Robert G. Millen, the executive at Principal Financial Group responsible for boosting variable annuity sales through banks, finds himself in a classic David-versus-Goliath scenario.

He knows that one company, The Hartford, already has 45% of the market, having sold $1.6 billion in variables through banks in the first half of this year. Nationwide and SunLife of Canada also are firmly entrenched.

And Mr. Millen knows that Principal is barely on the map for sales of variables through banks. Volume for all of last year did not even top the $1 million mark.

But Mr. Millen is confident that he can find a way to make Principal prevail-if not by slaying its rivals, then at least by carving out a sensible niche.

"The me-too approach clearly will not work," said Mr. Millen, 50, who joined the big financial services company two months ago to run its new individual annuities division. "So we'll have to differentiate on the basis of service, perhaps unique products, and maybe markets."

The insurance unit at Principal, based in Des Moines, is the seventh- largest insurance company in the nation, with $61 billion of assets under management. It may even look to international markets to get an edge in variable and fixed annuities, said Mr. Millen.

An extensive study that will start within a couple of weeks and be complete by midyear will lay the groundwork for Principal's battle plan.

Mr. Millen joined Principal from the Des Moines insurance company Wellmark Inc. As a vice president he oversaw the launch of Wellmark's financial services products, including life insurance, annuities, and pension products.

As head of Principal's individual annuities division he will lead the effort to increase the sales of annuities through banks, brokers, and other channels.

Mr. Millen projects "double digit" growth in bank variable sales in 1998 and in each of the next few years after that.

Principal plans to add wholesalers and marketing and administrative support personnel. And the company may buy others to expand its product list and distribution network, he said.

Industry experts say Principal will need every advantage it can get.

"It's harder to break into the variable marketplace because of the dominance of a few companies," said Kenneth Kehrer, a consultant in Princeton, N.J. "Companies like The Hartford and Nationwide are on the shelf with good products, and there's almost no shelf space left."

Principal sells variable and fixed annuities through 18 banks, including KeyCorp, Norwest, NationsBank, and Firstar.

Banks started selling a significant volume of variable annuities about five years ago, when consumer demand exploded, and insurance companies entering the market now are late, Mr. Kehrer said.

Principal has focused its bank sales efforts on fixed annuities, with what industry watchers call only modest success. It sold $50 million in the first half, while the industry leader, Western National, sold $916 million.

The emphasis on selling annuities comes as the market for insurers' traditional risk-protection products, like term and whole life insurance, is drying up.

At the same time, aging baby boomers who want a comfortable retirement are clamoring for products like variable annuities, which combine the growth potential of mutual funds with the tax advantages of insurance products.

"The demographics are such that most of the life industry is focused more on asset accumulation products as opposed to traditional risk protection products," said Peter E. Roth, a managing director at the New York brokerage firm Fox-Pitt, Kelton.

And insurers are increasingly looking to banks to handle the distribution, he said.

"The insurance agent has to go find the customer," Mr. Roth said, "but the banks already own the customer."

In all, Principal sold $8.1 billion in fixed and variable annuities last year, primarily through its career agent system.

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