Ameriprise 2008 Annual Report Download - page 71

Premiums
Premiums include premiums on property-casualty insurance, traditional life and health (disability income and long term care)
insurance and immediate annuities with a life contingent feature. Premiums on auto and home insurance are net of
reinsurance premiums and are recognized ratably over the coverage period. Premiums on traditional life and health insurance
are net of reinsurance ceded and are recognized as revenue when due.
Other Revenues
Other revenues include certain charges assessed on fixed and variable universal life insurance and annuities, which consist of
cost of insurance charges, net of reinsurance premiums for universal life insurance products, variable annuity guaranteed
benefit rider charges and administration charges against contractholder accounts or balances. Premiums paid by fixed and
variable universal life policyholders and annuity contractholders are considered deposits and are not included in revenue.
Other revenues also include revenues related to certain limited partnerships that were consolidated beginning in 2006.
Banking and Deposit Interest Expense
Banking and deposit interest expense primarily includes interest expense related to banking deposits and investment
certificates. Additionally, banking and deposit interest expense includes interest on non-recourse debt of a structured entity
while it was consolidated, as well as interest expense related to debt of certain consolidated limited partnerships. The
changes in fair value of investment certificate embedded derivatives and the derivatives hedging stock market certificates are
included within banking and deposit interest expense.
Distribution Expenses
Distribution expenses primarily include compensation paid to the Company’s financial advisors, registered representatives,
third-party distributors and wholesalers, net of amounts capitalized and amortized as part of DAC. The amounts capitalized
and amortized are based on actual distribution costs. The majority of these costs, such as advisor and wholesaler
compensation, vary directly with the level of sales. Distribution expenses also include marketing support and other distribution
and administration related payments made to affiliated and unaffiliated distributors of products provided by the Company’s
affiliates. The majority of these expenses vary with the level of sales, or assets held, by these distributors or are fixed costs.
Distribution expenses also include wholesaling costs.
Interest Credited to Fixed Accounts
Interest credited to fixed accounts represents amounts earned by contractholders and policyholders on fixed account values
associated with fixed and variable universal life and annuity contracts. The mark-to-market adjustment on equity indexed
annuity embedded derivatives and the derivatives hedging equity indexed annuities are included within interest credited to
fixed accounts.
Benefits, Claims, Losses and Settlement Expenses
Benefits, claims, losses and settlement expenses consist of amounts paid and changes in liabilities held for anticipated future
benefit payments under insurance policies and annuity contracts, along with costs to process and pay such amounts.
Amounts are net of benefit payments recovered or expected to be recovered under reinsurance contracts. Benefits under
variable annuity guarantees include the change in fair value of GMWB and GMAB embedded derivatives and the derivatives
hedging these benefits. Benefits, claims, losses and settlement expenses also include amortization of DSIC.
Amortization of DAC
Direct sales commissions and other costs deferred as DAC are amortized over time. For annuity and universal life contracts,
DAC are amortized based on projections of estimated gross profits over amortization periods equal to the approximate life of
the business. For other insurance products, DAC are generally amortized as a percentage of premiums over amortization
periods equal to the premium-paying period. For certain mutual fund products, DAC are generally amortized over fixed periods
on a straight-line basis adjusted for redemptions. See Deferred Acquisition Costs and Deferred Sales Inducement Costs under
Critical Accounting Policies for further information on DAC.
Interest and Debt Expense
Interest and debt expense primarily includes interest on corporate debt, the impact of interest rate hedging activities and
amortization of debt issuance costs.
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