FBL Financial Group Reports Third Quarter 2016 Results

WEST DES MOINES, Iowa--()--FBL Financial Group, Inc. (NYSE: FFG):

Financial Highlights

 

(Dollars in thousands, except per share data)

Three months ended September 30,
2016       2015
Net income attributable to FBL Financial Group $ 30,017       $ 26,659
Operating income 28,882 27,284
Earnings per common share (assuming dilution):
Net income 1.20 1.06
Operating income   1.15         1.09
 

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL Financial Group for the third quarter of 2016 of $30.0 million, or $1.20 per diluted common share, compared to $26.7 million, or $1.06 per diluted common share, for the third quarter of 2015. Operating income(1) totaled $28.9 million, or $1.15 per common share, for the third quarter of 2016, compared to $27.3 million, or $1.09 per common share, for the third quarter of 2015. Third quarter 2016 results reflect:

  • A growing book of profitable business
  • The favorable impact of $0.02 per share from unlocking assumptions used in the calculation of deferred acquisition costs, value of insurance in force acquired, unearned revenue reserves and certain reserves on interest sensitive products
  • The benefit of other investment-related income of $0.09 per share, primarily in the Annuity segment
  • Unfavorable mortality results, primarily in the Corporate & Other segment

Operating income differs from the GAAP measure, net income attributable to FBL Financial Group, in that it excludes the impact of realized gains and losses on investments and the change in net unrealized gains and losses on derivatives. 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 third quarter results reflect strong financial performance, with a 13 percent increase in net income to $1.20 per share and a 6 percent increase in operating income to $1.15 per share," said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. “These results reflect focus on our Farm Bureau niche market and support of our exclusive Farm Bureau agency force. We are benefiting from our balanced life and annuity in force business, which provides earnings stability, and are successfully addressing the continued challenges of the low interest rate environment."

Product Revenues. Premiums and product charges for the third quarter of 2016 totaled $73.5 million compared to $76.6 million in the third quarter of 2015. Interest sensitive product charges decreased 13 percent while traditional life insurance premiums increased two percent during the quarter. Premiums collected(2) in the third quarter of 2016 totaled $156.4 million compared to $184.0 million in the third quarter of 2015. Annuity premiums collected decreased 25 percent while life insurance premiums collected decreased one percent.

Investment Income. Net investment income in the third quarter of 2016 totaled $103.5 million, compared to $95.9 million in the third quarter of 2015. The increase is due to 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, was 5.43 percent for the nine months ended September 30, 2016, compared to 5.58 percent for the nine months ended September 30, 2015. At September 30, 2016, 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 $141.3 million in the third quarter of 2016, compared to $140.1 million in the third quarter of 2015. Death benefits, net of reinsurance and reserves released, totaled $27.4 million in the third quarter of 2016, compared to $26.9 million in the third quarter of 2015. By its nature, mortality experience can fluctuate from quarter to quarter.

Unlocking. During the third quarter of 2016, FBL Financial Group unlocked the assumptions used in the calculation of deferred acquisition costs, value of insurance in force acquired, unearned revenue reserves and certain reserves on interest sensitive products. This unlocking resulted in a pre-tax favorable impact of $0.7 million, or $0.02 per share after-tax.

Net Realized Gains/Losses on Investments. In the third quarter of 2016, FBL Financial Group recognized net realized gains on investments of $0.6 million.

Stock Repurchases. During the third quarter of 2016, FBL Financial Group did not repurchase any of its Class A or Class B common stock. FBL Financial Group has $49.5 million remaining under its current stock repurchase program.

Capital and Book Value. As of September 30, 2016, the book value per share of FBL Financial Group common stock totaled $52.72, compared to $45.61 at December 31, 2015. Book value per share, excluding accumulated other comprehensive income(3), totaled $40.94 at September 30, 2016, compared to $40.99 at December 31, 2015. The September 30, 2016 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 547 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, November 4, 2016, at 11:00 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. Its primary operating subsidiary, Farm Bureau Life Insurance Company, underwrites and markets a broad range of life insurance and annuities to individuals and businesses, which are 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. FBL Financial Group, headquartered in West Des Moines, Iowa, is traded on the New York Stock Exchange under the symbol FFG. For more information, please visit www.fblfinancial.com.

FBL Financial Group, Inc.

