10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year Ended December 31, 2012

OR

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

For the Transition Period from             to                

Commission file number 033-28976

RIVERSOURCE LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)

Minnesota	41-0823832
(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

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [Not Applicable]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2

of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No ý

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at February 26, 2013
Common Stock (par value $30 per share)	100,000 shares

All outstanding shares of the registrant are directly owned by Ameriprise Financial, Inc.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS I(1) (a) and (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

RIVERSOURCE LIFE INSURANCE COMPANY

FORM 10-K

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	21
Item 7.	Management’s Narrative Analysis	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	88
Item 9A.	Controls and Procedures	88
Item 9B.	Other Information	89
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	89
Item 11.	Executive Compensation	89
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	89
Item 13.	Certain Relationships and Related Transactions, and Director Independence	89
Item 14.	Principal Accountant Fees and Services	89
PART IV
Item 15.	Exhibits and Financial Statement Schedules	90
	Signatures	91
	Exhibit Index	E-1

PART I

ITEM 1.BUSINESS

Introduction

RiverSource Life Insurance Company is a stock life insurance company with one wholly owned stock life insurance company subsidiary, RiverSource Life Insurance Co. of New York (“RiverSource Life of NY”).  RiverSource Life Insurance Company is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”).

·RiverSource Life Insurance Company is domiciled in Minnesota and holds Certificates of Authority in American Samoa, the District of Columbia and all states except New York.  RiverSource Life Insurance Company issues insurance and annuity products.

·RiverSource Life of NY is domiciled and holds a Certificate of Authority in New York.  RiverSource Life of NY issues insurance and annuity products.

RiverSource Life Insurance Company also wholly owns RiverSource Tax Advantaged Investments, Inc. (“RTA”).  RTA is a stock company domiciled in Delaware and is a limited partner in affordable housing partnership investments.

RiverSource Life Insurance Company and RiverSource Life of NY are referred to collectively in this Item 1 and Item 1A of Form 10-K as “RiverSource Life”.

A majority of RiverSource Life’s business is sold through the retail distribution channel of Ameriprise Financial Services, Inc. (“AFSI”), a subsidiary of Ameriprise Financial.  RiverSource Distributors, Inc., a subsidiary of Ameriprise Financial, serves as the principal underwriter and distributor of variable annuity and life insurance products issued by RiverSource Life.

Annuities: Product Features and Risks

RiverSource Life offers both variable and fixed annuities to a broad range of consumers through AFSI. In 2012, cash sales for annuities sold through AFSI were $5.4 billion, of which $5.1 billion were for variable annuity sales and $300 million were for fixed annuity sales.

In the fourth quarter of 2010, RiverSource Life discontinued the sale of variable annuities through third-party banks and broker-dealers in order to focus on the distribution of its variable product offerings and sales through AFSI.  In 2012, RiverSource Life had total cash sales for fixed annuities through third-party banks and broker-dealers of $147 million.

Deferred variable and fixed annuities are products where assets accumulate until the contract is surrendered, the contractholder (or in some contracts, the annuitant) dies, or the contractholder or annuitant begins receiving benefits under an annuity payout option. Immediate annuities are products that begin payment within one year of issue and continue for life or for a fixed period of time.  The relative proportion between fixed and variable annuity sales is generally driven by the relative performance of the equity and fixed income markets.  Fixed sales are generally stronger when yields available in the fixed income markets are relatively high than when yields are relatively low.  Variable sales are generally stronger in times of superior performance in equity markets than in times of weak performance in equity markets.  The relative proportion between fixed and variable annuity sales is also influenced by product design and other factors.

Variable Annuities
A variable annuity provides a contractholder with investment returns linked to underlying investment accounts of the contractholder’s choice.  These underlying investment options may include affiliated RiverSource Variable Series Trust, Columbia Funds Variable Insurance Trust, Columbia Funds Variable Insurance Trust I and Wanger Advisors Trust funds (collectively, “VST Funds”) as well as funds of other companies.  Most variable annuity products in force offer a fixed account investment option with guaranteed minimum interest crediting rates ranging up to 4.0% as of December 31, 2012.

Contract purchasers can choose to add optional benefit provisions to their contracts to meet their needs, including guaranteed minimum death benefit (“GMDB”), guaranteed minimum withdrawal benefit (“GMWB”) and guaranteed minimum accumulation benefit (“GMAB”) provisions. Approximately 98% of RiverSource Life’s overall variable annuity assets include either an optional or a standard GMDB provision and approximately 53% of RiverSource Life’s overall variable annuity assets include a GMWB or GMAB provision.  In general, these features can help protect contractholders and beneficiaries from a shortfall in death or living benefits due to a decline in the value of their underlying investment accounts.

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In 2012, RiverSource Life introduced the SecureSource 3® living benefit rider, an optional GMWB rider that can be added to new purchases of variable annuities for a fee.  The SecureSource 3 benefit ensures a specified withdrawal amount annually for life. Clients who purchase this benefit are invested in a fund (the Columbia VP Managed Volatility Fund) designed to mitigate exposure to market volatility.  This rider provides clients with the security of guaranteed lifetime income, an opportunity for a less volatile investment experience and an opportunity for guaranteed income growth.  Clients purchasing a new variable annuity with the optional GMAB living benefit rider are also invested in the Columbia VP Managed Volatility Fund.

RiverSource Life’s Portfolio Navigator asset allocation program is available for new sales under its variable annuities, but as of April 30, 2012, is no longer available for sale with a living benefit rider. The Portfolio Navigator program allows clients to allocate their contract value to one of five funds of funds, each of which invests in various underlying funds. The Portfolio Navigator program is designed to allow a contract purchaser to select investment options based on the purchaser’s investment time horizon, risk tolerance and investment goals. Portfolio Navigator was designed to help a contract purchaser tailor the performance of annuity contracts and life insurance policies to their specific needs and to keep investment allocations on track over time. Columbia Management Investment Advisers, LLC (“CMIA”), RiverSource Life’s investment manager, serves as investment adviser for the funds of funds and all of the underlying funds in which the funds of funds invest.

RiverSource Life’s largest-selling variable annuities are the RiverSource® RAVA 5 series of variable annuities, which include the RAVA 5 Advantage®SM variable annuity, RAVA 5 SelectSM variable annuity and RAVA 5 AccessSM variable annuity (collectively, the “RAVA 5 Variable Annuities”).  Under the RAVA 5 Variable Annuities, the standard GMDB provides that if the contractholder is age 79 or younger on the date the contract is issued, the beneficiary will receive the greater of (i) the contract value less a pro-rata portion of any rider fees, (ii) the purchase payments minus adjusted partial surrenders; or (iii) the full surrender value.  If the contractholder is age 80 or older at contract issue, the beneficiary will receive the greater of (i) the contract value, less a pro-rata portion of any rider fees, or (ii) the full surrender value.

The following additional optional GMDBs are also available for an additional charge:

·A return of purchase payment death benefit for contractholders age 80 or older at contract issue.  This rider, in effect, adds the return of purchase payments less adjusted partial surrenders to the standard death benefit.

·A maximum anniversary value death benefit or a five-year maximum anniversary value death benefit.  These death benefit riders guarantee to pay the beneficiary the maximum account value on any contract anniversary or any fifth contract anniversary, plus subsequent purchase payments less adjusted partial surrenders.

·A 5% accumulation death benefit.  This rider in effect, adds a 5% accumulation death benefit floor to the return of purchase payment death benefit.

·An enhanced death benefit. This rider, in effect, adds the maximum anniversary value death benefit to the 5% accumulation death benefit.

·Benefit protector and benefit protector plus death benefits.  These riders are intended to provide an additional benefit to help offset expenses after the contractholder’s death.

Available features for annuity products for an additional charge also include the GMWB.  The GMWB allows guaranteed periodic withdrawals for the life of the contractholder, regardless of the investment performance of the contract.

Variable annuity contractholders can also obtain a lump sum principal-back guarantee by purchasing the optional GMAB rider for an additional charge.  The GMAB provides a guaranteed contract value at the end of a ten-year waiting period regardless of the investment performance of the contract.  The guarantee is equal to the greater of the total amount of purchase payments made or 80% of the highest anniversary value, adjusted for any withdrawals.

Certain variable annuity contracts contain a guaranteed minimum income benefit (“GMIB”) feature which, after a stipulated waiting period from contract issuance, guarantees a minimum lifetime annuity based on predetermined annuity purchase rates that may be in excess of what the contract account value can purchase at then-current annuity purchase rates.  In 2007, RiverSource Life ceased offering contracts with GMIB provisions.

RiverSource Life earns fee-based revenue in the form of mortality and expense risk fees, marketing support and administrative fees, fees charged for optional features elected by the contractholder and any surrender or withdrawal charges.

The general account assets of RiverSource Life support the contractual obligations under the guaranteed benefits RiverSource Life offers (see “General and Separate Account Assets — General Account” below).  As a result, RiverSource

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Life bears the risk that protracted under-performance of the financial markets could result in guaranteed benefit payments being higher than what current account values would support.  RiverSource Life’s exposure to risk from guaranteed benefits generally will increase when equity markets decline.  For a discussion of liabilities and reserves related to RiverSource Life’s annuity products, see Part II, Item 7A of this Annual Report on Form 10-K — “Quantitative and Qualitative Disclosures About Market Risk” as well as Note 2, Note 9 and Note 10 of the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Fixed Annuities
RiverSource Life’s fixed annuity products provide a contractholder with cash value that increases by a fixed or indexed interest rate.  RiverSource Life periodically resets rates at its discretion subject to certain policy terms establishing minimum guaranteed interest crediting rates.  RiverSource Life’s earnings from fixed annuities are based upon the spread between rates earned on assets purchased with fixed annuity deposits and the rates at which interest is credited to its fixed annuity contracts.

In 2007, RiverSource Life discontinued new sales of equity indexed annuities, however RiverSource Life continues to service existing policies.

Revenues for RiverSource Life’s fixed annuity products are primarily earned as net investment income on assets supporting fixed account balances with profitability significantly impacted by the spread between net investment income earned and interest credited on the fixed account balances.

The fixed annuity contracts in force provide guaranteed minimum interest crediting rates ranging from 1.0% to 5.0% as of December 31, 2012.  New contracts issued provide guaranteed minimum interest rates in compliance with state laws.

Insurance: Product Features and Risks

RiverSource Life issues both variable and fixed universal life insurance, traditional life insurance and disability income (“DI”) insurance.  These solutions are designed to help clients protect their income, grow assets and give to those individuals or causes that they care most about. Universal life insurance is a form of permanent life insurance characterized by flexible premiums, flexible death benefits and unbundled pricing factors (i.e., mortality, interest and expenses).   Variable universal life insurance combines the premium and death benefit flexibility of universal life with underlying fund investment flexibility and the risks associated therewith.  Traditional life insurance refers to whole and term life insurance policies. RiverSource Life also offers a chronic care rider, AdvanceSource® rider, on its new permanent insurance products.  This rider allows its policyholders to accelerate a portion of the life insurance death benefit in the event of a qualified chronic care need.

RiverSource Life’s sales of individual life insurance in 2012, as measured by scheduled annual premiums, lump sum and excess premiums, consisted of 11% variable universal life, 85% fixed universal life and 4% traditional life.  RiverSource Life issues only non-participating life insurance policies that do not pay dividends to policyholders. One of the major risks inherent in life insurance is the risk that mortality will be greater than anticipated. As discussed below, reinsurance is utilized by RiverSource Life to mitigate this risk.

Variable Universal Life Insurance
Variable universal life insurance provides life insurance coverage along with investment returns linked to underlying investment accounts of the policyholder’s choice.  Investment options may include affiliated VST Funds as well as funds of other companies.  Most variable universal life insurance products in force offer a fixed account investment option with guaranteed minimum interest crediting rates ranging from 2.0% to 4.5% as of December 31, 2012.  RiverSource Life’s major source of revenue from variable universal life insurance is cost of insurance and other charges. RiverSource Life’s Portfolio Navigator asset allocation program, as described in “Annuities: Product Features and Risks — Variable Annuities” is also available under its variable universal life insurance products.

Fixed Universal Life Insurance and Traditional Whole Life Insurance
Fixed universal life and traditional whole life insurance policies do not subject the policyholder to the investment risks associated with variable universal life insurance.

RiverSource Life’s fixed universal life insurance products provide life insurance coverage and cash value that increases by a fixed interest rate.  The rate is periodically reset at the discretion of RiverSource Life subject to certain policy terms relative to minimum interest crediting rates.  Fixed universal life insurance policies in force provide guaranteed minimum interest crediting rates ranging from 2.0% to 5.0% as of December 31, 2012. Approximately 9% of the face amount of RiverSource Life’s in force life insurance is fixed universal life, which includes indexed universal life (“IUL”), as described

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below.  Certain fixed universal life policies offered by RiverSource Life 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.  Approximately 38% of in force fixed universal life contains a secondary guarantee that generates an additional liability.

In 2011, RiverSource Life began offering IUL insurance. IUL is similar to universal life insurance in that it provides life insurance coverage and cash value that increases as a result of credited interest.  Also, like universal life insurance, there is a minimum guaranteed credited rate of interest.  Unlike universal life insurance, the rate of credited interest above the minimum guarantee for funds allocated to the indexed account is linked to the S&P 500 Index (subject to a cap). The policyholder may allocate all or a portion of the policy value to a fixed or indexed account.

In 2009, RiverSource Life discontinued new sales of traditional whole life insurance, however RiverSource Life continues to service existing policies.  RiverSource Life’s in force traditional whole life insurance policies combine a death benefit with a cash value that generally increases gradually over a period of years.

Term Life Insurance
Term life insurance provides a death benefit but it does not build up cash value.  The policyholder chooses the term of coverage with guaranteed premiums at the time of issue.  During the chosen term, RiverSource Life cannot raise premium rates even if claims experience deteriorates.  At the end of the chosen term, coverage may continue with higher premiums until the maximum age is attained, or the policy expires with no value.  RiverSource Life also offers a term life insurance product that pays the death benefit in the form of a monthly income stream.

Disability Income Insurance
DI insurance provides monthly benefits to individuals who are unable to earn income either at their occupation at time of disability (“own occupation”) or at any suitable occupation (“any occupation”) for premium payments that are guaranteed not to change.  Depending upon occupational and medical underwriting criteria, applicants for DI insurance can choose “own occupation” and “any occupation” coverage for varying benefit periods.  In some states, applicants may also choose various benefit provisions to help them integrate individual DI insurance benefits with Social Security or similar benefit plans and to help them protect their DI insurance benefits from the risk of inflation.

Long Term Care Insurance
As of December 31, 2002, RiverSource Life discontinued underwriting long term care (“LTC”) insurance.  Although new product sales were discontinued, RiverSource Life generally ceded 50% of the risk on a coinsurance basis to subsidiaries of Genworth Financial, Inc. (“Genworth”) and retained the remaining risk.  For policies issued by RiverSource Life of NY, this coinsurance only applies to policies issued in 1996 or later.

In 2004, RiverSource Life began to file for approval to implement rate increases on most of its existing blocks of nursing home-only indemnity LTC insurance policies.  Implementation of these rate increases began in early 2005 and continues.  Approvals have been received for some or all requested increases in the 50 states where increases have been requested, with an average approved cumulative rate increase of 82.7% of premium on all such policies where an increase was requested.

In 2007, RiverSource Life began to file for approval to implement rate increases on most of its existing blocks of comprehensive reimbursement LTC insurance policies.  Implementation of these rate increases began in late 2007 and continues. Approvals have been received for some or all requested increases in 48 states, with an average approved cumulative rate increase of 28.1% of premium on all such policies where an increase was requested.

RiverSource Life intends to seek additional rate increases with respect to these policies, subject to regulatory approval.

General and Separate Account Assets

Depending on the life insurance and annuity product purchased, the assets of RiverSource Life’s policyholders and contractholders may be placed in the general account of RiverSource Life (the “general account”) for fixed products and for the fixed account options under certain variable products or, in the case of variable life insurance and variable annuity products, in separate accounts that invest in underlying investment options (the “separate accounts”).

General Account
Assets in the general account support all obligations of RiverSource Life other than those supported by the separate accounts. RiverSource Life bears the investment risk of the general account assets.

In the general account, RiverSource Life, through its investment manager, CMIA, primarily invests in fixed maturity securities over a broad range of maturities for the purpose of providing a targeted rate of return on its investments while

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controlling risk.  The majority of these fixed maturity securities are interest-bearing investments such as government obligations, mortgage backed obligations and various corporate debt instruments.  RiverSource Life does not invest in securities to generate trading profits.

In accordance with regulatory investment guidelines, RiverSource Life Insurance Company and RiverSource Life of NY, through their respective boards of directors or board of directors’ investment committees or staff functions, review models projecting different interest rate scenarios, risk/return measures and their effect on profitability in order to guide the management of the general account assets.  They also review the distribution of assets in the portfolio by type and credit risk sector.  The objective is to structure the investment securities portfolio in the general account to meet contractual obligations under the insurance and annuity products and achieve targeted levels of profitability within defined risk parameters.

RiverSource Life has the discretion to set the rate of interest credited to contractholders’ accounts subject to each contract’s guaranteed minimum interest crediting rate.  To the extent the yield on RiverSource Life’s invested general account asset portfolio declines below its target spread plus the minimum guarantee, RiverSource Life’s profitability would be negatively affected.

The interest rates credited to contractholders’ fixed accounts generally reset towards new business rates; therefore, margins may be negatively impacted by increases in the general level of interest rates.  Part of RiverSource Life’s strategy includes the use of derivatives, such as interest rate swaptions, for risk management purposes.  These derivatives help protect margins by increasing investment returns if there is a sudden and severe rise in interest rates, thereby lessening the impact of an increase in rates credited to contractholders’ fixed accounts.  Conversely, in a low interest rate environment, margins may be negatively impacted as the interest rates available on RiverSource Life’s invested assets approach guaranteed minimum interest rates on the insurance policies or annuity contracts in force.  This negative impact may be compounded by the fact that many of these interest-bearing investments are callable or pre-payable by the issuer and calls and prepayments are more likely to occur in a low interest rate environment.

Separate Accounts
Variable annuity and insurance products offer separate account investment options. In addition, many of these products offer fixed account options.  Under the separate account option, contractholders and policyholders bear the investment risk.  The separate accounts are registered as unit investment trusts under the Investment Company Act of 1940.  State insurance law prescribes that separate accounts constitute a distinct operation from the general account and as such, assets in the separate accounts are only available to fund the liabilities of the separate accounts. Under the subaccounts of each separate account, RiverSource Life credits or charges income, capital gains and losses only to that subaccount.

Generally, the separate accounts consist of a number of subaccounts, each of which invests in shares of a particular fund.  Contractholders and policyholders can allocate their payments among these separate subaccounts.  The underlying funds are managed both by affiliated and unaffiliated third-party money managers.  These funds invest in portfolios containing a variety of securities including common stocks, bonds, managed assets and/or short-term securities.  The value of the subaccounts fluctuates with the investment return of the underlying funds in which the subaccounts invest.

RiverSource Life receives payments from its affiliate, CMIA, for providing certain sponsor and related servicing activity for the VST Funds which are available as investment options under the variable annuity and life insurance products.  RiverSource Life also receives revenues from assets allocated to subaccounts investing in VST Funds.  These revenues include shareholder services payments as well as payments for marketing, administrative services, training and other services provided by RiverSource Life.

In addition to the revenues described above, RiverSource Life receives shareholder servicing payments from other companies’ funds included as investment options under its variable annuity and life insurance products.  It also receives marketing and administrative support payments from the affiliates of other companies’ funds which are included as investment options in its variable annuity and life insurance products. These fees are generally based on the level of separate account assets held in a particular fund and accordingly will vary based on market conditions.

Competition

RiverSource Life competes with other insurers and product manufacturers including insurance companies, as well as certain banks, securities brokerage firms, independent financial advisors and other financial intermediaries that market insurance, annuities, mutual funds, retirement accounts and other financial products.

Competitive factors affecting the sale of RiverSource Life’s annuity and/or insurance products include:

·financial strength ratings from agencies such as A.M. Best;

·the breadth, quality, design and pricing of products and services offered;

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·guaranteed benefit features and hedging capability;

·the quality of underwriting;

·the effectiveness of advertising and promotion campaigns;

·reputation and recognition in the marketplace;

·distribution capabilities and compensation; and

·the quality of customer service.

Regulation

The Minnesota Department of Commerce regulates RiverSource Life Insurance Company, and the New York State Department of Financial Services regulates RiverSource Life of NY.

In addition to being regulated by the Minnesota Department of Commerce, RiverSource Life Insurance Company is regulated by each of the insurance regulators in the states where it is authorized to transact business.  The primary purpose of such regulation and supervision is to protect the interests of contractholders and policyholders.  In general, state insurance laws and regulations govern standards of solvency, capital requirements, the licensing of insurers and their agents, premium rates, policy forms, the nature of and limitations on investments, periodic reporting requirements and other matters. In addition, state regulators conduct periodic examinations into insurer market conduct and compliance with insurance and securities laws. Financial regulation of RiverSource Life is extensive and its financial and intercompany transactions (such as intercompany dividends and investment activities) are often subject to pre-notification and continuing evaluation by the regulators.

Virtually all states require participation in insurance guaranty associations which assess fees to insurance companies in order to fund claims of policyholders and contractholders of insolvent insurance companies. These assessments are generally based on a member insurer’s proportionate share of all premiums written by member insurers in the state during a specified period prior to an insolvency. See Note 18 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding guaranty association assessments.

Because RiverSource Life issues variable annuity and life insurance products required to be registered under federal and state securities laws, many aspects of its business are subject to extensive regulation and examination by the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority, commonly referred to as FINRA, and other federal and state regulatory bodies.

Insurance companies have recently been the subject of increasing regulatory, legislative and judicial scrutiny.  Numerous state and federal regulatory agencies have commenced investigations regarding sales and marketing practices (including sales to older consumers), claims handling, and unclaimed property and escheatment practices and procedures. In addition, federal securities regulators have recently increased their focus on the adequacy of disclosure regarding complex investment products, including variable life insurance and variable annuities, and have announced that they will carefully review actions by life insurers to improve profitability and reduce risks under in force insurance and annuity products with guaranteed benefits.  In reviewing such actions, regulators are examining, among other factors, potential conflicts between an insurer’s financial interests and the interests of contract owners in investment performance, as well as perceived inconsistencies between the insurer’s action and the expectations of investors at the time the products were sold.

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted into law.  The Dodd-Frank Act created the Federal Insurance Office (“FIO”) within the Department of Treasury. The FIO does not have substantive regulatory responsibilities, though it is tasked with monitoring the insurance industry and the effectiveness of its regulatory framework and providing periodic reports to the President and Congress. The scope and impact of the research and reports provided by the FIO and the work of the Basel, Switzerland-based International Association of Insurance Supervisors (“IAIS”), and the extent to which such work may ultimately lead to a more prominent role of the federal government in the regulation of the insurance industry, is uncertain.

In October 2012, RiverSource Life purchased a block of residential mortgage loans from an affiliate, Ameriprise Bank, FSB.  As an owner and servicer of residential mortgages, RiverSource Life must comply with applicable federal and state lending laws and is subject to the jurisdiction of the federal Consumer Finance Protection Bureau and certain state regulators relative to these mortgage loans.

The National Association of Insurance Commissioners (“NAIC”) has established risk-based capital (“RBC”) requirements that virtually all state insurance departments have adopted, with minor modifications.  The RBC requirements are used by the NAIC and state insurance regulators to identify companies that merit regulatory action designed to protect policyholders.  The NAIC RBC report is completed as of December 31 and filed annually, along with the statutory financial statements.

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RiverSource Life Insurance Company would be subject to various levels of regulatory intervention if its total adjusted statutory capital falls below defined RBC action levels.  At the “company action level,” defined as total adjusted capital level between 100% and 75% of the RBC requirement, an insurer must submit a plan for corrective action with its primary state regulator.  The “regulatory action level,” which is between 75% and 50% of the RBC requirement, subjects an insurer to examination, analysis and specific corrective action prescribed by the primary state regulator.  If a company’s total adjusted capital falls between 50% and 35% of its RBC requirement, referred to as “authorized control level,” the insurer’s primary state regulator may place the insurer under regulatory control.  Insurers with total adjusted capital below 35% of the requirement will be placed under regulatory control.

At December 31, 2012, RiverSource Life Insurance Company’s company action level RBC was $620 million, and the corresponding total adjusted capital was $3.3 billion, which represents 525% of company action level RBC.

At December 31, 2012, RiverSource Life of NY’s company action level RBC was $44 million, and the corresponding total adjusted capital was $256 million, which represents 577% of company action level RBC.

As described above, RiverSource Life Insurance Company and RiverSource Life of NY maintain capital levels well in excess of the company action level.

Financial Strength Ratings

RiverSource Life Insurance Company and RiverSource Life of NY receive ratings from independent rating organizations.  Ratings are important to maintain public confidence in RiverSource Life.  Lowering of RiverSource Life’s ratings could have a material adverse effect on its ability to market its products and could lead to increased surrenders of its products.  Rating organizations continually evaluate the financial soundness and claims-paying ability of insurance companies, and base their ratings on a number of different factors, including market position in core products and market segments, risk-adjusted capitalization and the quality of investment portfolios.

More specifically, the ratings assigned are developed from an evaluation of a company’s balance sheet strength, operating performance and business profile.  Balance sheet strength reflects a company’s ability to meet its current and ongoing obligations to its contractholders and policyholders and includes analysis of a company’s capital adequacy.  The evaluation of operating performance centers on the stability and sustainability of a company’s source of earnings.  The business profile component of the rating considers a company’s mix of business, market position and depth and experience of management.

The financial strength ratings for RiverSource Life can be found at ir.ameriprise.com. For the most current ratings information, please see the individual rating agency’s website.

Reinsurance

RiverSource Life reinsures a portion of the insurance risks associated with its life, DI and LTC insurance products through reinsurance agreements with unaffiliated reinsurance companies.  RiverSource Life uses reinsurance to limit losses, reduce exposure to large risks and provide additional capacity for future growth.  To manage exposure to losses from reinsurer insolvencies, RiverSource Life evaluates the financial condition of its reinsurers prior to entering into new reinsurance treaties and on a periodic basis during the terms of the treaties.  RiverSource Life remains primarily liable as the direct insurer on all risks reinsured.

Generally, RiverSource Life currently reinsures 90% of the death benefit liability related to almost all individual fixed and variable universal life and term life insurance products.  As a result, RiverSource Life typically retains and is at risk for, at most, 10% of each policy’s death benefit from the first dollar of coverage for new sales of these policies, subject to the reinsurers fulfilling their obligations.  RiverSource Life began reinsuring risks at this level in 2001 (RiverSource Life of NY began in 2002) for term life insurance and 2002 (2003 for RiverSource Life of NY) for individual fixed and variable universal life insurance.  Policies issued prior to these dates are not subject to these same reinsurance levels.  Generally, the maximum amount of life insurance risk retained by RiverSource Life is $1.5 million on a single life and $1.5 million on any flexible premium survivorship life policy.  Risk on fixed and variable universal life policies is reinsured on a yearly renewable term basis.  Risk on most term life policies starting in 2001 (2002 for RiverSource Life of NY) is reinsured on a coinsurance basis, a type of reinsurance in which the reinsurer participates proportionally in all material risks and premiums associated with a policy.

For existing LTC policies, RiverSource Life ceded 50% of the risk on a coinsurance basis to Genworth and retained the remaining risk. For RiverSource Life of NY, this reinsurance arrangement applies for 1996 and later issues only. As of December 31, 2012, RiverSource Life’s credit exposure to Genworth under this reinsurance arrangement was approximately $1.6 billion. Genworth also serves as claims administrator for RiverSource Life’s LTC policies.

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Generally, RiverSource Life retains at most $5,000 per month of risk per life on DI policies sold on policy forms introduced in most states in October 2007 (August 2010 for RiverSource Life of NY) and reinsures the remainder of the risk on a coinsurance basis with unaffiliated reinsurance companies.  RiverSource Life retains all risk for new claims on DI contracts sold on other policy forms.  RiverSource Life also retains all risk on accidental death benefit claims and substantially all risk associated with waiver of premium provisions.

RiverSource Life also has life insurance and fixed annuity risk previously assumed under reinsurance arrangements with unaffiliated insurance companies.  As of December 31, 2012, the amount related to assumed reinsurance arrangements was $615 million.

See Note 8 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on reinsurance.

ITEM 1A.RISK FACTORS

RiverSource Life’s operations and financial results are subject to various risks and uncertainties, including those described below, that could have a material adverse effect on RiverSource Life’s business, financial condition or results of operations.  Based on the information currently known, RiverSource Life believes that the following information identifies the most material factors affecting RiverSource Life. However, the risks and uncertainties RiverSource Life faces are not limited to those described below. Additional risks and uncertainties not presently known to RiverSource Life or which are currently believed to be immaterial may also adversely affect RiverSource Life’s business.

Risks Relating to RiverSource Life’s Business and Operations

RiverSource Life’s financial condition and results of operations may be adversely affected by market fluctuations and by economic, political and other factors.

RiverSource Life’s financial condition and results of operations may be materially affected by market fluctuations and by economic and other factors.  Many such factors of a global or localized nature include: political, social, economic and market conditions; the availability and cost of capital; the level and volatility of equity prices, commodity prices and interest rates, currency values and other market indices; technological changes and events; U.S. and foreign government fiscal and tax policies; the availability and cost of credit; inflation; investor sentiment and confidence in the financial markets; terrorism and armed conflicts; and natural disasters such as weather catastrophes and widespread health emergencies.  In addition, during periods of unfavorable market or economic conditions, the level of consumer investing and insuring activity may also decrease, which may negatively impact the results of RiverSource Life’s businesses.  Moreover, fluctuations in economic and market activity could impact the way then-existing customers allocate their available resources, which could affect RiverSource Life’s persistency, surrender and product cash value loan experience and could negatively impact its business.

Declines and volatility in U.S. and global market conditions have impacted RiverSource Life’s business in the past and may continue to do so.  RiverSource Life’s business has been and in the future may be adversely affected by U.S. and global capital market and credit crises, the repricing of credit risk, equity market volatility and decline, and stress or recession in the U.S. and global economies generally.

Significant downturns and volatility in equity markets may have, and have in the past had, an adverse effect on RiverSource Life’s financial condition and results of operations. Market downturns and volatility may cause, and have caused, potential new purchasers of RiverSource Life’s products to limit purchases of or to refrain from purchasing RiverSource Life’s variable annuities and variable universal life insurance products that have returns linked to the performance of the equity markets. Downturns may also cause contractholders in annuity products and policyholders in insurance products to withdraw cash values from those products. Downturns and volatility may also have an adverse effect on the performance of RiverSource Life’s investment portfolio.  In addition, market downturns and volatility in equity markets may cause and have caused RiverSource Life to accelerate amortization of deferred acquisition costs (“DAC”), which increases its expenses and reduces its net income.

Additionally, downturns and volatility in equity markets can have, and have had, an adverse effect on RiverSource Life’s asset-based revenues because the value of equity-based separate account assets will be reduced.

The GMAB and the non-life contingent benefits associated with GMWB provisions offered with certain RiverSource Life variable annuities create obligations which are carried at fair value separately from the underlying host variable annuity contract.  Changes in the fair value of these GMAB and GMWB obligations are recorded through earnings with fair value calculated by estimating the present value of future benefits, less applicable fees, using actuarial models, which simulate

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various economic scenarios.  Changes in interest rates, equity prices and/or equity market volatility may impact the fair value of the GMAB and GMWB liabilities.  Although RiverSource Life typically hedges against such changes, a significant change in either equity price levels or equity market volatility may result in a net adverse impact to current period financial statements.  Further, RiverSource Life’s cost of hedging these guarantees has increased as a result of low interest rates and volatility in the equity markets.  In addition, continued heightened volatility creates greater uncertainty for the accuracy of RiverSource Life’s future hedging effectiveness.

A significant market decline in equity price levels could also result in guaranteed minimum benefits under GMDB and GMIB provisions being higher than current account values would support, which could have an adverse effect on RiverSource Life’s financial condition and results of operations.  RiverSource Life does not currently hedge or reinsure GMIB or GMDB provisions.

Changes in interest rates and prolonged periods of low interest rates may adversely affect RiverSource Life’s financial condition and results of operations.

RiverSource Life’s insurance and annuity products are sensitive to interest rate fluctuations, and future impacts associated with such variations may differ from historical impacts.  In addition, interest rate fluctuations could result in fluctuations in the valuation of certain minimum guaranteed benefits contained in some of its variable annuity products.  Although RiverSource Life typically hedges to mitigate some of the effect of such fluctuations, significant changes in interest rates could have a material adverse impact on RiverSource Life’s results of operations.

During periods of increasing market interest rates, RiverSource Life offers higher crediting rates on interest-sensitive products, such as fixed universal life insurance and fixed annuities and RiverSource Life increases crediting rates on in force products to keep these products competitive. Because returns on invested assets may not increase as quickly as current interest rates, RiverSource Life may have to accept a lower “spread,” or the difference between the returns it earns on the investments that support its obligations under these products and the amounts that it must pay policyholders and contractholders, and thus lower profitability or face a decline in sales and greater loss of existing contracts and related assets.  In addition, increases in market interest rates may cause increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, as policyholders and contractholders seek to shift assets to products with perceived higher returns. This process may lead to an earlier than expected outflow of cash from the business.  Also, increases in market interest rates may result in extension of the maturity of some of RiverSource Life’s investment assets.  These withdrawals and surrenders may require investment assets to be sold at a time when the prices of those assets are lower because of the increase in market interest rates, which may result in realized investment losses.  Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on RiverSource Life’s financial condition and results of operations.  An increase in policy surrenders and withdrawals also may require RiverSource Life to accelerate amortization of DAC, which would increase its expenses and reduce its net income.

During periods of falling interest rates or stagnancy of low interest rates, RiverSource Life’s spread may be reduced or could become negative, primarily because some of these products have guaranteed minimum crediting rates.  Due to the long-term nature of the liabilities associated with RiverSource Life’s long term care and fixed universal life with secondary guarantees, as well as fixed annuities and guaranteed benefits on variable annuities, sustained declines in or stagnancy of low long-term interest rates may subject RiverSource Life to reinvestment risks and increased hedging costs.  In addition, reduced or negative spreads may require RiverSource Life to accelerate amortization of DAC, which would increase its expenses and reduce its net income.

Interest rate fluctuations also could have an adverse effect on the results of RiverSource Life’s investment portfolio. During periods of declining market interest rates or stagnancy of low interest rates, the interest RiverSource Life receives on variable interest rate investments decreases. In addition, during those periods, RiverSource Life is forced to reinvest the cash it receives as interest or return of principal on its investments in lower-yielding high-grade instruments or in lower-credit instruments to maintain comparable returns. Issuers of certain callable fixed income securities also may decide to prepay their obligations in order to borrow at lower market rates, which increases the risk that RiverSource Life may have to invest the cash proceeds of these securities in lower-yielding or lower-credit instruments.

Adverse capital and credit market conditions may significantly affect RiverSource Life’s ability to meet liquidity needs, access to capital and cost of capital.

The capital and credit markets may experience, and have experienced, varying degrees of volatility and disruption. In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for certain issuers.  RiverSource Life needs liquidity to pay contractholder and policyholder claims and benefits as well as operating expenses.  Without sufficient liquidity, RiverSource Life could be required to curtail its operations, and its business would suffer.

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RiverSource Life’s liquidity needs are satisfied primarily through its reserves and the cash generated by its operations. RiverSource Life believes the level of cash and securities it maintains, when combined with expected cash inflows from investments and operations, is adequate to meet anticipated short-term and long-term benefit and claims payment obligations. In the event current resources are insufficient to satisfy RiverSource Life’s needs, it may access financing sources from its parent holding company, its other affiliates or third parties. The availability of additional financing would depend on a variety of factors such as market conditions, the availability of liquidity from RiverSource Life’s parent or other affiliates, the general availability of credit, the overall availability of credit to the financial services industry, RiverSource Life’s credit ratings and credit capacity, as well as the possibility that customers or potential third-party lenders could develop a negative perception of RiverSource Life’s long- or short-term financial prospects if it incurs large investment losses or if the level of its business activity decreases due to a market downturn. Similarly, RiverSource Life’s access to funds may be rendered more costly or impaired if regulatory authorities or rating organizations take actions against it.  Also, transfers of cash or other assets from RiverSource Life’s parent or other affiliates must comply with applicable regulations and may be subject to the prior approval of state insurance regulators.

Disruptions, uncertainty or volatility in the capital and credit markets may also limit RiverSource Life’s or its parent’s access to capital required to operate its business.  Such market conditions may limit RiverSource Life’s ability to satisfy statutory capital requirements, generate fee income and market-related revenue to meet liquidity needs and access the capital necessary to grow its business. As such, RiverSource Life may be forced to use different types of capital than it would otherwise use, less effectively deploy such capital or bear an unattractive cost of capital which could decrease RiverSource Life’s profitability and significantly reduce its financial flexibility.

A downgrade or a potential downgrade in RiverSource Life’s financial strength ratings could result in a loss of business and adversely affect its financial condition and results of operations.

Financial strength ratings, which various ratings organizations publish as a measure of an insurance company’s ability to meet contractholder and policyholder obligations, are important to maintain public confidence in RiverSource Life’s products, the ability to market its products and its competitive position. A downgrade in RiverSource Life’s financial strength ratings, or the announced potential for a downgrade, could have a significant adverse effect on its financial condition and results of operations in many ways, including:

·reducing new sales of insurance and annuity products;

·adversely affecting RiverSource Life’s relationships with distributors of its products;

·materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders;

·requiring RiverSource Life to reduce prices for many of its products to remain competitive; and

·adversely affecting RiverSource Life’s ability to obtain reinsurance or obtain reasonable pricing on reinsurance.

In view of the difficulties experienced in recent years by certain companies in the insurance industry, the ratings organizations have heightened the level of scrutiny that they apply and have requested additional information from the companies that they rate. They may increase the frequency and scope of their reviews or adjust upward the capital and other requirements employed in the ratings organizations’ models for maintenance of ratings levels.  Ratings organizations may also become subject to tighter laws, regulations or scrutiny governing ratings, which may in turn impact ratings assigned to insurance companies.

RiverSource Life cannot predict what actions ratings organizations may take, or what actions RiverSource Life may take in response to the actions of ratings organizations, which could adversely affect its business. As with other companies in the insurance industry, RiverSource Life’s ratings could be changed at any time and without any notice by the ratings organizations.

Intense competition and the economics of changes in RiverSource Life’s product revenue mix and distribution channels could negatively impact RiverSource Life’s ability to maintain or increase its market share and profitability.

RiverSource Life operates in an intensely competitive industry. RiverSource Life competes based on a number of factors including name recognition, service, investment performance, product offerings and features, price, perceived financial strength, and claims-paying ability ratings. RiverSource Life’s competitors include insurers, asset managers and other financial institutions. RiverSource Life may face competitors that have greater market share, offer a broader range of products, have greater financial resources or have higher claims-paying ability ratings than RiverSource Life does.  Some of RiverSource Life’s competitors may possess or acquire intellectual property rights that could provide a competitive advantage to them in certain markets or for certain products, which could make it difficult for RiverSource Life to introduce

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new products and services.  Some of RiverSource Life’s competitors’ proprietary products or technology could be similar to its own, and this could result in disputes that could impact RiverSource Life’s financial condition or results of operations.  In addition, over time, certain sectors of the financial services industry have become considerably more concentrated, as financial institutions involved in a broad range of financial services have been acquired by or merged into other firms.  This convergence could result in RiverSource Life’s competitors gaining greater resources and RiverSource Life may experience pressures on its pricing and market share as a result of these factors and as some of RiverSource Life’s competitors seek to increase market share by reducing prices.

Historically, Ameriprise Financial’s advisor network provided annuity and insurance products issued almost exclusively (in the case of annuities) or predominantly (in the case of insurance products) by RiverSource Life. In 2010, Ameriprise Financial began to expand the offerings available to its advisors to include variable annuities issued by a limited number of unaffiliated insurance companies.  As a result of this and further openings of Ameriprise Financial’s advisor network to annuity and insurance products of other companies, RiverSource Life could experience lower sales of its products, higher surrenders or other developments, which could adversely affect its financial condition and results of operations.

RiverSource Life and its affiliates face intense competition in attracting and retaining key talent.

RiverSource Life’s continued success depends to a substantial degree on its, and its affiliates’, ability to attract and retain qualified people. The market for qualified talent is extremely competitive. If RiverSource Life is unable to attract and retain qualified individuals or its recruiting and retention costs increase significantly, its financial condition and results of operations could be materially adversely impacted.

The impairment or negative performance of other financial institutions could adversely affect RiverSource Life.

RiverSource Life has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, hedge funds, insurers, reinsurers and other investment funds and other institutions. The operations of U.S. and global financial services institutions are interconnected and a decline in the financial condition of one or more financial services institutions may expose RiverSource Life to credit losses or defaults, limit access to liquidity or otherwise disrupt the operations of RiverSource Life’s business. While RiverSource Life regularly assesses its exposure to different industries and counterparties, the performance and financial strength of specific institutions are subject to rapid change, the timing and extent of which cannot be known.

Many transactions with and investments in the products and securities of other financial institutions expose RiverSource Life to credit risk in the event of default of its counterparty. With respect to secured transactions, RiverSource Life’s credit risk may be exacerbated when the collateral held by it cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the loan or derivative exposure due to it. RiverSource Life also has exposure to financial institutions in the form of unsecured debt instruments, derivative transactions, (including with respect to derivatives hedging its exposure on variable annuity contracts with guaranteed benefits), reinsurance, repurchase and underwriting arrangements and equity investments.  There can be no assurance that any such losses or impairments to the carrying value of these assets would not materially and adversely impact RiverSource Life’s business and results of operations.

Downgrades in the credit or financial strength ratings assigned to the counterparties with whom RiverSource Life transacts business or other adverse reputational impacts to such counterparties could create the perception that its financial condition will be adversely impacted as a result of potential future defaults by such counterparties.  Additionally, RiverSource Life could be adversely affected by a general, negative perception of financial institutions caused by the downgrade or other adverse impact to the reputation of other financial institutions.

Poor investment performance in RiverSource Life’s variable products could adversely affect its financial condition and results of operations.

RiverSource Life believes that investment performance is an important factor in the growth of its variable annuity and variable life insurance business. Poor investment performance could impair revenues and earnings, as well as RiverSource Life’s prospects for growth, because RiverSource Life’s ability to attract funds from existing and new clients might diminish and existing clients might withdraw assets from RiverSource Life’s variable products in favor of better performing products of other companies, which would result in lower revenues.

AFSI may be unable to attract and retain financial advisors.

RiverSource Life is dependent on the financial advisors of AFSI for a significant portion of the sales of its annuity and insurance products. A significant number of the financial advisors operate as independent contractors under a franchise

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agreement with AFSI. There can be no assurance that AFSI will be successful in its efforts to maintain its current network of financial advisors or to recruit and retain new advisors to its network. If AFSI is unable to attract and retain quality financial advisors, fewer advisors would be available to sell RiverSource Life’s annuity and insurance products and RiverSource Life’s financial condition and results of operations could be materially adversely affected.

Third-party defaults, bankruptcy filings, legal actions and other events may limit the value of or restrict RiverSource Life’s access to cash and investments.

Capital and credit market volatility can exacerbate, and has exacerbated, the risk of third-party defaults, bankruptcy filings, foreclosures, legal actions and other events that may limit the value of or restrict RiverSource Life’s access to cash and investments.

Defaults in RiverSource Life’s fixed maturity securities portfolio could adversely affect its earnings.

Issuers of the fixed maturity securities that RiverSource Life owns may default on principal and interest payments. As of December 31, 2012, 6% of RiverSource Life’s invested assets had ratings below investment-grade.  Moreover, economic downturns and corporate malfeasance can increase the number of companies, including those with investment-grade ratings, that default on their debt obligations.  Default-related declines in the value of RiverSource Life’s fixed maturity securities portfolio could cause its net earnings to decline and could weaken its capital position.

RiverSource Life’s valuation of fixed maturity and equity securities may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to investment valuations that may materially adversely impact its financial condition or results of operations.

Fixed maturity, equity and short-term investments which are reported at fair value on the Consolidated Balance Sheets, represent the majority of RiverSource Life’s total cash and invested assets. The determination of fair values by management in the absence of quoted market prices is based on: (i) valuation methodologies; (ii) securities RiverSource Life deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, interest rates, credit spreads and quoted market prices of comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts.

During periods of market disruption, including periods of significantly rising or high interest rates and/or rapidly widening credit spreads or illiquidity, it may be difficult to value certain of RiverSource Life’s securities. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the financial environment. In such cases, the valuation of certain securities may require additional subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable or require greater estimation as well as valuation methods that are more sophisticated or require greater estimation, thereby resulting in values which may be less than the value at which the investments may be ultimately sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within RiverSource Life’s consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on RiverSource Life’s financial condition or results of operations.

The determination of the amount of allowances and impairments taken on certain investments is subject to management’s evaluation and judgment and could materially impact RiverSource Life’s financial position or results of operations.

The determination of the amount of allowances and impairments vary by investment type and is based upon RiverSource Life’s periodic evaluation and assessment of inherent and known risks associated with the respective asset class.  Such evaluations and assessments are revised as conditions change and new information becomes available.  Management updates its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised.  Historical trends may not be indicative of future impairments or allowances.

The assessment of whether impairments have occurred is based on management’s case-by-case evaluation of the underlying reasons for the decline in fair value that considers a wide range of factors about the security issuer or borrower, and management uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security or loan

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and in assessing the prospects for recovery. Inherent in management’s evaluation of the security or loan are assumptions and estimates about the operations of the issuer and its future earnings potential.

Some of RiverSource Life’s investments are relatively illiquid.

RiverSource Life invests a portion of its general account assets in certain privately placed fixed income securities, mortgage loans, policy loans, limited partnership interests, and collateralized debt obligations, among others, all of which are relatively illiquid. These asset classes represented 20% of the carrying value of RiverSource Life’s investment portfolio as of December 31, 2012.  If RiverSource Life requires significant amounts of cash on short notice in excess of its normal cash requirements, it may have difficulty selling these investments in a timely manner, or be forced to sell them for an amount less than it would otherwise have been able to realize, or both, which could have an adverse effect on RiverSource Life’s financial condition and results of operations.

The failure of other insurers could require RiverSource Life to pay higher assessments to state insurance guaranty funds.

RiverSource Life Insurance Company 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, RiverSource Life could be adversely affected by the requirement to pay assessments to the guaranty fund associations.  Uncertainty and volatility in the U.S. economy and financial markets in recent years have weakened the financial condition of numerous insurers, including insurers currently in receiverships, increasing the risk of triggering guaranty fund assessments.  For more information regarding assessments from guaranty fund associations, see Note 18 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

If the counterparties to RiverSource Life’s reinsurance arrangements or to the derivative instruments it uses to hedge its business risks default, RiverSource Life may be exposed to risks it had sought to mitigate, which could adversely affect its financial condition and results of operations.

RiverSource Life uses reinsurance to mitigate its risks in various circumstances as described in Item 1 of this Annual Report on Form 10-K — “Business — Reinsurance.”  Reinsurance does not relieve RiverSource Life of its direct liability to its policyholders, even when the reinsurer is liable to RiverSource Life. Accordingly, RiverSource Life bears credit and performance risk with respect to its reinsurers. A reinsurer’s insolvency or its inability or unwillingness to make payments under the terms of its reinsurance agreement could have a material adverse effect on RiverSource Life’s financial condition and results of operations.  See Note 2 and Note 8 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding reinsurance.

In addition, RiverSource Life uses a variety of derivative instruments (including options, forwards and interest rate swaps) with a number of counterparties to hedge business risks.  The amount and breadth of exposure to derivative counterparties, as well as the cost of derivative instruments, have increased significantly in connection with RiverSource Life’s strategies to hedge guaranteed benefit obligations under its variable annuity products.  If RiverSource Life’s counterparties fail to honor their obligations under the derivative instruments in a timely manner, RiverSource Life’s hedges of the related risk will be ineffective. That failure could have a material adverse effect on RiverSource Life’s financial condition and results of operations.  This risk of failure of RiverSource Life’s hedge transactions from counterparty default may be increased by capital market volatility.

If RiverSource Life’s reserves for future policy benefits and claims are inadequate, it may be required to increase its reserve liabilities, which would adversely affect its financial condition and results of operations.

RiverSource Life establishes reserves as estimates of its liabilities to provide for future obligations under its insurance policies and annuities contracts.  Reserves do not represent an exact calculation of liability, but rather are estimates of contract benefits and related expenses RiverSource Life expects to incur over time. The assumptions and estimates RiverSource Life makes in establishing reserves require certain judgments about future experience and, therefore, are inherently uncertain.  RiverSource Life cannot determine with precision the actual amounts that it will pay for contract benefits, the timing of payments, or whether the assets supporting its stated reserves will increase to the levels it estimates before payment of benefits or claims.  RiverSource Life monitors its reserve levels continually.  If RiverSource Life were to conclude that its reserves are insufficient to cover actual or expected contract benefits, it would be required to increase its reserves and incur income statement charges for the period in which it makes the determination, which would adversely affect its financial condition and results of operations. For more information on how RiverSource Life sets its reserves, see Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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Morbidity rates or mortality rates that differ significantly from RiverSource Life’s pricing expectations would negatively affect profitability.

RiverSource Life sets prices for its life, DI and LTC insurance and some annuity products based upon expected claim payment patterns, derived from assumptions RiverSource Life makes about its policyholders and contractholders, the morbidity rates, or likelihood of sickness, and mortality rates, or likelihood of death. The long-term profitability of these products depends upon how RiverSource Life’s actual experience compares with its pricing assumptions. For example, if morbidity rates are higher or mortality rates are lower than its pricing assumptions, RiverSource Life could be required to make greater payments under DI insurance policies, chronic care riders and immediate annuity contracts than it had projected.  The same holds true for LTC policies RiverSource Life previously underwrote to the extent of the risks that RiverSource Life retained.  If mortality rates are higher than its pricing assumptions, RiverSource Life could be required to make greater payments under its life insurance policies and annuity contracts with GMDBs than it has projected.

The risk that RiverSource Life’s claims experience may differ significantly from its pricing assumptions is particularly significant for its LTC insurance products, notwithstanding RiverSource Life’s ability to implement future price increases with regulatory approvals.  As with life insurance, LTC insurance policies provide for long-duration coverage and, therefore, its actual claims experience will emerge over many years. However, as a relatively new product in the market, LTC insurance does not have the extensive claims experience history of life insurance, and, as a result, RiverSource Life’s ability to forecast future claim rates for LTC insurance is more limited than for life insurance.  RiverSource Life has sought to moderate these uncertainties to some extent by partially reinsuring LTC policies that it had previously underwritten and by limiting its present LTC insurance offerings to policies underwritten fully by unaffiliated third-party insurers, and RiverSource Life has also implemented rate increases on certain in force policies as described in Item 1 of this Annual Report on Form 10-K — “Business — Insurance: Product Features and Risks — Long Term Care Insurance.”  RiverSource Life may be required to implement additional rate increases in the future and may or may not receive regulatory approval for the full extent and timing of any rate increases that RiverSource Life may seek.

RiverSource Life may face losses if there are significant deviations from its assumptions regarding the future persistency of its insurance policies and annuity contracts.

The prices and expected future profitability of RiverSource Life’s insurance and deferred annuity products are based in part upon assumptions related to persistency, which is the probability that a policy or contract will remain in force from one period to the next. Given the ongoing economic and market dislocations, future consumer persistency behaviors could vary materially from the past.  The effect of persistency on profitability varies for different products. For most of its life insurance and deferred annuity products, actual persistency that is lower than its persistency assumptions could have an adverse impact on profitability, especially in the early years of a policy or contract, primarily because RiverSource Life would be required to accelerate the amortization of expenses it deferred in connection with the acquisition of the policy or contract.

For RiverSource Life’s LTC insurance and universal life insurance policies with secondary guarantees, as well as variable annuities with GMWB, actual persistency that is higher than its persistency assumptions could have a negative impact on profitability. If these policies remain in force longer than RiverSource Life assumed, RiverSource Life could be required to make greater benefit payments than it had anticipated when it priced or partially reinsured these products.  Some of its LTC insurance policies have experienced higher persistency and poorer morbidity experience than RiverSource Life had assumed, which led it to increase premium rates on certain policies.

Because RiverSource Life’s assumptions regarding persistency experience are inherently uncertain, reserves for future policy benefits and policy claims and other policyholders’ funds may prove to be inadequate if actual persistency experience is different from those assumptions. Although some of its products permit RiverSource Life to increase premiums during the life of the policy or contract, RiverSource Life cannot guarantee that these increases would be sufficient to maintain profitability. Additionally, some of these pricing changes require regulatory approval, which may not be forthcoming. Moreover, many of RiverSource Life’s products do not permit RiverSource Life to increase premiums or limit those increases during the life of the policy or contract while premiums on certain other products (primarily LTC insurance) may not be increased without prior regulatory approval. Significant deviations in experience from pricing expectations regarding persistency could have an adverse effect on the profitability of RiverSource Life’s products.

RiverSource Life may be required to accelerate the amortization of DAC, which would increase its expenses and reduce profitability.

DAC represent the portion of costs which are incremental and direct to the acquisition of new or renewal business, principally direct sales commissions and other distribution and underwriting costs that have been deferred on the sale of

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annuity, life and DI insurance. For annuity and universal life products, DAC are amortized based on projections of estimated gross profits over amortization periods equal to the approximate life of the business.  For other insurance products, DAC are generally amortized as a percentage of premiums over amortization periods equal to the premium-paying period.

RiverSource Life’s projections underlying the amortization of DAC require the use of certain assumptions, including interest margins, mortality rates, persistency rates, maintenance expense levels and customer asset value growth rates for variable products. RiverSource Life periodically reviews and, where appropriate, adjusts its assumptions. When RiverSource Life changes its assumptions, it may be required to accelerate the amortization of DAC or to record a charge to increase benefit reserves.

For more information regarding DAC, see Part II, Item 7 in this Annual Report on Form 10-K — “Management’s Narrative Analysis — Critical Accounting Policies — Deferred Acquisition Costs and Deferred Sales Inducement Costs” and “— Recent Accounting Pronouncements.”

Misconduct by RiverSource Life’s employees and agents and its affiliates’ employees, financial advisors and agents is difficult to detect and deter and could harm RiverSource Life’s business, results of operations or financial condition.

Misconduct by RiverSource Life’s employees and agents and its affiliates’ employees, financial advisors and agents could result in violations of law, regulatory sanctions and/or serious reputational or financial harm. Misconduct can occur in each of RiverSource Life’s businesses and could include:

·binding RiverSource Life to transactions that exceed authorized limits;

·hiding unauthorized or unsuccessful activities resulting in unknown and unmanaged risks or losses;

·improperly using, disclosing, or otherwise compromising confidential information;

·recommending transactions that are not suitable;

·engaging in fraudulent or otherwise improper activity;

·engaging in unauthorized or excessive trading to the detriment of customers; or

·otherwise not complying with laws, regulations or RiverSource Life’s control procedures.

RiverSource Life cannot always deter misconduct by employees and agents and its affiliates’ employees, financial advisors and agents and the precautions RiverSource Life takes to prevent and detect this activity may not be effective in all cases.  RiverSource Life cannot also assure that misconduct by employees and agents and its affiliates’ employees, financial advisors and agents will not lead to a material adverse effect on its business, financial condition or results of operations.

Damage to the reputation of RiverSource Life or its affiliates could adversely affect the business of RiverSource Life.

The ability of RiverSource Life to market and sell its products is highly dependent upon external perceptions of its business practices and financial condition, as well as the business practices and financial condition of its affiliates. Damage to the reputation of RiverSource Life or its affiliates could cause significant harm to the business and prospects of RiverSource Life and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in RiverSource Life’s financial strength or liquidity, unethical behavior and the misconduct of employees, AFSI’s advisors and counterparties. Negative perceptions or publicity regarding these matters could damage RiverSource Life’s reputation among existing and potential clients, employees and distributors. Adverse developments with respect to the financial industry may also, by association, negatively impact RiverSource Life’s reputation or result in greater regulatory or legislative scrutiny or litigation.

RiverSource Life’s reputation is also dependent on its continued identification of and mitigation against conflicts of interest, including those relating to the activities of its affiliated entities. For example, conflicts may arise between RiverSource Life’s position as a manufacturer of insurance and annuity products and the position of AFSI, the distributor of these products. RiverSource Life and its affiliated entities have procedures and controls that are designed to identify, address and appropriately disclose perceived conflicts of interest. However, identifying and appropriately addressing conflicts of interest is complex and RiverSource Life’s reputation could be damaged if it fails, or appears to fail, to address conflicts of interest appropriately. In addition, the SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest. It is possible that potential or perceived conflicts could give rise to litigation or enforcement actions. Also, it is possible that the regulatory scrutiny of, and litigation in connection with, conflicts of interest will make RiverSource Life’s clients less willing to enter into transactions in which such a conflict may occur, and will adversely affect RiverSource Life’s business.

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Breaches of security, or interference with RiverSource Life’s technology infrastructure, could harm its business.

The business of RiverSource Life and its affiliates is reliant upon technology systems and networks, including systems and networks managed by third parties, to process, transmit and store information and to conduct business activities and transactions with clients, distributors, vendors and other third parties.  RiverSource Life is also subject to certain federal and state regulations that require it to establish and maintain policies and procedures designed to protect sensitive client information.  Maintaining the integrity of the systems and networks of RiverSource Life and its affiliates is critical to the success of RiverSource Life’s business operations, including the retention of clients, and to the protection of RiverSource Life’s proprietary information and RiverSource Life’s clients’ personal information. To date, RiverSource Life has not experienced any material breaches of or interference with its systems and networks, however, RiverSource Life routinely encounters and addresses such threats, including an increasing frequency of phishing scams, introductions of malware and unauthorized payment requests. Any such breaches or interference by third parties or by RiverSource Life’s employees that may in the future occur could have a material adverse impact on RiverSource Life’s business, financial condition or results of operations.

RiverSource Life and its affiliates have implemented and maintain security measures designed to protect against breaches of security and other interference with systems and networks resulting from attacks by third parties, including hackers, and from employee error or malfeasance.  RiverSource Life and its affiliates also require third party vendors who, in the provision of services to RiverSource Life and its affiliates, are provided with or process information pertaining to RiverSource Life’s business or its clients to meet certain information security standards. Changes in RiverSource Life’s technology platforms, such as an evolution to accommodate mobile computing, may also require corresponding changes in its systems, networks and data security measures. In addition, the increasing reliance on technology systems and networks and the occurrence and potential adverse impact of attacks on such systems and networks, both generally and in the financial services industry, have enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber-security threats. As these threats, and government and regulatory oversight of associated risks, continue to evolve, RiverSource Life may be required to expend additional resources to enhance or expand upon the security measures it currently maintains.

Despite the measures RiverSource Life has taken and may in the future take to address and mitigate these risks, RiverSource Life cannot assure that the systems and networks of RiverSource Life and its affiliates will not be subject to breaches or interference. Any such event may result in operational disruptions as well as unauthorized access to or the disclosure or loss of RiverSource Life’s proprietary information or RiverSource Life’s clients’ personal information, which in turn may result in legal claims, regulatory scrutiny and liability, reputational damage, the incurrence of costs to eliminate or mitigate further exposure, the loss of clients or other damage to its business.  In addition, the trend toward broad consumer and general public notification of such incidents could exacerbate the harm to RiverSource Life’s business, financial condition, or results of operations. Even if RiverSource Life successfully protected its technology infrastructure and the confidentiality of sensitive data, RiverSource Life may incur significant expenses in connection with its responses to any such attacks as well as the adoption and maintenance of appropriate security measures. RiverSource Life could also suffer harm to its business and reputation if attempted security breaches are publicized. RiverSource Life cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities, attempts to exploit vulnerabilities in its systems, data thefts, physical system or network break-ins or inappropriate access, or other developments will not compromise or breach the technology or other security measures protecting the networks and systems used in connection with its products and services.

Protection from system interruptions and operating errors is important to RiverSource Life’s business. If RiverSource Life experienced a sustained interruption to its telecommunications or data processing systems or other failure in operational execution, it could harm its business.

