Ameriprise Financial Reports Second Quarter 2006 Results.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- Ameriprise Financial Ameriprise Financial, Inc. (NYSE: AMP) is a company offering financial advice and products. It is the successor to American Express Financial Advisors (AEFA), which was a subsidiary of the American Express Company. , Inc. (NYSE NYSE See: New York Stock Exchange :AMP): --Net income per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share was $0.57 for the quarter, including $0.22 of non-recurring separation costs --Adjusted earnings per diluted share for the quarter were $0.79, reflecting strong underlying business performance Ameriprise Financial, Inc. (NYSE:AMP) today reported net income of $141 million for the quarter ended June June: see month. 30, 2006 versus income before discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of $149 million for the year-ago quarter. Adjusted earnings increased 22 percent to $195 million in the second quarter of 2006 compared to the second quarter of 2005. Adjusted earnings exclude income from discontinued operations, after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. non-recurring separation costs and after-tax earnings of AMEX AMEX See: American Stock Exchange Assurance in the 2005 period, a business that remained with American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. .(1) Net income per diluted share for the second quarter of 2006 was $0.57. Adjusted earnings per diluted share for the second quarter of 2006 were $0.79, up 22 percent from the year-ago period. Both per share amounts are based on an average diluted share count of 248 million. Revenues grew 8 percent to $2.1 billion in the second quarter of 2006. Adjusted revenues, which exclude the impact of AMEX Assurance, grew 13 percent, reflecting solid growth in retail client activity, which resulted in higher management fees, distribution fees and premiums. "Other" revenues were positively impacted by the proceeds from the sale of the defined contribution recordkeeping business, contributing 4 percentage points of the adjusted revenue growth. Return on equity for the 12 months ended June 30, 2006 was 7.1 percent. Adjusted return on equity increased to 10.7 percent from 10.4 percent for the 12 months ended March 31, 2006. During the quarter, the Company repurchased 1 million shares for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $42 million. "We had a solid operating quarter and continue to gain significant traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. against our strategic objectives, reflecting the benefits of the diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. within our integrated business model," said Jim Cracchiolo, chairman and chief executive officer. "We are exceeding our revenue and earnings targets and continue to drive improvement in return on equity. "A key factor in our success in the quarter is the continued stability and increased productivity of our advisor force. Branded advisor retention remains stable at high levels and advisor productivity increased significantly, reflected in strong growth in gross dealer concession Gross Dealer Concession or GDC is the revenue to a brokerage firm when commissioned securities and insurance salespeople sell a product, whether it is an investment like stocks, bonds, or mutual funds, or insurance like life insurance or long term care insurance. and advisor cash sales sales made for ready, money, in distinction from those on which credit is given; stocks sold, to be delivered on the day of transaction. See also: Cash , in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite the turbulent market environment. In addition, we continue to attract mass affluent Mass affluent and emerging affluent are marketing terms used to refer to the growing high end of the mass market. It is most commonly used by the financial services industry to refer to individuals with US$100,000 to US$1,000,000 of liquid financial assets,[1] clients into our base. (1) See definitions and reconciliations throughout the release. "Owned and managed net flows approached $2 billion in the quarter as we saw continued strong sales in wrap and variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. products and net outflows in RiverSource RiverSource is a subsidiary of Ameriprise Financial, Inc. RiverSource is made up of RiverSource Investments, RiverSource Annuities, and RiverSource Insurance. RiverSource Funds include more than 60 retail mutual funds and more than 20 variable portfolio mutual funds sold in Funds were essentially cut in half due to both increased sales and lower redemptions. I am pleased with the progress we're we're Contraction of we are. we're we are making. "With regard to our operating segments, our Asset Accumulation Accumulation 1) In the context of individual investing, it is the process of contributing cash to invest in securities over a period of time in order to build a portfolio of desired value. Dividends and capital gains are also reinvested during this process. and Income segment results were led by continued improvements in our brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. business driven by strong wrap net flows and other brokerage activity. The variable annuity business continues to experience strong net flows both within Ameriprise and through third parties. Our exposure to spread products, primarily certificates and fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. , declined as we continue to manage our exposure to the yield curve. "Within the Protection segment, we feel good about our results as we continue to gain market share in variable universal life, universal life and auto and home insurance. Profitability in our disability income insurance business has returned to historical levels after higher claims in the first quarter of the year. In addition, long term care insurance experienced lower-than-usual claims in the quarter; however, we see this as an anomaly Abnormality or deviation. Pronounced "uh-nom-uh-lee," it is a favorite word among computer people when complex systems produce output that is inexplicable. See software conflict and anomaly detection. rather than a trend." Second Quarter 2006 Summary Management believes that the presentation of adjusted financial measures best reflects the underlying performance of the Company's ongoing operations. The adjusted financial measures exclude discontinued operations, non-recurring separation costs and AMEX Assurance. This presentation is consistent with the non-GAAP financial information presented in the Company's annual report and Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005, filed March 8, 2006 with the Securities and Exchange Commission.
Ameriprise Financial, Inc.
2Q 2006 Summary
(in millions, unaudited) % Per Diluted Share %
-----------------
2Q06 2Q05 Change 2Q06 2Q05 Change
----- ----- ------- -------- -------- ------
Net income $141 $155 (9)% $0.57 $0.63 (10)%
Less: Income from
discontinued operations - 6 (a) - 0.02 (a)
----- ----- -------- --------
Income before
discontinued operations 141 149 (5) 0.57 0.61 (7)
Less: Income
attributable to
AMEX Assurance, after-tax - 26 (a) - 0.11 (a)
Add: Separation costs,
after-tax 54 37 46 0.22 0.15 47
----- ----- -------- --------
Adjusted earnings, after-
tax $195 $160 22 $0.79 $0.65 22
===== ===== ======== ========
(a) Variance of 100% or greater.
