Exhibit 99.1
FBL Financial Group Reports Third Quarter 2004 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--Nov. 1, 2004--FBL
Financial Group, Inc. (NYSE:FFG):
Financial Highlights
(Dollars in thousands, except per share data)
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Three Months Ended
September 30,
2004 2003
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Net income applicable to common stock 14,414 14,704
Operating income applicable to common stock 14,173 14,798
Earnings per common share (assuming dilution):
Net income 0.49 0.51
Operating income 0.49 0.52
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FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share totaled $0.49 ($14,414,000) for the
quarter ended September 30, 2004, compared to $0.51 ($14,704,000) in
the year ago quarter. Net income includes the impact of realized gains
and losses on investments, which was less than $0.01 per share in the
third quarter of 2004 and a loss of $0.01 per share in the third
quarter of 2003.
Operating Income (a). Operating income, which excludes the impact
of realized gains and losses on investments, totaled $14,173,000 for
the quarter ended September 30, 2004, versus $14,798,000 in the third
quarter of 2003. Diluted operating income per common share totaled
$0.49 in the third quarter of 2004, compared to $0.52 in the third
quarter of 2003. The primary reason for the decrease in operating
income is the decline in equity income attributable to our ownership
position in American Equity Investment Life Holding Company. Prior to
2004, equity income included FBL's share of American Equity's
earnings, which totaled $0.05 per share in the third quarter of 2003.
Following American Equity's initial public offering in December 2003,
FBL's ownership percentage decreased and as a result, FBL no longer
accounts for its investment under the equity method of accounting.
(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, "We are pleased to report solid operating results
this quarter of $0.49 per common share. Sales from our EquiTrust Life
channel continue to grow and for the quarter we had premiums collected
of $173 million, up from $124 million in the second quarter. Our Farm
Bureau Life channel also continues to deliver outstanding sales
results and in the third quarter we posted an eight percent increase
over third quarter 2003 total premiums collected."
Product Revenues Up. Premiums and product charges for the third
quarter of 2004 increased three percent to $53,801,000 from
$52,324,000 in the third quarter of 2003. Interest sensitive and index
product charges increased seven percent due to an increase in the
volume of business in force, while traditional life insurance premiums
were up slightly.
Premiums collected in the third quarter of 2004 increased to
$337,014,000 from $335,862,000 in the third quarter of 2003. This
increase reflects $172,998,000 in premiums collected from FBL's
growing EquiTrust Life channel. Premiums collected from FBL's Farm
Bureau Life channel increased eight percent to $123,116,000 and
premiums from the variable alliance channel increased to $6,495,000.
Premiums collected under FBL's now suspended coinsurance agreement
with American Equity Investment Life Insurance Company reflect only
one month of activity in the quarter and declined to $30,562,000.
Investment Income. Net investment income in the third quarter of
2004 increased eight percent to $106,807,000 from $98,541,000 in the
third quarter of 2003. This increase is due to an increase in average
invested assets resulting primarily from inflows from FBL's Farm
Bureau Life and EquiTrust Life distribution channels and a coinsurance
agreement. The annualized yield earned on average invested assets was
6.21 percent for the nine months ended September 30, 2004, compared to
6.98 percent for the same period of 2003. The 2004 yield reflects a
decline in market interest rates and a decrease in fee income from
bond calls and mortgage loan prepayments. Investment fee income
totaled $1,127,000 in the third quarter of 2004 compared to $1,957,000
in the third quarter of 2003. Investment fee income for the nine
months ended September 30, 2004 totaled $1,154,000 compared to
$11,762,000 for the same period of 2003.
Derivative Loss. FBL's derivative income totaled a loss of
$8,463,000 in the third quarter of 2004, compared to derivative income
of $2,078,000 in the third quarter of 2003. This decline primarily
reflects a decrease in the change in the underlying equity market
indices on which call options supporting our index annuity business
are based. Income (loss) from call options are generally offset by
corresponding changes in index product benefits.
Realized Gains on Investments. In the third quarter of 2004, FBL
recognized net realized gains on investments of $601,000. This
compares to net realized losses on investments of $318,000 in the
third quarter of 2003. Third quarter 2004 realized gains include
realized gains from sales of securities of $1,855,000, realized losses
from sales of securities of $26,000 and realized losses from the
write-down of a security that became other-than-temporarily impaired
of $1,228,000.
Benefits and Expenses. Benefits and expenses totaled $136,873,000
in the third quarter of 2004, compared to $135,488,000 in the third
quarter of 2003. This increase is due primarily to an increase in the
volume of annuity business in force, partially offset by a reduction
in index product benefits and interest crediting rates on interest
sensitive products. Other underwriting, acquisition and insurance
expenses increased and include approximately $1,500,000 in expenses
associated with the expansion of the EquiTrust Life distribution
channel.
Income from Equity Investments. Equity income, net of related
income taxes, was $487,000 in the third quarter of 2004, compared to
$1,534,000 in the third 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. Prior to 2004, equity income included FBL's share
of American Equity Investment Life Holding Company's earnings, which
totaled $1,357,000, net of taxes, in the third 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
third quarter of 2004 reflect a decline in all segments with the
exception of the variable segment, which had an increase in pre-tax
operating income. Further detail by segment is provided in FBL's
financial supplement, which is available on FBL's web site,
www.fblfinancial.com.
