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Citigroup Smith Barney Affluent Investor Poll May 2006; Economic Climate, Health Care Costs & Long-Term Care; Conducted by Greenwald & Associates and Synovate.

NEW YORK -- Citigroup Smith Barney has announced the results of its latest monthly poll of affluent investors. The poll was conducted with investors who have at least $100,000 in financial assets (excluding real estate and employer retirement plans), a definition that describes approximately 25% of all U.S. households. Investors with $1 million or more represent 49% of the interviews.

All results are specifically from those investors interviewed for the Citigroup Smith Barney Affluent Investor Poll between April 3 and April 18. The poll does not reflect Citigroup Smith Barney predictions or recommendations.

Investor Poll Highlights

Affluent investors in the latest Citigroup Smith Barney Affluent Investor Poll were asked their outlook for the current and future economic climate, trends in their personal finances, their views on health care costs and the health care system in the United States, and their experiences with long-term care and long-term care insurance.

--Affluent investors continue to have positive views about the current investment climate, but remain guarded about the future. Half believe the country's investment climate is better today that it was a year ago, yet there was a noticeable increase among those saying things will be worse a year from now.

--Most believe energy prices will be much higher next year. Along with higher inflation and higher interest rates, expectations for higher energy prices are at its highest point for the year.

--Satisfaction regarding the way President Bush is handling the economy is at its lowest point for the year; only one-quarter say they are satisfied, while thirty-five percent say they are very dissatisfied.

--The cost of health care is a concern for affluent investors. The costs of prescription drugs, health insurance and long-term care all generate major concerns.

--Lawyers and the federal government are believed to be most responsible for what investors see as the problems in the nation's health care system.

--Most investors would support any type of change to the current health care system. The most popular reforms include allowing small employers and individuals to bulk-purchase health insurance and limiting the rewards received for malpractice cases. Also, when read a description of the recently approved Massachusetts health insurance plan, 69% of all those polled favored enacting this type of plan in their state.

--Nearly three-quarters express concern about being able to pay the cost of long-term care if they need it during their retirement years, yet only one in four currently have long-term care insurance. Their estimate for yearly nursing home costs is $71,700 (median).

--Two out of three mistakenly believe that Medicare will assist with paying for some part of their long-term nursing care if they do not have long-term care insurance.

--Those investors who have supplied financial support to an elderly relative are among the most likely to have purchased long-term care insurance for themselves.

Positive views about the current investment climate, but the future outlook is a concern

Affluent investors continue to have positive views about the current investment climate. Half of those surveyed in this month's Citigroup-SmithBarney Affluent Investor Poll believe the country's investment climate is better today than it was a year ago, up four percent from last month's results, and equal to the highest scores seen for the year.

Sixty percent of the most affluent group of investors, those with at least $1 million in investable assets, say the current investment climate is better today compared to a year ago. This is an increase of nearly twenty percent from the previous two months' results, yet it is on par with the scores that wealthy investors gave early in the year.

Affluent investors remain guarded about the future of the country's investment climate. Fifty- seven percent believe things will be good six months from now, down two points from last month, and investor outlook for the next twelve months is up two points to thirty-one percent. Despite the slight increase of investors saying things will be better a year from now there was a substantial increase among those saying things will be worse.

Nearly half of the affluent investor population believes the economy is currently experiencing a slow down, and eleven percent believe it is in a recession. Despite that, more than two-thirds say that right now is a good time to invest in stocks or other equity based investments and another 55% say it is a good time to invest in bonds or other fixed investments.

Although many say it is the right time to invest in these specified financial vehicles, less than three in five believe it is a good time to make large purchases for the home, such as televisions or washers and dryers, which receives its lowest scores for 2006.

Personal financial situations are better than last year

About half of all affluent investors say they are getting along better financially today compared to a year ago. Looking ahead, two in five believe they will be better off financially six months from now.

Higher energy costs, interest rates and inflation

Close to nine in ten believe that energy prices will be higher a year from now, including 42% who expect prices to be "much" higher; this is up more than ten percent from last month's results. Affluent investors also foresee a future that includes higher interest rates, and increased inflation. Both of these expectations have been increasing throughout the year.

