Ameriprise 2007 Annual Report Download - page 39

reflected allocated corporate and support function costs, increased as
a result of Threadneedle hedge fund performance fee expense, profes-
sional fees and an increase in technology costs. These increases were
more than offset by a decline in expense related to certain consoli-
dated limited partnerships as well as a decrease in expense in 2007
related to our defined contribution recordkeeping business, which we
sold in the second quarter of 2006.
Annuities
Our Annuities segment provides RiverSource Life variable and fixed
annuity products to our retail clients primarily through our Advice &
Wealth Management segment and to the retail clients of unaffiliated
advisors through third-party distribution.
The following table presents the results of operations of our
Annuities segment for the years ended December 31, 2007 and 2006:
Years Ended December 31,
2007 2006 Change
(in millions, except percentages)
Revenues
Management and
financial advice fees $ 510 $ 392 $ 118 30%
Distribution fees 267 213 54 25
Net investment income 1,294 1,403 (109) (8)
Premiums 95 138 (43) (31)
Other revenues 138 50 88 #
Total revenues 2,304 2,196 108 5
Banking and deposit
interest expense ————
Total net revenues 2,304 2,196 108 5
Expenses
Distribution expenses 194 158 36 23
Interest credited to
fixed accounts 709 823 (114) (14)
Benefits, claims, losses
and settlement expenses 424 261 163 62
Amortization of deferred
acquisition costs 318 287 31 11
General and
administrative expense 236 203 33 16
Total expenses 1,881 1,732 149 9
Pretax income $ 423 $ 464 $ (41) (9)
# Variance of 100% or greater.
Our Annuities segment pretax income was $423 million for 2007,
down $41 million, or 9%, from $464 million for 2006.
Net revenues
Net revenues were $2.3 billion, an increase of $108 million, or 5%, in
2007 compared to 2006. Management and financial advice fees
related to variable annuities increased in 2007, driven by positive flows
and market appreciation. The increase in distribution fees was due
primarily to an increase in marketing support payments driven by
flows and market appreciation. These increases were partially offset by
a decline in net investment income which was primarily attributable
to declining average fixed account balances, partially offset by income
related to guaranteed minimum withdrawal benefit (“GMWB”) and
guaranteed minimum accumulation benefit (“GMAB”) hedges. The
decline in premiums was attributable to lower volumes related to
immediate annuities with life contingencies. The increase in other
revenues was due to the deconsolidation of a variable interest entity,
resulting in a gain of $49 million. Also contributing to the increase in
other revenues was an increase in our guaranteed benefit rider fees on
variable annuities, driven by volume increases.
Expenses
Total expenses increased $149 million, or 9%. The increase in distribu-
tion expenses reflected increased sales, and the increase in benefits,
claims, losses and settlement expenses was due primarily to the
unfavorable impact of markets on guaranteed benefits associated with
our variable annuity business. The increase in amortization of DAC
was due to growth in business volumes and the recurring impact of
SOP 05-1, partially offset by a decrease in amortization driven by the
mark-to-market impact of variable annuity guaranteed living benefit
riders and the impact of DAC unlocking in 2007. General and admin-
istrative expense increased due to higher technology and overhead
costs. The increases in expense were partially offset by a decrease in
interest credited to fixed accounts, driven by declining accumulation
values as well as decreases in life contingent immediate annuity benefit
provisions.
Protection
Our Protection segment offers a variety of protection products to
address the identified protection and risk management needs of our
retail clients including life, disability income and property-casualty
insurance.
The following table presents the results of operations of our Protec-
tion segment for the years ended December 31, 2007 and 2006.
Years Ended December 31,
2007 2006 Change
(in millions, except percentages)
Revenues
Management and
financial advice fees $68 $ 56 $ 12 21%
Distribution fees 102 96 6 6
Net investment income 361 355 6 2
Premiums 1,002 954 48 5
Other revenues 453 431 22 5
Total revenues 1,986 1,892 94 5
Banking and deposit
interest expense 11——
Total net revenues 1,985 1,891 94 5
Expenses
Distribution expenses 62 94 (32) (34)
Interest credited to
fixed accounts 141 145 (4) (3)
Benefits, claims, losses
and settlement expenses 850 852 (2) —
Amortization of deferred
acquisition costs 200 133 67 50
General and
administrative expense 247 233 14 6
Total expenses 1,500 1,457 43 3
Pretax income $ 485 $ 434 $ 51 12
Ameriprise Financial 2007 Annual Report 37