Palmer & Cay, Inc. Business Information, Profile, and History

Company Perspectives:

Ranked as one of the nation's leading professional services firms, Palmer & Cay's mission is to provide creative solutions in the areas of insurance, risk management, employee benefits, compensation and investments. As independent advisors, we offer practical and cost-effective solutions from an unbiased perspective and our capabilities span the farthest reaches of the globe. At Palmer & Cay, our focus is on the client, first and foremost.

History of Palmer & Cay, Inc.

With co-headquarters located in Savannah and Atlanta, Georgia, Palmer & Cay, Inc. is the third largest privately held insurance brokerage in the United States. The firm offers a wide range of services, including insurance brokerage services, reinsurance services, retirement plan services, risk management consulting, risk control, surety bond services, compensation consulting, actuarial services, investment consulting services, and human resource consulting and outsourcing services. Long a regional company, Palmer & Cay has in recent years aggressively moved into new markets. The firm now has 38 offices located in 22 states and the District of Columbia. Serving as chief executive officer and chairman of Palmer & Cay is John E. Cay III, a member of the fourth generation of the family to head the firm.

Palmer & Cay's Heritage Dating to Post-Civil War Era

The lineage of the firm can be traced back to the 1868 founding of The Carswell Insurance Group, which was a key acquisition for Palmer & Cay in 1985. Like Palmer & Cay, Carswell started in Savannah, established by Confederate General Joseph E. Johnston, who at the age of 58 went into business after a long career in the military. Representing Massachusetts Life Insurance and the Royal Globe Insurance Company of London, he succeeded in building a prosperous firm that within four short years was doing business throughout Georgia, Alabama, and Mississippi. Supposedly, the ex-General personally settled insurance claims in Savannah by dispensing gold coins from the saddlebags of his horse. In 1876 Johnston retired to Virginia and left the business to others to run. John Devine Carswell, fresh out of the University of Georgia, joined the firm in 1888. By 1905 he was able to buy the company and he renamed it after himself. About ten years later the firm began to compete with an upstart Savannah agency, Palmer & Cay.

The Palmer family business began as a cotton and naval store brokerage in the 1800s. The business prospered until the end of the century, but as cotton grew less dominant in the Southern economy, Savannah became more of a shipping town and the firm was forced to adapt. In the early years of the 20th century, it focused increasingly on its naval stores as well as marine hardware. Marine insurance became a natural extension and in 1913 Armin B. Palmer, a member of the second generation to lead the family business, launched an agency to provide coverage. It was in that same year that his daughter married John Eugene "Gene" Cay, who worked as an underwriter for an Atlanta insurance company. Cay was induced to come work for his father-in-law two years later, so that in 1915 the Palmer & Cay partnership was begun.

Palmer & Cay prospered during World War I, which brought a great deal of shipping business to Savannah. After the war the firm moved beyond marine insurance, becoming involved in adding coverage to a number of industries, including railroad, construction, and manufacturing. Like the rest of the United States, Savannah enjoyed the boom times of the 1920s and when the stock market crashed in 1929, setting off the Great Depression of the 1930s, it suffered its share of bankruptcies and bank failures. Palmer & Cay scraped by until the economy recovered in the 1940s, spurred by military spending that resulted from the United States' participation in World War II. It was also during the Depression, in 1937, that a third generation went to work for the firm: John "Jack" Eugene Cay, Jr., a recent graduate of the University of North Carolina at Chapel Hill. As was the case during the first world war, the Savannah shipping industry boomed during the second world war. Not only were dozens of Liberty ships and other vessels built in the port, military installations including Fort Stewart and Hunter Field brought business to the area and Palmer & Cay benefited in equal measure.

Post-World War II Change in Leadership

Following the war, in 1947, the firm was incorporated as Palmer & Cay, Inc. Jack Cay now assumed leadership of the firm, which was dedicated to serving as a general insurance agency and brokerage, with a modicum of real estate interests. The firm now rounded out its personal and commercial insurance offerings, as well as adding employee benefits services. After a recession that immediately followed World War II, the United States enjoyed another boom time, especially in the housing market. With ex-servicemen getting married and having children at a record clip, giving rise to the Baby Boom generation, housing developments sprang up across the country to accommodate these new families. In 1951 Palmer & Cay looked to take advantage of the building explosion by launching a mortgage company. Four years later the firm added a consumer financing unit.

Starting in 1961 Palmer & Cay began to grow by external means as well. In that year it acquired a pair of area insurance agencies: the Lynes Insurance Agency and the Joseph S. Espy Insurance Agency. They would be just the first of many agency acquisitions Palmer & Cay completed over the next four decades.

The following year, 1962, brought the death of the firm's cofounder, Gene Cay, marking the end of an era. A few years later, in 1968, John Eugene Cay III graduated from the University of North Carolina at Chapel Hill and became the fourth generation of the family to join the firm. He was already well familiar with the business, having worked there during summers since he was ten years old. He would soon be called away, however, to serve in the military because of the Vietnam War. As part of the Army Reserve military intelligence unit, he served six months of active duty, then relocated to New York City, where he learned the underwriting business working for Home Insurance Company, and rounded out his education by taking graduate classes at the College of Insurance. He was just 27 years old when he returned to Savannah in 1970 and succeeded his father as Palmer & Cay's president and chief executive officer, while his father stayed on as chairman.

John Cay brought a new energy to the firm. He immediately eliminated the afternoon coffee break and named the firm's first woman vice-president, and then took steps to vigorously grow Palmer & Cay, both by opening new offices in nearby coastal Georgia and by acquiring additional agencies. But Palmer & Cay was not the only firm eager to expand: The insurance brokerage business underwent a period of consolidation, resulting in ever larger companies. By the end of the 1970s, Palmer & Cay changed course, and instead of trying to build up its business in the immediate area, it began to position itself as a regional concern. In the early 1980s Palmer & Cay moved deeper into Georgia. It opened an office in Vidalia and acquired a pair of leading agencies: the Brunswick-based Shelander-Cowden-Warwick Agency and the Robert Walton Insurance Agency in Augusta.

