Edgar Filing: AMERIPRISE FINANCIAL INC

Document

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, 2017


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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x		Accelerated Filer o
Non-Accelerated Filer o (Do not check if a smaller reporting company)		Smaller reporting company o
		Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 20, 2017
Common Stock (par value $.01 per share)		147,930,011 shares

AMERIPRISE FINANCIAL, INC.

FORM 10-Q

INDEX



Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations — Three months and nine months ended September 30, 2017 and 2016				3
Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, 2017 and 2016				4
Consolidated Balance Sheets — September 30, 2017 and December 31, 2016				5
Consolidated Statements of Equity — Nine months ended September 30, 2017 and 2016				6
Consolidated Statements of Cash Flows — Nine months ended September 30, 2017 and 2016				7
Notes to Consolidated Financial Statements				9
1. Basis of Presentation				9
2. Recent Accounting Pronouncements				9
3. Variable Interest Entities				11
4. Investments				17
5. Financing Receivables				20
6. Deferred Acquisition Costs and Deferred Sales Inducement Costs				23
7. Policyholder Account Balances, Future Policy Benefits and Claims and Separate Account Liabilities				24
8. Variable Annuity and Insurance Guarantees				24
9. Debt				26
10. Fair Values of Assets and Liabilities				27
11. Offsetting Assets and Liabilities				38
12. Derivatives and Hedging Activities				40
13. Shareholders’ Equity				45
14. Income Taxes				47
15. Contingencies				48
16. Earnings per Share				49
17. Segment Information				50
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations				52
Item 3. Quantitative and Qualitative Disclosures About Market Risk				88
Item 4. Controls and Procedures				88

Part II. Other Information				89
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				90
Signatures				91

AMERIPRISE FINANCIAL, INC.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017			2016
	(in millions, except per share amounts)
Revenues
Management and financial advice fees	$	1,626	$	1,464	$	4,669		$	4,289
Distribution fees	437		455		1,310			1,338
Net investment income	372		387		1,154			1,090
Premiums	348		374		1,035			1,114
Other revenues	210		330		733			832
Total revenues	2,993		3,010		8,901			8,663
Banking and deposit interest expense	12		12		34			29
Total net revenues	2,981		2,998		8,867			8,634
Expenses
Distribution expenses	850		798		2,505			2,371
Interest credited to fixed accounts	176		161		509			465
Benefits, claims, losses and settlement expenses	474		855		1,652			1,934
Amortization of deferred acquisition costs	48		163		189			360
Interest and debt expense	52		52		154			160
General and administrative expense	753		731		2,244			2,221
Total expenses	2,353		2,760		7,253			7,511
Pretax income	628		238		1,614			1,123
Income tax provision	125		23		315			209
Net income	$	503	$	215	$	1,299		$	914

Earnings per share
Basic	$	3.29	$	1.31	$	8.37		$	5.43
Diluted	$	3.24	$	1.30	$	8.24		$	5.37

Cash dividends declared per common share	$	0.83	$	0.75	$	2.41		$	2.17

Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	$	—	$	—	$	(1	)	$	(2	)
Portion of loss recognized in other comprehensive income (before taxes)	—		—		—			1
Net impairment losses recognized in net investment income	$	—	$	—	$	(1	)	$	(1	)
See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(in millions)
Net income	$	503		$	215		$	1,299		$	914
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	16			(16		)	46			(55		)
Net unrealized gains (losses) on securities	(4		)	(28		)	60			382
Net unrealized gains (losses) on derivatives	1			1			2			3
Defined benefit plans	—			—			5			6
Other	—			—			(1		)	—
Total other comprehensive income (loss), net of tax	13			(43		)	112			336
Total comprehensive income	$	516		$	172		$	1,411		$	1,250
See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)



	September 30, 2017			December 31, 2016
	(in millions, except share amounts)
Assets
Cash and cash equivalents	$	2,398		$	2,318
Cash of consolidated investment entities	106			168
Investments	36,202			35,834
Investments of consolidated investment entities, at fair value	2,215			2,254
Separate account assets	85,287			80,210
Receivables	5,742			5,299
Receivables of consolidated investment entities, at fair value	9			11
Deferred acquisition costs	2,661			2,648
Restricted and segregated cash and investments	3,131			3,331
Other assets	7,735			7,748
Total assets	$	145,486		$	139,821

Liabilities and Equity
Liabilities:
Policyholder account balances, future policy benefits and claims	$	29,963		$	30,202
Separate account liabilities	85,287			80,210
Customer deposits	10,427			10,036
Short-term borrowings	201			200
Long-term debt	2,902			2,917
Debt of consolidated investment entities, at fair value	2,267			2,319
Accounts payable and accrued expenses	1,728			1,727
Other liabilities	6,363			5,823
Other liabilities of consolidated investment entities, at fair value	43			95
Total liabilities	139,181			133,529
Equity:
Ameriprise Financial, Inc.:
Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 327,007,785 and 324,006,315, respectively)	3			3
Additional paid-in capital	8,017			7,765
Retained earnings	11,271			10,351
Treasury shares, at cost (178,670,257 and 169,246,411 shares, respectively)	(13,298		)	(12,027		)
Accumulated other comprehensive income, net of tax	312			200
Total equity	6,305			6,292
Total liabilities and equity	$	145,486		$	139,821
See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)



