Since taking the helm at Keyport Life Insurance Co., John W. Rosensteel has focused on developing relationships with third-party marketers and building annuity sales through banks.

Mr. Rosensteel, a 25-year veteran of Aetna Life and Casualty Co., joined Boston-based Keyport a year ago as president and chief executive.

Since then, Keyport has climbed from being the No. 4 underwriter of annuities through banks in 1992 to the No. 2 spot for the first six months of 1993, according to rankings by Kenneth Kehrer & Associates, a Princeton, N.J., consulting firm.

Aiming High

About 82% of Keyport's $474 million in annuity sales were channeled through banks in the first half of this year, company officials said.

Mr. Rosensteel is betting that Keyport, which has $9 billion in assets under management, can double that in the next five years.

He also expects the company, a subsidiary of Liberty Financial Cos., to double its revenues from premiums in two years. "I'm looking at the franchise we've established in the bank marketplace as a platform for achieving this growth," he said.

Why does Mr. Rosensteel see banks as a means to sell Keyport's products to a broader population? "They want to hold onto their customers, they have large customer bases, and they have excellent access and terrific credibility," he said. "It's a natural."

Last year, when banks accounted for about 75% of Keyport's distribution, the company sold $850 million in fixed annuities and $125 in variable annuities through banks, he said. This year, the company expects to ring up sales of $900 million in fixed annuities and $175 million in variable annuities.

Annuities are tax-deferred insurance contracts that invest in a pool of securities to generate a steady stream of income, usually for retirement. Fixed annuities pay set yields, while yields on variable annuities fluctuate depending on the performance of the underlying investments.

A Fan of Variable Products

"I'm a big proponent of the variable-annuity story, especially as a retirement planning product," Mr. Rosensteel said.

Most of Keyport's variable annuities are sold by a sister company, Liberty Financial Bank Group, which manages sales programs for mutual funds and annuities at 80 banks.

James Mitchell & Co., San Diego, handles most of the distribution for Keyport's fixed product. A Mitchell official said the company sells Keyport's products through about eight banks, ranging from most Barnett Bank branches in Florida to Hemet Federal, a small California bank.

Chemical Connection

"We also hope to be selling some annuities through Chemical," Mr. Rosensteel said. The New York-based bank recently launched a joint venture with Liberty, called Chemical Investment Services, to sell investment products.

In the past year, Keyport has "significantly increased" its relationship with Invest Financial Corp. of Tampa, Fla., a third-party marketer, Mr. Rosensteel said.

Admittedly, Mr. Rosensteel said, Keyport's rising sales in the bank channel have ridden on the coattails of its marketing partners' success. However, the company, which has 16 employees dedicated to bank sales support, works directly with third-party marketers to build sales in the bank channel, he said.

Although banks are breaking into the business slowly, Mr. Rosensteel predicts that they will become bigger players. Only 5% of the $20 billion in variable annuities written in the first half of 1993 came through banks, according to the Vards Report, Roswell, Ga. "But I still think that's where the growth will be," Mr. Rosensteel said.

In 1992, banks sold $3.5 billion in variable annuities. That represented a 17% share of the market, up from 12% five years earlier.

Bankers also say they are experiencing an upward trend in variable annuity sales. About a third of the revenue from investment products sold by Boatmen's Bank, which has $26 billion in assets, is coming from annuities, according to Thomas E. Schwarz, vice president and packaged product manager for the St. Louis-based bank.

"Our variable annuity business has grown substantially, and we think that trend will continue," Mr. Schwarz said. Last year, variable annuities accounted for 30% of annuity sales, but this year they have sprouted to 70%, he added.

"I will be surprised if most banks don't get into the distribution of annuities," Mr. Rosensteel said.

Though he noted that banks have an incredible opportunity in the insurance business, he warned that not all banks will have the economies of scale needed to succeed.

"Banks also have to address the issue of what happens when it doesn't work out," he cautioned, "because getting out can be even harder than getting in."

Colonial Funds Added

In keeping with its increased interest in the bank channel, Keyport added three conservative funds from Colonial Mutual Funds to its product offerings this summer "because they are a popular load fund and they rounded out our portfolio," Mr. Rosensteel said. A new product development specialist was recently hired, and more products are on the drawing board.

While Keyport's success in the bank channel is directly linked to its third-party marketers, Mr. Rosensteel is confident that the company "will continue to have a strong presence in this market."

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