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 June 30, 2013

 

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

(Do not check if a smaller reporting company) o

 

Smaller reporting company o

 

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 July 19, 2013

Common Stock (par value $.01 per share)

 

197,850,182 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 six months ended June 30, 2013 and 2012

3

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income —
Three months and six months ended June 30, 2013 and 2012

4

 

 

 

 

 

 

Consolidated Balance Sheets — June 30, 2013 and December 31, 2012

5

 

 

 

 

 

 

Consolidated Statements of Equity — Six months ended June 30, 2013 and 2012

6

 

 

 

 

 

 

Consolidated Statements of Cash Flows — Six months ended June 30, 2013 and 2012

7

 

 

 

 

 

 

Notes to Consolidated Financial Statements

9

 

 

 

 

 

Item 2.

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

48

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

86

 

 

 

 

 

Item 4.

Controls and Procedures

86

 

 

 

 

Part II.

Other Information:

87

 

 

 

 

 

Item 1.

Legal Proceedings

87

 

 

 

 

 

Item 1A.

Risk Factors

87

 

 

 

 

 

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 June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Revenues

 

 

 

 

 

 

 

 

 

Management and financial advice fees

 

$

1,294

 

$

1,152

 

$

2,538

 

$

2,284

 

Distribution fees

 

448

 

396

 

882

 

798

 

Net investment income

 

451

 

472

 

940

 

1,003

 

Premiums

 

315

 

302

 

625

 

603

 

Other revenues

 

249

 

202

 

471

 

408

 

Total revenues

 

2,757

 

2,524

 

5,456

 

5,096

 

Banking and deposit interest expense

 

8

 

10

 

16

 

21

 

Total net revenues

 

2,749

 

2,514

 

5,440

 

5,075

 

Expenses

 

 

 

 

 

 

 

 

 

Distribution expenses

 

760

 

663

 

1,486

 

1,329

 

Interest credited to fixed accounts

 

198

 

209

 

396

 

415

 

Benefits, claims, losses and settlement expenses

 

490

 

409

 

899

 

914

 

Amortization of deferred acquisition costs

 

92

 

99

 

167

 

130

 

Interest and debt expense

 

60

 

72

 

126

 

141

 

General and administrative expense

 

747

 

763

 

1,477

 

1,525

 

Total expenses

 

2,347

 

2,215

 

4,551

 

4,454

 

Income from continuing operations before income tax provision

 

402

 

299

 

889

 

621

 

Income tax provision

 

120

 

128

 

241

 

201

 

Income from continuing operations

 

282

 

171

 

648

 

420

 

Loss from discontinued operations, net of tax

 

(1

)

(1

)

(2

)

(2

)

Net income

 

281

 

170

 

646

 

418

 

Less: Net loss attributable to noncontrolling interests

 

(40

)

(53

)

(10

)

(49

)

Net income attributable to Ameriprise Financial

 

$

321

 

$

223

 

$

656

 

$

467

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.57

 

$

1.01

 

$

3.18

 

$

2.09

 

Loss from discontinued operations

 

 

 

(0.01

)

(0.01

)

Net income

 

$

1.57

 

$

1.01

 

$

3.17

 

$

2.08

 

Diluted

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

1.54

 

$

0.99

 

$

3.13

 

$

2.05

 

Loss from discontinued operations

 

 

 

(0.01

)

(0.01

)

Net income

 

$

1.54

 

$

0.99

 

$

3.12

 

$

2.04

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.52

 

$

0.35

 

$

0.97

 

$

0.35

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures:

 

 

 

 

 

 

 

 

 

Total other-than-temporary impairment losses on securities

 

$

(3

)

$

(14

)

$

(4

)

$

(19

)

Portion of loss recognized in other comprehensive income (loss) (before taxes)

 

1

 

6

 

(1

)

5

 

Net impairment losses recognized in net investment income

 

$

(2

)

$

(8

)

$

(5

)

$

(14

)

 

See Notes to Consolidated Financial Statements.

