General Electric Co. on Friday forecast faster earnings growth for 2006 and said it would increase its dividend and stock buyback plan after announcing the planned sale of most of its Insurance Solutions business to Swiss Re.
The conglomerate said it now expects earnings, excluding the insurance business, of $1.92 to $2.02 a share for 2006, up 12 percent to 17 percent from its current forecast for 2005. The company had previously forecast 10 percent to 15 percent growth.
GE said it now expects 2005 earnings from continuing operations of about $1.72 a share. Before the sale, it had been on track to meet its forecast of $1.81 to $1.83, it said.
The company will report most of its insurance earnings, which it had expected to contribute about 10 cents per share to earnings in 2005 and 2006, as discontinued operations.
GE will receive up to $3.7 billion in cash and notes for the insurance business, about 55 percent of the $6.8 billion purchase price. The remaining 45 percent of the deal value will be paid in Swiss Re shares, GE said.
After the deal closes, GE said it would own between 10 percent and 13 percent of Swiss Re’s common stock and have the right to nominate one representative for election to the reinsurer’s board.
Chief Executive Jeff Immelt said in a statement that after the sale, the company would have “a better mix of growth, higher return on equity financial services businesses and faster-growing industrial businesses, all driving stronger free cash flow.”
GE said it expects 2006 cash flow from operating activities to rise to about $24 billion, up about 20 percent from 2005.
The company also said it will raise its quarterly dividend 14 percent to 25 cents a share. It will increase its stock repurchase program to $25 billion through 2008, up from its previous plan to buy back $15 billion in shares through 2007.
GE said it plans to buy more than $4 billion of its stock during 2005, $7 billion to $9 billion in 2006 and $6 billion to $8 billion per year in 2007 and 2008.
Fairfield, Connecticut-based GE has been scaling back its insurance business since 2002 to allocate capital for faster-growing businesses, such as consumer finance and medical equipment. The company said it has announced or completed five insurance divestitures in that period, generating about $25 billion in cash.