Mortgage giant Countrywide Credit Industries said Monday that it has agreed to buy the bulk of Balboa Life and Casualty Group from Associates First Capital Corp. for $425 million.

Countrywide, which owns the nation's largest independent mortgage bank and already sells insurance products to its borrowers, said the move would let it expand its presence in the insurance business.

"We have quite a presence as a captive insurance agency and there are many synergies that we would have by vertically integrating an insurance company," said Stanford L. Kurland, the president and chief executive officer of Countrywide Credit Industries' home loan unit.

Countrywide is paying 1.2 times book value for Balboa's homeowners and auto insurance business. It already sells homeowners, auto, home warranty, disability, term life insurance, and annuities.

Associates First, which acquired Balboa when it bought Avco Financial Services earlier this year, said it would retain the credit insurance business related to Avco.

James Overholt, a consultant with Milliman & Robertson, a Chicago consulting firm, said the two companies' products mesh perfectly. "The combination of distribution companies and the manufacturers like Balboa are probably going to continue," Mr. Overholt said.

Countrywide, based in Calabasas, Calif., has sold homeowners insurance since it was founded in 1969 and has been aggressively adding new insurance products in the past few years.

Angelo Mozilo, the chairman of Countrywide, noting that it has more than 300,000 policies in force, said Countrywide has proved it can sell insurance. "Countrywide's captive mortgage insurance customer base, retail distribution capability, and institutional customer base will blend with Balboa's product line, relationship marketing, and distinct group of institutional customers," Mr. Mozilo said.

Mortgage lending and servicing remains Countrywide's strength, said Jonathan E. Gray, an analyst with Sanford C. Bernstein. But he said the deal for Balboa, an Irvine, Calif.-based company that posted $20 million in earnings last year, should be accretive to earnings within a year.

Countrywide said Balboa would add about 3%, or 12 cents a share, to its 2000 consensus earnings estimates of $4.20 a share, he noted.

But he was skeptical about the company's cross-selling ambitions. "It sounds good, provided it doesn't distract management. Everybody with a customer base believes there are cross-selling opportunities. There is hardly any American that hasn't been solicited until they are dizzy by insurance companies."

Competitors, meanwhile, were divided on whether the deal would hurt Balboa's ability to market products through banks. One mortgage executive, who declined to be named, said he would be reluctant to sell insurance that is issued by a subsidiary of a competitor, and predicted that said several institutions would drop relationships with Balboa.

But Roger Dunker, the president of KeyCorp's insurance arm, said that Key sells Travelers' insurance products even though Travelers is now a unit of Citigroup, and that he sees no reason to treat Balboa products differently.

Mr. Kurland said he expects increased sales to offset the effect of any defections. Owning an insurer that operates in 50 states will allow the company to tailor insurance products to its customers and needs, he said.

There is no overlap between the two organizations, Mr. Kurland said, and Countrywide plans to build up Balboa's operation.

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