Western National Corp.'s annuity sales got off to a slow start this year but have now picked up steam, thanks in part to new bank sales.

The Houston-based company - one of the country's largest annuity underwriters - is expecting its sales of fixed annuities through banks to reach $180 million this quarter. That's 63% higher than in the second quarter and 3% more than in third quarter 1994.

"Our sales were down in the first half of the year, but we've added a large amount of banks in the first two quarters that are now just starting to kick in and make a difference," said Michael J. Poulos, the company's chairman and president.

Western National, a subsidiary of Western National Life Insurance Co., picked up sales contracts from First Union Corp., First of America Bank Corp., and UJB Financial Corp., among others.

The company sells its own brand of fixed annuities and also helps banks market proprietary fixed annuities, which Western National underwrites. Nearly 70% of its sales are made through the bank channel.

Mr. Poulos said the new sales programs revved up slowly because investment representatives at the banks needed time to gain familiarity with the products.

Even so, fixed annuities were also facing stiff competition from certificates of deposit earlier this year. The spread between the rates paid on fixed annuities and on one-year CDs was as narrow as 0.94% in January, according to data from Kenneth Kehrer & Associates, a Princeton, N.J., consultancy.

Annuity sales have grown steadily quarter by quarter, said Douglas Moat, president of the New York-based consulting firm Manhattan Group. But Western National's increase is substantially higher than that of the industry as a whole, he said.

Western National has been very aggressive in courting new bank business, and "there is no question that on the annuities side some of these banks have done very well at selling these products," Mr. Moat said.

Now that interest rates have started to climb and the yield curve has steepened, officials at Western National expect sales to be "bullish for the rest of the year," said John A. Graf, executive vice president and national sales manager for the company.

The company expects to end the year with total sales of $800 million - 6% higher than 1994 - including about $550 million from banks, officials said.

Right now, the company's fastest-growing distribution channel is through independent insurance agents, followed closely by the banks, Mr. Graf said.

But officials said they are confident that bank distribution will outstrip all other channels by next year.

Mr. Poulos said that First Union, for example, is expecting to sell more than $1 billion of fixed annuities in 1996, though he declined to estimate Western National's share.

The insurer is also getting ready to roll out a variable annuity in September, officials said. Western National will make the product available to banks that want to market a variable annuities under their own brand names.

The variable annuity will utilize investment portfolios from several outside companies. Among them are State Street Boston Corp., Oppenheimer Management Corp., First Boston Corp. and BEA Associates, an unit of Credit Suisse.

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