Ameriprise 2008 Annual Report Download - page 64

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis of our consolidated financial condition and results of operations should be read in
conjunction with the ‘‘Forward-Looking Statements,’’ our Consolidated Financial Statements and Notes that follow and the
‘‘Consolidated Five-Year Summary of Selected Financial Data’’ and the ‘‘Risk Factors’’ included in our Annual Report on
Form 10-K. Certain key terms and abbreviations 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,
2008, we had a network of more than 12,400 financial advisors and registered representatives (‘‘affiliated financial
advisors’’). In addition to serving clients through our affiliated financial advisors, our asset management, annuity, and auto
and home protection products are distributed through third-party advisors and affinity relationships.
We deliver solutions to our clients through an approach focused on building long-term personal relationships between our
advisors and clients. We offer financial planning and advice that are responsive to our clients’ evolving needs and helps them
achieve their identified financial goals by recommending actions and a range of product ‘‘solutions’’ consisting of investment,
annuities, insurance, banking and other financial products that help them attain over time a 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. Deep client-advisor relationships are central to the ability of our
business model to succeed through market cycles, including the extreme market conditions that persisted through 2008.
We have four main operating segments: Advice & Wealth Management, Asset Management, Annuities and Protection, as well
as our 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 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.
Equity market, credit market and interest rate fluctuations can have a significant impact on our results of operations, primarily
due to the effects they have on the asset management and other asset-based fees we earn, the ‘‘spread’’ income generated
on our annuities, banking and deposit products and universal life (‘‘UL’’) insurance products, the value of deferred acquisition
costs (‘‘DAC’’) and deferred sales inducement costs (‘‘DSIC’’) assets associated with variable annuity and variable UL
products, the values of liabilities for guaranteed benefits associated with our variable annuities and the values of derivatives
held to hedge these benefits. For additional information regarding our sensitivity to equity risk and interest rate risk, see
‘‘Quantitative and Qualitative Disclosures About Market Risk.’’
It is management’s priority to increase shareholder value over a multi-year horizon by achieving our on-average, over-time
financial targets. Our financial targets are:
• Net revenue growth of 6% to 8%,
• Earnings per diluted share growth of 12% to 15%, and
• Return on equity of 12% to 15%.
Our net revenues for the year ended December 31, 2008 were $7.0 billion, a decrease of $1.6 billion, or 19%, from the prior
year period. This revenue decline primarily reflects the unprecedented impacts of the credit market events that occurred
during the last few weeks of September and the fourth quarter of 2008. The majority of the impacts from the credit market
events have been reflected in net investment income, which decreased $1.2 billion, or 59%, from the prior year period. The
credit market events and weak equity markets also negatively impacted management and financial advice fees and
distribution fees.
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