Transamerica Corporation

600 Montgomery Street
San Francisco, California 94111
U.S.A.
(415) 983-4000

Public Company
Incorporated: October 11, 1928
Employees: 15,600
Sales: $6.080 billion
Market Value: $2.562 billion
Stock Index: New York London Amsterdam Zurich
Geneva

When Peter Amadeo Giannini, the son of Italian immigrants, began dreaming of his career in turn-of-the-century San Francisco, he had not set his heart on building a banking empire. Instead, at the age of 12 he was sneaking out of his home at night to work in his stepfather’s produce business and, by the age of 19, was a full partner. His early success at this business allowed him to retire at the age of 31 with a modest, but comfortable, fortune. His foray into the banking world did not begin until several years later when he received a legacy from his father-in-law, Joseph Cuneo, who had made Giannini a director of his Columbus Savings and Loan Society, a building and loan association in San Francisco. Giannini’s career in banking lasted for over forty years, and during this time he established the Transamerica Corporation.

After Giannini was appointed a director of Columbus Savings and Loan he became immersed in a number of disagreements with other directors of the bank over policy issues. He consequently left the Savings and Loan Society and established his own banking business which was located directly across the street from Columbus Savings and Loan. Giannini organized the Bank of Italy with $150,000 in capital contributed by his stepfather and ten friends. He envisioned the bank as an institution for the “little fellow,” and the bank subsequently made loans to merchants, farmers, and laborers who were mostly of Italian descent.

Ironically, the San Francisco fire and earthquake of 1906 established Giannini’s reputation in the banking world. As he stood amid the rubble of his bank on the morning of the earthquake, he was able to salvage over $2 million in gold and securities. In order to avoid the looters who were running through the city, he hid his bank’s resources under piles of vegetables in a horse-drawn cart borrowed from his former produce business. Giannini immediately alerted his depositors that their savings were safe and began making loans to businessmen who had lost their savings and their companies.

Giannini’s success as a banker is also clearly evidenced by his anticipation of the 1907 stock market crash, and his accumulation of gold before the crash. When the crash came Giannini was able to pay his depositors in cash while other banks were using certificates for cash. From this experience, Giannini realized that only larger banks would ensure security, and therefore he began purchasing small banks and converting them into branches of the Bank of Italy. With these acquisitions Giannini established the first branch banking policy in California.

The Bank of Italy grew so rapidly that by 1919 Giannini was able to form Bancitaly Corporation to organize the expansion. In 1928 Bancitaly Corporation was followed by Transamerica Corporation, which was formed as a holding company for all Giannini’s banking, insurance, and industrial concerns.

Giannini’s expansion into other areas of the financial services had established him as a leader in the financial services field. By 1929 he had moved into the New York banking scene and purchased the solidly established Bank of America. The following year after this important acquisition, all of Giannini’s banks were consolidated into Bank of America National Trust and Savings Association. Transamerica played the role of parent company throughout this period.

In 1931, just a year after the consolidation of his banks under Bank America, Giannini retired and left the top post to Elisha Walker, a Wall Street investment banker. Walker did his best to break up this “empire” created by Giannini. Not surprisingly, Giannini forced Walker out in a “furious proxy battle” at the 1932 annual meeting.

During the previous few decades Giannini’s operations had been closely observed by both Wall Street and regulatory branches of the U.S. Government; Giannini’s success had found critics within both these institutions. Throughout the 1930’s Transamerica experienced problems with regulatory procedures and changes enacted by the government. In 1937 Transamerica sold 58% of its stock in Bank America, although it still controlled the board of directors. At the time of his death in 1949, Giannini was embroiled in a fight with the Federal Reserve Board as to whether or not Transamerica had violated the Clayton Anti-Trust Act in creating a “credit monopoly” by placing directors on the boards of banks in the huge chain owned by Bank of America. It was the Reserve Board’s belief that Transamerica still controlled the bank even after the 1937 split.

The split between Bank of America and Transamerica was present throughout World War II until 1956 when Congress passed the Bank Holding Company Act, which did not allow bank holding companies the right to involve ’themselves in industrial activities. By this time, Transamerica was a holding company for several industrial concerns as well as the successful Occidental Life Insurance company. As a result of the passage of this Act, Transamerica sold its banks, forming Western Bancorporation, and was left with Occidental Life and other smaller concerns under its direction.

While the litigation continued over Bank of America, Transamerica was resourcefully building up its life insurance business through Occidental Life. By the early 1960’s Occidental Life had assets of $751 million. The success of Occidental Life was due largely to its ability to make the most of a sale. In the post war 1930’s Occidental was selling term life insurance to Californian families. Since term life insurance carried lower premiums than full life insurance, other insurance companies dismissed this type of sale as a trivial pursuit, but Occidental banked on high volume sales that would eventually be converted into full life insurance as the policyholder’s income increased, thus making up for the initially low profit. This method worked. Occidental’s insurance sales increased from $1 billion in 1945 to $6 billion in 1955 to $16 billion in 1965.

