Terms of the deal were not released. Willis said it expects the transaction to be completed in the first quarter.

Stewart Smith writes hard-to-place, unique, and specialty coverages. Based in New York, Stewart Smith has 13 branches located in major cities across the country and produced approximately $900 million in premium placements in 2004.

AmWINS said the sale would afford it greater opportunities to develop relationships with national retail brokers while diversifying the Charlotte-based company's product offerings, geographic presence and distribution force.

The Stewart Smith acquisition would bring AmWINS' total premium placements to over $2.4 billion.

Mark Smith, president and CEO of Stewart Smith, will assume the role of president of the AmWINS Brokerage Division.

In a statement, Joe Plumeri, chairman and chief executive officer of London-headquartered Willis, said the sale is in keeping with the firm's emphasis to focus on its retail brokerage operations, strengthening relationships there while divesting itself of non-core operations.

"In American Wholesale, we have found a dynamic company committed to this important sector of our industry," he said. "In only three years, their team has built one of the most respected wholesale organizations in the country."

M. Steven DeCarlo, AmWINS president and CEO, said the acquisition expands the firm's geographic footprint in the Pacific Northwest, Midwest and Southeast.

"This acquisition strategically enhances our insurance brokerage offerings to retail agents and brokers across the country. That said, our new scale by no means replaces the importance of earning our stripes each and every day?one account at a time," he noted.

American Wholesale has received a financing commitment for this transaction from Credit Suisse First Boston.

Steven Wevodau, principal with W.F.G. Capital Advisors based in Harrisburg, Pa., called Willis action "the beginning of the industry becoming more reflective and sensitive to their position in light of the investigations of New York Attorney General Eliot Spitzer and other attorneys general. We are beginning to see and will continue to see insurance brokers returning to their roots."

Concerns about conflicts of interest over wholesale brokerage holdings have emerged because some argue the brokers could steer wholesale placements toward their in-house units, picking up commission fees there in addition to the retail commissions.

Mr. Spitzer's exposure of illicit steering agreements has so far led to nine insurer and brokerage executives pleading guilty to criminal charges related to fraud involving falsification of bids and steering accounts to certain insurers.

For AmWINS, Mr. Wevodau noted the purchase gives the wholesaler a wider geographic spread with more markets. "It makes them a very solid wholesale competitor."

Prudential Equity Group issued an analysis noting that the sale would not have a material effect on Willis' earnings. Prudential is keeping a target price of $35 a share on Willis. While Willis said the sale was to focus its business on retail brokerage, Prudential speculated that the sale was done in a continuing effort to avoid conflict of interests between retail and wholesale units.

The sale, Prudential continued, could put pressure on Marsh & McLennan and Aon to do the same with their wholesale units. Should Aon sell its wholesale unit, Swett & Crawford, it would impact earnings more than MMC selling its unit, Crump. Prudential added that it did not expect MMC to sell its wholesale unit.

Prudential said it has no material relationship or conflict of interest with the three brokers that it is aware of.