AMERIPRISE FINANCIAL INC – 10-K – Management’s Discussion and Analysis of Financial Condition and Results of Operations

  Income taxes, as reported in our Consolidated Financial Statements, represent the net amount of income taxes that we expect to pay to or receive from various taxing jurisdictions in connection with our operations. We provide for income taxes based on amounts that we believe we 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       48 

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  of certain items. In the event that the ultimate tax treatment of items differs from our estimates, we may be required to significantly change the provision for income taxes recorded in our Consolidated Financial Statements.  In connection with the provision for income taxes, our 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. Included in deferred tax assets are significant 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.  We are required to establish a valuation allowance for any portion of our 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 our ability to realize our deferred tax assets and avoid the establishment of a valuation allowance with respect to such assets. Management believes it is more likely than not that we will not realize the full benefit of certain state net operating losses, and therefore a valuation allowance of $5 million has been established as of December 31, 2011.  

Recent Accounting Pronouncements

  For information regarding recent accounting pronouncements and their expected impact on our future consolidated results of operations and financial condition, see Note 2 to our Consolidated Financial Statements.  We adopted new accounting rules for the deferral of insurance and annuity acquisition costs on January 1, 2012 on a retrospective basis. The change reduced our DAC asset by $2.0 billion, which decreased retained earnings by $1.4 billion after-tax. The retrospective adoption increased our return on equity from continuing operations excluding accumulated other comprehensive income by 2.4% for the twelve months ended December 31, 2011. The adoption will not impact our strong excess capital position or cash flow. We estimate that the adoption will have a marginal impact to operating earnings in 2012.  

Sources of Revenues and Expenses

Management and Financial Advice Fees

  Management and financial advice fees relate primarily to fees earned from managing mutual funds, separate account and wrap account assets and institutional investments, as well as fees earned from providing financial advice and administrative services (including transfer agent, administration and custodial fees earned from providing services to retail mutual funds). Management and financial advice fees also include mortality and expense risk fees earned on separate account assets.  Our management fees are generally accrued daily and collected monthly. A significant portion of our management fees are calculated as a percentage of the fair value of our managed assets. The substantial majority of our managed assets are valued by third party pricing services vendors based upon observable market data. The selection of our third party pricing services vendors and the reliability of their prices are subject to certain governance procedures, such as exception reporting, subsequent transaction testing, and annual due diligence of our vendors, which includes assessing the vendor's valuation qualifications, control environment, analysis of asset-class specific valuation methodologies and understanding of sources of market observable assumptions.  Several of our mutual funds had a performance incentive adjustment ("PIA"). The PIA increased or decreased the level of management fees received based on the specific fund's relative performance as measured against a designated external index. We discontinued the PIA earned by our domestic mutual funds during 2011. We recognized PIA revenue monthly on a 12 month rolling performance basis. We may also receive performance-based incentive fees from hedge funds, Threadneedle Open Ended Investment Companies ("OEICs"), or other structured investments that we manage. The annual performance fees for structured investments are recognized as revenue at the time the performance fee is finalized or no longer subject to adjustment. All other performance fees are based on a full contract year and are final at the end of the contract year. Any performance fees received are not subject to repayment or any other clawback provisions and approximately 1% of managed assets as of December 31, 2011 are subject to "high water marks" whereby we will not earn incentive fees even if the fund has positive returns until it surpasses the previous high water mark. Employee benefit plan and institutional investment management and administration services fees are negotiated and are also generally                                                                           49 

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based on underlying asset values. Fees from financial planning and advice services are recognized when the financial plan is delivered.

Distribution Fees

  Distribution fees primarily include point-of-sale fees (such as mutual fund front-end sales loads) and asset-based fees (such as 12b-1 distribution and shareholder service fees) that are generally based on a contractual percentage of assets and recognized when earned. Distribution fees also include amounts received under marketing support arrangements for sales of mutual funds and other companies' products, such as through our wrap accounts, as well as surrender charges on fixed and variable universal life insurance and annuities.  

Net Investment Income

  Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale, commercial mortgage loans, policy loans, consumer loans, other investments and cash and cash equivalents; the changes in fair value of trading securities, certain derivatives and certain assets and liabilities of consolidated investment entities; the pro rata share of net income or loss on equity method investments; and realized gains and losses on the sale of securities and charges for other-than-temporary impairments of investments related to credit losses. Interest income is accrued as earned using the effective interest method, which makes an adjustment of the yield for security premiums and discounts on all performing fixed maturity securities classified as Available-for-Sale and commercial mortgage loans so that the related security or loan recognizes a constant rate of return on the outstanding balance throughout its term. Realized gains and losses on securities, other than trading securities and equity method investments, are recognized using the specific identification method on a trade date basis.  

Premiums

  Premiums include premiums on property-casualty insurance, traditional life and health (disability income and long term care) insurance and immediate annuities with a life contingent feature. Premiums on auto and home insurance are net of reinsurance premiums and are recognized ratably over the coverage period. Premiums on traditional life and health insurance are net of reinsurance ceded and are recognized as revenue when due.  

Other Revenues

  Other revenues include certain charges assessed on fixed and variable universal life insurance and annuities, which consist of cost of insurance charges, net of reinsurance premiums and cost of reinsurance for UL insurance products, variable annuity guaranteed benefit rider charges and administration charges against contractholder accounts or balances. Premiums paid by fixed and variable universal life policyholders and annuity contractholders are considered deposits and are not included in revenue. Other revenues also include revenues related to certain consolidated limited partnerships.  

Banking and Deposit Interest Expense

  Banking and deposit interest expense primarily includes interest expense related to banking deposits and investment certificates. Additionally, banking and deposit interest expense includes interest related to non-recourse debt of certain consolidated limited partnerships. The changes in fair value of stock market certificate embedded derivatives and the derivatives hedging stock market certificates are included within banking and deposit interest expense.  

Distribution Expenses

  Distribution expenses primarily include compensation paid to our financial advisors, registered representatives, third-party distributors and wholesalers, net of amounts capitalized and amortized as part of DAC. The amounts capitalized and amortized are based on actual distribution costs. The majority of these costs, such as advisor and wholesaler compensation, vary directly with the level of sales. Distribution expenses also include marketing support and other distribution and administration related payments made to affiliated and unaffiliated distributors of products provided by our affiliates. The majority of these expenses vary with the level of sales, or assets held, by these distributors, and the remainder is fixed. Distribution expenses also include wholesaling costs.  

Interest Credited to Fixed Accounts

  Interest credited to fixed accounts represents amounts earned by contractholders and policyholders on fixed account values associated with fixed and variable universal life and annuity contracts. The changes in fair value of equity indexed annuity and IUL embedded derivatives and the derivatives hedging these products are included within interest credited to fixed accounts.  

Benefits, Claims, Losses and Settlement Expenses

  Benefits, claims, losses and settlement expenses consist of amounts paid and changes in liabilities held for anticipated future benefit payments under insurance policies and annuity contracts, along with costs to process and pay such       50 

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  amounts. Amounts are net of benefit payments recovered or expected to be recovered under reinsurance contracts. Benefits under variable annuity guarantees include the changes in fair value of GMWB and GMAB embedded derivatives and the derivatives hedging these benefits, as well as the changes in fair value of derivatives hedging GMDB provisions. Benefits, claims, losses and settlement expenses also include amortization of DSIC.  

Amortization of DAC

  Direct sales commissions and other costs capitalized as DAC are amortized over time. For annuity and 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 certain mutual fund products, DAC are generally amortized over fixed periods on a straight-line basis adjusted for redemptions. See "Deferred Acquisition Costs and Deferred Sales Inducement Costs" under "Critical Accounting Policies" for further information on DAC.  

Interest and Debt Expense

Interest and debt expense primarily includes interest on corporate debt and debt of consolidated investment entities, the impact of interest rate hedging activities and amortization of debt issuance costs.

General and Administrative Expense

  General and administrative expense includes compensation, share-based awards and other benefits for employees (other than employees directly related to distribution, including financial advisors), integration costs, professional and consultant fees, information technology, facilities and equipment, advertising and promotion, legal and regulatory and corporate related expenses.  

Assets Under Management and Administration

  Assets under management ("AUM") include assets for which we provide investment management services, such as the assets of the Columbia funds and Threadneedle funds, assets of institutional clients and assets of clients in our affiliated advisor platform held in wrap accounts as well as assets managed by sub-advisers selected by us. AUM also includes certain assets on our Consolidated Balance Sheets for which we provide investment management services and recognize management fees in our Asset Management segment, such as the assets of the general account, RiverSource Variable Product funds held in separate accounts of our life insurance subsidiaries and client assets of CIEs. These assets do not include assets under advisement, for which we provide model portfolios but do not have full discretionary investment authority.  Assets under administration ("AUA") include assets for which we provide administrative services such as client assets invested in other companies' products that we offer outside of our wrap accounts. These assets include those held in clients' brokerage accounts. We generally record fees received from administered assets as distribution fees. We do not exercise management discretion over these assets and do not earn a management fee. These assets are not reported on our Consolidated Balance Sheets. AUA also includes certain assets on our Consolidated Balance Sheets for which we do not provide investment management services and do not recognize management fees, such as investments in non-affiliated funds held in the separate accounts of our life insurance subsidiaries. These assets do not include assets under advisement, for which we provide model portfolios but do not have full discretionary investment authority.  

The following table presents detail regarding our AUM and AUA:

                                                       December 31,                                                      2011      2010     Change                                                        (in billions)

Assets Under Management and Administration

        Advice & Wealth Management AUM               $ 104.7   $  97.5         7 %        Asset Management AUM                           435.5     456.8        (5 )        Eliminations                                   (12.6 )   (12.4 )      (2 )         Total Assets Under Management                  527.6     541.9       

(3 )

        Total Assets Under Administration              103.7     105.6        (2 )         Total AUM and AUA                            $ 631.3   $ 647.5        (3 )%   

Total AUM decreased $14.3 billion, or 3%, to $527.6 billion as of December 31, 2011 compared to the prior year primarily due to Asset Management AUM net outflows, partially offset by wrap account net inflows.

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Consolidated Results of Operations

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

  Management believes that operating measures, which exclude net realized gains or losses; the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization; integration and restructuring charges; income (loss) from discontinued operations; and the impact of consolidating CIEs, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. See our discussion on the use of these non-GAAP measures in the Overview section above.  

The following table presents our consolidated results of operations:

                                                Years Ended December 31,                                    2011                                        2010                                   Less:                                       Less:                    GAAP     Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                 (in millions) Revenues Management and financial advice fees      $  4,537     $          (49 )  $    4,586   $ 3,784      $          (38 )  $    3,822    $     764        20 % Distribution fees                1,573                  -         1,573     1,447                   -         1,447          126         9 Net investment income              2,046                 97         1,949     2,309                 308         2,001          (52 )      (3 ) Premiums            1,220                  -         1,220     1,179                   -         1,179           41         3 Other revenues        863                 94           769       863                 125           738           31         4  Total revenues     10,239                142        10,097     9,582                 395         9,187          910        10 Banking and deposit interest expense                47                  -            47        70                   -            70          (23 )     (33 )  Total net revenues           10,192                142        10,050     9,512                 395         9,117          933        10  Expenses Distribution expenses            2,497                  -         2,497     2,065                   -         2,065          432        21 Interest credited to fixed accounts        853                  -           853       909                   -           909          (56 )      (6 ) Benefits, claims, losses and settlement expenses            1,557                 67         1,490     1,750                   9         1,741         (251 )     (14 ) Amortization of deferred acquisition costs                 618                 (8 )         626       127                  16           111          515        NM Interest and debt expense          317                221            96       290                 181           109          (13 )     (12 ) General and administrative expense             2,965                116         2,849     2,737                 129         2,608          241         9  Total expenses      8,807                396         8,411     7,878                 335         7,543          868        12 Income from continuing operations before income tax provision       1,385               (254 )       1,639     1,634                  60         1,574           65         4 Income tax provision             355                (52 )         407       350                 (36 )         386           21         5  Income from continuing operations          1,030               (202 )       1,232     1,284                  96         1,188           44         4 Loss from discontinued operations, net of tax            (60 )              (60 )           -       (24 )               (24 )           -            -         -  Net income            970               (262 )       1,232     1,260                  72         1,188           44         4 Less: Net income (loss) attributable to non- controlling interests            (106 )             (106 )           -       163                 163             -            -         -  Net income attributable to Ameriprise Financial        $  1,076     $         (156 )  $    1,232   $ 1,097      $          (91 )  $    1,188    $      44         4 %       º NM    º Not Meaningful.     º (1)

º Includes the elimination of management fees we earn for services provided

to the CIEs and the related expense; revenues and expenses of the CIEs; net

     realized gains or losses; the market impact on variable annuity living      benefits, net of hedges, DSIC and DAC amortization; integration and      restructuring charges; and income (loss) from discontinued operations.      Income tax provision is calculated using the statutory tax rate of 35% on      applicable adjustments.       52 

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  The following table presents the components of the adjustments in the table above:                                                 Years Ended December 31,                                    2011                                        2010                                 Other             Total                    Other             Total                   CIEs    Adjustments (1)     Adjustments    CIEs    Adjustments (1)     Adjustments                                                      (in millions) Revenues Management and financial advice fees      $  (49 )   $            -     $       (49 ) $ (38 )   $            -     $       (38 ) Distribution fees                  -                  -               -       -                  -               - Net investment income               91                  6              97     275                 33             308 Premiums              -                  -               -       -                  -               - Other revenues       94                  -              94     125                  -             125  Total revenues      136                  6             142     362                 33             395 Banking and deposit interest expense               -                  -               -       -                  -               -  Total net revenues            136                  6             142     362                 33             395  Expenses Distribution expenses              -                  -               -       -                  -               - Interest credited to fixed accounts        -                  -               -       -                  -               - Benefits, claims, losses and settlement expenses              -                 67              67       -                  9               9 Amortization of deferred acquisition costs                 -                 (8 )            (8 )     -                 16              16 Interest and debt expense        221                  -             221     181                  -             181 General and administrative expense              21                 95             116      18                111             129  Total expenses      242                154             396     199                136             335 Income from continuing operations before income tax provision      (106 )             (148 )          (254 )   163               (103 )            60 Income tax provision             -                (52 )           (52 )     -                (36 )           (36 )  Income from continuing operations         (106 )              (96 )          (202 )   163                (67 )            96 Loss from discontinued operations, net of tax            -                (60 )           (60 )     -                (24 )           (24 )  Net income         (106 )             (156 )          (262 )   163                (91 )            72 Less: Net income (loss) attributable to noncontrolling interests          (106 )                -            (106 )   163                  -             163  Net income attributable to Ameriprise Financial        $    -     $         (156 )   $      (156 ) $   -     $          (91 )   $       (91 )       º (1)

º Other adjustments include net realized gains or losses; the market impact

on variable annuity living benefits, net of hedges, DSIC and DAC

amortization; integration and restructuring charges; and income (loss) from

discontinued operations.

  The following table presents a reconciliation of operating earnings per diluted share:                                                                    Per Diluted Share                               Years Ended December 31,         Years Ended December 31,                                 2011             2010            2011             2010                                         (in millions, except per share amounts) Income from continuing operations                  $      1,030     $      1,284 Less: Net income (loss) attributable to noncontrolling interests            (106 )            163  Net income from continuing operations attributable to Ameriprise Financial               1,136            1,121    $       4.61     $       4.27 Loss from discontinued operations, net of tax               (60 )            (24 )         (0.24 )          (0.09 )  Net income attributable to Ameriprise Financial            1,076            1,097            4.37             4.18 Operating adjustments, after-tax                            156               91            0.63             0.35  Operating earnings          $      1,232     $      1,188    $       5.00     $       4.53  Weighted average common shares outstanding: Basic                              241.4            257.4 Diluted                            246.3            262.3                                                                            53 

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The following table presents a reconciliation of operating return on equity excluding CIEs and accumulated other comprehensive income:

                                                     Twelve Months Ended December 31,                                                          2011               2010                                                                (in millions) Net income from continuing operations attributable to Ameriprise Financial                  $      1,136       $      1,121 Less: Adjustments (1)                                          (96 )              (67 )  Operating earnings                                    $      1,232       $      1,188  Total Ameriprise Financial, Inc. shareholders' equity                                                $     10,470       $  

10,309

 Less: Assets and liabilities held for sale                      29          

102

 Less: Accumulated other comprehensive income, net of tax                                                         603          

540

  Total Ameriprise Financial, Inc. shareholders' equity from continuing operations excluding AOCI             9,838          

9,667

 Less: Equity impacts attributable to CIEs                      478                455  Operating equity                                      $      9,360       $      9,212  Return on equity from continuing operations, excluding AOCI                                                11.5 %             11.6 % Operating return on equity excluding CIEs and AOCI (2)                                                      13.2 %             12.9 %       º (1)    º Adjustments reflect the trailing twelve months' sum of after-tax net

realized gains or losses; the market impact on variable annuity guaranteed

living benefits, net of hedges, DAC and DSIC amortization; and integration

and restructuring charges.

º (2)

º Operating return on equity excluding accumulated other comprehensive income

     is calculated using the trailing twelve months of earnings excluding the      after-tax net realized gains or losses; the market impact on variable      annuity guaranteed living benefits, net of hedges, DAC and DSIC      amortization; integration and restructuring charges; and discontinued

operations in the numerator, and Ameriprise Financial, Inc. shareholders'

equity excluding accumulated other comprehensive income; the impact of

CIEs; and the assets and liabilities held for sale using a five point

average of quarter-end equity in the denominator.

