Ameriprise 2013 Annual Report Download - page 132

to realize deferred tax assets and avoid the establishment of a valuation allowance with respect to such assets. In the
opinion of management, it is currently more likely than not that the Company will not realize the full benefit of certain state
deferred tax assets, primarily state net operating losses, and therefore a valuation allowance of $19 million has been
established at December 31, 2013.
Sources of Revenue
The Company generates revenue from a wide range of investment and insurance products. Principal sources of revenue
include management and financial advice fees, distribution fees, net investment income and premiums.
Management and Financial Advice Fees
Management and financial advice fees relate primarily to fees earned from managing mutual funds, separate account and
wrap account assets and institutional investments, as well as fees earned from providing financial advice and
administrative services (including transfer agent, administration and custodial fees earned from providing services to retail
mutual funds). Management and financial advice fees also include mortality and expense risk fees earned on separate
account assets.
The Company’s management fees are generally accrued daily and collected monthly. A significant portion of the Company’s
management fees are calculated as a percentage of the fair value of its managed assets. A large majority of the
Company’s managed assets are valued by third party pricing services vendors based upon observable market data. The
selection of the Company’s third party pricing services vendors and the reliability of their prices are subject to certain
governance procedures, such as exception reporting, subsequent transaction testing, and annual due diligence of the
Company’s vendors, which includes assessing the vendor’s valuation qualifications, control environment, analysis of asset-
class specific valuation methodologies and understanding of sources of market observable assumptions.
The Company may receive performance-based incentive fees from hedge funds, Threadneedle Open Ended Investment
Companies or other structured investments that it manages. The annual performance fees for structured investments are
recognized as revenue at the time the performance fee is finalized or no longer subject to adjustment. All other
performance fees are based on a full contract year and are final at the end of the contract year. Any performance fees
received are not subject to repayment or any other clawback provisions.
Employee benefit plan and institutional investment management and administration services fees are negotiated and are
also generally based on underlying asset values. Fees from financial planning and advice services are recognized when the
financial plan is delivered.
Distribution Fees
Distribution fees primarily include point-of-sale fees (such as mutual fund front-end sales loads) and asset-based fees
(such as 12b-1 distribution and shareholder service fees) that are generally based on a contractual percentage of assets
and recognized when earned. Distribution fees also include amounts received under marketing support arrangements for
sales of mutual funds and other companies’ products, such as through the Company’s wrap accounts, as well as surrender
charges on fixed and variable universal life insurance and annuities, which are recognized when assessed.
Net Investment Income
Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale,
mortgage loans, policy and certificate loans, other investments, cash and cash equivalents and investments of
consolidated investment entities; the changes in fair value of trading securities, certain derivatives and certain assets and
liabilities of consolidated investment entities; the pro rata share of net income or loss on equity method investments; and
realized gains and losses on the sale of securities and charges for other-than-temporary impairments of investments
related to credit losses. Interest income is accrued as earned using the effective interest method, which makes an
adjustment of the yield for security premiums and discounts on all performing fixed maturity securities classified as
Available-for-Sale so that the related security or loan recognizes a constant rate of return on the outstanding balance
throughout its term. Realized gains and losses on securities, other than trading securities and equity method investments,
are recognized using the specific identification method on a trade date basis.
Premiums
Premiums include premiums on auto and home insurance, traditional life and health (DI and LTC) insurance and immediate
annuities with a life contingent feature. Premiums on auto and home insurance are net of reinsurance premiums and are
recognized ratably over the coverage period. Premiums on traditional life, health insurance and immediate annuities with a
life contingent feature are net of reinsurance ceded and are recognized as revenue when due.
115