AMERIPRISE FINANCIAL INC - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

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

For the Quarterly Period Ended

September 30, 2020

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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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock (par value $.01 per share)

AMP

New York Stock Exchange

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

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☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller reporting company

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Emerging growth company

☐


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.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

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 30, 2020

Common Stock (par value $.01 per share)

117,977,834 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, 2020 and 2019		3
	Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, 2020 and 2019		4
	Consolidated Balance Sheets — September 30, 2020 and December 31, 2019		5
	Consolidated Statements of Equity — Three months and nine months ended September 30, 2020 and 2019		6
	Consolidated Statements of Cash Flows — Nine months ended September 30, 2020 and 2019		7
	Notes to Consolidated Financial Statements
	1.	Basis of Presentation	9
	2.	Summary of Significant Accounting Policies	9
	3.	Recent Accounting Pronouncements	13
	4.	Revenue from Contracts with Customers	16
	5.	Variable Interest Entities	21
	6.	Investments	26
	7.	Financing Receivables	30
	8.	Deferred Acquisition Costs and Deferred Sales Inducement Costs	33
	9.	Policyholder Account Balances, Future Policy Benefits and Claims and Separate Account Liabilities	34
	10.	Variable Annuity and Insurance Guarantees	35
	11.	Debt	36
	12.	Fair Values of Assets and Liabilities	37
	13.	Offsetting Assets and Liabilities	48
	14.	Derivatives and Hedging Activities	50
	15.	Shareholders’ Equity	54
	16.	Income Taxes	56
	17.	Contingencies	57
	18.	Earnings per Share	58
	19.	Segment Information	59
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			61
Item 3. Quantitative and Qualitative Disclosures About Market Risk			95
Item 4. Controls and Procedures			95

Part II. Other Information			96
Item 1. Legal Proceedings			96
Item 1A. Risk Factors			96
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			97
Item 6. Exhibits			98
Signatures			99

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,
	2020		2019		2020		2019
	(in millions, except per share amounts)
Revenues
Management and financial advice fees	$	1,893	$	1,794	$	5,365	$	5,153
Distribution fees	400		480		1,239		1,450
Net investment income	300		356		933		1,121
Premiums	80		374		249		1,121
Other revenues	340		347		983		941
Total revenues	3,013		3,351		8,769		9,786
Banking and deposit interest expense	10		34		53		106
Total net revenues	3,003		3,317		8,716		9,680
Expenses
Distribution expenses	1,028		971		2,963		2,819
Interest credited to fixed accounts	170		127		523		517
Benefits, claims, losses and settlement expenses	1,104		594		824		1,848
Amortization of deferred acquisition costs	85		112		349		186
Interest and debt expense	37		52		124		164
General and administrative expense	763		820		2,292		2,448
Total expenses	3,187		2,676		7,075		7,982
Pretax income (loss)	(184)		641		1,641		1,698
Income tax provision (benefit)	(44)		98		284		268
Net income (loss)	$	(140)	$	543	$	1,357	$	1,430

Earnings per share
Basic	$	(1.14)	$	4.09	$	10.87	$	10.53
Diluted	$	(1.14)	$	4.04	$	10.73	$	10.40

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,
	2020		2019		2020		2019
	(in millions)
Net income (loss)	$	(140)	$	543	$	1,357	$	1,430
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	27		(22)		(14)		(31)
Net unrealized gains (losses) on securities	95		90		268		660
Net unrealized gains (losses) on derivatives	—		—		—		(1)


Total other comprehensive income (loss), net of tax	122		68		254		628
Total comprehensive income (loss)	$	(18)	$	611	$	1,611	$	2,058

See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	September 30, 2020		December 31, 2019
	(in millions, except share amounts)
Assets
Cash and cash equivalents	$	7,441	$	3,709
Cash of consolidated investment entities	227		118
Investments (net of allowance for credit losses: 2020, $56; 2019, $24(1) )	40,737		37,915
Investments of consolidated investment entities, at fair value	1,903		1,606
Separate account assets	86,128		87,488
Receivables (net of allowance for credit losses: 2020, $46; 2019, $39)	7,383		7,202
Receivables of consolidated investment entities, at fair value	9		8
Deferred acquisition costs	2,450		2,698
Restricted and segregated cash, cash equivalents and investments	2,551		2,386
Other assets	9,858		8,698
Total assets	$	158,687	$	151,828

Liabilities and Equity
Liabilities:
Policyholder account balances, future policy benefits and claims	$	34,020	$	30,512
Separate account liabilities	86,128		87,488
Customer deposits	16,818		14,430
Short-term borrowings	200		201
Long-term debt	2,833		3,097
Debt of consolidated investment entities, at fair value	1,901		1,628
Accounts payable and accrued expenses	1,770		1,884
Other liabilities	8,730		6,775
Other liabilities of consolidated investment entities, at fair value	220		84
Total liabilities	152,620		146,099
Equity:
Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 331,440,683 and 329,842,827, respectively)	3		3
Additional paid-in capital	8,677		8,461
Retained earnings	15,241		14,279
Treasury shares, at cost (212,809,074 and 205,903,593 shares, respectively)	(18,370)		(17,276)
Accumulated other comprehensive income (loss), net of tax	516		262
Total equity	6,067		5,729
Total liabilities and equity	$	158,687	$	151,828

(1) Prior to January 1, 2020, the allowance for credit losses is not applicable to Available-for-Sale securities. See Notes 2, 3, 6 and 7 for more information.

See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)


	Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Retained Earnings		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Total
	(in millions, except per share data)
Balances at July 1, 2019	131,292,759	$	3	$	8,337	$	13,530	$	(16,109)	$	269	$	6,030

Comprehensive income:
Net income	—	—		—		543		—		—		543
Other comprehensive loss, net of tax	—	—		—		—		—		68		68
Total comprehensive income												611
Dividends to shareholders	—	—		—		(129)		—		—		(129)
Repurchase of common shares	(4,145,672)	—		—		—		(570)		—		(570)
Share-based compensation plans	258,009	—		55		—		—		—		55
Balances at September 30, 2019	127,405,096	$	3	$	8,392	$	13,944	$	(16,679)	$	337	$	5,997

Balances at July 1, 2020	120,607,501	$	3	$	8,622	$	15,510	$	(18,029)	$	394	$	6,500
Cumulative effect of adoption of current expected credit losses guidance	—	—		—		—		—		—		—
Comprehensive income:
Net income (loss)	—	—		—		(140)		—		—		(140)
Other comprehensive income, net of tax	—	—		—		—		—		122		122
Total comprehensive income (loss)												(18)
Dividends to shareholders	—	—		—		(129)		—		—		(129)
Repurchase of common shares	(2,215,753)	—		—		—		(341)		—		(341)
Share-based compensation plans	239,861	—		55		—		—		—		55
Balances at September 30, 2020	118,631,609	$	3	$	8,677	$	15,241	$	(18,370)	$	516	$	6,067

Balances at January 1, 2019	136,330,747	$	3	$	8,260	$	12,909	$	(15,293)	$	(291)	$	5,588
Cumulative effect of adoption of premium amortization on purchased callable debt securities guidance	—	—		—		(5)		—		—		(5)
Comprehensive income:
Net income	—	—		—		1,430		—		—		1,430
Other comprehensive loss, net of tax	—	—		—		—		—		628		628
Total comprehensive income												2,058
Dividends to shareholders	—	—		—		(390)		—		—		(390)
Repurchase of common shares	(10,597,948)	—		—		—		(1,442)		—		(1,442)
Share-based compensation plans	1,672,297	—		132		—		56		—		188
Balances at September 30, 2019	127,405,096	$	3	$	8,392	$	13,944	$	(16,679)	$	337	$	5,997

Balances at January 1, 2020	123,939,234	$	3	$	8,461	$	14,279	$	(17,276)	$	262	$	5,729
Cumulative effect of adoption of current expected credit losses guidance	—	—		—		(9)		—		—		(9)
Comprehensive income:
Net income	—	—		—		1,357		—		—		1,357
Other comprehensive income, net of tax	—	—		—		—		—		254		254
Total comprehensive income												1,611
Dividends to shareholders	—	—		—		(386)		—		—		(386)
Repurchase of common shares	(7,392,430)	—		—		—		(1,135)		—		(1,135)
Share-based compensation plans	2,084,805	—		216		—		41		—		257
Balances at September 30, 2020	118,631,609	$	3	$	8,677	$	15,241	$	(18,370)	$	516	$	6,067
See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended September 30,
	2020		2019
	(in millions)
Cash Flows from Operating Activities
Net income	$	1,357	$	1,430
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion, net	150		132
Deferred income tax expense (benefit)	198		(239)
Share-based compensation	107		100
Net realized investment (gains) losses	(14)		(15)
Net trading (gains) losses	(9)		(8)
Loss from equity method investments	58		54
Impairments and provision for loan losses	19		20
Net (gains) losses of consolidated investment entities	(7)		8
Changes in operating assets and liabilities:
Restricted and segregated investments	—		124
Deferred acquisition costs	187		(40)
Policyholder account balances, future policy benefits and claims, net	3,252		1,068
Derivatives, net of collateral	265		71
Receivables	(216)		205
Brokerage deposits	205		(492)
Accounts payable and accrued expenses	(94)		(43)
Current income tax expense (benefit)	(100)		57
Other operating assets and liabilities of consolidated investment entities, net	20		(12)
Other, net	261		154
Net cash provided by (used in) operating activities	5,639		2,574

Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	1,690		219
Maturities, sinking fund payments and calls	6,568		6,107
Purchases	(10,197)		(7,508)
Proceeds from sales, maturities and repayments of mortgage loans	146		188
Funding of mortgage loans	(147)		(197)
Proceeds from sales, maturities and collections of other investments	139		215
Purchase of other investments	(219)		(227)
Purchase of investments by consolidated investment entities	(679)		(524)
Proceeds from sales, maturities and repayments of investments by consolidated investment entities	454		521
Purchase of land, buildings, equipment and software	(107)		(100)
Cash paid for written options with deferred premiums	(292)		(124)
Cash received from written options with deferred premiums	129		71
Cash paid for deposit receivable	(3)		(348)
Cash received for deposit receivable	74		74
Other, net	23		(103)
Net cash provided by (used in) investing activities	$	(2,421)	$	(1,736)
See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
	Nine Months Ended September 30,
	2020		2019
	(in millions)
Cash Flows from Financing Activities
Investment certificates:
Proceeds from additions	$	3,428	$	4,029
Maturities, withdrawals and cash surrenders	(3,780)		(4,184)
Policyholder account balances:
Deposits and other additions	1,202		1,620
Net transfers from (to) separate accounts	(63)		(46)
Surrenders and other benefits	(1,035)		(1,320)
Change in banking deposits, net	2,532		2,543
Cash paid for purchased options with deferred premiums	(177)		(158)
Cash received from purchased options with deferred premiums	40		220
Issuance of long-term debt	494		497
Repayments of long-term debt	(760)		(310)
Dividends paid to shareholders	(375)		(380)
Repurchase of common shares	(1,036)		(1,392)
Exercise of stock options	2		2
Borrowings by consolidated investment entities	382		—
Repayments of debt by consolidated investment entities	(55)		(57)
Other, net	(6)		—
Net cash provided by (used in) financing activities	793		1,064
Effect of exchange rate changes on cash	(5)		(15)
Net increase (decrease) in cash and cash equivalents, including amounts restricted and cash balances classified as assets held-for-sale	4,006		1,887
Less: Net change in cash balances classified as assets held for sale	—		204
Net increase (decrease) in cash and cash equivalents, including amounts restricted	4,006		1,683
Cash and cash equivalents, including amounts restricted, at beginning of period	6,213		5,883
Cash and cash equivalents, including amounts restricted, at end of period	$	10,219	$	7,566

Supplemental Disclosures:
Interest paid excluding consolidated investment entities	$	136	$	209
Interest paid by consolidated investment entities	45		64
Income taxes paid, net	116		345
Leased assets obtained in exchange for finance lease liabilities	—		13
Leased assets obtained in exchange for operating lease liabilities	68		30
Non-cash investing activity:
Partnership commitments not yet remitted	4		4
Investments transferred in connection with reinsurance transaction	—		1,265

	September 30, 2020		December 31, 2019
	(in millions)
Reconciliation of cash and cash equivalents, including amounts restricted:
Cash and cash equivalents	$	7,441	$	3,709
Cash of consolidated investment entities	227		118
Restricted and segregated cash, cash equivalents and investments	2,551		2,386

Total cash and cash equivalents including amounts restricted per consolidated statements of cash flows	$	10,219	$	6,213
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 Singapore (Pte.) Ltd and their respective subsidiaries (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.

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. All adjustments made were of a normal recurring nature.

Changes to the Company’s reportable segments have been made as further discussed in Note 19. Certain prior period amounts have been revised to conform to current period presentation. These changes have no impact on previously reported consolidated balance sheets or statements of operations, comprehensive income, stockholders equity, or cash flows.

In the first quarter of 2020, the Company recorded an out-of-period correction of $19 million to management and financial advice fees related to performance fees. The impact of the correction was not material to the prior period financial statements.

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, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2020 (“2019 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. Summary of Significant Accounting Policies

The Company adopted accounting standard, Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments, on January 1, 2020. The significant accounting policies for Available-for-Sale Securities, Financing Receivables, and Reinsurance were updated as a result of adopting the new accounting standard. Refer to Note 3 for further details of the adoption.

Available-for-Sale Securities

Available-for-Sale securities are carried at fair value with unrealized gains (losses) recorded in accumulated other comprehensive income (“AOCI”), net of impacts to deferred acquisition costs (“DAC”), deferred sales inducement costs (“DSIC”), unearned revenue, benefit reserves, reinsurance recoverables and income taxes. Available-for-Sale securities are recorded within investments on the Consolidated Balance Sheets. Gains and losses are recognized on a trade date basis in the Consolidated Statements of Operations upon disposition of the securities.

Available-for-Sale securities are impaired when the fair value of an investment is less than its amortized cost. When an Available-for-Sale security is impaired, the Company first assesses whether or not: (i) it has the intent to sell the security (made a decision to sell) or (ii) it is more likely than not that the Company will be required to sell the security before its anticipated recovery. If either of these conditions exist, the Company recognizes an impairment by reducing the book value of the security for the difference between the investment’s amortized cost and its fair value with a corresponding charge to earnings. Subsequent increases in the fair value of Available-for-Sale securities that occur in periods after a write-down has occurred are recorded as unrealized gains in other comprehensive income (“OCI”), while subsequent decreases in fair value would continue to be recorded as reductions of book value with a charge to earnings.

For securities that do not meet the above criteria, the Company determines whether the decrease in fair value is due to a credit loss or due to other factors. The amount of impairment due to credit-related factors, if any, is recognized as an allowance for credit losses with a related charge to net investment income. The allowance for credit losses is limited to the amount by which the security’s amortized cost basis exceeds its fair value. The amount of the impairment related to other factors is recognized in OCI. Factors the Company considers in determining whether declines in the fair value of fixed maturity securities are due to credit-related factors include: (i) the extent to which the market value is below amortized cost; (ii) fundamental analysis of the liquidity, business prospects and overall financial condition of the issuer; and (iii) market events that could impact credit ratings, economic and business climate, litigation and government actions, and similar external business factors.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

If through subsequent evaluation there is a sustained increase in cash flows expected, both the allowance and related charge to earnings may be reversed to reflect the increase in expected principal and interest payments. However, for Available-for-Sale securities that recognized an impairment prior to January 1, 2020 by reducing the book value of the security, the difference between the new amortized cost basis and the improved cash flows expected to be collected is accreted as interest income.

In order to determine the amount of the credit loss component for corporate debt securities, a best estimate of the present value of cash flows expected to be collected discounted at the security’s effective interest rate is compared to the amortized cost basis of the security. The significant inputs to cash flow projections consider potential debt restructuring terms, projected cash flows available to pay creditors and the Company’s position in the debtor’s overall capital structure. When assessing potential credit-related impairments for structured investments (e.g., residential mortgage backed securities, commercial mortgage backed securities, asset backed securities and other structured investments), the Company also considers credit-related factors such as overall deal structure and its position within the structure, quality of underlying collateral, delinquencies and defaults, loss severities, recoveries, prepayments and cumulative loss projections.

Management has elected to exclude accrued interest in its measurement of the allowance for credit losses for Available-for-Sale securities. Accrued interest on Available-for-sale securities is recorded as earned in receivables on the Consolidated Balance Sheets. Available-for-Sale securities are placed on nonaccrual status when the accrued balance becomes 90 days past due or earlier based on management’s evaluation of the facts and circumstances of each security under review. At this time all previously accrued interest is reversed through net investment income.

Financing Receivables

Financing receivables are comprised of commercial loans, consumer loans, and deposit receivables.

Commercial Loans

Commercial loans include commercial mortgage loans, syndicated loans, and advisor loans and are recorded at amortized cost less the allowance for loan losses. Commercial mortgage loans and syndicated loans are recorded within investments on the Consolidated Balance Sheets. Advisor loans are recorded within receivables on the Consolidated Balance Sheets. Commercial mortgage loans are loans on commercial properties that are originated by the Company. Syndicated loans represent the Company’s investment in loan syndications originated by unrelated third parties. The Company offers loans to financial advisors primarily for recruiting, transitional cost assistance and retention purposes. These advisor loans are generally repaid over a five- to ten-year period. If the financial advisor is no longer affiliated with the Company, any unpaid balance of such loan becomes immediately due.

Interest income is accrued as earned on the unpaid principal balances of the loans. Interest income recognized on commercial mortgage loans and syndicated loans is recorded in net investment income on the Consolidated Statements of Operations. Interest income recognized on advisor loans is recorded in other revenues on the Consolidated Statements of Operations.

Consumer Loans

Consumer loans consist of credit card receivables, policy loans, and brokerage margin loans and are recorded at amortized cost less the allowance for loan losses. Credit card receivables and policy loans are recorded within investments on the Consolidated Balance Sheets. Brokerage margin loans are recorded within receivables on the Consolidated Balance Sheets. Credit card receivables are related to Ameriprise-branded credit cards issued to the Company’s customers by a third party. When originated, policy loan balances do not exceed the cash surrender value of the underlying products. As there is minimal risk of loss related to policy loans, the Company does not record an allowance for loan losses. The Company’s broker dealer subsidiaries enter into lending arrangements with clients through the normal course of business, which are primarily based on customer margin levels.

Interest income is accrued as earned on the unpaid principal balances of the loans. Interest income recognized on consumer loans is recorded in net investment income on the Consolidated Statements of Operations.

Deposit Receivable

For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability related to insurance risk in accordance with applicable accounting standards. If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Reinsurance deposits made are included in receivables. As amounts are received, consistent with the underlying contracts, the deposit receivable is adjusted. The deposit receivable is accreted using the interest method and the accretion is reported in other revenues.

See Note 7 for additional information on financing receivables.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Allowance for Credit Losses

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected over the asset’s expected life, considering past events, current conditions and reasonable and supportable forecasts of future economic conditions. Prior to January 1, 2020, the allowance for credit losses was based on an incurred loss model that did not require estimating expected credit losses over the expected life of the asset. Estimates of expected credit losses consider both historical charge-off and recovery experience as well as management’s expectation of future charge-off and recovery levels. Expected losses related to risks other than credit risk are excluded from the allowance for credit losses. The allowance for credit losses is measured and recorded upon initial recognition of the loan, regardless of whether it is originated or purchased. The methods and information used to develop the allowance for credit losses for each class of financing receivable are discussed below.

Commercial Loans

The allowance for credit losses for commercial mortgage loans and syndicated loans utilizes a probability of default and loss severity approach to estimate lifetime expected credit losses. Actual historical default and loss severity data for each type of commercial loan is adjusted for current conditions and reasonable and supportable forecasts of future economic conditions to develop the probability of default and loss severity assumptions that are applied to the amortized cost basis of the loans over the expected life of each portfolio. The allowance for credit losses on commercial mortgage loans and syndicated loans is recorded through provisions charged to net investment income and is reduced/increased by net charge-offs/recoveries.

Management determines the adequacy of the allowance for credit losses based on the overall loan portfolio composition, recent and historical loss experience, and other pertinent factors, including when applicable, internal risk ratings, loan-to-value (“LTV”) ratios and occupancy rates, along with reasonable and supportable forecasts of economic and market conditions. This evaluation is inherently subjective as it requires estimates, which may be susceptible to significant change. While the Company may attribute portions of the allowance to specific loan pools as part of the allowance estimation process, the entire allowance is available to absorb losses expected over the life of the loan portfolio.

When determining the allowance for credit losses for advisor loans, the Company considers its actual historical collection experience and advisor termination experience as well as other factors including amounts due at termination, the reasons for the terminated relationship, length of time since termination, and the former financial advisor’s overall financial position. Management uses its best estimate of future termination and collection rates to estimate expected credit losses over the expected life of the loans. The allowance for credit losses on advisor loans is recorded in distribution expenses.

Consumer Loans

The allowance for loan losses for credit card receivables is based on a model that projects the Company’s receivable exposure over the expected life of the loans using cohorts based on the age of the receivable, geographic location, and credit scores. The model utilizes industry data to derive probability of default and loss given default assumptions, adjusted for current and future economic conditions. Management evaluates actual historical charge-off experience and monitors risk factors including FICO scores and past-due status within the credit card portfolio to ensure the allowance for loan losses based on industry data appropriately reserves for risks specific to the Company’s portfolio. The allowance for credit losses for credit card receivables is recorded in net investment income.

The Company monitors the market value of collateral supporting the margin loans and requests additional collateral when necessary in order to mitigate the risk of loss. Due to these ongoing monitoring procedures, the allowance for credit losses is only measured for the margin loan balances that are uncollateralized at the balance sheet date.

Policy loans do not exceed the cash surrender value at origination. As there is minimal risk of loss related to policy loans, there is no allowance for credit losses.

Deposit receivable

The allowance for credit losses is calculated on an individual reinsurer basis. The deposit receivable is collateralized by an underlying trust arrangement. Management evaluates the terms of the reinsurance and trust agreements, the nature of the underlying assets, and the potential for changes in the collateral value when considering the need for an allowance for credit losses.

Nonaccrual Loans

Commercial mortgage loans and syndicated loans are placed on nonaccrual status when either the collection of interest or principal has become 90 days past due or is otherwise considered doubtful of collection. Advisor loans are placed on nonaccrual status upon the advisor’s termination. When a loan is placed on nonaccrual status, unpaid accrued interest is reversed. Interest payments received on loans on nonaccrual status are generally applied to principal unless the remaining principal balance has been determined to be fully collectible. Management has elected to exclude accrued interest in its measurement of the allowance for credit losses for commercial mortgage loans, syndicated loans, and consumer loans.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Restructured Loans

A loan is classified as a restructured loan when the Company makes certain concessionary modifications to contractual terms for borrowers experiencing financial difficulties. When the interest rate, minimum payments, and/or due dates have been modified in an attempt to make the loan more affordable to a borrower experiencing financial difficulties, the modification is considered a troubled debt restructuring. Modifications to loan terms do not automatically result in troubled debt restructurings (“TDRs”). Per the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus, modifications made on a good faith basis in response to the coronavirus disease 2019 (“COVID-19”) pandemic to borrowers who were not more than 30 days past due as of December 31, 2019, such as payment deferrals, extensions of repayment terms, fee waivers, or delays in payment that are not significant to the unpaid principal value of the loan, are not considered TDRs. Generally, performance prior to the restructuring or significant events that coincide with the restructuring are considered in assessing whether the borrower can meet the new terms which may result in the loan being returned to accrual status at the time of the restructuring or after a performance period. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, the loan remains on nonaccrual status.

Charge-off and Foreclosure

Commercial Loans

Charge-offs are recorded when the Company concludes that all or a portion of the commercial mortgage loan or syndicated loan is uncollectible. Factors used by the Company to determine whether all amounts due on commercial mortgage loans will be collected, include but are not limited to, the financial condition of the borrower, performance of the underlying properties, collateral and/or guarantees on the loan, and the borrower’s estimated future ability to pay based on property type and geographic location. Factors used by the Company to determine whether all amounts due on syndicated loans will be collected, include but are not limited to the borrower’s financial condition, industry outlook, and internal risk ratings based on rating agency data and internal analyst expectations.

If it is determined that foreclosure on a commercial mortgage loan is probable and the fair value is less than the current loan balance, expected credit losses are measured as the difference between the amortized cost basis of the asset and fair value less estimated selling costs. Upon foreclosure, the commercial mortgage loan and related allowance are reversed, and the foreclosed property is recorded as real estate owned in other assets.

Concerns regarding the recoverability of loans to advisors primarily arise in the event that the financial advisor is no longer affiliated with the Company. When the review of these factors indicates that further collection activity is highly unlikely, the outstanding balance of the loan is written-off and the related allowance is reduced.

Consumer Loans

Credit card receivables are not placed on nonaccrual status at 90 days past due, however, are fully charged off upon reaching 180 days past due.

Reinsurance

Policyholder account balances, future policy benefits and claims recoverable under reinsurance contracts are recorded within receivables, net of the allowance for credit losses. The Company evaluates the financial condition of its reinsurers prior to entering into new reinsurance contracts and on a periodic basis during the contract term. The allowance for credit losses related to reinsurance recoverable is based on applying observable industry data including insurer ratings, default and loss severity data to the Company’s reinsurance recoverable balances. Management evaluates the results of the calculation and considers differences between the industry data and the Company’s data. Such differences include the fact the Company has no actual history of losses and the fact that industry data may contain non-life insurers. This evaluation is inherently subjective as it requires estimates, which may be susceptible to significant change given the long-term nature of these receivables. In addition, the Company has a reinsurance protection agreement that provides credit protections for its reinsured long term care business. The allowance for credit losses on reinsurance recoverable is recorded through provisions charged to benefits, claims, losses and settlement expenses on the Consolidated Statements of Operations.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. Recent Accounting Pronouncements

Adoption of New Accounting Standards

Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to disclosures for fair value measurements. The update eliminates the following disclosures: 1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) the policy of timing of transfers between levels of the fair value hierarchy, and 3) the valuation processes for Level 3 fair value measurements. The new disclosures include changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements of instruments held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated. The new disclosures are required on a prospective basis; all other provisions should be applied retrospectively. The update is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted for the entire standard or only the provisions to eliminate or modify disclosure requirements. The Company early adopted the provisions of the standard to eliminate or modify disclosure requirements in the fourth quarter of 2018. The Company adopted the provisions of the standard to include new disclosures on January 1, 2020. The update does not have an impact on the Company’s consolidated results of operations or financial condition. See Note 12 for additional disclosures on fair value measurements.

Intangibles – Goodwill and Other – Internal-Use Software – Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

In August 2018, the FASB updated the accounting standards related to customer’s accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. The update requires implementation costs for a CCA to be evaluated for capitalization using the same approach as implementation costs associated with internal-use software. The update also addresses presentation, measurement and impairment of capitalized implementation costs in a CCA that is a service contract. The update requires new disclosures on the nature of hosting arrangements that are service contracts, significant judgements made when applying the guidance and quantitative disclosures, including amounts capitalized, amortized and impaired. The update is effective for interim and annual periods beginning after December 15, 2019, and can be applied either prospectively or retrospectively. The Company adopted the standard using a prospective approach on January 1, 2020. The adoption of this update did not 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 Company adopted the standard on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated results of operations or financial condition.

Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments

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. At adoption, the initial estimate of the expected credit losses will be recorded through retained earnings 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 credit loss model for Available-for-Sale debt securities did 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. 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 interests, and financial assets purchased with a more-than-insignificant amount of credit deterioration since origination. The Company adopted the standard on January 1, 2020. The adoption of this update did not have a material impact on the Company’s consolidated results of operations or 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 requires 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 standard was effective for interim and annual periods beginning after December 15, 2018. Entities had the option to adopt the standard using a modified retrospective approach at either the beginning of the earliest period presented or as of the date of adoption. The Company adopted the standard using a modified retrospective approach as of January 1, 2019. The Company also elected the package of practical expedients permitted under the transition guidance within the accounting standard that allows entities to carryforward their

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

historical lease classification and to not reassess contracts for embedded leases among other things. The Company recorded a right-of-use asset of $274 million and a corresponding lease liability of $295 million substantially related to real estate leases. The amount the lease liability exceeds the right-of-use asset primarily reflects lease incentives recorded as a reduction of the right-of-use asset that were previously recorded as a liability. The adoption of the standard did not have other material impacts on the Company’s consolidated results of operations or financial condition.

Income Statement – Reporting Comprehensive Income – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB updated the accounting standards related to the presentation of tax effects stranded in AOCI. The update allows a reclassification from AOCI to retained earnings for tax effects stranded in AOCI resulting from the legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The election of the update was optional. The update was effective for fiscal years beginning after December 15, 2018. Entities could record the impacts either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The Company adopted the standard on January 1, 2019 and elected not to reclassify the stranded tax effects in AOCI.

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 was effective for interim and annual periods beginning after December 15, 2018, and was required to be applied on a modified retrospective basis. The Company adopted the standard on January 1, 2019. The adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.

Receivables – Nonrefundable Fees and Other Costs – 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 previous guidance, premiums were 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 was effective for interim and annual periods beginning after December 15, 2018, and was required to 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. The Company adopted the standard on January 1, 2019. The adoption did not have a material impact on the Company’s consolidated results of operations or financial condition.

Future Adoption of New Accounting Standards

Reference Rate Reform – Expedients for Contract Modifications

In March 2020, the FASB updated the accounting standards to provide optional expedients and exceptions for applying GAAP to contracts, hedging or other transactions that are affected by reference rate reform (i.e., the elimination of LIBOR). The following expedients are provided for modified contracts whose reference rate is changed: 1) receivables and debt contracts are accounted for prospectively by adjusting the effective interest rate, 2) leases are accounted for as a continuation of the existing contracts with no reassessments of the lease classification and discount rate or remeasurements of lease payments that otherwise would be required, and 3) an entity is not required to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract. When elected, the optional expedients for contract modifications must be applied consistently for all eligible contracts or eligible transactions. The Company is currently evaluating the impact of electing to adopt the standard on its consolidated results of operations and financial condition.

Income Taxes – Simplifying the Accounting for Income Taxes

In December 2019, the FASB updated the accounting standards to simplify the accounting for income taxes. The update eliminates certain exceptions to accounting principles related to intraperiod tax allocation (prospective basis), deferred tax liabilities related to outside basis differences (modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption) and year-to-date losses in interim periods (prospective basis). The update also amends existing guidance related to situations when an entity receives a step-up in the tax basis of goodwill (prospective basis), allocation of income tax expense when members of a consolidated tax filing group issue separate financial statements (retrospective basis for all periods presented), interim recognition of enactment of tax laws or rate changes (prospective basis) and franchise taxes and other taxes partially based on income (retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption). The standard is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The method of adoption is noted parenthetically after each amendment above. The adoption of the standard is not expected to have an impact on the Company’s consolidated results of operations and financial condition.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Financial Services – Insurance – Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB updated the accounting standard related to long-duration insurance contracts. The guidance revises key elements of the measurement models and disclosure requirements for long-duration insurance contracts issued by insurers and reinsurers.

The guidance establishes a significant new category of benefit features called market risk benefits that protect the contractholder from other-than-nominal capital market risk and expose the insurer to that risk. Insurers will have to measure market risk benefits at fair value. Market risk benefits include variable annuity guaranteed benefits (i.e. guaranteed minimum death, withdrawal, withdrawal for life, accumulation and income benefits). The portion of the change in fair value attributable to a change in the instrument-specific credit risk of market risk benefits in a liability position will be recorded in OCI.

Significant changes also relate to the measurement of the liability for future policy benefits for nonparticipating traditional long-duration insurance contracts and immediate annuities with a life contingent feature include the following:

•Insurers will be required to review and update the cash flow assumptions used to measure the liability for future policy benefits rather than using assumptions locked in at contract inception. The review of assumptions to measure the liability for all future policy benefits will be required annually at the same time each year, or more frequently if suggested by experience. The effect of updating assumptions will be measured on a retrospective catch-up basis and presented separate from the ongoing policyholder benefit expense in the statement of operations in the period the update is made. This new unlocking process will be required for the Company’s term and whole life insurance, disability income, long term care insurance and immediate annuities with a life contingent feature.

•The discount rate used to measure the liability for future policy benefits will be standardized. The current requirement to use a discount rate reflecting expected investment yields will change to an upper-medium grade (low credit risk) fixed income corporate instrument yield (generally interpreted as an “A” rating) reflecting the duration characteristics of the liability. Entities will be required to update the discount rate at each reporting date with the effect of discount rate changes reflected in OCI.

