Truist Financial Corporation (TFC) Earnings Call Transcript & Summary

Thank you, everybody. Today, we have Truist Financial. As you know, it's the seventh largest bank in the United States with almost $550 billion in assets and approximately $23 billion in revenues possibly for 2022. It's a real diversified company with 64% of its revenues coming from net interest income and about 36% from noninterest income. Today, we have Mike Maguire, Chief Financial Officer. He recently, as we all know, was appointed as Chief Financial Officer. But before that, he spent years working in the Payments business for Truist, as well as in the Investment Banking area. Joining us also, and starting us off with a presentation is John Howard. John is their Chief Insurance Officer. Truist, as we all know, is quite unique in the fact that they have this very large Insurance business. And what we're going to do is John will start with insurance, then Mike will go and talk about the Payments business, and then we'll open it up for questions after that. So John, take it away.

Thanks, Gerard, and good morning, everyone. It's great to be here at the conference this year. Before we get started, please take note of our forward-looking statements and non-GAAP information on Slides 2 and 3. And turning to Slide 4, you'll see our familiar purpose, mission and values. Truist's purpose-driven culture is the foundation for our success as a company. It drives performance and defines how we do business every day. That was very apparent in how our teammates responded to each other and their clients in the aftermath of Hurricane Ian. While the rebuilding process is just getting started, we're committed to supporting these communities in the short term and also helping them become more resilient longer term. Our Insurance business will play a key role in supporting our clients throughout the claims process in the near term, in addition to helping them navigate a more complex insurance landscape in Florida over the longer term. Turning to Slide 5. Many of you have seen our investment thesis, which Mike will cover at the end, but we also wanted to show this slide at the beginning so you can see how the businesses we discussed today are connected to it. And now let's shift gears and discuss my favorite topic, Insurance. As you can see on Slide 7, Truist Insurance Holdings is a meaningful contributor for Truist, generating 14% of our revenue and almost 10% of net income. We're also fully aligned to Truist's investment thesis. First and foremost, a few products are as purpose-driven as insurance. We provide clients peace of mind and protection for the things they cherish most. Second, we have the scope and scale to provide comprehensive insurance brokerage and risk management solutions to our clients. Third, we're making forward-focused investments in products, technology, data and analytics that will drive long-term growth. And finally, for our shareholders, the business has a strong growth trajectory that is supported by favorable secular trends and strong organic and inorganic execution. It's also an important source of revenue diversification since insurance has little correlation to interest rate and credit cycles. Now let's get into some of the details on Slide 8. Truist Insurance was founded in 1922. So this is our 100-year anniversary. Throughout that period of time, we've changed and grown through more than 100 acquisitions. We facilitate $45 billion in premiums on a pro forma basis and generate more than $3 billion of revenue annually. As a reminder, we do not take any underwriting risk. The revenue mix from our 3 divisions is 59% wholesale; 35% retail; and 6% Insurance Services, which encompasses our title insurance and premium finance businesses. We operate coast-to-coast with approximately 250 offices and more than 9,000 teammates. We have deep expertise across a wide range of industries, and there's a strong alignment between our markets and Truist's Corporate and Investment Banking specialties. Let's turn to Slide 9 on relative performance. We're proud of our position as the sixth largest insurance brokerage in the U.S. More importantly, we're pleased with our strong relative performance. During the past 12 months, we delivered superior organic growth versus our peers, driven by new business, firm pricing and strong client retention. We also generated stronger margins, reflecting ongoing realization of acquisition-related synergies and stronger growth in wholesale versus retail. Overall, this business is attractive to Truist for the same reasons insurance brokers trade at higher multiples than banks, consistent growth, strong cash earnings and low capital consumption. In addition, insurance brokerage supports strong stress testing results for Truist, resulting in more efficient capital management. We believe there is significant shareholder value potential as investors better understand our insurance brokerage business, which is why I'm here today. On Slide 10, we'll look at why this is one of the most exciting times in my 3-decade career to be in the insurance business. Insurance is fundamentally an advice-driven business, and our teammates work closely with our clients to solve challenging risk management questions. Our world has become increasingly complex, and the attendant risk has manifested itself in higher insurance costs. Insurance premiums have trended higher in recent years, reflecting increased loss activity attributable to large catastrophe losses such as storms and wildfires as well as more subtle factors such as social inflation, which increases the propensity of juries to award higher damages. Given these trends, insurance carriers are shrinking capacity and tightening policy terms and conditions, which pushes more risk to excess and surplus lines and also leads to the increased use of wholesalers to place coverage. This has been a significant tailwind for Truist Insurance Holdings since we're 59% wholesale. There are also growth opportunities in emerging risks, particularly as they relate to cyber and technology. And the full impact of rising inflation has yet to be manifested in policy coverages. Let's go to Slide 11. We have a strong track record of growth. Total revenue has increased 12% annually over the past 20 years, reflecting a balanced mix of organic and inorganic growth. Organic growth has accelerated in recent years, reflecting a more firm pricing market, a shift towards wholesale and our strong execution. The good news is we continue to have multiple levers to drive growth. I've talked about the various macro tailwinds on the previous slide. Specific to Truist, we're in the early innings of fully capitalizing on our significant integrated relationship management or IRM opportunity. We have millions of retail clients and hundreds of thousands of commercial, middle-market and