Call him the Mr. Blackwell of the variable annuity industry.

Like the famous fashion commentator who has issued Hollywood's best- and worst-dressed lists every year since 1960, Doug Fabian has created a list of the worst-performing variable annuities.

Only, Mr. Fabian has nothing comparable to Mr. Blackwell's best-dressed list.

Fabian, president of Fabian Investment Resources of Huntington Beach, Calif., a 23-year-old investment advisory firm, has issued an inaugural variable annuity "lemon list" of policies with poor-performing sub-accounts.

After examining the three-year performance of sub-accounts of 402 variable annuity policies, Fabian Investment found that almost one out of every five had a majority of sub-accounts delivering returns under their benchmarks.

Many variable annuity sub-accounts have delivered single-digit returns for each of the past three years, Fabian's research showed. The worst, the Conseco Precious Metals sub-account in the Advisor annuity line of Conseco Capital Management of Carmel, Ind., depleted policyholders' investments by an average of 19.16 percent each year for the past three years ended June 30, Fabian said.

Other annuity sub-account lemons include the Van Eck Hard Asset sub-account in the Profile Variable Annuity of American International Group of New York, which has lost an average of 6.37 percent a year for the past three years ended June 30, Fabian said. Delaware Medallion III's Emerging Markets sub-account, offered by Delaware Investments of Philadelphia, has been another loser, according to Fabian. It has had an average negative performance of 14.51 percent each year for the past three years ended June 30, he said.

Investors have $110 billion in under-performing variable annuity sub-accounts, Fabian said.

Fabian examined the equity mutual fund sub-accounts of variable annuity policies to "single out the industry's sourest products," he said.

"Some annuities, like lemons, can be downright bitter," he said.

Of the policies he examined, he found that 75, or 19 percent, had a majority of sub-par sub-accounts. Fabian rated an annuity as sub-par if 50 percent or more of its equity fund offerings lagged behind the benchmarks of their peers over the past three years, Fabian said.

Of the top 10 variable annuity policies with the greatest number of sub-par sub-accounts, Allmerica General Financial Group of Houston was first, according to Fabian. It had 11 "equity lemon" annuity sub-accounts in the Allmerica Advantage/ExecAnnuity Plus line, Fabian said.

Two companies tied for second place with 10 sub-par sub-accounts apiece, according to Fabian. They are Equitable Life Assurance Society of New York and Allianz of Minneapolis. Equitable Life Assurance Society has two lines of variable annuities - each of which has 10 sub-par sub-accounts - the Equitable Equi-Vest Series 100/200 and the Equi-Vest Series 300/400. Allianz's leading sub-par product is the ValueMark Life variable annuity.

Few people who invest in annuities re-examine their investments after the initial purchase, Fabian said. He said he did not want his lemon list to prompt people to sell their annuities. Rather, he said he hoped the list would prompt investors to examine the performance of their sub-accounts and determine if they can do better.

Many variable annuities have poor-performing sub-accounts because these investment vehicles do not undergo the same type of scrutiny that mutual funds do, Fabian said.

"Most people are passive investors who are sold a variable annuity as an insurance product yielding 10 percent a year," he said. "They put their trust in the person selling them the variable annuity, put the product aside and can be unaware that they are in an under-performing product."

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