-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SoIg0kvhzkqYj3gwPcrx+vEkbYvYYcCAP22yaDRouwelkZ318Saw9CZXrsRS66rD 6Ds06DFaYChftuS+tLt+4A== 0001157523-08-004045.txt : 20080509 0001157523-08-004045.hdr.sgml : 20080509 20080509092613 ACCESSION NUMBER: 0001157523-08-004045 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080508 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20080509 DATE AS OF CHANGE: 20080509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FBL FINANCIAL GROUP INC CENTRAL INDEX KEY: 0001012771 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 421411715 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11917 FILM NUMBER: 08816209 BUSINESS ADDRESS: STREET 1: 5400 UNIVERSITY AVE CITY: WEST DES MOINES STATE: IA ZIP: 50266 BUSINESS PHONE: 5152255400 8-K 1 a5680403.htm FBL FINANCIAL GROUP, INC. 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): May 8, 2008

FBL Financial Group, Inc.
(Exact name of registrant as specified in its charter)

Iowa

1-11917

42-1411715

(State or other jurisdiction

of incorporation)

(Commission File Number)

(I.R.S. Employer

Identification No.)

5400 University Avenue, West Des Moines, Iowa

50266

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (515) 225-5400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 2.02     Results of Operations and Financial Condition
On May 8, 2008, FBL Financial Group, Inc. issued a news release reporting its financial results for the three months ended March 31, 2008. The news release is furnished as Exhibit 99.1 hereto and the Financial Supplement as Exhibit 99.2 hereto. This information shall not be deemed "filed" for purposes of Section 18 of the Securities Act of 1933, except as shall be expressly set forth by specific reference to such filing.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FBL FINANCIAL GROUP, INC.

(Registrant)
 

Date: May 8, 2008

 
 

/s/ James P. Brannen

James P. Brannen

Chief Financial Officer


EXHIBIT INDEX

Exhibit No.

Description

Exhibit 99.1

News release of the registrant dated May 8, 2008

Exhibit 99.2

Financial Supplement for the quarter ended March 31, 2008

EX-99.1 2 a5680403ex99_1.htm EXHIBIT 99.1

Exhibit 99.1

FBL Financial Group Reports First Quarter 2008 Results

WEST DES MOINES, Iowa--(BUSINESS WIRE)--FBL Financial Group, Inc. (NYSE: FFG):

Financial Highlights

(Dollars in thousands, except per share data)

Three months ended March 31,
2008   2007
Net income applicable to common stock $6,400   $24,073
Operating income applicable to common stock 15,030 22,059
Earnings per common share (assuming dilution):
Net income 0.21 0.80
Operating income 0.50   0.73

FBL Financial Group, Inc. (NYSE: FFG) today announced that diluted net income per common share totaled $0.21 ($6.4 million) for the quarter ended March 31, 2008, compared to $0.80 ($24.1 million) in the year ago quarter.

Operating Income(1). Operating income totaled $15.0 million for the quarter ended March 31, 2008, compared to $22.1 million in the first quarter of 2007. Diluted operating income per common share totaled $0.50 in the first quarter of 2008 compared to $0.73 in the first quarter of 2007. Operating income differs from the GAAP measure, net income, in that it excludes the impact of realized/unrealized gains and losses on investments, the change in net unrealized gains and losses on derivatives and the cumulative effect of changes in accounting principle. For further information on this non-GAAP financial measure, please refer to Note (1) and the reconciliation provided within this release.

“FBL Financial Group had a challenging first quarter led by adverse mortality experience and difficult financial market conditions, which increased option costs, pressured spreads and had a negative effect on the market value of our investment portfolio. At the same time sales for the first quarter were positive with Farm Bureau Life’s premiums collected increasing nine percent and EquiTrust Life’s independent channel premiums collected increasing 10 percent over the first quarter of 2007,” said Chief Executive Officer Jim Noyce. “I’m confident that we will navigate through these difficult financial markets with our high quality and diverse investment portfolio, commitment to spread management, solid niche Farm Bureau Life marketplace and growing EquiTrust Life independent distribution channel.”


Noyce added, “We do not expect many of the factors that negatively impacted us during the first quarter to happen on a regular basis. In addition, rate actions taken late in the first quarter and early in the second quarter should relieve some of the pressure on spread compression. At the same time, some of the economic and market factors that existed in the first quarter continue, and will possibly create short term earnings challenges. As a result of these factors and given our first quarter results, we are updating FBL’s full year 2008 operating income guidance to be within a range of $2.70 to $2.85 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.

Product Revenues Up. Premiums and product charges for the first quarter of 2008 increased six percent to $65.3 million from $61.5 million in the first quarter of 2007. Interest sensitive and index product charges increased eight percent, while traditional life insurance premiums increased five percent.

Premiums collected in the first quarter of 2008 increased 10 percent to $464.9 million from $423.7 million in the first quarter of 2007. 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 $326.7 million of premiums collected in the first quarter of 2008, an increase of 10 percent over the first quarter of 2007. The Farm Bureau Life distribution channel had first quarter 2008 premiums collected of $126.1 million, an increase of nine percent, reflecting a 28 percent increase in traditional annuity sales, a three percent increase in traditional and universal life insurance sales and a three percent decline in variable sales.

Investment Income. Net investment income in the first quarter of 2008 increased 12 percent to $168.5 million from $150.0 million in the first quarter of 2007. This increase is due to an increase in average invested assets resulting primarily from inflows from Farm Bureau Life and EquiTrust Life. The annualized yield earned on average invested assets, with securities at cost, was 6.09 percent for the quarter ended March 31, 2008, compared to 6.21 percent for the same period of 2007.

Derivative Loss. FBL’s derivative loss totaled $98.9 million in the first quarter of 2008, compared to $3.9 million in the first quarter of 2007. 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 in the form of index credits. In accordance with the accounting rules for derivatives (FAS 133), gains and losses on these call options are generally offset by a corresponding change in the value of index product embedded derivatives. Valuation adjustments made under FAS 133 have no relationship to any write down in value of an invested asset due to credit concerns.


Realized/Unrealized Losses on Investments. In the first quarter of 2008, FBL recognized net realized/unrealized losses on investments of $29.3 million compared to gains of $1.5 million in the first quarter of 2007. The realized/unrealized losses on investments of $29.3 million in the first quarter are attributable to six securities that were deemed other-than-temporarily impaired, including a collateralized debt obligation, an Alt-A asset-backed security and four corporate bonds. After taxes and other offsets, the impact of these realized losses on net income was $12.2 million ($0.40 per share).

Benefits and Expenses. Benefits and expenses totaled $102.6 million in the first quarter of 2008, compared to $180.0 million in the first quarter of 2007. The decrease in benefits and expenses is attributable to the change in the value of index product embedded derivatives resulting primarily from a decline in the value of underlying market indices supporting the index annuity business. In accordance with FAS 133, the change in the value of index product embedded derivatives is generally offset by a corresponding change in derivative income or loss. Additionally, primarily due to adverse permanent life experience, total death benefits increased to $29.4 million in the first quarter of 2008 compared to $25.0 million in the first quarter of 2007. By its nature, mortality experience can fluctuate from quarter to quarter.

