Ameriprise 2006 Annual Report Download - page 25

had net outflows of $5.6 billion in 2006 compared to
$10.3 billion in 2005. This improvement in net outflows was
driven by increased sales and lower redemption rates in our
branded advisor channel. Net outflows in RiverSource Funds in
2006 included $0.7 billion of outflow related to American
Express repositioning its 401(k) offerings. Administered assets
are lower at December 31, 2006 compared to
December 31, 2005, primarily as a result of the sale of our
defined contribution recordkeeping business in the second
quarter of 2006, which had administered assets of $16.7 billion
at the time of sale and $15.4 billion at December 31, 2005.
Significant Factors Affecting our Results of
Operations and Financial Condition
Share Repurchase
In March 2006, our Board of Directors authorized the
expenditure of up to $750 million for the repurchase of shares
of our common stock through the end of March 2008. This
authorization was in addition to a Board authorization in
January 2006 to repurchase up to 2 million shares by the end of
2006. Through December 31, 2006, we have purchased
10.7 million shares under these programs for an aggregate cost
of $470 million. As of December 31, 2006, we had purchased
all shares under the January 2006 authorization and have
$366 million remaining under the March 2006 authorization.
Sale of our Defined Contribution Recordkeeping Business
We completed the sale of our defined contribution
recordkeeping business during the second quarter of 2006,
which added $66 million to total 2006 revenues and generated
a net pretax gain of $36 million. The administered assets
transferred in connection with this sale were approximately
$16.7 billion. Although our defined contribution recordkeeping
business generated approximately $60 million in annual
revenue, we will experience expense savings related to this
sale and do not anticipate a material impact on pretax income.
We continue to manage approximately $11.8 billion of defined
contribution assets, primarily index and stable value collective
accounts, under investment management only contracts.
Launch of Ameriprise Bank, FSB and Acquisition of Bank
Deposits and Loans
In September 2006, we obtained our federal savings bank
charter and launched Ameriprise Bank, FSB (“Ameriprise Bank”),
a wholly-owned subsidiary. Ameriprise Bank acquired $12 million
of customer loans and assumed $963 million of customer
deposits from American Express Bank, FSB (“AEBFSB”), a
subsidiary of American Express, and received cash of
$951 million in connection with the transaction. Subsequently,
in October and November of 2006, Ameriprise Bank purchased
for cash consideration a total of $481 million of customer
loans from AEBFSB. Ameriprise Bank offers a suite of borrowing,
cash management and personal trust products and services,
primarily through our branded advisors.
New Financing Arrangements
On May 26, 2006, we issued $500 million principal amount of
junior subordinated notes due 2066 (“junior notes”). These
junior notes carry a fixed interest rate of 7.518% for the first
10 years and a variable interest rate thereafter. These junior
notes receive at least a 75% equity credit by the majority of
our credit rating agencies for purposes of their calculation of
our debt to total capital ratio. The net proceeds from the
issuance were for general corporate purposes.
On November 23, 2005, we issued $800 million principal amount
of 5.35% senior unsecured notes due November 15, 2010 and
$700 million principal amount of 5.65% senior unsecured notes
due November 15, 2015 (“senior notes”). The proceeds from the
senior notes were used to repay a bridge loan, which was drawn
on September 28, 2005 to repay American Express for
intercompany loans, and for other general corporate purposes.
In September 2005, we also obtained an unsecured revolving
credit facility of $750 million expiring in September 2010 from
various third-party financial institutions. Under the terms of the
credit agreement we may increase the amount of this facility to
$1.0 billion. Through December 31, 2006, we have not had
borrowings under this facility but have had outstanding letters
of credit, which were $5 million at December 31, 2006.
Separation from American Express
Our separation from American Express resulted in specifically
identifiable impacts to our consolidated results of operations
and financial condition.
Separation and Distribution
On February 1, 2005, the American Express Board of Directors
announced its intention to pursue the disposition of 100% of
its shareholdings in our company (the “Separation”) through a
tax-free distribution to American Express shareholders.
Effective as of the close of business on September 30, 2005,
American Express completed the Separation of our
company and the distribution of our common shares to
American Express shareholders (the “Distribution”). Prior to
the Distribution, we had been a wholly-owned subsidiary of
American Express.
Capital Structure
Prior to the Distribution, American Express provided a capital
contribution to our company of approximately $1.1 billion to
fund costs related to the Separation and Distribution and to
adequately support strong debt ratings for our company on the
Distribution. We replaced our intercompany indebtedness with
American Express, initially with a bridge loan from selected
financial institutions, and on November 23, 2005 through the
issuance of $1.5 billion of senior notes.
Separation Costs
Since the Separation announcement through December 31, 2006,
we have incurred $654 million of non-recurring separation
costs and expect to incur a total of approximately $875 million.
These costs are primarily associated with establishing the
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Ameriprise Financial, Inc. 2006 Annual Report