Ameriprise 2014 Annual Report Download - page 111

of variable annuity riders, equity indexed annuities, stock market certificates, indexed universal life insurance and the
associated hedge assets, we assume no change in implied market volatility despite the 10% drop in equity prices.
The following tables present our estimate of the impact on pretax income from these hypothetical market movements as of
December 31, 2014:
Equity Price Exposure to Pretax Income
Equity Price Decline 10% Before Hedge Impact Hedge Impact Net Impact
(in millions)
Asset-based management and distribution fees(1) $ (254) $ 4 $ (250)
DAC and DSIC amortization(2)(3) (100) — (100)
Variable annuity riders:
GMDB and GMIB(3) (103) — (103)
GMWB (239) 236 (3)
GMAB (36) 34 (2)
DAC and DSIC amortization(4) N/A N/A 8
Total variable annuity riders (378) 270 (100)
Macro hedge program(5) —1919
Equity indexed annuities 1 (1) —
Certificates 2(2)—
Indexed universal life insurance 18 (22) (4)
Total $ (711) $ 268 $ (435)
Interest Rate Exposure to Pretax Income
Interest Rate Increase 100 Basis Points Before Hedge Impact Hedge Impact Net Impact
(in millions)
Asset-based management and distribution fees(1) $ (44) $ — $ (44)
Variable annuity riders:
GMDB and GMIB ———
GMWB 826 (898) (72)
GMAB 28 (30) (2)
DAC and DSIC amortization(4) N/A N/A 14
Total variable annuity riders 854 (928) (60)
Macro hedge program(5) — (31) (31)
Fixed annuities, fixed insurance and fixed portion of variable annuities and
variable insurance products 49 — 49
Brokerage client cash balances 138 — 138
Certificates 2—2
Indexed universal life insurance 34 1 35
Total $ 1,033 $ (958) $ 89
N/A Not Applicable.
(1) Excludes incentive income which is impacted by market and fund performance during the period and cannot be readily estimated.
(2) Market impact on DAC and DSIC amortization resulting from lower projected profits.
(3) In estimating the impact on DAC and DSIC amortization resulting from lower projected profits, we have not changed our assumed
equity asset growth rates. This is a significantly more conservative estimate than if we assumed management follows its mean
reversion guideline and increased near-term rates to recover the drop in equity values over a five-year period. We make this same
conservative assumption in estimating the impact from GMDB and GMIB riders.
(4) Market impact on DAC and DSIC amortization related to variable annuity riders is modeled net of hedge impact.
(5) The market impact of the macro hedge program is modeled net of any related impact to DAC and DSIC amortization.
The above results compare to an estimated negative net impact to pretax income of $389 million related to a 10% equity
price decline and an estimated positive net impact to pretax income of $49 million related to a 100 basis point increase
in interest rates as of December 31, 2013.
Net impacts shown in the above table from GMWB and GMAB riders result largely from differences between the liability
valuation basis and the hedging basis. Liabilities are valued using fair value accounting principles, with risk margins
incorporated in contractholder behavior assumptions and with discount rates increased to reflect a current market estimate
of our risk of nonperformance specific to these liabilities. The nonperformance spread risk is not hedged.
Actual results could differ materially from those illustrated above as they are based on a number of estimates and
assumptions. These include assuming that implied market volatility does not change when equity prices fall by 10%, that
management does not increase assumed equity asset growth rates to anticipate recovery of the drop in equity values when
valuing DAC, DSIC and GMDB and GMIB liability values and that the 100 basis point increase in interest rates is a parallel
shift of the yield curve. Furthermore, we have not tried to anticipate changes in client preferences for different types of
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