##### Table of Contents



FORM 10-K
  [X]
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 December 31, 2008
  [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 1-11917
 FBL Financial Group, Inc.
  Iowa
    
    42-1411715(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)5400 University Avenue, West Des Moines, Iowa
    
    50266(Address of principal executive offices)
    
    (Zip Code)
 (515) 225-5400
  Title of each class
    
    Name of each exchange on which registeredClass A common stock, without par value
    
    New York Stock Exchange
  o x
 o x
 x o
 o
  Large accelerated filer o
    
    Accelerated filer x
    
    Non-accelerated filer  o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o x
   Title of each class
    
    Outstanding at February 13, 2009Class A Common Stock, without par value
    
    28,976,158Class B Common Stock, without par value
    
    1,192,990
  Document
    
    Parts Into Which IncorporatedProxy statement for annual shareholders meeting on May 20, 2009
    
    Part III




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##### 



FBL FINANCIAL GROUP, INC.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008
TABLE OF CONTENTS
 PART I.Cautionary Statement Regarding Forward Looking Information
    
    
    1Item 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    22Item 1B.
    
    Unresolved Staff Comments
    
    
    31Item 2.
    
    Properties
    
    
    31Item 3.
    
    Legal Proceedings
    
    
    31Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    31PART II.Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters, Issuer Purchases of Equity Securities and Securities Authorized for Issuance under Equity Compensation Plans
    
    
    32Item 6.
    
    Selected Consolidated Financial Data
    
    
    35Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    36Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    82Item 8.
    
    Consolidated Financial Statements and Supplementary Data
    
    
    83Managements Report on Internal Control Over Financial Reporting
    
    
    83Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
    
    
    83Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
    
    
    84Consolidated Balance Sheets
    
    
    85Consolidated Statements of Operations
    
    
    87Consolidated Statements of Changes in Stockholders Equity
    
    
    88Consolidated Statements of Cash Flows
    
    
    89Notes to Consolidated Financial Statements
    
    
    91Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    131Item 9A.
    
    Controls and Procedures
    
    
    131Item 9B.
    
    Other Information
    
    
    131PART III.
    
    The information required by Items 10 through 14 is incorporated by reference from our definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after December 31, 2008.PART IV.Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    131SIGNATURES
    
    
    135Report of Independent Registered Public Accounting Firm on Schedules
    
    
    136Schedule I  Summary of Investments  Other Than Investments in Related Parties
    
    
    137Schedule II  Condensed Financial Information of Registrant
    
    
    138Schedule III  Supplementary Insurance Information
    
    
    142Schedule IV  Reinsurance
    
    
    144EX-3(II)(C)EX-10.18EX-10.19EX-10.24EX-12EX-21EX-23EX-31.1EX-31.2EX-32




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Cautionary Statement Regarding Forward Looking Information
  
    
    Current difficult conditions in the financial markets and the economy may materially
adversely affect our business and results of operations.
    
    Continuing adverse financial market conditions may significantly affect our liquidity,
access to capital and cost of capital.
    
    The Market Value Adjustment (MVA) feature on certain policies may cause surrenders to
increase in an extremely low interest rate environment.
    
    Our valuation of fixed maturity securities may include methodologies, estimations and
assumptions that are subject to differing interpretations and could result in changes to
investment valuations that may materially adversely affect our results of operations or
financial condition.
    
    Our investment portfolio is subject to credit quality risks which may diminish the value
of our invested assets and affect our profitability and reported book value per share.
    
    Changing interest rates, market volatility and general economic conditions affect the
risks and the returns on both our products and our investment portfolio.
    
    We face competition from companies having greater financial resources, more advanced
technology systems, broader arrays of products, higher ratings and stronger financial
performance, which may impair our ability to retain existing customers, attract new
customers and maintain our profitability and financial strength.
    
    As a holding company, we depend on our subsidiaries for funds to meet our obligations,
but our subsidiaries ability to make distributions to us is limited by law, and could be
affected by risk-based capital computations.
    
    A significant ratings downgrade may have a material adverse effect on our business.
    
    All segments of our business are highly regulated and these regulations or changes in
them could affect our profitability.
    
    Inaccuracies in assumptions regarding future persistency, mortality and interest rates
used in calculating reserve, deferred policy acquisition expense and deferred sales
inducement amounts and pricing our products could have a material adverse impact on our net
income (loss).
    
    We may be required to accelerate the amortization of deferred policy acquisition costs
or deferred sales inducements, which could adversely affect our results of operations or
financial condition.
    
    Our earnings are influenced by our claims experience, which is difficult to estimate. If
our future claims experience does not match our pricing assumptions or past results, our
earnings could be materially adversely affected.
    
    We assumed a significant amount of closed block business through coinsurance agreements
and have only a limited ability to manage this business.
    
    Our reinsurance program involves risks because we remain liable with respect to the
liabilities ceded to reinsurers if the reinsurers fail to meet the obligations assumed by
them.
 1




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
    
    Our business is highly dependent on our relationships with Farm Bureau organizations and
would be adversely affected if those relationships became impaired.
    
    Our relationship with Farm Bureau organizations could result in conflicts of interests.
    
    Changes in federal tax laws may affect sales of our products and profitability.
    
    Our ability to maintain competitive costs is dependent upon the level of new sales and
persistency of existing business.
    
    If we are unable to attract and retain agents and develop new distribution sources,
sales of our products and services may be reduced.
    
    Attracting and retaining employees who are key to our business is critical to our growth
and success.
    
    Success of our business depends in part on effective information technology systems and
on continuing to develop and implement improvements.
    
    We experience volatility in net income(loss) due to accounting standards for
derivatives.
    
    We face risks relating to litigation, including the costs of such litigation, management
distraction and the potential for damage awards, which may adversely impact our business.
  2




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PART I
 
 ITEM 1. BUSINESS
 General
   FBLs Business by Company and Distribution Channel
 FBL Financial Group, Inc.
 COMPANY
    
    Farm Bureau Life
Insurance Company
    
    EquiTrust Life
Insurance Company
    
    Farm Bureau Mutual
Insurance Company*Western Agricultural
Insurance Company*CHANNEL
    
    Direct
    
    Direct
    
    FBLs Managed
Property-Casualty OperationsBRAND
    

(FARM BUREAU FINANCIAL SERVICES LOGO)
    

(EQUITRUST FINANCIAL SERVICES LOGO)
    

(FARM BUREAU FINANCIAL SERVICES LOGO)DISTRIBUTION
    
    1,962 exclusive
Farm Bureau agents
and agency managers
    
    19,098 independent
agents representing
broker/dealers, banks
and independent
marketing
organization
    
    1,176 exclusive Farm Bureau
agents and agency managers
(included under the
1,962 Farm Bureau Life
agents)PRODUCTS
    
    A comprehensive
line of life
insurance, annuity
and investment
products
    
    Traditional fixed-rate
and index annuities
    
    A full line of personal and
commercial
property-casualty insurance
productsTERRITORY
    
    15 Midwestern and
Western states
    
    Licensed in all states
except New York
    
    Arizona, Iowa, Kansas,
Minnesota, Nebraska, New
Mexico, South Dakota and
Utah, and other states for
crop and nonstandard auto
insurance
 *
    
    FBL Financial Group receives a management fee from these companies. Underwriting results do not
impact FBL Financial Groups results. 3




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www.fblfinancial.com www.fbfs.com www.equitrust.com
 Business Strategy
  Farm Bureau Life Insurance Company
      
    
    Just-In-Time Team  Comprised of product and sales experts available to agents through a
toll-free call, this team can answer nearly any question related to products, sales
approaches, suitability and more.
    
    Advanced Markets Team  This group is an extension of the Just-In-Time team and includes
high-end experts such as attorneys and others who specialize in financial matters.
    
    Life Sales Advisors  These field representatives are located strategically across our
15-state territory. They provide direct, hands-on training and support to agents on our broad
portfolio of products.
  4




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EquiTrust Life Insurance Company
        5




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Marketing and Distribution
 Farm Bureau Life Market Area
   Affiliation with Farm Bureau
     6




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Percent ofFarm Bureau LifeRoyalty Agreement
    
    2008 First YearState
    
    Expiration Date
    
    Premiums CollectedIowa
    
    December 31, 2014
    
    
    27.8
    %Kansas
    
    January 1, 2021
    
    
    18.8Oklahoma
    
    December 31, 2014
    
    
    11.4Minnesota
    
    December 31, 2032
    
    
    6.7Nebraska
    
    December 31, 2011
    
    
    4.9Utah
    
    December 31, 2032
    
    
    4.8Wyoming
    
    December 31, 2011
    
    
    3.9Arizona
    
    December 31, 2011
    
    
    3.8Idaho
    
    December 31, 2011
    
    
    3.7Montana
    
    December 31, 2011
    
    
    3.1New Mexico
    
    December 31, 2011
    
    
    3.0South Dakota
    
    December 31, 2032
    
    
    2.8Wisconsin
    
    December 31, 2011
    
    
    2.4Colorado
    
    December 31, 2011
    
    
    1.9North Dakota
    
    December 31, 2011
    
    
    1.0100.0
    %
     Farm Bureau Life Agency Force
   7




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EquiTrust Life Market Area
  8




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EquiTrust Life Independent Channel
    
    
    We are selective about the IMOs contracted with us and do not hire carrier-owned
organizations.
    
    We offer a high level of support and a competitive product portfolio, and are committed
to maintaining high ethical standards.
    
    We keep our product design simple and straightforward, and in the case of index
annuities have only one moving part  the participation rate or index cap.
    
    We are committed to being fair, honest and open in the way we advertise, sell and
service our products, as indicated by being an Insurance Marketplace Standards Association
(IMSA) qualified company.
    
    We believe in helping consumers understand what an annuity is and how it can be used to
support an individuals retirement or accumulation needs.
   Alliance Partners  Distribution
  Segmentation of Our Business
   9




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Traditional Annuity  Exclusive Annuity Segment
   Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)First year  individual
    
    $
    170,675
    
    
    $
    73,266
    
    
    $
    79,546Renewal  individual
    
    
    69,177
    
    
    
    44,543
    
    
    
    55,106Group
    
    
    9,187
    
    
    
    9,040
    
    
    
    5,627Total Traditional Annuity  Exclusive Distribution
    
    $
    249,039
    
    
    $
    126,849
    
    
    $
    140,279
  Fixed Rate Annuities
    Withdrawal Rates
  10




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Interest Crediting Policy
   Account Value at December 31,2008
    
    
    2007(Dollars in thousands)At guaranteed rate
    
    $
    309,307
    
    
    $
    96,885Between guaranteed rate and 50 basis points over guarantee
    
    
    56,208
    
    
    
    225,882Between 50 basis points and 100 basis points over guarantee
    
    
    634,872
    
    
    
    22,817Greater than 100 basis points over guarantee
    
    
    570,821
    
    
    
    1,082,060Total
    
    $
    1,571,208
    
    
    $
    1,427,644
 In Force  Exclusive Annuity Segment
 As of December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Number of direct contracts
    
    
    51,439
    
    
    
    51,311
    
    
    
    53,321Interest sensitive reserves
    
    $
    1,971,218
    
    
    $
    1,810,452
    
    
    $
    1,816,811Other insurance reserves
    
    
    381,838
    
    
    
    407,199
    
    
    
    412,801
 Traditional Annuity  Independent Distribution Segment
   Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Direct:Fixed rate annuities
    
    $
    915,843
    
    
    $
    690,646
    
    
    $
    807,103Index annuities
    
    
    649,412
    
    
    
    878,482
    
    
    
    1,001,379Total direct
    
    
    1,565,255
    
    
    
    1,569,128
    
    
    
    1,808,482Reinsurance assumed
    
    
    2,381
    
    
    
    3,187
    
    
    
    4,725Total Traditional Annuity -
Independent Distribution, net of
reinsurance
    
    $
    1,567,636
    
    
    $
    1,572,315
    
    
    $
    1,813,207
  11




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Index Annuities
 ®
     12




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Fixed Rate Annuities
   Withdrawal Rates
   Interest Crediting Policy
   Account Value at December 31,2008
    
    
    2007(Dollars in thousands)At guaranteed rate
    
    $
    29,897
    
    
    $
    3,157Between guaranteed rate and 50 basis points over guarantee
    
    
    2,807
    
    
    
    4,894Between 50 basis points and 100 basis points over guarantee
    
    
    321,212
    
    
    
    192,215Greater than 100 basis points over guarantee
    
    
    2,042,625
    
    
    
    1,421,029Total
    
    $
    2,396,541
    
    
    $
    1,621,295
 13




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Account Value at December 31,2008
    
    
    2007(Dollars in thousands)At guaranteed rate
    
    $
    42,038
    
    
    $
    60,294Between guaranteed rate and 50 basis points over guarantee
    
    
    386,472
    
    
    
    399,098Between 50 basis points and 100 basis points over guarantee
    
    
    41,490
    
    
    
    34,009Greater than 100 basis points over guarantee
    
    
    14,145
    
    
    
    54,391Total
    
    $
    484,145
    
    
    $
    547,792
  As of December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Number of direct contracts
    
    
    93,769
    
    
    
    73,980
    
    
    
    51,007Direct interest sensitive reserves
    
    $
    2,398,237
    
    
    $
    1,607,009
    
    
    $
    962,662Direct index annuity reserves
    
    
    3,581,396
    
    
    
    3,387,727
    
    
    
    2,463,086Assumed annuity reserves
    
    
    1,583,754
    
    
    
    1,766,735
    
    
    
    1,928,218Direct other insurance reserves
    
    
    145,036
    
    
    
    64,242
    
    
    
    13,983
 14




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Traditional and Universal Life Insurance Segment
   For the year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Universal life:First year
    
    $
    6,672
    
    
    $
    5,448
    
    
    $
    3,208Renewal
    
    
    39,338
    
    
    
    39,027
    
    
    
    38,429Total
    
    
    46,010
    
    
    
    44,475
    
    
    
    41,637Participating whole life:First year
    
    
    12,089
    
    
    
    14,680
    
    
    
    14,286Renewal
    
    
    93,378
    
    
    
    91,249
    
    
    
    87,753Total
    
    
    105,467
    
    
    
    105,929
    
    
    
    102,039Term life and other:First year
    
    
    10,414
    
    
    
    9,291
    
    
    
    7,312Renewal
    
    
    49,135
    
    
    
    44,518
    
    
    
    40,837Total
    
    
    59,549
    
    
    
    53,809
    
    
    
    48,149Total Traditional and Universal Life Insurance
    
    
    211,026
    
    
    
    204,213
    
    
    
    191,825Reinsurance assumed
    
    
    10,913
    
    
    
    11,695
    
    
    
    12,464Reinsurance ceded
    
    
    (19,094
    )
    
    
    (18,309
    )
    
    
    (16,640
    )Total Traditional and Universal Life Insurance, net of reinsurance
    
    $
    202,845
    
    
    $
    197,599
    
    
    $
    187,649
  Traditional Life Insurance
   Universal Life Insurance
  15




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Underwriting
  Interest Crediting and Participating Dividend Policy
   Account Value at December 31,2008
    
    
    2007(Dollars in thousands)At guaranteed rate
    
    $
    334,536
    
    
    $
    334,475Between guaranteed rate and 50 basis points over guarantee
    
    
    40,360
    
    
    
    40,882Between 50 basis points and 100 basis points over guarantee
    
    
    23,326
    
    
    
    22,613Greater than 100 basis points over guarantee
    
    
    237,760
    
    
    
    230,490Total
    
    $
    635,982
    
    
    $
    628,460
   Account Value at December 31,2008
    
    
    2007(Dollars in thousands)At guaranteed rate
    
    $
    67,021
    
    
    $
    106,199Between guaranteed rate and 50 basis points over guarantee
    
    
    480
    
    
    
    9,460Between 50 basis points and 100 basis points over guarantee
    
    
    67,689
    
    
    
    18,786Greater than 100 basis points over guarantee
    
    
    8
    
    
    
    5,058Total
    
    $
    135,198
    
    
    $
    139,503
  16




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As of December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands, except face amounts in millions)Number of direct policies  traditional
life
    
    
    335,505
    
    
    
    332,497
    
    
    
    328,152Number of direct policies  universal life
    
    
    55,094
    
    
    
    55,218
    
    
    
    56,673Direct face amounts  traditional life
    
    $
    30,998
    
    
    $
    28,552
    
    
    $
    25,993Direct face amounts  universal life
    
    
    4,817
    
    
    
    4,695
    
    
    
    4,675Direct interest sensitive reserves
    
    
    634,963
    
    
    
    628,563
    
    
    
    625,541Direct other insurance reserves
    
    
    1,389,546
    
    
    
    1,349,141
    
    
    
    1,306,987Assumed insurance reserves
    
    
    202,829
    
    
    
    190,741
    
    
    
    199,020
 Variable Segment
   For the year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Variable annuities:Exclusive distribution:First year
    
    $
    40,742
    
    
    $
    65,840
    
    
    $
    50,911Renewal
    
    
    23,047
    
    
    
    26,377
    
    
    
    23,956Total
    
    
    63,789
    
    
    
    92,217
    
    
    
    74,867Alliance channel:First year (1)
    
    
    15,685
    
    
    
    30,430
    
    
    
    22,382Renewal (1)
    
    
    4,417
    
    
    
    5,028
    
    
    
    3,724Total
    
    
    20,102
    
    
    
    35,458
    
    
    
    26,106Total variable annuities
    
    
    83,891
    
    
    
    127,675
    
    
    
    100,973Variable universal life:Exclusive distribution:First year
    
    
    4,930
    
    
    
    5,557
    
    
    
    6,451Renewal
    
    
    46,274
    
    
    
    46,052
    
    
    
    44,954Total
    
    
    51,204
    
    
    
    51,609
    
    
    
    51,405Alliance channel:First year (1)
    
    
    415
    
    
    
    779
    
    
    
    998Renewal (1)
    
    
    2,197
    
    
    
    2,102
    
    
    
    1,830Total
    
    
    2,612
    
    
    
    2,881
    
    
    
    2,828Total variable universal life
    
    
    53,816
    
    
    
    54,490
    
    
    
    54,233Total Variable
    
    
    137,707
    
    
    
    182,165
    
    
    
    155,206Reinsurance ceded
    
    
    (736
    )
    
    
    (856
    )
    
    
    (555
    )Total Variable, net of reinsurance
    
    $
    136,971
    
    
    $
    181,309
    
    
    $
    154,651
 (1)
    
    Amounts are net of portion ceded to and include amounts assumed from alliance partners.
  17




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Variable Universal Life Insurance
  Variable Annuities
   Underwriting
   As of December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands, except face amounts in millions)Number of direct contracts  variable annuity
    
    
    20,624
    
    
    
    21,041
    
    
    
    20,763Number of direct policies  variable
universal life
    
    
    61,319
    
    
    
    63,378
    
    
    
    64,502Direct face amounts  variable universal life
    
    $
    7,698
    
    
    $
    7,846
    
    
    $
    7,704Separate account assets
    
    
    577,420
    
    
    
    862,738
    
    
    
    764,377Interest sensitive reserves
    
    
    225,539
    
    
    
    202,211
    
    
    
    206,445Other insurance reserves
    
    
    30,382
    
    
    
    27,074
    
    
    
    30,898
 Corporate and Other Segment
  18




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Reinsurance
     A.M. Best
    
    Amount ofReinsurer
    
    Rating
    
    In Force Ceded(Dollars inmillions)RGA Reinsurance Company
    
    
    A+
    
    $
    2,643.8Generali USA Life Reassurance Company
    
    
    A
    
    
    2,249.1Swiss Re Life & Health America Inc.
    
    
    A+
    
    
    2,540.9Employers Reassurance Corporation
    
    
    A-
    
    
    616.4Scottish Re*
    
    
    D/E
    
    
    567.2Munich American Reassurance Company
    
    
    A+
    
    
    261.5All other (9 reinsurers)
    
    A- to A++
    
    
    265.3Total
    
    
    
    
    $
    9,144.2
 *
    
    New business with Scottish Re was terminated in early 2007, following difficulties at that
company and related ratings downgrades. Scottish Re continues to meet its reinsurance
obligation with us in a normal fashion.   19




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Variable Sub-Accounts and Mutual Funds
       20




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Ratings and Competition
   Rating
    
    Source
    
    OutlookFarm Bureau Life Insurance
Company
    
    A- (Excellent)
    
    A.M. Best
    
    NegativeEquiTrust Life Insurance Company
    
    A- (Excellent)
    
    A.M. Best
    
    NegativeFarm Bureau Life Insurance
Company
    
    A (Strong)
    
    Standard & Poors
    
    CreditWatch NegativeEquiTrust Life Insurance Company
    
    A (Strong)
    
    Standard & Poors
    
    CreditWatch Negative
  Rating
    
    Source
    
    OutlookFBL Financial Group, Inc.
    
    bbb-
    
    A.M. Best
    
    NegativeFBL Financial Group, Inc.
    
    BBB
    
    Standard & Poors
    
    Negative
    Regulation
   21




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Employees
  
 ITEM 1A. RISK FACTORS
 Risk Factors
  Current difficult conditions in the financial markets and the economy may materially adversely
affect our business and results of operations.
    22




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Continuing adverse financial market conditions may significantly affect our liquidity, access to
capital and cost of capital.
     The Market Value Adjustment (MVA) feature on certain policies may cause surrenders to increase in
an extremely low interest rate environment.
    23




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Our valuation of fixed maturity securities may include methodologies, estimations and assumptions
that are subject to differing interpretations and could result in changes to investment valuations
that may materially adversely affect our results of operations or financial condition.
   Our investment portfolio is subject to credit quality risks which may diminish the value of our
invested assets and affect our profitability and reported book value per share.
    Changing interest rates, market volatility and general economic conditions affect the risks and the
returns on both our products and our investment portfolio.
   24




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##### Table of Contents



We face competition from companies having greater financial resources, more advanced technology
systems, broader arrays of products, higher ratings and stronger financial performance, which may
impair our ability to retain existing customers, attract new customers and maintain our
profitability and financial strength.
  As a holding company, we depend on our subsidiaries for funds to meet our obligations, but our
subsidiaries ability to make distributions to us is limited by law, and could be affected by
risk-based capital computations.
     
    
    The company action level is triggered if an insurers total adjusted capital is less
than 200% of its authorized control level RBC, as defined in the Model Act. At the company
action level, the insurer must submit a plan to the regulatory authority that discusses
proposed corrective actions to improve its capital position.
 25




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##### Table of Contents




    
    The regulatory action level is triggered if an insurers total adjusted capital is less
than 150% of its authorized control level RBC. At the regulatory action level, the
regulatory authority will perform a special examination of the insurer and issue an order
specifying corrective actions that must be followed.
    
    If an insurers total adjusted capital is less than its authorized control level RBC,
the regulatory authority is authorized (although not mandated) to take regulatory control
of the insurer.
    
    The mandatory control level is triggered if an insurers total adjusted capital is less
than 70% of its authorized control level RBC, and at that level the regulatory authority
must take regulatory control of the insurer. Regulatory control may lead to rehabilitation
or liquidation of an insurer.
  A significant ratings downgrade may have a material adverse effect on our business.
  All segments of our business are highly regulated and these regulations or changes in them could
affect our profitability.
     26




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##### Table of Contents



Inaccuracies in assumptions regarding future persistency, mortality and interest rates used in
calculating reserve, deferred policy acquisition expense and deferred sales inducement amounts and
pricing our products could have a material adverse impact on our net income (loss).
  We may be required to accelerate the amortization of deferred policy acquisition costs or deferred
sales inducements, which could adversely affect our results of operations or financial condition.
  Our earnings are influenced by our claims experience, which is difficult to estimate. If our
future claims experience does not match our pricing assumptions or past results, our earnings could
be materially adversely affected.
  27




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##### Table of Contents



We assumed a significant amount of closed block business through coinsurance agreements and have
only a limited ability to manage this business.
  Our reinsurance program involves risks because we remain liable with respect to the liabilities
ceded to reinsurers if the reinsurers fail to meet the obligations assumed by them.
   Our business is highly dependent on our relationships with Farm Bureau organizations and would be
adversely affected if those relationships became impaired.
  Our relationship with Farm Bureau organizations could result in conflicts of interests.
  28




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##### Table of Contents



Changes in federal tax laws may affect sales of our products and profitability.
   Our ability to maintain competitive costs is dependent upon the level of new sales and persistency
of existing business.
  If we are unable to attract and retain agents and develop new distribution sources, sales of our
products and services may be reduced.
  Attracting and retaining employees who are key to our business is critical to our growth and
success.
   Success of our business depends in part on effective information technology systems and on
continuing to develop and implement improvements.
  29




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##### Table of Contents



We experience volatility in net income (loss) due to accounting standards for derivatives.
  
    
    We must mark to market the purchased call options we use to fund the index credits on
our index annuities based upon quoted market prices from related counterparties. We record
the change in fair value of these options as a component of our revenues. Included within
the change in fair value of the options is an element reflecting the time value of the
options, which initially is their purchase cost declining to zero at the end of their
lives. The change in the difference between fair value and remaining option cost at
beginning and end of year totaled ($109.7) million in 2008, ($51.1) million in 2007 and
$75.7 million in 2006.
    
    Under Statement No. 133, the future annual index credits on our index annuities are
treated as a series of embedded derivatives over the expected life of the applicable
contracts. We are required to estimate the fair value of these embedded derivatives. Our
estimates of the fair value of these embedded derivatives are based on assumptions related
to underlying policy terms (including annual cap rates, participation rates, asset fees and
minimum guarantees), index values, notional amounts, strike prices and expected lives of
the contracts. The change in fair value of embedded derivatives increases with increases
in volatility in the indices and changes in interest rates. We record the change in fair
value of embedded derivatives as a component of our benefits and expenses. However, it
will not correspond to the change in fair value of the purchased call options because the
purchased options are one or two-year assets while the embedded derivative in the index
contracts represents the rights of the contract holder to receive index credits over the
entire period the index annuities are expected to be in force, which typically exceeds 10
years. Changes in the value of the embedded derivatives included in the index annuity
contracts totaled ($189.4) million in 2008, ($5.9) million in 2007 and $70.3 million in
2006.
    