Overall

  Net income attributable to Ameriprise Financial decreased $21 million, or 2%, to $1.1 billion for the year ended December 31, 2011 compared to $1.1 billion for the prior year. Net income from continuing operations attributable to Ameriprise Financial increased $15 million, or 1%, to $1.1 billion for the year ended December 31, 2011 compared to $1.1 billion for the prior year. Loss from discontinued operations, net of tax, of $60 million for the year ended December 31, 2011 included a $77 million after-tax charge related to previously disclosed legal expenses and a $14 million after-tax gain on the sale of Securities America. Operating earnings exclude net realized gains or losses; the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization; integration and restructuring charges; income (loss) of discontinued operations; and the impact of consolidating CIEs. Operating earnings increased $44 million, or 4%, to $1.2 billion for the year ended December 31, 2011 compared to $1.2 billion for the prior year reflecting higher revenues from business growth and an additional four months of Columbia Management results, partially offset by the impact of updating valuation assumptions and models, the market impacts on DAC and DSIC amortization and the negative impact of the low interest rate environment. The market impact on DAC and DSIC amortization was a $17 million pretax charge for the year ended December 31, 2011 compared to a $34 million pretax benefit for the prior year.  Operating earnings will continue to be negatively impacted by the ongoing low interest rate environment in 2012. In addition to continuing spread compression in our interest sensitive product lines throughout the year, there is also the potential for interest rate related impacts to DAC and DSIC amortization and the level of reserves as a result of our ongoing review of various actuarial related assumptions, which could be material.  The total pretax impacts on our revenues and expenses for 2011 attributable to the review of valuation assumptions and models on an operating basis were as follows:                                            Benefits, Claims, Segment Pretax                                Losses and         Amortization of Benefit (Charge)       Other Revenues    Settlement Expenses           DAC          Total                                                   (in millions) Valuation assumptions and model changes: Annuities                $           -        $            40       $         (65 )  $ (25 ) Protection                         (20 )                    4                   2      (14 )  Total                    $         (20 )      $            44       $         (63 )  $ (39 )         54 

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  The total pretax impacts on our revenues and expenses for 2010 attributable to the review of valuation assumptions and models on an operating basis were as follows:                                                 Benefits, Claims,                                                    Losses and Segment Pretax Benefit                             Settlement       Amortization (Charge)                     Other Revenues         Expenses           of DAC       Total                                                      (in millions) Valuation assumptions and model changes: Annuities                      $           -      $          (256 )   $       353    $  97 Protection                               (20 )                (44 )            22      (42 )  Total                          $         (20 )    $          (300 )   $       375    $  55    Net Revenues  Net revenues increased $680 million, or 7%, to $10.2 billion for the year ended December 31, 2011 compared to $9.5 billion for the prior year. Operating net revenues exclude net realized gains or losses and revenues or losses of the CIEs and include the fees we earn from services provided to the CIEs. Operating net revenues increased $933 million, or 10%, to $10.1 billion for the year ended December 31, 2011 compared to $9.1 billion for the prior year driven by growth in asset-based fees from net inflows in wrap account assets, the Columbia Management Acquisition and increased client activity.  Management and financial advice fees increased $753 million, or 20%, to $4.5 billion for the year ended December 31, 2011 compared to $3.8 billion for the prior year. Operating management and financial advice fees include the fees we earn from services provided to the CIEs. Operating management and financial advice fees increased $764 million, or 20%, to $4.6 billion for the year ended December 31, 2011 compared to $3.8 billion for the prior year primarily due to an additional four months of business resulting from the Columbia Management Acquisition, as well as higher wrap account fees and variable annuity fees. Wrap account assets increased $5.9 billion, or 6%, to $103.4 billion at December 31, 2011 compared to the prior year due to net inflows. Average variable annuities contract accumulation values increased $6.4 billion, or 12%, from the prior year due to higher average equity market levels, as well as net inflows.  Distribution fees increased $126 million, or 9%, to $1.6 billion for the year ended December 31, 2011 compared to $1.4 billion for the prior year primarily due to higher asset-based fees driven by the Columbia Management Acquisition and net inflows in wrap account assets, as well as increased client activity.  Net investment income decreased $263 million, or 11%, to $2.0 billion for the year ended December 31, 2011 compared to $2.3 billion for the prior year. Net investment income for the year ended December 31, 2011 included a $91 million gain for changes in the assets and liabilities of CIEs, primarily debt and underlying syndicated loans, compared to a $275 million gain in the prior year. Operating net investment income excludes net realized gains or losses and changes in the assets and liabilities of CIEs. Operating net investment income decreased $52 million, or 3%, to $1.9 billion for the year ended December 31, 2011 compared to $2.0 billion for the prior year primarily due to a decrease in investment income on fixed maturity securities driven by lower invested assets and lower interest rates. The decrease in invested assets compared to the prior year resulted from net outflows in certificates driven by the low interest rate environment and lower investments in annuity general account assets due to the implementation of changes to the Portfolio Navigator program in the second quarter of 2010 and lower interest sensitive fixed annuity account balances. These negative impacts were partially offset by $43 million of additional bond discount accretion investment income related to prior periods resulting from revisions to the accounting classification of certain structured securities in the third quarter of 2011.  Premiums increased $41 million, or 3%, to $1.2 billion for the year ended December 31, 2011 compared to $1.2 billion for the prior year primarily due to growth in Auto and Home premiums driven by higher volumes, as well as higher sales of immediate annuities with life contingencies. Auto and Home policy counts increased 7% period-over-period.  Other revenues remained flat at $863 million for the year ended December 31, 2011 compared to the prior year. Operating other revenues exclude revenues of the CIEs. Operating other revenues increased $31 million, or 4%, to $769 million for the year ended December 31, 2011 compared to $738 million for the prior year due to higher fees from variable annuity guarantees driven by higher in force amounts. During the second quarter of 2011, we reclassified from accumulated other comprehensive income into earnings a $27 million gain on an interest rate hedge put in place in anticipation of issuing debt between December 2010 and June 2011. Operating other revenues for the year ended December 31, 2010 included a $25 million benefit from payments related to the Reserve Funds matter in the first quarter of 2010.  Banking and deposit interest expense decreased $23 million, or 33%, to $47 million for the year ended December 31, 2011 compared to $70 million for the prior year primarily due to lower certificate balances, as well as a decrease in crediting rates on certificate products.                                                                           55  

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Expenses

  Total expenses increased $929 million, or 12%, to $8.8 billion for the year ended December 31, 2011 compared to $7.9 billion for the prior year. Operating expenses exclude the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization; integration and restructuring charges; and expenses of the CIEs. Operating expenses increased $868 million, or 12%, to $8.4 billion for the year ended December 31, 2011 compared to $7.5 billion for the prior year primarily due to the impact of updating valuation assumptions and models, the market impact on DAC and DSIC amortization, and increases in distribution expenses and general and administrative expense.  Distribution expenses increased $432 million, or 21%, to $2.5 billion for the year ended December 31, 2011 compared to $2.1 billion for the prior year as a result of the Columbia Management Acquisition, as well as higher advisor compensation from business growth.  Interest credited to fixed accounts decreased $56 million, or 6%, to $853 million for the year ended December 31, 2011 compared to $909 million for the prior year driven by lower average variable annuities fixed sub-account balances and a lower average crediting rate on interest sensitive fixed annuities, as well as lower average fixed annuity account balances. Average variable annuities fixed sub-account balances decreased $580 million, or 11%, to $4.8 billion for the year ended December 31, 2011 compared to the prior year primarily due to the implementation of changes to the Portfolio Navigator program in the second quarter of 2010. The average fixed annuity crediting rate excluding capitalized interest decreased to 3.7% for the year ended December 31, 2011 compared to 3.8% for the prior year. Average fixed annuities contract accumulation values decreased $265 million, or 2%, to $14.3 billion for the year ended December 31, 2011 compared to the prior year due to outflows.  Benefits, claims, losses and settlement expenses decreased $193 million, or 11%, to $1.6 billion for the year ended December 31, 2011 compared to $1.8 billion for the prior year. Operating benefits, claims, losses and settlement expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges and DSIC amortization, decreased $251 million, or 14%, to $1.5 billion for the year ended December 31, 2011 compared to $1.7 billion for the prior year. Operating benefits, claims, losses and settlement expenses for the year ended December 31, 2011 included a benefit of $44 million from updating valuation assumptions and models compared to an expense of $300 million in the prior year. Benefits, claims, losses and settlement expenses related to our Auto and Home business increased from the prior year primarily due to $45 million of catastrophe losses in 2011 compared to $29 million in 2010, as well as higher auto liability reserves. Benefits, claims, losses and settlement expenses related to our immediate annuities with life contingencies increased from the prior year due to an unfavorable change in reserves primarily driven by higher premiums. In addition, benefits, claims, losses and settlement expenses increased as a result of higher UL claims and an increase in ongoing reserve levels for UL products with secondary guarantees compared to the prior year. The market impact to DSIC was an expense of $2 million in 2011 compared to a benefit of $3 million in the prior year. Benefits, claims, losses and settlement expenses for the prior year included a $21 million expense, net of DSIC, as a result of the implementation of changes to the Portfolio Navigator program.  Amortization of DAC increased $491 million to $618 million for the year ended December 31, 2011 compared to $127 million for the prior year. Operating amortization of DAC, which excludes the DAC offset to the market impact on variable annuity guaranteed living benefits, increased $515 million to $626 million for the year ended December 31, 2011 compared to $111 million for the prior year primarily due to the impact of updating valuation assumptions and models, as well as the market impact on amortization of DAC. Operating amortization of DAC in 2011 included an expense of $63 million from updating valuation assumptions and models compared to a benefit of $375 million in the prior year. The market impact on amortization of DAC was an expense of $15 million in 2011 compared to a benefit of $31 million in the prior year. Amortization of DAC for the year ended December 31, 2010 included a benefit of $19 million as a result of the implementation of changes to the Portfolio Navigator program.  Interest and debt expense increased $27 million, or 9%, to $317 million for the year ended December 31, 2011 compared to $290 million for the prior year. Operating interest and debt expense, which excludes interest expense on CIE debt, decreased $13 million, or 12%, to $96 million for the year ended December 31, 2011 compared to $109 million in the prior year primarily due to lower average debt balances.  General and administrative expense increased $228 million, or 8%, to $3.0 billion for the year ended December 31, 2011 compared to $2.7 billion for the prior year. Operating general and administrative expense excludes integration and restructuring charges and expenses of the CIEs. Integration and restructuring charges decreased $16 million to $95 million for the year ended December 31, 2011 compared to $111 million for the prior year. Operating general and administrative expense increased $241 million, or 9%, to $2.8 billion for the year ended December 31, 2011 compared to $2.6 billion for the prior year primarily reflecting an additional four months of ongoing expenses from the Columbia Management Acquisition, as well as higher compensation expense and an increase in advertising and investment spending compared to the prior year.  

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Income Taxes

  Our effective tax rate on income from continuing operations including income attributable to noncontrolling interests was 25.6% for the year ended December 31, 2011, compared to 21.5% for the prior year. Our effective tax rate on income from continuing operations excluding income attributable to noncontrolling interests was 23.8% for the years ended December 31, 2011 and 2010. Our operating effective tax rate was 24.8% for the year ended December 31, 2011, compared to 24.5% for the prior year.  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. Potential tax reform may also affect the U.S. tax rules regarding international operations. Any changes could have a material impact on our income tax expense and deferred tax balances.  The following table presents a reconciliation of our operating effective tax rate:                                                          Years Ended December 31,                                                       2011                    2010                                                 GAAP      Operating     GAAP      Operating                                                                (in millions) Income from continuing operations before income tax provision                          $ 1,385    $    1,639   $ 1,634    $    1,574 Less: Pretax income (loss) attributable to noncontrolling interests                         (106 )           -       163             -  Income from continuing operations before income tax provision excluding CIEs           $ 1,491    $    1,639   $ 

1,471 $ 1,574

  Income tax provision from continuing operations                                    $   355    $      407   $   350    $      386 Effective tax rate                               25.6 %        24.8 %    21.5 %        24.5 % Effective tax rate excluding noncontrolling interests                                        23.8 %        24.8 %    23.8 %        24.5 %                                                                            57 

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Results of Operations by Segment

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

The following table presents summary financial information by segment:

                                                 Years Ended December 31,                                    2011                                         2010                                   Less:                                        Less:                    GAAP     Adjustments (1)     Operating      GAAP     

Adjustments (1) Operating

                                                      (in millions) Advice & Wealth Management Net revenues     $  3,708     $           (5 )  $    3,713   $  3,343      $            1    $    3,342 Expenses            3,307                  -         3,307      3,027                   7         3,020  Pretax income    $    401     $           (5 )  $      406   $    316      $           (6 )  $      322  Asset Management Net revenues     $  2,900     $            3    $    2,897   $  2,368      $            3    $    2,365 Expenses            2,464                 95         2,369      2,050                  95         1,955  Pretax income    $    436     $          (92 )  $      528   $    318      $          (92 )  $      410  Annuities Net revenues     $  2,631     $            1    $    2,630   $  2,500      $            9    $    2,491 Expenses            2,110                 59         2,051      1,852                  25         1,827  Pretax income    $    521     $          (58 )  $      579   $    648      $          (16 )  $      664  Protection Net revenues     $  2,072     $            3    $    2,069   $  2,047      $            1    $    2,046 Expenses            1,702                  -         1,702      1,644                   -         1,644  Pretax income    $    370     $            3    $      367   $    403      $            1    $      402  Corporate & Other Net revenues     $    192     $          189    $        3   $    423      $          419    $        4 Expenses              535                291           244        474                 246           228  Pretax loss          (343 )             (102 )        (241 )      (51 )               173          (224 ) Less: Pretax income (loss) attributable to noncontrolling interests            (106 )             (106 )           -        163                 163             -  Pretax loss attributable to Ameriprise Financial        $   (237 )   $            4    $     (241 ) $   (214 )    $           10    $     (224 )  

Eliminations

Net revenues $ (1,311 ) $ (49 ) $ (1,262 ) $ (1,169 ) $ (38 ) $ (1,131 ) Expenses

           (1,311 )              (49 )      (1,262 )   (1,169 )               (38 )      (1,131 )  Pretax income    $      -     $            -    $        -   $      -      $            -    $        -       º (1)

º Includes the elimination of management fees we earn for services provided

to the CIEs and the related expense; revenues and expenses of the CIEs; net

     realized gains or losses; the market impact on variable annuity living      benefits, net of hedges, DSIC and DAC amortization; and integration and      restructuring charges.  Advice & Wealth Management  Our Advice & Wealth Management segment provides financial planning and advice, as well as brokerage and banking services, primarily to retail clients through our affiliated advisors. Our affiliated advisors have access to a diversified selection of both affiliated and non-affiliated products to help clients meet their financial needs. A significant portion of revenues in this segment is fee-based, driven by the level of client assets, which is impacted by both market movements and net asset flows. We also earn net investment income on invested assets primarily from certificate and banking products. This segment earns revenues (distribution fees) for distributing non-affiliated products and earns intersegment revenues (distribution fees) for distributing our affiliated products and services to our retail clients. Intersegment expenses for this segment include expenses for investment management services provided by the Asset Management segment.  

In addition to purchases of affiliated and non-affiliated mutual funds and other securities on a stand-alone basis, clients may purchase mutual funds, among other securities, in connection with investment advisory fee-based "wrap account" programs or services, and pay fees based on a percentage of their assets.

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  The following table presents the changes in wrap account assets for the years ended December 31:                                                             2011      2010                                                             (in billions)           Beginning balance                               $  97.5   $ 81.3           Net flows                                           7.3      7.6           Market appreciation (depreciation) and other       (1.4 )    8.6            Ending balance                                  $ 103.4   $ 97.5   

Wrap account assets increased $5.9 billion, or 6%, to $103.4 billion compared to the prior year due to net inflows.

  Management believes that operating measures, which exclude net realized gains or losses and integration and restructuring charges for our Advice & Wealth Management segment, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. See our discussion on the use of these non-GAAP measures in the Overview section above.  The following table presents the results of operations of our Advice & Wealth Management segment:                                                 Years Ended December 31,                                  2011                                        2010                                   Less:                                       Less:                   GAAP      Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                  (in millions) Revenues Management and financial advice fees      $ 1,590          $        -    $    1,590   $ 1,370          $        -    $    1,370    $    220           16 % Distribution fees               1,849                   -         1,849     1,696                   -         1,696         153            9 Net investment income               256                  (5 )         261       273                   1           272         (11 )         (4 ) Other revenues        61                   -            61        71                   -            71         (10 )        (14 )  Total revenues     3,756                  (5 )       3,761     3,410                   1         3,409         352           10 Banking and deposit interest expense               48                   -            48        67                   -            67         (19 )        (28 )  Total net revenues           3,708                  (5 )       3,713     3,343                   1         3,342         371           11  Expenses Distribution expenses           2,203                   -         2,203     1,954                   -         1,954         249           13 General and administrative expense            1,104                   -         1,104     1,073                   7         1,066          38            4  Total expenses     3,307                   -         3,307     3,027                   7         3,020         287           10  Pretax income    $   401          $       (5 )  $      406   $   316          $       (6 )  $      322    $     84           26 %       º (1)    º Adjustments include net realized gains or losses and integration and      restructuring charges.  Our Advice & Wealth Management segment pretax income increased $85 million, or 27%, to $401 million for the year ended December 31, 2011 compared to $316 million for the prior year. Our Advice & Wealth Management segment pretax operating income, which excludes net realized gains or losses and integration and restructuring charges, increased $84 million, or 26%, to $406 million for the year ended December 31, 2011 compared to $322 million for the prior year due to improved advisor productivity and new client flows. Pretax margin was 10.8% for the year ended December 31, 2011 compared to 9.5% for the prior year. Pretax operating margin was 10.9% for the year ended December 31, 2011 compared to 9.6% for the prior year.  Net Revenues  Net revenues increased $365 million, or 11%, to $3.7 billion for the year ended December 31, 2011 compared to $3.3 billion for the prior year. Operating net revenues exclude net realized gains or losses. Operating net revenues increased $371 million, or 11%, to $3.7 billion for the year ended December 31, 2011 compared to $3.3 billion for the prior year driven by higher management and distribution fees from growth in assets under management and increased client activity.  Management and financial advice fees increased $220 million, or 16%, to $1.6 billion for the year ended December 31, 2011 compared to $1.4 billion for the prior year driven by growth in assets under management. Wrap account assets increased $5.9 billion, or 6%, to $103.4 billion compared to the prior year due to net inflows.  Distribution fees increased $153 million, or 9%, to $1.8 billion for the year ended December 31, 2011 compared to $1.7 billion for the prior year primarily driven by growth in assets under management and increased client activity.                                                                           59  

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  Net investment income decreased $17 million, or 6%, to $256 million for the year ended December 31, 2011 compared to $273 million for the prior year. Operating net investment income, which excludes net realized gains or losses, decreased $11 million, or 4%, to $261 million for the year ended December 31, 2011 compared to $272 million for the prior year due to a decrease in investment income on fixed maturity securities driven by lower invested assets resulting from net outflows in certificates driven by the low interest rate environment, partially offset by higher banking invested asset balances and $6 million of additional bond discount accretion investment income related to prior periods resulting from revisions to the accounting classification of certain structured securities in the third quarter of 2011.  Banking and deposit interest expense decreased $19 million, or 28%, to $48 million for the year ended December 31, 2011 compared to $67 million for the prior year primarily due to lower certificate balances, as well as a decrease in crediting rates on certificate products.  

Expenses

Total expenses increased $280 million, or 9%, to $3.3 billion for the year ended December 31, 2011 compared to $3.0 billion for the prior year. Operating expenses, which exclude integration and restructuring charges, increased $287 million, or 10%, to $3.3 billion for the year ended December 31, 2011 compared to $3.0 billion for the prior year primarily due to an increase in distribution expenses.

Distribution expenses increased $249 million, or 13%, to $2.2 billion for the year ended December 31, 2011 compared to $2.0 billion for the prior year primarily due to higher advisor compensation from business growth.

