Exhibit 99.1
FBL Financial Group Reports Fourth Quarter 2003 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--Feb. 3, 2004--FBL
Financial Group, Inc. (NYSE:FFG):
Financial Highlights
(Dollars in thousands, except per share data)
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Three Months Ended
December 31,
2003 2002
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Net income applicable to common stock $17,591 $6,633
Operating income applicable to common stock
17,750 14,233
Earnings per common share (assuming
dilution):
Net income 0.61 0.24
Operating income 0.61 0.50
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FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share totaled $0.61 ($17,591,000) for the
quarter ended December 31, 2003, compared to $0.24 ($6,633,000) in the
year ago quarter. Net income includes the impact of realized losses on
investments, which were less than $0.01 per share in the fourth
quarter of 2003 and totaled $0.26 per share in the fourth quarter of
2002.
Operating Income (a). Operating income, which excludes the impact
of realized gains and losses on investments, totaled $17,750,000 for
the quarter ended December 31, 2003, versus $14,233,000 in the fourth
quarter of 2002. Diluted operating income per common share totaled
$0.61 in the fourth quarter of 2003, compared to $0.50 in the fourth
quarter of 2002. The 22 percent increase in operating income for the
fourth quarter of 2003 is primarily attributable to additional equity
income. Additionally, operating income in the fourth 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 $0.06 per share contribution in the fourth 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 fourth quarter results, Chief Executive
Officer Bill Oddy stated, "Results for the fourth quarter were
exceptional and cap off an outstanding year of record net income and
operating income results. We are anticipating a great year in 2004 and
are focused on growth through our Farm Bureau and EquiTrust
distribution channels. We are also pleased to have recently announced
the renewal of our coinsurance agreement with American Equity
Investment Life Insurance Company."
Product Revenues Up Seven Percent. Premiums and product charges
for the fourth quarter of 2003 increased seven percent to $53,146,000
compared to $49,861,000 in the fourth quarter of 2002. Interest
sensitive product charges increased seven percent while traditional
life insurance premiums increased six percent, both due to an increase
in the volume of business in force.
Premiums collected totaled $268,462,000 in the fourth quarter of
2003, which includes $142,529,000 assumed under traditional annuity
coinsurance agreements. Excluding the impact of these coinsurance
agreements, collected premiums increased four percent, with the
traditional annuity segment remaining flat, the traditional and
universal life insurance segment increasing two percent and the
variable segment increasing 13 percent. After experiencing a
challenging environment for most of 2003, FBL's Farm Bureau
distribution force increased sales in the fourth quarter, particularly
of whole life insurance, and achieved record production in the fourth
quarter.
Investment Income. Net investment income in the fourth quarter of
2003 increased two percent to $99,423,000 compared to $97,027,000 in
the fourth quarter of 2002. This increase is due to an increase in
average invested assets, resulting primarily from cash received under
coinsurance agreements and sales by FBL's Farm Bureau distribution
force. The yield earned on average invested assets was 6.79 percent
for the year ended December 31, 2003, compared to 7.19 percent for
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, primarily from bond calls and
mortgage loan prepayments and the impact of changing prepayments
speeds on mortgage and asset-backed securities at quarter end, totaled
$1,700,000 in the fourth quarter of 2003 compared to $3,762,000 in the
fourth quarter of 2002. Investment fee income for the full year of
2003 totaled $13,463,000 compared to $5,793,000 in 2002.
Derivative Income. FBL's derivative income totaled $9,365,000 in
the fourth quarter of 2003, compared to $152,000 in the fourth 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 index annuities. 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
index 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 fourth quarter of 2003, FBL
recognized net realized losses on investments of $574,000. This
compares to net realized losses on investments of $12,985,000 in the
fourth quarter of 2002, which primarily related to United Air Lines.
Fourth quarter 2003 realized losses include realized gains from sales
of securities of $3,827,000, realized losses from sales of securities
of $4,380,000 and realized losses from the write-down of securities
that became other-than-temporarily impaired of $21,000.
Benefits and Expenses. Benefits and expenses totaled $142,821,000
in the fourth quarter of 2003, compared to $126,638,000 in the fourth
quarter of 2002. This increase is due primarily to an increase in the
volume of business in force resulting principally from coinsurance
agreements. Partially offsetting this was the impact of reductions in
dividend and interest crediting rates on many of FBL's products
throughout 2002 and 2003. Additionally, benefits and expense in the
fourth quarter of 2003 include the impact of a one-time reserve
release on certain traditional life reserves, which increased pre-tax
income by $1,319,000.
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.
Income from Equity Investments. Equity income, net of related
income taxes, was $2,058,000 in the fourth quarter of 2003, compared
to $172,000 in the fourth quarter of 2002. Equity income in the fourth
quarter of 2003 includes FBL's share of American Equity Investment
Life Holding Company's third quarter 2003 earnings. This resulted in
$1,330,000 of equity income, net of taxes, representing FBL's 32
percent ownership interest in American Equity as of the end of the
third quarter. Following American Equity's initial public offering in
December 2003, FBL's ownership percentage decreased. As a result, FBL
will no longer account for its investment under the equity method of
accounting and has marked its investment in American Equity to market
in accordance with FAS 115. As of December 31, 2003, FBL's investment
in American Equity totaled $54,518,000, which includes unrealized
appreciation of $11,211,000. Also 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 these 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
fourth quarter of 2003 reflect improved pre-tax operating results for
all 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 $7.9 Billion. Total assets increased $1.1 billion to
$7.9 billion at December 31, 2003, from $6.8 billion at December 31,
2002. At December 31, 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 eleven percent to $26.42 at December 31, 2003, from $23.71
at December 31, 2002.
