Another company has dropped its variable annuity fees.

Last week, Citicorp Life Insurance reduced the annual fees on its CitiVariable Annuity by 29%, from 140 basis points to 99.

That brought the annuity, which had $363 million of assets under management at the end of March, well below the industry average of 127 basis points.

"We were hearing ... through our investment consultants who actually sell the annuities that consumers wanted lower fees," said Connie Kain, a spokeswoman for Citicorp's insurance group. The Citicorp annuities are sold mostly through brokers in Citibank branches.

Citicorp's move followed cuts by Nationwide Financial Services and Fidelity. In November, Columbus, Ohio-based Nationwide lowered the fees on its Future variable annuity to 95 basis points. Fidelity followed Nationwide's lead in March, dropping the fees on its Fidelity Advisory Generations to 95 basis points.

"It seems to be a trend driven by Nationwide," said Kenneth Kehrer, a Princeton, N.J.-based consultant.

Last fall criticisms of annuity fees reached a crescendo at the same time that the tax reform package was changing the way annuity distributions are figured for tax purposes.

That reform shrunk the relative competitive advantage of annuities over mutual funds, Mr. Kehrer said.

The two concurrent trends, plus Nationwide's fee reduction, started the move to lower fees. Mr. Kehrer expects more companies to follow suit.

"This clearly is one response by some insurance companies to reduce their fees to make them more competitive," he said.

At Citicorp, the fee reduction is designed to make annuities more competitive with mutual funds, the spokeswoman said. The fee cut also applies to CitiVariable Annuity Plus, a product only available in California.

That product offers a guaranteed minimum return of 4.25%. In all other ways it is identical to CitiVariable Annuity, she said.

The CitiVariable Annuity pays a return determined by the performance of its underlying securities. Purchasers choose among 24 investments including four proprietary asset-allocation portfolios.

Another change allows customers to transfer one-sixth of their account to other investments each month. Now a customer can transfer the whole account in just six months.

Previously, the rules made it impossible for a customer to do that in less than 30 months.

"The benefit is to the consumer, because if they'd like to make another investment they can," a Citicorp spokeswoman said.

As more companies cut their fees, Mr. Kehrer expects the revenues will be made up by trimming broker commissions. Citicorp executives were not available to address how their particular fee cut was achieved.

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