FBL Financial (FFG) 2 Aug 192019 Q2 Earnings call transcript

Good morning and welcome to the FBL Financial Group Second Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Kathleen Till Stange. ahead. go Please

Officer. welcome Officer; earnings and Jim Financial second and Charlie Chief Chief Group Chief answer Wasilewski, available Thank questions Ray Stice, your call. to Chief Presenting XXXX are Financial Seibel, Don conference Officer; Chief are Officer. present on quarter and Executive to Investment you Happel, and FBL Also Scott today's Operating Brannen, Officer; call Marketing

liability for today involve made statements contain by the Litigation Safe Securities may from that risks could statements qualify statements Certain cause to intended Reform Harbor expressed those actual forward-looking from or established uncertainties These Private the results to Act. materially implied. differ and

assumptions uncertainties These be filed in to the which reasonable. are reports on FBL's FBL detailed risks believes SEC and with based and are

given no the to obligation forward-looking can However, prove FBL correct. to disclaims assumptions be date. that this any assurance be statements after update will

certain items earnings GAAP measures. found this financial Where fblfinancial.com. call during on and our financial these release our include in which supplement, both website applicable, may Comments of to be non-GAAP second reconciled are quarter

Today's the call be comments on is on audio website. the found after website call. prepared our shortly may transcript a being replay and An simulcast of FBL's

it to now the that, to call pleasure CEO turn With is my over Brannen. Jim

and earnings. XXXX share $X.XX per to that quarter was FBL report was thank the call. had join pleased I'm strong adjusted I'm income everyone second and Kathleen, you Thanks, on income $X.XX to Financial to today. glad share. you're operating us able Net very per Group

wealth our in Chief the management in Don financial sales the results and Operating discussing will interest recent Then low environment by begin our review rate I'll Officer detail. announcement. business

appears bit interest interest back decline to low-for-long it have with challenge biggest After XXXX environment in a rates. increasing with a relief currently we The rates, declining in of market we're the market is rates.

premiums interest XXXX. to The at During XXXX decreased June XX second the quarter points yield low the the our rate in headwinds to spread-based compared especially decreased for XXXX of treasury us, environment business. basis XX% X% with first collected Annuity half second quarter the creates XXth. XX-year annuity

need to compensation our our offer more allowing rates while to enough are and attractive customers, market agent also profit higher We products for long-term interest that component.

our by we contract our But product to business, respect also monitor decrease is position our limited competitive frequently. and With crediting in-force spread guarantees to rates holder ability pressures.

the growth increases on life totaled sales for from hand continue trend in premium by Life $XX up to the other was life second driven upward. universal and XXXX This XXXX. the quarter Life million, X.X% term quarter collected second sales.

Our life billion insurance components provide us of of spread-related. that not business of block $XX life long-term with growing as has steadily additional total Life end. Insurance in-force quarter are insurance stream second profit sales been profit with

XXXX force As year-over-year an from agency XXth, of of totaled as and XXXX, the well June I'm this is agency managers. exclusive agents the increase our quarter pleased as first increase. end that

management business Farm Farm We wealth with infrastructure, platform, adding and complementing for technology now experienced recruiting Advisers. advisers We're and we're Bureau territories. the and built in new Wealth agency for our Bureau our force our Management

advisory an client As members These to Farm with appointed. us reasons. the our nine Advisers services joining Bureau Wealth for of XXth, referrals partnering are they three One, our existing Bureau June agents. serve by had Farm advisers Management have main opportunity we with excellent financial for

more we and on prospects. attracted independence And we level that to and and the to are provide. of support they many clients available. tools finally, allowing they of the Next, them handle administrative We welcome platform necessarily the that tasks technology have focus

service advisers Bureau Farm orientation who target and We're to this number culture a of and our initial reach continue to Management new advisers. fit referrals. and for with year to our force Advisers agency add are plan adding We Wealth fit great next our

book system, without Advisers accepting those to advisers Since to business our of management expect this we the of Management not we're stream Group diversified this the wealth or the results yet new to Currently, we're our business. earnings is financial Farm insignificant. Wealth stages in the FBL impact fee-based not distribution given adding a a to Bureau early business. Ultimately, nature add of to Financial

