When reading the following Management's Discussion and Analysis of Financial Condition and Results of Operations, please refer to our consolidated financial statements and related notes included in Item 8, "Financial Statements and Supplementary Data," of this report. Unless noted otherwise, all references to FBL Financial Group, Inc. (we or the Company) include all of its direct and indirect subsidiaries, including its life insurance subsidiary Farm Bureau Life Insurance Company (Farm Bureau Life).

In this discussion and analysis, we explain our consolidated results of operations, financial condition and where appropriate, factors that management believes may affect future performance, including:

• factors which affect our business,

• our revenues and expenses in the periods presented,

• changes in revenues and expenses between periods,

• sources of earnings and changes in stockholders' equity,

• impact of these items on our overall financial condition and

• expected sources and uses of cash.

We have organized our discussion and analysis as follows:

• First, we discuss our business and drivers of profitability.

• We then describe the business environment in which we operate including factors that affect operating results.

• We highlight significant events that are important to understanding our results of operations and financial condition.

• We then review the results of operations beginning with an overview of the total Company results, followed by a more detailed review of those results by operating segment.

• Finally, we discuss critical accounting policies and recently issued accounting standards. The critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult or complex judgment.

Overview and Profitability

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 subsidiaries support various functional areas of Farm Bureau Life and other affiliates by providing investment advisory, marketing and distribution, and leasing services. 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 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 operating income, which excludes the impact of certain items that are included in net income. See Note 15 to our consolidated financial statements for further information regarding how we define our segments and operating income.

We also include within our analysis "premiums collected" which is not a measure used in financial statements prepared in accordance with GAAP, but is a common industry measure of agent productivity. See Note 15 to our consolidated financial statements for further information regarding this measure and its relationship to GAAP revenues.

On December 30, 2011, we completed the sale of our wholly-owned subsidiary, EquiTrust Life Insurance Company (EquiTrust Life). As a result of the sale, certain lines of business are considered discontinued operations, and unless otherwise indicated, have been removed from the discussion that follows. See Note 2 to our consolidated financial statements for additional information related to the sale.

Our profitability is primarily a factor of:

• The volume of our life insurance and annuity business in force, which is driven by the level of our sales and the persistency of the business written.

• The amount of spread (excess of net investment income earned over interest credited) we earn on contract holders' general account balances.

• Our ability to price our life insurance products to earn acceptable margins over the cost of providing benefits and the expenses of acquiring and administering the products. Competitive conditions, mortality experience, persistency, investment results and our ability to maintain expenses in accordance with pricing assumptions drive our margins on the life products. On many products, we have the ability to mitigate adverse experience through adjustments to credited interest rates, policyholder dividends or cost of insurance charges.

• Our ability to manage our investment portfolio to maximize investment returns while providing adequate liquidity for obligations to policyholders and minimizing the risk of defaults or impairments of invested assets.

• Our ability to manage the level of our operating expenses.

• Actual experience and changes in assumptions for expected surrender and withdrawal rates, mortality and spreads used in the amortization of deferred acquisition costs.

Our profitability is also impacted by changes in accounting guidance that impact the timing of profit recognition. During the first quarter of 2012, we adopted new guidance that reduced the deferral of costs associated with the issuance of life insurance and annuity products which increased the amount of such expenses recognized in the current year and reduced the amount of amortization in future years. See Note 1 to our Consolidated Financial Statements for more information on this change.

In addition to the impact from the adoption of the guidance above, the accounting standards setting bodies are currently working on a project evaluating the accounting for insurance contracts, which may significantly impact the timing of profit emergence for those products. It is uncertain what the outcome of that project will be or when it will be completed.

Impact of Recent Business Environment

Our business generally benefits from moderate to strong economic expansion. Conversely, a lackluster economic recovery characterized by higher unemployment, lower family income, lower consumer spending, muted corporate earnings growth and lower business investment could adversely impact the demand for our products in the future. We also may experience a higher incidence of claims, lapses or surrenders of policies. We cannot predict whether or when such actions may occur, or what impact, if any, such actions could have on our business, results of operations, cash flows or financial condition.

While there were positive economic signs during 2012, the U.S. economy continues to face a number of challenges. Pertinent recent economic events include, but are not limited to the following:

• Gross Domestic Product increased approximately 2.0% during 2012 based on early estimates.

• Market yields on fixed maturity securities remained low with the 10-year U.S. Treasury at 1.76% at December 31, 2012.

• Unemployment remains high at 7.8% in the United States.

• Personal income growth remains relatively modest.

• Midwest farmers have experienced rising incomes and land values in recent years, but drought conditions during the summer of 2012 have reduced production yields and farm incomes. However, many farmers have mitigated losses through effective use of crop insurance.

