Edgar Filing: AMERIPRISE FINANCIAL INC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2011

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 July 22, 2011
Common Stock (par value $.01 per share)		236,078,732 shares

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AMERIPRISE FINANCIAL, INC.

FORM 10-Q

INDEX

Part I.	Financial Information:

	Item 1.	Financial Statements

		Consolidated Statements of Operations – Three months and six months ended June 30, 2011 and 2010	3

		Consolidated Balance Sheets – June 30, 2011 and December 31, 2010	4

		Consolidated Statements of Cash Flows – Six months ended June 30, 2011 and 2010	5

		Consolidated Statements of Equity – Six months ended June 30, 2011 and 2010	7

		Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	88

	Item 4.	Controls and Procedures	88

Part II.	Other Information:

	Item 1.	Legal Proceedings	89

	Item 1A.	Risk Factors	89

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89

	Item 6.	Exhibits	89

	Signatures		90

	Exhibit Index		E-1

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AMERIPRISE FINANCIAL, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in millions, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues
Management and financial advice fees	$	1,172		$	910		$	2,309		$	1,642
Distribution fees	416			387			813			713
Net investment income	498			655			1,013			1,244
Premiums	312			299			604			581
Other revenues	236			231			440			481
Total revenues	2,634			2,482			5,179			4,661
Banking and deposit interest expense	11			20			24			41
Total net revenues	2,623			2,462			5,155			4,620

Expenses
Distribution expenses	643			528			1,262			964
Interest credited to fixed accounts	212			231			419			459
Benefits, claims, losses and settlement expenses	406			297			788			649
Amortization of deferred acquisition costs	138			171			254			289
Interest and debt expense	75			74			150			138
General and administrative expense	750			699			1,496			1,301
Total expenses	2,224			2,000			4,369			3,800
Income from continuing operations before income tax provision	399			462			786			820
Income tax provision	114			66			207			130
Income from continuing operations	285			396			579			690
Income (loss) from discontinued operations, net of tax	(4		)	2			(75		)	4
Net income	281			398			504			694
Less: Net income (loss) attributable to noncontrolling interests	(28		)	139			(46		)	221
Net income attributable to Ameriprise Financial	$	309		$	259		$	550		$	473

Earnings per share attributable to Ameriprise Financial, Inc. common shareholders
Basic
Income from continuing operations	$	1.28		$	0.98		$	2.51		$	1.80
Income (loss) from discontinued operations	(0.02		)	0.01			(0.30		)	0.01
Net income	$	1.26		$	0.99		$	2.21		$	1.81
Diluted
Income from continuing operations	$	1.25		$	0.97		$	2.46		$	1.77
Income (loss) from discontinued operations	(0.02		)	0.01			(0.30		)	0.01
Net income	$	1.23		$	0.98		$	2.16		$	1.78

Weighted average common shares outstanding
Basic	245.5			261.1			248.5			260.9
Diluted	251.0			265.3			254.3			265.1

Cash dividends paid per common share	$	0.23		$	0.18		$	0.41		$	0.35

Supplemental Disclosures:
Net investment income:
Net investment income before impairment losses on securities	$	514		$	656		$	1,031		$	1,275
Total other-than-temporary impairment losses on securities	(43		)	—			(43		)	(32		)
Portion of loss recognized in other comprehensive income	27			(1		)	25			1
Net impairment losses recognized in net investment income	(16		)	(1		)	(18		)	(31		)
Net investment income	$	498		$	655		$	1,013		$	1,244

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts)

	June 30, 2011			December 31, 2010
	(unaudited)
Assets
Cash and cash equivalents	$	2,528		$	2,838
Investments	37,947			37,053
Separate account assets	70,763			68,330
Receivables	5,239			4,849
Deferred acquisition costs	4,582			4,619
Restricted and segregated cash	1,478			1,516
Other assets	5,341			4,965
Assets held for sale	162			173
Total assets before consolidated investment entities	128,040			124,343

Consolidated Investment Entities:
Cash	479			472
Investments, at fair value	5,416			5,444
Receivables (includes $62 and $33, respectively, at fair value)	96			60
Other assets, at fair value	1,107			895
Total assets of consolidated investment entities	7,098			6,871
Total assets	$	135,138		$	131,214

