Ameriprise 2012 Annual Report Download - page 60

expanded beyond our traditional strengths in the U.S. and U.K. to gather assets in Continental Europe, Asia, Australia, the
Middle East and Africa. In addition, we expect to leverage the collective investment and distribution capabilities of
Columbia and Threadneedle to develop new solutions designed to manage an increasingly complex and volatile
marketplace.
The financial results from the businesses underlying our go to market approaches are reflected in our five operating
segments:
• Advice & Wealth Management;
• Asset Management;
• Annuities;
• Protection; and
• Corporate & Other.
Our operating segments are aligned with the financial solutions we offer to address our clients’ needs. The products and
services we provide retail clients and, to a lesser extent, institutional clients, are the primary source of our revenues and
net income. Revenues and net income are significantly affected by investment performance and the total value and
composition of assets we manage and administer for our retail and institutional clients as well as the distribution fees we
receive from other companies. These factors, in turn, are largely determined by overall investment market performance and
the depth and breadth of our individual client relationships.
Financial markets and macroeconomic conditions have had and will continue to have a significant impact on our operating
and performance results. The persistent economic headwinds of the past several years have mitigated growth opportunities
in our industry by affecting asset values and dampening client confidence and activity. In addition, the business and
regulatory environment in which we operate remains subject to elevated uncertainty and change. To succeed, we expect to
continue focusing on our key strategic objectives. The success of these and other strategies may be affected by the factors
discussed in Item 1A of this Annual Report on Form 10-K — ‘‘Risk Factors.’’
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, deposit products and universal life (‘‘UL’’) insurance products, the value of 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.
Earnings, as well as operating earnings, will continue to be negatively impacted by the ongoing low interest rate
environment. In addition to continuing spread compression in our interest sensitive product lines, there is also the potential
for interest rate related impacts to DAC and DSIC amortization and the level of reserves as a result of our ongoing review
of various actuarial related assumptions, which could be material.
In January 2013, we completed the conversion of our federal savings bank subsidiary, Ameriprise Bank, FSB (‘‘Ameriprise
Bank’’), to a limited powers national trust bank. In connection with this conversion, deposit-taking and credit-originating
activities of Ameriprise Bank were terminated. In addition, Ameriprise Financial was deregistered by the Federal Reserve as
a savings and loan holding company and will no longer be subject to supervision and regulation as such. We will continue
to make available to our clients certain deposit and credit products via referral arrangements with respected third party
financial institutions. We incurred $26 million of restructuring charges in 2012 related to exiting the banking business, of
which $7 million related to the impact of an interest rate hedge. The transition released approximately $375 million of
formerly required capital, which we anticipate using to repurchase shares throughout 2013. We estimate that the transition
will reduce our annual earnings by approximately $60 million in 2013. At the enterprise level, we anticipate that the
earnings per share impact will be neutralized by the end of 2013, as we redeploy the excess capital to shareholders
through share repurchases.
In the third quarter of the year, we conduct our annual review of insurance and annuity valuation assumptions relative to
current experience and management expectations. To the extent that expectations change as a result of this review, we
update valuation assumptions and the impact is reflected as part of our annual review of life insurance and annuity
valuation assumptions and modeling changes (‘‘unlocking’’). The unlocking impact in the third quarter of 2012 primarily
reflected the low interest rate environment and the assumption of continued low interest rates over the near-term.
Specifically, the starting 10-year Treasury rate assumption used in modeling was reduced by 150 basis points and we
assumed rates would stay flat until mid-2013, then increasing to their ultimate rate by mid-2016. We did not change our
ultimate long term assumption. See our Consolidated and Segment Results of Operations sections below for the pretax
impacts on our revenues and expenses attributable to unlocking and additional discussion of the drivers of the unlocking
impact.
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