Ameriprise 2009 Annual Report Download - page 61

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 consolidated limited partnerships.
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 related to non-recourse debt of certain consolidated limited
partnerships. The changes in fair value of stock market 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 our 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 our affiliates. The majority of these expenses vary with the level of sales, or assets held,
by these distributors, and the remainder is fixed. 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 changes in fair value of 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
changes in fair value of GMWB and GMAB embedded derivatives and the derivatives hedging these benefits, as well as the changes in fair
value of derivatives hedging GMDB provisions. Benefits, claims, losses and settlement expenses also include amortization of DSIC.
Amortization of DAC
Direct sales commissions and other costs capitalized 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.
46 ANNUAL REPORT 2009