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  • FBL Financial Group Reports Fourth Quarter and Full Year 2020 Results

    February 10, 2021 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 2020 of $27.8 million, or $1.14 per diluted common share, compared to net income of $34.7 million, or $1.40 per diluted common share, for the fourth quarter of 2019. Adjusted operating income(1) totaled $27.3 million, or $1.11 per common share, for the fourth quarter of 2020, compared to $34.8 million, or $1.41 per common share, for the fourth quarter of 2019. Fourth quarter 2020 earnings reflect:

    • Unfavorable mortality results largely due to claims related to COVID-19
    • Higher equity income
    • Favorable market performance resulting in lower amortization of acquisition costs and a lower increase in reserves associated with Guaranteed Living Withdrawal Benefits (GLWB)
    • The benefit of other investment-related income
    • A focus on expense control
    • A lower effective tax rate
    • 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 expenses associated with the proposed acquisition, realized gains and losses on investments, the change in allowances for credit losses on investments and the change in fair value of 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.

    “I am pleased that FBL Financial Group reported solid earnings for the fourth quarter of 2020 as we continued to deliver growth in life insurance sales, offset by unfavorable mortality results due to COVID-19 related claims,” said Daniel D. Pitcher, Chief Executive Officer. “With a strong balance sheet and quality operating model, we remain well-positioned to deliver on our purpose to protect the livelihoods and futures of our client/members.”

    Product Revenues

    Premiums and product charges for the fourth quarter of 2020 totaled $83.8 million compared to $82.7 million in the fourth quarter of 2019. Interest sensitive product charges increased one percent while traditional life insurance premiums increased two percent during the quarter. Premiums collected(2) in the fourth quarter of 2020 totaled $136.8 million compared to $156.0 million in the fourth quarter of 2019. Total life insurance premiums collected increased seven percent while annuity premiums collected decreased 35 percent, reflecting the impact of lower market interest rates.

    Investment Income

    Net investment income in the fourth quarter of 2020 totaled $106.0 million, compared to $109.0 million in the fourth quarter of 2019. This decrease reflects a lower investment yield, partially offset by an increase in average invested assets. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties, was 4.73 percent for the year ended December 31, 2020 compared to 4.95 percent for the year ended December 31, 2019. At December 31, 2020, 96 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 $174.6 million in the fourth quarter of 2020, compared to $153.3 million in the fourth quarter of 2019. Death benefits, net of reinsurance and reserves released, totaled $41.2 million in the fourth quarter of 2020, compared to $33.9 million in the fourth quarter of 2019. The increase in the fourth quarter of 2020 reflects claims with COVID-19 as the reported cause of death. Included in benefits and expenses in the fourth quarter of 2020 is lower than expected amortization of acquisition costs and a lower increase in reserves associated with GLWB totaling $2.8 million as a result of favorable market performance. Other expenses in the fourth quarter of 2020 include $2.1 million of transaction expenses related to FBL Financial Group’s proposed merger.

    Net Realized Gains/Losses

    In the fourth quarter of 2020, FBL Financial Group recognized net realized losses on investments of $3.4 million. This is attributable to realized gains on sales of $0.2 million, realized losses on sales of $11.0 million and a net gain from equity securities held at quarter end of $7.4 million. In addition, in the fourth quarter of 2020, $6.7 million was recorded as a decrease to the allowance for credit losses.

    Equity Income

    Equity income, net of related income taxes, totaled $6.1 million in the fourth quarter of 2020, compared to $1.0 million in the fourth quarter of 2019. Equity income in the fourth quarter of 2020 includes a gain of $4.3 million from one transaction in an investment partnership.

    Capital and Book Value

    As of December 31, 2020, the book value per share of FBL Financial Group common stock totaled $69.24, compared to $60.12 at December 31, 2019. Book value per share, excluding accumulated other comprehensive income(3), totaled $45.16 at December 31, 2020, compared to $45.73 at December 31, 2019. The December 31, 2020 company action level risk based capital ratio of FBL Financial Group’s wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 524 percent.

    Farm Bureau Property & Casualty Insurance Company Transaction

    On January 11, 2021 Farm Bureau Property & Casualty Insurance Company (“FBPCIC”) and FBL Financial Group announced that they reached a definitive agreement under which FBPCIC will acquire all of the outstanding shares of FBL Financial Group Class A and Class B common stock that neither FBPCIC nor the Iowa Farm Bureau Federation currently own for $56.00 per share in cash. The per share purchase price represents a 50% premium to FBL Financial Group’s unaffected closing share price of $37.25 on September 3, 2020, a 19% premium to FBPCIC’s initial proposal of $47.00 per share on September 4, 2020, and a 56% premium to the FBL Financial Group’s unaffected 90-day volume-weighted average share price as measured on September 3, 2020.