corporate clients where we can play a role in helping them secure insurance coverage. We are making significant investments in training and technology to facilitate this. And now that the core bank integrations are complete, our teammates in those businesses have significantly more time to have strategic and risk advisory conversations with their clients. In addition, given the wild success of our Insurance Holdings Optimization Program, or IHOP, we have embarked on IHOP 2.0, 24 initiatives across multiple dimensions to further accelerate organic growth. Slide 12 provides more details about our acquisition strategy and recent transactions. When considering acquisition opportunities, we look for high-quality complementary firms that fit culturally and enhance our capabilities or geographic presence. There is also a strong focus on IRM and potential revenue synergies. The process is highly selective as we close just 1 of every 10 transactions that we look at. And that's a mere fraction of the opportunities that are out there. We have strong financial discipline, and potential transactions should generate at least mid-teens IRRs, assuming conservative exit multiples. We've completed 11 acquisitions since 2019. Each of our 3 transactions this year enhances our capability set and comes with significant IRM opportunities within insurance and across Truist. Kensington Vanguard expands our presence in title insurance and augments our capabilities in large, complex commercial transactions, typical of the CIG and CRE spaces. There are also clear opportunities between BenefitMall's employee benefits programs and our commercial community bank. And some of our wealth clients may prefer to take advantage of BankDirect's life insurance premium financing to optimize liquidity. To assist you with modeling our insurance revenue, we've included an updated seasonality schedule and acquisition impact outlook in the appendix. Continuing to retail on Slide 13. Our retail division operates under the McGriff brand. We have more than 120 offices and 3,500 teammates across the U.S. While in the bank space the word retail means consumer clients, in the insurance brokerage space the word retail means that the client has engaged us directly to help them obtain insurance coverage from a carrier. Our retail clients are primarily businesses or corporations, but we also help individuals find coverage on a number of personal lines, including homeowners, auto, umbrella and life insurance. Retail is organized into 4 client segments: specialty, which generally has industry expertise; middle market, which is our largest segment; small business; and personal lines. Our client-centric organization is intentional and resembles what you'd find elsewhere at Truist, whether in corporate and investment banking, commercial community banking or wealth. McGriff provides access to a broad spectrum of coverages, including commercial property and casualty, cyber, management liability, small business, employee benefits and personal lines. The retail industry is highly fragmented, and we compete against other public insurance brokers, large private equity-backed firms and various regional and small private brokers. We have a strong value proposition that is supported by our industry verticals, our integrated relationship management strategy and our highly recognized centralized sales approach in personal lines as well as our new digital platform that allows clients to shop online for their insurance needs, to name a few. Next, we'll look at wholesale on Slide 14. The key difference between retail and wholesale is in who the client is. In retail, as I said earlier, the client is an individual business or corporation who needs insurance coverage. In wholesale, the client is a retail insurance broker, who needs help finding specialized or difficult-to-place coverage. About 45% of our wholesale revenue is from Commercial Solutions, which operates under our leading CRC brand to help retail brokers find P&C, professional and other specialized coverages. These coverages can be hard to place when they involve a high-risk industry or catastrophe-exposed area. Commercial Solutions generates about $12 billion in premiums annually. Our Life Retirement and Benefit Solutions business generates 29% of wholesale revenue. Operating under our Crump and BenefitMall brands, this business primarily acts as a general agent that provides life, annuity, long-term care, disability and health products to independent brokers. We utilize our deep local presence, extensive relationships and expertise to serve over 60,000 retail brokers and generate $18 billion of premium annually. The remaining 26% of wholesale revenue comes from our Specialty Programs business, which includes our Starwind and AmRisc brands, among others. Specialty programs helps underwrite and distribute complex and unique insurance solutions with a focus on construction, transportation, executive and professional reinsurance, and marine and energy. Wholesale is performing extremely well and has grown 10% organically since 2017 as the business continues to be very successful at capitalizing on market tailwinds. Let's turn to Slide 15. Our Premium Finance business works with insurance brokers across the U.S. and Canada to help insurers finance their property and casualty premiums and with the acquisition of BankDirect, their life insurance premiums. You may be wondering why clients would need to finance their insurance premiums. In the property and casualty space, typically, there are no payment plans for commercial premiums. So companies may find it advantageous to seek premium financing to manage their liquidity. It's a similar situation in life insurance, where very high net worth individuals may prefer obtaining financing in lieu of funding their premiums upfront. Premium Finance is a solid growth business with attractive returns, healthy credit spreads, short durations and limited credit risk. Strategically, the BankDirect acquisition nearly doubles our Premium Finance business, broadens our capabilities to include life insurance and expands our West Coast presence. Pro forma, we estimate Truist Insurance Holdings will be the #2 premium finance player in the market with a coast-to-coast presence. Summing up on Slide 16. First, Truist Insurance Holdings is a leading insurance brokerage that delivers value-added advice and is a key contributor to Truist's integrated relationship management strategy. Second, our strong revenue growth is supported by favorable secular long-term trends, and we're augmenting that growth through targeted investments in talent, capabilities and technology. Lastly, we provide meaningful revenue diversification and generate strong cash earnings and capital for Truist shareholders. Now I'll turn it over to Mike to present on our Consumer Finance Solutions business.

