Ameriprise 2011 Annual Report Download - page 29

Management of Institutional Owned Assets’’ above). As a result, we bear the risk that protracted under-performance of the
financial markets could result in guaranteed benefit payments being higher than what current account values would
support. Our exposure to risk from guaranteed benefits generally will increase when equity markets decline. You can find a
discussion of liabilities and reserves related to our annuity products in Part II, Item 7A of this Annual Report on
Form 10-K — ‘‘Quantitative and Qualitative Disclosures About Market Risk’’, as well as in Note 2, Note 10, Note 11 and
Note 15 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
RiverSource variable annuities provide us with fee-based revenue in the form of mortality and expense risk fees, marketing
support and administrative fees, fees charged for optional features elected by the contractholder, and other contract
charges. We receive marketing support payments from the VIT Funds underlying our variable annuity products as well as
Rule 12b-1 distribution and servicing-related fees from the VIT Funds and the underlying funds of other companies. In
addition, we receive marketing support payments from the affiliates of other companies’ funds included as investment
options in our RiverSource variable annuity products.
Fixed Annuities
RiverSource fixed annuity products provide a contractholder with cash value that increases by a fixed or indexed interest
rate. We periodically reset rates at our discretion subject to certain policy terms establishing minimum guaranteed interest
crediting rates. Our earnings from fixed annuities are based upon the spread between rates earned on assets purchased
with fixed annuity deposits and the rates at which interest is credited to our RiverSource fixed annuity contracts.
In 2007, we discontinued new sales of equity indexed annuities, although we continue to service existing policies.
RiverSource fixed annuity contracts in force provide guaranteed minimum interest crediting rates ranging from 1.0% to
5.0% at December 31, 2011. New contracts issued provide guaranteed minimum interest rates in compliance with state
laws.
Liabilities and Reserves for Annuities
We maintain adequate financial reserves to cover the risks associated with guaranteed benefit provisions added to variable
annuity contracts in addition to liabilities arising from fixed and variable annuity base contracts. You can find a discussion
of liabilities and reserves related to our annuity products in Part II, Item 7A of this Annual Report on Form 10-K—
‘‘Quantitative and Qualitative Disclosures About Market Risk’’, as well as in Note 2, Note 10, Note 11 and Note 15 to our
Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Financial Strength Ratings
Our insurance company subsidiaries that issue RiverSource annuity products receive ratings from independent rating
organizations. Ratings are important to maintain public confidence in our insurance subsidiaries and our protection and
annuity products. For a discussion of the financial strength ratings of our insurance company subsidiaries, see the ‘‘Our
Segments — Protection — Financial Strength Ratings’’ section, below.
Distribution
Our RiverSource Distributors subsidiary is a registered broker-dealer that serves as the principal underwriter and distributor
of RiverSource variable and fixed annuities through AFSI, as well as serving as the distributor of fixed annuities through
third-party channels such as banks and broker-dealer networks. Our affiliated advisors are the largest providers of
RiverSource annuity products, although they can offer variable annuities from a select number of unaffiliated insurers as
well.
In the fourth quarter of 2010, RiverSource Life companies discontinued the sale of variable annuity products through third-
party channels in order to focus on the distribution of variable annuity products within our Advice & Wealth Management
segment. We continue to provide RiverSource fixed annuity products through third-party channels. In 2011, we had total
cash sales for fixed annuity products through third-party channels of $158 million. As of December 31, 2011, we had
distribution agreements for RiverSource fixed annuity products in place with more than 120 third party firms.
Our Segments — Protection
Our Protection segment provides a variety of products to address the protection and risk management needs of our retail
clients, including life, disability income and property-casualty insurance. These products are designed to provide a lifetime
of solutions that allow clients to protect income, grow assets and give to loved ones or charity.
Life and disability income products are primarily provided through our affiliated advisors. Our property-casualty products are
sold primarily through affinity relationships. We issue insurance policies through our life insurance subsidiaries and the
Property Casualty companies (as defined below under ‘‘Ameriprise Auto & Home Insurance Products’’). The primary sources
of revenues for this segment are premiums, fees and charges we receive to assume insurance-related risk. We earn net
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