In yet another effort to remove non-core assets from its balance sheet, Bank of America Corporation (BAC) has announced a deal to sell its Balboa Life Insurance Co. (BLIC) and Balboa Life Insurance Co. of New York (BLICNY) to St. Paul, Minnesota-based Securian Financial Group Inc. The acquiring company is a private insurance and retirement planning firm.
BLIC and BLICNY offer mortgage, accidental-death insurance, accidental death and dismemberment coverage and individual term-life insurance services, which would integrate fully with the products offered by Securian Financial. Both these units of BofA would be integrated into Securian Financial’s operations by next year.
BofA stated that the deal would be closed by October 1, 2011 but did not disclose the terms of the transaction. Also, the sale awaits regulatory approvals. The company, however, has retained Balboa's credit-card insurance business.
BofA had inherited Balboa from the mortgage lender Countrywide Financial acquired in 2008.
However, this is not the first time that BofA is going asset light by vending non-essential businesses. In fact, it remains committed to shedding its non-core assets, even after repaying the bailout money it had taken as part of its participation in the Troubled Asset Relief Program.
In June, BofA had announced the completion of its force-placed insurance subsidiary, Balboa Insurance Company, and affiliated entities to Australia-based QBE Insurance Group. Though the financial terms were not disclosed, BofA was expected to receive about $700 million as proceeds and additional future payments.
Also, in 2010, BofA undertook a number of non-core asset shedding actions. Among others, in November, BofA sold 43.6 million of its BlackRock shares for $163 each. The company disposed of most of its stake as it was not vital to its main business. Furthermore, the company also sold an additional 2.5 million shares of BlackRock to Japan’s third-biggest bank Mizuho Financial Group Inc.
In July 2010, the company completed the sale of First Republic Bank for $1.86 billion to a group of investors led by Colony Financial Inc. and General Atlantic LCC.
We expect BofA’s non-core asset shedding to continue until it gains confidence in its capital strength.
Currently, BofA retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, JPMorgan Chase & Co. (JPM), one of the company’s closest peers, retains a Zacks #3 Rank (short-term ‘Hold’ rating).
BANK OF AMER CP (BAC): Free Stock Analysis Report
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