•The current premium deficiency test is being replaced with a net premium ratio cap of 100%. If the net premium ratio (i.e. the ratio of the present value of total expected benefits and related expenses to the present value of total expected premiums) exceeds 100%, insurers are required to recognize a loss in the statement of operations in the period. Contracts from different issue years will no longer be permitted to be grouped to determine contracts in a loss position.

In addition, the update requires DAC and DSIC relating to all long-duration contracts and most investment contracts to be amortized on a straight-line basis over the expected life of the contract independent of profit emergence. Under the new guidance, interest will not accrue to the deferred balance and DAC and DSIC will not be subject to an impairment test.

The update requires significant additional disclosures, including disaggregated rollforwards of the liability for future policy benefits, policyholder account balances, market risk benefits, DAC and DSIC, as well as qualitative and quantitative information about expected cash flows, estimates and assumptions. On November 5, 2020, the FASB released an updated ASU to defer the effective date of the standard to interim and annual periods beginning after December 15, 2022, and interim periods within those years. The standard should be applied to the liability for future policy benefits and DAC and DSIC on a modified retrospective basis and applied to market risk benefits on a retrospective basis with the option to apply full retrospective transition if certain criteria are met. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated results of operations, financial condition and disclosures.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

4. Revenue from Contracts with Customers

During the third quarter of 2020, the composition of the Company’s reportable segments changed from five to four segments. The Retirement & Protection Solutions segment includes Retirement Solutions (Variable Annuities and Payout Annuities) and Protection Solutions (Life and Disability Insurance). In addition, the Company moved the Fixed Annuities and Fixed Indexed Annuities business to the Corporate & Other segment as a closed block. Certain prior period amounts have been revised to conform to the current presentation. See Note 19 for additional information on this change.

The following tables present revenue disaggregated by segment on an adjusted operating basis with a reconciliation of segment revenues to those reported on the Consolidated Statements of Operations:


	Three Months Ended September 30, 2020
	Advice & Wealth Management		Asset Management		Retirement & Protection Solutions		Corporate & Other		Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	466	$	—	$	—	$	466	$	—	$	466
Institutional	—		122		—		—		122		—		122
Advisory fees	907		—		—		—		907		—		907
Financial planning fees	81		—		—		—		81		—		81
Transaction and other fees	89		47		14		—		150		—		150
Total management and financial advice fees	1,077		635		14		—		1,726		—		1,726

Distribution fees:
Mutual funds	186		59		—		—		245		—		245
Insurance and annuity	202		45		75		—		322		—		322
Other products	91		—		—		—		91		—		91
Total distribution fees	479		104		75		—		658		—		658

Other revenues	44		—		5		—		49		—		49
Total revenue from contracts with customers	1,600		739		94		—		2,433		—		2,433

Revenue from other sources (1)	77		—		687		132		896		27		923
Total segment gross revenues	1,677		739		781		132		3,329		27		3,356
Less: Banking and deposit interest expense	10		—		—		—		10		—		10
Total segment net revenues	1,667		739		781		132		3,319		27		3,346
Less: Intersegment revenues	219		13		110		—		342		1		343
Total net revenues	$	1,448	$	726	$	671	$	132	$	2,977	$	26	$	3,003

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Three Months Ended September 30, 2019
	Advice & Wealth Management		Asset Management		Retirement & Protection Solutions		Corporate & Other		Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	448	$	—	$	—	$	448	$	—	$	448
Institutional	—		135		—		—		135		—		135
Advisory fees	813		—		—		—		813		—		813
Financial planning fees	80		—		—		—		80		—		80
Transaction and other fees	91		48		16		—		155		—		155
Total management and financial advice fees	984		631		16		—		1,631		—		1,631

Distribution fees:
Mutual funds	183		59		—		—		242		—		242
Insurance and annuity	226		43		91		1		361		—		361
Other products	169		—		—		—		169		—		169
Total distribution fees	578		102		91		1		772		—		772

Other revenues	40		—		—		—		40		—		40
Total revenue from contracts with customers	1,602		733		107		1		2,443		—		2,443

Revenue from other sources (1)	115		8		681		450		1,254		19		1,273
Total segment gross revenues	1,717		741		788		451		3,697		19		3,716
Less: Banking and deposit interest expense	35		(1)		—		1		35		—		35
Total segment net revenues	1,682		742		788		450		3,662		19		3,681
Less: Intersegment revenues	240		13		110		(1)		362		2		364
Total net revenues	$	1,442	$	729	$	678	$	451	$	3,300	$	17	$	3,317

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Nine Months Ended September 30, 2020
	Advice & Wealth Management		Asset Management		Retirement & Protection Solutions		Corporate & Other		Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	1,330	$	—	$	—	$	1,330	$	—	$	1,330
Institutional	—		308		—		—		308		—		308
Advisory fees	2,558		—		—		—		2,558		—		2,558
Financial planning fees	248		—		—		—		248		—		248
Transaction and other fees	264		139		45		—		448		—		448
Total management and financial advice fees	3,070		1,777		45		—		4,892		—		4,892

Distribution fees:
Mutual funds	540		174		—		—		714		—		714
Insurance and annuity	606		129		266		—		1,001		—		1,001
Other products	334		—		—		—		334		—		334
Total distribution fees	1,480		303		266		—		2,049		—		2,049

Other revenues	138		2		5		3		148		—		148
Total revenue from contracts with customers	4,688		2,082		316		3		7,089		—		7,089

Revenue from other sources (1)	264		11		1,979		411		2,665		28		2,693
Total segment gross revenues	4,952		2,093		2,295		414		9,754		28		9,782
Less: Banking and deposit interest expense	53		—		—		2		55		—		55
Total segment net revenues	4,899		2,093		2,295		412		9,699		28		9,727
Less: Intersegment revenues	649		39		319		(1)		1,006		5		1,011
Total net revenues	$	4,250	$	2,054	$	1,976	$	413	$	8,693	$	23	$	8,716

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Nine Months Ended September 30, 2019
	Advice & Wealth Management		Asset Management		Retirement & Protection Solutions		Corporate & Other		Total Segments		Non-operating Revenue		Total
	(in millions)
Management and financial advice fees:
Asset management fees:
Retail	$	—	$	1,319	$	—	$	—	$	1,319	$	—	$	1,319
Institutional	—		350		—		—		350		—		350
Advisory fees	2,317		—		—		—		2,317		—		2,317
Financial planning fees	233		—		—		—		233		—		233
Transaction and other fees	266		141		47		—		454		—		454
Total management and financial advice fees	2,816		1,810		47		—		4,673		—		4,673

Distribution fees:
Mutual funds	536		176		—		—		712		—		712
Insurance and annuity	649		127		265		5		1,046		—		1,046
Other products	534		—		—		—		534		—		534
Total distribution fees	1,719		303		265		5		2,292		—		2,292

Other revenues	134		4		—		—		138		—		138
Total revenue from contracts with customers	4,669		2,117		312		5		7,103		—		7,103

Revenue from other sources (1)	326		26		2,025		1,340		3,717		21		3,738
Total segment gross revenues	4,995		2,143		2,337		1,345		10,820		21		10,841
Less: Banking and deposit interest expense	106		—		—		5		111		—		111
Total segment net revenues	4,889		2,143		2,337		1,340		10,709		21		10,730
Less: Intersegment revenues	689		40		319		(4)		1,044		6		1,050
Total net revenues	$	4,200	$	2,103	$	2,018	$	1,344	$	9,665	$	15	$	9,680

(1) Revenues not included in the scope of the revenue from contracts with customers standard. The amounts primarily consist of revenue associated with insurance and annuity products or financial instruments.

The following discussion describes the nature, timing, and uncertainty of revenues and cash flows arising from the Company’s contracts with customers on a consolidated basis.

Management and Financial Advice Fees

Asset Management Fees

The Company earns revenue for performing asset management services for retail and institutional clients. The revenue is earned based on a fixed or tiered rate applied, as a percentage, to assets under management. Assets under management vary with market fluctuations and client behavior. The asset management performance obligation is considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. Asset management fees are accrued, invoiced and collected on a monthly or quarterly basis.

The Company’s asset management contracts for Open Ended Investment Companies (“OEICs”) and unit trusts in the UK and Société d'Investissement à Capital Variable (“SICAVs”) in Europe include performance obligations for asset management and fund distribution services. The amounts received for these services are reported as management and financial advice fees. The revenue recognition pattern is the same for both performance obligations as the fund distribution services revenue is variably constrained due to factors outside the Company’s control including market volatility and client behavior (such as how long clients hold their investment) and not recognized until assets under management are known.

The Company may also earn performance-based management fees on institutional accounts, hedge funds, collateralized loan obligations (“CLOs”), OEICs, SICAVs and property and other funds based on a percentage of account returns in excess of either a benchmark index or a contractually specified level. This revenue is variable and impacted primarily by the performance of the assets

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

being managed compared to the benchmark index or contractually specified level. The revenue is not recognized until it is probable that a significant reversal will not occur. Performance-based management fees are invoiced on a quarterly or annual basis.

Advisory Fees

The Company earns revenue for performing investment advisory services for certain brokerage customer’s discretionary and non-discretionary managed accounts. The revenue is earned based on a contractual fixed rate applied, as a percentage, to the market value of assets held in the account. The investment advisory performance obligation is considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. Advisory fees are billed on a monthly basis on the prior month end assets. Prior to the fourth quarter of 2019, advisory fees were primarily based on average assets for a monthly or quarterly period.

Financial Planning Fees

The Company earns revenue for providing financial plans to its clients. The revenue earned for each financial plan is either a fixed fee (received monthly, quarterly or annually) or a variable fee (received monthly) based on a contractual fixed rate applied, as a percentage, to the prior month end assets held in a client’s investment advisory account. The financial planning fee is based on the complexity of a client’s financial and life situation and his or her advisor’s experience. The performance obligation is satisfied at the time the financial plan is delivered to the customer. The Company records a contract liability for the unearned revenue when cash is received before the plan is delivered. The financial plan contracts with clients are annual contracts. Amounts recorded as a contract liability are recognized as revenue when the financial plan is delivered, which occurs within the annual contract period.

For fixed fee arrangements, revenue is recognized when the financial plan is delivered. The Company accrues revenue for any amounts that have not been received at the time the financial plan is delivered.

For variable fee arrangements, revenue is recognized for cash that has been received when the financial plan is delivered. The amount received after the plan is delivered is variably constrained due to factors outside the Company’s control including market volatility and client behavior. The revenue is recognized when it is probable that a significant reversal will not occur that is generally each month end as the advisory account balance uncertainty is resolved.

Contract liabilities for financial planning fees, which are included in other liabilities in the Consolidated Balance Sheets, were $133 million and $143 million as of September 30, 2020 and December 31, 2019, respectively.

The Company pays sales commissions to advisors when a new financial planning contract is obtained or when an existing contract is renewed. The sales commissions paid to the advisors prior to financial plan delivery are considered costs to obtain a contract with a customer and are initially capitalized. When the performance obligation to deliver the financial plan is satisfied, the commission is recognized as distribution expense. Capitalized costs to obtain these contracts are reported in other assets in the Consolidated Balance Sheets and were $107 million and $116 million as of September 30, 2020 and December 31, 2019, respectively.

Transaction and Other Fees

The Company earns revenue for providing customer support, shareholder and administrative services (including transfer agent services) for affiliated mutual funds and networking, sub-accounting and administrative services for unaffiliated mutual funds. The Company also receives revenue for providing custodial services and account maintenance services on brokerage and retirement accounts that are not included in an advisory relationship. Transfer agent and administrative revenue is earned based on either a fixed rate applied, as a percentage, to assets under management or an annual fixed fee for each fund position. Networking and sub-accounting revenue is earned based on either an annual fixed fee for each account or an annual fixed fee for each fund position. Custodial and account maintenance revenue is generally earned based on a quarterly or annual fixed fee for each account. Each of the customer support and administrative services performance obligations are considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. Transaction and other fees (other than custodial service fees) are invoiced or charged to brokerage accounts on a monthly or quarterly basis. Custodial service fees are invoiced or charged to brokerage accounts on an annual basis. Contract liabilities for custodial service fees, which are included in other liabilities in the Consolidated Balance Sheets, were $15 million and nil as of September 30, 2020 and December 31, 2019, respectively.

The Company earns revenue for providing trade execution services to franchise advisors. The trade execution performance obligation is satisfied at the time of each trade and the revenue is primarily earned based on a fixed fee per trade. These fees are invoiced and collected on a semi-monthly basis.

Distribution Fees

Mutual Funds and Insurance and Annuity Products

The Company earns revenue for selling affiliated and unaffiliated mutual funds, fixed and variable annuities and insurance products. The performance obligation is satisfied at the time of each individual sale. A portion of the revenue is based on a fixed rate applied, as a percentage, to amounts invested at the time of sale. The remaining revenue is recognized over the time the client owns the investment or holds the contract and is generally earned based on a fixed rate applied, as a percentage, to the net asset value of the fund, or the value of the insurance policy or annuity contract. The ongoing revenue is not recognized at the time of sale because it is variably constrained due to factors outside the Company’s control including market volatility and client behavior (such as how long

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

clients hold their investment, insurance policy or annuity contract). This ongoing revenue may be recognized for many years after the initial sale. The revenue will not be recognized until it is probable that a significant reversal will not occur.

The Company earns revenue for providing unaffiliated partners an opportunity to educate the Company’s advisors or to support availability and distribution of their products on the Company’s platforms. These payments allow the outside parties to train and support the advisors, explain the features of their products and distribute marketing and educational materials, and support trading and operational systems necessary to enable the Company’s client servicing and production distribution efforts. The Company earns revenue for placing and maintaining unaffiliated fund partners and insurance companies’ products on the Company’s sales platform (subject to the Company’s due diligence standards). The revenue is primarily earned based on a fixed fee or a fixed rate applied, as a percentage, to the market value of assets invested. These performance obligations are considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. These fees are invoiced and collected on monthly basis.

Other Products

The Company earns revenue for selling unaffiliated alternative products. The performance obligation is satisfied at the time of each individual sale. A portion of the revenue is based on a fixed rate applied, as a percentage, to amounts invested at the time of sale. The remaining revenue is recognized over the time the client owns the investment and is earned generally based on a fixed rate applied, as a percentage, to the market value of the investment. The ongoing revenue is not recognized at the time of sale because it is variably constrained due to factors outside the Company’s control including market volatility and client behavior (such as how long clients hold their investment). The revenue will not be recognized until it is probable that a significant reversal will not occur.

The Company earns revenue from brokerage clients for the execution of requested trades. The performance obligation is satisfied at the time of trade execution and amounts are received on the settlement date. The revenue varies for each trade based on various factors that include the type of investment, dollar amount of the trade and how the trade is executed (online or broker assisted).

The Company earns revenue for placing clients’ deposits in its brokerage sweep program with third-party banks. The amount received from the third-party banks is impacted by short-term interest rates. The performance obligation with the financial institutions that participate in the sweep program is considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. The revenue is earned daily and settled monthly based on a rate applied, as a percentage, to the deposits placed.

Other Revenues

The Company earns revenue from fees charged to franchise advisors for providing various services the advisors need to manage and grow their practices. The primary services include: licensing of intellectual property and software, compliance supervision, insurance coverage, technology services and support, consulting and other services. The services are either provided by the Company or third- party providers. The Company controls the services provided by third parties as it has the right to direct the third parties to perform the services, is primarily responsible for performing the services and sets the prices the advisors are charged. The Company recognizes revenue for the gross amount of the fees received from the advisors. The fees are primarily collected monthly as a reduction of commission payments.

Intellectual property and software licenses, along with compliance supervision, insurance coverage, and technology services and support are primarily earned based on a monthly fixed fee. These services are considered a series of distinct services that are substantially the same and are satisfied each day over the contract term. The consulting and other services performance obligations are satisfied as the services are delivered and revenue is earned based upon the level of service requested.

Receivables

Receivables for revenue from contracts with customers are recognized when the performance obligation is satisfied and the Company has an unconditional right to the revenue. Receivables related to revenues from contracts with customers were $350 million and $400 million as of September 30, 2020 and December 31, 2019, respectively.

5. Variable Interest Entities

The Company provides asset management services to investment entities which are considered to be VIEs, such as CLOs, hedge funds and other private funds, property funds and certain non-U.S. series funds (such as OEICs and SICAVs) (collectively, “investment entities”), which are sponsored by the Company. In addition, the Company invests in structured finance entities 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. The Company has no obligation to provide financial or other support to the non-consolidated VIEs beyond its initial investment and existing future funding commitments, and the Company has not provided any other 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

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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 value of the CLO’s collateral pool 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 consolidates certain CLOs where it is the primary beneficiary and has the power to direct the activities that most significantly impact the economic performance of the CLO.

The Company’s maximum exposure to loss with respect to non-consolidated CLOs is limited to its carrying value, which was $2 million and $4 million as of September 30, 2020 and December 31, 2019, respectively. The Company classifies these investments as Available-for-Sale securities. See Note 6 for additional information on these investments.

Property Funds

The Company provides investment advice and related services to property funds some of 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 any of the property funds. 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 property funds is reflected in other investments and was $21 million and $12 million as of September 30, 2020 and December 31, 2019, respectively.

Hedge Funds and other Private Funds

The Company does not consolidate hedge funds and other private 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 and the Company does not have a significant economic interest in any fund. 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 nil as of both September 30, 2020 and December 31, 2019.

Non-U.S. Series Funds

The Company manages non-U.S. 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 investments and was $24 million and $15 million as of September 30, 2020 and December 31, 2019, 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 $202 million and $270 million as of September 30, 2020 and December 31, 2019, respectively. The Company had a $9 million and a $15 million liability recorded as of September 30, 2020 and December 31, 2019, 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 funding commitments.

Structured Investments

The Company invests in structured finance entities that 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 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 amortized cost. See Note 6 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 12 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, 2020
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	14	$	—	$	14
Common stocks	—		2		—		2

Syndicated loans	—		1,769		118		1,887
Total investments	—		1,785		118		1,903
Receivables	—		9		—		9
Total assets at fair value	$	—	$	1,794	$	118	$	1,912

Liabilities
Debt (1)	$	—	$	1,901	$	—	$	1,901
Other liabilities	—		220		—		220
Total liabilities at fair value	$	—	$	2,121	$	—	$	2,121


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Investments:
Corporate debt securities	$	—	$	8	$	—	$	8
Common stocks	1		—		—		1

Syndicated loans	—		1,454		143		1,597
Total investments	1		1,462		143		1,606
Receivables	—		8		—		8
Total assets at fair value	$	1	$	1,470	$	143	$	1,614

Liabilities
Debt (1)	$	—	$	1,628	$	—	$	1,628
Other liabilities	—		84		—		84
Total liabilities at fair value	$	—	$	1,712	$	—	$	1,712

(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 $1.9 billion and $1.7 billion as of September 30, 2020 and December 31, 2019, respectively.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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


	Syndicated Loans
	(in millions)
Balance, July 1, 2020	$	211
Total gains (losses) included in:
Net income	2		(1)

Purchases	35
Sales	(12)

Settlements	(6)
Transfers into Level 3	29
Transfers out of Level 3	(141)
Balance, September 30, 2020	$	118

Changes in unrealized gains (losses) included in income relating to assets held at September 30, 2020	$	1	(1)


	Common Stocks		Syndicated Loans
	(in millions)
Balance, July 1, 2019	$	1	$	130
Total gains (losses) included in:
Net income	—		—

Purchases	—		26


Settlements	—		(25)
Transfers into Level 3	—		81
Transfers out of Level 3	(1)		(77)
Balance, September 30, 2019	$	—	$	135

Changes in unrealized gains (losses) included in income relating to assets held at September 30, 2019	$	—	$	(1)	(1)


	Syndicated Loans
	(in millions)
Balance, January 1, 2020	$	143
Total gains (losses) included in:
Net income	(19)		(1)
Purchases	80
Sales	(27)
Settlements	(32)
Transfers into Level 3	379
Transfers out of Level 3	(406)
Balance, September 30, 2020	$	118

Changes in unrealized gains (losses) included in income relating to assets held at September 30, 2020	$	(2)	(1)


	Common Stocks		Syndicated Loans
	(in millions)
Balance, January 1, 2019	$	—	$	226
Total gains (losses) included in:
Net income	—		(1)		(1)
Purchases	—		75
Sales	—		(8)
Settlements	—		(36)
Transfers into Level 3	1		165
Transfers out of Level 3	(1)		(286)
Balance, September 30, 2019	$	—	$	135

Changes in unrealized gains (losses) included in income relating to assets held at September 30, 2019	$	—	$	(2)	(1)

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

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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.

All Level 3 measurements as of September 30, 2020 and December 31, 2019 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. See Note 12 for a description of the Company’s determination of the fair value of corporate debt securities, 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 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 and 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, 2020		December 31, 2019
	(in millions)
Syndicated loans
Unpaid principal balance	$	2,005	$	1,678
Excess unpaid principal over fair value	(118)		(81)
Fair value	$	1,887	$	1,597

Fair value of loans more than 90 days past due	$	4	$	4
Fair value of loans in nonaccrual status	22		42
Difference between fair value and unpaid principal of loans more than 90 days past due, loans in nonaccrual status or both	30		18

Debt
Unpaid principal balance	$	2,089	$	1,761
Excess unpaid principal over fair value	(188)		(133)
Carrying value (1)	$	1,901	$	1,628

During the third quarter of 2020, the Company launched a new CLO and issued debt of $394 million.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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 $20 million and $(3) million for the three months ended September 30, 2020 and 2019, 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 $7 million and $(8) million for the nine months ended September 30, 2020 and 2019, respectively.

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


	Carrying Value				Weighted Average Interest Rate
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
	(in millions)
Debt of consolidated CLOs due 2025-2031	$	1,901	$	1,628	2.1	%	3.5	%

The debt of the consolidated CLOs has both fixed and floating interest rates, which range from 0.0% to 8.9%. The interest rates on the debt of CLOs are weighted average rates based on the outstanding principal and contractual interest rates.

6. Investments

The following is a summary of Ameriprise Financial investments:


	September 30, 2020		December 31, 2019
	(in millions)
Available-for-Sale securities, at fair value (net of allowance for credit losses: 2020, $14)	$	35,959	$	33,129
Mortgage loans, net (net of allowance for credit losses: 2020, $29; 2019, $19)	2,770		2,778
Policy loans	849		868
Other investments (net of allowance for credit losses: 2020, $13; 2019, $5)	1,159		1,140
Total	$	40,737	$	37,915

Other investments primarily reflect the Company’s interests in affordable housing partnerships, trading securities, seed money investments, syndicated loans, credit card receivables and certificates of deposit with original or remaining maturities at the time of purchase of more than 90 days.

The following is a summary of net investment income:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020			2019
	(in millions)
Investment income on fixed maturities	$	275		$	349	$	887		$	1,046
Net realized gains (losses)	4		(1)	(10)		(18)		(1)	(6)
Affordable housing partnerships	(14)			(26)		(50)			(58)
Other	13			19		58			67
Consolidated investment entities	22			24		56			72
Total	$	300		$	356	$	933		$	1,121

(1) Includes the change in the allowance for credit losses of $(2) million and $(30) million for the three months and nine months ended September 30, 2020, respectively.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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


	September 30, 2020
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
	(in millions)
Corporate debt securities	$	11,402	$	1,667	$	(34)	$	(13)	$	13,022
Residential mortgage backed securities	10,071		194		(7)		—		10,258
Commercial mortgage backed securities	6,016		235		(39)		—		6,212
Asset backed securities	3,053		48		(12)		(1)		3,088
State and municipal obligations	1,091		290		(1)		—		1,380
U.S. government and agency obligations	1,680		—		—		—		1,680
Foreign government bonds and obligations	250		19		(2)		—		267
Other securities	51		1		—		—		52
Total	$	33,614	$	2,454	$	(95)	$	(14)	$	35,959


Description of Securities	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
Corporate debt securities	$	10,847	$	1,344	$	(4)	$	12,187
Residential mortgage backed securities	9,954		94		(19)		10,029
Commercial mortgage backed securities	5,473		96		(6)		5,563
Asset backed securities	1,968		42		(4)		2,006
State and municipal obligations	1,131		238		(2)		1,367
U.S. government and agency obligations	1,679		1		—		1,680
Foreign government bonds and obligations	254		19		(2)		271
Other securities	26		—		—		26
Total	$	31,332	$	1,834	$	(37)	$	33,129

As of September 30, 2020 and December 31, 2019, accrued interest of $190 million and $177 million, respectively, is excluded from the amortized cost basis of Available-for-Sale securities in the tables above and is recorded in receivables on the Consolidated Balance Sheets.

As of September 30, 2020 and December 31, 2019, investment securities with a fair value of $3.8 billion and $2.2 billion, respectively, were pledged to meet contractual obligations under derivative contracts and short-term borrowings, of which $483 million and $576 million, respectively, may be sold, pledged or rehypothecated by the counterparty.

As of September 30, 2020 and December 31, 2019, fixed maturity securities comprised approximately 88% and 87%, 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 September 30, 2020 and December 31, 2019, the Company’s internal analysts rated $706 million and $624 million, respectively, of securities using criteria similar to those used by NRSROs.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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


Ratings	September 30, 2020						December 31, 2019
	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	20,156	$	20,563	57	%	$	18,256	$	18,437	56	%
AA	1,120		1,359		4		1,113		1,304		4
A	2,905		3,459		9		3,008		3,474		10
BBB	7,841		8,923		25		8,178		9,102		28
Below investment grade (1)	1,592		1,655		5		777		812		2
Total fixed maturities	$	33,614	$	35,959	100	%	$	31,332	$	33,129	100	%

(1) The amortized cost and fair value of below investment grade securities includes interest in CLOs managed by the Company of $4 million and $2 million, respectively, as of September 30, 2020, and $5 million and $6 million, respectively, as of December 31, 2019. These securities are not rated but are included in below investment grade due to their risk characteristics.

As of September 30, 2020 and December 31, 2019, approximately 34% and 45%, respectively, of securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities. No holdings of any issuer were greater than 10% of total equity.

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, 2020
	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	76	$	817	$	(29)	16	$	24	$	(5)	92	$	841	$	(34)
Residential mortgage backed securities	93	1,677		(5)		73	434		(2)		166	2,111		(7)
Commercial mortgage backed securities	49	1,190		(24)		18	326		(15)		67	1,516		(39)
Asset backed securities	53	932		(8)		11	184		(4)		64	1,116		(12)
State and municipal obligations	4	14		(1)		1	4		—		5	18		(1)
Foreign government bonds and obligations	6	25		(1)		10	10		(1)		16	35		(2)
Total	281	$	4,655	$	(68)	129	$	982	$	(27)	410	$	5,637	$	(95)


Description of Securities	December 31, 2019
	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	13	$	66	$	(1)	23	$	173	$	(3)	36	$	239	$	(4)
Residential mortgage backed securities	150	4,328		(10)		118	1,164		(9)		268	5,492		(19)
Commercial mortgage backed securities	52	1,622		(3)		31	314		(3)		83	1,936		(6)
Asset backed securities	34	598		(3)		16	213		(1)		50	811		(4)
State and municipal obligations	5	23		—		4	57		(2)		9	80		(2)
Foreign government bonds and obligations	1	—		—		10	15		(2)		11	15		(2)
Total	255	$	6,637	$	(17)	202	$	1,936	$	(20)	457	$	8,573	$	(37)

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

As part of the Company’s ongoing monitoring process, management determined that the change in gross unrealized losses on its Available-for-Sale securities during the nine months ended September 30, 2020 is primarily attributable to wider credit spreads, partially offset by lower interest rates. Consistent with the accounting policy described in Note 2, the Company did not recognize these unrealized losses in earnings because it was determined that such losses were due to non-credit factors. The Company does not intend to sell these securities and does not believe that it is more likely than not that the Company will be required to sell these securities before the anticipated recovery of the remaining amortized cost basis. As of September 30, 2020, 81% of the total of Available-for-Sale securities with gross unrealized losses were considered investment grade.

The following tables present a rollforward of the allowance for credit losses on Available-for-Sale securities:


	Corporate Debt Securities		Asset Backed Securities		Total
	(in millions)
Balance, July 1, 2020	$	13	$	1	$	14
Additions for which credit losses were not previously recorded	—		—		—
Additional increases (decreases) on securities that had an allowance recorded in a previous period	—		—		—
Balance, September 30, 2020	$	13	$	1	$	14


	Corporate Debt Securities		Asset Backed Securities		Total
	(in millions)
Balance, January 1, 2020 (1)	$	—	$	—	$	—
Additions for which credit losses were not previously recorded	13		—		13
Additional increases (decreases) on securities that had an allowance recorded in a previous period	—		1		1
Balance, September 30, 2020	$	13	$	1	$	14

(1) Prior to January 1, 2020, credit losses on Available-for-Sale securities were not recorded in an allowance but were recorded as a reduction of the book value of the security if the security was other-than-temporarily impaired. There is no adoption impact due to the prospective transition for Available-for-Sale securities.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Gross realized investment gains	$	4	$	6	$	17	$	28
Gross realized investment losses	—		(1)		(3)		(13)
Credit losses	—		(15)		(14)		(20)
Total	$	4	$	(10)	$	—	$	(5)

Credit losses for the nine months ended September 30, 2020 primarily related to recording an allowance for credit losses on certain corporate debt securities, primarily in the oil and gas industry. The Company recognized an impairment of $5 million in the first quarter of 2019 on investments held by Ameriprise Auto & Home Insurance (“AAH”) as the Company no longer intended to hold the securities until the recovery of fair value to book value.

See Note 15 for a rollforward of net unrealized investment gains (losses) included in AOCI.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Available-for-Sale securities by contractual maturity as of September 30, 2020 were as follows:


	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	2,998	$	3,013
Due after one year through five years	4,845		5,150
Due after five years through 10 years	2,533		2,814
Due after 10 years	4,098		5,424
	14,474		16,401
Residential mortgage backed securities	10,071		10,258
Commercial mortgage backed securities	6,016		6,212
Asset backed securities	3,053		3,088
Total	$	33,614	$	35,959

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 were not included in the maturities distribution.

7. Financing Receivables

Financing receivables are comprised of commercial loans, consumer loans, and the deposit receivable. See Note 2 for information regarding the Company’s accounting policies related to financing receivables and the allowance for credit losses.

Allowance for Credit Losses

The following tables present a rollforward of the allowance for credit losses for the nine months ended September 30:


	Commercial Loans		Consumer Loans		Total
	(in millions)
Balance, December 31, 2019 (1)	$	51	$	—	$	51
Cumulative effect of adoption of current expected credit losses guidance	2		3		5
Balance, January 1, 2020	53		3		56
Provisions	16		3		19
Charge-offs	(2)		(2)		(4)

Balance, September 30, 2020	$	67	$	4	$	71

(1) Prior to January 1, 2020, the allowance for credit losses was based on an incurred loss model that did not require estimating expected credit losses over the expected life of the asset.


	Commercial Loans
	(in millions)
Balance, January 1, 2019	$	49
Provisions	6
Charge-offs	(2)

Balance, September 30, 2019	$	53

Accrued interest on commercial loans was $17 million and $14 million as of September 30, 2020 and December 31, 2019, respectively, and is recorded in receivables on the Consolidated Balance Sheets and excluded from the amortized cost basis of commercial loans.

Purchases and Sales

During the three months ended September 30, 2020 and 2019, the Company purchased $96 million and $52 million, respectively, of syndicated loans, and sold $5 million and $13 million, respectively, of syndicated loans. During the nine months ended September 30, 2020 and 2019, the Company purchased $165 million and $126 million, respectively, of syndicated loans, and sold $12 million and $40 million, respectively, of syndicated loans.

During the three months ended September 30, 2020, the Company purchased nil of residential mortgage loans. During the nine months ended September 30, 2020, the Company purchased $22 million of residential loans from a third-party originator shortly after origination. The allowance for credit losses for residential mortgage loans was not material as of September 30, 2020.

The Company has not acquired any loans with deteriorated credit quality as of the acquisition date.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Credit Quality Information

Nonperforming loans were $24 million and $25 million as of September 30, 2020 and December 31, 2019, respectively. All other loans were considered to be performing.

Commercial Loans

Commercial Mortgage Loans

The Company reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Loan-to-value ratio is the primary credit quality indicator included in this review. Total commercial mortgage loans past due were $6 million and nil as of September 30, 2020 and December 31, 2019, respectively.

Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates as necessary. Commercial mortgage loans which management has assigned its highest risk rating were less than 1% of total commercial mortgage loans as of both September 30, 2020 and December 31, 2019. Loans with the highest risk rating represent distressed loans which the Company has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. Total commercial mortgage loan modifications in 2020 due to the COVID-19 pandemic consisted of 93 loans with a total unpaid balance of $369 million. Modifications primarily consisted of short-term forbearance and interest only payments. As of September 30, 2020, there were 25 loans remaining with a total unpaid balance of $127 million. All other loans returned to their normal payment schedules.

