FBL Financial Group Reports Fourth Quarter 2007 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 ): [TABLE OMITTED] 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 $0.39 ($11.8 million) for the quarter ended December 31, 2007, compared to $0.80 ($23.9 million) in the year ago quarter. 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 a record $24.9 million for the quarter ended December 31, 2007, from $22.6 million in the fourth quarter of 2006. Diluted operating income per common share increased nine percent to a record $0.82 in the fourth quarter of 2007 from $0.75 in the fourth quarter of 2006. 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. Commenting on FBL's fourth quarter results, Chief Executive Officer Jim Noyce stated, "Our fourth quarter results mark the end of an excellent year for FBL Financial Group. For the full year we achieved record operating income of $3.15 per share, an increase of 13 percent, and our total assets grew by more than 15 percent to $14.0 billion. We are well-positioned for 2008 and beyond with our solid niche Farm Bureau Life marketplace and growth opportunities with the EquiTrust Life independent distribution channel. With our sound business plans, strong balance sheet and capital strength, we continue to be optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the outlook for FBL Financial Group." Noyce added, "FBL's record operating results for the fourth quarter of 2007 reflect strong results across the board with operating income increases in all segments." Product Revenues Up. Premiums and product charges for the fourth quarter of 2007 increased nine percent to $66.9 million from $61.2 million in the fourth quarter of 2006. Interest sensitive and index product charges increased 16 percent, while traditional life insurance premiums increased four percent. Premiums collected in the fourth quarter of 2007 increased 10 percent to $629.8 million from $572.5 million in the fourth quarter of 2006. This increase is due to growth from both FBL's EquiTrust Life independent channel and FBL's exclusive Farm Bureau Life distribution channel. The EquiTrust Life independent channel had $504.6 million of premiums collected in the fourth quarter of 2007, an increase of 11 percent over the fourth quarter of 2006. The Farm Bureau Life distribution channel had fourth quarter 2007 premiums collected of $112.6 million, an increase of four percent, reflecting an eight percent increase in traditional and universal life insurance sales, a 22 percent increase in variable sales and an 18 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. Investment Income. Net investment income in the fourth quarter of 2007 increased 13 percent to $166.5 million from $147.1 million in the fourth quarter of 2006. 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 6.02 percent for the year ended December 31, 2007, compared to 6.07 percent for the same period of 2006. Derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. Loss. FBL's derivative loss totaled $52.2 million in the fourth quarter of 2007, compared to derivative income of $46.9 million in the fourth quarter of 2006. The derivative loss reflects the impact of a decrease in the value of the underlying market indices on which call options supporting FBL's index annuity business are based. At the policy anniversary, gains from call options, if any, are passed on to the policyholder Policyholder An individual who owns an insurance policy. in the form of index credits. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the accounting rules for derivatives (FAS 133), gains and losses on these call options are generally offset by corresponding changes in interest sensitive product benefits. Realized/Unrealized Losses on Investments. In the fourth quarter of 2007, FBL recognized net realized/unrealized losses on investments of $0.8 million compared to gains of $2.4 million in the fourth quarter of 2006. Fourth quarter 2007 realized/unrealized losses include 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. from sales of investments of $1.1 million, 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 investments of $0.2 million and realized losses due to an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. totaling $1.7 million, which related to one corporate bond in the printing and publishing industry. Benefits and Expenses. Benefits and expenses totaled $171.7 million in the fourth quarter of 2007, compared to $228.8 million in the fourth quarter of 2006. The decrease in benefits and expenses is primarily attributable to lower index product benefits resulting from a decline in the value of underlying market indices supporting the index annuity business. Additionally, death benefits decreased to $20.2 million in the fourth quarter of 2007 compared to $23.7 million in the fourth quarter of 2006. Operating Results by Segment. FBL's operating results for the fourth quarter of 2007 reflect an increase in all segments. Consistent with prior quarters, the majority of FBL's 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 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. Assets Total $14.0 Billion. Total assets increased $1.8 billion to $14.0 billion at December 31, 2007, from $12.2 billion at December 31, 2006. At December 31, 2007, 96 percent of the fixed maturity securities in FBL's investment portfolio were investment grade debt securities. Book value per share increased to $29.98 at December 31, 2007 from $29.59 at December 31, 2006. 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 nine percent to $31.19 at December 31, 2007, from $28.64 at December 31, 2006. Earnings Outlook. FBL expects full year 2008 operating income to be within a range of $3.15 to $3.30 per common share. This earnings outlook is subject to volatility resulting from a number of factors, including mortality experience and investment results. Because realized gains or losses on investments and unrealized gains and losses on derivatives cannot reasonably be estimated, FBL Financial Group only provides operating income guidance and not net income guidance. Conference Call. FBL management will hold a conference call with investors to discuss fourth quarter 2007 results. The call will be held tomorrow, February 7, 2008, at 11 a.m. Eastern Time. The call will be webcast over the Internet, and a replay will be available on FBL's website, www.fblfinancial.com. 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 decrease 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. FBL Financial Group 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 two Farm Bureau affiliated property-casualty insurance companies for a management fee. For more information, please visit www.fblfinancial.com. [TABLE OMITTED] (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, the change in net unrealized gains and losses on derivatives, a nonrecurring lawsuit lawsuit: see procedure; tort. settlement and the cumulative effect of changes in accounting principles. 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, and the cumulative effect of change in accounting principles and lawsuit settlement in 2006 are nonrecurring items. These fluctuations make it difficult to analyze core operating trends. In addition, for derivatives not designated as hedges, there is a mismatch mismatch 1. in blood transfusions and transplantation immunology, an incompatibility between potential donor and recipient. 2. one or more nucleotides in one of the double strands in a nucleic acid molecule without complementary nucleotides in the same position on the other 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): [TABLE OMITTED] (a) Net of adjustments, as applicable, to amortization of unearned revenue Unearned Revenue When an individual or company receives money for a service or product that has yet to be fulfilled. Notes: For example, prepayment on a lease contract - the revenue is a liability until it has been earned. See also: Earned Income, Passive Income reserves, deferred policy acquisition costs, deferred sales inducements, value of insurance in force acquired and income taxes attributable to these items. (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 (Loss) (Unaudited) [TABLE OMITTED] 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 $36.3 million at December 31, 2007 and a gain of $28.2 million at December 31, 2006. 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. [TABLE OMITTED] FFG-1 |
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