FBL Financial (FFG) 7 Aug 202020 Q2 Earnings call transcript

Good morning, and welcome to the FBL Financial Second Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kathleen Till Stange. Please go ahead.

Thank you and welcome to FBL Financial Group's second quarter 2020 earnings conference call. Presenting on today's call are Dan Pitcher, Chief Executive Officer; and Don Seibel, Chief Financial Officer. Vice to Life questions President, Investment Companies; Agency Ron available Chief Kelli Marketing Officer. and Distribution; Services; Officer, and Operating Dan Mead, present answer Whitehead, are your Eddy, and and Also Jeff Sales Chief President, Koster, Vice safe Securities Certain the Litigation may Reform qualify today established liability, made forward-looking statements Act. from statements to by intended contain for harbor the Private those cause involve actual that results expressed risks or materially differ statements implied. These could from and to uncertainties reports FBL's believes in with detailed are uncertainties and on FBL risks and SEC which based to filed are These the reasonable. assumptions, be

website assurance the release this measures, and to these items be to to be earnings include Comments no on of audio call found Dan shortly be Today's my CEO, GAAP is However, any With of fblfinancial.com. forward-looking where applicable after may in comments update the prepared can the the call given and financial date. assumptions Dan? simulcast being on replay is turn will obligation over be non-GAAP reconciled disclaims call. call may on our quarter which FBL that financial are pleasure now it during Pitcher. found prove to website An second after website. a our both our statements supplement, this correct. that, FBL's to certain transcript

FBL this and us national individuals. and to I are and with shareholders, well. you businesses today, and hope of I'm the welcome call. you guests. the Thanks, We the and that are on analysts opportunity for Kathleen; with everyone to upheaval connect communities pleased appreciate global year for

of than a and Financial times. agents, had negative advisors for challenging to employees fewer industry rate these challenges hard transitioned I'm the of the during and the While work-from-home sectors. other year, have interest dedication mostly we and and and low work our in environment. many unique the Earlier grateful our environment the FBL persist, Group pandemic impacts

adaptable return continue - some adaptable distancing advisors and Regardless our employees working extra very locations, go to client and are More offices made have running work The in measures have with is mile social very process to their operations employees our their Our of chosen recently, to very well. smoothly. the in have for members. place. been employees new agents,

the Investment leader Joining previously Jeff us is role Jeff we brings Jeff experience add held the who team. Company. on extensive that pleased new insurance to by retired the Happel, to Charlie today after our call the June our Chief were filled in years able strong investment a Officer, management with I'm such industry. XX Whitehead. in

to XX investment led him feel team past a very Investment confident was lead management portfolio. enable the for insurance Jeff's have managing proven investment today. U.S. our general the portfolio. deep team experience he with we in where will For Management, and manage Transamerica's Aegon account and responsible team executive he leadership FBL's high-quality years, successfully I

members. place us have purpose stable, futures of financially our that keep the and to client livelihoods Company in our strategies to allowing our strong We protect and fulfill

to earnings. now Turning

are collected collected well income as the period to second from benefited an FBL a annuity share. rates. Life grow. per June determining the perspective, sales focus consistently well. quarter, though perspective, decline XXXX, annuity lower at broad The market results, segment From earnings the Even life and premiums reflects continuing billion annuity expense year. For our as share will force the more total continued recovery product Group while results of quarter decreased increase of on a quarter. XXXX, operating XXth, per market decreased since From detail. reserves compared $XX.X X%, XX% March. to discuss premium Results these Don sales lower of net in insurance and totaled interest-sensitive same total each insurance of of management, lower impact solid $X.XX in in in appropriate reported continues steady income financial Financial business increase premiums our last - rates our annuity adjusted as interest this the $X.XX crediting book discipline

