be the cash surrender value for a portion of the underlying contracts.

The models used to estimate the impact of a 10% change in market interest rates utilize many assumptions and estimates that materially impact the fair value calculations. Key assumptions in the models include an immediate and parallel shift in the yield curve and an acceleration of bond calls and principal prepayments on mortgage and other asset-backed securities. The above estimates do not attempt to measure the financial statement impact on the resulting change in deferred acquisition costs, unearned revenue reserves, policyholder liabilities and income taxes. Due to the subjectivity of these assumptions, the actual impact of a 10% change in rates on the fair values would likely be different from that estimated.

Equity Risk

Equity price risk is limited due to the relatively small equity portfolio held at December 31, 2020. However, we are exposed to equity price risk in the following ways:

•Changes in the fair value of our equity securities are reported in earnings.

•We earn mortality and expense fee income based on the value of our separate accounts at annual rates ranging from 0% to 1.45% for 2020, 2019 and 2018. As a result, revenues from these sources fluctuate with changes in the fair value of the equity, fixed maturity and other securities held by the separate accounts.

•We have equity price risk to the extent we may owe amounts under the guaranteed minimum death benefit and guaranteed minimum income benefit provisions of our variable annuity contracts. See Note 4 to our consolidated financial statements included in Item 8 for additional discussion of these provisions.

•We also have equity price risk related to index product reserves related to guarantee living withdrawal benefits.

•Our profitability would be impacted if there were little or no gains in the entire series of options purchased over the expected life of an indexed product, as we would incur expenses for credited interest over and above our option costs.

•The amortization of deferred acquisition costs on our variable business can fluctuate with changes in the performance of the underlying separate accounts. See the Corporate and Other Segment discussion above for additional discussion of this amortization.

Credit Risk

We have exposure to credit risk as it relates to the uncertainty associated with the continued ability of a given entity to make timely payments of principal and interest. See “Financial Condition - Investments” for additional information about credit risk in our investment portfolio.

Liquidity and Capital Resources

Cash Flows

During 2020, our operating activities generated cash flows totaling $229.1 million, consisting of net income of $72.3 million adjusted for non-cash operating revenues and expenses netting to $156.8 million. We used cash of $197.7 million in our investing activities during 2020. The primary uses were $914.0 million of investment acquisitions, mostly in fixed maturity securities, partially offset by $778.5 million in sales, maturities and repayments of investments. Our financing activities used cash of $35.9 million during 2020. The primary financing source was $630.5 million in receipts from interest sensitive products credited to policyholder account balances, offset by $570.1 million for return of policyholder account balances on interest sensitive products and $86.2 million for dividends paid to stockholders. Funding agreements with the FHLB represent $264.5 million of receipts from interest sensitive products and $180.0 million of return of policyholder account balances.

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Contractual Obligations

In the normal course of business, we enter into insurance contracts, financing transactions, lease agreements or other commitments that are necessary or beneficial to our operations. These commitments may obligate us to certain cash flows during future periods. Our policyholder obligations are our largest contractual obligations. The differences between contractual obligations and the balance sheet values of our insurance liabilities are primarily the accumulation of interest and death benefits in excess of related policyholder reserves.

On a consolidated basis, we anticipate that funds to meet our short-term and long-term contractual obligations, capital expenditures, cash dividends to stockholders and operating cash needs will come from existing capital and internally-generated funds. We manage our investment portfolio to provide cash flows needed for policyholder obligations in the normal course of business as discussed in the Market Risks of Financial Instruments section above. 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. 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.

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 2020 included management fees from subsidiaries and affiliates totaling $7.9 million and dividends of $98.5 million. Cash outflows are principally for salaries, taxes and other expenses related to providing management services, dividends on outstanding stock, stock repurchases and interest on our parent company debt.

We paid regular cash dividends on our common and preferred stock totaling $49.2 million in 2020, $47.5 million in 2019 and $45.8 million in 2018. In addition, we paid a special $1.50 per common share cash dividend in March 2020, March 2019 and March 2018 totaling $37.0 million, $37.0 million, and $37.3 million, respectively. Under the Merger Agreement, the Company is permitted to declare and pay, and has agreed to declare and pay, quarterly cash dividends of $0.52 per share of common stock. We will also pay the quarterly cash dividend of $0.0075 per Series B redeemable preferred share. The 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 $50.9 million in 2021. The parent company expects to have sufficient resources and cash flows to meet its interest and dividend payments throughout 2021. The parent company had available cash and investments totaling $44.2 million at December 31, 2020. 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 other material commitments for capital expenditures as of December 31, 2020.

As discussed in Note 7 to our consolidated financial statements included in Item 8, 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. There was $26.3 million remaining for repurchases at December 31, 2020, under the current $50 million Class A common stock repurchase program. 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. We repurchased 290,144 shares of Class A common stock for $10.0 million in 2020, 66,475 shares of Class A common stock for $4.6 million in 2019 and 232,837 shares of stock Class A common stock for $15.9 million in 2018.

Interest payments on our debt totaled $4.9 million in 2020, 2019 and 2018. Interest payments on our debt outstanding at December 31, 2020 are estimated to be $4.9 million in 2021.

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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 and 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 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 $286.1 million in 2020, $235.5 million in 2019 and $268.9 million in 2018.

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, 2020, Farm Bureau Life’s statutory unassigned surplus was $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 (the Iowa Insurance Division) as discussed in Note 7 to our consolidated financial statements included in Item 8. During 2021, the maximum amount legally available for distribution to the parent company without further regulatory approval is $87.4 million. Timing of such dividends during the year is limited based on the timing of dividends paid within the preceding 12 months.

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. As of December 31, 2020, Farm Bureau Life’s statutory total adjusted capital was $696.1 million, resulting in an RBC ratio of 528%, based on company action level capital of $131.8 million.

Merger Agreement

Under the Merger Agreement, described in Part I, Item 1. Business, “Merger Agreement,” we are required to pay a termination fee of up to $18.5 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 a maximum of $5.3 million, if the Merger Agreement is terminated in specified circumstances.

Significant Accounting Policies and Estimates

The following is a brief summary of our significant accounting policies and critical accounting estimates. For a complete description of our significant accounting policies, see Note 1 to our consolidated financial statements included in Item 8.

In accordance with GAAP, premiums and considerations received for interest sensitive products, such as ordinary annuities and universal life insurance, are reflected as increases in liabilities for policyholder account balances and not as revenues. Revenues reported for these products consist of policy charges for the cost of insurance, administration charges, amortization of policy initiation fees and surrender charges assessed against policyholder account balances. Surrender benefits paid relating to these products are reflected as decreases in liabilities for policyholder account balances and not as expenses. Our insurance subsidiaries receive investment income earned from the funds deposited into account balances, a portion of which is passed through to the policyholders in the form of interest credited. For index products, proceeds from call options are earned from a portion of the funds deposited, which are passed through to the contract holders in the form of index credits. Index credits and interest credited to policyholder account balances and benefit claims in excess of policyholder account balances are reported as expenses in our consolidated financial statements.

Premium revenues reported for traditional life insurance products are recognized as revenues when due. Future policy benefits are recognized as expenses over the life of the policy by means of the provision for future policy benefits.

For variable universal life and variable annuities, premiums received are not reported as revenues. Similar to universal life and ordinary annuities, revenues reported consist of fee income and product charges collected from the policyholders. Expenses related to these products include benefit claims incurred in excess of policyholder account balances.

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The costs related to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally commissions), defined as deferred acquisition costs, are capitalized and amortized into expense. We also record an asset, value of insurance in force acquired, for the cost assigned to insurance contracts when an insurance company is acquired. For nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities for future policy benefits and are generally “locked in” at the date the policies are issued. For participating traditional life insurance and interest sensitive products, these costs are generally amortized in proportion to expected gross profits from surrender charges and investment, mortality and expense margins. This amortization is periodically adjusted or unlocked when we revise key assumptions used in the calculation. For example, deferred acquisition costs are amortized earlier than originally estimated when policy terminations are higher than originally estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated maturity.

Death and other policyholder benefits reflect exposure to mortality risk and fluctuate from year to year based on the level of claims incurred under insurance retention limits.

Pension assets and liabilities are affected by the estimated fair value of plan assets, estimates of the expected return on plan assets and/or discount rates. Actual changes in the fair value of plan assets and differences between the actual return on plan assets and the expected return on plan assets will affect the amount of pension expense ultimately recognized. The December 31, 2020 pension obligation was computed based on an average 2.68% discount rate, which was based on yields for high-quality corporate bonds with a maturity approximating the duration of our pension liability. The long-term return on plan assets is based on current and projected asset allocations. Declines in comparable bond and equity yields would decrease our net pension asset.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. It is reasonably possible that actual experience could differ from the estimates and assumptions utilized, which could have a material impact on our consolidated financial statements. A summary of our significant accounting estimates and the hypothetical effects of changes in the material assumptions used to develop each estimate, are included in the following table. We have discussed the identification, selection and disclosure of these critical accounting estimates with the Audit Committee of the Board of Directors.

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Balance Sheet Caption	Description of Critical Estimate	Assumptions / Approach Used	Effect if Different Assumptions / Approach Used
Fixed maturities - available for sale	Excluding U.S. Government treasury securities, very few of our fixed maturity securities trade on the balance sheet date. For those securities without a trade on the balance sheet date, fair values are determined using valuation processes that require judgment.	Fair values are obtained primarily from a variety of independent pricing sources, whose results we evaluate internally. Details regarding valuation techniques and processes are summarized in Notes 1 and 3 to our consolidated financial statements included in Item 8.	At December 31, 2020, our fixed maturity securities classified as available for sale had a fair value of $8,283.7 million, with gross unrealized gains totaling $1,123.2 million and gross unrealized losses totaling $14.0 million. Due to the large number of fixed maturity securities held, the unique attributes of each security and the complexity of valuation methods, it is not practical to estimate a potential range of fair values for different assumptions and methods that could be used in the valuation process.
Fixed maturities - available for sale	We are required to exercise judgment to determine to what extent an unrealized loss is due to credit and establish an allowance for credit losses on a security. Whether a realized loss needs to be recognized in earnings and the amount of the loss primarily depends on whether (1) a decline in fair value is credit related, (2) our intent to sell the security and (3) whether or not we could be required to sell prior to recovery. The amortized cost is not adjusted by the loss reported in earnings if the decline is credit related and the resulting allowance can increase or decrease between reporting periods. If we have the intent to sell the security or we could be required to sell the security prior to recovery the previous amortized cost is adjusted by the loss reported in earnings to provide a new cost basis for the fixed maturity security.	We evaluate the operating results of the underlying issuer, near-term prospects of the issuer, general market conditions, causes for the decline in value, and other key economic measures and our intent to sell and whether or not we would be required to sell prior to recovery.	At December 31, 2020, we had $18.8 million of gross unrealized losses, on which we have established an allowance for credit losses of $4.9 million. The allowance for credit losses we have recorded at December 31, 2020 was established at the fair value of the underlying investments, accordingly this would represent the maximum potential loss for those investments. The allowance represents our best estimate of potential losses across the fixed maturity portfolio. Our maximum additional loss exposure would be $13.9 million which represents the total unrealized portfolio losses not subject to an allowance for credit losses. Details regarding these securities are included in the “Financial Condition - Investments” section above. As discussed in Note 2 to our consolidated financial statements included in Item 8, we believe that all credit allowance losses within the portfolio have been recognized.

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Balance Sheet Caption	Description of Critical Estimate	Assumptions / Approach Used	Effect if Different Assumptions / Approach Used
Deferred acquisition costs	Amortization of deferred acquisition costs for participating life insurance and interest sensitive products is dependent upon estimates of future gross profits or margins on this business. Key assumptions used include the following: - amount of death and surrender benefits and the length of time the policies will stay in force, - yield on investments supporting the liabilities, - amount of interest or dividends credited to the policies, - amount of policy fees and charges and - amount of expenses necessary to maintain the policies.	Estimates used in the calculation of amortization of deferred acquisition costs, which are revised at least annually, are based on historical results and our best estimate of future experience.	Amortization of deferred acquisition costs for participating life insurance and interest sensitive products is expected to total approximately $27.2 million for 2021, excluding the impact of new production in 2021. Based upon a historical analysis of fluctuations in estimated gross profits, we believe it is reasonably likely that a 10% change in estimated gross profits could occur. A 10% increase in estimated gross profits for 2021 would result in $2.0 million of additional amortization expense. Correspondingly, a 10% decrease in estimated gross profits would result in a $2.0 million reduction of amortization expense. The information above is for illustrative purposes only and does not reflect our expectations regarding future changes in estimated gross profits.
Future policy benefits	Reserving for future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the policies, mortality experience, lapse rates, surrender rates and dividend crediting rates.	These assumptions are made based upon historical experience, industry standards and a best estimate of future results and, for traditional life products, include a provision for adverse deviation. For traditional life insurance, once established for a particular series of products, these assumptions are generally held constant.	Due to the number of independent variables inherent in the calculation of traditional life insurance reserves, it is not practical to perform a sensitivity analysis on the impact of reasonable changes in the underlying assumptions. The cost of performing detailed calculations using different assumption scenarios outweighs the benefit that would be derived. We believe our assumptions are realistic and produce reserves that are fairly stated in accordance with GAAP.

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Balance Sheet Caption	Description of Critical Estimate	Assumptions / Approach Used	Effect if Different Assumptions / Approach Used
Other assets/liabilities	The determination of net periodic pension cost and related accrued/prepaid pension expense requires the use of estimates as to the expected return on plan assets, discount rate on plan liabilities and other accrual assumptions. Pension expense for 2020 totaled $4.1 million.	To determine our net periodic pension costs for 2020, we assumed an expected long-term rate of return on plan assets of 5.85% and a discount rate of 3.37%. Details regarding the method used to determine the discount rate are summarized in Note 8 to our consolidated financial statements included in Item 8.	The long-term rate of return may fluctuate over time based on asset mix and if investment returns over a long period of time significantly differ from historical returns. The discount rate changes annually as it is based on current yields for high-quality corporate bonds with a maturity approximating the duration of our pension obligations. As fluctuations in the expected long-term rate of return and discount rate have been historically moderate and we have no current plans to change our investment strategy significantly, we believe a change of up to 100 basis points is reasonably likely. A 100 basis point decrease in the expected return on assets would result in a $1.2 million increase in pension expense and a 100 basis point increase would result in a $1.2 million decrease to pension expense. A 100 basis point decrease in the assumed discount rate would result in a $2.7 million increase in pension expense while a 100 basis point increase would result in a $2.4 million decrease to pension expense. The information above is for illustrative purposes only and does not reflect our expectations regarding future changes in the long-term rate of return or discount rates.
Deferred income taxes	The amount of deferred tax assets we hold is dependent on our estimate of the future deductibility of certain items. A valuation allowance against deferred income tax assets is established if it is more likely than not that some portion or all of the deferred income tax assets will not be realized. No valuation allowance was recorded on deferred tax assets at December 31, 2020.	We utilize tax planning strategies, which require forward-looking assumptions and management judgment, to determine the deductibility of certain items and to assess the need for a valuation allowance.  During periods in which we have deferred tax assets related to unrealized investment losses, we utilize tax planning strategies, including a buy-and-hold investment philosophy for securities experiencing unrealized losses and the sale of appreciated securities to ensure the deductibility of such losses in future periods.	At December 31, 2020, we held gross deferred tax assets totaling $45.0 million, primarily related to future policy benefits, employee benefits and loss carryforwards. Utilization of these deferred tax assets is dependent on our future earnings. No valuation allowance has been established for these deferred tax assets, as we believe future earnings will be sufficient to ensure their utilization. If future earnings are no longer expected to be sufficient, a valuation allowance will need to be established. Given the number of variables that impact the level of future earnings, it is not practicable to estimate a range of possible outcomes to the valuation of the deferred tax assets. Future changes in tax rates and other tax laws may also impact the utilization of deferred tax assets.

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Recent Accounting Changes

During 2020, the company adopted new accounting guidance for the accounting for credit impairments of certain financial instruments. Under the new guidance, credit losses are required to be estimated using an expected loss model under which an allowance for credit losses is established and reflected as a charge to earnings. This change and other accounting pronouncements recently adopted and not yet adopted are discussed further in Note 1 to our consolidated financial statements included in Item 8.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Market Risks of Financial Instruments,” for our quantitative and qualitative disclosures about market risk.

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a - 15(f). Under the supervision and the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

We engage Ernst & Young LLP as the independent registered public accounting firm to audit our financial statements and internal control over financial reporting and express their opinion thereon. A copy of Ernst & Young LLP’s audit opinions follows.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

FBL Financial Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited FBL Financial Group, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, FBL Financial Group, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of FBL Financial Group, Inc. as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedules listed in the Index at Item 15(a) and our report dated February 24, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

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dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Des Moines, Iowa

February 24, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

FBL Financial Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of FBL Financial Group, Inc. (the Company) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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	Future policy benefits liabilities for secondary guarantees on universal life- type products
Description of the Matter	The Company’s future policy benefits totaled $7.6 billion at December 31, 2020, a portion of which represented liabilities for secondary guarantees on universal life- type products. The carrying amount of this product guarantee is based on estimates of how much the Company will need to pay for future benefits and claims in excess of the amount of fees which are expected to be collected from policyholders for the policy feature. As described in Note 1 to the consolidated financial statements, the liabilities are accrued in relation to estimated contract assessments. There is significant uncertainty inherent in estimating this liability because there is a significant amount of management judgment involved in developing certain assumptions that impact the liability balance, including expected mortality experience, policyholder lapse rates, premium persistency, and yield of investments. Auditing management’s estimate of the future contract benefits liability related to those products with secondary guarantees involved the use of actuarial specialists and a high degree of subjectivity in evaluating management’s methods and assumptions used to develop those estimates.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the process to estimate the liability balance, including, among others, controls related to the review and approval processes that management has in place for the assumptions used in estimating the secondary guarantee liability. This included testing controls related to management’s evaluation of the need to update assumptions based on the comparison of actual Company experience to previous assumptions We involved specialists to assist with our audit procedures which included, among others, evaluating the significant assumptions used by management in estimating the secondary guarantee liability by performing a comparison of management’s assumptions used in their analysis, including expected mortality experience, policyholder lapse rates, premium persistency, and yield of investments with historical experience and observable market data. We also independently recalculated the secondary guarantee liability for a sample of contracts for comparison with the actuarial model used by management.

Deferred acquisition costs amortization based on estimated gross profits or estimated gross margins

Description of the Matter

The Company’s deferred acquisition costs totaled $176.1 million at December 31, 2020. The carrying amount of the deferred acquisition costs is the total costs deferred less amortization. As disclosed in Note 1 to the consolidated financial statements, a portion of the deferred acquisition costs are being amortized in proportion to expected gross profits or estimated gross margins of the underlying contracts. There is a significant amount of uncertainty inherent in calculating EGPs as the calculation includes management’s best estimate of assumptions such as expected mortality experience, policyholder lapse rates, premium persistency, and yield of investments. EGMs include similar assumptions as the components of EGPs. Management’s assumptions are adjusted, also known as unlocking, over time for emerging experience and expected trends. The unlocking results in amortization being recalculated, using the new assumptions for EGPs or EGMs that results either in additional or less cumulative amortization expense Auditing management’s estimate of the deferred acquisition costs involved the use of actuarial specialists and a high degree of subjectivity in evaluating management’s methods and assumptions used to calculate EGPs or EGMs.

