Bank of America has put its Balboa Insurance unit on the block, and should expect to see some private equity interest. The Irvine, Calif.-based group provides insurance coverage on foreclosed homes and properties occupied by distressed borrowers.
It was not clear what price Balbo would fetch. BofA, in its second quarter earnings announcement Friday, did not list Balboa. However, BofA’s net loss for home loans and insurance increased by $808 million to $1.5 billion for the three months ended June 30.
BofA acquired Balboa as part of its purchase of Countrywide Financial Corp. in 2007. Balboa had pretax earnings of about $600 million in 2007, Bloomberg said citing Countrywide’s annual report from that time.
Assurant, which was interested in Balboa before the Countrywide sale, will likely bid on the unit, as well as ZC Sterling, a unit of QBE Insurance Group, said Steven Schwartz, an analyst with Raymond James. Munich Re and Berkshire Hathaway, which also compete in the “forced-placed” insurance market, are likely also interested (Warrant Buffett owns Berkshire Hathaway and a near 8% stake in Munich Re).
One private equity investor said the most likely buyer for Balboa is a similar division of another bank. However, two other buyout sources pointed to Aquiline Capital Partners, the private equity firm run by former Marsh & McLennan CEO Jeff Greenberg, as a possible bidder. Aquiline raised $1.1 billion with its first fund in 2007 and invests in asset managers, insurance and financial technology.
“Except for a PE firm, I don’t see a P&C insurance firm getting into the business,” Schwartz said.
An Aquiline official declined comment.