Operating announcement I for a excited Companies. have We're Financial want Eddy Financial. President, recently Vice made later serving month She FBL ago. as Voya as experience, to and we join extensive mention has will to here. Kelli Operations Life that most her Senior Chief few weeks Officer, this an operational leadership Group Life

part directly report for plans She'll will Bureau have primary our succeed the Kelli operations Kelli to Ray team. Company, who Insurance management Farm of to of responsibility subsidiary. be executive me Wasilewski, Life FBL's operating will and retire. overall

to impressive transition. Ray the with company will will her be year-end our experience confident with and continue Farm Life's will and background of track success. Ray's through I'm assist Bureau allow underwriting Kelli's and operations and record that

I of and next the leadership best companies also greatly in stage life. of I Ray many of success these He's to thank him want wish for his contributed the friendship. to years very and the

strength. I I to affirmed Farm Excellent. A, financial our In Life's strength June, earnings acknowledged of Before recent of strong conclude, announcements and want external couple Bureau AM a mention which rating financial Best

ratios average has For good AM a Best's that Bureau with risk-adjusted of earnings. capitalization metrics level, volatility Best profitability low AM at very strongest and are Life profile liquidity Farm above-industry

named Life group Farm Bureau This XX the to Bureau companies. to in Farm Life Ward Ward's July Ward's then And XXth the has the Health List. that time XXXX marks of XX top-performing named Life been

in also eight row. above Bureau Services one time Ward's Our XX Financial fifth the named was organizations of property-casualty This to a companies the affiliated only Farm named makes for company with managed list.

and insurance XXX than casualty more and property insurers. analyzes Ward X,XXX life companies

So, we're operating strength. consistent be to strong for honored and financial performance recognized

through as remainder with Again, first pleased half the progress results feel the and of the we year. strong I'm I very financial the for of XXXX, confident

over call Seibel. the turn I'll Now, to Don? Don

welcome call. the to also everyone on I Jim. Thanks, want

per for was quarter. income was Adjusted net of quarter share. XXXX the second indicated, $X.XX at very share income for Jim strong second the $X.XX very strong at per As also operating

Results for impacted Life better results. fewer was the expectations the We than This and segment. several a in driven normal by second term expected were claims. experienced is This items. fluctuation by mortality positive above Insurance mortality was our experienced in quarterly quarter

Other prepayment couple income than also and of is market cents of We per resulting Corporate of This performance quarter, deferred in equity $X.XX lower the strong related investment We $X.XX higher amortization per share acquisition our in share expectations. from benefited by amortization fee the second $XXX,XXX and again a or decreased had costs which in segment. balances after-tax, after-tax.

these was Partially in income offsetting lower positive items spread segment. our Annuity

variances spread from per expectations Jim by experience, pressured discussed, has relating The approximately impact yields. income share. As income the investment total our of in mortality fee market $X.XX decline our been favorable conditions prepayment the to and positive

like detail experience may items in our they we cannot be I as segment go-forward reoccur variances favorable I'll consistently review While results. these in quarters, these to expected a discuss more future basis. on

higher-yielding the in the spread Annuity and for our segment the decreased lower-yielding results annuities due declined of primarily a of from decline Point-in-time proceeds of assets. points lower to basis XXXX reinvestment XXXX, individual X the and due quarter assets yield investment of maturity second during income. second on spreads quarter to

to increase In in option an costs. increased due addition, crediting rates slightly

smaller planned benefit prepayment investment in living guaranteed due during benefited $XXX,XXX The fee than of the as from equity as income segment increase well to our market reserve second quarter. Annuity positive performance a withdrawal

fee investment steadily Life prepayment book reflect XXXX Insurance income of expected the than better a second for of growing mortality segment results business quarter $XXX,XXX and of experience.

as option our on five universal investment decreased to well basis due point-in-time the primarily life as Similar of spreads, lower to business They spreads costs. declined points. Annuity also impact yields higher

quarter. Other acquisition the the from costs to markets quarter, for lower our in solid equity and segment on block of were variable benefiting positive business results Corporate closed second due amortization

range Additionally business. mortality variable -- life was range within experience expected our for

The Corporate of relating loss to $X.XX build-out for the and second $XXX,XXX after-tax management or initiative. per of of the wealth includes our quarter share XXXX net segment an Other

in the Our investment Management line through in of expectations. the our with XXXX business first months is six Wealth

has quarter and than is XX environment first quarter made of acquisitions the XXXX. lower lower increasingly investment yield become our new yield. was than our long-term challenging business tax-adjusted in remains The of acquisitions backing year, this basis points in X.XX% This second the investment The XXXX. on for portfolio

adding mostly high-quality In investments, we of on focused longer-duration bonds. the second quarter, corporate

