U.S. Trust Co. is entering the variable annuity business with proprietary products designed for its affluent customer base.
The New York banking company will be out by early next year with variable annuities linked to its UST Master mutual funds.
These tax-deferred insurance contracts, with returns based on the performance of underlying mutual funds, are a natural fit for U.S. Trust, which caters to individuals in the highest tax brackets, said Paul K. Napoli, executive vice president overseeing the program.
But U.S. Trust's plans extend beyond its own customer base. The company also plans to sell its variable annuities through personal trust departments at other financial institutions and to get investment product marketing companies to sell them, Mr. Napoli said.
"We are seeking maximum distribution," he explained. U.S. Trust's variable annuities will based on seven of the banking company's proprietary mutual funds, ranging from domestic equity to international bond funds. The banking company does not plan to offer a fixed option as part of its proprietary offerings.
U.S. Trust ranks as the 20thlargest manager of mutual funds among banks, with $3.7 billion of assets under management as of June 30, according to Lipper Analytical Services Inc. of Summit, N.J.
The banking company is developing the variable annuities with Chubb Life Insurance Co. of America, Concord, N.H., which will underwrite the insurance contracts.
U.S. Trust's variable annuities will carry lower charges than many competing products, Mr. Napoli said, although he did not disclose the charges.
U.S. Trust will also reduce its annual fees as more is invested in the variable annuities, Mr. Napoli said.
The minimum initial investment for U.S. Trust's annuities will be $50,000. Other companies normally require a minimum investment of $20,000, experts said.
U.S. Trust joins about a dozen other banks that have rolled out variable annuities since January 1993, when Fleet Financial Group launched the industry's first proprietary offerings.