  General and administrative expense increased $31 million, or 3%, to $1.1 billion for the year ended December 31, 2011 compared to $1.1 billion for the prior year. Operating general and administrative expense, which excludes integration and restructuring charges, increased $38 million, or 4%, to $1.1 billion for the year ended December 31, 2011 compared to $1.1 billion for the prior year primarily due to an increase in investment spending, including costs associated with our new brokerage platform.  

Asset Management

  Our Asset Management segment provides investment advice and investment products to retail and institutional clients. We provide our products and services on a global scale through two complementary asset management businesses: Columbia Management Investment Advisers, LLC ("Columbia" or "Columbia Management") and Threadneedle Asset Management Holdings Sàrl ("Threadneedle"). Columbia Management predominantly provides U.S. domestic products and services and Threadneedle predominantly provides international investment products and services. We provide clients with Columbia retail products through unaffiliated third party financial institutions and through our Advice & Wealth Management segment. We provide institutional products and services through our institutional sales force. We provide Threadneedle retail products primarily through third parties. Retail products include mutual funds and variable product funds underlying insurance and annuity separate accounts. Institutional asset management services are designed to meet specific client objectives and may involve a range of products including those that focus on traditional asset classes, separately managed accounts, individually managed accounts, collateralized loan obligations, hedge funds, collective funds and property funds. Revenues in this segment are primarily earned as fees based on managed asset balances, which are impacted by both market movements and net asset flows. In addition to the products and services provided to third party clients, management teams serving our Asset Management segment provide all intercompany asset management services. The fees for such services are reflected within the Asset Management segment results through intersegment transfer pricing. Intersegment expenses for this segment include distribution expenses for services provided by our Advice & Wealth Management, Annuities and Protection segments.  On April 30, 2010, we completed the acquisition of the long-term asset management business of the Columbia Management Group from Bank of America. The acquisition significantly enhanced the capabilities of the Asset Management segment by increasing its scale, broadening its retail and institutional distribution capabilities and strengthening and diversifying its lineup of retail and institutional products. The integration of the Columbia Management business, which is expected to be completed in 2012, has involved organizational changes to our portfolio management and analytical teams and to our operational, compliance, sales and marketing support staffs. This integration has also involved the streamlining of our U.S. domestic product offerings. As a result of the integration, we combined RiverSource Investments, our legacy U.S. asset management business, with Columbia Management, under the Columbia brand. Total U.S. retail assets and number of funds under the Columbia brand as of December 31, 2011 were $204.8 billion and 205 funds, respectively.  Threadneedle remains our primary international investment management platform. Threadneedle manages seven OEICs and one Societe d'Investissement A Capital Variable ("SICAV") offering. The seven OEICs are Threadneedle Investment Funds ICVC ("TIF"), Threadneedle Specialist Investment Funds ICVC ("TSIF"), Threadneedle Focus Investment Funds ("TFIF"), Threadneedle Advantage Portfolio Funds ("TPAF"), Threadneedle Investment Funds ICVC II ("TIF II"), Threadneedle Investment Funds ICVC III ("TIF III") and Threadneedle Investment Funds ICVC IV ("TIF IV"). TIF, TSIF, TFIF, TPAF, TIF II, TIF  

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  III and TIF IV are structured as umbrella companies with a total of 72 (33, 14, 2, 2, 6, 9, and 6, respectively) sub funds covering the world's bond and equity markets. The SICAV is the Threadneedle (Lux) SICAV ("T(Lux)"). T(Lux) is structured as an umbrella company with a total of 30 sub funds covering the world's bond, commodities and equity markets. In addition, Threadneedle manages 13 unit trusts, 10 of which invest into the OEICs, 7 property unit trusts and 1 property fund of funds.  

The following tables present the mutual fund performance of our retail Columbia and Threadneedle funds as of December 31, 2011:

Columbia

Mutual Fund Rankings in top 2 Lipper Quartiles

 Domestic Equity                                        Equal weighted   1 year      37 %                                                                         3 year      48 %                                                                         5 year      61 %                                                        Asset weighted   1 year      38 %                                                                         3 year      39 %                                                                         5 year      58 % International Equity                                   Equal weighted   1 year      61 %                                                                         3 year      65 %                                                                         5 year      50 %                                                        Asset weighted   1 year      71 %                                                                         3 year      77 %                                                                         5 year      65 % Taxable Fixed Income                                   Equal weighted   1 year      85 %                                                                         3 year      55 %                                                                         5 year      68 %                                                        Asset weighted   1 year      93 %                                                                         3 year      64 %                                                                         5 year      73 % Tax Exempt Fixed Income                                Equal weighted   1 year      95 %                                                                         3 year      85 %                                                                         5 year      95 %                                                        Asset weighted   1 year      85 %                                                                         3 year      84 %                                                                         5 year      99 % Asset Allocation Funds                                 Equal weighted   1 year      86 %                                                                         3 year      48 %                                                                         5 year      57 %                                                        Asset weighted   1 year      85 %                                                                         3 year      79 %                                                                         5 year      88 % Number of funds with 4 or 5 Morningstar star ratings                    Overall     52                                                                         3 year      46                                                                         5 year      49 Percent of funds with 4 or 5 Morningstar star ratings                                                                 Overall     44 %                                                                         3 year      39 %                                                                         5 year      44 % Percent of assets with 4 or 5 Morningstar star ratings                                                                 Overall     59 %                                                                         3 year      40 %                                                                         5 year      42 %   Mutual fund performance rankings are based on the performance of Class Z fund shares for Columbia branded mutual funds. In instances where a fund's Class Z shares do not have a full one, three or five year track record, performance for an older share class of the same fund, typically Class A shares, is utilized for the period before Class Z shares were launched. No adjustments to the historical track records are made to account for differences in fund expenses between share classes of a fund.  

Equal Weighted Rankings in Top 2 Quartiles: Counts the number of funds with above median ranking divided by the total number of funds. Asset size is not a factor.

  Asset Weighted Rankings in Top 2 Quartiles: Sums the total assets of the funds with above median ranking (using Class Z and appended Class Z) divided by total assets of all funds. Funds with more assets will receive a greater share of the total percentage above or below median.  

Aggregated data includes all Columbia branded mutual funds.

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Threadneedle

  Retail Fund Rankings in Top 2 Morningstar Quartiles or Above Index Benchmark               Equity                       Equal weighted   1 year      65 %                                                            3 year      72 %                                                            5 year      86 %                                           Asset weighted   1 year      68 %                                                            3 year      76 %                                                            5 year      86 %              Fixed Income                 Equal weighted   1 year      69 %                                                            3 year      77 %                                                            5 year      82 %                                           Asset weighted   1 year      69 %                                                            3 year      75 %                                                            5 year      97 %              Allocation (Managed) Funds   Equal weighted   1 year      33 %                                                            3 year      67 %                                                            5 year     100 %                                           Asset weighted   1 year      14 %                                                            3 year      49 %                                                            5 year     100 %  

The performance of each fund is measured on a consistent basis against the most appropriate benchmark - a peer group of similar funds or an index.

Equal weighted: Counts the number of funds with above median ranking (if measured against peer group) or above index performance (if measured against an index) divided by the total number of funds. Asset size is not a factor.

  Asset weighted: Sums the assets of the funds with above median ranking (if measured against peer group) or above index performance (if measured against an index) divided by the total sum of assets in the funds. Funds with more assets will receive a greater share of the total percentage above or below median or index.  Aggregated Allocation (Managed) Funds include funds that invest in other funds of the Threadneedle range including those funds that invest in both equity and fixed income.  

Aggregated Threadneedle data includes funds on the Threadneedle platform sub-advised by Columbia as well as advisors not affiliated with Ameriprise Financial, Inc.

  The following tables present the changes in Columbia and Threadneedle managed assets:                                                    Market                                               Appreciation/                  January 1,                   (Depreciation)         Foreign     December 31,                     2011        Net Flows      & Other (1)           Exchange        2011                                                  (in billions) Columbia Managed Assets: Retail Funds     $     218.5    $     (3.1 )   $        (10.6 )      $       -    $      204.8 Institutional Funds                  127.2          (9.8 )             (4.1 ) (2)          -           113.3 Alternative Funds                   10.0          (1.8 )             (0.1 )              -             8.1 Less: Eliminations            (0.2 )           -                0.1                -            (0.1 )  Total Columbia Managed Assets                 355.5         (14.7 )            (14.7 )              -           326.1 Threadneedle Managed Assets: Retail Funds            33.4           0.8               (2.2 )           (0.2 )          31.8 Institutional Funds                   70.9          10.0                0.1             (0.4 )          80.6 Alternative Funds                    1.3          (0.2 )              0.1                -             1.2  Total Threadneedle Managed Assets                 105.6          10.6               (2.0 )           (0.6 )         113.6 Less: Sub-Advised Eliminations            (4.3 )        (0.8 )              0.9                -            (4.2 )  Total Managed Assets           $     456.8    $     (4.9 )   $        (15.8 )      $    (0.6 )  $      435.5         62 

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  Table of Contents                                                      Market                                                Appreciation/                   January 1,                   (Depreciation)       Foreign     December 31,                      2010        Net Flows      & Other (1)         Exchange        2010                                                  (in billions) Columbia Managed Assets: (3) Retail Funds      $      76.9    $     (5.2 )   $        146.8 (4)  $       -    $      218.5 Institutional Funds                    62.3          (7.1 )             72.0 (5)          -           127.2 

Alternative

 Funds                     9.9             -                0.1              -            10.0 

Less:

 Eliminations             (0.1 )           -               (0.1 )            -            (0.2 )  Total Columbia Managed Assets          149.0         (12.3 )            218.8              -           355.5 Threadneedle Managed Assets: Retail Funds             29.1           1.9                3.5           (1.1 )          33.4 Institutional Funds                    66.8          (2.2 )              8.7           (2.4 )          70.9 Alternative Funds                     1.9          (0.2 )             (0.4 )            -             1.3  Total Threadneedle Managed Assets           97.8          (0.5 )             11.8           (3.5 )         105.6 Less: Sub-Advised Eliminations             (3.6 )        (0.1 )             (0.6 )            -            (4.3 )  Total Managed Assets            $     243.2    $    (12.9 )   $        230.0      $    (3.5 )  $      456.8       º (1)    º Distributions of Retail Funds are included in market      appreciation/(depreciation) and other.     º (2)

º Included in Market appreciation/(depreciation) and other is ($4.7) billion

due to the transfer of assets from Separately Managed Accounts (SMAs) to

United Management Accounts (UMAs).

º (3)

º Prior to the Columbia Management Acquisition, the domestic managed assets

of our Asset Management segment, which are now included in Columbia Managed

Assets, were managed by RiverSource Investments.

º (4)

º Included in Market appreciation/(depreciation) and other is $118.1 billion

due to the Columbia Management Acquisition, including $3 billion of assets

that were transferred to RiverSource Sub-advised through the implementation

     of the Portfolio Navigator program, and an additional $13.1 billion of      Portfolio Navigator related assets sub-advised by others.     º (5)

º Included in Market appreciation/(depreciation) and other is $68.4 billion

due to the Columbia Management Acquisition.

  Total segment assets under management declined $21.3 billion, or 5%, from a year ago to $435.5 billion as of December 31, 2011, driven by a decrease in Columbia managed assets, partially offset by an increase in Threadneedle managed assets. Columbia managed assets declined $29.4 billion, or 8%, from a year ago to $326.1 billion as of December 31, 2011, primarily due to net outflows, as well as market depreciation and other, including a $4.7 billion decrease due to a former parent related program sponsor that shifted assets from a traditional separately managed account platform to a model-delivery only unified managed account platform that utilizes Columbia models. While the assets are excluded from managed assets, the movement in assets was neutral to earnings. Columbia net outflows of $14.7 billion in 2011 included $9.0 billion of outflows of low basis point, former parent company assets. Threadneedle managed assets increased $8.0 billion, or 8%, from a year ago to $113.6 billion as of December 31, 2011 due to net inflows. Threadneedle net inflows of $10.6 billion in 2011 reflected approximately $14 billion from a strategic relationship with Liverpool Victoria to manage its insurance and pension fund portfolio.  Management believes that operating measures, which exclude net realized gains or losses and integration charges for our Asset Management segment, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. See our discussion on the use of these non-GAAP measures in the Overview section above.                                                                           63  

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  The following table presents the results of operations of our Asset Management segment:                                                 Years Ended December 31,                                    2011                                        2010                                   Less:                                       Less:                   GAAP      Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                  (in millions) Revenues Management and financial advice fees      $ 2,434      $            -    $    2,434   $ 1,979      $            -    $    1,979    $    455           23 % Distribution fees                 450                   -           450       358                   -           358          92           26 Net investment income                14                   3            11        17                   3            14          (3 )        (21 ) Other revenues         5                   -             5        15                   -            15         (10 )        (67 )  Total revenues     2,903                   3         2,900     2,369                   3         2,366         534           23 Banking and deposit interest expense                3                   -             3         1                   -             1           2           NM  Total net revenues           2,900                   3         2,897     2,368                   3         2,365         532           22  Expenses Distribution expenses           1,026                   -         1,026       734                   -           734         292           40 Amortization of deferred acquisition costs                 19                   -            19        20                   -            20          (1 )         (5 ) General and administrative expense            1,419                  95         1,324     1,296                  95         1,201         123           10  Total expenses     2,464                  95         2,369     2,050                  95         1,955         414           21  Pretax income    $   436      $          (92 )  $      528   $   318      $          (92 )  $      410    $    118           29 %    NM Not Meaningful.     º (1)

º Adjustments include net realized gains or losses and integration charges.

  Our Asset Management segment pretax income increased $118 million, or 37%, to $436 million for the year ended December 31, 2011 compared to $318 million for the prior year. Our Asset Management segment pretax operating income, which excludes net realized gains or losses and integration charges, increased $118 million, or 29%, to $528 million for the year ended December 31, 2011 compared to $410 million for the prior year. Earnings in 2011 reflected twelve months of Columbia Management earnings compared to eight months in the prior year, which impacted revenues and expenses. Pretax margin was 15.0% for the year ended December 31, 2011 compared to 13.4% for the prior year. Pretax operating margin was 18.2% for the year ended December 31, 2011 compared to 17.3% for the prior year.  Net Revenues  Net revenues increased $532 million, or 22%, to $2.9 billion for the year ended December 31, 2011 compared to $2.4 billion for the prior year. Operating net revenues, which exclude net realized gains or losses, increased $532 million, or 22%, to $2.9 billion for the year ended December 31, 2011 compared to $2.4 billion for the prior year driven by an increase in management and distribution fees.  Management and financial advice fees increased $455 million, or 23%, to $2.4 billion for the year ended December 31, 2011 compared to $2.0 billion for the prior year due to an additional four months of business resulting from the Columbia Management Acquisition, as well the impact of higher average equity market levels on assets, partially offset by net outflows and lower hedge fund performance fees.  Distribution fees increased $92 million, or 26%, to $450 million for the year ended December 31, 2011 compared to $358 million for the prior year driven by an additional four months of business resulting from the Columbia Management Acquisition, as well the impact of higher average equity market levels on assets, partially offset by net outflows.  

Expenses

  Total expenses increased $414 million, or 20%, to $2.5 billion for the year ended December 31, 2011 compared to $2.1 billion for the prior year. Operating expenses, which exclude integration charges, increased $414 million, or 21%, to $2.4 billion for the year ended December 31, 2011 compared to $2.0 billion for the prior year due to an increase in distribution expenses and general and administrative expense.  Distribution expenses increased $292 million, or 40%, to $1.0 billion for the year ended December 31, 2011 compared to $734 million for the prior year due to an additional four months of business resulting from the Columbia Management Acquisition, as well the impact of higher average equity market levels on assets, partially offset by net outflows.  General and administrative expense increased $123 million, or 9%, to $1.4 billion for the year ended December 31, 2011 compared to $1.3 billion for the prior year. Integration charges remained flat at $95 million for both 2011 and 2010.       64 

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  Operating general and administrative expense, which excludes integration charges, increased $123 million, or 10%, to $1.3 billion for the year ended December 31, 2011 compared to $1.2 billion for the prior year reflecting an additional four months of ongoing expenses of Columbia Management, as well as higher investment spending compared to the prior year, partially offset by lower hedge fund performance compensation.  

Annuities

  Our Annuities segment provides variable and fixed annuity products of RiverSource Life companies to retail clients. Prior to the fourth quarter of 2010, we provided our variable annuity products through our affiliated advisors as well as unaffiliated advisors through third-party distribution. During the fourth quarter of 2010, we discontinued new sales of our variable annuities in non-Ameriprise channels to further strengthen the risk and return characteristics of the business. We provide our fixed annuity products through affiliated advisors as well as unaffiliated advisors through third-party distribution. Revenues for our variable annuity products are primarily earned as fees based on underlying account balances, which are impacted by both market movements and net asset flows. Revenues for our fixed annuity products are primarily earned as net investment income on invested 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. We also earn net investment income on invested assets supporting reserves for immediate annuities and for certain guaranteed benefits offered with variable annuities and on capital supporting the business. Intersegment revenues for this segment reflect fees paid by the Asset Management segment for marketing support and other services provided in connection with the availability of RiverSource Variable Series Trust, Columbia Funds Variable Insurance Trust, Columbia Funds Variable Insurance Trust I and Wanger Advisors Trust funds under the variable annuity contracts. Intersegment expenses for this segment include distribution expenses for services provided by the Advice & Wealth Management segment, as well as expenses for investment management services provided by the Asset Management segment.  Management believes that operating measures, which exclude net realized gains or losses and the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization, for our Annuities segment, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. See our discussion on the use of these non-GAAP measures in the Overview section above.  The following table presents the results of operations of our Annuities segment:                                                 Years Ended December 31,                                    2011                                        2010                                   Less:                                       Less:                   GAAP      Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                  (in millions) Revenues Management and financial advice fees      $   622      $            -    $      622   $   546      $            -    $      546    $      76        14 % Distribution fees                 312                   -           312       284                   -           284           28        10 Net investment income             1,280                   1         1,279     1,318                   9         1,309          (30 )      (2 ) Premiums             161                   -           161       150                   -           150           11         7 Other revenues       256                   -           256       202                   -           202           54        27  Total revenues     2,631                   1         2,630     2,500                   9         2,491          139         6 Banking and deposit interest expense                -                   -             -         -                   -             -            -         -  Total net revenues           2,631                   1         2,630     2,500                   9         2,491          139         6  Expenses Distribution expenses             315                   -           315       268                   -           268           47        18 Interest credited to fixed accounts       711                   -           711       762                   -           762          (51 )      (7 ) Benefits, claims, losses and settlement expenses             472                  67           405       691                   9           682         (277 )     (41 ) Amortization of deferred acquisition costs                398                  (8 )         406       (76 )                16           (92 )        498        NM Interest and debt expense           1                   -             1         2                   -             2           (1 )     (50 ) General and administrative expense              213                   -           213       205                   -           205            8         4  Total expenses     2,110                  59         2,051     1,852                  25         1,827          224        12  Pretax income    $   521      $          (58 )  $      579   $   648      $          (16 )  $      664    $     (85 )     (13 )%    NM Not Meaningful.     º (1)

º Adjustments include net realized gains or losses and the market impact on

variable annuity living benefits, net of hedges, DSIC and DAC amortization.