While new annuity sales surrenders withdrawals are have also declined. down, and

per changes productivity on minimal The As exclusive these still of an XXXX, metrics number XX, of with the important of agents. of we total Generally, lowest who focused agents more quarter, June but and agency This reflecting some are during tenured X,XXX second agents has our life had managers. agents production. producing declined agent. had made is number, I'm deliberate less we

associates Our X,XXX their business. their grow them to client serve help sales licensed agents have members and

have enhanced agents. met recently the productive socially in-person most in our help of I they event. can a to agents to with be. with I tools rare recently yet appreciate agents We connect be opportunity XXX distanced top always to a the

return been While levels. has activity to XXXX to other, pleased a to any production year beginning I'm see normal agent unlike

half continues than in sales the are albeit halted COVID-XX all anticipated. March, at second ahead; excited advisor originally As we they grow, the FBL's too. had to slower of activities agents Management for and and the Wealth our a we business approach I'm about April service Wealth see May. opportunities Management on-boarding year, and pace

our Wisconsin as Management good advisor had first optimistic we Wealth hires include XX, June Management Farm recently. of have op. and Recent advisors. appointments have first XX we in Wealth several I'm As our made Bureau annuity

that named strongest Life June, than financial position. wealth time Farm conclude the XXst I List. Now financial Best's with affirmed good risk-adjusted has recent our investment A.M. Excellent. and professional of strength Company's XX named external Ward's ever of the noted on A.M. announcements level, Farm July, performing an members management Bureau In A.M. Farm There Ward want Bureau has as Life rating metrics, Health of XX were that Life Life's at A Bureau recognize experienced top Ward's quality. Best more been marks Life Best is that Bureau as need overall good strength. capitalization well liquidity to two which This XXXX that client is advise. comment group strong portfolio a companies. the In Group Farm our our to

Our managed the Bureau year insurance organizations named Farm to property the insurers. in companies Ward and casualty Services XX Ward makes only analyzes companies Ward's companies with a was affiliated sixth list. one for than eight X,XXX life to also Financial row. of and named property This XXX more casualty

financial So trends. and pandemic we we to be consistent a the remain are recognized operating and entered and honored positioned FBL Group strong Financial for of market and to position strength from consumer well performance adversity handle strength.

financial to Seibel results. the turn I'll Don CFO, call Now, over Don? cover to our

also liquidity. everyone on I the discuss second and I'll call. to financial on welcome the are you also quarter our hope I investments, comment Thanks and want Dan. capital well. for results then

earnings variable FBL this of due on for a were reported of As improvement Positively, I'll results this income we mention managing in results $X.XX impacted our a performance environment our adjusted the decreased business XXXX separate results associated Dan both product I $X.XX reflecting negatively. reserves markets market index withdrawal benefits the items to impact amortization on which In results quarter on on net of an focus solid, low per characterize global operating total, in products. income expenses. are line a These equity favorable market second equity performance as and and markets share interest $X.XX mentioned, with actions, per pandemic, positively experienced performance. and pricing quarter given our guaranteed market positive share. few of annuity and rates. account also the DAC of markets, share. challenging lower This volatile especially with expectations. notable, living totaled would our favorable per

interest time, limiting travel-related the positions challenge due personnel are when declined, Given Company. costs seeing expenses focused that a are Naturally, expense its positions new the individuals environment decline have not but of persistent sales, we this rate have impact and challenging the leave in we and expenses. during controlling also on to project filling low and on

year. On negative the investments from loss in generally experienced equity quarter-end we quarter arrears, of this reported are the at the they side, during so investments. alternative markets reflect first decline an These

investments the results third given in We of from these the strength improved expect quarter, market in the quarter. second the

for protecting level range at results. of our or cause allows significant. Many Mortality total of and on significant pandemic-related did listed these had significant of of was claims In we of COVID-XX but promise as long-term us net futures. quarter residents been several the conditions to-date, our a total, with was not fulfill facilities. some this had we XX our The $X.X of deliver during has can't driver within age experience We was quarter of experience and million. advanced medical being release, quantify the and underlying reserves Providing on of financial with expectations a claims, However, improvement not individuals the impact, purpose care second individuals impact were the of time. this coverage to financial of death. livelihoods XXXX,

Next, Annuity impact to discuss benefits withdrawal XXXX by quarter $X our performance. in reflects for this favorable I'll the market performance. the second results the second guaranteed of living results XXXX associated segment quarter Reserves decreased of with segment. market million due