Liabilities and Equity Liabilities:
Future policy benefits and claims	$	30,002		$	30,208
Separate account liabilities	70,763			68,330
Customer deposits	9,430			8,779
Short-term borrowings	505			397
Long-term debt	2,332			2,317
Accounts payable and accrued expenses	1,045			1,112
Other liabilities	3,724			2,983
Liabilities held for sale	190			79
Total liabilities before consolidated investment entities	117,991			114,205

Consolidated Investment Entities:
Debt (includes $5,234 and $5,171, respectively, at fair value)	5,702			5,535
Accounts payable and accrued expenses	27			22
Other liabilities (includes $177 and $154, respectively, at fair value)	190			167
Total liabilities of consolidated investment entities	5,919			5,724
Total liabilities	123,910			119,929

Equity:
Ameriprise Financial, Inc.:
Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 303,034,371 and 301,366,044, respectively)	3			3
Additional paid-in capital	6,108			6,029
Retained earnings	6,629			6,190
Appropriated retained earnings of consolidated investment entities	494			558
Treasury shares, at cost (65,974,154 and 54,668,152 shares, respectively)	(3,319		)	(2,620		)
Accumulated other comprehensive income, net of tax	633			565
Total Ameriprise Financial, Inc. shareholders’ equity	10,548			10,725
Noncontrolling interests	680			560
Total equity	11,228			11,285
Total liabilities and equity	$	135,138		$	131,214

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

	Six Months Ended June 30,
	2011			2010
Cash Flows from Operating Activities
Net income	$	504		$	694
Adjustments to reconcile net income to net cash provided by operating activities:
Capitalization of deferred acquisition and sales inducement costs	(254		)	(259		)
Amortization of deferred acquisition and sales inducement costs	284			324
Depreciation, amortization and accretion, net	67			48
Deferred income tax expense	45			426
Share-based compensation	80			70
Net realized investment gains	(21		)	(39		)
Other-than-temporary impairments and provision for loan losses	24			35
Net loss (income) attributable to noncontrolling interests	46			(221		)
Changes in operating assets and liabilities before consolidated investment entities:
Restricted and segregated cash	(13		)	22
Trading securities and equity method investments, net	(61		)	7
Future policy benefits and claims, net	17			54
Receivables	(157		)	(319		)
Brokerage deposits	48			(39		)
Accounts payable and accrued expenses	(75		)	83
Derivatives collateral, net	61			533
Other, net	225			(200		)
Changes in operating assets and liabilities of consolidated investment entities, net	(162		)	179
Net cash provided by operating activities	658			1,398

Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	644			1,192
Maturities, sinking fund payments and calls	3,025			3,204
Purchases	(4,111		)	(3,474		)
Proceeds from sales, maturities and repayments of commercial mortgage loans	112			107
Funding of commercial mortgage loans	(62		)	(82		)
Proceeds from sales of other investments	88			92
Purchase of other investments	(151		)	(23		)
Purchase of investments by consolidated investment entities	(1,785		)	(1,010		)
Proceeds from sales, maturities and repayments of investments by consolidated investment entities	1,949			933
Return of capital in investments of consolidated investment entities	6			2
Purchase of land, buildings, equipment and software	(89		)	(54		)
Change in policy and certificate loans, net	(4		)	(6		)
Acquisitions	—			(866		)
Change in consumer banking loans and credit card receivables, net	(216		)	(196		)
Other, net	(2		)	(8		)
Net cash used in investing activities	(596		)	(189		)

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

(in millions)

	Six Months Ended June 30,
	2011			2010
Cash Flows from Financing Activities
Investment certificates and banking time deposits:
Proceeds from additions	$	487		$	554
Maturities, withdrawals and cash surrenders	(750		)	(1,120		)
Change in other banking deposits	864			463
Policyholder and contractholder account values:
Consideration received	626			833
Net transfers to separate accounts	(59		)	(1,277		)
Surrenders and other benefits	(712		)	(692		)
Deferred premium options, net	(125		)	(77		)
Issuance of debt, net of issuance costs	—			744
Repayments of debt	(6		)	—
Change in short-term borrowings, net	108			484
Dividends paid to shareholders	(103		)	(91		)
Repurchase of common shares	(795		)	(206		)
Exercise of stock options	49			45
Excess tax benefits from share-based compensation	37			5
Borrowings by consolidated investment entities	121			58
Repayments of debt by consolidated investment entities	(180		)	(177		)
Noncontrolling interests investments in subsidiaries	101			29
Distributions to noncontrolling interests	(36		)	(40		)
Other, net	(1		)	(2		)
Net cash used in financing activities	(374		)	(467		)
Effect of exchange rate changes on cash	4			(12		)
Net increase (decrease) in cash and cash equivalents (1)	(308		)	730
Cash and cash equivalents at beginning of period (1)	2,861			3,097
Cash and cash equivalents at end of period (1)	$	2,553		$	3,827

