Ameriprise 2006 Annual Report Download - page 39

increase discussed previously, $7 million was related to
additional claims expense in connection with the recognition of
previously deferred cost of insurance revenues and the balance
was primarily volume-related. Health related expenses
increased $21 million in 2006 and were primarily due to higher
claims and reserves related to long term care and disability
income. In 2005, these expenses reflected the addition of
$13 million to long term care maintenance expense reserves.
Auto and home had a net increase in expenses of $11 million.
Volume-driven loss reserves attributable to higher average auto
and home policy counts were partially offset by a $21 million
net reduction in reserves primarily reflecting improvement in
2004 and 2005 accident year results. Expenses in 2005
included the assumption of $9 million in E&O reserves from
AMEX Assurance and a net reduction to AMEX Assurance
expenses of $12 million.
Amortization of DAC in 2006 primarily reflects higher DAC amor-
tization related to our auto and home products, partially offset
by the impact of the deconsolidation of AMEX Assurance, which
had $17 million of DAC amortization in 2005. We recognized
$28 million of additional DAC amortization in 2006 as a result
of an adjustment to DAC balances related to auto and home
insurance products. DAC amortization related to auto and home
insurance is also higher by $17 million in 2006 primarily as a
result of the effect of increased business and shorter amortiza-
tion periods compared to 2005. The total DAC unlocking
benefit in both 2006 and 2005 primarily related to our VUL/UL
products, which reduced DAC amortization by $52 million and
$53 million, respectively. The adoption of SOP 05-1 is expected
to result in an increase in DAC amortization in 2007. The
expected increase to amortization expense may vary depending
upon future changes in underlying valuation assumptions.
Other expenses decreased in 2006 relative to 2005 as a
result of the deconsolidation of AMEX Assurance, which had
$14 million in other expenses in 2005. This decrease was
partially offset by higher allocated corporate and support
function costs, including non-field compensation and
benefits, attributable to the Protection segment.
37
Ameriprise Financial, Inc. 2006 Annual Report
Corporate and Other
The following table presents the results of operations of our Corporate segment for the years ended December 31, 2006 and 2005:
Years Ended December 31,
2006 2005 Change
(in millions, except percentages)
Revenues
Management, financial advice and service fees $ 190 $ 195 $ (5) (3)%
Distribution fees 33——
Net investment income (loss) 59 (21) 80 #
Other revenues 32 35 (3) (9)
Total revenues 284 212 72 34
Expenses
Compensation and benefits—field 162 156 6 4
Interest and debt expense 109 73 36 49
Separation costs 361 293 68 23
Other expenses 169 114 55 48
Total expenses 801 636 165 26
Pretax segment loss $ (517) $ (424) $ (93) (22)
#Variance of 100% or greater.
Overall
Our Corporate pretax segment loss was $517 million for the
year ended December 31, 2006, compared to $424 million for
the year ended December 31, 2005. The higher pretax
segment loss in 2006 was primarily due to the $68 million
increase in separation costs, as well as higher interest and
debt expense and other expenses, partially offset by the
improvement in net investment income.
Revenues
Net investment income increased $80 million to income of
$59 million for the year ended December 31, 2006 compared
to a loss of $21 million for the year ended December 31, 2005.
The improvement in 2006 compared to 2005 was primarily
attributable to higher invested assets, partially offset by a
decrease in net realized investment gains of $13 million. The
net investment loss in 2005 was primarily the result of
amortization of affordable housing investments.
Expenses
The increase in interest and debt expense in 2006 primarily
reflects the higher cost of debt associated with the senior
notes as compared to our intercompany debt with American
Express prior to the Distribution, as well as interest on the
junior notes issued in May 2006. Interest expense in 2006 on
the senior and junior notes was $75 million and $23 million,