The table below presents the amortized cost basis of commercial mortgage loans as of September 30, 2020 by year of origination and loan-to-value ratio:


Loan-to-Value Ratio	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
> 100%	$	—	$	—	$	3	$	—	$	—	$	10	$	13
80% - 100%	15		15		12		3		5		21		71
60% - 80%	82		175		27		32		55		157		528
40% - 60%	13		50		74		160		108		571		976
< 40%	7		24		81		98		65		915		1,190
Total	$	117	$	264	$	197	$	293	$	233	$	1,674	$	2,778

Loan-to-value ratio is based on income and expense data provided by borrowers at least annually and long-term capitalization rate assumptions based on property type.

In addition, the Company reviews the concentrations of credit risk by region and property type. Concentrations of credit risk of commercial mortgage loans by U.S. region were as follows:


	Loans				Percentage
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
	(in millions)
East North Central	$	259	$	239	9	%	9	%
East South Central	119		121		4		4
Middle Atlantic	186		182		7		6
Mountain	245		251		9		9
New England	55		54		2		2
Pacific	829		831		30		30
South Atlantic	707		723		26		26
West North Central	202		214		7		8
West South Central	176		182		6		6
	2,778		2,797		100	%	100	%
Less: allowance for credit losses	29		19
Total	$	2,749	$	2,778

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Concentrations of credit risk of commercial mortgage loans by property type were as follows:


	Loans				Percentage
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
	(in millions)
Apartments	$	717	$	692	26	%	25	%
Hotel	50		51		2		2
Industrial	434		429		16		15
Mixed use	88		78		3		3
Office	392		419		14		15
Retail	898		931		32		33
Other	199		197		7		7
	2,778		2,797		100	%	100	%
Less: allowance for credit losses	29		19
Total	$	2,749	$	2,778

Syndicated Loans

The recorded investment in syndicated loans as of September 30, 2020 and December 31, 2019 was $627 million and $543 million, respectively. The Company’s syndicated loan portfolio is diversified across industries and issuers. Total syndicated loans past due were $6 million and $1 million as of September 30, 2020 and December 31, 2019, respectively. The Company assigns an internal risk rating to each syndicated loan in its portfolio ranging from 1 through 5, with 5 reflecting the lowest quality.

The table below presents the amortized cost basis of syndicated loans as of September 30, 2020 by origination year and internal risk rating:


Internal Risk Rating	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
Risk 5	$	—	$	—	$	1	$	—	$	—	$	—	$	1
Risk 4	—		4		4		9		2		10		29
Risk 3	—		4		9		28		13		26		80
Risk 2	20		53		65		71		21		47		277
Risk 1	21		39		58		59		23		40		240
Total	$	41	$	100	$	137	$	167	$	59	$	123	$	627

Financial Advisor Loans

The Company offers loans to financial advisors for transitional cost assistance. Repayment of the loan is highly dependent on the retention of the financial advisor. In the event a financial advisor is no longer affiliated with the Company, any unpaid balances become immediately due. Accordingly, the primary risk factor for advisor loans is termination status. The allowance for credit losses related to loans to advisors that have terminated their relationship with the Company was $10 million as of both September 30, 2020 and December 31, 2019.

The table below presents the amortized cost basis of advisor loans as of September 30, 2020 by origination year and termination status:


Termination Status	2020		2019		2018		2017		2016		Prior		Total
	(in millions)
Active	$	124	$	141	$	104	$	130	$	86	$	95	$	680
Terminated	—		—		—		1		2		10		13
Total	$	124	$	141	$	104	$	131	$	88	$	105	$	693

Consumer Loans

Credit Card Receivables

The credit cards are co-branded with Ameriprise Financial, Inc. and issued to the Company’s customers by a third party. FICO scores and delinquency rates are the primary credit quality indicators for the credit card portfolio. Delinquency rates are measured as based on the number of days past due. Credit card receivables over 30 days past due were 1% and 2% as of September 30, 2020 and December 31, 2019, respectively.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The table below presents the amortized cost basis of credit card receivables by FICO score as of September 30, 2020:


	Total
	(in millions)
> 800	$	25
750 - 799	22
700 - 749	25
650 - 699	14
< 650	5
Total	$	91

Policy Loans

Policy loans do not exceed the cash surrender value at origination. As there is minimal risk of loss related to policy loans, there is no allowance for credit losses.

Margin Loans

The Company monitors collateral supporting margin loans and requests additional collateral when necessary in order to mitigate the risk of loss. As of both September 30, 2020 and December 31, 2019, the allowance for credit losses on margin loans was not material.

Deposit Receivable

The deposit receivable was $1.4 billion and $1.5 billion as of September 30, 2020 and December 31, 2019, respectively. The deposit receivable is fully collateralized by the fair value of the assets held in a trust. Based on management’s evaluation of the nature of the underlying assets and the potential for changes in the collateral value, the Company did not have an allowance for credit losses for the deposit receivable as of both September 30, 2020 and December 31, 2019.

Troubled Debt Restructurings

The recorded investment in restructured loans was not material as of both September 30, 2020 and December 31, 2019. There were no loans accounted for as a troubled debt restructuring by the Company during each of the three months and nine months ended September 30, 2020 and 2019. There are no commitments to lend additional funds to borrowers whose loans have been restructured.

8. Deferred Acquisition Costs and Deferred Sales Inducement Costs

During the third quarter of the year, management updated market-related inputs and implemented model changes related to the living benefit valuation. In addition, management conducted its annual review of life insurance and annuity valuation assumptions relative to current experience and management expectations including modeling changes. These aforementioned changes are collectively referred to as unlocking. The impact of unlocking to DAC in both the third quarter of 2020 and 2019 primarily reflected an unfavorable impact from updates to interest rate assumptions, partially offset by a favorable impact from lower surrenders on variable annuities with living benefit guarantees.

The balances of and changes in DAC were as follows:


	2020		2019
	(in millions)
Balance at January 1	$	2,698	$	2,776
Capitalization of acquisition costs	162		226
Amortization	(249)		(172)
Amortization, impact of valuation assumptions review	(100)		(14)
Impact of change in net unrealized (gains) losses on securities	(61)		(175)
Reclassified to assets held for sale (1)	—		(15)
Balance at September 30	$	2,450	$	2,626

(1) On April 2, 2019, the Company announced it signed a definitive agreement with a subsidiary of American Family Mutual Holding Company (American Family Insurance) for the sale of AAH, a business unit of Ameriprise Financial. The Company met the requirements to classify assets related to AAH as held for sale as of June 30, 2019.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The balances of and changes in DSIC, which is included in other assets, were as follows:


	2020		2019
	(in millions)
Balance at January 1	$	218	$	251
Capitalization of sales inducement costs	1		1
Amortization	(19)		(13)
Amortization, impact of valuation assumptions review	(16)		—
Impact of change in net unrealized (gains) losses on securities	(1)		(21)
Balance at September 30	$	183	$	218

9. Policyholder Account Balances, Future Policy Benefits and Claims and Separate Account Liabilities

Policyholder account balances, future policy benefits and claims consisted of the following:


	September 30, 2020		December 31, 2019
	(in millions)
Policyholder account balances
Fixed annuities (1)	$	8,623	$	8,909
Variable annuity fixed sub-accounts	5,105		5,103
Universal life (“UL”)/variable universal life (“VUL”) insurance	3,117		3,110
Indexed universal life (“IUL”) insurance	2,189		2,025
Structured variable annuities	820		—
Other life insurance	616		646
Total policyholder account balances	20,470		19,793

Future policy benefits
Variable annuity guaranteed minimum withdrawal benefits (“GMWB”)	3,681		1,462
Variable annuity guaranteed minimum accumulation benefits (“GMAB”) (2)	24		(39)
Other annuity liabilities	183		139
Fixed annuity life contingent liabilities	1,389		1,444
Life and disability income insurance	1,191		1,212
Long term care insurance	5,668		5,302
UL/VUL and other life insurance additional liabilities	1,228		1,033
Total future policy benefits	13,364		10,553
Policy claims and other policyholders’ funds	186		166
Total policyholder account balances, future policy benefits and claims	$	34,020	$	30,512

(1) Includes fixed deferred annuities, non-life contingent fixed payout annuities and fixed deferred indexed annuity host contracts.

(2) Includes the fair value of GMAB embedded derivatives that was a net asset as of December 31, 2019 reported as a contra liability.

Separate account liabilities consisted of the following:


	September 30, 2020		December 31, 2019
	(in millions)
Variable annuity	$	73,919	$	74,965
VUL insurance	7,400		7,429
Other insurance	29		31
Threadneedle investment liabilities	4,780		5,063
Total	$	86,128	$	87,488

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. Variable Annuity and Insurance Guarantees

The majority of the variable annuity contracts offered by the Company contain guaranteed minimum death benefit (“GMDB”) provisions. The Company also offers variable annuities with death benefit provisions that gross up the amount payable by a certain percentage of contract earnings, which are referred to as gain gross-up (“GGU”) benefits. In addition, the Company offers contracts with GMWB and GMAB provisions. The Company previously offered contracts containing guaranteed minimum income benefit (“GMIB”) provisions.

Certain UL policies offered by the Company provide secondary guarantee benefits. The secondary guarantee ensures that, subject to specified conditions, the policy will not terminate and will continue to provide a death benefit even if there is insufficient policy value to cover the monthly deductions and charges.

The following table provides information related to variable annuity guarantees for which the Company has established additional liabilities:


Variable Annuity Guarantees by Benefit Type (1)	September 30, 2020							December 31, 2019
	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk		Weighted Average Attained Age	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk		Weighted Average Attained Age
	(in millions, except age)
GMDB:
Return of premium	$	62,475	$	60,537	$	16	68	$	62,909	$	60,967	$	5	67
Five/six-year reset	7,700		4,966		13		68	7,983		5,263		7		67
One-year ratchet	5,722		5,389		27		71	5,935		5,600		7		70
Five-year ratchet	1,350		1,295		2		67	1,396		1,340		—		66
Other	1,183		1,164		76		73	1,192		1,174		65		73
Total — GMDB	$	78,430	$	73,351	$	134	68	$	79,415	$	74,344	$	84	67

GGU death benefit	$	1,100	$	1,044	$	132	71	$	1,115	$	1,063	$	133	71

GMIB	$	172	$	158	$	10	71	$	186	$	172	$	6	70

GMWB:
GMWB	$	1,871	$	1,866	$	1	74	$	1,999	$	1,993	$	1	73
GMWB for life	46,837		46,762		391		68	46,799		46,691		272		68
Total — GMWB	$	48,708	$	48,628	$	392	68	$	48,798	$	48,684	$	273	68

GMAB	$	2,274	$	2,273	$	1	61	$	2,528	$	2,524	$	—	60

(1) Individual variable annuity contracts may have more than one guarantee and therefore may be included in more than one benefit type. Variable annuity contracts for which the death benefit equals the account value are not shown in this table.

The net amount at risk for GMDB, GGU and GMAB is defined as the current guaranteed benefit amount in excess of the current contract value. The net amount at risk for GMIB is defined as the greater of the present value of the minimum guaranteed annuity payments less the current contract value or zero. The net amount at risk for GMWB is defined as the greater of the present value of the minimum guaranteed withdrawal payments less the current contract value or zero.

The following table provides information related to insurance guarantees for which the Company has established additional liabilities:


	September 30, 2020			December 31, 2019
	Net Amount at Risk		Weighted Average Attained Age	Net Amount at Risk		Weighted Average Attained Age
	(in millions, except age)
UL secondary guarantees	$	6,600	67	$	6,550	67

The net amount at risk for UL secondary guarantees is defined as the current guaranteed death benefit amount in excess of the current policyholder account balance.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Changes in additional liabilities (contra liabilities) for variable annuity and insurance guarantees were as follows:


	GMDB & GGU		GMIB		GMWB (1)		GMAB (1)		UL
	(in millions)
Balance at January 1, 2019	$	19	$	8	$	875	$	(19)	$	659
Incurred claims	—		(1)		1,245		—		110
Paid claims	(4)		—		—		—		(34)
Balance at September 30, 2019	$	15	$	7	$	2,120	$	(19)	$	735

Balance at January 1, 2020	$	16	$	7	$	1,462	$	(39)	$	758
Incurred claims	10		1		2,219		63		172
Paid claims	(6)		(1)		—		—		(34)
Balance at September 30, 2020	$	20	$	7	$	3,681	$	24	$	896

(1) The incurred claims for GMWB and GMAB include the change in the fair value of the liabilities (contra liabilities) less paid claims.

The liabilities for guaranteed benefits are supported by general account assets.

The following table summarizes the distribution of separate account balances by asset type for variable annuity contracts providing guaranteed benefits:


	September 30, 2020		December 31, 2019
	(in millions)
Mutual funds:
Equity	$	42,327	$	44,739
Bond	24,723		23,374
Other	6,521		6,471
Total mutual funds	$	73,571	$	74,584

11. Debt

The balances and the stated interest rates of outstanding debt of Ameriprise Financial were as follows:


	Outstanding Balance				Stated Interest Rate
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
	(in millions)
Long-term debt:
Senior notes due 2020	$	—	$	750	—	%	5.3	%
Senior notes due 2022	500		500		3.0		3.0
Senior notes due 2023	750		750		4.0		4.0
Senior notes due 2024	550		550		3.7		3.7
Senior notes due 2025	500		—		3.0		—
Senior notes due 2026	500		500		2.9		2.9
Finance lease liabilities	47		57		N/A		N/A
Other (1)	(14)		(10)		N/A		N/A
Total long-term debt	2,833		3,097

Short-term borrowings:
Federal Home Loan Bank (“FHLB”) advances	200		201		0.4		1.8
Total	$	3,033	$	3,298

(1) Amounts include adjustments for fair value hedges on the Company’s long-term debt and unamortized discount and debt issuance costs. See Note 14 for information on the Company’s fair value hedges.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Long-term Debt

On April 2, 2020, the Company issued $500 million of unsecured 3.0% senior notes due April 2, 2025 and incurred debt issuance costs of $4 million. Interest payments are due semi-annually in arrears on April 2 and October 2, commencing on October 2, 2020.

The Company repaid $750 million principal amount of its 5.3% senior notes at maturity on March 16, 2020.

Short-term Borrowings

The Company’s life insurance and bank subsidiaries are members of the FHLB of Des Moines which provides access to collateralized borrowings. The Company has pledged Available-for-Sale securities consisting of commercial mortgage backed securities and residential mortgage backed securities as collateral to access these borrowings. The fair value of the securities pledged is recorded in investments and was $1.3 billion and $905 million, of commercial mortgage backed securities, and $660 million and $184 million, of residential mortgage backed securities, as of September 30, 2020 and December 31, 2019, respectively. The remaining maturity of outstanding FHLB advances was less than two months as of both September 30, 2020 and December 31, 2019. The stated interest rate of the FHLB advances is a weighted average annualized interest rate on outstanding borrowings as of the balance sheet date.

On October 12, 2017, the Company entered into an amended and restated credit agreement that provides for an unsecured revolving credit facility of up to $750 million that expires in October 2022. Under the terms of the credit agreement for the facility, the Company may increase the amount of this facility up to $1.0 billion upon satisfaction of certain approval requirements. As of both September 30, 2020 and December 31, 2019, the Company had no borrowings outstanding and had $1 million of letters of credit issued against the facility. The Company’s credit facility contains various administrative, reporting, legal and financial covenants. The Company was in compliance with all such covenants as of both September 30, 2020 and December 31, 2019.

12. Fair Values of Assets and Liabilities

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; that is, an exit price. The exit price assumes the asset or liability is not exchanged subject to a forced liquidation or distressed sale.

Valuation Hierarchy

The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date.

Level 2 Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables present the balances of assets and liabilities of Ameriprise Financial measured at fair value on a recurring basis:


	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	3,171	$	3,115	$	—	$	6,286
Available-for-Sale securities:
Corporate debt securities	—		12,280		742		13,022
Residential mortgage backed securities	—		10,208		50		10,258
Commercial mortgage backed securities	—		6,212		—		6,212
Asset backed securities	—		3,058		30		3,088
State and municipal obligations	—		1,380		—		1,380
U.S. government and agency obligations	1,680		—		—		1,680
Foreign government bonds and obligations	—		267		—		267
Other securities	—		52		—		52
Total Available-for-Sale securities	1,680		33,457		822		35,959

Investments at net asset value (“NAV”)							7		(1)
Trading and other securities	10		25		—		35
Separate account assets at NAV							86,128		(1)

Other assets:
Interest rate derivative contracts	—		2,015		—		2,015
Equity derivative contracts	442		2,990		—		3,432
Credit derivative contracts	—		5		—		5
Foreign exchange derivative contracts	—		36		—		36
Total other assets	442		5,046		—		5,488
Total assets at fair value	$	5,303	$	41,643	$	822	$	133,903


Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	3	$	44	$	47
IUL embedded derivatives	—		—		926		926
GMWB and GMAB embedded derivatives	—		—		2,943		2,943		(2)
Structured variable annuity embedded derivatives	—		—		9		9
Total policyholder account balances, future policy benefits and claims	—		3		3,922		3,925		(3)
Customer deposits	—		8		—		8
Other liabilities:
Interest rate derivative contracts	—		934		—		934
Equity derivative contracts	168		2,840		—		3,008

Foreign exchange derivative contracts	2		5		—		7
Other	2		7		40		49
Total other liabilities	172		3,786		40		3,998
Total liabilities at fair value	$	172	$	3,797	$	3,962	$	7,931

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	267	$	2,924	$	—	$	3,191
Available-for-Sale securities:
Corporate debt securities	—		11,437		750		12,187
Residential mortgage backed securities	—		10,012		17		10,029
Commercial mortgage backed securities	—		5,563		—		5,563
Asset backed securities	—		1,987		19		2,006
State and municipal obligations	—		1,367		—		1,367
U.S. government and agency obligations	1,680		—		—		1,680
Foreign government bonds and obligations	—		271		—		271
Other securities	—		26		—		26
Total Available-for-Sale securities	1,680		30,663		786		33,129
Equity securities	1		—		—		1
Investments at NAV							6		(1)
Trading and other securities	12		26		—		38
Separate account assets at NAV							87,488		(1)
Investments and cash equivalents segregated for regulatory purposes	14		—		—		14
Other assets:
Interest rate derivative contracts	—		1,455		—		1,455
Equity derivative contracts	162		2,722		—		2,884
Credit derivative contracts	—		4		—		4
Foreign exchange derivative contracts	1		17		—		18
Total other assets	163		4,198		—		4,361
Total assets at fair value	$	2,137	$	37,811	$	786	$	128,228


Liabilities
Policyholder account balances, future policy benefits and claims:
Fixed deferred indexed annuity embedded derivatives	$	—	$	3	$	43	$	46
IUL embedded derivatives	—		—		881		881
GMWB and GMAB embedded derivatives	—		—		763		763		(4)
Total policyholder account balances, future policy benefits and claims	—		3		1,687		1,690		(5)
Customer deposits	—		14		—		14
Other liabilities:
Interest rate derivative contracts	—		418		—		418
Equity derivative contracts	36		3,062		—		3,098

Foreign exchange derivative contracts	1		8		—		9
Other	6		4		44		54
Total other liabilities	43		3,492		44		3,579
Total liabilities at fair value	$	43	$	3,509	$	1,731	$	5,283

(1) Amounts are comprised of certain financial instruments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient and have not been classified in the fair value hierarchy.

(2) The fair value of the GMWB and GMAB embedded derivatives included $3.0 billion of individual contracts in a liability position and $36 million of individual contracts in an asset position as of September 30, 2020.

(3) The Company’s adjustment for nonperformance risk resulted in a $(1.0) billion cumulative increase (decrease) to the embedded derivatives as of September 30, 2020.

(4) The fair value of the GMWB and GMAB embedded derivatives included $981 million of individual contracts in a liability position and $218 million of individual contracts in an asset position as of December 31, 2019.

(5) The Company’s adjustment for nonperformance risk resulted in a $(502) million cumulative increase (decrease) to the embedded derivatives as of December 31, 2019.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables provide a summary of changes in Level 3 assets and liabilities of Ameriprise Financial measured at fair value on a recurring basis:


	Available-for-Sale Securities
	Corporate Debt Securities		Residential Mortgage Backed Securities		Asset Backed Securities		Total
	(in millions)
Balance, July 1, 2020	$	744	$	205	$	15	$	964
Total gains (losses) included in:

Other comprehensive income (loss)	5		—		1		6
Purchases	7		33		—		40


Settlements	(14)		—		1		(13)
Transfers into Level 3	—		—		13		13
Transfers out of Level 3	—		(188)		—		(188)
Balance, September 30, 2020	$	742	$	50	$	30	$	822

Changes in unrealized gains (losses) in net income relating to assets held at September 30, 2020	$	—	$	—	$	—	$	—
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at September 30, 2020	$	5	$	—	$	1	$	6


	Policyholder Account Balances, Future Policy Benefits and Claims														Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			GMWB and GMAB Embedded Derivatives			Structured Variable Annuity Embedded Derivatives			Total
	(in millions)
Balance, July 1, 2020	$	41		$	882		$	3,129		$	9		$	4,061	$	48
Total (gains) losses included in:
Net income	3		(1)	50		(1)	(296)		(2)	3		(2)	(240)		(11)		(3)
Issues	—			15			93			(3)			105		5
Settlements	—			(21)			17			—			(4)		(2)
Balance, September 30, 2020	$	44		$	926		$	2,943		$	9		$	3,922	$	40

Changes in unrealized (gains) losses in net income relating to liabilities held at September 30, 2020	$	—		$	50	(1)	$	(283)	(2)	$	—		$	(233)	$	—


	Available-for-Sale Securities
	Corporate Debt Securities		Residential Mortgage Backed Securities		Asset Backed Securities		Total
	(in millions)
Balance, July 1, 2019	$	809	$	448	$	24	$	1,281
Total gains (losses) included in:
Net income	(1)		—		—		(1)		(4)
Other comprehensive income (loss)	4		—		—		4
Purchases	21		60		—		81


Settlements	(39)		(6)		—		(45)
Transfers into Level 3	—		—		14		14
Transfers out of Level 3	—		(348)		(18)		(366)
Balance, September 30, 2019	$	794	$	154	$	20	$	968

Changes in unrealized gains (losses) in net income relating to assets held at September 30, 2019	$	—	$	—	$	—	$	—

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Policyholder Account Balances, Future Policy Benefits and Claims								Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives		IUL Embedded Derivatives			GMWB and GMAB Embedded Derivatives							Total
	(in millions)
Balance, July 1, 2019	$	31	$	819		$	696		$	1,546	$	31
Total (gains) losses included in:
Net income	—		(5)		(1)	663		(2)	658		(5)		(3)
Issues	6		25			96			127		—
Settlements	—		(17)			(3)			(20)		—
Balance, September 30, 2019	$	37	$	822		$	1,452		$	2,311	$	26

Changes in unrealized (gains) losses in net income relating to liabilities held at September 30, 2019	$	—	$	(5)	(1)	$	660	(2)	$	655	$	—


	Available-for-Sale Securities
	Corporate Debt Securities		Residential Mortgage Backed Securities		Asset Backed Securities				Total
	(in millions)
Balance, January 1, 2020	$	750	$	17	$	19	$	786
Total gains (losses) included in:
Net income	(1)		—		(1)		(2)		(4)
Other comprehensive income (loss)	13		1		(1)		13
Purchases	12		220		—		232


Settlements	(32)		—		—		(32)
Transfers into Level 3	—		—		13		13
Transfers out of Level 3	—		(188)		—		(188)
Balance, September 30, 2020	$	742	$	50	$	30	$	822

Changes in unrealized gains (losses) in net income relating to assets held at September 30, 2020	$	(1)	$	—	$	(1)	$	(2)	(4)
Changes in unrealized gains (losses) in other comprehensive income (loss) relating to assets held at September 30, 2020	$	13	$	1	$	(1)	$	13


	Policyholder Account Balances, Future Policy Benefits and Claims														Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			GMWB and GMAB Embedded Derivatives			Structured Annuity Embedded Derivatives			Total
	(in millions)
Balance, January 1, 2020	$	43		$	881		$	763		$	—		$	1,687	$	44
Total gains (losses) included in:
Net income	(2)		(1)	53		(1)	1,900		(2)	16		(2)	1,967		(12)		(3)
Issues	3			53			267			(7)			316		15
Settlements	—			(61)			13			—			(48)		(7)
Balance, September 30, 2020	$	44		$	926		$	2,943		$	9		$	3,922	$	40

Changes in unrealized gains (losses) in net income relating to liabilities held at September 30, 2020	$	—		$	53	(1)	$	1,936	(2)	$	—		$	1,989	$	—

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Available-for-Sale Securities
	Corporate Debt Securities		Residential Mortgage Backed Securities		Commercial Mortgage Backed Securities		Asset Backed Securities				Total
	(in millions)
Balance, January 1, 2019	$	913	$	136	$	20	$	6	$	1,075
Total gains (losses) included in:
Net income	(1)		—		—		—		(1)		(4)
Other comprehensive income (loss)	32		—		—		—		32
Purchases	35		477		—		18		530


Settlements	(185)		(12)		—		—		(197)
Transfers into Level 3	—		—		—		14		14
Transfers out of Level 3	—		(447)		(20)		(18)		(485)
Balance, September 30, 2019	$	794	$	154	$	—	$	20	$	968

Changes in unrealized gains (losses) in net income relating to assets held at September 30, 2019	$	(1)	$	—	$	—	$	—	$	(1)	(4)


	Policyholder Account Balances, Future Policy Benefits and Claims									Other Liabilities
	Fixed Deferred Indexed Annuity Embedded Derivatives			IUL Embedded Derivatives			GMWB and GMAB Embedded Derivatives							Total
	(in millions)
Balance, January 1, 2019	$	14		$	628		$	328		$	970	$	30
Total gains (losses) included in:
Net income	3		(1)	153		(1)	866		(2)	1,022		(4)		(3)
Issues	20			92			266			378		—
Settlements	—			(51)			(8)			(59)		—
Balance, September 30, 2019	$	37		$	822		$	1,452		$	2,311	$	26

Changes in unrealized gains (losses) in net income relating to liabilities held at September 30, 2019	$	—		$	153	(1)	$	859	(2)	$	1,012	$	—

(1) Included in interest credited to fixed accounts in the Consolidated Statements of Operations.

(2) Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Operations.

(3) Included in general and administrative expense in the Consolidated Statements of Operations.

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

The increase (decrease) to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its embedded derivatives was $(123) million and $85 million, net of DAC, DSIC, unearned revenue amortization and the reinsurance accrual, for the three months ended September 30, 2020 and 2019, respectively.

The increase (decrease) to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its embedded derivatives was $446 million and $(29) million, net of DAC, DSIC, unearned revenue amortization and the reinsurance accrual, for the nine months ended September 30, 2020 and 2019, respectively.

Securities transferred from Level 3 primarily represent securities with fair values that are now obtained from a third-party pricing service with observable inputs.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables provide a summary of the significant unobservable inputs used in the fair value measurements developed by the Company or reasonably available to the Company of Level 3 assets and liabilities:


	September 30, 2020
	Fair Value		Valuation Technique	Unobservable Input	Range					Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	734	Discounted cash flow	Yield/spread to U.S. Treasuries (1)	1.2	%	–	4.5%		1.9%
Asset backed securities	$	2	Discounted cash flow	Annual short-term default rate	8.5%					8.5%
				Annual long-term default rate (2)	3.5	%	–	4.0%		3.6%
				Discount rate	15.0%					15.0%
				Constant prepayment rate	10.0%					10.0%
				Loss recovery	63.6%					63.6%
IUL embedded derivatives	$	926	Discounted cash flow	Nonperformance risk (3)	85 bps					85 bps
Fixed deferred indexed annuity embedded derivatives	$	44	Discounted cash flow	Surrender rate (4)	0.0	%	–	50.0%		1.2%
				Nonperformance risk (3)	85 bps					85 bps
GMWB and GMAB embedded derivatives	$	2,943	Discounted cash flow	Utilization of guaranteed withdrawals (5) (6)	0.0	%	–	48.0%		10.5%
				Surrender rate (4)	0.1	%	–	73.5%		3.6%
				Market volatility (7) (8)	4.6	%	–	17.9%		11.8%
				Nonperformance risk (3)	85 bps					85 bps
Structured variable annuity embedded derivatives	$	9	Discounted cash flow	Surrender rate (4)	0.8	%	–	40.0%		0.9%
				Nonperformance risk (3)	85 bps					85 bps
Contingent consideration liabilities	$	40	Discounted cash flow	Discount rate (9)	0.0	%	–	9.0	%	3.3%


	December 31, 2019
	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	749	Discounted cash flow	Yield/spread to U.S. Treasuries	0.8	%	–	2.8%	1.2%
Asset backed securities	$	5	Discounted cash flow	Annual short-term default rate	3.3%
				Annual long-term default rate	3.0%
				Discount rate	12.0%
				Constant prepayment rate	5.0	%	–	10.0%	10.0%
				Loss recovery	36.4	%	–	63.6%	63.6%
IUL embedded derivatives	$	881	Discounted cash flow	Nonperformance risk (3)	65 bps
Fixed deferred indexed annuity embedded derivatives	$	43	Discounted cash flow	Surrender rate	0.0	%	–	50.0%
				Nonperformance risk (3)	65 bps
GMWB and GMAB embedded derivatives	$	763	Discounted cash flow	Utilization of guaranteed withdrawals (5)	0.0	%	–	36.0%
				Surrender rate	0.1	%	–	73.5%
				Market volatility (7)	3.7	%	–	15.9%
				Nonperformance risk (3)	65 bps
Contingent consideration liabilities	$	44	Discounted cash flow	Discount rate	9.0%

(1) The weighted average for the spread to U.S. Treasuries for corporate debt securities (private placements) is weighted based on the security’s market value as a percentage of the aggregate market value of the securities.

(2) The weighted average annual long-term default rate of asset backed securities is weighted based on the security’s market value as a percentage of the aggregate market value of the securities.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

(3) The nonperformance risk is the spread added to the observable interest rates used in the valuation of the embedded derivatives.

(4) The weighted average surrender rate is weighted based on the benefit base of each contract and represents the average assumption in the current year including the effect of a dynamic surrender formula.

(5) The utilization of guaranteed withdrawals represents the percentage of contractholders that will begin withdrawing in any given year.

(6) The weighted average utilization rate represents the average assumption for the current year, weighting each policy evenly. The calculation excludes policies that have already started taking withdrawals.

(7) Market volatility is implied volatility of fund of funds and managed volatility funds.

(8) The weighted average market volatility represents the average volatility across all contracts, weighted by the size of the guaranteed benefit.

(9) The weighted average discount rate represents the average discount rate across all contingent consideration liabilities, weighted based on the size of the contingent consideration liability.

Level 3 measurements not included in the table above are obtained from non-binding broker quotes where unobservable inputs utilized in the fair value calculation are not reasonably available to the Company.

Uncertainty of Fair Value Measurements

Significant increases (decreases) in the yield/spread to U.S. Treasuries used in the fair value measurement of Level 3 corporate debt securities in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in the annual default rate and discount rate used in the fair value measurement of Level 3 asset backed securities in isolation, generally, would have resulted in a significantly lower (higher) fair value measurement and significant increases (decreases) in loss recovery in isolation would have resulted in a significantly higher (lower) fair value measurement.

Significant increases (decreases) in the constant prepayment rate in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in nonperformance risk used in the fair value measurement of the IUL embedded derivatives in isolation would have resulted in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in nonperformance risk and surrender rate used in the fair value measurements of the fixed deferred indexed annuity embedded derivatives and structured variable annuity embedded derivatives in isolation would have resulted in a significantly lower (higher) liability value.

Significant increases (decreases) in utilization and volatility used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would have resulted in a significantly higher (lower) liability value.

Significant increases (decreases) in nonperformance risk and surrender rate used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would have resulted in a significantly lower (higher) liability value. Utilization of guaranteed withdrawals and surrender rates vary with the type of rider, the duration of the policy, the age of the contractholder, the distribution channel and whether the value of the guaranteed benefit exceeds the contract accumulation value.

Significant increases (decreases) in the discount rate used in the fair value measurement of the contingent consideration liability in isolation would have resulted in a significantly lower (higher) fair value measurement.

Determination of Fair Value

The Company uses valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The Company’s market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company’s income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Assets

Cash Equivalents

Cash equivalents include time deposits and other highly liquid investments with original or remaining maturities at the time of purchase of 90 days or less. Actively traded money market funds are measured at their NAV and classified as Level 1. U.S. Treasuries are also classified as Level 1. The Company’s remaining cash equivalents are classified as Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because of the short time between the purchase of the instrument and its expected realization.

