Ameriprise 2013 Annual Report Download - page 131

each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management
reviews and updates these assumptions annually in the third quarter of each year.
The liability for these future losses is determined by estimating the death benefits in excess of account value and
recognizing the excess over the estimated meaningful life based on expected assessments (e.g. cost of insurance charges,
contractual administrative charges, similar fees and investment margin). See Note 10 for information regarding the liability
for contracts with secondary guarantees.
Liabilities for unpaid amounts on reported life insurance claims are equal to the death benefits payable under the policies.
Liabilities for unpaid amounts on reported health insurance claims include any periodic or other benefit amounts due and
accrued, along with estimates of the present value of obligations for continuing benefit payments. These amounts are
calculated based on claim continuance tables which estimate the likelihood an individual will continue to be eligible for
benefits. Present values are calculated at interest rates established when claims are incurred. Anticipated claim
continuance rates are based on established industry tables, adjusted as appropriate for the Company’s experience.
Liabilities for estimated benefits payable on claims that have been incurred but not yet reported are based on periodic
analysis of the actual time lag between when a claim occurs and when it is reported.
Liabilities for estimates of benefits that will become payable on future claims on term life, whole life and health insurance
policies are based on the net level premium method, using anticipated premium payments, mortality and morbidity rates,
policy persistency and interest rates earned on assets supporting the liability. Anticipated mortality and morbidity rates are
based on established industry mortality and morbidity tables, with modifications based on the Company’s experience.
Anticipated premium payments and persistency rates vary by policy form, issue age, policy duration and certain other
pricing factors.
Changes in policyholder account balances, future policy benefits and claims are reflected in earnings in the period
adjustments are made.
Where applicable, benefit amounts expected to be recoverable from reinsurance companies who share in the risk are
separately recorded as reinsurance recoverable within receivables.
Auto and Home Reserves
Auto and home reserves include amounts determined from loss reports on individual claims, as well as amounts based on
historical loss experience for losses incurred but not yet reported. Such liabilities are based on estimates and, while
management believes that the reserve amounts were adequate at December 31, 2013 and 2012, the ultimate liability
may be in excess of or less than the amounts provided. The Company’s methods for making such estimates and for
establishing the resulting liabilities are continually reviewed, and any adjustments are reflected in earnings in the period
such adjustments are made.
Share-Based Compensation
The Company measures and recognizes the cost of share-based awards granted to employees and directors based on the
grant-date fair value of the award and recognizes the expense on a straight-line basis over the vesting period. The fair
value of each option is estimated on the grant date using a Black-Scholes option-pricing model. The Company recognizes
the cost of share-based awards granted to independent contractors on a fair value basis until the award is fully vested.
Income Taxes
The Company’s provision for income taxes represents the net amount of income taxes that the Company expects to pay or
to receive from various taxing jurisdictions in connection with its operations. The Company provides for income taxes based
on amounts that the Company believes it will ultimately owe taking into account the recognition and measurement for
uncertain tax positions. Inherent in the provision for income taxes are estimates and judgments regarding the tax treatment
of certain items.
In connection with the provision for income taxes, the Consolidated Financial Statements reflect certain amounts related to
deferred tax assets and liabilities, which result from temporary differences between the assets and liabilities measured for
financial statement purposes versus the assets and liabilities measured for tax return purposes.
The Company is required to establish a valuation allowance for any portion of its deferred tax assets that management
believes will not be realized. Significant judgment is required in determining if a valuation allowance should be established
and the amount of such allowance if required. Factors used in making this determination include estimates relating to the
performance of the business including the ability to generate capital gains. Consideration is given to, among other things in
making this determination: (i) future taxable income exclusive of reversing temporary differences and carryforwards;
(ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (iv) tax
planning strategies. Management may need to identify and implement appropriate planning strategies to ensure its ability
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