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

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

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

With regard to the bigger deal, announced yesterday, ACE said it will pay cash for the Johnston, Iowa-based holding company of Rain and Hail LLC, a managing general agency, and Agri General Insurance Company.

Rain and Hail Insurance Service will continue to operate as a separate and distinct franchise within the company's ACE Westchester division and Insurance-North America operations, ACE said.

Rain and Hail LLC, previously an employee-owned MGA, offers an extensive portfolio of agricultural insurance programs, including multiple peril crop insurance (MPCI), crop-hail and agribusiness coverage.

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

ACE Chair and Chief Executive Officer Evan Greenberg called the deal "a natural extension of [its] long-term, valued relationship with 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 across North America."

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

A presentation summarizing the deal on ACE's website also noted that crop insurance is not correlated to the broader property and casualty commercial insurance pricing cycle. Pie charts included in the presentation reveal that ACE believes non-cyclical business for its North America operation, including agriculture business, will jump to 59 percent of the total (based on 2009 net premiums) from 53 percent prior to the deal.

The transaction is subject to regulatory approvals and the approval of Rain and Hail shareholders. The deal is expected to be completed by the end of 2010.

ACE expects to fund the merger consideration for the transaction with available cash.

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

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

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

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

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 definitive agreement shortly and that the purchase price is subject to adjustment to reflect the book value of Jerneh Insurance Berhad at the transaction's closing.

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

Special Reports /

ACE Spending $1.1B For U.S. Crop Biz, $200M For Malaysian Firm

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