UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2019~~March 31, 2020.

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to _______________________

Commission File Number: 1-11917

~~FBL FINANCIAL GROUP INC~~

~~(Exact name of registrant as specified in its charter)~~

~~Iowa~~ ~~42-1411715~~

~~(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)~~

~~5400 University Avenue~~, ~~West Des Moines~~,~~Iowa50266-5997~~

~~(Address of principal executive offices) (Zip Code)~~

(~~515~~) ~~225-5400~~



FBL FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)

Iowa			42-1411715
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5400 University Avenue,	West Des Moines,	Iowa	50266-5997
(Address of principal executive offices)			(Zip Code)

		(515)	225-5400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, without par value	FFG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 ~~days.~~days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No



Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Title of each class		Outstanding at ~~July 30, 2019~~May 4, 2020
Class A Common Stock, without par value		~~24,648,472~~24,630,677
Class B Common Stock, without par value		11,413

(This page has been intentionally left blank.)

FBL FINANCIAL GROUP, INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2019~~MARCH 31, 2020

TABLE OF CONTENTS



PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income (Loss)	5
	Consolidated Statements of Changes in Stockholders’ Equity	5
	Consolidated Statements of Cash Flows	76
	Notes to Consolidated Financial Statements	98

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3433

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5452

Item 4.	Controls and Procedures	5452

PART II.	OTHER INFORMATION	5553

Item 1A.	Risk Factors	5553

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5553

Item 6.	Exhibits	5554

SIGNATURES		5655

ITEM 1. FINANCIAL STATEMENTS

FBL FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands)


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Assets
Investments:
Fixed maturities - available for sale, at fair value (amortized cost: 2019 - $6,909,984; 2018 - $6,856,277)	$	7,484,622	$	7,033,045
Equity securities at fair value (cost: 2019 - $101,847; 2018 - $93,564)	106,021		92,857
Mortgage loans	1,019,124		1,039,829
Fixed maturities - available for sale, at fair value (amortized cost 2020 - $7,115,265, 2019 - $7,015,269; and allowance for credit losses 2020 - $12,146, 2019 - $0)					$	7,617,165	$	7,702,628
Equity securities at fair value (cost: 2020 - $96,882, 2019 - $95,269)					88,610		100,228
Mortgage loans (net of allowance for credit losses 2020 - $3,279, 2019 - $0)					988,854		1,011,678
Real estate	1,543		1,543		955		955
Policy loans	200,246		197,366		202,227		201,589
Short-term investments	9,521		15,713		29,580		11,865
Other investments	48,833		33,765		41,777		62,680
Total investments	8,869,910		8,414,118		8,969,168		9,091,623

Cash and cash equivalents	13,854		19,035		17,524		17,277
Securities and indebtedness of related parties	68,733		60,962		77,641		74,791
Accrued investment income	73,683		74,524		77,263		72,332
Amounts receivable from affiliates	6,330		3,812		3,916		4,357
Reinsurance recoverable	102,898		102,386		105,438		107,498
Deferred acquisition costs	314,301		418,802		337,972		289,456
Value of insurance in force acquired	3,366		10,385		2,829		2,624
Current income taxes recoverable	2,036		4,807		7,570		6,427
Other assets	179,408		163,518		168,045		167,940
Assets held in separate accounts	625,177		561,281		525,582		645,881







Total assets	$	10,259,696	$	9,833,630	$	10,292,948	$	10,480,206

FBL FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands)


	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Liabilities and stockholders’ equity
Liabilities:
Future policy benefits:
Interest sensitive products	$	5,471,944	$	5,403,125	$	5,646,263	$	5,548,212
Traditional life insurance and accident and health products	1,826,458		1,802,346		1,856,580		1,845,337
Other policy claims and benefits	40,058		51,298		47,713		46,883
Supplementary contracts without life contingencies	302,685		303,627		293,016		296,915
Advance premiums and other deposits	258,295		260,252		254,523		253,458
Amounts payable to affiliates	3,421		1,461		1,015		1,218
Long-term debt payable to non-affiliates	97,000		97,000
Short-term debt					10,000		—
Long-term debt					97,000		97,000
Deferred income taxes	134,702		75,449		119,093		152,373
Other liabilities	102,414		93,532		107,841		107,013
Liabilities related to separate accounts	625,177		561,281		525,582		645,881
Total liabilities	8,862,154		8,649,371		8,958,626		8,994,290

Stockholders’ equity:
FBL Financial Group, Inc. stockholders’ 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		3,000		3,000		3,000
Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,648,472 shares in 2019 and 24,707,402 shares in 2018	152,454		152,652
Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2019 and 2018	72		72
Class A common stock, without par value - authorized 88,500,000 shares, issued and outstanding 24,630,777 shares in 2020 and 24,652,802 shares in 2019					152,754		152,661
Class B common stock, without par value - authorized 1,500,000 shares, issued and outstanding 11,413 shares in 2020 and 2019					72		72
Accumulated other comprehensive income	302,793		91,318		258,422		354,764
Retained earnings	939,143		937,097		920,032		975,260
Total FBL Financial Group, Inc. stockholders’ equity	1,397,462		1,184,139		1,334,280		1,485,757
Noncontrolling interest	80		120		42		159
Total stockholders’ equity	1,397,542		1,184,259		1,334,322		1,485,916
Total liabilities and stockholders’ equity	$	10,259,696	$	9,833,630	$	10,292,948	$	10,480,206

See accompanying notes.

FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share data)


	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
Revenues:
Interest sensitive product charges	$	32,534		$	30,906		$	63,800		$	61,004		$	31,720		$	31,266
Traditional life insurance premiums	50,987			51,091			100,379			100,588			49,308			49,392
Net investment income	104,894			103,974			214,534			204,996			74,917			109,640
Net realized capital gains (losses)	377			841			10,534			(906		)	(13,401		)	10,157
Net other-than-temporary impairment losses recognized in earnings	—			—			(869		)	(1,040		)
Change in allowance for credit losses on investments													(12,261		)	—
Other-than-temporary impairment losses													—			(869		)
Other income	4,114			3,637			8,084			8,237			4,980			3,970
Total revenues	192,906			190,449			396,462			372,879			135,263			203,556

Benefits and expenses:
Interest sensitive product benefits	65,223			62,637			135,819			123,982			44,351			70,596
Traditional life insurance benefits	41,960			43,725			88,635			89,181			46,208			46,675
Policyholder dividends	2,564			2,560			5,098			5,111			2,529			2,534
Underwriting, acquisition and insurance expenses	38,948			37,210			75,137			76,787			39,421			36,189
Interest expense	1,212			1,213			2,424			2,426			1,213			1,212
Other expenses	6,635			5,627			12,885			11,220			7,421			6,250
Total benefits and expenses	156,542			152,972			319,998			308,707			141,143			163,456
	36,364			37,477			76,464			64,172			(5,880		)	40,100
Income taxes	(5,511		)	(5,831		)	(11,787		)	(9,644		)
Income tax benefit (expense)													3,081			(6,276		)
Equity income, net of related income taxes	1,404			1,139			1,624			1,799			228			220
Net income	32,257			32,785			66,301			56,327
Net loss attributable to noncontrolling interest	41			18			40			41
Net income attributable to FBL Financial Group, Inc.	$	32,298		$	32,803		$	66,341		$	56,368
Net income (loss)													(2,571		)	34,044
Net (income) loss attributable to noncontrolling interest													56			(1		)
Net income (loss) attributable to FBL Financial Group, Inc.													$	(2,515	)	$	34,043

Earnings per common share	$	1.30		$	1.31		$	2.68		$	2.26
Earnings per common share - assuming dilution	$	1.30		$	1.31		$	2.68		$	2.25
Earnings (loss) per common share													$	(0.10	)	$	1.37
Earnings (loss) per common share - assuming dilution													$	(0.10	)	$	1.37

See accompanying notes.

FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(Dollars in thousands)


	Three months ended June 30,					Six months ended June 30,					Three months ended March 31,
	2019		2018			2019		2018			2020			2019
Net income	$	32,257	$	32,785		$	66,301	$	56,327
Net income (loss)											$	(2,571	)	$	34,044
Other comprehensive income (loss) (1)
Change in net unrealized investment gains/losses	113,416		(55,797		)	211,056		(148,951		)	(96,589		)	97,640
Change in underfunded status of postretirement benefit plans	211		267			419		529			247			208
Total other comprehensive income (loss), net of tax	113,627		(55,530		)	211,475		(148,422		)	(96,342		)	97,848
Total comprehensive income (loss), net of tax	145,884		(22,745		)	277,776		(92,095		)	(98,913		)	131,892
Comprehensive loss attributable to noncontrolling interest	41		18			40		41
Comprehensive (income) loss attributable to noncontrolling interest											56			(1		)
Total comprehensive income (loss) applicable to FBL Financial Group, Inc.	$	145,925	$	(22,727	)	$	277,816	$	(92,054	)	$	(98,857	)	$	131,891


(1)	Other comprehensive income (loss) is recorded net of deferred income taxes and other adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities.

FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

(Dollars in thousands)


	FBL Financial Group, Inc. Stockholders’ Equity																	FBL Financial Group, Inc. Stockholders’ Equity
	Series B Preferred Stock		Class A and Class B Common Stock			Accumulated Other Comprehensive Income			Retained Earnings			Non- controlling Interest			Total Stockholders’ Equity			Series B Preferred Stock		Class A and Class B Common Stock			Accumulated Other Comprehensive Income			Retained Earnings			Non- controlling Interest			Total Stockholders’ Equity
Balance at April 1, 2018	$	3,000	$	153,267		$	186,222		$	909,872		$	35		$	1,252,396
Cumulative effect of change in accounting principle related to net unrealized gains on equity securities	—		—			389			(389		)	—			—
Net income - three months ended June 30, 2018	—		—			—			32,803			(18		)	32,785
Balance at January 1, 2019																		$	3,000	$	152,724		$	91,318		$	937,097		$	120		$	1,184,259
Cumulative effect of change in accounting principle related to leases																		—		—			—			595			—			595
Net income - three months ended March 31, 2019																		—		—			—			34,043			1			34,044
Other comprehensive income																		—		—			97,848			—			—			97,848
Stock-based compensation																		—		202			—			—			—			202
Purchase of common stock																		—		(410		)	—			(4,167		)	—			(4,577		)
Dividends on preferred stock																		—		—			—			(38		)	—			(38		)
Dividends on common stock																		—		—			—			(48,812		)	—			(48,812		)
Balance at March 31, 2019																		$	3,000	$	152,516		$	189,166		$	918,718		$	121		$	1,263,521

Balance at January 1, 2020																		$	3,000	$	152,733		$	354,764		$	975,260		$	159		$	1,485,916
Cumulative effect of change in accounting principle related to current expected credit loss																		—		—			—			(2,685		)	—			(2,685		)
Net loss - three months ended March 31, 2020																		—		—			—			(2,515		)	(56		)	(2,571		)
Other comprehensive loss	—		—			(55,530		)	—			—			(55,530		)	—		—			(96,342		)	—			—			(96,342		)
Stock-based compensation	—		102			—			—			—			102			—		245			—			—			—			245
Purchase of common stock	—		(183		)	—			(1,860		)	—			(2,043		)	—		(152		)	—			(657		)	—			(809		)
Dividends on preferred stock	—		—			—			(37		)	—			(37		)	—		—			—			(38		)	—			(38		)
Dividends on common stock	—		—			—			(11,416		)	—			(11,416		)	—		—			—			(49,333		)	—			(49,333		)
Receipts related to noncontrolling interest	—		—			—			—			15			15
Balance at June 30, 2018	$	3,000	$	153,186		$	131,081		$	928,973		$	32		$	1,216,272

Balance at April 1, 2019	$	3,000	$	152,516		$	189,166		$	918,718		$	121		$	1,263,521
Net income - three months ended June 30, 2019	—		—			—			32,298			(41		)	32,257
Other comprehensive income	—		—			113,627			—			—			113,627
Stock-based compensation	—		10			—			—			—			10
Dividends on preferred stock	—		—			—			(37		)	—			(37		)
Dividends on common stock	—		—			—			(11,836		)	—			(11,836		)
Balance at June 30, 2019	$	3,000	$	152,526		$	302,793		$	939,143		$	80		$	1,397,542
Disbursements related to noncontrolling interest																		—		—			—			—			(61		)	(61		)
Balance at March 31, 2020																		$	3,000	$	152,826		$	258,422		$	920,032		$	42		$	1,334,322

See accompanying notes.

~~FBL FINANCIAL GROUP, INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)~~

~~(Dollars in thousands)~~

FBL Financial Group, Inc. Stockholders’ Equity
Series B Preferred Stock Class A and Class B Common Stock Accumulated Other Comprehensive Income Retained Earnings
Non-
controlling Interest
Total Stockholders’ Equity
Balance at January 1, 2018 $ 3,000
$ 153,661
$ 284,983
$ 935,423
$ 58
$ 1,377,125
Cumulative effect of change in accounting principle related to net unrealized gains on equity securities —
—
(5,480 ) 5,480
—
—
Net income - six months ended June 30, 2018 —
—
—
56,368
(41 ) 56,327
Other comprehensive loss —
—
(148,422 ) —
—
(148,422 )
Stock-based compensation —
320
—
—
—
320
Purchase of common stock —
(795 ) —
(8,054 ) —
(8,849 )
Dividends on preferred stock —
—
—
(75 ) —
(75 )
Dividends on common stock —
—
—
(60,169 ) —
(60,169 )
Receipts related to noncontrolling interest —
—
—
—
15
15
Balance at June 30, 2018 $ 3,000
$ 153,186
$ 131,081
$ 928,973
$ 32
$ 1,216,272

Balance at January 1, 2019 $ 3,000
$ 152,724
$ 91,318
$ 937,097
$ 120
$ 1,184,259
Cumulative effect of change in accounting principle related to leases —
—
—
595
—
595
Net income - six months ended June 30, 2019 —
—
—
66,341
(40 ) 66,301
Other comprehensive income —
—
211,475
—
—
211,475
Stock-based compensation —
212
—
—
—
212
Purchase of common stock —
(410 ) —
(4,167 ) —
(4,577 )
Dividends on preferred stock —
—
—
(75 ) —
(75 )
Dividends on common stock —
—
—
(60,648 ) —
(60,648 )
Balance at June 30, 2019 $ 3,000
$ 152,526
$ 302,793
$ 939,143
$ 80
$ 1,397,542

~~See accompanying notes.~~

FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)


	Six months ended June 30,						Three months ended March 31,
	2019			2018			2020			2019
Operating activities
Net income	$	66,301		$	56,327
Net income (loss)							$	(2,571	)	$	34,044
Adjustments to reconcile net income to net cash provided by operating activities:
Interest credited to account balances	80,152			82,699			40,980			38,531
Charges for mortality, surrenders and administration	(62,978		)	(60,081		)	(33,127		)	(31,201		)
Net realized (gains) losses on investments	(9,665		)	2,705			25,662			(9,288		)
Change in fair value of derivatives	(1,242		)	(3,089		)	1,567			(29		)
Increase in liabilities for life insurance and other future policy benefits	34,593			38,308			21,183			17,507
Deferral of acquisition costs	(22,628		)	(22,244		)	(9,155		)	(11,739		)
Amortization of deferred acquisition costs and value of insurance in force	17,176			20,318			9,597			7,774
Change in reinsurance recoverable	742			5,097			688			(805		)
Provision for deferred income taxes	3,020			(4,190		)	(6,958		)	1,822
Other	(19,850		)	11,362			(20,186		)	(1,923		)
Net cash provided by operating activities	85,621			127,212			27,680			44,693

Investing activities
Sales, maturities or repayments:
Fixed maturities - available for sale	314,460			352,051			120,845			128,274
Equity securities - available for sale	5,085			—
Equity securities							699			—
Mortgage loans	49,386			36,861			35,295			24,603
Derivative instruments	7,314			8,912			9,451			2,121
Policy loans	18,057			19,030			9,913			9,095
Securities and indebtedness of related parties	4,466			3,021			841			1,133
Other long-term investments	2,950			3,524
Other investments							1,333			1,210
Acquisitions:
Fixed maturities - available for sale	(346,440		)	(529,344		)	(203,333		)	(128,578		)
Equity securities - available for sale	(13,092		)	(2,283		)
Equity securities							(2,149		)	(11,069		)
Mortgage loans	(25,902		)	(47,936		)	(15,750		)	(5,650		)
Derivative instruments	(9,766		)	(7,049		)	(5,804		)	(4,432		)
Policy loans	(20,937		)	(22,470		)	(10,551		)	(10,959		)
Securities and indebtedness of related parties	(11,476		)	(8,409		)	(3,990		)	(4,710		)
Other long-term investments	(2,788		)	(6,531		)	(6,100		)	(975		)
Short-term investments, net change	6,192			1,866			(17,715		)	4,198
Purchases and disposals of property and equipment, net	(7,931		)	(6,067		)	(1,763		)	(4,049		)
Net cash used in investing activities	(30,422		)	(204,824		)
Net cash provided by (used in) investing activities							(88,778		)	212

FBL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in thousands)


	Six months ended June 30,						Three months ended March 31,
	2019			2018			2020			2019
Financing activities
Contract holder account deposits	$	316,988		$	402,751		$	271,542		$	135,844
Contract holder account withdrawals	(311,187		)	(311,878		)	(170,003		)	(143,456		)
Dividends paid	(60,723		)	(60,244		)	(49,371		)	(48,850		)
Proceeds from issuance of short-term debt	4,000			27,000			10,000			4,000
Repayments of short-term debt	(4,000		)	—
Issuance or repurchase of common stock, net	(5,458		)	(9,023		)	(762		)	(5,421		)
Other financing activities	—			15			(61		)	—
Net cash provided by (used in) financing activities	(60,380		)	48,621			61,345			(57,883		)
Decrease in cash and cash equivalents	(5,181		)	(28,991		)
Increase (decrease) in cash and cash equivalents							247			(12,978		)
Cash and cash equivalents at beginning of period	19,035			52,696			17,277			19,035
Cash and cash equivalents at end of period	$	13,854		$	23,705		$	17,524		$	6,057

Supplemental disclosures of cash flow information
Cash (paid) received during the period for:
Interest	$	(2,426	)	$	(2,425	)	$	(1,213	)	$	(1,213	)
Income taxes	(30		)	(20		)	(1,915		)	—

See accompanying notes.

FBL FINANCIAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~June 30, 2019~~March 31, 2020

1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of FBL Financial Group, Inc. (we or the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Our financial statements include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of our financial position and results of operations.

Operating results for the ~~quarter~~three months ended ~~June 30, 2019~~March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019~~2020., especially when considering the risks and uncertainties associated with the novel coronavirus ("COVID-19") and the impact it may have on our business, results of operations and financial condition. We encourage you to refer to the notes to our consolidated financial statements included in Item 8 of our Form 10-K for the year ended December 31, ~~2018~~2019 for a complete description of our material accounting policies. Also included in the Form 10-K is a description of areas of judgments and estimates and other information necessary to understand our financial position and results of operations. Our estimates and assumptions could change in the future as more information becomes known about the impact of COVID-19. Our results of operations and financial condition may also be impacted by evolving regulatory, legislative and accounting interpretations and guidance.

New Accounting Pronouncements



Description	Date of adoption	Effect on our consolidated financial statements or other significant matters
Standards adopted:
Leases In February 2016, the FASB issued a new lease accounting standard, which, for most lessees, results in a gross-up of the balance sheet. Under the new standard, lessees recognize the leased assets on the balance sheet and recognize a corresponding liability for the present value of lease payments over the lease term. The new standard requires the application of judgment and estimates. Also, there are accounting policy elections that may be taken both at transition and for the accounting post-transition, including whether to adopt a short-term lease recognition exemption.	January 1, 2019	Upon adoption using the modified retrospective approach, a cumulative effect adjustment of $0.6 million was recorded to retained earnings, representing the elimination of a deferred gain on a sale-leaseback transaction, and both other assets and other liabilities increased by $7.2 million. We elected the practical expedients provided for under the guidance but did not use hindsight in determining lease term. We have no finance leases and have elected to treat leases with terms of twelve months or less as short-term leases. ~~The impact to earnings per share due to adopting this guidance for the three and six months ended June 30, 2019 was ($0.01) per share. See Note 5 for additional discussion.~~
~~Financial instruments - recognition and measurement~~ In January 2016, the FASB issued guidance that amended certain aspects of the recognition and measurement of financial instruments. The new guidance primarily affected the accounting for equity securities, which are now carried at fair value with valuation changes recognized in the statement of operations rather than as other comprehensive income. The presentation and disclosure requirements for financial instruments and the methodology for assessing the need for a valuation allowance on deferred tax assets resulting from unrealized losses on available-for-sale fixed maturity securities were also revised under the new guidance. The new standard required the use of a modified retrospective method at adoption.	~~January 1, 2018~~	Upon adoption, we reclassified $5.5 million of net unrealized investment gains, net of adjustments to deferred acquisition costs, interest sensitive policy reserves and income taxes, on our equity securities from accumulated other comprehensive income to retained earnings as a cumulative effect adjustment.

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Description	Date of adoption	Effect on our consolidated financial statements or other significant matters
Standards ~~not yet~~ adopted:
Financial instruments - credit impairment In June 2016, the FASB issued guidance amending the accounting for the credit impairment of certain financial instruments. Under the new guidance, ~~impairment~~credit losses are ~~required to be~~ estimated using an expected loss model under which ~~a valuation~~an allowance for credit losses is established and ~~adjusted over time.~~reflected as a charge to earnings. The ~~valuation~~ allowance ~~will be~~is based on the probability of loss over the life of the instrument, considering historical, current and ~~forecasted~~forecast information. The new guidance differs significantly from the incurred loss model used ~~today,~~historically, and ~~will result~~results in the earlier recognition of ~~impairment~~credit losses. The new guidance may ~~also~~ increase the volatility of earnings to the extent ~~actual results differ from~~ the assumptions used in estimating the ~~establishment of~~allowance are revised as changes in the ~~valuation allowance. The financial instruments for which we~~allowance will be ~~required to use the new model include but are not limited to, mortgage loans, lease receivables and reinsurance recoverables.~~reflected in earnings. Our available-for-sale fixed maturities will continue to apply the incurred loss model; however, such losses will also be in the form of ~~a valuation~~an allowance ~~which can be increased in the case of future~~for credit losses ~~or decreased should conditions improve.~~ rather than an adjustment to the cost basis of the security. The new guidance permits entities to recognize improvements in credit loss estimates on fixed maturity available-for-sale securities by reducing the allowance account immediately through earnings.	January 1, 2020	~~We are currently evaluating~~Upon adoption using the impact of this new guidance on our consolidated financial statements. We believe the most significant impact upon adoption will be the establishment of an additional valuation allowance for our mortgage loan investments, which historically have not experienced significant credit impairment losses. We will apply this guidance using a modified retrospective approach, ~~by recording~~ a cumulative effect adjustment of $2.7 million after offsets was recorded to retained earnings as of the ~~beginning~~first reporting period in which the new guidance was effective. The cumulative effect adjustment arose from the establishment of an allowance for credit losses on our mortgage loan investments totaling $3.1 million and reinsurance recoverable totaling $0.9 million, before offsets. See the ~~year~~discussion that follows for further information. Application of ~~adoption.~~this guidance resulted in a decrease to net income of $0.1 million (less than $0.01 per basic and diluted share) for the quarter ended March 31, 2020. Prior periods were not restated.
Standards not yet adopted:
Targeted improvements: long-duration contracts In August 2018, the FASB issued guidance that will change the accounting for long-duration insurance contracts. The new guidance impacts several facets of the accounting for such contracts including the accounting for future policy benefits associated with traditional non-participating and limited payment insurance contracts as well as for guaranteed minimum benefits and the amortization model used for deferred acquisition costs. Disclosures as well as presentation of financial results will also change under the new guidance.	January 1, ~~2021~~2022	We are currently evaluating the impact of this guidance on our consolidated financial statements but expect the impact to the timing of profit emergence for the impacted insurance contracts to be significant. Adoption of certain portions of the guidance may be applied on a modified retrospective basis and others on a full retrospective basis.

~~Reclassifications~~Allowance for Credit Losses

As discussed above, effective January 1, 2020 we were required to apply new accounting guidance for the treatment of potential credit losses within certain financial instruments. Our accounting policies and practices as they pertain to the financial instruments impacted by this new guidance are as follows:

~~During~~Fixed Maturities

When the ~~third quarter~~fair value of ~~2018,~~a fixed maturity security is below its amortized cost, an impairment has occurred. To the extent we ~~voluntarily changed~~decide to sell the security or are required to sell the security prior to its recovery of fair value, a charge is taken to realized investment losses as reported within the Consolidated Statement of Operations, and the amortized cost basis of the security is adjusted for the loss. Under the accounting guidance we followed in 2019 and prior periods, to the extent we had no plan or requirement to sell an impaired security, but believed the impairment was other-than-temporary, we similarly recorded a charge to realized investment losses and the amortized cost basis of the security was adjusted for the loss. Beginning in 2020, to the extent an unrealized loss is due to credit, an allowance for credit loss is recognized within the Consolidated Statement of Operations. While fixed maturities are reported net of the allowance for credit losses in our Consolidated Balance Sheet, the allowance is not considered an adjustment to the amortized cost of the security. Accordingly the allowance may increase or decrease over the life of the security based on changes in the assumptions used to determine the allowance, with such changes reported as “Change in the allowance for credit losses on investments” within the Consolidated Statement of Operations. Fixed maturity securities are written-off to realized investment losses if we determine that no additional payments of principal or interest will be received. The factors considered in determining whether an allowance for credit losses is required are consistent with those considered in determining whether an other-than-temporary impairment loss had occurred under the accounting ~~policy for low income housing tax credit investments~~guidance we followed during 2019 and prior periods as discussed ~~in Note 1 to our consolidated financial statements included~~ in Item 8 of our Form 10-K for the ~~fiscal~~ year ended December 31, ~~2018.~~ 2019. We have elected the policy to exclude accrued interest receivable from our allowance calculation since uncollectible accrued interest will continue to be evaluated for collectability and written off as warranted.

