Big Business Wins, Taxpayers Lose in Crop Insurance Industry
Huge multinational corporations are selling off their crop insurance businesses. The reason, according to the industry, is that business is just too bad, despite billions in federal subsidies. What they don’t point out is other multinationals are snapping up those same companies.
Late last year, Wells Fargo sold its crop insurance business, Rural Community Insurance Services, to Zurich Insurance Group. Zurich, one of the largest insurance companies in the world, agreed to pay up to a staggering $1.05 billion for the insurance company. Who’s going to pay a billion bucks for a company that isn’t profitable?
- Just this week, Aspen Insurance Holdings – a holding company with more than $10 billion in assets – snapped up AgriLogic Insurance Services for an undisclosed price. Are we supposed to believe they’re shopping for a business that is losing money?
The truth is, crop insurance companies are guaranteed a profit, through a special deal they get from the federal government. These companies had an average rate of return over 14 percent between 2004 and 2013, showing that profits are alive and well.
Who’s footing the bill? You and me. American taxpayers’ dollars are flowing to some of the wealthiest companies in the world, many of which are headquartered outside the U.S., as EWG’s Crying Wolf analysis shows.
These two new parent companies are more of the same – both rich, both overseas. Zurich Insurance Group, headquartered in Switzerland, is currently worth more than $32.5 billion and had a 2014 net income of $3.9 billion. Aspen Insurance, headquartered in Bermuda, has a net worth of over $2.7 billion and 2014 net income of $355.8 million. Chris O’Kane, the current CEO of Aspen, received over $7.7 million in compensation in 2014 alone.
Wealthy corporations are not in business to buy companies that aren’t profitable. The federal crop insurance program guarantees that big business wins while taxpayers lose.