Operating Results by Segment. FBL’s operating results for the first quarter of 2008 reflect a decrease in all segments. Consistent with prior quarters, the majority of FBL’s operating earnings 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. At March 31, 2008, 96 percent of the fixed maturity securities in FBL’s investment portfolio were investment grade debt securities. Reflecting a decline in the market value of investments, FBL’s book value per share decreased to $26.64 at March 31, 2008 from $29.98 at December 31, 2007. Book value per share excluding accumulated other comprehensive loss(3) increased to $31.21 at March 31, 2008, from $31.19 at December 31, 2007.

Conference Call. FBL management will hold a conference call with investors to discuss first quarter 2008 results. The call will be held tomorrow, May 9, 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 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 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.


FBL Financial Group, Inc.

Consolidated Statements of Income (Unaudited)

(Dollars in thousands, except per share data)

 
Three months ended

March 31,

2008   2007
REVENUES
Interest sensitive and index product charges $ 29,121 $ 26,986
Traditional life insurance premiums 36,133 34,537
Net investment income 168,494 149,962
Derivative loss (98,896 ) (3,877 )
Realized/unrealized gains (losses) on investments (29,347 ) 1,456
Other income   5,865     7,096  
Total revenues 111,370 216,160
BENEFITS AND EXPENSES
Interest sensitive and index product benefits 104,761 94,832
Change in value of index product embedded derivatives (103,170 ) (4,044 )
Traditional life insurance benefits 27,252 24,670
Increase in traditional life future policy benefits 11,390 7,536
Distributions to participating policyholders 5,270 5,592
Underwriting, acquisition and insurance expenses 46,691 42,110
Interest expense 4,451 3,288
Other expenses   5,955     6,023  
Total benefits and expenses   102,600     180,007  
8,770 36,153
Income taxes (2,458 ) (12,407 )
Minority interest in loss (earnings) of subsidiaries 9 (10 )
Equity income, net of related income taxes   117     375  
Net income 6,438 24,111
Dividends on Series B preferred stock   (38 )   (38 )
Net income applicable to common stock $ 6,400   $ 24,073  
 
Earnings per common share - assuming dilution $ 0.21   $ 0.80  
 
Weighted average common shares 29,859,589 29,573,003
Effect of dilutive securities 348,274   649,268  
Weighted average common shares – diluted 30,207,863   30,222,271  

(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 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 is a nonrecurring item. 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 March 31,
2008   2007
Net income applicable to common stock $ 6,400 $ 24,073
Adjustments:
Net realized/unrealized (gains) losses on investments (a) 12,165 (954 )
Net change in unrealized gains/losses on derivatives (a) (3,535 ) (1,343 )
Cumulative effect of change in accounting principle (a)   -     283  
Operating income applicable to common stock $ 15,030   $ 22,059  
 
Operating income per common share – assuming dilution $ 0.50   $ 0.73  

(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 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 Loss (Unaudited)

March 31,   December 31,
2008 2007
Book value per share $ 26.64 $ 29.98
Less: Accumulated other comprehensive loss   (4.57 )   (1.21 )
Book value per share,

excluding accumulated other comprehensive loss

$ 31.21   $ 31.19  

Book value per share excluding accumulated other comprehensive loss is a non-GAAP financial measure. Accumulated other comprehensive loss totaled $138.0 million at March 31, 2008 and $36.3 million at December 31, 2007. Since accumulated other comprehensive 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.


FBL Financial Group, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

 
March 31, December 31,
2008 2007
Assets
Investments $ 10,979,006 $ 11,067,070
Cash and cash equivalents 101,404 84,015
Deferred policy acquisition costs 1,089,344 991,155
Deferred sales inducements 353,414 321,263
Other assets 626,230 601,618
Assets held in separate accounts   802,225   862,738
Total assets $ 13,951,623 $ 13,927,859
 
Liabilities and stockholders’ equity
Policy liabilities and accruals $ 11,072,282 $ 10,900,658
Other policyholders’ funds 633,862 608,894
Debt 316,949 316,930
Other liabilities 319,800 335,657
Liabilities related to separate accounts   802,225   862,738
Total liabilities 13,145,118 13,024,877
 
Minority interest in subsidiaries 129 91
 
Stockholders’ equity   806,376   902,891
Total liabilities and stockholders’ equity $ 13,951,623 $ 13,927,859
 
Common Shares Outstanding   30,162,058   30,019,728

FFG-1

CONTACT:
FBL Financial Group, Inc.
Kathleen Till Stange, Investor Relations Vice President,
515-226-6780
Kathleen.TillStange@FBLFinancial.com

EX-99.2 3 a5680403ex99_2.htm EXHIBIT 99.2

Exhibit 99.2

I N T E G R I T Y

F I N A N C I A L   S T R E N G T H

O P E R A T I O N A L   E X C E L L E N C E


FBL Financial Group, Inc.
Financial Supplement
March 31, 2008


  For more information contact:
 
Jim Brannen
Chief Financial Officer

Jim.Brannen@FBLFinancial.com

TEL: 515.225.5631
 
Don Seibel
Vice President - Finance

Don.Seibel@FBLFinancial.com

TEL: 515.226.6399
 
Kathleen Till Stange
Investor Relations Vice President

Kathleen.TillStange@FBLFinancial.com

TEL: 515.226.6780

NYSE: FFG

www.fblfinancial.com


FBL Financial Group, Inc.
Financial Supplement (Unaudited)
March 31, 2008
Table of Contents/Notes
 
 
Consolidated Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Income 4
Consolidated Statements of Operating Income, last five quarters 5
Financial Information by Segment:

Segment Information

6
Consolidating Statements of Pre-tax Operating Income 7
Statements of Pre-tax Operating Income, last five quarters:
Traditional Annuity - Exclusive Distribution Segment 8
Traditional Annuity - Independent Distribution Segment 9
Traditional and Universal Life Insurance Segment 10
Variable Segment 11
Corporate and Other Segment 12
Deferred Policy Acquisition Costs by Segment 13
Collected Premiums, last five quarters 14
Other Information 15
 
NOTE 1: 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 for the periods presented equals net income adjusted to eliminate the impact of:
 

• realized and unrealized gains and losses on investments;

• changes in net unrealized gains and losses on derivatives;

• the cumulative effect of changes in accounting principles.

 
NOTE 2: Certain financial information presented herein may not add due to rounding.
1

FBL Financial Group, Inc.
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
 
 
March 31, December 31,
2008 2007
Assets
Investments:

Fixed maturities - available for sale, at market (amortized cost: 2008 - $9,822,297; 2007 - $9,662,986)

$ 9,414,478 $ 9,522,592
Equity securities - available for sale, at market (cost of $22,410 in 2008 and 2007) 25,007 23,633
Mortgage loans on real estate 1,229,068 1,221,573
Derivative instruments 28,359 43,918
Investment real estate, less allowances for depreciation of $0 in 2008 and 2007 2,559 2,559
Policy loans 179,140 179,490
Other long-term investments 1,300 1,300
Short-term investments   99,095 72,005
Total investments 10,979,006 11,067,070
 
