Ameriprise 2005 Annual Report Download - page 79

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77
Ameriprise Financial, Inc. |
AMEX Assurance maintains the required licenses to offer
insurance in various states and both IDS Property Casualty
Insurance Company (IDS Property Casualty Co.), a subsidiary
of the Company, and American Express utilize those licenses
to offer their products in exchange for a ceding fee. AMEX
Assurance entered into separate reinsurance agreements with
IDS Property Casualty Co. and American Express to transfer
insurance related risks to the respective companies. As
described in Note 1, effective September 30, 2005, the
Company entered into an agreement to sell its interest in the
AMEX Assurance legal entity to American Express within two
years after the Distribution for a fixed price. This transaction,
combined with ceding of all travel and other card insurance
business to American Express, created a variable interest
entity for which the Company has a significant interest but is
not the primary beneficiary based on the Company’s variability
in losses and returns relative to other variable interest hold-
ers. Accordingly, the Company deconsolidated AMEX
Assurance as of September 30, 2005. AMEX Assurance had
$413 million of total assets as of December 31, 2004, and
$215 million of total revenues and $103 million of net income
for the year ended December 31, 2004. The maximum expo-
sure to loss as a result of the Company’s interest in AMEX
Assurance is represented by the agreed-upon fixed sales price,
which approximates $115 million.
5. Deferred Acquisition Costs and Deferred Sales Inducement Costs
The balances of and changes in DAC as of and for the years ended December 31, were:
2005 2004 2003
(in millions)
Balance, beginning of year $3,956 $3,743 $3,590
Impact of SOP 03-1 –20 –
Capitalization of acquisition costs 693 621 627
DAC transfer related to AMEX Assurance ceding arrangement (117) ––
Amortization, excluding impact of changes in assumptions (498) (517) (482)
Amortization, impact of annual third quarter changes in DAC-related assumptions 67 24 2
Amortization, impact of other quarter changes in DAC-related assumptions(a) –56 –
Impact of change in net unrealized securities losses 81 96
Balance, end of year $4,182 $3,956 $ 3,743
(a) Primarily relates to a $66 million reduction in DAC amortization expense to reflect the lengthening of the amortization periods for certain annuity and
life insurance products impacted by the Company’s adoption of SOP 03-1 on January 1, 2004, partially offset by a $10 million increase in amortization
expense due to a long-term care DAC valuation system conversion.
The balances of and changes in DSIC as of and for the years ended December 31, were:
2005 2004 2003
(in millions)
Balance, beginning of year $ 303 $ 279 $ 231
Impact of SOP 03-1 –(3) –
Capitalization of sales inducements 94 71 72
Amortization (40) (34) (24)
Impact of change in net unrealized securities losses (gains) 13 (10) –
Balance, end of year $ 370 $ 303 $ 279
6. Goodwill and Other Intangibles
Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are instead subject to impairment
tests. Management completed goodwill impairment tests during the years ended December 31, 2005, 2004 and 2003. Such
tests did not indicate impairment.