Florida's two largest banks have taken the first steps to directly market annuities in the state, now that regulators have given them the green light.

Barnett Banks Inc., and First Union Corp. announced last week that they will shortly begin selling annuities through their own branch-based investment sales representatives in Florida.

The two banking companies would be the first to test Florida regulators' new annuities sales guidelines, and may herald a flood of new competition in a much-sought-after market.

Other banks have expressed an interest in following the lead of these two banks. SunBanks, the Florida unit of SunTrust Banks Inc., Atlanta, and NationsBank Corp.'s Florida unit all have plans to market annuities by the end of the year, bank officials said.

"Florida is an affluent market; it's where the money is," said Kennedy G. Thompson, president of First Union National Bank of Florida, the second- largest bank in the state. "Annuities aren't going to be a little sideline product for us."

First Union started selling annuities directly last week. Richard Jones, Barnett's chief asset management executive, said the bank is severing ties with its annuity sales partner, James Mitchell & Co., San Diego, and will roll out a pilot sales program by next month.

In separate statements, the banking companies said their plans were spurred by the Supreme Court's decision in January that made it clear banks may sell annuities.

But until recently, Florida banks had been barred from selling the products directly. Earlier this month, Florida banking and insurance regulators retreated from their prior position, and hammered out annuity sales guidelines for banks to follow.

Jacksonville-based Barnett was the first to announce its plans. The $42 billion-asset banking company - Florida's largest - had been embroiled in a lengthy battle with regulators over charges that its sales partner, Mitchell & Co., had given bank employees improper compensation for referrals.

Last week, Barnett negotiated an end to its contract with Mitchell & Co., which will receive $4.5 million to continue servicing all $1.4 billion of Barnett's annuity accounts. Barnett will slowly take over the servicing of those accounts over the next 60 days, a spokesman said.

He added that Barnett's 140 investment sales representatives have begun training to sell annuities. Right now only 80 of the reps are licensed to sell insurance and annuities.

First Union officials said its 85 full-service brokers began selling annuities last Friday throughout Florida. Some 700 other sales representatives will be licensed to sell annuities by the end of the year, said David de Gorter, senior vice president and director of the banking company's First Union Insurance Group.

The bank will sell variable and fixed annuities from Western National Corp., Keyport Life Insurance Co., and ITT Hartford Life Insurance Cos., among others.

Mr. de Gorter would not reveal how much First Union expects to sell in Florida, but industry observers say the banking company expects to sell $1 billion of annuities in 1996, and Florida will represent a big chunk of that.

The Florida market has been ripe for the picking for a long time, some bank and insurance executives say. The state is viewed as a fertile market for banks wanting to sell annuities because its demographics closely mirror those of the average annuity buyer, said Michael J. Poulos, chairman of Western National Corp., a leading annuity marketer in Houston.

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