Operating errors and system or network interruptions could delay and disrupt RiverSource Life’s ability to develop, deliver or maintain its products and services, causing harm to its business and reputation and resulting in loss of customers or revenue.  Interruptions could be caused by operational failures arising from employee error or malfeasance, interference by third parties, including hackers, RiverSource Life’s implementation of new technology, as well as from maintenance of existing technology.  RiverSource Life’s financial, accounting, data processing or other operating systems and facilities may fail to operate or report data properly, experience connectivity disruptions or otherwise become disabled as a result of events that are wholly or partially beyond its control, adversely affecting its ability to process transactions or provide products and services to customers.  These interruptions can include fires, floods, earthquakes and other natural disasters, power losses, equipment failures, attacks by third parties, failures of internal or vendor software or systems and other events beyond its control.

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RiverSource Life relies on third party service providers and vendors for certain communications, technology and business functions and faces the risk of operational failure (including, without limitation, failure caused by an inaccuracy, untimeliness or other deficiency in data reporting), termination or capacity constraints of any of the clearing agents, exchanges, clearing houses or other third party service providers that RiverSource Life uses to facilitate or are component providers to its securities transactions and other product manufacturing and distribution activities. These risks are heightened by RiverSource Life’s deployment in response to both client interest and evolution in the financial markets of increasingly sophisticated products, such as those which incorporate automatic asset re-allocation, multiple portfolios or funds and business-driven hedging, compliance and other risk management or investment or financial management strategies. Any such failure, termination or constraint could adversely impact its ability to effect transactions, service its clients, manage its exposure to risk or otherwise achieve desired outcomes. For example, in 2012, RiverSource Life’s results were unfavorably impacted by a tax item that resulted from its discovery that it had received incomplete data from a third party service provider for securities lending activities. This lack of complete data caused RiverSource Life to miscalculate its dividend received deduction and foreign tax credit, which resulted in an understatement of taxes payable and an overstatement of reported earnings in prior periods.

RiverSource Life’s risk management policies and procedures may not be fully effective in identifying or mitigating its risk exposure in all market environments or against all types of risk, including employee and financial advisor misconduct.

RiverSource Life has devoted significant resources to develop its risk management policies and procedures and will continue to do so. Nonetheless, RiverSource Life’s policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating its risk exposure in all market environments or against all types of risk. Many of its methods of managing risk and exposures are based upon its use of observed historical market behavior or statistics based on historical models. During periods of market volatility or due to unforeseen events, the historically derived correlations upon which these methods are based may not be valid.  As a result, these methods may not predict future exposures accurately, which could be significantly greater than what its models indicate. This could cause RiverSource Life to incur investment losses or cause its hedging and other risk management strategies to be ineffective.  Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to RiverSource Life, which may not always be accurate, complete, up-to-date or properly evaluated.

Moreover, RiverSource Life is subject to the risks of errors and misconduct by its employees and AFSI’s advisors, such as fraud, non-compliance with policies, recommending transactions that are not suitable, and improperly using or disclosing confidential information.  These risks are difficult to detect in advance and deter, and could harm RiverSource Life’s business, financial condition or results of operations.  RiverSource Life is further subject to the risk of nonperformance or inadequate performance of contractual obligations by third-party vendors of products and services that are used in its businesses.  Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective in mitigating RiverSource Life’s risk exposure in all market environments or against all types of risk.  Insurance and other traditional risk-shifting tools may be held by or available to RiverSource Life in order to manage certain exposures, but they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.

The occurrence of natural or man-made disasters and catastrophes could adversely affect the financial condition and results of operations of RiverSource Life.

The occurrence of natural disasters and catastrophes, including earthquakes, hurricanes, floods, tornadoes, fires, severe winter weather, explosions, pandemic disease and man-made disasters, including acts of terrorism, insurrections and military actions, could adversely affect the financial condition or results of operations of RiverSource Life. Such disasters and catastrophes may damage its facilities, preventing its employees from performing their roles or otherwise disturbing its ordinary business operations, and by impacting claims, as described below.  Such disasters and catastrophes may also impact RiverSource Life indirectly by changing the condition and behaviors of its customers, business counterparties and regulators, as well as by causing declines or volatility in the economic and financial markets.

The effects of natural and man-made disasters and catastrophes on the business of RiverSource Life include but are not limited to the following: a catastrophic loss of life may materially increase the amount of or accelerate the timing in which benefits are paid under its insurance policies; an increase in claims and any resulting increase in claims reserves caused by a disaster may harm the financial condition of its reinsurers, thereby impacting the cost and availability of reinsurance and the probability of default on reinsurance recoveries; and declines and volatility in the financial markets may harm its financial condition.

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RiverSource Life cannot predict the timing and frequency with which natural and man-made disasters and catastrophes may occur, nor can RiverSource Life predict the impact that changing climate conditions may have on the frequency and severity of natural disasters.  As such, RiverSource Life cannot be sure that its actions to identify and mitigate the risks associated with such disasters and catastrophes, including predictive modeling, establishing liabilities for expected claims, acquiring insurance and reinsurance and developing business continuity plans, will be effective.

Legal, Regulatory and Tax Risks

Legal and regulatory actions are inherent in RiverSource Life’s business and could result in financial losses or harm its business.

RiverSource Life is, and in the future may be, subject to legal and regulatory actions in the ordinary course of its operations.  Actions brought against RiverSource Life may result in awards, settlements, penalties, injunctions or other adverse results, including reputational damage. In addition, RiverSource Life may incur significant expenses in connection with its defense against such actions regardless of their outcome. Various regulatory and governmental bodies have the authority to review RiverSource Life’s products and business practices and those of its employees and agents and its affiliates’ employees and agents and to bring regulatory or other legal actions against RiverSource Life if, in their view, RiverSource Life’s practices, or those of its employees and agents and its affiliates’ employees and agents, are improper.  Pending legal and regulatory actions include proceedings relating to aspects of RiverSource Life’s business and operations that are specific to it and proceedings that are typical of the industries in which it operates.  In or as a result of turbulent times such as those RiverSource Life experienced in recent years, the volume of claims and amount of damages sought in litigation and regulatory proceedings generally increase.

RiverSource Life’s business is regulated heavily, and changes to the laws and regulations may have an adverse effect on RiverSource Life’s operations, reputation and financial condition.

RiverSource Life is subject to various federal and state laws and regulations, and is required to obtain and maintain licenses for its business in addition to being subject to regulatory oversight.  For a discussion of the regulatory framework in which RiverSource Life operates, see Item 1 of this Annual Report on Form 10-K — “Regulation.” Compliance with these applicable laws and regulations is time-consuming and personnel-intensive, and RiverSource Life has invested and will continue to invest substantial resources to ensure compliance by its parent company and its subsidiaries, directors, officers, employees and affiliated employees and agents. Any enforcement actions, investigations or other proceedings brought against RiverSource Life or its subsidiaries, directors, employees and affiliated employees and agents by its regulators may result in fines, injunctions or other disciplinary actions that could harm RiverSource Life’s reputation or impact its results of operations. Further, any changes to the laws and regulations applicable to RiverSource Life’s business, as well as changes to the interpretation and enforcement of such laws and regulations, may affect its operations and financial condition. Such changes may impact the operations and profitability of RiverSource Life, including with respect to the scope of products and services provided and the incurrence of additional costs of doing business. The economic crisis of recent years has resulted in numerous changes to regulation and oversight of the insurance industry, the full impact of which has yet to be realized. Any incremental requirements, costs and risks imposed on RiverSource Life in connection with such current or future legislative or regulatory changes, may constrain its ability to market its products to potential customers, and could negatively impact its profitability and make it more difficult for RiverSource Life to pursue its growth strategy.

Some of the changes resulting from rules and regulations called for under the Dodd-Frank Act could present operational challenges and increase costs.  For example, in the area of derivatives, higher margin and capital requirements, coupled with more restrictive collateral rules, could impact RiverSource Life’s ability to effectively manage and hedge risk.  Ultimately these complexities and increased costs could have an impact on RiverSource Life’s ability to offer cost-effective and innovative insurance products to its clients.

RiverSource Life is subject to state regulation and must comply with statutory reserve and capital requirements, including preparing financial statements in accordance with statutory accounting principles.  State regulators continually review and update these requirements and other requirements relating to the business operations of insurance companies, including their underwriting and sales practices.  In December 2012, the NAIC adopted a new reserve valuation manual that applies principles-based reserve standards to life insurance products.  The valuation manual becomes the effective reserve valuation method when adopted by 42 jurisdictions although no states have adopted the valuation manual to date. The requirement for principles-based life insurance reserves may result in statutory reserves being more sensitive to changes in interest rates, policyholder behavior and other market factors. It is not possible at this time to estimate the potential impact of future changes in statutory reserve and capital requirements.  Further, RiverSource Life cannot predict the effect that proposed federal legislation, such as the option of federally chartered insurers or a mandated federal systemic risk regulator, may have on RiverSource Life or its competitors.

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RiverSource Life’s profit margins and earnings are dependent in part on its ability to maintain current fee levels for the products and services that it offers.  Competition within the financial services industry could lead RiverSource Life to reduce the fees that it charges its clients for products and services.  See the risk factor entitled “Intense competition and the economics of changes in RiverSource Life’s product revenue mix and distribution channels could negatively impact RiverSource Life’s ability to maintain or increase its market share and profitability.”  In addition, RiverSource Life may be required to reduce its fee levels, or restructure the fees it charges, as a result of regulatory initiatives or proceedings that are either industry-wide or specifically targeted at RiverSource Life.  Reductions or other changes in the fees that RiverSource Life charges for its products and services could reduce its revenues and earnings.

Changes in the supervision and regulation of the financial industry could materially impact RiverSource Life’s business.

In July 2010, the Dodd-Frank Act was enacted into law.  The Dodd-Frank Act calls for sweeping changes in the supervision and regulation of the financial services industry designed to provide for greater oversight of financial industry participants, reduce risk in banking practices and in securities and derivatives trading, enhance public company corporate governance practices and executive compensation disclosures, and provide greater protections to individual consumers and investors.  Certain elements of the Dodd-Frank Act became effective immediately, though the details of many provisions are subject to additional studies and will not be known until regulatory agencies adopt final rules.  The impact of the Dodd-Frank Act on RiverSource Life, the financial industry and the economy cannot be known until the rules and regulations called for under the Dodd-Frank Act have been finalized, and, in some cases, implemented over time.

Insurance companies and the business of insurance are exempted from several major provisions of the Dodd-Frank Act. However, because the Dodd-Frank Act significantly changes the regulation of the financial services industry and financial markets generally, and because the Dodd-Frank Act will apply directly to certain key affiliates of RiverSource Life, implementation of the Dodd-Frank Act could nevertheless materially impact RiverSource Life’s business. For example, to the extent that RiverSource Life invests in debt securities issued by a financial company that becomes subject to the orderly liquidation authority under the Dodd-Frank Act, RiverSource Life’s rights as a creditor could be adversely affected. RiverSource Life could also be subject to assessments to repay federal funding advanced to liquidated financial companies. Further, RiverSource Life may be impacted by the creation of the FIO within the Department of the Treasury, which is required to monitor the insurance industry and gather relevant information, including issues or gaps in the current state-based solvency regulation system.

In July 2010, the SEC proposed certain measures that would establish a new framework to replace the requirements of Rule 12b-1 under the Investment Company Act of 1940, with respect to how mutual funds and underlying funds of separate accounts collect and pay fees to cover the costs of selling and marketing their shares.  The proposed changes have been subject to a public comment period and, following any enactment, would be phased in over a number of years. As these measures are not final nor undergoing implementation throughout the financial services industry, the impact of changes such as those currently proposed cannot be predicted at this time.

RiverSource Life may not be able to protect its intellectual property and may be subject to infringement claims.

RiverSource Life relies on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect its intellectual property.  Although RiverSource Life uses a broad range of measures to protect its intellectual property rights, third parties may infringe or misappropriate its intellectual property. RiverSource Life may have to litigate to enforce and protect its copyrights, trademarks, patents, trade secrets and know-how or to determine their scope, validity or enforceability, which represents a diversion of resources that may be significant in amount and may not prove successful. The loss of intellectual property protection or the inability to secure or enforce the protection of RiverSource Life’s intellectual property assets could have a material adverse effect on its business and its ability to compete.

RiverSource Life also may be subject to costly litigation in the event that another party alleges its operations or activities infringe upon such other party’s intellectual property rights. Third parties may have, or may eventually be issued, patents or other protections that could be infringed by RiverSource Life’s products, methods, processes or services or could otherwise limit its ability to offer certain product features. Any party that holds such a patent could make a claim of infringement against RiverSource Life. RiverSource Life may also be subject to claims by third parties for breach of copyright, trademark, license usage rights, or misappropriation of trade secret rights. Any such claims and any resulting litigation could result in significant liability for damages. If RiverSource Life were found to have infringed or misappropriated a third-party patent or other intellectual property rights, it could incur substantial liability, and in some circumstances, could be enjoined from providing certain products or services to its customers or utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on RiverSource Life’s business, financial condition and results of operations.

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Changes in and the adoption of accounting standards could have a material impact on RiverSource Life’s financial statements.

RiverSource Life prepares its financial statements in accordance with U.S. generally accepted accounting principles.  From time to time, the Financial Accounting Standards Board, the SEC, and other regulators change the financial accounting and reporting standards governing the preparation of RiverSource Life’s financial statements. In some cases, RiverSource Life could be required to apply a new or revised standard retrospectively, resulting in the restating of prior period financial statements. These changes are difficult to predict and it is possible that such changes could have a material effect on RiverSource Life’s financial condition and results of operations.

Changes in U.S. federal income or estate tax law could make some of RiverSource Life’s products less attractive to clients.

Many of the products RiverSource Life issues or on which its business is based (including both insurance products and non-insurance products) receive favorable treatment under current U.S. federal income or estate tax law. Changes in U.S. federal income or estate tax law could reduce or eliminate the tax advantages of certain RiverSource Life’s products and thus make such products less attractive to clients.

RiverSource Life is subject to tax contingencies that could adversely affect the provision for income taxes.

RiverSource Life is subject to the income tax laws of the U.S., its states and municipalities. These tax laws are complex and may be subject to different interpretations.  RiverSource Life must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes and must also make estimates about when in the future certain items affect taxable income in the various tax jurisdictions.  Disputes over interpretations of the tax laws may be settled with the taxing authority upon examination or audit. In addition, changes to the Internal Revenue Code, administrative rulings or court decisions could increase RiverSource Life’s provision for income taxes.

ITEM 1B.             UNRESOLVED STAFF COMMENTS

None.

ITEM 2.                PROPERTIES

RiverSource Life Insurance Company owns and leases office space in Minneapolis, Minnesota.  RiverSource Life of NY rents office space in Albany, New York.  RiverSource Life believes that the facilities it occupies are suitable and adequate.

ITEM 3.                LEGAL PROCEEDINGS

Insurance companies have been the subject of increasing regulatory, legislative and judicial scrutiny.  Numerous state and federal regulatory agencies have commenced examinations and other inquiries of insurance companies regarding sales and marketing practices (including sales to older consumers and disclosure practices), claims handling, and unclaimed property and escheatment practices and procedures.  With regard to an industry-wide investigation of unclaimed property and escheatment practices and procedures, RiverSource Life is responding to regulatory audits, market conduct examinations and other inquires (including inquiries from the States of Minnesota and New York and a multistate insurance department examination).  RiverSource Life has cooperated and will continue to cooperate with the applicable regulators regarding their inquiries.

RiverSource Life is involved in the normal course of business in a number of other legal and arbitration proceedings concerning matters arising in connection with the conduct of its business activities.  RiverSource Life believes that it is not a party to, nor are any of its properties the subject of, any pending legal, arbitration or regulatory investigation or proceedings that would have a material adverse effect on its consolidated financial condition, results of operations or liquidity.  However, it is possible that the outcome of any such proceedings could have a material impact on results of operations in any particular reporting period as the proceedings are resolved.

ITEM 4.                MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All of RiverSource Life Insurance Company’s outstanding common stock is owned by Ameriprise Financial, Inc.  There is no established public trading market for RiverSource Life Insurance Company’s common stock.

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For discussion regarding RiverSource Life Insurance Company’s payment of dividends and restrictions on dividends, see Item 7 of this Annual Report on Form 10-K — “Management’s Narrative Analysis — Capital Activity” and Note 15 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 6.                SELECTED FINANCIAL DATA

Item omitted pursuant to General Instructions I(2)(a) of Form 10-K.

ITEM 7.                MANAGEMENT’S NARRATIVE ANALYSIS

Overview

RiverSource Life Insurance Company is a stock life insurance company with one wholly owned stock life insurance company subsidiary, RiverSource Life Insurance Co. of New York (“RiverSource Life of NY”).  RiverSource Life Insurance Company is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”).

·RiverSource Life Insurance Company is domiciled in Minnesota and holds Certificates of Authority in American Samoa, the District of Columbia and all states except New York.  RiverSource Life Insurance Company issues insurance and annuity products.

·RiverSource Life of NY is domiciled and holds a Certificate of Authority in New York.  RiverSource Life of NY issues insurance and annuity products.

RiverSource Life Insurance Company also wholly owns RiverSource Tax Advantaged Investments, Inc. (“RTA”).  RTA is a stock company domiciled in Delaware and is a limited partner in affordable housing partnership investments.

RiverSource Life Insurance Company and its subsidiaries are referred to collectively in this Form 10-K as the “Company”.

The following discussion and management’s narrative analysis of the financial condition and results of operations should be read in conjunction with the “Forward-Looking Statements,” “Item 1A - Risk Factors” and the Consolidated Financial Statements and Notes.  Management’s narrative analysis is presented pursuant to General Instructions I(2) (a) of Form 10-K in lieu of Management’s Discussion and Analysis of Financial Condition and Results of Operations.  Prior year amounts have been recast for the retrospective adoption of new accounting rules on deferred acquisition costs (“DAC”). In addition, certain reclassifications of prior year amounts have been made to conform to the current presentation.

Critical Accounting Policies

The accounting and reporting policies that the Company uses affect its Consolidated Financial Statements.  Certain of the Company’s accounting and reporting policies are critical to an understanding of the Company’s financial condition and results of operations 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 the Consolidated Financial Statements.  The accounting and reporting policies the Company has identified as fundamental to a full understanding of its financial condition and results of operations are described below.  See Note 2 to the Consolidated Financial Statements for further information about the Company’s accounting policies.

Valuation of Investments

The most significant component of the Company’s investments is its Available-for-Sale securities, which the Company carries at fair value within its Consolidated Balance Sheets. The fair value of the Company’s Available-for-Sale securities at December 31, 2012 was primarily obtained from third-party pricing sources.  The Company records unrealized securities gains (losses) in accumulated other comprehensive income, net of impacts to DAC, deferred sales inducement costs (“DSIC”), certain benefit reserves and income taxes.  The Company recognizes gains and losses in results of operations upon disposition of the securities.

When the fair value of an investment is less than its amortized cost, the Company 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 the Company will be required to sell the security before its anticipated recovery. If either of these conditions is met, an other-than-temporary impairment is considered to have occurred and the Company must recognize an other-than-temporary impairment for the difference between the investment’s amortized cost basis and its fair value through earnings. For securities that do not meet the above criteria and the Company does not expect to recover a security’s amortized cost basis, the security is also considered other-than-temporarily impaired. For these securities, the Company separates the total impairment into the credit loss component and the amount of the loss related to other factors. The amount of the total other-than-temporary impairment related to

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credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes. For Available-for-Sale securities that have recognized an other-than-temporary impairment through earnings, the difference between the amortized cost basis and the cash flows expected to be collected is accreted as interest income, if through subsequent evaluation there is a sustained increase in the cash flow expected. Subsequent increases and decreases in the fair value of Available-for-Sale securities are included in other comprehensive income.

For all securities that are considered temporarily impaired, the Company does not intend to sell these securities (has not made a decision to sell) and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis.  The Company believes that it will collect all principal and interest due on all investments that have amortized cost in excess of fair value that are considered only temporarily impaired.

Factors the Company considers in determining whether declines in the fair value of fixed maturity securities are other-than-temporary include: (i) the extent to which the market value is below amortized cost; (ii) the duration of time in which there has been a significant decline in value; (iii) fundamental analysis of the liquidity, business prospects and overall financial condition of the issuer; and (iv) market events that could impact credit ratings, economic and business climate, litigation and government actions, and similar external business factors.  In order to determine the amount of the credit loss component for corporate debt securities considered other-than-temporarily impaired, 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.

For structured investments (e.g., residential mortgage backed securities, commercial mortgage backed securities and asset backed securities), the Company also considers 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 in assessing potential other-than-temporary impairments of these investments. Based upon these factors, securities that have indicators of potential other-than-temporary impairment are subject to detailed review by management.  Securities for which declines are considered temporary continue to be carefully monitored by management.

Deferred Acquisition Costs and Deferred Sales Inducement Costs

The Company adopted new accounting rules for DAC on January 1, 2012 on a retrospective basis.  See below for the updated accounting policies on the deferral of acquisition costs.

The Company incurs costs in connection with acquiring new and renewal insurance and annuity businesses.  The portion of these costs which are incremental and direct to the acquisition of a new or renewal insurance policy or annuity contract are deferred.    Significant costs capitalized by the Company include sales based compensation related to the acquisition of new and renewal insurance policies and annuity contracts, medical inspection costs for successful sales, and a portion of employee compensation and benefit costs based upon the amount of time spent on successful sales.  Sales based compensation paid to Ameriprise Financial Services, Inc. (“AFSI”), a subsidiary of Ameriprise Financial, advisors and employees and third-party distributers is capitalized.  Employee compensation and benefits costs which are capitalized under the new accounting standard relate primarily to sales efforts, underwriting and processing. All other costs which are not incremental direct costs of acquiring an insurance policy or annuity contract are expensed as incurred.

For the Company’s annuity and life, disability income (“DI”) and long term care (“LTC”) insurance products, the DAC and DSIC balances at any reporting date are supported by projections that show management expects there to be adequate premiums or estimated gross profits after that date to amortize the remaining DAC and DSIC balances. These projections are inherently uncertain because they require management to make assumptions about financial markets, anticipated mortality and morbidity levels and policyholder behavior over periods extending well into the future. Projection periods used for the Company’s annuity products are typically 30 to 50 years.  Projection periods for its life and LTC insurance products are often 50 years or longer and projection periods for its DI products can be up to 45 years. Management regularly monitors financial market conditions and actual policyholder behavior experience and compares them to its assumptions.

For annuity and universal life (“UL”) insurance products, the assumptions made in projecting future results and calculating the DAC balance and DAC amortization expense are management’s best estimates. Management is required to update these assumptions whenever it appears that, based on actual experience or other evidence, earlier estimates should be revised. When assumptions are changed, the percentage of estimated gross profits used to amortize DAC might also change. A change in the required amortization percentage is applied retrospectively; an increase in amortization percentage will result in a decrease in the DAC balance and an increase in DAC amortization expense, while a decrease in amortization

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percentage will result in an increase in the DAC balance and a decrease in DAC amortization expense. The impact on results of operations of changing assumptions can be either positive or negative in any particular period and is reflected in the period in which such changes are made.  For products with associated DSIC, the same policy applies in calculating the DSIC balance and periodic DSIC amortization.

For traditional life, DI and LTC insurance products, the assumptions made in calculating the DAC balance and DAC amortization expense are consistent with those used in determining the liabilities and, therefore, are intended to provide for adverse deviations in experience and are revised only if management concludes experience will be so adverse that DAC are not recoverable. If management concludes that DAC are not recoverable, DAC are reduced to the amount that is recoverable based on best estimate assumptions and there is a corresponding expense recorded in the Consolidated Statements of Income.

For annuity, life, DI and LTC insurance products, key assumptions underlying these long-term projections include interest rates (both earning rates on invested assets and rates credited to contractholder and policyholder accounts), equity market performance, mortality and morbidity rates and the rates at which policyholders are expected to surrender their contracts, make withdrawals from their contracts and make additional deposits to their contracts. Assumptions about earned and credited interest rates are the primary factors used to project interest margins, while assumptions about equity and bond market performance are the primary factors used to project client asset value growth rates, and assumptions about surrenders, withdrawals and deposits comprise projected persistency rates. Management must also make assumptions to project maintenance expenses associated with servicing its annuity and insurance businesses during the DAC amortization period.

The client asset value growth rates are the rates at which variable annuity and variable universal life (“VUL”) insurance contract values invested in separate accounts are assumed to appreciate in the future. The rates used vary by equity and fixed income investments. Management reviews and, where appropriate, adjusts its assumptions with respect to client asset value growth rates on a regular basis. The long-term client asset value growth rates are based on assumed gross annual returns of 9% for equity funds and 6% for fixed income funds.  The Company typically uses a five-year mean reversion process as a guideline in setting near-term equity fund growth rates based on a long-term view of financial market performance as well as recent actual performance.  The suggested near-term equity fund growth rate is reviewed quarterly to ensure consistency with management’s assessment of anticipated equity market performance.

A decrease of 100 basis points in various rate assumptions is likely to result in an increase in DAC and DSIC amortization and an increase in benefits and claims expense from variable annuity guarantees.  The following table presents the estimated impact to current period pretax income:

	Estimated Impact to Pretax Income(1)
	(in millions)
Decrease in future near- and long-term fixed income returns by 100 basis points	$	(34	)
Decrease in future near-term equity fund growth returns by 100 basis points	$	(26	)
Decrease in future long-term equity fund growth returns by 100 basis points	(22		)
Decrease in future near- and long-term equity returns by 100 basis points	$	(48	)

(1)An increase in the above assumptions by 100 basis points would result in an increase to pretax income for approximately the same amount.

Management monitors other principal DAC and DSIC amortization assumptions, such as persistency, mortality, morbidity, interest margin and maintenance expense levels each quarter and, when assessed independently, each could impact the Company’s DAC and DSIC balances.

The analysis of DAC and DSIC balances and the corresponding amortization is a dynamic process that considers all relevant factors and assumptions described previously. Unless management identifies a significant deviation over the course of the quarterly monitoring, management reviews and updates these DAC and DSIC amortization assumptions annually in the third quarter of each year.  An assessment of sensitivity associated with changes in any single assumption would not necessarily be an indicator of future results.

Future Policy Benefits and Policy Claims and Other Policyholders’ Funds

Fixed Annuities and Variable Annuity Guarantees

Future policy benefits and policy claims and other policyholders’ funds related to fixed annuities and variable annuity guarantees include liabilities for fixed account values on fixed and variable deferred annuities, guaranteed benefits associated with variable annuities, equity indexed annuities (“EIA”) and fixed annuities in a payout status.

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Liabilities for fixed account values on fixed and variable deferred annuities are equal to accumulation values, which are the cumulative gross deposits and credited interest less withdrawals and various charges.

The majority of the variable annuity contracts offered by the Company contain guaranteed minimum death benefit (“GMDB”) provisions.  When market values of the customer’s accounts decline, the death benefit payable on a contract with a GMDB provision may exceed the contract accumulation value.  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 benefits.  In addition, the Company offers contracts with guaranteed minimum withdrawal benefit (“GMWB”) and guaranteed minimum accumulation benefit (“GMAB”) provisions and, until May 2007, the Company offered contracts containing guaranteed minimum income benefit (“GMIB”) provisions.

In determining the liabilities for GMDB, GMIB and the life contingent benefits associated with GMWB, the Company projects these benefits and contract assessments using actuarial models to simulate various equity market scenarios. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.  The amounts in the table above in “Deferred Acquisition Costs and Deferred Sales Inducement Costs” include the estimated impact to benefits and claims expense related to variable annuity guarantees resulting from a decrease of 100 basis points in various rate assumptions.

The GMDB liability is determined by estimating the expected value of death benefits in excess of the projected contract accumulation value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g., mortality and expense fees, contractual administrative charges and similar fees).

If elected by the contract owner and after a stipulated waiting period from contract issuance, a GMIB provision guarantees a minimum lifetime annuity payout based on a specified rate of contract accumulation value growth and predetermined annuity purchase rates.  The GMIB liability is determined each period by estimating the expected value of annuitization benefits in excess of the projected contract accumulation value at the date of annuitization and recognizing the excess over the estimated meaningful life based on expected assessments.

The embedded derivatives related to GMAB and the non-life contingent benefits associated with GMWB provisions are recorded at fair value. See Note 13 to the Consolidated Financial Statements for information regarding the fair value measurement of embedded derivatives.  The liability for the life contingent benefits associated with GMWB provisions is determined in the same way as the GMDB liability.  Significant assumptions made in projecting future benefits and fees relate to persistency and benefit utilization. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.  The changes in both the fair values of the GMWB and GMAB embedded derivatives and the liability for life contingent benefits are reflected in benefits, claims, losses and settlement expenses.

Liabilities for EIA are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

Liabilities for fixed annuities in a benefit or payout status are based on future estimated payments using established industry mortality tables and interest rates, ranging from 3.17% to 9.38% at December 31, 2012, depending on year of issue, with an average rate of approximately 5.02%.

Life, Disability Income and Long Term Care Insurance

Future policy benefits and policy claims and other policyholders’ funds related to life, DI and LTC insurance include liabilities for fixed account values on fixed and variable universal life policies, liabilities for indexed accounts of indexed universal life (“IUL”) products, liabilities for unpaid amounts on reported claims, estimates of benefits payable on claims incurred but not yet reported and estimates of benefits that will become payable on term life, whole life, DI and LTC policies as claims are incurred in the future.

Liabilities for fixed account values on fixed and variable universal life insurance are equal to accumulation values.  Accumulation values are the cumulative gross deposits and credited interest less various contractual expense and mortality charges and less amounts withdrawn by policyholders.

Liabilities for indexed accounts of IUL products are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

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A portion of the Company’s fixed and variable universal life policies have product features that result in profits followed by losses from the insurance component of the contract. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the contract.  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.

In determining the liability for contracts with profits followed by losses, the Company projects benefits and contract assessments using actuarial models. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.

The liability for these future losses is determined by estimating the death benefits in excess of account value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g. cost of insurance charges, contractual administrative charges, similar fees and investment margin). See Note 9 to the Consolidated Financial Statements for information regarding the liability for contracts with secondary guarantees.

Liabilities for unpaid amounts on reported life insurance claims are equal to the death benefits payable under the policies. Liabilities for unpaid amounts on reported DI and LTC claims include any periodic or other benefit amounts due and accrued, along with estimates of the present value of obligations for continuing benefit payments. These amounts are calculated based on claim continuance tables which estimate the likelihood an individual will continue to be eligible for benefits.  Present values are calculated at interest rates established when claims are incurred. Anticipated claim continuance rates are based on established industry tables, adjusted as appropriate for the Company’s experience.  Interest rates used with DI claims ranged from 3.0% to 8.0% at December 31, 2012, with an average rate of 4.5%.  Interest rates used with LTC claims ranged from 4.0% to 6.0% at December 31, 2012, with an average rate of 4.0%.

Liabilities for estimated benefits payable on claims that have been incurred but not yet reported are based on periodic analysis of the actual time lag between when a claim occurs and when it is reported.

Liabilities for estimates of benefits that will become payable on future claims on term life, whole life, DI and LTC policies are based on the net level premium method, using anticipated premium payments, mortality and morbidity rates, policy persistency and interest rates earned on assets supporting the liability. Anticipated mortality and morbidity rates are based on established industry mortality and morbidity tables, with modifications based on the Company’s experience. Anticipated premium payments and persistency rates vary by policy form, issue age, policy duration and certain other pricing factors. Anticipated interest rates for term and whole life ranged from 3.25% to 10.0% at December 31, 2012, depending on policy form, issue year and policy duration. Anticipated interest rates for DI policies ranged from 3.25% to 7.5% at December 31, 2012, depending on policy form, issue year and policy duration.  Anticipated interest rates for LTC policy reserves can vary by plan and year and ranged from 5.8% to 9.4% at December 31, 2012.

Changes in future policy benefits and policy claims and other policyholders’ funds are reflected in earnings in the period adjustments are made.

Where applicable, benefit amounts expected to be recoverable from reinsurance companies who share in the risk are separately recorded as reinsurance recoverables.

Derivative Instruments and Hedging Activities

The Company uses derivative instruments to manage its exposure to various market risks.  Examples include index options, interest rate swaps and swaptions, total return swaps and futures that economically hedge the equity and interest rate exposure of derivatives embedded in certain annuity and life liabilities. All derivatives are recorded at fair value.  The fair value of the Company’s derivative instruments is determined using either market quotes or valuation models that are based upon the net present value of estimated future cash flows and incorporate current market observable inputs to the extent available.

The accounting for changes in the fair value of a derivative instrument depends on its intended use and the resulting hedge designation, if any.  The Company primarily uses derivatives as economic hedges that are not designated as accounting hedges or do not qualify for hedge accounting treatment.  The Company occasionally designates derivatives as (i) hedges of changes in the fair value of assets, liabilities, or firm commitments (“fair value hedges”) or (ii) hedges of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedges”).

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The Company’s accounting policy is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement.  For derivative instruments that do not qualify for hedge accounting or are not designated as accounting hedges, changes in fair value are recognized in current period earnings.

For derivative instruments that qualify as fair value hedges, changes in the fair value of the derivatives, as well as changes in the fair value of the hedged assets, liabilities or firm commitments, are recognized on a net basis in current period earnings.  The carrying value of the hedged item is adjusted for the change in fair value from the designated hedged risk.  If a fair value hedge designation is removed or the hedge is terminated prior to maturity, previous adjustments to the carrying value of the hedged item are recognized into earnings over the remaining life of the hedged item.

For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instruments is reported in accumulated other comprehensive income and reclassified into earnings when the hedged item or transaction impacts earnings.  The amount that is reclassified into earnings is presented in the Consolidated Statements of Income with the hedged instrument or transaction impact.  Any ineffective portion of the gain or loss is reported in current period earnings as a component of net investment income.  If a hedge designation is removed or a hedge is terminated prior to maturity, the amount previously recorded in accumulated other comprehensive income is reclassified to earnings over the period that the hedged item impacts earnings.  For hedge relationships that are discontinued because the forecasted transaction is not expected to occur according to the original strategy, any related amounts previously recorded in accumulated other comprehensive income are recognized in earnings immediately.

For further details on the types of derivatives the Company uses and how it accounts for them, see Note 2 and Note 16 to the Consolidated Financial Statements.

Reinsurance

The Company cedes significant amounts of insurance risk to other insurers under reinsurance agreements. Reinsurance premiums paid and benefits received are accounted for consistently with the basis used in accounting for the policies from which risk is reinsured and consistently with the terms of the reinsurance contracts. Reinsurance premiums for traditional life, LTC and DI ceded on a coinsurance basis, net of the change in any prepaid reinsurance asset, are reported as a reduction of premiums. Fixed and variable universal life reinsurance premiums are reported as a reduction of policy and contract charges.  In addition, for fixed and variable universal life insurance policies, the net cost of reinsurance ceded, which represents the discounted amount of the expected cash flows between the reinsurer and the Company, is recognized as an asset and amortized over the term of the reinsurance contract, in proportion to the estimated gross profits and is subject to retrospective adjustment in a manner similar to retrospective adjustment of DAC.  The assumptions used to project the expected cash flows are consistent with those used for DAC asset valuation for the same contracts.  Changes in the net cost of reinsurance are reflected as a component of policy and contract charges.  Reinsurance recoveries are reported as components of benefits, claims, losses and settlement expenses.

Insurance liabilities are reported before the effects of reinsurance. Future policy benefits and policy claims and other policyholders’ funds recoverable under reinsurance contracts are recorded as reinsurance recoverables.

Income Tax Accounting

Income taxes, as reported in the Consolidated Financial Statements, represent the net amount of income taxes that the Company expects to pay to or receive from various taxing jurisdictions in connection with its operations. The Company provides for income taxes based on amounts that it believes it will ultimately owe taking into account the recognition and measurement for uncertain tax positions.  Inherent in the provision for income taxes are estimates and judgments regarding the tax treatment of certain items.  In the event that the ultimate tax treatment of items differs from the Company’s estimates, it may be required to significantly change the provision for income taxes recorded in its Consolidated Financial Statements.

In connection with the provision for income taxes, the Consolidated Financial Statements reflect certain amounts related to deferred tax assets and liabilities, which result from temporary differences between the assets and liabilities measured for financial statement purposes versus the assets and liabilities measured for tax return purposes. Among the Company’s deferred taxes is a significant deferred tax asset relating to capital losses that have been recognized for financial statement purposes but not yet for tax return purposes as well as future deductible capital losses realized for tax return purposes.  Under current U.S. federal income tax law, capital losses generally must be used against capital gain income within five years of the year in which the capital losses are recognized for tax purposes.

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The Company is required to establish a valuation allowance for any portion of its 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 including the ability to generate capital gains.  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.  Management may need to identify and implement appropriate planning strategies to ensure the Company’s ability to realize its deferred tax assets and avoid the establishment of a valuation allowance with respect to such assets.  In the opinion of management, it is currently more likely than not that the Company will not realize the full benefit of certain state net operating losses, and therefore a valuation allowance of $5 million has been established at December 31, 2012.

Recent Accounting Pronouncements

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

The Company adopted new accounting rules for DAC on January 1, 2012 on a retrospective basis.  See Note 1 to the Consolidated Financial Statements for the impact of the adoption on prior period consolidated financial condition and results of operations.

Consolidated Results of Operations

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

The following table presents the Company’s consolidated results of operations:

	Years Ended December 31,
	2012			2011		Change
	(in millions)
Revenues
Premiums	$	442		$	493	$	(51	)	(10	)%
Net investment income	1,480			1,593		(113		)	(7	)
Policy and contract charges	1,593			1,540		53			3
Other revenues	329			303		26			9
Net realized investment gains (losses)	(3		)	5		(8		)	NM
Total revenues	3,841			3,934		(93		)	(2	)
Benefits and expenses
Benefits, claims, losses and settlement expenses	1,216			950		266			28
Interest credited to fixed accounts	831			856		(25		)	(3	)
Amortization of deferred acquisition costs	225			336		(111		)	(33	)
Other insurance and operating expenses	755			781		(26		)	(3	)
Total benefits and expenses	3,027			2,923		104			4
Pretax income	814			1,011		(197		)	(19	)
Income tax provision	164			190		(26		)	(14	)
Net income	$	650		$	821	$	(171	)	(21	)%

NM  Not Meaningful.

Overview

In the third quarter of the year, management conducts its annual review of insurance and annuity valuation assumptions, relative to current experience and management expectations.  To the extent that expectations change as a result of this review, management updates valuation assumptions and the impact is reflected as part of its annual review of life insurance and annuity valuation assumptions and modeling changes (“unlocking”).  The unlocking impact in the third quarter of 2012 primarily reflected the low interest rate environment and the assumption of continued low interest rates over the near-term. Specifically, the starting 10-year Treasury rate assumption used in modeling was reduced by 150 basis points and it was assumed rates would stay flat until mid-2013, then increasing to their ultimate rate by mid-2016.  Management did not change its ultimate long-term assumption.

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Net income decreased $171 million or 21% compared to the prior year.  Pretax income decreased $197 million or 19% compared to the prior year primarily reflecting the market impact on variable annuity guaranteed living benefits (net of hedges and the related DAC and DSIC amortization), and the negative impact of the continued low interest rate environment, partially offset by the impact of market appreciation.  The prior year results included $34 million of additional investment income recognition (net of DAC and DSIC amortization). The market impact on variable annuity guaranteed living benefits (net of hedges and the related DAC and DSIC amortization) was a decrease to pretax income of $265 million for the year ended December 31, 2012, which included a $14 million negative impact associated with unlocking and model changes. This compares to a decrease of $62 million for the prior year, which included a $4 million negative impact associated with unlocking and model changes. The market impact on DAC and DSIC amortization was a benefit of $31 million for the year ended December 31, 2012 compared to an expense of $11 million for the prior year.

The following table presents the total pretax impacts on the Company’s revenues and expenses attributable to unlocking and model changes for the years ended December 31:

Pretax Increase (Decrease)	2012			2011
	(in millions)
Policy and contract charges	$	(41	)	$	(20	)
Benefits, claims, losses and settlement expenses	(28		)	(40		)
Interest credited to fixed accounts	2			—
Amortization of DAC	23			38
Total benefit and expenses	(3		)	(2		)
Total(1)	$	(38	)	$	(18	)

(1)Includes $14 million and $4 million of expense related to the market impact on variable annuity guaranteed living benefits for the years ended December 31, 2012 and 2011, respectively.

The impact of unlocking and model changes for 2012 included a $41 million benefit, net of DAC and DSIC amortization, from an adjustment to the model which values the reserves related to living benefit guarantees primarily attributable to prior periods.

Revenues

Total revenues decreased $93 million or 2% compared to the prior year.

Premiums decreased $51 million or 10% compared to the prior year.  The decrease was primarily due to lower sales of immediate annuities with life contingencies. The lower premiums are largely offset by the related favorable change in reserves described below.

Net investment income decreased $113 million or 7% compared to the prior year reflecting a $135 million decrease in investment income on fixed maturities. The decrease in investment income on fixed maturity securities was primarily due to continued low interest rates and $37 million of additional bond discount accretion investment income in 2011 related to prior periods resulting from revisions to the accounting classification of certain structured securities.

Other revenues increased $26 million or 9% compared to the prior year reflecting higher marketing support due to higher average separate account balances.

Net realized investment losses for the year ended December 31, 2012 were $3 million compared to net realized investment gains of $5 million for the prior year.  For the year ended December 31, 2012, net realized gains on Available-for-Sale securities due to sales, calls and tenders were $15 million offset by other-than-temporary impairments recognized in earnings of $17 million which related to credit losses on non-agency residential mortgage backed securities. For the year ended December 31, 2011, net realized gains on Available-for-Sale securities due to sales, calls and tenders were $28 million partially offset by other-than-temporary impairments recognized in earnings of $24 million which primarily related to credit losses on non-agency residential mortgage backed securities.  For the year ended December 31, 2011, the reserves on commercial mortgage loans decreased by $3 million partially offset by a realized loss of $1 million on commercial mortgage loans.

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Benefits and Expenses

Total benefits and expenses increased $104 million or 4% compared to the prior year.

Benefits, claims, losses and settlement expenses increased $266 million, or 28%, compared to the prior year primarily due to the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC amortization), which was an expense of $334 million in 2012, including $18 million of expense associated with unlocking and model changes, compared to an expense of $67 million in 2011, including $4 million of expense associated with unlocking and model changes. In 2012, the fair value of the variable annuity guaranteed living benefits liability decreased nearly $1 billion and the nonperformance credit spread was reduced. During this period, hedging management produced a loss and there was an increase in expense due to the reduction in credit spread. In 2011, the fair value of the variable annuity guaranteed living benefits liability increased over $1 billion and the nonperformance credit spread increased. Hedging management decisions and results in 2011 drove a gross expense that was materially offset by nonperformance credit spread movement for that fiscal year. Benefits, claims, losses and settlement expenses for 2012 included a $28 million benefit from unlocking and model changes primarily reflecting a $50 million benefit from an adjustment to the model which values the reserves related to living benefit guarantees primarily attributable to prior periods, partially offset by lower bond fund returns related to liabilities for the life contingent benefits associated with GMWB. Benefits, claims, losses and settlement expenses for 2011 included a $40 million benefit from unlocking and model changes, primarily reflecting a positive impact from enhancements made to the valuation of variable annuities with living benefits. The market impact on DSIC was a benefit of $7 million in 2012 compared to an expense of $2 million in 2011 as a result of favorable equity and bond fund returns in 2012 compared to unfavorable equity markets in 2011.

Amortization of DAC decreased $111 million, or 33%, compared to the prior year primarily due to the DAC offset to the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC amortization), as well as the impact of unlocking and model changes and the market impact on amortization of DAC. The DAC offset to the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC amortization) was a benefit of $69 million in 2012, including a $4 million benefit associated with unlocking and model changes, compared to a benefit of $5 million in 2011. Amortization of DAC for 2012 included a $23 million expense from unlocking and model changes, primarily reflecting a decrease in income earned on assets due to the low interest rate environment compared to the interest credited to the contractholders, which in many instances are at their minimum guarantees (“spread compression”), and lower bond fund growth rates, partially offset by a benefit from improved policyholder persistency and lowered mortality assumption. The impact of unlocking and model changes for 2012 included a $9 million expense for the DAC offset to the adjustment to the model which values the reserves related to living benefit guarantees primarily attributable to prior periods. Amortization of DAC for 2011 included a $38 million expense from unlocking and model changes primarily driven by spread compression, partially offset by a benefit from improved policyholder persistency. The market impact on DAC was a benefit of $24 million in 2012 compared to an expense of $9 million in the prior year as a result of favorable equity and bond fund returns in 2012 compared to unfavorable equity markets in 2011.

Income Taxes

The Company’s effective tax rate was 20% for the year ended December 31, 2012, compared to 19% for the year ended December 31, 2011. The effective tax rate for both periods is lower than the statutory rates as a result of tax preferred items including the dividends received deduction, foreign tax credits and low income housing credits.  The change in the effective tax rate for the year ended December 31, 2012 is primarily a result of a correction of tax related to securities lending activities partially offset by increased low income housing tax credits. See Note 1 to the Consolidated Financial Statements for additional information.

It is possible there will be corporate tax reform in the next few years.  While impossible to predict, corporate tax reform is likely to include a reduction in the corporate tax rate coupled with reductions in tax preferred items.  Any changes could have a material impact on the Company’s income tax expense and deferred tax balances.

Fair Value Measurements

The Company reports certain assets and liabilities at fair value; specifically, separate account assets, derivatives, embedded derivatives, most investments and cash equivalents.  Fair value assumes the exchange of assets or liabilities occurs in orderly transactions.  Companies are not permitted to use market prices that are the result of a forced liquidation or distressed sale.  The Company includes actual market prices, or observable inputs, in its fair value measurements to the extent available. Broker quotes are obtained when quotes from pricing services are not available.  The Company validates prices obtained from third parties through a variety of means such as: price variance analysis, subsequent sales

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testing, stale price review, price comparison across pricing vendors and due diligence reviews of vendors. See Note 13 to the Consolidated Financial Statements for additional information on the Company’s fair value measurements.

Non-Agency Residential Mortgage Backed Securities Backed by Sub-prime, Alt-A or Prime Collateral

Sub-prime mortgage lending is the origination of residential mortgage loans to customers with weak credit profiles. Alt-A mortgage lending is the origination of residential mortgage loans to customers who have credit ratings above sub-prime but may not conform to government-sponsored standards. Prime mortgage lending is the origination of residential mortgage loans to customers with good credit profiles.  The Company has exposure to each of these types of loans predominantly through mortgage backed securities. The slowdown in the U.S. housing market, combined with relaxed underwriting standards by some originators, has led to higher delinquency and loss rates for some of these investments. Persistent market conditions have increased the likelihood of other-than-temporary impairments for certain non-agency residential mortgage backed securities.  As a part of the Company’s risk management process, an internal rating system is used in conjunction with market data as the basis of analysis to assess the likelihood that the Company will not receive all contractual principal and interest payments for these investments. For the investments that are more at risk for impairment, the Company performs its own assessment of projected cash flows incorporating assumptions about default rates, prepayment speeds and loss severity to determine if an other-than-temporary impairment should be recognized.

The following table presents, as of December 31, 2012, the Company’s non-agency residential mortgage backed by sub-prime, Alt-A or prime mortgage loans by credit rating and vintage year:

	AAA				AA				A				BBB				BB & Below				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in millions)
Sub-prime
2004	$	—	$	—	$	—	$	—	$	—	$	—	$	2	$	2	$	7	$	5	$	9	$	7
2005	2		2		15		14		6		6		—		—		19		16		42		38
2006	—		—		—		—		1		1		—		—		—		—		1		1
2008	—		—		5		5		—		—		—		—		—		—		5		5
2012	8		8		—		—		—		—		—		—		—		—		8		8
Total Sub-prime	$	10	$	10	$	20	$	19	$	7	$	7	$	2	$	2	$	26	$	21	$	65	$	59
Alt-A
2003 & prior	$	—	$	—	$	—	$	—	$	8	$	9	$	—	$	—	$	2	$	2	$	10	$	11
2004	—		—		—		—		—		—		21		26		45		44		66		70
2005	—		—		—		—		—		—		15		15		142		121		157		136
2006	—		—		—		—		—		—		—		—		6		4		6		4
2007	—		—		—		—		—		—		—		—		22		15		22		15
Re-Remic(1)	—		—		9		9		—		—		—		—		—		—		9		9
Total Alt-A	$	—	$	—	$	9	$	9	$	8	$	9	$	36	$	41	$	217	$	186	$	270	$	245
Prime
2003 & prior	$	—	$	—	$	11	$	12	$	41	$	43	$	32	$	33	$	—	$	—	$	84	$	88
2004	—		—		5		5		3		3		7		8		22		24		37		40
2005	—		—		2		3		—		—		12		15		108		107		122		125
2006	—		—		—		—		12		13		—		—		23		24		35		37
2007	—		—		—		—		—		—		—		—		30		31		30		31
Re-Remic(1)	719		776		229		243		134		139		—		—		29		37		1,111		1,195
Total Prime	$	719	$	776	$	247	$	263	$	190	$	198	$	51	$	56	$	212	$	223	$	1,419	$	1,516
Grand Total	$	729	$	786	$	276	$	291	$	205	$	214	$	89	$	99	$	455	$	430	$	1,754	$	1,820

(1) Re-Remics of mortgage backed securities are prior vintages with cash flows structured into senior and subordinated bonds. Credit enhancement has been increased through the Re-Remic process on the securities the Company owns.

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European Exposure

The following table presents, as of December 31, 2012, the Company’s exposure to European debt by country segregated between sovereign and non-sovereign (financial and non-financial corporate debt) exposure:

	Sovereign				Financials				Non-Financials				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		% of Invested Assets(1)
	(in millions, except percentages)
Greece	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	—	%
Italy	—		—		—		—		131		135		131		135		0.4
Ireland	—		—		—		—		40		40		40		40		0.1
Portugal	—		—		—		—		—		—		—		—		—
Spain	—		—		—		—		169		179		169		179		0.6
Subtotal	—		—		—		—		340		354		340		354		1.1
Other European exposure	49		58		363		373		1,120		1,214		1,532		1,645		5.3
Total	$	49	$	58	$	363	$	373	$	1,460	$	1,568	$	1,872	$	1,999	6.4	%

(1)  Invested assets include cash and cash equivalents and investments.

The non-financial corporate debt holdings in Italy, Ireland and Spain are primarily in utilities/telecommunications. The non-financial corporate debt holdings in other European countries are multinational companies concentrated in utilities and non-cyclical industrials. The Company has no exposure to deeply subordinated instruments. The Company does not hedge its European exposure and has no unfunded commitments related to its European debt holdings as of December 31, 2012.

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 the Company’s obligations of its variable annuity riders, the Company considers the assumptions participants in a hypothetical market would make to reflect an exit price. As a result, the Company adjusts the valuation of variable annuity riders 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 the Company’s nonperformance risk. The nonperformance risk adjustment is based on broker quotes for credit default swaps that are adjusted to estimate the risk of the Company not fulfilling these liabilities. Consistent with general market conditions, this estimate resulted in a spread over the LIBOR swap curve as of December 31, 2012. As the Company’s 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 net income would be approximately $201 million, net of DAC and DSIC amortization and income taxes (calculated at the statutory tax rate of 35%), based on December 31, 2012 credit spreads.

Liquidity and Capital Resources

Liquidity Strategy

The liquidity requirements of the Company are generally met by funds provided by investment income, maturities and periodic repayments of investments, deposits, premiums and proceeds from sales of investments as well as capital contributions from Ameriprise Financial.  Other liquidity sources the Company has established are repurchase agreements and available lines of credit with Ameriprise Financial aggregating $1 billion.

RiverSource Life Insurance Company is a member of the Federal Home Loan Bank of Des Moines (“FHLB”), which provides RiverSource Life Insurance Company access to collateralized borrowings.  At December 31, 2012 and 2011, the Company had no borrowings from the FHLB.  The Company enters into repurchase agreements to reduce reinvestment risk from higher levels of expected annuity net cash flows. Repurchase agreements allow the Company to receive cash to reinvest in longer-duration assets, while paying back the short-term debt with cash flows generated by the fixed income portfolio. The balance of repurchase agreements at December 31, 2012 and 2011 was $501 million and $504 million, respectively, which are collateralized with agency residential mortgage backed securities and commercial mortgage backed securities from the Company’s investment portfolio.

As of December 31, 2012 and 2011, the outstanding balance under the lines of credit with Ameriprise Financial was $150 million and $300 million, respectively.

See Note 11 to the Consolidated Financial Statements for additional information on the lines of credit.

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The primary uses of funds are policy benefits, commissions, other product-related acquisition and sales inducement costs, operating expenses, policy loans, dividends to Ameriprise Financial and investment purchases.  The Company routinely reviews its sources and uses of funds in order to meet its ongoing obligations.

Capital Activity

Dividends paid and received by RiverSource Life Insurance Company were as follows:

	2012		2011		2010
	(in millions)
Cash dividends paid to Ameriprise Financial	$	865	$	750	$	500
Non-cash dividend paid to Ameriprise Financial	—		850		—
Cash dividends received from RiverSource Life of NY	50		79		28
Cash dividends received from RTA	—		53		63

For dividends from the life insurance companies, notifications to state insurance regulators were made in advance of payments in excess of statutorily defined thresholds.  See Note 15 to the Consolidated Financial Statements for additional information.

During 2012 and 2011, RiverSource Life Insurance Company made cash contributions to RTA of $53 million and $111 million, respectively, for ongoing funding commitments related to affordable housing partnership investments.

During 2010, RiverSource Life Insurance Company received a non-cash capital contribution of $14 million comprised of affordable housing partnership investments from Ameriprise Financial.

Regulatory Capital

RiverSource Life Insurance Company and RiverSource Life of NY are subject to regulatory capital requirements.  Actual capital, determined on a statutory basis, and regulatory capital requirements as of December 31 for each of the life insurance entities are as follows:

	Actual Capital(a)				Regulatory Capital Requirement(b)
	2012		2011		2012		2011
	(in millions)
RiverSource Life Insurance Company	$	3,257	$	3,058	$	620	$	619
RiverSource Life of NY	256		254		44		41

(a)Actual capital, as defined by the National Association of Insurance Commissioners for purposes of meeting regulatory capital requirements, includes statutory capital and surplus, plus certain statutory valuation reserves.

(b)Regulatory capital requirement is based on the statutory risk-based capital filing.

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Contractual Commitments

The contractual obligations identified in the table below include balance sheet transactions that represent material expected or contractually committed future obligations.  Payments due by period as of December 31, 2012 were as follows:

	Total		2013		2014- 2015		2016- 2017		2018 and Thereafter
	(in millions)
Insurance and annuities(1)	$	38,011	$	2,154	$	5,092	$	4,447	$	26,318
Deferred premium options(2)	2,353		373		668		527		785
Line of credit with Ameriprise Financial(3)	150		150		—		—		—
Affordable housing partnerships(4)	144		109		24		1		10
Total	$	40,658	$	2,786	$	5,784	$	4,975	$	27,113

(1)These scheduled payments are represented by reserves of approximately $30.7 billion at December 31, 2012 and are based on interest credited, mortality, morbidity, lapse, surrender and premium payment assumptions.  Actual payment obligations may differ if experience varies from these assumptions.  Separate account liabilities have been excluded as associated contractual obligations would be met by separate account assets.

(2)The fair value of these commitments included on the Consolidated Balance Sheets was $2.3 billion as of December 31, 2012.  See Note 16 to the Consolidated Financial Statements for more information about deferred premium options.

(3)The line of credit agreement with Ameriprise Financial does not include a repayment schedule.

(4) Affordable housing partnership commitments are related to investments in low income housing tax credit partnerships.  Call dates for the obligations presented are either date or event specific.  For date specific obligations, the Company is required to fund a specified amount on a stated date provided there are no defaults under the agreement.  For event specific obligations, the Company is required to fund a specified amount of its capital commitment when properties in a fund become fully stabilized.  For event specific obligations, the estimated call date of these commitments is used in the table above.

Total loan funding commitments, which are not included in the table above due to uncertainty with respect to timing of future cash flows, were $699 million at December 31, 2012.

Risk Management

In accordance with regulatory investment guidelines, RiverSource Life Insurance Company and RiverSource Life of NY, through their respective boards of directors or board of directors’ investment committees or staff functions, review models projecting different interest rate scenarios, risk/return measures, and their effect on profitability in order to guide the management of the general account assets.  They also review the distribution of assets in the portfolio by type and credit risk sector.  The objective is to structure the investment securities portfolio in the general account to meet contractual obligations under the insurance and annuity products and achieve targeted levels of profitability within defined risk parameters.

The Company has developed an asset/liability management approach with separate investment objectives to support specific product liabilities, such as insurance and annuities.  As part of this approach, the Company develops specific investment guidelines that are designed to optimize trade offs between risk and return and help ensure the Company is able to support future benefit payments under its insurance and annuity obligations.  These same objectives must be consistent with management’s overall investment objectives for the general account investment portfolio.

The Company’s owned investment securities are primarily invested in long-term and intermediate-term fixed maturity securities to provide clients with a competitive rate of return on their investments while managing risk. Investments in fixed maturity securities are designed to provide the Company with a targeted margin between the yield earned on investments and the interest rate credited to clients’ accounts. The Company does not trade in securities to generate short-term profits for its own account.

As part of the Company’s investment process, management, with the assistance of its investment advisors, conducts a quarterly review of investment performance.  The review process involves the review of certain invested assets which the committee evaluates to determine whether or not any investments are other-than-temporarily impaired and/or which specific interest earning investments should be put on an interest non-accrual basis.

The Company has interest rate risk and equity market risk. Interest rate risk results from investing in assets that are somewhat longer and reset less frequently than the liabilities they support.  The Company manages interest rate risk through the use of a variety of tools that include managing the duration of investments supporting its fixed annuities and insurance products.  Additionally, the Company enters into derivative instruments, such as structured derivatives, options, futures, interest rate swaps and swaptions, which change the interest rate characteristics of client liabilities or investment

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assets.  Because certain of its investment activities are impacted by the value of its managed equity-based portfolios, from time to time the Company enters into risk management strategies that may include the use of equity derivative instruments, such as equity options, to mitigate its exposure to volatility in the equity markets.

Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary market risk exposures are interest rate, equity price and credit risk. Equity price and interest rate fluctuations can have a significant impact on the Company’s results of operations, primarily due to the effects on asset-based fees and expenses, the “spread” income generated on its annuities and UL insurance products, the value of DAC and DSIC assets, the value of liabilities for guaranteed benefits associated with its variable annuities and the value of derivatives held to hedge these benefits.

The guaranteed benefits associated with the Company’s variable annuities are GMWB, GMAB, GMDB and GMIB. Each of these guaranteed benefits guarantees payouts to the annuity holder under certain specific conditions regardless of the performance of the underlying investment assets.

The Company continues to utilize 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.  The Company’s 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.  The Company uses various index options across the term structure, interest rate swaps and swaptions, total return swaps and futures to manage the risk exposures.  The exposures are measured and monitored daily and adjustments to the hedge portfolio are made as necessary.

To evaluate equity price risk and interest rate risk, the Company performs 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 annuity riders, EIAs, IUL and the associated hedge assets, the Company assumed no change in implied market volatility despite the 10% drop in equity prices.

The following tables present the Company’s estimate of the impact on pretax income from these hypothetical market movements as of December 31, 2012.

	Equity Price Exposure to Pretax Income
Equity Price Decline 10%	Before Hedge Impact			Hedge Impact			Net Impact
	(in millions)
Asset-based fees and expenses	$	(70	)	$	—		$	(70	)
DAC and DSIC amortization(1) (2)	(89		)	—			(89		)
Variable annuity riders:
GMDB and GMIB(2)	(57		)	—			(57		)
GMWB	(138		)	154			16
GMAB	(53		)	58			5
DAC and DSIC amortization(3)	N/A			N/A			(7		)
Total variable annuity riders	(248		)	212			(43		)
Equity indexed annuities	1			(1		)	—
Indexed universal life insurance	3			(4		)	(1		)
Total	$	(403	)	$	207		$	(203	)

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	Interest Rate Exposure to Pretax Income
Interest Rate Increase 100 Basis Points	Before Hedge Impact			Hedge Impact			Net Impact
	(in millions)
Asset-based fees and expenses	$	(22	)	$	—		$	(22	)
Variable annuity riders:
GMWB	645			(631		)	14
GMAB	41			(39		)	2
DAC and DSIC amortization(3)	N/A			N/A			(8		)
Total variable annuity riders	686			(670		)	8
Fixed annuities, fixed portion of variable annuities and fixed insurance products	85			—			85
Indexed universal life insurance	7			—			7
Total	$	756		$	(670	)	$	78

N/ANot Applicable.

