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People's United Closes Divestiture of PUIA to AssuredPartners

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People’s United Financial’s (PBCT - Free Report) banking subsidiary People's United Bank completed the divesture of People's United Insurance Agency (“PUIA”) to AssuredPartners. The all-cash deal worth $120 million was announced this September.

The divested unit operated as a full-service insurance brokerage and insurance firm for People’s United. It offered commercial and personal, along with employee-benefit insurance solutions.

AssuredPartners acts as an independent insurance agency involved in acquiring and investing in insurance brokerage businesses across the United States and the U.K. It offers property & casualty, risk management and personal insurance along with employee benefits.

The agreed purchase price as announced in September was a 3.7x multiple of last 12 months’ revenues. Notably, with this transaction, People's United will get free resources that can be used effectively, otherwise would have been invested in PUIA.

Therefore, with this divestiture, People's United aims to focus on core banking services enhancing digital products across commercial, retail and wealth management businesses.

Our Take

People’s United continues to benefit from a healthy business portfolio that has grown inorganically over time. Since 2016, the company has maintained its acquisition spree, fortifying footprint in various areas. Also, it has diversified its revenue sources, which are likely to keep supporting the bank’s financials. Therefore, the current divestiture is likely to further enhance its profitability.

However, persistent pressure on margins from low rates and escalating expenses might restrict its bottom-line growth in the near term.

Shares of People’s United have gained 7.5% over the past three months compared with the 9.8% rally of the industry.

Currently, People’s United carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amid the coronavirus pandemic-induced economic slowdown, several financial firms are undertaking initiatives to focus on core businesses. In July, Hilltop Holdings Inc. (HTH - Free Report) concluded the sale of its wholly-owned subsidiary — National Lloyds Corporation — to Align Financial Holdings, LLC.

At the end of August, Midland States Bancorp, Inc. (MSBI - Free Report) divested the commercial FHA origination platform to Dwight Capital, a nationwide mortgage banking firm based in New York. Also, CIT Group (CIT - Free Report) sold the trust and wealth advisory business to Sunflower Bank, N.A., a subsidiary of Denver, CO-based FirstSun Capital Bancorp.

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