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

   
Three months ended Nine months ended
September 30, September 30,
2016   2015 2016   2015
Revenues:
Interest sensitive product charges $ 25,851 $ 29,856 $ 82,989 $ 86,250
Traditional life insurance premiums 47,682 46,719 147,425 142,758
Net investment income 103,514 95,882 302,621 292,144
Net realized capital gains (losses) on sales of investments 646 (93 ) (33 ) 7,509
 
Total other-than-temporary impairment losses (25 ) (559 ) (3,769 ) (719 )
Non-credit portion in other comprehensive income (loss)   146   1,522   146  
Net impairment losses recognized in earnings (25 ) (413 ) (2,247 ) (573 )
 
Other income 3,616   3,543   11,480   12,097  
Total revenues 181,284 175,494 542,235 540,185
 
Benefits and expenses:
Interest sensitive product benefits 65,882 53,940 178,860 163,121
Traditional life insurance benefits 42,121 41,604 130,059 131,967
Policyholder dividends 2,459 2,885 8,014 8,802
Underwriting, acquisition and insurance expenses 25,785 36,176 102,437 107,535
Interest expense 1,213 1,213 3,638 3,637
Other expenses 3,854   4,277   12,647   13,425  
Total benefits and expenses 141,314   140,095   435,655   428,487  
39,970 35,399 106,580 111,698
Income taxes (13,091 ) (11,520 ) (34,637 ) (36,057 )
Equity income, net of related income taxes 3,128   2,761   8,393   6,932  
Net income 30,007 26,640 80,336 82,573
Net loss attributable to noncontrolling interest 10   19   7   49  
Net income attributable to FBL Financial Group, Inc. $ 30,017   $ 26,659   $ 80,343   $ 82,622  
 
Earnings per common share - assuming dilution $ 1.20   $ 1.06   $ 3.21   $ 3.30  
 
Weighted average common shares 24,990,441 24,923,202 24,977,342 24,926,188
Effect of dilutive securities 39,075   79,850   46,757   93,275  
Weighted average common shares - diluted 25,029,516   25,003,052   25,024,099   25,019,463  
 

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

In addition to net income, FBL Financial Group has consistently utilized operating income, a non-GAAP financial measure common in the life insurance industry, as a primary economic measure to evaluate its financial performance. Operating income equals net income attributable to FBL Financial Group adjusted to eliminate the impact of realized gains and losses on investments and changes in net unrealized gains and losses on derivatives. FBL Financial Group uses operating income, in addition to net income, to measure its performance since realized gains and losses on investments and the change in net unrealized gains and losses on derivatives can fluctuate greatly from quarter to quarter. These fluctuations make it difficult to analyze core operating trends. 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 operating income, together with net 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   Nine months ended
September 30, September 30,
2016   2015   2016   2015
(Dollars in thousands,
except per share data)
Net income attributable to FBL Financial Group $ 30,017   $ 26,659 $ 80,343   $ 82,622
Adjustments:
Net realized gains/losses on investments (a) (402 ) 307 1,142 (4,421 )
Change in net unrealized gains/losses on derivatives (a) (733 ) 318   (609 ) 703  
Operating income $ 28,882   $ 27,284   $ 80,876   $ 78,904  
 
Operating income per common share - assuming dilution $ 1.15   $ 1.09   $ 3.23   $ 3.15  
 

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

(2) Premiums Collected - Net statutory premiums collected, a measure of sales production, is a non-GAAP measure and includes premiums collected from annuities and universal life-type products. For GAAP reporting, these premiums received are not reported as revenues.

(3) Reconciliation of Book Value Per Share Excluding Accumulated Other Comprehensive Income - Unaudited

  September 30,   December 31,
2016 2015
Book value per share $ 52.72 $ 45.61
Less: Per share impact of accumulated other comprehensive income 11.78 4.62
Book value per share, excluding accumulated other comprehensive income $ 40.94 $ 40.99
 

Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $292.8 million at September 30, 2016 and $114.5 million at December 31, 2015. 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)

   
September 30, December 31,
2016 2015
Assets
Investments $ 8,343,882 $ 7,722,753
Cash and cash equivalents 65,386 29,490
Deferred acquisition costs 215,230 335,783
Other assets 438,315 418,721
Assets held in separate accounts 605,729   625,257
Total assets $ 9,668,542   $ 9,132,004
 
Liabilities and stockholders' equity
Liabilities
Future policy benefits $ 6,692,087 $ 6,401,481
Other policy funds, claims and benefits 625,584 638,362
Debt 97,000 112,000
Other liabilities 333,802 220,430
Liabilities related to separate accounts 605,729   625,257
Total liabilities 8,354,202 7,997,530
 
Stockholders' equity
FBL Financial Group, Inc. stockholders' equity:
Preferred stock 3,000 3,000
Class A common stock 152,102 149,248
Class B common stock 72 72
Accumulated other comprehensive income 292,828 114,532
Retained earnings 866,285   867,574
Total FBL Financial Group, Inc. stockholders' equity 1,314,287 1,134,426
Noncontrolling interest 53   48
Total stockholders' equity 1,314,340   1,134,474
Total liabilities and stockholders' equity $ 9,668,542   $ 9,132,004
 
Common shares outstanding 24,874,659   24,808,176

Contacts

FBL Financial Group, Inc.
Kathleen Till Stange, 515-226-6780
V.P. Corporate & Investor Relations
Kathleen.TillStange@FBLFinancial.com

Release Summary

FBL Financial Group Reports Third Quarter 2016 Results

Contacts

FBL Financial Group, Inc.
Kathleen Till Stange, 515-226-6780
V.P. Corporate & Investor Relations
Kathleen.TillStange@FBLFinancial.com