FBL Financial Group Reports First Quarter 2006 Results.WEST DES MOINES, Iowa West Des Moines is a city in Polk, Dallas, and Warren counties in the U.S. state of Iowa. As of the 2000 census, the city population was 46,403; a special census taken in the spring of 2005 counted 51,744 residents. -- FBL FBL Full Bell Lines (coin grading) FBL Fly by Light FBL FIATA Bill of Lading FBL Functional Baseline FBL Foundation for a Better Life FBL Federal Barge Lines, Inc. Financial Group, Inc. (NYSE NYSE See: New York Stock Exchange :FFG FFG Forschungsförderungsgesellschaft (German: Austrian research promotion agency) FFG Flash Flood Guidance FFG Guided Missile Frigate FFG Fall from Grace (band) FFG Fast Frigates FFG Freeware Flight Group ):
Financial Highlights
(Dollars in thousands, except per share data)
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Three Months Ended
March 31,
2006 2005
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Net income applicable to common stock $27,696 $17,167
Operating income applicable to common stock 17,548 16,807
Earnings per common share (assuming dilution):
Net income 0.93 0.59
Operating income 0.59 0.57
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E[acute accent acute accent n. A mark (´) indicating: a. that a vowel is close or tense, as é in French été. b. that a vowel or syllable has a high or rising pitch, as in Chinese or Ancient Greek. c. ]FBL Financial Group, Inc. (NYSE:FFG) today announced that diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per common share totaled $0.93 ($27,696,000) for the quarter ended March 31, 2006, compared to $0.59 ($17,167,000) in the year ago quarter. E[acute accent]Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (1). Operating income increased to $17,548,000 for the quarter ended March 31, 2006, from $16,807,000 in the first quarter of 2005. Diluted operating income per common share increased to $0.59 in the first quarter of 2006 from $0.57 in the first quarter of 2005. Operating income differs from the GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure, net income, in that it excludes the impact of realized/unrealized gains and losses on investments and the change in net unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. and losses on derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. . For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release. E[acute accent]Commenting on FBL's first quarter results, Chief Executive Officer Bill Oddy stated, "Despite increased death benefits, we were able to increase operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before and report strong net income during the first quarter. Sales in our EquiTrust Life independent channel continued to grow with $277 million of premiums collected in the quarter, up 50 percent from the first quarter of 2005 and 15 percent from the fourth quarter of 2005. As premium and assets increase, the independent channel is also growing earnings, as it contributed $0.03 per share to operating income for the quarter. FBL Financial Group is off to a great start in 2006 and continues to be well positioned with our solid base in the Farm Bureau Life niche niche: see ecology. niche Smallest unit of a habitat that is occupied by an organism. A habitat niche is the physical space occupied by the organism; an ecological niche is the role the organism plays in the community of organisms found in the marketplace and our growing EquiTrust Life business." E[acute accent]Commenting on FBL's earnings outlook, Oddy added, "As a result of significant realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on investments during the first quarter, we are increasing our full year 2006 net income guidance to $2.75 to $2.85 per common share. We maintain our full year 2006 operating income guidance at $2.40 to $2.50 per common share." This earnings outlook is subject to volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the resulting from a number of factors, including mortality experience and investment results. E[acute accent]Product Revenues Up. Premiums and product charges for the first quarter of 2006 increased five percent to $59,772,000 from $57,121,000 in the first quarter of 2005. Interest sensitive and index product charges increased seven percent due primarily to an increase in the volume and aging of business in force, while traditional life insurance premiums increased three percent. E[acute accent]Premiums collected(2) in the first quarter of 2006 increased 27 percent to $409,708,000 from $322,634,000 in the first quarter of 2005. This increase reflects growth in FBL's EquiTrust Life independent channel, which had $277,203,000 of premiums collected in the first quarter of 2006. Premiums collected from FBL's exclusive Farm Bureau Life distribution channel totaled $120,239,000 in the first quarter of 2006, reflecting a 13 percent increase in variable sales, a two percent increase in traditional and universal life insurance sales and a 13 percent decline in traditional annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. sales. E[acute accent]Investment Income. Net investment income in the first quarter of 2006 increased seven percent to $122,380,000 from $114,106,000 in the first quarter of 2005. This increase is due to an increase in average invested assets resulting primarily from inflows from Farm Bureau Life and EquiTrust Life. