Ameriprise 2015 Annual Report Download - page 91

estimated losses including IBNR. Catastrophe losses were $66 million for the year ended December 31, 2014
compared to $42 million for the prior year.
• A $26 million increase in expense related to higher reserve funding driven by the impact of higher fees from variable
annuity guarantee sales in the prior year where the fees start on the first anniversary date.
• A $21 million decrease in expenses compared to the prior year from policyholder movement of investments in Portfolio
Navigator (traditional asset allocation) funds under certain in force variable annuities with living benefit guarantees to
the Portfolio Stabilizer (managed volatility) funds. See additional discussion in the Annuities segment.
• A decrease in expense compared to the prior year due to an $8 million increase in disability income reserves in the
second quarter of 2013 related to prior periods.
• A $404 million decrease in expense compared to the prior year from the unhedged nonperformance credit spread risk
adjustment on variable annuity guaranteed benefits. As the embedded derivative liability on which the nonperformance
credit spread is applied increases (decreases), the impact of the nonperformance credit spread is favorable
(unfavorable) to expense. In 2014, the favorable impact of the nonperformance credit spread was $146 million
primarily driven by an increase in the embedded derivative liability. In 2013, the unfavorable impact of the
nonperformance credit spread was $258 million primarily driven by a decrease in the embedded derivative liability.
• A $303 million increase 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 increase was the result of an unfavorable
$2.9 billion change in the market impact on variable annuity guaranteed living benefits reserves, a favorable
$2.6 billion change in the market impact on derivatives hedging the variable annuity guaranteed benefits and an
unfavorable $2 million DSIC offset. The main market drivers contributing to these changes are summarized below:
• Interest rates were down in 2014 and up in 2013 resulting in an unfavorable change in the variable annuity
guaranteed living benefits liability, partially offset by a favorable change in the related hedge assets.
• Equity market and volatility impacts on the variable annuity guaranteed living benefits liability net of the impact
on the related hedge assets resulted in a benefit in 2014 compared to an expense in 2013.
• 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 favorable impact compared to the prior year.
Amortization of DAC increased $160 million, or 77%, to $367 million for the year ended December 31, 2014 compared
to $207 million for the prior year primarily reflecting the following items:
• Amortization of DAC for the year ended December 31, 2014 included an $8 million expense from unlocking, primarily
driven by lower than previously assumed interest rates, partially offset by favorable persistency and mortality experience
and a benefit from updating our variable annuity living benefit withdrawal utilization assumption. Amortization of DAC
for 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, primarily driven by
higher than previously assumed interest rates and changes in assumed policyholder behavior.
• The DAC offset to the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC
amortization) was a benefit of $9 million for the year ended December 31, 2014 compared to a benefit of $34 million
for the prior year.
• A $7 million expense related to an actuarial model correction in life insurance in the fourth quarter of 2014 primarily
related to prior periods.
• The impact on DAC from actual versus expected market performance based on our view of bond and equity
performance was a benefit of $21 million for the year ended December 31, 2014 compared to a benefit of
$26 million for the prior year. Equity market returns were favorable in both periods but less favorable in 2014 versus
the prior year. Bond fund returns were favorable in 2014 and unfavorable in the prior year.
Interest and debt expense increased $47 million, or 17%, to $328 million for the year ended December 31, 2014
compared to $281 million for the prior year due to a $53 million increase in interest and debt expense of CIEs.
Income Taxes
Our effective tax rate on income from continuing operations including income attributable to noncontrolling interests was
21.4% for the year ended December 31, 2014 compared to 25.0% for the prior year. Our effective tax rate on income
from continuing operations excluding income attributable to noncontrolling interests was 25.2% for the year ended
December 31, 2014 compared to 26.9% for the prior year. The effective tax rate for the year ended December 31, 2014
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