Jim Hohmann
Chief Executive Officer

Good morning.

I am pleased to begin this call by reporting outstanding second quarter results, with net income of $0.81 per share and operating income of $0.86 per share. In spite of a global financial crisis, we have recorded strong earnings and improved our balance sheet. Jim Brannen will be discussing this in more detail when he reviews our financial results.

Meanwhile, I will update you on how I have directed my attention and focus during these initial months.

Today, in our industry, capital management is more critical than ever, so I have directed efforts and resources towards work to conserve and strengthen our capital position. We've also focused heavily on our investment portfolio and improving our asset/liability position. Another area of focus has been our EquiTrust Life subsidiary and its strategy.

Our estimated June 30 RBC ratio for Farm Bureau Life is 354%, while EquiTrust Life ended the second quarter at 274%. Our goal is to maintain Farm Bureau Life in that 350% range and to move EquiTrust above 300 as soon as we can and then to increase it from there. We want to maintain a capital cushion for the impact of potential future ratings migrations or impairments in our investment portfolio. We are devoting considerable resources to developing, analyzing and evaluating a variety of strategies to improve our capital position.

We advanced one of these strategies prior to the end of the second quarter with a partial repositioning of the EquiTrust Life portfolio. Approximately 10% of that portfolio, or about $559 million in market value of fixed-income securities, was repositioned. This allowed us to rebalance the investment portfolio by reinvesting into different fixed-income securities, and to achieve multiple corporate and portfolio management goals at the same time. The security sales strengthened capital by generating approximately $26 million in pre-tax capital gains or about $17 million after-tax. Under statutory accounting rules, the capital gains generated in this transaction served to directly increase statutory surplus.

A key objective while reinvesting the proceeds was to minimize the reduction in the portfolio yield. This early action had several other effects; specifically it:

• improved the overall portfolio liquidity,
• enhanced the aggregate credit profile of the portfolio by decreasing the allocation of BBB corporate bonds
• improved duration and cash-flow matching and
• diversified the overall portfolio across asset classes, sectors and individual issuers.

Jim Brannen will have more to say about this and other aspects of our investment portfolio during his comments

In addition, we've identified a variety of strategies for further increasing our capital base. These strategies are currently under analysis and may include some utilization of reinsurance. At this time, we likely will not access the capital markets in the near term, however, we want to be prepared for the possibility. Accordingly, we intend to file a shelf registration during the third quarter.

From an asset liability management perspective, we have unified accountability for that function with an Enterprise level ALM Committee and we are refining our measurements and management tools.

Beyond this focus on capital, the investment portfolio and ALM, I am concentrating on our EquiTrust Life subsidiary. I am committed to the strategic intent of EquiTrust, which is to broaden FBL Financial Group and deliver profitable growth. But as you well know we have experienced some challenges with the current EquiTrust business model, as it is too narrow. My goal is to create a more diversified, sustainable business model for EquiTrust Life.

As part of that process we have completed an in-depth assessment of EquiTrust's capabilities and points of competitive differentiation as well as a review of the consumer, agent, intermediary, competitor and regulatory landscape.

Following this rigorous analysis, we are defining a strategy which we call the EquiTrust Reinvention, that has several key elements. While our work is still in process, indications are that EquiTrust Life can succeed by being more innovative and diversified across product lines and risks, while becoming more focused in terms of its distribution relationships and target customers. Ideally, this strategy could leverage EquiTrust's technology platform and distribution relationships and realize synergies among EquiTrust and Farm Bureau Life.

Before turning it over to Jim Brannen, let me share that in the three months that I've led FBL Financial Group, the values and integrity that I expected to find among employees and agents have been affirmed and demonstrated. We continue to put forth, not merely best efforts, but an "all efforts" approach, for the benefit of our customers, shareholders and the company.

So with that I will turn it over to Jim Brannen. Jim.

Jim Brannen
Chief Financial Officer

Thanks Jim, and good morning everyone.

