Ameriprise 2012 Annual Report Download - page 181

The Company projects its cost of future guaranty fund assessments based on estimates of insurance company insolvencies
provided by the National Organization of Life and Health Insurance Guaranty Associations (‘‘NOLHGA’’) and the amount of
its premiums written relative to the industry-wide premium in each state. The Company accrues the estimated cost of
future guaranty fund assessments when it is considered probable that an assessment will be imposed, the event obligating
the Company to pay the assessment has occurred and the amount of the assessment can be reasonably estimated.
Executive Life Insurance Company of New York (‘‘ELNY’’) was placed into rehabilitation by a New York state court in 1991.
On April 16, 2012, the court issued an order converting the rehabilitation into a liquidation proceeding under a plan
submitted by the New York insurance regulator with support from NOLHGA and the industry.
During the second quarter of 2012, the Company established a liability for estimated guaranty fund assessments and a
related premium tax asset, primarily associated with ELNY. At December 31, 2012, the estimated liability was $26 million
and the related premium tax asset was $19 million. The expected period over which the assessments will be made and
the related tax credits recovered is not known. At December 31, 2011, the net liability was not considered material.
Contingencies
The Company and its subsidiaries are involved in the normal course of business in legal, regulatory and arbitration
proceedings, including class actions, concerning matters arising in connection with the conduct of its activities as a
diversified financial services firm. These include proceedings specific to the Company as well as proceedings generally
applicable to business practices in the industries in which it operates. The Company can also be subject to litigation arising
out of its general business activities, such as its investments, contracts, leases and employment relationships. Uncertain
economic conditions, heightened and sustained volatility in the financial markets and significant financial reform legislation
may increase the likelihood that clients and other persons or regulators may present or threaten legal claims or that
regulators increase the scope or frequency of examinations of the Company or the financial services industry generally.
As with other financial services firms, the level of regulatory activity and inquiry concerning the Company’s businesses
remains elevated. From time to time, the Company receives requests for information from, and/or has been subject to
examination or claims by, the SEC, FINRA, the Federal Reserve Bank, the OCC, the FSA, state insurance and securities
regulators, state attorneys general and various other domestic or foreign governmental and quasi-governmental authorities
on behalf of themselves or clients concerning the Company’s business activities and practices, and the practices of the
Company’s financial advisors. During recent periods, the Company has received information requests, exams or inquiries
regarding certain matters, including: sales of, or disclosures pertaining to, mutual funds, annuities, equity and fixed income
securities, low priced securities, insurance products, brokerage services and financial advice offerings; front office systems
and controls; supervision of the Company’s financial advisors; and company procedures and information security. The
Company is also responding to regulatory audits, market conduct examinations and other inquiries (including inquiries from
the states of Minnesota and New York) relating to an industry-wide investigation of unclaimed property and escheatment
practices and procedures. The number of reviews and investigations has increased in recent years with regard to many
firms in the financial services industry, including Ameriprise Financial. The Company has cooperated and will continue to
cooperate with the applicable regulators regarding their inquiries.
These legal and regulatory proceedings and disputes are subject to uncertainties and, as such, it is inherently difficult to
determine whether any loss is probable or even possible, or to reasonably estimate the amount of any loss. The Company
cannot predict with certainty if, how or when such proceedings will be resolved or what the eventual settlement, fine,
penalty or other relief, if any, may be, particularly for proceedings that are in their early stages of development or where
plaintiffs seek indeterminate damages. Numerous issues may need to be resolved, including through potentially lengthy
discovery and determination of important factual matters, and by addressing unsettled legal questions relevant to the
proceedings in question, before a loss or range of loss can be reasonably estimated for any proceeding. An adverse
outcome in one or more of these proceedings could eventually result in adverse judgments, settlements, fines, penalties or
other relief, in addition to further claims, examinations or adverse publicity that could have a material adverse effect on the
Company’s consolidated financial condition or results of operations.
In accordance with applicable accounting standards, the Company establishes an accrued liability for contingent litigation
and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably
estimated. In such cases, there still may be an exposure to loss in excess of any amounts reasonably estimated and
accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability,
but continues to monitor, in conjunction with any outside counsel handling a matter, further developments that would make
such loss contingency both probable and reasonably estimable. Once the Company establishes an accrued liability with
respect to a loss contingency, the Company continues to monitor the matter for further developments that could affect the
amount of the accrued liability that has been previously established, and any appropriate adjustments are made each
quarter.
Certain legal and regulatory proceedings are described below.
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