Ameriprise 2008 Annual Report Download - page 143
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Liabilities
Embedded Derivatives
Variable Annuity Riders—Guaranteed Minimum Accumulation Benefit and Guaranteed Minimum Withdrawal
Benefit
The Company values the embedded derivative liability attributable to the provisions of certain variable annuity riders using
internal valuation models. These models calculate fair value by discounting expected cash flows from benefits plus margins for
profit, risk, and expenses less embedded derivative fees. The projected cash flows used by these models include observable
capital market assumptions and incorporate significant unobservable inputs related to contractholder behavior assumptions
and margins for risk, profit and expenses that the Company believes an exit market participant would expect. The fair value of
these embedded derivatives also reflects a current estimate of the Company’s nonperformance risk specific to these
liabilities. Given the significant unobservable inputs to this valuation, these measurements are classified as Level 3. The
embedded derivative liability attributable to these provisions is recorded in future policy benefits and claims.
Equity Indexed Annuities and Stock Market Certificates
The Company uses various Black-Scholes calculations to determine the fair value of the embedded derivative liability
associated with the provisions of its equity indexed annuities and stock market certificates. The inputs to these calculations
are primarily market observable. As a result, these measurements are classified as Level 2. The embedded derivative liability
attributable to the provisions of the Company’s equity indexed annuities and stock market certificates is recorded in future
policy benefits and claims and customer deposits, respectively.
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis:
December 31, 2008
Level 1 Level 2 Level 3 Total
(in millions)
Assets
Cash equivalents $ 504 $ 5,446 $ — $ 5,950
Available-for-Sale securities 32 20,228 2,613 22,873
Trading securities 224 244 30 498
Separate account assets — 44,746 — 44,746
Other assets 1 2,308 487 2,796
Total assets at fair value $ 761 $ 72,972 $ 3,130 $ 76,863
Liabilities
Future policy benefits and claims $ — $ 16 $ 1,832 $ 1,848
Customer deposits — 5 — 5
Other liabilities 7 673 — 680
Total liabilities at fair value $ 7 $ 694 $ 1,832 $ 2,533
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