Wells Fargo may divest its crop insurance business, one of the biggest in the United States, a spokeswoman told Reuters on Tuesday, as regulatory restrictions on U.S. banks force some to reconsider underwriting insurance policies.
Wells Fargo has launched an auction for the business that could fetch more than $1 billion, people familiar with the matter said. When contacted by Reuters, Wells Fargo said it is reviewing strategic options for its Rural Community Insurance Services (RCIS) subsidiary that may include a sale, excluding the Wells Fargo Insurance Crop Agency, its brokerage arm.
“Wells Fargo regularly evaluates the strengths and strategic fit for each of its businesses. As our model continues to evolve, we are more focused on increasing cross-sell and growing the distribution side of the insurance business,” a Wells Fargo spokeswoman said in a statement.
Crop insurance helps farmers protect themselves from financial ruin when drought, disease, freezing temperatures, hail, or wind destroy their crops. About 90 percent of planted farmland is covered by insurance every year.
A combination of low interest rates and extreme weather such as flooding and drought have combined to make the business unattractive to many financial institutions and companies of late. OneBeacon Insurance and Monsanto are among those to have sold their crop insurance arms in recent months.
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Source: Reuters
