10-Q 1 a12-6893_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended March 31, 2012

 

OR

 

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

 

For the Transition Period from                             to                        

 

Commission File No. 1-32525

 

AMERIPRISE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

13-3180631

(State or other jurisdiction of incorporation or organization)

 

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

 

 

 

1099 Ameriprise Financial Center, Minneapolis, Minnesota

 

55474

(Address of principal executive offices)

 

(Zip Code)

 

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

 

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

 

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

 

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

 

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

 

Large Accelerated Filer x

 

Accelerated Filer o

 

 

 

Non-Accelerated Filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

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

 

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

 

Class

 

Outstanding at April 27, 2012

Common Stock (par value $.01 per share)

 

218,622,891 shares

 

 

 



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

FORM 10-Q

 

INDEX

 

 

 

 

 

Part I.

Financial Information:

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

Consolidated Statements of Operations — Three months ended March 31, 2012 and 2011

3

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income — Three months ended March 31, 2012 and 2011

4

 

 

 

 

 

 

Consolidated Balance Sheets — March 31, 2012 and December 31, 2011

5

 

 

 

 

 

 

Consolidated Statements of Equity — Three months ended March 31, 2012 and 2011

6

 

 

 

 

 

 

Consolidated Statements of Cash Flows — Three months ended March 31, 2012 and 2011

7

 

 

 

 

 

 

Notes to Consolidated Financial Statements

9

 

 

 

 

 

Item 2.

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

45

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

68

 

 

 

 

 

Item 4.

Controls and Procedures

68

 

 

 

 

Part II.

Other Information:

 

 

 

 

 

 

Item 1.

Legal Proceedings

69

 

 

 

 

 

Item 1A.

Risk Factors

69

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

69

 

 

 

 

 

Item 6.

Exhibits

69

 

 

 

 

 

Signatures

70

 

 

 

 

 

Exhibit Index

E-1

 

2



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in millions, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

Revenues

 

 

 

 

 

Management and financial advice fees

 

$

1,132

 

$

1,137

 

Distribution fees

 

402

 

397

 

Net investment income

 

531

 

515

 

Premiums

 

301

 

292

 

Other revenues

 

206

 

204

 

Total revenues

 

2,572

 

2,545

 

Banking and deposit interest expense

 

11

 

13

 

Total net revenues

 

2,561

 

2,532

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

Distribution expenses

 

666

 

634

 

Interest credited to fixed accounts

 

206

 

208

 

Benefits, claims, losses and settlement expenses

 

492

 

383

 

Amortization of deferred acquisition costs

 

31

 

75

 

Interest and debt expense

 

69

 

75

 

General and administrative expense

 

775

 

771

 

Total expenses

 

2,239

 

2,146

 

Income from continuing operations before income tax provision

 

322

 

386

 

Income tax provision

 

73

 

92

 

Income from continuing operations

 

249

 

294

 

Loss from discontinued operations, net of tax

 

(1

)

(71

)

Net income

 

248

 

223

 

Less: Net income (loss) attributable to noncontrolling interests

 

4

 

(18

)

Net income attributable to Ameriprise Financial

 

$

244

 

$

241

 

 

 

 

 

 

 

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

 

 

 

 

 

Basic

 

 

 

 

 

Income from continuing operations

 

$

1.08

 

$

1.24

 

Loss from discontinued operations

 

(0.01

)

(0.28

)

Net income

 

$

1.07

 

$

0.96

 

Diluted

 

 

 

 

 

Income from continuing operations

 

$

1.06

 

$

1.21

 

Loss from discontinued operations

 

(0.01

)

(0.27

)

Net income

 

$

1.05

 

$

0.94

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

 

$

0.18

 

 

 

 

 

 

 

Supplemental Disclosures:

 

 

 

 

 

Total other-than-temporary impairment losses on securities

 

$

(5

)

$

 

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

 

(1

)

(2

)

Net impairment losses recognized in net investment income

 

$

(6

)

$

(2

)

 

See Notes to Consolidated Financial Statements.

