Ameriprise 2014 Annual Report Download - page 73

Sources of Revenues and Expenses
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, administrative
services (including transfer agent and administration fees earned from providing services to retail mutual funds) and other
custodial services. Management and financial advice fees also include mortality and expense risk fees that are generally
calculated as a percentage of the fair value of assets held in separate accounts.
Our management and financial advice fees are generally recognized when earned as the service is provided. A significant
portion of our management fees are calculated as a percentage of the fair value of our managed assets. A large majority
of our managed assets are valued by third party pricing services vendors based upon observable market data. The
selection of our third party pricing service 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 our 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.
We may receive performance-based incentive management fees on certain management contracts. Performance fees are
paid when specific performance hurdles are met. We recognize performance fees on the date the fee is no longer subject
to adjustment. Any performance fees received are not subject to repayment or any other clawback provisions.
Certain management and financial advice fees are charged based on an annual fee or a transaction fee. These fees
include financial planning, certain custodial and fund administration and brokerage fees. Fees from financial planning
services are recognized when the financial plan is delivered. Annual custodial and fund administration fees are recognized
evenly as service is provided over the contract period. Transaction based brokerage fees are recognized on the transaction
date.
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 our wrap accounts, as well as surrender charges on
fixed and variable universal life insurance and annuities, which are recognized as revenue 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 CIEs; the
changes in fair value of trading securities, certain derivatives and certain assets and liabilities of CIEs; 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 and commercial mortgage loans 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.
Other Revenues
Other revenues primarily include variable annuity guaranteed benefit rider charges and fixed and variable universal life
insurance charges, which consist of cost of insurance charges (net of reinsurance premiums and cost of reinsurance for UL
insurance products) and administrative and surrender charges. These charges are recognized as revenue when assessed.
We also record revenue related to consolidated property funds managed by Threadneedle. These revenues primarily
represent rental income of managed properties and are recognized on a straight line basis over the term of the lease.
54