Ameriprise 2005 Annual Report Download - page 47

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Ameriprise Financial, Inc. |
Expenses
Total expenses of $868 million increased by $370 million from
$498 million for the year ended December 31, 2004. Total
expenses before separation costs were $575 million, an
increase of $77 million over 2004. This increase was primarily
attributable to higher expense in compensation and benefits—
field, which rose $55 million to $406 million as a result of
higher commissions paid at SAI.
Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003
Loss before income tax provision and discontinued operations
was $67 million for the year ended December 31, 2004, com-
pared to $27 million for the year ended December 31, 2003.
Revenues
Total revenues were $431 million for the year ended
December 31, 2004, a $12 million, or 3% increase compared
to $419 million for the year ended December 31, 2003. The
increase in revenues primarily resulted from increased distribu-
tion fees and management, financial advice and service fees
due to increased activity at SAI.
Expenses
Total expenses were $498 million for the year ended
December 31, 2004, a $52 million, or 12% increase compared
to $446 million for the year ended December 31, 2003. This
increase in total expenses was primarily due to an increase in
field compensation and benefits, which resulted principally
from increased commissions paid as a result of increased
activity at SAI.
Financial Condition
The following table presents selected information from our
audited consolidated balance sheets as of December 31 for
the years indicated.
%
2005 2004 Change(a)
(in millions, except percentages)
Investments(b) $39,100 $40,232 (3)%
Separate account assets(c) 41,561 35,901 16
Total assets 93,121 93,113 –
Future policy benefits and
claims(c) 32,731 33,253 (2)
Investment certificate
reserves 5,649 5,831 (3)
Payable to American Express 52 1,751 (97)
Debt 1,833 385 #
Separate account liabilities(c) 41,561 35,901 16
Total liabilities 85,434 86,411 (1)
Total shareholders’ equity 7,687 6,702 15
(a) Percentage change calculated using thousands.
(b) Includes $32,530 million and $33,153 million as of December 31, 2005
and 2004, respectively, of investments held by our insurance subsidiaries.
(c) All amounts are held by our insurance subsidiaries.
# Variance of 100% or greater.
We took several actions in 2005 to strengthen our balance
sheet and reduce our risk profile:
We improved the credit quality of our balance sheet by liqui-
dating $1.2 billion of lower quality, structured assets. This
included the liquidation of two SLTs and the sale of benefi-
cial interests in a CDO securitization trust.
We improved our capital structure by: (i) receiving $1.065 bil-
lion of equity capital infusion from American Express
Company and (ii) issuing $1.5 billion of long-term, senior,
unsecured debt to refinance short-term bridge financing and
for general corporate purposes.
We improved the capitalization of IDS Life. Our year-end
reported Risk-Based Capital (as defined by the National
Association of Insurance Commissioners, see Note 11 to our
consolidated financial statements) ratio improved to 435% in
2005 from 355% in 2004.
We reduced interest rate risk by shortening the duration of
our investment portfolio.
Our total assets increased slightly and our liabilities decreased
as of December 31, 2005 from December 31, 2004. The
transfer of AEIDC to American Express on August 1, 2005
decreased total assets and liabilities. AEIDC had total assets
and liabilities of $5.9 billion and $5.6 billion, respectively, as
of December 31, 2004. The decreases attributed to the AEIDC
transfer were offset by an increase in separate account assets
and liabilities, which increased primarily as a result of net
client inflows and market appreciation.
Investments primarily include corporate debt and mortgage and
other asset-backed securities. At December 31, 2005, our cor-
porate debt securities comprise a diverse portfolio with the
largest concentrations, accounting for approximately 69% of the
portfolio, in the following industries: banking and finance, utili-
ties, and communications and media. Investments also include
$3.1 billion and $3.2 billion of mortgage loans on real estate as
of December 31, 2005 and December 31, 2004, respectively.
Investments are principally funded by sales of insurance, annu-
ities and investment certificates and by reinvested income.
Maturities of these investments are largely matched with the
expected future payments of insurance and annuity obligations.
Investments include $2.8 billion of below investment grade
securities (excluding net unrealized appreciation and deprecia-
tion) at December 31, 2005 and $3.0 billion at December 31,
2004. These investments represent 7.2% and 7.8% of our
investment portfolio at December 31, 2005 and December 31,
2004, respectively. Non-performing assets relative to invested
assets (excluding short-term cash positions) were 0.02% at
December 31, 2005 and 0.03% at December 31, 2004.
Our management believes a more relevant measure of expo-
sure of our below investment grade securities and
non-performing assets should exclude $197 million and
$230 million at December 31, 2005 and December 31, 2004,