Exhibit 99.1
FBL Financial Group Reports Second Quarter 2003 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--July 30, 2003--FBL
Financial Group, Inc. (NYSE:FFG)
Financial Highlights
(Dollars in thousands, except per share data)
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Three Months Ended
June 30,
2003 2002
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Net income applicable to common stock $20,513 $10,890
Operating income applicable to common stock 17,948 13,355
Earnings per common share (assuming
dilution):
Net income 0.72 0.39
Operating income 0.63 0.47
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FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share totaled $0.72 ($20,513,000) for the
quarter ended June 30, 2003, compared to $0.39 ($10,890,000) in the
year ago quarter. Net income includes the impact of realized gains on
investments of $0.09 per share in the second quarter of 2003 and
realized losses on investments of $0.08 per share in the second
quarter of 2002.
Operating Income(a). Operating income, which excludes the impact
of realized gains and losses on investments, totaled $17,948,000 for
the quarter ended June 30, 2003, versus $13,355,000 in the second
quarter of 2002. Diluted operating income per common share totaled
$0.63 in the second quarter of 2003, a 34 percent increase over $0.47
in the second quarter of 2002. Operating income in the second quarter
of 2003 includes a $0.06 per share contribution from FBL's coinsurance
agreement with American Equity Investment Life Insurance Company
compared to a $0.01 per share contribution in the second 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.
Commenting on FBL's second quarter results, Chief Executive
Officer Bill Oddy stated, "This was an exceptional quarter for FBL
with record operating income. Prepayment fee income boosted our
investment income, our traditional life and fixed annuity business
produced strong results, and equity income from our limited
partnership investments grew. Based on these impressive results for
the first half of the year, we are revising our operating income
guidance upward to $2.15-$2.20 per common share for the full year 2003
from our previous guidance of $1.97-$2.07."
"Despite the outstanding quarter, we are not without our
challenges. After experiencing increasing production from our Farm
Bureau sales force over the last several quarters, sales moderated
during the quarter, and premiums collected were not as high as the
very strong levels achieved in the second quarter of 2002 due to a
decrease in variable premiums. Also, like others in our industry, we
at FBL are challenged to maintain our investment spreads in this low
interest rate environment and are utilizing interest rate swaps, as
appropriate, in the asset liability management process for our fixed
annuity portfolio."
Product Revenues Up Five Percent. Premiums and product charges for
the second quarter of 2003 increased five percent to $56,148,000
compared to $53,463,000 in the second quarter of 2002. Interest
sensitive product charges and traditional life insurance premiums each
increased five percent.
Premiums collected totaled $314,574,000 in the second quarter of
2003, which includes $175,098,000 assumed under the coinsurance
agreement with American Equity. Excluding the impact of the American
Equity coinsurance agreement, collected premiums decreased two
percent, with the traditional annuity segment increasing 14 percent,
the traditional and universal life insurance segment increasing three
percent and the variable segment decreasing 29 percent. In the second
quarter of 2002, premiums assumed from American Equity totaled
$234,992,000.
Investment Income. Net investment income in the second quarter of
2003 increased over 20 percent to $99,970,000 compared to $82,977,000
in the second quarter of 2002. This increase is due to an increase in
average invested assets, resulting primarily from cash received in
2002 and the first half of 2003 pursuant to the American Equity
coinsurance agreement and sales from FBL's core Farm Bureau
distribution force. The annualized yield earned on average invested
assets was 7.20 percent for the six months ended June 30, 2003,
compared to 7.25 percent for the same period 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 $3,994,000 in the second
quarter of 2003 compared to less than $100,000 in the second quarter
of 2002.
Derivative Income. FBL's derivative income totaled $10,708,000 in
the second quarter of 2003, compared to a derivative loss of
$8,655,000 in the second quarter of 2002. The increase in 2003
derivative income is due primarily to the unrealized appreciation of
the bond and stock indexes underlying the call options purchased to
fund returns on equity-indexed annuities assumed from American Equity.
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 on Investments. In the second quarter of 2003, FBL
recognized net realized gains on investments of $4,516,000, compared
to net realized losses on investments of $5,823,000 in the second
quarter of 2002. Second quarter 2003 realized gains include realized
gains from sales of securities of $7,301,000, realized losses from
sales of securities of $341,000 and realized losses from the
write-down of securities that became other-than-temporarily impaired
of $2,444,000.
Benefits and Expenses. Benefits and expenses totaled $143,952,000
in the second quarter of 2003, compared to $108,285,000 in the second
quarter of 2002. This increase is due primarily to an increase in the
volume of business in force resulting from the coinsurance agreement
with American Equity. Additionally, death benefits for the second
quarter of 2003 were higher than the second quarter of 2002, but still
within a reasonable range. Partially offsetting these increases was
the impact of reductions in dividend and interest crediting rates on
many products throughout 2002 and 2003.
Income from Equity Investments. Equity income, net of related
income taxes, was $1,438,000 in the second quarter of 2003, compared
to $679,000 in the second quarter of 2002. Equity income in the second
quarter of 2003 includes $945,000 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 second quarter of 2003 were driven by strong increases in the
traditional annuity and traditional and universal life insurance
segments. Further detail by segment is provided in FBL's financial
supplement, which is available on FBL's web site,
www.fblfinancial.com.
