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Austin Mutual adding Nebraska insurance company as affiliate

Cooperative Mutual of Omaha will get capital from Austin, and in return, the Maple Grove-based insurer will get board and management control.

Austin Mutual Insurance, based in Maple Grove, will bring Cooperative Mutual of Omaha Nebraska into the Austin fold as an affiliate agency.

While Austin Mutual will provide capital to its new affiliate, the amount is subject to regulatory approval in Nebraska, according to Jeffrey Kusch, chairman, president and CEO of Austin Mutual. The deal, under discussion for several months, is scheduled to close by March 1.

Cooperative, which offers insurance to farmer-owned cooperatives in the Midwest, suffered substantial underwriting and investment losses in recent years, according to insurance credit rating agency A.M. Best. When the affiliation agreement was announced, Best placed Cooperative’s ratings “under review with developing implications,” pending the boost to Cooperative’s capital position “and the level of implicit and explicit support that will be provided by Austin Mutual.”

Currently, Cooperative’s financial strength rating is B+ (Good) and, according to Best, issuer credit rating is “bbb-.”

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“We view this as very positive,” said Best Assistant Vice President Gerard Altonji. “We don’t have enough information at this time” to change Cooperative’s rating, but it will meet with management, once the details of additional funding are disclosed, he added. 

 “It is going to be a positive move for Austin and it will strengthen our geographic reach and product line breadth. We’re very excited,” Kusch said in an interview.

In return for the capital investment, Austin “will have board and management control,” Kusch added.

The Cooperative name and brand will remain in place. As a mutual insurance company, ownership resides with the policy holders even though Austin has management and board control under the affiliation agreement.

Doug Derscheid, chairman of Cooperative Mutual, said in a prepared release that the “affiliation with Austin is essential for Cooperative Mutual to continue its longstanding mission of providing superior service and innovative products. In addition, this will allow us to expand our territories and enhance our products to better serve our policyholders.”

Cooperative Mutual wrote about $26 million in insurance in 2009, according to Kusch. The company was founded in Nebraska in 1935 by agricultural cooperatives and is licensed in 23 states and serves agricultural businesses.

Austin Mutual Insurance Co. was founded in 1896 in Austin, Minn., and currently operates in 33 states, underwriting about $85 million of property casualty insurance.