Ameriprise 2009 Annual Report Download - page 113

For all securities that are considered temporarily impaired, the Company does not intend to sell these securities (has not made a decision
to sell) and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis.
The Company believes that it will collect all principal and interest due on all investments that have amortized cost in excess of fair value
that are considered only temporarily impaired.
Factors the Company considers in determining whether declines in the fair value of fixed maturity securities are other-than-temporary
include: (i) the extent to which the market value is below amortized cost; (ii) the duration of time in which there has been a significant
decline in value; (iii) fundamental analysis of the liquidity, business prospects and overall financial condition of the issuer; and
(iv) market events that could impact credit ratings, economic and business climate, litigation and government actions, and similar
external business factors. In order to determine the amount of the credit loss component for corporate debt securities considered
other-than-temporarily impaired, a best estimate of the present value of cash flows expected to be collected discounted at the security’s
effective interest rate is compared to the amortized cost basis of the security. The significant inputs to cash flow projections consider
potential debt restructuring terms, projected cash flows available to pay creditors and the Company’s position in the debtor’s overall
capital structure.
For structured investments (e.g., residential mortgage backed securities, commercial mortgage backed securities, asset backed securities
and other structured investments), the Company also considers factors such as overall deal structure and its position within the structure,
quality of underlying collateral, delinquencies and defaults, loss severities, recoveries, prepayments and cumulative loss projections in
assessing potential other-than-temporary impairments of these investments. Based upon these factors, securities that have indicators of
potential other-than-temporary impairment are subject to detailed review by management. Securities for which declines are considered
temporary continue to be carefully monitored by management. For the year ended December 31, 2009, certain non-agency residential
mortgage backed securities were deemed other-than- temporarily impaired. Generally, the credit loss component for the non-agency
residential mortgage backed securities is determined as the amount the amortized cost basis exceeds the present value of the projected
cash flows expected to be collected. Significant inputs considered in these projections are consistent with the factors considered in
assessing potential other-than-temporary impairment for these investments. Current contractual interest rates considered in these cash
flow projections are used to calculate the discount rate used to determine the present value of the expected cash flows.
Commercial Mortgage Loans, Net
Commercial mortgage loans, net reflect principal amounts outstanding less the allowance for loan losses. The allowance for loan losses is
primarily based on the Company’s past loan loss experience, known and inherent risks in the portfolio, composition of the loan portfolio,
current economic conditions, and other relevant factors. Loans in this portfolio are generally smaller balance and homogeneous in nature
and accordingly the Company follows accounting guidance on contingencies when establishing necessary reserves for losses inherent in
the portfolio. For larger balance or restructured loans that are collateral dependent the allowance is based on the fair value of collateral.
Management regularly evaluates the adequacy of the allowance for loan losses and believes it is adequate to absorb estimated losses in the
portfolio.
The Company generally stops accruing interest on commercial mortgage loans for which interest payments are delinquent more than
three months. Based on management’s judgment as to the ultimate collectability of principal, interest payments received are either
recognized as income or applied to the recorded investment in the loan.
Trading Securities
Trading securities primarily include common stocks, trading bonds and seed money investments. Trading securities are carried at fair
value with unrealized and realized gains (losses) recorded within net investment income.
Policy Loans
Policy loans include life insurance policy, annuity and investment certificate loans. These loans are carried at the aggregate of the unpaid
loan balances, which do not exceed the cash surrender values of underlying products, plus accrued interest.
Other Investments
Other investments reflect the Company’s interests in affordable housing partnerships and syndicated loans. Affordable housing
partnerships are accounted for under the equity method. Syndicated loans reflect amortized cost less allowance for losses.
98 ANNUAL REPORT 2009