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AMERIPRISE FINANCIAL INC – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the "Forward-Looking Statements" that follow and our Consolidated Financial Statements and Notes presented in Item 1. Our Management's Discussion and Analysis should be read in conjunction with our Annual Report on Form 10-K for the year endedDecember 31, 2020 , filed with theSecurities and Exchange Commission ("SEC") onFebruary 24, 2021 ("2020 10-K"), as well as our current reports on Form 8-K and other publicly available information. References below to "Ameriprise Financial ," "Ameriprise ," the "Company," "we," "us," and "our" refer toAmeriprise Financial, Inc. exclusively, to our entire family of companies, or to one or more of our subsidiaries. OverviewAmeriprise Financial is a diversified financial services company with a more than 125-year history of providing financial solutions. We are a long-standing leader in financial planning and advice with$1.2 trillion in assets under management and administration as ofSeptember 30, 2021 . We offer a broad range of products and services designed to achieve individual and institutional clients' financial objectives. The coronavirus disease 2019 (''COVID-19'') pandemic has presented ongoing significant economic and societal disruption and market unpredictability, which has affected our business and operating environment driven by a low interest rate environment and volatility and changes in the equity markets and the potential associated implications to client behavior. In early 2020, we implemented a work-from-home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from theWorld Health Organization , theU.S. Centers for Disease Control and governments. We are thoughtfully returning to our office locations, where it is reasonable to do so, while complying with applicable health agencies' guidelines and governmental orders. COVID-19 continues its ongoing impact and has been occurring in multiple waves, so there are still no reliable estimates of how long the implications from the pandemic will last, the effects current and other new variants will ultimately have, how many people are likely to be affected by it, or its impact on the overall economy. Given the impact of the pandemic, financial results may not be comparable to previous years and the results presented in this report may not necessarily be indicative of future operating results. For further information regarding the impact of the COVID-19 pandemic, and any potentially material effects, see Part 1 - Item 1A "Risk Factors" of our 2020 10-K. The products and services we provide retail clients and, to a lesser extent, institutional clients, are the primary source of our revenues and net income. Revenues and net income are significantly affected by investment performance and the total value and composition of assets we manage and administer for our retail and institutional clients as well as the distribution fees we receive from other companies. These factors, in turn, are largely determined by overall investment market performance and the depth and breadth of our individual client relationships. Financial markets and macroeconomic conditions have had and will continue to have a significant impact on our operating and performance results. In addition, the business, political and regulatory environments in which we operate are subject to elevated uncertainty and substantial, frequent change. Accordingly, we expect to continue focusing on our key strategic objectives and obtaining operational and strategic leverage from our core capabilities. The success of these and other strategies may be affected by the factors discussed in Item 1A, "Risk Factors" in our 2020 10-K and other factors as discussed herein. Equity price, credit market and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects they have on the asset management and other asset-based fees we earn, the value of deferred acquisition costs ("DAC") and deferred sales inducement costs ("DSIC") assets, the values of liabilities for guaranteed benefits associated with our variable annuities and the values of derivatives held to hedge these benefits and the "spread" income generated on our fixed deferred annuities, fixed insurance, the fixed portion of variable annuities and variable insurance contracts and deposit products. Earnings, as well as adjusted operating earnings after tax, will be negatively impacted by the ongoing low interest rate environment should it continue. In addition to continuing spread compression in our interest sensitive product lines, a sustained low interest rate environment may result in increases to our reserves and changes in various rate assumptions we use to amortize DAC and DSIC, which may negatively impact our adjusted operating earnings after tax. For additional discussion on our interest rate risk, see Item 3. "Quantitative and Qualitative Disclosures About Market Risk" and the information set forth in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk." In the third quarter, we updated our market-related assumptions and implemented model changes related to our living benefit valuation. In addition, we conducted our annual review of life insurance and annuity valuation assumptions relative to current experience and management expectations including modeling changes. These aforementioned changes are collectively referred to as unlocking. We also reviewed our future policy benefit reserve adequacy for our long term care ("LTC") business in the third quarter. See our Consolidated and Segment Results of Operations sections for the pretax impacts on our revenues and expenses attributable to unlocking and LTC loss recognition.
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AMERIPRISE FINANCIAL, INC.
On June 2, 2021 , we filed an application to convert Ameriprise Bank , FSB to a
state-chartered industrial bank regulated by the Utah Department of Financial
Institutions and the Federal Deposit Insurance Corporation . We also filed an
application to transition the FSB's personal trust services business to a new
limited purpose national trust bank regulated by the Office of the Comptroller
of the Currency . If the applications are approved, the proposed changes are not
expected to impact our long-term strategy for the bank and should enable us to
continue our strong lineup of banking solutions, including deposits, credit
cards, mortgages and securities-based lending to our wealth management clients
without interruption.
During the third quarter of 2021, RiverSource Life Insurance Company
("RiverSource Life"), one of our life insurance subsidiaries, closed on a
transaction with Global Atlantic Financial Group's subsidiary Commonwealth
Annuity and Life Insurance Company , effective July 1, 2021 , to reinsure
approximately $7.0 billion of fixed deferred and immediate annuity policies. As
part of the transaction, RiverSource Life transferred $7.8 billion in
consideration primarily consisting of Available-for-Sale securities, commercial
mortgage loans, syndicated loans and cash. The transaction resulted in a net
realized gain of approximately $532 million on investments sold. A similar
previously announced transaction with RiverSource Life Co. of New York did not
receive regulatory approval in time to close by September 30, 2021 and the
transaction was terminated by the parties.
On November 8, 2021 , we completed our previously announced acquisition of the
European-based asset management business of BMO Financial Group . At close, the
consideration transferred consisted of £615 million (or $829 million ) for
initial price, plus an additional £103 million (or $138 million ) largely
associated with a customary adjustment for excess capital surplus that will be
accessible over time. The overall purchase price will continue to be subject to
further customary post-close adjustments. The all-cash transaction will add
approximately $131 billion of assets under management ("AUM") in EMEA.
We consolidate certain variable interest entities for which we provide asset
management services. These entities are defined as consolidated investment
entities ("CIEs"). While the consolidation of the CIEs impacts our balance sheet
and income statement, our exposure to these entities is unchanged and there is
no impact to the underlying business results. For further information on CIEs,
see Note 4 to our Consolidated Financial Statements. The results of operations
of the CIEs are reflected in the Corporate & Other segment. On a consolidated
basis, the management fees we earn for the services we provide to the CIEs and
the related general and administrative expenses are eliminated and the changes
in the fair value of assets and liabilities related to the CIEs, primarily
syndicated loans and debt, are reflected in net investment income. We include
the fees from these entities in the management and financial advice fees line
within our Asset Management segment.
While our consolidated financial statements are prepared in accordance with
U.S. generally accepted accounting principles ("GAAP"), management believes that
adjusted operating measures, which exclude net realized investment gains or
losses, net of the related DSIC and DAC amortization, unearned revenue
amortization and the reinsurance accrual; the market impact on non-traditional
long-duration products (including variable and fixed deferred annuity contracts
and universal life ("UL") insurance contracts, net of hedges and the related
DSIC and DAC amortization, unearned revenue amortization and the reinsurance
accrual; mean reversion related impacts (the impact on variable annuity and
variable universal life ("VUL") products for the difference between assumed and
updated separate account investment performance on DAC, DSIC, unearned revenue
amortization, reinsurance accrual and additional insurance benefit reserves);
the market impact of hedges to offset interest rate and currency changes on
unrealized gains or losses for certain investments; block transfer reinsurance
transaction impact; gain or loss on disposal of a business that is not
considered discontinued operations; 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. Management uses these non-GAAP
measures to evaluate our financial performance on a basis comparable to that
used by some securities analysts and investors. Also, certain of these non-GAAP
measures are taken into consideration, to varying degrees, for purposes of
business planning and analysis and for certain compensation-related matters.
Throughout our Management's Discussion and Analysis, these non-GAAP measures are
referred to as adjusted operating measures. These non-GAAP measures should not
be viewed as a substitute for U.S. GAAP measures. Effective in the third quarter
of 2021, management has excluded the impacts of block transfer reinsurance
transactions from the adjusted operating measures. Prior periods presented were
not impacted.
It is management's priority to increase shareholder value over a multi-year
horizon by achieving our on-average, over-time financial targets.
Our financial targets are:
•Adjusted operating earnings per diluted share growth of 12% to 15%, and
•Adjusted operating return on equity excluding accumulated other comprehensive
income ("AOCI") of over 30%.
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AMERIPRISE FINANCIAL, INC.
The following tables reconcile our GAAP measures to adjusted operating measures:
Per Diluted Share
Three Months Ended September 30, Three Months Ended September 30,
2021 2020 2021 2020
(in millions, except per share amounts)
Net income (loss) $ 1,031 $ (140) $ 8.65 $ (1.14) (3)
Add: Basic to diluted share conversion - - - 0.02 (4)
Less: Net realized investment gains (losses) (1) 12 4 0.10 0.03
Add: Market impact on non-traditional long-duration
products (1)
94 431 0.79 3.45 Add: Mean reversion related impacts (1) (9) (17) (0.08) (0.14) Add: Market impact of hedges on investments (1) 23 - 0.19 -
Add: Block transfer reinsurance transaction impacts
(1)
(521) - (4.37) - Add: Integration/restructuring charges (1) 7 1 0.06 0.01 Less: Net income (loss) attributable to CIEs 2 - 0.02 - Tax effect of adjustments (2) 88 (87) 0.74 (0.70) Adjusted operating earnings$ 699 $ 184 $ 5.86$ 1.47 Weighted average common shares outstanding: Basic 116.4 123.0 Diluted 119.2 124.9 Per Diluted Share Nine Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (in millions, except per share amounts) Net income (loss)$ 2,059 $ 1,357 $ 17.03 $ 10.73 Less: Net realized investment gains (losses) (1) 78 (18) 0.65 (0.14)
Add: Market impact on non-traditional long-duration
products (1)
577 (239) 4.78 (1.89) Add: Mean reversion related impacts (1) (107) 30 (0.89) 0.24 Add: Market impact of hedges on investments (1) 40 - 0.33 - Add: Block transfer reinsurance transaction impacts (1) (521) - (4.31) - Add: Integration/restructuring charges (1) 14 4 0.12 0.03 Less: Net income (loss) attributable to CIEs (1) (2) (0.01) (0.01) Tax effect of adjustments (2) 16 39 0.13 0.31 Adjusted operating earnings$ 2,001 $ 1,211 $ 16.55 $ 9.57 Weighted average common shares outstanding: Basic 118.2 124.8 Diluted 120.9 126.5 (1) Pretax adjusted operating adjustments. (2) Calculated using the statutory federal tax rate of 21%. (3) Diluted shares used in this calculation represent basic shares due to the net loss. Using actual diluted shares would result in anti-dilution. (4) Represents the difference of the per share amount for net loss using basic shares compared to the per share amount for net loss using diluted shares.
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AMERIPRISE FINANCIAL, INC.
