35 unchanged sentences
DAC and DSIC amortization (4)
−Removed: Variable annuity riders and structured variable annuities:
−Removed: (127) 93 (29)
+Added: Total variable annuity riders and structured variable annuities
Macro hedge program (5)
−Removed: Indexed annuities 5 (4) 1
−Removed: Certificates 1 (1) —
IUL insurance 61 (46) 15
16 unchanged sentences
Brokerage client cash balances 229 — 229
−Removed: Indexed annuities (1) — (1)
Certificates 14 — 14
10 unchanged sentences
The above results compare to an estimated negative net impact to pretax income of $73 million related to a 10% equity price decline and an estimated positive net impact to pretax income of $2 million related to a 100 basis point increase in interest rates as of December 31, 2020.
−Removed: The change in equity price exposure as of December 31, 2020 compared to prior year-end was driven by variable annuity riders, specifically GMWB, primarily due to changes in market rates.
+Added: The change in equity price exposure as of December 31, 2021 compared to prior year-end was primarily driven by a decrease in the equity hedge position.
Net impacts shown in the above table from GMWB riders result largely from differences between the liability valuation basis and the hedging basis.
−Removed: Liabilities are valued using fair value accounting principles, with risk margins incorporated in contractholder behavior assumptions and with discount rates increased to reflect a current market estimate of our risk of nonperformance specific to these liabilities.
+Added: Liabilities are valued using fair value accounting principles, with risk margins incorporated in contractholder behavior
+Added: assumptions and with discount rates increased to reflect a current market estimate of our risk of nonperformance specific to these liabilities.
Our hedging is based on our determination of economic risk, which excludes certain items in the liability valuation including the nonperformance spread risk.
6 unchanged sentences
We earn asset-based management fees and distribution fees on our assets under management.
−Removed: As of December 31, 2020, the value of our assets under management was $886.0 billion.
+Added: As of December 31, 2021, the value of our assets under management was $1.2 trillion.
These sources of revenue are subject to both interest rate and equity price risk since the value of these assets and the fees they earn fluctuate inversely with interest rates and directly with equity prices.
8 unchanged sentences
These contract values include GMWB and GMAB contracts which were $54.3 billion and $2.0 billion, respectively, as of December 31, 2021.
−Removed: As of December 31, 2020, reserves for GMWB were net liabilities of $3.0 billion and reserves for GMAB were net liabilities of $1 million.
+Added: As of December 31, 2021, reserves for GMWB were net liabilities of $2.3 billion and reserves for GMAB were net assets of $23 million.
The GMWB and GMAB reserves include the fair value of embedded derivatives, which fluctuates based on equity, interest rate and credit markets which can cause these embedded derivatives to be either an asset or a liability.
36 unchanged sentences
This dynamic would result in widening spreads under a modestly rising rate scenario given the current relationship between the current level of interest rates and the underlying GMIRs on the business.
−Removed: Of the $34.0 billion in policyholder account balances, future policy benefits and claims on our Consolidated Balance Sheets as of December 31, 2020, $21.4 billion is related to liabilities created by these products.
+Added: Of the $35.8 billion in Policyholder account balances, future policy benefits and claims as of December 31, 2021, $23.9 billion is related to liabilities created by these products.
We do not hedge this exposure.
43 unchanged sentences
This risk is not currently hedged and was immaterial as of December 31, 2021.
−Removed: Fixed Index Annuities
−Removed: The Company’s fixed index annuity product is a fixed annuity that includes an indexed account.
−Removed: The rate of interest credited above the minimum guarantee for funds allocated to the indexed account is linked to the performance of the specific index for the indexed account (subject to a cap).
−Removed: We previously offered S&P 500 ® Index and MSCI ® EAFE Index account options.
−Removed: Both options offered two crediting durations, one-year and two-year.
−Removed: The contractholder could allocate all or a portion of the policy value to a fixed or indexed account.
−Removed: The contractholder could choose to add a GMWB for life rider for an additional fee.
−Removed: As of December 31, 2020, we had $327 million in liabilities related to fixed index annuities.
−Removed: Equity Price Risk
−Removed: The equity-linked return to investors creates equity price risk as the amount credited depends on changes in equity prices.
−Removed: Most of the proceeds received from fixed index annuities are invested in fixed income securities.
−Removed: To hedge the equity exposure, a portion of the investment earnings received from the fixed income securities is used to purchase call spreads, options and futures which generate returns to replicate what we must credit to client accounts.
