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, 2012

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. 033-28976

RIVERSOURCE LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

Minnesota		41-0823832
(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 o		Accelerated Filer o

Non-Accelerated Filer x		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 November 5, 2012
Common Stock (par value $30 per share)		100,000 shares

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

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RIVERSOURCE LIFE INSURANCE COMPANY

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)

	September 30, 2012		December 31, 2011
Assets
Investments:
Available-for-Sale:
Fixed maturities, at fair value (amortized cost: 2012, $23,293; 2011, $24,398)	$	26,221	$	26,577
Common stocks, at fair value (cost: 2012 and 2011, $1)	3		2
Commercial mortgage loans, at cost (less allowance for loan losses: 2012, $26; 2011, $32)	2,424		2,473
Policy loans	750		739
Other investments	755		730
Total investments	30,153		30,521

Cash and cash equivalents	1,102		828
Restricted cash	183		26
Reinsurance recoverables	2,006		1,953
Other receivables	171		162
Accrued investment income	283		307
Deferred income taxes, net	—		60
Deferred acquisition costs	2,371		2,413
Deferred sales inducement costs	416		464
Other assets	4,157		3,578
Separate account assets	68,798		63,174

Total assets	$	109,640	$	103,486

Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits	$	31,063	$	31,169
Policy claims and other policyholders’ funds	130		121
Deferred income taxes, net	47		—
Borrowings under repurchase agreements	500		504
Line of credit with Ameriprise Financial, Inc.	150		300
Other liabilities	4,330		3,608
Separate account liabilities	68,798		63,174
Total liabilities	105,018		98,876

Shareholder’s equity:
Common stock, $30 par value; 100,000 shares authorized, issued and outstanding	3		3
Additional paid-in capital	2,462		2,461
Retained earnings	910		1,215
Accumulated other comprehensive income, net of tax	1,247		931
Total shareholder’s equity	4,622		4,610

Total liabilities and shareholder’s equity	$	109,640	$	103,486

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in millions)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues
Premiums	$	111		$	127		$	333		$	376
Net investment income	364			421			1,118			1,215
Policy and contract charges	373			369			1,172			1,146
Other revenues	84			77			242			228
Net realized investment gains (losses)	1			(2		)	1			(2		)
Total revenues	933			992			2,866			2,963

Benefits and expenses
Benefits, claims, losses and settlement expenses	376			93			970			585
Interest credited to fixed accounts	206			214			621			634
Amortization of deferred acquisition costs	52			187			152			320
Other insurance and operating expenses	185			185			576			583
Total benefits and expenses	819			679			2,319			2,122
Pretax income	114			313			547			841
Income tax provision	13			64			112			160
Net income	$	101		$	249		$	435		$	681

Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	$	—		$	(3	)	$	(9	)	$	(40	)
Portion of loss recognized in other comprehensive income (before taxes)	(5		)	—			(3		)	22
Net impairment losses recognized in net realized investment gains (losses)	$	(5	)	$	(3	)	$	(12	)	$	(18	)

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income	$	101		$	249		$	435		$	681
Other comprehensive income, net of tax:
Net unrealized gains on securities:
Net unrealized securities gains arising during the period	309			226			486			328
Reclassification of net securities losses included in net income	—			2			—			2
Impact on deferred acquisition costs, deferred sales inducement costs, benefit reserves and reinsurance recoverables	(112		)	(182		)	(174		)	(218		)
Total net unrealized gains on securities	197			46			312			112
Net unrealized losses on derivatives:
Reclassification of net derivative losses included in net income	2			—			4			3
Total net unrealized losses on derivatives	2			—			4			3
Total other comprehensive income, net of tax	199			46			316			115
Total comprehensive income	$	300		$	295		$	751		$	796

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (UNAUDITED)

(in millions)

	Common Shares		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income		Total

Balances at January 1, 2011, previously reported	$	3	$	2,460	$	3,410		$	675	$	6,548
Cumulative effect of change in accounting policies, net of tax	—		—		(1,416		)	85		(1,331		)