The following table reconciles the trailing twelve months' sum of net income to
adjusted operating earnings and the five-point average of quarter-end equity to
adjusted operating equity:
Twelve Months Ended
September 30,
2021 2020
(in millions)
Net income $ 2,236 $ 1,820
Less: Adjustments (1) (324) 58
Adjusted operating earnings 2,560 1,762
Total Ameriprise Financial, Inc. shareholders' equity 5,766 6,197
Less: AOCI, net of tax 404 243
5,362 5,954 Less: Equity impacts attributable to CIEs 3 - Adjusted operating equity$ 5,359 $ 5,954 Return on equity, excluding AOCI 41.7 %
30.6 %
Adjusted operating return on equity, excluding AOCI (2) 47.8 % 29.6 %
(1) Adjustments reflect the sum of after-tax net realized investment gains/losses, net of DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual; the market impact on non-traditional long-duration products (including variable and fixed deferred annuity contracts and UL insurance contracts), net of hedges and related DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual; mean reversion related impacts; block transfer reinsurance transaction impacts; the market impact of hedges to offset interest rate and currency changes on unrealized gains or losses for certain investments; gain or loss on disposal of a business that is not considered discontinued operations; integration and restructuring charges; income (loss) from discontinued operations; and net income (loss) from consolidated investment entities. After-tax is calculated using the statutory tax rate of 21%. (2) Adjusted operating return on equity, excluding AOCI is calculated using adjusted operating earnings in the numerator, andAmeriprise Financial shareholders' equity, excluding AOCI and the impact of consolidating investment entities using a five-point average of quarter-end equity in the denominator. After-tax is calculated using the statutory tax rate of 21%. Critical Accounting Estimates The accounting and reporting policies that we use affect our Consolidated Financial Statements. Certain of our accounting and reporting policies are critical to an understanding of our consolidated results of operations and financial condition and, in some cases, the application of these policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of our Consolidated Financial Statements. These accounting policies are discussed in detail in "Management's Discussion and Analysis - Critical Accounting Estimates" in our 2020 10-K. 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. Economic Environment Global equity market conditions could materially affect our financial condition and results of operations. The following table presents relevant market indices: Three months ended September 30, Nine Months Ended September 30, 2021 2020 Change 2021 2020 Change S&P 500 Daily average 4,425 3,316 33% 4,158 3,105 34% Period end 4,308 3,363 28% 4,308 3,363 28% Weighted Equity Index ("WEI") (1) Daily average 2,983 2,234 34% 2,836 2,107 35% Period end 2,909 2,255 29% 2,909 2,255 29% (1) Weighted Equity Index is anAmeriprise calculated proxy for equity market movements calculated using a weighted average of the S&P 500, Russell 2000,Russell Midcap and MSCI EAFE indices based onNorth America distributed equity assets. See our segment results of operations discussion below for additional information on how changes in the economic environment have and may continue to impact our results. For further information regarding the impact of the economic environment, and any potentially material effects, see Part 1 - Item 1A "Risk Factors" of our 2020 10-K.
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AMERIPRISE FINANCIAL, INC.
Assets Under Management and Administration
AUM include external client assets for which we provide investment management
services, such as the assets of the Columbia Threadneedle Investments funds,
institutional clients and clients in our advisor platform held in wrap accounts
as well as assets managed by sub-advisors 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 and the variable
product funds held in the separate accounts of our life insurance subsidiaries
and CIEs.
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 revenues 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.
AUM and AUA do not include assets under advisement, for which we provide
advisory services such as model portfolios but do not have full discretionary
investment authority.
The following table presents detail regarding our AUM and AUA:
September 30,
2021 2020
Change
(in billions)
Assets Under Management and Administration
Advice & Wealth Management AUM $ 431.8 $ 337.0 $ 94.8 28 %
Asset Management AUM 583.4 498.0 85.4 17
Corporate AUM 0.1 - 0.1 -
Eliminations (42.0) (34.1) (7.9) (23)
Total Assets Under Management 973.3 800.9 172.4 22
Total Assets Under Administration 233.0 197.7 35.3 18
Total AUM and AUA $ 1,206.3 $ 998.6 $ 207.7 21 %
Total AUM increased $172.4 billion , or 22%, to $973.3 billion as of
September 30, 2021 compared to $800.9 billion as of September 30, 2020 due to a
$94.8 billion increase in Advice & Wealth Management AUM driven by wrap account
net inflows and market appreciation and a $85.4 billion increase in Asset
Management AUM driven by market appreciation and net inflows, partially offset
by retail fund distributions. See our segment results of operations discussion
below for additional information on changes in our AUM.
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AMERIPRISE FINANCIAL, INC.
Consolidated Results of Operations for the Three Months Ended September 30, 2021
and 2020
The following table presents our consolidated results of operations:
Three Months Ended
September 30,
2021 2020 Change
(in millions)
Revenues
Management and financial advice fees $ 2,367 $ 1,893 $ 474 25 %
Distribution fees 458 400 58 15
Net investment income 773 300 473 NM
Premiums, policy and contract charges (805) 352 (1,157) NM
Other revenues 113 68 45 66
Total revenues 2,906 3,013 (107) (4)
Banking and deposit interest expense 3 10 (7) (70)
Total net revenues 2,903 3,003 (100) (3)
Expenses
Distribution expenses 1,285 1,028 257 25
Interest credited to fixed accounts 172 170 2 1
Benefits, claims, losses and settlement expenses (719) 1,104 (1,823) NM
Amortization of deferred acquisition costs 9 85 (76) (89)
Interest and debt expense 64 37 27 73
General and administrative expense 822 763 59 8
Total expenses 1,633 3,187 (1,554) (49)
Pretax income (loss) 1,270 (184) 1,454 NM
Income tax provision 239 (44) 283 NM
Net income (loss) $ 1,031 $ (140) $ 1,171 NM
NM Not Meaningful.
Overall
Pretax income increased $1.5 billion to $1.3 billion for the three months ended
September 30, 2021 compared to pretax loss of $184 million for the prior year
period. The following impacts were significant drivers of the period-over-period
change in pretax income:
•The favorable impact of the block transfer reinsurance transaction was $521
million for the three months ended September 30, 2021 primarily reflecting the
net realized gains on the investments sold to the reinsurer.
•The favorable impact of unlocking and LTC loss recognition was $17 million for
the three months ended September 30, 2021 compared to an unfavorable impact of
$454 million for the prior year period.
•The market impact on non-traditional long duration products (including variable
and fixed deferred annuity contracts and UL insurance contracts), net of hedges
and related DSIC and DAC amortization, unearned revenue amortization and the
reinsurance accrual was an expense of $94 million for the three months ended
September 30, 2021 compared to an expense of $431 million for the prior
year period.
•A favorable impact from higher average equity markets for the three months
ended September 30, 2021 compared to the prior year period.
•A favorable impact from continued net inflows from Advice & Wealth Management
and Asset Management.
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AMERIPRISE FINANCIAL, INC.
The following table presents the total pretax impacts on our revenues and
expenses attributable to unlocking and LTC loss recognition for the three months
ended September 30 :
Pretax Increase (Decrease) 2021 2020
(in millions)
Distribution fees $ 2 $ -
Premiums, policy and contract charges 17
(1)
Total revenues 19
(1)
Benefits, claims, losses and settlement expenses: LTC unlocking and loss recognition 3
141
Unlocking impact, excluding LTC 59
212
Total benefits, claims, losses and settlement expenses 62
353 Amortization of DAC (60) 100 Total expenses 2 453 Pretax income (1)$ 17 $ (454) (1) Includes a$25 million net benefit and$12 million net expense related to the market impact on variable annuity guaranteed benefits for the three months endedSeptember 30, 2021 and 2020, respectively, which is excluded from adjusted operating earnings. Refer to Results of Operations by Segment for the impact to pretax adjusted operating earnings attributable to unlocking and LTC loss recognition. The primary drivers of the year-over-year unlocking impact excluding LTC include the following items: •Interest rate assumptions resulted in a lower expense in the third quarter of 2021 compared to the prior year period. Our 10-yearTreasury rate assumption remained unchanged in 2021 at 3.5% with a grading period endingDecember 31, 2026 . •Equity market volatility and correlation assumptions on variable annuities resulted in a higher benefit in the third quarter of 2021 compared to the prior year period. •Surrenders assumptions on variable annuities with living benefit guarantees resulted in a lower expense in the third quarter of 2021 compared to the prior year period. The unfavorable LTC unlocking impact of$3 million in the third quarter of 2021 compared to the unfavorable LTC unlocking and loss recognition impact of$141 million in the prior year period is primarily due to updates to our interest rate assumptions in the prior year period. Net Revenues Net revenues decreased$100 million , or 3%, to$2.9 billion for the three months endedSeptember 30, 2021 compared to$3.0 billion for the prior year period. Management and financial advice fees increased$474 million , or 25%, to$2.4 billion for the three months endedSeptember 30, 2021 compared to$1.9 billion for the prior year period reflecting higher average equity markets and higher wrap account net inflows. Distribution fees increased$58 million , or 15%, to$458 million for the three months endedSeptember 30, 2021 compared to$400 million for the prior year period due to higher average equity markets and increased transactional activity. Net investment income increased$473 million to$773 million for the three months endedSeptember 30, 2021 compared to$300 million for the prior year period primarily reflecting the following items: •Net realized investment gains of$546 million , for the three months endedSeptember 30, 2021 compared to net realized investment gains of$4 million for the prior year period. Net realized investment gains for the three months endedSeptember 30, 2021 included net realized gains of$502 million on Available-for-Sale securities and a$42 million net gain related to commercial mortgage loans primarily due to the sale of securities and loans to the reinsurer as a result of the fixed deferred and immediate annuity reinsurance transaction that closed in the third quarter 2021. •A$22 million increase in net investment income of CIEs. •A$23 million unfavorable change in the market impact of hedges to offset interest rate and currency changes on certain investments. •The unfavorable impact of continued low interest rates, including lower investment yields on the investment portfolio supporting the certificate and on-balance sheet brokerage cash products. •The unfavorable impact of lower average invested assets due to the sale of investments to the reinsurer as a result of the fixed deferred and immediate annuity reinsurance transaction.
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AMERIPRISE FINANCIAL, INC.
Premiums, policy and contract charges decreased $1.2 billion to $(805) million
for the three months ended September 30, 2021 compared to $352 million for the
prior year primarily reflecting ceded premiums of $1.2 billion associated with
the reinsurance for life contingent immediate annuity policies.
Other revenues increased $45 million , or 66%, to $113 million for the three
months ended September 30, 2021 compared to $68 million for the prior year
period primarily reflecting the yield on deposit receivables.
Banking and deposit interest expense decreased $7 million , or 70%, to $3 million
for the three months ended September 30, 2021 compared to $10 million due to
lower average crediting rates on certificates and lower average certificate
balances.
Expenses
Total expenses decreased $1.6 billion , or 49%, to $1.6 billion for the three
months ended September 30, 2021 compared to $3.2 billion for the prior year
period.
Distribution expenses increased $257 million , or 25%, to $1.3 billion for the
three months ended September 30, 2021 compared to $1.0 billion for the
prior year period reflecting higher advisor compensation due to an increase in
average wrap account balances and increased transactional activity.
Interest credited to fixed accounts increased $2 million , or 1%, to $172 million
for the three months ended September 30, 2021 compared to $170 million for the
prior year period primarily reflecting the following items:
•A $16 million decrease in expense from the unhedged nonperformance credit
spread risk adjustment on IUL benefits. The unfavorable impact of the
nonperformance credit spread was $2 million for the three months ended
September 30, 2021 compared to an unfavorable impact of $18 million for the
prior year period.
•A $21 million increase in expense from other market impacts on IUL benefits,
net of hedges, which was an expense of $7 million for the three months ended
September 30, 2021 compared to a benefit of $14 million for the prior year
period. The increase in expense was primarily due to a decrease in the IUL
embedded derivative in the prior year period, which reflected lower option costs
due to lower credit spreads.
Benefits, claims, losses and settlement expenses decreased $1.8 billion to a
benefit of $719 million for the three months ended September 30, 2021 compared
to an expense of $1.1 billion for the prior year period primarily reflecting the
following items:
•A $1.2 billion decrease in expense associated with the reinsurance transaction
for life contingent immediate annuity policies.
•A $107 million decrease in expense primarily reflecting the impact of
year-over-year changes in the unhedged nonperformance credit spread risk
adjustment on variable annuity guaranteed benefits. The favorable impact of $4
million for the three months ended September 30, 2021 was driven by changes in
the undiscounted embedded derivative liability compared to an unfavorable impact
of $103 million for the prior year period. As the undiscounted embedded
derivative liability on which the nonperformance credit spread is applied
increases (decreases), the impact of the nonperformance credit spread is
favorable (unfavorable) to expense. Additionally, as the estimate of the
nonperformance credit spread over the LIBOR swap curve tightens or widens, the
embedded derivative liability will increase or decrease.
•A $307 million decrease in expense from other market impacts on variable
annuity guaranteed benefits, net of hedges in place to offset those risks and
the related DSIC amortization. This increase was the result of a favorable $707
million change in the market impact on derivatives hedging the variable annuity
guaranteed benefits, partially offset by an unfavorable $400 million change in
the market impact on variable annuity guaranteed living benefits reserves. The
main market drivers contributing to these changes are summarized below:
•Equity market impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
lower expense for the three months ended September 30, 2021 compared to the
prior year period.
