Ameriprise 2008 Annual Report Download - page 48

Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital required to operate
our business. Such market conditions may limit our ability to satisfy statutory capital requirements; generate fee income and
market-related revenue to meet liquidity needs; and access the capital necessary to grow our business. As such, we may be
forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital, or
bear an unattractive cost of capital which could decrease our profitability and significantly reduce our financial flexibility.
The impairment of other financial institutions could adversely affect us.
We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in
the financial services industry, including brokers and dealers, commercial banks, investment banks, hedge funds, insurers,
reinsurers and other investment funds and other institutions. Many of these transactions expose us to credit risk in the event
of default of our counterparty. In addition, with respect to secured transactions, our credit risk may be exacerbated when the
collateral we hold cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the loan or
derivative exposure due to it. We also have exposure to these financial institutions in the form of unsecured debt instruments,
derivative transactions (including with respect to derivatives hedging our exposure on variable annuity contracts with
guaranteed benefits), reinsurance and underwriting arrangements and equity investments. There can be no assurance that
any such losses or impairments to the carrying value of these assets would not materially and adversely impact our business
and results of operations. Downgrades in the credit or financial strength ratings assigned to the counterparties with whom we
transact could create the perception that our financial condition will be adversely impacted as a result of potential future
defaults by such counterparties. Additionally, we could be adversely affected by a general, negative perception of financial
institutions caused by the downgrade of other financial institutions. Accordingly, ratings downgrades for other financial
institutions could affect our market capitalization and could limit access to or increase the cost of capital for us.
The failure of other insurers could require us to pay higher assessments to state insurance guaranty
funds.
Our insurance companies are required by law to be members of the guaranty fund association in every state where they are
licensed to do business. In the event of insolvency of one or more unaffiliated insurance companies, our insurance companies
could be adversely affected by the requirement to pay assessments to the guaranty fund associations.
Third-party defaults, bankruptcy filings, legal actions and other events may limit the value of or restrict
our access and our clients’ access to cash and investments.
The extreme capital and credit market volatility that we continue to experience has exacerbated the risk of third-party defaults,
bankruptcy filings, foreclosures, legal actions and other events that may limit the value of or restrict our access and our
clients’ access to cash and investments. Although we are not required to do so, we have elected in the past, and we may elect
in the future, to compensate clients for losses incurred in response to such events, provide clients with temporary credit or
liquidity or other support related to products that we manage, or provide credit liquidity or other support to the financial
products we manage. Any such election to provide support may arise from factors specific to our clients, our products or
industry-wide factors. If we elect to provide additional support, we could incur losses from the support we provide and incur
additional costs, including financing costs, in connection with the support. These losses and additional costs could be
material and could adversely impact our results of operations. If we were to take such actions we may also restrict or otherwise
utilize our corporate assets, limiting our flexibility to use these assets for other purposes, and may be required to raise
additional capital.
Governmental initiatives intended to address capital market and general economic conditions may not
be effective and may give rise to additional requirements for our business, including new capital
requirements or other regulations, that could materially impact our results of operations, financial
condition and liquidity in ways that we cannot predict.
Legislation has been passed in the United States and abroad in an attempt to address the instability in global financial
markets. The U.S. federal government, Federal Reserve and other U.S. and foreign governmental and regulatory bodies have
taken or are considering taking other actions to address the financial crisis, including future investments in other financial
institutions and creation of a federal systemic risk regulator. This legislation or similar proposals may fail to stabilize the
financial markets or the economy generally. This legislation and other proposals or actions may also have other
consequences, including substantially higher compliance costs as well as material effects on interest rates and foreign
exchange rates, which could materially impact our investments, results of operations and liquidity in ways that we cannot
predict. In addition, prolonged government support for, and intervention in the management of, private institutions could
distort customary and expected commercial behavior on the part of those institutions, adversely impacting us.
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