The bank said that under the deal QBE, which is based in Sydney, Australia, will acquire Balboa's lender-placed and voluntary property and casualty insurance assets.
In exchange for assuming the insurance liabilities, QBE will get an equivalent amount of cash and other assets through a reinsurance transaction with Balboa, which was part of Countrywide Financial. In 2008, Bank of America acquired Countrywide, which had been the nation's largest home loan originator before the housing market collapse
QBE will also acquire other Balboa assets and retain an unspecified number of employees, Bank of America said.
Bank of America will get an upfront payment of $700 million in cash, as well as the future payments.
The bank also expects to record a one-time after-tax gain and benefit to its Tier 1 common capital, including a reduction of goodwill and other intangibles. It also will retain roughly $1.7 billion of Balboa's net tangible equity.
Bank of America and QBE also entered into distribution agreements for insurance and real estate-owned programs and other consumer insurance products.
The transaction is expected to be completed around mid-year.
Shares in Bank of America slipped 2 cents to $14.41 in aftermarket trading after adding 19 cents to $14.43 during the regular session.