•Interest rate impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
benefit for the three months ended September 30, 2021 compared to an expense for
the prior year period.
•Volatility impact on the variable annuity guaranteed living benefits liability
net of the impact on the corresponding hedge assets resulted in a benefit for
the three months ended September 30, 2021 compared to an expense for the prior
year period.
•Other unhedged items, including the difference between the assumed and actual
underlying separate account investment performance, fixed income credit
exposures, transaction costs and various behavioral items, were a lower net
expense for the three months ended September 30, 2021 compared to the prior year
period.
•The impact of unlocking excluding LTC was an expense of $59 million for the
three months ended September 30, 2021 compared to an expense of $212 million for
the prior year period.
•The annual review of LTC future policy benefit reserve in the third quarter of
2021 resulted in unlocking of $3 million compared to unlocking and loss
recognition of $141 million in the prior year period.
•The mean reversion related impact was a benefit of $6 million for the three
months ended September 30, 2021 compared to a benefit of $8 million for the
prior year period.
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AMERIPRISE FINANCIAL, INC.
Amortization of DAC decreased $76 million , or 89%, to $9 million for the three
months ended September 30, 2021 compared to a benefit of $85 million for the
prior year period primarily reflecting the following items:
•The impact of unlocking in the third quarter of 2021 was a benefit of $60
million compared to an expense of $100 million in the prior year period.
•The DAC offset to the market impact on non-traditional long-duration products
was a benefit of $2 million for the three months ended September 30, 2021
compared to a benefit of $64 million for the prior year period.
•The mean reversion related impact was a benefit of $3 million for the three
months ended September 30, 2021 compared to a benefit of $9 million for the
prior year period.
•A higher level of normalized amortization due to the growth of variable
annuities and unlocked market and policyholder assumptions in the prior year.
Interest and debt expense increased $27 million , or 73%, to $64 million or the
three months ended September 30, 2021 compared to $37 million for the prior year
period primarily due to an increase in interest expense of CIEs.
General and administrative expense increased $59 million , or 8%, to $822 million
for the three months ended September 30, 2021 compared to $763 million for the
prior year period primarily reflecting higher volume related expenses, an
unfavorable foreign exchange impact and higher performance-based compensation.
Income Taxes
Our effective tax rate was 18.8% for the three months ended September 30, 2021
compared to 23.5% for the prior year period. The lower effective tax rate for
the three months ended September 30, 2021 compared to the prior year period is
primarily the result of a pretax loss in the prior year relative to income
expected for the full year. See Note 16 to our Consolidated Financial Statements
for additional discussion on income taxes.
Results of Operations by Segment for the Three Months Ended September 30, 2021
and 2020
Adjusted operating earnings is the measure of segment profit or loss management
uses to evaluate segment performance. Adjusted operating earnings should not be
viewed as a substitute for GAAP pretax income. We believe the presentation of
segment adjusted operating earnings as we measure it for management purposes
enhances the understanding of our business by reflecting the underlying
performance of our core operations and facilitating a more meaningful trend
analysis. See Note 19 to the Consolidated Financial Statements for further
information on the presentation of segment results and our definition of
adjusted operating earnings.
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AMERIPRISE FINANCIAL, INC.
The following table presents summary financial information by segment:
Three Months Ended September 30,
2021 2020
(in millions)
Advice & Wealth Management
Net revenues $ 2,048 $ 1,667
Expenses 1,589 1,347
Adjusted operating earnings $ 459 $ 320
Asset Management
Net revenues $ 915 $ 739
Expenses 630 541
Adjusted operating earnings $ 285 $ 198
Retirement & Protection Solutions
Net revenues $ 834 $ 781
Expenses 647 870
Adjusted operating earnings $ 187 $ (89)
Corporate & Other
Net revenues $ 113 $ 132
Expenses 194 334
Adjusted operating loss $ (81) $ (202)
The following table presents the segment pretax adjusted operating impacts on
our revenues and expenses attributable to unlocking and LTC loss recognition for
the three months ended September 30 :
2021 2020
Retirement & Retirement &
Protection Protection
Segment Pretax Operating Increase (Decrease) Solutions Corporate Solutions Corporate
(in millions)
Distribution fees $ 2 $ - $ - $ -
Premiums, policy and contract charges 17 - 2 (3)
Total revenues 19 - 2 (3)
Benefits, claims, losses and settlement
expenses
LTC unlocking and loss recognition - 3 - 141
Unlocking impact, excluding LTC 89 - 189 7
Total benefits, claims, losses and settlement
expenses 89 3 189 148
Amortization of DAC (65) - 108 (4)
Total expenses 24 3 297 144
Pretax income $ (5) $ (3) $ (295) $ (147)
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Advice & Wealth Management
The following table presents the changes in wrap account assets and average
balances for the three months ended
2021 2020
(in billions)
Beginning balance $ 430.0 $ 317.6
Net flows (1) 9.4 5.7
Market appreciation (depreciation) and other (1) (4.0) 16.7
Ending balance
$ 435.4 $ 340.0
Advisory wrap account assets ending balance (2)
Average advisory wrap account assets (3)
$ 432.9 $ 327.4 (1) Beginning in the first quarter of 2021, wrap net flows is calculated including dividends and interest less fees, which were previously recorded in Market appreciation (depreciation) and other. Net flows excludes short-term and long-term capital gain distributions. Prior periods have been restated. (2) Advisory wrap account assets represent those assets for which clients receive advisory services and are the primary driver of revenue earned on wrap accounts. Clients may hold non-advisory investments in their wrap accounts that do not incur an advisory fee. (3) Average ending balances are calculated using an average of the prior period's ending balance and all months in the current period excluding the most recent month for the three months endedSeptember 30, 2021 and 2020. Wrap account assets increased$5.4 billion , or 1%, during the three months endedSeptember 30, 2021 due to net inflows of$9.4 billion , partially offset by market depreciation of$4.0 billion . Average advisory wrap account assets increased$105.5 billion , or 32%, compared to the prior year period reflecting market appreciation and net inflows. The following table presents the results of operations of our Advice & Wealth Management segment on an adjusted operating basis: Three Months Ended September 30, 2021 2020 Change (in millions) Revenues Management and financial advice fees$ 1,374 $ 1,077 $ 297 28 % Distribution fees 561 479 82 17 Net investment income 62 70 (8) (11) Other revenues 54 51 3 6 Total revenues 2,051 1,677 374 22 Banking and deposit interest expense 3 10 (7) (70) Total net revenues 2,048 1,667 381 23 Expenses Distribution expenses 1,238 998 240 24 Interest and debt expense 3 3 - - General and administrative expense 348 346 2 1 Total expenses 1,589 1,347 242 18 Adjusted operating earnings$ 459 $ 320 $ 139 43 % Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased$139 million , or 43%, to$459 million for the three months endedSeptember 30, 2021 compared to$320 million for the prior year period reflecting higher average wrap account balances due to net inflows and market appreciation and improved transactional activity. Pretax adjusted operating margin was 22.4% for the three months endedSeptember 30, 2021 compared to 19.2% for the prior year period.Ameriprise Bank , FSB has continued to add deposits, with$9.8 billion of cash sweep balances as ofSeptember 30, 2021 . In the fourth quarter of 2020, we acquired$224 million in an existing portfolio of brokerage client pledged asset lines of credit which has grown to over$408 million as ofSeptember 30, 2021 .
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Net Revenues
Net revenues exclude net realized investment gains or losses. Net revenues
increased $381 million , or 23%, to $2.0 billion for the three months ended
September 30, 2021 compared to $1.7 billion for the prior year period. Adjusted
operating net revenue per advisor increased to $203,000 for the three months
ended September 30, 2021 , up 21%, compared to $168,000 for the prior year
period.
Management and financial advice fees increased $297 million , or 28%, to
$1.4 billion for the three months ended September 30, 2021 compared to
$1.1 billion for the prior year period primarily due to growth in average wrap
account assets. Average advisory wrap account assets increased $105.5 billion ,
or 32%, compared to the prior year period reflecting market appreciation and net
inflows.
Distribution fees increased $82 million , or 17%, to $561 million for the three
months ended September 30, 2021 compared to $479 million for the prior year
period reflecting increased transactional activity and higher average equity
markets.
Net investment income, which excludes net realized investment gains or losses,
decreased $8 million , or 11%, to $62 million for the three months ended
September 30, 2021 compared to $70 million for the prior year period primarily
due to lower certificate balances and the unfavorable impact of continued low
interest rates, including lower investment yields on the investment portfolio
supporting the certificate and on-balance sheet brokerage cash products,
partially offset by higher average invested assets due to increased bank
deposits.
Banking and deposit interest expense decreased $7 million , or 70%, to $3 million
for the three months ended September 30, 2021 compared to $10 million for the
prior year period primarily due to lower average crediting rates on certificates
and lower average certificate balances.
Expenses
Total expenses increased $242 million , or 18%, to $1.6 billion for the three
months ended September 30, 2021 compared to $1.3 billion for the prior year
period.
Distribution expenses increased $240 million , or 24%, to $1.2 billion for the
three months ended September 30, 2021 compared to $998 million for the prior
year period reflecting higher asset-based advisor compensation from higher wrap
account assets and increased transactional activity.
Asset Management
The following tables present the fund performance of our retail Columbia
Threadneedle Investments funds as of September 30, 2021 :
Retail Fund Rankings in Top 2 Quartiles or Above Index
Benchmark - Asset Weighted 1 year 3 year 5 year 10 year
Equity 46% 86% 85% 88%
Fixed Income 85% 88% 94% 91%
Asset Allocation 41% 87% 95% 89%
4- or 5-star Morningstar rated funds Overall 3 year 5 year 10 year
Number of rated funds 105 91 91 84
Percent of rated assets 66% 61% 57% 67%
Retail Fund performance rankings for each fund is measured on a consistent basis
against the most appropriate peer group or index. Peer Groupings are defined by
either Lipper, IA, or Morningstar and based primarily on the Institutional Share
Class, Net of Fees. Comparisons to Index are measured Gross of Fees.
To calculate asset weighted performance, the sum of the total assets of the
funds with above median ranking are 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 Asset Allocation Funds may include funds that invest in other
Columbia or Threadneedle branded mutual funds included in both equity and fixed
income.
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The following table presents global managed assets by type: Average (1)
Three Months Ended
As of September 30, September 30,
2021 2020 Change 2021 2020 Change
(in billions)
Equity $ 332.7 $ 264.8 $ 67.9 26 % $ 340.8 $ 264.2 $ 76.6 29 %
Fixed income 199.3 188.8 10.5 6 200.7 187.2 13.5 7
Money market 5.8 5.1 0.7 14 5.9 5.1 0.8 16
Alternative 3.8 3.5 0.3 9 3.8 3.3 0.5 15
Hybrid and other 41.8 35.8 6.0 17 42.1 35.4 6.7 19
Total managed assets $ 583.4 $ 498.0 $ 85.4 17 % $ 593.3 $ 495.2 $ 98.1 20 %
(1) Average ending balances are calculated using an average of the prior
period's ending balance and all months in the current period.
The following table presents the changes in global managed assets:
Three Months Ended September 30,
2021 2020
(in billions)
Global Retail Funds
Beginning assets $ 359.5 $ 274.1
Inflows 16.4 14.5
Outflows (15.5) (13.2)
Net VP/VIT fund flows (1.1) (0.7)
Net new flows (0.2) 0.6
Reinvested dividends 2.0 1.4
Net flows 1.8 2.0
Distributions (2.1) (1.5)
Market appreciation (depreciation) and other (2.3) 13.8
Foreign currency translation (1) (1.2) 1.5
Total ending assets 355.7 289.9
Global Institutional
Beginning assets 233.9 202.0
Inflows (2) 9.4 7.0
Outflows (2) (7.3) (10.6)
Net flows 2.1 (3.6)
Market appreciation (depreciation) and other (3) (5.9) 6.6
Foreign currency translation (1) (2.4) 3.1
Total ending assets 227.7 208.1
Total managed assets $ 583.4 $ 498.0
Total net flows $ 3.9 $ (1.6)
Legacy insurance partners net flows (4) $
(1.4)
(1) Amounts represent local currency to US dollar translation for reporting purposes. (2) Global Institutional inflows and outflows include net flows from our RiverSource Structured Annuity product beginning in Q1 2020 andAmeriprise Bank , FSB beginning in Q1 2021. (3) Included in Market appreciation (depreciation) and other for Global Institutional is the change in affiliated general account balance, excluding net flows related to our structured variable annuity product beginning in Q1 2020 andAmeriprise Bank , FSB beginning in Q1 2021. (4) Legacy insurance partners assets and net flows are included in the rollforwards above.
