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 September 30, 2012

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 October 26, 2012
Common Stock (par value $.01 per share)		205,816,370 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 nine months ended September 30, 2012 and 2011	3

		Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, 2012 and 2011	4

		Consolidated Balance Sheets — September 30, 2012 and December 31, 2011	5

		Consolidated Statements of Equity — Nine months ended September 30, 2012 and 2011	6

		Consolidated Statements of Cash Flows — Nine months ended September 30, 2012 and 2011	7

		Notes to Consolidated Financial Statements	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	89

	Item 4.	Controls and Procedures	89

Part II.	Other Information:

	Item 1.	Legal Proceedings	90

	Item 1A.	Risk Factors	90

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91

	Item 6.	Exhibits	91

	Signatures		92

	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 September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues
Management and financial advice fees	$	1,191		$	1,127		$	3,475		$	3,436
Distribution fees	391			389			1,189			1,202
Net investment income	427			445			1,430			1,458
Premiums	309			311			912			915
Other revenues	161			195			569			635
Total revenues	2,479			2,467			7,575			7,646
Banking and deposit interest expense	11			12			32			36
Total net revenues	2,468			2,455			7,543			7,610
Expenses
Distribution expenses	667			641			1,996			1,934
Interest credited to fixed accounts	207			214			622			634
Benefits, claims, losses and settlement expenses	529			258			1,417			1,046
Amortization of deferred acquisition costs	67			202			197			366
Interest and debt expense	68			71			209			221
General and administrative expense	731			743			2,282			2,288
Total expenses	2,269			2,129			6,723			6,489
Income from continuing operations before income tax provision	199			326			820			1,121
Income tax provision	47			109			248			319
Income from continuing operations	152			217			572			802
Income (loss) from discontinued operations, net of tax	(1		)	2			(3		)	(73		)
Net income	151			219			569			729
Less: Net loss attributable to noncontrolling interests	(22		)	(105		)	(71		)	(151		)
Net income attributable to Ameriprise Financial	$	173		$	324		$	640		$	880
Earnings per share attributable to Ameriprise Financial, Inc. common shareholders
Basic
Income from continuing operations	$	0.81		$	1.35		$	2.91		$	3.89
Income (loss) from discontinued operations	(0.01		)	0.01			(0.02		)	(0.30		)
Net income	$	0.80		$	1.36		$	2.89		$	3.59
Diluted
Income from continuing operations	$	0.79		$	1.33		$	2.85		$	3.81
Income (loss) from discontinued operations	—			0.01			(0.01		)	(0.29		)
Net income	$	0.79		$	1.34		$	2.84		$	3.52

Cash dividends declared per common share	$	0.35		$	0.23		$	0.70		$	0.64

Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	$	(8	)	$	(13	)	$	(27	)	$	(56	)
Portion of loss recognized in other comprehensive income (before taxes)	(7		)	8			(2		)	33
Net impairment losses recognized in net investment income	$	(15	)	$	(5	)	$	(29	)	$	(23	)

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011

Net income	$	151		$	219		$	569		$	729
Other comprehensive income, net of tax:
Foreign currency translation adjustment	33			(36		)	43			(9		)
Net unrealized gains on securities:
Net unrealized securities gains arising during the period	378			215			615			340
Reclassification of net securities losses included in net income	44			3			49			1
Impact on deferred acquisition costs, deferred sales inducement costs, benefit reserves and reinsurance recoverables	(112		)	(182		)	(174		)	(218		)
Total net unrealized gains on securities	310			36			490			123
Net unrealized gains (losses) on derivatives:
Net unrealized derivative gains arising during the period	—			—			10			1
Reclassification of net derivative gains included in net income	—			—			(1		)	(22		)
Total net unrealized gains (losses) on derivatives	—			—			9			(21		)
Total other comprehensive income, net of tax	343			—			542			93
Total comprehensive income	494			219			1,111			822
Less: Comprehensive loss attributable to noncontrolling interests	(4		)	(125		)	(45		)	(157		)
Comprehensive income attributable to Ameriprise Financial	$	498		$	344		$	1,156		$	979

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)

	September 30, 2012			December 31, 2011
Assets
Cash and cash equivalents	$	3,325		$	2,781
Cash of consolidated investment entities	607			470
Investments	38,702			38,775
Investments of consolidated investment entities, at fair value	4,587			4,789
Separate account assets	71,919			66,780
Receivables	5,528			5,559
Receivables of consolidated investment entities (includes $24 and $39, respectively, at fair value)	56			59
Deferred acquisition costs	2,397			2,440
Restricted and segregated cash and investments	2,060			1,793
Other assets	8,224			7,751
Other assets of consolidated investment entities, at fair value	1,159			1,110
Total assets	$	138,564		$	132,307

