CHARLOTTE, N.C. - Truist Financial Corporation (NYSE: NYSE:TFC) has entered into a definitive agreement to divest its remaining interest in Truist Insurance Holdings (TIH) to a consortium led by private equity firms Stone Point Capital and Clayton, Dubilier & Rice. The all-cash transaction positions TIH at an enterprise value of $15.5 billion, approximately 18 times its 2023 core EBITDA.
The sale is expected to bolster Truist's CET1 capital ratio by 230 basis points and enhance its tangible book value per share by $7.12, or 33%. The transaction, which is anticipated to conclude in the second quarter of 2024, is subject to regulatory approvals and customary closing conditions. It is predicted to be $0.20 dilutive to Truist's 2024 earnings per share, assuming reinvestment of the $10.1 billion proceeds at a 4.5% yield.
Truist Chairman and CEO Bill Rogers (NYSE:ROG) stated the sale would strengthen the company's balance sheet and enable strategic investments in its core banking operations. He expressed pride in the achievements with TIH and optimism for its future growth under the new ownership.
TIH, the fifth largest insurance brokerage in the U.S., is set to benefit from the deep industry expertise of Stone Point and CD&R. The new ownership aims to bolster TIH's competitive edge in the evolving insurance brokerage market by providing resources for technological advancements and new product development.
John Howard, Chairman and CEO of TIH, emphasized the importance of scale in the industry and expressed confidence in the growth opportunities through the partnership with Stone Point, CD&R, and capital partners.
This article is based on a press release statement.
InvestingPro Insights
As Truist Financial Corporation (NYSE: TFC) moves forward with the divestiture of Truist Insurance Holdings, investors are closely monitoring the financial health and strategic positioning of the company. According to InvestingPro, TFC has a market capitalization of $48.15 billion, reflecting its substantial presence in the banking sector. Despite recent revenue contraction, with a -4.39% change in revenue over the last twelve months as of Q4 2023, Truist maintains a strong operating income margin of 35.8% for the same period, indicating efficient management of its operational expenses.
InvestingPro Tips reveal that Truist has a history of rewarding shareholders, having raised its dividend for 9 consecutive years and maintained dividend payments for an impressive 52 years. These consistent returns, along with a high shareholder yield, could be particularly attractive to income-focused investors. Additionally, analysts are optimistic about the company's profitability, predicting net income growth this year and a turnaround from the previous twelve months' lack of profitability.
While the company's P/E ratio stands at -33.06, the adjusted P/E ratio for the last twelve months as of Q4 2023 is a more favorable 8.31, suggesting that investors may be undervaluing the company's earnings potential. Furthermore, the dividend yield is currently at a generous 5.76%, which, combined with a large price uptick of 29.49% over the last six months, may signal a compelling opportunity for both yield seekers and growth investors.
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