• The European debt crisis continues to cause stress within the markets.

• Middle-east unrest continues to add uncertainty to the supply and cost of oil.

• Continued uncertainty as to actions the United States Congress will take to address the national debt, including potential actions to change the tax advantages of life insurance

Fixed maturity security yields generally finished lower for 2012 as both credit spreads and U.S. Treasury yields declined over the period. The yield curve remained moderately steep at year end, but low overall interest rates create a challenging environment for sales of new money fixed annuity products. Strong liquidity and favorable corporate profitability continue to support fundamental credit quality. In the securitized markets, yields for asset-backed securities generally declined for the year given continued strong investor demand and improving consumer fundamentals. Yields for residential mortgage-backed securities and high quality commercial mortgage-backed securities also declined during the year.

We intentionally decreased the amount of annuity sales in 2012 by suspending sales of certain products and reducing agent commission rates on certain products where it was difficult to achieve profitability targets due to the extremely low interest rate environment. Our life sales have increased, reflecting the attractiveness of enhanced universal life and term life product offerings and the strong farm and energy subsectors of the economy in our marketplace, as well as Farm Bureau Life's emphasis on life insurance product sales given the headwinds within the annuity market due to the low interest rates.

Results of Operations for the Three Years Ended December 31, 2012

                                                Year ended December 31,                Change over prior year
                                         2012            2011            2010            2012           2011

Pre-tax operating income:
Annuity segment                      $    55,910     $    58,263     $    49,683          (4 )%           17  %
Life Insurance segment                    43,741          50,502          53,732         (13 )%           (6 )%
Corporate and Other segment               16,856           2,293           5,561         635  %          (59 )%
Total pre-tax operating income           116,507         111,058         108,976           5  %            2  %
Income taxes on operating income         (33,748 )       (32,240 )       (36,688 )         5  %          (12 )%
Operating income                          82,759          78,818          72,288           5  %            9  %

Realized gains/losses on investments
(1)                                         (477 )        (5,983 )         6,491         (92 )%         (192 )%
Change in net unrealized
gains/losses on derivatives (1)              619             932           2,292         (34 )%          (59 )%
Loss on debt redemption (1)                  (22 )       (21,564 )             -        (100 )%          NA
Net impact of discontinued
operations (1)                            (2,939 )       (11,464 )        34,587         (74 )%         (133 )%
Net income attributable to FBL
Financial Group, Inc.                $    79,940     $    40,739     $   115,658          96  %          (65 )%

Operating income per common share -
assuming dilution                    $      2.97     $      2.52     $      2.35          18  %            7  %

Earnings per common share - assuming
dilution:
Continuing operations                $      2.97     $      1.67     $      2.63
Discontinued                               (0.10 )         (0.37 )          1.13
Earnings per common share - assuming
dilution                             $      2.87     $      1.30     $      3.76

Effective tax rate on operating
income                                        29 %            29 %            34 %

Average invested assets              $ 6,343,284     $ 5,887,520     $ 5,460,512           8  %            8  %
Annualized yield on average invested
assets                                      5.87 %          6.01 %          6.10 %
Impact on operating income of
unlocking deferred acquisition
costs, value of insurance in force
acquired and unearned revenue
reserve                              $    (3,413 )   $    (1,201 )   $     1,484         184  %         (181 )%

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

Net income attributable to FBL Financial Group increased in 2012 and decreased in 2011 primarily due to the impact of discontinued operations and operating income adjustments. Operating income increased in 2012 and 2011 due primarily to the impact of an increase in the volume of business in force and increased spreads. These increases were partially offset by increases in the amortization of deferred acquisition costs and the value of insurance in force in 2012 compared to 2011 and an increase in mortality in 2011 compared to 2010. Both 2011 and 2010 earnings benefitted from the impact of refining actuarial estimates that reduced the value of insurance in force and deferred acquisition costs by $7.4 million in 2011 and decreased reserves by $4.9 million in 2010.

Earnings per share from continuing operations and operating income per common share benefited from the repurchase of 5.5 million Class A common shares during the twelve months ended December 31, 2012. Details regarding the share repurchases are included in Note 9 to the consolidated financial statements. If the repurchase activity would have been completed on January 1, 2012, the earnings per share amounts, assuming dilution, would have been $0.23 higher for net income and $0.25 higher for operating income.

We periodically revise key assumptions used in the calculation of the amortization of deferred acquisition costs, value of insurance in force acquired and unearned revenue reserve for participating life insurance, variable and interest sensitive products, as applicable, through an "unlocking" process. These assumptions typically consist of withdrawal and lapse rates, earned spreads and mortality with revisions 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. See the discussion that follows for further details of the unlocking impact to our operating segments.