 

3



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net income

 

$

248

 

$

223

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Foreign currency translation adjustment

 

31

 

28

 

Net unrealized gains (losses) on securities:

 

 

 

 

 

Net unrealized securities gains (losses) arising during the period

 

81

 

(62

)

Reclassification of net securities losses included in net income

 

1

 

1

 

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

 

(3

)

25

 

Total net unrealized gains (losses) on securities

 

79

 

(36

)

Net unrealized gains (losses) on derivatives:

 

 

 

 

 

Net unrealized derivative gains arising during the period

 

10

 

1

 

Reclassification of net derivative gains included in net income

 

(1

)

(4

)

Total net unrealized gains (losses) on derivatives

 

9

 

(3

)

Total other comprehensive income (loss), net of tax

 

119

 

(11

)

Total comprehensive income

 

367

 

212

 

Less: Comprehensive income (loss) attributable to noncontrolling interests

 

23

 

(4

)

Comprehensive income attributable to Ameriprise Financial

 

$

344

 

$

216

 

 

See Notes to Consolidated Financial Statements.

 

4



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)

 

 

 

March 31, 2012

 

December 31, 2011

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

2,312

 

$

2,781

 

Cash of consolidated investment entities

 

562

 

470

 

Investments

 

39,104

 

38,775

 

Investments of consolidated investment entities, at fair value

 

4,815

 

4,789

 

Separate account assets

 

71,635

 

66,780

 

Receivables

 

5,473

 

5,559

 

Receivables of consolidated investment entities (includes $28 and $39, respectively, at fair value)

 

43

 

59

 

Deferred acquisition costs

 

2,472

 

2,440

 

Restricted and segregated cash and investments

 

1,875

 

1,793

 

Other assets

 

7,429

 

7,751

 

Other assets of consolidated investment entities, at fair value

 

1,037

 

1,110

 

Total assets

 

$

136,757

 

$

132,307

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Future policy benefits and claims

 

$

30,994

 

$

31,710

 

Separate account liabilities

 

71,635

 

66,780

 

Customer deposits

 

9,961

 

9,850

 

Short-term borrowings

 

504

 

504

 

Long-term debt

 

2,381

 

2,393

 

Debt of consolidated investment entities (includes $4,769 and $4,712, respectively, at fair value)

 

5,231

 

5,178

 

Accounts payable and accrued expenses

 

887

 

1,048

 

Accounts payable and accrued expenses of consolidated investment entities

 

20

 

17

 

Other liabilities

 

5,272

 

5,033

 

Other liabilities of consolidated investment entities (includes $90 and $85, respectively, at fair value)

 

123

 

100

 

Total liabilities

 

127,008

 

122,613

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Ameriprise Financial, Inc.:

 

 

 

 

 

Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 305,346,496 and 303,757,574, respectively)

 

3

 

3

 

Additional paid-in capital

 

6,237

 

6,237

 

Retained earnings

 

5,845

 

5,603

 

Appropriated retained earnings of consolidated investment entities

 

440

 

428

 

Treasury shares, at cost (85,739,512 and 81,814,591 shares, respectively)

 

(4,261

)

(4,034

)

Accumulated other comprehensive income, net of tax

 

851

 

751

 

Total Ameriprise Financial, Inc. shareholders’ equity

 

9,115

 

8,988

 

Noncontrolling interests

 

634

 

706

 

Total equity

 

9,749

 

9,694

 

Total liabilities and equity

 

$

136,757

 

$

132,307

 

 

See Notes to Consolidated Financial Statements.

 

5



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(in millions, except share data)

 

 

 

Ameriprise Financial, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appropriated

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

 

 

Ameriprise

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings of

 

 

 

Accumulated

 

Financial,

 

 

 

 

 

 

 

Number of

 

 

 

Additional

 

 

 

Consolidated

 

 

 

Other

 

Inc.

 

Non-

 

 

 

 

 

Outstanding

 

Common

 

Paid-In

 

Retained

 

Investment

 

Treasury

 

Comprehensive

 

Shareholders’

 

controlling

 

 

 

 

 

Shares

 

Shares

 

Capital

 

Earnings

 

Entities

 

Shares

 

Income

 

Equity

 

Interests

 

Total

 

Balances at January 1, 2011, previously reported

 

246,697,892

 

$

3

 

$

6,029

 

$

6,190

 

$

558

 

$

(2,620

)

$

565

 

$

10,725

 

$

560

 

$

11,285

 

Cumulative effect of change in accounting policies, net of tax

 