−Removed: Interest Rate Risk
−Removed: As mentioned above, most of the proceeds received from fixed index annuities are invested in fixed income securities with the return on those investments intended to fund the purchase of call spreads.
−Removed: There are two risks relating to interest rates.
−Removed: First, we have the risk that investment returns are such that we do not have enough investment income to purchase the needed call spreads.
−Removed: Second, in the event the policy is surrendered, we pay out a book value surrender amount and there is a risk that we will incur a loss upon having to sell the fixed income securities backing the liability (if interest rates have risen).
−Removed: This risk is not currently hedged.
Banking Deposits and Brokerage Client Cash Balances
We pay interest on banking deposits and certain brokerage client cash balances and have the ability to reset these rates from time to time based on prevailing economic and business conditions.
−Removed: We earn revenue to fund the interest paid from interest-earning assets or fees from off-balance sheet deposits at FDIC insured institutions, which are indexed to short-term interest rates.
+Added: We earn revenue to fund the interest paid from interest-earning assets or fees from off-balance sheet deposits at Federal Deposit Insurance Corporation insured institutions, which are indexed to short-term interest rates.
In general, the change in interest paid lags the change in revenues earned.
1 unchanged sentence
Fixed Rate Certificates
−Removed: We have interest rate risk from our investment certificates generally ranging in amounts from $ 1,000 to $ 2 million with interest crediting rate terms ranging from three to 36 months.
+Added: We have interest rate risk from our investment certificates generally ranging in amounts from $1 thousand to $2 million with interest crediting rate terms ranging from 3 to 36 months.
We guarantee an interest rate to the holders of these products.
5 unchanged sentences
Stock Market Certificates
−Removed: Stock market certificates are purchased for amounts generally from $1,000 to $2 million for terms of 52 weeks, 104 weeks or 156 weeks, which can be extended to a maximum of 15 years depending on the term.
+Added: Stock market certificates are purchased for amounts generally from $1 thousand to $2 million for terms of 52 weeks, 104 weeks or 156 weeks, which can be extended to a maximum of 15 years depending on the term.
For each term the certificate holder can choose to participate 100% in any percentage increase in the S&P 500 ® Index up to a maximum return or choose partial participation in any increase in the S&P 500 Index plus a fixed rate of interest guaranteed in advance.
8 unchanged sentences
Indexed Universal Life
−Removed: IUL insurance is similar to UL in many regards, although the rate of credited interest above the minimum guarantee for funds allocated to an indexed account is linked to the performance of the specified index for the indexed account (subject to a cap and floor).
+Added: IUL insurance is similar to UL in many regards, although the rate of credited interest above the minimum guarantee for funds allocated to an indexed account is linked to the performance of the specified index for the indexed account (subject to stated account parameters, which include a cap and floor, or a spread and floor).
We offer an S&P 500 ® Index account option and a blended multi-index account option comprised of the S&P 500 Index, the MSCI ® EAFE Index and the MSCI EM Index.
14 unchanged sentences
We have foreign currency risk through our net investment in foreign subsidiaries and our operations in foreign countries.
−Removed: We are primarily exposed to changes in British Pounds (“GBP”) related to our net investment in Threadneedle, which was 624 million GBP as of December 31, 2020.
−Removed: Our primary exposure related to operations in foreign countries is to the GBP, the Euro and the Indian Rupee.
+Added: We are primarily exposed to changes in British Pounds related to our net investment in Threadneedle and BMO Global Asset Management (EMEA), which was approximately £1.5 billion as of December 31, 2021.
+Added: We also have exposure related to operations in foreign countries to Euros, Indian Rupees and other currencies.
We monitor the foreign exchange rates that we have exposure to and enter into foreign currency forward contracts to mitigate risk when economically prudent.
10 unchanged sentences
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.
−Removed: 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.
+Added: Generally, our current credit exposure on over-the-
+Added: 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.
6 unchanged sentences
In addition, we regularly evaluate their financial strength during the terms of the treaties.
−Removed: As of December 31, 2020, our largest reinsurance credit risk is related to a LTC coinsurance treaty with life insurance subsidiaries of Genworth Financial, Inc.
−Removed: See Note 8 to our Consolidated Financial Statements for additional information on reinsurance.
+Added: As of December 31, 2021, our largest reinsurance credit risks are related to coinsurance treaties with Commonwealth and with life insurance subsidiaries of Genworth Financial, Inc.
+Added: See Note 7 and Note 8 to our Consolidated Financial Statements for additional information on reinsurance.
Ameriprise Financial, Inc.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.