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Total segment AUM decreased $10.0 billion , or 2%, during the three months ended
September 30, 2021 . Net inflows were $3.9 billion in the third quarter of 2021,
a $5.5 billion increase compared to the prior year period. Global retail net
inflows were $1.8 billion . Global institutional net inflows were $2.1 billion
and included $1.4 billion of outflows from legacy insurance partners assets.
The following table presents the results of operations of our Asset Management
segment on an adjusted operating basis:
Three Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Management and financial advice fees $ 794 $ 641 $ 153 24 %
Distribution fees 120 104 16 15
Net investment income 1 (6) 7 NM
Other revenues - - - -
Total revenues 915 739 176 24
Banking and deposit interest expense - - - -
Total net revenues 915 739 176 24
Expenses
Distribution expenses 288 240 48 20
Amortization of deferred acquisition costs 3 2 1 50 %
Interest and debt expense 1 2 (1) (50) %
General and administrative expense 338 297 41 14
Total expenses 630 541 89 16
Adjusted operating earnings $ 285 $ 198 $ 87 44 %
NM Not Meaningful.
Our Asset Management segment pretax adjusted operating earnings, which exclude
net realized investment gains or losses, increased $87 million , or 44%, to
$285 million for the three months ended September 30, 2021 compared to
$198 million for the prior year period primarily due to a higher level of
average AUM from market appreciation and net inflows, as well as higher
performance fees.
Net Revenues
Net revenues, which exclude net realized investment gains or losses, increased
$176 million , or 24%, to $915 million for the three months ended September 30,
2021 compared to $739 million for the prior year period.
Management and financial advice fees increased $153 million , or 24%, to
$794 million for the three months ended September 30, 2021 compared to
$641 million for the prior year period primarily due to higher average equity
markets, the impact from net inflows and $13 million of performance fees.
Distribution fees increased $16 million , or 15%, to $120 million for the three
months ended September 30, 2021 compared to $104 million for the prior year
period primarily due to higher average equity markets.
Net investment income, which excludes net realized investment gains or losses,
increased $7 million to $1 million for the three months ended September 30, 2021
compared to a loss of $6 million for the prior year period primarily reflecting
an impairment of an investment in the year ago period.
Expenses
Total expenses increased $89 million , or 16%, to $630 million for the three
months ended September 30, 2021 compared to $541 million for the prior year
period.
Distribution expenses increased $48 million , or 20%, to $288 million for the
three months ended September 30, 2021 compared to $240 million for the prior
year period reflecting higher average equity markets.
General and administrative expense increased $41 million , or 14%, to
$338 million for the three months ended September 30, 2021 compared to
$297 million for the prior year period primarily reflecting higher
performance-based compensation expenses related to stronger business performance
and the impact of foreign exchange rates.
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Retirement & Protection Solutions
The following table presents the results of operations of our Retirement &
Protection Solutions segment on an adjusted operating basis:
Three Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Management and financial advice fees $ 239 $ 213 $ 26 12 %
Distribution fees 125 111 14 13
Net investment income 114 121 (7) (6)
Premiums, policy and contract charges 353 333 20 6
Other revenues 3 3 - -
Total revenues 834 781 53 7
Banking and deposit interest expense - - - -
Total net revenues 834 781 53 7
Expenses
Distribution expenses 134 110 24 22
Interest credited to fixed accounts 99 100 (1) (1)
Benefits, claims, losses and settlement expenses 323 421 (98) (23)
Amortization of deferred acquisition costs 5 157 (152) (97)
Interest and debt expense 9 8 1 13
General and administrative expense 77 74 3 4
Total expenses 647 870 (223) (26)
Adjusted operating earnings $ 187 $ (89) $ 276 NM
NM Not Meaningful.
Our Retirement & Protection Solutions segment pretax adjusted operating
earnings, which excludes net realized investment gains or losses (net of the
related DSIC and DAC amortization, unearned revenue amortization and the
reinsurance accrual), the market impact on non-traditional long-duration
products (including variable annuity contracts and IUL contracts, net of hedges
and the related DSIC and DAC amortization, unearned amortization and the
reinsurance accrual), mean reversion related impacts, and block transfer
reinsurance transaction impacts increased $276 million to $187 million for the
three months ended September 30, 2021 compared to a loss of $89 million for the
prior year period.
Variable annuity account balances increased 12% to $89.6 billion as of
September 30, 2021 compared to the prior year period due to market appreciation,
partially offset by net outflows of $1.8 billion . Variable annuity sales
increased 28% compared to the prior year period reflecting an increase in sales
of structured variable annuities. Sales of variable annuities without living
benefit guarantees comprised 72% of total variable annuity sales for the three
months ended September 30, 2021 compared to 56% for the prior year period. This
trend is expected to continue and meaningfully shift the mix of business away
from products with living benefit guarantees over time.
Net Revenues
Management and financial advice fees increased $26 million , or 12%, to
$239 million for the three months ended September 30, 2021 compared to
$213 million for the prior year period primarily due to market appreciation,
partially offset by variable annuity net outflows.
Distribution fees increased $14 million , or 13%, to $125 million for the three
months ended September 30, 2021 compared to $111 million for the prior year
period due to higher average equity markets.
Expenses
Distribution expenses increased $24 million , or 22%, to $134 million for the
three months ended September 30, 2021 compared to $110 million for the prior
year period primarily reflecting higher average equity markets and increased
variable annuity and insurance sales.
Benefits, claims, losses and settlement expenses, which exclude the market
impact on variable annuity contracts (net of hedges and the related DSIC
amortization), mean reversion related impacts and the DSIC offset to net
realized investment gains or losses, decreased $98 million , or 23%, to
$323 million for the three months ended September 30, 2021 compared to
$421 million for the prior year period primarily reflecting the impact of
unlocking. The unlocking impact for the third quarter of 2021 was an expense of
$89 million
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primarily reflecting continued lower surrender rates compared to an expense of
$189 million in the prior year period which was also driven by lower surrender
rates.
Amortization of DAC, which excludes mean reversion related impacts, the DAC
offset to the market impact on variable annuity contracts and IUL contracts and
the DAC offset to net realized investment gains or losses, decreased
$152 million to $5 million for the three months ended September 30, 2021
compared to $157 million for the prior year period reflecting the impact of
unlocking primarily due to lower surrender rates, partially offset by a higher
level of normalized amortization. The unlocking impact for the third quarter of
2021 was a benefit of $65 million compared to an expense of $108 million in the
prior year period.
Corporate & Other
The following table presents the results of operations of our Corporate & Other
segment on an adjusted operating basis:
Three Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Net investment income $ 31 $ 93 $ (62) (67) %
Premiums, policy and contract charges 26 26 - -
Other revenues 56 13 43 NM
Total revenues 113 132 (19) (14)
Banking and deposit interest expense - - - -
Total net revenues 113 132 (19) (14)
Expenses
Distribution expenses (2) (2) - -
Interest credited to fixed accounts 64 66 (2) (3)
Benefits, claims, losses and settlement expenses 59 204 (145) (71)
Amortization of deferred acquisition costs 1 (2) 3 NM
Interest and debt expense 16 15 1 7
General and administrative expense 56 53 3 6
Total expenses 194 334 (140) (42)
Adjusted operating loss $ (81) $ (202) $ 121 60 %
NM Not Meaningful.
Our Corporate & Other segment includes our closed blocks of long term care
("LTC") insurance and fixed annuity and fixed indexed annuity ("FA") business.
Our Corporate & Other segment pretax adjusted operating loss excludes net
realized investment gains or losses, the market impact on fixed deferred annuity
contracts (net of hedges and the related DAC amortization), the market impact of
hedges to offset interest rate and currency changes on unrealized gains or
losses for certain investments, block transfer reinsurance transaction impacts,
gain or loss on disposal of a business that is not considered discontinued
operations, integration and restructuring charges, and the impact of
consolidating CIEs. Our Corporate & Other segment pretax adjusted operating loss
decreased $121 million , or 60%, to $81 million for the three months ended
September 30, 2021 compared to $202 million for the prior year period primarily
reflecting the impact of unlocking and loss recognition.
LTC insurance had a pretax adjusted operating loss of $1 million for the three
months ended September 30, 2021 compared to a pretax adjusted operating loss of
$135 million for the prior year period reflecting the return to more normalized
results compared to the COVID-19 related impacts in the year ago period, the
$141 million unfavorable impact from unlocking and loss recognition in the prior
year period and a net favorable out-of-period correction of $8 million .
FA business had a pretax adjusted operating loss of $7 million for the three
months ended September 30, 2021 compared to a pretax adjusted operating loss of
$9 million .
Fixed deferred annuity account balances declined 4% to $7.7 billion as of
September 30, 2021 compared to the prior year period as policies continue to
lapse and the discontinuance of new sales of fixed deferred annuities and fixed
index annuities due to the low interest rate environment. During the third
quarter of 2021, we closed on a transaction to reinsure RiverSource Life's fixed
deferred and immediate annuity policies. See Note 1 for more information on the
reinsurance transaction.
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Net Revenues
Net investment income, which excludes net realized investment gains or losses,
the market impact of hedges to offset interest rate and currency changes on
unrealized gains or losses for certain investments, block transfer reinsurance
transaction impacts, integration and restructuring charges, and the impact of
consolidating CIEs, decreased $62 million , or 67%, to $31 million for the three
months ended September 30, 2021 compared to $93 million for the prior year
period primarily reflecting lower average invested assets due to the sale of
investments to the reinsurer as a result of the fixed deferred and immediate
annuity reinsurance transaction.
Other revenues increased $43 million to $56 million for the three months ended
September 30, 2021 compared to $13 million for the prior year period primarily
reflecting the yield on deposit receivables.
Expenses
Benefits, claims, losses and settlement expenses, which excludes DSIC offset to
net realized investment gains or losses, decreased $145 million , or 71%, to
$59 million for the three months ended September 30, 2021 compared to
$204 million for the prior year period primarily reflecting the impacts from
unlocking and loss recognition. The unlocking impact for the third quarter of
2021 was an expense of $3 million compared to an unlocking and loss recognition
expense of $148 million in the prior year period.
Consolidated Results of Operations for the Nine Months Ended September 30, 2021
and 2020
The following table presents our consolidated results of operations:
Nine Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Management and financial advice fees $ 6,720 $ 5,365 $ 1,355 25 %
Distribution fees 1,368 1,239 129 10
Net investment income 1,428 933 495 53
Premiums, policy and contract charges (94) 1,019 (1,113) NM
Other revenues 259 213 46 22
Total revenues 9,681 8,769 912 10
Banking and deposit interest expense 10 53 (43) (81)
Total net revenues 9,671 8,716 955 11
Expenses
Distribution expenses 3,693 2,963 730 25
Interest credited to fixed accounts 455 523 (68) (13)
Benefits, claims, losses and settlement expenses 338 824 (486) (59)
Amortization of deferred acquisition costs 77 349 (272) (78)
Interest and debt expense 149 124 25 20
General and administrative expense 2,475 2,292 183 8
Total expenses 7,187 7,075 112 2
Pretax income 2,484 1,641 843 51
Income tax provision 425 284 141 50
Net income $ 2,059 $ 1,357 $ 702 52 %
NM Not Meaningful.
Overall
Pretax income increased $843 million , or 51%, to $2.5 billion for the nine
months ended September 30, 2021 compared to $1.6 billion for the prior year
period.
•The favorable impact of the block transfer reinsurance transaction was $521
million for the nine months ended September 30, 2021 primarily reflecting the
net realized gains on the investments sold to the reinsurer.
•The favorable impact of unlocking and LTC loss recognition was $17 million for
the nine months ended September 30, 2021 compared to an unfavorable impact of
$454 million for the prior year period.
