Jim Noyce
Chief Executive Officer

Good morning and welcome to all of you on today's call.

We had an excellent second quarter with record net income of $1.12 per share and record operating income of $0.80 per share. We're very pleased with this as the underlying results reflect the solid earnings capabilities of Farm Bureau Life and EquiTrust Life Insurance Companies. Jim Brannen will be discussing this in more detail when he reviews our financial results.

Farm Bureau Life had a great quarter and I have asked JoAnn Rumelhart to provide you with an update today on Farm Bureau Life's activities and results.

I'll focus my comments on our EquiTrust Life independent channel. The EquiTrust Life independent channel achieved total premiums collected for the quarter of $279 million. This was made up of $57 million of fixed rate annuities and $223 million of index annuities. We did expect, and have regularly communicated, that production levels would decline from the high levels achieved during 2006 due to lower multi-year guarantee annuity product sales. Even taking that into account, sales this past quarter were less than our expectations.

This is due in part to various changes to the rates and caps we made on these products early in the year as we worked to balance the growth and profitability of this business. At this same time the market for fixed index annuities appeared to be pricing for share growth. These changes increased the profitability of these products for us, with the trade-off at times being a lower relative competitive stance. We know this business is very rate sensitive and we are striving to achieve the right balance between sales growth and profitability. During the second quarter, we had the opportunity to take rate action, fine-tuned our pricing and increased rates several times. As a result, we have seen sales increase each month, with premiums collected of $86 million in April, $93 million in May, $100 million in June and that trend has continued. We have positive momentum and I am optimistic about the remainder of the year. We continue to have our 2007 target for this business of $1.4 billion. Achieving this target is attainable, but it will be a challenge. That being said, the business we have sold in the first half of the year, at $575 million, is still significant to us and likely as profitable, or more so, than any business we have sold through this channel.

In addition, the mix of our sales for 2007 most likely will be different than what we originally anticipated. Given current markets and the relative attractiveness of variable annuities, the demand for index annuities is not as high as it was when we initially developed our 2007 sales target. At the same time, as a result of improving investment yields throughout second quarter and a movement to a more normal yield curve, we have been able to offer our 5-year fixed rate product with a 5% rate. So our mix of business may now be more heavily weighted toward fixed rate annuities. We are focused on growing our EquiTrust Life independent channel business and will continue to maintain our pricing discipline so that this growth is profitable, regardless of the mix of business.

Other highlights during the past quarter at EquiTrust include the introduction of two new index annuity products, MarketTen Index and MarketTen Bonus Index. These products are a good addition to our product portfolio and appeal to agents and clients looking for a shorter surrender charge period and lower surrender charges and demonstrate our commitment to keeping our portfolios up-to-date and in tune with market conditions. We introduced these products in mid-June and they have been well received by our agents and marketing organizations.

Our EquiTrust Life independent agent count totaled 21,533 at the end of June. During the second quarter of 2007 we continued to be successful in growing our EquiTrust agent count with agent appointments of 1,462, which is up 20% from the recruitment level in the first quarter.

I would also like to comment on the various headlines lately about the suitability of certain annuity products. Since the inception of our EquiTrust Life independent channel, we have been proactive in the area of suitability and our approach to the marketplace. I believe there are several things that indicate our sensitivity to the issue.

• First and foremost, we have a very clean and simple product portfolio. As an example, all of our products provide the full account value at death, including the bonuses on our bonus products. We also do not have two-tiered products, which are products that require a customer to annuitize to receive the full benefits under the contract. Another example is that on our index annuities, there is only one moving part, which makes our product easier to understand for the client and the agent.
• From an education and suitability standpoint we are also proactive. We require every agent to walk through a product disclosure form with their client, which details all of the product features like the surrender charges, free withdrawal provisions, nursing home waiver, etc. We also require the completion of a needs analysis form, which is designed to determine if the sale is suitable for the client, and for the agent and the client to walk through this together. We require that these forms be filled out and signed at the point of application. We require this Needs Analysis form in all states for all ages and will not accept any application in-house without both of those forms.
• Last year our staff worked with the Iowa Insurance Division and Insurance Marketplace Standards Association to develop industry standards for index product sales relating to suitability, training and product disclosure.

These standard practices and our actions demonstrate that we are committed to maintaining our high ethical standards in all aspects of our business.

You may have seen on Wednesday we announced the addition of Richard Kypta to our management team. Rich will serve as Senior Vice President and General Counsel, replacing Steve Morain who retires from FBL after 30 years of dedicated service. Rich comes to FBL with great experience, most recently at Aviva USA and prior to that at Aegon, and I am sure he will be a great addition to our team.

To date, 2007 has been a very successful year and we have the strategies in place for continued success for the remainder of the year and beyond.

With that, I will turn it over to JoAnn Rumelhart for an update on Farm Bureau Life. JoAnn.

