Ameriprise 2010 Annual Report Download - page 32

Long Term Care Insurance
As of December 31, 2002, the RiverSource Life companies discontinued underwriting long term care insurance. However,
our branded financial advisors sell long term care insurance issued by other companies, including Genworth Life Insurance
Company, John Hancock Life Insurance Company and Prudential Insurance Company.
In 2004 RiverSource Life and RiverSource Life of NY began to file for approval to implement rate increases on most of
their existing blocks of nursing home-only indemnity long term care insurance policies. Implementation of these rate
increases began in early 2005 and continues. We have received approval for some or all requested increases in the 49
states where increases have been requested, with an average approved cumulative rate increase of 62.9% of premium on
all such policies where an increase was requested.
In 2007 RiverSource Life and RiverSource Life of NY began to file for approval to implement rate increases on most of
their existing blocks of comprehensive reimbursement long term care insurance policies. Implementation of these rate
increases began in late 2007 and continues. We have received approval for some or all requested increases in 47 states,
with an average approved cumulative rate increase of 17.5% of premium on all such policies where an increase was
requested.
We intend to seek additional rate increases with respect to these and other existing blocks of long term care insurance
policies, subject to regulatory approval.
Ameriprise Auto & Home Insurance Products
We offer personal auto, home and excess personal liability insurance products through IDS Property Casualty and its
subsidiary, Ameriprise Insurance Company (the ‘‘Property Casualty companies’’). Our Property Casualty companies provide
personal auto, home and liability coverage to clients in 43 states and the District of Columbia.
Distribution and Marketing Channels
We offer RiverSource life insurance products almost exclusively through our branded financial advisors. Our branded
advisors offer insurance products issued predominantly by the RiverSource Life companies. In addition, our branded
advisors may offer insurance products of unaffiliated carriers, subject to certain qualifications.
Our Property Casualty companies do not have field agents; rather, we use co-branded direct marketing to sell our personal
auto and home insurance products through alliances with commercial institutions and affinity groups, and directly to our
clients and the general public. We also receive referrals through our financial advisor network. Our Property Casualty
companies have a multi-year distribution agreement with Costco Insurance Agency, Inc., Costco’s affiliated insurance
agency. Costco members represented 62% of all new policy sales of our Property Casualty companies in 2010. Through
other alliances, we market our property casualty products to customers of Ford Motor Credit Company and offer personal
home insurance products to customers of the Progressive Group. Termination of one or more of these alliances could
adversely affect our ability to generate new sales and retain existing business.
Reinsurance
We reinsure a portion of the insurance risks associated with our life, disability income and long term care insurance
products through reinsurance agreements with unaffiliated reinsurance companies. We use reinsurance in order to limit
losses, reduce exposure to large risks and provide additional capacity for future growth. To manage exposure to losses from
reinsurer insolvencies, we evaluate the financial condition of reinsurers prior to entering into new reinsurance treaties and
on a periodic basis during the terms of the treaties. Our insurance companies remain primarily liable as the direct insurers
on all risks reinsured.
Generally, we currently reinsure 90% of the death benefit liability related to almost all individual fixed and variable universal
life and term life insurance products. As a result, the RiverSource Life companies typically retain and are 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 RiverSource Life companies began reinsuring risks at this level during 2001 (2002
for RiverSource Life of NY) for term life insurance and 2002 (2003 for RiverSource Life of NY) for individual fixed and
variable universal life insurance. Policies issued prior to these dates are not subject to these reinsurance levels. Generally,
the maximum amount of life insurance risk retained by the RiverSource Life companies is $1.5 million 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 (2002 for RiverSource Life of NY) 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 retained 50% of the risk and ceded on a coinsurance basis the
remaining 50% of the risk to subsidiaries of Genworth Financial, Inc. (‘‘Genworth’’). For RiverSource Life of NY, this
reinsurance arrangement applies for 1996 and later issues only. As of December 31, 2010, RiverSource Life companies’
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