 

3



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

281

 

$

170

 

$

646

 

$

418

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(21

)

(73

)

10

 

Net unrealized gains (losses) on securities:

 

 

 

 

 

 

 

 

 

Net unrealized securities gains (losses) arising during the period

 

(661

)

156

 

(802

)

237

 

Reclassification of net securities losses included in net income

 

1

 

4

 

 

5

 

Impact on deferred acquisition costs, deferred sales inducement costs, benefit reserves and reinsurance recoverables

 

201

 

(59

)

265

 

(62

)

Total net unrealized gains (losses) on securities

 

(459

)

101

 

(537

)

180

 

Net unrealized gains on derivatives:

 

 

 

 

 

 

 

 

 

Net unrealized derivative gains arising during the period

 

 

 

 

10

 

Reclassification of net derivative gains included in net income

 

 

 

 

(1

)

Total net unrealized gains on derivatives

 

 

 

 

9

 

Total other comprehensive income (loss), net of tax

 

(459

)

80

 

(610

)

199

 

Total comprehensive income (loss)

 

(178

)

250

 

36

 

617

 

Less: Comprehensive loss attributable to noncontrolling interests

 

(40

)

(64

)

(51

)

(41

)

Comprehensive income (loss) attributable to Ameriprise Financial

 

$

(138

)

$

314

 

$

87

 

$

658

 

 

See Notes to Consolidated Financial Statements.

 

4



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)

 

 

 

June 30, 2013

 

December 31, 2012

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

2,331

 

$

2,371

 

Cash of consolidated investment entities

 

1,046

 

579

 

Investments

 

35,388

 

36,877

 

Investments of consolidated investment entities, at fair value

 

4,579

 

4,370

 

Separate account assets

 

74,815

 

72,397

 

Receivables

 

4,583

 

4,220

 

Receivables of consolidated investment entities
(includes $47 and $77, respectively, at fair value)

 

68

 

95

 

Deferred acquisition costs

 

2,506

 

2,399

 

Restricted and segregated cash and investments

 

2,241

 

2,538

 

Other assets

 

8,378

 

7,667

 

Other assets of consolidated investment entities, at fair value

 

1,323

 

1,216

 

Total assets

 

$

137,258

 

$

134,729

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Future policy benefits and claims

 

$

30,088

 

$

31,217

 

Separate account liabilities

 

74,815

 

72,397

 

Customer deposits

 

6,586

 

6,526

 

Short-term borrowings

 

501

 

501

 

Long-term debt

 

2,352

 

2,403

 

Debt of consolidated investment entities
(includes $4,677 and $4,450, respectively, at fair value)

 

5,297

 

4,981

 

Accounts payable and accrued expenses

 

1,191

 

1,228

 

Accounts payable and accrued expenses of consolidated investment entities

 

107

 

96

 

Other liabilities

 

6,706

 

5,467

 

Other liabilities of consolidated investment entities
(includes $603 and $166, respectively, at fair value)

 

633

 

201

 

Total liabilities

 

128,276

 

125,017

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Ameriprise Financial, Inc.:

 

 

 

 

 

Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 314,623,268 and 309,399,529, respectively)

 

3

 

3

 

Additional paid-in capital

 

6,730

 

6,503

 

Retained earnings

 

6,831

 

6,381

 

Appropriated retained earnings of consolidated investment entities

 

299

 

336

 

Treasury shares, at cost (116,164,177 and 105,456,535 shares, respectively)

 

(6,148

)

(5,325

)

Accumulated other comprehensive income, net of tax

 

625

 

1,194

 

Total Ameriprise Financial, Inc. shareholders’ equity

 

8,340

 

9,092

 

Noncontrolling interests

 

642

 

620

 

Total equity

 

8,982

 

9,712

 

Total liabilities and equity

 

$

137,258

 

$

134,729

 

 

See Notes to Consolidated Financial Statements.

 

5



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(in millions, except share data)

 

 

 

Ameriprise Financial, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appropriated

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

 

 

Ameriprise

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings of

 

 

 

Accumulated

 

Financial,

 

 

 

 

 

 

 

Number of

 

 

 

Additional

 

 

 

Consolidated

 

 

 

Other 

 

Inc.

