Ameriprise 2008 Annual Report Download - page 84

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
The following table presents our consolidated results of operations for the years ended December 31, 2007 and 2006:
Years Ended December 31,
2007 2006 Change
(in millions, except percentages)
Revenues
Management and financial advice fees $ 3,238 $ 2,700 $ 538 20 %
Distribution fees 1,762 1,569 193 12
Net investment income 2,018 2,225 (207) (9)
Premiums 1,063 1,070 (7) (1)
Other revenues 724 707 17 2
Total revenues 8,805 8,271 534 6
Banking and deposit interest expense 249 245 4 2
Total net revenues 8,556 8,026 530 7
Expenses
Distribution expenses 2,057 1,728 329 19
Interest credited to fixed accounts 847 955 (108) (11)
Benefits, claims, losses and settlement
expenses 1,179 1,132 47 4
Amortization of deferred acquisition
costs 551 472 79 17
Interest and debt expense 112 101 11 11
Separation costs 236 361 (125) (35)
General and administrative expense 2,558 2,480 78 3
Total expenses 7,540 7,229 311 4
Pretax income 1,016 797 219 27
Income tax provision 202 166 36 22
Net income $ 814 $ 631 $ 183 29 %
In the second quarter of 2008, we reclassified the mark-to-market adjustment on certain derivatives from net investment income to
various expense lines where the mark-to-market adjustment on the related embedded derivative resides. The mark-to-market
adjustment on 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 income for 2007 was $814 million, up $183 million from $631 million for 2006. This income growth reflected
strong growth in fee-based businesses driven by net inflows in wrap accounts and variable annuities, market appreciation and
continued advisor productivity gains. Also contributing to our income growth was a decline of $125 million in our non-recurring
separation costs. These positives were partially offset by higher distribution expenses which reflect the higher levels of assets under
management and overall business growth.
Income in both 2007 and 2006 was impacted by non-recurring separation costs of $236 million and $361 million, respectively
($154 million and $235 million, respectively, after-tax). The impact of our annual third quarter detailed review of DAC and the
related valuation assumptions (‘‘DAC unlocking’’) was a net pretax expense of $30 million ($20 million after-tax) in 2007,
compared to a net benefit of $25 million ($16 million after-tax) in 2006.
Net revenues
Our revenue growth in management and financial advice fees was primarily driven by the growth in our fee-based businesses.
Management and financial advice fees increased in 2007 to $3.2 billion, up $538 million, or 20%, from $2.7 billion in 2006. Wrap
account assets grew 23% and variable annuity account assets increased 16% over the prior year driven by strong net inflows and
market appreciation. Overall, managed assets increased 2% over the prior year period.
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