Fair Values of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	139	$	1,480	$	—	$	1,619
Available-for-Sale securities:
Corporate debt securities	—		13,339		1,095		14,434
Residential mortgage backed securities	—		5,846		146		5,992
Commercial mortgage backed securities	—		4,320		—		4,320
Asset backed securities	—		1,506		17		1,523
State and municipal obligations	—		2,395		—		2,395
U.S. government and agency obligations	1,373		—		—		1,373
Foreign government bonds and obligations	—		282		—		282
Total Available-for-Sale securities	1,373		27,688		1,258		30,319
Equity securities	1		—		—		1
Equity securities at net asset value (“NAV”)							6		⁽¹⁾
Trading securities	13		42		—		55
Separate account assets at NAV							85,847		⁽¹⁾
Investments segregated for regulatory purposes	548		—		—		548
Other assets:
Interest rate derivative contracts	1		818		—		819
Equity derivative contracts	114		2,202		—		2,316
Foreign exchange derivative contracts	1		33		—		34
Total other assets	116		3,053		—		3,169
Total assets at fair value	$	2,190	$	32,263	$	1,258	$	121,564



Liabilities
Policyholder account balances, future policy benefits and claims:
Indexed annuity embedded derivatives	$	—	$	4	$	3		$	7
IUL embedded derivatives	—		—		585			585
GMWB and GMAB embedded derivatives	—		—		(329		)	(329		)	⁽²⁾
Total policyholder account balances, future policy benefits and claims	—		4		259			263			⁽³⁾
Customer deposits	—		9		—			9
Other liabilities:
Interest rate derivative contracts	—		512		—			512
Equity derivative contracts	74		2,692		—			2,766
Credit derivative contracts	—		2		—			2
Foreign exchange derivative contracts	3		22		—			25
Other	14		9		28			51
Total other liabilities	91		3,237		28			3,356
Total liabilities at fair value	$	91	$	3,250	$	287		$	3,628



	December 31, 2017
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Cash equivalents	$	147	$	2,025	$	—	$	2,172
Available-for-Sale securities:
Corporate debt securities	—		13,936		1,139		15,075
Residential mortgage backed securities	—		6,456		155		6,611
Commercial mortgage backed securities	—		4,374		—		4,374
Asset backed securities	—		1,573		7		1,580
State and municipal obligations	—		2,463		—		2,463
U.S. government and agencies obligations	503		—		—		503
Foreign government bonds and obligations	—		314		—		314
Common stocks	1		—		—		1
Common stocks at NAV							6		⁽¹⁾
Total Available-for-Sale securities	504		29,116		1,301		30,927
Trading securities	10		34		—		44
Separate account assets at NAV							87,368		⁽¹⁾
Investments segregated for regulatory purposes	623		—		—		623
Other assets:
Interest rate derivative contracts	—		1,104		—		1,104
Equity derivative contracts	63		2,360		—		2,423
Foreign exchange derivative contracts	2		34		—		36
Total other assets	65		3,498		—		3,563
Total assets at fair value	$	1,349	$	34,673	$	1,301	$	124,697



Liabilities
Policyholder account balances, future policy benefits and claims:
Indexed annuity embedded derivatives	$	—	$	5	$	—		$	5
IUL embedded derivatives	—		—		601			601
GMWB and GMAB embedded derivatives	—		—		(49		)	(49		)	⁽⁴⁾
Total policyholder account balances, future policy benefits and claims	—		5		552			557			⁽⁵⁾
Customer deposits	—		10		—			10
Other liabilities:
Interest rate derivative contracts	1		415		—			416
Equity derivative contracts	7		2,876		—			2,883
Credit derivative contracts	—		2		—			2
Foreign exchange derivative contracts	4		23		—			27
Other	9		6		28			43
Total other liabilities	21		3,322		28			3,371
Total liabilities at fair value	$	21	$	3,337	$	580		$	3,938

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

⁽²⁾ The fair value of the GMWB and GMAB embedded derivatives included $309 million of individual contracts in a liability position and $638 million of individual contracts in an asset position as of March 31, 2018.


⁽³⁾	The Company’s adjustment for nonperformance risk resulted in a $(432) million cumulative increase (decrease) to the embedded derivatives as of March 31, 2018.


⁽⁴⁾	The fair value of the GMWB and GMAB embedded derivatives included $443 million of individual contracts in a liability position and $492 million of individual contracts in an asset position as of December 31, 2017.


⁽⁵⁾	The Company’s adjustment for nonperformance risk resulted in a $(399) million cumulative increase (decrease) to the embedded derivatives as of December 31, 2017.

