Last year's separations of the three major wholesalebrokers–Swett & Crawford, Crump and Stewart Smith Group–fromtheir respective parent retail brokerage firms have translated intonew opportunities and additional investments, executives toldNational Underwriter. None of the developments might have occurredhad contingency fee probes not raised conflict-of-interestquestions for such retail-wholesale combinations.

For two, while separation brought organizational challenges,such as the need to re-establish independent administrativefunctions, newfound independence allowed them to rediscovermarketplaces that were inaccessible to them because of theiraffiliations with their former parents.

For the third, the end of its affiliation with its retailpartner paved the way for a new relationship with another purewholesaler, whose chief executive feels the move is another step infirm's growth strategy.

The three divorces–the dissolution of the partnership betweenAon and wholesaler Swett & Crawford, the separation of Marsh& McLennan and wholesaler Crump, and Willis' sale of StewartSmith Group to American Wholesale Group–came as a direct result ofthe contingency fee scandal that rocked the insurance industry lastyear.

To close out allegations by New York Attorney General EliotSpitzer of steering contracts to certain insurers in return forprofitable volume-based contingent fee commissions, the threeretailers agreed to pay millions into settlement funds, which arebeing paid to those policyholders who may have been harmed by thealleged practice. They also agreed to the elimination ofcontingency fees and transparency rules governing commissions.

However, potential questions over conflicts of interest betweenwholesaler and retail establishments, and the fact thatperformance-based contingents are a mainstay for wholesale units,meant staying together was no longer a viable option.

“We went back [to MMC] and said this agreement severely affectshow we do business,” said Glenn Hargrove, chief executive officerand president of Crump. “It worked fine for retail, but we neededto be separated. Their [MMC's] assets in Crump would not be able togrow. They were better off looking for an alternative. We pushedthe situation.”

“To be tied to any retail broker is not the best position forany wholesaler,” Mr. Hargrove continued. “There is too muchpotential for conflict and questions. It is not a good environmentto be in. The whole vertical model no longer worked.”

That's not the way events unfolded at Swett & Crawford, butthe outcome was the same.

“I was shocked when I heard about the sale,” said J. NealAbernathy, president and chief executive officer of Swett &Crawford. “But when one stood back and thought about it, it madesense. [Aon] didn't want to sell, but it was the only way torealize the full value. It turned out to be a classic win-winsituation in the corporate world.”

“My motto is independence matters,” said M. Steven DeCarlo,president and chief executive officer of American Wholesale Group,which acquired Stewart Smith Group from Willis in April of 2005.“Mr. Spitzer forced the issue. Today, it's a common theme and itmatters.”

“We saw the market coming our way, and we wanted to acquire oneof the three wholesale firms,” Mr. DeCarlo said of the purchase.“Now, all three are back to being independent wholesalers and it'stime to move on and grow.”

Despite being under the arm of Aon for years, Swett &Crawford, based in Atlanta, is considered the largest wholesalebroker in the United States. Its history can be traced back over 90years. With 750 employees and 37 offices around the country, it islooking to expand on the $3 billion in premium it booked in 2005,said Mr. Abernathy.

An investment group, Hicks, Muse, Tate & Furst Inc., andBanc of America Capital Investors put up the capital in November oflast year to make Swett an independent wholesaler once again.

“It's exciting and challenging,” said Mr. Abernathy of thefirm's newfound independence. “From a producer's standpoint, thereis a lot of excitement to being our own company and to havingprocedures in place specifically tailored to take care of ourcustomers.”

Of the relationship with Aon, he said it was a good one that thefirm continues to keep in place. But becoming independent made thefirm realize the amount of support service Aon provided over theyears.

“There were a number of challenges to making sure we could standalone,” he noted, which included creating several departments, suchas human resources and general counsel, and the transition oftechnology services to their own.

Despite these headaches, independence has given Swett theopportunity to grow and better align itself with the needs of itscustomers, both current and future ones.

“There are opportunities now that were not there for us before,”said Mr. Abernathy. “We have access to a number of new clients andfirms that would not do business with us before because we wereowned by Aon. They saw conflicts and said, 'Why should we supportone of our major competitors?'”

“No one was doing anything wrong, or doing something that wasnot in the client's best interest. It was just reality.”

After completing the transformation stage, Mr. Abernathy saidthe firm is primed for growth by expanding into new lines ofbusiness, and that reorganization of the firm into real teams willalso enhance customer relationships. And there are plans foracquisition where it makes sense, he said.

“We are in an excellent position with the potential to grow andadd people,” he pointed out. “Our position is fantastic. We are allexcited about the whole idea of being independent.”

According to the firm's biography on its Internet Web site,Crump was founded by E.H. Crump of Memphis, Tenn., as a retailinsurance agency back in 1920. Through years of growth andaffiliations, the company would eventually find itself part ofMarsh & McLennan Companies in 1998.

The Dallas-based wholesaler has 400 employees in 14 officesthroughout the U.S. and one in Bermuda.

