Ameriprise 2013 Annual Report Download - page 108

• risks of default, capacity constraint or repricing by issuers or guarantors of investments the Company owns or by
counterparties to hedge, derivative, insurance or reinsurance arrangements or by manufacturers of products the
Company distributes, experience deviations from the Company’s assumptions regarding such risks, the evaluations or
the prospect of changes in evaluations of any such third parties published by rating agencies or other analysts, and the
reactions of other market participants or the Company’s regulators, advisors, distribution partners or customers in
response to any such evaluation or prospect of changes in evaluation;
• experience deviations from the Company’s assumptions regarding morbidity, mortality and persistency in certain annuity
and insurance products, or from assumptions regarding market returns assumed in valuing or unlocking DAC and DSIC
or market volatility underlying the Company’s valuation and hedging of guaranteed benefit annuity riders; or from
assumptions regarding anticipated claims and losses relating to the Company’s automobile and home insurance
products;
• changes in capital requirements that may be indicated, required or advised by regulators or rating agencies;
• the impacts of the Company’s efforts to improve distribution economics and to grow third-party distribution of its
products;
• the ability to pursue and complete strategic transactions and initiatives, including acquisitions, divestitures,
restructurings, joint ventures and the development of new products and services;
• the ability to realize the financial, operating and business fundamental benefits of strategic transactions and initiatives
the Company has completed, is pursuing or may pursue in the future, which may be impacted by the ability to obtain
regulatory approvals, the ability to effectively manage related expenses and by market, business partner and consumer
reactions to such strategic transactions and initiatives;
• the ability and timing to realize savings and other benefits from re-engineering and tax planning;
• interruptions or other failures in the Company’s communications, technology and other operating systems, including
errors or failures caused by third party service providers, interference or failures caused by third party attacks on the
Company’s systems, or the failure to safeguard the privacy or confidentiality of sensitive information and data on such
systems; and
• general economic and political factors, including consumer confidence in the economy and the financial industry, the
ability and inclination of consumers generally to invest as well as their ability and inclination to invest in financial
instruments and products other than cash and cash equivalents, the costs of products and services the Company
consumes in the conduct of its business, and applicable legislation and regulation and changes therein, including tax
laws, tax treaties, fiscal and central government treasury policy, and policies regarding the financial services industry
and publicly-held firms, and regulatory rulings and pronouncements.
Management cautions the reader that the foregoing list of factors is not exhaustive. There may also be other risks that
management is unable to predict at this time that may cause actual results to differ materially from those in forward-
looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. Management undertakes no obligation to update publicly or revise any
forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
Our primary market risk exposures are interest rate, equity price, foreign currency exchange rate and credit risk. Equity
price and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects
they have on the asset management and other asset-based fees we earn, the spread income generated on our fixed
annuities, fixed insurance, brokerage client cash balances, face amount certificate products and the fixed portion of our
variable annuities and variable insurance contracts, the value of DAC and DSIC assets, the value of liabilities for
guaranteed benefits associated with our variable annuities and the value of derivatives held to hedge these benefits.
The guaranteed benefits associated with our variable annuities are guaranteed minimum withdrawal benefits (‘‘GMWB’’),
guaranteed minimum accumulation benefits (‘‘GMAB’’), guaranteed minimum death benefits (‘‘GMDB’’) and guaranteed
minimum income benefits (‘‘GMIB’’). Each of these guaranteed benefits guarantees payouts to the annuity holder under
certain specific conditions regardless of the performance of the underlying investment assets.
The variable annuity guarantees continue to be managed by utilizing a hedging program which attempts to match the
sensitivity of the assets with the sensitivity of the liabilities. This approach works with the premise that matched
sensitivities will produce a highly effective hedging result. Our comprehensive hedging program focuses mainly on first order
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