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How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the process to estimate the deferred acquisition costs balance, including, among others, controls related to the review and approval processes that management has in place for the assumptions used in estimating the EGPs and EGMs. This included testing controls related to management’s evaluation of the need to update assumptions based on the comparison of actual Company experience to previous assumptions
We involved actuarial specialists to assist with our audit procedures which included, among others, evaluating the significant assumptions used by management in estimating the EGPs and EGMs by performing a comparison of management’s assumptions, including expected mortality experience, policyholder lapse rates, premium persistency, and yield of investments, with prior actual experience, observable market data and management’s estimates of prospective changes in these assumptions. We also independently recalculated EGPs and EGMs for a sample of contracts for comparison with the actuarial model used by management.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1993.

Des Moines, Iowa

February 24, 2021

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FBL FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	December 31,
	2020		2019
Assets
Investments:
Fixed maturities - available for sale, at fair value (amortized cost: 2020 - $7,179,303; 2019 - $7,015,269) and allowance for credit losses (2020 - $4,882, 2019 - $0)	$	8,283,687	$	7,702,628
Equity securities at fair value (cost: 2020 - $82,999; 2019 - $95,269)	88,281		100,228
Mortgage loans, net of allowance for credit losses (2020 - $1,553, 2019 - $0)	994,101		1,011,678
Real estate	955		955
Policy loans	195,666		201,589
Short-term investments	63,062		11,865
Other investments, net of allowance for credit losses (2020 - $929, 2019 - $0)	58,258		62,680
Total investments	9,684,010		9,091,623
Cash and cash equivalents	12,882		17,277
Securities and indebtedness of related parties	88,445		74,791
Accrued investment income	70,278		72,332
Amounts receivable from affiliates	3,257		4,357
Reinsurance recoverable	115,168		107,498
Deferred acquisition costs	176,085		289,456
Value of insurance in force acquired	2,304		2,624
Current income taxes recoverable	16,732		6,427
Other assets	152,929		167,940
Assets held in separate accounts	674,182		645,881
Total assets	$	10,996,272	$	10,480,206

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FBL FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands)

	December 31,
	2020		2019
Liabilities and stockholders’ equity
Liabilities:
Future policy benefits:
Interest sensitive products	$	5,725,725	$	5,548,212
Traditional life insurance and accident and health products	1,890,547		1,845,337
Other policy claims and benefits	57,438		46,883
Supplementary contracts without life contingencies	274,469		296,915
Advance premiums and other deposits	271,082		253,458
Amounts payable to affiliates	406		1,218
Long-term debt payable to non-affiliates	97,000		97,000
Deferred income taxes	211,180		152,373
Other liabilities	102,127		107,013
Liabilities related to separate accounts	674,182		645,881
Total liabilities	9,304,156		8,994,290
Stockholders’ equity:
FBL Financial Group, Inc. stockholders’ equity
Preferred stock, without par value, at liquidation value - authorized 10,000,000 shares, issued and outstanding 5,000,000 Series B shares	3,000		3,000
Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,384,109 shares in 2020 and 24,652,802 shares in 2019	151,061		152,661
Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2020 and 2019	72		72
Accumulated other comprehensive income	587,279		354,764
Retained earnings	950,687		975,260
Total FBL Financial Group, Inc. stockholders’ equity	1,692,099		1,485,757
Noncontrolling interest	17		159
Total stockholders’ equity	1,692,116		1,485,916
Total liabilities and stockholders’ equity	$	10,996,272	$	10,480,206

See accompanying notes.

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FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

	Year ended December 31,
	2020		2019		2018
Revenues:
Interest sensitive product charges	$	132,522	$	127,113	$	122,789
Traditional life insurance premiums	198,749		197,863		198,312
Net investment income	397,231		424,998		394,618
Net realized capital gains (losses)	(12,085)		8,523		(7,276)
Change in allowance for credit losses on investments	(4,199)		0		0
Other-than-temporary impairment losses	0		(919)		(5,072)
Non-credit portion in other comprehensive income/loss	0		0		74
Other income	20,047		17,103		16,181
Total revenues	732,265		774,681		719,626
Benefits and expenses:
Interest sensitive product benefits	282,201		276,473		253,753
Traditional life insurance benefits	186,441		174,654		175,209
Policyholder dividends	7,538		10,053		10,130
Underwriting, acquisition and insurance expenses	143,887		140,624		152,055
Interest expense	5,015		4,850		4,851
Other expenses	32,711		25,246		22,595
Total benefits and expenses	657,793		631,900		618,593
	74,472		142,781		101,033
Income tax expense	(8,061)		(19,929)		(11,650)
Equity income, net of related income taxes	5,906		3,456		4,439
Net income	72,317		126,308		93,822
Net (income) loss attributable to noncontrolling interest	196		(99)		(29)
Net income attributable to FBL Financial Group, Inc.	$	72,513	$	126,209	$	93,793
Earnings per common share	$	2.94	$	5.09	$	3.76
Earnings per common share - assuming dilution	$	2.94	$	5.09	$	3.75

See accompanying notes.

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FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

	Year ended December 31,
	2020		2019		2018
Net income	$	72,317	$	126,308	$	93,822
Other comprehensive income (loss) (1)
Change in net unrealized investment gains/losses	232,659		264,940		(190,114)
Non-credit impairment losses	0		0		(58)
Change in underfunded status of postretirement benefit plans	(144)		(1,494)		1,987
Total other comprehensive income (loss), net of tax	232,515		263,446		(188,185)
Total comprehensive income (loss), net of tax	304,832		389,754		(94,363)
Comprehensive (income) loss attributable to noncontrolling interest	196		(99)		(29)
Total comprehensive income (loss) applicable to FBL Financial Group, Inc.	$	305,028	$	389,655	$	(94,392)

(1)Other comprehensive income (loss) 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.

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FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands)

	FBL Financial Group, Inc. Stockholders’ Equity
	Series B Preferred Stock		Class A and Class B Common Stock		Accumulated Other Comprehensive Income		Retained Earnings		Non- controlling Interest		Total Stockholders’ Equity
Balance at January 1, 2018	$	3,000	$	153,661	$	284,983	$	935,423	$	58	$	1,377,125
Cumulative effect of change in accounting principle related to net unrealized gains on equity securities	—		—		(5,480)		5,480		—		0
Net income	—		—		—		93,793		29		93,822
Other comprehensive loss	—		—		(188,185)		—		—		(188,185)
Stock-based compensation	—		499		—		—		—		499
Purchase of common stock	—		(1,436)		—		(14,471)		—		(15,907)
Dividends on preferred stock	—		—		—		(150)		—		(150)
Dividends on common stock	—		—		—		(82,978)		—		(82,978)
Receipts related to noncontrolling interest	—		—		—		—		33		33
Balance at December 31, 2018	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	—		—		—		126,209		99		126,308
Other comprehensive income	—		—		263,446		—		—		263,446
Stock-based compensation	—		419		—		—		—		419
Purchase of common stock	—		(410)		—		(4,167)		—		(4,577)
Dividends on preferred stock	—		—		—		(150)		—		(150)
Dividends on common stock	—		—		—		(84,324)		—		(84,324)
Disbursements related to noncontrolling interest	—		—		—		—		(60)		(60)
Balance at December 31, 2019	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 (loss)	—		—		—		72,513		(196)		72,317
Other comprehensive income	—		—		232,515		—		—		232,515
Stock-based compensation	—		197		—		—		—		197
Purchase of common stock	—		(1,797)		—		(8,203)		—		(10,000)
Dividends on preferred stock	—		—		—		(150)		—		(150)
Dividends on common stock	—		—		—		(86,048)		—		(86,048)
Receipts related to noncontrolling interest	—		—		—		—		54		54
Balance at December 31, 2020	$	3,000	$	151,133	$	587,279	$	950,687	$	17	$	1,692,116

See accompanying notes.

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FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Year ended December 31,
	2020		2019		2018
Operating activities
Net income	$	72,317	$	126,308	$	93,822
Adjustments to reconcile net income to net cash provided by operating activities:
Interest credited to account balances	170,251		161,893		164,623
Charges for mortality, surrenders and administration	(132,568)		(126,165)		(120,944)
Net realized (gains) losses on investments	16,284		(7,604)		12,274
Change in fair value of derivatives	(577)		(2,232)		7,162
Increase in liabilities for life insurance and other future policy benefits	74,741		66,503		77,786
Deferral of acquisition costs	(37,126)		(45,578)		(47,771)
Amortization of deferred acquisition costs and value of insurance in force	33,941		25,875		36,371
Change in reinsurance recoverable	(6,557)		(2,415)		4,081
Provision for deferred income taxes	(2,287)		6,876		(4,952)
Other	40,727		9,593		16,725
Net cash provided by operating activities	229,146		213,054		239,177
Investing activities
Sales, maturities or repayments:
Fixed maturities - available for sale	571,431		665,276		590,106
Equity securities	11,486		15,397		7,039
Mortgage loans	120,269		102,132		69,208
Derivative instruments	20,275		15,659		16,754
Policy loans	38,954		36,441		36,720
Securities and indebtedness of related parties	10,316		8,814		8,359
Other long-term investments	5,796		6,147		6,831
Real estate	0		641		0
Acquisitions:
Fixed maturities - available for sale	(734,636)		(815,762)		(705,250)
Equity securities	(2,850)		(16,729)		(4,447)
Mortgage loans	(104,245)		(71,202)		(139,836)
Derivative instruments	(4,069)		(19,886)		(14,425)
Policy loans	(33,031)		(40,664)		(42,688)
Securities and indebtedness of related parties	(25,472)		(21,084)		(21,146)
Other long-term investments	(9,670)		(7,649)		(7,891)
Short-term investments, net change	(51,197)		3,848		1,294
Purchases and disposals of property and equipment, net	(11,028)		(15,990)		(12,520)
Net cash used in investing activities	(197,671)		(154,611)		(211,892)

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FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in thousands)

	Year ended December 31,
	2020		2019		2018
Financing activities
Contract holder account deposits	$	630,473	$	606,917	$	668,482
Contract holder account withdrawals	(570,066)		(577,238)		(631,181)
Dividends paid	(86,198)		(84,474)		(83,128)
Proceeds from the issuance of short-term debt	10,000		55,000		27,000
Repayments of short-term debt	(10,000)		(55,000)		(27,000)
Repurchase of common stock, net of issuance	(10,133)		(5,346)		(15,152)
Other financing activities	54		(60)		33
Net cash used in financing activities	(35,870)		(60,201)		(60,946)
Decrease in cash and cash equivalents	(4,395)		(1,758)		(33,661)
Cash and cash equivalents at beginning of year	17,277		19,035		52,696
Cash and cash equivalents at end of year	$	12,882	$	17,277	$	19,035

Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest	$	(4,863)	$	(4,860)	$	(4,868)
Income taxes	(9,572)		(2,736)		(3,005)

See accompanying notes.

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FBL FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

Nature of Business

FBL Financial Group, Inc. (we or the Company), majority owned by the Iowa Farm Bureau Federation (IFBF), operates predominantly in the life insurance industry through its principal subsidiary, Farm Bureau Life Insurance Company (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. Greenfields Life Insurance Company (Greenfields), a subsidiary of Farm Bureau Life, offers life and annuity products in the state of Colorado. 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 affiliated property-casualty companies.

Consolidation

Our consolidated financial statements include the financial statements of the Company and its direct and indirect subsidiaries. All significant intercompany transactions have been eliminated.

Subsequent Event - Merger Agreement -Affiliate Acquisition of Outstanding Shares

On January 11, 2021, the Company announced that it reached an agreement with Farm Bureau Property & Casualty Insurance Company (FBPCIC), an Iowa domiciled stock property and casualty insurance company pursuant to which FBPCIC will acquire all of the outstanding Class A common shares, without par value, and Class B common shares, without par value (collectively, the Common Shares), of the Company that are not currently owned or controlled by FBPCIC or IFBF, an Iowa non-profit corporation, pursuant to the terms of the Agreement and Plan of Merger (the Merger Agreement), by and among the Company, FBPCIC, and 5400 Merger Sub, Inc., an Iowa corporation (Merger Sub). IFBF and FBPCIC currently own approximately 61% of the outstanding Common Shares. The Merger Agreement provides for the merger of Merger Sub with and into the 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, expiration or termination of applicable waiting periods, clearance by the Insurance Commissioner of the State of Iowa and approval by the Financial Industry Regulatory Authority as further described in the Merger Agreement.

See Note 9 to our consolidated financial statements for information regarding management and other agreements between the Company, IFBF and FBPCIC.

Adoption of New Accounting Pronouncements

Description	Date of adoption	Effect on our consolidated financial statements or other significant matters
Standards adopted:
Financial instruments - recognition and measurement In January 2016, the FASB issued guidance that amended certain aspects of the recognition and measurement of financial instruments. The new guidance primarily affected the accounting for equity securities, which are now carried at fair value with valuation changes recognized in the statement of operations rather than as other comprehensive income under the prior guidance. The presentation and disclosure requirements for financial instruments and the methodology for assessing the need for a valuation allowance on deferred tax assets resulting from unrealized losses on available-for-sale fixed maturity securities were also revised under the new guidance.	January 1, 2018	Upon adoption using the modified retrospective approach, we reclassified $5.5 million of net unrealized investment gains, net of adjustments to deferred acquisition costs, interest sensitive policy reserves and income taxes, on our equity securities from AOCI to retained earnings as a cumulative effect adjustment.

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Description	Date of adoption	Effect on our consolidated financial statements or other significant matters
Standards adopted continued:
Leases In February 2016, the FASB issued guidance amending the accounting for leases, which, for most lessees, resulted in a gross-up of the balance sheet. Under the new standard, lessees recognize the leased assets on the balance sheet and a corresponding liability for the present value of lease payments over the lease term. The new standard requires the application of judgment and estimates. The standard allowed accounting policy elections to be made both at transition and for the accounting post-transition, including whether to adopt a short-term lease recognition exemption.	January 1, 2019	Upon 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. The impact to earnings per share due to adopting this guidance was ($0.01) per basic and diluted share for the years ended December 31, 2020 and December 31, 2019.
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 required to be 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 are in the form of an allowance for credit losses rather than an adjustment to the cost basis of the security. Improvements in credit loss estimates on fixed maturity available-for-sale securities are immediately recognized through earnings by reducing the allowance.	January 1, 2020	Upon adoption using the modified retrospective approach, a cumulative effect adjustment of $2.7 million after offsets was recorded to retained earnings. 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. Due to allowances being released during the year, application of this guidance resulted in an increase to net income of $2.2 million ($0.09 per basic and diluted share) during the year ended December 31, 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 nonparticipating 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.	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.

Investments

Fixed Maturities

Fixed maturities are comprised of bonds and redeemable preferred stock and are designated as “available for sale” (AFS). AFS securities, with the exception of interest-only bonds, are reported at fair value and unrealized gains and losses on these securities are included directly in stockholders’ equity as a component of AOCI. The unrealized gains and losses, included in AOCI, are reduced by a provision for deferred income taxes and adjustments to deferred acquisition costs, value of insurance in force acquired, unearned revenue reserves and policyholder liabilities that would have been required as a charge or credit to income had such amounts been realized. Interest-only bonds are considered to have an embedded derivative feature;

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accordingly, unrealized gains and losses relating to these securities are recorded as a component of net investment income in the consolidated statements of operations.

Premiums and discounts for all fixed maturity securities are amortized/accreted into investment income over the life of the security using the effective interest method. Amortization/accrual of premiums and discounts on mortgage- and asset-backed securities incorporates prepayment assumptions to estimate the securities’ expected lives. Subsequent revisions in assumptions are recorded using the retrospective or prospective method. Under the retrospective method used for mortgage-backed and asset-backed securities of high credit quality (ratings equal to or greater than “AA” or an equivalent rating by a nationally recognized rating agency at the time of acquisition or that are backed by a U.S. agency), amortized cost of the security is adjusted to the amount that would have existed had the revised assumptions been in place at the date of acquisition. The adjustments to amortized cost are recorded as a charge or credit to net investment income. Under the prospective method, which is used for all other mortgage-backed and asset-backed securities, future cash flows are estimated and interest income is recognized going forward using the new internal rate of return.

When the fair value of a fixed maturity security is below its amortized cost, it is considered impaired. 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 net realized capital 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 (OTTI), we similarly recorded a charge to other-than-temporary impairment losses as reported within the consolidated statement of operations and the amortized cost basis of the security was adjusted for the loss. Prior to January 1, 2020, after an OTTI write down of fixed maturities with a credit-only impairment, the cost basis was not adjusted for subsequent recoveries in fair value. For fixed maturities for which we could reasonably estimate future cash flows after a write down, the discount or reduced premium recorded, based on the new cost basis, was amortized over the remaining life of the security. Amortization in this instance was computed using the prospective method and the current estimate of the amount and timing of future cash flows.

Beginning in 2020, to the extent an unrealized loss is due to a credit event, an increase in 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 sheets, 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 a change in allowance for credit losses on investments within the consolidated statement of operations. Fixed maturity securities are written-off to realized capital losses if we determine that no additional payments of principal or interest will be received. 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.

We monitor the financial condition and operations of the issuers of fixed maturities to determine whether an allowance for credit losses is required or, prior to January 1, 2020, that a credit impairment was an OTTI. We review factors such as:

•historical operating trends;

•business prospects;

•status of the industry in which the issuer operates;

•analyst ratings on the issuer and sector;

•quality of management;

•size of the unrealized loss; and

•level of current market interest rates compared to market interest rates when the security was purchased.

In order to determine the allowance for credit losses or credit impairment loss for fixed maturities, we estimate the present value of future cash flows that we expect to receive over the remaining life of the instrument, which in some instances could equal fair value, as well as review our plans to hold or sell the instrument. Significant assumptions regarding the present value of expected cash flows for each security are used when a credit loss or credit impairment that is OTTI occurs and there is a non-credit portion of the unrealized loss that will not be recognized in earnings. Our assumptions for residential mortgage-backed securities, commercial mortgage-backed securities and other asset-backed securities include collateral pledged, guarantees, vintage, anticipated principal and interest payments, prepayments, default levels, severity assumptions, delinquency rates and the level of nonperforming assets for the remainder of the investments’ expected term. We use a single best estimate of cash flows approach and use the effective yield prior to the date of impairment to calculate the present value of cash flows. Our assumptions for corporate and other fixed maturities include anticipated principal and interest payments and an estimated recovery value, generally based on a percentage return of the current fair value.

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Equity Securities

Equity securities, comprised of mutual funds and common and non-redeemable preferred stocks, are reported at fair value with changes in fair value included in net realized capital gains (losses) in the consolidated statement of operations.