Balances at January 1, 2011, as adjusted	3		2,460		1,994			760		5,217
Comprehensive income:
Net income	—		—		681			—		681
Other comprehensive income, net of tax	—		—		—			115		115
Total comprehensive income										796
Tax adjustment on share-based incentive compensation plan	—		1		—			—		1
Cash dividend to Ameriprise Financial, Inc.	—		—		(750		)	—		(750		)

Balances at September 30, 2011	$	3	$	2,461	$	1,925		$	875	$	5,264

Balances at January 1, 2012	$	3	$	2,461	$	1,215		$	931	$	4,610
Comprehensive income:
Net income	—		—		435			—		435
Other comprehensive income, net of tax	—		—		—			316		316
Total comprehensive income										751
Tax adjustment on share-based incentive compensation plan	—		1		—			—		1
Cash dividend to Ameriprise Financial, Inc.	—		—		(740		)	—		(740		)

Balances at September 30, 2012	$	3	$	2,462	$	910		$	1,247	$	4,622

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

	Nine Months Ended September 30,
	2012			2011
Cash Flows from Operating Activities
Net income	$	435		$	681
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net	(33		)	(69		)
Deferred income tax (benefit) expense	(63		)	138
Contractholder and policyholder charges, non-cash	(203		)	(197		)
Loss from equity method investments	18			25
Net realized investment gains	(13		)	(15		)
Other-than-temporary impairments and provision for loan losses recognized in net realized investment gains (losses)	12			17
Change in operating assets and liabilities:
Deferred acquisition costs	(33		)	109
Deferred sales inducement costs	37			73
Other investments, net	25			—
Future policy benefits for traditional life, disability income and long term care insurance	191			187
Policy claims and other policyholders’ funds	9			(1		)
Reinsurance recoverables	(67		)	(85		)
Other receivables	(31		)	30
Accrued investment income	24			12
Derivatives collateral, net	(661		)	335
Other assets and liabilities, net	810			(154		)
Net cash provided by operating activities	457			1,086

Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	148			498
Maturities, sinking fund payments and calls	2,346			2,460
Purchases	(1,551		)	(2,797		)
Proceeds from sales, maturities and repayments of commercial mortgage loans	180			169
Funding of commercial mortgage loans	(144		)	(108		)
Proceeds from sales of other investments	78			97
Purchase of other investments	(215		)	(256		)
Purchase of land, buildings, equipment and software	(7		)	(4		)
Change in policy loans, net	(11		)	(9		)
Net cash provided by investing activities	824			50

Cash Flows from Financing Activities
Policyholder and contractholder account values:
Considerations received	1,082			978
Net transfers to separate accounts	(30		)	(3		)
Surrenders and other benefits	(909		)	(1,010		)
Change in borrowings under repurchase agreements, net	(5		)	107
Proceeds from line of credit with Ameriprise Financial, Inc.	268			415
Payments on line of credit with Ameriprise Financial, Inc.	(418		)	(118		)
Deferred premium options, net	(256		)	(177		)
Tax adjustment on share-based incentive compensation plan	1			1
Cash dividend to Ameriprise Financial, Inc.	(740		)	(750		)
Net cash used in financing activities	(1,007		)	(557		)
Net increase in cash and cash equivalents	274			579
Cash and cash equivalents at beginning of period	828			76
Cash and cash equivalents at end of period	$	1,102		$	655
Supplemental Disclosures:
Income taxes paid, net	$	14		$	230
Interest paid on borrowings	4			3
Non-cash investing activity:
Affordable housing partnership commitments not yet remitted	16			124

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables present the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

	December 31, 2011
	Previously Reported		Effect of Change			As Adjusted
	(in millions)
Balance Sheets

Assets
Deferred income taxes, net	$	—	$	60		$	60
Deferred acquisition costs	4,367		(1,954		)	2,413
Total assets	$	105,380	$	(1,894	)	$	103,486

Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits	$	31,182	$	(13	)	$	31,169
Deferred income taxes, net	620		(620		)	—
Other liabilities	3,607		1			3,608
Total liabilities	99,508		(632		)	98,876

Shareholder’s equity:
Retained earnings	2,589		(1,374		)	1,215
Accumulated other comprehensive income, net of tax	819		112			931
Total shareholder’s equity	5,872		(1,262		)	4,610