Next I'll our comment capital. on

increase from we to special year. Life ratio an of an have an XXX%. the from capital $XX paid excellent financial capital dividends and is company XXXX the with At paid action year-end Life XXXX Bureau June XX, We fund position dividend, flexibility. this Farm million Farm regular holding This with our risk-based level estimated company significant Bureau to had shareholders of to even subsidiary

discipline midst good we first really we're of for growing results half interest declining of feel to rates, I'm you. been able market I In XXXX. closing, In where business. maintaining to these earnings our and with with the share at financial have the about pleased are

turn may you up have. now will to questions over the operator We any the and to call open

James. The question Greg go Instructions] first Peters [Operator ahead. comes from Please Raymond of

Hi, in Greg. calling good morning. for This is Marcos

Hey, good morning, Marcos.

company. congratulations your Jim, on the recognizing awards

Thank you.

guess, couple rates to And to you in outlook us stay could to the were minute imply flat with – possibly spread of there what's they right a the and if just hoping I with of the had spend and that are so compression. talk questions or I'll guys now a happening two business, that. part lower? about business I and I Annuities maybe was your I'll what where would start with start

said crediting And think were the then you up quarter. in I rates

much a going how maybe -- you of forward. I that minute So manage guys adjust sort on that can and

I information part with Okay. of last got I'll the on think Don's that. and that start

there's universal at block to guarantees. that force which life is Yes. XX% in business, With our business respect of of business our

-- points is of currently than the more XX% portion that guarantees. that the crediting that the at them means doesn't book above guarantee. XXX basis greater and So that And is than crediting

of and appropriately. business we is a piece that written has feel is and But we've low like that priced recently business very that the guarantee

make universal block. on So it's crediting difficult the actions life to

business With the further. competitive points the guarantees any XX% is rates they to book balance and not about pressures respect to the were of feeling majority of XX the the rates, above Annuity And basis that XX lower at crediting of to is guarantee.

clients. to opportunities mindful our We're business the and investments not alternative move to or for need have of that that retain

costs a year force in the the not book we And to during bit have fact is made prior With from a or portion preventing costs that reflection rate respect action is currently has book going above that the us to crediting a or rate taking relative make the changes been of that able during not the that also the on aggressive quarter. have increasing to crediting that's the on So that rate up, option quarter option of the guarantee. crediting quarter.

I'll then -- question. of So kind your picture part the take I'll bigger take Marcos of

So it's interest we've we're does Annuity operating and even low I think isn't interest many, same in low rate that And seeing many business. the It's pressure lower environment. that lowering long mean rate been been for for low is continued so what on years a now. environment put interest I an environment the rate

the a things can good of stats from base loyalty customer think on is you think perspective I One retention our about that good business. and

are multi-line good business between Annuities. Life really also Insurance with We balance and a

the that them and environment. front keeping exclusive working with for opportunity the of in agents of our the in we've are current always agency things that's the got to help that working with point to And force something kind direct marketplace

see And so focus you're bit a going Life to on little that's why Insurance. of

in And longer-term kind of Life that known is I'll steady create stream profit streams for. layers and some how of helps FBL those that it Insurance love earnings

certainly way. So pivot pivot a we little to and that as we'll environments continue change

the earning the it's earnings in anything different build and is management we'd meantime other stream come the lost like the regard. a but earnings we stream. got fee to the stream, the in to In started it's that help wealth building We've that replace reason business support spread advisory

game better with little rate and or the way. in back we annuity a increases get in be risk-free we'll future And a bit maybe in get widening bigger some maybe we'll of some spread luck the

-- balance context down some how ask much of go on Life more topic. write your couple current hold? were need these What's Got can the I capital capital of in block would trends, to? on or imply that -- generating you the just it. just And possibly the to that block you your might the can Thank that a with guess you premiums excess you to I'm How's if there all Jim? capital can a return ratio you'd an rule I'll premium this for does thumb hold Annuities question. affect curious of shareholders? -- you be this well at to

Yes.