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

(2)In estimating the impact on DAC and DSIC amortization resulting from lower projected profits, the Company has not changed its assumed equity asset growth rates.  This is a significantly more conservative estimate than if the Company assumed management follows its mean reversion guideline and increased near-term rates to recover the drop in equity values over a five-year period.  The Company makes this same conservative assumption in estimating the impact from GMDB and GMIB riders.

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

The above results compare to an estimated negative net impact to pretax income of $208 million related to a 10% equity price decline and an estimated negative net impact to pretax income of $24 million related to a 100 basis point increase in interest rates as of December 31, 2011.  The change in the interest rate exposure was primarily related to fixed annuities and the fixed portion of variable annuities, which increased approximately $63 million primarily driven by model updates, namely enhanced reflection of recent mortgage prepayment experience and enhanced asset portfolio turn-over logic. The underlying interest rate sensitivity of the fixed annuity and fixed portion of variable annuities has not materially changed due to market conditions.

Net impacts shown in the above table from GMWB and GMAB riders result largely from differences between the liability valuation basis and the hedging basis. Liabilities are valued using fair value accounting principles, with key policyholder behavior assumptions loaded to provide risk margins and with discount rates increased to reflect a current market estimate of the Company’s risk of nonperformance specific to these liabilities. For variable annuity riders introduced prior to mid-2009, management elected to hedge based on best estimate policyholder behavior assumptions.  For riders issued since mid-2009, management has been hedging on a basis that includes risk margins related to policyholder behavior.  The nonperformance spread risk is not hedged.

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%, that management does not increase assumed equity asset growth rates to anticipate recovery of the drop in equity values when valuing DAC, DSIC and GMDB and GMIB liability values and that the 100 basis point increase in interest rates is a parallel shift of the yield curve. Furthermore, the Company has not tried to anticipate changes in client preferences for different types of assets or other changes in client behavior, nor has the Company tried to anticipate 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.

Asset-Based Fees and Expenses

The Company earns asset-based management fees on its owned separate account assets partially offset by certain expenses.  At December 31, 2012, the value of these assets was $69.4 billion. This source of revenue is subject to both interest rate and equity price risk since the value of these assets and the fees they earn fluctuate inversely with interest rates and directly with equity prices. The Company does not currently hedge the interest rate or equity price risk of this exposure.

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DAC and DSIC Amortization

For annuity and UL products, DAC and DSIC are amortized on the basis of estimated gross profits. Estimated gross profits are a proxy for pretax income prior to the recognition of DAC and DSIC amortization expense. When events occur that reduce or increase current period estimated gross profits, DAC and DSIC amortization expense is typically reduced or increased as well, somewhat mitigating the impact of the event on pretax income.

Variable Annuity Riders

The total contract value of all variable annuities at December 31, 2012 was $68.1 billion compared to $62.3 billion at December 31, 2011. These contract values include GMWB and GMAB contracts which were $32.5 billion and $3.8 billion, respectively, at December 31, 2012, compared to $27.6 billion and $3.5 billion, respectively, at December 31, 2011.  At December 31, 2012, reserves for GMWB and GMAB were $799 million and $103 million, respectively, compared to $1.4 billion and $237 million, respectively, at December 31, 2011. The decrease in reserves for GMWB and GMAB reflect the changes in economic factors impacting the mark-to-market value of the guarantees.  At December 31, 2012, the reserve for the other variable annuity guaranteed benefits, GMDB and GMIB, was $13 million compared to $14 million at December 31, 2011.

Equity Price Risk — Variable Annuity Riders

The variable annuity guaranteed benefits guarantee payouts to the annuity holder under certain specific conditions regardless of the performance of the investment assets. For this reason, when equity prices decline, the returns from the separate account assets coupled with guaranteed benefit fees from annuity holders may not be sufficient to fund expected payouts. In that case, reserves must be increased with a negative impact to the Company’s earnings.

The core derivative instruments with which the Company hedges the equity price risk of its GMWB and GMAB provisions are longer dated put and call derivatives; these core instruments are supplemented with equity futures and total return swaps. See Note 16 to the Consolidated Financial Statements for further information on the Company’s derivative instruments.

Interest Rate Risk — Variable Annuity Riders

The GMAB and the non-life contingent benefits associated with the GMWB provisions create embedded derivatives which are carried at fair value separately from the underlying host variable annuity contract. Changes in the fair value of the GMWB and GMAB liabilities are recorded through earnings with fair value calculated based on projected, discounted cash flows over the life of the contract, including projected, discounted benefits and fees. Increases in interest rates reduce the fair value of the GMWB and GMAB liabilities. The GMWB and GMAB interest rate exposure is hedged with a portfolio of longer dated put and call derivatives, interest rate swaps and swaptions. The Company entered into interest rate swaps according to risk exposures along maturities, thus creating both fixed rate payor and variable rate payor terms. If interest rates were to increase, the Company would have to pay more to the swap counterparty and the fair value of its equity puts would decrease, resulting in a negative impact to the Company’s pretax income.

Fixed Annuities, Fixed Portion of Variable Annuities and Fixed Insurance Products

Interest rate exposures arise primarily with respect to the fixed account portion of the Company’s annuity and insurance products and its investment portfolio. The Company guarantees an interest rate to the holders of these products. Premiums and deposits collected from clients are primarily invested in fixed rate securities to fund the client credited rate with the spread between the rate earned from investments and the rate credited to clients recorded as earned income. Client liabilities and investment assets 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, generally speaking, 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, today’s historically low interest rate environment is resulting in interest rates below the level of some liability guaranteed minimum interest rates (“GMIRs”). Given that, a modest rise in interest rates would not necessarily result in any change to the liability credits 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. Of the $30.7 billion in future policy benefits on the Company’s Consolidated Balance Sheets at December 31, 2012, $29.7 billion is related to liabilities created by these products. The Company did not hedge this exposure.

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Equity Indexed Annuities

The Company’s equity indexed annuity product is a single premium annuity issued with an initial term of seven years. The annuity guarantees the contractholder a minimum return of 3% on 90% of the initial premium or end of prior term accumulation value upon renewal plus a return that is linked to the performance of the S&P 500 Index.  The equity-linked return is based on a participation rate initially set at between 50% and 90% of the S&P 500 Index which is guaranteed for the initial seven-year term when the contract is held to full term. At December 31, 2012, the Company had $33 million in reserves related to equity indexed annuities.  The Company discontinued new sales of equity indexed annuities in 2007.

Equity Price Risk — Equity Indexed Annuities

The equity-linked return to investors creates equity price risk as the amount credited depends on changes in equity prices. To hedge this exposure, the Company purchases futures, calls and puts which generate returns to replicate what the Company must credit to client accounts. In conjunction with purchasing puts, the Company also writes puts. Pairing purchased puts with written puts allows the Company to better match the characteristics of the liability.

Interest Rate Risk — Equity Indexed Annuities

Most of the proceeds received from equity indexed annuities are invested in fixed income securities with the return on those investments intended to fund the 3% guarantee. The Company earns income from the difference between the return earned on invested assets and the 3% guarantee rate credited to customer accounts. The spread between return earned and amount credited is affected by changes in interest rates. This risk is not currently hedged and was immaterial at December 31, 2012.

Indexed Universal Life

In 2011, the Company began offering IUL insurance.  IUL is similar to UL in that it provides life insurance coverage and cash value that increases as a result of credited interest.  Also, like UL, there is a minimum guaranteed credited rate of interest.  Unlike UL, the rate of credited interest above the minimum guarantee for funds allocated to the indexed account is linked to the S&P 500 Index (subject to a cap).  The policyholder may allocate all or a portion of the policy value to a fixed or indexed account.  At December 31, 2012, the Company had $104 million in reserves related to the index account of IUL.

Equity Price Risk — Indexed Universal Life

The equity-linked return to investors creates equity price risk as the amount credited depends on changes in equity prices.  Most of the proceeds received from IUL insurance are invested in fixed income securities. To hedge the equity exposure, a portion of the investment earnings received from the fixed income securities is used to purchase call spreads which generate returns to replicate what the Company must credit to client accounts.

Interest Rate Risk — Indexed Universal Life

As mentioned above, most of the proceeds received from IUL insurance are invested in fixed income securities with the return on those investments intended to fund the purchase of call spreads. There are two risks relating to interest rates.  First, the Company has the risk that investment returns are such that it does not have enough investment income to purchase the needed call spreads.  Second, in the event the policy is surrendered, the Company pays out a book value surrender amount and there is a risk that it will incur a loss upon having to sell the fixed income securities backing the liability (if interest rates have risen).This risk is not currently hedged.

Credit Risk

The Company is exposed to credit risk within its investment portfolio, including its loan portfolio, and through its derivative and reinsurance activities. Credit risk relates to the uncertainty of an obligor’s continued ability to make timely payments in accordance with the contractual terms of the financial instrument or contract. The Company considers its total potential credit exposure to each counterparty and its affiliates to ensure compliance with pre-established credit guidelines at the time it enters into a transaction which would potentially increase the Company’s credit risk. These guidelines and oversight of credit risk are managed through a comprehensive enterprise risk management program that includes members of senior management.

The Company manages the risk of credit-related losses in the event of nonperformance by counterparties by applying disciplined fundamental credit analysis and underwriting standards, prudently limiting exposures to lower-quality, higher-yielding investments, and diversifying exposures by issuer, industry, region and underlying investment type. The Company remains exposed to occasional adverse cyclical economic downturns during which default rates may be significantly higher than the long-term historical average used in pricing.

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The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master netting arrangements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Generally, the Company’s current credit exposure on over-the-counter derivative contracts is limited to a derivative counterparty’s net positive fair value of derivative contracts after taking into consideration the existence of netting arrangements and any collateral received. This exposure is monitored and managed to an acceptable threshold level.

Because exchange-traded futures are effected through regulated exchanges and positions are marked to market and generally cash settled on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments.

The Company manages its credit risk related to reinsurance treaties by evaluating the financial condition of reinsurance counterparties prior to entering into new reinsurance treaties. In addition, the Company regularly evaluates their financial strength during the terms of the treaties. As of December 31, 2012, the Company’s largest reinsurance credit risk is related to a long term care coinsurance treaty with life insurance subsidiaries of Genworth Financial, Inc.  See Note 8 to the Consolidated Financial Statements for additional information on reinsurance.

Forward-Looking Statements

This report contains forward-looking statements that reflect the Company’s plans, estimates and beliefs.  The Company’s 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, expectations, objectives, or goals, including those related to the consolidated tax rate;

·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 pace,” “project” 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:

·conditions in the interest rate, credit default, equity market and foreign exchange environments, including changes in valuations, liquidity and volatility;

·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 to be implemented in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act;

·the Company’s investment management performance and consumer acceptance of the Company’s products;

·effects of competition in the financial services industry and changes in the Company’s product distribution mix and distribution channels;

·changes to the Company’s reputation that may arise from employee or AFSI advisor misconduct, legal or regulatory actions, improper management of conflicts of interest or otherwise;

·the Company’s capital structure as a subsidiary of Ameriprise Financial, including the ability of its parent to support its financial strength and ratings, as well as the opinions of rating agencies and other analysts or the Company’s regulators, distributors or policyholders and contractholders in response to any change or prospect of change in any such opinion;

·risks of default by issuers or guarantors of investments the Company owns or by counterparties to hedge derivative, insurance or reinsurance arrangements, 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, 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 and persistency in certain annuity and insurance products, or from assumptions regarding market returns assumed in valuing or unlocking

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DAC and DSIC or market volatility underlying the Company’s valuation and hedging of guaranteed living benefit annuity riders;

·successfully cross-selling insurance and annuity products and services to Ameriprise Financial’s customer base;

·the Company’s ability to effectively hedge risks relating to guaranteed benefit riders and certain other products;

·the impact of intercompany allocations to the Company from Ameriprise Financial and its affiliates;

·Ameriprise Financial’s ability to attract, recruit and retain qualified advisors and employees and its ability to distribute the Company’s products through current and future distribution channels;

·changes in capital requirements that may be indicated, required or advised by regulators or rating agencies;

·the impacts of Ameriprise Financial’s efforts to improve distribution economics and realize benefits from reengineering 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 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, 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, including tax laws, tax treaties, fiscal and central government treasury policy, and policies regarding the financial services industry and regulatory rulings and pronouncements.

The Company cautions the reader that the foregoing list of factors is not exhaustive.  There may also be other risks that the Company 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.  The Company undertakes no obligation to update publicly or revise any forward-looking statements.

ITEM 7A.             QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Items required under this section are included in Item 7 in this Annual Report on Form 10-K — “Management’s Narrative Analysis - Quantitative and Qualitative Disclosures about Market Risk.”

ITEM 8.                FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firms	40
Consolidated Balance Sheets — December 31, 2012 and 2011	42
Consolidated Statements of Income — Years ended December 31, 2012, 2011 and 2010	43
Consolidated Statements of Comprehensive Income — Years ended December 31, 2012, 2011 and 2010	44
Consolidated Statements of Shareholder’s Equity — Years ended December 31, 2012, 2011 and 2010	45
Consolidated Statements of Cash Flows — Years ended December 31, 2012, 2011 and 2010	46
Notes to Consolidated Financial Statements	48

Schedules:

All information on schedules to the Consolidated Financial Statements required by Rule 7-05 in Article 7 of Regulation
S-X is included in the Consolidated Financial Statements and Notes thereto or is not required.  Therefore, all schedules have been omitted.

39

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of RiverSource Life Insurance Company:

We have audited the accompanying consolidated balance sheets of RiverSource Life Insurance Company and its subsidiaries (the “Company”) as of December 31, 2012 and December 31, 2011 and the related consolidated statements of income, statements of comprehensive income, shareholder’s equity, and cash flows for each of the two years in the period ended December 31, 2012.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RiverSource Life Insurance Company and its subsidiaries at December 31, 2012 and December 31, 2011, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the Consolidated Financial Statements, the Company changed the manner in which it accounts for deferred acquisition costs in 2012.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota

February 26, 2013

40

Report of Independent Registered Public Accounting Firm

The Board of Directors
RiverSource Life Insurance Company

We have audited the accompanying consolidated statements of income, comprehensive income, shareholder’s equity and cash flows of RiverSource Life Insurance Company, (a wholly owned subsidiary of Ameriprise Financial, Inc.) (the Company) for the year ended December 31, 2010.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  We were not engaged to perform an audit of the Company’s internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of RiverSource Life Insurance Company’s operations and its cash flows for the year ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

As discussed in Notes 1 and 3 to the consolidated financial statements, in 2012 the Company adopted new accounting guidance related to the deferral of acquisition costs for insurance and annuity products.  The accompanying 2010 financial statements have been retrospectively adjusted.

/s/ Ernst & Young LLP

Minneapolis, Minnesota

February 23, 2011; except for Notes 1 and 3, regarding the impact of the adopted new accounting guidance related to the deferral of acquisition costs for insurance and annuity products, as to which the date is February 26, 2013.

41

RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

 (in millions, except share amounts)

	December 31,
	2012		2011
Assets
Investments:
Available-for-Sale:
Fixed maturities, at fair value (amortized cost: 2012, $23,058; 2011, $24,398)	$	25,932	$	26,577
Common stocks, at fair value (cost: 2012, $2; 2011, $1)	4		2
Mortgage loans, at amortized cost (less allowance for loan losses: 2012, $26; 2011, $32)	3,389		2,473
Policy loans	752		739
Other investments	743		730
Total investments	30,820		30,521
Cash and cash equivalents	336		828
Restricted cash	86		26
Reinsurance recoverables	2,047		1,953
Other receivables	203		162
Accrued investment income	291		307
Deferred acquisition costs	2,373		2,413
Deferred sales inducement costs	404		464
Other assets	3,793		3,638
Separate account assets	69,395		63,174
Total assets	$	109,748	$	103,486
Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits	$	30,670	$	31,169
Policy claims and other policyholders’ funds	132		121
Borrowings under repurchase agreements	501		504
Line of credit with Ameriprise Financial, Inc.	150		300
Other liabilities	4,201		3,608
Separate account liabilities	69,395		63,174
Total liabilities	105,049		98,876
Shareholder’s equity:
Common stock, $30 par value; 100,000 shares authorized, issued and outstanding	3		3
Additional paid-in capital	2,462		2,461
Retained earnings	1,000		1,215
Accumulated other comprehensive income, net of tax	1,234		931
Total shareholder’s equity	4,699		4,610
Total liabilities and shareholder’s equity	$	109,748	$	103,486

See Notes to Consolidated Financial Statements.

42

RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(in millions)

	Years Ended December 31,
	2012			2011			2010
Revenues
Premiums	$	442		$	493		$	489
Net investment income	1,480			1,593			1,629
Policy and contract charges	1,593			1,540			1,389
Other revenues	329			303			272
Net realized investment gains (losses)	(3		)	5			16
Total revenues	3,841			3,934			3,795
Benefits and expenses
Benefits, claims, losses and settlement expenses	1,216			950			1,203
Interest credited to fixed accounts	831			856			909
Amortization of deferred acquisition costs	225			336			53
Other insurance and operating expenses	755			781			746
Total benefits and expenses	3,027			2,923			2,911
Pretax income	814			1,011			884
Income tax provision	164			190			195
Net income	$	650		$	821		$	689
Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	$	(12	)	$	(47	)	$	(22	)
Portion of gain (loss) recognized in other comprehensive income (before taxes)	(5		)	23			(6		)
Net impairment losses recognized in net realized investment gains (losses)	$	(17	)	$	(24	)	$	(28	)

See Notes to Consolidated Financial Statements.

43

RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	Years Ended December 31,
	2012			2011			2010
Net income	$	650		$	821		$	689
Other comprehensive income, net of tax:
Net unrealized gains on securities:
Net unrealized securities gains arising during the period	451			364			516
Reclassification of net securities (gains) losses included in net income	1			(3		)	(13		)
Impact on deferred acquisition costs, deferred sales inducement costs, benefit reserves and reinsurance recoverables	(154		)	(194		)	(169		)
Total net unrealized gains on securities	298			167			334
Net unrealized losses on derivatives:
Reclassification of net derivative losses included in net income	5			4			4
Total net unrealized losses on derivatives	5			4			4
Total other comprehensive income, net of tax	303			171			338
Total comprehensive income	$	953		$	992		$	1,027

See Notes to Consolidated Financial Statements.

44

RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

(in millions)

	Common Shares		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income		Total
Balances at January 1, 2010, previously reported	$	3	$	2,445	$	3,114		$	382	$	5,944
Cumulative effect of change in accounting policies, net of tax	—		—		(1,309		)	40		(1,269		)
Balances at January 1, 2010, as adjusted	$	3	$	2,445	$	1,805		$	422	$	4,675
Comprehensive income:
Net income	—		—		689			—		689
Other comprehensive income, net of tax	—		—		—			338		338
Total comprehensive income										1,027
Tax adjustment on share-based incentive compensation plan	—		1		—			—		1
Cash dividends to Ameriprise Financial, Inc.	—		—		(500		)	—		(500		)
Non-cash capital contribution from Ameriprise Financial, Inc.	—		14		—			—		14
Balances at December 31, 2010	3		2,460		1,994			760		5,217
Comprehensive income:
Net income	—		—		821			—		821
Other comprehensive income, net of tax	—		—		—			171		171
Total comprehensive income										992
Tax adjustment on share-based incentive compensation plan	—		1		—			—		1
Cash dividends to Ameriprise Financial, Inc.	—		—		(750		)	—		(750		)
Non-cash dividend to Ameriprise Financial, Inc.	—		—		(850		)	—		(850		)
Balances at December 31, 2011	3		2,461		1,215			931		4,610
Comprehensive income:
Net income	—		—		650			—		650
Other comprehensive income, net of tax	—		—		—			303		303
Total comprehensive income										953
Tax adjustment on share-based incentive compensation plan	—		1		—			—		1
Cash dividends to Ameriprise Financial, Inc.	—		—		(865		)	—		(865		)
Balances at December 31, 2012	$	3	$	2,462	$	1,000		$	1,234	$	4,699

See Notes to Consolidated Financial Statements.

45

RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Years Ended December 31,
	2012			2011			2010
Cash Flows from Operating Activities
Net income	$	650		$	821		$	689
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net	(16		)	(73		)	(79		)
Deferred income tax expense (benefit)	(40		)	50			359
Contractholder and policyholder charges, non-cash	(273		)	(264		)	(259		)
Loss from equity method investments	26			33			19
Net realized investment gains	(14		)	(26		)	(46		)
Other-than-temporary impairments and provision for loan losses recognized in net realized investment gains	17			21			29
Change in operating assets and liabilities:
Deferred acquisition costs	(28		)	54			(242		)
Deferred sales inducement costs	51			72			(38		)
Other investments, net	25			—			10
Future policy benefits for traditional life, disability income and long term care insurance	238			253			302
Policy claims and other policyholders’ funds	11			(13		)	11
Reinsurance recoverables	(107		)	(127		)	(143		)
Other receivables	(35		)	25			(53		)
Accrued investment income	16			2			(6		)
Derivatives collateral, net	(432		)	649			55
Other, net	623			191			271
Net cash provided by operating activities	712			1,668			879
Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	156			664			1,268
Maturities, sinking fund payments and calls	3,292			3,200			3,719
Purchases	(2,271		)	(4,084		)	(4,970		)
Proceeds from sales, maturities and repayments of mortgage loans	310			202			207
Funding of mortgage loans	(277		)	(207		)	(154		)
Purchase of residential mortgage loans from affiliate	(954		)	—			—
Proceeds from sales of other investments	117			114			95
Purchase of other investments	(286		)	(296		)	(86		)
Purchase of land, buildings, equipment and software	(8		)	(6		)	(15		)
Change in policy loans, net	(13		)	(10		)	(14		)
Net cash provided by (used in) investing activities	66			(423		)	50

See Notes to Consolidated Financial Statements.

46

RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in millions)

	Years Ended December 31,
	2012			2011			2010
Cash Flows from Financing Activities
Policyholder and contractholder account values:
Considerations received	$	1,406		$	1,378		$	1,593
Net transfers from (to) separate accounts	(30		)	39			(1,337		)
Surrenders and other benefits	(1,271		)	(1,311		)	(1,338		)
Change in borrowings under repurchase agreements, net	(5		)	107			397
Proceeds from line of credit with Ameriprise Financial, Inc.	418			415			13
Payments on line of credit with Ameriprise Financial, Inc.	(568		)	(118		)	(310		)
Deferred premium options, net	(356		)	(254		)	(182		)
Tax adjustment on share-based incentive compensation plan	1			1			—
Cash dividend to Ameriprise Financial, Inc.	(865		)	(750		)	(500		)
Net cash used in financing activities	(1,270		)	(493		)	(1,664		)
Net increase (decrease) in cash and cash equivalents	(492		)	752			(735		)
Cash and cash equivalents at beginning of period	828			76			811
Cash and cash equivalents at end of period	$	336		$	828		$	76
Supplemental Disclosures:
Income taxes paid, net	$	109		$	176		$	112
Interest paid on borrowings	4			5			3
Non-cash investing activity:
Capital contributions from Ameriprise Financial, Inc.	$	—		$	—		$	14
Dividend to Ameriprise Financial, Inc.	—			850			—
Affordable housing partnership commitments not yet remitted	13			137			171

See Notes to Consolidated Financial Statements.

47

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Nature of Business and Basis of Presentation

RiverSource Life Insurance Company is a stock life insurance company with one wholly owned stock life insurance company subsidiary, RiverSource Life Insurance Co. of New York (“RiverSource Life of NY”).  RiverSource Life Insurance Company is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”).

·RiverSource Life Insurance Company is domiciled in Minnesota and holds Certificates of Authority in American Samoa, the District of Columbia and all states except New York.  RiverSource Life Insurance Company issues insurance and annuity products.

·RiverSource Life of NY is domiciled and holds a Certificate of Authority in New York.  RiverSource Life of NY issues insurance and annuity products.

RiverSource Life Insurance Company also wholly owns RiverSource Tax Advantaged Investments, Inc. (“RTA”).  RTA is a stock company domiciled in Delaware and is a limited partner in affordable housing partnership investments.

The accompanying Consolidated Financial Statements include the accounts of RiverSource Life Insurance Company and companies in which it directly or indirectly has a controlling financial interest (collectively, the “Company”). All intercompany transactions and balances have been eliminated in consolidation.

The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) which vary in certain respects from reporting practices prescribed or permitted by state insurance regulatory authorities as described in Note 15.  Certain reclassifications of prior period amounts have been made to conform to the current presentation.

In the fourth quarter of 2012, the Company made an adjustment to the model which values the reserves related to living benefit guarantees primarily attributable to prior periods, which resulted in a $41 million pretax benefit, net of deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) amortization of $11 million.  In the second quarter of 2012, the Company made a correction for a tax item related to securities lending activities primarily attributable to prior periods, which resulted in a $32 million increase to tax expense. Management has determined that the effect of these corrections is not material to all current and previously issued financial statements.

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.

On January 1, 2012, the Company retrospectively adopted the new accounting standard for DAC for insurance and annuity products. See Note 2 and Note 3 for further information on the new accounting standard and the resulting changes in the Company’s accounting policies on the deferral of acquisition costs.

48

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following tables present the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

	December 31, 2011
	Previously Reported		Effect of Change			As Adjusted
	(in millions)
Balance Sheets
Assets
Deferred income taxes, net	$	—	$	60		$	60
Deferred acquisition costs	4,367		(1,954		)	2,413
Total assets	105,380		(1,894		)	103,486
Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits	31,182		(13		)	31,169
Deferred income taxes, net	620		(620		)	—
Other liabilities	3,607		1			3,608
Total liabilities	99,508		(632		)	98,876
Shareholder’s equity:
Retained earnings	2,589		(1,374		)	1,215
Accumulated other comprehensive income, net of tax	819		112			931
Total shareholder’s equity	5,872		(1,262		)	4,610
Total liabilities and shareholder’s equity	105,380		(1,894		)	103,486

	December 31, 2010							January 1, 2010
	Previously Reported		Effect of Change			As Adjusted		Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Shareholder’s Equity
Retained earnings	$	3,410	$	(1,416	)	$	1,994	$	3,114	$	(1,309	)	$	1,805
Accumulated other comprehensive income, net of tax	675		85			760		382		40			422
Total shareholder’s equity	6,548		(1,331		)	5,217		5,944		(1,269		)	4,675

	Year Ended December 31, 2011							Year Ended December 31, 2010
	Previously Reported		Effect of Change			As Adjusted		Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Income
Revenues
Total revenues	$	3,934	$	—		$	3,934	$	3,795	$	—		$	3,795
Benefits and expenses
Benefits, claims, losses and settlement expenses	950		—			950		1,203		—			1,203
Interest credited to fixed accounts	853		3			856		909		—			909
Amortization of deferred acquisition costs	539		(203		)	336		53		—			53
Other insurance and operating expenses	645		136			781		582		164			746
Total benefits and expenses	2,987		(64		)	2,923		2,747		164			2,911
Pretax income	947		64			1,011		1,048		(164		)	884
Income tax provision	168		22			190		252		(57		)	195
Net income	$	779	$	42		$	821	$	796	$	(107	)	$	689

The Company’s principal products are variable deferred annuities and variable universal life insurance which are issued primarily to individuals.  It also offers fixed annuities where assets accumulate until the contract is surrendered, the contractholder (or in some contracts, the annuitant) dies, or the contractholder or annuitant begins receiving benefits under an annuity payout option. It also offers immediate annuities in which payments begin within one year of issue and continue for life or for a fixed period of time.  The Company’s fixed deferred annuities guarantee a relatively low annual interest rate during the accumulation period (the time before annuity payments begin). However, the Company has the

49

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

option of paying a higher rate set at its discretion.  In addition, persons owning an equity indexed annuity (“EIA”) may have their interest calculated based on an increase in a broad-based stock market index.

The Company issues both variable and fixed universal life insurance, traditional life insurance and disability income (“DI”) insurance.  Universal life insurance is a form of permanent life insurance characterized by flexible premiums, flexible death benefit amounts and unbundled pricing factors (i.e., mortality, interest and expenses).  Traditional life insurance refers to whole and term life insurance policies that pay a specified sum to a beneficiary upon death of the insured for a fixed premium.  Variable universal life insurance combines the premium and death benefit flexibility of universal life with underlying fund investment flexibility and the risks associated therewith.  Waiver of premium and accidental death benefit riders are generally available with these life insurance products.  In 2011, the Company began offering indexed universal life (“IUL”) insurance. IUL is similar to universal life insurance in that it provides life insurance coverage and cash value that increases as a result of credited interest.  Also, like universal life insurance, there is a minimum guaranteed credited rate of interest.  Unlike universal life insurance, the rate of credited interest above the minimum guarantee for funds allocated to the indexed account is linked to the S&P 500 Index (subject to a cap).  The policyholder may allocate all or a portion of the policy value to a fixed or indexed account. The Company issues only non-participating life insurance policies which do not pay dividends to policyholders from realized policy margins.

Under the Company’s variable life insurance and variable annuity products described above, the purchaser may choose a fixed account option that is part of the Company’s “general account”, as well as investment options from a variety of portfolios that include common stocks, bonds, managed assets and/or short-term securities.

2.Summary of Significant Accounting Policies

Principles of Consolidation

The Company consolidates entities in which it holds a greater than 50% voting interest, or when certain conditions are met for variable interest entities (“VIEs”) and limited partnerships.  Entities in which the Company exercises significant influence or holds a greater than 20% but less than 50% voting interest are accounted for under the equity method.  All other investments that are not reported at fair value as trading or Available-for-Sale securities are accounted for under the cost method where the Company owns less than a 20% voting interest and does not exercise significant influence.

A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest (including substantive voting rights, the obligation to absorb the entity’s losses, or the rights to receive the entity’s returns) or has equity investors that do not provide sufficient financial resources for the entity to support its activities.  A VIE is required to be assessed for consolidation under two models:

·If the VIE is a money market fund or is an investment company, or has the financial characteristics of an investment company, and the following is true:

(i)the entity does not have an explicit or implicit obligation to fund the investment company’s losses; and

(ii)the investment company is not a securitization entity, asset backed financing entity, or an entity formally considered a qualifying special purpose entity,

then, the VIE will be consolidated by the entity that determines it stands to absorb a majority of the VIE’s expected losses or to receive a majority of the VIE’s expected residual returns. Examples of entities that are likely to be assessed for consolidation under this framework include hedge funds, property funds, private equity funds and venture capital funds.

·If the VIE does not meet the criteria above, the VIE will be consolidated by the entity that determines it has both:

(i)the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and

(ii)the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

When determining whether the Company stands to absorb the majority of a VIE’s expected losses or receive a majority of a VIE’s expected returns, it analyzes the design of the VIE to identify the variable interests it holds.  Then the Company quantitatively determines whether its variable interests will absorb a majority of the VIE’s variability.  If the Company determines it has control over the activities that most significantly impact the economic performance of the VIE and it will absorb a majority of the VIE’s expected variability, the Company consolidates the VIE.  The calculation of variability is based on an analysis of projected probability-weighted cash flows based on the design of the particular VIE.  When determining whether the Company has the power and the obligation to absorb losses or rights to receive benefits from the VIE that could potentially be significant, the Company qualitatively determines if its variable interests meet these criteria. If the Company consolidates a VIE under either scenario, it is referred to as the VIE’s primary beneficiary.

50

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Amounts Based on Estimates and Assumptions

Accounting estimates are an integral part of the Consolidated Financial Statements. In part, they are based upon assumptions concerning future events. Among the more significant are those that relate to investment securities valuation and recognition of other-than-temporary impairments, DAC and the corresponding recognition of DAC amortization, derivative instruments and hedging activities, claims reserves and income taxes and the recognition of deferred tax assets and liabilities. These accounting estimates reflect the best judgment of management and actual results could differ.

Investments

Available-for-Sale Securities

Available-for-Sale securities are carried at fair value with unrealized gains (losses) recorded in accumulated other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes.  Gains and losses are recognized in the Consolidated Statements of Income upon disposition of the securities.

When the fair value of an investment is less than its amortized cost, the Company 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 is met, an other-than-temporary impairment is considered to have occurred and the Company must recognize an other-than-temporary impairment for the difference between the investment’s amortized cost basis and its fair value through earnings. For securities that do not meet the above criteria and the Company does not expect to recover a security’s amortized cost basis, the security is also considered other-than-temporarily impaired. For these securities, the Company separates the total impairment into the credit loss component and the amount of the loss related to other factors. The amount of the total other-than-temporary impairment related to credit loss is recognized in earnings.

The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes. For Available-for-Sale securities that have recognized an other-than-temporary impairment through earnings, the difference between the amortized cost basis and the cash flows expected to be collected is accreted as interest income, if through subsequent evaluation there is a sustained increase in the cash flow expected. Subsequent increases and decreases in the fair value of Available-for-Sale securities are included in other comprehensive income.

The Company provides a supplemental disclosure on the face of its Consolidated Statements of Income that presents: (i) total other-than-temporary impairment losses recognized during the period and (ii) the portion of other-than-temporary impairment losses recognized in other comprehensive income. The sum of these amounts represents the credit-related portion of other-than-temporary impairments that were recognized in earnings during the period. The portion of other-than-temporary losses recognized in other comprehensive income includes: (i) the portion of other-than-temporary impairment losses related to factors other than credit recognized during the period and (ii) reclassifications of other-than-temporary impairment losses previously determined to be related to factors other than credit that are determined to be credit-related in the current period. The amount presented on the Consolidated Statements of Income as the portion of other-than-temporary losses recognized in other comprehensive income excludes subsequent increases and decreases in the fair value of these securities.

For all securities that are considered temporarily impaired, the Company does not intend to sell these securities (has not made a decision to sell) and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The Company believes that it will collect all principal and interest due on all investments that have amortized cost in excess of fair value that are considered only temporarily impaired.

Factors the Company considers in determining whether declines in the fair value of fixed maturity securities are other-than-temporary include: (i) the extent to which the market value is below amortized cost; (ii) the duration of time in which there has been a significant decline in value; (iii) fundamental analysis of the liquidity, business prospects and overall financial condition of the issuer; and (iv) market events that could impact credit ratings, economic and business climate, litigation and government actions, and similar external business factors. In order to determine the amount of the credit loss component for corporate debt securities considered other-than-temporarily impaired, 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.

For structured investments (e.g., residential mortgage backed securities, commercial mortgage backed securities and asset backed securities), the Company also considers 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

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RIVERSOURCE LIFE INSURANCE COMPANY

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projections in assessing potential other-than-temporary impairments of these investments. Based upon these factors, securities that have indicators of potential other-than-temporary impairment are subject to detailed review by management. Securities for which declines are considered temporary continue to be carefully monitored by management.

Mortgage Loans, net

Mortgage loans, net reflect the Company’s interest in commercial and residential mortgage loans, less the related allowance for loan losses.

Policy Loans

Policy loans include life insurance policy and annuity loans and are reported at the unpaid principal balance, plus accrued interest.

Other Investments

Other investments primarily reflect the Company’s interests in affordable housing partnerships and syndicated loans which represent investments in below investment grade loan syndications.  Affordable housing partnerships are accounted for under the equity method.

Financing Receivables

Mortgage Loans and Syndicated Loans

Mortgage loans and syndicated loans are stated at amortized cost, net of allowances for loan losses, if any.

In October 2012, the Company purchased residential mortgage loans from an affiliate, Ameriprise Bank, FSB.  These loans were purchased at fair value. The purchase price takes into account the credit quality of the loan portfolio, resulting in no allowance for loan losses recorded at the acquisition date.

Interest income is accrued on the unpaid principal balances of the loans as earned.

Policy Loans

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 these loans, the Company does not record an allowance for loan losses for policy loans.

Nonaccrual Loans

Generally, loans are evaluated for or 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.  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 or in accordance with the loan agreement unless the remaining principal balance has been determined to be fully collectible.

Commercial mortgage loans are evaluated for impairment when the loan is considered for nonaccrual status, restructured or foreclosure proceedings are initiated on the property.  If it is determined that the fair value is less than the current loan balance, it  is written down to fair value less estimated selling costs.  Residential mortgage loans are charged off when management determines the assets are uncollectible and commences foreclosure proceedings on the property, at which time the property is written down to fair value less selling costs.  Foreclosed property is recorded as real estate owned in other investments.  Syndicated loans are placed on nonaccrual status when management determines it will not collect all contractual principal and interest on the loan.

Allowance for Loan Losses

Management determines the adequacy of the allowance for loan losses by portfolio 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, FICO scores of the borrower and occupancy rates, along with economic and market conditions.  This evaluation is inherently subjective as it requires estimates, which may be susceptible to significant change.

The Company determines the amount of the allowance required for certain sectors based on management’s assessment of relative risk characteristics of the loan portfolio.  The allowance is recorded for homogeneous loan categories on a pool basis, based on an analysis of product mix and risk characteristics of the portfolio, including geographic concentration, bankruptcy experiences, and historical losses, adjusted for current trends and market conditions.

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RIVERSOURCE LIFE INSURANCE COMPANY

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While the Company attributes portions of the allowance to specific loan pools as part of the allowance estimation process, the entire allowance is available to absorb losses inherent in the total loan portfolio.  The allowance is increased through provisions charged to net realized investment gains (losses) and reduced/increased by net charge-offs/recoveries.

Impaired Loans

The Company considers a loan to be impaired when, based on current information and events, it is probable the Company will not be able to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement.  Impaired loans may also include loans that have been modified in troubled debt restructurings as a concession to borrowers experiencing financial difficulties.  Management evaluates for impairment all restructured loans and loans with higher impairment risk factors.  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. The evaluation of impairment on residential mortgage loans is primarily driven by delinquency status of individual loans.  The impairment recognized is measured as the excess of the loan’s recorded investment over: (i) the present value of its expected principal and interest payments discounted at the loan’s effective interest rate, (ii) the fair value of collateral or (iii) the loan’s observable market price.

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. 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.

Cash and Cash Equivalents

Cash equivalents include highly liquid investments with original maturities of 90 days or less.

Restricted Cash

Total restricted cash at December 31, 2012 and 2011 was $86 million and $26 million, respectively, consisting of cash that has been pledged to counterparties.

Reinsurance

The Company cedes significant amounts of insurance risk to other insurers under reinsurance agreements. Reinsurance premiums paid and benefits received are accounted for consistently with the basis used in accounting for the policies from which risk is reinsured and consistently with the terms of the reinsurance contracts. Reinsurance premiums for traditional life, long term care (“LTC”) and DI ceded on a coinsurance basis, net of the change in any prepaid reinsurance asset, are reported as a reduction of premiums. Fixed and variable universal life reinsurance premiums are reported as a reduction of policy and contract charges.  In addition, for fixed and variable universal life insurance policies, the net cost of reinsurance ceded, which represents the discounted amount of the expected cash flows between the reinsurer and the Company, is recognized as an asset and amortized over the term of the reinsurance contract, in proportion to the estimated gross profits and is subject to retrospective adjustment in a manner similar to retrospective adjustment of DAC.  The assumptions used to project the expected cash flows are consistent with those used for DAC asset valuation for the same contracts.  Changes in the net cost of reinsurance are reflected as a component of policy and contract charges.  Reinsurance recoveries are reported as components of benefits, claims, losses and settlement expenses.

Insurance liabilities are reported before the effects of reinsurance. Future policy benefits and policy claims and other policyholders’ funds recoverable under reinsurance contracts are recorded as reinsurance recoverables.

The Company also assumes life insurance and fixed annuity risk from other insurers in limited circumstances. Reinsurance premiums received and benefits paid are accounted for consistently with the basis used in accounting for the policies from which risk is reinsured and consistently with the terms of the reinsurance contracts.  Liabilities for assumed business are recorded within future policy benefits.

See Note 8 for additional information on reinsurance.

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RIVERSOURCE LIFE INSURANCE COMPANY

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Land, Buildings, Equipment and Software

Land, buildings, equipment and internally developed or purchased software are carried at cost less accumulated depreciation or amortization and are reflected within other assets. The Company generally uses the straight-line method of depreciation and amortization over periods ranging from three to 30 years.

At December 31, 2012 and 2011, land, buildings, equipment and software were $174 million and $182 million, respectively, net of accumulated depreciation of $91 million and $75 million, respectively. Depreciation and amortization expense for the years ended December 31, 2012, 2011 and 2010 was $17 million, $16 million and $14 million, respectively.

Derivative Instruments and Hedging Activities

Freestanding derivative instruments are recorded at fair value and are reflected in other assets or other liabilities.  The Company’s policy is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement.  The accounting for changes in the fair value of a derivative instrument depends on its intended use and the resulting hedge designation, if any.  The Company primarily uses derivatives as economic hedges that are not designated as accounting hedges or do not qualify for hedge accounting treatment.  The Company occasionally designates derivatives as (i) hedges of changes in the fair value of assets, liabilities, or firm commitments (“fair value hedges”) or (ii) hedges of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedges”).

Derivative instruments that are entered into for hedging purposes are designated as such at the time the Company enters into the contract.  For all derivative instruments that are designated for hedging activities, the Company formally documents all of the hedging relationships between the hedge instruments and the hedged items at the inception of the relationships.  Management also formally documents its risk management objectives and strategies for entering into the hedge transactions.  The Company formally assesses, at inception and on a quarterly basis, whether derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of hedged items.  If it is determined that a derivative is no longer highly effective as a hedge, the Company will discontinue the application of hedge accounting.

For derivative instruments that do not qualify for hedge accounting or are not designated as accounting hedges, changes in fair value are recognized in current period earnings.  Changes in fair value of derivatives are presented in the Consolidated Statements of Income based on the nature and use of the instrument.  Changes in fair value of derivatives used as economic hedges are presented in the Consolidated Statements of Income with the corresponding change in the hedged asset or liability.

For derivative instruments that qualify as fair value hedges, changes in the fair value of the derivatives, as well as changes in the fair value of the hedged assets, liabilities or firm commitments, are recognized on a net basis in current period earnings. The carrying value of the hedged item is adjusted for the change in fair value from the designated hedged risk.  If a fair value hedge designation is removed or the hedge is terminated prior to maturity, previous adjustments to the carrying value of the hedged item are recognized into earnings over the remaining life of the hedged item.

For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instruments is reported in accumulated other comprehensive income and reclassified into earnings when the hedged item or transaction impacts earnings.  The amount that is reclassified into earnings is presented in the Consolidated Statements of Income with the hedged instrument or transaction impact.  Any ineffective portion of the gain or loss is reported in current period earnings as a component of net investment income.  If a hedge designation is removed or a hedge is terminated prior to maturity, the amount previously recorded in accumulated other comprehensive income is reclassified to earnings over the period that the hedged item impacts earnings.  For hedge relationships that are discontinued because the forecasted transaction is not expected to occur according to the original strategy, any related amounts previously recorded in accumulated other comprehensive income are recognized in earnings immediately.

The equity components of EIA and IUL obligations are considered an embedded derivative.  Additionally, certain annuities contain guaranteed minimum accumulation benefit (“GMAB”) and guaranteed minimum withdrawal benefit (“GMWB”) provisions.  The GMAB and the non-life contingent benefits associated with GMWB provisions are also considered embedded derivatives.

See Note 13 for information regarding the Company’s fair value measurement of derivative instruments and Note 16 for the impact of derivatives on the Consolidated Statements of Income.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred Acquisition Costs

The Company incurs costs in connection with acquiring new and renewal insurance and annuity businesses.  The portion of these costs which are incremental and direct to the acquisition of a new or renewal insurance policy or annuity contract are deferred.    Significant costs capitalized by the Company include sales based compensation related to the acquisition of new and renewal insurance policies and annuity contracts, medical inspection costs for successful sales, and a portion of employee compensation and benefit costs based upon the amount of time spent on successful sales.  Sales based compensation paid to Ameriprise Financial Services, Inc. (“AFSI”), a subsidiary of Ameriprise Financial, advisors and employees and third-party distributers is capitalized.  Employee compensation and benefits costs which are capitalized relate primarily to sales efforts, underwriting and processing. All other costs which are not incremental direct costs of acquiring an insurance policy or annuity contract are expensed as incurred. The DAC associated with insurance policies or annuity contracts that are significantly modified or internally replaced with another contract are accounted for as contract terminations.  These transactions are anticipated in establishing amortization periods and other valuation assumptions.

Costs deferred as DAC are amortized over time.  For annuity and universal life (“UL”) contracts, DAC are amortized based on projections of estimated gross profits over amortization periods equal to the approximate life of the business.  For other insurance products, DAC are generally amortized as a percentage of premiums over amortization periods equal to the premium-paying period.

For annuity and UL insurance products, the assumptions made in projecting future results and calculating the DAC balance and DAC amortization expense are management’s best estimates.  Management is required to update these assumptions whenever it appears that, based on actual experience or other evidence, earlier estimates should be revised.  When assumptions are changed, the percentage of estimated gross profits used to amortize DAC might also change.  A change in the required amortization percentage is applied retrospectively; an increase in amortization percentage will result in a decrease in the DAC balance and an increase in DAC amortization expense, while a decrease in amortization percentage will result in an increase in the DAC balance and a decrease in DAC amortization expense.  The impact on results of operations of changing assumptions can be either positive or negative in any particular period and is reflected in the period in which such changes are made.

For traditional life, DI and LTC insurance products, the assumptions made in calculating the DAC balance and DAC amortization expense are consistent with those used in determining the liabilities and, therefore, are intended to provide for adverse deviations in experience and are revised only if management concludes experience will be so adverse that DAC are not recoverable.  If management concludes that DAC are not recoverable, DAC are reduced to the amount that is recoverable based on best estimate assumptions and there is a corresponding expense recorded in the Consolidated Statements of Income.

For annuity, life, DI and LTC insurance products, key assumptions underlying those long-term projections include interest rates (both earning rates on invested assets and rates credited to contractholder and policyholder accounts), equity market performance, mortality and morbidity rates and the rates at which policyholders are expected to surrender their contracts, make withdrawals from their contracts and make additional deposits to their contracts.  Assumptions about earned and credited interest rates are the primary factors used to project interest margins, while assumptions about equity and bond market performance are the primary factors used to project client asset value growth rates, and assumptions about surrenders, withdrawals and deposits comprise projected persistency rates.  Management must also make assumptions to project maintenance expenses associated with servicing its annuity and insurance businesses during the DAC amortization period.

The client asset value growth rates are the rates at which variable annuity and variable universal life (“VUL”) insurance contract values invested in separate accounts are assumed to appreciate in the future.  The rates used vary by equity and fixed income investments.  Management reviews and, where appropriate, adjusts its assumptions with respect to client asset value growth rates on a regular basis.  The Company typically uses a five-year mean reversion process as a guideline in setting near-term equity fund growth rates based on a long-term view of financial market performance as well as recent actual performance.  The suggested near-term equity fund growth rate is reviewed quarterly to ensure consistency with management’s assessment of anticipated equity market performance.  DAC amortization expense recorded in a period when client asset value growth rates exceed management’s near-term estimate will typically be less than in a period when growth rates fall short of management’s near-term estimate.

The Company monitors other principal DAC amortization assumptions, such as persistency, mortality, morbidity, interest margin and maintenance expense levels each quarter and, when assessed independently, each could impact the Company’s DAC balances.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The analysis of DAC balances and the corresponding amortization is a dynamic process that considers all relevant factors and assumptions described previously.  Unless the Company’s management identifies a significant deviation over the course of the quarterly monitoring, management reviews and updates these DAC amortization assumptions annually in the third quarter of each year.

Deferred Sales Inducement Costs

Sales inducement costs consist of bonus interest credits and premium credits added to certain annuity contract and insurance policy values.  These benefits are capitalized to the extent they are incremental to amounts that would be credited on similar contracts without the applicable feature.  The amounts capitalized are amortized using the same methodology and assumptions used to amortize DAC.  The amortization of DSIC is recorded in benefits, claims, losses and settlement expenses.

Separate Account Assets and Liabilities

Separate account assets and liabilities are primarily funds held for the exclusive benefit of variable annuity contractholders and variable life insurance policyholders, who assume the related investment risk.  Income and losses on separate account assets accrue directly to the contractholder or policyholder and are not reported in the Company’s Consolidated Statements of Income.  Separate account assets are recorded at fair value. Changes in the fair value of separate account assets are offset by changes in the related separate account liabilities. The Company receives mortality and expense risk and other fees, guarantee fees and cost of insurance charges from the related accounts.

Future Policy Benefits and Policy Claims and Other Policyholders’ Funds

Fixed Annuities and Variable Annuity Guarantees

Future policy benefits and policy claims and other policyholders’ funds related to fixed annuities and variable annuity guarantees include liabilities for fixed account values on fixed and variable deferred annuities, guaranteed benefits associated with variable annuities, EIAs and fixed annuities in a payout status.

Liabilities for fixed account values on fixed and variable deferred annuities are equal to accumulation values, which are the cumulative gross deposits and credited interest less withdrawals and various charges.

The majority of the variable annuity contracts offered by the Company contain guaranteed minimum death benefit (“GMDB”) provisions.  When market values of the customer’s accounts decline, the death benefit payable on a contract with a GMDB may exceed the contract accumulation value.  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 containing GMWB and GMAB provisions, and until May 2007, the Company offered contracts containing guaranteed minimum income benefit (“GMIB”) provisions.

In determining the liabilities for GMDB, GMIB and the life contingent benefits associated with GMWB, the Company projects these benefits and contract assessments using actuarial models to simulate various equity market scenarios. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews and, where appropriate, adjusts its assumptions each quarter.  Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.

The GMDB liability is determined by estimating the expected value of death benefits in excess of the projected contract accumulation value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g., mortality and expense fees, contractual administrative charges and similar fees).

If elected by the contract owner and after a stipulated waiting period from contract issuance, a GMIB guarantees a minimum lifetime annuity payout based on a specified rate of contract accumulation value growth and predetermined annuity purchase rates. The GMIB liability is determined each period by estimating the expected value of annuitization benefits in excess of the projected contract accumulation value at the date of annuitization and recognizing the excess over the estimated meaningful life based on expected assessments.

The embedded derivatives related to GMAB and the non-life contingent benefits associated with GMWB provisions are recorded at fair value.  See Note 13 for information regarding the fair value measurement of embedded derivatives.  The liability for the life contingent benefits associated with GMWB provisions is determined in the same way as the GMDB

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

liability.  Significant assumptions made in projecting future benefits and fees relate to persistency and benefit utilization. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.  The changes in both the fair values of the GMWB and GMAB embedded derivatives and the liability for life contingent benefits are reflected in benefits, claims, losses and settlement expenses.

Liabilities for EIAs are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

Liabilities for fixed annuities in a benefit or payout status are based on future estimated payments using established industry mortality tables and interest rates.

Life, Disability Income and Long Term Care Insurance

Future policy benefits and policy claims and other policyholders’ funds related to life, DI and LTC insurance include liabilities for fixed account values on fixed and variable universal life policies, liabilities for indexed accounts of IUL products, liabilities for unpaid amounts on reported claims, estimates of benefits payable on claims incurred but not yet reported and estimates of benefits that will become payable on term life, whole life, DI and LTC policies as claims are incurred in the future.

Liabilities for fixed account values on fixed and variable universal life insurance are equal to accumulation values.  Accumulation values are the cumulative gross deposits and credited interest less various contractual expense and mortality charges and less amounts withdrawn by policyholders.

Liabilities for indexed accounts of IUL products are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

A portion of the Company’s fixed and variable universal life policies have product features that result in profits followed by losses from the insurance component of the contract. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the contract.  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.

In determining the liability for contracts with profits followed by losses, the Company projects benefits and contract assessments using actuarial models. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.

The liability for these future losses is determined by estimating the death benefits in excess of account value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g. cost of insurance charges, contractual administrative charges, similar fees and investment margin). See Note 9 for information regarding the liability for contracts with secondary guarantees.

Liabilities for unpaid amounts on reported life insurance claims are equal to the death benefits payable under the policies. Liabilities for unpaid amounts on reported DI and LTC claims include any periodic or other benefit amounts due and accrued, along with estimates of the present value of obligations for continuing benefit payments. These amounts are calculated based on claim continuance tables which estimate the likelihood an individual will continue to be eligible for benefits. Present values are calculated at interest rates established when claims are incurred. Anticipated claim continuance rates are based on established industry tables, adjusted as appropriate for the Company’s experience.

Liabilities for estimated benefits payable on claims that have been incurred but not yet reported are based on periodic analysis of the actual time lag between when a claim occurs and when it is reported.

Liabilities for estimates of benefits that will become payable on future claims on term life, whole life, DI and LTC policies are based on the net level premium method, using anticipated premium payments, mortality and morbidity rates, policy persistency and interest rates earned on assets supporting the liability. Anticipated mortality and morbidity rates are based on established industry mortality and morbidity tables, with modifications based on the Company’s experience. Anticipated premium payments and persistency rates vary by policy form, issue age, policy duration and certain other pricing factors.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Changes in future policy benefits and policy claims and other policyholders’ funds are reflected in earnings in the period adjustments are made.

Where applicable, benefit amounts expected to be recoverable from reinsurance companies who share in the risk are separately recorded as reinsurance recoverables.

Sources of Revenue

The Company’s principal sources of revenue include premiums, net investment income and policy and contract charges.

Premiums

Premiums include premiums on traditional life, DI and LTC insurance products and immediate annuities with a life contingent feature.  Premiums are reported net of reinsurance ceded and are recognized as revenue when due.

Net Investment Income

Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale, commercial and residential mortgage loans, policy loans, other investments and cash and cash equivalents; the changes in fair value of certain derivatives; and the pro-rata share of net income or loss on equity method investments.  Interest income is accrued as earned using the effective interest method, which makes an adjustment of the yield for premiums and discounts on all performing fixed maturity securities classified as Available-for-Sale and on the residential mortgage loans so that the related security or loan recognizes a constant rate of return on the outstanding balance throughout its term.

Policy and Contract Charges

Policy and contract charges include mortality and expense risk fees and certain other charges assessed on annuities and fixed and variable universal life insurance, which consist of cost of insurance charges, net of reinsurance premiums and cost of reinsurance for universal life insurance products, and administrative and surrender charges.  Mortality and expense risk fees include risk, management and administration fees, which are generated directly and indirectly from the Company’s separate account assets.  Cost of insurance charges on fixed and variable universal life insurance and contract charges and surrender charges on annuities and fixed and variable universal life insurance are recognized as revenue when collected.

Net Realized Investment Gains (Losses)

Net realized investment gains (losses) primarily include realized gains and losses on the sale of securities and charges for the other-than-temporary impairments of investments related to credit losses.  Realized gains and losses on the sale of securities, other than equity method investments, are recognized using the specific identification method, on a trade date basis.

Other Insurance and Operating Expenses

Other insurance and operating expenses include expenses allocated to the Company from its parent, Ameriprise Financial, for the Company’s share of compensation, professional and consultant fees and expenses associated with information technology and communications, facilities and equipment, advertising and promotion and legal and regulatory costs.  Also included are commissions, sales and marketing expenses and other operating expenses.  These expenses are presented net of acquisition cost deferrals.

Income Taxes

The Company’s taxable income is included in the consolidated federal income tax return of Ameriprise Financial. The Company provides for income taxes on a separate return basis, except that, under an agreement between Ameriprise Financial and the Company, tax benefits are recognized for losses to the extent they can be used in the consolidated return.  It is the policy of Ameriprise Financial that it will reimburse its subsidiaries for any tax benefits recorded.  Inherent in the provision for income taxes are estimates and judgments regarding the tax treatment of certain items.

In connection with the provision for income taxes, the Consolidated Financial Statements reflect certain amounts related to deferred tax assets and liabilities, which result from temporary differences between the assets and liabilities measured for financial statement purposes versus the assets and liabilities measured for tax return purposes. Among the Company’s deferred taxes is a significant deferred tax asset relating to capital losses that have been recognized for financial statement purposes but not yet for tax return purposes as well as future deductible capital losses realized for tax return purposes.  Under current U.S. federal income tax law, capital losses generally must be used against capital gain income within five

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RIVERSOURCE LIFE INSURANCE COMPANY

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years of the year in which the capital losses are recognized for tax purposes.

The Company is required to establish a valuation allowance for any portion of its 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 including the ability to generate capital gains.  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.  Management may need to identify and implement appropriate planning strategies to ensure its ability to realize deferred tax assets and avoid the establishment of a valuation allowance with respect to such assets.  In the opinion of management, it is currently more likely than not that the Company will not realize the full benefit of certain state net operating losses and therefore a valuation allowance of $5 million has been established at December 31, 2012.

3.Recent Accounting Pronouncements

Adoption of New Accounting Standards

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to the presentation of comprehensive income. The standard requires entities to present all nonowner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The standard is effective for interim and annual periods beginning after December 15, 2011. The Company retrospectively adopted the standard in the first quarter of 2012.  The adoption of the standard did not impact the Company’s consolidated financial condition and results of operations.  See the Company’s Consolidated Statements of Comprehensive Income for the newly required statements.

Fair Value

In May 2011, the FASB updated the accounting standards related to fair value measurement and disclosure requirements. The standard requires entities, for assets and liabilities measured at fair value in the statement of financial position which are Level 3 fair value measurements, to disclose quantitative information about unobservable inputs and assumptions used in the measurements, a description of the valuation processes in place, and a qualitative discussion about the sensitivity of the measurements to changes in unobservable inputs and interrelationships between those inputs if a change in those inputs would result in a significantly different fair value measurement. In addition, the standard requires disclosure of fair value by level within the fair value hierarchy for each class of assets and liabilities not measured at fair value in the statement of financial position but for which the fair value is disclosed. The standard is effective for interim and annual periods beginning on or after December 15, 2011. The Company adopted the standard in the first quarter of 2012.  The adoption of the standard did not impact the Company’s consolidated financial condition and results of operations.  See Note 13 for the required disclosures.

Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreements

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

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB updated the accounting standard for DAC. Under this new standard, only the following costs incurred in the acquisition of new and renewal insurance contracts are capitalizable as DAC: (i) incremental direct costs of a successful contract acquisition, (ii) portions of employees’ compensation and benefits directly related to time spent performing acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and contract selling) for a contract that has been acquired, (iii) other costs related to  acquisition activities that would not have been incurred had the acquisition of the contract not occurred, and (iv) advertising costs that meet the capitalization criteria in other GAAP guidance for certain direct-response marketing. All other acquisition related costs are expensed as incurred. The Company retrospectively adopted the new standard on January 1, 2012. See Note 1 for the effect of the change on

59

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

affected financial statement line items for prior periods retrospectively adjusted and Note 2 for the Company’s accounting policies on DAC.

Receivables

In April 2011, the FASB updated the accounting standards for troubled debt restructurings. The new standard includes indicators that a lender should consider in determining whether a borrower is experiencing financial difficulties and provides clarification for determining whether the lender has granted a concession to the borrower. The standard sets the effective dates for troubled debt restructuring disclosures required by recent guidance on credit quality disclosures. The standard is effective for interim and annual periods beginning on or after June 15, 2011, and is to be applied retrospectively to modifications occurring on or after the beginning of the annual period of adoption. For purposes of measuring impairments of receivables that are considered impaired as a result of applying the new guidance, the standard should be applied prospectively for the interim or annual period beginning on or after June 15, 2011. The Company adopted the standard in the third quarter of 2011. The adoption did not have any effect on the Company’s consolidated financial condition and results of operations.  See Note 6 for the required disclosures.

Fair Value

In January 2010, the FASB updated the accounting standards related to disclosures on fair value measurements.  The standard expands the current disclosure requirements to include additional detail about significant transfers between Levels 1 and 2 within the fair value hierarchy and presents activity in the rollforward of Level 3 activity on a gross basis.  The standard also clarifies existing disclosure requirements related to the level of disaggregation to be used for assets and liabilities as well as disclosures on the inputs and valuation techniques used to measure fair value.  The standard is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure requirements related to the Level 3 rollforward, which are effective for interim and annual periods beginning after December 15, 2010.  The Company adopted the standard in the first quarter of 2010, except for the additional disclosures related to the Level 3 rollforward, which the Company adopted in the first quarter of 2011.  The adoption did not impact the Company’s consolidated financial condition and results of operations.   See Note 13 for the required disclosures.

Consolidation of Variable Interest Entities

In June 2009, the FASB updated the accounting standards related to the consolidation of VIEs.  The standard amends the guidance on the determination of the primary beneficiary of a VIE from a quantitative model to a qualitative model and requires additional disclosures about an enterprise’s involvement in VIEs.  Under the new qualitative model, the primary beneficiary must have both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive gains that could be potentially significant to the VIE. In February 2010, the FASB amended this guidance to defer application of the consolidation requirements for certain investment funds. The standards are effective for interim and annual reporting periods beginning after November 15, 2009.  The Company adopted the standard effective January 1, 2010 which did not impact its consolidated financial condition and results of operations.

