Wells Fargo & Co.

150 N. Michigan Ave., Suite 4100

Chicago, Ill. 60601;

312-423-2500; fax: 312-423-2508

www.acordia.com

www.wellsfargo.com

Three years after Wells Fargo & Co.'s 2001 acquisition of Acordia Inc., the Chicago-based broker's integration into its parent company's operations seems to have been realized, with both poised to reap the benefits of the relationship.

"Acordia was the largest bank acquisition in our industry and continues to be," said Kevin W. Conboy, Acordia's president and CEO. "I think a lot of people were looking at how Wells would handle the integration and the business plan of Acordia."

Three years on, however, "I think Wells has been the best owner we've ever had," Mr. Conboy said.

"We're in 83 different business lines," said David J. Zuercher, executive vp & head of the International, Correspondent Banking and Insurance Services Group at San Francisco-based Wells Fargo & Co. "What we're trying to do is develop a core competency in insurance brokerage and employee benefits," he explained.

"One of our strategic initiatives is to sell eight different products or services to every customer," Mr. Zuercher said. "So insurance becomes a big part of that equation because insurance is something every customer needs."

Acordia is "continuing to become more integrated with the bank and the bank's customer base," the Wells Fargo executive said. "We've made a lot of progress in the last 18 months or so."

"And Wells wants to be a bigger player in the business," added Mr. Conboy. "So our game plan is to continue to grow and build Acordia."

After operating briefly as a subsidiary of Wells Fargo Insurance Inc., the parent company reorganized its insurance operations late in 2001, returning Acordia's headquarters to Chicago where it operates as a wholly owned Wells Fargo subsidiary.

"It took some time for them to organize themselves within Wells Fargo and to refine their business model, and I think they, in fact, have accomplished that," said John W. Wicher, principal at insurance industry investment bank John Wicher & Associates Inc. in San Francisco. "It takes a while and you have to work at it to make it work. And they have."

Underscoring Acordia's integration into Wells Fargo, the companies have moved to report the results of all of Wells Fargo's insurance operations in a single combined fashion, including both Acordia and St. Louis Park, Minn.-based Wells Fargo Insurance Inc. Last year, Wells Fargo was still reporting the brokerage units' revenues separately.

The 2003 brokerage revenue for Wells Fargo & Co. of nearly $800.5 million was up 14.8% from 2002, placing Wells Fargo fifth among Business Insurance's ranking of the world's largest brokers.

While Acordia made a number of acquisitions in 2003, most of them occurred late in the year. Consequently, organic growth was the main driver of revenues for the company in 2003, according to Mr. Conboy, and the impact of the acquisitions will give a boost to the broker's 2004 figures.

Acquisitions in 2003 included the Pate Insurance Agency in Homer, Alaska; excess and surplus lines broker RMC2 L.L.C. of Chicago and West Palm Beach, Fla.; Care Insurance Services of Omaha, Neb.; Wisenberg Insurance & Risk Management of Houston; McDermott Brokerage Inc. in Omaha; Goodritz-Emanuel Insurance in Bala Cynwyd, Pa.; and Malenas Insurance Agency in Cleveland.

Acquisitions made so far this year have included Feeney Durler West Insurance Services L.L.C. in Santa Rosa, Calif.; Seattle-based Sacia Risk Solutions; Baldwin & Whitney in Dayton, Ohio; and Speare & Co. in Encino, Calif.

"Just like all of our competitors, acquisitions are a major part of our business plan," Mr. Conboy said. Acordia takes a disciplined approach to its acquisitions, however.

"Buying revenue for the sake of buying revenue has never been a good strategy," Mr. Conboy said. Instead, the broker looks for appropriate fits in terms of business and culture while focusing on opportunities not only within Wells Fargo's territorial footprint but also elsewhere in the country as acquisition possibilities emerge that fit with Acordia's overall marketing plan.

"They're as good as anybody on the street in rolling out their selective acquisition strategy," said Timothy J. Cunningham, principal at Chicago-based OPTIS Partners L.L.C. And when the broker acquires successful producers, it integrates them into the organization in a way that allows them to continue doing what it was that made them successful, he said.

Acordia embarked on several new initiatives in 2003.

"We started an alternative risk group last year headed by (Vp) Mark Green, and Mark and his team have done a good job of developing skill sets and new products for those customers looking at alternatives," Mr. Conboy said.

"We've seen probably 50 different customers or prospects in the past six months who've wanted to look at that," Scott R. Isaacson, Acordia's senior vp and chief marketing officer, said of the broker's ART activities. Acordia also is seeing significant interest in finite risk deals, Mr. Isaacson said.

Meanwhile, a Risk Finance Group started in 2003 focuses on errors and omissions, directors and officers, employment practices liability and environmental risks. "That's been a huge success," Mr. Conboy said.

The company's Acordia Re intermediary operation, which was launched in late 2002, has "turned out to be a very good business for us," Mr. Conboy said. "We just picked up some significant business in Latin America; in particular, Brazil."

And American E&S, Acordia's excess and surplus lines broker, had "outstanding results in 2003," the Acordia president and CEO said.

The broker's employee benefits operations also have been successful, Mr. Conboy said, and the company anticipates opening "one or two offices in the western part of the country."

On the workers compensation front, Acordia expects primarily to continue pursuing business opportunities in the mid-Atlantic and Southeast regions, he said.

Acordia intends to continue its mid-market focus, which fits well with that of its parent company.

Wells Fargo focuses on mid-market companies, and "Acordia, then, is a perfect fit, because Acordia is the most prominent player in the United States in that market," Wells Fargo's Mr. Zuercher said. "We clearly understand who we are and we stay focused on markets and products that we're very good at."

The approach is a good one in the current market, according to Mr. Wicher, the investment banker. "Where we are in the cycle is probably a good time to be Acordia, with a large number of small to midsize clients, not necessarily in major urban areas," he said.

"It's a big market," said Mr. Conboy. "There's a finite number of Fortune 500 customers out there."

And Acordia also plans to maintain its decentralized management approach, a style also in step with its parent, allowing operational authority to remain close to the customer and an entrepreneurial spirit to thrive.

"They're fairly decentralized, so a lot of the management responsibility remains out in the field," said Mr. Cunningham of OPTIS.

"Our play is to be out there close to our customers, understand their needs and then have corporate resources that we can call on when the need arises," Mr. Isaacson said. He conceded that with a more centralized approach "you can find efficiencies." But, he said, "We think it's more important to stay close to the customer and truly understand their needs."

As some of its customers look to do business abroad, Acordia continues to offer clients services in more than 90 countries around the world through HLA Global, the international network it formed in 2001 with London-based broker Heath Lambert Group Ltd.

Wells Fargo & Co.'s stock is traded on the New York Stock Exchange. It closed at $57.02 on July 9, and during the 52-week period ending then saw a high of $59.72 and a low of $48.90.