	Ameriprise Financial, Inc.																				Non-controlling Interests			Total
	Number of Outstanding Shares		Common Shares		Additional Paid-In Capital		Retained Earnings			Appropriated Retained Earnings of Consolidated Investment Entities			Treasury Shares			Accumulated Other Com- prehensive Income		Total Ameriprise Financial, Inc. Shareholders’ Equity
	(in millions, except share data)
Balances at January 1, 2016 ⁽¹⁾	171,033,260		$	3	$	7,611	$	9,525		$	137		$	(10,338	)	$	253	$	7,191		$	1,188		$	8,379
Cumulative effect of change in accounting policies	—		—		—		1			(137		)	—			6		(130		)	(1,188		)	(1,318		)
Comprehensive income:
Net income	—		—		—		914			—			—			—		914			—			914
Other comprehensive income, net of tax	—		—		—		—			—			—			336		336			—			336
Total comprehensive income																		1,250			—			1,250
Dividends to shareholders	—		—		—		(368		)	—			—			—		(368		)	—			(368		)
Repurchase of common shares	(14,349,061	)	—		—		—			—			(1,333		)	—		(1,333		)	—			(1,333		)
Share-based compensation plans	1,812,137		—		98		—			—			62			—		160			—			160
Balances at September 30, 2016 ⁽¹⁾	158,496,336		$	3	$	7,709	$	10,072		$	—		$	(11,609	)	$	595	$	6,770		$	—		$	6,770

Balances at January 1, 2017	154,759,904		$	3	$	7,765	$	10,351		$	—		$	(12,027	)	$	200	$	6,292		$	—		$	6,292
Comprehensive income:
Net income	—		—		—		1,299			—			—			—		1,299			—			1,299
Other comprehensive income, net of tax	—		—		—		—			—			—			112		112			—			112
Total comprehensive income																		1,411			—			1,411
Dividends to shareholders	—		—		—		(379		)	—			—			—		(379		)	—			(379		)
Repurchase of common shares	(10,184,145	)	—		—		—			—			(1,323		)	—		(1,323		)	—			(1,323		)
Share-based compensation plans	3,761,769		—		252		—			—			52			—		304			—			304
Balances at September 30, 2017	148,337,528		$	3	$	8,017	$	11,271		$	—		$	(13,298	)	$	312	$	6,305		$	—		$	6,305

⁽¹⁾ Prior period retained earnings were restated in the fourth quarter of 2016. See Note 1 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	September 30,
	2017			2016
	(in millions)
Cash Flows from Operating Activities
Net income	$	1,299		$	914
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion, net	176			187
Deferred income tax expense (benefit)	(58		)	(47		)
Share-based compensation	91			101
Net realized investment (gains) losses	(37		)	(1		)
Net trading (gains) losses	(5		)	(5		)
Loss from equity method investments	41			45
Net losses of consolidated investment entities	3			5
Changes in operating assets and liabilities:
Restricted and segregated investments	1			200
Deferred acquisition costs	(31		)	86
Other investments, net	(139		)	9
Policyholder account balances, future policy benefits and claims, net	(353		)	1,172
Derivatives, net of collateral	589			(676		)
Receivables	(445		)	(177		)
Brokerage deposits	(47		)	3
Accounts payable and accrued expenses	(19		)	(24		)
Other operating assets and liabilities of consolidated investment entities, net	—			(9		)
Other, net	113			239
Net cash provided by (used in) operating activities	1,179			2,022

Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	335			322
Maturities, sinking fund payments and calls	3,583			3,379
Purchases	(3,722		)	(4,666		)
Proceeds from sales, maturities and repayments of mortgage loans	348			705
Funding of mortgage loans	(372		)	(334		)
Proceeds from sales and collections of other investments	211			131
Purchase of other investments	(351		)	(144		)
Purchase of investments by consolidated investment entities	(1,092		)	(566		)
Proceeds from sales, maturities and repayments of investments by consolidated investment entities	1,087			803
Purchase of land, buildings, equipment and software	(125		)	(66		)
Other, net	(8		)	69
Net cash provided by (used in) investing activities	$	(106	)	$	(367	)
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

		September 30,
		2017			2016
		(in millions)
	Cash Flows from Financing Activities
	Investment certificates:
	Proceeds from additions	$	3,595		$	3,184
	Maturities, withdrawals and cash surrenders	(3,158		)	(2,376		)
	Policyholder account balances:
	Deposits and other additions	1,538			1,532
	Net transfers from (to) separate accounts	(120		)	113
	Surrenders and other benefits	(1,413		)	(1,448		)
	Cash paid for purchased options with deferred premiums	(187		)	(256		)
	Cash received from purchased options with deferred premiums	42			242
	Issuance of long-term debt	—			495
	Repayments of long-term debt	(8		)	(254		)
	Dividends paid to shareholders	(368		)	(361		)
	Repurchase of common shares	(1,161		)	(1,319		)
	Exercise of stock options	13			6
	Repayments of debt by consolidated investment entities	(59		)	(134		)
	Other, net	—			3
	Net cash provided by (used in) financing activities	(1,286		)	(573		)
	Effect of exchange rate changes on cash	32			(53		)
	Net increase (decrease) in cash, cash equivalents and restricted cash	(181		)	1,029
	Cash, cash equivalents and restricted cash at beginning of period	5,392			5,407
	Net cash outflows upon the deconsolidation of VIEs	—			(346		)
	Cash, cash equivalents and restricted cash at end of period	$	5,211		$	6,090

