|
4. Investments
The following is a summary of Ameriprise Financial investments:
|
|
|
June 30, 2011 |
|
December 31, 2010 |
|
|
|
|
(in millions) |
|
|
Available-for-Sale securities, at fair value |
|
$ |
33,348 |
|
$ |
32,619 |
|
|
Commercial mortgage loans, net |
|
2,524 |
|
2,577 |
|
|
Trading securities |
|
644 |
|
565 |
|
|
Policy loans |
|
736 |
|
733 |
|
|
Other investments |
|
695 |
|
559 |
|
|
Total |
|
$ |
37,947 |
|
$ |
37,053 |
|
Available-for-Sale securities distributed by type were as follows:
|
|
|
June 30, 2011 |
|
|
Description of Securities |
|
Amortized
Cost |
|
Gross
Unrealized
Gains |
|
Gross
Unrealized
Losses |
|
Fair Value |
|
Noncredit
OTTI (1) |
|
|
|
|
(in millions) |
|
|
Corporate debt securities |
|
$ |
15,366 |
|
$ |
1,298 |
|
$ |
(30 |
) |
$ |
16,634 |
|
$ |
— |
|
|
Residential mortgage backed securities |
|
7,647 |
|
350 |
|
(285 |
) |
7,712 |
|
(117 |
) |
|
Commercial mortgage backed securities |
|
4,453 |
|
286 |
|
(4 |
) |
4,735 |
|
— |
|
|
Asset backed securities |
|
2,020 |
|
76 |
|
(33 |
) |
2,063 |
|
(15 |
) |
|
State and municipal obligations |
|
1,971 |
|
59 |
|
(73 |
) |
1,957 |
|
— |
|
|
U.S. government and agencies obligations |
|
86 |
|
8 |
|
— |
|
94 |
|
— |
|
|
Foreign government bonds and obligations |
|
107 |
|
17 |
|
— |
|
124 |
|
— |
|
|
Common and preferred stocks |
|
6 |
|
4 |
|
— |
|
10 |
|
— |
|
|
Other debt obligations |
|
19 |
|
— |
|
— |
|
19 |
|
— |
|
|
Total |
|
$ |
31,675 |
|
$ |
2,098 |
|
$ |
(425 |
) |
$ |
33,348 |
|
$ |
(132 |
) |
|
|
|
December 31, 2010 |
|
|
Description of Securities |
|
Amortized
Cost |
|
Gross
Unrealized
Gains |
|
Gross
Unrealized
Losses |
|
Fair Value |
|
Noncredit
OTTI (1) |
|
|
|
|
(in millions) |
|
|
Corporate debt securities |
|
$ |
15,433 |
|
$ |
1,231 |
|
$ |
(58 |
) |
$ |
16,606 |
|
$ |
— |
|
|
Residential mortgage backed securities |
|
7,213 |
|
368 |
|
(323 |
) |
7,258 |
|
(117 |
) |
|
Commercial mortgage backed securities |
|
4,583 |
|
293 |
|
(8 |
) |
4,868 |
|
— |
|
|
Asset backed securities |
|
1,982 |
|
78 |
|
(40 |
) |
2,020 |
|
(16 |
) |
|
State and municipal obligations |
|
1,666 |
|
21 |
|
(105 |
) |
1,582 |
|
— |
|
|
U.S. government and agencies obligations |
|
135 |
|
8 |
|
— |
|
143 |
|
— |
|
|
Foreign government bonds and obligations |
|
91 |
|
17 |
|
— |
|
108 |
|
— |
|
|
Common and preferred stocks |
|
6 |
|
4 |
|
— |
|
10 |
|
— |
|
|
Other debt obligations |
|
24 |
|
— |
|
— |
|
24 |
|
— |
|
|
Total |
|
$ |
31,133 |
|
$ |
2,020 |
|
$ |
(534 |
) |
$ |
32,619 |
|
$ |
(133 |
) |
(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 both June 30, 2011 and December 31, 2010, fixed maturity securities comprised approximately 88% of Ameriprise Financial investments. Rating agency designations are based on the availability of ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”), including Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings Ltd. (“Fitch”). The Company uses the median of available ratings from Moody’s, S&P and Fitch, or, if fewer than three ratings are available, the lower rating is used. When ratings from Moody’s, S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. At both June 30, 2011 and December 31, 2010, the Company’s internal analysts rated $1.2 billion of securities, using criteria similar to those used by NRSROs. A summary of fixed maturity securities by rating was as follows:
