10-Q 1 amp09302014.htm 10-Q AMP 09.30.2014

 
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, 2014
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
October 24, 2014
Common Stock (par value $.01 per share)
 
184,532,059 shares
 



AMERIPRISE FINANCIAL, INC. 


FORM 10-Q
 
INDEX
 
 
 
 
 
 
Consolidated Statements of Operations — Three months and nine months ended September 30, 2014 and 2013
3

 
 
Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, 2014 and 2013
4

 
 
Consolidated Balance Sheets — September 30, 2014 and December 31, 2013
5

 
 
Consolidated Statements of Equity — Nine months ended September 30, 2014 and 2013
6

 
 
Consolidated Statements of Cash Flows — Nine months ended September 30, 2014 and 2013
7

 
 
Notes to Consolidated Financial Statements
9

 
Management's Discussion and Analysis of Financial Condition and Results of Operations
55

 
Quantitative and Qualitative Disclosures About Market Risk
96

 
Controls and Procedures
96

 
 
 
 
 
 
Legal Proceedings
97

 
Risk Factors
97

 
Unregistered Sales of Equity Securities and Use of Proceeds
97

 
Exhibits
97

 
Signatures
98

 
Exhibit Index
E-1


2


AMERIPRISE FINANCIAL, INC. 


PART I. FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share amounts) 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Revenues
 

 
 

 
 

 
 

Management and financial advice fees
$
1,483

 
$
1,318

 
$
4,321

 
$
3,856

Distribution fees
464

 
441

 
1,410

 
1,323

Net investment income
428

 
491

 
1,332

 
1,431

Premiums
351

 
324

 
1,026

 
949

Other revenues
392

 
247

 
1,111

 
718

Total revenues
3,118

 
2,821

 
9,200

 
8,277

Banking and deposit interest expense
7

 
8

 
21

 
24

Total net revenues
3,111

 
2,813

 
9,179

 
8,253

Expenses
 

 
 

 
 

 
 

Distribution expenses
813

 
731

 
2,409

 
2,161

Interest credited to fixed accounts
168

 
204

 
529

 
600

Benefits, claims, losses and settlement expenses
458

 
492

 
1,414

 
1,391

Amortization of deferred acquisition costs
116

 
(14
)
 
281

 
153

Interest and debt expense
79

 
68

 
237

 
194

General and administrative expense
757

 
730

 
2,320

 
2,263

Total expenses
2,391

 
2,211

 
7,190

 
6,762

Income from continuing operations before income tax provision
720

 
602

 
1,989

 
1,491

Income tax provision
155

 
154

 
441

 
395

Income from continuing operations
565

 
448

 
1,548

 
1,096

Income (loss) from discontinued operations, net of tax

 
1

 
(1
)
 
(1
)
Net income
565

 
449

 
1,547

 
1,095

Less: Net income attributable to noncontrolling interests
145

 
67

 
353

 
57

Net income attributable to Ameriprise Financial
$
420

 
$
382

 
$
1,194

 
$
1,038

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

 
 

 
 

Basic
 

 
 

 
 

 
 

Income from continuing operations
$
2.21

 
$
1.90

 
$
6.20

 
$
5.07

Loss from discontinued operations

 

 
(0.01
)
 

Net income
$
2.21

 
$
1.90

 
$
6.19

 
$
5.07

Diluted
 

 
 

 
 

 
 

Income from continuing operations
$
2.17

 
$
1.86

 
$
6.09

 
$
4.97

Loss from discontinued operations

 

 
(0.01
)
 

Net income
$
2.17

 
$
1.86

 
$
6.08

 
$
4.97

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.58

 
$
0.52

 
$
1.68

 
$
1.49

 
 
 
 
 
 
 
 
Supplemental Disclosures:
 

 
 

 
 

 
 

Total other-than-temporary impairment losses on securities
$
(5
)
 
$
(7
)
 
$
(6
)
 
$
(11
)
Portion of loss recognized in other comprehensive income (loss) (before taxes)

 
6

 

 
5

Net impairment losses recognized in net investment income
$
(5
)
 
$
(1
)
 
$
(6
)
 
$
(6
)
See Notes to Consolidated Financial Statements.

3


AMERIPRISE FINANCIAL, INC. 


