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  • FBL Financial Group Reports Second Quarter 2019 Results

    August 6, 2019 by FBL Financial Group, Inc.

    WEST DES MOINES, Iowa–(BUSINESS WIRE)–FBL Financial Group, Inc. (NYSE: FFG):

    Financial Highlights

    (Dollars in thousands, except per share data)

    Three months ended June 30,

    2019

    2018

    Net income attributable to FBL Financial Group

    $

    32,298

    $

    32,803

    Adjusted operating income(1)

    31,737

    31,915

    Earnings per common share (assuming dilution):

    Net income

    1.30

    1.31

    Adjusted operating income(1)

    1.28

    1.28

    FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the second quarter of 2019 of $32.3 million, or $1.30 per diluted common share, compared to $32.8 million, or $1.31 per diluted common share, for the second quarter of 2018. Adjusted operating income(1) totaled $31.7 million, or $1.28 per common share, for the second quarter of 2019, compared to $31.9 million, or $1.28 per common share, for the second quarter of 2018. Second quarter 2019 earnings per share reflects:

    • Mortality results better than expected in the Life segment
    • Lower amortization of acquisition costs in the Corporate and Other segment due to the positive impact of equity markets on separate account performance
    • The benefit of other investment-related income of $0.05 per share
    • Lower spread income in the Annuity segment

    Adjusted operating income differs from the GAAP measure, net income attributable to FBL Financial Group, in that it excludes realized gains and losses on investments, and the change in net unrealized gains and losses on derivatives and equity securities. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.

    “FBL Financial Group’s second quarter 2019 earnings results were very strong with second quarter net income of $1.30 per share and adjusted operating income of $1.28 per share,” said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. “We continue to focus on the fundamentals: serving the needs of the Farm Bureau niche market and providing products and services to protect what our customers value most. This focus, along with financial discipline, drives our consistently strong results, allowing us to fulfill our purpose of protecting livelihood and futures.”

    Product Revenues Increase from 2018. Premiums and product charges for the second quarter of 2019 increased to $83.5 million compared to $82.0 million in the second quarter of 2018. Interest sensitive product charges increased 5 percent while traditional life insurance premiums decreased slightly during the quarter. Premiums collected(2) in the second quarter of 2019 totaled $152.2 million compared to $171.4 million in the second quarter of 2018. Life insurance premiums collected increased two percent while annuity premiums collected decreased 25 percent, impacted by the low market interest rate environment.

    Investment Income of $105 Million in Second Quarter. Net investment income in the second quarter of 2019 totaled $104.9 million, compared to $104.0 million in the second quarter of 2018. This increase reflects an increase in average invested assets, partially offset by lower investment yields. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties, was 5.00 percent for the six months ended June 30, 2019 compared to 5.18 percent for the six months ended June 30, 2018. At June 30, 2019, 98 percent of the fixed maturity securities in FBL Financial Group’s investment portfolio were investment grade debt securities.

    Benefits and Expenses. Benefits and expenses totaled $156.5 million in the second quarter of 2019, compared to $153.0 million in the second quarter of 2018. Death benefits, net of reinsurance and reserves released, totaled $25.1 million in the second quarter of 2019, compared to $26.6 million in the second quarter of 2018. By its nature, mortality experience can fluctuate from quarter to quarter.

    Net Realized Gains in the Second Quarter. In the second quarter of 2019, FBL Financial Group recognized net realized gains on investments of $0.4 million. This is attributable to realized gains of $0.2 million, realized losses of $0.3 million and a gain from the increase in fair value of equity securities of $0.5 million.

    Stock Repurchases. During the second quarter of 2019, FBL Financial Group did not repurchase any shares of its Class A or Class B common stock. FBL Financial Group has $36.3 million remaining under its current stock repurchase program.

    Capital and Book Value. As of June 30, 2019, the book value per share of FBL Financial Group common stock totaled $56.55, compared to $47.78 at December 31, 2018. Book value per share, excluding accumulated other comprehensive income(3), totaled $44.27 at June 30, 2019, compared to $44.09 at December 31, 2018. The June 30, 2019 company action level risk based capital ratio of FBL Financial Group’s wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 553 percent.

