Fbl Financial Group Inc. has a market cap of $697.1 million; its shares were traded at around $22.85 with a P/E ratio of 6.8 and P/S ratio of 0.6. The dividend yield of Fbl Financial Group Inc. stocks is 1.1%.FFG is in the portfolios of Richard Pzena of Pzena Investment Management LLC.
Highlight of Business Operations:Net income attributable to FBL Financial Group, Inc. (FBL Net Income) was $22.3 million in the second quarter of 2010 and $40.3 million for the six months ended June 30, 2010 compared to $24.4 million and $22.9 million for the 2009 periods. As discussed in detail below, the increase for the six-month period was primarily due to an increase in spreads earned, a decrease in realized losses on investments, the impact of reduced surrender activity from our EquiTrust Life independent distribution and the impact of refinements made to reserve calculations, partially offset by the impact of separate account performance on our variable business. In addition, the volume of Farm Bureau Life's business in force increased in 2010. The increase in volume of business in force is quantified by summarizing the face amount of insurance in force for traditional life products or account values of contracts in force for interest sensitive products. The face amount of life insurance in force represents the gross death benefit payable to policyholders and account value represents the value of the contract to the contract holder before application of surrender charges or reduction for any policy loans outstanding. The following discussion provides additional details on the items impacting FBL Net Income.
During the second quarter of 2010, refinements were made to the calculation of reserves for certain traditional life contracts. These refinements, along with associated adjustments to deferred policy acquisition costs and taxes, resulted in an increase to 2010 net income of $3.0 million ($0.10 per basic and diluted common share).
Premiums and product charges decreased 22.1% to $73.2 million in the second quarter of 2010 and 17.7% to $142.5 million for the six-month period primarily due to a reduction in surrender charges on annuity products. In addition, premium and product charges declined as a result of the sale of a block of coinsured business in the fourth quarter of 2009. Surrender charges totaled $6.8 million for the second quarter of 2010 and $13.9 million for the six months ended June 30, 2010 compared to $29.8 million and $47.7 million in the respective 2009 periods. Net surrender charges decreased on certain products sold by our EquiTrust Life independent distribution as noted in the "Impact of Recent Business Environment" section above.
Traditional life insurance premiums increased due to an increase in the volume of business in force. The increase in the business in force is primarily attributable to sales of traditional life products by our Farm Bureau Life agency force exceeding the loss of in force amounts through deaths, lapses and surrenders and the sale of a block of coinsured business. Our average aggregate traditional life insurance in force, net of reinsurance, totaled $25,539.2 million for the six-month period in 2010 and $23,499.5 million for the six-month period in 2009. The change in life insurance in force is not proportional to the change in premium income due to a shift in the composition of our traditional life block of business from whole life policies to term policies. The premium for a term policy per $1,000 face amount is less than that for a whole life policy.
Net investment income, which excludes investment income on separate account assets relating to variable products, decreased 1.6% to $179.9 million in the second quarter of 2010 and 2.4% to $358.0 million for the six-month period. The decreases are primarily due to a decrease in average invested assets and a decrease in average yield on those assets. Average invested assets in the six-month period of 2010 decreased 1.0% to $12,261.1 million (based on securities at amortized cost) from $12,383.3 million in the 2009 period, principally due to the net cash outflows from EquiTrust Life, partially offset by net cash inflows from Farm Bureau Life during the eighteen-month period ended June 30, 2010. EquiTrust Life had net cash outflows in 2009 due to the reduction in sales to preserve capital, increased surrender activity from the independent distribution channel and assets transferred in connection with the sale of a block of coinsured business. The annualized yield earned on average invested assets decreased to 6.02% in the six months ended June 30, 2010 from 6.12% in the respective 2009 period.
Fee income from bond calls, tender offers and mortgage loan prepayments totaled $1.0 million in the six months ended June 30, 2010 compared to $1.8 million in the respective 2009 period. Net investment income also includes less than ($0.1) million in the six months ended June 30, 2010 compared to $1.2 million in the 2009 respective period representing the change of net discount accretion on mortgage and asset-backed securities resulting from changing prepayment speed assumptions at the end of each respective period. See the "Financial Condition - Investments" section that follows for a description of how changes in prepayment speeds impact net investment income.
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