As Jim stated we had very strong second quarter financial results with net income of $0.81 per share and operating income of $0.86 per share. In addition investment market values improved significantly and our book value increased to $19.39 per share from $8.84 per share at March 31.

I'll focus my comments today on our second quarter sales and financial results, investment portfolio and capital position.

Starting with sales, Farm Bureau Life's second quarter 2009 sales totaled $146.1 million, a slight increase over the second quarter of 2008. Traditional annuity sales were up a strong 14%, and while still very positive, are increasingly being impacted by competing rates on certificates of deposit. Traditional and universal life insurance premiums collected increased by 5%, while variable sales continue to be under pressure given that state of equity markets and were down 35%.

Premiums collected at EquiTrust Life, on the other hand, were lower in the second quarter and totaled $199 million for our independent channel. This slowing of sales was by design as we took a series of steps which would have that effect. In order to increase profitability and manage capital in our EquiTrust Life subsidiary, in mid-May we removed our high capital strain products and made changes to the rest of the products so that there is now little to no capital strain with new sales. Since that time we have made a few product changes in order to strike a balance between what is attractive to agents and consumers and what meets our pricing and profitability targets.

As we reported last quarter, the issue of increased surrenders has significantly diminished since hitting a peak in January. To illustrate, total surrender and transfer requests declined from $253 million of account value in January to $23 million in July. The July levels would be considered in our normal range. The decline is primarily the result of the increase in Treasury rates. The 10-year Treasury rate was above 3.00% for most of the second quarter and yesterday closed at 3.79%. This compares to 2.24% at year end. With a 10-year Treasury rate above 3.00%, surrender charges on our products provide much more appropriate protection.

As a result of this experience, we have made a number of changes.

• We have ongoing conservation programs in place.
• We have revised our market value adjustment formula and are now in the process of filing our products with this revised formula. Our new MVA formula will be based on current fixed account credited rates instead of Treasury rates and we've also put limits in place which reduce the maximum effect that an MVA can have on the effective surrender charge.
• In order to protect ourselves from this happening again, we have hedged EquiTrust Life's exposure to a significant drop in Treasury rates by purchasing discounted Treasury securities.

Next, I'll turn to our second quarter results. Operating income was $0.86 per share for the quarter, which is very strong, particularly given the last few quarters we have had. While very positive, I do need to point out that certain of these items provide a one-time benefit.

• Results for our EquiTrust Life independent channel increased $0.20 per share from an increase in the effective surrender charge rate on contracts surrendered during the quarter as well as the impact of a decrease in the level of excess surrender activity from that assumed in our DAC models. This income is not considered to be recurring as we believe the excess surrender issue is behind us.
• An improvement in equity markets and separate account performance resulted in less DAC amortization for our variable segment. We use a mean reversion approach and any positive equity market performance in excess of the cap flows through current period amortization and resulted in a benefit of approximately $0.07 per share this quarter.
• During the quarter we unlocked our EquiTrust Life Insurance blocks of business and changed certain assumptions including mortality, persistency and spreads. In total, this decreased income $0.03 per quarter.
• Mortality experience can fluctuate from quarter to quarter, and this quarter I would describe the level of death benefits as being good and a bit lower than our baseline expectation, but still within what we consider a normal range. This is an improvement over our experience in the first quarter and in 2008.
• In 2009 we have been implementing a variety of expense savings initiatives. We've incurred some costs relating to those initiatives, but overall our expense levels are lower across all operating segments.

Now let me turn to spreads. As of June 30, spreads on our exclusive annuity business increased by three basis points during the quarter to end June at 160 basis points on a statutory basis. This increase reflects a 20 basis point crediting rate decrease which was made on several annuity products in June. While improving, this spread remains below our target for this business of 167 basis points.

For our universal life business, our spread on a statutory basis ended the quarter at 183 basis points. This remains above our target spread for this business of 180 basis points, for excess spread of three basis points.

