Ameriprise 2013 Annual Report Download - page 84

Annuities
Our Annuities segment provides variable and fixed annuity products of RiverSource Life companies to individual clients. We
provide our variable annuity products through our advisors, and our fixed annuity products are distributed through both
affiliated and unaffiliated advisors and financial institutions. Revenues for our 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 our 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. We also earn 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 our 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 our Advice & Wealth Management segment, as well as expenses for investment management services provided by our
Asset Management segment.
The following table presents the results of operations of our Annuities segment on an operating basis:
Years Ended
December 31,
2013 2012 Change
(in millions)
Revenues
Management and financial advice fees $ 709 $ 648 $ 61 9%
Distribution fees 339 317 22 7
Net investment income 1,058 1,132 (74) (7)
Premiums 110 118 (8) (7)
Other revenues 367 309 58 19
Total revenues 2,583 2,524 59 2
Banking and deposit interest expense — — — —
Total net revenues 2,583 2,524 59 2
Expenses
Distribution expenses 434 395 39 10
Interest credited to fixed accounts 653 688 (35) (5)
Benefits, claims, losses and settlement expenses 498 419 79 19
Amortization of deferred acquisition costs 111 229 (118) (52)
Interest and debt expense 22——
General and administrative expense 199 224 (25) (11)
Total expenses 1,897 1,957 (60) (3)
Operating earnings $ 686 $ 567 $ 119 21%
Our Annuities segment pretax operating income, which excludes net realized gains or losses and the market impact on
variable annuity guaranteed benefits (net of hedges and the related DSIC and DAC amortization), increased $119 million,
or 21%, to $686 million for the year ended December 31, 2013 compared to $567 million for the prior year primarily due
to the impact of unlocking and model changes, which was an increase to pretax operating income of $60 million for the
year ended December 31, 2013 compared to a decrease of $11 million for the prior year.
During the fourth quarter of 2013, we added managed volatility fund options (Portfolio Stabilizer) for our in-force variable
annuities with living benefit guarantees. These additional investment options resulted in sizable asset movement into the
managed volatility funds. The resulting earnings benefit in the fourth quarter of 2013 was $26 million.
RiverSource variable annuity account balances increased 11% to $75.5 billion at December 31, 2013 compared to the
prior year due to market appreciation, partially offset by net outflows. Variable annuity net outflows of $757 million for the
year ended December 31, 2013 reflected the closed book of annuities previously sold through third parties, partially offset
by $245 million of net inflows in the Ameriprise channel.
RiverSource fixed annuity account balances declined 4% to $13.3 billion at December 31, 2013 compared to the prior
year due to ongoing net outflows resulting from low client demand given the interest rate environment. We are in the
process of setting lower renewal interest rates for a portion of our fixed annuities that are currently above the guaranteed
minimum, which should help relieve some of the spread compression caused by low rates. The majority of the interest rate
renewals will occur in the first half of 2014.
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