NU Online News Service, Sept. 14, 3:14 p.m.EDT

Zurich-based ACE Ltd. announced it plans to spend $1.1 billionto buy the 80 percent of Rain and Hail Insurance Service that itdoesn't already own.

In a separate announcement, ACE said it would buy a Malaysianinsurance company for $200 million.

With regard to the bigger deal, announced yesterday, ACE said itwill pay cash for the Johnston, Iowa-based holding company of Rainand Hail LLC, a managing general agency, and Agri General InsuranceCompany.

Rain and Hail Insurance Service will continue to operate as aseparate and distinct franchise within the company's ACEWestchester division and Insurance-North America operations, ACEsaid.

Rain and Hail LLC, previously an employee-owned MGA, offers anextensive portfolio of agricultural insurance programs, includingmultiple peril crop insurance (MPCI), crop-hail and agribusinesscoverage.

According to the MGA's website, the organization began operationas the Rain and Hail Insurance Bureau, forming one of the nation'sfirst risk management pools in 1919. The enterprise was reorganizedas an employee-owned MGA in 1981.

ACE Chair and Chief Executive Officer Evan Greenberg called thedeal "a natural extension of [its] long-term, valued relationshipwith Rain and Hail and [ACE's] specialty lines focus."

He noted that over time, ACE has been impressed with the MGA's"best-in-class management team" as

well as "the strength and reputation of their franchise acrossNorth America."

Commenting on benefits of the deal for ACE shareholders, Mr.Greenberg projected a return on capital exceeding 15 percent forthe acquired business.

A presentation summarizing the deal on ACE's website also notedthat crop insurance is not correlated to the broader property andcasualty commercial insurance pricing cycle. Pie charts included inthe presentation reveal that ACE believes non-cyclical business forits North America operation, including agriculture business, willjump to 59 percent of the total (based on 2009 net premiums) from53 percent prior to the deal.

The transaction is subject to regulatory approvals and theapproval of Rain and Hail shareholders. The deal is expected to becompleted by the end of 2010.

ACE expects to fund the merger consideration for the transactionwith available cash.

According to the website presentation, ACE acquired its 20percent stake in Rain and Hail Insurance Service through ACE'sacquisition of CIGNA's p&c operations in 1999, while itsproducer relationship dates back to 1980.

Rain and Hail has been acting as ACE's MGA under ACE's standardreinsurance agreement (SRA) with the federal government.

Based on information from the Federal Crop Insurance Corp., ACEreported that Rain and Hail administered $1.9 billion in cropinsurance premiums on behalf of ACE under the SRA in 2009, rankingsecond behind Wells Fargo's Rural Community Insurance Services.

In the second deal announced separately yesterday, the ACE Groupsaid it received approval from Malaysia's financial regulator, theMinister of Finance through Bank Negara Malaysia, to acquire JernehInsurance Berhad, a general insurance company for roughly $200million.

Jerneh Insurance Berhad is majority owned by Jerneh Asia Berhad,an investment holding company

listed on the Kuala Lumpur Stock Exchange.

ACE and the sellers said they expect to execute a definitiveagreement shortly and that the purchase price is subject toadjustment to reflect the book value of Jerneh Insurance Berhad atthe transaction's closing.

Mr. Greenberg said the deal provides a good strategic fit andcomplements ACE's current presence in Malaysia.