Both Wells Fargo and OneBeacon Insurance Group announced their exit from the sector this month, with Wells Fargo’s Rural Community Insurance Services likely to be divested and OneBeacon's Climate Crop Insurance Agency sold to another entity.
Rural Community Insurance Services is one of the largest of its kind in the US and is likely to fetch $1 billion or more. The bank has launched an auction for the business and says that it may result in a sale but that the brokerage part of its crop insurance operations would not be part of the sale.
Wells Fargo regularly evaluates the strengths and strategic fit for each of its businesses. As our model continues to evolve, we are more focused on increasing cross-sell and growing the distribution side of the insurance business," a Wells Fargo spokeswoman said in a statement.
OneBeacon Insurance Group announced its sale of San Francisco-based Climate Crop Insurance Agency Fridaym including all the company’s existing business, to AmTrust Financial Services. AmTrust will also take over policyholder servicing.
Mike Miller, president and CEO of Bermuda-based OneBeacon, said the company was committed to “ensuring a smooth transfer for both our policyholders and for the Climate crop insurance business team.”
“We have terminated our relationship with The Climate Corporation and have withdrawn our Plan of Operations with the US Department of Agriculture’s Risk Management Agency for the 2016 crop year.”
The two sales comes amid reports from grain analysts that crop insurance price guarantees for US corn, soybeans and spring wheat would drop 10% or more in 2015, based on futures settlement prices for February. A combination of low interest rates and severe weather such as flooding and drought have also combined to make the sector an undesirable one.
OneBeacon has also experienced a drop of nearly 3.53% in the past year. According to its most recent earnings report, shares reached a one-year low of $13.61 in June and the company has underperformed the index by 2.04% in the past four weeks.
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