Ameriprise 2012 Annual Report Download - page 30

expenses for investment management services provided by our Asset Management segment. All intersegment activity is
eliminated in our consolidated results.
Our annuity 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, 2012.
Contract purchasers can choose to add optional benefit provisions to their contracts to meet their needs, including
guaranteed minimum death benefit (‘‘GMDB’’), guaranteed minimum withdrawal benefit (‘‘GMWB’’) and guaranteed
minimum accumulation benefit (‘‘GMAB’’) provisions. Approximately 98% of RiverSource Life’s overall variable annuity
assets include either an optional or a standard GMDB provision and approximately 53% 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.
In 2012, we introduced the SecureSource 3ᓼ living benefit rider, an optional GMWB rider that can be added to new
purchases of RiverSource variable annuities for a fee. The SecureSource 3 benefit ensures a specified withdrawal amount
annually for life. Clients who purchase this benefit are invested in a fund (the Columbia VP Managed Volatility Fund)
designed to mitigate exposure to market volatility. This rider provides clients with the security of guaranteed lifetime
income, an opportunity for a less volatile investment experience and an opportunity for guaranteed income growth. Clients
purchasing a new variable annuity with the optional GMAB living benefit rider are also invested in the Columbia VP
Managed Volatility Fund.
Our Portfolio Navigator asset allocation program is available for new sales of our variable annuities, but as of April 30,
2012, is no longer available for sale with a living benefit rider. 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. Portfolio Navigator was designed to help 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.
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 —
Management of Enterprise 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.
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