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Instant Analysis: BB&T Makes an Acquisition

By Eric Volkman – Mar 1, 2016 at 12:26PM

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The financial services company reaches a deal to buy wholesale insurance specialist Swett & Crawford for $500 million.

What happened?
BB&T (TFC -1.26%) 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.

Eric Volkman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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