Supplemental Disclosures:
Interest paid on debt before consolidated investment entities	$	70		$	61
Income taxes paid, net	223			53
Non-cash investing activity:
Affordable housing partnership commitments not yet remitted	111			17

(1) Cash and cash equivalents includes cash held for sale. See Note 17 for additional information.

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(in millions, except share data)


	Ameriprise Financial, Inc.
										Appropriated
										Retained
										Earnings of						Accumulated
	Number of				Additional					Consolidated						Other			Non-
	Outstanding		Common		Paid-In		Retained			Investment			Treasury			Comprehensive			controlling
	Shares		Shares		Capital		Earnings			Entities			Shares			Income			Interests			Total
Balances at January 1, 2010	255,095,491		$	3	$	5,748	$	5,276		$	—		$	(2,023	)	$	265		$	603		$	9,872
Change in accounting principle	—		—		—		—			473			—			—			—			473
Comprehensive income:
Net income	—		—		—		473			—			—			—			221			694
Net income reclassified to appropriated retained earnings	—		—		—		—			147			—			—			(147		)	—
Other comprehensive income, net of tax:
Change in net unrealized securities gains	—		—		—		—			—			—			379			—			379
Change in noncredit related im-pairments on securities and net unrealized securities losses on previously impaired securities	—		—		—		—			—			—			2			—			2
Change in net unrealized derivatives gains	—		—		—		—			—			—			(2		)	—			(2		)
Foreign currency translation adjustment	—		—		—		—			—			—			(37		)	(45		)	(82		)
Total comprehensive income																						991
Dividends paid to shareholders	—		—		—		(91		)	—			—			—			—			(91		)
Noncontrolling interests investments in subsidiaries	—		—		—		—			—			—			—			29			29
Distributions to noncontrolling interests	—		—		—		—			—			—			—			(40		)	(40		)
Repurchase of common shares	(6,270,836	)	—		—		—			—			(236		)	—			—			(236		)
Share-based compensation plans	3,213,595		—		121		—			—			—			—			—			121
Balances at June 30, 2010	252,038,250		$	3	$	5,869	$	5,658		$	620		$	(2,259	)	$	607		$	621		$	11,119

Balances at January 1, 2011	246,697,892		$	3	$	6,029	$	6,190		$	558		$	(2,620	)	$	565		$	560		$	11,285
Comprehensive income:
Net income (loss)	—		—		—		550			—			—			—			(46		)	504
Net loss reclassified to appropriated retained earnings	—		—		—		—			(64		)	—			—			64			—
Other comprehensive income, net of tax:
Change in net unrealized securities gains	—		—		—		—			—			—			73			—			73
Change in noncredit related impairments on securities and net unrealized securities losses on previously impaired securities	—		—		—		—			—			—			4			—			4
Change in net unrealized derivatives gains	—		—		—		—			—			—			(22		)	—			(22		)
Foreign currency translation adjustment	—		—		—		—			—			—			13			14			27
Total comprehensive income																						586
Dividends paid to shareholders	—		—		—		(103		)	—			—			—			—			(103		)
Noncontrolling interests investments in subsidiaries	—		—		—		—			—			—			—			101			101
Distributions to noncontrolling interests	—		—		—		—			—			—			—			(36		)	(36		)
Repurchase of common shares	(12,972,436	)	—		—		—			—			(780		)	—			—			(780		)
Share-based compensation plans	3,334,761		—		79		(8		)	—			81			—			23			175
Balances at June 30, 2011	237,060,217		$	3	$	6,108	$	6,629		$	494		$	(3,319	)	$	633		$	680		$	11,228

See Notes to Consolidated Financial Statements.