  Our Annuities segment pretax income decreased $127 million, or 20%, to $521 million for the year ended December 31, 2011 compared to $648 million for the prior year. Our Annuities segment pretax operating income, which excludes net realized gains or losses and the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization, decreased $85 million, or 13%, to $579 million for the year ended December 31, 2011 compared to                                                                           65  

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$664 million for the prior year primarily due to the impact of updating valuation assumptions and models and the market impact on DAC and DSIC amortization.

Net Revenues

  Net revenues increased $131 million, or 5%, to $2.6 billion for the year ended December 31, 2011 compared to $2.5 billion for the prior year. Operating net revenues, which exclude net realized gains or losses, increased $139 million, or 6%, to $2.6 billion for the year ended December 31, 2011 compared to $2.5 billion for the prior year reflecting higher fee revenue from increased variable annuity separate account balances and higher fees from variable annuity guarantees.  Management and financial advice fees increased $76 million, or 14%, to $622 million for the year ended December 31, 2011 compared to $546 million for the prior year due to higher fees on variable annuities driven by higher separate account balances. Average variable annuities contract accumulation values increased $6.4 billion, or 12%, from the prior year due to higher average equity market levels, as well as net inflows. Variable annuity net inflows for the year ended December 31, 2011 included $1.6 billion of net inflows in the Ameriprise channel, partially offset by net outflows from the closed book of variable annuities sold through third-party channels.  Distribution fees increased $28 million, or 10%, to $312 million for the year ended December 31, 2011 compared to $284 million for the prior year primarily due to higher fees on variable annuities driven by higher average separate account balances.  Net investment income decreased $38 million, or 3%, to $1.3 billion for the year ended December 31, 2011 compared to $1.3 billion for the prior year. Operating net investment income, which excludes net realized gains or losses, decreased $30 million, or 2%, to $1.3 billion for the year ended December 31, 2011 compared to $1.3 billion for the prior year due to a decrease in investment income on fixed maturity securities reflecting lower invested assets and lower interest rates, partially offset by $37 million of additional bond discount accretion investment income related to prior periods resulting from revisions to the accounting classification of certain structured securities in the third quarter of 2011. The decrease in invested assets was driven by lower general account assets due to the implementation of changes to the Portfolio Navigator program in the second quarter of 2010 and lower interest sensitive fixed annuity account balances.  

Premiums increased $11 million, or 7%, to $161 million for the year ended December 31, 2011 compared to $150 million for the prior year due to higher sales of immediate annuities with life contingencies.

  Other revenues increased $54 million, or 27%, to $256 million for the year ended December 31, 2011 compared to $202 million for the prior year due to higher fees from variable annuity guarantees driven by higher in force amounts.  

Expenses

  Total expenses increased $258 million, or 14%, to $2.1 billion for the year ended December 31, 2011 compared to $1.9 billion for the prior year. Operating expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization, increased $224 million, or 12%, to $2.1 billion for the year ended December 31, 2011 compared to $1.8 billion for the prior year primarily due to the impact of updating valuation assumptions and models and the market impact on DAC and DSIC amortization.  

Distribution expenses increased $47 million</money>, or 18%, to $315 million for the year ended December 31, 2011 compared to $268 million for the prior year primarily due to higher variable annuity compensation due to increased sales.

  Interest credited to fixed accounts decreased $51 million, or 7%, to $711 million for the year ended December 31, 2011 compared to $762 million for the prior year driven by lower average variable annuities fixed sub-account balances and a lower average crediting rate on interest sensitive fixed annuities, as well as lower average fixed annuity account balances. Average variable annuities fixed sub-account balances decreased $580 million, or 11%, to $4.8 billion for the year ended December 31, 2011 compared to the prior year primarily due to the implementation of changes to the Portfolio Navigator program in the second quarter of 2010. The average fixed annuity crediting rate excluding capitalized interest decreased to 3.7% for the year ended December 31, 2011 compared to 3.8% for the prior year. Average fixed annuities contract accumulation values decreased $265 million, or 2%, to $14.3 billion for the year ended December 31, 2011 compared to the prior year due to outflows. Fixed annuities remained in net outflows due to low client demand given current interest rates.  Benefits, claims, losses and settlement expenses decreased $219 million, or 32%, to $472 million for the year ended December 31, 2011 compared to $691 million for the prior year. Operating benefits, claims, losses and settlement expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges and DSIC amortization, decreased $277 million, or 41%, to $405 million for the year ended December 31, 2011 compared to $682 million for the prior year. Operating benefits, claims, losses and settlement expenses in 2011 included a benefit of $40 million from updating valuation assumptions and models compared to an expense of $256 million in the prior year. Benefits, claims, losses and settlement expenses related to our immediate annuities with life contingencies increased from  

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  the prior year due to an unfavorable change in reserves primarily driven by higher premiums. The market impact to DSIC was an expense of $2 million in 2011 compared to a benefit of $3 million in the prior year. Benefits, claims, losses and settlement expenses for the prior year included a $21 million expense, net of DSIC, as a result of the implementation of changes to the Portfolio Navigator program.  Amortization of DAC increased $474 million to $398 million for the year ended December 31, 2011 compared to a benefit of $76 million for the prior year. Operating amortization of DAC, which excludes the DAC offset to the market impact on variable annuity guaranteed living benefits, increased $498 million to $406 million for the year ended December 31, 2011 compared to a benefit of $92 million for the prior year primarily due to the impact of updating valuation assumptions and models, as well as the market impact on amortization of DAC. Operating amortization of DAC in 2011 included an expense of $65 million from updating valuation assumptions and models compared to a benefit of $353 million in the prior year. The market impact on amortization of DAC was an expense of $13 million in 2011 compared to a benefit of $21 million in the prior year. Amortization of DAC in 2010 included a benefit of $13 million as a result of the implementation of changes to the Portfolio Navigator program.  

Protection

  Our Protection segment offers a variety of protection products to address the protection and risk management needs of our retail clients including life, disability income and property-casualty insurance. Life and disability income products are primarily provided through affiliated advisors. Our property-casualty products are provided direct, primarily through affinity relationships. We issue insurance policies through our life insurance subsidiaries and the property casualty companies. The primary sources of revenues for this segment are premiums, fees, and charges we receive to assume insurance-related risk. We earn net investment income on invested assets supporting insurance reserves and capital supporting the business. We also receive fees based on the level of assets supporting VUL separate account balances. This segment earns intersegment revenues from fees paid by the Asset Management segment for marketing support and other services provided in connection with the availability of RiverSource Variable Series Trust, Columbia Funds Variable Insurance Trust, Columbia Funds Variable Insurance Trust I and Wanger Advisors Trust funds under the VUL contracts. Intersegment expenses for this segment include distribution expenses for services provided by the Advice & Wealth Management segment, as well as expenses for investment management services provided by the Asset Management segment.  Management believes that operating measures, which exclude net realized gains or losses for our Protection segment, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. See our discussion on the use of these non-GAAP measures in the Overview section above.  The following table presents the results of operations of our Protection segment:                                                 Years Ended December 31,                                    2011                                        2010                                   Less:                                       Less:                   GAAP      Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                 (in millions) Revenues Management and financial advice fees      $    56          $        -    $       56   $    54          $        -    $       54    $      2          4 % Distribution fees                  95                   -            95        96                   -            96          (1 )       (1 ) Net investment income               429                   3           426       429                   1           428          (2 )        - Premiums           1,076                   -         1,076     1,047                   -         1,047          29          3 Other revenues       417                   -           417       422                   -           422          (5 )       (1 )  Total revenues     2,073                   3         2,070     2,048                   1         2,047          23          1 Banking and deposit interest expense                1                   -             1         1                   -             1           -          -  Total net revenues           2,072                   3         2,069     2,047                   1         2,046          23          1  Expenses Distribution expenses              32                   -            32        32                   -            32           -          - Interest credited to fixed accounts       142                   -           142       147                   -           147          (5 )       (3 ) Benefits, claims, losses and settlement expenses           1,085                   -         1,085     1,059                   -         1,059          26          2 Amortization of deferred acquisition costs                201                   -           201       183                   -           183          18         10 General and administrative expense              242                   -           242       223                   -           223          19          9  Total expenses     1,702                   -         1,702     1,644                   -         1,644          58          4  Pretax income    $   370          $        3    $      367   $   403          $        1    $      402    $    (35 )       (9 )%       º (1)    º Adjustments include net realized gains or losses.                                                                           67  

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  Our Protection segment pretax income decreased $33 million, or 8%, to $370 million for the year ended December 31, 2011, compared to $403 million for the prior year. Our Protection segment pretax operating income, which excludes net realized gains or losses, decreased $35 million, or 9%, to $367 million for the year ended December 31, 2011, compared to $402 million for the prior year primarily due to higher claims and general and administrative expenses partially offset by higher premiums.  Net Revenues  Net revenues increased $25 million, or 1%, to $2.1 billion for the year ended December 31, 2011 compared to $2.0 billion for the prior year. Operating net revenues, which exclude net realized gains or losses, increased $23 million, or 1%, to $2.1 billion for the year ended December 31, 2011 compared to $2.0 billion for the prior year due to Auto and Home premium growth.  Premiums increased $29 million, or 3%, to $1.1 billion for the year ended December 31, 2011 compared to $1.0 billion for the prior year due to growth in Auto and Home premiums driven by higher volumes. Auto and Home policy counts increased 7% period-over-period.  

Expenses

  Total expenses increased $58 million, or 4%, to $1.7 billion for the year ended December 31, 2011 compared to $1.6 billion for the prior year due to increases in benefits, claims, losses and settlement expenses, amortization of DAC and general and administrative expense.  Benefits, claims, losses and settlement expenses increased $26 million, or 2%, to $1.1 billion for the year ended December 31, 2011 compared to $1.1 billion for the prior year. Benefits, claims, losses and settlement expenses in 2011 included a benefit of $4 million from updating valuation assumptions and models compared to an expense of $44 million in the prior year. Benefits, claims, losses and settlement expenses related to our Auto and Home business increased from the prior year primarily due to $45 million of catastrophe losses in 2011 compared to $29 million in 2010, as well as higher auto liability reserves. In addition, benefits, claims, losses and settlement expenses increased as a result of higher UL claims and an increase in ongoing reserve levels for UL products with secondary guarantees compared to the prior year.  Amortization of DAC increased $18 million, or 10%, to $201 million for the year ended December 31, 2011 compared to $183 million for the prior year. Amortization of DAC in 2011 included a benefit of $2 million from updating valuation assumptions and models compared to a benefit of $22 million in the prior year. Amortization of DAC in 2010 included a benefit of $6 million as a result of the implementation of changes to the Portfolio Navigator program. The market impact on amortization of DAC was an expense of $2 million in 2011 compared to a benefit of $10 million in the prior year, which was partially offset by a decrease in DAC amortization as a result of better persistency and lower current period profits due to higher direct claims.  

Corporate & Other

  Our Corporate & Other segment consists of net investment income or loss on corporate level assets, including excess capital held in our subsidiaries and other unallocated equity and other revenues as well as unallocated corporate expenses. The Corporate & Other segment also includes revenues and expenses of CIEs.  Management believes that operating measures, which exclude net realized gains or losses, integration and restructuring charges and the impact of consolidating CIEs for our Corporate & Other segment, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. See our discussion on the use of these non-GAAP measures in the Overview section above.  

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  The following table presents the results of operations of our Corporate & Other segment:                                                Years Ended December 31,                                   2011                                       2010                                 Less:                                      Less:                   GAAP    Adjustments (1)     Operating     GAAP     Adjustments (1)     Operating       Operating Change                                                                  (in millions) Revenues Management and financial advice fees      $   (1 )   $            -    $       (1 ) $    -      $            -    $        -    $     (1 )         NM Distribution fees                  -                  -             -        -                   -             -           -            - Net investment income (loss)        68                 95           (27 )    273                 294           (21 )        (6 )        (29 )% Other revenues      124                 94            30      153                 125            28           2            7  Total revenues      191                189             2      426                 419             7          (5 )        (71 ) Banking and deposit interest expense              (1 )                -            (1 )      3                   -             3          (4 )         NM  Total net revenues            192                189             3      423                 419             4          (1 )        (25 )  Expenses Distribution expenses              1                  -             1        1                   -             1           -            - Interest and debt expense        316                221            95      288                 181           107         (12 )        (11 ) General and administrative expense             218                 70           148      185                  65           120          28           23  Total expenses      535                291           244      474                 246           228          16            7 Pretax loss        (343 )             (102 )        (241 )    (51 )               173          (224 )       (17 )         (8 ) Less: Net income (loss) attributable to noncontrolling interests          (106 )             (106 )           -      163                 163             -           -            -  Pretax loss attributable to Ameriprise Financial        $ (237 )   $            4    $     (241 ) $ (214 )    $           10    $     (224 )  $    (17 )         (8 )%    NM Not Meaningful.  

º (1)

º Includes revenues and expenses of the CIEs; net realized gains or losses;

and integration and restructuring charges.

  The following table presents the components of the adjustments in the table above:                                                 Years Ended December 31,                                     2011                                        2010                                  Other             Total                    Other             Total                   CIEs     Adjustments (1)     Adjustments    CIEs   

Adjustments (1) Adjustments

                                                      (in millions) Revenues Net investment income (loss)    $   91          $        4     $        95   $ 275       $         19     $       294 Other revenues       94                   -              94     125                  -             125  Total revenues      185                   4             189     400                 19             419 Banking and deposit interest expense               -                   -               -       -                  -               -  Total net revenues            185                   4             189     400                 19             419  Expenses Distribution expenses              -                   -               -       -                  -               - Interest and debt expense        221                   -             221     181                  -             181 General and administrative expense              70                   -              70      56                  9              65  Total expenses      291                   -             291     237                  9             246 Pretax loss        (106 )                 4            (102 )   163                 10             173 Less: Net income (loss) attributable to noncontrolling interests          (106 )                 -            (106 )   163                  -             163  Pretax loss attributable to Ameriprise Financial        $    -          $        4     $         4   $   -       $         10     $        10       º (1)

º Other adjustments include net realized gains or losses and integration and

restructuring charges.

  Our Corporate & Other segment pretax loss attributable to Ameriprise Financial was $237 million for the year ended December 31, 2011 compared to $214 million for the prior year. Our Corporate & Other segment pretax operating loss excludes net realized gains or losses, integration and restructuring charges and the impact of consolidating CIEs. Our Corporate & Other segment pretax operating loss was $241 million for the year ended December 31, 2011 compared to $224 million for the prior year.  Net revenues decreased $231 million, or 55%, to $192 million for the year ended December 31, 2011 compared to $423 million for the prior year reflecting the impact of consolidating CIEs. Operating net revenues, which exclude revenues or losses of CIEs and net realized gains or losses, decreased $1 million, or 25%, to $3 million for the year ended December 31, 2011 compared to $4 million for the prior year.                                                                           69 

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  Net investment income was $68 million for the year ended December 31, 2011 compared to $273 million for the prior year. Net investment income for the year ended December 31, 2011 included a $91 million gain for changes in the assets and liabilities of CIEs, primarily debt and underlying syndicated loans, compared to a $275 million gain for the prior year. Operating net investment loss, which excludes net investment income or loss of the CIEs and net realized gains or losses, was $27 million for the year ended December 31, 2011 compared to $21 million for the prior year.  Other revenues decreased $29 million, or 19%, to $124 million for the year ended December 31, 2011 compared to $153 million for the prior year. Operating other revenues, which exclude revenues or losses of the CIEs, increased $2 million, or 7%, to $30 million for the year ended December 31, 2011 compared to $28 million for the prior year. During the second quarter of 2011, we reclassified from accumulated other comprehensive income into earnings a $27 million gain on an interest rate hedge put in place in anticipation of issuing debt between December 2010 and June 2011. Operating other revenues for 2010 included a $25 million benefit from payments related to the Reserve Funds matter.  

Total expenses increased $61 million, or 13%, to $535 million for the year ended December 31, 2011 compared to $474 million for the prior year. Operating expenses, which exclude expenses of CIEs and integration and restructuring charges, increased $16 million, or 7%, to $244 million for the year ended December 31, 2011 compared to $228 million for the prior year.

  Interest and debt expense increased $28 million, or 10%, to $316 million for the year ended December 31, 2011 compared to $288 million for the prior year. Operating interest and debt expense, which excludes interest expense on CIE debt, decreased $12 million, or 11%, to $95 million for the year ended December 31, 2011 compared to $107 million for the prior year primarily due to lower average debt balances.  General and administrative expense increased $33 million, or 18%, to $218 million for the year ended December 31, 2011 compared to $185 million for the prior year. Operating general and administrative expense, which excludes expenses of the CIEs and integration and restructuring charges, increased $28 million, or 23%, to $148 million for the year ended December 31, 2011 compared to $120 million for the prior year.  