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Mortgage Loans

The ~~2018 consolidated financial statements~~allowance for credit losses on our mortgage loan investments is based on an estimate of credit losses that may occur over the life of the loans, which differs from the accounting guidance applied in 2019 and prior periods, which was based on incurred losses of individual loans. In determining the allowance, we segregate our mortgage loans with a similar risk profile based on an internal loan rating. Loss factors based on the potential frequency and severity of credit losses at different points in time of the portfolio life are applied to future cash flows to estimate the allowance for credit losses. In determining the loss factors, we consider the potential severity and likelihood of loss based on our historical loan loss experience along with that of other similar organizations as well as economic forecasts. We have ~~been reclassified~~elected the policy to ~~reflect~~exclude accrued interest receivable from our allowance calculation since uncollectible accrued interest will continue to be evaluated for collectability and written off as warranted. Mortgage loans are reported in our Consolidated Balance Sheet net of the allowance for credit losses. Changes in the allowance are reported within the Consolidated Statement of Operations as “Changes in allowance for credit losses on investments.” See Note 2 for further information.

Reinsurance Recoverable

The allowance for credit losses on our reinsurance recoverable is based on an estimate of credit losses that may occur over the life of the underlying ceded insurance business, which differs from the accounting guidance applied in 2019 and prior periods, which was based on incurred losses. We develop loss factors which are applied to the amounts due from each reinsurer which considers the potential severity and likelihood of loss based on the relative risk profile of each reinsurer, our internal loss history and those of other organizations, along with economic forecasts. We also consider other sources of information regarding individual reinsurers, as applicable, including amounts past-due according to the terms of the reinsurance contracts. Reinsurance recoverable assets are reported in our Consolidated Balance Sheet net of the allowance for credit losses. Amounts deemed to be uncollectible are written off against the allowance. Changes in the allowance are reported within the Consolidated Statement of Operations as “Underwriting, acquisition and insurance expenses.”



Allowance on Reinsurance Recoverables
	Three months ended March 31, 2020
	(Dollars in thousands)
Beginning balance of the allowance for credit losses	$	868
Change in allowance for credit losses	7
Ending balance of the allowance for credit losses	$	875

No reinsurance recoverables were considered past due as of March 31, 2020.

Income Taxes

Income taxes for interim reporting periods are generally recognized based on an estimated annual effective tax rate which is computed based on earnings forecasts for the year. During the first quarter of 2020, the spread of COVID-19 negatively impacted the U.S. economy, causing unusual market volatility which has impacted our first quarter earnings. At this ~~accounting change.~~time, we are unable to forecast our 2020 earnings primarily due to uncertainty regarding COVID-19’s potential impact on future investment credit losses. Accordingly, for purposes of estimating tax expense for the first quarter of 2020, we are applying an estimated year-to-date effective tax rate, which is based on estimated taxable earnings incurred through the end of the quarter. We expect to return to an estimated annual effective tax rate at such time as earnings can be reasonably forecast.

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2. Investment Operations

Fixed Maturity Securities


Available-For-Sale Fixed Maturity Securities by Investment Category	Available-For-Sale Fixed Maturity Securities by Investment Category											Available-For-Sale Fixed Maturity Securities by Investment Category
	June 30, 2019											March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit losses on other-than-temporary impairments (1)		Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)			Allowance for Credit Losses			Fair Value
	(Dollars in thousands)											(Dollars in thousands)
Fixed maturities:
Corporate	$	3,287,380	$	320,359	$	(21,989	)	$	3,585,750	$	—	$	3,460,539	$	312,121	$	(103,191	)	$	(12,146	)	$	3,657,323
Residential mortgage-backed	581,099		49,055		(775		)	629,379		2,084		624,574		44,124		(14,931		)	—			653,767
Commercial mortgage-backed	937,041		67,240		(526		)	1,003,755		—		977,147		167,839		(3,344		)	—			1,141,642
Other asset-backed	671,762		22,017		(2,332		)	691,447		740		742,954		4,191		(48,205		)	—			698,940
United States Government and agencies	17,029		1,572		(16		)	18,585		—		10,829		3,375		—			—			14,204
States and political subdivisions	1,415,673		140,791		(758		)	1,555,706		—		1,299,222		152,500		(433		)	—			1,451,289
Total fixed maturities	$	6,909,984	$	601,034	$	(26,396	)	$	7,484,622	$	2,824	$	7,115,265	$	684,150	$	(170,104	)	$	(12,146	)	$	7,617,165


	December 31, 2018											December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-credit losses on other-than-temporary impairments (1)		Amortized Cost		Gross Unrealized Gains (1)		Gross Unrealized Losses (1)			Fair Value
	(Dollars in thousands)											(Dollars in thousands)
Fixed maturities:
Corporate	$	3,231,846	$	138,972	$	(90,933	)	$	3,279,885	$	—	$	3,376,432	$	418,049	$	(15,531	)	$	3,778,950
Residential mortgage-backed	584,133		29,969		(7,242		)	606,860		2,823		626,663		47,654		(1,929		)	672,388
Commercial mortgage-backed	873,672		24,284		(19,390		)	878,566		—		969,453		77,433		(1,413		)	1,045,473
Other asset-backed	697,332		15,567		(5,329		)	707,570		1,143		697,390		19,745		(2,614		)	714,521
United States Government and agencies	19,673		996		(134		)	20,535		—		12,417		1,711		(5		)	14,123
States and political subdivisions	1,449,621		95,921		(5,913		)	1,539,629		—		1,332,914		145,125		(866		)	1,477,173
Total fixed maturities	$	6,856,277	$	305,709	$	(128,941	)	$	7,033,045	$	3,966	$	7,015,269	$	709,717	$	(22,358	)	$	7,702,628

(1)

~~Non-credit losses subsequent to the initial impairment measurement date on other-than-temporary impairment (OTTI) losses are included in the gross unrealized gains~~Includes $0.5 million and ~~gross unrealized losses columns above. The non-credit loss component~~$2.5 million as of ~~OTTI losses for residential mortgage-backed and other asset-backed securities at June 30, 2019~~March 31, 2020 and December 31, ~~2018 were~~2019, respectively, of net unrealized gains on impaired fixed maturities related to changes in ~~an unrealized gain position due to increases in estimated~~ fair value subsequent to ~~initial recognition of non-credit losses on such securities.~~the impairment date, which are included in AOCI.

Available-For-Sale Fixed Maturities by Maturity Date
June 30, 2019

Amortized
Cost

Fair Value
(Dollars in thousands)
Due in one year or less $ 73,729
$ 74,777
Due after one year through five years 530,041
556,513
Due after five years through ten years 716,263
771,586
Due after ten years 3,400,049
3,757,165
4,720,082
5,160,041
Mortgage-backed and other asset-backed 2,189,902
2,324,581
Total fixed maturities $ 6,909,984
$ 7,484,622

The amount of accrued interest excluded from the amortized cost basis of fixed maturities and included in accrued investment income on the balance sheet totaled $72.4 million at March 31, 2020. Any fixed maturity delinquent on contractual payments over 90 days past due is placed on non-accrual status. If the fixed maturity is placed on non-accrual status the prior accrued interest income is reversed off through net investment income. Interest income received on non-performing fixed maturities is generally recognized on a cash basis. Once fixed maturities are classified as non-accrual, the resumption of the interest accrual would commence only after all past due interest has been collected. There are currently no fixed maturities in non-accrual status.

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Available-For-Sale Fixed Maturities by Maturity Date
	March 31, 2020
	Amortized Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	83,447	$	83,726
Due after one year through five years	571,783		572,846
Due after five years through ten years	786,392		817,847
Due after ten years	3,328,968		3,648,397
	4,770,590		5,122,816
Mortgage-backed and other asset-backed	2,344,675		2,494,349
Total fixed maturities	$	7,115,265	$	7,617,165

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Fixed maturities not due at a single maturity date have been included in the above table in the year of final contractual maturity.

													Net Unrealized Gains on Investments in Accumulated Other Comprehensive Income
	June 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(Dollars in thousands)						(Dollars in thousands)
Net unrealized appreciation on:
Fixed maturities - available for sale	$	574,638		$	176,768		$	514,046		$	687,359
Adjustments for assumed changes in amortization pattern of:
Deferred acquisition costs	(158,405		)	(46,732		)	(152,526		)	(200,227		)
Value of insurance in force acquired	(12,827		)	(6,878		)	(11,747		)	(12,498		)
Unearned revenue reserve	15,127			5,134			17,362			18,025
Adjustments for assumed changes in policyholder liabilities	(24,724		)	(1,642		)	(27,382		)	(30,642		)
Provision for deferred income taxes	(82,699		)	(26,596		)	(71,348		)	(97,023		)
Net unrealized investment gains	$	311,110		$	100,054		$	268,405		$	364,994

Net unrealized investment gains ~~and losses are recorded net of deferred income taxes and other adjustments~~exclude the allowance for ~~assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities.~~credit losses.

Fixed Maturity Securities with Unrealized Losses by Length of Time
June 30, 2019
Less than one year One year or more Total
Description of Securities

Fair Value
Unrealized Losses

Fair Value
Unrealized Losses Fair Value Unrealized Losses Percent of Total
(Dollars in thousands)
Fixed maturities:
Corporate $ 29,173
$ (738 ) $ 252,898
$ (21,251 ) $ 282,071
$ (21,989 ) 83.3 %
Residential mortgage-backed 3,857
(329 ) 24,215
(446 ) 28,072
(775 ) 2.9
Commercial mortgage-backed 89
—
18,704
(526 ) 18,793
(526 ) 2.0
Other asset-backed 95,239
(1,401 ) 93,275
(931 ) 188,514
(2,332 ) 8.8
United States Government and agencies —
—
2,982
(16 ) 2,982
(16 ) 0.1
States and political subdivisions 4,219
(208 ) 6,426
(550 ) 10,645
(758 ) 2.9
Total fixed maturities $ 132,577
$ (2,676 ) $ 398,500
$ (23,720 ) $ 531,077
$ (26,396 ) 100.0 %


Fixed Maturity Securities with Unrealized Losses by Length of Time without an Allowance for Credit Losses																		Fixed Maturity Securities with Unrealized Losses by Length of Time without an Allowance for Credit Losses
	December 31, 2018																		March 31, 2020
	Less than one year					One year or more					Total								Less than one year					One year or more					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Percent of Total			Fair Value		Unrealized Losses (1)			Fair Value		Unrealized Losses (1)			Fair Value		Unrealized Losses (1)			Percent of Total
	(Dollars in thousands)																		(Dollars in thousands)
Fixed maturities:
Corporate	$	1,035,176	$	(60,299	)	$	207,381	$	(30,634	)	$	1,242,557	$	(90,933	)	70.5	%		$	797,924	$	(83,568	)	$	39,182	$	(19,623	)	$	837,106	$	(103,191	)	60.7	%
Residential mortgage-backed	191,365		(4,482		)	74,113		(2,760		)	265,478		(7,242		)	5.6			283,851		(13,927		)	4,956		(1,004		)	288,807		(14,931		)	8.8
Commercial mortgage-backed	302,159		(9,947		)	148,855		(9,443		)	451,014		(19,390		)	15.0			27,094		(3,344		)	—		—			27,094		(3,344		)	2.0
Other asset-backed	250,119		(3,397		)	149,997		(1,932		)	400,116		(5,329		)	4.1			494,386		(35,401		)	81,185		(12,804		)	575,571		(48,205		)	28.3
United States Government and agencies	—		—			6,474		(134		)	6,474		(134		)	0.1
States and political subdivisions	144,681		(3,885		)	16,943		(2,028		)	161,624		(5,913		)	4.7			8,389		(56		)	2,602		(377		)	10,991		(433		)	0.2
Total fixed maturities	$	1,923,500	$	(82,010	)	$	603,763	$	(46,931	)	$	2,527,263	$	(128,941	)	100.0	%		$	1,611,644	$	(136,296	)	$	127,925	$	(33,808	)	$	1,739,569	$	(170,104	)	100.0	%

~~Fixed maturities in the above tables include~~ ~~182securities from~~ ~~144~~ ~~issuers at~~ ~~June 30, 2019~~ ~~and~~ ~~709~~ ~~securities from~~ ~~465~~ ~~issuers at December 31, 2018.~~

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Fixed Maturity Securities with Unrealized Losses by Length of Time
	December 31, 2019
	Less than one year					One year or more					Total
Description of Securities	Fair Value		Unrealized Losses (1)			Fair Value		Unrealized Losses (1)			Fair Value		Unrealized Losses (1)			Percent of Total
	(Dollars in thousands)
Fixed maturities:
Corporate	$	114,520	$	(2,476	)	$	84,719	$	(13,055	)	$	199,239	$	(15,531	)	69.5	%
Residential mortgage-backed	68,743		(1,435		)	6,941		(494		)	75,684		(1,929		)	8.6
Commercial mortgage-backed	46,537		(1,266		)	2,610		(147		)	49,147		(1,413		)	6.3
Other asset-backed	112,462		(519		)	102,439		(2,095		)	214,901		(2,614		)	11.7
United States Government and agencies	—		—			2,494		(5		)	2,494		(5		)	—
States and political subdivisions	19,367		(379		)	5,936		(487		)	25,303		(866		)	3.9
Total fixed maturities	$	361,629	$	(6,075	)	$	205,139	$	(16,283	)	$	566,768	$	(22,358	)	100.0	%


(1)	Non-credit losses reported in AOCI are included with gross unrealized losses resulting in total gross unrealized losses for fixed maturities, available-for-sale being reported in the table.

Fixed maturities in the above tables include 566securities from 407 issuers at March 31, 2020 and 189 securities from 145 issuers at December 31, 2019. Unrealized losses ~~decreased~~increased during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 primarily due to ~~lower market interest rates.~~wider credit spreads. We do not consider securities declines in fair value below amortized cost to be ~~OTTI~~due to a credit loss when the market decline is attributable to factors such as interest rate movements, market volatility, liquidity or spread widening ~~and credit quality~~ when recovery of all amounts due under the contractual terms of the security is anticipated. Based on our intent not to sell or our belief that we will not be required to sell these securities before recovery of their amortized cost basis, we do not consider these investments to ~~be OTTI~~have a credit loss, and they do not require a loss allowance established at ~~June 30, 2019. We will continue to monitor~~March 31, 2020. The following summarizes the more significant unrealized losses of fixed maturity securities by investment ~~portfolio for future changes in issuer facts and circumstances that could result in future impairments beyond those currently identified.~~category as of March 31, 2020.

~~As described more fully~~Corporate securities: The largest unrealized losses were in ~~Note 1~~the energy sector ($208.0 million fair value and $55.4 million unrealized loss) and in the consumer non-cyclical sector ($100.5 million fair value and $11.4 million unrealized loss). The majority of losses were attributable to ~~our consolidated financial statements included~~credit spread widening across the energy sector associated with sharp declines in ~~Item 8~~crude oil prices. The price of ~~our Form 10-K for the year ended~~crude oil has decreased from $61.06 per barrel at December 31, ~~2018, we perform~~2019 to $20.48 per barrel at March 31, 2020. Energy-related companies have been negatively impacted by the rapid decline in oil prices due to a ~~regular evaluation~~decrease in demand and an increase in supply, which has pressured revenues and margins. Spreads widened during the quarter somewhat recovering towards the end of ~~all investment classes~~the quarter as the U.S. Federal Reserve Bank has taken a number of actions to stabilize the markets. This includes the establishment of two additional facilities to provide credit to large employers - the Primary Market Corporate Credit Facility (PMCCF) for ~~impairment in order~~new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to ~~evaluate whether such investments are OTTI.~~

Credit Loss Component of Other-Than-Temporary Impairments on Fixed Maturities
Six months ended June 30,
2019
2018
(Dollars in thousands)
Balance at beginning of period $ (5,963 ) $ (12,392 )
Reductions due to investments sold or paid down 729
3,369
Reduction for credit loss that no longer has a portion of the OTTI loss recognized in other comprehensive income —
2,529
Balance at end of period $ (5,234 ) $ (6,494 )

provide liquidity for outstanding investment-grade corporate bonds (with a target of maturities 5 years and less).

Residential mortgage-backed securities: The ~~table above sets forth~~unrealized losses on residential mortgage-backed securities were primarily due to price declines on legacy and newer issue bonds. The legacy bonds are still at an unrealized gain overall, but many individual securities are now at an unrealized loss that were previously at a gain. We purchased many of these investments at a discount to their face amount and the ~~amount~~contractual cash flows of these investments are based on mortgages and other assets backing the securities. The newer issue residential mortgage-backed securities are comprised of bonds issued during and after 2013 with strong underwriting and collateral characteristics. The majority of losses were attributable to credit ~~loss impairments~~spread widening across the asset class, partially offset by lower U.S. Treasury rates. The wider spreads at quarter end were caused by market uncertainty and reduced trading from economic contractions due to the COVID-19 virus.

Commercial mortgage-backed securities: The unrealized losses on ~~fixed maturities held~~commercial mortgage-backed securities were primarily due to spread widening, partially offset by lower U.S. Treasury rate during the ~~Company as~~quarter. The wider spreads were caused by market uncertainty from economic contractions due to the COVID-19 virus. The contractual cash flows of these investments are based on mortgages backing the securities.

Other asset-backed securities: The unrealized losses on asset-backed securities (ABS) were primarily due to concerns regarding COVID-19 and the resulting impact on consumer and commercial loans. Spreads widened during the quarter somewhat recovering towards the end of the ~~dates indicated for which~~quarter as the ~~non-credit portion~~U.S. Federal Reserve Bank has taken a number of actions to stabilize the ~~OTTI was recognized in other comprehensive income and corresponding changes in such amounts. Credit loss impairments with no portion~~markets. This includes establishment of a Term Asset-Backed Securities Loan Facility (TALF) to facilitate the ~~loss recognized in other comprehensive income, such as securities for which OTTI was measured at fair value, are excluded from the table.~~

Realized Gains (Losses) - Recorded in Income

Three months ended June 30, Six months ended June 30,
2019 2018 2019 2018
(Dollars in thousands)
Realized gains (losses) on investments
Fixed maturities:
Gross gains $ 143
$ 1,713
$ 3,137
$ 1,796
Gross losses (304 ) (1 ) (304 ) (1 )
Mortgage loans —
—
2,778
—
Other —
(5 ) (4 ) (18 )
(161 ) 1,707
5,607
1,777

Net gains (losses) recognized during the period on equity securities held at the end of the period 463
(866 ) 4,882
(2,683 )
Net gains recognized during the period on equity securities sold during the period 75
—
45
—
Net gains (losses) recognized during the period on equity securities 538
(866 ) 4,927
(2,683 )
Net realized gains (losses) 377
841
10,534
(906 )

Impairment losses recognized in earnings:
Other credit-related —
—
(869 ) (1,040 )
Net realized gains (losses) on investments recorded in income $ 377
$ 841
$ 9,665
$ (1,946 )

issuance of ABS

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~~Proceeds~~collateralized by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA) and certain other assets. The majority of our ABS have a sequential-pay structure that increases credit support as the pool amortizes. The average life of our portfolio is 3.6 years, down from ~~sales~~5.4 years at purchase. Average credit support for the portfolio has increased from 11 percent at time of ~~fixed maturities totaled $22.2 million during~~purchase to 18 percent as of March 31, 2020. The portfolio is rated nearly 70 percent NAIC-1. The unrealized losses on collateralized loan obligations (CLO) are due to concerns regarding COVID-19 and the ~~six months ended June 30, 2019~~resulting impact on leveraged loans.

The CLO market will also benefit from the programs that the U.S. Federal Reserve Bank is providing to the market. Our CLO portfolio is higher quality, with all of the securities rated NAIC-1. Internal stress testing has indicated that the weighted average constant default rate (CDR) of our portfolio without suffering loss is 17%. The CDR is the constant default rate (annually) that a CLO must suffer before our tranche takes its first dollar loss.

State, municipal and ~~$56.3 million during~~other governments: The unrealized losses on state, municipal and other government securities were primarily due to general spread widening relative to spreads at which we acquired the ~~six months ended~~ ~~June 30, 2018~~.bonds.

~~Realized gains~~An allowance for credit losses for the three months ended March 31, 2020 includes an energy sector bond and ~~losses on sales~~two financial sector bonds experiencing ongoing weakness in operating performance. These securities were also impacted by the recent market stresses discussed above. The allowance was established as the difference between the fair value of ~~investments are determined on~~ the ~~basis of specific identification.~~securities and their amortized cost and was considered to be entirely credit related.



Available-For-Sale Fixed Maturities Allowance for Credit Losses
	Three months ended March 31, 2020
	(Dollars in thousands)
Corporate securities:
Beginning balance of the allowance for credit losses	$	—
Additions to the allowance for credit losses on securities for which credit losses were not previously recorded	12,146
Ending balance of the allowance for credit losses	$	12,146

Mortgage Loans

Our mortgage loan portfolio consists of commercial mortgage loans that we have originated. Our lending policies require that the loans be collateralized by the value of the related property, establish limits on the amount that can be loaned to one borrower and require diversification by geographic location and collateral type. We originate loans with an initial loan-to-value ratio that provides sufficient collateral to absorb losses should we be required to foreclose and take possession of the collateral. ~~In order to identify impairment losses, management maintains and regularly reviews a watch list~~

The amount of accrued interest excluded from the cost basis of the mortgage loans ~~that have heightened risk. These loans may include those with borrowers delinquent~~and included in accrued investment income on contractual payments, borrowers experiencing financial difficulty, increases in rental real estate vacancies and significant declines in collateral value. We evaluate each of our mortgage loans individually and establish an estimated loss, if needed, for each impaired loan identified. An estimated loss is needed for loans for which we do not believe we will collect all amounts due according to the ~~contractual terms of the respective loan agreements.~~

balance sheet totaled $3.7 million at March 31, 2020. Any loan delinquent on contractual payments is considered non-performing. Mortgage loans are placed on non-accrual status if ~~we have concerns regarding~~ the ~~collectability of future payments.~~loan is over 90 days past due. If the loan is placed on non-accrual status the prior accrued interest income is reversed off through net investment income. Interest income received on non-performing loans is generally recognized on a cash basis. Once mortgage loans are classified as non-accrual loans, the resumption of the interest accrual would commence only after all past due interest has been collected or the mortgage loan has been restructured such that the collection of interest is considered likely. At ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, there were no non-performing loans over 9030 days past due on contractual payments. At ~~June 30, 2019,~~March 31, 2020, we had committed to provide additional funding for mortgage loans totaling ~~$9.3~~$6.0 million. These commitments arose in the normal course of business at terms that are comparable to similar investments.

Mortgage Loans by Collateral Type
June 30, 2019 December 31, 2018
Collateral Type Carrying Value Percent of Total Carrying Value Percent of Total
(Dollars in thousands)
Office $ 421,867
41.4 % $ 443,048
42.6 %
Retail 317,685
31.2
310,625
29.9
Industrial 205,917
20.2
211,138
20.3
Other 73,655
7.2
75,018
7.2
Total $ 1,019,124
100.0 % $ 1,039,829
100.0 %

Mortgage Loans by Geographic Location within the United States
June 30, 2019 December 31, 2018
Region of the United States Carrying Value Percent of Total Carrying Value Percent of Total
(Dollars in thousands)
South Atlantic $ 304,277
29.9 % $ 301,206
29.0 %
Pacific 156,210
15.3
162,824
15.7
East North Central 120,371
11.8
117,768
11.3
West North Central 112,130
11.0
126,320
12.1
Mountain 89,531
8.8
101,335
9.7
West South Central 85,648
8.4
85,919
8.3
East South Central 83,959
8.2
76,098
7.3
Middle Atlantic 34,271
3.4
34,843
3.4
New England 32,727
3.2
33,516
3.2
Total $ 1,019,124
100.0 % $ 1,039,829
100.0 %

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Mortgage Loans by Loan-to-Value Ratio
June 30, 2019 December 31, 2018
Loan-to-Value Ratio

Carrying Value
Percent of Total Carrying Value Percent of Total
(Dollars in thousands)
0% - 50% $ 415,111
40.7 % $ 409,089
39.3 %
51% - 60% 298,116
29.3
314,038
30.2
61% - 70% 283,310
27.8
264,973
25.5
71% - 80% 18,235
1.8
37,418
3.6
81% - 90% 4,352
0.4
14,311
1.4
Total $ 1,019,124
100.0 % $ 1,039,829
100.0 %



Mortgage Loans by Collateral Type
	March 31, 2020				December 31, 2019
Collateral Type	Amortized Cost		Percent of Total		Amortized Cost		Percent of Total
	(Dollars in thousands)
Office	$	407,723	41.1	%	$	417,746	41.3	%
Retail	333,975		33.7		345,870		34.2
Industrial	232,748		23.4		235,274		23.2
Apartment	9,005		0.9		—		—
Other	8,682		0.9		12,788		1.3
Total	$	992,133	100.0	%	$	1,011,678	100.0	%



Mortgage Loans by Geographic Location within the United States
	March 31, 2020				December 31, 2019
Region of the United States	Amortized Cost		Percent of Total		Amortized Cost		Percent of Total
	(Dollars in thousands)
South Atlantic	$	275,752	27.8	%	$	288,299	28.5	%
Pacific	168,456		17.0		164,996		16.3
East North Central	126,112		12.7		117,053		11.6
West North Central	101,559		10.2		108,942		10.8
Mountain	95,827		9.7		96,857		9.6
East South Central	80,523		8.1		81,275		8.0
West South Central	67,059		6.8		76,650		7.6
Middle Atlantic	45,337		4.6		45,687		4.5
New England	31,508		3.1		31,919		3.1
Total	$	992,133	100.0	%	$	1,011,678	100.0	%



Mortgage Loans by Loan-to-Value Ratio
	March 31, 2020				December 31, 2019
Loan-to-Value Ratio	Amortized Cost		Percent of Total		Amortized Cost		Percent of Total
	(Dollars in thousands)
0% - 50%	$	430,798	43.4	%	$	412,973	40.8	%
51% - 60%	322,097		32.5		310,869		30.7
61% - 70%	209,801		21.1		256,280		25.4
71% - 80%	29,437		3.0		31,556		3.1
Total	$	992,133	100.0	%	$	1,011,678	100.0	%

The loan-to-value ratio is determined using the most recent appraised value. Appraisals are updated periodically when there is indication of a possible significant collateral decline or there are loan modifications or refinance requests.