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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 material intercompany transactions and balances have been eliminated in consolidation. See Note 3 for additional information related to VIEs.

During the first quarter of 2011, management decided to identify an appropriate buyer for Securities America Financial Corporation and its subsidiaries (collectively, “Securities America”). Management believes a sale would allow Securities America to focus on growth opportunities in the independent channel and would allow the Company to devote resources to the Ameriprise branded advisor business. During the second quarter of 2011, the results of Securities America have been presented as discontinued operations for all periods presented and the related assets and liabilities have been classified as held for sale. See Note 17 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. Except for the adjustment described below, all adjustments made were of a normal recurring nature.

In the second quarter of 2010, the Company made an adjustment for revisions to certain calculations in its valuation of deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) which resulted in a $33 million pretax benefit ($21 million after-tax).

The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. 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, 2010, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2011.

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

Fair Value

In January 2010, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to disclosures on fair value measurements. The standard expands the current disclosure requirements to include additional detail about significant transfers between Levels 1 and 2 within the fair value hierarchy and presents activity in the rollforward of Level 3 activity on a gross basis. The standard also clarifies existing disclosure requirements related to the level of disaggregation to be used for assets and liabilities as well as disclosures on the inputs and valuation techniques used to measure fair value. The standard is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure requirements related to the Level 3 rollforward, which are effective for interim and annual periods beginning after December 15, 2010. The Company adopted the standard in the first quarter of 2010, except for the additional disclosures related to the Level 3 rollforward, which the Company adopted in the first quarter of 2011. The adoption did not have any effect on the Company’s consolidated results of operations and financial condition. See Note 3 and Note 11 for the required disclosures.

Consolidation of Variable Interest Entities

In June 2009, the FASB updated the accounting standards related to the consolidation of VIEs. The standard amends the guidance on the determination of the primary beneficiary of a VIE from a quantitative model to a qualitative model and requires

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AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

additional disclosures about an enterprise’s involvement in VIEs. Under the new qualitative model, the primary beneficiary must have both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive gains that could be potentially significant to the VIE. In February 2010, the FASB amended this guidance to defer application of the consolidation requirements for certain investment funds. The standards are effective for interim and annual reporting periods beginning after November 15, 2009. The Company adopted the standards effective January 1, 2010 and as a result consolidated certain collateralized debt obligations (“CDOs”). At adoption, the Company recorded a $5.5 billion increase to assets and a $5.1 billion increase to liabilities. The difference between the fair value of the assets and liabilities of the CDOs was recorded as a cumulative effect increase of $473 million to appropriated retained earnings of consolidated investment entities. Such amounts are recorded as appropriated retained earnings as the CDO note holders, not Ameriprise Financial, ultimately will receive the benefits or absorb the losses associated with the assets and liabilities of the CDOs. Subsequent to the adoption, the net change in fair value of the assets and liabilities of the CDOs will be recorded as net income attributable to noncontrolling interests and as an adjustment to appropriated retained earnings of consolidated investment entities. See Note 3 for additional information related to the application of the amended VIE consolidation model and the required disclosures.

Future Adoption of New Accounting Standards

Comprehensive Income

In June 2011, the 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. For both options, an entity is required to present reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. 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 standard is to be applied retrospectively. The adoption of the standard will not impact 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 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: 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 31, 2011. The adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

Receivables

In April 2011, the FASB updated the accounting standards for troubled debt restructurings. The new standard includes indicators that a lender should consider in determining whether a borrower is experiencing financial difficulties and provides clarification for determining whether the lender has granted a concession to the borrower. The standard sets the effective dates for troubled debt restructuring disclosures required by recent guidance on credit quality disclosures. The standard is effective for interim and annual periods beginning on or after June 15, 2011, and is to be applied retrospectively to modifications occurring on or after the beginning of the annual period of adoption. For purposes of measuring impairments of receivables that are considered impaired as a result of applying the new guidance, the standard should be applied prospectively for the interim or annual period beginning on or after June 15, 2011. The adoption of the standard is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

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AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB updated the accounting standards for DAC. Under this new standard, only the following costs incurred in the acquisition of new and renewal insurance contracts would be capitalizable as DAC: (i) incremental direct costs of a successful contract acquisition, (ii) portions of employees’ salaries and benefits directly related to time spent performing specified acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and sales force contract selling) for a contract that has actually been acquired, (iii) other costs related to the specified acquisition activities that would not have been incurred had the acquisition contract not occurred, and (iv) advertising costs that meet the capitalization criteria in other U.S. GAAP guidance for certain direct-response marketing. All other costs are to be expensed as incurred. The standard is effective for interim and annual periods beginning after December 15, 2011, with earlier adoption permitted if it is at the beginning of an entity’s annual reporting period. The standard is to be applied prospectively; however, retrospective application to all prior periods presented is permitted but not required. The Company will adopt the standard on January 1, 2012. 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 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.

