Ameriprise 2008 Annual Report Download - page 56

not be valid. As a result, these methods may not accurately predict future exposures, which could be significantly greater than
what our models indicate. This could cause us to incur investment losses or cause our hedging and other risk management
strategies to be ineffective. Other risk management methods depend upon the evaluation of information regarding markets,
clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us, which may not
always be accurate, complete, up-to-date or properly evaluated.
Moreover, we are subject to the risks of errors and misconduct by our employees and affiliated financial advisors, such as
fraud, non-compliance with policies, recommending transactions that are not suitable, and improperly using or disclosing
confidential information. These risks are difficult to detect in advance and deter, and could harm our business, results of
operations or financial condition. We are further subject to the risk of nonperformance or inadequate performance of
contractual obligations by third-party vendors of products and services that are used in our businesses. Management of
operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a
large number of transactions and events, and these policies and procedures may not be fully effective in mitigating our risk
exposure in all market environments or against all types of risk. Insurance and other traditional risk-shifting tools may be held
by or available to us in order to manage certain exposures, but they are subject to terms such as deductibles, coinsurance,
limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.
As a holding company, we depend on the ability of our subsidiaries to transfer funds to us to pay
dividends and to meet our obligations.
We act as a holding company for our insurance and other subsidiaries. Dividends from our subsidiaries and permitted
payments to us under our intercompany arrangements with our subsidiaries are our principal sources of cash to pay
shareholder dividends and to meet our other financial obligations. These obligations include our operating expenses and
interest and principal on our borrowings. If the cash we receive from our subsidiaries pursuant to dividend payment and
intercompany arrangements is insufficient for us to fund any of these obligations, we may be required to raise cash through
the incurrence of additional debt, the issuance of additional equity or the sale of assets. If any of this happens, it could
adversely impact our financial condition and results of operations.
Insurance, banking and securities laws and regulations regulate the ability of many of our subsidiaries (such as our insurance,
banking and brokerage subsidiaries and our face-amount certificate company) to pay dividends or make other permitted
payments. See Item 1 of this Annual Report on Form 10-K—‘‘Regulation’’ as well as the information contained in Part II,
Item 7 under the heading ‘‘Management’s Discussion and Analysis—Liquidity and Capital Resources.’’ In addition to the
various regulatory restrictions that constrain our subsidiaries’ ability to pay dividends or make other permitted payments to our
company, the rating organizations impose various capital requirements on our company and our insurance company
subsidiaries in order for us to maintain our ratings and the ratings of our insurance subsidiaries. The value of assets on the
company-level balance sheets of our subsidiaries is a significant factor in determining these restrictions and capital
requirements. As asset values decline, our and our subsidiaries’ ability to pay dividends or make other permitted payments
can be reduced. Additionally, the various asset classes held by our subsidiaries, and used in determining required capital
levels, are weighted differently or are restricted as to the proportion in which they may be held depending upon their liquidity,
credit risk and other factors. Volatility in relative asset values among different asset classes can alter the proportion of our
subsidiaries’ holdings in those classes, which could increase required capital and constrain our and our subsidiaries’ ability to
pay dividends or make other permitted payments. The regulatory capital requirements and dividend-paying ability of our
subsidiaries may also be affected by a change in the mix of products sold by such subsidiaries. For example, fixed annuities
typically require more capital than variable annuities, and an increase in the proportion of fixed annuities sold in relation to
variable annuities could increase the regulatory capital requirements of our life insurance subsidiaries. This may reduce the
dividends or other permitted payments which could be made from those subsidiaries in the near term without the rating
organizations viewing this negatively. Further, the capital requirements imposed upon our subsidiaries may be impacted by
heightened regulatory scrutiny and intervention, which could negatively affect our and our subsidiaries’ ability to pay dividends
or make other permitted payments. Additionally, in the past we have found it necessary to provide support to certain of our
subsidiaries in order to maintain adequate capital for regulatory or other purposes and we may provide such support in the
future. The provision of such support could adversely affect our excess capital, liquidity, and the dividends or other permitted
payments received from our subsidiaries.
Changes in U.S. federal income or estate tax law could make some of our products less attractive to
clients.
Many of the products we issue or on which our businesses are based (including both insurance products and non-insurance
products) enjoy favorable treatment under current U.S. federal income or estate tax law. Changes in U.S. federal income or
estate tax law could thus make some of our products less attractive to clients.
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