The market seems to like this news, at least over the last few days.
But after this, what is the next trick going to be?
https://finance.yahoo.com/video/block-truist-financial-rivian-trending-194855527.html
https://www.semafor.com/article/10/09/2023/truist-in-talks-to-sell-insurance-business-for-10-billion
@1zfr+1p26qzc3 - I appreciate your post regarding the benefits of selling IH, but here are my counterpoints.
First, IH should be considered almost akin to a “bond” holding in a volatile investment portfolio. A business, that if run moderately well, provides an annuity stream that offsets the cyclical volatility in our core business (which is obviously very rate/economically sensitive). IH has performed that role admirably over many business cycles.
Second, an insurance business should actually be a net positive for the balance sheet. Berkshire Hathaway is one of (if not THE) most effective and efficient managers of balance sheet capital in the world. While BH utilizes the funding/float portion in ways we obviously can’t, the business as a whole has been a cornerstone of their success. Buffet constantly lauds the market diversifying benefits of insurance to his other economically sensitive businesses.
Third, insurance was a material part of BB&T prior to the merger, and BB&T traded at a significantly higher multiple than SunTrust. How could that be if it was such a financial liability? None other than the great allocator of capital Bill Rogers lauded IH mere months ago.
Which all begs the question, why sell now with economic storm clouds on the horizon? The answer to me is crystal clear. IH is our most attractive asset, and the private equity group has been chomping at the bit to get the rest of it (hmmm, wonder why?!?). IH was a quick and easy capital raise to continue to support this farce of an executive team.
I fail to see how this sale had anything to do with “improving” Truist. In fact, I strongly doubt that entered the decision criteria. Just another move supporting an undeniable trend - a “win” for executive management at the expense of every other stakeholder.
“Someone explain this to me - why is the market reacting so favorably to this news?"
the market never thinks further than one quarter ahead.
I don’t know why people keep talking about Insurance being profitable or some kind of cash cow. It’s not. IH contributed $155 million in net income in Q2 while Consumer kicked in $931 million, like its not even close. CCB was around $576. And top line revenue was way higher in both. Q2 was an outlier for IH net income is usually much less.
P&C is going to struggle with so many natural disasters, and title insurance fee income is great when people are getting mortgages which they are not. IH ties up balance sheet capital, weighs on cash reserve requirements, has a set of regulatory costs separate from banking state by state, and contrary to popular belief doesn’t make much money. Just read the quarterly report, it’s very clear.
Someone explain this to me - why is the market reacting so favorably to this news? The core banking/wealth/retail business is hemorrhaging clients, financial performance is abysmal, and yet the market is applauding the sale of the one bright spot of Truist. My question is sincere; I honestly don’t understand. Do they honestly think this executive team has the ability to deploy the proceeds in a more lucrative strategy? Wow.
There is not a pension for new hires from about 5 years ago. Before that we were grandfathered in. But who knows what happens to it now
TIH doesn't have a 22pension
Shame, being the last bank backed brokerage was a great financial services offering. Not sure what happens to TIH but I definitely believe a leak in talent will ensue. As ‘toxic’ as bank association can be, TIH was the best of both worlds (private equity and Public company).
Second quarter this year. So is investment banking going to replace these numbers? I think not.
Insurance, as had been the case with legacy BB&T Corp. and Truist for several years, was the top revenue producer at $925 million, up 13.8% from the first quarter and up 13.3% year over year.
Issue is now they are disrupting insurance. Headhunters are all over Truist Insurance employees. No one has any idea what is going on: 1. Will pension go away. 2. Who will be the new company owners - I don’t see successful producers working for a PE firm. 3. Will CRC and McGriff be sold separately 4. Will 401k match go away
I am afraid we are going to start losing talented insurance producers while this gets dragged out.
10 billion in cash to keep the circus going. What's not to like.
The next trick will be G-b dancing out to the final countdown saying 'Bill made a huge mistake '.