UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2008

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

For the transition period from                      to                     

FBL Financial Group, Inc.

(Exact name of registrant as specified in its charter)

Iowa		42-1411715
(State of incorporation)		(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)

(Former name, former address and former fiscal year, if changed since last report)

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. þ Yes o No

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ 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 31, 2008
Class A Common Stock, without par value		28,960,429
Class B Common Stock, without par value		1,192,990

 

 

FBL FINANCIAL GROUP, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008
TABLE OF CONTENTS

PART I.      FINANCIAL INFORMATION
Cautionary Statement Regarding Forward Looking Information			2
Item 1.            Financial Statements (Unaudited)
Consolidated Balance Sheets			4
Consolidated Statements of Income (Loss)			6
Consolidated Statements of Changes in Stockholders’ Equity			7
Consolidated Statements of Cash Flows			8
Notes to Consolidated Financial Statements			10
Item 2.            Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3.            Quantitative and Qualitative Disclosures About Market Risk			48
Item 4.            Controls and Procedures			48
PART II.       OTHER INFORMATION
Item 4.            Submission of Matters to a Vote of Security Holders			49
Item 6.            Exhibits			50
SIGNATURES			53
Section 302 Certification
Section 302 Certification
Section 906 Certification

Cautionary Statement Regarding Forward Looking Information

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. The risks and uncertainties that may affect the operations, performance, development and results of our business include but are not limited to the following:

	•		If we are unable to attract and retain agents and develop new distribution sources, sales of our products and services may be reduced.
	•		Attracting and retaining employees who are key to our business is critical to our growth and success.
	•		Changing interest rates and market volatility, and general economic conditions, affect the risks and the returns on both our products and our investment portfolio.
	•		Our investment portfolio is subject to credit quality risks which may diminish the value of our invested assets and affect our profitability and reported book value per share.
	•		As a holding company, we depend on our subsidiaries for funds to meet our obligations, but our subsidiaries’ ability to make distributions to us is limited by law, and could be affected by risk based capital computations.
	•		A ratings downgrade may have a material adverse effect on our business.
	•		Our earnings are influenced by our claims experience, which is difficult to estimate. If our future claims experience does not match our pricing assumptions or past results, our earnings could be materially adversely affected.
	•		Our ability to grow depends upon the continued availability of capital, which may not be available when we need it, or may only be available on unfavorable terms.
	•		Our ability to maintain competitive costs is dependent upon the level of new sales and persistency of existing business.
	•		Inaccuracies in assumptions regarding future persistency, mortality and interest rates used in calculating reserve, deferred policy acquisition expense and deferred sales inducement amounts and pricing our products could have a material adverse impact on our net income (loss).
	•		Changes in federal laws, including tax laws, may affect sales of our products and profitability.
	•		All segments of our business are highly regulated and these regulations or changes in them could affect our profitability.
	•		We face competition from companies having greater financial resources, more advanced technology systems, broader arrays of products, higher ratings and stronger financial performance, which may impair our ability to retain existing customers, attract new customers and maintain our profitability and financial strength.
	•		Success of our business depends in part on effective information technology systems and on continuing to develop and implement improvements.

	•		Our business is highly dependent on our relationships with Farm Bureau organizations and would be adversely affected if those relationships became impaired.
	•		We assumed a significant amount of closed block business through coinsurance agreements and have only a limited ability to manage this business.
	•		Our reinsurance program involves risks because we remain liable with respect to the liabilities ceded to reinsurers if the reinsurers fail to meet the obligations assumed by them.
	•		We experience volatility in net income (loss) due to accounting standards for derivatives.
	•		We face risks relating to litigation, including the costs of such litigation, management distraction and the potential for damage awards, which may adversely impact our business.

See Part 1A, Risk Factors, of our annual report on Form 10-K for additional information.

ITEM 1. FINANCIAL STATEMENTS

FBL FINACIAL GROUP, INC.

		June 30,				December 31,
		2008				2007
Assets
Investments:
Fixed maturities – available for sale, at market (amortized cost: 2008 - $10,254,856; 2007 - $9,662,986)		$	9,697,741			$	9,522,592
Equity securities – available for sale, at market (cost: 2008 - $11,288; 2007 - $22,410)			11,448				23,633
Mortgage loans on real estate			1,262,813				1,221,573
Derivative instruments			25,914				43,918
Investment real estate, less allowances for depreciation of $0 in 2008 and 2007			2,559				2,559
Policy loans			180,631				179,490
Other long-term investments			1,300				1,300
Short-term investments			87,526				72,005
Total investments			11,269,932				11,067,070
Cash and cash equivalents			75,240				84,015
Securities and indebtedness of related parties			19,619				19,957
Accrued investment income			128,608				118,827
Amounts receivable from affiliates			10,924				10,831
Reinsurance recoverable			109,133				123,659
Deferred policy acquisition costs			1,161,533				991,155
Deferred sales inducements			378,559				321,263
Value of insurance in force acquired			48,628				41,215
Property and equipment, less allowances for depreciation of $81,128 in 2008 and $75,365 in 2007			47,257				49,164
Current income taxes recoverable			11,932				7,412
Deferred income tax benefit			59,971				—
Goodwill			11,170				11,170
Collateral held for securities lending and other transactions			95,326				186,925
Other assets			30,193				32,458
Assets held in separate accounts			794,846				862,738
Total assets		$	14,252,871			$	13,927,859