Mortgage Loans

Mortgage loans are reported at cost adjusted for amortization of premiums, accrual of discounts and net of allowance for credit losses. 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. Prior to January 1, 2020, the allowance 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.

Real Estate

Our real estate is held for investment and consists of land reported at cost, net of allowance for losses. The carrying value of these assets is subject to regular review. For properties held for investment, if indicators of impairment are present and a property’s expected undiscounted cash flows are not sufficient to recover the property’s carrying value, an impairment loss is recognized and the property’s cost basis is reduced to fair value. No properties were held for investment with impairment charges as of December 31, 2020 or 2019.

Other Investments

Policy loans are reported at unpaid principal balance. Short-term investments, which include investments with remaining maturities of one year or less, but greater than three months at the time of acquisition, are reported at cost adjusted for amortization of premiums and accrual of discounts. Other investments include common stock issued by the Federal Home Loan Bank of Des Moines (FHLB) carried at the current redemption value, call options carried at fair value less collateral received and a promissory note acquired in a sale of a partnership interest carried at the estimated recovery value of the note.

We have embedded derivatives associated with modified coinsurance contracts, which are included within reinsurance recoverable. These instruments are carried at fair value with changes reflected in net investment income. See Note 2 for more information regarding our derivative instruments.

Securities and indebtedness of related parties include investments in corporations and partnerships over which we may exercise significant influence and those investments for which we use the equity method of accounting. These corporations and partnerships operate predominately in the investment company, real estate and insurance industries. In applying the equity method, we record our share of income or loss reported by the equity investees. In accounting for these investments, we consistently use the most recent financial information available, which is generally for periods not more than three months prior to the ending date of the period for which we are reporting. For partnerships operating in the investment company industry, this income or loss includes changes in unrealized gains and losses in the partnerships’ investment portfolios.

Accrued Investment Income

We discontinue the accrual of investment income on invested assets when it is determined that it is probable that we will not collect the income.

Realized Gains and Losses on Investments

Realized gains and losses on sales of investments are determined on the basis of specific identification and included in net realized capital gains (losses) on the consolidated statement of operations. Change in allowance for credit losses on fixed maturity securities, mortgage loans and other investments are included in the change in allowance for credit losses on investments in the consolidated statement of operations. Prior to 2020, OTTI impairments were included in the other-than-

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temporary impairment losses and non-credit portion in other comprehensive income/loss on the consolidated statement of operations.

Fair Values

Fair values of fixed maturities are based on quoted market prices in active markets when available. Fair values of fixed maturities that are not actively traded are estimated using valuation methods that vary by asset class. Fair values of redeemable preferred stocks, equity securities and derivative investments are based on the latest quoted market prices, or for those items not readily marketable, generally at values that are representative of the fair values of comparable issues. Fair values for all securities are reviewed for reasonableness by considering overall market conditions and values for similar securities. See Note 3 for more information on our fair value policies, including assumptions and the amount of securities priced using the valuation models.

Cash and Cash Equivalents

For purposes of our consolidated statements of cash flows, we consider all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Reinsurance Recoverable

We use reinsurance to manage certain risks associated with our insurance operations. These reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential risks arising from large claims and provide additional capacity for growth. For business ceded to other companies, reinsurance recoverable includes the reinsurers’ share of policyholder liabilities, claims and expenses, net of amounts due the reinsurers for premiums.

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 an incurred loss model. 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 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 statement of operations as “Underwriting, acquisition and insurance expenses.”

For business assumed from other companies, reinsurance recoverable includes premium receivable net of our share of benefits and expenses we owe to the ceding company.

Fair values for the embedded derivatives in our modified coinsurance contracts are based on the difference between the fair value and the cost basis of the underlying investments. See Note 2 for more information regarding derivatives and Note 4 for additional details on our reinsurance agreements.

Deferred Acquisition Costs and Value of Insurance in Force Acquired

Deferred acquisition costs include certain costs of successfully acquiring new insurance business, including commissions and other expenses related to the production of new business, to the extent recoverable from future policy revenues, gross margins and gross profits. Also included are premium bonuses and bonus interest credited to contracts during the first contract year only. The value of insurance in force acquired represents the cost assigned to insurance contracts when an insurance company is acquired. The initial value was determined by an actuarial study using expected future gross profits as a measurement of the net present value of the insurance acquired. Value of insurance in force acquired is being amortized on a fixed amortization schedule.

For participating traditional life insurance and interest sensitive products, these costs are generally amortized in proportion to expected gross profits from surrender charges and investment, mortality and expense margins. This amortization is periodically adjusted or unlocked when we revise key assumptions used in the calculation of these costs. For nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities for future policy benefits.

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All insurance and investment contract modifications and replacements are reviewed to determine if the internal replacement results in a substantially changed contract. If so, the acquisition costs, sales inducements and unearned revenue associated with the new contract are deferred and amortized over the lifetime of the new contract. In addition, the existing deferred policy acquisition costs, sales inducement costs and unearned revenue balances associated with the replaced contract are written off. If an internal replacement results in a substantially unchanged contract, the acquisition costs, sales inducements and unearned revenue associated with the new contract are immediately recognized in the period incurred. In addition, the existing deferred policy acquisition costs, sales inducement costs or unearned revenue balance associated with the replaced contract is not written off, but instead is carried over to the new contract.

Other Assets

Other assets include non-guaranteed federal low income housing tax credit (LIHTC) investments. 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. LIHTC investments had a carrying value of $31.4 million at December 31, 2020 and $42.9 million at December 31, 2019. See discussion on variable interest entities in Note 2 for further information.

Other assets also include property and equipment, primarily comprised of capitalized software costs and furniture and equipment, which are reported at cost less allowances for depreciation and amortization. We expense costs incurred in the preliminary stages of developing internal-use software as well as costs incurred post-implementation for maintenance. Capitalization of internal-use software costs occurs after management has authorized the project and it is probable that the software will be used as intended. Amortization of software costs begins after the software has been placed in production. Depreciation and amortization expense is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from three to twenty years. Property and equipment had a carrying value of $40.5 million at December 31, 2020 and $42.2 million at December 31, 2019, and accumulated depreciation and amortization of $103.6 million at December 31, 2020 and $91.0 million at December 31, 2019. Depreciation and amortization expense for property and equipment was $12.8 million in 2020, $12.1 million in 2019 and $9.9 million in 2018.

Other assets at December 31, 2020 and 2019, also includes goodwill of $9.9 million related to the excess of the amounts paid to acquire companies over the fair value of the net assets acquired. Goodwill is not amortized but is subject to annual impairment testing. We evaluate our goodwill balance by comparing the fair value of our reporting units to the carrying value of the goodwill. We conduct a qualitative impairment review at least annually as well as when indicators suggest an impairment may have occurred to determine if indicators of deterioration in the business would suggest its value has declined below the carrying value of goodwill. Such circumstances include changes in the competitive or overall economic environment or other business condition changes that may negatively impact the value of the underlying business. On a periodic basis, as well as in the event circumstances indicate the value of the business may have declined significantly, we will estimate the value of the business using discounted cash flow techniques. We believe this approach better approximates the fair value of our goodwill than a market capitalization approach. A number of significant assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including future premiums, product lapses, investment yields and discount rate. Underlying assumptions are based on historical experience and our best estimates given information available at the time of testing. As a result of this analysis, we have determined our goodwill was not impaired as of December 31, 2020 or 2019.

Future Policy Benefits

Future policy benefit reserves for interest sensitive products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. We also have additional benefit reserves that are established for annuity or universal life-type contracts that provide benefit guarantees, or for contracts that are expected to produce profits followed by losses. The liabilities are accrued in relation to estimated contract assessments. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances. Interest crediting rates for our interest sensitive products ranged from 1.00% to 5.50% in 2020, 2019 and 2018.

The liability for future policy benefits for direct participating traditional life insurance is based on net level premium reserves, including assumptions as to interest, mortality and other factors underlying the guaranteed policy cash values. Reserve interest assumptions are level and range from 2.25% to 6.00%. The average rate of assumed gross investment yields used in estimating

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gross margins was 4.94% in 2020, 5.23% in 2019 and 5.48% in 2018. The liability for future policy benefits for nonparticipating traditional life insurance is computed using a net level method, including assumptions as to mortality, persistency and interest and includes provisions for possible unfavorable deviations.

The liabilities for future policy benefits for accident and health insurance are computed using a net level (or an equivalent) method, including assumptions as to morbidity, mortality and interest and include provisions for possible unfavorable deviations. Policy benefit claims are charged to expense in the period that the claims are incurred.

Other Policy Claims and Benefits

We have unearned revenue reserves that reflect the unamortized balance of charges assessed to interest sensitive contract holders to compensate us for services to be performed over future periods (policy initiation fees). These charges have been deferred and are being recognized in income over the period benefited using the same assumptions and factors used to amortize deferred acquisition costs.

We have accrued dividends for participating business that are established for anticipated amounts earned to date that have not been paid. The declaration of future dividends for participating business is at the discretion of the Board of Directors of Farm Bureau Life. Participating business accounted for 22% of traditional, universal and variable life insurance premiums collected from policyholders during 2020 (2019 - 25% and 2018 - 28%) and represented 9% of life insurance in force at December 31, 2020 and 2019 and 10% at December 31, 2018.

Deferred Income Taxes

Deferred income tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted tax rates expected to be in effect when the assets or liabilities are recovered or settled. Deferred income tax expenses or credits are based on the changes in the asset or liability from period to period. A valuation allowance against deferred income tax assets is established if it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

Separate Accounts

The separate account assets and liabilities reported in our accompanying consolidated balance sheets represent funds that are separately administered for the benefit of certain policyholders that bear the underlying investment risk. The separate account assets are carried at fair value and separate account liabilities represent policy account balances before applicable surrender charges. Revenues and expenses related to the separate account assets and liabilities, to the extent of benefits paid or provided to the separate account policyholders, are excluded from the amounts reported in the accompanying consolidated statements of operations.

Recognition of Premium Revenues and Costs

Revenues for interest sensitive and variable products consist of policy charges for the cost of insurance and product guarantees, asset charges, administration charges, amortization of policy initiation fees and surrender charges assessed against policyholder account balances. The timing of revenue recognition as it relates to these charges and fees is determined based on the nature of such charges and fees. Policy charges for the cost of insurance, asset charges and policy administration charges are assessed on a daily or monthly basis and are recognized as revenue when assessed and earned. Certain policy initiation fees that represent compensation for services to be provided in the future are reported as unearned revenue and recognized in income over the periods benefited. Surrender charges are determined based upon contractual terms and are recognized upon surrender of a contract. Policy benefits and claims charged to expense include interest and index amounts credited to policyholder account balances and benefit claims incurred in excess of policyholder account balances during the period. Amortization of deferred acquisition costs is recognized as expense over the estimated life of the policy.

Traditional life insurance premiums are recognized as revenues over the premium-paying period. Future policy benefits and policy acquisition costs are recognized as expenses over the life of the policy by means of the provision for future policy benefits and amortization of deferred acquisition costs.

All insurance-related revenues, benefits and expenses are reported net of reinsurance ceded. The cost of reinsurance ceded is recognized over the contract periods of the reinsurance agreements. Policies and contracts assumed are accounted for in a manner similar to that followed for direct business.

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Underwriting, Acquisition and Insurance Expenses
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Components of our underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	$	22,762	$	24,419	$	23,801
Amortization of deferred acquisition costs	30,226		22,887		33,137
Amortization of value of insurance in force acquired	2,171		2,141		2,167
Other underwriting, acquisition and insurance expenses, net of deferrals	88,728		91,177		92,950
Total	$	143,887	$	140,624	$	152,055

Other Income and Other Expenses

Other income and other expenses primarily consist of revenue and expenses generated by our various non-insurance subsidiaries for our wealth management business, investment advisory, marketing and distribution, and leasing services. They also include revenues and expenses generated by our parent company for management services. Certain of these activities are performed on behalf of our affiliates. Revenues are recognized for the performance of these services to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those services.

Lease income from leases with affiliates totaled $5.3 million in 2020 and 2019 and $4.9 million in 2018. Investment advisory fee income from affiliates totaled $3.2 million in 2020, $3.1 million in 2019 and $2.9 million in 2018. In addition, Farm Bureau Life has certain items, including fees earned from brokered products, reported as other income and other expense, which netted to $2.1 million in 2020, $1.7 million in 2019 and $2.7 million in 2018. We expense legal costs associated with a loss contingency as incurred.

Retirement and Compensation Plans

We participate with affiliates and an unaffiliated organization in defined benefit pension plans, including a multiemployer plan. The multiemployer plan records an asset or liability based on the difference between contributions made to the plan to date and expense recognized for the plan to date. The obligations for the single employer plans are based on an actuarial valuation of future benefits. For the multiemployer plan, our contributions are commingled with those of the other employers to fund the plan benefit obligations. Should a participating employer be unable to provide funding, the remaining employers would be required to continue funding all future obligations. The multiemployer plan employs a long-term investment strategy of maintaining diversified assets. The expected return on plan assets is set at the long-term rate expected to be earned based on the long-term investment strategy of the plans for assets at the end of the reporting period.

We participate in qualified and nonqualified defined contribution plans which include employer matching and discretionary contributions according to certain guidelines, which are charged to expense throughout the year.

Share-based compensation programs are also offered to certain employees, subject to specific requirements including vesting.

See Note 8 for additional details regarding these plans.

Comprehensive Income

Comprehensive income includes net income, as well as other comprehensive income items not recognized through net income. Other comprehensive income includes unrealized gains and losses on our available-for-sale securities as well as the underfunded obligation for certain retirement and postretirement benefit plans. These items are included in accumulated other comprehensive income, net of tax and other offsets, in stockholders’ equity. The changes in unrealized gains and losses reported in our Statement of Comprehensive Income (Loss), excludes net investment gains and losses included in net income that represent transfers from unrealized to realized gains and losses. These transfers are further discussed in Note 7. The components of the underfunded obligation for certain retirement and postretirement benefit plans are provided in Note 8.

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Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. For example, significant estimates and assumptions are utilized in the valuation of investments, determination of other-than-temporary impairments of investments, amortization of deferred acquisition costs, calculation of policyholder liabilities and accruals and determination of pension expense. It is reasonably possible that actual experience could differ from the estimates and assumptions utilized, which could have a material impact on the consolidated financial statements.

2. Investment Operations

Fixed Maturity Securities

Available-For-Sale Fixed Maturity Securities by Investment Category
	December 31, 2020
	Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)		Allowance for Credit Losses		Fair Value
Fixed maturities:
Corporate	$	3,542,136	$	704,586	$	(4,242)	$	(4,213)	$	4,238,267
Residential mortgage-backed	645,503		58,058		(1,442)		0		702,119
Commercial mortgage-backed	991,944		145,549		(1,160)		0		1,136,333
Other asset-backed	736,338		23,593		(4,511)		(669)		754,751
United States Government and agencies	35,174		2,887		(1,809)		0		36,252
States and political subdivisions	1,228,208		188,542		(785)		0		1,415,965
Total fixed maturities	$	7,179,303	$	1,123,215	$	(13,949)	$	(4,882)	$	8,283,687

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)		Fair Value
	(Dollars in thousands)
Fixed maturities:
Corporate	$	3,376,432	$	418,049	$	(15,531)	$	3,778,950
Residential mortgage-backed	626,663		47,654		(1,929)		672,388
Commercial mortgage-backed	969,453		77,433		(1,413)		1,045,473
Other asset-backed	697,390		19,745		(2,614)		714,521
United States Government and agencies	12,417		1,711		(5)		14,123
States and political subdivisions	1,332,914		145,125		(866)		1,477,173
Total fixed maturities	$	7,015,269	$	709,717	$	(22,358)	$	7,702,628

(1)Includes $1.7 million and $2.5 million as of December 31, 2020 and December 31, 2019, 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 $65.8 million at December 31, 2020. 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. There was no accrued interest income reversed during the twelve months ended December 31, 2020.

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Available-For-Sale Fixed Maturities by Maturity Date
	December 31, 2020
	Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	142,285	$	145,620
Due after one year through five years	574,155		618,031
Due after five years through ten years	732,772		842,903
Due after ten years	3,356,306		4,083,930
	4,805,518		5,690,484
Mortgage-backed and other asset-backed	2,373,785		2,593,203
Total fixed maturities	$	7,179,303	$	8,283,687

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 Income
	December 31,
	2020		2019
	(Dollars in thousands)
Net unrealized appreciation on:
Fixed maturities - available for sale	$	1,109,266	$	687,359
Adjustments for assumed changes in amortization pattern of:
Deferred acquisition costs	(320,489)		(200,227)
Value of insurance in force acquired	(10,647)		(12,498)
Unearned revenue reserve	29,393		18,025
Adjustments for assumed changes in policyholder liabilities	(51,001)		(30,642)
Provision for deferred income taxes (see Note 5)	(158,869)		(97,023)
Net unrealized investment gains	$	597,653	$	364,994

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 Losses
	December 31, 2020
	Less than one year				One year or more				Total
Description of Securities	Fair Value		Unrealized Losses (1)		Fair Value		Unrealized Losses (1)		Fair Value		Unrealized Losses (1)		Percent of Total
	(Dollars in thousands)
Fixed maturities:
Corporate	$	39,363	$	(1,716)	$	22,677	$	(2,526)	$	62,040	$	(4,242)	30.5	%
Residential mortgage-backed	45,059		(520)		16,918		(922)		61,977		(1,442)		10.3	%
Commercial mortgage-backed	26,829		(1,160)		0		0		26,829		(1,160)		8.3	%
Other asset-backed	113,439		(1,741)		67,128		(2,770)		180,567		(4,511)		32.3	%
United States Government and agencies	23,630		(1,809)		0		0		23,630		(1,809)		13.0	%
States and political subdivisions	12,577		(372)		2,568		(413)		15,145		(785)		5.6	%
Total fixed maturities	$	260,897	$	(7,318)	$	109,291	$	(6,631)	$	370,188	$	(13,949)	100.0	%

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Fixed Maturity Securities with Unrealized Losses by Length of Time
	December 31, 2019
	Less than one year				One year or more				Total
Description of Securities	Fair Value		Unrealized Losses (1)		Fair Value		Unrealized Losses (1)		Fair Value		Unrealized Losses (1)		Percent of Total
	(Dollars in thousands)
Fixed maturities:
Corporate	$	114,520	$	(2,476)	$	84,719	$	(13,055)	$	199,239	$	(15,531)	69.5	%
Residential mortgage-backed	68,743		(1,435)		6,941		(494)		75,684		(1,929)		8.6	%
Commercial mortgage-backed	46,537		(1,266)		2,610		(147)		49,147		(1,413)		6.3	%
Other asset-backed	112,462		(519)		102,439		(2,095)		214,901		(2,614)		11.7	%
United States Government and agencies	0		0		2,494		(5)		2,494		(5)		0	%
States and political subdivisions	19,367		(379)		5,936		(487)		25,303		(866)		3.9	%
Total fixed maturities	$	361,629	$	(6,075)	$	205,139	$	(16,283)	$	566,768	$	(22,358)	100.0	%

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

Fixed maturities in the above tables include 119 securities from 95 issuers at December 31, 2020 and 189 securities from 145 issuers at December 31, 2019. Unrealized losses decreased during the twelve months ended December 31, 2020 primarily due to a decrease in US 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 to be established at December 31, 2020. The following summarizes the more significant unrealized losses on fixed maturity securities by investment category as of December 31, 2020.