Mortgage Loans by Year of Origination
June 30, 2019 December 31, 2018
Year of Origination Carrying Value Percent of Total Carrying Value Percent of Total
(Dollars in thousands)
2019 $ 25,878
2.6 % $ —
— %
2018 135,831
13.3
137,519
13.2
2017 203,949
20.0
207,540
20.0
2016 146,900
14.4
149,437
14.4
2015 126,711
12.4
128,877
12.4
2014 & prior 379,855
37.3
416,456
40.0
Total $ 1,019,124
100.0 % $ 1,039,829
100.0 %

Impaired Mortgage Loans
June 30, 2019 December 31, 2018
(Dollars in thousands)
Unpaid principal balance $ 4,681
$ 18,622
Less:
Related allowance (329 ) (3,107 )
Carrying value of impaired mortgage loans $ 4,352
$ 15,515

Allowance on Mortgage Loans
Six months ended June 30,
2019 2018
(Dollars in thousands)
Balance at beginning of period $ 3,107
$ 497
Recoveries (2,778 ) (100 )
Balance at end of period $ 329
$ 397

Mortgage loans are rated internally to provide a current qualitative rating of each loan. We review the capital structure, collateral strength, physical occupancy, financial stability of the operating income stream, debt service coverage ratio, outstanding loan balance to estimated value of the collateral, property improvements and the financial strength of the borrower when determining the internal loan rating. Loans of high quality, low risk and with little concern of default or extension risk are rated an A; loans of moderate quality and moderate risk are rated a B; loans of low quality and high risk are rated a C, and loans for which there is concern of credit default are rated a W.

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Mortgage Loans by Internal Rating and Year of Origination
	March 31, 2020
	2020		2019		2018		2017		2016		2015 & prior		Total
Internal Rating	Amortized Cost
	(Dollars in thousands)
A	$	15,750	$	69,026	$	127,394	$	198,421	$	142,996	$	407,362	$	960,949
B	—		—		—		—		—		5,403		5,403
C	—		—		—		—		—		21,501		21,501
W	—		—		—		—		—		4,280		4,280
Total	$	15,750	$	69,026	$	127,394	$	198,421	$	142,996	$	438,546	$	992,133



	December 31, 2019
	2019		2018		2017		2016		2015		2014 & prior		Total
Internal Rating	Amortized Cost
	(Dollars in thousands)
A	$	69,319	$	128,334	$	200,283	$	144,311	$	119,724	$	316,079	$	978,050
B	—		—		—		—		—		7,512		7,512
C	—		—		—		—		—		21,812		21,812
W	—		—		—		—		—		4,304		4,304
Total	$	69,319	$	128,334	$	200,283	$	144,311	$	119,724	$	349,707	$	1,011,678

Our allowance for credit losses on mortgage loans was estimated by incorporating historical information, current conditions as well as conditions for a reasonable and supportable forecast that includes an estimated recessionary period. The loans are segmented by an internal risk rating as well as geographic region with an estimated loss ratio applied against each segment. For the years after our reasonable and supportable forecast period we graded the expected loss ratio over the estimated remaining recessionary period to our actual loss history. During the quarter ended March 31, 2020, we increased our recession probability factor for our reasonable and supportable forecast period, which caused our allowance to increase. However, the decrease in our mortgage loan principal balance from December 31, 2019 to March 31, 2020 partially offset the increase in our allowance resulting in a small increase to our allowance, during the first quarter 2020. Amounts on mortgage loans deemed to be uncollectible are charged off and removed from the valuation allowance.



Allowance for Credit Losses on Mortgage Loans
	Three months ended March 31, 2020
	(Dollars in thousands)
Beginning balance of the allowance for credit losses	$	3,164
Current period provision for expected credit losses	115
Ending balance of the allowance for credit losses	$	3,279

Mortgage Loan Modifications

Our commercial mortgage loan portfolio can include loans that have been modified. We assess loan modifications on a loan-by-loan basis to evaluate whether a troubled debt restructuring has occurred. Generally, the types of concessions include reduction of the contractual interest rate to a below-market rate, extension of the maturity date and/or a reduction of accrued interest. The amount, timing and extent of the concession granted is considered in determining if an impairment loss is needed for the restructuring. There were no loan modifications during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 or ~~June 30, 2018.~~March 31, 2019.

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Realized Gains (Losses) - Recorded in Income
	Three months ended March 31,
	2020			2019
	(Dollars in thousands)
Realized gains (losses) on investments
Fixed maturities:
Gross gains	$	12		$	2,994
Gross losses	(159		)	—
Mortgage loans	—			2,778
Other	(9		)	(4		)
	(156		)	5,768

Net gains (losses) recognized during the period on equity securities held at the end of the period	(13,231		)	4,419
Net gains and (losses) recognized during the period on equity securities sold during the period	(14		)	(30		)
Net gains (losses) recognized during the period on equity securities	(13,245		)	4,389
Net realized gains (losses)	(13,401		)	10,157

Credit losses recognized in earnings:
Other-than-temporary impairment losses	—			(869		)
Fixed maturity allowance for credit losses	(12,146		)	—
Mortgage loan allowance for credit losses	(115		)	—
Net realized gains (losses) on investments recorded in income	$	(25,662	)	$	9,288

Proceeds from sales of fixed maturities totaled $5.8 million during the three months ended March 31, 2020 and $6.7 million during the three months ended March 31, 2019.

Realized gains and losses on sales of investments are determined based on specific identification.

Variable Interest Entities

We evaluate our variable interest entity (VIE) investees to determine whether the level of our direct ownership interest, our rights to manage operations, or our obligation to provide ongoing financial support are such that we are the primary beneficiary of the entity, and would therefore be required to consolidate it for financial reporting purposes. After determining that we have a variable interest, we review our involvement in the VIE to determine whether we have both the power to direct activities that most significantly impact the economic performance of the VIE, and the obligation to absorb losses or the rights to receive benefits that could be potentially significant to the VIE. This analysis includes a review of the purpose and design of the VIE as well as the role that we played in the formation of the entity and how that role could impact our ability to control the VIE. We also review the activities and decisions considered significant to the economic performance of the VIE and assess what power we have in directing those activities and decisions. Finally, we review the agreements in place to determine if there are any guarantees that would affect our maximum exposure to loss.

We have reviewed the circumstances surrounding our investments in VIEs, which consist of (i) limited partnerships or limited liability companies accounted for under the equity method included in securities and indebtedness of related parties and (ii) non-guaranteed federal ~~LIHTC~~low income housing tax credit (LIHTC) investments included in other assets. In addition, we have reviewed the ownership ~~interest~~interests in our VIEs and determined that we do not hold direct majority ownership or have other contractual rights (such as kick out rights) that give us effective control over these entities resulting in us having both the power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. The maximum loss exposure relative to our VIEs is limited to the carrying value and any unfunded commitments that exist for each particular VIE. We also have not provided additional support or other guarantees that were not previously contractually required (financial or otherwise) to any of the VIEs as of ~~June 30, 2019~~March 31, 2020 or December 31, ~~2018.~~2019. Based on ~~our~~this analysis, none of our VIEs were required to be consolidated at ~~June 30, 2019~~March 31, 2020 or December 31, ~~2018.~~2019.

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LIHTC investments take the form of limited partnerships or limited liability companies, which in turn invest in a number of low income housing projects. We use the proportional amortization method of accounting for these investments. The proportional amortization method amortizes the cost of the investment over the period in which the investor expects to receive tax credits and other tax benefits, and the resulting amortization is recognized along with the tax ~~benefits~~benefit as a component of federal income tax expense on our consolidated statements of operations. The net benefits reflected in federal income tax expense related to LIHTC investments were $0.9 million for the second quarter of 2019 and $1.8 million for the six months ended June 30, 2019, compared to $0.9 million for the second quarter of 2018 and $1.9 million for the six months ended June 30, 2018.


VIE Investments by Category
	June 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Carrying Value		Maximum Exposure to Loss		Carrying Value		Maximum Exposure to Loss		Carrying Value		Maximum Exposure to Loss		Carrying Value		Maximum Exposure to Loss
	(Dollars in thousands)								(Dollars in thousands)
LIHTC investments	$	48,250	$	49,752	$	54,037	$	55,597	$	40,018	$	40,945	$	42,907	$	43,834
Investment companies	47,840		94,091		40,236		79,578		55,522		107,523		53,388		103,125
Real estate limited partnerships	9,415		15,938		8,945		15,673		10,075		15,379		9,565		15,527
Other	493		493		483		493		491		491		492		492
Total	$	105,998	$	160,274	$	103,701	$	151,341	$	106,106	$	164,338	$	106,352	$	162,978

In addition, we make passive investments in the normal course of business in structured securities issued by VIEs for which we are not the investment manager. These structured securities include all of the residential mortgage-backed securities, commercial mortgage-backed securities and other asset-backed securities included in our fixed ~~maturities.~~maturity securities. Our maximum exposure to loss on these securities is limited to our carrying value of the investment. We have determined that we are not the

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primary beneficiary of these structured securities because we do not have the power to direct the activities that most significantly impact the entities’ economic performance.

Derivative Instruments

Our primary derivative exposure relates to purchased call options, which provide an economic hedge against the embedded derivatives in our indexed products. We also have embedded derivatives within our modified coinsurance agreements as well as an interest-only fixed maturity investment. We do not apply hedge accounting to any of our derivative positions, and they are held at fair value.


Derivatives Instruments by Type
	June 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
	(Dollars in thousands)				(Dollars in thousands)
Assets
Freestanding derivatives:
Call options (reported in other investments)	$	19,698	$	4,745	$	5,661	$	31,469
Embedded derivatives:
Modified coinsurance (reported in reinsurance recoverable)	824		157
Modified coinsurance (reported in reinsurance recoverable - assumed)					1,507		2,327
Modified coinsurance (reported in reinsurance recoverable - ceded)					149		—
Interest-only security (reported in fixed maturities)	676		855		349		385
Total assets	$	21,198	$	5,757	$	7,666	$	34,181

Liabilities
Embedded derivatives:
Indexed products (reported in liability for future policy benefits)	$	59,375	$	40,028	$	61,071	$	76,346
Modified coinsurance (reported in other liabilities)	193		7,426		86		254
Total liabilities	$	59,568	$	47,454	$	61,157	$	76,600

Derivative Income (Loss)
Three months ended June 30, Six months ended June 30,
2019 2018 2019 2018
(Dollars in thousands)
Change in fair value of free-standing derivatives:
Call options $ 3,816
$ 2,193
$ 12,502
$ 1,041
Change in fair value of embedded derivatives:
Modified coinsurance 620
125
1,253
(818 )
Interest-only security 69
(44 ) 116
(79 )
Indexed products (3,294 ) 281
(12,629 ) 2,945
Total income from derivatives $ 1,211
$ 2,555
$ 1,242
$ 3,089

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Derivative Income (Loss)
	Three months ended March 31,
	2020			2019
	(Dollars in thousands)
Freestanding derivatives:
Call options	$	(22,163	)	$	8,685
Embedded derivatives:
Modified coinsurance	(504		)	633
Interest-only security	24			47
Indexed products	21,076			(9,336		)
Total income (loss) from derivatives	$	(1,567	)	$	29

Derivative income is reported in net investment income except for the change in fair value of the embedded derivatives on our indexed products, which is reported in interest sensitive product benefits.

We are exposed to credit losses in the event of nonperformance of the derivative counterparties. This credit risk is minimized by purchasing such agreements from financial institutions with high credit ratings (currently rated A or better by nationally recognized statistical rating organizations). We have also entered into credit support agreements with the counterparties requiring them to post collateral when net exposures exceed pre-determined thresholds that vary by counterparty. The net amount of such exposure is essentially the market value less collateral held for such agreements with each counterparty. The call options are supported by securities collateral received of ~~$16.2~~$6.7 million at ~~June 30, 2019,~~March 31, 2020, which is held in a separate custodial account. Subject to certain constraints, we are permitted to sell or re-pledge this collateral, but do not have legal rights to the collateral; accordingly, it has not been recorded on our balance sheet. We have elected to present our derivative receivables netted with the obligation to return cash collateral received on our balance sheet in other investments. We received cash collateral of $3.5 million included in cash and cash equivalents on our balance sheet as of March 31, 2020. At ~~June 30, 2019,~~March 31, 2020, none of the collateral had been sold or re-pledged. As of ~~June 30, 2019,~~March 31, 2020, our net derivative exposure recorded on the balance sheet without the off balance sheet collateral was ~~$3.6~~$5.7 million.

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3. Fair Values

Fair value is based on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As not all financial instruments are actively traded, various valuation methods may be used to estimate fair value. These methods rely on observable market data, or, if observable market data is not available, the best information available. Significant judgment may be required to interpret the data and select the assumptions used in the valuation estimates, particularly when observable market data is not available.

In the discussion that follows, we have ranked our financial instruments by the level of judgment used in the determination of the fair values presented above. The levels are defined as follows:

Level 1 - Fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Fair values are based on inputs, other than quoted prices from active markets, that are observable for the asset or liability, either directly or indirectly.

Level 3 - Fair values are based on significant unobservable inputs for the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. From time to time there may be movements between levels as inputs become more or less observable, which may depend on several factors including the activity of the market for the specific security, the activity of the market for similar securities, the level of risk spreads and the source from which we obtain the information. ~~Transfers into or out~~

Table of ~~any level are measured as of the beginning of the period.~~Contents

The following methods and assumptions were used in estimating the fair value of our financial instruments measured at fair value on a recurring basis:

Fixed maturities:

Level 1 fixed maturities consist of U.S. Treasury issues that are actively traded, allowing us to use current market prices as an estimate of their fair value.

Level 2 fixed maturities consist of corporate, mortgage- and asset-backed, United States Government agencies, state and political subdivisions and private placement corporate securities with observable market data, and in some circumstances recent trade activity. When quoted prices of identical assets in active markets are not available, we obtain prices from third-party pricing vendors. We have regular interaction with these vendors to ensure we understand their pricing methodologies and to confirm they are utilizing observable market information. Their methodologies vary by asset class and include inputs such as estimated cash flows, benchmark yields, reported trades, credit quality, industry events and economic events. Fixed maturities with validated prices from pricing services, which includes the majority of our public fixed maturities in all asset classes, are generally reflected in Level 2.

Also included in Level 2 are private placement corporate bonds with no quoted market prices available, for which an internal model using substantially all observable inputs or a matrix pricing valuation approach is used. In the matrix approach, securities are grouped into pricing categories that vary by sector, rating and average life. Each pricing category is assigned a risk spread based on studies of observable public market data. The expected cash flows of the security are then discounted back at the current Treasury curve plus the appropriate risk spread.

Level 3 fixed maturities include corporate, mortgage- and asset-backed and private placement corporate securities for which there is little or no current market data available. We use external pricing sources, or if prices are not available, we will estimate fair value internally. Fair values of private corporate investments in Level 3 are determined by reference to the public market, private transactions or valuations for comparable companies or assets in the relevant asset class when such amounts are available. For other securities for which an exit price based on relevant observable inputs is not obtained, the fair value is determined using a matrix calculation. Fair values estimated using matrix pricing methods rely on an estimate of credit spreads to a risk-free U.S. Treasury yield. Selecting the credit spread requires judgment based on an understanding of the security and may include a market liquidity premium. Our selection of comparable companies as well as the level of spread requires

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significant judgment. Increases in spreads used in our matrix models, or those used to value comparable companies, will result in a decrease in discounted cash flows used, and accordingly in the estimated fair value of the security.

We obtain fixed maturity fair values from a variety of external independent pricing services, including brokers, with access to observable data including recent trade information, if available. In certain circumstances in which an external price is not available for a Level 3 security, we will internally estimate its fair value. Our process for evaluation and selection of the fair values includes:

We follow a “pricing waterfall” policy, which establishes the pricing source preference for a particular security or security type. The order of preference is based on our evaluation of the valuation methods used, the source’s knowledge of the instrument and the reliability of the prices we have received from the source in the past. Our valuation policy dictates that fair values are initially sought from third-party pricing services. If our review of the prices received from our preferred source indicates an inaccurate price, we will use an alternative source within the waterfall and document the decision. In the event that fair values are not available from one of our external pricing services or upon review of the fair values provided it is determined that they may not be reflective of market conditions, those securities are submitted to brokers familiar with the security to obtain non-binding price quotes. Broker quotes tend to be used in limited circumstances such as for newly issued, private placement corporate bonds and other instruments that are not widely traded. For those securities for which an externally provided fair value is not available, we use cash flow modeling techniques to estimate fair value.

We evaluate third-party pricing source estimation methodologies to assess whether they will provide a fair value that approximates a market exit price.

We perform an overall analysis of portfolio fair value movement against general movements in interest rates and spreads.

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We compare period-to-period price trends to detect unexpected price fluctuations based on our knowledge of the market and the particular instrument. As fluctuations are noted, we will perform further research that may include discussions with the original pricing source or other external sources to ensure we agree with the valuation.

We compare prices between different pricing sources for unusual disparity.

We meet at least quarterly with our Investment Committee, the group that oversees our valuation process, to discuss valuation practices and observations during the pricing process.

Equity securities:

Level 1 equity securities consist of mutual funds and common stocks that are actively traded, allowing us to use current market prices as an estimate of their fair value.

Level 2 equity securities consist of non-redeemable preferred stock. Estimated fair value for the non-redeemable preferred stock is obtained from external pricing sources using a matrix pricing approach.

Level 3 equity securities consist of non-redeemable preferred stock for which fair value estimates are based on the value of comparable securities that are actively traded. Increases in spreads used to value comparable companies, will result in a decrease in discounted cash flows used, and accordingly in the estimated fair value of the security.

In the case that external pricing services are used for certain Level 1 and Level 2 equity securities, our review process is consistent with the process used to determine the fair value of fixed maturities discussed above.

Other investments:

Level 2 other investments measured at fair value include call options with fair values based on counterparty market prices adjusted for a credit component of the counterparty, net of collateral received.

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Cash, cash equivalents and short-term investments:

Level 1 cash, cash equivalents and short-term investments are highly liquid instruments for which historical cost approximates fair value.

Reinsurance recoverable:

Level 2 reinsurance recoverable includes embedded derivatives in our modified coinsurance contracts under which we cede or assume business. Fair values of these embedded derivatives are based on the difference between the fair value and the cost basis of the underlying fixed maturities, which are valued consistent with the discussion of fixed maturities above.

Assets held in separate accounts:

Level 1 assets held in separate accounts consist of mutual funds that are actively traded, allowing us to use current market prices as an estimate of their fair value.

Future policy benefits - indexed product embedded derivatives:

Indexed product contracts include embedded derivatives that are measured at fair value on a recurring basis. These embedded derivatives are a Level 3 measurement. The fair value of the embedded derivatives is based on the discounted excess of projected account values (including a risk margin) over projected guaranteed account values. The key unobservable inputs required in the projection of future values that require management judgment include the risk margin as well as our credit risk. Should the risk margin increase or the credit risk decrease, the discounted cash flows and the estimated fair value of the obligation will increase.

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Other liabilities:

Level 2 other liabilities include the embedded derivatives in our modified coinsurance contracts under which we cede business. Fair values for the embedded derivatives are based on the difference between the fair value and the cost basis of the underlying fixed maturities.



Valuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy Levels
	March 31, 2020
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value
	(Dollars in thousands)
Assets
Fixed maturities:
Corporate securities	$	—	$	3,647,867	$	9,456	$	3,657,323
Residential mortgage-backed securities	—		653,767		—		653,767
Commercial mortgage-backed securities	—		1,134,437		7,205		1,141,642
Other asset-backed securities	—		694,208		4,732		698,940
United States Government and agencies	3,344		10,860		—		14,204
States and political subdivisions	—		1,451,289		—		1,451,289
Total fixed maturities	3,344		7,592,428		21,393		7,617,165
Non-redeemable preferred stocks	—		61,011		6,858		67,869
Common stocks (1)	11,740		—		—		11,740
Other investments	—		5,661		—		5,661
Cash, cash equivalents and short-term investments	47,104		—		—		47,104
Reinsurance recoverable	—		1,655		—		1,655
Assets held in separate accounts	525,582		—		—		525,582
Total assets	$	587,770	$	7,660,755	$	28,251	$	8,276,776

Liabilities
Future policy benefits - indexed product embedded derivatives	$	—	$	—	$	61,071	$	61,071
Other liabilities	—		86		—		86
Total liabilities	$	—	$	86	$	61,071	$	61,157

2022

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Valuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy Levels
June 30, 2019

Quoted prices in active markets
for identical assets (Level 1)

Significant other observable inputs
(Level 2)

Significant unobservable inputs
(Level 3)
Fair Value
(Dollars in thousands)
Assets
Fixed maturities:
Corporate securities $ —
$ 3,566,052
$ 19,698
$ 3,585,750
Residential mortgage-backed securities —
627,255
2,124
629,379
Commercial mortgage-backed securities —
995,421
8,334
1,003,755
Other asset-backed securities —
677,645
13,802
691,447
United States Government and agencies 7,382
11,203
—
18,585
States and political subdivisions —
1,555,706
—
1,555,706
Total fixed maturities 7,382
7,433,282
43,958
7,484,622
Non-redeemable preferred stocks —
76,823
7,048
83,871
Common stocks (1) 16,749
—
—
16,749
Other investments —
19,698
—
19,698
Cash, cash equivalents and short-term investments 23,375
—
—
23,375
Reinsurance recoverable —
824
—
824
Assets held in separate accounts 625,177
—
—
625,177
Total assets $ 672,683
$ 7,530,627
$ 51,006
$ 8,254,316

Liabilities
Future policy benefits - indexed product embedded derivatives $ —
$ —
$ 59,375
$ 59,375
Other liabilities —
193
—
193
Total liabilities $ —
$ 193
$ 59,375
$ 59,568

~~Table of Contents~~

																	Valuation of our Financial Instruments Measured on a Recurring Basis by Hierarchy Levels
	December 31, 2018								December 31, 2019
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value
	(Dollars in thousands)								(Dollars in thousands)
Assets
Fixed maturities:
Corporate securities	$	—	$	3,257,874	$	22,011	$	3,279,885	$	—	$	3,772,362	$	6,588	$	3,778,950
Residential mortgage-backed securities	—		606,860		—		606,860		—		672,388		—		672,388
Commercial mortgage-backed securities	—		810,626		67,940		878,566		—		1,032,693		12,780		1,045,473
Other asset-backed securities	—		703,969		3,601		707,570		—		704,766		9,755		714,521
United States Government and agencies	7,917		12,618		—		20,535		4,821		9,302		—		14,123
States and political subdivisions	—		1,539,629		—		1,539,629		—		1,477,173		—		1,477,173
Total fixed maturities	7,917		6,931,576		93,552		7,033,045		4,821		7,668,684		29,123		7,702,628
Non-redeemable preferred stocks	—		77,433		6,862		84,295		—		67,873		6,927		74,800
Common stocks (1)	5,261		—		—		5,261		17,027		—		—		17,027
Other investments	—		4,745		—		4,745		—		31,469		—		31,469
Cash, cash equivalents and short-term investments	34,748		—		—		34,748		29,142		—		—		29,142
Reinsurance recoverable	—		157		—		157		—		2,327		—		2,327
Assets held in separate accounts	561,281		—		—		561,281		645,881		—		—		645,881
Total assets	$	609,207	$	7,013,911	$	100,414	$	7,723,532	$	696,871	$	7,770,353	$	36,050	$	8,503,274

Liabilities
Future policy benefits - indexed product embedded derivatives	$	—	$	—	$	40,028	$	40,028	$	—	$	—	$	76,346	$	76,346
Other liabilities	—		780		—		780		—		254		—		254
Total liabilities	$	—	$	780	$	40,028	$	40,808	$	—	$	254	$	76,346	$	76,600

(1)

A private equity fund with a fair value estimate of ~~$5.4~~$9.0 million at ~~June 30, 2019~~March 31, 2020 and ~~$3.3~~$8.4 million at December 31, ~~2018~~2019 using net asset value per share as a practical expedient, has not been classified in the fair value hierarchy above in accordance with fair value reporting guidance. This fund invests in senior secured middle market loans and had unfunded commitments totaling ~~$4.7~~$1.1 million at ~~June 30, 2019~~March 31, 2020 and ~~$6.8~~$1.7 million at December 31, ~~2018.~~2019. The investment is not currently eligible for redemption.