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. yield earned on average invested assets, with securities at cost, was 6.10 percent for the three months ended March 31, 2006, compared to 6.40 percent for the first quarter of 2005. E[acute accent]Derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. Income. FBL's derivative income totaled $16,832,000 in the first quarter of 2006, compared to a derivative loss of $12,400,000 in the first quarter of 2005. The increase in derivative income is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the impact of growth in the volume of index annuities in force and appreciation in the market indices on which these options are based. Gains from these options are passed on to the contract holders in the form of index credits. E[acute accent]Realized/Unrealized Gains on Investments. In the first quarter of 2006, FBL recognized net realized/unrealized gains on investments of $11,604,000, compared to realized/unrealized gains on investments of $412,000 in the first quarter of 2005. This increase is primarily attributable to a gain on the sale of shares of American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Equity Investment Life Holding Company common stock, which totaled $13,492,000 pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta , which is $0.29 per share on an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. . First quarter 2006 realized/unrealized gains include realized gains from sales of investments of $13,989,000, realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. from sales of securities of $3,000, realized losses from impairments of $2,340,000 and unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. on trading securities of $42,000. E[acute accent]Benefits and Expenses. Benefits and expenses totaled $174,077,000 in the first quarter of 2006, compared to $137,272,000 in the first quarter of 2005. This increase is primarily attributable to an increase in index product benefits resulting from a higher level of appreciation of the underlying equity market indices. Additionally, death benefits increased to $24,106,000 in 2006 compared to $21,089,000 in the first quarter of 2005. E[acute accent]Operating Results by Segment. Consistent with prior quarters, the majority of FBL's operating earnings for the first quarter of 2006 are attributable to the traditional annuity and traditional and universal life insurance segments. Further detail and results by segment are provided in FBL's financial supplement, which is available on FBL's website, www.fblfinancial.com. E[acute accent]Assets Total $10.3 Billion. Total assets increased $195 million to $10.3 billion at March 31, 2006, from $10.2 billion at December December: see month. 31, 2005. At March 31, 2006, 95 percent of the fixed maturity securities in FBL's investment portfolio were investment grade debt securities. Book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: totaled $26.47 at March 31, 2006, compared to $28.88 at December 31, 2005. Book value per share excluding accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as (loss)(3) increased three percent to $26.78 at March 31, 2006, from $26.05 at December 31, 2005. E[acute accent]Conference Call. FBL management will hold a conference call with investors to discuss first quarter 2006 results. The call will be held tomorrow, May 5, 2006, at 11 a.m. Eastern Time. The call will be webcast over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , and a replay will be available on FBL's website, www.fblfinancial.com. E[acute accent]The statements in this release concerning FBL's prospects for the future are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve certain risks and uncertainties. The risks and uncertainties that could cause actual results to differ materially are detailed in FBL's reports filed with the Securities and Exchange Commission and include interest rate changes, competitive factors, volatility of financial markets, the ability to attract and retain sales agents and a change in ratings. These forward-looking statements are based on assumptions which FBL Financial Group believes to be reasonable. No assurance can be given that the assumptions will prove to be correct. E[acute accent]FBL Financial Group (www.fblfinancial.com) is a holding company whose primary operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. are Farm Bureau Life Insurance Company and EquiTrust Life Insurance Company. FBL underwrites, markets and distributes life insurance, annuities and mutual funds to individuals and small businesses. In addition, FBL manages all aspects of three Farm Bureau affiliated af·fil·i·ate v. af·fil·i·at·ed, af·fil·i·at·ing, af·fil·i·ates v.tr. 1. To adopt or accept as a member, subordinate associate, or branch: property-casualty insurance companies for a management fee. FBL's three-pronged Adj. 1. three-pronged - having three prongs divided - separated into parts or pieces; "opinions are divided" growth strategy includes (1) growth through its traditional Farm Bureau Life distribution channel, (2) growth in EquiTrust Life through independent and other distribution channels and (3) acquisitions or consolidations.