XXXX, market to low market we've annuity on basis costs rates In during interest by rates, Results response in pressured individual for addition, interest business spreads decreased better annuity crediting reduced our In X certain roll-up by quarter. annuity rates acquisition caused of on indexed amortization in the persistency. decreased quarter during second interest annuities the portfolio point deferred to the was to our products low our half and due of continue caps lower be the and time products. on points rates first headwinds the

partially spreads and In XXXX of the by and steadily market the business our to segment and death quarter. the due annuity Life addition, on higher for impact by the portfolio results Corporate of reflect life Point we expenses, offset yield. declined segment business our on lower second results in deposits. several rates agent impacted benefits. book for lower growing of items commissions were quarter time a income have reduced insurance interest also equity certain quarter other during primarily the universal in low

due this amortization This million. amortization positive stated, acquisition segment previously of market equity lower deferred costs in second as impact First, decreased performance quarter. the the experienced $X.X to the of by

Second, insurance lower business. of life in our variable this segment block universal benefits experienced closed death

had segment expected lower equity this Third, than income.

loss share business. totaling incremental $X.XX continue million net an We in to $X.X or developing This per includes Management to this related after-tax also investment. segment Wealth invest our

a level XXXX. in business to the Wealth We expect of investment Management throughout continue similar

diversified discuss high well quality and Next, is portfolio. industry of and investment FBL's I'll is by individual issue, It class. asset

of XX, $XX billion, the the of $X.X had FBL securities included balance plus line of parties indebtedness of and in alternative million on June related total investments As investments sheet.

in were high-yield originating also as first were business on focused dislocation yield on we high-yield the purchases Given the number in and of was markets, us was the and year loans. The spread our of These financial our product for and as commercial invest Recent half in yield mortgage bonds. a high-grade well underweight securities, the and tax-adjusted timing corporate long-term first investments sectors. for a investment structured position of the across high backing to new great were acquisitions X.XX% acquisitions bonds, XXXX. municipal active half

securities of quality continues investment Our to with high investment-grade. being of portfolio XX.X% maturity be the fixed

Our performing. commercial continues are of mortgage perform quality XX, XXXX. currently portfolio at is to high mortgage loan million $XXX All and well. also commercial June totaled It loans

from of increase comment our $XXX on capital level an June XX, XX, increase Bureau base, of ratio an rating in XXXX. excess of risk-based quarter-end. XXXX, capital X than Bureau Life million At the Farm June increase notable had downgrades. due XXX% in This asset action estimated I'll XXX%. Life impact risk company points capital to approximately This is offset Farm had is as charges Next, as an levels. March our RBC at capital of the our more Using subsidiary

excess we In shareholders. capital level. the we capital $XX we roughly to estimate at quarter-end continue that holding challenging in Even have to return these company of times, million addition, at

annual totaled dividend regular quarter, yesterday's common we price, Based During million. $XX.X stock stock FBL on dividend, stock our paid yield we which was our the quarterly X.X%. repurchased closing million. And second indicated totaling $X.X

we addition, this a In dividend year. paid special earlier

To million remains generated and $XXX our being of position cash readily could investment million equivalents portfolio liquidity with are cash cash operations strong value this converted challenging U.S. government $XX activities. U.S. securities and and $XX included for million agency-backed in value. to that carrying well near or be of carrying we prepared at cash and At Our financing investments, of quarter-end, by conclude, government short-term environment.

changes. to product have capital pricing liquidity with and We we and interest to and actions market rate strong positions expense continue savings the adapt environment low

of strength call and for well may Company. FBL operator any execute continue the maintain balance the the of and I Group up We now to our open to turn XXXX. over to on it Financial will financial These fundamentals you the actions position have. questions the