Earnings Outlook. While subject to volatility resulting from a
number of factors, including mortality experience and investment
results, FBL reiterates its full year 2004 net income and operating
income guidance of a range of $2.00 to $2.10 per common share. This
earnings guidance is less than FBL's 2003 results due to no longer
accounting for FBL's ownership interest in American Equity under the
equity method of accounting, and the expectation of lower investment
prepayment fee income and additional investment in the distribution
and growth of FBL's subsidiary, EquiTrust Life Insurance Company.
Conference Call. FBL management will hold a conference call with
investors to discuss fourth quarter 2003 results. The call will be
held tomorrow, February 4, 2004, 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 other distribution channels and (3)
consolidations.
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
Dec. 31,
2003 2002
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REVENUES
Interest sensitive and index product charges $21,667 $20,182
Traditional life insurance premiums 31,304 29,499
Accident and health premiums 175 180
Net investment income 99,423 97,027
Derivative income 9,365 152
Realized losses on investments (574) (12,985)
Other income 4,483 4,096
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Total revenues 165,843 138,151
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 68,991 62,945
Traditional life insurance and accident and
health benefits 17,844 17,517
Increase in traditional life and accident and
health future policy benefits 7,283 8,893
Distributions to participating policyholders 6,823 7,267
Underwriting, acquisition and insurance
expenses 35,346 26,254
Interest expense 2,420 152
Other expenses 4,114 3,610
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Total benefits and expenses 142,821 126,638
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23,022 11,513
Income taxes (7,413) (2,659)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust - (1,212)
Other (38) (83)
Equity income, net of related income taxes 2,058 172
----------- -----------
Net income 17,629 7,731
Dividends on Series B and C preferred stock (38) (1,098)
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Net income applicable to common stock $17,591 $6,633
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Earnings per common share - assuming dilution $0.61 $0.24
=========== ===========
Weighted average common shares 28,167,205 27,726,895
Effect of dilutive securities 697,270 487,968
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Weighted average common shares - diluted 28,864,475 28,214,863
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FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Year ended
Dec. 31,
2003 2002
----------- -----------
REVENUES
Interest sensitive and index product charges $83,944 $78,475
Traditional life insurance premiums 129,190 121,999
Accident and health premiums 566 493
Net investment income 395,881 348,359
Derivative income (loss) 17,078 (10,418)
Realized losses on investments (2,008) (14,879)
Other income 16,894 17,086
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Total revenues 641,545 541,115
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 256,430 208,578
Traditional life insurance and accident and
health benefits 75,852 74,728
Increase in traditional life and accident and
health future policy benefits 32,745 33,262
Distributions to participating policyholders 27,443 29,540
Underwriting, acquisition and insurance
expenses 134,975 102,449
Interest expense 5,052 685
Other expenses 15,054 12,500
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Total benefits and expenses 547,551 461,742
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93,994 79,373
Income taxes (31,417) (23,869)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust (2,425) (4,850)
Other (16) (200)
Equity income, net of related income taxes 5,809 214
----------- -----------
Net income 65,945 50,668
Dividends on Series B and C preferred stock (2,297) (4,337)
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Net income applicable to common stock $63,648 $46,331
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Earnings per common share - assuming dilution $2.23 $1.64
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Weighted average common shares 27,977,739 27,624,662
Effect of dilutive securities 571,143 543,846
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Weighted average common shares - diluted 28,548,882 28,168,508
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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
Dec. 31,
2003 2002
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Net income applicable to common stock $17,591 $6,633
Adjustment:
Net realized losses on investments (1) 159 7,600
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Operating income applicable to common stock $17,750 $14,233
============ =============
Operating earnings per common share -
assuming dilution $0.61 $0.50
============ =============
Year ended
Dec. 31
2003 2002
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Net income applicable to common stock $63,648 $46,331
Adjustment:
Net realized losses on investments (1) 1,243 8,293
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Operating income applicable to common stock $64,891 $54,624
============ =============
Operating earnings per common share -
assuming dilution $2.27 $1.94
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(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)
December 31,
2003 2002
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Assets
Investments $6,341,701 $5,387,369
Cash and cash equivalents 233,858 263,011
Deferred policy acquisition costs 569,723 468,793
Other assets 340,016 332,559
Assets held in separate accounts 463,772 347,717
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Total assets $7,949,070 $6,799,449
=========== ===========
Liabilities and stockholders' equity
Policy liabilities and accruals $5,780,251 $4,856,207
Other policyholders' funds 521,816 462,113
Debt 185,480 40,000
Other liabilities 249,763 249,325
Liabilities related to separate accounts 463,772 347,717
----------- -----------
Total liabilities 7,201,082 5,955,362
Minority interest in subsidiaries 161 97,210
Series C redeemable preferred stock - 85,514
Stockholders' equity 747,827 661,363
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Total liabilities and stockholders' equity $7,949,070 $6,799,449
=========== ===========
Book Value Per Share, securities at market $26.42 $23.71
=========== ===========
Book Value Per Share, securities at cost (2) $22.11 $20.28
=========== ===========
Common Shares Outstanding 28,190,918 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 $121.6 million at
December 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, West Des Moines
Jim Noyce, 515-225-5599
jnoyce@fbfs.com