RIVERSOURCE LIFE INSURANCE CO – 10-Q – MANAGEMENT'S NARRATIVE ANALYSIS
Overview
RiverSource Life Insurance Company ("RiverSource Life") and its subsidiaries are referred to collectively in this Form 10-Q as the "Company". The following discussion and management's narrative analysis of the financial condition and results of operations should be read in conjunction with the "Forward-Looking Statements" that follow, the Consolidated Financial Statements and Notes presented in Item 1 and its Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSecurities and Exchange Commission ("SEC") onFebruary 25, 2022 ("2021 10-K"), as well as any current reports on Form 8-K and other publicly available information. The Consolidated Financial Statements are prepared in accordance withU.S. generally accepted accounting principles ("GAAP"). Management's narrative analysis is presented pursuant to General Instructions H(2)(a) of Form 10-Q in lieu of Management's Discussion and Analysis of Financial Condition and Results of Operations.
See Note 1 to the Consolidated Financial Statements for additional information.
The Company operates its business in the broader context of the macroeconomic forces around it, including the global andU.S. economies, the coronavirus disease 2019 ("COVID-19") pandemic, changes in interest and inflation rates, financial market volatility, fluctuations in foreign exchange rates, geopolitical strain, the competitive environment, client and customer activities and preferences, and the various regulatory and legislative developments. Financial markets and macroeconomic conditions have had and will continue to have a significant impact on the Company's operating and performance results. The Company's success may be affected by the factors discussed in Item 1A, "Risk Factors" in the Company's 2021 10-K and other factors as discussed herein. The Company consolidates certain variable interest entities for which it provides investment management services. These entities are defined as consolidated investment entities ("CIEs"). While the consolidation of the CIEs impacts the Company's balance sheet and income statement, the exposure to these entities is unchanged and there is no impact to the underlying business results. For further information on CIEs, see Note 4 to the Consolidated Financial Statements. Changes in the fair value of assets and liabilities related to the CIEs, primarily syndicated loans and debt, are reflected in Net investment income.
Critical Accounting Estimates
The accounting and reporting policies that the Company uses affect its Consolidated Financial Statements. Certain of the Company's accounting and reporting policies are critical to an understanding of the Company's financial condition and results of operations. In some cases, the application of these policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of the Consolidated Financial Statements. These accounting policies are discussed in detail in "Management's Narrative Analysis - Critical Accounting Estimates" in the Company's 2021 10-K.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements and their expected
impact on the Company's future consolidated financial condition or results of
operations, see Note 2 to the Consolidated Financial Statements.
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RIVERSOURCE LIFE INSURANCE COMPANY
Consolidated Results of Operations for the Nine Months Ended
and 2021
The following table presents the Company's consolidated results of operations:
Nine Months Ended September
30,
2022 2021 Change
(in millions)
Revenues
Premiums $ 223 $ (945) $ 1,168 NM
Net investment income 568 664 (96) (14) %
Policy and contract charges 1,626 1,715 (89) (5)
Other revenues 492 436 56 13
Net realized investment gains (losses) (90) 589 (679) NM
Total revenues 2,819 2,459 360 15
Benefits and expenses
Benefits, claims, losses and settlement expenses 660 337 323 96
Interest credited to fixed accounts 443 455 (12) (3)
Amortization of deferred acquisition costs 343 69 274 NM
Interest and debt expense 71 84 (13) (15)
Other insurance and operating expenses 509 553 (44) (8)
Total benefits and expenses 2,026 1,498 528 35
Pretax income (loss) 793 961 (168) (17)
Income tax provision (benefit) 98 121 (23) (19)
Net income (loss) $ 695 $ 840 $ (145) (17) %
NM Not Meaningful.
Overall
Net income decreased $145 million , or 17%, for the nine months ended September
30, 2022 compared to the prior year period. Pretax income decreased
$168 million , or 17%, for the nine months ended September 30, 2022 compared to
the prior year period.
