Ameriprise 2015 Annual Report Download - page 51

otherwise utilize our corporate assets, limiting our flexibility to use these assets for other purposes, and may be required to
raise additional capital.
Defaults in our fixed maturity securities portfolio or consumer credit holdings could adversely affect our
earnings.
Issuers of the fixed maturity securities that we own may default on principal and interest payments. As of December 31,
2015, 6% of our invested assets had ratings below investment-grade. Moreover, economic downturns and corporate
malfeasance can increase the number of companies, including those with investment-grade ratings, which default on their
debt obligations. Default-related declines in the value of our fixed maturity securities portfolio or consumer credit holdings
could cause our net earnings to decline and could also cause us to contribute capital to some of our regulated
subsidiaries, which may require us to obtain funding during periods of unfavorable market conditions.
Our valuation of fixed maturity and equity securities may include methodologies, estimations and assumptions
which are subject to differing interpretations and could result in changes to investment valuations that may
materially adversely impact our results of operations or financial condition.
Fixed maturity, equity, trading securities and short-term investments, which are reported at fair value on the consolidated
balance sheets, represent the majority of our total cash and invested assets. The determination of fair values by
management in the absence of quoted market prices is based on: (i) valuation methodologies; (ii) securities we deem to
be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are made at a
specific point in time, based on available market information and judgments about financial instruments, including
estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty.
Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund
requirements, credit rating, industry sector of the issuer, interest rates, credit spreads, and quoted market prices of
comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated
fair value amounts.
During periods of market disruption, including periods of significantly rising or high interest rates and rapidly widening credit
spreads or illiquidity, it may be difficult to value certain of our securities. There may be certain asset classes that were in
active markets with significant observable data that become illiquid due to the financial environment. In such cases, the
valuation of certain securities may require additional subjectivity and management judgment. As such, valuations may
include inputs and assumptions that are less observable and may require greater estimation as well as valuation methods
that are more sophisticated, which may result in values less than the value at which the investments may be ultimately
sold. Further, rapidly changing and unexpected credit and equity market conditions could materially impact the valuation of
securities as reported within our consolidated financial statements and the period-to-period changes in value could vary
significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition.
The determination of the amount of allowances and impairments taken on certain investments is subject to
management’s evaluation and judgment and could materially impact our results of operations or financial
position.
The determination of the amount of allowances and impairments vary by investment type and is based upon our periodic
evaluation and assessment of inherent and known risks associated with the respective asset class. Such evaluations and
assessments are revised as conditions change and new information becomes available. Management updates its
evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised.
Historical trends may not be indicative of future impairments or allowances.
The assessment of whether impairments have occurred is based on management’s case-by-case evaluation of the
underlying reasons for the decline in fair value that considers a wide range of factors about the security issuer or borrower,
and management uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security
or loan and in assessing the prospects for recovery. Inherent in management’s evaluation of the security or loan are
assumptions and estimates about the operations of the issuer and its future earnings potential.
Some of our investments are relatively illiquid.
We invest a portion of our owned assets in certain privately placed fixed income securities, mortgage loans, policy loans
and limited partnership interests, all of which are relatively illiquid. These asset classes represented 18% of the carrying
value of our investment portfolio as of December 31, 2015. If we require significant amounts of cash on short notice in
excess of our normal cash requirements, we may have difficulty selling these investments in a timely manner or be forced
to sell them for an amount less than we would otherwise have been able to realize, or both, which could have an adverse
effect on our financial condition and results of operations.
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