Ameriprise 2014 Annual Report Download - page 131

Liabilities for EIA 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.
Life and Health Insurance
Life and health insurance includes liabilities for fixed account values on fixed and variable universal life policies, liabilities
for indexed accounts of 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 and health
insurance 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charges and less amounts withdrawn by policyholders.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 the Company’s 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, the Company projects 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 life based on expected assessments (e.g. cost of insurance charges, contractual
administrative charges, similar fees and investment margin). See Note 11 for information regarding the liability for
contracts with secondary guarantees.
Liabilities for unpaid amounts on reported life insurance claims are equal to the death benefits payable under the policies.
Liabilities for unpaid amounts on reported health insurance claims include any periodic or other benefit amounts due and
accrued, along with estimates of the present value of obligations for continuing benefit payments. These amounts are
calculated based on claim continuance tables which estimate the likelihood an individual will continue to be eligible for
benefits. Present values are calculated at interest rates established when claims are incurred. Anticipated claim
continuance rates are based on established industry tables, adjusted as appropriate for the Company’s experience.
Liabilities for estimated benefits payable on claims that have been incurred but not yet reported are based on periodic
analysis of the actual time lag between when a claim occurs and when it is reported.
Liabilities for estimates of benefits that will become payable on future claims on term life, whole life and health insurance
policies are based on the net level premium method, using anticipated premium payments, mortality and morbidity rates,
policy persistency and interest rates earned on assets supporting the liability. Anticipated mortality and morbidity rates are
based on established industry mortality and morbidity tables, with modifications based on the Company’s experience.
Anticipated premium payments and persistency rates vary by policy form, issue age, policy duration and certain other
pricing factors.
For term life, whole life, DI and LTC polices, the Company utilizes best estimate assumptions as of the date the policy is
issued with provisions for the risk of adverse deviation, as appropriate. After the liabilities are initially established,
management performs premium deficiency tests annually in the third quarter of each year using best estimate assumptions
without provisions for adverse deviation. If the liabilities determined based on these best estimate assumptions are greater
than the net reserves (i.e., GAAP reserves net of any DAC balance), the existing net reserves are adjusted by first reducing
the DAC balance by the amount of the deficiency or to zero through a change to current period earnings. If the deficiency
is more than the DAC balance, then the net reserves are increased by the excess through a charge to current period
earnings. If a premium deficiency is recognized, the assumptions are locked in and used in subsequent valuations.
Changes in policyholder account balances, future policy benefits and claims are reflected in earnings in the period
adjustments are made.
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