Great Western Financial Corp. has taken the unusual step of adding "asset allocation" investment portfolios to its proprietary variable annuity.

The new portfolios periodically adjust their mix of mutual funds to stay in sync with the market and customers' risk tolerances. The Los Angeles-based thrift sees the asset allocation approach as a way of standing out from an increasingly crowded field of annuity creaters.

Many other financial institutions are just starting to get into the business, and their proprietary annuities do not feature asset allocation options, said Keith Pipes, senior vice president with Sierra Investment Services, Great Western's broker-dealer unit.

"What we've done is good for our customers and keeps us apart from other annuities," Mr. Pipes said.

Variable annuities are insurance contracts whose returns are generally linked to individual mutual funds. Asset allocation plans take a different approach, linking a group of mutual funds to gain greater diversity and, hopefully, higher returns.

Right now, fewer than a dozen banks and thrifts offer their own annuities. Great Western and First of America, Kalamazoo, Mich., are among an even smaller number that include asset allocation options.

Insurance companies, which create the lion's share of annuities, also have had limited involvement with asset allocation portfolios, said Rick Carey, editor of Vards Report, a variable annuity service in Atlanta.

"This approach may have merit, but I think most companies will want to see how customers take to it before jumping in," Mr. Carey said.

At least one insurance company executive is already weighing in with his opinion.

Asset allocation portfolios are "nice when the market is cooperating," said Joseph W, Jordan, vice president in the pension and savings center at Metropolitan Life Insurance Co., New York. "But people won't be happy when their annuity underperforms," Mr. Jordan said. "They'll point their finger at the investment managers."

Mr. Pipes of Great Western said he has proof that this doesn't have to be the case. He said customers have stuck with the asset allocation service Great Western rolled out for its mutual fund customers in 1990, and he expects similar allegiance from the thrift's variable annuity investors.

Customers, he said, will like having the opportunity to let professional money managers regularly make investment decisions for them.

Great Western culls from nine of its Sierra Trust mutual funds to develop the four asset allocation portfolios, or "strategies." The most conservative portfolio, a "fixed strategy," relies on government bonds and other debt instruments. On the other end of he spectrum, a "growth strategy" uses stocks that carry greater risk in return for potentially higher payouts.

Investors can expect to beat the inflation rate by three to seven percentage points, the thrift said.

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