Annuities have been a mainstay product in banks since the 1980s, and over time, many providers have tried to push into the crowded channel. Has it gotten too crowded?Given the litany of failed bank-channel programs-Sage Life and Massachusetts Mutual Life come to mind-that litter the annuity battlefield, the answer looks like yes.

But that's not the response being given by MONY Life Insurance Company of America, a $60 billion-asset insurer based in New York.

It makes sense

"We are in external discussions with banks, and we're talking to them about both variable and fixed annuities," says Richard E. Connors, a senior vice president and head of MONY's annuities division. "It's an extension that makes sense for us."

Most of the $450 million to $500 million of sales the company is on pace to make this year are of variable annuities, a product that has been ice cold in banks because of the lifeless stock market.

Analysts say MONY may be readying a push at the right time, though, because it could catch a rising wave of variable sales if the bear market really has ended.

"The bottom line is, it was difficult to get in a few years ago when the variable market was strong, and it's difficult now, when it's not," says Kenneth Kehrer, the president of Kenneth Kehrer Associates, a Princeton, N.J.-based consulting firm with expertise in the bank-annuity marketplace.

"Right now, the typical bank is selling 14 variable annuities from seven underwriters," he says, "and most have many of the top four in there. So let's say MONY is competing with the Sun Lifes and the Jackson Nationals for one of the other three spots. It's not easy. How does MONY get the bank to take them on instead?"

By being persistent and by offering innovative products, says Jack Cramer, a principal at Cramer, Wick & Associates, a bank-insurance consulting firm with headquarters in Austin, Texas, and Davidson, N.C.

"I think it's a turbulent time in the marketplace and once we reach calmer waters, we'll be surprised by the change in hierarchy," Cramer says. "Lesser players could play bigger roles, and this is a great time for MONY to break in, not that it's going to be easy."

Mr. Connors at MONY dismissed the argument that the marketplace is too saturated for new players.

"It's sort of like what Yogi Berra said, 'No one goes to that restaurant anymore, it's too crowded,'" Connors adds. "If you've been there, you have the inside track. But you always have an opportunity. There's always change. And when there is change, there is an opportunity."

Current market conditions

Right now, the variable annuity marketplace in the bank channel is dominated by Hartford Life, easily the top provider. Hartford Life had $737 million of variable sales through banks in the second quarter, according to the Kehrer firm's quarterly study.

Nationwide Financial Services was second, at $332 million, and AIG and Axa were the only other variable annuity providers with more than $200 million of bank sales.

Meanwhile, the sales trend in the bank channel heavily favors fixed annuities. Through August, fixed annuities had outsold variables by more than three-to-one.

"We have both," Connors says. "We're going into this with a portfolio."

MONY's chances should not be completely discounted, Kehrer notes. The company can get attention by offering guaranteed death benefits, or dollar-cost-averaging, a popular mechanism that gets the more conservative investors off the sidelines, he adds.

And two MONY variables introduced last week have a guaranteed death benefit, as does its third variable annuity, Connors says, adding that he is not troubled by reports that at least one insurer, Cigna, had priced its death benefit too thinly.

"It's an issue, but one of the things we've reserved (for) appropriately," Connors says. "We're a late entrant, but one advantage of being late is, we've avoided some of the mistakes others have made.

"Banks want to know how the product is priced so they have assurances that the product will be there and they won't be embarrassed," he adds. MONY also offers dollar-cost-averaging.

And there's one more thing that most banks talking to MONY ask about. "They tell us that they want to talk about life insurance next," Connors says. "We have that."

This article appeared in American Banker, a Thomson Media publication. Copyright 2002 Thomson Financial. All rights reserved.

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