Ameriprise 2010 Annual Report Download - page 47

A downgrade in our credit ratings could also adversely impact our future cost and speed of borrowing and have an adverse
effect on our financial condition, results of operations and liquidity.
In view of the difficulties experienced recently by many financial institutions, including our competitors in the insurance
industry, the ratings organizations have heightened the level of scrutiny that they apply to such institutions and have
requested additional information from the companies that they rate. They may increase the frequency and scope of their
credit reviews, adjust upward the capital and other requirements employed in the ratings organizations’ models for
maintenance of ratings levels, or downgrade ratings applied to particular classes of securities or types of institutions.
Ratings organizations may also become subject to tighter laws and regulations governing the ratings, which may in turn
impact the ratings assigned to financial institutions.
We cannot predict what actions rating organizations may take, or what actions we may take in response to the actions of
rating organizations, which could adversely affect our business. As with other companies in the financial services industry,
our ratings could be changed at any time and without any notice by the ratings organizations.
If our reserves for future policy benefits and claims or for our bank lending portfolio or for future certificate
redemptions and maturities are inadequate, we may be required to increase our reserve liabilities, which would
adversely affect our results of operations and financial condition.
We establish reserves as estimates of our liabilities to provide for future obligations under our insurance policies, annuities
and investment certificate contracts. We also establish reserves as estimates of the potential for loan losses in our
consumer lending portfolios. Reserves do not represent an exact calculation but, rather, are estimates of contract benefits
or loan losses and related expenses we expect to incur over time. The assumptions and estimates we make in establishing
reserves require certain judgments about future experience and, therefore, are inherently uncertain. We cannot determine
with precision the actual amounts that we will pay for contract benefits, the timing of payments, or whether the assets
supporting our stated reserves will increase to the levels we estimate before payment of benefits or claims. We monitor our
reserve levels continually. If we were to conclude that our reserves are insufficient to cover actual or expected contract
benefits or loan collections, we would be required to increase our reserves and incur income statement charges for the
period in which we make the determination, which would adversely affect our results of operations and financial condition.
For more information on how we set our reserves, see Note 2 to our Consolidated Financial Statements included in Part II,
Item 8 of this Annual Report on Form 10-K.
Morbidity rates or mortality rates that differ significantly from our pricing expectations could negatively affect
profitability.
We set prices for RiverSource life insurance and some annuity products based upon expected claim payment patterns,
derived from assumptions we make about our policyholders and contractholders, the morbidity rates, or likelihood of
sickness, and mortality rates, or likelihood of death. The long-term profitability of these products depends upon how our
actual experience compares with our pricing assumptions. For example, if morbidity rates are higher, or mortality rates are
lower, than our pricing assumptions, we could be required to make greater payments under disability income insurance
policies, chronic care riders and immediate annuity contracts than we had projected. The same holds true for long term
care policies we previously underwrote to the extent of the risks that we have retained. If mortality rates are higher than
our pricing assumptions, we could be required to make greater payments under our life insurance policies and annuity
contracts with guaranteed minimum death benefits than we have projected.
The risk that our claims experience may differ significantly from our pricing assumptions is particularly significant for our
long term care insurance products notwithstanding our ability to implement future price increases with regulatory approvals.
As with life insurance, long term care insurance policies provide for long-duration coverage and, therefore, our actual
claims experience will emerge over many years. However, as a relatively new product in the market, long term care
insurance does not have the extensive claims experience history of life insurance and, as a result, our ability to forecast
future claim rates for long term care insurance is more limited than for life insurance. We have sought to moderate these
uncertainties to some extent by partially reinsuring long term care policies we previously underwrote and by limiting our
present long term care insurance offerings to policies underwritten fully by unaffiliated third-party insurers, and we have
also implemented rate increases on certain in force policies as described in Item 1 of this Annual Report on Form 10-K—
‘‘Business—Our Segments—Protection—RiverSource Insurance Products—Long Term Care Insurance’’. We may be
required to implement additional rate increases in the future and may or may not receive regulatory approval for the full
extent and timing of any rate increases that we may seek.
We may face losses if there are significant deviations from our assumptions regarding the future persistency of our
insurance policies and annuity contracts.
The prices and expected future profitability of our life insurance and deferred annuity products are based in part upon
assumptions related to persistency, which is the probability that a policy or contract will remain in force from one period to
the next. Given the ongoing economic and market dislocations, future consumer persistency behaviors could vary materially
from the past. The effect of persistency on profitability varies for different products. For most of our life insurance and
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