	Supplemental Disclosures:
	Interest paid excluding consolidated investment entities	$	130		$	121
	Interest paid by consolidated investment entities	65			74
	Income taxes paid, net	387			201
	Non-cash investing activity:
	Partnership commitments not yet remitted	9			75
		September 30, 2017			December 31, 2016
		(in millions)
		(in millions)
	Reconciliation of cash, cash equivalents and restricted cash:
	Cash and cash equivalents	$	2,398		$	2,318
	Cash of consolidated investment entities	106			168
	Restricted and segregated cash and investments	3,131			3,331
	Less: Restricted and segregated investments	(424		)	(425		)
	Total cash, cash equivalents and restricted cash per consolidated statements of cash flows	$	5,211		$	5,392
	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 Threadneedle Asset Management Holdings Sàrl and Ameriprise Asset Management Holdings GmbH (collectively, “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”). All intercompany transactions and balances have been eliminated in consolidation. See Note 3 for additional information on VIEs.

The interim financial information in this report has not been audited. In the opinion of management, all adjustments necessary for fair statement 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 first quarter of 2017, the Company recorded a $20 million decrease to income tax provision related to an out-of-period correction for a reversal of a tax reserve.

In the third quarter of 2017, the Company recorded a $14 million out-of-period correction related to a variable annuity model assumption that decreased amortization of deferred acquisition costs (“DAC”) by $10 million and decreased benefits, claims, losses and settlement expenses by $4 million.

The impact to prior period financial statements of these out-of-period corrections was not material.

The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Results of operations reported for interim periods are not necessarily indicative of results for the entire year. These Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission (“SEC”) on February 23, 2017 (“2016 10-K”).

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. No subsequent events or transactions were identified.

2. Recent Accounting Pronouncements

Adoption of New Accounting Standards

Statement of Cash Flows – Restricted Cash

In November 2016, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to the classification of restricted cash on the statement of cash flows. The update requires entities to include restricted cash and restricted cash equivalents in cash and cash equivalent balances on the statement of cash flows and disclose a reconciliation between the balances on the statement of cash flows and the balance sheet. The standard is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company early adopted the standard for the interim period ended March 31, 2017 on a retrospective basis. As a result of the adoption of the standard, restricted cash balances of $2.7 billion and $2.9 billion at September 30, 2017 and December 31, 2016, respectively, are included in the cash and cash equivalents balances on the Company’s consolidated statements of cash flows. The impact of the change in restricted cash resulted in a $213 million increase to the Company’s operating cash flows for the prior period presented.

Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB updated the accounting standards related to classification of certain cash receipts and cash payments on the statement of cash flows. The update includes amendments to address diversity in practice for the classification of eight specific cash flow activities. The specific amendments the Company evaluated include the classification of debt prepayment and extinguishment costs, contingent consideration payments, proceeds from insurance settlements and corporate owned life insurance settlements, distributions from equity method investees and the application of the predominance principle to separately identifiable cash flows. The standard is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted and all amendments must be adopted during the same period. The Company early adopted the standard for the interim period ended March 31, 2017 on a retrospective basis. The adoption of the standard did not have a material impact on the Company’s operating, investing or financing cash flows.

Compensation – Stock Compensation

In March 2016, the FASB updated the accounting standards related to employee share-based payments. The update requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement. This change is required to be applied prospectively to excess tax benefits and tax deficiencies resulting from settlements after the date of adoption. No

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

adjustment is recorded for any excess tax benefits or tax deficiencies previously recorded in additional paid in capital. The update also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows. This provision can be applied on either a prospective or retrospective basis. The update permits entities to make an accounting policy election to recognize forfeitures as they occur rather than estimating forfeitures to determine the recognition of expense for share-based payment awards. The standard is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted. The Company adopted the standard on January 1, 2017 on a prospective basis, except for the cash flow statement provision, which the Company applied on a retrospective basis. During periods in which the settlement date value differs materially from the grant date fair value of certain share-based payment awards, the Company may experience volatility in income tax recognized in its consolidated results of operations. During the three months and nine months ended September 30, 2017, the Company recognized net excess tax benefits of $25 million and $57 million, respectively, as a reduction to the income tax provision in the consolidated statements of operations. The Company maintained its accounting policy of estimating forfeitures. As a result of the adoption of the standard, net excess tax benefits of $57 million and $8 million for the nine months ended September 30, 2017 and 2016, respectively, are included in the Other, net line within operating cash flows on the Company’s consolidated statements of cash flows.

