FBL FINANCIAL GROUP, INC. Item 8.01. Other Events.
As previously disclosed, onJanuary 11, 2021 ,FBL Financial Group, Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") withFarm Bureau Property & Casualty Insurance Company , anIowa domiciled stock property and casualty insurance company ("Parent") and 5400Merger Sub, Inc. , anIowa corporation ("Merger Sub"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company, with the Company surviving the merger as a subsidiary of Parent (the "Merger"). The Merger Agreement was unanimously approved by the Special Committee of the Board of Directors of the Company and the Board of Directors of the Company. In connection with the proposed Merger, onMarch 17, 2021 , the Company filed a definitive proxy statement with theSecurities and Exchange Commission (the "Proxy Statement"). The Company commenced mailing of the Proxy Statement to its shareholders on or aboutMarch 17, 2021 . Following the announcement of the Merger Agreement, as of the date of this Current Report on Form 8-K, five lawsuits challenging disclosures issued in connection with the Merger have been filed. Lawsuits relating to the Merger have been filed by purported shareholders of the Company as follows: (i) a lawsuit captionedLynn Luckasson v.FBL Financial Group, Inc. , et. al., No. 1:21-cv-03186, was filed onApril 13, 2021 in theUnited States District Court for the Southern District of New York (the "Luckasson Lawsuit"); (ii) a lawsuit captionedChristopher Taylor v.FBL Financial Group, Inc. , et. al., No. 1:21-cv-03260, was filed onApril 14, 2021 in theUnited States District Court for the Southern District of New York (the "Taylor Lawsuit"); (iii) a lawsuit captionedSam Carlisle v.FBL Financial Group, Inc. , et. al., No. 1:21-cv-03319, was filed onApril 15, 2021 in theUnited States District Court for the Southern District of New York (the "Carlisle Lawsuit"); (iv) a lawsuit captionedDenise Redfield v.FBL Financial Group, Inc. , et. al., No. 2:21-cv-01795, was filed onApril 16, 2021 in theUnited States District Court for the Eastern District of Pennsylvania (the "Redfield Lawsuit"); and (v) a lawsuit captionedAlex Ciccotelli v.FBL Financial Group, Inc. , et al., No. 1:21-cv-03363, in theUnited States District Court for the Southern District of New York onApril 16, 2021 (the "Ciccotelli Lawsuit", together with the Luckasson Lawsuit, the Taylor Lawsuit, the Carlisle Lawsuit and the Redfield Lawsuit, the "Merger Litigation"). The plaintiffs to the Merger Litigation allege that the definitive proxy statement filed onMarch 17, 2021 , relating to the transactions contemplated by the Merger Agreement, omitted material information in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and certain rules promulgated thereunder. The lawsuits name as defendants the Company and its directors and seek, among other relief, injunctive relief. There can be no assurance regarding the ultimate outcome of the Merger Litigation. The Company believes that the claims asserted in the Merger Litigation are without merit and supplemental disclosures are not required or necessary under applicable laws. However, in order to avoid the risk of the Merger Litigation delaying or otherwise adversely affecting the Merger and to minimize the costs, risks and uncertainties inherent in defending the lawsuits, and without admitting any liability or wrongdoing, the Company is voluntarily supplementing the Proxy Statement as described in this Current Report on Form 8-K. The Defendants deny that they have violated any laws or breached any duties to the Company's shareholders. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any disclosures set forth herein. To the contrary, the Company specifically denies all allegations in the Merger Litigation that any additional disclosure was or is required.
The Special Committee continues to unanimously recommend that shareholders of the Company vote "FOR" the proposed Merger on the WHITE proxy card.
Supplemental Disclosures to the Proxy Statement in Connection with the Merger Litigation
The additional disclosures (the "supplemental disclosures") in this Current Report on Form 8-K supplement the disclosures contained in the Proxy Statement and should be read in conjunction with the disclosures contained in the Proxy Statement, which should be read in its entirety. To the extent that information set forth in the supplemental disclosures differs from or updates information contained in the Proxy Statement, the information in this Current Report on Form 8-K shall supersede or supplement the information contained in the Proxy Statement. All page references are to the Proxy Statement and terms used but not otherwise defined herein shall have the meanings ascribed to such terms in
the Proxy Statement.
