Ameriprise 2014 Annual Report Download - page 110

• interruptions or other failures in the Company’s communications, technology and other operating systems, including
errors or failures caused by third party service providers, interference or failures caused by third party attacks on the
Company’s systems, or the failure to safeguard the privacy or confidentiality of sensitive information and data on such
systems; and
• general economic and political factors, including consumer confidence in the economy and the financial industry, the
ability and inclination of consumers generally to invest as well as their ability and inclination to invest in financial
instruments and products other than cash and cash equivalents, the costs of products and services the Company
consumes in the conduct of its business, and applicable legislation and regulation and changes therein, including tax
laws, tax treaties, fiscal and central government treasury policy, and policies regarding the financial services industry
and publicly-held firms, and regulatory rulings and pronouncements.
Management cautions the reader that the foregoing list of factors is not exhaustive. There may also be other risks that
management is unable to predict at this time that may cause actual results to differ materially from those in forward-
looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. Management undertakes no obligation to update publicly or revise any
forward-looking statements.
Ameriprise Financial announces financial and other information to investors through the Company’s investor relations
website at ir.ameriprise.com, as well as SEC filings, press releases, public conference calls and webcasts. Investors and
others interested in the company are encouraged to visit the investor relations website from time to time, as information is
updated and new information is posted. The website also allows users to sign up for automatic notifications in the event
new materials are posted. The information found on the website is not incorporated by reference into this report or in any
other report or document the Company furnishes or files with the SEC.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
Our primary market risk exposures are interest rate, equity price, foreign currency exchange rate and credit risk. Equity
price and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects
they have on the asset management and other asset-based fees we earn, the spread income generated on our fixed
annuities, fixed insurance, brokerage client cash balances, face-amount certificate products and the fixed portion of our
variable annuities and variable insurance contracts, the value of DAC and DSIC assets, the value of liabilities for
guaranteed benefits associated with our variable annuities and the value of derivatives held to hedge these benefits.
RiverSource Life has the following variable annuity guarantee benefits: guaranteed minimum withdrawal benefits
(‘‘GMWB’’), guaranteed minimum accumulation benefits (‘‘GMAB’’), guaranteed minimum death benefits (‘‘GMDB’’) and
guaranteed minimum income benefits (‘‘GMIB’’). Each of these guaranteed benefits guarantees payouts to the annuity
holder under certain specific conditions regardless of the performance of the underlying invested assets.
The variable annuity guarantees continue to be managed by utilizing a hedging program which attempts to match the
sensitivity of the assets with the sensitivity of the liabilities. This approach works with the premise that matched
sensitivities will produce a highly effective hedging result. Our comprehensive hedging program focuses mainly on first order
sensitivities of assets and liabilities: Equity Market Level (Delta), Interest Rate Level (Rho) and Volatility (Vega). Additionally,
various second order sensitivities are managed. We use various index options across the term structure, interest rate
swaps and swaptions, total return swaps and futures to manage the risk exposures. The exposures are measured and
monitored daily, and adjustments to the hedge portfolio are made as necessary.
We have a macro hedge program to provide protection against the statutory tail scenario risk arising from variable annuity
reserves on our statutory surplus and to cover some of the residual risks not covered by other hedging activities. We
assess the residual risk under a range of scenarios in creating and executing the macro hedge program. As a means of
economically hedging these risks, we use a combination of options and/or swaps. Certain of the macro hedge derivatives
used contain settlement provisions linked to both equity returns and interest rates; the remaining are interest rate
contracts or equity contracts. The macro hedge program could result in additional earnings volatility as changes in the
value of the macro hedge derivatives, which are designed to reduce statutory capital volatility, may not be closely aligned
to changes in the variable annuity guarantee embedded derivatives.
To evaluate interest rate and equity price risk we perform sensitivity testing which measures the impact on pretax income
from the sources listed below for a 12-month period following a hypothetical 100 basis point increase in interest rates or a
hypothetical 10% decline in equity prices. The interest rate risk test assumes a sudden 100 basis point parallel shift in the
yield curve, with rates then staying at those levels for the next 12 months. The equity price risk test assumes a sudden
10% drop in equity prices, with equity prices then staying at those levels for the next 12 months. In estimating the values
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