Executives at Summit Bancorp are very clear about what they expect from annuities: management fees.
That's why the Summit, N.J., bank company is taking a hand in managing a fixed annuity that will be available in branches later this year.
It's a role that relatively few banks have taken.
To be sure, about a dozen banks now manage their own variable annuities, tying the products to an existing family of proprietary mutual funds.
But fixed annuities are another matter. Managers of these products must be able to choose the right investments - usually a mix of investment-grade corporate bonds - to secure returns that exceed the fixed rate they set for the annuity.
Execution of this investment strategy can be tricky. Even some banks that manage variable annuities have left this part of the job to the insurance companies that underwrite the products.
And that's why Summit isn't handling the investment responsibilities alone. The bank will work with money managers at Western National Life Co., its annuity underwriter, to look at credit quality, durations, and other considerations that go into choosing investments for the annuity.
Summit sees financial benefits from taking an oversight role in the annuity instead of relying solely on other companies' off-the-shelf products.
"We expect to make more money by being involved with investment management," said Jack Cussen, executive vice president at Summit. Mr. Cussen declined to say just how much the bank company expects to earn through its joint venture with Houston-based Western National, or how profits would be split.
He maintained that Summit's involvement will also benefit customers. At the bank's request, investors will pay lower commissions and be able to cash out earlier than usual without paying penalties, Mr. Cussen said. "We see this as a very competitive product."
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New England Mutual Life Insurance Co. is using a new product and a new processing system to crack the bank market.
The Boston insurer plans to launch the American Growth Series, an annuity family with 13 investment options. CS First Boston and Salomon Brothers Inc. are among the money managers whose funds are offered. Bruce Long President, New England Annuities
The prominent money managers should help the products win shelf space at banks, said Bruce Long, president of New England Annuities, the division that oversees the new product.
Mr. Long, who joined New England Mutual last year from Keyport Life Insurance Co., a large seller of annuities through banks, said his employer has also devised technology to assist banks' sales.
New England's system allows sales representatives in banks to track customers' investment history, offer financial planning, and create direct mail and cross-selling programs, Mr. Long said.
Valerie Jordan, president of Jordan & Jordan, an insurance consulting firm in Belchertown Mass., said the system's top attribute is its "user- friendly" approach.
Although a number of other companies' systems offer similar services, they go untouched because representatives feel they are too complicated to use, Ms. Jordan said.