Liabilities and Equity Liabilities:
Future policy benefits and claims	$	31,595		$	31,710
Separate account liabilities	71,919			66,780
Customer deposits	10,048			9,850
Short-term borrowings	500			504
Long-term debt	2,413			2,393
Debt of consolidated investment entities (includes $4,691 and $4,712, respectively, at fair value)	5,221			5,178
Accounts payable and accrued expenses	1,145			1,048
Accounts payable and accrued expenses of consolidated investment entities	25			17
Other liabilities	5,779			5,033
Other liabilities of consolidated investment entities (includes $62 and $85, respectively, at fair value)	98			100
Total liabilities	128,743			122,613

Equity:
Ameriprise Financial, Inc.:
Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 306,651,342 and 303,757,574, respectively)	3			3
Additional paid-in capital	6,363			6,237
Retained earnings	6,087			5,603
Appropriated retained earnings of consolidated investment entities	390			428
Treasury shares, at cost (99,224,115 and 81,814,591 shares, respectively)	(4,953		)	(4,034		)
Accumulated other comprehensive income, net of tax	1,267			751
Total Ameriprise Financial, Inc. shareholders’ equity	9,157			8,988
Noncontrolling interests	664			706
Total equity	9,821			9,694
Total liabilities and equity	$	138,564		$	132,307

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								Total
										Retained								Ameriprise
										Earnings of						Accumulated		Financial,
	Number of				Additional					Consolidated						Other		Inc.			Non-
	Outstanding		Common		Paid-In		Retained			Investment			Treasury			Comprehensive		Shareholders’			controlling
	Shares		Shares		Capital		Earnings			Entities			Shares			Income		Equity			Interests			Total
Balances at January 1, 2011, previously reported	246,697,892		$	3	$	6,029	$	6,190		$	558		$	(2,620	)	$	565	$	10,725		$	560		$	11,285
Cumulative effect of change in accounting policies, net of tax	—		—		—		(1,420		)	—			—			85		(1,335		)	—			(1,335		)
Balances at January 1, 2011, as adjusted	246,697,892		3		6,029		4,770			558			(2,620		)	650		9,390			560			9,950
Comprehensive income (loss):
Net income (loss)	—		—		—		880			—			—			—		880			(151		)	729
Other comprehensive income (loss), net of tax	—		—		—		—			—			—			99		99			(6		)	93
Total comprehensive income (loss)																		979			(157		)	822
Net loss reclassified to appropriated retained earnings	—		—		—		—			(178		)	—			—		(178		)	178			—
Dividends to shareholders	—		—		—		(158		)	—			—			—		(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		)	—			(1,233		)
Share-based compensation plans	3,536,975		—		153		(13		)	—			81			—		221			29			250
Balances at September 30, 2011	227,184,776		$	3	$	6,182	$	5,479		$	380		$	(3,772	)	$	749	$	9,021		$	716		$	9,737

Balances at January 1, 2012	221,942,983		$	3	$	6,237	$	5,603		$	428		$	(4,034	)	$	751	$	8,988		$	706		$	9,694
Comprehensive income (loss):
Net income (loss)	—		—		—		640			—			—			—		640			(71		)	569
Other comprehensive income, net of tax	—		—		—		—			—			—			516		516			26			542
Total comprehensive income (loss)																		1,156			(45		)	1,111
Net loss reclassified to appropriated retained earnings	—		—		—		—			(30		)	—			—		(30		)	30			—
Dividends to shareholders	—		—		—		(156		)	—			—			—		(156		)	—			(156		)
Noncontrolling interests investments in subsidiaries	—		—		—		—			—			—			—		—			123			123
Distributions to noncontrolling interests	—		—		—		—			—			—			—		—			(158		)	(158		)
Repurchase of common shares	(19,209,287	)	—		—		—			—			(1,008		)	—		(1,008		)	—			(1,008		)
Share-based compensation plans	4,693,531		—		126		—			—			89			—		215			8			223
Other	—		—		—		—			(8		)	—			—		(8		)	—			(8		)
Balances at September 30, 2012	207,427,227		$	3	$	6,363	$	6,087		$	390		$	(4,953	)	$	1,267	$	9,157		$	664		$	9,821

