Minding Ag's Business

Reshuffling Crop Insurance

News this week that John Deere had appointed Citigroup to sell its crop insurance unit opens the door to more jostling among the nation's 19 multi-peril insurance providers. The company's chief financial officer told an investor conference in Brazil that proceeds from the potential sale would be used to repurchase Deere stock, J.P. Morgan analyst Ann Duignan reports.

Cynics within the crop insurance industry are already questioning congressional claims that the new farm bill "will do no harm" to insurance. The companies have balked at a farm bill provision to forgive APH yield histories when counties suffer 50% or higher losses, saying they didn't have time to assess actuarially sound premium charges for that change. Most already are bracing for a 20% reduction in 2015 premium volume due to lower commodity prices.

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Earlier this year, SNL Financial ranked Deere as the ninth largest crop insurance company with $475 million in premium sales annually. In contrast, Wells Fargo's Rural Community Insurance Co. was the largest writer of multiple peril crop insurance with $2.34 billion in sales in 2013.

According to The Insurance Insider, John Deere Insurance's operating losses ballooned from $4.05 million in 2010, to $19.2 million in 2011, $29.7 million in 2012 and $35.6 million in 2013. Multi-year droughts in Texas and the Great Plains have challenged all insurers in recent years. A 2012 Corn Belt drought was one of the nation's worst in 25 years. When Monsanto purchased Climate Corporation for nearly $1 billion last year, it stressed that it was more interested in the company's weather capabilities than its insurance unit.

Deere is the second crop insurance provider to be offered for sale this year. Cuna Mutual has also appointed Goldman Sachs to sell Producers Agriculture Insurance Company (ProAg).

For a list of the top crop Insurance providers go to http://www.insurancejournal.com/…


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