FBL FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in thousands)

		June 30,				December 31,
		2008				2007
Liabilities and stockholders’ equity
Liabilities:
Policy liabilities and accruals:
Future policy benefits:
Interest sensitive and index products		$	10,145,918			$	9,557,073
Traditional life insurance and accident and health products			1,307,138				1,284,068
Unearned revenue reserve			30,544				28,448
Other policy claims and benefits			37,943				31,069
			11,521,543				10,900,658
Other policyholders’ funds:
Supplementary contracts without life contingencies			478,002				439,441
Advance premiums and other deposits			167,763				158,245
Accrued dividends			9,920				11,208
			655,685				608,894
Amounts payable to affiliates			74				35
Long-term debt			316,967				316,930
Deferred income taxes			—				28,188
Collateral payable for securities lending and other transactions			95,114				202,594
Other liabilities			129,902				104,840
Liabilities related to separate accounts			794,846				862,738
Total liabilities			13,514,131				13,024,877
Minority interest in subsidiaries			130				91
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
Class A common stock, without par value – authorized 88,500,000 shares, issued and outstanding 28,970,937 shares in 2008 and 28,826,738 shares in 2007			105,795				101,221
Class B common stock, without par value – authorized 1,500,000 shares, issued and outstanding 1,192,990 shares			7,525				7,525
Accumulated other comprehensive loss			(186,765	)			(36,345	)
Retained earnings			809,055				827,490
Total stockholders’ equity			738,610				902,891
Total liabilities and stockholders’ equity		$	14,252,871			$	13,927,859

See accompanying notes.

FBL FINANCIAL GROUP, INC.

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
Revenues:
Interest sensitive and index product charges		$	31,785			$	27,930			$	60,906			$	54,916
Traditional life insurance premiums			38,769				38,975				74,902				73,512
Net investment income			172,173				154,582				340,667				304,544
Derivative income (loss)			(31,685	)			44,826				(130,581	)			40,949
Realized/unrealized gains (losses) on investments			(74,021	)			1,156				(103,368	)			2,612
Other income			6,955				6,446				12,820				13,542
Total revenues			143,976				273,915				255,346				490,075
Benefits and expenses:
Interest sensitive and index product benefits			104,477				120,569				209,238				215,400
Change in value of index product embedded derivatives			(30,321	)			276				(133,491	)			(3,767	)
Traditional life insurance benefits			22,602				23,411				49,854				48,081
Increase in traditional life future policy benefits			11,037				11,693				22,427				19,229
Distributions to participating policyholders			5,023				5,656				10,293				11,248
Underwriting, acquisition and insurance expenses			46,992				51,534				93,683				93,644
Interest expense			4,448				4,511				8,899				7,799
Other expenses			6,137				5,673				12,092				11,696
Total benefits and expenses			170,395				223,323				272,995				403,330
			(26,419	)			50,592				(17,649	)			86,745
Income taxes			9,996				(16,940	)			7,538				(29,347	)
Minority interest in loss (earnings) of subsidiaries			7				5				16				(5	)
Equity income (loss), net of related income taxes			(159	)			189				(42	)			564
Net income (loss)			(16,575	)			33,846				(10,137	)			57,957
Dividends on Series B preferred stock			(37	)			(37	)			(75	)			(75	)
Net income (loss) applicable to common stock		$	(16,612	)		$	33,809			$	(10,212	)		$	57,882
Earnings (loss) per common share		$	(0.56	)		$	1.14			$	(0.34	)		$	1.95
Earnings (loss) per common share – assuming dilution		$	(0.56	)		$	1.12			$	(0.34	)		$	1.91
Cash dividends per common share		$	0.125			$	0.120			$	0.250			$	0.240

See accompanying notes.

FBL FINANCIAL GROUP, INC.

														Accumulated
		Series B				Class A				Class B				Other								Total
		Preferred				Common				Common				Comprehensive				Retained				Stockholders’
		Stock				Stock				Stock				Income (Loss)				Earnings				Equity
Balance at January 1, 2007		$	3,000			$	86,462			$	7,519			$	28,195			$	755,544			$	880,720
Comprehensive loss:
Net income for six months ended June 30, 2007			—				—				—				—				57,957				57,957
Change in net unrealized investment gains/losses			—				—				—				(69,117	)			—				(69,117	)
Change in underfunded status of other postretirement benefit plans			—				—				—				15				—				15
Total comprehensive loss																							(11,145	)
Adjustment resulting from capital transactions of equity investee			—				6				1				—				—				7
Stock based compensation, including the issuance of 277,713 common shares under compensation plans			—				9,286				—				—				—				9,286
Dividends on preferred stock			—				—				—				—				(75	)			(75	)
Dividends on common stock			—				—				—				—				(7,108	)			(7,108	)
Balance at June 30, 2007		$	3,000			$	95,754			$	7,520			$	(40,907	)		$	806,318			$	871,685
Balance at January 1, 2008		$	3,000			$	101,221			$	7,525			$	(36,345	)		$	827,490			$	902,891
Comprehensive loss:
Net loss for six months ended June 30, 2008			—				—				—				—				(10,137	)			(10,137	)
Change in net unrealized investment gains/losses			—				—				—				(150,434	)			—				(150,434	)
Change in underfunded status of other postretirement benefit plans			—				—				—				14				—				14
Total comprehensive loss																							(160,557	)
Change in measurement date of benefit plans			—				—				—				—				(770	)			(770	)
Adjustment resulting from capital transactions of equity investee			—				5				—				—				—				5
Stock based compensation, including the issuance of 144,199 common shares under compensation plans			—				4,569				—				—				—				4,569
Dividends on preferred stock			—				—				—				—				(75	)			(75	)
Dividends on common stock			—				—				—				—				(7,453	)			(7,453	)
Balance at June 30, 2008		$	3,000			$	105,795			$	7,525			$	(186,765	)		$	809,055			$	738,610

