Reports: Truist may sell remainder of insurance unit

Truist completed on April 3 selling for $1.95 billion a 20% stake in Truist Insurance Holdings Inc. to funds managed by Stone Point Capital.

Truist Insurance Holdings is the sixth-largest U.S. insurance brokerage with more than 250 offices nationwide and more than 9,000 employees, or 17.1% of Truist's overall workforce of 52,564 as of June 30.

That transaction excludes an ownership stake in Truist Insurance Holdings' premium finance business.

The bank said Feb. 16 the sale price of the 20% stake values the whole insurance subsidiary at $14.75 billion.

Using that projection as a guideline, several banking industry media reports, first from Semafor.com, projected the $10 billion cost to buy the other 80%.

Truist said Tuesday it does not comment "on rumors or speculation."

Funds managed by Stone Point Capital, which is focused on the global financial services industry, are the primary acquirer of the 20% stake, along with Mubadala Investment Co. and other investors.

"This investment is a testament to the quality and success of Truist Insurance Holdings and our teammates," Truist chairman and chief executive Bill Rogers said in an April 3 statement.

"We look forward to continuing our longstanding relationship with Stone Point to grow our insurance business and further deepen our partnerships with clients and the communities we serve, while also preserving significant strategic and financial flexibility in the business."

Insurance, as has been the case with Truist and legacy BB&T Corp. for several years, was the bank's top fee-revenue producer for fiscal 2022 at $3.04 billion, up 15.8% over fiscal 2021.

By comparison, the next largest fee-income producer was wealth management income at $1.34 billion.

During the second quarter, Truist reported $925 million in insurance revenue, up 13.8% from the first quarter and up 13.3% year over year.

Stone Point chief executive Chuck Davis said in April that the firm sought the 20% stake primarily because the Truist insurance subsidiary "is a scaled, diversified U.S. retail and wholesale insurance distribution platform that has experienced strong growth both organically and through a disciplined acquisition strategy."

Janney Montgomery Scott analyst Chris Marinac said in April that "selling a great business at a possible peak multiple may not be effective to improving Truist's enterprise-wide valuation despite the positive sum-of-the-parts disclosure."

"Investors care more about rising earnings, and less about the capital benefit."

Marinac said Truist may have wanted the additional capital "to cover loss absorption" under the Federal Reserve's 2023 Stress Test submission.

The potential sale of all of Truist Insurance Holdings comes as Rogers said on Sept. 11 that it is undergoing a "sizable reductions in force" over the next 12 to 18 months that will represent at least $300 million in annual workforce cost-cut savings.

Truist has declined to comment on specific job-cut projections, and when and where they would take place.

A "sizable reduction in force" could be between 1,500 and 2,000 employees, projected Tony Plath, a retired finance professor at UNC Charlotte.

The bank disclosed plans for an overall $750 million annual cost reduction before a presentation at a Barclays Global Financial Services Conference by Rogers and chief financial officer Mike Maguire.

Rogers told analysts and investors that Truist is "aggressively cutting costs ... many achieved through near-term personnel-related reductions" over the next three quarters.

After the Barclays presentation, Truist released a statement in which it said "we regularly assess streamlining opportunities for our organization and make adjustments to meet client needs effectively and efficiently. As we continue to transform Truist to focus on our strengths and drive long-term growth and profitability, we're hiring in some areas and rightsizing in others through natural attrition and planned staffing reductions."

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