UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2011
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 |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class |
|
Outstanding at October 21, 2011 |
|
Common Stock (par value $.01 per share) |
|
226,255,030 shares |
AMERIPRISE FINANCIAL, INC.
AMERIPRISE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share amounts)
|
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||||||
|
Revenues |
|
|
|
|
|
|
|
|
| ||||||||
|
Management and financial advice fees |
|
$ |
1,127 |
|
$ |
996 |
|
$ |
3,436 |
|
$ |
2,638 |
| ||||
|
Distribution fees |
|
389 |
|
349 |
|
1,202 |
|
1,062 |
| ||||||||
|
Net investment income |
|
445 |
|
525 |
|
1,458 |
|
1,769 |
| ||||||||
|
Premiums |
|
311 |
|
303 |
|
915 |
|
884 |
| ||||||||
|
Other revenues |
|
195 |
|
176 |
|
635 |
|
657 |
| ||||||||
|
Total revenues |
|
2,467 |
|
2,349 |
|
7,646 |
|
7,010 |
| ||||||||
|
Banking and deposit interest expense |
|
12 |
|
15 |
|
36 |
|
56 |
| ||||||||
|
Total net revenues |
|
2,455 |
|
2,334 |
|
7,610 |
|
6,954 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Expenses |
|
|
|
|
|
|
|
|
| ||||||||
|
Distribution expenses |
|
624 |
|
519 |
|
1,886 |
|
1,483 |
| ||||||||
|
Interest credited to fixed accounts |
|
213 |
|
227 |
|
632 |
|
686 |
| ||||||||
|
Benefits, claims, losses and settlement expenses |
|
257 |
|
636 |
|
1,045 |
|
1,285 |
| ||||||||
|
Amortization of deferred acquisition costs |
|
318 |
|
(246 |
) |
572 |
|
43 |
| ||||||||
|
Interest and debt expense |
|
71 |
|
74 |
|
221 |
|
212 |
| ||||||||
|
General and administrative expense |
|
725 |
|
678 |
|
2,221 |
|
1,979 |
| ||||||||
|
Total expenses |
|
2,208 |
|
1,888 |
|
6,577 |
|
5,688 |
| ||||||||
|
Income from continuing operations before income tax provision |
|
247 |
|
446 |
|
1,033 |
|
1,266 |
| ||||||||
|
Income tax provision |
|
81 |
|
132 |
|
288 |
|
262 |
| ||||||||
|
Income from continuing operations |
|
166 |
|
314 |
|
745 |
|
1,004 |
| ||||||||
|
Income (loss) from discontinued operations, net of tax |
|
2 |
|
(2 |
) |
(73 |
) |
2 |
| ||||||||
|
Net income |
|
168 |
|
312 |
|
672 |
|
1,006 |
| ||||||||
|
Less: Net income (loss) attributable to noncontrolling interests |
|
(105 |
) |
(32 |
) |
(151 |
) |
189 |
| ||||||||
|
Net income attributable to Ameriprise Financial |
|
$ |
273 |
|
$ |
344 |
|
$ |
823 |
|
$ |
817 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Earnings per share attributable to Ameriprise Financial, Inc. common shareholders |
|
|
|
|
|
|
|
|
| ||||||||
|
Basic |
|
|
|
|
|
|
|
|
| ||||||||
|
Income from continuing operations |
|
$ |
1.14 |
|
$ |
1.36 |
|
$ |
3.66 |
|
$ |
3.14 |
| ||||
|
Income (loss) from discontinued operations |
|
0.01 |
|
(0.01 |
) |
(0.30 |
) |
0.01 |
| ||||||||
|
Net income |
|
$ |
1.15 |
|
$ |
1.35 |
|
$ |
3.36 |
|
$ |
3.15 |
| ||||
|
Diluted |
|
|
|
|
|
|
|
|
| ||||||||
|
Income from continuing operations |
|
$ |
1.12 |
|
$ |
1.33 |
|
$ |
3.58 |
|
$ |
3.09 |
| ||||
|
Income (loss) from discontinued operations |
|
0.01 |
|
(0.01 |
) |
(0.29 |
) |
0.01 |
| ||||||||
|
Net income |
|
$ |
1.13 |
|
$ |
1.32 |
|
$ |
3.29 |
|
$ |
3.10 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Cash dividends paid per common share |
|
$ |
0.23 |
|
$ |
0.18 |
|
$ |
0.64 |
|
$ |
0.53 |
| ||||
|
Supplemental Disclosures: |
|
|
|
|
|
|
|
|
| ||||||||
|
Net investment income: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net investment income before impairment losses on securities |
|
$ |
450 |
|
$ |
527 |
|
$ |
1,481 |
|
$ |
1,802 |
| ||||
|
Total other-than-temporary impairment losses on securities |
|
(13 |
) |
(2 |
) |
(56 |
) |
(34 |
) | ||||||||
|
Portion of loss recognized in other comprehensive income |
|
8 |
|
— |
|
33 |
|
1 |
| ||||||||
|
Net impairment losses recognized in net investment income |
|
(5 |
) |
(2 |
) |
(23 |
) |
(33 |
) | ||||||||
|
Net investment income |
|
$ |
445 |
|
$ |
525 |
|
$ |
1,458 |
|
$ |
1,769 |
| ||||
See Notes to Consolidated Financial Statements.
