Geico Corp. disclosed plans yesterday to sell its Government Employees Life Insurance Co. subsidiary to a British buyer for $140 million.

Government Employees Life, based in Rockville, will become a subsidiary of Legal & General Group Ltd., of London, if the sale is completed as planned.

The buyers plan to keep Gelico's offices here and retain its management and all 175 employes, said Geico corporate spokesman Robert Jackson.

The sale will take Geico out of the life insurance line at least for the time being and will bring into the U.S. insurance business a major British insurer with assets of more than $9 billion.

Goverment Employees Life collected $32.9 million in premiums last year, accounting for less than 5 percent of Geico Corp.'s $653 million in premium income.

Geico owns 66 percent of the stock of Government Employees Life; the remaining shares are held by other investors, some of whom have complained about relations between the life insurance firm and its parent company.

Legal & General has offered to pay $30.75 a share for all the Gelico stock, nearly twice the $15 5/8 a share the stock was selling for before trading was suspended Tuesday pending the announcement.

Geico's board has agreed to sell all 2.9 million Gelico shares owned by the parent company to Legal & General for a total of $89 million. Jackson said it is difficult to calculate what profit Geico will make on the sale or how the transaction will affect Geico's finances.

Shelby Collum Davis, former chairman of Government Employees Life and a critic of its ties to Geico, could not be reached for comment yesterday.

Davis in 1979 accused Geico executives of conflict of interest after the parent company bought up much of the Gelico stock from other shareholders for $14 a share. Davis complained that the stock was worth more.

Government Employees Life was incorporated in 1949 by the management of Government Employees Insurance Co. as a way of moving Geico into the life insurance business. Gelico's primary business is individual life insurance, but the company also offers group life, accident and health insurance and annuities.

The life insurance company became a majority-owned subsidiary of Geico in 1978 after the parent company bought back most of the shares that had been sold to the public. Geico, however, was never able to reach an agreement with minority shareholders to acquire the rest of the stock.

Under the agreement with Legal & General, two U.S. subsidiaries of the London firm will make a public offer for all Government Employees Life stock within the next week. The offer will require the approval of District of Columbia and New York insurance regulators and a vote by Legal & General's shareholders, a process expected to take 60 to 90 days, Jackson said.

He said Morgan Stanley & Co., the New York investment bankers, approached Geico about acquiring the life insurance operations, and the deal was signed after two months of negotiations.

"What it got down to was that Legal & General was willing to make a tender at a price that represented a very fair offer, and we had a responsibility to the minority shareholders to consider it," Jackson said.

The agreement between the two firms prohibits Geico from competing immediately with its former subsidiary, but it leaves the door open for the company eventually to re-enter the life insurance business, Jackson said.