Future Adoption of New Accounting Standards

Comprehensive Income

In February 2013, the FASB updated the accounting standard related to comprehensive income. The update requires entities to provide information about significant amounts reclassified out of accumulated other comprehensive income. The standard is effective for interim and annual periods beginning after December 15, 2012 and is required to be applied prospectively.  The adoption of the standard will not impact the Company’s consolidated results of operations and financial condition.

Balance Sheet

In December 2011, the FASB updated the accounting standards to require new disclosures about offsetting assets and liabilities. The standard requires an entity to disclose both gross and net information about certain financial instruments and transactions subject to master netting arrangements (or similar agreements) or eligible for offset in the statement of financial position. The standard is effective for interim and annual periods beginning on or after January 1, 2013 on a retrospective basis. The adoption of the standard is not expected to impact the Company’s consolidated financial condition and results of operations.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

4.Variable Interest Entities

RTA, a subsidiary of RiverSource Life Insurance Company, has variable interests in affordable housing partnerships for which it is not the primary beneficiary and, therefore, does not consolidate.

RTA’s maximum exposure to loss as a result of its investments in the affordable housing partnerships is limited to the carrying values of these investments. The carrying values are reflected in other investments and were $409 million and $384 million as of December 31, 2012 and 2011, respectively. RTA has no obligation to provide financial or other support to the affordable housing partnerships in addition to liabilities already recorded for future funding commitments nor has it provided any additional support to the affordable housing partnerships. The Company had liabilities of $144 million and $267 million recorded in other liabilities as of December 31, 2012 and 2011, respectively, related to the future funding commitments for affordable housing partnerships.

5.Investments

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

	December 31, 2012
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,881	$	2,167	$	(7	)	$	17,041	$	—
Residential mortgage backed securities	3,446		233		(58		)	3,621		(24		)
Commercial mortgage backed securities	2,717		287		—			3,004		—
State and municipal obligations	976		180		(34		)	1,122		—
Asset backed securities	808		66		(3		)	871		—
Foreign government bonds and obligations	188		36		—			224		—
U.S. government and agencies obligations	42		7		—			49		—
Total fixed maturities	23,058		2,976		(102		)	25,932		(24		)
Common stocks	2		2		—			4		1
Total	$	23,060	$	2,978	$	(102	)	$	25,936	$	(23	)

	December 31, 2011
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,770	$	1,726	$	(78	)	$	16,418	$	—
Residential mortgage backed securities	4,264		242		(138		)	4,368		(41		)
Commercial mortgage backed securities	3,355		276		—			3,631		—
State and municipal obligations	1,012		131		(47		)	1,096		—
Asset backed securities	812		43		(6		)	849		—
Foreign government bonds and obligations	126		19		(1		)	144		—
U.S. government and agencies obligations	49		8		—			57		—
Other structured investments	10		4		—			14		4
Total fixed maturities	24,398		2,449		(270		)	26,577		(37		)
Common stocks	1		1		—			2		—
Total	$	24,399	$	2,450	$	(270	)	$	26,579	$	(37	)

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

At December 31, 2012 and 2011, fixed maturity securities comprised approximately 84% and 87%, respectively, of the Company’s total 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

61

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Moody’s, S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. At December 31, 2012 and 2011, approximately $1.5 billion and $1.2 billion, respectively, of securities were internally rated by Columbia Management Investment Advisers, LLC using criteria similar to those used by NRSROs.

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

	December 31, 2012						December 31, 2011
Ratings	Amortized Cost		FairValue		Percent of Total Fair Value		Amortized Cost		FairValue		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	5,680	$	6,198	24	%	$	7,276	$	7,811	30	%
AA	1,102		1,273		5		1,161		1,291		5
A	4,262		4,849		19		4,148		4,578		17
BBB	10,409		12,019		46		10,211		11,446		43
Below investment grade	1,605		1,593		6		1,602		1,451		5
Total fixed maturities	$	23,058	$	25,932	100	%	$	24,398	$	26,577	100	%

At December 31, 2012 and 2011, approximately 32% and 33%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities.  No holdings of any other issuer were greater than 10% of total equity.

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:

	December 31, 2012
	Less than 12 months						12 months or more						Total
Description of Securities	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	50	$	477	$	(4	)	6	$	70	$	(3	)	56	$	547	$	(7	)
Residential mortgage backed securities	6	107		—			56	293		(58		)	62	400		(58		)
State and municipal obligations	—	—		—			2	100		(34		)	2	100		(34		)
Asset backed securities	1	10		—			5	86		(3		)	6	96		(3		)
Total	57	$	594	$	(4	)	69	$	549	$	(98	)	126	$	1,143	$	(102	)

	December 31, 2011
	Less than 12 months						12 months or more						Total
Description of Securities	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	70	$	1,004	$	(37	)	9	$	257	$	(41	)	79	$	1,261	$	(78	)
Residential mortgage backed securities	31	344		(8		)	63	336		(130		)	94	680		(138		)
State and municipal obligations	—	—		—			2	87		(47		)	2	87		(47		)
Asset backed securities	11	139		(3		)	3	43		(3		)	14	182		(6		)
Foreign government bonds and obligations	5	23		(1		)	—	—		—			5	23		(1		)
Total	117	$	1,510	$	(49	)	77	$	723	$	(221	)	194	$	2,233	$	(270	)

As part of the Company’s ongoing monitoring process, management determined that a majority of the gross unrealized losses on its Available-for-Sale securities are attributable to movement in credit spreads primarily related to non-agency residential mortgage backed securities purchased prior to 2008.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents a rollforward of the cumulative amounts recognized in the Consolidated Statements of Income for other-than-temporary impairments related to credit losses on securities for which a portion of the securities’ total other-than-temporary impairments was recognized in other comprehensive income:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Beginning balance	$	106		$	108		$	82
Credit losses for which an other-than-temporary impairment was not previously recognized	1			13			14
Credit losses for which an other-than-temporary impairment was previously recognized	16			11			12
Reductions for securities sold during the period (realized)	(36		)	(26		)	—
Ending balance	$	87		$	106		$	108

The change in net unrealized securities gains (losses) in other comprehensive income includes three components, net of tax: (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 other-than-temporary impairment losses to credit losses and (iii) other items primarily consisting of adjustments in asset and liability balances, such as DAC, DSIC, 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 table presents a rollforward of the net unrealized securities gains on Available-for-Sale securities included in accumulated other comprehensive income:

	NetUnrealizedSecuritiesGains			DeferredIncome Tax			Accumulated OtherComprehensive Income Related to Net Unrealized Securities Gains
	(in millions)
Balance at January 1, 2010	$	638		$	(222	)	$	416
Cumulative effect of accounting change	62			(22		)	40		(1)
Net unrealized securities gains arising during the period(2)	794			(278		)	516
Reclassification of net securities gains included in net income	(20		)	7			(13		)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(259		)	90			(169		)
Balance at December 31, 2010	1,215			(425		)	790		(3)
Net unrealized securities gains arising during the period(2)	560			(196		)	364
Reclassification of net securities gains included in net income	(5		)	2			(3		)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(299		)	105			(194		)
Balance at December 31, 2011		1,471			(514	)		957	(3)
Net unrealized securities gains arising during the period(2)	694			(243		)	451
Reclassification of net securities losses included in net income	2			(1		)	1
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(237		)	83			(154		)
Balance at December 31, 2012	$	1,930		$	(675	)	$	1,255	(3)

(1)The Company retrospectively adopted a new accounting standard on January 1, 2012 for DAC. See Note 1 and Note 3 for additional information on the adoption impact.

(2)Includes other-than-temporary impairment losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income during the period.

(3)Includes $(15) million, $(20) million and $(13) million of noncredit related impairments on securities and net unrealized securities losses on previously impaired securities at December 31, 2012, 2011 and 2010, respectively.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Gross realized investment gains	$	16		$	48		$	51
Gross realized investment losses	(1		)	(20		)	(4		)
Other-than-temporary impairments	(17		)	(24		)	(28		)
Total	$	(2	)	$	4		$	19

Other-than-temporary impairments for the years ended December 31, 2012 and 2011 primarily related to credit losses on non-agency residential mortgage backed securities.  Other-than-temporary impairments for the year ended December 31, 2010 primarily related to credit losses on non-agency residential mortgage backed securities as well as corporate debt securities in the gaming industry.

Available-for-Sale securities by contractual maturity at December 31, 2012 were as follows:

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	1,537	$	1,563
Due after one year through five years	4,065		4,372
Due after five years through 10 years	6,902		7,900
Due after 10 years	3,583		4,601
	16,087		18,436
Residential mortgage backed securities	3,446		3,621
Commercial mortgage backed securities	2,717		3,004
Asset backed securities	808		871
Common stocks	2		4
Total	$	23,060	$	25,936

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

At both December 31, 2012 and 2011, bonds carried at $7 million were on deposit with various states as required by law.

Net investment income is summarized as follows:

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Income on fixed maturities	$	1,324	$	1,469	$	1,486
Income on mortgage loans	158		149		156
Other investments	26		18		32
	1,508		1,636		1,674
Less: investment expenses	28		43		45
Total	$	1,480	$	1,593	$	1,629

Net realized investment gains (losses) are summarized as follows:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Fixed maturities	$	(2	)	$	4		$	19
Mortgage loans	—			2			(6		)
Other investments	(1		)	(1		)	3
Total	$	(3	)	$	5		$	16

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

6.Financing Receivables

The Company’s financing receivables include commercial and residential mortgage loans, syndicated loans and policy loans.  Syndicated loans are reflected in other investments.  Policy loans do not exceed the cash surrender value of the policy at origination.  As there is minimal risk of loss related to policy loans, the Company does not record an allowance for loan losses for policy loans.

Allowance for Loan Losses

The following tables present a rollforward of the allowance for loan losses for the years ended and the ending balance of the allowance for loan losses by impairment method and type of loan:

	December 31, 2012
	Commercial Mortgage Loans			Syndicated Loans			Total
	(in millions)
Beginning balance	$	32		$	5		$	37
Charge-offs	(6		)	(1		)	(7		)
Provisions	—			—			—
Ending balance	$	26		$	4		$	30
Individually evaluated for impairment	$	5		$	—		$	5
Collectively evaluated for impairment	21			4			25

	December 31, 2011
	Commercial Mortgage Loans			Syndicated Loans		Total
	(in millions)
Beginning balance	$	36		$	5	$	41
Charge-offs	(3		)	—		(3		)
Provisions	(1		)	—		(1		)
Ending balance	$	32		$	5	$	37
Individually evaluated for impairment	$	9		$	—	$	9
Collectively evaluated for impairment	23			5		28

	December 31, 2010
	Commercial Mortgage Loans			Syndicated Loans			Total
	(in millions)
Beginning balance	$	30		$	12		$	42
Charge-offs	(1		)	(2		)	(3		)
Provisions	7			(5		)	2
Ending balance	$	36		$	5		$	41
Individually evaluated for impairment	$	8		$	—		$	8
Collectively evaluated for impairment	28			5			33

The recorded investment in financing receivables by impairment method and type of loan was as follows:

	December 31, 2012
	Commercial Mortgage Loans		Residential Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	39	$	—	$	—	$	39
Collectively evaluated for impairment	2,442		934		303		3,679
Total	$	2,481	$	934	$	303	$	3,718

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

	December 31, 2011
	Commercial Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	64	$	1	$	65
Collectively evaluated for impairment	2,441		301		2,742
Total	$	2,505	$	302	$	2,807

As of December 31, 2012 and 2011, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $10 million and $4 million, respectively.

Residential mortgage loans are presented net of unamortized discount of $80 million as of December 31, 2012.

Purchases and sales of loans were as follows:

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Purchases
Residential mortgage loans	$	954	$	—	$	—
Syndicated loans	111		194		59
Total loans purchased	$	1,065	$	194	$	59
Sales
Syndicated loans	$	9	$	2	$	2

Credit Quality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $4 million and $12 million as of December 31, 2012 and 2011, respectively.  All other loans were considered to be performing.

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.  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 2% and 3% of total commercial mortgage loans at December 31, 2012 and 2011, respectively. 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. 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:

	December 31, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
South Atlantic	$	625	25	%	$	29	$	618	25	%	$	—
Pacific	565		23		15		556		22		1
Mountain	262		11		12		275		11		11
East North Central	255		10		3		247		10		—
West North Central	216		9		—		224		9		1
Middle Atlantic	198		8		6		217		9		—
West South Central	159		6		4		173		7		2
New England	135		5		1		130		5		—
East South Central	66		3		2		65		2		—
	2,481		100	%	$	72	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,455					$	2,473

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

	December 31, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
Retail	$	822	33	%	$	41	$	825	33	%	$	2
Office	597		24		—		669		27		2
Industrial	449		18		9		455		18		1
Apartments	415		17		13		358		14		—
Mixed use	42		2		—		42		2		—
Hotel	36		1		—		51		2		—
Other	120		5		9		105		4		10
	2,481		100	%	$	72	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,455					$	2,473

Residential Mortgage Loans

In October 2012, the Company purchased $954 million of residential mortgage loans at fair value from an affiliate, Ameriprise Bank, FSB.  The purchase price takes into account the credit quality of the loan portfolio resulting in no allowance for loan losses recorded at purchase. The Company considers the credit worthiness of borrowers (FICO score), collateral characteristics such as LTV and geographic concentration to determine when an amount for an allowance for loan losses for residential mortgage loans is appropriate.  At a minimum, management will update FICO scores and LTV ratios semiannually.

As of December 31, 2012, approximately 3% of residential mortgage loans had FICO scores below 640.  At December 31, 2012, approximately 7% of the Company’s residential mortgage loans had LTV ratios greater than 90%.  The Company’s most significant geographic concentration for residential mortgage loans is in California representing 38% of the portfolio as of December 31, 2012.  No other state represents more than 10% of the total residential mortgage loan portfolio. At December 31, 2012, the Company had $627 million of funding commitments for residential mortgage loans.

Syndicated Loans

The Company’s syndicated loan portfolio is diversified across industries and issuers.  The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication. Total nonperforming syndicated loans at December 31, 2012 and 2011 were $2 million and $1 million, respectively.

Troubled Debt Restructurings

The following table presents the number of loans restructured by the Company during the period and their recorded investment at the end of the period:

	Years Ended December 31,
	2012			2011
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(in millions, except number of loans)
Commercial mortgage loans	4	$	13	10	$	49
Syndicated loans	2	1		—	—
Total	6	$	14	10	$	49

The troubled debt restructurings did not have a material impact to the Company’s allowance for loan losses or income recognized for the years ended December 31, 2012 and 2011. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.

7.Deferred Acquisition Costs and Deferred Sales Inducement Costs

The Company retrospectively adopted a new accounting standard for DAC in the first quarter of 2012. See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In the third quarter of the year, management conducts its annual review of insurance and annuity valuation assumptions relative to current experience and management expectations. To the extent that expectations change as a result of this review, management updates valuation assumptions. The impact in the third quarter of 2012 and 2011 primarily reflected the low interest rate environment and for 2012, the assumption of continued low interest rates over the near-term. As part of the third quarter 2010 process, management extended the projection periods used for its annuity products and revised client asset value growth rates assumed for variable annuity and VUL contracts.

The balances of and changes in DAC (subsequent to the adjustment for the new accounting standard) were as follows:

	2012			2011			2010
	(in millions)
Balance at January 1	$	2,413		$	2,521		$	2,349
Capitalization of acquisition costs	253			282			295
Amortization, excluding the impact of valuation assumptions review	(214		)	(305		)	(227		)
Amortization, impact of valuation assumptions review	(11		)	(31		)	174
Impact of change in net unrealized securities gains	(68		)	(54		)	(70		)
Balance at December 31	$	2,373		$	2,413		$	2,521

The balances of and changes in DSIC were as follows:

	2012			2011			2010
	(in millions)
Balance at January 1	$	464		$	545		$	524
Capitalization of sales inducement costs	7			9			35
Amortization, excluding the impact of valuation assumptions review	(45		)	(70		)	(49		)
Amortization, impact of valuation assumptions review	(13		)	(11		)	52
Impact of change in net unrealized securities gains	(9		)	(9		)	(17		)
Balance at December 31	$	404		$	464		$	545

8.Reinsurance

Generally, the Company currently reinsures 90% of the death benefit liability related to almost all individual fixed and variable universal life and term life insurance products.  As a result, the Company typically retains and is at risk for, at most, 10% of each policy’s death benefit from the first dollar of coverage for new sales of these policies, subject to the reinsurers fulfilling their obligations.  RiverSource Life Insurance Company began reinsuring risks at this level in 2001 (RiverSource Life of NY began in 2002) for term life insurance and 2002 (2003 for RiverSource Life of NY) for individual fixed and variable universal life insurance.  Policies issued prior to these dates are not subject to these same reinsurance levels.  Generally, the maximum amount of life insurance risk retained by the Company is $1.5 million on a single life and $1.5 million on any flexible premium survivorship life policy.  Risk on fixed and variable universal life policies is reinsured on a yearly renewable term basis.  Risk on most term life policies starting in 2001 (2002 for RiverSource Life of NY) is reinsured on a coinsurance basis, a type of reinsurance in which the reinsurer participates proportionally in all material risks and premiums associated with a policy.

For existing LTC policies, the Company ceded 50% of the risk on a coinsurance basis to subsidiaries of Genworth Financial, Inc. (“Genworth”) and retained the remaining risk.  For RiverSource Life of NY, this reinsurance arrangement applies for 1996 and later issues only.

The Company also has life insurance and fixed annuity risk previously assumed under reinsurance arrangements with unaffiliated insurance companies.

Generally, the Company retains at most $5,000 per month of risk per life on DI policies sold on policy forms introduced in most states in October 2007 (August 2010 for RiverSource Life of NY) and reinsures the remainder of the risk on a coinsurance basis with unaffiliated reinsurance companies.  The Company retains all risk for new claims on DI contracts sold on other policy forms.  The Company also retains all risk on accidental death benefit claims and substantially all risk associated with waiver of premium provisions.

At December 31, 2012 and 2011, traditional life and universal life insurance in force aggregated $191.4 billion and $191.2 billion, respectively, of which $138.6 billion and $136.2 billion were reinsured at the respective year ends.  Life insurance in force is reported on a statutory basis.

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RIVERSOURCE LIFE INSURANCE COMPANY

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The effect of reinsurance on premiums was as follows:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Direct premiums	$	656		$	707		$	681
Reinsurance ceded	(214		)	(214		)	(192		)
Net premiums	$	442		$	493		$	489

Policy and contract charges are presented on the Consolidated Statements of Income net of $84 million, $71 million and $67 million of reinsurance ceded for the years ended December 31, 2012, 2011 and 2010, respectively.

Reinsurance recovered from reinsurers was $196 million, $189 million and $166 million for the years ended December 31, 2012, 2011 and 2010, respectively.  Reinsurance contracts do not relieve the Company from its primary obligation to policyholders.

Reinsurance recoverables include approximately $1.6 billion and $1.5 billion related to LTC risk ceded to Genworth as of December 31, 2012 and 2011, respectively.  Included in future policy benefits is $615 million and $629 million related to assumed reinsurance arrangements as of December 31, 2012 and 2011, respectively.

9. Future Policy Benefits, Policy Claims and Other Policyholders’ Funds and Separate Account Liabilities

The Company retrospectively adopted a new accounting standard for DAC in the first quarter of 2012.  See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

Future policy benefits (subsequent to the adjustment for the new accounting standard) and policy claims and other policyholders’ funds consisted of the following:

	December 31,
	2012		2011
	(in millions)
Fixed annuities	$	16,075	$	16,401
EIA accumulated host values	31		58
EIA embedded derivatives	2		2
Variable annuity fixed sub-accounts	4,843		4,852
Variable annuity GMWB	799		1,377
Variable annuity GMAB	103		237
Other variable annuity guarantees	13		14
Total annuities	21,866		22,941
VUL/UL insurance	2,760		2,662
IUL accumulated host values	59		4
IUL embedded derivatives	45		3
VUL/UL insurance additional liabilities	294		220
Other life, DI and LTC insurance	5,646		5,339
Total future policy benefits	30,670		31,169
Policy claims and other policyholders’ funds	132		121
Total future policy benefits and policy claims and other policyholders’ funds	$	30,802	$	31,290

Separate account liabilities consisted of the following:

	December 31,
	2012		2011
	(in millions)
Variable annuity variable sub-accounts	$	63,302	$	57,556
VUL insurance variable sub-accounts	6,051		5,575
Other insurance variable sub-accounts	42		43
Total	$	69,395	$	63,174

Fixed Annuities

Fixed annuities include both deferred and payout contracts.  Deferred contracts offer a guaranteed minimum rate of interest and security of the principal invested.  Payout contracts guarantee a fixed income payment for life or the term of the contract.  The Company generally invests the proceeds from the annuity payments in fixed rate securities.  The Company

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

may hedge the interest rate risks related to fixed annuities with derivative instruments. As of December 31, 2012 and 2011, there were no outstanding derivatives to hedge these risks.

Equity Indexed Annuities

The Index 500 Annuity, the Company’s EIA product, is a single premium deferred fixed annuity.  The contract is issued with an initial term of seven years and interest earnings are linked to the S&P 500 Index.  This annuity has a minimum interest rate guarantee of 3% on 90% of the initial premium, adjusted for any surrenders.  The Company generally invests the proceeds from the annuity deposits in fixed rate securities and hedges the equity risk with derivative instruments. See Note 16 for additional information regarding the Company’s derivative instruments.  In 2007, the Company discontinued new sales of EIAs.

Variable Annuities

Purchasers of variable annuities can select from a variety of investment options and can elect to allocate a portion to a fixed account.  A vast majority of the premiums received for variable annuity contracts are held in separate accounts where the assets are held for the exclusive benefit of those contractholders.

Most of the variable annuity contracts issued by the Company contain one or more guaranteed benefits, including GMWB, GMAB, GMDB and GGU provisions.  The Company previously offered contracts with GMIB provisions. See Note 2 and Note 10 for additional information regarding the Company’s variable annuity guarantees. The Company does not currently hedge its risk under the GMDB, GGU and GMIB provisions.  See Note 16 for additional information regarding derivative instruments used to hedge risks related to GMWB and GMAB provisions.

Insurance Liabilities

VUL/UL is the largest group of insurance policies written by the Company.  Purchasers of VUL can select from a variety of investment options and can elect to allocate a portion to a fixed account or a separate account.  A vast majority of the premiums received for VUL policies are held in separate accounts where the assets are held for the exclusive benefit of those policyholders.  In 2011, the Company began offering IUL insurance.  IUL is similar to UL in that it provides life insurance coverage and cash value that increases as a result of credited interest. Also, like UL, there is a minimum guaranteed credited rate of interest. Unlike UL, the rate of credited interest above the minimum guarantee for funds allocated to the indexed account is linked to the S&P 500 Index (subject to a cap). The policyholder may allocate all or a portion of the policy value to a fixed or indexed account.  The Company also offers term and whole life insurance as well as disability products.  The Company no longer offers standalone LTC products but has in force policies from prior years.  Insurance liabilities include accumulation values, unpaid reported claims, incurred but not reported claims and obligations for anticipated future claims.

Portions of the Company’s fixed and variable universal life policies have product features that result in profits followed by losses from the insurance component of the policy. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the policy.  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.

10.Variable Annuity and Insurance Guarantees

The majority of the variable annuity contracts offered by the Company contain GMDB provisions.  The Company also offers variable annuities with GGU, GMWB and GMAB provisions.  The Company previously offered contracts containing GMIB provisions.  See Note 2 and Note 9 for additional information regarding the Company’s variable annuity guarantees.

The GMDB provisions provide a specified minimum return upon death of the contractholder.  The death benefit payable is the greater of (i) the contract value less any purchase payment credits subject to recapture and less a pro-rata portion of any rider fees, or (ii) the GMDB provisions specified in the contract.  The Company has three primary GMDB provisions:

·Return of premium — provides purchase payments minus adjusted partial surrenders.

·Reset — provides that the value resets to the account value every sixth contract anniversary minus adjusted partial surrenders.  This provision was often provided in combination with the return of premium provision and is no longer offered.

·Ratchet — provides that the value ratchets up to the maximum account value at specified anniversary intervals, plus subsequent purchase payments less adjusted partial surrenders.

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RIVERSOURCE LIFE INSURANCE COMPANY

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The variable annuity contracts with GMWB riders typically have account values that are based on an underlying portfolio of mutual funds, the values of which fluctuate based on fund performance.  At issue, the guaranteed amount is equal to the amount deposited but the guarantee may be increased annually to the account value (a “step-up”) in the case of favorable market performance.

The Company has GMWB riders in force, which contain one or more of the following provisions:

·Withdrawals at a specified rate per year until the amount withdrawn is equal to the guaranteed amount.

·Withdrawals at a specified rate per year for the life of the contractholder (“GMWB for life”).

·Withdrawals at a specified rate per year for joint contractholders while either is alive.

·Withdrawals based on performance of the contract.

·Withdrawals based on the age withdrawals begin.

·Once withdrawals begin, the contractholder’s funds are moved to one of the three least aggressive asset allocation models.

·Credits are applied annually for a specified number of years to increase the guaranteed amount as long as withdrawals have not been taken.

Variable annuity contractholders age 79 or younger at contract issue can also obtain a principal-back guarantee by purchasing the optional GMAB rider for an additional charge.  The GMAB rider guarantees that, regardless of market performance at the end of the 10-year waiting period, the contract value will be no less than the original investment or 80% of the highest anniversary value, adjusted for withdrawals.  If the contract value is less than the guarantee at the end of the 10 year period, a lump sum will be added to the contract value to make the contract value equal to the guarantee value.

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:

	December 31, 2012							December 31, 2011
Variable Annuity Guarantees by Benefit Type (1)	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age
	(in millions, except age)
GMDB:
Return of premium	$	45,697	$	43,942	$	61	63	$	40,011	$	38,275	$	382	63
Five/six-year reset	11,233		8,722		115		63	11,631		9,118		350		63
One-year ratchet	7,367		6,933		106		65	7,233		6,777		479		64
Five-year ratchet	1,616		1,563		3		61	1,472		1,418		25		61
Other	912		885		62		68	759		732		93		68
Total — GMDB	$	66,825	$	62,045	$	347	63	$	61,106	$	56,320	$	1,329	63
GGU death benefit	$	958	$	907	$	93	63	$	920	$	868	$	78	63
GMIB	$	425	$	399	$	72	66	$	463	$	433	$	106	65
GMWB:
GMWB	$	3,898	$	3,880	$	34	66	$	3,887	$	3,868	$	236	65
GMWB for life	28,588		28,462		263		64	23,756		23,625		863		64
Total — GMWB	$	32,486	$	32,342	$	297	64	$	27,643	$	27,493	$	1,099	64
GMAB	$	3,773	$	3,762	$	5	57	$	3,516	$	3,509	$	63	56

(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.

(2)Represents the current guaranteed benefit amount in excess of the current contract value.  GMIB, GMWB and GMAB benefits are subject to waiting periods and payment periods specified in the contract.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

	GMDB & GGU			GMIB			GMWB			GMAB			UL
	(in millions)
Balance at January 1, 2010	$	6		$	6		$	204		$	100		$	15
Incurred claims	17			3			133			4			59
Paid claims	(18		)	(1		)	—			—			(6		)
Balance at December 31, 2010	5			8			337			104			68
Incurred claims	10			2			1,040			133			53
Paid claims	(10		)	(1		)	—			—			(10		)
Balance at December 31, 2011	5			9			1,377			237			111
Incurred claims	6			1			(578		)	(134		)	57
Paid claims	(7		)	(1		)	—			—			(13		)
Balance at December 31, 2012	$	4		$	9		$	799		$	103		$	155

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:

	December 31,
	2012		2011
	(in millions)
Mutual funds:
Equity	$	32,054	$	30,738
Bond	26,165		23,862
Other	3,991		1,969
Total mutual funds	$	62,210	$	56,569

No gains or losses were recognized on assets transferred to separate accounts for the years ended December 31, 2012, 2011 and 2010.

11.Lines of Credit

RiverSource Life Insurance Company, as the borrower, had an outstanding balance at December 31, 2012 and 2011 of $150 million and $300 million, respectively, under a revolving credit agreement with Ameriprise Financial as the lender.  The aggregate amount outstanding under the line of credit may not exceed $800 million at any time.  Prior to January 1, 2012, the interest rate for any borrowing under the agreement was established by reference to LIBOR plus 115 basis points.  In January 2012, an amendment to this agreement decreased the interest rate to LIBOR plus 90 basis points, subject to adjustment based on debt ratings of the senior unsecured debt of Ameriprise Financial. Amounts borrowed may be repaid at any time with no prepayment penalty.

The Company has a revolving credit agreement with Ameriprise Financial as the lender aggregating $200 million.  Prior to August 1, 2012, the interest rate for any borrowings is established by reference to LIBOR.  In August 2012, an amendment to this agreement increased the interest rate to LIBOR plus 90 basis points, subject to adjustment based on debt ratings of the senior unsecured debt of Ameriprise Financial. There were no amounts outstanding on this line of credit at December 31, 2012 and 2011.

In December 2009, RiverSource Life Insurance Company, as the lender, entered into a revolving credit agreement with Ameriprise Financial as the borrower.  This line of credit is not to exceed 3% of RiverSource Life Insurance Company’s statutory admitted assets as of the prior year end.  Prior to January 1, 2012, the interest rate for any borrowing was established by reference to LIBOR plus 115 basis points.  In January 2012, an amendment to this agreement decreased the interest rate to LIBOR plus 90 basis points, subject to adjustment based on debt ratings of the senior unsecured debt of Ameriprise Financial. In the event of default, an additional 1% interest will accrue during such period of default.  There were no amounts outstanding on this revolving credit agreement as of December 31, 2012 and 2011.

12.Borrowings under Repurchase Agreements

The Company enters into repurchase agreements in exchange for cash which it accounts for as secured borrowings.  The Company has pledged Available-for-Sale securities consisting of agency residential mortgage backed securities and commercial mortgage backed securities to collateralize its obligation under the repurchase agreements. The fair value of

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

the securities pledged is recorded in investments and was $518 million and $521 million at December 31, 2012 and 2011, respectively. The amount of the Company’s liability including accrued interest as of December 31, 2012 and 2011 was $501 million and $504 million, respectively.  The weighted average annualized interest rate on the repurchase agreements held as of December 31, 2012 and 2011 was 0.4% and 0.3%, respectively.

13.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 1Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date.

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

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

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

	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,387	$	1,654	$	17,041
Residential mortgage backed securities	—		3,598		23		3,621
Commercial mortgage backed securities	—		2,834		170		3,004
State and municipal obligations	—		1,122		—		1,122
Asset backed securities	—		715		156		871
Foreign government bonds and obligations	—		224		—		224
U.S. government and agencies obligations	10		39		—		49
Total Available-for-Sale securities: Fixed maturities	10		23,919		2,003		25,932
Common stocks	2		2		—		4
Cash equivalents	—		264		—		264
Other assets:
Interest rate derivative contracts	—		2,191		—		2,191
Equity derivative contracts	285		936		—		1,221
Foreign currency derivative contracts	—		6		—		6
Total other assets	285		3,133		—		3,418
Separate account assets	—		69,395		—		69,395
Total assets at fair value	$	297	$	96,713	$	2,003	$	99,013
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		45		—		45
GMWB and GMAB embedded derivatives	—		—		833		833
Total future policy benefits	—		47		833		880		(1)
Other liabilities:
Interest rate derivative contracts	—		1,486		—		1,486
Equity derivative contracts	258		1,535		—		1,793
Total other liabilities	258		3,021		—		3,279
Total liabilities at fair value	$	258	$	3,068	$	833	$	4,159

(1)The Company’s adjustment for nonperformance risk resulted in a $389 million cumulative decrease to the embedded derivative liability.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,076	$	1,342	$	16,418
Residential mortgage backed securities	—		4,310		58		4,368
Commercial mortgage backed securities	—		3,615		16		3,631
State and municipal obligations	—		1,096		—		1,096
Asset backed securities	—		716		133		849
Foreign government bonds and obligations	—		144		—		144
U.S. government and agencies obligations	10		47		—		57
Other structured investments	—		—		14		14
Total Available-for-Sale securities: Fixed maturities	10		25,004		1,563		26,577
Common stocks	1		1		—		2
Trading securities	—		25		—		25
Cash equivalents	—		809		—		809
Other assets:
Interest rate derivative contracts	—		1,801		—		1,801
Equity derivative contracts	274		1,041		—		1,315
Credit derivative contracts	—		1		—		1
Foreign currency derivative contracts	—		7		—		7
Total other assets	274		2,850		—		3,124
Separate account assets	—		63,174		—		63,174
Total assets at fair value	$	285	$	91,863	$	1,563	$	93,711
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		3		—		3
GMWB and GMAB embedded derivatives	—		—		1,585		1,585
Total future policy benefits	—		5		1,585		1,590		(1)
Other liabilities:
Interest rate derivative contracts	—		1,198		—		1,198
Equity derivative contracts	297		734		—		1,031
Foreign currency derivative contracts	—		10		—		10
Total other liabilities	297		1,942		—		2,239
Total liabilities at fair value	$	297	$	1,947	$	1,585	$	3,829

(1)The Company’s adjustment for nonperformance risk resulted in a $506 million cumulative decrease to the embedded derivative liability.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

	Available-for-Sale Securities: Fixed Maturities																		Future Policy Benefits:
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments			Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2012	$	1,342		$	58		$	16		$	133		$	14		$	1,563		$	(1,585	)
Total gains (losses) included in:
Net income	(1		)	(7		)	1			1			—			(6		)(1)	948		(2)
Other comprehensive income	12			10			7			2			1			32			—
Purchases	444			31			8			—			—			483			—
Sales	—			—			—			—			—			—			—
Issues	—			—			—			—			—			—			(188		)
Settlements	(153		)	(12		)	—			(2		)	—			(167		)	(8		)
Transfers into Level 3	10			25			146			22			—			203			—
Transfers out of Level 3	—			(82		)	(8		)	—			(15		)	(105		)	—
Balance, December 31, 2012	$	1,654		$	23		$	170		$	156		$	—		$	2,003		$	(833	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2012 included in:
Net investment income	$	(1	)	$	—		$	1		$	1		$	—		$	1		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			908

(1)Represents a $7 million loss included in net realized investment gains (losses) and a $1 million gain included in net investment income in the Consolidated Statements of Income.

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

	Available-for-Sale Securities: Fixed Maturities																		Future Policy Benefits:
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments			Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2011	$	1,317		$	2,697		$	30		$	148		$	13		$	4,205		$	(421	)
Total gains (losses) included in:
Net income	7			49			—			2			1			59		(1)	(1,007		)(2)
Other comprehensive income	12			(75		)	—			(6		)	(2		)	(71		)	—
Purchases	178			26			71			—			3			278			—
Sales	(50		)	(3		)	—			—			—			(53		)	—
Issues	—			—			—			—			—			—			(149		)
Settlements	(117		)	(471		)	—			(3		)	(1		)	(592		)	(8		)
Transfers into Level 3	7			—			1			—			—			8			—
Transfers out of Level 3	(12		)	(2,165		)	(86		)	(8		)	—			(2,271		)	—
Balance, December 31, 2011	$	1,342		$	58		$	16		$	133		$	14		$	1,563		$	(1,585	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2011 included in:
Net investment income	$	—		$	—		$	—		$	1		$	—		$	1		$	—
Net realized investment gains (losses)	—			(23		)	—			—			1			(22		)	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			(1,035		)

(1)Represents a $26 million loss included in net realized investment gains (losses) and an $85 million gain included in net investment income in the Consolidated Statements of Income.

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

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	Available-for-Sale Securities: Fixed Maturities																Future Policy Benefits:
	Corporate Debt Securities		Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments		Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2010	$	1,239	$	2,868		$	72		$	119		$	11	$	4,309		$	(299	)
Total gains (losses) included in:
Net income	1		55			1			5			2		64		(1)	4		(2)
Other comprehensive income	30		202			10			10			—		252			—
Purchases, sales, issues and settlements, net	22		(428		)	91			27			—		(288		)	(126		)
Transfers into Level 3	25		—			—			—			—		25			—
Transfers out of Level 3	—		—			(144		)	(13		)	—		(157		)	—
Balance, December 31, 2010	$	1,317	$	2,697		$	30		$	148		$	13	$	4,205		$	(421	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2010 included in:
Net investment income	$	—	$	79		$	—		$	4		$	—	$	83		$	—
Net realized investment gains (losses)	—		(26		)	—			—			—		(26		)	—
Benefits, claims, losses and settlement expenses	—		—			—			—			—		—			(15		)

(1)Represents a $21 million loss included in net realized investment gains (losses) and an $85 million gain included in net investment income in the Consolidated Statements of Income.

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

The impact to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its GMWB and GMAB embedded derivatives was $(82) million, $216 million and $36 million, net of DAC and DSIC amortization, for the years ended December 31, 2012, 2011 and 2010, respectively.

During the years ended December 31, 2012 and 2011, transfers from Level 3 to Level 2 included certain non-agency residential mortgage backed securities with a fair value of approximately $58 million and $2.2 billion, respectively.  The transfers reflect improved pricing transparency of these securities, a continuing trend of increased activity in the non-agency residential mortgage backed securities market and observability of significant inputs to the valuation methodology.  All other securities transferred from Level 3 to Level 2 represent securities with fair values that are now obtained from a third party pricing service with observable inputs. Securities transferred from Level 2 to Level 3 represent securities with fair values that are now based on a single non-binding broker quote. The Company recognizes transfers between levels of the fair value hierarchy as of the beginning of the quarter in which each transfer occurred.  For assets and liabilities held at the end of the reporting periods that are measured at fair value on a recurring basis, there were no transfers between Level 1 and Level 2.

The following table provides 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 at December 31, 2012:

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,624	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1% – 8.5% (2.2%)
GMWB and GMAB embedded derivatives	$	833	Discounted cash flow	Utilization of guaranteed withdrawals(1)	0.0% – 56.4%
				Surrender rate	0.0% – 56.3%
				Market volatility(2)	5.6% – 21.2%
				Nonperformance risk(3)	97 bps

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

(2)Market volatility is implied volatility of fund of funds.

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

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

Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs

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 result in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in utilization and volatility used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in surrender rate and nonperformance risk used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would result in a significantly lower (higher) fair value measurement. 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 system and whether the value of the guaranteed benefit exceeds the contract accumulation value.

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 highly liquid investments with original maturities of 90 days or less. 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.

Available-for-Sale 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.  Level 1 securities include U.S. Treasuries.  Level 2 securities include corporate bonds, residential mortgage backed securities, commercial mortgage backed securities, municipal bonds, asset backed securities and U.S. agency 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.

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.

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Separate Account Assets

The fair value of assets held by separate accounts is determined by the net asset value (“NAV”) of the funds in which those separate accounts are invested. The NAV represents the exit price for the separate account. Separate account assets are classified as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information.

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 fair value of derivatives that are traded in less active over-the-counter (“OTC”)  markets are 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 and the majority of options.  The counterparties’ nonperformance risk associated with uncollateralized derivative assets was immaterial at December 31, 2012 and 2011.  See Note 16 for further information on the credit risk of derivative instruments and related collateral.

Liabilities

Future Policy Benefits

The Company values the embedded derivative liability attributable to the provisions of certain variable annuity riders using internal valuation models.  These models calculate fair value by discounting expected cash flows from benefits plus margins for profit, risk and expenses less embedded derivative fees.  The projected cash flows used by these models include observable capital market assumptions and incorporate significant unobservable inputs related to contractholder behavior assumptions, implied volatility and margins for risk, profit and expenses that the Company believes an exit market participant would expect.  The fair value of these embedded derivatives also reflects a current estimate of the Company’s nonperformance risk specific to these liabilities.  Given the significant unobservable inputs to this valuation, these measurements are classified as Level 3.  The embedded derivative liability attributable to these provisions is recorded in future policy benefits.

The Company’s Corporate Actuarial Department calculates the fair value of the GMWB and GMAB embedded derivatives on a monthly basis. During this process, control checks are performed to validate the completeness of the data. Actuarial management approves various components of the valuation along with the final results. The change in the fair value of the embedded derivatives is reviewed monthly with senior management. The Level 3 inputs into the valuation are consistent with the pricing assumptions and updated as experience develops.  Significant unobservable inputs that reflect policyholder behavior are reviewed quarterly along with other valuation assumptions.

The Company uses various Black-Scholes calculations to determine the fair value of the embedded derivative liability associated with the provisions of its EIA and IUL products.  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 fair value of derivatives that are traded in less active OTC markets are 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 and the majority of options. The Company’s nonperformance risk associated with uncollateralized derivative liabilities was immaterial at December 31, 2012 and 2011.  See Note 16 for further information on the credit risk of derivative instruments and related collateral.

During the reporting periods, there were no material assets or liabilities measured at fair value on a nonrecurring basis.

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The following table provides the carrying value and the estimated fair value of financial instruments that are not reported at fair value. All other financial instruments that are reported at fair value have been included above in the table with balances of assets and liabilities measured at fair value on a recurring basis.

	December 31, 2012										December 31, 2011
	Carrying		Fair Value								Carrying		Fair
	Value		Level 1		Level 2		Level 3		Total		Value		Value
	(in millions)
Financial Assets
Mortgage loans, net	$	3,389	$	—	$	—	$	3,568	$	3,568	$	2,473	$	2,650
Policy loans	752		—		—		725		725		739		713
Other investments	309		—		292		24		316		308		311
Restricted cash	86		86		—		—		86		26		26
Financial Liabilities
Future policy benefits	$	14,701	$	—	$	—	$	15,982	$	15,982	$	15,064	$	16,116
Separate account liabilities	360		—		360		—		360		345		345
Line of credit with Ameriprise Financial	150		—		—		150		150		300		300
Borrowings under repurchase agreements	501		—		500		—		500		504		502
Other liabilities	144		—		—		142		142		267		263

Mortgage Loans, Net

The fair value of commercial mortgage loans, except those with significant credit deterioration, is determined by discounting contractual cash flows using discount rates that reflect current pricing for loans with similar remaining maturities and characteristics including loan-to-value ratio, occupancy rate, refinance risk, debt-service coverage, location, and property condition.  For commercial mortgage loans with significant credit deterioration, fair value is determined using the same adjustments as above with an additional adjustment for the Company’s estimate of the amount recoverable on the loan.

The fair value of residential mortgage loans is determined by discounting estimated cash flows and incorporating adjustments for prepayment, administration expenses, severity and credit loss estimates, with discount rates based on the Company’s estimate of current market conditions.

Given the significant unobservable inputs to the valuation of mortgage loans, these measurements are classified as Level 3.

Policy Loans

The fair value of policy loans is determined using discounted cash flows and are classified as Level 3 as the discount rate used may be adjusted for the underlying performance of individual policies.

Other Investments

Other investments primarily consist of syndicated loans and an investment in Federal Home Loan Bank of Des Moines (“FHLB”).  The fair value of syndicated loans is obtained from a third party service or non-binding broker quotes.  Syndicated loans that are priced by multiple non-binding broker quotes are classified as Level 2 and syndicated loans priced using a single non-binding broker quote are classified as Level 3.  The fair value of the investment in FHLB is approximated by the carrying value and classified as Level 3 due to restrictions on transfer or lack of liquidity.

Restricted Cash

Restricted cash is generally set aside for specific business transactions and restrictions are specific to the Company and do not transfer to third party market participants; therefore, the carrying amount is a reasonable estimate of fair value. The fair value of restricted cash is classified as Level 1.

Future Policy Benefits

The fair value of fixed annuities, in deferral status, is determined by discounting cash flows using a risk neutral discount rate with adjustments for profit margin, expense margin, early policy surrender behavior, a provision for adverse deviation from estimated early policy surrender behavior and the Company’s nonperformance risk specific to these liabilities.  The fair value of other liabilities including non-life contingent fixed annuities in payout status, EIA host contracts and the fixed

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portion of a small number of variable annuity contracts classified as investment contracts is determined in a similar manner.  Given the use of significant unobservable inputs to these valuations, the measurements are classified as Level 3.

Separate Account Liabilities

Certain separate account liabilities are classified as investment contracts and are carried at an amount equal to the related separate account assets.  The NAV of the related separate account assets represents the exit price for the separate account liabilities. Separate account liabilities are classified as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information. A nonperformance adjustment is not included as the related separate account assets act as collateral for these liabilities and minimize nonperformance risk.

Line of Credit with Ameriprise Financial

The fair value of the line of credit is determined by discounting cash flows with an adjustment for the Company’s nonperformance risk specific to this liability.  The fair value of the line of credit is classified as Level 3.

Borrowings under Repurchase Agreements

The fair value of borrowings under agreements to repurchase is obtained from a third party pricing service. A nonperformance adjustment is not included as collateral requirements for these borrowings minimize the nonperformance risk.  The fair value of borrowings under agreements to repurchase is classified as Level 2.

Other Liabilities

Other liabilities consist of future funding commitments to affordable housing partnerships.  The fair value of these future funding commitments is determined by discounting cash flows and is classified as Level 3 as the discount rate is adjusted.

14.Related Party Transactions

Columbia Management Investment Advisers, LLC is the investment manager for the proprietary mutual funds used as investment options by the Company’s variable annuity contractholders and variable life insurance policyholders.  The Company provides all fund management services, other than investment management, and is compensated for the administrative services it provides.  For the years ended December 31, 2012, 2011 and 2010, the Company received $244 million, $222 million and $136 million, respectively, from Columbia Management Investment Advisers, LLC for these services.

Charges by Ameriprise Financial and affiliated companies to the Company for use of joint facilities, technology support, marketing services and other services aggregated $477 million, $530 million and $527 million for 2012, 2011 and 2010, respectively.  Certain of these costs are included in DAC.  Expenses allocated to the Company may not be reflective of expenses that would have been incurred by the Company on a stand-alone basis.

Dividends paid and received by RiverSource Life Insurance Company were as follows:

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Cash dividends paid to Ameriprise Financial	$	865	$	750	$	500
Non-cash dividends paid to Ameriprise Financial	—		850		—
Cash dividends received from RiverSource Life of NY	50		79		28
Cash dividends received from RTA	—		53		63

Notifications to state insurance regulators were made in advance of payments of dividends for amounts in excess of statutorily defined thresholds.  See Note 15 for additional information.

During 2012 and 2011, RiverSource Life Insurance Company made cash contributions to RTA of $53 million and $111 million, respectively, for ongoing funding commitments related to affordable housing partnership investments.

In October 2012, the Company purchased $954 million of residential mortgage loans from an affiliate, Ameriprise Bank, FSB.   The Company purchased the loans for investment purposes and as part of Ameriprise Financial’s initiative to transition Ameriprise Bank, FSB from a federal savings bank to a limited powers national trust bank.  The portfolio consists primarily of variable rate revolving loans, and includes both first and second liens.  The loans were purchased by the Company at fair value.  See Note 6 for additional information.

During 2010, the Company received a non-cash capital contribution of $14 million comprised of affordable housing partnership investments from Ameriprise Financial.

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Beginning in 2010, the Company’s taxable income was included in the consolidated federal income tax return of Ameriprise Financial.  Net amount due to Ameriprise Financial for federal income taxes were $17 million at December 31, 2012. Net amount due from Ameriprise Financial for federal income taxes were $86 million at December 31, 2011.

15.Statutory Capital and Surplus

State insurance statutes contain limitations as to the amount of dividends or distributions that insurers may make without providing prior notification to state regulators.  For RiverSource Life Insurance Company, dividends or distributions in excess of unassigned surplus, as determined in accordance with accounting practices prescribed by the State of Minnesota, require advance notice to the Minnesota Department of Commerce, RiverSource Life Insurance Company’s primary regulator, and are subject to potential disapproval.  RiverSource Life Insurance Company’s statutory unassigned surplus aggregated $421 million and $(296) million as of December 31, 2012 and 2011, respectively.

In addition, dividends or distributions, whose fair market value, together with that of other dividends or distributions made within the preceding 12 months, exceed the greater of the previous year’s statutory net gain from operations or 10% of the previous year-end statutory capital and surplus are referred to as “extraordinary dividends.” Extraordinary dividends also require advance notice to the Minnesota Department of Commerce, and are subject to potential disapproval.

Statutory net gain from operations and net income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows:

	2012		2011			2010
	(in millions)
Statutory net gain (loss) from operations(1)	$	2,189	$	(475	)	$	1,200
Statutory net income (loss)(1)	1,976		(599		)	1,112
Statutory capital and surplus	3,113		2,681			3,735

(1)Statutory net gain (loss) from operations and statutory net income (loss) are significantly impacted by changes in reserves for variable annuity guaranteed benefits, however these impacts are substantially offset by unrealized gains (losses) on derivatives which are not included in statutory income but are recorded directly to surplus.

16.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 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.

Freestanding derivative instruments are recorded at fair value and are reflected in other assets or other liabilities. The Company’s policy on the recognition of derivatives on the Consolidated Balance Sheet is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement.

The following table presents the estimated fair value of the Company’s freestanding derivatives after considering the effect of master netting arrangements and collateral:

	December 31, 2012						December 31, 2011
	Net DerivativeAssets			Net DerivativeLiabilities			Net DerivativeAssets			Net DerivativeLiabilities
	(in millions)
Fair value of OTC derivatives after application of master netting agreements	$	646		$	603		$	861		$	129
Cash collateral on OTC derivatives	(262		)	(67		)	(613		)	(26		)
Fair value of OTC derivatives after application of master netting agreements and cash collateral	384			536			248			103
Securities collateral on OTC derivatives	(355		)	(532		)	(186		)	(95		)
Fair value of OTC derivatives after application of master netting agreements and cash and securities collateral	29			4			62			8
Fair value of exchange-traded derivatives	96			—			155			—
Total fair value of derivatives after application of master netting agreements and cash and securities collateral	$	125		$	4		$	217		$	8

In April 2012, the Financial Stability Oversight Council approved the final rule and interpretive guidance that provides the framework it will follow to determine if a nonbank financial company is a Systemically Important Financial Institution.

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The framework includes a three-stage process to help narrow down the pool of nonbank financial companies for review and possible designation. Stage 1 criteria include having at least $50 billion in assets and meeting one of five additional quantitative measures. One of the five thresholds is $3.5 billion of derivative liabilities after considering the effects of master netting arrangements and cash collateral held with the same counterparty. The following table presents the Company’s derivative liabilities as defined by the rule:

	December 31,
	2012		2011
	(in millions)
Fair value of OTC derivative liabilities after application of master netting agreements and cash collateral	$	536	$	103
Fair value of embedded derivative liabilities	880		1,590
Fair value of derivative liabilities after application of master netting agreements and cash collateral	$	1,416	$	1,693

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

		Asset					Liability
Derivatives not designated	Balance Sheet	December 31,					December 31,
as hedging instruments	Location	2012		2011		Balance Sheet Location	2012		2011
		(in millions)					(in millions)
GMWB and GMAB
Interest rate contracts	Other assets	$	2,191	$	1,801	Other liabilities	$	1,486	$	1,198
Equity contracts	Other assets	1,215		1,314		Other liabilities	1,792		1,031
Credit contracts	Other assets	—		1		Other liabilities	—		—
Foreign currency contracts	Other assets	6		7		Other liabilities	—		10
Embedded derivatives(1)	Not applicable	—		—		Future policy benefits	833		1,585
Total GMWB and GMAB		3,412		3,123			4,111		3,824
Other derivatives:
Equity
EIA embedded derivatives	Not applicable	—		—		Future policy benefits	2		2
IUL	Other assets	6		1		Other liabilities	1		—
IUL embedded derivatives	Not applicable	—		—		Future policy benefits	45		3
Total other		6		1			48		5
Total derivatives		$	3,418	$	3,124		$	4,159	$	3,829

(1)The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

See Note 13 for additional information regarding the Company’s fair value measurement of derivative instruments.

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The following table presents a summary of the impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income for the years ended December 31:

Derivatives not designated	Location of Gain (Loss) on	Amount of Gain (Loss) on Derivatives Recognized in Income
as hedging instruments	Derivatives Recognized in Income	2012			2011			2010
		(in millions)
GMWB and GMAB
Interest rate contracts	Benefits, claims, losses and settlement expenses	$	17		$	709		$	95
Equity contracts	Benefits, claims, losses and settlement expenses	(1,218		)	326			(370		)
Credit contracts	Benefits, claims, losses and settlement expenses	(2		)	(12		)	(44		)
Foreign currency contracts	Benefits, claims, losses and settlement expenses	(1		)	(2		)	—
Embedded derivatives(1)	Benefits, claims, losses and settlement expenses	752			(1,165		)	(121		)
Total GMWB and GMAB		(452		)	(144		)	(440		)
Other derivatives:
Interest rate
Tax hedge	Net investment income	1			—			—
Equity
GMDB	Benefits, claims, losses and settlement expenses	—			—			(4		)
EIA	Interest credited to fixed accounts	1			(1		)	2
EIA embedded derivatives	Interest credited to fixed accounts	1			1			7
IUL	Interest credited to fixed accounts	1			1			—
IUL embedded derivatives	Interest credited to fixed accounts	(4		)	(3		)	—
Total other		—			(2		)	5
Total derivatives		$	(452	)	$	(146	)	$	(435	)

(1)The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

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 and credit 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 Company economically hedges the exposure related to non-life contingent GMWB and GMAB provisions primarily using various futures, options, interest rate swaptions, interest rate swaps, total return swaps, variance swaps and credit default swaps.  At December 31, 2012 and 2011, the gross notional amount of derivative contracts for the Company’s GMWB and GMAB provisions was $142.1 billion and $104.7 billion, respectively.

The deferred premium associated with certain of the above options is paid or received semi-annually over the life of the option contract.  The following is a summary of the payments the Company is scheduled to make and receive for these options:

	Premiums Payable		Premiums Receivable
	(in millions)
2013	$	373	$	57
2014	348		55
2015	320		54
2016	289		46
2017	238		41
2018-2027	785		104

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

EIA and IUL 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 EIA and IUL products will positively or negatively impact earnings over the life of these products. As a means of economically hedging its obligations under the provisions of these products, the Company enters into index options and futures contracts. The gross notional amount of EIA derivative contracts was

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$10 million and $25 million at December 31, 2012 and 2011, respectively. The gross notional amount of IUL derivative contracts was $200 million and $12 million at December 31, 2012 and 2011, respectively.

Embedded Derivatives

Certain annuities contain GMAB and non-life contingent GMWB provisions, which are considered embedded derivatives.  In addition, the equity component of the EIA and IUL product obligations are also considered embedded derivatives.  These embedded derivatives are bifurcated from their host contracts and reported on the Consolidated Balance Sheets at fair value with changes in fair value reported in earnings.  As discussed above, the Company uses derivatives to mitigate the financial statement impact of these embedded derivatives.

Cash Flow Hedges

The Company has amounts classified in accumulated other comprehensive income related to gains and losses associated with the effective portion of previously designated cash flow hedges. The Company reclassifies these amounts into income as the forecasted transactions impact earnings. During the years ended December 31, 2012 and 2011, the Company held no derivatives that were designated as cash flow hedges.

At December 31, 2012, the Company expects to reclassify $6 million of deferred loss on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months that will be recorded in net investment income. These were originally losses on derivative instruments related to interest rate swaptions. During the years ended December 31, 2012 and 2011, no hedge relationships were discontinued due to forecasted transactions no longer being expected to occur according to the original hedge strategy.  For the years ended December 31, 2012, 2011 and 2010, the amount recognized in earnings on cash flow hedges due to ineffectiveness was $1 million, nil and nil, respectively.

The following table presents a rollforward of unrealized derivative losses related to cash flow hedges included in accumulated other comprehensive income:

	2012			2011			2010
	(in millions)
Net unrealized derivative losses at January 1	$	(26	)	$	(30	)	$	(34	)
Reclassification of realized losses(1)	7			6			6
Income tax benefit	(2		)	(2		)	(2		)
Net unrealized derivative losses at December 31	$	(21	)	$	(26	)	$	(30	)

(1)Loss reclassified from accumulated other comprehensive income to net investment income on the Consolidated Statements of Income.

Currently, the longest period of time over which the Company is hedging exposure to the variability in future cash flows is six years and relates to interest credited on forecasted fixed premium product sales.

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 arrangements and collateral arrangements whenever practical. As of December 31, 2012 and 2011, the Company held $262 million and $635 million, respectively, in cash and cash equivalents and recorded a corresponding liability in other liabilities for collateral the Company is obligated to return to counterparties.  As of December 31, 2012 and 2011, the Company had accepted additional collateral consisting of various securities with a fair value of $387 million and $186 million, respectively, which are not reflected on the Consolidated Balance Sheets.  As of December 31, 2012 and 2011, the Company’s maximum credit exposure related to derivative assets after considering netting arrangements with counterparties and collateral arrangements was approximately $29 million and $61 million, respectively.

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 financial strength rating (or based on the debt rating of the Company’s parent, Ameriprise Financial). Additionally, certain of the Company’s derivative contracts contain provisions that allow the counterparty to terminate the contract if the Company does not maintain a specific financial strength rating or Ameriprise Financial’s debt does not maintain a specific credit rating (generally an investment grade rating).  If these termination provisions were to be triggered, the Company’s counterparty could require immediate settlement of any net liability position. At December 31, 2012 and 2011, the aggregate fair value of derivative contracts in a net liability position containing such credit contingent provisions was $364 million and $106 million, respectively. The aggregate fair value of assets posted as collateral for such

84

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

instruments as of December 31, 2012 and 2011 was $360 million and $98 million, respectively. If the credit contingent provisions of derivative contracts in a net liability position at December 31, 2012 and 2011 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 $4 million and $8 million, respectively.

17.Income Taxes

The Company retrospectively adopted a new accounting standard for DAC in the first quarter of 2012. See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted. Prior period disclosures presented below have been retrospectively adjusted for the new accounting standard.

In 2012, the Company made a correction to tax expense primarily attributable to prior periods.  Management has determined that the effect of this correction is not material to the Consolidated Financial Statements for all current and prior periods presented. See Note 1 for additional information on this correction.

The Company qualifies as a life insurance company for federal income tax purposes.  As such, the Company is subject to the Internal Revenue Code provisions applicable to life insurance companies.  The Company provides for income taxes on a separate return basis, except that, under an agreement between Ameriprise Financial and the Company, tax benefits are recognized for losses to the extent they can be used in the consolidated return.  It is the policy of Ameriprise Financial that it will reimburse its subsidiaries for any tax benefits recorded.

The components of income tax provision were as follows:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Current income tax:
Federal	$	197		$	137		$	(167	)
State	7			3			3
Total current income tax	204			140			(164		)
Deferred income tax:
Federal	(38		)	51			360
State	(2		)	(1		)	(1		)
Total deferred income tax	(40		)	50			359
Total income tax provision	$	164		$	190		$	195

The principal reasons that the aggregate income tax provision is different from that computed by using the U.S. statutory rate of 35% are as follows:

	Years Ended December 31,
	2012		2011		2010
Tax at U.S. statutory rate	35.0	%	35.0	%	35.0	%
Changes in taxes resulting from:
Tax-exempt interest and dividend income	(9.7	)	(12.6	)	(7.8	)
State taxes, net of federal benefit	0.4		0.1		0.1
Low income housing credit	(4.7	)	(1.6	)	(1.6	)
Foreign tax credit, net of addback	(0.5	)	(1.6	)	(1.4	)
Taxes applicable to prior years	(2.5	)	—		(2.2	)
Other, net	2.1		(0.5	)	—
Income tax provision	20.1	%	18.8	%	22.1	%

The effective tax rates are lower than the statutory rate as a result of tax preferred items including the dividends received deduction, foreign tax credits and low income housing credits.  The change in the effective tax rate for the year ended December 31, 2012 is primarily due to a $32 million out-of-period correction of tax related to securities lending activities partially offset by increased low income housing tax credits.  See Note 1 for additional information on the out-of-period correction.

85

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred income tax assets and liabilities result from temporary differences between the assets and liabilities measured for GAAP reporting versus income tax return purposes.  The significant components of the Company’s deferred income tax assets and liabilities are reflected in the following table:

	December 31,
	2012			2011
	(in millions)
Deferred income tax assets:
Liabilities for future policy benefits	$	1,295		$	1,589
Investment related	161			—
Capital loss and tax credit carryforwards	5			30
State net operating losses	5			4
Gross deferred income tax assets	1,466			1,623
Less: valuation allowance	(5		)	(4		)
Total deferred income tax assets	1,461			1,619
Deferred income tax liabilities:
Deferred acquisition costs	677			639
Net unrealized gains on Available-for-Sale securities	676			501
Investment related	—			190
Deferred sales inducement costs	142			180
Other	29			49
Gross deferred income tax liabilities	1,524			1,559
Net deferred income tax assets (liabilities)	$	(63	)	$	60

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

	2012			2011			2010
	(in millions)
Balance at January 1	$	134		$	83		$	(77	)
Additions (reductions) based on tax positions related to the current year	1			(1		)	—
Additions for tax positions of prior years	19			79			322
Reductions for tax positions of prior years	(77		)	(7		)	(196		)
Settlements	(12		)	(20		)	34
Balance at December 31	$	65		$	134		$	83

The significant decrease in the amount of gross unrecognized tax benefits is a result of reaching an agreement with the Internal Revenue Service (“IRS”) on the treatment of certain items under audit.  If recognized, approximately $8 million, $12 million and $39 million, net of federal tax benefits, of unrecognized tax benefits as of December 31, 2012, 2011 and 2010, respectively, would affect the effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision.  The Company recognized a reduction of $3 million, an increase of $57 million and a reduction of $8 million in interest and penalties for the years ended December 31, 2012, 2011 and 2010, respectively.  At December 31, 2012 and 2011, the Company had a payable of $30 million and $33 million, respectively, related to accrued interest and penalties.

