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  • FBL Financial Group Reports Fourth Quarter and Full Year 2019 Results

    February 11, 2020 by FBL Financial Group, Inc.

    WEST DES MOINES, Iowa–(BUSINESS WIRE)–FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the fourth quarter of 2019 of $34.7 million, or $1.40 per diluted common share, compared to $6.4 million, or $0.26 per diluted common share, for the fourth quarter of 2018. Adjusted operating income(1) totaled $34.8 million, or $1.41 per common share, for the fourth quarter of 2019, compared to $18.8 million, or $0.75 per common share, for the fourth quarter of 2018. Fourth quarter 2019 earnings per share reflects:

    • The benefit of $0.32 per share from unlocking an actuarial assumption
    • Unfavorable mortality results in the Corporate & Other segment
    • Lower spread income in the Annuity segment
    • The benefit of other investment-related income of $0.07 per share
    • Continued investment in the Wealth Management business

    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, as well as the initial impact of changes in federal statutory income tax rates and tax laws. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.

       

    “FBL Financial Group reported excellent earnings for the fourth quarter, achieving net income of $1.40 per share and record adjusted operating income of $1.41 per share driven in part by a benefit from unlocking an actuarial assumption,” said Daniel D. Pitcher, Chief Executive Officer of FBL Financial Group, Inc. “I’m also pleased to report that we achieved record full year adjusted operating income of $4.75 per share. These results reflect steady growth in our business and a consistent, robust capital position. As we look forward, our focus is to maintain financial strength, support our Farm Bureau Financial Services agents and serve our clients’ diverse needs. This builds on our history of proven success, grounded in our purpose to protect livelihoods and futures.”

       

    Product Revenues
    Premiums and product charges for the fourth quarter of 2019 totaled $82.7 million compared to $80.2 million in the fourth quarter of 2018. Interest sensitive product charges increased five percent while traditional life insurance premiums increased two percent during the quarter. Premiums collected(2) in the fourth quarter of 2019 totaled $156.0 million compared to $157.4 million in the fourth quarter of 2018. Total life insurance premiums collected increased three percent while annuity premiums collected decreased five percent, impacted by the low market interest rate environment.

    Investment Income
    Net investment income in the fourth quarter of 2019 totaled $109.0 million, compared to $83.9 million in the fourth quarter of 2018. This increase is due to a change in the fair value of derivatives and 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 4.95 percent for the year ended December 31, 2019 compared to 5.13 percent for the year ended December 31, 2018. At December 31, 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 $153.3 million in the fourth quarter of 2019, compared to $156.0 million in the fourth quarter of 2018. Death benefits, net of reinsurance and reserves released, totaled $33.9 million in the fourth quarter of 2019, compared to $30.4 million in the fourth quarter of 2018. By its nature, mortality experience can fluctuate from quarter to quarter.

    Unlocking
    During the fourth quarter of 2019, FBL Financial Group extended the deferred acquisition cost amortization period for its participating whole life insurance block based on an experience analysis demonstrating an increase in persistency rates. This unlocking resulted in a pre-tax favorable impact of $10.0 million, or $0.32 per share after-tax.

    Net Realized Losses
    In the fourth quarter of 2019, FBL Financial Group recognized net realized losses on investments of $2.7 million. This is attributable to realized losses on sales of $3.5 million, realized gains on sales of $0.2 million and a gain from the increase in fair value of equity securities of $0.6 million.

    Stock Repurchases
    During the fourth 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 December 31, 2019, the book value per share of FBL Financial Group common stock totaled $60.12, compared to $47.78 at December 31, 2018. Book value per share, excluding accumulated other comprehensive income(3), totaled $45.73 at December 31, 2019, compared to $44.09 at December 31, 2018. The December 31, 2019 company action level risk based capital ratio of FBL Financial Group’s wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 562 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, February 7, 2020, at 11:00 a.m. Eastern Time. The call will be webcast and a replay will be available on FBL Financial Group’s website.

    Forward-Looking Statements
    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.

    About FBL Financial Group
    FBL Financial Group is a holding company with the purpose to protect livelihoods and futures. Operating under the consumer brand name Farm Bureau Financial Services, its affiliates offer a broad range of life insurance, annuity and investment products distributed by multiline exclusive Farm Bureau agents. Helping complete the financial services offering, advisors offer wealth management and financial planning services. 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

    FBL Financial Group, Inc.

