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FBL Financial Group Inc (NYSE: FFG) $28.12

Note to the reader: This report contains substantially new material. Subsequent editions will have new or revised material highlighted

Overview

FBL Financial Group, Inc, based in West Des Moines, Iowa, incorporated in October 1993, sells individual life insurance and annuity products principally through an exclusive distribution force consisting of farm bureau agents and managers in the Midwestern and western sections of the United States. Variable universal life and variable annuity products are also marketed in other states through alliances with other insurance companies and a regional broker/dealer. In addition to writing direct insurance business, FBL assumes through a coinsurance agreement a percentage of certain annuity business written by American Equity Investment Life Insurance Company. Several subsidiaries support various functional areas of the Company's primary life insurance subsidiaries, Farm Bureau Life Insurance Company and EquiTrust Life Insurance Company, and other affiliates by providing investment advisory, marketing and distribution, as well as leasing services. Its website is

The Company’s fourth quarter results indicate that earnings were in line with consensus excluding certain non-recurring items. All segments posted strong 4Q 04 operating results. Particular improvement was seen in life insurance and traditional annuities. A majority of the analysts maintain a neutral rating on the stock and believe that the projected book value growth is at a discount to FFG’s peers, though the EquiTrust channel has potential for growth in the upcoming quarters.

|Key Positive Arguments |Key Negative Arguments |

|Farm Bureau Life Insurance Company and EquiTrust Life Insurance Company have|Lower equity markets may reduce fees collected on assets under management in|

|insurer financial strength ratings of "A" Excellent from A.M. Best Company. |the upcoming quarters. |

| |Asset quality deterioration could result in lower net investment income |

| |Higher than expected mortality would negatively impact earnings |

| | |

| | |

| | |

The Company’s fiscal year ends in December, and all quarterly and annual references are to be construed accordingly.

Revenue

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The 4Q 04 Pre tax Operating Income figure was $28 mm (16.9% YOY growth).

The Company’s crediting spread refers to the net interest margin, which is the difference between what the Company pays on fixed annuities i.e. “the crediting rate” and what they earn –the average interest rate from their bond portfolio. One analyst (Keefe, Bruyette) believes that Management has indicated that the spread is not an issue in FY 05, even if rates are flat to slightly down, as the Company still has a provision to lower crediting rates (at least 50 basis points on a significant portion of the business). Only 7% of traditional annuities and 6% of Universal Life (UL) are currently at minimum guaranteed rates.

Please see the separately saved spreadsheet for more details

Margin

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The 4Q 04 net operating income figure was $21 mm (17.4% YOY growth).

Earnings per Share

EPS

|FY Ends Dec |4Q 04 |1QE 05 |2QE 05 |2004 A |2005E |2006 E |

|Digest High |$0.72 |$0.51 |$0.54 |$2.10 |$2.08 |$2.26 |

|Digest Low |$0.72 |$0.47 |$0.49 |$2.10 |$2.00 |$2.15 |

|Digest Avg. |$0.72 |$0.50 |$0.52 |$2.10 |$2.05 |$2.22 |

|Digest YoY Growth |18.03% |7.97% |20.16% |-7.49% |-2.38% |8.29% |

|Zacks Consensus |$0.72 |$0.49 |$0.52 |$2.10 |$2.04 |$2.20 |

Fourth quarter EPS was $0.72, compared to $0.61 in the year-earlier quarter (18% YOY growth). Street Consensus was $0.48. A majority of the analysts had expected a lower 4Q 04 EPS figure. The normalized 4Q04 operating EPS was $0.50 per share. The normalized EPS figure in 4Q 04 excludes a tax reserve release of 9 cents per share, higher than normal coinsurance income from a one-time change in the reserve calculation, as well as favorable mortality, life insurance reserve release and unlocking in the acquired Kansas Farm Bureau block, with the three items totaling about 6 cents. In 4Q 04 Sarbanes Oxley related expenses totaled $0.5 mm to $1mm.

Management reiterated their FY 05 operating EPS guidance of 2.00 - 2.10.

One analyst (Keefe, Bruyette) has increased their projected EPS estimate for FY 05, which reflects the assumption that the EquiTrust channel has potential for earnings in FY 05.

Please see the separately saved spreadsheet for more details.

Target Price/Valuation

The average target price for FFG is $27.

The excel spreadsheet associated with this report contains a complete breakdown of ratings, price targets, and valuation methods by individual analysts. Most of the analysts (75%) have given a neutral rating to the stock and remaining (25%) of the analysts have given a negative rating. For those analysts providing price targets, the range is $26 (Prudential) to $28 (Keefe, Bruyette). The Keefe, Bruyette analyst rates the stock Market Perform and values the shares on 1.1x year end 2005 estimated Book Value of $25.63. The Prudential analyst has an Underweight rating on the stock and values the shares on a 1.04x year end 2005 estimated Book Value of $25.

One Keefe, Bruyette analyst has increased the projected target price for FY 05 from $26 to $28, based on the increased FY 05 EPS estimate and higher sector valuations in the forthcoming quarters.

|Ratings Distribution |

|Positive |0% |

|Neutral |75% |

|Negative |25% |

|Average Price Objective |$27 |

|Number of Analysts |4 |

Risks to the target price objective are general market risk, interest rate changes, and underwriting risks.

Please see the separately saved spreadsheet for more details

Long-Term Growth

The long-term growth rates for FFG fall within the range of 10% (Keefe, Bruyette, and Raymond James) and 12.5 %( Prudential). The Digest long-term growth rate is 10.83%.

FFG’s three-pronged growth strategy includes: growth through its traditional Farm Bureau Life distribution channel; growth in EquiTrust Life through independent and other distribution channels; and acquisitions or consolidations.

One analyst (Keefe, Bruyette) believes that their concern for spread compression and modest top line growth is expected to be offset by an improving capital position and gradually rising interest rates in the long run.

Other Discussion Corporate Governance/Capital Structure/Cash Flow

On February 28, 2005 FFG Management declared a five percent increase in the quarterly cash dividend to $0.105 per share from $0.10 per share on its Class A and Class B common stock. The dividend reflects an indicated annual dividend rate of $0.42 per share.

Individual Analyst Opinions

POSITIVE RATINGS

There are no analysts with positive ratings on the stock currently.

NEUTRAL RATINGS

FTN Midwest Research-Neutral- report date 2/8/2005

The analyst maintains a neutral rating on the stock and has specified that they are discontinuing coverage on the shares of FFG, due to a reallocation of resources.

Keefe Bruyette-Market perform-($28) - report date 2/10/2005

The analyst believes that their projected target price reflects a 1.1x multiple of year end FY 05 book value projection of $25.63. However, the analyst feels that the EquiTrust channel has the potential for growth in the upcoming quarters.

Raymond James-Market perform- report date 2/11/2005

The analyst believes the stock is overvalued, based on a historical relative P/E of 54%, implying a 10x multiple on FY 05 earnings. However, the analyst feels that price volatility will be controlled due the to relatively small float.

NEGATIVE RATINGS

Prudential-Underweight-($26) - report date 2/8/2005

The analyst believes that FFG’s earnings growth rate and book value growth will trail relative to its peers in the forthcoming quarters. The analyst feels that no significant change will occur in the Company’s Return on Equity (ROE), and it may control the expansion in FFG’s price to book multiple in the upcoming quarters.

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March 21, 2005

[pic]Research Digest Research Associate :Shalini Jindal (M.A., M.B.A.),

Editor: Ian Madsen, MBA, CFA

imadsen@

Tel:  1-800-767-3771, x 417

155 North Wacker Drive Chicago, IL 60606

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