Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 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:



	September 30, 2017
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	136	$	1,882	$	—	$	2,018
Available-for-Sale securities:
Corporate debt securities	—		14,383		1,267		15,650
Residential mortgage backed securities	—		6,625		165		6,790
Commercial mortgage backed securities	—		3,887		65		3,952
Asset backed securities	—		1,611		35		1,646
State and municipal obligations	—		2,455		—		2,455
U.S. government and agencies obligations	6		—		—		6
Foreign government bonds and obligations	—		308		—		308
Common stocks	4		8		1		13
Common stocks measured at net asset value (“NAV”)							6		⁽¹⁾
Total Available-for-Sale securities	10		29,277		1,533		30,826
Trading securities	131		32		—		163
Separate account assets measured at NAV							85,287		⁽¹⁾
Investments segregated for regulatory purposes	424		—		—		424
Other assets:
Interest rate derivative contracts	1		1,200		—		1,201
Equity derivative contracts	51		1,891		—		1,942
Credit derivative contracts	—		4		—		4
Foreign exchange derivative contracts	1		42		—		43
Total other assets	53		3,137		—		3,190
Total assets at fair value	$	754	$	34,328	$	1,533	$	121,908



Liabilities
Policyholder account balances, future policy benefits and claims:
EIA embedded derivatives	$	—	$	4	$	—	$	4
IUL embedded derivatives	—		—		577		577
GMWB and GMAB embedded derivatives	—		—		45		45		⁽²⁾
Total policyholder account balances, future policy benefits and claims	—		4		622		626		⁽³⁾
Customer deposits	—		9		—		9
Other liabilities:
Interest rate derivative contracts	—		416		—		416
Equity derivative contracts	5		2,664		—		2,669
Foreign exchange derivative contracts	4		27		—		31
Other	6		6		27		39
Total other liabilities	15		3,113		27		3,155
Total liabilities at fair value	$	15	$	3,126	$	649	$	3,790



	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	—		1,778		—		1,778
Equity derivative contracts	43		1,531		—		1,574
Credit derivative contracts	—		1		—		1
Foreign exchange derivative contracts	13		80		—		93
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		987		—		989
Equity derivative contracts	3		2,132		—		2,135
Foreign exchange derivative contracts	2		45		—		47
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 $494 million of individual contracts in a liability position and $449 million of individual contracts in an asset position as of September 30, 2017.


⁽³⁾	The Company’s adjustment for nonperformance risk resulted in a $(376) million cumulative increase (decrease) to the embedded derivatives as of September 30, 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 increase (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			Commercial Mortgage Backed Securities		Asset Backed Securities			Common Stocks		Total
	(in millions)
Balance, July 1, 2017	$	1,333		$	172		$	—	$	33		$	—	$	1,538
Total gains (losses) included in:
Other comprehensive income	(1		)	1			—		(2		)	1		(1		)
Purchases	39			—			65		10			—		114
Settlements	(104		)	(9		)	—		—			—		(113		)
Transfers into Level 3	—			20			—		13			—		33
Transfers out of Level 3	—			(19		)	—		(19		)	—		(38		)
Balance, September 30, 2017	$	1,267		$	165		$	65	$	35		$	1	$	1,533
Changes in unrealized gains (losses) relating to assets held at September 30, 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, July 1, 2017	$	527			$	272			$	799		$	14
Total (gains) losses included in:
Net income	35			⁽¹⁾	(309		)	⁽²⁾	(274		)	—
Issues	26				84				110			13
Settlements	(11		)		(2		)		(13		)	—
Balance, September 30, 2017	$	577			$	45			$	622		$	27
Changes in unrealized (gains) losses relating to liabilities held at September 30, 2017	$	35		⁽¹⁾	$	(307	)	⁽²⁾	$	(272	)	$	—



	Available-for-Sale Securities															Other Derivative Contracts
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities		Asset Backed Securities			Total				Other Derivative Contracts
	(in millions)
Balance, July 1, 2016	$	1,350		$	153		$	—	$	178		$	1,681			$	2
Total gains (losses) included in:
Net income	—			—			—		1			1			⁽³⁾	(2		)	⁽²⁾
Other comprehensive income	(2		)	1			—		1			—				—
Purchases	20			144			33		12			209				—
Settlements	(26		)	(14		)	—		—			(40		)		—
Transfers out of Level 3	—			1			—		(27		)	(26		)		—
Balance, September 30, 2016	$	1,342		$	285		$	33	$	165		$	1,825			$	—
Changes in unrealized gains (losses) relating to assets held at September 30, 2016	$	—		$	—		$	—	$	—		$	—			$	(2	)	⁽²⁾



	Policyholder Account Balances, Future Policy Benefits and Claims
	IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total			Other Liabilities
	(in millions)
Balance, July 1, 2016	$	408			$	1,965			$	2,373		$	—
Total (gains) losses included in:
Net income	12			⁽¹⁾	(280		)	⁽²⁾	(268		)	—
Issues	25				77				102			13
Settlements	(7		)		(6		)		(13		)	—
Balance, September 30, 2016	$	438			$	1,756			$	2,194		$	13
Changes in unrealized (gains) losses relating to liabilities held at September 30, 2016	$	12		⁽¹⁾	$	(267	)	⁽²⁾	$	(255	)	$	—



