FBL FINANCIAL GROUP INC - FORM 8-K - EX-1 - EXHIBIT 99.1

Attached files

file	filename
8-K - 8-K - FBL FINANCIAL GROUP INC	a8-klihtc.htm

FBL FINANCIAL GROUP, INC.

Selected Unaudited Adjusted Financial Information

2018, 2017 and 2016




Corporate Headquarters	FBL Financial Group, Inc.
	5400 University Avenue
	West Des Moines, Iowa 50266-5997
	(515) 225-5400
Financial Inquiries	For more information contact:
	Kathleen Till Stange
	Vice President Corporate & Investor Relations
	Kathleen.TillStange@FBLFinancial.com
	(515) 226-6780
Internet Information	FBL Financial Group, Inc.
	www.fblfinancial.com
Stock Symbol	NYSE: FFG
Transfer Agent	American Stock Transfer & Trust Company, LLC
	6201 15th Avenue
	Brooklyn, NY 11219
	http://www.astfinancial.com



FBL Financial Group, Inc.
Financial Supplement - Selected Adjusted Information (Unaudited)
June 30, 2018
Table of Contents/Notes

Impact of Accounting Change - Summary		2
Consolidated Financial Statements:
Consolidated Balance Sheets		5
Consolidated Statements of Comprehensive Income		7
Consolidated Statements of Comprehensive Income, last five quarters		8
Net Income to Non-GAAP Operating Income Reconciliation and Pre-tax Non-GAAP Operating Income by Segment, last five quarters		9
Statements of Pre-tax Non-GAAP Operating Income, last five quarters - Corporate and Other Segment		10
Other Information		11

NOTE 1: As more fully disclosed on page 2 of this report, we are voluntarily changing our accounting for low-income housing tax credit (LIHTC) investments from one acceptable method to another acceptable method under U.S. Generally Accepted Accounting Principles (GAAP). The accounting change is applied retrospectively to our financial statements. This report summarizes the historical adjustments, which are confined to the consolidated financial statements and the Corporate and Other Segment. The Annuity and Life Insurance Segments were not impacted by this accounting change.

NOTE 2: In addition to net income as determined using GAAP, we have consistently used non-GAAP operating income (a measure of earnings not recognized under GAAP), a financial measure common in the life insurance industry, as a primary economic measure to evaluate our financial performance. Non-GAAP operating income for the periods presented consists of net income adjusted to exclude 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.

We use non-GAAP operating income, in addition to net income, to measure our performance since realized gains and losses on investments and the change in net unrealized gains and losses on derivatives and equities can fluctuate greatly from quarter to quarter. These fluctuations make it difficult to analyze core operating trends. A view of our non-GAAP operating performance without the impact of these items enhances the analysis of our results. We use non-GAAP operating income for goal setting, determining short-term incentive compensation and evaluating performance on a basis comparable to that used by many in the investment community.

NOTE 3: Certain financial information presented herein may not add due to rounding.

FBL Financial Group, Inc.

Impact of Accounting Change - Summary (Unaudited)

During the third quarter of 2018, FBL Financial Group, Inc (the Company) will voluntarily change its accounting policy for low income housing tax credit (LIHTC) investments. The Company will begin using the proportional method of accounting for its LIHTC investments rather than the equity method of accounting. While both methods of accounting are acceptable under U.S. generally accepted accounting principles, the Company believes the proportional amortization method is preferable because it more fairly represents the economics of LIHTC investments, which are made primarily for the purpose of receiving tax credits and other tax benefits. In addition, this method aligns to the method typically used by the companies within the Company's industry which have similar investments. In addition to a change in the timing of the recognition of income on LIHTC investments, there are also differences in how these investments will be reported within our consolidated financial statements, as follows:


•	LIHTC investments are now recorded in the "Other asset" line instead of the "Securities and indebtedness of related parties" line on the consolidated balance sheets.


•	Income/expense from LIHTC investments is now recorded in the "Income taxes" line instead of the "Equity income" line on the consolidated statements of operations.

