Ameriprise 2014 Annual Report Download - page 32

sales is generally driven by the relative performance of the equity and fixed income markets. Fixed sales are generally
stronger when yields available in the fixed income markets are relatively high than when yields are relatively low. Variable
sales are generally stronger in times of superior performance in equity markets than in times of weak performance in
equity markets. The relative proportion between fixed and variable annuity sales is also influenced by product design and
other factors. In addition to the revenues we generate on these products, we also receive fees charged on assets allocated
to our separate accounts to cover administrative costs and a portion of the management fees from the underlying
investment accounts in which assets are invested, as discussed below under ‘‘Variable Annuities.’’ Investment
management performance is critical to the profitability of our RiverSource annuity business.
Variable Annuities
A variable annuity provides a contractholder with investment returns linked to underlying investment accounts of the
contractholder’s choice. These underlying investment options may include the VIT Funds previously discussed (see
‘‘Business — Our Segments — Asset Management — Product and Service Offerings — U.S. Registered Funds,’’ above) as
well as variable portfolio funds of other companies. RiverSource variable annuity products in force offer a fixed account
investment option with guaranteed minimum interest crediting rates ranging up to 4% at December 31, 2014.
Contract purchasers can choose to add optional benefit provisions to their contracts to meet their needs, including
guaranteed minimum death benefit (‘‘GMDB’’), guaranteed minimum withdrawal benefit (‘‘GMWB’’) and guaranteed
minimum accumulation benefit (‘‘GMAB’’) provisions. Approximately 98% of RiverSource Life’s overall variable annuity
assets include either an optional or a standard GMDB provision and approximately 58% of RiverSource Life’s overall
variable annuity assets include a GMWB or GMAB provision. In general, these features can help protect contractholders
and beneficiaries from a shortfall in death or living benefits due to a decline in the value of their underlying investment
accounts.
In 2012, we introduced the SecureSource 3 living benefit rider, an optional GMWB rider that can be added to new
purchases of RiverSource variable annuities for a fee. The SecureSource 3 benefit ensures a specified withdrawal amount
annually for life. Clients who purchase this benefit are invested in one or more of four of our Portfolio Stabilizer (managed
volatility) funds of funds that are designed to pursue total return while seeking to mitigate exposure to market volatility. This
rider provides clients with the security of guaranteed lifetime income, an opportunity for a less volatile investment
experience and an opportunity for guaranteed income growth. Clients purchasing a new variable annuity with the optional
GMAB living benefit rider are also invested in one or more of four of our Portfolio Stabilizer funds of funds. Columbia
Management serves as investment advisor for the funds of funds and all of the underlying funds in which the funds of
funds invest.
Our Portfolio Navigator (traditional asset allocation) program funds are available for new sales of our variable annuities, but
as of April 2012, were no longer available for sale with a living benefit rider. Portfolio Navigator funds allow clients to
allocate their contract value to one of five funds of funds, each of which invests in various underlying funds. Portfolio
Navigator funds are designed to allow a contract purchaser to select investment options based on the purchaser’s
investment time horizon, risk tolerance and investment goals. Portfolio Navigator funds were designed to help a contract
purchaser tailor the performance of annuities and life insurance policies to their specific needs and to keep investment
allocations on track over time. Columbia Management, our investment management subsidiary, serves as investment
adviser for the funds of funds and all of the underlying funds in which the Portfolio Navigator funds of funds invest. Our
Portfolio Stabilizer funds of funds offering is available for new sales of variable annuities sold without a living benefit rider.
In addition to SecureSource 3 we have continued to expand our overall product mix to include new guaranteed income
solutions and income management tools. We introduced our Income Guide service late in 2014 to aid clients in managing
income through an adaptive withdrawal strategy. The service is available in our current suite of variable annuities where a
living benefit rider has not been elected. We also enhanced our annuitization options and immediate annuity products to
provide increased flexibility by allowing for greater liquidity once payments commence. These new income options can
assist clients by providing a guaranteed income stream while at the same time allowing some access to the underlying
value of remaining payments which can aid when unexpected expenses arise during retirement.
The general account assets of our life insurance subsidiaries support the contractual obligations under the guaranteed
benefit the Company offers (see ‘‘Business — Our Segments — Asset Management — Product and Service Offerings —
Management of Enterprise Owned Assets’’ above). As a result, we bear the risk that protracted under-performance of the
financial markets could result in guaranteed benefit payments being higher than what current account values would
support. Our exposure to risk from guaranteed benefits generally will increase when equity markets decline. The persistent
low interest rate environment has also had a negative effect, resulting in an increase in our guaranteed benefit reserves in
the current period.
RiverSource variable annuities provide us with fee-based revenue in the form of mortality and expense risk fees, marketing
support and administrative fees, fees charged for optional features elected by the contractholder, and other contract
charges. We receive marketing support payments from the VIT Funds underlying our variable annuity products as well as
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