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Truist Insurance sale may signal more big deals


Truist Financial Corp.’s pending sale of its insurance business to private-equity investors was widely anticipated and, coming on the heels of Aon PLC’s proposed acquisition of NFP Corp., could signal further consolidation among large brokers, experts say.

The deal — which valued Truist Insurance Holdings Inc., the world’s eighth-largest brokerage, at $15.5 billion — will also allow the brokerage to grow robustly through acquisitions with its private-equity backing, they said.

Truist said last week it has agreed to sell its remaining 80% stake in the brokerage to Stone Point Capital LLC and other investors. Last year, Stone Point acquired a 20% stake in Truist Insurance, and the sale of remaining stake had been rumored for some time.

“The sale of Truist Insurance Holdings accelerates our ability to meet increasing standards for capital and liquidity in the industry,” Mike Maguire, chief financial officer of Truist Financial, said on a call with investors last week.

The purchase price of 18 times earnings before interest, taxes, depreciation and amortization is a rich valuation for an insurance brokerage, analysts say.

“This multiple that they traded at is at or near the top of the market,” said Brian Ambrosia, director for MarshBerry Inc., a Woodmere, Ohio-based broker advisory company and mergers and acquisitions specialist.

“This is going to have a material impact on Truist’s balance sheet,” said  Timothy J. Cunningham, managing partner at Optis Partners LLC, an investment banking and financial consulting firm in Chicago. Valuations for brokerage acquisition targets remain historically high, he said, adding, “We have not seen any material diminution in valuations over the last year.”

Mr. Cunningham also noted the increased regulatory burden associated with a bank-owned insurance brokerage and that other banks with insurance operations have largely divested their brokerage operations over the past few years.

“It’s like the perfect storm coming together between all those factors, and it just makes sense to get out of the business,” Mr. Cunningham said.

Truist Insurance is the largest bank-owned insurance brokerage. Other recent sales include the second largest bank-owned insurance brokerage, Cadence Insurance Inc., part of Cadence Bank, which Arthur J. Gallagher & Co. bought for $904 million in cash in October.

As a Top 10 brokerage, Truist Insurance must continue to grow both organically and through mergers and acquisitions to remain competitive with its peers, Mr. Ambrosia said. This would require investment, something that Stone Point may be more willing and able to do than Truist Bank.

“We want to be able to lean into acquisitions and be on our front foot in a consolidating marketplace, and this deal allows us to do that,” said John Howard, chairman and CEO of Truist Insurance, in an interview.

Mr. Howard added that the move provides Truist Insurance employees with “a very significant wealth generation opportunity,” and “an opportunity to participate in the value that they create.”

The unit will shed its Truist Insurance branding, with a new name yet to be chosen, but all of the unit’s operating brands, such as McGriff Insurance Services LLC and CRC Group, will remain, Mr. Howard said.

Business referrals from Truist’s banking business will continue, he said. “The bank referrals are something that has worked well for us, and it’s worked well for the bank and everybody expects them to continue,” he said.

As the second large brokerage transaction to top $10 billion, after Aon’s December agreement to buy NFP for $13.4 billion, the Truist deal may signal further consolidation among larger brokerages, sources said.

“I think that over the next few years, you will see consolidation amongst some of the large private insurance brokers,” Mr. Howard said, in what he described as a “forward-looking statement.”

“Could one of the private-equity-sponsored firms that’s in that top 20, could they be acquired? Absolutely. Nothing would surprise me,” Mr. Cunningham said.

Mr. Ambrosia said that for 2024 “we expect to see a lot of transactions at this level with large brokers, either recapitalizing or potentially going public,” noting that private-equity investors typically seek to realize the gains on their investments.