Truist selling 20% stake in insurance subsidiary for $1.9 billion

Truist Financial Corp. announced Thursday it is selling a 20% stake in its insurance subsidiary to a private-equity group for $1.9 billion.

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. The investment is expected to close in the third quarter.

Truist Insurance Holdings Inc. is the sixth-largest U.S. insurance brokerage with more than 250 offices nationwide and more than 9,000 employees, or about 17% of Truist's overall workforce of 53,999 as of Dec. 31.

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

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

Bill Rogers, Truist's chairman and chief executive, said in a statement that selling the 20% stake to the investment coalition "demonstrates the significant value of Truist Insurance Holdings and strategically positions it, and Truist, for long-term success."

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.

"The transaction allows Truist to maintain strategic flexibility and future upside in Truist Insurance Holdings, which will continue to benefit from Truist's operations, access to capital and client relationships," Rogers said.

Rogers said the bank chose Stone Point in part because it "brings deep industry expertise to help accelerate Truist Insurance Holdings' growth."

There has been recent speculation among banking analysts, most notably Mike Mayo with Wells Fargo Securities, that Truist would look to "monetize some of the unrealized value" within the insurance subsidiary for the benefit of shareholders.

Rogers said in response to Mayo's question during the Jan. 19 fourth-quarter analyst call that he could not comment on rumors.

"I can comment on the fact that we really like the insurance business," Rogers said at that time. "We've been supporting the insurance business from acquisitions.

In March 2022, the Trust insurance subsidiary bought Kensington Vanguard National Land Services, one of the country's largest independent full-service national title insurance agencies. Terms were not disclosed.

Rogers said on Jan. 19 the insurance subsidiary has been able to grow successfully through internal means, as well as through acquisitions.

The bank and the insurance subsidiary have completed more than 100 acquisitions in the sector.

"It's also a consolidating business," Rogers said.

Stone Point chief executive Chuck Davis said 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."

As part of the transaction, Truist will form a five-member board of directors for the insurance subsidiary consisting of four representatives from the bank and one from Stone Point.

Truist reported on Jan. 19 a 5.6% uptick in fourth-quarter net income to $1.61 billion.

For fiscal 2022, net income was $5.93 billion, down 1.8% from fiscal 2021.

Truist's community/retail banking hub is in Winston-Salem.

Truist overall is the seventh-largest U.S. commercial bank at $552.96 billion as of Dec. 31.