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AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The following tables reflect the impact of consolidated investment entities on the Consolidated Balance Sheets and the Consolidated Statements of Operations:

	June 30, 2011
	Before		Consolidated
	Consolidation		Investment Entities		Eliminations			Total
	(in millions)
Total assets	$	128,099	$	7,098	$	(59	)	$	135,138

Total liabilities	$	117,991	$	5,919	$	—		$	123,910
Total Ameriprise Financial, Inc. shareholders’ equity	10,084		523		(59		)	10,548
Noncontrolling interests equity	24		656		—			680
Total liabilities and equity	$	128,099	$	7,098	$	(59	)	$	135,138

	December 31, 2010
	Before		Consolidated
	Consolidation		Investment Entities		Eliminations			Total
	(in millions)
Total assets	$	124,401	$	6,871	$	(58	)	$	131,214

Total liabilities	$	114,205	$	5,724	$	—		$	119,929
Total Ameriprise Financial, Inc. shareholders’ equity	10,196		587		(58		)	10,725
Noncontrolling interests equity	—		560		—			560
Total liabilities and equity	$	124,401	$	6,871	$	(58	)	$	131,214

	Three Months Ended June 30, 2011
	Before			Consolidated
	Consolidation			Investment Entities			Eliminations			Total
	(in millions)
Total net revenues	$	2,598		$	35		$	(10	)	$	2,623
Total expenses	2,171			63			(10		)	2,224
Income (loss) from continuing operations before income tax provision	427			(28		)	—			399
Income tax provision	114			—			—			114
Income (loss) from continuing operations	313			(28		)	—			285
Loss from discontinued operations, net of tax	(4		)	—			—			(4		)
Net income (loss)	309			(28		)	—			281
Net loss attributable to noncontrolling interests	—			(28		)	—			(28		)
Net income attributable to Ameriprise Financial	$	309		$	—		$	—		$	309

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

	Six Months Ended June 30, 2011
	Before			Consolidated
	Consolidation			Investment Entities			Eliminations			Total
	(in millions)
Total net revenues	$	5,093		$	82		$	(20	)	$	5,155
Total expenses	4,261			128			(20		)	4,369
Income (loss) from continuing operations before income tax provision	832			(46		)	—			786
Income tax provision	207			—			—			207
Income (loss) from continuing operations	625			(46		)	—			579
Loss from discontinued operations, net of tax	(75		)	—			—			(75		)
Net income (loss)	550			(46		)	—			504
Net loss attributable to noncontrolling interests	—			(46		)	—			(46		)
Net income attributable to Ameriprise Financial	$	550		$	—		$	—		$	550

	Three Months Ended June 30, 2010
	Before		Consolidated
	Consolidation		Investment Entities		Eliminations			Total
	(in millions)
Total net revenues	$	2,271	$	201	$	(10	)	$	2,462
Total expenses	1,948		62		(10		)	2,000
Income from continuing operations before income tax provision	323		139		—			462
Income tax provision	66		—		—			66
Income from continuing operations	257		139		—			396
Income from discontinued operations, net of tax	2		—		—			2
Net income	259		139		—			398
Net income attributable to noncontrolling interests	—		139		—			139
Net income attributable to Ameriprise Financial	$	259	$	—	$	—		$	259

	Six Months Ended June 30, 2010
	Before		Consolidated
	Consolidation		Investment Entities		Eliminations			Total
	(in millions)
Total net revenues	$	4,302	$	337	$	(19	)	$	4,620
Total expenses	3,703		116		(19		)	3,800
Income from continuing operations before income tax provision	599		221		—			820
Income tax provision	130		—		—			130
Income from continuing operations	469		221		—			690
Income from discontinued operations, net of tax	4		—		—			4
Net income	473		221		—			694
Net income attributable to noncontrolling interests	—		221		—			221
Net income attributable to Ameriprise Financial	$	473	$	—	$	—		$	473

