In another move to build on its balance sheet and recover from the financial crisis, BofA sells its Balboa's insurance unit.
Bank of America Corporation (NYSE: BAC) has agreed to sell its Balboa insurance unit to Australia's QBE Insurance Group for more than $700 million cash and undisclosed future payments.
Bank of America Corp. has been disposing its businesses and other assets as it recovers from the financial crisis, and repaying the bailout money it received from the government. So far the disposals, which have included stakes in Brazil's Itau Unibanco, Mastercard, and BlackRock, have helped BofA to fulfill its agreement to repay the money, and shrink its balance sheet.
The bank said Thursday, that it will get an upfront payment of $700 million in cash, and that it also expects an after-tax gains on the sale, while retaining about $1.7 billion in net tangible equity that can be redeployed as Balboa's insurance liability expires.
Bank of America and QBE also entered into a long-term distribution agreement for insurance and real estate-owned programs and other consumer insurance products. Under the agreement, QBE will also assume Balboa's liabilities.
The Australian insurance group has grown into a top 25 insurance and reinsurance group on the basis on net premium earned on the back of more than 100 acquisitions in the last 25 years. The group said that it has downgraded its 2010 business outlook, on the basis of the claims that have risen, after the flooding in Australia, and the earthquakes in Chile and New Zealand.
Shares of Bank of America Corp. gained 1.33 percent to settle at $14.43 on Thurday.
The transaction is expected to be completed by the mid of 2011.
