Ameriprise 2007 Annual Report Download - page 88

86 Ameriprise Financial 2007 Annual Report
and incurred debt issuance costs of $7 million. Interest payments are
due semi-annually on May 15 and November 15.
In June 2005, the Company entered into interest rate swap agree-
ments totaling $1.5 billion, which qualified as cash flow hedges
related to planned debt offerings. The Company terminated the swap
agreements in November 2005 when the senior notes were issued.
The related gain on the swap agreements of $71 million was recorded
to accumulated other comprehensive income and is being amortized
as a reduction to interest expense over the period in which the hedged
cash flows are expected to occur. Considering the impact of the hedge
credits, the effective interest rates on the senior notes due 2010 and
2015 are 4.8% and 5.2%, respectively.
On May 26, 2006, the Company issued $500 million of unsecured
junior subordinated notes (“junior notes”), which mature June 1, 2066,
and incurred debt issuance costs of $6 million. For the initial 10-year
period, the junior notes carry a fixed interest rate of 7.5% payable
semi-annually in arrears on June 1 and December 1. From June 1, 2016
until the maturity date, interest on the junior notes will accrue at an
annual rate equal to the three-month LIBOR plus a margin equal to
290.5 basis points, payable quarterly in arrears. The Company has
the option to defer interest payments, subject to certain limitations.
In addition, interest payments are mandatorily deferred if the
Company does not meet specified capital adequacy, net income or
shareholders’ equity levels.
The fixed and floating rate notes due 2011 were non-recourse debt of
a consolidated CDO, which the Company deconsolidated in the
fourth quarter of 2007 after determining it was no longer the primary
beneficiary of the structure as a result of the sale of a portion of its
interest in the residual and rated debt tranches of the CDO structure.
The municipal bond inverse floater certificates mature at various
dates from 2021 through 2036 and are non-recourse debt obligations
of a consolidated structured entity supported by a $30 million
portfolio of municipal bonds.
On September 30, 2005, the Company obtained an unsecured
revolving credit facility for $750 million expiring in September 2010
from various third party financial institutions. Under the terms of the
credit agreement, the Company may increase the amount of this
facility to $1.0 billion. As of December 31, 2007 and 2006, no
borrowings were outstanding under this facility. Outstanding letters
of credit issued against this facility were $6 million and $5 million as
of December 31, 2007 and 2006, respectively. The Company has
agreed under this credit agreement not to pledge the shares of its
principal subsidiaries and was in compliance with this covenant as of
December 31, 2007 and 2006.
At December 31, 2007, future maturities of debt were as follows:
(in millions)
2008 $ —
2009 —
2010 800
2011 —
2012 —
Thereafter 1,218
Total future maturities $2,018
16. Related Party Transactions
The Company may engage in transactions in the ordinary course of
business with significant shareholders or their subsidiaries, between
the Company and its directors and officers or with other companies
whose directors or officers may also serve as directors or officers for
the Company or its subsidiaries. The Company carries out these
transactions on customary terms. Other than for the share repurchase
from Berkshire Hathaway Inc. and subsidiaries described below, the
transactions have not had a material impact on the Company’s
consolidated results of operations or financial condition.
Berkshire Hathaway Inc. (“Berkshire”) and subsidiaries owned less
than 5% of the Company’s common stock at December 31, 2007
and 2006 and 12% of the Company’s common stock at
December 31, 2005. On March 29, 2006, the Company entered into
a Stock Purchase and Sale Agreement with Warren E. Buffet and
Berkshire to repurchase 6.4 million shares of the Company’s common
stock. The repurchase was completed on March 29, 2006 at a price
per share equal to the March 29, 2006 closing price of $42.91.
The Company’s executive officers and directors may have transactions
with the Company or its subsidiaries involving financial products and
insurance services. All obligations arising from these transactions are
in the ordinary course of the Company’s business and are on the same
terms in effect for comparable transactions with the general public.
Such obligations involve normal risks of collection and do not have
features or terms that are unfavorable to the Company’s subsidiaries.
The Company has entered into various transactions with American
Express in the normal course of business. The Company earned
approximately $10 million during the nine months ended
September 30, 2005 in revenues from American Express. The
Company received approximately $26 million for the nine months
ended September 30, 2005 of reimbursements from American
Express for the Company’s participation in certain corporate initia-
tives. As a result of the Separation, the Company determined it
appropriate to reflect certain reimbursements previously received
from American Express for costs incurred related to certain American
Express corporate initiatives as capital contributions rather than
reductions to expense amounts. This amount was approximately
$26 million for the nine months ended September 30, 2005.
17. Share-Based Compensation
The Company’s share-based compensation plans consist of the
amended and restated Ameriprise Financial 2005 Incentive Compen-
sation Plan (the “2005 ICP”) and the Deferred Equity Program for
Independent Financial Advisors (“P2 Deferral Plan”).
In accordance with the Employee Benefits Agreement (“EBA”)
entered into between the Company and American Express as part of
the Distribution, all American Express stock options and restricted
stock awards held by the Company’s employees which had not vested
on or before December 31, 2005 were substituted with a stock
option or restricted stock award issued under the 2005 ICP. All
American Express stock options and restricted stock awards held by
the Company’s employees that vested on or before December 31, 2005
remained American Express stock options or restricted stock awards.
Current taxes payable for 2007 and 2006 were reduced by $15 million