Ameriprise 2011 Annual Report Download - page 49

approval, which may not be forthcoming. Moreover, many of our products do not permit us to increase premiums or limit
those increases during the life of the policy or contract, while premiums on certain other products (primarily long term care
insurance) may not be increased without prior regulatory approval. Significant deviations in experience from pricing
expectations regarding persistency could have an adverse effect on the profitability of our products.
We may be required to accelerate the amortization of DAC, which would increase our expenses and reduce
profitability.
DAC represent the costs of acquiring new business, principally direct sales commissions and other distribution and
underwriting costs that have been deferred on the sale of annuity, life and disability income insurance and, to a lesser
extent, marketing and promotional expenses for personal auto and home insurance, and distribution expense for certain
mutual fund products. For annuity and universal life products, DAC are amortized based on projections of estimated gross
profits over amortization periods equal to the approximate life of the business. For other insurance products, DAC are
generally amortized as a percentage of premiums over amortization periods equal to the premium-paying period. For
certain mutual fund products, we generally amortize DAC over fixed periods on a straight-line basis, adjusted for
redemptions.
Our projections underlying the amortization of DAC require the use of certain assumptions, including interest margins,
mortality rates, persistency rates, maintenance expense levels and customer asset value growth rates for variable products.
We periodically review and, where appropriate, adjust our assumptions. When we change our assumptions, we may be
required to accelerate the amortization of DAC or to record a charge to increase benefit reserves.
For more information regarding DAC, see Part II, Item 7 of this Annual Report on Form 10-K under the heading
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies —
Deferred Acquisition Costs and Deferred Sales Inducement Costs’’ and ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Recent Accounting Pronouncements.’’
The occurrence of natural or man-made disasters and catastrophes could adversely affect our results of
operations and financial condition.
The occurrence of natural disasters and catastrophes, including earthquakes, hurricanes, floods, tornadoes, fires, severe
winter weather, explosions, pandemic disease and man-made disasters, including acts of terrorism, insurrections and
military actions, could adversely affect our results of operations or financial condition. Such disasters and catastrophes
may damage our facilities, preventing our employees and financial advisors from performing their roles or otherwise
disturbing our ordinary business operations and by impacting insurance claims, as described below. Such disasters and
catastrophes may also impact us indirectly by changing the condition and behaviors of our customers, business
counterparties and regulators, as well as by causing declines or volatility in the economic and financial markets.
The effects of natural and man-made disasters and catastrophes on certain of our businesses include but are not limited
to the following: a catastrophic loss of life may materially increase the amount of or accelerate the timing in which benefits
are paid under our insurance policies; significant property damage may materially increase the amount of claims submitted
under our property casualty insurance policies; an increase in claims and any resulting increase in claims reserves caused
by a disaster may harm the financial condition of our reinsurers, thereby impacting the cost and availability of reinsurance
and the probability of default on reinsurance recoveries; and declines and volatility in the financial markets may decrease
the value of our assets under management and administration, which would harm our financial condition and reduce our
management fees.
We cannot predict the timing and frequency with which natural and man-made disasters and catastrophes may occur, nor
can we predict the impact that changing climate conditions may have on the frequency and severity of natural disasters.
As such, we cannot be sure that our actions to identify and mitigate the risks associated with such disasters and
catastrophes, including predictive modeling, establishing liabilities for expected claims, acquiring insurance and reinsurance
and developing business continuity plans, will be effective.
We may not be able to protect our intellectual property and may be subject to infringement claims.
We rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and
protect our intellectual property. Although we use a broad range of measures to protect our intellectual property rights,
third parties may infringe or misappropriate our intellectual property. We may have to litigate to enforce and protect our
copyrights, trademarks, patents, trade secrets and know-how or to determine their scope, validity or enforceability, which
represents a diversion of resources that may be significant in amount and may not prove successful. The loss of
intellectual property protection or the inability to secure or enforce the protection of our intellectual property assets could
have a material adverse effect on our business and our ability to compete.
We also may be subject to costly litigation in the event that another party alleges our operations or activities infringe upon
such other party’s intellectual property rights. Third parties may have, or may eventually be issued, patents or other
protections that could be infringed by our products, methods, processes or services or could otherwise limit our ability to
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