John Hancock Mutual Life Insurance Co. said Tuesday that it has bought Essex Corp., the leading provider of investment products to banks, from Cendant Corp.

Terms of the deal were not disclosed.

Observers said the deal helps shore up distribution of John Hancock's fixed and variable annuities. It also gives the Boston-based company access to Essex's 100 bank clients for the purpose of selling life insurance.

"It was just a good fit for all parties. It made sense for everybody," said Kevin Crowe, chairman and chief executive officer of New York-based Essex. He said the partnership gives Essex access to technological resources, as well as "a very good, deep-pockets balance sheet."

Essex, which sold $3.1 billion of mutual funds and annuities through banks in 1997, had been on the block for several months. Cendant of Parsippany, N.J., has been shedding noncore businesses in order to repay debt and buy back its own stock. A spokesman for Cendant could not be reached to comment.

Observers said that John Hancock is a good partner for Essex, in part because the two companies have worked closely for several years. Indeed, John Hancock made an earlier offer for Essex-before it was bought by CUC International in January 1995 for $27 million. CUC International merged with HFS International in December 1997 to form Cendant.

Nonetheless, some observers said that the future of Essex hinges in part on its ability to maintain a high degree of independence from its product- providing parent.

Kathleen M. Graveline, senior vice president of alternative distribution for John Hancock, said that the insurance company liked Essex's distribution capabilities. In addition to the sales of its fixed and variable annuities, John Hancock hopes to use Essex to sell life insurance.

"Essex will be another distribution channel that we can work with on that," she said.

"Essex will remain independent and continue to sell other people's products," Ms. Graveline said. She added that the companies have worked together to determine sales goals, based mostly on Essex's business strategy. "It's not like we said, 'You must sell this,'" she said.

In recent years, companies like Essex have been swallowed up by insurance companies in search of greater distribution of their products. For example, PrimeVest Financial Services of St. Cloud, Minn., was bought by ReliaStar Financial Corp. of Minneapolis in October 1996. And Liberty Financial Cos., Boston, bought Independent Financial Marketing Group Inc. of Purchase, N.Y., in March 1996.

Clients would be unhappy if "Hancock forces Essex to shove products down banks' throats," said a source close to Essex.

Mr. Crowe of Essex said that John Hancock was chosen from among a number of interested parties "whose type of business might not have fit" or that would have been more intent on pushing product.

Hancock, he said, recognizes "that the way to win this game is to offer a variety of products on an equal playing field, and this very much has been our philosophy for years."

Separately, Essex and John Hancock said they are introducing an asset allocation program to help bank brokerage clients rethink their investment strategies.

Thirty bank clients have already agreed to use the program, which does not favor John Hancock's products over other companies', said William N. Wade, executive vice president of Essex.

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