Ameriprise 2009 Annual Report Download - page 133

Estimated intangible amortization expense as of December 31, 2009 for the next five years was as follows:
(in millions)
2010 $31
2011 28
2012 28
2013 26
2014 21
10. Reinsurance
Generally, the Company reinsures 90% of the death benefit liability related to individual fixed and variable universal life and term life
insurance products. As a result, the Company typically retains and is at risk for, at most, 10% of each policy’s death benefit from the first
dollar of coverage for new sales of these policies, subject to the reinsurers fulfilling their obligations. The Company began reinsuring risks
at this level beginning in 2001 for term life insurance and 2002 for individual fixed and variable universal life insurance. Policies issued
prior to these dates are not subject to these same reinsurance levels. Generally, the maximum amount of life insurance risk retained by the
Company is $1.5 million (increased from $750,000 during 2008) on a single life and $1.5 million on any flexible premium survivorship
life policy. Risk on fixed and variable universal life policies is reinsured on a yearly renewable term basis. Risk on most term life policies
starting in 2001 is reinsured on a coinsurance basis, a type of reinsurance in which the reinsurer participates proportionally in all material
risks and premiums associated with a policy.
For existing long term care policies, RiverSource Life (and RiverSource Life of NY for 1996 and later issues) retained 50% of the risk and
ceded the remaining 50% of the risk on a coinsurance basis to subsidiaries of Genworth Financial, Inc. (‘‘Genworth’’).
In addition, the Company assumes life insurance and fixed annuity risk under reinsurance arrangements with unaffiliated insurance
companies.
Generally, the Company retains at most $5,000 per month of risk per life on disability income policies sold on policy forms introduced in
October 2007 in most states and reinsures the remainder of the risk on a coinsurance basis with unaffiliated reinsurance companies. The
Company retains all risk for new claims on disability income contracts sold on other policy forms. The Company also retains all risk on
accidental death benefit claims and substantially all risk associated with waiver of premium provisions.
The Company also reinsures a portion of the risks associated with its personal auto and home insurance products through two types of
reinsurance agreements with unaffiliated reinsurance companies. The Company purchases reinsurance with a limit of $5 million per loss
and the Company retains $750,000 per loss. The Company purchases catastrophe reinsurance and retains $10 million of loss per event
with loss recovery up to $80 million per event.
The effect of reinsurance on premiums was as follows:
Years Ended December 31,
2009 2008 2007
(in millions)
Direct premiums $ 1,379 $ 1,263 $ 1,218
Reinsurance ceded (281) (215) (201)
Net premiums $ 1,098 $ 1,048 $ 1,017
Cost of insurance and administrative charges on UL and VUL insurance are reflected in other revenues and were net of reinsurance ceded
of $62 million, $61 million and $57 million for the years ended December 31, 2009, 2008 and 2007, respectively. Reinsurance recovered
from reinsurers was $174 million, $151 million and $130 million for the years ended December 31, 2009, 2008 and 2007, respectively.
Reinsurance contracts do not relieve the Company from its primary obligation to policyholders.
Receivables included $1.7 billion and $1.6 billion of reinsurance recoverables as of December 31, 2009 and 2008, respectively, including
$1.3 billion and $1.2 billion recoverable from Genworth, respectively. Included in future policy benefits and claims were $667 million and
$689 million related to assumed reinsurance arrangements as of December 31, 2009 and 2008, respectively.
118 ANNUAL REPORT 2009