Jim Noyce
Chief Executive Officer

Good morning everyone, and thank you for joining us on today's call.

As many of you know, for each of the last three quarters of 2007, and for that full year, we were able to report and talk about record operating earnings for FBL. Unfortunately, as you undoubtedly already know, the results for the first quarter of 2008 did not follow suit, and were a disappointment with net income of $0.21 per share and operating income of $0.50 per share. First quarter operating income results were negatively impacted by several factors, with poor mortality experience being the largest contributor, plus some other one-time items as well as pressure on spreads. And net income was also negatively impacted by other-than-temporary impairments.

We're going to start today's call by digging into the details of these results for the quarter, and of equal importance to us and all of you, what they imply for the rest of the year so that you can have a better understanding of why we lowered our 2008 operating income guidance to a range of $2.70 to $2.85 per share.

I'll turn it over to Jim Brannen to address these topics. Then I'll follow-up with some additional commentary before we open it up for your questions. Jim.

Jim Brannen
Chief Financial Officer

Thanks Jim, and good morning everyone.

The biggest part of our miss this quarter was our mortality experience. We had a record number of death claims for both term and permanent insurance and many of those claims were below our retention limits. As we have said in previous quarters, by its very nature mortality experience fluctuates from quarter to quarter. We had total death benefits of $29.4 million this quarter. This compares to average quarterly death benefits of $21.9 million in 2007 when mortality experience was favorable. As we indicated when we discussed earnings guidance last quarter, we expected mortality experience to be more normalized and at a higher level in 2008, but not at the levels seen in the first quarter. We consider this quarter's poor mortality experience a quarterly fluctuation like the very favorable experience of the past two quarters. This fluctuation accounted for $0.10 per share of the shortfall this quarter.

Within the traditional and universal life segment we also had certain one-time reserve and DAC adjustments which negatively impacted results and totaled roughly $0.05 per share.

Next, I'll turn to spreads, which have been under some pressure. As of March 31, our exclusive annuity business decreased by nine basis points to a spread of 161 basis points on a statutory basis. This is below our target for this business of 180 basis points. The investment yield decreased in this segment in large part due to a loss on some fixed-for-floating swaps we have backing this business. In the past, we had received a benefit from these swaps, but due to the decrease in the LIBOR rate, we are now in a loss position. In response to this, on March 1st we lowered the crediting rate on our primary Farm Bureau life annuity product by 30 basis points and on April 1st we also decreased the crediting rate on another block of annuity policies by 30 basis points. These rate changes will significantly make up for this shortfall. We will continue to see some spread pressure on this line as some of the business is at guaranteed rates and much of the business is out of its surrender charge period.

We are balancing our spread targets with maintaining crediting rates that are attractive to agents and consumers, while at the same time providing enough to existing policyholders so that the business is persistent. Since our traditional annuity - exclusive segment is a large contributor to FBL's total earnings, this shortfall in spread negatively impacted our results this quarter.

For our direct universal life business, our spread on a statutory basis decreased by two basis points during the quarter to 190 basis points. We remain above our target spread for this business of 182 basis points. This is positive as much of this business is at or near the minimum guarantee. The spread for our EquiTrust Life independent channel fixed rate annuity business increased four basis points during the quarter to 98 basis points on a statutory basis as of March 31 and remains above our target, which is 92 basis points.

This excess spread on our EquiTrust fixed rate business is positive and has helped to offset some of the deficiency we have with our EquiTrust Life direct index annuity business. Its spread increased by four basis points during the quarter to 221 basis points on a statutory basis, but is still below our target spread of 234 basis points. This is due to continued elevated option costs caused by volatility in the equity markets. This is reflected in the VIX volatility index which increased to an average of 26.1 in the first quarter of 2008 from 12.6 in the first quarter of 2007.

Our point in time index annuity reported spreads in the financial supplement do not include the actual experience of our hedging program. During the first quarter, the proceeds that we received from options exceeded index credits credited to policies by over $700,000. This is less than the benefit in the fourth quarter of $1.6 million. The reason for the decrease in the quarter was due to down equity markets. And given the markets we're in, we expect this excess hedge benefit to remain at these lower levels or decrease even further.