																			Level 3 Assets by Valuation Source - Recurring Basis
	June 30, 2019									March 31, 2020
	Third-party vendors			Priced internally			Fair Value			Third-party vendors			Priced internally			Fair Value
	(Dollars in thousands)									(Dollars in thousands)
Corporate securities	$	—		$	19,698		$	19,698		$	6,983		$	2,473		$	9,456
Residential mortgage-backed securities	2,124			—			2,124
Commercial mortgage-backed securities	8,334			—			8,334			7,205			—			7,205
Other asset-backed securities	11,710			2,092			13,802			4,732			—			4,732
Non-redeemable preferred stocks	—			7,048			7,048			—			6,858			6,858
Total assets	$	22,168		$	28,838		$	51,006		$	18,920		$	9,331		$	28,251
Percent of total	43.5		%	56.5		%	100.0		%	67.0		%	33.0		%	100.0		%

2223

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Level 3 Assets by Valuation Source - Recurring Basis
	December 31, 2018									December 31, 2019
	Third-party vendors			Priced internally			Fair Value			Third-party vendors			Priced internally			Fair Value
	(Dollars in thousands)									(Dollars in thousands)
Corporate securities	$	1,940		$	20,071		$	22,011		$	—		$	6,588		$	6,588
Commercial mortgage-backed securities	67,940			—			67,940			12,780			—			12,780
Other asset-backed securities	—			3,601			3,601			8,000			1,755			9,755
Non-redeemable preferred stocks	—			6,862			6,862			—			6,927			6,927
Total assets	$	69,880		$	30,534		$	100,414		$	20,780		$	15,270		$	36,050
Percent of total	69.6		%	30.4		%	100.0		%	57.6		%	42.4		%	100.0		%

											Quantitative Information about Level 3 Fair Value Measurements - Recurring Basis
	June 30, 2019					March 31, 2020
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars in thousands)					(Dollars in thousands)
Assets
Corporate securities	$	18,012	Discounted cash flow	Credit spread	1.09% - 6.50% (3.82%)	$	9,456	Discounted cash flow	Credit spread	2.00% - 10.75% (7.03%)
Commercial mortgage-backed securities	8,334		Discounted cash flow	Credit spread	1.20% - 2.20% (1.85%)	7,205		Discounted cash flow	Credit spread	3.01% - 4.54% (3.93%)
Non-redeemable preferred stocks	7,048		Discounted cash flow	Credit spread	2.86% (2.86%)	6,858		Discounted cash flow	Credit spread	6.06% (6.06%)
Total assets	$	33,394				$	23,519

Liabilities
Future policy benefits - indexed product embedded derivatives	$	59,375	Discounted cash flow	Credit risk Risk margin	0.40% - 1.65% (1.00%) 0.15% - 0.40% (0.25%)	$	61,071	Discounted cash flow	Credit risk Risk margin	2.25% - 2.85% (2.50%) 0.15% - 0.40% (0.25%)


	December 31, 2018					December 31, 2019
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars in thousands)					(Dollars in thousands)
Assets
Corporate securities	$	19,178	Discounted cash flow	Credit spread	1.23% - 7.00% (4.01%)	$	6,588	Discounted cash flow	Credit spread	2.11% - 5.85% (4.33%)
Commercial mortgage-backed securities	55,866		Discounted cash flow	Credit spread	1.45% - 3.55% (2.58%)	12,780		Discounted cash flow	Credit spread	1.18% - 2.22% (1.92%)
Other asset-backed securities						6,000		Discounted cash flow	Credit spread	2.15% - 2.30% (2.23%)
Non-redeemable preferred stocks	6,862		Discounted cash flow	Credit spread	4.36% (4.36%)	6,927		Discounted cash flow	Credit spread	2.72% (2.72%)
Total assets	$	81,906				$	32,295

Liabilities
Future policy benefits - indexed product embedded derivatives	$	40,028	Discounted cash flow	Credit risk Risk margin	0.55% - 1.80% (1.05%) 0.15% - 0.40% (0.25%)	$	76,346	Discounted cash flow	Credit risk Risk margin	0.40% - 1.35% (0.80%) 0.15% - 0.40% (0.25%)

The tables above exclude certain securities with the fair value based on non-binding broker quotes for which we could not reasonably obtain the quantitative unobservable inputs.

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Level 3 Financial Instruments Changes in Fair Value - Recurring Basis	Level 3 Financial Instruments Changes in Fair Value - Recurring Basis																							Level 3 Financial Instruments Changes in Fair Value - Recurring Basis
	June 30, 2019																							March 31, 2020
								Realized and unrealized gains (losses), net																							Realized and unrealized gains (losses), net
	Balance, December 31, 2018		Purchases		Disposals				Included in net income		Included in other compre-hensive income			Transfers into Level 3		Transfers out of Level 3 (1)			Amort-ization included in net income			Balance, June 30, 2019		Balance, December 31, 2019		Purchases		Disposals				Included in net income			Included in other compre-hensive income			Transfers into Level 3		Transfers out of Level 3 (1)			Amort-ization included in net income			Balance, March 31, 2020
	(Dollars in thousands)																							(Dollars in thousands)
Assets
Corporate securities	$	22,011	$	6,000	$	(2,673	)		$	—	$	376		$	—	$	(6,000	)	$	(16	)	$	19,698	$	6,588	$	6,983	$	(352	)		$	—		$	(154	)	$	—	$	(3,609	)	$	—		$	9,456
Residential mortgage-backed securities	—		2,124		—				—		—			—		—			—			2,124
Commercial mortgage-backed securities	67,940		—		(186		)		—		498			—		(59,918		)	—			8,334		12,780		—		(98		)		—			(920		)	—		(4,556		)	—			7,206
Other asset-backed securities	3,601		16,710		(640		)		—		(869		)	—		(5,000		)	—			13,802		9,755		3,054		(49		)		—			(27		)	—		(8,000		)	(1		)	4,732
Non-redeemable preferred stocks	6,862		—		—				—		186			—		—			—			7,048		6,927		—		—				—			(70		)	—		—			—			6,857
Total assets	$	100,414	$	24,834	$	(3,499	)		$	—	$	191		$	—	$	(70,918	)	$	(16	)	$	51,006	$	36,050	$	10,037	$	(499	)		$	—		$	(1,171	)	$	—	$	(16,165	)	$	(1	)	$	28,251

Liabilities
Future policy benefits - indexed product embedded derivatives	$	40,028	$	6,899	$	(3,364	)		$	15,812	$	—		$	—	$	—		$	—		$	59,375	$	76,346	$	4,891	$	(997	)		$	(19,169	)	$	—		$	—	$	—		$	—		$	61,071


	June 30, 2018																							March 31, 2019
								Realized and unrealized gains (losses), net																							Realized and unrealized gains (losses), net
	Balance, December 31, 2017		Purchases		Disposals				Included in net income		Included in other compre-hensive income			Transfers into Level 3		Transfers out of Level 3 (1)			Amort-ization included in net income			Balance, June 30, 2018		Balance, December 31, 2018		Purchases		Disposals				Included in net income		Included in other compre-hensive income			Transfers into Level 3		Transfers out of Level 3 (1)			Amort-ization included in net income			Balance, March 31, 2019
	(Dollars in thousands)																							(Dollars in thousands)
Assets
Corporate securities	$	33,600	$	—	$	(7,682	)		$	—	$	(812	)	$	7,082	$	(2,000	)	$	282		$	30,470	$	22,011	$	6,000	$	(1,262	)		$	—	$	212		$	—	$	—		$	(8	)	$	26,953
Residential mortgage-backed securities	9,124		23,940		—				—		—			—		(9,124		)	—			23,940
Commercial mortgage-backed securities	85,701		35,531		(423		)		—		(2,590		)	—		(30,826		)	(26		)	87,367		67,940		—		(92		)		—		195			—		(59,918		)	—			8,125
Other asset-backed securities	53,480		20,255		(2,106		)		—		13			—		(55,343		)	—			16,299		3,601		5,000		(83		)		—		(869		)	—		—			—			7,649
Non-redeemable preferred stocks	7,407		—		—				—		(351		)	—		—			—			7,056		6,862		—		—				—		267			—		—			—			7,129
Total assets	$	189,312	$	79,726	$	(10,211	)		$	—	$	(3,740	)	$	7,082	$	(97,293	)	$	256		$	165,132	$	100,414	$	11,000	$	(1,437	)		$	—	$	(195	)	$	—	$	(59,918	)	$	(8	)	$	49,856

Liabilities
Future policy benefits - indexed product embedded derivatives	$	27,774	$	5,226	$	(2,476	)		$	2,445	$	—		$	—	$	—		$	—		$	32,969	$	40,028	$	3,479	$	(1,169	)		$	9,553	$	—		$	—	$	—		$	—		$	51,891

(1)

Transfers out of Level 3 include those assets that we are now able to obtain pricing from a third-party pricing vendor that uses observable inputs. The fair values of newly issued securities often require additional estimation until a market is created, which is generally within a few months after issuance. Once a market is created, as was the case for the majority of the security transfers out of the Level 3 category above, Level 2 valuation sources become available. ~~There were no transfers between Level 1 and Level 2 during the periods presented above.~~

The Company has other financial assets and financial liabilities that are not carried at fair value but for which fair value disclosure is required. The following table presents the carrying value, fair value and fair value hierarchy level of these financial assets and financial liabilities.

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Valuation of our Financial Instruments Not Reported at Fair Value by Hierarchy Levels	Valuation of our Financial Instruments Not Reported at Fair Value by Hierarchy Levels										Valuation of our Financial Instruments Not Reported at Fair Value by Hierarchy Levels
	June 30, 2019										March 31, 2020
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value		Carrying Value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value		Carrying Value
	(Dollars in thousands)										(Dollars in thousands)
Assets
Mortgage loans	$	—	$	—	$	1,061,562	$	1,061,562	$	1,019,124	$	—	$	—	$	1,006,459	$	1,006,459	$	988,854
Policy loans	—		—		253,802		253,802		200,246		—		—		285,733		285,733		202,227
Other investments	—		—		29,934		29,934		29,135		—		34,301		2,271		36,572		36,116
Total assets	$	—	$	—	$	1,345,298	$	1,345,298	$	1,248,505	$	—	$	34,301	$	1,294,463	$	1,328,764	$	1,227,197

Liabilities
Future policy benefits	$	—	$	—	$	4,255,017	$	4,255,017	$	4,237,938	$	—	$	—	$	4,379,568	$	4,379,568	$	4,373,739
Supplementary contracts without life contingencies	—		—		311,443		311,443		302,685		—		—		297,351		297,351		293,016
Advance premiums and other deposits	—		—		250,601		250,601		250,601		—		—		245,971		245,971		245,971
Short-term debt											—		—		10,000		10,000		10,000
Long-term debt	—		—		78,182		78,182		97,000		—		—		67,822		67,822		97,000
Liabilities related to separate accounts	—		—		623,839		623,839		625,177		—		—		524,537		524,537		525,582
Total liabilities	$	—	$	—	$	5,519,082	$	5,519,082	$	5,513,401	$	—	$	—	$	5,525,249	$	5,525,249	$	5,545,308


	December 31, 2018										December 31, 2019
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value		Carrying Value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Fair Value		Carrying Value
	(Dollars in thousands)										(Dollars in thousands)
Assets
Mortgage loans	$	—	$	—	$	1,045,497	$	1,045,497	$	1,039,829	$	—	$	—	$	1,059,073	$	1,059,073	$	1,011,678
Policy loans	—		—		237,496		237,496		197,366		—		—		256,787		256,787		201,589
Other investments	—		—		30,087		30,087		29,020		—		29,534		2,215		31,749		31,211
Total assets	$	—	$	—	$	1,313,080	$	1,313,080	$	1,266,215	$	—	$	29,534	$	1,318,075	$	1,347,609	$	1,244,478

Liabilities
Future policy benefits	$	—	$	—	$	3,981,947	$	3,981,947	$	4,217,904	$	—	$	—	$	4,381,863	$	4,381,863	$	4,270,073
Supplementary contracts without life contingencies	—		—		298,869		298,869		303,627		—		—		309,601		309,601		296,915
Advance premiums and other deposits	—		—		252,318		252,318		252,318		—		—		245,480		245,480		245,480
Long-term debt	—		—		65,999		65,999		97,000		—		—		84,438		84,438		97,000
Liabilities related to separate accounts	—		—		559,799		559,799		561,281		—		—		644,691		644,691		645,881
Total liabilities	$	—	$	—	$	5,158,932	$	5,158,932	$	5,432,130	$	—	$	—	$	5,666,073	$	5,666,073	$	5,555,349

Level 3 Financial Instruments Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis, generally mortgage loans or real estate that have been deemed to be impaired during the reporting period. There were no mortgage loans or real estate impaired to fair value during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 or ~~June 30, 2018.~~March 31, 2019.

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4. Defined Benefit Plan

We participate with affiliates and an unaffiliated organization in defined benefit pension plans, including a multiemployer plan. Our share of net periodic pension cost for the plans is recorded as expense in our consolidated statements of operations.

																			Components of Net Periodic Pension Cost for FBL and Affiliates Combined - Multiemployer Plan
	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Service cost	$	1,137		$	1,493		$	2,274		$	2,986		$	1,304		$	1,137
Interest cost	3,319			3,410			6,637			6,821			3,142			3,318
Expected return on assets	(4,707		)	(5,562		)	(9,414		)	(11,124		)	(5,262		)	(4,707		)
Amortization of prior service cost	—			12			—			23
Amortization of actuarial loss	2,228			3,127			4,457			6,254			2,789			2,229
Net periodic pension cost	$	1,977		$	2,480		$	3,954		$	4,960		$	1,973		$	1,977

FBL Financial Group, Inc. share of net periodic pension costs	$	633		$	760		$	1,266		$	1,520		$	629		$	633

													Components of Net Periodic Pension Cost for FBL and Affiliates Combined - Other Plans
	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2019		2018		2019		2018		2020		2019
	(Dollars in thousands)								(Dollars in thousands)
Service cost	$	116	$	134	$	233	$	269	$	79	$	117
Interest cost	248		239		496		479		220		248
Amortization of actuarial loss	267		339		533		677		317		266
Net periodic pension cost	$	631	$	712	$	1,262	$	1,425	$	616	$	631

FBL Financial Group, Inc. share of net periodic pension costs	$	363	$	417	$	725	$	835	$	392	$	362

5. Credit Arrangements

Short-term debt as of March 31, 2020, consists of a $10.0 million short-term advance, collateralized by fixed maturity securities, payable to Federal Home Loan Bank of Des Moines (FHLB). The advance was taken on March 23, 2020, and matures on June 23, 2020, with an interest rate of 0.48%.

6. Commitments and Contingencies

Legal Proceedings

In the normal course of business, we may be involved in litigation in which damages are alleged that are substantially in excess of contractual policy benefits or certain other agreements. We are not aware of any claims threatened or pending against FBL Financial Group, Inc. or any of its subsidiaries for which a material loss is reasonably possible.

~~Lease Commitments~~

As discussed in Note 1 to our consolidated financial statements, we adopted new accounting guidance for leases during 2019. Upon adoption, we elected to follow the following practical expedients as allowed under the new guidance:

~~We did not reassess whether any expired or existing contracts are or contain leases.~~

~~We did not reassess the lease classification (operating vs. finance) for any expired or existing leases.~~

~~We did not reassess initial direct costs for any existing leases.~~

We consider leases with original terms of one year or less to be short-term. We have elected not to carry short-term leases on our consolidated balance sheet. We have no agreements with lease and non-lease components. None of our leases are considered finance leases.

~~Table of Contents~~

On the date of adoption, January 1, 2019, we held four long-term leases all of which related to real estate. The net present value of future cash flows for these leases is reported within our consolidated balance sheet in other assets and other liabilities. The carrying value of these leases was $14.9 million at June 30, 2019, and $7.2 million on the date of adoption. The most significant lease is for our home office facilities, which is owned by a subsidiary of our majority owner, the Iowa Farm Bureau Federation. Due to substantial leasehold improvements underway on this property, there is reasonable assurance that we will exercise the five-year renewal of the lease term, increasing the carrying value of our leased asset during the second quarter of 2019 to $13.6 million on June 30, 2019, compared to $6.1 million on January 1, 2019. All of our leases are based on fixed terms which expire from 2021 through 2024, but allow renewal. Two of our leases, not including the home office property, contain provisions that allow the lease cost to increase based on a stated step-up schedule or changes in the consumer price index. Our estimated incremental borrowing rate of 4.5% was used in determining the net present value of the future leases commitments.

~~Total lease expense was $1.3 million for the quarter and $2.6 million for the six months ended June 30, 2019.~~

~~Future remaining minimum lease payments for the long-term leases discussed above, as of June 30, 2019, are as follows:~~

Lease commitments by year
June 30, 2019
(Dollars in thousands)
2019 $ 1,303
2020 2,608
2021 2,610
2022 2,444
2023 2,278
Thereafter 6,594
Total minimum lease payments 17,837
Less: Interest (2,894 )
Present value of lease liabilities $ 14,943

Commitments for Partnership Investments and Private Corporate Bond Investments

~~In addition to our commitments to fund mortgage loans discussed above,~~At March 31, 2020, we have unfunded investment commitments ~~at June 30, 2019~~ to limited partnerships and limited liability companies of ~~$54.3~~$58.2 million and ~~to purchase~~ privately placed corporate securities commitments of ~~$17.2~~$5.8 million.

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6.7. Stockholders’ Equity

Share Repurchases

We periodically repurchase our Class A common stock under programs approved by our Board of Directors. These repurchase programs authorize us to make repurchases in the open market or through privately negotiated transactions, with the timing and terms of the purchases to be determined by management based on market conditions. Under these programs, we repurchased 24,525 shares of stock for $0.8 million during the three months ended March 31, 2020 and 66,475 shares of stock for $4.6 million during the ~~six~~three months ended ~~June 30, 2019 and 129,011 shares for $8.8 million during the six months ended June 30, 2018.~~March 31, 2019. Completion of ~~the current~~this program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice. At ~~June 30, 2019, $36.3~~March 31, 2020, $35.5 million remains available for repurchase under the active repurchase program.


Dividends
	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2019		2018		2019		2018		2020		2019
Class A and B common stock:
Cash dividends per common share	$	0.48	$	0.46	$	0.96	$	0.92	$	0.50	$	0.48
Special cash dividend per common share	—		—		1.50		1.50		1.50		1.50
Total common stock dividends per share	$	0.48	$	0.46	$	2.46	$	2.42	$	2.00	$	1.98

Series B preferred stock dividends per share	$	0.0075	$	0.0075	$	0.0150	$	0.0150	$	0.0075	$	0.0075

Special cash dividends paid to our Class A and Class B common shareholders totaled $37.0 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~$37.3 million for the six months ended June 30, 2018.~~March 31, 2019.


Reconciliation of Outstanding Common Stock	Reconciliation of Outstanding Common Stock													Reconciliation of Outstanding Common Stock
	Class A					Class B			Total					Class A					Class B			Total
	Shares		Dollars			Shares	Dollars		Shares		Dollars			Shares		Dollars			Shares	Dollars		Shares		Dollars
	(Dollars in thousands)													(Dollars in thousands)
Outstanding at January 1, 2018	24,919,113		$	153,589		11,413	$	72	24,930,526		$	153,661
Stock-based compensation	16,694		320			—	—		16,694		320
Purchase of common stock	(129,011	)	(795		)	—	—		(129,011	)	(795		)
Outstanding at June 30, 2018	24,806,796		$	153,114		11,413	$	72	24,818,209		$	153,186

Outstanding at January 1, 2019	24,707,402		$	152,652		11,413	$	72	24,718,815		$	152,724		24,707,402		$	152,652		11,413	$	72	24,718,815		$	152,724
Stock-based compensation	7,545		212			—	—		7,545		212			—		202			—	—		—		202
Purchase of common stock	(66,475	)	(410		)	—	—		(66,475	)	(410		)	(66,475	)	(410		)	—	—		(66,475	)	(410		)
Outstanding at June 30, 2019	24,648,472		$	152,454		11,413	$	72	24,659,885		$	152,526
Outstanding at March 31, 2019														24,640,927		$	152,444		11,413	$	72	24,652,340		$	152,516

Outstanding at January 1, 2020														24,652,802		$	152,661		11,413	$	72	24,664,215		$	152,733
Stock-based compensation														2,500		245			—	—		2,500		245
Purchase of common stock														(24,525	)	(152		)	—	—		(24,525	)	(152		)
Outstanding at March 31, 2020														24,630,777		$	152,754		11,413	$	72	24,642,190		$	152,826

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Accumulated Other Comprehensive Income, Net of Tax and Other Offsets	Accumulated Other Comprehensive Income, Net of Tax and Other Offsets												Accumulated Other Comprehensive Income, Net of Tax and Other Offsets
	Unrealized Net Investment Gains (Losses) on Available-for-Sale Securities (1)			Accumulated Non-Credit Impairment Losses (1)			Underfunded Status of Postretirement Benefit Plans			Total
	(Dollars in thousands)												Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)						Underfunded Status of Postretirement Benefit Plans
Balance at January 1, 2018	$	295,169		$	537		$	(10,723	)	$	284,983
Cumulative effect of change in accounting principle related to net unrealized gains on equity securities (2)	(5,480		)	—			—			(5,480		)
													Without Non-Credit Impairment Losses			With Non-Credit Impairment Losses			Underfunded Status of Postretirement Benefit Plans			Underfunded Status of Postretirement Benefit Plans				Total
													(Dollars in thousands)
Balance at January 1, 2019													$	96,921		$	3,133		$	(8,736	)	Underfunded Status of Postretirement Benefit Plans		$	91,318
Other comprehensive income before reclassifications													99,871			29			—				99,900
Reclassification adjustments													(2,260		)	—			208				(2,052		)
Balance at March 31, 2019													$	194,532		$	3,162		$	(8,528	)		$	189,166

Balance at January 1, 2020													$	363,020		$	1,974		$	(10,230	)		$	354,764
Other comprehensive income (loss) before reclassifications	(149,645		)	2,118			—			(147,527		)	(104,594		)	(1,550		)	—				(106,144		)
Reclassification adjustments	(1,424		)	—			529			(895		)	9,555			—			247				9,802
Balance at June 30, 2018	$	138,620		$	2,655		$	(10,194	)	$	131,081

Balance at January 1, 2019	$	96,921		$	3,133		$	(8,736	)	$	91,318
Other comprehensive income (loss) before reclassifications	214,083			(902		)	—			213,181
Reclassification adjustments	(2,125		)	—			419			(1,706		)
Balance at June 30, 2019	$	308,879		$	2,231		$	(8,317	)	$	302,793
Balance at March 31, 2020													$	267,981		$	424		$	(9,983	)		$	258,422


(1)	Includes the impact of taxes, deferred acquisition costs, value of insurance in force acquired, unearned revenue reserves and policyholder liabilities. See Note 2 to our consolidated financial statements for further information.


~~(2)~~	~~See Note 1 to our consolidated financial statements for further discussion on this one-time adjustment related to an accounting change.~~

Accumulated Other Comprehensive Income Reclassification Adjustments
Six months ended June 30, 2019
Unrealized Net Investment Gains (Losses) on Available-for-Sale Securities (1) Accumulated Non-Credit Impairment Losses (1)
Underfunded Status of Postretirement Benefit
Plans
Total
(Dollars in thousands)
Realized capital gains on sales of fixed maturities $ (2,833 ) $ —
$ —
$ (2,833 )
Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities 143
—
—
143
Other expenses - change in unrecognized postretirement items:

Net actuarial loss —
—
530
530
Reclassifications before income taxes (2,690 ) —
530
(2,160 )
Income taxes 565
—
(111 ) 454
Reclassification adjustments $ (2,125 ) $ —
$ 419
$ (1,706 )

~~Table of Contents~~



Accumulated Other Comprehensive Income Reclassification Adjustments
	Three months ended March 31, 2020
	Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)					Underfunded Status of Postretirement Benefit Plans
	Without Non-Credit Impairment Losses			With Non-Credit Impairment Losses		Underfunded Status of Postretirement Benefit Plans			Total
	(Dollars in thousands)
Realized capital losses on sales of fixed maturity securities	$	147		$	—	$	—		$	147
Change in allowance for credit losses on fixed maturity securities	12,146			—		—			12,146
Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities	(198		)	—		—			(198		)
Other expenses - net actuarial loss	—			—		313			313
Reclassifications before income taxes	12,095			—		313			12,408
Income taxes	(2,540		)	—		(66		)	(2,606		)
Reclassification adjustments	$	9,555		$	—	$	247		$	9,802


Accumulated Other Comprehensive Income Reclassification Adjustments
												Three months ended March 31, 2019
	Six months ended June 30, 2018											Unrealized Net Investment Gains (Losses) on Fixed Maturities Available-for-Sale (1)					Underfunded Status of Postretirement Benefit Plans
	Unrealized Net Investment Gains (Losses) on Available-for-Sale Securities (1)			Accumulated Non-Credit Impairment Losses (1)		Underfunded Status of Postretirement Benefit Plans			Total			Without Non-Credit Impairment Losses			With Non-Credit Impairment Losses					Total
	(Dollars in thousands)											(Dollars in thousands)
Realized capital gains on sales of fixed maturities	$	(1,795	)	$	—	$	—		$	(1,795	)	$	(2,994	)	$	—		$	—			$	(2,994	)
Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities	(8		)	—		—			(8		)	133			—		—				133
Other expenses - change in unrecognized postretirement items:
Net actuarial loss	—			—		668			668
Other expenses - net actuarial loss												—			—		263				263
Reclassifications before income taxes	(1,803		)	—		668			(1,135		)	(2,861		)	—		263				(2,598		)
Income taxes	379			—		(139		)	240			601			—		(55		)		546
Reclassification adjustments	$	(1,424	)	$	—	$	529		$	(895	)	$	(2,260	)	$	—	$	208			$	(2,052	)


(1)	See Note 2 to our consolidated financial statements for further information.

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7.8. Earnings per Share

Computation of Earnings per Common Share


	Three months ended June 30,				Six months ended June 30,				Three months ended March 31,
	2019		2018		2019		2018		2020			2019
	(Dollars in thousands, except per share data)								(Dollars in thousands, except per share data)
Numerator:
Net income attributable to FBL Financial Group, Inc.	$	32,298	$	32,803	$	66,341	$	56,368
Net income (loss) attributable to FBL Financial Group, Inc.									$	(2,515	)	$	34,043
Less: Dividends on Series B preferred stock	37		37		75		75		38			38
Income available to common stockholders	$	32,261	$	32,766	$	66,266	$	56,293
Income (loss) available to common stockholders									$	(2,553	)	$	34,005

Denominator:
Weighted average shares - basic	24,757,090		24,916,597		24,761,161		24,960,391		24,762,820			24,765,277
Effect of dilutive securities - stock-based compensation	11,122		12,903		11,149		14,405		—			11,176
Weighted average shares - diluted	24,768,212		24,929,500		24,772,310		24,974,796		24,762,820			24,776,453

Earnings per common share	$	1.30	$	1.31	$	2.68	$	2.26
Earnings per common share - assuming dilution	$	1.30	$	1.31	$	2.68	$	2.25
Earnings (loss) per common share									$	(0.10	)	$	1.37
Earnings (loss) per common share - assuming dilution									$	(0.10	)	$	1.37

There were no antidilutive stock options outstanding in any of the periods presented.