 

Non-

 

 

 

 

 

Outstanding

 

Common

 

Paid-In

 

Retained

 

Investment

 

Treasury

 

Comprehensive

 

Shareholders’

 

controlling

 

 

 

 

 

Shares

 

Shares

 

Capital

 

Earnings

 

Entities

 

Shares

 

Income

 

Equity

 

Interests

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2012

 

221,942,983

 

$

3

 

$

6,237

 

$

5,603

 

$

428

 

$

(4,034

)

$

751

 

$

8,988

 

$

706

 

$

9,694

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

467

 

 

 

 

467

 

(49

)

418

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

191

 

191

 

8

 

199

 

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

658

 

(41

)

617

 

Net loss reclassified to appropriated retained earnings

 

 

 

 

 

(26

)

 

 

(26

)

26

 

 

Dividends to shareholders

 

 

 

 

(80

)

 

 

 

(80

)

 

(80

)

Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 

 

62

 

62

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

(149

)

(149

)

Repurchase of common shares

 

(12,773,495

)

 

 

 

 

(666

)

 

(666

)

 

(666

)

Share-based compensation plans

 

3,517,445

 

 

50

 

 

 

89

 

 

139

 

4

 

143

 

Other

 

 

 

 

 

(8

)

 

 

(8

)

 

(8

)

Balances at June 30, 2012

 

212,686,933

 

$

3

 

$

6,287

 

$

5,990

 

$

394

 

$

(4,611

)

$

942

 

$

9,005

 

$

608

 

$

9,613

 

Balances at January 1, 2013

 

203,942,994

 

$

3

 

$

6,503

 

$

6,381

 

$

336

 

$

(5,325

)

$

1,194

 

$

9,092

 

$

620

 

$

9,712

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

656

 

 

 

 

656

 

(10

)

646

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

(569

)

(569

)

(41

)

(610

)

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87

 

(51

)

36

 

Net loss reclassified to appropriated retained earnings

 

 

 

 

 

(37

)

 

 

(37

)

37

 

 

Dividends to shareholders

 

 

 

 

(202

)

 

 

 

(202

)

 

(202

)

Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 

 

81

 

81

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

(54

)

(54

)

Repurchase of common shares

 

(12,650,339

)

 

 

 

 

(922

)

 

(922

)

 

(922

)

Share-based compensation plans

 

7,166,436

 

 

227

 

(4

)

 

99

 

 

322

 

9

 

331

 

Balances at June 30, 2013

 

198,459,091

 

$

3

 

$

6,730

 

$

6,831

 

$

299

 

$

(6,148

)

$

625

 

$

8,340

 

$

642

 

$

8,982

 

 

See Notes to Consolidated Financial Statements.

 

6



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

 

 

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

Cash Flows from Operating Activities

 

 

 

 

 

Net income

 

$

646

 

$

418

 

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

 

 

 

 

 

Depreciation, amortization and accretion, net

 

116

 

110

 

Deferred income tax expense

 

18

 

5

 

Share-based compensation

 

71

 

66

 

Net realized investment gains

 

(5

)

(7

)

Net unrealized trading losses

 

 

1

 

Loss (income) and gain from sale of equity method investments

 

(25

)

9

 

Other-than-temporary impairments and provision for loan losses

 

5

 

17

 

Net losses (gains) of consolidated investment entities

 

(9

)

61

 

Changes in operating assets and liabilities:

 

 

 

 

 

Restricted and segregated cash and investments

 

215

 

62

 

Deferred acquisition costs

 

 

(26

)

Other investments, net

 

1

 

15

 

Future policy benefits and claims, net

 

(812

)

(190

)

Derivatives, net of collateral

 

716

 

33

 

Receivables

 

(239

)

(39

)

Brokerage deposits

 

(147

)

(68

)

Accounts payable and accrued expenses

 

(23

)

(71

)

Cash held by consolidated investment entities

 

(456

)

(81

)

Investment properties of consolidated investment entities

 

(172

)

(11

)

Other operating assets and liabilities of consolidated investment entities, net

 

11

 

26

 

Other, net

 

(4

)

138

 

Net cash provided by (used in) operating activities

 

(93

)

468

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

Available-for-Sale securities:

 

 

 

 

 

Proceeds from sales

 

269

 

150

 

Maturities, sinking fund payments and calls

 

2,455

 

2,335

 

Purchases

 

(2,391

)

(2,367

)

Proceeds from sales, maturities and repayments of commercial mortgage loans

 

151

 

135

 

Funding of commercial mortgage loans

 

(188

)

(106

)

Proceeds from sales of other investments

 

200

 

98

 

Purchase of other investments

 

(207

)

(206

)

Purchase of investments by consolidated investment entities

 

(1,501

)

(909

)

Proceeds from sales, maturities and repayments of investments by consolidated investment entities

 

1,837

 

1,150

 

Purchase of land, buildings, equipment and software

 

(38

)

(99

)

Change in consumer loans, net

 

91

 

(1

)

Other, net

 

12

 

(7

)

Net cash provided by investing activities

 

690

 

173

 

 

See Notes to Consolidated Financial Statements.