Annuity Segment

                                           Year ended December 31,               Change over prior year
                                      2012           2011           2010          2012           2011
                                            (Dollars in thousands)
Operating revenues:
Interest sensitive product
charges and other income          $      790     $      666     $      567         19  %            17  %
Net investment income                191,211        181,974        166,932          5  %             9  %
Total operating revenues             192,001        182,640        167,499          5  %             9  %

Benefits and expenses:
Interest sensitive product
benefits                             102,961        100,487         98,880          2  %             2  %
Underwriting, acquisition and
insurance expenses:
Commissions net of deferrals           2,504          3,428          2,966        (27 )%            16  %
Amortization of deferred
acquisition costs                      9,327          8,916          6,044          5  %            48  %
Amortization of value of
insurance in force                     2,473            244         (1,018 )      914  %          (124 )%
Other underwriting expenses           18,826         11,302         10,944         67  %             3  %
Total underwriting, acquisition
and insurance expenses                33,130         23,890         18,936         39  %            26  %
Total benefits and expenses          136,091        124,377        117,816          9  %             6  %

Annuity Segment - continued

                                             Year ended December 31,                Change over prior year
                                      2012            2011            2010           2012           2011
                                             (Dollars in thousands)
Other data
Annuity premiums collected,
direct                            $   316,344     $   369,156     $   316,636        (14 )%          17  %
Policy liabilities and accruals,
end of period                       3,432,137       3,190,985       2,952,905          8  %           8  %
Average invested assets             3,435,090       3,184,619       2,858,917          8  %          11  %
Investment fee income included in
net investment income (1)               4,355           4,283             730          2  %         487  %
Average individual annuity
account value                       2,260,801       2,078,753       1,887,496          9  %          10  %

Earned spread on individual
annuity products:
Weighted average yield on cash
and invested assets                      6.06 %          6.24 %          6.22 %
Weighted average interest
crediting rate                           3.15 %          3.36 %          3.62 %
Spread                                   2.91 %          2.88 %          2.60 %

Individual annuity withdrawal
rate                                      4.8 %           4.6 %           5.0 %

Impact on operating income of
unlocking deferred acquisition
costs and value of insurance in
force acquired                            234             631           1,320        (63 )%         (52 )%

(1) Includes prepayment fee income and net discount of accretion on mortgage and asset-backed securities resulting from changing payment speed assumptions at the end of the period.

Pre-tax operating income for the Annuity segment decreased in 2012 and increased in 2011 compared to prior periods. The decrease in 2012 was primarily due an increase in expense allocations as discussed in the Corporate and Other segment and an increase in the amortization of the value of insurance in force, partially offset by an increase in spread income earned from a larger volume of business in force and a slight increase in spreads earned. The increase in 2011 was primarily due to increases in spread income earned from an increase in the volume of business in force and investment fee income, partially offset by increases in the amortization of deferred acquisition costs and the value of insurance in force.

Amortization of deferred acquisition costs and the value of insurance in force changed over the three year period primarily due to changes in actual profits on the underlying business and the impact of unlocking. During 2012, 2011 and 2010, amortization was impacted by unlocking deferred acquisition costs and the value of insurance in force acquired due to updating our amortization models for assumptions relating to withdrawal rates and earned spreads. During 2012, we incurred additional amortization through unlocking as a result of our analysis of the impact of a continued low interest rate environment on projected investment and spread income, as well as withdrawal rates. Amortization of deferred acquisition costs also increased $1.4 million in 2012 due to refining the projected credited rate assumption in the amortization model.

The average aggregate account value for individual annuity contracts in force increased in 2012 and 2011 due to continued sales. Premiums collected were lower in 2012 as sales of certain New Money products were suspended in the third quarter of 2011 due to the extremely low interest rate environment. The amount of traditional annuity premiums collected is highly dependent upon the relationship between the current crediting rate and perceived security of our products compared to those of competing products.

Also included within our policy liabilities are advances on our funding agreements with the Federal Home Loan Bank (FHLB). Outstanding funding agreements totaled $328.5 million at December 31, 2012, $268.0 million at December 31, 2011 and $268.5 million at December 30, 2010.
The weighted average yield on cash and invested assets for individual annuities decreased in 2012 primarily due to lower yields on new investment acquisitions from premium receipts and reinvestment of the proceeds from maturing investments, compared with the average existing portfolio yield. The 2012 decrease was partially offset by continued higher investment fee income. The 2011 weighted average yield was slightly higher than 2010 average yields due to higher investment fee income and a lower cost of an interest rate swap we held during a portion of 2011, offsetting the impact of relative lower yields on new investment acquisitions. See the "Financial Condition" section which follows for additional information regarding the yields obtained on

investment acquisitions. Decreases in the weighted average interest crediting rates are due to crediting rate actions taken on a significant portion of our annuity portfolio during 2012, 2011 and 2010 in response to the declining portfolio yield.