Thanks, John, great job. And Gerard, thank you for the introduction. I'm the new guy. And I think for that reason, maybe I'll just take a moment to introduce myself. And Gerard, I appreciate you providing some background. So just started as CFO, I guess about 45, 50 days ago now. And before that, led our Consumer Finance and Payments segment, which you're going to hear about, about half of that today, not the payments piece, but I was really excited when Ankur suggested that as a debut here at BAB, that I get to talk about some of these businesses that I've spent the last couple of years running. So looking forward to that. Prior to running Consumer Finance and Payments, I spent a year doing corporate venturing at the time at SunTrust. So introducing companies that were sort of on the emerging fringe of payments and financial software, two at the time, SunTrust and help structure commercial relationships or, in some cases, minority investment transactions into those deals. And before that, I spent about 15, 16 years in investment banking, focused on the financial technology sector. So yes, so looking forward to today to really spending some time on the Consumer Finance and Payments portfolio of businesses. As you can see on the slide, the left side of 18, these businesses, just like insurance, really are meaningful contributors to Truist. They represent about 18% of earnings and about 18% of loans. And like insurance are also really well aligned to our overall objectives and story at Truist. Like John went through the purpose perspective, you think about our -- the subcomponents of Consumer Finance Solutions at LightStream. One of the most common loan purposes that we serve our clients with is refinancing debt at a lower interest rate. So we have an opportunity to improve financial confidence. At Service Finance, perhaps we're helping a homeowner finance a new roof for their family. At Sheffield, we help families finance recreational equipment to spend more time outside the other perhaps. And in our indirect auto businesses, we have the chance to give people access to reliable transportation perhaps to get to work. Second of all, another thing that I really appreciate about these businesses is that they really are leading franchises in their respective segments, really across the board. And as well, for the most part, they're operating in markets that are either sizable and, in many cases, both sizable and growthy. And then third, these platforms are really well aligned, we think, to the future of banking from a convenience perspective. You'll hear me talk a little bit more about convenience commerce. Each of these businesses is leveraging technology to meet clients when and where they're making consequential purchase decisions. You put all this together, and what you'll find is that these businesses really do generate attractive risk-adjusted returns for Truist. And let me tell you a little bit more about that on Slide 19. So if you look at the left side of this page, you'll see this comment that we aspire to enable convenient commerce across these Consumer Finance Solutions businesses. And if you think about convenience, we really deliver that in a number of ways. In the case of LightStream, which is our direct-to-consumer platform, the goal there is to meet you wherever you choose. That could be at home. That could be on the go. It could be at a dealership, shopping. Wherever you are, if you've got your phone, we're there to serve you or if you've got your laptop. Our other units in the indirect business, Service Finance, Sheffield, the auto businesses, they leverage partnerships either with manufacturers, with their dealers or contractors in the case of Service Finance. And we reach the borrowers at that point of sale. So at Sheffield, that's on the showroom floor. For Service Finance, that's at the kitchen table, as you're thinking about a proposal for a home improvement. A question I've gotten a lot in the past, at least while I was running those businesses, whether it be internal or external, was how do these businesses work together? How do they fit together? How do they help support each other? And the answer to that is that while each of these businesses really is distinct and has its own competitive positioning in the marketplace, there are common themes and common characteristics or attributes that contribute to their success. First, I'd highlight that -- and this kind of comment around conveniences, we're always aspiring to be simple, fast and digital. I'll also note that each of these businesses generally relies on some kind of an analytical advantage. That could be in how we select risk. That could be in how we price risk, manage risk. A lot of times it's risk oriented, but also there's a marketing component to that. And then lastly, each of these businesses embraces sort of an open attitude towards partnership, and that extends our distribution