Ameriprise 2011 Annual Report Download - page 28

global and national consultancy firms. On the retail side, Threadneedle mutual funds are sold through financial
intermediaries and institutions, including banks, life insurance companies, independent financial advisers, wealth managers
and platforms offering a variety of investment products. Threadneedle’s dedicated Global Financial Institutions team offers
internationally coordinated coverage to such financial institutions.
Our Segments — Annuities
Our Annuities segment provides RiverSource variable and fixed annuity products to retail clients. The RiverSource Life
companies provide variable annuity products through our affiliated advisors, and fixed annuity products are provided
through both affiliated and unaffiliated advisors and financial institutions. 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 2011, 24% 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, 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.
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 — Columbia Management — 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, 2011. In 2010, we introduced
multiple versions of our RAVA 5SM variable annuity, including RAVA 5 Accessᓼ variable annuity, RAVA 5 Advantageᓼ variable
annuity and RAVA 5 Selectᓼ variable annuity.
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 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.
Substantially all of the variable annuity contracts we issue include guaranteed minimum death benefit (‘‘GMDB’’) provisions
designed to protect clients against market risk. 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 50% 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.
The general account assets of our life insurance subsidiaries support the contractual obligations under the guaranteed
benefit the company offers (see ‘‘Business — Our Segments — Asset Management — Columbia Management —
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