Ameriprise 2008 Annual Report Download - page 145

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characteristics including loan-to-value ratio, occupancy rate, refinance risk, debt-service coverage, location, and property
condition. For commercial mortgage loans with significant credit deterioration, fair value is determined using the same
adjustments as above with an additional adjustment for the Company’s estimate of the amount recoverable on the loan.
The fair value of policy loans is determined using discounted cash flows.
Receivables
The fair value of consumer banking loans is determined by discounting estimated cash flows and incorporating adjustments
for prepayment, administration expenses, severity and credit loss estimates, with discount rates based on the Company’s
estimate of current market conditions.
Loans held for sale are measured at the lower of cost or market and fair value is based on what secondary markets are
currently offering for loans with similar characteristics.
Brokerage margin loans are measured at outstanding balances, which are a reasonable estimate of fair value because of the
sufficiency of the collateral and short term nature of these loans.
Restricted and segregated cash
Restricted and segregated cash is generally set aside for specific business transactions and restrictions are specific to the
Company and do not transfer to third party market participants, therefore, the carrying amount is a reasonable estimate of fair
value.
Amounts segregated under federal and other regulations reflect resale agreements and are measured at the cost at which the
securities will be sold. This measurement is a reasonable estimate of fair value because of the short time between entering
into the transaction and its expected realization and the reduced risk of credit loss due to pledging U.S. government-backed
securities as collateral.
Future policy benefits and claims
The fair value of fixed annuities, in deferral status, is determined by discounting cash flows using a risk neutral discount rate
with adjustments for profit margin, expense margin, early policy surrender behavior, a provision for adverse deviation from
estimated early policy surrender behavior, and the Company’s non-performance risk specific to these liabilities. The fair value
of fixed annuities, in payout status, is determined by discounting cash flows using a risk neutral discount rate with adjustments
for expense margin and the Company’s non-performance risk specific to these liabilities. Variable annuity fixed sub-accounts
classified as investment contracts and equity indexed annuities fair value is determined by discounting cash flows adjusted for
policyholder and contractholder behavior and the Company’s non-performance risk specific to these liabilities.
Customer deposits
The fair value of investment certificate reserves is determined by discounting cash flows using discount rates that reflect
current pricing for assets with similar terms and characteristics, with adjustments for early withdrawal behavior, penalty fees,
expense margin and the Company’s non-performance risk specific to these liabilities.
Banking and brokerage customer deposits are liabilities with no defined maturities and fair value is the amount payable on
demand at the reporting date.
Separate account liabilities
Certain separate account liabilities are classified as investment contracts and are carried at an amount equal to the related
separate account assets. Carrying value is a reasonable estimate of the fair value as it represents the exit value as evidenced
by withdrawal transactions between contractholders and the Company. A non-performance adjustment is not included as the
related separate account assets act as collateral for these liabilities and minimize non-performance risk.
Debt and other liabilities
Debt fair value is based on quoted prices in active markets, when available. If quoted prices are not available fair values are
obtained from nationally-recognized pricing services, broker quotes, or other model-based valuation techniques such as
present value of cash flows.
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