Wells Fargo Insurance Services Inc. plans to buy more insurance brokerages as part of its strategy to develop new business in the West.
Last week the San Francisco unit of Wells Fargo & Co. bought Grady & Associates, a single-office retail insurance broker in Las Vegas. The price was not disclosed.
H. David Wood, the executive vice president of insurance brokerage for the Western region at Wells Fargo Insurance Services, said this is the unit's first acquisition since Wells Fargo reorganized its insurance business into Eastern and Western regions in January.
Wells Fargo Insurance, the fifth-largest insurance brokerage company in the world and the largest bank-owned one in the United States, has more than 200 offices in 37 states.
The Western region accounts for $340 million of Wells Fargo Insurance's $1.7 billion of brokerage revenue.
Wood said in an interview last week that the unit plans to expand in the West by "making acquisitions where they make sense," in addition to recruiting customers and hiring advisers. "In the West, the strategy is to build out the insurance operations to create better synergies with the bank and the customers in the region," he said. "Nevada is a big piece of that."
Wells Fargo Insurance has done business in Nevada for more than 10 years. Wood said the Grady acquisition "really rounds out the organization" in the Las Vegas region, because previously his unit's Nevada operations were heavily focused on property and casualty insurance products and services.
Grady, which was founded in 1999, focuses on health and benefits insurance. It serves customers in the hospitality, construction, hospitals, auto sales and home development industries.
By adding services in Nevada, Wood said he hopes to increase cross-selling in the state.
"Nevada looks like it is all about gaming and casinos, but there is a huge infrastructure in the state that is necessary to support the gaming and entertainment industries," he said. "We want to build out throughout the region and be as well rounded as possible."
Wells Fargo Insurance says it plans to add products and services in each of its seven regions in the West; each region will require different additions. For example, in the Northwest region, which consists of Oregon, Washington and Alaska, the unit plans to expand its employee benefit services.
"Each of our regions really has its own flavor and focus," Wood said. "Each has is own plan for growth."
Analysts said it could be difficult for Wells Fargo to make another major acquisition as it continues its integration of Wachovia Corp., which it bought in December, but that will not preclude its units from pursuing small deals.
"I think there are a lot of discussion going on in the insurance industry, the agency world and in terms of banks acquiring agencies," said Carmen Effron, who heads C.F. Effron Co. LLC in Weston, Conn. "But the problem right now is funding. The money is tight, and there is a big spread between what buyers want to pay and what the seller thinks they are worth."
Effron said that she thinks mergers and acquisitions will surge by December, but there will be "a lull before the storm."
Wood said Wells Fargo Insurance's Western region was "mostly unaffected" by the Wachovia acquisition. He said he expects more consolidation in the insurance brokerage industry in the next two years, though the economic climate may make acquiring difficult.
"The economy will create a greater need for consolidation, but it is also going to make consolidation less attractive on the sell side," he said. "We are going to proceed cautiously to make sure that we make the right deals at the right time."