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in millions) 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Net income
$
565

 
$
449

 
$
1,547

 
$
1,095

Other comprehensive income (loss), net of tax:
 

 
 

 
 

 
 

Foreign currency translation adjustment
(84
)
 
80

 
(31
)
 
7

Net unrealized gains (losses) on securities:
 

 
 

 
 

 
 

Net unrealized securities gains (losses) arising during the period
(137
)
 
(67
)
 
341

 
(869
)
Reclassification of net securities gains included in net income
(4
)
 
(5
)
 
(8
)
 
(5
)
Impact of deferred acquisition costs, deferred sales inducement costs,
benefit reserves and reinsurance recoverables
(1
)
 
18

 
(168
)
 
283

Total net unrealized gains (losses) on securities
(142
)
 
(54
)
 
165

 
(591
)
Net unrealized losses on derivatives:
 

 
 

 
 

 
 

Reclassification of net derivative losses included in net income
1

 
1

 
1

 
1

Total net unrealized losses on derivatives
1

 
1

 
1

 
1

Total other comprehensive income (loss), net of tax
(225
)
 
27

 
135

 
(583
)
Total comprehensive income
340

 
476

 
1,682

 
512

Less: Comprehensive income attributable to noncontrolling interests
94

 
114

 
337

 
63

Comprehensive income attributable to Ameriprise Financial
$
246

 
$
362

 
$
1,345

 
$
449

See Notes to Consolidated Financial Statements.


4


AMERIPRISE FINANCIAL, INC. 


CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)
 
September 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
Assets
 

 
 

Cash and cash equivalents
$
2,876

 
$
2,632

Cash of consolidated investment entities
279

 
419

Investments
35,899

 
35,735

Investments of consolidated investment entities, at fair value
5,661

 
5,002

Separate account assets
82,420

 
81,223

Receivables
4,827

 
4,538

Receivables of consolidated investment entities (includes $28 and $32, respectively, at fair value)
68

 
72

Deferred acquisition costs
2,605

 
2,663

Restricted and segregated cash and investments
2,382

 
2,360

Other assets
8,158

 
7,983

Other assets of consolidated investment entities, at fair value
2,018

 
1,949

Total assets
$
147,193

 
$
144,576

Liabilities and Equity
 

 
 

Liabilities:
 

 
 

Policyholder account balances, future policy benefits and claims
$
29,810

 
$
29,620

Separate account liabilities
82,420

 
81,223

Customer deposits
7,513

 
7,062

Short-term borrowings
200

 
500

Long-term debt
3,059

 
2,720

Debt of consolidated investment entities (includes $5,466 and $4,804, respectively, at fair value)
6,394

 
5,736

Accounts payable and accrued expenses
1,411

 
1,367

Accounts payable and accrued expenses of consolidated investment entities
50

 
62

Other liabilities
6,882

 
6,829

Other liabilities of consolidated investment entities (includes $81 and $193, respectively, at fair value)
114

 
225

Total liabilities
137,853

 
135,344

Equity:
 

 
 

Ameriprise Financial, Inc.:
 

 
 

Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 320,039,778 and 316,816,851, respectively)
3

 
3

Additional paid-in capital
7,232

 
6,929

Retained earnings
8,152

 
7,289

Appropriated retained earnings of consolidated investment entities
308

 
337

Treasury shares, at cost (134,646,639 and 124,698,544 shares, respectively)
(8,181
)
 
(6,961
)
Accumulated other comprehensive income, net of tax
746

 
595

Total Ameriprise Financial, Inc. shareholders’ equity
8,260

 
8,192

Noncontrolling interests
1,080

 
1,040

Total equity
9,340

 
9,232

Total liabilities and equity
$
147,193

 
$
144,576

See Notes to Consolidated Financial Statements.

5


AMERIPRISE FINANCIAL, INC. 


CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
(in millions, except share data) 
 
Ameriprise Financial, Inc.
 