Investments (Available-for-Sale Securities, Equity Securities and Trading Securities)

When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from third-party pricing services, non-binding broker quotes, or other model-based valuation techniques.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Level 1 securities primarily include U.S. Treasuries.

Level 2 securities primarily include corporate bonds, residential mortgage backed securities, commercial mortgage backed securities, asset backed securities, state and municipal obligations and foreign government securities. The fair value of these Level 2 securities is based on a market approach with prices obtained from third-party pricing services. Observable inputs used to value these securities can include, but are not limited to, reported trades, benchmark yields, issuer spreads and non-binding broker quotes.

Level 3 securities primarily include certain corporate bonds, non-agency residential mortgage backed securities, commercial mortgage backed securities and asset backed securities. The fair value of corporate bonds, non-agency residential mortgage backed securities, commercial mortgage backed securities and certain asset backed securities classified as Level 3 is typically based on a single non-binding broker quote. The underlying inputs used for some of the non-binding broker quotes are not readily available to the Company. The Company’s privately placed corporate bonds are typically based on a single non-binding broker quote. The fair value of certain asset backed securities is determined using a discounted cash flow model. Inputs used to determine the expected cash flows include assumptions about discount rates and default, prepayment and recovery rates of the underlying assets. Given the significance of the unobservable inputs to this fair value measurement, the fair value of the investment in certain asset backed securities is classified as Level 3.

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 investments 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 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.

Separate Account Assets

The fair value of assets held by separate accounts is determined by the NAV of the funds in which those separate accounts are invested. The NAV is used as a practical expedient for fair value and represents the exit price for the separate account. Separate account assets are excluded from classification in the fair value hierarchy.

Investments and Cash Equivalents Segregated for Regulatory Purposes

Investments and cash equivalents segregated for regulatory purposes includes U.S. Treasuries that are classified as Level 1.

Other Assets

Derivatives that are measured using quoted prices in active markets, such as derivatives that are exchange-traded are classified as Level 1 measurements. The variation margin on futures contracts is also classified as Level 1. The fair value of derivatives that are traded in less active over-the-counter (“OTC”) markets is generally measured using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include swaps, foreign currency forwards and the majority of options. The counterparties’ nonperformance risk associated with uncollateralized derivative assets was immaterial as of both September 30, 2020 and December 31, 2019. See Note 13 and Note 14 for further information on the credit risk of derivative instruments and related collateral.

Liabilities

Policyholder Account Balances, Future Policy Benefits and Claims

There is no active market for the transfer of the Company’s embedded derivatives attributable to the provisions of certain variable annuity riders, fixed deferred indexed annuity, structured variable annuity and IUL products.

The Company values the embedded derivatives attributable to the provisions of certain variable annuity riders using internal valuation models. These models calculate fair value as the present value of future expected benefit payments less the present value of future expected rider fees attributable to the embedded derivative feature. The projected cash flows used by these models include observable capital market assumptions and incorporate significant unobservable inputs related to implied volatility as well as contractholder behavior assumptions that include margins for risk, all of which the Company believes a market participant would incorporate into an exit price. The fair value also reflects a current estimate of the Company’s nonperformance risk specific to these embedded derivatives. Given the significant unobservable inputs to this valuation, these measurements are classified as Level 3. The embedded derivatives attributable to these provisions are recorded in policyholder account balances, future policy benefits and claims.

The Company uses a discounted cash flow model to determine the fair value of the embedded derivatives associated with the provisions of its equity index annuity product. The projected cash flows generated by this model are based on significant observable inputs related to interest rates, volatilities and equity index levels and, therefore, are classified as Level 2.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The Company uses discounted cash flow models including Black-Scholes calculations to determine the fair value of the embedded derivatives associated with the provisions of its fixed deferred indexed annuity, structured variable annuity and IUL products. The structured variable annuity product is a limited flexible purchase payment annuity that offers 45 different indexed account options providing equity market exposure and a fixed account. Each indexed account includes a protection option (a buffer or a floor). If the index has a negative return, contractholder losses will be reduced by buffer or limited to a floor. The portion allocated to an indexed account is accounted for as an embedded derivative. The fair value of fixed deferred indexed annuity, structured variable annuity and IUL embedded derivatives includes significant observable interest rates, volatilities and equity index levels and the significant unobservable estimate of the Company’s nonperformance risk. Given the significance of the nonperformance risk assumption to the fair value, the fixed deferred indexed annuity, structured variable annuity and IUL embedded derivatives are classified as Level 3.

The embedded derivatives attributable to these provisions are recorded in policyholder account balances, future policy benefits and claims.

Customer Deposits

The Company uses various Black-Scholes calculations to determine the fair value of the embedded derivative liability associated with the provisions of its stock market certificates (“SMC”). The inputs to these calculations are primarily market observable and include interest rates, volatilities and equity index levels. As a result, these measurements are classified as Level 2.

Other Liabilities

Derivatives that are measured using quoted prices in active markets, such as derivatives that are exchange-traded are classified as Level 1 measurements. The variation margin on futures contracts is also classified as Level 1. The fair value of derivatives that are traded in less active OTC markets is generally measured using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include swaps, foreign currency forwards and the majority of options. The Company’s nonperformance risk associated with uncollateralized derivative liabilities was immaterial as of both September 30, 2020 and December 31, 2019. See Note 13 and Note 14 for further information on the credit risk of derivative instruments and related collateral.

Securities sold but not yet purchased represent obligations of the Company to deliver specified securities that it does not yet own, creating a liability to purchase the security in the market at prevailing prices. When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from nationally-recognized pricing services, or other model-based valuation techniques such as the present value of cash flows. Level 1 securities sold but not yet purchased primarily include U.S Treasuries traded in active markets. Level 2 securities sold but not yet purchased primarily include corporate bonds.

Contingent consideration liabilities consist of earn-outs and/or deferred payments related to the Company’s acquisitions. Contingent consideration liabilities are recorded at fair value using a discounted cash flow model under multiple scenarios and an unobservable input (discount rate). Given the use of a significant unobservable input, the fair value of contingent consideration liabilities is classified as Level 3 within the fair value hierarchy.

Fair Value on a Nonrecurring Basis

The Company assesses its investment in affordable housing partnerships for impairment. The investments that are determined to be impaired are written down to their fair value. The Company uses a discounted cash flow model to measure the fair value of these investments. Inputs to the discounted cash flow model are estimates of future net operating losses and tax credits available to the Company and discount rates based on market condition and the financial strength of the syndicator (general partner). The balance of affordable housing partnerships measured at fair value on a nonrecurring basis was $99 million and $158 million as of September 30, 2020 and December 31, 2019, respectively, and is classified as Level 3 in the fair value hierarchy.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Asset and Liabilities Not Reported at Fair Value

The following tables provide the carrying value and the estimated fair value of financial instruments that are not reported at fair value:


	September 30, 2020
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,770	$	—	$	22	$	2,875	$	2,897
Policy loans	849		—		849		—		849		(1)
Receivables	3,175		57		972		2,360		3,389
Restricted and segregated cash	2,551		2,551		—		—		2,551
Other investments and assets	750		—		642		96		738

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	9,600	$	—	$	—	$	11,300	$	11,300
Investment certificate reserves	7,156		—		—		6,350		6,350
Banking and brokerage deposits	9,666		9,666		—		—		9,666
Separate account liabilities — investment contracts	5,103		—		5,103		—		5,103
Debt and other liabilities	3,115		103		3,257		15		3,375


	December 31, 2019
	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,778	$	—	$	—	$	2,833	$	2,833
Policy loans	868		—		868		—		868		(1)
Receivables	3,168		102		934		2,229		3,265
Restricted and segregated cash	2,372		2,372		—		—		2,372
Other investments and assets	671		—		626		46		672

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	9,110	$	—	$	—	$	10,061	$	10,061
Investment certificate reserves	7,508		—		—		7,497		7,497
Banking and brokerage deposits	6,929		6,929		—		—		6,929
Separate account liabilities — investment contracts	5,403		—		5,403		—		5,403
Debt and other liabilities	3,374		104		3,372		21		3,497

(1) During the third quarter of 2020, management changed the fair value methodology for policy loans from estimating future expected cash flows and discounting the cash flows at a rate based on the U.S. Treasury curve to using the carrying value as an approximation of fair value as the policy loans are fully collateralized by the cash surrender value of the underlying policies. As a result, policy loans were reclassified from Level 3 to Level 2 in the valuation hierarchy. For comparability and consistency purposes, prior period amounts were revised to reflect the current methodology and classification.

Receivables include the deposit receivable, brokerage margin loans, securities borrowed and loans to financial advisors. Restricted and segregated cash includes cash segregated under federal and other regulations held in special reserve bank accounts for the exclusive benefit of the Company’s brokerage customers. Other investments and assets primarily include syndicated loans, credit card receivables, certificate of deposits with original or remaining maturities at the time of purchase of more than 90 days, the Company’s membership in the FHLB and investments related to the Community Reinvestment Act. See Note 7 for additional information on mortgage loans, policy loans, syndicated loans, credit card receivables and the deposit receivable.

Policyholder account balances, future policy benefits and claims include fixed annuities in deferral status, non-life contingent fixed annuities in payout status, indexed annuity host contracts and the fixed portion of a small number of variable annuity contracts classified as investment contracts. See Note 9 for additional information on these liabilities. Investment certificate reserves represent customer deposits for fixed rate certificates and stock market certificates. Banking and brokerage deposits are amounts payable to

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

customers related to free credit balances, funds deposited by customers and funds accruing to customers as a result of trades or contracts. Separate account liabilities are primarily investment contracts in pooled pension funds offered by Threadneedle. Debt and other liabilities include the Company’s long-term debt, short-term borrowings, securities loaned and future funding commitments to affordable housing partnerships and other real estate partnerships. See Note 11 for further information on the Company’s long-term debt and short-term borrowings.

13. Offsetting Assets and Liabilities

Certain financial instruments and derivative instruments are eligible for offset in the Consolidated Balance Sheets. The Company’s derivative instruments and securities borrowing and lending agreements are subject to master netting and collateral arrangements and qualify for offset. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. Securities borrowed and loaned result from transactions between the Company’s broker dealer subsidiary and other financial institutions and are recorded at the amount of cash collateral advanced or received. Securities borrowed and securities loaned are primarily equity securities. The Company’s securities borrowed and securities loaned transactions generally do not have a fixed maturity date and may be terminated by either party under customary terms.

The Company’s policy is to recognize amounts subject to master netting arrangements on a gross basis in the Consolidated Balance Sheets.

The following tables present the gross and net information about the Company’s assets subject to master netting arrangements:


	September 30, 2020
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial Instruments (1)		Cash Collateral		Securities Collateral
	(in millions)
Derivatives:
OTC	$	5,137	$	—	$	5,137	$	(3,502)	$	(1,602)	$	(22)	$	11
OTC cleared	44		—		44		(44)		—		—		—
Exchange-traded	307		—		307		(86)		(159)		—		62
Total derivatives	5,488		—		5,488		(3,632)		(1,761)		(22)		73
Securities borrowed	57		—		57		(10)		—		(46)		1
Total	$	5,545	$	—	$	5,545	$	(3,642)	$	(1,761)	$	(68)	$	74


	December 31, 2019
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial Instruments (1)		Cash Collateral		Securities Collateral
	(in millions)
Derivatives:
OTC	$	4,258	$	—	$	4,258	$	(2,933)	$	(1,244)	$	(73)	$	8
OTC cleared	21		—		21		(21)		—		—		—
Exchange-traded	82		—		82		(5)		—		—		77
Total derivatives	4,361		—		4,361		(2,959)		(1,244)		(73)		85
Securities borrowed	102		—		102		(14)		—		(85)		3
Total	$	4,463	$	—	$	4,463	$	(2,973)	$	(1,244)	$	(158)	$	88

(1) Represents the amount of assets that could be offset by liabilities with the same counterparty under master netting or similar arrangements that management elects not to offset on the Consolidated Balance Sheets.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables present the gross and net information about the Company’s liabilities subject to master netting arrangements:


	September 30, 2020
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial Instruments (1)		Cash Collateral		Securities Collateral
	(in millions)
Derivatives:
OTC	$	3,759	$	—	$	3,759	$	(3,502)	$	—	$	(256)	$	1
OTC cleared	103		—		103		(44)		—		—		59
Exchange-traded	87		—		87		(86)		—		—		1
Total derivatives	3,949		—		3,949		(3,632)		—		(256)		61
Securities loaned	103		—		103		(10)		—		(90)		3
Total	$	4,052	$	—	$	4,052	$	(3,642)	$	—	$	(346)	$	64


	December 31, 2019
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial Instruments (1)		Cash Collateral		Securities Collateral
	(in millions)
Derivatives:
OTC	$	3,473	$	—	$	3,473	$	(2,933)	$	—	$	(540)	$	—
OTC cleared	41		—		41		(21)		—		—		20
Exchange-traded	11		—		11		(5)		—		—		6
Total derivatives	3,525		—		3,525		(2,959)		—		(540)		26
Securities loaned	104		—		104		(14)		—		(87)		3
Total	$	3,629	$	—	$	3,629	$	(2,973)	$	—	$	(627)	$	29

(1) Represents the amount of liabilities that could be offset by assets with the same counterparty under master netting or similar arrangements that management elects not to offset on the Consolidated Balance Sheets.

In the tables above, the amount of assets or liabilities presented are offset first by financial instruments that have the right of offset under master netting or similar arrangements, then any remaining amount is reduced by the amount of cash and securities collateral. The actual collateral may be greater than amounts presented in the tables.

When the fair value of collateral accepted by the Company is less than the amount due to the Company, there is a risk of loss if the counterparty fails to perform or provide additional collateral. To mitigate this risk, the Company monitors collateral values regularly and requires additional collateral when necessary. When the value of collateral pledged by the Company declines, it may be required to post additional collateral.

Freestanding derivative instruments are reflected in other assets and other liabilities. Cash collateral pledged by the Company is reflected in other assets and cash collateral accepted by the Company is reflected in other liabilities. Securities borrowing and lending agreements are reflected in receivables and other liabilities, respectively. See Note 14 for additional disclosures related to the Company’s derivative instruments and Note 5 for information related to derivatives held by consolidated investment entities.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. Derivatives and Hedging Activities

Derivative instruments enable the Company to manage its exposure to various market risks. The value of such instruments is derived from an underlying variable or multiple variables, including equity, foreign exchange and interest rate indices or prices. The Company primarily enters into derivative agreements for risk management purposes related to the Company’s products and operations.

Certain of the Company’s freestanding derivative instruments are subject to master netting arrangements. The Company’s policy on the recognition of derivatives on the Consolidated Balance Sheets is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement. See Note 13 for additional information regarding the estimated fair value of the Company’s freestanding derivatives after considering the effect of master netting arrangements and collateral.

The Company uses derivatives as economic hedges and accounting hedges. The following table presents the notional value and gross fair value of derivative instruments, including embedded derivatives:


	September 30, 2020						December 31, 2019
	Notional		Gross Fair Value				Notional		Gross Fair Value
			Assets (1)		Liabilities (2)(3)				Assets (1)		Liabilities (2)(3)
	(in millions)
Derivatives designated as hedging instruments
Interest rate contracts – fair value hedges	$	—	$	—	$	—	$	375	$	3	$	—
Foreign exchange contracts – net investment hedges	32		—		—		93		—		3
Total qualifying hedges	32		—		—		468		3		3

Derivatives not designated as hedging instruments
Interest rate contracts	70,716		2,015		934		57,979		1,452		418
Equity contracts	63,269		3,432		3,008		61,921		2,884		3,098
Credit contracts	2,594		5		—		1,419		4		—
Foreign exchange contracts	3,977		36		7		3,412		18		6
Other contracts	1		—		—		1		—		—
Total non-designated hedges	140,557		5,488		3,949		124,732		4,358		3,522

Embedded derivatives
GMWB and GMAB (4)	N/A		—		2,943		N/A		—		763
IUL	N/A		—		926		N/A		—		881
Fixed deferred indexed annuities	N/A		—		47		N/A		—		46
Structured variable annuities	N/A		—		9		N/A		—		—
SMC	N/A		—		8		N/A		—		14
Total embedded derivatives	N/A		—		3,933		N/A		—		1,704
Total derivatives	$	140,589	$	5,488	$	7,882	$	125,200	$	4,361	$	5,229

N/A Not applicable.

(1) The fair value of freestanding derivative assets is included in Other assets on the Consolidated Balance Sheets.

(2) The fair value of freestanding derivative liabilities is included in Other liabilities on the Consolidated Balance Sheets. The fair value of GMWB and GMAB, IUL, fixed deferred indexed annuity and structured variable annuity embedded derivatives is included in Policyholder account balances, future policy benefits and claims on the Consolidated Balance Sheets. The fair value of the SMC embedded derivative liability is included in Customer deposits on the Consolidated Balance Sheets.

(3) The fair value of the Company’s derivative liabilities after considering the effects of master netting arrangements, cash collateral held by the same counterparty and the fair value of net embedded derivatives was $4.3 billion and $2.3 billion as of September 30, 2020 and December 31, 2019, respectively. See Note 13 for additional information related to master netting arrangements and cash collateral. See Note 5 for information about derivatives held by consolidated VIEs.

(4) The fair value of the GMWB and GMAB embedded derivatives as of September 30, 2020 included $3.0 billion of individual contracts in a liability position and $36 million of individual contracts in an asset position. The fair value of the GMWB and GMAB embedded derivatives as of December 31, 2019 included $981 million of individual contracts in a liability position and $218 million of individual contracts in an asset position.

See Note 12 for additional information regarding the Company’s fair value measurement of derivative instruments.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

As of September 30, 2020 and December 31, 2019, investment securities with a fair value of $24 million and $84 million, respectively, were received as collateral to meet contractual obligations under derivative contracts, of which $24 million and $84 million, respectively, may be sold, pledged or rehypothecated by the Company. As of both September 30, 2020 and December 31, 2019, the Company had sold, pledged or rehypothecated none of these securities. In addition, as of both September 30, 2020 and December 31, 2019, non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Consolidated Balance Sheets.

Derivatives Not Designated as Hedges

The following tables present a summary of the impact of derivatives not designated as hedging instruments, including embedded derivatives, on the Consolidated Statements of Operations:


	Net Investment Income		Banking and Deposit Interest Expense		Distribution Expenses		Interest Credited to Fixed Accounts		Benefits, Claims, Losses and Settlement Expenses		General and Administrative Expense
	(in millions)
Three Months Ended September 30, 2020
Interest rate contracts	$	—	$	—	$	—	$	—	$	(371)	$	—
Equity contracts	—		2		41		42		(468)		6
Credit contracts	—		—		—		—		(12)		—
Foreign exchange contracts	—		—		—		—		(23)		5

GMWB and GMAB embedded derivatives	—		—		—		—		186		—
IUL embedded derivatives	—		—		—		(29)		—		—
Fixed deferred indexed annuity embedded derivatives	—		—		—		(3)		—		—
Structured variable annuity embedded derivatives	—		—		—		—		(3)		—
SMC embedded derivatives	—		(2)		—		—		—		—
Total gain (loss)	$	—	$	—	$	41	$	10	$	(691)	$	11

Nine Months Ended September 30, 2020
Interest rate contracts	$	(1)	$	—	$	2	$	—	$	2,204	$	—
Equity contracts	(1)		—		12		(7)		58		3
Credit contracts	—		—		—		—		(91)		—
Foreign exchange contracts	—		—		—		—		26		3

GMWB and GMAB embedded derivatives	—		—		—		—		(2,180)		—
IUL embedded derivatives	—		—		—		8		—		—
Fixed deferred indexed annuity embedded derivatives	—		—		—		2		—		—
Structured variable annuity embedded derivatives	—		—		—		—		(16)		—
SMC embedded derivatives	—		—		—		—		—		—
Total gain (loss)	$	(2)	$	—	$	14	$	3	$	1	$	6

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Net Investment Income		Banking and Deposit Interest Expense		Distribution Expenses		Interest Credited to Fixed Accounts		Benefits, Claims, Losses and Settlement Expenses		General and Administrative Expense
	(in millions)
Three Months Ended September 30, 2019
Interest rate contracts	$	(9)	$	—	$	1	$	—	$	804	$	—
Equity contracts	—		—		(1)		4		(100)		—
Credit contracts	—		—		—		—		(9)		—
Foreign exchange contracts	—		—		—		—		10		—

GMWB and GMAB embedded derivatives	—		—		—		—		(756)		—
IUL embedded derivatives	—		—		—		22		—		—

SMC embedded derivatives	—		(1)		—		—		—		—
Total gain (loss)	$	(9)	$	(1)	$	—	$	26	$	(51)	$	—

Nine Months Ended September 30, 2019
Interest rate contracts	$	(37)	$	—	$	1	$	—	$	1,761	$	—
Equity contracts	—		8		59		70		(1,017)		10
Credit contracts	—		—		—		—		(78)		—
Foreign exchange contracts	—		—		—		—		—		(1)

GMWB and GMAB embedded derivatives	—		—		—		—		(1,124)		—
IUL embedded derivatives	—		—		—		(102)		—		—
Fixed deferred indexed annuity embedded derivatives	—		—		—		(3)		—		—
SMC embedded derivatives	—		(7)		—		—		—		—
Total gain (loss)	$	(37)	$	1	$	60	$	(35)	$	(458)	$	9

The Company holds derivative instruments that either do not qualify or are not designated for hedge accounting treatment. These derivative instruments are used as economic hedges of equity, interest rate, credit and foreign currency exchange rate risk related to various products and transactions of the Company.

Certain annuity contracts contain GMWB or GMAB provisions, which guarantee the right to make limited partial withdrawals each contract year regardless of the volatility inherent in the underlying investments or guarantee a minimum accumulation value of consideration received at the beginning of the contract period, after a specified holding period, respectively. The indexed portion of structured variable annuities and the GMAB and non-life contingent GMWB provisions are considered embedded derivatives, which are bifurcated from their host contracts for valuation purposes and reported on the Consolidated Balance Sheets at fair value with changes in fair value reported in earnings. The Company economically hedges the aggregate exposure related to the indexed portion of structured variable annuities and the GMAB and non-life contingent GMWB provisions using options, swaptions, swaps and futures.

The deferred premium associated with certain of the above options and swaptions is paid or received semi-annually over the life of the contract or at maturity. The following is a summary of the payments the Company is scheduled to make and receive for these options and swaptions as of September 30, 2020:


	Premiums Payable		Premiums Receivable
	(in millions)
2020 (1)	$	35	$	4
2021	152		106
2022	205		205
2023	51		43
2024	140		25
2025 - 2028	379		7
Total	$	962	$	390

(1) 2020 amounts represent the amounts payable and receivable for the period from October 1, 2020 to December 31, 2020.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Actual timing and payment amounts may differ due to future settlements, modifications or exercises of the contracts prior to the full premium being paid or received.

The Company has a macro hedge program to provide protection against the statutory tail scenario risk arising from variable annuity reserves on its statutory surplus and to cover some of the residual risks not covered by other hedging activities. As a means of economically hedging these risks, the Company may use a combination of futures, options, swaps and swaptions. Certain of the macro hedge derivatives may contain settlement provisions linked to both equity returns and interest rates. The Company’s macro hedge derivatives that contain settlement provisions linked to both equity returns and interest rates, if any, are shown in other contracts in the tables above.

Fixed deferred indexed annuity, IUL and stock market certificate products have returns tied to the performance of equity markets. As a result of fluctuations in equity markets, the obligation incurred by the Company related to fixed deferred indexed annuity, IUL and stock market certificate products will positively or negatively impact earnings over the life of these products. The equity component of fixed deferred indexed annuity, IUL and stock market certificate product obligations are considered embedded derivatives, which are bifurcated from their host contracts for valuation purposes and reported on the Consolidated Balance Sheets at fair value with changes in fair value reported in earnings. As a means of economically hedging its obligations under the provisions of these products, the Company enters into index options and futures contracts.

The Company enters into futures, credit default swaps and commodity swaps to manage its exposure to price risk arising from seed money investments in proprietary investment products. The Company enters into foreign currency forward contracts to economically hedge its exposure to certain foreign transactions. The Company enters into futures contracts and total return swaps to economically hedge its exposure related to compensation plans. The Company enters into interest rate swaps to offset interest rate changes on unrealized gains or losses for certain investments.

Cash Flow Hedges

The Company has designated derivative instruments as a cash flow hedge of interest rate exposure on forecasted debt interest payments. For derivative instruments that qualify as cash flow hedges, the gain or loss on the derivative instruments is reported in AOCI and reclassified into earnings when the hedged item or transaction impacts earnings. The amount that is reclassified into earnings is presented within the same line item as the earnings impact of the hedged item in interest and debt expense.

For the three months and nine months ended September 30, 2020 and 2019, the amounts reclassified from AOCI to earnings related to cash flow hedges were immaterial. The estimated net amount recorded in AOCI as of September 30, 2020 that the Company expects to reclassify to earnings as a reduction to interest and debt expense within the next twelve months is $0.5 million. Currently, the longest period of time over which the Company is hedging exposure to the variability in future cash flows is 15 years and relates to forecasted debt interest payments. See Note 15 for a rollforward of net unrealized derivative gains (losses) included in AOCI related to cash flow hedges.

Fair Value Hedges

The Company entered into and designated as a fair value hedge an interest rate swap to convert senior notes due 2020 from fixed rate debt to floating rate debt. The interest rate swap related to the senior notes due March 2020 was settled during the first quarter when the debt was repaid. The swap had identical terms as the underlying debt being hedged. The Company no longer had any fair value hedges outstanding as of September 30, 2020. The Company recognizes gains and losses on the derivatives and the related hedged items within interest and debt expense. See Note 11 for the cumulative basis adjustments for fair value hedges.

The following table is a summary of the impact of derivatives designated as hedges on the Consolidated Statements of Operations:


	Three months ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Total interest and debt expense per Consolidated Statements of Operations	$	37	$	52	$	124	$	164
Gain (loss) on interest rate contracts designated as fair value hedges:
Hedged items	$	—	$	1	$	1	$	3
Derivatives designated as fair value hedges	—		(1)		(1)		(3)
Gain (loss) on interest rate contracts designated as cash flow hedges:
Amount of gain (loss) reclassified from AOCI into income	$	1	$	—	$	1	$	1

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Net Investment Hedges

The Company entered into, and designated as net investment hedges in foreign operations, forward contracts to hedge a portion of the Company’s foreign currency exchange rate risk associated with its investment in Threadneedle. As the Company determined that the forward contracts are effective, the change in fair value of the derivatives is recognized in AOCI as part of the foreign currency translation adjustment. For the three months ended September 30, 2020 and 2019, the Company recognized a loss of $2.5 million and nil, respectively, in OCI. For the nine months ended September 30, 2020 and 2019, the Company recognized a gain of $3 million and a loss of $3 million, respectively, in OCI.

Credit Risk

Credit risk associated with the Company’s derivatives is the risk that a derivative counterparty will not perform in accordance with the terms of the applicable derivative contract. To mitigate such risk, the Company has established guidelines and oversight of credit risk through a comprehensive enterprise risk management program that includes members of senior management. Key components of this program are to require preapproval of counterparties and the use of master netting and collateral arrangements whenever practical. See Note 13 for additional information on the Company’s credit exposure related to derivative assets.

Certain of the Company’s derivative contracts contain provisions that adjust the level of collateral the Company is required to post based on the Company’s debt rating (or based on the financial strength of the Company’s life insurance subsidiaries for contracts in which those subsidiaries are the counterparty). Additionally, certain of the Company’s derivative contracts contain provisions that allow the counterparty to terminate the contract if the Company’s debt does not maintain a specific credit rating (generally an investment grade rating) or the Company’s life insurance subsidiary does not maintain a specific financial strength rating. If these termination provisions were to be triggered, the Company’s counterparty could require immediate settlement of any net liability position. As of September 30, 2020 and December 31, 2019, the aggregate fair value of derivative contracts in a net liability position containing such credit contingent provisions was $176 million and $189 million, respectively. The aggregate fair value of assets posted as collateral for such instruments as of September 30, 2020 and December 31, 2019 was $176 million and $189 million, respectively. If the credit contingent provisions of derivative contracts in a net liability position as of September 30, 2020 and December 31, 2019 were triggered, the aggregate fair value of additional assets that would be required to be posted as collateral or needed to settle the instruments immediately would have been nil as of both September 30, 2020 and December 31, 2019.

15. Shareholders’ Equity

The following tables provide the amounts related to each component of OCI:


	Three Months Ended September 30,
	2020						2019
	Pretax		Income Tax Benefit (Expense)		Net of Tax		Pretax		Income Tax Benefit (Expense)		Net of Tax
	(in millions)
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) on securities arising during the period (1)	$	225	$	(53)	$	172	$	294	$	(58)	$	236
Reclassification of net (gains) losses on securities included in net income (2)	(4)		1		(3)		10		(2)		8
Impact of DAC, DSIC, unearned revenue, benefit reserves and reinsurance recoverables	(94)		20		(74)		(195)		41		(154)
Net unrealized gains (losses) on securities	127		(32)		95		109		(19)		90
Foreign currency translation	27		—		27		(23)		1		(22)
Total other comprehensive income (loss)	$	154	$	(32)	$	122	$	86	$	(18)	$	68

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Nine Months Ended September 30,
	2020						2019
	Pretax		Income Tax Benefit (Expense)		Net of Tax		Pretax		Income Tax Benefit (Expense)		Net of Tax
	(in millions)
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) on securities arising during the period (1)	$	562	$	(118)	$	444	$	1,463	$	(259)	$	1,204
Reclassification of net (gains) losses on securities included in net income (2)	—		—		—		5		(1)		4
Impact of DAC, DSIC, unearned revenue, benefit reserves and reinsurance recoverables	(223)		47		(176)		(694)		146		(548)
Net unrealized gains (losses) on securities	339		(71)		268		774		(114)		660
Net unrealized gains (losses) on derivatives:
Reclassification of net (gains) losses on derivatives included in net income (3)	—		—		—		(1)		—		(1)
Net unrealized gains (losses) on derivatives	—		—		—		(1)		—		(1)
Foreign currency translation	(15)		1		(14)		(32)		1		(31)
Total other comprehensive income (loss)	$	324	$	(70)	$	254	$	741	$	(113)	$	628

(1) Includes impairments on Available-for-Sale securities related to factors other than credit that were recognized in OCI during the period.

(2) Reclassification amounts are recorded in net investment income.

(3) Includes nil and $1 million pretax gain reclassified to interest and debt expense for the nine months ended September 30, 2020 and 2019, respectively.

Other comprehensive income (loss) related to net unrealized gains (losses) on securities includes three components: (i) unrealized gains (losses) that arose from changes in the market value of securities that were held during the period; (ii) (gains) losses that were previously unrealized, but have been recognized in current period net income due to sales of Available-for-Sale securities and due to the reclassification of noncredit impairments to credit losses; and (iii) other adjustments primarily consisting of changes in insurance and annuity asset and liability balances, such as DAC, DSIC, unearned revenue, benefit reserves and reinsurance recoverables, to reflect the expected impact on their carrying values had the unrealized gains (losses) been realized as of the respective balance sheet dates.

The following tables present the changes in the balances of each component of AOCI, net of tax:


	Net Unrealized Gains (Losses) on Securities			Net Unrealized Gains (Losses) on Derivatives		Defined Benefit Plans		Foreign Currency Translation		Other		Total
	(in millions)
Balance, July 1, 2020	$	749		$	6	$	(138)	$	(222)	$	(1)	$	394

OCI before reclassifications	98			—		—		27		—		125
Amounts reclassified from AOCI	(3)			—		—		—		—		(3)
Total OCI	95			—		—		27		—		122
Balance, September 30, 2020	$	844	(1)	$	6	$	(138)	$	(195)	$	(1)	$	516

Balance, January 1, 2020	$	576		$	6	$	(138)	$	(181)	$	(1)	$	262

OCI before reclassifications	268			—		—		(14)		—		254

Total OCI	268			—		—		(14)		—		254
Balance, September 30, 2020	$	844	(1)	$	6	$	(138)	$	(195)	$	(1)	$	516

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Net Unrealized Gains (Losses) on Securities			Net Unrealized Gains (Losses) on Derivatives		Defined Benefit Plans		Foreign Currency Translation		Other		Total
	(in millions)
Balance, July 1, 2019	$	590		$	7	$	(120)	$	(207)	$	(1)	$	269

OCI before reclassifications	82			—		—		(22)		—		60
Amounts reclassified from AOCI	8			—		—		—		—		8
Total OCI	90			—		—		(22)		—		68
Balance, September 30, 2019	$	680	(1)	$	7	$	(120)	$	(229)	$	(1)	$	337

Balance, January 1, 2019	$	20		$	8	$	(120)	$	(198)	$	(1)	$	(291)

OCI before reclassifications	656			—		—		(31)		—		625
Amounts reclassified from AOCI	4			(1)		—		—		—		3
Total OCI	660			(1)		—		(31)		—		628
Balance, September 30, 2019	$	680	(1)	$	7	$	(120)	$	(229)	$	(1)	$	337

(1) Includes nil and $(1) million of noncredit related impairments on securities and net unrealized gains (losses) on previously impaired securities as of September 30, 2020 and September 30, 2019, respectively.

