Validus Holdings Ltd. will buy up Archer Daniels Midland Company’s Crop Risk Services business for $127.5 million in cash.
Plans call for using cash on hand to fund the deal. Validus said it expects to conclude its purchase in the 2017 second quarter, pending regulatory approval and other typical closing conditions.
What Validus is getting with its purchase: Archer Daniels Midland’s Crop Risk Services Business (CRS) is a primary crop insurance general agent based in Decatur, Ill. It recorded $548.9 million in gross premiums written for the 2016 reinsurance year, and has 1,170 agents in 36 states.
Validus said it will have the Crop Risk Services business operate as part of the Western World Insurance Group, one of its operating companies. Validus is a holding company for both reinsurance and insurance operating companies and investment advisors.
The agreement also includes a marketing services agreement, where Archer Daniels Midland and Validus will work together to continue offering a wide range of insurance and farm products and services to CRS customers.
Validus Chairman and CEO Ed Noonan said that CRS is a good fit with some of its existing offerings.
“The addition of CRS complements Validus’ existing agriculture book, and participation in this market is a logical step as Validus continues to expand our presence in U.S. primary specialty lines,” Noonan said in a prepared statement.
Noonan added that Validus is “excited by the long-term partnership with ADM as this transaction further provides the unique opportunity of a marketing services agreement with one of the largest agricultural processors in the world.”
Joe Taets, president of ADM’s Agriculture Services business unit said he is glad that Validus will keep the CRS unit going and then stem.
“We are pleased to have found a buyer in Validus that is committed to running – and growing – the business, and we look forward to continuing to work with Validus and the CRS sales team and their customers across the country,” Taets said in prepared remarks.
The Validus/ADM crop insurance sale and agreement comes after the U.S. crop insurance sector saw a number of changes in 2016.
In July, Everest Re Group announced plans to sell its U.S. crop insurance subsidiary Heartland Crop Insurance to CGB Diversified Services for an undisclosed price. But Everest kept a hand in the business through reinsurance. A number of companies existed the crop insurance business last year, selling it to peers. They include Cargill, Wells Fargo, Monsanto and tractor maker Deere & Co.
Source: Validus Holdings