Ameriprise 2006 Annual Report Download - page 79

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A majority of the gross unrealized losses related to corporate
debt securities and substantially all of the gross unrealized
losses related to mortgage and other asset-backed securities
were attributable to changes in interest rates. A portion of the
gross unrealized losses, particularly related to corporate debt
securities, was also attributable to credit spreads and specific
issuer credit events. As noted in the table above, a significant
portion of the gross unrealized losses relates to securities
that have a fair value to amortized cost ratio of 95% or above,
resulting in an overall 97% ratio of fair value to amortized cost
for all securities with an unrealized loss. From an overall per-
spective, the gross unrealized losses were not concentrated in
any individual industries or with any individual securities.
However, the securities with a fair value to amortized cost ratio
of 80%-90% primarily relate to the auto, home building and
gaming industries. The largest unrealized loss associated with
an individual issuer, excluding GNMA, FNMA and FHLMC
mortgage-backed securities, was $5 million. The securities
related to this issuer have a fair value to amortized cost ratio
of 95%-100% and have been in an unrealized loss position for
more than 12 months. There were no securities with a fair
value to amortized cost ratio less than 80% in the portfolios.
The Company monitors the investments and metrics described
previously on a quarterly basis to identify and evaluate
investments that have indications of possible other-than-
temporary impairments. As stated earlier, the Company’s ongoing
monitoring process has revealed that a significant portion of
the gross unrealized losses on its Available-for-Sale securities
are attributable to changes in interest rates. Additionally, the
Company has the ability and intent to hold these securities for
a time sufficient to recover its amortized cost and has, therefore,
concluded that none had other-than-temporary impairment at
December 31, 2006.
The change in net unrealized securities gains (losses) in other
comprehensive income includes three components, net of tax:
(i) unrealized gains (losses) that arose from changes in the
market value of securities that were held during the period
(holding gains (losses)); (ii) (gains) losses that were previously
unrealized, but have been recognized in current period net
income due to sales and other-than-temporary impairments of
Available-for-Sale securities (reclassification of realized gains
(losses)); and (iii) other items primarily consisting of adjust-
ments in asset and liability balances, such as DAC, DSIC and
annuity liabilities to reflect the expected impact on their
carrying values had the unrealized gains (losses) been realized
as of the respective balance sheet dates.
77
Ameriprise Financial, Inc. 2006 Annual Report
December 31, 2005
Less than 12 months 12 months or more Total
Fair Unrealized Fair Unrealized Fair Unrealized
Description of Securities Value Losses Value Losses Value Losses
(in millions)
Corporate debt securities $ 8,445 $ (187) $ 2,771 $ (113) $ 11,216 $ (300)
Mortgage and other asset-backed securities 7,886 (114) 2,875 (97) 10,761 (211)
Structured investments 10 — — — 10 —
State and municipal obligations 172 (4) 24 (1) 196 (5)
U.S. government and agencies obligations 193 (4) 97 (3) 290 (7)
Foreign government bonds and obligations 13 — — — 13 —
Common and preferred stocks — — 5 — 5 —
Total $ 16,719 $ (309) $ 5,772 $ (214) $ 22,491 $ (523)
In evaluating potential other-than-temporary impairments, the Company considers the extent to which amortized cost exceeds fair
value and the duration of that difference. A key metric in performing this evaluation is the ratio of fair value to amortized cost. The
following table summarizes the unrealized losses by ratio of fair value to amortized cost as of December 31, 2006:
Less than 12 months 12 months or more Total
Number Gross Number Gross Number Gross
Ratio of Fair Value of Fair Unrealized of Fair Unrealized of Fair Unrealized
to Amortized Cost Securities Value Losses Securities Value Losses Securities Value Losses
(in millions, except number of securities)
95%–100% 242 $ 2,595 $ (26) 966 $ 18,671 $ (484) 1,208 $ 21,266 $ (510)
90%–95% — — — 63 1,075 (73) 63 1,075 (73)
80%–90% 1 1 — 7 95 (15) 8 96 (15)
Total 243 $ 2,596 $ (26) 1,036 $ 19,841 $ (572) 1,279 $ 22,437 $ (598)