Ameriprise 2014 Annual Report Download - page 87

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 from 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 from 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,
2014 2013 Change
(in millions)
Revenues
Management and financial advice fees $ 756 $ 709 $ 47 7%
Distribution fees 360 339 21 6
Net investment income 941 1,036 (95) (9)
Premiums 109 110 (1) (1)
Other revenues 425 367 58 16
Total revenues 2,591 2,561 30 1
Banking and deposit interest expense — — — —
Total net revenues 2,591 2,561 30 1
Expenses
Distribution expenses 439 420 19 5
Interest credited to fixed accounts 556 653 (97) (15)
Benefits, claims, losses and settlement expenses 463 498 (35) (7)
Amortization of deferred acquisition costs 235 111 124 NM
Interest and debt expense 38 37 1 3
General and administrative expense 227 213 14 7
Total expenses 1,958 1,932 26 1
Operating earnings $ 633 $ 629 $ 4 1%
NM Not Meaningful.
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 $4 million, or
1%, to $633 million for the year ended December 31, 2014 compared to $629 million for the prior year primarily due to
market appreciation, as well as a benefit from policyholder movement of investments in Portfolio Navigator funds under
certain in force variable annuities with living benefit guarantees to the Portfolio Stabilizer funds, partially offset by the
impact of unlocking. The impact of unlocking was a decrease to pretax operating income of $22 million for the year ended
December 31, 2014 compared to an increase of $60 million for the prior year.
During the fourth quarter of 2013, we added Portfolio Stabilizer fund options for our in force variable annuities with living
benefit guarantees. During the year ended December 31, 2014, approximately $4.7 billion of account value was moved
into these funds, exceeding expectations. The resulting earnings benefit for the year ended December 31, 2014 was
$44 million compared to a benefit of $26 million in the prior year. We anticipate a very minimal benefit to earnings going
forward.
RiverSource variable annuity account balances increased 2% to $77.0 billion at December 31, 2014 compared to the
prior year due to market appreciation, partially offset by net outflows of $1.7 billion.
RiverSource fixed annuity account balances declined 8% to $12.1 billion at December 31, 2014 compared to the prior
year reflecting elevated surrenders on products sold through third parties where crediting rates have reset lower. The
change in crediting rates decreased the level of spread compression for the year ended December 31, 2014. All of the
five-year guarantee block totaling $4.1 billion has been re-priced as of December 31, 2014.
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