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Aspen, CGB DS Join Forces to Consolidate Crop Insurance

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Aspen Insurance Holdings Limited has entered into a strategic partnership with CGB Diversified Services, Inc. (CGB DS).  Per the agreement, Aspen acquired 23.2% ownership of the newly-formed company, Crop Re Services LLC while CGB DS will have 76.8% stake in the same.

Concurrently, Aspen has sold AG Logic Holdings, LLC (AgriLogic), its U.S. crop insurance business, to CGB DS for $68.4 million. The company will also have rights to provide quota share reinsurance capacity on the combined crop insurance portfolios of AgriLogic and CGB DS.

This apart, Aspen will have access to additional crop reinsurance premium. Notably, gross written premium of AgriLogic and CGB DS combined is estimated at about $1.1 billion for the  crop reinsurance year of 2017. This makes the insurer one of the largest portfolios in the U.S. crop insurance market.

This partnership expands Aspen’s exposure to a larger and diversified portfolio of business. Incidentally, this transaction is a strategic fit for CGB DS’ crop insurance business.

Significantly, Aspen has been pursuing such strategic initiatives to ramp up its growth profile. The company in its effort to strengthen its competitive edge has considered cost efficiency a measure. This is expected to generate about $160 million of cumulative of savings over the next three years and $80 million annually, thereafter.

Shares of Aspen have lost 26.7% year to date, underperforming the industry’s rally of 18.5%. The stock has seen the Zacks Consensus Estimate for current-year earnings miss being revised downward to a loss of $3.20 per share, wider than $2.50 over the last 60 days. However, the consensus mark for earnings in 2018 moved 5.3% north over the same time frame. We expect such strategic endeavors to drive the shares up.


 

Zacks Rank & Stocks to Consider

Aspen carries a Zacks Rank #3 (Hold). Some better-ranked property and casualty insurers are Infinity Property and Casualty Corporation , CNA Financial Corporation (CNA - Free Report) and NMI Holdings Inc. (NMIH - Free Report) .

Infinity Property and Casualty provides personal automobile insurance products in the United States. The company’s four-quarter average positive surprise is 300.65% and it sports a Zacks Rank #1 (Strong Buy). Shares have rallied 20.9% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

CNA Financial provides commercial property and casualty insurance products, primarily in the United States. The company delivered a four-quarter average beat of 39.78%. Shares of the company have risen 26.7% year to date. The stock sports a Zacks Rank of 1.

NMI Holdings provides private mortgage guaranty insurance services in the United States. The company’s four-quarter average beat is 11.72% and it carries a Zacks Rank #2 (Buy). Shares have soared 60.6% year to date.

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