US-based Truist to sell insurance brokerage unit to PE firms in $15.5b deal

US-based Truist to sell insurance brokerage unit to PE firms in $15.5b deal

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Truist Financial said on Tuesday it has agreed to sell its insurance brokerage business to an investor group led by private equity firms Stone Point and CD&R, in a deal valued at $15.5 billion.

Insurance has been a bright spot in an otherwise arid period for deals in the rate-sensitive financial sector over the last two years, as demand for the sector’s products remains firm in an uncertain economy.

Investment firms such as Stone Point have also offered some respite in a tough dealmaking environment which has seen companies backpedal on deals and prioritize cost cuts.

The all-cash transaction for Truist Insurance Holdings also includes investments from Mubadala Investment Company and other co-investors.

The sale is expected to be increase Truist’s CET1 capital ratio, a measure of a bank’s core liquid capital, by 230 basis points and raise its tangible book value per share by $7.12, or 33%.

The broader U.S. banking industry had until recently seen large gains from the U.S. Federal Reserve’s interest-rate hikes, aimed at controlling inflation, as they earned more on loans.

However, Truist, the seventh largest bank in the U.S. according to Federal Reserve data, reported a loss in the fourth quarter, hurt by a raft of one-time charges tied to regulatory and restructuring activities, and a fall in net interest income.

Truist said it intends to evaluate a variety of capital deployment options, including a potential balance sheet repositioning, to replace the insurance brokerage business earnings after the deal closes.

The deal, which includes debt, is expected to close during the second quarter of 2024.

Late last year, Aon agreed to buy privately held NFP, in a deal valued at about $13.4 billion, to tap the fast-growing middle-market segment of insurance brokerage, wealth management and retirement plan advisory.

Reuters

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