AMERIPRISE FINANCIAL, INC.
(in millions, except share amounts)
|
|
|
September 30, 2011 |
|
December 31, 2010 |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
Assets |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
2,664 |
|
$ |
2,838 |
|
|
Investments |
|
38,590 |
|
37,053 |
| ||
|
Separate account assets |
|
63,237 |
|
68,330 |
| ||
|
Receivables |
|
5,313 |
|
4,849 |
| ||
|
Deferred acquisition costs |
|
4,324 |
|
4,619 |
| ||
|
Restricted and segregated cash |
|
1,378 |
|
1,516 |
| ||
|
Other assets |
|
7,898 |
|
4,965 |
| ||
|
Assets held for sale |
|
165 |
|
173 |
| ||
|
Total assets before consolidated investment entities |
|
123,569 |
|
124,343 |
| ||
|
|
|
|
|
|
| ||
|
Consolidated Investment Entities: |
|
|
|
|
| ||
|
Cash |
|
429 |
|
472 |
| ||
|
Investments, at fair value |
|
5,160 |
|
5,444 |
| ||
|
Receivables (includes $24 and $33, respectively, at fair value) |
|
51 |
|
60 |
| ||
|
Other assets, at fair value |
|
1,171 |
|
895 |
| ||
|
Total assets of consolidated investment entities |
|
6,811 |
|
6,871 |
| ||
|
Total assets |
|
$ |
130,380 |
|
$ |
131,214 |
|
|
|
|
|
|
|
| ||
|
Liabilities and Equity |
|
|
|
|
| ||
|
Liabilities: |
|
|
|
|
| ||
|
Future policy benefits and claims |
|
$ |
31,644 |
|
$ |
30,208 |
|
|
Separate account liabilities |
|
63,237 |
|
68,330 |
| ||
|
Customer deposits |
|
9,624 |
|
8,779 |
| ||
|
Short-term borrowings |
|
504 |
|
397 |
| ||
|
Long-term debt |
|
2,404 |
|
2,317 |
| ||
|
Accounts payable and accrued expenses |
|
1,005 |
|
1,112 |
| ||
|
Other liabilities |
|
5,199 |
|
2,983 |
| ||
|
Liabilities held for sale |
|
60 |
|
79 |
| ||
|
Total liabilities before consolidated investment entities |
|
113,677 |
|
114,205 |
| ||
|
|
|
|
|
|
| ||
|
Consolidated Investment Entities: |
|
|
|
|
| ||
|
Debt (includes $5,035 and $5,171, respectively, at fair value) |
|
5,529 |
|
5,535 |
| ||
|
Accounts payable and accrued expenses |
|
25 |
|
22 |
| ||
|
Other liabilities (includes $146 and $154, respectively, at fair value) |
|
162 |
|
167 |
| ||
|
Total liabilities of consolidated investment entities |
|
5,716 |
|
5,724 |
| ||
|
Total liabilities |
|
119,393 |
|
119,929 |
| ||
|
|
|
|
|
|
| ||
|
Equity: |
|
|
|
|
| ||
|
Ameriprise Financial, Inc.: |
|
|
|
|
| ||
|
Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 303,236,585 and 301,366,044, respectively) |
|
3 |
|
3 |
| ||
|
Additional paid-in capital |
|
6,182 |
|
6,029 |
| ||
|
Retained earnings |
|
6,842 |
|
6,190 |
| ||
|
Appropriated retained earnings of consolidated investment entities |
|
380 |
|
558 |
| ||
|
Treasury shares, at cost (76,051,809 and 54,668,152 shares, respectively) |
|
(3,772 |
) |
(2,620 |
) | ||
|
Accumulated other comprehensive income, net of tax |
|
636 |
|
565 |
| ||
|
Total Ameriprise Financial, Inc. shareholders’ equity |
|
10,271 |
|
10,725 |
| ||
|
Noncontrolling interests |
|
716 |
|
560 |
| ||
|
Total equity |
|
10,987 |
|
11,285 |
| ||
|
Total liabilities and equity |
|
$ |
130,380 |
|
$ |
131,214 |
|
See Notes to Consolidated Financial Statements.
