A.M. Best has revised the outlook for the issuer credit rating (ICR) to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and the ICR of “a” of Farm Bureau Life Insurance Company (FBL). The outlook for the FSR remains stable. Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of “bbb” of FBL Financial Group Inc. (FFG) (NYSE:FFG), the parent holding company of FBL. Both companies are domiciled in West Des Moines, IA.

The revision to the outlook reflects FBL’s strong risk-adjusted capitalization, positive earnings trends, strong operating returns and a capitalization profile that is qualitatively viewed as high. FBL has an investment portfolio of good overall credit quality with limited use of reinsurance and no utilization of captives. Overall capital trends remain favorable due to continued organic earnings growth and good penetration of life/annuity sales within its property/casualty distribution system. Additionally, financial leverage at the holding company is very modest with strong interest coverage ratios.

Partially offsetting rating factors include ongoing spread compression with a high percentage of annuity and universal life liabilities at guaranteed minimum crediting rates, although overall spreads remain strong due to an investment portfolio yield that is higher than the industry average. Additionally, a high percentage of annuity liabilities do not have surrender charge protection, which could result in disintermediation risk under a rapidly rising interest rate scenario, which A.M. Best views as unlikely in the near term. Finally, while FBL has good brand awareness, its business profile is primarily concentrated in the Midwest and Western geographic regions.

Factors that could lead to a positive rating action include an increase in risk-adjusted capitalization due to continued organic earnings growth and increased diversification among life and annuity lines of business. Factors that may lead to negative rating actions include a decrease in risk-adjusted capitalization due to operating losses, investment impairments and/or dividends to shareholders, a significant increase in interest-sensitive liabilities and a decrease in the credit quality of the investment portfolio or higher allocations to riskier assets.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

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