FBL Income Jumps 45% In 2Q As Distribution Reforms Take Hold

By Cyril Tuohy
InsuranceNewsNet

FBL Financial Group, the Iowa-based farm bureau life insurer with an exclusive sales force, attributed its 45 percent increase in net income growth to reforms in its distribution system, the company said.

FBL’s second quarter income of $29.6 million, or $1.13 per share diluted, was up 45 percent over $20.2 million, or 73 cents per share, in the year-ago period Operating income came to $25.6 million, or 98 cents per share, compared to $19.9 million, or 72 cents per share in the year-ago quarter, the West Des Moines company also said. The results soared past analysts’ estimates of 81 cents a share, compiled by Reuters.

James P. Brannen, CEO, said the company’s “outstanding performance” was due to the strengthening of the agency force and the hiring of two senior managers. In June, agency system veteran D. Scott Stice was hired as the company’s chief marketing officer, and John D. Currier Jr., former chief actuary of Aviva USA, came aboard as FBL’s chief actuary.

Brannen said the company is in the midst of reforming its agency system by replacing “low-productivity agents,” altering compensation structures and revising recruiting and training programs with a goal of increasing the agency force, making the agents with the company more efficient and boosting retention rates.

He blamed an outdated compensation structure for churn among agents who have turned over more frequently in urban markets compared to rural markets. Setting a higher performance bar, identifying promising agents early and investing in the ones that are producing at required levels will help bring more stability to the agency force, he said.

More than 1,793 agents and agency managers work for the company, which sells life insurance primary to individuals and small businesses.

“Over time, I expect these changes to result in an even stronger, more stable and productive, and larger agency force with higher retention rates,” he said in a prepared statement.

Revenue rose to $176.68 million from $165.98 million, helped by investment fee income in the annuity segment and reinsurance recoveries for losses in connection with accidental death claims, according to Chief Financial Officer Don Seibel.

Life insurance premiums shot up 36 percent over the year-ago period as consumers were drawn toward life products and away from fixed annuities. Annuity premium plunged 29 percent compared to the year-ago quarter, due to the company having previously suspended the sale of short-term deferred and immediate annuity products because of weak demand and low interest rates.

Despite recent higher interest rates, FBL wasn’t ready to crank up the dial on short-term annuities just yet, Brannen also said. Were interest rates to move higher, he said, “we’re prepared to jump in.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.