Assets Total $8.8 Billion. Total assets increased $843 million to
$8.8 billion at September 30, 2004, from $7.9 billion at December 31,
2003. At September 30, 2004, 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 cost,
increased five percent to $23.17 at September 30, 2004, from $22.11 at
December 31, 2003, while book value per common share, with securities
at market, increased six percent to $27.96 at September 30, 2004, from
$26.42 at December 31, 2003, reflecting an increase in unrealized
appreciation on fixed maturity securities.
Earnings Outlook. While subject to volatility resulting from a
number of factors, including mortality experience and investment
results, FBL maintains its full year 2004 net income and operating
income guidance of a range of $1.80 to $1.90 per common share.
Conference Call. FBL management will hold a conference call with
investors to discuss third quarter 2004 results. The call will be held
tomorrow, November 2, 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
Sept. 30,
2004 2003
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REVENUES
Interest sensitive and index product charges $22,437 $21,027
Traditional life insurance premiums 31,337 31,232
Accident and health premiums 27 65
Net investment income 106,807 98,541
Derivative income (loss) (8,463) 2,078
Realized gains (losses) on investments 601 (318)
Other income 5,531 3,980
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Total revenues 158,277 156,605
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 57,789 62,664
Traditional life insurance and accident and
health benefits 20,519 19,377
Increase in traditional life and accident and
health future policy benefits 8,567 7,069
Distributions to participating policyholders 5,845 6,381
Underwriting, acquisition and insurance
expenses 36,434 33,965
Interest expense 3,171 2,406
Other expenses 4,548 3,626
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Total benefits and expenses 136,873 135,488
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21,404 21,117
Income taxes (7,414) (7,921)
Minority interest in earnings of subsidiaries (26) 11
Equity income, net of related income taxes 487 1,534
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Net income 14,451 14,741
Dividends on Series B preferred stock (37) (37)
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Net income applicable to common stock $14,414 $14,704
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Earnings per common share - assuming dilution $0.49 $0.51
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Weighted average common shares 28,657,703 27,993,153
Effect of dilutive securities 494,531 638,588
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Weighted average common shares - diluted 29,152,234 28,631,741
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FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Nine months ended
Sept. 30,
2004 2003
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REVENUES
Interest sensitive and index product charges $66,757 $62,277
Traditional life insurance premiums 99,809 97,886
Accident and health premiums 285 391
Net investment income 305,735 296,458
Derivative income (loss) (6,310) 7,713
Realized gains (losses) on investments 1,294 (1,434)
Other income 15,614 12,411
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Total revenues 483,184 475,702
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 184,010 190,223
Traditional life insurance and accident and
health benefits 63,401 58,008
Increase in traditional life and accident and
health future policy benefits 26,118 25,462
Distributions to participating policyholders 18,676 20,620
Underwriting, acquisition and insurance
expenses 110,972 96,845
Interest expense 8,169 2,632
Other expenses 13,778 10,940
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Total benefits and expenses 425,124 404,730
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58,060 70,972
Income taxes (18,321) (24,004)
Minority interest in earnings (loss) of
subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary
trust - (2,425)
Other (68) 22
Equity income, net of related income taxes 975 3,751
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Net income 40,646 48,316
Dividends on Series B and C preferred stock (112) (2,259)
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Net income applicable to common stock $40,534 $46,057
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Earnings per common share - assuming dilution $1.39 $1.62
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Weighted average common shares 28,551,668 27,905,979
Effect of dilutive securities 561,854 526,080
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Weighted average common shares - diluted 29,113,522 28,432,059
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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,
2004 2003
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Net income applicable to common stock $14,414 $14,704
Adjustment:
Net realized (gains) losses on investments (1) (241) 94
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Operating income applicable to common stock $14,173 $14,798
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Operating earnings per common share - assuming
dilution $0.49 $0.52
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Nine months ended
Sept. 30,
2004 2003
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Net income applicable to common stock $40,534 $46,057
Adjustment:
Net realized (gains) losses on investments (1) (337) 1,084
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Operating income applicable to common stock $40,197 $47,141
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Operating earnings per common share - assuming
dilution $1.38 $1.66
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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)
Sept. 30, December 31,
2004 2003
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Assets
Investments $7,286,784 $6,341,701
Cash and cash equivalents 22,131 233,858
Deferred policy acquisition costs 571,484 530,580
Deferred sales inducements 66,106 39,143
Other assets 339,546 340,016
Assets held in separate accounts 505,637 463,772
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Total assets $8,791,688 $7,949,070
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Liabilities and stockholders' equity
Policy liabilities and accruals $6,426,305 $5,780,251
Other policyholders' funds 544,828 521,816
Debt 262,803 185,480
Other liabilities 246,755 249,763
Liabilities related to separate accounts 505,637 463,772
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Total liabilities 7,986,328 7,201,082
Minority interest in subsidiaries 186 161
Stockholders' equity 805,174 747,827
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Total liabilities and stockholders' equity $8,791,688 $7,949,070
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Book Value Per Share, securities at market $27.96 $26.42
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Book Value Per Share, securities at cost (2) $23.17 $22.11
============ ============
Common Shares Outstanding 28,688,848 28,190,918
============ ============
(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 $137.3 million at
September 30, 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
Investor Relations:
Kathleen Till Stange, 515-226-6780
ktillstange@fbfs.com