Ameriprise 2014 Annual Report Download - page 191

The accounting policies of the segments are the same as those of the Company, except for operating adjustments defined
below, the method of capital allocation, the accounting for gains (losses) from intercompany revenues and expenses and
not providing for income taxes on a segment basis.
The largest source of intersegment revenues and expenses is retail distribution services, where segments are charged
transfer pricing rates that approximate arm’s length market prices for distribution through the Advice & Wealth
Management segment. The Advice & Wealth Management segment provides distribution services for affiliated and
non-affiliated products and services. The Asset Management segment provides investment management services for the
Company’s owned assets and client assets, and accordingly charges investment and advisory management fees to the
other segments.
All costs related to shared services are allocated to the segments based on a rate times volume or fixed basis.
The Advice & Wealth Management segment provides financial planning and advice, as well as full-service brokerage
services, primarily to retail clients through the Company’s advisors. These services are centered on long-term, personal
relationships between the Company’s advisors and its clients and focus on helping clients confidently achieve their financial
goals. The Company’s advisors provide a distinctive approach to financial planning and have access to a broad selection of
both affiliated and non-affiliated products to help clients meet their financial needs. A significant portion of revenues in this
segment is fee-based, driven by the level of client assets, which is impacted by both market movements and net asset
flows. The Company also earns net investment income on invested assets primarily from certificate products. This segment
earns revenues (distribution fees) for distributing non-affiliated products and intersegment revenues (distribution fees) for
distributing the Company’s affiliated products and services provided to its retail clients. Intersegment expenses for this
segment include expenses for investment management services provided by the Asset Management segment. In January
2013, the Company completed the conversion of Ameriprise Bank to Ameriprise National Trust Bank. As a result of the
conversion, Ameriprise National Trust Bank is no longer engaged in deposit-taking and credit-originating activities. In 2012,
the Company liquidated banking deposits and returned all funds to its clients. The Company also sold Ameriprise Bank’s
consumer loan portfolio to affiliates of Ameriprise Bank and Ameriprise Bank’s credit card account portfolio to Barclays.
The Asset Management segment provides investment advice and investment products to retail, high net worth and
institutional clients on a global scale through Columbia Management Investment Advisers, LLC (‘‘Columbia’’ or ‘‘Columbia
Management’’) and Threadneedle. Columbia Management primarily provides products and services in the U.S. and
Threadneedle primarily provides products and services internationally. Columbia provides clients with U.S. domestic
individual products through unaffiliated third party financial institutions and through the Advice & Wealth Management
segment. Threadneedle provides institutional products and services through the Company’s institutional sales force.
International retail products are primarily distributed through third-party institutions. Individual products include U.S. mutual
funds and their non-U.S. equivalents, exchange-traded funds and variable product funds underlying insurance and annuity
separate accounts. Institutional asset management services are designed to meet specific client objectives and may
involve a range of products, including those that focus on traditional asset classes, separately managed accounts,
individually managed accounts, collateralized loan obligations, hedge funds, collective funds and property funds.
Collateralized loan obligations, hedge funds and certain private funds are often classified as alternative assets. Revenues in
this segment are primarily earned as fees based on managed asset balances, which are impacted by market movements,
net asset flows, asset allocation and product mix. The Company may also earn performance fees from certain accounts
where investment performance meets or exceeds certain pre-identified targets. The Asset Management segment also
provides intercompany asset management services for Ameriprise Financial subsidiaries. The fees for all such services are
reflected within the Asset Management segment results through intersegment transfer pricing. Intersegment expenses for
this segment include distribution expenses for services provided by the Advice & Wealth Management, Annuities and
Protection segments.
The Annuities segment provides variable and fixed annuity products of RiverSource Life companies to individual clients. The
Company provides variable annuity products through its advisors and its fixed annuity products are distributed through both
affiliated and unaffiliated advisors and financial institutions. Revenues for the Company’s 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 the Company’s 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. The Company also earns 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 the 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 the Advice & Wealth Management segment, as well as expenses for investment
management services provided by the Asset Management segment.
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