Market Overview

FBL Financial Group Reports Third Quarter 2019 Results

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FBL Financial Group, Inc. (NYSE:FFG):

Financial Highlights

(Dollars in thousands, except per share data)

 

Three months ended September 30,

 

2019

 

2018

Net income attributable to FBL Financial Group

$

25,129

 

$

31,010

Adjusted operating income(1)

25,215

 

31,872

Earnings per common share (assuming dilution):

 

 

 

Net income

1.01

 

1.24

Adjusted operating income(1)

1.02

 

1.28

FBL Financial Group, Inc. (NYSE:FFG) today reported net income attributable to FBL Financial Group for the third quarter of 2019 of $25.1 million, or $1.01 per diluted common share, compared to $31.0 million, or $1.24 per diluted common share, for the third quarter of 2018. Adjusted operating income(1) totaled $25.2 million, or $1.02 per common share, for the third quarter of 2019, compared to $31.9 million, or $1.28 per common share, for the third quarter of 2018. Third quarter 2019 earnings per share reflects:

  • A negative impact of $0.09 per share from unlocking actuarial assumptions used in the calculation of deferred acquisition costs, unearned revenue reserves and certain reserves on interest sensitive products
  • Unfavorable mortality results in the Life segment
  • Lower spread income in the Annuity segment
  • Continued investment in the Wealth Management initiative
  • A nonrecurring tax benefit totaling $0.10 per share due to the execution of a tax planning strategy

Adjusted operating income differs from the GAAP measure, net income attributable to FBL Financial Group, in that it excludes the initial impact of changes in federal statutory income tax rates and tax laws, realized gains and losses on investments, and the change in net unrealized gains and losses on derivatives and equity securities. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.

"FBL Financial Group's third quarter 2019 earnings results were below our expectations. This was due to several factors, including our annual actuarial assumption review, higher mortality benefits and lower spread income from the decline in investment yields," said James P. Brannen, Chief Executive Officer of FBL Financial Group, Inc. "We continue to benefit from our balanced book of life and annuity business to provide earnings stability. As we look ahead toward the close of 2019, we remain focused on financial discipline and supporting our exclusive Farm Bureau agency force as we work together to serve the needs of the Farm Bureau niche market."

Product Revenues. Premiums and product charges for the third quarter of 2019 totaled $78.1 million compared to $79.3 million in the third quarter of 2018. Interest sensitive product charges were flat while traditional life insurance premiums decreased two percent during the quarter. Premiums collected(2) in the third quarter of 2019 totaled $142.1 million compared to $141.7 million in the third quarter of 2018. Total life insurance premiums collected increased two percent while annuity premiums collected were flat, impacted by the low market interest rate environment.

Investment Income. Net investment income in the third quarter of 2019 totaled $101.5 million, compared to $105.8 million in the third quarter of 2018. This decrease is due to a decrease in derivative income and the impact of lower investment yields. The annualized yield earned on average invested assets, with securities at amortized cost, including investments held as securities and indebtedness of related parties, was 4.97 percent for the nine months ended September 30, 2019 compared to 5.16 percent for the nine months ended September 30, 2018. At September 30, 2019, 98 percent of the fixed maturity securities in FBL Financial Group's investment portfolio were investment grade debt securities.

Benefits, Expenses and Taxes. Benefits and expenses totaled $158.6 million in the third quarter of 2019, compared to $153.9 million in the third quarter of 2018. Death benefits, net of reinsurance and reserves released, totaled $30.2 million in the third quarter of 2019, compared to $29.4 million in the third quarter of 2018. By its nature, mortality experience can fluctuate from quarter to quarter. Federal income taxes were reduced $2.5 million, or $0.10 per share, during the third quarter of 2019 due to the execution of a tax planning strategy.

Unlocking. During the third quarter of 2019, FBL Financial Group unlocked the assumptions used in the calculation of deferred acquisition costs, unearned revenue reserves and certain reserves on interest sensitive products. This unlocking resulted in a pre-tax unfavorable impact of $2.7 million, or $0.09 per share after-tax.

Net Realized Gains. In the third quarter of 2019, FBL Financial Group recognized net realized gains on investments of $0.7 million. This is attributable to realized gains of $0.5 million and a gain from the increase in fair value of equity securities of $0.2 million.

Stock Repurchases. During the third quarter of 2019, FBL Financial Group did not repurchase any shares of its Class A or Class B common stock. FBL Financial Group has $36.3 million remaining under its current stock repurchase program.

Capital and Book Value. As of September 30, 2019, the book value per share of FBL Financial Group common stock totaled $61.28, compared to $47.78 at December 31, 2018. Book value per share, excluding accumulated other comprehensive income(3), totaled $44.81 at September 30, 2019, compared to $44.09 at December 31, 2018. The September 30, 2019 company action level risk based capital ratio of FBL Financial Group's wholly owned subsidiary, Farm Bureau Life Insurance Company, was approximately 555 percent.

Further Financial Information. Further information on FBL Financial Group's financial results, including results by segment, may be found in FBL Financial Group's financial supplement, available on its website, www.fblfinancial.com.

Conference Call. FBL Financial Group will hold a conference call with investors tomorrow, November 1, 2019, at 11:00 a.m. Eastern Time. The call will be webcast and a replay will be available on FBL Financial Group's website.

Certain statements in this release concerning FBL Financial Group's prospects for the future are forward-looking statements intended to qualify for the "safe harbor" from liability established by the Private Securities Litigation Reform Act. These statements generally can be identified by their context, including terms such as "believes," "anticipates," "expects," or similar words. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statement. These risks and uncertainties are detailed in FBL Financial Group's reports filed with the Securities and Exchange Commission and include, but are not limited to, changes in interest rates, difficult conditions in financial markets and the economy, lack of liquidity and access to capital, investment valuations, competitive factors, a decrease in ratings, changes in laws and regulations, differences between actual claims experience and underwriting assumptions, relationships with Farm Bureau organizations, the ability to attract and retain sales agents and adverse results from litigation. These forward-looking statements are based on assumptions which FBL Financial Group believes to be reasonable; however, no assurance can be given that the assumptions will prove to be correct. FBL Financial Group undertakes no obligation to update any forward-looking statements.

FBL Financial Group is a holding company with the purpose to protect livelihoods and futures. Operating under the consumer brand name Farm Bureau Financial Services, its affiliates offer a broad range of life insurance, annuity and investment products distributed by multiline exclusive Farm Bureau agents. In addition, FBL Financial Group manages all aspects of two Farm Bureau affiliated property-casualty insurance companies for a management fee. Headquartered in West Des Moines, Iowa, FBL Financial Group is traded on the New York Stock Exchange under the symbol FFG. For more information, please visit www.fblfinancial.com and www.fbfs.com.

- FINANCIAL INFORMATION AND NOTES FOLLOW -

FBL Financial Group, Inc.

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share data)

 

 

Three months ended

 

Nine months ended

 

September 30,

 

September 30,

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

Interest sensitive product charges

$

31,135

 

 

$

31,161

 

 

$

94,935

 

 

$

92,165

 

Traditional life insurance premiums

46,982

 

 

48,124

 

 

147,361

 

 

148,712

 

Net investment income

101,478

 

 

105,757

 

 

316,012

 

 

310,753

 

Net realized capital gains (losses)

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