By 1985 Palmer & Cay reached a major turning point in its drive to become a larger player. In December of that year, the firm acquired its longtime Savannah competitor, The Carswell Insurance Group, which had eight offices in three states and annual revenues of $4.5 million. In one stroke, Palmer & Cay doubled in size and took on debt for the first time in its history. But with its increased size, Palmer & Cay was now able to enter larger markets, such as Atlanta and Jacksonville, Florida. In the second half of the 1980s, the firm strengthened its position in Jacksonville through acquisitions, and also expanded into North Carolina by opening an office in Charlotte. The decade ended on a sad note with the passing of Jack Cay. His son now assumed the chairmanship as well as chief executive responsibilities.

A key to Palmer & Cay's growth was the addition of executive talent. The Carswell acquisition brought with it a number of seasoned insurance professionals. Then in 1991 the firm was able to pry F. Michael Crowley away from Johnson & Higgins, an old-line New York company that was the leading privately held insurance services and employee benefits consulting firm in the world. Crowley brought his 17 years of experience at Johnson & Higgins to Palmer & Cay, where he now became president and took the lead in beefing up the middle management ranks to position the firm for winning and servicing larger regional and national accounts.

In the first half of the 1990s the firm continued to pursue its strategy of achieving growth through external and internal means. Palmer & Cay acquired Mitchell/Woolfolk Insurance to establish a presence in Columbus, Georgia, and later supplemented the business with the acquisition of The Jordan Agency. The following year, Palmer & Cay acquired Midyette-Moor Insurance Agency, the largest independent agency in Tallahassee, Florida, which became the firm's second Florida operation. Next, in 1994, Palmer & Cay moved into Charleston, South Carolina, by acquiring the city's largest independent insurance agency, Heffron Ingle McDowell & Cooper. Virginia was added to the mix in 1995, when Palmer & Cay opened an office in Richmond. The firm then targeted Tennessee, acquiring McMurray, Daly & Leonard, the largest independent insurance agency in Knoxville, Tennessee. By this point, Palmer & Cay had grown to become one of the 20 largest brokers in the country, involved in 15 cities in six states.

Late 1990s Diversification

In the second half of the 1990s, Palmer & Cay not only expanded its territory, it also diversified its offerings. It forged alliances with major European insurance companies and risk management firms, creating a network of independent representatives on the Continent in order to better serve clients with international scope. More important, during this period Palmer

Palmer & Cay was also active on other fronts at the close of the century. In 1999 it acquired Lexington, Kentucky-based Powell-Walton-Milward Inc., one of the oldest and largest private insurance brokers in the state. Palmer & Cay also expanded in Texas in 1999 by acquiring McDonald & Company, as well as establishing offices in Boston and Minneapolis.

As it entered the new century, Palmer & Cay operated in a rapidly changing landscape. Changes in the law blurred the lines between financial institutions and insurance companies, permitting firms to now offer a smorgasbord of banking services, investment options, and insurance products. Consolidation in the insurance industry also resulted in ever larger concerns, making it increasingly difficult for such independent regional firms as Palmer & Cay to prosper. Moreover, Palmer & Cay was receiving overtures from larger banks and brokers eager to buy the firm. Management considered the possibility of selling, but in the end concluded that Palmer & Cay should remain independent, although it would have to expand into a national player if it were to remain competitive.

Palmer & Cay developed and began implementing a strategic plan to attract new talent, expand geographically, and diversify into new areas, such as captive management and human resource outsourcing. In 2003 the firm became involved in reinsurance, establishing two entities in Connecticut: Palmer & Cay Reinsurance Brokers and Savannah Reinsurance Underwriting Management L.L.C. Also in 2003, Palmer & Cay opened or expanded brokerage offices in Chicago; Milwaukee; Philadelphia; Cleveland, Columbus, and Cincinnati, Ohio; and Detroit and Grand Rapids, Michigan. But as Palmer & Cay pursued its national ambitions, it found that it could no longer devote the kind of attention necessary to some of its local operations. Thus in 2003 Palmer & Cay sold its Augusta, Georgia, assets to Augusta's Blanchard and Calhoun Insurance Agency Inc. Palmer & Cay also found that Savannah was no longer an ideal location for a firm with larger aspirations and in 2002 management announced that it was making Atlanta its co-headquarters. It was very likely that in the near future, Atlanta would become the firm's permanent home, as Palmer & Cay started yet another chapter in its storied history.

Principal Subsidiaries: Palmer & Cay Consulting Group Inc.; Palmer & Cay Investment Services, Inc.; Palmer & Cay Select; Palmer & Cay Worksite; Palmer & Cay Reinsurance Brokers; Savannah Reinsurance Underwriting Management L.L.C.; Palmer & Cay Outsourcing Solutions.

Principal Competitors: Aon Corporation; Commerce Insurance; Marsh & McLennan Companies, Inc.

Chronology

• Key Dates:
• 1868: Carswell Insurance Group is founded.
• 1915: Palmer & Cay insurance agency is formed.
• 1970: John E. Cay, III heads Palmer & Cay.
• 1985: Palmer & Cay acquires Carswell.
• 2000: Palmer & Cay Consulting Group Inc. is formed.
• 2002: Management announces the establishment of the firm's co-headquarters in Atlanta.
• 2003: The firm enters the field of reinsurance, establishing Palmer & Cay Reinsurance Brokers and Savannah Reinsurance Underwriting Management L.L.C., both in Connecticut.