Ameriprise 2008 Annual Report Download - page 122

Financial and the distribution of the Ameriprise Financial common shares to American Express shareholders (the
‘‘Distribution’’).
American Express historically provided a variety of corporate and other support services for the Company, including
information technology, treasury, accounting, financial reporting, tax administration, human resources, marketing, legal and
other services. Following the Distribution, American Express provided the Company with many of these services pursuant to
transition services agreements for transition periods of up to two years or more, if extended by mutual agreement of the
Company and American Express. The Company terminated all of these service agreements and completed its separation from
American Express in 2007.
The Company incurred significant non-recurring separation costs in 2007 and 2006 as a result of the Separation. These costs
were primarily associated with establishing the Ameriprise Financial brand, separating and reestablishing the Company’s
technology platforms and advisor and employee retention programs.
5. Acquisitions
In the fourth quarter of 2008, the Company completed its all-cash acquisitions of H&R Block Financial Advisors, Inc.,
subsequently renamed Ameriprise Advisor Services, Inc. (‘‘AASI’’), J. & W. Seligman & Co., Incorporated (‘‘Seligman’’) and
Brecek & Young Advisors, Inc. for $329 million, $432 million and $26 million, respectively. The cost of the acquisitions
included the purchase price and transaction costs. These acquisitions further expanded the Company’s retail distribution and
asset management businesses. The Company recorded the assets and liabilities acquired at fair value and allocated the
remaining costs to goodwill and intangible assets. See Note 2 and Note 9 for additional information on goodwill and intangible
assets.
In 2006, the Company’s subsidiary Ameriprise Bank, FSB (‘‘Ameriprise Bank’’) commenced operations and purchased
consumer loans and assumed deposits of American Express Bank, FSB (‘‘AEBFSB’’), a subsidiary of American Express.
Ameriprise Bank acquired $493 million of customer loans and $963 million of customer deposits and received net cash of
$470 million. The assets acquired and liabilities assumed were recorded at fair value. Separately, in 2006, the Company
purchased $33 million of secured loans from American Express Credit Corporation for cash consideration. The Company
recorded the loans purchased at fair value.
6. Variable Interest Entities
The Company has variable interests for which it is not the primary beneficiary and, therefore, does not consolidate. The
Company’s maximum exposure to loss as a result of its investment in these entities is limited to its carrying value. The
Company has no obligation to provide further financial or other support to the VIEs nor has the Company provided any
additional support to the VIEs other than services it is separately compensated for through management agreements. The
Company had no liabilities recorded as of December 31, 2008 and 2007 related to these entities.
The Company is a limited partner in affordable housing partnerships which qualify for government sponsored low income
housing tax credit programs. In most cases, the Company has less than 50% interest in the partnerships sharing in benefits
and risks with other limited partners in proportion to the Company’s ownership interest. In the limited cases in which the
Company has a greater than 50% interest in affordable housing partnerships, it was determined that the relationship with the
general partner is an agent relationship and the general partner was most closely related to the partnership as it is the key
decision maker and controls the operations. The carrying values of the affordable housing partnerships are reflected in
investments and were $54 million and $88 million as of December 31, 2008 and 2007, respectively.
For the collateralized debt obligations (‘‘CDOs’’) managed by the Company, the Company has evaluated its variability in losses
and returns considering its investment levels, which are less than 50% of the residual tranches, and the fees received from
managing the structures and has determined that consolidation is not required. The carrying values of the CDOs are reflected
in investments and were $50 million and $46 million as of December 31, 2008 and 2007, respectively. The Company
manages $6.9 billion of underlying collateral consisting primarily of below investment grade syndicated bank loans within the
CDOs.
The Company consolidates a VIE for which it is considered the primary beneficiary. As of December 31, 2008, the Company
had investments of $10 million and non-recourse debt of $6 million, respectively, on the Consolidated Balance Sheet related
to this entity.
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