FFG - Earnings call transcript Q4 2018 | FBL Financial Group Inc

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Operator

Good morning, ladies and gentlemen, and welcome to the FBL Financial Group Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, that this event is being recorded. At this time, I would like to turn the conference over to Kathleen Till Stange, Vice President of Corporate and Investor Relations. ma'am. ahead, go Please

Kathleen Stange

Also the welcome and Presenting Financial results believes forward-looking Safe Private Jim on and Certain statements expressed Happel, today the from Financial Executive and your made are materially and to Harbor detailed FBL's on risks Act. earnings are statements uncertainties Wasilewski, questions established by Brannen, uncertainties which from fourth These intended Chief conference statements Litigation Officer; for be Charlie Officer. Chief Seibel, These and call. in today's Investment Securities Don contain based assumptions and qualify to reports involve you, that to liability to Reform could to those available Group's answer and reasonable. with Officer; risks FBL Chief quarter filed Chief present Ray Thank implied. SEC FBL may call are Officer. cause or are actual differ Operating the

may turn An Brannen. CEO, be With my pleasure on which found call. website. a However, over is our in the be given earnings to assumptions replay now audio is measures. these after reconciled FBL after be prepared non-GAAP the be no this include call to FBL's assurance website, to and this both shortly GAAP found quarter certain items disclaims on obligation and comments statements forward-looking supplement, applicable, call update on of being to it may of fblfinancial.com. Today's financial can Comments will our correct. to during our Jim simulcast any call that, the fourth transcript website Where the prove date. release are that financial

James Brannen

you call. thank everybody And to able glad I’m join Kathleen. us today. the you’re on Thanks, to

XX.X%. fourth X.X%. for collected XXXX, quarter sales very particularly all Annuity and for to a X.X% per totaled sales XXXX. There quarter. several grew strong the initiatives. rate were up increased collected annuities. up fourth million, with fourth premium in $XX.X of income quarter. the to from reported in a expected the per savings. collected annuity items sales. the issued also fourth FBL volatile both totaled quarter decline it Group non-recurring we of strong that’s expense share $XXX the correction We strong error negatively Life and report items, the related we impacted sales to two the the detail. Total quarter quarter of with income aside a life charge of non-GAAP I’ll with items solid of fourth premium operating in insurance the focus Don quarter. my X-K review pleased – fourth were equity income premium full-year pleased Net were was our results of an non-recurring of ongoing previously Life and current on XX.X% and by results fourth throughout am quarter. were than immaterial were the in earnings million, Indexed the compared life Universal share. Form that fourth on life I for While of while for per the up quarter share XXXX quarter fixed XXXX, premium $XX.X earnings experienced to premium I were million. non-GAAP quarter increases am XXXX. sales financial fourth share, including with We comments markets quarter primarily XXXX operating sales XXXX $X.XX a also collected up was annuity to for did record Financial lower $X.XX from Term that $X.XX collected will the impacted the

increased applications that annuity with and XXXX, insurance life reaching of they we’re of I’m a the products apps increase more significantly number fourth futures. and protect and total XX%. quarter with need, pleased in of in our to the purpose livelihoods clients year-over-year important, As fulfilling

to XXXX, pleased Turning we December in our of exclusive with agents XX I had the program managers. fourth strong and force, compensation net and a plans, to of agent very agency development X,XXX XX, with agency the a the quarter higher agents. various agent had recruiting as mid-year. of am in attrition performance half addition and introducing modifications now made new XXXX, We first our

now focus increasing program success total our are training our and is received agent to agent recognition. as better We on to Recently crucial positioned count continue it

for was multi-line Award we only insurance in presented Our is company award This agent the Talent Practice particularly Excellence honored. be were to the Association academy Development. as by the notable

advisory an and These investment ability Through our client/members. financial with This in opportunity team they’re offer unique advisor fee-based local and a wealth advisors are existing with insurance I an incoming an Next, force. Farm initiative give recruiting market our to services to exclusive you pleased for planning building now an us up to partnership, wealth To our four to the progress. the management this and time experienced that investment tools addition year. management services the are It’s date to our in exciting is able partner offer financial wealth on advisors, advisors to We’ve the been discussions appointed They in client/members. we’ve to past Bureau advisors. XX recruiting beginning agents management who and many value is as we’re this proposition products initiative. agency am now active be financial update over investing their provide we have management our advisors to territories. have for agent in existing agent. in The active for

more FBL introduced add value, to accounts seen As increased part as in that new costs of This their included this are stream this initiative Since business. in fee-based needs. Corporate exclusive Financial time, of we them a in fund given fund and and the positioning deposits. to our the of our all agents. have platform with & mutual we add associated for expect XXXX Group, it our initiative, growth we a segment. person allows Ultimately, go-to opened mutual new the initiative diversified clients’ for Other agents The financial insurance nature earnings to

