Ameriprise 2012 Annual Report Download - page 184

segment include distribution expenses for services provided by the Advice & Wealth Management, Annuities and Protection
segments.
The Annuities segment provides variable and fixed annuity products of RiverSource Life companies to individual clients. The
Company provides variable annuity products through its advisors and fixed annuity products are provided through both
affiliated and unaffiliated advisors and financial institutions. Revenues for the Company’s 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 the Company’s 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. The Company also earns 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 the Asset Management
segment for marketing support and other services provided in connection with the availability of variable insurance trust
funds (‘‘VIT Funds’’) under the variable annuity contracts. Intersegment expenses for this segment include distribution
expenses for services provided by the Advice & Wealth Management segment, as well as expenses for investment
management services provided by the Asset Management segment.
The Protection segment offers a variety of products to address the protection and risk management needs of the
Company’s retail clients including life, DI and property-casualty insurance. Life and DI products are primarily provided
through the Company’s advisors. The Company’s property-casualty products are sold through affinity relationships. The
Company issues insurance policies through its life insurance subsidiaries and the Property Casualty companies. The primary
sources of revenues for this segment are premiums, fees, and charges that the Company receives to assume insurance-
related risk. The Company earns net investment income on owned assets supporting insurance reserves and capital
supporting the business. The Company also receives fees based on the level of assets supporting VUL separate account
balances. This segment earns intersegment revenues from fees paid by the Asset Management segment for marketing
support and other services provided in connection with the availability of VIT Funds under the VUL contracts. Intersegment
expenses for this segment include distribution expenses for services provided by the Advice & Wealth Management
segment, as well as expenses for investment management services provided by the Asset Management segment.
The Corporate & Other segment consists of net investment income or loss on corporate level assets, including excess
capital held in the Company’s subsidiaries and other unallocated equity and other revenues as well as unallocated
corporate expenses. The Corporate & Other segment also includes revenues and expenses of consolidated investment
entities, which are excluded on an operating basis.
Prior to 2012, the Chief Operating Decision Makers received segment results prepared on a GAAP basis and on an
operating basis and the Company has presented segment results in the Segment footnote on a GAAP basis. Operating
results have become more relevant in how management measures segment performance and determines compensation.
Accordingly, beginning in 2012, operating earnings have become the measure of segment profit or loss management uses
to evaluate segment performance. The segment results for the year ended December 31, 2012 are presented on an
operating basis and the prior periods have been recast.
Management uses segment operating measures in goal setting, as a basis for determining employee compensation and in
evaluating performance on a basis comparable to that used by some securities analysts and investors. Consistent with
GAAP accounting guidance for segment reporting, operating earnings is the Company’s measure of segment performance.
Operating earnings should not be viewed as a substitute for GAAP income from continuing operations before income tax
provision. The Company believes the presentation of segment operating earnings as the Company measures it for
management purposes enhances the understanding of its business by reflecting the underlying performance of its core
operations and facilitating a more meaningful trend analysis.
The accounting policies of the segments are the same as those of the Company, except for operating adjustments defined
below, the method of capital allocation, the accounting for gains (losses) from intercompany revenues and expenses and
not providing for income taxes on a segment basis.
Operating earnings is defined as operating net revenues less operating expenses. Operating net revenues and operating
expenses exclude the results of discontinued operations, integration and restructuring charges and the impact of
consolidating investment entities. Operating net revenues also exclude net realized gains or losses. Operating expenses
also exclude the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC and
DAC amortization). The market impact on variable annuity guaranteed living benefits includes changes in the GMWB and
GMAB embedded derivative liability values caused by changes in financial market conditions, net of changes in associated
economic hedge values. The market impact also includes certain valuation adjustments made in accordance with FASB
Accounting Standards Codification 820, Fair Value Measurements and Disclosures, including the impact on GMWB and
GMAB embedded derivative liability values of discounting projected benefits to reflect a current estimate of the Company’s
life insurance subsidiary’s nonperformance spread. Integration and restructuring charges primarily relate to the Company’s
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