EXHIBIT 99.1
FBL Financial Group Reports Third Quarter 2005 Results;
Net Income Up 18 Percent to $0.58 Per Share
WEST DES MOINES, Iowa--(BUSINESS WIRE)--Nov. 7, 2005--FBL
Financial Group, Inc. (NYSE:FFG):
Financial Highlights
(Dollars in thousands, except per share data)
Three Months Ended
September 30,
2005 2004
------------------
Net income applicable to common stock $16,982 $14,414
Operating income applicable to common stock 17,788 14,578
Earnings per common share (assuming dilution):
Net income 0.58 0.49
Operating income 0.60 0.50
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FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share increased 18 percent to $0.58
($16,982,000) for the quarter ended September 30, 2005 from $0.49
($14,414,000) in the year ago quarter.
Operating Income(1). Operating income increased to $17,788,000 for
the quarter ended September 30, 2005, from $14,578,000 in the third
quarter of 2004. Diluted operating income per common share increased
20 percent to $0.60 in the third quarter of 2005 from $0.50 in the
third quarter of 2004. Operating income differs from the GAAP measure,
net income, in that it excludes the impact of realized/unrealized
gains and losses on investments and the change in net unrealized gains
and losses on derivatives. For further information on this non-GAAP
financial measure, please refer to Note (1) and the reconciliation
provided within this release.
Commenting on FBL's third quarter results, Chief Executive Officer
Bill Oddy stated, "FBL Financial Group experienced excellent earnings
once again this quarter with an 18 percent increase in net income per
share and a 20 percent increase in operating income per share. This
performance results from our commitment to growth through both our
traditional Farm Bureau distribution channel and our new and expanding
EquiTrust Life independent agent channel. Based on our very strong
year-to-date results, we expect to exceed our already upwardly revised
full year 2005 net income and operating income guidance of $2.15 to
$2.25 per share."
Product Revenues Up. Premiums and product charges for the third
quarter of 2005 increased three percent to $55,514,000 from
$53,801,000 in the third quarter of 2004. This increase was driven by
a six percent growth in interest sensitive and index product charges
and a one percent increase in traditional life insurance premiums due
primarily to an increase in the volume of business in force.
Premiums collected(2) in the third quarter of 2005 increased nine
percent to $368,303,000 from $337,014,000 in the third quarter of
2004. This increase reflects growth in FBL's EquiTrust Life
independent channel, which had a record $243,191,000 of premiums
collected in the third quarter of 2005, up 41 percent from the third
quarter of 2004. Premiums collected from FBL's exclusive distribution
channel totaled $112,320,000 in the third quarter of 2005, reflecting
a four percent increase in traditional and universal life insurance, a
26 percent increase in variable sales and a 31 percent decline in
traditional annuity sales.
Investment Income. Net investment income in the third quarter of
2005 increased 13 percent to $120,336,000 from $106,807,000 in the
third quarter of 2004. This increase is due to an increase in average
invested assets resulting primarily from premium inflows from Farm
Bureau Life and EquiTrust Life. The annualized yield earned on average
invested assets, with securities at cost, was 6.29 percent for the
nine months ended September 30, 2005, compared to 6.21 percent for the
same period of 2004. The 2005 yield reflects an increase in investment
fee income, which includes income from bond calls, tender offers and
mortgage loan prepayments, to $2,939,000 in the third quarter of 2005
from $1,310,000 in the third quarter of 2004.
Derivative Income. FBL's derivative income (loss) totaled income
of $5,900,000 in the third quarter of 2005, compared to a loss of
$8,463,000 in the third quarter of 2004. This income primarily
reflects an increase in the volume of options supporting FBL's index
annuity business and appreciation of the underlying equity market
indices on which these options are based. Gains from these options are
generally passed on to the contract holders in the form of index
credits.
Realized/Unrealized Gains on Investments. In the third quarter of
2005, FBL recognized net realized/unrealized gains on investments of
$37,000 compared to $601,000 in the third quarter of 2004. Third
quarter 2005 realized/unrealized gains include realized gains from
sales of securities of $683,000, realized losses from sales of
securities of $6,000, realized losses from impairments of $517,000 and
unrealized losses on trading securities of $123,000.
Benefits and Expenses. Benefits and expenses totaled $162,923,000
in the third quarter of 2005, compared to $136,873,000 in the third
quarter of 2004. This increase is primarily attributable to benefits
associated with FBL's growing index annuity business.