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

	Nine Months Ended September 30,
	2012			2011
Cash Flows from Operating Activities
Net income	$	569		$	729
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net	168			61
Deferred income tax expense	—			151
Share-based compensation	98			101
Net realized investment losses (gains)	46			(21		)
Net unrealized trading losses	2			2
Loss from equity method investments	9			38
Other-than-temporary impairments and provision for loan losses	33			29
Net loss of consolidated investment entities	95			162
Changes in operating assets and liabilities:
Restricted and segregated cash and investments	(109		)	95
Deferred acquisition costs	(32		)	114
Other investments, net	19			(16		)
Future policy benefits and claims, net	304			(100		)
Receivables	(139		)	(139		)
Brokerage deposits	207			78
Accounts payable and accrued expenses	90			(111		)
Derivatives collateral, net	(642		)	449
Cash held by consolidated investment entities	(137		)	43
Investment properties of consolidated investment entities	(94		)	(278		)
Other operating assets and liabilities of consolidated investment entities, net	25			26
Other, net	371			38
Net cash provided by operating activities	883			1,451

Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	600			656
Maturities, sinking fund payments and calls	3,668			4,107
Purchases	(3,345		)	(5,469		)
Proceeds from sales, maturities and repayments of commercial mortgage loans	197			185
Funding of commercial mortgage loans	(162		)	(130		)
Proceeds from sales of other investments	136			135
Purchase of other investments	(273		)	(257		)
Purchase of investments by consolidated investment entities	(1,215		)	(2,542		)
Proceeds from sales, maturities and repayments of investments by consolidated investment entities	1,619			2,696
Purchase of land, buildings, equipment and software	(143		)	(149		)
Change in consumer banking loans and credit card receivables, net	40			(288		)
Other, net	(9		)	(3		)
Net cash provided by (used in) investing activities	1,113			(1,059		)

See Notes to Consolidated Financial Statements.

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AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

(in millions)

	Nine Months Ended September 30,
	2012			2011
	(in millions)
Cash Flows from Financing Activities
Investment certificates and banking time deposits:
Proceeds from additions	$	966		$	681
Maturities, withdrawals and cash surrenders	(724		)	(1,013		)
Change in other banking deposits	(246		)	1,092
Policyholder and contractholder account values:
Consideration received	1,082			978
Net transfers to separate accounts	(30		)	(3		)
Surrenders and other benefits	(909		)	(1,010		)
Deferred premium options, net	(256		)	(177		)
Repayments of debt	—			(8		)
Change in short-term borrowings, net	(5		)	107
Dividends paid to shareholders	(212		)	(158		)
Repurchase of common shares	(1,008		)	(1,233		)
Exercise of stock options	77			50
Excess tax benefits from share-based compensation	41			89
Borrowings by consolidated investment entities	175			163
Repayments of debt by consolidated investment entities	(374		)	(222		)
Noncontrolling interests investments in subsidiaries	123			148
Distributions to noncontrolling interests	(158		)	(42		)
Other, net	(3		)	(1		)
Net cash used in financing activities	(1,461		)	(559		)
Effect of exchange rate changes on cash	9			(1		)
Net increase (decrease) in cash and cash equivalents	544			(168		)
Cash and cash equivalents at beginning of period	2,781			2,861
Cash and cash equivalents at end of period	$	3,325		$	2,693

Supplemental Disclosures:
Interest paid before consolidated investment entities	$	133		$	142
Income taxes paid, net	174			355
Non-cash investing activity:
Affordable housing partnership commitments not yet remitted	16			124

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

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

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

The Company evaluated events or transactions that may have occurred after the balance sheet date for potential recognition or disclosure through the date the financial statements were issued.

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 second quarter of 2012, the Company made a correction for a tax item related to prior periods, which resulted in a $32 million decrease to net income attributable to Ameriprise Financial. During the second quarter, the Company discovered it had received incomplete data from a third-party service provider for securities lending activities that resulted in the miscalculation of the Company’s dividend received deduction and foreign tax credit, which resulted in an understatement of taxes payable and an overstatement of reported earnings in prior periods. Management has determined that the effect of this correction is not material to the Consolidated Financial Statements for all current and prior periods. The Company has resolved the data issue and has stopped the securities lending that negatively impacted its tax position.

In the third quarter of 2011, the Company made an adjustment for additional bond discount accretion investment income related to prior periods resulting from revisions to the accounting classification of certain structured securities, which resulted in a $40 million pretax benefit, net of deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) amortization. Management has determined that the effect of this adjustment is immaterial to prior periods presented.

