Exhibit 99.1
FBL Financial Group Reports First Quarter 2003 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--May 5, 2003--FBL Financial
Group, Inc. (NYSE:FFG):
Financial Highlights
(Dollars in thousands, except per share data)
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Three Months Ended
March 31,
2003 2002
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Net income applicable to common stock $10,840 $12,474
Operating income applicable to common stock 14,395 11,433
Earnings per common share (assuming
dilution):
Net income 0.38 0.45
Operating income 0.51 0.41
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FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share totaled $0.38 ($10,840,000) for the
quarter ended March 31, 2003, compared to $0.45 ($12,474,000) in the
year ago quarter. Net income includes the impact of realized losses on
investments of $0.13 per share in the first quarter of 2003 and
realized gains on investments of $0.04 per share in the first quarter
of 2002.
Operating Income(a). Operating income, which excludes the impact
of realized gains and losses on investments, totaled $14,395,000 for
the quarter ended March 31, 2003, versus $11,433,000 in the first
quarter of 2002. Diluted operating income per common share totaled
$0.51 in the first quarter of 2003, a 24 percent increase over $0.41
in the first quarter of 2002. Operating income in the first quarter of
2003 includes a $0.10 per share contribution from FBL's coinsurance
agreement with American Equity Investment Life Insurance Company (AE)
compared to a $0.01 per share contribution in the first quarter of
2002.
(a) In addition to net income, FBL Financial Group has
consistently utilized operating income, a non-GAAP financial measure
commonly used in the life insurance industry, as a primary economic
measure to evaluate its financial performance. Operating income equals
net income adjusted to eliminate the impact of realized gains and
losses on investments. Because realized gains and losses on
investments may fluctuate greatly from quarter to quarter, FBL
believes a measure excluding their impact is useful in analyzing core
operating trends. FBL believes the combined presentation and
evaluation of operating income, together with net income, provides
information that may enhance an investor's understanding of FBL's
underlying results and profitability. A reconciliation of net income
to operating income is provided in the accompanying tables.
"Following solid performance during 2002, FBL once again realized
strong operating results in the first quarter of 2003. Our core
distribution continued its momentum and again produced strong sales
for the quarter, led by a 39 percent increase in traditional annuity
sales," said Bill Oddy, Chief Executive Officer. "Based on our first
quarter earnings results, and our commitment to our growth strategies,
we remain optimistic about our long-term growth prospects and affirm
our operating income guidance of $1.97 to $2.07 per common share for
the year 2003."
Product Revenues Up Eight Percent. Premiums and product charges
for the first quarter of 2003 increased eight percent to $52,082,000
compared to $48,327,000 in the first quarter of 2002. Interest
sensitive product charges increased ten percent while traditional life
insurance premiums increased six percent.
Premiums collected totaled $260,896,000 in the first quarter of
2003, which includes $120,060,000 assumed under the coinsurance
agreement with American Equity. Excluding the impact of the AE
coinsurance agreement, collected premiums increased 13 percent, with
the traditional annuity segment increasing 39 percent, the traditional
and universal life insurance segment increasing five percent and the
variable segment decreasing 13 percent. In the first quarter of 2002,
premiums assumed from AE totaled $189,478,000.
Investment Income. Net investment income in the first quarter of
2003 increased 23 percent to $97,947,000 compared to $79,537,000 in
the first quarter of 2002. This increase is due to an increase in
average invested assets, resulting primarily from cash received in
2002 and the first quarter of 2003 pursuant to the AE coinsurance
agreement and growth in sales from FBL's core Farm Bureau distribution
force. The annualized yield earned on average invested assets was 7.33
percent for the three months ended March 31, 2003, compared to 7.38
percent for the first quarter of 2002. The 2003 yield reflects the
impact of a decline in market interest rates, partially offset by an
increase in investment fee income. Fee income from bond calls and
mortgage loan prepayments totaled $2,431,000 in the first quarter of
2003 compared to $272,000 in the first quarter of 2002. In addition,
investment income increased due to additional discount accretion on
mortgage and asset-backed securities. In the first quarter of 2003 the
benefit created by changing prepayments speeds on mortgage and
asset-backed securities at quarter end was $2,925,000, compared to
additional premium amortization of $29,000 in the first quarter of
2002.
