Ameriprise 2008 Annual Report Download - page 91

Corporate & Other
The following table presents the results of operations of our Corporate & Other segment 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 $ 1 $ — $ 1 NM
Net investment income 22 29 (7) (24)%
Other revenues 7 6 1 17
Total revenues 30 35 (5) (14)
Banking and deposit interest expense 6 7 (1) (14)
Total net revenues 24 28 (4) (14)
Expenses
Distribution expenses 1 — 1 NM
Interest and debt expense 112 101 11 11
Separation costs 236 361 (125) (35)
General and administrative expense 159 116 43 37
Total expenses 508 578 (70) (12)
Pretax loss $ (484) $ (550) $ 66 12 %
NM Not Meaningful.
Our Corporate & Other pretax segment loss in 2007 was $484 million, an improvement of $66 million compared to a pretax
segment loss of $550 million in 2006. The improvement was primarily due to a decrease in separation costs of $125 million,
as the separation from American Express was completed in 2007. This improvement was offset partially by an increase in
general and administrative expense which was the result of increased technology and overhead costs.
Fair Value Measurements
We report certain assets and liabilities at fair value; specifically, separate account assets, derivatives, embedded derivatives,
properties held by our consolidated property funds, and most investments and cash equivalents. Statement of Financial
Accounting Standards No. 157, ‘‘Fair Value Measurements’’ (‘‘SFAS 157’’) defines fair value, provides a framework for
measuring fair value and expands disclosures about fair value measurements. Fair value assumes the exchange of assets or
liabilities occurs in orderly transactions. We include actual market prices, or observable inputs, in our fair value measurements
to the extent available. Broker quotes are obtained when quotes from pricing services are not available. We validate prices
obtained from third parties through a variety of means such as: price variance analysis, subsequent sales testing, stale price
review, price comparison across pricing vendors and due diligence reviews of vendors. SFAS 157 does not require the use of
market prices that are the result of a forced liquidation or distressed sale.
Inactive Markets
Through our own experience transacting in the marketplace and through discussions with our pricing vendors, we believe that
the market for non-agency residential mortgage backed securities is inactive. Indicators of inactive markets include: pricing
services’ reliance on brokers or discounted cash flow analyses to provide prices, an increase in the disparity between prices
provided by different pricing services for the same security, unreasonably large bid-offer spreads and a significant decrease in
the volume of trades relative to historical levels. In certain cases, this market inactivity has resulted in our applying valuation
techniques that rely more on an income approach (discounted cash flows using market rates) than on a market approach
(prices from pricing services). We consider market observable yields for other asset classes we consider to be of similar risk
which includes nonperformance and liquidity for individual securities to set the discount rate for applying the income approach
to certain non-agency residential mortgage backed securities. The discount rates used for these securities at December 31,
2008 ranged from 13% to 22%.
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