Ameriprise 2010 Annual Report Download - page 57

values of derivatives held to hedge these benefits. For additional information regarding our sensitivity to equity price and
interest rate risk, see Part II, Item 7A ‘‘Quantitative and Qualitative Disclosures About Market Risk.’’
In June 2009, the Financial Accounting Standards Board (‘‘FASB’’) updated the accounting standards related to the
required consolidation of certain variable interest entities (‘‘VIEs’’). We adopted the accounting standard effective
January 1, 2010 and recorded as a cumulative change in accounting principle an increase to appropriated retained
earnings of consolidated investment entities of $473 million and consolidated approximately $5.5 billion of client assets
and $5.1 billion of liabilities in VIEs onto our Consolidated Balance Sheets that were not previously consolidated.
Management views the VIE assets as client assets and the liabilities have recourse only to those assets. While the
economics of our business have not changed, the financial statements were impacted. Prior to adoption, we consolidated
certain property funds and hedge funds. These entities and the VIEs consolidated as of January 1, 2010, are defined as
consolidated investment entities (‘‘CIEs’’). Changes in the valuation of the CIE assets and liabilities impact pretax income.
The net income of the CIEs is reflected in net income attributable to noncontrolling interests. The results of operations of
the CIEs are reflected in the Corporate & Other segment. On a consolidated basis, the management fees we earn for the
services we provide to the CIEs and the related general and administrative expenses are eliminated and the changes in the
assets and liabilities related to the CIEs, primarily debt and underlying syndicated loans, are reflected in net investment
income. We continue to include the fees in the management and financial advice fees line within our Asset Management
segment.
Management believes that operating measures, which exclude net realized gains or losses, integration and restructuring
charges and the impact of consolidating CIEs, best reflect the underlying performance of our 2010 and 2009 core
operations and facilitate a more meaningful trend analysis. Management uses certain of these non-GAAP measures to
evaluate our financial performance on a basis comparable to that used by some securities analysts and investors. Also,
certain of these non-GAAP measures are taken into consideration, to varying degrees, for purposes of business planning
and analysis and for certain compensation-related matters. Throughout our Management’s Discussion and Analysis, these
non-GAAP measures are referred to as operating measures. While the consolidation of the CIEs impacts our balance sheet
and income statement, our exposure to these entities is unchanged and there is no impact to the underlying business
results. The CIEs we manage have the following characteristics:
• They were formed on behalf of institutional investors to obtain a diversified investment portfolio and were not formed in
order to obtain financing for Ameriprise Financial.
• Ameriprise Financial receives customary, industry standard management fees for the services it provides to these CIEs
and has a fiduciary responsibility to maximize the investors’ returns.
• Ameriprise Financial does not have any obligation to provide financial support to the CIEs, does not provide any
performance guarantees of the CIEs and has no obligation to absorb the investors’ losses.
• Management excludes the impact of consolidating the CIEs on assets, liabilities, pretax income and equity for setting
our financial performance targets and annual incentive award compensation targets.
It is management’s priority to increase shareholder value over a multi-year horizon by achieving our on-average, over-time
financial targets.
Our financial targets are:
• Net operating revenue growth of 6% to 8%,
• Operating earnings per diluted share growth of 12% to 15%, and
• Operating return on equity excluding accumulated other comprehensive income of 12% to 15%.
On April 30, 2010, we acquired the long-term asset management business of Columbia Management Group from Bank of
America (the ‘‘Columbia Management Acquisition’’). The acquisition, the integration of which is expected to be completed
in 2011, is expected to further enhance the scale and performance of our retail mutual fund and institutional asset
management businesses. Our initial estimate of the purchase price was $927 million, which included a provisional
estimate of a payable to Bank of America of $31 million and $30 million of assumed liabilities. We recorded the assets
and liabilities acquired at fair value and allocated the costs to goodwill and intangible assets. In the fourth quarter of
2010, we determined the provisional payable was no longer necessary and goodwill was reduced by $31 million as of the
acquisition date. We incurred pretax non-recurring integration costs related to the Columbia Management Acquisition of
$100 million for the year ended December 31, 2010. In total, we have incurred $107 million of pretax non-recurring
integration costs through December 31, 2010, and expect to incur between $130 million and $160 million in total of
such costs through 2011. These costs include system integration costs, proxy and other regulatory filing costs, employee
reduction and retention costs, and investment banking, legal and other acquisition costs. We have realized integration
gross expense synergies of approximately $75 million for the year ended December 31, 2010, and expect annualized
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