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, 2018

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. 811-00002

AMERIPRISE CERTIFICATE COMPANY

(Exact name of registrant as specified in its charter)

Delaware	41-6009975
(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 xNo o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).      Yes xNo o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filero	Smaller reporting companyo
Non-Accelerated Filerx	Emerging growth companyo
Accelerated Filero
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes oNo 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, 2018
Common Shares (par value $10 per share)	150,000 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.

AMERIPRISE CERTIFICATE COMPANY

FORM 10-Q

INDEX

Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations — Three months and nine months ended September 30, 2018 and 2017	3
Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, 2018 and 2017	4
Consolidated Balance Sheets — September 30, 2018 and December 31, 2017	5
Consolidated Statements of Shareholder's Equity — Nine months ended September 30, 2018 and 2017	6
Consolidated Statements of Cash Flows — Nine months ended September 30, 2018 and 2017	7
Notes to Consolidated Financial Statements	8
1. Basis of Presentation	8
2. Recent Accounting Pronouncements	8
3. Investments	9
4. Commercial Mortgage, Syndicated and Certificate Loans	13
5. Fair Values of Assets and Liabilities	14
6. Offsetting Assets and Liabilities	19
7. Derivatives and Hedging Activities	20
8. Contingencies	21
9. Shareholder’s Equity	21
10. Income Taxes	22
Item 2.  Management’s Narrative Analysis	23
Item 4.  Controls and Procedures	24
Part II.  Other Information	25
Item 1.  Legal Proceedings	25
Item 1A.  Risk Factors	25
Item 6.  Exhibits	25
Signatures	26

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AMERIPRISE CERTIFICATE COMPANY

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017
	(in thousands)
Investment income	$	49,215		$	37,890		$	132,596	$	106,014
Investment expenses	11,080			9,489			31,425		27,913
Net investment income before provision for certificate reserves and income taxes	38,135			28,401			101,171		78,101
Net provision for certificate reserves	23,247			11,701			56,602		32,403
Net investment income before income taxes	14,888			16,700			44,569		45,698
Income tax expense	3,937			5,479			11,499		16,225
Net investment income, after-tax	10,951			11,221			33,070		29,473
Net realized gain (loss) on investments before income taxes	(104		)	(43		)	496		8,854
Income tax expense (benefit)	(22		)	(15		)	104		3,099
Net realized gain (loss) on investments, after-tax	(82		)	(28		)	392		5,755
Net income	$	10,869		$	11,193		$	33,462	$	35,228
Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	$	—		$	—		$	—	$	—
Portion of loss recognized in other comprehensive income (loss) (before taxes)	—			—			—		(193		)
Net impairment losses recognized in net realized gain (loss) on investments	$	—		$	—		$	—	$	(193	)
See Notes to Consolidated Financial Statements.

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AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018			2017		2018			2017
	(in thousands)
Net income	$	10,869		$	11,193	$	33,462		$	35,228
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities:
Net unrealized securities gains (losses) arising during the period	(4,872		)	587		(28,283		)	16,110
Reclassification of net securities (gains) losses included in net income	73			37		(231		)	(5,742		)
Total other comprehensive income (loss), net of tax	(4,799		)	624		(28,514		)	10,368
Total comprehensive income (loss)	$	6,070		$	11,817	$	4,948		$	45,596
See Notes to Consolidated Financial Statements.

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AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30, 2018			December 31, 2017
	(in thousands, except share data)
Assets
Qualified Assets
Cash and cash equivalents	$	352,867		$	68,471
Investments in unaffiliated issuers	7,381,585			6,755,381
Receivables	32,275			29,037
Derivative assets	48,605			54,346
Total qualified assets	7,815,332			6,907,235
Deferred taxes, net	2,325			736
Taxes receivable from parent	2,411			3,874
Total assets	$	7,820,068		$	6,911,845
Liabilities and Shareholder's Equity
Liabilities
Certificate reserves	$	7,347,378		$	6,400,324
Taxes payable to parent	4,387			5,402
Derivative liabilities	38,561			46,756
Payable for investment securities purchased	10,735			56,778
Due to related party and other liabilities	39,723			43,249
Total liabilities	7,440,784			6,552,509
Shareholder's Equity
Common shares ($10 par value, 150,000 shares authorized and issued)	1,500			1,500
Additional paid-in capital	267,517			252,517
Total retained earnings	144,406			110,946
Accumulated other comprehensive income (loss), net of tax	(34,139		)	(5,627		)
Total shareholder's equity	379,284			359,336
Total liabilities and shareholder's equity	$	7,820,068		$	6,911,845
See Notes to Consolidated Financial Statements.