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

just I was a have And a areas. where know compress, because crediting going on I'm focus lowering I the And about guess prepared you on life lower your X, of the opportunities the expand how I remarks. you Is just supplement, your crediting couple in it Page rates talk crediting you looking - rates to spoke crediting compress your year-over-year in forward? And declining rate in Page little your so rate rate And about a the of us give by in margin basis. you going about business. or you rate ever total lower of I the - we annuity on up bit. where then the supplement, bit it rates? crediting see And XX to the at little to it's environment, business, going gone is the think the would going environment the interest the interest context on yield to

ability I at Don. down took we have is total, guarantee, we've business address side, of this contracts question. do and guarantee. In products which on insurance the to rates the not decrease more block limited annuity our This portfolio are written is life product actually XX% XX% is X%. crediting XX% year, the that universal of further will that mid-March to the to Greg. of you, recently. that's change the Thank those that And are in approximately minimum that at made We our contracts, guarantee,

certainly the to the revenue building business challenge from that of a is and source offset expenses it bottom have not So Management perspective that line it longer of a strategy out that's then bit we the dependent. on term, why focusing are and profitability Wealth to a a spread

that these crediting assume offset rate, lower business new to the assumption. you're that selling you're of with on in environment rate both helping interest a low then And pricing areas, is I the fair a with

Yes. And we've that our and index rates our product tight the decreases reflected and made the and four-year helped we in caps have annuities we multi-year roll-up also on that then in on guarantee that's annuity. the MIGA-X

this business profession, trying insurance, are your to economic might curious pool your and bigger consider people as the to talk has it's the It as might as affecting that a you them widespread but in disruption build buy I'd step as been discretionary level, about like unemployment, out maybe willing the find picture And the particular sense just to at prospects of opportunity thought wealth items well. seems cetera? a areas you I result a back, or And then that issues be macro of getting maybe considering have big kind business. profound. those how a what big I'm views secondly, about the from you're survey around on customers, pandemic et to life you their their ability

Dan macro the In more lot be many or do and insurance want this some comments. customers to couple start the is that do probably ability last there might one underwriting when we I'll that the in off, the opportunity our life shelter-in-place pandemic. and I short-term, you Pitcher. medical of due that - to But to complicated. additional this sales the is level, of the a with think to we from some have mentioned for needed we was underwriting call of obviously customers, and there a potential - and more first long-term, make think the about This restrictions,

insurance life didn't - I more feel so the was processes that I work COVID. from we became definitely to consumer don't due complex overall that selling - - of industry. our general agents against feel hear the would were And a sentiment of getting

from strength lot out to So, to from think long-term of impact I come behind positioned concerns want and position don't a we're of of us, we all get this well about have this the pandemic. really but a

impact to kind and as wealth into the as of a benefit on in that the management second unemployment the probably far side. The isn't jobs, economy, the big area the went

and - may us the we're our managers of be my in hire think, it agents press trying but in I of given comments wealth agency area level if benefit unemployment. releases generally, some think to notes, of can at look the and for experienced We earlier. we company growing you the more selective for the that hiring

as and agents this know has into of economy are driven best folks entrepreneurs Our a you unemployment. lot entrepreneurial

some from had think do benefit you we any know, So comments. if will additional I Don, that. don't be there

of respect will. we you wealth access With provide, one to to the is joining if that Yes. a lead, us question, proposition manager hot value wealth management the a

So we've investment we that life have and insurance significant that in good have agents not years But to relationships not we them. in aspect past, while - wealthy their job with a property needs, our into individuals was total. of is provide sold casualty services we very that mutual meeting of that that funds wallets penetration long-term their show done not

So proposition advisors to get see like come some prospecting. to these a wealth allure we have value to to to over us. that And advisors as experienced customers management of brought to opposed and as real them

on we pandemic at that hold economic consider least for through is like are sort the guess, that periodically positions the your you when the you and as a is I And final the things or on crisis, Thanks capital presume for different I special near-term would the strength dividends. work Should capital view? capital. there of the you've around color. I past, in that in the ratios question Obviously, are commented know organization. of excess and

as like. some we first question have could we the in Dan stronger capital year our you Don. faced the and ratio But several years. you'd not what color as over half of we of provide if as over is are And certainly this much well. have have we grown last the that Yes, several have last additional than tackle headwinds that I'll the years

to prudent is own, a see play driven that it timing respect the securities credit by rating can of happen. So and the out issuers the anything of special what see rebounds, but this and do amount of is how economy we the see and dividend agencies but, ratings with Board to

ahead. Backer go Marla question [Operator from Please Sidoti. Instructions] The next is with