capabilities, which you'll hear a little bit more about in a few minutes. So our agenda today really has me going through each of these components of CFS and looking forward to doing that with you and looking forward to your questions. I'm going to start with LightStream on Slide 20. So LightStream, you probably know well. It's our national direct-to-consumer, digital-only lending platform, LightStream offers unsecured loans, generally up to about $100,000. And we focus on the prime and the super-prime borrower. Our application process is designed to be really fast, really simple, and it can generally be completed in just a few minutes if you've got your own information organized. Something I hear a lot of great feedback about LightStream as I travel, one of the things I hear a lot about is the same-day funding phenomena. If you're approved for a LightStream loan before 2:00, we'll fund you same day into your bank account. Our focus, as I mentioned, is on borrowers with exceptional credit. If you look at our weighted average FICO of the portfolio, it's 780, so that speaks for itself. And to know LightStream is really to understand its channels. So -- and there are 3 primary, I'll call them, performance marketing channels. The first is just direct marketing. So think digital mail campaigns, snail mail campaigns. The second is partnerships. So think about online aggregators, other lead generators, NerdWallet, companies like that. And then the third is search and other advertising. So that could be general search online. It could be radio spots, occasionally TV spots. It would surprise me if some of you haven't heard or maybe you'll acknowledge in the future that you'll hear spots on CNBC, for example, on the drive-in in the morning and maybe a sports podcast. I'll say, in addition to those 3 performance marketing channels, something that we're really excited about, frankly, is we're getting more brand recognition in the market. So more people are finding LightStream on their own. We think of that a sort of an organic channel. And the nice thing about that is that reduces our cost per loan. So there's no marketing partner to compensate, which reduces our cost per loan. The balances have grown about 10% over the last couple of years. It's about $8 billion today in total footings. Our loan purposes span a number of topics or a number of categories. But primarily, it's home improvement, it's automobiles, both new and used, and debt consolidation purposes, I mentioned. The portfolio is relatively granular. It's got an average loan size of about $27,000. The ROA is in the mid-2% range, which is actually quite attractive as you think about a returns profile for Truist. Something that's new at LightStream, you've heard us sort of dabble in talking about this is that we're piloting a new savings product at LightStream that will pair with our borrower offering. So think of it as a save and borrow offering. Really cool possible funding tool for Truist. We'll see as it scales. But I think more importantly, it gave us a chance to work with some pretty interesting emerging technology companies, including a next-gen core deposit system. The save aspect to the borrow and safe proposition is still relatively new, but it's something we're excited about, and there'll be more to come there. So I'm going to move on to Service Finance, which we continue to be very excited about. We're approaching our first anniversary of ownership. It's got great business momentum. For those of you who are new to Service Finance, Service Finance is a contractor-led point-of-sale lender that operates in the home improvement space. So like LightStream, it offers unsecured loans. And also like LightStream, the borrowers tend to be prime or super prime. Its weighted average FICO in the portfolio is 763. Service Finance is also relatively granular. In terms of the average ticket size, it's about $13,000. That might surprise you. It might seem a little bit low if you think about the home improvement space. The reason for that is we have a lot of concentration and focus and interest in the replacement HVAC market. We like that market. It's less discretionary than, say, a larger ticket, higher discretionary item like a swimming pool or something like that. At Service Finance, and you'll hear about this at Sheffield as well, we rely very heavily on the relationships we have with our 15,000-plus contractors all over the country. We partner with those contractors to serve their clients. We're a top 3 provider in the market. We continue to gain ground. We think we've gained ground since we bought the company last December. And we think part of that benefit has been the increased scale and relevance that Truist has brought to the table in terms of some of the relationships we have with large manufacturers. Service Finance was really strategic, we continue to believe at Truist, because it expanded the scale and capabilities