Jim Noyce
Chief Executive Officer

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

As you saw from the release, it was somewhat of a mixed quarter. Our second quarter operating income results of $0.70 per share were well ahead of the disappointing operating results of $0.50 per share for the first quarter of this year. Jim Brannen will get into the details when he covers the financial results, but from a very high level we had two items that cost us a few pennies or so this quarter. Unlocking on DAC and deferred sales inducements cost us a penny per share this quarter on an operating basis and investment prepayment fees were essentially nonexistent. Given that these worked against us, we feel the overall result was reasonably good.

On a net income basis, results for the quarter were not positive, with a net loss of $0.56 per share. This is primarily the result of one group of securities that were deemed other-than-temporarily impaired. Jim Brannen will provide more detail on these impairments, but I want to tell you that with these impairments we now feel like we've addressed the group of assets which were causing us the most concern.

Another issue that may impact our business is the SEC's proposed rule on index annuities. I've asked John Paule to speak on the call today about what's happening there and what we are doing to respond. Then, Jim Brannen will review the quarterly results, investments and capital position. But before we do that, I'll discuss sales and other highlights from the quarter.

A strong point during the quarter was sales. In total, premiums collected were up 66% from the second quarter of last year to $694 million with increased sales levels at both Farm Bureau Life and EquiTrust Life.

First - Farm Bureau Life. Following a 9% increase in the first quarter of this year, Farm Bureau Life had an 18% increase in premiums collected for the second quarter, so they have had a great first half of the year from a production standpoint. Traditional annuity sales continued to be strong again this quarter with sales up 76%. Traditional and universal life insurance sales were up 2%, which is positive given that life sales have been at record levels for the last few years. And variables sales were down 16%, which is not surprising given the volatile equity markets this year.

Our Farm Bureau Life agents continue to focus on needs-based selling to the Farm Bureau niche marketplace using our full line of life insurance and annuity products which meet the needs of our policyholders in various stages of their lives and economic scenarios. Our universal life product with a secondary guarantee, which was introduced in the first quarter, has been well received by agents and customers.

Farm Bureau Life was recently recognized as one of the Ward's Top 50, which is a list of the 50 top-performing life insurance companies in the United States. This is the 12th consecutive year Farm Bureau Life has received this recognition.

Farm Bureau Life's strong affinity and brand awareness provides FBL with a unique market proposition and competitive advantage. With this foundation, Farm Bureau Life continues to deliver solid earnings and steady growth, while at the same time generating capital for FBL.

Now, I'll turn to our EquiTrust Life independent channel, which had premiums collected of $538 million during the quarter, which was a significant increase of 93% over the second quarter of 2007. Of this $538 million of sales, 30% was from index annuities, 6% from immediate annuities and 64% from our multiyear guarantee annuity products.

This mix of business for the quarter reflects several things.

• First, our index annuity sales, while significant at $160 million, were down 28% from the second quarter of last year. We've been in a period of time where many index annuity crediting strategies are not paying off and clients are attracted to products offering a guaranteed return, which has further increased the interest in our multi-year product. At the same time, our lack of an income rider on our index products may have been impacting sales levels. Just last week we introduced the EquiTrust Income for Life rider. This rider offers guaranteed lifetime income, while still maintaining all of the benefits of the fixed deferred annuity. We feel that our rider is competitive with that of other carriers.
• Sales of our single premium immediate annuity continue to rise at a steady pace and in the second quarter accounted for $31 million of premiums collected.
• Sales of our multiyear guarantee annuity during the quarter were significant, with second quarter sales of $347 million, which is well above the level of $44 million in the second quarter of 2007. This business is extremely rate sensitive, and at times when our rates compete favorably with other products vying for the same dollars, like bank CDs, the product has generated very high levels of production. With the steeper yield curve, beginning on May 9th we were able to offer a 5% guarantee on our 5-year MYGA. This rate drove significant sales volume for the quarter.