The following impacts were significant drivers of the period-over-period change
in pretax income:
•The prior year impact of the block transfer reinsurance transaction resulted in
primarily reflecting the net realized gains on the investments sold to the
reinsurer.
•The impact on variable annuity and variable universal life products for the
difference between assumed and updated separate account investment performance
on DAC, DSIC, unearned revenue amortization, reinsurance accrual and additional
insurance benefit reserves ("mean reversion related impact") was an expense of
$299 million for the nine months ended September 30, 2022 compared to a benefit
of $107 million for the prior year period.
•The unfavorable impact of unlocking was $161 million for the nine months ended
September 30, 2022 compared to a favorable impact of $17 million for the prior
year period.
•A
insurance claims in the current period compared to the benefit of COVID-19
related impacts in the year ago period.
•Net realized investment losses of$90 million for the nine months endedSeptember 30, 2022 were primarily driven by impairments on securities the Company intends to sell as it repositioned a portion of its fixed maturity bond portfolio in response to recent market conditions and credit losses on corporate debt securities. •The market impact on non-traditional long-duration products (including variable and fixed deferred annuity contracts and universal life ("UL") insurance contracts), net of hedges and the related deferred sales inducement costs ("DSIC") and deferred acquisition costs ("DAC") amortization, unearned revenue amortization and the reinsurance accrual was a benefit of$571 million for the nine months endedSeptember 30, 2022 compared to an expense of$577 million for the prior year period. Variable annuity account balances decreased 20% to$71.3 billion as ofSeptember 30, 2022 compared to the prior year period due to market depreciation and net outflows of$2.0 billion . Variable annuity sales decreased 35% compared to the prior year period reflecting a decrease in sales of variable annuities with living benefit guarantees. The risk profile of its in force block continues to improve, with account values with living benefit riders down to 58% as ofSeptember 30, 2022 compared to 62% a year ago. This trend is expected to continue and meaningfully shift the mix of business away from products with living benefit guarantees over time.
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RIVERSOURCE LIFE INSURANCE COMPANY The Company continues to optimize its risk profile and shift its business mix to lower risk offerings. During the fourth quarter of 2021, the Company made the decision to discontinue new sales of substantially all of its variable annuities with living benefit guarantees at the end of 2021, and has fully stopped issuing new contracts as ofJune 30, 2022 . In addition, the Company has discontinued new sales of its universal life insurance with secondary guarantees and its single-pay fixed universal life with a long term care rider products at the end of 2021.
Fixed deferred annuity account balances declined 5% to
continue. During the third quarter of 2021, the Company closed on a transaction
to reinsure RiverSource Life's fixed deferred and immediate annuity policies.
In the third quarter, management updates its market-related assumptions and implements model changes related to the living benefit valuation. In addition, management conducts its annual review of insurance and annuity valuation assumptions relative to current experience and management expectations including modeling changes. These aforementioned changes are collectively referred to as unlocking. Management also reviews its future policy benefit reserve adequacy for its LTC business in the third quarter. The following table presents the total pretax impacts on the Company's revenues and expenses attributable to unlocking for the nine months endedSeptember 30 : Pretax Increase (Decrease) 2022 2021 (in millions) Policy and contract charges$ 1 $ 19 Total revenues 1 19 Benefits, claims, losses and settlement expenses: LTC unlocking -
3
Unlocking impact, excluding LTC 170
59
Total benefits, claims, losses and settlement expenses 170 62 Amortization of DAC (8) (60) Total expenses 162 2 Pretax income$ (161) $ 17
The primary drivers of the year-over-year unlocking impact excluding LTC include
the following items:
•Mortality assumption on variable annuities with living benefit guarantees resulted in a higher expense in the third quarter of 2022 compared to the prior year period. •Equity market volatility and correlation assumptions on variable annuities resulted in an unfavorable impact in the third quarter of 2022 compared to a favorable impact in the prior year period.
