The days of banking companies assembling insurance agency networks gradually through small purchases may not be over, but recent deals by Wells Fargo & Co., Wachovia Corp., and Regions Financial Corp. of Birmingham, Ala., indicate that more buyers have a big - or at least midsize - appetite.

Wells' deal for Acordia Inc. of Chicago, Regions' done deal for Rebsamen Insurance Inc. of Little Rock, and Wachovia's deal for Hamilton Dorsey Alston Co. involved agencies among the 100 largest, according to the 1999 list from Business Insurance magazine, the most current such list available.

John Wepler of the consulting firm Marsh Berry & Co. predicts that 40 of the top 100 agencies will be bank-owned by yearend. Currently 13 of the top 100 are either owned by banking companies or have announced an agreement to be bought by one. He also predicts that five of the biggest banking companies will collectively acquire agencies with about $1 billion of insurance revenue in the next three years.

Jim Campbell, senior vice president of Reagan Consulting, said: "I think we are going to see a couple of developments" between now and January. "Just the pure number of transactions will continue to grow, and there are going to be more big deals."

Wachovia's agreement to buy Hamilton Dorsey, an Atlanta property-casualty and employee benefits agency with revenue of $20 million, was announced last week.

"Clearly, convergence is the word of the day," David Holton, president of Wachovia Insurance Services, said in an interview. "If you are trying to help somebody amass wealth, you have to help protect that wealth."

Mr. Campbell said there were signs this wave was coming.

"A lot of the larger banks, early on, just wanted to get into the business," he said. They struck partnerships with carriers and agencies "just to get their feet wet and start to learn. But they knew that was going to be an interim step, and they would move toward an ownership model."

Richard D. Starr, director of strategic insurance initiatives for ABN Amro Financial Services Inc. in Chicago and chairman of the Financial Institutions Insurance Association, said it makes sense for larger banking companies to buy like-size agencies.

"A big bank is not going to do a bunch of itty-bitty transactions if it doesn't have to, because the cost of the transactions is expensive," he said.

He predicts that the recent large deals will spur others - some of them flawed because the buyer will not think things through.

"It can't just be a great idea," Mr. Starr said. "It has to prove itself financially."

Few bank-owned agencies are profitable, he noted. "You kind of wonder when they are going to come to a conclusion that this is not working and why."

Mr. Campbell had a similar view of this merger-and-acquisition market.

"When you're looking at the Business Insurance list, if a bank is going after one of those guys, it's typically going to be looking for an agency that is growing on its own and producing on its own," he said.

Mr. Holton said the expertise of Hamilton Dorsey's top agents was a big selling point to Wachovia.

"This is not like a bank buying another bank, where there's a full stable of bankers to step in and fill empty positions," he said.

There are limits to just how big buyers are willing to go - Mr. Wepler said the leading agencies, such as Marsh & McLennan, Aon Corp., Willis Group, and Arthur J. Gallagher will almost certainly remain independent. For one thing, such agencies target Fortune 1000 clients, instead of the middle-market clients that bankers covet, he said.

These top agencies also have subsidiaries that banking companies may not want to own, Mr. Wepler said. In addition to being the world's largest agency, Marsh & McLennan owns Putnam Investments and Mercer Consulting Group.

Only the largest companies - like Citigroup Inc. and J.P. Morgan Chase & Co., which are still concentrating on selling personal lines - could afford an agency the size of Marsh, whose 2000 revenue was $10.2 billion, Mr. Wepler said.

He said there is a strong regional component in bank-agency merger trends, and he predicted that several areas - including the West Coast, Birmingham, and New York - will heat up before the year is out.

Activity in Michigan, the Carolinas, and Florida has been brisk because those states have several large regional banking companies and have been permitting certain deals through laws that predate the Gramm-Leach-Bliley Act of 1999, Mr. Wepler said. "If you look at where a lot of the transactions have occurred, it's in states where there's a pretty heavy presence of bank home offices of midsize banks."

Regional companies such as First of America Bancorp of Kalamazoo, now a unit of National City Corp. of Cleveland, Comerica Inc. of Detroit, and Standard Federal Bancorp of Troy, now part of ABN Amro, all have headquarters in Michigan and have bought agencies in that state, Mr. Wepler said.

Now, he said, more buyers recognize that home is not necessarily the best place to be. Florida was the first state to get attention from acquisition-minded banks based elsewhere.

Birmingham, meanwhile, "is an area where a lot of banks have home offices," including Regions and Amsouth Bancorp, Mr. Wepler said. While the city has been "a relatively slow sort of market," several Birmingham companies are looking to enter the insurance agency fray this year, he said.

Booming southwestern states such as Arizona also offer potential, while New York could be attractive to larger banking companies shopping for agencies, Mr. Wepler said.

One company looking to buy in New York is Commerce Bancorp of Cherry Hill, N.J. George E. Norcross, president and chief executive officer of Commerce National Insurance Services, said the company plans to open branches in Manhattan this fall and is actively seeking an agency as well.

There have been few agency acquisitions in New York, because the market is tough, Mr. Norcross said. "They are sharks up there."

However, Commerce considers insurance a vital part of its service-driven strategy and its plans to expand into the city, he said.

Beth Morrow, senior industry analyst for the national insurance group at Ernst & Young, said one other trend appears to be holding - few banking companies, if any, are buying underwriters.

"Banks are suited for distribution, therefore it makes perfect sense that they would acquire agencies," she said. "On the other hand, underwriting isn't something banks do very well. Why would any rational bank buy an underwriter when they can get this nice, juicy little distribution percentage buying an agency? Why not just be happy with that?"

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