BB&T (NYSE:BBT) is diving deeper into a non-banking financial niche. The company announced it has reached agreement to buy wholesale insurance broker CGSC North America Holdings, better known as Swett & Crawford. The seller is parent company Cooper Gay Swett & Crawford, and the price is $500 million in cash.
The asset being sold is Cooper Gay Swett & Crawford's North American operations. The company will retain its foreign business, which is much smaller than the unit being divested.
In the press release heralding the acquisition, BB&T quoted its CEO Kelly King as saying that "Swett & Crawford nicely enhances our insurance business and increases and diversifies our overall fee income profile."
Currently, BB&T offers various types of insurance through a set of subsidiaries.
The Swett & Crawford deal is subject to approval from the relevant regulators. BB&T expects it to close in the first half of this year.
Does it matter?
It's no wonder BB&T is spending time and money bulking up its insurance offerings. Insurance is a vibrant and busy business for the bank, to the point where it's the single biggest component of its noninterest income. In Q4, for example, insurance brought in $380 million, or 37% of total noninterest income.
BB&T anticipates that having Swett & Crawford in its portfolio will boost its take from insurance by around $200 million annually, meaning that if all goes well, the acquisition should pay for itself before very long.
This is the latest in a series of asset buys for BB&T. Last summer it completed the acquisition of fellow regional lender Susquehanna Bancshares, while a similar buy -- for National Penn Bancshares -- should close within months. Both were smart purchases of complimentary assets, and it's becoming apparent that BB&T has a sharp eye for acquisition opportunities that can help it grow. Shareholders should be encouraged by the Swett & Crawford news.