CB Financial joins parade of banks divesting insurance units
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CB Financial in Washington, Pennsylvania, has agreed to sell its insurance business, Exchange Underwriters, to World Insurance Associates for more than $30 million.
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CB Financial in Washington, Pennsylvania, has become the latest bank to sell an insurance agency, announcing a $30.5 million deal with World Insurance Associates.
Banks’ selling their insurance units has emerged as a notable trend in 2023 as the sellers have sought to monetize noncore assets to raise capital. That appeared to be the motivation for the $1.4 billion-asset CB, holding company for the 122-year-old Community Bank. “This transaction realizes a significant valuation premium and is immediately accretive to capital, tangible book value, and liquidity,” CEO John Montgomery said Friday in a press release announcing the sale.
CB’s sale of its Exchange Underwriters unit comes little more than three weeks after the $2.1 billion-asset Evans Bancorp in Williamsville, New York, agreed to sell its insurance agency to Arthur J. Gallagher & Co. for $40 million. Other prominent bank-insurance transactions include the $48.5 billion-asset Cadence Bancorp’s $904 million deal with Gallagher in October, and the $21 billion-asset, Boston-based Eastern Bankshares’ September decision to sell its insurance agency to Gallagher for $510 million. The $8.6 billion-asset Premier Financial Corp in Defiance, Ohio, struck a deal June 30 to sell its insurance group to Risk Strategies in Boston for $32.6 million.
Truist Financial in Charlotte, North Carolina, sold a 20% stake in its insurance brokerage subsidiary — the nation’s fifth largest — to the Greenwich, Connecticut-based Stone Point Capital for $1.95 billion. That deal was announced in February. It closed in April.
CB acquired Exchange Underwriters as part of its $54.5 million purchase of FirstFed Financial Corp. in Monessen, Pennsylvania, in October 2014. Since then, CB has grown insurance commission earnings at a steady clip. Commission income for the first nine months of 2023 totaled $4.9 million, up 7% year-over-year. Over the past eight years, CB has grown insurance commission income at an 8% combined annual growth rate. Through the first three quarters of 2023, insurance generated nearly two-thirds of CB’s $7.5 million in noninterest income.
World Insurance Association’s $30.5 million offer, which will yield $16.4 million after-tax, would boost CB’s Tier 1 leverage ratio 105 basis points, to 10.42%, while improving tangible book value per share 16.8%, to $23.47.
The cash “provides flexibility to evaluate and pursue various strategic initiatives to redeploy capital in support of our core banking business,” Montgomery said. The purchase price amounts to 26 times Exchange Underwriters’ trailing 12 months earnings as of Sept. 30.
The transaction is expected to close in the fourth quarter. Exchange Underwriters’ management team and direct employees are expected to join World Insurance Associates. “We believe World is the right partner, providing optimal benefit for all stakeholders, and assuring our associates and clients are well taken care of,” Montgomery said.
Founded in 2011, World Insurance Associates has grown rapidly, in large part through M&A. The Iselin, New Jersey, company has completed more than 200 acquisitions. In August, World Insurance Associates received a $1 billion investment from a group of funds advised by Goldman Sachs Asset Management that it plans to put to use fueling growth.
