Ameriprise 2010 Annual Report Download - page 29

investment products. Threadneedle’s dedicated Global Financial Institutions team offers internationally coordinated
coverage to financial institutions with a global reach.
Our Segments—Annuities
Our Annuities segment provides RiverSource variable and fixed annuity products to retail clients. Variable annuity products
are distributed through our branded financial advisors, while fixed annuity products are distributed through both affiliated
and unaffiliated advisors. Revenues for our 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 our 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. We also earn 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 our Asset Management segment for marketing support and other services provided in
connection with the availability of VIT Funds under the variable annuity contracts. Intersegment expenses for this segment
include distribution expenses for services provided by our Advice & Wealth Management segment, as well as expenses for
investment management services provided by our Asset Management segment. All intersegment activity is eliminated in
our consolidated results. In 2010, 23% of our revenues from external clients were attributable to our Annuities segment.
Our products include deferred variable and fixed annuities, in which assets accumulate until the contract is surrendered,
the contractholder (or in some contracts, the annuitant) dies or the contractholder or annuitant begins receiving benefits
under an annuity payout option. We also offer immediate annuities, in which payments begin within one year of issue and
continue for life or for a fixed period of time. The relative proportion between fixed and variable annuity sales is generally
driven by the relative performance of the equity and fixed income markets. Fixed sales are generally stronger when yields
available in the fixed income markets are relatively high than when yields are relatively low. Variable sales are generally
stronger in times of superior performance in equity markets than in times of weak performance in equity markets. The
relative proportion between fixed and variable annuity sales is also influenced by product design and other factors. In
addition to the revenues we generate on these products, which are described below, we also receive fees charged on
assets allocated to our separate accounts to cover administrative costs and a portion of the management fees from the
underlying investment accounts in which assets are invested, as discussed below under ‘‘Variable Annuities.’’ Investment
management performance is critical to the profitability of our RiverSource annuity business.
Our branded advisors are the largest distributors of RiverSource annuity products, although they can offer variable annuities
from a select number of unaffiliated insurers as well. In 2010, we expanded the offerings available through our branded
advisors by including variable annuities issued by a limited number of unaffiliated insurance companies. Our RiverSource
Distributors subsidiary is a broker-dealer that serves as the principal underwriter and distributor of RiverSource variable and
fixed annuities through AFSI and fixed annuities through SAI, as well as serving as the distributor of fixed annuities through
third-party channels such as banks and broker-dealer networks.
Variable Annuities
A variable annuity provides a contractholder with investment returns linked to underlying investment accounts of the
contractholder’s choice. These underlying investment options may include the VIT Funds previously discussed (see
‘‘Business—Our Segments—Asset Management—U.S. Asset Management Offerings—Mutual Funds,’’ above) as well as
variable portfolio funds of other companies. RiverSource variable annuity products in force offer a fixed account investment
option with guaranteed minimum interest crediting rates ranging up to 4% at December 31, 2010. In 2010, we introduced
multiple versions of our new RAVA 5 variable annuity, including RAVA 5 Access, RAVA 5 Advantage and RAVA 5 Select.
Our Portfolio Navigator asset allocation program is available under our variable annuities. The Portfolio Navigator program
allows clients to allocate their contract value to one of five funds of funds, each of which invests in various underlying
funds. The Portfolio Navigator program is designed to allow a contract purchaser to select investment options based on the
purchaser’s investment time horizon, risk tolerance and investment goals. We believe the Portfolio Navigator program helps
a contract purchaser to tailor the performance of annuities and life insurance policies to their specific needs and to keep
investment allocations on track over time. CMIA, our investment management subsidiary, serves as investment adviser for
the funds of funds and all of the underlying funds in which the funds of funds invest.
The majority of the variable annuity contracts we issue include guaranteed minimum death benefit (‘‘GMDB’’) provisions.
Contract purchasers can choose to add optional benefit provisions to their contracts to meet their needs, including
guaranteed minimum withdrawal benefit (‘‘GMWB’’) and guaranteed minimum accumulation benefit (‘‘GMAB’’) provisions.
Approximately 98% of RiverSource Life’s overall variable annuity assets include a GMDB provision and approximately 45%
of RiverSource Life’s overall variable annuity assets include a GMWB or GMAB provision. In general, these features can
help protect contractholders and beneficiaries from a shortfall in death or living benefits due to a decline in the value of
their underlying investment accounts.
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