Life Insurance Segment

                                           Year ended December 31,               Change over prior year
                                      2012           2011           2010           2012           2011
                                            (Dollars in thousands)

Operating revenues:
Interest sensitive product
charges and other income          $   54,691     $   49,438     $   45,655          11  %            8  %
Traditional life insurance
premiums                             175,086        168,519        162,056           4  %            4  %
Net investment income                138,076        134,999        132,414           2  %            2  %
Total operating revenues             367,853        352,956        340,125           4  %            4  %

Benefits and expenses:
Interest sensitive product
benefits:
Interest credited                     29,252         29,719         29,444          (2 )%            1  %
Death benefits                        33,324         32,645         26,343           2  %           24  %
Total interest sensitive product
benefits                              62,576         62,364         55,787           -  %           12  %
Traditional life insurance
benefits:
Death benefits                        67,331         69,479         58,780          (3 )%           18  %
Surrender and other benefits          36,554         35,860         37,166           2  %           (4 )%
Increase in traditional life
future policy benefits                52,395         43,627         41,223          20  %            6  %
Total traditional life insurance
benefits                             156,280        148,966        137,169           5  %            9  %
Distributions to participating
policyholders                         14,275         17,030         17,571         (16 )%           (3 )%
Underwriting, acquisition and
insurance expenses:
Commission expense, net of
deferrals                             17,476         16,074         15,452           9  %            4  %
Amortization of deferred
acquisition costs                     21,216         18,042         16,252          18  %           11  %
Amortization of value of
insurance in force                     2,984         (4,948 )        2,601        (160 )%         (290 )%
Other underwriting expenses           49,305         44,926         41,561          10  %            8  %
Total underwriting, acquisition
and insurance expenses                90,981         74,094         75,866          23  %           (2 )%
Total benefits and expenses          324,112        302,454        286,393           7  %            6  %
Pre-tax operating income          $   43,741     $   50,502     $   53,732         (13 )%           (6 )%

Life Insurance Segment -
continued

                                              Year ended December 31,                  Change over prior year
                                       2012             2011             2010             2012            2011
                                               (Dollars in thousands)
Other data
Life premiums collected, net of
reinsurance                       $    255,709     $    229,468     $    213,445           11  %             8 %
Policy liabilities and accruals,
end of period                        2,301,155        2,197,597        2,120,814            5  %             4 %
Life insurance in force, end of
period                              46,139,999       43,717,077       41,404,530            6  %             6 %
Average invested assets              2,258,593        2,187,603        2,105,938            3  %             4 %
Investment fee income included in
net investment income (1)                2,831              548              446          417  %            23 %
Average interest sensitive life
account value                          650,821          631,443          626,917            3  %             1 %

Interest sensitive life insurance
spread:
Weighted average yield on cash
and invested assets                       6.36 %           6.49 %           6.61 %
Weighted average interest
crediting rate                            4.14 %           4.19 %           4.26 %
Spread                                    2.22 %           2.30 %           2.35 %

Life insurance lapse and
surrender rates                            6.1 %            6.8 %            6.3 %

Death benefits, net of
reinsurance and reserves released $     65,624     $     67,284     $     61,629           (2 )%             9 %
Impact on income of unlocking
deferred acquisition costs, value
of insurance in force acquired
and unearned revenue reserve            (3,762 )         (1,554 )         (1,102 )        142  %            41 %

(1) Includes prepayment fee income and net discount of accretion on mortgage and asset-backed securities resulting from changing payment speed assumptions at the end of the period.

Pre-tax operating income for the Life Insurance segment decreased in 2012, compared to the prior period, primarily due to the impact of refining valuation estimates during 2011 and an increase in expense allocations as discussed in the Corporate and Other segment, partially offset by an increase in investment fee income and business in force. The decrease in 2011 was primarily due to increased mortality experience and an increase in expenses allocated to the segment, partially offset by an increase in our business in force and refinements to valuation estimates.

Certain reserve refinements made in 2012, including the impact of updates to mortality tables and lapse assumptions, increased life insurance reserves $1.8 million. The impact of refining methods and assumptions relating to the value of insurance in force, deferred acquisition costs and certain traditional life insurance reserves decreased benefits and expenses $7.4 million in 2011 and $4.9 million in 2010.

Unlocking of deferred acquisition costs, value of insurance in force and unearned revenue reserve resulted in a decrease in operating income in 2012 and 2011 compared to prior periods. Each year, unlocking reflected changes in projected policy lapses and mortality assumptions used in the estimate of future . . .