Fair Values of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2017

Schedule of balances of assets and liabilities measured at fair value on a recurring basis

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



	March 31, 2017
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	31	$	1,607	$	—	$	1,638
Available-for-Sale securities:
Corporate debt securities	—		14,745		1,344		16,089
Residential mortgage backed securities	—		6,566		316		6,882
Commercial mortgage backed securities	—		3,274		—		3,274
Asset backed securities	—		1,583		64		1,647
State and municipal obligations	—		2,400		—		2,400
U.S. government and agencies obligations	8		—		—		8
Foreign government bonds and obligations	—		264		—		264
Common stocks	4		1		8		13
Common stocks measured at net asset value (“NAV”)							5		⁽¹⁾
Total Available-for-Sale securities	12		28,833		1,732		30,582
Trading securities	115		29		—		144
Separate account assets measured at NAV							82,169		⁽¹⁾
Investments segregated for regulatory purposes	400		—		—		400
Other assets:
Interest rate derivative contracts	—		1,142		—		1,142
Equity derivative contracts	40		1,627		—		1,667
Credit derivative contracts	—		1		—		1
Foreign exchange derivative contracts	2		58		—		60
Other derivative contracts	1		—		—		1
Total other assets	43		2,828		—		2,871
Total assets at fair value	$	601	$	33,297	$	1,732	$	117,804



Liabilities
Policyholder account balances, future policy benefits and claims:
EIA embedded derivatives	$	—	$	4	$	—	$	4
IUL embedded derivatives	—		—		493		493
GMWB and GMAB embedded derivatives	—		—		188		188		⁽²⁾
Total policyholder account balances, future policy benefits and claims	—		4		681		685		⁽³⁾
Customer deposits	—		9		—		9
Other liabilities:
Interest rate derivative contracts	1		463		—		464
Equity derivative contracts	10		2,237		—		2,247
Foreign exchange derivative contracts	1		37		—		38
Other derivative contracts	—		135		—		135
Other	7		6		13		26
Total other liabilities	19		2,878		13		2,910
Total liabilities at fair value	$	19	$	2,891	$	694	$	3,604



	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	30	$	1,796	$	—	$	1,826
Available-for-Sale securities:
Corporate debt securities	—		14,925		1,311		16,236
Residential mortgage backed securities	—		6,650		268		6,918
Commercial mortgage backed securities	—		3,367		—		3,367
Asset backed securities	—		1,481		68		1,549
State and municipal obligations	—		2,358		—		2,358
U.S. government and agencies obligations	8		—		—		8
Foreign government bonds and obligations	—		261		—		261
Common stocks	8		8		1		17
Common stocks at NAV							5		⁽¹⁾
Total Available-for-Sale securities	16		29,050		1,648		30,719
Trading securities	9		16		—		25
Separate account assets at NAV							80,210		⁽¹⁾
Investments segregated for regulatory purposes	425		—		—		425
Other assets:
Interest rate derivative contracts	—		1,775		—		1,775
Equity derivative contracts	42		1,526		—		1,568
Credit derivative contracts	—		1		—		1
Foreign exchange derivative contracts	13		80		—		93
Other derivative contracts	1		8		—		9
Total other assets	56		3,390		—		3,446
Total assets at fair value	$	536	$	34,252	$	1,648	$	116,651



Liabilities
Policyholder account balances, future policy benefits and claims:
EIA embedded derivatives	$	—	$	5	$	—	$	5
IUL embedded derivatives	—		—		464		464
GMWB and GMAB embedded derivatives	—		—		614		614		⁽⁴⁾
Total policyholder account balances, future policy benefits and claims	—		5		1,078		1,083		⁽⁵⁾
Customer deposits	—		8		—		8
Other liabilities:
Interest rate derivative contracts	2		977		—		979
Equity derivative contracts	3		2,024		—		2,027
Foreign exchange derivative contracts	2		45		—		47
Other derivative contracts	—		118		—		118
Other	3		8		13		24
Total other liabilities	10		3,172		13		3,195
Total liabilities at fair value	$	10	$	3,185	$	1,091	$	4,286

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

⁽²⁾ The fair value of the GMWB and GMAB embedded derivatives included $585 million of individual contracts in a liability position and $397 million of individual contracts in an asset position as of March 31, 2017.


⁽³⁾	The Company’s adjustment for nonperformance risk resulted in a $435 million cumulative decrease to the embedded derivatives as of March 31, 2017.


⁽⁴⁾	The fair value of the GMWB and GMAB embedded derivatives included $880 million of individual contracts in a liability position and $266 million of individual contracts in an asset position as of December 31, 2016.


⁽⁵⁾	The Company’s adjustment for nonperformance risk resulted in a $498 million cumulative decrease to the embedded derivatives as of December 31, 2016.

Summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

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



	Available-for-Sale Securities
	Corporate Debt Securities			Residential Mortgage Backed Securities			Asset Backed Securities			Common Stocks			Total
	(in millions)
Balance, January 1, 2017	$	1,311		$	268		$	68		$	1		$	1,648
Total gains included in:
Other comprehensive income	—			—			1			—			1
Purchases	62			132			49			—			243
Settlements	(29		)	(12		)	(13		)	—			(54		)
Transfers into Level 3	—			—			—			8			8
Transfers out of Level 3	—			(72		)	(41		)	(1		)	(114		)
Balance, March 31, 2017	$	1,344		$	316		$	64		$	8		$	1,732

Changes in unrealized gains (losses) relating to assets held at March 31, 2017	$	—		$	—		$	—		$	—		$	—