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
March 31,
2006 2005
------------ ------------
REVENUES
Interest sensitive and index product
charges $25,314 $23,768
Traditional life insurance premiums 34,388 33,333
Accident and health premiums 70 20
Net investment income 122,380 114,106
Derivative income (loss) 16,832 (12,400)
Realized/unrealized gains on investments 11,604 412
Other income 5,479 4,969
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Total revenues 216,067 164,208
BENEFITS AND EXPENSES
Interest sensitive and index product
benefits 86,702 55,558
Traditional life insurance and accident and
health benefits 22,661 20,771
Increase in traditional life and accident
and health future policy benefits 8,753 8,250
Distributions to participating
policyholders 5,697 6,164
Underwriting, acquisition and insurance
expenses 41,806 38,468
Interest expense 2,961 3,295
Other expenses 5,497 4,766
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Total benefits and expenses 174,077 137,272
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41,990 26,936
Income taxes (14,381) (9,374)
Minority interest in earnings of
subsidiaries (55) (98)
Equity income (loss), net of related income
taxes 180 (259)
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Net income 27,734 17,205
Dividends on Series B preferred stock (38) (38)
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Net income applicable to common stock $27,696 $17,167
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Earnings per common share - assuming
dilution $0.93 $0.59
============ ============
Weighted average common shares 29,228,454 28,759,200
Effect of dilutive securities 537,020 514,208
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Weighted average common shares - diluted 29,765,474 29,273,408
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(1) Reconciliation of Net Income to Operating Income (Unaudited)
In addition to net income, FBL Financial Group has consistently
utilized operating income, a non-GAAP financial measure commonly
used in the life insurance industry, as a primary economic measure
to evaluate its financial performance. Operating income equals net
income adjusted to eliminate the impact of realized/unrealized
gains and losses on investments and the change in net unrealized
gains and losses on derivatives. FBL uses operating income, in
addition to net income, to measure its performance since
realized/unrealized gains and losses on investments and the change
in net unrealized gains and losses on derivatives can fluctuate
greatly from quarter to quarter. These fluctuations make it
difficult to analyze core operating trends. In addition, for
derivatives not designated as hedges, there is a mismatch between
the valuation of the asset and liability when deriving net income.
This non-GAAP measure is used for goal setting, determining
company-wide bonuses and evaluating performance on a basis
comparable to that used by many in the investment community. FBL
believes the combined presentation and evaluation of operating
income, together with net income, provides information that may
enhance an investor's understanding of FBL's underlying results
and profitability. A reconciliation of net income to operating
income is provided in the following table (dollars in thousands,
except per share data):
Three months ended
March 31,
2006 2005
------------ ------------
Net income applicable to common stock $27,696 $17,167
Adjustments:
Net realized/unrealized gains on
investments (a) (7,693) (527)
Net change in unrealized gains/losses on
derivatives (a) (2,455) 167
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Operating income applicable to common stock $17,548 $16,807
============ ============
Operating income per common share - assuming
dilution $0.59 $0.57
============ ============
(a) Net of adjustments, as applicable, to amortization of unearned
revenue reserves, deferred policy acquisition costs, deferred
sales inducements, value of insurance in force acquired and income
taxes attributable to gains and losses on investments and
derivatives.
(2) Premiums Collected - Net statutory premiums collected, a
measure of sales production, is a non-GAAP measure and includes
premiums collected from annuities and universal life-type
products. For GAAP reporting, these premiums received are not
reported as revenues.
(3) Reconciliation of Book Value Per Share
Excluding Accumulated Other Comprehensive Income (Unaudited)
March 31, December 31,
2006 2005
------------ ------------
Book value per share $26.47 $28.88
Accumulated other comprehensive income
(loss) (0.31) 2.83
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Book value per share, excluding accumulated
other comprehensive income (loss) $26.78 $26.05
============ ============
Book value per share excluding accumulated other comprehensive income
(loss) is a non-GAAP financial measure. Accumulated other
comprehensive income (loss) totaled a loss of $9,252,000 at March 31,
2006 and income of $82,301,000 at December 31, 2005. Since accumulated
other comprehensive income (loss) fluctuates from quarter to quarter
due to unrealized changes in the fair market value of investments
caused principally by changes in market interest rates, FBL believes
this non-GAAP financial measure provides useful supplemental
information.
FBL FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
March 31, December 31,
2006 2005
------------ ------------
Assets
Investments $8,343,669 $8,299,208
Cash and cash equivalents 12,880 5,120
Deferred policy acquisition costs 762,197 695,067
Deferred sales inducements 163,564 146,978
Other assets 384,065 367,665
Assets held in separate accounts 682,700 639,895
------------ ------------
Total assets $10,349,075 $10,153,933
============ ============
Liabilities and stockholders' equity
Policy liabilities and accruals $7,924,886 $7,634,922
Other policyholders' funds 559,332 560,863
Debt 218,432 218,446
Other liabilities 179,462 255,412
Liabilities related to separate accounts 682,700 639,895
------------ ------------
Total liabilities 9,564,812 9,309,538
Minority interest in subsidiaries 191 164
Stockholders' equity 784,072 844,231
------------ ------------
Total liabilities and stockholders' equity $10,349,075 $10,153,933
============ ============
Common Shares Outstanding 29,511,796 29,133,331
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