Monday, July 23, 2012
The severe drought ravaging farmland in the Midwest could put a dent in the upcoming profits of Wells Fargo, one of the nation's largest crop insurers.
Analysts with investment firm Stifel Nicolaus tried to put a dollar figure on the potential impact in a research note released Monday, as corn crops continue to suffer in one of the worst droughts since 1956.
While Wells Fargo has underwritten about $1.8 billion in crop insurance in affected states since last year, more than three-quarters of that has been reinsured.
Taking that into account and using loss estimates from the severe 2002 drought, the analysts came up with a potential hit of $380 million, or 5 cents per share. They called it "very manageable."
Wells Fargo told Bloomberg that it expects an "extreme claims season," but would not estimate what the ultimate impact would be.
Posted by Andrew Dunn at 12:45 PM