Truist Financial Corp. said Tuesday it agreed to sell its remaining stake in Truist Insurance Holdings to an investor group led by Stone Point Capital and Clayton, Dubilier & Rice in a deal that values the insurance-brokerage business at $15.5 billion.
The deal comes at a time when banks are building up their balance sheets ahead of a potential economic downturn and as federal regulators have proposed higher capital requirements.
It’s also a further sign of interest in the insurance space from private-equity firms.
The investor group, which includes Mubadala Investment Co., is buying the fifth-largest insurance brokerage in the U.S. from Truist.
Truist
TFC,
said it will evaluate a “variety of capital deployment options” with the roughly $10 billion in cash proceeds from the deal, “including a potential balance sheet repositioning.”
Prior to any capital deployment, Truist said the deal would dilute its earnings by 20 cents a share in 2024, assuming the sale closes at the beginning of 2024 and the proceeds from the sale were reinvested in cash yielding 4.5%.
The deal is expected to close during the second quarter.
Truist’s stock was down by 0.4% in premarket trades on Tuesday.
Chief Executive Bill Rogers said the transaction “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 estimated the merger would boost its CET1 capital ratio by 2.3% and increase its tangible book value per share by $7.12 or 33%.
Clayton, Dubilier & Rice and Stone Point teamed up last August to buy Focus Financial Partners Inc., an investment adviser, for about $7 billion.
For its part, Truist is the result of a merger between the 2019 merger of BB&T and SunTrust.
Private-equity firms such as Apollo Global Management
APO,
and Blackstone Inc.
BX,
have been increasing their presence in the insurance sector in recent years to diversify and boost their assets under management.
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