As its own top executives are the first to admit, American Skandia sure sounds like a furniture store.
But as it pushes its way into banks, the company is looking more and more like the variable annuities powerhouse that it has set out to be.
The Shelton, Conn., firm sparked a banking industry trend last year when it helped Fleet Financial Group bring out the first bank-managed variable annuity.
Since then, American Skandia Life Assurance Co., as it is formally known, has helped Wells Fargo & Co. launch its variable annuities and has laid the groundwork for a big drive to sell its own products through banks.
Aiming for Top Spot
"We want to be the No. I annuity company in the country," said Bayard F. Tracy, senior vice president in charge of institutional sales. "And banks offer the greatest market share growth potential."
He believes banks can sell annuities as vigorously as the brokerage firms, insurance agents, and financial planners that now account for the bulk of American Skandia's sales.
Variable annuities combine the features of an insurance policy and a mutual fund - and offer a tax break to boot. Earnings accumulate tax-free until withdrawal, making the investments a hot retirement savings vehicle.
50% Growth in 1993
Retail customers last year snapped up $24.6 billion of variable annuities, up 50% from $16 billion in 1992, according to Kenneth Kehrer Associates, Princeton, N.J. And banks' share of the market is growing rapidly - totaling $2.8 billion last year, double 1992's level.
Variable annuities are not, however, entirely an easy sell.
"A lot of people in banks are still savers, and clearly, a spike in interest rates would eliminate some people who might have bought variable annuities," Mr. Tracy acknowledged.
"But if you have properly trained your sales staff, variable annuities will do very well."
Mr. Tracy, who spent 16 years in banking before joining American Skandia four years ago, is spearheading the company's efforts to create proprietary annuities for banks.
His counterpart for distributing American Skandia's own products through banks is Alan Blank, who joined the company in February with two decades of experience in investment products marketing to his credit.
"We're attempting to position our company to be the true leader in helping banks," said Mr. Blank, whose title is national sales manager for banks. "We have to teach them to sell, and support their sales efforts."
The two executives - sometimes alone, sometimes in tandem - have been crisscrossing the country to raise American Skandia's profile in an industry already crowded with major U.S. insurance and mutual fund companies like Hartford, Putnam, and Franklin.
Highly Regarded Abroad
American Skandia is part of Skandia Life Insurance Co., a Swedish concern that enjoys a good reputation abroad, and manages more than $28 billion in 20 countries. But its U.S. unit was launched only in 1988.
"It's obviously not a company with household name recognition," Mr. Blank said. He said the name of the game will be to boost the company's image with banks and investment-product marketing companies. Once that happens, consumer recognition will follow.
To this end, Mr. Blank recently hired five sales executives whose job is to introduce Skandia's products to banks and offer continuing support. This fall, Skandia will supplement their efforts by introducing a software training program for bank representatives.
Skandia's own product for banks, the Advisors Plan, uses fund managers like T. Rowe Price and Scudder Stevens & Clark to oversee its mutual fund portfolios,
While the company's sales efforts through banks are just taking off, it is compiling a solid track record as a partner to banks that want to manage variable annuities.
Since American Skandia brought Heel into variable annuities in January 1993, about a dozen banks have followed suit.
These banks are launching annuities as an extension of their proprietary mutual fund business, attracted by the fee income they can collect for managing the assets that make up the annuities' investment portfolios.
To create the products, banks clone several of their existing mutual funds and offer them as investment options for annuity purchasers. Insurers like American Skandia come into the picture because the task of underwriting the annuities' insurance contracts is off limits to banks.
One of the factors banks weigh in choosing annuity partners is their creditworthiness.
American Skandia's ratings are A-minus from AM Best and double-A-minus from Duff and Phelps -- "okay," but not spectacular, according to Andrew' Singer, managing director of Bank Insurance Market Research Group, Mamaroneck. N.Y.
"A lot of banks won't do business with anyone below A-minus," Mr. Singer said.
Fleet Expands Marketing
At first, Fleet limited marketing of its Galaxy annuities to high-net-worth customers. But earlier this year, the bank expanded distribution to include branch customers, and assets began growing "by a couple of million a week," Mr. Tracy said.
As the effort gathers momentum, sales are nearing the $100 million mark, said Thomas Munsell, senior vice president of Heel Investment Services.
Mr. Tracy lists two reasons for Fleet's success.
The first is competitive pricing. Fleet's variable annuities carry no sales loads and no surrender charges, setting them apart from most in the industry.
"I'd say that's a real plus for investors," said Mr. Singer. "An annuity that doesn't carry a surrender charge is quite unusual."
Customer Service Technology
Heel and American Skandia have also teamed to develop customer service technology.
American Skandia takes a daily inventory of Galaxy annuity accounts and their investment amounts and transfers this information to Fleet's system for processing.
The arrangement allowed Fleet this spring to offer customers combined statements containing annuity data along with other account information.
In some ways, Mr. Tracy said, "this business is more of a technology play than it is an investments play by the bank."
And Heel "has a technology vision that is broader than a lot of banks'," he added.
Leading the Charge at American Skandia
Bayard Tracy
Senior vice president for institutional sales
Oversees American Skandia's efforts to help banks create variable annuities
Forged the first annuity partnership between a bank and an insurer, pairing up with Fleet Financial
Joined Skandia in 1990 after 16 years at Connecticut Bank and Trust, most recently as senior vice president for national banking
Alan Blank
National sales manager for banks
Heads American Skandia's program to sell annuities through banks
Joined the company in 1994 from Liberty Securities, where he was vice chairman
Founded Pamco, one of the first marketers of investment products through banks
