Zurich Insurance Group emerged as the winning bidder for Rural Community Insurance Services, the Anoka-based crop insurance unit of Wells Fargo & Co. that had been on the block for several months.
Wells Fargo will sell the business for $675 million, plus the amount of excess capital in RCIS at the time of closing, under the agreement announced by the companies on Friday. That's expected to be as much as $375 million, driving the overall value of the transaction to around $1 billion.
RCIS is one of the nation's largest crop insurance firms and had about $2.1 billion in gross written premiums last year. Wells Fargo put the business up for sale last summer after it endured weather-related losses. The company and other major banks have been under pressure to exit some of their more risky businesses.
RCIS has been a relatively small unit inside Wells Fargo, the nation's fourth-largest bank by assets. But RCIS is a leading provider of crop insurance, employing 4,000 agents across the country and offering policies on about 130 varieties of crops that today cover more than 90 million acres.
RCIS President Mike Day said business will continue as usual at the company and that agents would keep their current customers. "You can rest assured that we will make this process as seamless as possible for customers," he said in a message to company employees.
Day said in an interview that the policy-issuing company, Rural Community Insurance Company, is included in this sale, so policyholders will see no change in the policy company name.
"The same management and field team will be in place as well as all of our locations, including our headquarters in Anoka," Day said.
The transaction will close by the end of the first quarter 2016 after necessary regulatory approvals are secured.
Mike Foley, chief executive of Zurich's North America operations, said RCIS has a national footprint and insures one in six U.S. farmers through a system of experienced agents that provides outstanding service. "These products and services help America's agricultural producers stay competitive and be more innovative, as well as to have the financial security to stay in business and go on to plant the next season," he said in a statement.
Zurich and RCIS have done business together since 1992 with its Zurich Insurance America unit responsible for about 25 percent of RCIS' retained premiums through a quota share contract.
Laura Schupbach, head of Wells Fargo Insurance, said in a statement that the company will now focus on consumer and commercial insurance distribution, which accounts for about two-thirds of its insurance revenue.
"We have tremendous opportunity to provide our consumer and commercial customers the insurance and risk management solutions they need and we continue to invest in the business," she said.