Assets Total $7.4 Billion. Total assets increased $634 million to
$7.4 billion at June 30, 2003, from $6.8 billion at December 31, 2002.
At June 30, 2003, 94 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 12 percent to
$26.44 at June 30, 2003, from $23.71 at December 31, 2002.
Conference Call. FBL management will hold a conference call with
investors to discuss second quarter 2003 results. The call will be
held tomorrow, July 31, 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.
- FINANCIAL INFORMATION FOLLOWS -
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
June 30,
2003 2002
----------- -----------
REVENUES
Interest sensitive product charges $20,628 $19,608
Traditional life insurance premiums 35,281 33,677
Accident and health premiums 239 178
Net investment income 99,970 82,977
Derivative income (loss) 10,708 (8,655)
Realized gains (losses) on investments 4,516 (5,823)
Other income 4,422 4,338
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Total revenues 175,764 126,300
BENEFITS AND EXPENSES
Interest sensitive product benefits 71,706 42,958
Traditional life insurance and accident and
health benefits 18,996 19,286
Increase in traditional life and accident and
health future policy benefits 10,996 11,659
Distributions to participating policyholders 6,583 7,696
Underwriting, acquisition and insurance
expenses 31,773 23,681
Interest expense 108 181
Other expenses 3,790 2,824
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Total benefits and expenses 143,952 108,285
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31,812 18,015
Income taxes (10,470) (5,450)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust (1,212) (1,212)
Other 61 (62)
Equity income, net of related income taxes 1,438 679
----------- -----------
Net income 21,629 11,970
Dividends on Series B and C preferred stock (1,116) (1,080)
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Net income applicable to common stock $20,513 $10,890
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Earnings per common share - assuming dilution $0.72 $0.39
=========== ===========
Weighted average common shares 27,897,773 27,599,815
Effect of dilutive securities 469,649 625,877
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Weighted average common shares - diluted 28,367,422 28,225,692
=========== ===========
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Six months ended
June 30,
2003 2002
----------- -----------
REVENUES
Interest sensitive product charges $41,250 $38,380
Traditional life insurance premiums 66,654 63,140
Accident and health premiums 326 270
Net investment income 197,917 162,514
Derivative income (loss) 5,635 (9,437)
Realized losses on investments (1,116) (3,577)
Other income 8,431 8,797
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Total revenues 319,097 260,087
BENEFITS AND EXPENSES
Interest sensitive product benefits 125,786 91,226
Traditional life insurance and accident and
health benefits 38,631 36,668
Increase in traditional life and accident and
health future policy benefits 18,393 19,504
Distributions to participating policyholders 14,239 15,667
Underwriting, acquisition and insurance
expenses 64,653 48,372
Interest expense 226 358
Other expenses 7,314 6,100
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Total benefits and expenses 269,242 217,895
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49,855 42,192
Income taxes (16,083) (13,121)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust (2,425) (2,425)
Other 11 (95)
Equity income (loss), net of related income
taxes 2,217 (1,036)
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Net income 33,575 25,515
Dividends on Series B and C preferred stock (2,222) (2,151)
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Net income applicable to common stock $31,353 $23,364
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Earnings per common share - assuming dilution $1.11 $0.83
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Weighted average common shares 27,861,670 27,538,285
Effect of dilutive securities 460,009 571,231
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Weighted average common shares - diluted 28,321,679 28,109,516
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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
June 30,
2003 2002
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Net income applicable to common stock $20,513 $10,890
Adjustment:
Net realized (gains) losses on investments (1) (2,565) 2,465
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Operating income applicable to common stock $17,948 $13,355
========= =========
Operating earnings per common share - assuming
dilution $0.63 $0.47
========= =========
Six months ended
June 30,
2003 2002
--------- ---------
Net income applicable to common stock $31,353 $23,364
Adjustment:
Net realized losses on investments (1) 990 1,424
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Operating income applicable to common stock $32,343 $24,788
========= =========
Operating earnings per common share - assuming
dilution $1.14 $0.88
========= =========
(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
(gains) losses.
FBL FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
June 30, December 31,
2003 2002
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Assets
Investments $6,064,492 $5,387,369
Cash and cash equivalents 119,684 263,011
Deferred policy acquisition costs 502,746 468,793
Other assets 353,763 332,559
Assets held in separate accounts 392,708 347,717
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Total assets $7,433,393 $6,799,449
============ ============
Liabilities and stockholders' equity
Policy liabilities and accruals $5,299,009 $4,856,207
Other policyholders' funds 494,030 462,113
Debt 40,000 40,000
Other liabilities 282,958 249,325
Liabilities related to separate accounts 392,708 347,717
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Total liabilities 6,508,705 5,955,362
Minority interest in subsidiaries 97,086 97,210
Series C redeemable preferred stock 86,978 85,514
Stockholders' equity 740,624 661,363
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Total liabilities and stockholders' equity $7,433,393 $6,799,449
============ ============
Book Value Per Share, securities at market $26.44 $23.71
============ ============
Book Value Per Share, securities at cost (2) $21.20 $20.28
============ ============
Common Shares Outstanding 27,902,063 27,771,269
============ ============
(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 $146.2 million at
June 30, 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