It is reasonably possible that the total amounts of unrecognized tax benefits will change in the next 12 months.  Based on the current audit position of the Company, it is estimated that the total amount of gross unrecognized tax benefits may decrease by $63 million in the next 12 months.

The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The IRS had previously completed its field examination of the 1997 through 2007 tax returns in recent years. However, for federal income tax purposes, these years except for 2007, continue to remain open as a consequence of certain issues under appeal.  The IRS is in the process of completing the audit of the Company’s income tax returns for 2008 and 2009 and began auditing 2010 and 2011 in the fourth quarter of 2012.  The Company or certain of its subsidiaries’ state income tax returns are currently under examination by various jurisdictions for years ranging from 1997 through 2009 and remain open for the years after 2009.

It is possible there will be corporate tax reform in the next few years.  While impossible to predict, corporate tax reform is likely to include a reduction in the corporate tax rate coupled with reductions in tax preferred items.  Any changes could have a material impact on the Company’s income tax expense and deferred tax balances.

86

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The items comprising other comprehensive income are presented net of the following income tax provision (benefit) amounts:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Net unrealized securities gains	$	161		$	89		$	181
Net unrealized derivative losses	(2		)	(2		)	(2		)
Net income tax provision	$	159		$	87		$	179

18.Commitments and Contingencies

At December 31, 2012 and 2011, the Company had no material commitments to purchase investments other than mortgage loan fundings. See Note 6 for additional information.

The Company’s annuity and life products all have minimum interest rate guarantees in their fixed accounts.  As of December 31, 2012, these guarantees range up to 5.0%.

Insurance companies have been the subject of increasing regulatory, legislative and judicial scrutiny.  Numerous state and federal regulatory agencies have commenced examinations and other inquiries of insurance companies regarding sales and marketing practices (including sales to older consumers and disclosure practices), claims handling, and unclaimed property and escheatment practices and procedures. With regard to an industry-wide investigation of unclaimed property and escheatment practices and procedures, the Company is responding to regulatory audits, market conduct examinations and other inquires (including inquiries from the States of Minnesota and New York and a multistate insurance department examination).  The Company has cooperated and will continue to cooperate with the applicable regulators regarding their inquiries.

The Company is involved in the normal course of business in a number of other legal and arbitration proceedings concerning matters arising in connection with the conduct of its business activities.  The Company believes that it is not a party to, nor are any of its properties the subject of, any pending legal, arbitration or regulatory investigation or proceeding that is likely to have a material adverse effect on its consolidated financial condition, results of operations or liquidity.  Notwithstanding the foregoing, it is possible that the outcome of any current or future legal, arbitration or regulatory proceeding could have a material impact on results of operations in any particular reporting period as the proceedings are resolved.

The Company is required by law to be a member of the guaranty fund association in every state where it is 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.  Uncertainty and volatility in the U.S. economy and financial markets in recent years have weakened the financial condition of numerous insurers, including insurers currently in receiverships, increasing the risk of triggering guaranty fund assessments.

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.

Executive Life Insurance Company of New York (“ELNY”) was placed into rehabilitation by a New York state court in 1991. On April 16, 2012, the court issued an order converting the rehabilitation into a liquidation proceeding under a plan submitted by the New York insurance regulator with support from NOLHGA and the industry.

During the second quarter of 2012, the Company established a liability for estimated guaranty fund assessments and a related premium tax asset, primarily associated with ELNY.  At December 31, 2012, the estimated liability was $26 million and the related premium tax asset was $19 million. The expected period over which the assessments will be made and the related tax credits recovered is not known.  At December 31, 2011, the net liability was not considered material.

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 insurance industry generally.

87

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains 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 Securities and Exchange Commission (“SEC”) regulations, including controls and procedures designed to ensure that this information is accumulated and communicated to the Company’s management, including its principal 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, the 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.

The Company’s management, under the supervision and with the participation of the Company’s principal 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, the Company’s principal executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures were effective at a reasonable level of assurance as of December 31, 2012.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s 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 fourth fiscal quarter of the year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting for the Company.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s internal control over financial reporting is a process designed by or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America, and includes those policies and procedures that:

·Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management, with the participation of its principal executive officer and chief financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework.

88

Based on management’s assessment and those criteria, the Company believes that, as of December 31, 2012, the Company’s internal control over financial reporting is effective.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.

ITEM 9B.OTHER INFORMATION

None.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item omitted pursuant to General Instructions I(2)(c) of Form 10-K.

ITEM 11.EXECUTIVE COMPENSATION

Item omitted pursuant to General Instructions I(2)(c) of Form 10-K.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item omitted pursuant to General Instructions I(2)(c) of Form 10-K.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Item omitted pursuant to General Instructions I(2)(c) of Form 10-K.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Audit Committee of the Board of Directors of Ameriprise Financial has appointed Pricewaterhouse Coopers LLP (“PwC’) as independent registered public accounting firm to audit the Consolidated Financial Statements of the Company for the years ended December 31, 2012 and 2011.

Fees Paid to the Registrant’s Independent Auditor

The following table presents fees for professional services rendered by PwC for the audit of the Company’s financial statements for the years ended December 31, 2012 and 2011 and other fees billed for other services rendered by PwC during those periods.

	2012		2011
	(in thousands)
Audit Fees(1)	$	1,729	$	1,729
Audit-related Fees	16		16
Tax Fees	—		—
All Other Fees	—		—
Total	$	1,745	$	1,745

(1)Audit fees included audit work performed in the review of the financial statements, as well as services that generally only the independent auditor can be expected to provide, such as comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the Securities and Exchange Commission.

Policy on Pre-Approval of Services Provided by Independent Registered Public Accounting Firm

Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the terms of the engagement of PwC are subject to the specific pre-approval of the Audit Committee of Ameriprise Financial.  All audit and permitted non-audit services to be performed by PwC for the Company require pre-approval by the Audit Committee of Ameriprise Financial in accordance with pre-approval procedures established by the Audit Committee of Ameriprise Financial.  The procedures require all proposed engagements of PwC for services to the Company of any kind to be directed to the General Auditor of Ameriprise Financial, and then submitted for approval to the Audit Committee of Ameriprise Financial prior to the beginning of any services.

In 2012 and 2011, 100% of the services provided by PwC for the Company were pre-approved by the Audit Committee of Ameriprise Financial.

89

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)  (1) and (2)Consolidated Financial Statements and Financial Statement Schedules

The information required herein has been provided in Item 8.

(3)Exhibits

See Exhibit Index on pages E-1 through E-2 hereof.

90

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

RIVERSOURCE LIFE INSURANCE COMPANY

Registrant

February 26, 2013	By	/s/ John R. Woerner
Date		John R. Woerner, Chairman and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

February 26, 2013	/s/ John R. Woerner
Date	John R. Woerner, Director, Chairman and President
	(Principal Executive Officer)
February 26, 2013	/s/ Brian J. McGrane
Date	Brian J. McGrane, Director, Executive Vice President
	and Chief Financial Officer
	(Principal Financial Officer)
February 26, 2013	/s/ Gumer C. Alvero
Date	Gumer C. Alvero, Director
February 26, 2013	/s/ David K. Stewart
Date	David K. Stewart, Vice President and Controller
	(Principal Accounting Officer)
February 26, 2013	/s/ Steve M. Gathje
Date	Steve M. Gathje, Director
February 26, 2013	/s/ William F. Truscott
Date	William F. Truscott, Director
February 26, 2013	/s/ Bridget M. Sperl
Date	Bridget M. Sperl, Director
February 26, 2013	/s/ Jon Stenberg
Date	Jon Stenberg, Director

91

EXHIBIT INDEX

The following exhibits are filed as part of this Annual Report or, where indicated, were already filed and are hereby incorporated by reference.

3.1Copy of Certificate of Incorporation of IDS Life Insurance Company filed as Exhibit 3.1 to Post-Effective Amendment No. 5 to Registration Statement No. 33-28976 is incorporated by reference.

3.1.1Copy of Certificate of Amendment of Certificate of Incorporation of IDS Life Insurance Company dated June 22, 2006, filed as Exhibit 3.1 to Form 8-K filed on Jan. 5, 2007 is incorporated by reference.

3.2Copy of Amended and Restated By-Laws of RiverSource Life Insurance Company dated June 22, 2006, filed as Exhibit 27(f)(2) to Post-Effective Amendment No. 28 to Registration Statement No. 333-69777, is incorporated by reference.

4.1Instruments defining the rights of security holders, including indentures, are incorporated by reference to Registration Statement Nos. 333-92297, 333-139763, 333-73958, 333-139759, 333-74865, 333-139760, 333-82149, 333-139761, 333-85567, 333-139762, 33-47302, 333-79311, 333-114888 and 33-28976.

10.1Copy of Principal Underwriter Agreement for Variable Annuities and Variable Life Insurance between RiverSource Life Insurance Company and RiverSource Distributors, Inc. effective January 1, 2007, filed as Exhibit 10.1 to Form 10-K filed on February 28, 2007, is incorporated by reference.

10.2 Copy of Selling Agreement by and among RiverSource Life Insurance Company, RiverSource Distributors, Inc. and Ameriprise Financial Services, Inc. effective January 1, 2007, filed as Exhibit 10.2 to Form 10-K filed on February 28, 2007, is incorporated by reference.

10.3Copy of Marketing Support Services Agreement between Ameriprise Financial Services, Inc. and RiverSource Life Insurance Company effective January 1, 2007, filed as Exhibit 10.3 to Form 10-K filed on February 28, 2007, is incorporated by reference.

10.4Copy of Investment Management and Services Agreement between RiverSource Investments, LLC (n/k/a Columbia Management Investment Advisers, LLC) and RiverSource Life Insurance Company effective January 1, 2007, filed as Exhibit 10.4 to Form 10-K filed on February 28, 2007, is incorporated by reference.

10.5Copy of Federal Income Tax Sharing Agreement between or among Ameriprise Financial, Inc. and certain subsidiaries, including RiverSource Life Insurance Company and RiverSource Life Insurance Co. of New York effective December 1, 2010, filed as Exhibit 10.5 to Form 10-K filed on February 23, 2011, is incorporated by reference.

10.6Copy of Amended and Restated Agreement by and among RiverSource Life Insurance Company, Ameriprise India Private Limited, and Ameriprise Financial, Inc. (a/k/a/ Supplementary Agreement No. 1) effective January 1, 2007, filed as Exhibit 10.6 to Form 10-K filed on February 28, 2007, is incorporated by reference.

10.7Copy of Management, Service & Marketing Support Agreement by and among Columbia Management Investments Advisers, LLC, Columbia Management Investment Services Corp. and RiverSource Life Insurance Company effective January 1, 2011, filed as Exhibit 10.7 to Form 10-K filed on February 23, 2011, is incorporated by reference.

10.8Copy of RiverSource Variable Portfolio Funds Service Agreement by and between RiverSource Distributors, Inc. and RiverSource Life Insurance Company effective January 1, 2007, filed as Exhibit 10.8 to Form 10-K filed on February 28, 2007, is incorporated by reference.

E-1

EXHIBIT INDEX (Continued)

*31.1 Certification of John R. Woerner, Chairman and President, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

*31.2 Certification of Brian J. McGrane, Chief Financial Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

*32.1 Certification of John R. Woerner, Chairman and President, and Brian J. McGrane, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*101The following materials from RiverSource Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2012, formatted in XBRL: (i) Consolidated Balance Sheets at December 31, 2012 and 2011; (ii) Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010; (iv) Consolidated Statements of Shareholder’s Equity for the years ended December 31, 2012, 2011 and 2010; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010 and 2009; and (vi) Notes to the Consolidated Financial Statements.

* Filed electronically herewith.

E-2

EX-31.1

Exhibit 31.1

CERTIFICATION

I, John R. Woerner, certify that:

1.I have reviewed this Annual Report on Form 10-K of RiverSource Life Insurance Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    February 26, 2013
	/s/ John R. Woerner
	Name:	John R. Woerner
	Title:	Chairman and President
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Brian J. McGrane, certify that:

1.I have reviewed this Annual Report on Form 10-K of RiverSource Life Insurance Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    February 26, 2013
	/s/ Brian J. McGrane
	Name:	Brian J. McGrane
	Title:	Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of RiverSource Life Insurance Company (the “Company”) for the fiscal year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John R. Woerner, Chairman and President of the Company, and Brian J. McGrane, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John R. Woerner
Name:		John R. Woerner
Title:		Chairman and President
		(Principal Executive Officer)
Date:		February 26, 2013
/s/ Brian J. McGrane
Name:	Brian J. McGrane
Title:	Chief Financial Officer
	(Principal Financial Officer)
Date:	February 26, 2013

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Nature of Business and Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended	3 Months Ended
	Dec. 31, 2012 item	Dec. 31, 2012 Adjustment to the model which values the reserves	Jun. 30, 2012 Correction for a tax item related to securities lending activities
Nature of Business and Basis of Presentation
Number of wholly owned subsidiaries	1
Reclassifications of prior period amounts
Pretax benefit, net of DAC and DSIC		$ 41
DAC and DSIC amortization expense		11
Decrease to net income resulting from prior period adjustments	$ 32		$ 32

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Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	$ 30,670	$ 31,169
Policy claims and other policyholders' funds	132	121
Total future policy benefits and policy claims and other policyholders' funds	30,802	31,290
Separate account liabilities
Variable annuity variable sub-accounts	63,302	57,556
VUL insurance variable sub-accounts	6,051	5,575
Other insurance variable sub-accounts	42	43
Total	69,395	63,174
Fixed annuities
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	16,075	16,401
EIA accumulated host values
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	31	58
Equity Indexed Annuities
Contract term of equity indexed annuities	7 years
Minimum interest rate guarantee on equity indexed annuities (as a percent)	3.00%
Percentage of initial premium from equity indexed annuity product receiving a minimum interest rate guarantee	90.00%
EIA embedded derivatives
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	2	2
Variable annuity fixed sub-accounts
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	4,843	4,852
Variable annuity GMWB
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	799	1,377
Variable annuity GMAB
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	103	237
Other variable annuity guarantees
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	13	14
Total annuities
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	21,866	22,941
VUL/UL insurance
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	2,760	2,662
IUL accumulated host values
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	59	4
IUL embedded derivatives
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	45	3
VUL/UL insurance additional liabilities
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	294	220
Other life, DI and LTC insurance
Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities
Total future policy benefits	$ 5,646	$ 5,339

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Investments (Details 6) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net investment income
Income on fixed maturities	$ 1,324	$ 1,469	$ 1,486
Income on mortgage loans	158	149	156
Other investments	26	18	32
Gross investment income	1,508	1,636	1,674
Less: investment expenses	28	43	45
Total	1,480	1,593	1,629
Net realized investment gains (losses)
Fixed maturities	(2)	4	19
Mortgage loans		2	(6)
Other investments	(1)	(1)	3
Net realized investment gains	$ (3)	$ 5	$ 16

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Derivatives and Hedging Activities (Details 4) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash Flow Hedges
Deferred loss on derivative instruments expected to be reclassified from accumulated other comprehensive income to earnings during the next 12 months	$ 6
Amount recognized in earnings on cash flow hedges due to ineffectiveness	1
Rollforward of unrealized derivative losses included in accumulated other comprehensive income related to cash flow hedges
Net unrealized derivative losses at the beginning of the period	(26)	(30)	(34)
Reclassification of realized losses	7	6	6
Income tax benefit	(2)	(2)	(2)
Net unrealized derivative losses at the end of the period	(21)	(26)	(30)
Longest period of time over which the entity hedges exposure to the variability in future cash flows	6 years
2013
Summary of option premiums payable and receivable
Premiums Payable	373
Premiums Receivable	57
2014
Summary of option premiums payable and receivable
Premiums Payable	348
Premiums Receivable	55
2015
Summary of option premiums payable and receivable
Premiums Payable	320
Premiums Receivable	54
2016
Summary of option premiums payable and receivable
Premiums Payable	289
Premiums Receivable	46
2017
Summary of option premiums payable and receivable
Premiums Payable	238
Premiums Receivable	41
2018-2027
Summary of option premiums payable and receivable
Premiums Payable	785
Premiums Receivable	$ 104

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Variable Annuity and Insurance Guarantees (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 item	Dec. 31, 2011
GMDB:
Variable Annuity and Insurance Guarantees
Number of primary GMDB provisions	3
Total Contract Value	$ 66,825	$ 61,106
Contract Value in Separate Accounts	62,045	56,320
Net Amount at Risk	347	1,329
Weighted Average Attained Age	63 years	63 years
GMDB: | Return of premium
Variable Annuity and Insurance Guarantees
Total Contract Value	45,697	40,011
Contract Value in Separate Accounts	43,942	38,275
Net Amount at Risk	61	382
Weighted Average Attained Age	63 years	63 years
GMDB: | Five/six-year reset
Variable Annuity and Insurance Guarantees
Total Contract Value	11,233	11,631
Contract Value in Separate Accounts	8,722	9,118
Net Amount at Risk	115	350
Weighted Average Attained Age	63 years	63 years
GMDB: | One-year ratchet
Variable Annuity and Insurance Guarantees
Total Contract Value	7,367	7,233
Contract Value in Separate Accounts	6,933	6,777
Net Amount at Risk	106	479
Weighted Average Attained Age	65 years	64 years
GMDB: | Five-year ratchet
Variable Annuity and Insurance Guarantees
Total Contract Value	1,616	1,472
Contract Value in Separate Accounts	1,563	1,418
Net Amount at Risk	3	25
Weighted Average Attained Age	61 years	61 years
GMDB: | Other
Variable Annuity and Insurance Guarantees
Total Contract Value	912	759
Contract Value in Separate Accounts	885	732
Net Amount at Risk	62	93
Weighted Average Attained Age	68 years	68 years
GGU death benefit
Variable Annuity and Insurance Guarantees
Total Contract Value	958	920
Contract Value in Separate Accounts	907	868
Net Amount at Risk	93	78
Weighted Average Attained Age	63 years	63 years
GMIB
Variable Annuity and Insurance Guarantees
Total Contract Value	425	463
Contract Value in Separate Accounts	399	433
Net Amount at Risk	72	106
Weighted Average Attained Age	66 years	65 years
GMWB:
Variable Annuity and Insurance Guarantees
GMWB asset allocation models available subsequent to withdrawal	3
Total Contract Value	32,486	27,643
Contract Value in Separate Accounts	32,342	27,493
Net Amount at Risk	297	1,099
Weighted Average Attained Age	64 years	64 years
GMWB: | GMWB
Variable Annuity and Insurance Guarantees
Total Contract Value	3,898	3,887
Contract Value in Separate Accounts	3,880	3,868
Net Amount at Risk	34	236
Weighted Average Attained Age	66 years	65 years
GMWB: | GMWB for life
Variable Annuity and Insurance Guarantees
Total Contract Value	28,588	23,756
Contract Value in Separate Accounts	28,462	23,625
Net Amount at Risk	263	863
Weighted Average Attained Age	64 years	64 years
GMAB
Variable Annuity and Insurance Guarantees
Maximum age of variable annuity contractholders for the option of obtaining principal-back guarantee	79 years
GMAB rider guarantees waiting period	10 years
Percentage of highest anniversary value guarantee at end of waiting period	80.00%
Total Contract Value	3,773	3,516
Contract Value in Separate Accounts	3,762	3,509
Net Amount at Risk	$ 5	$ 63
Weighted Average Attained Age	57 years	56 years

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Investments (Details 4) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Rollforward of the net unrealized securities gains (losses) on Available-for-Sale securities included in accumulated other comprehensive income
Net unrealized securities gains arising during the period	$ 161	$ 89	$ 181
Net unrealized securities gains arising during the period	451	364	516
Net realized gains and losses on Available-for-Sale securities
Gross realized investment gains	16	48	51
Gross realized investment losses	(1)	(20)	(4)
Other-than-temporary impairments	(17)	(24)	(28)
Total	(2)	4	19
Net Unrealized Securities Gains
Rollforward of the net unrealized securities gains (losses) on Available-for-Sale securities included in accumulated other comprehensive income
Balance at the beginning of the period	1,471	1,215	638
Cumulative effect of accounting change			62
Net unrealized securities gains arising during the period	694	560	794
Reclassification of net securities gains included in net income	2	(5)	(20)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(237)	(299)	(259)
Balance at the end of the period	1,930	1,471	1,215
Deferred Income Tax
Rollforward of the net unrealized securities gains (losses) on Available-for-Sale securities included in accumulated other comprehensive income
Balance at the beginning of the period	(514)	(425)	(222)
Cumulative effect of accounting change			(22)
Net unrealized securities gains arising during the period	(243)	(196)	(278)
Reclassification of net securities gains included in net income	(1)	2	7
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	83	105	90
Balance at the end of the period	(675)	(514)	(425)
Accumulated Other Comprehensive Loss Related to Net Unrealized Securities Gains
Rollforward of the net unrealized securities gains (losses) on Available-for-Sale securities included in accumulated other comprehensive income
Balance at the beginning of the period	957	790	416
Cumulative effect of accounting change			40
Net unrealized securities gains arising during the period	451	364	516
Reclassification of net securities gains included in net income	1	(3)	(13)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(154)	(194)	(169)
Balance at the end of the period	1,255	957	790
Noncredit related impairments on securities and net unrealized securities losses on previously impaired securities, included in Accumulated Other Comprehensive Income	$ (15)	$ (20)	$ (13)

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Variable Annuity and Insurance Guarantees (Tables)

12 Months Ended

Dec. 31, 2012

Variable Annuity and Insurance Guarantees

Schedule of variable annuity guarantees for which the Company has established additional liabilities

	December 31, 2012							December 31, 2011
Variable Annuity Guarantees by Benefit Type (1)	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age
	(in millions, except age)
GMDB:
Return of premium	$	45,697	$	43,942	$	61	63	$	40,011	$	38,275	$	382	63
Five/six-year reset	11,233		8,722		115		63	11,631		9,118		350		63
One-year ratchet	7,367		6,933		106		65	7,233		6,777		479		64
Five-year ratchet	1,616		1,563		3		61	1,472		1,418		25		61
Other	912		885		62		68	759		732		93		68
Total — GMDB	$	66,825	$	62,045	$	347	63	$	61,106	$	56,320	$	1,329	63
GGU death benefit	$	958	$	907	$	93	63	$	920	$	868	$	78	63
GMIB	$	425	$	399	$	72	66	$	463	$	433	$	106	65
GMWB:
GMWB	$	3,898	$	3,880	$	34	66	$	3,887	$	3,868	$	236	65
GMWB for life	28,588		28,462		263		64	23,756		23,625		863		64
Total — GMWB	$	32,486	$	32,342	$	297	64	$	27,643	$	27,493	$	1,099	64
GMAB	$	3,773	$	3,762	$	5	57	$	3,516	$	3,509	$	63	56

(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.

(2) Represents the current guaranteed benefit amount in excess of the current contract value.  GMIB, GMWB and GMAB benefits are subject to waiting periods and payment periods specified in the contract.

Schedule of changes in additional liabilities for variable annuity and insurance guarantees

	GMDB & GGU			GMIB			GMWB			GMAB			UL
	(in millions)
Balance at January 1, 2010	$	6		$	6		$	204		$	100		$	15
Incurred claims	17			3			133			4			59
Paid claims	(18		)	(1		)	—			—			(6		)
Balance at December 31, 2010	5			8			337			104			68
Incurred claims	10			2			1,040			133			53
Paid claims	(10		)	(1		)	—			—			(10		)
Balance at December 31, 2011	5			9			1,377			237			111
Incurred claims	6			1			(578		)	(134		)	57
Paid claims	(7		)	(1		)	—			—			(13		)
Balance at December 31, 2012	$	4		$	9		$	799		$	103		$	155

Schedule of distribution of separate account balances by asset type for variable annuity contracts providing guaranteed benefits

	December 31,
	2012		2011
	(in millions)
Mutual funds:
Equity	$	32,054	$	30,738
Bond	26,165		23,862
Other	3,991		1,969
Total mutual funds	$	62,210	$	56,569

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Commitments and Contingencies
Minimum interest rate guarantees, high end of the range (as a percent)	5.00%
Future guaranty fund assessments
Commitments and Contingencies
Liability related to guaranty fund assessments	26
Premium tax asset	19

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Variable Annuity and Insurance Guarantees (Details 3) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Mutual funds
Variable Annuity and Insurance Guarantees
Total mutual funds	$ 62,210	$ 56,569
Equity
Variable Annuity and Insurance Guarantees
Total mutual funds	32,054	30,738
Bond
Variable Annuity and Insurance Guarantees
Total mutual funds	26,165	23,862
Other
Variable Annuity and Insurance Guarantees
Total mutual funds	$ 3,991	$ 1,969

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Derivatives and Hedging Activities (Details 5) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Derivatives liabilities, credit risk related contingent features
Aggregate fair value of all derivative instruments in a net liability position containing such credit risk features	$ 364	$ 106
Aggregate fair value of assets posted as collateral	360	98
Additional fair value of assets needed to settle derivative liabilities	4	8
Derivative assets | Credit risk
Derivative assets, credit risk
Cash and cash equivalents and corresponding liability in other liabilities for collateral	262	635
Fair market value of securities accepted as additional collateral	387	186
Maximum credit exposure related to derivative assets	$ 29	$ 61

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies

Commitments and Contingencies

18. Commitments and Contingencies

At December 31, 2012 and 2011, the Company had no material commitments to purchase investments other than mortgage loan fundings. See Note 6 for additional information.

The Company’s annuity and life products all have minimum interest rate guarantees in their fixed accounts.  As of December 31, 2012, these guarantees range up to 5.0%.

Insurance companies have been the subject of increasing regulatory, legislative and judicial scrutiny.  Numerous state and federal regulatory agencies have commenced examinations and other inquiries of insurance companies regarding sales and marketing practices (including sales to older consumers and disclosure practices), claims handling, and unclaimed property and escheatment practices and procedures. With regard to an industry-wide investigation of unclaimed property and escheatment practices and procedures, the Company is responding to regulatory audits, market conduct examinations and other inquires (including inquiries from the States of Minnesota and New York and a multistate insurance department examination).  The Company has cooperated and will continue to cooperate with the applicable regulators regarding their inquiries.

The Company is involved in the normal course of business in a number of other legal and arbitration proceedings concerning matters arising in connection with the conduct of its business activities.  The Company believes that it is not a party to, nor are any of its properties the subject of, any pending legal, arbitration or regulatory investigation or proceeding that is likely to have a material adverse effect on its consolidated financial condition, results of operations or liquidity.  Notwithstanding the foregoing, it is possible that the outcome of any current or future legal, arbitration or regulatory proceeding could have a material impact on results of operations in any particular reporting period as the proceedings are resolved.

The Company is required by law to be a member of the guaranty fund association in every state where it is 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.  Uncertainty and volatility in the U.S. economy and financial markets in recent years have weakened the financial condition of numerous insurers, including insurers currently in receiverships, increasing the risk of triggering guaranty fund assessments.

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.

Executive Life Insurance Company of New York (“ELNY”) was placed into rehabilitation by a New York state court in 1991. On April 16, 2012, the court issued an order converting the rehabilitation into a liquidation proceeding under a plan submitted by the New York insurance regulator with support from NOLHGA and the industry.

During the second quarter of 2012, the Company established a liability for estimated guaranty fund assessments and a related premium tax asset, primarily associated with ELNY.  At December 31, 2012, the estimated liability was $26 million and the related premium tax asset was $19 million. The expected period over which the assessments will be made and the related tax credits recovered is not known.  At December 31, 2011, the net liability was not considered material.

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 insurance industry generally.

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Financing Receivables (Details 2) (USD $) In Millions, unless otherwise specified	12 Months Ended																																									1 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2012 Syndicated Loans	Dec. 31, 2011 Syndicated Loans	Dec. 31, 2012 Commercial Mortgage Loans	Dec. 31, 2011 Commercial Mortgage Loans	Dec. 31, 2012 Commercial Mortgage Loans Retail	Dec. 31, 2011 Commercial Mortgage Loans Retail	Dec. 31, 2012 Commercial Mortgage Loans Office	Dec. 31, 2011 Commercial Mortgage Loans Office	Dec. 31, 2012 Commercial Mortgage Loans Industrial	Dec. 31, 2011 Commercial Mortgage Loans Industrial	Dec. 31, 2012 Commercial Mortgage Loans Apartments	Dec. 31, 2011 Commercial Mortgage Loans Apartments	Dec. 31, 2012 Commercial Mortgage Loans Mixed Use	Dec. 31, 2011 Commercial Mortgage Loans Mixed Use	Dec. 31, 2012 Commercial Mortgage Loans Hotel	Dec. 31, 2011 Commercial Mortgage Loans Hotel	Dec. 31, 2012 Commercial Mortgage Loans Other	Dec. 31, 2011 Commercial Mortgage Loans Other	Dec. 31, 2012 Commercial Mortgage Loans South Atlantic	Dec. 31, 2011 Commercial Mortgage Loans South Atlantic	Dec. 31, 2012 Commercial Mortgage Loans Pacific	Dec. 31, 2011 Commercial Mortgage Loans Pacific	Dec. 31, 2012 Commercial Mortgage Loans Mountain	Dec. 31, 2011 Commercial Mortgage Loans Mountain	Dec. 31, 2012 Commercial Mortgage Loans East North Central	Dec. 31, 2011 Commercial Mortgage Loans East North Central	Dec. 31, 2012 Commercial Mortgage Loans West North Central	Dec. 31, 2011 Commercial Mortgage Loans West North Central	Dec. 31, 2012 Commercial Mortgage Loans Middle Atlantic	Dec. 31, 2011 Commercial Mortgage Loans Middle Atlantic	Dec. 31, 2012 Commercial Mortgage Loans West South Central	Dec. 31, 2011 Commercial Mortgage Loans West South Central	Dec. 31, 2012 Commercial Mortgage Loans New England	Dec. 31, 2011 Commercial Mortgage Loans New England	Dec. 31, 2012 Commercial Mortgage Loans East South Central	Dec. 31, 2011 Commercial Mortgage Loans East South Central	Dec. 31, 2012 Residential Mortgage Loans item	Oct. 31, 2012 Residential Mortgage Loans Ameriprise Bank, FSB
Financing Receivables
Percentage of loans with highest risk rating							2.00%	3.00%
Loans, gross	$ 3,718	$ 2,807					$ 2,481	$ 2,505	$ 822	$ 825	$ 597	$ 669	$ 449	$ 455	$ 415	$ 358	$ 42	$ 42	$ 36	$ 51	$ 120	$ 105	$ 625	$ 618	$ 565	$ 556	$ 262	$ 275	$ 255	$ 247	$ 216	$ 224	$ 198	$ 217	$ 159	$ 173	$ 135	$ 130	$ 66	$ 65
Less: allowance for loan losses	30	37	41	42			26	32
Total loans							2,455	2,473
Percent of Loans							100.00%	100.00%	33.00%	33.00%	24.00%	27.00%	18.00%	18.00%	17.00%	14.00%	2.00%	2.00%	1.00%	2.00%	5.00%	4.00%	25.00%	25.00%	23.00%	22.00%	11.00%	11.00%	10.00%	10.00%	9.00%	9.00%	8.00%	9.00%	6.00%	7.00%	5.00%	5.00%	3.00%	2.00%
Funding Commitments							72	15	41	2		2	9	1	13						9	10	29		15	1	12	11	3			1	6		4	2	1		2		627
Purchase of loans from affiliate	(954)																																									954
Percentage of residential mortgage loans below specified FICO scores																																									3.00%
Percentage of residential mortgage loans above specified LTV ratios																																									7.00%
Specified FICO Score																																									640
Specified LTV Ratios																																									90.00%
Percentage of total loan portfolio represented by state of California																																									38.00%
Nonperforming loans	$ 4	$ 12			$ 2	$ 1

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Variable Interest Entities (Details) (Variable interests in affordable housing partnerships, RTA, USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Variable interests in affordable housing partnerships | RTA
Variable Interest Entities
Carrying values of investments reflected in other investments	$ 409	$ 384
Liabilities related to the future funding commitments recorded in other liabilities	$ 144	$ 267

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Derivatives and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2012

Derivatives and Hedging Activities

Schedule of estimated fair value of the Company's freestanding derivatives after considering the effect of master netting arrangements and collateral

	December 31, 2012						December 31, 2011
	Net DerivativeAssets			Net DerivativeLiabilities			Net DerivativeAssets			Net DerivativeLiabilities
	(in millions)
Fair value of OTC derivatives after application of master netting agreements	$	646		$	603		$	861		$	129
Cash collateral on OTC derivatives	(262		)	(67		)	(613		)	(26		)
Fair value of OTC derivatives after application of master netting agreements and cash collateral	384			536			248			103
Securities collateral on OTC derivatives	(355		)	(532		)	(186		)	(95		)
Fair value of OTC derivatives after application of master netting agreements and cash and securities collateral	29			4			62			8
Fair value of exchange-traded derivatives	96			—			155			—
Total fair value of derivatives after application of master netting agreements and cash and securities collateral	$	125		$	4		$	217		$	8

Schedule of derivative liabilities as defined by the rule of guidance by FSOC

	December 31,
	2012		2011
	(in millions)
Fair value of OTC derivative liabilities after application of master netting agreements and cash collateral	$	536	$	103
Fair value of embedded derivative liabilities	880		1,590
Fair value of derivative liabilities after application of master netting agreements and cash collateral	$	1,416	$	1,693

Schedule of balance sheet location and gross fair value of derivative instruments, including embedded derivatives

		Asset					Liability
Derivatives not designated	Balance Sheet	December 31,					December 31,
as hedging instruments	Location	2012		2011		Balance Sheet Location	2012		2011
		(in millions)					(in millions)
GMWB and GMAB
Interest rate contracts	Other assets	$	2,191	$	1,801	Other liabilities	$	1,486	$	1,198
Equity contracts	Other assets	1,215		1,314		Other liabilities	1,792		1,031
Credit contracts	Other assets	—		1		Other liabilities	—		—
Foreign currency contracts	Other assets	6		7		Other liabilities	—		10
Embedded derivatives(1)	Not applicable	—		—		Future policy benefits	833		1,585
Total GMWB and GMAB		3,412		3,123			4,111		3,824
Other derivatives:
Equity
EIA embedded derivatives	Not applicable	—		—		Future policy benefits	2		2
IUL	Other assets	6		1		Other liabilities	1		—
IUL embedded derivatives	Not applicable	—		—		Future policy benefits	45		3
Total other		6		1			48		5
Total derivatives		$	3,418	$	3,124		$	4,159	$	3,829

(1) The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

Schedule of impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income

Derivatives not designated	Location of Gain (Loss) on	Amount of Gain (Loss) on Derivatives Recognized in Income
as hedging instruments	Derivatives Recognized in Income	2012			2011			2010
		(in millions)
GMWB and GMAB
Interest rate contracts	Benefits, claims, losses and settlement expenses	$	17		$	709		$	95
Equity contracts	Benefits, claims, losses and settlement expenses	(1,218		)	326			(370		)
Credit contracts	Benefits, claims, losses and settlement expenses	(2		)	(12		)	(44		)
Foreign currency contracts	Benefits, claims, losses and settlement expenses	(1		)	(2		)	—
Embedded derivatives(1)	Benefits, claims, losses and settlement expenses	752			(1,165		)	(121		)
Total GMWB and GMAB		(452		)	(144		)	(440		)
Other derivatives:
Interest rate
Tax hedge	Net investment income	1			—			—
Equity
GMDB	Benefits, claims, losses and settlement expenses	—			—			(4		)
EIA	Interest credited to fixed accounts	1			(1		)	2
EIA embedded derivatives	Interest credited to fixed accounts	1			1			7
IUL	Interest credited to fixed accounts	1			1			—
IUL embedded derivatives	Interest credited to fixed accounts	(4		)	(3		)	—
Total other		—			(2		)	5
Total derivatives		$	(452	)	$	(146	)	$	(435	)

(1) The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

Schedule of payments the entity has to make and receive for the options related to minimum guaranteed benefits

	Premiums Payable		Premiums Receivable
	(in millions)
2013	$	373	$	57
2014	348		55
2015	320		54
2016	289		46
2017	238		41
2018-2027	785		104

Summary of unrealized derivative losses included in accumulated other comprehensive income related to cash flow hedges

	2012			2011			2010
	(in millions)
Net unrealized derivative losses at January 1	$	(26	)	$	(30	)	$	(34	)
Reclassification of realized losses(1)	7			6			6
Income tax benefit	(2		)	(2		)	(2		)
Net unrealized derivative losses at December 31	$	(21	)	$	(26	)	$	(30	)

(1) Loss reclassified from accumulated other comprehensive income to net investment income on the Consolidated Statements of Income.

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Deferred Acquisition Costs and Deferred Sales Inducement Costs (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Balances of and changes in DAC (subsequent to the adjustment for the new accounting standard)
Balance at the beginning of the period	$ 2,413	$ 2,521	$ 2,349
Capitalization of acquisition costs	253	282	295
Amortization, excluding the impact of valuation assumptions review	(214)	(305)	(227)
Amortization impact of valuation assumptions review	(11)	(31)	174
Impact of change in net unrealized securities gains	(68)	(54)	(70)
Balance at the end of the period	2,373	2,413	2,521
Balances of and changes in DSIC
Balance at the beginning of the period	464	545	524
Capitalization of sales inducement costs	7	9	35
Amortization, excluding the impact of valuation assumptions review	(45)	(70)	(49)
Amortization impact of valuation assumptions review	(13)	(11)	52
Impact of change in net unrealized securities gains	(9)	(9)	(17)
Balance at the end of the period	$ 404	$ 464	$ 545

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Derivatives and Hedging Activities (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 item	Dec. 31, 2011
Net Derivative Assets
Fair value of derivatives after application of master netting agreements and cash and securities collateral	$ 125,000,000	$ 217,000,000
Net Derivative Liabilities
Fair value of derivatives after application of master netting agreements and cash collateral	1,416,000,000	1,693,000,000
Fair value of derivatives after application of master netting agreements and cash and securities collateral	4,000,000	8,000,000
Additional quantitative measures to determine SIFI status	5
Minimum
Net Derivative Liabilities
Threshold assets to determine the SIFI status	50,000,000,000
Additional quantitative measures to be met for the SIFI status	1
Threshold derivative liabilities to determine the SIFI status	3,500,000,000
OTC derivative
Net Derivative Assets
Fair value of derivatives after application of master netting agreements	646,000,000	861,000,000
Cash collateral on derivatives	(262,000,000)	(613,000,000)
Fair value of derivatives after application of master netting agreements and cash collateral	384,000,000	248,000,000
Securities collateral on derivatives	(355,000,000)	(186,000,000)
Fair value of derivatives after application of master netting agreements and cash and securities collateral	29,000,000	62,000,000
Net Derivative Liabilities
Fair value of derivatives after application of master netting agreements	603,000,000	129,000,000
Cash collateral on derivatives	(67,000,000)	(26,000,000)
Fair value of derivatives after application of master netting agreements and cash collateral	536,000,000	103,000,000
Securities collateral on derivatives	(532,000,000)	(95,000,000)
Fair value of derivatives after application of master netting agreements and cash and securities collateral	4,000,000	8,000,000
Exchange-traded derivatives
Net Derivative Assets
Fair value of derivatives after application of master netting agreements and cash and securities collateral	96,000,000	155,000,000
Embedded derivatives
Net Derivative Liabilities
Fair value of embedded derivative liabilities	$ 880,000,000	$ 1,590,000,000

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Fair Values of Assets and Liabilities (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Assets
Available-for-Sale securities: Fixed maturities	$ 25,932	$ 26,577
Common stocks	4	2
Separate account assets	69,395	63,174
Liabilities
Future policy benefits	30,670	31,169
Cumulative decrease to the embedded derivative liability	389	506
Recurring basis | Level 1
Assets
Available-for-Sale securities: Fixed maturities	10	10
Common stocks	2	1
Other assets	285	274
Total assets at fair value	297	285
Liabilities
Other liabilities	258	297
Total liabilities at fair value	258	297
Recurring basis | Level 1 | Equity derivative contracts
Assets
Other assets	285	274
Liabilities
Other liabilities	258	297
Recurring basis | Level 1 | U.S. government and agencies obligations
Assets
Available-for-Sale securities: Fixed maturities	10	10
Recurring basis | Level 2
Assets
Available-for-Sale securities: Fixed maturities	23,919	25,004
Common stocks	2	1
Trading securities		25
Cash equivalents	264	809
Other assets	3,133	2,850
Separate account assets	69,395	63,174
Total assets at fair value	96,713	91,863
Liabilities
Future policy benefits	47	5
Other liabilities	3,021	1,942
Total liabilities at fair value	3,068	1,947
Recurring basis | Level 2 | Interest rate derivative contracts
Assets
Other assets	2,191	1,801
Liabilities
Other liabilities	1,486	1,198
Recurring basis | Level 2 | Equity derivative contracts
Assets
Other assets	936	1,041
Liabilities
Other liabilities	1,535	734
Recurring basis | Level 2 | Credit derivative contracts
Assets
Other assets		1
Recurring basis | Level 2 | Foreign currency derivative contracts
Assets
Other assets	6	7
Liabilities
Other liabilities		10
Recurring basis | Level 2 | EIA embedded derivatives
Liabilities
Future policy benefits	2	2
Recurring basis | Level 2 | IUL embedded derivatives
Liabilities
Future policy benefits	45	3
Recurring basis | Level 2 | Corporate debt securities
Assets
Available-for-Sale securities: Fixed maturities	15,387	15,076
Recurring basis | Level 2 | Residential mortgage backed securities
Assets
Available-for-Sale securities: Fixed maturities	3,598	4,310
Recurring basis | Level 2 | Commercial mortgage backed securities
Assets
Available-for-Sale securities: Fixed maturities	2,834	3,615
Recurring basis | Level 2 | State and municipal obligations
Assets
Available-for-Sale securities: Fixed maturities	1,122	1,096
Recurring basis | Level 2 | Asset backed securities
Assets
Available-for-Sale securities: Fixed maturities	715	716
Recurring basis | Level 2 | Foreign government bonds and obligations
Assets
Available-for-Sale securities: Fixed maturities	224	144
Recurring basis | Level 2 | U.S. government and agencies obligations
Assets
Available-for-Sale securities: Fixed maturities	39	47
Recurring basis | Level 3
Assets
Available-for-Sale securities: Fixed maturities	2,003	1,563
Total assets at fair value	2,003	1,563
Liabilities
Future policy benefits	833	1,585
Total liabilities at fair value	833	1,585
Recurring basis | Level 3 | GMWB and GMAB embedded derivatives
Liabilities
Future policy benefits	833	1,585
Recurring basis | Level 3 | Corporate debt securities
Assets
Available-for-Sale securities: Fixed maturities	1,654	1,342
Recurring basis | Level 3 | Residential mortgage backed securities
Assets
Available-for-Sale securities: Fixed maturities	23	58
Recurring basis | Level 3 | Commercial mortgage backed securities
Assets
Available-for-Sale securities: Fixed maturities	170	16
Recurring basis | Level 3 | Asset backed securities
Assets
Available-for-Sale securities: Fixed maturities	156	133
Recurring basis | Level 3 | Other structured investment
Assets
Available-for-Sale securities: Fixed maturities		14
Recurring basis | Total
Assets
Available-for-Sale securities: Fixed maturities	25,932	26,577
Common stocks	4	2
Trading securities		25
Cash equivalents	264	809
Other assets	3,418	3,124
Separate account assets	69,395	63,174
Total assets at fair value	99,013	93,711
Liabilities
Future policy benefits	880	1,590
Other liabilities	3,279	2,239
Total liabilities at fair value	4,159	3,829
Recurring basis | Total | Interest rate derivative contracts
Assets
Other assets	2,191	1,801
Liabilities
Other liabilities	1,486	1,198
Recurring basis | Total | Equity derivative contracts
Assets
Other assets	1,221	1,315
Liabilities
Other liabilities	1,793	1,031
Recurring basis | Total | Credit derivative contracts
Assets
Other assets		1
Recurring basis | Total | Foreign currency derivative contracts
Assets
Other assets	6	7
Liabilities
Other liabilities		10
Recurring basis | Total | EIA embedded derivatives
Liabilities
Future policy benefits	2	2
Recurring basis | Total | IUL embedded derivatives
Liabilities
Future policy benefits	45	3
Recurring basis | Total | GMWB and GMAB embedded derivatives
Liabilities
Future policy benefits	833	1,585
Recurring basis | Total | Corporate debt securities
Assets
Available-for-Sale securities: Fixed maturities	17,041	16,418
Recurring basis | Total | Residential mortgage backed securities
Assets
Available-for-Sale securities: Fixed maturities	3,621	4,368
Recurring basis | Total | Commercial mortgage backed securities
Assets
Available-for-Sale securities: Fixed maturities	3,004	3,631
Recurring basis | Total | State and municipal obligations
Assets
Available-for-Sale securities: Fixed maturities	1,122	1,096
Recurring basis | Total | Asset backed securities
Assets
Available-for-Sale securities: Fixed maturities	871	849
Recurring basis | Total | Foreign government bonds and obligations
Assets
Available-for-Sale securities: Fixed maturities	224	144
Recurring basis | Total | U.S. government and agencies obligations
Assets
Available-for-Sale securities: Fixed maturities	49	57
Recurring basis | Total | Other structured investment
Assets
Available-for-Sale securities: Fixed maturities		$ 14

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Investments (Details 5) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Amortized Cost
Due within one year	$ 1,537
Due after one year through five years	4,065
Due after five years through 10 years	6,902
Due after 10 years	3,583
Total having single maturity dates	16,087
Total	23,060	24,399
Fair Value
Due within one year	1,563
Due after one year through five years	4,372
Due after five years through 10 years	7,900
Due after 10 years	4,601
Total having single maturity dates	18,436
Total	25,936	26,579
Bonds as deposit with various states as required by law	7	7
Residential mortgage backed securities
Amortized Cost
Without single maturity dates	3,446
Total	3,446	4,264
Fair Value
Without single maturity dates	3,621
Total	3,621	4,368
Commercial mortgage backed securities
Amortized Cost
Without single maturity dates	2,717
Total	2,717	3,355
Fair Value
Without single maturity dates	3,004
Total	3,004	3,631
Asset backed securities
Amortized Cost
Without single maturity dates	808
Total	808	812
Fair Value
Without single maturity dates	871
Total	871	849
Common stocks
Amortized Cost
Without single maturity dates	2
Total	2	1
Fair Value
Without single maturity dates	4
Total	$ 4	$ 2

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Principles of Consolidation

The Company consolidates entities in which it holds a greater than 50% voting interest, or when certain conditions are met for variable interest entities (“VIEs”) and limited partnerships.  Entities in which the Company exercises significant influence or holds a greater than 20% but less than 50% voting interest are accounted for under the equity method.  All other investments that are not reported at fair value as trading or Available-for-Sale securities are accounted for under the cost method where the Company owns less than a 20% voting interest and does not exercise significant influence.

A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest (including substantive voting rights, the obligation to absorb the entity’s losses, or the rights to receive the entity’s returns) or has equity investors that do not provide sufficient financial resources for the entity to support its activities.  A VIE is required to be assessed for consolidation under two models:

· If the VIE is a money market fund or is an investment company, or has the financial characteristics of an investment company, and the following is true:

(i) the entity does not have an explicit or implicit obligation to fund the investment company’s losses; and

(ii) the investment company is not a securitization entity, asset backed financing entity, or an entity formally considered a qualifying special purpose entity,

then, the VIE will be consolidated by the entity that determines it stands to absorb a majority of the VIE’s expected losses or to receive a majority of the VIE’s expected residual returns. Examples of entities that are likely to be assessed for consolidation under this framework include hedge funds, property funds, private equity funds and venture capital funds.

· If the VIE does not meet the criteria above, the VIE will be consolidated by the entity that determines it has both:

(i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and

(ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

When determining whether the Company stands to absorb the majority of a VIE’s expected losses or receive a majority of a VIE’s expected returns, it analyzes the design of the VIE to identify the variable interests it holds.  Then the Company quantitatively determines whether its variable interests will absorb a majority of the VIE’s variability.  If the Company determines it has control over the activities that most significantly impact the economic performance of the VIE and it will absorb a majority of the VIE’s expected variability, the Company consolidates the VIE.  The calculation of variability is based on an analysis of projected probability-weighted cash flows based on the design of the particular VIE.  When determining whether the Company has the power and the obligation to absorb losses or rights to receive benefits from the VIE that could potentially be significant, the Company qualitatively determines if its variable interests meet these criteria. If the Company consolidates a VIE under either scenario, it is referred to as the VIE’s primary beneficiary.

Amounts Based on Estimates and Assumptions

Accounting estimates are an integral part of the Consolidated Financial Statements. In part, they are based upon assumptions concerning future events. Among the more significant are those that relate to investment securities valuation and recognition of other-than-temporary impairments, DAC and the corresponding recognition of DAC amortization, derivative instruments and hedging activities, claims reserves and income taxes and the recognition of deferred tax assets and liabilities. These accounting estimates reflect the best judgment of management and actual results could differ.

Investments

Available-for-Sale Securities

Available-for-Sale securities are carried at fair value with unrealized gains (losses) recorded in accumulated other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes.  Gains and losses are recognized in the Consolidated Statements of Income upon disposition of the securities.

When the fair value of an investment is less than its amortized cost, the Company 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 is met, an other-than-temporary impairment is considered to have occurred and the Company must recognize an other-than-temporary impairment for the difference between the investment’s amortized cost basis and its fair value through earnings. For securities that do not meet the above criteria and the Company does not expect to recover a security’s amortized cost basis, the security is also considered other-than-temporarily impaired. For these securities, the Company separates the total impairment into the credit loss component and the amount of the loss related to other factors. The amount of the total other-than-temporary impairment related to credit loss is recognized in earnings.

The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes. For Available-for-Sale securities that have recognized an other-than-temporary impairment through earnings, the difference between the amortized cost basis and the cash flows expected to be collected is accreted as interest income, if through subsequent evaluation there is a sustained increase in the cash flow expected. Subsequent increases and decreases in the fair value of Available-for-Sale securities are included in other comprehensive income.

The Company provides a supplemental disclosure on the face of its Consolidated Statements of Income that presents: (i) total other-than-temporary impairment losses recognized during the period and (ii) the portion of other-than-temporary impairment losses recognized in other comprehensive income. The sum of these amounts represents the credit-related portion of other-than-temporary impairments that were recognized in earnings during the period. The portion of other-than-temporary losses recognized in other comprehensive income includes: (i) the portion of other-than-temporary impairment losses related to factors other than credit recognized during the period and (ii) reclassifications of other-than-temporary impairment losses previously determined to be related to factors other than credit that are determined to be credit-related in the current period. The amount presented on the Consolidated Statements of Income as the portion of other-than-temporary losses recognized in other comprehensive income excludes subsequent increases and decreases in the fair value of these securities.

For all securities that are considered temporarily impaired, the Company does not intend to sell these securities (has not made a decision to sell) and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The Company believes that it will collect all principal and interest due on all investments that have amortized cost in excess of fair value that are considered only temporarily impaired.

Factors the Company considers in determining whether declines in the fair value of fixed maturity securities are other-than-temporary include: (i) the extent to which the market value is below amortized cost; (ii) the duration of time in which there has been a significant decline in value; (iii) fundamental analysis of the liquidity, business prospects and overall financial condition of the issuer; and (iv) market events that could impact credit ratings, economic and business climate, litigation and government actions, and similar external business factors. In order to determine the amount of the credit loss component for corporate debt securities considered other-than-temporarily impaired, 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.

For structured investments (e.g., residential mortgage backed securities, commercial mortgage backed securities and asset backed securities), the Company also considers 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 in assessing potential other-than-temporary impairments of these investments. Based upon these factors, securities that have indicators of potential other-than-temporary impairment are subject to detailed review by management. Securities for which declines are considered temporary continue to be carefully monitored by management.

Mortgage Loans, net

Mortgage loans, net reflect the Company’s interest in commercial and residential mortgage loans, less the related allowance for loan losses.

Policy Loans

Policy loans include life insurance policy and annuity loans and are reported at the unpaid principal balance, plus accrued interest.

Other Investments

Other investments primarily reflect the Company’s interests in affordable housing partnerships and syndicated loans which represent investments in below investment grade loan syndications.  Affordable housing partnerships are accounted for under the equity method.

FinancingReceivables

Mortgage Loans and Syndicated Loans

Mortgage loans and syndicated loans are stated at amortized cost, net of allowances for loan losses, if any.

In October 2012, the Company purchased residential mortgage loans from an affiliate, Ameriprise Bank, FSB.  These loans were purchased at fair value. The purchase price takes into account the credit quality of the loan portfolio, resulting in no allowance for loan losses recorded at the acquisition date.

Interest income is accrued on the unpaid principal balances of the loans as earned.

Policy Loans

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 these loans, the Company does not record an allowance for loan losses for policy loans.

Nonaccrual Loans

Generally, loans are evaluated for or 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.  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 or in accordance with the loan agreement unless the remaining principal balance has been determined to be fully collectible.

Commercial mortgage loans are evaluated for impairment when the loan is considered for nonaccrual status, restructured or foreclosure proceedings are initiated on the property.  If it is determined that the fair value is less than the current loan balance, it  is written down to fair value less estimated selling costs.  Residential mortgage loans are charged off when management determines the assets are uncollectible and commences foreclosure proceedings on the property, at which time the property is written down to fair value less selling costs.  Foreclosed property is recorded as real estate owned in other investments.  Syndicated loans are placed on nonaccrual status when management determines it will not collect all contractual principal and interest on the loan.

Allowance for Loan Losses

Management determines the adequacy of the allowance for loan losses by portfolio 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, FICO scores of the borrower and occupancy rates, along with economic and market conditions.  This evaluation is inherently subjective as it requires estimates, which may be susceptible to significant change.

The Company determines the amount of the allowance required for certain sectors based on management’s assessment of relative risk characteristics of the loan portfolio.  The allowance is recorded for homogeneous loan categories on a pool basis, based on an analysis of product mix and risk characteristics of the portfolio, including geographic concentration, bankruptcy experiences, and historical losses, adjusted for current trends and market conditions.

While the Company attributes portions of the allowance to specific loan pools as part of the allowance estimation process, the entire allowance is available to absorb losses inherent in the total loan portfolio.  The allowance is increased through provisions charged to net realized investment gains (losses) and reduced/increased by net charge-offs/recoveries.

Impaired Loans

The Company considers a loan to be impaired when, based on current information and events, it is probable the Company will not be able to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement.  Impaired loans may also include loans that have been modified in troubled debt restructurings as a concession to borrowers experiencing financial difficulties.  Management evaluates for impairment all restructured loans and loans with higher impairment risk factors.  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. The evaluation of impairment on residential mortgage loans is primarily driven by delinquency status of individual loans.  The impairment recognized is measured as the excess of the loan’s recorded investment over: (i) the present value of its expected principal and interest payments discounted at the loan’s effective interest rate, (ii) the fair value of collateral or (iii) the loan’s observable market price.

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. 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.

Cash and Cash Equivalents

Cash equivalents include highly liquid investments with original maturities of 90 days or less.

Restricted Cash

Total restricted cash at December 31, 2012 and 2011 was $86 million and $26 million, respectively, consisting of cash that has been pledged to counterparties.

Reinsurance

The Company cedes significant amounts of insurance risk to other insurers under reinsurance agreements. Reinsurance premiums paid and benefits received are accounted for consistently with the basis used in accounting for the policies from which risk is reinsured and consistently with the terms of the reinsurance contracts. Reinsurance premiums for traditional life, long term care (“LTC”) and DI ceded on a coinsurance basis, net of the change in any prepaid reinsurance asset, are reported as a reduction of premiums. Fixed and variable universal life reinsurance premiums are reported as a reduction of policy and contract charges.  In addition, for fixed and variable universal life insurance policies, the net cost of reinsurance ceded, which represents the discounted amount of the expected cash flows between the reinsurer and the Company, is recognized as an asset and amortized over the term of the reinsurance contract, in proportion to the estimated gross profits and is subject to retrospective adjustment in a manner similar to retrospective adjustment of DAC.  The assumptions used to project the expected cash flows are consistent with those used for DAC asset valuation for the same contracts.  Changes in the net cost of reinsurance are reflected as a component of policy and contract charges.  Reinsurance recoveries are reported as components of benefits, claims, losses and settlement expenses.

Insurance liabilities are reported before the effects of reinsurance. Future policy benefits and policy claims and other policyholders’ funds recoverable under reinsurance contracts are recorded as reinsurance recoverables.

The Company also assumes life insurance and fixed annuity risk from other insurers in limited circumstances. Reinsurance premiums received and benefits paid are accounted for consistently with the basis used in accounting for the policies from which risk is reinsured and consistently with the terms of the reinsurance contracts.  Liabilities for assumed business are recorded within future policy benefits.

See Note 8 for additional information on reinsurance.

Land, Buildings, Equipment and Software

Land, buildings, equipment and internally developed or purchased software are carried at cost less accumulated depreciation or amortization and are reflected within other assets. The Company generally uses the straight-line method of depreciation and amortization over periods ranging from three to 30 years.

At December 31, 2012 and 2011, land, buildings, equipment and software were $174 million and $182 million, respectively, net of accumulated depreciation of $91 million and $75 million, respectively. Depreciation and amortization expense for the years ended December 31, 2012, 2011 and 2010 was $17 million, $16 million and $14 million, respectively.

Derivative Instruments and Hedging Activities

Freestanding derivative instruments are recorded at fair value and are reflected in other assets or other liabilities.  The Company’s policy is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement.  The accounting for changes in the fair value of a derivative instrument depends on its intended use and the resulting hedge designation, if any.  The Company primarily uses derivatives as economic hedges that are not designated as accounting hedges or do not qualify for hedge accounting treatment.  The Company occasionally designates derivatives as (i) hedges of changes in the fair value of assets, liabilities, or firm commitments (“fair value hedges”) or (ii) hedges of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedges”).

Derivative instruments that are entered into for hedging purposes are designated as such at the time the Company enters into the contract.  For all derivative instruments that are designated for hedging activities, the Company formally documents all of the hedging relationships between the hedge instruments and the hedged items at the inception of the relationships.  Management also formally documents its risk management objectives and strategies for entering into the hedge transactions.  The Company formally assesses, at inception and on a quarterly basis, whether derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of hedged items.  If it is determined that a derivative is no longer highly effective as a hedge, the Company will discontinue the application of hedge accounting.

For derivative instruments that do not qualify for hedge accounting or are not designated as accounting hedges, changes in fair value are recognized in current period earnings.  Changes in fair value of derivatives are presented in the Consolidated Statements of Income based on the nature and use of the instrument.  Changes in fair value of derivatives used as economic hedges are presented in the Consolidated Statements of Income with the corresponding change in the hedged asset or liability.

For derivative instruments that qualify as fair value hedges, changes in the fair value of the derivatives, as well as changes in the fair value of the hedged assets, liabilities or firm commitments, are recognized on a net basis in current period earnings. The carrying value of the hedged item is adjusted for the change in fair value from the designated hedged risk.  If a fair value hedge designation is removed or the hedge is terminated prior to maturity, previous adjustments to the carrying value of the hedged item are recognized into earnings over the remaining life of the hedged item.

For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instruments is reported in accumulated other comprehensive income and reclassified into earnings when the hedged item or transaction impacts earnings.  The amount that is reclassified into earnings is presented in the Consolidated Statements of Income with the hedged instrument or transaction impact.  Any ineffective portion of the gain or loss is reported in current period earnings as a component of net investment income.  If a hedge designation is removed or a hedge is terminated prior to maturity, the amount previously recorded in accumulated other comprehensive income is reclassified to earnings over the period that the hedged item impacts earnings.  For hedge relationships that are discontinued because the forecasted transaction is not expected to occur according to the original strategy, any related amounts previously recorded in accumulated other comprehensive income are recognized in earnings immediately.