Jim Brannen will be discussing our capital position in his comments, but given this high rate of growth and related use of capital, we are taking steps to limit this growth. For example, with our 5-year MYGA product, we lowered the rate to 4.85% on July 7th. We still expect to generate growth in FBL's asset base, albeit at maybe a slower growth trajectory, plus we expect the margins to be higher.

Now, I'll turn it over to John Paule to discuss the SEC's proposed rule on index annuities. While we don't know what will happen, it certainly is possible that in the future we will have a more regulated environment for index annuities. Whatever the outcome is with this proposed rule, I am confident we will be able to adapt our EquiTrust business model as necessary and continue to thrive.

John Paule
Executive Vice President - EquiTrust Life

Thanks Jim. I'll walk you through what has happened on the regulatory front, our position on the rule and what we're doing at this point in time.

On June 25, the SEC published for public comment proposed Rule 151A which would require index annuities to be regulated by the SEC. Under this proposed rule, index annuities would be considered a type of security, and all agents selling the product would need to be registered representatives affiliated with a licensed broker dealer. We expected the SEC to come out with clarification, but we, along with most all industry participants, did not expect anything this far reaching.

We issued a news release shortly after Rule 151A was announced stating that we oppose SEC regulation of index annuities. The proposed rule is too far-reaching and is inconsistent with existing law, given that index annuities are traditional fixed annuities which fall under the jurisdiction of state insurance departments.

The primary reason we are opposing the proposed rule has to do with risk transfer. With an index annuity, the amount of interest credited is tied to the performance of an index, in our case, the S&P 500. The amount of interest credited, that an annuitant receives, is impacted by the performance of this index, but only to the extent that it is above the minimum guarantee. We still bear the counterparty risk for the call option purchased to fund the index performance, plus all of the investment risks associated with the general account. And as evidenced by the impairments taking place in the industry this year, these investment risks are significant and include default risk, interest rate risk, liquidity risk, disintermediation risk and prepayment risk.

We also believe that the state insurance department initiatives adopted in the last few years address most of the concerns expressed by the SEC. The suitability regulations, disclosure requirements, continuing education requirements, and other state initiatives adopted over the last several years have substantially reduced the problems referenced by the SEC in its release accompanying the proposed rule.

We are taking several steps to address Rule 151A.

• Internally, at EquiTrust Life we are working on plans and alternatives for doing business under the proposed rule.
• And externally, we are working with state regulators, industry groups, outside counsel and other index annuity writers to develop plans to challenge adoption of this rule.

We're confident that we can transition to an SEC regulated environment, if the proposed rule is approved. We understand the regulated environment as EquiTrust Life and Farm Bureau Life are both variable product writers and have experience with registered investment products. We also have an active affiliated broker dealer, EquiTrust Marketing Services.

There is always the possibility that the SEC may withdraw the proposed rule, but if the rule is adopted, the SEC indicated that there would be 12 months between publication and the final rule becoming effective. We believe this would allow us adequate time to implement changes necessary for compliance.

Our desire is for the SEC to work with the state insurance departments and the NAIC, to learn of the work already done and the regulations already in place.

Index annuity products have been an important source of growth for FBL, but they are not the only product family offered by EquiTrust Life. As Jim mentioned in his comments, EquiTrust Life also sells multiyear guarantee annuities and immediate annuities and we estimate that 10% of FBL's 2007 operating income of $3.15 per common share was attributable to EquiTrust Life's direct index annuities.

In a few short years, EquiTrust Life has built a strong and valuable business model that has demonstrated its ability to produce top and bottom-line results. The company has produced a portfolio of products and built an independent distribution system. The scaleable infrastructure foundation is based on best practices and regardless of the outcome of the SEC actions, we are confident in our ability to adapt and be successful.

Jim Brannen
Chief Financial Officer

This morning I'll be covering three topics: our financial results, our investment portfolio, including the impairments taken this quarter, and our capital position.