Included in consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net income and adjusted earnings for the second quarter of 2006 were $6 million in pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern realized net investment gains. Included in the second quarter of 2005 were $57 million in pretax realized net investment gains. The reported adjusted earnings and adjusted revenues reflect the strong underlying improvement in business results. Although there are a number of special items addressed later in the release, in total, they negatively impacted adjusted earnings by $1 million. Second Quarter 2006 Consolidated Business Highlights --Performance against shareholder targets remains strong with adjusted revenues up 13 percent, adjusted earnings up 22 percent and adjusted return on equity of 10.7 percent. --Strong productivity increases drove 15 percent growth in total Gross Dealer Concession (GDC GDC Game Developers Conference GDC General Dental Council GDC Gouvernement du Canada GDC Georgia Department of Corrections GDC Global Data Center GDC Guglielmi Detachable Coil GDC Global Development Center GDC Institute for Genetic Disease Control in Animals ) from the year-ago period, reflecting a 12 percent increase in branded advisor cash sales combined with continued strong net flows into advisor managed wrap accounts Wrap Account An account in which a brokerage manages an investor's portfolio for a flat quarterly or annual fee. This fee covers all administrative, commission, and management expenses. Sometimes this also includes funds of funds. . Per branded advisor GDC increased 14 percent from the second quarter of 2005. --As of June 30, 2006, advisors totaled 12,372, up 2 percent from the year-ago quarter. There was no significant change in the number of branded advisors, primarily due to fewer new hires in the employee channel. Franchisee retention remained strong at 91 percent. --Productivity increases were also the result of growth in mass affluent clients, those with $100,000 or more in assets or comparable product values with the Company, up 8 percent from the year-ago period. --Financial plans sold were essentially flat from the prior year period. Financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against penetration The successful unauthorized breach of a security perimeter. See penetration test. remained at 44 percent, with the financial planning penetration of newly acquired mass affluent clients at 58 percent year to date. --Owned and managed net flows of $1.9 billion in the quarter included $1.9 billion in Ameriprise wrap net flows, $0.8 billion in Securities America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. wrap net flows, $1.3 billion in RiverSource variable annuity net flows and $1.0 billion in RiverSource mutual fund net outflows, down from $2.5 billion in mutual fund net outflows in the prior year period. Certificate and fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. net outflows were $1.3 billion, as the Company managed its exposure to the yield curve. --At June 30, 2006, owned, managed and administered assets were $428 billion, reflecting a $17 billion decline in administered assets resulting from the sale of the defined contribution recordkeeping business. Owned and managed assets of $365 billion increased 8 percent from June 30, 2005. --Life insurance in-force was up 9 percent year-over-year to $167 billion. --After nine months as an independent company, separation activities continue to be well executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. and on track, with continued improvement in Ameriprise Financial brand awareness.
Ameriprise Financial, Inc.
Consolidated Income Statements Reconciled to Adjusted
AMEX Assurance
Quarters Ended Quarters Ended
June 30, % June 30,
-------------- --------------
(in millions, unaudited) 2006 2005 Change 2006 2005
-------------- ------ --------------
Revenues
Management, financial advice and
service fees $721 $632 14% $- $1
Distribution fees 325 289 12 - -
Net investment income 522 558 (6) - 3
Premiums 229 279 (18) - 71
Other revenues 256 137 87 - 1
------- ------ ------- ------
Total revenues 2,053 1,895 8 - 76
------- ------ ------- ------
Expenses
Compensation and benefits:
Field 436 371 18 - 1
Non-field 330 280 18 - -
------- ------ ------- ------
Total compensation and benefits 766 651 18 - 1
Interest credited to account
values 307 328 (6) - -
Benefits, claims, losses and
settlement
expenses 225 238 (5) - 20
Amortization of deferred
acquisition costs 153 134 14 - 9
Interest and debt expense 28 19 47 - -
Other expenses 304 278 9 - 7
------- ------ ------- ------
Total expenses before
separation costs 1,783 1,648 8 - 37
------- ------ ------- ------
Income before income tax
provision, discontinued
operations and separation costs
(1) 270 247 9 - 39
Income tax provision before tax
benefit attributable to
separation costs (1) 75 61 23 - 13
------- ------ ------- ------
Income before discontinued
operations and separation costs
(1) 195 186 5 $- $26
======= ======
Separation costs, after-tax (1) 54 37 46
------- ------
Income before discontinued
operations 141 149 (5)
Discontinued operations, net of
tax - 6 (a)
------- ------
Net income $141 $155 (9)
======= ======
Weighted average common shares
outstanding:
Basic 246.3 246.2 -
Diluted 248.0 246.2 1%
Adjusted
Quarters Ended
June 30, %
-----------------------
(in millions, unaudited) 2006 2005 Change
----------------------- ------------
Revenues
Management, financial advice and
service fees $721 $631 14%
Distribution fees 325 289 12
Net investment income 522 555 (6)
Premiums 229 208 10
Other revenues 256 136 88
----------- -----------
Total revenues 2,053 1,819 13
----------- -----------
Expenses
Compensation and benefits:
Field 436 370 18
Non-field 330 280 18
----------- -----------
Total compensation and benefits 766 650 18
Interest credited to account
values 307 328 (6)
Benefits, claims, losses and
settlement
expenses 225 218 3
Amortization of deferred
acquisition costs 153 125 22
Interest and debt expense 28 19 47
Other expenses 304 271 12
----------- -----------
Total expenses before
separation costs 1,783 1,611 11
----------- -----------
Income before income tax
provision, discontinued
operations and separation costs
(1) 270 208 30
Income tax provision before tax
benefit attributable to
separation costs (1) 75 48 56
----------- -----------
Income before discontinued
operations and separation costs
(1) $195 $160 22
=========== ===========
Separation costs, after-tax (1)
Income before discontinued
operations
Discontinued operations, net of
tax
Net income
Weighted average common shares
outstanding:
Basic
Diluted
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
(a) Variance of 100% or greater.
