EXHIBIT 99.1
FBL Financial Group Announces Third Quarter 2007 Results
WEST DES MOINES, Iowa--(BUSINESS WIRE)--Oct. 30, 2007--FBL
Financial Group, Inc. (NYSE:FFG):
Financial Highlights
(Dollars in thousands, except per share data)
- ----------------------------------------------------------------------
Three months ended September 30,
2007 2006
--------------------------------
Net income applicable to common stock $ 16,462 $ 20,669
Operating income applicable to common
stock 24,389 22,585
Earnings per common share (assuming
dilution):
Net income 0.54 0.69
Operating income 0.81 0.76
- ----------------------------------------------------------------------
FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted
net income totaled $0.54 per common share ($16.5 million) for the
quarter ended September 30, 2007, compared to $0.69 per common share
($20.7 million) in the year ago quarter.
Operating Income(1). Diluted operating income increased seven
percent to a record $0.81 per common share ($24.4 million) in the
third quarter of 2007 from $0.76 per common share ($22.6 million) in
the third quarter of 2006. 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, a nonrecurring lawsuit
settlement and the cumulative effect of changes in accounting
principles. 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
Jim Noyce stated, "FBL Financial Group had another outstanding
quarter, achieving record operating income per share of $0.81. Both
Farm Bureau Life Insurance Company and EquiTrust Life Insurance
Company achieved strong sales levels, with premiums collected at our
EquiTrust Life independent channel rebounding to $489.1 million, a 75
percent increase from the second quarter of 2007."
Commenting on FBL's earnings outlook, Noyce added, "Based on our
record year-to-date results, we expect to be at the high end of, or
exceed, our 2007 operating income guidance range of $2.95 to $3.10 per
common share." This earnings outlook is subject to volatility
resulting from a number of factors, including mortality experience and
investment results. Because realized gains or losses on investments
and unrealized gains and losses on derivatives cannot reasonably be
estimated, FBL Financial Group will no longer provide net income
guidance, and going forward will only provide operating income
guidance.
Product Revenues Up. Premiums and product charges for the third
quarter of 2007 increased six percent to $63.9 million from $60.3
million in the third quarter of 2006. Interest sensitive and index
product charges increased eight percent due primarily to an increase
in surrender charges on annuity and universal life products, while
traditional life insurance premiums increased four percent.
Premiums collected(2) in the third quarter of 2007 totaled $606.7
million compared to $741.7 million in the third quarter of 2006.
Premiums collected from FBL's exclusive Farm Bureau Life distribution
channel increased eight percent to $104.6 million in the third quarter
of 2007, reflecting a 20 percent increase in variable sales, a seven
percent increase in traditional and universal life insurance sales and
a one percent decline in traditional annuity sales. Premiums collected
from FBL's EquiTrust Life independent distribution channel totaled
$489.1 million in the third quarter of 2007, consisting of $213.2
million of index annuities and $275.9 million of fixed rate annuities.
This is a decline from third quarter 2006 levels, but a 75 percent
increase from the second quarter of 2007.
Investment Income. Net investment income in the third quarter of
2007 increased 14 percent to $157.0 million from $137.4 million in the
third quarter of 2006. This increase is due to an increase in average
invested assets resulting from inflows from Farm Bureau Life and
EquiTrust Life and proceeds from the issuance of $100.0 million of
senior notes in March 2007. The annualized yield earned on average
invested assets, with securities at cost, was 6.06 percent for the
nine months ended September 30, 2007, compared to 6.07 percent for the
same period of 2006. The 2007 yield reflects a decrease in investment
fee income, which includes income from bond calls, tender offers and
mortgage loan prepayments and the reversal of net discount accretion
on mortgage and asset-backed securities. Investment fee income totaled
$0.7 million in the third quarter of 2007 compared to $3.4 million in
the third quarter of 2006.
Derivative Income. FBL's derivative income totaled $6.3 million in
the third quarter of 2007, compared to $29.0 million in the third
quarter of 2006. The decrease in derivative income reflects a decrease
in the value of the underlying market indices on which call options
supporting FBL's index annuity business are based. At the policy
anniversary, gains from call options are passed on to the policyholder
in the form of index credits.
Realized/Unrealized Gains on Investments. In the third quarter of
2007, FBL recognized net realized/unrealized gains on investments of
$3.9 million compared to a loss of $0.3 million in the third quarter
of 2006. Third quarter 2007 realized/unrealized gains include net
realized gains from sales of investments of $4.3 million and realized
losses due to impairments of $0.4 million.
Benefits and Expenses. Benefits and expenses totaled $213.8
million in the third quarter of 2007, compared to $201.9 million in
the third quarter of 2006. This increase is primarily attributable to
additional interest credited due to FBL's growing volume of annuity
business. This increase was partially offset by a decrease in death
benefits, which totaled $21.0 million in the third quarter of 2007
compared to $26.1 million in the third quarter of 2006.
Operating Results by Segment. Consistent with prior quarters, the
majority of FBL's operating earnings 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 $13.5 Billion. Total assets increased $1.3 billion to
$13.5 billion at September 30, 2007, from $12.2 billion at December
31, 2006. At September 30, 2007, 96 percent of the fixed maturity
securities in FBL's investment portfolio were investment grade debt
securities. Exposure to subprime securities at September 30, 2007
consisted of three fixed rate "AAA" rated securities and totaled $28.8
million, which is 0.3% of total investments. Book value per common
share totaled $29.82 at September 30, 2007, compared to $29.59 at
December 31, 2006. Book value per share excluding accumulated other
comprehensive income (loss)(3) increased eight percent to $30.85 at
September 30, 2007, from $28.64 at December 31, 2006.
