Ameriprise 2015 Annual Report Download - page 114

enter into a transaction which would potentially increase our credit risk. These guidelines and oversight of credit risk are
managed through a comprehensive enterprise risk management program that includes members of senior management.
We manage the risk of credit-related losses in the event of nonperformance by counterparties by applying disciplined
fundamental credit analysis and underwriting standards, prudently limiting exposures to lower-quality, higher-yielding
investments, and diversifying exposures by issuer, industry, region and underlying investment type. We remain exposed to
occasional adverse cyclical economic downturns during which default rates may be significantly higher than the long-term
historical average used in pricing.
There has been significant interest in the energy sector given oil prices. We have approximately $3.3 billion of energy
sector exposure. The following table presents our energy holdings by sub-sector as of December 31, 2015:
% of
Total
Invested Amortized Fair Unrealized
Assets(1) Cost Value Gain (Loss)
(in millions, except percentages)
Energy Sector — Investment Grade Corporate Bonds
Midstream 3.4% $ 1,237 $ 1,231 $ (6)
Independent Energy 3.1 1,163 1,122 (41)
Integrated Energy 1.1 378 424 46
Refining 0.5 196 197 1
Oil Field Services 0.4 146 128 (18)
Total 8.5% $ 3,120 $ 3,102 $ (18)
Energy Sector — High Yield Corporate Bonds/Syndicated Loans
Oil Field Services 0.3% $ 125 $ 103 $ (22)
Independent Energy 0.1 55 44 (11)
Integrated Energy — 1 1 —
Total 0.4% $ 181 $ 148 $ (33)
(1) Invested assets include cash and cash equivalents and investments (excluding CIEs).
The duration of our energy holdings is short with over 35% maturing by year end 2018. The average rating of our energy
holdings is BBB. The high quality of our energy holdings is reflected in the less than 2% net unrealized loss in aggregate.
Within the Midstream sub-sector, the vast majority of our exposure is with a handful of the largest U.S. pipeline operators.
The rest of our energy exposure is focused on large diversified North American-based companies.
We manage our credit risk related to over-the-counter derivatives by entering into transactions with creditworthy
counterparties, maintaining collateral arrangements and through the use of master netting arrangements that provide for a
single net payment to be made by one counterparty to another at each due date and upon termination. Generally, our
current credit exposure on over-the-counter derivative contracts is limited to a derivative counterparty’s net positive fair
value of derivative contracts after taking into consideration the existence of netting arrangements and any collateral
received. This exposure is monitored and managed to an acceptable threshold level.
The counterparty risk for centrally cleared over-the-counter derivatives is transferred to a central clearing party through
contract novation. Because the central clearing party monitors open positions and adjusts collateral requirements daily, we
have minimal credit exposure from such derivative instruments.
Exchange-traded derivatives are effected through regulated exchanges that require contract standardization and initial
margin to transact through the exchange. Because exchange-traded futures are marked to market and generally cash
settled on a daily basis, we have minimal exposure to credit-related losses in the event of nonperformance by
counterparties to such derivative instruments. Other exchange-traded derivatives would be exposed to nonperformance by
counterparties for amounts in excess of initial margin requirements only if the exchange is unable to fulfill the contract.
We manage our credit risk related to reinsurance treaties by evaluating the financial condition of reinsurance counterparties
prior to entering into new reinsurance treaties. In addition, we regularly evaluate their financial strength during the terms of
the treaties. As of December 31, 2015, our largest reinsurance credit risk is related to a long term care coinsurance treaty
with life insurance subsidiaries of Genworth Financial, Inc. See Note 7 to our Consolidated Financial Statements for
additional information on reinsurance.
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