Ameriprise 2009 Annual Report Download - page 86

lower yields on our investment portfolio as we increased our liquidity position. Investment income on fixed maturity securities decreased
$159 million to $985 million compared to investment income of $1.1 billion in 2007.
Premiums declined $10 million to $85 million in 2008 primarily due to lower sales of immediate annuities with life contingencies. Other
revenues decreased $10 million to $128 million in 2008 primarily due to a gain of $49 million in 2007 related to the deconsolidation of a
CDO, partially offset by an increase in our guaranteed benefit rider fees on variable annuities driven by volume increases in 2008.
Expenses
Total expenses increased $122 million, or 7%, to $1.9 billion in 2008, primarily due to an increase in amortization of DAC partially offset
by decreases in interest credited to fixed accounts, benefits, claims, losses and settlement expenses and general and administrative
expense.
Distribution expenses increased $13 million to $207 million in 2008 primarily due to capitalizing less deferrals due to a product mix shift,
and therefore expensing more costs.
Interest credited to fixed accounts decreased $60 million, or 8%, to $646 million in 2008 primarily driven by declining fixed annuity
balances, which were $12.2 billion as of December 31, 2008 compared to $12.5 billion as of December 31, 2007. The balances had been
decreasing steadily throughout 2008 until the fourth quarter when we experienced positive flows into fixed annuities.
Benefits, claims, losses and settlement expenses decreased $60 million, or 18%, to $269 million in 2008 compared to $329 million in
2007. Benefits, claims, losses and settlement expenses in 2008 included a $46 million benefit from updating valuation assumptions and
converting to a new valuation system in the third quarter of 2008 and a benefit of $101 million related to the unfavorable market impact
on variable annuity living benefits, net of hedges, partially offset by an expense of $41 million related to the market’s impact on DSIC and
a $69 million expense related to the equity market’s impact on variable annuity guaranteed death and income benefits. Expenses related
to changes in the fair value of variable annuity guaranteed living benefit riders, net of hedges were comprised of a $1.6 billion increase in
hedge assets partially offset by a $1.5 billion increase in reserves. Prior year benefits, claims, losses and settlement expenses included
$36 million related to the unfavorable market impact on variable annuity guaranteed living benefits, net of hedges and $2 million from
updating valuation assumptions.
Amortization of DAC increased $258 million, or 81%, to $576 million in 2008 primarily due to the market and the effect on DAC
amortization from hedged variable annuity products. In response to the accelerated market deterioration in the fourth quarter of 2008,
management took action in the fourth quarter of 2008 to lower future variable annuity profit expectations based on continued
depreciation in contract values and historical equity market return patterns.
General and administrative expense decreased $29 million, or 12%, to $207 million in 2008 compared to $236 million in 2007 primarily
due to expense control initiatives.
Protection
Our Protection segment offers a variety of protection products to address the identified protection and risk management needs of our
retail clients including life, disability income and property-casualty insurance.
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