Second Quarter 2006 Consolidated Results The Asset Accumulation and Income (AA&I) segment contributed 73 percent of the quarter's $2.1 billion of consolidated revenues, the Protection segment contributed 24 percent of the consolidated revenues and the Corporate and Other and Eliminations (Corporate) segment contributed 3 percent. Revenues AA&I segment revenues of $1.5 billion grew 13 percent, or $169 million, from the year-ago quarter. Management, financial advice and service fees increased $100 million, primarily as a result of strong net flows into wrap and RiverSource variable annuity products, as well as market appreciation. Distribution fees also increased $36 million as a result of strong brokerage and advisor activity levels. Net investment income declined $57 million as realized net investment gains declined $31 million, the income recognized from certain hedges declined $15 million and certificate and fixed annuity balances declined. These decreases were partially offset by increased income from hedge fund hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" investments. "Other" revenues increased $90 million, including $66 million in proceeds from the sale of the defined contribution recordkeeping business. On a product level, Brokerage, banking and other revenue grew 32 percent, or $116 million, to $474 million, primarily due to increases in wrap account values; Asset management revenue grew 23 percent, or $82 million, to $441 million, primarily due to the proceeds from the sale of the defined contribution recordkeeping business; Variable annuity revenues grew 10 percent, or $21 million, to $235 million, due to strong net inflows into variable annuity products; and Fixed annuity and certificate revenues declined 13 percent, or $50 million, primarily due to lower account balances. Protection segment revenues were down 5 percent. Adjusted Protection segment revenues of $496 million were up 11 percent, or $49 million, from the year-ago quarter, excluding the impact of AMEX Assurance. Adjusted growth was primarily due to a $20 million increase in premiums, primarily in Auto and Home, and a $24 million increase in adjusted "Other" revenues, including $18 million from recognizing previously deferred cost of insurance revenues. On a product level, VUL/UL revenues were up 18 percent, or $30 million, to $198 million, primarily driven by the previously mentioned recognition of the deferred cost of insurance revenues and increased sales; Auto and home revenues grew 17 percent, or $22 million, to $150 million, due to increased premium revenues and higher net investment income; Disability income, long term care and other revenues declined 2 percent, or $2 million, to $126 million, reflecting lower net investment income, partially offset by higher premiums. Expenses Consolidated expenses totaled $1.8 billion for the three months ended June 30, 2006. Adjusted expenses were up 11 percent or $172 million from a year ago. The increase in adjusted expenses was primarily driven by a $116 million increase in compensation and benefits. Adjusted field compensation and benefits contributed $66 million of the increase due to growth in business activity. Adjusted non-field compensation and benefits contributed $50 million of the increase, primarily due to ongoing costs associated with being an independent company, $11 million in severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when , primarily related to ongoing reengineering Using information technology to improve performance and cut costs. Its main premise, as popularized by the book "Reengineering the Corporation" by Michael Hammer and James Champy, is to examine the goals of an organization and to redesign work and business processes from the ground up initiatives and $16 million in severance and other costs related to the sale of the defined contribution recordkeeping business. Interest credited to account values decreased $21 million, primarily due to lower account balances. Amortization of deferred acquisition costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) increased $19 million. Adjusted amortization of DAC increased $28 million, as a result of a $28 million adjustment to DAC balances in Auto and Home. "Other" expenses increased $26 million. Adjusted "other" expenses increased $33 million, including $14 million in costs related to the sale of the defined contribution recordkeeping business. Non-recurring separation costs incurred during the quarter of $84 million pretax ($54 million after-tax) compares to $56 million pretax ($37 million after-tax) in the second quarter of 2005. From the announcement of the separation from American Express through quarter end, cumulative non-recurring separation costs totaled $444 million pretax ($289 million after-tax). Pretax Income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. Consolidated pretax income for the quarter was $186 million. Adjusted pretax income of $270 million was up 30 percent, or $62 million, from the year-ago quarter, primarily due to a $51 million increase in the AA&I segment and a $10 million decrease in losses in the Corporate segment. Results in the Protection segment were essentially flat compared to the prior year quarter. The AA&I segment pretax income of $222 million includes $6 million of realized net investment gains and a $36 million net gain from the sale of the defined contribution recordkeeping business, substantially offset by $32 million in legal and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. costs. The year-ago period included $37 million in realized net investment gains and $34 million in legal and regulatory costs. The Protection segment pretax income of $92 million reflects the benefit from $28 million in reserve and balance sheet adjustments, offset by a $28 million expense from a DAC adjustment in Auto and Home. The year-ago period included $7 million in realized net investment gains. The Corporate segment includes $11 million in severance costs primarily related to ongoing reengineering initiatives. The year-ago period included $13 million in realized net investment gains. Taxes The effective tax rate on adjusted earnings for the quarter was 27.8 percent compared to 23.1 percent for the second quarter of 2005. Included in the second quarter of 2005 was a $3 million benefit related to an IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. audit of previous years' tax returns. Balance Sheet and Capital The Company issued $500 million of junior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes during the quarter. These securities mature in 60 years, carry a fixed rate coupon A certificate evidencing the obligation to pay an installment of interest or a dividend that must be cut and presented to its issuer for payment when it is due. Coupons are usually attached to a document, such as a promissory note, bond, share of stock, or a bearer of 7.518 percent for the first 10 years and receive at least 75 percent equity credit by the majority of the Company's rating agencies. During the quarter, the Company repurchased 1 million shares for approximately $42 million. The quarter-end basic share count was 245.5 million and the ending diluted share count was 247.1 million. Average diluted share count for the quarter was 248.0 million compared to 253.5 million for the first quarter of 2006. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. as of second quarter 2006 was $7.2 billion, up $0.2 billion, or 3 percent, from June 30, 2005 and down $106 million from March 31, 2006. The change from March 31, 2006 was primarily driven by an increase in unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. resulting from the impact of rising interest rates on the Company's owned fixed income investment portfolio. Book value per outstanding share was $29.65 as of June 30, 2006. The Company maintained substantial liquidity with $2.1 billion in cash and cash equivalents at June 30, 2006. The quality of the investment portfolio remained high with 7 percent of the fixed income portfolio in below investment grade securities. Unrealized net investment losses in the Available-for-Sale Investment portfolio increased to $1.0 billion from $0.6 billion as of March 31, 2006. The debt to capital ratio as of June 30, 2006 was 25.1 percent. Assuming 75 percent equity credit for the junior subordinated notes, the debt to capital ratio was 17.6 percent. At June 30, 2006 the ratio of earnings to fixed charges was 5.8 times. Excluding interest on non-recourse debt Non-Recourse Debt A loan that is secured by some sort of collateral, usually property. The issuer can seize the collateral if the borrower defaults. Notes: These types of projects are characterized by high capital expenditures, long loan periods, and uncertain revenue , the ratio of earnings to fixed charges was 7.0 times.
Asset Accumulation and Income Segment
Income Statements
Quarters Ended
June 30, %
----------------
(in millions, unaudited) 2006 2005 Change
-------- ------- ------
Revenues
Management, financial advice and service
fees $654 $554 18%
Distribution fees 297 261 14
Net investment income 427 484 (12)
Other revenues 115 25 (a)
-------- -------
Total revenues 1,493 1,324 13
-------- -------
Expenses
Compensation and benefits - field 376 310 21
Interest credited to account values 271 292 (7)
Benefits, claims, losses and settlement
expenses 12 21 (43)
Amortization of deferred acquisition costs 91 89 2
Interest and debt expense 5 - (a)
Other expenses 516 441 17
-------- -------
Total expenses 1,271 1,153 10
-------- -------
Pretax segment income $222 $171 30
======== =======
(a) Variance of 100% or greater.
