FBL Financial Group Reports Third Quarter 2001 Results - Operating Income Per Share Totals $0.37.Business Editors WEST DES MOINES West Des Moines (də moin`), city (1990 pop. 31,702), Polk co., S central Iowa, a growing suburb W of Des Moines; inc. 1893 as Valley Junction, renamed 1938. Products manufactured there include cement, metal items, and pumps. , Iowa--(BUSINESS WIRE)--Oct. 31, 2001 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
Sept. 30,
2001 2000
------------------------
Operating revenues $121,844 $97,497
Operating income applicable to common stock
10,344 11,267
Net income applicable to common stock 10,162 1,843
Earnings per common share (assuming
dilution):
Operating income 0.37 0.36
Net income 0.36 0.06
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FBL Financial Group, Inc. (NYSE:FFG) today announced that 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. totaled $10,344,000 for the quarter ended September September: see month. 30, 2001, versus $11,267,000 in the third quarter of 2000. With the benefit of a reduction in the number of common shares outstanding, 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. operating income per common share increased to $0.37 in the third quarter of 2001, from $0.36 in the third quarter of 2000. Operating income equals net income adjusted to eliminate the impact of 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. and losses on investments. Operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. also reflect this adjustment. "This quarter, our results were impacted by several items, some positive and some negative. Our coinsurance A provision of an insurance policy that provides that the insurance company and the insured will apportion between them any loss covered by the policy according to a fixed percentage of the value for which the property, or the person, is insured. transaction with National Travelers Life, which was effective May 1, 2001, added $0.05 per share this quarter, while our acquisition of Kansas Kansas, state, United States Kansas (kăn`zəs), midwestern state occupying the center of the coterminous United States. It is bordered by Missouri (E), Oklahoma (S), Colorado (W), and Nebraska (N). Farm Bureau Life as of January January: see month. 1, 2001, was neutral to this quarter'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 ," said Bill Oddy, Chief Executive Officer. "The positive impact of the NTL NTL Nevertheless NTL National Transportation Library NTL Norsk Tjenestemannslag NTL National Training Laboratories NTL Never Too Late NTL Nothing to Lose NTL National Training Laboratory NTL None the Less NTL Number Theory Library transaction was more than offset by higher death benefits, including $1.6 million in reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. losses from the World Trade Center attack on September 11, 2001." "During the quarter we sold our individual disability income block that we acquired with the Kansas Farm Bureau Life business earlier this year. This was a small product line and exiting it allows us to focus on our core life insurance business," added Oddy. "We continue to focus on our defined growth strategy of internal growth, alliances and consolidations." Product Revenues Up 27 Percent. Premiums and product charges for the third quarter of 2001 increased 27 percent to $46,951,000, compared to $36,988,000 in the third quarter of 2000. Interest sensitive product charges increased 24 percent and traditional life insurance premiums increased over 39 percent while, as planned, accident and health premiums decreased. Product revenues attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the addition of the Kansas and National Travelers Life (NTL) transactions totaled $10,834,000. Kansas product revenues were comprised of interest sensitive product charges of $353,000, traditional life insurance premiums of $5,879,000 and accident and health premiums of $613,000. NTL product revenues were comprised of interest sensitive product charges of $2,565,000 and traditional life insurance premiums of $1,424,000. Total premiums collected, net of internal rollovers, increased 39 percent to $89,100,000 from $64,149,000 in the third quarter of 2000. Collected premiums on variable products (from both FBL's core distribution and alliance partners), net of internal rollovers, increased three percent to $24,645,000. Total 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. premiums collected increased 198 percent to $23,325,000 from $7,817,000 in the third quarter of 2000, due in part to the addition of the Kansas and NTL business. "This quarter we experienced increased sales in our core distribution, and on top of that, added premiums from our Kansas and NTL transactions," stated Oddy. "Earlier this year we introduced a new competitive term portfolio, which has proven to be very popular with our agents and customers. Year to date, not including business from Kansas and NTL, we have seen a 39 percent increase in our new term sales. We are also pleased that despite difficult market conditions, our variable sales have remained steady. At the beginning of October October: see month. , we introduced a new traditional portfolio and additions to our variable product subaccounts. Our variable products now have 37 sub-account options managed by eight investment firms, one of which is our own EquiTrust Investment Management Services." Investment Income. Net investment income in the third quarter totaled $70,599,000 compared to $55,579,000 in the year ago quarter. This increase is primarily due to an increase in average invested assets resulting from the acquisition of $920,108,000 in investments with the Kansas Farm Bureau Life and NTL transactions. 