New Merger Shrinks Ranks of Insurers as Trend Sweeps Sector

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New Merger Shrinks Ranks of Insurers as Trend Sweeps Sector

By LAURENCE DARMIENTO

Staff Reporter

Dodge Warren & Peters Insurance Services Inc., one of L.A.’s largest independent brokerages, is being acquired by U.S.I. Holdings Corp., the latest in a series of mergers and acquisitions in the consolidating industry.

The deal, expected to close by March 31, will join 27-year-old DWP, the county’s ninth largest brokerage, with U.S.I., which was founded 10 years ago and already generated $355 million in revenue last year through an aggressive, national acquisition strategy.

“This has been a highly fragmented industry, and there has been a lot of consolidation,” said Dave Eslick, U.S.I.’s chairman and chief executive. “There is opportunity for growth.”

Headquartered in Briarcliff Manor, N.Y., U.S.I. already has a regional office in Sherman Oaks, and the $50.1 million revenue of the combined local operations would have placed it fourth on the Business Journal’s list of largest brokerages.

Other notable acquisitions include the 2001 purchase of Armstrong Robitaille Insurance Services of Fullerton by Union Bank of California, based in San Francisco, and the 2002 purchase of James Econn & Co. of Los Angeles by Guaranty Financial Services, a Texas-based bank.

For years, shops with less than $1 million in annual revenues dominated the insurance brokerage industry, but that began to change over the past decade or so. The consolidation is driven by the preference of carriers to deal with fewer and larger brokerages.

“It’s just cheaper and more efficient to work with fewer and larger distribution channels,” said Thomas Linn, a senior vice president at the Laguna Beach office of Marsh Berry & Co., a consulting firm.

Another factor: Financial institutions have increasingly provided one-stop shopping for a variety of services, causing companies such as Union Bank to start acquiring brokerages.

There’s also the increasing use of expensive information systems that smaller brokerages may not be able to afford, and the consolidation strategy of several national brokerages, such as Brown & Brown Inc. and U.S.I., targeting middle market companies,

U.S.I. now has 63 offices in 20 states. Eslick said acquiring Dodge would allow a wider array of services in the Los Angeles area.

Randall Mallory, chief financial officer for Dodge, said the brokerage has focused on workers’ compensation, but it has had a difficult time growing its group benefits business, a strength of U.S.I.’s local office. “We will be able to service more markets and provide better service,” he said.

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