Ameriprise 2008 Annual Report Download - page 55

life of the policy or contract, while premiums on certain other products (primarily long term care insurance) may not be
increased without prior regulatory approval. Significant deviations in experience from pricing expectations regarding
persistency could have an adverse effect on the profitability of our products.
We may be required to accelerate the amortization of deferred acquisition costs, which would increase
our expenses and reduce profitability.
Deferred acquisition costs (‘‘DAC’’) represent the costs of acquiring new business, principally direct sales commissions and
other distribution and underwriting costs that have been deferred on the sale of annuity, life and disability income insurance
and, to a lesser extent, marketing and promotional expenses for personal auto and home insurance, and distribution expense
for certain mutual fund products. For annuity and universal life products, DAC are amortized based on projections of estimated
gross profits over amortization periods equal to the approximate life of the business. For other insurance products, DAC are
generally amortized as a percentage of premiums over amortization periods equal to the premium-paying period. For certain
mutual fund products, we generally amortize DAC over fixed periods on a straight-line basis.
Our projections underlying the amortization of DAC require the use of certain assumptions, including interest margins,
mortality rates, persistency rates, maintenance expense levels and customer asset value growth rates for variable products.
We periodically review and, where appropriate, adjust our assumptions. When we change our assumptions, we may be
required to accelerate the amortization of DAC or to record a charge to increase benefit reserves.
For more information regarding DAC, see Part II, Item 7 of this Annual Report on Form 10-K under the heading
‘‘Management’s Discussion and Analysis—Critical Accounting Policies—Deferred Acquisition Costs and Deferred Sales
Inducement Costs’’ and ‘‘—Recent Accounting Pronouncements.’’
Breaches of security, or the perception that our technology infrastructure is not secure, could harm our
business.
Our business requires the appropriate and secure utilization of client and other sensitive information. Our operations require
the secure transmission of confidential information over public networks. Security breaches in connection with the delivery of
our products and services, including products and services utilizing the Internet and the trend toward broad consumer and
general public notification of such incidents, could significantly harm our business, financial condition or results of operations.
Even if we successfully protect our technology infrastructure and the confidentiality of sensitive data, we could suffer harm to
our business and reputation if attempted security breaches are publicized. We cannot be certain that advances in criminal
capabilities, discovery of new vulnerabilities, attempts to exploit vulnerabilities in our systems, data thefts, physical system or
network break-ins or inappropriate access, or other developments will not compromise or breach the technology or other
security measures protecting the networks used in connection with our products and services.
Protection from system interruptions is important to our business. If we experience a sustained
interruption to our telecommunications or data processing systems, it could harm our business.
System or network interruptions could delay and disrupt our ability to develop, deliver or maintain our products and services,
causing harm to our business and reputation and resulting in loss of customers or revenue. Interruptions could be caused by
operational failures arising from our implementation of new technology, as well from our maintenance of existing technology.
Our financial, accounting, data processing or other operating systems and facilities may fail to operate properly or become
disabled as a result of events that are wholly or partially beyond our control, adversely affecting our ability to process
transactions or provide products and services to our customers. These interruptions can include fires, floods, earthquakes,
power losses, equipment failures, failures of internal or vendor software or systems and other events beyond our control.
Further, we face the risk of operational failure, termination or capacity constraints of any of the clearing agents, exchanges,
clearing houses or other financial intermediaries that we use to facilitate our securities transactions. Any such failure,
termination or constraint could adversely impact our ability to effect transactions, service our clients and manage our
exposure to risk.
Risk management policies and procedures may not be fully effective in mitigating risk exposure in all
market environments or against all types of risk, including employee and financial advisor misconduct.
We have devoted significant resources toward developing our risk management policies and procedures and will continue to
do so. Nonetheless, our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating
our risk exposure in all market environments or against all types of risk. Many of our methods of managing risk and exposures
are based upon our use of observed historical market behavior or statistics based on historical models. During periods of
market volatility or due to unforeseen events, the historically derived correlations upon which these methods are based may
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