Jim Noyce
Chief Executive Officer

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

There's no question that 2008 will go down in history as one of the most difficult economic years for our country, our industry, and our company. Financial markets have experienced some of the worst declines since the Great Depression. FBL's results for the fourth quarter and year were disappointing, and reflect recognition of these unfavorable conditions. Despite the challenges brought on by the global economic crisis, our companies are adequately capitalized and we have liquidity to fulfill our commitments. Jim Brannen will be discussing our capital and liquidity positions in further detail. I'll focus my comments today on how we're managing our businesses in this environment and I'll focus on each of our subsidiaries - Farm Bureau Life Insurance Company and EquiTrust Life Insurance Company.

We had originally planned to announce our fourth quarter financial results on February 5th, but we pushed this date back by a couple of weeks for two primary reasons.

The first was so that we could hold our regular quarterly board meeting and file our 2008 Form 10-K with the SEC at the same time as our release. With the state of today's credit markets, we wanted to make sure there were no changes in the impairment status of any of our investment securities.

The other reason was to allow adequate time for the analysis of an emerging issue, which was a very recent increase in surrenders at EquiTrust Life. Our EquiTrust Life annuity products have a market value adjustment - or MVA - feature. The MVA calculation is tied to U.S. Treasury rates and is designed to provide disintermediation protection to the company. As you are likely aware, Treasury rates collapsed in the fourth quarter creating a situation where contract holders may be able to surrender with lower net surrender charges.

To illustrate, the 10-year Treasury rate was at 3.78% on November 6th, the date of our last conference call, but had dropped to 2.04% by December 18th, before ending the year at 2.24%. The 10-year Treasury has been above 3% since 1958 and was last in the 2.30% range in 1954. So I want you to understand that this was a very recent and emerging event and we wanted to take the proper time to analyze the impact to our deferred policy acquisition costs and assumptions.

We reviewed our assumptions for deferred policy acquisition costs and deferred sales inducements, or DAC, and performed an unscheduled DAC unlocking. As a result of higher surrender assumptions and resulting lower expected profitability for this business, we recorded a fourth quarter pre-tax charge of $29.6 million, or $0.64 per share after tax.

With this recent rise in surrender requests, we have a variety of conservation programs in effect including working with policyholders so that they understand the surrender charge and MVA impact, tax considerations and options other than surrender.

Treasury rates have been increasing recently and as of yesterday were at 2.86%. This is positive, and as a result, surrender activity, while still higher than we desire, has slowed during the past couple of weeks and is currently at much lower levels than during January. We don't expect that Treasury rates will remain at these low levels, but would certainly feel more comfortable with a 10-year Treasury rate above 3.00%. At that level, the MVA impact on surrender charges dampens and is typically less likely to impact policyholder behavior.

This MVA feature is a very common feature on multiyear guarantee annuity and index annuity products. Because the company and the policyholder share in the risks, a benefit to the company is lower reserve requirements and the opportunity to support better product crediting rate. And since nearly all MYGA and most index carriers have a MVA feature, it also helps with product competitiveness.

Despite the increase in Treasury rates since year end, we are redesigning our product portfolio so that we have greater protection in extremely low Treasury rate environments.

I'll make a few other comments on EquiTrust Life before turning to Farm Bureau Life. Mid-year, we took action to slow the pace of sales growth at EquiTrust Life in order to preserve capital. These efforts have been successful with fourth quarter 2008 premiums collected at the EquiTrust Life independent channel of $204 million, a decrease of 60 percent from the fourth quarter of 2007. This deliberate slowdown was done with the desire to have EquiTrust Life support its production with internally generated capital.

In December, the SEC approved its Rule 151A, which will change the federal law status of index annuities from insurance products to registered securities products. Since that time, various organizations including a coalition of insurance companies and independent marketing organizations as well as the NAIC and the National Conference of Insurance Legislators, have filed suit against the SEC challenging this action and are attempting to overturn this rule. Assuming this rule is enacted, its effective date is expected to be January 12, 2011. The good news is that the SEC increased the transition period to two years from the one-year period originally proposed. This longer transition period will allow FBL time to implement changes as needed, plus hopefully it will give time for these lawsuits to be litigated.

