Ameriprise 2012 Annual Report Download - page 34

Generally, RiverSource Life companies retain at most $5,000 per month of risk per life on disability income policies sold
on policy forms introduced in most states in October 2007 (August 2010 for RiverSource Life of NY) and they reinsure the
remainder of the risk on a coinsurance basis with unaffiliated reinsurance companies. RiverSource Life companies retain all
risk for new claims on disability income contracts sold on other policy forms. Our insurance companies also retain all risk
on accidental death benefit claims and substantially all risk associated with waiver of premium provisions.
We also reinsure a portion of the risks associated with our personal auto, home and excess liability insurance products
through three types of reinsurance agreements with unaffiliated reinsurance companies, as follows:
• We purchase reinsurance with a limit of $5 million per loss, and we retain $750,000 per loss.
• We purchase catastrophe reinsurance that, for 2012, had a limit of $110 million per event and we retained
$20 million per event. For 2013, our catastrophe reinsurance has a limit of $125 million per event and we retain
$20 million.
• We purchase reinsurance that limits our personal liability insurance exposure to 10% of any loss. This 90% quota
share treaty uses the same reinsurers as our excess of loss treaty.
See Note 7 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for
additional information on reinsurance.
Liabilities and Reserves
We maintain adequate financial reserves to cover the insurance risks associated with the insurance products we issue.
Generally, reserves represent estimates of the invested assets that our insurance companies need to hold to provide
adequately for future benefits and expenses. For a discussion of liabilities and reserves related to our insurance products,
see Note 2 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Financial Strength Ratings
Independent rating organizations rate our insurance subsidiaries. Rating organizations evaluate the financial soundness and
claims-paying ability of insurance companies continually, and they base their ratings on a number of different factors,
including market position in core products and market segments, risk-adjusted capitalization and the quality of the
company’s investment portfolios. More specifically, the ratings assigned are developed from an evaluation of a company’s
balance sheet strength, operating performance and business profile. Balance sheet strength reflects a company’s ability to
meet its current and ongoing obligations to its contractholders and policyholders and includes analysis of a company’s
capital adequacy. The evaluation of operating performance centers on the stability and sustainability of a company’s
sources of earnings. The business profile component of the rating considers a company’s mix of business, market position
and depth and experience of management.
Our insurance subsidiaries’ ratings are important to maintain public confidence in our protection and annuity products.
Lowering of our insurance subsidiaries’ ratings could have a material adverse effect on our ability to market our protection
and annuity products and could lead to increased surrenders of these products. We list our ratings on our website at
ir.ameriprise.com. For the most current ratings information, please see the individual rating agency’s website.
Our Segments — Corporate & Other
Our Corporate & Other segment consists of net investment income or loss on corporate level assets, including excess
capital held in our subsidiaries and other unallocated equity and other revenues as well as unallocated corporate expenses.
Competition
We operate in a highly competitive global industry. As a diversified financial services firm, we compete directly with a variety
of financial institutions, including registered investment advisors, securities brokers, asset managers, banks and insurance
companies. Our competitors may have greater financial resources, broader and deeper distribution capabilities and
products and services than we do. We compete directly with these entities for the provision of products and services to
clients, as well as for our financial advisors and investment management personnel. Our products and services also
compete indirectly in the marketplace with the products and services of our competitors.
Our Advice & Wealth Management segment competes with securities broker-dealers, independent broker-dealers, financial
planning firms, registered investment advisors, insurance companies and other financial institutions to attract and retain
financial advisors and their clients. Competitive factors influencing our ability to attract and retain financial advisors include
compensation structures, brand recognition and reputation, product offerings and technology and service capabilities and
support. Further, our financial advisors compete for clients with a range of other advisors, broker-dealers and direct
channels, including wirehouses, regional broker-dealers, independent broker-dealers, insurers, banks, asset managers,
registered investment advisers and direct distributors. Competitive factors influencing our ability to attract and retain clients
include quality of advice provided, price, reputation, product offerings and technology and service quality.
Our Asset Management segment competes to acquire and retain managed and administered assets against a substantial
number of firms, including those in the categories listed above. Such competitors may have achieved greater economies of
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