Revenues
Premiums increased$1.2 billion for the nine months endedSeptember 30, 2022 compared to the prior year period primarily reflecting ceded premiums of$1.2 billion associated with the reinsurance transaction for the life contingent immediate annuity policies in the year ago period. Net investment income decreased$96 million , or 14%, for the nine months endedSeptember 30, 2022 compared to the prior year period reflecting lower average invested assets due to the sale of investments in the prior year period to a reinsurer as a result of the fixed deferred and immediate annuity reinsurance transaction and lower net investment income of consolidated CIEs.
Policy and contract charges decreased
ended
mortality and expense fees due to market depreciation.
Other revenues increased
yield on deposit receivables arising from reinsurance transactions.
Net realized investment losses were$90 million for the nine months endedSeptember 30, 2022 compared to net realized investment gains of$589 million for the prior year period. The nine months endedSeptember 30, 2022 were primarily driven by impairments on securities the Company intends to sell as it repositioned a portion of its fixed maturity bond portfolio in response to recent market conditions and credit losses on corporate debt securities. The nine months endedSeptember 30, 2021 included net realized gains of$548 million on Available-for-Sale securities and net realized gains of$56 million primarily related to commercial mortgage loans and syndicated loans. These net realized gains are primarily due to sale of securities and loans to the reinsurer as a result of the fixed deferred and immediate annuity reinsurance transaction that closed in the third quarter 2021. Also included in net realized investment gains are$15 million of losses in the consolidated CIEs.
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RIVERSOURCE LIFE INSURANCE COMPANY
Benefits and Expenses
Benefits, claims, losses and settlement expenses increased$323 million , or 96%, for the nine months endedSeptember 30, 2022 compared to the prior year period primarily reflecting the following items:
•A
for life contingent immediate annuity policies in the prior year period.
•A
year-over-year changes in the unhedged nonperformance credit spread risk
adjustment on variable annuity guaranteed benefits.
•A$986 million decrease 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 decrease was the result of a favorable$449 million change in the market impact on derivatives hedging the variable annuity guaranteed benefits and a favorable$537 million change in the market impact on variable annuity guaranteed living benefits reserves. The main market drivers contributing to these changes are summarized below:
•Equity market impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
benefit for the nine months ended
the prior year period.
•Interest rate impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
higher expense for the nine months ended
prior year period.
•Volatility impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in a lower expense for the nine months endedSeptember 30, 2022 compared to the prior year period. •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 expense for the nine months endedSeptember 30, 2022 compared to a net benefit for the prior year period. •The unlocking impact excluding LTC for the nine months endedSeptember 30, 2022 was an expense of$170 million primarily reflecting continued lower surrender rates and updated mortality assumptions for variable annuities with living benefits compared to an expense of$59 million in the prior year period which was also driven by lower surrender rates. •The mean reversion related impact was an expense of$174 million for the nine months endedSeptember 30, 2022 compared to a benefit of$65 million for the prior year period.
•A
normalized levels compared to the prior year period which benefited from
COVID-19 related impacts.
Interest credited to fixed accounts decreased
months ended
reflecting the following items:
•A$70 million decrease in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The favorable impact of the nonperformance credit spread was$54 million for the nine months endedSeptember 30, 2022 compared to an unfavorable impact of$16 million for the prior year period. •A$74 million increase in expense from other market impacts on IUL benefits, net of hedges, which was an expense of$29 million for the nine months endedSeptember 30, 2022 compared to a benefit of$45 million for the prior year period. The increase in expense was primarily due to an increase in the IUL embedded derivative in the current year period, which reflected higher option costs due to a higher new money rate, compared to a decrease in the IUL embedded derivative in the prior year period, which reflected lower option costs due to higher discount rates. Amortization of DAC increased$274 million for the nine months endedSeptember 30, 2022 compared to the prior year period primarily reflecting the following items:
•The impact of unlocking in the third quarter of 2022 was a benefit of
million
•The DAC offset to the market impact on non-traditional long-duration products
was an expense of
compared to a benefit of
•The mean reversion related impact was an expense of$124 million for the nine months endedSeptember 30, 2022 compared to a benefit of$41 million for the prior year period.