|
|
|
June 30, 2011 |
|
December 31, 2010 |
|
|
Ratings |
|
Amortized
Cost |
|
Fair Value |
|
Percent of
Total Fair
Value |
|
Amortized
Cost |
|
Fair Value |
|
Percent of
Total Fair
Value |
|
|
|
|
(in millions, except percentages) |
|
|
AAA |
|
$ |
12,202 |
|
$ |
12,854 |
|
39 |
% |
$ |
12,142 |
|
$ |
12,809 |
|
39 |
% |
|
AA |
|
1,833 |
|
1,917 |
|
6 |
|
1,843 |
|
1,899 |
|
6 |
|
|
A |
|
4,916 |
|
5,195 |
|
15 |
|
4,449 |
|
4,670 |
|
14 |
|
|
BBB |
|
10,801 |
|
11,737 |
|
35 |
|
10,536 |
|
11,408 |
|
35 |
|
|
Below investment grade |
|
1,917 |
|
1,635 |
|
5 |
|
2,157 |
|
1,823 |
|
6 |
|
|
Total fixed maturities |
|
$ |
31,669 |
|
$ |
33,338 |
|
100 |
% |
$ |
31,127 |
|
$ |
32,609 |
|
100 |
% |
At June 30, 2011 and December 31, 2010, approximately 34% and 29%, 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:
|
|
|
June 30, 2011 |
|
|
|
|
Less than 12 months |
|
12 months or more |
|
Total |
|
|
|
|
Number of |
|
Fair |
|
Unrealized |
|
Number of |
|
Fair |
|
Unrealized |
|
Number of |
|
Fair |
|
Unrealized |
|
|
Description of Securities |
|
Securities |
|
Value |
|
Losses |
|
Securities |
|
Value |
|
Losses |
|
Securities |
|
Value |
|
Losses |
|
|
|
|
(in millions, except number of securities) |
|
|
Corporate debt securities |
|
98 |
|
$ |
1,304 |
|
$ |
(23 |
) |
7 |
|
$ |
115 |
|
$ |
(7 |
) |
105 |
|
$ |
1,419 |
|
$ |
(30 |
) |
|
Residential mortgage backed securities |
|
142 |
|
1,175 |
|
(17 |
) |
132 |
|
714 |
|
(268 |
) |
274 |
|
1,889 |
|
(285 |
) |
|
Commercial mortgage backed securities |
|
33 |
|
419 |
|
(4 |
) |
— |
|
— |
|
— |
|
33 |
|
419 |
|
(4 |
) |
|
Asset backed securities |
|
27 |
|
231 |
|
(3 |
) |
29 |
|
154 |
|
(30 |
) |
56 |
|
385 |
|
(33 |
) |
|
State and municipal obligations |
|
109 |
|
342 |
|
(11 |
) |
57 |
|
235 |
|
(62 |
) |
166 |
|
577 |
|
(73 |
) |
|
Total |
|
409 |
|
$ |
3,471 |
|
$ |
(58 |
) |
225 |
|
$ |
1,218 |
|
$ |
(367 |
) |
634 |
|
$ |
4,689 |
|
$ |
(425 |
) |
|
|
|
December 31, 2010 |
|
|
|
|
Less than 12 months |
|
12 months or more |
|
Total |
|
|
|
|
Number of |
|
Fair |
|
Unrealized |
|
Number of |
|
Fair |
|
Unrealized |
|
Number of |
|
Fair |
|
Unrealized |
|
|
Description of Securities |
|
Securities |
|
Value |
|
Losses |
|
Securities |
|
Value |
|
Losses |
|
Securities |
|
Value |
|
Losses |
|
|
|
|
(in millions, except number of securities) |
|
|
Corporate debt securities |
|
115 |
|
$ |
1,859 |
|
$ |
(46 |
) |
13 |
|
$ |
157 |
|
$ |
(12 |
) |
128 |
|
$ |
2,016 |
|
$ |
(58 |
) |
|
Residential mortgage backed securities |
|
108 |
|
782 |
|
(12 |
) |
133 |
|
712 |
|
(311 |
) |
241 |
|
1,494 |
|
(323 |
) |
|
Commercial mortgage backed securities |
|
30 |
|
498 |
|
(7 |
) |
1 |
|
23 |
|
(1 |
) |
31 |
|
521 |
|
(8 |
) |
|
Asset backed securities |
|
29 |
|
354 |
|
(8 |
) |
25 |
|
123 |
|
(32 |
) |
54 |
|
477 |
|
(40 |
) |
|
State and municipal obligations |
|
206 |
|
696 |
|
(31 |
) |
60 |
|
232 |
|
(74 |
) |
266 |
|
928 |
|
(105 |
) |
|
Total |
|
488 |
|
$ |
4,189 |
|
$ |
(104 |
) |
232 |
|
$ |
1,247 |
|
$ |
(430 |
) |
720 |
|
$ |
5,436 |
|
$ |
(534 |
) |
As part of Ameriprise Financial’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.