 
 
 
 
Number of
Outstanding
Shares
 
Common
Shares
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Appropriated
Retained
Earnings of
Consolidated
Investment
Entities
 
Treasury
Shares
 
Accumulated
Other Com-
prehensive
Income
 
Total
Ameriprise
Financial,
Inc. Share-
holders’
Equity
 
Non-controlling
Interests
 
Total
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:
Net income

 

 

 
1,038

 

 

 

 
1,038

 
57

 
1,095

Other comprehensive income (loss), net of tax

 

 

 

 

 

 
(589
)
 
(589
)
 
6

 
(583
)
Total comprehensive income
 
449

 
63

 
512

Net loss reclassified to appropriated retained earnings

 

 

 

 
(1
)
 

 

 
(1
)
 
1

 

Dividends to shareholders

 

 

 
(307
)
 

 

 

 
(307
)
 

 
(307
)
Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 
290

 
290

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 
(142
)
 
(142
)
Repurchase of common shares
(17,362,549
)
 

 

 

 

 
(1,339
)
 

 
(1,339
)
 

 
(1,339
)
Share-based compensation plans
8,659,145

 

 
337

 
(5
)
 

 
99

 

 
431

 
12

 
443

Balances at September 30, 2013
195,239,590

 
$
3

 
$
6,840

 
$
7,107

 
$
335

 
$
(6,565
)
 
$
605

 
$
8,325

 
$
844

 
$
9,169

Balances at January 1, 2014
192,118,307

 
$
3

 
$
6,929

 
$
7,289

 
$
337

 
$
(6,961
)
 
$
595

 
$
8,192

 
$
1,040

 
$
9,232

Comprehensive income:
Net income

 

 

 
1,194

 

 

 

 
1,194

 
353

 
1,547

Other comprehensive income (loss), net of tax

 

 

 

 

 

 
151

 
151

 
(16
)
 
135

Total comprehensive income
 
1,345

 
337

 
1,682

Net loss reclassified to appropriated retained earnings

 

 

 

 
(29
)
 

 

 
(29
)
 
29

 

Dividends to shareholders

 

 

 
(326
)
 

 

 

 
(326
)
 

 
(326
)
Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 
113

 
113

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 
(448
)
 
(448
)
Repurchase of common shares
(11,505,559
)
 

 

 

 

 
(1,309
)
 

 
(1,309
)
 

 
(1,309
)
Share-based compensation plans
4,780,391

 

 
303

 
(5
)
 

 
89

 

 
387

 
9

 
396

Balances at September 30, 2014
185,393,139

 
$
3

 
$
7,232

 
$
8,152

 
$
308

 
$
(8,181
)
 
$
746

 
$
8,260

 
$
1,080

 
$
9,340

See Notes to Consolidated Financial Statements.

6


AMERIPRISE FINANCIAL, INC. 


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
 
Nine Months Ended September 30,
 
2014
 
2013
Cash Flows from Operating Activities
 
 
 
Net income
$
1,547

 
$
1,095

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion, net
193

 
175

Deferred income tax benefit
(75
)
 
(73
)
Share-based compensation
97

 
106

Net realized investment gains
(18
)
 
(13
)
Net trading gains
(6
)
 

Loss (income) from equity method investments
10

 
(28
)
Other-than-temporary impairments and provision for loan losses
8

 
7

Net gains of consolidated investment entities
(337
)
 
(63
)
Changes in operating assets and liabilities:
 
 
 
Restricted and segregated cash and investments
(23
)
 
193

Deferred acquisition costs
28

 
(98
)
Other investments, net
(152
)
 
(2
)
Policyholder account balances, future policy benefits and claims, net
516

 
(1,024
)
Derivatives, net of collateral
(485
)
 
1,094

Receivables
(346
)
 
(138
)
Brokerage deposits
202

 
(157
)
Accounts payable and accrued expenses
52

 
62

Cash held by consolidated investment entities
149

 
249

Investment properties of consolidated investment entities
177

 
(357
)
Other operating assets and liabilities of consolidated investment entities, net
39

 
(46
)
Other, net
405

 
124

Net cash provided by operating activities
1,981

 
1,106

 
 
 
 
Cash Flows from Investing Activities
 
 
 
Available-for-Sale securities:
 
 
 
Proceeds from sales
435

 
327

Maturities, sinking fund payments and calls
2,856

 
3,826

Purchases
(2,513
)
 
(4,094
)
Proceeds from maturities and repayments of mortgage loans
419

 
548

Funding of mortgage loans
(375
)
 
(478
)
Proceeds from sales and collections of other investments
153

 
248

Purchase of other investments
(334
)
 
(267
)
Purchase of investments by consolidated investment entities
(2,368
)
 
(2,437
)
Proceeds from sales, maturities and repayments of investments by consolidated investment entities
1,643

 
2,215

Purchase of land, buildings, equipment and software
(89
)
 
(68
)
Other, net
1

 
37

Net cash used in investing activities
(172
)
 
(143
)
See Notes to Consolidated Financial Statements.

