CUNA Mutual Group to sell off crop insurance side business for $110M

Oct. 03--Madison-based CUNA Mutual Group has made a deal to sell a crop insurance side business to HCC Insurance Holdings, Inc., a specialty insurer headquartered in Texas, for an estimated $110 million in cash, as the company increases its focus on its core products.

The transaction, expected to close early next year pending regulatory approvals, represents a strategic shift away from a diversification policy pursued by former CEO Jeff Post starting in fall 2009 to bolster revenues.

The idea had been to move beyond the credit union insurer's core business of providing financial services to credit unions and their members. The crop insurance business, known as Producer's Ag Insurance Group, protected farmers and agricultural producers nationwide from financial losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects and disease.

Post at the time said the strategy made sense as CUNA Mutual tried to remain profitable after a deep recession and in a shrinking and more competitive marketplace, with credit unions consolidating and some turning to other insurance companies. The strategy also included offering some of the company's core credit union products and services -- including 401K retirement plan management -- to employees of companies outside the credit union sector.

But it's questionable whether the crop insurance business ever provided much of a financial cushion on an annual basis. According to reports released by the company since 2009, crop insurance produced losses for CUNA Mutual in three out of four years -- only in 2010 was it described as a cash cow for the overall company, contributing almost half of the year's operating revenue growth, and helping increase net income to $87 million.

That annual increase came after a $51 million net profit in 2009 and a $149 million loss in 2008.

In the other years -- 2011, 2012 and 2013 -- annual reports described losses in the crop insurance business, overcome by gains from CUNA Mutual's traditional business lines, for five straight years of net profits.

In a news release, company CEO Robert Trunzo, who replaced Post in January, said off-loading ProAg would let CUNA Mutual capitalize on renewed strong growth in its "core business lines" serving consumers, credit unions and others. The company also said crop insurance made sense as a "key diversification option" at a time when the "nation's economy was fragile" and the financial services industry was struggling more, but wasn't needed now.

"Like any other insurance business, crop protection financial results are better in some years than others," company spokesman Rick Uhlmann said in response to questions about Pro-Ag's financial performance. "Bottom line, we benefited from this diversification. But today, five years later, the economy is recovering and our core products have demonstrated stability and growth."

"We believe it was time to transition out of the crop insurance business and put greater focus on the company's future direction," Uhlmann added. "This will allow us to focus on our core businesses."

Uhlmann confirmed CUNA Mutual was still operating another part of its diversification strategy -- the company formerly known as CPI Qualified Plan Consultants, a Kansas-based administrator of employee benefit plans for non-credit union employees that CUNA Mutual acquired in 2009 after the Pro-Ag purchase.

Renamed CUNA Mutual Retirement Solutions, that business now manages 401K plans for employees of companies both in and outside the credit union sector.

"That's actually one of our core businesses and that's a business that we plan on growing," Uhlmann said.

Founded in 1935, CUNA Mutual provides life insurance, health insurance, fidelity bonds and property/casualty insurance to 96.5 percent of credit unions around the country and many of their members. Long one of Madison's largest employers, the company has streamlined operations in recent years but still employs about 4,300 worldwide, including 1,750 in Madison. It reported annual revenues of $2.9 billion in 2013.

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