Magazine article American Banker

Allstate Annuity Proves Popular in Sales by Banks

Magazine article American Banker

Allstate Annuity Proves Popular in Sales by Banks

Article excerpt

When Allstate Insurance Co. started to push its Treasury-Linked Annuity through banks in May, its senior vice president for the bank channel admitted that the phrase "new fixed annuity" was an oxymoron.

But he still extolled the product's virtues -- and apparently, the banks have been listening.

Now "we have about 60 banks that have signed agreements," said Robert Shore, the senior vice president of the insurer's financial institutions division, in an interview late last month. "We're quite optimistic that in the third quarter we'll have big sales."

Allstate sold $17.5 million of the Treasury-Linked Annuity through banks in the second quarter, Mr. Shore said. Then in July alone, it sold just under $21 million through banks. The product was introduced in February.

Using the July figures, Mr. Shore said, the company estimates the product's "run rate" -- the amount it would sell in 12 months if sales held steady -- at $250 million. Since then, "we've added some larger banks in the second quarter, and their sales are up," he said.

Among the banks that have added the annuity to their product rosters are SunTrust in Atlanta; Compass in Birmingham, Ala.; and California Federal Bank in San Francisco. The latter is a unit of Golden State Bancorp, which Citigroup Inc. has agreed to buy.

The product's yield is tied entirely to the five-year Treasury rate. An investor gets a yearly growth rate approximating that on the five-year Treasury security, with the exact yield also depending on how much the customer invests, Mr. Shore said.

If the five-year Treasury rate rises, the investor can get a higher growth rate, he added, but if the rate drops, the customer stays locked in at the rate at the time of purchase.

This means the historically low Treasury rate has created a buying opportunity.

"From 1960 to 2002, the average five-year Treasury was 7. …

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