Under the agreement with Mr. Spitzer, said Mr. Hargrove, Crumprealized its growth would be stifled and it was time to look for analternative.

That alternative came in the form of J.C. Flowers & Co.,LLC, a New York-based private equity firm who in October of 2005purchased the company from MMC.

“It was an open bidding process,” said Mr. Hargrove of the move.“Quite a few people looked at us–private equity firms and otherwholesalers. But we wanted to remain independent and viable on ourown. We selected each other and arranged for Flowers to purchase100 percent of Crump.”

The choice was made, he said, because Flowers had a track recordin the field working with other insurers, reinsurers and banks.

“It's been great so far, and a terrific relief to us,” said Mr.Hargrove.

Before the sale, Crump was suffering a little. Like Swett, therewere some markets that refused to deal with Crump because of itsrelationship with Marsh. Also, Marsh was more likely to turn toother units internally before turning to Crump. The tarnish of theMarsh fallout was beginning to affect Crump's other clientrelationships.

Since the sale, Mr. Hargrove said, customers who would not dobusiness with Crump are now welcoming the firm back. “We aregetting reacquainted with them,” he said.

Transition issues relating to human resources, informationtechnology, banking and other support sections have beenovercome.

“For all of us, this is a new experience to be independent,” Mr.Hargrove observed. “Under Sedgwick,” which owned Crump prior toMMC's acquisition of Sedgwick Ltd. of London, “we had moreindependence than under Marsh. We were running under theirobjectives, not ours.”

The main objective for Crump will be growth, pointed out Mr.Hargrove. The aim will be to round out certain product areas and toadd offices where it makes good strategic sense.

Acquisition will be in the picture, too, he added. Under Marsh,Crump was limited to acquiring agencies with over $1- or $2 millionin revenue. Now, the wholesaler has the option of acquiring smallerfirms and molding the agreements to fit its own idea of what thedeals should look like.

“We will be looking for firms that complement what we aredoing,” said Mr. Hargrove. “We are not looking for bolt-ons. Wewant someone who brings exclusive programs or expertise that we donot have.”

Since the move, the broker has hired 12 new brokers, and theexpectation is that expansion of the talent pool will continue.

Unlike Swett and Crump, Stewart Smith Group's identity has nowbeen melded into American Wholesale Group.

Back in 2003, National Underwriter profiled AmWINS while it wasstill in its nascent stage. Mr. DeCarlo was still building a firmthat at the time had 300 employees and more than $800 million inpremium volume. The company was formed in 1998 with the backing ofa group of venture capitalists who wanted to build a companythrough a group of like-minded wholesale agents and form a singlebusiness.

The Charlotte, N.C.-based firm has continued to grow, today with700 employees in 34 offices nationwide and $2.4 billion in annualpremiums.

The deal to acquire Stewart Smith was “a fabulous opportunityfor us,” said Mr. DeCarlo, which he added the firm pursuedaggressively. Completed in April of 2005, it was the first dealthat turned out to be the trend among the three major brokers todissolve their wholesale subsidiaries.

“It's a perfect niche for us,” he said. “We formed relationshipswith 70 brokers without whom we would have had no opportunity toform many new relationships with other retail brokers. We had tobring more brokers in [to grow], and along with Mark Smith asleader, the move has met all our expectations.”

Mr. Smith, who was president and CEO of Stewart Smith when itwas with Willis, is now a division president with AmWINS.

In any change, there are challenges, but the Stewart Smith dealhas gone “exactly to our expectations,” said Mr. DeCarlo. “From myown perspective, I couldn't be happier.”

What the deal does for AmWINS, he said, is to open the doorgeographically in Florida, San Francisco and Chicago. It alsoimproved AmWINS' presence in the Southeast and opened the door to awholesale relationship with Willis that was closed before.

“It was such a home run for us,” he said. “That's why we were soaggressive in moving in quickly to secure the deal.”

To Willis' credit, Mr. DeCarlo said that Joe Plumeri, Willis'CEO, was investing in Stewart Smith, and the firm was growing underWillis.

For the future, Mr. DeCarlo said he is building a wholesale firmwith a long-term future.

“We are trying to build a firm that will be around for the next150 years.”

SWETT & CRAWFORD

Years In Business: Over 90

Employees: 750

Offices: 37

Premium Volume: $3 billion in 2005

Former Parent: Aon Corp.

Buyers: An investment group led by Hicks, Muse, Tate & FurstInc. and Banc of America Capital Investors

Separation Date: Nov. 2005

CRUMP GROUP

Years In Business: Over 80

Employees: 400 employees

Offices: 14 U.S. offices, and one in Bermuda

Former Parent: Marsh & McLennan

Buyer: J.C. Flowers & Co., LLC, a New York-based privateequity firm

Separation Date: Oct. 2005

AmWINS

Year In Business: 3

Employees: 700 employees

Offices: 34 offices nationwide

Premium Volume: $2.4 billion

Acquired: Stewart-Smith Group from former parent Willis GroupHoldings

Acquisition Dates: Announced Feb. 2005; completed April2005.