Corporate securities: The largest unrealized losses were in the energy sector ($23.5 million fair value and $1.7 million unrealized loss) and in the consumer non-cyclical sector ($6.0 million fair value and $0.9 million unrealized loss). The majority of losses were attributable to credit spread widening across the energy sector associated with the decline in crude oil prices. 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. 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. 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 COVID-19 for some securities. The contractual cash flows of these investments are based on mortgages backing the securities.

Other asset-backed securities: 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. Overall, ABS spreads are generally unchanged. However, there are certain sectors, including whole business and auto-related, where spreads have widened. 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 2.9 years, down from 5.4 years at purchase. Average credit support for the portfolio has increased from 10% at time of purchase to 23% as of December 31, 2020. Our ABS portfolio is rated nearly 73% NAIC-1.

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 more than 98% of the securities rated NAIC-1. Internal

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stress testing has indicated that the weighted average constant default rate (CDR) of our portfolio without suffering a loss is 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, and uncertainty related to pandemic impacts on revenue and taxes.

Our allowance for credit losses at December 31, 2020 includes two financial sector bonds experiencing ongoing weakness in operating performance. The allowance for these bonds was established as the difference between the amortized cost and present value of expected cash flows, which is equal to 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.

We also established 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.

Available-For-Sale Fixed Maturities Allowance for Credit Losses
	Year ended December 31, 2020
	Corporate		Other ABS		Total
	(Dollars in thousands)
Beginning balance	$	0	$	0	$	0
Additions for credit losses not previously recorded	13,118		669		13,787
Net decrease to previously recorded allowance	(1,723)		0		(1,723)
Reductions for securities sold	(7,182)		0		(7,182)
Ending balance	$	4,213	$	669	$	4,882

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 $3.5 million at December 31, 2020. 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 December 31, 2020 and December 31, 2019, there were no non-performing loans over 30 days past due on contractual payments. At December 31, 2020, we had committed to provide additional funding for mortgage loans totaling $3.5 million. These commitments arose in the normal course of business at terms that are comparable to similar investments.

Mortgage Loans by Collateral Type
	December 31, 2020				December 31, 2019
Collateral Type	Carrying Value		Percent of Total		Carrying Value		Percent of Total
	(Dollars in thousands)
Office	$	375,622	37.7	%	$	417,746	41.3	%
Retail	320,575		32.2		345,870		34.2
Industrial	227,424		22.9		235,274		23.2
Apartment	59,626		6.0		0		0
Other	12,407		1.2		12,788		1.3
Total	$	995,654	100.0	%	$	1,011,678	100.0	%

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Mortgage Loans by Geographic Location within the United States
	December 31, 2020				December 31, 2019
Region of the United States	Carrying Value		Percent of Total		Carrying Value		Percent of Total
	(Dollars in thousands)
South Atlantic	$	252,964	25.4	%	$	288,299	28.5	%
Pacific	181,743		18.3		164,996		16.3
East North Central	147,342		14.8		117,053		11.6
Mountain	107,833		10.8		96,857		9.6
West North Central	94,044		9.4		108,942		10.8
East South Central	75,540		7.6		81,275		8.0
West South Central	65,808		6.6		76,650		7.6
Middle Atlantic	52,512		5.3		45,687		4.5
New England	17,868		1.8		31,919		3.1
Total	$	995,654	100.0	%	$	1,011,678	100.0	%

Mortgage Loans by Loan-to-Value Ratio
	December 31, 2020				December 31, 2019
Loan-to-Value Ratio	Carrying Value		Percent of Total		Carrying Value		Percent of Total
	(Dollars in thousands)
0% - 50%	$	463,130	46.5	%	$	412,973	40.8	%
51% - 60%	309,477		31.1		310,869		30.7
61% - 70%	202,114		20.3		256,280		25.4
71% - 80%	20,933		2.1		31,556		3.1
Total	$	995,654	100.0	%	$	1,011,678	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
	December 31, 2020
Internal Rating	2020		2019		2018		2017		2016		2015 & prior		Total
	(Dollars in thousands)
A	$	103,781	$	56,288	$	118,283	$	189,257	$	130,070	$	362,346	$	960,025
B	—		11,789		1,883		3,459		—		1,516		18,647
C	—		—		4,456		—		3,945		4,372		12,773
W	—		—		—		—		—		4,209		4,209
Total	$	103,781	$	68,077	$	124,622	$	192,716	$	134,015	$	372,443	$	995,654

	December 31, 2019
Internal Rating	2019		2018		2017		2016		2015		2014 & prior		Total
	(Dollars in thousands)
A	$	69,319	$	128,334	$	200,283	$	144,311	$	119,724	$	316,079	$	978,050
B	—		—		—		—		—		7,512		7,512
C	—		—		—		—		—		21,812		21,812
W	—		—		—		—		—		4,304		4,304
Total	$	69,319	$	128,334	$	200,283	$	144,311	$	119,724	$	349,707	$	1,011,678

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As discussed in Note 1, during 2020 we adopted accounting guidance which requires establishing an allowance for credit losses that may occur over the life of the mortgage loan portfolio. At December 31, 2020, 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 year ended December 31, 2020, positive trends in the historical industry averages and a decrease in our mortgage loan principal balance during 2020 more than offset our negative internal rating migrations and increased recessionary probabilities for the year which led to a decrease in our allowance. Amounts on mortgage loans deemed to be uncollectible are charged off and removed from the valuation allowance. The allowance for credit losses at the date of adoption, January 1, 2020, and December 31, 2020 is as follows.

Allowance for Credit Losses on Mortgage Loans
	Year ended
	December 31, 2020
Beginning balance	$	3,165
Current period provision for expected credit losses	(1,612)
Ending balance	$	1,553

As discussed in Note 1, accounting guidance followed prior to 2020 required an allowance for credit losses be established based on an incurred loss model. The allowance for credit losses at December 31, 2019 was as follows below.

Allowance on Mortgage Loans
	Year ended
	December 31, 2019
Balance at beginning of period	$	3,107
Recoveries	(2,778)
Balance at end of period balance	$	329

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 allowed 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, there were no loan modifications during the years ended December 31, 2020 or December 31, 2019.

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Components of Net Investment Income
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Fixed maturities - available for sale	$	328,911	$	334,557	$	340,498
Equity securities	7,272		8,718		8,488
Mortgage loans	44,228		46,182		45,294
Policy loans	9,326		9,416		9,210
Short-term investments, cash and cash equivalents	233		1,043		772
Derivative income (loss)	10,436		25,282		(10,405)
Prepayment fee income and other	4,787		7,332		9,208
	405,193		432,530		403,065
Less investment expenses	(7,962)		(7,532)		(8,447)
Net investment income	$	397,231	$	424,998	$	394,618

Realized Gains (Losses) - Recorded in Income
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Realized gains (losses) on investments
Fixed maturities:
Gross gains	$	591	$	3,779	$	2,195
Gross losses	(8,935)		(3,777)		(363)
Mortgage loans	0		2,778		0
Real estate	0		54		0
Other	(59)		(4)		(19)
	(8,403)		2,830		1,813
Net gains and (losses) recognized during the period on equity securities held at the end of the period	323		5,666		(8,137)
Net gains and (losses) recognized during the period on equity securities sold during the period	(4,005)		27		(952)
Net gains (losses) recognized during the period on equity securities	(3,682)		5,693		(9,089)
Net realized capital gains (losses)	(12,085)		8,523		(7,276)
Change in allowances for credit losses/other-than-temporary impairment:
Allowance for credit losses on fixed maturity securities	(4,882)		0		0
Allowance for credit losses on mortgage loans	1,612		0		0
Allowance for credit losses on other investments	(929)		—		—
Other-than-temporary impairment losses	0		(919)		(4,998)
Net realized gains (losses) on investments recorded in income	$	(16,284)	$	7,604	$	(12,274)

Proceeds from sales of fixed maturities totaled $16.9 million in 2020, $34.6 million in 2019 and $82.9 million in 2018.

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

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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) 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 December 31, 2020 or December 31, 2019. Based on this analysis, none of our VIEs were required to be consolidated at December 31, 2020 or December 31, 2019.

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 Category
	December 31, 2020				December 31, 2019
	Carrying Value		Maximum Exposure to Loss		Carrying Value		Maximum Exposure to Loss
	(Dollars in thousands)
LIHTC investments	$	31,382	$	32,263	$	42,907	$	43,834
Investment companies	66,326		138,413		53,388		103,125
Real estate limited partnerships	13,398		14,869		9,565		15,527
Other	491		491		492		492
Total	$	111,597	$	186,036	$	106,352	$	162,978

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.

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Derivatives Instruments by Type
	December 31, 2020		December 31, 2019
	(Dollars in thousands)
Assets
Freestanding derivatives:
Call options (reported in other investments)	$	23,576	$	31,469
Embedded derivatives:
Modified coinsurance (reported in reinsurance recoverable)	4,373		2,327
Interest-only security (reported in fixed maturities)	25		385
Total assets	$	27,974	$	34,181
Liabilities
Embedded derivatives:
Indexed products (reported in liability for future policy benefits)	$	106,852	$	76,346
Modified coinsurance (reported in other liabilities)	320		254
Total liabilities	$	107,172	$	76,600

Derivative Income (Loss)
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Freestanding derivatives:
Call options	$	8,383	$	22,497	$	(7,749)
Embedded derivatives:
Modified coinsurance	1,980		2,695		(2,480)
Interest-only security	73		90		(176)
Indexed products	(9,859)		(23,050)		3,243
Total income (loss) from derivatives	$	577	$	2,232	$	(7,162)

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 $18.9 million at December 31, 2020, 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 $10.2 million included in cash and cash equivalents on our balance sheet as of December 31, 2020. At December 31, 2020, none of the collateral had been sold or re-pledged. As of December 31, 2020, our net derivative exposure recorded on the balance sheet without the off balance sheet collateral was $23.5 million.

Other

Affidavits of deposit to meet regulatory requirements of state agencies covered investments that had a carrying value totaling $8,927.0 million at December 31, 2020 and $8,452.8 million at December 31, 2019. Fixed maturities on deposit with the FHLB as collateral for funding agreements had a carrying value of $636.9 million at December 31, 2020 and $535.7 million at December 31, 2019.

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The carrying value of investments which have been non-income producing includes real estate totaling $1.0 million for the twelve months ended December 31, 2020 and for the twelve months ended December 31, 2019 included real estate and equity securities totaling $3.0 million.

No investment in any entity or its affiliates (other than bonds issued by agencies of the United States Government) exceeded 10.0% of stockholders’ equity at December 31, 2020 or December 31, 2019.

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.

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.

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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.

•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 listed 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.

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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 cash 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.

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.

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Valuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy Levels
	December 31, 2020
	Quoted 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)
Assets
Fixed maturities:
Corporate securities	$	0	$	4,235,226	$	3,041	$	4,238,267
Residential mortgage-backed securities	0		702,119		0		702,119
Commercial mortgage-backed securities	0		1,128,199		8,134		1,136,333
Other asset-backed securities	0		733,561		21,190		754,751
United States Government and agencies	25,901		10,351		0		36,252
States and political subdivisions	0		1,415,965		0		1,415,965
Total fixed maturities	25,901		8,225,421		32,365		8,283,687
Non-redeemable preferred stocks	0		65,870		6,612		72,482
Common stocks (1)	6,510		0		0		6,510
Other investments	0		23,576		0		23,576
Cash, cash equivalents and short-term investments	75,944		0		0		75,944
Reinsurance recoverable	0		4,373		0		4,373
Assets held in separate accounts	674,182		0		0		674,182
Total assets	$	782,537	$	8,319,240	$	38,977	$	9,140,754
Liabilities
Future policy benefits - indexed product embedded derivatives	$	0	$	0	$	106,852	$	106,852
Other liabilities	0		320		0		320
Total liabilities	$	0	$	320	$	106,852	$	107,172

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Valuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy Levels
	December 31, 2019
	Quoted 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)
Assets
Fixed maturities:
Corporate securities	$	0	$	3,772,362	$	6,588	$	3,778,950
Residential mortgage-backed securities	0		672,388		0		672,388
Commercial mortgage-backed securities	0		1,032,693		12,780		1,045,473
Other asset-backed securities	0		704,766		9,755		714,521
United States Government and agencies	4,821		9,302		0		14,123
States and political subdivisions	0		1,477,173		0		1,477,173
Total fixed maturities	4,821		7,668,684		29,123		7,702,628
Non-redeemable preferred stocks	0		67,873		6,927		74,800
Common stocks (1)	17,027		0		0		17,027
Other investments	0		31,469		0		31,469
Cash, cash equivalents and short-term investments	29,142		0		0		29,142
Reinsurance recoverable	0		2,327		0		2,327
Assets held in separate accounts	645,881		0		0		645,881
Total assets	$	696,871	$	7,770,353	$	36,050	$	8,503,274
Liabilities
Future policy benefits - indexed product embedded derivatives	$	0	$	0	$	76,346	$	76,346
Other liabilities	0		254		0		254
Total liabilities	$	0	$	254	$	76,346	$	76,600

(1)    A private equity fund with a fair value estimate of $9.3 million at December 31, 2020 and $8.4 million at December 31, 2019 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 unfunded commitments totaling $0.8 million at December 31, 2020 and $1.7 million at December 31, 2019. The investment is not currently eligible for redemption.

Level 3 Assets by Valuation Source - Recurring Basis
	December 31, 2020
	Third-party vendors			Priced internally			Fair Value
	(Dollars in thousands)
Corporate securities	$	0		$	3,041		$	3,041
Commercial mortgage-backed securities	8,134			0			8,134
Residential mortgage-backed securities	0			0			0
Other asset-backed securities	17,876			3,314			21,190
Non-redeemable preferred stocks	0			6,612			6,612
Total level 3 assets	$	26,010		$	12,967		$	38,977
Percent of total	66.7		%	33.3		%	100.0		%

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Level 3 Assets by Valuation Source - Recurring Basis
	December 31, 2019
	Third-party vendors			Priced internally			Fair Value
	(Dollars in thousands)
Corporate securities	$	0		$	6,588		$	6,588
Commercial mortgage-backed securities	12,780			0			12,780
Other asset-backed securities	8,000			1,755			9,755
Non-redeemable preferred stocks	0			6,927			6,927
Total level 3 assets	$	20,780		$	15,270		$	36,050
Percent of total	57.6		%	42.4		%	100.0		%

Quantitative Information about Level 3 Fair Value Measurements - Recurring Basis
	December 31, 2020
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars in thousands)
Assets
Corporate securities	$	3,041	Discounted cash flow	Credit spread	5.95% - 19.41% (14.52%)
Other asset-backed securities	13,564		Discounted cash flow	Credit spread	2.10% - 9.75% (5.70%)
Commercial mortgage-backed securities	8,134		Discounted cash flow	Credit spread	1.86% - 2.42% (2.18%)
Non-redeemable preferred stocks	6,612		Discounted cash flow	Credit spread	3.57% (3.57%)
Total assets	$	31,351
Liabilities
Future policy benefits - indexed product embedded derivatives	$	106,852	Discounted cash flow	Credit risk Risk margin	0.35% - 1.45% (0.80%) 0.15% - 0.40% (0.25%)

	December 31, 2019
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars in thousands)
Assets
Corporate securities	$	6,588	Discounted cash flow	Credit spread	2.11% - 5.85% (4.33%)
Commercial mortgage-backed securities	12,780		Discounted cash flow	Credit spread	1.18% - 2.22% (1.92%)
Other asset-backed securities	6,000		Discounted cash flow	Credit spread	2.15% - 2.30% (2.23%)
Non-redeemable preferred stocks	6,927		Discounted cash flow	Credit spread	2.72% (2.72%)
Total assets	$	32,295
Liabilities
Future policy benefits - indexed product embedded derivatives	$	76,346	Discounted cash flow	Credit 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 Basis
	December 31, 2020
							Realized and unrealized gains (losses), net
	Balance, December 31, 2019		Purchases		Disposals		Included in net income		Included in other compre-hensive income		Transfers into Level 3 (1)		Transfers out of Level 3 (1)		Amort-ization included in net income		Balance, December 31, 2020
	(Dollars in thousands)
Assets
Corporate securities	$	6,588	$	10,101	$	(4,073)	$	0	$	(960)	$	3,283	$	(11,898)	$	0	$	3,041
Residential mortgage-backed securities	0		12,629		0		0		(1)		0		(12,628)		0		0
Commercial mortgage-backed securities	12,780		0		(402)		0		312		0		(4,556)		0		8,134
Other asset-backed securities	9,755		42,754		(227)		0		(703)		2,067		(32,455)		(1)		21,190
Non-redeemable preferred stocks	6,927		0		0		0		(315)		0		0		0		6,612
Total assets	$	36,050	$	65,484	$	(4,702)	$	0	$	(1,667)	$	5,350	$	(61,537)	$	(1)	$	38,977
Liabilities
Future policy benefits - indexed product embedded derivatives	$	76,346	$	15,121	$	(12,673)	$	28,058	$	0	$	0	$	0	$	—	$	106,852

	December 31, 2019
							Realized and unrealized gains (losses), net
	Balance, December 31, 2018		Purchases		Disposals		Included in net income		Included in other compre-hensive income		Transfers into Level 3 (1)		Transfers out of Level 3 (1)		Amort-ization included in net income		Balance, December 31, 2019
	(Dollars in thousands)
Assets
Corporate securities	$	22,011	$	6,000	$	(3,344)	$	0	$	443	$	3,643	$	(22,137)	$	(28)	$	6,588
Residential mortgage-backed securities	0		18,378		0		0		0		0		(18,378)		0		0
Commercial mortgage-backed securities	67,940		7,540		(376)		0		578		0		(62,902)		0		12,780
Other asset-backed securities	3,601		28,710		(977)		0		(869)		0		(20,710)		0		9,755
Non-redeemable preferred stocks	6,862		0		0		0		65		0		0		0		6,927
Total assets	$	100,414	$	60,628	$	(4,697)	$	0	$	217	$	3,643	$	(124,127)	$	(28)	$	36,050
Liabilities
Future policy benefits - indexed product embedded derivatives	$	40,028	$	15,325	$	(7,014)	$	28,007	$	0	$	0	$	0	$	—	$	76,346

(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 Levels
	December 31, 2020
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value		Carrying Value
	(Dollars in thousands)
Assets
Mortgage loans	$	0	$	0	$	1,074,939	$	1,074,939	$	994,101
Policy loans	0		0		271,963		271,963		195,666
Other investments	0		33,409		1,273		34,682		34,682
Total assets	$	0	$	33,409	$	1,348,175	$	1,381,584	$	1,224,449
Liabilities
Future policy benefits	$	0	$	0	$	4,739,739	$	4,739,739	$	4,348,539
Supplementary contracts without life contingencies	0		0		297,351		297,351		274,469
Advance premiums and other deposits	0		0		264,192		264,192		264,192
Long-term debt	0		0		80,975		80,975		97,000
Liabilities related to separate accounts	0		0		673,181		673,181		674,182
Total liabilities	$	0	$	0	$	6,055,438	$	6,055,438	$	5,658,382

	December 31, 2019
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value		Carrying Value
	(Dollars in thousands)
Assets
Mortgage loans	$	0	$	0	$	1,059,073	$	1,059,073	$	1,011,678
Policy loans	0		0		256,787		256,787		201,589
Other investments	0		29,534		2,215		31,749		31,211
Total assets	$	0	$	29,534	$	1,318,075	$	1,347,609	$	1,244,478
Liabilities
Future policy benefits	$	0	$	0	$	4,381,863	$	4,381,863	$	4,270,073
Supplementary contracts without life contingencies	0		0		309,601		309,601		296,915
Advance premiums and other deposits	0		0		245,480		245,480		245,480
Long-term debt	0		0		84,438		84,438		97,000
Liabilities related to separate accounts	0		0		644,691		644,691		645,881
Total liabilities	$	0	$	0	$	5,666,073	$	5,666,073	$	5,555,349

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 2020 or 2019.

