Exhibit 99.1
FBL Financial Group Reports First Quarter 2004 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--April 28, 2004--FBL
Financial Group, Inc. (NYSE:FFG):
Financial Highlights
(Dollars in thousands, except per share data)
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Three Months Ended
March 31,
2004 2003
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Net income applicable to common stock $13,144 $10,840
Operating income applicable to common stock
13,354 14,395
Earnings per common share (assuming
dilution):
Net income 0.45 0.38
Operating income 0.46 0.51
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FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share totaled $0.45 ($13,144,000) for the
quarter ended March 31, 2004, compared to $0.38 ($10,840,000) in the
year ago quarter. Net income includes the impact of realized gains and
losses on investments, which totaled a loss of $0.01 per share in the
first quarter of 2004 and a loss of $0.13 per share in the first
quarter of 2003.
Operating Income (a). Operating income, which excludes the impact
of realized gains and losses on investments, totaled $13,354,000 for
the quarter ended March 31, 2004, versus $14,395,000 in the first
quarter of 2003. Diluted operating income per common share totaled
$0.46 in the first quarter of 2004, compared to $0.51 in the first
quarter of 2003. The decrease in operating income for the first
quarter of 2004 is primarily attributable to increases in death
benefits and operating expenses and decreases in equity income and
investment fee income.
(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 first quarter results, Chief Executive Officer
Bill Oddy stated, "As expected, results for the first quarter were
down in comparison to the high level achieved in 2003. Death benefits,
which can fluctuate on a quarterly basis, were up, and like others in
the industry, we are experiencing lower investment yields. Our
traditional Farm Bureau Life distribution channel continues to
represent the majority of our business, but we are also now investing
in growing our EquiTrust Life distribution channel. This channel,
along with our variable alliance partnerships, experienced excellent
growth in premiums collected during the quarter."
Product Revenues Up Seven Percent. Premiums and product charges
for the first quarter of 2004 increased seven percent to $55,827,000
compared to $52,082,000 in the first quarter of 2003. Interest
sensitive and index product charges increased seven percent while
traditional life insurance premiums increased eight percent, due to an
increase in the volume of business in force.
Premiums collected totaled $227,125,000 in the first quarter of
2004 compared to $260,896,000 in the first quarter of 2003. Premiums
assumed under traditional and universal life and annuity coinsurance
agreements continue to contribute significantly to total premiums
collected, but declined to $76,129,000 in the first quarter of 2004
from $125,106,000 in the first quarter of 2003. Excluding the impact
of these coinsurance agreements, collected premiums increased 11
percent, primarily due to sales by EquiTrust Life Insurance Company's
new distribution channel.
Investment Income. Net investment income in the first quarter of
2004 increased slightly to $98,546,000 from $97,947,000 in the first
quarter of 2003. This increase is due to an increase in average
invested assets resulting from premium inflows from a coinsurance
agreement and from FBL's Farm Bureau and EquiTrust distribution
channels. The annualized yield earned on average invested assets was
6.34 percent for the three months ended March 31, 2004, compared to
7.33 percent for the first quarter of 2003. The first quarter 2004
yield reflects the impact of a decline in market interest rates and a
decrease in 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. This fee income (loss) totaled
a loss of $156,000 in the first quarter of 2004 compared to fee income
of $5,356,000 in the first quarter of 2003. Expecting a decline in
this fee income, FBL assumes no prepayment fee income in its 2004
earnings guidance.
Derivative Income. FBL's derivative income totaled $4,212,000 in
the first quarter of 2004, compared to a derivative loss of $5,073,000
in the first quarter of 2003. The increase in 2004 derivative income
is due primarily to proceeds from option settlements from the call
options purchased to fund returns on index annuities. These proceeds
reflect the general increase in the underlying equity market indices
on which the options are based. Gains and losses on these call options
and proceeds from option settlements are 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 and index product benefits.
Realized Gains on Investments. In the first quarter of 2004, FBL
recognized net realized gains on investments of $64,000. This compares
to net realized losses on investments of $5,632,000 in the first
quarter of 2003. First quarter 2004 realized gains include realized
gains from sales of securities of $2,333,000, realized losses from
sales of securities of $410,000 and realized losses from the
write-down of securities that became other-than-temporarily impaired
of $1,859,000.
Benefits and Expenses. Benefits and expenses totaled $143,640,000
in the first quarter of 2004, compared to $125,290,000 in the first
quarter of 2003. This increase is due primarily to an increase in the
volume of annuity business in force and an increase in death benefits,
which can fluctuate on a quarterly basis, partially offset by a
reduction in crediting rates on interest sensitive products.
Additionally, other underwriting, acquisition and insurance expenses
increased and include approximately $800,000 in expenses associated
with the expansion of the EquiTrust Life distribution channel.