The equity components of EIA and IUL obligations are considered an embedded derivative.  Additionally, certain annuities contain guaranteed minimum accumulation benefit (“GMAB”) and guaranteed minimum withdrawal benefit (“GMWB”) provisions.  The GMAB and the non-life contingent benefits associated with GMWB provisions are also considered embedded derivatives.

See Note 13 for information regarding the Company’s fair value measurement of derivative instruments and Note 16 for the impact of derivatives on the Consolidated Statements of Income.

Deferred Acquisition Costs

The Company incurs costs in connection with acquiring new and renewal insurance and annuity businesses.  The portion of these costs which are incremental and direct to the acquisition of a new or renewal insurance policy or annuity contract are deferred.    Significant costs capitalized by the Company include sales based compensation related to the acquisition of new and renewal insurance policies and annuity contracts, medical inspection costs for successful sales, and a portion of employee compensation and benefit costs based upon the amount of time spent on successful sales.  Sales based compensation paid to Ameriprise Financial Services, Inc. (“AFSI”), a subsidiary of Ameriprise Financial, advisors and employees and third-party distributers is capitalized.  Employee compensation and benefits costs which are capitalized relate primarily to sales efforts, underwriting and processing. All other costs which are not incremental direct costs of acquiring an insurance policy or annuity contract are expensed as incurred. The DAC associated with insurance policies or annuity contracts that are significantly modified or internally replaced with another contract are accounted for as contract terminations.  These transactions are anticipated in establishing amortization periods and other valuation assumptions.

Costs deferred as DAC are amortized over time.  For annuity and universal life (“UL”) contracts, DAC are amortized based on projections of estimated gross profits over amortization periods equal to the approximate life of the business.  For other insurance products, DAC are generally amortized as a percentage of premiums over amortization periods equal to the premium-paying period.

For annuity and UL insurance products, the assumptions made in projecting future results and calculating the DAC balance and DAC amortization expense are management’s best estimates.  Management is required to update these assumptions whenever it appears that, based on actual experience or other evidence, earlier estimates should be revised.  When assumptions are changed, the percentage of estimated gross profits used to amortize DAC might also change.  A change in the required amortization percentage is applied retrospectively; an increase in amortization percentage will result in a decrease in the DAC balance and an increase in DAC amortization expense, while a decrease in amortization percentage will result in an increase in the DAC balance and a decrease in DAC amortization expense.  The impact on results of operations of changing assumptions can be either positive or negative in any particular period and is reflected in the period in which such changes are made.

For traditional life, DI and LTC insurance products, the assumptions made in calculating the DAC balance and DAC amortization expense are consistent with those used in determining the liabilities and, therefore, are intended to provide for adverse deviations in experience and are revised only if management concludes experience will be so adverse that DAC are not recoverable.  If management concludes that DAC are not recoverable, DAC are reduced to the amount that is recoverable based on best estimate assumptions and there is a corresponding expense recorded in the Consolidated Statements of Income.

For annuity, life, DI and LTC insurance products, key assumptions underlying those long-term projections include interest rates (both earning rates on invested assets and rates credited to contractholder and policyholder accounts), equity market performance, mortality and morbidity rates and the rates at which policyholders are expected to surrender their contracts, make withdrawals from their contracts and make additional deposits to their contracts.  Assumptions about earned and credited interest rates are the primary factors used to project interest margins, while assumptions about equity and bond market performance are the primary factors used to project client asset value growth rates, and assumptions about surrenders, withdrawals and deposits comprise projected persistency rates.  Management must also make assumptions to project maintenance expenses associated with servicing its annuity and insurance businesses during the DAC amortization period.

The client asset value growth rates are the rates at which variable annuity and variable universal life (“VUL”) insurance contract values invested in separate accounts are assumed to appreciate in the future.  The rates used vary by equity and fixed income investments.  Management reviews and, where appropriate, adjusts its assumptions with respect to client asset value growth rates on a regular basis.  The Company typically uses a five-year mean reversion process as a guideline in setting near-term equity fund growth rates based on a long-term view of financial market performance as well as recent actual performance.  The suggested near-term equity fund growth rate is reviewed quarterly to ensure consistency with management’s assessment of anticipated equity market performance.  DAC amortization expense recorded in a period when client asset value growth rates exceed management’s near-term estimate will typically be less than in a period when growth rates fall short of management’s near-term estimate.

The Company monitors other principal DAC amortization assumptions, such as persistency, mortality, morbidity, interest margin and maintenance expense levels each quarter and, when assessed independently, each could impact the Company’s DAC balances.

The analysis of DAC balances and the corresponding amortization is a dynamic process that considers all relevant factors and assumptions described previously.  Unless the Company’s management identifies a significant deviation over the course of the quarterly monitoring, management reviews and updates these DAC amortization assumptions annually in the third quarter of each year.

Deferred Sales Inducement Costs

Sales inducement costs consist of bonus interest credits and premium credits added to certain annuity contract and insurance policy values.  These benefits are capitalized to the extent they are incremental to amounts that would be credited on similar contracts without the applicable feature.  The amounts capitalized are amortized using the same methodology and assumptions used to amortize DAC.  The amortization of DSIC is recorded in benefits, claims, losses and settlement expenses.

Separate Account Assets and Liabilities

Separate account assets and liabilities are primarily funds held for the exclusive benefit of variable annuity contractholders and variable life insurance policyholders, who assume the related investment risk.  Income and losses on separate account assets accrue directly to the contractholder or policyholder and are not reported in the Company’s Consolidated Statements of Income.  Separate account assets are recorded at fair value. Changes in the fair value of separate account assets are offset by changes in the related separate account liabilities. The Company receives mortality and expense risk and other fees, guarantee fees and cost of insurance charges from the related accounts.

Future Policy Benefits and Policy Claims and Other Policyholders’ Funds

Fixed Annuities and Variable Annuity Guarantees

Future policy benefits and policy claims and other policyholders’ funds related to fixed annuities and variable annuity guarantees include liabilities for fixed account values on fixed and variable deferred annuities, guaranteed benefits associated with variable annuities, EIAs and fixed annuities in a payout status.

Liabilities for fixed account values on fixed and variable deferred annuities are equal to accumulation values, which are the cumulative gross deposits and credited interest less withdrawals and various charges.

The majority of the variable annuity contracts offered by the Company contain guaranteed minimum death benefit (“GMDB”) provisions.  When market values of the customer’s accounts decline, the death benefit payable on a contract with a GMDB may exceed the contract accumulation value.  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 containing GMWB and GMAB provisions, and until May 2007, the Company offered contracts containing guaranteed minimum income benefit (“GMIB”) provisions.

In determining the liabilities for GMDB, GMIB and the life contingent benefits associated with GMWB, the Company projects these benefits and contract assessments using actuarial models to simulate various equity market scenarios. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews and, where appropriate, adjusts its assumptions each quarter.  Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.

The GMDB liability is determined by estimating the expected value of death benefits in excess of the projected contract accumulation value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g., mortality and expense fees, contractual administrative charges and similar fees).

If elected by the contract owner and after a stipulated waiting period from contract issuance, a GMIB guarantees a minimum lifetime annuity payout based on a specified rate of contract accumulation value growth and predetermined annuity purchase rates. The GMIB liability is determined each period by estimating the expected value of annuitization benefits in excess of the projected contract accumulation value at the date of annuitization and recognizing the excess over the estimated meaningful life based on expected assessments.

The embedded derivatives related to GMAB and the non-life contingent benefits associated with GMWB provisions are recorded at fair value.  See Note 13 for information regarding the fair value measurement of embedded derivatives.  The liability for the life contingent benefits associated with GMWB provisions is determined in the same way as the GMDB liability.  Significant assumptions made in projecting future benefits and fees relate to persistency and benefit utilization. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.  The changes in both the fair values of the GMWB and GMAB embedded derivatives and the liability for life contingent benefits are reflected in benefits, claims, losses and settlement expenses.

Liabilities for EIAs are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

Liabilities for fixed annuities in a benefit or payout status are based on future estimated payments using established industry mortality tables and interest rates.

Life, Disability Income and Long Term Care Insurance

Future policy benefits and policy claims and other policyholders’ funds related to life, DI and LTC insurance include liabilities for fixed account values on fixed and variable universal life policies, liabilities for indexed accounts of IUL products, liabilities for unpaid amounts on reported claims, estimates of benefits payable on claims incurred but not yet reported and estimates of benefits that will become payable on term life, whole life, DI and LTC policies as claims are incurred in the future.

Liabilities for fixed account values on fixed and variable universal life insurance are equal to accumulation values.  Accumulation values are the cumulative gross deposits and credited interest less various contractual expense and mortality charges and less amounts withdrawn by policyholders.

Liabilities for indexed accounts of IUL products are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

A portion of the Company’s fixed and variable universal life policies have product features that result in profits followed by losses from the insurance component of the contract. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the contract.  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.

In determining the liability for contracts with profits followed by losses, the Company projects benefits and contract assessments using actuarial models. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.

The liability for these future losses is determined by estimating the death benefits in excess of account value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g. cost of insurance charges, contractual administrative charges, similar fees and investment margin). See Note 9 for information regarding the liability for contracts with secondary guarantees.

Liabilities for unpaid amounts on reported life insurance claims are equal to the death benefits payable under the policies. Liabilities for unpaid amounts on reported DI and LTC claims include any periodic or other benefit amounts due and accrued, along with estimates of the present value of obligations for continuing benefit payments. These amounts are calculated based on claim continuance tables which estimate the likelihood an individual will continue to be eligible for benefits. Present values are calculated at interest rates established when claims are incurred. Anticipated claim continuance rates are based on established industry tables, adjusted as appropriate for the Company’s experience.

Liabilities for estimated benefits payable on claims that have been incurred but not yet reported are based on periodic analysis of the actual time lag between when a claim occurs and when it is reported.

Liabilities for estimates of benefits that will become payable on future claims on term life, whole life, DI and LTC policies are based on the net level premium method, using anticipated premium payments, mortality and morbidity rates, policy persistency and interest rates earned on assets supporting the liability. Anticipated mortality and morbidity rates are based on established industry mortality and morbidity tables, with modifications based on the Company’s experience. Anticipated premium payments and persistency rates vary by policy form, issue age, policy duration and certain other pricing factors.

Changes in future policy benefits and policy claims and other policyholders’ funds are reflected in earnings in the period adjustments are made.

Where applicable, benefit amounts expected to be recoverable from reinsurance companies who share in the risk are separately recorded as reinsurance recoverables.

Sources of Revenue

The Company’s principal sources of revenue include premiums, net investment income and policy and contract charges.

Premiums

Premiums include premiums on traditional life, DI and LTC insurance products and immediate annuities with a life contingent feature.  Premiums are reported net of reinsurance ceded and are recognized as revenue when due.

Net Investment Income

Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale, commercial and residential mortgage loans, policy loans, other investments and cash and cash equivalents; the changes in fair value of certain derivatives; and the pro-rata share of net income or loss on equity method investments.  Interest income is accrued as earned using the effective interest method, which makes an adjustment of the yield for premiums and discounts on all performing fixed maturity securities classified as Available-for-Sale and on the residential mortgage loans so that the related security or loan recognizes a constant rate of return on the outstanding balance throughout its term.

Policy and Contract Charges

Policy and contract charges include mortality and expense risk fees and certain other charges assessed on annuities and fixed and variable universal life insurance, which consist of cost of insurance charges, net of reinsurance premiums and cost of reinsurance for universal life insurance products, and administrative and surrender charges.  Mortality and expense risk fees include risk, management and administration fees, which are generated directly and indirectly from the Company’s separate account assets.  Cost of insurance charges on fixed and variable universal life insurance and contract charges and surrender charges on annuities and fixed and variable universal life insurance are recognized as revenue when collected.

Net Realized Investment Gains (Losses)

Net realized investment gains (losses) primarily include realized gains and losses on the sale of securities and charges for the other-than-temporary impairments of investments related to credit losses.  Realized gains and losses on the sale of securities, other than equity method investments, are recognized using the specific identification method, on a trade date basis.

Other Insurance and Operating Expenses

Other insurance and operating expenses include expenses allocated to the Company from its parent, Ameriprise Financial, for the Company’s share of compensation, professional and consultant fees and expenses associated with information technology and communications, facilities and equipment, advertising and promotion and legal and regulatory costs.  Also included are commissions, sales and marketing expenses and other operating expenses.  These expenses are presented net of acquisition cost deferrals.

Income Taxes

The Company’s taxable income is included in the consolidated federal income tax return of Ameriprise Financial. The Company provides for income taxes on a separate return basis, except that, under an agreement between Ameriprise Financial and the Company, tax benefits are recognized for losses to the extent they can be used in the consolidated return.  It is the policy of Ameriprise Financial that it will reimburse its subsidiaries for any tax benefits recorded.  Inherent in the provision for income taxes are estimates and judgments regarding the tax treatment of certain items.

In connection with the provision for income taxes, the Consolidated Financial Statements reflect certain amounts related to deferred tax assets and liabilities, which result from temporary differences between the assets and liabilities measured for financial statement purposes versus the assets and liabilities measured for tax return purposes. Among the Company’s deferred taxes is a significant deferred tax asset relating to capital losses that have been recognized for financial statement purposes but not yet for tax return purposes as well as future deductible capital losses realized for tax return purposes.  Under current U.S. federal income tax law, capital losses generally must be used against capital gain income within five years of the year in which the capital losses are recognized for tax purposes.

The Company is required to establish a valuation allowance for any portion of its 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 including the ability to generate capital gains.  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.  Management may need to identify and implement appropriate planning strategies to ensure its ability to realize deferred tax assets and avoid the establishment of a valuation allowance with respect to such assets.  In the opinion of management, it is currently more likely than not that the Company will not realize the full benefit of certain state net operating losses and therefore a valuation allowance of $5 million has been established at December 31, 2012.

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Fair Values of Assets and Liabilities (Details 2) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Loss included in net realized investment gains (losses)	$ 7	$ 26	$ 21
Gain included in net investment income	1	85	85
GMWB and GMAB Embedded Derivatives
Available-for-Sale securities:
Purchases, sales, issues and settlements, net			(126)
Future Policy Benefits:
Balance at the beginning of the period	(1,585)	(421)	(299)
Net income	948	(1,007)	4
Purchases, sales, issues and settlements, net			(126)
Issues	(188)	(149)
Settlements	(8)	(8)
Balance at the end of the period	(833)	(1,585)	(421)
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Benefits, claims, losses and settlement expenses	908	(1,035)	(15)
Cumulative increase (decrease) to the embedded derivative liability	(82)	216	36
Corporate Debt Securities
Available-for-Sale securities:
Balance at the beginning of the period	1,342	1,317	1,239
Net income	(1)	7	1
Other comprehensive income	12	12	30
Purchases	444	178
Sales		(50)
Purchases, sales, issues and settlements, net			22
Settlements	(153)	(117)
Transfers into Level 3	10	7	25
Transfers out of Level 3		(12)
Balance at the end of the period	1,654	1,342	1,317
Future Policy Benefits:
Purchases, sales, issues and settlements, net			22
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Net investment income	(1)
Residential Mortgage Backed Securities
Available-for-Sale securities:
Balance at the beginning of the period	58	2,697	2,868
Net income	(7)	49	55
Other comprehensive income	10	(75)	202
Purchases	31	26
Sales		(3)
Purchases, sales, issues and settlements, net			(428)
Settlements	(12)	(471)
Transfers into Level 3	25
Transfers out of Level 3	(82)	(2,165)
Balance at the end of the period	23	58	2,697
Future Policy Benefits:
Purchases, sales, issues and settlements, net			(428)
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Net investment income			79
Net realized investment gains (losses)		(23)	(26)
Commercial Mortgage Backed Securities
Available-for-Sale securities:
Balance at the beginning of the period	16	30	72
Net income	1		1
Other comprehensive income	7		10
Purchases	8	71
Purchases, sales, issues and settlements, net			91
Transfers into Level 3	146	1
Transfers out of Level 3	(8)	(86)	(144)
Balance at the end of the period	170	16	30
Future Policy Benefits:
Purchases, sales, issues and settlements, net			91
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Net investment income	1
Asset Backed Securities
Available-for-Sale securities:
Balance at the beginning of the period	133	148	119
Net income	1	2	5
Other comprehensive income	2	(6)	10
Purchases, sales, issues and settlements, net			27
Settlements	(2)	(3)
Transfers into Level 3	22
Transfers out of Level 3		(8)	(13)
Balance at the end of the period	156	133	148
Future Policy Benefits:
Purchases, sales, issues and settlements, net			27
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Net investment income	1	1	4
Other Structured Investments
Available-for-Sale securities:
Balance at the beginning of the period	14	13	11
Net income		1	2
Other comprehensive income	1	(2)
Purchases		3
Settlements		(1)
Transfers out of Level 3	(15)
Balance at the end of the period		14	13
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Net realized investment gains (losses)		1
Mortgage Backed Securities
Available-for-Sale securities:
Transfers out of Level 3	(58)	(2,200)
Available-for-Sale Securities: Fixed Maturities
Available-for-Sale securities:
Balance at the beginning of the period	1,563	4,205	4,309
Net income	(6)	59	64
Other comprehensive income	32	(71)	252
Purchases	483	278
Sales		(53)
Purchases, sales, issues and settlements, net			(288)
Settlements	(167)	(592)
Transfers into Level 3	203	8	25
Transfers out of Level 3	(105)	(2,271)	(157)
Balance at the end of the period	2,003	1,563	4,205
Future Policy Benefits:
Purchases, sales, issues and settlements, net			(288)
Changes in unrealized gains (losses) relating to assets and liabilities held at the end of the period included in:
Net investment income	1	1	83
Net realized investment gains (losses)		$ (22)	$ (26)

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Investments (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Investments
Amortized Cost	$ 23,060	$ 24,399
Gross Unrealized Gains	2,978	2,450
Gross Unrealized Losses	(102)	(270)
Fair Value	25,936	26,579
Noncredit OTTI	(23)	(37)
Corporate debt securities
Investments
Amortized Cost	14,881	14,770
Gross Unrealized Gains	2,167	1,726
Gross Unrealized Losses	(7)	(78)
Fair Value	17,041	16,418
Residential mortgage backed securities
Investments
Amortized Cost	3,446	4,264
Gross Unrealized Gains	233	242
Gross Unrealized Losses	(58)	(138)
Fair Value	3,621	4,368
Noncredit OTTI	(24)	(41)
Commercial mortgage backed securities
Investments
Amortized Cost	2,717	3,355
Gross Unrealized Gains	287	276
Fair Value	3,004	3,631
State and municipal obligations
Investments
Amortized Cost	976	1,012
Gross Unrealized Gains	180	131
Gross Unrealized Losses	(34)	(47)
Fair Value	1,122	1,096
Asset backed securities
Investments
Amortized Cost	808	812
Gross Unrealized Gains	66	43
Gross Unrealized Losses	(3)	(6)
Fair Value	871	849
Foreign government bonds and obligations
Investments
Amortized Cost	188	126
Gross Unrealized Gains	36	19
Gross Unrealized Losses		(1)
Fair Value	224	144
U.S. government and agencies obligations
Investments
Amortized Cost	42	49
Gross Unrealized Gains	7	8
Fair Value	49	57
Other structured investment
Investments
Amortized Cost		10
Gross Unrealized Gains		4
Fair Value		14
Noncredit OTTI		4
Total fixed maturities
Investments
Amortized Cost	23,058	24,398
Gross Unrealized Gains	2,976	2,449
Gross Unrealized Losses	(102)	(270)
Fair Value	25,932	26,577
Noncredit OTTI	(24)	(37)
Common stocks
Investments
Amortized Cost	2	1
Gross Unrealized Gains	2	1
Fair Value	4	2
Noncredit OTTI	$ 1

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Financing Receivables (Tables)

12 Months Ended

Dec. 31, 2012

Financing Receivables

Rollforward of the allowance for loan losses

	December 31, 2012
	Commercial Mortgage Loans			Syndicated Loans			Total
	(in millions)
Beginning balance	$	32		$	5		$	37
Charge-offs	(6		)	(1		)	(7		)
Provisions	—			—			—
Ending balance	$	26		$	4		$	30
Individually evaluated for impairment	$	5		$	—		$	5
Collectively evaluated for impairment	21			4			25

	December 31, 2011
	Commercial Mortgage Loans			Syndicated Loans		Total
	(in millions)
Beginning balance	$	36		$	5	$	41
Charge-offs	(3		)	—		(3		)
Provisions	(1		)	—		(1		)
Ending balance	$	32		$	5	$	37
Individually evaluated for impairment	$	9		$	—	$	9
Collectively evaluated for impairment	23			5		28

	December 31, 2010
	Commercial Mortgage Loans			Syndicated Loans			Total
	(in millions)
Beginning balance	$	30		$	12		$	42
Charge-offs	(1		)	(2		)	(3		)
Provisions	7			(5		)	2
Ending balance	$	36		$	5		$	41
Individually evaluated for impairment	$	8		$	—		$	8
Collectively evaluated for impairment	28			5			33

Schedule of recorded investment in financing receivables by impairment method and type of loan

	December 31, 2012
	Commercial Mortgage Loans		Residential Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	39	$	—	$	—	$	39
Collectively evaluated for impairment	2,442		934		303		3,679
Total	$	2,481	$	934	$	303	$	3,718

	December 31, 2011
	Commercial Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	64	$	1	$	65
Collectively evaluated for impairment	2,441		301		2,742
Total	$	2,505	$	302	$	2,807

Schedule of purchases and sales of loans

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Purchases
Residential mortgage loans	$	954	$	—	$	—
Syndicated loans	111		194		59
Total loans purchased	$	1,065	$	194	$	59
Sales
Syndicated loans	$	9	$	2	$	2

Schedule of concentrations of credit risk of commercial mortgage loans by U.S. region

	December 31, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
South Atlantic	$	625	25	%	$	29	$	618	25	%	$	—
Pacific	565		23		15		556		22		1
Mountain	262		11		12		275		11		11
East North Central	255		10		3		247		10		—
West North Central	216		9		—		224		9		1
Middle Atlantic	198		8		6		217		9		—
West South Central	159		6		4		173		7		2
New England	135		5		1		130		5		—
East South Central	66		3		2		65		2		—
	2,481		100	%	$	72	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,455					$	2,473

Schedule of concentrations of credit risk of commercial mortgage loans by property type

	December 31, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
Retail	$	822	33	%	$	41	$	825	33	%	$	2
Office	597		24		—		669		27		2
Industrial	449		18		9		455		18		1
Apartments	415		17		13		358		14		—
Mixed use	42		2		—		42		2		—
Hotel	36		1		—		51		2		—
Other	120		5		9		105		4		10
	2,481		100	%	$	72	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,455					$	2,473

Schedule of troubled debt restructurings

	Years Ended December 31,
	2012			2011
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(in millions, except number of loans)
Commercial mortgage loans	4	$	13	10	$	49
Syndicated loans	2	1		—	—
Total	6	$	14	10	$	49

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Investments (Tables)

12 Months Ended

Dec. 31, 2012

Investments.

Schedule of available-for-sale securities distributed by type

	December 31, 2012
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,881	$	2,167	$	(7	)	$	17,041	$	—
Residential mortgage backed securities	3,446		233		(58		)	3,621		(24		)
Commercial mortgage backed securities	2,717		287		—			3,004		—
State and municipal obligations	976		180		(34		)	1,122		—
Asset backed securities	808		66		(3		)	871		—
Foreign government bonds and obligations	188		36		—			224		—
U.S. government and agencies obligations	42		7		—			49		—
Total fixed maturities	23,058		2,976		(102		)	25,932		(24		)
Common stocks	2		2		—			4		1
Total	$	23,060	$	2,978	$	(102	)	$	25,936	$	(23	)

	December 31, 2011
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,770	$	1,726	$	(78	)	$	16,418	$	—
Residential mortgage backed securities	4,264		242		(138		)	4,368		(41		)
Commercial mortgage backed securities	3,355		276		—			3,631		—
State and municipal obligations	1,012		131		(47		)	1,096		—
Asset backed securities	812		43		(6		)	849		—
Foreign government bonds and obligations	126		19		(1		)	144		—
U.S. government and agencies obligations	49		8		—			57		—
Other structured investments	10		4		—			14		4
Total fixed maturities	24,398		2,449		(270		)	26,577		(37		)
Common stocks	1		1		—			2		—
Total	$	24,399	$	2,450	$	(270	)	$	26,579	$	(37	)

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

Schedule of fixed maturity securities by rating

	December 31, 2012						December 31, 2011
Ratings	Amortized Cost		FairValue		Percent of Total Fair Value		Amortized Cost		FairValue		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	5,680	$	6,198	24	%	$	7,276	$	7,811	30	%
AA	1,102		1,273		5		1,161		1,291		5
A	4,262		4,849		19		4,148		4,578		17
BBB	10,409		12,019		46		10,211		11,446		43
Below investment grade	1,605		1,593		6		1,602		1,451		5
Total fixed maturities	$	23,058	$	25,932	100	%	$	24,398	$	26,577	100	%

Schedule of available-for-sale securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position

	December 31, 2012
	Less than 12 months						12 months or more						Total
Description of Securities	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	50	$	477	$	(4	)	6	$	70	$	(3	)	56	$	547	$	(7	)
Residential mortgage backed securities	6	107		—			56	293		(58		)	62	400		(58		)
State and municipal obligations	—	—		—			2	100		(34		)	2	100		(34		)
Asset backed securities	1	10		—			5	86		(3		)	6	96		(3		)
Total	57	$	594	$	(4	)	69	$	549	$	(98	)	126	$	1,143	$	(102	)

	December 31, 2011
	Less than 12 months						12 months or more						Total
Description of Securities	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	70	$	1,004	$	(37	)	9	$	257	$	(41	)	79	$	1,261	$	(78	)
Residential mortgage backed securities	31	344		(8		)	63	336		(130		)	94	680		(138		)
State and municipal obligations	—	—		—			2	87		(47		)	2	87		(47		)
Asset backed securities	11	139		(3		)	3	43		(3		)	14	182		(6		)
Foreign government bonds and obligations	5	23		(1		)	—	—		—			5	23		(1		)
Total	117	$	1,510	$	(49	)	77	$	723	$	(221	)	194	$	2,233	$	(270	)

Schedule of rollforward of the cumulative amounts recognized in the consolidated statements of income for other-than-temporary impairments related to credit losses

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Beginning balance	$	106		$	108		$	82
Credit losses for which an other-than-temporary impairment was not previously recognized	1			13			14
Credit losses for which an other-than-temporary impairment was previously recognized	16			11			12
Reductions for securities sold during the period (realized)	(36		)	(26		)	—
Ending balance	$	87		$	106		$	108

Other Comprehensive Income Available-for-Sale Securities Disclosure

	NetUnrealizedSecuritiesGains			DeferredIncome Tax			Accumulated OtherComprehensive Income Related to Net Unrealized Securities Gains
	(in millions)
Balance at January 1, 2010	$	638		$	(222	)	$	416
Cumulative effect of accounting change	62			(22		)	40		(1)
Net unrealized securities gains arising during the period(2)	794			(278		)	516
Reclassification of net securities gains included in net income	(20		)	7			(13		)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(259		)	90			(169		)
Balance at December 31, 2010	1,215			(425		)	790		(3)
Net unrealized securities gains arising during the period(2)	560			(196		)	364
Reclassification of net securities gains included in net income	(5		)	2			(3		)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(299		)	105			(194		)
Balance at December 31, 2011		1,471			(514	)		957	(3)
Net unrealized securities gains arising during the period(2)	694			(243		)	451
Reclassification of net securities losses included in net income	2			(1		)	1
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(237		)	83			(154		)
Balance at December 31, 2012	$	1,930		$	(675	)	$	1,255	(3)

(1) The Company retrospectively adopted a new accounting standard on January 1, 2012 for DAC. See Note 1 and Note 3 for additional information on the adoption impact.

(2) Includes other-than-temporary impairment losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income during the period.

(3) Includes $(15) million, $(20) million and $(13) million of noncredit related impairments on securities and net unrealized securities losses on previously impaired securities at December 31, 2012, 2011 and 2010, respectively.

Schedule of net realized gains on available-for-sale securities

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Gross realized investment gains	$	16		$	48		$	51
Gross realized investment losses	(1		)	(20		)	(4		)
Other-than-temporary impairments	(17		)	(24		)	(28		)
Total	$	(2	)	$	4		$	19

Schedule of available-for-sale securities by contractual maturity

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	1,537	$	1,563
Due after one year through five years	4,065		4,372
Due after five years through 10 years	6,902		7,900
Due after 10 years	3,583		4,601
	16,087		18,436
Residential mortgage backed securities	3,446		3,621
Commercial mortgage backed securities	2,717		3,004
Asset backed securities	808		871
Common stocks	2		4
Total	$	23,060	$	25,936

Schedule of net investment income

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Income on fixed maturities	$	1,324	$	1,469	$	1,486
Income on mortgage loans	158		149		156
Other investments	26		18		32
	1,508		1,636		1,674
Less: investment expenses	28		43		45
Total	$	1,480	$	1,593	$	1,629

Summary of net realized investment gains (losses)

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Fixed maturities	$	(2	)	$	4		$	19
Mortgage loans	—			2			(6		)
Other investments	(1		)	(1		)	3
Total	$	(3	)	$	5		$	16

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Variable Annuity and Insurance Guarantees (Details 2) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
GMDB & GGU
Changes in additional liabilities for variable annuity and insurance guarantees
Balance at the beginning of the period	$ 5	$ 5	$ 6
Incurred claims	6	10	17
Paid claims	(7)	(10)	(18)
Balance at the end of the period	4	5	5
GMIB
Changes in additional liabilities for variable annuity and insurance guarantees
Balance at the beginning of the period	9	8	6
Incurred claims	1	2	3
Paid claims	(1)	(1)	(1)
Balance at the end of the period	9	9	8
GMWB
Changes in additional liabilities for variable annuity and insurance guarantees
Balance at the beginning of the period	1,377	337	204
Incurred claims	(578)	1,040	133
Balance at the end of the period	799	1,377	337
GMAB
Changes in additional liabilities for variable annuity and insurance guarantees
Balance at the beginning of the period	237	104	100
Incurred claims	(134)	133	4
Balance at the end of the period	103	237	104
UL
Changes in additional liabilities for variable annuity and insurance guarantees
Balance at the beginning of the period	111	68	15
Incurred claims	57	53	59
Paid claims	(13)	(10)	(6)
Balance at the end of the period	$ 155	$ 111	$ 68

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Investments (Details 2) (USD $)	Dec. 31, 2012	Dec. 31, 2011
Investments
Amortized Cost	$ 23,060,000,000	$ 24,399,000,000
Fair Value	25,936,000,000	26,579,000,000
Percentage of GNMA, FNMA and FHLMC securities rated AAA	32.00%	33.00%
Holdings of Issuer Other Than GNMA, FNMA and FHLMC as Percentage of Shareholders Equity, Maximum	10.00%
AAA
Investments
Amortized Cost	5,680,000,000	7,276,000,000
Fair Value	6,198,000,000	7,811,000,000
Percent of Total Fair Value	24.00%	30.00%
AA
Investments
Amortized Cost	1,102,000,000	1,161,000,000
Fair Value	1,273,000,000	1,291,000,000
Percent of Total Fair Value	5.00%	5.00%
A
Investments
Amortized Cost	4,262,000,000	4,148,000,000
Fair Value	4,849,000,000	4,578,000,000
Percent of Total Fair Value	19.00%	17.00%
BBB
Investments
Amortized Cost	10,409,000,000	10,211,000,000
Fair Value	12,019,000,000	11,446,000,000
Percent of Total Fair Value	46.00%	43.00%
Below investment grade
Investments
Amortized Cost	1,605,000,000	1,602,000,000
Fair Value	1,593,000,000	1,451,000,000
Percent of Total Fair Value	6.00%	5.00%
Total fixed maturities
Investments
Fixed maturity securities as percentage of the entity's total investments	84.00%	87.00%
Amount of securities internally rated	1,500,000,000	1,200,000,000
Amortized Cost	23,058,000,000	24,398,000,000
Fair Value	$ 25,932,000,000	$ 26,577,000,000
Percent of Total Fair Value	100.00%	100.00%

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Deferred Acquisition Costs and Deferred Sales Inducement Costs (Tables)

12 Months Ended

Dec. 31, 2012

Deferred Acquisition Costs and Deferred Sales Inducement Costs

Schedule of balances of and changes in DAC (subsequent to the adjustment for the new accounting standard)

	2012			2011			2010
	(in millions)
Balance at January 1	$	2,413		$	2,521		$	2,349
Capitalization of acquisition costs	253			282			295
Amortization, excluding the impact of valuation assumptions review	(214		)	(305		)	(227		)
Amortization, impact of valuation assumptions review	(11		)	(31		)	174
Impact of change in net unrealized securities gains	(68		)	(54		)	(70		)
Balance at December 31	$	2,373		$	2,413		$	2,521

Schedule of balances of and changes in DSIC

	2012			2011			2010
	(in millions)
Balance at January 1	$	464		$	545		$	524
Capitalization of sales inducement costs	7			9			35
Amortization, excluding the impact of valuation assumptions review	(45		)	(70		)	(49		)
Amortization, impact of valuation assumptions review	(13		)	(11		)	52
Impact of change in net unrealized securities gains	(9		)	(9		)	(17		)
Balance at December 31	$	404		$	464		$	545

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Reinsurance (Tables)

12 Months Ended

Dec. 31, 2012

Reinsurance

Schedule of effect of reinsurance on premiums

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Direct premiums	$	656		$	707		$	681
Reinsurance ceded	(214		)	(214		)	(192		)
Net premiums	$	442		$	493		$	489

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Nature of Business and Basis of Presentation

12 Months Ended

Dec. 31, 2012

Nature of Business and Basis of Presentation

Nature of Business and Basis of Presentation

1. Nature of Business and Basis of Presentation

RiverSource Life Insurance Company is a stock life insurance company with one wholly owned stock life insurance company subsidiary, RiverSource Life Insurance Co. of New York (“RiverSource Life of NY”).  RiverSource Life Insurance Company is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”).

· RiverSource Life Insurance Company is domiciled in Minnesota and holds Certificates of Authority in American Samoa, the District of Columbia and all states except New York.  RiverSource Life Insurance Company issues insurance and annuity products.

· RiverSource Life of NY is domiciled and holds a Certificate of Authority in New York.  RiverSource Life of NY issues insurance and annuity products.

RiverSource Life Insurance Company also wholly owns RiverSource Tax Advantaged Investments, Inc. (“RTA”).  RTA is a stock company domiciled in Delaware and is a limited partner in affordable housing partnership investments.

The accompanying Consolidated Financial Statements include the accounts of RiverSource Life Insurance Company and companies in which it directly or indirectly has a controlling financial interest (collectively, the “Company”). All intercompany transactions and balances have been eliminated in consolidation.

The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) which vary in certain respects from reporting practices prescribed or permitted by state insurance regulatory authorities as described in Note 15.  Certain reclassifications of prior period amounts have been made to conform to the current presentation.

In the fourth quarter of 2012, the Company made an adjustment to the model which values the reserves related to living benefit guarantees primarily attributable to prior periods, which resulted in a $41 million pretax benefit, net of deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) amortization of $11 million.  In the second quarter of 2012, the Company made a correction for a tax item related to securities lending activities primarily attributable to prior periods, which resulted in a $32 million increase to tax expense. Management has determined that the effect of these corrections is not material to all current and previously issued financial statements.

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.

On January 1, 2012, the Company retrospectively adopted the new accounting standard for DAC for insurance and annuity products. See Note 2 and Note 3 for further information on the new accounting standard and the resulting changes in the Company’s accounting policies on the deferral of acquisition costs.

The following tables present the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

	December 31, 2011
	Previously Reported		Effect of Change			As Adjusted
	(in millions)
Balance Sheets
Assets
Deferred income taxes, net	$	—	$	60		$	60
Deferred acquisition costs	4,367		(1,954		)	2,413
Total assets	105,380		(1,894		)	103,486
Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits	31,182		(13		)	31,169
Deferred income taxes, net	620		(620		)	—
Other liabilities	3,607		1			3,608
Total liabilities	99,508		(632		)	98,876
Shareholder’s equity:
Retained earnings	2,589		(1,374		)	1,215
Accumulated other comprehensive income, net of tax	819		112			931
Total shareholder’s equity	5,872		(1,262		)	4,610
Total liabilities and shareholder’s equity	105,380		(1,894		)	103,486

	December 31, 2010							January 1, 2010
	Previously Reported		Effect of Change			As Adjusted		Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Shareholder’s Equity
Retained earnings	$	3,410	$	(1,416	)	$	1,994	$	3,114	$	(1,309	)	$	1,805
Accumulated other comprehensive income, net of tax	675		85			760		382		40			422
Total shareholder’s equity	6,548		(1,331		)	5,217		5,944		(1,269		)	4,675

	Year Ended December 31, 2011							Year Ended December 31, 2010
	Previously Reported		Effect of Change			As Adjusted		Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Income
Revenues
Total revenues	$	3,934	$	—		$	3,934	$	3,795	$	—		$	3,795
Benefits and expenses
Benefits, claims, losses and settlement expenses	950		—			950		1,203		—			1,203
Interest credited to fixed accounts	853		3			856		909		—			909
Amortization of deferred acquisition costs	539		(203		)	336		53		—			53
Other insurance and operating expenses	645		136			781		582		164			746
Total benefits and expenses	2,987		(64		)	2,923		2,747		164			2,911
Pretax income	947		64			1,011		1,048		(164		)	884
Income tax provision	168		22			190		252		(57		)	195
Net income	$	779	$	42		$	821	$	796	$	(107	)	$	689

The Company’s principal products are variable deferred annuities and variable universal life insurance which are issued primarily to individuals.  It also offers fixed annuities where assets accumulate until the contract is surrendered, the contractholder (or in some contracts, the annuitant) dies, or the contractholder or annuitant begins receiving benefits under an annuity payout option. It also offers immediate annuities in which payments begin within one year of issue and continue for life or for a fixed period of time.  The Company’s fixed deferred annuities guarantee a relatively low annual interest rate during the accumulation period (the time before annuity payments begin). However, the Company has the option of paying a higher rate set at its discretion.  In addition, persons owning an equity indexed annuity (“EIA”) may have their interest calculated based on an increase in a broad-based stock market index.

The Company issues both variable and fixed universal life insurance, traditional life insurance and disability income (“DI”) insurance.  Universal life insurance is a form of permanent life insurance characterized by flexible premiums, flexible death benefit amounts and unbundled pricing factors (i.e., mortality, interest and expenses).  Traditional life insurance refers to whole and term life insurance policies that pay a specified sum to a beneficiary upon death of the insured for a fixed premium.  Variable universal life insurance combines the premium and death benefit flexibility of universal life with underlying fund investment flexibility and the risks associated therewith.  Waiver of premium and accidental death benefit riders are generally available with these life insurance products.  In 2011, the Company began offering indexed universal life (“IUL”) insurance. IUL is similar to universal life insurance in that it provides life insurance coverage and cash value that increases as a result of credited interest.  Also, like universal life insurance, there is a minimum guaranteed credited rate of interest.  Unlike universal life insurance, the rate of credited interest above the minimum guarantee for funds allocated to the indexed account is linked to the S&P 500 Index (subject to a cap).  The policyholder may allocate all or a portion of the policy value to a fixed or indexed account. The Company issues only non-participating life insurance policies which do not pay dividends to policyholders from realized policy margins.

Under the Company’s variable life insurance and variable annuity products described above, the purchaser may choose a fixed account option that is part of the Company’s “general account”, as well as investment options from a variety of portfolios that include common stocks, bonds, managed assets and/or short-term securities.

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Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities (Tables)

12 Months Ended

Dec. 31, 2012

Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities

Schedule of future policy benefits (subsequent to the adjustment for the new accounting standard) and policy claims and other policyholders' funds

	December 31,
	2012		2011
	(in millions)
Fixed annuities	$	16,075	$	16,401
EIA accumulated host values	31		58
EIA embedded derivatives	2		2
Variable annuity fixed sub-accounts	4,843		4,852
Variable annuity GMWB	799		1,377
Variable annuity GMAB	103		237
Other variable annuity guarantees	13		14
Total annuities	21,866		22,941
VUL/UL insurance	2,760		2,662
IUL accumulated host values	59		4
IUL embedded derivatives	45		3
VUL/UL insurance additional liabilities	294		220
Other life, DI and LTC insurance	5,646		5,339
Total future policy benefits	30,670		31,169
Policy claims and other policyholders’ funds	132		121
Total future policy benefits and policy claims and other policyholders’ funds	$	30,802	$	31,290

Schedule of separate account liabilities

	December 31,
	2012		2011
	(in millions)
Variable annuity variable sub-accounts	$	63,302	$	57,556
VUL insurance variable sub-accounts	6,051		5,575
Other insurance variable sub-accounts	42		43
Total	$	69,395	$	63,174

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Nature of Business and Basis of Presentation (Details 2) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Assets
Deferred income taxes, net	$ (63)	$ 60
Deferred acquisition costs	2,373	2,413	2,521	2,349
Total assets	109,748	103,486
Liabilities
Future policy benefits	30,670	31,169
Deferred income taxes, net	1,524	1,559
Other liabilities	4,201	3,608
Total liabilities	105,049	98,876
Shareholder's equity
Retained earnings	1,000	1,215	1,994	1,805
Accumulated other comprehensive income, net of tax	1,234	931	760	422
Total shareholder's equity	4,699	4,610	5,217	4,675
Total liabilities and shareholder's equity	109,748	103,486
Revenues
Total revenues	3,841	3,934	3,795
Benefits and expenses
Benefits, claims, losses and settlement expenses	1,216	950	1,203
Interest credited to fixed accounts	831	856	909
Amortization of deferred acquisition costs	225	336	53
Other insurance and operating expenses	755	781	746
Total benefits and expenses	3,027	2,923	2,911
Pretax income	814	1,011	884
Income tax provision	164	190	195
Net income	650	821	689
Immediate annuities payments beginning period	1 year
Previously Reported
Assets
Deferred acquisition costs		4,367
Total assets		105,380
Liabilities
Future policy benefits		31,182
Deferred income taxes, net		620
Other liabilities		3,607
Total liabilities		99,508
Shareholder's equity
Retained earnings		2,589	3,410	3,114
Accumulated other comprehensive income, net of tax		819	675	382
Total shareholder's equity		5,872	6,548	5,944
Total liabilities and shareholder's equity		105,380
Revenues
Total revenues		3,934	3,795
Benefits and expenses
Benefits, claims, losses and settlement expenses		950	1,203
Interest credited to fixed accounts		853	909
Amortization of deferred acquisition costs		539	53
Other insurance and operating expenses		645	582
Total benefits and expenses		2,987	2,747
Pretax income		947	1,048
Income tax provision		168	252
Net income		779	796
Effect of Change | Adoption of Accounting Standards Update 2010-26 Financial Services-Insurance (Topic 944)
Assets
Deferred income taxes, net		60
Deferred acquisition costs		(1,954)
Total assets		(1,894)
Liabilities
Future policy benefits		(13)
Deferred income taxes, net		(620)
Other liabilities		1
Total liabilities		(632)
Shareholder's equity
Retained earnings		(1,374)	(1,416)	(1,309)
Accumulated other comprehensive income, net of tax		112	85	40
Total shareholder's equity		(1,262)	(1,331)	(1,269)
Total liabilities and shareholder's equity		(1,894)
Benefits and expenses
Interest credited to fixed accounts		3
Amortization of deferred acquisition costs		(203)
Other insurance and operating expenses		136	164
Total benefits and expenses		(64)	164
Pretax income		64	(164)
Income tax provision		22	(57)
Net income		$ 42	$ (107)

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Reinsurance (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Effect of reinsurance on premiums
Direct premiums	$ 656,000,000	$ 707,000,000	$ 681,000,000
Reinsurance ceded	(214,000,000)	(214,000,000)	(192,000,000)
Net premiums	442,000,000	493,000,000	489,000,000
Reinsurance ceded offset with policy and contract charges	84,000,000	71,000,000	67,000,000
Reinsurance recovered from reinsurers	196,000,000	189,000,000	166,000,000
Reinsurance recoverable related to LTC risk ceded to Genworth	1,600,000,000	1,500,000,000
Future policy benefits and claims for assumed reinsurance arrangements	615,000,000	629,000,000
Life Insurance
Reinsurance
Reinsurance percentage of death benefit liability	90.00%
Maximum percentage of death benefit liability not reinsured by the company	10.00%
Maximum amount of life insurance risk retained by the entity on a single life	1,500,000
Maximum amount of life insurance risk retained by the entity on any flexible premium survivorship life policy	1,500,000
Amount of traditional life and universal life insurance in force aggregated	191,400,000,000	191,200,000,000
Amount life insurance reinsured at the year end	138,600,000,000	136,200,000,000
Long Term Care
Reinsurance
Reinsurance percentage of death benefit liability	50.00%
Disability Income
Reinsurance
Maximum amount of life insurance risk retained by the entity on a single life	$ 5,000

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Current income tax:
Federal	$ 197	$ 137	$ (167)
State	7	3	3
Total current income tax	204	140	(164)
Deferred income tax:
Federal	(38)	51	360
State	(2)	(1)	(1)
Total deferred income tax	(40)	50	359
Total income tax provision	164	190	195
Reconciliation of aggregate income tax provision from that computed by using the U.S. statutory rate
Tax at U.S. statutory rate (as a percent)	35.00%	35.00%	35.00%
Changes in taxes resulting from:
Tax-exempt interest and dividend income (as a percent)	(9.70%)	(12.60%)	(7.80%)
State taxes, net of federal benefit (as a percent)	0.40%	0.10%	0.10%
Low income housing credit (as a percent)	(4.70%)	(1.60%)	(1.60%)
Foreign tax credit, net of addback (as a percent)	(0.50%)	(1.60%)	(1.40%)
Taxes applicable to prior years (as a percent)	(2.50%)		(2.20%)
Other, net (as a percent)	2.10%	(0.50%)
Income tax provision (as a percent)	20.10%	18.80%	22.10%
Increase in effective tax rates due to out-of-period correction of tax deductions for prior periods related to securities lending activities	32
Deferred income tax assets:
Liabilities for future policy benefits	1,295	1,589
Investment related	161
Capital loss and tax credit carryforwards	5	30
State net operating losses	5	4
Gross deferred income tax assets	1,466	1,623
Less: Valuation Allowance	(5)	(4)
Total deferred income tax assets	1,461	1,619
Deferred income tax liabilities:
Deferred acquisition costs	677	639
Net unrealized gains on Available-for-Sale securities	676	501
Investment related		190
Deferred sales inducement costs	142	180
Other	29	49
Gross deferred income tax liabilities	1,524	1,559
Net deferred income tax assets (liabilities)	(63)	60
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits
Balance at the beginning of the period	134	83	(77)
Additions (reductions) based on tax positions related to the current year	1	(1)
Additions for tax positions of prior years	19	79	322
Reductions for tax positions of prior years	(77)	(7)	(196)
Settlements	(12)	(20)	34
Balance at the end of the period	65	134	83
Unrecognized tax benefits, net of federal tax benefits that would affect the effective tax rate if recognized	8	12	39
Increase (decrease) in interest and penalties	(3)	57	(8)
Payable related to accrued interest and penalties	30	33
Estimated decrease in amount of unrecognized tax benefits in next 12 months	63
Income tax provision (benefit) amounts of items comprising other comprehensive income (loss)
Net unrealized securities gains	161	89	181
Net unrealized derivative losses	(2)	(2)	(2)
Net income tax provision	$ 159	$ 87	$ 179

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CONSOLIDATED BALANCE SHEETS (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Available-for-Sale:
Fixed maturities, at fair value (amortized cost: 2012, $23,058; 2011, $24,398)	$ 25,932	$ 26,577
Common stocks, at fair value (cost: 2012, $2; 2011, $1)	4	2
Mortgage loans, at amortized cost (less allowance for loan losses: 2012, $26; 2011, $32)	3,389	2,473
Policy loans	752	739
Other investments	743	730
Total investments	30,820	30,521
Cash and cash equivalents	336	828
Restricted cash	86	26
Reinsurance recoverables	2,047	1,953
Other receivables	203	162
Accrued investment income	291	307
Deferred acquisition costs	2,373	2,413
Deferred sales inducement costs	404	464
Other assets	3,793	3,638
Separate account assets	69,395	63,174
Total assets	109,748	103,486
Liabilities:
Future policy benefits	30,670	31,169
Policy claims and other policyholders' funds	132	121
Borrowings under repurchase agreements	501	504
Line of credit with Ameriprise Financial, Inc.	150	300
Other liabilities	4,201	3,608
Separate account liabilities	69,395	63,174
Total liabilities	105,049	98,876
Shareholder's equity:
Common stock, $30 par value; 100,000 shares authorized, issued and outstanding	3	3
Additional paid-in capital	2,462	2,461
Retained earnings	1,000	1,215
Accumulated other comprehensive income, net of tax	1,234	931
Total shareholder's equity	4,699	4,610
Total liabilities and shareholder's equity	$ 109,748	$ 103,486

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Investments (Details 3) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 item	Dec. 31, 2011 item	Dec. 31, 2010
Number of Securities
Less than 12 months (number of positions)	57	117
12 months or more (number of positions)	69	77
Total (number of positions)	126	194
Fair Value
Less than 12 months	$ 594	$ 1,510
12 months or more	549	723
Total	1,143	2,233
Unrealized Losses
Less than 12 months	(4)	(49)
12 months or more	(98)	(221)
Total	(102)	(270)
Rollforward of the cumulative amounts recognized in the Consolidated Statements of Income for other-than-temporary impairments related to credit losses on securities
Beginning balance	106	108	82
Credit losses for which an other-than-temporary impairment was not previously recognized	1	13	14
Credit losses for which an other-than-temporary impairment was previously recognized	16	11	12
Reductions for securities sold during the period (realized)	(36)	(26)
Ending balance	87	106	108
Corporate debt securities
Number of Securities
Less than 12 months (number of positions)	50	70
12 months or more (number of positions)	6	9
Total (number of positions)	56	79
Fair Value
Less than 12 months	477	1,004
12 months or more	70	257
Total	547	1,261
Unrealized Losses
Less than 12 months	(4)	(37)
12 months or more	(3)	(41)
Total	(7)	(78)
Residential mortgage backed securities
Number of Securities
Less than 12 months (number of positions)	6	31
12 months or more (number of positions)	56	63
Total (number of positions)	62	94
Fair Value
Less than 12 months	107	344
12 months or more	293	336
Total	400	680
Unrealized Losses
Less than 12 months		(8)
12 months or more	(58)	(130)
Total	(58)	(138)
State and municipal obligations
Number of Securities
12 months or more (number of positions)	2	2
Total (number of positions)	2	2
Fair Value
12 months or more	100	87
Total	100	87
Unrealized Losses
12 months or more	(34)	(47)
Total	(34)	(47)
Asset backed securities
Number of Securities
Less than 12 months (number of positions)	1	11
12 months or more (number of positions)	5	3
Total (number of positions)	6	14
Fair Value
Less than 12 months	10	139
12 months or more	86	43
Total	96	182
Unrealized Losses
Less than 12 months		(3)
12 months or more	(3)	(3)
Total	(3)	(6)
Foreign government bonds and obligations
Number of Securities
Less than 12 months (number of positions)		5
Total (number of positions)		5
Fair Value
Less than 12 months		23
Total		23
Unrealized Losses
Less than 12 months		(1)
Total		$ (1)

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CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (USD $) In Millions, unless otherwise specified	Total	Common Shares	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income	Comprehensive Income
Balances at Dec. 31, 2009 (Previously Reported)		$ 3	$ 2,445	$ 3,114	$ 382
Balances at Dec. 31, 2009	4,675	3	2,445	3,114	382
Increase (Decrease) in Stockholders' Equity
Balances, as adjusted	4,675		2,445	1,805	422
Cumulative effect of change in accounting policies, net of tax (Adoption of Accounting Standards Update 2010-26 Financial Services-Insurance (Topic 944))	(1,269)			(1,309)	40
Balances at Jan. 02, 2010
Balances at Dec. 31, 2009 (Previously Reported)	5,944	3	2,445	3,114	382
Balances at Dec. 31, 2009	4,675	3	2,445	3,114	382
Comprehensive income:
Net income	689			689		689
Net income at Jan. 01, 2010 (Previously Reported)	796
Other comprehensive income, net of tax	338				338	338
Total comprehensive income	1,027					1,027
Tax adjustment on share-based incentive compensation plan	1		1
Cash dividends to Ameriprise Financial, Inc.	(500)			(500)
Non-cash capital contribution from Ameriprise Financial, Inc.	14		14
Balances at Dec. 31, 2010 (Previously Reported)	6,548
Balances at Dec. 31, 2010	5,217	3	2,460	1,994	760
Comprehensive income:
Net income	821			821		821
Net income at Jan. 01, 2011 (Previously Reported)	779
Other comprehensive income, net of tax	171				171	171
Total comprehensive income	992					992
Tax adjustment on share-based incentive compensation plan	1		1
Cash dividends to Ameriprise Financial, Inc.	(750)			(750)
Non-cash dividend to Ameriprise Financial, Inc.	(850)			(850)
Balances at Dec. 31, 2011 (Previously Reported)	5,872
Balances at Dec. 31, 2011	4,610	3	2,461	1,215	931
Comprehensive income:
Net income	650			650		650
Other comprehensive income, net of tax	303				303	303
Total comprehensive income	953					953
Tax adjustment on share-based incentive compensation plan	1		1
Cash dividends to Ameriprise Financial, Inc.	(865)			(865)
Balances at Dec. 31, 2012	$ 4,699	$ 3	$ 2,462	$ 1,000	$ 1,234

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Lines of Credit (Details 2) (Revolving credit agreement with Ameriprise Financial as the borrower, Ameriprise Financial)	1 Months Ended	12 Months Ended
	Aug. 31, 2012	Dec. 31, 2012	Dec. 31, 2011
Revolving credit agreement with Ameriprise Financial as the borrower | Ameriprise Financial
Lines of Credit
Maximum borrowings under the loan receivable as a percentage of the lender's statutory admitted assets as of the prior year end		3.00%
Reference rate	LIBOR	LIBOR	LIBOR
Interest rate added to reference rate (as a percent)	0.90%	0.90%	1.15%
Percentage of additional interest to be accrued in the event of default		1.00%

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2012

Related Party Transactions

Schedule of dividends paid and received

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Cash dividends paid to Ameriprise Financial	$	865	$	750	$	500
Non-cash dividends paid to Ameriprise Financial	—		850		—
Cash dividends received from RiverSource Life of NY	50		79		28
Cash dividends received from RTA	—		53		63

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Related Party Transactions (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended																		1 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2012 Columbia Management Investment Advisers, LLC	Dec. 31, 2011 Columbia Management Investment Advisers, LLC	Dec. 31, 2010 Columbia Management Investment Advisers, LLC	Dec. 31, 2012 Ameriprise Financial and affiliated companies	Dec. 31, 2011 Ameriprise Financial and affiliated companies	Dec. 31, 2010 Ameriprise Financial and affiliated companies	Dec. 31, 2012 Ameriprise Financial	Dec. 31, 2011 Ameriprise Financial	Dec. 31, 2010 Ameriprise Financial	Dec. 31, 2012 RiverSource Life of NY	Dec. 31, 2011 RiverSource Life of NY	Dec. 31, 2010 RiverSource Life of NY	Dec. 31, 2012 RTA	Dec. 31, 2011 RTA	Dec. 31, 2010 RTA	Oct. 31, 2012 Ameriprise Bank, FSB Residential Mortgage Loans
Related Party Transactions
Amount received for provision of administrative services				$ 244	$ 222	$ 136
Charges for use of joint facilities, technology support, marketing services and other services							477	530	527
Cash dividends paid	865	750	500							865	750	500
Non-cash dividends paid		850									850
Cash dividends received													50	79	28		53	63
Cash contributions for affordable housing partnership investments																53	111
Purchase of loans from affiliate	(954)																		954
Non-cash capital contribution for affordable housing partnership investments			14									14
Amount due to Ameriprise Financial for federal income taxes										17
Amount due from Ameriprise Financial for federal income taxes											$ 86

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Statutory Capital and Surplus

12 Months Ended

Dec. 31, 2012

Statutory Capital and Surplus

Statutory Capital and Surplus

15. Statutory Capital and Surplus

State insurance statutes contain limitations as to the amount of dividends or distributions that insurers may make without providing prior notification to state regulators.  For RiverSource Life Insurance Company, dividends or distributions in excess of unassigned surplus, as determined in accordance with accounting practices prescribed by the State of Minnesota, require advance notice to the Minnesota Department of Commerce, RiverSource Life Insurance Company’s primary regulator, and are subject to potential disapproval.  RiverSource Life Insurance Company’s statutory unassigned surplus aggregated $421 million and $(296) million as of December 31, 2012 and 2011, respectively.

In addition, dividends or distributions, whose fair market value, together with that of other dividends or distributions made within the preceding 12 months, exceed the greater of the previous year’s statutory net gain from operations or 10% of the previous year-end statutory capital and surplus are referred to as “extraordinary dividends.” Extraordinary dividends also require advance notice to the Minnesota Department of Commerce, and are subject to potential disapproval.

Statutory net gain from operations and net income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows:

	2012		2011			2010
	(in millions)
Statutory net gain (loss) from operations(1)	$	2,189	$	(475	)	$	1,200
Statutory net income (loss)(1)	1,976		(599		)	1,112
Statutory capital and surplus	3,113		2,681			3,735

(1) Statutory net gain (loss) from operations and statutory net income (loss) are significantly impacted by changes in reserves for variable annuity guaranteed benefits, however these impacts are substantially offset by unrealized gains (losses) on derivatives which are not included in statutory income but are recorded directly to surplus.

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Statutory Capital and Surplus (Tables)

12 Months Ended

Dec. 31, 2012

Statutory Capital and Surplus

Summary of statutory net gain from operations, net income and capital and surplus

	2012		2011			2010
	(in millions)
Statutory net gain (loss) from operations(1)	$	2,189	$	(475	)	$	1,200
Statutory net income (loss)(1)	1,976		(599		)	1,112
Statutory capital and surplus	3,113		2,681			3,735

(1) Statutory net gain (loss) from operations and statutory net income (loss) are significantly impacted by changes in reserves for variable annuity guaranteed benefits, however these impacts are substantially offset by unrealized gains (losses) on derivatives which are not included in statutory income but are recorded directly to surplus.

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Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

17. Income Taxes

The Company retrospectively adopted a new accounting standard for DAC in the first quarter of 2012. See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted. Prior period disclosures presented below have been retrospectively adjusted for the new accounting standard.

In 2012, the Company made a correction to tax expense primarily attributable to prior periods.  Management has determined that the effect of this correction is not material to the Consolidated Financial Statements for all current and prior periods presented. See Note 1 for additional information on this correction.

The Company qualifies as a life insurance company for federal income tax purposes.  As such, the Company is subject to the Internal Revenue Code provisions applicable to life insurance companies.  The Company provides for income taxes on a separate return basis, except that, under an agreement between Ameriprise Financial and the Company, tax benefits are recognized for losses to the extent they can be used in the consolidated return.  It is the policy of Ameriprise Financial that it will reimburse its subsidiaries for any tax benefits recorded.

The components of income tax provision were as follows:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Current income tax:
Federal	$	197		$	137		$	(167	)
State	7			3			3
Total current income tax	204			140			(164		)
Deferred income tax:
Federal	(38		)	51			360
State	(2		)	(1		)	(1		)
Total deferred income tax	(40		)	50			359
Total income tax provision	$	164		$	190		$	195

The principal reasons that the aggregate income tax provision is different from that computed by using the U.S. statutory rate of 35% are as follows:

	Years Ended December 31,
	2012		2011		2010
Tax at U.S. statutory rate	35.0	%	35.0	%	35.0	%
Changes in taxes resulting from:
Tax-exempt interest and dividend income	(9.7	)	(12.6	)	(7.8	)
State taxes, net of federal benefit	0.4		0.1		0.1
Low income housing credit	(4.7	)	(1.6	)	(1.6	)
Foreign tax credit, net of addback	(0.5	)	(1.6	)	(1.4	)
Taxes applicable to prior years	(2.5	)	—		(2.2	)
Other, net	2.1		(0.5	)	—
Income tax provision	20.1	%	18.8	%	22.1	%

The effective tax rates are lower than the statutory rate as a result of tax preferred items including the dividends received deduction, foreign tax credits and low income housing credits.  The change in the effective tax rate for the year ended December 31, 2012 is primarily due to a $32 million out-of-period correction of tax related to securities lending activities partially offset by increased low income housing tax credits.  See Note 1 for additional information on the out-of-period correction.