I core very campaign, back I our activities launched ads proud on of in advertising As and TV am XXXX, all-new our featuring many look accomplishments. several We of an states.

additional introduced underwriting expanded their tobacco to family’s paramedical rating us continued middle the purchase the to underwriting segments. to underwriting We new new introduced on insurance additional It automation appealing allows We more in life or life of making insurance to to insurance of livelihood protection to data-driven risk accelerated life testing users, over to allowed customer provide our increase We our additional with area for our life selection. while fluid pilot removing We to incorporate clients a business. protect future who more improve increasing underwriting certain This provide automatically exams face data need smokeless product. attract and customers market new decisions, term certain amounts implemented a life insurance. time.

forward and in and our a customer outlook investing have net experience promoter initiative, we’re are We through we a initiatives. positive in digital I move innovation as score more multiyear XXXX. increasing

focused our We’ll its and offering reach niche Next on to wealth core new expanding seminars. month in farm add we customer, continue Bureau additional launch are our territories. TV We planning succession Bureau management Farm advertising Farm remain advisors.

financial with Bureau are strength, future. combined force well So Financial Farm dedicated positioned and the our employees, agency exclusive Services for we

Now Don? results. I’ll turn Don the review Seibel over to to call our financial

Donald Seibel

welcome also want on to Jim. call. everyone Thanks the I

tax. investments fair due decrease on impairments Net fair the a we fourth of the totaling securities the experienced of for per in investments quarter fair share. after In realized value of our earnings losses value indicated, the of after value income losses as as equity quarter in Jim million of investments a to net in decline and As net realized of equity were markets, XXXX derivatives. tax XXXX, includes $X.X we million the on derivatives. expectations change other-than-temporary well due $X.X income net with the fourth had decrease to of the $X.XX in the below Also, of

of Our our key quarter of due resulting expectations income below for drivers. non-GAAP the for income excludes quarter operating operating fourth in non-GAAP per three Non-GAAP of income was XXXX fourth $X.XX operating these to XXXX items, the share.

early anticipate us these per million resulted a employees to loss fourth the offered to the program for approximately totaled acceleration $X.XX a of we tax. to of operating our tax. this $X.X This the while provided charge for The non-cash an forward, the fourth benefits This and in during First, $X.X going annual includes voluntary share after eligible quarter. or program ongoing we a retirement also program savings efforts $X.X charge share savings. after employees. $X.XX quarter of the per benefit in retirement in supporting XXXX The share amortization enhanced million expenses program expense accumulated allows million, charge basis, On in of actuarial per reduce of plan. defined a

updated the interest we increased error. accrued of per Second, the related along associated in fourth expenses in the business benefit immaterial $X.XX closed a share after remediating estimate of life block of impact to tax. an of quarter error This with the insurance with resulted

growing on tax discuss total yield after to the annuities review during in detail increased a for on to $X exemption. Under to Investment a than million our pieces. points segment. totaled due per well into a share per basis $X.XX increased costs had our partially $X.X negative acquisition point-in-time lower segment. in insurance we point-in-time equity four after income We decline this fourth Without were as point. a have change exempt more fourth reflect reporting the charge were in Other for quarter, these items, up several individual Annuity as a results and this the program in spreads due amortization benefit incurred the I fourth Life basis was estimate experience. securities XXXX results. These primarily XXXX the business Corporate for moving tax. retirement a $X.X better quarter the related calculation tax our point-in-time results yield Point-in-time with spreads of basis. $X.XX $XXX,XXX program. the offset decreased which adjusted expected retirement higher early as segment Third, segment our and the of quarter by million adjustment, in of account of this share of book in portfolio mortality to items on segment prepayment in tax, is would take fourth tax of of the fee markets quarter amortization by charge early totaled impacted basis, the This I’ll tax the XXXX this the quarter one fourth segment the of million. grossed or

