Bank of America to Sell Countrywide Insurance Unit
Bank of America Corp. chief executive officer Brian T. Moynihan. Photographer: Chris Keane/Bloomberg
July 16 (Bloomberg) -- Brian Moynihan, chief executive officer of Bank of America Corp., discusses the company's second-quarter profit reported today. The largest U.S. lender said net income dropped to $3.2 billion, or 28 cents a share before preferred dividends, from $3.22 billion, or 33 cents, in the same period a year earlier. Moynihan, speaking from Charlotte, North Carolina, talks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Bank of America Corp. plans to sell the insurance unit it acquired in the purchase of Countrywide Financial Corp. as Chief Executive Officer Brian T. Moynihan seeks to simplify the company and raise funds.
“We just today put it on the market,” Moynihan said in a conference call. “One of the reasons we’re getting rid of these non-core activities is a restructuring that not only has a value of capital, but also has a value of a more straightforward company.”
Bank of America, the largest U.S. lender, is selling assets as regulators push the company to raise a net $3 billion this year. The Charlotte, North Carolina-based bank has agreed to sell its stake in Banco Santander SA’s Mexican unit and its Columbia long-term asset management business.
Balboa is one of the largest providers of coverage on foreclosed homes and properties occupied by distressed borrowers. Sales have expanded as banks seek to protect their mortgage collateral and seized houses against storm damage and vandalism. Munich Re and Warren Buffett’s Berkshire Hathaway Inc. have entered the market for so-called forced-placed coverage to compete with Balboa and market leader Assurant Inc.
Assurant said in May 2008, before Countrywide was sold to Bank of America, that it would be interested in buying Balboa. Shawn Kahle, a spokeswoman for New York-based Assurant, didn’t return a call for comment today.
“I would imagine that they would still be very, very interested in Balboa,” said Steven Schwartz, who covers Assurant for Raymond James & Associates Inc. “They’re already the dominant player, but it would eliminate, really, their only other large competitor in the marketplace.”
Mortgage Guarantors
Bank of America didn’t name Balboa in a statement today announcing a second-quarter profit. Balboa had pretax earnings of about $600 million in 2007, according to Countrywide’s annual report for that year. In addition to creditor-placed coverage, Balboa sold voluntary home and auto policies, life insurance products and reinsurance to mortgage guarantors, according to the filing.
Bank of America joins bailed-out Citigroup Inc. and Ally Financial Inc., formerly known as GMAC Inc., in raising money from insurance units after posting losses on home loans. Citigroup held a public offering for Primerica Inc. in March, raising more than $300 million. Ally struck a deal last year to sell its property-casualty insurance business to American Capital Acquisition Corp.
$425 Million
Countrywide, which sold itself to Bank of America after losses on mortgages, bought Balboa in 1999 for $425 million from Associates First Capital Corp.
Assurant slipped 38 cents to $36.58 at 4:15 p.m. in New York Stock Exchange composite trading. Bank of America fell $1.41, or 9.2 percent, to $13.98 after the company reported lower profit and revenue and said stock buybacks aren’t imminent.
Moynihan said Bank of America will probably record a gain on the sale of Balboa and that insurance is “not a core activity of making mortgages.”
Terese Rosenthal, a U.S. based spokeswoman for Munich Re declined to comment. Buffett didn’t respond to a message left with an assistant for comment.
To contact the reporter on this story: Sarah Frier in New York at sfrier@bloomberg.net; Andrew Frye in New York at afrye@bloomberg.net.
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