J.C. Penney OKs Sale of Insurance Unit to Aegon

J.C. Penney Co. on Thursday agreed to sell its direct-marketing insurance unit to Dutch insurer Aegon for $1.3 billion in cash.

The sale will enable the troubled company to focus on its retailing business, Chief Executive Allen Questrom said.

Penney, the No. 2 U.S. department-store chain, has been trying to reverse a slump in earnings that has caused its shares to fall 78% since mid-1998. The insurance unit had revenue of $1.1 billion in 1999.

The Penney unit sells life, accident and health insurance products directly to customers holding credit cards sponsored by banks, oil companies and retailers, including JCPenney department stores.

As part of the agreement, J.C. Penney and Aegon will form a 15-year marketing alliance to offer financial services to J.C. Penney customers. The venture is expected to generate payments to Penney of as much as $300 million.

Plano, Texas-based Penney plans to use proceeds from the sale to reduce debt, Questrom said.

Shares of J.C. Penney rose $1.26 to close at $18.25 on the New York Stock Exchange.