Competing amidst Connecticut's insurance industry and New York's much larger banks, Summit Bancorp. has been waging a quiet battle for a better share of the annuity marketplace - and winning.

Seven years after it sold its first fixed-rate annuity, the Chatham, N.J.-based banking company is an ambitious seller of fixed and variable annuities, piling up more than $53 million in total sales last year.

Not satisfied with its gains so far, the $5.5 billion-asset company is rolling up its sleeves and preparing to launch its own fixed-rate annuity with enough "bells and whistles" to attract even more customers. "We've had our lunch eaten up by insurance companies and brokerages for years," said Jack D. Cussen, executive vice president of Summit's financial services group. "It's about time we take some of that market share back."

Summit's drive has already borne fruit. The company has made record gains in annuities sales in recent years.

Sales volume of fixed-rate annuities has nearly doubled in the past two years, from $18 million in 1992 to $35 million in 1994, and now makes up about 35% of Summit's total investment sales. Variable annuity sales have skyrocketed as well, from $6 million in 1993 to $18 million last year.

Like many banks, Summit got into the investment sales business after it saw customers withdrawing deposits to buy annuities from local brokers and insurance dealers. With the help of Essex Corp., a New York-based investment products marketer, Summit started selling fixed annuities in 1988; it followed up four years later with mutual funds and variable annuities.

From the beginning, Summit executives said, they have kept a close watch on how the sales program is run and how the investment products are picked and marketed. "We've always liked to control the program, and that's why we've kept our own employees as sales reps," Mr. Cussen said. "We also review every trade and 'mystery shop' our branches."

The bank's 175 platform sales representatives and 19 dedicated sales representatives shy away from high-pressure sales tactics, depending instead on a steady stream of internal and customer referrals, Mr. Cussen said.

Bank employees receive incentives based on the number of referrals they make to the investment department. Mr. Cussen declined to say how much employees are paid but asserted that the referral program conforms with current federal guidelines.

To be sure, Mr. Cussen credits sagging mutual fund performance for making fixed-rate annuities more popular with consumers lately, but he added that it's not a passing fad. "The grain of America is aging, and we see a very good outlook for this product," as baby boomers turn to investing for their retirement, Mr. Cussen said.

Summit's marketplace is an increasingly aging and affluent one, spreading across northern and central New Jersey from large urban centers like Newark to more rural communities like the borough of Washington near the Pennsylvania border. The state's per-capita income is among the highest in the country, Mr. Cussen said.

Confident of its ability to market annuities, Summit is gearing up to launch its proprietary fixed annuity this May. The move is aimed at increasing the bank's share of management fees and boosting its reputation as an investment manager.

Summit is taking a bold step that few other banks have attempted. Fleet Financial Group rolled out a fixed annuity last year, and First Union Corp. has one in the works.

All three banking companies are attracted by fee income that comes from managing the money that customers invest, but Summit is by far the smallest bank to take this route.

"We're reasonably happy with returns" on annuities sales, Mr. Cussen said, but he quickly smiled and added, "O.K., we're never satisfied with returns."

He would not discuss how much the bank will get in commissions and management fees from the proprietary product. Summit is teaming up with Western National Life Insurance Co., which will underwrite the annuity contracts and set investment parameters for Summit's money managers.

The bank already sells fixed-rate annuities from companies such as Western National, John Hancock Mutual Life Insurance Co., and Hartford Life and Accident Insurance Co., as well as variable annuities from Putnam Investments, Franklin Resources Inc., and American Skandia Life Assurance Corp., among others. While designing Summit's annuity, Mr. Cussen said, he "approached it like a consumer."

Among features he thought would attract consumers, the annuity will have a shorter surrender period and will allow investors to "bump up" the rate of return twice during the life of the product in order to take advantage of any shift in interest rates.

Roger Thomas, a Columbia, Mo.-based bank consultant, said the Summit product is innovative and could be a winner. Fixed annuities, he said, are good products for banks to sell because they're easier for consumers to understand. Like certificates of deposit, fixed annuities have a set payout and maturity. "The market is there, and it is huge," Mr. Thomas said. "What's going to dictate how successful they'll be is how much they're willing to put out to market the product." Right now, only 5% of Summit's customers use the bank's investment services, said Mr. Cussen.

He added that he'd like to boost that share to 20% in the next two to three years by doing a better job of profiling Summit's customers. For the time being, Essex will continue to market investments for Summit, Mr. Cussen said.

However, the bank is looking into starting up its own broker-dealer subsidiary and proprietary mutual funds in the near future, at which pointSummit may bring its mutual funds and securities sales in-house, while keeping Essex in charge of marketing annuities. n

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