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8.9. Segment Information

We analyze operations by reviewing financial information regarding our primary products that are aggregated into the Annuity and Life Insurance product segments. ~~In addition, our~~Our Corporate and Other segment ~~includes various support operations, corporate capital and other product lines that are not currently underwritten by the Company.~~consists of less significant business activities.

Our chief operating decision makers use pre-tax adjusted operating income to evaluate segment performance and allocate resources. Pre-tax adjusted operating income ~~is not a measure used in financial statements prepared in accordance with GAAP, but is a common life insurance industry measure of performance.~~

~~Pre-tax adjusted operating income~~ consists of pre-tax net income adjusted to exclude realized gains and losses on investments including the change in fair value of equity securities, the change in allowances for credit losses on investments, and the change in fair value of derivatives ~~and equity securities, which~~as the impact of these items can fluctuate greatly from period to period. These fluctuations make it difficult to analyze core operating trends. In addition, for derivatives not designated as hedges, there is a mismatch between the valuation of the asset and liability when deriving net income (loss). Specifically, call options relating to our indexed annuity business are one-year assets while the embedded derivatives in the indexed contracts represent the rights of the contract holder to receive index credits over the entire period the indexed products are expected to be in force. Adjustments to pre-tax net income are net of amortization of unearned revenue reserves and deferred acquisition costs, ~~and value of insurance in force acquired,~~ as well as changes in interest sensitive product reserves. While not applicable for the periods reported herein, in determining pre-tax adjusted operating income we will also remove the impact ~~of:~~of settlements or judgments arising from lawsuits, net of any recoveries from third ~~parties;~~parties, the cumulative effect of changes in accounting principles and discontinued operations.

Segment results are reported net of inter-segment transactions.

Financial Information Concerning our Operating Segments

Three months ended June 30, Six months ended June 30,
2019 2018 2019 2018
(Dollars in thousands)
Pre-tax adjusted operating income:
Annuity $ 14,637
$ 15,998
$ 30,299
$ 32,580
Life Insurance 18,239
16,381
28,331
27,278
Corporate and Other 4,595
5,434
8,914
8,967
Total pre-tax adjusted operating income 37,471
37,813
67,544
68,825

Adjustments to pre-tax adjusted operating income:
Net realized gains/losses on investments (1) 366
878
9,518
(1,936 )
Change in fair value of derivatives (1) 345
246
1,498
(398 )
Pre-tax net income attributable to FBL Financial Group, Inc. 38,182
38,937
78,560
66,491
Income tax expense (5,511 ) (5,831 ) (11,787 ) (9,644 )
Tax on equity income (373 ) (303 ) (432 ) (479 )
Net income attributable to FBL Financial Group, Inc. $ 32,298
$ 32,803
$ 66,341
$ 56,368

Adjusted operating revenues:
Annuity $ 54,263
$ 56,415
$ 106,945
$ 113,850
Life Insurance 110,938
109,581
218,196
217,308
Corporate and Other 23,554
23,869
46,682
47,980
188,755
189,865
371,823
379,138
Net realized gains/losses on investments (1) 377
844
9,666
(2,127 )
Change in fair value of derivatives (1) 3,774
(260 ) 14,973
(4,132 )
Consolidated revenues $ 192,906
$ 190,449
$ 396,462
$ 372,879

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Financial Information Concerning our Operating Segments

	Three months ended March 31,
	2020			2019
	(Dollars in thousands)
Pre-tax adjusted operating income:
Annuity	$	12,019		$	15,662
Life Insurance	10,267			10,092
Corporate and Other	219			4,319
Total pre-tax adjusted operating income	22,505			30,073

Adjustments to pre-tax adjusted operating income:
Net realized gains/losses on investments (1)	(25,458		)	9,152
Change in fair value of derivatives (1)	(2,582		)	1,153
Pre-tax net income attributable to FBL Financial Group, Inc.	(5,535		)	40,378
Income tax benefit (expense)	3,081			(6,276		)
Tax on equity income	(61		)	(59		)
Net income (loss) attributable to FBL Financial Group, Inc.	$	(2,515	)	$	34,043

Adjusted operating revenues:
Annuity	$	54,654		$	52,682
Life Insurance	107,215			107,258
Corporate and Other	24,040			23,128
	185,909			183,068
Net realized gains/losses on investments (1)	(25,666		)	9,289
Change in fair value of derivatives (1)	(24,980		)	11,199
Consolidated revenues	$	135,263		$	203,556


(1)	Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, value of insurance in force acquired and interest sensitive policy reserves attributable to these items.

~~Table of Contents~~

Interest expense is attributable to the Corporate and Other segment. Expenditures for long-lived assets were not significant during the periods presented above. Goodwill at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 was allocated among the segments as follows: Annuity ($3.9 million) and Life Insurance ($6.1 million).

Equity income related to securities and indebtedness of related parties is attributable to the Life Insurance and Corporate and Other segments. The following chart provides the related equity income by segment.


Equity Income by Operating Segment	Equity Income by Operating Segment
	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Pre-tax equity income:
Life Insurance	$	1,008		$	1,292		$	1,378		$	1,987		$	375		$	370
Corporate and Other	769			150			678			291			(86		)	(91		)
	1,777			1,442			2,056			2,278
Total pre-tax equity income													289			279

Income taxes	(373		)	(303		)	(432		)	(479		)	(61		)	(59		)
Equity income, net of related income taxes	$	1,404		$	1,139		$	1,624		$	1,799		$	228		$	220

Premiums collected, which is not a measure used in financial statements prepared according to GAAP, includes premiums received on life insurance policies and deposits on annuities and universal life-type products. Premiums collected is a common life insurance industry measure of agent productivity. Net premiums collected totaled ~~$152.2~~$154.0 million for the quarter ended ~~June 30, 2019~~March 31, 2020 and ~~$171.4~~$160.7 million for the same period in ~~2018. Net premiums collected totaled $312.9 million for the six months ended June 30, 2019 and $341.0 million for the same period in 2018.~~2019.

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Under GAAP, premiums on whole life and term life policies are recognized as revenues over the premium-paying period and reported in the Life Insurance segment. The following chart provides a reconciliation of life insurance premiums collected to those reported in the GAAP financial statements.


Reconciliation of Traditional Life Insurance Premiums, Net of Reinsurance	Reconciliation of Traditional Life Insurance Premiums, Net of Reinsurance

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Traditional and universal life insurance premiums collected	$	79,398		$	77,900		$	157,399		$	154,163		$	82,635		$	78,001
Premiums collected on interest sensitive products	(29,517		)	(27,849		)	(57,896		)	(54,431		)	(31,996		)	(28,379		)
Traditional life insurance premiums collected	49,881			50,051			99,503			99,732			50,639			49,622
Change in due premiums and other	1,106			1,040			876			856			(1,331		)	(230		)
Traditional life insurance premiums as included in the Consolidated Statements of Operations	$	50,987		$	51,091		$	100,379		$	100,588		$	49,308		$	49,392

There is no comparable GAAP financial measure for premiums collected on annuities and universal life-type products. GAAP revenues for those interest sensitive and variable products consist of various policy charges and fees assessed on those contracts, as summarized in the chart below.

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Interest Sensitive Product Charges by Segment	Interest Sensitive Product Charges by Segment
	Three months ended June 30,					Six months ended June 30,					Three months ended March 31,
	2019		2018			2019		2018			2020			2019
	(Dollars in thousands)										(Dollars in thousands)
Annuity
Rider and other product charges	$	1,370	$	933		$	2,633	$	1,786		$	1,530		$	1,263
Surrender charges	402		284			706		633			356			304
Total	1,772		1,217			3,339		2,419			1,886			1,567

Life Insurance
Administration charges	4,926		4,194			9,593		8,240			5,443			4,667
Cost of insurance charges	12,813		12,681			25,446		25,218			13,379			12,633
Surrender charges	718		568			1,339		1,249			705			621
Amortization of policy initiation fees	1,178		1,636			2,245		2,431			852			1,067
Total	19,635		19,079			38,623		37,138			20,379			18,988

Corporate and Other
Administration charges	1,232		1,325			2,468		2,641			1,184			1,236
Cost of insurance charges	7,184		7,195			14,386		14,335			7,160			7,202
Surrender charges	37		20			61		43			32			24
Separate account charges	2,016		2,165			3,952		4,310			2,031			1,936
Amortization of policy initiation fees	245		397			252		794			549			7
Total	10,714		11,102			21,119		22,123			10,956			10,405

Impact of net realized gains/losses on investments and change in fair value of derivatives on amortization of unearned revenue reserves	413		(492		)	719		(676		)	(1,501		)	306
Interest sensitive product charges as included in the Consolidated Statements of Operations	$	32,534	$	30,906		$	63,800	$	61,004		$	31,720		$	31,266

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section includes a summary of FBL Financial Group, Inc.’s consolidated results of operations, financial condition and where appropriate, factors that management believes may affect future performance. Unless noted otherwise, all references to FBL Financial Group, Inc. (we or the Company) include all of its direct and indirect subsidiaries, including insurance subsidiaries Farm Bureau Life Insurance Company (Farm Bureau Life) and Greenfields Life Insurance Company (Greenfields Life). Please read this discussion in conjunction with the accompanying consolidated financial statements and related notes. In addition, we encourage you to refer to our Form 10-K for the ~~fiscal~~ year ended December 31, ~~2018~~2019 for a complete description of our significant accounting policies and estimates. Familiarity with this information is important in understanding our financial position and results of operations.

This Form 10-Q includes statements relating to anticipated financial performance, business prospects, new products and similar matters. These statements and others, which include words such as “expect,” “anticipate,” “believe,” “intend” and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. A variety of factors could cause our actual results and experiences to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. See ~~Part~~Item 1A, Risk Factors, of our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2018~~2019, and Part II within this report for additional information on the risks and uncertainties that may affect the operations, performance, development and results of our business.

Overview

We operate predominantly in the life insurance industry through our principal subsidiary, Farm Bureau Life. Farm Bureau Life markets individual life insurance policies and annuity contracts to Farm Bureau members and other individuals and businesses in the Midwestern and Western sections of the United States through an exclusive agency force. ~~Several~~Other subsidiaries ~~support various functional areas of Farm Bureau Life~~provide external wealth management services as well as investment management and other ~~affiliates by providing investment advisory, marketing and distribution, and leasing services.~~support services to our affiliated insurance companies. In addition, we manage two Farm Bureau-affiliated property-casualty companies.

We analyze operations by reviewing financial information regarding our primary products that are aggregated in Annuity and Life Insurance product segments. In addition, our Corporate and Other segment includes our wealth management business, various support operations, corporate capital and other product lines that are not currently underwritten by the Company. We analyze our segment results based on pre-tax adjusted operating income, which excludes the impact of certain items that are included in pre-tax net income. Pre-tax adjusted operating income is athe same basis ~~allowed~~used for segment reporting under U.S. generally accepted accounting principles (GAAP). We also analyze operations using adjusted operating income on a post-tax basis. Adjusted operating income on a post-tax basis is not a measure used in financial statements prepared in accordance with GAAP, but is a common life insurance industry measure of performance. We have included a reconciliation to the comparable GAAP measure herein. See Note 89 to our consolidated financial statements for further information regarding how we define our segments and pre-tax adjusted operating income.

We also include within our analysis “premiums collected,” ~~which~~another measure that is not ~~a measure~~ used in financial statements prepared in accordance with GAAP, but is a common life insurance industry measure of agent productivity. See Note 89 to our consolidated financial statements for further information regarding this measure and its relationship to GAAP revenues.

Impact of COVID-19 and Recent Business Environment

~~Our business generally benefits from moderate~~The COVID-19 pandemic that swept across the United States during the first quarter of 2020 negatively impacted the economy and caused significant societal disruption as businesses were forced to ~~strong economic expansion. Conversely, a lackluster economy characterized by higher unemployment, lower family income, lower consumer spending, muted corporate earnings growth~~close and ~~lower business investment could adversely impact~~individuals were asked to practice social distancing. As the ~~demand for our products~~severity of the pandemic became apparent, we formed an incident management work group in the future. We also may experience a higher incidence of claims, lapses or surrenders of policies during such times. We cannot predict whether or when such actions may occur, or what impact, if any, such actions could have onaccordance with our business ~~results of operations, cash flows or financial condition.~~

~~Economic~~continuity plan. This work group, acting in conjunction with the executive management team, monitors business developments, identifies issues, recommends solutions and ~~other environmental factors that may impact our business include, but are not limited to, the following:~~

develops communications with employees, agents and client/members.

The impact of COVID-19 on the economy has been profound.

U.S. ~~10-year Treasury yield~~gross domestic product decreased ~~during the second quarter of 2019 to 2.00% at June 30, 2019 from 2.69% at December 31, 2018.~~

~~Gross Domestic Product increased~~ at an annual rate of 4.8% in the first quarter of 2020, compared to a 2.1% increase during the ~~second~~fourth quarter of 2019.

U.S. unemployment rose to 4.4% at March 31, 2020 from 3.5% at December 31, 2019 ~~based~~and is expected to climb higher.

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The energy sector has come under significant pressure as the price of crude oil decreased to $20.48 per barrel at March 31, 2020 from $61.06 per barrel at December 31, 2019.

The yield on ~~recent estimates.~~the 10-year U.S. Treasury Note decreased to 0.70% at March 31, 2020 from 1.92% at December 31, 2019.

Overall fixed maturity security yields increased during the first quarter of 2020 as increased business risks caused corporate credit spreads to widen to 276 basis points at March 31, 2020 from 96 basis points at December 31, 2019.

The COVID-19 pandemic has had the following impacts on our company:

Operations

To provide for the health and safety of our employees we transitioned to a mostly work-from-home environment in a matter of days. This transformation was carried out with minimal interruption to supporting our agents, advisors and client/members. We remain vigilant in practicing social distancing and have severely restricted company travel. Our agents continue to serve our client/members, albeit from a distance, using communication technology to service existing business and solicit new business. As summarized in the “Results of Operations” section that follows, we experienced a slight decline in premiums collected during the first quarter of 2020. The issuance of some life insurance business has been delayed due to impediments to completing medical tests.

Our ability to onboard new agents and wealth management advisors has been temporarily slowed due to the closure of governmental offices that issue required licenses. Furthermore, restrictions have prevented in-person training and the ability to have face-to-face meetings with clients.

Financial results

As discussed in the “Results of Operations” section that follows, the economic headwinds brought on by COVID-19 and the attendant decline in the equity markets caused the following negative impacts to operations in the first quarter of 2020:

Net realized losses on the sales of securities, net realized losses on the value of equity securities and an increase in the allowance for credit losses on investments totaling $25.7 million.

An increase in the reserve for guaranteed living withdrawal benefits of $2.3 million.

An increase in the amortization of deferred acquisition cost on variable annuities and variable universal life insurance contracts totaling $3.7 million.

The impact of COVID-19 on mortality experience was insignificant. During the first quarter of 2020, we identified two claims totaling $0.4 million relating to COVID-19.

As a result of these items, we recorded a net loss totaling $2.5 million for the first quarter of 2020. The U.S. federal government has taken actions to support the economy, including those unemployed during the crisis. To the extent the economic downturn caused by COVID-19 continues for an extended period, or worsens, it is uncertain how that will impact our operations, including sales and the value of our assets and liabilities although we expect the impact would be negative.

Financial position

The increase in market interest rates has caused a decline in the market value of our fixed maturity securities during the first quarter of 2020. Accumulated other comprehensive income included in stockholders’ equity declined to $258.4 million at March 31, 2020 from $354.8 million at December 31, 2019.

Book value per common share totaled $45.73 at March 31, 2020 and $60.12 at December 31, 2019. The decline in book value per share for the quarter is attributable to the decline in accumulated other comprehensive income, our net loss for the first quarter of 2020 and dividends paid to common shareholders totaling $2.00 per share.

Despite these factors, our capital position remains strong with Farm Bureau Life’s company action level risk-based capital ratio totaling 525% at March 31, 2020.

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~~U.S. unemployment was estimated to be 3.7% at~~Liquidity

Our liquidity position remains strong with cash being generated by operations and financing activities. In addition, we have a significant portion of our liquid fixed maturity securities in an unrealized gain position. See the ~~end of the second quarter of 2019.~~“Investments” and “Liquidity and Capital Resources” discussions that follow.

~~U.S. net farm income is forecast to increase 10.0% in 2019 and farm real estate value is estimated to increase 1.8% during 2019 according to recent U.S. Department of Agriculture estimates.~~

~~The impact to our customer base from tariffs recently imposed as well as proposed on the general U.S. and farm economies.~~Risk Factors

~~The long-term impact of the enactment of the Tax Cuts and Jobs Act of 2017 on the general U.S. economy, business initiatives and consumer demand for our insurance products.~~

~~The Securities and Exchange Commission recently adopted new regulations impacting certain securities products and services.~~ See ~~Part~~“Part II, Item 1A, Risk Factors”, for ~~further information.~~additional discussion.

The interest rate environment continues to impact our investment yields as well as the interest we credit on our interest sensitive products. The 10-year U.S. Treasury yield trended lower in the second quarter and finished at 2.00%, 69 basis points lower than year-end 2018. We experienced an increase in the fair value of our fixed maturity security portfolio during the second quarter of 2019 primarily due to a decrease in market yields. Average corporate credit spreads tightened during the second quarter of 2019 by approximately 4 basis points as yields remain historically low. Low crediting rates pose challenges to maintaining attractive annuity and universal life products, although our rates are comparable to other insurance companies, allowing us to maintain our competitive position within the market. See the segment discussion and “Financial Condition” section that follows for additional information regarding the impact of low market interest rates on our business.

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Results of Operations for the Periods Ended ~~June 30, 2019~~March 31, 2020 and ~~2018~~2019


	Three months ended June 30,								Six months ended June 30,								Three months ended March 31,
	2019			2018			Change		2019			2018			Change		2020			2019			Change
	(Dollars in thousands, except per share data)																(Dollars in thousands, except per share data)
Net income attributable to FBL Financial Group, Inc.	$	32,298		$	32,803		(2	)%	$	66,341		$	56,368		18	%
Net income (loss) attributable to FBL Financial Group, Inc.																	$	(2,515	)	$	34,043		(107	)%
Net income adjustments:
Net realized gains/losses on investments (1)	(289		)	(694		)	(58	)%	(7,519		)	1,529			(592	)%	20,112			(7,230		)	(378	)%
Change in fair value of derivatives (1)	(272		)	(194		)	40	%	(1,183		)	315			(476	)%	2,039			(911		)	(324	)%
Adjusted operating income (2)	$	31,737		$	31,915		(1	)%	$	57,639		$	58,212		(1	)%	$	19,636		$	25,902		(24	)%

Pre-tax adjusted operating income:
Annuity segment	$	14,637		$	15,998		(9	)%	$	30,299		$	32,580		(7	)%	$	12,019		$	15,662		(23	)%
Life Insurance segment	18,239			16,381			11	%	28,331			27,278			4	%	10,267			10,092			2	%
Corporate and Other segment	4,595			5,434			(15	)%	8,914			8,967			(1	)%	219			4,319			(95	)%
Total pre-tax adjusted operating income	37,471			37,813			(1	)%	67,544			68,825			(2	)%	22,505			30,073			(25	)%
Income taxes on adjusted operating income	(5,734		)	(5,898		)	(3	)%	(9,905		)	(10,613		)	(7	)%	(2,869		)	(4,171		)	(31	)%
Adjusted operating income (2)	$	31,737		$	31,915		(1	)%	$	57,639		$	58,212		(1	)%	$	19,636		$	25,902		(24	)%

Earnings per common share - assuming dilution	$	1.30		$	1.31		(1	)%	$	2.68		$	2.25		19	%
Earnings (loss) per common share - assuming dilution																	$	(0.10	)	$	1.37		(107	)%
Adjusted operating income per common share - assuming dilution (2)	1.28			1.28			—	%	2.32			2.33			—	%	0.79			1.04			(24	)%
Effective tax rate on adjusted operating income	15		%	16		%			15		%	15		%			13		%	14		%
Average invested assets, at amortized cost (3)									$	8,307,155		$	8,227,072		1	%	$	8,479,853		$	8,292,919		2	%
Annualized yield on average invested assets (3)									5.00		%	5.18		%			4.72		%	4.97		%

Other data
Death benefits, net of reinsurance and reserves released, net of tax																	$	23,550		$	26,777		(12	)%
Estimated impact from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve, net of tax																	(2,686		)	1,738			(255	)%
Other investment-related income included in net investment income (1)(4)																	454			1,002			(55	)%


(1)	Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves and deferred acquisition costs, ~~and value of insurance in force acquired,~~ as well as changes in interest sensitive product reserves and income taxes attributable to these items.


(2)	Adjusted operating income is a non-GAAP measure of earnings, see the Overview section above for additional information.


(3)	Average invested assets and annualized yield, including investments held as securities and indebtedness of related parties.


(4)	Includes prepayment fee income and adjustments to the amortization of premium or discounts from changes in our payment speed assumptions.

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Net income (loss) decreased from the prior period primarily due to net realized capital losses from the change in fair value of equity securities and ~~pre-tax~~an increase in allowances for credit losses on investments. Net income (loss) and adjusted operating income decreased in the ~~second~~first quarter of ~~2019,~~2020, compared to the prior year period, ~~primarily~~ due to less spread income earned from lower yields on invested assets, the impact of market performance on reserves associated with guaranteed living withdrawal benefits and ~~increased expenses,~~amortization of deferred acquisition costs associated with our variable business, partially offset by a decrease in death benefits and the positive impact of market performance on our indexed products and variable business. Net income increased in the six months ended June 30, 2019, compared to the prior year period, primarily due to net realized gains from investments and changes in the fair value of derivatives. Net income and pre-tax adjusted operating income for the six month period, compared to the prior year period, was negatively impacted by less spread income earned from lower yields on invested assets, less other investment-related income and increased expenses, partially offset by the positive impact of market performance on our indexed products and variable business.benefits. See the discussion that follows for details regarding pre-tax adjusted operating income by segment. See the “Impact of COVID-19 and Recent Business Environment” section above for additional information on market performance.



Annuity Segment
	Three months ended March 31,
	2020		2019		Change
	(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges	$	1,886	$	1,567	20	%
Net investment income	52,768		51,115		3	%
Total adjusted operating revenues	54,654		52,682		4	%

Adjusted operating benefits and expenses:
Interest sensitive product benefits	33,883		28,070		21	%
Underwriting, acquisition and insurance expenses:
Commissions net of deferrals	421		514		(18	)%
Amortization of deferred acquisition costs	2,646		2,679		(1	)%
Amortization of value of insurance in force	175		163		7	%
Other underwriting expenses	5,510		5,594		(2	)%
Total underwriting, acquisition and insurance expenses	8,752		8,950		(2	)%
Total adjusted operating benefits and expenses	42,635		37,020		15	%
Pre-tax adjusted operating income	$	12,019	$	15,662	(23	)%

~~Table of Contents~~

Annuity Segment
Three months ended June 30, Six months ended June 30,
2019 2018 Change 2019 2018 Change
(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges $ 1,772
$ 1,217
46 % $ 3,339
$ 2,419
38 %
Net investment income 52,491
55,198
(5 )% 103,606
111,431
(7 )%
Total adjusted operating revenues 54,263
56,415
(4 )% 106,945
113,850
(6 )%

Adjusted operating benefits and expenses:
Interest sensitive product benefits 30,450
31,393
(3 )% 58,520
62,679
(7 )%
Underwriting, acquisition and insurance expenses:
Commissions net of deferrals 482
518
(7 )% 996
1,022
(3 )%
Amortization of deferred acquisition costs 2,917
3,070
(5 )% 5,596
6,135
(9 )%
Amortization of value of insurance in force 163
172
(5 )% 326
344
(5 )%
Other underwriting expenses 5,614
5,264
7 % 11,208
11,090
1 %
Total underwriting, acquisition and insurance expenses 9,176
9,024
2 % 18,126
18,591
(3 )%
Total adjusted operating benefits and expenses 39,626
40,417
(2 )% 76,646
81,270
(6 )%
Pre-tax adjusted operating income $ 14,637
$ 15,998
(9 )% $ 30,299
$ 32,580
(7 )%


Other data
Annuity premiums collected, direct (1)	$	59,652	$	79,838	(25	)%	$	129,158		$	158,648		(19	)%	$	58,099		$	69,506		(16	)%
Policy liabilities and accruals, end of period							4,400,928			4,422,265			—	%	4,528,280			4,379,558			3	%
Average invested assets, at amortized cost							4,486,038			4,523,314			(1	)%	4,564,600			4,481,499			2	%
Other investment-related income included in net investment income (2)	507		1,233		(59	)%	1,546			3,890			(60	)%	705			1,039			(32	)%
Average individual annuity account value							3,180,894			3,123,772			2	%	3,179,639			3,179,153			—	%

Earned spread on individual annuity products:
Weighted average yield on cash and invested assets							4.75		%	4.92		%			4.59		%	4.76		%
Weighted average crediting rate							2.56		%	2.48		%			2.47		%	2.53		%
Spread							2.19		%	2.44		%			2.12		%	2.23		%

Individual annuity withdrawal rate							5.5		%	5.2		%			5.2		%	5.6		%


(1)	Premiums collected is a non-GAAP measure of sales production, see Note 89 to our consolidated financial statements for additional information.


(2)	Includes prepayment fee income and adjustments to the amortization of premium or discounts from changes in our payment speed assumptions.

Pre-tax adjusted operating income for the Annuity segment decreased in the ~~second~~first quarter of ~~2019 and the six months ended June 30, 2019,~~2020, compared to the prior year ~~periods,~~period, primarily due to ~~reduced spread income earned from lower yields on invested assets and lower other investment-related income, partially offset by~~ the impact of ~~favorable~~ market performance on reserves associated with guaranteed living withdrawal benefits and ~~increases in interest sensitive product charges due to growth in our indexed annuity business in force.~~reduced spread income earned from lower yields on invested assets. See the “Impact of COVID-19 and Recent Business Environment” section above for additional information on market performance.

