A Swiss insurance company will pay as much as $1.05 billion to buy the crop insurance business of Wells Fargo, saying the deal will allow it to diversify its portfolio and counterbalance risk from its general insurance business. The purchase will give Zurich Insurance Group a 20-percent share of the crop insurance market, according to an analyst cited by Bloomberg. The analyst said the deal would pay for itself in a year or two.
There were two other major deals in the industry last year. HCC Insurance Holdings purchased Producers Ag Insurance Group from CUNA Mutual Group. Deere and Co. sold its crop insurance wing to Farmers Mutual Hail Insurance Co. of Iowa. Wells Fargo is the largest U.S. bank and has focused on boosting its activities in wealth management and commercial lending, said Bloomberg. Crop insurance was a tiny part of its operations.
Wells Fargo and ACE Ltd were the largest crop insurers in recent years. The USDA has approved 17 companies to sell crop insurance for 2016. The government pays an average of 62 cents of every $1 in premium, pays part of the overhead for delivering coverage and carries most of the burden during crop disasters. Insurers are required to accept all customers. The government sets the premium rate and decides which policies can be sold in each county.