The following presents the effect of the change on financial statement line items for prior periods that were retrospectively adjusted:



Consolidated Balance Sheet Impact
	December 31, 2016							December 31, 2017
	Originally Reported		Currently Reported		Effect of Change			Originally Reported		Currently Reported		Effect of Change
	(Dollars in thousands)							(Dollars in thousands)
Assets
Securities and indebtedness of related parties	$	137,422	$	46,167	$	(91,255	)	$	130,240	$	47,823	$	(82,417	)
Current income taxes recoverable	4,309		7,756		3,447			3,269		6,764		3,495
Other assets	92,021		171,284		79,263			112,054		177,764		65,710
Total assets					$	(8,545	)					$	(13,212	)

Liabilities and stockholders’ equity
Deferred income taxes	$	163,495	$	159,653	$	(3,842	)	$	131,912	$	130,425	$	(1,487	)
Retained earnings	882,672		877,969		(4,703		)	947,148		935,423		(11,725		)
Total liabilities and stockholders’ equity					$	(8,545	)					$	(13,212	)



Consolidated Balance Sheet Impact
	June 30, 2018
	Originally Reported		Currently Reported		Effect of Change
	(Dollars in thousands)
Assets
Securities and indebtedness of related parties	$	127,876	$	52,502	$	(75,374	)
Current income taxes recoverable	—		501		501
Other assets	106,722		166,432		59,710
Total assets					$	(15,163	)

Liabilities and stockholders’ equity
Current income taxes payable	$	2,984	$	—	$	(2,984	)
Deferred income taxes	88,993		88,230		(763		)
Retained earnings	940,389		928,973		(11,416		)
Total liabilities and stockholders’ equity					$	(15,163	)



Consolidated Statements of Operations Impact
	Year ended December 31, 2016									Year ended December 31, 2017
	Originally Reported			Currently Reported			Effect of Change			Originally Reported			Currently Reported			Effect of Change

Revenues:
Net impairment loss recognized in earnings	$	(4,869	)	$	(4,869	)	$	—		$	(3,986	)	$	(1,553	)	$	2,433

Income taxes	(46,010		)	(41,220		)	4,790			40,729			39,983			(746		)
Equity income (loss), net of related income taxes	11,440			2,269			(9,171		)	11,299			2,590			(8,709		)
Net income (loss) attributable to FBL Financial Group, Inc.							$	(4,381	)							$	(7,022	)
Impact of change in federal tax rate (1)							—									4,640
Realized gains/losses on investments, net of tax							—									(1,922		)
Non-GAAP operating income							$	(4,381	)							$	(4,304	)

Earnings (loss) per common share - assuming dilution							$	(0.18	)							$	(0.28	)
Non-GAAP operating income per common share - assuming dilution							$	(0.18	)							$	(0.17	)


(1)	Amounts include catch up amortization on LIHTC related to changes in federal tax rates.



Income statement impact of LIHTC accounting change by quarter
	2017												2018
	Q1			Q2			Q3			Q4			Q1			Q2
	(In thousands, except per share data)
Net income attributable to FBL Financial Group, Inc.
Originally reported	$	26,433		$	32,291		$	27,104		$	108,499		$	23,631		$	32,428
Currently reported	25,144			32,054			26,127			103,980			23,565			32,803
Effect of change	$	(1,289	)	$	(237	)	$	(977	)	$	(4,519	)	$	(66	)	$	375

Change in earnings (loss) per common share - basic and assuming dilution	$	(0.05	)	$	(0.01	)	$	(0.04	)	$	(0.18	)	$	—		$	0.01

Non-GAAP operating income
Originally reported	$	26,988		$	30,817		$	25,753		$	24,804		$	27,633		$	32,693
Currently reported	25,699			30,580			24,776			23,003			26,297			31,915
Effect of change	$	(1,289	)	$	(237	)	$	(977	)	$	(1,801	)	$	(1,336	)	$	(778	)

Change in operating earnings (loss) per common share - basic and assuming dilution	$	(0.05	)	$	(0.01	)	$	(0.04	)	$	(0.07	)	$	(0.05	)	$	(0.03	)

FBL Financial Group, Inc.

Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)



	As adjusted
	June 30, 2018		December 31, 2017
Assets
Investments:
Fixed maturities - available for sale, at fair value (amortized cost: 2018 - $6,922,505; 2017 - $6,757,250)	$	7,173,415	$	7,291,967
Equity securities - available for sale, at fair value (cost: 2018 - $99,279; 2017 - $96,715)	104,026		104,145
Mortgage loans	982,987		971,812
Real estate	1,543		1,543
Policy loans	194,838		191,398
Short-term investments	15,141		17,007
Other investments	44,724		42,371
Total investments	8,516,674		8,620,243

Cash and cash equivalents	23,705		52,696
Securities and indebtedness of related parties (adjusted)	52,502		47,823
Accrued investment income	75,044		76,468
Amounts receivable from affiliates	8,200		3,561
Reinsurance recoverable	103,032		108,948
Deferred acquisition costs	387,527		302,611
Value of insurance in force acquired	8,880		4,560
Current income taxes recoverable (adjusted)	501		6,764
Other assets (adjusted)	166,432		177,764
Assets held in separate accounts	638,061		651,963








Total assets (adjusted)	$	9,980,558	$	10,053,401

FBL Financial Group, Inc.

Consolidated Balance Sheets (Continued)

(Dollars in thousands)



	As adjusted
	June 30, 2018		December 31, 2017
Liabilities and stockholders' equity
Liabilities:
Future policy benefits:
Interest sensitive products	$	5,417,955	$	5,299,961
Traditional life insurance and accident and health products	1,775,968		1,750,504
Other policy claims and benefits	46,681		44,475
Supplementary contracts without life contingencies	312,399		322,630
Advance premiums and other deposits	265,763		267,023
Amounts payable to affiliates	1,299		1,164
Short-term debt payable to non-affiliates	27,000		—
Long-term debt payable to non-affiliates	97,000		97,000
Current income taxes payable (adjusted)	—		—
Deferred income taxes (adjusted)	88,230		130,425
Other liabilities	93,930		111,131
Liabilities related to separate accounts	638,061		651,963
Total liabilities (adjusted)	8,764,286		8,676,276

Stockholders' equity:
FBL Financial Group, Inc. 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 24,806,796 in 2018 and 24,919,113 shares in 2017	153,114		153,589
Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2018 and 2017	72		72
Accumulated other comprehensive income	131,081		284,983
Retained earnings (adjusted)	928,973		935,423
Total FBL Financial Group, Inc. stockholders' equity (adjusted)	1,216,240		1,377,067
Noncontrolling interest	32		58
Total stockholders' equity (adjusted)	1,216,272		1,377,125
Total liabilities and stockholders' equity (adjusted)	$	9,980,558	$	10,053,401

FBL Financial Group, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in thousands, except per share data)



	As adjusted
	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Revenues:
Interest sensitive product charges	$	30,906		$	29,456		$	61,004		$	58,657
Traditional life insurance premiums	51,091			50,262			100,588			98,696
Net investment income	103,974			103,908			204,996			204,902
Net realized capital gains (losses)	841			921			(906		)	518
Net impairment losses recognized in earnings (adjusted)	—			—			(1,040		)	(66		)
Other income	3,637			4,450			8,237			8,210
Total revenues (adjusted)	190,449			188,997			372,879			370,917

Benefits and expenses:
Interest sensitive product benefits	62,637			58,251			123,982			121,011
Traditional life insurance benefits	43,725			42,610			89,181			85,564
Policyholder dividends	2,560			2,557			5,111			5,110
Underwriting, acquisition and insurance expenses	37,210			36,341			76,787			70,694
Interest expense	1,213			1,213			2,426			2,425
Other expenses	5,627			4,740			11,220			8,891
Total benefits and expenses	152,972			145,712			308,707			293,695
	37,477			43,285			64,172			77,222
Income tax expense (adjusted)	(5,831		)	(12,470		)	(9,644		)	(22,137		)
Equity income, net of related income taxes (adjusted)	1,139			1,266			1,799			2,142
Net income (adjusted)	32,785			32,081			56,327			57,227
Net loss (income) attributable to noncontrolling interest	18			(27		)	41			(29		)
Net income attributable to FBL Financial Group, Inc. (adjusted)	$	32,803		$	32,054		$	56,368		$	57,198

