Annuities Growing In Product Arsenals

Last year, banks sold $8 billion in annuity products. That was 13% increase from 1989. And according to many industry watchers, customers' appetites are growing for annuity products, which are tax-deferred, long-term savings plans normally offered through insurance companies.

"When I look into my crystal ball, I see more and more banks offering annuities," said Miriam Allison, founder of Sunstone Financial Group, Milwaukee.

But legislative problems loom for banks that want to offer annuities to customers.

"Legislation varies from state to state," said D. Mark Olson, president and chief executive officer of Invest Financial Services, Tampa, Fla. "On the whole, it's fairly restrictive."

Most Banks Use Agents

What's more, even if banks manage to wade through the legislative muck, the expense of starting an annuity product can be prohibitive.

"Based on surplus requirements, annuity issuers would have to set aside substantial reserves. The cost would become very burdensome," said Mr. Olson. "So most banks sell through agents."

For example, New York-based Chemical Bank offers its customers annuity products from Invest, a subsidiary of Kemper Corp., creator of the annuities.

This year, Provident National Bank, the Philadelphia-based unit of PNC Financial Corp., started selling annuities through its branches in a joint venture with GNA Corp., Seattle. Ten GNA account executives now have offices in Provident branches to meet with customers interested in annuities. In the past, customers were referred to outside sales offices for investment products.

The program is intended to serve existing bank customers and attract new ones.

"We have long recognized that our customers have financial assets that they are not. carrying with us," said Fred Frank, senior vice president for retail banking at Provident.

Attractive to Big Banks

Chase Manhattan Bank also sells annuities through GNA, although it intends to convert the GNA sales force to an in-house crew.

Many large banks view direct sales of annuities as a promising new source of fee income.

Citibank began using 130 employees to market annuities to customers this year. Previously, the Citicorp unit had offered annuities through a third party. The bank's move was in response to a decision by the Office of the Comptroller of the Currency that gave national banks authority to sell annuities on condition they comply with state laws where they operate.

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