Farm Bureau Mutual Insurance Co., an affiliate of West Des Moines-based FBL Financial Group Inc., has signed a letter of intent to purchase Urbandale-based Crop1 Insurance for an undisclosed sum.

Crop1, which was founded five years ago, currently sells crop insurance in 15 states and has more than 16,000 policyholders. In 2003, it was the first insurance company in the nation approved by the Federal Deposit Insurance Corp. to offer producers discounts for FDIC-approved crop insurance through the Premium Reduction Program. Since 2003, Crop1’s PRP program has helped farmers save more than $4 million in crop insurance premiums, according to William Rose Jr., the founder and CEO of the company.

Farm Bureau Mutual has been approved by the FDIC to offer the PRP to its customers in 2006. Crop1’s expertise in this area and the software it had developed for the program put it an “enviable” position, and factored into Farm Bureau Mutual’s decision to buy the company, according to Bruce Trost, Farm Bureau Mutual’s executive vice president.

“Their innovation, technology, expertise, and the fact that they’ve been able to deliver a savings to clients – that all rings true with what Farm Bureau is about, and we wanted to be a part of that as well,” Trost said.

Using the software and systems created by Crop1, Farm Bureau Mutual hopes to maximize cost savings for customers as it introduces the PRP program in the eight states it serves. Trost said the acquisition is consistent with Farm Bureau Mutual’s mission to “serve the unique needs of crop producers throughout our service area.” He expects it to be mutually beneficial, with Crop1 drawing upon the strength and reputation of the Farm Bureau Mutual brand. Together, the companies plan to develop crop insurance policies that will provide a greater value for customers.

“The acquisition ensures that going forward, more producers in more states will have easier access to the most innovative and affordable crop insurance available today,” Trost said.

The acquisition is expected to close in early 2006, after which Crop1 will operate as a wholly owned subsidiary of Farm Bureau Mutual.

Craig Hill, a member of the board of directors of Farm Bureau Mutual and vice president of the Iowa Farm Bureau Federation, said Crop1 shares many of the same ideals as Farm Bureau Mutual, making it a smart decision to work together.

“We’ve witnessed the progress at Crop1, and today we unite our strengths to strive for the same goal of good product design, service, sophistication and lower premium costs for our producers,” Hill said. “Together we will continue to improve as a company.”

Steve Baccus, chairman of Farm Bureau Mutual and president of the Kansas Farm Bureau Federation, called the acquisition of Crop1 “great for agriculture.” As a farmer, he said he constantly faces the challenge of operating efficiently in order to make a profit, and lower premiums for crop insurance would help free up his resources to run his farm business.

“Farm Bureau Mutual has been an insurance leader and innovator since its inception more than 65 years ago, and is steadfast in its commitment to serving farmers and ranchers with innovative products, unparalleled service and the most competitive insurance premiums available,” Baccus said. “The marriage of these two innovators through the acquisition will create an entirely new standard for crop insurance value within the agriculture industry.”

Crop1’s network of 400 independent agents and Farm Bureau Mutual’s 1,200 captive agents will be retained in the acquisition.

In 2005, Crop1 operated in 15 states, and it plans to expand to six others in 2006. These are the states the company will serve: Arizona, California, Colorado, Iowa, Idaho, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, North Dakota, Nebraska, New Mexico, Ohio, Oklahoma, Oregon, South Dakota, Texas, Washington and Wisconsin.

Farm Bureau Mutual operates in eight Midwestern and Western states: Arizona, Iowa, Kansas, Minnesota, Nebraska, New Mexico, South Dakota and Utah.

Rose estimates that the merged company will have about 30,000 policyholders, which is only about a 4 percent share of the market for crop insurance in the states in which the companies do business. He said this leaves significant opportunity for growth..

“The acquisition will allow Crop I to continue to be a leader and innovator and help us all move to the next level in providing excellent service and savings to farmers,” Rose said.