    Changes in the fair value of interest rate swaps backing our annuity liabilities are
recorded in derivative income (loss) and totaled ($1.4) million in 2008 and ($4.8) million
in 2007. Prior to April 2007, changes in the fair value of these swaps were recorded as a
component of the change in accumulated other
 30




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##### Table of Contents



comprehensive income (loss). Amounts recorded
in accumulated other comprehensive income (loss) as of March 31, 2007, are being amortized
over the remaining life of the swap. These amounts totaled ($1.1) million in 2008, ($3.8)
million in 2007 and ($1.2) million in 2006.
 
    
    We adjust the amortization of deferred policy acquisition costs and deferred sales
inducements to reflect the impact of the three items discussed above.
    
    Our earnings are also affected by the changes in the value of the embedded derivatives
in convertible fixed maturity securities and modified coinsurance contracts. Changes in
the value of these embedded derivatives totaled $0 in 2008, less than ($0.1) million in
2007 and ($0.2) million in 2006.
  We face risks relating to litigation, including the costs of such litigation, management
distraction and the potential for damage awards, which may adversely impact our business.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  31




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##### Table of Contents



PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS, ISSUER PURCHASES OF EQUITY SECURITIES AND SECURITIES AUTHORIZED FOR
ISSUANCE UNDER EQUITY COMPENSATION PLANS
 Stock Market and Dividend Information
  Class A Common Stock Data (per share)
    
    1st Qtr.
    
    
    2nd Qtr.
    
    
    3rd Qtr.
    
    
    4th Qtr.2008High
    
    $
    35.21
    
    
    $
    30.05
    
    
    $
    34.86
    
    
    $
    27.47Low
    
    
    26.07
    
    
    
    17.17
    
    
    
    18.39
    
    
    
    6.53Dividends declared and paid
    
    $
    0.125
    
    
    $
    0.125
    
    
    $
    0.125
    
    
    $
    0.1252007High
    
    $
    41.53
    
    
    $
    40.61
    
    
    $
    40.50
    
    
    $
    42.50Low
    
    
    36.58
    
    
    
    36.89
    
    
    
    30.33
    
    
    
    33.98Dividends declared and paid
    
    $
    0.120
    
    
    $
    0.120
    
    
    $
    0.120
    
    
    $
    0.120
    32




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##### Table of Contents



Comparison of Five-Year Total Return
 
 Period Ending12/31/03
    
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08FBL Financial Group, Inc.
    
    
    $
    100.00
    
    
    
    $
    112.28
    
    
    
    $
    130.91
    
    
    
    $
    158.00
    
    
    
    $
    141.40
    
    
    
    $
    64.97S&P 500 Index
    
    
    
    100.00
    
    
    
    
    110.88
    
    
    
    
    116.33
    
    
    
    
    134.70
    
    
    
    
    142.10
    
    
    
    
    89.53S&P 500 Life & Health
Insurance Index
    
    
    
    100.00
    
    
    
    
    122.14
    
    
    
    
    149.65
    
    
    
    
    174.36
    
    
    
    
    193.53
    
    
    
    
    100.02
  Issuer Purchases of Equity Securities
  33




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##### Table of Contents



Securities Authorized for Issuance Under Equity Compensation Plans
  (c) Number of
SecuritiesRemaining(a) Number
    
    
    
    
    
    
    Available forof Securities
    
    
    (b) Weighted
    
    
    Future Issuanceto be Issued
    
    
    Average
    
    
    Under EquityUpon
    
    
    Exercise Price
    
    
    CompensationExercise of
    
    
    of
    
    
    PlansOutstanding
    
    
    Outstanding
    
    
    (Excluding
    
    
    (d) Total ofOptions,
    
    
    Options,
    
    
    Securities
    
    
    Securities inWarrants
    
    
    Warrants and
    
    
    Reflected in
    
    
    Columns (a)Plan Category
    
    and Rights
    
    
    Rights
    
    
    Column (a))
    
    
    and (c)Equity compensation plans approved by
shareholders:Stock compensation plan (1)
    
    
    2,662,425
    
    
    $
    28.68
    
    
    
    3,788,923
    
    
    
    6,451,348Directors deferred compensation plan
    
    
    60,825
    
    
    
    
    
    
    
    35,250
    
    
    
    96,075Executive deferred compensation plan
    
    
    31,843
    
    
    
    
    
    
    
    217,094
    
    
    
    248,937Total
    
    
    2,755,093
    
    
    
    
    
    
    
    4,041,267
    
    
    
    6,796,360Equity compensation plans not approved
by shareholders:
    
    
    None
    
    
    
    
    
    
    
    None
    
    
    
    NoneEmployer match deferred compensation plan
    
    
    5,769
    
    
    
    
    
    
    
    
    
    
    
    5,769
 
 (1)
    
    The stock compensation plan also permits the grant of restricted stock and other forms of
equity, without limiting the number of shares which may be subject to any one kind of grant. The
Company has granted 473,728 restricted shares beginning in 2004, of which at December 31, 2008,
69,582 shares have vested, 73,200 have been forfeited, and 330,946 remain subject to forfeiture if
performance targets are not met. See Compensation Discussion and Analysis  Long Term Incentives;
Options and Restricted Stock from the Companys definitive proxy statement to be filed within 120
days of December 31, 2008. 34




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##### Table of Contents



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 As of or for the year ended December 31,2008
    
    

2007(2)
    
    
    2006
    
    
    2005
    
    
    2004(Dollars in thousands, except per share data)Consolidated Statement of Income DataInterest sensitive and index product charges
    
    $
    127,199
    
    
    $
    114,529
    
    
    $
    105,033
    
    
    $
    96,258
    
    
    $
    89,925Traditional life insurance premiums
    
    
    149,186
    
    
    
    144,682
    
    
    
    138,401
    
    
    
    134,618
    
    
    
    131,865Net investment income
    
    
    707,872
    
    
    
    628,031
    
    
    
    535,836
    
    
    
    475,443
    
    
    
    416,081Derivative income (loss)
    
    
    (208,793
    )
    
    
    (4,951
    )
    
    
    70,340
    
    
    
    (2,800
    )
    
    
    15,607Realized/unrealized gains (losses) on
investments
    
    
    (156,309
    )
    
    
    5,769
    
    
    
    13,971
    
    
    
    2,961
    
    
    
    8,175Total revenues
    
    
    644,465
    
    
    
    914,599
    
    
    
    887,353
    
    
    
    728,148
    
    
    
    682,602Net income (loss)
    
    
    (18,149
    )
    
    
    86,339
    
    
    
    90,129
    
    
    
    72,842
    
    
    
    66,076Per common share:Earnings
    
    
    (0.61
    )
    
    
    2.90
    
    
    
    3.06
    
    
    
    2.51
    
    
    
    2.31Earnings  assuming dilution
    
    
    (0.61
    )
    
    
    2.84
    
    
    
    3.01
    
    
    
    2.47
    
    
    
    2.26Cash dividends
    
    
    0.50
    
    
    
    0.48
    
    
    
    0.46
    
    
    
    0.42
    
    
    
    0.40Weighted average common shares
outstanding  assuming dilution
    
    
    29,893,909
    
    
    
    30,321,617
    
    
    
    29,904,624
    
    
    
    29,414,988
    
    
    
    29,140,890Consolidated Balance Sheet DataTotal investments
    
    $
    10,854,059
    
    
    $
    11,067,070
    
    
    $
    9,782,626
    
    
    $
    8,299,208
    
    
    $
    7,501,680Assets held in separate accounts
    
    
    577,420
    
    
    
    862,738
    
    
    
    764,377
    
    
    
    639,895
    
    
    
    552,029Total assets
    
    
    14,060,814
    
    
    
    13,927,859
    
    
    
    12,154,012
    
    
    
    10,153,933
    
    
    
    9,100,736Long-term debt
    
    
    371,005
    
    
    
    316,930
    
    
    
    218,399
    
    
    
    218,446
    
    
    
    217,183Total liabilities
    
    
    13,802,353
    
    
    
    13,024,877
    
    
    
    11,273,154
    
    
    
    9,309,538
    
    
    
    8,267,934Total stockholders equity (1)
    
    
    258,365
    
    
    
    902,891
    
    
    
    880,720
    
    
    
    844,231
    
    
    
    832,611Book value per common share (1)
    
    
    8.46
    
    
    
    29.98
    
    
    
    29.59
    
    
    
    28.88
    
    
    
    28.87
 
 Notes to Selected Consolidated Financial Data(1)
    
    Amounts are impacted by accumulated other comprehensive income (loss) totaling ($649.8)
million in 2008, ($36.3) million in 2007, $28.2 million in 2006, $82.3 million in 2005, and
$141.2 million in 2004. These amounts are net of deferred income taxes and other adjustments
for assumed changes in the amortization of deferred policy acquisition costs, deferred sales
inducements, unearned revenue reserve and value of insurance in force acquired.(2)
    
    Certain amounts in the 2007 consolidated balance sheet data have been reclassified to conform
to the 2008 financial statement presentation. 35




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
    
    factors which affect our business,
    
    our revenues and expenses in the periods presented,
    
    changes in revenues and expenses between periods,
    
    sources of earnings and changes in shareholders equity,
    
    impact of these items on our overall financial condition and
    
    expected sources and uses of cash.
  
    
    First, we discuss our business and drivers of profitability.
    
    We then describe the business environment in which we operate including factors that
affect operating results.
    
    We highlight significant events that are important to understanding our results of
operations and financial condition.
    
    We then review the results of operations beginning with an overview of the total company
results, followed by a more detailed review of those results by operating segment.
    
    We review our financial condition addressing investment portfolio, market risks, sources
and uses of cash, capital resources and requirements and commitments.
    
    Finally, we discuss critical accounting policies and recently issued accounting
standards. The critical accounting policies are those that are most important to the
portrayal of our financial condition and results of operations and require managements
most difficult or complex judgment.
 Overview and Profitability
   
    
    The volume of our life insurance and annuity business in force, which is driven by the
level of our sales and the persistency of the business written.
    
    The amount of spread (excess of net investment income earned over interest credited/option
costs) we earn on contract holders general account balances.
    
    The amount of fees we earn on contract holders separate account balances.
    
    Our ability to price our life insurance products to earn acceptable margins over the cost
of providing benefits and the expenses of acquiring and administering the products.
Competitive conditions, mortality experience, persistency, investment results and our ability
to maintain expenses in accordance with pricing assumptions
 36




---



##### Table of Contents



drive our margins on the life products. On many products, we have the ability to mitigate
adverse experience through adjustments to credited interest rates, policyholder dividends or
cost of insurance charges.
    
    Our ability to manage our investment portfolio to maximize investment returns while
providing adequate liquidity for obligations to policyholders and minimizing the risk of
defaults or impairments of invested assets.
    
    Our ability to manage the level of our operating expenses.
    
    Actual experience and changes in assumptions for expected surrender and withdrawal rates,
mortality, and spreads used in the amortization of deferred policy acquisition expense and
deferred sales inducement amounts.
    
    Changes in fair values of derivatives and embedded derivatives relating to our index
annuity business.
 Impact of Recent Business Environment
      37




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##### Table of Contents



Results of Operations for the Three Years Ended December 31, 2008
 Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands, except per share data)Revenues
    
    $
    644,465
    
    
    $
    914,599
    
    
    $
    887,353Benefits and expenses
    
    
    676,343
    
    
    
    788,793
    
    
    
    753,865(31,878
    )
    
    
    125,806
    
    
    
    133,488Income taxes
    
    
    13,662
    
    
    
    (41,051
    )
    
    
    (44,368
    )Minority interest and equity income
    
    
    67
    
    
    
    1,584
    
    
    
    1,009Net income (loss)
    
    $
    (18,149
    )
    
    $
    86,339
    
    
    $
    90,129Earnings (loss) per common share
    
    $
    (0.61
    )
    
    $
    2.90
    
    
    $
    3.06Earnings (loss) per common share  assuming dilution
    
    $
    (0.61
    )
    
    $
    2.84
    
    
    $
    3.01Other dataDirect premiums collected, net of reinsurance ceded:Traditional Annuity  Exclusive Distribution
    
    $
    249,039
    
    
    $
    126,849
    
    
    $
    140,279Traditional Annuity  Independent Distribution
    
    
    1,565,255
    
    
    
    1,569,128
    
    
    
    1,808,482Traditional and Universal Life Insurance
    
    
    191,932
    
    
    
    185,904
    
    
    
    175,185Variable Annuity and Variable Universal Life (1)
    
    
    136,971
    
    
    
    181,309
    
    
    
    154,651Reinsurance assumed and other
    
    
    13,672
    
    
    
    15,238
    
    
    
    17,604Total
    
    $
    2,156,869
    
    
    $
    2,078,428
    
    
    $
    2,296,201Direct life insurance in force, end of year (in millions)
    
    $
    43,513
    
    
    $
    41,092
    
    
    $
    38,372Life insurance lapse rates
    
    
    6.4
    %
    
    
    6.1
    %
    
    
    6.5
    %Withdrawal rates  individual traditional annuity:Exclusive Distribution
    
    
    3.9
    %
    
    
    5.2
    %
    
    
    5.1
    %Independent Distribution
    
    
    7.8
    %
    
    
    5.5
    %
    
    
    5.1
    %
 
 (1)
    
    Amounts are net of portion ceded to and include amounts assumed from alliance partners.   38




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##### Table of Contents



Net income (loss)
   Year ended December 31,2008
    
    
    2007
    
    
    2006Weighted average yield on cash and invested assets
    
    
    6.18
    %
    
    
    6.13
    %
    
    
    6.23
    %Weighted average interest crediting rate/index cost
    
    
    3.94
    %
    
    
    3.72
    %
    
    
    3.63
    %Spread
    
    
    2.24
    %
    
    
    2.41
    %
    
    
    2.60
    %
   Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands except per share data)Amortization of deferred policy acquisition costs
    
    $
    (14,957
    )
    
    $
    942
    
    
    $
    1,570Amortization of deferred sales inducements
    
    
    (14,437
    )
    
    
    1,134
    
    
    
    146Amortization of value of insurance in force acquired
    
    
    (265
    )
    
    
    (1,276
    )
    
    
    (405
    )Amortization of unearned revenues
    
    
    316
    
    
    
    405
    
    
    
    332Increase (decrease) to pre-tax income
    
    $
    (29,343
    )
    
    $
    1,205
    
    
    $
    1,643Impact per common share (basic and diluted), net of tax
    
    $
    (0.64
    )
    
    $
    0.03
    
    
    $
    0.04
 39




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##### Table of Contents



Impact of Operating Adjustments on Net Income (Loss)
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Realized/unrealized gains (losses) on investments
    
    $
    (156,309
    )
    
    $
    5,769
    
    
    $
    13,971Change in net unrealized gains/losses on derivatives
    
    
    75,652
    
    
    
    (49,361
    )
    
    
    4,574Change in amortization of:Deferred policy acquisition costs
    
    
    (4,255
    )
    
    
    16,856
    
    
    
    (1,561
    )Deferred sales inducements
    
    
    (19,966
    )
    
    
    12,895
    
    
    
    (1,409
    )Value of insurance in force acquired
    
    
    820
    
    
    
    12
    
    
    
    54Unearned revenue reserve
    
    
    (158
    )
    
    
    (16
    )
    
    
    (1
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (283
    )
    
    
    Lawsuit settlement
    
    
    
    
    
    
    
    
    
    
    (4,880
    )Income tax offset
    
    
    36,475
    
    
    
    4,846
    
    
    
    (3,762
    )Net impact of operating income adjustments
    
    $
    (67,741
    )
    
    $
    (9,282
    )
    
    $
    6,986Summary of adjustments noted above after offsets and
income taxes:Realized/unrealized gains (losses) on investments
    
    $
    (79,542
    )
    
    $
    4,501
    
    
    $
    9,222Change in net unrealized gains/losses on derivatives
    
    
    11,801
    
    
    
    (13,500
    )
    
    
    936Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (283
    )
    
    
    Lawsuit settlement
    
    
    
    
    
    
    
    
    
    
    (3,172
    )Net impact of operating income adjustments
    
    $
    (67,741
    )
    
    $
    (9,282
    )
    
    $
    6,986Net impact per common share  basic
    
    $
    (2.27
    )
    
    $
    (0.31
    )
    
    $
    0.24Net impact per common share  assuming dilution
    
    $
    (2.27
    )
    
    $
    (0.31
    )
    
    $
    0.23
 40




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##### Table of Contents



Changes in Net Income (Loss)
  Year ended December 31,2008 vs. 2007
    
    
    2007 vs. 2006Premiums and product charges
    
    $
    17,174
    
    
    $
    15,777Net investment income
    
    
    79,841
    
    
    
    92,195Derivative income (loss)
    
    
    (203,842
    )
    
    
    (75,291
    )Realized/unrealized gains (losses) on investments
    
    
    (162,078
    )
    
    
    (8,202
    )Other income and other expenses
    
    
    (1,573
    )
    
    
    642Interest sensitive and index products benefits and change in value
of index product embedded derivative
    
    
    185,561
    
    
    
    (27,510
    )Traditional life insurance policy benefits
    
    
    (10,293
    )
    
    
    (3,069
    )Underwriting, acquisition and insurance expenses
    
    
    (59,573
    )
    
    
    2,698Interest expense
    
    
    (2,901
    )
    
    
    (4,922
    )Income taxes
    
    
    54,713
    
    
    
    3,317Minority interest and equity income
    
    
    (1,517
    )
    
    
    575Total change in net income (loss)
    
    $
    (104,488
    )
    
    $
    (3,790
    )
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Premiums and product charges:Interest sensitive and index product charges
    
    $
    127,199
    
    
    $
    114,529
    
    
    $
    105,033Traditional life insurance premiums
    
    
    149,186
    
    
    
    144,682
    
    
    
    138,401Total
    
    $
    276,385
    
    
    $
    259,211
    
    
    $
    243,434
    Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Surrender charges:Gross surrender charges
    
    $
    37,519
    
    
    $
    8,792
    
    
    $
    3,538Market value adjustments
    
    
    (15,537
    )
    
    
    1,145
    
    
    
    879Net surrender charges
    
    $
    21,982
    
    
    $
    9,937
    
    
    $
    4,417
  41




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##### Table of Contents



Net Investment Income
     Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Derivative income (loss):Components of derivative income (loss) from call options:Gains received at expiration
    
    $
    36,280
    
    
    $
    156,378
    
    
    $
    67,919Change in the difference between fair value and
remaining option cost at beginning and end of year
    
    
    (109,727
    )
    
    
    (51,087
    )
    
    
    75,655Cost of money for call options
    
    
    (128,514
    )
    
    
    (108,379
    )
    
    
    (73,070
    )(201,961
    )
    
    
    (3,088
    )
    
    
    70,504Other
    
    
    (6,832
    )
    
    
    (1,863
    )
    
    
    (164
    )Total
    
    $
    (208,793
    )
    
    $
    (4,951
    )
    
    $
    70,340
 42




---



##### Table of Contents



®
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Annual point-to-point strategy
    
    
    0.0%-2.6
    %
    
    
    1.9%-24.4
    %
    
    
    1.1%-16.0
    %Monthly sum cap strategy
    
    
    0.0
    %
    
    
    N/A
    
    
    
    N/AMonthly point-to-point strategy
    
    
    0.0
    %
    
    
    0.0%-16.1
    %
    
    
    0.0%-12.7
    %Monthly average strategy  one-year options
    
    
    0.0%-6.3
    %
    
    
    1.2%-14.1
    %
    
    
    0.9%-9.1
    %Monthly average strategy  two-year options
    
    
    0.0%-14.1
    %
    
    
    8.1%-16.4
    %
    
    
    N/ADaily average strategy
    
    
    0.0%-5.2
    %
    
    
    2.1%-11.1
    %
    
    
    0.7%-8.7
    %
 
 N/A 
    
    not applicable as option strategy was not offered during the prior period.   Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Realized/unrealized gains (losses) on investments:Realized gains on sales
    
    $
    7,387
    
    
    $
    10,398
    
    
    $
    16,861Realized losses on sales
    
    
    (5,477
    )
    
    
    (200
    )
    
    
    (633
    )Realized losses due to impairments
    
    
    (158,219
    )
    
    
    (4,502
    )
    
    
    (2,340
    )Unrealized gains on trading securities
    
    
    
    
    
    
    73
    
    
    
    83Total
    
    $
    (156,309
    )
    
    $
    5,769
    
    
    $
    13,971
  43




---



##### Table of Contents




    
    historical operating trends;
    
    business prospects;
    
    status of the industry in which the company operates;
    
    analyst ratings on the issuer and sector;
    
    quality of management;
    
    size of the unrealized loss;
    
    level of current market interest rates compared to market interest rates when the
security was purchased;
    
    length of time the security has been in an unrealized loss position; and
    
    our intent and ability to hold the security.
   ImpairmentGeneral Description
    
    Loss
    
    Circumstances(Dollars inthousands)Year ended December 31, 2008:Other asset-backed securities
    
    $
    68,487
    
    
    Losses on 13 securities increased due to increasing delinquencies by homeowners. Collateral is second lien home equity loans with  minimal recoveries expected. In addition, underlying insurance that was expected to absorb losses was deemed to be less valuable due to the monoline insurer being downgraded.  One issuer also filed for bankruptcy. (A)Depository Institution
    
    $
    10,969
    
    
    Issuer filed for bankruptcy after unsuccessful attempts to obtain financial assistance.  This reduced estimates on potential recovery. (A)Commercial mortgage-backed security
    
    $
    10,959
    
    
    Ratings declined and the probability of future losses increased due to declining economic conditions and a reduction in the debt available to absorb losses prior to our ownership class. (A)Foreign depository institution
    
    $
    9,900
    
    
    The probability of future losses increased due to declining economic conditions.  In addition, the board of directors resigned and a foreign government seized control of the entire banking system due to financial turmoil. (A)Collateralized debt obligation
    
    $
    9,800
    
    
    The value of collateral supporting this issue declined, which triggered an event whereby we did not receive interest on our investment.  Rating declines on the security also occurred during 2008. (A)Other asset-backed security
    
    $
    9,114
    
    
    Ratings declined and losses from the underlying home equity loans to Alt-A borrowers increased. (A)
 44




---



##### Table of Contents



ImpairmentGeneral Description
    
    Loss
    
    CircumstancesReinsurance carrier
    
    $
    7,299
    
    
    Rating declines occurred and the fair value decreased significantly due to subprime and Alt-A exposure and the parent's potential reorganization, which reduced estimates on potential recovery. (A)Major printing & publishing company
    
    $
    6,868
    
    
    Rating declines occurred and concerns regarding short-term liquidity in the current economic environment reduced estimates on potential recovery. (A)Securities & commodities broker
    
    $
    5,980
    
    
    Issuer filed for bankruptcy after unsuccessful attempts to obtain financial assistance.  This reduced estimates on potential recovery. (A)Major printing & publishing company
    
    $
    3,871
    
    
    Issuer filed for bankruptcy after unsuccessful attempts to obtain financial assistance.  This reduced estimates on potential recovery. (A)Major United States automaker
    
    $
    3,570
    
    
    Rating declines occurred due to deteriorating economic conditions and increased concerns about the company's ability to sustain as a going concern. This reduced estimates on potential recovery. (A)Securities & commodities broker
    
    $
    2,893
    
    
    Bankruptcy filings by a counterparty reduced estimates on the potential recovery of derivative instruments assumed through a coinsurance agreement.  (A)Major United States automaker
    
    $
    2,338
    
    
    Rating declines occurred due to deteriorating economic conditions and liquidity concerns.  This reduced estimates on potential recovery. (A)Major printing & publishing company
    
    $
    2,283
    
    
    Rating declines and other adverse details regarding the financial status of the company became available.  The company also filed for bankruptcy protection. (A)Major retail company
    
    $
    2,219
    
    
    The company reported negative earnings results and the probability of future losses increased due to declining economic conditions.  The company also filed for bankruptcy protection, further reducing estimates on potential recovery. (A)Structured investment vehicle
    
    $
    1,670
    
    
    Rating declines occurred and the issuer was served a notice of default, which reduced estimates on potential recovery. The company also filed for bankruptcy protection.  This issue is held as collateral for securities lending. (A)Year ended December 31, 2007:Major printing and publishing company
    
    $
    3,285
    
    
    The company announced that it would take the company private in a series of transactions tendering outstanding shares. In addition, rating declines and other adverse details regarding the financial status of the company became available. (A)United
States military base  
housing revenue bond
    
    $
    812
    
    
    The United States closed one military base leading to a restructuring and tender offer for the bonds. (A)
 45




---



##### Table of Contents



ImpairmentGeneral Description
    
    Loss
    
    CircumstancesYear ended December 31, 2006:Major United States credit company
    
    $
    986
    
    
    Valuation of this security is tied to the strength of its parent.  Continued rating declines and other adverse details regarding the financial status of the parent company became available. (A)Major United States automaker
    
    $
    648
    
    
    Continued rating declines and other adverse details regarding the financial status of the company became available. In addition, the company faced labor strikes and restated its financial statements. (A)Major United States automaker
    
    $
    643
    
    
    Continued rating declines and other adverse details regarding the financial status of the company became available. (A)
 
 (A)
    
    Negative trends in this segment of the industry were considered in our analysis, which is
done on an issue-by-issue basis. We concluded that there is no impact on other material
investments in addition to amounts already written down. Other Income and Other Expenses
   Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Interest sensitive and index product benefits:Interest credited
    
    $
    289,761
    
    
    $
    240,943
    
    
    $
    204,693Index credits
    
    
    35,552
    
    
    
    154,449
    
    
    
    71,299Amortization of deferred sales inducements
    
    
    67,729
    
    
    
    9,352
    
    
    
    18,680Interest sensitive death benefits
    
    
    47,388
    
    
    
    37,800
    
    
    
    44,160440,430
    
    
    
    442,544
    
    
    
    338,832Change in value of index product embedded derivative
    
    
    (189,354
    )
    
    
    (5,907
    )
    
    
    70,295Total
    
    $
    251,076
    
    
    $
    436,637
    
    
    $
    409,127
   46




---



##### Table of Contents



Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Traditional life insurance policy benefits:Traditional life insurance benefits
    