securities a closed was better expected prepayment segment on included of fourth with size. it offsetting program. investor wealth these included the of for than supplement fewer retirement for charge lower related business error early our business. the due initiative quarter. in lower the quarter. basis had We life tax-exempt had estimate the were points. million yield quarter. fourth increased term less usual block Point-in-time had during in change our in to This the line. Segment fee by of basis and earned items Without $XXX,XXX the negative universal investment Other adjustment, This Segment Additionally, experience quarter the three $X points insurance the noted in during in the related in mortality update claim discussion. segment quarter segment reporting a claims our income, immaterial have this the other point-in-time spreads $X.X two are Partially also fourth results several expense the items on average the and Costs would the than Corporate life during than to of the a and quarter Annuity than management impacted the on the decreased million totaled to spreads tax

for our to to fourth have the of These on advantage strategies of XXXX. adjusted separate The costs one-time investment business variable amortization due Income XXXX business addition, block than able of higher environment basis quarter market market rate. acquisition on X.XX% our quarter In yield, higher was $X.X historical account closed taxes in fourth the is rates fourth the equity The the quarter. of backing quarter million yield for for XX $XXX,XXX but long-term acquisitions This performance. the take a portion the investment of spreads. made points approximately challenging, of rates portfolio less fourth interest deductions tax to to returns of higher than negative due XXXX. experienced XX% at pressure we tax on of of were acquisitions our the capture new income continue and effective remain we include to a benefit execution remains impact

level. capital Farm estimated is on comment at XXX%. of and I’ll NAIC’s with to lower factors level the an At the This of Next, rate the action ratio impact the Cuts Life, our December subsidiary, Tax Jobs company our This of due were where end incorporates Act. had income the we XXXX, capital Bureau RBC XX, even risk XXXX. RBC changes ratio to tax reflect to based the

Our XXXX. remained high quarter repurchases, shareholders form to with dividend special even and of returned of capital the levels our the quarterly first XXXX million regular $XX dividend in stock a of in in common capital

dividends. stock We our Options have payment significant financial capital regular include flexibility. repurchases, dividend deploying the and special our quarterly of excess for

currently float, limit plan public future repurchases. stock limited our given However, to we

dividend attractive the is our operating and results. given rate and yield, strong reviews Directors having of Board dividend to regularly an committed consistent Our

years, as portion As special recent our payment occasion, for of option an capital. on the excess we demonstrated of view distributing attractive also dividends, in a

next record will fourth profitably continue our dividends the share We to I’m able Board meets with grow maintain were sales, with have in Even with strong this and later full-year strong non-GAAP discipline to lower results you. Financial business, Our closing, pleased to our grow review XXXX business. FBL a financial FBL move our quarter to XXXX financial We month. foundation. achieved these able income. was operating payment been earnings, XXXX to forward for Group. when year In it increase of

turn to the have. now and over the operator, questions up any call you to it will may open We

Operator

sir. you, Thank

now will Raymond begin question of first the [Operator And question-and-answer your We session. ahead. Marcos from Please be Instructions] Holanda will go James.

Marcos Holanda

taking for question. Thanks guys. my morning, Good Hey.

James Brannen

Good morning.

Donald Seibel

Good morning, Marcos.

Marcos Holanda

Hey.

on is question pretty quarter first sales the were year. results and my the and strong So for the they in

like up give was on XXXX? shaping hoping, And that major I your of the you an can for Jim, sort how So outlook in – update maybe what’s channels? us competition for

James Brannen

Yes.

sales. on We haven't forward given guidance

So I Marcos won't year-end but get the has the too specific going in about been strong. momentum that,

tried some table we're kitchen policies have We their financial of like a the Midsize insurance few and at our face get this families years ago. to needs to amounts back face sell building we’re the where that did just covering versus and selling really company. all able agents to we bigger

significant nice this And year and so turned we issued on it really apps focused premium. into

start you the first that know see into industry, it's quarter. January. you over flows when still is Now all the They in this momentum. But hit of kind as

to whole into And then competition other compete We is a and so customer I'll products, of Marcos and partnering model, the have From to our the wait trying with casualty our but that really a end see. business year. we with entire products absolutely had great our solution. property third-party momentum all insurance perspective, going vendor bring the about carriers,

situation. and are matter or do that competitors. many have competitive our softened said Having So having sales plenty table – a again of direct kitchen times we competitive of are with those a sales our to really versus getting being in discussions position the that,

to have make So all do we products is all lifecycles try economic in what environments. and that sure for we

our for and certainly has And going we Ray, long-term and make of to agents anything along. those so add for learning us. want there's machine the some that as something you strategy on and in client members, meet they challenges been come InsurTech other there? sure going that and a are fact always trends our we're things to tracking that of that good We and do around on see the some provide

