Ameriprise 2008 Annual Report Download - page 53

We cannot always deter misconduct by our employees and affiliated financial advisors, and the precautions we take to prevent
and detect this activity may not be effective in all cases. Preventing and detecting misconduct among our branded franchisee
advisors and our unbranded affiliated financial advisors who are not employees of our company and tend to be located in
small, decentralized offices, present additional challenges. We also cannot assure that misconduct by our employees and
affiliated financial advisors will not lead to a material adverse effect on our business, results of operations or financial
condition.
Legal and regulatory actions are inherent in our businesses and could result in financial losses or harm
our businesses.
We are, and in the future may be, subject to legal and regulatory actions in the ordinary course of our operations, both
domestically and internationally. Various regulatory and governmental bodies have the authority to review our products and
business practices and those of our employees and independent financial advisors and to bring regulatory or other legal
actions against us if, in their view, our practices, or those of our employees or affiliated financial advisors, are improper.
Pending legal and regulatory actions include proceedings relating to aspects of our businesses and operations that are
specific to us and proceedings that are typical of the industries and businesses in which we operate. Some of these
proceedings have been brought on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs
are seeking large and/or indeterminate amounts, including punitive or exemplary damages. See Item 3 of this Annual Report
on Form 10-K—‘‘Legal Proceedings.’’ In turbulent times such as these, the volume of claims and amount of damages sought
in litigation and regulatory proceedings generally increase. Substantial legal liability in current or future legal or regulatory
actions could have a material adverse financial effect or cause significant reputational harm, which in turn could seriously
harm our business prospects.
A downgrade or a potential downgrade in our financial strength or credit ratings could adversely affect
our financial condition and results of operations.
Financial strength ratings, which various ratings organizations publish as a measure of an insurance company’s ability to meet
contractholder and policyholder obligations, are important to maintaining public confidence in our products, the ability to
market our products and our competitive position. A downgrade in our financial strength ratings, or the announced potential
for a downgrade, could have a significant adverse effect on our financial condition and results of operations in many ways,
including:
• reducing new sales of insurance products, annuities and investment products;
• adversely affecting our relationships with our affiliated financial advisors and third-party distributors of our products;
• materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders;
• requiring us to reduce prices for many of our products and services to remain competitive; and
• adversely affecting our ability to obtain reinsurance or obtain reasonable pricing on reinsurance.
A downgrade in our credit ratings could also adversely impact our future cost and speed of borrowing and have an adverse
effect on our financial condition, results of operations and liquidity.
In view of the difficulties experienced recently by many financial institutions, including our competitors in the insurance
industry, we believe it is possible that the ratings organizations will heighten the level of scrutiny that they apply to such
institutions, will increase the frequency and scope of their credit reviews, will request additional information from the
companies that they rate, and may adjust upward the capital and other requirements employed in the ratings organization’s
models for maintenance of ratings levels. Ratings organizations may also become subject to tighter laws and regulations
governing the ratings, which may in turn impact the ratings assigned to financial institutions.
We cannot predict what actions rating organizations may take, or what actions we may take in response to the actions of rating
organizations, which could adversely affect our business. As with other companies in the financial services industry, our
ratings could be changed at any time and without any notice by the ratings organizations.
If our reserves for future policy benefits and claims or for our bank lending portfolio are inadequate, we
may be required to increase our reserve liabilities, which could adversely affect our results of
operations and financial condition.
We establish reserves as estimates of our liabilities to provide for future obligations under our insurance policies, annuities
and investment certificate contracts. We also establish reserves as estimates of the potential for loan losses in our consumer
lending portfolios. Reserves do not represent an exact calculation but, rather, are estimates of contract benefits or loan losses
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