Future Adoption of New Accounting Standards

Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB updated the accounting standards to amend the hedge accounting recognition and presentation requirements. The objectives of the update are to better align the financial reporting of hedging relationships to the economic results of an entity’s risk management activities and simplify the application of the hedge accounting guidance. The update also adds new disclosures and amends existing disclosure requirements. The standard is effective for interim and annual periods beginning after December 15, 2018, and should be applied on a modified retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

Receivables – Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB updated the accounting standards to shorten the amortization period for certain purchased callable debt securities held at a premium. Under current guidance, premiums are generally amortized over the contractual life of the security. The amendments require the premium to be amortized to the earliest call date. The update applies to securities with explicit, non-contingent call features that are callable at fixed prices and on preset dates. The standard is effective for interim and annual periods beginning after December 15, 2018, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted. The update is not expected to have a material impact on the Company’s consolidated results of operations or financial condition.

Intangibles – Goodwill and Other – Simplifying the Test for Goodwill Impairment

In January 2017, the FASB updated the accounting standards to simplify the accounting for goodwill impairment. The update removes the hypothetical purchase price allocation (Step 2) of the goodwill impairment test. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. The standard is effective for interim and annual periods beginning after December 15, 2019, and should be applied prospectively with early adoption permitted for any impairment tests performed after January 1, 2017. The update is not expected to have a material impact on the Company’s consolidated results of operations or financial condition.

Income Taxes – Intra-Entity Transfers of Assets Other Than Inventory

In October 2016, the FASB updated the accounting standards related to the recognition of income tax impacts on intra-entity transfers. The update requires entities to recognize the income tax consequences of intra-entity transfers, other than inventory, upon the transfer of the asset. The update requires the selling entity to recognize a current tax expense or benefit and the purchasing entity to recognize a deferred tax asset or liability when the transfer occurs. The standard is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

Financial Instruments – Measurement of Credit Losses

In June 2016, the FASB updated the accounting standards related to accounting for credit losses on certain types of financial instruments. The update replaces the current incurred loss model for estimating credit losses with a new model that requires an entity to estimate the credit losses expected over the life of the asset. Generally, the initial estimate of the expected credit losses and subsequent changes in the estimate will be reported in current period earnings and recorded through an allowance for credit losses on the balance sheet. The current credit loss model for Available-for-Sale debt securities does not change; however, the credit loss calculation and subsequent recoveries are required to be recorded through an allowance. The standard is effective for interim and annual periods beginning after December 15, 2019. Early adoption will be permitted for interim and annual periods beginning after December 15, 2018. A modified retrospective cumulative adjustment to retained earnings should be recorded as of the first reporting period in which the guidance is effective for loans, receivables, and other financial instruments subject to the new expected credit loss model. Prospective adoption is required for establishing an allowance related to Available-for-Sale debt securities, certain beneficial

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

interests, and financial assets purchased with a more-than-insignificant amount of credit deterioration since origination. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

Leases – Recognition of Lease Assets and Liabilities on Balance Sheet

In February 2016, the FASB updated the accounting standards for leases. The update was issued to increase transparency and comparability for the accounting of lease transactions. The standard will require most lease transactions for lessees to be recorded on the balance sheet as lease assets and lease liabilities and both quantitative and qualitative disclosures about leasing arrangements. The Company currently discloses information related to operating lease arrangements within Note 23 of the 2016 10-K. The standard is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted. The update should be applied at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.

Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB updated the accounting standards on the recognition and measurement of financial instruments. The update requires entities to carry marketable equity securities, excluding investments in securities that qualify for the equity method of accounting, at fair value with changes in fair value reflected in net income each reporting period. The update affects other aspects of accounting for equity instruments, as well as the accounting for financial liabilities utilizing the fair value option. The update eliminates the requirement to disclose the methods and assumptions used to estimate the fair value of financial assets or liabilities held at cost on the balance sheet and requires entities to use the exit price notion when measuring the fair value of financial instruments. The standard is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted for certain provisions. Generally, the update should be applied using a modified retrospective approach by recording a cumulative-effect adjustment to equity at the beginning of the period of adoption. The update is not expected to have a material impact on the consolidated results of operations or financial condition.

Revenue from Contracts with Customers

In May 2014, the FASB updated the accounting standards for revenue from contracts with customers. The update provides a five step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are in the scope of other standards). The standard also updates the accounting for certain costs associated with obtaining and fulfilling a customer contract and requires disclosure of quantitative and qualitative information that enables users of financial statements to understand the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers. Subsequent related updates provide clarification on certain revenue recognition guidance in the new standard. The standard is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted for interim and annual periods beginning after December 15, 2016. The standard may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The Company plans to adopt the revenue recognition guidance on a retrospective basis in the first quarter of 2018. The update does not apply to revenue associated with the manufacturing of insurance and annuity products or financial instruments as these revenues are in the scope of other standards. Therefore, the Company does not expect the update to have an impact on these revenues. The Company’s implementation efforts include the identification of revenue within the guidance and the review of the customer contracts to determine the Company’s performance obligation and the associated timing of each performance obligation. The Company has determined that certain payments received primarily related to franchise advisor fees should be presented as revenue rather than a reduction of expense. The Company expects the impact of this change to be an increase to both revenues and expenses of approximately $95 million to $120 million. The Company does not expect a material impact to the timing of revenue recognition; however, the Company’s implementation effort to assess the impact of the standard is still in process.

