Deere & Co. has finally found a buyer for its crop insurance business. In a deal announced Thursday, the Moline, Ill.-based farm machinery company will sell John Deere Financial’s crop insurance business to Farmers Mutual Hail Insurance Co. of Iowa.
"We are confident that customers of John Deere crop insurance will be well served with this action," said Don Preusser, president of John Deere Insurance Company and John Deere Risk Protection, in a statement. "Farmers Mutual Hail has provided tailored crop insurance packages to farmers for more than 120 years. We believe the success and long tenure of FMH speaks volumes about their dedication to customer service."
Terms were not disclosed for the sale, but Deere has been shopping the business for several months. In September, it announced that it has hired investment firm Citigroup as its financial adviser and said it would be reviewing “strategic options” for its crop insurance offerings.
Deere has offered crop insurance since 2004. It included the business in its financial services division, which posted $624.5 million in net income in 2014. Deere said in its most recent financial filing that crop insurance margins have been slipping while credit losses have been increasing this year.
For Farmers Mutual Hail, a privately owned insurance company founded in 1893, the acquisition brings dramatically greater market share in the crop insurance business. Prior to the deal, Farmers Mutual Hail was writing $532 million worth of gross written premiums in 15 states. When combined, the two companies will be the second largest crop hail insurance provider in the country, offer policies in 39 states, and have more than $1 billion in gross written premiums.
"I am very excited at the potential the combination of FMH and John Deere crop insurance creates,” said Ron Rutledge, chairman, president and CEO of Farmers Mutual Hail, which is based in West Des Moines, Iowa. “in addition to the advantages that greater scale and diversity bring, our similar company cultures focused around taking care of the customer means all of our policyholders will continue to enjoy the high level of service they've come to expect."