Under terms of the agreement, QBE will assume substantially all of the insurance liabilities of Balboa in exchange for QBE's acquisition of an equivalent amount of cash and other assets through a reinsurance transaction with Balboa.
In addition, QBE will acquire certain other assets of the Balboa business and will extend ongoing employment to those associates supporting these businesses. QBE and Bank of America agreed to enter into long-term distribution agreements for lender-placed insurance and real estate owned programs and certain voluntary consumer insurance products.
The sale is consistent with Bank of America's strategy to focus on businesses that directly serve customers and clients around the world while continuing to strengthen its balance sheet.
Bank of America and its affiliates are expected to receive an upfront cash payment of approximately $700m, subject to certain closing and other adjustments, as well as additional future payments.
The transaction is expected to result in a one-time after-tax gain and benefit Bank of America's Tier 1 common capital, including a reduction in goodwill and other intangibles. The remaining net tangible equity of approximately $1.7 billion of Balboa will be retained by Bank of America and is expected to be available for redeployment over the next two years as the Balboa insurance liabilities expire.
Balboa Insurance was acquired by the former Countrywide Financial Corporation in 1999. The transaction is subject to regulatory approvals and expected to be completed in mid-2011.
Is this a sensible move from Bank of America?
Have your say and discuss with your peers on the InfoGrok community.
Participate by posting your comments now.