FBL Financial Group Reports Second Quarter 2005 Results; Net Income Up 38 Percent to $0.62 Per Share.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
June 30,
2005 2004
--------------------
Net income applicable to common stock $18,258 $12,976
Operating income applicable to common stock 18,308 13,487
Earnings per common share (assuming dilution):
Net income 0.62 0.45
Operating income 0.62 0.46
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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 increased 38 percent to $0.62 ($18,258,000) for the quarter ended June June: see month. 30, 2005 from $0.45 ($12,976,000) 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 $18,308,000 for the quarter ended June 30, 2005, from $13,487,000 in the second quarter of 2004. Diluted operating income per common share increased 35 percent to $0.62 in the second quarter of 2005 from $0.46 in the second quarter of 2004. 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 second quarter results, Chief Executive Officer Bill Oddy stated, "FBL Financial Group delivered excellent second quarter results with a 38 percent increase in net income per share, a 35 percent increase in operating income per share and continued growth in premiums collected. Our Farm Bureau Life subsidiary once again had a solid quarter and our EquiTrust Life subsidiary continued its growth. In the second quarter our EquiTrust Life independent channel achieved record sales with total premiums collected of $233 million. As a result, we are confident this unit will exceed its premiums collected target of $750 million for the year." "Based on our very strong year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. results and our positive outlook for the remainder of the year, we are increasing our earnings guidance by $0.15 per share. We now expect our full year 2005 net income and operating income to be $2.15 to $2.25 per share," Oddy added. Product Revenues Up. Premiums and product charges for the second quarter of 2005 increased seven percent to $61,394,000 from $57,223,000 in the second quarter of 2004. This increase was driven by a nine percent growth in interest sensitive and index product charges and a six percent increase in traditional life insurance premiums due primarily to an increase in the volume of business in force. Premiums collected in the second quarter of 2005 increased three percent to $381,725,000 from $369,775,000 in the second quarter of 2004. This increase reflects growth in FBL's EquiTrust Life independent channel, which had a record $233,126,000 of premiums collected in the second quarter of 2005. Premiums collected from FBL's exclusive distribution channel totaled $132,524,000 in the second quarter of 2005, reflecting a three percent increase in traditional and universal life insurance, a 19 percent increase in variable 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. Investment Income. Net investment income in the second quarter of 2005 increased 17 percent to $117,931,000 from $100,382,000 in the second quarter of 2004. This increase is due to an increase in average invested assets resulting primarily from premium 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 6.36 percent for the six months ended June 30, 2005, compared to 6.23 percent for the same period of 2004. The 2005 yield reflects an increase in investment fee income, which includes income from bond calls, tender offers and mortgage loan prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. , to $2,525,000 in the second quarter of 2005 from $586,000 in the second quarter of 2004. 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 (loss) totaled income of $120,000 in the second quarter of 2005, compared to a loss of $2,059,000 in the second quarter of 2004. This income primarily reflects an increase in the value of the underlying equity market indices on which call options supporting FBL's index annuity business are based. Gains from these options are generally passed on to the contract holders in the form of index credits. Realized/Unrealized Gains on Investments. In the second quarter of 2005, FBL recognized net realized/unrealized gains on investments of $2,876,000 compared to $629,000 in the second quarter of 2004. Second quarter 2005 realized/unrealized gains 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 securities of $4,646,000, 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 $34,000, realized losses from impairments of $1,732,000 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 $4,000. Benefits and Expenses. Benefits and expenses totaled $159,801,000 in the second quarter of 2005, compared to $144,611,000 in the second quarter of 2004. This increase is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to benefits associated with FBL's growing index annuity business. In connection with the closing of a processing unit and certain workforce reductions, in the second half of 2005 FBL expects to record a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $2,300,000 ($0.05 per share after tax) primarily related to severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when and early retirement benefits. As a result of these actions, beginning in 2006 FBL expects to achieve pre-tax annual savings of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $4,000,000, which is $0.09 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. . Operating Results by Segment. FBL's operating results for the second quarter of 2005 reflect strong results for the traditional annuity-exclusive, traditional annuity-independent and traditional and universal life insurance segments, and a pre-tax operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the variable segment. Further detail and results by segment are provided in FBL's financial supplement, which is available on FBL's web site, www.fblfinancial.com. Assets Total $9.7 Billion. Total assets increased $606,005,000 to $9.7 billion at June 30, 2005, from $9.1 billion at December December: see month. 31, 2004. At June 30, 2005, 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 $31.09 at June 30, 2005 compared to $28.87 at December 31, 2004. 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 (2) increased to $24.97 at June 30, 2005, from $23.96 at December 31, 2004. Conference Call. FBL management will hold a conference call with investors to discuss second quarter 2005 results. The call will be held tomorrow, August 9, 2005, 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 web site, 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, including the continued acceptance of FBL's insurance products by customers, the continued success of FBL's marketing efforts, the marketing success of FBL's alliance partners, and fluctuations in mortality experience and investment results. These forward-looking statements are based on assumptions which FBL Financial Group believe to be reasonable. No assurance can be given that the assumptions will prove to be correct, and the difference between assumptions and actual results could be material. 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
