Ameriprise 2010 Annual Report Download - page 105

The following tables present our estimate of the impact on pretax income from these hypothetical market movements as of
December 31, 2010:
Equity Price Exposure to Pretax Income
Equity Price Decline 10% Before Hedge Impact Hedge Impact Net Impact
(in millions)
Asset-based management and distribution fees(1) $ (177) $ — $ (177)
DAC and DSIC amortization(2)(3) (127) — (127)
Variable annuity riders:
GMDB and GMIB(3) (25) — (25)
GMWB (40) 42 2
GMAB (25) 28 3
DAC and DSIC amortization(4) N/A N/A (2)
Total variable annuity riders (90) 70 (22)
Equity indexed annuities 1(1)—
Stock market certificates 6(6)—
Total $ (387) $ 63 $ (326)
Interest Rate Exposure to Pretax Income
Interest Rate Increase 100 Basis Points Before Hedge Impact Hedge Impact Net Impact
(in millions)
Asset-based management and distribution fees(1) $ (36) $ — $ (36)
Variable annuity riders:
GMWB 253 (300) (47)
GMAB 34 (39) (5)
DAC and DSIC amortization(4) N/A N/A 18
Total variable annuity riders 287 (339) (34)
Fixed annuities, fixed portion of variable annuities and fixed insurance products — — —
Brokerage client cash balances 84 (17) 67
Flexible savings and other fixed rate savings products 14 — 14
Total $ 349 $ (356) $ 11
N/A Not Applicable.
(1) Includes the impact of the Columbia Management Acquisition. Excludes incentive income which is impacted by market and fund
performance during the period and cannot be readily estimated.
(2) Market impact on DAC and DSIC amortization resulting from lower projected profits.
(3) In estimating the impact on DAC and DSIC amortization resulting from lower projected profits, we have not changed our assumed
equity asset growth rates. This is a significantly more conservative estimate than if we assumed management follows its mean
reversion guideline and increased near-term rates to recover the drop in equity values over a five-year period. We make this same
conservative assumption in estimating the impact from GMDB and GMIB riders.
(4) Market impact on DAC and DSIC amortization related to variable annuity riders is modeled net of hedge impact.
The above results compare to an estimated negative net impact to pretax income of $287 million related to a 10% equity
price decline and an estimated positive net impact to pretax income of $4 million related to a 100 basis point increase in
interest rates as of December 31, 2009. The estimated positive net impact to pretax income related to a 100 basis point
increase in interest rates as of December 31, 2009 was updated from prior year to include the impact of brokerage client
cash balances. The increase in equity exposure at December 31, 2010 compared to the prior year is primarily due to the
inclusion of Columbia Management in the asset-based management and distribution fees category at December 31, 2010.
The increase in the estimated positive net impact to pretax income related to a 100 basis point increase in interest rates
at December 31, 2010 compared to the prior year was primarily due to lower rates partially offset by a negative impact
from the hedge on brokerage client cash balances, which was not in place at December 31, 2009.
Net impacts shown in the above table from GMWB and GMAB riders result largely from differences between the liability
valuation basis and the hedging basis. Liabilities are valued using fair value accounting principles, with key policyholder
behavior assumptions loaded to provide risk margins and with discount rates increased to reflect a current market estimate
of our risk of nonperformance specific to these liabilities. For variable annuity riders introduced prior to mid-2009,
management elected to hedge based on best estimate policyholder behavior assumptions. For riders issued since
mid-2009, management has been hedging on a basis that includes risk margins related to policyholder behavior. The
nonperformance spread risk is not hedged. Net impacts shown in the above table from GMDB and GMIB reflect the fact
that these guaranteed benefits are primarily retained by us and not hedged.
Actual results could differ materially from those illustrated above as they are based on a number of estimates and
assumptions. These include assuming that implied market volatility does not change when equity prices fall by 10%, that
management does not increase assumed equity asset growth rates to anticipate recovery of the drop in equity values when
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