Ameriprise 2006 Annual Report Download - page 30

change in 2004. Our non-GAAP financial measures, which we
view as important indicators of financial performance, include:
adjusted revenues or revenues excluding AMEX Assurance;
revenue growth excluding the impact of our separation from
American Express;
expenses excluding non-recurring separation costs and
AMEX Assurance;
adjusted earnings or income before discontinued operations
and cumulative effect of accounting change and excluding
non-recurring separation costs and AMEX Assurance;
net income growth excluding the impact of our separation
from American Express; and
return on equity excluding the impact of our separation
from American Express, or adjusted return on equity, using
as the numerator adjusted earnings for the last 12 months
and as the denominator a five-point average of equity
excluding both the assets and liabilities of discontinued
operations and equity allocated to expected non-recurring
separation costs as of the last day of the preceding four
quarters and the current quarter.
Management believes that the presentation of these non-GAAP
financial measures excluding these specific income statement
impacts best reflects the underlying performance of our ongoing
operations and facilitates a more meaningful trend analysis.
These non-GAAP measures are also used for goal setting,
certain compensation related to our annual incentive award
program and evaluating our performance on a basis comparable
to that used by securities analysts.
A reconciliation of non-GAAP measures is as follows:
Years Ended December 31,
2006 2005 2004
(in millions)
Consolidated Income Data
Revenues $8,140 $7,484 $7,027
Less: AMEX Assurance
revenues —138 260
Adjusted revenues $8,140 $7,346 $6,767
Net income $ 631 $ 574 $ 794
Less: Income from
discontinued operations,
net of tax —16 40
Add: Cumulative effect of
accounting change,
net of tax ——71
Add: Separation costs,
after-tax 235 191 —
Less: AMEX Assurance net
income —56 102
Adjusted earnings $ 866 $ 693 $ 723
Separation costs $ 361 $ 293 $ —
Less: Tax benefit attributable
to separation costs 126 102 —
Separation costs, after-tax $ 235 $ 191 $ —
Years Ended December 31,
2006 2005
(in millions, except percentages)
Return on Equity
Return on equity excluding
discontinued operations 8.3% 8.0%
Income before discontinued
operations $ 631 $ 558
Add: Separation costs, after-tax 235 191
Less: AMEX Assurance net income —56
Adjusted earnings $ 866 $ 693
Equity excluding
discontinued operations $7,588 $6,980
Less: Equity allocated to
expected separation costs 273 168
Adjusted equity $7,315 $6,812
Adjusted return on equity 11.8% 10.2%
Owned, Managed and Administered Assets
We earn management fees on our owned separate account
assets based on the market value of assets held in the
separate accounts. We record the income associated with our
owned investments, including net realized gains and losses
associated with these investments and other-than-temporary
impairments of these investments, as net investment income.
For managed assets, we receive management fees based on
the value of these assets. We generally report these fees as
management, financial advice and service fees. We may also
receive distribution fees based on the value of these assets.
We generally record fees received from administered assets as
distribution fees.
Fluctuations in our owned, managed and administered assets
impact our revenues. Our owned, managed and administered
assets are impacted by market movements and net flows of
client assets. Owned assets are also affected by changes in
our capital structure. In 2006, we had net inflows in our
financial advisor-managed assets of $6.3 billion in Ameriprise
Financial wrap accounts and $1.8 billion in SAI wrap accounts
and had $5.3 billion in net inflows in our owned RiverSource
annuity variable accounts. We had net outflows in 2006 in our
retail managed RiverSource mutual funds of $5.6 billion and in
our owned certificate and fixed annuity assets of $5.0 billion,
reflecting a continued trend of net outflows in these assets.
The amount of net outflows in RiverSource Funds in 2006
included $0.7 billion of outflow related to American Express
repositioning its 401(k) offerings.
28 Ameriprise Financial, Inc. 2006 Annual Report