BofA to Get $700 Million for Insurer Chief Moynihan Had `No Reason' To Own
Bank of America Chief Executive Officer Brian T. Moynihan
Brendan Hoffman/Bloomberg
Bank of America Chief Executive Officer Brian T. Moynihan is focusing on retail customers, commercial borrowers and investment banking, and getting rid of unrelated assets to raise capital.
Bank of America Chief Executive Officer Brian T. Moynihan is focusing on retail customers, commercial borrowers and investment banking, and getting rid of unrelated assets to raise capital.Photographer: Brendan Hoffman/Bloomberg
Bank of America Corp., the largest U.S. lender by assets, will get at least $700 million from QBE Insurance Group Ltd. for the Balboa insurance unit, exiting the market for coverage of foreclosed homes and those with distressed buyers.
QBE, Australia’s largest insurer, will also make unspecified future payments for the unit, Charlotte, North Carolina-based Bank of America said in a statement. The companies agreed to a 10-year distribution deal in which QBE will cover properties for Bank of America, the Sydney-based insurer said in a separate statement today.
Bank of America Chief Executive Officer Brian T. Moynihan, 51, is focusing on retail customers, commercial borrowers and investment banking, and getting rid of unrelated assets to raise capital. Balboa, obtained by Bank of America with the 2008 purchase of Countrywide Financial Corp., is among the largest providers of lender-placed coverage in the U.S.
“They really have no reason to be in this business,” said Jonathan Hatcher, a Jefferies Group Inc. analyst in New York. Given that the bank also originates and services loans for properties that need insurance, “if Balboa was owned by someone else, then there’s not this possible look of a conflict of interest.”
Bank of America sold about $19 billion in assets last year, Moynihan said in a call with analysts on Jan. 21. In November, the lender sold most of its stake in BlackRock Inc. for about $8.3 billion.
QBE Acquisitions
QBE, which bought ZC Sterling Corp. in 2008 to add to U.S. sales of lender-placed coverage, has grown to operations in 49 countries and 13,500 employees through more than 125 acquisitions in the past three decades, according to its website. The firm has struck deals for 11 acquisitions in the U.S. since 1996, including Balboa, worth a combined total of more than $4 billion, according to Bloomberg data.
Banks require mortgage investors to purchase insurance protecting seized houses against vandalism and storm damage. Balboa competes with Munich Re, QBE and Assurant Inc., the No. 1 seller in the U.S. of lender-placed insurance.
“We’re focusing our resources on our core customer-facing activities, and the sale today is consistent with that strategy,” said Jerry Dubrowski, a spokesman for Bank of America. “We really don’t need to own an insurance company to be able to provide lender-placed insurance to our customers. We’ll be able to accomplish that through a distribution agreement that we have now with QBE.”
Distribution Deal
The 10-year distribution deal with Bank of America also applies to voluntary home coverage and vehicle insurance, according to QBE’s statement.
Bank of America slipped 14 cents to $14.29 at 4:01 p.m. in New York Stock Exchange composite trading. QBE jumped 7.4 percent, the most since January 2008 in Sydney, after saying the new business is more profitable than its own and it won’t sell shares to fund the deal.
Countrywide bought Balboa in 1999 for $425 million from Associates First Capital Corp. Bank of America took a $2 billion writedown on its Countrywide operations in the fourth quarter, saying the unit’s value had declined because of litigation and foreclosure costs.
To contact the reporters on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net
To contact the editors responsible for this story: Dan Kraut in New York at dkraut2@bloomberg.net
Rate this Page