Due to the success of Occidental Life it is not surprising that in 1959 President Horace W. Brower was interested in expanding the company’s financial services and moving toward “modern merchandising techniques.” When Brower rose to the chairman’s seat, he looked outside the company to find a “hard-nose financial man” who could successfully run the company as president. The man Transamerica found was John R. Beckett, a 42-year old investment banker and vice president of Blyth and Company’s San Francisco office. Beckett was considered to be extremely conversant with the world of finance and negotiations, an important quality since Brower was ready to begin a major acquisition program for Transamerica Corporation.

The plan at Transamerica during this time was to create a financial institution where people could do all their business, something of a “department store of finances.” It was Beckett’s belief that people wanted “convenience and service” and he was willing to provide such banking. Beckett’s concern centered on the fact the financial service industry changed quickly and he was determined to stay ahead of his competitors.

Occidental Life was used as a base for changing Transamerica into a holding company not only for insurance but other companies within the service field. Beckett was interested in company’s that would “work in harmony with one another in the market place.” The first major acquisition after Beckett became president was Pacific Finance Corporation in 1961, and additional acquisitions focused on land, title insurance and mortgage banking companies. New credit card, leasing and life insurance operations were also started during the 1960’s. By 1969 Transamerica was considered a large service conglomerate. To his credit, Beckett changed the dependency on Occidental from 75% of the company’s profits to just over 50% by 1966.

Beckett saw the transformation of Transamerica not only as a chance for consumers to do business with a “friendly” full-service bank, but as a way to impress upon customers the importance of using these services over and over again. Beckett compared Transamerica with General Electric: “We hope it will be like the family that buys a refrigerator from G.E. If they like the product and the price, and they get good service, they’ll go back to G.E. when they need a new stove... That’s exactly what we’re trying to do in financial services.”

Beckett’s attempts to enlarge Transamerica resulted in the company being labeled a conglomerate, but Beckett strongly disagreed with this image. Beckett saw managers of conglomerates as “opportunists, people who make acquisitions strictly on an ad hoc basis. They move too quickly, pay too much, use funny accounting and don’t look for long-range values. Eventually their bubbles will burst.” In contrast, Beckett believed that he was acquiring companies slowly and in concert with a plan to provide a full-line financial services company.

According to Beckett’s plan, financial services also included leisure time services for consumers such as movies and travel. In 1967 Transamerica acquired United Artists and in 1968 Trans International Airlines and Budget Rent-a-Car. United Artists would prove to be the acquisition of the 1960’s that resulted in financial difficulties for Transamerica.

United Artists, created in 1919 by such movie stars as Douglas Fairbanks, Sr., Mary Pickford, Charlie Chaplin, and D.W. Griffith, looked like a profitable acquisition in 1968, but in 1970, two years after Beckett became chairman, Transamerica’s earnings dropped by half because of an $18 million loss due to several unsuccessful films. This interest in the movie industry stemmed back to Giannini’s days when, just after his acquisition of Bank of America, he provided financial support to film producers when most every other bank in the country was refusing to do so. Beckett, although caught by surprise by the large loss at United Artists, eventually saw the film company turn into a very profitable business by the late 1970’s with such successful films as Rocky, Coming Home and One Flew Over the Cuckoo’s Nest.

However, along with these successes there was also unrest within United Artists; the management who had initially sold the film company to Transamerica was now interested in buying it back. Beckett fought back, telling Fortune magazine that if “the people at United Artists don’t like it, they can quit and go off on their own.” That is exactly what they did.

Beckett claimed that he would never sell United Artists, but in 1981 it was sold for $380 million under the direction of president James R. Harvey, who took over in January of 1981 when Beckett became chairman. Harvey was an executive vice president under Beckett and had been with the company since 1965. Harvey’s goal for Transamerica is to shape the company into a financial services company once again. The sale of United Artists in the early 1980’s has been succeeded by the sale of Trans International Airlines and Budget Rent-a-Car in 1986.

In 1982 a $300 million acquisition of Fred S. James and Company, an insurance broker, was made. With this acquisition, President Harvey said that Transamerica was “shaping the prototype of the insurance company of the future.” Harvey’s acquisition focus is now on financial services which include insurance, consumer finance and equipment leasing, and industrial machinery. In 1986 Transamerica was interested in purchasing a large brokerage house or mutual fund management company to add to its growing financial services line.

Transamerica’s success as a major financial services operation has been based on a good understanding of consumer needs. Through a history of changes and growth, Transamerica has maintained its powerful and influential position in the world of finance. It is clear that Transamerica is headed toward a promising future as a full-service financial institution.

Principal Subsidiaries

Transamerica Occidental Life Insurance Co.; Transamerica Insurance Co.; Transamerica Title Insurance Co.; Transamerica Financial Corp.; Transamerica Interway, Inc.; Transamerica Equipment Leasing Co.; Transamerica Airlines, Inc.; Budget Rent a Car Corp.; Transamerica Investment Services, Inc.; Transamerica Development Co.; Transamerica Realty Services; FSJ Holding Company, Inc.; Compass Computer Services (50%); Transamerica Overseas Finance Corp. NV; Transamerica Delaval Inc.; Transamerica Life Companies; Transamerica Real Estate Tax Service.