SunAmerica Buying a Ford Unit To Spur Bank Sales of Annuities

of a push to become a force in the selling of annuities through banks. The Los Angeles-based firm said last week that it had signed an agreement to acquire Ford Life Insurance Co. for $172.5 million. The transaction is expected to close early next year. Ford Life was the seventh-largest seller of annuities through banks last year, according to a study conducted by Kenneth Kehrer, a Princeton, N.J., consultant. "You may well see us do some other acquisitions of companies that have sold annuities to banks," said Eli Broad, SunAmerica's chief executive. SunAmerica's is trying to expand the sales of its annuities and mutual funds into distribution channels beyond financial planning firms, which have been the core of its business. It launched a $1 billion advertising campaign last year to increase awareness among investors. SunAmerica holds $28 billion in assets, and would capture an additional $3 billion under management via the Ford Life acquisition. More than 70% of Ford's annuity assets comes from banks. Mr. Broad, who sees great potential in the banking industry, predicts that the share of annuities sold through banks will rise from 7% to 20% in five years. Despite recent sales agreements with Chase Manhattan Corp. and Chemical Banking Corp., SunAmerica's sales through banks "were lacking," he said. Dearborn, Michigan-based Ford Life was founded in 1966 to sell credit life and credit disability. The company began selling annuities to banks in 1991 and watched sales soar to $612 million the following year. But the Ford unit's capital base began falling as its commission costs to annuity brokers became burdensome. Standard & Poor's dropped Ford Motor Life's rating from AA to A- in March. An industry observer said pride compelled Ford Motor Co. to dump its annuity business."It was embarrassed to be downgraded," he said. A spokeswoman with Ford Life said, "The annuity line of business is far removed from Ford Motor Co.'s core business." The Detroit-based car manufacturer is retaining its other insurance businesses, including credit life, credit accident and health insurance. Ford Life sold annuities through banks exclusively through Essex Corp., a New York-based marketing firm. Essex was the leading seller of fixed annuities in banks last year. Essex's chairman, Kevin Crowe, predicted SunAmerica will be more committed to the sale of annuities than Ford Motor Co. SunAmerica "understands our business, as opposed to a big holding company that's not in the insurance business," he said. Mr. Crowe said Ford contributed no more than 15% of Essex's overall sales of fixed annuities through banks this year. Last year, the company made a 34% to 35% contribution, he said. As part of the new attention SunAmerica is giving banks, the company plans to hire over the next year six new sales representatives in its financial institutions division, said Mark Moore, senior vice president and national sales manager. The unit, set up in 1989, now has four sales representatives dedicated to selling the company's variable annuities and mutual funds to banks.