 

 

 

(1,420

)

 

 

85

 

(1,335

)

 

(1,335

)

Balances at January 1, 2011, as adjusted

 

246,697,892

 

3

 

6,029

 

4,770

 

558

 

(2,620

)

650

 

9,390

 

560

 

9,950

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

241

 

 

 

 

241

 

(18

)

223

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

(25

)

(25

)

14

 

(11

)

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

216

 

(4

)

212

 

Net loss reclassified to appropriated retained earnings

 

 

 

 

 

(28

)

 

 

(28

)

28

 

 

Dividends to shareholders

 

 

 

 

(46

)

 

 

 

(46

)

 

(46

)

Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 

 

64

 

64

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

(27

)

(27

)

Repurchase of common shares

 

(6,863,309

)

 

 

 

 

(413

)

 

(413

)

 

(413

)

Share-based compensation plans

 

3,073,897

 

 

14

 

 

 

81

 

 

95

 

17

 

112

 

Balances at March 31, 2011

 

242,908,480

 

$

3

 

$

6,043

 

$

4,965

 

$

530

 

$

(2,952

)

$

625

 

$

9,214

 

$

638

 

$

9,852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2012

 

221,942,983

 

$

3

 

$

6,237

 

$

5,603

 

$

428

 

$

(4,034

)

$

751

 

$

8,988

 

$

706

 

$

9,694

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

244

 

 

 

 

244

 

4

 

248

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

100

 

100

 

19

 

119

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

344

 

23

 

367

 

Net income reclassified to appropriated retained earnings

 

 

 

 

 

12

 

 

 

12

 

(12

)

 

Dividends to shareholders

 

 

 

 

(2

)

 

 

 

(2

)

 

(2

)

Noncontrolling interests investments in subsidiaries

 

 

 

 

 

 

 

 

 

4

 

4

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

(88

)

(88

)

Repurchase of common shares

 

(5,724,684

)

 

 

 

 

(316

)

 

(316

)

 

(316

)

Share-based compensation plans

 

3,388,685

 

 

 

 

 

89

 

 

89

 

1

 

90

 

Balances at March 31, 2012

 

219,606,984

 

$

3

 

$

6,237

 

$

5,845

 

$

440

 

$

(4,261

)

$

851

 

$

9,115

 

$

634

 

$

9,749

 

 

See Notes to Consolidated Financial Statements.

 

6



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

Cash Flows from Operating Activities

 

 

 

 

 

Net income

 

$

248

 

$

223

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation, amortization and accretion, net

 

56

 

30

 

Deferred income tax benefit

 

(56

)

(19

)

Share-based compensation

 

32

 

42

 

Net realized investment gains

 

(3

)

(1

)

Other-than-temporary impairments and provision for loan losses

 

7

 

4

 

Net loss (income) attributable to noncontrolling interests

 

(4

)

18

 

Changes in operating assets and liabilities before consolidated investment entities:

 

 

 

 

 

Restricted and segregated cash and investments

 

(85

)

6

 

Deferred acquisition costs

 

(51

)

(7

)

Other investments, net

 

(6

)

(3

)

Future policy benefits and claims, net

 

294

 

57

 

Receivables

 

(7

)

(65

)

Brokerage deposits

 

23

 

12

 

Accounts payable and accrued expenses

 

(165

)

(256

)

Derivatives collateral, net

 

(526

)

9

 

Other, net

 

404

 

365

 

Changes in operating assets and liabilities of consolidated investment entities, net

 

14

 

(400

)

Net cash provided by operating activities

 

175

 

15

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

Available-for-Sale securities:

 

 

 

 

 

Proceeds from sales

 

100

 

538

 

Maturities, sinking fund payments and calls

 

1,174

 

1,516

 

Purchases

 

(1,529

)

(2,379

)

Proceeds from sales, maturities and repayments of commercial mortgage loans

 

46

 

54

 

Funding of commercial mortgage loans

 

(72

)

(26

)

Proceeds from sales of other investments

 

53

 

50

 

Purchase of other investments

 

(76

)

(80

)

Purchase of investments by consolidated investment entities

 

(324

)

(629

)

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

 

468

 

1,017

 

Purchase of land, buildings, equipment and software

 

(61

)

(47

)

Change in consumer banking loans and credit card receivables, net

 

(14

)

(91

)

Other, net

 

1

 

4

 

Net cash used in investing activities

 

(234

)

(73

)

 

See Notes to Consolidated Financial Statements.