7


AMERIPRISE FINANCIAL, INC. 


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
(in millions)
 
Nine Months Ended September 30,
 
2014
 
2013
Cash Flows from Financing Activities
 
 
 
Investment certificates:
 
 
 
Proceeds from additions
$
1,894

 
$
1,752

Maturities, withdrawals and cash surrenders
(1,646
)
 
(1,377
)
Policyholder account balances:
 
 
 
Deposits and other additions
1,526

 
1,589

Net transfers to separate accounts
(167
)
 
(54
)
Surrenders and other benefits
(1,896
)
 
(1,479
)
Cash paid for purchased options with deferred premiums
(318
)
 
(290
)
Cash received from purchased options with deferred premiums
54

 

Issuance of debt, net of issuance costs
543

 
593

Repayments of debt
(200
)
 

Change in short-term borrowings, net
(301
)
 
(2
)
Dividends paid to shareholders
(319
)
 
(300
)
Repurchase of common shares
(1,191
)
 
(1,205
)
Exercise of stock options
25

 
100

Excess tax benefits from share-based compensation
133

 
101

Borrowings by consolidated investment entities
1,559

 
1,187

Repayments of debt by consolidated investment entities
(918
)
 
(969
)
Noncontrolling interests investments in subsidiaries
113

 
290

Distributions to noncontrolling interests
(448
)
 
(142
)
Other, net
(1
)
 
(1
)
Net cash used in financing activities
(1,558
)
 
(207
)
Effect of exchange rate changes on cash
(7
)
 
(2
)
Net increase in cash and cash equivalents
244

 
754

Cash and cash equivalents at beginning of period
2,632

 
2,371

Cash and cash equivalents at end of period
$
2,876

 
$
3,125

 
 
 
 
Supplemental Disclosures:
 
 
 
Interest paid excluding consolidated investment entities
$
123

 
$
124

Interest paid by consolidated investment entities
140

 
113

Income taxes paid, net
345

 
182

Non-cash investing activity:
 
 
 
Affordable housing partnership commitments not yet remitted

 
26

See Notes to Consolidated Financial Statements.




8


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 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.
The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). 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, 2013, filed with the Securities and Exchange Commission (“SEC”) on February 27, 2014.
In the Consolidated Statements of Operations, the Company reclassified certain fixed wholesaling costs from distribution expenses to general and administrative expense on a retroactive basis to improve consistency in its presentation of wholesaling distribution expense. The amount reclassified for the three months and nine months ended September 30, 2013 was $26 million and $82 million, respectively. The Company also reclassified certain prior period amounts in the Consolidated Statements of Cash Flows, as discussed below, to improve the transparency of its cash flows. Total cash flows provided by (used in) operating, investing and financing activities did not change as a result of the reclassifications.
Within investing activities, the change in residential mortgage loans was reclassified from “Change in consumer loans, net” to “Proceeds from maturities and repayments of mortgage loans” and “Funding of mortgage loans.” These lines also include changes in commercial mortgage loans.
Within financing activities, the increase in policyholder account balances for interest credited was reclassified from “Policyholder account balances: Surrenders and other benefits” to “Policyholder account balances: Deposits and other additions.” The increase in certificate account balances for interest credited was reclassified from “Investment certificates: Maturities, withdrawals and cash surrenders” to “Investment certificates: Proceeds from additions.”
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
Income Taxes
In July 2013, the Financial Accounting Standards Board (“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 adopted the standard in the first quarter of 2014. The adoption of the standard did not have a material impact on the Company’s consolidated results of operations and financial condition.