•A positive impact from higher average equity markets during the nine months
ended September 30, 2021 compared to the prior year period.
•A positive impact from higher client net inflows and higher transactional
activity during the nine months ended September 30, 2021 compared to the prior
year period.
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•The mean reversion related impact was a benefit of $107 million for the nine
months ended September 30, 2021 compared to an expense of $30 million for the
prior year period.
•The market impact on non-traditional long duration products (including variable
and fixed deferred annuity contracts and UL insurance contracts), net of hedges
and the related DSIC and DAC amortization, unearned revenue amortization and the
reinsurance accrual was an expense of $577 million for the nine months ended
September 30, 2021 compared to a benefit of $239 million for the prior
year period.
•A negative impact of $78 million in the Advice & Wealth Management segment from
lower short-term interest rates.
See our Consolidated Results of Operations for the three months ended September
30, 2021 and 2020 for a table and discussion of total pretax impacts on our
revenues and expenses attributable to unlocking and LTC loss recognition.
Net Revenues
Net revenues increased $1.0 billion , or 11%, to $9.7 billion for the nine months
ended September 30, 2021 compared to $8.7 billion for the prior year period.
Management and financial advice fees increased $1.4 billion , or 25%, to
$6.7 billion for the nine months ended September 30, 2021 compared to
$5.4 billion for the prior year period reflecting higher average equity markets
and higher wrap account net inflows, an increase in performance fees of $16
million and an unfavorable $19 million performance fee correction in the prior
year period.
Distribution fees increased $129 million , or 10%, to $1.4 billion for the nine
months ended September 30, 2021 compared to $1.2 billion for the prior year
period due to higher average equity markets and increased transactional
activity, partially offset by $55 million of lower fees on off-balance sheet
brokerage cash primarily due to a decrease in short-term interest rates.
Net investment income increased $495 million , or 53%, to $1.4 billion for the
nine months ended September 30, 2021 compared to $933 million for the prior year
period primarily reflecting:
•Net realized investment gains of $627 million for the nine months ended
September 30, 2021 compared to net realized investment losses of $18 million for
the prior year period. Net realized investment gains for the nine months ended
September 30, 2021 included net realized gains of $553 million on
Available-for-Sale securities and a $55 million net gain related to commercial
mortgage loans primarily due to the sale of securities and loans to the
reinsurer as a result of the fixed deferred and immediate annuity reinsurance
transaction that closed in the third quarter 2021, as well as a $15 million gain
on a strategic investment.
•An increase of $42 million in net investment income of CIEs
•The unfavorable impact of continued low interest rates, including lower
investment yields on the investment portfolio supporting the certificate and
on-balance sheet brokerage cash products.
•A $40 million unfavorable change in the market impact of hedges to offset
interest rate and currency changes on certain investments.
•The unfavorable impact of lower average invested assets due to the sale of
investments as a result of the fixed deferred and immediate annuity reinsurance
transaction.
Premiums, policy and contract charges decreased $1.1 billion , to an expense of
$94 million for the nine months ended September 30, 2021 compared to
$1.0 billion for the prior year period primarily reflecting ceded premiums of
$1.2 billion associated with the reinsurance transaction for life contingent
immediate annuity policies.
Other revenues increased $46 million , or 22%, to $259 million for the nine
months ended September 30, 2021 compared to $213 million for the prior year
period primarily reflecting the yield on deposit receivables.
Banking and deposit interest expense decreased $43 million , or 81%, to
$10 million for the nine months ended September 30, 2021 compared to
$53 million for the prior year period due to lower average crediting rates on
certificates and lower average certificate balances.
Expenses
Total expenses increased $112 million , or 2%, to $7.2 billion for the nine
months ended September 30, 2021 compared to $7.1 billion for the prior year
period.
Distribution expenses increased $730 million , or 25%, to $3.7 billion for the
nine months ended September 30, 2021 compared to $3.0 billion for the prior year
period reflecting higher advisor compensation due to an increase in average wrap
account balances and increased transactional activity.
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Interest credited to fixed accounts decreased $68 million , or 13%, to
$455 million for the nine months ended September 30, 2021 compared to
$523 million for the prior year period primarily reflecting the following items:
•A $39 million increase in expense from the unhedged nonperformance credit
spread risk adjustment on IUL benefits. The unfavorable impact of the
nonperformance credit spread was $16 million for the nine months ended
September 30, 2021 compared to a favorable impact of $23 million for the prior
year period.
•A $98 million decrease in expense from other market impacts on IUL benefits,
net of hedges, which was a benefit of $45 million for the nine months ended
September 30, 2021 compared to an expense of $53 million for the prior year
period. The decrease in expense was primarily due to a decrease in the IUL
embedded derivative in the current period, which reflected lower option costs
due to higher discount rates compared to an increase in the IUL embedded
derivative in the prior year period, which reflected higher option costs due to
lower discount rates.
Benefits, claims, losses and settlement expenses decreased $486 million to
$338 million for the nine months ended September 30, 2021 compared to
$824 million for the prior year period primarily reflecting the following items:
•A $1.2 billion decrease in expense associated with the reinsurance transaction
for life contingent immediate annuity policies.
•A $687 million increase in expense primarily reflecting the impact of
year-over-year changes in the unhedged nonperformance credit spread risk
adjustment on variable annuity guaranteed benefits. The unfavorable impact of
the nonperformance credit spread was $157 million for the nine months ended
September 30, 2021 and was driven by changes in the undiscounted embedded
derivative liability compared to a favorable impact of $530 million for the
prior year period. As the undiscounted embedded derivative liability on which
the nonperformance credit spread is applied increases (decreases), the impact of
the nonperformance credit spread is favorable (unfavorable) to expense.
Additionally, as the estimate of the nonperformance credit spread over the LIBOR
swap curve tightens or widens, the embedded derivative liability will increase
or decrease.
•A $342 million increase in expense from other market impacts on variable
annuity guaranteed benefits, net of hedges in place to offset those risks and
the related DSIC amortization. This increase was the result of an unfavorable
$3.9 billion change in the market impact on derivatives hedging the variable
annuity guaranteed benefits, partially offset by a favorable $3.5 billion change
in the market impact on variable annuity guaranteed living benefits reserves.
The main market drivers contributing to these changes are summarized below:
•Equity market impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in an
expense for the nine months ended September 30, 2021 compared to a benefit in
the prior year period.
•Interest rate impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
lower expense for the nine months ended September 30, 2021 compared to the prior
year period.
•Volatility impact on the variable annuity guaranteed living benefits liability
net of the impact on the corresponding hedge assets resulted in a lower expense
for the nine months ended September 30, 2021 compared to the prior year period.
•Other unhedged items, including the difference between the assumed and actual
underlying separate account investment performance, fixed income credit
exposures, transaction costs and various behavioral items, were a net benefit
for the nine months ended September 30, 2021 compared to a net expense for the
prior year period.
•The impact of unlocking excluding LTC was an expense of $59 million for the
nine months ended September 30, 2021 compared to an expense of $212 million for
the prior year period.
•The annual review of LTC future policy benefit reserve in the third quarter of
2021 resulted in unlocking of $3 million compared to unlocking and loss
recognition of $141 million in the prior year period.
•The mean reversion related impact was a benefit of $65 million for the nine
months ended September 30, 2021 compared to an expense of $21 million for the
prior year period.
Amortization of DAC decreased $272 million , or 78%, to $77 million for the nine
months ended September 30, 2021 compared to $349 million for the
prior year period primarily reflecting the following items:
•The impact of unlocking in the third quarter of 2021 was a benefit of $60
million compared to an expense of $100 million in the prior year period.
•The DAC offset to the market impact on non-traditional long-duration products
was a benefit of $42 million for the nine months ended September 30, 2021
compared to an expense of $89 million for the prior year period.
•The mean reversion related impact was a benefit of $41 million for the nine
months ended September 30, 2021 compared to an expense of $9 million for the
prior year period.
•A higher level of normalized amortization due to the growth of variable
annuities and unlocked market and policyholder assumptions in the prior year.
Interest and debt expense increased $25 million , or 20%, to $149 million for the
nine months ended September 30, 2021 compared to $124 million for the prior year
period primarily due to an increase in interest expense of CIEs.
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General and administrative expense increased $183 million , or 8%, to
$2.5 billion for the nine months ended September 30, 2021 compared to
$2.3 billion for the prior year period primarily reflecting higher performance
related compensation, higher expenses from CIEs, an unfavorable foreign exchange
impact, and higher volume related expenses, partially offset by disciplined
expense management and reengineering.
Income Taxes
Our effective tax rate was 17.1% for the nine months ended September 30, 2021
compared to 17.4% for the prior year period. See Note 16 to our Consolidated
Financial Statements for additional discussion on income taxes.
Results of Operations by Segment for the Nine Months Ended September 30, 2021
and 2020
The following table presents summary financial information by segment:
Nine Months Ended September 30,
2021 2020
(in millions)
Advice & Wealth Management
Net revenues $ 5,907 $ 4,899
Expenses 4,636 3,930
Adjusted operating earnings $ 1,271 $ 969
Asset Management
Net revenues $ 2,622 $ 2,093
Expenses 1,856 1,597
Adjusted operating earnings $ 766 $ 496
Retirement & Protection Solutions
Net revenues $ 2,429 $ 2,295
Expenses 1,877 1,995
Adjusted operating earnings $ 552 $ 300
Corporate & Other
Net revenues $ 371 $ 412
Expenses 550 721
Adjusted operating loss $ (179) $ (309)
Advice & Wealth Management
The following table presents the changes in wrap account assets and average
balances for the nine months ended
2021 2020
(in billions)
Beginning balance $ 380.0 $ 317.5
Net flows (1) 29.9 18.1
Market appreciation (depreciation) and other (1) 25.5 4.4
Ending balance
$ 435.4 $ 340.0
Advisory wrap account assets ending balance (2)
Average advisory wrap account assets (3)
$ 406.6 $ 309.8 (1) Beginning in the first quarter of 2021, wrap net flows is calculated including dividends and interest less fees which were previously recorded in Market appreciation (depreciation) and other. Net flows excludes short-term and long-term capital gain distributions. Prior periods have been restated. (2) Advisory wrap account assets represent those assets for which clients receive advisory services and are the primary driver of revenue earned on wrap accounts. Clients may hold non-advisory investments in their wrap accounts that do not incur an advisory fee. (3) Average ending balances are calculated using an average of the prior period's ending balance and all months in the current period excluding the most recent month for the six months endedSeptember 30, 2021 and 2020. Wrap account assets increased$55.4 billion , or 15%, during the nine months endedSeptember 30, 2021 due to net inflows of$29.9 billion and market appreciation and other of$25.5 billion . Average advisory wrap account assets increased$96.8 billion , or 31%, compared to the prior year period primarily reflecting market appreciation and net inflows.
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The following table presents the results of operations of our Advice & Wealth
Management segment on an adjusted operating basis:
Nine Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Management and financial advice fees $ 3,878 $ 3,070 $ 808 26 %
Distribution fees 1,682 1,480 202 14
Net investment income 189 247 (58) (23)
Other revenues 168 155 13 8
Total revenues 5,917 4,952 965 19
Banking and deposit interest expense 10 53 (43) (81)
Total net revenues 5,907 4,899 1,008 21
Expenses
Distribution expenses 3,567 2,881 686 24
Interest and debt expense 8 8 - -
General and administrative expense 1,061 1,041 20 2
Total expenses 4,636 3,930 706 18
Adjusted operating earnings $ 1,271 $ 969 $ 302 31 %
Our Advice & Wealth Management segment pretax adjusted operating earnings, which
exclude net realized investment gains or losses, increased $302 million , or 31%,
to $1.3 billion for the nine months ended September 30, 2021 compared to
$969 million for the prior year period due to higher average wrap account
balances and increased transactional activity, partially offset by lower
earnings on brokerage cash as a result of low interest rates. Pretax adjusted
operating margin was 21.5% for the for the nine months ended September 30, 2021
compared to 19.8% for the prior year period.
Net Revenues
Net revenues exclude net realized investment gains or losses. Net revenues
increased $1.0 billion , or 21%, to $5.9 billion for the nine months ended
September 30, 2021 compared to $4.9 billion for the prior year period.