 

7



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

(in millions)

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

 

 

(in millions)

 

Cash Flows from Financing Activities

 

 

 

 

 

Investment certificates and banking time deposits:

 

 

 

 

 

Proceeds from additions

 

$

185

 

$

294

 

Maturities, withdrawals and cash surrenders

 

(254

)

(431

)

Change in other banking deposits

 

149

 

244

 

Policyholder and contractholder account values:

 

 

 

 

 

Consideration received

 

392

 

291

 

Net transfers to separate accounts

 

(9

)

(46

)

Surrenders and other benefits

 

(335

)

(371

)

Deferred premium options, net

 

(76

)

(58

)

Repayments of debt

 

 

(6

)

Dividends paid to shareholders

 

(62

)

(46

)

Change in short-term borrowings, net

 

 

100

 

Repurchase of common shares

 

(292

)

(393

)

Exercise of stock options

 

40

 

39

 

Excess tax benefits from share-based compensation

 

15

 

14

 

Borrowings by consolidated investment entities

 

4

 

15

 

Repayments of debt by consolidated investment entities

 

(90

)

(32

)

Noncontrolling interests investments in subsidiaries

 

4

 

64

 

Distributions to noncontrolling interests

 

(88

)

(27

)

Other, net

 

 

2

 

Net cash used in financing activities

 

(417

)

(347

)

Effect of exchange rate changes on cash

 

7

 

4

 

Net decrease in cash and cash equivalents

 

(469

)

(401

)

Cash and cash equivalents at beginning of period

 

2,781

 

2,861

 

Cash and cash equivalents at end of period

 

$

2,312

 

$

2,460

 

Supplemental Disclosures:

 

 

 

 

 

Interest paid before consolidated investment entities

 

$

37

 

$

41

 

Income taxes paid (received), net

 

(79

)

10

 

 

See Notes to Consolidated Financial Statements.

 

8



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

1.  Basis of Presentation

 

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

 

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

 

The results of Securities America Financial Corporation and its subsidiaries (collectively, “Securities America”) have been presented as discontinued operations for all periods presented. The Company completed the sale of Securities America in the fourth quarter of 2011. See Note 14 for additional information on discontinued operations.

 

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, except for the prior period adjustments for the retrospective adoption of the new accounting standard for deferred acquisition costs (“DAC”) as described below.

 

The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain reclassifications of prior period amounts have been made to conform to the current presentation. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. These Consolidated Financial Statements and Notes should be read in conjunction with the consolidated Financial Statements and Notes in the Company’s annual report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (“SEC”) on February 24, 2012.

 

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.

 

9



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

On January 1, 2012, the Company retrospectively adopted the new accounting standard for DAC for insurance and annuity products. See Note 2 and Note 6 for further information on the new accounting standard and the resulting changes in the Company’s accounting policies on the deferral of acquisition costs. The following tables present the effect of the change on affected financial statement line items for prior periods retrospectively adjusted. Per share amounts for the three months ended March 31, 2011 did not change as a result of the adoption.

 

 

 

Three Months Ended March 31, 2011

 

 

 

Previously

 

 

 

 

 

 

 

Reported

 

Effect of Change

 

As Adjusted

 

 

 

(in millions)

 

Revenues

 

 

 

 

 

 

 

Total net revenues

 

$

2,532

 

$

 

$

2,532

 

Expenses

 

 

 

 

 

 

 

Distribution expenses

 

619

 

15

 

634

 

Interest credited to fixed accounts

 

207

 

1

 

208

 

Benefits, claims, losses and settlement expenses

 

382

 

1

 

383

 

Amortization of deferred acquisition costs

 

116

 

(41

)

75

 

Interest and debt expense

 

75

 

 

75

 

General and administrative expense

 

746

 

25

 

771

 

Total expenses

 

2,145

 

1

 

2,146

 

Income from continuing operations before income tax provision

 

387

 

(1

)

386

 

Income tax provision

 

93

 

(1

)

92

 

Income from continuing operations

 

294

 

 

294

 

