Ameriprise 2005 Annual Report Download - page 50

48 |Ameriprise Financial, Inc.
For IDS Life, the dividend capacity is based on the greater of
(1) the previous year’s statutory net gain from operations and
(2) 10% of the previous year-end statutory capital and surplus.
Dividends that, together with the amount of other distributions
made within the preceding 12 months, exceed this statutory
limitation are referred to as “extraordinary dividends” and
require advance notice to the Minnesota Department of
Commerce, IDS Life’s primary state regulator, and are subject
to potential disapproval. IDS Life exceeded the statutory limita-
tion during 2004, as reflected above by paying $930 million to
our company, a portion of which was an extraordinary dividend
(which we then paid to American Express, see “—Cash
Flows—Financing Cash Flows”). Notice of non-disapproval was
received from the Minnesota Department of Commerce prior to
paying these extraordinary dividends.
For ACC, the dividend capacity is based on capital held in
excess of regulatory requirements. In 2004, ACC’s dividend
capacity was significantly reduced because of capital required
due to growth in the balance sheet resulting from increased
product sales.
For AMPF and AEIS, the dividend capacity is based on an inter-
nal model used to determine the availability of dividends, while
maintaining net capital at a level sufficiently in excess of mini-
mum levels defined by Securities and Exchange Commission
(SEC) rules.
For IDS Property Casualty Co., the dividend capacity is based
on the lesser of (1) 10% of the previous year-end capital and
surplus and (2) the greater of (a) net income (excluding real-
ized gains) of the previous year and (b) the aggregate net
income of the previous three years excluding realized gains
less any dividends paid within the first two years of the three-
year period. Dividends that, together with the amount of other
distributions made within the preceding 12 months, exceed
this statutory limitation are referred to as “extraordinary divi-
dends” and require advance notice to the Office of the
Commissioner of Insurance of the State of Wisconsin, the pri-
mary state regulator of IDS Property Casualty Co., and are
subject to potential disapproval. For IDS Property Casualty Co.,
dividends paid in 2003 and 2004 and the dividend capacity in
2004 increased significantly due to the inclusion of AMEX
Assurance as a subsidiary of IDS Property Casualty Co. The
portion of dividends paid by IDS Property Casualty Co. in
2005, 2004 and 2003 in excess of the dividend capacity set
forth in the table above were extraordinary dividends and
received approval from the Office of the Commissioner of
Insurance of the State of Wisconsin.
On January 26, 2006, our Board of Directors declared a regu-
lar quarterly cash dividend of $0.11 per common share. The
dividend is payable February 17, 2006 to our stockholders of
record at the close of business on February 2, 2006. In addi-
tion, we announced that our Board of Directors authorized the
repurchase of up to 2 million shares of our common stock.
The authorization is effective until the end of 2006.
Cash Flows
We had $2.5 billion in cash and cash equivalents at
December 31, 2005, up from $1.1 billion at December 31,
2004, including cash from discontinued operations, primarily
due to a $1.1 billion capital contribution from American
Express. We believe cash flows from operations, available
cash balances and short-term borrowings will be sufficient to
fund our operating liquidity needs.
Operating Cash Flows
For the year ended December 31, 2005, net cash provided by
operating activities was $945 million compared to $683 million
for the same period in 2004. This increase reflects a net
decrease in trading securities and equity method investments
in hedge funds and a net increase in accounts payable and
accrued expenses partially offset by lower net income.
For the year ended December 31, 2004, net cash provided by
operating activities was $683 million, significantly higher than
for the year ended December 31, 2003. We generated net
cash from operating activities in amounts greater than net
income during 2004 primarily due to adjustments for deprecia-
tion and amortization, which represent expenses in our
consolidated statements of income but do not require cash at
the time of provision. Net cash used to fund seed money in
our mutual funds and hedge funds, which are classified as
trading securities and used to fund equity method investments
in hedge funds, substantially decreased in 2004 compared to
2003. Operating cash flows also increased in 2004 due to net
cash provided by changes in derivatives and other assets,
which can vary significantly due to the amount and timing of
payments.
Investing Cash Flows
Our investing activities primarily relate to our Available-for-Sale
investment portfolio. Further, this activity is significantly
affected by the net flows of our investment certificate, fixed
annuity and universal life products reflected in financing activi-
ties. For the year ended December 31, 2005, net cash used in
investing activities was $255 million compared to $1.6 billion
used in investing activities during the same period in 2004.
This change resulted primarily from $4.3 billion in proceeds
from the sales of Available-for-Sale securities for the year
ended December 31, 2005, compared to $2.0 billion in the
same period one year ago. This was partially offset by $8.7
billion in purchases of Available-for-Sale securities during the
year ended December 31, 2005 compared to $7.3 billion in
purchases for the same period in 2004.