The West Des Moines, Iowa-based buyer, which was founded in 1893, is counting on more demand as farm production expands to meet the needs of a growing population. Companies including Wells Fargo & Co. and Ace Ltd. historically profited through the coverage, which is partly backed by U.S. taxpayers. Deere’s push into multiple peril crop insurance, or MPCI, was followed by record drought and a plunge of corn prices, which fueled higher- than-expected claims in 2012 and 2013.

“MPCI has traditionally been very profitable,” Marc Liebowitz, a senior financial analyst for A.M. Best Co., said in an interview before the sale was announced. “In the last few years, one thing or another has impacted the results.”

XL Group Plc, HCC Insurance Holdings Inc. and Maurice “Hank” Greenberg’s Starr Cos. are among companies that have bet on crop coverage to diversify insurance risks and benefit from the government backstop. XL in February 2014 acquired Global Ag Insurance Services LLC. HCC agreed in September to buy Producers Ag Insurance Group, which is larger than the Deere unit by sales, for $110 million.

Agricultural output will need to double by 2050 as global population rises about one-third to 9.6 billion and the middle class expands, according to the Global Harvest Initiative, an effort supported by companies including Deere that back expanded farm production.

Annual Losses

Deere Chairman and Chief Executive Officer Samuel Allen is narrowing his company’s focus to businesses like farm machinery, technology and services. He sold an irrigation business to FIMI Opportunity Fund in May 2014. Another private equity firm, Clayton, Dubilier & Rice LLC purchased a landscape unit from Deere in 2013.

Deere’s crop business was the ninth largest in the U.S. by 2013 policy sales, according to data from the National Association of Insurance Commissioners. The unit’s net loss narrowed to $26.7 million last year from $29.6 million in 2012, according to a regulatory filing that uses state rules for insurers rather than U.S. generally accepted accounting principles. The loss was $20.1 million in 2011.

Crop insurance can protect farmers against weather-related losses or lower-than-expected revenue. The Deere unit was hurt in 2011 and 2012 by drought in states such as Texas, Kansas and Oklahoma, and last year by a decline in crop prices.

Record corn production in the U.S. fueled a 21 percent decline in prices this year on the Chicago Board of Trade through Sept. 22, the day before Deere said it hired Citigroup Inc. to explore options for the unit. That followed a 40 percent slump in 2013.

–With assistance from Alan Bjerga in Washington and Millie Munshi in New York.