•A decrease in amortization reflecting lower than expected client exit rates.
Interest and debt expense decreased
ended
lower expenses of consolidated CIEs.
Other insurance and operating expenses decreased$44 million , or 8%, for the nine months endedSeptember 30, 2022 compared to the prior year period primarily reflecting lower distribution expenses and lower expenses from the consolidation of CIEs. 48
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RIVERSOURCE LIFE INSURANCE COMPANY
Income Taxes
The Company's effective tax rate was 12.3% for the nine months ended
30, 2022
Consolidated Financial Statements for additional discussion on income taxes.
Market Risk
The Company's primary market risk exposures are interest rate, equity price and
credit risk. Equity price and interest rate fluctuations can have a significant
impact on the Company's results of operations, primarily due to the effects on
asset-based fees and expenses, the "spread" income generated on its fixed
insurance, fixed portion of its variable annuities and variable insurance
contracts, and the fixed deferred annuities, the value of DAC and DSIC assets,
the value of liabilities for guaranteed benefits associated with its variable
annuities and the value of derivatives held to hedge these benefits.
The Company's earnings from fixed insurance, the fixed portion of variable
annuities and variable insurance contracts, and fixed deferred annuities are
based upon the spread between rates earned on assets held and the rates at which
interest is credited to accounts. The Company primarily invests in fixed rate
securities to fund the rate credited to clients. The Company guarantees an
interest rate to the holders of these products. Investment assets and client
liabilities generally differ as it relates to basis, repricing or maturity
characteristics. Rates credited to clients' accounts generally reset at shorter
intervals than the yield on the underlying investments. Therefore, in an
increasing interest rate environment, higher interest rates may be reflected in
crediting rates to clients sooner than in rates earned on invested assets, which
could result in a reduced spread between the two rates, reduced earned income
and a negative impact on pretax income. While interest rates under the current
environment have relieved some pressure from the liability guaranteed minimum
interest rates ("GMIRs"), there are still some GMIRs above current levels.
Hence, liability credited rates will move more slowly under a modest rise in
interest rates while projected asset purchases would capture the full increase
in interest rates. 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.
As a result of the current market environment, reinvestment yields are becoming
more aligned with the current portfolio yield. We would expect the recent
decline in our portfolio income yields to slow and begin to stabilize in future
periods under the current environment. The carrying value and weighted average
yield of total non-structured fixed maturity securities and commercial mortgage
loans in the Company's investment portfolio that may generate proceeds to
reinvest through September 30, 2024 due to prepayment, maturity or call activity
at the option of the issuer, excluding securities with a make-whole provision,
were $0.9 billion and 4.0%, respectively, as of September 30, 2022 . In addition,
residential mortgage-backed securities, which can be subject to prepayment risk
under a low interest rate environment, totaled $2.6 billion and had a weighted
average yield of 2.9% as of September 30, 2022 . While these amounts represent
investments that could be subject to reinvestment risk, it is also possible that
these investments will be used to fund liabilities or may not be prepaid and
will remain invested at their current yields. In addition to the interest rate
environment, the mix of benefit payments versus product sales as well as the
timing and volumes associated with such mix may impact the Company's investment
yield. Furthermore, reinvestment activities and the associated investment yield
may also be impacted by corporate strategies implemented at management's
discretion. The average yield for investment purchases during the nine months
ended September 30, 2022 was approximately 4.5%.
The reinvestment of proceeds from maturities, calls and prepayments at rates
near the current portfolio yield will have limited impact to future operating
results. In this volatile rate environment, the Company assesses reinvestment
risk in its investment portfolio and monitors this risk in accordance with its
asset/liability management framework. In addition, the Company may update the
crediting rates on its fixed products when warranted, subject to guaranteed
minimums.
In addition to the fixed rate exposures noted above, the Company also has the
following variable annuity guarantee benefits: guaranteed minimum withdrawal
benefits ("GMWB"), guaranteed minimum accumulation benefits ("GMAB"), guaranteed
minimum death benefits ("GMDB") and guaranteed minimum income benefits ("GMIB").