Asset Accumulation and Income Segment - Second Quarter 2006 Results Pretax segment income was $222 million for the second quarter, up 30 percent from $171 million in the second quarter of 2005. Solid results primarily reflect positive net flows in variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. and advisor managed accounts, as well as equity market appreciation. The positive impact of the sale of the defined contribution recordkeeping business, which added a net $36 million to the pretax earnings of this segment, was offset by a $31 million decline in realized net investment gains. The underlying business performance includes an 8 percent increase in managed assets and strong advisor productivity, reflected in a 16 percent increase in segment GDC and a 14 percent increase in distribution fees. Partially offsetting this strong performance was a $57 million decline in net investment income, comprised of a $31 million decline in realized net investment gains, a $15 million decline in the income recognized from certain hedges and lower certificate and fixed annuity balances, offset in part by increased income from hedge fund investments. Segment Highlights --During the quarter the Company closed the sale of the defined contribution recordkeeping business, realizing a net pretax gain of $36 million. --Wrap product net flows of $2.7 billion in the quarter resulted in total ending assets of $66.5 billion, up 36 percent compared to the year-ago quarter, and was comprised of $56.7 billion in Ameriprise wrap assets and $9.8 billion in Securities America wrap assets. --The quarter reflected strong growth in RiverSource variable annuities with sales up 56 percent from the prior year period, which contributed to a 24 percent increase in ending balances from the same period last year. Ending annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. fixed account balances decreased 7 percent, or $1.9 billion, compared to the prior year period. --RiverSource Annuities launched three new innovative variable annuities within the Retirement Advisor 4 Variable Annuity Series sold through the branded advisor channel. In addition, it launched its new rider, Guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. Withdrawal Benefit for Life(SM), on annuities sold through both the branded and third party channels. --Investment performance at RiverSource Investments and Threadneedle Investments continues to be strong. --Total RiverSource mutual fund assets Fund assets The total value of a portfolio's securities, cash, and other holdings, minus any outstanding debts. under management of $56.8 billion decreased $2.0 billion from the first quarter of 2006, reflecting continued, though improving, net outflows in addition to equity market depreciation. Sales in the advisor channel increased to $2.7 billion, up from $2.5 billion in the first quarter of 2006, while redemptions dropped to $3.7 billion from $4.7 billion in the first quarter of 2006. The Company expects net outflows to continue in 2007. --RiverSource Funds introduced 10 new mutual funds including the innovative product solution - RiverSource(SM) Retirement Plus - a series of target maturity funds that utilize the Company's quantitative quantitative /quan·ti·ta·tive/ (kwahn´ti-ta?tiv) 1. denoting or expressing a quantity. 2. relating to the proportionate quantities or to the amount of the constituents of a compound. investment capabilities. Total revenues increased 13 percent, or $169 million, from the year-ago quarter, to $1.5 billion. --Management, financial advice and service fees grew 18 percent, or $100 million, to $654 million, driven by strong net inflows into wrap accounts and variable annuities, and equity market appreciation, partially offset by net outflows in RiverSource mutual funds. --Distribution fees increased 14 percent, or $36 million, to $297 million, primarily due to increased retail brokerage activity. --Net investment income decreased 12 percent, or $57 million, primarily due to a $31 million decline in realized net investment gains and a $15 million decline in the value of S&P 500 Index options hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. stock market certificates, equity index annuities and options hedging Guaranteed Minimum Withdrawal Benefits (GMWB GMWB Guaranteed Minimum Withdrawal Benefit ). The hedge related losses were primarily offset in the Interest Credited to Account Values and Benefits, Claims, Losses and Settlement expense line items where applicable. In addition, declining fixed annuity and certificate account balances negatively impacted net investment income and were partially offset by higher income from hedge fund investments. --Other revenues increased $90 million primarily from the proceeds of the sale of the defined contribution recordkeeping business and a $28 million increase in revenues primarily due to the revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of certain limited partner property funds managed by Threadneedle that prior to 2006 were not consolidated. There is an equal and offsetting $28 million increase in expenses related to the consolidation of these Threadneedle managed partnerships. Total expenses of $1.3 billion increased 10 percent, or $118 million, from the year-ago quarter. --Compensation and benefits - field rose 21 percent, or $66 million, to $376 million, reflecting higher commissions paid driven by strong sales activity and higher advisor assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. . --Interest credited to account values decreased 7 percent, or $21 million, to $271 million, primarily due to declining fixed annuity and certificate balances. --Other expenses, which primarily reflect allocated corporate and support function costs, increased 17 percent, or $75 million, include $30 million of costs associated with the sale of the defined contribution recordkeeping business and $25 million associated with the consolidation of certain limited partner property funds managed by Threadneedle that prior to 2006 were not consolidated.
Protection Segment
Income Statements Reconciled to Adjusted
AMEX Assurance
Quarters Ended Quarters Ended
June 30, % June 30,
-------------- --------------
(in millions, unaudited) 2006 2005 Change 2006 2005
------- ------ ------ -------- -----
Revenues
Management, financial advice
and service fees $19 $16 19% $- $1
Distribution fees 27 27 - - -
Net investment income 86 88 (2) - 3
Premiums 234 285 (18) - 71
Other revenues 130 107 21 - 1
------- ------ -------- -----
Total revenues 496 523 (5) - 76
------- ------ -------- -----
Expenses
Compensation and benefits -
field 22 21 5 - 1
Interest credited to account
values 36 36 - - -
Benefits, claims, losses and
settlement expenses 213 217 (2) - 20
Amortization of deferred
acquisition costs 62 45 38 - 9
Other expenses 71 74 (4) - 7
------- ------ -------- -----
Total expenses 404 393 3 - 37
------- ------ -------- -----
Pretax segment income $92 $130 (29) $- $39
======= ====== ======== =====
Adjusted
Quarters Ended
June 30, %
-----------------------
(in millions, unaudited) 2006 2005 Change
----------- ----------- ------------
Revenues
Management, financial advice
and service fees $19 $15 27%
Distribution fees 27 27 -
Net investment income 86 85 1
Premiums 234 214 9
Other revenues 130 106 23
----------- -----------
Total revenues 496 447 11
----------- -----------
Expenses
Compensation and benefits -
field 22 20 10
Interest credited to account
values 36 36 -
Benefits, claims, losses and
settlement expenses 213 197 8
Amortization of deferred
acquisition costs 62 36 72
Other expenses 71 67 6
----------- -----------
Total expenses 404 356 13
----------- -----------
Pretax segment income $92 $91 1
=========== ===========
Protection Segment - Second Quarter 2006 Results AMEX Assurance results are included in the Protection segment. Adjusted financial information excludes AMEX Assurance from prior periods. Pretax segment income was $92 million for the second quarter of 2006, down 29 percent from the year-ago period. Adjusted pretax segment earnings increased 1 percent from $91 million in the prior year quarter. Although there were a number of special items in the quarter, there was no net impact to the segment's adjusted pretax earnings. Segment Highlights --Life insurance in-force of $167 billion increased 9 percent from the prior year period. --Auto and Home premiums grew 15 percent from the prior year period, reflecting continued growth through the Company's alliance with Costco Costco Wholesale Corporation (NASDAQ: COST) is the largest membership warehouse club chain in the world based on sales volume, headquartered in Issaquah, Washington, United States,[1] with its flagship warehouse in nearby Seattle. . Total revenues of $496 million decreased 5 percent from the year-ago quarter. Adjusted segment revenues increased 11 percent. --Net investment income decreased 2 percent to $86 million. Adjusted segment net investment income increased 1 percent due to increased assets and capital supporting the growth of Auto and Home and VUL/UL businesses and higher income from hedge fund investments, offset by lower realized net investment gains. --Premiums declined 18 percent to $234 million. Adjusted segment premiums increased 9 percent, primarily driven by solid growth from Auto and Home. --"Other" revenues increased 21 percent. Adjusted "other" revenues increased 23 percent, or $24 million, to $130 million, including $18 million from recognizing previously deferred cost of insurance revenues. Total expenses of $404 million increased 3 percent from $393 million in the year-ago quarter. Adjusted segment expenses increased 13 percent, or $48 million. --Benefits, claims, losses and settlement expenses decreased 2 percent to $213 million. Adjusted segment benefits, claims, losses and settlement expenses increased 8 percent, or $16 million, from the prior year period, including $7 million in claim liabilities related to the previously mentioned recognition of the deferred cost of insurance revenues, higher claims in disability income and long term care insurance, partially offset by a $12 million prior period reserve benefit in Auto and Home. Claims in disability income and long term care insurance were favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. compared to the first quarter of 2006. While loss experience in disability income insurance was at expected levels, long term care insurance claims were slightly better than anticipated. --Amortization of DAC increased 38 percent to $62 million. Adjusted segment amortization of DAC increased 72 percent, or $26 million, compared to the second quarter of 2005. This increase was primarily driven by a $28 million expense from an adjustment to DAC balances in Auto and Home. In addition, in recognizing the deferred cost of insurance revenues, the related claim liabilities were included in the calculation of DAC amortization resulting in a $5 million benefit.