Deferred income tax assets and liabilities result from temporary differences between the assets and liabilities measured for GAAP reporting versus income tax return purposes.  The significant components of the Company’s deferred income tax assets and liabilities are reflected in the following table:

	December 31,
	2012			2011
	(in millions)
Deferred income tax assets:
Liabilities for future policy benefits	$	1,295		$	1,589
Investment related	161			—
Capital loss and tax credit carryforwards	5			30
State net operating losses	5			4
Gross deferred income tax assets	1,466			1,623
Less: valuation allowance	(5		)	(4		)
Total deferred income tax assets	1,461			1,619
Deferred income tax liabilities:
Deferred acquisition costs	677			639
Net unrealized gains on Available-for-Sale securities	676			501
Investment related	—			190
Deferred sales inducement costs	142			180
Other	29			49
Gross deferred income tax liabilities	1,524			1,559
Net deferred income tax assets (liabilities)	$	(63	)	$	60

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

	2012			2011			2010
	(in millions)
Balance at January 1	$	134		$	83		$	(77	)
Additions (reductions) based on tax positions related to the current year	1			(1		)	—
Additions for tax positions of prior years	19			79			322
Reductions for tax positions of prior years	(77		)	(7		)	(196		)
Settlements	(12		)	(20		)	34
Balance at December 31	$	65		$	134		$	83

The significant decrease in the amount of gross unrecognized tax benefits is a result of reaching an agreement with the Internal Revenue Service (“IRS”) on the treatment of certain items under audit.  If recognized, approximately $8 million, $12 million and $39 million, net of federal tax benefits, of unrecognized tax benefits as of December 31, 2012, 2011 and 2010, respectively, would affect the effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision.  The Company recognized a reduction of $3 million, an increase of $57 million and a reduction of $8 million in interest and penalties for the years ended December 31, 2012, 2011 and 2010, respectively.  At December 31, 2012 and 2011, the Company had a payable of $30 million and $33 million, respectively, related to accrued interest and penalties.

It is reasonably possible that the total amounts of unrecognized tax benefits will change in the next 12 months.  Based on the current audit position of the Company, it is estimated that the total amount of gross unrecognized tax benefits may decrease by $63 million in the next 12 months.

The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The IRS had previously completed its field examination of the 1997 through 2007 tax returns in recent years. However, for federal income tax purposes, these years except for 2007, continue to remain open as a consequence of certain issues under appeal.  The IRS is in the process of completing the audit of the Company’s income tax returns for 2008 and 2009 and began auditing 2010 and 2011 in the fourth quarter of 2012.  The Company or certain of its subsidiaries’ state income tax returns are currently under examination by various jurisdictions for years ranging from 1997 through 2009 and remain open for the years after 2009.

It is possible there will be corporate tax reform in the next few years.  While impossible to predict, corporate tax reform is likely to include a reduction in the corporate tax rate coupled with reductions in tax preferred items.  Any changes could have a material impact on the Company’s income tax expense and deferred tax balances.

The items comprising other comprehensive income are presented net of the following income tax provision (benefit) amounts:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Net unrealized securities gains	$	161		$	89		$	181
Net unrealized derivative losses	(2		)	(2		)	(2		)
Net income tax provision	$	159		$	87		$	179

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Derivatives and Hedging Activities (Details 2) (Derivatives not designated as hedging instruments, USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Derivatives and Hedging Activities
Asset	$ 3,418	$ 3,124
Liability	4,159	3,829
GMWB and GMAB
Derivatives and Hedging Activities
Asset	3,412	3,123
Liability	4,111	3,824
GMWB and GMAB | Interest rate contracts
Derivatives and Hedging Activities
Asset	2,191	1,801
Liability	1,486	1,198
GMWB and GMAB | Equity contracts
Derivatives and Hedging Activities
Asset	1,215	1,314
Liability	1,792	1,031
GMWB and GMAB | Credit contracts
Derivatives and Hedging Activities
Asset		1
GMWB and GMAB | Foreign currency contracts
Derivatives and Hedging Activities
Asset	6	7
Liability		10
GMWB and GMAB | Embedded derivatives
Derivatives and Hedging Activities
Liability	833	1,585
EIA embedded derivatives | Equity contracts
Derivatives and Hedging Activities
Liability	2	2
IUL | Equity contracts
Derivatives and Hedging Activities
Asset	6	1
Liability	1
IUL embedded derivatives | Equity contracts
Derivatives and Hedging Activities
Liability	45	3
Other derivatives
Derivatives and Hedging Activities
Asset	6	1
Liability	$ 48	$ 5

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash Flows from Operating Activities
Net income	$ 650	$ 821	$ 689
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net	(16)	(73)	(79)
Deferred income tax expense (benefit)	(40)	50	359
Contractholder and policyholder charges, non-cash	(273)	(264)	(259)
Loss from equity method investments	26	33	19
Net realized investment gains	(14)	(26)	(46)
Other-than-temporary impairments and provision for loan losses recognized in net realized investment gains	17	21	29
Change in operating assets and liabilities:
Deferred acquisition costs	(28)	54	(242)
Deferred sales inducement costs	51	72	(38)
Other investments, net	25		10
Future policy benefits for traditional life, disability income and long term care insurance	238	253	302
Policy claims and other policyholders' funds	11	(13)	11
Reinsurance recoverables	(107)	(127)	(143)
Other receivables	(35)	25	(53)
Accrued investment income	16	2	(6)
Derivatives collateral, net	(432)	649	55
Other, net	623	191	271
Net cash provided by operating activities	712	1,668	879
Available-for-Sale securities:
Proceeds from sales	156	664	1,268
Maturities, sinking fund payments and calls	3,292	3,200	3,719
Purchases	(2,271)	(4,084)	(4,970)
Proceeds from sales, maturities and repayments of mortgage loans	310	202	207
Funding of mortgage loans	(277)	(207)	(154)
Purchase of residential mortgage loans from affiliate	(954)
Proceeds from sales of other investments	117	114	95
Purchase of other investments	(286)	(296)	(86)
Purchase of land, buildings, equipment and software	(8)	(6)	(15)
Change in policy loans, net	(13)	(10)	(14)
Net cash provided by (used in) investing activities	66	(423)	50
Policyholder and contractholder account values:
Considerations received	1,406	1,378	1,593
Net transfers from (to) separate accounts	(30)	39	(1,337)
Surrenders and other benefits	(1,271)	(1,311)	(1,338)
Change in borrowings under repurchase agreements, net	(5)	107	397
Proceeds from line of credit with Ameriprise Financial, Inc.	418	415	13
Payments on line of credit with Ameriprise Financial, Inc.	(568)	(118)	(310)
Deferred premium options, net	(356)	(254)	(182)
Tax adjustment on share-based incentive compensation plan	1	1
Cash dividend to Ameriprise Financial, Inc.	(865)	(750)	(500)
Net cash used in financing activities	(1,270)	(493)	(1,664)
Net increase (decrease) in cash and cash equivalents	(492)	752	(735)
Cash and cash equivalents at beginning of period	828	76	811
Cash and cash equivalents at end of period	336	828	76
Supplemental Disclosures:
Income taxes paid, net	109	176	112
Interest paid on borrowings	4	5	3
Non-cash investing activity:
Capital contributions from Ameriprise Financial, Inc.			14
Dividend to Ameriprise Financial, Inc.		850
Affordable housing partnership commitments not yet remitted	$ 13	$ 137	$ 171

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
CONSOLIDATED BALANCE SHEETS
Fixed maturities, amortized cost	$ 23,058	$ 24,398
Common stocks, cost	2	1
Mortgage loans, allowance for loan losses	$ 26	$ 32
Common stock, par value (in dollars per share)	$ 30	$ 30
Common stock, shares authorized (in shares)	100,000	100,000
Common stock, shares issued (in shares)	100,000	100,000
Common stock, shares outstanding (in shares)	100,000	100,000

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Variable Annuity and Insurance Guarantees

12 Months Ended

Dec. 31, 2012

Variable Annuity and Insurance Guarantees

Variable Annuity and Insurance Guarantees

10. Variable Annuity and Insurance Guarantees

The majority of the variable annuity contracts offered by the Company contain GMDB provisions.  The Company also offers variable annuities with GGU, GMWB and GMAB provisions.  The Company previously offered contracts containing GMIB provisions.  See Note 2 and Note 9 for additional information regarding the Company’s variable annuity guarantees.

The GMDB provisions provide a specified minimum return upon death of the contractholder.  The death benefit payable is the greater of (i) the contract value less any purchase payment credits subject to recapture and less a pro-rata portion of any rider fees, or (ii) the GMDB provisions specified in the contract.  The Company has three primary GMDB provisions:

· Return of premium — provides purchase payments minus adjusted partial surrenders.

· Reset — provides that the value resets to the account value every sixth contract anniversary minus adjusted partial surrenders.  This provision was often provided in combination with the return of premium provision and is no longer offered.

· Ratchet — provides that the value ratchets up to the maximum account value at specified anniversary intervals, plus subsequent purchase payments less adjusted partial surrenders.

The variable annuity contracts with GMWB riders typically have account values that are based on an underlying portfolio of mutual funds, the values of which fluctuate based on fund performance.  At issue, the guaranteed amount is equal to the amount deposited but the guarantee may be increased annually to the account value (a “step-up”) in the case of favorable market performance.

The Company has GMWB riders in force, which contain one or more of the following provisions:

· Withdrawals at a specified rate per year until the amount withdrawn is equal to the guaranteed amount.

· Withdrawals at a specified rate per year for the life of the contractholder (“GMWB for life”).

· Withdrawals at a specified rate per year for joint contractholders while either is alive.

· Withdrawals based on performance of the contract.

· Withdrawals based on the age withdrawals begin.

· Once withdrawals begin, the contractholder’s funds are moved to one of the three least aggressive asset allocation models.

· Credits are applied annually for a specified number of years to increase the guaranteed amount as long as withdrawals have not been taken.

Variable annuity contractholders age 79 or younger at contract issue can also obtain a principal-back guarantee by purchasing the optional GMAB rider for an additional charge.  The GMAB rider guarantees that, regardless of market performance at the end of the 10-year waiting period, the contract value will be no less than the original investment or 80% of the highest anniversary value, adjusted for withdrawals.  If the contract value is less than the guarantee at the end of the 10 year period, a lump sum will be added to the contract value to make the contract value equal to the guarantee value.

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:

	December 31, 2012							December 31, 2011
Variable Annuity Guarantees by Benefit Type (1)	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk(2)		Weighted Average Attained Age
	(in millions, except age)
GMDB:
Return of premium	$	45,697	$	43,942	$	61	63	$	40,011	$	38,275	$	382	63
Five/six-year reset	11,233		8,722		115		63	11,631		9,118		350		63
One-year ratchet	7,367		6,933		106		65	7,233		6,777		479		64
Five-year ratchet	1,616		1,563		3		61	1,472		1,418		25		61
Other	912		885		62		68	759		732		93		68
Total — GMDB	$	66,825	$	62,045	$	347	63	$	61,106	$	56,320	$	1,329	63
GGU death benefit	$	958	$	907	$	93	63	$	920	$	868	$	78	63
GMIB	$	425	$	399	$	72	66	$	463	$	433	$	106	65
GMWB:
GMWB	$	3,898	$	3,880	$	34	66	$	3,887	$	3,868	$	236	65
GMWB for life	28,588		28,462		263		64	23,756		23,625		863		64
Total — GMWB	$	32,486	$	32,342	$	297	64	$	27,643	$	27,493	$	1,099	64
GMAB	$	3,773	$	3,762	$	5	57	$	3,516	$	3,509	$	63	56

(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.

(2) Represents the current guaranteed benefit amount in excess of the current contract value.  GMIB, GMWB and GMAB benefits are subject to waiting periods and payment periods specified in the contract.

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

	GMDB & GGU			GMIB			GMWB			GMAB			UL
	(in millions)
Balance at January 1, 2010	$	6		$	6		$	204		$	100		$	15
Incurred claims	17			3			133			4			59
Paid claims	(18		)	(1		)	—			—			(6		)
Balance at December 31, 2010	5			8			337			104			68
Incurred claims	10			2			1,040			133			53
Paid claims	(10		)	(1		)	—			—			(10		)
Balance at December 31, 2011	5			9			1,377			237			111
Incurred claims	6			1			(578		)	(134		)	57
Paid claims	(7		)	(1		)	—			—			(13		)
Balance at December 31, 2012	$	4		$	9		$	799		$	103		$	155

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:

	December 31,
	2012		2011
	(in millions)
Mutual funds:
Equity	$	32,054	$	30,738
Bond	26,165		23,862
Other	3,991		1,969
Total mutual funds	$	62,210	$	56,569

No gains or losses were recognized on assets transferred to separate accounts for the years ended December 31, 2012, 2011 and 2010.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Feb. 26, 2013
Document and Entity Information
Entity Registrant Name	RIVERSOURCE LIFE INSURANCE CO
Entity Central Index Key	0000727892
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Public Float	$ 0
Entity Common Stock, Shares Outstanding		100,000
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY

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Lines of Credit

12 Months Ended

Dec. 31, 2012

Lines of Credit

Lines of Credit

11. Lines of Credit

RiverSource Life Insurance Company, as the borrower, had an outstanding balance at December 31, 2012 and 2011 of $150 million and $300 million, respectively, under a revolving credit agreement with Ameriprise Financial as the lender.  The aggregate amount outstanding under the line of credit may not exceed $800 million at any time.  Prior to January 1, 2012, the interest rate for any borrowing under the agreement was established by reference to LIBOR plus 115 basis points.  In January 2012, an amendment to this agreement decreased the interest rate to LIBOR plus 90 basis points, subject to adjustment based on debt ratings of the senior unsecured debt of Ameriprise Financial. Amounts borrowed may be repaid at any time with no prepayment penalty.

The Company has a revolving credit agreement with Ameriprise Financial as the lender aggregating $200 million.  Prior to August 1, 2012, the interest rate for any borrowings is established by reference to LIBOR.  In August 2012, an amendment to this agreement increased the interest rate to LIBOR plus 90 basis points, subject to adjustment based on debt ratings of the senior unsecured debt of Ameriprise Financial. There were no amounts outstanding on this line of credit at December 31, 2012 and 2011.

In December 2009, RiverSource Life Insurance Company, as the lender, entered into a revolving credit agreement with Ameriprise Financial as the borrower.  This line of credit is not to exceed 3% of RiverSource Life Insurance Company’s statutory admitted assets as of the prior year end.  Prior to January 1, 2012, the interest rate for any borrowing was established by reference to LIBOR plus 115 basis points.  In January 2012, an amendment to this agreement decreased the interest rate to LIBOR plus 90 basis points, subject to adjustment based on debt ratings of the senior unsecured debt of Ameriprise Financial. In the event of default, an additional 1% interest will accrue during such period of default.  There were no amounts outstanding on this revolving credit agreement as of December 31, 2012 and 2011.

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Revenues
Premiums	$ 442	$ 493	$ 489
Net investment income	1,480	1,593	1,629
Policy and contract charges	1,593	1,540	1,389
Other revenues	329	303	272
Net realized investment gains (losses)	(3)	5	16
Total revenues	3,841	3,934	3,795
Benefits and expenses
Benefits, claims, losses and settlement expenses	1,216	950	1,203
Interest credited to fixed accounts	831	856	909
Amortization of deferred acquisition costs	225	336	53
Other insurance and operating expenses	755	781	746
Total benefits and expenses	3,027	2,923	2,911
Pretax income	814	1,011	884
Income tax provision	164	190	195
Net income	650	821	689
Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	(12)	(47)	(22)
Portion of gain (loss) recognized in other comprehensive income (before taxes)	(5)	23	(6)
Net impairment losses recognized in net realized investment gains (losses)	$ (17)	$ (24)	$ (28)

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Investments

12 Months Ended

Dec. 31, 2012

Investments.

Investments

5. Investments

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

	December 31, 2012
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,881	$	2,167	$	(7	)	$	17,041	$	—
Residential mortgage backed securities	3,446		233		(58		)	3,621		(24		)
Commercial mortgage backed securities	2,717		287		—			3,004		—
State and municipal obligations	976		180		(34		)	1,122		—
Asset backed securities	808		66		(3		)	871		—
Foreign government bonds and obligations	188		36		—			224		—
U.S. government and agencies obligations	42		7		—			49		—
Total fixed maturities	23,058		2,976		(102		)	25,932		(24		)
Common stocks	2		2		—			4		1
Total	$	23,060	$	2,978	$	(102	)	$	25,936	$	(23	)

	December 31, 2011
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI(1)
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,770	$	1,726	$	(78	)	$	16,418	$	—
Residential mortgage backed securities	4,264		242		(138		)	4,368		(41		)
Commercial mortgage backed securities	3,355		276		—			3,631		—
State and municipal obligations	1,012		131		(47		)	1,096		—
Asset backed securities	812		43		(6		)	849		—
Foreign government bonds and obligations	126		19		(1		)	144		—
U.S. government and agencies obligations	49		8		—			57		—
Other structured investments	10		4		—			14		4
Total fixed maturities	24,398		2,449		(270		)	26,577		(37		)
Common stocks	1		1		—			2		—
Total	$	24,399	$	2,450	$	(270	)	$	26,579	$	(37	)

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

At December 31, 2012 and 2011, fixed maturity securities comprised approximately 84% and 87%, respectively, of the Company’s total 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. At December 31, 2012 and 2011, approximately $1.5 billion and $1.2 billion, respectively, of securities were internally rated by Columbia Management Investment Advisers, LLC using criteria similar to those used by NRSROs.

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

	December 31, 2012						December 31, 2011
Ratings	Amortized Cost		FairValue		Percent of Total Fair Value		Amortized Cost		FairValue		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	5,680	$	6,198	24	%	$	7,276	$	7,811	30	%
AA	1,102		1,273		5		1,161		1,291		5
A	4,262		4,849		19		4,148		4,578		17
BBB	10,409		12,019		46		10,211		11,446		43
Below investment grade	1,605		1,593		6		1,602		1,451		5
Total fixed maturities	$	23,058	$	25,932	100	%	$	24,398	$	26,577	100	%

At December 31, 2012 and 2011, approximately 32% and 33%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities.  No holdings of any other issuer were greater than 10% of total equity.

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:

	December 31, 2012
	Less than 12 months						12 months or more						Total
Description of Securities	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	50	$	477	$	(4	)	6	$	70	$	(3	)	56	$	547	$	(7	)
Residential mortgage backed securities	6	107		—			56	293		(58		)	62	400		(58		)
State and municipal obligations	—	—		—			2	100		(34		)	2	100		(34		)
Asset backed securities	1	10		—			5	86		(3		)	6	96		(3		)
Total	57	$	594	$	(4	)	69	$	549	$	(98	)	126	$	1,143	$	(102	)

	December 31, 2011
	Less than 12 months						12 months or more						Total
Description of Securities	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	70	$	1,004	$	(37	)	9	$	257	$	(41	)	79	$	1,261	$	(78	)
Residential mortgage backed securities	31	344		(8		)	63	336		(130		)	94	680		(138		)
State and municipal obligations	—	—		—			2	87		(47		)	2	87		(47		)
Asset backed securities	11	139		(3		)	3	43		(3		)	14	182		(6		)
Foreign government bonds and obligations	5	23		(1		)	—	—		—			5	23		(1		)
Total	117	$	1,510	$	(49	)	77	$	723	$	(221	)	194	$	2,233	$	(270	)

As part of the Company’s ongoing monitoring process, management determined that a majority of the gross unrealized losses on its Available-for-Sale securities are attributable to movement in credit spreads primarily related to non-agency residential mortgage backed securities purchased prior to 2008.

The following table presents a rollforward of the cumulative amounts recognized in the Consolidated Statements of Income for other-than-temporary impairments related to credit losses on securities for which a portion of the securities’ total other-than-temporary impairments was recognized in other comprehensive income:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Beginning balance	$	106		$	108		$	82
Credit losses for which an other-than-temporary impairment was not previously recognized	1			13			14
Credit losses for which an other-than-temporary impairment was previously recognized	16			11			12
Reductions for securities sold during the period (realized)	(36		)	(26		)	—
Ending balance	$	87		$	106		$	108

The change in net unrealized securities gains (losses) in other comprehensive income includes three components, net of tax: (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 other-than-temporary impairment losses to credit losses and (iii) other items primarily consisting of adjustments in asset and liability balances, such as DAC, DSIC, 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 table presents a rollforward of the net unrealized securities gains on Available-for-Sale securities included in accumulated other comprehensive income:

	NetUnrealizedSecuritiesGains			DeferredIncome Tax			Accumulated OtherComprehensive Income Related to Net Unrealized Securities Gains
	(in millions)
Balance at January 1, 2010	$	638		$	(222	)	$	416
Cumulative effect of accounting change	62			(22		)	40		(1)
Net unrealized securities gains arising during the period(2)	794			(278		)	516
Reclassification of net securities gains included in net income	(20		)	7			(13		)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(259		)	90			(169		)
Balance at December 31, 2010	1,215			(425		)	790		(3)
Net unrealized securities gains arising during the period(2)	560			(196		)	364
Reclassification of net securities gains included in net income	(5		)	2			(3		)
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(299		)	105			(194		)
Balance at December 31, 2011		1,471			(514	)		957	(3)
Net unrealized securities gains arising during the period(2)	694			(243		)	451
Reclassification of net securities losses included in net income	2			(1		)	1
Impact on DAC, DSIC, benefit reserves and reinsurance recoverables	(237		)	83			(154		)
Balance at December 31, 2012	$	1,930		$	(675	)	$	1,255	(3)

(1) The Company retrospectively adopted a new accounting standard on January 1, 2012 for DAC. See Note 1 and Note 3 for additional information on the adoption impact.

(2) Includes other-than-temporary impairment losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income during the period.

(3) Includes $(15) million, $(20) million and $(13) million of noncredit related impairments on securities and net unrealized securities losses on previously impaired securities at December 31, 2012, 2011 and 2010, respectively.

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

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Gross realized investment gains	$	16		$	48		$	51
Gross realized investment losses	(1		)	(20		)	(4		)
Other-than-temporary impairments	(17		)	(24		)	(28		)
Total	$	(2	)	$	4		$	19

Other-than-temporary impairments for the years ended December 31, 2012 and 2011 primarily related to credit losses on non-agency residential mortgage backed securities.  Other-than-temporary impairments for the year ended December 31, 2010 primarily related to credit losses on non-agency residential mortgage backed securities as well as corporate debt securities in the gaming industry.

Available-for-Sale securities by contractual maturity at December 31, 2012 were as follows:

	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	1,537	$	1,563
Due after one year through five years	4,065		4,372
Due after five years through 10 years	6,902		7,900
Due after 10 years	3,583		4,601
	16,087		18,436
Residential mortgage backed securities	3,446		3,621
Commercial mortgage backed securities	2,717		3,004
Asset backed securities	808		871
Common stocks	2		4
Total	$	23,060	$	25,936

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

At both December 31, 2012 and 2011, bonds carried at $7 million were on deposit with various states as required by law.

Net investment income is summarized as follows:

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Income on fixed maturities	$	1,324	$	1,469	$	1,486
Income on mortgage loans	158		149		156
Other investments	26		18		32
	1,508		1,636		1,674
Less: investment expenses	28		43		45
Total	$	1,480	$	1,593	$	1,629

Net realized investment gains (losses) are summarized as follows:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Fixed maturities	$	(2	)	$	4		$	19
Mortgage loans	—			2			(6		)
Other investments	(1		)	(1		)	3
Total	$	(3	)	$	5		$	16

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Variable Interest Entities

12 Months Ended

Dec. 31, 2012

Variable Interest Entities

Variable Interest Entities

4. Variable Interest Entities

RTA, a subsidiary of RiverSource Life Insurance Company, has variable interests in affordable housing partnerships for which it is not the primary beneficiary and, therefore, does not consolidate.

RTA’s maximum exposure to loss as a result of its investments in the affordable housing partnerships is limited to the carrying values of these investments. The carrying values are reflected in other investments and were $409 million and $384 million as of December 31, 2012 and 2011, respectively. RTA has no obligation to provide financial or other support to the affordable housing partnerships in addition to liabilities already recorded for future funding commitments nor has it provided any additional support to the affordable housing partnerships. The Company had liabilities of $144 million and $267 million recorded in other liabilities as of December 31, 2012 and 2011, respectively, related to the future funding commitments for affordable housing partnerships.

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Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2012

Derivatives and Hedging Activities

Derivatives and Hedging Activities

16. 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 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.

Freestanding derivative instruments are recorded at fair value and are reflected in other assets or other liabilities. The Company’s policy on the recognition of derivatives on the Consolidated Balance Sheet is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement.

The following table presents the estimated fair value of the Company’s freestanding derivatives after considering the effect of master netting arrangements and collateral:

	December 31, 2012						December 31, 2011
	Net DerivativeAssets			Net DerivativeLiabilities			Net DerivativeAssets			Net DerivativeLiabilities
	(in millions)
Fair value of OTC derivatives after application of master netting agreements	$	646		$	603		$	861		$	129
Cash collateral on OTC derivatives	(262		)	(67		)	(613		)	(26		)
Fair value of OTC derivatives after application of master netting agreements and cash collateral	384			536			248			103
Securities collateral on OTC derivatives	(355		)	(532		)	(186		)	(95		)
Fair value of OTC derivatives after application of master netting agreements and cash and securities collateral	29			4			62			8
Fair value of exchange-traded derivatives	96			—			155			—
Total fair value of derivatives after application of master netting agreements and cash and securities collateral	$	125		$	4		$	217		$	8

In April 2012, the Financial Stability Oversight Council approved the final rule and interpretive guidance that provides the framework it will follow to determine if a nonbank financial company is a Systemically Important Financial Institution.

The framework includes a three-stage process to help narrow down the pool of nonbank financial companies for review and possible designation. Stage 1 criteria include having at least $50 billion in assets and meeting one of five additional quantitative measures. One of the five thresholds is $3.5 billion of derivative liabilities after considering the effects of master netting arrangements and cash collateral held with the same counterparty. The following table presents the Company’s derivative liabilities as defined by the rule:

	December 31,
	2012		2011
	(in millions)
Fair value of OTC derivative liabilities after application of master netting agreements and cash collateral	$	536	$	103
Fair value of embedded derivative liabilities	880		1,590
Fair value of derivative liabilities after application of master netting agreements and cash collateral	$	1,416	$	1,693

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

		Asset					Liability
Derivatives not designated	Balance Sheet	December 31,					December 31,
as hedging instruments	Location	2012		2011		Balance Sheet Location	2012		2011
		(in millions)					(in millions)
GMWB and GMAB
Interest rate contracts	Other assets	$	2,191	$	1,801	Other liabilities	$	1,486	$	1,198
Equity contracts	Other assets	1,215		1,314		Other liabilities	1,792		1,031
Credit contracts	Other assets	—		1		Other liabilities	—		—
Foreign currency contracts	Other assets	6		7		Other liabilities	—		10
Embedded derivatives(1)	Not applicable	—		—		Future policy benefits	833		1,585
Total GMWB and GMAB		3,412		3,123			4,111		3,824
Other derivatives:
Equity
EIA embedded derivatives	Not applicable	—		—		Future policy benefits	2		2
IUL	Other assets	6		1		Other liabilities	1		—
IUL embedded derivatives	Not applicable	—		—		Future policy benefits	45		3
Total other		6		1			48		5
Total derivatives		$	3,418	$	3,124		$	4,159	$	3,829

(1) The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

See Note 13 for additional information regarding the Company’s fair value measurement of derivative instruments.

The following table presents a summary of the impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income for the years ended December 31:

Derivatives not designated	Location of Gain (Loss) on	Amount of Gain (Loss) on Derivatives Recognized in Income
as hedging instruments	Derivatives Recognized in Income	2012			2011			2010
		(in millions)
GMWB and GMAB
Interest rate contracts	Benefits, claims, losses and settlement expenses	$	17		$	709		$	95
Equity contracts	Benefits, claims, losses and settlement expenses	(1,218		)	326			(370		)
Credit contracts	Benefits, claims, losses and settlement expenses	(2		)	(12		)	(44		)
Foreign currency contracts	Benefits, claims, losses and settlement expenses	(1		)	(2		)	—
Embedded derivatives(1)	Benefits, claims, losses and settlement expenses	752			(1,165		)	(121		)
Total GMWB and GMAB		(452		)	(144		)	(440		)
Other derivatives:
Interest rate
Tax hedge	Net investment income	1			—			—
Equity
GMDB	Benefits, claims, losses and settlement expenses	—			—			(4		)
EIA	Interest credited to fixed accounts	1			(1		)	2
EIA embedded derivatives	Interest credited to fixed accounts	1			1			7
IUL	Interest credited to fixed accounts	1			1			—
IUL embedded derivatives	Interest credited to fixed accounts	(4		)	(3		)	—
Total other		—			(2		)	5
Total derivatives		$	(452	)	$	(146	)	$	(435	)

(1) The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

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 and credit 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 Company economically hedges the exposure related to non-life contingent GMWB and GMAB provisions primarily using various futures, options, interest rate swaptions, interest rate swaps, total return swaps, variance swaps and credit default swaps.  At December 31, 2012 and 2011, the gross notional amount of derivative contracts for the Company’s GMWB and GMAB provisions was $142.1 billion and $104.7 billion, respectively.

The deferred premium associated with certain of the above options is paid or received semi-annually over the life of the option contract.  The following is a summary of the payments the Company is scheduled to make and receive for these options:

	Premiums Payable		Premiums Receivable
	(in millions)
2013	$	373	$	57
2014	348		55
2015	320		54
2016	289		46
2017	238		41
2018-2027	785		104

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

EIA and IUL 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 EIA and IUL products will positively or negatively impact earnings over the life of these products. As a means of economically hedging its obligations under the provisions of these products, the Company enters into index options and futures contracts. The gross notional amount of EIA derivative contracts was $10 million and $25 million at December 31, 2012 and 2011, respectively. The gross notional amount of IUL derivative contracts was $200 million and $12 million at December 31, 2012 and 2011, respectively.

Embedded Derivatives

Certain annuities contain GMAB and non-life contingent GMWB provisions, which are considered embedded derivatives.  In addition, the equity component of the EIA and IUL product obligations are also considered embedded derivatives.  These embedded derivatives are bifurcated from their host contracts and reported on the Consolidated Balance Sheets at fair value with changes in fair value reported in earnings.  As discussed above, the Company uses derivatives to mitigate the financial statement impact of these embedded derivatives.

Cash Flow Hedges

The Company has amounts classified in accumulated other comprehensive income related to gains and losses associated with the effective portion of previously designated cash flow hedges. The Company reclassifies these amounts into income as the forecasted transactions impact earnings. During the years ended December 31, 2012 and 2011, the Company held no derivatives that were designated as cash flow hedges.

At December 31, 2012, the Company expects to reclassify $6 million of deferred loss on derivative instruments from accumulated other comprehensive income to earnings during the next 12 months that will be recorded in net investment income. These were originally losses on derivative instruments related to interest rate swaptions. During the years ended December 31, 2012 and 2011, no hedge relationships were discontinued due to forecasted transactions no longer being expected to occur according to the original hedge strategy.  For the years ended December 31, 2012, 2011 and 2010, the amount recognized in earnings on cash flow hedges due to ineffectiveness was $1 million, nil and nil, respectively.

The following table presents a rollforward of unrealized derivative losses related to cash flow hedges included in accumulated other comprehensive income:

	2012			2011			2010
	(in millions)
Net unrealized derivative losses at January 1	$	(26	)	$	(30	)	$	(34	)
Reclassification of realized losses(1)	7			6			6
Income tax benefit	(2		)	(2		)	(2		)
Net unrealized derivative losses at December 31	$	(21	)	$	(26	)	$	(30	)

(1) Loss reclassified from accumulated other comprehensive income to net investment income on the Consolidated Statements of Income.

Currently, the longest period of time over which the Company is hedging exposure to the variability in future cash flows is six years and relates to interest credited on forecasted fixed premium product sales.

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 arrangements and collateral arrangements whenever practical. As of December 31, 2012 and 2011, the Company held $262 million and $635 million, respectively, in cash and cash equivalents and recorded a corresponding liability in other liabilities for collateral the Company is obligated to return to counterparties.  As of December 31, 2012 and 2011, the Company had accepted additional collateral consisting of various securities with a fair value of $387 million and $186 million, respectively, which are not reflected on the Consolidated Balance Sheets.  As of December 31, 2012 and 2011, the Company’s maximum credit exposure related to derivative assets after considering netting arrangements with counterparties and collateral arrangements was approximately $29 million and $61 million, respectively.

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 financial strength rating (or based on the debt rating of the Company’s parent, Ameriprise Financial). Additionally, certain of the Company’s derivative contracts contain provisions that allow the counterparty to terminate the contract if the Company does not maintain a specific financial strength rating or Ameriprise Financial’s debt does not maintain a specific credit rating (generally an investment grade rating).  If these termination provisions were to be triggered, the Company’s counterparty could require immediate settlement of any net liability position. At December 31, 2012 and 2011, the aggregate fair value of derivative contracts in a net liability position containing such credit contingent provisions was $364 million and $106 million, respectively. The aggregate fair value of assets posted as collateral for such instruments as of December 31, 2012 and 2011 was $360 million and $98 million, respectively. If the credit contingent provisions of derivative contracts in a net liability position at December 31, 2012 and 2011 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 $4 million and $8 million, respectively.

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Borrowings under Repurchase Agreements

12 Months Ended

Dec. 31, 2012

Borrowings under Repurchase Agreements

Borrowings under Repurchase Agreements

12. Borrowings under Repurchase Agreements

The Company enters into repurchase agreements in exchange for cash which it accounts for as secured borrowings.  The Company has pledged Available-for-Sale securities consisting of agency residential mortgage backed securities and commercial mortgage backed securities to collateralize its obligation under the repurchase agreements. The fair value of the securities pledged is recorded in investments and was $518 million and $521 million at December 31, 2012 and 2011, respectively. The amount of the Company’s liability including accrued interest as of December 31, 2012 and 2011 was $501 million and $504 million, respectively.  The weighted average annualized interest rate on the repurchase agreements held as of December 31, 2012 and 2011 was 0.4% and 0.3%, respectively.

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Reinsurance

12 Months Ended

Dec. 31, 2012

Reinsurance

Reinsurance

8. Reinsurance

Generally, the Company currently reinsures 90% of the death benefit liability related to almost all individual fixed and variable universal life and term life insurance products.  As a result, the Company typically retains and is at risk for, at most, 10% of each policy’s death benefit from the first dollar of coverage for new sales of these policies, subject to the reinsurers fulfilling their obligations.  RiverSource Life Insurance Company began reinsuring risks at this level in 2001 (RiverSource Life of NY began in 2002) for term life insurance and 2002 (2003 for RiverSource Life of NY) for individual fixed and variable universal life insurance.  Policies issued prior to these dates are not subject to these same reinsurance levels.  Generally, the maximum amount of life insurance risk retained by the Company is $1.5 million on a single life and $1.5 million on any flexible premium survivorship life policy.  Risk on fixed and variable universal life policies is reinsured on a yearly renewable term basis.  Risk on most term life policies starting in 2001 (2002 for RiverSource Life of NY) is reinsured on a coinsurance basis, a type of reinsurance in which the reinsurer participates proportionally in all material risks and premiums associated with a policy.

For existing LTC policies, the Company ceded 50% of the risk on a coinsurance basis to subsidiaries of Genworth Financial, Inc. (“Genworth”) and retained the remaining risk.  For RiverSource Life of NY, this reinsurance arrangement applies for 1996 and later issues only.

The Company also has life insurance and fixed annuity risk previously assumed under reinsurance arrangements with unaffiliated insurance companies.

Generally, the Company retains at most $5,000 per month of risk per life on DI policies sold on policy forms introduced in most states in October 2007 (August 2010 for RiverSource Life of NY) and reinsures the remainder of the risk on a coinsurance basis with unaffiliated reinsurance companies.  The Company retains all risk for new claims on DI contracts sold on other policy forms.  The Company also retains all risk on accidental death benefit claims and substantially all risk associated with waiver of premium provisions.

At December 31, 2012 and 2011, traditional life and universal life insurance in force aggregated $191.4 billion and $191.2 billion, respectively, of which $138.6 billion and $136.2 billion were reinsured at the respective year ends.  Life insurance in force is reported on a statutory basis.

The effect of reinsurance on premiums was as follows:

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Direct premiums	$	656		$	707		$	681
Reinsurance ceded	(214		)	(214		)	(192		)
Net premiums	$	442		$	493		$	489

Policy and contract charges are presented on the Consolidated Statements of Income net of $84 million, $71 million and $67 million of reinsurance ceded for the years ended December 31, 2012, 2011 and 2010, respectively.

Reinsurance recovered from reinsurers was $196 million, $189 million and $166 million for the years ended December 31, 2012, 2011 and 2010, respectively.  Reinsurance contracts do not relieve the Company from its primary obligation to policyholders.

Reinsurance recoverables include approximately $1.6 billion and $1.5 billion related to LTC risk ceded to Genworth as of December 31, 2012 and 2011, respectively.  Included in future policy benefits is $615 million and $629 million related to assumed reinsurance arrangements as of December 31, 2012 and 2011, respectively.

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Borrowings under Repurchase Agreements (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Borrowings
Amount of the company's liability including accrued interest	$ 501	$ 504
Repurchase Agreement Borrowings
Borrowings
Fair value of securities pledged	518	521
Amount of the company's liability including accrued interest	$ 501	$ 504
Weighted average annualized interest rate on the repurchase agreements (as a percent)	0.40%	0.30%

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Financing Receivables

12 Months Ended

Dec. 31, 2012

Financing Receivables

Financing Receivables

6. Financing Receivables

The Company’s financing receivables include commercial and residential mortgage loans, syndicated loans and policy loans.  Syndicated loans are reflected in other investments.  Policy loans do not exceed the cash surrender value of the policy at origination.  As there is minimal risk of loss related to policy loans, the Company does not record an allowance for loan losses for policy loans.

Allowancefor Loan Losses

The following tables present a rollforward of the allowance for loan losses for the years ended and the ending balance of the allowance for loan losses by impairment method and type of loan:

	December 31, 2012
	Commercial Mortgage Loans			Syndicated Loans			Total
	(in millions)
Beginning balance	$	32		$	5		$	37
Charge-offs	(6		)	(1		)	(7		)
Provisions	—			—			—
Ending balance	$	26		$	4		$	30
Individually evaluated for impairment	$	5		$	—		$	5
Collectively evaluated for impairment	21			4			25

	December 31, 2011
	Commercial Mortgage Loans			Syndicated Loans		Total
	(in millions)
Beginning balance	$	36		$	5	$	41
Charge-offs	(3		)	—		(3		)
Provisions	(1		)	—		(1		)
Ending balance	$	32		$	5	$	37
Individually evaluated for impairment	$	9		$	—	$	9
Collectively evaluated for impairment	23			5		28

	December 31, 2010
	Commercial Mortgage Loans			Syndicated Loans			Total
	(in millions)
Beginning balance	$	30		$	12		$	42
Charge-offs	(1		)	(2		)	(3		)
Provisions	7			(5		)	2
Ending balance	$	36		$	5		$	41
Individually evaluated for impairment	$	8		$	—		$	8
Collectively evaluated for impairment	28			5			33

The recorded investment in financing receivables by impairment method and type of loan was as follows:

	December 31, 2012
	Commercial Mortgage Loans		Residential Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	39	$	—	$	—	$	39
Collectively evaluated for impairment	2,442		934		303		3,679
Total	$	2,481	$	934	$	303	$	3,718

	December 31, 2011
	Commercial Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	64	$	1	$	65
Collectively evaluated for impairment	2,441		301		2,742
Total	$	2,505	$	302	$	2,807

As of December 31, 2012 and 2011, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $10 million and $4 million, respectively.

Residential mortgage loans are presented net of unamortized discount of $80 million as of December 31, 2012.

Purchases and sales of loans were as follows:

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Purchases
Residential mortgage loans	$	954	$	—	$	—
Syndicated loans	111		194		59
Total loans purchased	$	1,065	$	194	$	59
Sales
Syndicated loans	$	9	$	2	$	2

CreditQuality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $4 million and $12 million as of December 31, 2012 and 2011, respectively.  All other loans were considered to be performing.

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.  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 2% and 3% of total commercial mortgage loans at December 31, 2012 and 2011, respectively. 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. 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:

	December 31, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
South Atlantic	$	625	25	%	$	29	$	618	25	%	$	—
Pacific	565		23		15		556		22		1
Mountain	262		11		12		275		11		11
East North Central	255		10		3		247		10		—
West North Central	216		9		—		224		9		1
Middle Atlantic	198		8		6		217		9		—
West South Central	159		6		4		173		7		2
New England	135		5		1		130		5		—
East South Central	66		3		2		65		2		—
	2,481		100	%	$	72	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,455					$	2,473

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

	December 31, 2012						December 31, 2011
	Loans		Percent of Loans		Funding Commitments		Loans		Percent of Loans		Funding Commitments
	(in millions, except percentages)
Retail	$	822	33	%	$	41	$	825	33	%	$	2
Office	597		24		—		669		27		2
Industrial	449		18		9		455		18		1
Apartments	415		17		13		358		14		—
Mixed use	42		2		—		42		2		—
Hotel	36		1		—		51		2		—
Other	120		5		9		105		4		10
	2,481		100	%	$	72	2,505		100	%	$	15
Less: allowance for loan losses	26						32
Total	$	2,455					$	2,473

Residential Mortgage Loans

In October 2012, the Company purchased $954 million of residential mortgage loans at fair value from an affiliate, Ameriprise Bank, FSB.  The purchase price takes into account the credit quality of the loan portfolio resulting in no allowance for loan losses recorded at purchase. The Company considers the credit worthiness of borrowers (FICO score), collateral characteristics such as LTV and geographic concentration to determine when an amount for an allowance for loan losses for residential mortgage loans is appropriate.  At a minimum, management will update FICO scores and LTV ratios semiannually.

As of December 31, 2012, approximately 3% of residential mortgage loans had FICO scores below 640.  At December 31, 2012, approximately 7% of the Company’s residential mortgage loans had LTV ratios greater than 90%.  The Company’s most significant geographic concentration for residential mortgage loans is in California representing 38% of the portfolio as of December 31, 2012.  No other state represents more than 10% of the total residential mortgage loan portfolio. At December 31, 2012, the Company had $627 million of funding commitments for residential mortgage loans.

Syndicated Loans

The Company’s syndicated loan portfolio is diversified across industries and issuers.  The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication. Total nonperforming syndicated loans at December 31, 2012 and 2011 were $2 million and $1 million, respectively.

TroubledDebt Restructurings

The following table presents the number of loans restructured by the Company during the period and their recorded investment at the end of the period:

	Years Ended December 31,
	2012			2011
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(in millions, except number of loans)
Commercial mortgage loans	4	$	13	10	$	49
Syndicated loans	2	1		—	—
Total	6	$	14	10	$	49

The troubled debt restructurings did not have a material impact to the Company’s allowance for loan losses or income recognized for the years ended December 31, 2012 and 2011. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.

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Deferred Acquisition Costs and Deferred Sales Inducement Costs

12 Months Ended

Dec. 31, 2012

Deferred Acquisition Costs and Deferred Sales Inducement Costs

Deferred Acquisition Costs and Deferred Sales Inducement Costs

7. Deferred Acquisition Costs and Deferred Sales Inducement Costs

The Company retrospectively adopted a new accounting standard for DAC in the first quarter of 2012. See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

In the third quarter of the year, management conducts its annual review of insurance and annuity valuation assumptions relative to current experience and management expectations. To the extent that expectations change as a result of this review, management updates valuation assumptions. The impact in the third quarter of 2012 and 2011 primarily reflected the low interest rate environment and for 2012, the assumption of continued low interest rates over the near-term. As part of the third quarter 2010 process, management extended the projection periods used for its annuity products and revised client asset value growth rates assumed for variable annuity and VUL contracts.

The balances of and changes in DAC (subsequent to the adjustment for the new accounting standard) were as follows:

	2012			2011			2010
	(in millions)
Balance at January 1	$	2,413		$	2,521		$	2,349
Capitalization of acquisition costs	253			282			295
Amortization, excluding the impact of valuation assumptions review	(214		)	(305		)	(227		)
Amortization, impact of valuation assumptions review	(11		)	(31		)	174
Impact of change in net unrealized securities gains	(68		)	(54		)	(70		)
Balance at December 31	$	2,373		$	2,413		$	2,521

The balances of and changes in DSIC were as follows:

	2012			2011			2010
	(in millions)
Balance at January 1	$	464		$	545		$	524
Capitalization of sales inducement costs	7			9			35
Amortization, excluding the impact of valuation assumptions review	(45		)	(70		)	(49		)
Amortization, impact of valuation assumptions review	(13		)	(11		)	52
Impact of change in net unrealized securities gains	(9		)	(9		)	(17		)
Balance at December 31	$	404		$	464		$	545

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Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities

12 Months Ended

Dec. 31, 2012

Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities

Future Policy Benefits, Policy Claims and Other Policyholders' Funds and Separate Account Liabilities

9. Future Policy Benefits, Policy Claims and Other Policyholders’ Funds and Separate Account Liabilities

The Company retrospectively adopted a new accounting standard for DAC in the first quarter of 2012.  See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted.

Future policy benefits (subsequent to the adjustment for the new accounting standard) and policy claims and other policyholders’ funds consisted of the following:

	December 31,
	2012		2011
	(in millions)
Fixed annuities	$	16,075	$	16,401
EIA accumulated host values	31		58
EIA embedded derivatives	2		2
Variable annuity fixed sub-accounts	4,843		4,852
Variable annuity GMWB	799		1,377
Variable annuity GMAB	103		237
Other variable annuity guarantees	13		14
Total annuities	21,866		22,941
VUL/UL insurance	2,760		2,662
IUL accumulated host values	59		4
IUL embedded derivatives	45		3
VUL/UL insurance additional liabilities	294		220
Other life, DI and LTC insurance	5,646		5,339
Total future policy benefits	30,670		31,169
Policy claims and other policyholders’ funds	132		121
Total future policy benefits and policy claims and other policyholders’ funds	$	30,802	$	31,290

Separate account liabilities consisted of the following:

	December 31,
	2012		2011
	(in millions)
Variable annuity variable sub-accounts	$	63,302	$	57,556
VUL insurance variable sub-accounts	6,051		5,575
Other insurance variable sub-accounts	42		43
Total	$	69,395	$	63,174

Fixed Annuities

Fixed annuities include both deferred and payout contracts.  Deferred contracts offer a guaranteed minimum rate of interest and security of the principal invested.  Payout contracts guarantee a fixed income payment for life or the term of the contract.  The Company generally invests the proceeds from the annuity payments in fixed rate securities.  The Company may hedge the interest rate risks related to fixed annuities with derivative instruments. As of December 31, 2012 and 2011, there were no outstanding derivatives to hedge these risks.

Equity Indexed Annuities

The Index 500 Annuity, the Company’s EIA product, is a single premium deferred fixed annuity.  The contract is issued with an initial term of seven years and interest earnings are linked to the S&P 500 Index.  This annuity has a minimum interest rate guarantee of 3% on 90% of the initial premium, adjusted for any surrenders.  The Company generally invests the proceeds from the annuity deposits in fixed rate securities and hedges the equity risk with derivative instruments. See Note 16 for additional information regarding the Company’s derivative instruments.  In 2007, the Company discontinued new sales of EIAs.

Variable Annuities

Purchasers of variable annuities can select from a variety of investment options and can elect to allocate a portion to a fixed account.  A vast majority of the premiums received for variable annuity contracts are held in separate accounts where the assets are held for the exclusive benefit of those contractholders.

Most of the variable annuity contracts issued by the Company contain one or more guaranteed benefits, including GMWB, GMAB, GMDB and GGU provisions.  The Company previously offered contracts with GMIB provisions. See Note 2 and Note 10 for additional information regarding the Company’s variable annuity guarantees. The Company does not currently hedge its risk under the GMDB, GGU and GMIB provisions.  See Note 16 for additional information regarding derivative instruments used to hedge risks related to GMWB and GMAB provisions.

Insurance Liabilities

VUL/UL is the largest group of insurance policies written by the Company.  Purchasers of VUL can select from a variety of investment options and can elect to allocate a portion to a fixed account or a separate account.  A vast majority of the premiums received for VUL policies are held in separate accounts where the assets are held for the exclusive benefit of those policyholders.  In 2011, the Company began offering IUL insurance.  IUL is similar to UL in that it provides life insurance coverage and cash value that increases as a result of credited interest. Also, like UL, there is a minimum guaranteed credited rate of interest. Unlike UL, the rate of credited interest above the minimum guarantee for funds allocated to the indexed account is linked to the S&P 500 Index (subject to a cap). The policyholder may allocate all or a portion of the policy value to a fixed or indexed account.  The Company also offers term and whole life insurance as well as disability products.  The Company no longer offers standalone LTC products but has in force policies from prior years.  Insurance liabilities include accumulation values, unpaid reported claims, incurred but not reported claims and obligations for anticipated future claims.

Portions of the Company’s fixed and variable universal life policies have product features that result in profits followed by losses from the insurance component of the policy. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the policy.  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.

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Fair Values of Assets and Liabilities (Details 4) (USD $) In Millions, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Financial Assets
Mortgage loans, net	$ 3,389	$ 2,473
Policy loans	752	739
Restricted cash	86	26
Financial Liabilities
Future policy benefits	30,670	31,169
Separate account liabilities	69,395	63,174
Line of credit with Ameriprise Financial	150	300
Carrying Value
Financial Assets
Mortgage loans, net	3,389	2,473
Policy loans	752	739
Other investments	309	308
Restricted cash	86	26
Financial Liabilities
Future policy benefits	14,701	15,064
Separate account liabilities	360	345
Line of credit with Ameriprise Financial	150	300
Borrowings under repurchase agreements	501	504
Other liabilities	144	267
Fair Value
Financial Assets
Mortgage loans, net		2,650
Policy loans		713
Other investments		311
Restricted cash		26
Financial Liabilities
Future policy benefits		16,116
Separate account liabilities		345
Line of credit with Ameriprise Financial		300
Borrowings under repurchase agreements		502
Other liabilities		263
Fair Value | Level 1
Financial Assets
Restricted cash	86
Fair Value | Level 2
Financial Assets
Other investments	292
Financial Liabilities
Separate account liabilities	360
Borrowings under repurchase agreements	500
Fair Value | Level 3
Financial Assets
Mortgage loans, net	3,568
Policy loans	725
Other investments	24
Financial Liabilities
Future policy benefits	15,982
Line of credit with Ameriprise Financial	150
Other liabilities	142
Fair Value | Total
Financial Assets
Mortgage loans, net	3,568
Policy loans	725
Other investments	316
Restricted cash	86
Financial Liabilities
Future policy benefits	15,982
Separate account liabilities	360
Line of credit with Ameriprise Financial	150
Borrowings under repurchase agreements	500
Other liabilities	$ 142

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Statutory Capital and Surplus (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Statutory Capital and Surplus
Statutory unassigned surplus	$ 421	$ (296)
Period of dividend or distributions	12 months
Percentage of previous year-end statutory capital and surplus	10.00%
Statutory net gain from operations, net income and capital and surplus
Statutory net gain (loss) from operations	2,189	(475)	1,200
Statutory net income (loss)	1,976	(599)	1,112
Statutory capital and surplus	$ 3,113	$ 2,681	$ 3,735

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Fair Values of Assets and Liabilities (Details 3) (Discounted cash flow, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
GMWB and GMAB embedded derivatives
Fair values of assets and liabilities
Fair Value	$ 833
Nonperformance risk (as a percent)	0.97%
GMWB and GMAB embedded derivatives | Minimum
Fair values of assets and liabilities
Utilization of guaranteed withdrawals (as a percent)	0.00%
Surrender rate (as a percent)	0.00%
Market volatility (as a percent)	5.60%
GMWB and GMAB embedded derivatives | Maximum
Fair values of assets and liabilities
Utilization of guaranteed withdrawals (as a percent)	56.40%
Surrender rate (as a percent)	56.30%
Market volatility (as a percent)	21.20%
Corporate debt securities (private placements)
Fair values of assets and liabilities
Fair Value	$ 1,624
Corporate debt securities (private placements) | Minimum
Fair values of assets and liabilities
Yield/spread to U.S. Treasuries (as a percent)	1.10%
Corporate debt securities (private placements) | Maximum
Fair values of assets and liabilities
Yield/spread to U.S. Treasuries (as a percent)	8.50%
Corporate debt securities (private placements) | Weighted Average
Fair values of assets and liabilities
Yield/spread to U.S. Treasuries (as a percent)	2.20%

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Fair Values of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2012

Fair Values of Assets and Liabilities

Schedule of balances of assets and liabilities measured at fair value on a recurring basis

	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,387	$	1,654	$	17,041
Residential mortgage backed securities	—		3,598		23		3,621
Commercial mortgage backed securities	—		2,834		170		3,004
State and municipal obligations	—		1,122		—		1,122
Asset backed securities	—		715		156		871
Foreign government bonds and obligations	—		224		—		224
U.S. government and agencies obligations	10		39		—		49
Total Available-for-Sale securities: Fixed maturities	10		23,919		2,003		25,932
Common stocks	2		2		—		4
Cash equivalents	—		264		—		264
Other assets:
Interest rate derivative contracts	—		2,191		—		2,191
Equity derivative contracts	285		936		—		1,221
Foreign currency derivative contracts	—		6		—		6
Total other assets	285		3,133		—		3,418
Separate account assets	—		69,395		—		69,395
Total assets at fair value	$	297	$	96,713	$	2,003	$	99,013
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		45		—		45
GMWB and GMAB embedded derivatives	—		—		833		833
Total future policy benefits	—		47		833		880		(1)
Other liabilities:
Interest rate derivative contracts	—		1,486		—		1,486
Equity derivative contracts	258		1,535		—		1,793
Total other liabilities	258		3,021		—		3,279
Total liabilities at fair value	$	258	$	3,068	$	833	$	4,159

(1) The Company’s adjustment for nonperformance risk resulted in a $389 million cumulative decrease to the embedded derivative liability.

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,076	$	1,342	$	16,418
Residential mortgage backed securities	—		4,310		58		4,368
Commercial mortgage backed securities	—		3,615		16		3,631
State and municipal obligations	—		1,096		—		1,096
Asset backed securities	—		716		133		849
Foreign government bonds and obligations	—		144		—		144
U.S. government and agencies obligations	10		47		—		57
Other structured investments	—		—		14		14
Total Available-for-Sale securities: Fixed maturities	10		25,004		1,563		26,577
Common stocks	1		1		—		2
Trading securities	—		25		—		25
Cash equivalents	—		809		—		809
Other assets:
Interest rate derivative contracts	—		1,801		—		1,801
Equity derivative contracts	274		1,041		—		1,315
Credit derivative contracts	—		1		—		1
Foreign currency derivative contracts	—		7		—		7
Total other assets	274		2,850		—		3,124
Separate account assets	—		63,174		—		63,174
Total assets at fair value	$	285	$	91,863	$	1,563	$	93,711
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		3		—		3
GMWB and GMAB embedded derivatives	—		—		1,585		1,585
Total future policy benefits	—		5		1,585		1,590		(1)
Other liabilities:
Interest rate derivative contracts	—		1,198		—		1,198
Equity derivative contracts	297		734		—		1,031
Foreign currency derivative contracts	—		10		—		10
Total other liabilities	297		1,942		—		2,239
Total liabilities at fair value	$	297	$	1,947	$	1,585	$	3,829

(1) The Company’s adjustment for nonperformance risk resulted in a $506 million cumulative decrease to the embedded derivative liability.

Summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

	Available-for-Sale Securities: Fixed Maturities																		Future Policy Benefits:
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments			Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2012	$	1,342		$	58		$	16		$	133		$	14		$	1,563		$	(1,585	)
Total gains (losses) included in:
Net income	(1		)	(7		)	1			1			—			(6		)(1)	948		(2)
Other comprehensive income	12			10			7			2			1			32			—
Purchases	444			31			8			—			—			483			—
Sales	—			—			—			—			—			—			—
Issues	—			—			—			—			—			—			(188		)
Settlements	(153		)	(12		)	—			(2		)	—			(167		)	(8		)
Transfers into Level 3	10			25			146			22			—			203			—
Transfers out of Level 3	—			(82		)	(8		)	—			(15		)	(105		)	—
Balance, December 31, 2012	$	1,654		$	23		$	170		$	156		$	—		$	2,003		$	(833	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2012 included in:
Net investment income	$	(1	)	$	—		$	1		$	1		$	—		$	1		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			908

(1) Represents a $7 million loss included in net realized investment gains (losses) and a $1 million gain included in net investment income in the Consolidated Statements of Income.

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

	Available-for-Sale Securities: Fixed Maturities																		Future Policy Benefits:
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments			Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2011	$	1,317		$	2,697		$	30		$	148		$	13		$	4,205		$	(421	)
Total gains (losses) included in:
Net income	7			49			—			2			1			59		(1)	(1,007		)(2)
Other comprehensive income	12			(75		)	—			(6		)	(2		)	(71		)	—
Purchases	178			26			71			—			3			278			—
Sales	(50		)	(3		)	—			—			—			(53		)	—
Issues	—			—			—			—			—			—			(149		)
Settlements	(117		)	(471		)	—			(3		)	(1		)	(592		)	(8		)
Transfers into Level 3	7			—			1			—			—			8			—
Transfers out of Level 3	(12		)	(2,165		)	(86		)	(8		)	—			(2,271		)	—
Balance, December 31, 2011	$	1,342		$	58		$	16		$	133		$	14		$	1,563		$	(1,585	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2011 included in:
Net investment income	$	—		$	—		$	—		$	1		$	—		$	1		$	—
Net realized investment gains (losses)	—			(23		)	—			—			1			(22		)	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			(1,035		)

(1) Represents a $26 million loss included in net realized investment gains (losses) and an $85 million gain included in net investment income in the Consolidated Statements of Income.

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

	Available-for-Sale Securities: Fixed Maturities																Future Policy Benefits:
	Corporate Debt Securities		Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments		Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2010	$	1,239	$	2,868		$	72		$	119		$	11	$	4,309		$	(299	)
Total gains (losses) included in:
Net income	1		55			1			5			2		64		(1)	4		(2)
Other comprehensive income	30		202			10			10			—		252			—
Purchases, sales, issues and settlements, net	22		(428		)	91			27			—		(288		)	(126		)
Transfers into Level 3	25		—			—			—			—		25			—
Transfers out of Level 3	—		—			(144		)	(13		)	—		(157		)	—
Balance, December 31, 2010	$	1,317	$	2,697		$	30		$	148		$	13	$	4,205		$	(421	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2010 included in:
Net investment income	$	—	$	79		$	—		$	4		$	—	$	83		$	—
Net realized investment gains (losses)	—		(26		)	—			—			—		(26		)	—
Benefits, claims, losses and settlement expenses	—		—			—			—			—		—			(15		)

(1) Represents a $21 million loss included in net realized investment gains (losses) and an $85 million gain included in net investment income in the Consolidated Statements of Income.

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

Significant unobservable inputs used in the fair value measurements

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,624	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1% – 8.5% (2.2%)
GMWB and GMAB embedded derivatives	$	833	Discounted cash flow	Utilization of guaranteed withdrawals(1)	0.0% – 56.4%
				Surrender rate	0.0% – 56.3%
				Market volatility(2)	5.6% – 21.2%
				Nonperformance risk(3)	97 bps

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

(2) Market volatility is implied volatility of fund of funds.

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

Schedule of carrying value and the estimated fair value of financial instruments that are not reported at fair value

	December 31, 2012										December 31, 2011
	Carrying		Fair Value								Carrying		Fair
	Value		Level 1		Level 2		Level 3		Total		Value		Value
	(in millions)
Financial Assets
Mortgage loans, net	$	3,389	$	—	$	—	$	3,568	$	3,568	$	2,473	$	2,650
Policy loans	752		—		—		725		725		739		713
Other investments	309		—		292		24		316		308		311
Restricted cash	86		86		—		—		86		26		26
Financial Liabilities
Future policy benefits	$	14,701	$	—	$	—	$	15,982	$	15,982	$	15,064	$	16,116
Separate account liabilities	360		—		360		—		360		345		345
Line of credit with Ameriprise Financial	150		—		—		150		150		300		300
Borrowings under repurchase agreements	501		—		500		—		500		504		502
Other liabilities	144		—		—		142		142		267		263

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Financing Receivables (Details 3) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 item	Dec. 31, 2011 item
Troubled Debt Restructurings
Number of Loans	6	10
Recorded Investment	$ 14	$ 49
Commercial Mortgage Loans
Troubled Debt Restructurings
Number of Loans	4	10
Recorded Investment	13	49
Syndicated Loans
Troubled Debt Restructurings
Number of Loans	2
Recorded Investment	$ 1

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Related Party Transactions

12 Months Ended

Dec. 31, 2012

Related Party Transactions

Related Party Transactions

14. Related Party Transactions

Columbia Management Investment Advisers, LLC is the investment manager for the proprietary mutual funds used as investment options by the Company’s variable annuity contractholders and variable life insurance policyholders.  The Company provides all fund management services, other than investment management, and is compensated for the administrative services it provides.  For the years ended December 31, 2012, 2011 and 2010, the Company received $244 million, $222 million and $136 million, respectively, from Columbia Management Investment Advisers, LLC for these services.