Each of these benefits guarantees payouts to the annuity holder under certain
specific conditions regardless of the performance of the underlying invested
assets.
The variable annuity guarantees continue to be managed by utilizing a hedging
program which attempts to match the sensitivity of the assets with the
sensitivity of the liabilities. This approach works with the premise that
matched sensitivities will produce a highly effective hedging result. The
Company's comprehensive hedging program focuses mainly on first order
sensitivities of assets and liabilities: Equity Market Level (Delta), Interest
Rate Level (Rho) and Volatility (Vega). Additionally, various second order
sensitivities are managed. The Company uses various options, swaptions, swaps
and futures to manage risk exposures. The exposures are measured and monitored
daily and adjustments to the hedge portfolio are made as necessary.
The Company has a macro hedge program to provide protection against the
statutory tail scenario risk arising from variable annuity reserves on its
statutory surplus and to cover some of the residual risks not covered by other
hedging activities. The Company assesses this residual risk under a range of
scenarios in creating and executing the macro hedge program. As a means of
economically hedging these risks, the Company may use a combination of futures,
options, swaps and swaptions. Certain of the macro hedge derivatives used
contain settlement provisions linked to both equity returns and interest rates;
the remaining are interest rate contracts or equity contracts. The macro hedge
program could result in additional earnings volatility as changes in the value
of the macro hedge
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RIVERSOURCE LIFE INSURANCE COMPANY
derivatives, which are designed to reduce statutory capital volatility, may not
be closely aligned to changes in the variable annuity guarantee embedded
derivatives.
To evaluate interest rate and equity price risk, the Company performs sensitivity testing which measures the impact on pretax income from the sources listed below for a 12-month period following a hypothetical 100 basis point increase in interest rates or a hypothetical 10% decline in equity prices. The interest rate risk test assumes a sudden 100 basis point parallel shift in the yield curve, with rates then staying at those levels for the next 12 months. The equity price risk test assumes a sudden 10% drop in equity prices, with equity prices then staying at those levels for the next 12 months. In estimating the values of variable annuity riders, indexed annuities, IUL insurance and the associated hedge assets, the Company assumed no change in implied market volatility despite the 10% drop in equity prices. The following tables present the Company's estimate of the impact on pretax income from the above defined hypothetical market movements as ofSeptember 30, 2022 : Equity Price Exposure to Pretax Income Equity Price Decline 10% Before Hedge Impact Hedge Impact Net Impact (in millions) Asset-based fees and expenses $ (51) $ -$ (51) DAC and DSIC amortization (1) (2) (55) - (55) Variable annuities: GMDB and GMIB (2) (42) - (42) GMWB (2) (554) 534 (20) GMAB (34) 34 - Structured variable annuities 432 (400) 32 DAC and DSIC amortization (3) N/A N/A 8 Total variable annuities (198) 168 (22) Macro hedge program (4) - 195 195 IUL insurance 13 (18) (5) Total $ (291) $ 345$ 62 Interest Rate Exposure to Pretax Income Interest Rate Increase 100 Basis Points Before Hedge Impact Hedge Impact Net Impact (in millions) Asset-based fees and expenses $ (12) $ -$ (12) Variable annuities: GMWB 742 (922) (180) GMAB 3 (5) (2) Structured variable annuities (35) 177
142
DAC and DSIC amortization (3) N/A N/A 15 Total variable annuities 710 (750) (25) Macro hedge program (4) - (252) (252)
Fixed annuities, fixed insurance and fixed portion of variable
annuities and variable insurance products
58 - 58 IUL insurance 16 2 18 Total $ 772$ (1,000) $ (213) N/A Not Applicable.
(1) Market impact on DAC and DSIC amortization resulting from lower projected
profits.
(2) In estimating the impact to pretax income on DAC and DSIC amortization and additional insurance benefit reserves, the assumed equity asset growth rates reflect what management would follow in its mean reversion guidelines.
