Shawmut Bank is considering adding a proprietary variable annuity to its current retail-investment offerings.

In creating its own variable annuity, Shawmut would in effect be repackaging its own mutual funds, the Shawmul Funds, into a tax-advantaged product.

Stream of Fee Income

The Boston-based bank already offers several annuities managed by outside vendors through a program with MDS/ Bankmark, a third-party marketing firm in Morris Plains, N.J.

If Shawmut proceeds with the plan, it would join a small but growing circle of banks that have launched proprietary annuities.

Wells Fargo & Co., Great Western Bank, and Fleet Financial all teamed up this year with insurance companies to create such products, and Norwest Corp. has one in the works.

Banks earn a stream of fee income by serving as adviser to the securities portfolios, typically mutual funds, in which their variable annuities invest.

While a proprietary annuity would be designed to "complement" Shawmut's other offerings, Bankmark "may or may not" be involved in the annuity addition, a Shawmut spokesman said.

Annuities are insurance contracts whose earnings are not taxed until they are tapped.

Fixed annuities pay set yields, much like bank certificates of deposit. Yields on variable annuities fluctuate depending on the performance of the investments.

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