 

7



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

(in millions)

 

 

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

Cash Flows from Financing Activities

 

 

 

 

 

Investment certificates and banking time deposits:

 

 

 

 

 

Proceeds from additions

 

$

1,105

 

$

427

 

Maturities, withdrawals and cash surrenders

 

(899

)

(472

)

Change in other banking deposits

 

 

349

 

Policyholder and contractholder account values:

 

 

 

 

 

Consideration received

 

649

 

748

 

Net transfers to separate accounts

 

(44

)

(24

)

Surrenders and other benefits

 

(649

)

(620

)

Cash paid for purchased options with deferred premiums

 

(215

)

(172

)

Change in short-term borrowings, net

 

(1

)

(7

)

Dividends paid to shareholders

 

(197

)

(139

)

Repurchase of common shares

 

(807

)

(666

)

Exercise of stock options

 

74

 

45

 

Excess tax benefits from share-based compensation

 

77

 

28

 

Borrowings by consolidated investment entities

 

1,054

 

83

 

Repayments of debt by consolidated investment entities

 

(791

)

(194

)

Noncontrolling interests investments in subsidiaries

 

81

 

62

 

Distributions to noncontrolling interests

 

(54

)

(149

)

Other, net

 

(1

)

(2

)

Net cash used in financing activities

 

(618

)

(703

)

Effect of exchange rate changes on cash

 

(19

)

2

 

Net decrease in cash and cash equivalents

 

(40

)

(60

)

Cash and cash equivalents at beginning of period

 

2,371

 

2,781

 

Cash and cash equivalents at end of period

 

$

2,331

 

$

2,721

 

 

 

 

 

 

 

Supplemental Disclosures:

 

 

 

 

 

Interest paid before consolidated investment entities

 

$

90

 

$

95

 

Income taxes paid, net

 

93

 

131

 

Non-cash investing activity:

 

 

 

 

 

Affordable housing partnership commitments not yet remitted

 

28

 

22

 

 

See Notes to Consolidated Financial Statements.

 

8



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, 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 foreign operations of Ameriprise Financial, Inc. are conducted primarily 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 intercompany transactions and balances have been eliminated in consolidation. See Note 3 for additional information related to VIEs.

 

The results of Securities America Financial Corporation and its subsidiaries (collectively, “Securities America”) have been presented as discontinued operations for all periods presented. The Company completed the sale of Securities America in the fourth quarter of 2011.

 

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, 2012, filed with the Securities and Exchange Commission (“SEC”) on February 27, 2013.

 

The Company has reclassified certain prior year amounts in the Consolidated Statements of Cash Flows within operating activities to provide more detail related to derivatives. The Company previously classified the change in freestanding derivatives hedging guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum accumulation benefits (“GMAB”) liabilities in the “Future policy benefits and claims” line, the change in all other freestanding derivatives in the “Other, net” line, and the change in derivatives collateral in the “Derivatives collateral, net” line within operating cash flows. The Company reclassified the changes in freestanding derivatives, as well as the change in derivatives collateral, to a new line titled “Derivatives, net of collateral” within operating cash flows.

 

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 adjustment described below, all adjustments made were of a normal recurring nature.

 

In the second quarter of 2012, the Company made a correction for a tax item related to prior periods, which resulted in a $32 million decrease to net income attributable to Ameriprise Financial. The Company discovered it had received incomplete data from a third party service provider for securities lending activities that resulted in the miscalculation of the Company’s dividend received deduction and foreign tax credit, which resulted in an understatement of taxes payable and an overstatement of reported earnings in prior periods. Management determined that the effect of this correction was not material to the Consolidated Financial Statements for all prior periods. The Company resolved the data issue and stopped the securities lending that negatively impacted its tax position.

 

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

 

Comprehensive Income

 

In February 2013, the Financial Accounting Standards Board (“FASB”) updated the accounting standard related to comprehensive income. The update requires entities to provide information about significant amounts reclassified out of accumulated other comprehensive income (“AOCI”). The standard is effective for interim and annual periods beginning after December 15, 2012 and is required to be applied prospectively. The Company adopted the standard in the first quarter of 2013. The adoption of the standard did not have any effect on the Company’s consolidated results of operations and financial condition. See Note 13 for the required disclosures.