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The average aggregate account value for individual annuity contracts in force ~~increased~~at March 31, 2020 remained level with the prior year period as continued sales and the crediting of interest were largely offset by product benefits and withdrawals. Premiums collected were lower in the ~~six months ended June 30, 2019,~~first quarter of 2020, compared to the prior year period, due to ~~continued sales and the crediting of interest. Premiums collected were lower in the second quarter of 2019 and the six months ended June 30, 2019, compared to the prior year periods, due to~~ decreased sales of ~~indexed annuity and~~ fixed rate deferred annuity ~~products.~~products, partially offset by increased sales of indexed annuities. Individual fixed rate deferred annuity collected premiums were ~~$30.3~~$22.9 million in the ~~second~~first quarter of ~~2019 and $69.7~~2020, compared to $39.4 million in the ~~six months ended June 30, 2019, compared to $39.0 million in the second~~first quarter of ~~2018 and $77.4 million in the six months ended June 30, 2018.~~2019. Indexed annuity collected premiums were ~~$28.4~~$32.6 million in the ~~second~~first quarter of ~~2019 and $56.7~~2020, compared to $28.3 million in the ~~six months ended June 30, 2019, compared to $37.4 million in the second~~first quarter of ~~2018 and $75.1 million in the six months ended June 30, 2018.~~2019. Outstanding funding agreements with FHLB ~~decreased to $443.0~~totaled $597.5 million at ~~June 30, 2019 compared with $463.7~~March 31, 2020 and $437.2 million at June 30, 2018 and contributed to the decrease in our annuity segment policy liabilities. The decrease in our annuity segment policy liabilities contributed to decreases in benefits, invested assets and net investment income.March 31, 2019.

Interest sensitive product charges increased for the quarter and six month periods ending June 30, 2019, compared to the prior year periods, primarily due to growth in our indexed annuity business in force resulting from the introduction of a flexible premium indexed annuity product in the third quarter of 2017, which includes certain product fees beginning at the end of the contract year.

Amortization of deferred acquisition costs was less during the second quarter of 2019 and six months ended June 30, 2019, compared to the prior year periods, primarily due to changes in actual spreads earned and expected profits on the underlying business.

The weighted average yield on cash and invested assets for individual annuities decreased in the ~~six months ended June 30, 2019,~~first quarter of 2020, compared to the prior year period, primarily due to ~~less other investment-related income and~~ lower yields on new investment acquisitions from premium receipts and reinvestment of the proceeds from maturing investments, compared with the average existing portfolio yield. See the “Financial Condition” section for additional information regarding the yields obtained on investment acquisitions. Weighted average crediting rates on our individual annuity products ~~increased~~decreased in the first quarter of 2020, compared to the same period in 2019, due to ~~increased amortization on~~crediting rate actions taken in 2020 in response to a declining portfolio yield and a change in our ~~call options supporting our indexed annuity products.~~mix of business in force.



Life Insurance Segment
	Three months ended March 31,
	2020		2019		Change
	(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges and other income	$	20,332	$	18,875	8	%
Traditional life insurance premiums	49,308		49,392		—	%
Net investment income	37,575		38,991		(4	)%
Total adjusted operating revenues	107,215		107,258		—	%

Adjusted operating benefits and expenses:
Interest sensitive product benefits:
Interest and index credits	7,843		8,051		(3	)%
Death benefits and other	16,371		14,466		13	%
Total interest sensitive product benefits	24,214		22,517		8	%
Traditional life insurance benefits:
Death benefits	26,098		24,416		7	%
Surrender and other benefits	10,142		9,723		4	%
Increase in traditional life future policy benefits	9,970		12,534		(20	)%
Total traditional life insurance benefits	46,210		46,673		(1	)%
Distributions to participating policyholders	2,529		2,534		—	%
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	4,832		4,639		4	%
Amortization of deferred acquisition costs	2,419		4,799		(50	)%
Amortization of value of insurance in force	370		372		(1	)%
Other underwriting expenses	16,749		16,002		5	%
Total underwriting, acquisition and insurance expenses	24,370		25,812		(6	)%
Total adjusted operating benefits and expenses	97,323		97,536		—	%
	9,892		9,722		2	%
Equity income, before tax	375		370		1	%
Pre-tax adjusted operating income	$	10,267	$	10,092	2	%

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Life Insurance Segment
Three months ended June 30, Six months ended June 30,
2019 2018 Change 2019 2018 Change
(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges and other income $ 19,497
$ 18,726
4 % $ 38,372
$ 36,706
5 %
Traditional life insurance premiums 50,987
51,091
— % 100,379
100,588
— %
Net investment income 40,454
39,764
2 % 79,445
80,014
(1 )%
Total adjusted operating revenues 110,938
109,581
1 % 218,196
217,308
— %

Adjusted operating benefits and expenses:
Interest sensitive product benefits:
Interest and index credits 9,018
9,093
(1 )% 17,069
17,486
(2 )%
Death benefits and other 13,892
14,709
(6 )% 28,358
29,950
(5 )%
Total interest sensitive product benefits 22,910
23,802
(4 )% 45,427
47,436
(4 )%
Traditional life insurance benefits:
Death benefits 20,577
19,297
7 % 44,993
43,032
5 %
Surrender and other benefits 10,092
10,392
(3 )% 19,815
20,536
(4 )%
Increase in traditional life future policy benefits 11,291
14,022
(19 )% 23,825
25,600
(7 )%
Total traditional life insurance benefits 41,960
43,711
(4 )% 88,633
89,168
(1 )%
Distributions to participating policyholders 2,564
2,560
— % 5,098
5,111
— %
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals 5,179
4,715
10 % 9,818
9,638
2 %
Amortization of deferred acquisition costs 4,344
4,498
(3 )% 9,143
8,934
2 %
Amortization of value of insurance in force 372
373
— % 744
746
— %
Other underwriting expenses 16,378
14,833
10 % 32,380
30,984
5 %
Total underwriting, acquisition and insurance expenses 26,273
24,419
8 % 52,085
50,302
4 %
Total adjusted operating benefits and expenses 93,707
94,492
(1 )% 191,243
192,017
— %
17,231
15,089
14 % 26,953
25,291
7 %
Equity income, before tax 1,008
1,292
(22 )% 1,378
1,987
(31 )%
Pre-tax adjusted operating income $ 18,239
$ 16,381
11 % $ 28,331
$ 27,278
4 %

3937

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Life Insurance Segment - continued
	Three months ended June 30,						Six months ended June 30,								Three months ended March 31,
	2019		2018		Change		2019			2018			Change		2020			2019			Change
	(Dollars in thousands)														(Dollars in thousands)
Other data
Life premiums collected, net of reinsurance (1)	$	79,398	$	77,900	2	%	$	157,399		$	154,163		2	%	$	82,635		$	78,001		6	%
Policy liabilities and accruals, end of period							3,032,835			2,942,046			3	%	3,106,864			3,015,751			3	%
Life insurance in force, end of period							60,708,865			59,008,306			3	%	61,852,616			60,240,261			3	%
Average invested assets, at amortized cost (2)							3,122,408			2,999,681			4	%	3,213,376			3,107,575			3	%
Other investment-related income included in net investment income (3)	953		374		155	%	1,283			1,872			(31	)%	59			330			(82	)%
Average interest sensitive life account value							872,635			848,459			3	%	896,688			869,476			3	%

Interest sensitive life insurance spread:
Weighted average yield on cash and invested assets (2)							5.27		%	5.35		%			4.99		%	5.21		%
Weighted average crediting rate							3.72		%	3.68		%			3.87		%	3.68		%
Spread							1.55		%	1.67		%			1.12		%	1.53		%

Life insurance lapse and surrender rates							4.7		%	4.8		%			4.5		%	4.6		%
Death benefits, net of reinsurance and reserves released	$19,867		$22,384		(11	)%	$	46,539		$	48,863		(5	)%	$	25,668		$	26,672		(4	)%


(1)	Premiums collected is a non-GAAP measure of sales production, see Note 89 to our consolidated financial statements for additional information.


(2)	Average invested assets and weighted average yield including investments held as securities and indebtedness of related parties.


(3)	Includes prepayment fee income and adjustments to the amortization of premium or discounts from changes in our payment speed assumptions.

Pre-tax adjusted operating income for the Life Insurance segment increased in the ~~second~~first quarter of ~~2019 and the six months ended June 30, 2019,~~2020, compared to the prior year ~~periods,~~period, primarily due to ~~decreases~~a decrease in death benefits, net of reinsurance and reserves released, and ~~the~~amortization of deferred acquisition costs. The impact of ~~an increase in the volume of business in force, partially~~these items was largely offset by an increase in ~~expenses.~~

~~Continued growth~~expenses and a decrease in our business in force contributed to the increase in revenues and expenses. Increases in expenses in the quarter and six months ended June 30, 2019, compared to the prior year periods, were also due to additional expenses associated with system enhancements.net investment income from lower yielding securities.

Amortization of deferred acquisition costs ~~was lower~~changed during the ~~second~~first quarter of ~~2019, but higher during the six months ended June 30, 2019,~~2020, compared to the prior year ~~periods,~~period, primarily due to changes in actual and expected profits on the underlying business.

Death benefits, net of reinsurance and reserves released, decreased in the ~~second~~first quarter of ~~2019 and the six months ended June 30, 2019,~~2020, compared to the prior year ~~periods,~~period, primarily due to a decrease in ~~the~~ average claim ~~amount,~~amounts, net of reinsurance and reserves released, partially offset by an increase in the ~~second quarter~~number of ~~2019.~~claims.

~~We assign a portion~~Other underwriting expenses increased in the first quarter of 2020, compared to 2019, due to system enhancements and other general expense increases associated with growth of our investments held in securities and indebtedness of related parties to the Life Insurance segment. These investments include equity interests in limited liability partnerships and corporations, accounted for under the equity method of accounting. Equity income, before tax, consists of our proportionate share of gains and losses attributable to our relative ownership interest in these investments. See the Equity Income discussion that follows, and Note 8 to our consolidated financial statements, for additional information regarding these investments.

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business.

The weighted average yield on cash and invested assets for interest sensitive life insurance products decreased in the ~~six months ended June 30, 2019,~~first quarter of 2020, compared to the prior year period, due to lower yields on new investment acquisitions from premium receipts and reinvestment of the proceeds from maturing investments ~~partially offset by an increase~~and a decrease in other investment-related income. See the “Financial Condition” section for additional information regarding the yields obtained on investment acquisitions. Weighted average crediting rates on our interest sensitive life insurance products increased in the first quarter of 2020, compared to the first quarter of 2019, primarily due to increased amortization on our call options supporting our indexed universal life product.

Corporate and Other Segment
Three months ended June 30, Six months ended June 30,
2019 2018 Change 2019 2018 Change
(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges $ 10,714
$ 11,102
(3 )% $ 21,119
$ 22,123
(5 )%
Net investment income 8,588
8,777
(2 )% 17,228
17,188
— %
Other income 4,252
3,990
7 % 8,335
8,669
(4 )%
Total adjusted operating revenues 23,554
23,869
(1 )% 46,682
47,980
(3 )%

Adjusted operating benefits and expenses:
Interest sensitive product benefits 8,858
7,714
15 % 19,223
17,056
13 %
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals 746
667
12 % 1,450
1,347
8 %
Amortization of deferred acquisition costs 905
1,876
(52 )% (62 ) 4,388
(101 )%
Other underwriting expenses 1,413
1,506
(6 )% 2,566
2,908
(12 )%
Total underwriting, acquisition and insurance expenses 3,064
4,049
(24 )% 3,954
8,643
(54 )%
Interest expense 1,212
1,213
— % 2,424
2,426
— %
Other expenses 6,635
5,627
18 % 12,885
11,220
15 %
Total adjusted operating benefits and expenses 19,769
18,603
6 % 38,486
39,345
(2 )%
3,785
5,266
(28 )% 8,196
8,635
(5 )%
Net loss attributable to noncontrolling interest 41
18
128 % 40
41
(2 )%
Equity income, before tax 769
150
413 % 678
291
133 %
Pre-tax adjusted operating income $ 4,595
$ 5,434
(15 )% $ 8,914
$ 8,967
(1 )%

Other data
Average invested assets, at amortized cost (1)
$ 698,709
$ 704,077
(1 )%
Other investment-related income included in net investment income (2) $ 367
$ 149
146 % 488
286
71 %
Average interest sensitive life account value
361,570
359,978
— %
Death benefits, net of reinsurance and reserves released 5,453
4,321
26 % 12,522
10,260
22 %
Estimated impact on pre-tax adjusted operating income from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve 600
(255 ) (335 )% 2,800
(1,115 ) (351 )%

4138

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Corporate and Other Segment
	Three months ended March 31,
	2020			2019			Change
	(Dollars in thousands)
Adjusted operating revenues:
Interest sensitive product charges	$	10,956		$	10,405		5	%
Net investment income	8,057			8,640			(7	)%
Other income	5,027			4,083			23	%
Total adjusted operating revenues	24,040			23,128			4	%

Adjusted operating benefits and expenses:
Interest sensitive product benefits	7,626			10,365			(26	)%
Underwriting, acquisition and insurance expenses:
Commission expense, net of deferrals	699			704			(1	)%
Amortization of deferred acquisition costs	5,055			(967		)	(623	)%
Other underwriting expenses	1,777			1,153			54	%
Total underwriting, acquisition and insurance expenses	7,531			890			746	%
Interest expense	1,213			1,212			—	%
Other expenses	7,421			6,250			19	%
Total adjusted operating benefits and expenses	23,791			18,717			27	%
	249			4,411			(94	)%
Net (income) loss attributable to noncontrolling interest	56			(1		)	(5,700	)%
Equity income, before tax	(86		)	(91		)	(5	)%
Pre-tax adjusted operating income	$	219		$	4,319		(95	)%



Other data
Average invested assets, at amortized cost (1)	$	701,876		$	703,846	—	%
Other investment-related income included in net investment income (2)	4			121		(97	)%
Average interest sensitive life account value	358,936			361,872		(1	)%
Death benefits, net of reinsurance and reserves released	4,343			7,069		(39	)%
Estimated impact on pre-tax adjusted operating income from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve	(3,400		)	2,200		(255	)%


(1)	Average invested assets including investments held as securities and indebtedness of related parties.


(2)	Includes prepayment fee income and adjustments to the amortization of premium or discounts from changes in our payment speed assumptions.

Pre-tax adjusted operating income decreased for the Corporate and Other segment in the ~~second~~first quarter of ~~2019 and the six months ended June 30, 2019,~~2020, compared to the prior year ~~periods,~~period, primarily due to increases in ~~death benefits~~expenses and ~~expenses, partially offset by a decrease in~~ amortization of deferred acquisition costs resulting from the impact of ~~favorable~~ market performance on our variable ~~business.~~business, partially offset by a decrease in death benefits. See the “Impact of COVID-19 and Recent Business Environment” section above for additional information on market performance.

Death benefits, net of reinsurance and reserves released, ~~increased~~decreased in the ~~second~~first quarter of ~~2019 and the six months ended June 30, 2019,~~2020, compared to the prior year ~~periods,~~period, due to ~~increases~~decreases in the ~~average size and~~ number of ~~claims.~~claims and the average claim amounts, net of reinsurance and reserves released.

Amortization of deferred acquisition costs changed during the first quarter of 2020, compared to the prior year period, primarily due to the impact of market performance on our variable business.

Other income and other expenses include fees and expenses from sales of brokered products and operating results of our non-insurance subsidiaries, which include wealth management services, advisory, ~~marketing and distribution services~~management and leasing activities. Other income and other expenses increased in the ~~second~~first quarter of ~~2019 and six months ended June 30, 2019,~~2020, compared to the prior year ~~periods,~~period, primarily due to ~~costs associated with~~ expanding our wealth management ~~offerings. Other income included~~business. The expansion of our wealth management business has increased administrative costs along with the costs of implementing a ~~one-time benefit~~new delivery platform to allow for additional product offerings and an enhanced customer

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experience. Revenues associated with our wealth management expansion increased modestly as we continue to develop this business, increasing $0.7 million induring the quarter compared to the first quarter of ~~2018.~~

~~We assign a portion of~~2019. Expenses, including commissions, associated with our ~~investments held in securities and indebtedness of related parties~~wealth management expansion have increased $1.3 million during the quarter compared to the ~~Corporate and Other segment. These investments include equity interests in limited liability partnerships and corporations, accounted for under the equity method~~first quarter of accounting. Equity income, before tax, consists of our proportionate share of gains and losses attributable to our relative ownership interest in these investments. See the Equity Income discussion that follows, and Note 8 to our consolidated financial statements, for additional information regarding these investments.2019.

Equity Income

Equity income includes our proportionate share of gains and losses attributable to our ownership interest in partnerships, joint ventures and certain companies over which we exhibit some control but have a minority ownership interest. We consistently use the most recent financial information available, generally for periods not to exceed three months prior to the ending date of the period for which we are reporting, to account for equity income. Several of these entities are investment companies whose operating results are derived primarily from unrealized and realized gains and losses generated by their investment portfolios.

The level of gains and losses for these entities normally fluctuates from period to period depending on the prevailing economic environment, changes in ~~prices~~the value of ~~bond and equity securities~~underlying investments held by the investment partnerships, the timing and success of initial public offerings or exit strategies, and the timing of the sale of investments held by the partnerships and joint ventures.

Equity income, net of related taxes, ~~for~~was $0.2 million in the ~~second~~first quarter of ~~2019 was $1.4 million compared with $1.1 million for the second quarter of 2018,~~2020 and ~~$1.6 million for the six months ended June 30, 2019 compared with $1.8 million for the six months ended June 30, 2018.~~2019. See Note 2 to our consolidated financial statements for further information.

Income Taxes on Adjusted Operating Income

The effective tax rate on adjusted operating income was ~~15.3%~~12.7% for the ~~second~~first quarter of ~~2019 and 14.7%~~2020, compared with 13.9% for the ~~six months ended June 30, 2019, compared with 15.6% for the second~~first quarter of ~~2018 and 15.4% for the six months ended June 30, 2018.~~2019. The effective tax rates differ from the federal statutory rate of 21% primarily due to the impact of LIHTC investments and tax-exempt investment income.

~~Table~~ See Note 1 to the consolidated financial statements for further information regarding our estimate of ~~Contents~~tax expenses for the first quarter of 2020.


Components of income taxes
Components of income tax
	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Income tax expense	$	(5,511	)	$	(5,831	)	$	(11,787	)	$	(9,644	)
Income tax benefit (expense)													$	3,081		$	(6,276	)
Tax on equity income	(373		)	(303		)	(432		)	(479		)	(61		)	(59		)
Income tax offset on net income adjustments	150			236			2,314			(490		)	(5,889		)	2,164
Income taxes on adjusted operating income	$	(5,734	)	$	(5,898	)	$	(9,905	)	$	(10,613	)	$	(2,869	)	$	(4,171	)

Income taxes on adjusted operating income before benefits of LIHTC investments	$	(6,633	)	$	(6,824	)	$	(11,709	)	$	(12,466	)	$	(3,752	)	$	(5,076	)
Amounts related to LIHTC investments	899			926			1,804			1,853			883			905
Income taxes on adjusted operating income	$	(5,734	)	$	(5,898	)	$	(9,905	)	$	(10,613	)	$	(2,869	)	$	(4,171	)


Impact of Adjustments to Net Income Attributable to FBL	Impact of Adjustments to Net Income Attributable to FBL

	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Realized gains (losses) on investments and change in fair value of equity securities and derivatives	$	444		$	1,357		$	11,290		$	(2,638	)	$	(28,069	)	$	10,846
Offsets: (1)
Change in amortization	(48		)	(226		)	(304		)	112			(176		)	(256		)
Reserve change on interest sensitive products	315			(7		)	30			192			205			(285		)
Income tax	(150		)	(236		)	(2,314		)	490			5,889			(2,164		)
Net impact of adjustments to net income	$	561		$	888		$	8,702		$	(1,844	)	$	(22,151	)	$	8,141
Net impact per common share - basic and assuming dilution	$	0.02		$	0.03		$	0.36		$	(0.08	)	$	(0.89	)	$	0.33


(1)	The items excluded from adjusted operating income impact the amortization of deferred acquisition costs ~~value of business acquired~~ and unearned revenue reserve. Certain interest sensitive reserves as well as income taxes are also impacted.

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Realized Gains (Losses) on Investments
	Three months ended June 30,						Six months ended June 30,						Three months ended March 31,
	2019			2018			2019			2018			2020			2019
	(Dollars in thousands)												(Dollars in thousands)
Realized gains (losses) on investments:
Realized gains	$	218		$	1,713		$	5,990		$	1,796		$	12		$	5,772
Realized losses	(304		)	(6		)	(338		)	(19		)	(182		)	(34		)
Change in unrealized gains/losses on equity securities	463			(866		)	4,882			(2,683		)	(13,231		)	4,419
Total other-than-temporary impairment charges	—			—			(869		)	(1,040		)
Total other-than-temporary impairment losses													—			(869		)
Total allowance for credit losses													(12,261		)	—
Net realized investment gains (losses)	$	377		$	841		$	9,665		$	(1,946	)	$	(25,662	)	$	9,288

The level of realized gains (losses) is subject to fluctuation from period to period due to movements in credit spreads and prevailing interest rates, changes in the economic environment, the timing of the sales of the investments generating the realized gains and losses, as well as the timing of ~~other than temporary impairment charges,~~allowances, impairments, recovery of allowances and unrealized gains and losses on equity securities. See “Financial Condition - Investments” and Note 2 to our consolidated financial statements for details regarding our unrealized gains and losses on available-for-sale securities at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019.

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Investment Credit Impairment Losses Recognized in Net Income
	Three months ended March 31,
	2020		2019
	(Dollars in thousands)
Corporate securities:
Financial	$	5,430	$	—
Energy	6,716		—
Other asset-backed	—		869
Mortgage loans	115		—
Total allowance for credit losses (2020); other-than-temporary impairment losses (2019) reported in net income	$	12,261	$	869

Investment Credit Impairment Losses Recognized in Net Income
Three months ended June 30, Six months ended June 30,
2019
2018 2019 2018
(Dollars in thousands)
Corporate securities:
Financial $ —
$ —
$ —
$ 26
Energy —
—
—
1,014
Other asset-backed —
—
869

Total other-than-temporary impairment losses reported in net income $ —
$ —
$ 869
$ 1,040

Allowance for credit losses for the three months ended March 31, 2020 include an energy sector bond and two financial sector bonds impaired to fair value caused by ongoing weakness in operating performance. Other-than-temporary credit impairment losses for the ~~six~~three months ended ~~June 30,~~March 31, 2019 include an asset-backed bond due to a decline in expected cash flows. ~~Other-than-temporary credit impairment losses for the six months ended June 30, 2018 included a previously impaired energy sector bond due to the commencement of bankruptcy proceedings.~~

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Financial Condition

Investments

Our investment portfolio ~~increased~~decreased ~~5.4%~~1.3% to $~~8,869.9~~8,969.2 million at ~~June 30, 2019~~March 31, 2020 compared to $~~8,414.1~~9,091.6 million at December 31, ~~2018.~~2019. The portfolio ~~increase~~decrease is primarily due to ~~$397.9~~$173.3 million ofdecrease in the net unrealized appreciation of fixed maturities. The decrease in unrealized appreciation is the result of an increase in market interest rates driven by an increase in credit spreads. Additional details regarding securities in an unrealized gain or loss position at ~~June 30, 2019~~March 31, 2020 are included in the discussion that follows and in Note 2 to our consolidated financial statements. Details regarding investment impairments are discussed above in the “Realized Gains (Losses) on Investments” section under “Results of Operations.”

We manage the investment portfolio to optimize risk-adjusted yield within the context of prudent asset-liability management. We evaluate multiple cash flow testing scenarios as part of this process. The Company’s investment policy calls for investing primarily in high quality fixed maturities and commercial mortgage loans.


Fixed Maturity Acquisitions Selected Information
	Six months ended June 30,						Three months ended March 31,
	2019			2018			2020			2019
	(Dollars in thousands)						(Dollars in thousands)
Cost of acquisitions:
Corporate	$	192,180		$	86,494		$	123,877		$	75,567
Mortgage- and asset-backed	152,187			366,866			95,381			57,951
Tax-exempt municipals	18,692			60,600			—			8,060
Total	$	363,059		$	513,960		$	219,258		$	141,578
Effective annual yield	4.18		%	4.05		%	3.50		%	4.33		%
Credit quality
NAIC 1 designation	65.3		%	84.6		%	66.1		%	74.3		%
NAIC 2 designation	34.7		%	15.4		%	24.8		%	25.7		%
Non-investment grade							9.1		%	—		%
Weighted-average life in years	16.0			14.0			7.0			15.0

The table above summarizes selected information for fixed maturity purchases. The effective annual yield shown is the yield calculated to the “worst-call date.” For non-callable bonds, the worst-call date is always the maturity date. For callable bonds, the worst-call date is the call or maturity date that produces the lowest yield. The weighted-average life is calculated using scheduled pay-downs and expected prepayments for amortizing securities. For non-amortizing securities, the weighted-average life is equal to the stated maturity date.

A portion of the securities acquired during the ~~six~~three months ended ~~June 30,~~March 31, 2020 and March 31, 2019 ~~and June 30, 2018~~ were acquired with the proceeds from advances on our funding agreements with the FHLB. The securities acquired to support these funding agreements often carry a lower average yield than securities acquired to support our other insurance products, due to the shorter maturity and relatively low interest rate paid on those advances. In addition, certain municipal securities acquired are exempt

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from federal income taxes, and accordingly have a higher actual return than reflected in the yields stated above. The average yield of the securities acquired, excluding the securities supporting the funding agreements and using a tax-adjusted yield for the municipal securities, was ~~4.24%~~4.73% during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and was ~~4.13%~~4.42% during the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.