95

4. Reinsurance and Policy Provisions

Reinsurance

In the normal course of business, we seek to limit our exposure to loss on any single insured or event and to recover a portion of benefits paid by ceding a portion of our exposure to other insurance companies. Our reinsurance coverage for life insurance varies according to the age and risk classification of the insured with current retention limits ranging up to $1.0 million of coverage per individual life. Certain term life products are reinsured on a first dollar quota share basis. We do not use financial or surplus relief reinsurance. We have assumed closed blocks of certain life and annuity business through coinsurance and modified coinsurance agreements.

Farm Bureau Life may cede certain losses under an annual 100% quota share accidental death reinsurance agreement. Coverage includes all acts of terrorism including those of a nuclear, chemical or biological origin. Coverage is subject to an annual aggregate retention of $17.0 million. A maximum occurrence limit of $50.0 million per aircraft applies to policies written on agents of the Company who are participating in company-sponsored incentive trips. Additionally, a $200.0 million occurrence limit applies to employees in the home office building, net of reinsurance on group life policies. All other occurrence catastrophes are unlimited in amount.

Reinsurance contracts do not relieve us of our obligations to policyholders. To the extent that reinsuring companies are later unable to meet their obligations under reinsurance agreements, our insurance subsidiaries would be liable for these obligations, and payment of these obligations could result in losses. As discussed in Note 1, accounting guidance adopted in 2020 requires an allowance for credit losses be established for losses that may occur over the life of the reinsurance contract. The allowance established on our reinsurance recoverable assets was as follows as of the date of adoption of this guidance on January 1, 2020 and as of December 31, 2020. No allowance was required as of December 31, 2019 under the incurred loss model required under accounting guidance followed prior to January 1, 2020.

Allowance on Reinsurance Recoverables
		Year ended December 31, 2020
	(Dollars in thousands)
Beginning balance of the allowance for credit losses		$	868
Change in allowance for credit losses		(11)
Ending balance of the allowance for credit losses		$	857

Ceded reinsurance reduces our revenues by the amount that we pay for premium or forego in product charges and reduces our benefits and expenses by reimbursements of claims by our reinsurers. Assumed reinsurance adds to our premiums or product charges and to benefits and expenses related to the business we assume. These impacts are shown in the table below.

Impact of Reinsurance on our Financial Statements
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Ceded (reductions to financial statement items):
Premiums and product charges	$	31,970	$	31,363	$	32,450
Insurance benefits	32,500		20,759		21,358
Allowances for expenses and commissions	3,419		2,899		4,231
Assumed (additions to financial statement items):
Premiums and product charges	2,367		2,546		2,508
Insurance benefits	3,257		7,437		2,752
Allowances for expenses and commissions	1,284		1,340		1,410

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Reinsurance in Force and Percentage of Direct Life Insurance in Force
	Year ended December 31,
	2020				2019
	(Dollars in millions)
Ceded reinsurance	$	13,586	20.2	%	$	13,771	21.0	%
Assumed reinsurance	408		0.6	%	431		0.7	%

Policy Provisions

Analysis of the Value of Insurance in Force Acquired

	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Balance at beginning of year	$	15,122	$	17,263	$	19,430
Amortization per fixed schedule	(2,171)		(2,141)		(2,167)
Balance at end of year	12,951		15,122		17,263
Impact of net unrealized investment gains and losses	(10,647)		(12,498)		(6,878)
Value of insurance in force acquired	$	2,304	$	2,624	$	10,385

We amortize the value of insurance in force based on a fixed amortization schedule. Net amortization for the next five years is expected to be as follows: 2021 - $2.0 million; 2022 - $2.0 million; 2023 - $2.0 million; 2024 - $1.0 million; and 2025 - $1.0 million.

Certain variable annuity and variable universal life contracts in our separate accounts and in variable business we have assumed through reinsurance partners have minimum interest guarantees on funds deposited in our general account. In addition, we have certain variable annuity contracts that include a) guaranteed minimum death benefits (GMDB), b) an incremental death benefit (IDB) rider that pays a percentage of the gain on the contract upon the death of the contract holder, and/or c) a guaranteed minimum income benefit (GMIB) that provides monthly income to the contract holder after the eighth policy year.

GMDB, IDB and GMIB Net Amount at Risk by Type of Guarantee
	December 31, 2020				December 31, 2019
	Separate Account Balance		Net Amount at Risk		Separate Account Balance		Net Amount at Risk
	(Dollars in thousands)
Guaranteed minimum death benefit:
Return of net deposits	$	169,462	$	334	$	166,055	$	362
Return the greater of highest anniversary value or net deposits	292,786		19,053		287,518		9,936
Incremental death benefit	274,462		77,387		259,735		62,411
Guaranteed minimum income benefit	24,187		1		25,137		1
Total			$	96,775			$	72,710

The separate account assets are primarily comprised of stock and bond mutual funds. The net amount at risk for these contracts is based on the amount by which GMDB, IDB or GMIB exceeds account value. The reserve for GMDBs, IDBs or GMIBs, determined using modeling techniques and industry mortality assumptions, that is included in future policy benefits, totaled $9.4 million at December 31, 2020 and $8.3 million at December 31, 2019. The weighted average age of the contract holders with GMDB, IDB or GMIB rider exposure was 68 years at December 31, 2020 and at December 31, 2019. Benefits paid for GMDBs, IDBs and GMIBs totaled $0.3 million for 2020, $0.2 million for 2019 and $0.2 million for 2018.

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5. Income Taxes

Deferred income taxes have been established based upon the temporary differences between the financial statement and income tax bases of assets and liabilities. The reversal of the temporary differences will result in taxable or deductible amounts in future years when the related asset or liability is recovered or settled. A valuation allowance is required if it is more likely than not that all or a portion of a deferred tax asset will not be realized. In assessing the need for a valuation allowance, we considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Based on the available positive and negative evidence regarding future sources of taxable income, we have determined that the establishment of a valuation allowance was not necessary at December 31, 2020 and 2019.

The Tax Cuts and Jobs Act of 2017 (Tax Act) made broad changes to the U.S. tax code impacting our companies, including reducing the federal corporate tax rate from 35% to 21% and numerous base-broadening provisions. We recorded a provisional estimate of the impact of the Tax Act during 2017, and in 2018 the accounting for the Tax Act was completed, resulting in no significant impact to earnings.

Income Tax Expenses (Credits)
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Taxes provided in consolidated statement of operations on:
Income before equity income:
Current	$	13,883	$	16,557	$	20,429
Deferred	(2,287)		6,876		(4,953)
LIHTC	(3,535)		(3,504)		(3,826)
	8,061		19,929		11,650
Equity income	1,571		919		1,179
Taxes provided in consolidated statements of changes in stockholders’ equity:
Accumulated other comprehensive income related to investments	61,846		70,427		(52,009)
Other	(752)		(379)		1,984
	61,094		70,048		(50,025)
	$	70,726	$	90,896	$	(37,196)

Effective Tax Rate Reconciliation to Federal Income Tax Rate
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Income before income taxes and equity income	$	74,472	$	142,781	$	101,033
Income tax at federal statutory rate	$	15,639	$	29,984	$	21,217
Tax effect (decrease) of:
Tax-exempt dividend and interest income	(4,302)		(3,949)		(3,762)
Net impact of LIHTC	(3,535)		(3,504)		(3,826)
Adjustments to tax-basis policy reserves	0		(2,460)		0
Other items	259		(142)		(1,979)
Income tax expense	$	8,061	$	19,929	$	11,650

98

Tax Effect of Temporary Differences Giving Rise to Deferred Income Tax Assets and Liabilities
	December 31,
	2020		2019
	(Dollars in thousands)
Deferred income tax assets:
Future policy benefits	$	37,912	$	33,719
Accrued benefit and compensation costs	3,099		3,736
Loss carryforwards	3,361		2,698
Other	656		1,060
	45,028		41,213
Deferred income tax liabilities:
Fixed maturity and equity securities	240,039		151,212
Deferred acquisition costs	1,295		26,813
Value of insurance in force acquired	484		551
Property and equipment	7,917		7,961
Derivative instruments	4,477		4,386
Other	1,996		2,663
	256,208		193,586
Net deferred income tax liability	$	211,180	$	152,373

We recognize the benefits of uncertain tax positions when the benefits are more-likely-than-not to be sustained. Our reserve for uncertain tax positions was $0.6 million at December 31, 2020 and at December 31, 2019. We recognize interest related to uncertain tax positions in interest expense and related penalties in other expenses. We paid no such interest or penalties during 2020, 2019 or 2018. We do not expect any significant changes in the amount of our reserve for uncertain tax positions within the next twelve months. We are generally no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years prior to 2017.

At December 31, 2020, we had non-life net operating loss carryforwards for federal income tax purposes totaling $15.1 million, which begin to expire after 2032. We also had non-life net operating loss carryforwards in several state jurisdictions, with varying expiration dates. State deferred taxes are not generally provided on any temporary differences or carryforwards, as state taxes have historically been insignificant.

6. Credit Arrangements

Long-term debt includes $97.0 million of our subordinated debt obligation to FBL Financial Group Capital Trust (the Trust). We issued 5% Subordinated Deferrable Interest Notes due June 30, 2047 (the Notes) with a principal amount of $100.0 million to support $97.0 million of 5% Preferred Securities issued by the Trust. We also have a $3.0 million equity investment in the Trust, which is netted against the Notes on the consolidated balance sheets due to a contractual right of offset. The sole assets of the Trust are and will be the Notes and any interest accrued thereon. The interest payment dates on the Notes correspond to the distribution dates on the 5% Preferred Securities. The 5% Preferred Securities, which have a liquidation value of $1,000.00 per share plus accrued and unpaid distributions, mature simultaneously with the Notes. As of December 31, 2020 and 2019, 97,000 shares of 5% Preferred Securities were outstanding, all of which we unconditionally guarantee.

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7. 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 290,144 shares of stock for $10.0 million in 2020, 66,475 shares of stock for $4.6 million in 2019 and 232,837 shares of stock for $15.9 million in 2018. 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, if any, that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice. There was $26.3 million remaining available for repurchases at December 31, 2020 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.

Dividends
	Year ended December 31,
	2020		2019		2018
Class A and B common stock:
Cash dividends per common share	$	2.00	$	1.92	$	1.84
Special cash dividend per common share	1.50		1.50		1.50
Total common stock dividends per share	$	3.50	$	3.42	$	3.34
Series B preferred stock cash dividends per share	$	0.03	$	0.03	$	0.03

Special cash dividends paid to our Class A and Class B common shareholders totaled $37.0 million in 2020 and 2019 and $37.3 million in 2018.

Dividend Restrictions

We have agreed that we will not pay dividends on the Class A or Class B Common Stock, nor on the Series B Preferred Stock, if we are in default of the Subordinated Deferrable Interest Note Agreement dated May 30, 1997 with FBL Financial Group Capital Trust. We are compliant with all terms of this agreement at December 31, 2020. See Note 6 for additional information regarding this agreement.

The amount of dividends we have available to pay our common shareholders is limited to a certain extent by the amount of dividends our primary operating subsidiary, Farm Bureau Life, is able to pay to its parent, FBL Financial Group, Inc. See Note 12 for discussion of our statutory dividend restrictions.

Reconciliation of Outstanding Common Stock
	Class A			Class B (1)			Total
	Shares	Dollars		Shares	Dollars		Shares	Dollars
	(Dollars in thousands)
Outstanding at January 1, 2018	24,919,113	$	153,589	11,413	$	72	24,930,526	$	153,661
Issuance of common stock under compensation plans	21,126	499		0	0		21,126	499
Purchase of common stock	(232,837)	(1,436)		0	0		(232,837)	(1,436)
Outstanding at December 31, 2018	24,707,402	152,652		11,413	72		24,718,815	152,724
Stock-based compensation	11,875	419		0	0		11,875	419
Purchase of common stock	(66,475)	(410)		0	0		(66,475)	(410)
Outstanding at December 31, 2019	24,652,802	152,661		11,413	72		24,664,215	152,733
Stock-based compensation	21,451	197		0	0		21,451	197
Purchase of common stock	(290,144)	(1,797)		0	0		(290,144)	(1,797)
Outstanding at December 31, 2020	24,384,109	$	151,061	11,413	$	72	24,395,522	$	151,133

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(1)    There is no established market for our Class B common stock, although it is convertible upon demand of the holder into Class A common stock on a share-for-share basis.

Holders of the Class A common stock and Series B preferred stock vote together to elect Class A Directors (four to ten). Holders of the Class B common stock elect the Class B Directors (five to seven). Voting for the Directors is noncumulative. All of the holders of our Class B common stock are parties to a Stockholders’ Agreement. The IFBF’s ownership in the three classes of stock results in IFBF owning 72% of our voting stock as of December 31, 2020 and having the ability to control the Company. Holders of Class A common stock and Class B common stock receive equal per-share cash dividends.

The IFBF owns all of our outstanding Series B preferred stock. Each share of Series B preferred stock has a liquidation preference of $0.60 and voting rights identical to that of Class A common stock with the exception that each Series B share is entitled to two votes while each Class A share is entitled to one vote. The Series B preferred stock pays cumulative cash dividends and is redeemable by us, at our option, at $0.60 per share plus unpaid dividends if the stock ceases to be beneficially owned by a Farm Bureau organization.

Accumulated Other Comprehensive Income, Net of Tax and Other Offsets
	Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)				Underfunded Portion of Certain Benefit Plans (2)
	Without Non-Credit Impairment Losses		With Non-Credit Impairment Losses				Total
	(Dollars in thousands)
Balance at January 1, 2018	$	295,169	$	537	$	(10,723)	$	284,983
Cumulative effect of change in accounting principle related to net unrealized gains on equity securities (3)	(5,480)		—		—		(5,480)
Other comprehensive loss before reclassifications	(191,158)		2,654		0		(188,504)
Reclassification adjustments	(1,610)		(58)		1,987		319
Balance at December 31, 2018	96,921		3,133		(8,736)		91,318
Other comprehensive income before reclassifications	265,910		(1,159)		0		264,751
Reclassification adjustments	189		0		(1,494)		(1,305)
Balance at December 31, 2019	363,020		1,974		(10,230)		354,764
Other comprehensive income before reclassifications	226,972		(656)		0		226,316
Reclassification adjustments	6,343		0		(144)		6,199
Balance at December 31, 2020	$	596,335	$	1,318	$	(10,374)	$	587,279

(1)Unrealized net investment gains (losses) relate to available-for-sale securities and include the impact of taxes, deferred acquisition costs, value of insurance in force acquired, unearned revenue reserves and policyholder liabilities. See Note 2 for further information.

(2)For descriptions of the underfunded portion of our postretirement benefit plans, see Note 8 - Other Retirement Plans, and for certain other defined benefit plans, see Note 8 - Defined Benefit Pension Plans.

(3)See Note 1 to our consolidated financial statements for further discussion on this one-time adjustment related to an accounting change.

101

Accumulated Other Comprehensive Income Reclassification Adjustments
	Year ended December 31, 2020
	Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)				Underfunded Portion of Certain Benefit Plans (2)
	Without Non-Credit Impairment Losses		With Non-Credit Impairment Losses				Total
	(Dollars in thousands)
Realized capital losses on sales of fixed maturities	$	8,344	$	0	$	0	$	8,344
Adjustments for assumed changes in deferred policy acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities	(315)		0		0		(315)
Other expenses - change in unrecognized postretirement items:
Net actuarial gain	0		0		(181)		(181)
Reclassifications before income taxes	8,029		0		(181)		7,848
Income taxes	(1,686)		0		37		(1,649)
Reclassification adjustments	$	6,343	$	0	$	(144)	$	6,199

	Year ended December 31, 2019
	Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)				Underfunded Portion of Certain Benefit Plans (2)
	Without Non-Credit Impairment Losses		With Non-Credit Impairment Losses				Total
	(Dollars in thousands)
Realized capital gains on sales of investments	$	(2)	$	0	$	0	$	(2)
Adjustments for assumed changes in deferred policy acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities	241		0		0		241
Other expenses - change in unrecognized postretirement items:
Net actuarial gain	0		0		(1,892)		(1,892)
Reclassifications before income taxes	239		0		(1,892)		(1,653)
Income taxes	(50)		0		398		348
Reclassification adjustments	$	189	$	0	$	(1,494)	$	(1,305)

	Year ended December 31, 2018
	Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)				Underfunded Portion of Certain Benefit Plans (2)
	Without Non-Credit Impairment Losses		With Non-Credit Impairment Losses				Total
	(Dollars in thousands)
Realized capital gains on sales of investments	$	(1,832)	$	0	$	0	$	(1,832)
Adjustments for assumed changes in deferred policy acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities	(206)		1		0		(205)
Other than temporary impairment losses	—		(74)		—		(74)
Other expenses - change in unrecognized postretirement items:
Net actuarial loss	0		0		2,515		2,515
Reclassifications before income taxes	(2,038)		(73)		2,515		404
Income taxes	428		15		(528)		(85)
Reclassification adjustments	$	(1,610)	$	(58)	$	1,987	$	319

(1)See Note 2 for further information.

(2)For descriptions of the underfunded portion of our postretirement benefit plans, see Note 8 - Other Retirement Plans, and for certain other defined benefit plans, see Note 8 - Defined Benefit Plans.

102

8. Retirement and Compensation Plans

Defined Benefit Pension Plans

We participate in various defined benefit pension plans (the Plans), including a multiemployer plan. The multiemployer plan is considered qualified under Internal Revenue Service regulations and covers our employees and the employees of the other participating companies who had attained age 21, had one year of service and were employed prior to January 1, 2013. We also have a plan that provides supplemental pension benefits to certain highly compensated employees who have salaries and/or pension benefits in excess of the qualified limits imposed by federal law and were employed prior to January 1, 2013. Benefits under these plans are based on years of service and the employee’s compensation. The plans are discussed below.