	Available-for-Sale Securities
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities		Asset Backed Securities			Common Stocks			Total
	(in millions)
Balance, January 1, 2017	$	1,311		$	268		$	—	$	68		$	1		$	1,648
Total gains (losses) included in:
Other comprehensive income	1			2			—		—			1			4
Purchases	109			132			65		64			—			370
Settlements	(154		)	(34		)	—		(15		)	—			(203		)
Transfers into Level 3	—			20			—		27			8			55
Transfers out of Level 3	—			(223		)	—		(109		)	(9		)	(341		)
Balance, September 30, 2017	$	1,267		$	165		$	65	$	35		$	1		$	1,533
Changes in unrealized gains (losses) relating to assets held at September 30, 2017	$	—		$	—		$	—	$	(1	)	$	—		$	(1	)	⁽³⁾



	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	75			⁽¹⁾	(798		)	⁽²⁾	(723		)	1		⁽⁴⁾
Issues	70				238				308			13
Settlements	(32		)		(9		)		(41		)	—
Balance, September 30, 2017	$	577			$	45			$	622		$	27
Changes in unrealized (gains) losses relating to liabilities held at September 30, 2017	$	75		⁽¹⁾	$	(771	)	⁽²⁾	$	(696	)	$	—



	Available-for-Sale Securities																Other Derivative Contracts
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total				Other Derivative Contracts
	(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	(2		)	—			—			—			(2		)	⁽³⁾	(2		)	⁽²⁾
Other comprehensive income	29			—			—			(5		)	24				—
Purchases	34			144			42			28			248				2
Settlements	(144		)	(53		)	(3		)	(1		)	(201		)		—
Transfers into Level 3	—			—			—			12			12				—
Transfers out of Level 3	—			(24		)	(9		)	(52		)	(85		)		—
Balance, September 30, 2016	$	1,342		$	285		$	33		$	165		$	1,825			$	—
Changes in unrealized gains (losses) relating to assets held at September 30, 2016	$	(1	)	$	—		$	—		$	—		$	(1	)	⁽³⁾	$	(2	)	⁽²⁾



	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, 2016	$	364			$	851			$	1,215		$	—
Total (gains) losses included in:
Net income	8			⁽¹⁾	708			⁽²⁾	716			—
Issues	86				215				301			13
Settlements	(20		)		(18		)		(38		)	—
Balance, September 30, 2016	$	438			$	1,756			$	2,194		$	13
Changes in unrealized (gains) losses relating to liabilities held at September 30, 2016	$	8		⁽¹⁾	$	830		⁽²⁾	$	838		$	—

⁽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.

⁽⁴⁾ Included in general and administrative expense 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:



	September 30, 2017
	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	1,266	Discounted cash flow	Yield/spread to U.S. Treasuries	0.8	%	–	2.3%	1.1	%
Asset backed securities	$	11	Discounted cash flow	Annual short-term default rate	3.8%
				Annual long-term default rate	2.5%		–	3.0%	2.6	%
				Discount rate	11.0%
				Constant prepayment rate	5.0	%	–	10.0%	9.9	%
				Loss recovery	36.4	%	–	63.6%	63.1	%
IUL embedded derivatives	$	577	Discounted cash flow	Nonperformance risk ⁽¹⁾	67 bps
GMWB and GMAB embedded derivatives	$	45	Discounted cash flow	Utilization of guaranteed withdrawals ⁽²⁾	0.0	%	–	42.0%
				Surrender rate	0.1	%	–	74.7%
				Market volatility ⁽³⁾	4.3	%	–	15.9%
				Nonperformance risk ⁽¹⁾	67 bps
Contingent consideration liabilities	$	27	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 liabilities	$	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:



	September 30, 2017
	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,749	$	—	$	—	$	2,768	$	2,768
Policy and certificate loans	841		—		1		797		798
Receivables	1,595		196		942		457		1,595
Restricted and segregated cash	2,707		2,707		—		—		2,707
Other investments and assets	511		—		439		71		510

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	10,415	$	—	$	—	$	11,052	$	11,052
Investment certificate reserves	6,364		—		—		6,351		6,351
Brokerage customer deposits	4,065		4,065		—		—		4,065
Separate account liabilities measured at NAV	4,989								4,989		⁽¹⁾
Debt and other liabilities	3,395		202		3,197		140		3,539



	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 ⁽²⁾	1,396		127		870		403		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.


⁽²⁾	In the third quarter of 2017, the Company corrected the classification of the fair value of advisor loans, net from Level 2 to Level 3 as the valuation includes a significant unobservable input. The fair value levels at December 31, 2016 have been revised to reflect this change. The fair value of advisor loans, net was $400 million at December 31, 2016.