	Policyholder Account Balances, Future Policy Benefits and Claims											Other Liabilities
	IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total			Other Liabilities
	(in millions)
Balance, January 1, 2017	$	464			$	614			$	1,078		$	13
Total (gains) losses included in:
Net income	19			⁽¹⁾	(499		)	⁽²⁾	(480		)	—
Issues	22				77				99			—
Settlements	(12		)		(4		)		(16		)	—
Balance, March 31, 2017	$	493			$	188			$	681		$	13

Changes in unrealized (gains) losses relating to liabilities held at March 31, 2017	$	19		⁽¹⁾	$	(484	)	⁽²⁾	$	(465	)	$	—



	Available-for-Sale Securities
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total
	(in millions)
Balance, January 1, 2016	$	1,425		$	218		$	3		$	162		$	1,808
Cumulative effect of change in accounting policies	—			—			—			21			21
Total gains (losses) included in:
Net income	(1		)	—			—			(1		)	(2		)	⁽³⁾
Other comprehensive income	18			(3		)	—			(3		)	12
Purchases	—			—			9			1			10
Settlements	(31		)	(16		)	(2		)	—			(49		)
Transfers out of Level 3	—			(25		)	—			(10		)	(35		)
Balance, March 31, 2016	$	1,411		$	174		$	10		$	170		$	1,765

Changes in unrealized losses relating to assets held at March 31, 2016	$	—		$	—		$	—		$	(1	)	$	(1	)	⁽³⁾



	Policyholder Account Balances, Future Policy Benefits and Claims
	IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total
	(in millions)
Balance, January 1, 2016	$	364			$	851			$	1,215
Total (gains) losses included in:
Net income	(8		)	⁽¹⁾	602			⁽²⁾	594
Issues	32				68				100
Settlements	(6		)		(6		)		(12		)
Balance, March 31, 2016	$	382			$	1,515			$	1,897

Changes in unrealized (gains) losses relating to liabilities held at March 31, 2016	$	(8	)	⁽¹⁾	$	616		⁽²⁾	$	608

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

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

⁽³⁾Included in net investment income in the Consolidated Statements of Operations.

Significant unobservable inputs used in the fair value measurements

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



	March 31, 2017
	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	1,340	Discounted cash flow	Yield/spread to U.S. Treasuries	0.9	%	–	2.5%	1.2%
Asset backed securities	$	15	Discounted cash flow	Annual short-term default rate	4.3%
				Annual long-term default rate	2.5%
				Discount rate	11.0%
				Constant prepayment rate	5.0	%	–	10.0%	9.9%
				Loss recovery	36.4	%	–	63.6%	62.8%
IUL embedded derivatives	$	493	Discounted cash flow	Nonperformance risk ⁽¹⁾	80 bps
GMWB and GMAB embedded derivatives	$	188	Discounted cash flow	Utilization of guaranteed withdrawals ⁽²⁾	0.0	%	–	75.6%
				Surrender rate	0.1	%	–	66.4%
				Market volatility ⁽³⁾	5.0	%	–	20.0%
				Nonperformance risk ⁽¹⁾	80 bps
Contingent consideration liability	$	13	Discounted cash flow	Discount rate	9.0%



	December 31, 2016
	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	1,308	Discounted cash flow	Yield/spread to U.S. Treasuries	0.9	%	–	2.5%	1.3	%
Asset backed securities	$	14	Discounted cash flow	Annual short-term default rate	4.8%
				Annual long-term default rate	2.5%
				Discount rate	13.5%
				Constant prepayment rate	5.0	%	–	10.0%	9.9	%
				Loss recovery	36.4	%	–	63.6%	62.8	%
IUL embedded derivatives	$	464	Discounted cash flow	Nonperformance risk ⁽¹⁾	82 bps
GMWB and GMAB embedded derivatives	$	614	Discounted cash flow	Utilization of guaranteed withdrawals ⁽²⁾	0.0	%	–	75.6%
				Surrender rate	0.1	%	–	66.4%
				Market volatility ⁽³⁾	5.3	%	–	21.2%
				Nonperformance risk ⁽¹⁾	82 bps
Contingent consideration liability	$	13	Discounted cash flow	Discount rate	9.0%


⁽¹⁾	The nonperformance risk is the spread added to the observable interest rates used in the valuation of the embedded derivatives.


⁽²⁾	The utilization of guaranteed withdrawals represents the percentage of contractholders that will begin withdrawing in any given year.


⁽³⁾	Market volatility is implied volatility of fund of funds and managed volatility funds.

Schedule of carrying value and the estimated fair value of financial instruments that are not reported at fair value

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



	March 31, 2017
	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,981	$	—	$	—	$	2,988	$	2,988
Policy and certificate loans	830		—		—		791		791
Receivables	1,455		156		1,295		2		1,453
Restricted and segregated cash	3,003		3,003		—		—		3,003
Other investments and assets	508		—		443		65		508

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	10,715	$	—	$	—	$	11,247	$	11,247
Investment certificate reserves	6,129		—		—		6,114		6,114
Brokerage customer deposits	4,190		4,190		—		—		4,190
Separate account liabilities measured at NAV	4,463								4,463		⁽¹⁾
Debt and other liabilities	3,388		169		3,192		164		3,525



	December 31, 2016
	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,986	$	—	$	—	$	2,972	$	2,972
Policy and certificate loans	831		—		1		807		808
Receivables	1,396		127		1,270		3		1,400
Restricted and segregated cash	2,905		2,905		—		—		2,905
Other investments and assets	508		—		449		61		510

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	10,906	$	—	$	—	$	11,417	$	11,417
Investment certificate reserves	5,927		—		—		5,914		5,914
Brokerage customer deposits	4,112		4,112		—		—		4,112
Separate account liabilities measured at NAV	4,253								4,253		⁽¹⁾
Debt and other liabilities	3,371		146		3,176		169		3,491


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