of our existing point-of-sale business, Sheffield primarily. And we believe that consumer preference continues to shift in that way, right, towards convenience, towards simple, easy, fast. We also like the home improvement market in general, just given its size, and we think continued secular growth. So you'll -- I've mentioned a couple of times, we acquired the business last December. And we did primarily shift the business model from a gain-on-sale model, where they were partnering with us and other investors to distribute the balances to an on-balance sheet model. And these balances are growing nicely and, frankly, have more than offset the runoff from our pre-existing home improvement portfolio, which was generated vis-a-vis partnerships with companies like Service Finance, including Service Finance. In terms of the economic model, I'll just make one quick note, which is that the interest -- the net interest income that we earn at Truist really can be subdivided into 2 components. This is true at Sheffield as well, which is that it's a combination of interest that's paid by the borrower, and it's coupled with discounts or subsidies that are provided by the manufacturer or the merchant. So hopefully, that makes sense. So I'm going to move to Slide 22, and it's a nice parlay actually into Sheffield. So Sheffield runs a really similar playbook to Service Finance. But instead of focusing on the home improvement sector, it focuses on the outdoor power equipment market. One distinction between Service Finance and LightStream and Sheffield is that Sheffield loans are, in fact, secured. And -- but again, similar, Sheffield has relationships with 200 equipment manufacturers, including industry leaders like Polaris, Toro, BRP. And we have access to their more than 15,000 dealers all across the country. Top categories that we finance, there are others, but like LightStream, I gave you the top 3, it's powersports. So think ATV, side-by-side, small watercraft, kind of fun stuff. Outdoor power equipment. So think about mowers, blowers, small tractors, and then trailers, essentially a category to pull the other stuff around on. And we've got great -- leading top 2, top 3 market share across each of those various categories as it relates to subsidy-based financing. Our portfolio is about $5.5 billion. It's grown nicely, consistently over the last couple of years, also a pretty granular ticket size of around $11,000. We've seen nice loan production trends at Sheffield. Some of that has to do with overall inflation as the price of this equipment is increased, so to have the loan values. But also there was quite a bit of supply chain interruption in these categories. Dealers had a hard time getting inventory from manufacturers. That seems to be smoothing out a little bit. So I feel pretty good about Sheffield. Like LightStream, Sheffield is constantly working to improve the borrower experience as well as the experience in Sheffield's case and in Service Finance's case for its dealers, and we've got multiple initiatives that are in place that we started in the last year or two to make sure that we're meeting clients and dealers in the ways they want to be met. And we want it to be fast and easy and ultimately, again, more -- just more convenient. Like LightStream and Service Finance, an attractive margin profile, Sheffield has attractive returns in the sort of 3% ROA area. This has really been a great business for Truist. BB&T acquired Sheffield many years ago, and it was one of the reasons that, that performance and the profitability that gave us confidence and conviction around going into the home improvement sector and acquiring Service Finance. And so far, that's been really productive. So I'm going to turn to Slide 23 now and just hit on the Dealer Financial Services. I'm going to hit prime auto and then we're going to talk a little bit about sub-prime, near-prime auto. But Dealer Financial Services, which is our indirect auto lending unit focused on the prime and super-prime borrower, I think it's a bit more conventional. And you guys are probably more familiar with that model than some of these other specialty businesses. So I'll spend a little bit less time here. But in short, we have a national business. We focus on prime and super-prime borrowers. We've got 6,500 dealers plus, and we rank about ninth in the country in this business. Over the last several years, we've seen balances pretty consistently grow. We would anticipate that growth to slow going forward as we think about allocating our capital to businesses and portfolios that have either a more attractive returns profile or perhaps are more core from a client relationship potential perspective. So it's a nice segue to Slide 24, which is Regional Acceptance Corp. You'll hear us often refer to this business as RAC. Again, another longtime business that BB&T acquired. This is our national sub-prime and near-prime