Montreal-based BMO Capital Markets Corp. is expanding its insurance investment banking business in the United States through the reunion of two former Salomon Smith Barney industry specialists.

In September BMO hired Bank of America Merrill Lynch's Scott Littlejohn as a managing director in charge of its new U.S. insurance investment banking business and James MacNaughton, most recently a senior adviser to the Federal Reserve Bank of New York, as vice chair of U.S. investment and corporate banking. Both are based in BMO's New York office.

Littlejohn, 48, was a managing director in BofA's insurance investment and corporate banking group and headed BofA's corporate and investment banking insurance practice before it bought Merrill Lynch. Before joining BofA in 2007, Littlejohn spent 15 years at Salomon Smith Barney, where he started his career after receiving an M.B.A. from New York University's Stern School of Business in 1992. Three years later, he was recruited into its insurance group by MacNaughton, who took charge of Salomon's financial institutions group M&A department in 1997.

MacNaughton, a 21-year Salomon veteran, left the firm in 2001 to head Rothschild's FIG group. He departed from that firm in 2008 and a year later took on an advisory role to the New York Fed, which was still dealing with its bailout of giant insurer American International Group Inc. MacNaughton was recruited to BMO by Littlejohn, who says the firm plans to target specialty and regional property and casualty insurers and reinsurers -- a segment he says is underserved by the larger U.S. investment banks, which focus mostly on sizable multinational insurance companies.

Also joining BMO is U.S. insurance group vice president Phil Enan from Piper Jaffray & Co.'s FIG. BMO is in the process of adding an insurance research analyst and a corporate banker.

While MacNaughton's specialty is insurance, he also plans to help BMO expand its overall U.S. FIG coverage to perhaps include asset management and online financial services. "For all [financial services] companies midmarket and up, if we don't have it now, we will eventually have breadth," he says.