Wells Fargo & Co. is considering options for its crop-insurance business that may include a sale amid a flurry of acquisitions in the industry.
The lender is looking into “strategic options,” Katie Ellis, a spokeswoman for San Francisco-based Wells Fargo, said in an e-mailed statement. Reuters reported the review earlier Tuesday, suggesting the business may fetch $1 billion without saying how it came up with the valuation.
“Wells Fargo regularly evaluates the strengths and strategic fit for each of its businesses,” according to the statement. As the bank reviews its model, it will look to focus on insurance distribution and selling more products to the same customers, the company said.
A retreat by Wells Fargo, which has been in crop insurance for decades, would be the latest change in an industry that’s suffering losses and wavering support among lawmakers. Crop insurance can protect farmers against weather-related setbacks or lower-than-expected revenue. A government program absorbs some losses for the industry.
Wells Fargo’s Rural Community Insurance Co. had total capital and surplus of $618.5 million at the end of 2014, according to a regulatory filing. It had net income of $21.1 million in 2014, little changed from a year earlier. Minnesota, North Dakota and Kansas are among the company’s largest markets.
A sale wouldn’t include Wells Fargo Insurance Crop Agency, according to the statement.
The market for crop-insurance units has been active. In December, Deere & Co. agreed to sell its business after being hurt in 2011 and 2012 by drought in states such as Texas, Kansas and Oklahoma. In September, CUNA Mutual Group reached a deal to sell Producers Ag Insurance Group for $110 million to HCC Insurance Holdings Inc.
HCC has joined insurers including XL Group Plc, Validus Holdings Ltd. and Maurice “Hank” Greenberg’s Starr Cos. in pushing into crop coverage to diversify risks and take advantage of the U.S. backstop.