Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended September 30, 2010

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from                        to                       

 

Commission File No. 1-32525

 

AMERIPRISE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

13-3180631

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

1099 Ameriprise Financial Center, Minneapolis, Minnesota

 

55474

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (612) 671-3131

 

Former name, former address and former fiscal year, if changed since last report: Not Applicable

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  x    No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer x

 

Accelerated Filer o

 

 

 

Non-Accelerated Filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o   No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at October 22, 2010

Common Stock (par value $.01 per share)

 

247,961,736 shares

 

 

 



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

FORM 10-Q

INDEX

 

Part I.

Financial Information:

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

Consolidated Statements of Operations — Three months and nine months ended September 30, 2010 and 2009

3

 

 

 

 

 

 

Consolidated Balance Sheets — September 30, 2010 and December 31, 2009

4

 

 

 

 

 

 

Consolidated Statements of Cash Flows — Nine months ended September 30, 2010 and 2009

5

 

 

 

 

 

 

Consolidated Statements of Equity — Nine months ended September 30, 2010 and 2009

7

 

 

 

 

 

 

Notes to Consolidated Financial Statements

8

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

85

 

 

 

 

 

Item 4.

Controls and Procedures

85

 

 

 

 

Part II.

Other Information:

 

 

 

 

 

Item 1.

Legal Proceedings

86

 

 

 

 

 

Item 1A.

Risk Factors

86

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

87

 

 

 

 

 

Item 6.

Exhibits

87

 

 

 

 

 

Signatures

88

 

 

 

 

 

Exhibit Index

E-1

 

2



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

PART I.  FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in millions, except per share amounts)

 

 

 

Three Months Ended 
September 30,

 

Nine Months Ended 
September 30,

 

 

 

2010

 

2009

 

2010

 

2009

 

Revenues

 

 

 

 

 

 

 

 

 

Management and financial advice fees

 

$

1,040

 

$

689

 

$

2,769

 

$

1,849

 

Distribution fees

 

415

 

367

 

1,259

 

1,029

 

Net investment income

 

527

 

538

 

1,771

 

1,467

 

Premiums

 

303

 

276

 

884

 

811

 

Other revenues

 

180

 

109

 

671

 

493

 

Total revenues

 

2,465

 

1,979

 

7,354

 

5,649

 

Banking and deposit interest expense

 

15

 

33

 

56

 

113

 

Total net revenues

 

2,450

 

1,946

 

7,298

 

5,536

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Distribution expenses

 

611

 

462

 

1,757

 

1,278

 

Interest credited to fixed accounts

 

227

 

232

 

686

 

674

 

Benefits, claims, losses and settlement expenses

 

640

 

306

 

1,292

 

993

 

Amortization of deferred acquisition costs

 

(246

)

(64

)

43

 

97

 

Interest and debt expense

 

74

 

45

 

212

 

99

 

General and administrative expense

 

702

 

625

 

2,039

 

1,806

 

Total expenses

 

2,008

 

1,606

 

6,029

 

4,947

 

Pretax income

 

442

 

340

 

1,269

 

589

 

Income tax provision

 

130

 

80

 

263

 

126

 

Net income

 

312

 

260

 

1,006

 

463

 

Less: Net income (loss) attributable to noncontrolling interests

 

(32

)

 

189

 

(22

)

Net income attributable to Ameriprise Financial

 

$

344

 

$

260

 

$

817

 

$

485

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Ameriprise Financial, Inc.  common shareholders

 

 

 

 

 

 

 

 

 

Basic

 

$

1.35

 

$

1.00

 

$

3.15

 

$

2.05

 

Diluted

 

1.32

 

1.00

 

3.10

 

2.04

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

255.3

 

258.7

 

259.0

 

236.6

 

Diluted

 

259.9

 

260.7

 

263.4

 

238.0

 

Cash dividends paid per common share

 

$

0.18

 

$

0.17

 

$

0.53

 

$

0.51

 

Supplemental Disclosures:

 

 

 

 

 

 

 

 

 

Net investment income:

 

 

 

 

 

 

 

 

 

Net investment income before impairment losses on securities

 

$

529

 

$

558

 

$

1,804

 

$

1,553

 

Total other-than-temporary impairment losses on securities

 

(2

)

(17

)

(34

)

(72

)

Portion of loss recognized in other comprehensive income

 

 

(3

)

1

 

(14

)

Net impairment losses recognized in net investment income

 

(2

)

(20

)

(33

)

(86

)

Net investment income

 

$

527

 

$

538

 

$

1,771

 

$

1,467

 

 

See Notes to Consolidated Financial Statements.

