Ameriprise 2009 Annual Report Download - page 118

GMWB and GMAB embedded derivatives and the liability for life contingent benefits are reflected in benefits, claims, losses and
settlement expenses.
Liabilities for equity indexed annuities are equal to the accumulation of host contract values covering guaranteed benefits and the fair
value of embedded equity options.
Liabilities for fixed annuities in a benefit or payout status are based on future estimated payments using established industry mortality
tables and interest rates, ranging from 4.6% to 9.5% at December 31, 2009, depending on year of issue, with an average rate of
approximately 5.7%.
Life and Health Insurance
Future policy benefits and claims related to life and health insurance include liabilities for fixed account values on fixed and variable
universal life policies, liabilities for unpaid amounts on reported claims, estimates of benefits payable on claims incurred but not yet
reported and estimates of benefits that will become payable on term life, whole life and health insurance policies as claims are incurred in
the future.
Liabilities for fixed account values on fixed and variable universal life insurance are equal to accumulation values. Accumulation values
are the cumulative gross deposits and credited interest less various contractual expense and mortality charges and less amounts
withdrawn by policyholders.
Liabilities for unpaid amounts on reported life insurance claims are equal to the death benefits payable under the policies. Liabilities for
unpaid amounts on reported health insurance claims include any periodic or other benefit amounts due and accrued, along with
estimates of the present value of obligations for continuing benefit payments. These amounts are calculated based on claim continuance
tables which estimate the likelihood an individual will continue to be eligible for benefits. Present values are calculated at interest rates
established when claims are incurred. Anticipated claim continuance rates are based on established industry tables, adjusted as
appropriate for the Company’s experience. Interest rates used with disability income claims ranged from 3.0% to 8.0% at December 31,
2009, with an average rate of 4.7%. Interest rates used with long term care claims ranged from 4.0% to 7.0% at December 31, 2009, with
an average rate of 4.1%.
Liabilities for estimated benefits payable on claims that have been incurred but not yet reported are based on periodic analysis of the
actual time lag between when a claim occurs and when it is reported.
Liabilities for estimates of benefits that will become payable on future claims on term life, whole life and health insurance policies are
based on the net level premium method, using anticipated premium payments, mortality and morbidity rates, policy persistency and
interest rates earned on assets supporting the liability. Anticipated mortality and morbidity rates are based on established industry
mortality and morbidity tables, with modifications based on the Company’s experience. Anticipated premium payments and persistency
rates vary by policy form, issue age, policy duration and certain other pricing factors. Anticipated interest rates for term and whole life
ranged from 4.0% to 10.0% at December 31, 2009, depending on policy form, issue year and policy duration. Anticipated interest rates for
disability income vary by plan and are 7.5% and 6.0% at policy issue grading to 5.0% over five years and 4.5% over 20 years, respectively.
Anticipated interest rates for long term care policy reserves can vary by plan and year and ranged from 5.8% to 9.4% at December 31,
2009.
Where applicable, benefit amounts expected to be recoverable from reinsurance companies who share in the risk are separately recorded
as reinsurance recoverable within receivables.
Auto and Home Reserves
Auto and home reserves include amounts determined from loss reports on individual claims, as well as amounts based on historical loss
experience for losses incurred but not yet reported. Such liabilities are necessarily based on estimates and, while management believes
that the reserve amounts were adequate at December 31, 2009 and 2008, the ultimate liability may be in excess of or less than the
amounts provided. The Company’s methods for making such estimates and for establishing the resulting liabilities are continually
reviewed, and any adjustments are reflected in earnings in the period such adjustments are made.
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