3. Variable Interest Entities

The Company provides asset management services to investment entities which are considered to be VIEs, such as collateralized loan obligations (“CLOs”), hedge funds, property funds, certain international series funds (Open Ended Investment Companies and Societes d’Investissement A Capital Variable) and private equity funds (collectively, “investment entities”), which are sponsored by the Company. In addition, the Company invests in structured investments other than CLOs and certain affordable housing partnerships which are considered VIEs. The Company consolidates certain investment entities (collectively, “consolidated investment entities”). If the Company is deemed to be the primary beneficiary, it will consolidate the VIE. The Company has no obligation to provide financial or other support to the non-consolidated VIEs beyond its investment nor has the Company provided any support to these entities.

CLOs

CLOs 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 CLO, offering investors various maturity and credit risk characteristics. The debt securities issued by the CLOs are non-recourse to the Company. The CLO’s debt holders have recourse only to the assets of the CLO. The assets of the CLOs cannot be used by the Company. Scheduled debt payments are based on the performance of the CLO’s collateral pool. The Company earns management fees from the CLOs based on the CLO’s collateral pool

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

and, in certain instances, may also receive incentive fees. The fee arrangement is at market and commensurate with the level of effort required to provide those services. The Company has invested in a portion of the unrated, junior subordinated notes of certain CLOs. The Company has determined that consolidation is required for certain CLOs.

The Company’s maximum exposure to loss with respect to non-consolidated CLOs is limited to its investments amortized cost, which was $6 million and $9 million as of September 30, 2017 and December 31, 2016, respectively. The Company classifies these investments as Available-for-Sale securities. See Note 4 for additional information on these investments.

Property Funds

The Company provides investment advice and related services to property funds, which are considered VIEs. 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 fee arrangement is at market and commensurate with the level of effort required to provide those services. The Company does not have a significant economic interest and is not required to consolidate the property funds. The carrying value of the Company’s investment in property funds is reflected in other investments and was $26 million as of both September 30, 2017 and December 31, 2016.

Hedge Funds and Private Equity Funds

The Company has determined that consolidation is not required for hedge funds and private equity funds which are sponsored by the Company and considered VIEs. For investment management services, the Company earns management fees based on the market value of assets under management, and in certain instances may also receive performance-based fees. The fee arrangement is at market and commensurate with the level of effort required to provide those services. The Company’s maximum exposure to loss with respect to its investment in these entities is limited to its carrying value. The carrying value of the Company’s investment in these entities is reflected in other investments and was $7 million and $13 million as of September 30, 2017 and December 31, 2016, respectively.

International Series Funds

The Company manages international series funds, which are considered VIEs. For investment management services, the Company earns management fees based on the market value of assets under management, and in certain instances may also receive performance-based fees. The fee arrangement is at market and commensurate with the level of effort required to provide those services. The Company does not consolidate these funds and its maximum exposure to loss is limited to its carrying value. The carrying value of the Company’s investment in these funds is reflected in other assets and was $26 million and $33 million as of September 30, 2017 and December 31, 2016, respectively.

Affordable Housing Partnerships and Other Real Estate Partnerships

The Company is a limited partner in affordable housing partnerships that qualify for government-sponsored low income housing tax credit programs and partnerships that invest in multi-family residential properties that were originally developed with an affordable housing component. The Company has determined it is not the primary beneficiary and therefore does not consolidate these partnerships.

A majority of the limited partnerships are VIEs. The Company’s maximum exposure to loss as a result of its investment in the VIEs is limited to the carrying value. The carrying value is reflected in other investments and was $455 million and $482 million as of September 30, 2017 and December 31, 2016, respectively. The Company had a $114 million and $135 million liability recorded as of September 30, 2017 and December 31, 2016, respectively, related to original purchase commitments not yet remitted to the VIEs. The Company has not provided any additional support and is not contractually obligated to provide additional support to the VIEs beyond the above mentioned funding commitments.

Structured Investments

The Company invests in structured investments which are considered 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 classifies these investments as Available-for-Sale securities. The Company has determined that it is not the primary beneficiary of these structures due to the size of the Company’s investment in the entities and position in the capital structure of these entities. The Company’s maximum exposure to loss as a result of its investment in these structured investments is limited to its carrying value. See Note 4 for additional information on these structured investments.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Fair Value of Assets and Liabilities

The Company categorizes its fair value measurements according to a three-level hierarchy. See Note 10 for the definition of the three levels of the fair value hierarchy.

