Ameriprise 2014 Annual Report Download - page 104

certain contractholder assumptions, adding explicit margins to provide for profit, risk and expenses, and adjusting the rates
used to discount expected cash flows to reflect a current market estimate of our nonperformance risk. The
nonperformance risk adjustment is based on broker quotes for credit default swaps that are adjusted to estimate the risk
of our life insurance company subsidiaries not fulfilling these liabilities. Consistent with general market conditions, this
estimate resulted in a spread over the LIBOR swap curve as of December 31, 2014. As our estimate of this spread widens
or tightens, the liability will decrease or increase. If this nonperformance credit spread moves to a zero spread over the
LIBOR swap curve, the reduction to net income would be approximately $157 million, net of DAC, DSIC and unearned
revenue amortization, the reinsurance accrual and income taxes (calculated at the statutory tax rate of 35%), based on
December 31, 2014 credit spreads.
Liquidity and Capital Resources
Overview
We maintained substantial liquidity during the year ended December 31, 2014. At both December 31, 2014 and 2013,
we had $2.6 billion in cash and cash equivalents. We have additional liquidity available through an unsecured revolving
credit facility for up to $500 million that expires in September 2018. Under the terms of the underlying credit agreement,
we can increase this facility to $750 million upon satisfaction of certain approval requirements. Available borrowings under
this facility are reduced by any outstanding letters of credit. At December 31, 2014 we had no outstanding borrowings
under this credit facility and had $1 million of outstanding letters of credit. Our junior subordinated notes due 2066 and
credit facility contain various administrative, reporting, legal and financial covenants. We were in compliance with all such
covenants at December 31, 2014.
On September 18, 2014, we issued $550 million of unsecured senior notes due October 15, 2024, and incurred debt
issuance costs of $5 million. Interest payments are due semi-annually in arrears on April 15 and October 15, commencing
on April 15, 2015.
We redeemed $200 million of our senior notes due 2039 on June 16, 2014 pursuant to the terms of the indenture at the
principal value plus accrued interest to the redemption date. We recognized an expense for the remaining unamortized
debt issuance costs on the notes in the second quarter of 2014.
We intend to use cash on hand to fund the repayment of $350 million of our senior notes due in November 2015.
We enter into short-term borrowings, which may include repurchase agreements and Federal Home Loan Bank (‘‘FHLB’’)
advances, to reduce reinvestment risk. Short-term borrowings allow us to receive cash to reinvest in longer-duration assets,
while paying back the short-term debt with cash flows generated by the fixed income portfolio. The balance of repurchase
agreements at both December 31, 2014 and 2013 was $50 million, which is collateralized with agency residential
mortgage backed securities and commercial mortgage backed securities from our investment portfolio. Our subsidiary,
RiverSource Life Insurance Company (‘‘RiverSource Life’’), is a member of the FHLB of Des Moines, which provides access
to collateralized borrowings. As of December 31, 2014 and 2013, we had borrowings of $150 million and $450 million,
respectively, from the FHLB, which is collateralized with commercial mortgage backed securities. We believe cash flows
from operating activities, available cash balances and our availability of revolver borrowings will be sufficient to fund our
operating liquidity needs.
Dividends from Subsidiaries
Ameriprise Financial is primarily a parent holding company for the operations carried out by our wholly owned subsidiaries.
Because of our holding company structure, our ability to meet our cash requirements, including the payment of dividends
on our common stock, substantially depends upon the receipt of dividends or return of capital from our subsidiaries,
particularly our life insurance subsidiary, RiverSource Life, our face-amount certificate subsidiary, Ameriprise Certificate
Company (‘‘ACC’’), AMPF Holding Corporation, which is the parent company of our retail introducing broker-dealer
subsidiary, Ameriprise Financial Services, Inc. (‘‘AFSI’’) and our clearing broker-dealer subsidiary, American Enterprise
Investment Services, Inc. (‘‘AEIS’’), our Auto and Home insurance subsidiary, IDS Property Casualty Insurance Company
(‘‘IDS Property Casualty’’), doing business as Ameriprise Auto & Home Insurance, our transfer agent subsidiary, Columbia
Management Investment Services Corp., our investment advisory company, Columbia Management Investment
Advisers, LLC, and Threadneedle. The payment of dividends by many of our subsidiaries is restricted and certain of our
subsidiaries are subject to regulatory capital requirements.
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