Management and financial advice fees increased $808 million , or 26%, to
$3.9 billion for the nine months ended September 30, 2021 compared to
$3.1 billion for the prior year period primarily due to growth in average wrap
account assets. Average advisory wrap account assets increased $96.8 billion , or
31%, compared to the prior year period primarily reflecting market appreciation
and net inflows.
Distribution fees increased $202 million , or 14%, to $1.7 billion for the nine
months ended September 30, 2021 compared to $1.5 billion for the prior year
period reflecting increased transactional activity and higher average equity
markets, partially offset by $55 million of lower fees on off-balance sheet
brokerage cash due to a decrease in short-term interest rates.
Net investment income, which excludes net realized investment gains or losses,
decreased $58 million , or 23%, to $189 million for the nine months ended
September 30, 2021 compared to $247 million for the prior year period primarily
due to lower certificate balances and the unfavorable impact of continued low
interest rates, including lower investment yields on the investment portfolio
supporting the certificates and on-balance sheet brokerage cash products,
partially offset by higher average invested assets due to increased bank
deposits.
Banking and deposit interest expense decreased $43 million , or 81%, to
$10 million for the nine months ended September 30, 2021 compared to $53 million
for the prior year period primarily due to lower average crediting rates on
certificates and lower average certificate balances.
Expenses
Total expenses increased $706 million , or 18%, to $4.6 billion for the nine
months ended September 30, 2021 compared to $3.9 billion for the prior year
period.
Distribution expenses increased $686 million , to $3.6 billion for the nine
months ended September 30, 2021 compared to $2.9 billion for the prior year
period reflecting higher asset-based advisor compensation from higher wrap
account assets and increased transactional activity, as well as increased
investments in recruiting experienced advisors.
General and administrative expense increased $20 million , or 2%, to $1.1 billion
for the nine months ended September 30, 2021 compared to $1.0 billion for the
prior year period primarily due to higher volume related expenses and higher
performance-based compensation expenses.
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Asset Management
The following table presents global managed assets by type: Average (1)
Nine Months Ended
As of September 30, September 30,
2021 2020 Change 2021 2020 Change
(in billions)
Equity $ 332.7 $ 264.8 $ 67.9 26 % $ 326.3 $ 252.5 $ 73.8 29 %
Fixed income 199.3 188.8 10.5 6 198.9 183.2 15.7 9
Money market 5.8 5.1 0.7 14 5.9 5.0 0.9 18
Alternative 3.8 3.5 0.3 9 3.8 3.1 0.7 23
Hybrid and other 41.8 35.8 6.0 17 40.8 35.0 5.8 17
Total managed assets $ 583.4 $ 498.0 $ 85.4 17 % $ 575.7 $ 478.8 $ 96.9 20 %
(1) Average ending balances are calculated using an average of the prior
period's ending balance and all months in the current period.
The following table presents the changes in global managed assets:
Nine Months Ended September 30,
2021 2020
(in billions)
Global Retail Funds
Beginning assets $ 323.5 $ 287.5
Inflows 58.4 47.8
Outflows (50.2) (47.5)
Net VP/VIT fund flows (3.1) (2.0)
Net new flows 5.1 (1.7)
Reinvested dividends 5.5 3.9
Net flows 10.6 2.2
Distributions (6.4) (4.5)
Market appreciation (depreciation) and other 29.0 4.6
Foreign currency translation (1) (1.0) 0.1
Total ending assets 355.7 289.9
Global Institutional
Beginning assets 223.1 206.8
Inflows (2) 26.5 22.0
Outflows (2) (21.6) (25.5)
Net flows 4.9 (3.5)
Market appreciation (depreciation) and other (3) 1.4 5.6
Foreign currency translation (1) (1.7) (0.8)
Total ending assets 227.7 208.1
Total managed assets $ 583.4 $ 498.0
Total net flows $ 15.5 $ (1.3)
Legacy insurance partners net flows (4) $
(4.0)
(1) Amounts represent local currency to US dollar translation for reporting purposes. (2) Global Institutional inflows and outflows include net flows from our RiverSource Structured Annuity product beginning in Q1 2020 andAmeriprise Bank , FSB beginning in Q1 2021. (3) Included in Market appreciation (depreciation) and other for Global Institutional is the change in affiliated general account balance, excluding net flows related to our structured variable annuity product beginning in Q1 2020 andAmeriprise Bank , FSB beginning in Q1 2021. (4) Legacy insurance partners assets and net flows are included in the rollforwards above.
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Total segment AUM increased $36.8 billion , or 7%, during the nine months ended
September 30, 2021 . Net flows were $15.5 billion for the nine months ended
September 30, 2021 , a $16.8 billion improvement compared to the prior year
period.
The following table presents the results of operations of our Asset Management
segment on an adjusted operating basis:
Nine Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Management and financial advice fees $ 2,265 $ 1,794 $ 471 26 %
Distribution fees 352 303 49 16
Net investment income 4 (5) 9 NM
Other revenues 1 1 - -
Total revenues 2,622 2,093 529 25
Banking and deposit interest expense - - - -
Total net revenues 2,622 2,093 529 25
Expenses
Distribution expenses 838 691 147 21
Amortization of deferred acquisition costs 9 8 1 13
Interest and debt expense 3 4 (1) (25)
General and administrative expense 1,006 894 112 13
Total expenses 1,856 1,597 259 16
Adjusted operating earnings $ 766 $ 496 $ 270 54 %
NM Not Meaningful.
Our Asset Management segment pretax adjusted operating earnings, which exclude
net realized investment gains or losses, increased $270 million , or 54%, to
$766 million for the nine months ended September 30, 2021 compared to
$496 million for the prior year period primarily due to market appreciation and
disciplined expense management.
Net Revenues
Net revenues, which exclude net realized investment gains or losses, increased
$529 million , or 25%, to $2.6 billion for the nine months ended September 30,
2021 compared to $2.1 billion for the prior year period.
Management and financial advice fees increased $471 million , or 26%, to
$2.3 billion for the nine months ended September 30, 2021 compared to
$1.8 billion for the prior year period primarily due to higher average equity
markets, an increase in performance fees of $16 million , an unfavorable $19
million performance fee correction in the prior year period, and a favorable
impact of foreign exchange rates.
Distribution fees increased $49 million , or 16%, to $352 million for the nine
months ended September 30, 2021 compared to $303 million for the prior year
period primarily due to higher average equity markets.
Net investment income, which excludes net realized investment gains or losses,
increased $9 million to $4 million for the nine months ended September 30, 2021
compared to a loss of $5 million for the prior year period primarily reflecting
an impairment of an investment in the year ago period.
Expenses
Total expenses increased $259 million , or 16%, to $1.9 billion for the nine
months ended September 30, 2021 compared to $1.6 billion for the prior year
period.
Distribution expenses increased $147 million , or 21%, to $838 million for the
nine months ended September 30, 2021 compared to $691 million for the prior year
period reflecting higher average equity markets.
General and administrative expense increased $112 million , or 13%, to
$1.0 billion for the nine months ended September 30, 2021 compared to
$894 million for the prior year period primarily reflecting higher compensation
expenses related to stronger business performance, higher volume related
expenses, and the negative impact of foreign exchange rates.
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Retirement & Protection Solutions
The following table presents the results of operations of our Retirement &
Protection Solutions segment on an adjusted operating basis:
Nine Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Management and financial advice fees $ 695 $ 612 $ 83 14 %
Distribution fees 363 322 41 13
Net investment income 367 380 (13) (3)
Premiums, policy and contract charges 1,001 978 23 2
Other revenues 3 3 - -
Total revenues 2,429 2,295 134 6
Banking and deposit interest expense - - - -
Total net revenues 2,429 2,295 134 6
Expenses
Distribution expenses 397 331 66 20
Interest credited to fixed accounts 293 297 (4) (1)
Benefits, claims, losses and settlement expenses 798 878 (80) (9)
Amortization of deferred acquisition costs 138 241 (103) (43)
Interest and debt expense 28 29 (1) (3)
General and administrative expense 223 219 4 2
Total expenses 1,877 1,995 (118) (6)
Adjusted operating earnings $ 552 $ 300 $ 252 84 %
Our Retirement & Protection Solutions segment pretax adjusted operating
earnings, which excludes net realized investment gains or losses (net of the
related DAC amortization, unearned revenue amortization and the reinsurance
accrual), the market impact on variable annuity guaranteed benefits (net of
hedges and the related DSIC and DAC amortization), the market impact on IUL
benefits (net of hedges and the related DAC amortization, unearned revenue
amortization and the reinsurance accrual), mean reversion related impacts, and
block transfer reinsurance transaction impacts increased $252 million , or 84%,
to $552 million for the nine months ended September 30, 2021 compared to $300
million for the prior year period.
Net Revenues
Management and financial advice fees increased $83 million , or 14%, to $695
million for the nine months ended September 30, 2021 compared to $612 million
for the prior year period primarily due to market appreciation, partially offset
by variable annuity net outflows.
Distribution fees increased $41 million , or 13%, to $363 million for the nine
months ended September 30, 2021 compared to $322 million for the prior year
period due to higher average equity markets.
Expenses
Distribution expenses increased $66 million , or 20%, to $397 million for the
nine months ended September 30, 2021 compared to $331 million for the prior year
period primarily reflecting market appreciation and higher variable annuity and
insurance sales.
Benefits, claims, losses and settlement expenses, which exclude the market
impact on variable annuity guaranteed benefits (net of hedges and the related
DSIC amortization) and mean reversion related impacts, decreased $80 million , or
9%, to $798 million for the nine months ended September 30, 2021 compared to
$878 million for the prior year period primarily reflecting the impact of
unlocking, partially offset by higher reserve funding as surrenders and
withdrawals returned to more normalized levels versus the historically low
levels experienced in the prior year period. The unlocking impact for the third
quarter of 2021 was an expense of $89 million primarily reflecting continued
lower surrender rates compared to an expense of $189 million in the prior year
period which was also driven by lower surrender rates.
Amortization of DAC, which excludes mean reversion related impacts and the DAC
offset to the market impact on variable annuity guaranteed benefits, decreased
$103 million , or 43%, to $138 million for the nine months ended September 30,
2021 compared to $241 million for the prior year period reflecting the impact of
unlocking due to lower surrender rates, partially offset by a higher level of
normalized amortization. The unlocking impact for the third quarter of 2021 was
a benefit of $65 million compared to an expense of $108 million in the prior
year period.
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Corporate & Other
The following table presents the results of operations of our Corporate & Other
segment on an adjusted operating basis:
Nine Months Ended September 30,
2021 2020 Change
(in millions)
Revenues
Net investment income $ 210 $ 285 $ (75) (26) %
Premiums, policy and contract charges 75 76 (1) (1)
Other revenues 87 53 34 64
Total revenues 372 414 (42) (10)
Banking and deposit interest expense 1 2 (1) (50)
Total net revenues 371 412 (41) (10)
Expenses
Distribution expenses (6) (5) (1) (20)
Interest credited to fixed accounts 187 196 (9) (5)
Benefits, claims, losses and settlement expenses 126 305 (179) (59)
Amortization of deferred acquisition costs 7 3 4 NM
Interest and debt expense 48 50 (2) (4)
General and administrative expense 188 172 16 9
Total expenses 550 721 (171) (24)
Adjusted operating loss $ (179) $ (309) $ 130 42 %
NM Not Meaningful.
Our Corporate & Other segment pretax adjusted operating loss excludes net
realized investment gains or losses, the market impact on fixed index annuity
benefits (net of hedges and the related DAC amortization), the market impact of
hedges to offset interest rate and currency changes on unrealized gains or
losses for certain investments, block transfer reinsurance transaction impact,
gain or loss on disposal of a business that is not considered discontinued
operations, integration and restructuring charges, and the impact of
consolidating CIEs. Our Corporate & Other segment pretax adjusted operating loss
decreased $130 million , or 42%, to $179 million for the nine months ended
September 30, 2021 compared to $309 million for the prior year period.
LTC insurance had a pretax adjusted operating earnings of $48 million for the
nine months ended September 30, 2021 compared to a pretax adjusted operating
loss of $116 million for the prior year period primarily reflecting the impact
from unlocking and loss recognition in the prior year period.
