Wachovia To Buy Brokerage Firm Palmer & Cay

"While many of our competitors are shedding business lines and are focused on their internal issues, we are investing and growing our business and are focused entirely on the client," said Stewart McDowell, president and chief executive officer of Wachovia Corp.' insurance brokerage unit, Wachovia Insurance Services.

"In today's environment, clients are seeking professional service firms that look new and different from the traditional mega-broker model," he added.

The two companies said their transaction is scheduled to be completed during next three months.

The Charlotte, N.C.-based Wachovia Corp. is the country's fourth-largest banking firm, and its insurance brokerage unit is ranked as the eleventh-largest U.S. broker, with some $250 million in revenues, the company reported.

The Savannah, Ga.-based Palmer & Cay is ranked the fifteenth-largest broker and the third-largest privately held broker in the country, with about $150 million in revenues and 950 employees, the firm said. Established in 1868, Palmer & Cay is also one of the oldest brokerage firms in North America.

The transaction will give a "critical mass" to Wachovia's brokerage unit, with $400 million of combined annual revenue and about 1,800 employees, according to the company. Wachovia Insurance Services, with the acquisition of Palmer & Cay, is expected to become the tenth-largest broker in the country.

Wachovia said Stewart McDowell, president and CEO of Wachovia Insurance Services, will continue in his current role. John Cay III, Palmer & Cay's chairman and CEO who is the fourth generation in his family to serve as the firm's top executive, will become chairman of Wachovia Insurance Services.

Mr. McDowell told National Underwriter that this deal represents a "natural evolution" since Wachovia Insurance Services has been steadily acquiring a number of brokers in recent years. "We have done about 10 or 12 smaller transactions in last five years. So the Palmer & Cay transaction is a natural next step for us," he said.

Mr. McDowell also pointed to geographical and strategic reasons for the acquisition. "Over the years Palmer & Cay has built resources and practice groups, specialized expertise and industry niches that we can capitalize on," he said.

Palmer & Cay will also "fill holes" in about a dozen major markets in the East Coast to help Wachovia continue cross-sell efforts. Mr. McDowell noted the addition of Palmer & Cay will boost Wachovia's property-casualty and employee benefits capabilities while enhancing market coverage on the East Coast, and in the Midwest and Southwest.

"It's also a critical-mass play. We now break into the top-ten rank of U.S. insurance brokers," Mr. McDowell said.

Mr. Cay from Palmer & Cay added that the transaction is also a great win for his clients, who will now benefit from added resources that the combined business brings to the table. "We felt that for our clients and our employees this was an excellent strategic and cultural fit," Mr. Cay said.