9


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


Investment Companies
In June 2013, the FASB updated the accounting standard related to investment companies. The standard provides a new two-tiered approach for determining whether a company is an investment company and requires new disclosures for investment companies. The guidance does not directly apply to the Company and did not impact investment entities that the Company consolidates. The standard is effective for interim and annual periods beginning after December 15, 2013 and is required to be applied prospectively. The adoption of the standard did not have a material impact on the Company’s consolidated results of operations and financial condition.
Future Adoption of New Accounting Standards
Presentation of Financial Statements - Going Concern
In August 2014, the FASB updated the accounting standard related to an entity’s assessment of its ability to continue as a going concern. The standard requires that management evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. In situations where there is substantial doubt about an entity’s ability to continue as a going concern, disclosure should be made so that a reader can understand the conditions that raise substantial doubt, management’s assessment of those conditions and any plan management has to mitigate those conditions. The standard is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.
Consolidation
In August 2014, the FASB updated the accounting standard related to consolidation of collateralized financing entities. The update applies to reporting entities that consolidate a collateralized financing entity and measures all financial assets and liabilities of the collateralized financing entity at fair value. The update provides a measurement alternative which would allow an entity to measure both the financial assets and financial liabilities at the fair value of the more observable of the fair value of the financial assets or financial liabilities. When the measurement alternative is elected, the reporting entity’s net income should reflect its own economic interests in the collateralized financing entity, including changes in the fair value of the beneficial interests retained by the reporting entity and beneficial interests that represent compensation for services. If the measurement alternative is not elected, the financial assets and financial liabilities should be measured separately in accordance with the requirements of the fair value topic. Any difference in the fair value of the assets and liabilities would be recorded to net income attributable to the reporting entity. The standard is effective for interim and annual periods beginning after December 15, 2015 and early adoption is permitted as of the beginning of an annual period. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.
Compensation - Stock Compensation
In June 2014, the FASB updated the accounting standards related to stock compensation. The update clarifies the accounting for share-based payments with a performance target that could be achieved after the requisite service period. The update specifies the performance target should not be reflected in estimating the grant-date fair value of the award. Instead, the probability of achieving the performance target should impact vesting of the award. The standard is effective for interim and annual periods beginning after December 15, 2015 and early adoption is permitted. The adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.
Transfers and Servicing
In June 2014, the FASB updated the accounting standards related to transfers and servicing. The update requires repurchase-to-maturity transactions and linked repurchase financings to be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. The standard requires disclosures related to transfers of financial assets accounted for as sales in transactions that are similar to repurchase agreements. The standard also requires disclosures on the remaining contractual maturity of the agreements, disaggregation of the gross obligation by class of collateral pledged and potential risks associated with the agreements and the related collateral pledged in repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings. The standard is effective for interim and annual periods beginning after December 15, 2014, except for the disclosure requirements for repurchase-to-maturity transactions accounted for as secured borrowings which are effective for interim periods beginning after March 15, 2015. Early adoption of the standard is prohibited. The standard requires entities to present changes in accounting for transactions outstanding at the effective date as a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. As the Company does not have repurchase-to-maturity transactions, the adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

10


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


Revenue from Contracts with Customers
In May 2014, the FASB updated the accounting standards for revenue from contracts with customers. The update provides a five step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are in the scope of other standards). The standard also updates the accounting for certain costs associated with obtaining and fulfilling a customer contract. In addition, the standard requires disclosure of quantitative and qualitative information that enables users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The standard is effective for interim and annual periods beginning after December 15, 2016 and early adoption is prohibited. The standard may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.
Receivables - Troubled Debt Restructuring by Creditors 
In January 2014, the FASB updated the accounting standard related to recognizing residential real estate obtained through a repossession or foreclosure from a troubled debtor. The update clarifies the criteria for derecognition of the loan receivable and recognition of the real estate property. The standard is effective for interim and annual periods beginning after December 15, 2014 and can be applied under a modified retrospective transition method or a prospective transition method. Early adoption is permitted. The adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.
Investments - Equity Method and Joint Ventures
In January 2014, the FASB updated the accounting standard related to investments in qualified affordable housing projects. The update allows for an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the investment in a qualified affordable housing project is amortized in proportion to the tax credits and other tax benefits received. The net investment performance is recognized as a component of income tax expense (benefit). The standard is effective for interim and annual periods beginning after December 15, 2014 and should be applied retrospectively to all periods presented. Early adoption 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 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.