Total liabilities and shareholder’s equity	$	105,380	$	(1,894	)	$	103,486

	December 31, 2010
	Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Shareholder’s Equity

Retained earnings	$	3,410	$	(1,416	)	$	1,994
Accumulated other comprehensive income, net of tax	675		85			760
Total shareholder’s equity	$	6,548	$	(1,331	)	$	5,217

	Three Months Ended September 30, 2011							Nine Months Ended September 30, 2011
	Previously Reported		Effect of Change			As Adjusted		Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Income

Revenues
Total revenues	$	992	$	—		$	992	$	2,963	$	—		$	2,963

Benefits and expenses
Benefits, claims, losses and settlement expenses	92		1			93		584		1			585
Interest credited to fixed accounts	213		1			214		632		2			634
Amortization of deferred acquisition costs	299		(112		)	187		513		(193		)	320
Other insurance and operating expenses	153		32			185		481		102			583
Total benefits and expenses	757		(78		)	679		2,210		(88		)	2,122

Pretax income	235		78			313		753		88			841
Income tax provision	36		28			64		129		31			160

Net income	$	199	$	50		$	249	$	624	$	57		$	681

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2. Recent Accounting Pronouncements

Adoption of New Accounting Standards

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to the presentation of comprehensive income. The standard requires entities to present all nonowner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The standard is effective for interim and annual periods beginning after December 15, 2011. The Company retrospectively adopted the standard in the first quarter of 2012. The adoption of the standard did not impact the Company’s consolidated financial condition and results of operations. See the Company’s Consolidated Statements of Comprehensive Income for the newly required statements.

Fair Value

In May 2011, the FASB updated the accounting standards related to fair value measurement and disclosure requirements. The standard requires entities, for assets and liabilities measured at fair value in the statement of financial position which are Level 3 fair value measurements, to disclose quantitative information about unobservable inputs and assumptions used in the measurements, a description of the valuation processes in place, and a qualitative discussion about the sensitivity of the measurements to changes in unobservable inputs and interrelationships between those inputs if a change in those inputs would result in a significantly different fair value measurement. In addition, the standard requires disclosure of fair value by level within the fair value hierarchy for each class of assets and liabilities not measured at fair value in the statement of financial position but for which the fair value is disclosed. The standard is effective for interim and annual periods beginning on or after December 15, 2011. The Company adopted the standard in the first quarter of 2012. The adoption of the standard did not impact the Company’s consolidated financial condition and results of operations. See Note 11 for the required disclosures.

Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreements

In April 2011, the FASB updated the accounting standards related to accounting for repurchase agreements and other similar agreements. The standard modifies the criteria for determining when these transactions would be accounted for as secured borrowings as opposed to sales. The standard is effective prospectively for new transfers and existing transactions that are modified in the first interim or annual period beginning on or after December 15, 2011. The Company adopted the standard in the first quarter of 2012. The adoption of the standard did not impact the Company’s consolidated financial condition and results of operations.

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB updated the accounting standard for 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 accumulated other comprehensive income by $112 million after-tax, totaling to a $1.3 billion after-tax reduction in total equity at January 1, 2012. See Note 1 and Note 6 for additional information on the adoption of this standard.

Future Adoption of New Accounting Standards

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 instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The standard is effective for interim and annual periods beginning on or after January 1, 2013 on a retrospective basis. The Company is currently evaluating the impact of the standard on its consolidated financial condition and results of operations.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. Variable Interest Entities

RTA, a subsidiary of RiverSource Life Insurance Company, has variable interests in affordable housing partnerships for which it is not the primary beneficiary and, therefore, does not consolidate.

RTA’s maximum exposure to loss as a result of its investments in the affordable housing partnerships is limited to the carrying values of these investments. The carrying values are reflected in other investments and were $417 million and $384 million as of September 30, 2012 and December 31, 2011, respectively. RTA has no obligation to provide financial or other support to the affordable housing partnerships in addition to liabilities already recorded for future funding commitments nor has it provided any additional support to the affordable housing partnerships. The Company had liabilities of $174 million and $267 million recorded in other liabilities as of September 30, 2012 and December 31, 2011, respectively, related to the future funding commitments for affordable housing partnerships.