indirect auto lender. It complements the prime business, we believe, very nicely. It allows us to offer financing solutions to clients that are either building or perhaps rebuilding their credit. We manage this business, as you can imagine, with an intense focus on credit discipline, which has resulted in really strong performance over the years. Since our acquisition of RAC, we've never lost money in the business. In our trough year, which was 2008, we actually earned an ROA of about 60 basis points. In a non-stressed time, you could expect RAC to generate ROAs in the 4% area. So again, a very attractive return profile. As far as credit is concerned, through-the-cycle net charge-offs for RAC are in the 400 to 700 basis points area. We're operating today in the 450 basis points area. We've seen some normalization in that portfolio. That's not surprising. You probably heard that from other others who participate in this segment or similar segments. So that trend, we believe, will continue. And I'll just note a couple of notes on the portfolio. We've actually seen balances decline year-over-year about 10% in RAC. That's been driven, in part, by supply chain challenges and unavailability of autos and -- but also we've decided to make changes to our credit policy. We've tightened our credit box, I guess, to simply put it. And so that's also impacted the production. We've also noted that our portfolio mix at RAC has remixed a little bit. We have a higher percentage of near prime versus pure subprime. I think that's a credit positive for the portfolio. And I would just say from an expectations perspective, we would expect this business to be relatively stable going forward. We don't expect to significantly grow it. But we are fond of it. So as we move to Slide 25, maybe I'll just take a few moments to wrap up on the Consumer Finance Solutions before I spend a minute or two talking about Truist in general. So I think a couple of takeaways that at least I hope you heard from today. Number one, the Consumer Finance Solutions businesses are really performing quite well in this market, and we expect that to continue. The businesses are market leaders in their segments, and they've got really defensible position, whether that be based on relationships with partners, whether that be based on their integration through technology or reputation, et cetera. And we're successful in these businesses because we offer convenience, right? We think that's increasingly important to dealers. We think it's increasingly important to borrowers. We deliver on fast and easy. And the way we do that is we make investments in our digital experiences, in automation, in making sure we have an analytics advantage and in these strong partnerships I've referenced a couple of times. And we also, of course, apply discipline to the cycle, underwriting and risk management frameworks to these businesses, which are, again, very important to our overall portfolio. So maybe I'll take a moment to wrap up with Truist investment thesis. And you've all seen this slide before. John touched on it quickly. So I'll just hit a few points. I think, first of all, I hope that John's remarks and mine also are helpful to you and help you get a sense for how these -- double clicking into these 2 businesses, how they fit with our overall sort of 4 pillars of our investment thesis. We continue to believe and are excited about the fact that we're building an exceptional company at Truist. Our offering is comprehensive, our business mix is diverse, and we operate in great markets, and we've got fantastic market share in those markets. We've invested in franchises. That's included in John's business in Insurance and Investment Banking, which we didn't talk about today; point-of-sale lending, which we touched on today; our retail network. So it's important to us to have defensible market positions. And we feel really good about our ability to deliver for our clients. We continue to invest in our technology stack, which we know will continue to allow us to lean into the future of banking, understanding what consumers' preferences are, what businesses' preferences are is important to our vision as well, and we're excited about the support that we're able to invest to that effort. And then finally, combined with our conservative risk profile, our goal is really to generate superior earnings growth and profitability, but to do it with lower volatility than our peers over the long term. So we feel great about how the company is positioned across a broad range of economic outcomes and that overall, we're on the right path. So before I turn it back over to you, Gerard, for questions, just I guess I want to say thank you all very much for the chance to get in front of you for the debut here at BAB, for me at least, and John -- to give John a chance to talk a little bit about the Insurance business, and we'd be happy to answer any questions.

