GE Unit to Buy First Colony for $1.8 Billion
General Electric Co.’s financial services unit said Monday that it will buy First Colony Corp. for $1.8 billion as it expands into insurance and retirement planning.
General Electric Capital Corp. will pay $36.15 a share for Lynchburg, Va.-based First Colony, a life insurer that sells annuities, term insurance and structured settlements.
The acquisition would add $11 billion of assets to GE Capital’s insurance and savings businesses, bringing the assets at GE Capital to $185 billion.
Stamford, Conn.-based GE Capital is trying to offer more retirement-related financial services and advice. Opportunities are growing in the field as companies shift from traditional pension plans to 401(k) plans and individual retirement accounts, said Patrick Welch, president of GE Capital Assurance & Great Northern Annuity.
“It’s really our goal to be the leader in providing solutions for wealth accumulation,” he said. “Americans are getting older and they’re living longer so they have to have a longer time perspective.”
GE Capital’s Seattle-based Great Northern Annuity unit sells annuities, insurance and mutual funds. The company expects the planned acquisition to boost 1997 earnings, but Welch declined to say by how much.
GE Capital specializes in financial services. Businesses include equipment management and mortgage financing.
GE’s strategy reflects how the lines between life insurance companies and financial service companies are blurring as they compete for the retirement savings of baby boomers. In the last year, GE Capital has also purchased the life insurance unit of American Express Co. and two units of Aon Corp.
“The target is the baby-boomer-type of market,” said Ira Zuckerman, an analyst with Nutmeg Securities Ltd.
First Colony’s American Life Insurance Co. and First Colony Life Insurance Co. would become units of GE Capital Assurance, GE said.
In addition to life insurance, First Colony also sells so-called structured settlements to other insurers, which use them to make installment payments stemming from personal injury lawsuits.
GE stock fell 25 cents to $85.875 on the New York Stock Exchange. First Colony’s stock soared $4.75 to $34.75.
“This transaction successfully completes First Colony’s evaluation of strategic alternatives to maximize value to shareholders,” First Colony Chairman and Chief Executive Bruce C. Gottwald said in a statement.
The transaction is subject to regulatory approval.
Welch wouldn’t say how many First Colony employees would be laid off as a result of the takeover.
