Ameriprise 2012 Annual Report Download - page 148

Fixed Annuities
Fixed annuities include both deferred and payout contracts. Deferred contracts offer a guaranteed minimum rate of interest
and security of the principal invested. Payout contracts guarantee a fixed income payment for life or the term of the
contract. The Company generally invests the proceeds from the annuity payments in fixed rate securities. The Company
may hedge the interest rate risks related to fixed annuities with derivative instruments. As of December 31, 2012 and
2011, there were no outstanding derivatives to hedge these risks.
Equity Indexed Annuities
The Index 500 Annuity, the Company’s EIA product, is a single premium deferred fixed annuity. The contract is issued with
an initial term of seven years and interest earnings are linked to the S&P 500 Index. This annuity has a minimum interest
rate guarantee of 3% on 90% of the initial premium, adjusted for any surrenders. The Company generally invests the
proceeds from the annuity deposits in fixed rate securities and hedges the equity risk with derivative instruments. See
Note 15 for additional information regarding the Company’s derivative instruments. In 2007, the Company discontinued
new sales of equity indexed annuities.
Variable Annuities
Purchasers of variable annuities can select from a variety of investment options and can elect to allocate a portion to a
fixed account. A vast majority of the premiums received for variable annuity contracts are held in separate accounts where
the assets are held for the exclusive benefit of those contractholders.
Most of the variable annuity contracts issued by the Company contain one or more guaranteed benefits, including GMWB,
GMAB, GMDB and GGU provisions. The Company previously offered contracts with GMIB provisions. See Note 2 and
Note 11 for additional information regarding the Company’s variable annuity guarantees. The Company does not currently
hedge its risk under the GMDB, GGU and GMIB provisions. See Note 15 for additional information regarding derivative
instruments used to hedge risks related to GMWB and GMAB provisions.
Insurance Liabilities
VUL/UL is the largest group of insurance policies written by the Company. Purchasers of VUL can select from a variety of
investment options and can elect to allocate a portion to a fixed account or a separate account. A vast majority of the
premiums received for VUL policies are held in separate accounts where the assets are held for the exclusive benefit of
those policyholders. In 2011, the Company began offering IUL insurance. IUL is similar to UL in that it provides life
insurance coverage and cash value that increases as a result of credited interest. Also, like UL, there is a minimum
guaranteed credited rate of interest. Unlike UL the rate of credited interest above the minimum guarantee for funds
allocated to the indexed account is linked to the S&P 500 Index (subject to a cap). The policyholder may allocate all or a
portion of the policy value to a fixed or indexed account. The Company also offers term and whole life insurance as well as
disability products. The Company no longer offers standalone LTC products but has in force policies from prior years.
Insurance liabilities include accumulation values, unpaid reported claims, incurred but not reported claims and obligations
for anticipated future claims.
Portions of the Company’s fixed and variable universal life policies have product features that result in profits followed by
losses from the insurance component of the policy. These profits followed by losses can be generated by the cost structure
of the product or secondary guarantees in the policy. The secondary guarantee ensures that, subject to specified
conditions, the policy will not terminate and will continue to provide a death benefit even if there is insufficient policy value
to cover the monthly deductions and charges.
Threadneedle Investment Liabilities
Threadneedle provides a range of unitized pooled pension funds, which invest in property, stocks, bonds and cash. The
investments are selected by the clients and are based on the level of risk they are willing to assume. All investment
performance, net of fees, is passed through to the investors. The value of the liabilities represents the value of the units in
issue of the pooled pension funds.
11. Variable Annuity and Insurance Guarantees
The majority of the variable annuity contracts offered by the Company contain GMDB provisions. The Company also offers
variable annuities with GGU, GMWB and GMAB provisions. The Company previously offered contracts containing GMIB
provisions. See Note 2 and Note 10 for additional information regarding the Company’s variable annuity guarantees.
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