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AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (UNAUDITED)

	Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Retained Earnings							Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
						Appropriated for Pre-Declared Additional Credits and Interest		Appropriated for Additional Interest on Advance Payments		Unappropriated
	(in thousands, except share data)
Balance at January 1, 2017	150,000	$	1,500	$	247,517	$	—	$	15	$	81,925		$	(5,165	)	$	325,792
Comprehensive income (loss):
Net income	—	—		—		—		—		35,228			—			35,228
Other comprehensive income (loss), net of tax	—	—		—		—		—		—			10,368			10,368
Total comprehensive income (loss)																45,596
Dividend to parent	—	—		—		—		—		(5,000		)	—			(5,000		)
Receipt of capital from parent	—	—		5,000		—		—		—			—			5,000
Balance at September 30, 2017	150,000	$	1,500	$	252,517	$	—	$	15	$	112,153		$	5,203		$	371,388
Balance at January 1, 2018	150,000	$	1,500	$	252,517	$	23	$	15	$	110,908		$	(5,627	)	$	359,336
Cumulative effect of change in accounting policies	—	—		—		—		—		(2		)	2			—
Comprehensive income (loss):
Net income	—	—		—		—		—		33,462			—			33,462
Other comprehensive income (loss), net of tax	—	—		—		—		—		—			(28,514		)	(28,514		)
Total comprehensive income (loss)																4,948
Transfer to appropriated from unappropriated	—	—		—		642		—		(642		)	—			—
Receipt of capital from parent	—	—		15,000		—		—		—			—			15,000
Balance at September 30, 2018	150,000	$	1,500	$	267,517	$	665	$	15	$	143,726		$	(34,139	)	$	379,284
See Notes to Consolidated Financial Statements.

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AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2018			2017
	(in thousands)
Cash Flows from Operating Activities
Net income	$	33,462		$	35,228
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of premiums, accretion of discounts, net	(6,634		)	16,714
Deferred income tax expense (benefit)	(189		)	(50		)
Net realized (gain) loss on Available-for-Sale securities	(292		)	(9,026		)
Other net realized (gain) loss	(204		)	(21		)
Other-than-temporary impairments and provision for loan loss	—			193
Changes in operating assets and liabilities:
Dividends and interest receivable	(2,326		)	(4,418		)
Certificate reserves, net	3,353			1,258
Deferred taxes, net	7,580			(5,583		)
Taxes payable to/receivable from parent, net	448			2,678
Derivatives, net of collateral	926			(809		)
Other liabilities	(7,450		)	(2,782		)
Other receivables	(85		)	(25		)
Other, net	(242		)	277
Net cash provided by (used in) operating activities	28,347			33,634
Cash Flows from Investing Activities
Available-for-Sale securities:
Sales	360,976			90,498
Maturities, redemptions and calls	2,805,371			1,495,221
Purchases	(3,827,319		)	(1,987,024		)
Syndicated loans, commercial mortgage loans and real estate owned:
Sales, maturities and repayments	38,630			32,423
Purchases and fundings	(80,533		)	(45,447		)
Equity securities:
Sales	35			—
Certificate loans, net	188			72
Net cash provided by (used in) investing activities	(702,652		)	(414,257		)
Cash Flows from Financing Activities
Payments from certificate holders and other additions	4,440,456			3,594,855
Certificate maturities and cash surrenders	(3,496,755		)	(3,158,088		)
Capital contribution from parent	15,000			5,000
Dividend to parent	—			(5,000		)
Net cash provided by (used in) financing activities	958,701			436,767
Net increase (decrease) in cash and cash equivalents	284,396			56,144
Cash and cash equivalents at beginning of period	68,471			134,189
Cash and cash equivalents at end of period	$	352,867		$	190,333
Supplemental disclosures including non-cash transactions:
Cash paid (received) for income taxes	$	13,236		$	13,359
Cash paid for interest	56,399			34,815
See Notes to Consolidated Financial Statements.