Loss from discontinued operations, net of tax

 

(71

)

 

(71

)

Net income

 

223

 

 

223

 

Less: Net loss attributable to noncontrolling interests

 

(18

)

 

(18

)

Net income attributable to Ameriprise Financial

 

$

241

 

$

 

$

241

 

 

 

 

December 31, 2011

 

 

 

Previously

 

 

 

 

 

 

 

Reported

 

Effect of Change

 

As Adjusted

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

Deferred acquisition costs

 

$

4,402

 

$

(1,962

)

$

2,440

 

Other assets

 

7,468

 

283

 

7,751

 

Total assets

 

133,986

 

(1,679

)

132,307

 

Liabilities and Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Future policy benefits and claims

 

31,723

 

(13

)

31,710

 

Other liabilities

 

5,432

 

(399

)

5,033

 

Total liabilities

 

123,025

 

(412

)

122,613

 

Equity:

 

 

 

 

 

 

 

Retained earnings

 

6,983

 

(1,380

)

5,603

 

Accumulated other comprehensive income, net of tax

 

638

 

113

 

751

 

Total equity

 

10,961

 

(1,267

)

9,694

 

Total liabilities and equity

 

$

133,986

 

$

(1,679

)

$

132,307

 

 

 

 

December 31, 2010

 

 

 

Previously

 

 

 

 

 

 

 

Reported

 

Effect of Change

 

As Adjusted

 

 

 

(in millions)

 

Retained earnings

 

$

6,190

 

$

(1,420

)

$

4,770

 

Accumulated other comprehensive income, net of tax

 

565

 

85

 

650

 

Total equity

 

$

11,285

 

$

(1,335

)

$

9,950

 

 

10



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

2.  Recent Accounting Pronouncements

 

Adoption of New Accounting Standards

 

Comprehensive Income

 

In June 2011, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to the presentation of comprehensive income. The standard requires entities to present all nonowner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not affect how earnings per share is calculated or presented. The standard is effective for interim and annual periods beginning after December 15, 2011. The Company retrospectively adopted the standard in the first quarter of 2012. The adoption of the standard did not have any effect on the Company’s consolidated results of operations and financial condition.

 

Fair Value

 

In May 2011, the FASB updated the accounting standards related to fair value measurement and disclosure requirements. The standard requires entities, for assets and liabilities measured at fair value in the statement of financial position which are Level 3 fair value measurements, to disclose quantitative information about unobservable inputs and assumptions used in the measurements, a description of the valuation processes in place, and a qualitative discussion about the sensitivity of the measurements to changes in unobservable inputs and interrelationships between those inputs if a change in those inputs would result in a significantly different fair value measurement. In addition, the standard requires disclosure of fair value by level within the fair value hierarchy for each class of assets and liabilities not measured at fair value in the statement of financial position but for which the fair value is disclosed. The standard is effective for interim and annual periods beginning on or after December 15, 2011. The Company adopted the standard in the first quarter of 2012. The adoption of the standard did not have any effect on the Company’s consolidated results of operations and financial condition. See Note 3 and Note 10 for the required disclosures.

 

Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreements

 

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

 

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

 

In October 2010, the FASB updated the accounting standard for DAC. Under this new standard, only the following costs incurred in the acquisition of new and renewal insurance contracts are capitalizable as DAC: (i) incremental direct costs of a successful contract acquisition, (ii) portions of employees’ compensation and benefits directly related to time spent performing acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and contract selling) for a contract that has been acquired, (iii) other costs related to acquisition activities that would not have been incurred had the acquisition of the contract not occurred, and (iv) advertising costs that meet the capitalization criteria in other GAAP guidance for certain direct-response marketing. All other acquisition related costs are expensed as incurred. The Company retrospectively adopted the new standard on January 1, 2012. The cumulative effect of the adoption reduced retained earnings by $1.4 billion after-tax and increased accumulated other comprehensive income by $113 million after-tax, totaling to a $1.3 billion after-tax reduction in total equity at January 1, 2012. See Note 1 and Note 6 for additional information on the adoption of this standard.

