Johnston-based Rain and Hail Insurance Service Inc., the second-largest crop insurer in North America, has agreed to be acquired by ACE Ltd., a global property and casualty insurance company with headquarters in Switzerland.

ACE announced yesterday that it has signed a definitive agreement to acquire all of the outstanding common stock of Rain and Hail not currently owned by ACE for approximately $1.1 billion in cash. ACE currently owns approximately 20 percent of the outstanding common stock of Rain and Hail, which will continue to operate as a separate and distinct franchise within the company’s ACE Westchester division and Insurance-North America operations.

“This transaction is a natural extension of our long-term, valued relationship with Rain and Hail and our company’s specialty lines focus,” said Evan Greenberg, ACE chairman and CEO, in a press release.  “Rain and Hail is a leader in the crop insurance business, and over the course of our relationship with them, we have been impressed by their best-in-class management team and the strength and reputation of their franchise across North America.”

In 2009 Rain and Hail generated gross premiums of $2 billion, net premiums of $800 million and net income of $199 million. ACE expects to recoup the cost of the acquisition in less than five years.

According to an investor summary issued by ACE, the company plans to keep Rain and Hail’s current management team in place.

Employing 400 full-time workers, Rain and Hail operates eight regional offices, including a location in Canada, and is licensed in 48 states. Its two operating companies, Rain and Hail LLC and Agri General Insurance Co. (AGIC), work with a network of more than 11,000 agents.

The transaction, which is subject to regulatory approvals, the approval of Rain and Hail shareholders and other customary conditions, is expected to be completed by the end of this year.

Rain and Hail is among 16 insurance companies that recently signed a renegotiated agreement for the Multi-Peril Crop Insurance program. Under that contract, known as the Standard Reinsurance Agreement (SRA), the crop insurance industry faces $6 billion in reductions in federal subsidies in the next 10 years, or $600 million per year. Click here for related story