Annuity if with change dividend returning you quarter it's through don't have been strong in we know capital I sure. in the on dividends for a writings excess for impact regular to and of we've the time with some last know saw basis as several each the the that years. going in materially And So managing special been and regular

strong capital much. changing see I Don, this So past see over to capital the don't returning has shareholders really plan been years if the difference. and our you several

a Yes. to I agree the we seeing driver that to lower you premiums a that But is which that our write significant ratio, excess would around in the so capital RBC business and not points is year. the we're did that. first only volume it few capital charges our There view. of of half down added CX in of adjust the for

management pivoting setting as agency then guys And Jim, looking this for additions what the guess to the force. the well. still force And wealth operation as modeling to from Okay. and you year? then the maybe the us agency we at be to business management headwinds talk I side, should on about wealth up the

Scott to where of force start and there. let the field Sure. where at kind comments we're headed just I'm with to going we're and describe

into those very So we they and our you assist new approach of as dividends. paying year some good approach into last handful years for and first put agent get our we are might them changes all recall business changes financing where recruiting

retention agents are with we're think of I the two-year at sitting number's significantly and year-over-year to rates gain continue those XX both rate -- retention agents Year-over-year, expect one-year up. Our we right and trends.

front the in strong. Jim our remained also opening wealth advisers management nine So that comments recruiting agent mentioned efforts on year-to-date. retention recruited and have we've his

of and seen improve in good to processes pretty We months momentum are and learn couple develop there there. the positive have continuing our last

the for rest up be setting the rest the we year, -- And management? the much of balance Okay. the costs the then as should with as about look we how forward wealth of thinking associated

Yes.

Yes. This Thank question. is Don. I'll that you. take

in As second initiative. the loss don't half in year. almost million during management buildup investment specific the after-tax We I continue quarter the to the related earnings had my we're said an to And net to $X prepared really of provide we in of see comments, that going second wealth the guidance.

you it's will appreciably give that change not from rate. to a going going not quarter I the I'm run to So number. second But say

a Okay. maybe couple I guess picture. broader I just have a macro more for Charlie and maybe

in Just I seeing guess credit. talk what to us you're

I that attitude If think guys minute companies of about some you and of the -- spectrum? lowest you the follow. most the talk the lower one change have towards a Does -- the talking credit BBBs to environment your spend Charlie we please. actually just are exposure

Yes. Sure.

with want you we've a to obviously, take lot out risk you the stay longer-duration now. our As -- of kind of allocation tried and because you line little because just BBB noted, a less likely And we've to of years we who back we've on dialed to found on XX bit are other from alternatives have really further our go sight are to the on have survivors credit the targets.

we've more than been a XX-year BBBs on So As focused XX-year on select than basis. other

BBB at levels like the credit. -- the those the big-picture just a really all-time aligned the terms underlying You a substantial relative metrics an component metrics is has at There's of that credit of kind BBB record and BBBs. just story know the corporate sector and more GDP of credit bond segment market in high-yield high to on is

some concerns. have big-picture So we

certainly just last hard XX here the credit reconcile, me had soon guess of in that equities macro-level -- an XXX, days risk-free spreads. we a being they tell going wider of if Now move to year. see be a get for It's in don't that this meaningful where to a launch all increasingly to And by lot the see a some accompanied now just we I to are that off. We've fireworks as it's in is risk. element catalyst too risk it's but right I and rates. few

difficult And credit and for a are. it's XXX they XX tight me reconcile as also to for as year spreads

we're it's where for me little to difficult a from. exactly, tell So, to see movement. guess likely going you it's I come some But going

I status -- the just see can't I But likely being quo, over very several months. next

going not right watch will sit I from it's and think now. sure see from. to opportunity. to And We're going we're going where continue just dislocations. just some to I guess where I'm that to exactly wait. I'll I certainly come great

be excesses seeing might Are you pockets building? where any

Across or ... the economy,

market. corporate the Across

macro biggest that companies, would don't revenues demand. at, being my call evaporate really risk that maybe is dependent a look earn if advertising we are financialized the you quickly. that collected what And of Well, companies from that profit on just can some are pretty

we've tried of So, element hard of that clear to the stay market.

any why repurchase then, And this reason didn't Okay. you any shares quarter? just guys finally,

have. mindful appetite float Yeah. stocks. have the for This our decreasing of And we very liquidity strong and We're of the public that shares Don. don't we a is repurchasing

Certainly, to the price we stock market. but we're seen, the into in that not trigger the point, makes decrease the more to have it willing jump very where attractive

it, Thank much for guys answers.\ you Got okay. the so

questions, Marcos. Appreciate the

Ms. like no Seeing Stange closing questions, are would I that for back the Instructions] further conference to there over remarks. [Operator turn to

to questions. day. you a today. Thanks. to us call Please if follow-up everyone have have give And joined call, a Thank you the good feel who us free any on

for has attending The today's Thank you now conference concluded. presentation.

You may disconnect. now