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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

	June 30, 2011
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments
Corporate debt securities	$	—	$	347	$	6	$	353
Common stocks	38		88		23		149
Other structured investments	—		60		3		63
Syndicated loans	—		4,605		246		4,851
Total investments	38		5,100		278		5,416
Receivables	—		62		—		62
Other assets	—		10		1,097		1,107
Total assets at fair value	$	38	$	5,172	$	1,375	$	6,585

Liabilities
Debt	$	—	$	—	$	5,234	$	5,234
Other liabilities	—		177		—		177
Total liabilities at fair value	$	—	$	177	$	5,234	$	5,411

	December 31, 2010
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments
Corporate debt securities	$	—	$	418	$	6	$	424
Common stocks	26		53		11		90
Other structured investments	—		39		22		61
Syndicated loans	—		4,867		—		4,867
Trading securities	—		2		—		2
Total investments	26		5,379		39		5,444
Receivables	—		33		—		33
Other assets	—		8		887		895
Total assets at fair value	$	26	$	5,420	$	926	$	6,372

Liabilities
Debt	$	—	$	—	$	5,171	$	5,171
Other liabilities	—		154		—		154
Total liabilities at fair value	$	—	$	154	$	5,171	$	5,325

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					Other
	Debt		Common			Structured		Syndicated			Other
	Securities		Stocks			Investments		Loans			Assets			Debt
	(in millions)
Balance, April 1, 2011	$	6	$	26		$	—	$	216		$	920		$	(5,333	)
Total gains (losses) included in:
Net income	—		(1		)(1)	—		—			—			(31		)(1)
Other comprehensive income	—		—			—		—			1			—
Purchases	—		—			3		68			184			—
Sales	—		—			—		(4		)	—			—
Issues	—		—			—		—			—			(17		)
Settlements	—		—			—		(54		)	—			147
Transfers into (out of) of Level 3	—		(2		)(2)	—		20		(3)	(8		)(4)	—
Balance, June 30, 2011	$	6	$	23		$	3	$	246		$	1,097		$	(5,234	)

Changes in unrealized gains (losses) included in income relating to assets held at June 30, 2011	$	—	$	(1	)(1)	$	—	$	1	(1)	$	—		$	(27	)(1)

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

(2) Represents securities with a fair value of $5 million that were transferred to Level 2 as the fair value of the securities is now obtained from a nationally-recognized pricing service with observable inputs and securities with a fair value of $3 million that were transferred to Level 3 as the fair value of the securities is now based on a single broker quote.

(3) Represents securities with a fair value of $47 million that were transferred to Level 2 as the fair value of the securities is now obtained from a nationally-recognized pricing service with observable inputs and securities with a fair value of $67 million that were transferred to Level 3 as the fair value of the securities is now based on a single broker quote.

(4) Represents securities that were transferred to Level 2 as the fair value of these securities is now obtained from a nationally-recognized pricing service with observable inputs.

	Corporate						Other
	Debt			Common			Structured			Other
	Securities			Stocks			Investments			Assets			Debt
	(in millions)
Balance, April 1, 2010	$	15		$	—		$	6		$	870		$	(5,144	)
Cumulative effect of accounting change	—			—			—			—			—
Total gains (losses) included in:
Net income	(1		)(1)	1			(1)		(1)	35		(2)	77		(1)
Other comprehensive income	—			—			—			(14		)	—
Purchases, sales, issues and settlements, net	(8		)	3			5			(209		)	19
Balance, June 30, 2010	$	6		$	4		$	10		$	682		$	(5,048	)

Changes in unrealized gains (losses) included in income relating to assets held at June 30, 2010	$	—		$	1	(1)	$	—		$	5	(3)	$	77	(1)

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

(2) Represents a $36 million gain included in other revenues and a $1 million loss included in net investment income in the Consolidated Statements of Operations.

(3) Represents a $6 million gain included in other revenues and a $1 million loss included in net investment income in the Consolidated Statements of Operations.

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Corporate

Other

Debt

Common

Structured

Syndicated