During the quarter spreads for the index business in our independent annuity segment remained fairly steady, but are still below our target of 241 basis points. The spread for the fixed rate business in our independent annuity segment was impacted by the portfolio repositioning. While this repositioning accomplished several portfolio management goals, it did cause the yield on securities backing our fixed rate securities to decline, which resulted in the spread declining to 79 basis points at quarter end, which is below our target for this business of 95 basis points. We still have some repositioning proceeds to reinvest, so this spread is likely to improve.

Turning to our investment portfolio, as of June 30, 2009, FBL Financial Group held fixed maturity securities with gross unrealized losses of $1.2 billion. When combined with securities with unrealized gains, this nets to $1.1 billion, which is a significant improvement from the $1.6 billion net unrealized loss position at March 31. We saw the most significant improvement in the valuations of our corporate bonds, particularly those in the financial services sector and other highly rated corporates.

The net unrealized loss at June 30 continues to reflect wider credit spreads rather than specific credit deterioration. These assets continue to perform and we expect to hold them until recovery of value or maturity. Our portfolio remains of high quality, with 93.5 percent of the fixed maturity securities being investment grade.

As Jim mentioned, we are working to optimize our investment portfolio. The EquiTrust Life portfolio repositioning in June allowed us to reduce our holdings in residential mortgage backed securities and corporate bonds and increase our cash and municipal bond holdings. With this repositioning, we also improved the credit of the portfolio by reducing our holdings in BBB securities.

Despite the sale of certain BBB securities, our allocation to BBBs did grow during the quarter. That is largely a reflection of ratings downgrades. While we were not intending to increase our BBB allocation, we see some counterbalancing effects from the fact that we are underweight in other more risky asset classes such as foreign and alternative. Nonetheless, we will continue to monitor and manage our BBB exposure.

We had other-than-temporary impairments this quarter of $27.4 million impacting earnings. These impairments were on a several securities, including CIT Group, a CDO and a corporate bond in the retail sector among others, as well as further write-downs to several previously impaired securities.

Finally, I'll comment on capital and liquidity. At June 30 we estimate that company action level Risk Based Capital was 354 for Farm Bureau Life and 274 for EquiTrust Life. This reflects a slight decrease for Farm Bureau Life during the quarter, but a larger decrease for EquiTrust Life, primarily due to the impact of the Mortgage Experience Adjustment Factor. As Jim stated, we continue to work on several possible solutions for increasing capital.

Our debt-to-total capitalization ratio, with equity credit for our trust preferreds, is at to 20.8% at June 30. We do not have any debt due until 2011, and that debt is the $100 million of senior notes we have with affiliates.

We maintain liquidity in the form of cash and short-term investments, which as of June 30 totaled more than $540 million. This elevated level reflects our desire to have additional liquidity as well as proceeds from some of our portfolio repositioning that had not yet been reinvested as of June 30. Should additional future liquidity be needed, we also have access to funding through the Federal Home Loan Bank.

In closing, we are optimistic about FBL's future, having successfully navigated through the economic storm of the past few quarters.

That concludes my prepared comments. We will now turn the call over to the operator and open it up to any questions you may have.

Kathleen Till Stange
Investor Relations Vice President

(After Q&A) Hearing no more questions, let me turn it over to Jim Hohmann for some closing comments.

Jim Hohmann
Chief Executive Officer

Thank you, Kathleen and thank you again to everyone who joined us on the call today.

While we are pleased to have shared with you the actions we took in the second quarter to manage capital, improve the investment portfolio and strengthen our financial position, we will not be resting on these early accomplishments. These efforts remain our daily priority and they do advance on a daily basis.

Beyond these financial efforts, our team is excited and energized by the work we are doing on EquiTrust Life's strategy. We are seeing lots of possibilities to add breadth and diversity to our company, further positioning FBL Financial Group for future growth and positive results.

So with that, let me close the call. Thank you very much for joining us and that you for your continued interest in FBL Financial Group.

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