Ameriprise 2011 Annual Report Download - page 150

Assets
Cash Equivalents
Cash equivalents include highly liquid investments with original maturities of 90 days or less. Actively traded money market
funds are measured at their net asset value (‘‘NAV’’) and classified as Level 1. The Company’s remaining cash equivalents
are classified as Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because of the
short time between the purchase of the instrument and its expected realization.
Investments (Trading Securities and Available-for-Sale Securities)
When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available,
fair values are obtained from third party pricing services, non-binding broker quotes, or other model-based valuation
techniques. Level 1 securities primarily include U.S. Treasuries. Level 2 securities primarily include residential mortgage
backed securities, commercial mortgage backed securities, asset backed securities, municipal and corporate bonds, and
U.S. agency and foreign government securities. The fair value of these Level 2 securities is based on a market approach
with prices obtained from third party pricing services. Observable inputs used to value these securities can include, but are
not limited to reported trades, benchmark yields, issuer spreads and non-binding broker quotes. Level 3 securities primarily
include certain non-agency residential mortgage backed securities, asset backed securities and corporate bonds. The fair
value of corporate bonds and certain asset backed securities classified as Level 3 is typically based on a single
non-binding broker quote. The fair value of certain asset backed securities and non-agency residential mortgage backed
securities is obtained from third party pricing services who use significant unobservable inputs to estimate the fair value.
Prices received from third party pricing services are subjected to exception reporting that identifies investments with
significant daily price movements as well as no movements. The Company reviews the exception reporting and resolves the
exceptions through reaffirmation of the price or recording an appropriate fair value estimate. The Company also performs
subsequent transaction testing. The Company performs annual due diligence of third party pricing services. The Company’s
due diligence procedures include assessing the vendor’s valuation qualifications, control environment, analysis of asset-
class specific valuation methodologies, and understanding of sources of market observable assumptions and unobservable
assumptions, if any, employed in the valuation methodology. The Company also considers the results of its exception
reporting controls and any resulting price challenges that arise.
Separate Account Assets
The fair value of assets held by separate accounts is determined by the NAV of the funds in which those separate
accounts are invested. The NAV represents the exit price for the separate account. Separate account assets are classified
as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information.
Investments Segregated for Regulatory Purposes
When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available,
fair values are obtained from third party pricing services, non-binding broker quotes, or other model-based valuation
techniques. Level 2 securities include agency mortgage backed securities, asset backed securities, municipal and
corporate bonds, and U.S. agency and foreign government securities.
Other Assets
Derivatives that are measured using quoted prices in active markets, such as foreign currency forwards, or derivatives that
are exchange-traded are classified as Level 1 measurements. The fair value of derivatives that are traded in less active
over-the-counter markets are generally measured using pricing models with market observable inputs such as interest rates
and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include swaps
and the majority of options. The counterparties’ nonperformance risk associated with uncollateralized derivative assets was
immaterial at December 31, 2011 and 2010. See Note 15 for further information on the credit risk of derivative
instruments and related collateral.
Assets Held for Sale
Assets held for sale consist of cash equivalents of Securities America.
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