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AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  Basis of Presentation

Ameriprise Certificate Company (“ACC”) is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial” or the “Parent”). ACC is registered as an investment company under the Investment Company Act of 1940. The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). ACC uses the consolidation method of accounting for its wholly owned subsidiary, Investors Syndicate Development Corp. 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. All adjustments made were of a normal recurring nature. 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 Annual Report on Form 10-K of ACC for the year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”) on February 23, 2018 (“2017 10-K”).

ACC evaluated events or transactions that occurred after the consolidated balance sheet date for potential recognition or disclosure through the date the consolidated financial statements were issued. No subsequent events or transactions were identified.

2.  Recent Accounting Pronouncements

Adoption of New Accounting Standards

Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the Financial Accounting Standards Board (“FASB”) updated the accounting standards on the recognition and measurement of financial instruments. The update requires entities to carry marketable equity securities, excluding investments in securities that qualify for the equity method of accounting, at fair value with changes in fair value reflected in net income each reporting period. The update affects other aspects of accounting for equity instruments, as well as the accounting for financial liabilities utilizing the fair value option. The update eliminates the requirement to disclose the methods and assumptions used to estimate the fair value of financial assets or liabilities held at cost on the balance sheet and requires entities to use the exit price notion when measuring the fair value of these financial instruments. The standard is effective for interim and annual periods beginning after December 15, 2017. ACC adopted the standard on January 1, 2018 using a modified retrospective approach. The adoption of the standard did not have a material impact on ACC’s consolidated results of operations or financial condition.

Future Adoption of New Accounting Standards

Fair Value Measurement – Disclosure Framework –Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB updated the accounting standards related to disclosures for fair value measurements. The update eliminates the following disclosures: 1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) the policy of timing of transfers between levels of the fair value hierarchy, and 3) the valuation processes for Level 3 fair value measurements. The new disclosures include changes in unrealized gains and losses for the period included in other comprehensive income (“OCI”) for recurring Level 3 fair value measurements of instruments held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated. The new disclosures are required on a prospective basis; all other provisions should be applied retrospectively. The update is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted for the entire standard or only the provisions that eliminate or modify disclosure requirements. ACC is currently evaluating the impact of the standard on its disclosures. The update does not have an impact on ACC’s consolidated results of operations or financial condition.

Income Statement – Reporting Comprehensive Income – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB updated the accounting standards related to the presentation of tax effects stranded in OCI. The update allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for tax effects stranded in AOCI resulting from the legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The update is optional and entities may elect not to reclassify the stranded tax effects. The update is effective for fiscal years beginning after December 15, 2018. Entities may elect to record the impacts either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. Early adoption is permitted in any period. ACC does not plan to reclassify the stranded tax effects in OCI. As such, the update will not have an impact on ACC’s consolidated results of operations and financial condition.

Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB updated the accounting standards to amend the hedge accounting recognition and presentation requirements. The objectives of the update are to better align the financial reporting of hedging relationships to the economic results of an entity’s risk management activities and simplify the application of the hedge accounting guidance. The update also adds new disclosures and amends existing disclosure requirements. The standard is effective for interim and annual periods beginning after December 15, 2018, and should be applied on a modified retrospective basis. Early adoption is permitted. ACC is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

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AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB updated the accounting standards related to accounting for credit losses on certain types of financial instruments. The update replaces the current incurred loss model for estimating credit losses with a new model that requires an entity to estimate the credit losses expected over the life of the asset. Generally, the initial estimate of the expected credit losses and subsequent changes in the estimate will be reported in current period earnings and recorded through an allowance for credit losses on the balance sheet. The current credit loss model for Available-for-Sale debt securities does not change; however, the credit loss calculation and subsequent recoveries are required to be recorded through an allowance. The standard is effective for interim and annual periods beginning after December 15, 2019. Early adoption will be permitted for interim and annual periods beginning after December 15, 2018. A modified retrospective cumulative adjustment to retained earnings should be recorded as of the first reporting period in which the guidance is effective for loans, receivables, and other financial instruments subject to the new expected credit loss model. Prospective adoption is required for establishing an allowance related to Available-for-Sale debt securities, certain beneficial interests, and financial assets purchased with a more-than-insignificant amount of credit deterioration since origination. ACC is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

3.  Investments

Investments in unaffiliated issuers were as follows:

	September 30, 2018		December 31, 2017
	(in thousands)
Available-for-Sale securities:
Fixed maturities, at fair value (amortized cost: 2018, $7,174,621; 2017, $6,556,338)	$	7,127,551	$	6,546,761
Common stocks, at fair value(1) (cost: 2017, $1,002)	—		1,000
Commercial mortgage loans and syndicated loans, at cost (less allowance for loan losses: 2018, $3,120; 2017, $3,283; fair value: 2018, $251,340; 2017, $207,681)	252,829		207,187
Equity securities, at fair value(1) (cost: 2018, $875)	960		—
Certificate loans — secured by certificate reserves, at cost, which approximates fair value	245		433
Total	$	7,381,585	$	6,755,381

⁽¹⁾ As of January 1, 2018, common stocks were reclassified from Available-for-Sale securities to Equity securities due to the adoption of a new accounting standard on recognition and measurement of financial instruments. See Note 2 for more information.

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

Description of Securities	September 30, 2018
	Amortized  Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in thousands)
Residential mortgage backed securities	$	2,933,704	$	7,008	$	(32,797	)	$	2,907,915	$	—
Corporate debt securities	1,034,942		193		(9,279		)	1,025,856		3
Commercial mortgage backed securities	950,214		605		(8,367		)	942,452		—
Asset backed securities	698,608		3,146		(6,599		)	695,155		—
State and municipal obligations	66,651		17		(784		)	65,884		—
U.S. government and agency obligations	1,490,502		35		(248		)	1,490,289		—
Total	$	7,174,621	$	11,004	$	(58,074	)	$	7,127,551	$	3

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AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Description of Securities	December 31, 2017
	Amortized  Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI (1)
	(in thousands)
Residential mortgage backed securities	$	3,259,976	$	9,020	$	(12,669	)	$	3,256,327	$	—
Corporate debt securities	1,184,360		763		(4,833		)	1,180,290		3
Commercial mortgage backed securities	798,047		1,292		(3,876		)	795,463		—
Asset backed securities	758,477		3,452		(2,426		)	759,503		—
State and municipal obligations	58,380		166		(489		)	58,057		—
U.S. government and agency obligations	497,098		43		(20		)	497,121		—
Common stocks	1,002		168		(170		)	1,000		—
Total	$	6,557,340	$	14,904	$	(24,483	)	$	6,547,761	$	3

⁽¹⁾ Represents the amount of other-than-temporary impairment (“OTTI”) losses in AOCI. 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.

As of September 30, 2018 and December 31, 2017, investment securities with a fair value of $41 thousand and $31 thousand, respectively, were pledged to meet contractual obligations under derivative contracts.

As of September 30, 2018 and December 31, 2017, fixed maturity securities comprised approximately 92% and 96%, respectively, of ACC’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”). ACC 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, as is the case for many private placement securities, ACC may utilize ratings from other NRSROs or rate the securities internally. As of September 30, 2018 and December 31, 2017, approximately $36.1 million and $61.5 million, respectively, of securities were internally rated by Columbia Management Investment Advisers, LLC (“CMIA”), an affiliate of ACC, using criteria similar to those used by NRSROs.

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

Ratings	September 30, 2018						December 31, 2017
	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
	(in thousands, except percentages)
AAA	$	5,579,742	$	5,542,705	78	%	$	4,526,696	$	4,519,506	69	%
AA	265,650		264,822		4		367,747		368,377		5
A	534,126		529,026		7		595,445		593,421		9
BBB	758,288		754,385		10		1,029,953		1,029,082		16
Below investment grade	36,815		36,613		1		36,497		36,375		1
Total fixed maturities	$	7,174,621	$	7,127,551	100	%	$	6,556,338	$	6,546,761	100	%

As of September 30, 2018 and December 31, 2017, approximately 31% and 37%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities.