4. Investments

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

	September 30, 2012
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,707	$	2,211	$	(14	)	$	16,904	$	—
Residential mortgage backed securities	3,460		245		(65		)	3,640		(28		)
Commercial mortgage backed securities	2,979		307		—			3,286		—
State and municipal obligations	979		184		(37		)	1,126		—
Asset backed securities	930		67		(12		)	985		—
Foreign government bonds and obligations	188		35		—			223		—
U.S. government and agencies obligations	43		7		—			50		—
Other structured investments	7		—		—			7		—
Total fixed maturities	23,293		3,056		(128		)	26,221		(28		)
Common stocks	1		2		—			3		1
Total	$	23,294	$	3,058	$	(128	)	$	26,224	$	(27	)

	December 31, 2011
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,770	$	1,726	$	(78	)	$	16,418	$	—
Residential mortgage backed securities	4,193		242		(126		)	4,309		(41		)
Commercial mortgage backed securities	3,355		276		—			3,631		—
State and municipal obligations	1,012		131		(47		)	1,096		—
Asset backed securities	883		43		(18		)	908		—
Foreign government bonds and obligations	126		19		(1		)	144		—
U.S. government and agencies obligations	49		8		—			57		—
Other structured investments	10		4		—			14		4
Total fixed maturities	24,398		2,449		(270		)	26,577		(37		)
Common stocks	1		1		—			2		—
Total	$	24,399	$	2,450	$	(270	)	$	26,579	$	(37	)

(1) Represents the amount of other-than-temporary impairment (“OTTI”) 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, 2012 and December 31, 2011, fixed maturity securities comprised approximately 87% of the Company’s total 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,

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. At September 30, 2012 and December 31, 2011, approximately $1.4 billion and $1.2 billion, respectively, of securities were internally rated by Columbia Management Investment Advisers, LLC using criteria similar to those used by NRSROs.

A summary of fixed maturity securities by rating was as follows:

	September 30, 2012						December 31, 2011
Ratings	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	6,192	$	6,758	26	%	$	7,276	$	7,811	30	%
AA	1,034		1,207		5		1,161		1,291		5
A	4,389		5,009		19		4,148		4,578		17
BBB	10,220		11,831		45		10,211		11,446		43
Below investment grade	1,458		1,416		5		1,602		1,451		5
Total fixed maturities	$	23,293	$	26,221	100	%	$	24,398	$	26,577	100	%

At September 30, 2012 and December 31, 2011, approximately 31% and 33%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities. No holdings of any other issuer were greater than 10% of total equity.

The following tables provide information about Available-for-Sale securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position:

	September 30, 2012
	Less than 12 months						12 months or more						Total
Description of Securities	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	15	$	130	$	(2	)	11	$	231	$	(12	)	26	$	361	$	(14	)
Residential mortgage backed securities	10	118		(1		)	46	276		(64		)	56	394		(65		)
State and municipal obligations	—	—		—			2	97		(37		)	2	97		(37		)
Asset backed securities	—	—		—			16	130		(12		)	16	130		(12		)
Total	25	$	248	$	(3	)	75	$	734	$	(125	)	100	$	982	$	(128	)

	December 31, 2011
	Less than 12 months						12 months or more						Total
Description of Securities	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	70	$	1,004	$	(37	)	9	$	257	$	(41	)	79	$	1,261	$	(78	)
Residential mortgage backed securities	30	338		(8		)	48	283		(118		)	78	621		(126		)
State and municipal obligations	—	—		—			2	87		(47		)	2	87		(47		)
Asset backed securities	12	145		(3		)	18	96		(15		)	30	241		(18		)
Foreign government bonds and obligations	5	23		(1		)	—	—		—			5	23		(1		)
Total	117	$	1,510	$	(49	)	77	$	723	$	(221	)	194	$	2,233	$	(270	)