Earnings from our EquiTrust Life independent channel totaled $0.10 per share this quarter, which is solid, but about three cents short of our expectations and a couple of cents less than the fourth quarter. This reflects the elevated option costs, less hedge benefit from excess hedge proceeds and higher overhead expenses being allocated to this business unit starting this year.

Turning to our closed block coinsurance business from American Equity, it contributed less than our expectations this quarter. This business provided an average quarterly contribution of $0.10 per share to operating income during 2007, but accounted for only $0.06 per share of operating income this quarter. This decline reflects less surrender charge fee income and lower spreads. This business is also experiencing continued elevated option costs, plus some of the contracts from the earlier years of this coinsurance agreement are hitting their minimum guarantees. After further analysis of this block, we expect some of these pressures to continue for the near term.

Next, I want to spend some time discussing our rationale for our revised operating income guidance. Taking into consideration the various one-time items such as mortality experience, the traditional life reserve and DAC adjustments, as well as lower than anticipated corporate net investment income, lower investment prepayment fee income and the timing of our crediting rate decreases, we estimate that normalized results for the first quarter would have been $0.70 per share. Based on the first quarter results, the nature and amount of the one-time items and our expectations for growth in our businesses over the balance of the year, we have revised our full year 2008 operating income guidance to be within a range of $2.70 to $2.85 per share. This reduction incorporates the shortfall for the first quarter, existing market conditions, plus reduced expectations for the American Equity closed block coinsurance agreement for the remainder of the year and a lack of spread expansion available on certain products due to minimum guarantees.

Now I'll turn to investments and the other-than-temporary impairments we took on several securities this quarter. These impairments totaled $12.2 million after tax and other offsets and were comprised of a CDO, which I mentioned in our last conference call, one Alt-A asset-backed security and four corporate bonds.

We have a formal process in place for determining other-than-temporary impairments. All securities that have a market value 15% less than carrying value will automatically go on our watch list. All securities on our watch list are reviewed with detailed write-ups on each one to determine if they should be impaired. We take into account the decline in price, the length of time the price has been down, cash flows, our intent to hold to maturity and other facts and circumstances specific to the security.

What has happened in the residential real estate world is unprecedented; and I'm pretty sure we haven't seen the end of it. In the meantime, we will continue to monitor our portfolio on a regular basis and provide you with our honest assessment of risks and concerns. With our goal of transparency in mind, in February we filed a Form 8-K with additional detail on our investment portfolio and this quarter we expanded our Form 10-Q to include added detail on investments.

One area we are watching closely in our investment portfolio is our exposure to monoline insurers. A large number of our municipal bond securities are wrapped, but we are not overly concerned about these securities as we underwrite municipal bonds based on the underlying credit quality of the bond, not based on the wrap, and these types of bonds have historically low default rates. Where we have more concern regarding the monoline insurers is on the wraps in our other asset backed securities portfolio. Some of the monoline insurers have been successful at raising capital and stabilizing their ratings, while others have not been as successful. Right now our assumptions are that guarantees will be honored on these securities. If they are not, then we may have further impairments of our ABS portfolio.

In our Form 10-Q this quarter, you will see expanded disclosure on our ABS portfolio, including the amounts wrapped by the monoline insurers.

There are some pieces of good news. First, with regards to our mortgage-backed security portfolio, earlier this year as the mortgage market volatility continued, we conducted a formal review of our mortgage-backed portfolio to examine details and documentation and to refine our definitions of prime, Alt-A and subprime to be more consistent with those used by others in the industry. As a result of this review, we determined that $167.4 million of market value in securities should be reclassified from Alt-A to prime residential mortgage-backed securities from the 2003 origination year. A majority of the securities reclassified had collateral where the underlying mortgages were of a higher quality than originally anticipated. And, in addition to credit scores, beginning in 2008, we are now also considering owner occupancy, the level of documentation, Bloomberg data and quality of collateral, for determining the appropriate classification of the securities in the portfolio. We believe the revised classifications are more consistent with the industry and are more appropriate as a security's performance is highly dependent on the quality of the borrower.