Comprehensive loss totaled $65.3 million in the second quarter of 2008 and $37.5 million in the second quarter of 2007.

See accompanying notes.

FBL FINANCIAL GROUP, INC.

		Six months ended June 30,
		2008				2007
Operating activities
Net income (loss)		$	(10,137	)		$	57,957
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments related to interest sensitive and index products:
Interest credited/index credits to account balances, excluding deferred sales inducements			160,550				178,408
Change in fair value of embedded derivatives			(133,491	)			(3,768	)
Charges for mortality and administration			(56,925	)			(50,866	)
Deferral of unearned revenues			777				715
Amortization of unearned revenue reserve			(715	)			(704	)
Provision for depreciation and amortization of property and equipment			7,876				6,736
Provision for accretion and amortization of investments			(3,429	)			(6,254	)
Realized/unrealized losses (gains) on investments			103,368				(2,612	)
Change in fair value of derivatives			106,786				(28,975	)
Increase in traditional life and accident and health benefit accruals			23,070				22,449
Policy acquisition costs deferred			(86,098	)			(79,668	)
Amortization of deferred policy acquisition costs			47,185				48,581
Amortization of deferred sales inducements			25,716				16,290
Amortization of value of insurance in force			1,067				2,000
Net sale of fixed maturities – trading			—				15,000
Change in accrued investment income			(9,749	)			(5,344	)
Change in amounts receivable from/payable to affiliates			(54	)			4,428
Change in reinsurance recoverable			14,525				357
Change in current income taxes			(4,520	)			2,512
Provision for deferred income taxes			(6,584	)			5,450
Other			(6,990	)			81
Net cash provided by operating activities			172,228				182,773
Investing activities
Sale, maturity or repayment of investments:
Fixed maturities – available for sale			380,419				279,806
Equity securities – available for sale			15,473				15,716
Mortgage loans on real estate			32,897				26,964
Derivative instruments			23,293				71,507
Policy loans			19,769				21,399
			471,851				415,392
Acquisition of investments:
Fixed maturities – available for sale			(1,078,701	)			(774,367	)
Equity securities – available for sale			(224	)			(143	)
Mortgage loans on real estate			(74,115	)			(142,319	)
Derivative instruments			(116,084	)			(40,978	)
Investment real estate			—				(17	)
Policy loans			(20,909	)			(20,749	)
Short-term investments – net			(15,521	)			(11,312	)
			(1,305,554	)			(989,885	)

FBL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)

		Six months ended June 30,
		2008				2007
Investing activities – continued
Proceeds from disposal, repayments of advances and other distributions of capital from equity investees		$	129			$	14
Investments in and advances to equity investees			—				(250	)
Purchases of property and equipment			(8,356	)			(9,102	)
Disposal of property and equipment			1,220				1,271
Net cash used in investing activities			(840,710	)			(582,560	)
Financing activities
Receipts from interest sensitive and index products credited to policyholder account balances			1,170,146				792,495
Return of policyholder account balances on interest sensitive and index products			(506,535	)			(455,835	)
Proceeds from long-term debt			—				98,460
Distributions related to minority interests – net			55				2
Excess tax deductions on stock-based compensation			262				1,076
Issuance of common stock			3,307				7,269
Dividends paid			(7,528	)			(7,183	)
Net cash provided by financing activities			659,707				436,284
Increase (decrease) in cash and cash equivalents			(8,775	)			36,497
Cash and cash equivalents at beginning of period			84,015				112,292
Cash and cash equivalents at end of period		$	75,240			$	148,789
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		$	8,895			$	7,721
Income taxes			3,286				20,614
Non-cash operating activity:
Deferral of sales inducements			33,388				43,794

See accompanying notes.

FBL Financial Group, Inc.		June 30, 2008

FBL FINANCIAL GROUP, INC.

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 three and six-month periods ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. We encourage you to refer to our consolidated financial statements and notes for the year ended December 31, 2007 included in our annual report on Form 10-K 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.

Accounting Changes

Effective January 1, 2008, we adopted Statement of Financial Accounting Standards (Statement) No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value and expands the required disclosures about fair value measurements. See Note 2, “Fair Value,” for detailed information regarding our fair value measurements. The impact of adoption as of January 1, 2008, was to decrease the carrying value of certain investments and certain policy liabilities and accruals in our consolidated financial statements, resulting in an increase to net income (loss) of $5.6 million ($0.19 per basic and diluted common share). The primary impact of this change was a decrease to the embedded derivatives in the index annuity reserves of $26.7 million. The impact of this change on net income (loss) was mitigated by offsets for the amortization of deferred policy acquisition costs and deferred sales inducements and income taxes.

