Truist chief coy on whether he'll sell big chunk of insurance unit

A jolt of uncertainty surrounds Truist Financial’s plans for its insurance brokerage unit following a report that the company is thinking about selling a sizable chunk of the business.

CEO Bill Rogers on Tuesday affirmed the bank’s commitment to building out and investing in the subsidiary known as Truist Insurance Holdings. But he stopped short of answering the question of whether Truist will sell up to 30% of the unit to investors.

“The insurance business is a growing business … and it’s a scale business, and it’s a business we want to make sure that we can continue to invest in,” Rogers told analysts during Goldman Sachs’s annual U.S. financial services conference in New York.

“Keep in mind we’re the only institution that can do it of scale, that can have that conversation with the client and look at their overall management and risk of their company from really soup to nuts, and that’s just an advantage that we don’t want to compromise,” he added.

Truist gets 9% of its net income and 14% of its revenue from its insurance brokerage unit, Truist Insurance Holdings.

Chana R. Schoenberger

Truist’s large insurance business makes it unusual in the U.S. banking industry. Truist Insurance Holdings, the nation’s sixth-largest insurance broker, provides 9% of the $545.6 billion-asset company’s net income and 14% of its revenue, according to a Truist presentation in November.

Rogers’s comments come four days after The Insurer, an industry publication, reported that Truist hired Morgan Stanley to explore a sale of up to 30% of its insurance brokerage unit. The sale would help provide third-party validation of the value of the business, which the company has said is underpriced, according to the article.

Officials at Truist, which is based in Charlotte, North Carolina, have not commented on the story.

In recent years, Truist has been expanding in the insurance business. Since 2019 it has completed 11 insurance-related acquisitions, and there could be more to come, John Howard, the company’s chief insurance officer, said in November.

This year alone, Truist’s insurance division has announced three acquisitions, including the recent purchase of a national insurance premium finance firm from Texas Capital Bancshares.

That deal was finalized on Nov. 1.

In a research note Monday, analyst Mike Mayo of Wells Fargo Securities wrote that a partial sale of the business could help Truist “monetize a portion of its franchise value” as well as “free up trapped capital” equivalent to an estimated 5-8% of the company’s market capitalization.

Such a deal would also raise some questions, including how such a sale “would sync” with the company’s “desire to have insurance comprise more earnings,” Mayo wrote. 

In addition, Truist would need to reassure investors that it would not get penalized from the perspective of stress tests and capital planning, since a sale would reduce some fee business income, and the company would need to “show a good use for any proceeds from a sale,” Mayo added.