Ameriprise 2013 Annual Report Download - page 46

Third-party defaults, bankruptcy filings, legal actions and other events may limit the value of or restrict our
access and our clients’ access to cash and investments.
Capital and credit market volatility can exacerbate, and has exacerbated, the risk of third-party defaults, bankruptcy filings,
foreclosures, legal actions and other events that may limit the value of or restrict our access and our clients’ access to
cash and investments. Although we are not required to do so, we have elected in the past, and we may elect in the
future, to compensate clients for losses incurred in response to such events, provide clients with temporary credit or
liquidity or other support related to products that we manage, or provide credit liquidity or other support to the financial
products we manage. Any such election to provide support may arise from factors specific to our clients, our products or
industry-wide factors. If we elect to provide additional support, we could incur losses from the support we provide and incur
additional costs, including financing costs, in connection with the support. These losses and additional costs could be
material and could adversely impact our results of operations. If we were to take such actions we may also restrict or
otherwise utilize our corporate assets, limiting our flexibility to use these assets for other purposes, and may be required to
raise additional capital.
Defaults in our fixed maturity securities portfolio or consumer credit holdings could adversely affect our
earnings.
Issuers of the fixed maturity securities that we own may default on principal and interest payments. As of December 31,
2013, 6% of our invested assets had ratings below investment-grade. Moreover, economic downturns and corporate
malfeasance can increase the number of companies, including those with investment-grade ratings, which default on their
debt obligations. Default-related declines in the value of our fixed maturity securities portfolio or consumer credit holdings
could cause our net earnings to decline and could also cause us to contribute capital to some of our regulated
subsidiaries, which may require us to obtain funding during periods of unfavorable market conditions.
Our valuation of fixed maturity and equity securities may include methodologies, estimations and assumptions
which are subject to differing interpretations and could result in changes to investment valuations that may
materially adversely impact our results of operations or financial condition.
Fixed maturity, equity, trading securities and short-term investments, which are reported at fair value on the consolidated
balance sheets, represent the majority of our total cash and invested assets. The determination of fair values by
management in the absence of quoted market prices is based on: (i) valuation methodologies; (ii) securities we deem to
be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are made at a
specific point in time, based on available market information and judgments about financial instruments, including
estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty.
Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund
requirements, credit rating, industry sector of the issuer, interest rates, credit spreads, and quoted market prices of
comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated
fair value amounts.
During periods of market disruption, including periods of significantly rising or high interest rates and rapidly widening credit
spreads or illiquidity, it may be difficult to value certain of our securities. There may be certain asset classes that were in
active markets with significant observable data that become illiquid due to the financial environment. In such cases, the
valuation of certain securities may require additional subjectivity and management judgment. As such, valuations may
include inputs and assumptions that are less observable or require greater estimation as well as valuation methods that
are more sophisticated or require greater estimation, thereby resulting in values which may be less than the value at which
the investments may be ultimately sold. Further, rapidly changing and unprecedented credit and equity market conditions
could materially impact the valuation of securities as reported within our consolidated financial statements and the
period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our
results of operations or financial condition.
The determination of the amount of allowances and impairments taken on certain investments is subject to
management’s evaluation and judgment and could materially impact our results of operations or financial
position.
The determination of the amount of allowances and impairments vary by investment type and is based upon our periodic
evaluation and assessment of inherent and known risks associated with the respective asset class. Such evaluations and
assessments are revised as conditions change and new information becomes available. Management updates its
evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised.
Historical trends may not be indicative of future impairments or allowances.
The assessment of whether impairments have occurred is based on management’s case-by-case evaluation of the
underlying reasons for the decline in fair value that considers a wide range of factors about the security issuer or borrower,
and management uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security
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