    Consolidated Statements of Operations (Unaudited)

    (Dollars in thousands, except per share data)

             

     

     

    Three months ended

     

    Year ended

     

     

    December 31,

     

    December 31,

     

     

    2019

     

    2018

     

    2019

     

    2018

    Revenues:

     

     

     

     

     

     

     

     

    Interest sensitive product charges

     

    $

    32,178

     

     

    $

    30,624

     

     

    $

    127,113

     

     

    $

    122,789

     

    Traditional life insurance premiums

     

     

    50,502

     

     

     

    49,600

     

     

     

    197,863

     

     

     

    198,312

     

    Net investment income

     

     

    108,986

     

     

     

    83,865

     

     

     

    424,998

     

     

     

    394,618

     

    Net realized capital gains (losses)

     

     

    (2,707

    )

     

     

    (5,661

    )

     

     

    8,523

     

     

     

    (7,276

    )

    Net other-than-temporary impairment losses recognized in earnings

     

     

     

     

    (3,908

    )

     

     

    (919

    )

     

     

    (4,998

    )

    Other income

     

     

    4,602

     

     

     

    4,116

     

     

     

    17,103

     

     

     

    16,181

     

    Total revenues

     

     

    193,561

     

     

     

    158,636

     

     

     

    774,681

     

     

     

    719,626

     

     

     

     

     

     

     

     

     

     

    Benefits and expenses:

     

     

     

     

     

     

     

     

    Interest sensitive product benefits

     

     

    73,507

     

     

     

    59,626

     

     

     

    276,473

     

     

     

    253,753

     

    Traditional life insurance benefits

     

     

    43,142

     

     

     

    41,860

     

     

     

    174,654

     

     

     

    175,209

     

    Policyholder dividends

     

     

    2,514

     

     

     

    2,539

     

     

     

    10,053

     

     

     

    10,130

     

    Underwriting, acquisition and insurance expenses

     

     

    26,290

     

     

     

    44,434

     

     

     

    140,624

     

     

     

    152,055

     

    Interest expense

     

     

    1,213

     

     

     

    1,213

     

     

     

    4,850

     

     

     

    4,851

     

    Other expenses

     

     

    6,597

     

     

     

    6,314

     

     

     

    25,246

     

     

     

    22,595

     

    Total benefits and expenses

     

     

    153,263

     

     

     

    155,986

     

     

     

    631,900

     

     

     

    618,593

     

     

     

     

    40,298

     

     

     

    2,650

     

     

     

    142,781

     

     

     

    101,033

     

    Income taxes

     

     

    (6,500

    )

     

     

    2,812

     

     

     

    (19,929

    )

     

     

    (11,650

    )

    Equity income, net of related income taxes

     

     

    1,033

     

     

     

    998

     

     

     

    3,456

     

     

     

    4,439

     

    Net income

     

     

    34,831

     

     

     

    6,460

     

     

     

    126,308

     

     

     

    93,822

     

    Net income attributable to noncontrolling interest

     

     

    (92

    )

     

     

    (45

    )

     

     

    (99

    )

     

     

    (29

    )

    Net income attributable to FBL Financial Group, Inc.

     

    $

    34,739

     

     

    $

    6,415

     

     

    $

    126,209

     

     

    $

    93,793

     

     

     

     

     

     

     

     

     

     

    Earnings per common share – assuming dilution

     

    $

    1.40

     

     

    $

    0.26

     

     

    $

    5.09

     

     

    $

    3.75

     

     

     

     

     

     

     

     

     

     

    Weighted average common shares

     

     

    24,761,224

     

     

     

    24,887,779

     

     

     

    24,760,541

     

     

     

    24,932,189

     

    Effect of dilutive securities

     

     

    8,238

     

     

     

    9,762

     

     

     

    10,134

     

     

     

    12,412

     

    Weighted average common shares – diluted

     

     

    24,769,462

     

     

     

    24,897,541

     

     

     

    24,770,675

     

     

     

    24,944,601

     

     

     

     

     

     

     

     

     

     

    (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, as well as the initial impact of changes in federal statutory income tax rates and tax laws. 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