Effective January 1, 2008, we adopted the measurement date portion of Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This portion of Statement No. 158 requires measurement of a plan’s assets and benefit obligations as of the end of the employer’s fiscal year. We adopted the measurement date portion of this Statement, using the single measurement date method, which resulted in a decrease to retained earnings totaling $0.8 million.

Effective January 1, 2008, we adopted Financial Accounting Standards Board (FASB) Staff Position FIN 39-1 (FSP FIN 39-1), which amends certain aspects of FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts – an interpretation of APB Opinion No. 10 and FASB Statement No. 105.” This FSP allows a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. The guidance in this FSP is effective for fiscal years beginning after November 15, 2007, with early application permitted. We elected to implement this statement and have adopted a policy to offset the collateral against the derivatives. At June 30, 2008, we had master netting agreements with counterparties covering cash collateral payable totaling $10.9 million and cash collateral receivable totaling $8.9 million. These amounts are netted against the fair value of the call options included in derivative instruments and interest rate swaps included in other liabilities in our consolidated balance sheets. At December 31, 2007, we had master netting agreements with counterparties covering cash collateral payable totaling $70.9 million and cash collateral receivable totaling $7.5 million. Any excess collateral that remains after the netting is included in the collateral held or payable for securities lending and other transactions on our consolidated balance sheets. We held excess collateral totaling $0.2 million at June 30, 2008 and $0.1 million at December 31, 2007. These amounts have been restated in the prior year balance sheet. This FSP has no impact on our consolidated statements of income (loss).

FBL Financial Group, Inc.		June 30, 2008

2. Fair Value

As discussed in Note 1 above, Statement No. 157, “Fair Value Measurements,” defines fair value, establishes a framework for measuring fair value and expands the required disclosures about fair value measurements. Per Statement No. 157, 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. Statement No. 157 also establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

We have valued our investments, in the absence of observable market prices, using the valuation methodologies described below applied on a consistent basis. For some investments little market activity may exist and management’s determination of fair value is then based on the best information available in the circumstances, and may incorporate management’s own assumptions, which involves a significant degree of judgment.

Investments for which market prices are not observable are generally private investments, securities valued using non-binding broker quotes or securities with very little trading activity. Fair values of private investments are determined by reference to public market or private transactions or valuations for comparable companies or assets in the relevant asset class when such amounts are available. If these are not available, we use a discounted cash flow analysis using the specific creditors’ credit default swap spread adjusted for the maturity/average life differences. Spread adjustments are intended to reflect an illiquidity premium and take into account a variety of factors including but not limited to: senior unsecured versus secured, par amount outstanding, number of holders, maturity, average life, composition of lending group and debt rating. These valuation methodologies involve a significant degree of judgment.

Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories.

Level 1 – Quoted prices are available in active markets for identical financial instruments as of the reporting date. The types of financial instruments included in Level 1 are listed equities, mutual funds, money market funds and non-interest bearing cash. As required by Statement No. 157, we do not adjust the quoted price for these financial instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.

Level 2 – Pricing inputs are other than quoted prices in active markets which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methods. Financial instruments which are generally included in this category include corporate bonds, short-term securities, less liquid and restricted equity securities and over-the-counter derivatives.

Level 3 – Pricing inputs are unobservable for the financial instrument and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include private corporate securities, broker-only quoted public securities, collateralized debt obligations and index annuity embedded derivatives.

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.

FBL Financial Group, Inc.		June 30, 2008

The following table summarizes the valuation of our financial instruments presented in our consolidated balance sheets by the fair value hierarchy levels defined in Statement No. 157:

		June 30, 2008
		Quoted prices in
		active markets				Significant other				Significant
		for identical				observable				unobservable
		assets (Level 1)				inputs (Level 2)				inputs (Level 3)				Total
						(Dollars in thousands)
Assets
Fixed maturities – available for sale		$	—			$	8,754,829			$	942,912			$	9,697,741
Equity securities – available for sale			2,828				8,620				—				11,448
Derivative instruments			—				25,914				—				25,914
Other long-term investments			—				—				1,300				1,300
Cash and short-term investments			117,766				45,000								162,766
Reinsurance recoverable			—				7,871				—				7,871
Collateral held for securities lending and other transactions			—				95,326				—				95,326
Assets held in separate accounts			794,846				—				—				794,846

Approximately 9.7% of the total fixed maturities are included in the Level 3 group.

		June 30, 2008
		Quoted prices in
		active markets				Significant other				Significant
		for identical				observable				unobservable
		assets (Level 1)				inputs (Level 2)				inputs (Level 3)				Total
						(Dollars in thousands)
Liabilities
Future policy benefits – index annuity embedded derivatives		$	—			$	—			$	624,105			$	624,105
Collateral payable for securities lending and other transactions			—				95,114				—				95,114
Other liabilities			—				26				—				26

We have elected to report the preceding financial instruments at fair value in our consolidated balance sheets and used the following methods and assumptions to determine the fair value.

Fixed maturity securities: Fair values for fixed maturity securities are obtained primarily from a variety of independent pricing sources, whose results undergo evaluation by our internal investment professionals.

