MINNEAPOLIS Wells Fargo & Co., taking a major step forward in the insurance agency business, announced late Thursday that it has agreed to buy ACO Brokerage Holdings Corp., the countrys fifth-largest insurance broker.
Chicago-based ACO, the parent company of Acordia Inc., has revenue of about $400 million and has 112 offices in 29 states. Acordia and Wells Fargo Insurance combined would have revenue of $630 million in revenue and 176 offices in 38 states.
According to Business Insurances annual list of the top U.S. brokers, Acordia, a property and casualty agency, ranked fifth and Wells Fargo Insurance eighth in 1999 revenues. Using combined numbers, they would have edged up to the fourth spot behind behemoths Marsh & McLennan, Aon, and Willis Group.
In a statement, Wells Fargo president and chief executive Richard Kovacevich said the acquisition would bring his company closer to reaching our goal of having our insurance, trust, and brokerage businesses contribute 25% of our income.
Timothy J. King, president of Wells Fargo Insurance, said the bank would keep Acordias extensive East Coast operations, even though they do not match up with Wells Fargos network.
We are going to continue to grow the business, Mr. King said. [The Acordia agencies] fit in very well with our corporate banking and small business initiatives throughout the 50 states.
He said Acordia and Wells Fargo Insurance have only one overlapping location, in Minneapolis. Those two offices will be combined.
The companies expect the acquisition to close in the second quarter. The price was not disclosed.
Michael D. White, president of the consulting firm Michael White Associates in Radnor, Pa., said this would be the largest acquisition of an insurance agency or brokerage ever in the United States. Talk of a possible deal had made the rounds for some time, he said.
Acordia was a publicly traded company until 1997, when its largest shareholder and former parent, Anthem Inc., an Indianapolis health insurance company, decided to sell its majority share. Acordia was taken private by its management and a group of investors, and management said publicly at the time that it would eventually seek a buyer.
The agreement comes at a time when insurance as a sector has won renewed interest on Wall Street. Property and casualty underwriters in particular had suffered through years of difficult financial performance but an overall recovery in the segment had led some analysts to conclude that the sector is headed for extensive consolidation.
In taking on Acordia, Wells kept to the pattern generally adopted by banks partnering or acquiring agency businesses rather than pairing up or buying an underwriter.