(3) Market impact on DAC and DSIC amortization related to variable annuities is
modeled net of hedge impact.
(4) The market impact of the macro hedge program is modeled net of any related
impact to DAC and DSIC amortization.
The above results compare to an estimated positive net impact to pretax income of$98 million related to a 10% equity price decline and an estimated negative net impact to pretax income of$170 million related to a 100 basis point increase in interest rates as ofDecember 31, 2021 . The change in interest rate exposure as ofSeptember 30, 2022 compared toDecember 31, 2021 was driven by additional downside rate protection added in the macro hedge program.
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RIVERSOURCE LIFE INSURANCE COMPANY Net impacts shown in the above table from GMWB riders result largely from differences between the liability valuation basis and the hedging basis. 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 the Company's risk of nonperformance specific to these liabilities. The Company's hedging is based on its determination of economic risk, which excludes certain items in the liability valuation including the nonperformance spread risk. Actual results will differ materially from those illustrated above as they are based on a number of estimates and assumptions. These include assuming that implied market volatility does not change when equity prices fall by 10% and that the 100 basis point increase in interest rates is a parallel shift of the yield curve. Furthermore, the Company has not tried to anticipate changes in client preferences for different types of assets or other changes in client behavior, nor has the Company tried to anticipate all strategic actions management might take to increase revenues or reduce expenses in these scenarios. The selection of a 100 basis point interest rate increase as well as a 10% equity price decline should not be construed as a prediction of future market events. Impacts of larger or smaller changes in interest rates or equity prices may not be proportional to those shown for a 100 basis point increase in interest rates or a 10% decline in equity prices.
Fair Value Measurements
The Company reports certain assets and liabilities at fair value; specifically, separate account assets, derivatives, embedded derivatives, most investments and cash equivalents. Fair value assumes the exchange of assets or liabilities occurs in orderly transactions and is not the result of a forced liquidation or distressed sale. The Company includes actual market prices, or observable inputs, in its fair value measurements to the extent available. Broker quotes are obtained when quotes from pricing services are not available. The Company validates prices obtained from third parties through a variety of means such as: price variance analysis, subsequent sales testing, stale price review, price comparison across pricing vendors and due diligence reviews of vendors. See Note 11 to the Consolidated Financial Statements for additional information on the Company's fair value measurements.
Fair Value of Liabilities and Nonperformance Risk
Companies are required to measure the fair value of liabilities at the price that would be received to transfer the liability to a market participant (an exit price). Since there is not a market for the Company's obligations of its variable annuity riders, fixed deferred indexed annuities, structured variable annuities, and IUL insurance, the Company considers the assumptions participants in a hypothetical market would make to reflect an exit price. As a result, the Company adjusts the valuation of variable annuity riders, fixed deferred indexed annuities, structured variable annuities, and IUL insurance by updating certain contractholder assumptions, adding explicit margins to provide for risk, and adjusting the rates used to discount expected cash flows to reflect a current market estimate of the Company's nonperformance risk. The nonperformance risk adjustment is based on observable market data adjusted to estimate the risk of the Company not fulfilling these liabilities. Consistent with general market conditions, this estimate resulted in a spread over theU.S. Treasury curve as ofSeptember 30, 2022 . As the Company's estimate of this spread widens or tightens, the liability will decrease or increase. If this nonperformance credit spread moves to a zero spread over theU.S. Treasury curve, the reduction to future net income would be approximately$548 million , net of DAC, DSIC, unearned revenue amortization, the reinsurance accrual and income taxes (calculated at the statutory tax rate of 21%), based onSeptember 30, 2022 credit spreads.
Liquidity and Capital Resources
Liquidity Strategy
The liquidity requirements of the Company are generally met by funds provided by
investment income, maturities and periodic repayments of investments, premiums
and proceeds from sales of investments, fixed annuity and fixed insurance
deposits as well as capital contributions from its parent, Ameriprise Financial
Inc. ("Ameriprise Financial"). Other liquidity sources the Company has
established are short-term borrowings and available lines of credit with
Ameriprise Financial aggregating $854 million .
