Later this year, Firstar Corp. will join a select group of banks offering annuities whose assets will be largely bank-managed.

Last month, the Milwaukee-based banking company, which has $18 billion in assets, signed a letter of intent with Western National Life, the Houston-based insurer, to jointly establish a proprietary fixed-rate annuity.

Western National Life will help develop the product and provide marketing, sales, and administrative support. But Western Life executive vice president John A. Graf said: "The bank itself will have a major hand in managing the assets."

Firstar officials said it wasn't easy finding an insurance partner willing to share investment management responsibilities.

"We interviewed about 10 different insurance companies and most didn't want to play in that ballpark," said Joseph Alberti, president of Firstar Insurance Services, the unit that will sell the annuities.

Firstar has sold other companies' annuities since 1986. But the shift to a proprietary product fits well with the company's goal to increase fee- generating business and company strengths in asset management, a Firstar executive said.

In essence, Firstar's Financial Investment and Resources Management Unit will act as the asset subadviser. "It's just another client relationship for us," said Mary Ellen Stanek, president of Firmco.

While the arrangement would once have been unusual, some observers see it as part of a burgeoning trend. Banks have the fixed-rate asset management skill, said annuity consultant Kenneth Kehrer, but "They have lacked the way to deal with the regulatory environment." The arrangement between Western National and Firstar neatly matches complementary skills, he said.

"This fixed-rate annuity has all the trappings of being a proprietary product, but Firstar doesn't own it," Mr. Kehrer said. Firstar has the advantage of controlling the investments, allowing it to better protect its customers while also getting money management fees.

From 1990 through 1994, the share of annuities sold by banks climbed to 24% of the $76.1 billion market, according to Mr. Kehrer. He characterized performance for the first half of this year as flat.

Mr. Alberti said he expects to offer the fixed-rate annuity at 250 Firstar bank branches throughout Wisconsin, Illinois, Minnesota, and Iowa beginning Nov. 1. The bank's trust operations in Arizona and Florida will also sell the new product.

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