Ameriprise 2006 Annual Report Download - page 44

42 Ameriprise Financial, Inc. 2006 Annual Report
Other expenses increased primarily as a result of higher non-field compensation and benefits attributable to management
incentives, higher benefit costs and merit adjustments, and the $100 million comprehensive settlement of a consolidated securities
class action lawsuit, partially offset by a decrease in mutual fund industry regulatory costs of approximately $40 million.
Protection
The following table presents the results of operations of our Protection segment for the years ended December 31, 2005 and 2004. The
travel insurance and card related business of our AMEX Assurance subsidiary was ceded to American Express effective July 1, 2005.
AMEX Assurance was deconsolidated on a U.S. GAAP basis effective September 30, 2005. The results of operations of AMEX Assurance
for periods ending prior to the deconsolidation were reported in our Protection segment and are also included in the table below.
Years Ended December 31, AMEX Assurance
2005 2004 Change 2005(1)(2) 2004(1)
(in millions, except percentages)
Revenues
Management, financial advice and
service fees $ 67 $ 58 $ 9 16 % $ 3 $ 4
Distribution fees 106 105 1 1 — —
Net investment income 339 313 26 8 9 12
Premiums 1,001 1,023 (22) (2) 127 245
Other revenues 435 420 15 4 (1) (1)
Total revenues 1,948 1,919 29 2 138 260
Expenses
Compensation and benefits—field 115 90 25 28 37 2
Interest credited to account values 146 143 3 2 — —
Benefits, claims, losses and
settlement expenses 828 776 52 7 (12) 42
Amortization of deferred acquisition costs 108 131 (23) (18) 17 33
Other expenses 298 276 22 8 14 30
Total expenses 1,495 1,416 79 6 56 107
Pretax segment income $ 453 $ 503 $ (50) (10) $ 82 $ 153
(1) AMEX Assurance results of operations were consolidated in 2005 through September 30, 2005 and for all of 2004.
(2) AMEX Assurance premiums in 2005 included $10 million in intercompany revenues related to errors and omissions coverage.
Overall
Our Protection pretax segment income for the year ended
December 31, 2005 declined $50 million to $453 million
compared to pretax segment income of $503 million for the
year ended December 31, 2004. The deconsolidation of
AMEX Assurance resulted in a decline in pretax segment
income of $71 million. This decline was partially offset by the
growth in our auto and home insurance business.
Revenues
Net investment income increased $26 million to $339 million
in 2005 compared to 2004. The increase was primarily due
to higher average invested assets during 2005 primarily
attributable to auto and home insurance.
Premiums in 2005 were negatively impacted by the
deconsolidation of AMEX Assurance, which had premiums of
$127 million in 2005 compared to $245 million in 2004.
This decrease was primarily offset by a $71 million rise in
premiums from auto and home insurance products.
Other revenues increased primarily as a result of a $13 million
increase in the cost of insurance on higher average variable
and fixed universal life policies in-force.
Expenses
Compensation and benefits-field in 2005 reflect $35 million in
ceding commissions paid to American Express related to
AMEX Assurance.
Benefits, claims, losses and settlement expenses in 2005
reflect a $69 million increase as a result of higher average
auto and home insurance policies in-force, a $17 million
increase due to higher life insurance in-force levels and a
$13 million increase in the expense for future policy benefits in
2005 related to the inclusion of an explicit maintenance
reserve for long term care insurance. These increases are net
of a $54 million decline related to the impact of ceding the
AMEX Assurance reserves in 2005.
Amortization of DAC was $108 million in 2005 compared to
$131 million in 2004. DAC amortization in 2005 was reduced
by $53 million as a result of the annual DAC assessment
performed in the third quarter, while DAC amortization in 2004
was reduced by $23 million in the first quarter as a result of
lengthening amortization periods on certain life insurance
products in conjunction with our adoption of SOP 03-1 and by
$16 million as a result of the annual DAC assessment in the
third quarter. The deconsolidation of AMEX Assurance resulted
in a decrease in DAC amortization in 2005 of $16 million.