     

    Year ended

     

     

    December 31,

     

    December 31,

     

     

    2019

     

    2018

     

    2019

     

    2018

     

     

    (Dollars in thousands,

       

    except per share data)

    Net income attributable to FBL Financial Group

     

    $

    34,739

     

     

    $

    6,415

     

     

    $

    126,209

     

     

    $

    93,793

     

    Adjustments:

     

     

     

     

     

     

     

     

    Initial impact of the Tax Act(a)

     

     

     

     

     

     

     

    (617

    )

    Net realized gains/losses on investments(b)

     

    2,147

     

     

    7,414

     

     

    (5,813

    )

     

    9,546

     

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

     

    (2,047

    )

     

    4,997

     

     

    (2,703

    )

     

    6,188

     

    Adjusted operating income

     

    $

    34,839

     

     

    $

    18,826

     

     

    $

    117,693

     

     

    $

    108,910

     

     

     

     

     

     

     

     

     

     

    Adjusted operating income per common share – assuming dilution

     

    $

    1.41

     

     

    $

    0.75

     

     

    $

    4.75

     

     

    $

    4.36

     

     

     

     

     

     

    (a) Amount represents a change in the provisional estimate of the impact of the Tax Cuts and Jobs Act of 2017 on deferred tax assets and liabilities as of December 31, 2017.

    (b) 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

       

     

     

    December 31,

     

    December 31,

       
           

    2019

     

    2018

       
       

    Book value per share

     

    $

    60.12

     

    $

    47.78

       
       

    Less: Per share impact of accumulated other comprehensive income

     

    14.39

     

    3.69

       
       

    Book value per share, excluding accumulated other comprehensive income

     

    $

    45.73

     

    $

    44.09

       

    Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $354.8 million at December 31, 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)

             
             

     

     

    December 31,

     

    December 31,

       

    2019

     

    2018

    Assets

     

     

     

     

    Investments

     

    $

    9,091,623

     

     

    $

    8,414,118

     

    Cash and cash equivalents

     

    17,277

     

     

    19,035

     

    Deferred acquisition costs

     

    289,456

     

     

    418,802

     

    Other assets

     

    435,969

     

     

    420,394

     

    Assets held in separate accounts

     

    645,881

     

     

    561,281

     

    Total assets

     

    $

    10,480,206

     

     

    $

    9,833,630

     

     

     

     

     

     

    Liabilities and stockholders’ equity

     

     

     

     

    Liabilities

     

     

     

     

    Future policy benefits

     

    $

    7,393,549

     

     

    $

    7,205,471

     

    Other policy funds, claims and benefits

     

    597,256

     

     

    615,177

     

    Debt

     

    97,000

     

     

    97,000

     

    Other liabilities

     

    260,604

     

     

    170,442

     

    Liabilities related to separate accounts

     

    645,881

     

     

    561,281

     

    Total liabilities

     

    8,994,290

     

     

    8,649,371

     

     

     

     

     

     

    Stockholders’ equity

     

     

     

     

    FBL Financial Group, Inc. stockholders’ equity:

     

     

     

     

    Preferred stock

     

    3,000

     

     

    3,000

     

    Class A common stock

     

    152,661

     

     

    152,652

     

    Class B common stock

     

    72

     

     

    72

     

    Accumulated other comprehensive income

     

    354,764

     

     

    91,318

     

    Retained earnings

     

    975,260

     

     

    937,097

     

    Total FBL Financial Group, Inc. stockholders’ equity

     

    1,485,757

     

     

    1,184,139

     

    Noncontrolling interest

     

    159

     

     

    120

     

    Total stockholders’ equity

     

    1,485,916

     

     

    1,184,259

     

    Total liabilities and stockholders’ equity

     

    $

    10,480,206

     

     

    $

    9,833,630

     

     

     

     

     

     

    Common shares outstanding

     

    24,664,215

     

     

    24,718,815

     

     

    Contacts

    Investor Relations Contact
    Kathleen Till Stange, Vice President Corporate & Investor Relations
    (515) 226-6780, Kathleen.TillStange@FBLFinancial.com

    Originally Posted at Business Wire on February 6, 2020 by FBL Financial Group, Inc..

    Categories: Industry Articles
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