Ameriprise 2011 Annual Report Download - page 71

Expenses
Total expenses increased $929 million, or 12%, to $8.8 billion for the year ended December 31, 2011 compared to
$7.9 billion for the prior year. Operating expenses exclude the market impact on variable annuity guaranteed living benefits,
net of hedges, DSIC and DAC amortization; integration and restructuring charges; and expenses of the CIEs. Operating
expenses increased $868 million, or 12%, to $8.4 billion for the year ended December 31, 2011 compared to
$7.5 billion for the prior year primarily due to the impact of updating valuation assumptions and models, the market
impact on DAC and DSIC amortization, and increases in distribution expenses and general and administrative expense.
Distribution expenses increased $432 million, or 21%, to $2.5 billion for the year ended December 31, 2011 compared
to $2.1 billion for the prior year as a result of the Columbia Management Acquisition, as well as higher advisor
compensation from business growth.
Interest credited to fixed accounts decreased $56 million, or 6%, to $853 million for the year ended December 31, 2011
compared to $909 million for the prior year driven by lower average variable annuities fixed sub-account balances and a
lower average crediting rate on interest sensitive fixed annuities, as well as lower average fixed annuity account balances.
Average variable annuities fixed sub-account balances decreased $580 million, or 11%, to $4.8 billion for the year ended
December 31, 2011 compared to the prior year primarily due to the implementation of changes to the Portfolio Navigator
program in the second quarter of 2010. The average fixed annuity crediting rate excluding capitalized interest decreased to
3.7% for the year ended December 31, 2011 compared to 3.8% for the prior year. Average fixed annuities contract
accumulation values decreased $265 million, or 2%, to $14.3 billion for the year ended December 31, 2011 compared to
the prior year due to outflows.
Benefits, claims, losses and settlement expenses decreased $193 million, or 11%, to $1.6 billion for the year ended
December 31, 2011 compared to $1.8 billion for the prior year. Operating benefits, claims, losses and settlement
expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges and DSIC
amortization, decreased $251 million, or 14%, to $1.5 billion for the year ended December 31, 2011 compared to
$1.7 billion for the prior year. Operating benefits, claims, losses and settlement expenses for the year ended
December 31, 2011 included a benefit of $44 million from updating valuation assumptions and models compared to an
expense of $300 million in the prior year. Benefits, claims, losses and settlement expenses related to our Auto and Home
business increased from the prior year primarily due to $45 million of catastrophe losses in 2011 compared to $29 million
in 2010, as well as higher auto liability reserves. Benefits, claims, losses and settlement expenses related to our
immediate annuities with life contingencies increased from the prior year due to an unfavorable change in reserves
primarily driven by higher premiums. In addition, benefits, claims, losses and settlement expenses increased as a result of
higher UL claims and an increase in ongoing reserve levels for UL products with secondary guarantees compared to the
prior year. The market impact to DSIC was an expense of $2 million in 2011 compared to a benefit of $3 million in the
prior year. Benefits, claims, losses and settlement expenses for the prior year included a $21 million expense, net of DSIC,
as a result of the implementation of changes to the Portfolio Navigator program.
Amortization of DAC increased $491 million to $618 million for the year ended December 31, 2011 compared to
$127 million for the prior year. Operating amortization of DAC, which excludes the DAC offset to the market impact on
variable annuity guaranteed living benefits, increased $515 million to $626 million for the year ended December 31, 2011
compared to $111 million for the prior year primarily due to the impact of updating valuation assumptions and models, as
well as the market impact on amortization of DAC. Operating amortization of DAC in 2011 included an expense of
$63 million from updating valuation assumptions and models compared to a benefit of $375 million in the prior year. The
market impact on amortization of DAC was an expense of $15 million in 2011 compared to a benefit of $31 million in the
prior year. Amortization of DAC for the year ended December 31, 2010 included a benefit of $19 million as a result of the
implementation of changes to the Portfolio Navigator program.
Interest and debt expense increased $27 million, or 9%, to $317 million for the year ended December 31, 2011
compared to $290 million for the prior year. Operating interest and debt expense, which excludes interest expense on CIE
debt, decreased $13 million, or 12%, to $96 million for the year ended December 31, 2011 compared to $109 million in
the prior year primarily due to lower average debt balances.
General and administrative expense increased $228 million, or 8%, to $3.0 billion for the year ended December 31, 2011
compared to $2.7 billion for the prior year. Operating general and administrative expense excludes integration and
restructuring charges and expenses of the CIEs. Integration and restructuring charges decreased $16 million to $95 million
for the year ended December 31, 2011 compared to $111 million for the prior year. Operating general and administrative
expense increased $241 million, or 9%, to $2.8 billion for the year ended December 31, 2011 compared to $2.6 billion
for the prior year primarily reflecting an additional four months of ongoing expenses from the Columbia Management
Acquisition, as well as higher compensation expense and an increase in advertising and investment spending compared to
the prior year.
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