Cadence Bank will sell its insurance operations to Arthur J. Gallagher & Co. for $904 million in a cash transaction, the company announced Tuesday.
Cadence Bank estimates the immediate net capital increase after-tax reduction would be roughly $620 million and net cash proceeds $650 million — boosting its balance sheet flexibility and profitability. The proceeds from the sale will also help to reduce wholesale borrowings and help the lender to reinvest the capital into its strategic franchise growth initiatives and drive shareholder value, the company noted.
Cadence Insurance has grown into the second-largest bank-affiliated insurance brokerage in the U.S. over 24 years, CEO Dan Rollins said in a statement.
“The sale will allow us to focus on what we do best — building strong, long-lasting banking relationships, while also continuing to realize our long-term strategy. I have enjoyed working with the Cadence Insurance team immensely and have profound respect for what they do, and how well they do it,” he added.
Following the transaction — expected to close this quarter — executive leadership, management and employees will join Gallagher, the company said.
"Cadence Bank has been a fantastic partner of ours for the past 24 years, supporting our growth and evolution,” Markham McKnight, CEO of Cadence Insurance, said in a statement. “We both determined that Gallagher is the best partner for us. Our team is what makes us who we are, and Gallagher recognized from the first conversation the talent of our team and its commitment to our clients and communities. We are energized about our future with Gallagher and what our team will be enabled to deliver to our clients.”
The move, first made public almost a month ago, was around the same time Gallagher announced its plan to buy the insurance segment of Eastern Bankshares for $510 million.
Gallagher has been on a buying spree and declared acquisition plans for three insurance companies in the past week.
The announcement comes at a time when banks with substantial insurance brokerage arms are shedding their highly valued subsidiaries. Truist in February announced its plan to sell 20% of its insurance brokerage unit to private-equity firm Stone Point Capital for $1.95 billion. Earlier this month, Truist was reportedly in talks to sell the rest of its insurance brokerage segment to the same buyer for nearly $10 billion.
Cadence’s adjusted efficiency ratio during the third quarter was 66.1% — much higher than the 54.4% the company hoped to achieve by 2022, American Banker reported.
But Rollins told analysts his company was not where it wanted to be, compared with what was going on in the market.
“We've got to improve, and I think this transaction gives us some tools in our toolkit to allow us to improve,” Rollins said, according to American Banker.
Cadence Insurance, headquartered in Baton Rouge, Louisiana, has nearly 770 employees in 30 offices across nine states in the Southeast. The segment originated as a collection of agencies acquired by BancorpSouth from 1999 through 2003. BancorpSouth merged with Cadence in 2021.
The company has been trying to cut its noninterest expenses, closing 35 branches over the past quarter and reducing its headcount by 319, with 80 more job cuts expected in the fourth quarter, the outlet noted.