 

9



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

Balance Sheet

 

In December 2011, the FASB updated the accounting standards to require new disclosures about offsetting assets and liabilities. The standard requires an entity to disclose both gross and net information about certain financial instruments and transactions subject to master netting arrangements (or similar agreements) or eligible for offset in the statement of financial position. The standard is effective for interim and annual periods beginning on or after January 1, 2013 on a retrospective basis. The Company adopted the standard in the first quarter of 2013. The adoption of the standard did not have any effect on the Company’s consolidated results of operations and financial condition. See Note 11 for the required disclosures.

 

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

 

In October 2010, the FASB updated the accounting standard for deferred acquisition costs (“DAC”). Under this new standard, only the following costs incurred in the acquisition of new and renewal insurance contracts are capitalizable as DAC: (i) incremental direct costs of a successful contract acquisition, (ii) portions of employees’ compensation and benefits directly related to time spent performing acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and contract selling) for a contract that has been acquired, (iii) other costs related to acquisition activities that would not have been incurred had the acquisition of the contract not occurred, and (iv) advertising costs that meet the capitalization criteria in other GAAP guidance for certain direct-response marketing. All other acquisition related costs are expensed as incurred. The Company retrospectively adopted the new standard on January 1, 2012. The cumulative effect of the adoption reduced retained earnings by $1.4 billion after-tax and increased AOCI by $113 million after-tax, totaling to a $1.3 billion after-tax reduction in total equity at January 1, 2012.

 

Future Adoption of New Accounting Standards

 

Income Taxes

 

In July 2013, the FASB updated the accounting standard for income taxes. The update provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The standard is effective for interim and annual periods beginning after December 15, 2013 and should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

 

3.  Consolidated Investment Entities

 

The Company provides asset management services to various collateralized debt obligations (“CDOs”) and other investment products (collectively, “investment entities”), which are sponsored by the Company. 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.

 

The CDOs managed by the Company 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 of the CDOs 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 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 benefits or the potential obligation to absorb losses that are significant to the CDO. 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 or it does hold a variable interest but does not have the potential to receive benefits or the potential obligation to absorb losses that are significant to the CDO.

 

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

 

10



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

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 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. The Company’s maximum exposure to loss as a result of its investment in structured investments that it does not consolidate 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. See Note 4 for additional information about these structured investments.

 

Fair Value of Assets and Liabilities

 

The Company categorizes its fair value measurements according to a three-level hierarchy. See Note 10 for the definition of the three levels of the fair value hierarchy.

 

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

 

 

 

June 30, 2013

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

$

217

 

$

3

 

$

220

 

U.S. government and agencies obligations

 

4

 

 

 

4

 

Common stocks

 

117

 

32

 

16

 

165

 

Other structured investments

 

 

40

 

 

40

 

Syndicated loans

 

 

3,858

 

292

 

4,150

 

Total investments

 

121

 

4,147

 

311

 

4,579

 

Receivables

 

 

47

 

 

47

 

Other assets

 

 

1

 

1,322

 

1,323

 

Total assets at fair value

 

$

121

 

$

4,195

 

$

1,633

 

$

5,949

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

$

 

$

 

$

4,677

 

$

4,677

 

Other liabilities

 

 

603

 

 

603

 

Total liabilities at fair value

 

$

 

$

603

 

$

4,677

 

$

5,280

 

 

 

 

December 31, 2012

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

$

251

 

$

3

 

$

254

 

Common stocks

 

91

 

32

 

14

 

137

 

Other structured investments

 

 

57

 

 

57

 

Syndicated loans

 

 

3,720

 

202

 

3,922

 

Total investments

 

91

 

4,060

 

219

 

4,370

 

Receivables

 

 

77

 

 

77

 

Other assets

 

 

2

 

1,214

 

1,216

 

Total assets at fair value

 

$

91

 

$

4,139

 

$

1,433

 

$

5,663

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

$

 

$

 

$

4,450

 

$

4,450

 

Other liabilities

 

 

166

 

 

166

 

Total liabilities at fair value

 

$

 

$

166

 

$

4,450

 

$

4,616

 

 

11



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

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:

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Debt

 

Common

 

Syndicated

 

Other

 

 

 

 

 

Securities

 

Stocks

 

Loans

 

Assets

 

Debt

 

 

 

(in millions)

 

Balance, April 1, 2013

 

$

3

 

$

8

 

$

205

 