To begin with, our results. As Jim indicated, with operating income of $0.70 per share it was a solid quarter and a definite improvement when compared to our first quarter operating results - and this is in spite of the couple of things working against us that Jim mentioned.

The biggest reason for the improvement from first quarter is mortality experience this quarter which was in line with our expectations. Death benefits for the quarter totaled $24.6 million, which compares to $29.4 million in the first quarter of this year and an average of $23.4 million for the last five quarters.

Investment income increased 11% for the quarter, primarily due to an increase in invested assets. This quarter investment income did not benefit from fee income like it did in the second quarter of 2007 when we had investment fee income of $3.0 million.

Spreads increased this quarter in all product segments, but are still under pressure in some segments. As of June 30, spreads on our exclusive annuity business increased by a couple of basis points to a spread of 163 basis points on a statutory basis. However, this is below our target for this business of 178 basis points. We took crediting rate decreases on this business in March and April due to the investment yield in this segment being negatively impacted by a loss on some fixed-for-floating swaps we have backing this business. Despite these actions, we continue to see some spread pressure on this line as some of the business, primarily our older acquired blocks of business, is at guaranteed rates. And much of this business is out of its surrender charge period, so we're especially sensitive about maintaining crediting rates that provide enough to existing policyholders so that the business is persistent.

For our direct universal life business, our spread on a statutory basis increased by four basis points during the quarter to 194 basis points. We remain well above our target spread for this business of 182 basis points.

The spreads for our EquiTrust Life independent channel fixed rate annuity business increased by one basis point during the quarter to 99 basis points on a statutory basis as of June 30, which is above our target of 94 basis points, for excess spread of 5 basis points.

Spreads on our EquiTrust Life direct index annuity business also improved this quarter, with an increase of seven basis points to 228 basis points on a statutory basis. This is positive and is the second quarter in a row that spreads for this business have increased. However, it is still below our target spread of 235 basis points. Some of the relief during the quarter came from higher investment yields as well as option costs coming down a bit due to lower volatility in the second quarter.

Unlocking of deferred policy acquisition costs and deferred sales inducements occurred on several blocks of business this quarter with various mortality, withdrawal and surrender assumptions updated based on our actual experience. This unlocking decreased operating income by $0.01 per share. This decrease consists of an increase in deferred sales inducement amortization, partially offset by a decrease in the amortization of deferred acquisition costs.

With our earnings release yesterday, we reiterated our 2008 operating income guidance range of $2.70 to $2.85 per common share. We expect full year operating income to be within this range, but given our results for the first half of the year, our outlook and the current economic environment, we would now steer towards the lower end of the range.

Now I'll turn to investments and the other-than-temporary impairments we took this quarter. Our realized losses totaled $74.0 million, which amounted to $42.6 million after tax and other offsets. Included in this amount are gross impairments of $78.0 million. The large majority of this amount relates to one group of assets - Alt-A asset backed securities with second lien home equity loan collateral wrapped with insurance from FGIC. These securities were all AAA rated when we purchased them. The pricing on this group of assets deteriorated from around 53 at the end of the first quarter to an average of 32 at the end of the second quarter. Even though the securities are still performing, given the price deterioration, the current level of losses in them and the further downgrades of FGIC by the rating agencies it is our desire to address these losses now. After disclosing potential issues for these securities last quarter, we are happy that we have addressed the investments that were giving us the most concern. And, during July we were opportunistic and sold 3 of 13 of these impaired investments where prices had significantly improved from June 30, and will record a $2.2 million gain from them in the third quarter. Pricing on the remainder of these securities at July 31 is similar to the June 30 levels but underlying losses in the deals slowed during the month of July, which is a good sign.

Now I'll review some other aspects of our investment portfolio. 24% of our investments are comprised of mortgage and asset backed securities. These securities have a carrying value of $2.7 billion and an unrealized loss of $222 million. Aside from the impairments we took this quarter, we are comfortable with the performance of the underlying collateral of these securities. We have expanded the investment disclosure in our Form 10-Q and have provided additional detail on these securities including collateral type, vintage year, ratings and additional enhancement via insurance.