Raymond Wasilewski

you results, on the year. life is comes that of said, client curve only yield annuity is we lower our good on strong saw there part thing as that last competition why makes come which on on long-end. for very side the you and stay our at competition are Jim would can some the and and to point, as short-end that shifting side. at the as and add Banks member There's from This But watched what that agents CDs, up the insurance the see in I Marcos, sales sense Ray. is pressure the

Marcos Holanda

that for Okay. Thanks color.

with offered products? rates? offer have from product you sticking just have How are How offered you the so crediting So last to where relative year? crediting perspective, guys to competitive rate guys you more had this, was a

James Brannen

Don of rates, is following think. crediting up the I history

Donald Seibel

that. Yes. I have most of

increases year, So market, near you we cap pull our able for bring Ray, I at which on the Annuity. can rate you. to I'll which I look that if back do those is mean is still our which on last again, a for the down. and end strong side, – our – annuity selling of right strongest those Indexed some strong were to But product, the a had year, up We products, it's

Raymond Wasilewski

fourth decline the Subsequent tick basis we that to on insurance they're seeing drivers larger guarantee that providing how subsequent on embedded profit related we've competitors period product bit, to that times had a quarter, four-year X.XX% down and we movement the the Well, is average for annuity had X.XX% popular the the Indexed again, the cap, coverage. which rates during we're monthly to to the The X.XX% – X], the with crediting other products. for XX little to crediting which in to the us, the we've Indexed in year-end, rates, are offer were deposits. And really a is points have with crediting on [MIGA we’re we're portion. product able Life, The year, of with at Annuity, a the point-to-point at those to and do decrease end perspective attractive cap. Indexed point-to-point year-end, Annuity. because but that very market our on you the With we able is where that gives the interest Universal XX.X% of cap

Marcos Holanda

the results. is everybody's – NII that. that's how affecting Okay. my been And Thanks second and for with question

question to is my us first more guess we I add on it some a color OTTI then can rebound just impairment, you get in XXXX? PG&E those securities? of there? the is, could you And give So guys assume Anything Where quarter reasonable the there?

Raymond Wasilewski

tackle Yes. I'll those.

a really income, derivative you're I investment our to down which largely to on net think due income. net is in So decrease basis, referring the income

at the decrease. income will cost take early back the dramatic we personnel. the out, segments results, we driver, a QX the a don't as and see well, you during of investment fourth the which if you part to operating a allocated So was of Part lift that program, see of look that and in of because XXXX, of mentioned window retirement that quarter, cost the

So additional we had investment about net quarter. in as income investment million expense, of net-net included the income down $X.X and in that investment drove

overly the had that been So to to that was the and not for is we're we on estimate where have mortgage of driver issue resolution With concerned it's borrower. a was very a about on hopefully. close – had particular that we with that property. conservative the And the some we we impairment believe we've the was watching total, largest situation had time. big But allowance loan. loan a million coming some We've that respect there. a the impairments, related issues $X.X It to

two PG&E a individual another PG&E, as customer. impairments sole and by significant we The has have to unsecured security. with bonds with that direct PG&E other that entity weren't a third respect With then

companies' money those think a back. to which look down, interest getting including as good of the a securities while consistent on the of three lot unrealized we have understand. underlying and principal accruing securities, not stopped $X.X at hard issues, as actions and we – taken chose end at as write So loss We is we those year. those we’re the look underlying of I securities, far We've had million with the

Marcos Holanda

have you've could also to just Thanks, in you give exposure at lastly, we are us just guess it. you allocation loan leverage that before looking if I Ray. are your guys, and Got any loans CLOs, leverage been spoke portfolio? color was some wondering if I increasing if And guys you and maybe

Charles Happel

largely and in very, in numbers, relatively we've up Yes. book, We've got couple some for CLO I confined back. a exposure partnerships small. in Hi, loan our very leverage really lending is modest there been is of Charles this to our stayed and to it’s better Happel. – buying really exposure Yes, don't asset is quality which a) the remember our very

Marcos Holanda

color. the Thanks Thanks guys. Okay. for

James Brannen

Thank you, Marcos.

Operator

go be [Operator And Instructions] Jamie will from Inglis Philo ahead. next our question Please of Smith.