AMERIPRISE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
|
|
|
Nine Months Ended September 30, |
| ||||
|
|
|
2011 |
|
2010 |
| ||
|
Cash Flows from Operating Activities |
|
|
|
|
| ||
|
Net income |
|
$ |
672 |
|
$ |
1,006 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation, amortization and accretion, net |
|
61 |
|
79 |
| ||
|
Deferred income tax expense |
|
120 |
|
573 |
| ||
|
Share-based compensation |
|
101 |
|
111 |
| ||
|
Net realized investment gains |
|
(21 |
) |
(43 |
) | ||
|
Other-than-temporary impairments and provision for loan losses |
|
29 |
|
42 |
| ||
|
Net loss (income) attributable to noncontrolling interests |
|
151 |
|
(189 |
) | ||
|
Changes in operating assets and liabilities before consolidated investment entities: |
|
|
|
|
| ||
|
Restricted and segregated cash |
|
98 |
|
(155 |
) | ||
|
Change in deferred acquisition costs, net |
|
205 |
|
(332 |
) | ||
|
Trading securities and equity method investments, net |
|
21 |
|
(10 |
) | ||
|
Future policy benefits and claims, net |
|
(98 |
) |
(89 |
) | ||
|
Receivables |
|
(139 |
) |
(226 |
) | ||
|
Brokerage deposits |
|
78 |
|
27 |
| ||
|
Accounts payable and accrued expenses |
|
(111 |
) |
106 |
| ||
|
Derivatives collateral, net |
|
449 |
|
627 |
| ||
|
Other, net |
|
33 |
|
71 |
| ||
|
Changes in operating assets and liabilities of consolidated investment entities, net |
|
(198 |
) |
225 |
| ||
|
Net cash provided by operating activities |
|
1,451 |
|
1,823 |
| ||
|
|
|
|
|
|
| ||
|
Cash Flows from Investing Activities |
|
|
|
|
| ||
|
Available-for-Sale securities: |
|
|
|
|
| ||
|
Proceeds from sales |
|
656 |
|
1,265 |
| ||
|
Maturities, sinking fund payments and calls |
|
4,107 |
|
4,783 |
| ||
|
Purchases |
|
(5,469 |
) |
(5,822 |
) | ||
|
Proceeds from sales, maturities and repayments of commercial mortgage loans |
|
185 |
|
154 |
| ||
|
Funding of commercial mortgage loans |
|
(130 |
) |
(132 |
) | ||
|
Proceeds from sales of other investments |
|
135 |
|
135 |
| ||
|
Purchase of other investments |
|
(257 |
) |
(48 |
) | ||
|
Purchase of investments by consolidated investment entities |
|
(2,542 |
) |
(1,491 |
) | ||
|
Proceeds from sales, maturities and repayments of investments by consolidated investment entities |
|
2,696 |
|
1,386 |
| ||
|
Purchase of land, buildings, equipment and software |
|
(149 |
) |
(88 |
) | ||
|
Acquisitions |
|
— |
|
(866 |
) | ||
|
Change in consumer banking loans and credit card receivables, net |
|
(288 |
) |
(283 |
) | ||
|
Other, net |
|
(3 |
) |
(15 |
) | ||
|
Net cash used in investing activities |
|
(1,059 |
) |
(1,022 |
) | ||
See Notes to Consolidated Financial Statements.