Equity securities: The fair values for equity securities are based on quoted market prices, where available. For equity securities that are not actively traded, estimated fair values are based on values of comparable issues.

Derivative instruments: Fair values for call options and interest rate swaps are based on counterparty market prices adjusted for a credit component of the counterparty, net of collateral paid. Prices are verified using analytical tools by our internal investment professionals.

Cash, short-term investments and other long-term investments: Amounts are reported at historical cost, adjusted for amortization of premiums and accrual of discounts, as applicable, which approximates the fair values due to the nature of these assets.

Collateral held and payable for securities lending and other transactions: Fair values are obtained from an independent pricing source.

Reinsurance recoverable: Reinsurance recoverable relating to our portion of the call options used to fund index credits on the index annuities assumed from a reinsurer is reported at fair value. Fair value is determined using quoted market prices for the call options, less an adjustment for credit risk. Reinsurance recoverable also includes the embedded derivatives in our modified coinsurance contracts under which we cede or assume business. Market values for these embedded derivatives are based on the difference between the fair value and the cost basis of the underlying fixed maturity securities. We are not required to estimate fair value for the remainder of the reinsurance recoverable balance.

FBL Financial Group, Inc.		June 30, 2008

Assets held in separate accounts: Separate account assets are reported at estimated fair value in our consolidated balance sheets based on quoted net asset values of the underlying mutual funds.

Future policy benefits – index annuity embedded derivatives: Fair values of index annuity embedded derivatives are calculated using discounted cash flow valuation techniques based on current interest rates adjusted to reflect our credit risk and an additional provision for adverse deviation.

Other liabilities: Other liabilities include interest rate swaps with fair values based on counterparty market prices adjusted for a credit component, net of collateral paid. Prices are verified using analytical tools by our internal investment professionals.

The following table summarizes the Level 3 fixed maturity investments by valuation methodology as of June 30, 2008:

		June 30, 2008
										Mortgage or
		Private				Publicly traded				other asset -								Percent of
		corporation				issues				backed securities				Total				Total
		(Dollars in thousands)
Source of valuation
Third-party vendors		$	367,488			$	277,285			$	171,902			$	816,675				86.6	%
Priced internally			27,365				92,176				6,696				126,237				13.4
Total		$	394,853			$	369,461			$	178,598			$	942,912				100.0	%

The changes in financial instruments measured at fair value, excluding accrued interest income, for which we have used Level 3 inputs to determine fair value during the first six months of 2008 are as follows:

		Fixed maturities				Other long-term
		available for sale				investments
		(Dollars in thousands)
Assets
Balance, December 31, 2007		$	1,072,697			$	1,300
Purchases (disposals), net			170,234				—
Realized and unrealized gains (losses), net			(86,645	)			—
Transfers in and/or (out) of Level 3 (A)			(213,336	)			—
Included in earnings (amortization)			(38	)			—
Balance, June 30, 2008		$	942,912			$	1,300
Change in unrealized gains/losses on investments held at June 30, 2008		$	(55,413	)		$	—

Future policy benefits – index product embedded derivatives
Balance, December 31, 2007		$	747,511
Premiums less benefits, net			26,518
Impact of unrealized gains (losses), net			(149,924	)
Balance, June 30, 2008		$	624,105
Change in unrealized gains/losses on embedded derivatives held at June 30, 2008 (1)		$	(149,924	)

FBL Financial Group, Inc.		June 30, 2008

3. Defined Benefit Plans

We participate with several affiliates and an unaffiliated organization in various multiemployer defined benefit plans. Our share of net periodic pension cost for the plans recorded in our consolidated statements of income (loss) for the second quarter totaled $1.1 million for 2008 and $1.5 million for 2007, and for the six months ended June 30 totaled $2.3 million for 2008 and $3.0 million for 2007. As described in Note 1 above, we also recorded a portion of the net periodic pension costs as a charge to retained earnings totaling $0.8 million as a result of adopting the measurement date portion of Statement No. 158. Components of net periodic pension cost for all employers in the multiemployer plans are as follows:

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Dollars in thousands)
Service cost		$	1,659			$	2,341			$	3,318			$	4,682
Interest cost			3,709				3,476				7,418				6,951
Expected return on assets			(3,495	)			(3,087	)			(6,990	)			(6,174	)
Amortization of prior service cost			196				193				392				387
Amortization of actuarial loss			945				1,119				1,890				2,239
Net periodic pension cost – all employers		$	3,014			$	4,042			$	6,028			$	8,085

4. Commitments and Contingencies

In the normal course of business, we may be involved in litigation where amounts are alleged that are substantially in excess of contractual policy benefits or certain other agreements. At June 30, 2008, management is not aware of any claims for which a material loss is reasonably possible.

We seek to limit our exposure to loss on any single insured or event and to recover a portion of benefits paid by ceding a portion of our exposure to other insurance enterprises or reinsurers. Reinsurance contracts do not relieve us of our obligations to policyholders. To the extent that reinsuring companies are later unable to meet obligations under reinsurance agreements, our insurance subsidiaries would be liable for these obligations, and payment of these obligations could result in losses. To limit the possibility of such losses, we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk. No allowance for uncollectible amounts has been established against our asset for reinsurance recoverable since none of our receivables are deemed to be uncollectible.