As a reminder, we have minimal exposure to subprime mortgages. As of March 31, our three subprime securities had a market value total of $28 million. That represents 0.3% of our total investments. These issues are all rated AAA, are fixed rate and were originated in 2005.

Lastly, our capital position remains strong. As of March 31, our total capitalization, excluding AOCI, was nearly $1.3 billion and we had cash and investments of $55 million at the holding company. We continue to target the capital levels required for our "A" ratings from AM Best and Standard & Poor's. Our debt-to-total capitalization ratio also continues to be at a reasonable and appropriate level - 25.1% at quarter end, and is even less when you take into consideration the equity credit given for our trust preferreds.

With that, I will turn it back to Jim Noyce. Jim.

Jim Noyce
Chief Executive Officer

Thanks, Jim, for that review of our earnings and guidance.

Despite the short-term earnings issues which Jim addressed, the fundamentals of our businesses remain solid. Farm Bureau Life continues to generate capital for our companies by serving a core customer base of persistent Farm Bureau members. And EquiTrust Life continues to grow and add to our total assets and bottom line.

A strong point during the quarter was sales. In total, premiums collected were up 10% from the first quarter of last year to $465 million with strong sales levels from both Farm Bureau Life and EquiTrust Life.

Farm Bureau Life built on its success from 2007 with premiums collected up 9% over the first quarter of last year. After several quarters of declining traditional annuity sales, I am pleased to say that traditional annuity premiums collected reversed their downward trend and were up 28% for the quarter. Traditional and universal life premiums collected were up 3%, while variable product sales were down 3%.

Within Farm Bureau Life we continue to keep our product portfolio up to date with new product introductions. The latest is a universal life product with a secondary guarantee that we launched in early March. This has become the fastest growing universal life product within the industry; and most of the multi-line exclusive agency companies do not yet have this type of product available for their agents. The product has been well received by our agents and early sales levels are positive.

Recruiting Farm Bureau Life exclusive agents remains a challenge, but our agents continue to add sales and service associates, who assist them and are licensed to sell life and annuity products. We now have nearly 1,600 sales and service associates in our 15 states in addition to our over 1,900 Farm Bureau Life agents. This reflects the fact that our agency force is becoming more entrepreneurial and sophisticated as their role as agents is transformed into entrepreneurial business owners with their own producer groups.

Within Farm Bureau Life we continue to focus on efficiency and streamlining operations. In the first quarter we further implemented our scanning, imaging and automated workflow system into a number of additional areas including underwriting and life policy issuance.

Our EquiTrust Life independent channel had premiums collected of $327 million during the quarter, which was up 10% over the first quarter of 2007. Contributing to the strong sales results this quarter was a steeper yield curve and the effect it has on our competitive position relative to bank CDs. This environment led to fixed rate annuity sales of $121 million for the quarter. Index annuity premiums collected on the other hand were down seven percent from last year's first quarter. We're a bit disappointed with the decline in index annuity sales, but at the same time we are balancing the rates offered in these products with our desire to make our target spreads.

We have continued to enhance our immediate annuity product, called Confidence Income. When the product was introduced, we only offered period certain guarantee payouts. We added the single life options to the product last September and joint life options in March of this year. This product accounted for $64 million in premiums in 2007 and $27 million in the first quarter of 2008; and we're excited about its prospects going forward.

In the first quarter we recruited 1,123 agents for net agent growth of 945 agents and now have 20,726 EquiTrust Life independent agents appointed.

As our EquiTrust Life independent channel grows, we continue to expand other marketing activities. For the first time, we will be sponsoring an agent incentive trip, which an agent can qualify for with EquiTrust Life production between May 1 of this year and April 30th of next. In addition, we're adding two regional wholesalers who will spend their time in the field promoting EquiTrust Life products with our marketing organizations.

To conclude, I'm confident that we will navigate through the current challenges. We have a strong balance sheet and capital strength, and with our solid business fundamentals, we believe we are positioned for long term success.

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