Profile: FBL Financial Group, Inc. (FFG.N)

FBL Financial Group, Inc., incorporated in October 1993, sells individual life and annuity products principally under the consumer brand names, Farm Bureau Financial Services and EquiTrust Financial Services. These brand identities are represented by the distribution channels of the Company’s subsidiaries, Farm Bureau Life Insurance Company (Farm Bureau Life) and EquiTrust Life Insurance Company (EquiTrust Life). As of December 31, 2008, the Farm Bureau Life distribution channel consisted of 1,962 exclusive agents and agency managers. These agents and agency managers sell its products in the Midwestern and Western sections of the United States. As of December 31, 2008, EquiTrust Life independent distribution channel consisted of 19,098 independent agents. These agents sell its products in all states except New York, and also in the District of Columbia. In addition to the Farm Bureau Life and EquiTrust Life distribution channels, the Company also has two closed blocks of co-insurance business, and its variable products are marketed by four variable alliance partner companies. FBL Financial Group, Inc.'s operations are aggregated into four product segments: Traditional Annuity-Exclusive Distribution (Exclusive Annuity); Traditional Annuity-Independent Distribution (Independent Annuity); Traditional and Universal Life Insurance, and Variable. It also has various support operations and corporate capital that are aggregated into a Corporate and Other segment.

The Company sponsors the EquiTrust Series Fund, Inc. (the Series Fund) and EquiTrust Variable Insurance Series Fund (the Insurance Series Fund) (collectively, the EquiTrust Funds) which are open-end, diversified series management investment companies. The Company’s variable products include sub-accounts that invest in funds managed by outside investment advisors, in addition to its own funds. The outside investment advisors and related sub-accounts available to its variable contract holders include Fidelity Management & Research Company (13 sub-accounts), Franklin Advisers, Inc. (10 sub-accounts), T. Rowe Price Associates, Inc. (nine sub-accounts), Calvert Investments (7 sub-accounts), JP Morgan Investment Management Inc. (six sub-accounts), American Century Investment Management Services, Inc. (five sub-accounts), Dreyfus Corporation (five sub-accounts), Columbia Management (four sub-accounts) and DWS Scudder Investments (two sub-accounts).

The Company sponsors a money market fund, EquiTrust Money Market Fund, Inc. (Money Market Fund), which is a no-load open-end diversified management investment company with an investment objective of maximum current income consistent with liquidity and stability of principal. EquiTrust Series Fund, Inc. and EquiTrust Money Market Fund, Inc. are offered through EquiTrust Marketing.

Traditional Annuity-Exclusive Distribution Segment

The Exclusive Annuity segment primarily consists of fixed-rate annuities and supplementary contracts (some of which involve life contingencies). Traditional annuities provide for tax-deferred savings, and supplementary contracts provide for the systematic repayment of funds that accumulate interest. The Company offers annuities that are generally marketed to individuals in anticipation of retirement. It offers traditional annuities principally in the form of flexible premium deferred annuities (FPDA) that allow policyholders to make contributions over a number of periods. For traditional annuity products, policyholder account balances are credited interest at rates that the Company determines. Approximately 39% of the Company’s individual direct traditional annuity business based on account balances is held in qualified retirement plans. In addition to FPDAs, FBL Financial Group, Inc. also markets single premium deferred annuity (SPDA) and single premium immediate annuity (SPIA) products, which feature a single premium paid when the contract is issued. Benefit payments and the surrender charge structure on SPDA contracts are similar to other fixed-rate annuities.

Traditional Annuity-Independent Distribution Segment

The Independent Annuity segment consists of fixed-rate annuities, supplementary contracts (some of which involve life contingencies) and index annuities sold by the Company’s independent agents or assumed through its co-insurance agreements. FBL Financial Group, Inc.’s EquiTrust Life independent channel offers a variety of fixed-rate and index annuities. These products are available to individuals who are seeking to accumulate tax-deferred savings for retirement or other purposes. During the year ended December 31, 2008, 41% of premiums were placed in annuities that were part of some tax-qualified benefit plan (primarily individual retirement account (IRA)) and 59% in non-qualified plans. Surrender charge rates range from 0% to 20%, and surrender charge periods range from 7 years to 14 years depending upon the terms of the product. Surrender charge rates on its direct fixed-rate products range from 4.5% to 10% with the surrender charge periods consistent with the guarantee periods.

Approximately 62% of the annuities in the Independent Annuity segment are index annuities. The index annuity contract value is equal to the premiums paid plus interest credited to the fixed portion of the contract, index credits on the indexed portion of the contract, premium bonus, if applicable, less and partial withdrawals taken from the contract. Certain index annuities sold through the EquiTrust Life independent distribution are bonus products. These products are credited with a bonus ranging from 5% to 10% of the annuity deposit upon issuance of the contract.

Approximately 38% of the annuities in the Independent Annuity segment are fixed-rate annuities. It also sells multi-year guaranteed annuities (MYGAs) that include guarantees of the annual crediting rate for three-year, five-year, six-year, eight-year or 10-year periods. The Company co-insures FPDA and SPDA products with characteristics, which are similar to the products offered directly through the Exclusive Annuity segment.

Traditional and Universal Life Insurance Segment

FBL Financial Group, Inc. sells a variety of traditional and universal life insurance. 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 Company offers traditional participating whole life insurance products. Participating whole life insurance provides benefits for the life of the insured. It provides level premiums and a level death benefit and requires payments in excess of mortality charges in early years to offset increasing mortality costs in later years. Participating business accounted for 41% of direct life receipts from policyholders during 2008, and represented 13% of life insurance in force at December 31, 2008. It also markets non-participating term insurance policies that provide life insurance protection for a specified period. Its universal life policies provide permanent life insurance protection with a flexible or fixed premium structure, which allows the customer to pre-fund future insurance costs and accumulate savings on a tax-deferred basis. Premiums received, less policy assessments for administration expenses and mortality costs, are credited to the policyholder’s account balance.

Variable Segment

FBL Financial Group, Inc. sells several variable products. In addition, it receives variable business through its EquiTrust Life variable product alliances. 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 range of investment sub-accounts, thereby passing the investment risk to the contract holder. The Company offers variable universal life policies that are similar in design to universal life policies, but the policyholder has the ability to direct the cash value of the policy to an assortment of variable sub-accounts and, in turn, assumes the investment risk passed through by those funds. Policyholders can select from variable sub-accounts managed by the Company, as well as sub-accounts that are managed by outside investment advisors. For variable annuities, policyholders have the right to direct the cash value of the policy into an assortment of sub-accounts, thereby assuming the investment risk passed through by those sub-accounts. The sub-account options for variable annuity contracts are the same as those available for variable universal life policies. In addition, variable annuity contract holders can also elect a declared interest option, under which the cash values are credited with interest as declared.

Corporate and Other Segment

The Corporate and Other segment includes advisory services for the management of investments and companies; marketing and distribution services for the sale of mutual funds and insurance products not issued by the Company; leasing services, primarily with affiliates; a small block of closed accident and health business; interest expense, and investments and related investment income not specifically allocated to the Company’s segments.