Cash and cash equivalents 101,404 84,015
Securities and indebtedness of related parties 20,043 19,957
Accrued investment income 130,063 118,827
Amounts receivable from affiliates 5,937 10,831
Reinsurance recoverable 111,849 123,659
Deferred policy acquisition costs 1,089,344 991,155
Deferred sales inducements 353,414 321,263
Value of insurance in force acquired 45,525 41,215
Property and equipment, less allowances for depreciation of $77,678 in 2008 and $75,365 in 2007 49,352 49,164
Current income tax recoverable 15,405 7,412
Deferred income tax benefit 16,711 -
Goodwill 11,170 11,170
Collateral held for securities lending and other transactions 198,029 186,925
Other assets 22,146 32,458
Assets held in separate accounts 802,225 862,738
 
 
 
 
       
Total assets $ 13,951,623 $ 13,927,859
2

FBL Financial Group, Inc.
Consolidated Balance Sheets (Continued)
(Dollars in thousands)
 
 
March 31, December 31,
  2008   2007

Liabilities and stockholders' equity

Liabilities:
Policy liabilities and accruals:
Future policy benefits:

Interest sensitive and index products

$ 9,707,117 $ 9,557,073
Traditional life insurance and accident and health products 1,297,198 1,284,068
Unearned revenue reserve 29,774 28,448
Other policy claims and benefits   38,193   31,069
11,072,282 10,900,658
Other policyholders' funds:
Supplementary contracts without life contingencies 460,554 439,441
Advance premiums and other deposits 162,174 158,245
Accrued dividends   11,134   11,208
633,862 608,894
 
Amounts payable to affiliates 1,228 35
Long-term debt 316,949 316,930
Deferred income taxes - 28,188
Collateral payable for securities lending and other transactions 197,477 202,594
Other liabilities 121,095 104,840
Liabilities related to separate accounts   802,225   862,738
Total liabilities 13,145,118 13,024,877
 
 
Minority interest in subsidiaries 129 91
 
Stockholders’ equity:
Preferred stock, without par value, at liquidation value – authorized 10,000,000 shares, issued and outstanding 5,000,000 Series B shares 3,000 3,000
Class A common stock, without par value – authorized 88,500,000 shares, issued and outstanding 28,969,068 shares in 2008 and 28,826,738 shares in 2007 104,453 101,221
Class B common stock, without par value – authorized 1,500,000 shares, issued and outstanding 1,192,990 shares 7,525 7,525
Accumulated other comprehensive loss (137,996) (36,345)
Retained earnings   829,394   827,490
Total stockholders’ equity   806,376   902,891
Total liabilities and stockholders’ equity $ 13,951,623 $ 13,927,859
3

FBL Financial Group, Inc.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
         
 
Three months ended March 31,
2008 2007
Revenues:
Interest sensitive and index product charges $ 29,121 $ 26,986
Traditional life insurance premiums 36,133 34,537
Net investment income 168,494 149,962
Derivative loss (98,896) (3,877)
Realized/unrealized gains (losses) on investments (29,347) 1,456
Other income   5,865   7,096
Total revenues 111,370 216,160
Benefits and expenses:
Interest sensitive and index product benefits 104,761 94,832
Change in value of index product embedded derivatives (103,170) (4,044)
Traditional life insurance benefits 27,252 24,670
Increase in traditional life future policy benefits 11,390 7,536
Distributions to participating policyholders 5,270 5,592
Underwriting, acquisition and insurance expenses 46,691 42,110
Interest expense 4,451 3,288
Other expenses   5,955   6,023
Total benefits and expenses   102,600   180,007
8,770 36,153
Income taxes (2,458) (12,407)
 
Minority interest in loss (earnings) of subsidiaries 9 (10)
Equity income, net of related income taxes   117   375
Net income 6,438 24,111
Dividends on Series B preferred stock   (38)   (38)
Net income applicable to common stock $ 6,400 $ 24,073
 
Earnings per common share $ 0.21 $ 0.81
 
Earnings per common share – assuming dilution $ 0.21 $ 0.80
 
Cash dividends per common share $ 0.125 $ 0.120
4

FBL Financial Group, Inc.
Consolidated Statements of Operating Income
(Dollars in thousands, except per share data)
         
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
 
Operating revenues:
Interest sensitive and index product charges $ 26,986 $ 27,940 $ 29,129 $ 30,492 $ 29,206
Traditional life insurance premiums 34,537 38,975 34,751 36,419 36,133
Net investment income 149,962 154,582 157,016 166,471 168,494
Derivative income (loss) (4,013) 17,135 28,257 8,937 (17,926)
Other income   7,096   6,446   6,513   6,484   5,865
Total operating revenues 214,568 245,078 255,666 248,803 221,772
 
Benefits and expenses:
Interest sensitive and index product benefits 93,902 115,044 128,428 118,064 99,147
Traditional life insurance 24,670 23,411 21,595 21,132 27,252
Increase in traditional life future policy benefits 7,536 11,693 8,840 9,613 11,390
Distributions to participating policyholders 5,592 5,656 4,866 5,306 5,270
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals 3,404 3,648 3,455 3,398 3,401
Amortization of deferred policy acquisition costs 18,510 20,688 22,027 24,025 22,436
Amortization of value of insurance in force acquired 911 1,097 1,004 2,068 1,055
Other underwriting expenses   18,110   17,899   19,281   19,160   19,369
Total underwriting, acquisition and insurance expenses 40,935 43,332 45,767 48,651 46,261
Interest expense 3,288 4,511 4,437 4,430 4,451
Other expenses   6,024   5,673   5,675   6,389   5,955
Total benefits and expenses   181,947   209,320   219,608   213,585   199,726
32,621 35,758 36,058 35,218 22,046
Income taxes (10,889) (11,749) (12,172) (10,807) (7,104)
Minority interest in loss (earnings) of subsidiaries (10) 5 2 52 9
Equity income, net of related income taxes 375 189 538 433 117
Dividends on Series B preferred stock   (38)   (37)   (37)   (37)   (38)
 
Operating income applicable to common stock 22,059 24,166 24,389 24,859 15,030
 
Realized/unrealized gains (losses) on investments, net of offsets 954 1,365 2,392 (213) (12,165)
Change in net unrealized gains/losses on derivatives, net of offsets 1,343 8,278 (10,319) (12,800) 3,535
Cumulative effect of change in accounting principle (283) - - - -
           
Net income applicable to common stock $ 24,073 $ 33,809 $ 16,462   $ 11,846 $ 6,400
 
Operating income per common share - assuming dilution $ 0.73 $ 0.80 $ 0.81 $ 0.82 $ 0.50
Earnings per common share - assuming dilution $ 0.80 $ 1.12 $ 0.54 $ 0.39 $ 0.21
 
Weighted average common shares outstanding (in thousands):
Basic 29,573 29,682 29,731 29,787 29,860
Effect of dilutive securities   649   603   551   626   348
Diluted   30,222   30,285   30,282   30,413   30,208
 
Operating return on equity, excluding AOCI - last twelve months   10.5%   10.7%   10.6%   10.6%   9.6%
Operating return on equity, including AOCI - last twelve months   10.6%   10.8%   10.6%   10.7%   10.1%
5

FBL Financial Group, Inc.
Segment Information


We analyze operations by reviewing financial information regarding products that are aggregated into four product segments.  The product segments are (1) Traditional Annuity - Exclusive Distribution ("Exclusive Annuity"), (2) Traditional Annuity - Independent Distribution ("Independent Annuity"), (3) Traditional and Universal Life Insurance and (4) Variable.  We also have various support operations and corporate capital that are aggregated into the Corporate and Other segment.

