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Chicago, August 9, 2006 — Providing enough income during retirement is a challenge and concern for all generations, particularly today's baby boomers. Annuities serve as a financial planning solution designed to provide a guaranteed source of income through retirement. The Substandard Annuities report, launched today, jointly sponsored by the Society of Actuaries (SOA) and LIMRA International with supporting research conducted by Ernst & Young, provides vital insight to insurers on the challenges, risks, and benefits associated with offering substandard annuities.

The report notes that this untapped annuity product could generate one to two billion dollars in annuity sales for the insurance industry by 2009, if the product achieves its potential. This could equate to a tripling of the current market, but the report notes the need for more industry consideration and consumer awareness.

Substandard annuities offer larger payouts for impaired risk individuals with shorter-than-average life expectancies than standard immediate annuities. Medical underwriting, age-ratings, and impaired risk are the three dimensions for addressing individuals for a substandard annuity.

The Substandard Annuities report identified three primary factors that are driving the need for products that offer a guaranteed lifetime income: the decreased number of defined benefit pension plans available; the increased prevalence of defined contribution retirement plans, and finally, fears of potential cuts in Social Security benefits. With these current needs in mind and recognizing a population with health-impaired risk, the report states that annuity providers may examine entering the substandard annuities market or keep apprised of the immediate annuities market to account for changing market practices.

"Actuaries are involved in developing solutions for longevity risk, which is guaranteeing financial security for retirees who live to a higher age," said Noel Abkemeier, chair of SOA's oversight committee for the project. "By developing and offering substandard annuities, insurance companies can broaden the product to cover a larger portion of retirees seeking a lifetime cash flow. However, before entering this market, insurance providers must evaluate the financial impact to profits and premium revenue of launching a substandard annuity product." Current substandard annuities comprised only 4 percent of the total immediate annuity contracts in 2004.

"There are major barriers in offering substandard annuities from narrow distribution of the product and low public awareness to underwriting resources and the number of annuity providers, given the small market size currently," said Eric T. Sondergeld, corporate vice president and director of LIMRA's retirement research. "With the increased need in retirement planning for an aging population, substandard annuity providers have an opportunity to gain more in the annuities market."
Howard S. Drescher, (860) 285-7875,
Catherine Theroux, (860) 285-7787,

About LIMRA International
LIMRA International is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA International at

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