Aetna Life and Casualty Co. has taken a major step to boost its paltry sales through banks by entering a selling agreement with a leading marketer of investment products.
The Hartford, Conn.-based insurance giant gained access to 242 banks after entering an agreement last week to sell annuities and insurance through Invest Financial Corp., Tampa.
Invest, which markets life insurance, annuities, and securities to banks, has the third-largest client base in its industry.
The selling agreement opens a substantial growth opportunity for Aetna, said David Sanderford, vice president of financial institutions marketing for Aeta's annuity subsidiary, Aetna Life Insurance Annuity Co.
Aetna could capture up to 30% of Invest's sales through banks, said Kenneth Kehrer, a consultant in Princeton, N.J. He said Invest sold $640 million in annuities at the end of 1994.
Despite being the nation's eighth-largest annuities company, with $21 billion in assets, the company's sales through banks have been nominal so far.
Currently, Aetna already sells directly through six banks, the largest of which is First Bank System Inc., Minneapolis, a $25.9 billion-asset banking company. The insurance company also sells through two small marketing companies, but Mr. Sanderford declined to say how many banks are selling Aetna's annuities.
Mr. Sanderford said the agreement with Invest is Aetna's first large- scale attempt to acquire bank business, because the company's attention was first on creating new products for banks.
"We've only been taking our show on the road for about three months, now we've got stuff coming out of the pipeline," he said.
As part of the sales agreement, Invest will offer Aetna's line of flexible premium fixed annuities and its variable annuity, Aetna Marathon Plus.
Even with its well-recognized brand name, Aetna could still face difficulties attracting Invest bank clients, because the marketing firm sells the insurance and annuities of 20 competitors, including ITT Hartford and Lincoln National Life Insurance Co. Those two companies are the top sellers of annuities through banks.
But Mr. Sanderford insisted Aetna's brand name will hold up against those competitors. "Of the top 20 insurance companies selling to banks, our name recognition is better," he said.
The selling agreement with Invest may afford Aetna access to many banks, but Aetna's main strategy is to develop long-term relationships with large regional banks, Mr. Sanderford said. He said that Aetna executives have talked to at least six banks about setting up proprietary annuities.
Aetna, like many of the largest insurance companies, did not enter the bank channel earlier because bank investment sales representatives competed with their captive agents. But banks have become the fastest-growing distribution channel for annuities, so they find it harder now to resist.
Bank sales of annuities have steadily increased, doubling their market share to 31.7% of fixed annuities since 1989. The total share of nonbanks has dropped steadily since 1990, from 83.4% to $68.3%, according to Mr. Kehrer.
"Aetna's entrance in this business is a reflection of the bank channel beginning to attract some of the more old-line, brand-name respected companies," Mr. Kehrer said.
Mr. Kehrer said banks tend to attract typical annuity buyers, older people with moderate income who are used to certificates of deposit. Life insurance agents tend to seek either young or wealthy clients who will generate commissions over a longer period of time.
But this trend means Aetna isn't the only insurance company with name recognition that is eyeing banks. Allstate Insurance Group, Mutual of Omaha, and Transamerica Life Insurance Co. are among the big names getting their feet wet in banks, he said.