Very good. Thank you, Mike. We have time for maybe 1 or 2 questions. And the first question, I guess, John, there's about what, 4,800 -- 4,600 commercial banks in the United States, down from 18,000. The insurance brokerage business has also went through a big consolidation. You've participated in it. How many are there today? And do you think you'll still be active in that kind of market making acquisitions?

Within the insurance brokerage space, there is tremendous consolidation underway. There are roughly 30,000 retail insurance agencies and brokers and several hundred wholesale insurance brokers. I do expect that consolidation to continue. We have fantastic platforms in both spaces, but we -- I think we will see some attractive components that help us fill in white space, whether it's bringing an additional capability or a geographic coverage that would be beneficial for us.

Yes. And so a question, yes, Mike.

Well, thanks for being here. So 25% to 30% of the firm you guys represent, John, Insurance and Mike, Consumer Finance, seems like good revenue growth stories. But for the firm as a whole, the revenue growth and efficiency stories have fallen short. And I'll continue with the analogy of a Corvette. I mean when will this Corvette drive the speed limit, at least? And so Mike, you're new in your position as CFO. So just, are you going to be a better driver? Put different gas in the car? You have more pit stops? Or what do you bring to the table as CFO? And I know it's the same Board and the same CEO and all that, but you're a different person. So nuance changes about how you're going to be thinking about investments and efficiency.

