Truist Financial reached a definitive agreement to sell its remaining stake in Truist Insurance Holdings (TIH), a subsidiary of Truist and the fifth largest insurance brokerage in the U.S., to an investor group led by private equity firms Stone Point Capital and Clayton, Dubilier & Rice (CD&R). Mubadala Investment Company and other co-investors are also participating in the investment.

The all-cash transaction values TIH at an implied enterprise value of $15.5 billion or approximately 18 times TIH’s 2023 core EBITDA. The sale of TIH is expected to increase Truist’s Dec. 31, 2023, CET1 capital ratio by 230 basis points and increase its tangible book value per share by $7.12 or 33%. The sale of TIH and a reinvestment of $10.1 billion of expected cash proceeds are estimated to be $0.20 dilutive to 2024 earnings per share for Truist, assuming the sale closes at the beginning of 2024 and the proceeds from the sale are reinvested in cash yielding 4.5%. Following closing, Truist intends to evaluate a variety of capital deployment options, including a potential balance sheet repositioning with a goal of replacing TIH’s earnings. Any future actions would be subject to market conditions and other factors.

“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,” Bill Rogers, chairman and CEO of Truist, said. “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.”

“Today’s announcement is a testament to our strategy, the value of our insurance business, and the strength and dedication of our teammates,” John Howard, chairman and CEO of TIH, said. “Scale is critical to remain competitive in our rapidly changing industry, and through this partnership, we will benefit from Stone Point’s and CD&R’s expertise in financial services, proven track records of transformative value creation, and the significant capital support from two leading financial sponsors. Together with our capital partners, we will remain focused on growth and look forward to the opportunity to strengthen our relationships with our clients and business partners more than ever before.”

“Truist has built a valuable insurance distribution franchise and we have enjoyed working with them over the past year as a minority shareholder in TIH,” Chuck Davis, CEO of Stone Point, said. “And now, with our partners at CD&R and Mubadala, we are thrilled to be pursuing the next chapter of our partnership with John Howard, Dave Obenauer and the rest of the TIH management team.”

“We are excited to work alongside management, Stone Point and the many dedicated teammates at TIH to build on the company’s leadership positions in the retail and wholesale insurance brokerage market. As new owners of an independent TIH, we will be laser focused on clients and colleagues by enhancing the company’s capabilities to better serve clients and becoming an even more attractive destination for top industry talent,” David Winokur, a partner at CD&R, said. “We are thrilled about the opportunity to work with our partners to grow TIH as a standalone entity.”

The parties expect to complete the transaction during Q2/24, subject to certain regulatory reviews and approvals and the satisfaction of other customary closing conditions. Truist’s board of directors unanimously approved the agreement.

Morgan Stanley is serving as lead financial advisor, with Truist Securities and Goldman Sachs serving as co-advisors and Davis Polk & Wardwell serving as legal counsel to Truist.

J.P. Morgan Securities, BofA Securities, Wells Fargo Securities, Barclays, RBC Capital Markets, Citi, BNP Paribas Securities, Mizuho, TD Securities, Evercore and UBS Investment Bank are serving as financial advisors to Stone Point and CD&R. Simpson Thacher & Bartlett is serving as legal counsel and Paul, Weiss, Rifkind, Wharton & Garrison is serving as debt financing counsel to Stone Point. Debevoise & Plimpton is serving as legal counsel to CD&R. Skadden, Arps, Slate, Meagher & Flom is serving as legal counsel to Mubadala Investment Company.