Exhibit 99.1
FBL Financial Group Reports Third Quarter 2003 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--Oct. 29, 2003--FBL
Financial Group, Inc. (NYSE:FFG)
Financial Highlights
(Dollars in thousands, except per share data)
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Three Months Ended
September 30,
2003 2002
-----------------------
Net income applicable to common stock $14,704 $16,334
Operating income applicable to common stock 14,798 15,603
Earnings per common share (assuming
dilution):
Net income 0.51 0.58
Operating income 0.52 0.55
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FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share totaled $0.51 ($14,704,000) for the
quarter ended September 30, 2003, compared to $0.58 ($16,334,000) in
the year ago quarter. Net income includes the impact of realized
losses on investments of $0.01 per share in the third quarter of 2003
and realized gains on investments of $0.03 per share in the third
quarter of 2002.
Operating Income(a). Operating income, which excludes the impact
of realized gains and losses on investments, totaled $14,798,000 for
the quarter ended September 30, 2003, versus $15,603,000 in the third
quarter of 2002. Diluted operating income per common share totaled
$0.52 in the third quarter of 2003, compared to $0.55 in the third
quarter of 2002. The decrease in operating income for the third
quarter of 2003 is primarily attributable to an increase in the
amortization of deferred policy acquisition costs. In addition, the
2002 third quarter benefited from a one-time release of a group life
reserve due to the exiting of that business. Operating income in the
third quarter of 2003 includes an $0.08 per share contribution from
FBL's coinsurance agreement with American Equity Investment Life
Insurance Company compared to a $0.02 per share contribution in the
third 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 third quarter results, Chief Executive Officer
Bill Oddy stated, "This was another good quarter for FBL with
operating income meeting our expectations of $0.52 per common share.
We continue to see an increase in premiums collected from our core
distribution, and our relationship with American Equity remains a
positive contributor to our earnings. We are reaffirming our full year
2003 operating income guidance of $2.15-$2.20 per common share and
expect fourth quarter 2003 earnings to be within a range of
$0.49-$0.54 per common share."
"We remain optimistic about FBL's future and are pleased to
announce that we have reached an agreement in principle to renew our
coinsurance agreement with American Equity Investment Life Insurance
Company for at least another two years. Under this agreement, we
expect to coinsure at least $500 million of certain fixed and
equity-indexed annuities, annually. We are also pleased to report that
we recently renewed our variable product alliance with United Farm
Family Life Insurance Company of Indiana for another three years."
Product Revenues Up Six Percent. Premiums and product charges for
the third quarter of 2003 increased six percent to $52,324,000
compared to $49,316,000 in the third quarter of 2002. Interest
sensitive product charges and traditional life insurance premiums each
increased six percent due to an increase in the volume of business in
force.
Premiums collected totaled $336,749,000 in the third quarter of
2003, which includes $212,129,000 assumed under the coinsurance
agreement with American Equity. Excluding the impact of the American
Equity coinsurance agreement, collected premiums increased three
percent, with the traditional annuity segment increasing eight
percent, the traditional and universal life insurance segment
increasing four percent and the variable segment decreasing eight
percent. In the third quarter of 2002, premiums assumed from American
Equity totaled $232,528,000.
Investment Income. Net investment income in the third quarter of
2003 increased 11 percent to $98,541,000 compared to $88,818,000 in
the third quarter of 2002. This increase is due to an increase in
average invested assets, resulting primarily from cash received under
the American Equity coinsurance agreement and sales from FBL's core
Farm Bureau distribution force. The annualized yield earned on average
invested assets was 6.98 percent for the nine months ended September
30, 2003, compared to 7.18 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 for the year.
Fee income from bond calls and mortgage loan prepayments and the
impact of changing prepayments speeds on mortgage and asset-backed
securities at quarter end totaled $1,957,000 in the third quarter of
2003 compared to $1,453,000 in the third quarter of 2002.
Derivative Income. FBL's derivative income totaled $2,078,000 in
the third quarter of 2003, compared to a derivative loss of $1,133,000
in the third quarter of 2002. The increase in 2003 derivative income
is due primarily to gains on the various indexes underlying the call
options purchased to fund returns on equity-indexed annuities assumed
from American Equity. Gains and losses on these 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 holders, which are
recorded as a component of interest sensitive product benefits.
Realized Losses on Investments. In the third quarter of 2003, FBL
recognized net realized losses on investments of $318,000, compared to
net realized gains on investments of $1,683,000 in the third quarter
of 2002. Third quarter 2003 realized losses include realized gains
from sales of securities of $1,834,000, realized losses from sales of
securities of $1,000 and realized losses from the write-down of
securities that became other-than-temporarily impaired of $2,151,000.
Benefits and Expenses. Benefits and expenses totaled $135,488,000
in the third quarter of 2003, compared to $117,209,000 in the third
quarter of 2002. This increase is due primarily to an increase in the
volume of business in force resulting principally from the coinsurance
agreement with American Equity. Partially offsetting this was the
impact of reductions in dividend and interest crediting rates on many
products throughout 2002 and 2003.
Interest expense increased due to the reclassification of
dividends on company-obligated mandatorily redeemable preferred stock
of subsidiary trust and Series C preferred stock beginning in the
third quarter of 2003 in accordance with the adoption of Statement No.
150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity." In conjunction with
the adoption of this Statement, the company-obligated mandatorily
redeemable preferred stock of subsidiary trust and Series C redeemable
preferred stock were reclassified to debt on the consolidated balance
sheet. All reclassifications made due to the adoption of Statement No.
150 were permitted on a prospective basis only and are not reflected
in prior periods.
