WFG Capital Advisors: Agency Consolidation Gaining Momentum; Outlook Remains Cloudy

October 19, 2004

WFG Capital Advisors, an investment banking firm specializing in the insurance industry, announced on Tuesday that agency consolidation will likely achieve record results for 2004 but the outlook for 2005 remains unclear.

According to Steven Wevodau, managing principal of WFG, “2004 announced agency acquisitions will more than likely outpace prior years by at least 25 percent. Insurance brokers continue to make a significant impact in consolidation representing 53 percent of all announced deals as of September 30 and already outpacing their total 2003 results by 10 percent.” Wevodau added, “As product rates continue to soften and stabilize, public company brokers are accelerating their buying pace in order to close the gap on declining organic revenue gains.”

Acquirers by Type (Number of Announced Deals) YTD

Insurance Carrier and Other 39 34 29 43 45
Bank and Thrift 84 63 71 55 37
Insurance Broker 65 80 89 84 93
Total 188 177 189 182 175

Acquirers by Type (% of Announced Deals) YTD

Insurance Carrier and Other 21% 19% 15% 24% 26%
Bank and Thrift 45% 36% 38% 30% 21%
Insurance Broker 35% 45% 47% 46% 53%
Total 100% 100% 100% 100% 100%

“There are several developing factors that may re-shape the consolidation pace during 2005,” added Wevodau. “The direction of product rates, long term capital gains rates, and the impact that the banks have on agency consolidation are all key dynamics that may shift the pace during 2005.”

Robert Lieblein, another managing principal of WFG ( mentioned, “The recent Elliot Spitzer case against Marsh may redefine the entire insurance brokerage segment and their appetite for acquisitions during the upcoming year. This is probably the most salient issue facing the market today and is too difficult to predict its outcome.” Lieblein added, “New entrants such as private equity groups are beginning to make some significant headway into the market while financial institutions appear to be retrenching. The combination of these two segments will have significant impact on the marketplace in the upcoming year as well.”

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