Ace Completes $1.1 Billion Acquisition of Rain and Hail Insurance Service

Ace Ltd. said it completed its acquisition of crop insurer Rain and Hail Insurance Service Inc. for about $1.1 billion in cash.

Ace had already owned about 20% of the outstanding common stock of Johnston, Iowa-based Rain and Hail when the acquisition was first announced in September (BestWire, Sept. 15, 2010).

Rain and Hail employees owned the remaining 80% of the company before the acquisition.

The insurer will continue to operate as a separate franchise within Ace's Ace Westchester division and Insurance-North America operations, Ace said in a statement.

Rain and Hail acts as Ace's managing general agent under Ace's standard reinsurance agreement with the federal government, and virtually all of the company's gross premiums flow through Ace under Ace's reinsurance agreement, the company said.

Rain and Hail Insurance Services Inc. is a holding company comprised of three wholly owned subsidiaries: Agri General Insurance Co., Rain and Hail Insurance Service International Inc. and Rain and Hail Insurance Corp., according to BestLink, which provides online access to A.M. Best's database of insurance information.

Rain and Hail has a network of 11,000 agents and is one of the largest MGAs serving the U.S. crop insurance industry. It has 400 employees and a five-year average combined ratio of 73, according to Ace.

Ace's relationship with Rain and Hail dates to 1980, and it acquired its 20% stake in the company through the acquisition of Cigna's property/casualty business in 1999. Ace said it serves as the primary insurer of Rain and Hail's business.

Crop insurance is not correlated to broader property/casualty insurance pricing cycle and increases Ace's proportion of less cyclical business, Ace said in September.

With $1.37 billion in direct written premiums for year-end 2009, Ace INA Group is the second-largest writer of multiple peril crop insurance in the United States, according to BestLink. The top writer is Wells Fargo, with $1.40 billion in direct written premiums.

Ace American Pool currently has a Best's Financial Strength Rating of A+ (Superior). Agri General's rating of A (Excellent) was put under review with positive implications as a result of the acquisition announcement.

Shares of Ace Ltd. (NYSE: ACE) were trading at $62.13 midday on Dec. 29, down 0.26% from the previous close.

(By Meg Green, senior associate editor, BestWeek: Meg.Green@ambest.com)