 

3



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

3,685

 

$

3,097

 

Investments

 

37,980

 

36,938

 

Separate account assets

 

64,014

 

58,129

 

Receivables

 

4,892

 

4,435

 

Deferred acquisition costs

 

4,437

 

4,334

 

Restricted and segregated cash

 

1,447

 

1,452

 

Other assets

 

5,849

 

4,286

 

Total assets before consolidated investment entities

 

122,304

 

112,671

 

 

 

 

 

 

 

Consolidated Investment Entities:

 

 

 

 

 

Cash

 

403

 

181

 

Investments, at fair value

 

5,375

 

36

 

Receivables (includes $42 and nil, respectively, at fair value)

 

77

 

49

 

Other assets, at fair value

 

885

 

833

 

Total assets of consolidated investment entities

 

6,740

 

1,099

 

Total assets

 

$

129,044

 

$

113,770

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Future policy benefits and claims

 

$

31,124

 

$

30,886

 

Separate account liabilities

 

64,014

 

58,129

 

Customer deposits

 

8,492

 

8,554

 

Short-term borrowings

 

869

 

 

Long-term debt

 

2,735

 

1,868

 

Accounts payable and accrued expenses

 

1,080

 

918

 

Other liabilities

 

3,662

 

3,093

 

Total liabilities before consolidated investment entities

 

111,976

 

103,448

 

 

 

 

 

 

 

Consolidated Investment Entities:

 

 

 

 

 

Debt (includes $5,097 and nil, respectively, at fair value)

 

5,456

 

381

 

Accounts payable and accrued expenses

 

26

 

28

 

Other liabilities (includes $69 and $30, respectively, at fair value)

 

82

 

41

 

Total liabilities of consolidated investment entities

 

5,564

 

450

 

Total liabilities

 

117,540

 

103,898

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Ameriprise Financial, Inc.:

 

 

 

 

 

Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 299,395,952 and 295,839,581, respectively)

 

3

 

3

 

Additional paid-in capital

 

5,917

 

5,748

 

Retained earnings

 

5,955

 

5,276

 

Appropriated retained earnings of consolidated investment entities

 

590

 

 

Treasury shares, at cost (50,715,212 and 40,744,090 shares, respectively)

 

(2,412

)

(2,023

)

Accumulated other comprehensive income, net of tax

 

897

 

265

 

Total Ameriprise Financial, Inc. shareholders’ equity

 

10,950

 

9,269

 

Noncontrolling interests

 

554

 

603

 

Total equity

 

11,504

 

9,872

 

Total liabilities and equity

 

$

129,044

 

$

113,770

 

 

See Notes to Consolidated Financial Statements.

 

4



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

 

 

 

Nine Months Ended September 30,

 

 

 

2010

 

2009

 

Cash Flows from Operating Activities

 

 

 

 

 

Net income

 

$

1,006

 

$

463

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

Capitalization of deferred acquisition and sales inducement costs

 

(407

)

(560

)

Amortization of deferred acquisition and sales inducement costs

 

34

 

95

 

Depreciation, amortization and accretion, net

 

79

 

101

 

Deferred income tax expense

 

573

 

103

 

Share-based compensation

 

111

 

138

 

Net realized investment gains

 

(43

)

(132

)

Other-than-temporary impairments and provision for loan losses

 

42

 

107

 

Net (income) loss attributable to noncontrolling interests

 

(189

)

22

 

Changes in operating assets and liabilities before consolidated investment entities:

 

 

 

 

 

Restricted and segregated cash

 

(155

)

87

 

Trading securities and equity method investments, net

 

(10

)

278

 

Future policy benefits and claims, net

 

(89

)

294

 

Receivables

 

(419

)

(207

)

Brokerage deposits

 

27

 

23

 

Accounts payable and accrued expenses

 

106

 

(140

)

Derivatives collateral, net

 

627

 

(1,659

)

Other, net

 

398

 

113

 

Changes in operating assets and liabilities of consolidated investment entities

 

224

 

(48

)

Net cash provided by (used in) operating activities

 

1,915

 

(922

)

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

Available-for-Sale securities:

 

 

 

 

 

Proceeds from sales

 

1,979

 

3,910

 

Maturities, sinking fund payments and calls

 

4,783

 

4,375

 

Purchases

 

(6,536

)

(14,497

)

Proceeds from sales and maturities of commercial mortgage loans

 

154

 

235

 

Funding of commercial mortgage loans

 

(132

)

(83

)

Proceeds from sales of other investments

 

135

 

47

 

Purchase of other investments

 

(141

)

(14

)

Purchase of investments by consolidated investment entities

 

(1,491

)

 

Proceeds from sales and maturities of investments by consolidated investment entities

 

1,386

 

 

Return of capital in investments of consolidated investment entities

 

5

 

 

Purchase of land, buildings, equipment and software

 

(88

)

(56

)

Change in policy and certificate loans, net

 

(12

)

9

 

Acquisitions

 

(866

)

 

Change in consumer banking loans and credit card receivables, net

 

(283

)

(107

)

Other, net

 

(8

)

 

Net cash used in investing activities

 

(1,115

)

(6,181

)

 

See Notes to Consolidated Financial Statements.

 

5



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

(in millions)

 

 

 

Nine Months Ended September 30,

 

 

 

2010

 

2009

 

Cash Flows from Financing Activities

 

 

 

 

 

Investment certificates and banking time deposits:

 

 

 

 

 

Proceeds from additions

 

$

783

 

$

2,141

 

Maturities, withdrawals and cash surrenders

 

(1,496

)

(2,515

)

Change in other banking deposits

 

622

 

1,157

 

Policyholder and contractholder account values:

 

 

 

 

 

Consideration received

 

1,248

 

4,386

 

Net transfers (to) from separate accounts

 

(1,283

)

174

 

Surrenders and other benefits

 

(992

)

(1,587

)

Deferred premium options, net

 

(111

)

(38

)

Proceeds from issuance of common stock

 

 

869

 

Issuances of debt, net of issuance costs

 

744

 

491

 

Repayments of debt

 

 

(550

)

Change in short-term borrowings, net

 