Corporate and Other and Eliminations Segment
Income Statements
Quarters Ended
June 30, %
----------------
(in millions, unaudited) 2006 2005 Change
-------- ------- ------
Revenues
Management, financial advice and service
fees $48 $62 (23)%
Distribution fees 1 1 -
Net investment income (loss) 9 (14) (a)
Premiums (5) (6) (17)
Other revenues 11 5 (a)
-------- -------
Total revenues 64 48 33
-------- -------
Expenses
Compensation and benefits - field 38 40 (5)
Interest and debt expense 23 19 21
Other expenses 47 43 9
-------- -------
Total expenses before separation costs 108 102 6
-------- -------
Pretax segment loss before separation costs (44) (54) 19
Separation costs, pretax 84 56 50
-------- -------
Pretax segment loss $(128) $(110) (16)
======== =======
(a) Variance of 100% or greater.
Corporate and Other and Eliminations Segment - Second Quarter 2006 Results Current business activities in this segment reflect financial planning fees and associated compensation. Pretax segment loss was $128 million for the second quarter of 2006, compared to a pretax loss pretax loss A loss reported before tax benefits are considered. of $110 million in the year-ago quarter. The change was predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. due to a $28 million increase in non-recurring separation costs and a $14 million decrease in management, financial advice and service fees, partially offset by a $23 million improvement in investment income. --Pretax non-recurring separation costs of $84 million increased $28 million from the prior year's quarter. --Management, financial advice and service fees decreased 23 percent, or $14 million. The decline from the prior year quarter was primarily due to the decline in management fees from variable interest entities. --Net investment income (loss) improved by $23 million to $9 million, primarily reflecting the additional investments and related income from corporate capital issuance, partially offset by a $13 million decline in realized net investment gains. --"Other" expenses of $47 million increased $4 million from the second quarter of 2005 and include $11 million in severance cost, primarily related to ongoing reengineering initiatives in the second quarter of 2006. Definitions Allocated Equity - The internal allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of consolidated shareholders' equity, excluding accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as (loss), to the Company's operating segments for purposes of measuring segment return on allocated equity. Allocated equity does not represent insurance company risk-based capital or other regulatory capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. applicable to the Company and certain of its subsidiaries. AMEX Assurance Company - A legal entity owned by IDS Property Casualty Insurance Company that offers travel and other card insurance to American Express customers. This business had historically been reported in the Travel Related Services segment of American Express Company (American Express). Under the separation agreement with American Express, 100 percent of this business was ceded to an American Express subsidiary in return for an arm's length arm's length adj. the description of an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other. ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. fee. Ameriprise Financial expects to sell the legal entity of AMEX Assurance to American Express within two years after September September: see month. 30, 2005 for a fixed price equal to the net book value of AMEX Assurance. Clients With a Financial Plan Percentage - The period-end number of current clients who have received a financial plan, or have entered into an agreement to receive and have paid for a financial plan, divided by the number of active retail client groups, serviced by branded employees, franchise advisors and the Company's customer service organization. Contribution Margin - Total revenues less compensation and benefits - field, interest credited to account values and benefits, claims, losses and settlement expenses as a percentage of total revenues. Debt to Capital Ratio - A ratio comprised of total debt divided by total capital. This ratio is also presented excluding non-recourse debt of a CDO (Collaborative Data Objects) A programming interface from Microsoft for accessing MAPI-based e-mail, calendaring and scheduling servers. Originally called "OLE Messaging" and "Active Messaging," CDO wraps the Enhanced MAPI library into a COM object that provides the consolidated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 46R and non-recourse debt of property fund limited partnerships managed by Threadneedle consolidated in accordance with EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 04-5. In addition, we provide debt to capital ratio information, excluding non-recourse debt, that reflects an equity credit on our junior subordinated notes we issued on May 26, 2006. These junior subordinated notes receive at least a 75 percent equity credit by the majority of the rating agencies. Deferred Acquisition Costs (DAC) - DAC represents the costs of acquiring new protection, annuity and certain mutual fund business, principally direct sales commissions and other distribution and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. costs that have been deferred on the sale of annuity, life, disability income and long term care insurance and, to a lesser extent, deferred marketing and promotion expenses on auto and home insurance and deferred distribution costs distribution costs distribute npl → Vertriebskosten pl on certain mutual fund products. These costs are deferred to the extent they are recoverable from future profits. Gross Dealer Concession (GDC) - An internal measure, commonly used in the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industry, of the sales production of the advisor channel. Mass Affluent - Individuals with $100,000 to $1 million in investable assets. Mass Affluent Clients - Individuals with over $100,000 in invested assets or comparable product values with the Company. Net Flows - Sales less redemptions plus other. Other includes reinvested dividends. Non-Recurring Separation Costs - The Company has incurred significant non-recurring separation costs as a result of the separation from American Express. Separation costs generally consist of costs associated with separating and reestablishing the Company's technology platforms, establishing the Ameriprise Financial brand and advisor and employee retention programs. Ratio of Earnings to Fixed Charges - A ratio comprised of earnings divided by fixed charges. Earnings are defined as income before income tax provision, discontinued operations and accounting change plus interest and debt expense, the interest portion of rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. expense, amortization of capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. and adjustments related to equity investments and minority interests in consolidated entities. Fixed charges are defined as interest and debt expense, the interest portion of rental expense and capitalized interest. The ratio is also presented excluding the effect of interest on non-recourse debt of a Collateralized Debt Obligation Collateralized Debt Obligation (CDO) A general inclusive term which covers Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations, consolidated in accordance with FIN 46 and the Threadneedle managed property fund limited partnerships consolidated in accordance with EITF 04-5.