11


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


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.
During the nine months ended September 30, 2014, the Company consolidated three new investment entities with assets of approximately $1.3 billion and liquidated one investment entity resulting in the sale of approximately $300 million in assets.
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:
 
September 30, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(in millions)
Assets
 

 
 

 
 

 
 

Investments:
 

 
 

 
 

 
 

Corporate debt securities
$

 
$
183

 
$

 
$
183

Common stocks
152

 
44

 
7

 
203

Other investments
4

 
25

 

 
29

Syndicated loans

 
4,932

 
314

 
5,246

Total investments
156

 
5,184

 
321

 
5,661

Receivables

 
28

 

 
28

Other assets

 
1

 
2,017

 
2,018

Total assets at fair value
$
156

 
$
5,213

 
$
2,338

 
$
7,707

Liabilities
 

 
 

 
 

 
 

Debt
$

 
$

 
$
5,466

 
$
5,466

Other liabilities

 
81

 

 
81

Total liabilities at fair value
$

 
$
81

 
$
5,466

 
$
5,547


12


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(in millions)
Assets
 

 
 

 
 

 
 

Investments:
 

 
 

 
 

 
 

Corporate debt securities
$

 
$
200

 
$
2

 
$
202

Common stocks
147

 
31

 
14

 
192

Other investments
3

 
33

 

 
36

Syndicated loans

 
4,204

 
368

 
4,572

Total investments
150

 
4,468

 
384

 
5,002

Receivables

 
32

 

 
32

Other assets

 
13

 
1,936

 
1,949

Total assets at fair value
$
150

 
$
4,513

 
$
2,320

 
$
6,983

Liabilities
 

 
 

 
 

 
 

Debt
$

 
$

 
$
4,804

 
$
4,804

Other liabilities

 
193

 

 
193

Total liabilities at fair value
$

 
$
193

 
$
4,804

 
$
4,997

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 Securities
 
Common Stocks
 
Syndicated Loans
 
Other Assets
 
Debt
 
 
(in millions)
  
Balance, July 1, 2014
$

 
$
7

 
$
427

 
$
2,389

 
$
(5,511
)
 
Total gains (losses) included in:
 
 
 
 
 
 
 
 
 
 
Net income




(1
)
(1) 
144

(2) 
(7
)
(1) 
Other comprehensive income

 

 

 
(151
)
 

 
Purchases

 

 
41

 
23

 

 
Sales

 

 
(14
)
 
(388
)
 

 
Settlements

 

 
(38
)
 

 
52

 
Transfers into Level 3

 
1

 
84

 

 

 
Transfers out of Level 3

 
(1
)
 
(185
)
 

 

 
Balance, September 30, 2014
$

 
$
7

 
$
314

 
$
2,017

 
$
(5,466
)
 
Changes in unrealized gains (losses) included in
income relating to assets and liabilities held at
September 30, 2014
$


$


$
(1
)
(1) 
$
95

(2) 
$
(7
)
(1) 
(1) Included in net investment income in the Consolidated Statements of Operations.
(2) Included in other revenues in the Consolidated Statements of Operations.

13


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
Corporate Debt Securities
 
Common Stocks
 
Syndicated Loans
 
Other Assets
 
Debt
 
 
(in millions)
  
Balance, July 1, 2013
$
3

 
$
16

 
$
292

 
$
1,322

 
$
(4,677
)
 
Total gains (losses) included in:
 
 
 

 
 

  
 

  
 

  
Net income

 
(1
)
(1) 
(1
)
(1) 
20

(2) 
50

(1) 
Other comprehensive loss

 

 

 
73

 

 
Purchases

 

 
72

 
239

 

 
Sales

 

 
(8
)
 
(54
)
 

 
Settlements
(1
)
 

 
(13
)
 

 
168

 
Transfers into Level 3

 

 
105

 

 

 
Transfers out of Level 3

 
(8
)
 
(145
)
 
(9
)
 

 
Balance, September 30, 2013
$
2

 
$
7

 
$
302

 
$
1,591

 
$
(4,459
)
 
Changes in unrealized gains (losses) included in
income relating to assets and liabilities held at
September 30, 2013
$

 
$
(1
)
(1) 
$
(2
)
(1) 
$
(1
)
(2) 
$
50

(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 Securities
 
Common Stocks
 
Syndicated Loans
 
Other Assets
 
Debt
 
 
(in millions)
 
Balance, January 1, 2014
$
2

 
$
14

 
$
368

 
$
1,936

 
$
(4,804
)
 
Total gains (losses) included in:
 
 
 
 
 
 
 
 
 