For the nine months ended September 30, 2020 and 2019, the Company repurchased a total of 6.3 million shares and 9.8 million shares, respectively, of its common stock for an aggregate cost of $956 million and $1.3 billion, respectively. In February 2019, the Company’s Board of Directors authorized a repurchase of up to $2.5 billion of the Company’s common stock through March 31, 2021. In August 2020, the Company’s Board of Directors authorized an additional expenditure of up to $2.5 billion for the repurchase of shares of the Company’s common stock through September 30, 2022. As of September 30, 2020, the Company had $2.7 billion remaining under these share repurchase authorizations.

The Company may also reacquire shares of its common stock under its share-based compensation plans related to restricted stock awards and certain option exercises. The holders of restricted shares may elect to surrender a portion of their shares on the vesting date to cover their income tax obligation. These vested restricted shares are reacquired by the Company and the Company’s payment of the holders’ income tax obligations are recorded as a treasury share purchase.

For the nine months ended September 30, 2020 and 2019, the Company reacquired 0.3 million shares and 0.3 million shares, respectively, of its common stock through the surrender of shares upon vesting and paid in the aggregate $51 million and $34 million, respectively, related to the holders’ income tax obligations on the vesting date. Option holders may elect to net settle their vested awards resulting in the surrender of the number of shares required to cover the strike price and tax obligation of the options exercised. These shares are reacquired by the Company and recorded as treasury shares. For the nine months ended September 30, 2020 and 2019, the Company reacquired 0.7 million shares and 0.5 million shares, respectively, of its common stock through the net settlement of options for an aggregate value of $128 million and $70 million, respectively.

During the nine months ended September 30, 2020 and 2019, the Company reissued 0.5 million and 0.7 million, respectively, treasury shares for restricted stock award grants, performance share units and issuance of shares vested under advisor deferred compensation plans.

16. Income Taxes

The Company’s effective tax rate was 23.5% and 15.4% for the three months ended September 30, 2020 and 2019, respectively. The Company’s effective tax rate was 17.4% and 15.8% for the nine months ended September 30, 2020 and 2019, respectively.

The Company recorded a pretax loss for the three months ended September 30, 2020. Tax benefits applied to a pretax loss increase the effective tax rate. The effective tax rate for the three months ended September 30, 2020 is higher than the statutory tax rate due to the tax benefits including low income housing tax credits and the dividends received deduction. The effective tax rate for the nine months ended September 30, 2020 is lower than the statutory rate as a result of tax preferred items including low income housing tax credits and dividends received deduction, partially offset by state income taxes, net of federal benefit.

The effective tax rate for the three months ended September 30, 2019 is lower than the statutory rate as a result of tax preferred items including low income housing tax credits and dividends received deduction. The effective tax rate for the nine months ended September 30, 2019 is lower than the statutory rate as a result of tax preferred items including low income housing tax credits and foreign tax credits.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The higher effective tax rate for the three months ended September 30, 2020 compared to September 30, 2019 is primarily the result of a pretax loss in the current quarter. The higher effective tax rate for the nine months ended September 30, 2020 compared to September 30, 2019 is primarily the result of a decrease in tax preferred items, including foreign tax credits.

Included in the Company’s deferred income tax assets are tax benefits related to state net operating losses of $18 million, net of federal benefit, which will expire beginning December 31, 2020.

The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. Significant judgment is required in determining if a valuation allowance should be established, and the amount of such allowance if required. Factors used in making this determination include estimates relating to the performance of the business. Consideration is given to, among other things in making this determination, (i) future taxable income exclusive of reversing temporary differences and carryforwards, (ii) future reversals of existing taxable temporary differences, (iii) taxable income in prior carryback years, and (iv) tax planning strategies. Based on analysis of the Company’s tax position, management believes it is more likely than not that the Company will not realize certain state net operating losses of $10 million and state deferred tax assets of $2 million; therefore a valuation allowance has been established. The valuation allowance was $12 million and $19 million as of September 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020 and December 31, 2019, the Company had $111 million and $100 million, respectively, of gross unrecognized tax benefits. If recognized, approximately $82 million and $67 million, net of federal tax benefits, of unrecognized tax benefits as of September 30, 2020 and December 31, 2019, respectively, would affect the effective tax rate.

It is reasonably possible that the total amount of unrecognized tax benefits will change in the next 12 months. The Company estimates that the total amount of gross unrecognized tax benefits may decrease by nil to $10 million in the next 12 months primarily due to Internal Revenue Service (“IRS”) settlements and state exams.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. The Company recognized a net increase of $1 million and $2 million in interest and penalties for the three months and nine months ended September 30, 2020, respectively. The Company recognized a net decrease of $1 million and a net increase of $1 million in interest and penalties for the three months and nine months ended September 30, 2019, respectively. As of September 30, 2020 and December 31, 2019, the Company had a payable of $10 million and $8 million, respectively, related to accrued interest and penalties.

The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The federal statute of limitations are closed on years through 2015, except for one issue for 2014 and 2015 which was claimed on amended returns. The IRS is currently auditing the Company’s U.S. income tax returns for 2016, 2017 and 2018. The Company’s state income tax returns are currently under examination by various jurisdictions for years ranging from 2010 through 2018. In the United Kingdom (“UK”), Her Majesty’s Revenue and Customs is performing a business risk review of the Company’s UK subsidiaries for the 2016 tax year.

17. Contingencies

Contingencies

The Company and its subsidiaries are involved in the normal course of business in legal proceedings which include regulatory inquiries, arbitration and litigation, including class actions, concerning matters arising in connection with the conduct of its activities as a diversified financial services firm. These include proceedings specific to the Company as well as proceedings generally applicable to business practices in the industries in which it operates. The Company can also be subject to legal proceedings arising out of its general business activities, such as its investments, contracts, leases and employment relationships. Uncertain economic conditions, heightened and sustained volatility in the financial markets and significant financial reform legislation may increase the likelihood that clients and other persons or regulators may present or threaten legal claims or that regulators increase the scope or frequency of examinations of the Company or the financial services industry generally.

As with other financial services firms, the level of regulatory activity and inquiry concerning the Company’s businesses remains elevated. From time to time, the Company receives requests for information from, and/or has been subject to examination or claims by, the SEC, the Financial Industry Regulatory Authority, the OCC, the UK Financial Conduct Authority, the Federal Reserve Board, state insurance and securities regulators, state attorneys general and various other domestic or foreign governmental and quasi-governmental authorities on behalf of themselves or clients concerning the Company’s business activities and practices, and the practices of the Company’s financial advisors. The Company typically has numerous pending matters which include information requests, exams or inquiries regarding certain subjects, including: sales and distribution of mutual funds, exchange traded funds, annuities, equity and fixed income securities, real estate investment trusts, insurance products, and financial advice offerings, including managed accounts; supervision of the Company’s financial advisors and other associated persons; administration of insurance and annuity claims; security of client information; trading activity and the Company’s monitoring and supervision of such activity; and transaction monitoring systems and controls. The Company has cooperated and will continue to cooperate with the applicable regulators.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

These legal proceedings are subject to uncertainties and, as such, it is inherently difficult to determine whether any loss is probable or even reasonably possible, or to reasonably estimate the amount of any loss. The Company cannot predict with certainty if, how or when any such proceedings will be initiated or resolved. Matters frequently need to be more developed before a loss or range of loss can be reasonably estimated for any proceeding. An adverse outcome in one or more proceedings could eventually result in adverse judgments, settlements, fines, penalties or other sanctions, in addition to further claims, examinations or adverse publicity that could have a material adverse effect on the Company’s consolidated financial condition, results of operations or liquidity.

In accordance with applicable accounting standards, the Company establishes an accrued liability for contingent litigation and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. The Company discloses the nature of the contingency when management believes there is at least a reasonable possibility that the outcome may be material to the Company’s consolidated financial statements and, where feasible, an estimate of the possible loss. In such cases, there still may be an exposure to loss in excess of any amounts reasonably estimated and accrued. When a loss contingency is not both probable and reasonably estimable, the Company does not establish an accrued liability, but continues to monitor, in conjunction with any outside counsel handling a matter, further developments that would make such loss contingency both probable and reasonably estimable. Once the Company establishes an accrued liability with respect to a loss contingency, the Company continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established, and any appropriate adjustments are made each quarter.

Guaranty Fund Assessments

RiverSource Life and RiverSource Life of NY are required by law to be a member of the guaranty fund association in every state where they are licensed to do business. In the event of insolvency of one or more unaffiliated insurance companies, the Company could be adversely affected by the requirement to pay assessments to the guaranty fund associations. The Company projects its cost of future guaranty fund assessments based on estimates of insurance company insolvencies provided by the National Organization of Life and Health Insurance Guaranty Associations (“NOLHGA”) and the amount of its premiums written relative to the industry-wide premium in each state. The Company accrues the estimated cost of future guaranty fund assessments when it is considered probable that an assessment will be imposed, the event obligating the Company to pay the assessment has occurred and the amount of the assessment can be reasonably estimated.

The Company has a liability for estimated guaranty fund assessments and a related premium tax asset. As of both September 30, 2020 and December 31, 2019, the estimated liability was $12 million. As of both September 30, 2020 and December 31, 2019, the related premium tax asset was $10 million. The expected period over which guaranty fund assessments will be made and the related tax credits recovered is not known.

18. Earnings per Share

The computations of basic and diluted earnings per share is as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020		2019
	(in millions, except per share amounts)
Numerator:
Net income	$	(140)		$	543	$	1,357	$	1,430

Denominator:
Basic: Weighted-average common shares outstanding	123.0			132.7		124.8		135.8
Effect of potentially dilutive nonqualified stock options and other share-based awards	1.9			1.8		1.7		1.7
Diluted: Weighted-average common shares outstanding	124.9			134.5		126.5		137.5

Earnings per share:
Basic	$	(1.14)		$	4.09	$	10.87	$	10.53
Diluted	$	(1.14)	(1)	$	4.04	$	10.73	$	10.40

(1) Diluted shares used in this calculation represent basic shares due to the net loss. Using actual diluted shares would result in anti-dilution.

The calculation of diluted earnings per share excludes the incremental effect of 1.5 million and 1.0 million options as of September 30, 2020 and 2019, respectively, due to their anti-dilutive effect.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

19. Segment Information

During the third quarter of 2020, as the Company continues to reposition its business and implement strategies focusing on product features and sales, the composition of its reportable segments changed from five to four segments. The Chief Operating Decision Maker (“CODM”) manages the Annuities and Protection business as one operating segment, referred to as Retirement & Protection Solutions. The Retirement & Protection Solutions segment includes Retirement Solutions (Variable Annuities and Payout Annuities) and Protection Solutions (Life and Disability Insurance). In addition, the Company moved the Fixed Annuities and Fixed Indexed Annuities business to the Corporate & Other segment as a closed block. These segment reporting changes align with the way the CODM began assessing the performance of the Company’s reportable segments and other business activities effective in the third quarter of 2020. Certain prior period amounts have been revised to conform to the current presentation. The Company’s four reporting segments are Advice & Wealth Management, Asset Management, Retirement & Protection Solutions and Corporate & Other.

The accounting policies of the segments are the same as those of the Company, except for operating adjustments defined below, the method of capital allocation, the accounting for gains (losses) from intercompany revenues and expenses and not providing for income taxes on a segment basis.

Management uses segment adjusted operating measures in goal setting, as a basis for determining employee compensation and in evaluating performance on a basis comparable to that used by some securities analysts and investors. Consistent with GAAP accounting guidance for segment reporting, adjusted operating earnings is the Company’s measure of segment performance. Adjusted operating earnings should not be viewed as a substitute for GAAP pretax income. The Company believes the presentation of segment adjusted operating earnings, as the Company measures it for management purposes, enhances the understanding of its business by reflecting the underlying performance of its core operations and facilitating a more meaningful trend analysis.

Management excludes mean reversion related impacts from the Company’s adjusted operating measures. The mean reversion related impact is defined as the impact on variable annuity and VUL products for the difference between assumed and updated separate account investment performance on DAC, DSIC, unearned revenue amortization, reinsurance accrual and additional insurance benefit reserves.

Adjusted operating earnings is defined as adjusted operating net revenues less adjusted operating expenses. Adjusted operating net revenues and adjusted operating expenses exclude the market impact on IUL benefits (net of hedges and the related DAC amortization, unearned revenue amortization, and the reinsurance accrual), mean reversion related impacts (the impact on variable annuity and VUL products for the difference between assumed and updated separate account investment performance on DAC, DSIC, unearned revenue amortization, reinsurance accrual and additional insurance benefit reserves), integration and restructuring charges and the impact of consolidating investment entities. Adjusted operating net revenues also exclude net realized investment gains or losses (net of unearned revenue amortization and the reinsurance accrual) and the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments. Adjusted operating expenses also exclude the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC and DAC amortization), the market impact on fixed index annuity benefits (net of hedges and the related DAC amortization), and the DSIC and DAC amortization offset to net realized investment gains or losses. The market impact on variable annuity guaranteed benefits, fixed index annuity benefits and IUL benefits includes changes in embedded derivative values caused by changes in financial market conditions, net of changes in economic hedge values and unhedged items including the difference between assumed and actual underlying separate account investment performance, fixed income credit exposures, transaction costs and certain policyholder contract elections, net of related impacts on DAC and DSIC amortization. The market impact also includes certain valuation adjustments made in accordance with FASB Accounting Standards Codification 820, Fair Value Measurements and Disclosures, including the impact on embedded derivative values of discounting projected benefits to reflect a current estimate of the Company’s life insurance subsidiary’s nonperformance spread.

The following tables summarize selected financial information by segment and reconcile segment totals to those reported on the consolidated financial statements:


	September 30, 2020		December 31, 2019
	(in millions)
Advice & Wealth Management	$	20,558	$	17,607
Asset Management	8,143		8,226
Retirement & Protection Solutions	107,411		104,227
Corporate & Other	22,575		21,768
Total assets	$	158,687	$	151,828

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Adjusted operating net revenues:
Advice & Wealth Management	$	1,667	$	1,682	$	4,899	$	4,889
Asset Management	739		742		2,093		2,143
Retirement & Protection Solutions	781		788		2,295		2,337
Corporate & Other	132		450		412		1,340
Less: Eliminations (1)(2)	342		362		1,006		1,044
Total segment adjusted operating net revenues	2,977		3,300		8,693		9,665
Net realized gains (losses)	4		(13)		(19)		(4)
Revenue attributable to consolidated investment entities	21		22		52		67
Market impact on IUL benefits, net	1		17		(10)		(8)

Market impact of hedges on investments	—		(9)		—		(37)
Integration and restructuring charges	—		—		—		(3)
Total net revenues per Consolidated Statements of Operations	$	3,003	$	3,317	$	8,716	$	9,680

(1) Represents the elimination of intersegment revenues recognized for the three months ended September 30, 2020 and 2019 in each segment as follows: Advice & Wealth Management ($219 million and $240 million, respectively); Asset Management ($13 million and $13 million, respectively); Retirement & Protection Solutions ($110 million and $110 million, respectively); and Corporate & Other (nil and $(1) million, respectively).

(2) Represents the elimination of intersegment revenues recognized for the nine months ended September 30, 2020 and 2019 in each segment as follows: Advice & Wealth Management ($649 million and $689 million, respectively); Asset Management ($39 million and $40 million, respectively); Retirement & Protection Solutions ($319 million and $319 million, respectively); and Corporate & Other ($(1) million and $(4) million, respectively).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions)
Adjusted operating earnings:
Advice & Wealth Management	$	320	$	396	$	969	$	1,122
Asset Management	198		173		496		483
Retirement & Protection Solutions	(89)		165		300		545
Corporate & Other	(202)		(79)		(309)		(187)
Total segment adjusted operating earnings	227		655		1,456		1,963
Net realized gains (losses)	4		(11)		(18)		(2)
Net income (loss) attributable to consolidated investment entities	—		(1)		(2)		—
Market impact on variable annuity guaranteed benefits, net	(427)		(2)		274		(204)
Market impact on IUL benefits, net	(4)		48		(35)		(29)
Market impact on fixed annuity benefits, net	—		(1)		—		—
Mean reversion related impacts	17		(36)		(30)		18
Market impact of hedges on investments	—		(9)		—		(37)
Integration and restructuring charges	(1)		(2)		(4)		(11)
Pretax income per Consolidated Statements of Operations	$	(184)	$	641	$	1,641	$	1,698

AMERIPRISE FINANCIAL, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the “Forward-Looking Statements” that follow and our Consolidated Financial Statements and Notes presented in Item 1. Our Management’s Discussion and Analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2020 (“2019 10-K”), as well as our current reports on Form 8-K and other publicly available information. References below to “Ameriprise Financial,” “Ameriprise,” the “Company,” “we,” “us,” and “our” refer to Ameriprise Financial, Inc. exclusively, to our entire family of companies, or to one or more of our subsidiaries.

Overview

Ameriprise Financial is a diversified financial services company with a more than 125-year history of providing financial solutions. We are a long-standing leader in financial planning and advice with nearly $1 trillion in assets under management and administration as of September 30, 2020. We offer a broad range of products and services designed to achieve individual and institutional clients’ financial objectives.

The coronavirus disease 2019 (‘‘COVID-19’’) pandemic presents ongoing significant economic and societal disruption and market volatility, which has had and will continue to have ongoing impacts to our business and operating environment driven by a low interest rate environment and significant volatility in the equity markets and the potential associated implications to client behavior. There are no reliable estimates of how long the pandemic will last, how many people are likely to be affected by it, or its impact on the overall economy.

We continue to implement comprehensive strategies to navigate the operating environment spurred by the pandemic. During the first quarter, we implemented a work-from-home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health Organization, the U.S. Centers for Disease Control and governments. We have begun a thoughtful phased reopening of our office locations while complying with applicable health agencies’ guidelines and governmental orders. We continue to operate successfully and satisfy elevated customer service volumes in this unique time - client service and the health and safety of our clients, advisors and employees remain our priorities while our employees and advisors have various work arrangements. The pandemic strategy we have employed is flexible and scalable, recognizing this pandemic is widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity.

There was significant economic volatility during 2020 and our results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic. There is still uncertainty surrounding the magnitude, duration, speed and reach of the ongoing global pandemic, as well as the impact of actions that have been or could be taken by governmental authorities, clients or other third parties. While we have successfully adapted to a virtual work environment and deployed numerous adaptive business strategies so far this year, we believe the pandemic and its accompanying impact on the global financial markets and on our operations and financial results may cause results not to be comparable to the same period in previous years. The results presented in this report are not necessarily indicative of future operating results. For further information regarding the impact of the COVID-19 pandemic, and any potentially material effects, see Item 1A, “Risk Factors” in this report.

The products and services we provide retail clients and, to a lesser extent, institutional clients, are the primary source of our revenues and net income. Revenues and net income are significantly affected by investment performance and the total value and composition of assets we manage and administer for our retail and institutional clients as well as the distribution fees we receive from other companies. These factors, in turn, are largely determined by overall investment market performance and the depth and breadth of our individual client relationships.

Financial markets and macroeconomic conditions have had and will continue to have a significant impact on our operating and performance results. In addition, the business, political and regulatory environments in which we operate are subject to elevated uncertainty and substantial, frequent change, particularly given the ongoing COVID-19 pandemic. Accordingly, we expect to continue focusing on our key strategic objectives and obtaining operational and strategic leverage from our core capabilities. The success of these and other strategies may be affected by the factors discussed in Item 1A, “Risk Factors” in our 2019 10-K and other factors as discussed herein.

Equity price, credit market and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects they have on the asset management and other asset-based fees we earn, the value of deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) assets, the values of liabilities for guaranteed benefits associated with our variable annuities and the values of derivatives held to hedge these benefits and the “spread” income generated on our fixed deferred annuities, fixed insurance, the fixed portion of variable annuities and variable insurance contracts and deposit products.

AMERIPRISE FINANCIAL, INC.

Earnings, as well as adjusted operating earnings after tax, will be negatively impacted by the ongoing low interest rate environment should it continue. In addition to continuing spread compression in our interest sensitive product lines, a sustained low interest rate environment may result in increases to our reserves and changes in various rate assumptions we use to amortize DAC and DSIC, which may negatively impact our adjusted operating earnings after tax. For additional discussion on our interest rate risk, see Item 3. “Quantitative and Qualitative Disclosures About Market Risk.”

In the third quarter, we updated our market-related assumptions and implemented model changes related to our living benefit valuation. In addition, we conducted our annual review of life insurance and annuity valuation assumptions relative to current experience and management expectations including modeling changes. These aforementioned changes are collectively referred to as unlocking. We also reviewed our active life future policy benefit reserve adequacy for our long term care (“LTC”) business in the third quarter. See our Consolidated and Segment Results of Operations sections for the pretax impacts on our revenues and expenses attributable to unlocking and LTC loss recognition.

During the third quarter of 2020, as we continue to reposition the business and implement strategies focusing on product features and sales, the composition of our reportable segments changed from five to four segments. The Chief Operating Decision Maker (“CODM”) now manages the Annuities and Protection business as one operating segment, referred to as Retirement & Protection Solutions. The Retirement & Protection Solutions segment will include Retirement Solutions (Variable Annuities and Payout Annuities) and Protection Solutions (Life and Disability Insurance). In addition, we moved the Fixed Annuities and Fixed Indexed Annuities business to the Corporate & Other segment as a closed block. These segment reporting changes align with the way our CODM began assessing the performance of our reportable segments and other business activities effective in the third quarter of 2020. Certain prior period amounts have been revised to conform to the current presentation. These changes have no impact on previously reported consolidated balance sheets or statements of operations, comprehensive income, stockholders equity, or cash flows.

On October 1, 2019, we completed the sale of our Ameriprise Auto & Home Insurance business (“AAH”) to American Family Insurance Mutual Holding Company (American Family Insurance). This sale is consistent with our focus on our core growth areas of Advice & Wealth Management and Asset Management.

We consolidate certain variable interest entities for which we provide asset management services. These entities are defined as consolidated investment entities (“CIEs”). While the consolidation of the CIEs impacts our balance sheet and income statement, our exposure to these entities is unchanged and there is no impact to the underlying business results. For further information on CIEs, see Note 5 to our Consolidated Financial Statements. The results of operations of the CIEs are reflected in the Corporate & Other segment. On a consolidated basis, the management fees we earn for the services we provide to the CIEs and the related general and administrative expenses are eliminated and the changes in the fair value of assets and liabilities related to the CIEs, primarily syndicated loans and debt, are reflected in net investment income. We include the fees from these entities in the management and financial advice fees line within our Asset Management segment.

While our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), management believes that adjusted operating measures, which exclude net realized investment gains or losses, net of the related DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual; the market impact on variable annuity guaranteed benefits, net of hedges and the related DSIC and DAC amortization; the market impact on indexed universal life (“IUL”) benefits, net of hedges and the related DAC amortization, unearned revenue amortization and the reinsurance accrual; the market impact on fixed index annuity benefits, net of hedges and the related DAC amortization; mean reversion related impacts (the impact on variable annuity and variable universal life (“VUL”) products for the difference between assumed and updated separate account investment performance on DAC, DSIC, unearned revenue amortization, reinsurance accrual and additional insurance benefit reserves); the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments; gain or loss on disposal of a business that is not considered discontinued operations; integration and restructuring charges; income (loss) from discontinued operations; and the impact of consolidating CIEs, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. Management uses these non-GAAP measures to evaluate our financial performance on a basis comparable to that used by some securities analysts and investors. Also, certain of these non-GAAP measures are taken into consideration, to varying degrees, for purposes of business planning and analysis and for certain compensation-related matters. Throughout our Management’s Discussion and Analysis, these non-GAAP measures are referred to as adjusted operating measures. These non-GAAP measures should not be viewed as a substitute for U.S. GAAP measures.

It is management’s priority to increase shareholder value over a multi-year horizon by achieving our on-average, over-time financial targets.

Our financial targets are:

•Adjusted operating earnings per diluted share growth of 12% to 15%, and

•Adjusted operating return on equity excluding accumulated other comprehensive income (“AOCI”) of over 30%.

AMERIPRISE FINANCIAL, INC.

The following tables reconcile our GAAP measures to adjusted operating measures:


					Per Diluted Share
	Three Months Ended September 30,				Three Months Ended September 30,
	2020		2019		2020			2019
	(in millions, except per share amounts)
Net income (loss)	$	(140)	$	543	$	(1.14)	(3)	4.04
Add: Basic to diluted share conversion	—		—		0.02		(4)	—
Less: Net income (loss) attributable to CIEs	—		(1)		—			(0.01)
Add: Integration/restructuring charges (1)	1		2		0.01			0.01
Add: Market impact on variable annuity guaranteed benefits (1)	427		2		3.42			0.01
Add: Market impact on fixed index annuity benefits (1)	—		1		—			0.01
Add: Market impact on IUL benefits (1)	4		(48)		0.03			(0.36)
Add: Mean reversion related impacts (1)	(17)		36		(0.14)			0.27
Add: Market impact of hedges on investments (1)	—		9		—			0.07
Less: Net realized investment gains (losses) (1)	4		(11)		0.03			(0.08)
Tax effect of adjustments (2)	(87)		(3)		(0.70)			(0.02)
Adjusted operating earnings	$	184	$	554	$	1.47		$	4.12

Weighted average common shares outstanding:
Basic	123.0		132.7
Diluted	124.9		134.5


					Per Diluted Share
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions, except per share amounts)
Net income	$	1,357	$	1,430	$	10.73	$	10.40
Less: Net income (loss) attributable to CIEs	(2)		—		(0.01)		—
Add: Integration/restructuring charges (1)	4		11		0.03		0.08
Add: Market impact on variable annuity guaranteed benefits (1)	(274)		204		(2.17)		1.48
Add: Market impact on fixed index annuity benefits (1)	—		—		—		—
Add: Market impact on IUL benefits (1)	35		29		0.28		0.21
Add: Mean reversion related impacts (1)	30		(18)		0.24		(0.13)
Add: Market impact of hedges on investments (1)	—		37		—		0.27
Less: Net realized investment gains (losses) (1)	(18)		(2)		(0.14)		(0.01)
Tax effect of adjustments (2)	39		(56)		0.31		(0.41)
Adjusted operating earnings	$	1,211	$	1,639	$	9.57	$	11.92

Weighted average common shares outstanding:
Basic	124.8		135.8
Diluted	126.5		137.5

(1) Pretax adjusted operating adjustments.

(2) Calculated using the statutory tax rate of 21%.

(3) Diluted shares used in this calculation represent basic shares due to the net loss. Using actual diluted shares would result in anti-dilution.

(4) Represents the difference of the per share amount for net loss using basic shares compared to the per share amount for net loss using diluted shares.

AMERIPRISE FINANCIAL, INC.

The following table reconciles the trailing twelve months’ sum of net income to adjusted operating earnings and the five-point average of quarter-end equity to adjusted operating equity:


	Twelve Months Ended September 30,
	2020			2019
	(in millions)
Net income	$	1,820		$	1,969
Less: Adjustments (1)	58			(214)
Adjusted operating earnings	1,762			2,183

Total Ameriprise Financial, Inc. shareholders’ equity	6,197			5,815
Less: AOCI, net of tax	243			21
Total Ameriprise Financial, Inc. shareholders’ equity, excluding AOCI	5,954			5,794
Less: Equity impacts attributable to CIEs	—			1
Adjusted operating equity	$	5,954		$	5,793

Return on equity, excluding AOCI	30.6		%	34.0		%
Adjusted operating return on equity, excluding AOCI (2)	29.6		%	37.7		%

(1) Adjustments reflect the trailing twelve months’ sum of after-tax net realized investment gains/losses, net of DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual; mean reversion related impacts; gain or loss on disposal of business that is not considered discontinued operations; the market impact on variable annuity guaranteed benefits, net of hedges and related DSIC and DAC amortization; the market impact on IUL benefits, net of hedges and the related DAC amortization, unearned revenue amortization, and the reinsurance accrual; the market impact on fixed index annuity benefits, net of hedges and the related DAC amortization; the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments; integration and restructuring charges; and net income (loss) from consolidated investment entities. After-tax is calculated using the statutory tax rate of 21%.

(2) Adjusted operating return on equity, excluding AOCI, is calculated using the trailing twelve months of adjusted operating earnings in the numerator, and Ameriprise Financial shareholders’ equity, excluding AOCI and the impact of consolidating investment entities using a five-point average of quarter-end equity in the denominator. After-tax is calculated using the statutory tax rate of 21%.

Critical Accounting Estimates

The accounting and reporting policies that we use affect our Consolidated Financial Statements. Certain of our accounting and reporting policies are critical to an understanding of our consolidated results of operations and financial condition and, in some cases, the application of these policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of our Consolidated Financial Statements. These accounting policies are discussed in detail in “Management’s Discussion and Analysis — Critical Accounting Estimates” in our 2019 10-K.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements and their expected impact on our future consolidated results of operations and financial condition, see Note 3 to our Consolidated Financial Statements.

Assets Under Management and Administration

Assets under management (“AUM”) include external client assets for which we provide investment management services, such as the assets of the Columbia Threadneedle Investments funds, institutional clients and clients in our advisor platform held in wrap accounts as well as assets managed by sub-advisors selected by us. AUM also includes certain assets on our Consolidated Balance Sheets for which we provide investment management services and recognize management fees in our Asset Management segment, such as the assets of the general account and the variable product funds held in the separate accounts of our life insurance subsidiaries and CIEs. These assets do not include assets under advisement, for which we provide advisory services such as model portfolios but do not have full discretionary investment authority.

Assets under administration (“AUA”) include assets for which we provide administrative services such as client assets invested in other companies’ products that we offer outside of our wrap accounts. These assets include those held in clients’ brokerage accounts. We generally record revenues received from administered assets as distribution fees. We do not exercise management discretion over these assets and do not earn a management fee. These assets are not reported on our Consolidated Balance Sheets. AUA also includes certain assets on our Consolidated Balance Sheets for which we do not provide investment management services and do not recognize management fees, such as investments in non-affiliated funds held in the separate accounts of our life insurance subsidiaries.

AMERIPRISE FINANCIAL, INC.

These assets do not include assets under advisement, for which we provide advisory services such as model portfolios but do not have full discretionary investment authority.

The following table presents detail regarding our AUM and AUA:


	September 30,				Change
	2020		2019
	(in billions)
Assets Under Management and Administration
Advice & Wealth Management AUM	$	337.0	$	295.9	$	41.1	14	%
Asset Management AUM	498.0		468.6		29.4		6
Eliminations	(34.1)		(29.7)		(4.4)		(15)
Total Assets Under Management	800.9		734.8		66.1		9
Total Assets Under Administration	197.7		186.5		11.2		6
Total AUM and AUA	$	998.6	$	921.3	$	77.3	8	%

Total AUM increased $66.1 billion, or 9%, to $800.9 billion as of September 30, 2020 compared to $734.8 billion as of September 30, 2019 due to a $41.1 billion increase in Advice & Wealth Management AUM driven by wrap account net inflows and market appreciation and a $29.4 billion increase in Asset Management AUM driven by market appreciation and continued improvement in net flows, partially offset by retail fund distributions. See our segment results of operations discussion below for additional information on changes in our AUM.

Consolidated Results of Operations for the Three Months Ended September 30, 2020 and 2019

The following table presents our consolidated results of operations:


	Three Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	1,893	$	1,794	$	99	6	%
Distribution fees	400		480		(80)		(17)
Net investment income	300		356		(56)		(16)
Premiums	80		374		(294)		(79)
Other revenues	340		347		(7)		(2)
Total revenues	3,013		3,351		(338)		(10)
Banking and deposit interest expense	10		34		(24)		(71)
Total net revenues	3,003		3,317		(314)		(9)
Expenses
Distribution expenses	1,028		971		57		6
Interest credited to fixed accounts	170		127		43		34
Benefits, claims, losses and settlement expenses	1,104		594		510		86
Amortization of deferred acquisition costs	85		112		(27)		(24)
Interest and debt expense	37		52		(15)		(29)
General and administrative expense	763		820		(57)		(7)
Total expenses	3,187		2,676		511		19
Pretax income (loss)	(184)		641		(825)		NM
Income tax provision	(44)		98		(142)		NM
Net income (loss)	$	(140)	$	543	$	(683)	NM
NM Not Meaningful.

