LONDON Halifax Group PLC agreed to buy Equitable Life Assurance Society for $1.5 billion after the worlds oldest mutual insurer rejected a takeover approach from General Electric Capital Corp.
Equitable Life was forced to put itself up for sale in July after the House of Lords, the highest court in England and Wales, ruled the 239-year-old company had unlawfully cut bonuses to some customers.
Halifax has been seeking to diversify outside mortgage lending. Equitable would double the banking companys funds under management and boost its presence in insurance.
The agreement with Equitable was made as GE Capital considered making a formal offer for the insurer. Chris Headdon, Equitables chief executive, said he sees little point in meeting executives from GE Capital. A spokesman for GE Capital, the worlds biggest nonbank financial company, declined to comment.
General Electric Co. of Fairfield, Conn., has been building businesses in Europe since the early 1990s, including consumer finance and reinsurance. Analysts said GE Capital wants a U.K. pension company to add to its annuity business to capitalize on social security changes that are forcing more Europeans to save for retirement.
Equitable was founded in 1762 during the reign of King George III to offer age-adjusted premiums to people paying into mutual protection funds, pools of money that were paid to widows. The insurers current woes stemmed from the 1970s and 1980s, when it guaranteed that some holders of its pensions would be able to buy annuities that had a set rate when they retired.
The decision backfired in 1994, when the company reduced the size of payments to some customers to fund the above-market-rate annuities.