Ameriprise 2009 Annual Report Download - page 166

under the T&O Bonus program which were converted to 2.0 million share-based awards under the 2005 ICP. The awards had all been
issued as of December 31, 2008.
26. Segment Information
The Company’s five segments are Advice & Wealth Management, Asset Management, Annuities, Protection and Corporate & Other. Each
segment records revenues and expenses as if they were each a stand-alone business using the Company’s transfer pricing methodology.
Transfer pricing uses rates that approximate market-based arm’s length prices for specific services provided. The Company reviews the
transfer pricing rates periodically and makes appropriate adjustments to ensure the transfer pricing rates that approximate arm’s length
market prices remain at current market levels. Costs related to shared services are allocated to segments based on their usage of the
services provided.
The largest source of intersegment revenues and expenses is retail distribution services, where segments are charged transfer pricing
rates that approximate arm’s length market prices for distribution through the Advice & Wealth Management segment. The Advice &
Wealth Management segment provides distribution services for affiliated and non-affiliated products and services. The Asset
Management segment provides investment management services for the Company’s owned assets and client assets, and accordingly
charges investment and advisory management fees to the other segments.
All costs related to shared services are allocated to the segments based on a rate times volume or fixed basis.
The Advice & Wealth Management segment provides financial planning and advice, as well as full service brokerage and banking services,
primarily to retail clients through the Company’s financial advisors. The Company’s affiliated financial advisors utilize a diversified
selection of both affiliated and non-affiliated products to help clients meet their financial needs. A significant portion of revenues in this
segment is fee-based, driven by the level of client assets, which is impacted by both market movements and net asset flows. The Company
also earns net investment income on owned assets primarily from certificate and banking products. This segment earns revenues
(distribution fees) for distributing non-affiliated products and earns intersegment revenues (distribution fees) for distributing the
Company’s affiliated products and services provided to its retail clients. Intersegment expenses for this segment include expenses for
investment management services provided by the Asset Management segment.
The Asset Management segment provides investment advice and investment products to retail and institutional clients. RiverSource
Investments predominantly provides U.S. domestic products and services and Threadneedle predominantly provides international
investment products and services. U.S. domestic retail products are primarily distributed through the Advice & Wealth Management
segment and also through unaffiliated advisors. International retail products are primarily distributed through third parties. Retail
products include mutual funds, variable product funds underlying insurance and annuity separate accounts, separately managed
accounts and collective funds. Asset Management products are also distributed directly to institutions through an institutional sales force.
Institutional asset management products include traditional asset classes, separate accounts, collateralized loan obligations, hedge funds
and property funds. Revenues in this segment are primarily earned as fees based on managed asset balances, which are impacted by both
market movements and net asset flows. The asset management teams serving our Asset Management segment provide all intercompany
asset management services for Ameriprise Financial, and the fees for all such services are reflected within the Asset Management segment
results through intersegment allocations. Intersegment expenses for this segment include distribution expenses for services provided by
the Advice & Wealth Management, Annuities and Protection segments.
The Annuities segment provides variable and fixed annuity products of RiverSource Life companies to retail clients primarily distributed
through the Company’s affiliated financial advisors and to the retail clients of unaffiliated advisors through third-party distribution.
Revenues for the Company’s variable annuity products are primarily earned as fees based on underlying account balances, which are
impacted by both market movements and net asset flows. Revenues for the Company’s fixed annuity products are primarily earned as net
investment income on assets supporting fixed account balances, with profitability significantly impacted by the spread between net
investment income earned and interest credited on the fixed account balances. The Company also earns net investment income on owned
assets supporting reserves for immediate annuities and for certain guaranteed benefits offered with variable annuities and on capital
supporting the business. Intersegment revenues for this segment reflect fees paid by the Asset Management segment for marketing
support and other services provided in connection with the availability of RiverSource Variable Series Trust (‘‘VST’’) Funds under the
variable annuity contracts. Intersegment expenses for this segment include distribution expenses for services provided by the Advice &
Wealth Management segment, as well as expenses for investment management services provided by the Asset Management segment.
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