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		Total
	(in millions)
Balance, January 1, 2018	$	1,139		$	155		$	7	$	1,301
Total gains (losses) included in:
Net income	(1		)	—			—		(1		)	⁽¹⁾
Other comprehensive income (loss)	(14		)	(2		)	—		(16		)
Purchases	—			—			10		10
Settlements	(29		)	(7		)	—		(36		)
Balance, March 31, 2018	$	1,095		$	146		$	17	$	1,258

Changes in unrealized (gains) losses relating to assets held at March 31, 2018	$	(1	)	$	—		$	—	$	(1	)	⁽¹⁾



	Policyholder Account Balances, Future Policy Benefits and Claims													Other Liabilities
	Indexed Annuity Embedded Derivatives		IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total			Other Liabilities
	(in millions)
Balance, January 1, 2018	$	—	$	601			$	(49	)		$	552		$	28
Total (gains) losses included in:
Net income	—		(25		)	⁽²⁾	(356		)	⁽³⁾	(381		)	—
Issues	3		20				83				106			—
Settlements	—		(11		)		(7		)		(18		)	—
Balance, March 31, 2018	$	3	$	585			$	(329	)		$	259		$	28

Changes in unrealized (gains) losses relating to liabilities held at March 31, 2018	$	—	$	(25	)	⁽²⁾	$	(348	)	⁽³⁾	$	(373	)	$	—



	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 (losses) 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			⁽²⁾	(499		)	⁽³⁾	(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		⁽²⁾	$	(484	)	⁽³⁾	$	(465	)	$	—

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

⁽²⁾ Included in interest credited to fixed accounts in the Consolidated Statements of Operations.

⁽³⁾ Included in benefits, claims, losses and settlement expenses 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, 2018
	Fair Value			Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	1,093		Discounted cash flow	Yield/spread to U.S. Treasuries	0.8	%	–	2.2%	1.1	%
Asset backed securities	$	7		Discounted cash flow	Annual short-term default rate	2.3%
					Annual long-term default rate	2.5%		–	3.5%	3.2	%
					Discount rate	11.5%
					Constant prepayment rate	5.0	%	–	10.0%	10.0	%
					Loss recovery	36.4	%	–	63.6%	63.5	%
IUL embedded derivatives	$	585		Discounted cash flow	Nonperformance risk ⁽¹⁾	88 bps
Indexed annuity embedded derivatives	$	3		Discounted cash flow	Surrender rate	0.0	%	–	50.0%
					Nonperformance risk ⁽¹⁾	88 bps
GMWB and GMAB embedded derivatives	$	(329	)	Discounted cash flow	Utilization of guaranteed withdrawals ⁽²⁾	0.0	%	–	42.0%
					Surrender rate	0.1	%	–	74.7%
					Market volatility ⁽³⁾	4.0	%	–	16.2%
					Nonperformance risk ⁽¹⁾	88 bps
Contingent consideration liabilities	$	28		Discounted cash flow	Discount rate	9.0%



	December 31, 2017
	Fair Value			Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	1,138		Discounted cash flow	Yield/spread to U.S. Treasuries	0.7	%	–	2.3%	1.1	%
Asset backed securities	$	7		Discounted cash flow	Annual short-term default rate	3.8%
					Annual long-term default rate	2.5%		–	3.0%	2.7	%
					Discount rate	10.5%
					Constant prepayment rate	5.0	%	–	10.0%	9.9	%
					Loss recovery	36.4	%	–	63.6%	63.2	%
IUL embedded derivatives	$	601		Discounted cash flow	Nonperformance risk ⁽¹⁾	71 bps
GMWB and GMAB embedded derivatives	$	(49	)	Discounted cash flow	Utilization of guaranteed withdrawals ⁽²⁾	0.0	%	–	42.0%
					Surrender rate	0.1	%	–	74.7%
					Market volatility ⁽³⁾	3.7	%	–	16.1%
					Nonperformance risk ⁽¹⁾	71 bps
Contingent consideration liabilities	$	28		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, 2018
	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,721	$	—	$	—	$	2,697	$	2,697
Policy and certificate loans	844		—		—		799		799
Receivables	1,579		115		977		480		1,572
Restricted and segregated cash	2,270		2,270		—		—		2,270
Other investments and assets	752		—		702		54		756

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	10,074	$	—	$	—	$	10,295	$	10,295
Investment certificate reserves	6,535		—		—		6,506		6,506
Brokerage customer deposits	3,708		3,708		—		—		3,708
Separate account liabilities at NAV	5,363								5,363		⁽¹⁾
Debt and other liabilities	3,266		114		3,102		100		3,316



	December 31, 2017
	Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	2,756	$	—	$	—	$	2,752	$	2,752
Policy and certificate loans	845		—		—		801		801
Receivables	1,537		103		946		487		1,536
Restricted and segregated cash	2,524		2,524		—		—		2,524
Other investments and assets ⁽²⁾	725		—		677		49		726

Financial Liabilities
Policyholder account balances, future policy benefits and claims	$	10,246	$	—	$	—	$	10,755	$	10,755
Investment certificate reserves	6,390		—		—		6,374		6,374
Brokerage customer deposits	3,915		3,915		—		—		3,915
Separate account liabilities at NAV	5,177								5,177		⁽¹⁾
Debt and other liabilities	3,290		118		3,180		119		3,417

⁽²⁾ Amounts have been corrected to include certificates of deposit with original or remaining maturities at the time of purchase of more than 90 days but less than 12 months of $205 million as of December 31, 2017. The certificates of deposit are classified as Level 2 and recorded at cost, which is a reasonable estimate of fair value because of the short time between the purchase of the instrument and its expected realization.