• FFG: $68.42

Press Release

FBL Financial Group Reports Fourth Quarter 2014 Results

Company Release - 2/5/2015 4:00 PM ET

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

Financial Highlights
(Dollars in thousands, except per share data)

 
    Three months ended December 31,
2014     2013
Net income attributable to FBL $ 28,148     $ 26,952
Operating income 28,347 25,263
Earnings per common share (assuming dilution):
Net income 1.13 1.07
Operating income       1.13       1.00
 

FBL Financial Group, Inc. (NYSE: FFG) today reported net income attributable to FBL for the fourth quarter of 2014 of $28.1 million, or $1.13 per diluted common share compared to $27.0 million, or $1.07 per diluted common share, for the fourth quarter of 2013.

Operating Income(1). Operating income totaled $28.3 million, or $1.13 per common share, for the fourth quarter of 2014, compared to $25.3 million, or $1.00 per common share, for the fourth quarter of 2013. Fourth quarter 2014 operating income per share reflects:

  • A growing book of profitable business
  • Investment fee income of $0.10 per share, primarily due to higher than expected bond prepayments
  • Favorable mortality results
  • Unfavorable impact of $0.07 per share from unlocking interest related assumptions used in the calculation of deferred acquisition costs, value of insurance in force acquired and unearned revenue reserves
  • Lower operating expense levels resulting from FBL's focus on expense control
  • Increased equity income from investments in low income housing tax credit partnerships and investment companies

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.

"I am pleased to report that FBL Financial Group demonstrated another excellent quarter of earnings, with net income and operating income of $1.13 per share. These results cap off a year where we achieved record highs in full-year net income and operating income per share, and returned more than $50 million to shareholders through dividends and repurchases," said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "Our priorities in 2015 are to serve the Farm Bureau niche market, support and grow our exclusive Farm Bureau agency force, leverage technology, and maintain a strong capital position."

Product Revenues. Premiums and product charges for the fourth quarter of 2014 totaled $73.0 million compared to $73.3 million in the fourth quarter of 2013. Interest sensitive product charges increased two percent while traditional life insurance premiums decreased two percent during the quarter. Premiums collected(2) in the fourth quarter of 2014 totaled $142.1 million compared to $144.5 million in the fourth quarter of 2013. Annuity premiums collected were flat, while life insurance premiums collected decreased two percent.

Investment Income. Net investment income in the fourth quarter of 2014 totaled $98.5 million compared to $93.6 million in the fourth quarter of 2013. The increase is due to higher average invested assets partially offset by lower investment yields. The annualized yield earned on average invested assets, with securities at amortized cost, was 5.61 percent for the year ended December 31, 2014, compared to 5.74 percent for the year ended December 31, 2013. Investment fee income totaled $0.10 per share in the fourth quarter of 2014, and was primarily in the Annuity segment. At December 31, 2014, 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 $137.7 million in the fourth quarter of 2014, an increase from $135.4 million in the fourth quarter of 2013. Death benefits, net of reinsurance and reserves released, decreased to $22.1 million in the fourth quarter of 2014, compared to $24.7 million in the fourth quarter of 2013. By its nature, mortality experience can fluctuate from quarter to quarter.

Unlocking. During the fourth quarter of 2014, FBL Financial Group unlocked the assumptions used in the calculation of deferred acquisition costs, value of insurance in force acquired and unearned revenue reserves based on the current low interest rate environment. This unlocking resulted in the unfavorable impact of $2.5 million, or $0.07 per share after-tax.

Net Realized Losses on Investments. In the fourth quarter of 2014, FBL Financial Group recognized net realized losses on investments of $0.3 million. The net realized loss on investments of $0.3 million is attributable to gains on sales of $0.2 million and other-than-temporary impairments of $0.5 million.

Stock Repurchases. During the fourth quarter of 2014, FBL repurchased 33,930 shares of its Class A common stock for $1.5 million. FBL has $42.7 million remaining under its current stock repurchase program.

Capital and Book Value. As of December 31, 2014, the book value per share of FBL Financial Group common stock totaled $50.57, a 20 percent increase from $42.08 at December 31, 2013. Book value per share, excluding accumulated other comprehensive income(3), increased to $40.11 at December 31, 2014 from $37.27 at December 31, 2013. The December 31, 2014 company action level risk based capital ratio of Farm Bureau Life Insurance Company was approximately 545 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 6, 2015, at 11:00 a.m. Eastern Time. The call will be webcast over the Internet, 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, difficult conditions in financial markets and the economy, lack of liquidity and access to capital, investment valuations, interest rate changes, changes in laws and regulations, competitive factors, relationships with Farm Bureau organizations, differences between actual claims experience and underwriting assumptions, the ability to attract and retain sales agents, adverse results from litigation and a decrease in ratings. 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 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 Year ended
December 31, December 31,
2014   2013 2014   2013
Revenues:
Interest sensitive product charges $ 27,685 $ 27,206 $ 109,770 $ 111,575
Traditional life insurance premiums 45,344 46,069 183,300 180,944
Net investment income 98,492 93,561 382,082 370,651
Net realized capital gains on sales of investments 221 3,142 3,760 15,967
 