Income from Equity Investments. Equity income, net of related
income taxes, was $1,534,000 in the third quarter of 2003, compared to
$1,078,000 in the third quarter of 2002. Equity income in the third
quarter of 2003 includes $1,357,000 of income, net of taxes, from
FBL's 33 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 operating results for the
third quarter of 2003 reflect strong increases in the pre-tax
operating income for the traditional annuity and variable product
segments. The traditional and universal life insurance segment
experienced a 32 percent decrease in pre-tax operating income
primarily due to an increase in the amortization of deferred policy
acquisition costs. Further detail by segment is provided in FBL's
financial supplement, which is available on FBL's web site,
www.fblfinancial.com.
Assets Total $7.7 Billion. Total assets increased $940 million to
$7.7 billion at September 30, 2003, from $6.8 billion at December 31,
2002. At September 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 nine percent to $25.83 at September 30, 2003, from $23.71 at
December 31, 2002.
Conference Call. FBL management will hold a conference call with
investors to discuss third quarter 2003 results. The call will be held
tomorrow, October 30, 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
Sept. 30,
2003 2002
----------- -----------
REVENUES
Interest sensitive product charges $21,027 $19,913
Traditional life insurance premiums 31,232 29,360
Accident and health premiums 65 43
Net investment income 98,541 88,818
Derivative income (loss) 2,078 (1,133)
Realized gains (losses) on investments (318) 1,683
Other income 3,980 4,193
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Total revenues 156,605 142,877
BENEFITS AND EXPENSES
Interest sensitive product benefits 61,653 54,407
Traditional life insurance and accident and
health benefits 19,377 20,543
Increase in traditional life and accident and
health future policy benefits 7,069 4,865
Distributions to participating policyholders 6,381 6,606
Underwriting, acquisition and insurance
expenses 34,976 27,823
Interest expense 2,406 175
Other expenses 3,626 2,790
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Total benefits and expenses 135,488 117,209
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21,117 25,668
Income taxes (7,921) (8,089)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust - (1,213)
Other 11 (22)
Equity income, net of related income taxes 1,534 1,078
----------- -----------
Net income 14,741 17,422
Dividends on Series B and C preferred stock (37) (1,088)
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Net income applicable to common stock $14,704 $16,334
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Earnings per common share - assuming dilution $0.51 $0.58
=========== ===========
Weighted average common shares 27,993,153 27,692,367
Effect of dilutive securities 638,588 553,452
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Weighted average common shares - diluted 28,631,741 28,245,819
=========== ===========
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Nine months ended
Sept. 30,
2003 2002
----------- -----------
REVENUES
Interest sensitive product charges $62,277 $58,293
Traditional life insurance premiums 97,886 92,500
Accident and health premiums 391 313
Net investment income 296,458 251,332
Derivative income (loss) 7,713 (10,570)
Realized losses on investments (1,434) (1,894)
Other income 12,411 12,990
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Total revenues 475,702 402,964
BENEFITS AND EXPENSES
Interest sensitive product benefits 187,439 145,633
Traditional life insurance and accident and
health benefits 58,008 57,211
Increase in traditional life and accident and
health future policy benefits 25,462 24,369
Distributions to participating policyholders 20,620 22,273
Underwriting, acquisition and insurance
expenses 99,629 76,195
Interest expense 2,632 533
Other expenses 10,940 8,890
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Total benefits and expenses 404,730 335,104
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70,972 67,860
Income taxes (24,004) (21,210)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust (2,425) (3,638)
Other 22 (117)
Equity income, net of related income taxes 3,751 42
----------- -----------
Net income 48,316 42,937
Dividends on Series B and C preferred stock (2,259) (3,239)
----------- -----------
Net income applicable to common stock $46,057 $39,698
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Earnings per common share - assuming dilution $1.62 $1.41
=========== ===========
Weighted average common shares 27,905,979 27,590,210
Effect of dilutive securities 526,080 565,645
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Weighted average common shares - diluted 28,432,059 28,155,855
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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
Sept. 30,
2003 2002
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Net income applicable to common stock $14,704 $16,334
Adjustment:
Net realized losses (gains) on investments (1) 94 (731)
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Operating income applicable to common stock $14,798 $15,603
======== ========
Operating earnings per common share - assuming
dilution $0.52 $0.55
======== ========
Nine months ended
Sept. 30,
2003 2002
-------- --------
Net income applicable to common stock $46,057 $39,698
Adjustment:
Net realized losses on investments (1) 1,084 693
-------- --------
Operating income applicable to common stock $47,141 $40,391
======== ========
Operating earnings per common share - assuming
dilution $1.66 $1.43
======== ========
(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
(gains).
FBL FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
Sept. 30, Dec. 31,
2003 2002
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Assets
Investments $6,137,780 $5,387,369
Cash and cash equivalents 278,268 263,011
Deferred policy acquisition costs 545,664 468,793
Other assets 366,832 332,559
Assets held in separate accounts 410,527 347,717
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Total assets $7,739,071 $6,799,449
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Liabilities and stockholders' equity
Policy liabilities and accruals $5,549,479 $4,856,207
Other policyholders' funds 505,204 462,113
Debt 224,724 40,000
Other liabilities 320,453 249,325
Liabilities related to separate accounts 410,527 347,717
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Total liabilities 7,010,387 5,955,362
Minority interest in subsidiaries 109 97,210
Series C redeemable preferred stock - 85,514
Stockholders' equity 728,575 661,363
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Total liabilities and stockholders' equity $7,739,071 $6,799,449
=========== ===========
Book Value Per Share, securities at market $25.83 $23.71
=========== ===========
Book Value Per Share, securities at cost (2) $21.59 $20.28
=========== ===========
Common Shares Outstanding 28,088,631 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 $119.2 million at
September 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