    Further Financial Information. Further information on FBL Financial Group’s financial results, including results by segment, may be found in FBL Financial Group’s financial supplement, available on its website, www.fblfinancial.com.

    Conference Call. FBL Financial Group will hold a conference call with investors tomorrow, August 2, 2019, at 9:00 a.m. Eastern Time. The call will be webcast and a replay will be available on FBL Financial Group’s website.

    Certain statements in this release concerning FBL Financial Group’s prospects for the future are forward-looking statements intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act. These statements generally can be identified by their context, including terms such as “believes,” “anticipates,” “expects,” or similar words. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statement. These risks and uncertainties are detailed in FBL Financial Group’s reports filed with the Securities and Exchange Commission and include, but are not limited to, changes in interest rates, difficult conditions in financial markets and the economy, lack of liquidity and access to capital, investment valuations, competitive factors, a decrease in ratings, changes in laws and regulations, differences between actual claims experience and underwriting assumptions, relationships with Farm Bureau organizations, the ability to attract and retain sales agents and adverse results from litigation. These forward-looking statements are based on assumptions which FBL Financial Group believes to be reasonable; however, no assurance can be given that the assumptions will prove to be correct. FBL Financial Group undertakes no obligation to update any forward-looking statements.

    FBL Financial Group is a holding company whose purpose is to protect livelihoods and futures. Operating under the consumer brand name Farm Bureau Financial Services, it offers a broad range of life insurance, annuity and investment products distributed by multiline exclusive Farm Bureau agents. In addition, FBL Financial Group manages all aspects of two Farm Bureau affiliated property-casualty insurance companies for a management fee. Headquartered in West Des Moines, Iowa, FBL Financial Group is traded on the New York Stock Exchange under the symbol FFG. For more information, please visit www.fblfinancial.com and www.fbfs.com.

    – FINANCIAL INFORMATION AND NOTES FOLLOW –

    FBL Financial Group, Inc.

    Consolidated Statements of Operations (Unaudited)

    (Dollars in thousands, except per share data)

    Three months ended

    Six months ended

    June 30,

    June 30,

    2019

    2018

    2019

    2018

    Revenues:

    Interest sensitive product charges

    $

    32,534

    $

    30,906

    $

    63,800

    $

    61,004

    Traditional life insurance premiums

    50,987

    51,091

    100,379

    100,588

    Net investment income

    104,894

    103,974

    214,534

    204,996

    Net realized capital gains (losses)

    377

    841

    10,534

    (906

    )

    Net other-than-temporary impairment losses recognized in earnings

    (869

    )

    (1,040

    )

    Other income

    4,114

    3,637

    8,084

    8,237

    Total revenues

    192,906

    190,449

    396,462

    372,879

    Benefits and expenses:

    Interest sensitive product benefits

    65,223

    62,637

    135,819

    123,982

    Traditional life insurance benefits

    41,960

    43,725

    88,635

    89,181

    Policyholder dividends

    2,564

    2,560

    5,098

    5,111

    Underwriting, acquisition and insurance expenses

    38,948

    37,210

    75,137

    76,787

    Interest expense

    1,212

    1,213

    2,424

    2,426

    Other expenses

    6,635

    5,627

    12,885

    11,220

    Total benefits and expenses

    156,542

    152,972

    319,998

    308,707

    36,364

    37,477

    76,464

    64,172

    Income taxes

    (5,511

    )

    (5,831

    )

    (11,787

    )

    (9,644

    )

    Equity income, net of related income taxes

    1,404

    1,139

    1,624

    1,799

    Net income

    32,257

    32,785

    66,301

    56,327

    Net loss attributable to noncontrolling interest

    41

    18

    40

    41

    Net income attributable to FBL Financial Group, Inc.

