EXHIBIT 99.1
FBL Financial Group Reports Second Quarter 2006 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--Aug. 3, 2006--FBL
Financial Group, Inc. (NYSE:FFG):
Financial Highlights
(Dollars in thousands, except per share data)
Three Months Ended
June 30,
2006 2005
------------------
Net income applicable to common stock $17,665 $18,258
Operating income applicable to common stock 20,274 18,308
Earnings per common share (assuming
dilution):
Net income 0.59 0.62
Operating income 0.68 0.62
- ----------------------------------------------------------------------
FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income per common share totaled $0.59 ($17,665,000) for the
quarter ended June 30, 2006, compared to $0.62 ($18,258,000) in the
year ago quarter.
Operating Income(1). Operating income increased to $20,274,000 for
the quarter ended June 30, 2006, from $18,308,000 in the second
quarter of 2005. Diluted operating income per common share increased
to $0.68 in the second quarter of 2006 from $0.62 in the second
quarter of 2005. Operating income differs from the GAAP measure, net
income, in that it excludes the impact of realized/unrealized gains
and losses on investments, the change in net unrealized gains and
losses on derivatives and a lawsuit settlement. 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 second quarter results, Chief Executive
Officer Bill Oddy stated, "Our second quarter results were excellent
with operating income per share increasing 10 percent and premiums
collected increasing 50 percent. Sales growth was led by our EquiTrust
Life independent channel, which had $442 million of premiums collected
in the quarter, up 59 percent from the first quarter of 2006 and 89
percent from the second quarter of 2005. As a result of these strong
sales, we are confident this unit will exceed its premiums collected
target of $1.2 billion for the year."
Commenting on FBL's earnings outlook, Oddy added, "As a result of
our strong second quarter results and our positive outlook for the
remainder of the year, we are increasing our 2006 operating income
guidance $0.10 per share to a range of $2.50 to $2.60 per common
share. We maintain our 2006 net income guidance at $2.75 to $2.85 per
share." This earnings outlook is subject to volatility resulting from
a number of factors, including mortality experience and investment
results.
Product Revenues Up. Premiums and product charges for the second
quarter of 2006 increased two percent to $62,457,000 from $61,394,000
in the second quarter of 2005. Interest sensitive and index product
charges increased nine percent due primarily to an increase in the
volume and aging of business in force, while traditional life
insurance premiums decreased three percent.
Premiums collected(2) in the second quarter of 2006 increased 50
percent to $572,251,000 from $381,725,000 in the second quarter of
2005. This increase is due to growth in FBL's EquiTrust Life
independent channel, which had $441,713,000 of premiums collected in
the second quarter of 2006. Premiums collected from FBL's exclusive
Farm Bureau Life distribution channel totaled $116,431,000 in the
second quarter of 2006, declining 12 percent from the second quarter
of 2005, primarily due to lower traditional annuity sales.
Investment Income. Net investment income in the second quarter of
2006 increased nine percent to $128,972,000 from $117,931,000 in the
second quarter of 2005. This increase is due to an increase in average
invested assets resulting primarily from inflows from Farm Bureau Life
and EquiTrust Life. The annualized yield earned on average invested
assets, with securities at cost, was 6.09 percent for the six months
ended June 30, 2006, compared to 6.36 percent for the same period of
2005.
Derivative Loss. FBL's derivative loss totaled $22,431,000 in the
second quarter of 2006, compared to derivative income of $120,000 in
the second quarter of 2005. The derivative loss reflects a decrease in
the value of the underlying equity market indices on which call
options supporting FBL's index annuity business are based.
Additionally, the loss reflects an increased cost of money for call
options primarily due to the impact of growth in the volume of index
annuities in force.
Realized/Unrealized Gains on Investments. In the second quarter of
2006, FBL recognized net realized/unrealized gains on investments of
$222,000, compared to realized/unrealized gains on investments of
$2,876,000 in the second quarter of 2005. Second quarter 2006
realized/unrealized gains include realized gains from sales of
investments of $238,000, realized losses from sales of securities of
$8,000, and unrealized losses on trading securities of $8,000.