869

 

 

Dividends paid to shareholders

 

(138

)

(118

)

Repurchase of common shares

 

(389

)

(9

)

Exercise of stock options

 

53

 

1

 

Excess tax benefits from share-based compensation

 

5

 

12

 

Borrowings of consolidated investment entities

 

30

 

62

 

Repayments of debt of consolidated investment entities

 

(53

)

 

Noncontrolling interests investments in subsidiaries

 

68

 

7

 

Distributions to noncontrolling interests

 

(166

)

(42

)

Other, net

 

(1

)

(2

)

Net cash (used in) provided by financing activities

 

(207

)

4,439

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(5

)

16

 

Net increase (decrease) in cash and cash equivalents

 

588

 

(2,648

)

Cash and cash equivalents at beginning of period

 

3,097

 

6,228

 

Cash and cash equivalents at end of period

 

$

3,685

 

$

3,580

 

 

 

 

 

 

 

Supplemental Disclosures:

 

 

 

 

 

Interest paid on debt before consolidated investment entities

 

$

84

 

$

84

 

Income taxes paid, net

 

56

 

13

 

 

See Notes to Consolidated Financial Statements.

 

6



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

 

 

 

Ameriprise Financial, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appropriated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings of

 

 

 

Other

 

 

 

 

 

 

 

Number of

 

 

 

Additional

 

 

 

Consolidated

 

 

 

Comprehensive

 

Non-

 

 

 

 

 

Outstanding

 

Common

 

Paid-In

 

Retained

 

Investment

 

Treasury

 

Income

 

controlling

 

 

 

 

 

Shares

 

Shares

 

Capital

 

Earnings

 

Entities

 

Shares

 

(Loss)

 

Interests

 

Total

 

 

 

(in millions, except share data)

 

Balances at January 1, 2009

 

216,510,699

 

$

3

 

$

4,688

 

$

4,586

 

$

 

$

(2,012

)

$

(1,091

)

$

289

 

$

6,463

 

Change in accounting principles, net of tax

 

 

 

 

132

 

 

 

(132

)

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

485

 

 

 

 

(22

)

463

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized securities losses

 

 

 

 

 

 

 

1,411

 

 

1,411

 

Change in noncredit related impairments on securities and net unrealized securities losses on previously impaired securities

 

 

 

 

 

 

 

41

 

 

41

 

Change in net unrealized derivatives losses

 

 

 

 

 

 

 

(1

)

 

(1

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

51

 

24

 

75

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,989

 

Issuance of common stock

 

36,000,000

 

 

869

 

 

 

 

 

 

869

 

Dividends paid to shareholders

 

 

 

 

(118

)

 

 

 

 

(118

)

Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 

96

 

96

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

(42

)

(42

)

Repurchase of common shares

 

(697,411

)

 

 

 

 

(9

)

 

 

(9

)

Share-based compensation plans

 

3,246,543

 

 

142

 

 

 

 

 

 

142

 

Balances at September 30, 2009

 

255,059,831

 

$

3

 

$

5,699

 

$

5,085

 

$

 

$

(2,021

)

$

279

 

$

345

 

$

9,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2010

 

255,095,491

 

$

3

 

$

5,748

 

$

5,276

 

$

 

$

(2,023

)

$

265

 

$

603

 

$

9,872

 

Change in accounting principles

 

 

 

 

 

473

 

 

 

 

473

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

817

 

 

 

 

189

 

1,006

 

Net income reclassified to appropriated retained earnings

 

 

 

 

 

117

 

 

 

(117

)

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized securities gains

 

 

 

 

 

 

 

628

 

 

628

 

Change in noncredit related impairments on securities and net unrealized securities losses on previously impaired securities

 

 

 

 

 

 

 

17

 

 

17

 

Change in net unrealized derivatives gains

 

 

 

 

 

 

 

1

 

 

1

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

(14

)

(23

)

(37

)

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,615

 

Dividends paid to shareholders

 

 

 

 

(138

)

 

 

 

 

(138

)

Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 

68

 

68

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

(166

)

(166

)

Repurchase of common shares

 

(9,971,122

)

 

 

 

 

(389

)

 

 

(389

)

Share-based compensation plans

 

3,556,371

 

 

169

 

 

 

 

 

 

169

 

Balances at September 30, 2010

 

248,680,740

 

$

3

 

$

5,917

 

$

5,955

 

$

590

 

$

(2,412

)

$

897

 

$

554

 

$

11,504

 

 

See Notes to Consolidated Financial Statements.

 

7



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

1.  Basis of Presentation

 

Ameriprise Financial, Inc. is a holding company, which primarily conducts business through its subsidiaries to provide financial planning and products and services that are designed to be utilized as solutions for clients’ cash and liquidity, asset accumulation, income, protection and estate and wealth transfer needs. The Company’s foreign operations in the United Kingdom (“UK”) are conducted through its subsidiary, Threadneedle Asset Management Holdings Sàrl (“Threadneedle”).

 

The accompanying Consolidated Financial Statements include the accounts of Ameriprise Financial, Inc., companies in which it directly or indirectly has a controlling financial interest and variable interest entities (“VIEs”) in which it is the primary beneficiary (collectively, the “Company”). The income or loss generated by consolidated entities which will not be realized by the Company’s shareholders is attributed to noncontrolling interests in the Consolidated Statements of Operations. Noncontrolling interests are the ownership interests in subsidiaries not attributable, directly or indirectly, to Ameriprise Financial, Inc. and are classified as equity within the Consolidated Balance Sheets. The Company excluding noncontrolling interests is defined as Ameriprise Financial. All material intercompany transactions and balances have been eliminated in consolidation. See Note 3 for additional information related to the consolidated VIEs.

