Ameriprise 2006 Annual Report Download - page 75

as of the Distribution, which was approximately
$115 million. These transactions created a variable
interest entity, for U.S. GAAP purposes, for which the
Company is not the primary beneficiary. Accordingly, the
Company deconsolidated AMEX Assurance for U.S. GAAP
purposes as of September 30, 2005.
A tax allocation agreement with American Express was
signed effective September 30, 2005.
American Express provided the Company a capital
contribution of approximately $1.1 billion, which is in
addition to the $164 million capital contribution noted
above.
Ameriprise Financial and American Express completed the
split of the American Express Retirement Plan, which
resulted in additional pension liability in 2006 and 2005
of $5 million and $32 million, respectively, and
adjustments to additional paid in capital in 2006 and
2005 of $5 million and $18 million (net of tax),
respectively.
As a result of the Distribution, Ameriprise Financial entered
into an unsecured bridge loan in the amount of $1.4 billion.
That loan was drawn down in September 2005 and was repaid
using proceeds from a $1.5 billion senior note issuance in
November 2005.
The Company has incurred significant non-recurring separation
costs as a result of the Separation. These costs have primarily
been associated with establishing the Ameriprise Financial
brand, separating and reestablishing the Company’s technology
platforms and advisor and employee retention programs. During
the years ended December 31, 2006 and 2005, $361 million
($235 million after-tax) and $293 million ($191 million after-
tax), respectively, of such costs were incurred.
American Express has historically provided a variety of
corporate and other support services for the Company, including
information technology, treasury, accounting, financial report-
ing, tax administration, human resources, marketing, legal,
procurement and other services. Following the Distribution,
American Express has continued to provide the Company with
many of these services pursuant to transition services agree-
ments for transition periods of up to two years or more, if
extended by mutual agreement of the Company and
American Express. The Company has terminated or will terminate
a particular service after it has completed the procurement of
the designated service through arrangements with third parties
or through the Company’s own employees.
5. Acquisition of Bank Deposits and Loans
On September 29, 2005, the Company and American Express
Bank, FSB (“AEBFSB”), a subsidiary of American Express, entered
into a Purchase and Assumption Agreement (the “Agreement”)
pursuant to which the Company agreed to purchase assets and
assume liabilities, primarily consumer loans and deposits of
AEBFSB, upon obtaining a federal savings bank charter. In
September 2006, the Company and AEBFSB entered into amend-
ments to the Agreement, pursuant to which the Company agreed
to acquire the assets and liabilities from AEBFSB in three
phases. Ameriprise Bank, FSB (“Ameriprise Bank”), a wholly-
owned subsidiary of the Company, commenced operations in
September 2006 subsequent to obtaining the charter and
performed the agreement with AEBFSB. For the first phase, which
closed on September 18, 2006, Ameriprise Bank acquired
$12 million of customer loans, assumed $963 million of
customer deposits and received cash of $951 million from
AEBFSB. Ameriprise Bank completed the second phase of the
agreement in October 2006 with the purchase of $49 million of
customer loans for cash consideration and completed the final
phase in November 2006 with the purchase of $432 million in
customer loans for cash consideration. The assets acquired and
liabilities assumed were recorded at fair value.
Separately, on October 23, 2006, the Company purchased
$33 million of secured loans from American Express Credit
Corporation for cash consideration. These loans were made to
the Company’s customers and are secured by the customers’
investment assets and/or insurance policies and will be
serviced by Ameriprise Bank. The Company recorded the loans
purchased at fair value.
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Ameriprise Financial, Inc. 2006 Annual Report
6. Discontinued Operations
The components of earnings from the discontinued operations of AEIDC were as follows:
Years Ended December 31,
2005 2004
(in millions)
Net investment income $ 165 $ 222
Expenses:
Interest credited to account values 104 84
Other expenses 36 77
Total expenses 140 161
Income before income tax provision 25 61
Income tax provision 921
Income from discontinued operations, net of tax $ 16 $ 40