In July 2012, the Company announced its intention to transition its federal savings bank subsidiary, Ameriprise Bank, FSB, to a limited powers national trust bank by year-end 2012. Final approvals from the appropriate federal and state regulators are pending.

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AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

On January 1, 2012, the Company retrospectively adopted the new accounting standard for DAC for insurance and annuity products. See Note 2 and Note 6 for further information on the new accounting standard and the resulting changes in the Company’s accounting policies on the deferral of acquisition costs. The following tables present the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

	Three Months Ended September 30, 2011
	Previously
	Reported			Effect of Change			As Adjusted
	(in millions)
Revenues
Total net revenues	$	2,455		$	—		$	2,455
Expenses
Distribution expenses	624			17			641
Interest credited to fixed accounts	213			1			214
Benefits, claims, losses and settlement expenses	257			1			258
Amortization of deferred acquisition costs	318			(116		)	202
Interest and debt expense	71			—			71
General and administrative expense	725			18			743
Total expenses	2,208			(79		)	2,129
Income from continuing operations before income tax provision	247			79			326
Income tax provision	81			28			109
Income from continuing operations	166			51			217
Income from discontinued operations, net of tax	2			—			2
Net income	168			51			219
Less: Net loss attributable to noncontrolling interests	(105		)	—			(105		)
Net income attributable to Ameriprise Financial	$	273		$	51		$	324

Earnings per share attributable to Ameriprise Financial, Inc. common shareholders
Basic
Income from continuing operations	$	1.14		$	0.21		$	1.35
Income from discontinued operations	0.01			—			0.01
Net income	$	1.15		$	0.21		$	1.36
Diluted
Income from continuing operations	$	1.12		$	0.21		$	1.33
Income from discontinued operations	0.01			—			0.01
Net income	$	1.13		$	0.21		$	1.34

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AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

	Nine Months Ended September 30, 2011
	Previously
	Reported			Effect of Change			As Adjusted
	(in millions)
Revenues
Total net revenues	$	7,610		$	—		$	7,610
Expenses
Distribution expenses	1,886			48			1,934
Interest credited to fixed accounts	632			2			634
Benefits, claims, losses and settlement expenses	1,045			1			1,046
Amortization of deferred acquisition costs	572			(206		)	366
Interest and debt expense	221			—			221
General and administrative expense	2,221			67			2,288
Total expenses	6,577			(88		)	6,489
Income from continuing operations before income tax provision	1,033			88			1,121
Income tax provision	288			31			319
Income from continuing operations	745			57			802
Loss from discontinued operations, net of tax	(73		)	—			(73		)
Net income	672			57			729
Less: Net loss attributable to noncontrolling interests	(151		)	—			(151		)
Net income attributable to Ameriprise Financial	$	823		$	57		$	880

Earnings per share attributable to Ameriprise Financial, Inc. common shareholders
Basic
Income from continuing operations	$	3.66		$	0.23		$	3.89
Loss from discontinued operations	(0.30		)	—			(0.30		)
Net income	$	3.36		$	0.23		$	3.59
Diluted
Income from continuing operations	$	3.58		$	0.23		$	3.81
Loss from discontinued operations	(0.29		)	—			(0.29		)
Net income	$	3.29		$	0.23		$	3.52

	December 31, 2011
	Previously
	Reported		Effect of Change			As Adjusted
			(in millions)
Assets
Deferred acquisition costs	$	4,402	$	(1,962	)	$	2,440
Other assets	7,468		283			7,751
Total assets	133,986		(1,679		)	132,307
Liabilities and Equity
Liabilities:
Future policy benefits and claims	31,723		(13		)	31,710
Other liabilities	5,432		(399		)	5,033
Total liabilities	123,025		(412		)	122,613
Equity:
Retained earnings	6,983		(1,380		)	5,603
Accumulated other comprehensive income, net of tax	638		113			751
Total equity	10,961		(1,267		)	9,694
Total liabilities and equity	$	133,986	$	(1,679	)	$	132,307

	December 31, 2010
	Previously
	Reported		Effect of Change			As Adjusted
	(in millions)

Retained earnings	$	6,190	$	(1,420	)	$	4,770
Accumulated other comprehensive income, net of tax	565		85			650
Total equity	$	11,285	$	(1,335	)	$	9,950

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

2. Recent Accounting Pronouncements

Adoption of New Accounting Standards

Comprehensive Income

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

Fair Value

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

Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreements

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

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

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

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Future Adoption of New Accounting Standards

Balance Sheet

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

3. Consolidated Investment Entities

The Company provides asset management services to various collateralized debt obligations (“CDOs”) and other investment products (collectively, “investment entities”), which are sponsored by the Company for the investment of client assets in the normal course of business. Certain of these investment entities are considered to be VIEs while others are considered to be voting rights entities (“VREs”). The Company consolidates certain of these investment entities.