    $
    96,884
    
    
    $
    90,808
    
    
    $
    90,837Increase in traditional life future policy benefits
    
    
    43,255
    
    
    
    37,682
    
    
    
    33,500Distributions to participating policyholders
    
    
    20,064
    
    
    
    21,420
    
    
    
    22,504Total
    
    $
    160,203
    
    
    $
    149,910
    
    
    $
    146,841
  47




---



##### Table of Contents



Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Underwriting, acquisition and insurance expenses:Commission expense, net of deferrals
    
    $
    13,613
    
    
    $
    13,906
    
    
    $
    13,497Amortization of deferred policy acquisition costs
    
    
    128,114
    
    
    
    68,394
    
    
    
    68,541Amortization of value of insurance in force acquired
    
    
    2,705
    
    
    
    5,069
    
    
    
    3,458Other underwriting, acquisition and insurance
expenses, net of deferrals
    
    
    76,961
    
    
    
    74,451
    
    
    
    79,022Total
    
    $
    221,393
    
    
    $
    161,820
    
    
    $
    164,518
    Interest Expense
  Income Taxes
  48




---



##### Table of Contents



Equity Income (Loss), Net of Related Income Taxes
  Segment Information
   
    
    realized and unrealized gains and losses on investments;
    
    changes in net unrealized gains and losses on derivatives;
    
    the cumulative effect of changes in accounting principles; and
    
    a nonrecurring lawsuit settlement.
  49




---



##### Table of Contents



Reconciliation of Net Income (Loss) to Pre-tax Operating Income
 Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Net income (loss)
    
    $
    (18,149
    )
    
    $
    86,339
    
    
    $
    90,129Net impact of operating income adjustments (1)
    
    
    67,741
    
    
    
    9,282
    
    
    
    (6,986
    )Income taxes on operating income
    
    
    22,812
    
    
    
    46,444
    
    
    
    41,218Pre-tax operating income
    
    $
    72,404
    
    
    $
    142,065
    
    
    $
    124,361Pre-tax operating income (loss) by segment:Traditional Annuity  Exclusive Distribution
    
    $
    27,946
    
    
    $
    33,011
    
    
    $
    35,555Traditional Annuity  Independent Distribution
    
    
    5,360
    
    
    
    39,875
    
    
    
    30,439Traditional and Universal Life Insurance
    
    
    53,059
    
    
    
    58,685
    
    
    
    58,706Variable
    
    
    (1,584
    )
    
    
    12,514
    
    
    
    3,596Corporate and Other
    
    
    (12,377
    )
    
    
    (2,020
    )
    
    
    (3,935
    )$
    72,404
    
    
    $
    142,065
    
    
    $
    124,361(1)     See Impact of Operating Adjustments on Net Income (Loss) above for additional details on
operating income adjustments.A discussion of our operating results, by segment, follows:Traditional Annuity  Exclusive Distribution SegmentYear ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Pre-tax operating incomeOperating revenues:Interest sensitive and index product charges and
other income
    
    $
    1,261
    
    
    $
    1,111
    
    
    $
    1,091Net investment income
    
    
    145,309
    
    
    
    146,267
    
    
    
    146,433Derivative income (loss)
    
    
    (2,859
    )
    
    
    3,025
    
    
    
    (159
    )143,711
    
    
    
    150,403
    
    
    
    147,365Benefits and expenses
    
    
    115,765
    
    
    
    117,392
    
    
    
    111,810Pre-tax operating income
    
    $
    27,946
    
    
    $
    33,011
    
    
    $
    35,555Other dataAnnuity premiums collected, direct
    
    $
    249,039
    
    
    $
    126,849
    
    
    $
    140,279Policy liabilities and accruals, end of year
    
    
    2,353,056
    
    
    
    2,217,651
    
    
    
    2,229,612Individual deferred annuity spread:Weighted average yield on cash and invested assets
    
    
    6.17
    %
    
    
    6.67
    %
    
    
    6.74
    %Weighted average interest crediting rate/index cost
    
    
    4.07
    %
    
    
    4.36
    %
    
    
    4.29
    %Spread
    
    
    2.10
    %
    
    
    2.31
    %
    
    
    2.45
    %Individual traditional annuity withdrawal rate
    
    
    3.9
    %
    
    
    5.2
    %
    
    
    5.1
    %
   50




---



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51




---



##### Table of Contents



Traditional Annuity  Independent Distribution Segment
 Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Pre-tax operating incomeOperating revenues:Interest sensitive and index product charges
    
    $
    30,467
    
    
    $
    20,466
    
    
    $
    15,612Net investment income
    
    
    395,127
    
    
    
    309,131
    
    
    
    225,206Derivative income (loss)
    
    
    (92,233
    )
    
    
    47,290
    
    
    
    (4,371
    )333,361
    
    
    
    376,887
    
    
    
    236,447Benefits and expenses
    
    
    328,001
    
    
    
    337,012
    
    
    
    206,008Pre-tax operating income
    
    $
    5,360
    
    
    $
    39,875
    
    
    $
    30,439Other dataAnnuity premiums collected, independent channelFixed rate annuities
    
    $
    915,843
    
    
    $
    690,646
    
    
    $
    807,103Index annuities
    
    
    649,412
    
    
    
    878,482
    
    
    
    1,001,379Total annuity premiums collected, independent channel
    
    
    1,565,255
    
    
    
    1,569,128
    
    
    
    1,808,482Annuity premiums collected, assumed
    
    
    2,381
    
    
    
    3,187
    
    
    
    4,725Policy liabilities and accruals, end of year
    
    
    7,708,423
    
    
    
    6,825,713
    
    
    
    5,367,949Individual deferred annuity spread:Weighted average yield on cash and invested assets
    
    
    6.12
    %
    
    
    5.84
    %
    
    
    5.86
    %Weighted average interest crediting rate/index cost
    
    
    3.86
    %
    
    
    3.48
    %
    
    
    3.26
    %Spread
    
    
    2.26
    %
    
    
    2.36
    %
    
    
    2.60
    %Individual traditional annuity withdrawal rate
    
    
    7.8
    %
    
    
    5.5
    %
    
    
    5.1
    %
     52




---



##### Table of Contents



Traditional and Universal Life Insurance Segment
 Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Pre-tax operating incomeOperating revenues:Interest sensitive product charges
    
    $
    47,687
    
    
    $
    46,180
    
    
    $
    44,997Traditional life insurance premiums and other income
    
    
    149,153
    
    
    
    144,682
    
    
    
    138,401Net investment income
    
    
    143,324
    
    
    
    144,231
    
    
    
    142,620340,164
    
    
    
    335,093
    
    
    
    326,018Benefits and expenses
    
    
    287,105
    
    
    
    276,408
    
    
    
    267,312Pre-tax operating income
    
    $
    53,059
    
    
    $
    58,685
    
    
    $
    58,706Other dataLife premiums collected, net of reinsurance
    
    $
    202,845
    
    
    $
    197,599
    
    
    $
    187,649Policy liabilities and accruals, end of year
    
    
    2,227,338
    
    
    
    2,168,445
    
    
    
    2,131,548Direct life insurance in force, end of year (in millions)
    
    
    35,815
    
    
    
    33,246
    
    
    
    30,668Interest sensitive life insurance spread:Weighted average yield on cash and invested assets
    
    
    6.63
    %
    
    
    6.83
    %
    
    
    6.85
    %Weighted average interest crediting rate
    
    
    4.42
    %
    
    
    4.42
    %
    
    
    4.49
    %Spread
    
    
    2.21
    %
    
    
    2.41
    %
    
    
    2.36
    %
   53




---



##### Table of Contents



Variable Segment
 Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Pre-tax operating income (loss):Operating revenues:Interest sensitive product charges
    
    $
    48,209
    
    
    $
    46,790
    
    
    $
    43,334Net investment income
    
    
    14,257
    
    
    
    13,658
    
    
    
    14,437Other income
    
    
    1,918
    
    
    
    2,932
    
    
    
    1,23964,384
    
    
    
    63,380
    
    
    
    59,010Benefits and expenses
    
    
    65,968
    
    
    
    50,866
    
    
    
    55,414Pre-tax operating income (loss)
    
    $
    (1,584
    )
    
    $
    12,514
    
    
    $
    3,596Other dataVariable premiums collected, net of reinsurance
    
    $
    136,971
    
    
    $
    181,309
    
    
    $
    154,651Policy liabilities and accruals, end of year
    
    
    255,921
    
    
    
    229,196
    
    
    
    237,343Separate account assets, end of year
    
    
    577,419
    
    
    
    862,738
    
    
    
    764,377Direct life insurance in force, end of year (in millions)
    
    
    7,698
    
    
    
    7,846
    
    
    
    7,704
    54




---



##### Table of Contents



Corporate and Other Segment
 Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Pre-tax operating lossOperating revenues:Net investment income
    
    $
    9,855
    
    
    $
    14,744
    
    
    $
    7,140Other income
    
    
    23,158
    
    
    
    23,607
    
    
    
    22,53333,013
    
    
    
    38,351
    
    
    
    29,673Interest expense
    
    
    19,567
    
    
    
    16,666
    
    
    
    11,744Benefits and other expenses
    
    
    25,887
    
    
    
    26,116
    
    
    
    23,485(12,441
    )
    
    
    (4,431
    )
    
    
    (5,556
    )Minority interest
    
    
    71
    
    
    
    49
    
    
    
    (126
    )Equity income, before tax
    
    
    (7
    )
    
    
    2,362
    
    
    
    1,747Pre-tax operating loss
    
    $
    (12,377
    )
    
    $
    (2,020
    )
    
    $
    (3,935
    )
    Financial Condition
 Investments
    55




---



##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Carrying Value
    
    
    Percent
    
    
    Carrying Value
    
    
    Percent(Dollars in thousands)Fixed maturities  available for sale:Public
    
    $
    7,406,964
    
    
    
    68.3
    %
    
    $
    7,866,990
    
    
    
    71.1
    %144A private placement
    
    
    1,164,417
    
    
    
    10.7
    
    
    
    1,318,181
    
    
    
    11.9Private placement
    
    
    394,062
    
    
    
    3.6
    
    
    
    337,421
    
    
    
    3.0Total fixed maturities  available
for sale
    
    
    8,965,443
    
    
    
    82.6
    
    
    
    9,522,592
    
    
    
    86.0Equity securities
    
    
    44,863
    
    
    
    0.4
    
    
    
    23,633
    
    
    
    0.2Mortgage loans on real estate
    
    
    1,381,854
    
    
    
    12.8
    
    
    
    1,221,573
    
    
    
    11.0Derivative instruments
    
    
    12,933
    
    
    
    0.1
    
    
    
    43,918
    
    
    
    0.4Investment real estate
    
    
    2,559
    
    
    
    
    
    
    
    2,559
    
    
    
    Policy loans
    
    
    182,421
    
    
    
    1.7
    
    
    
    179,490
    
    
    
    1.6Other long-term investments
    
    
    1,527
    
    
    
    
    
    
    
    1,300
    
    
    
    Short-term investments
    
    
    262,459
    
    
    
    2.4
    
    
    
    72,005
    
    
    
    0.8Total investments
    
    $
    10,854,059
    
    
    
    100.0
    %
    
    $
    11,067,070
    
    
    
    100.0
    %
   NAIC
    
    
    
    December 31, 2008
    
    
    December 31, 2007Designation
    
    Equivalent S&P Ratings (1)
    
    Carrying Value
    
    
    Percent
    
    
    Carrying Value
    
    
    Percent(Dollars in thousands)1
    
    AAA, AA, A
    
    $
    5,382,110
    
    
    
    60.0
    %
    
    $
    6,056,231
    
    
    
    63.6
    %2
    
    BBB
    
    
    3,243,034
    
    
    
    36.2
    
    
    
    3,100,795
    
    
    
    32.6Total investment grade
    
    
    8,625,144
    
    
    
    96.2
    
    
    
    9,157,026
    
    
    
    96.23
    
    BB
    
    
    244,814
    
    
    
    2.7
    
    
    
    264,070
    
    
    
    2.74
    
    B
    
    
    40,565
    
    
    
    0.5
    
    
    
    64,700
    
    
    
    0.75
    
    CCC, CC, C
    
    
    43,064
    
    
    
    0.5
    
    
    
    36,314
    
    
    
    0.46
    
    In or near default
    
    
    11,856
    
    
    
    0.1
    
    
    
    482
    
    
    
    Total below investment grade
    
    
    340,299
    
    
    
    3.8
    
    
    
    365,566
    
    
    
    3.8Total fixed maturities 
available for sale
    
    $
    8,965,443
    
    
    
    100.0
    %
    
    $
    9,522,592
    
    
    
    100.0
    %
 (1)
    
    The Securities Valuation Office of the NAIC generally rates private placement
securities. Comparisons between NAIC designations and S&P ratings are published by the
NAIC. S&P has not rated some of the fixed maturity securities in our portfolio.
 56




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December 31, 2008Carrying Value
    
    
    
    
    
    
    Carrying Valueof Securities
    
    
    
    
    
    
    of SecuritiesTotal
    
    
    with Gross
    
    
    Gross
    
    
    with Gross
    
    
    GrossCarrying
    
    
    Unrealized
    
    
    Unrealized
    
    
    Unrealized
    
    
    UnrealizedValue
    
    
    Gains
    
    
    Gains
    
    
    Losses
    
    
    Losses(Dollars in thousands)Corporate securities:Financial services
    
    $
    1,246,895
    
    
    $
    114,067
    
    
    $
    4,806
    
    
    $
    1,132,828
    
    
    $
    (547,594
    )Manufacturing
    
    
    1,211,102
    
    
    
    289,093
    
    
    
    11,187
    
    
    
    922,009
    
    
    
    (183,439
    )Mining
    
    
    469,935
    
    
    
    24,521
    
    
    
    1,770
    
    
    
    445,414
    
    
    
    (73,562
    )Retail trade
    
    
    104,379
    
    
    
    24,170
    
    
    
    569
    
    
    
    80,209
    
    
    
    (16,819
    )Services
    
    
    184,528
    
    
    
    42,850
    
    
    
    1,164
    
    
    
    141,678
    
    
    
    (28,796
    )Transportation
    
    
    177,844
    
    
    
    52,034
    
    
    
    6,849
    
    
    
    125,810
    
    
    
    (20,253
    )Utilities
    
    
    1,279,641
    
    
    
    299,537
    
    
    
    16,623
    
    
    
    980,104
    
    
    
    (135,654
    )Other
    
    
    159,831
    
    
    
    52,252
    
    
    
    3,209
    
    
    
    107,579
    
    
    
    (21,275
    )Total corporate securities
    
    
    4,834,155
    
    
    
    898,524
    
    
    
    46,177
    
    
    
    3,935,631
    
    
    
    (1,027,392
    )Mortgage and asset-backed securities
    
    
    2,569,769
    
    
    
    975,193
    
    
    
    46,573
    
    
    
    1,594,576
    
    
    
    (478,994
    )United States Government and agencies
    
    
    250,893
    
    
    
    217,379
    
    
    
    12,891
    
    
    
    33,514
    
    
    
    (4,031
    )State, municipal and other governments
    
    
    1,310,626
    
    
    
    142,107
    
    
    
    4,565
    
    
    
    1,168,519
    
    
    
    (139,430
    )Total
    
    $
    8,965,443
    
    
    $
    2,233,203
    
    
    $
    110,206
    
    
    $
    6,732,240
    
    
    $
    (1,649,847
    )
 December 31, 2007Carrying Value
    
    
    
    
    
    
    Carrying Valueof Securities
    
    
    
    
    
    
    of SecuritiesTotal
    
    
    with Gross
    
    
    Gross
    
    
    with Gross
    
    
    GrossCarrying
    
    
    Unrealized
    
    
    Unrealized
    
    
    Unrealized
    
    
    UnrealizedValue
    
    
    Gains
    
    
    Gains
    
    
    Losses
    
    
    Losses(Dollars in thousands)Corporate securities:Financial services
    
    $
    1,826,956
    
    
    $
    720,244
    
    
    $
    25,480
    
    
    $
    1,106,712
    
    
    $
    (91,717
    )Manufacturing
    
    
    1,089,836
    
    
    
    582,073
    
    
    
    23,726
    
    
    
    507,763
    
    
    
    (31,703
    )Mining
    
    
    434,459
    
    
    
    265,921
    
    
    
    10,149
    
    
    
    168,538
    
    
    
    (7,738
    )Retail trade
    
    
    115,178
    
    
    
    71,302
    
    
    
    4,391
    
    
    
    43,876
    
    
    
    (3,336
    )Services
    
    
    171,913
    
    
    
    108,239
    
    
    
    4,818
    
    
    
    63,674
    
    
    
    (3,550
    )Transportation
    
    
    187,513
    
    
    
    93,600
    
    
    
    6,266
    
    
    
    93,913
    
    
    
    (5,460
    )Utilities
    
    
    1,115,319
    
    
    
    640,827
    
    
    
    26,962
    
    
    
    474,492
    
    
    
    (19,599
    )Other
    
    
    88,206
    
    
    
    50,289
    
    
    
    1,265
    
    
    
    37,917
    
    
    
    (1,711
    )Total corporate securities
    
    
    5,029,380
    
    
    
    2,532,495
    
    
    
    103,057
    
    
    
    2,496,885
    
    
    
    (164,814
    )Mortgage and asset-backed securities
    
    
    2,685,973
    
    
    
    955,176
    
    
    
    16,052
    
    
    
    1,730,797
    
    
    
    (102,631
    )United States Government and agencies
    
    
    554,340
    
    
    
    405,936
    
    
    
    8,454
    
    
    
    148,404
    
    
    
    (4,524
    )State, municipal and other governments
    
    
    1,252,899
    
    
    
    723,326
    
    
    
    19,118
    
    
    
    529,573
    
    
    
    (15,106
    )Total
    
    $
    9,522,592
    
    
    $
    4,616,933
    
    
    $
    146,681
    
    
    $
    4,905,659
    
    
    $
    (287,075
    )
 57




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##### Table of Contents



December 31, 2008Carrying Valueof Securities with
    
    
    
    
    
    
    GrossNAIC
    
    
    
    Gross Unrealized
    
    
    Percent
    
    
    Unrealized
    
    
    PercentDesignation
    
    Equivalent S&P Ratings
    
    Losses
    
    
    of Total
    
    
    Losses
    
    
    of Total(Dollars in thousands)1
    
    AAA, AA, A
    
    $
    3,545,103
    
    
    
    52.7
    %
    
    $
    (740,675
    )
    
    
    44.9
    %2
    
    BBB
    
    
    2,890,656
    
    
    
    42.9
    
    
    
    (738,512
    )
    
    
    44.8Total investment grade
    
    
    6,435,759
    
    
    
    95.6
    
    
    
    (1,479,187
    )
    
    
    89.73
    
    BB
    
    
    212,438
    
    
    
    3.1
    
    
    
    (70,545
    )
    
    
    4.34
    
    B
    
    
    37,399
    
    
    
    0.6
    
    
    
    (45,228
    )
    
    
    2.75
    
    CCC, CC, C
    
    
    40,308
    
    
    
    0.6
    
    
    
    (47,615
    )
    
    
    2.96
    
    In or near default
    
    
    6,336
    
    
    
    0.1
    
    
    
    (7,272
    )
    
    
    0.4Total below investment grade
    
    
    296,481
    
    
    
    4.4
    
    
    
    (170,660
    )
    
    
    10.3Total
    
    $
    6,732,240
    
    
    
    100.0
    %
    
    $
    (1,649,847
    )
    
    
    100.0
    %
 December 31, 2007Carrying Valueof Securities with
    
    
    
    
    
    
    GrossNAIC
    
    
    
    Gross Unrealized
    
    
    Percent
    
    
    Unrealized
    
    
    PercentDesignation
    
    Equivalent S&P Ratings
    
    Losses
    
    
    of Total
    
    
    Losses
    
    
    of Total(Dollars in thousands)1
    
    AAA, AA, A
    
    $
    3,113,384
    
    
    
    63.5
    %
    
    $
    (172,016
    )
    
    
    59.9
    %2
    
    BBB
    
    
    1,605,652
    
    
    
    32.7
    
    
    
    (89,572
    )
    
    
    31.2Total investment grade
    
    
    4,719,036
    
    
    
    96.2
    
    
    
    (261,588
    )
    
    
    91.13
    
    BB
    
    
    130,043
    
    
    
    2.7
    
    
    
    (13,533
    )
    
    
    4.74
    
    B
    
    
    26,633
    
    
    
    0.5
    
    
    
    (5,335
    )
    
    
    1.95
    
    CCC, CC, C
    
    
    29,947
    
    
    
    0.6
    
    
    
    (6,619
    )
    
    
    2.36
    
    In or near default
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total below investment grade
    
    
    186,623
    
    
    
    3.8
    
    
    
    (25,487
    )
    
    
    8.9Total
    
    $
    4,905,659
    
    
    
    100.0
    %
    
    $
    (287,075
    )
    
    
    100.0
    %
  December 31, 2008Amortized
    
    
    Gross UnrealizedCost
    
    
    LossesMarket Value
    
    
    Market Value is
    
    
    Market Value
    
    
    Market Value isNumber
    
    
    is Less than
    
    
    75% or Greater
    
    
    is Less than
    
    
    75% or Greaterof Issuers
    
    
    75% of Cost
    
    
    than Cost
    
    
    75% of Cost
    
    
    than CostThree months or less
    
    
    170
    
    
    $
    31,774
    
    
    $
    784,689
    
    
    $
    (12,658
    )
    
    $
    (51,824
    )Greater than three months to six months
    
    
    193
    
    
    
    75,356
    
    
    
    1,024,158
    
    
    
    (28,791
    )
    
    
    (82,320
    )Greater than six months to nine months
    
    
    262
    
    
    
    182,184
    
    
    
    1,140,978
    
    
    
    (56,719
    )
    
    
    (111,013
    )Greater than nine months to twelve
months
    
    
    143
    
    
    
    288,140
    
    
    
    780,947
    
    
    
    (103,539
    )
    
    
    (97,928
    )Greater than twelve months
    
    
    455
    
    
    
    1,733,949
    
    
    
    2,339,912
    
    
    
    (785,180
    )
    
    
    (319,875
    )Total
    
    
    
    
    
    $
    2,311,403
    
    
    $
    6,070,684
    
    
    $
    (986,887
    )
    
    $
    (662,960
    )
 December 31, 2007Amortized
    
    
    Gross UnrealizedCost
    
    
    LossesMarket Value
    
    
    Market Value is
    
    
    Market Value
    
    
    Market Value isNumber
    
    
    is Less than
    
    
    75% or Greater
    
    
    is Less than
    
    
    75% or Greaterof Issuers
    
    
    75% of Cost
    
    
    than Cost
    
    
    75% of Cost
    
    
    than CostThree months or less
    
    
    82
    
    
    $
    3,998
    
    
    $
    567,265
    
    
    $
    (1,140
    )
    
    $
    (12,874
    )Greater than three months to six months
    
    
    33
    
    
    
    12,022
    
    
    
    195,483
    
    
    
    (3,164
    )
    
    
    (9,828
    )Greater than six months to nine months
    
    
    143
    
    
    
    39,900
    
    
    
    972,367
    
    
    
    (12,795
    )
    
    
    (49,754
    )Greater than nine months to twelve
months
    
    
    58
    
    
    
    2,610
    
    
    
    298,247
    
    
    
    (1,375
    )
    
    
    (12,843
    )Greater than twelve months
    
    
    375
    
    
    
    74,182
    
    
    
    3,026,660
    
    
    
    (29,496
    )
    
    
    (153,806
    )Total
    
    
    
    
    
    $
    132,712
    
    
    $
    5,060,022
    
    
    $
    (47,970
    )
    
    $
    (239,105
    )
 58




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Carrying Value of
    
    
    
    
    
    
    Carrying Value ofSecurities with
    
    
    Gross
    
    
    Securities with
    
    
    GrossGross Unrealized
    
    
    Unrealized
    
    
    Gross Unrealized
    
    
    UnrealizedLosses
    
    
    Losses
    
    
    Losses
    
    
    Losses(Dollars in thousands)Due in one year or less
    
    $
    43,483
    
    
    $
    (4,985
    )
    
    $
    4,697
    
    
    $
    (2
    )Due after one year through five years
    
    
    791,636
    
    
    
    (143,559
    )
    
    
    206,405
    
    
    
    (10,436
    )Due after five years through ten years
    
    
    2,037,451
    
    
    
    (514,869
    )
    
    
    1,205,663
    
    
    
    (66,342
    )Due after ten years
    
    
    2,260,568
    
    
    
    (506,966
    )
    
    
    1,747,686
    
    
    
    (106,075
    )5,133,138
    
    
    
    (1,170,379
    )
    
    
    3,164,451
    
    
    
    (182,855
    )Mortgage and asset-backed securities
    
    
    1,594,576
    
    
    
    (478,994
    )
    
    
    1,730,797
    
    
    
    (102,631
    )Redeemable preferred stocks
    
    
    4,526
    
    
    
    (474
    )
    
    
    10,411
    
    
    
    (1,589
    )Total
    
    $
    6,732,240
    
    
    $
    (1,649,847
    )
    
    $
    4,905,659
    
    
    $
    (287,075
    )
  
    
    increased credit spreads on commercial real estate investment trust bonds, due to the
underlying real estate exposure and market concerns about the ability to access capital
markets,
    
    increased credit spreads and defaults in collateralized debt obligations,
    
    a decrease in market liquidity and credit quality concerns of assets held by banking
institutions and
    
    increased credit spreads from weaker operating results in the manufacturing sector.
 
