Ameriprise 2014 Annual Report Download - page 113

spreads under a modestly rising rate scenario given the current relationship between the current level of interest rates and
the underlying GMIRs on the business. Of the $30.4 billion in policyholder account balances, future policy benefits and
claims on our Consolidated Balance Sheet at December 31, 2014, $23.5 billion is related to liabilities created by these
products. We do not hedge this exposure.
As a result of the low interest rate environment, our current reinvestment yields are generally lower than the current
portfolio yield. We expect our portfolio income yields to continue to decline in future periods if interest rates remain low.
The carrying value and weighted average yield of non-structured fixed maturity securities and commercial mortgage loans
that may generate proceeds to reinvest through 2016 due to prepayment, maturity or call activity at the option of the
issuer, excluding securities with a make-whole provision, were $4.0 billion and 3.6%, respectively, as of December 31,
2014. In addition, residential mortgage-backed securities, which are subject to prepayment risk as a result of the low
interest rate environment, totaled $6.2 billion and had a weighted average yield of 3.1% as of December 31, 2014. While
these amounts represent investments that could be subject to reinvestment risk, it is also possible that these investments
will be used to fund liabilities or may not be prepaid and will remain invested at their current yields. In addition to the
interest rate environment, the mix of benefit payments versus product sales as well as the timing and volumes associated
with such mix may impact our investment yield. Furthermore, reinvestment activities and the associated investment yield
may also be impacted by corporate strategies implemented at management’s discretion. The average yield for investment
purchases during the year ended December 31, 2014 was approximately 2.7%.
The reinvestment of proceeds from maturities, calls and prepayments at rates below the current portfolio yield, which may
be below the level of some liability guaranteed minimum interest rates, will have a negative impact to future operating
results. To mitigate the unfavorable impact that the low interest rate environment has on our spread income, we assess
reinvestment risk in our investment portfolio and monitor this risk in accordance with our asset/liability management
framework. In addition, we may reduce the crediting rates on our fixed products when warranted, subject to guaranteed
minimums. In 2014, we completed the process of setting lower renewal interest rates for a portion of our fixed annuities
that were above the guaranteed minimum interest rates, which helped relieve some of the spread compression caused by
low rates. All of the five-year guarantee block totaling $4.1 billion has been re-priced as of December 31, 2014.
The following table presents the account values of fixed annuities, fixed insurance, and the fixed portion of variable
annuities and variable insurance contracts by range of guaranteed minimum crediting rates and the range of the difference
between rates credited to policyholders and contractholders as of December 31, 2014 and the respective guaranteed
minimums, as well as the percentage of account values subject to rate reset in the time period indicated. Rates are reset
at our discretion, subject to guaranteed minimums.
Account Values with Crediting Rates
1-49 bps 50-99 bps 100-150 bps Greater Than
At above above above 150 bps above
Guaranteed Guaranteed Guaranteed Guaranteed Guaranteed
Minimum Minimum Minimum Minimum Minimum Total
(in billions, except percentages)
Range of Guaranteed Minimum Crediting Rates
1% - 1.99% $ 0.3 $ 3.1 $ 0.4 $ 0.2 $ 0.1 $ 4.1
2% - 2.99% 0.5 — — — — 0.5
3% - 3.99% 9.3 0.1 — — — 9.4
4% - 5.00% 5.6 — — — — 5.6
Total $ 15.7 $ 3.2 $ 0.4 $ 0.2 $ 0.1 $ 19.6
Percentage of Account Values That Reset In:
Next 12 months(1) 99% 96% 34% 42% 93% 97%
> 12 months to 24 months(2) — 1 28 25 7 1
> 24 months(2) 1 3 38 33 — 2
Total 100% 100% 100% 100% 100% 100%
(1) Includes contracts with annual discretionary crediting rate resets and contracts with twelve or less months until the crediting rate
becomes discretionary on an annual basis.
(2) Includes contracts with more than twelve months remaining until the crediting rate becomes an annual discretionary rate.
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