 

The interim financial information in this report has not been audited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods have been made. Except for the adjustments described below, all adjustments made were of a normal recurring nature.

 

In the third quarter of 2010, the Company made adjustments for revisions to the valuations of reserves, deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) related to insurance and living benefit guarantees which resulted in a $32 million pretax charge ($21 million after-tax).  In the second quarter of 2010, the Company made an adjustment for revisions to certain calculations in its valuation of DAC and DSIC which resulted in a $33 million pretax benefit ($21 million after-tax).

 

In the second quarter of 2010, the Company purchased an additional $6 million ownership interest in Cofunds, a leading investment platform that provides distribution access to over 1,300 funds from over 90 UK fund managers. This additional investment increased the Company’s ownership percentage from 16% to 20%, and as a result, the Company adopted the equity method of accounting and recorded a retrospective adjustment to the investment balance, results of operations and retained earnings as if the equity method had been in effect during all previous periods in which the investment was held. The effect of the change to the Company’s prior period consolidated results of operations and financial condition was not material.

 

The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain reclassifications of prior period amounts have been made to conform to the current presentation. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. These Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission (“SEC”) on February 24, 2010.

 

The Company evaluated events or transactions that may have occurred after the balance sheet date for potential recognition or disclosure through the date the financial statements were issued.

 

2.  Recent Accounting Pronouncements

 

Adoption of New Accounting Standards

 

Consolidation of Variable Interest Entities

 

In June 2009, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to the consolidation of VIEs. The standard amends the guidance on the determination of the primary beneficiary of a VIE from a quantitative model to a qualitative model and requires additional disclosures about an enterprise’s involvement in VIEs. Under the new qualitative model, the primary beneficiary must have both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive gains that could be potentially significant to the VIE. In February 2010, the FASB amended this guidance to defer application of the consolidation requirements for certain investment funds. The standards are effective for interim and annual reporting periods beginning after November 15, 2009. The Company adopted the standards effective January 1, 2010 and consolidated certain collateralized debt obligations (“CDOs”). As a result of the adoption, the Company recorded a $5.5 billion increase to assets and a $5.1 billion increase to liabilities. The difference between the fair value of the assets and liabilities of the CDOs was recorded as a cumulative effect increase of $473 million to appropriated retained earnings of consolidated investment entities. Such amounts are recorded as appropriated retained

 

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Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

earnings as the CDO note holders, not Ameriprise Financial, ultimately will receive the benefits or absorb the losses associated with the assets and liabilities of the CDOs. Subsequent to the adoption, the net change in fair value of the assets and liabilities of the CDOs will be recorded as net income (loss) attributable to noncontrolling interests and as an adjustment to appropriated retained earnings of consolidated investment entities. See Note 3 for additional information related to the application of the amended VIE consolidation model and the required disclosures.

 

Subsequent Events

 

In February 2010, the FASB amended the accounting standards related to the recognition and disclosure of subsequent events. The amendments remove the requirement to disclose the date through which subsequent events are evaluated for SEC filers. The standard is effective upon issuance and shall be applied prospectively. The Company adopted the standard in the first quarter of 2010. The adoption did not have any effect on the Company’s consolidated results of operations and financial condition.

 

Fair Value

 

In January 2010, the FASB updated the accounting standards related to disclosures on fair value measurements. The standard expands the current disclosure requirements to include additional detail about significant transfers between Levels 1 and 2 within the fair value hierarchy and presents activity in the rollforward of Level 3 activity on a gross basis. The standard also clarifies existing disclosure requirements related to the level of disaggregation to be used for assets and liabilities as well as disclosures on the inputs and valuation techniques used to measure fair value. The standard is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure requirements related to the Level 3 rollforward, which are effective for interim and annual periods beginning after December 15, 2010. The Company adopted the standard in the first quarter of 2010, except for the additional disclosures related to the Level 3 rollforward, which the Company will adopt in the first quarter of 2011. The adoption did not have any effect on the Company’s consolidated results of operations and financial condition.

 

Recognition and Presentation of Other-Than-Temporary Impairments (“OTTI”)

 

In April 2009, the FASB updated the accounting standards for the recognition and presentation of other-than-temporary impairments. The standard amends existing guidance on other-than-temporary impairments for debt securities and requires that the credit portion of other-than-temporary impairments be recorded in earnings and the noncredit portion of losses be recorded in other comprehensive income (loss) when the entity does not intend to sell the security and it is more likely than not that the entity will not be required to sell the security prior to recovery of its cost basis. The standard requires separate presentation of both the credit and noncredit portions of other-than-temporary impairments on the financial statements and additional disclosures. This standard is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. At the date of adoption, the portion of previously recognized other-than-temporary impairments that represent the noncredit related loss component shall be recognized as a cumulative effect of adoption with an adjustment to the opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income (loss). The Company adopted the standard in the first quarter of 2009 and recorded a cumulative effect increase to the opening balance of retained earnings of $132 million, net of DAC and DSIC amortization, certain benefit reserves and income taxes, and a corresponding increase to accumulated other comprehensive loss, net of impacts to DAC and DSIC amortization, certain benefit reserves and income taxes. See Note 4 for the required disclosures.