  December 31, 2008
    
    
    December 31, 2007Amortized Cost
    
    
    Carrying Value
    
    
    Amortized Cost
    
    
    Carrying Value(Dollars in thousands)Due in one year or less
    
    $
    117,268
    
    
    $
    113,169
    
    
    $
    63,476
    
    
    $
    63,980Due after one year through five years
    
    
    1,182,860
    
    
    
    1,045,741
    
    
    
    881,754
    
    
    
    895,729Due after five years through ten years
    
    
    2,949,740
    
    
    
    2,458,698
    
    
    
    2,441,018
    
    
    
    2,411,240Due after ten years
    
    
    3,248,026
    
    
    
    2,773,540
    
    
    
    3,470,968
    
    
    
    3,432,6727,497,894
    
    
    
    6,391,148
    
    
    
    6,857,216
    
    
    
    6,803,621Mortgage and asset-backed securities
    
    
    3,002,190
    
    
    
    2,569,769
    
    
    
    2,772,552
    
    
    
    2,685,973Redeemable preferred stocks
    
    
    5,000
    
    
    
    4,526
    
    
    
    33,218
    
    
    
    32,998Total
    
    $
    10,505,084
    
    
    $
    8,965,443
    
    
    $
    9,662,986
    
    
    $
    9,522,592
  Mortgage and Asset-Backed Securities
   59




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##### Table of Contents



December 31, 2008Percent of FixedAmortized Cost
    
    
    Par Value
    
    
    Carrying Value
    
    
    Maturities(Dollars in thousands)Residential mortgage-backed securities:Sequential
    
    $
    1,237,035
    
    
    $
    1,264,691
    
    
    $
    1,068,869
    
    
    
    11.9
    %Pass-through
    
    
    219,447
    
    
    
    219,855
    
    
    
    225,513
    
    
    
    2.5Planned and targeted amortization class
    
    
    508,133
    
    
    
    513,373
    
    
    
    464,296
    
    
    
    5.2Other
    
    
    40,086
    
    
    
    40,184
    
    
    
    31,011
    
    
    
    0.4Total residential mortgage-backed securities
    
    
    2,004,701
    
    
    
    2,038,103
    
    
    
    1,789,689
    
    
    
    20.0Commercial mortgage-backed securities
    
    
    799,546
    
    
    
    819,030
    
    
    
    640,236
    
    
    
    7.1Other asset-backed securities
    
    
    197,943
    
    
    
    265,435
    
    
    
    139,844
    
    
    
    1.6Total mortgage and asset-backed securities
    
    $
    3,002,190
    
    
    $
    3,122,568
    
    
    $
    2,569,769
    
    
    
    28.7
    %
 December 31, 2007Percent of FixedAmortized Cost
    
    
    Par Value
    
    
    Carrying Value
    
    
    Maturities(Dollars in thousands)Residential mortgage-backed securities:Sequential
    
    $
    1,186,016
    
    
    $
    1,211,070
    
    
    $
    1,153,555
    
    
    
    12.1
    %Pass-through
    
    
    199,854
    
    
    
    200,024
    
    
    
    200,900
    
    
    
    2.1Planned and targeted amortization class
    
    
    479,194
    
    
    
    484,620
    
    
    
    473,094
    
    
    
    5.0Other
    
    
    40,704
    
    
    
    40,798
    
    
    
    36,521
    
    
    
    0.4Total residential mortgage-backed securities
    
    
    1,905,768
    
    
    
    1,936,512
    
    
    
    1,864,070
    
    
    
    19.6Commercial mortgage-backed securities
    
    
    578,510
    
    
    
    578,416
    
    
    
    570,057
    
    
    
    6.0Other asset-backed securities
    
    
    288,274
    
    
    
    289,173
    
    
    
    251,846
    
    
    
    2.6Total mortgage and asset-backed securities
    
    $
    2,772,552
    
    
    $
    2,804,101
    
    
    $
    2,685,973
    
    
    
    28.2
    %
  60




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Percent
    
    
    
    
    
    
    
    
    
    
    PercentAmortized
    
    
    Carrying
    
    
    of Fixed
    
    
    Amortized
    
    
    Carrying
    
    
    of FixedCost
    
    
    Value
    
    
    Maturities
    
    
    Cost
    
    
    Value
    
    
    Maturities(Dollars in thousands)
    
    
    (Dollars in thousands)Government agency
    
    $
    557,311
    
    
    $
    579,489
    
    
    
    6.5
    %
    
    $
    423,831
    
    
    $
    427,097
    
    
    
    4.5
    %Prime
    
    
    1,068,716
    
    
    
    913,772
    
    
    
    10.2
    
    
    
    1,098,484
    
    
    
    1,068,460
    
    
    
    11.2Alt-A
    
    
    524,264
    
    
    
    397,556
    
    
    
    4.5
    
    
    
    611,399
    
    
    
    561,443
    
    
    
    5.9Subprime
    
    
    30,133
    
    
    
    20,311
    
    
    
    0.2
    
    
    
    30,146
    
    
    
    29,259
    
    
    
    0.3Commercial mortgage
    
    
    799,546
    
    
    
    640,236
    
    
    
    7.1
    
    
    
    578,510
    
    
    
    570,057
    
    
    
    6.0Non-mortgage
    
    
    22,220
    
    
    
    18,405
    
    
    
    0.2
    
    
    
    30,182
    
    
    
    29,657
    
    
    
    0.3Total
    
    $
    3,002,190
    
    
    $
    2,569,769
    
    
    
    28.7
    %
    
    $
    2,772,552
    
    
    $
    2,685,973
    
    
    
    28.2
    %
 61




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##### Table of Contents



December 31, 2008Government & Prime
    
    
    Alt-A
    
    
    TotalAmortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    CarryingCost (1)
    
    
    Value
    
    
    Cost (1)
    
    
    Value
    
    
    Cost
    
    
    Value(Dollars in thousands)2008
    
    $
    63,195
    
    
    $
    67,391
    
    
    $
    
    
    
    $
    
    
    
    $
    63,195
    
    
    $
    67,3912007
    
    
    120,089
    
    
    
    117,851
    
    
    
    60,265
    
    
    
    32,723
    
    
    
    180,354
    
    
    
    150,5742006
    
    
    117,671
    
    
    
    106,016
    
    
    
    22,436
    
    
    
    11,099
    
    
    
    140,107
    
    
    
    117,1152005
    
    
    28,517
    
    
    
    27,581
    
    
    
    
    
    
    
    
    
    
    
    28,517
    
    
    
    27,5812004 and prior
    
    
    1,273,488
    
    
    
    1,162,275
    
    
    
    319,040
    
    
    
    264,753
    
    
    
    1,592,528
    
    
    
    1,427,028Total
    
    $
    1,602,960
    
    
    $
    1,481,114
    
    
    $
    401,741
    
    
    $
    308,575
    
    
    $
    2,004,701
    
    
    $
    1,789,689
 December 31, 2007Government & Prime
    
    
    Alt-A
    
    
    TotalAmortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    CarryingCost (1)
    
    
    Value
    
    
    Cost (1)
    
    
    Value
    
    
    Cost
    
    
    Value(Dollars in thousands)2007
    
    $
    100,400
    
    
    $
    101,344
    
    
    $
    60,235
    
    
    $
    58,313
    
    
    $
    160,635
    
    
    $
    159,6572006
    
    
    94,081
    
    
    
    94,749
    
    
    
    22,438
    
    
    
    19,361
    
    
    
    116,519
    
    
    
    114,1102005
    
    
    29,200
    
    
    
    29,446
    
    
    
    
    
    
    
    
    
    
    
    29,200
    
    
    
    29,4462004 and prior
    
    
    1,275,024
    
    
    
    1,247,272
    
    
    
    324,390
    
    
    
    313,585
    
    
    
    1,599,414
    
    
    
    1,560,857Total
    
    $
    1,498,705
    
    
    $
    1,472,811
    
    
    $
    407,063
    
    
    $
    391,259
    
    
    $
    1,905,768
    
    
    $
    1,864,070
 (1)
    
    Insurance on 2006 Alt-A issues is provided by MBIA Insurance Corporation (78% in 2008 and
2007). Insurance on 2007 Alt-A issues is provided by Assured Guaranty Ltd. (32% in 2008 and
2007) and MBIA Insurance Corporation (25% in 2008 and 2007). There is no insurance coverage
on Government & Prime investments or Alt-A investments with collateral originating prior to
2006.
  December 31, 2008
    
    
    December 31, 2007Carrying Value
    
    
    Percent of Total
    
    
    Carrying Value
    
    
    Percent of Total(Dollars in thousands)AAA
    
    $
    1,721,046
    
    
    
    96.2
    %
    
    $
    1,864,039
    
    
    
    100.0
    %AA
    
    
    3,462
    
    
    
    0.2
    
    
    
    31
    
    
    
    A
    
    
    24,121
    
    
    
    1.3
    
    
    
    
    
    
    
    BBB
    
    
    7,281
    
    
    
    0.4
    
    
    
    
    
    
    
    BB
    
    
    17,326
    
    
    
    1.0
    
    
    
    
    
    
    
    B
    
    
    16,453
    
    
    
    0.9
    
    
    
    
    
    
    
    Total
    
    $
    1,789,689
    
    
    
    100.0
    %
    
    $
    1,864,070
    
    
    
    100.0
    %
  December 31, 2008
    
    
    December 31, 2007Amortized Cost
    
    
    Carrying Value
    
    
    Amortized Cost
    
    
    Carrying Value(Dollars in thousands)2008
    
    $
    197,725
    
    
    $
    196,908
    
    
    $
    
    
    
    $
    2007
    
    
    194,169
    
    
    
    114,816
    
    
    
    186,701
    
    
    
    187,0272006
    
    
    170,452
    
    
    
    117,606
    
    
    
    146,924
    
    
    
    143,5232005
    
    
    56,220
    
    
    
    41,877
    
    
    
    52,273
    
    
    
    45,0222004 and prior
    
    
    180,980
    
    
    
    169,029
    
    
    
    192,612
    
    
    
    194,485Total
    
    $
    799,546
    
    
    $
    640,236
    
    
    $
    578,510
    
    
    $
    570,057
 62




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Carrying Value
    
    
    Percent of Total
    
    
    Carrying Value
    
    
    Percent of Total(Dollars in thousands)GNMA
    
    $
    386,634
    
    
    
    60.4
    %
    
    $
    196,042
    
    
    
    34.4
    %FNMA
    
    
    15,611
    
    
    
    2.4
    
    
    
    16,407
    
    
    
    2.9AAAGeneric AAA
    
    
    1,174
    
    
    
    0.2
    
    
    
    30,306
    
    
    
    5.3Super Senior AAA
    
    
    103,951
    
    
    
    16.2
    
    
    
    106,448
    
    
    
    18.7Mezzanine AAA
    
    
    62,823
    
    
    
    9.8
    
    
    
    52,460
    
    
    
    9.2Junior AAA
    
    
    41,662
    
    
    
    6.5
    
    
    
    127,209
    
    
    
    22.3Total AAA
    
    
    209,610
    
    
    
    32.7
    
    
    
    316,423
    
    
    
    55.5AA
    
    
    14,682
    
    
    
    2.3
    
    
    
    19,636
    
    
    
    3.4A
    
    
    3,870
    
    
    
    0.6
    
    
    
    21,549
    
    
    
    3.8BBB
    
    
    9,349
    
    
    
    1.5
    
    
    
    
    
    
    
    CCC
    
    
    480
    
    
    
    0.1
    
    
    
    
    
    
    
    Total
    
    $
    640,236
    
    
    
    100.0
    %
    
    $
    570,057
    
    
    
    100.0
    %
    December 31, 2008Government & Prime
    
    
    Alt-A
    
    
    Subprime
    
    
    Non-Mortgage
    
    
    TotalAmortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    CarryingCost (1)
    
    
    Value
    
    
    Cost (1)
    
    
    Value
    
    
    Cost (1)
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(Dollars in thousands)2007
    
    $
    9,989
    
    
    $
    2,820
    
    
    $
    17,442
    
    
    $
    9,140
    
    
    $
    
    
    
    $
    
    
    
    $
    7,091
    
    
    $
    4,465
    
    
    $
    34,522
    
    
    $
    16,4252006
    
    
    9,726
    
    
    
    5,966
    
    
    
    66,826
    
    
    
    45,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,552
    
    
    
    51,7062005
    
    
    
    
    
    
    
    
    
    
    26,653
    
    
    
    25,068
    
    
    
    30,133
    
    
    
    20,311
    
    
    
    
    
    
    
    
    
    
    
    56,786
    
    
    
    45,3792004 and prior
    
    
    3,352
    
    
    
    3,361
    
    
    
    11,602
    
    
    
    9,033
    
    
    
    
    
    
    
    
    
    
    
    15,129
    
    
    
    13,940
    
    
    
    30,083
    
    
    
    26,334Total
    
    $
    23,067
    
    
    $
    12,147
    
    
    $
    122,523
    
    
    $
    88,981
    
    
    $
    30,133
    
    
    $
    20,311
    
    
    $
    22,220
    
    
    $
    18,405
    
    
    $
    197,943
    
    
    $
    139,844
 December 31, 2007Government & Prime
    
    
    Alt-A
    
    
    Subprime
    
    
    Non-Mortgage
    
    
    TotalAmortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    Carrying
    
    
    Amortized
    
    
    CarryingCost (1)
    
    
    Value
    
    
    Cost (1)
    
    
    Value
    
    
    Cost (1)
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(Dollars in thousands)2007
    
    $
    9,995
    
    
    $
    9,172
    
    
    $
    30,979
    
    
    $
    27,501
    
    
    $
    
    
    
    $
    
    
    
    $
    6,861
    
    
    $
    6,908
    
    
    $
    47,835
    
    
    $
    43,5812006
    
    
    9,746
    
    
    
    9,659
    
    
    
    135,575
    
    
    
    106,534
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145,321
    
    
    
    116,1932005
    
    
    
    
    
    
    
    
    
    
    26,937
    
    
    
    25,719
    
    
    
    30,146
    
    
    
    29,259
    
    
    
    
    
    
    
    
    
    
    
    57,083
    
    
    
    54,9782004 and prior
    
    
    3,869
    
    
    
    3,915
    
    
    
    10,845
    
    
    
    10,430
    
    
    
    
    
    
    
    
    
    
    
    23,321
    
    
    
    22,749
    
    
    
    38,035
    
    
    
    37,094Total
    
    $
    23,610
    
    
    $
    22,746
    
    
    $
    204,336
    
    
    $
    170,184
    
    
    $
    30,146
    
    
    $
    29,259
    
    
    $
    30,182
    
    
    $
    29,657
    
    
    $
    288,274
    
    
    $
    251,846
 (1)
    
    Insurance on 2006 Alt-A issues is provided by Financial Guaranty Insurance Co. (38% in 2008
and 63% in 2007) and AMBAC Assurance Corporation (34% in 2008 and 17% in 2007). Insurance on
2007 Alt-A issues is provided by AMBAC Assurance Corporation (57% in 2008 and 32% in 2007),
MBIA Insurance Corporation (29% in 2008 and 16% in 2007) and Financial Guaranty Insurance Co.
(14% in 2008 and 48% in 2007). The
 63




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##### Table of Contents



December 31, 2008
    
    
    December 31, 2007Percent of
    
    
    
    
    
    
    Percent ofCarrying Value
    
    
    Total
    
    
    Carrying Value
    
    
    Total(Dollars in thousands)AAA
    
    $
    59,900
    
    
    
    42.8
    %
    
    $
    226,282
    
    
    
    89.9
    %AA
    
    
    18,852
    
    
    
    13.5
    
    
    
    13,621
    
    
    
    5.4A
    
    
    3,015
    
    
    
    2.2
    
    
    
    3,085
    
    
    
    1.2BBB
    
    
    36,337
    
    
    
    26.0
    
    
    
    8,858
    
    
    
    3.5BB
    
    
    11,666
    
    
    
    8.3
    
    
    
    
    
    
    
    B
    
    
    2,615
    
    
    
    1.9
    
    
    
    
    
    
    
    CCC
    
    
    4,894
    
    
    
    3.5
    
    
    
    
    
    
    
    CC
    
    
    2,565
    
    
    
    1.8
    
    
    
    
    
    
    
    Total
    
    $
    139,844
    
    
    
    100.0
    %
    
    $
    251,846
    
    
    
    100.0
    %
    December 31, 2008
    
    
    December 31, 2007Insurers
    
    
    Residential
    
    
    Other
    
    
    Total
    
    
    Residential
    
    
    Other
    
    
    TotalS&P
    
    
    Mortgage-
    
    
    Asset-
    
    
    Carrying
    
    
    Mortgage-
    
    
    Asset-
    
    
    CarryingRating (1)
    
    
    Backed
    
    
    Backed
    
    
    Value
    
    
    Backed
    
    
    Backed
    
    
    Value(Dollars in thousands)Insured:AMBAC Assurance
Corporation
    
    
    A
    
    
    $
    
    
    
    $
    18,380
    
    
    $
    18,380
    
    
    $
    
    
    
    $
    39,510
    
    
    $
    39,510Assured Guaranty
Ltd.
    
    AAA
    
    
    11,608
    
    
    
    
    
    
    
    11,608
    
    
    
    18,773
    
    
    
    
    
    
    
    18,773Financial Guaranty

Insurance Co.
    
    CCC
    
    
    
    
    
    
    27,239
    
    
    
    27,239
    
    
    
    
    
    
    
    81,574
    
    
    
    81,574MBIA Insurance
Corporation
    
    AA
    
    
    15,762
    
    
    
    10,558
    
    
    
    26,320
    
    
    
    29,222
    
    
    
    24,112
    
    
    
    53,334Total with insurance
    
    
    
    
    
    
    27,370
    
    
    
    56,177
    
    
    
    83,547
    
    
    
    47,995
    
    
    
    145,196
    
    
    
    193,191Uninsured:GNMA
    
    
    
    
    
    
    187,682
    
    
    
    
    
    
    
    187,682
    
    
    
    172,291
    
    
    
    
    
    
    
    172,291FHLMC
    
    
    
    
    
    
    257,810
    
    
    
    3,226
    
    
    
    261,036
    
    
    
    121,373
    
    
    
    3,914
    
    
    
    125,287FNMA
    
    
    
    
    
    
    130,613
    
    
    
    135
    
    
    
    130,748
    
    
    
    129,488
    
    
    
    250
    
    
    
    129,738Other
    
    
    
    
    
    
    1,186,215
    
    
    
    80,306
    
    
    
    1,266,521
    
    
    
    1,392,923
    
    
    
    102,486
    
    
    
    1,495,409Total
    
    
    
    
    
    $
    1,789,690
    
    
    $
    139,844
    
    
    $
    1,929,534
    
    
    $
    1,864,070
    
    
    $
    251,846
    
    
    $
    2,115,916
 (1)
    
    Rating in effect as of December 31, 2008.
 64




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##### Table of Contents



Collateralized Debt Obligations
   State, Municipal and Other Government Securities
   December 31, 2008Insured Bonds
    
    
    
    
    
    
    
    
    
    
    Total BondsInsured Bonds by
    
    
    By Underlying
    
    
    Total Bonds by
    
    
    By UnderlyingUninsured Bonds
    
    
    Insurer Rating
    
    
    Issue Rating
    
    
    Insurer Rating
    
    
    Issue RatingCarrying
    
    
    % of
    
    
    Carrying
    
    
    % of
    
    
    Carrying
    
    
    % of
    
    
    Carrying
    
    
    % of
    
    
    Carrying
    
    
    % ofRating
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total(Dollars in thousands)AAA (1)
    
    $
    166,829
    
    
    
    48.7
    %
    
    $
    198,432
    
    
    
    20.5
    %
    
    $
    4,850
    
    
    
    0.5
    %
    
    $
    365,261
    
    
    
    27.9
    %
    
    $
    171,679
    
    
    
    13.1
    %AA
    
    
    119,324
    
    
    
    34.8
    
    
    
    454,193
    
    
    
    46.9
    
    
    
    319,786
    
    
    
    33.0
    
    
    
    573,517
    
    
    
    43.7
    
    
    
    439,110
    
    
    
    33.5A
    
    
    29,505
    
    
    
    8.6
    
    
    
    310,695
    
    
    
    32.1
    
    
    
    361,165
    
    
    
    37.4
    
    
    
    340,200
    
    
    
    26.0
    
    
    
    390,670
    
    
    
    29.8BBB
    
    
    27,039
    
    
    
    7.9
    
    
    
    4,609
    
    
    
    0.5
    
    
    
    42,630
    
    
    
    4.4
    
    
    
    31,648
    
    
    
    2.4
    
    
    
    69,669
    
    
    
    5.3NR (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239,498
    
    
    
    24.7
    
    
    
    
    
    
    
    
    
    
    
    239,498
    
    
    
    18.3$
    342,697
    
    
    
    100.0
    %
    
    $
    967,929
    
    
    
    100.0
    %
    
    $
    967,929
    
    
    
    100.0
    %
    
    $
    1,310,626
    
    
    
    100.0
    %
    
    $
    1,310,626
    
    
    
    100.0
    %
 65




---



##### Table of Contents



December 31, 2007Insured Bonds
    
    
    
    
    
    
    
    
    
    
    Total BondsInsured Bonds by
    
    
    By Underlying
    
    
    Total Bonds by
    
    
    By UnderlyingUninsured Bonds
    
    
    Insurer Rating
    
    
    Issue Rating
    
    
    Insurer Rating
    
    
    Issue RatingCarrying
    
    
    % of
    
    
    Carrying
    
    
    % of
    
    
    Carrying
    
    
    % of
    
    
    Carrying
    
    
    % of
    
    
    Carrying
    
    
    % ofRating
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total
    
    
    Value
    
    
    Total(Dollars in thousands)AAA (1)
    
    $
    146,483
    
    
    
    48.4
    %
    
    $
    947,316
    
    
    
    99.7
    %
    
    $
    
    
    
    
    
    %
    
    $
    1,093,799
    
    
    
    87.3
    %
    
    $
    146,483
    
    
    
    11.7
    %AA
    
    
    112,912
    
    
    
    37.3
    
    
    
    3,075
    
    
    
    0.3
    
    
    
    316,797
    
    
    
    33.3
    
    
    
    115,987
    
    
    
    9.3
    
    
    
    429,709
    
    
    
    34.3A
    
    
    9,987
    
    
    
    3.3
    
    
    
    
    
    
    
    
    
    
    
    302,980
    
    
    
    31.9
    
    
    
    9,987
    
    
    
    0.8
    
    
    
    312,967
    
    
    
    25.0BBB
    
    
    31,367
    
    
    
    10.4
    
    
    
    
    
    
    
    
    
    
    
    57,983
    
    
    
    6.1
    
    
    
    31,367
    
    
    
    2.5
    
    
    
    89,350
    
    
    
    7.1BB
    
    
    1,759
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,759
    
    
    
    0.1
    
    
    
    1,759
    
    
    
    0.1NR (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    272,631
    
    
    
    28.7
    
    
    
    
    
    
    
    
    
    
    
    272,631
    
    
    
    21.8$
    302,508
    
    
    
    100.0
    %
    
    $
    950,391
    
    
    
    100.0
    %
    
    $
    950,391
    
    
    
    100.0
    %
    
    $
    1,252,899
    
    
    
    100.0
    %
    
    $
    1,252,899
    
    
    
    100.0
    %
 (1)
    
    AAA uninsured bonds includes $57.7 million in 2008 and $47.2 million in 2007 of bonds with
GNMA and/or FNMA collateral.(2)
    
    No formal public rating issued. Approximately 58% in 2008 and 53% in 2007 of the non-rated
securities relate to military housing bonds, which we believe have an A- shadow rating;
approximately 29% in 2008 and 31% in 2007 are revenue obligation bonds; and approximately 13%
in 2008 and 2007 are general obligation bonds. Insurance on these bonds is provided by AMBAC
Assurance Corporation (61% in 2008 and 64% in 2007), Financial Security Assurance, Inc. (16%
in 2008 and 18% 2007), MBIA Insurance Corporation (17% in 2008 and 11% in 2007), Financial
Guaranty Insurance Co. (5% in 2008 and 6% in 2007) and other (1% in 2008 and 2007).
 Equity Securities
  Mortgage Loans
  66




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December 31, 2008
    
    
    December 31, 2007Percent of
    
    
    
    
    
    
    Percent ofCollateral Type
    
    Carrying Value
    
    
    Total
    
    
    Carrying Value
    
    
    Total(Dollars in thousands)Retail
    
    $
    467,942
    
    
    
    33.8
    %
    
    $
    386,506
    
    
    
    31.6
    %Office
    
    
    466,068
    
    
    
    33.7
    
    
    
    426,005
    
    
    
    34.9Industrial
    
    
    418,050
    
    
    
    30.3
    
    
    
    373,449
    
    
    
    30.6Other
    
    
    29,794
    
    
    
    2.2
    
    
    
    35,613
    
    
    
    2.9Total
    
    $
    1,381,854
    
    
    
    100.0
    %
    
    $
    1,221,573
    
    
    
    100.0
    %
  December 31, 2008
    
    
    December 31, 2007Percent of
    
    
    
    
    
    
    Percent ofRegion of the United States
    
    Carrying Value
    
    
    Total
    
    
    Carrying Value
    
    
    Total(Dollars in thousands)South Atlantic
    
    $
    341,728
    
    
    
    24.8
    %
    
    $
    284,872
    
    
    
    23.3
    %East North Central
    
    
    269,876
    
    
    
    19.5
    
    
    
    242,899
    
    
    
    19.9Pacific
    
    
    261,581
    
    
    
    18.9
    
    
    
    228,366
    
    
    
    18.7West North Central
    
    
    172,283
    
    
    
    12.5
    
    
    
    158,538
    
    
    
    13.0Mountain
    
    
    132,649
    
    
    
    9.6
    
    
    
    127,055
    
    
    
    10.4West South Central
    
    
    69,582
    
    
    
    5.0
    
    
    
    69,739
    
    
    
    5.7Other
    
    
    134,155
    
    
    
    9.7
    
    
    
    110,104
    
    
    
    9.0Total
    
    $
    1,381,854
    
    
    
    100.0
    %
    
    $
    1,221,573
    
    
    
    100.0
    %
  December 31, 2008
    
    
    December 31, 2007Gross
    
    
    Percent of
    
    
    Gross
    
    
    Percent ofCarrying Value
    
    
    Total
    
    
    Carrying Value
    
    
    Total(Dollars in thousands)0% - 50%
    
    $
    330,144
    
    
    
    23.9
    %
    
    $
    285,897
    
    
    
    23.4
    %50% -60%
    
    
    269,816
    
    
    
    19.6
    
    
    
    209,444
    
    
    
    17.160% - 70%
    
    
    474,436
    
    
    
    34.3
    
    
    
    418,941
    
    
    
    34.370% - 80%
    
    
    267,159
    
    
    
    19.3
    
    
    
    264,245
    
    
    
    21.680% - 90%
    
    
    34,904
    
    
    
    2.5
    
    
    
    36,463
    
    
    
    3.090% - 100%
    
    
    5,395
    
    
    
    0.4
    
    
    
    6,583
    
    
    
    0.6Greater than 100%
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    1,381,854
    
    
    
    100.0
    %
    
    $
    1,221,573
    
    
    
    100.0
    %
 (1)
    
    Loan-to-Value Ratio at origination
  December 31, 2008
    
    
    December 31, 2007Gross
    
    
    Percent of
    
    
    Gross
    
    
    Percent ofCarrying Value
    
    
    Total
    
    
    Carrying Value
    
    
    Total(Dollars in thousands)2008
    
    $
    205,925
    
    
    
    14.9
    %
    
    $
    
    
    
    
    
    %2007
    
    
    291,261
    
    
    
    21.1
    
    
    
    296,826
    
    
    
    24.32006
    
    
    197,153
    
    
    
    14.2
    
    
    
    203,082
    
    
    
    16.62005
    
    
    136,753
    
    
    
    9.9
    
    
    
    142,505
    
    
    
    11.72004 and prior
    
    
    550,762
    
    
    
    39.9
    
    
    
    579,160
    
    
    
    47.4Total
    
    $
    1,381,854
    
    
    
    100.0
    %
    
    $
    1,221,573
    
    
    
    100.0
    %
  67




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##### Table of Contents



Derivative Instruments
  Collateral
Related to Securities Lending and Other Transactions
  Other
Assets
  Liabilities
  68




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##### Table of Contents



Stockholders
Equity
   Market Risks of Financial Instruments
 Interest Rate Risk
   
    
    The average life of the portfolio.
 