$

1,176

 

$

(4,595

)

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

1

(1)

1

(2)

8

(2)

(61

)(1)

Other comprehensive loss

 

 

 

 

3

 

 

Purchases

 

1

 

 

117

 

144

 

 

Sales

 

(1

)

(3

)

(26

)

(17

)

 

Issues

 

 

 

 

 

(518

)

Settlements

 

 

 

(20

)

 

497

 

Transfers into Level 3

 

 

13

 

76

 

8

 

 

Transfers out of Level 3

 

 

(3

)

(61

)

 

 

Balance, June 30, 2013

 

$

3

 

$

16

 

$

292

 

$

1,322

 

$

(4,677

)

Changes in unrealized gains (losses) included in income relating to assets and liabilities held at June 30, 2013

 

$

 

$

(1

)(1)

$

 

$

12

(2)

$

(34

)(1)

 


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

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

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Debt

 

Common

 

Syndicated

 

Other

 

 

 

 

 

Securities

 

Stocks

 

Loans

 

Assets

 

Debt

 

 

 

(in millions)

 

Balance, April 1, 2012

 

$

4

 

$

8

 

$

195

 

$

1,035

 

$

(4,769

)

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

1

(1)

(25

)(2)

(16

)(1)

Other comprehensive income

 

 

 

 

(19

)

 

Purchases

 

 

 

27

 

96

 

 

Sales

 

 

(2

)

(2

)

(7

)

 

Settlements

 

 

 

(32

)

 

59

 

Transfers into Level 3

 

 

12

 

41

 

 

 

Transfers out of Level 3

 

 

(6

)

(61

)

 

 

Balance, June 30, 2012

 

$

4

 

$

12

 

$

169

 

$

1,080

 

$

(4,726

)

Changes in unrealized losses included in income relating to assets and liabilities held at June 30, 2012

 

$

 

$

 

$

(1

)(1)

$

(27

)(2)

$

(15

)(1)

 


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

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

 

12



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Debt

 

Common

 

Syndicated

 

Other

 

 

 

 

 

Securities

 

Stocks

 

Loans

 

Assets

 

Debt

 

 

 

(in millions)

 

Balance, January 1, 2013

 

$

3

 

$

14

 

$

202

 

$

1,214

 

$

(4,450

)

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

1

(1)

1

(1)

2

(2)

(88

)(1)

Other comprehensive loss

 

 

 

 

(74

)

 

Purchases

 

1

 

 

193

 

195

 

 

Sales

 

(1

)

(3

)

(44

)

(23

)

 

Issues

 

 

 

 

 

(926

)

Settlements

 

 

 

(33

)

 

787

 

Transfers into Level 3

 

 

15

 

127

 

8

 

 

Transfers out of Level 3

 

 

(11

)

(154

)

 

 

Balance, June 30, 2013

 

$

3

 

$

16

 

$

292

 

$

1,322

 

$

(4,677

)

Changes in unrealized gains (losses) included in income relating to assets and liabilities held at June 30, 2013

 

 

(1

)(1)

1

(1)

7

(2)

(59

)(1)

 


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

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

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Debt

 

Common

 

Syndicated

 

Other

 

 

 

 

 

Securities

 

Stocks

 

Loans

 

Assets

 

Debt

 

 

 

(in millions)

 

Balance, January 1, 2012

 

$

4

 

$

13

 

$

342

 

$

1,108

 

$

(4,712

)

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

(1

)(1)

4

(1)

(52

)(2)

(141

)(1)

Other comprehensive income

 

 

 

 

13

 

 

Purchases

 

 

6

 

34

 

108

 

 

Sales

 

 

(4

)

(7

)

(97

)

 

Issues

 

 

 

 

 

 

Settlements

 

 

 

(62

)

 

127

 

Transfers into Level 3

 

 

13

 

127

 

 

 

Transfers out of Level 3

 

 

(15

)

(269

)

 

 

Balance, June 30, 2012

 

$

4

 

$

12

 

$

169

 

$

1,080

 

$

(4,726

)

Changes in unrealized losses included in income relating to assets and liabilities held at June 30, 2012

 

$

 

$

 

$

(1

)(1)

$

(61

)(2)

$

(140

)(1)

 


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

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

 

Securities and loans transferred from Level 2 to Level 3 represent assets with fair values that are now based on a single non-binding broker quote. Securities and loans transferred from Level 3 to Level 2 represent assets with fair values that are now obtained from a third party pricing service with observable inputs. During the reporting periods, there were no transfers between Level 1 and Level 2.

