Walter Investment Management announced it’s selling 100% of the stock of its indirect, wholly-owned subsidiary, GTI Holdings, which is the holding company of Walter's primary licensed insurance agency, Green Tree Insurance Agency, to a wholly-owned subsidiary of Assurant for $125 million in cash.
Walter noted that the agreement is subject to adjustment as specified in the stock purchase agreement.
The announcement also stated that the affiliate of Assurant agreed to make potential earnout payments, in an aggregate amount of up to $25 million in cash, to a direct, wholly-owned subsidiary of Walter. The amount of the payments will be based on the gross written premium of certain voluntary homeowners' insurance written by certain affiliates of Assurant.
As it stands, Assurant said it currently earns underwriting profits on the majority of Green Tree’s voluntary homeowners’ and manufactured housing insurance sales.
Through this acquisition, Assurant will retain its existing book of voluntary insurance for home mortgage borrowers whose loans are serviced by Walter’s subsidiary, Ditech Financial Services, and will have the opportunity to write additional voluntary business for Ditech borrowers.
Assurant, which is a global provider of risk management solutions, said it expects the acquisition to improve margins on the existing block of business and generate roughly $25 million of incremental annualized net earned premium and fee income in 2017, with the opportunity to grow the business over time.
“We are building upon the strength of our 30-year history with Green Tree,” said Alan Colberg, president CEO of Assurant. “More importantly, this acquisition enables Assurant to further its strategic focus in the housing market by expanding our voluntary offerings, through this distribution channel, to new and existing clients.”
Walter Investment has faced continued challenges this year. Back in November, the company posted its third straight quarterly loss, pushing the company’s net loss for the year above $500 million.
But shortly after releasing its earnings in November, the company announced a move that would generate cash flow, enough to nearly wipe out its entire third-quarter loss.
The deal involved a subsidiary of Walter Investment Management selling mortgage servicing rights to New Residential Mortgage, a subsidiary of New Residential Investment Corp.
This latest stock sale should further help the health of the company.
"We are pleased to have executed the SPA with Assurant relating to the sale of our insurance business,” said Anthony Renzi, Walter's CEO and president.
“This transaction is expected to reduce the complexity of our business operations and allow us to better focus on our process efficiency efforts to improve the performance of our core servicing and originations businesses," said Renzi. "We look forward to continuing our relationship with Assurant."
The transaction is expected to close in the first quarter of 2017.