Ameriprise 2008 Annual Report Download - page 37

Variable Annuities
A variable annuity provides a contractholder with investment returns linked to underlying investment accounts of the
contractholder’s choice. These underlying investment options may include the RiverSource VP Funds previously discussed
(see ‘‘Business—Our Segments—Asset Management—Asset Management Offerings—Mutual Fund Families—RiverSource,
Threadneedle and Seligman’’, above) as well as variable portfolio funds of other companies. RiverSource variable annuity
products in force offer a fixed account investment option with guaranteed minimum interest crediting rates ranging up to 4%
at December 31, 2008.
Our Portfolio Navigator asset allocation program is available under our variable annuities. The Portfolio Navigator program is
designed to help a contract purchaser select an asset allocation model portfolio from the choices available under the
program, based on the purchaser’s stated investment time horizon, risk tolerance and investment goals. We believe the
benefits of the Portfolio Navigator asset allocation program include a well-diversified annuity portfolio, disciplined,
professionally created asset allocation models, simplicity and ease of use, access to multiple well-known money managers
within each model portfolio and automatic rebalancing of the client’s contract value on a quarterly basis. RiverSource
Investments, our investment management subsidiary, designs and periodically updates the model portfolios under the
Portfolio Navigator asset allocation program, based on recommendations from Morningstar Associates.
Contract purchasers can choose optional benefit provisions to their contracts to meet their needs, including enhanced
guaranteed minimum death benefit (‘‘GMDB’’), guaranteed minimum withdrawal benefit (‘‘GMWB’’) and guaranteed
minimum accumulation benefit (‘‘GMAB’’) provisions. Approximately one-third of RiverSource Life’s overall variable annuity
contracts include the GMWB or GMAB features. In general, these features can help protect contractholders and beneficiaries
from a shortfall in death or living benefits due to a decline in the value of their underlying investment accounts.
The general account assets of our life insurance subsidiaries support the contractual obligations under the guaranteed benefit
provisions the company issues (see ‘‘Business—Our Segments—Asset Management—Asset Management Offerings—
Management of Institutional Owned Assets’’ above). As a result, we bear the risk that protracted under-performance of the
financial markets could result in guaranteed benefit payments being higher than what current account values would support.
Our exposure to risk from guaranteed benefits generally will increase when equity markets decline, as evidenced by the
significant decline experienced in 2008. You can find a discussion of liabilities and reserves related to our annuity products in
Note 2 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
RiverSource variable annuities provide us with fee-based revenue in the form of mortality and expense risk fees, marketing
support and administrative fees, fees charged for optional features elected by the contractholder, and other contract charges.
We receive marketing support payments from the VP Funds underlying our variable annuity products as well as Rule 12b-1
distribution and servicing-related fees from the VP Funds and the underlying funds of other companies. In addition, we receive
marketing support payments from the affiliates of other companies’ funds included as investment options in our RiverSource
variable annuity products.
Fixed Annuities
RiverSource fixed annuity products provide a contractholder with cash value that increases by a fixed or indexed interest rate.
We periodically reset rates at our discretion subject to certain policy terms establishing minimum guaranteed interest crediting
rates. Our earnings from fixed annuities are based upon the spread between rates earned on assets purchased with fixed
annuity deposits and the rates at which interest is credited to our RiverSource fixed annuity contracts.
We previously offered equity indexed annuities. In 2007, new sales were discontinued.
RiverSource fixed annuity contracts in force provide guaranteed minimum interest crediting rates ranging from 1.5% to 5.0%
at December 31, 2008. New contracts issued provide guaranteed minimum interest rates in compliance with state laws
providing for indexed guaranteed rates.
Liabilities and Reserves for Annuities
We maintain adequate financial reserves to cover the risks associated with guaranteed benefit provisions added to variable
annuity contracts in addition to liabilities arising from fixed and variable annuity base contracts. You can find a discussion of
liabilities and reserves related to our annuity products in Note 2 to our Consolidated Financial Statements included in Part II,
Item 8 of this Annual Report on Form 10-K.
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