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Consolidated Results of Operations

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

The following table presents our consolidated results of operations:

                                                Years Ended December 31,                                    2010                                        2009                                   Less:                                       Less:                   GAAP      Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                             (in millions) Revenues Management and financial advice fees      $ 3,784      $          (38 )  $    3,822   $ 2,558      $           (2 )  $    2,560    $    1,262       49 % Distribution fees               1,447                   -         1,447     1,182                   -         1,182           265       22 Net investment income             2,309                 308         2,001     1,998                  55         1,943            58        3 Premiums           1,179                   -         1,179     1,098                   -         1,098            81        7 Other revenues       863                 125           738       702                  28           674            64        9  Total revenues     9,582                 395         9,187     7,538                  81         7,457         1,730       23 Banking and deposit interest expense               70                   -            70       141                   6           135           (65 )    (48 )  Total net revenues           9,512                 395         9,117     7,397                  75         7,322         1,795       25  Expenses Distribution expenses           2,065                   -         2,065     1,462                   -         1,462           603       41 Interest credited to fixed accounts       909                   -           909       903                   -           903             6        1 Benefits, claims, losses and settlement expenses           1,750                   9         1,741     1,334                 154         1,180           561       48 Amortization of deferred acquisition costs                127                  16           111       217                 (93 )         310          (199 )    (64 ) Interest and debt expense         290                 181           109       127                   -           127           (18 )    (14 ) General and administrative expense            2,737                 129         2,608     2,434                 105         2,329           279       12  Total expenses     7,878                 335         7,543     6,477                 166         6,311         1,232       20 Income from continuing operations before income tax provision      1,634                  60         1,574       920                 (91 )       1,011           563       56 Income tax provision            350                 (36 )         386       184                 (37 )         221           165       75  Income from continuing operations         1,284                  96         1,188       736                 (54 )         790           398       50 Income (loss) from discontinued operations, net of tax           (24 )               (24 )           -         1                   1             -             -        -  Net income         1,260                  72         1,188       737                 (53 )         790           398       50 Less: Net income attributable to non- controlling interests            163                 163             -        15                  15             -             -        -  Net income attributable to Ameriprise Financial        $ 1,097      $          (91 )  $    1,188   $   722      $          (68 )  $      790    $      398       50 %       º (1)

º Includes the elimination of management fees we earn for services provided

to the CIEs and the related expense; revenues and expenses of the CIEs; net

     realized gains or losses; the market impact on variable annuity living      benefits, net of hedges, DSIC and DAC amortization; integration and      restructuring charges; and income (loss) from discontinued operations.      Income tax provision is calculated using the statutory tax rate of 35% on      applicable adjustments.                                                                           71 

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  The following table presents the components of the adjustments in the table above:                                                Years Ended December 31,                                    2010                                       2009                                Other             Total                    Other             Total                  CIEs    Adjustments (1)     Adjustments    CIEs    Adjustments (1)     Adjustments                                                      (in millions) Revenues Management and financial advice fees      $ (38 )   $            -     $       (38 )  $ (2 )   $            -     $        (2 ) Distribution fees                 -                  -               -       -                  -               - Net investment income             275                 33             308       2                 53              55 Premiums             -                  -               -       -                  -               - Other revenues     125                  -             125      28                  -              28  Total revenues     362                 33             395      28                 53              81 Banking and deposit interest expense              -                  -               -       6                  -               6  Total net revenues           362                 33             395      22                 53              75  Expenses Distribution expenses             -                  -               -       -                  -               - Interest credited to fixed accounts       -                  -               -       -                  -               - Benefits, claims, losses and settlement expenses             -                  9               9       -                154             154 Amortization of deferred acquisition costs                -                 16              16       -                (93 )           (93 ) Interest and debt expense       181                  -             181       -                  -               - General and administrative expense             18                111             129       7                 98             105  Total expenses     199                136             335       7                159             166 Income from continuing operations before income tax provision      163               (103 )            60      15               (106 )           (91 ) Income tax provision            -                (36 )           (36 )     -                (37 )           (37 )  Income from continuing operations         163                (67 )            96      15                (69 )           (54 ) Income (loss) from discontinued operations, net of tax           -                (24 )           (24 )     -                  1               1  Net income         163                (91 )            72      15                (68 )           (53 ) Less: Net income attributable to noncontrolling interests          163                  -             163      15                  -              15  Net income attributable to Ameriprise Financial        $   -     $          (91 )   $       (91 )  $  -     $          (68 )   $       (68 )       º (1)

º Other adjustments include net realized gains or losses; the market impact

on variable annuity living benefits, net of hedges, DSIC and DAC

amortization; integration and restructuring charges; and income (loss) from

discontinued operations.

Overall

  Net income attributable to Ameriprise Financial increased $375 million, or 52%, to $1.1 billion for the year ended December 31, 2010 compared to $722 million for the prior year. Operating earnings exclude net realized gains or losses; the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization; integration and restructuring charges; income (loss) of discontinued operations; and the impact of consolidating CIEs. Operating earnings increased $398 million, or 50%, to $1.2 billion for the year ended December 31, 2010 compared to $790 million for the prior year driven by improved client activity, market appreciation and net inflows in wrap account assets and variable annuities, as well as improved scale from the Columbia Management Acquisition.  The total pretax impacts on our revenues and expenses for 2010 attributable to the review of valuation assumptions and models on an operating basis were as follows:                                                      Benefits,                                                   Claims, Losses Segment Pretax Benefit                            and Settlement    Amortization (Charge)                       Other Revenues        Expenses          of DAC       Total                                                       (in millions) Valuation assumptions and model changes: Annuities                        $           -     $         (256 )   $       353    $  97 Protection                                 (20 )              (44 )            22      (42 )  Total                            $         (20 )   $         (300 )   $       375    $  55         72 

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The total pretax impacts on our revenues and expenses for 2009 attributable to the review of valuation assumptions on an operating basis were as follows:

                                                     Benefits,                                                  Claims, Losses                                       Other      and Settlement    

Amortization

   Segment Pretax Benefit (Charge)   Revenues        Expenses          of DAC       Total                                                          (in millions)   Valuation assumptions:   Annuities                          $      -       $         57     $        61    $ 118   Protection                              (65 )               33              55       23    Total                              $    (65 )     $         90     $       116    $ 141    Net Revenues  Net revenues increased $2.1 billion, or 29%, to $9.5 billion for the year ended December 31, 2010 compared to $7.4 billion for the prior year. Operating net revenues exclude net realized gains or losses and revenues or losses of the CIEs and include the fees we earn from services provided to the CIEs. Operating net revenues increased $1.8 billion, or 25%, to $9.1 billion for the year ended December 31, 2010 compared to $7.3 billion for the prior year primarily due to growth in asset-based management fees and distribution fees driven by higher asset levels reflecting the Columbia Management Acquisition, market appreciation and net inflows in wrap account assets and variable annuities, as well as increased client activity.  Management and financial advice fees increased $1.2 billion, or 48%, to $3.8 billion for the year ended December 31, 2010 compared to $2.6 billion for the prior year. Operating management and financial advice fees include the fees we earn from services provided to the CIEs. Operating management and financial advice fees increased $1.3 billion, or 49%, to $3.8 billion for the year ended December 31, 2010 compared to $2.6 billion for the prior year primarily due to higher asset levels reflecting the Columbia Management Acquisition, market appreciation and net inflows in wrap account assets and variable annuities. The daily average S&P 500 Index increased 20% compared to the prior year. Wrap account assets increased $16.2 billion, or 20%, to $97.5 billion at December 31, 2010 compared to the prior year due to net inflows and market appreciation. Average variable annuities contract accumulation values increased $10.3 billion, or 25%, from the prior year due to higher equity market levels and net inflows. Total Asset Management AUM increased $213.7 billion, or 88%, to $456.8 billion at December 31, 2010 compared to the prior year primarily due to the Columbia Management Acquisition and market appreciation, partially offset by net outflows.  Distribution fees increased $265 million, or 22%, to $1.4 billion for the year ended December 31, 2010 compared to $1.2 billion for the prior year primarily due to higher asset-based fees driven by growth in assets from the Columbia Management Acquisition, market appreciation and net inflows in wrap account assets and variable annuities, as well as increased client activity.  Net investment income increased $311 million, or 16%, to $2.3 billion for the year ended December 31, 2010 compared to $2.0 billion for the prior year. Net investment income for 2010 included a $275 million gain for changes in the assets and liabilities of CIEs, primarily debt and underlying syndicated loans, compared to $2 million in the prior year. Operating net investment income excludes net realized gains or losses and changes in the assets and liabilities of CIEs. Operating net investment income increased $58 million, or 3%, to $2.0 billion for the year ended December 31, 2010 compared to $1.9 billion for the prior year primarily due to a $42 million increase in investment income on fixed maturity securities driven by higher fixed annuity account balances and higher investment yields, as well as higher investment yields and increased account balances related to assets supporting our Protection business, partially offset by lower investment income related to certificates.  Premiums increased $81 million, or 7%, to $1.2 billion for the year ended December 31, 2010 compared to $1.1 billion for the prior year primarily due to growth in Auto and Home premiums driven by higher volumes, as well as higher sales of immediate annuities with life contingencies. Auto and Home policy counts increased 9% period-over-period.  Other revenues increased $161 million, or 23%, to $863 million for the year ended December 31, 2010 compared to $702 million for the prior year. Operating other revenues exclude revenues of the CIEs. Operating other revenues increased $64 million, or 9%, to $738 million for the year ended December 31, 2010 compared to $674 million for the prior year primarily due to lower charges related to updating valuation assumptions and models, higher fees from variable annuity guarantees, and a $25 million benefit from payments related to the Reserve Funds matter in 2010, partially offset by a $58 million benefit in 2009 from repurchasing our junior notes at a discount. Other revenues in 2010 included a charge of $20 million from updating valuation assumptions and models compared to a charge of $65 million in the prior year.                                                                           73  

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  Banking and deposit interest expense decreased $71 million, or 50%, to $70 million for the year ended December 31, 2010 compared to $141 million for the prior year primarily due to lower certificate balances as a result of the run-off of certificate rate promotions and a decrease in crediting rates on certificate products.  

Expenses

  Total expenses increased $1.4 billion, or 22%, to $7.9 billion for the year ended December 31, 2010 compared to $6.5 billion for the prior year. Operating expenses exclude the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization; integration and restructuring charges; and expenses of the CIEs. Operating expenses increased $1.2 billion, or 20%, to $7.5 billion for the year ended December 31, 2010 compared to $6.3 billion for the prior year primarily due to increases in distribution expenses, benefits, claims, losses and settlement expenses and general and administrative expense, partially offset by a decrease in amortization of DAC.  Distribution expenses increased $603 million, or 41%, to $2.1 billion for the year ended December 31, 2010 compared to $1.5 billion for the prior year as a result of market appreciation and the Columbia Management Acquisition, as well as higher advisor compensation from business growth.  Interest credited to fixed accounts increased $6 million, or 1%, to $909 million for the year ended December 31, 2010 compared to $903 million for the prior year driven by higher average fixed annuity account balances, partially offset by a lower average crediting rate on interest sensitive fixed annuities. Average fixed annuities contract accumulation values increased $600 million, or 4%, to $14.5 billion for 2010 compared to the prior year. The average fixed annuity crediting rate excluding capitalized interest decreased to 3.8% in 2010 compared to 3.9% in the prior year.  Benefits, claims, losses and settlement expenses increased $416 million, or 31%, to $1.8 billion for the year ended December 31, 2010 compared to $1.3 billion for the prior year. Operating benefits, claims, losses and settlement expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges and DSIC amortization, increased $561 million, or 48%, to $1.7 billion for the year ended December 31, 2010 compared to $1.2 billion for the prior year driven by the impact of updating valuation assumptions and models. Operating benefits, claims, losses and settlement expenses in 2010 included an expense of $300 million from updating valuation assumptions and models compared to a benefit of $90 million in the prior year. Benefits, claims, losses and settlement expenses related to our Auto and Home business increased compared to the prior year primarily due to higher business volumes and higher claims driven by $11 million in catastrophe losses from a hail storm in the Phoenix area and a $16 million reserve increase for higher auto liability claims. Benefits, claims, losses and settlement expenses related to our immediate annuities with life contingencies increased compared to the prior year primarily due to higher premiums. In addition, benefits, claims, losses and settlement expenses increased as a result of the implementation of changes to the Portfolio Navigator program in the second quarter of 2010, higher disability income and long-term care insurance claims and higher reserves for UL products with secondary guarantees compared to the prior year.  Amortization of DAC decreased $90 million, or 41%, to $127 million for the year ended December 31, 2010 compared to $217 million for the prior year. Operating amortization of DAC, which excludes the DAC offset to the market impact on variable annuity guaranteed living benefits, decreased $199 million, or 64%, to $111 million for the year ended December 31, 2010 compared to $310 million for the prior year primarily due to the impact of updating valuation assumptions and models, as well as the market impact on amortization of DAC. Operating amortization of DAC in 2010 included a benefit of $375 million from updating valuation assumptions and models compared to a benefit of $116 million in the prior year. The market impact on amortization of DAC was a benefit of $31 million in 2010 compared to a benefit of $26 million in the prior year. An increase in DAC amortization related to higher variable annuity gross profits was partially offset by a decrease as a result of the implementation of changes to the Portfolio Navigator program in the second quarter of 2010.  Interest and debt expense increased $163 million to $290 million for the year ended December 31, 2010 compared to $127 million for the prior year. Interest and debt expense in 2010 included $181 million of interest expense on CIE debt compared to nil in the prior year. Operating interest and debt expense excludes interest expense on CIE debt. Operating interest and debt expense decreased $18 million, or 14%, to $109 million for the year ended December 31, 2010 compared to $127 million for the prior year primarily due to an expense of $13 million in 2009 related to the early retirement of $450 million of our senior notes due 2010.  General and administrative expense increased $303 million, or 12%, to $2.7 billion for the year ended December 31, 2010 compared to $2.4 billion for the prior year. Operating general and administrative expense excludes integration and restructuring charges and expenses of the CIEs. Integration and restructuring charges increased $13 million to $111 million in 2010 compared to $98 million in the prior year. Operating general and administrative expense increased $279 million, or 12%, to $2.6 billion for the year ended December 31, 2010 compared to $2.3 billion for the prior year primarily reflecting ongoing expenses from the Columbia Management Acquisition, as well as higher performance based compensation partially offset by lower hedge fund performance compensation.  

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Income Taxes

  Our effective tax rate on income from continuing operations including income attributable to noncontrolling interests was 21.5% for the year ended December 31, 2010, compared to 20.0% for the year ended December 31, 2009. The increase in our effective tax rate primarily reflects an increase in pretax income relative to tax advantaged items, which was partially offset by $53 million in benefits from tax planning and the completion of certain audits. Our effective tax rate on income from continuing operations excluding net income attributable to noncontrolling interests was 23.8% for the year ended December 31, 2010, compared to 20.3% for the year ended December 31, 2009. Our operating effective tax rate was 24.5% for the year ended December 31, 2010, compared to 21.9% for the year ended December 31, 2009.  The following table presents a reconciliation of our operating effective tax rate:                                                           Years Ended December 31                                                        2010                    2009                                                  GAAP      Operating     GAAP     Operating                                                                (in millions) Income from continuing operations before income tax provision                           $ 1,634    $    1,574   $  920    $    1,011 Less: Pretax income attributable to noncontrolling interests                           163             -       15             -  Income from continuing operations before income tax provision excluding CIEs            $ 1,471    $    1,574   $  

905 $ 1,011

  Income tax provision from continuing operations                                     $   350    $      386   $  184    $      221 Effective tax rate                                21.5 %        24.5 %   20.0 %        21.9 % Effective tax rate excluding noncontrolling interests                                         23.8 %        24.5 %   20.3 %        21.9 %   

Results of Operations by Segment

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

The following table presents summary financial information by segment:

                                                 Years Ended December 31,                                     2010                                         2009                                    Less:                                        Less:                    GAAP      Adjustments (1)     Operating      GAAP     

Adjustments (1) Operating

                                                       (in millions) Advice & Wealth Management Net revenues     $  3,343      $            1    $    3,342   $  2,804      $          (15 )  $    2,819 Expenses            3,027                   7         3,020      2,837                  64         2,773  Pretax income (loss)           $    316      $           (6 )  $      322   $    (33 )    $          (79 )  $       46  Asset Management Net revenues     $  2,368      $            3    $    2,365   $  1,346      $           (3 )  $    1,349 Expenses            2,050                  95         1,955      1,286                  30         1,256  Pretax income    $    318      $          (92 )  $      410   $     60      $          (33 )  $       93  Annuities Net revenues     $  2,500      $            9    $    2,491   $  2,265      $           44    $    2,221 Expenses            1,852                  25         1,827      1,617                  61         1,556  Pretax income    $    648      $          (16 )  $      664   $    648      $          (17 )  $      665  Protection Net revenues     $  2,047      $            1    $    2,046   $  1,964      $           27    $    1,937 Expenses            1,644                   -         1,644      1,467                   -         1,467  Pretax income    $    403      $            1    $      402   $    497      $           27    $      470  Corporate & Other Net revenues     $    423      $          419    $        4   $     26      $           24    $        2 Expenses              474                 246           228        278                  13           265  Pretax loss           (51 )               173          (224 )     (252 )                11          (263 ) Less: Pretax income attributable to noncontrolling interests             163                 163             -         15                  15             -  Pretax loss attributable to Ameriprise Financial        $   (214 )    $           10    $     (224 ) $   (267 )    $           (4 )  $     (263 )  

Eliminations

Net revenues $ (1,169 ) $ (38 ) $ (1,131 ) $ (1,008 ) $

           (2 )  $   (1,006 ) Expenses           (1,169 )               (38 )      (1,131 )   (1,008 )                (2 )      (1,006 )  Pretax income    $      -      $            -    $        -   $      -      $            -    $        -       º (1)

º Includes the elimination of management fees we earn for services provided

to the CIEs and the related expense; revenues and expenses of the CIEs; net

     realized gains or losses; the market impact on variable annuity living      benefits, net of hedges, DSIC and DAC amortization; and integration and      restructuring charges.                                                                           75 

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Advice & Wealth Management

  The following table presents the changes in wrap account assets for the years ended December 31:                                                      2010      2009                                                      (in billions)                   Beginning balance                $  81.3   $ 62.2                   Net flows                            7.6      7.9                   Market appreciation and other        8.6     11.2                    Ending balance                   $  97.5   $ 81.3   

Wrap account assets increased $16.2 billion, or 20%, to $97.5 billion compared to the prior year due to market appreciation and net inflows.

  The following table presents the results of operations of our Advice & Wealth Management segment:                                                 Years Ended December 31,                                    2010                                       2009                                  Less:                                       Less:                   GAAP     Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                  (in millions) Revenues Management and financial advice fees      $ 1,370       $          -    $    1,370   $ 1,088      $            -    $    1,088    $    282           26 % Distribution fees               1,696                  -         1,696     1,491                   -         1,491         205           14 Net investment income               273                  1           272       293                 (15 )         308         (36 )        (12 ) Other revenues        71                  -            71        65                   -            65           6            9  Total revenues     3,410                  1         3,409     2,937                 (15 )       2,952         457           15 Banking and deposit interest expense               67                  -            67       133                   -           133         (66 )        (50 )  Total net revenues           3,343                  1         3,342     2,804                 (15 )       2,819         523           19  Expenses Distribution expenses           1,954                  -         1,954     1,644                   -         1,644         310           19 General and administrative expense            1,073                  7         1,066     1,193                  64         1,129         (63 )         (6 )  Total expenses     3,027                  7         3,020     2,837                  64         2,773         247            9 %  Pretax income (loss)           $   316       $         (6 )  $      322   $   (33 )    $          (79 )  $       46    $    276           NM    NM Not Meaningful.     º (1)

º Adjustments include net realized gains or losses and integration and

restructuring charges.

  Our Advice & Wealth Management segment pretax income was $316 million for the year ended December 31, 2010 compared to a loss of $33 million in the prior year. Our Advice & Wealth Management segment pretax operating income, which excludes net realized gains or losses and integration charges, was $322 million for the year ended December 31, 2010 compared to $46 million in the prior year driven by higher asset-based fees partially offset by higher distribution expenses. Pretax margin for 2010 was 9.5% and operating pretax margin was 9.6%.  