The CDOs managed by the Company are considered VIEs. These CDOs are asset backed financing entities collateralized by a pool of assets, primarily syndicated loans and, to a lesser extent, high-yield bonds. Multiple tranches of debt securities are issued by a CDO, offering investors various maturity and credit risk characteristics. The debt securities issued by the CDOs are non-recourse to the Company. The CDO’s debt holders have recourse only to the assets of the CDO. The assets of the CDOs cannot be used by the Company. Scheduled debt payments are based on the performance of the CDO’s collateral pool. The Company generally earns management fees from the CDOs based on the par value of outstanding debt and, in certain instances, may also receive performance-based fees. In the normal course of business, the Company has invested in certain CDOs, generally an insignificant portion of the unrated, junior subordinated debt.

For certain of the CDOs, the Company has determined that consolidation is required as it has power over the CDOs and holds a variable interest in the CDOs for which the Company has the potential to receive significant benefits or the potential obligation to absorb significant losses. For other CDOs managed by the Company, the Company has determined that consolidation is not required as the Company does not hold a variable interest in the CDOs.

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

The Company also provides investment advisory, distribution and other services to the Columbia and Threadneedle mutual fund families. The Company has determined that consolidation is not required for these mutual funds.

In addition, the Company may invest in structured investments including VIEs for which it is not the sponsor. These structured investments typically invest in fixed income instruments and are managed by third parties and include asset backed securities, commercial mortgage backed securities and residential mortgage backed securities. The Company includes these investments in Available-for-Sale securities. The Company has determined that it is not the primary beneficiary of these structures due to its relative size, position in the capital structure of these entities and the Company’s lack of power over the structures. The Company’s maximum exposure to loss as a result of its investment in structured investments that it does not consolidate is limited to its carrying value. The Company has no obligation to provide further financial or other support to these structured investments nor has the Company provided any support to these structured investments. See Note 4 for additional information about these structured investments.

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Fair Value of Assets and Liabilities

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

	September 30, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	275	$	4	$	279
Common stocks	83		29		13		125
Other structured investments	—		55		—		55
Syndicated loans	—		3,945		183		4,128
Total investments	83		4,304		200		4,587
Receivables	—		24		—		24
Other assets	—		1		1,158		1,159
Total assets at fair value	$	83	$	4,329	$	1,358	$	5,770
Liabilities
Debt	$	—	$	—	$	4,691	$	4,691
Other liabilities	—		62		—		62
Total liabilities at fair value	$	—	$	62	$	4,691	$	4,753

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	314	$	4	$	318
Common stocks	75		25		13		113
Other structured investments	—		54		—		54
Syndicated loans	—		3,962		342		4,304
Total investments	75		4,355		359		4,789
Receivables	—		39		—		39
Other assets	—		2		1,108		1,110
Total assets at fair value	$	75	$	4,396	$	1,467	$	5,938
Liabilities
Debt	$	—	$	—	$	4,712	$	4,712
Other liabilities	—		85		—		85
Total liabilities at fair value	$	—	$	85	$	4,712	$	4,797

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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

	Corporate
	Debt		Common		Syndicated			Other
	Securities		Stocks		Loans			Assets			Debt
	(in millions)
Balance, July 1, 2012	$	4	$	12	$	169		$	1,080		$	(4,726	)
Total gains (losses) included in:
Net income	—		—		2		(1)	(27		)(2)	(82		)(1)
Other comprehensive income	—		—		—			21			—
Purchases	—		—		26			146			—
Sales	—		—		(2		)	(62		)	—
Settlements	—		—		(22		)	—			117
Transfers into Level 3	—		1		59			—			—
Transfers out of Level 3	—		—		(49		)	—			—
Balance, September 30, 2012	$	4	$	13	$	183		$	1,158		$	(4,691	)

Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2012	$	—	$	—	$	1	(1)	$	(39	)(2)	$	(81	)(1)

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

(2) Included in other revenues in the Consolidated Statements of Operations.

	Corporate						Other
	Debt			Common			Structured			Syndicated			Other
	Securities			Stocks			Investments			Loans			Assets			Debt
	(in millions)
Balance, 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.

Table of Contents

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Corporate

Debt

Common

Syndicated

Other

Securities

Stocks

Loans

Assets

Debt

(in millions)

Balance, January 1, 2012