The Company enters into short-term borrowings, which may include repurchase
agreements and Federal Home Loan Bank ("FHLB") advances to reduce reinvestment
risk. Short-term borrowings allow the Company to receive cash to reinvest in
longer-duration assets, while maintaining the flexibility to pay back the
short-term debt with cash flows generated by the fixed income portfolio.
RiverSource Life Insurance Company is a member of the FHLB of Des Moines , which
provides RiverSource Life Insurance Company access to collateralized borrowings.
As of September 30, 2022 and December 31, 2021 , the Company had estimated
maximum borrowing capacity of $4.1 billion and $4.0 billion under the FHLB
facility, respectively, of which $201 million and $200 million was outstanding
as of September 30, 2022 and December 31, 2021 , respectively, and is
collateralized with commercial mortgage backed securities.
There have been no material changes to the Company's contractual obligations
disclosed in the Company's 2021 10-K.
See Note 10 to the Consolidated Financial Statements for further information
about the Company's long-term debt.
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RIVERSOURCE LIFE INSURANCE COMPANY The primary uses of funds are policy benefits, commissions, other product-related acquisition and sales inducement costs, operating expenses, policy loans, dividends to Ameriprise Financial and investment purchases. The Company routinely reviews its sources and uses of funds in order to meet its ongoing obligations. The Company believes these cash flows will be sufficient to fund its short-term and long-term operating liquidity needs and dividends to Ameriprise Financial. In 2009, the Company established an agreement to protect its exposure toGenworth Life Insurance Company ("GLIC") for its reinsured long term care ("LTC"). In 2016, substantial enhancements to this reinsurance protection agreement were finalized. The terms of these confidential provisions within the agreement have been shared, in the normal course of regular reviews, with the Company's domiciliary regulator and rating agencies. GLIC is domiciled inDelaware , so in the event GLIC were subjected to rehabilitation or insolvency proceedings, such proceedings would be located in (and governed by)Delaware laws.Delaware courts have a long tradition of respecting commercial and reinsurance affairs as well as contracts among sophisticated parties. Similar credit protections to what the Company has with GLIC have been tested and respected inDelaware and elsewhere inthe United States , and as a result the Company believes its credit protections would be respected even in the unlikely event that GLIC becomes subject to rehabilitation or insolvency proceedings inDelaware . Accordingly, while no credit protections are perfect, the Company believes the correct way to think about the risks represented by its counterparty credit exposure to GLIC is not the full amount of the gross liability that GLIC reinsures, but a much smaller net exposure to GLIC (if any that might exist after taking into account the Company's credit protections). Thus, management believes that this agreement and offsetting non LTC legacy arrangements with Genworth will enable the Company to recover on all net exposure in all material respects in the event of a rehabilitation or insolvency of GLIC. Capital Activity
Cash dividends or distributions paid and received by
Company
Nine Months Ended September 30,
2022 2021
(in millions)
Paid to Ameriprise Financial $ 600 $ 1,675
Received from RiverSource Life Insurance Co. of New York ("RiverSource Life 63 -
of NY")
Received from RiverSource Tax Advantaged Investments, Inc. - 50
For dividends or distributions from the life insurance companies, notifications
to state insurance regulators were made in advance of payments in excess of
statutorily defined thresholds.
RiverSource Life Insurance Company and RiverSource Life of NY are subject to regulatory capital requirements. Actual capital, determined on a statutory basis, and regulatory capital requirements for each of the life insurance entities were as follows: Regulatory Capital Actual Capital (1) Requirements (2) December 31, December 31, September 30, 2022 2021 2021 (in millions) RiverSource Life Insurance Company$ 2,998 $ 3,419 $ 502 RiverSource Life of NY 168 310 42
(1) Actual capital, as defined by the
Commissioners
statutory capital and surplus, plus certain statutory valuation reserves.