AMERIPRISE FINANCIAL, INC.

Overall

Pretax loss was $184 million for the three months ended September 30, 2020 compared to pretax income of $641 million for the prior year period. The following impacts were significant drivers of the period-over-period change in pretax income:

•The unfavorable impact of unlocking and LTC loss recognition was $454 million for the three months ended September 30, 2020 compared to $16 million for the prior year period.

•The market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC and DAC amortization) was an expense of $427 million for the three months ended September 30, 2020 compared to an expense of $2 million for the prior year period.

•A negative impact of $116 million in the Advice & Wealth Management segment from lower short-term interest rates.

•The market impact on IUL benefits (net of hedges and the related DAC amortization, unearned revenue amortization and the reinsurance accrual) was an expense of $4 million for the three months ended September 30, 2020 compared to a benefit of $48 million for the prior year period.

•The mean reversion related impact was a benefit of $17 million for the three months ended September 30, 2020 compared to an expense of $36 million for the prior year period.

•A favorable impact from higher average equity markets for the three months ended September 30, 2020 compared to the prior year period.

The following table presents the total pretax impacts on our revenues and expenses attributable to unlocking and LTC loss recognition for the three months ended September 30:


Pretax Increase (Decrease)	2020		2019
	(in millions)
Other revenues	$	(1)	$	5
Total revenues	(1)		5

Benefits, claims, losses and settlement expenses:
LTC unlocking and loss recognition	141		8
Unlocking impact, excluding LTC	212		(1)
Total benefits, claims, losses and settlement expenses	353		7
Amortization of DAC	100		14
Total expenses	453		21
Pretax income(1)	$	(454)	$	(16)

(1) Includes a $12 million net expense and $4 million net benefit related to the market impact on variable annuity guaranteed benefits for the three months ended September 30, 2020 and 2019, respectively, which is excluded from adjusted operating earnings. Refer to Results of Operations by Segment for the impact to pretax adjusted operating earnings attributable to unlocking and LTC loss recognition.

The primary drivers of the unfavorable unlocking impact excluding LTC in the third quarter of 2020 were consistent with the prior year period and include the following items:

•Updates to our interest rate assumptions resulted in a higher expense in the third quarter of 2020 compared to the prior year period.

•Lower surrenders assumptions on variable annuities with living benefit guarantees resulted in a higher expense in the third quarter of 2020 compared to the prior year period.

•Changes in equity market volatility and correlation assumptions on variable annuities resulted in a lower benefit in the third quarter of 2020 compared to the prior year period.

The primary drivers of the unfavorable LTC unlocking and loss recognition in the third quarter of 2020 were consistent to the prior year period and include the following items:

•Updates to our interest rates assumptions resulted in a higher expense in the third quarter of 2020 compared to the prior year period.

•Assumptions regarding morbidity, mortality and persistency were more in line with experience and resulted in a lower expense in the third quarter of 2020 compared to the prior year period.

•Approved and expected premium rate increases and benefit reductions resulted in a lower benefit in the third quarter of 2020 compared to the prior year period.

The total unfavorable impact of updates to our interest rate assumptions noted above for unlocking and LTC loss recognition was $405 million. The non-cash unfavorable impact was primarily driven by the reduction of our 10-year Treasury rate assumption from 5% to 3.5% due to recent interest rate trends and extending the grading period from three years to 6.5 years with no grading in 2020.

AMERIPRISE FINANCIAL, INC.

Net Revenues

Net revenues decreased $314 million, or 9%, to $3.0 billion for the three months ended September 30, 2020 compared to $3.3 billion for the prior year period.

Management and financial advice fees increased $99 million, or 6%, to $1.9 billion for the three months ended September 30, 2020 compared to $1.8 billion for the prior year period reflecting higher average equity markets and higher wrap account net inflows partially offset by lower performance fees.

Distribution fees decreased $80 million, or 17%, to $400 million for the three months ended September 30, 2020 compared to $480 million for the prior year period due to $90 million of lower fees on off-balance sheet brokerage cash primarily due to a decrease in short-term interest rates, variable annuity net outflows and lower transactional activity partially offset by higher average equity markets.

Net investment income decreased $56 million, or 16%, to $300 million for the three months ended September 30, 2020 compared to $356 million for the prior year period primarily reflecting the following items:

•The unfavorable impact of lower short-term interest rates on certificates and on-balance sheet brokerage cash, and lower certificate balances due to lower average invested assets.

•Net realized investment gains of $4 million for the three months ended September 30, 2020 compared to net realized investment losses of $10 million for the prior year period.

•The favorable impact of higher invested assets related to the bank.

•Lower impairments of our investments in affordable housing partnerships.

Premiums decreased $294 million, or 79% to $80 million for the three months ended September 30, 2020 compared to $374 million for the prior year primarily reflecting the sale of AAH and lower sales of immediate annuities with a life contingent feature. Premiums in the prior year period included $281 million from AAH.

Other revenues decreased $7 million, or 2%, to $340 million for the three months ended September 30, 2020 compared to $347 million primarily due to a $1 million unfavorable impact from unlocking for the three months ended September 30, 2020 compared to a $5 million favorable impact in the prior year period.

Banking and deposit interest expense decreased $24 million, or 71%, to $10 million for the three months ended September 30, 2020 compared to $34 million due to lower average crediting rates on certificates and lower average certificate balances.

Expenses

Total expenses increased $511 million, or 19%, to $3.2 billion for the three months ended September 30, 2020 compared to $2.7 billion for the prior year period.

Distribution expenses increased $57 million, or 6%, to $1.0 billion for the three months ended September 30, 2020 compared to $971 million for the prior year period reflecting higher average markets and higher advisor compensation due to an increase in average wrap account balances.

Interest credited to fixed accounts increased $43 million, or 34%, to $170 million for the three months ended September 30, 2020 compared to $127 million for the prior year period primarily reflecting the following items:

•A $13 million increase in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The unfavorable impact of the nonperformance credit spread was $18 million for the three months ended September 30, 2020 compared to an unfavorable impact of $5 million for the prior year period.

•A $31 million increase in expense from other market impacts on IUL benefits, net of hedges, which was a benefit of $14 million for the three months ended September 30, 2020 compared to a benefit of $45 million for the prior year period. The increase in expense was primarily due to a an increase in the IUL embedded derivative, which is reflecting higher option costs.

Benefits, claims, losses and settlement expenses increased $510 million, or 86% to $1.1 billion for the three months ended September 30, 2020 compared to $594 million for the prior year period primarily reflecting the following items:

•A $214 million increase in expense from the unhedged nonperformance credit spread risk adjustment on variable annuity guaranteed benefits. The unfavorable impact of the nonperformance credit spread was $103 million for the three months ended September 30, 2020 compared to a favorable impact of $111 million for the prior year period. As the estimate of the nonperformance credit spread over the LIBOR swap curve tightens or widens, the embedded derivative liability will increase or decrease. As the embedded derivative liability on which the nonperformance credit spread is applied increases (decreases), the impact of the nonperformance credit spread is favorable (unfavorable) to expense.

AMERIPRISE FINANCIAL, INC.

•A $288 million increase in expense from other market impacts on variable annuity guaranteed benefits, net of hedges in place to offset those risks and the related DSIC amortization. This increase was the result of an unfavorable $1.5 billion change in the market impact on derivatives hedging the variable annuity guaranteed benefits, partially offset by a favorable $1.3 billion change in the market impact on variable annuity guaranteed living benefits reserves. The main market drivers contributing to these changes are summarized below:

•Equity market impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in an expense for the three months ended September 30, 2020 compared to a benefit for the prior year period.

•Interest rate impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in a lower expense for the three months ended September 30, 2020 compared to the prior year period.

•Volatility impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in a higher benefit for the three months ended September 30, 2020 compared to the prior year period.

•Other unhedged items, including the difference between the assumed and actual underlying separate account investment performance, fixed income credit exposures, transaction costs and various behavioral items, were a net unfavorable impact compared to the prior year period.

•The impact of unlocking excluding LTC was an expense of $212 million for the three months ended September 30, 2020 compared to a benefit of $1 million for the prior year period. The unlocking impact for the third quarter of 2020 primarily reflected a higher unfavorable impact from updates to our interest rate assumptions and lower surrenders on variable annuities with living benefit guarantees partially offset by a lower benefit from changes in equity market volatility and correlation assumptions on variable annuities compared to the prior year period.

•Our annual review of LTC active life future policy benefit reserve adequacy in the third quarter of 2020 resulted in unlocking and loss recognition of $141 million compared to $8 million in the prior year period. The unlocking and loss recognition in the third quarter of 2020 was primarily due to a higher unfavorable impact from updates to our interest rates assumptions, a lower unfavorable impact from lesser changes to assumptions regarding morbidity, mortality and persistency and a lower benefit from approved and expected premium rate increases and benefit reductions compared to the prior year period.

•A $259 million decrease in auto and home expenses reflecting the sale of AAH.

•The mean reversion related impact was a benefit of $8 million for the three months ended September 30, 2020 compared to an expense of $25 million for the prior year period.

•A $12 million decrease in reserves for immediate annuities with a life contingent feature primarily due to lower sales. This impact is offset by a decrease in premiums.

Amortization of DAC decreased $27 million, or 24% to $85 million for the three months ended September 30, 2020 compared to an expense of $112 million for the prior year period primarily reflecting the following items:

•The DAC offset to the market impact on variable annuity guaranteed benefits was a benefit of $64 million for the three months ended September 30, 2020 compared to an expense of $8 million for the prior year period.

•The mean reversion related impact was a benefit of $9 million for the three months ended September 30, 2020 compared to an expense of $11 million for the prior year period.

•A $14 million decrease in auto and home expenses reflecting the sale of AAH.

•The impact of unlocking in the third quarter of 2020 was an expense of $100 million compared to an expense of $14 million in the prior year period. The unlocking impact for the third quarter of 2020 primarily reflected a higher unfavorable impact from updates to our interest rate assumptions and lower surrenders on variable annuities with living benefit guarantees compared to the prior year period.

•The DAC offset to the market impact on IUL benefits, net of hedges was an expense of $1 million for the three months ended September 30, 2020 compared to $9 million for the prior year period.

Interest and debt expense decreased $15 million, or 29%, to $37 million for the three months ended September 30, 2020 compared to $52 million for the prior year period primarily due to a decrease in interest expense of CIEs.

General and administrative expense decreased $57 million, or 7%, to $763 million for the three months ended September 30, 2020 compared to $820 million for the prior year period primarily reflecting a $29 million decrease in auto and home expenses reflecting the sale of AAH, disciplined expense management and reengineering.

Income Taxes

Our effective tax rate was 23.5% for the three months ended September 30, 2020 compared to 15.4% for the prior year period. The higher effective tax rate for the three months ended September 30, 2020 compared to the prior year period is primarily the result of pretax loss. See Note 16 to our Consolidated Financial Statements for additional discussion on income taxes.

AMERIPRISE FINANCIAL, INC.

Results of Operations by Segment for the Three Months Ended September 30, 2020 and 2019

Adjusted operating earnings is the measure of segment profit or loss management uses to evaluate segment performance. Adjusted operating earnings should not be viewed as a substitute for GAAP pretax income. We believe the presentation of segment adjusted operating earnings as we measure it for management purposes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitating a more meaningful trend analysis. See Note 19 to the Consolidated Financial Statements for further information on the presentation of segment results and our definition of adjusted operating earnings.

The following table presents summary financial information by segment:


	Three Months Ended September 30,
	2020		2019
	(in millions)
Advice & Wealth Management
Net revenues	$	1,667	$	1,682
Expenses	1,347		1,286
Adjusted operating earnings	$	320	$	396
Asset Management
Net revenues	$	739	$	742
Expenses	541		569
Adjusted operating earnings	$	198	$	173
Retirement & Protection Solutions
Net revenues	$	781	$	788
Expenses	870		623
Adjusted operating earnings	$	(89)	$	165
Corporate & Other
Net revenues	$	132	$	450
Expenses	334		529
Adjusted operating loss	$	(202)	$	(79)

The following table presents the segment pretax adjusted operating impacts on our revenues and expenses attributable to unlocking and LTC loss recognition for the three months ended September 30:


Segment Pretax Operating Increase (Decrease)	2020				2019
	Retirement & Protection Solutions		Corporate		Retirement & Protection Solutions		Corporate
	(in millions)
Other revenues	$	2	$	(3)	$	5	$	—
Total revenues	2		(3)		5		—

Benefits, claims, losses and settlement expenses
LTC unlocking and loss recognition	—		141		—		8
Unlocking impact, excluding LTC	189		7		6		(2)
Total benefits, claims, losses and settlement expenses	189		148		6		6
Amortization of DAC	108		(4)		15		(2)
Total expenses	297		144		21		4
Pretax income	$	(295)	$	(147)	$	(16)	$	(4)

AMERIPRISE FINANCIAL, INC.

Advice & Wealth Management

The following table presents the changes in wrap account assets and average balances for the three months ended September 30:


	2020		2019
	(in billions)
Beginning balance	$	317.6	$	292.0
Net flows	5.2		4.1
Market appreciation (depreciation) and other	17.2		2.0
Ending balance	$	340.0	$	298.1

Advisory wrap account assets ending balance (1)	$	336.0	$	295.0
Average advisory wrap account assets (2)	$	327.4	$	291.9

(1) Advisory wrap account assets represent those assets for which clients receive advisory services and are the primary driver of revenue earned on wrap accounts. Clients may hold non-advisory investments in their wrap accounts that do not incur an advisory fee.

(2) Average ending balances are calculated using an average of the prior period’s ending balance and all months in the current period excluding the most recent month for the three months ended September 30, 2020. The calculation of the prior year period average used an average of the prior period’s ending balance and all the months in the current period.

Wrap account assets increased $22.4 billion, or 7%, during the three months ended September 30, 2020 due to market appreciation of $17.2 billion and net inflows of $5.2 billion. Average advisory wrap account assets increased $35.5 billion, or 12%, compared to the prior year period reflecting market appreciation and net inflows.

The following table presents the results of operations of our Advice & Wealth Management segment on an adjusted operating basis:


	Three Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	1,077	$	984	$	93	9	%
Distribution fees	479		578		(99)		(17)
Net investment income	70		110		(40)		(36)
Other revenues	51		45		6		13
Total revenues	1,677		1,717		(40)		(2)
Banking and deposit interest expense	10		35		(25)		(71)
Total net revenues	1,667		1,682		(15)		(1)
Expenses
Distribution expenses	998		948		50		5
Interest and debt expense	3		2		1		50
General and administrative expense	346		336		10		3
Total expenses	1,347		1,286		61		5
Adjusted operating earnings	$	320	$	396	$	(76)	(19)	%

Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, decreased $76 million, or 19%, to $320 million for the three months ended September 30, 2020 compared to $396 million for the prior year period due to lower earnings on brokerage cash as a result of low interest rates, partially offset by higher average wrap account balances. Pretax adjusted operating margin was 19.2% for the three months ended September 30, 2020 compared to 23.5% for the prior year period.

We launched Ameriprise Bank, FSB in the second quarter of 2019. In the third quarter of 2019, we purchased the existing Ameriprise portfolio of credit card accounts from a third-party bank. Cash sweep balances for Ameriprise Bank, FSB were a total of $6.3 billion as of September 30, 2020 compared to a total of $2.5 billion as of September 30, 2019, which contributed earnings of $8 million for the three months ended September 30, 2020 compared to $2 million for the prior year period.

AMERIPRISE FINANCIAL, INC.

Net Revenues

Net revenues exclude net realized investment gains or losses. Net revenues decreased $15 million, or 1%, for the three months ended September 30, 2020 compared to the prior year period. Adjusted operating net revenue per advisor was $168,000 for the three months ended September 30, 2020 compared to $169,000 for the prior year period.

Management and financial advice fees increased $93 million, or 9%, to $1.1 billion for the three months ended September 30, 2020 compared to $984 million for the prior year period primarily due to growth in average wrap account assets. Average advisory wrap account assets increased $35.5 billion, or 12%, compared to the prior year period reflecting net inflows and market appreciation.

Distribution fees decreased $99 million, or 17%, to $479 million for the three months ended September 30, 2020 compared to $578 million for the prior year period reflecting $90 million of lower fees on off-balance sheet brokerage cash due to a decrease in short-term interest rates and lower sales of variable annuities, partially offset by higher average equity markets.

Net investment income, which excludes net realized investment gains or losses, decreased $40 million, or 36%, to $70 million for the three months ended September 30, 2020 compared to $110 million for the prior year period primarily due to lower certificate balances and the unfavorable impact of lower short-term interest rates on certificates and on-balance sheet brokerage cash, partially offset by higher average invested assets due to increased bank deposits.

Banking and deposit interest expense decreased $25 million, or 71%, to $10 million for the three months ended September 30, 2020 compared to $35 million for the prior year period primarily due to lower average crediting rates on certificates and lower average certificate balances.

Expenses

Total expenses increased $61 million, or 5%, for the three months ended September 30, 2020 compared to the prior year period.

Distribution expenses increased $50 million, or 5%, to $998 million for the three months ended September 30, 2020 compared to $948 million for the prior year period reflecting higher asset-based advisor compensation from higher wrap account assets and increased investments in recruiting experienced advisors.

General and administrative expense increased $10 million, or 3%, to $346 million for the three months ended September 30, 2020 compared to $336 million for the prior year period primarily due to planned investments for future growth, partially offset by expense reengineering.

AMERIPRISE FINANCIAL, INC.

Asset Management

The following tables present the mutual fund performance of our retail Columbia Threadneedle Investments funds as of September 30:


Columbia Mutual Fund Rankings in top 2 Lipper Quartiles			2020		2019
Domestic Equity	Equal weighted	1 year	71	%	46	%
		3 year	61	%	47	%
		5 year	57	%	56	%
	Asset weighted	1 year	75	%	63	%
		3 year	72	%	61	%
		5 year	69	%	75	%


International Equity	Equal weighted	1 year	79	%	77	%
		3 year	92	%	80	%
		5 year	92	%	60	%
	Asset weighted	1 year	67	%	83	%
		3 year	89	%	87	%
		5 year	89	%	68	%


Taxable Fixed Income	Equal weighted	1 year	71	%	76	%
		3 year	69	%	75	%
		5 year	80	%	88	%
	Asset weighted	1 year	83	%	64	%
		3 year	57	%	82	%
		5 year	83	%	90	%


Tax Exempt Fixed Income	Equal weighted	1 year	53	%	89	%
		3 year	74	%	100	%
		5 year	84	%	94	%
	Asset weighted	1 year	28	%	98	%
		3 year	59	%	100	%
		5 year	65	%	98	%


Asset Allocation Funds	Equal weighted	1 year	86	%	38	%
		3 year	71	%	73	%
		5 year	75	%	89	%
	Asset weighted	1 year	95	%	64	%
		3 year	84	%	94	%
		5 year	93	%	99	%


Number of funds with 4 or 5 Morningstar star ratings	Overall	58	52
	3 year	39	48
	5 year	50	49


Percent of funds with 4 or 5 Morningstar star ratings	Overall	63	%	50	%
	3 year	42	%	47	%
	5 year	55	%	49	%


Percent of assets with 4 or 5 Morningstar star ratings	Overall	66	%	58	%
	3 year	46	%	49	%
	5 year	51	%	57	%

Mutual fund performance rankings are based on the performance of the Institutional Class for Columbia branded mutual funds. Only funds with Institutional Class shares are included.

Equal Weighted Rankings in Top 2 Quartiles: Counts the number of funds with above median ranking divided by the total number of funds. Asset size is not a factor.

Asset Weighted Rankings in Top 2 Quartiles: Sums the total assets of the funds with above median ranking divided by total assets of all funds. Funds with more assets will receive a greater share of the total percentage above or below median.

AMERIPRISE FINANCIAL, INC.


Threadneedle Retail Fund Rankings in Top 2 Morningstar Quartiles or Above Index Benchmark			2020		2019
Equity	Equal weighted	1 year	78	%	65	%
		3 year	76	%	64	%
		5 year	73	%	72	%
	Asset weighted	1 year	86	%	79	%
		3 year	85	%	73	%
		5 year	84	%	82	%


Fixed Income	Equal weighted	1 year	93	%	79	%
		3 year	92	%	88	%
		5 year	96	%	81	%
	Asset weighted	1 year	99	%	81	%
		3 year	97	%	93	%
		5 year	97	%	93	%


Allocation (Managed) Funds	Equal weighted	1 year	78	%	67	%
		3 year	75	%	75	%
		5 year	88	%	75	%
	Asset weighted	1 year	96	%	56	%
		3 year	96	%	94	%
		5 year	99	%	94	%

The performance of each fund is measured on a consistent basis against the most appropriate benchmark – a peer group of similar funds or an index. Prior period rankings have been adjusted to reflect foreign exchange forward and spot contract transactions executed by those funds, and also to include cash items, primarily fee rebates, that were previously excluded from the gross performance calculations.

Equal weighted: Counts the number of funds with above median ranking (if measured against peer group) or above index performance (if measured against an index) divided by the total number of funds. Asset size is not a factor.

Asset weighted: Sums the assets of the funds with above median ranking (if measured against peer group) or above index performance (if measured against an index) divided by the total sum of assets in the funds. Funds with more assets will receive a greater share of the total percentage above or below median or index.

Aggregated Allocation (Managed) Funds include funds that invest in other funds of the Threadneedle range including those funds that invest in both equity and fixed income.

Aggregated Threadneedle data includes funds on the Threadneedle platform sub-advised by Columbia Management as well as advisors not affiliated with Ameriprise Financial, Inc.

The following table presents global managed assets by type:


									Average (1)				Change
	September 30,				Change				Three Months Ended September 30,
	2020		2019						2020		2019
	(in billions)
Equity	$	264.8	$	250.8	$	14.0	6	%	$	264.2	$	251.0	$	13.2	5	%
Fixed income	188.8		176.1		12.7		7		187.2		174.4		12.8		7
Money market	5.1		4.8		0.3		6		5.1		4.9		0.2		4
Alternative	3.5		3.2		0.3		9		3.3		3.1		0.2		6
Hybrid and other	35.8		33.7		2.1		6		35.4		34.0		1.4		4
Total managed assets	$	498.0	$	468.6	$	29.4	6	%	$	495.2	$	467.4	$	27.8	6	%

(1) Average ending balances are calculated using an average of the prior period’s ending balance and all months in the current period.

AMERIPRISE FINANCIAL, INC.

The following table presents the changes in global managed assets:


	Three Months Ended September 30,
	2020		2019
	(in billions)
Global Retail Funds
Beginning assets	$	274.1	$	272.8
Inflows	14.5		11.1
Outflows	(13.2)		(12.5)
Net VP/VIT fund flows	(0.7)		(0.6)
Net new flows	0.6		(2.0)
Reinvested dividends	1.4		0.6
Net flows	2.0		(1.4)
Distributions	(1.5)		(0.7)
Market appreciation (depreciation) and other	13.8		1.8
Foreign currency translation (1)	1.5		(1.1)
Total ending assets	289.9		271.4
Global Institutional
Beginning assets	202.0		195.5
Inflows (2)	7.0		6.4
Outflows	(10.6)		(6.3)
Net flows	(3.6)		0.1
Market appreciation (depreciation) and other (3)	6.6		4.1
Foreign currency translation (1)	3.1		(2.5)
Total ending assets	208.1		197.2
Total managed assets	$	498.0	$	468.6

Total net flows	$	(1.6)	$	(1.3)

Former Parent Company Related (4)
Retail net new flows	$	0.3	$	(0.1)
Institutional net new flows	(0.9)		(1.2)
Total net new flows	$	(0.6)	$	(1.3)

(1) Amounts represent local currency to US dollar translation for reporting purposes.

(2) Includes $409 million of net flows from our recently launched structured variable annuity product.

(3) Includes $1.2 billion and $1.1 billion for the change in Affiliated General Account Assets, excluding net flows related to our recently launched structured variable annuity product, during the three months ended September 30, 2020 and 2019, respectively.

(4) Former parent company related assets and net new flows are included in the rollforwards above.

The United Kingdom (“UK”) withdrew from the European Union (“EU”) on January 31, 2020, pursuant to a transitionary withdrawal agreement with the EU that in substance maintains the pre-withdrawal, status quo until the end of 2020. The full impact of the British exit from the EU (commonly known as “Brexit”) and its related consequences remain uncertain, including with respect to the UK reaching agreement with the EU on cross border financial services (which appears to be increasingly unlikely) as well as new trade agreements with the EU and other global trading partners. This uncertainty may have a negative impact on our UK and European net flows (as well as foreign currency translation if the British Pound weakens) and depending on the outcome of negotiations, may increase costs to provide our services.

Total segment AUM increased $21.9 billion, or 5%, during the three months ended September 30, 2020. Net outflows were $1.6 billion in the third quarter of 2020, a $0.3 billion decrease compared to the prior year period. Global retail inflows were $2.0 billion. Global institutional net outflows were $3.6 billion and included a $3.5 billion quant mandate redemption from a sovereign wealth client primarily related to an asset allocation change, a $0.9 billion net redemption from an insurance client following the sale of a business and $0.9 billion of outflows from former parent-related assets.

AMERIPRISE FINANCIAL, INC.

The following table presents the results of operations of our Asset Management segment on an adjusted operating basis:


	Three Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	641	$	636	$	5	1	%
Distribution fees	104		102		2		2
Net investment income	(6)		2		(8)		NM
Other revenues	—		1		(1)		(100)
Total revenues	739		741		(2)		—
Banking and deposit interest expense	—		(1)		1		(100)
Total net revenues	739		742		(3)		—
Expenses
Distribution expenses	240		236		4		2
Amortization of deferred acquisition costs	2		2		—		—
Interest and debt expense	2		6		(4)		(67)
General and administrative expense	297		325		(28)		(9)
Total expenses	541		569		(28)		(5)
Adjusted operating earnings	$	198	$	173	$	25	14	%
NM Not Meaningful.

Our Asset Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased $25 million, or 14%, to $198 million for the three months ended September 30, 2020 compared to $173 million for the prior year period primarily due to market appreciation and disciplined expense management.

Net Revenues

Net revenues, which exclude net realized investment gains or losses, decreased $3 million to $739 million for the three months ended September 30, 2020 compared to $742 million for the prior year period.

Management and financial advice fees increased $5 million, or 1%, to $641 million for the three months ended September 30, 2020 compared to $636 million for the prior year period primarily due to higher average equity markets, partially offset by a $33 million decrease in performance fees.

Net investment income, which excludes net realized investment gains or losses, decreased $8 million to a loss of $6 million for the three months ended September 30, 2020 compared to income of $2 million for the prior year period primarily reflecting an impairment of an investment and lower interest income.

Expenses

Total expenses decreased $28 million, or 5%, to $541 million for the three months ended September 30, 2020 compared to $569 million for the prior year period.

General and administrative expense decreased $28 million, or 9%, to $297 million for the three months ended September 30, 2020 compared to $325 million for the prior year period primarily reflecting disciplined expense management and reengineering. Expenses in the prior year included elevated performance fee compensation.

AMERIPRISE FINANCIAL, INC.

Retirement & Protection Solutions

The following table presents the results of operations of our Retirement & Protection Solutions segment on an adjusted operating basis:


	Three Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	213	$	209	$	4	2	%
Distribution fees	111		112		(1)		(1)
Net investment income	121		128		(7)		(5)
Premiums	61		76		(15)		(20)
Other revenues	275		263		12		5
Total revenues	781		788		(7)		(1)
Banking and deposit interest expense	—		—		—		—
Total net revenues	781		788		(7)		(1)
Expenses
Distribution expenses	110		122		(12)		(10)
Interest credited to fixed accounts	100		99		1		1
Benefits, claims, losses and settlement expenses	421		251		170		68
Amortization of deferred acquisition costs	157		68		89		NM
Interest and debt expense	7		8		(1)		(13)
General and administrative expense	75		75		—		—
Total expenses	870		623		247		40
Adjusted operating earnings	$	(89)	$	165	$	(254)	NM
NM Not Meaningful.

Our Retirement & Protection Solutions segment pretax adjusted operating earnings, which excludes net realized investment gains or losses (net of the related DAC amortization, unearned revenue amortization and the reinsurance accrual), the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC and DAC amortization), the market impact on IUL benefits (net of hedges and the related DAC amortization, unearned revenue amortization and the reinsurance accrual), and mean reversion related impacts, decreased $254 million to a loss of $89 million for the three months ended September 30, 2020 compared to income of $165 million for the prior year period.

RiverSource variable annuity account balances increased 3% to $79.8 billion as of September 30, 2020 compared to the prior year period due to market appreciation, partially offset by net outflows of $2.4 billion. Variable annuity sales increased 2% compared to the prior year period reflecting a decrease in sales of variable annuities with living benefit guarantees that was more than offset by sales of structured variable annuities launched earlier in 2020. This trend is expected to continue and meaningfully shift the mix of business away from products with living benefit guarantees over time.

Net Revenues

Management and financial advice fees increased $4 million, or 2%, to $213 million for the three months ended September 30, 2020 compared to $209 million for the prior year period primarily due to market appreciation, partially offset by variable annuity net outflows.

Net investment income, which excludes net realized investment gains or losses, decreased $7 million, or 5% to $121 million for the three months ended September 30, 2020 compared to $128 million reflecting lower fixed maturity investment yields.

Premiums decreased $15 million, or 20%, to $61 million for the three months ended September 30, 2020 compared to $76 million for the prior year period reflecting lower sales of immediate annuities with a life contingent feature.

Other revenues, which exclude the unearned revenue amortization and reinsurance accrual offset to net realized investment gains or losses and the market impact on IUL benefits, increased $12 million, or 5%, to $275 million for the three months ended September 30, 2020 compared to $263 million for the prior year period primarily reflecting an increase in insurance charges related to favorable persistency and higher fees from variable annuity guarantee sales in the prior year where the fees start on the first anniversary date and higher average fee rates, partially offset by the impact of unlocking.

AMERIPRISE FINANCIAL, INC.

Expenses

Distribution expenses decreased $12 million, or 10% to $110 million for the three months ended September 30, 2020 compared to $122 million for the prior year period primarily reflecting a decrease in net outflows due to lower insurance sales and annuity product mix.

Benefits, claims, losses and settlement expenses, which exclude the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC amortization) and mean reversion related impacts, increased $170 million, or 68%, to $421 million for the three months ended September 30, 2020 compared to $251 million for the prior year period primarily reflecting the impact of unlocking partially offset by lower sales of immediate annuities with a life contingent feature. The unlocking impact for the third quarter of 2020 was an expense of $189 million compared to an expense of $6 million for the prior year period and primarily reflected a higher unfavorable impact from updates to our interest rate assumptions and lower surrenders on variable annuities with living benefit guarantees, partially offset by a lower benefit from changes in equity market volatility and correlation assumptions on variable annuities with living benefit guarantees compared to the prior year period.

Amortization of DAC, which excludes mean reversion related impacts and the DAC offset to the market impact on variable annuity guaranteed benefits, increased $89 million to $157 million for the three months ended September 30, 2020 compared to $68 million for the prior year period primarily reflecting the impact of unlocking. The impact of unlocking for the third quarter of 2020 was an expense of $108 million compared to an expense of $15 million in the prior year period. The unlocking impact for the third quarter of 2020 primarily reflected a higher unfavorable impact from updates to our interest rate assumptions and lower surrenders on variable annuities with living benefit guarantees compared to the prior year period.

Corporate & Other

The following table presents the results of operations of our Corporate & Other segment on an adjusted operating basis:


	Three Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	—	$	2	$	(2)	(100)	%
Distribution fees	—		1		(1)		(100)
Net investment income	93		118		(25)		(21)
Premiums	26		306		(280)		(92)
Other revenues	13		24		(11)		(46)
Total revenues	132		451		(319)		(71)
Banking and deposit interest expense	—		1		(1)		(100)
Total net revenues	132		450		(318)		(71)
Expenses
Distribution expenses	(2)		2		(4)		NM
Interest credited to fixed accounts	66		68		(2)		(3)
Benefits, claims, losses and settlement expenses	204		328		(124)		(38)
Amortization of deferred acquisition costs	(2)		15		(17)		NM
Interest and debt expense	15		18		(3)		(17)
General and administrative expense	53		98		(45)		(46)
Total expenses	334		529		(195)		(37)
Adjusted operating loss	$	(202)	$	(79)	$	(123)	NM
NM Not Meaningful.

Our Corporate & Other segment pretax adjusted operating loss excludes net realized investment gains or losses, the market impact on fixed index annuity benefits (net of hedges and the related DAC amortization), the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments, gain or loss on disposal of a business that is not considered discontinued operations, integration and restructuring charges, and the impact of consolidating CIEs. Our Corporate & Other segment pretax adjusted operating loss decreased $123 million to $202 million for the three months ended September 30, 2020 compared to $79 million for the prior year period.

