When Arthur F. Ryan took the helm two years ago, observers said Prudential Insurance Co. was perfectly poised to push its wares through banks. After all, the new chairman was a veteran of Chase Manhattan Corp. and had spent four years as the bank's president.

But the nation's largest underwriter has been too busy fighting accusations of abusive sales practices to decide whether it wants to increase its bank presence. And should it make such a move, there's little evidence bankers would be interested. Their admiration for its chairman-who helped convert Chase Manhattan from a commercial lender to a global wholesale bank-has done little to convince them to get a piece of the rock.

"Most of us are not real interested in chatting with them today because of the problems," said Rick O. Bowman, president of U.S. Bancorp's insurance agency. "There's concern over their financial stability in the future."

Like many of its competitors, Prudential has been suffering a decline in sales through its agency force and wants to mine alternative markets. But while a slew of insurers are racing ahead to hawk policies through banks, brokers, affinity groups, and employers, Prudential hasn't left the starting gate.

A source close to the company said it has put on hold a search for an executive to run an "alternative distribution" unit. Indeed, the company has only begun to research whether it wants to sell through banks and other markets.

"Executives can't devote much attention to it now because of their problems," the source said.

A spokeswoman for Prudential confirmed the company is considering selling through banks. "We will look at it to see if it serves our customers and our agency force well," she said.

Bankers have long waited for Prudential to make a serious go at their market. They admired Prudential's position as the insurance industry's "rock" and thought the company could help them get their fledgling insurance programs off the ground.

When Mr. Ryan came in, bankers' interest in the big-name insurance company grew. They expected Prudential to truly understand the marketing and support needs of banks.

But developing a bank program has probably been the last thing on Mr. Ryan's mind. Prudential is struggling to reach a settlement with 10.7 million policyholders that could reach $1 billion. And that's only the latest in a string of problems at the Newark, N.J.-based insurer.

Last month, the company was fined $1 million for destroying potentially incriminating documents amid lawsuits. And in 1994, it settled a $1.5 billion suit alleging fraudulent sales of limited partnerships in its brokerage unit.

"If I were a banker talking to them, I would do it quietly," said Michael D. Hellyar, a senior vice president at KeyCorp's life insurance division.

A few years ago, bankers say, Prudential designed a simplified term insurance policy specifically for financial institutions. They add, however, that the policy was scrapped once Prudential's agents got wind of it.

Last summer, Prudential dropped its long-standing credit life insurance program-marketed exclusively through banks-as part of Mr. Ryan's cost- cutting initiative. If Prudential executives aren't committed to a product already firmly entrenched at banks, bankers ask, how can they be devoted to life program.

Bankers also point to Prudential's decision nearly two years ago to scrap a major campaign to mass market insurance through the mail as an example of how easily the company succumbs to pressure by its agents.

"That's a track record that's worrisome," said an executive overseeing the insurance program at a large northeastern bank.

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