 

Future Adoption of New Accounting Standards

 

Balance Sheet

 

In December 2011, the FASB updated the accounting standards to require new disclosures about offsetting assets and liabilities. The standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The standard is effective for interim and annual periods beginning on or after January 1, 2013 on a retrospective basis. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

 

11



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

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 for the investment of client assets in the normal course of business. Certain of these investment entities are considered to be VIEs while others are considered to be voting rights entities (“VREs”). The Company consolidates certain of these investment entities.

 

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 significant benefits or the potential obligation to absorb significant losses. For other CDOs managed by the Company, the Company has determined that consolidation is not required as the Company does not hold a variable interest in the CDOs.

 

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

 

The Company also provides investment advisory, distribution and other services to the 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.

 

12



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

Fair Value of Assets and Liabilities

 

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

 

 

 

March 31, 2012

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

$

295

 

$

4

 

$

299

 

Common stocks

 

106

 

34

 

8

 

148

 

Other structured investments

 

 

57

 

 

57

 

Syndicated loans

 

 

4,116

 

195

 

4,311

 

Total investments

 

106

 

4,502

 

207

 

4,815

 

Receivables

 

 

28

 

 

28

 

Other assets

 

 

2

 

1,035

 

1,037

 

Total assets at fair value

 

$

106

 

$

4,532

 

$

1,242

 

$

5,880

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

$

 

$

 

$

4,769

 

$

4,769

 

Other liabilities

 

 

90

 

 

90

 

Total liabilities at fair value

 

$

 

$

90

 

$

4,769

 

$

4,859

 

 

 

 

December 31, 2011

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

 

$

314

 

$

4

 

$

318

 

Common stocks

 

75

 

25

 

13

 

113

 

Other structured investments

 

 

54

 

 

54

 

Syndicated loans

 

 

3,962

 

342

 

4,304

 

Total investments

 

75

 

4,355

 

359

 

4,789

 

Receivables

 

 

39

 

 

39

 

Other assets

 

 

2

 

1,108

 

1,110

 

Total assets at fair value

 

$

75

 

$

4,396

 

$

1,467

 

$

5,938

 

Liabilities

 

 

 

 

 

 

 

 

 

Debt

 

$

 

$

 

$

4,712

 

$

4,712

 

Other liabilities

 

 

85

 

 

85

 

Total liabilities at fair value

 

$

 

$

85

 

$

4,712

 

$

4,797

 

 

13



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

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

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

Debt

 

Common

 

Syndicated

 

Other

 

 

 

 

 

Securities

 

Stocks

 

Loans

 

Assets

 

Debt

 

 

 

(in millions)

 

Balance, January 1, 2012

 

$

4

 

$

13

 

$

342

 

$

1,108

 

$

(4,712

)

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

(1

)(1)

3

(1)

(27

)(2)

(125

)(1)

Other comprehensive income

 

 

 

 

32

 

 

Purchases

 

 

6

 

7

 

12

 

 

Sales

 

 

(2

)

(5

)

(90

)

 

Settlements

 

 

 

(30

)

 

68

 

Transfers into Level 3

 

 

1

 

86

 

 

 

Transfers out of Level 3

 

 

(9

)

(208

)

 

 

Balance, March 31, 2012

 

$

4

 

$

8

 

$

195

 

$

1,035

 

$

(4,769

)

Changes in unrealized gains (losses) included in income relating to assets and liabilities held at March 31, 2012

 

$

 

$

 

$

2

(1)

$

(34

)(2)

$

(125

)(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

 

 

 

Other

 

 

 

 

 

 

 

 

 

Debt

 

Common

 

Structured

 

Syndicated

 

Other

 

 

 

 

 

Securities

 

Stocks

 

Investments

 

Loans

 

Assets

 

Debt

 

 

 

(in millions)

 

Balance, January 1, 2011

 

$

6

 

$

11

 

$

22

 

$

 

$

887

 

$

(5,171

)

Total gains (losses) included in:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

5

(1)

 

4

(1)

4

(2)

(184

)(1)

Other comprehensive income

 

 

 

 

 

24

 

 

Purchases

 

 

 

 

26

 

12

 

 

Sales

 

(1

)

 

 

(2

)

(15

)

 

Issuances

 

 

 

 

 

 

(10

)

Settlements

 

 

 

 

(3

)

1

 

32

 

Transfers into Level 3

 

1

 

11

 

 

192

 

7

 

 

Transfers out of Level 3

 

 

(1

)

(22

)

(1

)

 

 

Balance, March 31, 2011

 

$

6

 

$

26

 

$

 

$

216

 

$

920

 

$

(5,333

)

Changes in unrealized gains (losses) included in income relating to assets held at March 31, 2011

 

$

 

$

5

(1)

$

 

$

4

(1)

$

13

(3)

$

(184

)(1)

 


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

(2)    Represents a $3 million gain included in other revenues and a $1 million gain included in net investment income in the Consolidated Statements of Operations.