    
    The amount and speed at which market interest rates rise or fall.
 
    
    The amount by which bond calls, mortgage loan prepayments and paydowns on mortgage and
asset-backed securities accelerate during periods of declining interest rates.
 
    
    The amount by which bond calls, mortgage loan prepayments and paydowns on mortgage and
asset-backed securities decelerate during periods of increasing interest rates.
     69




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Account Value at December 31, 2008Direct (1)
    
    
    Assumed Coinsurance(Dollars in thousands)At guaranteed rate
    
    $
    673,740
    
    
    $
    109,059Between guaranteed rate and 50 basis points over
over guaranteed rate
    
    
    99,375
    
    
    
    386,952Between 50 basis points and 100 basis points over
guaranteed rate
    
    
    979,409
    
    
    
    109,180Greater than 100 basis points over guaranteed rate
    
    
    2,851,207
    
    
    
    14,153Total
    
    $
    4,603,731
    
    
    $
    619,344
 (1)
    
    Includes the general account portion of variable contracts.
    70




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Reserve Balance at December 31, 2008Direct
    
    
    Assumed Coinsurance(Dollars in thousands)Surrender charge rate before any market value
adjustment:Greater than or equal to 5%
    
    $
    6,390,736
    
    
    $
    1,353,184Less than 5%, but still subject to surrender charge
    
    
    769,137
    
    
    
    213,075Not subject to surrender charge
    
    
    1,781,166
    
    
    
    282,665Not subject to surrender or discretionary withdrawal
    
    
    241,909
    
    
    
    4,981Total
    
    $
    9,182,948
    
    
    $
    1,853,905
    71




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January 31, 2009
    
    
    
    
    
    Weighted Average SurrenderU.S. Treasury Rate (1)
    
    
    
    
    
    Charge Rate with MVAWeightedAnnuities
    
    U.S.
    
    
    
    
    
    U.S.
    
    Average
    
    U.S.
    
    
    
    
    
    U.S.Reserve
    
    Treasury
    
    U.S.
    
    Treasury
    
    Surrender
    
    Treasury
    
    U.S.
    
    TreasuryDecember 31,
    
    Rate
    
    Treasury
    
    Rate
    
    Rate
    
    Rate
    
    Treasury
    
    Rate2008
    
    less 0.50%
    
    Rate
    
    plus 0.50%
    
    before MVA
    
    less 0.50%
    
    Rate
    
    plus 0.50%(Dollars in thousands)Fixed Index
Annuities
    
    $
    3,677,428
    
    
    
    2.37
    %
    
    
    2.87
    %
    
    
    3.37
    %
    
    
    17.8
    %
    
    
    3.4
    %
    
    
    7.6
    %
    
    
    11.9
    %Fixed Rate
Annuities
    
    $
    2,366,859
    
    
    
    1.35
    %
    
    
    1.85
    %
    
    
    2.35
    %
    
    
    9.2
    %
    
    
    1.6
    %
    
    
    3.0
    %
    
    
    4.3
    %
 (1)
    
    A 10-year U.S. Treasury rate is used for the fixed index annuities. A 5-year U.S. Treasury rate
is used for the
fixed rate annuities. These U.S. Treasury rates approximate the interest rate feature of the
respective annuities.
      72




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Equity Risk
  Credit Risk
  Counterparty Risk
  73




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
  Sources and Uses of Capital Resources
    74




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75




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##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments Due by PeriodLess than
    
    
    1  3
    
    
    4  5
    
    
    AfterTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(Dollars in thousands)Contractual Obligations:Insurance liabilities (1)
    
    $
    21,983,253
    
    
    $
    1,998,156
    
    
    $
    2,490,673
    
    
    $
    2,882,955
    
    
    $
    14,611,469Subordinated note payable to
Capital Trust, including
interest payments (2)
    
    
    283,725
    
    
    
    4,850
    
    
    
    9,700
    
    
    
    9,700
    
    
    
    259,475Revolving line of credit,
including interest payments
(3)
    
    
    61,039
    
    
    
    61,039
    
    
    
    -
    
    
    
    -
    
    
    
    -2017 Senior Notes, including
interest payments
    
    
    149,938
    
    
    
    5,875
    
    
    
    11,750
    
    
    
    11,750
    
    
    
    120,5632014 Senior Notes, including
interest payments
    
    
    99,132
    
    
    
    4,388
    
    
    
    8,775
    
    
    
    8,775
    
    
    
    77,1942011 Senior Notes, including
interest payments
    
    
    126,337
    
    
    
    9,250
    
    
    
    117,087
    
    
    
    -
    
    
    
    -Collateral payable for
securities lending and other
transactions
    
    
    69,656
    
    
    
    69,656
    
    
    
    -
    
    
    
    -
    
    
    
    -Home office operating leases
    
    
    11,353
    
    
    
    2,671
    
    
    
    5,343
    
    
    
    3,339
    
    
    
    -Purchase obligations
    
    
    2,569
    
    
    
    1,075
    
    
    
    1,062
    
    
    
    432
    
    
    
    -Other long-term liabilities (4)
    
    
    32,444
    
    
    
    12,583
    
    
    
    5,561
    
    
    
    5,556
    
    
    
    8,744Total
    
    $
    22,819,446
    
    
    $
    2,169,543
    
    
    $
    2,649,951
    
    
    $
    2,922,507
    
    
    $
    15,077,445
 (1)
    
    Amounts shown in this table are projected payments through the year 2057 which we are
contractually obligated to pay to our life insurance and annuity contract holders. The
payments are derived from actuarial models which assume a level interest rate scenario and
incorporate assumptions regarding mortality and persistency when applicable. These
assumptions are based on our historical experience. The total of the contractual obligations
relating to insurance contracts noted above differs from the liability balance on our
consolidated balance sheet as follows:
 Contractual
    
    
    Balance SheetObligations
    
    
    Carrying Value
    
    
    Difference(Dollars in thousands)(a) Reserves based on account values, including separate
accounts
    
    $
    16,473,292
    
    
    $
    10,971,099
    
    
    $
    5,502,193(c) Supplementary contracts involving life contingencies
    
    
    469,775
    
    
    
    138,287
    
    
    
    331,48816,943,067
    
    
    
    11,109,386
    
    
    
    5,833,681(b) Traditional life insurance and accident and health products
    
    
    4,115,344
    
    
    
    1,328,506
    
    
    
    2,786,838(c) Supplementary contracts without life contingencies
    
    
    601,828
    
    
    
    504,885
    
    
    
    96,943Total
    
    $
    21,660,239
    
    
    $
    12,942,777
    
    
    $
    8,717,462
 76




---



##### Table of Contents



(a)
    
    reserves for products such as annuities and universal life products are generally based
on the account values of the contracts without taking into account surrender charges, while
the contractual obligations table includes projected cash payments. The following are the
reconciling items between these balances (dollars in thousands):
 Reserves based on account values, including separate accounts, per table above
    
    $
    10,971,099Projected amounts pertaining to:Accumulation of interest/index credits
    
    
    5,022,605Surrender charges
    
    
    (102,427
    )Death benefits on universal life business in excess of projected account values
    
    
    1,130,966Net cost of insurance charges on variable and universal life business
    
    
    (632,605
    )Other, net
    
    
    83,654Contractual obligations per table above
    
    $
    16,473,292
 (b)
    
    traditional life reserves are computed as the present value of future benefits less the
present value of future premiums while the contractual obligations table includes gross
benefit payments and(c)
    
    reserves for supplementary contracts and similar instruments are computed as the
present value of future cash payments while the table above includes cash payments without
the impact of discounting.
 In addition, contractual obligations totaling $323.0 million relating to dividend accumulations
and other policy claims are included in the Other policy claims and benefits and Advance
premiums and other deposits lines on our consolidated balance sheets.(2)
    
    Amount shown is net of $3.0 million equity investment in the Capital Trust due to the
contractual right of setoff upon repayment of the note.(3)
    
    Interest on the revolving line of credit is estimated at 3.73%.(4)
    
    Includes our estimated future contributions to multiemployer defined benefit plans.
Contributions related to the qualified pension plan are included through 2009. No amounts
related to the qualified pension plan are included beyond 2009 as the contribution amounts
will be re-evaluated based on actual results.
  Effects of Inflation
  Significant Accounting Policies and Estimates
   77




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78




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##### Table of Contents



Balance Sheet
    
    
    Description of
    
    
    Assumptions /
    
    
    Effect if DifferentCaption
    
    
    Critical Estimate
    
    
    Approach Used
    
    
    Assumptions / Approach UsedFixed maturities 
available for sale
    
    
    Excluding U.S.
government treasury
securities, very few
of our fixed maturity
securities trade on
the balance sheet
date. For those
securities without a
trade on the balance
sheet date, fair
values are determined
using valuation
processes that require
judgment.
    
    
    Fair values are
obtained primarily
from a variety of
independent pricing
sources, whose
results undergo
evaluation by our
internal investment
professionals.
Details regarding
valuation
techniques and
processes are
summarized in Note
1, Significant
Accounting Policies
 Investments 
Fair Values, and
Note 4, Fair
Values of Financial
Instruments, to
our consolidated
financial
statements.
    
    
    At December 31, 2008, our
fixed maturity securities
classified as available
for sale had a fair value
of $8,965.4 million, with
gross unrealized gains
totaling $110.2 million
and gross unrealized
losses totaling $1,649.8
million. Due to the large
number of fixed maturity
securities held, the
unique attributes of each
security and the
complexity of valuation
methods, it is not
practical to estimate a
potential range of fair
values for different
assumptions and methods
that could be used in the
valuation process.Fixed maturities 
available for sale
and equity
securities
    
    
    We are required to
exercise judgment to
determine when a
decline in the value
of a security is other
than temporary. When
the value of a
security declines and
the decline is
determined to be other
than temporary, the
carrying value of the
investment is reduced
to its fair value and
a realized loss is
recorded to the extent
of the decline.
    
    
    We evaluate the
operating results
of the underlying
issuer, near-term
prospects of the
issuer, general
market conditions,
causes for the
decline in value,
the length of time
there has been a
decline in value,
other key economic
measures and our
intent and ability
to hold a security
to recovery of fair
value.
    
    
    At December 31, 2008, we
had 1,458 fixed maturity
and equity securities with
gross unrealized losses
totaling $1,661.1 million.
Included in the gross
unrealized losses are
losses attributable to
both movements in market
interest rates as well as
temporary credit issues.
Details regarding these
securities are included in
the Financial Condition 
Investments section that
follows. Net income
(loss) would have been
reduced by approximately
$1,012.1 million if all
these securities were
deemed to be
other-than-temporarily
impaired on December 31,
2008.
 79




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Balance Sheet
    
    
    Description of
    
    
    Assumptions /
    
    
    Effect if DifferentCaption
    
    
    Critical Estimate
    
    
    Approach Used
    
    
    Assumptions / Approach UsedDeferred policy
acquisition costs
and deferred sales
inducements
    
    
    Amortization of
deferred policy
acquisition costs and
deferred sales
inducements for
participating life
insurance and interest
sensitive and index
products is dependent
upon estimates of
future gross profits
or margins on this
business. Key
assumptions used
include the following: amount of
death and surrender
benefits and the
length of time the
policies will stay in
force,

 yield on
investments supporting
the liabilities,

 amount of
interest or dividends
credited to the
policies,

 amount of
policy fees and
charges, and

 amount of
expenses necessary to
maintain the policies.
    
    
    These estimates,
which are revised
at least annually,
are based on
historical results
and our best
estimate of future
experience.
    
    
    Amortization of deferred
policy acquisition costs
and deferred sales
inducements for
participating life
insurance and interest
sensitive and index
products totaled
approximately $150.9
million for 2009,
excluding the impact of
new production in 2009. A
10% increase in estimated
gross profits for 2009
would result in $10.0
million of additional
amortization expense.
Correspondingly, a 10%
decrease in estimated
gross profits would result
in a $10.2 million
reduction of amortization
expense.Future policy 

benefits
    
    
    Reserving for future
policy benefits for
traditional life
insurance products
requires the use of
many assumptions,
including the duration
of the policies,
mortality experience,
lapse rates, surrender
rates and dividend
crediting rates.
The development of
reserves for future
policy benefits for
index annuities
requires the valuation
of the embedded
derivatives relating
to the contract
holders right to
participate in one or
more market indices.
This valuation
requires assumptions
as to future option
costs that are
dependent upon the
volatility of the
market indices, risk
free interest rates,
market returns and the
expected lives of the
contracts.
    
    
    These assumptions
are made based upon
historical
experience,
industry standards
and a best estimate
of future results
and, for
traditional life
products, include a
provision for
adverse deviation.
For traditional
life insurance,
once established
for a particular
series of products,
these assumptions
are generally held
constant. For
index annuities,
these assumptions
are revised at each
balance sheet date.
    
    
    Due to the number of
independent variables
inherent in the
calculation of traditional
life insurance reserves
and reserves for the
embedded derivatives in
index annuities, it is not
practical to perform a
sensitivity analysis on
the impact of reasonable
changes in the underlying
assumptions. The cost of
performing detailed
calculations using
different assumption
scenarios outweighs the
benefit that would be
derived. We believe our
assumptions are realistic
and produce reserves that
are fairly stated in
accordance with GAAP.
 80




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Balance Sheet
    
    
    Description of
    
    
    Assumptions /
    
    
    Effect if DifferentCaption
    
    
    Critical Estimate
    
    
    Approach Used
    
    
    Assumptions / Approach UsedOther 
assets/liabilities
    
    
    The determination of
net periodic pension
expense and related
accrued/prepaid
pension cost requires
the use of estimates
as to the expected
return on plan assets,
discount rate on plan
liabilities and other
actuarial assumptions.
Pension expense for
2008 totaled $5.4
million.
    
    
    We assume an
expected long-term
rate of return on
plan assets of
7.00% and discount
rate of 6.01%.
Details regarding
the method used to
determine the
discount rate are
summarized in Note
9, Retirement and
Compensation
Plans, to our
consolidated
financial
statements.
    
    
    A 100 basis point decrease
in the expected return on
assets would result in a
$1.0 million increase in
pension expense and a 100
basis point increase would
result in a $1.0 million
decrease to pension
expense. A 100 basis
point decrease in the
assumed discount rate
would result in a $0.2
million increase in
pension expense while a
100 basis point increase
would result in a $0.1
million decrease to
pension expense.
 Accounting Changes Adopted
     Pending Accounting Changes
   81




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  82




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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
 MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 Internal Control  Integrated Framework Internal Control  Integrated Framework,
  
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
 
 Internal
ControlIntegrated Framework
    83




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON CONSOLIDATED FINANCIAL STATEMENTS
 
       
 84




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
 December 31,2008
    
    
    2007AssetsInvestments:Fixed maturities  available for sale, at market
(amortized cost: 2008 - $10,505,084; 2007 - $9,662,986)
    
    $
    8,965,443
    
    
    $
    9,522,592Equity securities  available for sale, at market (cost:
2008 - $51,958; 2007 - $22,410)
    
    
    44,863
    
    
    
    23,633Mortgage loans on real estate
    
    
    1,381,854
    
    
    
    1,221,573Derivative instruments
    
    
    12,933
    
    
    
    43,918Investment real estate
    
    
    2,559
    
    
    
    2,559Policy loans
    
    
    182,421
    
    
    
    179,490Other long-term investments
    
    
    1,527
    
    
    
    1,300Short-term investments
    
    
    262,459
    
    
    
    72,005Total investments
    
    
    10,854,059
    
    
    
    11,067,070Cash and cash equivalents
    
    
    37,710
    
    
    
    84,015Securities and indebtedness of related parties
    
    
    18,921
    
    
    
    19,957Accrued investment income
    
    
    136,893
    
    
    
    118,827Amounts receivable from affiliates
    
    
    15,791
    
    
    
    10,831Reinsurance recoverable
    
    
    107,854
    
    
    
    123,659Deferred policy acquisition costs
    
    
    1,365,609
    
    
    
    991,155Deferred sales inducements
    
    
    420,147
    
    
    
    321,263Value of insurance in force acquired
    
    
    63,121
    
    
    
    41,215Property and equipment, less allowances for depreciation of
$63,730 in 2008 and $75,365 in 2007
    
    
    23,074
    
    
    
    49,164Current income taxes recoverable
    
    
    14,389
    
    
    
    7,412Deferred income tax benefit
    
    
    305,080
    
    
    
    Goodwill
    
    
    11,170
    
    
    
    11,170Collateral held for securities lending and other transactions
    
    
    67,953
    
    
    
    186,925Other assets
    
    
    41,623
    
    
    
    32,458Assets held in separate accounts
    
    
    577,420
    
    
    
    862,738Total assets
    
    $
    14,060,814
    
    
    $
    13,927,859
 85




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
 December 31,2008
    
    
    2007Liabilities and stockholders equityLiabilities:Policy liabilities and accruals:Future policy benefits:Interest sensitive and index products
    
    $
    10,531,967
    
    
    $
    9,557,073Traditional life insurance and accident and health products
    
    
    1,328,506
    
    
    
    1,284,068Unearned revenue reserve
    
    
    34,663
    
    
    
    28,448Other policy claims and benefits
    
    
    38,256
    
    
    
    31,06911,933,392
    
    
    
    10,900,658Other policyholders funds:Supplementary contracts without life contingencies
    
    
    504,885
    
    
    
    439,441Advance premiums and other deposits
    
    
    167,473
    
    
    
    158,245Accrued dividends
    
    
    10,241
    
    
    
    11,208682,599
    
    
    
    608,894Amounts payable to affiliates
    
    
    247
    
    
    
    35Short-term debt
    
    
    59,446
    
    
    
    Long-term debt payable to affiliates
    
    
    100,000
    
    
    
    Long-term debt
    
    
    271,005
    
    
    
    316,930Deferred income taxes
    
    
    
    
    
    
    28,188Collateral payable for securities lending and other transactions
    
    
    69,656
    
    
    
    202,594Other liabilities
    
    
    108,588
    
    
    
    104,840Liabilities related to separate accounts
    
    
    577,420
    
    
    
    862,738Total liabilities
    
    
    13,802,353
    
    
    
    13,024,877Minority interest in subsidiaries
    
    
    96
    
    
    
    91Stockholders equity:Preferred stock, without par value, at liquidation value 
authorized 10,000,000 shares, issued and outstanding 5,000,000
Series B shares
    
    
    3,000
    
    
    
    3,000Class A common stock, without par value  authorized 88,500,000
shares, issued and outstanding 28,975,889 shares in 2008 and
28,826,738 shares in 2007
    
    
    104,090
    
    
    
    101,221Class B common stock, without par value  authorized 1,500,000
shares, issued and outstanding 1,192,990 shares
    
    
    7,522
    
    
    
    7,525Accumulated other comprehensive loss
    
    
    (649,758
    )
    
    
    (36,345
    )Retained earnings
    
    
    793,511
    
    
    
    827,490Total stockholders equity
    
    
    258,365
    
    
    
    902,891Total liabilities and stockholders equity
    
    $
    14,060,814
    
    
    $
    13,927,859
  86




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share data)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Revenues:Interest sensitive and index product charges
    
    $
    127,199
    
    
    $
    114,529
    
    
    $
    105,033Traditional life insurance premiums
    
    
    149,186
    
    
    
    144,682
    
    
    
    138,401Net investment income
    
    
    707,872
    
    
    
    628,031
    
    
    
    535,836Derivative income (loss)
    
    
    (208,793
    )
    
    
    (4,951
    )
    
    
    70,340Realized/unrealized gains (losses) on investments
    
    
    (156,309
    )
    
    
    5,769
    
    
    
    13,971Other income
    
    
    25,310
    
    
    
    26,539
    
    
    
    23,772Total revenues
    
    
    644,465
    
    
    
    914,599
    
    
    
    887,353Benefits and expenses:Interest sensitive and index product benefits
    
    
    440,430
    
    
    
    442,544
    
    
    
    338,832Change in value of index product embedded derivatives
    
    
    (189,354
    )
    
    
    (5,907
    )
    
    
    70,295Traditional life insurance benefits
    
    
    96,884
    
    
    
    90,808
    
    
    
    90,837Increase in traditional life future policy benefits
    
    
    43,255
    
    
    
    37,682
    
    
    
    33,500Distributions to participating policyholders
    
    
    20,064
    
    
    
    21,420
    
    
    
    22,504Underwriting, acquisition and insurance expenses
    
    
    221,393
    
    
    
    161,820
    
    
    
    164,518Interest expense
    
    
    19,567
    
    
    
    16,666
    
    
    
    11,744Other expenses
    
    
    24,104
    
    
    
    23,760
    
    
    
    21,635Total benefits and expenses
    
    
    676,343
    
    
    
    788,793
    
    
    
    753,865(31,878
    )
    
    
    125,806
    
    
    
    133,488Income taxes
    
    
    13,662
    
    
    
    (41,051
    )
    
    
    (44,368
    )Minority interest in loss (earnings) of subsidiaries
    
    
    71
    
    
    
    49
    
    
    
    (126
    )Equity income (loss), net of related income taxes
    
    
    (4
    )
    
    
    1,535
    
    
    
    1,135Net income (loss)
    
    $
    (18,149
    )
    
    $
    86,339
    
    
    $
    90,129Earnings (loss) per common share
    
    $
    (0.61
    )
    
    $
    2.90
    
    
    $
    3.06Earnings (loss) per common share  assuming dilution
    
    $
    (0.61
    )
    
    $
    2.84
    
    
    $
    3.01Cash dividends per common share
    
    $
    0.50
    
    
    $
    0.48
    
    
    $
    0.46
  87




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Dollars in thousands)
 AccumulatedSeries B
    
    
    Class A
    
    
    Class B
    
    
    Other
    
    
    
    
    
    
    TotalPreferred
    
    
    Common
    
    
    Common
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Income (Loss)
    
    
    Earnings
    
    
    EquityBalance at January 1, 2006
    
    $
    3,000
    
    
    $
    72,260
    
    
    $
    7,524
    
    
    $
    82,301
    
    
    $
    679,146
    
    
    $
    844,231Record underfunded status of
other postretirement benefit
plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (209
    )
    
    
    
    
    
    
    (209
    )Comprehensive income:Net income for 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,129
    
    
    
    90,129Change in net unrealized
investment gains/losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,897
    )
    
    
    
    
    
    
    (53,897
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,232Adjustment resulting from capital
transactions of equity investee
    
    
    
    
    
    
    (52
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (57
    )Stock-based compensation,
including the issuance of 528,321
common shares under compensation
plans
    
    
    
    
    
    
    14,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,254Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    (150
    )Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,581
    )
    
    
    (13,581
    )Balance at December 31, 2006
    
    
    3,000
    
    
    
    86,462
    
    
    
    7,519
    
    
    
    28,195
    
    
    
    755,544
    
    
    
    880,720Comprehensive income:Net income for 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,339
    
    
    
    86,339Change in net unrealized
investment gains/losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,520
    )
    
    
    
    
    
    
    (64,520
    )Change in underfunded status
of other postretirement
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,799Adjustment resulting from capital
transactions of equity investee
    
    
    
    
    
    
    67
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    73Stock-based compensation,
including the issuance of 358,076
common shares under compensation
plans
    
    
    
    
    
    
    14,692
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,692Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    (150
    )Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,243
    )
    
    
    (14,243
    )Balance at December 31, 2007
    
    
    3,000
    
    
    
    101,221
    
    
    
    7,525
    
    
    
    (36,345
    )
    
    
    827,490
    
    
    
    902,891Comprehensive loss:Net loss for 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,149
    )
    
    
    (18,149
    )Change in net unrealized
investment gains/losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (613,431
    )
    
    
    
    
    
    
    (613,431
    )Change in underfunded status
of other postretirement
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (631,562
    )Change in measurement date of
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770
    )
    
    
    (770
    )Adjustment resulting from capital
transactions of equity investee
    
    
    
    
    
    
    (40
    )
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    (43
    )Stock-based compensation,
including the issuance of 149,151
common shares under compensation
plans
    
    
    
    
    
    
    2,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,909Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    (150
    )Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,910
    )
    
    
    (14,910
    )Balance at December 31, 2008
    
    $
    3,000
    
    
    $
    104,090
    
    
    $
    7,522
    
    
    $
    (649,758
    )
    
    $
    793,511
    
    
    $
    258,365
  88




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Operating activitiesNet income (loss)
    