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AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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:

Description of Securities	September 30, 2018
	Less than 12 months						12 months or more						Total
	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in thousands, except number of securities)
Residential mortgage backed securities	102	$	1,425,735	$	(17,711	)	94	$	750,810	$	(15,086	)	196	$	2,176,545	$	(32,797	)
Corporate debt securities	61	702,998		(4,979		)	21	269,219		(4,300		)	82	972,217		(9,279		)
Commercial mortgage backed securities	16	255,329		(3,460		)	20	151,940		(4,907		)	36	407,269		(8,367		)
Asset backed securities	27	386,202		(3,626		)	15	148,613		(2,973		)	42	534,815		(6,599		)
State and municipal obligations	12	41,168		(258		)	7	14,364		(526		)	19	55,532		(784		)
U.S. government and agency obligations	24	1,415,908		(248		)	—	—		—			24	1,415,908		(248		)
Total	242	$	4,227,340	$	(30,282	)	157	$	1,334,946	$	(27,792	)	399	$	5,562,286	$	(58,074	)

Description of Securities	December 31, 2017
	Less than 12 months						12 months or more						Total
	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in thousands, except number of securities)
Residential mortgage backed securities	67	$	1,078,412	$	(5,833	)	89	$	664,954	$	(6,836	)	156	$	1,743,366	$	(12,669	)
Corporate debt securities	55	715,852		(2,161		)	23	257,891		(2,672		)	78	973,743		(4,833		)
Commercial mortgage backed securities	12	183,428		(1,721		)	18	119,790		(2,155		)	30	303,218		(3,876		)
Asset backed securities	23	297,823		(1,466		)	18	110,842		(960		)	41	408,665		(2,426		)
State and municipal obligations	8	17,906		(430		)	4	5,891		(59		)	12	23,797		(489		)
U.S. government and agency obligations	1	49,900		(20		)	—	—		—			1	49,900		(20		)
Common stocks	1	56		(4		)	3	661		(166		)	4	717		(170		)
Total	167	$	2,343,377	$	(11,635	)	155	$	1,160,029	$	(12,848	)	322	$	3,503,406	$	(24,483	)

As part of ACC’s ongoing monitoring process, management determined that the change in gross unrealized losses on its Available-for-Sale securities is primarily attributable to an increase in interest rates as well as slightly wider credit spreads.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(in thousands)
Beginning balance	$	—	$	—	$	—	$	46,522
Reductions for securities sold during the period (realized)	—		—		—		(46,715		)
Credit losses for which an other-than-temporary impairment was previously recognized	—		—		—		193
Ending balance	$	—	$	—	$	—	$	—

The change in net unrealized securities gains (losses) in other comprehensive income (loss) includes two components, net of tax: (i) unrealized gains (losses) that arose from changes in the market value of securities that were held during the period and (ii) (gains)

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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.

The following table presents a rollforward of the net unrealized securities gains (losses) on Available-for-Sale securities included in AOCI:

	Net Unrealized Investment Gains (Losses)			Deferred Income Tax			Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
	(in thousands)
Balance at January 1, 2017	$	(8,195	)	$	3,030			$	(5,165	)
Net unrealized securities gains (losses) arising during the period (1)	25,282			(9,172		)		16,110
Reclassification of (gains) losses included in net income	(8,833		)	3,091				(5,742		)
Balance at September 30, 2017	$	8,254		$	(3,051	)		$	5,203		(2)
Balance at January 1, 2018	$	(9,579	)	$	3,952			$	(5,627	)
Cumulative effect of change in accounting policies	3			(1		)		2
Net unrealized securities gains (losses) arising during the period (1)	(37,202		)	8,919				(28,283		)
Reclassification of (gains) losses included in net income	(292		)	61				(231		)
Balance at September 30, 2018	$	(47,070	)	$	12,931			$	(34,139	)	(2)

⁽¹⁾ Net unrealized securities gains (losses) arising during the period include other-than-temporary impairment losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income (loss) during the period.

⁽²⁾ Includes $2 thousand and $1.9 million of noncredit related impairments on securities and net unrealized securities gains (losses) on previously impaired securities as of September 30, 2018 and 2017, respectively.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in thousands)
Gross realized gains	$	—		$	—		$	910		$	11,107
Gross realized losses	(93		)	(58		)	(618		)	(2,081		)
Other-than-temporary impairments	—			—			—			(193		)
Total	$	(93	)	$	(58	)	$	292		$	8,833

Other-than-temporary impairments for the nine months ended September 30, 2017 are related to credit losses on non-agency residential mortgage backed securities.