As part of the Company’s ongoing monitoring process, management determined that a majority of the gross unrealized losses on its Available-for-Sale securities are attributable to movement in credit spreads.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table presents a rollforward of the cumulative amounts recognized in the Consolidated Statements of Income for other-than-temporary impairments related to credit losses on securities for which a portion of the securities’ total other-than-temporary impairments was recognized in other comprehensive income:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012			2011
	(in millions)
Beginning balance	$	90	$	107	$	106		$	108
Credit losses for which an other-than-temporary impairment was not previously recognized	—		1		1			13
Credit losses for which an other-than-temporary impairment was previously recognized	6		3		12			6
Reductions for securities sold during the period (realized)	—		—		(23		)	(16		)
Ending balance	$	96	$	111	$	96		$	111

The change in net unrealized securities gains (losses) in other comprehensive income includes three components, net of tax: (i) unrealized gains (losses) that arose from changes in the market value of securities that were held during the period; (ii) (gains) losses that were previously unrealized, but have been recognized in current period net income due to sales of Available-for-Sale securities and due to the reclassification of noncredit other-than-temporary impairment losses to credit losses and (iii) other items primarily consisting of adjustments in asset and liability balances, such as DAC, DSIC, benefit reserves and reinsurance recoverables, to reflect the expected impact on their carrying values had the unrealized gains (losses) been realized as of the respective balance sheet dates.

The following table presents a rollforward of the net unrealized securities gains on Available-for-Sale securities included in accumulated other comprehensive income:

	Net Unrealized Securities Gains			Deferred Income Tax			Accumulated Other Comprehensive Income Related to Net Unrealized Securities Gains
	(in millions)
Balance at January 1, 2011	$	1,084		$	(379	)	$	705
Cumulative effect of accounting change	131			(46		)	85		(1)
Net unrealized securities gains arising during the period(2)	505			(177		)	328
Reclassification of net securities losses included in net income	3			(1		)	2
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(335		)	117			(218		)
Balance at September 30, 2011	$	1,388		$	(486	)	$	902	(3)

Balance at January 1, 2012	$	1,472		$	(515	)	$	957	(1)
Net unrealized securities gains arising during the period(2)	749			(263		)	486
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(268		)	94			(174		)
Balance at September 30, 2012	$	1,953		$	(684	)	$	1,269	(3)

(1) The Company retrospectively adopted a new accounting standard on January 1, 2012 for DAC. See Note 1 and Note 2 for additional information on the adoption impact.

(2) Includes other-than-temporary impairment losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income during the period.

(3) Includes $(15) million and $(17) million of noncredit related impairments on securities and net unrealized securities losses on previously impaired securities at September 30, 2012 and 2011, respectively.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Net realized gains and losses on Available-for-Sale securities, determined using the specific identification method, recognized in net realized investment gains (losses) were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in millions)
Gross realized investment gains	$	5		$	—		$	13		$	33
Gross realized investment losses	—			—			(1		)	(18		)
Other-than-temporary impairments	(5		)	(3		)	(12		)	(18		)
Total	$	—		$	(3	)	$	—		$	(3	)

Other-than-temporary impairments for the three months and nine months ended September 30, 2012 and 2011 primarily related to credit losses on non-agency residential mortgage backed securities.

Available-for-Sale securities by contractual maturity at September 30, 2012 were as follows:

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	1,412	$	1,438
Due after one year through five years	4,151		4,454
Due after five years through 10 years	6,726		7,743
Due after 10 years	3,628		4,668
	15,917		18,303
Residential mortgage backed securities	3,460		3,640
Commercial mortgage backed securities	2,979		3,286
Asset backed securities	930		985
Other structured investments	7		7
Common stocks	1		3
Total	$	23,294	$	26,224

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage backed securities, commercial mortgage backed securities, asset backed securities and other structured investments are not due at a single maturity date. As such, these securities, as well as common stocks, were not included in the maturities distribution.