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 increased to 7.48 percent for the first nine months of 2001, compared to 7.39 percent for the same period of 2000. The increase in yield reflects an increase in investment fee income primarily due to bond calls, which totaled $3,346,000 in the 2001 period ($273,000 in the third quarter) compared to less than $100,000 in the first nine months of 2000. Benefits and Expenses. Benefits and expenses totaled $104,987,000 in the third quarter of 2001, compared to $79,337,000 in the year ago quarter. This increase is largely due to the addition of the Kansas and NTL business. Policy benefits attributable to the addition of the Kansas and NTL business totaled $19,007,000, comprised of interest sensitive product benefits of $11,065,000, traditional life insurance and accident and health benefits, including change in reserves, of $6,455,000 and distributions to policyholders of $1,487,000. Additionally, death benefits increased and FBL incurred $1,600,000 ($0.04 per share) in reinsurance losses due to its participation in a reinsurance pool that had exposure to losses from the September 11, 2001 tragedy. Partially offsetting these increases was a decrease in accident and health benefits and reserve changes due to the reinsurance of FBL's individual disability income business. Income from Equity Investments. Equity income, net of related income taxes, was $595,000 in the third quarter of 2001, compared to $571,000 in the year ago quarter. Included in equity income is FBL's share of income and losses from investments in various partnerships and joint ventures. Due to the nature of these investments, it is not unusual to experience fluctuations on a quarter-to-quarter basis. Operating Results by Segment. Pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta operating income by segment for the third quarter of 2001 was traditional annuity, 30 percent; traditional and universal life insurance, 67 percent; variable, 8 percent; and corporate and other, (5) percent. Further detail is provided in FBL's financial supplement, which is available on FBL's web site. Net Income Applicable to Common Stock. Diluted net income per common share totaled $0.36 ($10,162,000) for the quarter ended September 30, 2001, compared to $0.06 ($1,843,000) in the year ago quarter. In the third quarter of 2001, FBL recognized 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. on investments totaling $221,000, compared to realized losses on investments of $15,353,000 in the third quarter of 2000. The 2000 realized losses primarily related to write-downs on investments that became other-than-temporarily impaired See assistive technology. . Assets Total $5.0 Billion. Total assets increased $1.3 billion to $5.0 billion at September 30, 2001 from $3.7 billion at December December: see month. 31, 2000. This increase is due principally to the acquisition of $1.0 billion of assets in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the Kansas Farm Bureau Life and NTL transactions. At September 30, 2001, 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: , with securities at market, increased 21 percent to $21.04 at September 30, 2001, from $17.35 at December 31, 2000. Book value per common share, with securities at cost, increased five percent to $18.96 from $18.13 at December 31, 2000. Sale of Individual Disability Income Business. Effective September 1, 2001, FBL reinsured the individual disability income business acquired through the acquisition of Kansas Farm Bureau Life via a 100 percent coinsurance agreement with Assurity Life Insurance Company, a subsidiary of Woodmen Accident and Life Company of Lincoln, Nebraska The City of Lincoln is the capital and the second most populous city of the U.S. state of Nebraska. Lincoln is also the county seat of Lancaster County and the home of the University of Nebraska. . At September 1, 2001, related accident and health reserves totaled $14,378,000, and deferred policy acquisition costs and value of insurance in force acquired totaled $3,850,000. FBL transferred cash and investments to Assurity Life equal to the reserves on this business at September 1, 2001. Assurity Life, in turn, transferred $3,025,000 in cash to FBL. A loss on the transaction of $825,000 has been deferred and is being recognized over the term of the underlying policies. Similar to FBL's other Farm Bureau agents in its core distribution system, FBL's agents in the state of Kansas now sell disability income insurance underwritten by Country Life, which is part of COUNTRY Insurance and Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. . Alliance Partner Update. Woodmen of the World/Omaha Woodmen, previously an FBL variable alliance partner, has decided not to develop variable products and has discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: its variable alliance partnership with FBL. Another FBL alliance partner, Modern Woodmen of America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. , is on track to begin selling its jointly developed variable products in the Spring of 2002. Conference Call. FBL management will hold a conference call with investors to discuss third quarter results. The call will be held tomorrow, November November: see month. 