Segments:
Asset Accumulation and Income Segment - This segment offers
products and services, both the Company's and other companies', to
help the Company's retail clients address identified financial
objectives related to asset accumulation and income management.
Products and services in this segment are related to financial
advice services, asset management, brokerage and banking, and
include mutual funds, wrap accounts, variable and fixed annuities,
brokerage accounts, financial advice services and investment
certificates. This operating segment also serves institutional
clients by providing investment management services in separately
managed accounts, sub-advisory, alternative investments and 401(k)
markets. The Company earns revenues in this segment primarily
through fees we receive based on managed assets and annuity
separate account assets. These fees are impacted by both market
movements and net asset flows. The Company also earns net
investment income on owned assets, principally supporting the
fixed annuity business and distribution fees on sales of mutual
funds and other products. This segment includes the results of
Securities America Financial Corporation (SAFC) which through its
operating subsidiary, Securities America, Inc., operates its own
separately branded distribution network.
Protection Segment - This segment offers a variety of protection
products, both the Company's and other companies', including life,
disability income, long term care and auto and home insurance to
address the identified protection and risk management needs of the
Company's retail clients. The Company earns revenues in this
operating segment primarily through premiums, fees and charges
that the Company receives to assume insurance-related risk, fees
the Company receives on owned assets and net investment income the
Company earns on assets on the Company's consolidated balance
sheets related to this segment.
Corporate and Other and Eliminations Segment - This segment
consists of income derived from financial planning fees, corporate
level assets and unallocated corporate expenses. This segment also
includes non-recurring costs associated with the Company's
separation from American Express. For purposes of presentation in
this earnings release and statistical supplement, this segment
also includes eliminations.
Total Clients - The sum of all clients, individual, business and institutional, that receive investment management and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. other services, excluding those clients serviced by SAFC SAFC South Australian Film Corporation SAFC Sunderland Association Football Club SAFC Securities America Financial Corporation SAFC South Australia Film Corporation SAFC Stirling Albion Football Club (UK) and Threadneedle. Ameriprise Financial, Inc. is a leading financial planning and services company with more than 12,000 financial advisors and registered representatives that provides solutions for clients' asset accumulation, income management and insurance protection needs. The Company's financial advisors deliver tailored solutions to clients through a comprehensive and personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. financial planning approach built on a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. relationship with a knowledgeable advisor. The Company specializes in meeting the retirement-related financial needs of the mass affluent. Financial advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal and investments are available through Ameriprise Financial Services, Inc. Member NASD NASD See: National Association of Securities Dealers NASD See National Association of Securities Dealers (NASD). and SIPC (Simply Interactive PC) An earlier umbrella term from Microsoft and Intel for a PC that works like a home appliance. For example, it has a sealed case, uses external connectors for expansion and boots in just a couple of seconds. . For more information, visit www.ameriprise.com. Forward Looking Statements This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that reflect the Company's plans, estimates and beliefs. Actual results could differ materially from those described in these forward-looking statements. The Company has made various forward-looking statements in this news release. Examples of such forward-looking statements include: --statements of plans, intentions, expectations, objectives or goals, including those relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the establishment of the Company's new brands, mass affluent client acquisition strategy, asset flows and competitive environment; --statements about future economic performance, the performance of equity markets and interest rate variations and the economic performance of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ; and --statements of assumptions underlying such statements. The words "believe," "expect," "anticipate," "optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op ," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from such statements. Such factors include, but are not limited to: --the impact of the separation from American Express; --ability to establish the Company's new brands; --the Company's capital structure as a stand-alone company stand-alone company An independent operating firm. For example, a large diversified firm may consider spinning off a subsidiary because, as a stand-alone company, the subsidiary would command a higher price-earnings ratio than the parent. , including ratings and indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , and limitations on subsidiaries to pay dividends; --changes in the interest rate and equity market environments; --changes in the regulatory environment, including ongoing legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. and regulatory actions; --investment management performance; --effects of competition in the financial services industry and changes in product distribution mix and distribution channels; --risks of default by issuers of investments the Company owns or by counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. to derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. or reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. arrangements; --experience deviations from assumptions regarding morbidity morbidity /mor·bid·i·ty/ (mor-bid´it-e) 1. a diseased condition or state. 2. the incidence or prevalence of a disease or of all diseases in a population. mor·bid·i·ty n. , mortality and persistency in certain annuity and insurance products; and --general economic and political factors, including consumer confidence in the economy. Readers are cautioned that the foregoing list of factors is not exhaustive. There may also be other risks that the Company is unable to predict at this time that may cause actual results to differ materially from those in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update publicly or revise any forward-looking statements.
Ameriprise Financial, Inc.
YTD June 30, 2006 Summary
(in millions, unaudited)
June 30, June 30, %
2006 2005 Change
-------- -------- -------
Net income $286 $338 (15)%
Less: Income from discontinued operations - 14 (a)
-------- --------
Income before discontinued operations 286 324 (12)
Less: Income attributable to
AMEX Assurance, after-tax - 53 (a)
Add: Separation costs, after-tax 98 50 96
-------- --------
Adjusted earnings, after-tax $384 $321 20
======== ========
(in millions, unaudited) Per Diluted Share
-----------------
June 30, June 30, %
2006 2005 Change
-------- -------- -------
Net income $1.14 $1.37 (17)%
Less: Income from discontinued operations - 0.05 (a)
-------- --------
Income before discontinued operations 1.14 1.32 (14)
Less: Income attributable to
AMEX Assurance, after-tax - 0.22 (a)
Add: Separation costs, after-tax 0.39 0.20 95
-------- --------
Adjusted earnings, after-tax $1.53 $1.30 18
======== ========
(a) Variance of 100% or greater.
Ameriprise Financial, Inc.