AMERIPRISE FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
(in millions)
|
|
|
Nine Months Ended September 30, |
| ||||
|
|
|
2011 |
|
2010 |
| ||
|
Cash Flows from Financing Activities |
|
|
|
|
| ||
|
Investment certificates and banking time deposits: |
|
|
|
|
| ||
|
Proceeds from additions |
|
$ |
681 |
|
$ |
783 |
|
|
Maturities, withdrawals and cash surrenders |
|
(1,013 |
) |
(1,496 |
) | ||
|
Change in other banking deposits |
|
1,092 |
|
622 |
| ||
|
Policyholder and contractholder account values: |
|
|
|
|
| ||
|
Consideration received |
|
978 |
|
1,248 |
| ||
|
Net transfers to separate accounts |
|
(3 |
) |
(1,283 |
) | ||
|
Surrenders and other benefits |
|
(1,010 |
) |
(992 |
) | ||
|
Deferred premium options, net |
|
(177 |
) |
(111 |
) | ||
|
Issuance of debt, net of issuance costs |
|
— |
|
744 |
| ||
|
Repayments of debt |
|
(8 |
) |
— |
| ||
|
Change in short-term borrowings, net |
|
107 |
|
869 |
| ||
|
Dividends paid to shareholders |
|
(158 |
) |
(138 |
) | ||
|
Repurchase of common shares |
|
(1,233 |
) |
(389 |
) | ||
|
Exercise of stock options |
|
50 |
|
53 |
| ||
|
Excess tax benefits from share-based compensation |
|
89 |
|
5 |
| ||
|
Borrowings by consolidated investment entities |
|
163 |
|
156 |
| ||
|
Repayments of debt by consolidated investment entities |
|
(222 |
) |
(180 |
) | ||
|
Noncontrolling interests investments in subsidiaries |
|
148 |
|
68 |
| ||
|
Distributions to noncontrolling interests |
|
(42 |
) |
(166 |
) | ||
|
Other, net |
|
(1 |
) |
(1 |
) | ||
|
Net cash used in financing activities |
|
(559 |
) |
(208 |
) | ||
|
Effect of exchange rate changes on cash |
|
(1 |
) |
(5 |
) | ||
|
Net increase (decrease) in cash and cash equivalents (1) |
|
(168 |
) |
588 |
| ||
|
Cash and cash equivalents at beginning of period (1) |
|
2,861 |
|
3,097 |
| ||
|
Cash and cash equivalents at end of period (1) |
|
$ |
2,693 |
|
$ |
3,685 |
|
|
|
|
|
|
|
| ||
|
Supplemental Disclosures: |
|
|
|
|
| ||
|
Interest paid before consolidated investment entities |
|
$ |
142 |
|
$ |
157 |
|
|
Income taxes paid, net |
|
355 |
|
56 |
| ||
|
Non-cash investing activity: |
|
|
|
|
| ||
|
Affordable housing partnership commitments not yet remitted |
|
124 |
|
93 |
| ||
(1) Cash and cash equivalents includes cash held for sale. See Note 16 for additional information.
See Notes to Consolidated Financial Statements.
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 Com- |
|
Non- |
|
|
| ||||||||
|
|
|
Outstanding |
|
Common |
|
Paid-In |
|
Retained |
|
Investment |
|
Treasury |
|
prehensive |
|
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 |
|
— |
|
— |
|
— |
|
817 |
|
— |
|
— |
|
— |
|
189 |
|
1,006 |
| ||||||||
|
Net income reclassified to appropriated retained earnings |
|
— |
|
— |
|
— |
|
— |
|
117 |
|
— |
|
— |
|
(117 |
) |
— |
| ||||||||
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Change in net unrealized securities gains |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
628 |
|
— |
|
628 |
| ||||||||
|
Change in noncredit related impairments on securities and net unrealized securities losses on previously impaired securities |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
17 |
|
— |
|
17 |
| ||||||||
|
Change in net unrealized derivatives gains |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
1 |
|
— |
|
1 |
| ||||||||
|
Foreign currency translation adjustment |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(14 |
) |
(23 |
) |
(37 |
) | ||||||||
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,615 |
| ||||||||
|
Dividends paid to shareholders |
|
— |
|
— |
|
— |
|
(138 |
) |
— |
|
— |
|
— |
|
— |
|
(138 |
) | ||||||||
|
Noncontrolling interests investments in subsidiaries |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
68 |
|
68 |
| ||||||||
|
Distributions to noncontrolling interests |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(166 |
) |
(166 |
) | ||||||||
|
Repurchase of common shares |
|
(9,971,122 |
) |
— |
|
— |
|
— |
|
— |
|
(389 |
) |
— |
|
— |
|
(389 |
) | ||||||||
|
Share-based compensation plans |
|
3,556,371 |
|
— |
|
169 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
169 |
| ||||||||
|
Balances at September 30, 2010 |
|
248,680,740 |
|
$ |
3 |
|
$ |
5,917 |
|
$ |
5,955 |
|
$ |
590 |
|
$ |
(2,412 |
) |
$ |
897 |
|
$ |
554 |
|
$ |
11,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
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) |
|
— |
|
— |
|
— |
|
823 |
|
— |
|
— |
|
— |
|
(151 |
) |
672 |
| ||||||||
|
