As the head of a company that manages more than $23 billion in annuities, Mr. Broad has plenty of ideas about successful marketing strategies. In this second installment of a recent speech to the National Association for Variable Annuities, Mr. Broad gives advice on how to sell annuities through banks.

Approaching the bank marketplace, in particular, demands certain disciplines. I would like to describe five disciplines that we at SunAmerica have found important.

First, to play in the bank arena, you must be well capitalized. Banks are inherently conservative. Even for variable products, they want to deal with companies like SunAmerica that are rated at least AA.

Second, you must have state-of-the-art technology. Quick and efficient electronic linkages are the future of customer account servicing in the annuity business.

Our customer service reps now work in a basically paperless environment. We receive applications and issue policies electronically overnight. (The industry average is about six days.) And we retrieve records and execute transactions in a matter of seconds.

We're currently working in partnership with a major brokerage firm to provide their registered representatives with instant electronic access to customer accounts in their own offices. Soon, we'll have the ability to electronically issue policies in bank lobbies and financial planners' offices within minutes.

Ultimately, down the line, we expect to provide bank customers with instant access to their annuity accounts via ATMs and telephone key pads.

Third, you must view the relationship as a long-term strategic partnership - and be able to bring "value added" to the table.

The types of banks you choose to do business with are important. It's not just a matter of size. We look for long-term relationships with bank partners that have a proven ability to sell other packaged products such as mutual funds. They are far ahead on the learning curve.

In forging strategic alliances, SunAmerica has been able to offer large banks a powerful auxiliary distribution force for their products through our two broker-dealers. Key to signing the Chase Manhattan deal was our 30- year relationship with top management and the ability to sell their mutual funds and variable annuities through SunAmerica's 4,400 registered reps. In addition, as a $24 billion company, we offer the potential for significant commercial banking and other relationships.

Fourth, I believe you must stay ahead of the product development and technology curve. Today's generation of variable annuities is far more sophisticated than we saw in the 1980s. Multimanager and asset allocation products are the annuities of choice. Shelf life is shorter than in the past. Yet systems programming demands are immense and product enhancements require even longer lead times, given the current backlog at the SEC. Such an environment requires exceptional vigilance and a commitment to product development.

Finally, I believe that financial discipline is imperative as companies approach the bank marketplace. As excited as we are about this distribution channel, there are serious questions to consider. Competition is intense. We all need to ask ourselves whether we are chasing distribution without regard to its costs and our long-term profitability.

It's no secret that annuities are a low-margin business. Right now, I'm convinced that many new entrants to the variable annuity market are pricing their products at a level that isn't profitable. What's more, they are literally paying ransom to obtain distribution. Throughout the industry, high commissions, marketing allowances, bonuses, and promotions are getting out of control and are unsustainable.

At SunAmerica, we run our company as owners, not managers. We have a strong pricing discipline. And we have cost controls in place that, despite rapid growth, reduced our general and administrative expenses by 2% last year. As a result, we've seen a 40% annual compound increase in earnings over the past five years.

There is no question that the competition is heating up as more and more players go after the same huge untapped marketplace. None of us own a market or a category. Everyone wants a piece of the action. In the frenzy for market share, let's not kill the golden goose. Chasing sales without requisite profitability is fool's gold.

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