Our Corporate & Other segment includes our closed blocks of long term care (“LTC”) insurance and fixed annuity and fixed indexed annuity (“FA”) business.

AMERIPRISE FINANCIAL, INC.

LTC insurance had a pretax adjusted operating loss of $135 million for the three months ended September 30, 2020 compared to a pretax adjusted operating loss of $8 million for the prior year period reflecting the impact from unlocking and loss recognition. Our annual review of LTC active life future policy benefit reserve adequacy resulted in unlocking and loss recognition of $141 million in the third quarter of 2020 compared to $8 million in the prior year period. The unlocking and loss recognition in the third quarter of 2020 was primarily due a higher unfavorable impact from updates to our interest rates assumptions, a lower unfavorable impact from lesser changes to assumptions regarding morbidity, mortality and persistency and a lower benefit from approved and expected premium rate increases and benefit reductions compared to the prior year period.

FA business had a pretax adjusted operating loss of $9 million for the three months ended September 30, 2020 compared to a pretax adjusted operating earnings of $12 million for the prior year period reflecting the low interest rate impact on spread and the impacts from unlocking. The unlocking impact for the third quarter of 2020 was an expense of $3 million compared to a benefit of $4 million for the prior year period.

RiverSource fixed deferred annuity account balances declined 4% to $8.0 billion as of September 30, 2020 compared to the prior year period as policies continue to lapse and the discontinuance of new sales of fixed deferred annuities and fixed index annuities due to the low interest rate environment as well as our strategic decisions regarding our fixed annuity business.

Auto and home pretax adjusted operating loss was $10 million for the three months ended September 30, 2019. We sold AAH on October 1, 2019.

Net Revenues

Net investment income, which excludes net realized investment gains or losses, the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments, integration and restructuring charges, and the impact of consolidating CIEs, decreased $25 million, or 21%, to $93 million for the three months ended September 30, 2020 compared to $118 million for the prior year period primarily reflecting the sale of AAH and lower average invested assets due to fixed annuity net outflows and lower asset earned rates, partially offset by lower impairments of our investments in affordable housing partnerships.

Premiums decreased $280 million, or 92%, to $26 million for the three months ended September 30, 2020 compared to $306 million for the prior year period primarily reflecting the sale of AAH.

Expenses

Benefits, claims, losses and settlement expenses, which excludes DSIC offset to net realized investment gains or losses, decreased $124 million, or 38%, to $204 million for the three months ended September 30, 2020 compared to $328 million for the prior year period primarily reflecting the sale of AAH, partially offset by the impact of LTC unlocking and loss recognition and the FA unlocking impact.

Amortization of DAC, which excludes the DAC offset to the market impact on fixed index annuity benefits and the DAC offset to net realized investment gains or losses, decreased $17 million to a benefit of $2 million for the three months ended September 30, 2020 compared to an expense of $15 million for the prior year period reflecting the sale of AAH.

General and administrative expense, which excludes integration and restructuring charges, decreased $45 million, or 46%, to $53 million for the three months ended September 30, 2020 compared to $98 million for the prior year period primarily due to the sale of AAH and lower project expenses.

AMERIPRISE FINANCIAL, INC.

Consolidated Results of Operations for the Nine Months Ended September 30, 2020 and 2019

The following table presents our consolidated results of operations:


	Nine Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	5,365	$	5,153	$	212	4	%
Distribution fees	1,239		1,450		(211)		(15)
Net investment income	933		1,121		(188)		(17)
Premiums	249		1,121		(872)		(78)
Other revenues	983		941		42		4
Total revenues	8,769		9,786		(1,017)		(10)
Banking and deposit interest expense	53		106		(53)		(50)
Total net revenues	8,716		9,680		(964)		(10)
Expenses
Distribution expenses	2,963		2,819		144		5
Interest credited to fixed accounts	523		517		6		1
Benefits, claims, losses and settlement expenses	824		1,848		(1,024)		(55)
Amortization of deferred acquisition costs	349		186		163		88
Interest and debt expense	124		164		(40)		(24)
General and administrative expense	2,292		2,448		(156)		(6)
Total expenses	7,075		7,982		(907)		(11)
Pretax income	1,641		1,698		(57)		(3)
Income tax provision	284		268		16		6
Net income	$	1,357	$	1,430	$	(73)	(5)	%
NM Not Meaningful

Overall

Pretax income decreased $57 million, or 3%, to $1.6 billion for the nine months ended September 30, 2020 compared to $1.7 billion for the prior year period.

•The unfavorable impact of unlocking and LTC loss recognition was $454 million for the nine months ended September 30, 2020 compared to $16 million for the prior year period.

•A negative impact of $292 million in the Advice & Wealth Management segment from lower short-term interest rates.

•The mean reversion related impact was an expense of $30 million for the nine months ended September 30, 2020 compared to a benefit of $18 million for the prior year period.

•The market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC and DAC amortization) was a benefit of $274 million for the nine months ended September 30, 2020 compared to an expense of $204 million for the prior year period.

•The market impact of hedges on investments was nil for the nine months ended September 30, 2020 compared to an expense of $37 million for the prior year period.

•A positive impact from higher average equity markets during the nine months ended September 30, 2020 compared to the prior year period.

See our Consolidated Results of Operations for the three months ended September 30, 2020 and 2019 for a table and discussion of total pretax impacts on our revenues and expenses attributable to unlocking and LTC loss recognition.

Net Revenues

Net revenues decreased $964 million, or 10%, to $8.7 billion for the nine months ended September 30, 2020 compared to $9.7 billion for the prior year period.

Management and financial advice fees increased $212 million, or 4%, to $5.4 billion for the nine months ended September 30, 2020 compared to $5.2 billion for the prior year period reflecting higher average equity markets and higher wrap account net inflows, partially offset by lower performance fees.

AMERIPRISE FINANCIAL, INC.

Distribution fees decreased $211 million, or 15%, to $1.2 billion for the nine months ended September 30, 2020 compared to $1.5 billion due to $248 million of lower fees on off-balance sheet brokerage cash due to a decrease in short-term interest rates, partially offset by higher average equity markets.

Net investment income decreased $188 million, or 17%, to $933 million for the nine months ended September 30, 2020 compared to $1.1 billion for the prior year period primarily reflecting:

•Net realized investment losses of $18 million for the nine months ended September 30, 2020 compared to net realized investment losses of $6 million for the prior year period.

•The unfavorable impact of fixed annuity net outflows and the fixed annuities reinsurance transaction.

•The unfavorable impact of lower short-term interest rates on certificates and on-balance sheet brokerage cash, and lower certificate balances due to lower average invested assets.

•The unfavorable market impact of hedges on investments of $37 million in the prior year period.

•A decrease of $16 million in net investment income of CIEs.

•A decrease of $40 million due to the sale of AAH.

•The favorable impact of higher average invested assets related to the bank.

Premiums decreased $872 million, or 78% to $249 million for the nine months ended September 30, 2020 compared to $1.1 billion due to the sale of AAH and lower sales of immediate annuities with a life contingent feature. Premiums in the prior year period included $828 million from AAH.

Other revenues increased $42 million, or 4%, to $983 million for the nine months ended September 30, 2020 compared to $941 million due to higher fees on variable annuity riders, higher cost of insurance charges on universal life (“UL”) and VUL insurance, partially offset by the impact of unlocking.

Banking and deposit interest expense decreased $53 million, or 50%, to $53 million for the nine months ended September 30, 2020 compared to $106 million due to lower average crediting rates on certificates and lower average certificate balances.

Expenses

Total expenses decreased $907 million, or 11%, to $7.1 billion for the nine months ended September 30, 2020 compared to $8.0 billion for the prior year period.

Distribution expenses increased $144 million, or 5%, to $3.0 billion for the nine months ended September 30, 2020 compared to $2.8 billion for the prior year period reflecting higher average markets and higher advisor compensation due to an increase in average wrap account balances.

Interest credited to fixed accounts increased $6 million, or 1%, to $523 million for the nine months ended September 30, 2020 compared to $517 million for the prior year period primarily reflecting the following items:

•A $70 million decrease in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The favorable impact of the nonperformance credit spread was $23 million for the nine months ended September 30, 2020 compared to an unfavorable impact of $47 million for the prior year period.

•A $74 million increase in expense from other market impacts on IUL benefits, net of hedges, which was an expense of $53 million for the nine months ended September 30, 2020 compared to a benefit of $21 million for the prior year period. The increase in expense was primarily due to an increase in the IUL embedded derivative, which is reflecting higher option costs.

Benefits, claims, losses and settlement expenses decreased $1.0 billion, or 55%, to $824 million for the nine months ended September 30, 2020 compared to an expense of $1.8 billion for the prior year period primarily reflecting the following items:

•A $521 million decrease in expense from the unhedged nonperformance credit spread risk adjustment on variable annuity guaranteed benefits. The favorable impact of the nonperformance credit spread was $530 million for the nine months ended September 30, 2020 compared to a favorable impact of $9 million for the prior year period. As the estimate of the nonperformance credit spread over the LIBOR swap curve tightens or widens, the embedded derivative liability will increase or decrease. As the embedded derivative liability on which the nonperformance credit spread is applied increases (decreases), the impact of the nonperformance credit spread is favorable (unfavorable) to expense.

•An $80 million decrease in expense from other market impacts on variable annuity guaranteed benefits, net of hedges in place to offset those risks and the related DSIC amortization. This decrease was the result of a favorable $1.5 billion change in the market impact on derivatives hedging the variable annuity guaranteed benefits, partially offset by an unfavorable $1.5 billion change in the market impact on variable annuity guaranteed living benefits reserves. The main market drivers contributing to these changes are summarized below:

•Equity market impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in a lower benefit for the nine months ended September 30, 2020 compared to the prior year period.

AMERIPRISE FINANCIAL, INC.

•Interest rate impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in an expense for the nine months ended September 30, 2020 compared to a benefit in the prior year period.

•Volatility impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in a higher benefit for the nine months ended September 30, 2020 compared to the prior year period.

•The impact of unlocking excluding LTC was an expense of $212 million for the nine months ended September 30, 2020 compared to a benefit of $1 million for the prior year period. The unlocking impact for the third quarter of 2020 primarily reflected a higher unfavorable impact from updates to our interest rate assumptions and lower surrenders on variable annuities with living benefit guarantees partially offset by a lower benefit from changes in equity market volatility and correlation assumptions on variable annuities compared to the prior year period.

•A $719 million decrease in auto and home expenses reflecting the sale of AAH.

•The mean reversion related impact was an expense of $21 million for the nine months ended September 30, 2020 compared to a benefit of $2 million for the prior year period.

•A $27 million decrease in reserves for immediate annuities with a life contingent feature primarily due to lower sales. This impact is offset by a decrease in premiums.

Amortization of DAC increased $163 million, or 88%, to $349 million for the nine months ended September 30, 2020 compared to $186 million for the prior year period primarily reflecting the following items:

•The DAC offset to the market impact on variable annuity guaranteed benefits was an expense of $94 million for the nine months ended September 30, 2020 compared to a benefit of $24 million for the prior year period.

•The mean reversion related impact was an expense of $9 million for the nine months ended September 30, 2020 compared to a benefit of $16 million for the prior year period.

•A $43 million decrease in auto and home expenses reflecting the sale of AAH.

Interest and debt expense decreased $40 million, or 24%, to $124 million for the nine months ended September 30, 2020 compared to $164 million for the prior year period primarily due to a decrease in interest expense of CIEs.

General and administrative expense decreased $156 million, or 6%, to $2.3 billion for the nine months ended September 30, 2020 compared to $2.4 billion for the prior year period primarily reflecting a $90 million decrease in auto and home expenses reflecting the sale of AAH, lower performance fee compensation, disciplined expense management and reengineering.

Income Taxes

Our effective tax rate was 17.4% for the nine months ended September 30, 2020 compared to 15.8% for the prior year period. See Note 16 to our Consolidated Financial Statements for additional discussion on income taxes.

AMERIPRISE FINANCIAL, INC.

Results of Operations by Segment for the Nine Months Ended September 30, 2020 and 2019

The following table presents summary financial information by segment:


	Nine Months Ended September 30,
	2020		2019
	(in millions)
Advice & Wealth Management
Net revenues	$	4,899	$	4,889
Expenses	3,930		3,767
Adjusted operating earnings	$	969	$	1,122
Asset Management
Net revenues	$	2,093	$	2,143
Expenses	1,597		1,660
Adjusted operating earnings	$	496	$	483
Retirement & Protection Solutions
Net revenues	$	2,295	$	2,337
Expenses	1,995		1,792
Adjusted operating earnings	$	300	$	545
Corporate & Other
Net revenues	$	412	$	1,340
Expenses	721		1,527
Adjusted operating loss	$	(309)	$	(187)

See our Results of Operations by Segment for the three months ended September 30, 2020 and 2019 for a table and discussion of total pretax impacts on our revenues and expenses attributable to unlocking and LTC loss recognition.

Advice & Wealth Management

The following table presents the changes in wrap account assets and average balances for the nine months ended September 30:


	2020		2019
	(in billions)
Beginning balance	$	317.5	$	251.5
Net flows	16.2		13.3
Market appreciation (depreciation) and other	6.3		33.3
Ending balance	$	340.0	$	298.1

Advisory wrap account assets ending balance (1)	$	336.0	$	295.0
Average advisory wrap account assets (2)	$	309.8	$	278.8

(2) Average ending balances are calculated using an average of the prior period’s ending balance and all months in the current period excluding the most recent month for the nine months ended September 30, 2020. The calculation of the prior year period average used an average of the prior period’s ending balance and all the months in the current period.

Wrap account assets increased $22.5 billion, or 7%, during the nine months ended September 30, 2020 due to net inflows of $16.2 billion and market appreciation and other of $6.3 billion. Average advisory wrap account assets increased $31.0 billion, or 11%, compared to the prior year period primarily reflecting market appreciation and net inflows.

AMERIPRISE FINANCIAL, INC.

The following table presents the results of operations of our Advice & Wealth Management segment on an adjusted operating basis:


	Nine Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	3,070	$	2,816	$	254	9	%
Distribution fees	1,480		1,719		(239)		(14)
Net investment income	247		310		(63)		(20)
Other revenues	155		150		5		3
Total revenues	4,952		4,995		(43)		(1)
Banking and deposit interest expense	53		106		(53)		(50)
Total net revenues	4,899		4,889		10		—
Expenses
Distribution expenses	2,881		2,744		137		5
Interest and debt expense	8		8		—		—
General and administrative expense	1,041		1,015		26		3
Total expenses	3,930		3,767		163		4
Adjusted operating earnings	$	969	$	1,122	$	(153)	(14)	%

Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, decreased $153 million, or 14%, to $969 million for the nine months ended September 30, 2020 compared to $1.1 billion for the prior year period due to lower earnings on brokerage cash as a result of low interest rates, partially offset by higher average wrap account balances.

Net Revenues

Net revenues exclude net realized investment gains or losses. Net revenues increased $10 million for the nine months ended September 30, 2020 compared to the prior year period.

Management and financial advice fees increased $254 million, or 9%, to $3.1 billion for the nine months ended September 30, 2020 compared to $2.8 billion for the prior year period primarily due to growth in average wrap account assets. Average advisory wrap account assets increased $31.0 billion, or 11%, compared to the prior year period primarily reflecting market appreciation and net inflows.

Distribution fees decreased $239 million, or 14%, to $1.5 billion for the nine months ended September 30, 2020 compared to $1.7 billion for the prior year period reflecting $248 million of lower fees on off-balance sheet brokerage cash due to a decrease in short-term interest rates.

Net investment income, which excludes net realized investment gains or losses, decreased $63 million, or 20%, to $247 million for the nine months ended September 30, 2020 compared to $310 million for the prior year period primarily due to lower certificate balances and the unfavorable impact of lower short-term interest rates on certificates and on-balance sheet brokerage cash, partially offset by higher average invested assets due to increased bank deposits.

Banking and deposit interest expense decreased $53 million, or 50%, to $53 million for the nine months ended September 30, 2020 compared to $106 million for the prior year period primarily due to lower average crediting rates on certificates and lower average certificate balances.

Expenses

Total expenses increased $163 million, or 4%, to $3.9 billion for the nine months ended September 30, 2020 compared to $3.8 billion for the prior year period.

Distribution expenses increased $137 million, or 5%, to $2.9 billion for the nine months ended September 30, 2020 compared to $2.7 billion for the prior year period reflecting higher asset-based advisor compensation from higher wrap account assets and increased investments in recruiting experienced advisors.

General and administrative expense increased $26 million, or 3%, for the nine months ended September 30, 2020 compared to the prior year period primarily due to planned investments for future growth, partially offset by expense reengineering.

AMERIPRISE FINANCIAL, INC.

Asset Management


The following table presents global managed assets by type:									Average(1)				Change
	September 30,				Change				Nine Months Ended September 30,
	2020		2019						2020		2019
	(in billions)
Equity	$	264.8	$	250.8	$	14.0	6	%	$	252.5	$	247.7	$	4.8	2	%
Fixed income	188.8		176.1		12.7		7		183.2		169.0		14.2		8
Money market	5.1		4.8		0.3		6		5.0		5.0		—		—
Alternative	3.5		3.2		0.3		9		3.1		3.1		—		—
Hybrid and other	35.8		33.7		2.1		6		35.0		33.7		1.3		4
Total managed assets	$	498.0	$	468.6	$	29.4	6	%	$	478.8	$	458.5	$	20.3	4	%

(1) Average ending balances are calculated using an average of the prior period’s ending balance and all months in the current period.


The following table presents the changes in global managed assets:	Nine Months Ended September 30,
	2020		2019
	(in billions)
Global Retail Funds
Beginning assets	$	287.5	$	247.9
Inflows	47.8		34.1
Outflows	(47.5)		(41.0)
Net VP/VIT fund flows	(2.0)		(2.1)
Net new flows	(1.7)		(9.0)
Reinvested dividends	3.9		4.1
Net flows	2.2		(4.9)
Distributions	(4.5)		(4.8)
Market appreciation (depreciation) and other	4.6		34.5
Foreign currency translation (1)	0.1		(1.3)
Total ending assets	289.9		271.4

Global Institutional
Beginning assets	206.8		182.8
Inflows (2)	22.0		16.6
Outflows	(25.5)		(22.1)
Net flows	(3.5)		(5.5)
Market appreciation (depreciation) and other (3)	5.6		22.7
Foreign currency translation (1)	(0.8)		(2.8)
Total ending assets	208.1		197.2
Total managed assets	$	498.0	$	468.6

Total net flows	$	(1.3)	$	(10.4)

Former Parent Company Related (4)
Retail net new flows	$	0.5	$	(0.7)
Institutional net new flows	(2.1)		(2.7)
Total net new flows	$	(1.6)	$	(3.4)

(1) Amounts represent local currency to US dollar translation for reporting purposes.

(2) Includes $789 million of net flows from our recently launched structured variable annuity product.

(3) Includes $3.7 billion and $3.8 billion for the change in Affiliated General Account Assets, excluding net flows related to our recently launched structured annuity product, during the nine months ended September 30, 2020 and 2019, respectively.

(4) Former parent company related assets and net new flows are included in the rollforwards above.

AMERIPRISE FINANCIAL, INC.

Total segment AUM increased $3.7 billion, or 1%, during the nine months ended September 30, 2020. Net outflows were $1.3 billion for the nine months ended September 30, 2020, a $9.1 billion improvement compared to the prior year period.

The following table presents the results of operations of our Asset Management segment on an adjusted operating basis:


	Nine Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	1,794	$	1,827	$	(33)	(2)	%
Distribution fees	303		303		—		—
Net investment income	(5)		11		(16)		NM
Other revenues	1		2		(1)		(50)
Total revenues	2,093		2,143		(50)		(2)
Banking and deposit interest expense	—		—		—		—
Total net revenues	2,093		2,143		(50)		(2)
Expenses
Distribution expenses	691		689		2		—
Amortization of deferred acquisition costs	8		7		1		14
Interest and debt expense	4		19		(15)		(79)
General and administrative expense	894		945		(51)		(5)
Total expenses	1,597		1,660		(63)		(4)
Adjusted operating earnings	$	496	$	483	$	13	3	%
NM Not Meaningful.

Our Asset Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased $13 million, or 3%, to $496 million for the nine months ended September 30, 2020 compared to $483 million for the prior year period primarily due to market appreciation and disciplined expense management.

Net Revenues

Net revenues, which exclude net realized investment gains or losses, decreased $50 million, or 2%, for the nine months ended September 30, 2020 compared to the prior year period.

Management and financial advice fees decreased $33 million, or 2%, for the nine months ended September 30, 2020 compared to the prior year period primarily due to a $51 million decrease in performance fees, partially offset by higher average equity markets.

Net investment income, which excludes net realized investment gains or losses, decreased $16 million, to a loss of $5 million for the nine months ended September 30, 2020 compared to income of $11 million for the prior year period primarily reflecting an impairment of an investment and lower interest income.

Expenses

Total expenses decreased $63 million, or 4%, to $1.6 billion for the nine months ended September 30, 2020 compared to $1.7 billion for the prior year period.

General and administrative expense decreased $51 million, or 5%, to $894 million for the nine months ended September 30, 2020 compared to $945 million for the prior year period primarily reflecting disciplined expense management and reengineering. Expenses in the prior year included elevated performance fee compensation.

AMERIPRISE FINANCIAL, INC.

Retirement & Protection Solutions

The following table presents the results of operations of our Retirement & Protection Solutions segment on an adjusted operating basis:


	Nine Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	612	$	614	$	(2)	—	%
Distribution fees	322		327		(5)		(2)
Net investment income	380		399		(19)		(5)
Premiums	196		242		(46)		(19)
Other revenues	785		755		30		4
Total revenues	2,295		2,337		(42)		(2)
Banking and deposit interest expense	—		—		—		—
Total net revenues	2,295		2,337		(42)		(2)
Expenses
Distribution expenses	331		350		(19)		(5)
Interest credited to fixed accounts	297		290		7		2
Benefits, claims, losses and settlement expenses	878		735		143		19
Amortization of deferred acquisition costs	241		173		68		39
Interest and debt expense	28		24		4		17
General and administrative expense	220		220		—		—
Total expenses	1,995		1,792		203		11
Adjusted operating earnings	$	300	$	545	$	(245)	(45)	%

Our Retirement & Protection Solutions segment pretax adjusted operating earnings, which excludes net realized investment gains or losses (net of the related DAC amortization, unearned revenue amortization and the reinsurance accrual), the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC and DAC amortization), the market impact on IUL benefits (net of hedges and the related DAC amortization, unearned revenue amortization and the reinsurance accrual), and mean reversion related impacts, decreased $245 million, or 45%, to $300 million for the nine months ended September 30, 2020 compared to $545 million for the prior year period.

Net Revenues

Net investment income, which excludes net realized investment gains or losses, decreased $19 million, or 5%, to $380 million for the nine months ended September 30, 2020 compared to $399 million for the prior year period reflecting lower fixed maturity investment yields.

Premiums decreased $46 million, or 19%, to $196 million for the nine months ended September 30, 2020 compared to $242 million for the prior year period primarily due to lower sales of immediate annuities with a life contingent feature.

Other revenues, which exclude the unearned revenue amortization and reinsurance accrual offset to net realized investment gains or losses and the market impact on IUL benefits, increased $30 million, or 4%, to $785 million for the nine months ended September 30, 2020 compared to $755 million for the prior year period primarily reflecting an increase in insurance charges related to favorable persistency and higher fees from variable annuity guarantee sales in the prior year where the fees start on the first anniversary date and higher average fee rates, partially offset by the impact of unlocking.

Expenses

Distribution expenses decreased $19 million, or 5% to $331 million for the nine months ended September 30, 2020 compared to $350 million for the prior year period primarily reflecting a decrease in net outflows due to lower insurance sales and annuity product mix.

Benefits, claims, losses and settlement expenses, which exclude the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC amortization) and mean reversion related impacts, increased $143 million, or 19%, to $878 million for the nine months ended September 30, 2020 compared to $735 million for the prior year period primarily reflecting the impact of unlocking partially offset by lower sales of immediate annuities with a life contingent feature. The unlocking impact for the nine months ended September 30, 2020 was an expense of $189 million compared to an expense of $6 million for the prior year period and primarily reflected a higher unfavorable impact from updates to our interest rate assumptions and lower surrenders on variable

AMERIPRISE FINANCIAL, INC.

annuities with living benefit guarantees, partially offset by a lower benefit from changes in equity market volatility and correlation assumptions on variable annuities with living benefit guarantees compared to the prior year period.

Amortization of DAC, which excludes mean reversion related impacts and the DAC offset to the market impact on variable annuity guaranteed benefits, increased $68 million, or 39%, to $241 million for the nine months ended September 30, 2020 compared to $173 million for the prior year period primarily reflecting the impact of unlocking, partially offset by a lower DAC amortization rate which is the result of lower surrenders on variable annuities. The impact of unlocking for the nine months ended September 30, 2020 was an expense of $108 million compared to an expense of $15 million in the prior year period. The unlocking impact for the third quarter of 2020 primarily reflected a higher unfavorable impact from updates to our interest rate assumptions and lower surrenders on variable annuities with living benefit guarantees compared to the prior year period.

Corporate & Other

The following table presents the results of operations of our Corporate & Other segment on an adjusted operating basis:


	Nine Months Ended September 30,				Change
	2020		2019
	(in millions)
Revenues
Management and financial advice fees	$	—	$	4	$	(4)	(100)	%
Distribution fees	—		5		(5)		(100)
Net investment income	285		387		(102)		(26)
Premiums	76		904		(828)		(92)
Other revenues	53		45		8		NM
Total revenues	414		1,345		(931)		(69)
Banking and deposit interest expense	2		5		(3)		(60)
Total net revenues	412		1,340		(928)		(69)
Expenses
Distribution expenses	(5)		7		(12)		NM
Interest credited to fixed accounts	196		202		(6)		(3)
Benefits, claims, losses and settlement expenses	305		900		(595)		(66)
Amortization of deferred acquisition costs	3		52		(49)		(94)
Interest and debt expense	50		60		(10)		(17)
General and administrative expense	172		306		(134)		(44)
Total expenses	721		1,527		(806)		(53)
Adjusted operating loss	$	(309)	$	(187)	$	(122)	(65)	%
NM Not Meaningful.

Our Corporate & Other segment pretax adjusted operating loss excludes net realized investment gains or losses, the market impact on fixed index annuity benefits (net of hedges and the related DAC amortization), the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments, gain or loss on disposal of a business that is not considered discontinued operations, integration and restructuring charges, and the impact of consolidating CIEs. Our Corporate & Other segment pretax adjusted operating loss increased $122 million, or 65%, to $309 million for the nine months ended September 30, 2020 compared to $187 million for the prior year period.

LTC insurance had a pretax adjusted operating loss of $116 million for the nine months ended September 30, 2020 compared to a pretax adjusted operating earnings of $2 million for the prior year period reflecting the impact from unlocking and loss recognition, partially offset by the impacts from COVID-19, with fewer clients entering nursing homes as well as increased mortality-related terminations from clients on claim.

FA business had a pretax adjusted operating loss of $6 million for the nine months ended September 30, 2020 compared to a pretax adjusted operating earnings of $28 million for the prior year period reflecting fixed annuity net outflows, the impact of low interest rates and the impacts from unlocking.

Auto and home pretax adjusted operating earnings were $13 million for the nine months ended September 30, 2019. We sold AAH on October 1, 2019.

AMERIPRISE FINANCIAL, INC.

Net Revenues

Net investment income, which excludes net realized investment gains or losses, the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments, integration and restructuring charges, and the impact of consolidating CIEs, decreased $102 million, or 26%, to $285 million for the nine months ended September 30, 2020 compared to $387 million for the prior year period primarily reflecting the sale of AAH and lower average invested assets due to fixed annuity net outflows and lower asset earned rates.

Premiums decreased $828 million, or 92%, to $76 million for the nine months ended September 30, 2020 compared to $904 million for the prior year period reflecting the sale of AAH.

Expenses

Benefits, claims, losses and settlement expenses, which excludes DSIC offset to net realized investment gains or losses, decreased $595 million, or 66%, to $305 million for the nine months ended September 30, 2020 compared to $900 million for the prior year period primarily reflecting the sale of AAH, partially offset by the impact of LTC unlocking and loss recognition and the FA unlocking impact.

Amortization of DAC, which excludes the DAC offset to the market impact on fixed index annuity benefits and the DAC offset to net realized investment gains or losses, decreased $49 million, or 94%, to $3 million for the nine months ended September 30, 2020 compared to $52 million for the prior year period reflecting the sale of AAH.

General and administrative expense, which excludes integration and restructuring charges, decreased $134 million, or 44%, to $172 million for the nine months ended September 30, 2020 compared to $306 million for the prior year period primarily due to the sale of AAH and lower project expenses.

Market Risk

Our primary market risk exposures are interest rate, equity price, foreign currency exchange rate and credit risk. Equity price and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects they have on the asset management and other asset-based fees we earn, the spread income generated on our fixed deferred annuities, fixed insurance, brokerage client cash balances, banking deposits, face-amount certificate products and the fixed portion of our variable annuities and variable insurance contracts, the value of DAC and DSIC assets, the value of liabilities for guaranteed benefits associated with our variable annuities and the value of derivatives held to hedge these benefits.

Our earnings from fixed deferred annuities, fixed insurance, and the fixed portion of variable annuities and variable insurance contracts are based upon the spread between rates earned on assets held and the rates at which interest is credited to accounts. We primarily invest in fixed rate securities to fund the rate credited to clients. We guarantee an interest rate to the holders of these products. Investment assets and client liabilities generally differ as it relates to basis, repricing or maturity characteristics. Rates credited to clients’ accounts generally reset at shorter intervals than the yield on the underlying investments. Therefore, in an increasing interest rate environment, higher interest rates may be reflected in crediting rates to clients sooner than in rates earned on invested assets, which could result in a reduced spread between the two rates, reduced earned income and a negative impact on pretax income. However, the current low interest rate environment is resulting in interest rates below the level of some of our liability guaranteed minimum interest rates (“GMIRs”). Hence, a modest rise in interest rates would not necessarily result in changes to all the liability credited rates while projected asset purchases would capture the full increase in interest rates. This dynamic would result in widening spreads under a modestly rising rate scenario given the current relationship between the current level of interest rates and the underlying GMIRs on the business.

As a result of the low interest rate environment, our current reinvestment yields are generally lower than the current portfolio yield. We expect our portfolio income yields to continue to decline in future periods if interest rates remain low. The carrying value and weighted average yield of non-structured fixed maturity securities and commercial mortgage loans that may generate proceeds to reinvest through September 30, 2021 due to prepayment, maturity or call activity at the option of the issuer, excluding securities with a make-whole provision, were $4.6 billion and 2.3%, respectively, as of September 30, 2020. In addition, residential mortgage backed securities, which are subject to prepayment risk as a result of the low interest rate environment, totaled $10.3 billion and had a weighted average yield of 1.7% as of September 30, 2020. While these amounts represent investments that could be subject to reinvestment risk, it is also possible that these investments will be used to fund liabilities or may not be prepaid and will remain invested at their current yields. In addition to the interest rate environment, the mix of benefit payments versus product sales as well as the timing and volumes associated with such mix may impact our investment yield. Furthermore, reinvestment activities and the associated investment yield may also be impacted by corporate strategies implemented at management’s discretion. The average yield for investment purchases during the nine months ended September 30, 2020 was approximately 1.7%.

The reinvestment of proceeds from maturities, calls and prepayments at rates below the current portfolio yield, which may be below the level of some liability GMIRs, will have a negative impact to future operating results. To mitigate the unfavorable impact that the low interest rate environment has on our spread income, we assess reinvestment risk in our investment portfolio and monitor this risk

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in accordance with our asset/liability management framework. In addition, we may reduce the crediting rates on our fixed products when warranted, subject to guaranteed minimums.

In addition to the fixed rate exposures noted above, RiverSource Life has the following variable annuity guarantee benefits: guaranteed minimum withdrawal benefits (“GMWB”), guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum death benefits (“GMDB”) and guaranteed minimum income benefits (“GMIB”). Each of these benefits guarantees payouts to the annuity holder under certain specific conditions regardless of the performance of the underlying invested assets.

The variable annuity guarantees continue to be managed by utilizing a hedging program which attempts to match the sensitivity of the assets with the sensitivity of the liabilities. This approach works with the premise that matched sensitivities will produce a highly effective hedging result. Our comprehensive hedging program focuses mainly on first order sensitivities of assets and liabilities: Equity Market Level (Delta), Interest Rate Level (Rho) and Volatility (Vega). Additionally, various second order sensitivities are managed. We use various options, swaptions, swaps and futures to manage risk exposures. The exposures are measured and monitored daily, and adjustments to the hedge portfolio are made as necessary.