 
Net income
1

(1) 
2

(1) 
5

(1) 
330

(2) 
(32
)
(1) 
Other comprehensive income

 

 

 
(84
)
 

 
Purchases
2

 

 
280

 
282

 

 
Sales
(9
)
 
(2
)
 
(42
)
 
(458
)
 

 
Issues

 

 

 

 
(1,064
)
 
Settlements

 

 
(76
)
 

 
434

 
Transfers into Level 3
10

 
12

 
328

 
11

 

 
Transfers out of Level 3
(6
)
 
(19
)
 
(549
)
 

 

 
Balance, September 30, 2014
$

 
$
7

 
$
314

 
$
2,017

 
$
(5,466
)
 
Changes in unrealized gains included in
income relating to assets and liabilities held at
September 30, 2014
$


$
1

(1) 
$
1

(1) 
$
280

(2) 
$
3

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

14


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
Corporate Debt Securities
 
Common Stocks
 
Syndicated Loans
 
Other Assets
 
Debt
 
 
(in millions)
 
Balance, January 1, 2013
$
3

 
$
14

 
$
202

 
$
1,214

 
$
(4,450
)
 
Total gains (losses) included in:
 
 
 
 
 
 
 
 
 
 
Net income

 




22

(2) 
(38
)
(1) 
Other comprehensive loss

 

 

 
(1
)
 

 
Purchases
1

 

 
265

 
434

 

 
Sales
(1
)
 
(3
)
 
(52
)
 
(77
)
 

 
Issues

 

 

 

 
(926
)
 
Settlements
(1
)
 

 
(46
)
 

 
955

 
Transfers into Level 3

 
15

 
232

 
8

 

 
Transfers out of Level 3

 
(19
)
 
(299
)
 
(9
)
 

 
Balance, September 30, 2013
$
2

 
$
7

 
$
302

 
$
1,591

 
$
(4,459
)
 
Changes in unrealized gains (losses) included in
income relating to assets and liabilities held at
September 30, 2013
$

 
$
(2
)
(1) 
$
(1
)
(1) 
$
5

(2) 
$
(10
)
(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 or priced in active markets. During the reporting periods, there were no transfers between Level 1 and Level 2.
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:
 
September 30, 2014
 
Fair Value
 
Valuation Technique
 
Unobservable Input
 
Range 
 
Weighted Average
 
(in millions)
 
 
 
 
 
 
 
 
Other assets
$
2,017

 
Discounted cash flow/ market comparables
 
Equivalent yield
 
4.1
%
12.0%
 
6.7
%
 
 

 
 
 
Expected rental value (per square foot)
 
$3
$103
 
$35
Debt
$
5,466

 
Discounted cash flow
 
Annual default rate
 
2.5%
 


 
 

 
 
 
Discount rate
 
1.3
%
7.3%
 
2.5
%
 
 

 
 
 
Constant prepayment rate
 
5.0
%
10.0%
 
9.8
%
 
 

 
 
 
Loss recovery
 
36.4
%
63.6%
 
62.6
%
 
December 31, 2013
 
Fair Value
 
Valuation Technique
 
Unobservable Input
 
Range 
 
Weighted Average
 
(in millions)
 
 
 
 
 
 
 
 
Other assets
$
1,936

 
Discounted cash flow/ market comparables
 
Equivalent yield
 
4.4
%
12.4%
 
7.4
%
 
 

 
 
 
Expected rental value (per square foot) (1)
 
$3
$165
 
$27
Debt
$
4,804

 
Discounted cash flow
 
Annual default rate
 
2.5%
 


 
 

 
 
 
Discount rate
 
1.5
%
8.3%
 
2.7
%
 
 

 
 
 
Constant prepayment rate
 
5.0
%
10.0%
 
9.8
%
 
 
 
 
 
Loss recovery
 
36.4
%
63.6%
 
62.3
%
(1) 
The previously reported range and weighted average for the expected rental value was $5-$373 per square foot and $33 per square foot, respectively. These inputs have been revised in this disclosure only and the change does not impact the fair value of other assets.

15


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


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 using a market approach with observable inputs 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.
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 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 CDOs consist primarily of warrants. Warrants 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.

