FBL Financial Group Reports Third Quarter 2002 Results.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. 30, 2002 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
September 30,
2002 2001
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Net income applicable to common stock $16,334 $10,162
Operating income applicable to common stock 15,603 10,344
Earnings per common share (assuming
dilution):
Net income 0.58 0.36
Operating income 0.55 0.37
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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 totaled $0.58 ($16,334,000) for the quarter ended September September: see month. 30, 2002, compared to $0.36 ($10,162,000) 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. totaled $15,603,000 for the quarter ended September 30, 2002, versus $10,344,000 in the third quarter of 2001. Diluted operating income per common share increased 49 percent to $0.55 in the third quarter of 2002, from $0.37 in the third quarter of 2001. 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 and the cumulative effect of change in accounting principle. "We are very pleased with our strong third quarter operating results, which reflect continued improved sales from our core distribution system, good equity income results and a positive contribution from the 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. agreements that we entered into last year," said Bill Oddy, Chief Executive Officer. "With this earnings announcement, we are increasing our full year 2002 operating income guidance to a range of $1.88 to $1.92 per share. I am pleased to say that this is FBL's second upward revision (programming) revision - A release of a piece of software which is not a major release or a bugfix, but only introduces small changes or new features. since initially giving guidance for 2002 operating income." Product Revenues Up Five Percent. Premiums and product charges for the third quarter of 2002 increased five percent to $49,316,000 compared to $46,951,000 in the third quarter of 2001. Interest sensitive product charges increased nine percent and traditional life insurance premiums increased five percent while, as planned, accident and health premiums decreased due to the sale of the 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). individual disability income block of business effective September 1, 2001. Total premiums collected increased 288 percent to $353,820,000 from $91,279,000 in the third quarter of 2001. Excluding the impact of the 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 Insurance Company (AE) coinsurance agreement, collected premiums increased 33 percent, with the 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. segment increasing 111 percent, the traditional and universal life insurance segment increasing three percent and the variable segment increasing 13 percent. Investment Income. Net investment income in the third quarter of 2002 increased 25 percent to $88,818,000 compared to $71,262,000 in the third quarter of 2001. This increase is due to an increase in average invested assets, resulting primarily from cash received pursuant to the AE coinsurance agreement. 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 was 7.18 percent for the nine months ended September 30, 2002 compared to 7.48 percent for the same period in 2001. The 2002 yield reflects the impact of a decline in market interest rates and a decrease in investment fee income for the year. Fee income from bond calls and mortgage loan prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. for the quarter, however, increased to $508,000 in the third quarter of 2002 from $273,000 in the third quarter of 2001. 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 increased to $1,133,000 in the third quarter of 2002, compared to $663,000 in the third quarter of 2001, due to a decrease in the value of call options purchased to fund returns on equity-indexed annuities equity-indexed annuity A contract with an insurance company that promises periodic payments keyed in a specified manner to a stock market index. Unlike variable annuities, equity-indexed annuities specify a guaranteed minimum return that is typically 3%. assumed from AE. Derivative income (loss) can fluctuate from period to period based upon the performance of the bond and stock indices underlying the call options. Gains and losses on call options are partially offset by changes in the value of the embedded Inserted into. See embedded system. 