QBE expects a $US120 million ($161.39 million) loss from the sale of its controversial US mortgage business.

The insurer will sell Mortgage & Lender Services (M&LS) to New York-based personal lines insurer National General Holdings Corp for $US90 million ($121.04 million).

The business made QBE the second-largest force-placed insurer in the US last year, with $US576 million ($774.66 million) of gross written and managed premium.

Force-placed insurance is taken out by a lender when a borrower does not maintain mortgage insurance. The cost is passed to the homeowner.

It has attracted class actions and regulator investigations over criticisms of high pricing and cover that offers less protection than voluntary insurance.

QBE Group CEO John Neal says the sale is a “pleasing result as we look to focus on commercial lines and significantly build out our specialty underwriting capabilities in North America”.

The sale is another step in QBE’s transformation, as Mr Neal divests underperforming businesses acquired during a buying spree under his predecessor Frank O’Halloran.

The sale will reduce gross written premium by $US400 million ($537.96 million) but is expected to improve QBE North America’s combined operating ratio by 1.5% next year.

QBE entered the business when it bought Bank of America’s force-placed insurance arm in 2011.

M&LS offers fire, home and flood products and an auto product, and owns a loan tracking business.

National General’s Chairman and CEO Michael Karfunkel says it is a complementary business to his group’s operations. “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,” he said.