Net investment income is summarized as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(in millions)
Income on fixed maturities	$	328	$	389	$	1,008	$	1,119
Income on commercial mortgage loans	36		38		109		113
Other investments	8		4		21		13
	372		431		1,138		1,245
Less: investment expenses	8		10		20		30
Total	$	364	$	421	$	1,118	$	1,215

5. Financing Receivables

The Company’s financing receivables include commercial mortgage loans, syndicated loans and policy loans. Syndicated loans are reflected in other investments. Policy loans do not exceed the cash surrender value of the policy at origination. As there is minimal risk of loss related to policy loans, the Company does not record an allowance for loan losses for policy loans.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Allowance for Loan Losses

The following table presents a rollforward of the allowance for loan losses for the nine months ended and the ending balance of the allowance for loan losses by impairment method and type of loan:

	September 30, 2012									September 30, 2011
	Commercial Mortgage Loans			Syndicated Loans			Total			Commercial Mortgage Loans			Syndicated Loans		Total
	(in millions)
Beginning balance	$	32		$	5		$	37		$	36		$	5	$	41
Charge-offs	(6		)	(1		)	(7		)	(2		)	—		(2		)
Provisions	—			—			—			(1		)	—		(1		)
Ending balance	$	26		$	4		$	30		$	33		$	5	$	38
Individually evaluated for impairment	$	5		$	—		$	5		$	10		$	—	$	10
Collectively evaluated for impairment	21			4			25			23			5		28

The recorded investment in financing receivables by impairment method and type of loan was as follows:

	September 30, 2012						December 31, 2011
	Commercial Mortgage Loans		Syndicated Loans		Total		Commercial Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	39	$	1	$	40	$	64	$	1	$	65
Collectively evaluated for impairment	2,411		305		2,716		2,441		301		2,742
Total	$	2,450	$	306	$	2,756	$	2,505	$	302	$	2,807

As of September 30, 2012 and December 31, 2011, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $10 million and $4 million, respectively.

Purchases and sales of syndicated loans were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(in millions)
Purchases	$	21	$	82	$	74	$	185
Sales	4		—		4		2

The Company has not acquired any loans with deteriorated credit quality as of the acquisition date.

Credit Quality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $2 million and $12 million as of September 30, 2012 and December 31, 2011, respectively. All other loans were considered to be performing.

Commercial Mortgage Loans

The Company reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates as necessary. Commercial mortgage loans which management has assigned its highest risk rating were 2% and 3% of total commercial mortgage loans at September 30, 2012 and December 31, 2011, respectively. Loans with the highest risk rating represent distressed loans which the Company has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. In addition, the Company reviews the concentrations of credit risk by region and property type.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Concentrations of credit risk of commercial mortgage loans by U.S. region were as follows:

	September 30, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
South Atlantic	$	610	25	%	$	38	$	618	25	%	$	—
Pacific	552		22		30		556		22		1
Mountain	266		11		3		275		11		11
East North Central	249		10		10		247		10		—
West North Central	210		9		8		224		9		1
Middle Atlantic	203		8		6		217		9		—
West South Central	162		7		—		173		7		2
New England	133		5		4		130		5		—
East South Central	65		3		—		65		2		—
	2,450		100	%	$	99	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,424					$	2,473

Concentrations of credit risk of commercial mortgage loans by property type were as follows:

	September 30, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
Retail	$	815	33	%	$	37	$	825	33	%	$	2
Office	602		25		13		669		27		2
Industrial	460		19		9		455		18		1
Apartments	380		15		29		358		14		—
Mixed use	41		2		2		42		2		—
Hotel	37		1		—		51		2		—
Other	115		5		9		105		4		10
	2,450		100	%	$	99	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,424					$	2,473

Syndicated Loans

The Company’s syndicated loan portfolio is diversified across industries and issuers. The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication. Total nonperforming syndicated loans at both September 30, 2012 and December 31, 2011 were $1 million.

Part I.	Financial Information:

	Item 1.	Financial Statements

		Consolidated Balance Sheets — September 30, 2012 and December 31, 2011	1

		Consolidated Statements of Income — Three months and nine months ended September 30, 2012 and 2011	2

		Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, 2012 and 2011	3

		Consolidated Statements of Shareholder’s Equity — Nine months ended September 30, 2012 and 2011	4

		Consolidated Statements of Cash Flows — Nine months ended September 30, 2012 and 2011	5

		Notes to Consolidated Financial Statements	6

	Item 2.	Management’s Narrative Analysis	32

	Item 4.	Controls and Procedures	39

Part II.	Other Information:

	Item 1.	Legal Proceedings	40

	Item 1A.	Risk Factors	40

	Item 6.	Exhibits	40

	Signatures		41

	Exhibit Index		E-1