Xome buys Assurant's mortgage unit a day after WMIH deal closes
Xome acquired Assurant's Mortgage Solutions unit one day after its parent company Nationstar was bought by the shell company of the former Washington Mutual.
The deal took place on Aug. 1, the day after Nationstar's purchase by WMIH closed. Xome paid $35 million cash with additional compensation possible based on reaching certain performance targets.
"We're confident that the products and expertise Assurant Mortgage Solutions brings will give our combined clients exceptional service and comprehensive end-to-end capabilities," Jay Bray, chairman and CEO of WMIH, said in a press release. "This acquisition accelerates Xome's goals for third-party growth and brings more value to our company, valued clients and shareholders."
The deal reinforces the commitment to Xome, a change from the first-quarter 2017 earnings call when Nationstar considered strategic alternatives for the unit, Bray said at the time.
Going forward, the majority of Xome's revenue will be derived from third-party business. The 2018 earnings target for Xome is expected to remain unchanged as WMIH integrates the Assurant businesses. The acquisition is expected to be accretive to earnings in 2019.
Xome reported $10 million in pretax income for the second quarter, down from $17 million during the same period a year ago.
Nearly all of Assurant Mortgage Solutions' employees will join Xome. Its businesses spanned a number of areas including title, valuations, mortgage technology and field services.
"Successful execution of our profitable growth strategy requires us to align resources with our best opportunities," Michael Campbell, president of Assurant Global Home, said in a separate press release. "Our sale of the mortgage solutions business is driven by our ongoing desire to focus on lines of business where we have leadership positions, as well as to strengthen our offerings and capabilities in lender-placed homeowners insurance, multifamily housing and the connected home."
Assurant's second-quarter 2018 net operating income for the global housing business will include the operating results of the mortgage solutions unit. However, the sale and associated costs are expected to result in an estimated net loss of $34 million that will be reflected in consolidated net income.