In connection with the closing of a processing unit and certain
workforce reductions, in the third quarter of 2005 FBL recorded a
pre-tax charge of $815,000 primarily related to severance benefits. An
additional pre-tax charge of $1,600,000 is expected to be recorded in
the fourth quarter of 2005 for early retirement benefits relating to
the terminations. As a result of efficiencies gained with these
activities, FBL expects to achieve pre-tax annual savings of
approximately $4,000,000. These savings will begin to emerge during
the fourth quarter of 2005.
In the third quarter of 2005, FBL recorded an unlocking adjustment
which increased pre-tax income by $2,203,000 ($0.05 per share).
Periodically, the key assumptions used in the calculation of the
amortization of deferred policy acquisition costs, deferred sales
inducements, value of insurance in force acquired and unearned
revenues are revised, as needed, through an "unlocking" process.
Revisions are made based on historical results and the best estimate
of future experience. The impact of unlocking in the third quarter
resulted in a decrease to amortization of deferred policy acquisition
costs of $2,582,000, a decrease to amortization of deferred sales
inducements of $29,000 and a decrease to amortization of unearned
revenues of $408,000.
Operating Results by Segment. Consistent with prior quarters, the
majority of FBL's operating earnings for the third quarter of 2005 are
attributable to the traditional annuity and traditional and universal
life insurance segments. Further detail and results by segment are
provided in FBL's financial supplement, which is available on FBL's
web site, www.fblfinancial.com.
Assets Total $9.9 Billion. Total assets increased $826,219,000 to
$9.9 billion at September 30, 2005, from $9.1 billion at December 31,
2004. At September 30, 2005, 95 percent of the fixed maturity
securities in FBL's investment portfolio were investment grade debt
securities. Book value per common share totaled $28.99 at September
30, 2005 compared to $28.87 at December 31, 2004. Book value per share
excluding accumulated other comprehensive income(3) increased to
$25.44 at September 30, 2005, from $23.96 at December 31, 2004.
Conference Call. FBL management will hold a conference call with
investors to discuss third quarter 2005 results. The call will be held
tomorrow, November 8, 2005, 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. The risks and uncertainties that could cause actual
results to differ materially are detailed in FBL's reports filed with
the Securities and Exchange Commission and include interest rate
changes, competitive factors, volatility of financial markets, the
ability to attract and retain sales agents and a decrease in ratings.
These forward-looking statements are based on assumptions which FBL
Financial Group believes to be reasonable. No assurance can be given
that the assumptions will prove to be correct.
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)
growth through its traditional Farm Bureau Life distribution channel,
(2) growth in EquiTrust Life through independent and other
distribution channels and (3) acquisitions or consolidations.
FBL Financial Group, Inc.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
September 30,
2005 2004
----------- -----------
REVENUES
Interest sensitive and index product charges $23,834 $22,437
Traditional life insurance premiums 31,649 31,337
Accident and health premiums 31 27
Net investment income 120,336 106,807
Derivative income (loss) 5,900 (8,463)
Realized/unrealized gains on investments 37 601
Other income 5,436 5,531
----------- -----------
Total revenues 187,223 158,277
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 79,639 57,789
Traditional life insurance and accident and
health benefits 20,714 20,519
Increase in traditional life and accident and
health future policy benefits 8,244 8,567
Distributions to participating policyholders 5,393 5,845
Underwriting, acquisition and insurance
expenses 40,040 36,434
Interest expense 3,427 3,171
Other expenses 5,466 4,548
----------- -----------
Total benefits and expenses 162,923 136,873
----------- -----------
24,300 21,404
Income taxes (7,901) (7,414)
Minority interest in earnings of subsidiaries (24) (26)
Equity income, net of related income taxes 644 487
----------- -----------
Net income 17,019 14,451
Dividends on Series B preferred stock (37) (37)
----------- -----------
Net income applicable to common stock $16,982 $14,414
=========== ===========
Earnings per common share - assuming dilution $0.58 $0.49
=========== ===========
Weighted average common shares 28,954,638 28,657,703
Effect of dilutive securities 514,135 494,531
----------- -----------
Weighted average common shares - diluted 29,468,773 29,152,234
=========== ===========
FBL Financial Group, Inc.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Nine months ended
September 30,
2005 2004
----------- -----------
REVENUES
Interest sensitive and index product charges $71,895 $66,757
Traditional life insurance premiums 101,897 99,809
Accident and health premiums 237 285
Net investment income 352,373 305,735
Derivative loss (6,380) (6,310)
Realized/unrealized gains on investments 3,325 1,294
Other income 15,828 15,614
----------- -----------
Total revenues 539,175 483,184
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 210,549 184,010
Traditional life insurance and accident and
health benefits 64,651 63,401
Increase in traditional life and accident and
health future policy benefits 26,902 26,118
Distributions to participating policyholders 17,235 18,676
Underwriting, acquisition and insurance
expenses 115,546 110,972
Interest expense 10,097 8,169
Other expenses 15,016 13,778
----------- -----------
Total benefits and expenses 459,996 425,124
----------- -----------
79,179 58,060
Income taxes (27,104) (18,321)
Minority interest in earnings of subsidiaries (131) (68)
Equity income, net of related income taxes 575 975
----------- -----------
Net income 52,519 40,646
Dividends on Series B preferred stock (112) (112)
----------- -----------
Net income applicable to common stock $52,407 $40,534
=========== ===========
Earnings per common share - assuming dilution $1.79 $1.39
=========== ===========
Weighted average common shares 28,855,159 28,551,668
Effect of dilutive securities 501,919 561,854
----------- -----------
Weighted average common shares - diluted 29,357,078 29,113,522
=========== ===========
(1) Reconciliation of Net Income to Operating Income (Unaudited)
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/unrealized
gains and losses on investments and the change in net unrealized
gains and losses on derivatives. FBL uses operating income, in
addition to net income, to measure its performance since
realized/unrealized gains and losses on investments and the change
in net unrealized gains and losses on derivatives can fluctuate
greatly from quarter to quarter. These fluctuations make it
difficult to analyze core operating trends. In addition, for
derivatives not designated as hedges, there is a mismatch between
the valuation of the asset and liability when deriving net income.