Comprehensive income (loss) attributable to FBL Financial Group, Inc. (adjusted)	$	(22,727	)	$	78,813		$	(92,054	)	$	120,000

Earnings per common share (adjusted)	$	1.31		$	1.28		$	2.26		$	2.28
Earnings per common share - assuming dilution (adjusted)	$	1.31		$	1.28		$	2.25		$	2.28

Cash dividends per common share	$	0.46		$	0.44		$	0.92		$	0.88
Special cash dividend per common share	$	—		$	—		$	1.50		$	1.50

FBL Financial Group, Inc.

Consolidated Statements of Comprehensive Income (Unaudited) - Quarterly

(Dollars in thousands, except per share data)



	As adjusted
	Q2 2017			Q3 2017			Q4 2017			Q1 2018			Q2 2018
Revenues:
Interest sensitive product charges	$	29,456		$	28,004		$	26,275		$	30,098		$	30,906
Traditional life insurance premiums	50,262			47,087			49,547			49,497			51,091
Net investment income	103,908			102,950			107,347			101,022			103,974
Net realized capital gains (losses)	921			81			—			(1,747		)	841
Net impairment losses recognized in earnings (adjusted)	—			(67		)	(1,420		)	(1,040		)	—
Other income	4,450			3,501			3,689			4,600			3,637
Total revenues (adjusted)	188,997			181,556			185,438			182,430			190,449

Benefits and expenses:
Interest sensitive product benefits	58,251			67,206			63,661			61,345			62,637
Traditional life insurance benefits	42,610			42,633			44,826			45,456			43,725
Policyholder dividends	2,557			2,487			2,543			2,551			2,560
Underwriting, acquisition and insurance expenses	36,341			27,535			36,649			39,577			37,210
Interest expense	1,213			1,213			1,212			1,213			1,213
Other expenses	4,740			4,971			4,520			5,593			5,627
Total benefits and expenses	145,712			146,045			153,411			155,735			152,972
	43,285			35,511			32,027			26,695			37,477
Income tax benefit (expense) (adjusted)	(12,470		)	(9,880		)	72,000			(3,813		)	(5,831		)
Equity income, net of related income taxes (adjusted)	1,266			487			(39		)	660			1,139
Net income (adjusted)	32,081			26,118			103,988			23,542			32,785
Net loss (income) attributable to noncontrolling interest	(27		)	9			(8		)	23			18
Net income attributable to FBL Financial Group, Inc. (adjusted)	$	32,054		$	26,127		$	103,980		$	23,565		$	32,803

Comprehensive income (loss) attributable to FBL Financial Group, Inc. (adjusted)	$	78,813		$	37,639		$	116,868		$	(69,327	)	$	(22,727	)

Earnings per common share (adjusted)	$	1.28		$	1.04		$	4.15		$	0.94		$	1.31
Earnings per common share - assuming dilution (adjusted)	$	1.28		$	1.04		$	4.15		$	0.94		$	1.31

Cash dividends per common share	$	0.44		$	0.44		$	0.44		$	0.46		$	0.46
Special cash dividend per common share	$	—		$	—		$	—		$	1.50		$	—

Weighted average common shares outstanding (in thousands):
Basic	25,031			25,037			25,039			25,004			24,917
Effect of dilutive securities	20			18			18			16			13
Diluted	25,051			25,055			25,057			25,020			24,930



FBL Financial Group, Inc.
Net Income to Non-GAAP Operating Income Reconciliation and Pre-tax Non-GAAP Operating Income by Segment
(Dollars in thousands, except per share data)

