First Interstate to Market Variable Annuities

In a move that extends the development of banks into financial supermarkets, First Interstate Bancorp and insurance giant SunAmerica Inc. on Wednesday announced an agreement under which SunAmerica’s tax-deferred variable annuities will be sold through First Interstate branches.

SunAmerica, a Los Angeles-based life insurer with $23 billion in assets, said it struck a similar deal with Chase Manhattan Corp., the nation’s sixth-largest bank, which will offer SunAmerica’s variable annuities through its 350 branches in four East Coast states and its network of 900 investment broker-dealers around the country.

For First Interstate, the agreement matches an earlier move by California rival Wells Fargo, which teamed up with Skandia America Group to offer variable annuities. At least a dozen other large banks also carry the products. First Interstate is the nation’s 13th-largest bank, with 1,063 branches in 13 western states.

Variable annuities are akin to individual retirement accounts in that consumers may use them to shelter income while building a nest egg for retirement or a future expense, such as a child’s college education. As with an IRA, investors in variable annuities may allocate their investments among stock, bond and money market portfolios.

Unlike ordinary bank accounts, variable annuities are not protected by federal deposit insurance. To protect consumers, regulators restrict the way banks may market the annuities. They may be sold only by licensed investment agents--in most cases, the same people who sell banks’ other uninsured offerings, such as mutual funds, municipal bonds and Treasury certificates.

As banks push deeper into territory that has traditionally belonged to insurance companies and investment brokerages, regulators and courts are struggling to keep up. The U.S. Supreme Court earlier this month agreed to hear a case that may resolve the question of whether national banks have the right to sell variable annuities at all.

The case involves an appeal by NationsBank of North Carolina of a lower court ruling that barred the bank from selling variable annuities in all but the smallest communities.