The Exclusive Annuity segment primarily consists of fixed rate annuities and supplementary contracts (some of which involve life contingencies) sold through our exclusive agency distribution.  Fixed rate annuities provide for tax-deferred savings and supplementary contracts provide for the systematic repayment of funds that accumulate interest.  Fixed rate annuities consist primarily of flexible premium deferred annuities, but also include single premium deferred and immediate contracts. With fixed rate annuities, we bear the underlying investment risk and credit interest to the contracts at rates we determine, subject to interest rate guarantees.  The Exclusive Annuity segment also includes index annuities.  With index annuity products, we bear the underlying investment risk and credit interest in an amount equal to a percentage of the gain in a specified market index, subject to minimum guarantees.

The Independent Annuity segment consists of fixed rate and index annuities and supplementary contracts (some of which involve life contingencies) sold through our independent distribution or assumed through coinsurance agreements.

The Traditional and Universal Life Insurance segment consists of whole life, term life and universal life policies.  These policies provide benefits upon the death of the insured and may also allow the customer to build cash value on a tax-deferred basis.

The Variable segment consists of variable universal life insurance and variable annuity contracts.  These products are similar to universal life insurance and traditional annuity contracts, except the contract holder has the option to direct the cash value of the contract to a wide range of investment sub-accounts, thereby passing the investment risk to the contract holder.

The Corporate and Other segment consists of the following corporate items and products/services that do not meet the quantitative threshold for separate segment reporting:

- investments and related investment income not specifically allocated to our product segments;
- interest expense;
- accident and health insurance products, primarily a closed block of group policies;
- advisory services for the management of investments and other companies;

- marketing and distribution services for the sale of mutual funds and insurance products not issued by us; and

- leasing services, primarily with affiliates.

We analyze our segment results based on pre-tax operating income (loss).  Accordingly, income taxes are not allocated to the segments.  In addition, operating results are generally reported net of any transactions between the segments.

6

FBL Financial Group, Inc.
Consolidating Statements of Pre-tax Operating Income
           
 
 
Quarter Ended March 31, 2008 Traditional Traditional Traditional
Annuity - Annuity - & Universal Corporate
Exclusive Independent Life Insurance Variable & Other Consolidated
(Dollars in thousands)
Operating revenues:
Interest sensitive and index product charges $ 265 $ 5,309 $ 11,421 $ 12,211 $ - $ 29,206
Traditional life insurance premiums - - 36,133 - - 36,133
Net investment income 35,538 90,766 35,787 3,341 3,062 168,494
Derivative loss (133) (17,793) - - - (17,926)
Other income   26   -   21   383   5,435   5,865
Total operating revenues 35,696 78,282 83,362 15,935 8,497 221,772
 
Benefits and expenses:
Interest sensitive and index product benefits 23,287 53,534 16,385 5,941 - 99,147
Traditional life insurance benefits - - 27,252 - - 27,252
Increase in traditional life future policy benefits - - 11,390 - - 11,390
Distributions to participating policyholders - - 5,270 - - 5,270
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals - - 2,579 822 - 3,401
Amortization of deferred policy acquisition costs 2,482 13,011 4,446 2,497 - 22,436
Amortization of value of insurance in force acquired 534 - 521 - - 1,055
Other underwriting expenses   2,151   3,942   7,355   5,304   617   19,369
Total underwriting, acquisition and insurance expenses 5,167 16,953 14,901 8,623 617 46,261
Interest expense - - - - 4,451 4,451
Other expenses   -   -   -   203   5,752   5,955
Total benefits and expenses   28,454   70,487   75,198   14,767   10,820   199,726
7,242 7,795 8,164 1,168 (2,323) 22,046
Minority interest in loss of subsidiaries - - - - 9 9
Equity income, before tax   -   -   -   -   180   180
Pre-tax operating income (loss) $ 7,242 $ 7,795 $ 8,164 $ 1,168 $ (2,134) $ 22,235
 
 
 
 
Quarter Ended March 31, 2007 Traditional Traditional Traditional
Annuity - Annuity - & Universal Corporate
Exclusive Independent Life Insurance   Variable & Other Consolidated
(Dollars in thousands)
Operating revenues:
Interest sensitive and index product charges $ 287 $ 4,105 $ 11,329 $ 11,265 $ - $ 26,986
Traditional life insurance premiums - - 34,537 - - 34,537
Net investment income 36,810 71,122 35,837 3,473 2,720 149,962
Derivative income (loss) 41 (4,054) - - - (4,013)
Other income   -   -   -   1,623   5,473   7,096
Total operating revenues 37,138 71,173 81,703 16,361 8,193 214,568
 
Benefits and expenses:
Interest sensitive and index product benefits 23,387 47,720 17,672 5,123 - 93,902
Traditional life insurance benefits - - 24,670 - - 24,670
Increase in traditional life future policy benefits - - 7,536 - - 7,536
Distributions to participating policyholders - - 5,592 - - 5,592
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals - - 2,589 815 - 3,404
Amortization of deferred policy acquisition costs 2,045 9,292 4,409 2,764 - 18,510
Amortization of value of insurance in force acquired 413 - 498 - - 911
Other underwriting expenses   2,176   3,002   7,343   5,209   380   18,110
Total underwriting, acquisition and insurance expenses 4,634 12,294 14,839 8,788 380 40,935
Interest expense - - - - 3,288 3,288
Other expenses   -   -   -   192   5,832   6,024
Total benefits and expenses   28,021   60,014   70,309   14,103   9,500   181,947
9,117 11,159 11,394 2,258 (1,307) 32,621
Minority interest in earnings of subsidiaries - - - - (10) (10)
Equity income, before tax   -   -   -   -   577   577
Pre-tax operating income (loss) $ 9,117 $ 11,159 $ 11,394 $ 2,258 $ (740) $ 33,188
7

FBL Financial Group, Inc.
Statements of Pre-tax Operating Income
Traditional Annuity - Exclusive Distribution Segment
         
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
Pre-tax Operating Income (Dollars in thousands)
 
Operating revenues:
Interest sensitive and index product charges $ 287 $ 289 $ 276 $ 259 $ 265
Net investment income 36,810 36,932 35,664 36,861 35,538
Derivative income (loss):
Proceeds from option settlements 126 127 48 165 73
Cost of money for call options (85) (95) (99) (98) (94)

Proceeds from (cost of) interest rate swaps

  -   998   1,107   832   (112)
Total derivative income (loss) 41 1,030 1,056 899 (133)
Other income   -   -   -   -   26
Total operating revenues 37,138 38,251 36,996 38,019 35,696
 
Benefits and expenses:
Interest sensitive and index product benefits 23,387 24,641 24,613 24,563 23,287
Underwriting, acquisition and insurance expenses:
Amortization of deferred policy acquisition costs 2,045 2,607 3,179 2,111 2,482
Amortization of value of insurance in force acquired 413 447 343 311 534
Other underwriting expenses   2,176   2,098   2,196   2,262   2,151
Total underwriting, acquisition and insurance expenses   4,634   5,152   5,718   4,684   5,167
Total benefits and expenses   28,021   29,793   30,331   29,247   28,454
Pre-tax operating income $ 9,117 $ 8,458 $ 6,665 $ 8,772 $ 7,242
 
