insurance business, buying up several agencies in the upper Midwest. But after trying to make a big splash in the business the old-fashioned way, executives at First Bank decided to pull back. They sold off the agencies, integrating insurance sales with other bank products. Today, the Minneapolis-based banking company is using investment product reps to hawk life insurance policies along with mutual funds and annuities. This approach distinguishes First Bank from other banks that are using dedicated life insurance agents. "Anytime we can leverage infrastructure that we have already built, we increase our ability to be a more profitable organization," says Joe Tessmer, president of FBS Investment Services, the brokerage arm of the $34.1 billion-asset banking company. In introducing life products through its investment sales force, the bank is focusing on two key product lines. The first offers a single-premium whole life policy underwritten by Aegon Insurance Group, Minneapolis. The other is a choice of two variable universal life products, one from Aegon and another from Fortis Financial Group, St. Paul. Pilot testing of the single-premium product began in September through a limited number of investment product reps. This type of insurance is designed for people interested in passing the principal of the policy on to their heirs. Variable universal life is one of the more sophisticated whole life policies offered today. The policy's death benefit - along with the cash value of the policy - is related to the performance of investment options that the client chooses. In addition, the policy has a "universal" component, meaning the customer can vary the amount and timing of the premium. While the first two variable universal products, which will be tested starting later this month, will require salespeople to ask customers more than 30 qualifying questions, the additional variable universal option being planned cuts the number of qualifying questions to six. If the underwriters determine that more questions should be asked, they will be responsible for the follow-up, not the First Bank System sales rep. "We will find out if reducing the underwriting requirements and the uncomfortable questions associated with life underwriting makes these products much more adaptable to this sales force," Mr. Tessmer says. Kenneth Kehrer, a consultant in Princeton, N.J., says First Bank is unusual in taking on a product as complicated as variable universal life. "Most banks that have their investment counselors sell life insurance have simpler products such as term insurance," he says. Just taking on the task of distributing life products through a sales force already juggling a number of products would have been enough of a challenge. "In general that approach has been disappointing for banks," Mr. Kehrer says. "The best sales are about $1,500 in premiums per month per broker. That doesn't add up to a lot of premium or revenue." But it appears that First Bank is taking a longer view that depends on its cross-selling abilities. "We think this adds to the sales process," Mr. Tessmer says. "We want to offer our customers products that best meet their needs, whether it's a mutual fund, individual stocks and bonds, an annuity product, or a life product. "The more versatile and the better trained our sales force, the more we build a high-quality mechanism to deliver products to our customer," he adds. To Steve Schroll, a senior analyst at Piper Jaffray Inc. in Minneapolis, insurance remains a good fit for First Bank. "Banks that have developed a strong sales culture in recent years are in a much better position to have success at selling new products and services," he says. "First Bank, like Norwest and many other premier institutions, has proven its ability to sell a variety of products." Mr. Schroll notes that First Bank's insurance strategy also fits into a companywide focus on opening new lines of business with the best return for shareholders. Insurance offers a good return on investment and return on capital, he says. While asking fewer questions makes sales of life products less time- consuming, he adds, it also makes training salespeople easier and keeps them focused on the benefits of the products and identifying customer needs. The single-premium life product, for example, is positioned as an annuity alternative for customers setting estate planning goals. Mr. Tessmer says that the single-premium product is a more attractive option, since it makes it easier for policyholders to pass on assets to their heirs with substantial tax advantages. "In our reviews of needs assessments, somewhere in excess of 25% of our customers who are buying fixed annuities intend to transfer those assets to their heirs," Mr. Tessmer says. "We think this product fits into that customer base very well." In the case of variable universal life insurance, Mr. Tessmer says customers gain the advantage of protection planning for their families while setting aside tax-deferred dollars for their retirement. "Both of these products are already being bought by our customers, but they are being sold through insurance agents and brokerages," Mr. Tessmer says. "From a competitive standpoint, we need to be able to meet the objectives of our customers ourselves and train our salespeople to look for them." While the potential for sales may be there, Mr. Tessmer says only 15% of the sales force will be part of the life product pilot. "Not all reps are created equal," he says. "Some will do well offering the product; others will not. Getting every rep up to speed will be a gradual process. "We don't see this as a quick home run within the organization," he says. "It will take a while to filter through the distribution mechanism." By moving slowly to introduce the products through brokerage distribution channels, Mr. Tessmer says First Bank is displaying characteristic caution. "We want to make sure that when we make a business decision, it's based on the fact that we can do it in the right fashion, that we've tested it, and that we are doing it appropriately rather than having taken a wholesale plunge," Mr. Tessmer says. "The issue for us is to determine how best to put these products within our distribution system," he says.

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