In Annuities for Dummies: A Buyers Guide, annuities expert witness Stephen George writes:
Generally, annuities are unconditionally backed by insurance companies. By investing conservatively and hedging their exposure to stock and bond market fluctuations, insurance companies can guarantee savers a minimum interest regardless of market down-turns. If indexes rise during the annuity term, the annuity owner shares the gain with the insurance company without risk to his premium deposit. If the market drops, the owner gets a minimum guaranteed interest.