Zurich Insurance to Buy Wells Fargo Crop Insurance Business--Update

By Digby Larner

Zurich Insurance Group AG has agreed to pay up to $1.05 billion for U.S. bank Wells Fargo & Company's crop insurance business, as it attempts to overcome a tumultuous period in which it parted company with its chief executive.

Its Zurich American Insurance Company unit will buy Rural Community Insurance Services in a deal that is expected to close by the end of the first quarter of 2016.

The business is one of the largest U.S. crop insurance providers, offering federal crop insurance programs that include multiperil and other private crop insurance products. It writes around $2 billion in insurance.

Wells Fargo said the estimated purchase price of the business is between $675 million and $1.05 billion. It had been trying to sell the business, part of the bank's insurance division, since at least August, people familiar with the matter said.

The move follows a difficult few months for Zurich Insurance, which recently called off a potential $8 billion bid to buy U.K.-based RSA Insurance Group PLC. At that same time, the company warned that it would report a weaker-than-expected third-quarter profit for general insurance.

Last month it reported a 79% decline in third-quarter net profit, and an operating loss of $183 million at its general insurance business in the period, where it said it planned to cut roughly 200 jobs.

At the beginning of December, the company said Chief Executive Martin Senn would step down by the end of the year. He is being replaced on an interim basis by Chairman Tom de Swaan while a permanent successor is sought.

Wells Fargo's insurance division makes up roughly 4% of its noninterest income, with crop insurance a fraction of that business.

Rural Community Insurance Services has around 1,200 people out of the roughly 5,000 employees that work for Wells Fargo's insurance division.

Wells Fargo has worked to bolster that insurance unit, slimming down certain parts of its business the past few years. It has hired around 100 executives in recent months in an effort to build relationships with the bank's existing middle-market clients, among others, Laura Schupbach, head of Wells Fargo Insurance, has said.

Emily Glazer contributed

Write to Digby Larner at digby.larner@wsj.com

(END) Dow Jones Newswires

December 18, 2015 10:44 ET (15:44 GMT)

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