1. The third paragraph on page 37 of the Proxy Statement under the header
"Opinion of Barclays" is hereby amended and restated as follows:
Barclays calculated and compared various financial multiples and ratios of the
Company and the selected comparable companies. As part of its selected
comparable company analysis, Barclays calculated and analyzed each company's
ratio of its current share price to its projected earnings per share (commonly
referred to as a price earnings ratio, or "P/E"), book value, book value
excluding accumulated other comprehensive income ("AOCI") and tangible book
value excluding AOCI, as well as each company's operating return on average
equity ("ROAE") and annual dividend yield and payout. All of these calculations
were performed and based on publicly available financial data (including Wall
Street research estimates and FactSet) and closing prices, as of January 8,
2021 , the last trading date prior to the delivery of Barclays' opinion. The
following table summarizes the results of these calculations ($ in millions,
except per share data):
Selected BV TBV Operating Annual Annual
Comparable Price Market 2021E Book (ex- (ex- ROAE Dividend Dividend
Companies 1/8/21 Value EPS Value AOCI) AOCI) (2021E) Yield Payout
Globe Life
Inc. $ 96.44 $ 10,132 12.8x 1.23x 1.79x 1.94x 12.30 % 0.80 % 11.20 %
Primerica,
Inc. $ 136.31 $ 5,367 12.6x 3.12x 3.29x 3.39x 23.80 % 1.10 % 16.50 %
CNO
Financial
Group Inc. $ 22.70 $ 3,155 10.8x 0.62x 0.96x NA 5.50 % 2.00 % 14.50 %
Athene
Holding Ltd. $ 45.16 $ 8,648 5.6x 0.61x 0.77x 0.77x 12.90 % 0.00 % 0.00 %
American
Equity
Investment $ 29.69 $ 2.73 7.0x 0.50x 0.83x 0.83x 10.30 % 1.00 % 3.20 %
2. The last two paragraphs on page 38 of the Proxy Statement under the header
"Opinion of Barclays" are hereby amended and restated as follows:
The estimated earnings used by Barclays are consistent with FBL's 2021 plan earnings on a standalone basis. For the purposes of its financial analysis, Barclays adjusted the life and annuity earnings for the removal of excess capital above 425% RBC at a 3.0% pre-tax cost of capital, and added back the net loss attributable to the wealth management segment from corporate/other to analyze the business separately. Barclays selected an 11.0x - 13.0x multiple range of calendar year 2021 estimated earnings for the Company's adjusted protection business and a range of 6.0x - 7.0x multiples of calendar year 2021 estimated earnings for the Company's adjusted annuity business, which, in each case, was derived by analyzing the results from an analysis of the selected comparable companies described above and based on Barclays' professional judgment and experience. Barclays selected a blended valuation range of 9.0x - 10.5x multiples representing a 60 / 40 protection / annuity weighting method between business segments to value the corporate segment earnings, which Barclays adjusted to remove the losses associated with the wealth management business. Barclays ascribed a value of zero dollars to the wealth management segment for the purposes of the sum of the parts valuation. Barclays assumed 24,550,623 fully diluted shares as ofJanuary 7, 2021 , a number provided by FBL management, to calculate a range of implied prices per share of the Company.
3. The second paragraph on page 39 of the Proxy Statement under the header
"Opinion of Barclays" is hereby amended and restated as follows:
Barclays also conducted a price / book vs. return on equity ("ROE") regression
analysis by analyzing the results from an analysis of the selected comparable
companies described above. Taking into account Barclays' professional judgment
and experience, Barclays selected 1.03x - 1.35x multiples of price to book value
excluding AOCI, with the low end based on the Company's unaffected share price
of $37.25 as of the close on September 3, 2020 (the "Unaffected Price")
multiplied by average peer appreciation since September 3, 2020 divided by book
value excluding AOCI as of September 30, 2020 and the high end based on the
regression including all peers except Primerica, Inc. Barclays made the decision
to exclude Primerica, Inc. from the regression analysis given the differing
business model to that of the Company which drives a materially higher ROE than
that of the rest of the selected comparable companies. Inputs of the Company
were calculated based on calculated cost of equity using current capital
structure and 2021 ROE from the Company's projections. In this analysis, FBL's
book value per share excluding AOCI is $44.52 as of September 30, 2020 , which is
the most recently publicly available figure as of the date of Barclays' opinion.
The following table summarizes the results of these calculations:
4. The last paragraph on page 39 of the Proxy Statement under the header "Opinion
of Barclays" is hereby amended and restated as follows:
The reasons for and the circumstances surrounding each of the selected precedent
life transactions analyzed were diverse and there are inherent differences in
the business, operations, financial conditions and prospects of the Company and
the companies included in the selected precedent life insurance transaction
analysis. Based upon the multiples for the precedent transactions set forth
above, which range Barclays determined on the basis of its professional judgment
and experience in the industry, Barclays selected a range of 1.00x to 1.25x
multiples of price to book value excluding AOCI. The following table summarizes
the results of these calculations using the Company's price per book value
excluding AOCI as of September 30, 2020 , as reported in the Company's Form 10-Q
for the quarter ended September 30, 2020 :
5. The second paragraph on page 40 of the Proxy Statement under the header
"Opinion of Barclays" is hereby amended and restated as follows:
Barclays performed a dividend discount analysis on the Company using the
Company's projections and certain publicly available information, which was used
as a basis for discount rates and a terminal value range. The terminal value
range for the analysis is $893 million to $1,150 million . In its calculation and
analysis, Barclays used the Company's projected dividends for 2021 to 2023 to
calculate a present value of that cash flow assuming a 9.0% - 11.0% cost of
capital range. Barclays determined the cost of capital range using the capital
asset pricing model calculation and the perpetuity growth assumption. These
models were developed on the basis of Barclays' professional judgment and
experience in the industry as well as the Company's projected growth profile
from the FBL management plan.