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Investment Portfolio Summary
	June 30, 2019				December 31, 2018				March 31, 2020				December 31, 2019
	Carrying Value		Percent		Carrying Value		Percent		Carrying Value		Percent		Carrying Value		Percent
	(Dollars in thousands)								(Dollars in thousands)
Fixed maturities - available for sale:
Public	$	5,721,967	64.5	%	$	5,367,590	63.8	%	$	5,688,408	63.4	%	$	5,763,570	63.4	%
144A private placement	1,560,078		17.6		1,477,550		17.6		1,680,060		18.7		1,699,924		18.7
Private placement	202,577		2.3		187,905		2.2		248,697		2.8		239,134		2.6
Total fixed maturities - available for sale	7,484,622		84.4		7,033,045		83.6		7,617,165		84.9		7,702,628		84.7
Equity securities	106,021		1.2		92,857		1.1		88,610		1.0		100,228		1.1
Mortgage loans	1,019,124		11.5		1,039,829		12.4		988,854		11.0		1,011,678		11.2
Real estate	1,543		—		1,543		—		955		—		955		—
Policy loans	200,246		2.3		197,366		2.3		202,227		2.3		201,589		2.2
Short-term investments	9,521		0.1		15,713		0.2		29,580		0.3		11,865		0.1	%
Other investments	48,833		0.5		33,765		0.4		41,777		0.5		62,680		0.7	%
Total investments	$	8,869,910	100.0	%	$	8,414,118	100.0	%	$	8,969,168	100.0	%	$	9,091,623	100.0	%

As of March 31, 2020, ~~June 30, 2019~~, ~~97.7~~97.4% (based on carrying value) of the available-for-sale fixed maturities were investment grade debt securities, defined as being in the highest two National Association of Insurance Commissioners (NAIC) designations. Non-investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. We regularly review the percentage of our portfolio that is invested in non-investment grade debt securities (NAIC designations 3 through 6). As of ~~June 30, 2019~~March 31, 2020, no single non-investment grade holding exceeded 0.2% of total investments.

																			Credit Quality by NAIC Designation and Equivalent Rating
		June 30, 2019				December 31, 2018					March 31, 2020				December 31, 2019
NAIC Designation	Equivalent Rating (1)	Carrying Value		Percent		Carrying Value		Percent		Equivalent Rating (1)	Carrying Value		Percent		Carrying Value		Percent
		(Dollars in thousands)									(Dollars in thousands)
1	AAA, AA, A	$	5,089,917	68.0	%	$	4,802,497	68.3	%	AAA, AA, A	$	5,279,557	69.3	%	$	5,255,079	68.2	%
2	BBB	2,224,368		29.7		2,063,069		29.3		BBB	2,139,645		28.1		2,268,920		29.5
	Total investment grade	7,314,285		97.7		6,865,566		97.6		Total investment grade	7,419,202		97.4		7,523,999		97.7
3	BB	118,700		1.6		105,544		1.5		BB	146,123		1.9		123,120		1.6
4	B	46,803		0.6		48,051		0.7		B	41,965		0.6		38,272		0.5
5	CCC	4,827		0.1		9,640		0.1		CCC	9,869		0.1		17,231		0.2
6	In or near default	7		—		4,244		0.1		In or near default	6		—		6		—
	Total below investment grade	170,337		2.3		167,479		2.4		Total below investment grade	197,963		2.6		178,629		2.3
	Total fixed maturities - available for sale	$	7,484,622	100.0	%	$	7,033,045	100.0	%	Total fixed maturities - available for sale	$	7,617,165	100.0	%	$	7,702,628	100.0	%


(1)	Equivalent ratings are based on those provided by nationally recognized rating agencies with some exceptions for certain residential mortgage, commercial mortgage- and asset-backed securities that are based on the expected loss of the security rather than the probability of default. This may result in a final designation being higher or lower than the equivalent credit rating.

See Note 2 to our consolidated financial statements for a summary of fixed maturities by contractual maturity date.

Table of Contents



Gross Unrealized Gains and Gross Unrealized Losses by Internal Industry Classification
	March 31, 2020
	Total Carrying Value		Carrying Value of Securities with Gross Unrealized Gains		Gross Unrealized Gains		Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses
	(Dollars in thousands)
Corporate securities:
Basic industrial	$	315,125	$	213,895	$	17,975	$	101,230	$	(9,972	)
Capital goods	296,462		244,789		20,944		51,673		(2,352		)
Communications	145,589		132,610		16,508		12,979		(1,837		)
Consumer cyclical	166,559		121,146		11,343		45,413		(6,045		)
Consumer non-cyclical	615,093		514,586		61,483		100,507		(11,426		)
Energy	344,945		136,945		13,502		208,000		(55,449		)
Finance	670,913		488,527		40,519		182,386		(7,909		)
Transportation	131,266		98,904		8,823		32,362		(3,260		)
Utilities	161,218		128,891		13,877		32,327		(1,993		)
Technology	785,525		715,296		104,734		70,229		(2,948		)
Other	24,628		24,628		2,413		—		—
Total corporate securities	3,657,323		2,820,217		312,121		837,106		(103,191		)
Mortgage- and asset-backed securities	2,494,349		1,602,877		216,154		891,472		(66,480		)
United States Government and agencies	14,204		14,204		3,375		—		—
States and political subdivisions	1,451,289		1,440,298		152,500		10,991		(433		)
Total	$	7,617,165	$	5,877,596	$	684,150	$	1,739,569	$	(170,104	)



	December 31, 2019
	Total Carrying Value		Carrying Value of Securities with Gross Unrealized Gains		Gross Unrealized Gains		Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses
	(Dollars in thousands)
Corporate securities:
Basic industrial	$	337,004	$	330,254	$	33,472	$	6,750	$	(259	)
Capital goods	302,566		292,480		28,427		10,086		(278		)
Communications	143,907		139,092		17,900		4,815		(453		)
Consumer cyclical	154,744		145,584		12,971		9,160		(357		)
Consumer non-cyclical	611,618		554,145		68,658		57,473		(4,057		)
Energy	420,805		384,898		42,177		35,907		(6,637		)
Finance	692,341		667,173		62,295		25,168		(2,287		)
Transportation	129,421		116,659		11,186		12,762		(415		)
Utilities	158,073		155,105		15,617		2,968		(23		)
Technology	804,317		770,167		123,232		34,150		(765		)
Other	24,154		24,154		2,114		—		—
Total corporate securities	3,778,950		3,579,711		418,049		199,239		(15,531		)
Mortgage- and asset-backed securities	2,432,382		2,092,650		144,832		339,732		(5,956		)
United States Government and agencies	14,123		11,629		1,711		2,494		(5		)
States and political subdivisions	1,477,173		1,451,870		145,125		25,303		(866		)
Total	$	7,702,628	$	7,135,860	$	709,717	$	566,768	$	(22,358	)

Table of Contents



Credit Quality of Available-for-Sale Fixed Maturities with Unrealized Losses
		March 31, 2020
NAIC Designation	Equivalent Rating	Carrying Value of Securities with Gross Unrealized Losses		Percent of Total		Gross Unrealized Losses			Percent of Total
		(Dollars in thousands)
1	AAA, AA, A	$	904,365	52.0	%	$	(62,180	)	36.6	%
2	BBB	678,811		39.0		(66,156		)	38.9
	Total investment grade	1,583,176		91.0		(128,336		)	75.5
3	BB	123,293		7.1		(36,241		)	21.3
4	B	29,937		1.7		(5,526		)	3.2
5	CCC	3,157		0.2		(1		)	—
6	In or near default	6		—		—			—
	Total below investment grade	156,393		9.0		(41,768		)	24.5
	Total	$	1,739,569	100.0	%	$	(170,104	)	100.0	%



		December 31, 2019
NAIC Designation	Equivalent Rating	Carrying Value of Securities with Gross Unrealized Losses		Percent of Total		Gross Unrealized Losses			Percent of Total
		(Dollars in thousands)
1	AAA, AA, A	$	394,099	69.5	%	$	(6,932	)	31.0	%
2	BBB	103,400		18.2		(3,093		)	13.8
	Total investment grade	497,499		87.7		(10,025		)	44.8
3	BB	37,184		6.6		(5,096		)	22.9
4	B	22,928		4.1		(1,616		)	7.2
5	CCC	9,150		1.6		(5,621		)	25.1
6	In or near default	7		—		—			—
	Total below investment grade	69,269		12.3		(12,333		)	55.2
	Total	$	566,768	100.0	%	$	(22,358	)	100.0	%



Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
	March 31, 2020
	Amortized Cost				Gross Unrealized Losses
	Fair Value is Less than 75% of Cost		Fair Value is 75% or Greater than Cost		Fair Value is Less than 75% of Cost			Fair Value is 75% or Greater than Cost
	(Dollars in thousands)
Three months or less	$	76,110	$	1,626,219	$	(27,556	)	$	(103,257	)
Greater than three months to six months	—		7,982		—			(265		)
Greater than six months to nine months	—		25,685		—			(2,097		)
Greater than nine months to twelve months	3,944		8,000		(2,451		)	(670		)
Greater than twelve months	43,961		117,772		(17,789		)	(16,019		)
Total	$	124,015	$	1,785,658	$	(47,796	)	$	(122,308	)

Table of Contents

Gross Unrealized Gains and Gross Unrealized Losses by Internal Industry Classification
June 30, 2019
Total Carrying Value Carrying Value of Securities
with Gross Unrealized Gains Gross Unrealized Gains
Carrying Value of Securities
with Gross Unrealized Losses
Gross Unrealized Losses
(Dollars in thousands)
Corporate securities:
Basic industrial $ 342,720
$ 307,173
$ 25,157
$ 35,547
$ (1,319 )
Capital goods 281,101
257,517
20,495
23,584
(316 )
Communications 139,377
121,426
13,456
17,951
(562 )
Consumer cyclical 136,994
123,518
9,088
13,476
(436 )
Consumer non-cyclical 577,479
477,414
44,810
100,065
(7,545 )
Energy 408,248
370,359
33,306
37,889
(8,586 )
Finance 656,430
636,203
48,924
20,227
(2,119 )
Transportation 111,171
105,506
8,521
5,665
(530 )
Utilities 760,344
737,563
103,206
22,781
(487 )
Other 171,886
167,000
13,396
4,886
(89 )
Total corporate securities 3,585,750
3,303,679
320,359
282,071
(21,989 )
Mortgage- and asset-backed securities 2,324,581
2,089,202
138,312
235,379
(3,633 )
United States Government and agencies 18,585
15,603
1,572
2,982
(16 )
States and political subdivisions 1,555,706
1,545,061
140,791
10,645
(758 )
Total $ 7,484,622
$ 6,953,545
$ 601,034
$ 531,077
$ (26,396 )



Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
	December 31, 2019
	Amortized Cost				Gross Unrealized Losses
	Fair Value is Less than 75% of Cost		Fair Value is 75% or Greater than Cost		Fair Value is Less than 75% of Cost			Fair Value is 75% or Greater than Cost
	(Dollars in thousands)
Three months or less	$	—	$	255,507	$	—		$	(3,518	)
Greater than three months to six months	—		98,253		—			(2,093		)
Greater than six months to nine months	—		13,944		—			(464		)
Greater than nine months to twelve months	—		—		—			—
Greater than twelve months	25,805		195,617		(8,444		)	(7,839		)
Total	$	25,805	$	563,321	$	(8,444	)	$	(13,914	)

December 31, 2018
Total Carrying Value Carrying Value of Securities
with Gross Unrealized Gains Gross Unrealized Gains
Carrying Value of Securities
with Gross Unrealized Losses
Gross Unrealized Losses
(Dollars in thousands)
Corporate securities:
Basic industrial $ 321,192
$ 194,019
$ 9,990
$ 127,173
$ (8,376 )
Capital goods 248,385
123,157
6,933
125,228
(7,208 )
Communications 131,364
75,687
5,098
55,677
(4,705 )
Consumer cyclical 105,882
74,866
3,627
31,016
(1,782 )
Consumer non-cyclical 497,789
224,674
12,441
273,115
(29,469 )
Energy 384,982
227,770
11,460
157,212
(17,063 )
Finance 602,159
392,188
22,124
209,971
(10,298 )
Transportation 96,579
61,034
3,049
35,545
(2,135 )
Utilities 733,604
565,250
60,399
168,354
(7,483 )
Other 157,949
98,683
3,851
59,266
(2,414 )
Total corporate securities 3,279,885
2,037,328
138,972
1,242,557
(90,933 )
Mortgage- and asset-backed securities 2,192,996
1,076,388
69,820
1,116,608
(31,961 )
United States Government and agencies 20,535
14,061
996
6,474
(134 )
States and political subdivisions 1,539,629
1,378,005
95,921
161,624
(5,913 )
Total $ 7,033,045
$ 4,505,782
$ 305,709
$ 2,527,263
$ (128,941 )

~~Table of Contents~~

Credit Quality of Available-for-Sale Fixed Maturities with Unrealized Losses
June 30, 2019
NAIC Designation Equivalent Rating Carrying Value of Securities with Gross Unrealized Losses Percent of Total Gross Unrealized Losses Percent of Total
(Dollars in thousands)
1 AAA, AA, A $ 247,743
46.6 % $ (3,643 ) 13.8 %
2 BBB 195,842
36.9
(6,745 ) 25.6
Total investment grade 443,585
83.5
(10,388 ) 39.4
3 BB 54,856
10.3
(7,700 ) 29.1
4 B 30,212
5.7
(8,290 ) 31.4
5 CCC 2,417
0.5
(18 ) 0.1
6 In or near default 7
—
—
—
Total below investment grade 87,492
16.5
(16,008 ) 60.6
Total $ 531,077
100.0 % $ (26,396 ) 100.0 %

December 31, 2018
NAIC Designation Equivalent Rating Carrying Value of Securities with Gross Unrealized Losses Percent of Total Gross Unrealized Losses Percent of Total
(Dollars in thousands)
1 AAA, AA, A $ 1,500,626
59.4 % $ (45,593 ) 35.3 %
2 BBB 903,855
35.7
(61,615 ) 47.8
Total investment grade 2,404,481
95.1
(107,208 ) 83.1
3 BB 90,883
3.6
(10,056 ) 7.8
4 B 26,212
1.1
(10,887 ) 8.5
5 CCC 5,679
0.2
(790 ) 0.6
6 In or near default 8
—
—
—
Total below investment grade 122,782
4.9
(21,733 ) 16.9
Total $ 2,527,263
100.0 % $ (128,941 ) 100.0 %

Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
June 30, 2019
Amortized Cost Gross Unrealized Losses

Fair Value
is Less than 75% of Cost

Fair Value is
75% or Greater
than Cost
Fair Value is Less than 75% of Cost
Fair Value is
75% or Greater
than Cost
(Dollars in thousands)
Three months or less $ —
$ 32,615
$ —
$ (240 )
Greater than three months to six months —
2,005
—
(5 )
Greater than six months to nine months —
63,916
—
(930 )
Greater than nine months to twelve months —
36,717
—
(1,501 )
Greater than twelve months 31,759
390,461
(10,539 ) (13,181 )
Total $ 31,759
$ 525,714
$ (10,539 ) $ (15,857 )

~~Table of Contents~~

Available-For-Sale Fixed Maturities with Unrealized Losses by Length of Time
December 31, 2018
Amortized Cost Gross Unrealized Losses

Fair Value
is Less than 75% of Cost
Fair Value is 75% or Greater than Cost Fair Value is Less than 75% of Cost
Fair Value is
75% or Greater
than Cost
(Dollars in thousands)
Three months or less $ —
$ 329,067
$ —
$ (7,081 )
Greater than three months to six months —
362,426
—
(10,386 )
Greater than six months to nine months —
514,023
—
(21,352 )
Greater than nine months to twelve months —
799,994
—
(43,191 )
Greater than twelve months 24,809
625,885
(9,547 ) (37,384 )
Total $ 24,809
$ 2,631,395
$ (9,547 ) $ (119,394 )

																					Available-For-Sale Fixed Maturities with Unrealized Losses by Maturity Date
	June 30, 2019					December 31, 2018					March 31, 2020					December 31, 2019
	Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses			Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses			Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses			Carrying Value of Securities with Gross Unrealized Losses		Gross Unrealized Losses
	(Dollars in thousands)										(Dollars in thousands)
Due in one year or less	$	1,494	$	(5	)	$	496	$	(4	)	$	21,200	$	(653	)	$	1,498	$	(2	)
Due after one year through five years	11,673		(1,646		)	86,795		(3,286		)	150,892		(14,130		)	17,902		(3,340		)
Due after five years through ten years	56,340		(3,116		)	299,532		(14,667		)	199,031		(25,347		)	32,003		(478		)
Due after ten years	226,191		(17,996		)	1,023,832		(79,023		)	476,974		(63,494		)	175,633		(12,582		)
	295,698		(22,763		)	1,410,655		(96,980		)	848,097		(103,624		)	227,036		(16,402		)
Mortgage- and asset-backed	235,379		(3,633		)	1,116,608		(31,961		)	891,472		(66,480		)	339,732		(5,956		)
Total	$	531,077	$	(26,396	)	$	2,527,263	$	(128,941	)	$	1,739,569	$	(170,104	)	$	566,768	$	(22,358	)

See Note 2 to our consolidated financial statements for additional analysis of these unrealized losses.

Mortgage- and Asset-Backed Securities

Mortgage-backed and other asset-backed securities are purchased when we believe these types of investments provide superior risk-adjusted returns compared to returns of more conventional investments such as corporate bonds and mortgage loans. These securities are diversified as to collateral types, cash flow characteristics and maturity.

The repayment pattern on mortgage and other asset-backed securities is more variable than that of more traditional fixed maturity securities because the repayment terms are tied to underlying debt obligations that are subject to prepayments. The prepayment speeds (e.g., the rate of individuals refinancing their home mortgages) can vary based on a number of economic factors that cannot be predicted with certainty. These factors include the prevailing interest rate environment and general status of the economy.

At each balance sheet date, we review and update our expectation of future prepayment speeds and the book value of the mortgage and other asset-backed securities purchased at a premium or discount is reset, if needed. See Note 1 to our consolidated financial statements included in Item 8 of our Form 10-K for the year ended December 31, ~~2018~~2019 for more detail on accounting for the amortization of premium and accrual of discount on mortgage-backed and asset-backed securities.

Our direct exposure to the Alt-A home equity and subprime first-lien sectors is limited to investments in structured securities collateralized by senior tranches of residential mortgage loans. We also have a partnership interest in one fund at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, that owns securities backed by Alt-A home equity, subprime first-lien and adjustable rate mortgage collateral. The fund is reported as securities and indebtedness of related parties in our consolidated balance sheets with a fair value of ~~$1.7~~$1.3 million at ~~June 30, 2019~~March 31, 2020 and ~~$2.0~~$1.4 million at December 31, ~~2018~~2019. We do not own any direct investments in subprime lenders.

4846

Table of Contents

																									Mortgage- and Asset-Backed Securities by Collateral Type
	June 30, 2019						December 31, 2018						March 31, 2020						December 31, 2019
	Amortized Cost		Carrying Value		Percent of Fixed Maturities		Amortized Cost		Carrying Value		Percent of Fixed Maturities		Amortized Cost		Carrying Value		Percent of Fixed Maturities		Amortized Cost		Carrying Value		Percent of Fixed Maturities
	(Dollars in thousands)												(Dollars in thousands)
Government agency	$	224,204	$	241,490	3.2	%	$	227,545	$	232,658	3.3	%	$	217,813	$	249,048	3.3	%	$	220,209	$	236,734	3.1	%
Prime	284,109		303,974		4.1		279,856		287,073		4.1		341,574		337,448		4.4		338,795		357,769		4.6
Alt-A	74,816		88,453		1.2		81,668		95,396		1.4		65,376		69,667		0.9		68,483		80,732		1.0
Subprime	139,211		151,323		2.0		143,441		152,907		2.1		127,284		123,187		1.6		133,410		144,485		1.9
Commercial mortgage	937,041		1,003,755		13.4		873,672		878,566		12.5		977,147		1,141,642		15.0		969,453		1,045,473		13.6
Collateralized loan obligation													192,547		173,412		2.3		186,671		185,427		2.4
Non-mortgage	530,521		535,586		7.2		548,955		546,396		7.8		422,934		399,945		5.3		376,485		381,762		5.0
Total	$	2,189,902	$	2,324,581	31.1	%	$	2,155,137	$	2,192,996	31.2	%	$	2,344,675	$	2,494,349	32.8	%	$	2,293,506	$	2,432,382	31.6	%

The mortgage- and asset-backed securities can be summarized into three broad categories: residential, commercial and other asset-backed securities.

The residential mortgage-backed portfolio includes government agency pass-through and collateralized mortgage obligation (CMO) securities. With a government agency pass-through security, we receive a pro rata share of principal payments as payments are made on the underlying mortgage loans. CMOs consist of pools of mortgages divided into sections or “tranches” with varying stated maturities that provide sequential retirement of the bonds. While each tranche receives monthly interest payments, a subsequent tranche is not entitled to receive payment of principal until the entire principal of the preceding tranche is paid off. We primarily invest in sequential tranches, which allow us to manage cash flow stability and prepayment risk by the level of tranche in which we invest. In addition, to provide call protection and more stable average lives, we invest in CMOs such as planned amortization class (PAC) and targeted amortization class (TAC) securities. PAC bonds provide more predictable cash flows within a range of prepayment speeds and provide some protection against prepayment risk. TAC bonds provide protection from a rise in the prepayment rate due to falling interest rates. We generally do not purchase certain types of CMOs that we believe would subject the investment portfolio to excessive prepayment risk.


Residential Mortgage-Backed Securities by NAIC Designation and Origination Year	Residential Mortgage-Backed Securities by NAIC Designation and Origination Year																	Residential Mortgage-Backed Securities by NAIC Designation and Origination Year
		June 30, 2019																	March 31, 2020
		2004 & Prior				2005 to 2008				2009 & After				Total					2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value			Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
		(Dollars in thousands)																	(Dollars in thousands)
1		$	66,502	$	68,643	$	67,575	$	87,369	$	438,512	$	462,976	$	572,589	$	618,988		$	57,884	$	57,509	$	59,951	$	66,667	$	498,226	$	521,120	$	616,061	$	645,296
2																			—		—		705		533		—		—		705		533
3		—		—		445		—		—		438		445		438			214		199		190		195		—		—		404		394
4		—		—		7,756		9,628		—		—		7,756		9,628			—		—		4,240		4,381		—		—		4,240		4,381
5		302		318		—		—		—		—		302		318			—		—		3,158		3,157		—		—		3,158		3,157
6		7		7		—		—		—		—		7		7			6		6		—		—		—		—		6		6
Total		$	66,811	$	68,968	$	75,776	$	96,997	$	438,512	$	463,414	$	581,099	$	629,379		$	58,104	$	57,714	$	68,244	$	74,933	$	498,226	$	521,120	$	624,574	$	653,767

December 31, 2018
2004 & Prior 2005 to 2008 2009 & After Total
NAIC Designation Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value

Amortized
Cost

Carrying
Value
(Dollars in thousands)
1 $ 72,281
$ 72,921
$ 69,478
$ 89,128
$ 430,982
$ 430,881
$ 572,741
$ 592,930
2 —
—
2,420
2,301
—
—
2,420
2,301
3 —
—
562
553
—
—
562
553
4 354
359
8,048
10,709
—
—
8,402
11,068
6 8
8
—
—
—
—
8
8
Total $ 72,643
$ 73,288
$ 80,508
$ 102,691
$ 430,982
$ 430,881
$ 584,133
$ 606,860



	December 31, 2019
	2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
	(Dollars in thousands)
1	$	60,698	$	62,145	$	61,993	$	80,465	$	495,061	$	519,147	$	617,752	$	661,757
3	279		275		1,113		1,080		—		—		1,392		1,355
4	—		—		4,297		5,372		—		—		4,297		5,372
5	—		—		3,216		3,898		—		—		3,216		3,898
6	6		6		—		—		—		—		6		6
Total	$	60,983	$	62,426	$	70,619	$	90,815	$	495,061	$	519,147	$	626,663	$	672,388

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The commercial mortgage-backed securities (CMBS) are primarily sequential securities. CMBS typically have cash flows that are less subject to refinance risk than residential mortgage-backed securities principally due to prepayment restrictions on many of the underlying commercial mortgage loans.


Commercial Mortgage-Backed Securities by NAIC Designation and Origination Year	Commercial Mortgage-Backed Securities by NAIC Designation and Origination Year																	Commercial Mortgage-Backed Securities by NAIC Designation and Origination Year
		June 30, 2019																	March 31, 2020
		2004 & Prior				2005 to 2008				2009 & After				Total					2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value			Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
		(Dollars in thousands)																	(Dollars in thousands)
1		$	8,162	$	9,008	$	112,537	$	130,047	$	780,738	$	826,421	$	901,437	$	965,476		$	7,783	$	9,561	$	93,150	$	119,298	$	834,815	$	961,939	$	935,748	$	1,090,798
2		—		—		35,604		38,279		—		—		35,604		38,279			—		—		41,399		50,844		—		—		41,399		50,844
Total (1)		$	8,162	$	9,008	$	148,141	$	168,326	$	780,738	$	826,421	$	937,041	$	1,003,755		$	7,783	$	9,561	$	134,549	$	170,142	$	834,815	$	961,939	$	977,147	$	1,141,642


	December 31, 2018																December 31, 2019
	2004 & Prior				2005 to 2008				2009 & After				Total				2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
	(Dollars in thousands)																(Dollars in thousands)
1	$	8,415	$	9,029	$	113,526	$	124,885	$	715,899	$	708,447	$	837,840	$	842,361	$	7,908	$	8,851	$	93,249	$	110,805	$	826,744	$	880,702	$	927,901	$	1,000,358
2	—		—		35,832		36,205		—		—		35,832		36,205		—		—		41,552		45,115		—		—		41,552		45,115
Total (1)	$	8,415	$	9,029	$	149,358	$	161,090	$	715,899	$	708,447	$	873,672	$	878,566	$	7,908	$	8,851	$	134,801	$	155,920	$	826,744	$	880,702	$	969,453	$	1,045,473

(1)

The CMBS portfolio included government agency-backed securities with a carrying value of ~~$811.4~~$920.9 million at ~~June 30, 2019~~March 31, 2020 and ~~$693.3~~$845.5 million at December 31, ~~2018.~~2019. Also included in the CMBS portfolio are military housing bonds totaling ~~$164.6~~$181.6 million at ~~June 30, 2019~~March 31, 2020 and ~~$156.7~~$163.9 million at December 31, ~~2018.~~2019. These bonds are used to fund the construction of multi-family homes on United States military bases. The bonds are backed by a first mortgage lien on residential military housing projects.

