Ameriprise 2011 Annual Report Download - page 58

Equity price, credit market and interest rate fluctuations can have a significant impact on our results of operations,
primarily due to the effects they have on the asset management and other asset-based fees we earn, the ‘‘spread’’
income generated on our annuities, banking and deposit products and universal life (‘‘UL’’) insurance products, the value
of deferred acquisition costs (‘‘DAC’’) and deferred sales inducement costs (‘‘DSIC’’) assets, the values of liabilities for
guaranteed benefits associated with our variable annuities and the values of derivatives held to hedge these benefits.
In June 2009, the Financial Accounting Standards Board 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 (loss) of the CIEs
is reflected in net income (loss) 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; the market impact on variable
annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization; integration and restructuring charges;
income (loss) from discontinued operations; and the impact of consolidating CIEs, best reflect the underlying performance
of our 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:
• Operating total net 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%.
Net revenues increased $680 million, or 7%, to $10.2 billion for the year ended December 31, 2011 compared to
$9.5 billion for the prior year. Operating net revenues exclude net realized gains or losses and revenues or losses of the
CIEs and include the fees we earn from services provided to the CIEs. Operating net revenues increased $933 million, or
10%, to $10.1 billion for the year ended December 31, 2011 compared to $9.1 billion for the prior year.
Net income from continuing operations attributable to Ameriprise Financial per diluted share increased $0.34, or 8%, to
$4.61 for the year ended December 31, 2011 compared to $4.27 for the prior year. Operating earnings exclude net
realized gains or losses; the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC
amortization; integration and restructuring charges; income (loss) from discontinued operations; and the impact of
consolidating CIEs. Operating earnings per diluted share increased $0.47, or 10%, to $5.00 for the year ended
December 31, 2011 compared to $4.53 for the prior year.
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