This non-GAAP measure is used for goal setting, determining
company-wide bonuses and evaluating performance on a basis
comparable to that used by many in the investment community. 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 following table (dollars in thousands,
except per share data):
Three months ended
September 30,
2005 2004
-------- --------
Net income applicable to common stock $16,982 $14,414
Adjustments:
Net realized/unrealized (gains) losses on
investments (a) 6 (241)
Net change in unrealized gains/losses on
derivatives (a) 800 405
-------- --------
Operating income applicable to common stock $17,788 $14,578
======== ========
Operating income per common share - assuming
dilution $0.60 $0.50
======== ========
Nine months ended
September 30,
2005 2004
-------- --------
Net income applicable to common stock $52,407 $40,534
Adjustments:
Net realized/unrealized gains on investments (a) (1,795) (337)
Net change in unrealized gains/losses on
derivatives (a) 2,291 522
-------- --------
Operating income applicable to common stock $52,903 $40,719
======== ========
Operating income per common share - assuming
dilution $1.80 $1.40
======== ========
(a) Net of adjustments, as applicable, to amortization of unearned
revenue reserves, deferred policy acquisition costs, deferred sales
inducements, value of insurance in force acquired and income taxes
attributable to gains and losses on investments and derivatives.
(2) Premiums Collected - Net statutory premiums collected, a measure
of sales production, is a non-GAAP measure and includes premiums
collected from annuities and universal life-type products. For GAAP
reporting, these premiums received are not reported as revenues.
(3) Reconciliation of Book Value Per Share
Excluding Accumulated Other Comprehensive Income (Unaudited)
Sept. 30, December 31,
2005 2004
------------ ------------
Book value per share $28.99 $28.87
Less: Accumulated other comprehensive income 3.55 4.91
------------ ------------
Book value per share, excluding accumulated
other comprehensive income $25.44 $23.96
============ ============
Book value per share excluding accumulated other comprehensive income
is a non-GAAP financial measure. Accumulated other comprehensive
income totaled $103,540,000 at September 30, 2005 and $141,240,000 at
December 31, 2004. 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.
FBL Financial Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except per share data)
Sept. 30, December 31,
2005 2004
------------ ------------
Assets
Investments $8,147,182 $7,501,680
Cash and cash equivalents 10,711 27,957
Deferred policy acquisition costs 660,283 587,391
Deferred sales inducements 128,830 78,443
Other assets 365,435 353,236
Assets held in separate accounts 614,514 552,029
------------ ------------
Total assets $9,926,955 $9,100,736
============ ============
Liabilities and stockholders' equity
Policy liabilities and accruals $7,388,347 $6,650,973
Other policyholders' funds 562,343 549,968
Debt 264,328 263,183
Other liabilities 250,243 251,781
Liabilities related to separate accounts 614,514 552,029
------------ ------------
Total liabilities 9,079,775 8,267,934
Minority interest in subsidiaries 160 191
Stockholders' equity 847,020 832,611
------------ ------------
Total liabilities and stockholders' equity $9,926,955 $9,100,736
============ ============
Common shares outstanding 29,112,473 28,734,857
============ ============
FFG-1
CONTACT: FBL Financial Group, Inc., West Des Moines
Kathleen Till Stange, 515-226-6780
Kathleen.TillStange@FBLFinancial.com