JoAnn Rumelhart
Executive Vice President, Farm Bureau Life

Thanks Jim. It's great to have the opportunity to update you on Farm Bureau Life Insurance Company, because the first half of 2007 has been excellent.

Sales results for the past quarter are encouraging, with premiums collected up 6%. For the second quarter of 2007, premiums collected were fairly evenly split between traditional and universal life insurance, traditional annuity, and variable product sales.

• Traditional and universal life insurance continues to grow within Farm Bureau Life. Life sales have been strong for the last several years and they continued that trend in the second quarter with premiums collected up 6%, to the highest level ever achieved by Farm Bureau Life. Since our life insurance business is profitable, persistent business for us - and really the bread and butter of what we do at Farm Bureau Life - it's a very positive achievement.
• Looking at this business from a face amount perspective, in the second quarter we issued $1.4 billion of face amount. This compares to $1.1 billion face amount issued in the first quarter of 2007, with a total in force of $39.7 billion on June 30.
• Our return of premium rider continues to be a popular option on term insurance, with 50% of all eligible Choice Term policyholders choosing this rider.
• Similar to the industry, our traditional annuity premiums are down, but they are starting to level off. This quarter traditional annuity premiums collected were down 2% from the second quarter of 2006 and totaled $36.6 million.
• Variable product premiums collected, on the other hand, were up 14%, reflecting strong variable annuity sales, which totaled $38.3 million, surpassing traditional annuity sales.

In addition to growing Farm Bureau Life's sales, we're also focused on expense control. Behind the scenes we're working on implementing an automated work distribution system. When fully implemented, we expect use of this system to further streamline our operations and increase efficiencies.

Our agents remain focused on needs-based selling to the Farm Bureau niche marketplace using our full line of life insurance and annuity products. Our strong affinity and brand awareness provides us with a unique market proposition and competitive advantage. With this foundation, Farm Bureau Life is making steady and consistent progress each quarter and I expect this positive momentum and direction to continue.

We at Farm Bureau Life will deliver on our goal of contributing consistent, predictable and sustainable organic growth and results to FBL's bottom line.

Before I conclude, I'd like to mention that Farm Bureau Life was recently named to Ward's 50 Benchmarking Group, which is a list of the 50 top-performing life insurance companies in the United States. I'm proud to say that this marks the 11th consecutive year Farm Bureau Life has received this recognition.

Now, Jim Brannen will provide the financial review. Jim.

Jim Brannen
Chief Financial Officer

Thanks JoAnn, and good morning everyone.

As Jim stated, results for the quarter were excellent with record net income of $1.12 per share and record operating income of $0.80 per share.

Before I delve into operating income, I would like to first make a few comments on the adjusting items between operating income and net income and the impact of those. This quarter the difference between operating income and net income was a positive $0.32 per share. Of this, $0.05 related to net realized gains on investments and $0.27 related to the net change in unrealized gains and losses on derivatives as calculated per FAS 133. The FAS 133 adjustment was particularly high this quarter due to the impact of an increase in the discount rate used in calculating our FAS 133 reserve on index business. The risk-free rate at the long end of the curve shifted up about 40 basis points from March to June. While this is positive and contributed to net income, it could also have the opposite impact if rates decrease. In part because of this volatility, the FAS 133 adjustment is backed out of net income in calculating operating income.

I'll now turn to operating income and highlight some of the items that impacted our results this quarter. " Following a quarter of increased death benefits, this quarter our mortality experience was very good with lower death benefits that were within our range of expectations.

• Investment income increased 20% for the quarter, primarily due to an increase in invested assets. We also benefited from additional investment fee income, which totaled $3.0 million for the quarter. This fee income represents income from bond calls and prepayments as well as the impact from FAS 91 for the reversal of net discount accretion on mortgage and asset-backed securities. We expect to have some of this fee income every quarter and the impact this quarter was not out of line, but it was an increase from the second quarter 2006 amount of $1.4 million.
• We did have some unlocking during the quarter as part of our routine review of the assumptions used in the amortization of deferred acquisition costs and deferred sales inducements. The unlocking adjustments did not have a significant impact in total, but they did vary by segment and block of business. Please see the DAC rollforward that we provide in our financial supplement on page 13. Of note was the impact to the independent annuity segment. A variety of assumptions regarding lapses, mortality, earned rates and crediting rates were updated. This unlocking increased the earnings this quarter on our coinsured business while at the same time decreased the earnings of our EquiTrust Life independent channel business.
• Earnings from our EquiTrust Life independent channel totaled $0.07 per share this quarter. The unlocking I just discussed negatively impacted these results by $0.04 per share. Excluding the impact of unlocking, this business contributed $0.11 per share in the second quarter, up $0.02 per share from the pre-unlocked results in the first quarter of 2007.
• Our closed block coinsurance business from American Equity continues to be profitable for us. This quarter it benefited by $0.04 per share from unlocking and contributed $0.13 per share to operating income. Excluding the unlocking benefit, results for this business for the quarter were $0.09 per share, which is a typical run rate for this closed block.
• Looking at segment results, I would like to point out that the variable segment operating results were favorable, primarily due to favorable mortality experience and the impact of increased market performance.