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. in the underlying equity-indexed contracts, which are recorded as a component of interest sensitive product benefits. In total, the AE coinsurance agreement added $0.02 per share to FBL's operating income in the third quarter of 2002. Realized Gains (Losses) on Investments. In the third quarter of 2002, FBL recognized net realized gains on investments of $1,683,000, compared to net 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 of $221,000 in the third quarter of 2001. Benefits and Expenses. Benefits and expenses totaled $117,209,000 in the third quarter of 2002, compared to $104,987,000 in the third quarter last year. This increase is largely due to the coinsurance agreement with AE. Income from Equity Investments. Equity income, net of related income taxes, was $1,078,000 in the third quarter of 2002, compared to $595,000 in the third quarter of 2001. Equity income in the third quarter of 2002 is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to $897,000 of income, net of taxes, from FBL's 32 percent ownership interest in American Equity Investment Life Holding Company. Included in equity income is FBL's share of income and losses from investments in various partnerships and joint ventures, the majority of which are booked a quarter in arrears Adv. 1. in arrears - in debt; "he fell behind with his mortgage payments"; "a month behind in the rent"; "a company that has been run behindhand for years"; "in arrears with their utility bills" behindhand, behind . Due to the nature of investment partnerships, it is not unusual to experience fluctuations on a quarter-to-quarter basis. Operating Results by Segment. FBL's favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. operating results for the third quarter of 2002 came from the traditional annuity and traditional and universal life insurance segments. Pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta operating income for the traditional annuity segment increased 46 percent while pre-tax operating income for the traditional and universal life insurance segment increased 67 percent. Contributing to the increase in the traditional and universal life segment was a $4,184,000 decrease in amortization of deferred acquisition costs from a change in assumptions used to calculate these costs. The variable segment experienced 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. of $2,120,000 due primarily to a $3,747,000 increase in amortization of deferred acquisition costs from a change in assumptions used to calculate these costs. Further detail by segment is provided in FBL's financial supplement, which is available on FBL's web site, www.fblfinancial.com. Assets Total $6.6 Billion. Total assets increased $972 million to $6.6 billion at September 30, 2002 from $5.6 billion at December December: see month. 31, 2001. At September 30, 2002, 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 to $23.73 at September 30, 2002, from $20.53 at December 31, 2001. Book value per common share, with securities at cost, increased six percent to $20.16 from $19.10 at December 31, 2001. Earnings Outlook. While 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, FBL expects fourth quarter 2002 operating income to be $0.45 to $0.49 per common share and full year 2002 operating income to be $1.88 to $1.92 per common share. The fourth quarter 2002 guidance is less than the third quarter 2002 experience due to several line items, including investment income and total benefits and expenses, being better than expected in the third quarter of 2002. The full year 2002 guidance is higher than the full year $1.75 to $1.85 guidance last given on July July: see month. 31, 2002, and is FBL's second upward revision of its 2002 operating income. These estimates exclude the impact of realized gains and losses on investments as well as the impact of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Conference Call. FBL management will hold a conference call with investors to discuss third quarter 2002 results. The call will be held tomorrow, October October: see month. 31, 2002, 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 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 two 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, (2) alliances and relationships 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
September 30,
2002 2001
-------- --------
REVENUES
Interest sensitive product charges $19,913 $18,350
Traditional life insurance premiums 29,360 27,965
Accident and health premiums 43 636
Net investment income 88,818 71,262
Derivative loss (1,133) (663)
Realized gains (losses) on investments 1,683 (221)
Other income 4,193 4,358
-------- --------
Total revenues 142,877 121,687
BENEFITS AND EXPENSES
Interest sensitive product benefits 54,407 44,254
Traditional life insurance and accident and health
benefits 20,543 21,883
Increase in traditional life and accident and health
future policy benefits 4,865 4,206
Distributions to participating policyholders 6,606 7,549
Underwriting, acquisition and insurance expenses 27,823 23,293
Interest expense 175 430
Other expenses 2,790 3,372
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Total benefits and expenses 117,209 104,987
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25,668 16,700
Income taxes (8,089) (4,832)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary trust (1,213) (1,213)
Other (22) (34)
Equity income, net of related income taxes 1,078 595
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Net income 17,422 11,216
Dividends on Series B and C preferred stock (1,088) (1,054)
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Net income applicable to common stock $16,334 $10,162
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Earnings per common share - assuming dilution $0.58 $0.36
