Wells Fargo Shoots For Insurance Growth

Ever since the breakup of the Citicorp-Travelers marriage–the merger that had prompted passage of federal financial services modernization legislation in late 1999–banks have shown little interest in underwriting insurance risk, instead choosing to profit from its sale and distribution.

Wells Fargo has no plans to challenge that equation. "I am not really excited about the carrier aspect of the business," he said. "But I am very interested in the distribution–that is, meeting with customers and filling their needs."

Historically, low risk of returns for the underwriting end of the business has kept Wells Fargo and its counterparts from rushing into the supply side of the insurance industry, along with what has been described as bankers' different views of risk as opposed to that of insurers.

Mr. Wissinger comes to the insurance field primarily from the mortgage lending world, having served as president and CEO of Wells Fargo Home Mortgage. He joined the company in 1984 when he became vice president and store manager for Norwest Mortgage 14 years before its merger with Wells Fargo.

In June of 2004, Mr. Wissinger took on his current role as head of the bank's retail insurance business, along with overseeing its managing general agency, which specializes in crop insurance.

Wells Fargo's 15-million strong customer base will serve as the perfect launching pad for it to become a top player in the commercial brokerage field, the company believes, but there is still quite a row to hoe.

Last year, Wells Fargo ranked as the world's fifth-largest insurance brokerage, with $943.7 million in 2004 brokerage revenues derived from Wells Fargo Insurance–compared to the world's number-one brokerage, Marsh, with revenues of $10.4 billion in the same period.

"When you think of Wells, it is 82 different businesses, not just banking, so we work with all those businesses and customer bases to offer insurance," Mr. Wissinger explained.

The mortgage and home equity group could be a source of homeowners' insurance referrals, while the small-business banking section could serve the same need for businessowner policies at Acordia, he noted.

"Our goal is to supply all of our customers with their insurance needs, so we will continue to grow our outreach efforts to the 15 million Wells customers," he said.

While Wells Fargo's banking operations are not in all 50 states, its insurance operations do reach that scale through its mortgage company and other businesses.

Even though Acordia's current focus is on the middle market, Mr. Wissinger sees no reason why the brokerage could not also serve the Fortune 500 companies usually thought to be the province of Marsh, Aon and Willis.

"Why wouldn't we go after them?" he said. "Our focus is on meeting with customers, counseling them on their insurance needs and filling them, whether it is business or individual customers, and that is where we would like to be number one."

Wells Fargo has tried a number of branding strategies over the years. Shortly after the 2001 acquisition, Wells Fargo moved Acordia to St. Louis Park, Minn., and began integrating it with Wells Fargo Insurance, the company's personal lines operation.

However, after a six-month integration experiment, Acordia regained its independence as a wholly-owned subsidiary and moved back to its current headquarters in Chicago.

While Mr. Wissinger's appointment would indicate a stronger integration between the two units, there is no effort now to go back to the strategy first employed five years ago.

Acordia is looking to grow not only organically through tapping the bank's 14,000 wholesale bank customers and 140,000 small-business banking clients, but also via acquisitions. "We have been pretty aggressive. Last year we did about 15 deals," he noted.

Cross-selling will remain a key to the bank's growth in all business areas. "We are the largest direct consumer mortgage lender in the country. You can't get a mortgage loan without homeowners insurance, and we can help them," he said.

The recent controversies in the brokerage sector over compensation issues have not touched Acordia in any way. "Our business model has not changed. We did not do the things other companies were accused of," he said. "We have gone and looked and double-checked all of our systems and processes."

However, neither has the company been able to exploit that fact in attracting potentially disillusioned clients from the bigger brokerages that were caught up in the contingency fee and bid-rigging scandal. "It's just business as usual for us," he said.

Robert Lieblein, managing principal of WFG Capital Advisors in Harrisburg, Pa., said the challenges Wells Fargo faces in growing its insurance revenues stem from melding two different types of business.

"You are taking the Wells Fargo business, which is what I would call more transactional, and trying to integrate that business and build the synergies and the cross-sell with the Acordia side of the business, which is relationship-oriented," he said.

People in the insurance business, when they think of Wells Fargo, think of Acordia, "because that is what is competing with the Arthur Gallagher and the HRH, etc. of the world," he said.

Eventually all the insurance businesses will have to have one brand, even though at the outset of the marriage that might have been difficult, the company concedes. The fact that the Sept. 11 terrorist attacks hit soon after the merger put the issue of branding complexities on the back burner.

"That transition now will be much easier than before," Mr. Lieblein said.

As for their ambition to become the largest insurance broker in the country, Mr. Lieblein said: "I'm not sure how you do that without changing your business mix."

Any such goal would naturally include a merger and acquisition strategy beyond the current one of acquiring similarly-sized firms–perhaps going after one of the Big Three of Marsh, Aon or Willis.

"Wells clearly would have the capital to do it," according to Mr. Lieblein, "but I can't say I anticipate that happening."