Available-for-Sale securities by contractual maturity as of September 30, 2018 were as follows:

	Amortized Cost		Fair Value
	(in thousands)
Due within one year	$	1,808,449	$	1,806,278
Due after one year through five years	783,436		775,513
Due after five years through 10 years	—		—
Due after 10 years	210		238
	2,592,095		2,582,029
Residential mortgage backed securities	2,933,704		2,907,915
Commercial mortgage backed securities	950,214		942,452
Asset backed securities	698,608		695,155
Total	$	7,174,621	$	7,127,551

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 and asset backed securities are not due at a single maturity date. As such, these securities were not included in the maturities distribution.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

4.  Commercial Mortgage, Syndicated and Certificate Loans

ACC’s financing receivables include commercial mortgage loans, syndicated loans and certificate loans. Certificate loans do not exceed the cash surrender value of the certificate at origination. As there is minimal risk of loss related to certificate loans, ACC does not record an allowance for loan losses for certificate loans.

Allowance for Loan Losses

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

	September 30,
	2018			2017
	(in thousands)
Beginning balance	$	3,283		$	3,283
Charge-offs	(163		)	—
Provisions	—			—
Ending balance	$	3,120		$	3,283
Individually evaluated for impairment	$	—		$	—
Collectively evaluated for impairment	3,120			3,283

The recorded investment in commercial mortgage loans and syndicated loans by impairment method was as follows:

	September 30, 2018		December 31, 2017
	(in thousands)
Individually evaluated for impairment	$	2,812	$	—
Collectively evaluated for impairment	253,137		210,470
Total	$	255,949	$	210,470

As of September 30, 2018 and December 31, 2017, ACC’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $2.8 million and nil, respectively. Unearned income,unamortized premiums and discounts, and net unamortizeddeferred fees andcosts are not material to ACC’s total loan balance.

During the three months and nine months endedSeptember 30, 2018, ACC purchased $14.1 million and $71.5 million, respectively, of syndicated loans. During the three months and nine months endedSeptember 30, 2017, ACC purchased $4.3 million and $33.0 million, respectively, of syndicated loans. During the three months and nine months endedSeptember 30, 2018, ACC sold $0.2 million and $6.6 million, respectively, of syndicated loans. During the three months and nine months endedSeptember 30, 2017, ACC sold $2.3 million and $3.5 million, respectively, of syndicated loans.

ACC 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 nil as of both September 30, 2018 and December 31, 2017. All loans were considered to be performing.

Commercial Mortgage Loans

ACC 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 nil as of both September 30, 2018 and December 31, 2017. Loans with the highest risk rating represent distressed loans which ACC has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. In addition, ACC reviews the concentrations of credit risk by region and property type.

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

	Loans				Percentage
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
	(in thousands)
East North Central	$	5,740	$	6,029	5	%	5	%
East South Central	4,415		4,891		4		4
Middle Atlantic	14,596		11,887		13		11
Mountain	9,973		10,452		9		10
New England	7,442		7,586		7		7
Pacific	33,148		32,386		30		29
South Atlantic	21,839		23,694		20		22
West North Central	6,278		6,706		6		6
West South Central	6,636		6,354		6		6
	110,067		109,985		100	%	100	%
Less: allowance for loan losses	2,341		2,341
Total	$	107,726	$	107,644

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

	Loans				Percentage
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
	(in thousands)
Apartments	$	27,186	$	23,840	25	%	21	%
Industrial	25,672		25,025		23		23
Mixed use	7,762		4,580		7		4
Office	11,553		11,872		10		11
Retail	35,428		34,934		32		32
Hotel	650		777		1		1
Other	1,816		8,957		2		8
	110,067		109,985		100	%	100	%
Less: allowance for loan losses	2,341		2,341
Total	$	107,726	$	107,644

Syndicated Loans

The recorded investment in syndicated loans as of September 30, 2018 and December 31, 2017 was $145.9 million and $100.5 million, respectively. ACC’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.

Troubled Debt Restructurings

There were no loans restructured by ACC during the three months and nine months endedSeptember 30, 2018 and 2017. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.

5.  Fair Values of Assets and Liabilities

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; that is, an exit price. The exit price assumes the asset or liability is not exchanged subject to a forced liquidation or distressed sale.

