US commercial bank Truist Financial Corporation (Truist) has confirmed it is selling its remaining stake in subsidiary Truist Insurance Holdings (TIH) to investors led by private equity firms Stone Point Capital and Clayton, Dubilier & Rice. The confirmation comes following reports that Truist was nearing a deal.
Announcing the definitive agreement, Truist said: “The all-cash transaction values TIH at an implied enterprise value of $15.5 billion or approximately 18x TIH’s 2023 core EBITDA (earnings before interest, taxes, depreciation, and amortization).
“The sale of TIH is expected to increase Truist’s December 31, 2023, CET1 (Common Equity Tier 1) capital ratio by 230 basis points and increase its tangible book value per share by $7.12 or 33%.
“The sale of TIH and reinvestment of the $10.1 billion of expected cash proceeds are estimated to be $0.20 dilutive to 2024 earnings per share, assuming the sale closed at the beginning of 2024 and the proceeds from the sale were reinvested in cash yielding 4.5%.”
When its divestment is finalized, Truist plans to evaluate capital deployment options, including a potential repositioning of its balance sheet to replace earnings from the offloaded insurance brokerage.
“We are pleased to have reached an agreement to sell TIH as it will further strengthen our balance sheet, afford us the ability to maintain our earnings profile, and create significant ongoing flexibility to invest in our core banking franchise,” Truist chair and chief executive Bill Rogers commented.
“We are incredibly proud of the success we’ve achieved together with TIH over the years and are excited to see how Stone Point and CD&R continue to build the business in its next chapter of growth.”
TIH, the sale of which has been approved by Truist’s board and is expected to be completed in the second quarter, is described as the fifth-largest insurance brokerage in the US.
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