Charges by Ameriprise Financial and affiliated companies to the Company for use of joint facilities, technology support, marketing services and other services aggregated $477 million, $530 million and $527 million for 2012, 2011 and 2010, respectively.  Certain of these costs are included in DAC.  Expenses allocated to the Company may not be reflective of expenses that would have been incurred by the Company on a stand-alone basis.

Dividends paid and received by RiverSource Life Insurance Company were as follows:

	Years Ended December 31,
	2012		2011		2010
	(in millions)
Cash dividends paid to Ameriprise Financial	$	865	$	750	$	500
Non-cash dividends paid to Ameriprise Financial	—		850		—
Cash dividends received from RiverSource Life of NY	50		79		28
Cash dividends received from RTA	—		53		63

Notifications to state insurance regulators were made in advance of payments of dividends for amounts in excess of statutorily defined thresholds.  See Note 15 for additional information.

During 2012 and 2011, RiverSource Life Insurance Company made cash contributions to RTA of $53 million and $111 million, respectively, for ongoing funding commitments related to affordable housing partnership investments.

In October 2012, the Company purchased $954 million of residential mortgage loans from an affiliate, Ameriprise Bank, FSB.   The Company purchased the loans for investment purposes and as part of Ameriprise Financial’s initiative to transition Ameriprise Bank, FSB from a federal savings bank to a limited powers national trust bank.  The portfolio consists primarily of variable rate revolving loans, and includes both first and second liens.  The loans were purchased by the Company at fair value.  See Note 6 for additional information.

During 2010, the Company received a non-cash capital contribution of $14 million comprised of affordable housing partnership investments from Ameriprise Financial.

Beginning in 2010, the Company’s taxable income was included in the consolidated federal income tax return of Ameriprise Financial.  Net amount due to Ameriprise Financial for federal income taxes were $17 million at December 31, 2012. Net amount due from Ameriprise Financial for federal income taxes were $86 million at December 31, 2011.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Summary of Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation

The Company consolidates entities in which it holds a greater than 50% voting interest, or when certain conditions are met for variable interest entities (“VIEs”) and limited partnerships.  Entities in which the Company exercises significant influence or holds a greater than 20% but less than 50% voting interest are accounted for under the equity method.  All other investments that are not reported at fair value as trading or Available-for-Sale securities are accounted for under the cost method where the Company owns less than a 20% voting interest and does not exercise significant influence.

A VIE is an entity that either has equity investors that lack certain essential characteristics of a controlling financial interest (including substantive voting rights, the obligation to absorb the entity’s losses, or the rights to receive the entity’s returns) or has equity investors that do not provide sufficient financial resources for the entity to support its activities.  A VIE is required to be assessed for consolidation under two models:

· If the VIE is a money market fund or is an investment company, or has the financial characteristics of an investment company, and the following is true:

(i) the entity does not have an explicit or implicit obligation to fund the investment company’s losses; and

(ii) the investment company is not a securitization entity, asset backed financing entity, or an entity formally considered a qualifying special purpose entity,

then, the VIE will be consolidated by the entity that determines it stands to absorb a majority of the VIE’s expected losses or to receive a majority of the VIE’s expected residual returns. Examples of entities that are likely to be assessed for consolidation under this framework include hedge funds, property funds, private equity funds and venture capital funds.

· If the VIE does not meet the criteria above, the VIE will be consolidated by the entity that determines it has both:

(i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and

(ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

When determining whether the Company stands to absorb the majority of a VIE’s expected losses or receive a majority of a VIE’s expected returns, it analyzes the design of the VIE to identify the variable interests it holds.  Then the Company quantitatively determines whether its variable interests will absorb a majority of the VIE’s variability.  If the Company determines it has control over the activities that most significantly impact the economic performance of the VIE and it will absorb a majority of the VIE’s expected variability, the Company consolidates the VIE.  The calculation of variability is based on an analysis of projected probability-weighted cash flows based on the design of the particular VIE.  When determining whether the Company has the power and the obligation to absorb losses or rights to receive benefits from the VIE that could potentially be significant, the Company qualitatively determines if its variable interests meet these criteria. If the Company consolidates a VIE under either scenario, it is referred to as the VIE’s primary beneficiary.

Amounts Based on Estimates and Assumptions

Amounts Based on Estimates and Assumptions

Accounting estimates are an integral part of the Consolidated Financial Statements. In part, they are based upon assumptions concerning future events. Among the more significant are those that relate to investment securities valuation and recognition of other-than-temporary impairments, DAC and the corresponding recognition of DAC amortization, derivative instruments and hedging activities, claims reserves and income taxes and the recognition of deferred tax assets and liabilities. These accounting estimates reflect the best judgment of management and actual results could differ.

Investments

Investments

Available-for-Sale Securities

Available-for-Sale securities are carried at fair value with unrealized gains (losses) recorded in accumulated other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes.  Gains and losses are recognized in the Consolidated Statements of Income upon disposition of the securities.

When the fair value of an investment is less than its amortized cost, the Company 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 is met, an other-than-temporary impairment is considered to have occurred and the Company must recognize an other-than-temporary impairment for the difference between the investment’s amortized cost basis and its fair value through earnings. For securities that do not meet the above criteria and the Company does not expect to recover a security’s amortized cost basis, the security is also considered other-than-temporarily impaired. For these securities, the Company separates the total impairment into the credit loss component and the amount of the loss related to other factors. The amount of the total other-than-temporary impairment related to credit loss is recognized in earnings.

The amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of impacts to DAC, DSIC, certain benefit reserves and income taxes. For Available-for-Sale securities that have recognized an other-than-temporary impairment through earnings, the difference between the amortized cost basis and the cash flows expected to be collected is accreted as interest income, if through subsequent evaluation there is a sustained increase in the cash flow expected. Subsequent increases and decreases in the fair value of Available-for-Sale securities are included in other comprehensive income.

The Company provides a supplemental disclosure on the face of its Consolidated Statements of Income that presents: (i) total other-than-temporary impairment losses recognized during the period and (ii) the portion of other-than-temporary impairment losses recognized in other comprehensive income. The sum of these amounts represents the credit-related portion of other-than-temporary impairments that were recognized in earnings during the period. The portion of other-than-temporary losses recognized in other comprehensive income includes: (i) the portion of other-than-temporary impairment losses related to factors other than credit recognized during the period and (ii) reclassifications of other-than-temporary impairment losses previously determined to be related to factors other than credit that are determined to be credit-related in the current period. The amount presented on the Consolidated Statements of Income as the portion of other-than-temporary losses recognized in other comprehensive income excludes subsequent increases and decreases in the fair value of these securities.

For all securities that are considered temporarily impaired, the Company does not intend to sell these securities (has not made a decision to sell) and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The Company believes that it will collect all principal and interest due on all investments that have amortized cost in excess of fair value that are considered only temporarily impaired.

Factors the Company considers in determining whether declines in the fair value of fixed maturity securities are other-than-temporary include: (i) the extent to which the market value is below amortized cost; (ii) the duration of time in which there has been a significant decline in value; (iii) fundamental analysis of the liquidity, business prospects and overall financial condition of the issuer; and (iv) market events that could impact credit ratings, economic and business climate, litigation and government actions, and similar external business factors. In order to determine the amount of the credit loss component for corporate debt securities considered other-than-temporarily impaired, 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.

For structured investments (e.g., residential mortgage backed securities, commercial mortgage backed securities and asset backed securities), the Company also considers 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 in assessing potential other-than-temporary impairments of these investments. Based upon these factors, securities that have indicators of potential other-than-temporary impairment are subject to detailed review by management. Securities for which declines are considered temporary continue to be carefully monitored by management.

Mortgage Loans, net

Mortgage loans, net reflect the Company’s interest in commercial and residential mortgage loans, less the related allowance for loan losses.

Policy Loans

Policy loans include life insurance policy and annuity loans and are reported at the unpaid principal balance, plus accrued interest.

Other Investments

Other investments primarily reflect the Company’s interests in affordable housing partnerships and syndicated loans which represent investments in below investment grade loan syndications.  Affordable housing partnerships are accounted for under the equity method.

Financing Receivables

FinancingReceivables

Mortgage Loans and Syndicated Loans

Mortgage loans and syndicated loans are stated at amortized cost, net of allowances for loan losses, if any.

In October 2012, the Company purchased residential mortgage loans from an affiliate, Ameriprise Bank, FSB.  These loans were purchased at fair value. The purchase price takes into account the credit quality of the loan portfolio, resulting in no allowance for loan losses recorded at the acquisition date.

Interest income is accrued on the unpaid principal balances of the loans as earned.

Policy Loans

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 these loans, the Company does not record an allowance for loan losses for policy loans.

Nonaccrual Loans

Generally, loans are evaluated for or 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.  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 or in accordance with the loan agreement unless the remaining principal balance has been determined to be fully collectible.

Commercial mortgage loans are evaluated for impairment when the loan is considered for nonaccrual status, restructured or foreclosure proceedings are initiated on the property.  If it is determined that the fair value is less than the current loan balance, it  is written down to fair value less estimated selling costs.  Residential mortgage loans are charged off when management determines the assets are uncollectible and commences foreclosure proceedings on the property, at which time the property is written down to fair value less selling costs.  Foreclosed property is recorded as real estate owned in other investments.  Syndicated loans are placed on nonaccrual status when management determines it will not collect all contractual principal and interest on the loan.

Allowance for Loan Losses

Management determines the adequacy of the allowance for loan losses by portfolio 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, FICO scores of the borrower and occupancy rates, along with economic and market conditions.  This evaluation is inherently subjective as it requires estimates, which may be susceptible to significant change.

The Company determines the amount of the allowance required for certain sectors based on management’s assessment of relative risk characteristics of the loan portfolio.  The allowance is recorded for homogeneous loan categories on a pool basis, based on an analysis of product mix and risk characteristics of the portfolio, including geographic concentration, bankruptcy experiences, and historical losses, adjusted for current trends and market conditions.

While the Company attributes portions of the allowance to specific loan pools as part of the allowance estimation process, the entire allowance is available to absorb losses inherent in the total loan portfolio.  The allowance is increased through provisions charged to net realized investment gains (losses) and reduced/increased by net charge-offs/recoveries.

Impaired Loans

The Company considers a loan to be impaired when, based on current information and events, it is probable the Company will not be able to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement.  Impaired loans may also include loans that have been modified in troubled debt restructurings as a concession to borrowers experiencing financial difficulties.  Management evaluates for impairment all restructured loans and loans with higher impairment risk factors.  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. The evaluation of impairment on residential mortgage loans is primarily driven by delinquency status of individual loans.  The impairment recognized is measured as the excess of the loan’s recorded investment over: (i) the present value of its expected principal and interest payments discounted at the loan’s effective interest rate, (ii) the fair value of collateral or (iii) the loan’s observable market price.

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. 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.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents include highly liquid investments with original maturities of 90 days or less.

Restricted Cash

Restricted Cash

Total restricted cash at December 31, 2012 and 2011 was $86 million and $26 million, respectively, consisting of cash that has been pledged to counterparties.

Reinsurance

Reinsurance

The Company cedes significant amounts of insurance risk to other insurers under reinsurance agreements. Reinsurance premiums paid and benefits received are accounted for consistently with the basis used in accounting for the policies from which risk is reinsured and consistently with the terms of the reinsurance contracts. Reinsurance premiums for traditional life, long term care (“LTC”) and DI ceded on a coinsurance basis, net of the change in any prepaid reinsurance asset, are reported as a reduction of premiums. Fixed and variable universal life reinsurance premiums are reported as a reduction of policy and contract charges.  In addition, for fixed and variable universal life insurance policies, the net cost of reinsurance ceded, which represents the discounted amount of the expected cash flows between the reinsurer and the Company, is recognized as an asset and amortized over the term of the reinsurance contract, in proportion to the estimated gross profits and is subject to retrospective adjustment in a manner similar to retrospective adjustment of DAC.  The assumptions used to project the expected cash flows are consistent with those used for DAC asset valuation for the same contracts.  Changes in the net cost of reinsurance are reflected as a component of policy and contract charges.  Reinsurance recoveries are reported as components of benefits, claims, losses and settlement expenses.

Insurance liabilities are reported before the effects of reinsurance. Future policy benefits and policy claims and other policyholders’ funds recoverable under reinsurance contracts are recorded as reinsurance recoverables.

The Company also assumes life insurance and fixed annuity risk from other insurers in limited circumstances. Reinsurance premiums received and benefits paid are accounted for consistently with the basis used in accounting for the policies from which risk is reinsured and consistently with the terms of the reinsurance contracts.  Liabilities for assumed business are recorded within future policy benefits.

See Note 8 for additional information on reinsurance.

Land, Buildings, Equipment and Software

Land, Buildings, Equipment and Software

Land, buildings, equipment and internally developed or purchased software are carried at cost less accumulated depreciation or amortization and are reflected within other assets. The Company generally uses the straight-line method of depreciation and amortization over periods ranging from three to 30 years.

At December 31, 2012 and 2011, land, buildings, equipment and software were $174 million and $182 million, respectively, net of accumulated depreciation of $91 million and $75 million, respectively. Depreciation and amortization expense for the years ended December 31, 2012, 2011 and 2010 was $17 million, $16 million and $14 million, respectively.

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Freestanding derivative instruments are recorded at fair value and are reflected in other assets or other liabilities.  The Company’s policy is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement.  The accounting for changes in the fair value of a derivative instrument depends on its intended use and the resulting hedge designation, if any.  The Company primarily uses derivatives as economic hedges that are not designated as accounting hedges or do not qualify for hedge accounting treatment.  The Company occasionally designates derivatives as (i) hedges of changes in the fair value of assets, liabilities, or firm commitments (“fair value hedges”) or (ii) hedges of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedges”).

Derivative instruments that are entered into for hedging purposes are designated as such at the time the Company enters into the contract.  For all derivative instruments that are designated for hedging activities, the Company formally documents all of the hedging relationships between the hedge instruments and the hedged items at the inception of the relationships.  Management also formally documents its risk management objectives and strategies for entering into the hedge transactions.  The Company formally assesses, at inception and on a quarterly basis, whether derivatives designated as hedges are highly effective in offsetting the fair value or cash flows of hedged items.  If it is determined that a derivative is no longer highly effective as a hedge, the Company will discontinue the application of hedge accounting.

For derivative instruments that do not qualify for hedge accounting or are not designated as accounting hedges, changes in fair value are recognized in current period earnings.  Changes in fair value of derivatives are presented in the Consolidated Statements of Income based on the nature and use of the instrument.  Changes in fair value of derivatives used as economic hedges are presented in the Consolidated Statements of Income with the corresponding change in the hedged asset or liability.

For derivative instruments that qualify as fair value hedges, changes in the fair value of the derivatives, as well as changes in the fair value of the hedged assets, liabilities or firm commitments, are recognized on a net basis in current period earnings. The carrying value of the hedged item is adjusted for the change in fair value from the designated hedged risk.  If a fair value hedge designation is removed or the hedge is terminated prior to maturity, previous adjustments to the carrying value of the hedged item are recognized into earnings over the remaining life of the hedged item.

For derivative instruments that qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instruments is reported in accumulated other comprehensive income and reclassified into earnings when the hedged item or transaction impacts earnings.  The amount that is reclassified into earnings is presented in the Consolidated Statements of Income with the hedged instrument or transaction impact.  Any ineffective portion of the gain or loss is reported in current period earnings as a component of net investment income.  If a hedge designation is removed or a hedge is terminated prior to maturity, the amount previously recorded in accumulated other comprehensive income is reclassified to earnings over the period that the hedged item impacts earnings.  For hedge relationships that are discontinued because the forecasted transaction is not expected to occur according to the original strategy, any related amounts previously recorded in accumulated other comprehensive income are recognized in earnings immediately.

The equity components of EIA and IUL obligations are considered an embedded derivative.  Additionally, certain annuities contain guaranteed minimum accumulation benefit (“GMAB”) and guaranteed minimum withdrawal benefit (“GMWB”) provisions.  The GMAB and the non-life contingent benefits associated with GMWB provisions are also considered embedded derivatives.

See Note 13 for information regarding the Company’s fair value measurement of derivative instruments and Note 16 for the impact of derivatives on the Consolidated Statements of Income.

Deferred Acquisition Costs

Deferred Acquisition Costs

The Company incurs costs in connection with acquiring new and renewal insurance and annuity businesses.  The portion of these costs which are incremental and direct to the acquisition of a new or renewal insurance policy or annuity contract are deferred.    Significant costs capitalized by the Company include sales based compensation related to the acquisition of new and renewal insurance policies and annuity contracts, medical inspection costs for successful sales, and a portion of employee compensation and benefit costs based upon the amount of time spent on successful sales.  Sales based compensation paid to Ameriprise Financial Services, Inc. (“AFSI”), a subsidiary of Ameriprise Financial, advisors and employees and third-party distributers is capitalized.  Employee compensation and benefits costs which are capitalized relate primarily to sales efforts, underwriting and processing. All other costs which are not incremental direct costs of acquiring an insurance policy or annuity contract are expensed as incurred. The DAC associated with insurance policies or annuity contracts that are significantly modified or internally replaced with another contract are accounted for as contract terminations.  These transactions are anticipated in establishing amortization periods and other valuation assumptions.

Costs deferred as DAC are amortized over time.  For annuity and universal life (“UL”) contracts, DAC are amortized based on projections of estimated gross profits over amortization periods equal to the approximate life of the business.  For other insurance products, DAC are generally amortized as a percentage of premiums over amortization periods equal to the premium-paying period.

For annuity and UL insurance products, the assumptions made in projecting future results and calculating the DAC balance and DAC amortization expense are management’s best estimates.  Management is required to update these assumptions whenever it appears that, based on actual experience or other evidence, earlier estimates should be revised.  When assumptions are changed, the percentage of estimated gross profits used to amortize DAC might also change.  A change in the required amortization percentage is applied retrospectively; an increase in amortization percentage will result in a decrease in the DAC balance and an increase in DAC amortization expense, while a decrease in amortization percentage will result in an increase in the DAC balance and a decrease in DAC amortization expense.  The impact on results of operations of changing assumptions can be either positive or negative in any particular period and is reflected in the period in which such changes are made.

For traditional life, DI and LTC insurance products, the assumptions made in calculating the DAC balance and DAC amortization expense are consistent with those used in determining the liabilities and, therefore, are intended to provide for adverse deviations in experience and are revised only if management concludes experience will be so adverse that DAC are not recoverable.  If management concludes that DAC are not recoverable, DAC are reduced to the amount that is recoverable based on best estimate assumptions and there is a corresponding expense recorded in the Consolidated Statements of Income.

For annuity, life, DI and LTC insurance products, key assumptions underlying those long-term projections include interest rates (both earning rates on invested assets and rates credited to contractholder and policyholder accounts), equity market performance, mortality and morbidity rates and the rates at which policyholders are expected to surrender their contracts, make withdrawals from their contracts and make additional deposits to their contracts.  Assumptions about earned and credited interest rates are the primary factors used to project interest margins, while assumptions about equity and bond market performance are the primary factors used to project client asset value growth rates, and assumptions about surrenders, withdrawals and deposits comprise projected persistency rates.  Management must also make assumptions to project maintenance expenses associated with servicing its annuity and insurance businesses during the DAC amortization period.

The client asset value growth rates are the rates at which variable annuity and variable universal life (“VUL”) insurance contract values invested in separate accounts are assumed to appreciate in the future.  The rates used vary by equity and fixed income investments.  Management reviews and, where appropriate, adjusts its assumptions with respect to client asset value growth rates on a regular basis.  The Company typically uses a five-year mean reversion process as a guideline in setting near-term equity fund growth rates based on a long-term view of financial market performance as well as recent actual performance.  The suggested near-term equity fund growth rate is reviewed quarterly to ensure consistency with management’s assessment of anticipated equity market performance.  DAC amortization expense recorded in a period when client asset value growth rates exceed management’s near-term estimate will typically be less than in a period when growth rates fall short of management’s near-term estimate.

The Company monitors other principal DAC amortization assumptions, such as persistency, mortality, morbidity, interest margin and maintenance expense levels each quarter and, when assessed independently, each could impact the Company’s DAC balances.

The analysis of DAC balances and the corresponding amortization is a dynamic process that considers all relevant factors and assumptions described previously.  Unless the Company’s management identifies a significant deviation over the course of the quarterly monitoring, management reviews and updates these DAC amortization assumptions annually in the third quarter of each year.

Deferred Sales Inducement Costs

Deferred Sales Inducement Costs

Sales inducement costs consist of bonus interest credits and premium credits added to certain annuity contract and insurance policy values.  These benefits are capitalized to the extent they are incremental to amounts that would be credited on similar contracts without the applicable feature.  The amounts capitalized are amortized using the same methodology and assumptions used to amortize DAC.  The amortization of DSIC is recorded in benefits, claims, losses and settlement expenses.

Separate Account Assets and Liabilities

Separate Account Assets and Liabilities

Separate account assets and liabilities are primarily funds held for the exclusive benefit of variable annuity contractholders and variable life insurance policyholders, who assume the related investment risk.  Income and losses on separate account assets accrue directly to the contractholder or policyholder and are not reported in the Company’s Consolidated Statements of Income.  Separate account assets are recorded at fair value. Changes in the fair value of separate account assets are offset by changes in the related separate account liabilities. The Company receives mortality and expense risk and other fees, guarantee fees and cost of insurance charges from the related accounts.

Future Policy Benefits and Policy Claims and Other Policyholders' Funds

Future Policy Benefits and Policy Claims and Other Policyholders’ Funds

Fixed Annuities and Variable Annuity Guarantees

Future policy benefits and policy claims and other policyholders’ funds related to fixed annuities and variable annuity guarantees include liabilities for fixed account values on fixed and variable deferred annuities, guaranteed benefits associated with variable annuities, EIAs and fixed annuities in a payout status.

Liabilities for fixed account values on fixed and variable deferred annuities are equal to accumulation values, which are the cumulative gross deposits and credited interest less withdrawals and various charges.

The majority of the variable annuity contracts offered by the Company contain guaranteed minimum death benefit (“GMDB”) provisions.  When market values of the customer’s accounts decline, the death benefit payable on a contract with a GMDB may exceed the contract accumulation value.  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 containing GMWB and GMAB provisions, and until May 2007, the Company offered contracts containing guaranteed minimum income benefit (“GMIB”) provisions.

In determining the liabilities for GMDB, GMIB and the life contingent benefits associated with GMWB, the Company projects these benefits and contract assessments using actuarial models to simulate various equity market scenarios. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews and, where appropriate, adjusts its assumptions each quarter.  Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.

The GMDB liability is determined by estimating the expected value of death benefits in excess of the projected contract accumulation value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g., mortality and expense fees, contractual administrative charges and similar fees).

If elected by the contract owner and after a stipulated waiting period from contract issuance, a GMIB guarantees a minimum lifetime annuity payout based on a specified rate of contract accumulation value growth and predetermined annuity purchase rates. The GMIB liability is determined each period by estimating the expected value of annuitization benefits in excess of the projected contract accumulation value at the date of annuitization and recognizing the excess over the estimated meaningful life based on expected assessments.

The embedded derivatives related to GMAB and the non-life contingent benefits associated with GMWB provisions are recorded at fair value.  See Note 13 for information regarding the fair value measurement of embedded derivatives.  The liability for the life contingent benefits associated with GMWB provisions is determined in the same way as the GMDB liability.  Significant assumptions made in projecting future benefits and fees relate to persistency and benefit utilization. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.  The changes in both the fair values of the GMWB and GMAB embedded derivatives and the liability for life contingent benefits are reflected in benefits, claims, losses and settlement expenses.

Liabilities for EIAs are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

Liabilities for fixed annuities in a benefit or payout status are based on future estimated payments using established industry mortality tables and interest rates.

Life, Disability Income and Long Term Care Insurance

Future policy benefits and policy claims and other policyholders’ funds related to life, DI and LTC insurance include liabilities for fixed account values on fixed and variable universal life policies, liabilities for indexed accounts of IUL products, liabilities for unpaid amounts on reported claims, estimates of benefits payable on claims incurred but not yet reported and estimates of benefits that will become payable on term life, whole life, DI and LTC policies as claims are incurred in the future.

Liabilities for fixed account values on fixed and variable universal life insurance are equal to accumulation values.  Accumulation values are the cumulative gross deposits and credited interest less various contractual expense and mortality charges and less amounts withdrawn by policyholders.

Liabilities for indexed accounts of IUL products are equal to the accumulation of host contract values covering guaranteed benefits and the fair value of embedded equity options.

A portion of the Company’s fixed and variable universal life policies have product features that result in profits followed by losses from the insurance component of the contract. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the contract.  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.

In determining the liability for contracts with profits followed by losses, the Company projects benefits and contract assessments using actuarial models. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, persistency and investment margins and are consistent with those used for DAC asset valuation for the same contracts. As with DAC, management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.

The liability for these future losses is determined by estimating the death benefits in excess of account value and recognizing the excess over the estimated meaningful life based on expected assessments (e.g. cost of insurance charges, contractual administrative charges, similar fees and investment margin). See Note 9 for information regarding the liability for contracts with secondary guarantees.

Liabilities for unpaid amounts on reported life insurance claims are equal to the death benefits payable under the policies. Liabilities for unpaid amounts on reported DI and LTC claims include any periodic or other benefit amounts due and accrued, along with estimates of the present value of obligations for continuing benefit payments. These amounts are calculated based on claim continuance tables which estimate the likelihood an individual will continue to be eligible for benefits. Present values are calculated at interest rates established when claims are incurred. Anticipated claim continuance rates are based on established industry tables, adjusted as appropriate for the Company’s experience.

Liabilities for estimated benefits payable on claims that have been incurred but not yet reported are based on periodic analysis of the actual time lag between when a claim occurs and when it is reported.

Liabilities for estimates of benefits that will become payable on future claims on term life, whole life, DI and LTC policies are based on the net level premium method, using anticipated premium payments, mortality and morbidity rates, policy persistency and interest rates earned on assets supporting the liability. Anticipated mortality and morbidity rates are based on established industry mortality and morbidity tables, with modifications based on the Company’s experience. Anticipated premium payments and persistency rates vary by policy form, issue age, policy duration and certain other pricing factors.

Changes in future policy benefits and policy claims and other policyholders’ funds are reflected in earnings in the period adjustments are made.

Where applicable, benefit amounts expected to be recoverable from reinsurance companies who share in the risk are separately recorded as reinsurance recoverables.

Sources of Revenue

Sources of Revenue

The Company’s principal sources of revenue include premiums, net investment income and policy and contract charges.

Premiums

Premiums include premiums on traditional life, DI and LTC insurance products and immediate annuities with a life contingent feature.  Premiums are reported net of reinsurance ceded and are recognized as revenue when due.

Net Investment Income

Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale, commercial and residential mortgage loans, policy loans, other investments and cash and cash equivalents; the changes in fair value of certain derivatives; and the pro-rata share of net income or loss on equity method investments.  Interest income is accrued as earned using the effective interest method, which makes an adjustment of the yield for premiums and discounts on all performing fixed maturity securities classified as Available-for-Sale and on the residential mortgage loans so that the related security or loan recognizes a constant rate of return on the outstanding balance throughout its term.

Policy and Contract Charges

Policy and contract charges include mortality and expense risk fees and certain other charges assessed on annuities and fixed and variable universal life insurance, which consist of cost of insurance charges, net of reinsurance premiums and cost of reinsurance for universal life insurance products, and administrative and surrender charges.  Mortality and expense risk fees include risk, management and administration fees, which are generated directly and indirectly from the Company’s separate account assets.  Cost of insurance charges on fixed and variable universal life insurance and contract charges and surrender charges on annuities and fixed and variable universal life insurance are recognized as revenue when collected.

Net Realized Investment Gains (Losses)

Net realized investment gains (losses) primarily include realized gains and losses on the sale of securities and charges for the other-than-temporary impairments of investments related to credit losses.  Realized gains and losses on the sale of securities, other than equity method investments, are recognized using the specific identification method, on a trade date basis.

Other Insurance and Operating Expenses

Other Insurance and Operating Expenses

Other insurance and operating expenses include expenses allocated to the Company from its parent, Ameriprise Financial, for the Company’s share of compensation, professional and consultant fees and expenses associated with information technology and communications, facilities and equipment, advertising and promotion and legal and regulatory costs.  Also included are commissions, sales and marketing expenses and other operating expenses.  These expenses are presented net of acquisition cost deferrals.

Income Taxes

Income Taxes

The Company’s taxable income is included in the consolidated federal income tax return of Ameriprise Financial. The Company provides for income taxes on a separate return basis, except that, under an agreement between Ameriprise Financial and the Company, tax benefits are recognized for losses to the extent they can be used in the consolidated return.  It is the policy of Ameriprise Financial that it will reimburse its subsidiaries for any tax benefits recorded.  Inherent in the provision for income taxes are estimates and judgments regarding the tax treatment of certain items.

In connection with the provision for income taxes, the Consolidated Financial Statements reflect certain amounts related to deferred tax assets and liabilities, which result from temporary differences between the assets and liabilities measured for financial statement purposes versus the assets and liabilities measured for tax return purposes. Among the Company’s deferred taxes is a significant deferred tax asset relating to capital losses that have been recognized for financial statement purposes but not yet for tax return purposes as well as future deductible capital losses realized for tax return purposes.  Under current U.S. federal income tax law, capital losses generally must be used against capital gain income within five years of the year in which the capital losses are recognized for tax purposes.

The Company is required to establish a valuation allowance for any portion of its 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 including the ability to generate capital gains.  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.  Management may need to identify and implement appropriate planning strategies to ensure its ability to realize deferred tax assets and avoid the establishment of a valuation allowance with respect to such assets.  In the opinion of management, it is currently more likely than not that the Company will not realize the full benefit of certain state net operating losses and therefore a valuation allowance of $5 million has been established at December 31, 2012.

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Financing Receivables (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Rollforward of the allowance for loan losses
Beginning balance	$ 37	$ 41	$ 42
Charge-offs	(7)	(3)	(3)
Provisions		(1)	2
Ending balance	30	37	41
Individually evaluated for impairment	5	9	8
Collectively evaluated for impairment	25	28	33
Recorded investment in financing receivables by impairment method and type of loan
Individually evaluated for impairment	39	65
Collectively evaluated for impairment	3,679	2,742
Total	3,718	2,807
Recorded investment in financing receivables individually evaluated for impairment with no related allowance for loan losses	10	4
Total loans purchased	1,065	194	59
Nonperforming loans	4	12
Commercial Mortgage Loans
Rollforward of the allowance for loan losses
Beginning balance	32	36	30
Charge-offs	(6)	(3)	(1)
Provisions		(1)	7
Ending balance	26	32	36
Individually evaluated for impairment	5	9	8
Collectively evaluated for impairment	21	23	28
Recorded investment in financing receivables by impairment method and type of loan
Individually evaluated for impairment	39	64
Collectively evaluated for impairment	2,442	2,441
Total	2,481	2,505
Residential Mortgage Loans
Recorded investment in financing receivables by impairment method and type of loan
Collectively evaluated for impairment	934
Total	934
Unamortized discount	80
Total loans purchased	954
Syndicated Loans
Rollforward of the allowance for loan losses
Beginning balance	5	5	12
Charge-offs	(1)		(2)
Provisions			(5)
Ending balance	4	5	5
Collectively evaluated for impairment	4	5	5
Recorded investment in financing receivables by impairment method and type of loan
Individually evaluated for impairment		1
Collectively evaluated for impairment	303	301
Total	303	302
Total loans purchased	111	194	59
Loans sold	$ 9	$ 2	$ 2

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Summary of Significant Accounting Policies (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Restricted Cash
Restricted cash	$ 86	$ 26
Land, Buildings, Equipment and Software
Land, buildings, equipment and software, net of accumulated depreciation	174	182
Accumulated depreciation	91	75
Depreciation and amortization expense	17	16	14
Deferred Acquisition Costs
Mean reversion process period	5 years
Income Taxes
Maximum period for recognizing capital losses	5 years
Less: Valuation Allowance	$ 5	$ 4
Minimum
Land, Buildings, Equipment and Software
Amortization periods	3 years
Maximum
Land, Buildings, Equipment and Software
Amortization periods	30 years

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$ 650	$ 821	$ 689
Net unrealized gains on securities:
Net unrealized securities gains arising during the period	451	364	516
Reclassification of net securities (gains) losses included in net income	1	(3)	(13)
Impact on deferred acquisition costs, deferred sales inducement costs, benefit reserves and reinsurance recoverables	(154)	(194)	(169)
Total net unrealized gains on securities	298	167	334
Net unrealized losses on derivatives:
Reclassification of net derivative losses included in net income	5	4	4
Total net unrealized losses on derivatives	5	4	4
Total other comprehensive income, net of tax	303	171	338
Total comprehensive income	$ 953	$ 992	$ 1,027

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Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2012

Recent Accounting Pronouncements

Recent Accounting Pronouncements

3. Recent Accounting Pronouncements

Adoption ofNew Accounting Standards

Comprehensive Income

In June 2011, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to the presentation of comprehensive income. The standard requires entities to present all nonowner changes in stockholders’ equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  The standard is effective for interim and annual periods beginning after December 15, 2011. The Company retrospectively adopted the standard in the first quarter of 2012.  The adoption of the standard did not impact the Company’s consolidated financial condition and results of operations.  See the Company’s Consolidated Statements of Comprehensive Income for the newly required statements.

Fair Value

In May 2011, the FASB updated the accounting standards related to fair value measurement and disclosure requirements. The standard requires entities, for assets and liabilities measured at fair value in the statement of financial position which are Level 3 fair value measurements, to disclose quantitative information about unobservable inputs and assumptions used in the measurements, a description of the valuation processes in place, and a qualitative discussion about the sensitivity of the measurements to changes in unobservable inputs and interrelationships between those inputs if a change in those inputs would result in a significantly different fair value measurement. In addition, the standard requires disclosure of fair value by level within the fair value hierarchy for each class of assets and liabilities not measured at fair value in the statement of financial position but for which the fair value is disclosed. The standard is effective for interim and annual periods beginning on or after December 15, 2011. The Company adopted the standard in the first quarter of 2012.  The adoption of the standard did not impact the Company’s consolidated financial condition and results of operations.  See Note 13 for the required disclosures.

Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreements

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

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB updated the accounting standard for DAC. Under this new standard, only the following costs incurred in the acquisition of new and renewal insurance contracts are capitalizable as DAC: (i) incremental direct costs of a successful contract acquisition, (ii) portions of employees’ compensation and benefits directly related to time spent performing acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and contract selling) for a contract that has been acquired, (iii) other costs related to  acquisition activities that would not have been incurred had the acquisition of the contract not occurred, and (iv) advertising costs that meet the capitalization criteria in other GAAP guidance for certain direct-response marketing. All other acquisition related costs are expensed as incurred. The Company retrospectively adopted the new standard on January 1, 2012. See Note 1 for the effect of the change on affected financial statement line items for prior periods retrospectively adjusted and Note 2 for the Company’s accounting policies on DAC.

Receivables

In April 2011, the FASB updated the accounting standards for troubled debt restructurings. The new standard includes indicators that a lender should consider in determining whether a borrower is experiencing financial difficulties and provides clarification for determining whether the lender has granted a concession to the borrower. The standard sets the effective dates for troubled debt restructuring disclosures required by recent guidance on credit quality disclosures. The standard is effective for interim and annual periods beginning on or after June 15, 2011, and is to be applied retrospectively to modifications occurring on or after the beginning of the annual period of adoption. For purposes of measuring impairments of receivables that are considered impaired as a result of applying the new guidance, the standard should be applied prospectively for the interim or annual period beginning on or after June 15, 2011. The Company adopted the standard in the third quarter of 2011. The adoption did not have any effect on the Company’s consolidated financial condition and results of operations.  See Note 6 for the required disclosures.

Fair Value

In January 2010, the FASB updated the accounting standards related to disclosures on fair value measurements.  The standard expands the current disclosure requirements to include additional detail about significant transfers between Levels 1 and 2 within the fair value hierarchy and presents activity in the rollforward of Level 3 activity on a gross basis.  The standard also clarifies existing disclosure requirements related to the level of disaggregation to be used for assets and liabilities as well as disclosures on the inputs and valuation techniques used to measure fair value.  The standard is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure requirements related to the Level 3 rollforward, which are effective for interim and annual periods beginning after December 15, 2010.  The Company adopted the standard in the first quarter of 2010, except for the additional disclosures related to the Level 3 rollforward, which the Company adopted in the first quarter of 2011.  The adoption did not impact the Company’s consolidated financial condition and results of operations.   See Note 13 for the required disclosures.

Consolidation of Variable Interest Entities

In June 2009, the FASB updated the accounting standards related to the consolidation of VIEs.  The standard amends the guidance on the determination of the primary beneficiary of a VIE from a quantitative model to a qualitative model and requires additional disclosures about an enterprise’s involvement in VIEs.  Under the new qualitative model, the primary beneficiary must have both the power to direct the activities of the VIE and the obligation to absorb losses or the right to receive gains that could be potentially significant to the VIE. In February 2010, the FASB amended this guidance to defer application of the consolidation requirements for certain investment funds. The standards are effective for interim and annual reporting periods beginning after November 15, 2009.  The Company adopted the standard effective January 1, 2010 which did not impact its consolidated financial condition and results of operations.

Future Adoption of New Accounting Standards

Comprehensive Income

In February 2013, the FASB updated the accounting standard related to comprehensive income. The update requires entities to provide information about significant amounts reclassified out of accumulated other comprehensive income. The standard is effective for interim and annual periods beginning after December 15, 2012 and is required to be applied prospectively.  The adoption of the standard will not impact the Company’s consolidated results of operations and financial condition.

Balance Sheet

In December 2011, the FASB updated the accounting standards to require new disclosures about offsetting assets and liabilities. The standard requires an entity to disclose both gross and net information about certain financial instruments and transactions subject to master netting arrangements (or similar agreements) or eligible for offset in the statement of financial position. The standard is effective for interim and annual periods beginning on or after January 1, 2013 on a retrospective basis. The adoption of the standard is not expected to impact the Company’s consolidated financial condition and results of operations.

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Lines of Credit (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Line of Credit Facility
Outstanding balance under a revolving credit agreement with Ameriprise Financial as the lender	$ 150	$ 300
Line of Credit Agreement, one | Ameriprise Financial
Line of Credit Facility
Outstanding balance under a revolving credit agreement with Ameriprise Financial as the lender	150	300
Maximum borrowing capacity under the line of credit	800
Reference rate	LIBOR	LIBOR
Interest rate added to reference rate (as a percent)	0.90%	1.15%
Line of Credit Agreement, two | Ameriprise Financial
Line of Credit Facility
Maximum borrowing capacity under the line of credit	$ 200

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Derivatives and Hedging Activities (Details 3) (Derivatives not designated as hedging instruments, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	$ (452)	$ (146)	$ (435)
Interest rate Tax hedge
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	1
GMWB and GMAB
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	(452)	(144)	(440)
Gross notional amount of derivative contracts	142,100	104,700
GMWB and GMAB | Interest rate contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	17	709	95
GMWB and GMAB | Equity contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	(1,218)	326	(370)
GMWB and GMAB | Credit contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	(2)	(12)	(44)
GMWB and GMAB | Foreign currency contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	(1)	(2)
GMWB and GMAB | Embedded derivatives
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	752	(1,165)	(121)
GMDB | Equity contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income			(4)
EIA
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Gross notional amount of derivative contracts	10	25
EIA | Equity contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	1	(1)	2
EIA embedded derivatives | Equity contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	1	1	7
IUL
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Gross notional amount of derivative contracts	200	12
IUL | Equity contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	1	1
IUL embedded derivatives | Equity contracts
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income	(4)	(3)
Other derivatives
Impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income
Amount of Gain (Loss) on Derivatives Recognized in Income		$ (2)	$ 5

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Nature of Business and Basis of Presentation (Tables)

12 Months Ended

Dec. 31, 2012

Nature of Business and Basis of Presentation

Schedule of effect of the change on affected financial statement items for prior periods retrospectively adjusted

	December 31, 2011
	Previously Reported		Effect of Change			As Adjusted
	(in millions)
Balance Sheets
Assets
Deferred income taxes, net	$	—	$	60		$	60
Deferred acquisition costs	4,367		(1,954		)	2,413
Total assets	105,380		(1,894		)	103,486
Liabilities and Shareholder’s Equity
Liabilities:
Future policy benefits	31,182		(13		)	31,169
Deferred income taxes, net	620		(620		)	—
Other liabilities	3,607		1			3,608
Total liabilities	99,508		(632		)	98,876
Shareholder’s equity:
Retained earnings	2,589		(1,374		)	1,215
Accumulated other comprehensive income, net of tax	819		112			931
Total shareholder’s equity	5,872		(1,262		)	4,610
Total liabilities and shareholder’s equity	105,380		(1,894		)	103,486

	December 31, 2010							January 1, 2010
	Previously Reported		Effect of Change			As Adjusted		Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Shareholder’s Equity
Retained earnings	$	3,410	$	(1,416	)	$	1,994	$	3,114	$	(1,309	)	$	1,805
Accumulated other comprehensive income, net of tax	675		85			760		382		40			422
Total shareholder’s equity	6,548		(1,331		)	5,217		5,944		(1,269		)	4,675

	Year Ended December 31, 2011							Year Ended December 31, 2010
	Previously Reported		Effect of Change			As Adjusted		Previously Reported		Effect of Change			As Adjusted
	(in millions)
Statements of Income
Revenues
Total revenues	$	3,934	$	—		$	3,934	$	3,795	$	—		$	3,795
Benefits and expenses
Benefits, claims, losses and settlement expenses	950		—			950		1,203		—			1,203
Interest credited to fixed accounts	853		3			856		909		—			909
Amortization of deferred acquisition costs	539		(203		)	336		53		—			53
Other insurance and operating expenses	645		136			781		582		164			746
Total benefits and expenses	2,987		(64		)	2,923		2,747		164			2,911
Pretax income	947		64			1,011		1,048		(164		)	884
Income tax provision	168		22			190		252		(57		)	195
Net income	$	779	$	42		$	821	$	796	$	(107	)	$	689

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Taxes

Schedule of components of income tax provision

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Current income tax:
Federal	$	197		$	137		$	(167	)
State	7			3			3
Total current income tax	204			140			(164		)
Deferred income tax:
Federal	(38		)	51			360
State	(2		)	(1		)	(1		)
Total deferred income tax	(40		)	50			359
Total income tax provision	$	164		$	190		$	195

Schedule of principal reasons that the aggregate income tax provision is different from that computed by using the U.S. statutory rate of 35%

	Years Ended December 31,
	2012		2011		2010
Tax at U.S. statutory rate	35.0	%	35.0	%	35.0	%
Changes in taxes resulting from:
Tax-exempt interest and dividend income	(9.7	)	(12.6	)	(7.8	)
State taxes, net of federal benefit	0.4		0.1		0.1
Low income housing credit	(4.7	)	(1.6	)	(1.6	)
Foreign tax credit, net of addback	(0.5	)	(1.6	)	(1.4	)
Taxes applicable to prior years	(2.5	)	—		(2.2	)
Other, net	2.1		(0.5	)	—
Income tax provision	20.1	%	18.8	%	22.1	%

Schedule of components of the Company's deferred income tax assets and liabilities

	December 31,
	2012			2011
	(in millions)
Deferred income tax assets:
Liabilities for future policy benefits	$	1,295		$	1,589
Investment related	161			—
Capital loss and tax credit carryforwards	5			30
State net operating losses	5			4
Gross deferred income tax assets	1,466			1,623
Less: valuation allowance	(5		)	(4		)
Total deferred income tax assets	1,461			1,619
Deferred income tax liabilities:
Deferred acquisition costs	677			639
Net unrealized gains on Available-for-Sale securities	676			501
Investment related	—			190
Deferred sales inducement costs	142			180
Other	29			49
Gross deferred income tax liabilities	1,524			1,559
Net deferred income tax assets (liabilities)	$	(63	)	$	60

Schedule of reconciliation of the beginning and ending amount of gross unrecognized tax benefits

	2012			2011			2010
	(in millions)
Balance at January 1	$	134		$	83		$	(77	)
Additions (reductions) based on tax positions related to the current year	1			(1		)	—
Additions for tax positions of prior years	19			79			322
Reductions for tax positions of prior years	(77		)	(7		)	(196		)
Settlements	(12		)	(20		)	34
Balance at December 31	$	65		$	134		$	83

Income tax provision (benefit) amounts for items comprising other comprehensive income

	Years Ended December 31,
	2012			2011			2010
	(in millions)
Net unrealized securities gains	$	161		$	89		$	181
Net unrealized derivative losses	(2		)	(2		)	(2		)
Net income tax provision	$	159		$	87		$	179

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Fair Values of Assets and Liabilities

12 Months Ended

Dec. 31, 2012

Fair Values of Assets and Liabilities

Fair Values of Assets and Liabilities

13. 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.

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

	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,387	$	1,654	$	17,041
Residential mortgage backed securities	—		3,598		23		3,621
Commercial mortgage backed securities	—		2,834		170		3,004
State and municipal obligations	—		1,122		—		1,122
Asset backed securities	—		715		156		871
Foreign government bonds and obligations	—		224		—		224
U.S. government and agencies obligations	10		39		—		49
Total Available-for-Sale securities: Fixed maturities	10		23,919		2,003		25,932
Common stocks	2		2		—		4
Cash equivalents	—		264		—		264
Other assets:
Interest rate derivative contracts	—		2,191		—		2,191
Equity derivative contracts	285		936		—		1,221
Foreign currency derivative contracts	—		6		—		6
Total other assets	285		3,133		—		3,418
Separate account assets	—		69,395		—		69,395
Total assets at fair value	$	297	$	96,713	$	2,003	$	99,013
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		45		—		45
GMWB and GMAB embedded derivatives	—		—		833		833
Total future policy benefits	—		47		833		880		(1)
Other liabilities:
Interest rate derivative contracts	—		1,486		—		1,486
Equity derivative contracts	258		1,535		—		1,793
Total other liabilities	258		3,021		—		3,279
Total liabilities at fair value	$	258	$	3,068	$	833	$	4,159

(1) The Company’s adjustment for nonperformance risk resulted in a $389 million cumulative decrease to the embedded derivative liability.

	December 31, 2011
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities:
Fixed maturities:
Corporate debt securities	$	—	$	15,076	$	1,342	$	16,418
Residential mortgage backed securities	—		4,310		58		4,368
Commercial mortgage backed securities	—		3,615		16		3,631
State and municipal obligations	—		1,096		—		1,096
Asset backed securities	—		716		133		849
Foreign government bonds and obligations	—		144		—		144
U.S. government and agencies obligations	10		47		—		57
Other structured investments	—		—		14		14
Total Available-for-Sale securities: Fixed maturities	10		25,004		1,563		26,577
Common stocks	1		1		—		2
Trading securities	—		25		—		25
Cash equivalents	—		809		—		809
Other assets:
Interest rate derivative contracts	—		1,801		—		1,801
Equity derivative contracts	274		1,041		—		1,315
Credit derivative contracts	—		1		—		1
Foreign currency derivative contracts	—		7		—		7
Total other assets	274		2,850		—		3,124
Separate account assets	—		63,174		—		63,174
Total assets at fair value	$	285	$	91,863	$	1,563	$	93,711
Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		3		—		3
GMWB and GMAB embedded derivatives	—		—		1,585		1,585
Total future policy benefits	—		5		1,585		1,590		(1)
Other liabilities:
Interest rate derivative contracts	—		1,198		—		1,198
Equity derivative contracts	297		734		—		1,031
Foreign currency derivative contracts	—		10		—		10
Total other liabilities	297		1,942		—		2,239
Total liabilities at fair value	$	297	$	1,947	$	1,585	$	3,829

(1) The Company’s adjustment for nonperformance risk resulted in a $506 million cumulative decrease to the embedded derivative liability.

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

	Available-for-Sale Securities: Fixed Maturities																		Future Policy Benefits:
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments			Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2012	$	1,342		$	58		$	16		$	133		$	14		$	1,563		$	(1,585	)
Total gains (losses) included in:
Net income	(1		)	(7		)	1			1			—			(6		)(1)	948		(2)
Other comprehensive income	12			10			7			2			1			32			—
Purchases	444			31			8			—			—			483			—
Sales	—			—			—			—			—			—			—
Issues	—			—			—			—			—			—			(188		)
Settlements	(153		)	(12		)	—			(2		)	—			(167		)	(8		)
Transfers into Level 3	10			25			146			22			—			203			—
Transfers out of Level 3	—			(82		)	(8		)	—			(15		)	(105		)	—
Balance, December 31, 2012	$	1,654		$	23		$	170		$	156		$	—		$	2,003		$	(833	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2012 included in:
Net investment income	$	(1	)	$	—		$	1		$	1		$	—		$	1		$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			908

(1) Represents a $7 million loss included in net realized investment gains (losses) and a $1 million gain included in net investment income in the Consolidated Statements of Income.

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

	Available-for-Sale Securities: Fixed Maturities																		Future Policy Benefits:
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments			Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2011	$	1,317		$	2,697		$	30		$	148		$	13		$	4,205		$	(421	)
Total gains (losses) included in:
Net income	7			49			—			2			1			59		(1)	(1,007		)(2)
Other comprehensive income	12			(75		)	—			(6		)	(2		)	(71		)	—
Purchases	178			26			71			—			3			278			—
Sales	(50		)	(3		)	—			—			—			(53		)	—
Issues	—			—			—			—			—			—			(149		)
Settlements	(117		)	(471		)	—			(3		)	(1		)	(592		)	(8		)
Transfers into Level 3	7			—			1			—			—			8			—
Transfers out of Level 3	(12		)	(2,165		)	(86		)	(8		)	—			(2,271		)	—
Balance, December 31, 2011	$	1,342		$	58		$	16		$	133		$	14		$	1,563		$	(1,585	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2011 included in:
Net investment income	$	—		$	—		$	—		$	1		$	—		$	1		$	—
Net realized investment gains (losses)	—			(23		)	—			—			1			(22		)	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—			(1,035		)

(1) Represents a $26 million loss included in net realized investment gains (losses) and an $85 million gain included in net investment income in the Consolidated Statements of Income.

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

	Available-for-Sale Securities: Fixed Maturities																Future Policy Benefits:
	Corporate Debt Securities		Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investments		Total			GMWB and GMAB Embedded Derivatives
	(in millions)
Balance, January 1, 2010	$	1,239	$	2,868		$	72		$	119		$	11	$	4,309		$	(299	)
Total gains (losses) included in:
Net income	1		55			1			5			2		64		(1)	4		(2)
Other comprehensive income	30		202			10			10			—		252			—
Purchases, sales, issues and settlements, net	22		(428		)	91			27			—		(288		)	(126		)
Transfers into Level 3	25		—			—			—			—		25			—
Transfers out of Level 3	—		—			(144		)	(13		)	—		(157		)	—
Balance, December 31, 2010	$	1,317	$	2,697		$	30		$	148		$	13	$	4,205		$	(421	)
Changes in unrealized gains (losses) relating to assets and liabilities held at December 31, 2010 included in:
Net investment income	$	—	$	79		$	—		$	4		$	—	$	83		$	—
Net realized investment gains (losses)	—		(26		)	—			—			—		(26		)	—
Benefits, claims, losses and settlement expenses	—		—			—			—			—		—			(15		)

(1) Represents a $21 million loss included in net realized investment gains (losses) and an $85 million gain included in net investment income in the Consolidated Statements of Income.

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

The impact to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its GMWB and GMAB embedded derivatives was $(82) million, $216 million and $36 million, net of DAC and DSIC amortization, for the years ended December 31, 2012, 2011 and 2010, respectively.

During the years ended December 31, 2012 and 2011, transfers from Level 3 to Level 2 included certain non-agency residential mortgage backed securities with a fair value of approximately $58 million and $2.2 billion, respectively.  The transfers reflect improved pricing transparency of these securities, a continuing trend of increased activity in the non-agency residential mortgage backed securities market and observability of significant inputs to the valuation methodology.  All other securities transferred from Level 3 to Level 2 represent securities with fair values that are now obtained from a third party pricing service with observable inputs. Securities transferred from Level 2 to Level 3 represent securities with fair values that are now based on a single non-binding broker quote. The Company recognizes transfers between levels of the fair value hierarchy as of the beginning of the quarter in which each transfer occurred.  For assets and liabilities held at the end of the reporting periods that are measured at fair value on a recurring basis, there were no transfers between Level 1 and Level 2.

The following table provides 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 at December 31, 2012:

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in millions)
Corporate debt securities (private placements)	$	1,624	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1% – 8.5% (2.2%)
GMWB and GMAB embedded derivatives	$	833	Discounted cash flow	Utilization of guaranteed withdrawals(1)	0.0% – 56.4%
				Surrender rate	0.0% – 56.3%
				Market volatility(2)	5.6% – 21.2%
				Nonperformance risk(3)	97 bps

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

(2) Market volatility is implied volatility of fund of funds.

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

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

Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs

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 result in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in utilization and volatility used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in surrender rate and nonperformance risk used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would result in a significantly lower (higher) fair value measurement. 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 system and whether the value of the guaranteed benefit exceeds the contract accumulation value.

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 highly liquid investments with original maturities of 90 days or less. 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.

Available-for-Sale 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.  Level 1 securities include U.S. Treasuries.  Level 2 securities include corporate bonds, residential mortgage backed securities, commercial mortgage backed securities, municipal bonds, asset backed securities and U.S. agency 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.

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 net asset value (“NAV”) of the funds in which those separate accounts are invested. The NAV represents the exit price for the separate account. Separate account assets are classified as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information.

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 fair value of derivatives that are traded in less active over-the-counter (“OTC”)  markets are 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 and the majority of options.  The counterparties’ nonperformance risk associated with uncollateralized derivative assets was immaterial at December 31, 2012 and 2011.  See Note 16 for further information on the credit risk of derivative instruments and related collateral.

Liabilities

Future Policy Benefits

The Company values the embedded derivative liability attributable to the provisions of certain variable annuity riders using internal valuation models.  These models calculate fair value by discounting expected cash flows from benefits plus margins for profit, risk and expenses less embedded derivative fees.  The projected cash flows used by these models include observable capital market assumptions and incorporate significant unobservable inputs related to contractholder behavior assumptions, implied volatility and margins for risk, profit and expenses that the Company believes an exit market participant would expect.  The fair value of these embedded derivatives also reflects a current estimate of the Company’s nonperformance risk specific to these liabilities.  Given the significant unobservable inputs to this valuation, these measurements are classified as Level 3.  The embedded derivative liability attributable to these provisions is recorded in future policy benefits.

The Company’s Corporate Actuarial Department calculates the fair value of the GMWB and GMAB embedded derivatives on a monthly basis. During this process, control checks are performed to validate the completeness of the data. Actuarial management approves various components of the valuation along with the final results. The change in the fair value of the embedded derivatives is reviewed monthly with senior management. The Level 3 inputs into the valuation are consistent with the pricing assumptions and updated as experience develops.  Significant unobservable inputs that reflect policyholder behavior are reviewed quarterly along with other valuation assumptions.

The Company uses various Black-Scholes calculations to determine the fair value of the embedded derivative liability associated with the provisions of its EIA and IUL products.  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 fair value of derivatives that are traded in less active OTC markets are 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 and the majority of options. The Company’s nonperformance risk associated with uncollateralized derivative liabilities was immaterial at December 31, 2012 and 2011.  See Note 16 for further information on the credit risk of derivative instruments and related collateral.

During the reporting periods, there were no material assets or liabilities measured at fair value on a nonrecurring basis.

The following table provides the carrying value and the estimated fair value of financial instruments that are not reported at fair value. All other financial instruments that are reported at fair value have been included above in the table with balances of assets and liabilities measured at fair value on a recurring basis.

	December 31, 2012										December 31, 2011
	Carrying		Fair Value								Carrying		Fair
	Value		Level 1		Level 2		Level 3		Total		Value		Value
	(in millions)
Financial Assets
Mortgage loans, net	$	3,389	$	—	$	—	$	3,568	$	3,568	$	2,473	$	2,650
Policy loans	752		—		—		725		725		739		713
Other investments	309		—		292		24		316		308		311
Restricted cash	86		86		—		—		86		26		26
Financial Liabilities
Future policy benefits	$	14,701	$	—	$	—	$	15,982	$	15,982	$	15,064	$	16,116
Separate account liabilities	360		—		360		—		360		345		345
Line of credit with Ameriprise Financial	150		—		—		150		150		300		300
Borrowings under repurchase agreements	501		—		500		—		500		504		502
Other liabilities	144		—		—		142		142		267		263

Mortgage Loans, Net

The fair value of commercial mortgage loans, except those with significant credit deterioration, is determined by discounting contractual cash flows using discount rates that reflect current pricing for loans with similar remaining maturities and characteristics including loan-to-value ratio, occupancy rate, refinance risk, debt-service coverage, location, and property condition.  For commercial mortgage loans with significant credit deterioration, fair value is determined using the same adjustments as above with an additional adjustment for the Company’s estimate of the amount recoverable on the loan.

The fair value of residential mortgage loans is determined by discounting estimated cash flows and incorporating adjustments for prepayment, administration expenses, severity and credit loss estimates, with discount rates based on the Company’s estimate of current market conditions.

Given the significant unobservable inputs to the valuation of mortgage loans, these measurements are classified as Level 3.

Policy Loans

The fair value of policy loans is determined using discounted cash flows and are classified as Level 3 as the discount rate used may be adjusted for the underlying performance of individual policies.

Other Investments

Other investments primarily consist of syndicated loans and an investment in Federal Home Loan Bank of Des Moines (“FHLB”).  The fair value of syndicated loans is obtained from a third party service or non-binding broker quotes.  Syndicated loans that are priced by multiple non-binding broker quotes are classified as Level 2 and syndicated loans priced using a single non-binding broker quote are classified as Level 3.  The fair value of the investment in FHLB is approximated by the carrying value and classified as Level 3 due to restrictions on transfer or lack of liquidity.

Restricted Cash

Restricted cash is generally set aside for specific business transactions and restrictions are specific to the Company and do not transfer to third party market participants; therefore, the carrying amount is a reasonable estimate of fair value. The fair value of restricted cash is classified as Level 1.

Future Policy Benefits

The fair value of fixed annuities, in deferral status, is determined by discounting cash flows using a risk neutral discount rate with adjustments for profit margin, expense margin, early policy surrender behavior, a provision for adverse deviation from estimated early policy surrender behavior and the Company’s nonperformance risk specific to these liabilities.  The fair value of other liabilities including non-life contingent fixed annuities in payout status, EIA host contracts and the fixed portion of a small number of variable annuity contracts classified as investment contracts is determined in a similar manner.  Given the use of significant unobservable inputs to these valuations, the measurements are classified as Level 3.

Separate Account Liabilities

Certain separate account liabilities are classified as investment contracts and are carried at an amount equal to the related separate account assets.  The NAV of the related separate account assets represents the exit price for the separate account liabilities. Separate account liabilities are classified as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information. A nonperformance adjustment is not included as the related separate account assets act as collateral for these liabilities and minimize nonperformance risk.

Line of Credit with Ameriprise Financial

The fair value of the line of credit is determined by discounting cash flows with an adjustment for the Company’s nonperformance risk specific to this liability.  The fair value of the line of credit is classified as Level 3.

Borrowings under Repurchase Agreements

The fair value of borrowings under agreements to repurchase is obtained from a third party pricing service. A nonperformance adjustment is not included as collateral requirements for these borrowings minimize the nonperformance risk.  The fair value of borrowings under agreements to repurchase is classified as Level 2.

Other Liabilities

Other liabilities consist of future funding commitments to affordable housing partnerships.  The fair value of these future funding commitments is determined by discounting cash flows and is classified as Level 3 as the discount rate is adjusted.