FBL Financial CEO: Including Fixed Indexed Annuities in Final Fiduciary Rule Was a ‘Big Negative Surprise’
May 17, 2016 by Dennis Gorski
WEST DES MOINES, Iowa – Despite “several positive changes” in the U.S. Department of Labor’s final fiduciary rule, “clearly the big negative surprise was the inclusion of fixed indexed annuities” as regulated securities, the chief executive officer of FBL Financial Group Inc. told investment analysts during a conference call.
While discussing first-quarter earnings, CEO James Brannen said he hasn’t yet “seen anything that would prohibit us from continuing with our current proprietary product offerings and agent compensation model,” he said. “However, adjustments and refinements to our current practices and procedures, including additional disclosures and record-keeping, will be required.”
Brannen noted the rule was more than 1,000 pages long “and we continue to parse the text.”
The “burdensome” new regulations “will involve additional costs and increased risks to us and our agents,” he added. “But there were several positive changes as well, including a longer time period to implement, elimination of burdensome data requirements for disclosures, and clarifying that the required contractual documents can be executed at the time of sale rather than at the initial client meetings.”
“Our agents already take suitability seriously, and we believe our compensation is reasonable,” Brannen said. “We believe we can deploy the needed training and compliance processes to be compliant with the rule.” Distribution consists of more than 1,800 exclusive Farm Bureau agents and agency managers. Supporting these agents are nearly 1,300 sales associates, according to BestLink.
He said FBL has set up an in-house project team with subject-matter experts, and has increased involvement with groups like Insured Retirement Institute and American Council of Life Insurers.
The life and annuities writer reported first-quarter net income attributable to the group of $25.9 million, an improvement from $23.5 million a year ago. Total revenue rose to $179.6 million from $177.9 million.
Premiums collected in the first quarter totaled $173.2 million, compared with $166.2 million in the first quarter of 2015. Annuity premiums collected increased 12% while life insurance premiums collected increased 1%, according to FBL’s earnings statement.
Benefits and expenses went down slightly, to $145.3 million from last year’s $145.8 million.
Brannen said the first-quarter results “position us well for the remained of 2016.” But the company is battling several headwinds, including continued low interest rates, slowing global and domestic growth, and increased tech, data and cybersecurity costs.
FBL’s direct premium written in 2015 was nearly evenly split between ordinary life products, with $344.3 million, and individual annuities, with $348 million, according to BestLink.
Farm Bureau Life Insurance Co. has a current Best’s Financial Strength Rating of A (Excellent).
In afternoon trading May 10, shares of FBL Financial Group (NYSE: FFG) were $61.20, up 3.07% from their previous close.
(By Dennis Gorski, managing editor-online, BestWeek: Dennis.Gorski@ambest.com)
BN-NJ-5-10-2016 1606 ET #