Evaluations of Bush's economic management continues to fall, but not among the most affluent

Satisfaction with the President's management of the economy has dropped to its lowest point all year. Just one in four affluent investors describe themselves as satisfied with the way President Bush is managing the economy, which is down six percent from last month and continues the downward trend seen since the beginning of the year. Thirty-five percent say they are "very dissatisfied" with Bush's economic management.

Concerns about the nation's health care system

The cost of health care is a major concern for affluent investors, more so than quality of care available perhaps because investors believe they will bear the brunt of on going drug and insurance costs while they discount the probability of being subject to an on going need for doctor and hospital care. The national health care issues of greatest concern are the cost of prescription drugs, the cost of health insurance, and the cost of long-term care (with about half of all investors saying they are very concerned about each of these issues). Only about one in four express strong concern about the quality of care provided by doctors or hospitals.

Health insurance companies, pharmaceutical companies, lawyers, and the federal government all share some of the blame for what investors see as the problems in the nation's health care system, with the largest shares naming attorneys (23%) and the federal government (21%) as most responsible. The most affluent group of investors are noticeably less likely than others to assign blame to health insurance companies or pharmaceutical companies, and are noticeably more likely to say that lawyers are a major contributor to the problems in the health care system.

Widespread support for any type of change

Vast majorities would support any type of change to the current health care system, with most saying they strongly favor the idea of malpractice limits (56% strongly favor), allowing small companies and individuals to join together to purchase health insurance at better group insurance rates (69%), and allowing low and middle income workers to deduct the cost of health insurance premiums from their taxes (50%). Nearly as many favor easing restrictions on imported prescription drugs and establishing tax incentives for those who use high deductible health plans.

Affluent investors were also asked about the health insurance reform recently passed in Massachusetts, in which all citizens are required to have some type of health coverage. While two out of three overall express support for this type of plan, the most affluent do not necessarily feel that way. Those who have assets of $1 million or more are more likely to oppose this idea (46%) than they are to support it (43%).

Personal health concerns

One reason that health care costs are a top-of-mind issue for affluent investors may be the fact that eight out of ten have seen their health insurance costs increase over the past year. In addition, their personal health is something very important to these investors. When asked to rank the importance of various areas in their life, investors place their health second, on average, behind family, but far ahead of financial security or career. They also back-up the importance of health with their pocketbook, as more than half report that they make donations to non-profit organizations that focus on health issues.

One of the health issues that concerns investors the most is the idea of becoming ill or injured and requiring long-term nursing home care. More than one-quarter of affluent investors describe themselves as very concerned about this possibility; nearly as many are very concerned about the possibility of becoming disabled. A majority of affluent investors say that their concerns about each of these have increased over the past year.

Cancer and heart disease are also common concerns, with nearly one in four describing themselves as very concerned, and seven out of ten saying they are at least somewhat concerned about developing these conditions.

Only one in four indicate that catching the avian flu is even somewhat of a health concern for themselves or their family (26%). This is down from two months ago, when 35% described themselves as at least somewhat concerned about avian flu. Over the same period, though, the share of investors who report having read newspaper or magazine articles about the avian flu has increased slightly (from 60% in March to 67% currently).

Health care costs could become an even greater concern in retirement

When investors think about their retirement years, seven in ten are at least somewhat concerned about being able to pay the cost of long-term care, either in a nursing home or at home. Likewise, seven in ten have concerns about outliving the money they have saved for retirement, and even more are at least somewhat concerned about maintaining their desired standard of living throughout retirement (eight in ten).

Despite their concerns regarding the potential cost of long-term care and the fact that more than half believe that they are likely to need long-term care assistance at some point in their life, most of these investors have not done even some planning for their own long-term care needs. Only 25% of affluent investors currently own a long-term care insurance policy. As might be expected, ownership of long-term care policies is more common among the more affluent (34% among those with assets of $500,000 or more).

One in three overall have at least discussed the idea of long-term care insurance with their financial advisor, although in many cases those who had such a discussion elected not to purchase a policy (often deciding that it was not a good investment).

Paying for long-term care

Without long-term care insurance, how do the affluent plan to pay for long-term care if they need it? While two out of three say they would use their own personal funds, just as many mistakenly believe that they can count on Medicare to pay at least part of the costs. Many (43%) believe that those who have assets of several million dollars do not need long-term care insurance; others point out that a long-term care policy can be a good safety net against the unexpected.

In Their Own Words: Why do you feel that affluent consumers with several million dollars or more in assets do not need long-term care insurance?

