Ameriprise 2012 Annual Report Download - page 87

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. Benefits, claims, losses and settlement expenses for the
year ended December 31, 2011 included a benefit of $40 million from unlocking and model changes primarily reflecting a
positive impact from enhancements made to the valuation of variable annuities with living benefits compared to an
expense of $263 million in 2010 primarily related to changes in policyholder surrender assumptions. The market impact
on variable annuity guaranteed living benefits (net of hedges and the related DSIC amortization) was an increase to
benefits, claims, losses and settlement expenses of $67 million in 2011, including $4 million of expense associated with
unlocking and model changes. This compares to an increase of $9 million for 2010, including a $37 million benefit
associated with unlocking and model changes. In 2011, the fair value of the variable annuity guaranteed living benefits
liability increased over $1 billion and nonperformance credit spread increased. Hedging management decisions and results
drove a gross expense that was materially offset by nonperformance credit spread movement. Benefits, claims, losses and
settlement expenses related to our auto and home business increased from the prior year primarily due to premium
growth, a $16 million increase in catastrophe losses and 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 as a result of unfavorable equity markets in 2011 compared to
improving equity markets in 2010. Benefits, claims, losses and settlement expenses for 2010 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 $283 million to $397 million for the year ended December 31, 2011 compared to
$114 million for the prior year. Amortization of DAC in 2011 included an expense of $38 million from unlocking and model
changes primarily driven by a decrease in income earned on assets due to the low interest rate environment compared to
the interest credited to the contractholders, which in many instances are at their minimum guarantees, partially offset by a
benefit from improved policyholder persistency. In 2010, there was a $197 million benefit to amortization of DAC from
unlocking and model changes, of which $107 million was due to extending annuity amortization periods. Persistency on
both fixed and variable annuities improved to the point where the DAC amortization periods needed to be extended to
better align the recognition of expense with revenues anticipated over the life of the business. In addition, improved
persistency led to an increase in benefit costs for variable annuity guarantees which reduces profits used to amortize DAC
and resulted in a decrease in amortization of DAC of $58 million in 2010. A $39 million benefit was also recognized in
2010 due to an increase in spreads. The DAC offset to the market impact on variable annuity guaranteed living benefits
(net of hedges and the related DSIC amortization) was a benefit of $5 million for the year ended December 31, 2011
compared to an expense of $10 million for the prior year which was associated with unlocking and model changes. The
market impact on amortization of DAC was an expense of $9 million in 2011 compared to a benefit of $17 million in the
prior year as a result of unfavorable equity markets in 2011 compared to improving equity markets in 2010. Amortization
of DAC in 2010 included a benefit of $12 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 due to a $40 million increase in interest and debt expense of CIEs, partially
offset by lower average Ameriprise Financial debt balances.
General and administrative expense increased $214 million, or 8%, to $3.1 billion for the year ended December 31, 2011
compared to $2.8 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.
Income Taxes
Our effective tax rate on income from continuing operations including income attributable to noncontrolling interests was
26.1% for the year ended December 31, 2011, compared to 19.9% for the prior year. Our effective tax rate on income
from continuing operations excluding income attributable to noncontrolling interests was 24.3% for the year ended
December 31, 2011, compared to 22.5% for the prior year.
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