Next, I'll turn to spreads. As of June 30, our direct individual fixed annuity - exclusive distribution business had a spread of 169 basis points on a statutory basis, which is currently below our target for this business of 182 basis points. For our direct universal life business, our spread on a statutory basis narrowed by five basis points during the quarter to 185 basis points, but still remains above our target spread for this business of 183 basis points. Additionally, this week we made a 10 basis point decrease to the credited rate on our primary universal life product, further increasing the spread for this business.

Spreads for our direct EquiTrust Life independent channel business widened during the quarter. You will notice in our financial supplement on page nine we have provided additional spread disclosure for our traditional annuity - independent distribution segment. We are now breaking the spread detail out between fixed rate annuities and index annuities. This detail provides you with greater insight into these products. While their priced ROEs are the same, their spreads are quite different. The fixed rate annuities, our multi-year guarantee annuity business, have lower commissions and other product features associated with them, so that their required spreads are lower. As of June 30 on a statutory basis, the spread for our EquiTrust Life independent channel fixed rate annuity business was 96 basis points, widening by nine basis points during the quarter and above its target of 83 basis points, for an excess spread of 13 basis points. The spread for our EquiTrust Life direct index annuity business also widened during the quarter to 224 basis points, but remains below its target spread of 232 basis points. This shortfall reflects elevated option costs.

As Jim mentioned, we are very focused on the profitability of this business and are making pricing and rate decisions by balancing our desire for sales growth with our profitability and return on equity objectives for this business.

Our earnings outlook for the remainder of 2007 is positive. With the announcement of our earnings yesterday, we did increase full year 2007 operating income guidance to a range of $2.95 to $3.10 per share and 2007 net income guidance to $3.35 to $3.50 per share.

Our capital levels remain strong. As of June 30, our total capitalization was $1.2 billion, with Farm Bureau Life and EquiTrust Life exceeding the capital levels required to maintain our "A" ratings from AM Best and Standard & Poor's. Risked based capital levels remain high with a company action level of 423 estimated for Farm Bureau Life and 285 estimated for EquiTrust Life at June 30. At June 30, 2007, we had cash and investments of $99.6 million at the holding company level to support our growing operations. Our debt-to-total capitalization ratio is at 25.8%, what I consider a reasonable and appropriate level.

I would like to discuss the topic of subprime mortgage exposure. Let me begin by saying that our exposure here is very minimal. We have three subprime securities with a market value total of $29 million. That represents 0.2% of our total investments. These issues are all rated AAA, are fixed rate, were originated in 2005 or before and have subordination levels that have increased since they were originally purchased. These issues are seasoned, they've improved overall and I don't expect there to be a problem with them going forward, especially given the build up in subordination.

Our investments in CDOs is small as well, and make up $40 million, or 0.4%, of our investment portfolio. Only one of our CDO investments has exposure to the subprime market, with just a portion of it backed by subprime collateral. So exposure here is very limited as well.

As you're aware, the majority of the problems we're witnessing in the subprime market right now are related to adjustable rate mortgages and to the most recent vintage paper, 2006. We have not invested in adjustable rate mortgages because, in our opinion, the related risk is not worth the additional yield on these securities. Obviously that's borne out with the markets currently, so we're pleased that this is a category we avoided.

We did have a couple of other-than-temporary impairments during the quarter, but they did not relate to any of the subprime issues. They totaled $2.4 million and were for newspaper and military housing bonds.

I'd like to take a step back now and discuss our total investment portfolio. We diversify our investments by individual issue, industry and asset class. Our portfolio is of high quality, with 96% being investment grade. We are very disciplined in terms of sector weightings and security selection.

• The majority of our investments, 62%, are in fixed maturity securities. The majority of these are corporate bonds. Over the last several years we have been investing new money primarily in corporate bonds as we worked to reduce our exposure to structured products.
• Investments in structured products - residential mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities - make up 24% of our investments and have a carrying value of $2.4 billion. This allocation to structured products is relatively high compared to other life insurance companies, but they have served us very well. We purchased these securities when we felt they offered a very attractive risk return scenario. Our mortgage-backed securities are agency or private label issues. All of them are fixed rate, AAA rated, and the majority are very simple structures. They're either direct pass throughs, sequential payers, or PAC structures.
• Commercial mortgage loans comprise 11% of our investment portfolio. These are seasoned and well diversified by geography and property type. We underwrite these very conservatively, and have a long history of extremely low delinquency rate

With our high quality and diverse investment portfolio, we are very well positioned. We will obviously monitor very closely the small subprime exposure that we have, but I do not expect the market conditions to have a significant impact on our portfolio.

With that, we will now turn the call over to the operator and open it up to any questions you may have.

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