Ameriprise 2008 Annual Report Download - page 74

In the second quarter of 2008, we reclassified the changes in fair value of certain derivatives from net investment income to
various expense lines where the changes in fair value of the related embedded derivatives reside. The changes in fair value of
derivatives hedging variable annuity living benefits, equity indexed annuities and stock market certificates were reclassified to
benefits, claims, losses and settlement expenses, interest credited to fixed accounts and banking and deposit interest
expense, respectively. Prior period amounts were reclassified to conform to the current presentation.
Overall
Consolidated net loss for 2008 was $38 million, down $852 million from consolidated net income of $814 million for 2007.
The loss in 2008 was primarily attributable to negative economic, credit and equity market trends that accelerated in the third
and fourth quarters of 2008. The S&P 500 Index ended 2008 at 903 compared to 1,468 at the end of 2007, a drop of 565
points, or 38%. Credit spreads widened in the fourth quarter of 2008 as reflected in the 114 basis point increase in the
Barclays U.S. Corporate Investment Grade Index and the 642 basis point increase in the Barclays High Yield Index. Short-term
interest rates declined in the fourth quarter of 2008 as the Fed Funds rate was reduced to 0-25 basis points.
Pretax net realized investment losses on Available-for-Sale securities were $757 million for the year ended December 31,
2008, which primarily related to other-than-temporary impairments of various financial services securities, high yield
corporate credits and residential mortgage backed securities, compared to pretax net realized investment gains on
Available-for-Sale securities of $44 million for the year ended December 31, 2007. In response to the accelerated market
deterioration in the fourth quarter of 2008, management increased the discount rate, expected loss and severity rates used to
value non-agency residential mortgage backed securities and increased the expected default rates for high yield corporate
credits, which resulted in $420 million in pretax net realized investment losses.
Consolidated net loss for 2008 included $192 million in integration and restructuring charges and support costs related to the
RiverSource 2a-7 money market funds and unaffiliated money market funds. Included in consolidated net income for the year
ended December 31, 2007 were $236 million of pretax non-recurring separation costs.
Results for the year ended December 31, 2008 also included an increase in DAC and DSIC amortization due to the market
dislocation in 2008, as well as an increase in GMDB and GMIB benefits due to lower equity markets. These negative impacts
were partially offset by a benefit resulting from our annual review of valuation assumptions for products of RiverSource Life
companies in the third quarter of 2008 and our conversion to a new industry standard valuation system that provides
enhanced modeling capabilities. The annual review of valuation assumptions resulted in a decrease in expenses resulting
primarily from updating mortality and expense assumptions for certain life insurance products and from updating fund mix and
contractholder behavior assumptions for variable annuities with guaranteed benefits. The valuation system conversion also
resulted in an increase in revenue primarily from improved modeling of the expected value of existing reinsurance agreements
and a decrease in expense from modeling annuity amortization periods at the individual policy level. Our annual review of
valuation assumptions in the third quarter of 2007 resulted in a net $30 million increase in expense from updating product
persistency assumptions, partially offset by decreases in expense from updating other assumptions.
The total pretax impacts on revenues and expenses for the year ended December 31, 2008 attributable to the annual review
of valuation assumptions for products of RiverSource Life companies, the valuation system conversion and the impact of
markets on DAC and DSIC amortization, variable annuity living benefit riders, net of hedges and GMDB and GMIB benefits
were as follows:
Segment Pretax Other Distribution Benefits, Claims, Losses Amortization
Benefit (Charge) Premiums Revenues Expenses and Settlement Expenses of DAC Total
(in millions)
Annuities $ — $ — $ 1 $ 26 $ (330) $ (303)
Protection 2 95 — 44 (145) (4)
Total $ 2 $ 95 $ 1 $ 70 $ (475) $ (307)
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