 
Balance sheet data, securities at cost:
 
Assets:
Investments $ 2,340,938 $ 2,330,355 $ 2,334,881 $ 2,315,044 $ 2,350,332
Deferred policy acquisition costs 79,574 78,932 79,556 80,685 84,023
Value of insurance in force acquired 14,042 13,598 13,257 12,949 12,509
Other assets   49,728   44,192   44,747   51,155   50,485
Total assets $ 2,484,282 $ 2,467,077 $ 2,472,441 $ 2,459,833 $ 2,497,349
 
Liabilities and equity:
Liabilities:
Interest sensitive and index product reserves $ 1,822,350 $ 1,820,788 $ 1,824,221 $ 1,825,325 $ 1,842,844
Other insurance reserves 396,292 396,295 395,144 392,326 394,576
Other liabilities   33,774   20,058   21,260   15,362   36,711
Total liabilities 2,252,416 2,237,141 2,240,625 2,233,013 2,274,131
Allocated equity   231,866   229,936   231,816   226,820   223,218
Total liabilities and equity $ 2,484,282 $ 2,467,077 $ 2,472,441 $ 2,459,833 $ 2,497,349
 
Other data:
Number of direct contracts 52,918 52,311 51,769 51,311 50,926
 
Net statutory portfolio yield, excluding cash 6.21% 6.12% 6.12% 6.05% 5.75%
Credited rate   4.43%   4.43%   4.43%   4.35%   4.14%
Spread on direct fixed annuities at end of quarter   1.78%   1.69%   1.69%   1.70%   1.61%
 
 
Interest sensitive and index product reserve activity:
Individual deferred annuity reserve:
Balance, beginning of period $ 1,436,611 $ 1,436,152 $ 1,436,517 $ 1,439,049 $ 1,442,520
 
Deposits 32,230 33,344 23,978 24,045 43,164
Withdrawals, surrenders and death benefits   (25,150)   (32,173)   (22,702)   (22,659)   (24,090)
Net flows 7,080 1,171 1,276 1,386 19,074
 
Policyholder interest/index credits 15,275 15,425 15,423 15,382 14,897
Annuitizations and other   (22,814)   (16,231)   (14,167)   (13,297)   (18,679)
Balance, end of period 1,436,152 1,436,517 1,439,049 1,442,520 1,457,812
Other interest sensitive reserves   386,198   384,271   385,172   382,805   385,032
Total interest sensitive and index product reserves $ 1,822,350 $ 1,820,788 $ 1,824,221 $ 1,825,325 $ 1,842,844
8

FBL Financial Group, Inc.
Statements of Pre-tax Operating Income
Traditional Annuity - Independent Distribution Segment
         
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
Pre-tax Operating Income (Dollars in thousands)
 
Operating revenues:
Interest sensitive and index product charges $ 4,105 $ 4,829 $ 5,133 $ 6,399 $ 5,309
Net investment income 71,122 73,442 78,337 86,230 90,766
Derivative income (loss):
Proceeds from option settlements 19,667 41,650 55,258 38,717 14,341
Cost of money for call options   (23,721)   (25,545)   (28,057)   (30,679)   (32,134)
Total derivative income (loss)   (4,054)   16,105   27,201   8,038   (17,793)
Total operating revenues 71,173 94,376 110,671 100,667 78,282
 
Benefits and expenses:
Interest sensitive and index product benefits:
Interest sensitive product benefits 17,664 18,059 19,171 23,222 25,430
Index product benefits:
Interest credited 9,874 11,084 12,116 12,034 13,579
Index credits   20,182   40,913   53,428   39,465   14,525
Total index product benefits   30,056   51,997   65,544   51,499   26,267
Total interest sensitive and index product benefits 47,720 70,056 84,715 74,721 53,534
Underwriting, acquisition and insurance expenses:
Amortization of deferred policy acquisition costs 9,292 12,766 12,191 13,339 13,011
Other underwriting expenses   3,002   3,079   2,986   3,145   3,942
Total underwriting, acquisition and insurance expenses   12,294   15,845   15,177   16,484   16,953
Total benefits and expenses   60,014   85,901   99,892   91,205   70,487
Pre-tax operating income $ 11,159 $ 8,475 $ 10,779 $ 9,462 $ 7,795
 
 
Balance sheet data, securities at cost:
 
Assets:
Investments $ 5,109,465 $ 5,416,676 $ 5,841,363 $ 6,249,207 $ 6,393,489
Deferred policy acquisition costs 399,681 404,758 433,409 468,529 478,708
Deferred sales inducements 231,063 241,245 261,522 286,849 292,491
Other assets   151,110   149,404   153,391   142,582   167,015
Total assets $ 5,891,319 $ 6,212,083 $ 6,689,685 $ 7,147,167 $ 7,331,703
 
Liabilities and equity:
Liabilities:
Interest sensitive and index product reserves - direct $ 3,707,801 $ 3,997,813 $ 4,506,311 $ 4,994,736 $ 5,172,016
Interest sensitive and index product reserves - assumed 1,890,704 1,860,472 1,825,551 1,766,735 1,719,151
Other insurance reserves 30,178 34,343 48,829 64,242 89,362
Other liabilities   3,552   40,471   23,292   21,034   36,972
Total liabilities 5,632,235 5,933,099 6,403,983 6,846,747 7,017,501
Allocated equity   259,084   278,984   285,702   300,420   314,202
Total liabilities and equity $ 5,891,319 $ 6,212,083 $ 6,689,685 $ 7,147,167 $ 7,331,703
 
Other data:
Number of direct contracts 55,420 59,862 66,957 73,980 78,241
 
Fixed rate annuitites:
Net statutory portfolio yield, excluding cash 5.63% 5.73% 5.80% 5.80% 5.83%
Credited rate   4.76%   4.77%   4.83%   4.86%   4.85%
Spread on direct fixed rate annuities at end of quarter   0.87%   0.96%   0.97%   0.94%   0.98%
 
Index annutities:
Net statutory portfolio yield, excluding cash 5.59% 5.68% 5.71% 5.74% 5.77%
Credited rate/option cost   3.39%   3.44%   3.51%   3.57%   3.56%
Spread on direct index annuities at end of quarter   2.20%   2.24%   2.20%   2.17%   2.21%
 
Interest sensitive and index product reserve activity:
Individual deferred annuity reserve:
Balance, beginning of period $ 5,352,604 $ 5,597,140 $ 5,856,937 $ 6,330,502 $ 6,759,976
 
Deposits 282,679 268,323 474,385 485,878 303,676
Withdrawals, surrenders and death benefits   (95,219)   (98,253)   (109,068)   (130,841)   (134,517)
Net flows 187,460 170,070 365,317 355,037 169,159
 
Policyholder interest/index credits 65,273 85,412 98,090 86,470 63,945
Derivative value change and other   (8,197)   4,315   10,158   (12,033)   (103,467)
Balance, end of period 5,597,140 5,856,937 6,330,502 6,759,976 6,889,613
Other interest sensitive reserves   1,365   1,348   1,360   1,495   1,554
Total interest sensitive and index product reserves $ 5,598,505 $ 5,858,285 $ 6,331,862 $ 6,761,471 $ 6,891,167
9

FBL Financial Group, Inc.
Statements of Pre-tax Operating Income
Traditional and Universal Life Insurance Segment
         
