Ameriprise 2012 Annual Report Download - page 157

Future Policy
Available-for-Sale Securities Benefits and
Residential Commercial Claims: GMWB
Corporate Mortgage Mortgage Asset Other and GMAB
Debt Backed Backed Backed Common Structured Embedded
Securities Securities Securities Securities Stocks Investments Total Derivatives
(in millions)
Balance, January 1, 2010 $ 1,252 $ 4,287 $ 72 $ 150 $ 4 $ 58 $ 5,823 $ (299)
Total gains included in:
Net income 1 62 1 5 — — 69(1) 4(2)
Other comprehensive
income 30 318 10 12 1 — 371 —
Purchases, sales, issues and
settlements, net 17 (114) 112 48 — (58)(3) 5 (126)
Transfers into Level 3 25 — — — — — 25 —
Transfers out of Level 3 — (21) (144) (24) — — (189) —
Balance, December 31, 2010 $ 1,325 $ 4,532 $ 51 $ 191 $ 5 $ — $ 6,104 $ (421)
Changes in unrealized gains
(losses) relating to assets and
liabilities held at
December 31, 2010 included
in:
Net investment income $ — $ 60 $ — $ 5 $ — $ — $ 65 $ —
Benefits, claims, losses and
settlement expenses — — — — — — — (15)
(1) Included in net investment income in the Consolidated Statements of Operations.
(2) Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Operations.
(3) Represents the elimination of Ameriprise Financial’s investment in CDOs, which were consolidated due to the adoption of a new accounting
standard. See Note 2 and Note 4 for additional information related to the consolidation of CDOs.
The impact to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its GMWB and
GMAB embedded derivatives was $(82) million, $216 million and $36 million, net of DAC and DSIC amortization, for the
years ended December 31, 2012, 2011 and 2010, respectively.
During the years ended December 31, 2012 and 2011, transfers from Level 3 to Level 2 included certain non-agency
residential mortgage backed securities with a fair value of approximately $146 million and $3.9 billion, respectively. The
transfers reflect improved pricing transparency of these securities, a continuing trend of increased activity in the
non-agency residential mortgage backed securities market and observability of significant inputs to the valuation
methodology. All other securities transferred from Level 3 to Level 2 represent securities with fair values that are now
obtained from a third party pricing service with observable inputs. Securities transferred from Level 2 to Level 3 represent
securities with fair values that are now based on a single non-binding broker quote. The Company recognizes transfers
between levels of the fair value hierarchy as of the beginning of the quarter in which each transfer occurred. For assets
and liabilities held at the end of the reporting periods that are measured at fair value on a recurring basis, there were no
transfers between Level 1 and Level 2.
The following table provides a summary of the significant unobservable inputs used in the fair value measurements
developed by the Company or reasonably available to the Company of Level 3 assets and liabilities at December 31,
2012:
Valuation Range
Fair Value Technique Unobservable Input (Weighted Average)
(in millions)
Corporate debt securities $ 1,712 Discounted cash flow Yield/spread to U.S. Treasuries 1.1% - 8.5% (2.1)%
(private placements)
GMWB and GMAB $ 833 Discounted cash flow Utilization of guaranteed withdrawals(1) 0% - 56.4%
embedded derivatives
Surrender rate 0% - 56.3%
Market volatility(2) 5.6% - 21.2%
Nonperformance risk(3) 97 bps
(1) The utilization of guaranteed withdrawls represents the percentage of policyholders that will begin withdrawing in any given year.
(2) Market volatility is implied volatility of fund of funds.
(3) The nonperformance risk is the spread added to the observable interest rates used in the valuation of the embedded derivatives.
Level 3 measurements not included in the table above are obtained from non-binding broker quotes where unobservable
inputs are not reasonably available to the Company.
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