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FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
Nine months ended
September 30,
2002 2001
-------- --------
REVENUES
Interest sensitive product charges $58,293 $51,867
Traditional life insurance premiums 92,500 86,827
Accident and health premiums 313 2,858
Net investment income 251,332 209,078
Derivative loss (10,570) (1,529)
Realized losses on investments (1,894) (1,490)
Other income 12,990 12,733
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Total revenues 402,964 360,344
BENEFITS AND EXPENSES
Interest sensitive product benefits 145,633 122,938
Traditional life insurance and accident and health
benefits 57,211 63,240
Increase in traditional life and accident and health
future policy benefits 24,369 17,038
Distributions to participating policyholders 22,273 22,049
Underwriting, acquisition and insurance expenses 76,195 72,016
Interest expense 533 1,524
Other expenses 8,890 9,960
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Total benefits and expenses 335,104 308,765
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67,860 51,579
Income taxes (21,210) (15,386)
Minority interest in earnings of subsidiaries:
Dividends on company-obligated mandatorily
redeemable preferred stock of subsidiary trust (3,638) (3,638)
Other (117) (90)
Equity income, net of related income taxes 42 569
-------- --------
Income before cumulative effect of change in
accounting principle 42,937 33,034
Cumulative effect of change in accounting for
derivative instruments - 344
-------- --------
Net income 42,937 33,378
Dividends on Series B and C preferred stock (3,239) (3,139)
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Net income applicable to common stock $39,698 $30,239
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Earnings per common share - assuming dilution:
Income before accounting change $1.41 $1.08
Cumulative effect of change in accounting for
derivative instruments - 0.01
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Earnings per common share - assuming dilution $1.41 $1.09
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FBL FINANCIAL GROUP, INC.
RECONCILIATION OF NET INCOME TO OPERATING INCOME (Unaudited)
(Dollars in thousands, except per share data)
Three months ended
September 30,
2002 2001
----------- -----------
Net income applicable to common stock $16,334 $10,162
Adjustment:
Net realized losses (gains) on investments (1) (731) 182
----------- -----------
Operating income applicable to common stock $15,603 $10,344
=========== ===========
Operating earnings per common share - assuming
dilution $0.55 $0.37
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Weighted average common shares 27,692,367 27,396,913
Effect of dilutive securities 553,452 559,882
----------- -----------
Weighted average common shares - diluted 28,245,819 27,956,795
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Nine months ended
September 30,
2002 2001
----------- -----------
Net income applicable to common stock $39,698 $30,239
Adjustments:
Net realized losses on investments (1) 693 1,322
Cumulative effect of change in accounting for
derivative instruments - (344)
----------- -----------
Operating income applicable to common stock $40,391 $31,217
=========== ===========
Operating earnings per common share - assuming
dilution $1.43 $1.12
=========== ===========
Weighted average common shares 27,590,210 27,369,225
Effect of dilutive securities 565,645 480,700
----------- -----------
Weighted average common shares - diluted 28,155,855 27,849,925
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(1) Net of adjustments for that portion of amortization of deferred
policy acquisition costs, unearned revenue reserve, value of
insurance in force acquired and income taxes attributable to such
losses (gains).
FBL FINANCIAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share data)
September 30, December 31,
2002 2001
------------- ------------
Assets
Investments $5,360,287 $4,300,856
Cash and cash equivalents 163,914 271,459
Deferred policy acquisition costs 427,099 360,156
Other assets 326,299 340,270
Assets held in separate accounts 323,686 356,448
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Total assets $6,601,285 $5,629,189
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Liabilities and stockholders' equity
Policy liabilities and accruals $4,615,477 $3,795,897
Other policyholders' funds 438,558 390,037
Debt 40,000 40,000
Other liabilities 341,562 301,192
Liabilities related to separate accounts 323,686 356,448
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Total liabilities 5,759,283 4,883,574
Minority interest in subsidiaries 97,122 97,131
Series C redeemable preferred stock 84,795 82,691
Stockholders' equity 660,085 565,793
------------- ------------
Total liabilities and stockholders' equity $6,601,285 $5,629,189
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Book Value Per Share, securities at market $23.73 $20.53
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Book Value Per Share, securities at cost $20.16 $19.10
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Common Shares Outstanding 27,692,865 27,408,675
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