I'm the So a new a of of in work get able on of provide process bit will has through Can been this of Management more move going the specifically out wondering initiative before terms Wealth we some - color forward? what if to and could us little its walk is get on-boarding just better little new how bit to or you advisers. the has occur feel how for way to over, it advisor process slowed a

start level things the can little shelter-in-place the that can of This Dan. the I bit and mean, hit I as slowing at were process. to a pandemic orders morning, there. I the wealth all far happened restriction advisors. Good the appreciate two is And out as management Marla. you and high after think existing

is clients. there off, from of first the current a calls First quarter, in were and answering they lot of questions, obviously turmoil a their fielding busy a market quite so lot

into many to of of then was basically wealth to training was to recruiting from to down. shut course, that again pick process develop, now. management - where other the licensing and we we And to The impacted model. that that there in my basically all had our the interview have way train three that and beginning were components was the that comments process to and really It's we thing, up and interviewing, months advisors were by ability moving

point. some good the impact closer, of yet, feel location the we're recent course, about of of restrictions. our in think it been there has rate, what in don't we normal we're I the and another spike on virus and continue been Obviously, work - are getting of so, the loosening I I near this wouldn't on is through the to to be spread all to cases. it We've say number And of might able but depends the up future to recruiting. back what And

of get that the to is are, on not given us telling of sort benchmark - just you've Even of delayed internal some progress And but help of target a internal us your there you impact by your the you're activity, COVID-XX what targets perhaps what sort been initiatives? said, us [technical can understating that in any your telling sort giving way terms feel how on - for as us difficulty].

able investment anticipated. worth a as of comments be then add may slowed Yes, it. commented, in noting But to and But also. I'll wealth had to what general expenses management Don I make slower also our mean, than couple we Don had down into

don't two of kind On we components you add to any basis, internal on a don't have we those offsetting Don, you - had that. each if So anything share really - other but else bit. go-forward know want targets, we a I our do

the If wealth aspect business question a this broader? I directed of could is towards management it question just or clarify, the was the

just was of towards bring in what about advisors going numbers. the that under understood a management specific it weren't how aspects. of you're think but thinking directed And the targeting like I management, over to to of general No, the you assets targets, to providing sense numbers you're without terms what disclose wealth

bet. You

management by model those assets assets. clearly from that is driven fees and then So result the the economic managing under

adding future. to be nature, disclosed it's to growth that will the to-date for the in asset AUM that is balances. And startup certainly, under we So not our bottom it and the the key FBL. turning base But corner line that given have

Now switching topics.

interest rate of mentioned some You reduced that you the on impact is agent had offset to environment of commissions interest-sensitive the before some you've thing products. one that low of done the

think what that correct, is said. was that's you understanding think I my - I if

to to is or is that intended what be duration be - intended a in permanent that agent is So commissions? that reduction

guarantees. deposits have make perhaps limited that written and renewal were really those the to and decades years are - that right towards they have to-date taken years ago and contract we've that minimum holders actions around contracts The to contracts

eliminated So guarantee, that deposits those for that pay X% or make we on that wanted have a those money. we higher where could contracts we still a historically have because commissions we the minimum assets, those spread on

has many we've commission but of those - to extent one bolster pull. that of be any the we bottom to - has of things limited, line. levers So challenged, been And continues done the one those reduction it's help that's of our it because one can that things commissions

seeing you assumed are defaults, a as result in your any economy? what's of And change going on the in

product default our For purposes, when a we rates take crediting pricing parameters really other setting assumptions view we're long-term on and products. around

that not a economic but that's in cycle, so morphs long-term something And time that over based rather something particular industry significantly data. will it's in adjust upon a year, particular

And any you are in change ascribe terms to just seeing versus changes what the now, actually you defaults had then of real-world expected downturn? right that in XXXX in economic

it more speak the of Clearly, we or spot. took has we the certainly in that defaults we where much, to of in was elevated over charges the of see quarter we way from and in a had had level credit the defaults cycle - impairment or several or much the didn't second last impairments good - significant years, first quarter, much

and the of activity. So would the on portfolio reverting of we're more of our expect, mean the months, based given impairment size what just level six to we

you. Thank

over back Till questions. for remarks. Instructions] question-and-answer our no any [Operator This conference concludes to would Stange session. the Kathleen turn Showing like closing further I to

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

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

may now disconnect. You