 

13



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

The following tables provide a summary of the significant unobservable inputs used in the fair value measurements developed by the Company or reasonably available to the Company of Level 3 assets and liabilities held by consolidated investment entities:

 

 

 

June 30, 2013

 

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Average)

 

 

(in millions)

 

 

 

 

 

 

Other assets

 

$

1,313

 

Discounted cash flow/market comparables

 

Equivalent yield

 

4.3% - 14.6% (7.4%)

 

 

 

 

 

 

Expected rental value (per square foot)

 

$4 - $289 ($29)

 

 

 

 

 

 

 

 

 

Debt

 

$

4,677

 

Discounted cash flow

 

Annual default rate

 

2.5% - 4.5% (2.5%)

 

 

 

 

 

 

Discount rate

 

1.2% - 32.0% (2.2%)

 

 

 

 

 

 

Constant prepayment rate

 

5.0% - 10.0% (9.7%)

 

 

 

 

 

 

Loss recovery

 

36.4% - 63.6% (62.4%)

 

 

 

December 31, 2012

 

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Average)

 

 

(in millions)

 

 

 

 

 

 

Other assets

 

$

1,214

 

Discounted cash flow/market comparables

 

Equivalent yield

 

4.1% - 12.9% (7.2%)

 

 

 

 

 

 

Expected rental value (per square foot)

 

$4 - $309 ($32)

 

 

 

 

 

 

 

 

 

Debt

 

$

4,450

 

Discounted cash flow

 

Annual default rate

 

2.5% - 4.5% (2.5%)

 

 

 

 

 

 

Discount rate

 

1.6% - 30.0% (2.9%)

 

 

 

 

 

 

Constant prepayment rate

 

5.0% - 10.0% (9.6%)

 

 

 

 

 

 

Loss recovery

 

36.4% - 63.6% (62.0%)

 

Level 3 measurements not included in the tables above are obtained from non-binding broker quotes where unobservable inputs are not reasonably available to the Company.

 

Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs

 

Generally, a significant increase (decrease) in the expected rental value used in the fair value measurement of properties held by consolidated investment entities in isolation would result in a significantly higher (lower) fair value measurement and a significant increase (decrease) in the equivalent yield in isolation would result in a significantly lower (higher) fair value measurement.

 

Generally, a significant increase (decrease) in the annual default rate and discount rate used in the fair value measurement of the CDO’s debt in isolation would result in a significantly lower (higher) fair value measurement and a significant increase (decrease) in loss recovery in isolation would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the constant prepayment rate in isolation would result in a significantly higher (lower) fair value measurement.

 

Determination of Fair Value

 

Assets

 

Investments

 

The fair value of syndicated loans obtained from third party pricing services with multiple non-binding broker quotes as the underlying valuation source is classified as Level 2. The fair value of syndicated loans obtained from third party pricing services with a single non-binding broker quote as the underlying valuation source is classified as Level 3. The underlying inputs used in non-binding broker quotes are not readily available to the Company.

 

In consideration of the above, management is responsible for the fair values recorded on the financial statements. Prices received from third party pricing services are subjected to exception reporting that identifies loans with significant daily price movements as well as no movements. The Company reviews the exception reporting and resolves the exceptions through reaffirmation of the price or recording an appropriate fair value estimate. The Company also performs subsequent transaction testing. The Company performs annual due diligence of the third party pricing services. The Company’s due diligence procedures include assessing the vendor’s valuation qualifications, control environment, analysis of asset-class specific valuation methodologies and understanding of sources of market observable assumptions and unobservable assumptions, if any, employed in the valuation methodology. The Company also considers the results of its exception reporting controls and any resulting price challenges that arise.

 

14



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

See Note 10 for a description of the Company’s determination of the fair value of corporate debt securities, U.S. government and agencies obligations, common stocks and other structured investments.

 

Receivables

 

For receivables of the consolidated CDOs, the carrying value approximates fair value as the nature of these assets has historically been short term and the receivables have been collectible. The fair value of these receivables is classified as Level 2.