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
Pre-tax Operating Income (Dollars in thousands, except face amounts in millions)
 
Operating revenues:
Interest sensitive product charges $ 11,329 $ 11,098 $ 12,296 $ 11,457 $ 11,421
Traditional life insurance premiums 34,537 38,975 34,751 36,419 36,133
Net investment income 35,837 37,319 35,326 35,749 35,787
Other income   -   -   -   -   21
Total operating revenues 81,703 87,392 82,373 83,625 83,362
 
Benefits and expenses:
Interest sensitive product benefits:
Interest credited 9,476 8,729 9,046 9,146 9,140
Death benefits   8,196   7,024   5,831   5,092   7,245
Total interest sensitive product benefits 17,672 15,753 14,877 14,238 16,385
Traditional life insurance benefits:
Death benefits 13,670 11,983 12,883 12,582 18,433
Surrender and other benefits   11,000   11,428   8,712   8,550   8,819
Total traditional life insurance benefits 24,670 23,411 21,595 21,132 27,252
Increase in traditional life future policy benefits 7,536 11,693 8,840 9,613 11,390
Distributions to participating policyholders 5,592 5,656 4,866 5,306 5,270
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals 2,589 2,808 2,676 2,461 2,579
Amortization of deferred policy acquisition costs 4,409 4,127 6,042 5,555 4,446
Amortization of value of insurance in force acquired 498 650 661 1,757 521
Other underwriting expenses   7,343   7,077   7,702   7,603   7,355
Total underwriting, acquisition and insurance expenses   14,839   14,662   17,081   17,376   14,901
Total benefits and expenses   70,309   71,175   67,259   67,665   75,198
Pre-tax operating income $ 11,394 $ 16,217 $ 15,114 $ 15,960 $ 8,164
 
 
Balance sheet data, securities at cost:
Assets:
Investments $ 2,204,059 $ 2,214,197 $ 2,225,049 $ 2,216,803 $ 2,228,639
Deferred policy acquisition costs 223,324 226,657 227,267 230,399 233,127
Deferred sales inducements 2,972 3,267 3,607 3,806 3,861
Value of insurance in force acquired 30,707 30,061 29,395 27,642 27,182
Other assets   61,100   61,532   61,655   66,256   78,837
Total assets $ 2,522,162 $ 2,535,714 $ 2,546,973 $ 2,544,906 $ 2,571,646
 
Liabilities and equity:
Liabilities:
Interest sensitive reserves $ 770,949 $ 767,304 $ 766,769 $ 768,066 $ 768,141
Other insurance reserves 1,371,866 1,379,671 1,385,873 1,400,379 1,416,311
Other liabilities   73,436   81,654   88,892   66,566   65,445
Total liabilities 2,216,251 2,228,629 2,241,534 2,235,011 2,249,897
Allocated equity   305,911   307,085   305,439   309,895   321,749
Total liabilities and equity $ 2,522,162 $ 2,535,714 $ 2,546,973 $ 2,544,906 $ 2,571,646
 
Other data:
Number of direct policies - traditional life 328,590 329,940 330,209 332,494 332,538
Number of direct policies - universal life 56,153 55,785 55,439 55,218 54,787
Direct face amounts - traditional life $ 26,545 $ 27,295 $ 27,853 $ 28,551 $ 29,088
Direct face amounts - universal life $ 4,667 $ 4,674 $ 4,675 $ 4,695 $ 4,684
 
Net statutory portfolio yield, excluding cash 6.35% 6.30% 6.30% 6.32% 6.30%
Credited rate   4.45%   4.45%   4.39%   4.40%   4.40%
Spread on direct universal life at end of quarter   1.90%   1.85%   1.91%   1.92%   1.90%
 
Interest sensitive reserve activity:
Balance, beginning of period $ 772,405 $ 770,949 $ 767,304 $ 766,769 $ 768,066
 
Deposits 12,836 13,504 13,476 14,079 13,395
Withdrawals and surrenders   (7,958)   (11,298)   (7,814)   (7,539)   (7,439)
Net flows 4,878 2,206 5,662 6,540 5,956
 
Policyholder interest credited 8,672 7,955 8,043 8,604 8,286
Policy charges (11,377) (10,547) (11,120) (11,328) (11,263)
Benefits and other   (3,629)   (3,259)   (3,120)   (2,519)   (2,904)
Balance, end of period $ 770,949 $ 767,304 $ 766,769 $ 768,066 $ 768,141
10

FBL Financial Group, Inc.
Statements of Pre-tax Operating Income
Variable Segment
         
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
Pre-tax Operating Income (Dollars in thousands, except face amounts in millions)
 
Operating revenues:
Interest sensitive product charges:
Variable universal life product charges $ 9,183 $ 9,433 $ 9,200 $ 9,936 $ 9,913
Variable annuity product charges   2,082   2,291   2,224   2,441   2,298
Total interest sensitive product charges 11,265 11,724 11,424 12,377 12,211
Net investment income 3,473 3,503 3,330 3,352 3,341
Other income   1,623   535   573   201   383
Total operating revenues 16,361 15,762 15,327 15,930 15,935
 
Benefits and expenses:
Interest sensitive product benefits:
Interest credited 2,029 1,971 1,943 2,003 2,217
Death benefits   3,094   2,623   2,280   2,539   3,724
Total interest sensitive product benefits 5,123 4,594 4,223 4,542 5,941
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals 815 840 779 852 822
Amortization of deferred policy acquisition costs 2,764 1,188 615 3,020 2,497
Other underwriting expenses   5,209   5,186   5,140   5,238   5,304
Total underwriting, acquisition and insurance expenses 8,788 7,214 6,534 9,110 8,623
Other expenses   192   181   189   176   203
Total benefits and expenses   14,103   11,989   10,946   13,828   14,767
Pre-tax operating income $ 2,258 $ 3,773 $ 4,381 $ 2,102 $ 1,168
 
 
Balance sheet data, securities at cost:
Assets:
Investments $ 217,297 $ 207,147 $ 216,939 $ 215,176 $ 224,408
Deferred policy acquisition costs 147,906 151,076 154,059 156,055 156,980
Deferred sales inducements 1,712 1,858 2,208 2,369 2,379
Other assets 12,911 30,955 14,032 11,539 15,909
Separate account assets   784,995   838,190   865,557   862,738   802,225
Total assets $ 1,164,821 $ 1,229,226 $ 1,252,795 $ 1,247,877 $ 1,201,901
 
Liabilities and equity:
Liabilities:
Interest sensitive reserves $ 202,829 $ 201,472 $ 201,586 $ 202,211 $ 204,965
Other insurance reserves 30,288 28,558 26,934 26,985 28,596
Other liabilities 51,782 50,613 46,226 39,290 38,249
Separate account liabilities   784,995   838,190   865,557   862,738   802,225
Total liabilities 1,069,894 1,118,833 1,140,303 1,131,224 1,074,035
Allocated equity   94,927   110,393   112,492   116,653   127,866
Total liabilities and equity $ 1,164,821 $ 1,229,226 $ 1,252,795 $ 1,247,877 $ 1,201,901
 
