Ameriprise 2009 Annual Report Download - page 88

Corporate & Other
The following table presents the results of operations of our Corporate & Other segment:
Years Ended December 31,
2008 2007 Change
(in millions, except percentages)
Revenues
Management and financial advice fees $ — $ 1 $ (1) NM
Net investment income (25) 22 (47) NM
Other revenues 26 7 19 NM
Total revenues 1 30 (29) (97)%
Banking and deposit interest expense 2 6 (4) (67)
Total net revenues (1) 24 (25) NM
Expenses
Distribution expenses 1 1 — —
Interest and debt expense 109 112 (3) (3)
Separation costs — 236 (236) NM
General and administrative expense 253 159 94 59
Total expenses 363 508 (145) (29)
Pretax loss $ (364) $ (484) $ 120 25 %
NM Not Meaningful.
Our Corporate & Other segment pretax loss in 2008 was $364 million, an improvement of $120 million compared to a pretax loss of
$484 million in 2007. The improvement was primarily due to a decrease in separation costs of $236 million, as the separation from
American Express was completed in 2007. Other revenues increased $19 million due to recognizing a $19 million gain from extinguishing
$43 million of our junior notes in the fourth quarter of 2008. These positive impacts were offset by a $47 million decrease in net
investment income and a $94 million increase in general and administrative expense. The decrease in net investment income was
primarily due to lower investment income on fixed maturities and lower income on seed money investments and other investments. The
increase in general and administrative expense was driven by a $77 million expense related to changes in fair value of Lehman Brothers
securities that we purchased from various 2a-7 money market mutual funds managed by RiverSource Investments, expense of
$36 million for the cost of guaranteeing specific client holdings in an unaffiliated money market mutual fund and $60 million in
restructuring charges. Partially offsetting these increases in general and administrative expense were decreases related to our expense
reduction initiatives and lower incentive compensation accruals.
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. Fair value assumes the exchange of assets or
liabilities occurs in orderly transactions. Companies are not permitted to use market prices that are the result of a forced liquidation or
distressed sale. 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.
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
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