FA business had a pretax adjusted operating loss of $17 million for the nine
months ended September 30, 2021 compared to a pretax adjusted operating loss of
$6 million for the prior year period reflecting fixed annuity net outflows and
the impact of low interest rates.
Net Revenues
Net investment income, which excludes net realized investment gains or losses,
the market impact of hedges to offset interest rate and currency changes on
unrealized gains or losses for certain investments, integration and
restructuring charges, and the impact of consolidating CIEs, decreased
$75 million , or 26%, to $210 million for the nine months ended September 30,
2021 compared to $285 million for the prior year period primarily reflecting
lower average invested assets due to the sale of investments to the reinsurer as
a result of the fixed deferred and immediate annuity reinsurance transaction,
lower asset earned rates, and a $7 million impairment in our affordable housing
partnerships, partially offset by a $15 million gain on a strategic investment.
Other revenues increased $34 million to $87 million for the nine months ended
September 30, 2021 compared to $53 million for the prior year period primarily
reflecting the yield on deposit receivables.
Expenses
Benefits, claims, losses and settlement expenses, which excludes DSIC offset to
net realized investment gains or losses, decreased $179 million , or 59%, to
$126 million for the nine months ended September 30, 2021 compared to
$305 million for the prior year period primarily reflecting the impacts from
unlocking and loss recognition and lower LTC insurance claims. The unlocking
impact for the third quarter of 2021 was an expense of $3 million compared to an
unlocking and loss recognition expense of $148 million in the prior year period.
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General and administrative expense, which excludes integration and restructuring
charges, increased $16 million , or 9%, to $188 million for the nine months ended
September 30, 2021 compared to $172 million for the prior year period primarily
due to an unfavorable change in the mark-to-market impact on share-based
compensation expense due to share price appreciation.
Market Risk
Our primary market risk exposures are interest rate, equity price, foreign
currency exchange rate and credit risk. Equity price and interest rate
fluctuations can have a significant impact on our results of operations,
primarily due to the effects they have on the asset management and other
asset-based fees we earn, the spread income generated on our fixed insurance,
brokerage client cash balances, banking deposits, face-amount certificate
products, fixed portion of our variable annuities and variable insurance
contracts, and the fixed deferred annuities, the value of DAC and DSIC assets,
the value of liabilities for guaranteed benefits associated with our variable
annuities and the value of derivatives held to hedge these benefits.
Our earnings from fixed insurance, fixed portion of variable annuities and
variable insurance contracts, and the fixed deferred annuities are based upon
the spread between rates earned on assets held and the rates at which interest
is credited to accounts. We primarily invest in fixed rate securities to fund
the rate credited to clients. We guarantee an interest rate to the holders of
these products. Investment assets and client liabilities generally differ as it
relates to basis, repricing or maturity characteristics. Rates credited to
clients' accounts generally reset at shorter intervals than the yield on the
underlying investments. Therefore, in an increasing interest rate environment,
higher interest rates may be reflected in crediting rates to clients sooner than
in rates earned on invested assets, which could result in a reduced spread
between the two rates, reduced earned income and a negative impact on pretax
income. However, the current low interest rate environment is resulting in
interest rates below the level of some of our liability guaranteed minimum
interest rates ("GMIRs"). Hence, a modest rise in interest rates would not
necessarily result in changes to all the liability credited rates while
projected asset purchases would capture the full increase in interest rates.
This dynamic would result in widening spreads under a modestly rising rate
scenario given the current relationship between the current level of interest
rates and the underlying GMIRs on the business.
As a result of the low interest rate environment, our current reinvestment
yields are generally lower than the current portfolio yield. We expect our
portfolio income yields to continue to decline in future periods if interest
rates remain low. The carrying value and weighted average yield of
non-structured fixed maturity securities and commercial mortgage loans that may
generate proceeds to reinvest through September 30, 2023 due to prepayment,
maturity or call activity at the option of the issuer, excluding securities with
a make-whole provision, were $2.5 billion and 1.8%, respectively, as of
September 30, 2021 . In addition, residential mortgage backed securities, which
are subject to prepayment risk as a result of the low interest rate environment,
totaled $9.7 billion and had a weighted average yield of 1.4% as of
September 30, 2021 . While these amounts represent investments that could be
subject to reinvestment risk, it is also possible that these investments will be
used to fund liabilities or may not be prepaid and will remain invested at their
current yields. In addition to the interest rate environment, the mix of benefit
payments versus product sales as well as the timing and volumes associated with
such mix may impact our investment yield. Furthermore, reinvestment activities
and the associated investment yield may also be impacted by corporate strategies
implemented at management's discretion. The average yield for investment
purchases during the nine months ended September 30, 2021 was approximately
1.3%.
The reinvestment of proceeds from maturities, calls and prepayments at rates
below the current portfolio yield, which may be below the level of some
liability GMIRs, will have a negative impact to future operating results. To
mitigate the unfavorable impact that the low interest rate environment has on
our spread income, we assess reinvestment risk in our investment portfolio and
monitor this risk in accordance with our asset/liability management framework.
In addition, we may reduce the crediting rates on our fixed products when
warranted, subject to guaranteed minimums.
In addition to the fixed rate exposures noted above, RiverSource Life has the
following variable annuity guarantee benefits: guaranteed minimum withdrawal
benefits ("GMWB"), guaranteed minimum accumulation benefits ("GMAB"), guaranteed
minimum death benefits ("GMDB") and guaranteed minimum income benefits ("GMIB").
Each of these benefits guarantees payouts to the annuity holder under certain
specific conditions regardless of the performance of the underlying invested
assets.
The variable annuity guarantees continue to be managed by utilizing a hedging
program which attempts to match the sensitivity of the assets with the
sensitivity of the liabilities. This approach works with the premise that
matched sensitivities will produce a highly effective hedging result. Our
comprehensive hedging program focuses mainly on first order sensitivities of
assets and liabilities: Equity Market Level (Delta), Interest Rate Level (Rho)
and Volatility (Vega). Additionally, various second order sensitivities are
managed. We use various options, swaptions, swaps and futures to manage risk
exposures. The exposures are measured and monitored daily, and adjustments to
the hedge portfolio are made as necessary.
We have a macro hedge program to provide protection against the statutory tail
scenario risk arising from variable annuity reserves on our statutory surplus
and to cover some of the residual risks not covered by other hedging activities.
We assess the residual risk under a range of scenarios in creating and executing
the macro hedge program. As a means of economically hedging these risks, we may
use a combination of futures, options, swaps and swaptions. Certain of the macro
hedge derivatives used contain settlement provisions linked to both equity
returns and interest rates; the remaining are interest rate contracts or equity
contracts. The macro hedge program
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could result in additional earnings volatility as changes in the value of the
macro hedge derivatives, which are designed to reduce statutory capital
volatility, may not be closely aligned to changes in the variable annuity
guarantee embedded derivatives.
To evaluate interest rate and equity price risk we perform sensitivity testing
which measures the impact on pretax income from the sources listed below for a
12-month period following a hypothetical 100 basis point increase in interest
rates or a hypothetical 10% decline in equity prices. The interest rate risk
test assumes a sudden 100 basis point parallel shift in the yield curve, with
rates then staying at those levels for the next 12 months. The equity price risk
test assumes a sudden 10% drop in equity prices, with equity prices then staying
at those levels for the next 12 months. In estimating the values of variable
annuities, fixed deferred indexed annuities, stock market certificates, IUL
insurance and the associated hedge assets, we assume no change in implied market
volatility despite the 10% drop in equity prices.
The following tables present our estimate of the impact on pretax income from
the above defined hypothetical market movements as of September 30, 2021 :
Equity Price Exposure to Pretax Income
Equity Price Decline 10% Before Hedge Impact Hedge Impact Net Impact
(in millions)
Asset-based management and distribution fees (1) $ (334) $ 3 $ (331)
DAC and DSIC amortization (2)(3) (15) - (15)
Variable annuities:
GMDB and GMIB (3) (4) - (4)
GMWB (3) (391) 318 (73)
GMAB (22) 21 (1)
Structured variable annuities 317 (264) 53
DAC and DSIC amortization (4) N/A N/A (1)
Total variable annuities (100) 75 (26)
Macro hedge program (5) - 189 189
Certificates - - -
IUL insurance 54 (53) 1
Total $ (395) $ 214 $ (182) (6)
N/A Not Applicable.
Interest Rate Exposure to Pretax Income
Interest Rate Increase 100 Basis Points Before Hedge Impact Hedge Impact Net Impact
(in millions)
Asset-based management and distribution fees (1) $ (62) $ - $ (62)
Variable annuities:
GMWB 1,389 (1,706) (317)
GMAB 17 (22) (5)
Structured variable annuities (19) 99 80
DAC and DSIC amortization (4) N/A N/A 31
Total variable annuities 1,387 (1,629) (211)
Macro hedge program (5) - (3) (3)
Fixed annuities, fixed insurance and fixed portion of variable annuities
and variable insurance products
63 - 63 Banking deposits 58 - 58 Brokerage client cash balances 209 - 209 Certificates 13 - 13 IUL insurance 18 2 20 Total$ 1,686 $ (1,630) $ 87 N/A Not Applicable. (1) Excludes incentive income which is impacted by market and fund performance during the period and cannot be readily estimated. (2) Market impact on DAC and DSIC amortization resulting from lower projected profits. (3) In estimating the impact to pretax income on DAC and DSIC amortization and additional insurance benefit reserves, our assumed equity asset growth rates reflect what management would follow in its mean reversion guidelines. (4) Market impact on DAC and DSIC amortization related to variable annuity riders is modeled net of hedge impact.
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(5) The market impact of the macro hedge program is modeled net of any related
impact to DAC and DSIC amortization.
(6) Represents the net impact to pretax income. The estimated net impact to
pretax adjusted operating income is approximately $(331) million .
The above results compare to an estimated negative net impact to pretax income
of $73 million related to a 10% equity price decline and an estimated positive
net impact to pretax income of $2 million related to a 100 basis point increase
in interest rates as of December 31, 2020 . The change in interest rate exposure
as of September 30, 2021 compared to December 31, 2020 was driven by variable
annuity riders, specifically GMWB, primarily due to changes in market rates.
Net impacts shown in the above table from GMWB riders result largely from
differences between the liability valuation basis and the hedging basis.
Liabilities are valued using fair value accounting principles, with risk margins
incorporated in contractholder behavior assumptions and with discount rates
increased to reflect a current market estimate of our risk of nonperformance
specific to these liabilities. Our hedging is based on our determination of
economic risk, which excludes certain items in the liability valuation including
the nonperformance spread risk.
Actual results could differ materially from those illustrated above as they are
based on a number of estimates and assumptions. These include assuming that
implied market volatility does not change when equity prices fall by 10% and
that the 100 basis point increase in interest rates is a parallel shift of the
yield curve. Furthermore, we have not tried to anticipate changes in client
preferences for different types of assets or other changes in client behavior,
nor have we tried to anticipate all strategic actions management might take to
increase revenues or reduce expenses in these scenarios.
The selection of a 100 basis point interest rate increase as well as a 10%
equity price decline should not be construed as a prediction of future market
events. Impacts of larger or smaller changes in interest rates or equity prices
may not be proportional to those shown for a 100 basis point increase in
interest rates or a 10% decline in equity prices.
Fair Value Measurements
We report certain assets and liabilities at fair value; specifically, separate
account assets, derivatives, embedded derivatives and most investments and cash
equivalents. Fair value assumes the exchange of assets or liabilities occurs in
orderly transactions and is not 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. Broker quotes are obtained when quotes
from pricing services are not available. We validate prices obtained from third
parties through a variety of means such as: price variance analysis, subsequent
sales testing, stale price review, price comparison across pricing vendors and
due diligence reviews of vendors. See Note 12 to the Consolidated Financial
Statements for additional information on our fair value measurements.
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, fixed deferred indexed annuities, structured variable annuities,
and IUL insurance, 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, fixed deferred indexed annuities, structured
annuities, and IUL insurance by updating certain contractholder assumptions,
adding explicit margins to provide for profit, risk and expense, 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 observable market data 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 September 30, 2021 . 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 future net income
would be approximately $365 million , net of DAC, DSIC, unearned revenue
amortization, the reinsurance accrual and income taxes (calculated at the
statutory tax rate of 21%), based on September 30, 2021 credit spreads.