Multiemployer Defined Benefit Plan

The FBL Financial Group Retirement Plan (the Multiemployer Plan) is considered a multiemployer plan, with the participation of affiliated and unaffiliated employers along with FBL Financial Group, Inc. and its subsidiaries. Under the multiemployer plan structure, contributions are made each year and our contributions are commingled with those of the other employers to fund the payment of future plan benefit obligations. Should a participating employer be unable to provide funding, the remaining employers would be required to continue funding all future obligations. If an employer elects to discontinue participation, prior to departure they will be required to contribute their portion of the underfunded pension obligation associated with their employees. This required contribution will be based on an actuarial estimate of future benefit obligations, which as an estimate may not ultimately be sufficient to fund future actual benefits. None of the participating employers have provided notice that they would be discontinuing participation in the Multiemployer Plan or would otherwise be unable to continue providing their share of required funding as of December 31, 2020.

Multiemployer Plan name		FBL Financial Group Retirement Plan
Employer identification number		42-1411715
Plan number		001
FBL’s contributions (in thousands)
	2020	$15,000
	2019	$15,000
	2018	$30,000

Net periodic pension cost of the Multiemployer Plan is allocated between participating employers on a basis of time incurred by the respective employees for each employer. Such allocations are reviewed annually. The Multiemployer Plan is not subject to collective bargaining agreements, a financial improvement plan or a rehabilitation plan. No surcharges were required to be paid to the Multiemployer Plan during 2020, 2019 or 2018. We are the primary employer in the Multiemployer Plan, providing more than 5 percent of the total contributions during 2020, 2019 and 2018.

Other Defined Benefit Plans

The other defined benefit plans (the Other Plans) provide benefits in addition to those offered under the Multiemployer Plan to certain of our employees or affiliated employers. These non-qualified benefit plans are not funded, whereby contributions are made as current benefit obligations become due. Net periodic pension cost of the Other Plans is allocated between the subsidiaries of FBL Financial Group, Inc. and the Farm Bureau affiliated property-casualty companies on a basis of time incurred by the respective employees for each company.

103

Funding Status and Net Periodic Pension Costs

	Multiemployer Plan				Other Plans
	As of and for the year ended December 31,				As of and for the year ended December 31,
	2020		2019		2020		2019
	(Dollars in thousands)
Change in projected benefit obligation:
Net benefit obligation at beginning of the year	$	381,120	$	319,931	$	27,923	$	25,363
Service cost	5,215		4,549		316		467
Interest cost	12,566		13,273		880		992
Actuarial loss	51,458		51,338		1,398		2,930
Benefits paid	(13,315)		(7,971)		(3,830)		(1,829)
Projected benefit obligation	437,044		381,120		26,687		27,923
Change in plan assets:
Fair value of plan assets at beginning of the year	362,864		316,008		0		0
Actual return on plan assets	33,022		39,827		0		0
Employer contributions	15,000		15,000		3,830		1,829
Benefits paid	(13,315)		(7,971)		(3,830)		(1,829)
Fair value of plan assets at end of the year	397,571		362,864		0		0
Underfunded status at end of the year	$	(39,473)	$	(18,256)	$	(26,687)	$	(27,923)
Accumulated benefit obligation	$	394,352	$	343,029	$	23,987	$	25,471

The fair value of plan assets of the Multiemployer Plan exceeded the accumulated benefit obligation at December 31, 2020 and December 31, 2019.

Net Periodic Pension Costs Incurred by the Plans

	Multiemployer Plan						Other Plans
	As of and for the year ended December 31,						As of and for the year ended December 31,
	2020		2019		2018		2020		2019		2018
	(Dollars in thousands)
Service cost	$	5,215	$	4,549	$	5,973	$	316	$	467	$	539
Interest cost	12,566		13,273		13,642		880		992		958
Expected return on plan assets	(21,047)		(18,827)		(22,247)		0		0		0
Amortization of prior service cost	0		0		46		0		0		0
Amortization of actuarial loss	11,157		8,913		12,507		1,268		1,066		1,353
Effect of settlement	0		0		17,406		0		0		0
Effect of special termination benefit	0		0		5,168		0		0		0
Net periodic pension cost	$	7,891	$	7,908	$	32,495	$	2,464	$	2,525	$	2,850
FBL Financial Group, Inc. share of net periodic pension cost	$	2,516	$	2,533	$	9,956	$	1,570	$	1,449	$	1,671

Pension settlement charges were recognized after determining the total cash payments exceeded the sum of the service and interest cost for 2018. The special termination benefit represents a voluntary early retirement program offered in the Multiemployer Plan during 2018 that provided an additional two years of service and two years of age benefit enhancement.

The Plans’ prior service costs are amortized using a straight-line amortization method over the average remaining service period or life expectancy of the employees, depending upon who is covered under each plan. For actuarial gains and losses, a corridor (10% of the greater of the projected benefit obligation or the market value of plan assets) is used to determine the amounts to

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amortize. For the Multiemployer Plan it is expected that net periodic pension cost in 2021 will include $14.9 million for amortization of the actuarial loss. For the Other Plans it is expected that net periodic pension cost in 2021, included in accumulated other comprehensive income, will include $1.4 million for amortization of the actuarial loss.

We expect contributions to be paid to the Multiemployer Plan by us and our affiliated and unaffiliated employers for 2021 to be approximately $15.0 million, of which $4.4 million is expected to be contributed by us. Expected benefits to be paid under the Multiemployer Plan are as follows: 2021 - $20.5 million, 2022 - $21.1 million, 2023 - $23.1 million, 2024 - $22.7 million, 2025 - $25.1 million and 2026 through 2030 - $129.2 million. Since the Other Plans are not funded, contributions are made as benefit obligations become due. Expected benefits to be paid under the Other Plans are as follows: 2021 - $4.0 million, 2022 - $3.9 million, 2023 - $4.8 million, 2024 - $3.6 million, 2025 - $1.4 million and 2026 through 2030 - $7.8 million.

FBL’s Proportionate Share of Prepaid or Accrued Pension Cost

	Multiemployer Plan				Other Plans
	As of and for the year ended December 31,				As of and for the year ended December 31,
	2020		2019		2020		2019
	(Dollars in thousands)
Amount recognized in FBL’s consolidated balance sheets
Prepaid benefit cost	$	40,631	$	38,365	$	807	$	749
Accrued benefit cost	0		0		(21,358)		(21,922)
Net amount recognized	$	40,631	$	38,365	$	(20,551)	$	(21,173)
Amount recognized in FBL’s accumulated other comprehensive income, before taxes (1)
Net actuarial loss					$	13,121	$	12,990
Net amount recognized					$	13,121	$	12,990

(1)For the Multiemployer Plan, the underfunded portion of the pension benefit obligation is not required to be recognized as a liability in our consolidated balance sheets. The unrecognized liability for the underfunded status of the Multiemployer Plan totaled $39.5 million at December 31, 2020 and $18.3 million at December 31, 2019.

Weighted Average Assumptions Used to Determine Benefit Obligation
	December 31,
	2020		2019
Discount rate	2.68	%	3.37	%
Annual salary increases	3.21	%	3.27	%

The discount rate is estimated by projecting and discounting future benefit payments inherent in the projected benefit obligation using a commercially available “spot” yield curve constructed using techniques and a bond universe specifically selected to meet the accounting standard requirements.

Weighted Average Assumptions Used to Determine Net Periodic Pension Cost
	Year Ended December 31,
	2020		2019		2018
Discount rate	3.37	%	4.24	%	3.72	%
Expected long-term return on plan assets	5.85	%	6.00	%	6.50	%
Annual salary increases	3.27	%	3.21	%	3.27	%

The Multiemployer Plan’s expected long-term return on assets represents the rate of earnings expected in the funds invested to provide for anticipated benefit payments, which is analyzed annually and revised as needed.

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Multiemployer Plan Assets

The Multiemployer Plan assets are primarily invested in annuity products and diversified investments including insurance company pooled separate accounts, mutual funds, fixed maturity securities and alternative investments. Certain pension obligations that are fully funded through annuity contracts with Farm Bureau Life, are presented as funded annuity contracts below. For 2020, excluding the funded annuity contracts, the Multiemployer Plan’s long-term investment allocation targets were as follows: 46% in fixed income investments, 30% in equities, 15% in long duration fixed income investments and 9% in alternative investments. At December 31, 2020, the Multiemployer Plan assets were invested approximately 45% in fixed income investments, 32% in equities, 18% in long duration fixed income investments and 5% in alternative investments. The fixed income investments consist primarily of the group annuity contract and fixed income securities held in pooled separate accounts. The equity securities are in pooled separate accounts and mutual funds. The long duration fixed income investments consist of holdings of corporate bonds, United States government treasuries and cash. The alternative investments consist of interests in limited partnerships that own various liquid and illiquid assets. The investment strategy for the Multiemployer Plan is to (1) achieve a long-term return sufficient to satisfy all Multiemployer Plan obligations, (2) assume a prudent level of risk and (3) maintain adequate liquidity. The expected return on Multiemployer Plan assets is set at the long-term rate expected to be earned based on the long-term investment strategy of the Multiemployer Plan. In estimating the expected rate of return for each asset class, factors such as historical rates of return, expected future risk-free rates of return and anticipated returns given the risk profile of each asset class are analyzed.

The valuation methodologies used for assets measured at fair value are:

•Group and funded annuity contracts: contract value approximates fair value, as the interest-crediting rate is declared annually and subject to change when the rate no longer approximates the market rate.

•Pooled separate accounts: valued at net asset value, which is based on the fair value of the underlying assets owned by the fund less any liabilities. The net asset value, which is not publicly quoted, is available to current investors via the Multiemployer Plan’s recordkeeper’s website. It is the basis for current transactions and units can be redeemed at net asset value as of the measurement date.

•Mutual funds: valued at quoted prices in an active market which represent net asset value of shares held by the Multiemployer Plan.

•Fixed maturities: the fair value of U.S. Treasuries is estimated using quoted market prices available in active markets. The fair value of corporate securities is obtained from third-party pricing vendors. We have regular interaction with these vendors to ensure we understand their pricing methodologies and confirm they are utilizing observable market information. The pricing methodologies include observable inputs such as estimated cash flows, benchmark yields, reported trades, credit quality, industry events and economic events.

•Cash and cash equivalents: due to the short-term nature, the carrying amounts approximate fair value.

•Alternative investments: the carrying value of the limited partnership interests reflects the Plan’s proportionate share of the net asset value of those partnerships, which is derived from the fair value of the underlying holdings. There are no redemption frequency or redemption notice period restrictions on the alternative investments.

The pension financial instruments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 - Unadjusted quoted prices in active markets for identical assets that are accessible to us at the measurement date.

Level 2 - Inputs other than quoted prices in active markets for identical assets that are either directly or indirectly observable for substantially the full term of the asset or liability.

Level 3 - Inputs are unobservable and require management’s judgment about the assumptions that market participants would use in pricing the assets.

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Fair Values of the Multiemployer Plan Assets by Asset Category and Hierarchy Levels
	December 31, 2020
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
	(Dollars in thousands)
Mutual funds: (1)
U.S. equity funds	$	34,167	$	0	$	0	$	34,167
International funds	55,917		0		0		55,917
Pooled separate accounts: (1)
Short-term fixed income funds	777		0		0		777
Fixed income funds	14,272		0		0		14,272
U.S. equity funds	20,835		0		0		20,835
Real estate fund	14,198		0		0		14,198
Annuities: (2)
Group annuity contract	0		0		156,414		156,414
Funded annuity contracts	0		0		10,461		10,461
Fixed maturities: (3)
Corporate	0		32,245		0		32,245
United States government and agencies	38,566		0		0		38,566
Alternative investments: (4)
Limited partnerships	0		0		17,909		17,909
Cash and cash equivalents (5)	111		0		0		111
Total	$	178,843	$	32,245	$	184,784	$	395,872

	December 31, 2019
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
	(Dollars in thousands)
Mutual funds: (1)
U.S. equity funds	$	26,294	$	0	$	0	$	26,294
International funds	44,730		0		0		44,730
Pooled separate accounts: (1), (6)
Short-term fixed income funds	1,502		0		0		1,502
Fixed income funds	13,538		0		0		13,538
U.S. equity funds	17,941		0		0		17,941
Real estate fund	14,380		0		0		14,380
Annuities: (2)
Group annuity contract	0		0		157,248		157,248
Funded annuity contracts	0		0		10,378		10,378
Fixed maturities: (3)
Corporate	0		28,509		0		28,509
United States government and agencies	30,648		0		0		30,648
Alternative investments: (4)
Limited partnerships	0		0		16,147		16,147
Cash and cash equivalents (5)	21		0		0		21
Total	$	149,054	$	28,509	$	183,773	$	361,336

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(1)Represents mutual funds and pooled separate account investments with Principal Life Insurance Company.

(2)Represents annuity contracts with Farm Bureau Life.

(3)Represents bonds to support the long duration fixed income investments.

(4)Represents interests in several limited partnerships. A limited partnership with a fair value estimate of $1.7 million as of December 31, 2020 and $1.5 million as of December 31, 2019, 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. In 2020, the Multiemployer Plan entered into one alternative investment with Principal Life Insurance Company.

(5)Represents approximate fair value of cash held.

(6)Pooled separate account investments reported in 2019 were reclassified from Level 2 to Level 1 as daily pricing is available.

Level 3 Multiemployer Plan Asset Changes in Fair Value
	December 31, 2020
					Return on assets
	December 31, 2019		Purchases (disposals), net		Held at year end		Sold during year		Transfers into (out) of level 3		December 31, 2020
	(Dollars in thousands)
Group annuity contract	$	157,248	$	(9,266)	$	5,071	$	0	$	3,361	$	156,414
Funded annuity contracts	10,378		(523)		606		0		0		10,461
Limited partnerships	16,147		1,369		393		0		0		17,909
Total	$	183,773	$	(8,420)	$	6,070	$	0	$	3,361	$	184,784

	December 31, 2019
					Return on assets
	December 31, 2018		Purchases (disposals), net		Held at year end		Sold during year		Transfers into (out) of level 3		December 31, 2019
	(Dollars in thousands)
Group annuity contract	$	148,106	$	(1,066)	$	5,382	$	0	$	4,826	$	157,248
Funded annuity contracts	10,500		(730)		608		0		0		10,378
Limited partnerships	12,410		2,587		1,150		0		0		16,147
Total	$	171,016	$	791	$	7,140	$	0	$	4,826	$	183,773

Other Retirement Plans

We participate with affiliated and unaffiliated employers in a 401(k) defined contribution plan, which covers substantially all employees. We match employee contributions and provide an additional discretionary contribution as summarized in the table below. Costs are allocated among the affiliates on a basis of time incurred by the respective employees for each company. Our expense related to this plan totaled $3.5 million in 2020, $3.1 million in 2019 and $2.9 million in 2018.

Attained age 40 and 10 years of service at December 31, 2012	Accruing years of service in the Multiemployer Plan	100% Employer Match	50% Employer Match	Discretionary Employer Contribution
Yes	Yes	first 2% of employee’s contributions	employee contributions between 2% and 4%	No
No	No	first 4% of employee’s contributions	employee contributions between 4% and 6%	2.75% to 5.75%

We have established deferred compensation plans for certain key current and former employees and have certain other benefit plans that provide for retirement and other benefits. Liabilities for these plans are accrued as the related benefits are earned.

Certain of the assets related to these plans are on deposit with us and amounts relating to these plans are included in our financial statements. In addition, certain amounts included in the policy liabilities for interest sensitive products relate to deposit administration funds maintained by us on behalf of affiliates.

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In addition to benefits offered under the aforementioned benefit plans, we participate with affiliated and unaffiliated employers in a plan that provides group term life insurance benefits to retirees. We froze our portion of the plan on December 31, 2016 such that no new participants will enter the plan. We also have two single-employer plans, frozen to new participants, that provide health and medical benefits to a small group of retirees. Postretirement benefit expenses for these plans are immaterial. The immaterial change in the underfunded portion of these plans is reported in other comprehensive income. During 2018, our allocated expense totaled $0.4 million related to 18 months of medical benefits to be provided to employees who accepted the voluntary early retirement program offered during 2018.

Share-based Compensation Plans

Stock Option Awards

Prior to 2012, we granted stock options for Class A common stock to officers and employees, which have a contractual term of 10 years. The exercise price for all options is equal to the fair value of the common stock on the grant date. Expenses have been fully recognized under this plan.

Stock Option Activity
	Number of Shares	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (1)
	(Dollars in thousands, except per share data)
Shares under option at January 1, 2020	6,696	$	24.71
Exercised	(5,696)	23.92
Shares under option at December 31, 2020	1,000	29.23		0.04	$	23
Vested at December 31, 2020	1,000	$	29.23	0.04	$	23
Exercisable options at December 31, 2020	1,000	$	29.23	0.04	$	23

(1)Represents the difference between the share price and exercise price for each option, excluding options for which the exercise price is above the share price, at December 31, 2020.

The intrinsic value of options exercised during the year totaled $0.2 million for 2020, $0.1 million for 2019 and $0.7 million for 2018.

We issue new shares to satisfy stock option exercises.    Cash received from stock options exercised totaled $0.1 million for 2020 and 2019 and $0.3 million for 2018. The actual tax benefit realized from stock options exercised totaled less than $0.1 million for 2020 and 2019 and $0.1 million for 2018.

Cash-Based Restricted Stock Units

We annually grant cash-based restricted stock units to certain executives. The restricted stock units will vest and be paid out in cash over 5 years, contingent on continued employment with us.

The amount payable per unit awarded is equal to the price per share of the Company’s common stock at settlement of the award, and as such, we measure the value of the award each reporting period based on the current stock price. The effects of changes in the stock price during the service period are recognized as compensation expense over the service period. The impact of forfeitures is estimated and compensation expense is recognized only for those units expected to vest. We allocate a portion of the expense for these arrangements to affiliates; expense amounts below represent our share of these expenses. Compensation expense for arrangements under this plan totaled $0.5 million for 2020, $1.2 million for 2019 and $1.7 million for 2018. The income tax benefit recognized in the statements of operations for this arrangement totaled $0.2 million in 2020, $0.4 million in 2019 and $0.6 million in 2018.

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Restricted Stock Unit Activity
	Number of Units	Weighted-Average Grant-Date Fair Value per Unit
Restricted stock units at January 1, 2020	64,017	$	67.30
Granted	25,454	53.78
Vested	(23,169)	63.01
Forfeited or canceled	(28,900)	65.84
Restricted stock units at December 31, 2020	37,402	61.87

The weighted average grant-date fair value per common share of restricted stock units granted was $53.78 in 2020, $70.88 in 2019 and $71.20 in 2018. Unrecognized compensation expense related to unvested restricted stock units based on the stock price at December 31, 2020 totaled $0.8 million. This expense is expected to be recognized over a weighted-average period of 2.14 years. Dividends are paid on restricted stock units upon vesting. Cash payments including dividends for restricted stock units totaled $1.5 million in 2020, $2.5 million in 2019 and $3.3 million in 2018.

