Ameriprise 2013 Annual Report Download - page 67

material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually
in the third quarter of each year. The amounts in the table above in ‘‘Deferred Acquisition Costs and Deferred Sales
Inducement Costs’’ include the estimated impact to benefits and claims expense related to variable annuity guarantees
resulting from a decrease of 100 basis points in various rate assumptions.
The GMDB liability is determined by estimating the expected value of death benefits in excess of the projected contract
accumulation value and recognizing the excess over the estimated meaningful life based on expected assessments
(e.g., mortality and expense fees, contractual administrative charges and similar fees).
If elected by the contract owner and after a stipulated waiting period from contract issuance, a GMIB guarantees a
minimum lifetime annuity based on a specified rate of contract accumulation value growth and predetermined annuity
purchase rates. The GMIB liability is determined each period by estimating the expected value of annuitization benefits in
excess of the projected contract accumulation value at the date of annuitization and recognizing the excess over the
estimated meaningful life based on expected assessments.
The fair value of embedded derivatives related to GMAB and the non-life contingent benefits associated with GMWB
provisions fluctuates based on equity, interest rate and credit markets which can cause these embedded derivatives to be
either an asset or a liability. These embedded derivatives are recorded in policyholder account balances, future policy
benefits and claims. See Note 14 to our Consolidated Financial Statements for information regarding the fair value
measurement of embedded derivatives. The liability for the life contingent benefits associated with GMWB provisions is
determined in the same way as the GMDB liability. Significant assumptions made in projecting future benefits and fees
relate to persistency and benefit utilization. Management reviews, and where appropriate, adjusts its assumptions 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 changes in both the fair values of the
GMWB and GMAB embedded derivatives and the liability for life contingent benefits are reflected in benefits, claims, losses
and settlement expenses.
Liabilities for equity indexed annuities are equal to the host contract values covering guaranteed benefits and the fair value
of embedded equity options.
Liabilities for fixed annuities in a benefit or payout status are based on future estimated payments using established
industry mortality tables and interest rates, ranging from 3.05% to 9.38% at December 31, 2013, depending on year of
issue, with an average rate of approximately 4.83%.
Life, Disability Income and Long Term Care Insurance
Life, disability income and long term care insurance includes liabilities for fixed account values on fixed and variable
universal life policies, liabilities for indexed accounts of indexed universal life (‘‘IUL’’) products, liabilities for unpaid
amounts on reported claims, estimates of benefits payable on claims incurred but not yet reported and estimates of
benefits that will become payable on term life, whole life, disability income and long term care policies as claims are
incurred in the future.
Liabilities for fixed account values on fixed and variable universal life insurance are equal to accumulation values.
Accumulation values are the cumulative gross deposits and credited interest less various contractual expense and mortality
charges and less amounts withdrawn by policyholders.
Liabilities for indexed accounts of IUL products are equal to the accumulation of host contract values covering guaranteed
benefits and the fair value of embedded equity options.
A portion of our fixed and variable universal life policies have product features that result in profits followed by losses from
the insurance component of the contract. These profits followed by losses can be generated by the cost structure of the
product or secondary guarantees in the contract. The secondary guarantee ensures that, subject to specified conditions,
the policy will not terminate and will continue to provide a death benefit even if there is insufficient policy value to cover
the monthly deductions and charges.
In determining the liability for contracts with profits followed by losses, we project benefits and contract assessments using
actuarial models. Significant assumptions made in projecting future benefits and assessments relate to customer asset
value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC valuation for
the same contracts. As with DAC, management reviews, and where appropriate, adjusts its assumptions 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 to our Consolidated Financial
Statements for information regarding the liability for contracts with secondary guarantees.
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