    The transaction, which was unanimously approved by FBL Financial Group’s Board of Directors, is subject to the receipt of regulatory and FBL Financial Group shareholder approval, including approval from a majority of unaffiliated FBL Financial Group shareholders, and the satisfaction of specified closing conditions.

    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.

    No Conference Call

    FBL Financial Group will not hold an earnings conference call with investors for its fourth quarter 2020 results in light of the merger agreement by and among FBL Financial Group, Farm Bureau Property & Casualty Insurance Company and 5400 Merger Sub, Inc. announced on January 11, 2021.

    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, risks related to the proposed transaction with Farm Bureau Property & Casualty Insurance Company, including failure to complete the proposed transaction, the incurrence of costs related to the proposed transaction and operational disruptions resulting from the proposed transaction, 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, adverse results from litigation and the impact of the COVID-19 pandemic and any future pandemics. 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.

    – FINANCIAL INFORMATION AND NOTES FOLLOW –

     

    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,

     

    2020

     

    2019

     

    2020

     

    2019

    Revenues:

     

     

     

     

     

     

     

    Interest sensitive product charges

    $

    32,473

     

     

     

    $

    32,178

     

     

     

    $

    132,522

     

     

     

    $

    127,113

     

     

    Traditional life insurance premiums

    51,320

     

     

     

    50,502

     

     

     

    198,749

     

     

     

    197,863

     

     

    Net investment income

    106,023

     

     

     

    108,986

     

     

     

    397,231

     

     

     

    424,998

     

     

    Net realized capital gains (losses)

    (3,428

    )

     

     

    (2,707

    )

     

     

    (12,085

    )

     

     

    8,523

     

     

    Change in allowance for credit losses on investments

    6,656

     

     

     

     

     

     

    (4,199

    )

     

     

     

     

    Other-than-temporary impairment losses

     

     

     

     

     

     

     

     

     

    (919

    )

     

    Other income

    5,400

     

     

     

    4,602

     

     

     

    20,047

     

     

     

    17,103

     

     

    Total revenues

    198,444

     

     

     

    193,561

     

     

     

    732,265

     

     

     

    774,681

     

     

     

     

     

     

     

     

     

     

    Benefits and expenses:

     

     

     

     

     

     

     

    Interest sensitive product benefits

    78,944

     

     

     

    73,507

     

     

     

    282,201

     

     

     

    276,473

     

     

    Traditional life insurance benefits

    49,592

     

     

     

    43,142

     

     

     

    186,441

     

     

     

    174,654

     

     

    Policyholder dividends

    1,659

     

     

     

    2,514

     

     

     

    7,538

     

     

     

    10,053

     

     

    Underwriting, acquisition and insurance expenses

    32,843

     

     

     

    26,290

     

     

     

    143,887

     

     

     

    140,624

     

     

    Interest expense

    1,377

     

     

     

    1,213

     

     

     

    5,015

     

     

     

    4,850

     

     

    Other expenses

    10,187

     

     

     

    6,597

     

     

     

    32,711

     

     

     

    25,246

     

     

    Total benefits and expenses

    174,602

     

     

     

    153,263

     

     

     

    657,793

     

     

     

    631,900

     

     

     

    23,842

     

     

     

    40,298

     

     

     

    74,472

     

     

     

    142,781

     

     

    Income tax

    (2,174

    )

     

     

    (6,500

    )

     

     

    (8,061

    )

     

     

    (19,929

    )

     

    Equity income, net of related income taxes

    6,144

     

     

     

    1,033

     

     

     

    5,906

     

     

     

    3,456

     

     

    Net income

    27,812

     

     

     

    34,831

     

     

     

    72,317

     

     

     

    126,308

     

     

    Net (income) loss attributable to noncontrolling interest

    31

     

     

     

    (92

    )

     

     

    196

     

     

     

    (99

    )

     

    Net income attributable to FBL Financial Group, Inc.