The following table presents a rollforward of the cumulative amounts recognized in the Consolidated Statements of Operations 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:
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
|
|
(in millions) |
|
|
Beginning balance of credit losses on securities held for which a portion of other-than-temporary impairment was recognized in other comprehensive income |
|
$ |
283 |
|
$ |
290 |
|
$ |
297 |
|
$ |
263 |
|
|
Additional amount related to credit losses for which an other-than-temporary impairment was not previously recognized |
|
13 |
|
— |
|
13 |
|
15 |
|
|
Reductions for securities sold during the period (realized) |
|
— |
|
— |
|
(16 |
) |
— |
|
|
Additional increases to the amount related to credit losses for which an other-than-temporary impairment was previously recognized |
|
3 |
|
1 |
|
5 |
|
13 |
|
|
Ending balance of credit losses on securities held as of June 30 for which a portion of other-than-temporary impairment was recognized in other comprehensive income |
|
$ |
299 |
|
$ |
291 |
|
$ |
299 |
|
$ |
291 |
|
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 (losses) on Available-for-Sale securities included in accumulated other comprehensive income:
|
|
|
Net |
|
|
|
Accumulated Other |
|
|
|
|
Unrealized |
|
|
|
Comprehensive Income |
|
|
|
|
Securities |
|
Deferred |
|
Related to Net Unrealized |
|
|
|
|
Gains (Losses) |
|
Income Tax |
|
Securities Gains (Losses) |
|
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2010 |
|
$ |
474 |
|
$ |
(164 |
) |
$ |
310 |
|
|
Net unrealized securities gains arising during the period (2) |
|
898 |
|
(315 |
) |
583 |
|
|
Reclassification of gains included in net income |
|
(8 |
) |
3 |
|
(5 |
) |
|
Impact of DAC, DSIC, benefit reserves and reinsurance recoverables |
|
(305 |
) |
107 |
|
(198 |
) |
|
Balance at June 30, 2010 |
|
$ |
1,059 |
|
$ |
(369 |
) |
$ |
690 |
(1) |
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2011 |
|
$ |
946 |
|
$ |
(331 |
) |
$ |
615 |
|
|
Net unrealized securities gains arising during the period (2) |
|
192 |
|
(66 |
) |
126 |
|
|
Reclassification of gains included in net income |
|
(5 |
) |
2 |
|
(3 |
) |
|
Impact of DAC, DSIC, benefit reserves and reinsurance recoverables |
|
(71 |
) |
25 |
|
(46 |
) |
|
Balance at June 30, 2011 |
|
$ |
1,062 |
|
$ |
(370 |
) |
$ |
692 |
(1) |
(1) Includes $(62) million and $(82) million of noncredit related impairments on securities and net unrealized securities losses on previously impaired securities at June 30, 2011 and June 30, 2010, respectively.
(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.
Net realized gains and losses on Available-for-Sale securities, determined using the specific identification method, recognized in earnings were as follows:
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
|
|
(in millions) |
|
(in millions) |
|
|
Gross realized gains from sales |
|
$ |
21 |
|
$ |
7 |
|
$ |
39 |
|
$ |
40 |
|
|
Gross realized losses from sales |
|
(1 |
) |
— |
|
(18 |
) |
(1 |
) |
|
Other-than-temporary impairments |
|
(16 |
) |
(1 |
) |
(18 |
) |
(31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other-than-temporary impairments for the three months and six months ended June 30, 2011and 2010 primarily related to credit losses on non-agency residential mortgage backed securities.
Available-for-Sale securities by contractual maturity at June 30, 2011 were as follows:
|
|
|
Amortized Cost |
|
Fair Value |
|
|
|
|
(in millions) |
|
|
Due within one year |
|
$ |
903 |
|
$ |
920 |
|
|
Due after one year through five years |
|
5,690 |
|
6,043 |
|
|
Due after five years through 10 years |
|
6,287 |
|
6,829 |
|
|
Due after 10 years |
|
4,669 |
|
5,036 |
|
|
|
|
17,549 |
|
18,828 |
|
|
Residential mortgage backed securities |
|
7,647 |
|
7,712 |
|
|
Commercial mortgage backed securities |
|
4,453 |
|
4,735 |
|
|
Asset backed securities |
|
2,020 |
|
2,063 |
|
|
Common and preferred stocks |
|
6 |
|
10 |
|
|
Total |
|
$ |
31,675 |
|
$ |
33,348 |
|
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 and preferred stocks, were not included in the maturities distribution.
Trading Securities
Net recognized gains related to trading securities held at June 30, 2011 and 2010 were $2 million and $7 million, respectively, for the three months then ended. Net recognized gains related to trading securities held at June 30, 2011 and 2010 were $5 million and $9 million, respectively, for the six months then ended. |