Consolidated Income Statements Reconciled to Adjusted
AMEX Assurance
Six Months
Six Months Ended Ended
June 30, % June 30,
----------------- ---------------
(in millions, unaudited) 2006 2005 Change 2006 2005
----------------- ------ ---------------
Revenues
Management, financial advice
and service fees $1,431 $1,240 15% $- $2
Distribution fees 626 577 8 - -
Net investment income 1,096 1,106 (1) - 6
Premiums 449 549 (18) - 142
Other revenues 400 270 48 - -
-------- -------- -------- ------
Total revenues 4,002 3,742 7 - 150
-------- -------- -------- ------
Expenses
Compensation and benefits:
Field 859 733 17 - 2
Non-field 646 559 16 - -
-------- -------- -------- ------
Total compensation and
benefits 1,505 1,292 16 - 2
Interest credited to account
values 631 639 (1) - -
Benefits, claims, losses and
settlement
expenses 452 456 (1) - 39
Amortization of deferred
acquisition costs 281 270 4 - 17
Interest and debt expense 51 36 42 - -
Other expenses 554 536 3 - 13
-------- -------- -------- ------
Total expenses before
separation costs 3,474 3,229 8 - 71
-------- -------- -------- ------
Income before income tax
provision, discontinued
operations and separation
costs (1) 528 513 3 - 79
Income tax provision before
tax benefit attributable to
separation costs (1) 144 139 4 - 26
-------- -------- -------- ------
Income before discontinued
operations and separation
costs (1) 384 374 3 $- $53
======== ======
Separation costs, after-tax
(1) 98 50 96
-------- --------
Income before discontinued
operations 286 324 (12)
Discontinued operations, net
of tax - 14 (a)
-------- --------
Net income $286 $338 (15)
======== ========
Weighted average common
shares outstanding:
Basic 249.3 246.2 1%
Diluted 250.8 246.2 2
Adjusted
Six Months Ended
June 30, %
-------------------------
(in millions, unaudited) 2006 2005 Change
------------------------- --------------
Revenues
Management, financial advice
and service fees $1,431 $1,238 16%
Distribution fees 626 577 8
Net investment income 1,096 1,100 -
Premiums 449 407 10
Other revenues 400 270 48
------------- -----------
Total revenues 4,002 3,592 11
------------- -----------
Expenses
Compensation and benefits:
Field 859 731 18
Non-field 646 559 16
------------- -----------
Total compensation and
benefits 1,505 1,290 17
Interest credited to account
values 631 639 (1)
Benefits, claims, losses and
settlement
expenses 452 417 8
Amortization of deferred
acquisition costs 281 253 11
Interest and debt expense 51 36 42
Other expenses 554 523 6
------------- -----------
Total expenses before
separation costs 3,474 3,158 10
------------- -----------
Income before income tax
provision, discontinued
operations and separation
costs (1) 528 434 22
Income tax provision before
tax benefit attributable to
separation costs (1) 144 113 27
------------- -----------
Income before discontinued
operations and separation
costs (1) $384 $321 20
============= ===========
Separation costs, after-tax
(1)
Income before discontinued
operations
Discontinued operations, net
of tax
Net income
Weighted average common
shares outstanding:
Basic
Diluted
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
(a) Variance of 100% or greater.
Asset Accumulation and Income Segment
Income Statements
Six Months Ended
June 30, %
------------------
(in millions, unaudited) 2006 2005 Change
--------- -------- ------
Revenues
Management, financial advice and service
fees $1,300 $1,101 18%
Distribution fees 570 523 9
Net investment income 902 957 (6)
Other revenues 143 42 (a)
--------- --------
Total revenues 2,915 2,623 11
--------- --------
Expenses
Compensation and benefits - field 742 619 20
Interest credited to account values 559 567 (1)
Benefits, claims, losses and settlement
expenses 16 24 (33)
Amortization of deferred acquisition
costs 178 181 (2)
Interest and debt expense 8 - -
Other expenses 962 887 8
--------- --------
Total expenses 2,465 2,278 8
--------- --------
Pretax segment income $450 $345 30
========= ========
(a) Variance of 100% or greater.
Protection Segment
Income Statements Reconciled to Adjusted
AMEX Assurance
Six Months
Six Months Ended Ended
June 30, % June 30,
----------------- ---------------
(in millions, unaudited) 2006 2005 Change 2006 2005
-------- -------- ------ -------- ------
Revenues
Management, financial
advice and service fees $38 $32 19% $- $2
Distribution fees 55 54 2 - -
Net investment income 175 171 2 - 6
Premiums 460 560 (18) - 142
Other revenues 241 214 13 - -
-------- -------- -------- ------
Total revenues 969 1,031 (6) - 150
-------- -------- -------- ------
Expenses
Compensation and benefits -
field 45 45 - - 2
Interest credited to
account values 72 72 - - -
Benefits, claims, losses
and settlement expenses 436 432 1 - 39
Amortization of deferred
acquisition costs 103 89 16 - 17
Other expenses 147 150 (2) - 13
-------- -------- -------- ------
Total expenses 803 788 2 - 71
-------- -------- -------- ------
Pretax segment income $166 $243 (32) $- $79
======== ======== ======== ======
Adjusted
Six Months Ended
June 30, %
-------------------------
(in millions, unaudited) 2006 2005 Change
------------- ----------- --------------
Revenues
Management, financial
advice and service fees $38 $30 27%
Distribution fees 55 54 2
Net investment income 175 165 6
Premiums 460 418 10
Other revenues 241 214 13
------------- -----------
Total revenues 969 881 10
------------- -----------
Expenses
Compensation and benefits -
field 45 43 5
Interest credited to
account values 72 72 -
Benefits, claims, losses
and settlement expenses 436 393 11
Amortization of deferred
acquisition costs 103 72 43
Other expenses 147 137 7
------------- -----------
Total expenses 803 717 12
------------- -----------
Pretax segment income $166 $164 1
============= ===========
Corporate and Other and Eliminations Segment
Income Statements
Six Months Ended
June 30, %
------------------
(in millions, unaudited) 2006 2005 Change
--------- -------- ------
Revenues
Management, financial advice and service
fees $93 $107 (13)%
Distribution fees 1 - -
Net investment income (loss) 19 (22) (a)
Premiums (11) (11) -
Other revenues 16 14 14
--------- --------
Total revenues 118 88 34
--------- --------
Expenses
Compensation and benefits - field 72 69 4
Interest and debt expense 43 36 19
Other expenses 91 58 57
--------- --------
Total expenses before separation
costs 206 163 26
--------- --------
Pretax segment loss before separation costs (88) (75) (17)
Separation costs, pretax 151 76 99
--------- --------
Pretax segment loss $(239) $(151) (58)
========= ========
(a) Variance of 100% or greater.