Now I'll turn to Farm Bureau Life. Farm Bureau Life's 2008 sales were a record and the company continues to generate capital. For the fourth quarter, Farm Bureau Life had premiums collected of $136.4 million, an increase of 21% from the fourth quarter of 2007. Traditional annuity sales continued to be strong again this quarter and were up 144%. Traditional and universal life insurance premiums collected were up 3%, and variable sales were down 43%, reflecting consumers' lessening desire for variable products given the volatile equity markets.

Both of our subsidiaries have experienced pressure on investment valuations and both have had other-than-temporary impairments. However, Farm Bureau Life is well prepared in this environment as it has long been capital self-sustaining and consistently generated 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. The Farm Bureau niche customer base is the foundation of our companies and this franchise is strong. We see opportunity ahead for Farm Bureau Life and are focused on delivering consistent, predictable and sustainable growth from this marketplace.

2009 will be a challenging year. As we navigate through the current challenges, we plan to maintain and build upon our capital strength through the management of EquiTrust Life premium levels, strict expense controls, and a continual focus on enterprise risk management. These actions are designed to help us weather this storm and position FBL for the future when we come out of this recession.

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

Jim Brannen
Chief Financial Officer

Thanks, and good morning everyone.

This morning I'll be covering several topics: capital and liquidity, fourth quarter results, and our investment portfolio and related unrealized losses.

First, I'll comment on our capital levels. FBL Financial Group has total capitalization, excluding accumulated other comprehensive loss, of over $1.3 billion. This is an increase from year end 2007. Taking into account accumulated other comprehensive loss, total capitalization was nearly $700 million. As we discussed on last quarter's call, in November we obtained $100 million in debt financing with a three year maturity from affiliates Farm Bureau Mutual and the Iowa Farm Bureau Federation.

At year end, our debt-to-total capitalization ratio, with equity credit for our trust preferreds, was 24.9% with securities at cost. We are comfortable with this level.

We estimate that Farm Bureau Life has approximately $55 million of excess capital for an A level rating from S& P and $133 million of excess capital for an A level rating from AM Best. EquiTrust Life has the appropriate capital for an A rating at S&P and $56 million of excess capital from AM Best. We plan to continue to target the A rating levels despite having a rating of A- (Excellent) rating from A.M. Best and regardless of any future rating agency actions.

At this time we believe we have adequate liquidity to fulfill our commitments, and we have more than $80 million available at the holding company level.

At year end 2008 we estimate that Company action level RBC was 416 for Farm Bureau Life and 300 for EquiTrust Life.

As Jim mentioned, Farm Bureau Life's business model is strong and Farm Bureau Life continues to be a steady producer of capital. EquiTrust Life continues the goal of being self-sustaining from a capital perspective. This started in the second half of 2008 with changes made to slow the pace of growth.

We maintain liquidity in the form of short-term investments and cash and cash equivalents. As of year end 2008 this totaled over $300 million. This is nearly double the level held at year end 2007. In addition, Farm Bureau Life and EquiTrust Life are members of the Federal Home Loan Bank. This provides a source of additional liquidity to each of those companies. We also have 2.2 billion of securities in a gain position that could be sold, if needed.

Next, I'll turn to our fourth quarter results. We experienced an operating loss of $0.18 per share. Results for the quarter were primarily impacted by three items: the DAC charge due to increased surrenders at EquiTrust Life, the related additional DAC amortization and mortality experience higher than our expectations.

The largest item by far was the DAC charge of $0.64 per share, after tax. This relates to the increased surrenders that Jim discussed and updating our shock lapse assumptions on our MYGA business.

As a result of the increased surrenders we had a higher DAC and DSI of $0.12 per share in the fourth quarter. Another difference from expectations was $4.3 million, or $0.09 per share, in increased DAC amortization for our variable segment due to the decline in equity markets.

As you know, mortality experience can fluctuate from quarter to quarter. Death benefits for the fourth quarter totaled $25.8 million. This compares to $20.2 million in the fourth quarter of 2007. While a bit higher than our expectations, mortality experience was still within what we would consider a normal range.

Now let me turn to spreads. In general our universal life spreads remain above target, while our annuity spreads are under pressure, reflecting elevated option costs, a loss in investment income from swaps and holding more cash.