Yes, Mike, I appreciate the question. I think -- think about this as we've got more focused drivers. And it's not just me driving or Bill driving, it's our whole company, our leaders, our bankers driving. And they're more focused, I think, on clients for the first time in a couple of years. And so I think we're beginning to see the fruits of that. We're seeing pipelines build. We're seeing productivity gains and just, again, putting the client first, and that's going to be a really important focus for us. As far as from an expense perspective, something I'm very focused on is prioritization, right? Because you've heard Bill consistently talk about the importance of making investments. We've talked about investing in our teammates to drive productivity, whether that be the minimum wage decision we made. We've talked about some of these franchises we piloted today in insurance and investment banking and otherwise, technology, but those all come with trade-offs. So I think it will be really important as we really pivot from this phase of internal focus, execution conversion into the sort of show-me mode, to really start to exercise that relative decisioning. And that's probably my nearest term focus, Mike.

I have a question, Mike. Obviously, heading up the Consumer Finance businesses, some of these businesses have not been tested yet through a real recession like LightStream and even Service Finance under your ownership. Can you share with us what are you guys looking at for trends in terms of credit deterioration? What are the early warning signs? And do you think consumers are going to be able to handle some of these changes, like a 400 basis point increase in interest rates, for example?

Yes. That's a great question. On the -- we get the most questions probably about the unsecured portfolios, LightStream and Service Finance, they're newer vintages. And you're absolutely right, they weren't around in the last financial crisis. These portfolios, a, they're performing really well now. They've performed really well since we've been in the business. They've stress tested very well, too. We obviously put quite a bit of rigor around our stress testing, and these businesses have great returns profile. There's quite a bit of a buffer as you can imagine. They stress test well. I'll also just remind you, the unsecured portfolios are also very, very -- we target borrowers that have extremely good credit. So I mentioned LightStream's weighted average FICO portfolio is 780. Service Finance is in the 760s. So we've got a really strong borrower to start with. What do we think about? I think unemployment is probably the biggest factor impacting the higher credit tiers. If you look at RAC, we're much more focused on inflation and rents and gas prices and even the interest rate environment and how it might impact other debt. These loans that we're making at LightStream and Service Finance and even in Sheffield, they're fixed rate. So we don't have floaters out there. And again, I'll also mention in terms of like the payment sizes. In the case of Sheffield and Service Finance, you're dealing with a portion of the overall borrowing cost being borne by the manufacturer or the dealer, whoever's subsidizing the transaction. So yes, so I think, again, great credit quality, stress tested as well on the high side. And on the low side, it's unemployment, inflation. And I guess why you're seeing the RAC portfolio return to a more normalized level faster than the other portfolios.

Okay. And there's 1 question.

Yes, I've just got 2 questions. One, with respect to the return on asset figures you cited for each of those different businesses. As we sort of think about what -- how that translates to a return on equity figure. I mean, are these sort of 100% risk-weighted assets? Or is there something more? And is there sort of a fully allocated expense burden, just to sort of...

Yes, they're 100% risk weighted. I think that's -- it's a good proxy for full allocation, perhaps even conservative. And I'm sorry, was it -- there was another component, position of the pen.

Do those figures have sort of a fully allocated expense to it? I mean, is that -- I'm just wondering, can I literally multiply by 10?

Yes. Yes.

Okay. And then the other question just on the Premium Finance business. Do those loans -- do those $7 billion loans show up as like commercial loans in the financials? Or do they show up as receivables? And maybe just a quick comment on kind of what the economics of those are in terms of sort of spreads and terms and credit and so forth.

Yes. They show up as C&I loans in the portfolio for the bank from a credit standpoint, outstanding credit performance, negligible de minimis losses. When you look at it on a risk-weighted basis, outstanding spreads versus what we earn elsewhere in the book, we view it as a really attractive asset class.

With that, but before we break, I do want to point out that there is a lunch table that's set aside for Truist. So if people want to get to know Mike and John, everybody knows Ankur, of course, please make your way over to that table. But please join me in a round of applause thanking Truist.