Ameriprise 2012 Annual Report Download - page 33

Long Term Care Insurance
As of December 31, 2002, the RiverSource Life companies discontinued underwriting stand-alone long term care
insurance. However, our advisors sell long term care insurance issued by other companies, including Genworth Life
Insurance Company and John Hancock Life Insurance Company.
In 2004, the RiverSource Life companies began to file for approval to implement rate increases on most of their existing
blocks of nursing home-only indemnity long term care insurance policies. Implementation of these rate increases began in
early 2005 and continues. We have received approval for some or all requested increases in the 50 states where
increases have been requested, with an average approved cumulative rate increase of 82.7% of premium on all such
policies where an increase was requested.
In 2007, the RiverSource Life companies began to file for approval to implement rate increases on most of their existing
blocks of comprehensive reimbursement long term care insurance policies. Implementation of these rate increases began
in late 2007 and continues. We have received approval for some or all requested increases in 48 states, with an average
approved cumulative rate increase of 28.1% of premium on all such policies where an increase was requested.
We intend to seek additional rate increases with respect to these and other existing blocks of long term care insurance
policies, subject to regulatory approval.
Ameriprise Auto & Home Insurance Products
We offer personal auto, home, excess personal liability and travel insurance products through IDS Property Casualty and its
subsidiary, Ameriprise Insurance Company (the ‘‘Property Casualty companies’’). Our Property Casualty companies provide
personal auto, home and liability coverage to clients in 43 states and the District of Columbia.
Distribution and Marketing Channels
Our Property Casualty companies do not have field agents; rather, we use co-branded direct marketing to sell our personal
auto, home and travel insurance products through alliances with commercial institutions and affinity groups, and directly to
our clients and the general public. We also receive referrals through our financial advisor network. Our Property Casualty
companies have a multi-year distribution agreement with Costco Insurance Agency, Inc., Costco’s affiliated insurance
agency. Costco members represented 51% of all new policy sales of our Property Casualty companies in 2012. Through
other alliances, we market our property casualty products to customers of Ford Motor Credit Company and offer personal
home insurance products to customers of the Progressive Group. Termination of one or more of these alliances could
adversely affect our ability to generate new sales and retain existing business.
We offer RiverSource life insurance products almost exclusively through our advisors. Our advisors offer insurance products
issued predominantly by the RiverSource Life companies, though they may also offer insurance products of unaffiliated
carriers, subject to certain qualifications.
Reinsurance
We reinsure a portion of the insurance risks associated with our life, disability income, long term care and property
casualty insurance products through reinsurance agreements with unaffiliated reinsurance companies. We use reinsurance
to limit losses, reduce exposure to large and catastrophic risks and provide additional capacity for future growth. To
manage exposure to losses from reinsurer insolvencies, we evaluate the financial condition of reinsurers prior to entering
into new reinsurance treaties and on a periodic basis during the terms of the treaties. Our insurance companies remain
primarily liable as the direct insurers on all risks reinsured.
Generally, we currently reinsure 90% of the death benefit liability related to almost all individual fixed and variable universal
life and term life insurance products. As a result, the RiverSource Life companies typically retain and are at risk for, at
most, 10% of each policy’s death benefit from the first dollar of coverage for new sales of these policies, subject to the
reinsurers fulfilling their obligations. RiverSource Life began reinsuring risks at this level in 2001 (RiverSource Life of NY
began in 2002) for term life insurance and 2002 (2003 for RiverSource Life of NY) for individual fixed and variable
universal life insurance. Policies issued prior to these dates are not subject to these reinsurance levels. Generally, the
maximum amount of life insurance risk retained by the RiverSource Life companies is $1.5 million on a single life and
$1.5 million on any flexible premium survivorship life policy. Risk on fixed and variable universal life policies is reinsured on
a yearly renewable term basis. Risk on most term life policies starting in 2001 (2002 for RiverSource Life of NY) is
reinsured on a coinsurance basis, a type of reinsurance in which the reinsurer participates proportionally in all material
risks and premiums associated with a policy.
For existing long term care policies, the Company ceded 50% of the risk on a coinsurance basis to subsidiaries of
Genworth Financial, Inc. (‘‘Genworth’’) and retained the remaining risk. For RiverSource Life of NY, this reinsurance
arrangement applies for 1996 and later issues only. As of December 31, 2012, RiverSource Life companies’ credit
exposure to Genworth under this reinsurance arrangement was approximately $1.6 billion. Genworth also serves as claims
administrator for our long term care policies.
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