Short Takes: Moderate Growth Forecast for Annuity Sales

Variable annuities and defined-benefit plans should continue to fuel moderate growth in overall annuity sales through the year, according to a report issued by Standard & Poor's.

"The variable annuity segment is still anticipated to grow, but it may not be at its historic rate," said Kevin Ahern, a Standard & Poor's associate director who co-authored the report, released early last week. Mr. Ahern said he expects growth of 10% to 12% for 1999, spurred by group annuities.

Group annuities, which businesses offer to their employees, are in favor because of an aging work force and uncertainty about the future of Social Security, the report says.

Variable annuities, which put part of investors' assets to work in equity markets, continue to sell well. But relatively slower sales in the second half of 1998 caused many insurers to lower fees and cut expenses to entice customers.

The reduced fees may spur some companies to sell their book of business to larger annuity players, the report added. Fixed annuities continue to sell slowly because of low interest rates, and Mr. Ahern said he expects no changes barring a rise in rates.