Dive Brief:

• Truist is selling 20% of its insurance brokerage unit to private-equity firm Stone Point Capital for $1.95 billion, the bank announced Thursday.
• The deal represents an aggregate value of $14.75 billion for the bank’s subsidiary Truist Insurance Holdings, including a common-equity value of $9.75 billion and $5 billion of intercompany preferred equity issued by Truist Insurance Holdings to Truist, the Charlotte North Carolina-based lender said in a statement. Mubadala Investment Company and other co-investors are participating in the investment with Stone Point, the bank said.
• Following the close of the deal, which is expected in the second quarter of this year, Truist will retain an 80% stake in the unit, the bank said.

Dive Insight:

Truist’s announcement follows a report in December that the bank was exploring the sale of up to 30% of its insurance brokerage unit. Trade publication The Insurer reported the firm had tapped investment bank Morgan Stanley to help it explore sale options.

The deal with Stone Point paves the way for future growth and enhances the competitiveness of the bank’s insurance business amid a rapidly consolidating industry, Truist CEO Bill Rogers said during a call with analysts Thursday.

“We considered many options, but we believe this approach maximizes our long-term strategic and financial flexibility,” Rogers said. “Importantly, because we're only selling a minority stake, Truist will continue to own and consolidate Truist Insurance Holdings, which will remain a strong contributor for our company.”

The bank’s brokerage unit is the sixth-largest insurance broker in the U.S., operating coast to coast with more than 250 offices and 9,000 employees, Truist Insurance Holdings CEO John Howard said on Thursday’s call.

The unit, which is made up of 60% wholesale and 40% retail, facilitates approximately $45 billion in premiums and generates over $3 billion of revenue annually, he said.

“Given the scale of our operations, we are a meaningful contributor for Truist,” Howard said, adding the unit accounts for 13% of the bank’s total revenue, 35% of its fee income and 8% of its net income.

Howard touted Stone Point’s operational expertise in the insurance industry, and said the deal with the private equity firm will help the bank drive efficiencies.

“They have partnered with other insurance brokers and have helped to create exceptional platforms. And I'm confident that that will be the case here,” he said. “Our new partners at Stone Point know the industry as well as anybody and will be very valuable advisers.”

Under the terms of the deal, a five-person board — made up of four Truist appointees and one Stone Point appointee — will be formed to oversee Truist Insurance Holdings, the bank said in a press release.