(2) Regulatory capital requirement is the company action level and is based on
the statutory risk-based capital filing. The regulatory capital requirement is
only required to be calculated annually.
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RIVERSOURCE LIFE INSURANCE COMPANY
Forward-Looking Statements
This report contains forward-looking statements that reflect the Company's
plans, estimates and beliefs. The Company's actual results could differ
materially from those described in these forward-looking statements. Examples of
such forward-looking statements include:
•statements of the Company's plans, intentions, expectations, objectives, or goals, including those related to the introduction, cessation, terms or pricing of new or existing products and services and the consolidated tax rate;
•statements about the expected trend in the shift to lower-risk products,
including the exit from variable annuities with living benefit riders and the
discontinuance of new sales of universal life insurance with secondary
guarantees;
•other statements about future economic performance, the performance of equity markets and interest rate variations and the economic performance ofthe United States and of global markets; and
•statements of assumptions underlying such statements.
The words "believe," "expect," "anticipate," "optimistic," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely," "forecast," "on track," "project," "continue," "able to remain," "resume," "deliver," "develop," "evolve," "drive," "enable," "flexibility," "scenario," "case", "appear", "expand" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from such statements.
Such factors include, but are not limited to:
•the impacts on the Company's business of the COVID-19 pandemic and the related
economic, client, governmental and healthcare system responses;
•market fluctuations and general economic and political factors, including
volatility in the
volatility in the markets for the Company's products;
•changes in interest rates and periods of low interest rates;
•adverse capital and credit market conditions or any downgrade in the Company's
credit ratings;
•effects of competition and the Company's larger competitors' economies of
scale;
•declines in the Company's investment management performance;
•the Company's and its affiliates' ability to compete in attracting and
retaining talent, including AFS attracting and retaining financial advisors;
•impairment, negative performance or default by financial institutions or other
counterparties;
•poor performance of the Company's variable products;
•changes in valuation of securities and investments included in the Company's
assets;
•effects of the elimination of LIBOR on, and value of, securities and other
assets and liabilities tied to LIBOR;
•the determination of the amount of allowances taken on loans and investments;
•the illiquidity of the Company's investments;
•failures by other insurers that lead to higher assessments the Company owes to
state insurance guaranty funds;
•failures or defaults by counterparties to the Company's reinsurance
arrangements;
•inadequate reserves for future policy benefits and claims or for future
redemptions and maturities;
•deviations from the Company's assumptions regarding morbidity, mortality and
persistency affecting the Company's profitability;
•changes to the Company's or its affiliates' reputation arising from employee or
agent misconduct or otherwise;
•direct or indirect effects of or responses to climate change;
•interruptions or other failures in the Company's operating systems and
networks, including errors or failures caused by third-party service providers,
interference or third-party attacks;
•interruptions or other errors in the Company's telecommunications or data
processing systems;
•identification and mitigation of risk exposure in market environments, new
products, vendors and other types of risk;
•occurrence of natural or man-made disasters and catastrophes;
•legal and regulatory actions brought against the Company;
•changes to laws and regulations that govern operation of the Company's
business;
•changes in corporate tax laws and regulations and interpretations and
determinations of tax laws impacting the Company's products;
•protection of the Company's intellectual property and claims the Company
infringes the intellectual property of others; and
•changes in and the adoption of new accounting standards.
The Company cautions the reader that the foregoing list of factors is not
exhaustive. There may also be other risks that the Company is unable to predict
at this time that may cause actual results to differ materially from those in
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date on which they
are made. The Company undertakes no obligation to update publicly or revise any
forward-looking statements. The foregoing list of factors should be read in
conjunction with the "Risk Factors" discussion included in Part I, Item 1A of
the Company's 2021 10-K.
53
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RIVERSOURCE LIFE INSURANCE COMPANY
To fix the US healthcare system, start with helping burned-out doctors and providers | Opinion [Miami Herald]
AMERIPRISE FINANCIAL INC – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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