Truist Financial (NYSE:TFC), the entity born from the merger of BB&T and SunTrust, has agreed to sell an 80% stake in its insurance business to Stone Point Capital. The deal, announced on Tuesday, is valued at $10 billion and allows Truist to shift its focus toward lending and wealth management services.
Stone Point Capital had previously acquired a 20% stake in the insurance business. This recent acquisition boosts Truist's stock and is projected to offset the bank's $12 billion losses on securities incurred in the second quarter of this year. It also strengthens Truist's balance sheet ahead of its estimated $23 billion sales in 2024.
The sale comes as Truist faces challenges from missing earnings per share estimates in most of the past 20 quarters, coupled with macroeconomic concerns impacting all banks. Despite these obstacles, Barron’s has recommended Truist for its potential cost-cutting measures and anticipated improvements in profit margins.
The bank's restructuring plan, dubbed "Truist 2.0", has been praised by Wells Fargo (NYSE:WFC) analyst Mike Mayo. The plan is expected to enhance the company's financial performance as it shifts away from insurance services.
As part of its financial projections for the coming year, Truist forecasts dividends per share at $2.10, yielding over 7%. Its stock currently trades at 8.3 times expected earnings per share (EPS) for the upcoming 12 months. This valuation is comparable to that of the SPDR S&P Regional Banking (NYSE:KRE) exchange-traded fund (KRE).
Notably, the valuation of this deal surpasses that of Aflac (NYSE:AFL), indicating a significant milestone for Truist and Stone Point Capital.
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