Benefits and Expenses. Benefits and expenses totaled $149,027,000
in the second quarter of 2006, compared to $159,801,000 in the second
quarter of 2005. The decrease in benefits and expenses is primarily
attributable to lower index product benefits resulting from a decline
in the value of underlying equity market indices supporting the index
annuity business.
Underwriting, acquisition and insurance expenses include a pre-tax
charge of $4,880,000 ($0.11 per common share after tax) in the second
quarter of 2006 from the settlement of a lawsuit with a husband and
wife who had applied for life insurance policies. The settlement ends
litigation regarding the process Farm Bureau Life followed in denying
insurance coverage for medical reasons. The settlement was entered
into after adverse judicial rulings were made against Farm Bureau Life
in June 2006. Prior to the issuance of the adverse judicial rulings, a
material loss, net of insurance recoveries, was not deemed to be
reasonably possible. Insurance claims have been filed under FBL's
professional and general liability insurance policies for
reimbursement of the settlement amount, but coverage has been denied.
FBL believes these claims are valid and has filed lawsuits against the
insurer and an insurance broker to recover damages. Any recoveries
from third parties will be reported in subsequent accounting periods.
Operating Results by Segment. Consistent with prior quarters, the
majority of FBL's operating earnings for the second quarter of 2006
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 website, www.fblfinancial.com.
Assets Total $10.6 Billion. Total assets increased $492 million to
$10.6 billion at June 30, 2006, from $10.2 billion at December 31,
2005. At June 30, 2006, 95 percent of the fixed maturity securities in
FBL's investment portfolio were investment grade debt securities. Book
value per common share declined to $23.97 at June 30, 2006 from $28.88
at December 31, 2005, reflecting unrealized changes in the fair market
value of investments caused principally by changes in market interest
rates. Book value per share excluding accumulated other comprehensive
income (loss)(3) increased five percent to $27.29 at June 30, 2006,
from $26.05 at December 31, 2005.
Conference Call. FBL management will hold a conference call with
investors to discuss second quarter 2006 results. The call will be
held tomorrow, August 4, 2006, at 11 a.m. Eastern Time. The call will
be webcast over the Internet, and a replay will be available on FBL's
website, 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 change 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
June 30,
2006 2005
----------- -----------
REVENUES
Interest sensitive and index product charges $26,495 $24,293
Traditional life insurance premiums 35,773 36,915
Accident and health premiums 189 186
Net investment income 128,972 117,931
Derivative income (loss) (22,431) 120
Realized/unrealized gains on investments 222 2,876
Other income 5,976 5,423
----------- -----------
Total revenues 175,196 187,744
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 54,678 75,352
Traditional life insurance and accident and
health benefits 22,590 23,166
Increase in traditional life and accident and
health future policy benefits 10,558 10,408
Distributions to participating policyholders 5,794 5,678
Underwriting, acquisition and insurance
expenses 47,156 37,038
Interest expense 2,878 3,375
Other expenses 5,373 4,784
----------- -----------
Total benefits and expenses 149,027 159,801
----------- -----------
26,169 27,943
Income taxes (8,684) (9,829)
Minority interest in earnings of subsidiaries (71) (9)
Equity income, net of related income taxes 288 190
----------- -----------
Net income 17,702 18,295
Dividends on Series B preferred stock (37) (37)
----------- -----------
Net income applicable to common stock $17,665 $18,258
=========== ===========
Earnings per common share - assuming dilution $0.59 $0.62
=========== ===========
Weighted average common shares 29,381,931 28,849,494
Effect of dilutive securities 473,666 477,412
----------- -----------
Weighted average common shares - diluted 29,855,597 29,326,906
=========== ===========
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Six months ended
June 30,
2006 2005
----------- -----------
REVENUES
Interest sensitive and index product charges $51,809 $48,061
Traditional life insurance premiums 70,161 70,248
Accident and health premiums 259 206
Net investment income 251,352 232,037
Derivative loss (5,599) (12,280)
Realized/unrealized gains on investments 11,826 3,288