 

Future Adoption of New Accounting Standards

 

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

 

In October 2010, the FASB updated the accounting standards regarding accounting for DAC. Under this new standard, only the following costs incurred in the acquisition of new and renewal insurance contracts would be capitalizable as DAC: (i) incremental direct costs of a successful contract acquisition, (ii) portions of employees’ salaries and benefits directly related to time spent performing specified acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and sales force contract selling) for a contract that has actually been acquired, (iii) other costs related to the specified acquisition activities that would not have been incurred had the acquisition contract not occurred, and (iv) advertising costs that meet the capitalization criteria in other GAAP guidance for certain direct-response marketing. All other costs are to be expensed as incurred. The standard is effective for interim and annual periods beginning after December 15, 2011, with earlier adoption permitted if it is at the beginning of an entity’s annual reporting period. The standard is to be applied prospectively; however, retrospective application to all prior periods presented is permitted but not required. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

 

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Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

Receivables

 

In July 2010, the FASB updated the accounting standards for disclosures about the credit quality of financing receivables and the allowance for credit losses. The standard requires additional disclosure related to the credit quality of financing receivables, troubled debt restructurings and significant purchases or sales of financing receivables during the period. The standard requires that these disclosures and existing disclosures be presented on a disaggregated basis, similar to the manner that the entity uses to evaluate its credit losses. Disclosures of information as of the end of a reporting period are effective for interim and annual periods ending after December 15, 2010 and disclosures of activity that occurred during a reporting period are effective for interim and annual periods beginning after December 15, 2010. The Company’s adoption of the standard will not impact its consolidated results of operations and financial condition.

 

How Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments

 

In April 2010, the FASB updated the accounting standards regarding accounting for investment funds determined to be VIEs. Under this standard an insurance enterprise would not be required to consolidate a voting-interest investment fund when it holds the majority of the voting interests of the fund through its separate accounts. In addition, the enterprise would not consider the interests held through separate accounts in evaluating its economic interests in a VIE, unless the separate account contract holder is a related party. The standard is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2010. The adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

 

3.  Consolidated Investment Entities

 

The Company provides asset management services to various CDOs and other investment products (collectively, “investment entities”), which are sponsored by the Company for the investment of client assets in the normal course of business. Certain of these investment entities are considered to be VIEs while others are considered to be voting rights entities (“VREs”). The Company consolidates certain of these investment entities.

 

Variable Interest Entities

 

A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest (including substantive voting rights, the obligation to absorb the entity’s losses, or the rights to receive the entity’s returns) or has equity investors that do not provide sufficient financial resources for the entity to support its activities. A VIE is required to be assessed for consolidation under two models:

 

·          If the VIE is a money market fund or is an investment company, or has the financial characteristics of an investment company, and the following is true:

 

(i)             the entity does not have an explicit or implicit obligation to fund the investment company’s losses; and

 

(ii)          the investment company is not a securitization entity, asset backed financing entity, or an entity formally considered a qualifying special purpose entity,

 

then, the VIE will be consolidated by the entity that determines it stands to absorb a majority of the VIE’s expected losses or to receive a majority of the VIE’s expected residual returns. Examples of entities that are likely to be assessed for consolidation under this framework include hedge funds, property funds, private equity funds and venture capital funds.

 

·          If the VIE does not meet the criteria above, the VIE will be consolidated by the entity that determines it has both:

 

(i)             the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance; and

 

(ii)          the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

 

The Company’s CDOs are generally assessed for consolidation under this framework.

 

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Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

When determining whether the Company stands to absorb the majority of the VIE’s expected losses or receive a majority of the VIE’s expected returns, it analyzes the design of the VIE to identify the variable interests it holds. Then the Company quantitatively determines whether its variable interests will absorb a majority of the VIE’s variability. If the Company determines it has control over the activities that most significantly impact the economic performance of the VIE and it will absorb a majority of the VIE’s expected variability, the Company consolidates the VIE. The calculation of variability is based on an analysis of projected probability-weighted cash flows based on the design of the particular VIE. When determining whether the Company has the power and the obligation to absorb losses or rights to receive benefits from the VIE that could potentially be significant, the Company qualitatively determines if its variable interests meet these criteria. If the Company consolidates a VIE under either scenario, it is referred to as the VIE’s primary beneficiary.

 

Investment Entities

 

Collateralized Debt Obligations

 

The Company provides collateral management services to CDOs which are considered VIEs. These CDOs are asset backed financing entities collateralized by a pool of assets, primarily syndicated loans and, to a lesser extent, high-yield bonds. Multiple tranches of debt securities are issued by a CDO, offering investors various maturity and credit risk characteristics. The debt securities issued by the CDOs are non-recourse to the Company. The CDO’s debt holders have recourse only to the assets of the CDO. The assets the CDOs collateralize cannot be used by the Company. Scheduled debt payments are based on the performance of the CDO’s collateral pool. The Company generally earns management fees from the CDOs based on the par value of outstanding debt and, in certain instances, may also receive performance-based fees. In the normal course of business, the Company has invested in certain CDOs, generally taking an insignificant portion of the unrated, junior subordinated debt.

