QBE Selling Lender-Placed Insurance Business for $90M

By and | July 16, 2015

QBE Insurance Group Ltd., Australia’s second-largest insurer by market value, agreed to sell its North American mortgage and lender services business to National General Holdings Corp. for $90 million.

The transaction will result in a pretax loss of about $120 million this year on non-cash charges and write-offs, QBE said Thursday in a regulatory filing. The unit offers mandatory coverage for borrowers who lapsed on insurance payments to their original carriers.

The sale is part of Chief Executive Officer John Neal’s strategy to turn around the insurer that has been beset with writedowns in North America and higher claims in Latin America. He sold shares and some businesses last year after QBE reported in 2013 its first annual loss in 12 years.

QBE will “look to focus on commercial lines and significantly build out our specialty underwriting capabilities in North America,” Neal said in Thursday’s statement.

The deal will release more than $100 million in capital and reduce policy sales by about $400 million, the Sydney-based insurer said. The sale is set to be completed on Sept. 30.

QBE shares have climbed 28 percent this year in Sydney compared with a 4.2 percent increase for the benchmark S&P/ASX200 Index.

QBE became the second-largest lender-placed insurer in the U.S. after its purchase of Balboa Insurance Co. from Bank of America Corp. in 2011. The company was fined $10 million two years later by New York’s financial services regulator after a probe into kickbacks insurers in the industry paid to banks in exchange for business.

“While the lender-placed business has had difficulties in the past, we believe it is now an area of great opportunity after numerous changes that have been enacted throughout the industry,” Michael Karfunkel, CEO of New York-based National General, said in a separate statement.

National General Holdings Corp., headquartered in New York City, is a specialty personal lines insurance holding company.

According to the announcement, QBE’s LPI unit produced $576 million of gross written and managed premium in 2014. QBE offers lender-placed insurance products through three business segments: LPI Home, which offers fire, home and flood products and wrote $390 million in business in 2014; LPI Auto, which offers collateral protection insurance and guaranteed asset protection products for automobiles and wrote $150 million in 2014; and Seattle Specialty Insurance Services, an agency and tracking business focused on the smaller niche loan servicing market that wrote $36 million in 2014.

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