	As adjusted
	Q2 2017			Q3 2017			Q4 2017			Q1 2018			Q2 2018

Net income attributable to FBL Financial Group, Inc. (adjusted)	$	32,054		$	26,127		$	103,980		$	23,565		$	32,803
Net income adjustments:
Impact of change in federal tax rate (adjusted)	—			—			(81,157		)	—			—
Realized gains/losses on investments (1)(2) (adjusted)	(788		)	38			656			2,223			(694		)
Change in net unrealized gains/losses on derivatives (1)	(686		)	(1,389		)	(476		)	509			(194		)
Non-GAAP operating income (adjusted)	$	30,580		$	24,776		$	23,003		$	26,297		$	31,915

Non-GAAP operating income per common share - assuming dilution (adjusted)	$1.22			$0.99			$0.92			$1.05			$1.27

Non-GAAP operating return on equity, excluding AOCI - last twelve months (adjusted)	10.7%			10.3%			10.0%			10.0%			9.7%
Non-GAAP operating return on equity, including AOCI - last twelve months (adjusted)	8.8%			8.5%			8.3%			8.3%			8.1%


	Q2 2017			Q3 2017			Q4 2017			Q1 2018			Q2 2018
Impact of Adjustments on FBL Net Income
Impact of change in federal tax rate (adjusted)	$	—		$	—		$	81,157		$	—		$	—
Realized gains/losses on investments (adjusted)	921			14			(1,420		)	(970		)	1,707
Change in net unrealized gains/losses on equity securities	—			—			—			(1,817		)	(866		)
Change in net unrealized gains/losses on derivatives	107			1,897			629			(1,208		)	516
Offsets:
Change in amortization	222			(20		)	(90		)	338			(226		)
Reserve change on interest sensitive products	1,018			187			79			199			(7		)
Income tax (adjusted)	(794		)	(727		)	622			726			(236		)
Net impact of net income adjustments (adjusted)	$	1,474		$	1,351		$	80,977		$	(2,732	)	$	888


	Q2 2017			Q3 2017			Q4 2017			Q1 2018			Q2 2018
Pre-tax non-GAAP operating income by segment:
Annuity segment	$	18,174		$	17,015		$	17,211		$	16,582		$	15,998
Life Insurance segment	17,631			12,620			9,856			10,897			16,381
Corporate and Other segment (adjusted)	7,133			4,556			5,694			3,533			5,434
Total pre-tax non-GAAP operating income (adjusted)	42,938			34,191			32,761			31,012			37,813
Income taxes on non-GAAP operating income (adjusted)	(12,358		)	(9,415		)	(9,758		)	(4,715		)	(5,898		)
Non-GAAP operating income (adjusted)	$	30,580		$	24,776		$	23,003		$	26,297		$	31,915


(1)	Amounts are net of offsets related to changes in amortization of unearned revenue reserves, deferred sales inducements and deferred acquisition costs, as well as changes in interest sensitive product reserves and income taxes attributable to these items.


(2)	Beginning in 2018, amount includes changes in net unrealized gains/losses on equity securities.



FBL Financial Group, Inc.
Statements of Pre-tax Non-GAAP Operating Income
Corporate and Other

	As adjusted
	Q2 2017				Q3 2017			Q4 2017			Q1 2018			Q2 2018
Pre-tax Non-GAAP Operating Income				(Dollars in thousands)

Non-GAAP operating revenues:
Interest sensitive product charges	$	10,894			$	10,393		$	11,252		$	11,021		$	11,102
Net investment income	8,643				8,719			8,788			8,411			8,777
Other income	4,567				3,589			3,829			4,679			3,990
Total non-GAAP operating revenues	24,104				22,701			23,869			24,111			23,869

Non-GAAP operating benefits and expenses:
Interest sensitive product benefits	7,894				11,697			9,410			9,342			7,714
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	812				705			716			680			667
Amortization of deferred acquisition costs	1,223				(2,276		)	904			2,512			1,876
Other underwriting expenses	1,721				2,045			1,607			1,402			1,506
Total underwriting, acquisition and insurance expenses	3,756				474			3,227			4,594			4,049
Interest expense	1,213				1,213			1,212			1,213			1,213
Other expenses	4,740				4,971			4,520			5,593			5,627
Total non-GAAP operating benefits and expenses	17,603				18,355			18,369			20,742			18,603
	6,501				4,346			5,500			3,369			5,266
Net loss (income) attributable to noncontrolling interest	(27		)		9			(8		)	23			18
Equity loss, before tax (adjusted)	659				201			202			141			150
Pre-tax non-GAAP operating income (adjusted)	$	7,133			$	4,556		$	5,694		$	3,533		$	5,434