 

For certain of the CDOs, the Company has determined that consolidation is required as it has power over the CDOs and holds a variable interest in the CDOs for which the Company has the potential to receive significant benefits or the potential obligation to absorb significant losses. For other CDOs managed by the Company, the Company has determined that consolidation is not required as the Company does not hold a variable interest in the CDOs.

 

Other Investment Products

 

The Company provides investment advice and related services to private, pooled investment vehicles organized as limited partnerships, limited liability companies or foreign (non-U.S.) entities. Certain of these pooled investment vehicles are considered VIEs while others are VREs. For investment management services, the Company generally earns management fees based on the market value of assets under management, and in certain instances may also receive performance-based fees. The Company provides seed money occasionally to certain of these funds. For certain of the pooled investment vehicles, the Company has determined that consolidation is required as the Company stands to absorb a majority of the entity’s expected losses or receive a majority of the entity’s expected residual returns. For other VIE pooled investment vehicles, the Company has determined that consolidation is not required because the Company is not expected to absorb the majority of the expected losses or receive the majority of the expected residual returns. For the pooled investment vehicles which are VREs, the Company consolidates the structure when it has a controlling financial interest.

 

The Company also provides investment advisory, distribution and other services to the RiverSource, Columbia, and Threadneedle mutual fund families. The Company has determined that consolidation is not required for these mutual funds.

 

In addition, the Company may invest in structured investments including VIEs for which it is not the sponsor. These structured investments typically invest in fixed income instruments and are managed by third parties and include asset backed securities, commercial mortgage backed securities, and residential mortgage backed securities. The Company includes these investments in Available-for-Sale securities. The Company has determined that it is not the primary beneficiary of these structures due to its relative size, position in the capital structure of these entities, and the Company’s lack of power over the structures. See Note 4 for additional information about these structured investments.

 

The Company’s maximum exposure to loss as a result of its investment in structured investments is limited to its carrying value. The Company has no obligation to provide further financial or other support to these structured investments nor has the Company provided any support to these structured investments.

 

11



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

The following tables reflect the impact of consolidated investment entities on the Consolidated Balance Sheet as of September 30, 2010 and the Consolidated Statements of Operations for the three months and nine months ended September 30, 2010:

 

 

 

September 30, 2010

 

 

 

Before

 

Consolidated

 

 

 

 

 

 

 

Consolidation

 

Investment Entities

 

Eliminations

 

Total

 

 

 

(in millions)

 

Total assets

 

$

122,365

 

$

6,740

 

$

(61

)

$

129,044

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

111,976

 

5,564

 

 

117,540

 

Total Ameriprise Financial shareholders’ equity

 

10,389

 

622

 

(61

)

10,950

 

Noncontrolling interests equity

 

 

554

 

 

554

 

Total liabilities and equity

 

$

122,365

 

$

6,740

 

$

(61

)

$

129,044

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2010

 

 

 

Before

 

Consolidated

 

 

 

 

 

 

 

Consolidation

 

Investment Entities

 

Eliminations

 

Total

 

 

 

(in millions)

 

Total net revenues

 

$

2,433

 

$

26

 

$

(9

)

$

2,450

 

Total expenses

 

1,959

 

58

 

(9

)

2,008

 

Pretax income

 

474

 

(32

)

 

442

 

Income tax provision

 

130

 

 

 

130

 

Net income

 

344

 

(32

)

 

312

 

Net loss attributable to noncontrolling interests

 

 

(32

)

 

(32

)

Net income attributable to Ameriprise Financial

 

$

344

 

$

 

$

 

$

344

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2010

 

 

 

Before

 

Consolidated

 

 

 

 

 

 

 

Consolidation

 

Investment Entities

 

Eliminations

 

Total

 

 

 

(in millions)

 

Total net revenues

 

$

6,963

 

$

363

 

$

(28

)

$

7,298

 

Total expenses

 

5,883

 

174

 

(28

)

6,029

 

Pretax income

 

1,080

 

189

 

 

1,269

 

Income tax provision

 

263

 

 

 

263

 

Net income

 

817

 

189

 

 

1,006

 

Net income attributable to noncontrolling interests

 

 

189

 

 

189

 

Net income attributable to Ameriprise Financial

 

$

817

 

$

 

$

 

$

817

 

 

12



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

The following tables present the balances of assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis:

 

 

 

September 30, 2010

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

$

456

 

$

6

 

$

462

 

Common stocks

 

1

 

64

 

 

65

 

Other structured investments

 

 

44

 

13

 

57

 

Syndicated loans

 

 

4,789

 

 

4,789

 

Trading securities

 

 

2

 

 

2

 

Total investments

 

1

 

5,355

 

19

 

5,375

 

Receivables

 

 

42

 

 

42

 

Other assets

 

 

7

 

878

 

885

 

Total assets at fair value

 

$

1

 

$

5,404

 

$

897

 

$

6,302

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

 

 

5,097

 

5,097

 

Other liabilities

 

 

69

 

 

69

 

Total liabilities at fair value

 

$

 

$

69

 

$

5,097

 

$

5,166

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

Trading securities

 

$

 

$

36

 

$

 

$

36

 

Total investments

 

 

36

 

 

36

 

Other assets

 

 

2

 

831

 

833

 

Total assets at fair value

 

$

 

$

38

 

$

831

 

$

869

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

30

 

 

30

 

Total liabilities at fair value

 

$

 

$

30

 

$

 

$

30

 