Net Revenues

  Net revenues were $3.3 billion for the year ended December 31, 2010 compared to $2.8 billion in the prior year, an increase of $539 million, or 19%. Operating net revenues exclude net realized gains or losses. Operating net revenues were $3.3 billion for the year ended December 31, 2010 compared to $2.8 billion in the prior year, an increase of $523 million, or 19%, driven by growth in average fee-based assets, as well as increased client activity.  Management and financial advice fees increased $282 million, or 26%, to $1.4 billion for the year ended December 31, 2010 compared to $1.1 billion for the prior year driven by growth in average fee-based assets resulting from market appreciation and net inflows in wrap account assets. The daily average S&P 500 Index increased 20% compared to the prior year. Wrap account assets increased $16.2 billion, or 20%, to $97.5 billion at December 31, 2010 compared to the prior year due to market appreciation and net inflows.  

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  Distribution fees increased $205 million, or 14%, to $1.7 billion for the year ended December 31, 2010 compared to $1.5 billion for the prior year primarily driven by growth in average fee-based assets resulting from market appreciation and net inflows in wrap account assets, as well as increased client activity.  Net investment income decreased $20 million, or 7%, to $273 million for the year ended December 31, 2010 compared to $293 million for the prior year. Operating net investment income, which excludes net realized gains or losses, decreased $36 million, or 12%, to $272 million for the year ended December 31, 2010 compared to $308 million for the prior year driven by lower invested assets resulting from net outflows in certificates, as well as lower average yields on invested assets related to certificates.  Banking and deposit interest expense decreased $66 million, or 50%, to $67 million for the year ended December 31, 2010 compared to $133 million for the prior year primarily due to lower certificate balances as a result of the run-off of certificate rate promotions, as well as a decrease in crediting rates on certificate products.  Expenses  Total expenses increased $190 million, or 7%, to $3.0 billion for the year ended December 31, 2010 compared to $2.8 billion for the prior year. Operating expenses, which exclude integration charges, increased $247 million, or 9%, to $3.0 billion for the year ended December 31, 2010 compared to $2.8 billion for the prior year due to an increase in distribution expenses partially offset by a decrease in general and administrative expense.  Distribution expenses increased $310 million, or 19%, to $2.0 billion for the year ended December 31, 2010 compared to $1.6 billion for the prior year primarily due to growth in average fee-based assets, as well as higher advisor compensation from business growth.  General and administrative expense decreased $120 million, or 10%, to $1.1 billion for the year ended December 31, 2010 compared to $1.2 billion for the prior year. Integration charges decreased $57 million to $7 million in 2010 compared to $64 million in the prior year. Operating general and administrative expense, which excludes integration charges, decreased $63 million, or 6%, to $1.1 billion for the year ended December 31, 2010 reflecting cost controls.  

Asset Management

  The following tables present the changes in Columbia and Threadneedle managed assets:                                                     Market                                                Appreciation/                   January 1,                   (Depreciation)       Foreign     December 31,                      2010        Net Flows      & Other (1)         Exchange        2010                                                  (in billions) Columbia Managed Assets: (2) Retail Funds      $      76.9    $     (5.2 )   $        146.8 (3)  $       -    $      218.5 Institutional Funds                    62.3          (7.1 )             72.0 (4)          -           127.2 

Alternative

 Funds                     9.9             -                0.1              -            10.0 

Less:

 Eliminations             (0.1 )           -               (0.1 )            -            (0.2 )  Total Columbia Managed Assets          149.0         (12.3 )            218.8              -           355.5 Threadneedle Managed Assets: Retail Funds             29.1           1.9                3.5           (1.1 )          33.4 Institutional Funds                    66.8          (2.2 )              8.7           (2.4 )          70.9 Alternative Funds                     1.9          (0.2 )             (0.4 )            -             1.3  Total Threadneedle Managed Assets           97.8          (0.5 )             11.8           (3.5 )         105.6 Less: Sub-Advised Eliminations             (3.6 )        (0.1 )             (0.6 )            -            (4.3 )  Total Managed Assets            $     243.2    $    (12.9 )   $        230.0      $    (3.5 )  $      456.8       º (1)    º Distributions of Retail Funds are included in market      appreciation/(depreciation) and other.     º (2)

º Prior to the Columbia Management Acquisition, the domestic managed assets

of our Asset Management segment, which are now included in Columbia Managed

Assets, were managed by RiverSource Investments.

º (3)

º Included in Market appreciation/(depreciation) and other is $118.1 billion

due to the Columbia Management Acquisition, including $3 billion of assets

that were transferred to RiverSource Sub-advised through the implementation

     of the Portfolio Navigator program, and an additional $13.1 billion of      Portfolio Navigator related assets sub-advised by others.     º (4)

º Included in Market appreciation/(depreciation) and other is $68.4 billion

due to the Columbia Management Acquisition.

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   Table of Contents                                                      Market                                                 Appreciation/                    January 1,                   (Depreciation)       Foreign    December 31,                       2009        Net Flows      & Other (1)        Exchange        2009                                                   (in billions) Columbia Managed Assets: (2) Retail Funds       $      63.9    $     (0.5 )   $         13.5      $      -    $       76.9 Institutional Funds                     54.7           2.6                5.0             -            62.3 Alternative Funds                      9.4          (0.1 )              0.6             -             9.9 Less: Eliminations              (0.1 )           -                  -             -            (0.1 )  Total Columbia Managed Assets           127.9           2.0               19.1             -           149.0 Threadneedle Managed Assets: Retail Funds              16.3           4.9                6.1 (3)       1.8            29.1 Institutional Funds                     55.3          (1.4 )              7.5           5.4            66.8 Alternative Funds                      2.6           0.1               (1.0 )         0.2             1.9  Total Threadneedle Managed Assets            74.2           3.6               12.6           7.4            97.8 Less: Sub-Advised Eliminations              (2.5 )         0.3               (1.4 )           -            (3.6 )  Total Managed Assets             $     199.6    $      5.9     $         30.3      $    7.4    $      243.2       º (1)    º Distributions of Retail Funds are included in market      appreciation/(depreciation) and other.     º (2) 

º Prior to the Columbia Management Acquisition, the domestic managed assets

of our Asset Management segment, which are now included in Columbia Managed

Assets, were managed by RiverSource Investments.

º (3)

º Included in Market appreciation/(depreciation) and other are assets due to

the addition of Standard Chartered Bank's World Express Funds investment

business.

  Columbia assets under management were $355.5 billion at December 31, 2010 compared to $149.0 billion a year ago, driven by the Columbia Management Acquisition and market appreciation, partially offset by net outflows. Equity and fixed income investment performance remained strong across one-, three- and five-year periods. Retail net outflows of $5.2 billion in 2010 were primarily in equity and subadvisory portfolios, reflecting industry-wide outflows in equities and lower retail sales as a result of pending fund mergers. Institutional net outflows of $7.1 billion in 2010 were primarily in lower basis point fixed income portfolios.  Threadneedle assets under management were $105.6 billion at December 31, 2010, up 8% from a year ago reflecting year-over-year market appreciation and retail net inflows, partially offset by negative foreign currency translation and institutional net outflows. Total net outflows of $0.5 billion in 2010 reflected net outflows in lower basis point institutional portfolios, partially offset by retail net inflows from higher sales from European investors. Institutional net outflows in 2010 primarily reflected continued outflows in Zurich-related portfolios. Investment track records remained strong across one-, three- and five-year periods.  The following table presents the results of operations of our Asset Management segment:                                                 Years Ended December 31,                                    2010                                        2009                                   Less:                                       Less:                   GAAP      Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                 (in millions) Revenues Management and financial advice fees      $ 1,979      $            -    $    1,979   $ 1,106      $            -    $    1,106    $      873       79 % Distribution fees                 358                   -           358       216                   -           216           142       66 Net investment income                17                   3            14        18                  (3 )          21            (7 )    (33 ) Other revenues        15                   -            15         8                   -             8             7       88  Total revenues     2,369                   3         2,366     1,348                  (3 )       1,351         1,015       75 Banking and deposit interest expense                1                   -             1         2                   -             2            (1 )    (50 )  Total net revenues           2,368                   3         2,365     1,346                  (3 )       1,349         1,016       75  Expenses Distribution expenses             734                   -           734       371                   -           371           363       98 Amortization of deferred acquisition costs                 20                   -            20        21                   -            21            (1 )     (5 ) General and administrative expense            1,296                  95         1,201       894                  30           864           337       39  Total expenses     2,050                  95         1,955     1,286                  30         1,256           699       56 %  Pretax income    $   318      $          (92 )  $      410   $    60      $          (33 )  $       93    $      317       NM    NM Not Meaningful.     º (1)

º Adjustments include net realized gains or losses and integration charges.

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  Our Asset Management segment pretax income was $318 million for the year ended December 31, 2010 compared to $60 million for the prior year. Our Asset Management segment pretax operating income, which excludes net realized gains or losses and integration charges, was $410 million for the year ended December 31, 2010 compared to $93 million for the prior year reflecting eight months of earnings from business acquired in the Columbia Management Acquisition and market appreciation. Pretax margin for 2010 was 13.4% and operating pretax margin was 17.3%.  

Net Revenues

  Net revenues increased $1.0 billion, or 76%, to $2.4 billion for the year ended December 31, 2010 compared to $1.3 billion for the prior year driven by an increase in asset-based management fees and distribution fees due to growth in assets from the Columbia Management Acquisition and market appreciation.  Management and financial advice fees increased $873 million, or 79%, to $2.0 billion for the year ended December 31, 2010 compared to $1.1 billion for the prior year primarily due to growth in assets from the Columbia Management Acquisition and market appreciation, partially offset by lower hedge fund performance fees. The daily average S&P 500 Index increased 20% compared to the prior year. Total Asset Management managed assets increased $213.7 billion, or 88%, to $456.8 billion at December 31, 2010 compared to the prior year primarily due to the Columbia Management Acquisition and market appreciation, partially offset by net outflows.  Distribution fees increased $142 million, or 66%, to $358 million for the year ended December 31, 2010 compared to $216 million for the prior year primarily driven by growth in assets from the Columbia Management Acquisition and market appreciation.  Expenses  Total expenses increased $764 million, or 59%, to $2.1 billion for the year ended December 31, 2010 compared to $1.3 billion for the prior year. Operating expenses, which exclude integration charges, increased $699 million, or 56%, to $2.0 billion for the year ended December 31, 2010 compared to $1.3 billion for the prior year due to an increase in distribution expenses and general and administrative expense. We realized integration gross expense synergies related to the Columbia Management Acquisition of approximately $75 million for the year ended December 31, 2010.  Distribution expenses increased $363 million, or 98%, to $734 million for the year ended December 31, 2010 compared to $371 million for the prior year primarily due to growth in assets from the Columbia Management Acquisition and market appreciation.  General and administrative expense increased $402 million, or 45%, to $1.3 billion for the year ended December 31, 2010 compared to $894 million for the prior year. Integration charges increased $65 million to $95 million in 2010 compared to $30 million in the prior year. Operating general and administrative expense, which excludes integration charges, increased $337 million, or 39%, to $1.2 billion for the year ended December 31, 2010 compared to $864 million for the prior year primarily due to increased operating costs of Columbia Management, as well as higher performance based compensation partially offset by lower legal expenses and lower hedge fund performance compensation.                                                                           79  

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  Table of Contents   Annuities  The following table presents the results of operations of our Annuities segment:                                                 Years Ended December 31,                                    2010                                        2009                                   Less:                                       Less:                   GAAP      Adjustments (1)     Operating     GAAP     

Adjustments (1) Operating Operating Change

                                                                 (in millions) Revenues Management and financial advice fees      $   546      $            -    $      546   $   438      $            -    $      438    $      108       25 % Distribution fees                 284                   -           284       247                   -           247            37       15 Net investment income             1,318                   9         1,309     1,323                  44         1,279            30        2 Premiums             150                   -           150       104                   -           104            46       44 Other revenues       202                   -           202       153                   -           153            49       32  Total revenues     2,500                   9         2,491     2,265                  44         2,221           270       12 Banking and deposit interest expense                -                   -             -         -                   -             -             -        -  Total net revenues           2,500                   9         2,491     2,265                  44         2,221           270       12  Expenses Distribution expenses             268                   -           268       211                   -           211            57       27 Interest credited to fixed accounts       762                   -           762       759                   -           759             3        - Benefits, claims, losses and settlement expenses             691                   9           682       418                 154           264           418       NM Amortization of deferred acquisition costs                (76 )                16           (92 )      37                 (93 )         130          (222 )     NM Interest and debt expense           2                   -             2         -                   -             -             2       NM General and administrative expense              205                   -           205       192                   -           192            13        7  Total expenses     1,852                  25         1,827     1,617                  61         1,556           271       17 %  Pretax income    $   648      $          (16 )  $      664   $   648      $          (17 )  $      665    $       (1 )      -    NM Not Meaningful.     º (1)

º Adjustments include net realized gains or losses and the market impact on

variable annuity living benefits, net of hedges, DSIC and DAC amortization.

  Our Annuities segment pretax income was $648 million for both 2010 and 2009. Our Annuities segment pretax operating income, which excludes net realized gains or losses and the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization, decreased $1 million to $664 million for the year ended December 31, 2010 compared to $665 million in the prior year.  

Net Revenues

  Net revenues increased $235 million, or 10%, to $2.5 billion for the year ended December 31, 2010 compared to $2.3 billion for the prior year. Operating net revenues, which exclude net realized gains or losses, increased $270 million, or 12%, to $2.5 billion for the year ended December 31, 2010 compared to $2.2 billion for the prior year reflecting increased management fees from higher separate account balances, increased premiums from immediate annuities with life contingencies and higher fees from variable annuity guarantees.  Management and financial advice fees increased $108 million, or 25%, to $546 million for the year ended December 31, 2010 compared to $438 million for the prior year due to higher fees on variable annuities driven by higher separate account balances. Average variable annuities contract accumulation values increased $10.3 billion, or 25%, from the prior year due to higher equity market levels and net inflows. Variable annuity net inflows during 2010 were $1.2 billion driven by our introduction in the third quarter of a new variable annuity in the Ameriprise channel, RAVA 5, and an updated guaranteed minimum withdrawal benefit rider in the Ameriprise and third-party channels.  Distribution fees increased $37 million, or 15%, to $284 million for the year ended December 31, 2010 compared to $247 million for the prior year primarily due to higher fees on variable annuities driven by higher separate account balances.  Net investment income decreased $5 million to $1.3 billion for the year ended December 31, 2010. Operating net investment income, which excludes net realized gains or losses, increased $30 million, or 2%, to $1.3 billion for the year ended December 31, 2010, primarily driven by higher fixed annuity account balances and higher investment yields, partially offset by the negative impact of the implementation of changes to the Portfolio Navigator program. With these changes, assets of clients participating in the Portfolio Navigator program were reallocated, pursuant to their consent. This reallocation in part resulted in a shift of assets from interest bearing investments in the general account into separate accounts.       80 

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Premiums increased $46 million, or 44%, to $150 million for the year ended December 31, 2010 compared to $104 million for the prior year due to higher sales of immediate annuities with life contingencies.

  Other revenues increased $49 million, or 32%, to $202 million for the year ended December 31, 2010 compared to $153 million for the prior year due to higher fees from variable annuity guarantees.  

Expenses

  Total expenses increased $235 million, or 15%, to $1.9 billion for the year ended December 31, 2010 compared to $1.6 billion for the prior year. Operating expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges, DSIC and DAC amortization, increased $271 million, or 17%, to $1.8 billion for the year ended December 31, 2010 compared to $1.6 billion for the prior year primarily due to increases in distribution expenses and benefits, claims, losses and settlement expenses partially offset by a decrease in amortization of DAC.  

Distribution expenses increased $57 million, or 27%, to $268 million for the year ended December 31, 2010 compared to $211 million for the prior year primarily due to higher variable annuity compensation.

  Interest credited to fixed accounts increased $3 million to $762 million for the year ended December 31, 2010 compared to $759 million for the prior year due to higher average fixed annuity account balances partially offset by a lower average crediting rate on interest sensitive fixed annuities. Average fixed annuities contract accumulation values increased $600 million, or 4%, to $14.5 billion for 2010 compared to the prior year. The average fixed annuity crediting rate excluding capitalized interest decreased to 3.8% in 2010 compared to 3.9% in the prior year.  Benefits, claims, losses and settlement expenses increased $273 million, or 65%, to $691 million for the year ended December 31, 2010 compared to $418 million for the prior year. Operating benefits, claims, losses and settlement expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges and DSIC amortization, increased $418 million to $682 million for the year ended December 31, 2010 compared to $264 million for the prior year primarily driven by the impact of updating valuation assumptions and model changes. Operating benefits, claims, losses and settlement expenses in 2010 included an expense of $256 million from updating valuation assumptions and model changes compared to a benefit of $57 million in the prior year. The market impact to DSIC was a benefit of $3 million in 2010 compared to a benefit of $4 million in the prior year. Benefits, claims, losses and settlement expenses related to our immediate annuities with life contingencies increased compared to the prior year primarily due to higher premiums. In addition, benefits, claims, losses and settlement expenses increased as a result of the implementation of changes to the Portfolio Navigator program in the second quarter of 2010.  Amortization of DAC decreased $113 million to a benefit of $76 million for the year ended December 31, 2010 compared to an expense of $37 million in the prior year. Operating amortization of DAC, which excludes the DAC offset to the market impact on variable annuity guaranteed living benefits, decreased $222 million to a benefit of $92 million for the year ended December 31, 2010 compared to an expense of $130 million for the prior year primarily due to the impact of updating valuation assumptions and model changes. Operating amortization of DAC in 2010 included a benefit of $353 million from updating valuation assumptions and model changes compared to a benefit of $61 million in the prior year. The market impact on DAC amortization in 2010 was a benefit of $21 million compared to a benefit of $23 million in the prior year. An increase in DAC amortization related to higher variable annuity gross profits was partially offset by a decrease as a result of the implementation of changes to the Portfolio Navigator program in the second quarter of 2010.  General and administrative expense increased $13 million, or 7%, to $205 million for the year ended December 31, 2010 compared to $192 million for the prior year primarily driven by additional expenses related to new product introductions and enhancements.                                                                           81 

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  Table of Contents   Protection  The following table presents the results of operations of our Protection segment:                                                 Years Ended December 31,                                    2010                                        2009                                   Less:                                      Less:                   GAAP      Adjustments (1)     Operating     GAAP    

Adjustments (1) Operating Operating Change

                                                                  (in millions) Revenues Management and financial advice fees      $    54          $        -    $       54   $    47       $          -    $       47    $      7           15 % Distribution fees                  96                   -            96        97                  -            97          (1 )         (1 ) Net investment income               429                   1           428       422                 27           395          33            8 Premiums           1,047                   -         1,047     1,013                  -         1,013          34            3 Other revenues       422                   -           422       386                  -           386          36            9  Total revenues     2,048                   1         2,047     1,965                 27         1,938         109            6 Banking and deposit interest expense                1                   -             1         1                  -             1           -            -  Total net revenues           2,047                   1         2,046     1,964                 27         1,937         109            6  Expenses Distribution expenses              32                   -            32        22                  -            22          10           45 Interest credited to fixed accounts       147                   -           147       144                  -           144           3            2 Benefits, claims, losses and settlement expenses           1,059                   -         1,059       916                  -           916         143           16 Amortization of deferred acquisition costs                183                   -           183       159                  -           159          24           15 General and administrative expense              223                   -           223       226                  -           226          (3 )         (1 )  Total expenses     1,644                   -         1,644     1,467                  -         1,467         177           12  Pretax income    $   403          $        1    $      402   $   497       $         27    $      470    $    (68 )        (14 )%       º (1)    º Adjustments include net realized gains or losses.  Our Protection segment pretax income was $403 million for the year ended December 31, 2010, a decrease of $94 million, or 19%, from $497 million for the prior year. Our Protection segment pretax operating income, which excludes net realized gains or losses, was $402 million for the year ended December 31, 2010, a decrease of $68 million, or 14%, from $470 million for the prior year.  