Rollforward of separate account balances:
Beginning separate account balance $ 764,377 $ 784,995 $ 838,190 $ 865,557 $ 862,738
Net premiums 35,529 38,202 29,257 35,594 27,019
Net investment gain (loss) 10,818 42,722 21,709 (14,608) (61,229)
Charges, benefits and surrenders   (25,729)   (27,729)   (23,599)   (23,805)   (26,303)
Ending separate account balance $ 784,995 $ 838,190 $ 865,557 $ 862,738 $ 802,225
 
Separate account balance:
Balance per financial statements $ 784,995 $ 838,190 $ 865,557 $ 862,738 $ 802,225
Less: alliance partners' share (22,767) (22,865) (23,205) (22,301) (20,932)
Add: alliance partner separate account assets on business assumed   63,307   69,545   77,110   79,150   79,212
$ 825,535 $ 884,870 $ 919,462 $ 919,587 $ 860,505
 
Other data:
Number of direct contracts - variable annuity 20,820 20,960 21,009 21,041 21,025
Number of direct policies - variable universal life 64,122 63,842 63,562 63,378 62,858
Direct face amounts - variable universal life $ 7,704 $ 7,755 $ 7,779 $ 7,846 $ 7,804
11

FBL Financial Group, Inc.
Statements of Pre-tax Operating Income
Corporate and Other Segment
         
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
Pre-tax Operating Loss (Dollars in thousands)
 
Operating revenues:
Net investment income $ 2,720 $ 3,386 $ 4,359 $ 4,279 $ 3,062
Other income   5,473   5,911   5,940   6,283   5,435
Total operating revenues 8,193 9,297 10,299 10,562 8,497
 
Benefits and expenses:
Other underwriting and insurance expenses 380 459 1,257 997 617
Interest expense 3,288 4,511 4,437 4,430 4,451
Other expenses   5,832   5,492   5,486   6,213   5,752
Total benefits and expenses   9,500   10,462   11,180   11,640   10,820
(1,307) (1,165) (881) (1,078) (2,323)
Minority interest in loss (earnings) of subsidiaries (10) 5 2 52 9
Equity income, before tax   577   291   828   666   180
Pre-tax operating loss $ (740) $ (869) $ (51) $ (360) $ (2,134)
 
 
Balance sheet data, securities at cost:
Assets:
Investments $ 209,753 $ 236,869 $ 260,628 $ 280,864 $ 188,101
Securities and indebtedness of related parties 18,220 18,510 19,511 19,954 20,040
Other assets   337,539   389,252   377,199   426,436   451,908
Total assets $ 565,512 $ 644,631 $ 657,338 $ 727,254 $ 660,049
 
Liabilities and equity:
Liabilities:
Insurance reserves $ 72,475 $ 70,645 $ 68,330 $ 68,360 $ 68,710
Debt 316,229 316,893 316,912 316,930 316,949
Other liabilities   190,451   270,753   279,425   356,423   316,923
Total liabilities 579,155 658,291 664,667 741,713 702,582
Minority interest in subsidiaries 148 146 143 91 129
Equity   (13,791)   (13,806)   (7,472)   (14,550)   (42,662)
Total liabilities and equity $ 565,512 $ 644,631 $ 657,338 $ 727,254 $ 660,049
12

FBL Financial Group, Inc.
Deferred Policy Acquisition Costs by Segment
         
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
(Dollars in thousands)
Traditional Annuity - Exclusive Distribution
Deferred policy acquisition costs - beginning of period $ 78,169 $ 79,574 $ 78,932 $ 79,556 $ 80,685
Capitalization:
Commissions 2,614 2,620 1,791 1,844 2,774
Expenses   784   388   559   303   720
Total capitalization 3,398 3,008 2,350 2,147 3,494
Amortization - operating basis, before impact of unlocking (2,045) (2,607) (1,953) (2,111) (2,482)
Amortization - unlocking - - (1,226) - -
Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives
  52   (1,043)   1,453   1,093   2,326
Deferred policy acquisition costs - end of period $ 79,574 $ 78,932 $ 79,556 $ 80,685 $ 84,023
 
Traditional Annuity - Independent Distribution
Deferred policy acquisition costs - beginning of period $ 384,375 $ 399,681 $ 404,756 $ 433,409 $ 468,529
Capitalization:
Commissions 24,105 23,240 30,087 31,001 24,478
Expenses   1,607   1,800   2,216   2,176   1,931
Total capitalization 25,712 25,040 32,303 33,177 26,409
Amortization - operating basis, before impact of unlocking (10,731) (12,147) (12,191) (13,339) (13,011)
Amortization - unlocking 1,439 (619) - - -
Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives
  (1,114)   (7,199)   8,541   15,282   (3,219)
Deferred policy acquisition costs - end of period $ 399,681 $ 404,756 $ 433,409 $ 468,529 $ 478,708
 
Traditional & Universal Life Insurance
Deferred policy acquisition costs - beginning of period $ 220,858 $ 223,324 $ 226,659 $ 227,267 $ 230,399
Capitalization:
Commissions 3,148 4,104 3,084 4,828 2,960
Expenses   3,728   3,339   3,573   3,850   3,818
Total capitalization 6,876 7,443 6,657 8,678 6,778
Amortization - operating basis, before impact of unlocking (4,409) (4,580) (4,438) (5,555) (4,446)
Coinsurance adjustment - - - - -
Amortization - unlocking - 453 (1,604) - -
Amortization - realized gains/losses on investments   (1)   19   (7)   9   396
Deferred policy acquisition costs - end of period $ 223,324 $ 226,659 $ 227,267 $ 230,399 $ 233,127
 
Variable
Deferred policy acquisition costs - beginning of period $ 146,934 $ 147,906 $ 151,076 $ 154,059 $ 156,055
Capitalization:
Commissions 2,836 3,412 2,857 3,765 2,618
Expenses   1,011   932   1,156   969   893
Total capitalization 3,847 4,344 4,013 4,734 3,511
Amortization - operating basis, before impact of unlocking (2,764) (1,454) (1,590) (4,277) (2,497)
Amortization - unlocking - 266 975 1,257

-

Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives
  (111)   14   (415)   282   (89)
Deferred policy acquisition costs - end of period $ 147,906 $ 151,076 $ 154,059 $ 156,055 $ 156,980
 
Total
Deferred policy acquisition costs - beginning of period $ 830,336 $ 850,485 $ 861,423 $ 894,291 $ 935,668
Capitalization:
Commissions 32,703 33,376 37,819 41,438 32,830
Expenses   7,130   6,459   7,504   7,298   7,362
Total capitalization 39,833 39,835 45,323 48,736 40,192
Amortization - operating basis, before impact of unlocking (19,949) (20,789) (20,172) (25,282) (22,436)
Amortization - unlocking 1,439 101 (1,855) 1,257 -
Coinsurance adjustment - - - - -
Amortization - realized gains/losses on investments and unrealized gains/losses on derivatives
  (1,174)   (8,209)   9,572   16,666   (586)
Deferred policy acquisition costs - end of period 850,485 861,423 894,291 935,668 952,838
Impact of unrealized gains/losses on investments   (9,009)   60,217   49,872   55,487   136,506
Deferred policy acquisition costs $ 841,476 $ 921,640 $ 944,163 $ 991,155 $ 1,089,344
13