 

The following tables provide a summary of changes in Level 3 assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis:

 

 

 

2010

 

2009

 

 

 

Corporate
Debt
Securities

 

Other
Structured
Investments

 

Other
Assets

 

Debt

 

Other
Assets

 

 

 

(in millions)

 

Balance, July 1

 

$

6

 

$

10

 

$

682

 

$

(5,048

)

$

341

 

Cumulative effect of accounting change

 

 

 

 

 

 

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

(1

)(1)

(3

)(2)

(51

)(1)

(10

)(2)

Other comprehensive income

 

 

 

35

 

 

(10

)

Purchases, sales, issuances and settlements, net

 

 

4

 

164

 

2

 

154

 

Balance, September 30

 

$

6

 

$

13

 

$

878

 

$

(5,097

)

$

475

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in unrealized losses included in income relating to assets held at September 30

 

$

 

$

(1

)(1)

$

 

$

(51

)(1)

$

(12

)(2)

 


(1) Included in net investment income in the Consolidated Statements of Operations.

(2) Included in other revenues in the Consolidated Statements of Operations.

 

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AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

 

 

2010

 

2009

 

 

 

Corporate
Debt
Securities

 

Other
Structured
Investments

 

Other
Assets

 

Debt

 

Other
Assets

 

 

 

(in millions)

 

Balance, January 1

 

$

 

$

 

$

831

 

$

 

$

287

 

Cumulative effect of accounting change

 

15

 

5

 

 

(4,962

)

 

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

(1

)(1)

 

68

(2)

(157

)(1)

(44

)(3)

Other comprehensive income

 

 

 

(29

)

 

23

 

Purchases, sales, issuances and settlements, net

 

(8

)

8

 

8

 

22

 

209

 

Balance, September 30

 

$

6

 

$

13

 

$

878

 

$

(5,097

)

$

475

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in unrealized gains (losses) included in income relating to assets held at September 30

 

$

 

$

 

$

101

(4)

$

(157

)(1)

$

(40

)(3)

 


(1) Included in net investment income in the Consolidated Statements of Operations.

(2) Represents a $69 million gain included in other revenue and a $1 million loss included in net investment income in the Consolidated Statements of Operations.

(3) Included in other revenues in the Consolidated Statements of Operations.

(4) Represents a $103 million gain included in other revenues and a $2 million loss included in net investment income in the Consolidated Statements of Operations.

 

The Company has elected the fair value option for the financial assets and liabilities of the consolidated CDOs. Management believes that the use of the fair value option better matches the changes in fair value of assets and liabilities related to the CDOs.

 

For receivables, other assets and other liabilities of the consolidated CDOs, the carrying value approximates fair value as the nature of these assets and liabilities have historically been short term and the receivables have been collectible. The fair value of these assets and liabilities is classified as Level 2. The fair value of syndicated loans is obtained from nationally-recognized pricing services and is classified as Level 2. Other assets consist primarily of properties held in consolidated pooled investment vehicles managed by Threadneedle. The fair value of these properties is determined using discounted cash flows and market comparables. Inputs into the valuation of these properties include: rental cash flows, current occupancy, historical vacancy rates, tenant history and assumptions regarding how quickly the property can be occupied and at what rental rates. Given the significance of the unobservable inputs to these measurements, these assets are classified as Level 3. The fair value of the CDO’s debt is valued using a discounted cash flow methodology. Inputs used to determine the expected cash flows include assumptions about default and recovery rates of the CDO’s underlying assets. Given the significance of the unobservable inputs to this fair value measurement, the CDO debt is classified as Level 3. Other liabilities consist primarily of short securities held in consolidated hedge funds. The fair value of these securities is obtained from nationally-recognized pricing services and is classified as Level 2. See Note 10 for a description of the Company’s determination of the fair value of investments.

 

The following table presents the fair value and unpaid principal balance of assets and liabilities carried at fair value under the fair value option as of September 30, 2010:

 

 

 

(in millions)

 

Syndicated loans

 

 

 

Unpaid principal balance

 

$

5,144

 

Excess unpaid principal over fair value

 

(355

)

Fair value

 

$

4,789

 

 

 

 

 

Fair value of loans more than 90 days past due

 

127

 

Fair value of loans in non-accrual status

 

110

 

Difference between fair value and unpaid principal of loans more than 90 days past due, loans in non-accrual status or both

 

71

 

Debt

 

 

 

Unpaid principal balance

 

6,000

 

Excess unpaid principal over fair value

 

(903

)

Carrying value at estimated fair value

 

$

5,097

 

 

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Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

Interest income from syndicated loans, bonds and structured investments is recorded based on contractual rates in net investment income. Gains and losses related to changes in the fair value of investments and gains and losses on sales of investments are recorded in net investment income. Interest expense on debt is recorded in interest and debt expense with gains and losses related to changes in the fair value of debt recorded in net investment income.

 

Total gains and losses recognized in net investment income related to changes in the fair value of financial assets and liabilities for which the fair value option was elected were $(32) million and $96 million for the three months and nine months ended September 30, 2010, respectively. The majority of the syndicated loans and debt have floating rates; as such, changes in their fair values are primarily attributable to changes in credit spreads.

