Ameriprise 2007 Annual Report Download - page 44

Advice & Wealth Management
The following table presents the results of operations of our Advice &
Wealth Management segment for the years ended December 31, 2006
and 2005:
Years Ended December 31,
2006 2005 Change
(in millions, except percentages)
Revenues
Management and
financial advice fees $1,080 $ 837 $243 29%
Distribution fees 2,034 1,781 253 14
Net investment income 405 371 34 9
Other revenues 62 60 2 3
Total revenues 3,581 3,049 532 17
Banking and deposit
interest expense 246 215 31 14
Total net revenues 3,335 2,834 501 18
Expenses
Distribution expenses 2,068 1,756 312 18
General and
administrative expense 1,071 1,060 11 1
Total expenses 3,139 2,816 323 11
Pretax income $ 196 $ 18 $178 #
# Variance of 100% or greater.
Our Advice & Wealth Management segment reported pretax segment
income of $196 million in 2006, up from $18 million in 2005.
Net revenues
Management and financial advice fees increased $243 million, or
29%, in 2006 as compared to 2005. The increase was primarily the
result of net increases in wrap account assets of 32% from
December 31, 2005 to December 31, 2006. The growth in distribu-
tion fees of $253 million, or 14% from 2005, reflects the strong net
inflows in wrap accounts and strong growth in sales of direct invest-
ments as well as market appreciation. Net investment income growth
is primarily due to higher on-balance sheet deposit balances, in part
due to the launch of Ameriprise Bank in the third quarter of 2006.
This increase was partially offset by declining average account
balances in certificate products. Banking and deposit interest expense
increased $31 million of which $12 million relates to face-amount
certificates.
Expenses
The increase in distribution expenses reflects higher commissions
paid driven by strong sales activity and higher assets under manage-
ment. General and administrative expense increased in 2006 due to
increases in compensation expense, professional and other services
and legal and regulatory costs. Offsetting these increases was expense
of $100 million related to the settlement of a consolidated securities
class action lawsuit in 2005.
Asset Management
The following table presents the results of operations of our Asset
Management segment for the years ended December 31, 2006 and
2005:
Years Ended December 31,
2006 2005 Change
(in millions, except percentages)
Revenues
Management and
financial advice fees $1,221 $ 1,204 $ 17 1%
Distribution fees 336 365 (29) (8)
Net investment income 63 50 13 26
Other revenues 157 10 147 #
Total revenues 1,777 1,629 148 9
Banking and deposit
interest expense 26 20 6 30
Total net revenues 1,751 1,609 142 9
Expenses
Distribution expenses 415 414 1 —
Amortization of deferred
acquisition costs 52 79 (27) (34)
General and
administrative expense 1,031 939 92 10
Total expenses 1,498 1,432 66 5
Pretax income $ 253 $ 177 $ 76 43
# Variance of 100% or greater.
Overall
Our Asset Management pretax segment income was $253 million in
2006, up $76 million, or 43%, from $177 million in 2005.
Net revenues
Net revenues increased $142 million, or 9%, in 2006 compared to
2005. Contributing to the increase was $77 million related to certain
consolidated limited partnerships and $66 million of proceeds from
the sale of our defined contribution recordkeeping business. The
expenses from the sale of our defined contribution recordkeeping
business are primarily reflected in general and administrative expense.
Additionally, a slight increase in management and financial advice
fees, resulting from higher average assets under management, as well
as an increase in net investment income due to higher interest income
associated with the consolidation of certain variable interest entities
(“VIEs”), partially offset by an increase in banking and deposit
interest expense, were offset by a decline in distribution fees related to
RiverSource mutual funds which was largely due to lower mutual
fund asset balances. This shift reflects an emerging preference of
clients to migrate from transaction-based fee arrangements to asset-
based fee arrangements, where the asset-based fees are paid over time
and are included in management and financial advice fees.
Expenses
Total expenses increased $66 million, or 5%. In 2006, general and
administrative expense, which primarily reflects allocated corporate
and support function costs, included $70 million of expense related
to the consolidation of certain limited partnerships and $30 million
of costs associated with the sale of our defined contribution record-
keeping business in the second quarter of 2006. The sale related costs
were offset by expense savings related to the defined contribution
42 Ameriprise Financial 2007 Annual Report