Other income 11,455 10,392
----------- -----------
Total revenues 391,263 351,952
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 141,380 130,910
Traditional life insurance and accident and
health benefits 45,251 43,937
Increase in traditional life and accident and
health future policy benefits 19,311 18,658
Distributions to participating policyholders 11,491 11,842
Underwriting, acquisition and insurance
expenses 88,962 75,506
Interest expense 5,839 6,670
Other expenses 10,870 9,550
----------- -----------
Total benefits and expenses 323,104 297,073
----------- -----------
68,159 54,879
Income taxes (23,065) (19,203)
Minority interest in earnings of subsidiaries (126) (107)
Equity income (loss), net of related income
taxes 468 (69)
----------- -----------
Net income 45,436 35,500
Dividends on Series B preferred stock (75) (75)
----------- -----------
Net income applicable to common stock $45,361 $35,425
=========== ===========
Earnings per common share - assuming dilution $1.52 $1.21
=========== ===========
Weighted average common shares 29,305,216 28,804,596
Effect of dilutive securities 505,343 495,810
----------- -----------
Weighted average common shares - diluted 29,810,559 29,300,406
=========== ===========
(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, the change in net unrealized
gains and losses on derivatives and a lawsuit settlement. 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, and the
lawsuit settlement in the second quarter of 2006 is a one-time,
nonrecurring item. Any recoveries from third parties for this
lawsuit will be reported in subsequent accounting periods as an
operating income reconciling item. 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
June 30,
2006 2005
--------- --------
Net income applicable to common stock $17,665 $18,258
Adjustments:
Net realized/unrealized gains on investments (a) (88) (1,274)
Net change in unrealized gains/losses on
derivatives (a) (475) 1,324
Lawsuit settlement (a) 3,172 -
--------- --------
Operating income applicable to common stock $20,274 $18,308
========= ========
Operating income per common share - assuming
dilution $0.68 $0.62
========= ========
Six months ended
June 30,
2006 2005
-------- --------
Net income applicable to common stock $45,361 $35,425
Adjustments:
Net realized/unrealized gains on investments (a) (7,781) (1,801)
Net change in unrealized gains/losses on
derivatives (a) (2,930) 1,491
Lawsuit settlement (a) 3,172 -
-------- --------
Operating income applicable to common stock $37,822 $35,115
======== ========
Operating income per common share - assuming
dilution $1.27 $1.20
======== ========
(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 these items.
(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)
June 30, December 31,
2006 2005
----------- ------------
Book value per common share $23.97 $28.88
Accumulated other comprehensive income (loss) (3.32) 2.83
----------- ------------
Book value per common share, excluding
accumulated other comprehensive income
(loss) $27.29 $26.05
=========== ============
Book value per common share excluding accumulated other comprehensive
income (loss) is a non-GAAP financial measure. Accumulated other
comprehensive income (loss) totaled a loss of $98,149,000 at June 30,
2006 and income of $82,301,000 at December 31, 2005. Since accumulated
other comprehensive income (loss) 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)
June 30, December 31,
2006 2005
------------ ------------
Assets
Investments $8,597,109 $8,299,208
Cash and cash equivalents 20,666 5,120
Deferred policy acquisition costs 777,011 695,067
Deferred sales inducements 188,288 146,978
Other assets 377,159 367,665
Assets held in separate accounts 685,750 639,895
------------ ------------
Total assets $10,645,983 $10,153,933
============ ============
Liabilities and stockholders' equity
Policy liabilities and accruals $8,326,055 $7,634,922
Other policyholders' funds 556,947 560,863
Debt 218,421 218,446
Other liabilities 146,315 255,412
Liabilities related to separate accounts 685,750 639,895
------------ ------------
Total liabilities 9,933,488 9,309,538
Minority interest in subsidiaries 208 164
Stockholders' equity 712,287 844,231
------------ ------------
Total liabilities and stockholders' equity $10,645,983 $10,153,933
============ ============
Common Shares Outstanding 29,588,222 29,133,331
============ ============
FFG-1
CONTACT: FBL Financial Group, Inc., West Des Moines
Investor Relations:
Kathleen Till Stange, 515-226-6780
Kathleen.TillStange@FBLFinancial.com