Net loss reclassified to appropriated retained earnings |
|
— |
|
— |
|
— |
|
— |
|
(178 |
) |
— |
|
— |
|
178 |
|
— |
| ||||||||
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Change in net unrealized securities gains |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
100 |
|
— |
|
100 |
| ||||||||
|
Change in noncredit related impairments on securities and net unrealized securities losses on previously impaired securities |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(5 |
) |
— |
|
(5 |
) | ||||||||
|
Change in net unrealized derivatives gains |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(22 |
) |
— |
|
(22 |
) | ||||||||
|
Foreign currency translation adjustment |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(2 |
) |
(6 |
) |
(8 |
) | ||||||||
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
737 |
| ||||||||
|
Dividends paid to shareholders |
|
— |
|
— |
|
— |
|
(158 |
) |
— |
|
— |
|
— |
|
— |
|
(158 |
) | ||||||||
|
Noncontrolling interests investments in subsidiaries |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
148 |
|
148 |
| ||||||||
|
Distributions to noncontrolling interests |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(42 |
) |
(42 |
) | ||||||||
|
Repurchase of common shares |
|
(23,050,091 |
) |
— |
|
— |
|
— |
|
— |
|
(1,233 |
) |
— |
|
— |
|
(1,233 |
) | ||||||||
|
Share-based compensation plans |
|
3,536,975 |
|
— |
|
153 |
|
(13 |
) |
— |
|
81 |
|
— |
|
29 |
|
250 |
| ||||||||
|
Balances at September 30, 2011 |
|
227,184,776 |
|
$ |
3 |
|
$ |
6,182 |
|
$ |
6,842 |
|
$ |
380 |
|
$ |
(3,772 |
) |
$ |
636 |
|
$ |
716 |
|
$ |
10,987 |
|
See Notes to Consolidated Financial Statements.
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 third quarter of 2011, the Company signed a definitive agreement to sell Securities America Financial Corporation and its subsidiaries (“Securities America”) to Ladenburg Thalmann Financial Services, Inc. for $150 million in cash and potential future payments if Securities America reaches certain financial criteria. The sale closed on November 4, 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 16 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 adjustments described below, all adjustments made were of a normal recurring nature.
In the third quarter of 2011, the Company made an adjustment for additional bond discount amortization investment income related to prior periods resulting from revisions to the accounting classification of certain structured securities, which resulted in a $39 million pretax benefit, net of deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) amortization ($25 million after-tax). Management has determined that the effect of this adjustment is immaterial to all current and prior periods presented. In the third quarter of 2010, the Company made adjustments for revisions to the valuations of reserves, DAC and DSIC related to insurance and living benefit guarantees which resulted in a $32 million pretax charge ($21 million after-tax). In the second quarter of 2010, the Company made an adjustment for revisions to certain calculations in its valuation of DAC and 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 (“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
Receivables
In April 2011, the Financial Accounting Standards Board (“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 Company
AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
adopted the standard in the third quarter of 2011. The adoption did not have any effect on the Company’s consolidated results of operations and financial condition. See Note 5 for the required disclosures.
Fair Value
In January 2010, the 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 10 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 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. 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
AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 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.
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 GAAP guidance for certain direct-response marketing. All other costs are to be expensed as incurred. The Company will retrospectively adopt the standard on January 1, 2012 and expects the cumulative effect of the adoption to reduce retained earnings by a range of $1.3 billion to $1.4 billion after-tax at January 1, 2012. Management expects the adoption will have a marginal impact to net income in 2012.
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.
AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
The following tables present the balances of assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis:
|
|
|
September 30, 2011 |
| ||||||||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
|
|
|
(in millions) |
| ||||||||||
|
Assets |
|
|
|
|
|
|
|
|
| ||||
|
Investments: |
|
|
|
|
|
|
|
|
| ||||
|
Corporate debt securities |
|
$ |
— |
|
$ |
347 |
|
$ |
7 |
|
$ |
354 |
|
|
Common stocks |
|
33 |
|
83 |
|
9 |
|
125 |
| ||||
|
Other structured investments |
|
— |
|
59 |
|
— |
|
59 |
| ||||
|
Syndicated loans |
|
— |
|
4,187 |
|
435 |
|
4,622 |
| ||||
|
Total investments |
|
33 |
|
4,676 |
|
451 |
|
5,160 |
| ||||
|
Receivables |
|
— |
|
24 |
|
— |
|
24 |
| ||||
|
Other assets |
|
— |
|
8 |
|
1,163 |
|
1,171 |
| ||||
|
Total assets at fair value |
|
$ |
33 |
|
$ |
4,708 |
|
$ |
1,614 |
|
$ |
6,355 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
|
Debt |
|
$ |
— |
|
$ |
— |
|
$ |
5,035 |
|
$ |
5,035 |
|
|
Other liabilities |
|
— |
|
146 |
|
— |
|
146 |
| ||||
|
Total liabilities at fair value |
|
$ |
— |
|
$ |
146 |
|
$ |
5,035 |
|
$ |
5,181 |
|
|
|
|
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 |
|
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, July 1, 2011 |
|
$ |
6 |
|
$ |
23 |
|
$ |
3 |
|
$ |
246 |
|
$ |
1,097 |
|
$ |
(5,234 |
) |
|
Total gains (losses) included in: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net income |
|
— |
|
(1 |
)(1) |
— |
|
(27 |
)(1) |
— |
|
157 |
(1) | ||||||
|
Other comprehensive income |
|
— |
|
— |
|
— |
|
— |
|
(32 |
) |
— |
| ||||||
|
Purchases |
|
2 |
|
— |
|
— |
|
90 |
|
101 |
|
— |
| ||||||
|
Sales |
|
— |
|
— |
|
— |
|
(2 |
) |
(3 |
) |
— |
| ||||||
|
Issues |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||
|
Settlements |
|
(1 |
) |
— |
|
— |
|
(57 |
) |
— |
|
42 |
| ||||||
|
Transfers into Level 3 |
|
— |
|
5 |
|
— |
|
250 |
|
— |
|
— |
| ||||||
|
Transfers out of Level 3 |
|
— |
|
(18 |
) |
(3 |
) |
(65 |
) |
— |
|
— |
| ||||||
|
Balance, September 30, 2011 |
|
$ |
7 |
|
$ |
9 |
|
$ |
— |
|
$ |
435 |
|
$ |
1,163 |
|
$ |
(5,035 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2011 |
|
$ |
— |
|
$ |
(1 |
)(1) |
$ |
— |
|
$ |
(26 |
)(1) |
$ |
5 |
(2) |
$ |
156 |
(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 |
|
Other |
|
|
| |||||
|
|
|
Securities |
|
Stocks |
|
Investments |
|
Assets |
|
Debt |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Balance, July 1, 2010 |
|
$ |
6 |
|
$ |
4 |
|
$ |
10 |
|
$ |
682 |
|
$ |
(5,048 |
) |
|
Total gains (losses) included in: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
— |
|
2 |
(1) |
(1 |
)(1) |
(3 |
)(2) |
(51 |
)(1) | |||||
|
Other comprehensive income |
|
— |
|
— |
|
— |
|
35 |
|
— |
| |||||
|
Purchases, sales, issues and settlements, net |
|
— |
|
3 |
|
4 |
|
164 |
|
2 |
| |||||
|
Balance, September 30, 2010 |
|
$ |
6 |
|
$ |
9 |
|
$ |
13 |
|
$ |
878 |
|
$ |
(5,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2010 |
|
$ |
— |
|
$ |
2 |
(1) |
$ |
(1 |
)(1) |
$ |
(7 |
)(2) |
$ |
(51 |
)(1) |
(1) Included in net investment income in the Consolidated Statements of Operations.
(2) Included in other revenues in the Consolidated Statements of Operations.
AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
|
|
|
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 |
|
— |
|
4 |
(1) |
(1 |
)(1) |
(23 |
)(1) |
5 |
(2) |
(59 |
)(1) | ||||||
|
Other comprehensive income |
|
— |
|
— |
|
— |
|
— |
|
(7 |
) |
— |
| ||||||
|
Purchases |
|
2 |
|
— |
|
3 |
|
183 |
|
296 |
|
— |
| ||||||
|
Sales |
|
(1 |
) |
— |
|
— |
|
(8 |
) |
(18 |
) |
— |
| ||||||
|
Issues |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(27 |
) | ||||||
|
Settlements |
|
(1 |
) |
— |
|
— |
|
(113 |
) |
1 |
|
222 |
| ||||||
|
Transfers into Level 3 |
|
1 |
|
19 |
|
— |
|
507 |
|
7 |
|
— |
| ||||||
|
Transfers out of Level 3 |
|
— |
|
(25 |
) |
(24 |
) |
(111 |
) |
(8 |
) |
— |
| ||||||
|
Balance, September 30, 2011 |
|
$ |
7 |
|
$ |
9 |
|
$ |
— |
|
$ |
435 |
|
$ |
1,163 |
|
$ |
(5,035 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2011 |
|
$ |
— |
|
$ |
1 |
(1) |
$ |
— |
|
$ |
(22 |
)(1) |
$ |
17 |
(2) |
$ |
(55 |
)(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 |
|
Other |
|
|
| |||||
|
|
|
Securities |
|
Stocks |
|
Investments |
|
Assets |
|
Debt |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Balance, January 1, 2010 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
831 |
|
$ |
— |
|
|
Cumulative effect of accounting change |
|
15 |
|
— |
|
5 |
|
— |
|
(4,962 |
) | |||||
|
Total gains (losses) included in: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income |
|
(1 |
)(1) |
2 |
(1) |
— |
|
68 |
(2) |
(157 |
)(1) | |||||
|
Other comprehensive income |
|
— |
|
— |
|
— |
|
(29 |
) |
— |
| |||||
|
Purchases, sales, issues and settlements, net |
|
(8 |
) |
7 |
|
8 |
|
8 |
|
22 |
| |||||
|
Balance, September 30, 2010 |
|
$ |
6 |
|
$ |
9 |
|
$ |
13 |
|
$ |
878 |
|
$ |
(5,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2010 |
|
$ |
— |
|
$ |
2 |
(1) |
$ |
— |
|
$ |
35 |
(3) |
$ |
(157 |
)(1) |
|
(1) |
Included in net investment income in the Consolidated Statements of Operations. |
|
(2) |
Represents a $69 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 $36 million gain included in other revenues and a $1 million loss included in net investment income in the Consolidated Statements of Operations. |
Securities transferred from Level 2 to Level 3 represent securities with fair values that are now based on a single broker quote. Securities transferred from Level 3 to Level 2 represent securities with fair values that are now obtained from a nationally-recognized pricing service with observable inputs.
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.
For receivables, certain other assets and other liabilities of the consolidated CDOs, the carrying value approximates fair value as the nature of these assets and liabilities has historically been short term and the receivables have been collectible. The fair value of these assets and liabilities is classified as Level 2. Other liabilities consist primarily of securities purchased but not yet settled held by consolidated CDOs. The fair value of syndicated loans obtained from nationally-recognized pricing services is classified as Level 2. The fair value of syndicated loans obtained from a single broker quote is classified as Level 3. Other assets consist primarily of properties held in consolidated pooled investment vehicles managed by Threadneedle. The fair value of these
AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
properties is determined using discounted cash flows and market comparables. Inputs into the valuation of these properties 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. Given the significance of the unobservable inputs to these measurements, these assets are classified as Level 3. The fair value of the CDO’s debt is valued using a discounted cash flow methodology. Inputs used to determine the expected cash flows include assumptions about default 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. See Note 10 for a description of the Company’s determination of the fair value of investments.
The following table presents the fair value and unpaid principal balance of loans and debt for which the fair value option has been elected:
|
|
|
September 30, 2011 |
|
December 31, 2010 |
| ||
|
|
|
(in millions) |
| ||||
|
Syndicated loans |
|
|
|
|
| ||
|
Unpaid principal balance |
|
$ |
4,984 |
|
$ |
5,107 |
|
|
Excess estimated unpaid principal over fair value |
|
(362 |
) |
(240 |
) | ||
|
Fair value |
|
$ |
4,622 |
|
$ |
4,867 |
|
|
|
|
|
|
|
| ||
|
Fair value of loans more than 90 days past due |
|
$ |
23 |
|
$ |
71 |
|
|
Fair value of loans in non-accrual status |
|
23 |
|
71 |
| ||
|
Difference between fair value and unpaid principal of loans more than 90 days past due, loans in non-accrual status or both |
|
20 |
|
62 |
| ||
|
Debt |
|
|
|
|
| ||
|
Unpaid principal balance |
|
$ |
5,698 |
|
$ |
5,893 |
|
|
Excess estimated unpaid principal over fair value |
|
(663 |
) |
(722 |
) | ||
|
Fair value |
|
$ |
5,035 |
|
$ |
5,171 |
|
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.
