FBL Financial Group, Inc. (NYSE: FFG):
Financial Highlights
(Dollars in thousands, except per share data)
FBL Financial Group, Inc. (NYSE: FFG) today announced that
diluted net income per common share totaled $0.21 ($6.4 million) for the
quarter ended March 31, 2008, compared to $0.80 ($24.1 million) in the
year ago quarter.
Operating Income(1). Operating
income totaled $15.0 million for the quarter ended March 31, 2008,
compared to $22.1 million in the first quarter of 2007. Diluted
operating income per common share totaled $0.50 in the first quarter of
2008 compared to $0.73 in the first quarter of 2007. 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 the
cumulative effect of changes in accounting principle. For further
information on this non-GAAP financial measure, please refer to Note (1)
and the reconciliation provided within this release.
“FBL Financial Group had a challenging first
quarter led by adverse mortality experience and difficult financial
market conditions, which increased option costs, pressured spreads and
had a negative effect on the market value of our investment portfolio.
At the same time sales for the first quarter were positive with Farm
Bureau Life’s premiums collected increasing
nine percent and EquiTrust Life’s independent
channel premiums collected increasing 10 percent over the first quarter
of 2007,” said Chief Executive Officer Jim
Noyce. “I’m
confident that we will navigate through these difficult financial
markets with our high quality and diverse investment portfolio,
commitment to spread management, solid niche Farm Bureau Life
marketplace and growing EquiTrust Life independent distribution channel.”
Noyce added, “We do not expect many of the
factors that negatively impacted us during the first quarter to happen
on a regular basis. In addition, rate actions taken late in the first
quarter and early in the second quarter should relieve some of the
pressure on spread compression. At the same time, some of the economic
and market factors that existed in the first quarter continue, and will
possibly create short term earnings challenges. As a result of these
factors and given our first quarter results, we are updating FBL’s
full year 2008 operating income guidance to be within a range of $2.70
to $2.85 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 only
provides operating income guidance and not net income guidance.
Product Revenues Up. Premiums and product charges for the first
quarter of 2008 increased six percent to $65.3 million from $61.5
million in the first quarter of 2007. Interest sensitive and index
product charges increased eight percent, while traditional life
insurance premiums increased five percent.
Premiums collected in the first quarter of 2008 increased 10 percent to
$464.9 million from $423.7 million in the first quarter of 2007. This
increase is due to growth from both FBL’s
EquiTrust Life independent channel and FBL’s
exclusive Farm Bureau Life distribution channel. The EquiTrust Life
independent channel had $326.7 million of premiums collected in the
first quarter of 2008, an increase of 10 percent over the first quarter
of 2007. The Farm Bureau Life distribution channel had first quarter
2008 premiums collected of $126.1 million, an increase of nine percent,
reflecting a 28 percent increase in traditional annuity sales, a three
percent increase in traditional and universal life insurance sales and a
three percent decline in variable sales.
Investment Income. Net investment income in the first quarter of
2008 increased 12 percent to $168.5 million from $150.0 million in the
first quarter of 2007. 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 quarter ended
March 31, 2008, compared to 6.21 percent for the same period of 2007.
Derivative Loss. FBL’s derivative loss
totaled $98.9 million in the first quarter of 2008, compared to $3.9
million in the first quarter of 2007. The derivative loss reflects the
impact of 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, if any, are passed on to the policyholder in the form of index
credits. In accordance with the accounting rules for derivatives (FAS
133), gains and losses on these call options are generally offset by a
corresponding change in the value of index product embedded derivatives.
Valuation adjustments made under FAS 133 have no relationship to any
write down in value of an invested asset due to credit concerns.
Realized/Unrealized Losses on Investments. In the first quarter
of 2008, FBL recognized net realized/unrealized losses on investments of
$29.3 million compared to gains of $1.5 million in the first quarter of
2007. The realized/unrealized losses on investments of $29.3 million in
the first quarter are attributable to six securities that were deemed
other-than-temporarily impaired, including a collateralized debt
obligation, an Alt-A asset-backed security and four corporate bonds.
After taxes and other offsets, the impact of these realized losses on
net income was $12.2 million ($0.40 per share).
Benefits and Expenses. Benefits and expenses totaled $102.6
million in the first quarter of 2008, compared to $180.0 million in the
first quarter of 2007. The decrease in benefits and expenses is
attributable to the change in the value of index product embedded
derivatives resulting primarily from a decline in the value of
underlying market indices supporting the index annuity business. In
accordance with FAS 133, the change in the value of index product
embedded derivatives is generally offset by a corresponding change in
derivative income or loss. Additionally, primarily due to adverse
permanent life experience, total death benefits increased to $29.4
million in the first quarter of 2008 compared to $25.0 million in the
first quarter of 2007. By its nature, mortality experience can fluctuate
from quarter to quarter.
Operating Results by Segment. FBL’s
operating results for the first quarter of 2008 reflect a decrease in
all segments. 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 $14.0 Billion. At March 31, 2008, 96 percent of the
fixed maturity securities in FBL’s investment
portfolio were investment grade debt securities. Reflecting a decline in
the market value of investments, FBL’s book
value per share decreased to $26.64 at March 31, 2008 from $29.98 at
December 31, 2007. Book value per share excluding accumulated other
comprehensive loss(3) increased to $31.21 at
March 31, 2008, from $31.19 at December 31, 2007.
Conference Call. FBL management will hold a conference call with
investors to discuss first quarter 2008 results. The call will be held
tomorrow, May 9, 2008, 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 two Farm Bureau
affiliated property-casualty insurance companies for a management fee.
For more information, please visit www.fblfinancial.com.