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



	September 30, 2017
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	29	$	—	$	29
Common stocks	22		11		4		37
Other investments	4		—		—		4
Syndicated loans	—		1,963		182		2,145
Total investments	26		2,003		186		2,215
Receivables	—		9		—		9
Total assets at fair value	$	26	$	2,012	$	186	$	2,224

Liabilities
Debt ⁽¹⁾	$	—	$	2,267	$	—	$	2,267
Other liabilities	—		43		—		43
Total liabilities at fair value	$	—	$	2,310	$	—	$	2,310



	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	19	$	—	$	19
Common stocks	22		6		5		33
Other investments	4		—		—		4
Syndicated loans	—		1,944		254		2,198
Total investments	26		1,969		259		2,254
Receivables	—		11		—		11
Total assets at fair value	$	26	$	1,980	$	259	$	2,265

Liabilities
Debt ⁽¹⁾	$	—	$	2,319	$	—	$	2,319
Other liabilities	—		95		—		95
Total liabilities at fair value	$	—	$	2,414	$	—	$	2,414


⁽¹⁾	The carrying value of the CLOs’ debt is set equal to the fair value of the CLOs’ assets. The estimated fair value of the CLOs’ debt was $2.2 billion and $2.3 billion as of September 30, 2017 and December 31, 2016, respectively.

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 Securities		Common Stocks				Syndicated Loans
	(in millions)
Balance, July 1, 2017	$	—	$	7			$	185
Total gains (losses) included in:
Net income	—		1			⁽¹⁾	(1		)	⁽¹⁾
Purchases	—		—				6
Sales	—		—				(12		)
Settlements	—		—				(3		)
Transfers into Level 3	—		—				84
Transfers out of Level 3	—		(4		)		(77		)
Balance, September 30, 2017	$	—	$	4			$	182
Changes in unrealized gains (losses) included in income relating to assets held at September 30, 2017	$	—	$	1		⁽¹⁾	$	—



	Common Stocks		Syndicated Loans				Other Assets
	(in millions)
Balance at July 1, 2016	$	1	$	243			$	1
Total gains (losses) included in:
Net income	—		2			⁽¹⁾	—
Purchases	1		50				—
Sales	—		(10		)		—
Settlements	—		(26		)		—
Transfers into Level 3	1		57				—
Transfers out of Level 3	—		(120		)		—
Balance, September 30, 2016	$	3	$	196			$	1
Changes in unrealized gains (losses) included in income relating to assets held at September 30, 2016	$	—	$	2		⁽¹⁾	$	—



	Corporate Debt Securities			Common Stocks				Syndicated Loans
	(in millions)
Balance, January 1, 2017	$	—		$	5			$	254
Total gains (losses) included in:
Net income	—			1			⁽¹⁾	—
Purchases	—			3				133
Sales	(2		)	(1		)		(27		)
Settlements	—			—				(56		)
Transfers into Level 3	2			2				197
Transfers out of Level 3	—			(6		)		(319		)
Balance, September 30, 2017	$	—		$	4			$	182
Changes in unrealized gains (losses) included in income relating to assets held at September 30, 2017	$	—		$	1		⁽¹⁾	$	(2	)	⁽¹⁾

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)



	Common Stocks			Syndicated Loans				Other Assets				Debt
	(in millions)
Balance at January 1, 2016, previously reported	$	3		$	529			$	2,065			$	(6,630	)
Cumulative effect of change in accounting policies ⁽³⁾	(2		)	(304		)		(2,065		)		6,630
Balance at January 1, 2016, as adjusted	1			225				—				—
Total gains (losses) included in:
Net income	—			1			⁽¹⁾	1			⁽²⁾	—
Purchases	1			100				—				—
Sales	—			(11		)		—				—
Settlements	—			(51		)		—				—
Transfers into Level 3	3			286				—				—
Transfers out of Level 3	(2		)	(354		)		—				—
Balance, September 30, 2016	$	3		$	196			$	1			$	—
Changes in unrealized gains (losses) included in income relating to assets and liabilities held at September 30, 2016	$	—		$	1		⁽¹⁾	$	—			$	—

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

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

⁽³⁾ The cumulative effect of change in accounting policies includes the adoption impact of ASU 2015-02 and ASU 2014-13 – Consolidation: Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity (“ASU 2014-13”).

Securities and loans transferred from Level 3 primarily represent assets with fair values that are now obtained from a third-party pricing service with observable inputs or priced in active markets. Securities and loans transferred to Level 3 represent assets with fair values that are now based on a single non-binding broker quote. The Company recognizes transfers between levels of the fair value hierarchy as of the beginning of the quarter in which each transfer occurred. For assets and liabilities held at the end of the reporting periods that are measured at fair value on a recurring basis, there were no transfers between Level 1 and Level 2.

All Level 3 measurements as of September 30, 2017 and December 31, 2016 were obtained from non-binding broker quotes where unobservable inputs utilized in the fair value calculation are not reasonably available to the Company.

Determination of Fair Value

Assets

Investments

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

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

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

Receivables

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

Liabilities

Debt

The fair value of the CLOs’ assets, typically syndicated bank loans, is more observable than the fair value of the CLOs’ debt tranches

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

for which market activity is limited and less transparent. As a result, the fair value of the CLOs’ debt is set equal to the fair value of the CLOs’ assets. The fair value of the CLOs’ debt is classified as Level 2.