Upon the effective time of the Merger contemplated under the Merger Agreement, each restricted stock unit would be cancelled and exchanged for the right of each holder to receive an amount in cash equal to the agreed Merger consideration per share, multiplied by the total number restricted stock units, plus the aggregate sum of any cash dividend equivalents on the restricted stock units. The payment would be made in accordance with the restricted stock unit vesting schedule in place immediately before the closing of the Merger, provided the executive remains employed, or in the service of, the Company, FBPCIC or their subsidiaries on each applicable vesting date and other conditions set forth in the Merger Agreement.

Other

We have a Director Compensation Plan under which non-employee directors on our Board may elect to receive a portion of their compensation in the form of cash or deferred cash-based stock units. Cash-based stock units outstanding under this plan totaled 29,803 at December 31, 2020 and 26,042 at December 31, 2019. Prior to 2012, deferred stock units were used instead of deferred cash-based stock units. Under this plan, we have deferred stock units outstanding totaling 44,399 at December 31, 2020 and 47,092 at December 31, 2019. At December 31, 2020, there were 99,517 shares of Class A common stock available for future issuance under the Director Compensation Plan.

We also have an Executive Salary and Bonus Deferred Compensation Plan under which certain officers of the Company were allowed to use their base salary and annual cash bonus to purchase deferred cash-based stock units. Cash-based stock units outstanding under this plan totaled 3,277 at December 31, 2020 and 8,478 at December 31, 2019. Prior to 2012, deferred stock units were used instead of deferred cash-based stock units. Under this plan, we have deferred stock units outstanding totaling 38,621 at December 31, 2020 and 48,740 at December 31, 2019. At December 31, 2020, shares of Class A common stock available for future issuance under this plan totaled 89,087. This plan was frozen to future deferrals on December 31, 2013.

We also have an Executive Excess 401(k) Plan under which officers of the Company who met salary guidelines and 401(k) contribution guidelines were allowed to purchase unregistered deferred stock units. Under this plan, we have deferred stock units outstanding totaling 600 at December 31, 2020 and 3,514 at December 31, 2019. This plan was frozen to future deferrals on December 31, 2013.

Upon the effective time of the Merger contemplated under the Merger Agreement, each deferred or cash-based stock unit in the plans referenced in this section would be cancelled and exchanged for the right of each holder to receive an amount in cash equal to the agreed Merger consideration per share, multiplied by the total number of deferred or cash-based stock units. Payments would be made within the respective plans, under which different investment options may be available.

9. Management and Other Agreements

We have management agreements under which we provide general business, administrative and management services to FBPCIC and other affiliates. Fee income for these services totaled $2.0 million in 2020, 2019 and 2018. In addition, as discussed in Note 1, we provide investment advisory services and lease property and equipment under agreements with FBPCIC, other affiliates and non-affiliates.

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We share certain office facilities and services with the IFBF and its affiliated companies. These expenses are allocated based on cost and time studies that are updated annually and consist primarily of rent, salaries and related expenses, travel and other operating costs. In addition, Farm Bureau Management Corporation, a wholly-owned subsidiary of the IFBF, provides certain services to us under a separate arrangement. Related expenses, net of reimbursements for certain services we provide, totaled $1.5 million in 2020, $1.6 million in 2019 and $1.5 million in 2018.

We also have an expense allocation agreement with FBPCIC for the use of property and equipment. Expense relating to this agreement totaled $0.3 million in 2020, 2019 and 2018.

We have service agreements with the Farm Bureau-affiliated property-casualty companies operating within our marketing territory, including FBPCIC and another affiliate. Under the service agreements, the property-casualty companies are responsible for development and management of our agency force for a fee. We incurred expenses totaling $8.4 million in 2020, $8.0 million in 2019 and $9.2 million in 2018 relating to these arrangements.

We are licensed by the IFBF to use the “Farm Bureau” and “FB” designations in Iowa. In connection with this license, we incurred royalty expense totaling $0.6 million in 2020, 2019 and 2018. The royalty agreement with the IFBF provides IFBF an option to terminate the agreement if our quarterly common stock dividend is less than $0.10 per share. We have similar royalty arrangements with other state Farm Bureau organizations in our market territory. Total royalty expense to Farm Bureau organizations other than the IFBF totaled $1.7 million in 2020 and 2019 and $1.8 million in 2018. The loss of the right to use these designations in a state with a high premium concentration could have a material adverse effect on operating results.

Premium Concentration by State
	Year ended December 31,
	2020		2019		2018
Life and annuity collected premiums:
Iowa	26.1	%	26.3	%	25.5	%
Kansas	17.0		16.4		19.2
Oklahoma	8.2		7.6		7.9

10. 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.

Lease Commitments

We consider leases with original terms of one year or less to be short-term. We have elected not to carry short-term leases on our consolidated balance sheets. We have no agreements with lease and non-lease components. None of our leases are considered finance leases.

At December 31, 2020, we held ten long-term leases, while at December 31, 2019 we held eight long-term leases, all of which relate to real estate. The net present value of future cash flows for these leases is reported within our consolidated balance sheets in other assets and other liabilities. The carrying value of these leases total $12.1 million at December 31, 2020 and $14.0 million at December 31, 2019. The most significant lease is for our home office facilities, which is owned by a subsidiary of IFBF. All of our leases are based on fixed terms which expire from 2021 through 2026, but allow for renewal. Two of our leases, not including the home office property, contain provisions that allow the lease cost to increase based on a stated step-up schedule or changes in the consumer price index. The incremental borrowing rate used in determining the net present value of the future lease commitments for new leases was 4.25% in 2020 and 4.50% in 2019.

Lease expense and the related cash flows totaled $5.8 million in 2020 and $5.4 million in 2019. For our home office building, lease expense totaled $4.3 million in 2018, net of $0.2 million in amortization of a deferred gain on the exchange of our home office properties for common stock in 1998.

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Future remaining minimum lease payments for the long-term leases discussed above, as of December 31, 2020, are as follows:

Lease commitments by year
	December 31, 2020
	(Dollars in thousands)
2021	$	2,853
2022	2,681
2023	2,496
2024	2,442
2025	2,226
Thereafter	2,195
Total minimum lease payments	14,893
Less: Interest	(2,807)
Present value of lease liabilities	$	12,086

Commitments for Partnership Investments and Private Corporate Bond Investments

At December 31, 2020, we have unfunded investment commitments to limited partnerships and limited liability companies of $89.2 million and privately placed corporate securities commitments of $4.8 million.

Other

We self-insure our employee health and dental claims. However, claims in excess of our self-insurance limits are fully insured. We previously funded insurance claims through a self-insurance trust, which was dissolved as of December 31, 2019. Expenses equal to our best estimate of claims continue to be reflected in operations. An allowance for incurred but not reported claims is included in other liabilities.

From time to time, assessments are levied on our insurance subsidiaries by life and health guaranty associations in most states in which the subsidiaries are licensed. These assessments, which are accrued for, are to cover losses of policyholders of insolvent or rehabilitated companies. In some states, these assessments can be partially recovered through a reduction in future premium taxes. Expenses for guaranty fund assessments, net of related premium tax offsets, totaled less than $0.1 million in 2020, 2019 and 2018.

11. Earnings per Share

Computation of Earnings per Common Share

	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands, except per share data)
Numerator:
Net income attributable to FBL Financial Group, Inc.	$	72,513	$	126,209	$	93,793
Less: Dividends on Series B preferred stock	150		150		150
Income available to common stockholders	$	72,363	$	126,059	$	93,643
Denominator:
Weighted-average shares - basic	24,614,591		24,760,541		24,932,189
Effect of dilutive securities - stock-based compensation	3,325		10,134		12,412
Weighted-average shares - diluted	24,617,916		24,770,675		24,944,601
Earnings per common share	$	2.94	$	5.09	$	3.76
Earnings per common share - assuming dilution	$	2.94	$	5.09	$	3.75

There were no antidilutive stock options outstanding in any period presented.

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12. Statutory Insurance Information

The statutory financial statements of Farm Bureau Life and Greenfields are prepared in accordance with the accounting practices prescribed or permitted by the Insurance Division of the state of Iowa. The insurance division has adopted the accounting guidance contained in the National Association of Insurance Commissioners (NAIC) Accounting Practices and Procedures manual (NAIC SAP) as the prescribed accounting practice for insurance companies domiciled in Iowa. The insurance division may permit or prescribe accounting practices that differ from those prescribed by NAIC SAP. Farm Bureau Life has adopted such practices related to index products and option accounting. Several differences exist between GAAP and statutory accounting practices. Principally, under statutory accounting, deferred acquisition costs are not capitalized, fixed maturity securities are generally carried at amortized cost, insurance liabilities are presented net of reinsurance, contract holder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted.

Statutory Information of our Insurance Subsidiaries
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Farm Bureau Life:
Net gain from operations (excludes impact of realized gains and losses on investments)	$	87,363	$	98,529	$	100,819
Net income	72,566		100,141		103,923
State prescribed practices that increased (decreased) statutory net income	1,207		577		(7,505)
Greenfields:
Net gain (losses) from operations (excludes impact of realized gains and losses on investments)	74		146		(321)
Net income (loss)	74		146		(321)

	Farm Bureau Life						Greenfields
	December 31,						December 31,
	2020			2019			2020			2019
	(Dollars in thousands)
Total capital and surplus	$	628,042		$	642,409		$	8,867		$	8,814
Unassigned surplus (deficit)	494,559			508,926			(1,933)			(1,986)
State prescribed practices that increased (decreased) statutory surplus	(6,409)			(8,320)			—			—
Risk-Based Capital measurements:
Total adjusted capital	696,108			718,175			8,881			8,826
Company action level capital	131,754			127,864			175			194
RBC Ratio	528		%	562		%	5,089		%	4,551		%

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.

Farm Bureau Life’s ability to pay dividends to the parent company is restricted by the Iowa Insurance Holding Company Act to earned surplus arising from its business as of the date the dividend is paid. In addition, prior approval of the Iowa Insurance Commissioner is required for a dividend distribution of cash or other property whose fair value, together with that of other dividends made within the preceding 12 months, exceeds the greater of (i) 10% of policyholders’ surplus as of the preceding year end, or (ii) the statutory net gain from operations of the insurer for the preceding calendar year. As shown in the tables above, at December 31, 2020, Farm Bureau Life’s net gain from operations of $87.4 million, exceeded 10% of statutory surplus; accordingly, that amount is the maximum available for distribution to FBL Financial Group, Inc. without regulatory approval during 2021. Timing of such dividends during the year is limited based on the timing of dividends paid within the preceding 12 months.

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13. 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.

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 primarily consist 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 annuities, 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 (IUL). 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. With IUL, 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 Corporate and Other segment includes (i) wealth management services; (ii) advisory services for the management of investments for other companies; (iii) a management fee for managing the affiliated property-casualty companies; (iv) marketing and distribution services for the sale of mutual funds and insurance products not issued by us; (v) leasing services with affiliates; (vi) closed blocks of variable annuity, variable life and accident and health products; (vii) interest expense and (viii) investments and related investment income not specifically allocated to our product segments.

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 proposed acquisition transaction expenses, 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 and nonrecurring proposed acquisition expenses 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, 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. 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.

114

Financial Information Concerning our Operating Segments
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Pre-tax adjusted operating income:
Annuity	$	61,033	$	52,834	$	62,846
Life Insurance	36,658		67,134		47,680
Corporate and Other	8,867		16,309		16,013
Total pre-tax adjusted operating income	106,558		136,277		126,539
Adjustments to pre-tax adjusted operating income:
Proposed acquisition transaction expenses	(2,147)		—		—
Net realized gains/losses on investments (1)	(15,991)		7,358		(12,085)
Change in fair value of derivatives (1)	(6,275)		3,422		(7,832)
Pre-tax net income attributable to FBL Financial Group, Inc.	82,145		147,057		106,622
Income tax expense	(8,061)		(19,929)		(11,650)
Tax on equity income	(1,571)		(919)		(1,179)
Net income attributable to FBL Financial Group, Inc.	$	72,513	$	126,209	$	93,793

Adjusted operating revenues:
Annuity	$	215,714	$	212,538	$	223,996
Life Insurance	439,700		432,294		430,194
Corporate and Other	91,353		94,230		93,681
	746,767		739,062		747,871
Net realized gains/losses on investments (1)	(16,279)		7,606		(12,455)
Change in fair value of derivatives (1)	1,777		28,013		(15,790)
Consolidated revenues	$	732,265	$	774,681	$	719,626
Net investment income:
Annuity	$	207,736	$	205,857	$	218,823
Life Insurance	157,498		158,230		158,003
Corporate and Other	29,540		34,302		33,272
	394,774		398,389		410,098
Change in fair value of derivatives	2,457		26,609		(15,480)
Consolidated net investment income	$	397,231	$	424,998	$	394,618
Depreciation and amortization:
Annuity	$	7,726	$	14,954	$	9,335
Life Insurance	18,310		4,926		16,515
Corporate and Other	1,572		66		7,025
	27,608		19,946		32,875
Net realized gains/losses on investments (1)	(314)		241		(184)
Change in fair value of derivatives (1)	(33)		345		(1,598)
Consolidated depreciation and amortization	$	27,261	$	20,532	$	31,093

115

Operating Segment Assets
	December 31,
	2020		2019
	(Dollars in thousands)
Assets:
Annuity	$	4,754,782	$	4,671,210
Life Insurance	3,760,718		3,665,179
Corporate and Other	1,702,642		1,669,183
	10,218,142		10,005,572
Net unrealized gains in accumulated other comprehensive income (2)	778,130		474,634
Consolidated assets	$	10,996,272	$	10,480,206

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

(2)Amounts are net adjustments for assumed changes in deferred acquisition costs and value of insurance in force acquired attributable to these items.

Depreciation and amortization related to property and equipment are allocated to the product segments while the related property, equipment and capitalized software are allocated to the Corporate and Other segment. Depreciation and amortization for the Corporate and Other segment include $4.8 million for 2020 and 2019 and $4.5 million for 2018 relating to leases with affiliates. In the consolidated statements of operations, we record these depreciation amounts net of related lease income from affiliates.

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 December 31, 2020 and 2019 was allocated to the segments as follows: Annuity ($3.9 million) and Life Insurance ($6.1 million).

Equity income 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 by segment.

Equity Income by Operating Segment
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Pre-tax equity income:
Life Insurance	$	2,042	$	3,224	$	3,840
Corporate and Other	5,435		1,151		1,778
Total pre-tax equity income	7,477		4,375		5,618
Income taxes	(1,571)		(919)		(1,179)
Equity income, net of related income taxes	$	5,906	$	3,456	$	4,439

Premiums collected, which is not a measure used in financial statements prepared according to GAAP, include 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 $549.9 million in 2020, $611.1 million in 2019 and $640.1 million in 2018.

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.

116

Reconciliation of Traditional Life Insurance Premiums, Net of Reinsurance
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Traditional and universal life insurance premiums collected	$	322,219	$	310,727	$	304,229
Premiums collected on interest sensitive products	(122,610)		(114,092)		(106,609)
Traditional life insurance premiums collected	199,609		196,635		197,620
Change in due premiums and other	(860)		1,228		692
Traditional life insurance premiums as included in the consolidated statements of operations.	$	198,749	$	197,863	$	198,312

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 Segment
	Year ended December 31,
	2020		2019		2018
	(Dollars in thousands)
Annuity
Rider and other product charges	$	6,473	$	5,319	$	3,880
Surrender charges	1,505		1,362		1,293
Total	$	7,978	$	6,681	$	5,173
Life Insurance
Administration charges	$	21,836	$	19,264	$	16,944
Cost of insurance charges	53,138		51,122		50,727
Surrender charges	2,563		2,619		2,352
Amortization of policy initiation fees	6,170		3,737		4,462
Total	$	83,707	$	76,742	$	74,485
Corporate and Other
Administration charges	$	4,471	$	4,707	$	5,021
Cost of insurance charges	28,330		28,794		29,151
Surrender charges	58		99		92
Separate account charges	8,095		8,168		8,535
Amortization of policy initiation fees	558		516		823
Total	$	41,512	$	42,284	$	43,622
Impact of net realized gains/losses on investments and change in fair value of derivatives on amortization of unearned revenue reserves	(675)		1,406		(491)
Interest sensitive product charges as included in the consolidated statements of operations	$	132,522	$	127,113	$	122,789

Changes in amortization of policy initiation fees, compared to the prior year periods, is primarily due to the impact of unlocking assumptions used in the calculation of unearned revenue reserves.

117

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. 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. Any significant changes in controls are evaluated prior to implementation to help ensure the continued effectiveness of our internal controls and internal control environment. While changes have taken place in our internal controls during the quarter ended December 31, 2020, there have been no changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

See Item 8 for Management’s Report on Internal Control Over Financial Reporting. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of this examination.

ITEM 9B. OTHER INFORMATION

There is no information required to be disclosed on Form 8-K for the quarter ended December 31, 2020 that has not been previously reported.

Farm Bureau Life and FHLB entered into a revised Advances, Pledge and Security Agreement (APSA) dated February 19, 2021. The revised agreement was required by FHLB to provide for consistency in terms across its agreements with insurance company members. The APSA governs advances obtained by Farm Bureau Life from FHLB, but does not constitute an agreement or commitment by FHLB to grant advances. The APSA further provides for collateral security for any advances, including without limitation the pledge of FHLB stock owned by Farm Bureau Life. This summary of the APSA does not purport to be complete and is qualified in its entirety by reference to the APSA, a copy of which is attached as Exhibit 10.28 and incorporated by reference herein.

118

PART III

The information required by Part III, Items 10 through 14, will be set forth in an amendment to this Annual Report on Form 10-K or is incorporated by reference to our definitive proxy statement for our 2021 annual shareholders meeting to be filed pursuant to Regulation 14A within 120 days after December 31, 2020.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	1.	Financial Statements. See Table of Contents following the cover page for a list of financial statements included in this Report.
	2.	Financial Statement Schedules. The following financial statement schedules are included as part of this Report immediately following the signature page:
			Schedule I - Summary of Investments
			Schedule II - Condensed Financial Information of Registrant (Parent Company)
			Schedule III - Supplementary Insurance Information
			Schedule IV - Reinsurance

All other schedules are omitted because they are not applicable, not required or the information they contain is included elsewhere in the consolidated financial statements or notes.