 

Debt of the consolidated investment entities and the stated interest rates as of September 30, 2010 were as follows:

 

 

 

Carrying Value

 

Stated Interest Rate

 

 

 

(in millions)

 

 

 

Debt of consolidated CDOs due 2012-2021

 

$

5,097

 

1.2

%

Floating rate revolving credit borrowings due 2014

 

192

 

5.9

 

Floating rate revolving credit borrowings due 2014

 

139

 

5.1

 

Floating rate revolving credit borrowings due 2015

 

28

 

5.0

 

Total

 

$

5,456

 

 

 

 

The debt of the consolidated CDOs has both fixed and floating interest rates. The stated interest rate of the debt of consolidated CDOs is a weighted average rate based on the principal and stated interest rate according to the terms of each CDO structure, which range from 0% to 14.1%. The carrying value of the debt of the consolidated CDOs represents the fair value of the aggregate debt as of September 30, 2010. The carrying value of the floating rate revolving credit borrowings represents the outstanding principal amount of debt of certain consolidated pooled investment vehicles managed by Threadneedle. The fair value of this debt was $359 million as of September 30, 2010.

 

At September 30, 2010, future maturities of debt were as follows:

 

 

 

(in millions)

 

2011

 

$

 

2012

 

21

 

2013

 

150

 

2014

 

331

 

2015

 

383

 

Thereafter

 

5,474

 

Total future maturities

 

$

6,359

 

 

4.  Investments

 

The following is a summary of Ameriprise Financial investments:

 

 

 

September 30, 2010

 

December 31, 2009

 

 

 

(in millions)

 

Available-for-Sale securities, at fair value

 

$

33,586

 

$

32,546

 

Commercial mortgage loans, net

 

2,631

 

2,663

 

Trading securities

 

571

 

556

 

Policy loans

 

732

 

720

 

Other investments

 

460

 

453

 

Total

 

$

37,980

 

$

36,938

 

 

15



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

Available-for-Sale securities distributed by type were as follows:

 

 

 

September 30, 2010

 

Description of Securities

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

Noncredit
OTTI 
(1)

 

 

 

(in millions)

 

Corporate debt securities

 

$

15,402

 

$

1,707

 

$

(16

)

$

17,093

 

$

14

 

Residential mortgage backed securities

 

7,388

 

445

 

(352

)

7,481

 

(132

)

Commercial mortgage backed securities

 

4,604

 

368

 

(3

)

4,969

 

 

Asset backed securities

 

1,954

 

95

 

(40

)

2,009

 

(17

)

State and municipal obligations

 

1,659

 

81

 

(45

)

1,695

 

 

U.S. government and agencies obligations

 

137

 

10

 

 

147

 

 

Foreign government bonds and obligations

 

91

 

21

 

 

112

 

 

Common and preferred stocks

 

53

 

3

 

(2

)

54

 

 

Other debt obligations

 

26

 

 

 

26

 

 

Total

 

$

31,314

 

$

2,730

 

$

(458

)

$

33,586

 

$

(135

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

Description of Securities

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

Noncredit
OTTI 
(1)

 

 

 

(in millions)

 

Corporate debt securities

 

$

15,336

 

$

894

 

$

(107

)

$

16,123

 

$

12

 

Residential mortgage backed securities

 

8,050

 

218

 

(498

)

7,770

 

(152

)

Commercial mortgage backed securities

 

4,437

 

196

 

(20

)

4,613

 

 

Asset backed securities

 

1,984

 

72

 

(62

)

1,994

 

(18

)

State and municipal obligations

 

1,472

 

21

 

(76

)

1,417

 

 

U.S. government and agencies obligations

 

379

 

9

 

(1

)

387

 

 

Foreign government bonds and obligations

 

95

 

14

 

(1

)

108

 

 

Common and preferred stocks

 

52

 

1

 

(10

)

43

 

 

Other structured investments

 

22

 

36

 

 

58

 

21

 

Other debt obligations

 

33

 

 

 

33

 

 

Total

 

$

31,860

 

$

1,461

 

$

(775

)

$

32,546

 

$

(137

)

 


(1) Represents the amount of other-than-temporary impairment losses in Accumulated Other Comprehensive Income. Amount includes unrealized gains and losses on impaired securities subsequent to the initial impairment measurement date. These amounts are included in gross unrealized gains and losses as of the end of the period.

 

At both September 30, 2010 and December 31, 2009, fixed maturity securities comprised approximately 88% of Ameriprise Financial investments. Rating agency designations are based on the availability of ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”), including Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings Ltd. (“Fitch”). The Company uses the median of available ratings from Moody’s, S&P and Fitch, or, if fewer than three ratings are available, the lower rating is used. When ratings from Moody’s, S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. At both September 30, 2010 and December 31, 2009, the Company’s internal analysts rated $1.2 billion of securities, using criteria similar to those used by NRSROs.  A summary of fixed maturity securities by rating was as follows:

 

 

 

September 30, 2010

 

December 31, 2009

 

Ratings

 

Amortized
Cost

 

Fair Value

 

Percent of
Total Fair
Value

 

Amortized
Cost

 

Fair Value

 

Percent of
Total Fair
Value

 

 

 

(in millions, except percentages)

 

AAA

 

$

12,320

 

$

13,169

 

39

%

$

13,003

 

$

13,396

 

41

%

AA

 

1,848

 

1,973

 

6

 

1,616

 

1,601

 

5

 

A

 

4,494

 

4,859

 

15

 

4,778

 

4,910

 

15

 

BBB

 

10,545