Net Revenues

  Net revenues increased $83 million, or 4%, to $2.0 billion for the year ended December 31, 2010 compared to $2.0 billion for the prior year. Operating net revenues, which exclude net realized gains or losses, increased $109 million, or 6%, to $2.0 billion for the year ended December 31, 2010 compared to $1.9 billion for the prior year primarily due to the impact of updating valuation assumptions and model changes and an increase in net investment income and premiums.  Management and financial advice fees increased $7 million, or 15%, to $54 million for the year ended December 31, 2010 compared to $47 million for the prior year primarily due to higher management fees from VUL separate account growth due to market appreciation.  Net investment income increased $7 million, or 2%, to $429 million for the year ended December 31, 2010 compared to $422 million for the prior year. Operating net investment income, which excludes net realized gains or losses, increased $33 million, or 8%, to $428 million for the year ended December 31, 2010 compared to $395 million for the prior year primarily due to higher investment yields and increased general account assets.  Premiums increased $34 million, or 3%, to $1.0 billion for the year ended December 31, 2010 compared to $1.0 billion for the prior year due to growth in Auto and Home premiums driven by higher volumes. Auto and Home policy counts increased 9% period-over-period.  Other revenues increased $36 million, or 9%, to $422 million for the year ended December 31, 2010 compared to $386 million for the prior year primarily due to updating valuation assumptions and model changes. Other revenues in 2010 included a charge of $20 million from updating valuation assumptions and model changes compared to a charge of $65 million in the prior year.  

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Expenses

Total expenses increased $177 million, or 12%, to $1.6 billion for the year ended December 31, 2010 compared to $1.5 billion for the prior year primarily due to updating valuation assumptions and model changes and an increase in insurance claims compared to the prior year.

  Benefits, claims, losses and settlement expenses increased $143 million, or 16%, to $1.1 billion for the year ended December 31, 2010 compared to $916 million for the prior year primarily due to updating valuation assumptions and model changes and higher claims in 2010. Benefits, claims, losses and settlement expenses in 2010 included an expense of $44 million from updating valuation assumptions and model changes compared to a benefit of $33 million in the prior year. Benefits, claims, losses and settlement expenses related to our Auto and Home business increased compared to the prior year primarily due to higher business volumes and higher claims driven by $11 million in catastrophe losses from a hail storm in the Phoenix area and a $16 million reserve increase for higher auto liability claims. In addition, benefits, claims, losses and settlement expenses in 2010 included higher disability income and long-term care insurance claims and higher reserves for UL products with secondary guarantees compared to the prior year.  Amortization of DAC increased $24 million, or 15%, to $183 million for the year ended December 31, 2010 compared to $159 million in the prior year primarily due to updating valuation assumptions and model changes. Amortization of DAC for 2010 included a benefit of $22 million from updating valuation assumptions and model changes compared to a benefit of $55 million in the prior year. The market impact on DAC resulted in a benefit of $10 million in 2010 compared to a benefit of $3 million in the prior year.  

Corporate & Other

  The following table presents the results of operations of our Corporate & Other segment:                                                Years Ended December 31,                                    2010                                      2009                                  Less:                                     Less:                         Operating                   GAAP     Adjustments (1)     Operating     GAAP    Adjustments (1)     Operating       Change                                                             (in millions) Revenues Net investment income (loss)    $  273      $          294    $      (21 ) $  (57 )     $          2    $      (59 ) $  38      64 % Other revenues      153                 125            28       90                 28            62     (34 )   (55 )  Total revenues      426                 419             7       33                 30             3       4      NM Banking and deposit interest expense               3                   -             3        7                  6             1       2      NM  Total net revenues            423                 419             4       26                 24             2       2     100  Expenses Distribution expenses              1                   -             1        3                  -             3      (2 )   (67 ) Interest and debt expense        288                 181           107      127                  -           127     (20 )   (16 ) General and administrative expense             185                  65           120      148                 13           135     (15 )   (11 )  Total expenses      474                 246           228      278                 13           265     (37 )   (14 ) Pretax loss         (51 )               173          (224 )   (252 )               11          (263 )    39      15 Less: Net income attributable to noncontrolling interests           163                 163             -       15                 15             -       -       -  Pretax loss attributable to Ameriprise Financial        $ (214 )    $           10    $     (224 ) $ (267 )     $         (4 )  $     (263 ) $  39      15 %    NM Not Meaningful.  

º (1)

º Includes revenues and expenses of the CIEs, net realized gains or losses

and integration and restructuring charges.

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  The following table presents the components of the adjustments in the table above:                                                Years Ended December 31,                                    2010                                       2009                                Other             Total                    Other             Total                  CIEs    Adjustments (1)     Adjustments    CIEs    Adjustments (1)     Adjustments                                                      (in millions) Revenues Net investment income (loss)    $ 275       $         19     $       294    $  2       $          -      $        2 Other revenues     125                  -             125      28                  -              28  Total revenues     400                 19             419      30                  -              30 Banking and deposit interest expense              -                  -               -       6                  -               6  Total net revenues           400                 19             419      24                  -              24  Expenses Distribution expenses             -                  -               -       -                  -               - Interest and debt expense       181                  -             181       -                  -               - General and administrative expense             56                  9              65       9                  4              13  Total expenses     237                  9             246       9                  4              13 Pretax loss        163                 10             173      15                 (4 )            11 Less: Net income attributable to noncontrolling interests          163                  -             163      15                  -              15  Pretax loss attributable to Ameriprise Financial        $   -       $         10     $        10    $  -       $         (4 )    $       (4 )       º (1)

º Other adjustments include net realized gains or losses and integration and

restructuring charges.

  Our Corporate & Other segment pretax loss attributable to Ameriprise Financial was $214 million for the year ended December 31, 2010 compared to $267 million in the prior year. Our Corporate & Other segment pretax operating loss attributable to Ameriprise Financial excludes net realized gains or losses, integration and restructuring charges and the impact of consolidating CIEs. Our Corporate & Other segment pretax operating loss attributable to Ameriprise Financial was $224 million for the year ended December 31, 2010 compared to $263 million in the prior year.  Net revenues increased $397 million to $423 million for the year ended December 31, 2010 compared to $26 million for the prior year primarily reflecting revenues of CIEs. Operating net revenues, which exclude revenues of CIEs and net realized gains or losses, increased $2 million to $4 million for the year ended December 31, 2010.  Net investment income was $273 million for the year ended December 31, 2010 compared to a loss of $57 million in the prior year. Net investment income in 2010 primarily reflects changes in the assets and liabilities of CIEs, primarily debt and underlying syndicated loans. The decrease in operating net investment loss, which excludes revenues of CIEs and net realized gains or losses, reflects lower transfer priced interest income allocated to the Annuities and Protection segments for maintaining excess liquidity.  Other revenues increased $63 million, or 70%, to $153 million for the year ended December 31, 2010, primarily due to an increase in revenues of CIEs. Operating other revenues, which exclude revenues of CIEs, decreased $34 million, or 55%, to $28 million for the year ended December 31, 2010, due to a $58 million gain on the repurchase of certain of our junior notes in 2009 partially offset by a $25 million benefit from the payments related to the Reserve Funds matter in 2010.  Total expenses increased $196 million, or 71%, to $474 million for the year ended December 31, 2010 compared to $278 million for the prior year primarily reflecting expenses of CIEs. Operating expenses, which exclude expenses of CIEs and integration and restructuring charges, decreased $37 million, or 14%, to $228 million for the year ended December 31, 2010 compared to $265 million for the prior year.  Interest and debt expense increased $161 million to $288 million for the year ended December 31, 2010 compared to $127 million for the prior year primarily reflecting interest expense of the CIE debt. Operating interest and debt expense, which excludes interest expense of the CIE debt, decreased $20 million, or 16%, to $107 million for the year ended December 31, 2010 compared to $127 million for the prior year primarily due to an expense of $13 million in 2009 related to the early retirement of $450 million of our senior notes due 2010.  General and administrative expense increased $37 million, or 25%, to $185 million for the year ended December 31, 2010 compared to $148 million for the prior year. Operating general and administrative expense, which excludes expenses of the CIEs and integration and restructuring charges, decreased $15 million, or 11%, to $120 million for the year ended December 31, 2010 compared to $135 million for the prior year.  

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  Table of Contents   Fair Value Measurements  We report certain assets and liabilities at fair value; specifically, separate account assets, derivatives, embedded derivatives, properties held by our consolidated property funds, and 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. We include actual market prices, or observable inputs, in our fair value measurements to the extent available. Non-binding broker quotes are obtained when quotes from third party pricing services are not available. We validate prices obtained from third parties through a variety of means as described in Note 14 to our Consolidated Financial Statements.  

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. We have exposure to each of these types of loans predominantly through mortgage backed and asset 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 our risk management process, an internal rating system is used in conjunction with market data as the basis of analysis to assess the likelihood that we will not receive all contractual principal and interest payments for these investments. For the investments that are more at risk for impairment, we perform our 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, 2011, our non-agency residential mortgage backed and asset backed securities backed by sub-prime, Alt-A or prime mortgage loans by credit rating and vintage year:

                       AAA                     AA                     A                     BBB                 BB & Below                Total               Amortized     Fair      Amortized     Fair     Amortized     Fair     Amortized     Fair     Amortized     Fair     Amortized     Fair                Cost        Value       Cost       Value       Cost       Value       Cost       Value       Cost       Value       Cost        Value                                                                            (in millions) Sub-prime 2003 & prior        $        5   $     5     $       -    $   -     $       -    $   -     $       -    $   -    $        -    $   -    $        5   $     5 2004                 20        18             2        2             5        5             -        -            14       10            41        35 2005                 41        40            36       33            10       10             -        -            28       23           115       106 2006                 41        40             -        -             -        -             4        4            42       29            87        73 2007                 15        14             -        -             -        -             2        2             5        1            22        17 2008                  -         -             6        5             -        -             -        -             -        -             6         5 Re-Remic (1)                  10        10             -        -             3        3            27       26             -        -            40        39  Total Sub-prime    $      132   $   127     $      44    $  40     $      18    $  18     $      33    $  32    $       89    $  63    $      316   $   280  Alt-A 2003 & prior        $        1   $     1     $      11    $  12     $       -    $   -     $       3    $   3    $        -    $   -    $       15   $    16 2004                  -         -            11       10            16       17            53       46            31       22           111        95 2005                  -         -             -        -             1        1             9        7           262      176           272       184 2006                  -         -             -        -             -        -             -        -           114       74           114        74 2007                  -         -             -        -             -        -             -        -           168       94           168        94 2008                  -         -             -        -             -        -             -        -             -        -             -         - 2009                  -         -             -        -             -        -             -        -             -        -             -         - 2010                 67        66             -        -             -        -             -        -             -        -            67        66 Re-Remic (1)                 180       178             -        -             3        3             7        7             -        -           190       188  Total Alt-A        $      248   $   245     $      22    $  22     $      20    $  21     $      72    $  63    $      575    $ 366    $      937   $   717  Prime 2003 & prior        $      107   $   110     $      43    $  42     $     109    $ 105     $      10    $  10    $        -    $   -    $      269   $   267 2004                 17        17            56       53            23       22            30       27            62       44           188       163 2005                  -         -             3        3            18       19             6        6           221      182           248       210 2006                  -         -             -        -            14       15             -        -            32       31            46        46 2007                  -         -             -        -            27       25             -        -            31       28            58        53 Re-Remic (1)               1,664     1,734           255      266           238      241             -        -             9       16         2,166     2,257  Total Prime        $    1,788   $ 1,861     $     357    $ 364     $     429    $ 427     $      46    $  43    $      355    $ 301    $    2,975   $ 2,996  Grand Total        $    2,168   $ 2,233     $     423    $ 426     $     467    $ 466     $     151    $ 138    $    1,019    $ 730    $    4,228   $ 3,993       º (1)

º 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 we own.

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European Exposure

  The following table presents, as of December 31, 2011, our exposure to European debt by country segregated between sovereign and non-sovereign (financial and non-financial corporate debt) exposure:                   Sovereign              Financials           Non-Financials                      Total                                                                                                                % of             Amortized     Fair      Amortized     Fair     Amortized     Fair      Amortized     Fair       Invested               Cost        Value       Cost       Value       Cost        Value       Cost        Value     Assets (1)                                                  (in millions, except percentage) Greece        $      -    $    -      $      -    $   -     $       -   $     -    $        -   $     -            0.0 % Italy                -         -             -        -           117       114           117       114            0.3 % Ireland              -         -             -        -            40        39            40        39            0.1 % Portugal             -         -             -        -             -         -             -         -            0.0 % Spain                -         -             -        -           134       130           134       130            0.3 %  Subtotal             -         -             -        -           291       283           291       283            0.7 % Other European exposure            30        31           420      387           938     1,004         1,388     1,422            3.4 %  Total         $     30    $   31      $    420    $ 387     $   1,229   $ 1,287    $    1,679   $ 1,705            4.1 %       º (1)    º Invested assets include cash and cash equivalents and investments.  The non-financial corporate debt holdings in Greece, Italy, Ireland, Portugal 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. We have no exposure to deeply subordinated instruments. We do not hedge our European exposure and we have no unfunded commitments related to our European debt holdings as of December 31, 2011.  

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 our obligations of our variable annuity riders, we consider the assumptions participants in a hypothetical market would make to reflect an exit price. As a result, we adjust 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 our nonperformance risk. The nonperformance risk adjustment is based on non-binding broker quotes for credit default swaps that are adjusted to estimate the risk of our life insurance company subsidiaries not fulfilling these liabilities. Consistent with general market conditions, this estimate resulted in a spread over the LIBOR swap curve as of December 31, 2011. As our 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 $226 million, net of DAC and DSIC amortization and income taxes, based on December 31, 2011 credit spreads.  

Liquidity and Capital Resources

Overview

  We maintained substantial liquidity during the year ended December 31, 2011. At both December 31, 2011 and 2010, we had $2.8 billion in cash and cash equivalents. We have additional liquidity available through an unsecured revolving credit facility for up to $500 million that expires in November 2015. Under the terms of the underlying credit agreement, we can increase this facility to $750 million upon satisfaction of certain approval requirements. Available borrowings under this facility are reduced by any outstanding letters of credit. We have had no borrowings under this credit facility and had $2 million of outstanding letters of credit at December 31, 2011.  In March 2010, we issued $750 million of 5.30% senior notes due 2020. A portion of the proceeds was used to retire $340 million of debt that matured in November 2010. On April 30, 2010, we closed on the Columbia Management Acquisition and paid $866 million in the second quarter with cash on hand and assumed liabilities of $30 million. Our subsidiaries, Ameriprise Bank, FSB and RiverSource Life Insurance Company ("RiverSource Life"), are members of the Federal Home Loan Bank ("FHLB") of Des Moines, which provides these subsidiaries with access to collateralized borrowings. As of December 31, 2011, we had no borrowings from the FHLB. Beginning in 2010, we entered into repurchase agreements to reduce reinvestment risk from higher levels of expected annuity net cash flows. Repurchase agreements allow us 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, 2011 was $504 million, which is collateralized with agency residential mortgage backed securities and commercial mortgage backed securities from our investment portfolio. We believe cash flows from operating activities, available cash balances and our availability of revolver borrowings will be sufficient to fund our operating liquidity needs.  

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Dividends from Subsidiaries

Ameriprise Financial is primarily a parent holding company for the operations carried out by our wholly owned subsidiaries. Because of our holding company structure, our ability to meet our cash requirements, including the payment of dividends on our common stock, substantially depends upon the receipt of dividends or return of capital from our subsidiaries, particularly our life insurance subsidiary, RiverSource Life; our face-amount certificate subsidiary, Ameriprise Certificate Company ("ACC"); AMPF Holding Corporation, which is the parent company of our retail introducing broker-dealer subsidiary, Ameriprise Financial Services, Inc. ("AFSI") and our clearing broker-dealer subsidiary, American Enterprise Investment Services Inc. ("AEIS"); our Auto and Home insurance subsidiary, IDS Property Casualty Insurance Company ("IDS Property Casualty"), doing business as Ameriprise Auto & Home Insurance; our transfer agent subsidiary, Columbia Management Investment Services Corp.; our investment advisory company, Columbia Management Investment Advisers, LLC; and Threadneedle. The payment of dividends by many of our subsidiaries is restricted and certain of our subsidiaries are subject to regulatory capital requirements.  

Actual capital and regulatory capital requirements for our wholly owned subsidiaries subject to regulatory capital requirements were as follows:

                                                                  Regulatory Capital                                  Actual Capital                     Requirements                            December 31,     December 31,     December 31,     December 31,                               2011             2010             2011             2010                                                     (in millions) RiverSource Life (1)(2)                      $      3,058    $      3,813      $       619      $       652 RiverSource Life of NY (1)(2)                               254             291               41               38 IDS Property Casualty (1)(3)                               431             411              148              141 Ameriprise Insurance Company (1)(3)                        41              44                2                2 ACC (4)(5)                           164             184              151              173 Threadneedle (6)                     218             182              170              104 Ameriprise Bank, FSB (7)                                  402             302              391              294 AFSI (3)(4)                          115             119                2                1 Ameriprise Captive Insurance Company (3)                 43              38               16               12 Ameriprise Trust Company (3)                           44              41               41               40 AEIS (3)(4)                          122             115               42               35 Securities America, Inc. (3)(4)(8)                              -               2                -                # RiverSource Distributors, Inc. (3)(4)                                27              24                #                # Columbia Management Investment Distributors, Inc. (3)(4)                                30              27                #                #       º #    º Amounts are less than $1 million.     º (1)    º Actual capital is determined on a statutory basis.     º (2) 

º Regulatory capital requirement is based on the statutory risk-based capital

     filing.     º (3)    º Regulatory capital requirement is based on the applicable regulatory      requirement, calculated as of December 31, 2011 and 2010.     º (4)    º Actual capital is determined on an adjusted GAAP basis.     º (5)

º ACC is required to hold capital in compliance with the Minnesota Department

     of Commerce and SEC capital requirements.     º (6)    º Actual capital and regulatory capital requirements are determined in

accordance with U.K. regulatory legislation. The actual capital and the

regulatory capital requirements at December 31, 2011 represent management's

assessment at September 30, 2011 of the risk based requirements, as

specified by FSA regulations and submitted to the FSA in December 2011.