We participate in a reinsurance pool with various unaffiliated life insurance companies to mitigate the impact of a catastrophic event on our financial position and results of operations. Members of the pool share in the eligible catastrophic losses based on their size and contribution to the pool. Under the pool arrangement, we will be able to cede approximately 65% of catastrophic losses after other reinsurance and a deductible of $0.9 million. Pool losses are capped at $17.8 million per event and the maximum loss we could incur as a result of losses assumed from other pool members is $6.4 million per event.

We self-insure our employee health and dental claims. However, claims in excess of self-insurance levels are fully insured. We fund insurance claims through a self-insurance trust. Deposits to the trust are made at an amount equal to our best estimate of claims incurred during the period. Accordingly, no accruals are recorded on our financial statements for unpaid claims and claims incurred but not reported. Adjustments, if any, resulting in changes in the estimate of claims incurred will be reflected in operations in the periods in which such adjustments are known.

On June 25, 2008, the Securities Exchange Commission (SEC) published for public comment proposed Rule 151A which would require index annuities to be regulated by the SEC. Under this proposed rule, index annuities would be considered a type of security and all agents selling the product would have to be registered representatives affiliated with a licensed broker dealer. While there is uncertainty regarding the outcome of this proposed rule, it is possible that we will have a more regulated environment for index annuities in the future. If the proposed rule is adopted in its current form, we believe it would likely result in increased costs and decreased production with possible product design and compensation limitations. Index annuities are important to our business, however we also offer a wide variety of life insurance and annuity products and have experience with registered investment products. The

FBL Financial Group, Inc.		June 30, 2008

proposed rule indicates there would be 12 months between publication and the effectiveness of any final rule. We are confident that we can transition to an SEC regulated environment within this time period.

In 2006, we incurred a pre-tax charge of $4.9 million relating to the settlement of a lawsuit with a husband and wife who had applied for life insurance policies. The settlement ended litigation regarding the process we followed in denying insurance coverage for medical reasons. Insurance claims have been filed under our professional liability and general liability insurance policies for reimbursement of the settlement amount, but coverage has been denied, and we have made a claim against an insurance broker for breach of contractual duties. We have filed lawsuits against the insurer and the insurance broker to recover those damages. While we have received an adverse ruling in the case against the insurer at the district court level, the adverse ruling has been appealed and we continue to believe both claims are valid. Recoveries from third parties are required to be accounted for as gain contingencies and not recorded in our financial statements until the lawsuits are resolved. Accordingly, any recoveries will be recorded in net income (loss) in the period the recovery is received.

5. Earnings (Loss) Per Share

The following table sets forth the computation of earnings (loss) per common share and earnings (loss) per common share – assuming dilution.

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Dollars in thousands, except per share data)
Numerator:
Net income (loss)		$	(16,575	)		$	33,846			$	(10,137	)		$	57,957
Dividends on Series B preferred stock			(37	)			(37	)			(75	)			(75	)
Numerator for earnings (loss) per common share – income (loss) available to common stockholders		$	(16,612	)		$	33,809			$	(10,212	)		$	57,882
Denominator:
Weighted average shares			29,815,392				29,621,284				29,802,226				29,582,618
Deferred common stock units relating to deferred compensation plans			76,686				60,370				73,446				58,420
Denominator for earnings (loss) per common share – weighted-average shares			29,892,078				29,681,654				29,875,672				29,641,038
Effect of dilutive securities – stock-based compensation			—				603,538				—				626,403
Denominator for diluted earnings (loss) per common share – adjusted weighted-average shares			29,892,078				30,285,192				29,875,672				30,267,441
Earnings (loss) per common share		$	(0.56	)		$	1.14			$	(0.34	)		$	1.95
Earnings (loss) per common share – assuming dilution		$	(0.56	)		$	1.12			$	(0.34	)		$	1.91

FBL Financial Group, Inc.		June 30, 2008

6. Segment Information

We analyze operations by reviewing financial information regarding products that are aggregated into four product segments. The product segments are: (1) Traditional Annuity – Exclusive Distribution (“Exclusive Annuity”), (2) Traditional Annuity – Independent Distribution (“Independent Annuity”), (3) Traditional and Universal Life Insurance and (4) Variable. We also have various support operations and corporate capital that are aggregated into a Corporate and Other segment.

We analyze our segment results based on pre-tax operating income (loss). Accordingly, income taxes are not allocated to the segments. In addition, operating results are generally reported net of any transactions between the segments. Operating income (loss) represents net income (loss) excluding, as applicable, the impact of:

	•		realized and unrealized gains and losses on investments;
	•		changes in net unrealized gains and losses on derivatives; and
	•		the cumulative effect of changes in accounting principles.

We use operating income (loss), in addition to net income (loss), to measure our performance since realized and unrealized gains and losses on investments and the change in net unrealized gains and losses on derivatives can fluctuate greatly from quarter to quarter. Also, the cumulative effect of changes in accounting principles is a nonrecurring item. 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 index business are one or two-year assets while the embedded derivative in the index contracts represents the rights of the contract holder to receive index credits over the entire period the index annuities are expected to be in force. For our other embedded derivatives in the product segments and interest rate swaps backing our annuity liabilities, the derivatives are marked to market, but the associated insurance liabilities are not marked to market. A view of our operating performance without the impact of these mismatches and nonrecurring item enhances the analysis of our results. We use operating income (loss) for goal setting, determining company-wide bonuses and evaluating performance on a basis comparable to that used by many in the investment community.