    $
    (18,149
    )
    
    $
    86,339
    
    
    $
    90,129Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Adjustments related to interest sensitive and index
products:Interest credited/index credits to account
balances, excluding deferred sales inducements
    
    
    324,873
    
    
    
    395,952
    
    
    
    279,257Change in fair value of embedded derivatives
    
    
    (189,354
    )
    
    
    (5,907
    )
    
    
    70,295Charges for mortality and administration
    
    
    (119,819
    )
    
    
    (104,989
    )
    
    
    (96,940
    )Deferral of unearned revenues
    
    
    1,606
    
    
    
    1,429
    
    
    
    1,035Amortization of unearned revenue reserve
    
    
    (2,141
    )
    
    
    (2,292
    )
    
    
    (1,666
    )Provision for depreciation and amortization of
property and equipment
    
    
    15,550
    
    
    
    14,324
    
    
    
    14,298Provision for accretion and amortization of investments
    
    
    (5,366
    )
    
    
    (10,228
    )
    
    
    (8,181
    )Realized/unrealized losses (gains) on investments
    
    
    153,416
    
    
    
    (5,769
    )
    
    
    (13,971
    )Change in fair value of derivatives
    
    
    170,841
    
    
    
    3,398
    
    
    
    (51,853
    )Increase in traditional life and accident and health
benefit accruals
    
    
    44,438
    
    
    
    39,356
    
    
    
    38,114Policy acquisition costs deferred
    
    
    (159,866
    )
    
    
    (173,723
    )
    
    
    (190,955
    )Amortization of deferred policy acquisition costs
    
    
    128,114
    
    
    
    68,394
    
    
    
    68,541Amortization of deferred sales inducements
    
    
    67,860
    
    
    
    9,555
    
    
    
    18,745Amortization of value of insurance in force
    
    
    2,705
    
    
    
    5,069
    
    
    
    3,458Net sale of fixed maturities  trading
    
    
    
    
    
    
    15,000
    
    
    
    Change in accrued investment income
    
    
    (18,066
    )
    
    
    (14,162
    )
    
    
    (21,536
    )Change in amounts receivable from/payable to affiliates
    
    
    (4,748
    )
    
    
    (507
    )
    
    
    (10,866
    )Change in reinsurance recoverable
    
    
    15,805
    
    
    
    23,130
    
    
    
    (30,757
    )Change in current income taxes
    
    
    (6,977
    )
    
    
    (16,152
    )
    
    
    6,422Provision for deferred income taxes
    
    
    (2,576
    )
    
    
    521
    
    
    
    3,397Other
    
    
    5,929
    
    
    
    28,914
    
    
    
    (63,792
    )Net cash provided by operating activities
    
    
    404,075
    
    
    
    357,652
    
    
    
    103,174Investing activitiesSale, maturity or repayment of investments:Fixed maturities  available for sale
    
    
    632,174
    
    
    
    554,217
    
    
    
    453,942Equity securities  available for sale
    
    
    15,474
    
    
    
    19,980
    
    
    
    32,725Mortgage loans on real estate
    
    
    60,397
    
    
    
    56,804
    
    
    
    79,332Derivative instruments
    
    
    32,231
    
    
    
    104,950
    
    
    
    104,106Investment real estate
    
    
    
    
    
    
    9,741
    
    
    
    554Policy loans
    
    
    37,611
    
    
    
    39,522
    
    
    
    28,777Short-term investments  net
    
    
    
    
    
    
    
    
    
    
    134,979777,887
    
    
    
    785,214
    
    
    
    834,415Acquisition of investments:Fixed maturities  available for sale
    
    
    (1,675,422
    )
    
    
    (1,852,613
    )
    
    
    (1,963,560
    )Equity securities  available for sale
    
    
    (12,676
    )
    
    
    (205
    )
    
    
    (273
    )Mortgage loans on real estate
    
    
    (220,667
    )
    
    
    (298,453
    )
    
    
    (218,658
    )Derivative instruments
    
    
    (172,840
    )
    
    
    (104,694
    )
    
    
    (72,142
    )Investment real estate
    
    
    
    
    
    
    (536
    )
    
    
    Policy loans
    
    
    (40,542
    )
    
    
    (39,113
    )
    
    
    (31,804
    )Short-term investments  net
    
    
    (190,454
    )
    
    
    (27,651
    )
    
    
    (2,312,601
    )
    
    
    (2,323,265
    )
    
    
    (2,286,437
    )
 89




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Investing activities - continuedProceeds from disposal, repayments of advances and other
distributions of capital from equity investees
    
    $
    629
    
    
    $
    127
    
    
    $
    9,931Investments in and advances to equity investees
    
    
    
    
    
    
    (850
    )
    
    
    (1,550
    )Purchases of property and equipment
    
    
    (14,272
    )
    
    
    (20,463
    )
    
    
    (19,630
    )Disposal of property and equipment
    
    
    23,342
    
    
    
    4,475
    
    
    
    6,100Net cash used in investing activities
    
    
    (1,525,015
    )
    
    
    (1,554,762
    )
    
    
    (1,457,171
    )Financing activitiesReceipts from interest sensitive and index products
credited to policyholder account balances
    
    
    2,162,398
    
    
    
    2,010,769
    
    
    
    2,211,283Return of policyholder account balances on interest
sensitive and index products
    
    
    (1,187,442
    )
    
    
    (935,385
    )
    
    
    (746,824
    )Proceeds from long-term debt payable to affiliates
    
    
    100,000
    
    
    
    
    
    
    
    Proceeds from long-term debt
    
    
    
    
    
    
    98,460
    
    
    
    Proceeds from short-term debt with affiliates
    
    
    20,000
    
    
    
    
    
    
    
    Repayment of short-term debt with affiliates
    
    
    (20,000
    )
    
    
    
    
    
    
    Proceeds from short-term debt
    
    
    13,400
    
    
    
    
    
    
    
    Receipts (distributions) related to minority interests  net
    
    
    76
    
    
    
    2
    
    
    
    (152
    )Excess tax deductions on stock-based compensation
    
    
    133
    
    
    
    1,376
    
    
    
    1,591Issuance of common stock
    
    
    1,130
    
    
    
    8,004
    
    
    
    9,002Dividends paid
    
    
    (15,060
    )
    
    
    (14,393
    )
    
    
    (13,731
    )Net cash provided by financing activities
    
    
    1,074,635
    
    
    
    1,168,833
    
    
    
    1,461,169Increase (decrease) in cash and cash equivalents
    
    
    (46,305
    )
    
    
    (28,277
    )
    
    
    107,172Cash and cash equivalents at beginning of year
    
    
    84,015
    
    
    
    112,292
    
    
    
    5,120Cash and cash equivalents at end of year
    
    $
    37,710
    
    
    $
    84,015
    
    
    $
    112,292Supplemental disclosures of cash flow informationCash paid (refunded) during the year for:Interest
    
    $
    18,843
    
    
    $
    15,095
    
    
    $
    11,744Income taxes
    
    
    (4,244
    )
    
    
    56,133
    
    
    
    33,569Non-cash operating activity:Deferral of sales inducements
    
    
    60,824
    
    
    
    83,713
    
    
    
    90,454Non-cash financing activity:Reclassification of debt from long-term to short-term
    
    
    46,000
    
    
    
    
    
    
    
    
  90




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1)
    
    Significant Accounting Policies
 Nature of Business
  Consolidation
  Accounting Changes
     91




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Investments
 Fixed Maturities and Equity Securities
    Mortgage Loans on Real Estate
  92




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Derivative Instruments
    Investment Real Estate
  Other Investments
   93




---



##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Collateral Held/Payable for Securities Lending and Other Transactions
   Accrued Investment Income
  Realized/Unrealized Gains and Losses on Investments
  Fair Values
   94




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Cash and Cash Equivalents
  Reinsurance Recoverable
    Deferred Policy Acquisition Costs, Deferred Sales Inducements and Value of Insurance In Force
Acquired
    95




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Property and Equipment
   Goodwill
  Future Policy Benefits
    96




---



##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Deferred Income Taxes
  Separate Accounts
  Recognition of Premium Revenues and Costs
   97




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Underwriting, acquisition and insurance expenses:Commission expense, net of deferrals
    
    $
    13,613
    
    
    $
    13,906
    
    
    $
    13,497Amortization of deferred policy acquisition costs
    
    
    128,114
    
    
    
    68,394
    
    
    
    68,541Amortization of value of insurance in force acquired
    
    
    2,705
    
    
    
    5,069
    
    
    
    3,458Other underwriting, acquisition and insurance expenses, net of
deferrals
    
    
    76,961
    
    
    
    74,451
    
    
    
    79,022Total
    
    $
    221,393
    
    
    $
    161,820
    
    
    $
    164,518
    Other Income and Other Expenses
  98




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Retirement and Compensation Plans
    Comprehensive Income (Loss)
  Dividend Restriction
  Reclassifications
  Use of Estimates
  99




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 2) Investment Operations
 Fixed Maturities and Equity Securities
  Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    Estimated FairAmortized Cost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)December 31, 2008Bonds:Corporate securities
    
    $
    5,810,370
    
    
    $
    46,177
    
    
    $
    (1,026,918
    )
    
    $
    4,829,629Mortgage and asset-backed securities
    
    
    3,002,190
    
    
    
    46,573
    
    
    
    (478,994
    )
    
    
    2,569,769United States Government and
agencies
    
    
    242,033
    
    
    
    12,891
    
    
    
    (4,031
    )
    
    
    250,893State, municipal and other
governments
    
    
    1,445,491
    
    
    
    4,565
    
    
    
    (139,430
    )
    
    
    1,310,626Redeemable preferred stocks
    
    
    5,000
    
    
    
    
    
    
    
    (474
    )
    
    
    4,526Total fixed maturities
    
    $
    10,505,084
    
    
    $
    110,206
    
    
    $
    (1,649,847
    )
    
    $
    8,965,443Equity securities
    
    $
    51,958
    
    
    $
    4,173
    
    
    $
    (11,268
    )
    
    $
    44,863
 Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    Estimated FairAmortized Cost
    
    
    Gains
    
    
    Losses
    
    
    Value(Dollars in thousands)December 31, 2007Bonds:Corporate securities
    
    $
    5,057,919
    
    
    $
    101,688
    
    
    $
    (163,225
    )
    
    $
    4,996,382Mortgage and asset-backed securities
    
    
    2,772,552
    
    
    
    16,052
    
    
    
    (102,631
    )
    
    
    2,685,973United States Government and
agencies
    
    
    550,410
    
    
    
    8,454
    
    
    
    (4,524
    )
    
    
    554,340State, municipal and other
governments
    
    
    1,248,887
    
    
    
    19,118
    
    
    
    (15,106
    )
    
    
    1,252,899Redeemable preferred stocks
    
    
    33,218
    
    
    
    1,369
    
    
    
    (1,589
    )
    
    
    32,998Total fixed maturities
    
    $
    9,662,986
    
    
    $
    146,681
    
    
    $
    (287,075
    )
    
    $
    9,522,592Equity securities
    
    $
    22,410
    
    
    $
    1,290
    
    
    $
    (67
    )
    
    $
    23,633
  100




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2008EstimatedAmortized Cost
    
    
    Fair Value(Dollars in thousands)Due in one year or less
    
    $
    117,268
    
    
    $
    113,169Due after one year through five years
    
    
    1,182,860
    
    
    
    1,045,741Due after five years through ten years
    
    
    2,949,740
    
    
    
    2,458,698Due after ten years
    
    
    3,248,026
    
    
    
    2,773,5407,497,894
    
    
    
    6,391,148Mortgage and asset-backed securities
    
    
    3,002,190
    
    
    
    2,569,769Redeemable preferred stocks
    
    
    5,000
    
    
    
    4,526$
    10,505,084
    
    
    $
    8,965,443
   December 31,2008
    
    
    2007(Dollars in thousands)Unrealized appreciation (depreciation) on:Fixed maturities  available for sale
    
    $
    (1,539,641
    )
    
    $
    (140,394
    )Equity securities  available for sale
    
    
    (7,095
    )
    
    
    1,223Interest rate swaps
    
    
    (3,250
    )
    
    
    (591
    )(1,549,986
    )
    
    
    (139,762
    )Adjustments for assumed changes in amortization pattern of:Deferred policy acquisition costs
    
    
    398,192
    
    
    
    55,490Deferred sales inducements
    
    
    134,157
    
    
    
    28,237Value of insurance in force acquired
    
    
    25,235
    
    
    
    624Unearned revenue reserve
    
    
    (6,941
    )
    
    
    (191
    )Provision for deferred income taxes
    
    
    349,794
    
    
    
    19,461(649,549
    )
    
    
    (36,141
    )Proportionate share of net unrealized investment gains of
equity investees
    
    
    2
    
    
    
    25Net unrealized investment losses
    
    $
    (649,547
    )
    
    $
    (36,116
    )
  101




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2008
 Less than one year
    
    
    One year or more
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(Dollars in thousands)Corporate securities
    
    $
    2,416,471
    
    
    $
    (369,595
    )
    
    $
    1,514,634
    
    
    $
    (657,323
    )
    
    $
    3,931,105
    
    
    $
    (1,026,918
    )Mortgage and
asset-backed
securities
    
    
    527,498
    
    
    
    (106,413
    )
    
    
    1,067,078
    
    
    
    (372,581
    )
    
    
    1,594,576
    
    
    
    (478,994
    )United States
Government and
agencies
    
    
    31,052
    
    
    
    (4,000
    )
    
    
    2,462
    
    
    
    (31
    )
    
    
    33,514
    
    
    
    (4,031
    )State, municipal and
other governments
    
    
    783,887
    
    
    
    (64,310
    )
    
    
    384,632
    
    
    
    (75,120
    )
    
    
    1,168,519
    
    
    
    (139,430
    )Redeemable preferred
stocks
    
    
    4,526
    
    
    
    (474
    )
    
    
    
    
    
    
    
    
    
    
    4,526
    
    
    
    (474
    )Total fixed maturities
    
    $
    3,763,434
    
    
    $
    (544,792
    )
    
    $
    2,968,806
    
    
    $
    (1,105,055
    )
    
    $
    6,732,240
    
    
    $
    (1,649,847
    )
 December 31, 2007
 Less than one year
    
    
    One year or more
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(Dollars in thousands)Corporate securities
    
    $
    1,177,231
    
    
    $
    (58,031
    )
    
    $
    1,309,243
    
    
    $
    (105,194
    )
    
    $
    2,486,474
    
    
    $
    (163,225
    )Mortgage and asset-backed securities
    
    
    611,532
    
    
    
    (40,452
    )
    
    
    1,119,265
    
    
    
    (62,179
    )
    
    
    1,730,797
    
    
    
    (102,631
    )United States
Government and
agencies
    
    
    51,200
    
    
    
    (372
    )
    
    
    97,204
    
    
    
    (4,152
    )
    
    
    148,404
    
    
    
    (4,524
    )State, municipal and
other governments
    
    
    142,733
    
    
    
    (3,343
    )
    
    
    386,840
    
    
    
    (11,763
    )
    
    
    529,573
    
    
    
    (15,106
    )Redeemable preferred
stocks
    
    
    5,425
    
    
    
    (1,575
    )
    
    
    4,986
    
    
    
    (14
    )
    
    
    10,411
    
    
    
    (1,589
    )Total fixed
maturities
    
    $
    1,988,121
    
    
    $
    (103,773
    )
    
    $
    2,917,538
    
    
    $
    (183,302
    )
    
    $
    4,905,659
    
    
    $
    (287,075
    )
  Corporate securities
  102




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Mortgage and asset-backed securities:
 United States Government and agencies:
 State, municipal and other governments:
   103




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      
    
    historical operating trends;
    
    business prospects;
    
    status of the industry in which the company operates;
    
    analyst ratings on the issuer and sector;
    
    quality of management;
    
    size of the unrealized loss;
    
    level of current market interest rates compared to market interest rates when the
security was purchased;
    
    length of time the security has been in an unrealized loss position; and
    
    our intent and ability to hold the security.
 104




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Mortgage Loans on Real Estate
    Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Fixed maturities  available for sale
    
    $
    615,400
    
    
    $
    542,669
    
    
    $
    463,723Fixed maturities  trading
    
    
    
    
    
    
    195
    
    
    
    546Equity securities  available for sale
    
    
    3,115
    
    
    
    511
    
    
    
    522Mortgage loans on real estate
    
    
    78,588
    
    
    
    68,201
    
    
    
    58,042Investment real estate
    
    
    
    
    
    
    461
    
    
    
    435Policy loans
    
    
    10,931
    
    
    
    10,800
    
    
    
    10,415Short-term investments, cash and cash equivalents
    
    
    3,513
    
    
    
    11,104
    
    
    
    3,693Prepayment fee income and other
    
    
    3,895
    
    
    
    5,345
    
    
    
    6,262Interest paid on collateral held
    
    
    (426
    )
    
    
    (4,526
    )
    
    
    (1,243
    )715,016
    
    
    
    634,760
    
    
    
    542,395Less investment expenses
    
    
    (7,144
    )
    
    
    (6,729
    )
    
    
    (6,559
    )Net investment income
    
    $
    707,872
    
    
    $
    628,031
    
    
    $
    535,836
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Fixed maturities  available for sale
    
    $
    (155,710
    )
    
    $
    (2,743
    )
    
    $
    (1,521
    )Fixed maturities  trading
    
    
    
    
    
    
    73
    
    
    
    83Equity securities  available for sale
    
    
    4,128
    
    
    
    5,794
    
    
    
    13,492Investment real estate
    
    
    
    
    
    
    2,645
    
    
    
    (19
    )Collateral held for securities lending and other transactions
    
    
    (1,834
    )
    
    
    
    
    
    
    Derivative instruments assumed
    
    
    (2,893
    )
    
    
    
    
    
    
    Securities and indebtedness of related parties
    
    
    
    
    
    
    
    
    
    
    1,936Realized/unrealized gains (losses) on investments
    
    $
    (156,309
    )
    
    $
    5,769
    
    
    $
    13,971
  105




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Fixed maturities  available for sale
    
    $
    (1,399,247
    )
    
    $
    (161,626
    )
    
    $
    (87,587
    )Equity securities  available for sale
    
    
    (8,318
    )
    
    
    (13,451
    )
    
    
    (13,258
    )Interest rate swaps
    
    
    (2,659
    )
    
    
    (5,317
    )
    
    
    (798
    )Change in unrealized
appreciation/depreciation of
investments
    
    $
    (1,410,224
    )
    
    $
    (180,394
    )
    
    $
    (101,643
    )
  Gross Realized
    
    
    Gross RealizedAmortized Cost
    
    
    Gains
    
    
    Losses
    
    
    Proceeds(Dollars in thousands)Year ended December 31, 2008Scheduled principal repayments and
calls  available for sale
    
    $
    526,311
    
    
    $
    
    
    
    $
    
    
    
    $
    526,311Sales  available for sale
    
    
    107,918
    
    
    
    3,256
    
    
    
    (5,310
    )
    
    
    105,864Total
    
    $
    634,229
    
    
    $
    3,256
    
    
    $
    (5,310
    )
    
    $
    632,175Year ended December 31, 2007Scheduled principal repayments and
calls  available for sale
    
    $
    497,676
    
    
    $
    
    
    
    $
    
    
    
    $
    497,676Sales  available for sale
    
    
    55,088
    
    
    
    1,626
    
    
    
    (173
    )
    
    
    56,541Total
    
    $
    552,764
    
    
    $
    1,626
    
    
    $
    (173
    )
    
    $
    554,217Year ended December 31, 2006Scheduled principal repayments and
calls  available for sale
    
    $
    393,789
    
    
    $
    
    
    
    $
    
    
    
    $
    393,789Sales  available for sale
    
    
    59,454
    
    
    
    1,226
    
    
    
    (527
    )
    
    
    60,153Total
    
    $
    453,243
    
    
    $
    1,226
    
    
    $
    (527
    )
    
    $
    453,942
   Variable Interest Entities
  106




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Other
       
  3) Derivative Instruments
   107




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Carrying and Fair Value at December 31,Maturity
    
    Notional
    
    
    Receive
    
    PayDate
    
    Amount
    
    
    Rate
    
    Rate
    
    2008
    
    
    2007(dollars in thousands)4/1/2008
    
    $
    50,000
    
    
    3 month LIBOR*
    
    3.865%
    
    $
    
    
    
    $
    1207/1/2008
    
    
    50,000
    
    
    1 month LIBOR*
    
    2.579
    
    
    
    
    
    
    4407/1/2008
    
    
    50,000
    
    
    1 month LIBOR*
    
    2.465
    
    
    
    
    
    
    4511/1/2010
    
    
    50,000
    
    
    1 month LIBOR*
    
    4.858
    
    
    (1,860
    )
    
    
    (1,080
    )10/7/2010
    
    
    46,000
    
    
    3 month LIBOR*
    
    4.760
    
    
    (2,692
    )
    
    
    (1,159
    )12/1/2010
    
    
    50,000
    
    
    1 month LIBOR*
    
    5.040
    
    
    
    
    
    
    (1,640
    )6/1/2011
    
    
    50,000
    
    
    1 month LIBOR*
    
    5.519
    
    
    (4,905
    )
    
    
    (2,554
    )$
    (9,457
    )
    
    $
    (5,422
    )
 * London Interbank Offered Rate
      108




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  4) Fair Values of Financial Instruments
     Fixed maturity securities:
 Equity securities:
 Mortgage loans on real estate:
 Derivative instruments:
 109




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Policy loans
 Other long-term investments, cash and short-term investments:
 Reinsurance recoverable:
 Collateral held and payable for securities lending and other transactions:
 Assets held in separate accounts:
 Future policy benefits and other policyholders funds:
 Short-term and long-term debt:
 Other liabilities:
 Liabilities related to separate accounts:
 110




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31,2008
    
    
    2007Carrying Value
    
    
    Fair Value
    
    
    Carrying Value
    
    
    Fair Value(Dollars in thousands)AssetsFixed maturities  available for sale
    
    $
    8,965,443
    
    
    $
    8,965,443
    
    
    $
    9,522,592
    
    
    $
    9,522,592Equity securities  available for sale
    
    
    44,863
    
    
    
    44,863
    
    
    
    23,633
    
    
    
    23,633Mortgage loans on real estate
    
    
    1,381,854
    
    
    
    1,335,851
    
    
    
    1,221,573
    
    
    
    1,244,718Derivative instruments
    
    
    12,933
    
    
    
    12,933
    
    
    
    43,918
    
    
    
    43,918Policy loans
    
    
    182,421
    
    
    
    251,838
    
    
    
    179,490
    
    
    
    215,208Other long-term investments
    
    
    1,527
    
    
    
    1,527
    
    
    
    1,300
    
    
    
    1,300Cash and short-term investments
    
    
    300,169
    
    
    
    300,169
    
    
    
    156,020
    
    
    
    156,020Reinsurance recoverable
    
    
    5,920
    
    
    
    5,920
    
    
    
    22,659
    
    
    
    22,659Collateral held for securities
lending and other transactions
    
    
    67,953
    
    
    
    67,953
    
    
    
    186,925
    
    
    
    186,925Assets held in separate accounts
    
    
    577,420
    
    
    
    577,420
    
    
    
    862,738
    
    
    
    862,738LiabilitiesFuture policy benefits
    
    $
    9,633,590
    
    
    $
    8,831,537
    
    
    $
    8,666,463
    
    
    $
    7,670,795Other policyholders funds
    
    
    671,325
    
    
    
    676,966
    
    
    
    596,557
    
    
    
    601,966Short-term debt
    
    
    59,446
    
    
    
    59,005
    
    
    
    
    
    
    
    Long-term debt
    
    
    371,005
    
    
    
    248,399
    
    
    
    316,930
    
    
    
    273,971Collateral payable for securities
lending and other transactions
    
    
    69,656
    
    
    
    69,656
    
    
    
    202,594
    
    
    
    202,594Other liabilities
    
    
    10,314
    
    
    
    10,314
    
    
    
    6,433
    
    
    
    6,433Liabilities related to separate accounts
    
    
    577,420
    
    
    
    559,843
    
    
    
    862,738
    
    
    
    837,591
      111




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     December 31, 2008Quoted prices inactive markets
    
    
    Significant other
    
    
    Significantfor identical
    
    
    observable
    
    
    unobservableassets (Level 1)
    
    
    inputs (Level 2)
    
    
    inputs (Level 3)
    
    
    Total(Dollars in thousands)AssetsFixed maturities  available for sale
    
    $
    
    
    
    $
    8,057,826
    
    
    $
    907,617
    
    
    $
    8,965,443Equity securities  available for sale
    
    
    2,246
    
    
    
    42,617
    
    
    
    
    
    
    
    44,863Derivative instruments
    
    
    
    
    
    
    12,933
    
    
    
    
    
    
    
    12,933Other long-term investments
    
    
    
    
    
    
    
    
    
    
    1,527
    
    
    
    1,527Cash and short-term investments
    
    
    270,181
    
    
    
    29,988
    
    
    
    
    
    
    
    300,169Reinsurance recoverable
    
    
    
    
    
    
    5,920
    
    
    
    
    
    
    
    5,920Collateral held for securities
lending and other transactions
    
    
    
    
    
    
    67,953
    
    
    
    
    
    
    
    67,953Assets held in separate accounts
    
    
    577,420
    
    
    
    
    
    
    
    
    
    
    
    577,420LiabilitiesFuture policy benefits 
index annuity embedded
derivatives
    
    $
    
    
    
    $
    
    
    
    $
    523,515
    
    
    $
    523,515Collateral payable for
securities lending and other
transactions
    
    
    
    
    
    
    69,656
    
    
    
    
    
    
    
    69,656
  112




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2008Mortgage orPrivate
    
    
    Publicly traded
    
    
    other asset -
    
    
    
    
    
    
    Percent ofcorporation
    
    
    issues
    
    
    backed securities
    
    
    Total
    
    
    Total(Dollars in thousands)Source of valuationThird-party vendors
    
    $
    44,760
    
    
    $
    298,852
    
    
    $
    40,721
    
    
    $
    384,333
    
    
    
    42.3
    %Priced internally
    
    
    349,302
    
    
    
    96,896
    
    
    