º (7)

º Ameriprise Bank is required to maintain capital in compliance with the

Office of the Comptroller of Currency ("OCC") regulations and policies.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the

responsibility for the ongoing examination, supervision, and regulation of

federal savings associations, including Ameriprise Bank, transferred from

     the Office of Thrift Supervision to the OCC effective July 21, 2011.     º (8)    º Securities America was sold in the fourth quarter of 2011.  In addition to the particular regulations restricting dividend payments and establishing subsidiary capitalization requirements, we take into account the overall health of the business, capital levels and risk management considerations in determining a dividend strategy for payments to our company from our subsidiaries, and in deciding to use cash to make capital contributions to our subsidiaries.  During the year ended December 31, 2011, the parent holding company received cash dividends or a return of capital from its subsidiaries of $1.2 billion (including $750 million from RiverSource Life) and contributed cash to its subsidiaries of $128 million. In addition, during the year ended December 31, 2011, RiverSource Life paid an $850 million dividend to the parent holding company consisting of high-quality, short-duration securities. During the year ended December 31, 2010, the parent holding company received cash dividends or a return of capital from its subsidiaries of $912 million (including $500 million from RiverSource Life) and contributed cash to its subsidiaries of $73 million.                                                                           87  

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  The following table presents the dividends that could have been paid within the limitations of the applicable regulatory authorities as further described below, excluding extraordinary dividends for the years ended December 31:                                                         2011          2010         2009                                                                   (in millions) RiverSource Life (1)                                  $ 1,200     $         886   $ 253 AEIS (2)                                                    -                 -     154 ACC (3)                                                    70               171      87 Columbia Management Investment Advisers, LLC              295               191      89 Columbia Management Investment Services Corporation         5                 -       3 Threadneedle                                               82               125      95 Ameriprise Trust Company                                    1                 -       4 Securities America Financial Corporation (4)                -                 2      15 AFSI (2)                                                    -                 -      78 IDS Property Casualty (5)                                  40                44      42 Ameriprise Captive Insurance Company                       27                26      16 RiverSource Distributors, Inc.                             26                23      41 AMPF Holding Corporation (2)                              334               282       - Columbia Management Investment Distributors, Inc.          30                27      13  Total dividend capacity                               $ 2,110     $       1,777   $ 890       º (1)

º RiverSource Life dividends in excess of statutory unassigned funds require

advance notice to the Minnesota Department of Commerce, RiverSource Life's

primary regulator, and are subject to potential disapproval. In addition,

dividends whose fair market value, together with that of other dividends or

     distributions made within the preceding 12 months, exceeds the greater of      (1) the previous year's statutory net gain from operations or (2) 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. For dividends exceeding these thresholds,

RiverSource Life provided notice to the Minnesota Department of Commerce

and received responses indicating that it did not object to the payment of

these dividends.

º (2)

º In 2009, AEIS and AFSI became subsidiaries of AMPF Holding Corporation. For

AEIS and AFSI the dividend capacity is based on an internal model used to

determine the availability of dividends, while maintaining net capital at a

level sufficiently in excess of minimum levels defined by Securities and

Exchange Commission rules.     º (3)    º The dividend capacity for ACC is based on capital held in excess of      regulatory requirements.     º (4)    º Securities America was sold in the fourth quarter of 2011.     º (5)

º The dividend capacity for IDS Property Casualty is based on the lesser of

(1) 10% of the previous year-end capital and surplus or (2) the greater of

(a) net income (excluding realized gains) of the previous year or (b) the

aggregate net income of the previous three years excluding realized gains

less any dividends paid within the first two years of the three-year

period. Dividends that, together with the amount of other distributions

made within the preceding 12 months, exceed this statutory limitation are

referred to as "extraordinary dividends" and require advance notice to the

Office of the Commissioner of Insurance of the State of Wisconsin, the

primary state regulator of IDS Property Casualty, and are subject to

potential disapproval.

  The following table presents the cash dividends paid or return of capital to the parent holding company, net of cash capital contributions made by the parent holding company for the following subsidiaries for the years ended December 31:                                                              2011     2010    2009                                                                  (in millions)      RiverSource Life (1)                                  $   750   $ 500   $   -      Ameriprise Bank, FSB                                      (71 )   (35 )   (85 )      ACC                                                        57     160      25

     Columbia Management Investment Advisers, LLC              250      90 

-

Columbia Management Investment Services Corporation - -

     3      Threadneedle                                               34      48      49      Ameriprise Trust Company                                   (3 )    (5 )     -

     Securities America Financial Corporation (2)              (10 )     - 

-

     IDS Property Casualty                                       -      30 

85

     Ameriprise Advisor Capital, LLC                           (44 )   (33

) (10 )

     AMPF Holding Corporation (3)                              140      84 

   (38 )      Other                                                       -       -       2       Total                                                 $ 1,103   $ 839   $  31       º (1)

º In addition, during the year ended December 31, 2011, RiverSource Life paid

     an $850 million dividend to the parent holding company consisting of      high-quality, short-duration securities.     º (2)    º Securities America was sold in the fourth quarter of 2011.     º (3)

º In 2009, AEIS and AFSI became subsidiaries of AMPF Holding Corporation. For

AEIS and AFSI the dividend capacity is based on an internal model used to

determine the availability of dividends, while maintaining net capital at a

level sufficiently in excess of minimum levels defined by Securities and

Exchange Commission rules.

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Dividends Paid to Shareholders and Share Repurchases

  We paid regular quarterly cash dividends to our shareholders totaling $212 million and $183 million for the year ended December 31, 2011 and 2010, respectively. On December 7, 2011, our Board of Directors declared a quarterly cash dividend of $0.28 per common share. The dividend will be paid on February 24, 2012 to our shareholders of record at the close of business on February 10, 2012.  On May 11, 2010, we announced that our board of directors authorized an expenditure of up to $1.5 billion for the repurchase of shares of our common stock through the date of our 2012 annual shareholders meeting. On June 15, 2011, we announced that our Board of Directors authorized an additional expenditure of up to $2.0 billion for the repurchase of shares of our common stock through June 28, 2013. We intend to fund share repurchases through existing working capital, future earnings and other customary financing methods. The share repurchase program does not require the purchase of any minimum number of shares, and depending on market conditions and other factors, these purchases may be commenced or suspended at any time without prior notice. Acquisitions under the share repurchase program may be made in the open market, through privately negotiated transactions or block trades or other means. During the year ended December 31, 2011, we repurchased a total of 27.9 million shares of our common stock at an average price of $52.15 per share. As of December 31, 2011, we had $1.5 billion remaining under our share repurchase authorizations.  In both 2011 and 2010, we extinguished $14 million principal amount of our junior notes due 2066. In the future, we may from time to time seek to retire or purchase additional outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise, without prior notice. Such repurchases, if any, will depend upon market conditions and other factors. The amounts involved could be material.  

Cash Flows

  Cash flows of CIEs are reflected in our cash flows provided by (used in) operating activities, investing activities and financing activities. Cash held by CIEs is not available for general use by Ameriprise Financial, nor is Ameriprise Financial cash available for general use by its CIEs. As such, the operating, investing and financing cash flows of the CIEs have no impact to the change in cash and cash equivalents.  

Operating Activities

  Net cash provided by operating activities for the year ended December 31, 2011 increased $331 million to $2.2 billion compared to $1.8 billion for the year ended December 31, 2010. Net cash provided by operating activities for the year ended December 31, 2011 included a negative impact of $188 million related to CIEs compared to a positive impact of $148 million in the prior year. In 2011, operating cash increased $738 million due to an increase in net cash collateral held related to derivative instruments compared to an increase of $111 million in the prior year. Income taxes paid increased $309 million in 2011 compared to the prior year. Net cash provided by operating activities in 2011 included an increase in cash generated from higher fee revenue, partially offset by higher payments for distribution expenses.  Net cash provided by operating activities for the year ended December 31, 2010 was $1.8 billion compared to net cash used in operating activities of $1.3 billion for the year ended December 31, 2009. Net cash provided by operating activities for the year ended December 31, 2010 included a positive impact of $148 million related to CIEs compared to a negative impact of $453 million in the prior year. In 2009, operating cash flows were reduced by $1.9 billion due to a decrease in net cash collateral held related to derivative instruments compared to an increase of $111 million in 2010. The increase in operating cash compared to the prior year was also driven by higher fee revenue, partially offset by higher advisor compensation.  

Investing Activities

  Our investing activities primarily relate to our Available-for-Sale investment portfolio. Further, this activity is significantly affected by the net flows of our investment certificate, fixed annuity and UL products reflected in financing activities.  Net cash used in investing activities was $1.1 billion for the year ended December 31, 2011 compared to $734 million for the year ended December 31, 2010. Cash used to purchase Available-for-Sale securities decreased $266 million compared to the prior year and cash proceeds from sales and maturities, sinking fund payments and calls of Available-for-Sale securities decreased $1.8 billion compared to the prior year. We paid cash of $866 million for the Columbia Management Acquisition in 2010 and received cash of $150 million in 2011 for the sale of Securities America.  Net cash used in investing activities decreased $5.6 billion to $734 million for the year ended December 31, 2010 compared to $6.4 billion for the year ended December 31, 2009, primarily due to a $10.3 billion decrease in cash used for purchases of Available-for-Sale securities, partially offset by a $3.6 billion reduction in proceeds from sales and maturities, sinking fund payments and calls of Available-for-Sale securities. We also paid cash of $866 million for the Columbia Management Acquisition in 2010.                                                                           89  

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Financing Activities

  Net cash used in financing activities was $1.1 billion for the year ended December 31, 2011 compared to $1.3 billion for the year ended December 31, 2010. Net cash inflows related to policyholder and contractholder account values were $106 million for the year ended December 31, 2011 compared to net cash outflows of $1.1 billion for the prior year. Net cash outflows related to policyholder and contractholder account values in the prior year included net transfers to separate accounts of $1.3 billion primarily due to the implementation of changes to the Portfolio Navigator program. Cash outflows related to investment certificates and banking time deposits decreased $472 million due to lower maturities, withdrawals and cash surrenders compared to the prior year. Cash provided by other banking deposits increased $368 million compared to the prior year. Net cash inflows related to changes in repurchase agreements decreased $290 million compared to the prior year. Cash proceeds from issuance of debt, net of issuance costs, was $744 million in 2010 compared to nil in 2011. Cash used for the repurchase of common stock increased $913 million for the year ended December 31, 2011 compared to the prior year.  Net cash used in financing activities was $1.3 billion for the year ended December 31, 2010 compared to net cash provided by financing activities of $4.5 billion for the year ended December 31, 2009. Net cash outflows related to policyholder and contractholder account values were $1.1 billion for the year ended December 31, 2010 compared to net cash inflows of $3.1 billion for the prior year primarily due to a decrease in fixed annuity deposits and the transfer of general account assets to separate accounts from the implementation of changes to the Portfolio Navigator program. Proceeds from sales of investment certificates and banking time deposits decreased $1.4 billion compared to the prior year primarily due to the run-off of certificate rate promotions, partially offset by a $1.3 billion decrease in maturities, withdrawals and cash surrenders. Cash provided by other banking deposits decreased $345 million compared to the prior year. Cash received due to issuance of debt, net of repayments, increased $449 million for the year ended December 31, 2010 compared to the prior year. In 2010, net cash received related to repurchase agreements was $397 million. In 2009, we received cash of $869 million from the issuance of common stock. Cash used for the repurchase of common stock increased $571 million for the year ended December 31, 2010 compared to the prior year.  

Contractual Commitments

The contractual obligations identified in the table below include both our on and off-balance sheet transactions that represent material expected or contractually committed future obligations. Payments due by period as of December 31, 2011 were as follows:

                                                                                    2017 and                                  Total      2012      2013-2014     2015-2016     Thereafter                                                          (in millions) Balance Sheet: Long-term debt (1)              $  2,244   $     -    $        -    $      700    $     1,544 Insurance and annuities (2)       48,653     2,582         5,587         5,834         34,650 Investment certificates (3)        2,771     2,554           217             -              - Deferred premium options (4)       2,531       372           673           561            925 Affordable housing partnerships (5)                     267       168            96             1              2 Off-Balance Sheet: Lease obligations                    608        97           171           134            206 Purchase obligations (6)             493       154           188            85             66 Interest on long-term debt (7)                                2,273       139           278           233          1,623  Total                           $ 59,840   $ 6,066    $    7,210    $    7,548    $    39,016       º (1)

º See Note 13 to our Consolidated Financial Statements for more information

     about our long-term debt.    º (2)    º These scheduled payments are represented by reserves of approximately      $31.2 billion at December 31, 2011 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.

º (3)

º The payments due by year are based on contractual term maturities. However,

contractholders have the right to redeem the investment certificates

earlier and at their discretion subject to surrender charges, if any.

Redemptions are most likely to occur in periods of substantial increases in

interest rates.

º (4)

º The fair value of these commitments included on the Consolidated Balance

Sheets was $2.4 billion as of December 31, 2011. See Note 15 to our

Consolidated Financial Statements for more information about our deferred

premium options.

º (5)

º 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 specific amount on a stated date provided

there are no defaults under the agreement. For event specific obligations,

the Company is required to fund a specific 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.

º (6)

º Purchase obligations include the minimum contractual amounts by period

     under contracts that were in effect at December 31, 2011. Many of the      purchase agreements giving rise to these purchase obligations include      termination clauses that may require payment of termination fees if the      agreements are terminated by the Company without cause prior to their      stated expiration; however, the table reflects the amounts to be paid      assuming the contracts are not terminated.    º (7) 

º Interest on debt was estimated based on rates in effect as of December 31,

      2011.       90  

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In addition to the contractual commitments outlined in the table above, we periodically fund the employees' defined benefit plans. We contributed $72 million and $64 million in 2011 and 2010, respectively, to our pension plans. In 2012, we expect to contribute $46 million to our pension plans and $2 million to our defined benefit postretirement plans. See Note 21 to our Consolidated Financial Statements for additional information.

  Total loan funding commitments, which are not included in the table above due to uncertainty with respect to timing of future cash flows, were $2.4 billion at December 31, 2011.  

For additional information relating to these contractual commitments, see Note 22 to our Consolidated Financial Statements.

Off-Balance Sheet Arrangements

  We provide asset management services to various collateralized debt obligations and other investment products, which are sponsored by us for the investment of client assets in the normal course of business. Certain of these investment entities are considered to be variable interest entities while others are considered to be voting rights entities. We consolidate certain of these investment entities. For entities that we do not consolidate, our maximum exposure to loss is our investment in the entity, which was not material as of December 31, 2011. We have no obligation to provide further financial or other support to these structured investments nor have we provided any support to these structured investments. See Note 4 to our Consolidated Financial Statements for additional information on our arrangements with structured investments.  

Forward-Looking Statements

  This report contains forward-looking statements that reflect management's plans, estimates and beliefs. Actual results could differ materially from those described in these forward-looking statements. Examples of such forward-looking statements include:  

º •

º statements of the Company's plans, intentions, positioning, expectations,

objectives or goals, including those relating to asset flows, mass affluent

     and affluent client acquisition strategy, client retention and growth of      our client base, financial advisor productivity, retention, recruiting and

enrollments, acquisition integration, general and administrative costs;

consolidated tax rate, return of capital to shareholders, and excess

capital position and financial flexibility to capture additional growth

opportunities;

º •

º 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     º •    º 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:

º •

º changes in the valuations, liquidity and volatility in the interest rate,

credit default, equity market, and foreign exchange environments;

º •

º changes in and the adoption of relevant accounting standards, 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;     º • 

º investment management performance and distribution partner and consumer

acceptance of the Company's products;

º •

º effects of competition in the financial services industry and changes in

     product distribution mix and distribution channels;     º •    º changes to the Company's reputation that may arise from employee or      affiliated advisor misconduct, legal or regulatory actions, improper      management of conflicts of interest or otherwise;     º •

º the Company's capital structure, including indebtedness, limitations on

subsidiaries to pay dividends, and the extent, manner, terms and timing of

any share or debt repurchases management may effect as well as the opinions

of rating agencies and other analysts and the reactions of market

participants or the Company's regulators, advisors, distribution partners

or customers in response to any change or prospect of change in any such

opinion;

º •

º changes to the availability of liquidity and the Company's credit capacity

that may arise due to shifts in market conditions, the Company's credit

ratings and the overall availability of credit;

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º •

º risks of default, capacity constraint or repricing by issuers or guarantors

of investments the Company owns or by counterparties to hedge, derivative,

insurance or reinsurance arrangements or by manufacturers of products the

Company distributes, 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, advisors, distribution partners or customers in response to any

such evaluation or prospect of changes in evaluation;

º •

º with respect to VIE pooled investments the Company has determined do not

require consolidation under GAAP, the Company's assessment that it does not

have the power over the VIE or hold a variable interest in these

investments for which the Company has the potential to receive significant

benefits or to absorb significant losses;

º •

º 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

DAC and DSIC or market volatility underlying the Company's valuation and

hedging of guaranteed living benefit annuity riders; or from assumptions

     regarding anticipated claims and losses relating to the Company's      automobile and home insurance products;     º •

º changes in capital requirements that may be indicated, required or advised

by regulators or rating agencies;

º •

º the impacts of the Company's efforts to improve distribution economics and

to grow third-party distribution of its products;

º •

º the Company's ability to pursue and complete strategic transactions and

initiatives, including acquisitions, divestitures, restructurings, joint

ventures and the development of new products and services;

º •

º the Company's ability to realize the financial, operating and business

fundamental benefits or to obtain regulatory approvals regarding

integrations we plan for the acquisitions we have completed or may pursue

and contract to complete in the future, as well as the amount and timing of

     integration expenses;     º •    º the ability and timing to realize savings and other benefits from      re-engineering and tax planning;     º •

º changes in the capital markets and competitive environments induced or

resulting from the partial or total ownership or other support by central

governments of certain financial services firms or financial assets; and

º •

º 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 publicly-held firms,

and regulatory rulings and pronouncements.

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