Our investment portfolio's allocation to structured products hit its peak in 2004 and has been declining since that time as we put most of our new money into corporate bonds. The majority of our residential mortgage backed securities are in the 2003 and 2004 vintage years, with subordination that has increased since origination. These securities are agency or private label issues and are all fixed rate with no exposure to adjustable rate mortgages. In addition, the majority of our residential mortgage backed securities are very simple structures - either direct pass throughs, sequential payers, or PAC structures.

We have minimal exposure to subprime securities. At June 30, we had three subprime securities with a market value totaling $26 million. This exposure is small and represents only 0.2% of our total investments. These subprime issues are all performing well, are AAA-rated, fixed rate and were originated in 2005.

The quality of our overall portfolio remains high. Over 96% of our fixed maturity securities are investment grade and this percentage has actually increased a little over the past year.

We're monitoring our portfolio very closely and have a formal process in place for determining other-than-temporary impairments. All securities that have a market value 15% less than carrying value automatically go on our watch list.

As of June 30, we had securities with gross unrealized losses of $635 million, with much of this having been in an unrealized loss position for more than a year. This reflects the fact that we have had tremendous growth in assets over the last several years due to growing sales at EquiTrust Life. These investments were put on in a low interest rate environment and the unrealized losses reflect primarily interest rate changes that have occurred.

All securities on our watch list are reviewed in detail to determine if they should be impaired. In addition to the decline in price and the length of time the price has been down, we also look at cash flows, our intent to hold to maturity and other facts and circumstances specific to the security. While our watch list has definitely grown, the majority of it has to do with spread widening and the level of interest rates. We have performed a detailed analysis and believe that the securities with credit specific issues comprise a small part of our watch list. Given interest rates, due to the timing of when many of our securities were purchased, many of them may remain in an unrealized loss position, while still performing, for quite some time.

Our impairment process is reviewed by our external auditors and the Audit Committee of the board. While we are not pleased to take impairments in the quarter, we feel they reflect our honest assessment of the market. We're particularly glad to have the issue of the FGIC wrapped impairments addressed.

That's not to say that we could not have future impairments, particularly given that we have an investment portfolio of over $11 billion with unrealized losses embedded in it, and that the credit cycle may continue to deteriorate.

Lastly, I'll discuss our capital position. As of June 30, our total capitalization, excluding AOCI, was over $1.2 billion. Farm Bureau Life continues to be a steady producer of capital, while EquiTrust Life, given its high production levels, has been a net user of capital. At the end of the first quarter we had cash and investments of $55 million at the holding company. In order to support the growth at EquiTrust Life, approximately one half of that was contributed to EquiTrust Life at the end of June and the remainder will be contributed in the third quarter. We continue to target the capital levels required for our "A" ratings from A.M. Best and Standard & Poor's.

At June 30, 2008, we estimate that Farm Bureau Life has approximately $45.9 million of excess capital and EquiTrust Life, after the infusion of available capital at the holding company, has a very small capital need. In order to have more than sufficient capital to support our operations, we are working to expand our bank line of credit and expect any incremental borrowings to be less than $100 million. Our debt-to-total capitalization ratio, with equity credit for our trust preferreds, was 17.7% at quarter end with securities at cost, so we have adequate room there to increase our leverage.

At the same time that we are obtaining this additional capital, we are also taking steps to allow our businesses to be more self-sustaining from a capital perspective. Given the current high cost of raising additional capital beyond this bank debt, we believe that this is prudent given the existing environment. As Jim mentioned, we have slowed top line growth at EquiTrust and will manage our multiyear guarantee business for smoother and more predictable growth, along with increased product profitability and/or less risk. And we're also evaluating other alternatives, such as reinsurance.

To conclude, the current economic environment is challenging, but manageable. With our solid business fundamentals, I'm confident that we will navigate through these challenging times very well.

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