Wells Fargo Acquires Brokerage Firm - Analyst Blog

Wells Fargo Insurance Services USA Inc., an insurance unit of  Wells Fargo & Company (WFC) announced the acquisition of Prestige Professional Plans on Wednesday. Based in Dayton, Ohio, the acquired entity is an employee benefits insurance brokerage firm.

Wells Fargo closed the acquisition on December 1, 2010, but the requisites of the transaction were not disclosed.

Since 25 years, the employee benefit insurer provides individuals and business firms with employee benefits consulting and brokerage services including medical, dental, life, vision, disability and other health insurance plans. Further, the firm offers various plans including fully-insured plans, self-funded plans, high deductible health plans and health savings accounts (HSAs).

Wells Fargo Insurance Services is the fifth largest insurance brokerage in the world and the largest bank-owned insurance brokerage in the U.S., with more than 200 offices in 37 states. It has 9,200 insurance professionals which places more than $16 billion of risk premiums with experience in property, casualty, benefits, international, personal lines and life products.

Working jointly with Wells Fargo Insurance Services, Prestige Professional Plans will expand its capabilities to better serve customers and help them protect their businesses and employees. The customers will be accessed to more financial services and products.

The partnership between the two firms will strengthen the presence of Wells Fargo in Ohio and will help customers to gain financially. The acquisition will open up new options for the customers and will be provided with fully integrated financial and insurance solutions for their businesses.

Further, customers' satisfaction will generate more customers for Wells Fargo, which in turn, will lead to business growth. The synergies of the acquisition might be reflected in the upcoming quarter's earnings. Currently, Zacks Consensus Estimate is 60 cents for fourth quarter and $2.22 for fiscal year 2010.

Two of Wells Fargo's closest competitors – Citigroup Inc. (C) and Bank of America Corporation (BAC) – are expected to release fourth quarter results in the third week of January 2011.

We believe with its diverse geographic and business mix, Wells Fargo is well positioned compared to its peers. The Wachovia acquisition and the demise of some smaller players helped it garner a larger share in the mortgage markets. Yet, the recent financial regulations are expected to have a negative impact on both top- and bottom-line results of the company.

We maintain our long-term Neutral recommendation on Wells Fargo. Also, the company currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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