Ameriprise 2005 Annual Report Download - page 25

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Ameriprise Financial, Inc. |
Financial Targets
It is management’s priority to increase shareholder value over
a multi-year horizon by achieving our financial targets, on aver-
age and over time. Management measures its progress
against these goals excluding accounting changes and the
impact of our separation from American Express, specifically,
excluding discontinued operations, non-recurring separation
costs and AMEX Assurance Company (AMEX Assurance).
The financial targets are:
Annual revenue growth of 6 to 8 percent,
Annual net income growth of 10 to 13 percent, and
Return on average equity of 12 to 15 percent.
During 2006, as part of our capital redeployment plan, man-
agement will evaluate the use of an earnings per common
share measure for one of its financial targets.
For the year ended 2005, our revenue growth, excluding the
impact of the separation, exceeded our target. Our income and
return on average equity, both excluding the impact of the sep-
aration, fell short of our targets.
Owned, Managed and Administered Assets
We present our owned, managed and administered assets as
of the end of the periods indicated. These three categories of
assets include the following:
Owned assets. We refer to certain assets on our consolidated
balance sheets as owned assets. These assets primarily
include investments in the separate accounts and general
accounts of our life insurance subsidiaries, investments of our
face-amount certificate subsidiary, cash and cash equivalents,
restricted and segregated cash and receivables. Separate
account assets are assets that are maintained and estab-
lished primarily for the purpose of funding our variable annuity
and variable universal life insurance products. These assets
are only available to fund the liabilities of the variable annuity
contractholders and variable universal life insurance policy-
holders and others with contracts requiring premiums or other
deposits to a separate account. We earn management fees
based on the market value of assets held in these accounts.
All investment performance of separate account assets, net of
fees, is passed through to the contractholder or policyholder.
Investments recorded on our consolidated balance sheets con-
sist primarily of the fair value of our Available-for-Sale
securities and trading securities, equity method investments in
hedge funds, as well as mortgage loans on real estate, net of
allowance for loan losses. We record the income associated
with these investments, including net realized gains and
losses associated with these assets and other-than-temporary
impairments of these assets, in “Net investment income” in
our consolidated statements of income.
Managed assets. We refer to assets for which we provide
investment management and other services as managed
assets. Managed assets include assets of our retail clients
that are invested in the RiverSource family of mutual funds
and retail assets in our wrap accounts (including assets
invested in mutual funds managed by other companies), for
which we earn fees based on the asset levels of such
accounts. Managed assets also include assets managed pri-
marily for institutional clients, such as separately managed
accounts, including defined benefit plans. Managed assets
include assets managed by sub-advisors selected by us. We
receive a fee based on the value of the managed assets,
which we generally record under “Management, financial
advice and service fees” in our consolidated statements of
income (although we include fees from distribution of other
companies’ products through our wrap accounts under
“Distribution fees”). We do not record managed assets on our
consolidated balance sheets.
Administered assets. We refer to assets for which we provide
administrative services for our clients as administered assets.
These assets include assets held in clients’ brokerage
accounts or invested in other companies’ products (excluding
non-proprietary wrap assets included in managed assets
above). Administered assets also include certain assets in
defined contribution plans, such as mutual funds managed by
other companies and investments in a plan sponsor’s stock.
We do not exercise investment discretion over these assets
and we are not paid a management fee based on the amount
of assets administered. We generally record fees received
from administered assets under “Distribution fees” in our con-
solidated statements of income. We do not record
administered assets on our consolidated balance sheets.
Our Segments
We have two main operating segments aligned with the finan-
cial solutions we offer to address our clients’ needs:
Asset Accumulation and Income. This segment offers prod-
ucts and services, both our own and other companies’, to
help our retail clients address identified financial objectives
related to asset accumulation and income management.
Products and services in this segment are related to finan-
cial advice, asset management, brokerage and banking, and
include mutual funds, wrap accounts, variable and fixed
annuities, brokerage accounts, financial advice services and
investment certificates. This operating segment also serves
institutional clients by providing investment management
services in separately managed accounts, sub-advisory, alter-
native investments and 401(k) markets. We earn revenues in
this segment primarily through fees we receive based on
managed assets and annuity separate account assets.
These fees are impacted by both market movements and net
asset flows. We also earn net investment income on owned
assets, principally supporting the fixed annuity business, and
distribution fees on sales of mutual funds and other
products.
Protection. This segment offers a variety of protection prod-
ucts, both our own and other companies’, including life,
disability income, long-term care and auto and home insurance
to address the identified protection and risk management