Ameriprise 2006 Annual Report Download - page 69

general partner. Syndicated loans reflect amortized cost less
allowance for losses.
Separate Account Assets and Liabilities
Separate account assets and liabilities are primarily funds held
for the exclusive benefit of variable annuity and variable life
insurance contractholders. The Company receives investment
management fees, mortality and expense risk fees, guarantee
fees and cost of insurance charges from the related accounts.
Included in separate account liabilities are investment liabili-
ties of Threadneedle which represent the value of the units in
issue of the pooled pension funds which are offered by
Threadneedle’s subsidiary, Threadneedle Pensions Limited.
Receivables
Receivables include reinsurance recoverable, consumer bank-
ing loans, accrued investment income, brokerage customer
receivables, premiums due and other receivables.
Reinsurance
The Company reinsures a portion of the risks associated with
its life and long term care insurance products through
reinsurance agreements with unaffiliated insurance
companies. Reinsurance is used in order to limit losses,
minimize exposure to large risks, provide additional capacity
for future growth and to effect business-sharing arrangements.
To minimize exposure to significant losses from reinsurer
insolvencies, the Company evaluates the financial condition of
its reinsurers prior to entering into new reinsurance treaties
and on a periodic basis during the terms of the treaties. The
Company remains primarily liable as the direct insurer on all
risks reinsured.
Generally, the Company reinsures 90% of the death benefit
liability related to individual fixed and variable universal life and
term life insurance products. The Company began reinsuring
risks at this level beginning in 2001 for term life insurance and
2002 for variable and universal life insurance. Policies issued
prior to these dates are not subject to the same reinsurance
levels. The maximum amount of life insurance risk retained by
the Company is $750,000 on any policy insuring a single life
and $1.5 million on any flexible premium survivorship variable
life policy. For existing long term care policies except those sold
by RiverSource Life Insurance Co. of New York prior to 1996, the
Company retained 50% of the risk and the remaining 50% of
the risk was ceded on a coinsurance basis to affiliates of
Genworth Financial, Inc. (“Genworth”). Reinsurance recoverable
from Genworth related to the Company’s long term care liabilities
was $945 million at December 31, 2006, while amounts
recoverable from each other reinsurer were much smaller.
Risk on variable life and universal life policies is reinsured on a
yearly renewable term basis. Risk on most term life policies
starting in 2001 is reinsured on a coinsurance basis.
The Company retains all risk for new claims on disability
income contracts. Risk is currently managed by limiting the
amount of disability insurance written on any one individual.
The Company also retains all accidental death benefit and
almost all waiver of premium risk.
For the years ended December 31, 2006, 2005 and 2004, net
premiums earned on life, long term care and disability income
insurance products were $394 million, $370 million and
$352 million, respectively, which included reinsurance
assumed of $3 million, $2 million and $4 million, respectively,
and were net of amounts ceded under all reinsurance
agreements of $170 million, $176 million and $160 million,
respectively. Reinsurance recovered from reinsurers was
$115 million, $106 million and $73 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
The Company also reinsures a portion of the risks associated
with our personal auto and home insurance products through
two types of reinsurance agreements with unaffiliated
reinsurance companies. We purchase reinsurance with a limit
of $5 million per loss and we retain $350,000 per loss. We
purchase catastrophe reinsurance and retain $6 million of loss
per event with loss recovery up to $74 million per event.
Consumer Banking Loans
Included in receivables at December 31, 2006 are consumer
banking loans of $506 million, net of allowance for loan
losses. The lending portfolio primarily consists of home equity
lines of credit and secured and unsecured lines of credit.
Brokerage Customer Receivables
At December 31, 2006 and 2005, brokerage customer receiv-
ables included receivables that represent credit extended to
brokerage customers to finance their purchases of securities
on margin of $196 million and $248 million, respectively, and
other customer receivables of $39 million and $31 million,
respectively. Brokerage margin loans are generally collateralized
by securities with market values in excess of the amounts due.
Deferred Acquisition Costs
DAC represent the costs of acquiring new business, principally
direct sales commissions and other distribution and
underwriting costs that have been deferred on the sale of
annuity and insurance products and, to a lesser extent, certain
mutual fund products. These costs are deferred to the extent
they are recoverable from future profits or premiums.
Restricted and Segregated Cash
Total restricted cash at December 31, 2006 and 2005 was
$120 million and $5 million, respectively, which cannot be
utilized for operations. The Company’s restricted cash at
December 31, 2006 primarily related to certain limited
partnerships that were consolidated beginning in 2006.
Restricted cash at December 31, 2005 primarily related to
Threadneedle. At both December 31, 2006 and 2005, amounts
segregated under federal and other regulations reflect resale
agreements of $1.1 billion segregated in special bank
accounts for the benefit of the Company’s brokerage
customers. The Company’s policy is to take possession of
securities purchased under agreements to resell. Such
securities are valued daily and additional collateral is obtained
when appropriate.
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Ameriprise Financial, Inc. 2006 Annual Report