 

Other Assets

 

Other assets consist primarily of properties held in consolidated pooled investment vehicles managed by Threadneedle. The fair value of these properties is calculated by a third party appraisal service by discounting future cash flows generated by the expected market rental value for the property using the equivalent yield of a similar investment property. Inputs used in determining the equivalent yield and expected rental value of the property may 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. Management reviews the valuation report and assumptions used to ensure that the valuation was performed in accordance with applicable independence, appraisal and valuation standards. Given the significance of the unobservable inputs to these measurements, these assets are classified as Level 3.

 

Other assets of the consolidated CDO’s consist primarily of warrants. Warrants that are traded directly with the issuer are classified as Level 2 when the price is derived from observable market data. Warrants from an issuer whose securities are not priced in active markets are classified as Level 3.

 

Liabilities

 

Debt

 

The fair value of the CDOs’ debt is determined using a discounted cash flow model. Inputs used to determine the expected cash flows include assumptions about default, discount, prepayment and recovery rates of the CDOs’ underlying assets. Given the significance of the unobservable inputs to this fair value measurement, the fair value of the CDOs’ debt is classified as Level 3.

 

Other Liabilities

 

Other liabilities consist primarily of securities purchased but not yet settled held by consolidated CDOs. The carrying value approximates fair value as the nature of these liabilities has historically been short term. The fair value of these liabilities is classified as Level 2.

 

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.

 

The following table presents the fair value and unpaid principal balance of loans and debt for which the fair value option has been elected:

 

 

 

June 30, 2013

 

December 31, 2012

 

 

 

(in millions)

 

Syndicated loans

 

 

 

 

 

Unpaid principal balance

 

$

4,176

 

$

4,023

 

Excess unpaid principal over fair value

 

(26

)

(101

)

Fair value

 

$

4,150

 

$

3,922

 

 

 

 

 

 

 

Fair value of loans more than 90 days past due

 

$

5

 

$

34

 

Fair value of loans in nonaccrual status

 

5

 

34

 

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

 

26

 

38

 

 

 

 

 

 

 

Debt

 

 

 

 

 

Unpaid principal balance

 

$

4,855

 

$

4,757

 

Excess unpaid principal over fair value

 

(178

)

(307

)

Fair value

 

$

4,677

 

$

4,450

 

 

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

 

15



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

investments are also 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 net 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 $30 million and $35 million for the three months ended June 30, 2013 and 2012, respectively. Total net 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 $9 million and $26 million for the six months ended June 30, 2013 and 2012, 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 were as follows:

 

 

 

Carrying Value

 

Weighted Average Interest Rate

 

 

 

June 30,
2013

 

December 31,
2012

 

June 30,
2013

 

December 31,
2012

 

 

 

(in millions)

 

 

 

 

 

Debt of consolidated CDOs due 2016-2025

 

$

4,677

 

$

4,450

 

1.0

%

0.9

%

Floating rate revolving credit borrowings due 2014

 

285

 

309

 

2.6

 

2.6

 

Floating rate revolving credit borrowings due 2015

 

98

 

104

 

2.4

 

2.4

 

Floating rate revolving credit borrowings due 2017

 

111

 

118

 

4.5

 

4.5

 

Floating rate revolving credit borrowings due 2018

 

126

 

 

3.7

 

 

Total

 

$

5,297

 

$

4,981

 

 

 

 

 

 

The debt of the consolidated CDOs has both fixed and floating interest rates, which range from 0% to 13.2%. The interest rates on the debt of CDOs are weighted average rates based on the outstanding principal and contractual interest rates. The carrying value of the debt of the consolidated CDOs represents the fair value of the aggregate debt. 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 $620 million and $531 million as of June 30, 2013 and December 31, 2012, respectively. The consolidated pooled investment vehicles have entered into interest rate swaps and collars to manage the interest rate exposure on the floating rate revolving credit borrowings. The fair value of these derivative instruments is recorded gross and was a liability of $12 million and $17 million at June 30, 2013 and December 31, 2012, respectively. The overall effective interest rate reflecting the impact of the derivative contracts was 4.5% and 4.8% as of June 30, 2013 and December 31, 2012, respectively.

 

4.  Investments

 

The following is a summary of Ameriprise Financial investments:

 

 

 

June 30, 2013

 

December 31, 2012

 

 

 

(in millions)

 

Available-for-Sale securities, at fair value

 

$

30,018

 

$

31,472

 

Mortgage loans, net

 

3,558

 

3,609

 

Policy and certificate loans

 

761

 

754

 

Other investments

 

1,051

 

1,042

 

Total

 

$

35,388

 

$

36,877