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Truist (TFC) to Divest 20% Stake in Insurance Arm for $1.95B
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Truist Financial (TFC - Free Report) has announced an agreement to divest 20% stake in its subsidiary – Truist Insurance Holdings ("TIH") – to Stone Point Capital, in partnership with co-investors, including Mubadala Investment Company, for $1.95 billion. The cash deal, which values TIH at $14.75 billion in aggregate, is expected to close in the second quarter of 2023. The agreement is still subject to customary closing conditions and regulatory approvals.
Upon completion of the transaction, TFC will hold 80% of TIH (currently the sixth-largest insurance brokerage in the country). Also, a five-person board will be constituted to oversee TIH, with four members being appointed by Truist and one by Stone Point. Notably, the deal doesn’t include TIH’s premium finance business.
Bill Rogers, Chairman and the CEO of TFC, said, “We are excited for this collaboration with Stone Point, as the investment demonstrates the significant value of Truist Insurance Holdings and strategically positions it, and Truist, for long-term success.”
In 2022, TIH (excluding premium finance business) comprised 35% of Truist’s total fee income and 8% of adjusted net income available to common shareholders. Further, over the last five years, TIH witnessed approximately 8% organic growth on average.
The transaction is financially attractive as well. Truist’s consolidated CET1 ratio is expected to increase 32 basis points. While the company anticipated the transaction to be nearly “neutral to net income available to common shareholders and earnings per share,” it will be accretive to earnings over time.
TIH Chairman and CEO John Howard commented, “We operate in an attractive, growing, and dynamic industry in which scale is critical to remain competitive. With Stone Point’s industry expertise and role as a capital partner, we will be strategically positioned for long-term success and growth as we continue expanding our portfolio and investing in innovative digital solutions.”
Our Take
Truist has been undertaking several measures, including acquisitions, to strengthen TIH businesses. In sync with this, in the past couple of years, it acquired BankDirect Capital Finance, BenefitMall, Kensington Vanguard National Land Services and the insurance distribution platform Constellation Affiliated Partners.
Hence, the above-mentioned deal is an attractive proposition that will further enhance shareholder value and unlock value for TIH.
Over the past three months, shares of Truist have rallied 5.1%, outperforming the industry’s growth of 2.9%.
Amid a challenging operating backdrop due to expectations of economic slowdown, banks are undertaking expansion moves through acquisitions. Recently, Bank of Montreal (BMO - Free Report) announced the closure of its acquisition of Bank of the West from BNP Paribas (BNPQY - Free Report) .
With this deal, BMO expands its presence across more than 500 additional branches and commercial and wealth offices in major U.S. growth markets. For BNPQY, the sale is part of its efforts to streamline operations and enhance operating efficiency.
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Truist (TFC) to Divest 20% Stake in Insurance Arm for $1.95B
Truist Financial (TFC - Free Report) has announced an agreement to divest 20% stake in its subsidiary – Truist Insurance Holdings ("TIH") – to Stone Point Capital, in partnership with co-investors, including Mubadala Investment Company, for $1.95 billion. The cash deal, which values TIH at $14.75 billion in aggregate, is expected to close in the second quarter of 2023. The agreement is still subject to customary closing conditions and regulatory approvals.
Upon completion of the transaction, TFC will hold 80% of TIH (currently the sixth-largest insurance brokerage in the country). Also, a five-person board will be constituted to oversee TIH, with four members being appointed by Truist and one by Stone Point. Notably, the deal doesn’t include TIH’s premium finance business.
Bill Rogers, Chairman and the CEO of TFC, said, “We are excited for this collaboration with Stone Point, as the investment demonstrates the significant value of Truist Insurance Holdings and strategically positions it, and Truist, for long-term success.”
In 2022, TIH (excluding premium finance business) comprised 35% of Truist’s total fee income and 8% of adjusted net income available to common shareholders. Further, over the last five years, TIH witnessed approximately 8% organic growth on average.
The transaction is financially attractive as well. Truist’s consolidated CET1 ratio is expected to increase 32 basis points. While the company anticipated the transaction to be nearly “neutral to net income available to common shareholders and earnings per share,” it will be accretive to earnings over time.
TIH Chairman and CEO John Howard commented, “We operate in an attractive, growing, and dynamic industry in which scale is critical to remain competitive. With Stone Point’s industry expertise and role as a capital partner, we will be strategically positioned for long-term success and growth as we continue expanding our portfolio and investing in innovative digital solutions.”
Our Take
Truist has been undertaking several measures, including acquisitions, to strengthen TIH businesses. In sync with this, in the past couple of years, it acquired BankDirect Capital Finance, BenefitMall, Kensington Vanguard National Land Services and the insurance distribution platform Constellation Affiliated Partners.
Hence, the above-mentioned deal is an attractive proposition that will further enhance shareholder value and unlock value for TIH.
Over the past three months, shares of Truist have rallied 5.1%, outperforming the industry’s growth of 2.9%.
Image Source: Zacks Investment Research
Currently, Truist carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Expansion Efforts by Other Banks
Amid a challenging operating backdrop due to expectations of economic slowdown, banks are undertaking expansion moves through acquisitions. Recently, Bank of Montreal (BMO - Free Report) announced the closure of its acquisition of Bank of the West from BNP Paribas (BNPQY - Free Report) .
With this deal, BMO expands its presence across more than 500 additional branches and commercial and wealth offices in major U.S. growth markets. For BNPQY, the sale is part of its efforts to streamline operations and enhance operating efficiency.