    $

    27,843

     

     

     

    $

    34,739

     

     

     

    $

    72,513

     

     

     

    $

    126,209

     

     

     

     

     

     

     

     

     

     

    Earnings per common share

    $

    1.14

     

     

     

    $

    1.40

     

     

     

    $

    2.94

     

     

     

    $

    5.09

     

     

     

     

     

     

     

     

     

     

    Weighted average shares – basic

    24,477,634

     

     

     

    24,761,224

     

     

     

    24,614,591

     

     

     

    24,760,541

     

     

    Effect of dilutive securities – stock-based compensation

    1,728

     

     

     

    8,238

     

     

     

    3,325

     

     

     

    10,134

     

     

    Weighted average shares – diluted

    24,479,362

     

     

     

    24,769,462

     

     

     

    24,617,916

     

     

     

    24,770,675

     

     

     

     

     

     

     

     

     

     

    (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 expenses associated with the proposed acquisition, realized gains and losses on investments, the change in allowances for credit 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). For example, 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 combined 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,

     

    2020

     

    2019

     

    2020

     

    2019

     

    (Dollars in thousands,
    except per share data)

    Net income attributable to FBL Financial Group

    $

    27,843

     

     

     

    $

    34,739

     

     

     

    $

    72,513

     

     

    $

    126,209

     

     

    Adjustments:

     

     

     

     

     

     

     

    Proposed acquisition transaction expenses(a)

    2,147

     

     

     

     

     

     

    2,147

     

     

     

     

    Net realized gains/losses on investments(b)

    (2,808

    )

     

     

    2,147

     

     

     

    12,295

     

     

    (5,813

    )

     

    Change in fair value of derivatives(b)

    91

     

     

     

    (2,047

    )

     

     

    4,957

     

     

    (2,703

    )

     

    Adjusted operating income

    $

    27,273

     

     

     

    $

    34,839

     

     

     

    $

    91,912

     

     

    $

    117,693

     

     

     

     

     

     

     

     

     

     

    Adjusted operating income per common share – assuming dilution

    $

    1.11

     

     

     

    $

    1.41

     

     

     

    $

    3.73

     

     

    $

    4.75

     

     

    (a) Amount represents the transaction expenses relating to FBL Financial Group’s proposed go-private transaction.

    (b) Net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, 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,
    2020

     

    December 31,
    2019

    Book value per share

    $

    69.24

     

     

    $

    60.12

     

    Less: Per share impact of accumulated other comprehensive income

    24.08

     

     

    14.39

     

    Book value per share, excluding accumulated other comprehensive income

    $

    45.16

     

     

    $

    45.73

     

                   

    Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $587.3 million at December 31, 2020 and $354.8 million at December 31, 2019. 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,
    2020

     

    December 31,
    2019

    Assets

     

     

     

    Investments

    $

    9,684,010

     

     

    $

    9,091,623

     

    Cash and cash equivalents

    12,882

     

     

    17,277

     

    Deferred acquisition costs

    176,085

     

     

    289,456

     

    Other assets

    449,113

     

     

    435,969

     

    Assets held in separate accounts

    674,182

     

     

    645,881

     

    Total assets

    $

    10,996,272

     

     

    $

    10,480,206

     

     

     

     

     

    Liabilities and stockholders’ equity

     

     

     

    Liabilities

     

     

     

    Future policy benefits

    $

    7,616,272

     

     

    $

    7,393,549

     

    Other policy funds, claims and benefits

    602,989

     

     

    597,256

     

    Debt

    97,000

     

     

    97,000

     

    Other liabilities

    313,713

     

     

    260,604

     

    Liabilities related to separate accounts

    674,182

     

     

    645,881

     

    Total liabilities

    9,304,156

     

     

    8,994,290

     

     

     

     

     

    Stockholders’ equity

     

     

     

    FBL Financial Group, Inc. stockholders’ equity:

     

     

     

    Preferred stock

    3,000

     

     

    3,000

     

    Class A common stock

    151,061

     

     

    152,661

     

    Class B common stock

    72

     

     

    72

     

    Accumulated other comprehensive income

    587,279

     

     

    354,764

     

    Retained earnings

    950,687

     

     

    975,260

     

    Total FBL Financial Group, Inc. stockholders’ equity

    1,692,099

     

     

    1,485,757

     

    Noncontrolling interest

    17

     

     

    159

     

    Total stockholders’ equity

    1,692,116

     

     

    1,485,916

     

    Total liabilities and stockholders’ equity

    $

    10,996,272

     

     

    $

    10,480,206

     

     

     

     

     

    Common shares outstanding

    24,395,522

     

     

    24,664,215

     

     

    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 4, 2021 by FBL Financial Group, Inc..

    Categories: Industry Articles
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