FBL Financial Group, Inc.		June 30, 2008

Financial information concerning our operating segments is as follows:

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Dollars in thousands)
Operating revenues:
Traditional Annuity – Exclusive Distribution		$	35,003			$	38,251			$	70,699			$	75,389
Traditional Annuity – Independent Distribution			81,053				94,376				159,336				165,549
Traditional and Universal Life Insurance			86,218				87,392				169,580				169,095
Variable			16,561				15,762				32,496				32,123
Corporate and Other			8,800				9,297				17,297				17,490
			227,635				245,078				449,408				459,646
Realized/unrealized gains (losses) on investments (A)			(74,129	)			1,156				(103,561	)			2,612
Change in net unrealized gains/losses on derivatives (A)			(9,530	)			27,681				(90,501	)			27,817
Consolidated revenues		$	143,976			$	273,915			$	255,346			$	490,075
Pre-tax operating income (loss):
Traditional Annuity – Exclusive Distribution		$	7,614			$	8,458			$	14,856			$	17,575
Traditional Annuity – Independent Distribution			8,894				8,475				16,690				19,634
Traditional and Universal Life Insurance			15,665				16,217				23,828				27,611
Variable			1,680				3,773				2,848				6,031
Corporate and Other			(2,504	)			(869	)			(4,638	)			(1,609	)
			31,349				36,054				53,584				69,242
Income taxes on operating income			(10,221	)			(11,851	)			(17,388	)			(22,942	)
Realized/unrealized gains (losses) on investments, net (A)			(42,642	)			1,365				(54,807	)			2,319
Change in net unrealized gains/losses on derivatives (A)			4,939				8,278				8,474				9,621
Cumulative effect of change in accounting principle			—				—				—				(283	)
Consolidated net income (loss)		$	(16,575	)		$	33,846			$	(10,137	)		$	57,957

Our investment in equity method investees, the related equity income (loss) and interest expense are attributable to the Corporate and Other segment. Expenditures for long-lived assets were not significant during the periods presented above. Goodwill at June 30, 2008 and December 31, 2007 is allocated among the segments as follows: Exclusive Annuity ($3.9 million), Traditional and Universal Life Insurance ($6.1 million) and Corporate ($1.2 million).

FBL Financial Group, Inc.		June 30, 2008

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 its primary life insurance subsidiaries, Farm Bureau Life Insurance Company (Farm Bureau Life) and EquiTrust Life Insurance Company (EquiTrust Life) (collectively, the Life Companies). Please read this discussion in conjunction with the accompanying consolidated financial statements and related notes. In addition, we encourage you to refer to our 2007 Form 10-K 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.

Results of Operations for the Three and Six Months Ended June 30, 2008 Compared to Three and Six Months Ended June 30, 2007

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Dollars in thousands, except per share data)
Revenues		$	143,976			$	273,915			$	255,346			$	490,075
Benefits and expenses			170,395				223,323				272,995				403,330
			(26,419	)			50,592				(17,649	)			86,745
Income taxes			9,996				(16,940	)			7,538				(29,347	)
Minority interest and equity income (loss)			(152	)			194				(26	)			559
Net income (loss)			(16,575	)			33,846				(10,137	)			57,957
Less dividends on Series B preferred stock			(37	)			(37	)			(75	)			(75	)
Net income (loss) applicable to common stock		$	(16,612	)		$	33,809			$	(10,212	)		$	57,882
Earnings (loss) per common share		$	(0.56	)		$	1.14			$	(0.34	)		$	1.95
Earnings (loss) per common share – assuming dilution		$	(0.56	)		$	1.12			$	(0.34	)		$	1.91
Other data
Direct premiums collected, net of reinsurance ceded:
Traditional Annuity – Exclusive Distribution		$	64,425			$	36,616			$	109,773			$	72,079
Traditional Annuity – Independent Distribution			538,207				279,352				864,893				575,412
Traditional and Universal Life Insurance			49,081				48,090				96,340				93,927
Variable Annuity and Variable Universal Life (1)			38,873				49,707				80,794				92,490
Reinsurance assumed and other			3,712				4,840				7,392				8,425
Total		$	694,298			$	418,605			$	1,159,192			$	842,333
Direct life insurance in force, end of quarter (in millions)										$	42,048			$	39,724
Life insurance lapse rates											6.4	%			6.0	%
Withdrawal rates – individual traditional annuity:
Exclusive Distribution											3.4	%			5.9	%
Independent Distribution											6.3	%			5.3	%

FBL Financial Group, Inc.		June 30, 2008

Premiums collected is not a measure used in financial statements prepared according to U.S. generally accepted accounting principles (GAAP). There is no comparable GAAP financial measure. We use premiums collected to measure the productivity of our exclusive and independent agents. Direct Traditional Annuity – independent distribution premiums collected increased for 2008 periods due to continued growth of our EquiTrust Life independent distribution channel. This is driven largely by an increase in the number of individual licensed independent agents to 22,361 at June 30, 2008, from 17,356 at June 30, 2007. In addition, the pricing of our fixed rate annuities during 2008 was very competitive relative to competing products such as bank-offered certificates of deposit.