June 30,
2005 2004
----------- -----------
REVENUES
Interest sensitive and index product charges $24,293 $22,301
Traditional life insurance premiums 36,915 34,738
Accident and health premiums 186 184
Net investment income 117,931 100,382
Derivative income (loss) 120 (2,059)
Realized/unrealized gains on investments 2,876 629
Other income 5,423 5,382
----------- -----------
Total revenues 187,744 161,557
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 75,352 62,951
Traditional life insurance and accident and
health benefits 23,166 21,057
Increase in traditional life and accident and
health future policy benefits 10,408 10,819
Distributions to participating policyholders 5,678 6,108
Underwriting, acquisition and insurance
expenses 37,038 36,179
Interest expense 3,375 2,965
Other expenses 4,784 4,532
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Total benefits and expenses 159,801 144,611
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27,943 16,946
Income taxes (9,829) (4,187)
Minority interest in loss (earnings) of
subsidiaries (9) 21
Equity income, net of related income taxes 190 233
----------- -----------
Net income 18,295 13,013
Dividends on Series B preferred stock (37) (37)
----------- -----------
Net income applicable to common stock $18,258 $12,976
=========== ===========
Earnings per common share - assuming dilution $0.62 $0.45
=========== ===========
Weighted average common shares 28,849,494 28,605,087
Effect of dilutive securities 477,412 549,744
----------- -----------
Weighted average common shares - diluted 29,326,906 29,154,831
=========== ===========
FBL Financial Group, Inc.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Six months ended
June 30,
2005 2004
----------- -----------
REVENUES
Interest sensitive and index product charges $48,061 $44,320
Traditional life insurance premiums 70,248 68,472
Accident and health premiums 206 258
Net investment income 232,037 198,928
Derivative income (loss) (12,280) 2,153
Realized/unrealized gains on investments 3,288 693
Other income 10,392 10,083
----------- -----------
Total revenues 351,952 324,907
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 130,910 126,221
Traditional life insurance and accident and
health benefits 43,937 42,882
Increase in traditional life and accident and
health future policy benefits 18,658 17,551
Distributions to participating policyholders 11,842 12,831
Underwriting, acquisition and insurance
expenses 75,506 74,538
Interest expense 6,670 4,998
Other expenses 9,550 9,230
----------- -----------
Total benefits and expenses 297,073 288,251
----------- -----------
54,879 36,656
Income taxes (19,203) (10,907)
Minority interest in loss (earnings) of
subsidiaries (107) (42)
Equity income (loss), net of related income
taxes (69) 488
----------- -----------
Net income 35,500 26,195
Dividends on Series B preferred stock (75) (75)
----------- -----------
Net income applicable to common stock $35,425 $26,120
=========== ===========
Earnings per common share - assuming dilution $1.21 $0.90
=========== ===========
Weighted average common shares 28,804,596 28,498,068
Effect of dilutive securities 495,810 595,515
----------- -----------
Weighted average common shares - diluted 29,300,406 29,093,583
=========== ===========
(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
June 30,
2005 2004
---------- ---------
Net income applicable to common stock $18,258 $12,976
Adjustments:
Net realized/unrealized gains on investments (a) (1,274) (306)
Net change in unrealized gains/losses on
derivatives (a) 1,324 817
---------- ---------
Operating income applicable to common stock $18,308 $13,487
========== =========
Operating income per common share - assuming
dilution $0.62 $0.46
========== =========
Six months ended
June 30,
2005 2004
--------- --------
Net income applicable to common stock $35,425 $26,120
Adjustments:
Net realized/unrealized gains on investments (a) (1,801) (96)
Net change in unrealized gains/losses on
derivatives (a) 1,491 117
--------- --------
Operating income applicable to common stock $35,115 $26,141
========= ========
Operating income per common share - assuming
dilution $1.20 $0.90
========= ========
(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) Reconciliation of Book Value Per Share
Excluding Accumulated Other Comprehensive Income (Unaudited)
June 30, December 31,
2005 2004
------------- ------------
Book value per share $31.09 $28.87
Less: Accumulated other comprehensive income 6.12 4.91
------------- ------------
Book value per share, excluding accumulated
other comprehensive income $24.97 $23.96
============= ============
Book value per share excluding accumulated other comprehensive income
is a non-GAAP financial measure. Accumulated other comprehensive
income totaled $177,277,000 at June 30, 2005 and $141,240,000 at
December 31, 2004. Since accumulated other comprehensive income
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)
June 30, December 31,
2005 2004
------------- ------------
Assets
Investments $8,017,282 $7,501,680
Cash and cash equivalents 36,031 27,957
Deferred policy acquisition costs 613,088 587,391
Deferred sales inducements 102,904 78,443
Other assets 358,134 353,236
Assets held in separate accounts 579,302 552,029
------------- ------------
Total assets $9,706,741 $9,100,736
============= ============
Liabilities and stockholders' equity
Policy liabilities and accruals $7,127,824 $6,650,973
Other policyholders' funds 564,612 549,968
Debt 263,942 263,183
Other liabilities 268,560 251,781
Liabilities related to separate accounts 579,302 552,029
------------- ------------
Total liabilities 8,804,240 8,267,934
Minority interest in subsidiaries 144 191
Stockholders' equity 902,357 832,611
------------- ------------
Total liabilities and stockholders' equity $9,706,741 $9,100,736
============= ============
Common shares outstanding 28,922,970 28,734,857
============= ============
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