Ameriprise 2006 Annual Report Download - page 47

(1) The dividend capacity for RiverSource Life is based on the greater of
(1) the previous year’s statutory net gain from operations or (2) 10% of
the previous year-end statutory capital and surplus. Dividends that,
together with the amount of other distributions made within the
preceding 12 months, exceed this statutory limitation are referred to as
“extraordinary dividends” and require advance notice to the Minnesota
Department of Commerce, RiverSource Life’s primary state regulator,
and are subject to potential disapproval. On May 15 and
September 26, 2006, RiverSource Life paid extraordinary dividends of
$100 million on each date to our company. Prior to the payment of each
of these dividends, RiverSource Life made the required advance notice
to the Minnesota Department of Commerce and received a response
from it stating that it did not object to the payment of these dividends.
RiverSource Life exceeded the statutory limitation during 2004, as
reflected above by paying $930 million to our company, a portion of
which was an extraordinary dividend. Notice of non-disapproval was
received from the Minnesota Department of Commerce prior to paying
these extraordinary dividends.
(2) The dividend capacity for ACC is based on capital held in excess of
regulatory requirements. For AMPF and AEIS, the dividend capacity is
based on an internal model used to determine the availability of
dividends, while maintaining net capital at a level sufficiently in excess of
minimum levels defined by Securities and Exchange Commission rules.
(3) The dividend capacity for IDS Property Casualty is based on the lesser
of (1) 10% of the previous year-end capital and surplus or (2) the
greater of (a) net income (excluding realized gains) of the previous year
or (b) the aggregate net income of the previous three years excluding
realized gains less any dividends paid within the first two years of the
three-year period. Dividends that, together with the amount of other
distributions made within the preceding 12 months, exceed this
statutory limitation are referred to as “extraordinary dividends” and
require advance notice to the Office of the Commissioner of Insurance
of the State of Wisconsin, the primary state regulator of IDS Property
Casualty, and are subject to potential disapproval. For IDS Property
Casualty, dividends paid in 2004 and the dividend capacity in 2004
increased significantly due to the inclusion of AMEX Assurance as a
subsidiary of IDS Property Casualty. The portion of dividends paid by
IDS Property Casualty in 2005 in excess of the dividend capacity set
forth in the table above were extraordinary dividends and received
approval from the Office of the Commissioner of Insurance of the State
of Wisconsin.
Operating Activities
Net cash provided by operating activities for the year ended
December 31, 2006 was $619 million compared to $975 million
for the year ended December 31, 2005, a decrease of
$356 million.
For the year ended December 31, 2005, net cash provided by
operating activities was $975 million compared to $812 million
for the year ended December 31, 2004. This increase reflects
a net decrease in trading securities and equity method invest-
ments in hedge funds and a net increase in accounts payable
and accrued expenses partially offset by lower net income.
Investing Activities
Our investing activities primarily relate to our Available-for-Sale
investment portfolio. Further, this activity is significantly affected
by the net outflows of our investment certificate, fixed annuity
and universal life products reflected in financing activities.
Net cash provided by investing activities for the year ended
December 31, 2006 was $3.5 billion compared to net cash
used in investing activities of $255 million for the year ended
December 31, 2005, a cash flow improvement of $3.8 billion.
Purchases of Available-for-Sale securities decreased $5.9 billion
to $2.8 billion in 2006 compared to $8.7 billion in 2005.
Proceeds from sales of Available-for-Sale securities in 2006
decreased $1.8 billion to $2.5 billion from $4.3 billion in 2005.
Net cash used in investing activities for the year ended
December 31, 2005 was $255 million compared to $1.6 billion
for the year ended December 31, 2004. This change resulted
primarily from a net increase of $2.3 billion in proceeds from
the sales of Available-for-Sale securities, partially offset by a
net increase of $1.4 billion in purchases of Available-for-Sale
securities in 2005 compared to 2004.
Financing Activities
Net cash used in financing activities was $3.9 billion for the
year ended December 31, 2006 compared to net cash
provided by financing activities of $177 million for the year
ended December 31, 2005, a decrease of $4.1 billion. This
decline in cash flow was primarily due to higher surrenders
and other benefits related to fixed annuities, lower sales of
certificate products and a net decrease related to debt and
capital transactions.
Cash used for surrenders and other benefits on policyholder
and contractholder account values, most of which related to
fixed annuities, increased $1.5 billion in 2006 compared to
2005. Cash flows related to payments we receive from certifi-
cate owners declined $1.3 billion in 2006 compared to 2005,
while cash used for certificate maturities and cash surrenders
decreased $544 million. The reduction in sales and increase
in maturities was the result of the American Express Bank
Limited and American Express Bank International business
wind-down and a sales promotion that was in effect during a
portion of the 2005 period, offset somewhat by a sales
promotion that began in late 2006 and ended in early 2007.
Our new debt issued in 2006 was primarily related to the
issuance of $500 million of junior notes. In 2005, we obtained
a $1.4 billion bridge loan and issued $1.5 billion of senior
notes. We repaid $284 million of debt in 2006 compared to
$1.4 billion in 2005.
On May 26, 2006, we issued $500 million of junior notes and
incurred debt issuance costs of $6 million. These junior notes
are due in 2066 and carry a fixed interest rate of 7.518% for
the first 10 years, converting to a variable interest rate there-
after. The proceeds from the issuance were for general
corporate purposes.
On November 23, 2005, we issued $800 million principal
amount of 5.35% unsecured senior notes due November 15, 2010
and $700 million principal amount of 5.65% senior notes due
November 15, 2015. Considering the impact of hedge credits, the
effective interest rates on the senior notes due 2010 and 2015
are 4.8% and 5.2%, respectively. The proceeds from the
issues were used to replace the $1.4 billion bridge loan and
for other general corporate purposes.
We repaid our $50 million medium-term notes in February 2006.
In addition, $168 million of nonrecourse debt related to the
consolidated property fund limited partnerships was
repaid in September 2006 following a restructuring of the
45
Ameriprise Financial, Inc. 2006 Annual Report