FBL Financial Group Inc., the insurer whose real estate transactions helped transform West Des Moines from a bedroom community to a location for many of Central Iowa’s largest companies, is undergoing a large change itself.

The company is remaking its board of directors in the face of new regulatory hurdles imposed by the New York Stock Exchange. Though it’s working to add insurance agents to its traditional network of 15 western and Midwestern states, the company is betting it can hasten growth beyond those rural areas by concentrating on large cities and by putting more emphasis on EquiTrust Life Insurance Co., a subsidiary it has owned for six years but is now putting more emphasis on. EquiTrust has licenses to sell financial products in 47 states.

The changes come as FBL works to grow quickly in a environment in which life insurance companies are quickly consolidating. For instance, Canada’s Manulife Financial Corp. spent about $11 billion to buy John Hancock Financial Services in October. In November, St. Paul Cos. said it would buy Travelers Property Casualty Corp. for about $16 billion.

FBL, similar to other financial services companies that specialize in insurance, is also working to add to the number of products it offers as competition heats up among all financial-related companies, including brokerage houses and banks as members of the Baby Boom generation begin to retire.

“We recognize a need to grow,” said EquiTrust Life Insurance Co. Executive Vice President and FBL Chief Marketing Officer John Paule. “There is a limited market for Farm Bureau Life, and this is a way we can expand beyond that.”

So far, FBL has been on the buying side of the drive to consolidate, most recently snapping up the Farm Bureau property and casualty affiliates in Nebraska and Kansas in 2001. At the time of the acquisitions, the Kansas insurer had about 470 employees, 293 agents and total assets of about $265 million, and the Nebraska company had 145 workers, 171 agents and total assets of $114 million.

At the end of 2003, FBL has assets of about $7.9 billion, up 17 percent from a year earlier. Its 2,052 employees handle $32 billion worth of life insurance policies, among other tasks.  

The acquisitions have aided FBL in a variety of ways, from helping it lower costs through economies of scale to letting it spread its insurance risk from violent weather and other liabilities across more customers, which will help stabilize premium rates. A larger size also gives it access to more assets, which FBL’s investment managers can put to better use, and helps it compete in product offerings with larger competitors.

Earlier this month, FBL said its fourth-quarter net income jumped to $17.6 million, or 61 cents a share, from $6.63 million, or 24 cents, during the same quarter in 2002, as agents sold more life insurance policies and U.S. stock markets regained some of the ground they had lost over the prior three years. Revenues rose 20 percent in the period to $165.8 million from $138.2 million.

Investors have noticed, sending FBL’s shares up 33 percent in 2003 and another 9 percent so far this year.

For the current year, FBL expects net income of $2 to $2.10 per share. That’s less than the $2.23 per share it earned in 2003, mainly because of its reduced ownership in West Des Moines-based American Equity Investment Life Holding Co., which sold its shares to the public in December.

FBL is American Equity’s largest shareholder, and the life insurer has been a source of profits for FBL in recent years, adding 8 cents per share to operating earnings in the fourth quarter of 2003 and 6 cents in the year-earlier quarter. FBL spent $5 million buying American Equity stock at its initial public offering, but its stake in the company was reduced to less than 20 percent because of the dilution of shares that resulted from the sale. Prior to the IPO, FBL owned 32 percent of American Equity. FBL maintains a $500 million co-insurance agreement with American Equity.

On Dec. 18, FBL said it would restructure its board, eliminating seven of its 21 members and making changes to its board election rules so that each of the directors would be elected annually. Currently, the company has two boards: a three-member Class A board that’s composed of independent directors and an 18-member Class B board consisting of a combination of FBL executives and the presidents of the Farm Bureau organizations in each of its member states.

The restructuring, spurred by NYSE rules that require companies’ boards to be made up mostly of independent directors, will be voted on by shareholders at FBL’s annual meeting in May. FBL, given its structure, could have applied for an exemption to the requirements, said William Oddy, FBL’s chief executive, but chose not to because it was fearful that such a move could reduce shareholders’ trust in the company.

Indeed, corporate governance and integrity are important to FBL’s top managers. The company won the Better Business Bureau’s Integrity Award in 2002 and was given the organization’s International Torch Award for Marketplace Ethics in 2003, the first time an Iowa-based business had won the honor.

The company’s real estate division, which helped develop the corporate homes for Wells Fargo Home Mortgage Inc., Hy-Vee Inc. and its own headquarters at the West Lakes Business Park, a project it continues to work on with Knapp Properties Inc., is shifting and expanding its focus to develop Greater Des Moines.

A year ago, it announced plans to develop three multi-use business parks on land it owns in Des Moines, West Des Moines and Waukee. The parks will add 609 acres to the partnership’s holdings of 889 acres, bringing the total to nearly 1,500 acres since its formation in 1989. They are zoned for light industrial, office, retail and residential uses.

The new parks include 341 acres at the intersection of Iowa Highway 5 and Southwest Ninth Street, about 123 acres in West Des Moines at the junction of Highway 5 and Southwest Connector, and about 145 acres in Waukee at the intersection of Alice’s and Hickman Roads. These three sites are among the most-talked-about areas of development in Central Iowa:   Farm Bureau Life, which accounts for about 75 percent of FBL’s profits, is working to expand beyond its rural roots, adding agents in large cities in the Southwest and Midwest, including Phoenix, Salt Lake City and Minneapolis.

Despite that, FBL’s growth in the future, executives say, will increasingly come from EquiTrust Life Insurance Co., which earns about 25 percent of FBL’s profits.

FBL’s top managers are hopeful a new emphasis on the division, an effort to increase the number of agents who sell EquiTrust’s products and a number of new products will help the subsidiary’s growth outpace that of Farm Bureau Life.

The division introduced an EquiTrust-branded fixed annuity in December, and earlier this month started selling its first equity-indexed annuity. Equity-indexed products are typically among the most profitable that insurers offer, though Jim Noyce, FBL’s chief financial officer, said the company tries to price all of its products at levels that ensure equal profits.

EquiTrust is planning to introduce new products each quarter, according to Paule.

It is also planning to add to its base of insurance agents. The division currently has agreements with 450 agents. It would like to have 30,000. It plans to fund marketing efforts, new product development and strategies for growth, in part, through a $60 million line of credit from Chicago’s LaSalle Bank and Des Moines’ Bankers Trust Co. it recently negotiated.

“The bulk of our profitability still comes from Farm Bureau Life,” Noyce said. “It’s growing, but slowly. Our real growth is coming from EquiTrust and American Equity.”