As of year end, spreads on our exclusive annuity business decreased during the quarter by 14 basis points to a spread of 157 basis points. While we did take rate action on this business of 15 bps during the quarter, the investment yield for this business declined from our interest rate swaps. These swaps are tied to LIBOR and LIBOR dropped dramatically near year end resulting in an additional loss in those contracts. Our target for this business is 170 basis. We continue to monitor LIBOR and will make crediting rate changes if deemed appropriate.

For our universal life business, our spread on a statutory basis decreased by four basis points during the quarter to 189 basis points. This remains well above our target spread for this business of 181 basis points, for excess spread of 8 basis points. Spreads on this business have been fairly stable.

The spread for our independent direct fixed rate annuity business decreased by one basis point during the quarter to 100 basis points, which is above our target of 94 basis points.

Spreads on our independent direct index annuity business were at 229 basis points at quarter end. The investment yield was held steady, but option costs increased due to volatility. This business is below our target of 238.

As we announced earlier this month, in order to control expenses during these turbulent economic times, we have taken actions to reduce expenses, including reducing our workforce by 4%, and streamlining operations and reducing many other expenditures. As a result of these actions, we expect to achieve annual cost savings of approximately $7 million, pre-tax. We expect to record a pre-tax special charge of $1.2 million in the first quarter of 2009 related to these expense savings.

With our earnings announcement yesterday, we stated that we will not be providing 2009 earnings guidance due to volatile market conditions. That, combined with the extraordinary events affecting financial companies, does not allow us to provide an accurate earnings estimate for you at this time. That being said, I would mention that the $0.64 of DAC unlocking and much of the $0.12 of increased amortization we believe are one-time events.

Over the course of the year, we've spent a lot of time discussing our investment portfolio. We filed our Form 10-K yesterday and I urge you review that as it has a wealth of information on our investments. Today, I'd like to spend a few minutes discussing the investment categories that have been the hottest topics lately - commercial mortgage loans and CMBS.

At year end we held commercial mortgage loans totaling $1.4 billion, which is 12.7% of our total investments. This represents 352 whole loans that are underwritten internally. We underwrite these very conservatively. They are well diversified by property type and geographic location. We focus on the underlying real estate value, the leasing and business use for this real estate, as well as the financial strength and management of the borrower. We primarily focus on office, retail and industrial/distribution properties and have no single-family, hotel, apartment or agriculture loans. At year end FBL's average loan-to-value of the current outstanding principal balance to the appraised value at origination was a conservative 59%.

We have a long history of extremely low delinquency rates. As of year end we had one mortgage loan in foreclosure, but do not expect to take a loss on this loan. The outstanding loan amount is $9.4 million and the appraised value is $11.1 million. We recognize that the U.S. economy is facing unprecedented challenges, but even with these challenges, we feel that this mortgage loan portfolio will hold up well.

Next I'll turn to our commercial mortgage backed securities portfolio. At year end we held CMBS totaling $640 million, which is 5.9% of our total investments. Most of this CMBS is government backed or is super senior. Almost all of this is AAA rated. We've performed a variety of stress testing of this portfolio and believe it will hold up very well. There's the risk that these securities will be downgraded and there is pressure on pricing, but ultimately we believe they will still continue to perform.

As of December 31, 2008, FBL held fixed maturity securities with gross unrealized losses of $1.65 billion. When combined with securities with unrealized gains, this nets to $1.54 billion. These unrealized losses reflect a decrease in the market value of investments resulting primarily from increased spreads due to distressed and volatile financial markets. Our analysis indicates the lion's share of this unrealized loss relates to investment grade debt securities where values have declined from the widening of credit spreads to unprecedented levels rather than specific credit deterioration. As most of you know, pricing pressure is coming more from the illiquid markets than defaults. As of December 31, 2008, 96 percent of the fixed maturity securities in FBL's investment portfolio were investment grade debt securities.

In closing, 2008 was by far the most challenging year financially since FBL's inception as a public company. Looking ahead through 2009, there is continued uncertainty about the global economy and capital markets. Despite the tough environment, our companies are adequately capitalized and we have liquidity to fulfill our commitments. We are addressing the challenges of these difficult times and working to ensure the long term success of FBL Financial Group.

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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