Selected balance sheet data, securities at amortized cost:
Assets:
Investments	$	652,011			$	647,104		$	671,857		$	680,285		$	678,014
Deferred acquisition costs	67,425				71,038			70,247			68,202			66,315
Separate account assets	625,971				637,746			651,963			638,751			638,061

Liabilities and equity:
Liabilities:
Interest sensitive reserves	$	367,929			$	369,167		$	369,726		$	369,022		$	367,937
Other insurance reserves	91,316				94,088			93,754			91,305			89,427
Separate account liabilities	625,971				637,746			651,963			638,751			638,061
Allocated equity, excluding AOCI (adjusted)	375,883				385,733			420,412			351,866			369,593

Rollforward of separate account balances:
Beginning separate account balance	$	615,892			$	625,971		$	637,746		$	651,963		$	638,751
Net premiums and transfers	6,804				4,945			4,745			6,667			6,264
Net investment income (loss)	19,679				22,852			26,039			(3,424		)	11,995
Charges, benefits and surrenders	(16,404		)		(16,022		)	(16,567		)	(16,455		)	(18,949		)
Ending separate account balance	$	625,971			$	637,746		$	651,963		$	638,751		$	638,061

Other data:
Number of direct contracts - variable annuity	10,157				10,017			9,857			9,671			9,491
Number of direct policies - variable universal life	37,800				37,400			36,986			36,548			36,056
Direct face amounts - variable universal life	$	4,654,603			$	4,599,050		$	4,549,732		$	4,501,972		$	4,440,315



FBL Financial Group, Inc.
Other Information

	As adjusted
	June 30,				September 30,			December 31,			March 31,			June 30,
	2017				2017			2017			2018			2018
				(Dollars in thousands, except per share data)

Capitalization:
Short-term debt	$	—			$	—		$	—		$	—		$	27,000
Trust preferred securities, due 2047	97,000				97,000			97,000			97,000			97,000
Total debt	97,000				97,000			97,000			97,000			124,000

Preferred stock	3,000				3,000			3,000			3,000			3,000
Common stockholders' equity, excluding AOCI (adjusted)	1,029,198				1,044,521			1,089,084			1,063,139			1,082,159
Total capitalization, excluding AOCI (adjusted)	1,129,198				1,144,521			1,189,084			1,163,139			1,209,159

Accumulated other comprehensive income	212,357				223,869			284,983			186,222			131,081
Total capitalization, including AOCI (adjusted)	$	1,341,555			$	1,368,390		$	1,474,067		$	1,349,361		$	1,340,240

Common shares outstanding	24,928,568				24,933,510			24,930,526			24,837,976			24,818,209

Book Value per Share:
Excluding AOCI (adjusted)	$	41.29			$	41.89		$	43.68		$	42.80		$	43.60
Including AOCI (adjusted)	49.80				50.87			55.12			50.30			48.89

Debt-to-Capital Ratio:
Excluding AOCI (adjusted)	8.5		%		8.4		%	8.1		%	8.3		%	10.2		%
Including AOCI (adjusted)	7.2				7.1			6.5			7.1			9.2

Debt-to-Capital Ratio with 50% Credit for Trust Preferred Securities:
Excluding AOCI (adjusted)	4.3		%		4.2		%	4.0		%	4.1		%	5.1		%
Including AOCI (adjusted)	3.6				3.5			3.3			3.6			4.6

Class A Common Ownership:
Iowa Farm Bureau Federation	59.2		%		59.2		%	59.2		%	59.5		%	59.5		%
Public	40.8				40.8			40.8			40.5			40.5
	100.0		%		100.0		%	100.0		%	100.0		%	100.0		%

Attached files

Stock widget

Investing forum

FBL FINANCIAL GROUP INC Reports