    77,086
    
    
    
    523,284
    
    
    
    57.7Total
    
    $
    394,062
    
    
    $
    395,748
    
    
    $
    117,807
    
    
    $
    907,617
    
    
    
    100.0
    %
  Fixed maturities
    
    
    Other long-termavailable for sale
    
    
    investments(Dollars in thousands)AssetsBalance, December 31, 2007
    
    $
    1,072,697
    
    
    $
    1,300Purchases (disposals), net
    
    
    150,046
    
    
    
    173Realized and unrealized gains (losses), net
    
    
    (238,254
    )
    
    
    Transfers in and/or (out) of Level 3 (1)
    
    
    (76,552
    )
    
    
    Included in earnings (amortization)
    
    
    (320
    )
    
    
    54Balance, December 31, 2008
    
    $
    907,617
    
    
    $
    1,527Change in unrealized gains/losses on
investments held at December 31, 2008
    
    $
    (193,176
    )
    
    $
    
 (1)
    
    Included in the transfers in and/or out line above is $270.1 million of securities that
were priced using a broker only quote at December 31, 2007 and were transferred to a
pricing service that uses observable market data in the prices and $193.6 million that were
transferred into Level 3 that did not have enough observable data to include in Level 2 at
December 31, 2008, primarily due to a reduction in market activity.
 Future policy benefits  index product embedded derivativesBalance, December 31, 2007
    
    $
    747,511Premiums less benefits, net
    
    
    22,432Impact of unrealized gains (losses), net
    
    
    (246,428
    )Balance, December 31, 2008
    
    $
    523,515Change in unrealized gains/losses on embedded derivatives
held at December 31, 2008 (1)
    
    $
    (246,428
    )
 (1)
    
    Excludes host accretion and the timing of posting index credits, which are included
with the change in value of index product embedded derivatives in the consolidated
statements of operations.
 5) Reinsurance and Policy Provisions
 Reinsurance
  113




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
        114




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Policy
Provisions
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Excluding impact of net unrealized investment gains
and losses:Balance at beginning of year
    
    $
    40,591
    
    
    $
    45,660
    
    
    $
    49,118Accretion of interest during the year
    
    
    1,662
    
    
    
    1,819
    
    
    
    6,186Amortization of asset
    
    
    (4,367
    )
    
    
    (6,888
    )
    
    
    (9,644
    )Balance prior to impact of net unrealized
investment gains and losses
    
    
    37,886
    
    
    
    40,591
    
    
    
    45,660Impact of net unrealized investment gains and losses
    
    
    25,235
    
    
    
    624
    
    
    
    (2,819
    )Balance at end of year
    
    $
    63,121
    
    
    $
    41,215
    
    
    $
    42,841
    December 31, 2008
    
    
    December 31, 2007Separate
    
    
    
    
    
    
    SeparateAccount
    
    
    Net Amount
    
    
    Account
    
    
    Net AmountType of Guarantee
    
    Balance
    
    
    at Risk
    
    
    Balance
    
    
    at Risk(Dollars in thousands)Guaranteed minimum death benefit:Return of net deposits
    
    $
    144,119
    
    
    $
    19,626
    
    
    $
    241,716
    
    
    $
    365Return the greater of highest anniversary
value or net deposits
    
    
    265,105
    
    
    
    126,169
    
    
    
    478,694
    
    
    
    6,925Incremental death benefit
    
    
    224,999
    
    
    
    6,512
    
    
    
    442,323
    
    
    
    42,015Guaranteed minimum income benefit
    
    
    5,568
    
    
    
    27
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    152,334
    
    
    
    
    
    
    $
    49,305
  6) Income Taxes
  115




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Taxes provided in consolidated statements of operations
on:Income (loss) before minority interest in loss
(earnings) of subsidiaries and equity income 
(loss):Current
    
    $
    (11,086
    )
    
    $
    40,530
    
    
    $
    40,993Deferred
    
    
    (2,576
    )
    
    
    521
    
    
    
    3,375(13,662
    )
    
    
    41,051
    
    
    
    44,368Equity income (loss)  current
    
    
    (2
    )
    
    
    827
    
    
    
    612Taxes provided in consolidated statements of changes in
stockholders equity:Change in cumulative effect of change in accounting
principal  deferred
    
    
    (439
    )
    
    
    
    
    
    
    Change in net unrealized investment gains/losses 
deferred
    
    
    (330,308
    )
    
    
    (34,742
    )
    
    
    (29,022
    )Adjustment resulting from capital transaction of
equity investee  deferred
    
    
    (23
    )
    
    
    39
    
    
    
    (31
    )Change in underfunded status of other post-retirement
benefit plans  deferred
    
    
    10
    
    
    
    (10
    )
    
    
    (112
    )Issuance of shares under stock option plan  current
    
    
    (134
    )
    
    
    (1,376
    )
    
    
    (1,614
    )Issuance of shares under stock option plan  deferred
    
    
    69
    
    
    
    
    
    
    
    22(330,825
    )
    
    
    (36,089
    )
    
    
    (30,757
    )$
    (344,489
    )
    
    $
    5,789
    
    
    $
    14,223
 116




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Income (loss) before income taxes, minority
interest in loss (earnings) of subsidiaries and

equity income (loss)
    
    $
    (31,879
    )
    
    $
    125,806
    
    
    $
    133,488Income tax (benefit) at federal statutory rate (35%)
    
    $
    (11,158
    )
    
    $
    44,032
    
    
    $
    46,721Tax effect (decrease) of:Tax-exempt dividend and interest income
    
    
    (2,618
    )
    
    
    (2,700
    )
    
    
    (1,963
    )Reversal of tax accruals no longer necessary
based on events and analysis performed 
during
the year
    
    
    
    
    
    
    
    
    
    
    (525
    )Other items
    
    
    114
    
    
    
    (281
    )
    
    
    135Income tax expense (benefit)
    
    $
    (13,662
    )
    
    $
    41,051
    
    
    $
    44,368
  December 31,2008
    
    
    2007(Dollars in thousands)Deferred income tax assets:Fixed maturity and equity securities
    
    
    585,456
    
    
    
    46,481Future policy benefits
    
    
    306,651
    
    
    
    342,244Accrued dividends
    
    
    3,584
    
    
    
    3,923Accrued benefit and compensation costs
    
    
    11,378
    
    
    
    12,469Other
    
    
    2,445
    
    
    
    2,736909,514
    
    
    
    407,853Deferred income tax liabilities:Deferred policy acquisition costs
    
    $
    425,817
    
    
    $
    298,703Deferred sales inducements
    
    
    147,059
    
    
    
    112,452Value of insurance in force acquired
    
    
    22,092
    
    
    
    14,425Property and equipment
    
    
    5,407
    
    
    
    9,162Other
    
    
    4,059
    
    
    
    1,299604,434
    
    
    
    436,041Net deferred income tax asset (liability)
    
    $
    305,080
    
    
    $
    (28,188
    )
  7) Credit Arrangements
  short-term
 117




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     8) Stockholders Equity
  118




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  9) Retirement and Compensation Plans
 Defined Benefit Plans
    As of or for the year endedDecember 31,2008
    
    
    2007(Dollars in thousands)Change in benefit obligation  all employersNet benefit obligation at beginning of the year
    
    $
    260,738
    
    
    $
    261,289Service cost
    
    
    8,291
    
    
    
    9,364Interest cost
    
    
    18,534
    
    
    
    13,903Actuarial loss (gain)
    
    
    12,787
    
    
    
    (3,446
    )Benefits paid
    
    
    (22,465
    )
    
    
    (20,564
    )Other
    
    
    (2,244
    )
    
    
    192Net benefit obligation at end of the year
    
    
    275,641
    
    
    
    260,738Change in plan assets  all employersFair value of plan assets at beginning of the year
    
    
    207,456
    
    
    
    182,452Actual return on plan assets
    
    
    (25,327
    )
    
    
    13,515Employer contributions
    
    
    16,372
    
    
    
    32,053Benefits paid
    
    
    (22,465
    )
    
    
    (20,564
    )Other
    
    
    (3,328
    )
    
    
    Fair value of plan assets at end of the year
    
    
    172,708
    
    
    
    207,456Underfunded status at end of the year
    
    $
    (102,933
    )
    
    $
    (53,282
    )
  119




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Service cost
    
    $
    6,636
    
    
    $
    9,364
    
    
    $
    9,583Interest cost
    
    
    14,835
    
    
    
    13,903
    
    
    
    13,711Expected return on assets
    
    
    (13,978
    )
    
    
    (12,347
    )
    
    
    (10,984
    )Amortization of prior service cost
    
    
    784
    
    
    
    775
    
    
    
    804Amortization of actuarial loss
    
    
    3,779
    
    
    
    4,479
    
    
    
    5,593Settlement expense
    
    
    1,476
    
    
    
    
    
    
    
    Net periodic pension cost  all employers
    
    $
    13,532
    
    
    $
    16,174
    
    
    $
    18,707
    December 31,2008
    
    
    2007(Dollars in thousands)Amounts recognized in our consolidated financial statementsPrepaid benefit cost
    
    $
    13,140
    
    
    $
    14,342Accrued benefit cost
    
    
    (10,241
    )
    
    
    (10,666
    )Net amount recognized in our consolidated financial statements
    
    $
    2,899
    
    
    $
    3,676
   December 31,2008
    
    2007(Dollars in thousands)Projected benefit obligation  all employers
    
    $
    275,641
    
    
    $
    260,738Accumulated benefit obligation  all employers
    
    
    243,358
    
    
    
    228,574Fair value of plan assets  all employers
    
    
    172,708
    
    
    
    207,456
  December 31,2008
    
    
    2007Discount rate
    
    
    5.93%
    
    
    
    6.01%Annual salary increases
    
    
    4.00%
    
    
    
    4.00%
  120




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Year Ended December 31,2008
    
    2007
    
    2006Discount rate
    
    
    6.01
    %
    
    
    5.60
    %
    
    
    5.50
    %Expected long-term return on plan assets
    
    
    7.00
    %
    
    
    7.00
    %
    
    
    7.00
    %Annual salary increases
    
    
    4.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
  Other Retirement Plans
     Stock Compensation Plans
  121




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Stock
Option Awards
   Year ended December 31,2008
    
    2007
    
    2006Weighted average risk-free interest rate
    
    
    3.10
    %
    
    
    4.73
    %
    
    
    4.33
    %Dividend yield
    
    
    1.25
    %
    
    
    1.35
    %
    
    
    1.40
    %Weighted average volatility factor of
the expected market price
    
    
    0.25
    
    
    
    0.20
    
    
    
    0.24Weighted average expected term
    
    
    5.3
    years
    
    
    5.7
    years
    
    
    5.6
    years
   Weighted-AverageRemainingWeighted-
    
    
    Contractual
    
    
    AggregateNumber of
    
    
    Average Exercise
    
    
    Term (in
    
    
    IntrinsicShares
    
    
    Price per Share
    
    
    Years)
    
    
    Value (1)(Dollars in thousands, except per share data)Shares under option at January 1, 2008
    
    
    2,260,597
    
    
    $
    27.54Granted
    
    
    511,208
    
    
    
    32.73Exercised
    
    
    (54,915
    )
    
    
    20.23Forfeited or expired
    
    
    (54,465
    )
    
    
    27.86Shares under option at December 31, 2008
    
    
    2,662,425
    
    
    
    28.68
    
    
    
    5.40
    
    
    $
    238Vested at December 31, 2008 or expected
to vest in the future
    
    
    2,608,351
    
    
    $
    28.60
    
    
    
    5.35
    
    
    $
    238Exercisable options at December 31, 2008
    
    
    1,766,896
    
    
    $
    26.52
    
    
    
    4.12
    
    
    $
    238
 (1)
    
    Represents the difference between the stock price and exercise price for each option,
excluding options where the exercise price is above the stock price, at December 31, 2008.
   122




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Performance Based Restricted Stock
   Weighted-Average Grant-Date Fair ValueNumber of Shares
    
    
    per ShareRestricted stock at January 1, 2008
    
    
    256,541
    
    
    $
    34.99Granted
    
    
    145,722
    
    
    
    31.37Released
    
    
    (28,915
    )
    
    
    27.18Forfeited
    
    
    (42,402
    )
    
    
    32.53Restricted stock at December 31, 2008
    
    
    330,946
    
    
    
    34.66
   Other
  10) Management and Other Agreements
  123




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     11) Commitments and Contingencies
      124




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  12) Earnings (Loss) per Share
  Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands, except per share data)Numerator:Net income (loss)
    
    $
    (18,149
    )
    
    $
    86,339
    
    
    $
    90,129Dividends on Series B preferred stock
    
    
    (150
    )
    
    
    (150
    )
    
    
    (150
    )Numerator for earnings (loss) per common share 
income available to common stockholders
    
    $
    (18,299
    )
    
    $
    86,189
    
    
    $
    89,979Denominator:Weighted average shares
    
    
    29,815,654
    
    
    
    29,653,470
    
    
    
    29,332,661Deferred common stock units relating to deferred compensation
plans
    
    
    78,255
    
    
    
    60,792
    
    
    
    46,704Denominator for earnings (loss) per common share 
weighted-average shares
    
    
    29,893,909
    
    
    
    29,714,262
    
    
    
    29,379,365Effect of dilutive securities  stock-based compensation
    
    
    
    
    
    
    607,355
    
    
    
    525,259Denominator for diluted earnings (loss) per common share 
adjusted weighted-average 
shares
    
    
    29,893,909
    
    
    
    30,321,617
    
    
    
    29,904,624Earnings (loss) per common share
    
    $
    (0.61
    )
    
    $
    2.90
    
    
    $
    3.06Earnings (loss) per common share  assuming dilution
    
    $
    (0.61
    )
    
    $
    2.84
    
    
    $
    3.01
   December 31,2008
    
    2007
    
    2006Number of shares excluded
    

    2,141,609
    
    592,768

    

    325,434Range of option price per share
    

    $20.00 -$40.85

    
    $31.43 to $40.85

    

    $25.60 to $39.48Year through which options expire
    

    2018

    

    2017

    
    2016
 13) Statutory Information
   125




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      14) Segment Information
  126




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      
    
    investments and related investment income not specifically allocated to our product
segments;
    
    interest expense;
    
    accident and health insurance products, primarily a closed block of group policies;
    
    advisory services for the management of investments and other companies;
    
    marketing and distribution services for the sale of mutual funds and insurance products
not issued by us; and
    
    leasing services, primarily with affiliates.
  
    
    realized and unrealized gains and losses on investments;
    
    changes in net unrealized gains and losses on derivatives;
    
    the cumulative effect of changes in accounting principles; and
    
    a nonrecurring lawsuit settlement.
  127




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FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   Year ended December 31,2008
    
    
    2007
    
    
    2006(Dollars in thousands)Operating revenues:Traditional Annuity  Exclusive Distribution
    
    $
    143,711
    
    
    $
    150,403
    
    
    $
    147,365Traditional Annuity  Independent Distribution
    
    
    333,361
    
    
    
    376,887
    
    
    
    236,447Traditional and Universal Life Insurance
    
    
    340,164
    
    
    
    335,093
    
    
    
    326,018Variable
    
    
    64,384
    
    
    
    63,380
    
    
    
    59,010Corporate and Other
    
    
    33,013
    
    
    
    38,351
    
    
    
    29,673914,633
    
    
    
    964,114
    
    
    
    798,513Realized/unrealized gains (losses) on investments (A)
    
    
    (156,467
    )
    
    
    5,769
    
    
    
    13,970Change in net unrealized gains/losses on derivatives (A)
    
    
    (113,701
    )
    
    
    (55,284
    )
    
    
    74,870Consolidated revenues
    
    $
    644,465
    
    
    $
    914,599
    
    
    $
    887,353Net investment income:Traditional Annuity  Exclusive Distribution
    
    $
    145,309
    
    
    $
    146,267
    
    
    $
    146,433Traditional Annuity  Independent Distribution
    
    
    395,127
    
    
    
    309,131
    
    
    
    225,206Traditional and Universal Life Insurance
    
    
    143,324
    
    
    
    144,231
    
    
    
    142,620Variable
    
    
    14,257
    
    
    
    13,658
    
    
    
    14,437Corporate and Other
    
    
    9,855
    
    
    
    14,744
    
    
    
    7,140Consolidated net investment income
    
    $
    707,872
    
    
    $
    628,031
    
    
    $
    535,836Depreciation and amortization:Traditional Annuity  Exclusive Distribution
    
    $
    13,546
    
    
    $
    10,453
    
    
    $
    8,159Traditional Annuity  Independent Distribution
    
    
    123,702
    
    
    
    67,508
    
    
    
    53,727Traditional and Universal Life Insurance
    
    
    19,853
    
    
    
    20,474
    
    
    
    13,283Variable
    
    
    17,038
    
    
    
    8,489
    
    
    
    8,763Corporate and Other
    
    
    11,322
    
    
    
    9,953
    
    
    
    9,959185,461
    
    
    
    116,877
    
    
    
    93,891Realized/unrealized gains (losses) on investments (A)
    
    
    (34,095
    )
    
    
    (1,171
    )
    
    
    (164
    )Change in net unrealized gains/losses on derivatives (A)
    
    
    57,496
    
    
    
    (28,592
    )
    
    
    3,134Consolidated depreciation and amortization
    
    $
    208,862
    
    
    $
    87,114
    
    
    $
    96,861Pre-tax operating income (loss):Traditional Annuity  Exclusive Distribution
    
    $
    27,946
    
    
    $
    33,011
    
    
    $
    35,555Traditional Annuity  Independent Distribution
    
    
    5,360
    
    
    
    39,875
    
    
    
    30,439Traditional and Universal Life Insurance
    
    
    53,059
    
    
    
    58,685
    
    
    
    58,706Variable
    
    
    (1,584
    )
    
    
    12,514
    
    
    
    3,596Corporate and Other
    
    
    (12,377
    )
    
    
    (2,020
    )
    
    
    (3,935
    )72,404
    
    
    
    142,065
    
    
    
    124,361Income taxes on operating income
    
    
    (22,812
    )
    
    
    (46,444
    )
    
    
    (41,218
    )Realized/unrealized gains (losses) on investments (A)
    
    
    (79,542
    )
    
    
    4,501
    
    
    
    9,222Change in net unrealized gains/losses on derivatives (A)
    
    
    11,801
    
    
    
    (13,500
    )
    
    
    936Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (283
    )
    
    
    Lawsuit settlement (A)
    
    
    
    
    
    
    
    
    
    
    (3,172
    )Consolidated net income (loss)
    
    $
    (18,149
    )
    
    $
    86,339
    
    
    $
    90,129
 128




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 December 31,2008
    
    
    2007(Dollars in thousands)Assets:Traditional Annuity  Exclusive Distribution
    
    $
    2,593,176
    
    
    $
    2,455,569Traditional Annuity  Independent Distribution
    
    
    8,116,304
    
    
    
    7,076,313Traditional and Universal Life Insurance
    
    
    2,619,677
    
    
    
    2,544,906Variable
    
    
    984,872
    
    
    
    1,247,877Corporate and Other
    
    
    597,471
    
    
    
    727,25414,911,500
    
    
    
    14,051,919Unrealized gains (losses) in accumulated other
comprehensive income (loss) (A)
    
    
    (684,072
    )
    
    
    (54,819
    )Other classification adjustments
    
    
    (166,614
    )
    
    
    (69,241
    )Consolidated assets
    
    $
    14,060,814
    
    
    $
    13,927,859
 (A)
    
    Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves,
deferred policy acquisition costs, deferred sales inducements, value of insurance in force
acquired and income taxes attributable to these items.
     Year ended December 31,2008
    
    2007
    
    2006Life and annuity collected premiums (excluding
Independent Annuity segment):Iowa
    
    
    27.3
    %
    
    
    27.7
    %
    
    
    28.1
    %Kansas
    
    
    18.0
    
    
    
    15.7
    
    
    
    16.5Oklahoma
    
    
    9.4
    
    
    
    6.0
    
    
    
    7.4Independent Annuity segment collected premiums:Pennsylvania
    
    
    9.8
    
    
    
    10.1
    
    
    
    7.9Florida
    
    
    9.1
    
    
    
    9.2
    
    
    
    10.3California
    
    
    6.9
    
    
    
    7.1
    
    
    
    7.6Texas
    
    
    6.7
    
    
    
    7.1
    
    
    
    9.2
 129




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##### Table of Contents



FBL FINANCIAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 15) Quarterly Financial Information (Unaudited)
  2008Quarter ended
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(Dollars in thousands, except per share data)Premiums and product charges
    
    $
    65,254
    
    
    $
    70,554
    
    
    $
    69,213
    
    
    $
    71,364Net investment income
    
    
    168,494
    
    
    
    172,173
    
    
    
    181,888
    
    
    
    185,317Derivative loss
    
    
    (98,896
    )
    
    
    (31,685
    )
    
    
    (40,951
    )
    
    
    (37,261
    )Realized losses on investments
    
    
    (29,347
    )
    
    
    (74,021
    )
    
    
    (27,156
    )
    
    
    (22,813
    )Total revenues
    
    
    111,370
    
    
    
    143,976
    
    
    
    189,539
    
    
    
    202,552Net income (loss)
    
    
    6,438
    
    
    
    (16,575
    )
    
    
    11,216
    
    
    
    (19,177
    )Earnings (loss) per common share
    
    $
    0.21
    
    
    $
    (0.56
    )
    
    $
    0.37
    
    
    $
    (0.64
    )Earnings (loss) per common
share  assuming dilution
    
    $
    0.21
    
    
    $
    (0.56
    )
    
    $
    0.37
    
    
    $
    (0.64
    )
 2007Quarter ended
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(Dollars in thousands, except per share data)Premiums and product charges
    
    $
    61,523
    
    
    $
    66,905
    
    
    $
    63,880
    
    
    $
    66,903Net investment income
    
    
    149,962
    
    
    
    154,582
    
    
    
    157,016
    
    
    
    166,471Derivative income (loss)
    
    
    (3,877
    )
    
    
    44,826
    
    
    
    6,327
    
    
    
    (52,227
    )Realized/unrealized gains
(losses) on investments
    
    
    1,456
    
    
    
    1,156
    
    
    
    3,932
    
    
    
    (775
    )Total revenues
    
    
    216,160
    
    
    
    273,915
    
    
    
    237,668
    
    
    
    186,856Net income
    
    
    24,111
    
    
    
    33,846
    
    
    
    16,499
    
    
    
    11,883Earnings per common share
    
    $
    0.81
    
    
    $
    1.14
    
    
    $
    0.55
    
    
    $
    0.40Earnings per common share 
assuming dilution
    
    $
    0.80
    
    
    $
    1.12
    
    
    $
    0.54
    
    
    $
    0.39
   Quarter ended
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(Dollars in thousands)2008
    
    $
    3,535
    
    
    $
    4,939
    
    
    $
    5,270
    
    
    $
    (1,943
    )2007
    
    
    1,343
    
    
    
    8,278
    
    
    
    (10,319
    )
    
    
    (12,802
    )
 130




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
    
 ITEM 9B. OTHER INFORMATION
  
 PART III
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    
    1.
    
    
    Financial Statements. See Table of Contents following the cover page for a list
of financial statements included in this Report.2.
    
    
    Financial Statement Schedules. The following financial statement
schedules are included as part of this Report immediately following the signature
page:Schedule I  Summary of InvestmentsSchedule II  Condensed Financial Information of Registrant (Parent Company)Schedule III  Supplementary Insurance InformationSchedule IV  Reinsurance
 131




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##### Table of Contents



3.
    