Net income (loss) applicable to common stock for the second quarter of 2008 was ($16.6) million compared to $33.8 million for the second quarter of 2007 and was ($10.2) million for the six months ended June 30, 2008 compared to $57.9 million for the 2007 period. These decreases are primarily due to realized losses on investments, a decrease in spreads, an increase in death benefits and the impact of unlocking adjustments on deferred policy acquisition costs and deferred sales inducements. These decreases were partially offset by the change in unrealized gains and losses on derivative instruments and the impact of an increase in the volume of business in force. The increase in volume of business in force is quantified in the detailed discussion that follows by summarizing the face amount of insurance in force for life products or account values of contracts in force for interest sensitive products. The face amount of life insurance in force represents the gross death benefit payable to policyholders and account value represents the value of the contract to the contract holder before application of surrender charges or reduction for any policy loans outstanding.

The spreads earned on our universal life and individual traditional annuity products are as follows:

		Six months ended June 30,
		2008				2007
Weighted average yield on cash and invested assets			5.96		%		6.15		%
Weighted average interest crediting rate/index cost			3.85				3.75
Spread			2.11		%		2.40		%

The weighted average yield on cash and invested assets represents the yield on cash and investments backing the universal life and individual traditional annuity products net of investment expenses. The yield also includes gains or losses relating to our interest rate swap program for certain individual traditional annuities. The impact of the swap program was previously reported in the weighted average crediting rate/index costs and the 2007 results above have been restated to conform to the 2008 presentation. With respect to our index annuities, index costs represent the expenses we incur to fund the annual index credits through the purchase of options and minimum guaranteed interest credited on the index business. The weighted average crediting rate/index cost and spread are computed excluding the impact of the amortization of deferred sales inducements. See the “Segment Information” section that follows for a discussion of our spreads.

As noted in the “Segment Information” section that follows, we use both net income (loss) and operating income to measure our operating results. Operating income for the periods covered by this report equals net income (loss), excluding the impact of: (1) realized gains and losses on investments, (2) the change in net unrealized gains and losses on derivatives and (3) the cumulative effect of change in accounting principles. The rationale for excluding these items from operating income is also explained in the “Segment Information” section that follows. The impact of these adjustments on net income (loss) is as follows:

FBL Financial Group, Inc.		June 30, 2008

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
						(Dollars in thousands)
Realized/unrealized gains (losses) on investments		$	(74,021	)		$	1,156			$	(103,368	)		$	2,612
Change in net unrealized gains/losses on derivatives			20,791				27,417				42,990				31,597
Change in amortization of:
Deferred policy acquisition costs			(1,358	)			(8,209	)			(1,944	)			(9,381	)
Deferred sales inducements			(3,711	)			(5,525	)			(9,324	)			(6,455	)
Value of insurance in force acquired			401				8				557				8
Unearned revenue reserve			(108	)			(10	)			(193	)			(10	)
Cumulative effect of change in accounting principle			—				—				—				(283	)
Income tax offset			20,303				(5,194	)			24,949				(6,431	)
Net impact of operating income adjustments		$	(37,703	)		$	9,643			$	(46,333	)		$	11,657

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Dollars in thousands)
Summary of adjustments noted above after offsets and income taxes:
Realized/unrealized gains (losses) on investments		$	(42,642	)		$	1,365			$	(54,807	)		$	2,319
Change in net unrealized gains/losses on derivatives			4,939				8,278				8,474				9,621
Cumulative effect of change in accounting principle			—				—				—				(283	)
Net impact of operating income adjustments		$	(37,703	)		$	9,643			$	(46,333	)		$	11,657
Net impact per common share – basic		$	(1.26	)		$	0.32			$	(1.55	)		$	0.39
Net impact per common share – assuming dilution		$	(1.26	)		$	0.32			$	(1.55	)		$	0.39

We periodically revise the key assumptions used in the calculation of the amortization of deferred policy acquisition costs, deferred sales inducements, value of insurance in force acquired and unearned revenues for participating life insurance, variable and interest sensitive and index products, as applicable, through an “unlocking” process. Revisions are made based on historical results and our best estimate of future experience. The impact of unlocking is recorded in the current period as an increase or decrease to amortization of the respective balances. While the unlocking process can take place at any time, as needs dictate, the process typically takes place annually with different blocks of business unlocked each quarter. The impact of unlocking in 2008 was primarily due to updating the amortization model for assumptions relating to withdrawal rates, mortality and the current volume of business in force. The impact in 2007 was primarily due to decreasing lapse assumptions in the models for our direct index annuity business. The impact of unlocking on our pre-tax income is as follows:

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
		(Dollars in thousands)
Amortization of deferred sales inducements		$	(1,909	)		$	(115	)		$	(1,909	)		$	1,121
Amortization of deferred policy acquisition costs			647				101				647				1,539
Amortization of unearned revenues			(35	)			(3	)			(35	)			(3	)
Increase (decrease) to pre-tax income		$	(1,297	)		$	(17	)		$	(1,297	)		$	2,657
Impact per common share (basic and diluted), net of tax		$	(0.04	)		$	—			$	(0.04	)		$	0.09