Ameriprise 2007 Annual Report Download - page 92

90 Ameriprise Financial 2007 Annual Report
Financial Assets
Assets for which carrying values approximate fair values include cash
and cash equivalents, restricted and segregated cash, consumer
banking loans, brokerage margin loans, Available-for-Sale securities,
trading securities, separate account assets, derivative assets and certain
other assets. Generally these assets are either short-term in duration,
variable rate in nature or are recorded at fair value on the Consoli-
dated Balance Sheets.
The fair value of commercial mortgage loans, except those with
significant credit deterioration, were estimated using discounted cash
flow analysis, based on current interest rates for loans with similar
terms to borrowers of similar credit quality. For loans with significant
credit deterioration, fair values were based on estimates of future cash
flows discounted at rates commensurate with the risk inherent in the
revised cash flow projections or, for collateral dependent loans, on
collateral value.
Other investments include the Company’s interest in syndicated
loans, which are carried at amortized cost less allowance for losses.
Fair values were based on quoted market prices.
Financial Liabilities
Liabilities for which carrying values approximate fair values primarily
include banking and brokerage customer deposits and derivative
liabilities. Generally these liabilities are either short-term in duration,
variable rate in nature or are recorded at fair value on the Consoli-
dated Balance Sheets.
Fair values of fixed annuities in deferral status were estimated as the
accumulated value less applicable surrender charges. For annuities in
payout status, fair value was estimated using discounted cash flows
based on current interest rates. The fair value of these reserves
excluded life insurance-related elements of $1.5 billion as of both
December 31, 2007 and 2006. If the fair value of the fixed annuities
were realized, the write-off of DAC and DSIC would be $308 million
and $422 million as of December 31, 2007 and 2006, respectively.
Fair values of separate account liabilities, excluding life insurance-
related elements of $6.3 billion and $5.8 billion as of December 31, 2007
and 2006, respectively, were estimated as the accumulated value less
applicable surrender charges. If the fair value of the separate account
liabilities were realized, the surrender charges received would be offset by
the write-off of the DAC and DSIC associated with separate account
liabilities of $2.5 billion and $2.3 billion as of December 31, 2007 and
2006, respectively.
For variable rate investment certificates that reprice within a year, fair
value approximated carrying value. For other investment certificates,
fair value was estimated using discounted cash flows based on current
interest rates. The valuations were reduced by the amount of appli-
cable surrender charges.
The fair values of the senior notes, junior notes and non-recourse
debt of a consolidated CDO were estimated using quoted market
prices. In 2007, the Company deconsolidated the CDO as a result of
the sale of a portion of its interest in the CDO structure. The fair
value approximated carrying value for the non-recourse debt of a
consolidated structured entity.
20. Retirement Plans and Profit Sharing
Arrangements
The Company’s EBA with American Express allocated certain liabili-
ties and responsibilities relating to employee compensation and
benefit plans and programs and other related matters in connection
with the Distribution, including the general treatment of outstanding
American Express equity awards, certain outstanding annual and long
term incentive awards, existing deferred compensation obligations
and certain retirement and welfare benefit obligations. As of the date
of the Distribution, Ameriprise Financial generally assumed, retained
and became liable for all wages, salaries, welfare, incentive compensa-
tion and employee-related obligations and liabilities for all of its
current and former employees. The EBA also provided for the
transfer of qualified plan assets and transfer of liabilities relating to
the pre-distribution participation of Ameriprise Financial’s employees
in American Express’ various retirement, welfare and employee
benefit plans from such plans to the applicable plans Ameriprise
Financial adopted for the benefit of its employees.
Defined Benefit Plans
Pension Plans
The Company’s employees in the United States are eligible to partici-
pate in the Ameriprise Financial Retirement Plan (the “Retirement
Plan”), a noncontributory defined benefit plan which is a qualified
plan under the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), under which the cost of retirement benefits
for eligible employees in the United States is measured by length of
service, compensation and other factors and is currently being funded
through a trust. Funding of retirement costs for the Retirement Plan
complies with the applicable minimum funding requirements speci-
fied by ERISA. The Retirement Plan is a cash balance plan by which
the employees’ accrued benefits are based on notional account
balances, which are maintained for each individual. Each pay period
these balances are credited with an amount equal to a percentage
(determined by an employee’s age plus service) of compensation as
defined by the Retirement Plan (which includes, but is not limited
to, base pay, certain incentive pay and commissions, shift differential,
overtime and transition pay). Employees’ balances are also credited
daily with a fixed rate of interest that is updated each January 1 and is
based on the average of the daily five-year U.S. Treasury Note yields
for the previous October 1 through November 30, with a minimum
crediting rate of 5%. Employees have the option to receive annuity
payments or a lump sum payout at vested termination or retirement.
In addition, the Company sponsors an unfunded non-qualified
Supplemental Retirement Plan (the “SRP”) for certain highly
compensated employees to replace the benefit that cannot be
provided by the Retirement Plan due to Internal Revenue Service
limits. The SRP generally parallels the Retirement Plan but offers
different payment options.
Most employees outside the United States are covered by local retire-
ment plans, some of which are funded, while other employees receive
payments at the time of retirement or termination under applicable
labor laws or agreements.
Pursuant to the EBA described previously, the liabilities and plan
assets associated with the American Express Retirement Plan,