Derivative Loss. FBL's derivative loss totaled $5,073,000 in the
first quarter of 2003, compared to a loss of $782,000 in the first
quarter of 2002. Derivative income (loss) can fluctuate from period to
period based upon the performance of the bond and stock indexes
underlying the call options purchased to fund returns on
equity-indexed annuities assumed from AE. Gains and losses on call
options and proceeds from option settlements are partially offset by
changes in the value of the embedded derivatives in the underlying
equity-indexed contracts and index credits to the contract holder,
which are recorded as a component of interest sensitive product
benefits.
Realized Gains (Losses) on Investments. In the first quarter of
2003, FBL recognized net realized losses on investments of $5,632,000,
compared to net realized gains on investments of $2,246,000 in the
first quarter of 2002. First quarter 2003 realized losses include
realized gains from sales of securities of $3,713,000, realized losses
from sales of securities of $40,000 and realized losses from the
write-down of securities that became other-than-temporarily impaired
of $9,305,000.
Benefits and Expenses. Benefits and expenses totaled $125,290,000
in the first quarter of 2003, compared to $109,610,000 in the first
quarter of 2002. This increase is due to an increase in death benefits
and an increase in the volume of business in force resulting primarily
from the coinsurance agreement with AE and growth in sales from FBL's
core Farm Bureau distribution system. Additionally, effective January
1, 2003, FBL began expensing stock options, which resulted in
additional first quarter 2003 compensation expense of $74,000.
Partially offsetting these increases was the impact of a reduction of
the dividend crediting rate in 2002 and a reduction in interest
crediting rates on many products throughout 2002 and 2003.
Income from Equity Investments. Equity income (loss), net of
related income taxes, was $779,000 in the first quarter of 2003,
compared to a loss of $1,715,000 in the first quarter of 2002. Equity
income in the first quarter of 2003 includes $801,000 of income, net
of taxes, from FBL's 32 percent ownership interest in American Equity
Investment Life Holding Company. Included in equity income is FBL's
share of income and losses from investments in various partnerships
and joint ventures, the majority of which are booked a quarter in
arrears. Due to the nature of investment partnerships, it is not
unusual to experience fluctuations on a quarter-to-quarter basis.
Operating Results by Segment. FBL's favorable operating results
for the first quarter of 2003 were driven by a 90 percent increase in
the pre-tax operating income for the traditional annuity segment.
Pre-tax operating income in the traditional and universal life
insurance segment was negatively impacted by increased death benefits.
Further detail by segment is provided in FBL's financial supplement,
which is available on FBL's web site, www.fblfinancial.com.
Assets Total $7.2 Billion. Total assets increased $356 million to
$7.2 billion at March 31, 2003, from $6.8 billion at December 31,
2002. At March 31, 2003, 95 percent of the fixed maturity securities
in FBL's investment portfolio were investment grade debt securities.
Book value per common share, with securities at market, increased to
$24.30 at March 31, 2003, from $23.71 at December 31, 2002.
Conference Call. FBL management will hold a conference call with
investors to discuss first quarter 2003 results. The call will be held
tomorrow, May 6, 2003, at 11 a.m. Eastern Time. The call will be
webcast over the Internet, and a replay will be available on FBL's web
site, www.fblfinancial.com.
The statements in this release concerning FBL's prospects for the
future are forward-looking statements that involve certain risks and
uncertainties, including the continued acceptance of FBL's insurance
products by customers, the continued success of FBL's marketing
efforts, the marketing success of FBL's alliance partners, and
fluctuations in mortality experience and investment results. These
forward-looking statements are based on assumptions which FBL
Financial Group believe to be reasonable. No assurance can be given
that the assumptions will prove to be correct, and the difference
between assumptions and actual results could be material.
