Ameriprise 2014 Annual Report Download - page 152

and Note 11 for additional information regarding the Company’s variable annuity guarantees. The Company does not
currently hedge its risk under the GMDB, GGU and GMIB provisions. See Note 14 and Note 16 for additional information
regarding the Company’s derivative instruments used to hedge risks related to GMWB and GMAB provisions.
Insurance Liabilities
VUL/UL is the largest group of insurance policies written by the Company. Purchasers of VUL can select from a variety of
investment options and can elect to allocate a portion to a fixed account or a separate account. A vast majority of the
premiums received for VUL policies are held in separate accounts where the assets are held for the exclusive benefit of
those policyholders.
IUL insurance is similar to UL in many regards, although the rate of credited interest above the minimum guarantee for
funds allocated to an indexed account is linked to the performance of the specific index for the indexed account (subject
to a cap and floor). The Company offers an S&P 500 Index account option and a blended multi-index account comprised
of the S&P 500 Index, the MSCI EAFE Index and MSCI EM Index. Both options offer two crediting durations, one-year and
two-year. The policyholder may allocate all or a portion of the policy value to a fixed or any available indexed account.
The Company also offers term life insurance as well as disability products. The Company no longer offers standalone LTC
products and whole life insurance but has in force policies from prior years. Insurance liabilities include accumulation
values, unpaid reported claims, incurred but not reported claims and obligations for anticipated future claims.
Portions 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 policy. These profits followed by losses can be generated by the cost structure
of the product or secondary guarantees in the policy. 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.
Threadneedle Investment Liabilities
Threadneedle provides a range of unitized pooled pension funds, which invest in property, stocks, bonds and cash. The
investments are selected by the clients and are based on the level of risk they are willing to assume. All investment
performance, net of fees, is passed through to the investors. The value of the liabilities represents the fair value of the
pooled pension funds.
11. Variable Annuity and Insurance Guarantees
The majority of the variable annuity contracts offered by the Company contain GMDB provisions. The Company also offers
variable annuities with GGU, GMWB and GMAB provisions. The Company previously offered contracts containing GMIB
provisions. See Note 2 and Note 10 for additional information regarding the Company’s variable annuity guarantees.
The GMDB and GGU provisions provide a specified minimum return upon death of the contractholder. The death benefit
payable is the greater of (i) the contract value less any purchase payment credits subject to recapture and less a pro-rata
portion of any rider fees, or (ii) the GMDB provisions specified in the contract. The Company has the following primary
GMDB provisions:
• Return of premium — provides purchase payments minus adjusted partial surrenders.
• Reset — provides that the value resets to the account value every sixth contract anniversary minus adjusted partial
surrenders. This provision was often provided in combination with the return of premium provision and is no longer
offered.
• Ratchet — provides that the value ratchets up to the maximum account value at specified anniversary intervals, plus
subsequent purchase payments less adjusted partial surrenders.
The variable annuity contracts with GMWB riders typically have account values that are based on an underlying portfolio of
mutual funds, the values of which fluctuate based on fund performance. At issue, the guaranteed amount is equal to the
amount deposited but the guarantee may be increased annually to the account value (a ‘‘step-up’’) in the case of
favorable market performance.
The Company has GMWB riders in force, which contain one or more of the following provisions:
• Withdrawals at a specified rate per year until the amount withdrawn is equal to the guaranteed amount.
• Withdrawals at a specified rate per year for the life of the contractholder (‘‘GMWB for life’’).
• Withdrawals at a specified rate per year for joint contractholders while either is alive.
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