Other Liabilities

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

Fair Value Option

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

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, 2017			December 31, 2016
	(in millions)
Syndicated loans
Unpaid principal balance	$	2,215		$	2,281
Excess unpaid principal over fair value	(70		)	(83		)
Fair value	$	2,145		$	2,198
Fair value of loans more than 90 days past due	$	12		$	8
Fair value of loans in nonaccrual status	12			8
Difference between fair value and unpaid principal of loans more than 90 days past due, loans in nonaccrual status or both	26			34

Debt
Unpaid principal balance	$	2,400		$	2,459
Excess unpaid principal over carrying value	(133		)	(140		)
Carrying value ⁽¹⁾	$	2,267		$	2,319

⁽¹⁾ The carrying value of the CLOs’ debt is set equal to the fair value of the CLOs’ assets. The estimated fair value of the CLOs’ debt was $2.2 billion and $2.3 billion as of September 30, 2017 and December 31, 2016, respectively.

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

Total net gains (losses) recognized in net investment income related to changes in the fair value of financial assets and liabilities for which the fair value option was elected were $(1) million and nil for the three months ended September 30, 2017 and 2016, 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 $(3) million and $(5) million for the nine months ended September 30, 2017 and 2016, respectively.

Debt of the consolidated investment entities and the stated interest rates were as follows:



	Carrying Value				Weighted Average Interest Rate
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
	(in millions)
Debt of consolidated CLOs due 2025-2026	$	2,267	$	2,319	2.7	%	2.5	%

The debt of the consolidated CLOs has both fixed and floating interest rates, which range from 0% to 7.3%. The interest rates on the debt of CLOs are weighted average rates based on the outstanding principal and contractual interest rates.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

4. Investments

The following is a summary of Ameriprise Financial investments:



	September 30, 2017		December 31, 2016
	(in millions)
Available-for-Sale securities, at fair value	$	30,826	$	30,719
Mortgage loans, net	3,000		2,986
Policy and certificate loans	841		831
Other investments	1,535		1,298
Total	$	36,202	$	35,834

The following is a summary of net investment income:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(in millions)
Investment income on fixed maturities	$	340		$	342		$	1,012		$	1,028
Net realized gains (losses)	(3		)	6			35			(5		)
Affordable housing partnerships	(17		)	(17		)	(42		)	(35		)
Other	26			25			70			13
Consolidated investment entities	26			31			79			89
Total	$	372		$	387		$	1,154		$	1,090

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



Description of Securities	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI ⁽¹⁾
	(in millions)
Corporate debt securities	$	14,528	$	1,145	$	(23	)	$	15,650	$	—
Residential mortgage backed securities	6,740		79		(29		)	6,790		—
Commercial mortgage backed securities	3,917		62		(27		)	3,952		—
Asset backed securities	1,611		39		(4		)	1,646		5
State and municipal obligations	2,216		249		(10		)	2,455		—
U.S. government and agencies obligations	5		1		—			6		—
Foreign government bonds and obligations	292		21		(5		)	308		—
Common stocks	9		11		(1		)	19		6
Total	$	29,318	$	1,607	$	(99	)	$	30,826	$	11

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)



Description of Securities	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI ⁽¹⁾
	(in millions)
Corporate debt securities	$	15,231	$	1,065	$	(60	)	$	16,236	$	—
Residential mortgage backed securities	6,899		86		(67		)	6,918		(3		)
Commercial mortgage backed securities	3,347		59		(39		)	3,367		—
Asset backed securities	1,532		33		(16		)	1,549		5
State and municipal obligations	2,195		198		(35		)	2,358		—
U.S. government and agencies obligations	7		1		—			8		—
Foreign government bonds and obligations	251		17		(7		)	261		—
Common stocks	10		13		(1		)	22		6
Total	$	29,472	$	1,472	$	(225	)	$	30,719	$	8


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

As of September 30, 2017 and December 31, 2016, investment securities with a fair value of $1.7 billion and $1.6 billion, respectively, were pledged to meet contractual obligations under derivative contracts and short-term borrowings, of which $793 million and $473 million, respectively, may be sold, pledged or rehypothecated by the counterparty.

As of September 30, 2017 and December 31, 2016, fixed maturity securities comprised approximately 85% and 86%, respectively, of Ameriprise Financial investments. Rating agency designations are based on the availability of ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”), including Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings Ltd. (“Fitch”). The Company uses the median of available ratings from Moody’s, S&P and Fitch, or, if fewer than three ratings are available, the lower rating is used. When ratings from Moody’s, S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. As of both September 30, 2017 and December 31, 2016, the Company’s internal analysts rated $1.1 billion of securities using criteria similar to those used by NRSROs.

A summary of fixed maturity securities by rating was as follows:



Ratings	September 30, 2017						December 31, 2016
Ratings	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	10,444	$	10,528	34	%	$	9,252	$	9,305	31	%
AA	1,914		2,132		7		1,729		1,906		6
A	4,986		5,453		18		5,157		5,567		18
BBB	10,745		11,435		37		11,739		12,340		40
Below investment grade ⁽¹⁾	1,220		1,259		4		1,585		1,579		5
Total fixed maturities	$	29,309	$	30,807	100	%	$	29,462	$	30,697	100	%


⁽¹⁾	The amortized cost and fair value of below investment grade securities includes interest in CLOs managed by the Company of $6 million and $11 million, respectively, at September 30, 2017, and $9 million and $14 million, respectively, at December 31, 2016. These securities are not rated but are included in below investment grade due to their risk characteristics.

