Bruce Abrams, who was named president of American General Annuity Insurance Co. in Houston last week, has set an ambitious goal for his unit: to increase variable annuity sales through banks so they are equal to sales of fixed annuities.
"A lot of companies have focused on the variable annuities, but there's a lot of growth potential there," Mr. Abrams said. His company hopes to offer banks "a different value proposition" by increasing their involvement in product design and giving them more marketing support than its competitors, he said.
Mr. Abrams has been with the American General Financial Group unit since 1994, when the company bought Western National Life, where he had worked since 1978.
Since 1995 he had been the executive vice president and chief financial institutions marketing officer for the company's asset accumulation division.
American General Annuity sells its products through about 300 banks. In the third quarter it was the country's second-largest insurer in annuity sales through banks, behind only Hartford Life, according to Kenneth Kehrer Associates.
About 90% of the unit's products are proprietary, in which the banks that sell them act as a subadviser to the funds used in the annuities. The banks can also add their brand names to the fixed and variable products, and can set initial and renewal rates on the proprietary fixed annuities.
Mr. Abrams said the company sees growth opportunities in providing proprietary annuity products to smaller banks, and it intends to increase its small bank penetration next year.
"We will manufacture any product" that banks "want to sell," Mr. Abrams said. Since banks are sizable annuity sellers - they sold 27% of all fixed annuities and nearly 13% of all variable annuities in the third quarter, according to Kenneth Kehrer - American General Annuity will customize its products for banks and will offer them support through marketing campaigns, he said.
The unit is on track to sell $4 billion of annuities through banks this year, with about two-thirds coming from fixed annuities, Mr. Abrams said.
On the fixed annuity side, Mr. Abrams said, multiyear annuities with rates of return guaranteed for five years (instead of varying from year to year over the life of the contract) are driving bank sales, despite a tough interest rate environment for annuities overall.
Over the past two months the unit has rolled out 14 proprietary versions of this annuity for different banks that requested them, Mr. Abrams said. These products now generate two-thirds of the unit's premiums, he said.
In the third quarter "most of our products were still one-year products," he said. "We set out to convert the one-year products to five-year products, and our premium in many accounts has doubled."
Kenneth Kehrer, president of Kenneth Kehrer Associates of Princeton, N.J., said that some customers were displeased with insurers' earlier products, because the banks were given a "bonus" interest rate their first year and returns were much lower in subsequent years.
Now that the insurers have developed products with guarantees, their bank sales are growing, Mr. Kehrer said.
Mr. Abrams said that insurers have had a difficult time in recent months, as turbulence in the equity markets have made variable annuities more volatile, and interest rate changes have made fixed annuities less attractive than CDs. However, "I think we can sell a lot of annuities in every interest rate cycle."
Selling annuities in a tough interest rate environment just requires a better focus on the benefits of tax deferral, he said.
Carmen Effron, president of C.F. Effron & Co., a consulting firm in Westport, Conn., said she has a similar view. "If you look at what's going on in the stock market, it's not hard to believe that people are looking for some sort of guarantee."
The recent stock volatility has affected variable annuities and made bank representatives look for an easier and more stable product to sell, she said.
Mr. Abrams said that another challenge for insurers distributing through banks is to "help people move from selling annuities to selling life insurance."
The key to selling life insurance in banks is making the sale more transactional, he said. Most life insurance requires medical exams and 60- to 90-day waiting periods, as opposed to annuities, where the customer can often leave that day with a contract in hand.
"We have very busy bankers who we are asking to sell life insurance," he said. "They don't like to collect specimens, and they don't like to wait 60 to 90 days for their commissions."
American General Financial said it is currently developing simpler life insurance products, and it is adding features to its variable annuity products to increase the sales of those products.