(3)    Represents a $12 million gain included in other revenues and a $1 million gain included in net investment income in the Consolidated Statements of Operations.

 

Securities and loans transferred from Level 2 to Level 3 represent securities 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 securities with fair values that are now obtained from a third party pricing service with observable inputs. For assets and liabilities held by consolidated investment entities at the end of the reporting period that are measured at fair value on a recurring basis, there were no transfers between Level 1 and Level 2.

 

14



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

The following table provides 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 at March 31, 2012:

 

 

 

Fair Value

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Average)

 

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other assets

 

$

1,035

 

Discounted cash flow/market comparables

 

Equivalent yield

 

3.1% - 10.7% (6.6%)

 

 

 

 

 

Expected rental value
(per square foot)

 

$2 - $1,281 $(34)

 

 

 

 

 

 

 

 

 

Debt

 

$

4,769

 

Discounted cash flow

 

Annual default rate

 

2.5% - 4.5% (2.8%)

 

 

 

 

 

 

Discount rate

 

2.3% - 45% (3.8%)

 

 

 

 

 

 

Constant prepayment rate

 

5% - 10% (9.6%)

 

 

 

 

 

 

Loss recovery

 

36.4% - 63.6% (61.9%)

 

Level 3 measurements not included in the table 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 could result in a significantly lower (higher) fair value measurement and a significant increase (decrease) in loss recovery in isolation could result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the constant prepayment rate in isolation could result in a significantly higher (lower) fair value measurement.

 

Determination of Fair Value

 

Assets

 

Investments

 

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

 

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

 

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

 

Receivables

 

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

 

15



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

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.

 

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

 

Liabilities

 

Debt

 

The fair value of the CDO’s 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 CDO’s underlying assets. Given the significance of the unobservable inputs to this fair value measurement, the CDO debt is classified as Level 3.

 

Other Liabilities

 

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

 

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

 

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

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

(in millions)

 

Syndicated loans

 

 

 

 

 

Unpaid principal balance

 

$

4,473

 

$

4,548

 

Excess unpaid principal over fair value

 

(162

)

(244

)

Fair value

 

$

4,311

 

$

4,304

 

 

 

 

 

 

 

Fair value of loans more than 90 days past due

 

$

20

 

$

18

 

Fair value of loans in nonaccrual status

 

20

 

18

 

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

 

15

 

16

 

 

 

 

 

 

 

Debt

 

 

 

 

 

Unpaid principal balance

 

$

5,267

 

$

5,335

 

Excess unpaid principal over fair value

 

(498

)

(623

)

Fair value

 

$

4,769

 

$

4,712

 

 

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

 

16



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

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 $9 million and $(33) million for the three months ended March 31, 2012 and 2011, 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

 

 

 

March 31,
2012

 

December 31,
2011

 

March 31,
2012

 

December 31,
2011

 

 

 

(in millions)

 

 

 

 

 

Debt of consolidated CDOs due 2012-2021

 

$

4,769

 

$

4,712

 

1.1

%

0.9

%

Floating rate revolving credit borrowings due 2014

 

367

 

378

 

3.1

 

3.2

 

Floating rate revolving credit borrowings due 2015

 

95

 

88

 

2.9

 

3.0

 

Total

 

$

5,231

 

$

5,178

 

 

 

 

 

 

The debt of the consolidated CDOs has both fixed and floating interest rates, which range from 0% to 13.2%. The interest rates on the debt of consolidated investment entities are weighted average rates based on the outstanding principal and contractual interest rates. The carrying value of the debt of the consolidated CDOs represents the fair value of the aggregate debt. The carrying value of the floating rate revolving credit borrowings represents the outstanding principal amount of debt of certain consolidated pooled investment vehicles managed by Threadneedle. The fair value of this debt was $462 million and $466 million as of March 31, 2012 and December 31, 2011, 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 was a liability of $19 million and $20 million as of March 31, 2012 and December 31, 2011, respectively. The overall effective interest rate reflecting the impact of the derivative contracts was 5.0% as of both March 31, 2012 and December 31, 2011.