As of September 30, 2017 and December 31, 2016, approximately 41% and 47%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities. No holdings of any other issuer were greater than 10% of total equity.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The following tables provide information about Available-for-Sale securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position:



Description of Securities	September 30, 2017
	Less than 12 months						12 months or more						Total
	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	106	$	1,151	$	(7	)	34	$	325	$	(16	)	140	$	1,476	$	(23	)
Residential mortgage backed securities	113	1,901		(16		)	109	993		(13		)	222	2,894		(29		)
Commercial mortgage backed securities	90	1,391		(21		)	19	210		(6		)	109	1,601		(27		)
Asset backed securities	33	398		(2		)	16	105		(2		)	49	503		(4		)
State and municipal obligations	89	176		(1		)	16	142		(9		)	105	318		(10		)
Foreign government bonds and obligations	6	19		—			14	21		(5		)	20	40		(5		)
Common stocks	—	—		—			3	1		(1		)	3	1		(1		)
Total	437	$	5,036	$	(47	)	211	$	1,797	$	(52	)	648	$	6,833	$	(99	)



Description of Securities	December 31, 2016
	Less than 12 months						12 months or more						Total
	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	187	$	2,452	$	(33	)	38	$	377	$	(27	)	225	$	2,829	$	(60	)
Residential mortgage backed securities	127	2,533		(33		)	177	1,290		(34		)	304	3,823		(67		)
Commercial mortgage backed securities	100	1,583		(39		)	5	43		—			105	1,626		(39		)
Asset backed securities	48	524		(9		)	27	298		(7		)	75	822		(16		)
State and municipal obligations	181	374		(14		)	3	110		(21		)	184	484		(35		)
Foreign government bonds and obligations	7	30		(1		)	15	23		(6		)	22	53		(7		)
Common stocks	—	—		—			3	1		(1		)	3	1		(1		)
Total	650	$	7,496	$	(129	)	268	$	2,142	$	(96	)	918	$	9,638	$	(225	)

As part of Ameriprise Financial’s ongoing monitoring process, management determined that the change in gross unrealized losses on its Available-for-Sale securities is attributable to a decline in interest rates on the long end of the interest rate curve and tighter credit spreads.

The following table presents a rollforward of the cumulative amounts recognized in the Consolidated Statements of Operations for other-than-temporary impairments related to credit losses on Available-for-Sale securities for which a portion of the securities’ total other-than-temporary impairments was recognized in other comprehensive income (loss) (“OCI”):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017			2016
	(in millions)
Beginning balance	$	2	$	81	$	69		$	85
Credit losses for which an other-than-temporary impairment was not previously recognized	—		—		—			1
Credit losses for which an other-than-temporary impairment was previously recognized	—		—		1			—
Reductions for securities sold during the period (realized)	—		—		(68		)	(5		)
Ending balance	$	2	$	81	$	2		$	81

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Net realized gains and losses on Available-for-Sale securities, determined using the specific identification method, recognized in earnings were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(in millions)
Gross realized gains	$	6		$	10		$	50		$	24
Gross realized losses	(2		)	(3		)	(6		)	(12		)
Other-than-temporary impairments	—			—			(1		)	(1		)
Total	$	4		$	7		$	43		$	11

Other-than-temporary impairments for the nine months ended September 30, 2017 and 2016 primarily related to credit losses on asset backed securities.

See Note 13 for a rollforward of net unrealized investment gains (losses) included in AOCI.

Available-for-Sale securities by contractual maturity as of September 30, 2017 were as follows:



	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	2,311	$	2,340
Due after one year through five years	6,562		6,820
Due after five years through 10 years	3,852		4,010
Due after 10 years	4,316		5,249
	17,041		18,419
Residential mortgage backed securities	6,740		6,790
Commercial mortgage backed securities	3,917		3,952
Asset backed securities	1,611		1,646
Common stocks	9		19
Total	$	29,318	$	30,826

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage backed securities, commercial mortgage backed securities and asset backed securities are not due at a single maturity date. As such, these securities, as well as common stocks, were not included in the maturities distribution.

5. Financing Receivables

The Company’s financing receivables include commercial mortgage loans, syndicated loans, consumer loans, policy loans, certificate loans and margin loans. Commercial mortgage loans, syndicated loans, consumer loans, policy loans and certificate loans are reflected in investments. Margin loans are recorded in receivables.

Allowance for Loan Losses

Policy and certificate loans do not exceed the cash surrender value at origination. As there is minimal risk of loss related to policy and certificate loans, the Company does not record an allowance for loan losses. The Company monitors collateral supporting margin loans and requests additional collateral when necessary in order to mitigate the risk of loss. As there is minimal risk of loss related to margin loans, the allowance for loan losses is immaterial.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The following table presents a rollforward of the allowance for loan losses for the nine months ended and the ending balance of the allowance for loan losses by impairment method:



	September 30,
	2017		2016
	(in millions)
Beginning balance	$	29