NU Online News Service, Oct. 27, 2004, 3:45 p.m. EDT
Recent investigations into broker fee practices ultimately may help spur acquisitions in the insurance broker industry, says investment banker WFG Capital Advisors.[@@]
WFG, in Harrisburg, Penn., disagrees with speculation by some observers that the recent investigations by New York Attorney General Eliot Spitzer and others would have a long-term effect on mergers and acquisitions in the industry.
“The Eliot Spitzer cases may temporarily slow industry consolidation,” Robert Lieblein, a managing principal of WFG, says. “But our firm belief is that when there is so much scrutiny placed on contingent, wholesale and reinsurance commissions being funneled back to the retail segment. . . acquisitions will actually have to play a larger role in many firms’ growth. We believe that the prospective rate of consolidation will be even greater than before, especially in light of little or no change in product pricing.”
WFG says its analysis of top brokers found they recently have pursued an aggressive acquisition campaign to achieve revenue and profit goals.