    Exhibits.
 3(i)(a)
    

Restated
Articles of Incorporation, filed with Iowa Secretary of State
March 19, 1996 (G)3(i)(b)
    
    Articles of Amendment, Designation of Series A Preferred Stock, filed with Iowa Secretary
of State April 30, 1996 (G)3(i)(c)
    
    Articles of Amendment, Designation of Series B Preferred Stock, filed with Iowa Secretary
of State May 30, 1997 (G)3(i)(d)
    
    Articles of Correction, filed with Iowa Secretary of State October 27, 2000 (G)3(i)(f)
    
    Articles of Amendment, filed with Iowa Secretary of State May 15, 2003 (G)3(i)(g)
    
    Articles of Amendment, filed with Iowa Secretary of State May 14, 2004 (G)3(ii)(a)
    
    Second Restated Bylaws, adopted May 14, 2004 (G)3(ii)(b)
    
    Amendment to Article VI of Second Restated Bylaws adopted May 16, 2007 (P)3(ii)(c)
    
    Amendment to Article V, Sections 5.2 and 5.4 of Second Restated Bylaws adopted August 20,
2008.4.1
    
    Form of Class A Common Stock Certificate of the Registrant (A)4.2
    
    Restated Stockholders Agreement Regarding Management and Transfer of Shares of Class B
Common Stock of FBL Financial Group, Inc. dated as of March 31, 2004 (G)4.3
    
    Certificate of Trust; Declaration of Trust of FBL Financial Group Capital Trust dated May
30, 1997, including in Annex I thereto the form of Trust Preferred Security and the form
of Trust Common Security; Subordinated Deferrable Interest Note Agreement dated May 30,
1997 between FBL Financial Group, Inc. and FBL Financial Group Capital Trust, including
therein the form of Subordinated Deferrable Interest Note; Preferred Securities Guarantee
Agreement of FBL Financial Group, Inc., dated May 30, 1997 (B)4.4(a)
    
    Master Transaction Agreement between Federal Home Loan Bank of Des Moines and Farm Bureau
Life Insurance Company dated May 1, 2006 (M)4.4(b)
    
    Advance Agreement between Federal Home Loan Bank of Des Moines and Farm Bureau Life
Insurance Company dated September 12, 2006 (M)4.5
    
    Amended and Restated Credit Agreement and related Schedules and Exhibits dated as of
October 7, 2005 between FBL Financial Group, Inc. and Bank of America as successor to
LaSalle Bank National Association, together with amendments dated January 20, 2006, March
12, 2007 and November 5, 2008. These documents are not filed pursuant to the exception
of Regulation S-K, Item 601(b)(4)(iii)(A); FBL Financial Group, Inc. agrees to furnish
these documents to the Commission upon request.4.6
    
    Indenture, dated as of April 12, 2004, between FBL Financial Group, Inc. and Deutsche
Bank Trust Company Americas as Trustee (F)4.7
    
    Form of 5.85% Senior Note Due 2014 (F)4.8
    
    Form of 9.25% Senior Notes Due 2011 and attached registration rights agreement. These
documents are not filed pursuant to the exception of Regulation S-K, Item
601(b)(4)(iii)(A); FBL Financial Group, Inc. agrees to furnish these documents to the
Commission upon request.4.10
    
    Indenture, dated as of March 12, 2007, between FBL Financial Group, Inc. and LaSalle
Bank National Association as Trustee (O)4.11
    
    Form of 5.875% Senior Note Due 2017 (O)10.1
    
    2006 Class A Common Stock Compensation Plan adopted May 17, 2006 (L) *10.1(a)
    
    Form of Stock Option Agreement, pursuant to the FBL Financial Group, Inc. 2006 Class A
Common Stock Compensation Plan (L)*10.2
    
    Trademark License from the American Farm Bureau Federation to Farm Bureau Life Insurance
Company dated May 20, 1987 (A)10.3
    
    Membership Agreement between American Farm Bureau Federation and the Iowa Farm Bureau
Federation dated February 13, 1987 (A)10.4
    
    Form of Royalty Agreement with Farm Bureau organizations (I)10.5
    
    Executive Salary and Bonus Deferred Compensation Plan, effective June 1, 2005 (J) *10.6
    
    2008 Revised Rules for Payment of Meeting Fees, Retainers and Expenses to the Board of
Directors (Q) *10.7
    
    Form of Services Agreement between FBL Financial Group, Inc. and Farm Bureau Management
Corporation, dated as of January 1, 1996 (A)10.8
    
    Management Services Agreement between FBL Financial Group, Inc. and Farm Bureau
 132




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##### Table of Contents



Mutual
effective as of January 1, 2003 (E)10.10
    
    Management Performance Plan (2008) sponsored by FBL Financial Group, Inc. (Q) *10.14
    
    Lease Agreement dated as of March 31, 1998 between IFBF Property Management, Inc., FBL
Financial Group, Inc. and Farm Bureau Mutual Insurance Company (C)10.15
    
    Building Management Services Agreement dated as of March 31, 1998 between IFBF Property
Management, Inc. and FBL Financial Group, Inc. (C)10.16
    
    Coinsurance Agreement between EquiTrust Life Insurance Company and American Equity
Investment Life Insurance Company, dated December 29, 2003 (E)10.17
    
    First Amendment to the Coinsurance Agreement by and between EquiTrust Life Insurance
Company and American Equity Investment Life Insurance Company, effective August 1, 2004
(H)10.18
    
    Form of Change In Control Agreement Form A effective January 1, 2009 between the Company
and James W. Noyce, John M. Paule, Bruce A. Trost, James P. Brannen and Richard J. Kypta
*10.19
    
    Form of Change in Control Agreement Form B effective January 1, 2009 between the Company
and Douglas W. Gumm, Charles T. Happel, David T. Sebastian and Donald J. Seibel *10.23
    
    Form of Early Retirement Agreement, dated June 1, 1993 executed by the Company and James
W. Noyce (K) *10.24
    
    Summary of Named Executive Officer Compensation *10.25
    
    Form of Restricted Stock Agreement, dated as of February 20, 2007 between the Company and
each of James W. Noyce, John M. Paule, Bruce A. Trost, James P. Brannen, Douglas W. Gumm,
David T. Sebastian and Donald J. Seibel (N) *10.26
    
    Form of Restricted Stock Agreement, dated as of February 19, 2008 between the Company and
each of James W. Noyce, Richard J. Kypta, John M. Paule, Bruce A. Trost, James P.
Brannen, Douglas W. Gumm, David T. Sebastian and Donald J. Seibel (Q) *12
    
    Statement Regarding Computation of Ratios of Earnings to Fixed Charges21
    
    Subsidiaries of FBL Financial Group, Inc.23
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    Certification Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
  
 133




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134




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##### Table of Contents



SIGNATURES
  FBL Financial Group, Inc.By:
    /s/ James W. NoyceJames W. NoyceChief Executive Officer  Signature
    
    Title
    
    Date/s/ JAMES W. NOYCE
James W. Noyce
    
    Chief Executive Officer (Principal Executive Officer)
and Director
    
    February 18, 2009/s/ JAMES P. BRANNEN
James P. Brannen
    
    Chief Financial Officer and Chief Administrative Officer
    
    February 18, 2009/s/ CRAIG A. LANG
Craig A. Lang
    
    Chairman of the Board and Director
    
    February 18, 2009/s/ JERRY L. CHICOINE
Jerry L. Chicoine
    
    Vice Chair and Director
    
    February 18, 2009/s/ STEVE L. BACCUS
Steve L. Baccus
    
    Director
    
    February 18, 2009/s/ TIM H. GILL
Tim H. Gill
    
    Director
    
    February 18, 2009/s/ ROBERT H. HANSON
Robert H. Hanson
    
    Director
    
    February 18, 2009/s/ CRAIG D. HILL
Craig D. Hill
    
    Director
    
    February 18, 2009/s/ PAUL E. LARSON
Paul E. Larson
    
    Director
    
    February 18, 2009/s/ EDWARD W. MEHRER
Edward W. Mehrer
    
    Director
    
    February 18, 2009/s/ KEITH R. OLSEN
Keith R. Olsen
    
    Director
    
    February 18, 2009/s/ KIM M. ROBAK
Kim M. Robak
    
    Director
    
    February 18, 2009/s/ KEVIN G. ROGERS
Kevin G. Rogers
    
    Director
    
    February 18, 2009/s/ JOHN E. WALKER
John E. Walker
    
    Director
    
    February 18, 2009
 135




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULES
 
    
 136




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##### Table of Contents



Schedule I  Summary of Investments  Other
 Than Investments in Related Parties
 FBL FINANCIAL GROUP, INC.
 December 31, 2008
 Column A
    
    Column B
    
    
    Column C
    
    
    Column DAmount at whichshown in the balanceType of Investment
    
    Cost (1)
    
    
    Value
    
    
    sheet(Dollars in thousands)Fixed maturity securities, available for sale:Bonds:Corporate securities
    
    $
    5,810,370
    
    
    $
    4,829,629
    
    
    $
    4,829,629Mortgage and asset-backed securities
    
    
    3,002,190
    
    
    
    2,569,769
    
    
    
    2,569,769United States Government and agencies
    
    
    242,033
    
    
    
    250,893
    
    
    
    250,893State, municipal and other governments
    
    
    1,445,491
    
    
    
    1,310,626
    
    
    
    1,310,626Redeemable preferred stocks
    
    
    5,000
    
    
    
    4,526
    
    
    
    4,526Total
    
    
    10,505,084
    
    
    $
    8,965,443
    
    
    
    8,965,443Equity securities, available for sale:Common stocks:Banks, trusts, and insurance companies
    
    
    41,005
    
    
    $
    30,147
    
    
    
    30,147Industrial, miscellaneous, and all other
    
    
    10,953
    
    
    
    14,716
    
    
    
    14,716Total
    
    
    51,958
    
    
    $
    44,863
    
    
    
    44,863Mortgage loans on real estate
    
    
    1,381,319
    
    
    
    
    
    
    
    1,381,854Derivative instruments
    
    
    129,979
    
    
    $
    12,933
    
    
    
    12,933Investment real estate
    
    
    2,559
    
    
    
    
    
    
    
    2,559Policy loans
    
    
    182,421
    
    
    
    
    
    
    
    182,421Other long-term investments
    
    
    1,527
    
    
    
    
    
    
    
    1,527Short-term investments
    
    
    262,459
    
    
    
    
    
    
    
    262,459Total investments
    
    $
    12,517,306
    
    
    
    
    
    
    $
    10,854,059
 (1)
    
    On the basis of cost adjusted for repayments and amortization of premiums and accrual of
discounts for fixed maturities and short-term investments; original cost for equity
securities, real estate and other long-term investments; original cost net of collateral
received for derivative instruments; and unpaid principal balance for mortgage loans on real
estate and policy loans.
 137




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Schedule II  Condensed Financial Information of Registrant
 FBL FINANCIAL GROUP, INC. (PARENT COMPANY)
 Condensed Balance Sheets
 (Dollars in thousands)
 December 31,2008
    
    
    2007AssetsCash and cash equivalents
    
    $
    1,454
    
    
    $
    53Amounts receivable from affiliates
    
    
    11,518
    
    
    
    10,831Amounts receivable from subsidiaries (eliminated in consolidation)
    
    
    1,350
    
    
    
    4,630Accrued investment income
    
    
    268
    
    
    
    509Current income taxes recoverable
    
    
    3,825
    
    
    
    2,927Deferred income taxes
    
    
    7,194
    
    
    
    6,660Other assets
    
    
    1,727
    
    
    
    2,481Short-term investments
    
    
    65,795
    
    
    
    5,916Fixed
maturities-available for sale, at market (amortized cost:
2008 - $15,474, 2007 - $46,990)
    
    
    16,224
    
    
    
    45,774Investments in subsidiaries (eliminated in consolidation)
    
    
    590,752
    
    
    
    1,154,336Total assets
    
    $
    700,107
    
    
    $
    1,234,117Liabilities and stockholders equityLiabilities:Accrued expenses and other liabilities
    
    $
    9,087
    
    
    $
    14,047Amounts payable to affiliates
    
    
    131
    
    
    
    35Amounts payable to subsidiaries (eliminated in consolidation)
    
    
    2,073
    
    
    
    214Short-term debt
    
    
    59,446
    
    
    
    Long-term debt payable to affiliates
    
    
    100,000
    
    
    
    Long-term debt
    
    
    271,005
    
    
    
    316,930Total liabilities
    
    
    441,742
    
    
    
    331,226Stockholders equity:Preferred stock
    
    
    3,000
    
    
    
    3,000Class A common stock
    
    
    104,090
    
    
    
    101,221Class B common stock
    
    
    7,522
    
    
    
    7,525Accumulated other comprehensive loss
    
    
    (649,758
    )
    
    
    (36,345
    )Retained earnings
    
    
    793,511
    
    
    
    827,490Total stockholders equity
    
    
    258,365
    
    
    
    902,891Total liabilities and stockholders equity
    
    $
    700,107
    
    
    $
    1,234,117
  138




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##### Table of Contents



Schedule II  Condensed Financial Information of Registrant (Continued)
FBL FINANCIAL GROUP, INC. (PARENT COMPANY)
Condensed Statements of Operations
(Dollars in thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues:Net investment income
    
    $
    1,717
    
    
    $
    4,425
    
    
    $
    408Realized gains (losses) on investments
    
    
    (3,524
    )
    
    
    (2,488
    )
    
    
    408Dividends from subsidiaries (eliminated in consolidation)
    
    
    24,300
    
    
    
    13,900
    
    
    
    98,200Management fee income from affiliates
    
    
    3,509
    
    
    
    3,072
    
    
    
    2,631Management fee income from subsidiaries (eliminated in
consolidation)
    
    
    6,589
    
    
    
    6,345
    
    
    
    6,808Other income
    
    
    (121
    )
    
    
    512
    
    
    
    107Total revenues
    
    
    32,470
    
    
    
    25,766
    
    
    
    108,562Expenses:Interest expense
    
    
    19,540
    
    
    
    16,611
    
    
    
    11,744General and administrative expenses
    
    
    5,784
    
    
    
    6,360
    
    
    
    5,135Total expenses
    
    
    25,324
    
    
    
    22,971
    
    
    
    16,8797,146
    
    
    
    2,795
    
    
    
    91,683Income tax benefit
    
    
    6,179
    
    
    
    4,376
    
    
    
    2,221Income before equity in undistributed income of subsidiaries
    
    
    13,325
    
    
    
    7,171
    
    
    
    93,904Equity in undistributed income (loss) (dividends in excess
of equity income (loss)) of subsidiaries (eliminated in
consolidation)
    
    
    (31,474
    )
    
    
    79,168
    
    
    
    (3,775
    )Net income (loss)
    
    $
    (18,149
    )
    
    $
    86,339
    
    
    $
    90,129
  139




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##### Table of Contents



Schedule II  Condensed Financial Information of Registrant (Continued)
FBL FINANCIAL GROUP, INC. (PARENT COMPANY)
Condensed Statements of Cash Flows
(Dollars in thousands)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Net cash used in operating activities
    
    $
    (8,729
    )
    
    $
    (5,502
    )
    
    $
    (53,760
    )Investing activitiesSale, maturity or repayment of investments:Fixed maturities  available for sale
    
    
    2,116
    
    
    
    1,383
    
    
    
    Short-term investments  net
    
    
    
    
    
    
    
    
    
    
    48,550Acquisition of investments:Short-term investments  net
    
    
    (59,879
    )
    
    
    (6,527
    )
    
    
    Fixed maturities  available for sale
    
    
    (15,460
    )
    
    
    (97,600
    )
    
    
    (14,930
    )Investment in subsidiaries (eliminated in consolidation)
    
    
    
    
    
    
    
    
    
    
    (45,783
    )Dividends from subsidiaries (eliminated in consolidation)
    
    
    24,300
    
    
    
    13,900
    
    
    
    64,624Net cash provided by (used in) investing activities
    
    
    (48,923
    )
    
    
    (88,844
    )
    
    
    52,461Financing activitiesProceeds from long-term debt payable to affiliates
    
    
    100,000
    
    
    
    
    
    
    
    Proceeds from long-term debt
    
    
    
    
    
    
    98,460
    
    
    
    Proceeds from short-term debt payable to affiliates
    
    
    20,000
    
    
    
    
    
    
    
    Repayment of short-term debt payable to affiliates
    
    
    (20,000
    )
    
    
    
    
    
    
    Proceeds from short-term debt
    
    
    13,400
    
    
    
    
    
    
    
    Excess tax deductions on stock-based compensation
    
    
    134
    
    
    
    1,376
    
    
    
    1,591Issuance of common stock
    
    
    1,130
    
    
    
    8,004
    
    
    
    12,663Capital contributions to subsidiary
    
    
    (40,551
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (15,060
    )
    
    
    (14,393
    )
    
    
    (13,731
    )Net cash provided by financing activities
    
    
    59,053
    
    
    
    93,447
    
    
    
    523Increase (decreas)e in cash and cash equivalents
    
    
    1,401
    
    
    
    (899
    )
    
    
    (776
    )Cash and cash equivalents at beginning of year
    
    
    53
    
    
    
    952
    
    
    
    1,728Cash and cash equivalents at end of year
    
    $
    1,454
    
    
    $
    53
    
    
    $
    952Supplemental disclosure of cash flow informationCash received during the year for income taxes
    
    $
    4,789
    
    
    $
    1,591
    
    
    $
    5,633Cash paid during the year for interest
    
    
    18,843
    
    
    
    15,095
    
    
    
    11,744Non-cash investing activity:Fixed maturity
securities contributed to subsidiary
    
    
    (41,649
    )
    
    
    (47,263
    )
    
    
    (49,117
    )Short-term investments contributed to subsidiary
    
    
    
    
    
    
    (2,737
    )
    
    
    Fixed maturity securities received from subsidiary
    
    
    
    
    
    
    
    
    
    
    33,576Non-cash financing activity:Reclassification of debt from long-term to short-term
    
    
    46,000
    
    
    
    
    
    
    
    
  140




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##### Table of Contents



Schedule II  Condensed Financial Information of Registrant (Continued)
FBL FINANCIAL GROUP, INC. (PARENT COMPANY)
Notes to Condensed Financial Statements
 December 31, 2008
 1. Basis of Presentation
   2. Dividends from Subsidiary
  3. Debt
  141




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##### Table of Contents



Schedule III  Supplementary Insurance Information
 FBL FINANCIAL GROUP, INC.
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EDeferred
    
    
    Future policypolicy
    
    
    benefits, losses,
    
    
    
    
    
    
    Otheracquisition
    
    
    claims and loss
    
    
    Unearned
    
    
    policyholdercosts
    
    
    expenses
    
    
    revenues
    
    
    funds(Dollars in thousands)December 31, 2008:Traditional
Annuity-Exclusive
Distribution
    
    $
    89,714
    
    
    $
    1,970,182
    
    
    $
    
    
    
    $
    382,874Traditional
Annuity-Independent
Distribution
    
    
    479,288
    
    
    
    7,574,394
    
    
    
    
    
    
    
    134,029Traditional and Universal
Life Insurance
    
    
    245,020
    
    
    
    2,060,176
    
    
    
    10,995
    
    
    
    156,161Variable
    
    
    153,395
    
    
    
    229,728
    
    
    
    16,727
    
    
    
    9,466Corporate and Other
    
    
    
    
    
    
    64,249
    
    
    
    
    
    
    
    69Impact of unrealized
gains/ losses
    
    
    398,192
    
    
    
    
    
    
    
    6,941
    
    
    
    Total
    
    $
    1,365,609
    
    
    $
    11,898,729
    
    
    $
    34,663
    
    
    $
    682,599December 31, 2007:Traditional
Annuity-Exclusive
Distribution
    
    $
    80,684
    
    
    $
    1,825,394
    
    
    $
    
    
    
    $
    392,257Traditional
Annuity-Independent
Distribution
    
    
    468,528
    
    
    
    6,769,663
    
    
    
    
    
    
    
    56,050Traditional and Universal
Life Insurance
    
    
    230,398
    
    
    
    2,003,916
    
    
    
    10,970
    
    
    
    153,555Variable
    
    
    156,055
    
    
    
    204,877
    
    
    
    17,287
    
    
    
    7,032Corporate and Other
    
    
    
    
    
    
    68,360
    
    
    
    
    
    
    
    Impact of unrealized
gains/ losses
    
    
    55,490
    
    
    
    
    
    
    
    191
    
    
    
    Total
    
    $
    991,155
    
    
    $
    10,872,210
    
    
    $
    28,448
    
    
    $
    608,894December 31, 2006:Traditional
Annuity-Exclusive
Distribution
    
    $
    78,169
    
    
    $
    1,830,561
    
    
    $
    
    
    
    $
    399,051Traditional
Annuity-Independent
Distribution
    
    
    384,375
    
    
    
    5,366,681
    
    
    
    
    
    
    
    1,268Traditional and Universal
Life Insurance
    
    
    220,858
    
    
    
    1,966,198
    
    
    
    11,801
    
    
    
    153,549Variable
    
    
    146,934
    
    
    
    211,048
    
    
    
    17,319
    
    
    
    8,976Corporate and Other
    
    
    
    
    
    
    71,675
    
    
    
    
    
    
    
    Impact of unrealized
gains/ losses
    
    
    (2,616
    )
    
    
    
    
    
    
    (684
    )
    
    
    Total
    
    $
    827,720
    
    
    $
    9,446,163
    
    
    $
    28,436
    
    
    $
    562,844
 142




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##### Table of Contents



Schedule III  Supplementary Insurance Information (Continued)
 FBL FINANCIAL GROUP, INC.
 Column A
    
    Column F
    
    
    Column G
    
    
    Column H
    
    
    Column I
    
    
    Column JAmortizationBenefits, claims,
    
    
    of deferredlosses and
    
    
    policy
    
    
    OtherPremium
    
    
    Net investment
    
    
    settlement
    
    
    acquisition
    
    
    operatingrevenue
    
    
    income
    
    
    expenses
    
    
    costs
    
    
    expenses(Dollars in thousands)December 31, 2008:Traditional Annuity-Exclusive
Distribution
    
    $
    994
    
    
    $
    145,309
    
    
    $
    93,815
    
    
    $
    11,948
    
    
    $
    10,002Traditional Annuity-Independent
Distribution
    
    
    30,467
    
    
    
    395,127
    
    
    
    234,713
    
    
    
    78,214
    
    
    
    15,075Traditional and Universal Life
Insurance
    
    
    196,873
    
    
    
    143,324
    
    
    
    207,192
    
    
    
    18,156
    
    
    
    41,693Variable
    
    
    48,209
    
    
    
    14,257
    
    
    
    24,883
    
    
    
    15,540
    
    
    
    24,881Corporate and Other
    
    
    
    
    
    
    9,855
    
    
    
    
    
    
    
    
    
    
    
    2,448Change in net unrealized
gains/losses on derivatives
    
    
    
    
    
    
    
    
    
    
    (161,526
    )
    
    
    29,668
    
    
    
    Impact of realized gains/losses
    
    
    (158
    )
    
    
    
    
    
    
    (7,862
    )
    
    
    (25,412
    )
    
    
    (820
    )Total
    
    $
    276,385
    
    
    $
    707,872
    
    
    $
    391,215
    
    
    $
    128,114
    
    
    $
    93,279December 31, 2007:Traditional Annuity-Exclusive
Distribution
    
    $
    1,111
    
    
    $
    146,267
    
    
    $
    97,204
    
    
    $
    9,942
    
    
    $
    10,246Traditional
Annuity-Independent
Distribution
    
    
    20,466
    
    
    
    309,131
    
    
    
    277,212
    
    
    
    47,588
    
    
    
    12,212Traditional and Universal Life
Insurance
    
    
    190,860
    
    
    
    144,231
    
    
    
    191,030
    
    
    
    20,133
    
    
    
    43,825Variable
    
    
    46,790
    
    
    
    13,658
    
    
    
    18,482
    
    
    
    7,587
    
    
    
    24,059Corporate and Other
    
    
    
    
    
    
    14,744
    
    
    
    
    
    
    
    
    
    
    
    3,096Change in net unrealized
gains/losses on derivatives
    
    
    
    
    
    
    
    
    
    
    (18,265
    )
    
    
    (16,233
    )
    
    
    Impact of realized gains/losses
    
    
    (16
    )
    
    
    
    
    
    
    (536
    )
    
    
    (623
    )
    
    
    (12
    )Total
    
    $
    259,211
    
    
    $
    628,031
    
    
    $
    565,127
    
    
    $
    68,394
    
    
    $
    93,426December 31, 2006:Traditional Annuity-Exclusive
Distribution
    
    $
    1,091
    
    
    $
    146,433
    
    
    $
    94,394
    
    
    $
    7,074
    
    
    $
    10,342Traditional
Annuity-Independent
Distribution
    
    
    15,612
    
    
    
    225,206
    
    
    
    155,787
    
    
    
    39,550
    
    
    
    10,671Traditional and Universal Life
Insurance
    
    
    183,398
    
    
    
    142,620
    
    
    
    188,784
    
    
    
    12,823
    
    
    
    43,201Variable
    
    
    43,334
    
    
    
    14,437
    
    
    
    22,794
    
    
    
    7,533
    
    
    
    24,381Corporate and Other
    
    
    
    
    
    
    7,140
    
    
    
    
    
    
    
    
    
    
    
    2,558Change in net unrealized
gains/losses on derivatives
    
    
    
    
    
    
    
    
    
    
    71,688
    
    
    
    1,742
    
    
    
    Impact of realized gains/losses
    
    
    (1
    )
    
    
    
    
    
    
    17
    
    
    
    (181
    )
    
    
    (54
    )Lawsuit Settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,880Total
    
    $
    243,434
    
    
    
    535,836
    
    
    
    533,464
    
    
    
    68,541
    
    
    
    95,979
 143




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##### Table of Contents



Schedule IV  Reinsurance
 FBL FINANCIAL GROUP, INC.
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column E
    
    
    Column FAssumed from
    
    
    
    
    
    
    Percent ofCeded to other
    
    
    other
    
    
    
    
    
    
    amountGross amount
    
    
    companies
    
    
    companies
    
    
    Net amount
    
    
    assumed to net(Dollars in thousands)Year ended December 31, 2008:Life insurance in force, at
end of year
    
    $
    43,513,321
    
    
    $
    9,144,223
    
    
    $
    1,503,808
    
    
    $
    35,872,906
    
    
    
    4.2
    %Insurance premiums and other
considerations:Interest sensitive and
index product charges
    
    $
    109,522
    
    
    $
    1,120
    
    
    $
    18,797
    
    
    $
    127,199
    
    
    
    14.8
    %Traditional life insurance
premiums
    
    
    165,775
    
    
    
    19,924
    
    
    
    3,335
    
    
    
    149,186
    
    
    
    2.2Accident and health premiums
    
    
    11,155
    
    
    
    10,777
    
    
    
    
    
    
    
    378
    
    
    
    $
    286,452
    
    
    $
    31,821
    
    
    $
    22,132
    
    
    $
    276,763
    
    
    
    8.0Year ended December 31, 2007:Life insurance in force, at
end of year
    
    $
    41,092,455
    
    
    $
    8,482,773
    
    
    $
    1,573,705
    
    
    $
    34,183,387
    
    
    
    4.6
    %Insurance premiums and other
considerations:Interest sensitive and
index product charges
    
    $
    94,686
    
    
    $
    952
    
    
    $
    20,795
    
    
    $
    114,529
    
    
    
    18.2
    %Traditional life insurance
premiums
    
    
    159,436
    
    
    
    18,455
    
    
    
    3,701
    
    
    
    144,682
    
    
    
    2.6Accident and health premiums
    
    
    11,715
    
    
    
    11,361
    
    
    
    
    
    
    
    354
    
    
    
    $
    265,837
    
    
    $
    30,768
    
    
    $
    24,496
    
    
    $
    259,565
    
    
    
    9.4Year ended December 31, 2006:Life insurance in force, at
end of year
    
    $
    38,371,878
    
    
    $
    8,012,799
    
    
    $
    1,626,519
    
    
    $
    31,985,598
    
    
    
    5.1
    %Insurance premiums and other
considerations:Interest sensitive and
index product charges
    
    $
    84,825
    
    
    $
    1,726
    
    
    $
    21,934
    
    
    $
    105,033
    
    
    
    20.9
    %Traditional life insurance
premiums
    
    
    151,338
    
    
    
    17,028
    
    
    
    4,091
    
    
    
    138,401
    
    
    
    3.0Accident and health premiums
    
    
    12,356
    
    
    
    11,941
    
    
    
    
    
    
    
    415
    
    
    
    $
    248,519
    
    
    $
    30,695
    
    
    $
    26,025
    
    
    $
    243,849
    
    
    
    10.7
 144