Jim Noyce
Chief Executive Officer

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

Current economic conditions and market turmoil have created challenges for FBL just like almost everyone else, but fundamentally and operationally our companies are strong and continue to perform and serve their respective markets.

Jim Brannen will discuss our financial results, but overall, they were acceptable considering current extraordinary markets conditions. Operating income came in at $0.62 per share and net income was $0.37 per share. We did have $12.7 million of impairments, after tax and offsets, which brought our net income down. These impairments primarily related to some of the headline names - Lehman and Washington Mutual.

I'd like to take a moment and tell you strategically how we are dealing with the current environment and its impact on us. Our focus primarily is on two things:

• Number one, making sure we are managing within our means from a capital perspective. In a moment, I'll update you on our activities to slow the sales growth at EquiTrust Life in order to achieve this first goal.
• Second, raising additional capital, not for growth but to make sure we do have what we call dry powder, or additional financial flexibility. This is so we have the capital necessary for at least the A ratings which we target, in addition to having excess capital in the event there are any future investment impairments. In that regard, we have successfully secured $100 million of new debt capital which Jim will discuss in more detail.

During the past quarter we have been taking steps to slow growth at EquiTrust Life. With its significant growth over the last several years, EquiTrust Life has been a net user of capital. Given the environment we are in right now and EquiTrust Life's maturity and scale, our desire is for it to be self-sustaining from a capital perspective.

During the third quarter we took three rate decreases at our EquiTrust Life independent channel. These actions reduced premiums collected from $252 million in July to $141 million in August and $103 million in September. Our goal was and is to level off at a run rate of $180 million per quarter, which equates to $720 million annually. Our modeling indicates this amount is breakeven from a capital perspective under neutral market conditions. At the end of September and in October we took further rate action, and additionally increased minimum required policy amounts.

We moved closer to achieving our desired level of premiums collected for the month of October and for the last two weeks are at those desired levels. Our pending count was 890 at the end of October compared to 2,563 at the end of June. These numbers are telling and demonstrate that we have been successful at reducing sales to levels that will allow EquiTrust Life to support its production with internally generated capital.

These steps were taken systematically in order to maintain the value of our EquiTrust Life distribution. While we are attempting to have sales levels at a capital neutral position, we still expect to generate growth in EquiTrust Life's asset base, plus we expect the margins to be higher.

Next I'll move on to Rule 151A. In our last conference call, John Paule provided an update on the SEC's proposed Rule 151A. Since that time, the SEC reopened the comment period for a 30-day extension. We oppose the proposed rule and participated in a coalition of index annuity writers who actively lobbied congressional leaders and members of the SEC during third quarter. The majority of the comments the SEC received were objections to the idea of the SEC sharing oversight over index annuities with state regulators, arguing that the products are clearly insurance, not securities, and that the concerns expressed by the SEC are being addressed by changes in state insurance regulation of the products.

We continue to work on our plans and options in the event that the SEC adopts this regulation. Whatever the outcome, I am confident we will be able to adapt our EquiTrust Life business model.

Now, I'll turn to our ratings. During the quarter our subsidiaries were downgraded by A.M. Best to A- (Excellent) with a negative outlook and our rating of A (Strong) was affirmed by Standard & Poor's, but a negative outlook was added. These rating changes coincide with recent changes by both A.M. Best and S&P in their outlooks for the entire life insurance industry to negative from stable.

Both of these ratings are very important to our companies, and while we are not happy with the downgrade, both Farm Bureau Life and EquiTrust Life are operating fine with A- (Excellent) ratings from A.M. Best.

While I'm disappointed with A.M. Best's decision regarding our ratings, both of our companies currently have strong capital levels. Jim Brannen will discuss our capital levels, but according to the A.M. Best BCAR model, at the end of the third quarter Farm Bureau Life held capital at an A.M. Best indicative rating level of A++ and EquiTrust Life held capital at an A.M. Best indicative rating level of A+.

