Berkshire Hills in Boston to sell insurance business

Berkshire Hills Bancorp in Boston has agreed to sell its insurance business to Brown & Brown in Daytona Beach, Fla.

The $12.3 billion-asset Berkshire said in a press release Tuesday that it will sell the assets and operations of Berkshire Insurance Group for $41.5 million. The deal is expected to close by the end of September.

The insurance business, formed in 2000, offers personal and commercial property-and-casualty insurance.

The sale is part of a broader strategy by Berkshire to improve investor returns over the next three years.

“This transaction allows us to simplify our operating model, repurpose valuable resources and redeploy capital to support core businesses and strategic initiatives that will enhance long term stakeholder value,” Nitin Mhatre, Berkshire’s CEO, said in the release.

Berkshire will record a net gain on sale of roughly 55 cents a share in the third quarter. The sale will also lower earnings per share in the second half of this year by 2 cents.

Brown & Brown has offered positions to existing employees of the insurance business. Through a partner relationship, Berkshire will continue to refer customers to Brown & Brown.

"While we readily acknowledge that the company is reducing fee income, which investors often prefer to spread income, we also recognize this was a subscale business with mediocre returns," Mark Fitzgibbon, an analyst at Piper Sandler, wrote in a client note.

"This transaction strikes us as quite logical," Fitzgibbon added.

RBC Capital Markets and Luse Gorman advised Berkshire.