While the market still has not produced a success story, life insurance sales may be the next hot area for banks.

Today banks account for about 1% to 2% of total life insurance sales. KPMG Peat Marwick recently surveyed 88 life insurance companies to learn what products they were selling through banks.

The survey found that the most popular insurance product sold through banks continues to be the single-premium deferred annuity. Its success is most likely due to its similarity to certificates of deposit.

Like CDs, SPDAs generally carry interest rates that are reset each year and have early-withdrawal penalties. And because SPDAs are not registered with the Securities Exchange Commission, bank employees who sell them do not need securities licenses.

Variable annuities, which took second place in the survey, have gained significant ground at banks thanks to the public's interest in the bull stock market. A variable annuity is basically a mutual fund wrapped within an annuity so the product enjoys the tax deferral advantage of an annuity.

It will be interesting to see whether the stock market's recent volatility affects variable annuity sales. The product has not yet been tested in a prolonged bear market.

The market value adjusted annuity, or MVA, is not currently sold in significant volume, but it is ranked third in banks' product stable.

This annuity guarantees an interest rate for one to 10 years as selected by the investor.

If the investor surrenders the annuity before it matures, a positive market value adjustment is made when interest rates have declined since the annuity was issued. By contrast, if interest rates have risen, there is a negative market value adjustment.

When interest rates are low, banks include the MVA annuity in their product stable to position themselves for a rate increase. Marketing pundits believe that MVA annuity sales will take off if the rate for the 10-year guarantee is at least 7%.

Money placed at 7% for 10 years virtually doubles at maturity, which is a significant selling point.

The equity indexed annuity, or EIA, is gaining popularity because its performance is linked to the movements of an index-generally the S&P 500 Composite Stock Price Index. Because there are so many varieties, these annuities are sometimes called "snowflake annuities," since no two are alike.

With variable annuities, performance is linked to a mutual fund, with no restriction on the potential gain or loss. With an EIA, however, performance is linked to an index, with a guarantee that it may not fall to less than, for example, 90% of the premium accumulated at 3% interest.

Because of this underlying guarantee, the product is not usually registered with the SEC. People who sell it, therefore, are required to hold an insurance license but not a securities license.

Universal life and level-premium term life were tied for fifth place. Universal life often offers permanent life insurance protection. Unlike an annuity-which may create an income tax liability at death for the beneficiary-universal life may allow a tax-effective means for transferring wealth to the next generation.

Level-premium term life gives relatively inexpensive life insurance protection for a specified term. The target customer for this product is often the underserved person, who does not currently have a personal life insurance agent.

Schwab's No. 2 To Get Title of Co-Chief Exec


Charles Schwab Corp., San Francisco, on Monday named David S. Pottruck as its co-chief executive officer, effective January 1.

Mr. Pottruck, 49, will share executive duties with founder and CEO Charles R. Schwab. Mr. Schwab will retain the additional title of chairman.

The move-the latest in a series of high-level reshufflings at Schwab- solidifies Mr. Pottruck's position as the firm's second-in-command, observers said.

In practice, Mr. Pottruck has held the No. 2 post for some time. But this restructuring bolsters his chances to succeed Mr. Schwab if he should retire, said Michael W. Sears, an equity analyst at Lehman Brothers.

Mr. Pottruck, a 13-year veteran of Schwab, will remain president but give up his position as chief operating officer. His successor has not been named.

He will also remain on the board of directors and continue as chief executive officer of the discount brokerage Charles Schwab & Co., the firm's flagship unit.

Mr. Pottruck's appointment reflects Mr. Schwab's "desire to have Dave focus even more on the strategy for the firm," a spokesman said. Mr. Schwab, meanwhile, "will continue to be as engaged as ever in the company."

In a management reorganization last September, Timothy F. McCarthy succeeded Mr. Pottruck as president and chief operating officer of the discount brokerage unit.

Mr. McCarthy had headed Schwab's mutual fund group, which includes the popular OneSource fund supermarket as well as capital markets and international business. Mr. McCarthy, in turn was succeeded by Tom Seip, who took over all but the capital markets portfolio.

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