A.M. Best expressed concern regarding the high level of growth in our annuity reserves, particularly at EquiTrust Life. As we communicated to you on our second quarter conference call and as we have regularly communicated to A.M. Best, we had previously implemented business plans that deal with their concerns and as you can tell from my earlier discussion, we have been successful with these plans.

We remain committed to maintaining the capital levels necessary for A or better ratings from A.M. Best and Standard & Poor's, and the business plans that we are currently executing are consistent with restoring our A.M. Best A (Excellent) ratings.

I have discussed EquiTrust Life's sales and now want to comment on Farm Bureau Life. For the quarter, Farm Bureau Life had premiums collected of $147.3 million, an increase of 41%. Traditional annuity sales continued to be strong again this quarter and were up 165%. Traditional and universal life insurance premiums collected were up 5%, and variable sales were down 16%, which is not surprising given the volatile equity markets.

Our concern over limiting sales does not extend to Farm Bureau Life as its sales levels are much more consistent. Farm Bureau Life has long been capital self-sustaining and regularly generates excess capital.

Farm Bureau Life's strong affinity and brand awareness continue to provide FBL with a unique market position and competitive advantage. Particularly during these times of market volatility and economic stress, our Farm Bureau agents and our full line of life insurance and annuity products provide value and support to the niche marketplace of Farm Bureau members.

As I mentioned, this week we secured $100 million of debt capital from affiliated Farm Bureau entities. This positive development was made possible because of our Farm Bureau relationships.

Because of all that is going on with financial markets and the economy, 2008 has been a challenging year for FBL as it has been for the entire industry. I'm proud of the way our employees and agents have been able to adapt to this difficult environment. This will allow us to navigate through the remainder of 2008 and into 2009, as we continue to act prudently for the benefit of our shareholders, policyholders, employees and agents.

With that I will turn it over to Jim Brannen for the financial review. Jim.

Jim Brannen
Chief Financial Officer

Thanks Jim, and good morning everyone.

This morning I'll be covering three topics: our financial results, our investment portfolio and unrealized losses, and our capital position.

As Jim indicated, our operating income is $0.62 per share. This is below our expectations, but given all that is happening with the financial markets right now, I consider them to be solid. The reasons for the shortfall from our expectations mainly come from two items: mortality experience higher than our expectations and results from our variable segment being impacted by the decline in equity markets.

As you know, mortality experience can fluctuate from quarter to quarter. Death benefits for the third quarter of this year totaled $27.5 million, compared to $21.0 million in the third quarter of last year and an average of $23.4 million for the last five quarters. These increased death benefits are due to adverse term life and variable universal life experience. Our analysis shows an average number of death claims, but a higher than average face amount. We have analyzed these results by geographic location, underwriting year, policy type, etc. and do not see anything other than a normal quarterly fluctuation. These death benefits were $0.06 per share higher than our expectations.

The other main difference from expectations was increased DAC amortization for our variable segment due to the decline in equity markets. For our VA and VUL business, we utilize a reversion to the mean approach in the calculation of DAC and have a long-term gross separate account growth rate assumption of 8.6%. The restriction on the calculated mean reversion rate is that it can not differ from the long-term growth rate assumption by more than the collar of 2%. Since we are currently hitting the upper collar on the mean reversion rate, in this case, 10.6%, we increased the DAC amortization in the third quarter by $3.2 million, which is $0.07 per share.

Note, this is not considered DAC unlocking since we have not revised our long-term growth rate assumption. We still feel our long-term return assumptions by asset class are appropriate, and at this time do not plan to make any changes to our variable DAC models in the fourth quarter.

Now let me turn to a few other components of our operating results.

Investment income increased 16% for the quarter, primarily due to an increase in invested assets.

