Ameriprise 2012 Annual Report Download - page 162

15. Derivatives and Hedging Activities
Derivative instruments enable the Company to manage its exposure to various market risks. The value of such instruments
is derived from an underlying variable or multiple variables, including equity, foreign exchange and interest rate indices or
prices. The Company primarily enters into derivative agreements for risk management purposes related to the Company’s
products and operations.
Freestanding derivative instruments are recorded at fair value and are reflected in other assets or other liabilities. The
Company’s policy on the recognition of derivatives on the Consolidated Balance Sheet is to not offset fair value amounts
recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting
arrangement.
The following table presents the estimated fair value of the Company’s freestanding derivatives after considering the effect
of master netting arrangements and collateral:
December 31, 2012 December 31, 2011
Net Derivative Net Derivative Net Derivative Net Derivative
Assets Liabilities Assets Liabilities
(in millions)
Fair value of OTC derivatives after application of master netting
agreements $ 822 $ 604 $ 1,025 $ 142
Cash collateral on OTC derivatives (428) (67) (767) (34)
Fair value of OTC derivatives after application of master netting
agreements and cash collateral 394 537 258 108
Securities collateral on OTC derivatives (355) (531) (186) (95)
Fair value of OTC derivatives after application of master netting
agreements and cash and securities collateral 39 6 72 13
Fair value of exchange-traded derivatives 96 — 155 —
Total fair value of derivatives after application of master netting
agreements and cash and securities collateral $ 135 $ 6 $ 227 $ 13
In April 2012, the Financial Stability Oversight Council approved the final rule and interpretive guidance that provides the
framework it will follow to determine if a nonbank financial company is a Systemically Important Financial Institution. The
framework includes a three-stage process to help narrow down the pool of nonbank financial companies for review and
possible designation. Stage 1 criteria include having at least $50 billion in assets and meeting one of five additional
quantitative measures. One of the five thresholds is $3.5 billion of derivative liabilities after considering the effects of
master netting arrangements and cash collateral held with the same counterparty. The following table presents the
Company’s derivative liabilities as defined by the rule:
December 31,
2012 2011
(in millions)
Fair value of OTC derivative liabilities after application of master netting agreements and cash collateral $ 537 $ 108
Fair value of embedded derivative liabilities 888 1,596
Fair value of CIE derivative liabilities 17 20
Fair value of derivative liabilities after application of master netting agreements and cash collateral $ 1,442 $ 1,724
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