The insurance underwriter Hartford Life Inc. has long reigned as the largest provider of annuities sold by banks. But if Robert M. Devlin, chief executive officer of American General Financial Group, gets his way, bragging rights could soon shift to his Houston-based company.

"With our growth rate at banks, we do have a good shot of being No. 1,'' Mr. Devlin said in a recent interview. "Even if we don't do it this year, we are still going to bring in a lot of business.''

Mr. Devlin has reason to be optimistic. In the past year American General, the No. 2 annuity underwriter in the bank market, has been closing in on Hartford. Its efforts have been powered by a major acquisition last year and a strategy that focuses on helping banks and thrifts -- such as First Union Corp., Washington Mutual Inc., and Bank One Corp. -- to develop their own "proprietary," or bank-managed, fixed and variable annuities.

In the second quarter, the latest period for which figures are available, American General's annuity sales through financial institutions reached $948 million in premium dollars, a 41% jump from the first quarter, said Kenneth Kehrer, a consultant in Princeton, N.J. By contrast, Hartford's annuity sales at financial institutions -- almost all of which are in variable contracts -- grew 16%, to $1.13 billion.

"I think American General has a good chance of catching the Hartford later this year,'' Mr. Kehrer said.

American General, primarily an underwriter of fixed annuities, has been helped by a return to favor of these traditional retirement savings products. Their popularity has been buoyed by more favorable interest rates and investor concerns about the growth in the equity markets.'

A Hartford spokeswoman conceded as much, arguing that her company, the largest U.S. underwriter of variable annuities through all sales channels, will strive to maintain its lead in the bank marketplace by being nimble.

"If interest rates make the fixed annuity market a better product to be in, we will participate in that,'' she said, declining to comment further about the company's bank annuity strategy.

As recently as four or five years ago, a rivalry between two insurance carriers for supremacy in the bank annuity market would have meant far less. But as the annuities business has taken off across a retirement-obsessed America, and as banks have become formidable sellers of these tax-deferred investments, the stakes have risen.

In the second quarter banks generated a record $7.3 billion of annuity premiums, 31% more than in the previous quarter and more than double the level of three years ago, Mr. Kehrer said. Banks garnered $3.9 billion of variable annuity premiums, up 25% over the previous quarter and the best-ever performance for these trendy mutual fund-like investments. Fixed annuity premiums jumped 36%, to $3.4 billion, the highest level since 1994.

Banks are gaining ground against other retailer sellers of annuities. In the second quarter, bank distributors' share of the nation's $9.4 billion fixed annuity market rose to 36%, a jump from 27% a year earlier, according to Limra International. The bank share of the much larger $29.2 billion variable annuity market also has grown, to 13% in the second quarter from 11% a year earlier

Watching this trend develop in recent years, executives at American General -- an insurance-oriented financial services conglomerate with a decidedly low profile with both banks and the public --decided to act. In February 1998 the company bought Western National Life Insurance, the nation's leading seller of fixed annuities through financial institutions, and renamed it American General Annuity.

Through the acquisition, American General became an overnight contender in the bank annuity marketplace, inheriting several relationships with major banks such as First Union Corp., National City Corp., and Huntington Bancshares.

Western National had been a industry pioneer of the "proprietary'' fixed annuity, a product that differs from an off-the-shelf fixed annuity in that banks can manage the assets in the account and set contract terms that might be more favorable to the customer.

Western National, for example, helped First Union develop the First Choice Bonus Annuity, which pays customers a return of about 150 basis points higher than the average off-the-shelf annuity, says Robert Wick, national sales manager for First Union Insurance Group. Since buying Western National, American General has inked proprietary fixed annuity deals with Wells Fargo & Co., Washington Mutual, and Union Planters.

Though the fixed annuity business has made up the bulk of American General's sales through banks, and though these products have enjoyed a comeback, variable annuities may grow more robustly over time, Mr. Devlin said.

As a result, Mr. Devlin is intent on seeing American General build that business. "Clearly, the variable side is where the biggest growth over the long term will come from,'' he said.

In September, American General joined with Bank One Corp. in creating the underwriter's first proprietary variable annuity deal with a major bank. Though American Generates provides the insurance wrapper and gets a mortality fee, the funds are managed by Bank One and a host of mutual fund companies, and the contract terms are a bit more customer-friendly than for most annuities. "We went with American General because they were receptive to some of the things that we wanted to do," said Glen Milesko, president of Bank One Insurance Group.

Executives at American General are hoping this kind of bank reaction, along with a new brand campaign that includes increased national television advertising, will propel their company into the lead position among all bank annuity underwriters.

"Being No. 1 is an important goal," said John Graf, an American General vice chairman in charge of retirement services. "It's important for banks to know that we have the scale to handle the business."

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