Ameriprise 2007 Annual Report Download - page 28

Management’s Discussion and Analysis
You should read the following discussion and analysis of our consoli-
dated results of operations and financial condition in conjunction
with the “Forward-Looking Statements,” our Consolidated Financial
Statements and Notes and the “Consolidated Five-Year Summary of
Selected Financial Data” that follow and the “Risk Factors” included
in our Annual Report on Form 10-K. Certain key terms and abbrevi-
ations are defined in the Glossary of Selected Terminology.
Overview
We are engaged in providing financial planning, products and services
that are designed to be utilized as solutions for our clients’ cash and
liquidity, asset accumulation, income, protection and estate and
wealth transfer needs. As of December 31, 2007, we had approxi-
mately 2.8 million individual, business and institutional clients and a
network of more than 11,800 financial advisors and registered repre-
sentatives (“affiliated financial advisors”). Our asset management,
annuity, and auto and home protection products are also distributed
outside of our affiliated financial advisors, through third party advisors
and affinity relationships.
We strive to deliver solutions to our clients through an approach
focused on building long term personal relationships. We offer finan-
cial planning and advice that aims to be responsive to our clients’
evolving needs and helps them achieve their identified financial goals
by recommending clients’ actions and a range of product solutions
consisting of investment, annuities, insurance, banking and other
financial products that position our clients to realize a positive return
or form of protection while accepting what they determine to be an
appropriate range and level of risk. The financial product solutions we
offer through our affiliated advisors include both our own products
and services and products of other companies. Our financial planning
and advisory process is designed to provide comprehensive advice,
when appropriate, to address our clients’ cash and liquidity, asset
accumulation, income, protection, and estate and wealth transfer
needs. We believe that our focus on personal relationships, together
with our strengths in financial planning and product development,
allows us to better address our clients’ financial needs, including the
financial needs of our primary target market segment, the mass
affluent and affluent, which we define as households with investable
assets of more than $100,000. This focus also puts us in a strong
position to capitalize on significant demographic and market trends,
which we believe will continue to drive increased demand for our
financial planning and other financial services.
We have four main operating segments: Advice & Wealth Manage-
ment, Asset Management, Annuities and Protection, as well as a
Corporate & Other segment. Our four main operating segments are
aligned with the financial solutions we offer to address our clients’
needs. The products and services we provide retail clients and, to a
lesser extent, institutional clients, are the primary source of our
revenues and net income. Revenues and net income are significantly
impacted by the relative investment performance and the total value
and composition of assets we manage and administer for our retail
and institutional clients as well as the distribution fees we receive
from other companies. These factors, in turn, are largely determined
by overall investment market performance and the depth and breadth
of our individual client relationships.
It is management’s priority to increase shareholder value over a multi-
year horizon by achieving our on-average, over-time financial targets.
We measure progress against these goals excluding the impact of our
separation from American Express Company (“American Express”),
specifically, non-recurring separation costs and AMEX Assurance
Company (“AMEX Assurance”) results. Our financial targets,
adjusted to exclude these impacts, are:
• Adjusted net revenue growth of 6% to 8%,
• Adjusted earnings per diluted share growth of 12% to 15%, and
• Adjusted return on equity of 12% to 15%.
For 2007, we met or exceeded our targets for annual adjusted net
revenue growth, adjusted earnings per diluted share growth and adjusted
return on equity growth, excluding the impact of the separation.
Our net revenues for 2007 were $8.7 billion, an increase of 8% over
2006. The strong revenue growth in 2007 primarily reflected growth
in our fee-based businesses, including growth in management and
financial advice fees and distribution fees, driven by continued strong
net inflows in wrap accounts and annuity variable accounts, market
appreciation and continued advisor productivity gains. These
positives were partially offset by lower net investment income, driven
by lower fixed annuity and certificate account balances.
Our consolidated net income for the year ended December 31, 2007
was $814 million, up $183 million, or 29%, from net income of
$631 million for the year ended December 31, 2006. Our adjusted
earnings, which exclude after-tax non-recurring separation costs from
both 2007 and 2006, rose 12% to $968 million in 2007 from
$866 million in 2006. Adjusted return on equity for the year ended
December 31, 2007 rose to 12.6% from 11.8% for the year ended
December 31, 2006.
We continue to establish Ameriprise Financial as a financial services
leader as we focus on meeting the financial needs of the mass affluent
and affluent, as evidenced by the growth in our mass affluent and
affluent client base, continued leadership in financial planning, gains
in advisor productivity, growth in our assets, and our strong corpo-
rate foundation. The number of our mass affluent and affluent client
groups increased 5% since year end last year. While our franchisee
26 Ameriprise Financial 2007 Annual Report