6. The last paragraph on page 40 of the Proxy Statement under the header "Opinion
of Barclays" is hereby amended and restated as follows:
The Milliman Report includes the value of Farm Bureau Life and insurance
subsidiaries as of September 30, 2020 at discount rates ranging from 7.0% to
10.0%. The total actuarial value at the selected discount rate range is $1,483 -
$1,153 million . Barclays added to the valuation range from the Milliman Report
certain topside adjustments for the Company's non-insurance operations,
including its leasing, investment management and financial services businesses.
The value of Company's leasing business is based on $0.6 million of pre-tax
earnings in 2021, tax effected at 21%, and valued using a growth methodology of
a 2% growth rate. The value of third party investment management business is
based on $0.1 million of pre-tax earnings in 2021, tax effected at 21% and
valued using a growth methodology using a 2% growth rate. The value of
investment management fees paid by FBPCIC subsidiaries to FBL Financial Services
is based on $3.0 million of pre-tax income, tax effected at 21%, and valued
using a growth methodology using a 2% growth rate. Additionally, Barclays
attributed no value to the Company's wealth management segment, consistent with
the other valuation analyses. FBL's 2021-2023 plan had the segment operating at
a loss, so rather than applying a multiple or growth model valuation that would
have resulted in a negative value, Barclays attributed no value to account for
the embedded value of the platform. Barclays also deducted from the valuation
range in the Milliman Report certain holding company net losses and noted that
holding company net income assumes Farm Bureau Life pays a $6 million management
fee and Parent pays a $2 million management fee to the parent company, which
offset $13.5 million of general and administrative expenses for the parent
company, further adjusted to reflect $2.5 million of pre-tax public company
savings. In its analysis, Barclays utilized discount rates of 7% to 10%
consistent with the discount rates used in the Milliman Report. Barclays also
removed the book value of the Company's trust preferred securities from the
value and added the value of certain holding company net assets. In aggregate
these adjustments resulted in a reduction to the values in the Milliman Report
ranging from $60 million at 7% and $64 million at 10%. Barclays then utilized
. . .
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
Exhibit No. Description
Cover page Interactive Data File formatted as iXBRL (Inline eXtensible
104 Business Reporting Language) and contained in Exhibit 101.
Forward-Looking Statements
Some of the statements in this communication are forward-looking statements (or
forward-looking information). When we use words such as "anticipate," "intend,"
"plan," "seek," "believe," "may," "could," "will," "should," "would," "could,"
"estimate," "continue," "predict," "potential," "project," "expect," or similar
expressions, we do so to identify forward-looking statements. Forward-looking
statements are based on current expectations that involve assumptions that are
difficult or impossible to predict accurately and many of which are beyond our
control, including general economic and market conditions, industry conditions,
operational and other factors. Actual results may differ materially from those
expressed or implied in these statements as a result of significant risks and
uncertainties, including, but not limited to, the occurrence of any event,
change or other circumstances that could give rise to the termination of the
merger agreement; the inability to obtain the requisite shareholder approval for
the proposed transaction or the failure to satisfy other conditions to
completion of the proposed transaction; the risk that shareholder litigation in
connection with the proposed transaction may result in significant costs of
defense, indemnification and liability; risks that the proposed transaction
disrupts current plans and operations; the ability to recognize the benefits of
the transaction; the amount of the costs, fees, and expenses and charges related
to the transaction; change in interest rates; changes in laws and regulations;
differences between actual claims experience and underwriting assumptions;
relationships with Farm Bureau organizations; the ability to attract and retain
sales agents; adverse results from litigation; the impact of the COVID-19
pandemic and any future pandemics and the impact and results of the contested
solicitation by Capital Returns Management, LLC . Additional information about
these risks and uncertainties, as well as others that may cause actual results
to differ materially from those projected, is contained in FBL Financial Group's
filings with the SEC , including FBL Financial Group's Annual Report on Form 10-K
and FBL Financial Group's quarterly reports on Form 10-Q. The statements in this
communication speak only as of the date of this communication and we undertake
no obligation or intention to update or revise any forward-looking statement,
whether as a result of new information, changes in assumptions, future
developments or otherwise, except as may be required by law.
Additional Information and Where to Find It
In connection with the proposed transaction,FBL Financial Group has filed with theSEC the Proxy on Schedule 14A and a Schedule 13e-3 Transaction Statement, and may file other documents with theSEC regarding the proposed transaction. This communication is not a substitute for the definitive proxy statement or any other document thatFBL Financial Group may file with theSEC . INVESTORS IN, AND SECURITY HOLDERS OF, FBL FINANCIAL GROUP ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THESEC , AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the Proxy Statement and accompanying WHITE proxy card, any amendments or supplements to the Proxy Statement and other documents filed with theSEC byFBL Financial Group through the web site maintained by theSEC at www.sec.gov or by contacting the individuals listed below.
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