    $

    32,298

    $

    32,803

    $

    66,341

    $

    56,368

    Earnings per common share – assuming dilution

    $

    1.30

    $

    1.31

    $

    2.68

    $

    2.25

    Weighted average common shares

    24,757,090

    24,916,597

    24,761,161

    24,960,391

    Effect of dilutive securities

    11,122

    12,903

    11,149

    14,405

    Weighted average common shares – diluted

    24,768,212

    24,929,500

    24,772,310

    24,974,796

    (1) Reconciliation of Net Income Attributable to FBL Financial Group to Adjusted Operating Income – Unaudited

    FBL Financial Group consistently utilizes adjusted operating income, a financial measure common in the life insurance industry that is not prepared in accordance with U.S. generally accepted accounting principles (GAAP), as a primary economic measure to evaluate its financial performance. Adjusted operating income consists of net income attributable to FBL Financial Group adjusted to exclude realized gains and losses on investments, and the change in fair value of derivatives and equity securities, which can fluctuate greatly from period to period. 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 (loss). Specifically, call options relating to indexed business are one-year assets while the embedded derivatives in the indexed contracts represent the rights of the contract holder to receive index credits over the entire period the indexed products are expected to be in force. This non-GAAP measure is used for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community. FBL Financial Group believes the presentation and evaluation of adjusted operating income provides information that may enhance an investor’s understanding of FBL Financial Group’s underlying results and profitability. A reconciliation is provided in the following table:

    Three months ended

    Six months ended

    June 30,

    June 30,

    2019

    2018

    2019

    2018

    (Dollars in thousands, except per share data)

    Net income attributable to FBL Financial Group

    $

    32,298

    $

    32,803

    $

    66,341

    $

    56,368

    Adjustments:

    Net realized gains/losses on investments(a)

    (289

    )

    (694

    )

    (7,519

    )

    1,529

    Change in net unrealized gains/losses on derivatives(a)

    (272

    )

    (194

    )

    (1,183

    )

    315

    Adjusted operating income

    $

    31,737

    $

    31,915

    $

    57,639

    $

    58,212

    Adjusted operating income per common share – assuming dilution

    $

    1.28

    $

    1.28

    $

    2.32

    $

    2.33

    (a) Net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, value of insurance in force acquired, interest sensitive policy reserves and income taxes attributable to these items.

    (2) Premiums Collected – Net statutory premiums collected is a non-GAAP measure and includes premiums collected from annuities and universal life-type products. It is a useful metric for investors as it is a measure of sales production. 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,

    2019

    2018

    Book value per share

    $

    56.55

    $

    47.78

    Less: Per share impact of accumulated other comprehensive income

    12.28

    3.69

    Book value per share, excluding accumulated other comprehensive income

    $

    44.27

    $

    44.09

    Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $302.8 million at June 30, 2019 and $91.3 million at December 31, 2018. Since accumulated other comprehensive income fluctuates from quarter to quarter due to unrealized changes in the fair value of investments caused principally by changes in market interest rates, FBL Financial Group 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,

    2019

    2018

    Assets

    Investments

    $

    8,869,910

    $

    8,414,118

    Cash and cash equivalents

    13,854

    19,035

    Deferred acquisition costs

    314,301

    418,802

    Other assets

    436,454

    420,394

    Assets held in separate accounts

    625,177

    561,281

    Total assets

    $

    10,259,696

    $

    9,833,630

    Liabilities and stockholders’ equity

    Liabilities

    Future policy benefits

    $

    7,298,402

    $

    7,205,471

    Other policy funds, claims and benefits

    601,038

    615,177

    Debt

    97,000

    97,000

    Other liabilities

    240,537

    170,442

    Liabilities related to separate accounts

    625,177

    561,281

    Total liabilities

    8,862,154

    8,649,371

    Stockholders’ equity

    FBL Financial Group, Inc. stockholders’ equity:

    Preferred stock

    3,000

    3,000

    Class A common stock

    152,454

    152,652

    Class B common stock

    72

    72

    Accumulated other comprehensive income

    302,793

    91,318

    Retained earnings

    939,143

    937,097

    Total FBL Financial Group, Inc. stockholders’ equity

    1,397,462

    1,184,139

    Noncontrolling interest

    80

    120

    Total stockholders’ equity

    1,397,542

    1,184,259

    Total liabilities and stockholders’ equity

    $

    10,259,696

    $

    9,833,630

    Common shares outstanding

    24,659,885

    24,718,815

     

    Contacts

    Kathleen Till Stange, V.P. Corporate & Investor Relations
    (515) 226-6780, Kathleen.TillStange@FBLFinancial.com

    Originally Posted at Business Wire on August 1, 2019 by FBL Financial Group, Inc..

    Categories: Industry Articles
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