A headline on a story about Geico Corp. in yesterday's Business section incorrectly characterized a transaction between Geico and Aetna Life & Casualty Co. Geico has agreed to transfer, not sell, its homeowners insurance business to Aetna Life & Casualty.
The Sun regrets the errors.
Geico Corp., the Bethesda insurer, has given up on its relatively small homeowners insurance business and will transfer to Aetna Life & Casualty, the companies said yesterday.
FOR THE RECORD - CORRECTION
Geico writes homeowners policies through a wholly owned insurance agency called Insurance Counselors Inc., which is based in Maryland. Under the transition Geico still will own ICI, but starting in July the independent agency will begin signing up new customers with Hartford-based Aetna, which will pay commissions to Geico through ICI.
"Most of our book of business is in auto, and actually our homeowners book of business has started to decline a bit," said Geico investor relations director David L. Anderson.
"We just thought we could no longer achieve the economies of scale," he said.
The company's homeowners line represented $159 million out of $2.5 billion in premiums in 1994. Last year the business suffered a 4 percent decline in policyholders, to about 438,000 customers, Mr. Anderson said. The company insured about 3.5 million automobiles last year.
"We just thought we could deploy that money better elsewhere," he said.
None of the 250 people who work in the homeowners insurance division in Fredericksburg, Va., will be laid off, he said, although a few jobs may end through attrition.
Some of the Fredericksburg employees will move to ICI, according to Mr. Anderson.
Aetna said it will offer renewal policies to most holders of Geico homeowners insurance as their policies expire after Jan. 1, 1996.
The policy conversion process will be completed in most states by January 1997, the company said.
"Taking on a high-quality homeowners business such as Geico's is a great opportunity to improve the long-term profitability of our personal insurance business," said Robert P. Restrepo Jr., senior vice president of Aetna's auto and homeowners businesses.
Aetna will offer coverage to Geico customers in all states except Alaska, Hawaii and Mississippi.
In those states, ICI will work to obtain coverage for customers through other insurers.
Geico does not sell homeowners coverage in New Jersey.
Aetna is the country's eighth-largest homeowners insurer, with 1.5 million policies, $527 million in 1994 premiums and a 2 percent share of the market.
Geico's stock fell 25 cents yesterday to close at $50.125 a share. Aetna gained 37.5 cents, closing at $58.50.