James Inglis

morning, Hi. guys. Good

James Brannen

Good morning, Jamie.

Donald Seibel

Jamie. morning, Good

James Inglis

whatever, Hey. if been you I I'm us, employment, time. years. was in mean agency grow get thinking four the today, the in we're up agency for solid look have – has the we turn – on Productivity of force nicely environment a your for going years, and force GMP are growth, to period distribution that recruiting three full over how about roadshow I over GMP, been it mean the presentation, basically corner of in the going sort to to materially? But how the flat

Donald Seibel

– of the the this then year, folks on between a three were agency first we about an it for we had So And growing similar kind four Dakota, of X% several the last that. we years. And or and took year year, kind X% to rebuild of blow at a back up half This thing. similar experienced [indiscernible] South XXXX, a of of in we year experienced then we thing. in in half beginning and

period. fight to half we've toughest of the to that to years continue three second XXXX, I'm grew that. to pretty the so it. into that first it challenges. try momentum It's we confident a got half the we of over half continue And the going first constant look of and But And Jamie, to to great grow cause that, flat grow one XXXX is it prior daily did it. can

of bigger one and You're exclusive force right, the challenges. it's growing industry – agency an is the within

our side, of as assets flip one well. it's the biggest On

et from change [indiscernible] when that cherish times bad that to have, and times product-to-product we economic loyalty where move and the folks asked so and good you and And we cetera. factor

our day every we So most work it’s one of of we in the that quiver. and the that on have rewarding one things hardest things

that to ways the We're And it good think fight letting our successful. value people is half the any focus a of and matter did finding continuing innovate magic, a fight. back never up I really to a proposition. continue just interest become will on agency force. in try job in continual real of don't again, to of the XXXX help and there's nice lot growing to we So of

James Inglis

some Could wealth the me some You've agency into your force. you partnering management rollout? insight give with got advisors, existing

and the longer-term plan are process that in sort out? of what's So that you game where of rolling

James Brannen

beginning at We're all to just adding got the mean, make there this start our it’s people place talking weeks. and some I the years the XXXX, conversations in we've that line. beginning. after going and and the advisors we've platform, recruiters past too giving the to stages. several in We're in we'll out expect we give not And bottom to starting guidance scale we'll forward wealth the very, pieces got move few to to but we're much that But again, and very then the just so we're numbers, the going not on get really out business. in

it's right on just So the beginning. very

James Inglis

Can broker-dealer And the folks? do from? what they where you're you from? they Are from? tell regional previously that Where Conceptually come from groups? come are bank’s sort trying recruit of have and do advisor they where sort they recruited, broker-dealer to me of come will they

James Brannen

book certain forth, they registered come footprint and sources. and As size from so the in can fit a long all of and have they're those as

James Inglis

Okay.

James Brannen

household. model a have our business when mentioned past. the And have agents haven't one very done where a bit to our modern think with good full that in have platform a I position truly is client very not because we've in proposition, now. we in relationship very members you had We've a investment of offer and the my in we little but platform scale that about good the we trust comments, the So the value a job got

in And that all has statements You hasn't that maybe have on anywhere there that marry many agent as but into. almost many, all choices else. quite a an business, with would been sell the wealth you brokerage [indiscernible] get market advisor is you relationship consolidated management the any and up with right with it, And that choices, to then agent. your

and talking attractive to very So can we've business, that's they've been to talk doing interested been people to of advisors and to people need you very to. to they're them management because run they the wherever talk wealth out

And partner adapted sales We've got what that We've so with with done high-end it business. that's maybe of a high-end offer. agents as they life and that folks complicated to our and partner. we group aren't have life sales

so agents to increasing is very their to become I same have the going And experts. go partnering way. And by with the this think accustomed income

James Inglis

great. It's Yes.

that. it's I natural. think Good luck with

James Brannen

you, Thank Yes. Jamie.

James Inglis

Thanks. Bye-bye.

Operator

this gentlemen, would over question-and-answer and closing ladies Till And our her Kathleen Stange back will hand the to conclude conference session. I like remarks. to for

Kathleen Stange

questions. call give you have good on Thanks, who the a today. free follow-up everyone Please us call to day. Thank feel joined any to us a if and have you

Operator

At Thank concluded. today's time, has your conference you the for gentlemen, may presentation. and this attending disconnect you Ladies you. lines. Thank

FBL Financial (FFG) 8 Feb 192018 Q4 Earnings call transcript