Ameriprise Financial, Inc.
Reconciliation Table: Selected Adjusted Consolidated Income Data to
GAAP
(in millions,
unaudited) Three Months Ended June 30, 2006
-------------------------------------------
Presented
Before
Separation Difference
Line item in Cost Impacts Attributable
non-GAAP in Reported to Separation GAAP GAAP Line
presentation Financials Costs Equivalent Item
---------------- -------------- -------------- ----------- -----------
Total revenues Total
(GAAP measure) $2,053 $- $2,053 revenues
Total expenses
before
separation Total
costs 1,783 84 1,867 expenses
-------------- -----------
Income before
income tax Income
provision and before
separation income tax
costs 270 (84) 186 provision
Income tax
provision
before tax
benefit
attributable to
separation Income tax
costs (1) 75 (30) 45 provision
-------------- -----------
Income before
separation
costs 195
Separation
costs, after-
tax (1) 54
--------------
Net income
(GAAP measure) $141 $141 Net income
============== ===========
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
Ameriprise Financial, Inc.
Reconciliation Table: Selected Adjusted Consolidated Income Data to
GAAP
(in millions,
unaudited) Three Months Ended June 30, 2005
---------------------------------------
Presented
Before Difference
Separation Attributable
Line item in Cost Impacts to
non-GAAP in Reported Separation GAAP GAAP Line
presentation Financials Costs Equivalent Item
---------------- ------------- ------------- ----------- -------------
Total revenues Total
(GAAP measure) $1,895 $- $1,895 revenues
Total expenses
before
separation Total
costs 1,648 56 1,704 expenses
------------- -----------
Income before
income tax Income before
provision, income tax
discontinued provision
operations and and
separation discontinued
costs 247 (56) 191 operations
Income tax
provision
before tax
benefit
attributable to
separation Income tax
costs (1) 61 (19) 42 provision
------------- -----------
Income before
discontinued
operations and
separation
costs 186
Separation
costs, after-
tax (1) 37
-------------
Income before
discontinued Income before
operations discontinued
(GAAP measure) $149 $149 operations
============= ===========
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
Ameriprise Financial, Inc.
Reconciliation Table: Selected Adjusted Consolidated Income Data to
GAAP
(in millions,
unaudited) Six Months Ended June 30, 2006
-------------------------------------------
Presented
Before Difference
Separation Attributable
Line item in Cost Impacts to
non-GAAP in Reported Separation GAAP GAAP Line
presentation Financials Costs Equivalent Item
---------------- --------------- ------------- ----------- -----------
Total revenues Total
(GAAP measure) $4,002 $- $4,002 revenues
Total expenses
before
separation Total
costs 3,474 151 3,625 expenses
--------------- -----------
Income before
income tax Income
provision and before
separation income tax
costs 528 (151) 377 provision
Income tax
provision
before tax
benefit
attributable to
separation Income tax
costs (1) 144 (53) 91 provision
--------------- -----------
Income before
separation
costs 384
Separation
costs, after-
tax (1) 98
---------------
Net income
(GAAP measure) $286 $286 Net income
=============== ===========
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
Ameriprise Financial, Inc.
Reconciliation Table: Selected Adjusted Consolidated Income Data to
GAAP
(in millions,
unaudited) Six Months Ended June 30, 2005
---------------------------------------
Presented
Before Difference
Separation Attributable
Line item in Cost Impacts to
non-GAAP in Reported Separation GAAP GAAP Line
presentation Financials Costs Equivalent Item
---------------- ------------- ------------- ----------- -------------
Total revenues Total
(GAAP measure) $3,742 $- $3,742 revenues
Total expenses
before
separation Total
costs 3,229 76 3,305 expenses
------------- -----------
Income before
income tax Income before
provision, income tax
discontinued provision
operations and and
separation discontinued
costs 513 (76) 437 operations
Income tax
provision
before tax
benefit
attributable to
separation Income tax
costs (1) 139 (26) 113 provision
------------- -----------
Income before
discontinued
operations and
separation
costs 374
Separation
costs, after-
tax (1) 50
-------------
Income before
discontinued Income before
operations discontinued
(GAAP measure) $324 $324 operations
============= ===========
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
Ameriprise Financial, Inc.
Return on Equity Calculation for the 12 Months Ended June 30, 2006
ROE excluding
Discontinued
Adjusted
(in millions, unaudited) Operations (1) Adjustments ROE (2)
Return $520 $236 $756
Equity $7,348 (291) $7,057
Return on Equity 7.1% 10.7%
Ameriprise Financial, Inc.
Return on Equity Calculation for the 12 Months Ended March 31, 2006
ROE excluding
Discontinued
Adjusted
(in millions, unaudited) Operations (1) Adjustments ROE (2)
--------------- ----------- --------
Return $528 $192 $720
Equity $7,156 (234) $6,921
--------------- --------
Return on Equity 7.4% 10.4%
=============== ========
Ameriprise Financial, Inc.
Return on Equity Calculation for the 12 Months Ended December 31, 2005
ROE excluding
Discontinued
Adjusted
(in millions, unaudited) Operations (1) Adjustments ROE (2)
--------------- ----------- --------
Return $558 $$135 $693
Equity $6,980 (168) $6,812
Return on Equity 8.0% 10.2%
(1) Return on equity calculated using the 12 month trailing income
before discontinued operations in the numerator and the average of
shareholders' equity before the assets and liabilities of
discontinued operations as of the last day of the preceding four
quarters and the current quarter in the denominator.
(2) Adjusted return on equity calculated using adjusted earnings
(income before discontinued operations excluding non-recurring
separation costs and AMEX Assurance) in the numerator, and equity
excluding both the assets and liabilities of discontinued
operations and equity allocated to expected non-recurring
separation costs as of the last day of the preceding four quarters
and the current quarter in the denominator.
Both return on equity calculations use the trailing twelve months'
return, and equity calculated using a five point average of
quarter-end equity.
Ameriprise Financial, Inc.
Reconciliation Table: Debt to Total Capital
June 30, 2006
----------------------------------------------------------------------
Debt Less
Non-
Debt Less Impact of recourse
Non- Non- 75% with
(in millions, GAAP recourse recourse Equity Equity
unaudited) Measure Debt Debt Credit(a) Credit(a)
----------------------------------------------------------------------
----------------------------------------------------------------------
Debt $2,419 $419 $2,000 $375 $1,625
----------------------------------------------------------------------
Capital 9,654 419 9,235 9,235
----------------------------------------------------------------------
Debt to Capital 25.1% 21.7% 17.6%
----------------------------------------------------------------------
(a) The Company's junior subordinated notes receive an equity credit
of at least 75% by the majority of the rating agencies.
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