Ameriprise 2014 Annual Report Download - page 93

Benefits, claims, losses and settlement expenses increased $55 million, or 3%, to $2.0 billion for the year ended
December 31, 2013 compared to $1.9 billion for the prior year primarily reflecting the following items:
• The year ended December 31, 2013 included a $5 million benefit from unlocking, which included a $22 million
benefit related to the market impact on variable annuity guaranteed benefits, and the prior year included a $28 million
benefit, which included an $18 million expense related to the market impact on variable annuity guaranteed benefits.
The market impact on variable annuity guaranteed benefits is discussed below. The impact from unlocking for the year
ended December 31, 2013 reflected expected higher interest rates and changes in assumed policyholder behavior,
partially offset by the impact of variable annuity model changes. The impact from unlocking for the prior year primarily
reflected a $50 million benefit from an adjustment to the model which values the reserves related to living benefit
guarantees primarily attributable to prior periods, partially offset by lower bond fund returns related to the life
contingent benefits associated with GMWB.
• An increase in expenses related to our auto and home business driven by higher claim and claim adjustment expense
reflecting the impact of growth in exposures due to a 29% increase in gross new policies and higher loss cost trends,
partially offset by lower catastrophe losses. Auto and home catastrophe losses were $42 million in 2013 compared to
$51 million in the prior year, including $20 million from Superstorm Sandy.
• An increase in expenses of approximately $40 million related to higher reserve funding driven by the impact of higher
fees from prior year sales with variable annuity guarantees.
• An $8 million increase in disability income reserves in the second quarter of 2013 related to prior periods and a
$9 million benefit from a life insurance reserve release in the prior year.
• A $29 million decrease in expenses from policyholder movement of investments in Portfolio Navigator funds under
certain in-force variable annuities with living benefit guarantees to the Portfolio Stabilizer funds. See additional
discussion in the Annuities segment.
• A $141 million increase in expense compared to the prior year from the unhedged nonperformance credit spread risk
adjustment on variable annuity guaranteed benefits.
• A $271 million decrease in expense from other market impacts on variable annuity guaranteed benefits, net of hedges
in place to offset those risks and the related DSIC amortization. This decrease was the result of a favorable
$916 million change in the market impact on variable annuity guaranteed living benefits reserves, partially offset by an
unfavorable $635 million change in the market impact on derivatives hedging the variable annuity guaranteed benefits
and an unfavorable $10 million DSIC offset. The main market drivers contributing to these changes are summarized
below:
• Interest rates were up in 2013 and down in 2012 resulting in a favorable change in the variable annuity
guaranteed benefits liability, partially offset by an unfavorable change in the related hedge assets.
• Equity market and volatility impacts on the hedge assets resulted in lower expenses in 2013 compared to
2012. This benefit was partially offset by higher expenses in 2013 compared to 2012 due to equity market
and volatility impacts on the corresponding variable annuity guaranteed living benefits liability.
• Other unhedged items including the difference between the assumed and actual underlying separate account
investment performance, fixed income credit exposures, transaction costs and various behavioral items were a
net unfavorable impact compared to the prior year.
Amortization of DAC decreased $79 million, or 28%, to $207 million for the year ended December 31, 2013 compared to
$286 million for the prior year primarily reflecting the following items:
• The year ended December 31, 2013 included a $79 million benefit from unlocking, which included a $5 million
expense related to the DAC offset to the market impact on variable annuity guaranteed benefits (net of hedges and
the related DSIC amortization), primarily driven by the impact of expected higher interest rates and changes in
assumed policyholder behavior. The prior year included a $23 million expense from unlocking, which included a
$4 million benefit related to the DAC offset to the market impact on variable annuity guaranteed benefits (net of
hedges and the related DSIC amortization), primarily reflecting spread compression and lower bond fund growth rates,
partially offset by a benefit from improved persistency and lowered mortality assumption. The impact of unlocking for
the prior year included a $9 million expense for the DAC offset to the adjustment to the model which values the
reserves related to living benefit guarantees primarily attributable to prior periods.
• The DAC offset to the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC
amortization) was a benefit of $34 million for the year ended December 31, 2013 compared to a benefit of
$69 million in the prior year.
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