119

3. Exhibits.

		Incorporated by reference
Exhibit #	Description	Form	SEC File No.	Report Date
2.1	Agreement and Plan of Merger, dated as of January 11, 2021, by and among Farm Bureau Property and Casualty Insurance Company, 5400 Merger Sub, Inc. and FBL Financial Group, Inc.	8-K	001-11917	January 11, 2021
2.2	Rollover Agreement, dated as of January 11, 2021, by and among 5400 Merger Sub, Inc. and the shareholders of FBL Financial Group, Inc. listed on Schedule I thereto.	8-K	001-11917	January 11, 2021
3.1	Restated Articles of Incorporation, filed with the Iowa Secretary of State on August 29, 2012	10-Q	001-11917	September 30, 2012
3.2	Fifth Restated Bylaws, as amended through March 23, 2017	8-K/A	001-11917	March 23, 2017
4.1	Form of Class A Common Stock Certificate of the Registrant	S-1/A	333-04332	June 19, 1996
4.2	Restated Stockholders' Agreement Regarding Management and Transfer of Shares of Class B Common Stock of FBL Financial Group, Inc., effective February 14, 2013	10-K	001-11917	December 31, 2013
4.2(a)	Amendment to Restated Stockholders' Agreement Regarding Management and Transfer of Shares of Class B Common Stock of FBL Financial Group, Inc., effective February 14, 2013	10-K	001-11917	December 31, 2013
4.3	Certificate of Trust; Declaration of Trust of FBL Financial Group Capital Trust dated May 30, 1997, including in Annex I thereto the form of Trust Preferred Security and the form of Trust Common Security; Subordinated Deferrable Interest Note Agreement dated May 30, 1997 between FBL Financial Group, Inc. and FBL Financial Group Capital Trust, including therein the form of Subordinated Deferrable Interest Note; Preferred Securities Guarantee Agreement of FBL Financial Group, Inc., dated May 30 1997	8-K	001-11917	June 6, 1997
4.4+	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities and Exchange Act of 1934
10.1	Trademark License from the American Farm Bureau Federation to Farm Bureau Life Insurance Company, dated May 20, 1987	10-K	001-11917	December 31, 2017
10.2	Form of Royalty Agreement with Farm Bureau organizations adopted 2009	10-K	001-11917	December 31, 2009
10.3	Restated Services Agreement between FBL Financial Group, Inc. and Farm Bureau Management Corporation, dated May 2017	10-K	001-11917	December 31, 2017
10.4	Management Services Agreement effective as of January 1, 2012 between Farm Bureau Mutual Holding Company, Farm Bureau Multi-State Services, Inc., Farm Bureau Property & Casualty Insurance Company and Western Agricultural Insurance Company, and FBL Financial Group, Inc.	10-K	001-11917	December 31, 2012
10.5	Lease Agreement dated as of March 31, 1998 between IFBF Property Management, Inc., FBL Financial Group, Inc. and Farm Bureau Property & Casualty Insurance Company	10-Q	001-11917	March 31, 1998
10.5(a)	Amendment effective January 1, 2012 to Lease Agreement	10-K	001-11917	December 31, 2011
10.6	Building Management Consulting Services Agreement, dated April 1, 1998, between IFBF Property Management, Inc. and FBL Financial Group, Inc.	10-Q	001-11917	March 31, 1998
10.7*	2006 Class A Common Stock Compensation Plan as amended through February 17, 2011	10-Q	001-11917	March 31, 2011
10.7(a)*	Form of Stock Option Agreement, pursuant to the FBL Financial Group, Inc. 2006 Class A Common Stock Compensation Plan	10-Q	001-11917	March 31, 2011
10.8*	Executive Salary and Bonus Deferred Compensation Plan as amended through August 21, 2013	10-Q	001-11917	September 30, 2013
10.9*	Rules for Payment of Meeting Fees, Retainers and Expenses to the Board of Directors of FBL Financial Group, Inc.	10-K	001-11917	December 31, 2007
10.10*	Rules for Payment of Meeting Fees, Retainers and Expenses to the Board of Directors of Farm Bureau Life Insurance Company	10-K	001-11917	December 31, 2017

120

		Incorporated by reference
Exhibit #	Description	Form	SEC File No.	Report Date
10.11*	Management Performance Plan, effective January 1, 2019	10-Q	001-11917	March 31, 2019
10.12*	Director Compensation Plan as amended through December 15, 2011	10-K	001-11917	December 31, 2011
10.13*	Retirement and Transition Agreement effective as of November 20, 2019 between FBL Financial Group, Inc. and James Brannen	8-K	001-11917	November 18, 2019
10.14*	Cash-Based Restricted Stock Unit Plan as amended through February 27, 2019	10-Q	001-11917	March 31, 2019
10.15*	Form of 2017 Restricted Stock Unit Agreement between the Company and its executive officers	10-Q	001-11917	March 31, 2017
10.16*	Form of 2017 Restricted Stock Unit Agreement between the Company and participants (other than executive officers)	10-Q	001-11917	March 31, 2017
10.17*	Form of 2018 Restricted Stock Unit Agreement between the Company and its executive officers	10-Q	001-11917	March 31, 2018
10.18*	Form of 2018 Restricted Stock Unit Agreement between the Company and participants (other than executive officers)	10-Q	001-11917	March 31, 2018
10.19*	Form of 2019 Restricted Stock Unit Agreement between the Company and participants	10-Q	001-11917	March 31, 2019
10.20*	Form of 2020 Restricted Stock Unit Agreement between the Company and participants	10-Q	001-11917	March 31, 2020
10.21*	Cash-Based Restricted Surplus Unit Plan, as amended through February 27, 2019	10-Q	001-11917	March 31, 2019
10.22*	Form of 2017 Restricted Surplus Unit Agreement between the Company and its executive officers	10-Q	001-11917	March 31, 2017
10.23*	Form of 2017 Restricted Surplus Unit Agreement between the Company and participants (other than executive officers)	10-Q	001-11917	March 31, 2017
10.24*	Form of 2018 Restricted Surplus Unit Agreement between the Company and its executive officers	10-Q	001-11917	March 31, 2018
10.25*	Form of 2018 Restricted Surplus Unit Agreement between the Company and participants (other than executive officers)	10-Q	001-11917	March 31, 2018
10.26*	Form of 2019 Restricted Surplus Unit Agreement between the Company and participants	10-Q	001-11917	March 31, 2019
10.27*	Form of 2020 Restricted Surplus Unit Agreement between the Company and participants	10-Q	001-11917	March 31, 2020
10.28+	Advances, Pledge and Security Agreement between Farm Bureau Life Insurance Company and Federal Home Loan Bank of Des Moines, dated February 19, 2021
21+	Subsidiaries of FBL Financial Group, Inc.
23+	Consent of Independent Registered Public Accounting Firm
31.1+	Certification Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2+	Certification Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32+	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101+	Interactive Data Files formatted in iXBRL (Inline eXtensible Business Reporting Language) from FBL Financial Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020 as follows: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Financial Statements.
104	Cover Page Interactive Data File formatted as iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.
*	exhibit relates to a compensatory plan for management or directors
+	filed herewith

121

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

FBL Financial Group, Inc.

By: /s/ DANIEL D. PITCHER

Daniel D. Pitcher

Chief Executive Officer

Date: February 24, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ DANIEL D. PITCHER Daniel D. Pitcher	Chief Executive Officer (Principal Executive Officer) and Director	February 24, 2021
/s/ DONALD J. SEIBEL Donald J. Seibel	Chief Financial Officer and Treasurer (Principal Financial Officer)	February 24, 2021
/s/ ANTHONY J. ALDRIDGE Anthony J. Aldridge	Chief Accounting Officer (Principal Accounting Officer)	February 24, 2021
/s/ CRAIG D. HILL Craig D. Hill	Chairman of the Board and Director	February 24, 2021
/s/ PAUL E. LARSON Paul E. Larson	Vice Chair and Director	February 24, 2021
/s/ ROGER K. BROOKS Roger K. Brooks	Director	February 24, 2021
/s/ RICHARD W. FELTS Richard W. Felts	Director	February 24, 2021
/s/ JOE D. HEINRICH Joe D. Heinrich	Director	February 24, 2021
/s/ PAUL A. JUFFER Paul A. Juffer	Director	February 24, 2021
/s/ KEVIN D. PAAP Kevin D. Paap	Director	February 24, 2021
/s/ BRYAN L. SEARLE Bryan L. Searle	Director	February 24, 2021
/s/ SCOTT E. VANDERWAL Scott E. VanderWal	Director	February 24, 2021

122

Schedule I - Summary of Investments - Other

Than Investments in Related Parties

FBL FINANCIAL GROUP, INC.

December 31, 2020

Column A	Column B		Column C		Column D
Type of Investment	Cost (1)		Value		Amount at which shown in the balance sheet
	(Dollars in thousands)
Fixed maturities, available for sale:
Bonds:
Corporate	$	3,542,136	$	4,238,267	$	4,238,267
Mortgage- and asset-backed	2,373,785		2,593,203		2,593,203
United States Government and agencies	35,174		36,252		36,252
States and political subdivisions	1,228,208		1,415,965		1,415,965
Total	7,179,303		$	8,283,687	8,283,687
Equity securities:
Common stocks:
Banks, trusts and insurance companies	5,672		$	6,510	6,510
Industrial, miscellaneous and all other	9,301		9,289		9,289
Non-redeemable preferred stocks	68,026		72,482		72,482
Total	82,999		$	88,281	88,281
Mortgage loans (2)	995,983				994,101
Investment real estate	955				955
Policy loans	195,666				195,666
Short-term investments	63,062				63,062
Other investments	37,868				58,258
Total investments	$	8,555,836			$	9,684,010

(1)Cost adjusted for repayments and amortization of premiums and accrual of discounts for fixed maturities and short-term investments; original cost for equity securities, real estate and other investments (net of collateral received); and unpaid principal balance for mortgage loans and policy loans.

(2)Amount shown on balance sheet differs from cost due to allowance for possible losses.

123

Schedule II - Condensed Financial Information of Registrant

FBL FINANCIAL GROUP, INC. (PARENT COMPANY)

Condensed Balance Sheets

(Dollars in thousands)

	December 31,
	2020		2019
Assets
Investments in subsidiaries (eliminated in consolidation)	$	1,753,409	$	1,537,121
Fixed maturities - available for sale, at fair value (amortized cost: 2020 - $15,773; 2019 - $18,420)	19,040		22,483
Equity securities (cost: 2020 - $5,672; 2019 - $6,587)	6,510		7,130
Short-term investments	7,772		5,077
Cash and cash equivalents	10,858		14,130
Amounts receivable from affiliates	2,419		2,382
Amounts receivable from subsidiaries (eliminated in consolidation)	2,730		3,777
Accrued investment income	4		13
Current income taxes recoverable	176		0
Deferred income tax assets	6,818		6,832
Other assets	28,101		27,926
Total assets	$	1,837,837	$	1,626,871
Liabilities and stockholders’ equity
Liabilities:
Accrued expenses and other liabilities	$	48,738	$	44,089
Current income taxes	0		25
Long-term debt payable to non-affiliates	97,000		97,000
Total liabilities	145,738		141,114
Stockholders’ equity:
Preferred stock	3,000		3,000
Class A common stock	151,061		152,661
Class B common stock	72		72
Accumulated other comprehensive income	587,279		354,764
Retained earnings	950,687		975,260
Total stockholders’ equity	1,692,099		1,485,757
Total liabilities and stockholders’ equity	$	1,837,837	$	1,626,871

See accompanying notes to condensed financial statements.

124

Schedule II -Condensed Financial Information of Registrant (Continued)

FBL FINANCIAL GROUP, INC. (PARENT COMPANY)

Condensed Statements of Operations

(Dollars in thousands)

	Year Ended December 31,
	2020		2019		2018
Revenues:
Net investment income	$	1,457	$	1,970	$	2,381
Realized gains (losses) on investments	291		584		(591)
Dividends from subsidiaries, eliminated in consolidation	98,500		91,300		91,997
Management fee income from affiliates	2,001		2,000		2,001
Management fee income from subsidiaries, eliminated in consolidation	5,888		6,265		6,458
Other income	3		8		2
Total revenues	108,140		102,127		102,248
Expenses:
Interest expense	4,850		4,850		4,850
General and administrative expenses	9,814		8,101		8,605
Total expenses	14,664		12,951		13,455
	93,476		89,176		88,793
Income tax benefit	3,011		1,971		2,175
Income before equity in undistributed income of subsidiaries	96,487		91,147		90,968
Equity in undistributed income of subsidiaries (distribution in excess of income of subsidiaries), eliminated in consolidation	(23,974)		35,062		2,825
Net income	$	72,513	$	126,209	$	93,793

See accompanying notes to condensed financial statements.

125

Schedule II - Condensed Financial Information of Registrant (Continued)

FBL FINANCIAL GROUP, INC. (PARENT COMPANY)

Condensed Statements of Cash Flows

(Dollars in thousands)

	Year ended December 31,
	2020		2019		2018
Net cash provided by (used in) operating activities	$	2,234	$	(107)	$	(2,102)
Investing activities
Sales, maturities or redemptions of fixed maturities - available for sale	3,435		3,849		4,641
Sales, maturities or redemptions (acquisitions) of equity securities - available for sale	1,285		(938)		(1,147)
Short-term investments, net change	(2,695)		530		853
Dividends from subsidiaries (eliminated in consolidation)	98,500		91,300		91,997
Net cash provided by investing activities	100,525		94,741		96,344
Financing activities
Repurchase of common stock, net	(10,133)		(5,346)		(15,152)
Capital contribution to subsidiary	(9,700)		(2,800)		(7,800)
Dividends paid	(86,198)		(84,474)		(83,128)
Net cash used in financing activities	(106,031)		(92,620)		(106,080)
Increase (decrease) in cash and cash equivalents	(3,272)		2,014		(11,838)
Cash and cash equivalents at beginning of year	14,130		12,116		23,954
Cash and cash equivalents at end of year	$	10,858	$	14,130	$	12,116
Supplemental disclosure of cash flow information
Cash received (paid) during the year for:
Income taxes	$	3,019	$	2,383	$	1,617
Interest	(4,850)		(4,850)		(4,850)

See accompanying notes to condensed financial statements.

126

Schedule II - Condensed Financial Information of Registrant (Continued)

FBL FINANCIAL GROUP, INC. (PARENT COMPANY)

Notes to Condensed Financial Statements

December 31, 2020

1. Basis of Presentation

The accompanying condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto of FBL Financial Group, Inc.

In the parent company only financial statements, our investments in subsidiaries are stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. In addition, the carrying value includes net unrealized gains/losses on the subsidiaries’ investments classified as “available for sale.”

2. Dividends from Subsidiaries

The parent company received dividends in the form of cash totaling $98.5 million in 2020, $91.3 million in 2019 and $92.0 million in 2018.

3. Debt

See Note 6 to the consolidated financial statements included in Item 8 for a description of the parent company’s debt. The company’s debt matures in 2047.

127

Schedule III - Supplementary Insurance Information

FBL FINANCIAL GROUP, INC.

Column A	Column B		Column C		Column D		Column E
	Deferred acquisition costs		Future policy benefits, losses, claims and loss expenses		Unearned revenues		Other policyholder funds
	(Dollars in thousands)
December 31, 2020:
Annuity	$	86,289	$	4,191,493	$	0	$	317,933
Life Insurance	353,626		3,003,912		25,688		197,174
Corporate and Other	56,659		419,858		11,151		30,444
Impact of unrealized gains/losses	(320,489)		51,001		(29,393)		0
Total	$	176,085	$	7,666,264	$	7,446	$	545,551
December 31, 2019:
Annuity	$	88,295	$	4,105,054	$	0	$	335,222
Life Insurance	341,143		2,872,119		22,025		188,220
Corporate and Other	60,245		417,172		11,445		26,931
Impact of unrealized gains/losses	(200,227)		30,642		(18,025)		0
Total	$	289,456	$	7,424,987	$	15,445	$	550,373
December 31, 2018:
Annuity	$	93,819	$	4,036,152	$	0	$	338,646
Life Insurance	308,937		2,776,656		19,427		194,879
Corporate and Other	62,778		416,403		11,623		30,354
Impact of unrealized gains/losses	(46,732)		1,642		(5,134)		0
Total	$	418,802	$	7,230,853	$	25,916	$	563,879

128

Schedule III - Supplementary Insurance Information (Continued)

FBL FINANCIAL GROUP, INC.

Column A	Column F		Column G		Column H		Column I		Column J
	Premium revenue		Net investment income		Benefits, claims, losses and settlement expenses		Amortization of deferred acquisition costs		Other operating expenses
	(Dollars in thousands)
December 31, 2020:
Annuity	$	7,978	$	207,736	$	120,991	$	10,866	$	22,824
Life Insurance	282,456		157,498		298,845		17,175		81,526
Corporate and Other	41,512		29,540		40,062		3,165		9,311
Change in fair value of derivatives	(680)		2,457		8,719		(667)		0
Impact of realized gains/losses	5		0		25		(313)		0
Total	$	331,271	$	397,231	$	468,642	$	30,226	$	113,661
December 31, 2019:
Annuity	$	6,681	$	205,857	$	118,085	$	16,374	$	25,245
Life Insurance	274,605		158,230		270,916		2,819		84,596
Corporate and Other	42,284		34,302		39,180		1,801		7,896
Change in fair value of derivatives	1,404		26,609		22,932		1,659		0
Impact of realized gains/losses	2		0		14		234		0
Total	$	324,976	$	424,998	$	451,127	$	22,887	$	117,737
December 31, 2018:
Annuity	$	5,173	$	218,823	$	124,015	$	11,243	$	25,892
Life Insurance	272,797		158,003		276,571		15,264		84,389
Corporate and Other	43,622		33,272		34,465		8,869		8,637
Change in fair value of derivatives	(310)		(15,480)		(6,065)		(1,893)		0
Impact of realized gains/losses	(181)		0		(24)		(346)		0
Total	$	321,101	$	394,618	$	428,962	$	33,137	$	118,918

129

Schedule IV - Reinsurance

FBL FINANCIAL GROUP, INC.

Column A	Column B		Column C		Column D		Column E		Column F
	Gross amount		Ceded to other companies		Assumed from other companies		Net amount		Percent of amount assumed to net
	(Dollars in thousands)
Year ended December 31, 2020:
Life insurance in force, at end of year	$	67,343,372	$	13,586,090	$	407,991	$	54,165,273	0.8	%
Insurance premiums and other considerations:
Interest sensitive product charges	$	131,337	$	923	$	2,108	$	132,522	1.6	%
Traditional life insurance premiums	224,967		26,477		259		198,749		0.1	%
Accident and health premiums	4,840		4,570		0		270		0
	$	361,144	$	31,970	$	2,367	$	331,541	0.7	%
Year ended December 31, 2019:
Life insurance in force, at end of year	$	65,683,485	$	13,770,695	$	430,583	$	52,343,373	0.8	%
Insurance premiums and other considerations:
Interest sensitive product charges	$	125,832	$	1,010	$	2,291	$	127,113	1.8	%
Traditional life insurance premiums	222,955		25,347		255		197,863		0.1	%
Accident and health premiums	5,447		5,006		0		441		0
	$	354,234	$	31,363	$	2,546	$	325,417	0.8	%
Year ended December 31, 2018:
Life insurance in force, at end of year	$	64,290,040	$	14,029,567	$	455,176	$	50,715,649	0.9	%
Insurance premiums and other considerations:
Interest sensitive product charges	$	121,456	$	1,044	$	2,377	$	122,789	1.9	%
Traditional life insurance premiums	223,960		25,779		131		198,312		0.1	%
Accident and health premiums	6,038		5,627		0		411		0
	$	351,454	$	32,450	$	2,508	$	321,512	0.8	%

130