Valuation Hierarchy

ACC categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by ACC’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Level 2 Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis:

	September 30, 2018
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents	$	—	$	328,873	$	—	$	328,873
Available-for-Sale securities:
Residential mortgage backed securities	—		2,863,465		44,450		2,907,915
Corporate debt securities	—		984,068		41,788		1,025,856
Commercial mortgage backed securities	—		942,452		—		942,452
Asset backed securities	—		695,155		—		695,155
State and municipal obligations	—		65,884		—		65,884
U.S. government and agency obligations	1,490,289		—		—		1,490,289
Total Available-for-Sale securities	1,490,289		5,551,024		86,238		7,127,551
Equity securities	497		463		—		960
Equity derivative contracts	—		48,605		—		48,605
Total assets at fair value	$	1,490,786	$	5,928,965	$	86,238	$	7,505,989
Liabilities
Stock market certificate embedded derivatives	$	—	$	12,230	$	—	$	12,230
Equity derivative contracts	—		38,561		—		38,561
Total liabilities at fair value	$	—	$	50,791	$	—	$	50,791

	December 31, 2017
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents	$	—	$	51,296	$	—	$	51,296
Available-for-Sale securities:
Residential mortgage backed securities	—		3,187,617		68,710		3,256,327
Corporate debt securities	—		1,112,949		67,341		1,180,290
Commercial mortgage backed securities	—		795,463		—		795,463
Asset backed securities	—		759,503		—		759,503
State and municipal obligations	—		58,057		—		58,057
U.S. government and agency obligations	497,121		—		—		497,121
Common stocks	545		427		28		1,000
Total Available-for-Sale securities	497,666		5,914,016		136,079		6,547,761
Equity derivative contracts	—		54,346		—		54,346
Total assets at fair value	$	497,666	$	6,019,658	$	136,079	$	6,653,403
Liabilities
Stock market certificate embedded derivatives	$	—	$	9,734	$	—	$	9,734
Equity derivative contracts	3		46,753		—		46,756
Total liabilities at fair value	$	3	$	56,487	$	—	$	56,490

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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

	Available-for-Sale Securities
	Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total
	(in thousands)
Balance, July 1, 2018	$	51,065		$	41,760		$	40,000		$	12,333		$	145,158
Total gains (losses) included in:
Net income	22			(15		)	—			—			7			(1)
Other comprehensive income (loss)	42			43			—			—			85
Purchases	20,000			—			—			—			20,000
Settlements	(4,015		)	—			—			—			(4,015		)
Transfers out of Level 3	(22,664		)	—			(40,000		)	(12,333		)	(74,997		)
Balance, September 30, 2018	$	44,450		$	41,788		$	—		$	—		$	86,238
Changes in unrealized gains (losses) relating to assets held at September 30, 2018	$	22		$	(15	)	$	—		$	—		$	7		(1)

	Available-for-Sale Securities
	Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities		Asset Backed Securities			Common Stocks			Total
	(in thousands)
Balance, July 1, 2017	$	82,214		$	143,322		$	—	$	3,049		$	268		$	228,853
Total gains (losses) included in:
Net income	5			(124		)	—		1			—			(118		)	(1)
Other comprehensive income (loss)	(57		)	29			—		(9		)	35			(2		)
Purchases	—			1,313			30,000		—			—			31,313
Settlements	(7,682		)	(23,000		)	—		—			—			(30,682		)
Transfers into Level 3	20,182			—			—		13,195			—			33,377
Transfers out of Level 3	(18,456		)	—			—		(3,049		)	(161		)	(21,666		)
Balance, September 30, 2017	$	76,206		$	121,540		$	30,000	$	13,187		$	142		$	241,075
Changes in unrealized gains (losses) relating to assets held at September 30, 2017	$	5		$	(124	)	$	—	$	1		$	—		$	(118	)	(1)

	Available-for-Sale Securities																Equity Securities
	Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total
	(in thousands)
Balance, January 1, 2018	$	68,710		$	67,341		$	—		$	—		$	136,051			$	28
Total gains (losses) included in:
Net income	(3		)	(214		)	—			—			(217		)	(1)	—
Other comprehensive income (loss)	(444		)	(339		)	—			—			(783		)		—
Purchases	20,000			—			40,000			12,333			72,333				—
Settlements	(18,879		)	(25,000		)	—			—			(43,879		)		—
Transfers out of Level 3	(24,934		)	—			(40,000		)	(12,333		)	(77,267		)		(28		)
Balance, September 30, 2018	$	44,450		$	41,788		$	—		$	—		$	86,238			$	—
Changes in unrealized gains (losses) relating to assets held at September 30, 2018	$	55		$	(46	)	$	—		$	—		$	9		(1)	$	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Available-for-Sale Securities
Residential Mortgage Backed Securities	Corporate Debt Securities