1, 2001, at 10 a.m. Central 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 and the marketing success of FBL's alliance partners. 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 four 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 and provides certain management and other services to National Travelers Life Company. FBL's three-pronged Adj. 1. three-pronged - having three prongs divided - separated into parts or pieces; "opinions are divided" growth strategy includes (1) internal growth within its traditional Farm Bureau distribution network in 15 midwestern Mid·west or Middle West A region of the north-central United States around the Great Lakes and the upper Mississippi Valley. It is generally considered to include Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, Kansas, and and western states, (2) alliances with other companies and (3) consolidations.
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended Sept. 30,
2001 2000
-------------- -------------
REVENUES
Interest sensitive product charges $18,350 $14,778
Traditional life insurance premiums 27,965 20,038
Accident and health premiums 636 2,172
Net investment income 70,599 55,579
Realized losses on investments (221) (15,353)
Other income 4,358 4,876
-------------- -------------
Total revenues 121,687 82,090
BENEFITS AND EXPENSES
Interest sensitive product benefits 44,254 32,963
Traditional life insurance and
accident and health benefits 21,883 15,056
Increase in traditional life and
accident and health future policy
benefits 4,206 2,781
Distributions to participating
policyholders 7,549 6,045
Underwriting, acquisition and
insurance expenses 23,293 17,840
Interest expense 430 956
Other expenses 3,372 3,696
-------------- -------------
Total benefits and expenses 104,987 79,337
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16,700 2,753
Income taxes (4,832) (289)
Minority interest in earnings of
subsidiaries:
Dividends on company-obligated
mandatorily redeemable preferred
stock of subsidiary trust (1,213) (1,213)
Other (34) 59
Equity income, net of related income
taxes 595 571
-------------- -------------
Net income 11,216 1,881
Dividends on Series B and C preferred
stock (1,054) (38)
-------------- -------------
Net income applicable to common stock $10,162 $1,843
============== =============
Earnings per common share $0.37 $0.06
============== =============
Earnings per common share - assuming
dilution $0.36 $0.06
============== =============
FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Nine months ended Sept. 30,
2001 2000
-------------- -------------
REVENUES
Interest sensitive product charges $51,867 $44,525
Traditional life insurance premiums 86,827 64,504
Accident and health premiums 2,858 9,310
Net investment income 207,549 165,635
Realized losses on investments (1,490) (19,562)
Other income 12,733 14,333
-------------- -------------
Total revenues 360,344 278,745
BENEFITS AND EXPENSES
Interest sensitive product benefits 122,938 96,938
Traditional life insurance and
accident and health benefits 63,240 47,584
Increase in traditional life and
accident and health future policy
benefits 17,038 14,871
Distributions to participating
policyholders 22,049 18,696
Underwriting, acquisition and
insurance expenses 72,016 54,901
Interest expense 1,524 2,727
Other expenses 9,960 10,787
-------------- -------------
Total benefits and expenses 308,765 246,504
-------------- -------------
51,579 32,241
Income taxes (15,386) (9,570)
Minority interest in earnings of
subsidiaries:
Dividends on company-obligated
mandatorily redeemable preferred
stock of subsidiary trust (3,638) (3,638)
Other (90) 17
Equity income, net of related income
taxes 569 10,630
-------------- -------------
Income before cumulative effect of change
in accounting principle 33,034 29,680
Cumulative effect of change in accounting
for derivative instruments 344 -
-------------- -------------
Net income 33,378 29,680
Dividends on Series B and C preferred
stock (3,139) (113)
-------------- -------------
Net income applicable to common stock $30,239 $29,567
============== =============
Earnings per common share:
Income before accounting change $1.09 $0.95
Cumulative effect of change in
accounting for derivative instruments 0.01 -
------------- -------------
Earnings per common share $1.10 $0.95
============== =============
Earnings per common share - assuming
dilution:
Income before accounting change $1.08 $0.94
Cumulative effect of change in
accounting for derivative instruments 0.01 -
-------------- -------------
Earnings per common share - assuming
dilution $1.09 $0.94
============== =============
FBL FINANCIAL GROUP, INC.