FBL Financial Group (www.fblfinancial.com) is a holding company
whose primary operating subsidiaries are Farm Bureau Life Insurance
Company and EquiTrust Life Insurance Company. FBL underwrites, markets
and distributes life insurance, annuities and mutual funds to
individuals and small businesses. In addition, FBL manages all aspects
of three Farm Bureau affiliated property-casualty insurance companies
for a management fee. FBL's three-pronged growth strategy includes (1)
internal growth within its traditional Farm Bureau distribution
network, (2) alliances and relationships with other companies and (3)
consolidations.
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
March 31,
2003 2002
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REVENUES
Interest sensitive product charges $20,622 $18,772
Traditional life insurance premiums 31,373 29,463
Accident and health premiums 87 92
Net investment income 97,947 79,537
Derivative loss (5,073) (782)
Realized gains (losses) on investments (5,632) 2,246
Other income 4,009 4,459
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Total revenues 143,333 133,787
BENEFITS AND EXPENSES
Interest sensitive product benefits 54,080 48,268
Traditional life insurance and accident and health
benefits 19,635 17,382
Increase in traditional life and accident and health
future policy benefits 7,397 7,845
Distributions to participating policyholders 7,656 7,971
Underwriting, acquisition and insurance expenses 32,880 24,691
Interest expense 118 177
Other expenses 3,524 3,276
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Total benefits and expenses 125,290 109,610
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18,043 24,177
Income taxes (5,613) (7,671)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary trust (1,213) (1,213)
Other (50) (33)
Equity income (loss), net of related income taxes 779 (1,715)
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Net income 11,946 13,545
Dividends on Series B and C preferred stock (1,106) (1,071)
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Net income applicable to common stock $10,840 $12,474
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Earnings per common share - assuming dilution $0.38 $0.45
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FBL FINANCIAL GROUP, INC.
RECONCILIATION OF NET INCOME TO OPERATING INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
March 31,
2003 2002
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Net income applicable to common stock $10,840 $12,474
Adjustment:
Net realized losses (gains) on investments (1) 3,555 (1,041)
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Operating income applicable to common stock $14,395 $11,433
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Operating earnings per common share - assuming
dilution $0.51 $0.41
=========== ===========
Weighted average common shares 27,825,165 27,476,071
Effect of dilutive securities 479,066 508,085
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Weighted average common shares - diluted 28,304,231 27,984,156
=========== ===========
(1) Net of adjustments for that portion of amortization of deferred
policy acquisition costs, unearned revenue reserve, value of insurance
in force acquired and income taxes attributable to such losses.
FBL FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
March 31, December 31,
2003 2002
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Assets
Investments $5,717,422 $5,387,369
Cash and cash equivalents 271,998 263,011
Deferred policy acquisition costs 494,520 468,793
Other assets 330,128 332,559
Assets held in separate accounts 341,626 347,717
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Total assets $7,155,694 $6,799,449
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Liabilities and stockholders' equity
Policy liabilities and accruals $5,058,481 $4,856,207
Other policyholders' funds 480,442 462,113
Debt 40,000 40,000
Other liabilities 371,904 249,325
Liabilities related to separate accounts 341,626 347,717
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Total liabilities 6,292,453 5,955,362
Minority interest in subsidiaries 97,219 97,210
Series C redeemable preferred stock 86,241 85,514
Stockholders' equity 679,781 661,363
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Total liabilities and stockholders' equity $7,155,694 $6,799,449
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Book Value Per Share, securities at market $24.30 $23.71
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Book Value Per Share, securities at cost (2) $20.57 $20.28
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Common Shares Outstanding 27,852,239 27,771,269
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(2) Book value per share with securities at cost, a non-GAAP financial
measure, is based on stockholders' equity excluding the effect of
accumulated other comprehensive income, which was $104.0 million at
March 31, 2003 and $95.1 million at December 31, 2002. Since
accumulated other comprehensive income fluctuates from quarter to
quarter due to unrealized changes in the fair market value of
investments caused principally by changes in market interest rates,
FBL believes this non-GAAP financial measure provides useful
supplemental information.
CONTACT: FBL Financial Group, Inc., West Des Moines
Jim Noyce, 515/225-5599
jnoyce@fbfs.com