Total other-than-temporary impairment losses (549 ) (802 ) (822 ) (6,662 )
Non-credit portion in other comprehensive income               4,250  
Net impairment losses recognized in earnings (549 ) (802 ) (822 ) (2,412 )
 
Other income   3,954     3,808     14,849     14,506  
Total revenues 175,147 172,984 692,939 691,231
 
Benefits and expenses:
Interest sensitive product benefits 53,395 53,188 211,540 203,599
Traditional life insurance benefits 41,013 40,676 162,876 160,471
Policyholder dividends 2,926 3,322 12,012 13,319
Underwriting, acquisition and insurance expenses 34,711 32,831 138,258 138,260
Interest expense 1,212 1,217 4,707 6,863
Other expenses   4,446     4,175     16,445     18,414  
Total benefits and expenses   137,703     135,409     545,838     540,926  
37,444 37,575 147,101 150,305
Income taxes (12,233 ) (12,399 ) (47,335 ) (49,322 )
Equity income, net of related income taxes   2,932     1,741     10,103     7,410  
Net income 28,143 26,917 109,869 108,393
Net loss attributable to noncontrolling interest   5     35     72     165  
Net income attributable to FBL Financial Group, Inc. $ 28,148   $ 26,952   $ 109,941   $ 108,558  
 
Earnings per common share - assuming dilution $ 1.13   $ 1.07   $ 4.39   $ 4.21  
 
Weighted average common shares 24,830,476 24,896,180 24,866,284 25,508,522
Effect of dilutive securities   131,709     232,967     149,960     265,893  
Weighted average common shares - diluted   24,962,185     25,129,147     25,016,244     25,774,415  
 

(1) Reconciliation of Net Income Attributable to FBL 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 adjusted to eliminate the impact of realized gains and losses on investments and changes in net unrealized gains and losses on derivatives. FBL 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 believes the combined presentation and evaluation of operating income, together with net income, provides information that may enhance an investor's understanding of FBL's underlying results and profitability. A reconciliation is provided in the following table:

  Three months ended   Year ended
December 31, December 31,
2014   2013 2014   2013
(Dollars in thousands,

except per share data)

Net income attributable to FBL $ 28,148 $ 26,952 $ 109,941 $ 108,558
Adjustments:

Net realized gains/losses on investments (a)

220 (1,492 ) (1,786 ) (8,206 )

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

  (21 )   (197 )   (1,114 )   241  
Operating income $ 28,347   $ 25,263   $ 107,041   $ 100,593  
 
Operating income per common share - assuming dilution $ 1.13   $ 1.00   $ 4.27   $ 3.90  
 

(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

   

December 31,
2014

December 31,
2013

Book value per share $ 50.57 $ 42.08
Less: Per share impact of accumulated other comprehensive income   10.46     4.81
Book value per share, excluding accumulated other comprehensive income $ 40.11   $ 37.27
 

Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Accumulated other comprehensive income totaled $258.4 million at December 31, 2014 and $119.1 million at December 31, 2013. 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 believes this non-GAAP financial measure provides useful supplemental information.

 
FBL Financial Group, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
   
December 31,
2014
December 31,
2013
Assets
Investments $ 7,680,970 $ 7,040,002
Cash and cash equivalents 76,632 6,370
Deferred acquisition costs 220,760 335,514
Other assets 403,013 385,482
Assets held in separate accounts   683,033   693,955
Total assets $ 9,064,408 $ 8,461,323
 
Liabilities and stockholders' equity
Liabilities
Future policy benefits $ 6,125,118 $ 5,794,010
Other policy funds, claims and benefits 625,529 635,732
Debt 97,000 97,000
Other liabilities 280,846 195,835
Liabilities related to separate accounts   683,033   693,955
Total liabilities 7,811,526 7,416,532
 
Stockholders' equity
FBL Financial Group, Inc. stockholders' equity:
Preferred stock 3,000 3,000
Class A common stock 144,625 134,993
Class B common stock 72 72
Accumulated other comprehensive income 258,410 119,067
Retained earnings   846,737   787,609
Total FBL Financial Group, Inc. stockholders' equity 1,252,844 1,044,741
Noncontrolling interest   38   50
Total stockholders' equity   1,252,882   1,044,791
Total liabilities and stockholders' equity $ 9,064,408 $ 8,461,323
 
Common shares outstanding   24,715,316   24,754,355

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

Source: FBL Financial Group, Inc.