Ameriprise 2009 Annual Report Download - page 79

Overall
Net loss attributable to Ameriprise Financial was $38 million for 2008, down $852 million from net income attributable to Ameriprise
Financial 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:
Benefits,
Claims, Losses
Other Distribution and Settlement Amortization
Segment Pretax Benefit (Charge) Premiums Revenues Expenses Expenses of DAC Total
(in millions)
Annuities $ — $ — $ 1 $ 37 $ (339) $ (301)
Protection 2 95 — 43 (146) (6)
Total $ 2 $ 95 $ 1 $ 80 $ (485) $ (307)
64 ANNUAL REPORT 2009