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 $(120) million and $(32) million for the three months ended September 30, 2011 and 2010, respectively. 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 $(186) million and $96 million for the nine months ended September 30, 2011 and 2010, respectively. The majority of the syndicated loans and debt have floating rates; as such, changes in their fair values are primarily attributable to changes in credit spreads.
Debt of the consolidated investment entities and the stated interest rates were as follows:
|
|
|
Carrying Value |
|
Weighted Average Interest Rate |
| ||||||
|
|
|
September 30, |
|
December 31, |
|
September 30, |
|
December 31, |
| ||
|
|
|
(in millions) |
|
|
|
|
| ||||
|
Debt of consolidated CDOs due 2012-2021 |
|
$ |
5,035 |
|
$ |
5,171 |
|
0.8 |
% |
1.0 |
% |
|
Floating rate revolving credit borrowings due 2014 |
|
406 |
|
329 |
|
5.4 |
|
5.6 |
| ||
|
Floating rate revolving credit borrowings due 2015 |
|
88 |
|
35 |
|
4.4 |
|
5.2 |
| ||
|
Total |
|
$ |
5,529 |
|
$ |
5,535 |
|
|
|
|
|
The debt of the consolidated CDOs has both fixed and floating interest rates, which range from 0% to 13.3%. 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 as of September 30, 2011 and December 31, 2010. 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 $494 million and $364 million as of September 30, 2011 and December 31, 2010, respectively.
AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. Investments
The following is a summary of Ameriprise Financial investments:
|
|
|
September 30, 2011 |
|
December 31, 2010 |
| ||
|
|
|
(in millions) |
| ||||
|
Available-for-Sale securities, at fair value |
|
$ |
34,012 |
|
$ |
32,619 |
|
|
Commercial mortgage loans, net |
|
2,520 |
|
2,577 |
| ||
|
Trading securities |
|
567 |
|
565 |
| ||
|
Policy loans |
|
741 |
|
733 |
| ||
|
Other investments |
|
750 |
|
559 |
| ||
|
Total |
|
$ |
38,590 |
|
$ |
37,053 |
|
Available-for-Sale securities distributed by type were as follows:
|
|
|
September 30, 2011 |
| |||||||||||||
|
Description of Securities |
|
Amortized |
|
Gross |
|
Gross |
|
Fair Value |
|
Noncredit |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Corporate debt securities |
|
$ |
15,750 |
|
$ |
1,674 |
|
$ |
(81 |
) |
$ |
17,343 |
|
$ |
— |
|
|
Residential mortgage backed securities |
|
7,436 |
|
311 |
|
(314 |
) |
7,433 |
|
(125 |
) | |||||
|
Commercial mortgage backed securities |
|
4,625 |
|
264 |
|
(4 |
) |
4,885 |
|
— |
| |||||
|
Asset backed securities |
|
2,004 |
|
72 |
|
(42 |
) |
2,034 |
|
(16 |
) | |||||
|
State and municipal obligations |
|
1,985 |
|
161 |
|
(63 |
) |
2,083 |
|
— |
| |||||
|
U.S. government and agencies obligations |
|
63 |
|
10 |
|
— |
|
73 |
|
— |
| |||||
|
Foreign government bonds and obligations |
|
111 |
|
17 |
|
(1 |
) |
127 |
|
— |
| |||||
|
Common stocks |
|
6 |
|
3 |
|
(1 |
) |
8 |
|
— |
| |||||
|
Other debt obligations |
|
26 |
|
— |
|
— |
|
26 |
|
— |
| |||||
|
Total |
|
$ |
32,006 |
|
$ |
2,512 |
|
$ |
(506 |
) |
$ |
34,012 |
|
$ |
(141 |
) |
|
|
|
December 31, 2010 |
| |||||||||||||
|
Description of Securities |
|
Amortized |
|
Gross |
|
Gross |
|
Fair Value |
|
Noncredit |
| |||||
|
|
|
(in millions) |
| |||||||||||||
|
Corporate debt securities |
|
$ |
15,433 |
|
$ |
|||||||||||