For Toronto's Manulife Financial Corp., banks own more and more of the regional broker-dealers making up its core U.S. distribution force for variable annuities and single-premium variable life.

But unlike some others in the same boat, Manulife's U.S. wholesaling unit for these products has carved up its sales force in the past couple of months to bring banks and their broker-dealers together.

"The major regional banks that have made a commitment to the financial services business have done so by acquiring regional firms in their parts of the country," said Robert Cassato, president and chief executive officer of the unit, Manulife Wood Logan. Among Manulife's distributors, he noted, Wheat First Butcher Singer Inc. has been bought by First Union Corp., Hilliard-Lyons by PNC Financial Services Group Inc., and McDonald & Co. by KeyCorp.

Banks and bank-owned broker dealers are now "the fastest growing channel" for variable insurance and annuity distribution, Mr. Cassato said.

Last year about 20% of Manulife Wood Logan's $4.5 billion in sales went through the 40 banks and bank-owned broker-dealers with which it works.

In recent months two competing insurers, Hartford Life and Lincoln Financial Group, have reorganized their wholesaling so that each bank gets one person to deal with for all products.

But because so many regionals are owned by banks, Manulife Wood Logan, which is based in Stamford, Conn., has split its 180 salespeople into two groups, dividing those who call on banks and regional brokerages from those who call on wirehouses.

The parent Manulife Financial still uses a multipronged distribution system in the United States. Three groups of wholesalers sell different product lines to all but the largest accounts.

  • Annuities and variable life products are distributed to banks, brokerages, wirehouses, and independent agents by Manulife Wood Logan.
  • A U.S. group pensions unit distributes 401(k)'s and other pension products.
  • A U.S. life insurance unit sells other life products.

The group pensions and life insurance units work together with the wholesalers from Manulife Wood Logan to cross-sell, Mr. Cassato said. Constant communication and cross-compensation - paying people for referrals about other products - helps the different groups work together seamlessly, he said."Once you get collegiality among wholesalers, you get a great deal of communication on the local level," Mr. Cassato said. "Instead of bumping into each other, you instead join meetings."
The bank channel offers even more opportunities for growth, he said. "Typically, banks do not offer a broad array of products, so when yours is on the shelf you get a great deal of attention."

Manulife has tried to get shelf space by offering products that appeal to the conservative investors who make up a typical bank's customer base - products such the Guaranteed Retirement Income Program option, introduced in January, for its variable annuity.

The company also ranks first in variable annuity wholesaling support, according to the annual poll Dalbar Inc. released in October of financial professionals working for or in banks.

And Kenneth Kehrer Associates ranked Manulife 13th by volume among variable annuity sellers through banks, at $396 million in 2000, up 13% from 1999. (Manulife does not break out its sales of life insurance through banks.)

Valerie Jordan, president of the Jordan & Jordan Associates consulting firm in Belchertown, Mass. said that Manulife's strong relationships with big banks mean its key bank accounts are probably served by the national sales force anyway.

"They're not really dealing in the community bank marketplace," where having a single wholesaler to deal with a bank is just not financially viable, Ms. Jordan said.

Carmen Effron, president of the C.F. Effron consulting firm in Westport, Conn., said Manulife may have made the right decision. Though the Hartford and Lincoln approach makes sense, she said, it is relatively untested - and expensive.

"Why would they [Manulife] switch if they didn't have to switch?" she said. Its dual system - one wholesaler for big accounts, many for small accounts - means Manulife has less need than other insurers to retrain people on various products, Ms. Effron said.

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