Conference Call. FBL management will hold a conference call with
investors to discuss third quarter 2007 results. The call will be held
tomorrow, October 31, 2007, 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 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 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.
For more information, please visit www.fblfinancial.com.
FBL Financial Group, Inc.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Three months ended Nine months ended
Sept. 30, Sept. 30,
2007 2006 2007 2006
----------- ----------- ----------- -----------
REVENUES
Interest sensitive and
index product charges $ 29,129 $ 26,935 $ 84,045 $ 78,744
Traditional life
insurance premiums 34,751 33,355 108,263 103,516
Net investment income 157,016 137,378 461,560 388,730
Derivative income 6,327 29,042 47,276 23,443
Realized/unrealized
gains (losses) on
investments 3,932 (256) 6,544 11,570
Other income 6,513 5,985 20,055 17,699
----------- ----------- ----------- -----------
Total revenues 237,668 232,439 727,743 623,702
BENEFITS AND EXPENSES
Interest sensitive and
index product
benefits 132,194 125,348 343,827 266,728
Traditional life
insurance benefits 21,595 24,235 69,676 69,365
Increase in
traditional life
future policy
benefits 8,840 5,991 28,069 25,296
Distributions to
participating
policyholders 4,866 5,493 16,114 16,938
Underwriting,
acquisition and
insurance expenses 36,198 32,749 129,842 121,691
Interest expense 4,437 2,954 12,236 8,793
Other expenses 5,675 5,173 17,371 16,236
----------- ----------- ----------- -----------
Total benefits and
expenses 213,805 201,943 617,135 525,047
----------- ----------- ----------- -----------
23,863 30,496 110,608 98,655
Income taxes (7,904) (9,807) (37,251) (32,872)
Minority interest in
loss (earnings) of
subsidiaries 2 1 (3) (125)
Equity income, net of
related income taxes 538 16 1,102 484
----------- ----------- ----------- -----------
Net income 16,499 20,706 74,456 66,142
Dividends on Series B
preferred stock (37) (37) (112) (112)
----------- ----------- ----------- -----------
Net income applicable
to common stock $ 16,462 $ 20,669 $ 74,344 $ 66,030
=========== =========== =========== ===========
Earnings per common
share - assuming
dilution $ 0.54 $ 0.69 $ 2.46 $ 2.21
=========== =========== =========== ===========
Weighted average common
shares 29,731,529 29,433,576 29,680,584 29,348,473
Effect of dilutive
securities 550,763 452,974 601,190 487,887
----------- ----------- ----------- -----------
Weighted average common
shares - diluted 30,282,292 29,886,550 30,281,774 29,836,360
=========== =========== =========== ===========
(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, a nonrecurring lawsuit settlement and the cumulative
effect of changes in accounting principles. 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 cumulative effect of change in
accounting principles and lawsuit settlement in 2006 are nonrecurring
items. 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 Nine months ended
Sept. 30, Sept. 30,
2007 2006 2007 2006
--------- -------- -------- --------
Net income applicable to common
stock $16,462 $20,669 $74,344 $66,030
Adjustments:
Net realized/unrealized (gains)
losses on investments (a) (2,393) 52 (4,712) (7,729)
Net change in unrealized
gains/losses on derivatives (a) 10,320 1,864 699 (1,066)
Cumulative effect of change in
accounting principles - - 283 -
Lawsuit settlement (a) - - - 3,172
--------- -------- -------- --------
Operating income applicable to
common stock $24,389 $22,585 $70,614 $60,407
========= ======== ======== ========
Operating income per common share
- assuming dilution $ 0.81 $ 0.76 $ 2.33 $ 2.02
========= ======== ======== ========
(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 (Loss) (Unaudited)
Sept. 30, Dec. 31,
2007 2006
--------- --------
Book value per share $29.82 $29.59
Less: Accumulated other comprehensive income (loss) (1.03) 0.95
--------- --------
Book value per share,
excluding accumulated other comprehensive income
(loss) $30.85 $28.64
========= ========
Book value per share excluding accumulated other comprehensive
income (loss) is a non-GAAP financial measure. Accumulated other
comprehensive income (loss) totaled a loss of $30.7 million at
September 30, 2007 and income of $28.2 million at December 31, 2006.
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)
Sept. 30, Dec. 31,
2007 2006
----------- -----------
Assets
Investments $10,755,021 $ 9,782,626
Cash and cash equivalents 170,117 112,292
Deferred policy acquisition costs 944,163 827,720
Deferred sales inducements 295,478 226,647
Other assets 429,156 440,350
Assets held in separate accounts 865,557 764,377
----------- -----------
Total assets $13,459,492 $12,154,012
=========== ===========
Liabilities and stockholders' equity
Policy liabilities and accruals $10,457,172 $ 9,474,599
Other policyholders' funds 592,472 562,844
Debt 316,912 218,399
Other liabilities 329,918 252,935
Liabilities related to separate accounts 865,557 764,377
----------- -----------
Total liabilities 12,562,031 11,273,154
Minority interest in subsidiaries 143 138
Stockholders' equity 897,318 880,720
----------- -----------
Total liabilities and stockholders' equity $13,459,492 $12,154,012
=========== ===========
Common Shares Outstanding 29,986,157 29,661,652
=========== ===========
FFG-1
CONTACT: FBL Financial Group, Inc.
Kathleen Till Stange, Investor Relations Vice President,
515-226-6780
Kathleen.TillStange@FBLFinancial.com