Ameriprise Spends 7% More on Annuity Distribution

Ameriprise Financial Inc. spent $114 million in the fourth quarter on paying and supporting the people who sell its annuities, or about 7% more than it spent on annuity distribution expenses in the fourth quarter of 2016.

Annuity unit revenue increased 3%, year-over-year, to $638 million, and annuity unit pretax operating income increased 17%, to $148 million.

Total fixed annuity ending balances fell 7%, to $9.3 billion, but total variable annuity ending balances increased 7%, to $80 billion.

Ameriprise included those figures in a statistical supplement today when it posted its earnings for the fourth quarter, and for all of 2017.

A copy of the supplement is available here.

(Related: 3 New Questions About Annuity Issuers’ Performance)

Ameriprise, which is based in Minneapolis, was the first publicly traded U.S. life and annuity issuer to release its fourth-quarter results.

Overall Earnings

Ameriprise sells advice and wealth management services, asset management services, life insurance, and auto and home insurance as well as annuities.

The company as a whole is reporting $181 million in net income for the latest quarter on $3.2 billion in revenue, compared with $400 million in net income on $3.1 billion in revenue for the fourth quarter of 2016.

The company expects the new Tax Cuts and Jobs Act (TCJA) to slash its future income tax bills, but other, immediate effects led the company to record $320 million in TCJA-related charges. 

The company’s operating earnings total, which excludes the effects of the TCJA charges, increased 13%, to $502 million.

Annuity Distribution Expenses

Ameriprise notes in an annual financial report it filed with the U.S. Securities and Exchange Commission for 2017 that its annuity distribution expenses “primarily include compensation paid to our financial advisors, representatives, third-party distributors and wholesalers, net of amounts capitalized as part of [deferred acquisition costs (DACs)].”