Ameriprise 2013 Annual Report Download - page 137

Securities and loans transferred from Level 2 to Level 3 represent assets with fair values that are now based on a single
non-binding broker quote. Securities and loans transferred from Level 3 to Level 2 represent assets with fair values that
are now obtained from a third party pricing service with observable inputs or priced in active markets. During the reporting
periods, there were no transfers between Level 1 and Level 2.
The following tables provide a summary of the significant unobservable inputs used in the fair value measurements
developed by the Company or reasonably available to the Company of Level 3 assets and liabilities held by consolidated
investment entities:
December 31, 2013
Fair Value Valuation Technique Unobservable Input Range Weighted Average
(in millions)
Other assets $ 1,936 Discounted cash flow/market Equivalent yield 4.4% - 12.4% 7.4%
comparables Expected rental value (per
square foot) $5 - $373 $ 33
Debt $ 4,804 Discounted cash flow Annual default rate 2.5% - 2.5% 2.5%
Discount rate 1.5% - 8.3% 2.7%
Constant prepayment rate 5.0% - 10.0% 9.8%
Loss recovery 36.4% - 63.6% 62.3%
December 31, 2012
Fair Value Valuation Technique Unobservable Input Range Weighted Average
(in millions)
Other assets $ 1,214 Discounted cash flow/market Equivalent yield 4.1% - 12.9% 7.2%
comparables Expected rental value (per
square foot) $4 - $309 $ 32
Debt $ 4,450 Discounted cash flow Annual default rate 2.5% - 4.5% 2.5%
Discount rate 1.6% - 30.0% 2.9%
Constant prepayment rate 5.0% - 10.0% 9.6%
Loss recovery 36.4% - 63.6% 62.0%
Level 3 measurements not included in the tables above are obtained from non-binding broker quotes where unobservable
inputs are not reasonably available to the Company.
Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs
Generally, a significant increase (decrease) in the expected rental value used in the fair value measurement of properties
held by consolidated investment entities in isolation would result in a significantly higher (lower) fair value measurement
and a significant increase (decrease) in the equivalent yield in isolation would result in a significantly lower (higher) fair
value measurement.
Generally, a significant increase (decrease) in the annual default rate and discount rate used in the fair value
measurement of the CDO’s debt in isolation would result in a significantly lower (higher) fair value measurement and a
significant increase (decrease) in loss recovery in isolation would result in a significantly higher (lower) fair value
measurement. A significant increase (decrease) in the constant prepayment rate in isolation would result in a significantly
higher (lower) fair value measurement.
Determination of Fair Value
Assets
Investments
The fair value of syndicated loans obtained from third party pricing services with multiple non-binding broker quotes as the
underlying valuation source is classified as Level 2. The fair value of syndicated loans obtained from third party pricing
services with a single non-binding broker quote as the underlying valuation source is classified as Level 3. The underlying
inputs used in non-binding broker quotes are not readily available to the Company.
In consideration of the above, management is responsible for the fair values recorded on the financial statements. Prices
received from third party pricing services are subjected to exception reporting that identifies loans with significant daily
price movements as well as no movements. The Company reviews the exception reporting and resolves the exceptions
through reaffirmation of the price or recording an appropriate fair value estimate. The Company also performs subsequent
transaction testing. The Company performs annual due diligence of the third party pricing services. The Company’s due
diligence procedures include assessing the vendor’s valuation qualifications, control environment, analysis of asset-class
specific valuation methodologies and understanding of sources of market observable assumptions and unobservable
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