Interest expense increased primarily 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 accounting standards
adopted late in 2003. In conjunction with the adoption of these
standards, the Series C redeemable preferred stock and the
subordinated notes relating to the company-obligated mandatorily
redeemable preferred stock were reclassified to debt on the
consolidated balance sheet.
Income from Equity Investments. Equity income, net of related
income taxes, was $255,000 in the first quarter of 2004, compared to
$779,000 in the first quarter of 2003. 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. Prior to 2004, equity income included FBL's
share of American Equity Investment Life Holding Company's earnings,
which totaled $801,000, net of taxes, in the first quarter of 2003.
Following American Equity's initial public offering in December 2003,
FBL's ownership percentage decreased. As a result, FBL no longer
accounts for its investment under the equity method of accounting and
this investment in American Equity is now marked to market in
accordance with FAS 115.
Operating Results by Segment. FBL's operating results for the
first quarter of 2004 reflect a three percent increase in pre-tax
operating income for the traditional and universal life insurance
segment, while the other product segments experienced a decline in
pre-tax operating results. Further detail by segment is provided in
FBL's financial supplement, which is available on FBL's web site,
www.fblfinancial.com.
Assets Total $8.2 Billion. Total assets increased $296 million to
$8.2 billion at March 31, 2004, from $7.9 billion at December 31,
2003. At March 31, 2004, 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
eight percent to $28.60 at March 31, 2004, from $26.42 at December 31,
2003.
Subsequent Event - Senior Note Offering. On April 12, 2004, FBL
Financial Group issued $75,000,000 of 5.85% Senior Notes due April 15,
2014. Interest on the notes will be paid semi-annually beginning
October 15, 2004.
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.
Conference Call. FBL management will hold a conference call with
investors to discuss first quarter 2004 results. The call will be held
tomorrow, April 29, 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
March 31,
2004 2003
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REVENUES
Interest sensitive and index product charges $22,019 $20,622
Traditional life insurance premiums 33,734 31,373
Accident and health premiums 74 87
Net investment income 98,546 97,947
Derivative income (loss) 4,212 (5,073)
Realized gains (losses) on investments 64 (5,632)
Other income 4,701 4,009
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Total revenues 163,350 143,333
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 63,270 54,981
Traditional life insurance and accident and
health benefits 21,825 19,635
Increase in traditional life and accident and
health future policy benefits 6,732 7,397
Distributions to participating policyholders 6,723 7,656
Underwriting, acquisition and insurance
expenses 38,359 31,979
Interest expense 2,033 118
Other expenses 4,698 3,524
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Total benefits and expenses 143,640 125,290
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19,710 18,043
Income taxes (6,720) (5,613)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust - (1,213)
Other (63) (50)
Equity income, net of related income taxes 255 779
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Net income 13,182 11,946
Dividends on Series B and C preferred stock (38) (1,106)
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Net income applicable to common stock $13,144 $10,840
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Earnings per common share - assuming dilution $0.45 $0.38
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Weighted average common shares 28,391,050 27,825,165
Effect of dilutive securities 641,285 479,066
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Weighted average common shares - diluted 29,032,335 28,304,231
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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,
2004 2003
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Net income applicable to common stock $13,144 $10,840
Adjustment:
Net realized gains/losses on investments (1) 210 3,555
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Operating income applicable to common stock $13,354 $14,395
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Operating earnings per common share - assuming
dilution $0.46 $0.51
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(1) Net of adjustments for that portion of amortization of deferred
policy acquisition costs, deferred sales inducements, value of
insurance in force acquired, unearned revenue reserve and income taxes
attributable to such gains/losses.
FBL FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
March 31, December 31,
2004 2003
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Assets
Investments $6,625,500 $6,341,701
Cash and cash equivalents 221,402 233,858
Deferred policy acquisition costs 519,008 530,580
Deferred sales inducements 38,448 39,143
Other assets 358,875 340,016
Assets held in separate accounts 481,950 463,772
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Total assets $8,245,183 $7,949,070
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Liabilities and stockholders' equity
Policy liabilities and accruals $5,894,211 $5,780,251
Other policyholders' funds 537,097 521,816
Debt 186,568 185,480
Other liabilities 324,574 249,763
Liabilities related to separate accounts 481,950 463,772
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Total liabilities 7,424,400 7,201,082
Minority interest in subsidiaries 181 161
Stockholders' equity 820,602 747,827
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Total liabilities and stockholders' equity $8,245,183 $7,949,070
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Book Value Per Share, securities at market $28.60 $26.42
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Book Value Per Share, securities at cost (2) $22.42 $22.11
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Common Shares Outstanding 28,584,503 28,190,918
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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 $176.7 million at
March 31, 2004 and $121.6 million at December 31, 2003. 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.
FFG-1
CONTACT: FBL Financial Group, Inc., West Des Moines
Jim Noyce, 515-225-5599
jnoyce@fbfs.com