DBRS Morningstar: Truist’s Sale of a Stake in its Insurance Brokerage Business is Neutral to Ratings

DBRS, Inc. (DBRS Morningstar) commented that Truist Financial Corporation’s (Truist or the Company) announced sale of a stake in its insurance brokerage subsidiary, Truist Insurance Holdings (TIH), has no impact on the Company’s ratings, including its Long-Term Issuer Rating of AA (low) with a Stable trend. DBRS Morningstar views the sale, which will result in a gain and boost CET1 capital, as enhancing financial flexibility while being neutral to earnings per share as the proceeds from the sale are reinvested. Additionally, the new structure provides an additional currency to pursue future acquisitions and incentivize employees. The transaction is expected to close in 2Q23 and is subject to customary closing conditions and regulatory approvals.

The Company agreed to sell a 20% minority stake in TIH (excluding premium finance) to Stone Point Capital, an alternative investment management firm, and other co-investors for $1.95 billion. The sale indicates a $9.75 billion common equity value and a $14.75 billion aggregate value including $5.0 billion of preferred equity issued to Truist. Of note, the sale is expected to generate 32 basis points of CET1 capital and be 6% accretive to tangible book value.

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