We have a macro hedge program to provide protection against the statutory tail scenario risk arising from variable annuity reserves on our statutory surplus and to cover some of the residual risks not covered by other hedging activities. We assess the residual risk under a range of scenarios in creating and executing the macro hedge program. As a means of economically hedging these risks, we may use a combination of futures, options, swaps and swaptions. Certain of the macro hedge derivatives used contain settlement provisions linked to both equity returns and interest rates; the remaining are interest rate contracts or equity contracts. The macro hedge program could result in additional earnings volatility as changes in the value of the macro hedge derivatives, which are designed to reduce statutory capital volatility, may not be closely aligned to changes in the variable annuity guarantee embedded derivatives.

To evaluate interest rate and equity price risk we perform sensitivity testing which measures the impact on pretax income from the sources listed below for a 12-month period following a hypothetical 100 basis point increase in interest rates or a hypothetical 10% decline in equity prices. The interest rate risk test assumes a sudden 100 basis point parallel shift in the yield curve, with rates then staying at those levels for the next 12 months. The equity price risk test assumes a sudden 10% drop in equity prices, with equity prices then staying at those levels for the next 12 months. In estimating the values of variable annuities, fixed deferred indexed annuities, stock market certificates, IUL insurance and the associated hedge assets, we assume no change in implied market volatility despite the 10% drop in equity prices.

The following tables present our estimate of the impact on pretax income from the above defined hypothetical market movements as of September 30, 2020:


Equity Price Decline 10%	Equity Price Exposure to Pretax Income
	Before Hedge Impact		Hedge Impact		Net Impact
	(in millions)
Asset-based management and distribution fees (1)	$	(270)	$	4	$	(266)
DAC and DSIC amortization (2)(3)	(45)		—		(45)
Variable annuities:
GMDB and GMIB (3)	(12)		—		(12)
GMWB (3)	(393)		296		(97)
GMAB	(24)		23		(1)
Structured variable annuities	72		(60)		12
DAC and DSIC amortization (4)	N/A		N/A		9
Total variable annuities	(357)		259		(89)
Macro hedge program (5)	—		295		295
Fixed deferred indexed annuities	4		(4)		—
Certificates	2		(2)		—
IUL insurance	72		(55)		17
Total	$	(594)	$	497	$	(88)	(6)

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Interest Rate Increase 100 Basis Points	Interest Rate Exposure to Pretax Income
	Before Hedge Impact		Hedge Impact		Net Impact
	(in millions)
Asset-based management and distribution fees (1)	$	(53)	$	—	$	(53)
Variable annuities:

GMWB	1,654		(2,084)		(430)
GMAB	25		(32)		(7)
Structured variable annuities	(6)		25		19
DAC and DSIC amortization (4)	N/A		N/A		62
Total variable annuities	1,673		(2,091)		(356)
Macro hedge program (5)	—		(6)		(6)
Fixed annuities, fixed insurance and fixed portion of variable annuities and variable insurance products	79		—		79
Banking deposits	45		—		45
Brokerage client cash balances	219		—		219
Fixed deferred indexed annuities	(1)		—		(1)
Certificates	18		—		18
IUL insurance	15		2		17
Total	$	1,995	$	(2,095)	$	(38)
N/A Not Applicable.

(1) Excludes incentive income which is impacted by market and fund performance during the period and cannot be readily estimated.

(2) Market impact on DAC and DSIC amortization resulting from lower projected profits.

(3) In estimating the impact to pretax income on DAC and DSIC amortization and additional insurance benefit reserves, our assumed equity asset growth rates reflect what management would follow in its mean reversion guidelines.

(4) Market impact on DAC and DSIC amortization related to variable annuity riders is modeled net of hedge impact.

(5) The market impact of the macro hedge program is modeled net of any related impact to DAC and DSIC amortization.

(6) Represents the net impact to pretax income. The estimated net impact to pretax adjusted operating income is approximately $(266) million.

The above results compare to an estimated negative net impact to pretax income of $90 million related to a 10% equity price decline and an estimated positive net impact to pretax income of $37 million related to a 100 basis point increase in interest rates as of December 31, 2019. The change in interest rate exposure as of September 30, 2020 compared to December 31, 2019 was driven by variable annuity riders, specifically GMWB, primarily due to changes in market rates.

Net impacts shown in the above table from GMWB riders result largely from differences between the liability valuation basis and the hedging basis. Liabilities are valued using fair value accounting principles, with risk margins incorporated in contractholder behavior assumptions and with discount rates increased to reflect a current market estimate of our risk of nonperformance specific to these liabilities. Our hedging is based on our determination of economic risk, which excludes certain items in the liability valuation including the nonperformance spread risk.

Actual results could differ materially from those illustrated above as they are based on a number of estimates and assumptions. These include assuming that implied market volatility does not change when equity prices fall by 10% and that the 100 basis point increase in interest rates is a parallel shift of the yield curve. Furthermore, we have not tried to anticipate changes in client preferences for different types of assets or other changes in client behavior, nor have we tried to anticipate all strategic actions management might take to increase revenues or reduce expenses in these scenarios.

The selection of a 100 basis point interest rate increase as well as a 10% equity price decline should not be construed as a prediction of future market events. Impacts of larger or smaller changes in interest rates or equity prices may not be proportional to those shown for a 100 basis point increase in interest rates or a 10% decline in equity prices.

Fair Value Measurements

We report certain assets and liabilities at fair value; specifically, separate account assets, derivatives, embedded derivatives and most investments and cash equivalents. Fair value assumes the exchange of assets or liabilities occurs in orderly transactions and is not the result of a forced liquidation or distressed sale. We include actual market prices, or observable inputs, in our fair value measurements to the extent available. Broker quotes are obtained when quotes from pricing services are not available. We validate prices obtained from third parties through a variety of means such as: price variance analysis, subsequent sales testing, stale price review, price

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comparison across pricing vendors and due diligence reviews of vendors. See Note 12 to the Consolidated Financial Statements for additional information on our fair value measurements.

Fair Value of Liabilities and Nonperformance Risk

Companies are required to measure the fair value of liabilities at the price that would be received to transfer the liability to a market participant (an exit price). Since there is not a market for our obligations of our variable annuity riders, indexed annuities and IUL insurance, we consider the assumptions participants in a hypothetical market would make to reflect an exit price. As a result, we adjust the valuation of variable annuity riders, indexed annuities and IUL insurance by updating certain contractholder assumptions, adding explicit margins to provide for profit, risk and expenses, and adjusting the rates used to discount expected cash flows to reflect a current market estimate of our nonperformance risk. The nonperformance risk adjustment is based on observable market data adjusted to estimate the risk of our life insurance company subsidiaries not fulfilling these liabilities. Consistent with general market conditions, this estimate resulted in a spread over the LIBOR swap curve as of September 30, 2020. As our estimate of this spread widens or tightens, the liability will decrease or increase. If this nonperformance credit spread moves to a zero spread over the LIBOR swap curve, the reduction to future net income would be approximately $731 million, net of DAC, DSIC, unearned revenue amortization, the reinsurance accrual and income taxes (calculated at the statutory tax rate of 21%), based on September 30, 2020 credit spreads.

Liquidity and Capital Resources

Overview

We maintained substantial liquidity during the nine months ended September 30, 2020. At September 30, 2020 and December 31, 2019, we had $7.4 billion and $3.7 billion, respectively, in cash and cash equivalents excluding CIEs and other restricted cash on a consolidated basis.

At September 30, 2020 and December 31, 2019, the parent company had $1.6 billion and $1.8 billion, respectively, in cash, cash equivalents, and unencumbered liquid securities. Liquid securities predominantly include U.S. government agency mortgage back securities. Additional sources of liquidity include a line of credit with an affiliate up to $867 million and an unsecured revolving committed credit facility for up to $750 million that expires in October 2022. Management’s estimate of liquidity available to the parent company in a volatile and uncertain economic environment as of September 30, 2020 was $2.8 billion which includes cash, cash equivalents, unencumbered liquid securities, the line of credit with an affiliate and a portion of the committed credit facility.

Under the terms of the committed credit facility, we can increase the availability to $1.0 billion upon satisfaction of certain approval requirements. Available borrowings under this facility are reduced by any outstanding letters of credit. At September 30, 2020, we had no outstanding borrowings under this credit facility and had $1 million of outstanding letters of credit. Our credit facility contains various administrative, reporting, legal and financial covenants. Compliance with these covenants is not currently impaired by the COVID-19 pandemic, and we remain in compliance with all such covenants at September 30, 2020.

On April 2, 2020, we issued $500 million of 3.0% unsecured senior notes due 2025 and incurred debt issuance costs of $4 million. The net proceeds from the sale of the notes will be used for general corporate purposes.

In addition, we have access to collateralized borrowings, which may include repurchase agreements and Federal Home Loan Bank (“FHLB”) advances. Our subsidiaries, RiverSource Life Insurance Company (“RiverSource Life”), and Ameriprise Bank, FSB are members of the FHLB of Des Moines, which provides access to collateralized borrowings. We had $200 million and $201 million of borrowings from the FHLB, which is collateralized with commercial mortgage backed securities and residential mortgage backed securities, as of September 30, 2020 and December 31, 2019, respectively. We believe cash flows from operating activities, available cash balances and our availability of revolver borrowings will be sufficient to fund our operating liquidity needs and stress requirements.

On November 3, 2020, S&P Global lowered our issuer credit and senior unsecured debt rating from A with a negative outlook to A-with a stable outlook due to gradual expansion in our non-insurance businesses driving a S&P ratings methodology change. We do not believe this rating change will have a material impact on our access to or cost of capital or otherwise materially impact our liquidity.

We continue to monitor and respond to the ongoing COVID-19 pandemic. Our risk management strategy is designed to provide proactive protection during stress events such as the current pandemic. We believe our process is working as intended, and our liquidity and capital resources have remained a source of balance sheet strength during the nine months ended September 30, 2020.

Dividends from Subsidiaries

Ameriprise Financial is primarily a parent holding company for the operations carried out by our wholly-owned subsidiaries. Because of our holding company structure, our ability to meet our cash requirements, including the payment of dividends on our common stock, substantially depends upon the receipt of dividends or return of capital from our subsidiaries, particularly our life insurance subsidiary, RiverSource Life, our face-amount certificate subsidiary, Ameriprise Certificate Company (“ACC”), AMPF Holding Corporation, which is the parent company of our retail introducing broker-dealer subsidiary, Ameriprise Financial Services, LLC (“AFS”) and our clearing broker-dealer subsidiary, American Enterprise Investment Services, Inc. (“AEIS”), our transfer agent subsidiary, Columbia Management Investment Services Corp., our investment advisory company, Columbia Management Investment

AMERIPRISE FINANCIAL, INC.

Advisers, LLC, and Ameriprise International Holdings GmbH, which is the parent company of Threadneedle Asset Management Holdings Sàrl. The payment of dividends by many of our subsidiaries is restricted and certain of our subsidiaries are subject to regulatory capital requirements.


Actual capital and regulatory capital requirements for our wholly owned subsidiaries subject to regulatory capital requirements were
as follows:	Actual Capital				Regulatory Capital Requirements
	September 30, 2020		December 31, 2019		September 30, 2020	December 31, 2019
	(in millions)
RiverSource Life (1)(2)	$	3,973	$	2,924	N/A	$	601
RiverSource Life of NY (1)(2)	399		235		N/A	38
ACC (4)(5)	414		430		383	402
Threadneedle Asset Management Holdings Sàrl (6)	419		287		192	183
Ameriprise Bank, FSB (4) (7)	552		300		476	180
AFS (3)(4)	191		94		#	#
Ameriprise Captive Insurance Company (3)	45		48		11	9
Ameriprise Trust Company (3)	37		35		34	32
AEIS (3)(4)	125		133		25	22
RiverSource Distributors, Inc. (3)(4)	13		13		#	#
Columbia Management Investment Distributors, Inc. (3)(4)	16		16		#	#

N/A Not applicable.

# Amounts are less than $1 million.

(1) Actual capital is determined on a statutory basis.

(2) Regulatory capital requirement is the company action level and is based on the statutory risk-based capital filing.

(3) Regulatory capital requirement is based on the applicable regulatory requirement, calculated as of September 30, 2020 and December 31, 2019.

(4) Actual capital is determined on an adjusted GAAP basis.

(5) ACC is required to hold capital in compliance with the Minnesota Department of Commerce and SEC capital requirements.

(6) Actual capital and regulatory capital requirements are determined in accordance with U.K. regulatory legislation. The regulatory capital requirements at September 30, 2020 represent calculations at December 31, 2019 of the rule based requirements, as specified by FCA regulations.

(7) Regulatory capital requirement is based on minimum requirements for well capitalized banks in accordance with the Office of the Comptroller of the Currency (“OCC”).

In addition to the particular regulations restricting dividend payments and establishing subsidiary capitalization requirements, we take into account the overall health of the business, capital levels and risk management considerations in determining a strategy for payments to our parent holding company from our subsidiaries, and in deciding to use cash to make capital contributions to our subsidiaries.

During the nine months ended September 30, 2020, the parent holding company received cash dividends or a return of capital from its subsidiaries of $1.5 billion (including $650 million from RiverSource Life) and contributed cash to its subsidiaries of $284 million (including $210 million to Ameriprise Bank, FSB). During the nine months ended September 30, 2019, the parent holding company received cash dividends or a return of capital from its subsidiaries of $1.9 billion (including $850 million from RiverSource Life) and contributed cash to its subsidiaries of $233 million (including $180 million to Ameriprise Bank, FSB).

In 2009, RiverSource established an agreement to protect its exposure to Genworth Life Insurance Company (“GLIC”) for its reinsured LTC. In 2016, substantial enhancements to this reinsurance protection agreement were finalized. The terms of these confidential provisions within the agreement have been shared, in the normal course of regular reviews, with our domiciliary regulator and rating agencies. GLIC is domiciled in Delaware so in the event GLIC were subjected to rehabilitation or insolvency proceedings, such proceedings would be located in (and governed by) Delaware laws. Delaware courts have a long tradition of respecting commercial and reinsurance affairs as well as contracts among sophisticated parties. Similar credit protections to what we have with GLIC have been tested and respected in Delaware and elsewhere in the United States, and as a result we believe our credit protections would be respected even in the unlikely event that GLIC becomes subject to rehabilitation or insolvency proceedings in Delaware. Accordingly, while no credit protections are perfect, we believe the correct way to think about the risks represented by our counterparty credit exposure to GLIC is not the full amount of the gross liability that GLIC reinsures, but a much smaller net exposure to GLIC (if any that might exist after taking into account our credit protections). Thus, management believes that our agreement and offsetting non LTC legacy arrangements with Genworth will enable RiverSource to recover on all net exposure in all material respects in the event of a rehabilitation or insolvency of GLIC.

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Dividends Paid to Shareholders and Share Repurchases

We paid regular quarterly dividends to our shareholders totaling $386 million and $390 million for the nine months ended September 30, 2020 and 2019, respectively. On October 28, 2020, we announced a quarterly dividend of $1.04 per common share. The dividend will be paid on November 20, 2020 to our shareholders of record at the close of business on November 9, 2020.

In February 2019, our Board of Directors authorized us to repurchase up to $2.5 billion of our common stock through March 31, 2021. In August 2020, our Board of Directors authorized an additional expenditure of up to $2.5 billion for the repurchase of shares of our common stock through September 30, 2022. As of September 30, 2020, we had $2.7 billion remaining under these share repurchase authorizations. We intend to fund share repurchases through existing working capital, future earnings and other customary financing methods. The share repurchase program does not require the purchase of any minimum number of shares, and depending on market conditions and other factors, these purchases may be commenced or suspended at any time without prior notice. Acquisitions under the share repurchase program may be made in the open market, through privately negotiated transactions or block trades or other means. During the nine months ended September 30, 2020, we repurchased a total of 6.3 million shares of our common stock at an average price of $150.91 per share.

Cash Flows

Cash flows of CIEs and restricted and segregated cash and cash equivalents are reflected in our cash flows provided by (used in) operating activities, investing activities and financing activities. Cash held by CIEs is not available for general use by Ameriprise Financial, nor is Ameriprise Financial cash available for general use by its CIEs. Cash and cash equivalents segregated under federal and other regulations is held for the exclusive benefit of our brokerage customers and is not available for general use by Ameriprise Financial.

Operating Activities

Net cash provided by operating activities increased $3.1 billion to $5.6 billion for the nine months ended September 30, 2020 compared to $2.6 billion for the prior year period primarily reflecting a $697 million increase in cash from changes in brokerage deposits, an increase in cash collateral related to derivatives and a $229 million decrease in income taxes paid.

Investing Activities

Our investing activities primarily relate to our Available-for-Sale investment portfolio. Further, this activity is significantly affected by the net flows of our investment certificate, fixed annuity and universal life products reflected in financing activities.

Net cash used in investing activities increased $685 million to $2.4 billion for the nine months ended September 30, 2020 compared to $1.7 billion for the prior year period primarily reflecting a $2.7 billion increase in cash used for purchases of Available-for-Sale securities, a $222 million decrease in net cash flows related to investments of consolidated investment entities and a $110 million decrease to cash related to written options with deferred premiums partially offset by a $1.5 billion increase in proceeds from sales of Available-for-Sale securities, a $461 million increase in proceeds from maturities, sinking fund payments and calls of Available-for-Sale securities and a $345 million decrease in cash paid for the fixed annuities reinsurance arrangement.

Financing Activities

Net cash provided by financing activities decreased $271 million to $793 million for the nine months ended September 30, 2020 compared to $1.1 billion for the prior year period primarily reflecting a $450 million increase in repayments of our senior notes, a $150 million decrease in net cash flows related to policyholder account balances, a $197 million decrease in net cash flows from investment certificates, a $199 million decrease in net cash flows related to purchased options with deferred premiums partially offset by a $356 million decrease in share repurchases and a $382 million increase in borrowings by consolidated investment entities.

Contractual Commitments

There have been no material changes to our contractual obligations disclosed in our 2019 10-K.

Off-Balance Sheet Arrangements

We provide asset management services to investment entities which are considered to be VIEs, such as CLOs, hedge funds, property funds and other private funds, which are sponsored by us. We consolidate certain CLOs. We have determined that consolidation is not required for hedge funds, property funds and other private funds, which are sponsored by us. Our maximum exposure to loss with respect to our investment in these non-consolidated entities is limited to our carrying value. We have no obligation to provide further financial or other support to these investment entities nor have we provided any support to these investment entities. See Note 5 to our Consolidated Financial Statements for additional information on our arrangements with these investment entities.

Forward-Looking Statements

This report contains forward-looking statements that reflect management’s plans, estimates and beliefs. Actual results could differ materially from those described in these forward-looking statements. Examples of such forward-looking statements include:

•statements of the Company’s plans, intentions, positioning, expectations, objectives or goals, including those relating to asset flows, mass affluent and affluent client acquisition strategy, client retention and growth of our client base, financial advisor

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productivity, retention, recruiting and enrollments, the introduction, cessation, terms or pricing of new or existing products and services, acquisition integration, benefits and claims expenses, general and administrative costs, consolidated tax rate, return of capital to shareholders, debt repayment and excess capital position and financial flexibility to capture additional growth opportunities;

•statements of the Company’s position, future performance and ability to pursue business strategy relative to the spread and impact of the COVID-19 pandemic and the related market, economic, client, governmental and healthcare system response;

•statements about the expected trend in the shift of the variable annuity sales business away from products with living benefit guarantees over time;

•other statements about future economic performance, the performance of equity markets and interest rate variations and the economic performance of the United States and of global markets; and

•statements of assumptions underlying such statements.

The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” “forecast,” “on track,” “project,” “continue,” “able to remain,” “resume,” “deliver,” “develop,” “evolve,” “drive,” “enable,” “flexibility,” “scenario,” “case” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from such statements.

Such factors include, but are not limited to:

•the impacts on our business of the spread and impact of the COVID-19 pandemic and the related economic, client, governmental and healthcare system responses;

•conditions in the interest rate, credit default, equity market and foreign exchange environments, including changes in valuations, liquidity and volatility;

•uncertainty as to the timing of launching the Company’s federal savings bank products;

•changes in and the adoption of relevant accounting standards and securities rating agency standards and processes, as well as changes in the litigation and regulatory environment, including ongoing legal proceedings and regulatory actions, the frequency and extent of legal claims threatened or initiated by clients, other persons and regulators, and developments in regulation and legislation, including the rules and regulations implemented or that may be implemented or modified in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act, bank holding company laws and regulations or in light of the U.S. Department of Labor’s fiduciary regulations (as well as state and other fiduciary rules, the SEC best interest standards, or similar standards such as the Certified Financial Planner Board standards) pertaining to the fiduciary status of investment advice providers to 401(k) plans, plan sponsors, plan participants and the holders of individual retirement or health savings accounts and related issues;

•investment management performance and distribution partner and consumer acceptance of the Company’s products;

•effects of competition in the financial services industry, including pricing pressure, the introduction of new products and services and changes in product distribution mix and distribution channels;

•changes to the Company’s reputation that may arise from employee or advisor misconduct, legal or regulatory actions, cybersecurity incidents, perceptions of the financial services industry generally, improper management of conflicts of interest or otherwise;

•the Company’s capital structure, including indebtedness, limitations on subsidiaries to pay dividends, and the extent, manner, terms and timing of any share or debt repurchases management may effect as well as the opinions of rating agencies (such as S&P Global recently lowering our issuer credit and senior unsecured debt rating) and other analysts and the reactions of market participants or the Company’s regulators, advisors, distribution partners or customers in response to any change or prospect of change in any such opinion;

•changes to the availability and cost of liquidity and the Company’s credit capacity that may arise due to shifts in market conditions, the Company’s credit ratings and the overall availability of credit;

•risks of default, capacity constraint or repricing by issuers or guarantors of investments the Company owns or by counterparties to hedge, derivative, insurance or reinsurance arrangements or by manufacturers of products the Company distributes, experience deviations from the Company’s assumptions regarding such risks, the evaluations or the prospect of changes in evaluations of any such third parties published by rating agencies or other analysts, and the reactions of other market participants or the Company’s regulators, advisors, distribution partners or customers in response to any such evaluation or prospect of changes in evaluation;

•experience deviations from the Company’s assumptions regarding morbidity, mortality, persistency and premium rate increases in certain annuity and insurance products (including, but not limited to, variable annuities and long term care policies), or from assumptions regarding market returns assumed in valuing or unlocking DAC and DSIC or market volatility underlying the Company’s valuation and hedging of guaranteed benefit annuity riders, or from assumptions regarding interest rates or asset yield assumed in the Company's loss recognition testing of its long term care business, or from assumptions regarding anticipated claims and losses relating to the Company’s auto and home insurance products;

•changes in capital requirements that may be indicated, required or advised by regulators or rating agencies;

•the impacts of the Company’s efforts to improve distribution economics and to grow third-party distribution of its products;

AMERIPRISE FINANCIAL, INC.

•the ability to pursue and complete strategic transactions and initiatives, including acquisitions, divestitures, restructurings, joint ventures and the development of new products and services;

•the ability to realize the financial, operating and business fundamental benefits of strategic transactions and initiatives the Company has completed, is pursuing or may pursue in the future, which may be impacted by the ability to obtain regulatory approvals, the ability to effectively manage related expenses and by market, business partner and consumer reactions to such strategic transactions and initiatives;

•the ability and timing to realize savings and other benefits from re-engineering and tax planning;

•interruptions or other failures in the Company’s communications, technology and other operating systems, including errors or failures caused by third-party service providers, interference or failures caused by third party attacks on the Company’s systems (or other cybersecurity incidents), or the failure to safeguard the privacy or confidentiality of sensitive information and data on such systems; and

•general economic and political factors, including consumer confidence in the economy and the financial industry, the ability and inclination of consumers generally to invest as well as their ability and inclination to invest in financial instruments and products other than cash and cash equivalents, the costs of products and services the Company consumes in the conduct of its business, and applicable legislation and regulation and changes therein (such as the ongoing negotiations in connection with UK’s membership in the European Union and recent U.S. election), including tax laws, tax treaties, fiscal and central government treasury policy, and policies regarding the financial services industry and publicly-held firms, and regulatory rulings and pronouncements.

Management cautions the reader that the foregoing list of factors is not exhaustive. There may also be other risks that management is unable to predict at this time that may cause actual results to differ materially from those in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Management undertakes no obligation to update publicly or revise any forward-looking statements. The foregoing list of factors should be read in conjunction with the “Risk Factors” discussion included in Part I, Item 1A of our 2019 10-K and “Item 1A. Risk Factors” in this Form 10-Q.

Ameriprise Financial announces financial and other information to investors through the Company’s investor relations website at ir.ameriprise.com, as well as SEC filings, press releases, public conference calls and webcasts. Investors and others interested in the company are encouraged to visit the investor relations website from time to time, as information is updated and new information is posted. The website also allows users to sign up for automatic notifications in the event new materials are posted. The information found on the website is not incorporated by reference into this report or in any other report or document the Company furnishes or files with the SEC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information set forth in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk” in this report is incorporated herein by reference. These disclosures should be read in conjunction with the “Quantitative and Qualitative Disclosures About Market Risk” discussion included as Part II, Item 7A of our 2019 10-K filed with the SEC on February 26, 2020.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to provide reasonable assurance that the information required to be reported in the Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in and pursuant to SEC regulations, including controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. It should be noted that, because of inherent limitations, our company’s disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the disclosure controls and procedures are met.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our company’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable level of assurance as of September 30, 2020.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.

AMERIPRISE FINANCIAL, INC.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 17 to the Consolidated Financial Statements in Part I, Item 1 is incorporated herein by reference.

ITEM 1A. RISK FACTORS

We are including the following risk factor which should be read in conjunction with our risk factors provided in Part I, Item 1A of our 2019 10-K:

The COVID-19 pandemic creates significant risks and uncertainties for our business.

The ongoing coronavirus disease 2019 (‘‘COVID-19’’) pandemic creates significant and pervasive societal, economic and market disruption globally. In particular, global financial markets have seen increased volatility and significant changes to the value of investments. If the value of assets under management decreases, our revenue and operating results could be substantially impacted. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition will depend on current and future developments. These developments are highly uncertain, including the scope, duration and severity of the pandemic, the effectiveness of our remote working and our ongoing phased office reopenings, the measures that may be taken by various governmental authorities in response to the outbreak (such as legislative action, stimulus, quarantines and travel restrictions, effectiveness of health care, and new or interim regulation), the actions of other third parties in response to the pandemic, and the possible further impacts on the global economy. Given the uncertainty of future developments, we seek to manage our risks effectively, but our ability to do so is subject to the inherent limitations of obtaining timely, reliable analysis and information in a situation that continues to develop. No assurance can be given that the steps we have taken will continue to be effective or appropriate.

Starting in the end of the first quarter of 2020, the COVID-19 pandemic impacted (and will likely continue to impact) each of our business segments. Consumer demand, client investing decisions in light of ongoing economic uncertainty, our fee and investment income, our owned asset values, and our credit reserve and other financial or actuarial assumptions and reserve calculations have been (and may further be) negatively impacted from a decline and volatility of asset prices, sustained reduction in interest rates, nonperformance credit spreads, credit deterioration, decreased liquidity in trading markets and other economic and market effects of the global pandemic. We are actively monitoring the potential direct and indirect impacts that the COVID-19 pandemic may have on our segments. The most significant impacts of the COVID-19 pandemic on the operational and financial results of our core business segments include:

•In our Advice and Wealth Management segment, the significant and ongoing impact of reduced interest rates, and the fee income impact from volatile equity markets and transactional client activity driven by client investing decisions in light of ongoing economic uncertainty;

•In our Asset Management segment, volatile average equity markets and changes in consumer demand and client investing decisions in light of ongoing economic uncertainty; and

•In our Retirement & Protection Solutions segment, the significant reduction in interest rates and the impact of volatile equity market levels on spread and fee income and the associated deferred acquisition cost amortization as well as changes in consumer demand and the operating environment that altered our mix of sales and product offerings.

If these conditions continue or worsen, we could experience volatility and uncertainty in volumes, uncertainty in availability and price levels of financial assets and hedges, reduced client activity and fees, increased mortality and morbidity in our insurance policyholder base, increased constraints and costs of capital, possible impacts to our credit ratings and other negative impacts on our financial position.

The COVID 19 pandemic may also affect the ability of our suppliers, distributors, vendors, reinsurers and other counterparties to provide products and services and otherwise fulfill their commitments to us. In addition, the market and economic uncertainty and the effects of the COVID-19 pandemic will heighten the other risks described in the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K.

AMERIPRISE FINANCIAL, INC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents the information with respect to purchases made by or on behalf of Ameriprise Financial, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the third quarter of 2020:


Period	(a)	(b)		(c)	(d)
	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1 to July 31, 2020
Share repurchase program (1)	433,550	$	151.84	433,550	$	406,770,075
Employee transactions (2)	45,499	$	147.34	N/A	N/A

August 1 to August 31, 2020
Share repurchase program (1)	621,055	$	157.76	621,055	$	2,808,791,115
Employee transactions (2)	81,779	$	159.73	N/A	N/A

September 1 to September 30, 2020
Share repurchase program (1)	1,013,362	$	152.48	1,013,362	$	2,654,274,924
Employee transactions (2)	17,936	$	155.14	N/A	N/A

Totals
Share repurchase program (1)	2,067,967	$	153.93	2,067,967
Employee transactions (2)	145,214	$	155.28	N/A
	2,213,181			2,067,967

N/A Not applicable.

(1) In February 2019, our Board of Directors authorized an expenditure of up to $2.5 billion for the repurchase of our common stock through March 31, 2021. In August 2020, our Board of Directors authorized an expenditure of up to $2.5 billion for the repurchase of our common stock through September 30, 2022.The share repurchase program does not require the purchase of any minimum number of shares, and depending on market conditions and other factors, these purchases may be commenced or suspended at any time without prior notice. Acquisitions under the share repurchase program may be made in the open market, through privately negotiated transactions or block trades or other means.

(2) Includes restricted shares withheld pursuant to the terms of awards under the Company’s share-based compensation plans to offset tax withholding obligations that occur upon vesting and release of restricted shares. The value of the restricted shares withheld is the closing price of common stock of Ameriprise Financial, Inc. on the date the relevant transaction occurs. Also includes shares withheld pursuant to the net settlement of Non-Qualified Stock Option (“NQSO”) exercises to offset tax withholding obligations that occur upon exercise and to cover the strike price of the NQSO. The value of the shares withheld pursuant to the net settlement of NQSO exercises is the closing price of common stock of Ameriprise Financial, Inc. on the day prior to the date the relevant transaction occurs.

AMERIPRISE FINANCIAL, INC.

ITEM 6. EXHIBITS

Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed certain agreements as exhibits to this Quarterly Report on Form 10-Q. These agreements may contain representations and warranties by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe our actual state of affairs at the date hereof and should not be relied upon.

The following exhibits are filed as part of this Quarterly Report on Form 10-Q. The exhibit numbers followed by an asterisk (*) indicate exhibits electronically filed herewith. All other exhibit numbers indicate exhibits previously filed and are hereby incorporated herein by reference.


Exhibit			Description

3.1			Amended and Restated Certificate of Incorporation of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, File No. 1-32525, filed on May 1, 2014).
3.2			Amended and Restated Bylaws of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, File No. 1-32525, filed on October 5, 2018).
4.1			Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to Form 10 Registration Statement, File No. 1-32525, filed on August 19, 2005). Other instruments defining the rights of holders of long-term debt securities of the registrant are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The registrant agrees to furnish copies of these instruments to the SEC upon request.
31.1*			Certification of James M. Cracchiolo pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2*			Certification of Walter S. Berman pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32*			Certification of James M. Cracchiolo and Walter S. Berman pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			The following materials from Ameriprise Financial, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2020 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for the three months and nine months ended September 30, 2020 and 2019; (ii) Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2020 and 2019; (iii) Consolidated Balance Sheets at September 30, 2020 and December 31, 2019; (iv) Consolidated Statements of Equity for the three months and nine months ended September 30, 2020 and 2019; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019; and (vi) Notes to the Consolidated Financial Statements.
104			The cover page from Ameriprise Financial, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2020 is formatted in iXBRL and contained in Exhibit 101.
* Filed electronically herewithin.

AMERIPRISE FINANCIAL, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


									AMERIPRISE FINANCIAL, INC.
									(Registrant)


Date:	November 9, 2020	By:	/s/ Walter S. Berman
			Walter S. Berman
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)


Date:	November 9, 2020	By:	/s/ John R. Hutt
			John R. Hutt
			Senior Vice President – Corporate Finance and Controller
			(Principal Accounting Officer)