Several years after leaving the bank channel, Conseco Inc. is laying the groundwork to rebuild its annuity sales through bank alliances.

But its decision to seek new bank partners is coming as annuity sales are down across the board and some banks have begun to talk about paring the number of annuity relationships they manage.

John Howard, president of Conseco Retirement Services in Carmel, Ind., said he believes now is the time to get into bank distribution of annuities — something the insurer has done very little of since shedding its Western National Life unit in 1994.

“We realize that it’s tough, but if we focus on the relationships, aligning with banks that target the same customers we do, we can succeed,” Mr. Howard said. “We’re focused on middle America, and there are banks that do the same thing.”

Conseco, which managed $58.5 billion of assets at March 31, had used the Western National unit to distribute annuities through banks. But it spun off the subsidiary in February 1994, then sold its minority interest in Western National to Houston-based American General Corp. later that year.

American General is one of the biggest distributors of annuities through banks. Conseco, meanwhile, had $873 million of variable annuity sales and $850 million of fixed annuity sales in 2000, virtually none through banks, Mr. Howard said.

And two Aprils ago, Conseco bought Green Tree Financial, a consumer finance company based in St. Paul. The deal was roundly panned and has earned the Indiana insurer little but trouble for the past two years.

Though Conseco spent 2000 climbing out of the earnings hole dug by Green Tree’s poor performance, analysts said they think the company still has a way to go.

It says it is hoping to increase sales by adding bank relationships to the ones it already has and by creating annuity products for this channel. For the past year, Conseco has offered a variable annuity through six community banks.

Last week, the company launched the Conseco Century fixed annuity through the same six community banks, as well as through $160 billion-asset U.S. Bancorp of Minneapolis, the latter a relatively new relationship. Conseco is adding U.S. Bancorp as a variable annuity distributor this month, Mr. Howard said.

And in July, Conseco plans to launch a variable annuity designed for banks, he said.

Mr. Howard said Conseco’s sales goal for 2001 is to reap 5% of its annuity premiums, variable and fixed taken together, from bank sales. He said he expects to sell more than $1 billion each of variable and fixed annuities this year, despite the unsettled stock market, which has driven down variable annuity sales industrywide.

“Yes, the market is tough, but the new products, we think, will make up for it,” Mr. Howard said.

Analysts, however, questioned whether Conseco would be able to move aggressively into the bank annuity market while it struggles financially with Green Tree.

“One of the challenges is, most banks put a high value on ratings. Banks value the financial strength of companies with which they have relationships,” said Julie Burke, an insurance analyst in Chicago at Fitch Inc. Because Conseco’s ratings are comparatively poor — it is rated BBB by both Fitch and Standard & Poor’s but A-minus by A.M. Best — “banks aren’t going to sell [Conseco] products right away,” she said. “It’s going to be a tough nut for Conseco to crack. Banks are going to want to see higher ratings than that.”

Carmen Effron, president of the consulting firm C.F. Effron Co. of Westport, Conn., said, “More conservative banks will want an S&P or Fitch rating in the A’s. Other banks might be less picky.”

Travis Pascavis, an insurance analyst in Chicago for Morningstar Inc., agreed with Ms. Burke but added that Conseco must bolster its bank annuity business if it plans to be a big player in annuities.

“I’d give them six months before I judge how they’re going to do down the road,” Mr. Pascavis said. “In a year, they might be effective through banks. But they’re not out of the woods financially. They still have a high debt level, and they’re still fighting fires.”

Mr. Howard said some banks may be scared off by Conseco’s financial struggles.

“If a bank is going to say that the provider has to have a 10-year track record in order to be convinced to sell our products, that’s not going to be our best opportunity,” he said. “But some will see what we’ve gone through and how we’ve turned it around and will work with us. There will be enough banks that think that way.”

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