The other asset-backed securities are backed by both residential and non-residential collateral. The collateral for residential asset-backed securities primarily consists of second lien fixed-rate home equity loans. The cash flows of these securities are less subject to prepayment risk than residential mortgage-backed securities as the borrowers are less likely to refinance than those with only a first lien mortgage. The collateral for non-residential asset-backed securities primarily includes securities backed by credit card receivables, auto dealer receivables, auto installment loans, aircraft leases, middle market and syndicated business loans, timeshare receivables and trade and account receivables. The majority of these securities are high quality, short-duration assets with limited cash flow variability.

Our CLO portfolio included in other asset-backed securities is high quality, with all of the securities rated NAIC-1. Internal stress testing has indicated that the weighted average constant default rate (CDR) of our portfolio without suffering loss is 17%. The CDR is the constant default rate (annually) that a CLO must suffer before our tranche takes its first dollar loss.


Other Asset-Backed Securities by NAIC Designation and Origination Year	Other Asset-Backed Securities by NAIC Designation and Origination Year																	Other Asset-Backed Securities by NAIC Designation and Origination Year
		June 30, 2019																	March 31, 2020
		2004 & Prior				2005 to 2008				2009 & After				Total					2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value			Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
		(Dollars in thousands)																	(Dollars in thousands)
1		$	8,779	$	8,626	$	138,706	$	153,863	$	398,348	$	399,493	$	545,833	$	561,982		$	5,958	$	5,152	$	127,728	$	127,082	$	496,641	$	462,372	$	630,327	$	594,606
2		1,503		1,633		1,704		1,776		117,353		120,394		120,560		123,803			—		—		—		—		104,226		95,925		104,226		95,925
3		—		—		—		—		3,105		3,402		3,105		3,402			161		151		—		—		5,165		5,170		5,326		5,321
4		172		168		—		—		—		—		172		168			1,348		1,361		—		—		—		—		1,348		1,361
5		—		—		—		—		2,092		2,092		2,092		2,092			—		—		—		—		1,727		1,727		1,727		1,727
Total		$	10,454	$	10,427	$	140,410	$	155,639	$	520,898	$	525,381	$	671,762	$	691,447		$	7,467	$	6,664	$	127,728	$	127,082	$	607,759	$	565,194	$	742,954	$	698,940

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Other Asset-Backed Securities by NAIC Designation and Origination Year	Other Asset-Backed Securities by NAIC Designation and Origination Year																	Other Asset-Backed Securities by NAIC Designation and Origination Year
		December 31, 2018																	December 31, 2019
		2004 & Prior				2005 to 2008				2009 & After				Total					2004 & Prior				2005 to 2008				2009 & After				Total
NAIC Designation		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value			Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
		(Dollars in thousands)																	(Dollars in thousands)
1		$	9,314	$	9,038	$	141,728	$	154,747	$	415,228	$	412,078	$	566,270	$	575,863		$	6,188	$	5,981	$	134,272	$	147,913	$	435,077	$	435,779	$	575,537	$	589,673
2		1,586		1,693		1,890		1,943		121,796		122,300		125,272		125,936			1,396		1,488		1,547		1,608		113,762		116,354		116,705		119,450
3		—		—		313		303		1,697		1,697		2,010		2,000			163		160		—		—		3,230		3,483		3,393		3,643
4		179		170		—		—		—		—		179		170
5		—		—		—		—		3,601		3,601		3,601		3,601			—		—		—		—		1,755		1,755		1,755		1,755
Total		$	11,079	$	10,901	$	143,931	$	156,993	$	542,322	$	539,676	$	697,332	$	707,570		$	7,747	$	7,629	$	135,819	$	149,521	$	553,824	$	557,371	$	697,390	$	714,521

State and Political Subdivision Securities

State and political subdivision securities totaled ~~$1,555.7~~$1,451.3 million, or ~~20.8%~~19.1% of total fixed maturities, at ~~June 30, 2019~~March 31, 2020, and ~~$1,539.6~~$1,477.2 million, or ~~21.9%~~19.2% of total fixed maturities at December 31, ~~2018~~2019 and include investments in general obligation, revenue and municipal housing bonds. Our investment strategy is to utilize municipal bonds in addition to corporate bonds, as we believe they provide additional diversification and have historically low default rates compared with similarly rated corporate bonds. We evaluate the credit strength of the underlying issues on both a quantitative and qualitative basis, excluding insurance, prior to acquisition. The majority of the municipal bonds we hold are investment grade credits without consideration of insurance. Our municipal bonds are well diversified by type and geography with the top exposure being water and sewer revenue bonds. Our municipal bond holdings were trading at ~~108.6%~~111.7% of amortized cost at ~~June 30, 2019.~~March 31, 2020. We do not hold any Puerto Rico-related bonds. Exposure to the state of Illinois and municipalities within the state accounted for ~~1.3%~~1.1% of our total fixed maturities at ~~June 30, 2019~~March 31, 2020. As of ~~June 30, 2019~~March 31, 2020, our Illinois-related portfolio holdings were rated investment grade and were trading at ~~113.6%~~116.3% of amortized cost.

Mortgage Loans

Mortgage loans totaled $~~1,019.1~~988.9 million at ~~June 30, 2019~~March 31, 2020 and $~~1,039.8~~1,011.7 million at December 31, ~~2018~~2019. Our mortgage loans are diversified as to property type, location and loan size, and are collateralized by the related properties. The total number of commercial mortgage loans outstanding was ~~210~~208 at ~~June 30, 2019~~March 31, 2020 and ~~208~~209 at December 31, ~~2018~~2019. In the first ~~six~~three months of ~~2019,~~2020, new loans ranged from ~~$1.6~~$4.4 million to ~~$9.2~~$6.4 million in size, with an average loan size of ~~$5.2~~$5.3 million, an average loan term of 1912 years and an average net yield of ~~4.73%~~3.66%. Our mortgage lending policies establish limits on the amount that can be loaned to one borrower and require diversification by geographic location and collateral type. The majority of our mortgage loans amortize principal, with ~~1.7%~~2.2% that are interest-only loans as of ~~June 30, 2019~~March 31, 2020. At ~~June 30, 2019~~March 31, 2020, the average loan-to-value of the current outstanding principal balance using the most recent appraised value was ~~52.4%~~51.4% and the weighted average debt service coverage ratio was 1.7 based on the results of our 2018 annual study. See Note 2 to our consolidated financial statements for further discussion regarding our mortgage loans.

Other Assets and Liabilities



	March 31, 2020	December 31, 2019	Percentage change
Selected other assets:
Cash and cash equivalents	17,524	17,277	1.4	%
Reinsurance recoverable	105,438	107,498	(1.9	)%
Deferred acquisition costs	337,972	289,456	16.8	%
Other assets	168,045	167,940	0.1	%
Assets held in separate accounts	525,582	645,881	(18.6	)%
Selected other liabilities:
Future policy benefits	7,502,843	7,393,549	1.5	%
Other policyholder funds	595,252	597,256	(0.3	)%
Deferred income taxes	119,093	152,373	(21.8	)%
Other liabilities	107,841	107,013	0.8	%
Liabilities held in separate accounts	525,582	645,881	(18.6	)%

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~~Other Assets and Liabilities~~

June 30,
2019 December 31,
2018 Percentage change
Selected other assets:
Cash and cash equivalents 13,854
19,035
(27.2 )%
Reinsurance recoverable 102,898
102,386
0.5 %
Deferred acquisition costs 314,301
418,802
(25.0 )%
Other assets 179,408
163,518
9.7 %
Assets held in separate accounts 625,177
561,281
11.4 %
Selected other liabilities:
Future policy benefits 7,298,402
7,205,471
1.3 %
Other policyholder funds 601,038
615,177
(2.3 )%
Deferred income taxes 134,702
75,449
78.5 %
Other liabilities 102,414
93,532
9.5 %
Liabilities held in separate accounts 625,177
561,281
11.4 %

Cash and cash equivalents ~~decreased~~increased primarily due to normal fluctuations in timing of payments made and received. Deferred acquisition costs ~~decreased~~increased compared to the prior year primarily due to a ~~$111.7~~$47.7 million ~~increase~~decrease in the impact of the change in net unrealized appreciation on fixed maturity securities during the period. ~~Other assets increased primarily due to revaluation of our leased asset related to our home office building as discussed in Note 5 to our consolidated financial statements.~~ Assets and liabilities held in separate accounts ~~increased~~decreased due to market performance on the underlying investment portfolios.

Future policy benefits increased primarily due to ~~an increase~~increases in our funding agreements with the ~~volume of annuity and life business in force.~~FHLB. Deferred income taxes ~~increased~~decreased primarily due to the tax impact of the change in unrealized appreciation/depreciation on investments. Other liabilities increased due to an increase in unsettled security trades and lease obligations related to our home office building as discussed above, partially offset by decreases in amounts for expenses and commissions.

Stockholders’ Equity

As discussed in Note 67 to our consolidated financial statements, stockholders’ equity was impacted by capital deployment actions during the first quarter of ~~2019,~~2020, which included a special cash dividend of $1.50 per share on Class A and Class B common stock and an increase in our regular quarterly dividend by ~~4.3%~~4.2% to ~~$0.48~~$0.50 per share.


	June 30, 2019		December 31, 2018		Percentage change		March 31, 2020		December 31, 2019		Percentage change
	(dollars in thousands, except per share data)						(dollars in thousands, except per share data)
Total FBL Financial Group, Inc. stockholders’ equity	$	1,397,462	$	1,184,139	18.0	%	$	1,334,280	$	1,485,757	(10.2	)%
Common stockholders’ equity	1,394,462		1,181,139		18.1	%	1,331,280		1,482,757		(10.2	)%

Book value per share	$	56.55	$	47.78	18.4	%	$	54.02	$	60.12	(10.1	)%
Less: Per share impact of accumulated other comprehensive income	12.28		3.69		232.8	%	10.48		14.39		(27.2	)%
Book value per share, excluding accumulated other comprehensive income (1)	$	44.27	$	44.09	0.4	%	$	43.54	$	45.73	(4.8	)%


(1)	Book value per share excluding accumulated other comprehensive income is a non-GAAP financial measure. Since accumulated other comprehensive income fluctuates from quarter to quarter due to unrealized changes in the fair value of investments caused principally by changes in market interest rates, we believe this non-GAAP financial measure provides useful supplemental information.

Our stockholders’ equity ~~increased compared to~~decreased during the ~~prior year~~three months ended March 31, 2020 primarily due to the change in unrealized appreciation of fixed maturity securities during the period and ~~net income, partially offset by~~ dividends paid.

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Liquidity and Capital Resources

Cash Flows

During the first ~~six months~~quarter of ~~2019,~~2020, our operating activities generated cash flows totaling ~~$85.6~~$27.7 million, consisting of net ~~income~~loss of ~~$66.3~~$2.6 million adjusted for non-cash operating revenues and expenses netting to ~~$19.3~~$30.3 million. We used cash of ~~$30.4~~$88.8 million in our investing activities during the ~~2019~~2020 period. The primary uses were ~~$430.4~~$247.7 million of investment acquisitions, mostly in fixed maturity securities, partially offset by ~~$401.7~~$178.4 million in sales, maturities and repayments of investments. Our financing activities ~~used~~provided cash of ~~$60.4~~$61.3 million during the ~~2019~~2020 period. The primary financing source was ~~$317.0~~$271.5 million in receipts from interest sensitive products credited to policyholder account balances, which was offset by ~~$311.2~~$170.0 million for return of policyholder account balances on interest sensitive products and ~~$60.7~~$49.4 million for dividends paid to stockholders. The change in policyholder account balances includes a net increase of $109.2 million in funding agreements with the FHLB during the first quarter of 2020.

Sources and Uses of Capital Resources

Parent company cash inflows from operations consist primarily of fees that it charges various subsidiaries and affiliates for management of their operations, expense reimbursements and tax settlements from subsidiaries and affiliates, ~~proceeds from~~ investment income and dividends from subsidiaries, if declared and paid. Revenue sources for the parent company during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 included management fees from subsidiaries and affiliates totaling ~~$4.2~~$2.1 million and dividends of ~~$63.5~~ $50.0

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million. Cash outflows are principally for salaries, taxes and other expenses related to providing management services, dividends on outstanding stock, stock repurchases and interest on our parent company debt.

We paid regular cash dividends on our common and preferred stock during the ~~six-month~~three-month period ended ~~June 30~~March 31 totaling ~~$23.7~~$12.4 million in ~~2019~~2020 and ~~$22.9~~$11.9 million in ~~2018.~~2019. In addition, we paid a special $1.50 per common share cash dividend ~~in March 2019 and March 2018~~ totaling $37.0 million in March 2020 and ~~$37.3 million, respectively.~~March 2019. It is anticipated that quarterly cash dividend requirements for ~~2019~~2020 will be $0.0075 per Series B redeemable preferred share and ~~$0.48~~$0.50 per common share. Common stock dividend rates are analyzed quarterly and are dependent upon our capital and liquidity positions. In addition, alternative uses of excess capital may impact future dividend levels. Assuming these quarterly dividend rates, the common and preferred dividends would total approximately ~~$23.7~~$37.1 million for the remainder of ~~2019.~~2020. The parent company expects to have sufficient resources and cash flows to meet its interest and dividend payments throughout ~~2019.~~2020. The parent company had available cash and investments totaling ~~$38.8~~$32.5 million at ~~June 30, 2019.~~March 31, 2020. The parent company expects to rely on available cash resources, dividends from Farm Bureau Life and management fee income to make dividend payments to its stockholders, interest payments on its debt and to fund any capital initiatives such as stock repurchases. In addition, our parent company and Farm Bureau Life have entered into a reciprocal line of credit arrangement, which provides additional liquidity for either entity up to $20.0 million. We had no material commitments for capital expenditures as of ~~June 30, 2019.~~March 31, 2020.

As discussed in Note 67 to our consolidated financial statements, we have periodically taken advantage of opportunities to repurchase our outstanding Class A common stock through Class A common stock repurchase programs approved by our Board of Directors. At ~~June 30, 2019, $36.3~~March 31, 2020, $35.5 million remains available for repurchase under the current Class A common stock repurchase program. Under this program, we repurchased ~~66,475~~24,525 shares for ~~$4.6~~$0.8 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Completion of this program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice.

Interest payments on our debt totaled ~~$2.4~~$1.2 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~June 30, 2018.~~March 31, 2019. Interest payments on our debt outstanding at ~~June 30, 2019~~March 31, 2020 are estimated to be ~~$2.4~~$3.6 million for the remainder of ~~2019.~~2020.

Farm Bureau Life’s cash inflows primarily consist of premiums; deposits to policyholder account balances; income from investments; sales, maturities and calls of investments; and repayments of investment principal. Farm Bureau Life’s cash outflows are primarily related to withdrawals of policyholder account balances, investment purchases, payment of policy acquisition costs, policyholder benefits, income taxes, current operating expenses and dividends. Life insurance companies generally produce a positive cash flow that may be measured by the degree to which cash inflows are adequate to meet benefit obligations to policyholders and normal operating expenses as they are incurred. The remaining cash flow is generally used to increase the asset base to provide funds to meet the need for future policy benefit payments and for writing new business. Continuing operations and financing activities from Farm Bureau Life relating to interest sensitive products provided funds totaling ~~$96.1~~$135.8 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 and ~~$222.6~~$45.3 million for the prior year period.

~~Table of Contents~~

Farm Bureau Life’s ability to pay dividends to the parent company is limited by law to earned profits (statutory unassigned surplus) as of the date the dividend is paid, as determined in accordance with accounting practices prescribed by insurance regulatory authorities of the State of Iowa. At December 31, ~~2018,~~2019, Farm Bureau Life’s statutory unassigned surplus was ~~$503.7~~$508.9 million. There are certain additional limits on the amount of dividends that may be paid within a year without approval of the Insurance Division, Department of Commerce of the State of Iowa as discussed in Note 7 to our consolidated financial statements included in Item 8 of our ~~2018~~ Form ~~10-K.~~10-K for the year ended December 31, 2019. During the remainder of ~~2019,~~2020, the maximum amount legally available for distribution to the parent company without further regulatory approval is ~~$38.3~~$48.5 million.

We manage the amount of capital held by our insurance subsidiaries to ensure they meet regulatory requirements. State laws specify regulatory actions if an insurer’s risk-based capital (RBC) ratio, a measure of solvency, falls below certain levels. The NAIC has a standard formula for annually assessing RBC based on the various risk factors related to an insurance company’s capital and surplus, including insurance, business, asset and interest rate risks. The insurance regulators monitor the level of RBC against a statutory “authorized control level” RBC at which point regulators have the option to assume control of the insurance company. The company action level RBC is 200% of the authorized control level and is the first point at which any action would be triggered. Our adjusted capital and RBC is reported to our insurance regulators annually based on formulas that may be revised throughout the year. We estimate our adjusted capital and RBC quarterly; however, these estimates may differ from actual results. As of ~~June 30, 2019,~~March 31, 2020, Farm Bureau Life’s statutory total adjusted capital is estimated at ~~$693.2~~$674.9 million, resulting in an RBC ratio of ~~553%~~525%, based on company action level capital of ~~$125.4~~$128.6 million.

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On a consolidated basis, we anticipate that funds to meet our short-term and long-term capital expenditures, cash dividends to stockholders and operating cash needs will come from existing capital and internally-generated funds. However, there can be no assurance that future experience regarding benefits and surrenders will be similar to historic experience since benefits and surrender levels are influenced by such factors as the interest rate environment, our financial strength ratings, the economy and of other factors that impact policyholder behavior. There has been a significant impact to the U.S. economy during the first quarter 2020 due to the COVID-19 pandemic. Although there has been an impact to the values of certain assets and liabilities due to market volatility associated with COVID-19, we expect to continue generating sufficient funds from operations to maintain sufficient liquidity. Our investment portfolio at March 31, 2020, included $29.6 million of short-term investments, $17.5 million of cash and cash equivalents and $587.9 million in carrying value of U.S. Government and U.S. Government agency backed securities that could be readily converted to cash at or near carrying value. In addition, Farm Bureau Life is a member of the FHLB, which provides a source for additional liquidity, if needed. This membership allows us to utilize fixed or floating rate advances offered by the FHLB and secured by qualifying collateral. Our total capacity to utilize such advances is impacted by multiple factors including the market value of eligible collateral, our level of statutory admitted assets and excess reserves and our willingness or capacity to hold activity-based FHLB common stock.

Contractual Obligations

In the normal course of business, we enter into insurance contracts, financing transactions, lease agreements or other commitments that are necessary or beneficial to our operations. These commitments may obligate us to certain cash flows during future periods. There have been no material changes to our total contractual obligations since December 31, ~~2018~~2019.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks of Financial Instruments

There have been no material changes in the market risks from the information provided in “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

The COVID-19 pandemic presents additional uncertainty to financial markets. See Item II, Management’s Discussion and Analysis, “Impact of COVID-19 and Recent Business Environment” and Part II, Item 1A, “Risk Factors.”

ITEM 4. CONTROLS AND PROCEDURES

At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities and Exchange Act of 1934 (the Act) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Our internal control over financial reporting changes from time-to-time as we modify and enhance our systems and processes to meet our dynamic needs. Changes are also made as we strive to be more efficient in how we conduct our business. In addition, minor modifications regarding how control procedures are executed and documented have been made with the operational changes required in response to COVID-19. While changes have taken place in our internal controls during the quarter ended ~~June 30, 2019,~~March 31, 2020, there have been no changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

In June 2019, the Securities and Exchange Commission adopted new regulations impacting securities products and services. These regulations, including Regulation Best Interest and the Customer Relationship Summary requirement, will require us to make additional disclosures to customers and omay require us to make changes to certain products and services we offer. We are currently evaluating the impact of the new regulations on our business, including the cost of compliance.

The performance of our company is subject to a variety of risks that you should review. Occurrence of these risks could materially affect our business, results of operations or financial condition, cause the trading price of our common stock to decline materially or cause our actual results to differ materially from those expected or those expressed in any forward looking statements made by or on behalf of the Company. Please refer to Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019. We are supplementing the risk factors previously disclosed in such report as follows:

Our business, including our results of operations and financial condition, has been and is expected to continue to be adversely affected by the COVID-19 pandemic and may be adversely affected by any future pandemics.

The COVID-19 pandemic that swept across the United States during the first quarter of 2020 negatively impacted the U.S. economy and caused significant societal disruption, as businesses were forced to close and individuals were asked to practice social distancing. The COVID-19 pandemic has adversely affected our business and we expect it will continue to do so for an uncertain period of time. The future impact of COVID-19 or any other pandemic on our business cannot be predicted with certainty, but may include, without limitation, decreases in demand for or sales of our products, increases in death benefits and other expenses, decreases in the value of our investment portfolio and/or decreases in our stockholders’ equity.

The COVID-19 pandemic has also had the effect of heightening many of the other risks disclosed in the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~We had no~~The following table sets forth issuer ~~repurchases~~purchases of equity securities for the quarter ended ~~June 30, 2019.~~ March 31, 2020.



Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1, 2020 through January 31, 2020	—	$	—	—	$36,321,488
February 1, 2020 through February 29, 2020	—	—		—	$36,321,488
March 1, 2020 through March 31, 2020	24,525	32.97		24,525	$35,512,900
Total	24,525	$	32.97

We have ~~$36.3~~$35.5 million available under the repurchase program announced on March 1, 2018, which will expire March 31, 2022. The program authorizes us to make repurchases of Class A common stock in the open market or through privately negotiated transactions, with the timing and terms of the purchases to be determined by management based on market conditions. Completion of the program is dependent on market conditions and other factors. There is no guarantee as to the exact timing of any repurchases or the number of shares, if any, that we will repurchase. The share repurchase program may be modified or terminated at any time without prior notice.

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ITEM 6. EXHIBITS

(a) Exhibits:



10.1*+	Form of 2020 Restricted Stock Unit Agreement between the Company and participants
10.2*+	Form of 2020 Restricted Surplus Unit Agreement between the Company and participants
10.3*+	Transition Agreement dated March 2, 2020 between the Company and Charles Happel
31.1+	Certification Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2+	Certification Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32+	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101+	Interactive Data Files formatted in iXBRL (Inline eXtensible Business Reporting Language) from FBL Financial Group, Inc.’s Quarterly Report on Form 10-Q for the period ended ~~June 30, 2019~~March 31, 2020 as follows: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Financial Statements
104	Cover Page Interactive Data File formatted as iXBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101.

+	Filed herewith
*	Exhibit relates to a compensatory plan for management or directors.

5554

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~August 1, 2019~~May 7, 2020



	FBL FINANCIAL GROUP, INC.


	By	/s/ ~~James P. Brannen~~Daniel D. Pitcher
		~~James P. Brannen~~Daniel D. Pitcher
		Chief Executive Officer (Principal Executive Officer)

	By	/s/ Donald J. Seibel
		Donald J. Seibel
		Chief Financial Officer and Treasurer (Principal Financial Officer)

	By	/s/ Anthony J. Aldridge
		Anthony J. Aldridge
		Chief Accounting Officer (Principal Accounting Officer)

5655



Mortgage Loans by Year of Origination
	June 30, 2019				December 31, 2018
Year of Origination	Carrying Value		Percent of Total		Carrying Value		Percent of Total
	(Dollars in thousands)
2019	$	25,878	2.6	%	$	—	—	%
2018	135,831		13.3		137,519		13.2
2017	203,949		20.0		207,540		20.0
2016	146,900		14.4		149,437		14.4
2015	126,711		12.4		128,877		12.4
2014 & prior	379,855		37.3		416,456		40.0
Total	$	1,019,124	100.0	%	$	1,039,829	100.0	%



Impaired Mortgage Loans
	June 30, 2019			December 31, 2018
	(Dollars in thousands)
Unpaid principal balance	$	4,681		$	18,622
Less:
Related allowance	(329		)	(3,107		)
Carrying value of impaired mortgage loans	$	4,352		$	15,515



Allowance on Mortgage Loans
	Six months ended June 30,
	2019			2018
	(Dollars in thousands)
Balance at beginning of period	$	3,107		$	497
Recoveries	(2,778		)	(100		)
Balance at end of period	$	329		$	397



Lease commitments by year
	June 30, 2019
	(Dollars in thousands)
2019	$	1,303
2020	2,608
2021	2,610
2022	2,444
2023	2,278
Thereafter	6,594
Total minimum lease payments	17,837
Less: Interest	(2,894		)
Present value of lease liabilities	$	14,943



Accumulated Other Comprehensive Income Reclassification Adjustments
	Six months ended June 30, 2019
	Unrealized Net Investment Gains (Losses) on Available-for-Sale Securities (1)			Accumulated Non-Credit Impairment Losses (1)		Underfunded Status of Postretirement Benefit Plans			Total
	(Dollars in thousands)
Realized capital gains on sales of fixed maturities	$	(2,833	)	$	—	$	—		$	(2,833	)
Adjustments for assumed changes in deferred acquisition costs, value of insurance in force acquired, unearned revenue reserve and policyholder liabilities	143			—		—			143
Other expenses - change in unrecognized postretirement items:
Net actuarial loss	—			—		530			530
Reclassifications before income taxes	(2,690		)	—		530			(2,160		)
Income taxes	565			—		(111		)	454
Reclassification adjustments	$	(2,125	)	$	—	$	419		$	(1,706	)



Other data
Average invested assets, at amortized cost (1)								$	698,709	$	704,077		(1	)%
Other investment-related income included in net investment income (2)	$	367	$	149		146	%	488		286			71	%
Average interest sensitive life account value								361,570		359,978			—	%
Death benefits, net of reinsurance and reserves released	5,453		4,321			26	%	12,522		10,260			22	%
Estimated impact on pre-tax adjusted operating income from separate account performance on amortization of deferred acquisition costs, deferred sales inducements and unearned revenue reserve	600		(255		)	(335	)%	2,800		(1,115		)	(351	)%