16


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


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.
Fair Value Option
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:
 
September 30, 2014
 
December 31, 2013
 
(in millions)
Syndicated loans
 

 
 

Unpaid principal balance
$
5,301

 
$
4,628

Excess unpaid principal over fair value
(55
)
 
(56
)
Fair value
$
5,246

 
$
4,572

Fair value of loans more than 90 days past due
$
34

 
$
23

Fair value of loans in nonaccrual status
34

 
23

Difference between fair value and unpaid principal of loans more than 90 days past due, loans in nonaccrual status or both
23

 
33

Debt
 

 
 

Unpaid principal balance
$
5,680

 
$
5,032

Excess unpaid principal over fair value
(214
)
 
(228
)
Fair value
$
5,466

 
$
4,804

Interest income from syndicated loans, bonds and structured investments is recorded based on contractual rates in net investment income. Gains and losses related to changes in the fair value of investments and gains and losses on sales of investments are 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 gains (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 $(16) million and $32 million for the three months ended September 30, 2014 and 2013, respectively. Total net gains 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 $4 million and $23 million for the nine months ended September 30, 2014 and 2013, 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
 
September 30, 2014
 
December 31, 2013
 
September 30, 2014
 
December 31, 2013
 
(in millions)
 
 
 
 
Debt of consolidated CDOs due 2016-2026
$
5,466

 
$
4,804

 
1.2
%
 
1.0
%
Floating rate revolving credit borrowings due 2014
181

 
305

 
2.3

 
2.6

Floating rate revolving credit borrowings due 2015
63

 
97

 
2.4

 
2.4

Floating rate revolving credit borrowings due 2017
118

 
120

 
2.6

 
4.5

Floating rate revolving credit borrowings due 2018
416

 
377

 
2.6

 
3.5

Floating rate revolving credit borrowings due 2019
150

 
33

 
3.3

 
3.0

Total
$
6,394

 
$
5,736

 
 

 
 


17


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


The debt of the consolidated CDOs has both fixed and floating interest rates, which range from 0% to 9.23%. The interest rates on the debt of CDOs are weighted average rates based on the outstanding principal and current 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 $928 million and $932 million as of September 30, 2014 and December 31, 2013, 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 $5 million at both September 30, 2014 and December 31, 2013. The overall effective interest rate reflecting the impact of the derivative contracts was 3.2% and 4.2% as of September 30, 2014 and December 31, 2013, respectively.

4.  Investments
The following is a summary of Ameriprise Financial investments:
 
September 30, 2014
 
December 31, 2013
 
(in millions)
Available-for-Sale securities, at fair value
$
30,256

 
$
30,310

Mortgage loans, net
3,457

 
3,510

Policy and certificate loans
805

 
774

Other investments
1,381

 
1,141

Total
$
35,899

 
$
35,735

The following is a summary of net investment income:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Investment income on fixed maturities
$
365

 
$
390

 
$
1,114

 
$
1,194

Net realized gains
4

 
6

 
10

 
7

Affordable housing partnerships
(8
)
 
(3
)
 
(20
)
 
(11
)
Other
26

 
17

 
70

 
76

Consolidated investment entities
41

 
81

 
158

 
165

Total net investment income
$
428

 
$
491

 
$
1,332

 
$
1,431

 
Available-for-Sale securities distributed by type were as follows:
 
 
September 30, 2014
Description of Securities
 
Amortized
Cost
 
Gross
Unrealized Gains
 
Gross
Unrealized Losses
 
Fair Value
 
Noncredit
OTTI (1)
 
 
(in millions)
Corporate debt securities
 
$
15,804

 
$
1,551

 
$
(33
)
 
$
17,322

 
$
3

Residential mortgage backed securities
 
6,152

 
153

 
(73
)
 
6,232

 
(16
)
Commercial mortgage backed securities
 
2,522

 
120

 
(5
)
 
2,637

 

Asset backed securities
 
1,440

 
52

 
(4
)
 
1,488

 

State and municipal obligations
 
2,066

 
220

 
(29
)
 
2,257

 

U.S. government and agencies obligations
 
42

 
5

 

 
47

 

Foreign government bonds and obligations
 
237

 
21

 
(5
)
 
253

 

Common stocks
 
8

 
12

 

 
20

 
5

Total
 
$
28,271

 
$
2,134

 
$
(149
)
 
$
30,256

 
$
(8
)

18


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
 
December 31, 2013
Description of Securities
 
Amortized
Cost
 
Gross
Unrealized Gains