Spreads at September 30 increased from June 30 for our annuity segments, but declined slightly for our traditional and universal life segment. As of September 30, spreads on our exclusive annuity business increased by 8 basis points to a spread of 171 basis points. This is very positive, but this business is still slightly below our target of 175 basis points. To increase spreads on this business, effective October 1st we took a 15 basis point decrease on our largest block of Farm Bureau Life annuity products.

For our universal life business, our spread on a statutory basis decreased by one basis point during the quarter to 193 basis points. This remains well above our target spread for this business of 181 basis points, for excess spread of 12 basis points.

The spread for our independent direct fixed rate annuity business increased by two basis points during the quarter to 101 basis points, which is above our target of 94 basis points, for excess spread of 7 basis points.

Spreads on our independent direct index annuity business also improved this quarter. With this increase of nine basis points we hit our target of 237 basis points. We view this to be very positive and is the third quarter in a row that spreads for this business have increased. The improvement during the quarter came primarily from lower option costs. This reflects more expensive options purchased in 2006 and 2007 maturing and being replaced with less expensive options in 2008.

Unlocking of deferred policy acquisition costs and deferred sales inducements occurred on several blocks of Farm Bureau Life business this quarter with various mortality, withdrawal and surrender assumptions updated based on our actual experience. This unlocking increased operating income by $0.01 per share.

With our earnings announcement yesterday, we stated that we are withdrawing our 2008 earnings guidance. The volatility in the marketplace and general economic and financial market conditions make it difficult for us to accurately estimate our earnings for the remainder of this year. Taking out the higher than average mortality experience and lower variable results, results for the third quarter would have been roughly $0.75 per share in a normal environment. But we're not in a normal environment and equity markets continue to deteriorate and that will affect the results of our variable segment. Plus, we'll have higher interest expense due to additional debt, which will also impact results going forward.

Now I'll turn to the other-than-temporary impairments we took this quarter. Our realized losses totaled $27.2 million, which amounted to $12.7 million after tax and other offsets. Included in this amount are gross impairments of $26.3 million. The majority of this amount relates to securities issued by Lehman Brothers and Washington Mutual, which totaled $16.9 million pre-tax. We also had a $5.7 million pre-tax impairment related to Kaupthing Bank, an Icelandic bank that was taken over by its government.

I also want to take a minute to walk through our investment portfolio.

At the end of the third quarter, we had investments totaling $11.3 billion. These investments are diversified by asset class, industry and individual issue. Our portfolio is of high quality, with more than 96% of our fixed maturity securities being investment grade. We are disciplined in terms of sector weightings and security selection and have limits in place for each credit exposure. This discipline is very important, but has not made us immune to losses, particularly when we find ourselves impairing formerly AAA-rated securities. I'll break our investments down by category and comment on each, starting with the credit category.

This category consists of corporate and municipal bonds. Over the past several years most of our new money has been invested in investment grade corporate bonds as we worked to decrease our exposure to structured securities. Corporate bonds comprise $5.3 billion, or 47.0% of our portfolio. 93% of these are investment grade and are well diversified by industry and individual issue.

Our largest sector within corporate bonds is the financial services sector. Our investments in financials include a diversified mix of banks - international, large U.S. and regional. In this sector we also have exposure to commercial REIT bonds. Note these are commercial REITS with hard assets backing them and not residential REITs.

Our corporate securities portfolio includes five CDOs. At September 30, these CDOs had a carrying value of $14.6 million and an unrealized loss of $37.4 million. These CDOs are backed by investment grade credit default swaps with no home equity exposure and are rated AA. Our review and analysis indicates that these securities could withstand more defaults without incurring any principal defaults on our issues.

The credit category also includes investments in muni bonds. We have $1.4 billion, or 12.0% of our portfolio, in muni's. Our strategy is to utilize these as a substitute for corporate bonds. We believe they provide additional diversification and have historically very low default rates when compared with corporate bonds. We underwrite these securities based on the underlying credit quality of the bond, just like we do corporate securities. We do not rely on the insurance wrap in our investment decision.

