Ameriprise 2015 Annual Report Download - page 161

Assets
Cash Equivalents
Cash equivalents include highly liquid investments with original maturities of 90 days or less. Actively traded money market
funds are measured at their NAV and classified as Level 1. The Company’s remaining cash equivalents are classified as
Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because of the short time between
the purchase of the instrument and its expected realization.
Investments (Available-for-Sale Securities and Trading Securities)
When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available,
fair values are obtained from third party pricing services, non-binding broker quotes, or other model-based valuation
techniques. Level 1 securities primarily include U.S. Treasuries. Level 2 securities primarily include corporate bonds,
residential mortgage backed securities, commercial mortgage backed securities, asset backed securities, state and
municipal obligations and U.S. agency and foreign government securities. The fair value of these Level 2 securities is
based on a market approach with prices obtained from third party pricing services. Observable inputs used to value these
securities can include, but are not limited to, reported trades, benchmark yields, issuer spreads and non-binding broker
quotes. Level 3 securities primarily include certain corporate bonds, non-agency residential mortgage backed securities,
commercial mortgage backed securities and asset backed securities. The fair value of corporate bonds, non-agency
residential mortgage backed securities, commercial mortgage backed securities and certain asset backed securities
classified as Level 3 is typically based on a single non-binding broker quote. The underlying inputs used for some of the
non-binding broker quotes are not readily available to the Company. The Company’s privately placed corporate bonds are
typically based on a single non-binding broker quote. In addition to the general pricing controls, the Company reviews the
broker prices to ensure that the broker quotes are reasonable and, when available, compares prices of privately issued
securities to public issues from the same issuer to ensure that the implicit illiquidity premium applied to the privately
placed investment is reasonable considering investment characteristics, maturity, and average life of the investment.
In consideration of the above, management is responsible for the fair values recorded on the financial statements. Prices
received from third party pricing services are subjected to exception reporting that identifies investments with significant
daily price movements as well as no movements. The Company reviews the exception reporting and resolves the
exceptions through reaffirmation of the price or recording an appropriate fair value estimate. The Company also performs
subsequent transaction testing. The Company performs annual due diligence of third party pricing services. The Company’s
due diligence procedures include assessing the vendor’s valuation qualifications, control environment, analysis of asset-
class specific valuation methodologies, and understanding of sources of market observable assumptions and unobservable
assumptions, if any, employed in the valuation methodology. The Company also considers the results of its exception
reporting controls and any resulting price challenges that arise.
Separate Account Assets
The fair value of assets held by separate accounts is determined by the NAV of the funds in which those separate
accounts are invested. The NAV represents the exit price for the separate account. Separate account assets are classified
as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information.
Investments Segregated for Regulatory Purposes
Investments segregated for regulatory purposes includes U.S. Treasuries that are classified as Level 1.
Other Assets
Derivatives that are measured using quoted prices in active markets, such as foreign currency forwards, or derivatives that
are exchange-traded are classified as Level 1 measurements. The variation margin on futures contracts is also classified as
Level 1. The fair value of derivatives that are traded in less active over-the-counter (‘‘OTC’’) markets is generally measured
using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are
classified as Level 2 within the fair value hierarchy and include swaps and the majority of options. Other derivative
contracts consist of the Company’s macro hedge program. See Note 16 for further information on the macro hedge
program. The counterparties’ nonperformance risk associated with uncollateralized derivative assets was immaterial at
December 31, 2015 and 2014. See Note 15 and Note 16 for further information on the credit risk of derivative
instruments and related collateral.
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