FBL Financial Jumps 31% On Minority Stake Buyout Proposal

Shares of FBL Financial Group surged 30.9% on Friday after the Iowa-based life insurance company revealed that it had received a minority stake buyout proposal from Farm Bureau Property & Casualty Insurance Company (FBPCIC).

FBL Financial Group (FFG) stated on September 4 that FBPCIC has proposed to purchase the remaining stakes of FBL that it does not own at a consideration of $47 per share. FBPCIC currently owns 60% of FBL’s Class A shares and 67% of Class B common stock. Following Friday’s rally the stock is now trading at $48.9.

On August 6, FBL reported mixed results for 2Q where revenues surpassed Street estimates while earnings missed. The company’s 2Q revenues increased 4% to $200.7 million and beat analysts’ expectations of $186 million. Its adjusted EPS of $1.02 fell short of Street forecast of $1.05 and declined 20% from the year-ago quarter due to loss from alternative investment and higher taxes. (See FBL stock analysis on TipRanks).

Last month, Raymond James analyst Charles Peters upgraded the stock to Buy from Hold and reiterated his price target of $60 (22.8% upside potential) saying “FFG represents a more compelling risk/reward opportunity relative to other spread-based businesses in our coverage universe.” Peters noted that “The company’s current dividend yield is 5.4% (above the peer average of 3.9%), which we believe FFG should be able to sustain (and potentially pay another special dividend in 1Q21) given the company’s excess capital position.”

Currently, the Street has a cautiously optimistic outlook on the stock, with a Moderate Buy analyst consensus. The average price target of $53.50 implies an upside potential of 9.5% to current levels. Shares are down 17.1% year-to-date.

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