 

4.  Investments

 

The following is a summary of Ameriprise Financial investments:

 

 

 

March 31, 2012

 

December 31, 2011

 

 

 

(in millions)

 

Available-for-Sale securities, at fair value

 

$

34,805

 

$

34,505

 

Commercial mortgage loans, net

 

2,615

 

2,589

 

Policy loans

 

741

 

742

 

Other investments

 

943

 

939

 

Total

 

$

39,104

 

$

38,775

 

 

The following is a summary of net investment income:

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

 

 

(in millions)

 

Investment income on fixed maturities

 

$

447

 

$

470

 

Net realized gains (losses)

 

(2

)

1

 

Affordable housing partnerships

 

(8

)

(7

)

Other

 

33

 

24

 

Consolidated investment entities

 

61

 

27

 

Total net investment income

 

$

531

 

$

515

 

 

17



Table of Contents

 

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

 

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

 

 

 

March 31, 2012

 

Description of Securities

 

Amortized 
Cost

 

Gross 
Unrealized 
Gains

 

Gross 
Unrealized 
Losses

 

Fair Value

 

Noncredit 
OTTI 
(1)

 

 

 

(in millions)

 

Corporate debt securities

 

$

16,687

 

$

1,737

 

$

(31

)

$

18,393

 

$

 

Residential mortgage backed securities

 

7,356

 

281

 

(279

)

7,358

 

(127

)

Commercial mortgage backed securities

 

4,284

 

301

 

(1

)

4,584

 

 

Asset backed securities

 

2,032

 

63

 

(39

)

2,056

 

(14

)

State and municipal obligations

 

1,994

 

170

 

(51

)

2,113

 

 

U.S. government and agencies obligations

 

59

 

9

 

 

68

 

 

Foreign government bonds and obligations

 

183

 

22

 

 

205

 

 

Common stocks

 

6

 

5

 

 

11

 

 

Other debt obligations

 

17

 

 

 

17

 

 

Total

 

$

32,618

 

$

2,588

 

$

(401

)

$

34,805

 

$

(141

)

 

 

 

December 31, 2011

 

Description of Securities

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Fair Value

 

Noncredit
OTTI 
(1)

 

 

 

(in millions)

 

Corporate debt securities

 

$

16,380

 

$

1,741

 

$

(81

)

$

18,040

 

$

 

Residential mortgage backed securities

 

7,440

 

287

 

(331

)

7,396

 

(139

)

Commercial mortgage backed securities

 

4,430

 

291

 

(2

)

4,719

 

 

Asset backed securities

 

1,968

 

61

 

(44

)

1,985

 

(15

)

State and municipal obligations

 

2,026

 

162

 

(58

)

2,130

 

 

U.S. government and agencies obligations

 

61

 

10

 

 

71

 

 

Foreign government bonds and obligations

 

126

 

19

 

(1

)

144

 

 

Common stocks

 

5

 

4

 

 

9

 

 

Other debt obligations

 

11

 

 

 

11

 

 

Total

 

$

32,447

 

$

2,575

 

$

(517

)

$

34,505

 

$

(154

)

 


(1)    Represents the amount of other-than-temporary impairment (“OTTI”) losses in accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities subsequent to the initial impairment measurement date. These amounts are included in gross unrealized gains and losses as of the end of the period.

 

At both March 31, 2012 and December 31, 2011, fixed maturity securities comprised approximately 89% of Ameriprise Financial investments. Rating agency designations are based on the availability of ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”), including Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings Ltd. (“Fitch”). The Company uses the median of available ratings from Moody’s, S&P and Fitch, or, if fewer than three ratings are available, the lower rating is used. When ratings from Moody’s, S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. At March 31, 2012 and December 31, 2011, the Company’s internal analysts rated $1.3 billion and $1.2 billion, respectively, of securities, using criteria similar to those used by NRSROs. A summary of fixed maturity securities by rating was as follows:

 

 

 

March 31, 2012