RECONCILIATION OF NET INCOME TO OPERATING INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
Sept. 30,
2001 2000
-------------- -------------
Net income applicable to common stock $10,162 $1,843
Adjustment:
Realized losses, net of related
adjustments to deferred policy
acquisition costs, value of insurance in
force acquired, unearned revenue reserve
and income taxes 182 9,424
-------------- -------------
Operating income applicable to common
stock $10,344 $11,267
============== =============
Operating earnings per common share -
assuming dilution $0.37 $0.36
============== =============
Weighted average common shares 27,396,913 31,026,236
Effect of dilutive securities 559,882 376,333
-------------- -------------
Weighted average common shares - diluted 27,956,795 31,402,569
============== =============
FBL FINANCIAL GROUP, INC.
RECONCILIATION OF NET INCOME TO OPERATING INCOME (Unaudited)
(Dollars in thousands, except per share data)
Nine months ended
Sept. 30,
2001 2000
-------------- -------------
Net income applicable to common stock $30,239 $29,567
Adjustments:
Realized losses, net of related
adjustments to deferred policy
acquisition costs, value of insurance
in force acquired, unearned revenue
reserve and income taxes 1,322 11,998
Cumulative effect of change in accounting
for derivative instruments (344) -
-------------- -------------
Operating income applicable to common
stock $31,217 $41,565
============== =============
Operating earnings per common share -
assuming dilution $1.12 $1.32
============== =============
Weighted average common shares 27,369,225 31,082,195
Effect of dilutive securities 480,700 401,808
-------------- -------------
Weighted average common shares - diluted 27,849,925 31,484,003
============== =============
FBL FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
Sept. 30, December 31,
2001 2000
------------- -------------
Assets
Investments $3,905,011 $2,870,659
Cash and cash equivalents 146,406 3,099
Deferred policy acquisition costs 294,502 250,971
Other assets 327,568 251,910
Assets held in separate accounts 320,318 327,407
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Total assets $4,993,805 $3,704,046
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Liabilities and stockholders' equity
Policy liabilities and accruals $3,335,192 $2,412,090
Other policyholders' funds 377,051 265,528
Debt 40,000 49,943
Other liabilities 162,833 75,133
Liabilities related to separate accounts 320,318 327,407
------------- -------------
Total liabilities 4,235,394 3,130,101
Minority interest in subsidiaries 97,135 97,142
Series C redeemable preferred stock 82,007 -
Stockholders' equity 579,269 476,803
------------- -------------
Total liabilities and stockholders' equity $4,993,805 $3,704,046
============= =============
Book Value Per Share, securities at market $21.04 $17.35
============= =============
Book Value Per Share, securities at cost $18.96 $18.13
============= =============
Common Shares Outstanding 27,389,346 27,308,110
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