Our government securities total $301 million. That represents 2.7% of our portfolio. The majority of these are callable agency securities.

Our structured securities make up $2.7 billion, or 23.9% of our investment portfolio. They break down into residential mortgage backed securities, at 16.0%; commercial mortgage backed securities, at 6.5%; and other asset backed securities, at 1.4%.

Our 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.

We did take some other-than-temporary impairments for our other asset-backed securities in the second quarter. We did not take any additional impairments in this category in the third quarter. Given the impairments to date, we are comfortable with the performance of the underlying collateral of these securities.

The majority of our residential mortgage backed securities are in the 2004 and prior vintage years. Subordination has increased since origination. These securities are agency or private label issues. All are fixed rate with no exposure to adjustable rate mortgages. The majority of our residential mortgage backed securities are very simple structures - either direct pass throughs, sequential payers, or PAC structures.

Within this structured product category, we have minimal exposure to subprime securities. At the end of September, we had subprime securities with a market value totaling $23 million. This exposure is small, representing only 0.2% of our total investments. These subprime issues are all AAA-rated, fixed rate and were originated in 2005.

Our commercial mortgage loans total $1.3 billion and represent 11.7% of our investment portfolio. These are seasoned and well diversified by geography and property type. They have an average loan-to-value of 59%. We underwrite these very conservatively, and have a long history of extremely low delinquency rates, with no loans currently in default. We've not had a loss on a commercial mortgage loan for more than three years. While that's no guarantee of future performance, I think it gives you a feel for how conservatively these loans are underwritten.

During the recent period there has been very little new issuance to invest in and most of our new money is being invested in treasuries. We are maintaining higher than average liquidity.

As of September 30, we had securities with gross unrealized losses of $1.0 billion, 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 made in a low interest rate environment and the unrealized losses reflect primarily interest rate changes that have occurred.

We have analyzed these securities in detail. All securities with a market value 15% less than carrying value automatically go on our watch list to determine if they should be impaired.

Our analysis indicates that of this total unrealized loss, the lion's share relates to investment grade debt securities where values have declined from the widening of credit spreads to unprecedented levels rather than specific credit deterioration.

Finally, I'll comment on our capital levels and recent debt financing.

During the third quarter we borrowed an additional $14 million on our bank line of credit, bringing it to $60 million. Also, as a short-term measure, we entered into a $20 million note with our property-casualty affiliate, Farm Bureau Mutual Insurance Company. With these borrowings and existing cash, we were able to contribute $55 million from the holding company to EquiTrust Life.

At September 30, we estimate that Farm Bureau Life has approximately $30 million of excess capital and EquiTrust Life has the appropriate capital for an A rating. These estimates are based on the the most stringent rating agency threshold, which for us is the S&P model. And, despite currently having an A- rating from A.M. Best, we still target the A rating level and manage our companies with significant excess capital necessary for an A rating.

At the end of the third quarter our estimated RBC was 350 for Farm Bureau Life and 383 for EquiTrust Life. And we have the ability to contribute additional capital, if necessary, due to the additional $100 million financing that Jim mentioned.

This financing occurred this week when we issued three year notes at 9.25% payable to affiliates. One note for $75 million was issued to Farm Bureau Mutual and one for $25 million was issued to an investment affiliate of the Iowa Farm Bureau Federation, our majority shareholder.

These are three year notes that are prepayable at par. Our desire is to replace these notes with longer term debt capital when we see liquidity return to the marketplace. A portion of the proceeds from these notes will be used to repay the $20 million short-term debt that was borrowed from Farm Bureau Mutual.

This financing adds to our capital base and will be used to maintain the stability of our financial position. At this time, it is not our intention to use this capital for growth.

This financing adds to our capital base and will be used to maintain the stability of our financial position. At this time, it is not our intention to use this capital for growth.

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.

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