Crop Insurer Sold To Swiss
By Philip Brasher, DesMoinesRegister.com
ACE, based in Switzerland, already owns 20 percent of Rain and Hail’s common stock. Rain and Hail, which handled $1.8 billion in premiums this year, primarily has been employee owned since 1980.
The deal should not have any impact on Rain and Hail’s 400-member work force, including the 180 people who work in Johnston, says Steve Harms, president of Rain and Hail. Rain and Hail’s board approved the deal and shareholders are expected to follow suit.
"Basically there will be no disruption in service. The transition will be very smooth, and most people won’t even know there is a change," Harms says.
The acquisition comes on the heels of a new operating agreement between the USDA and the 16 companies, including Rain and Hail, that sell federally subsidized crop insurance policies. The agreement reduced the profits the companies can take and the commissions they pay to agents, but it gives ACE some assurance of Rain and Hail’s profitability going forward, analysts said. Talks between ACE and Rain and Hail began in June as the USDA agreement was being concluded.
"Everybody thinks (crop insurance) will still be profitable, and I don’t think anyone expects that it will be unprofitable in the future," says Paul Newsome, an analyst with Sandler O’Neill and Partners.
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ACE’s interest in Rain and Hail "says there is still public money flowing at a good rate to the industry," says Bruce Babcock, an Iowa State University economist.
The merger won’t need approval from the USDA because ACE already is the name on the new operating agreement, Harms said.
Rain and Hail is one of four crop insurers based in Iowa, along with John Deere Risk Protection Inc. of Johnston, Farmers Mutual Hail Insurance Co. of West Des Moines, and Agro National LLC of Council Bluffs.