FBL Financial Group, Inc.
Collected Premiums
               
   
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008
(Dollars in thousands)
Traditional Annuity - Exclusive Distribution
First year - individual $ 20,676 $ 20,572 $ 17,052 $ 14,966 $ 25,530
Renewal - individual 12,826 14,100 8,282 9,335 18,115
Group   1,961   1,944   2,514   2,621   1,703
Total Traditional Annuity - Exclusive Distribution 35,463 36,616 27,848 26,922 45,348
 
Traditional Annuity - Independent Distribution
Fixed rate annuities 74,543 56,674 275,866 283,563 120,928
Index annuities   221,517   222,678   213,254   221,033   205,758
Total direct 296,060 279,352 489,120 504,596 326,686
Reinsurance assumed   755   1,311   663   458   882
Total Traditional Annuity - Independent Distribution, net of reinsurance
296,815 280,663 489,783 505,054 327,568
 
Traditional and Universal Life Insurance
Universal life:
First year 1,038 1,079 1,286 2,045 1,361
Renewal   9,867   10,062   9,178   9,920   9,919
Total 10,905 11,141 10,464 11,965 11,280
Participating whole life:
First year 3,720 4,029 3,660 3,271 2,848
Renewal   22,534   24,364   21,695   22,656   23,135
Total 26,254 28,393 25,355 25,927 25,983
Term life and other:
First year 2,142 2,320 2,326 2,503 2,595
Renewal   11,011   11,069   11,027   11,411   12,038
Total   13,153   13,389   13,353   13,914   14,633
Total Traditional and Universal Life Insurance - Exclusive Distribution 50,312 52,923 49,172 51,806 51,896
Reinsurance assumed 2,760 3,501 2,911 2,905 2,735
Reinsurance ceded   (4,475)   (4,833)   (4,157)   (4,844)   (4,637)
Total Traditional and Universal Life Insurance, net of reinsurance 48,597 51,591 47,926 49,867 49,994
 
Variable
Variable annuities:
Exclusive distribution:
First year 15,097 17,566 13,923 19,254 13,217
Renewal   6,617   7,758   5,966   6,036   6,682
Total 21,714 25,324 19,889 25,290 19,899
Alliance channel:
First year (1) 6,420 9,037 7,493 7,480 6,385
Renewal (1)   1,244   1,585   1,121   1,078   1,435
Total   7,664   10,622   8,614   8,558   7,820
Total variable annuities 29,378 35,946 28,503 33,848 27,719
Variable universal life:
Exclusive distribution:
First year 1,527 1,087 904 2,039 1,756
Renewal   11,513   12,079   11,158   11,302   11,936
Total 13,040 13,166 12,062 13,341 13,692
Alliance channel:
First year (1) 186 205 236 152 122
Renewal (1)   528   535   510   529   541
Total   714   740   746   681   663
Total variable universal life 13,754 13,906 12,808 14,022 14,355
Total Variable 43,132 49,852 41,311 47,870 42,074
Reinsurance ceded   (349)   (145)   (202)   (160)   (153)
Total Variable, net of reinsurance 42,783 49,707 41,109 47,710 41,921
 
Corporate and Other
Accident and health premiums collected, net of reinsurance
  70   28   24   234   63
$ 423,728 $ 418,605 $ 606,690 $ 629,787 $ 464,894

(1) Amounts are net of portion ceded to and include amounts assumed from alliance partners.

14

FBL Financial Group, Inc.
Other Information
 
                   
March 31, June 30, September 30, December 31, March 31,
2007   2007   2007   2007   2008  
(Dollars in thousands, except per share data)
Capitalization:
Revolving line of credit agreement $ 46,000 $ 46,000 $ 46,000 $ 46,000 $ 46,000
Senior notes, due 2014 75,388 75,376 75,365 75,353 75,341
Senior notes, due 2017 97,841 98,517 98,547 98,577 98,608
Trust preferred securities   97,000     97,000     97,000     97,000     97,000  
Total debt 316,229 316,893 316,912 316,930 316,949
 
Preferred stock 3,000 3,000 3,000 3,000 3,000
Common stockholders' equity, excluding AOCI   875,204     909,592     924,976     936,236     941,372  
Total capitalization, excluding AOCI 1,194,433 1,229,485 1,244,888 1,256,166 1,261,321
 
Accumulated other comprehensive income (loss)   30,476     (40,907)     (30,658)     (36,345)     (137,996)  
Total capitalization, including AOCI $ 1,224,909   $ 1,188,578   $ 1,214,230   $ 1,219,821   $ 1,123,325  
 
Common shares outstanding   29,834,194     29,939,365     29,986,157     30,019,728     30,162,058  
 
Book Value per Share:
Excluding AOCI $ 29.34 $ 30.38 $ 30.85 $ 31.19 $ 31.21
Including AOCI 30.36 29.01 29.82 29.98 26.64
 
Debt-to-Capital Ratio:
Excluding AOCI 26.5 % 25.8 % 25.5 % 25.2 % 25.1 %
Including AOCI 25.8 26.7 26.1 26.0 28.2
 
Class A Common Ownership:
Iowa Farm Bureau Federation 51.3 % 51.1 % 51.0 % 51.0 % 50.7 %
Other Farm Bureau entities 9.3 9.1 9.0 9.0 8.9
Public   39.4     39.8     40.0     40.0     40.4  
  100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
 
Quality of Fixed Income Securities:
(AAA, AA, A) 64.3 % 62.8 % 63.4 % 63.6 % 62.0 %
(BBB) 31.6 33.0 32.5 32.6 34.1
(BB) 3.0 3.2 3.1 2.7 2.8
(<BB) 1.1 1.0 1.0 1.1 1.1
 
Investment by Type:
Fixed maturities 61.9 % 61.6 % 61.3 % 61.4 % 61.3 %
Residential mortgage-backed 17.1 16.7 17.0 16.7 17.0
Commercial mortgage-backed 4.1 4.0 4.3 5.1 5.2
Asset-backed 2.7 2.8 2.6 2.3 2.3
Mortgage loans 10.1 10.7 10.8 11.0 11.2
Equity securities 0.4 0.3 0.3 0.2 0.2
Other 3.7 3.9 3.7 3.3 2.8
 
Securities and indebtedness of related parties:
Real estate investment partnerships (2 at March 31, 2008) $ 11,859 $ 12,115 $ 13,029 $ 13,245 $ 13,123
Berthel Fisher and Company 5,664 5,877 5,936 6,154 6,422
Investment partnerships (3 at March 31, 2008) 663 498 443 396 441
Other   48     41     37     41     57  
18,234 18,531 19,445 19,836 20,043
Proportionate share of net unrealized investment gains (loss) of equity investees
  (11)     (18)     69     121     -  
Securities and indebtedness of related parties $ 18,223   $ 18,513   $ 19,514   $ 19,957   $ 20,043  
 
Agent Strength Totals:
Farm Bureau Life channel:
8-state Farm Bureau Mutual channel 1,249 1,234 1,234 1,188 1,192
7 Life-only states   781     786     790     779     763  
Total Farm Bureau Life channel   2,030     2,020     2,024     1,967     1,955  
 
Percentage registered representatives:
Farm Bureau Life channel   87.0%     87.9%     88.3%     88.3%     88.6%  
 
EquiTrust Life channel:
Independent Agents   16,220     17,356     18,902     19,781     20,726  

15

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