--"Earnings on assets should cover health care expenses."

--"People should pay their own way."

--"Those with significant assets of their own don't need insurance. They can finance care on their own."

--"I might as well save the money, invest it, and have it available for whatever needs I have in retirement."

In Their Own Words: Why do you feel that affluent consumers with several million dollars or more in assets do need long-term care insurance?

--"Any long-term care can be exceptionally costly, even for wealthy people."

--"It can be a tricky guess to assume all of the potential costs of long-term care by self insuring. Why risk it?"

--"The cost of healthcare and assisted living continues to increase, while the average lifespan also increases. It is very likely that personal funds would run out."

--"Why deplete your assets for care when you can afford to buy the insurance?"

Concerns come from personal experience

Concerns about health and medical costs in old age are related to the fact that many affluent investors have personal experience dealing with the needs of the elderly. Seven out of ten have personally known someone who has needed long-term care assistance, and four in ten say that either they or their spouse have provided hands-on care or other types of assistance to an elderly parent or relative. Those who have been through this experience are among the most likely to report that they are concerned about having to live in a nursing home or having to depend on others to care for them. However, these concerns have not led to increased ownership of long-term care insurance among this group.

Most often, those who have provided assistance to an elderly family member have helped with transportation, managing health care needs, shopping, and housekeeping. Others have provided assistance with meal preparation or bathing/dressing/going to the bathroom.

As might be expected, affluent investors have also been called upon to provide financial assistance to elderly relatives (one in five has had this responsibility). Those who have provided financial support are especially likely to be concerned about their own retirement years and outliving the money they have saved for retirement. Investors who have supported others are also among the most likely to have purchased long-term care insurance for themselves.

Relatively few of those investors who have provided care to an elderly parent or relative acknowledge that the experience had an impact on their ability to save for their own retirement. The most common impact appears to be on the amount of stress that these care providers feel.

In Their Own Words: What part of caring for an elderly relative was most difficult for you personally?

--"Emotional stress and time. Work-Life balance."

--"Time requirements and stress."

--"Feeling guilty when I was too tired or stressed-out."

--"Seeing a once vibrant person have difficulty coping with everyday chores."

The young also receive financial assistance

In addition to caring for the elderly, more than one-fifth of all affluent investors provide financial assistance to an adult child. In fact, 29% of those who have a child between the ages of 18 and 29 report that their adult child is living at home. In four out of ten cases, investors who are supporting an adult child expect to continue doing so for at least another five years.

Background and Methodology

Greenwald & Associates and Synovate conducted the Citigroup Smith Barney Affluent Investor Poll April 3 and April 18. Interviewing was conducted online with 580 investors who are members of the Synovate Consumer Opinion Panel. In order to qualify for participation, panel members had to have at least $100,000 in financial assets (excluding real estate and employer retirement plans), a definition that describes approximately one-quarter of all U.S. households. Survey results include 167 interviews with households that have $100,000 to $499,999 in savings and investments, 129 interviews with those in the $500,000 to $999,999 asset range, and 284 interviews with investors who have $1 million or more. Survey results have been weighted by age and asset level to reflect national population norms. The results of the Citigroup Smith Barney Investor Poll have a maximum margin of sampling error (at the 95% confidence level) of plus or minus four percentage points.

(C) 2006 Citigroup Global Markets, Inc. Member SIPC, Smith Barney is a division and service mark of Citigroup Global Markets, Inc. and its affiliates and is used and registered throughout the world. CITIGROUP and the Umbrella Device are trademarks and service marks of Citigroup, Inc. or its affiliates and are used and registered throughout the world.

Mathew Greenwald & Associates, Inc. is a leading full service public opinion and market research firm that has been conducting customized research for our clients for over 20 years. Specializing in serving the research needs of financial services organizations, Greenwald & Associates has earned a reputation for extensive research knowledge, industry expertise, and commitment to serving the needs of our clients. For more information about Mathew Greenwald & Associates, call (202) 686-0300 or visit www.greenwaldresearch.com.

Synovate, the market research arm of Aegis Group plc, generates consumer insights that drive competitive marketing solutions. The network provides clients with cohesive global support and a comprehensive suite of research solutions. Synovate employs over 5,000 staff in 107 offices across 50 countries. More information on Synovate can be found at www.synovate.com or call (508) 655-0777.
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