Liquidity and Capital Resources
Overview
We maintained substantial liquidity during the nine months ended September 30,
2021 . At September 30, 2021 and December 31, 2020 , we had $7.7 billion and $6.8
billion , respectively, in cash and cash equivalents excluding CIEs and other
restricted cash on a consolidated basis.
At September 30, 2021 and December 31, 2020 , the parent company had $2.2 billion
and $1.1 billion , respectively, in cash, cash equivalents, and unencumbered
liquid securities. Liquid securities predominantly include U.S. government
agency mortgage back securities. Additional sources of liquidity include a line
of credit with an affiliate up to $1.0 billion and an unsecured revolving
committed credit facility for up to $1.0 billion that expires in June 2026 .
Management's estimate of liquidity available to the parent company in a volatile
and uncertain economic environment as of September 30, 2021 was $3.7 billion
which includes cash, cash equivalents, unencumbered liquid securities, the line
of credit with an affiliate and a portion of the committed credit facility.
Under the terms of the committed credit facility, we can increase the
availability to $1.25 billion upon satisfaction of certain approval
requirements. Available borrowings under this facility are reduced by any
outstanding letters of credit. At September 30, 2021 , we had
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AMERIPRISE FINANCIAL, INC.
no outstanding borrowings under this credit facility and had $1.1 million of
outstanding letters of credit. Our credit facility contains various
administrative, reporting, legal and financial covenants. We remain in
compliance with all such covenants at September 30, 2021 .
In addition, we have access to collateralized borrowings, which may include
repurchase agreements and Federal Home Loan Bank ("FHLB") advances. Our
subsidiaries, RiverSource Life, and Ameriprise Bank , FSB are members of the FHLB
of Des Moines , which provides access to collateralized borrowings. We had $200
million of borrowings from the FHLB, which is collateralized with commercial
mortgage backed securities and residential mortgage backed securities for both
September 30, 2021 and December 31, 2020 . 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 and stress
requirements.
We continue to monitor and respond to the ongoing COVID-19 pandemic. Our risk
management strategy is designed to provide proactive protection during stress
events such as the current pandemic. We believe our process is working as
intended, and our liquidity and capital resources have remained a source of
balance sheet strength during the nine months ended September 30, 2021 .
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, LLC ("AFS") and our clearing broker-dealer subsidiary,
American Enterprise Investment Services, Inc. ("AEIS"), our transfer agent
subsidiary, Columbia Management Investment Services Corp. , our investment
advisory company, Columbia Management Investment Advisers, LLC , and TAM UK
International Holdings Ltd , which includes Threadneedle Asset Management
Holdings Sàrl within its organizational structure. 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:
Actual Capital Regulatory Capital Requirements
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
(in millions)
RiverSource Life (1)(2) $ 3,626 $ 5,021 N/A $
993
RiverSource Life of NY (1)(2) 321 323 N/A 42 ACC (4)(5) 313 387 291 362 TAM UK International Holdings Ltd (6) 577 N/A 208
N/A
Threadneedle Asset Management Holdings Sàrl (7) N/A 445 N/A
204
Ameriprise Bank, FSB (4) (8) 747 658 251 543 AFS (3)(4) 157 134 # # Ameriprise Captive Insurance Company (3) 40 41 12
8
Ameriprise Trust Company (3) 45 42 41 37 AEIS (3)(4) 158 122 29 25 RiverSource Distributors, Inc. (3)(4) 9 12 #
#
Columbia Management Investment Distributors, Inc. (3)(4) 14 16 # # N/A Not applicable as only required to be calculated annually. # Amounts are less than$1 million . (1) Actual capital is determined on a statutory basis. (2) Regulatory capital requirement is the company action level and is based on the statutory risk-based capital filing. (3) Regulatory capital requirement is based on the applicable regulatory requirement, calculated as ofSeptember 30, 2021 andDecember 31, 2020 . (4) Actual capital is determined on an adjusted GAAP basis. (5) ACC is required to hold capital in compliance with theMinnesota Department of Commerce andSEC capital requirements. (6) Actual capital and regulatory capital requirements are determined in accordance withU.K. regulatory legislation. The regulatory capital requirements atSeptember 30, 2021 represent calculations atDecember 31, 2020 of the rule based requirements, as specified byFCA regulations for Threadneedle Asset Management Sàrl, which is used as a proxy forTAM UK International Holdings Ltd. (7) Actual capital and regulatory capital requirements are determined in accordance withU.K. regulatory legislation.
86
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AMERIPRISE FINANCIAL, INC.
(8) Regulatory capital requirement is based on minimum requirements for well
capitalized banks in accordance with the Office of the Comptroller of the
Currency ("OCC"). Beginning in the first quarter of 2021, Ameriprise Bank
transitioned to the Simplified Supervisory Formula Approach ("SSFA") for
risk-weighting non-agency securitized investments, resulting in a significant
reduction in risk-weighted assets and an improvement in regulatory capital
ratios that were already in a well-capitalized position.
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 strategy for payments to our parent holding
company from our subsidiaries, and in deciding to use cash to make capital
contributions to our subsidiaries.
During the nine months ended September 30, 2021 , the parent holding company
received cash dividends or a return of capital from its subsidiaries of $3.0
billion (including $1.7 billion from RiverSource Life) and contributed cash to
its subsidiaries of $158 million (including $42 million to Ameriprise Bank ,
FSB). During the nine months ended September 30, 2020 , the parent holding
company received cash dividends or a return of capital from its subsidiaries of
$1.5 billion (including $650 million from RiverSource Life) and contributed cash
to its subsidiaries of $284 million (including $210 million to Ameriprise Bank ,
FSB).
In 2009, RiverSource Life established an agreement to protect its exposure to
Genworth Life Insurance Company ("GLIC") for its reinsured LTC. In 2016,
substantial enhancements to this reinsurance protection agreement were
finalized. The terms of these confidential provisions within the agreement have
been shared, in the normal course of regular reviews, with our domiciliary
regulator and rating agencies. GLIC is domiciled in Delaware so in the event
GLIC were subjected to rehabilitation or insolvency proceedings, such
proceedings would be located in (and governed by) Delaware laws. Delaware courts
have a long tradition of respecting commercial and reinsurance affairs as well
as contracts among sophisticated parties. Similar credit protections to what we
have with GLIC have been tested and respected in Delaware and elsewhere in the
United States , and as a result we believe our credit protections would be
respected even in the unlikely event that GLIC becomes subject to rehabilitation
or insolvency proceedings in Delaware . Accordingly, while no credit protections
are perfect, we believe the correct way to think about the risks represented by
our counterparty credit exposure to GLIC is not the full amount of the gross
liability that GLIC reinsures, but a much smaller net exposure to GLIC (if any
that might exist after taking into account our credit protections). Thus,
management believes that our agreement and offsetting non LTC legacy
arrangements with Genworth will enable RiverSource Life to recover on all net
exposure in all material respects in the event of a rehabilitation or insolvency
of GLIC.
Dividends Paid to Shareholders and Share Repurchases
We paid regular quarterly dividends to our shareholders totaling $396 million
and $386 million for the nine months ended September 30, 2021 and 2020,
respectively. On October 26, 2021 , we announced a quarterly dividend of $1.13
per common share. The dividend will be paid on November 19, 2021 to our
shareholders of record at the close of business on November 8, 2021 .
In August 2020 , our Board of Directors authorized us to repurchase up to
$2.5 billion of our common stock through September 30, 2022 . As of September 30,
2021 , we had $932 million remaining under this share repurchase authorizations.
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 nine months ended
September 30, 2021 , we repurchased a total of 5.5 million shares of our common
stock at an average price of $246.78 per share.
Cash Flows
Cash flows of CIEs and restricted and segregated cash and cash equivalents 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. Cash and cash equivalents segregated
under federal and other regulations is held for the exclusive benefit of our
brokerage customers and is not available for general use by Ameriprise
Financial .
Operating Activities
Net cash provided by operating activities decreased $3.9 billion to $1.8 billion
for the nine months ended September 30, 2021 compared to $5.6 billion for the
prior year period primarily reflecting a $2.1 billion decrease in policyholder
account balances, future policy benefits and claims, net, a $613 million
increase in net realized investment gains and a $555 million decrease in
derivatives, net of collateral, partially offset by a $702 million increase in
net income.
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 universal life products reflected
in financing activities.
Net cash used in investing activities decreased $1.0 billion to $1.4 billion for
the nine months ended September 30, 2021 compared to $2.4 billion for the prior
year period primarily reflecting a $2.4 billion increase in proceeds from
maturities, sinking fund payments
87
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AMERIPRISE FINANCIAL, INC.
and calls of Available-for-Sale securities, partially offset by a $1.1 billion
decrease in proceeds from sales of Available-for-Sale securities and a $386
million increase in net cash flows related to investments of consolidated
investment entities.
Financing Activities
Net cash provided by financing activities decreased $534 million to $259 million
for the nine months ended September 30, 2021 compared to $793 million for the
prior year period primarily reflecting a $964 million decrease in net cash flows
from investment certificates, a $702 million increase in repayments of debt by
consolidated investment entities, a $490 million decrease in issuance of
long-term debt and a $431 million increase in repurchase of common shares,
partially offset by a $993 million increase in borrowings by consolidated
investment entities, a $754 million increase in repayments of long-term debt and
a $623 million decrease in net cash flows related to purchased options with
deferred premiums.
Contractual Commitments
There have been no material changes to our contractual obligations disclosed in
our 2020 10-K.
Off-Balance Sheet Arrangements
We provide asset management services to investment entities which are considered
to be VIEs, such as CLOs, hedge funds, property funds and other private funds,
which are sponsored by us. We consolidate certain CLOs. We have determined that
consolidation is not required for hedge funds, property funds and other private
funds, which are sponsored by us. Our maximum exposure to loss with respect to
our investment in these non-consolidated entities is limited to our carrying
value. We have no obligation to provide further financial or other support to
these investment entities nor have we provided any support to these investment
entities. See Note 4 to our Consolidated Financial Statements for additional
information on our arrangements with these investment entities.
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:
•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, the
introduction, cessation, terms or pricing of new or existing products and
services, acquisition integration, benefits and claims expenses, general and
administrative costs, consolidated tax rate, return of capital to shareholders,
debt repayment and excess capital position and financial flexibility to capture
additional growth opportunities;
•statements of the Company's position, future performance and ability to pursue
business strategy relative to the spread and impact of the COVID-19 pandemic and
the related market, economic, client, governmental and healthcare system
response;
•statements about the expected trend in the shift of the retirement product
sales business to lower risk products over time, such as products without living
benefit guarantees;
•statements about the Company's announced acquisition of BMO's European-based
asset management business, including the expected AUM of the acquired business;
•statements about the outcomes from the application to convert Ameriprise Bank ,
FSB to a state-chartered bank and national trust bank;
•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
•statements of assumptions underlying such statements.
The words "believe," "expect," "anticipate," "optimistic," "intend," "plan,"
"aim," "will," "may," "should," "could," "would," "likely," "forecast," "on
track," "project," "continue," "able to remain," "resume," "deliver," "develop,"
"evolve," "drive," "enable," "flexibility," "scenario," "case", "appear",
"expand" 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:
•the impacts on our business of the COVID-19 pandemic and the related economic,
client, governmental and healthcare system responses;
•market fluctuations and general economic and political factors, including
volatility in the U.S. and global market conditions, client behavior and
volatility in the markets for our products;
•changes in interest rates and periods of low interest rates;
•adverse capital and credit market conditions or any downgrade in our credit
ratings;
•effects of competition and the economics of changes in our product revenue mix
and distribution channels;
•declines in our investment management performance;
•our ability to compete in attracting and retaining talent, including financial
advisors;
•impairment, negative performance or default by financial institutions or other
counterparties;
•the ability to maintain our unaffiliated third-party distribution channels and
the impacts of sales of unaffiliated products;
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AMERIPRISE FINANCIAL, INC.
•changes in valuation of securities and investments included in our assets;
•the determination of the amount of allowances taken on loans and investments;
•the illiquidity of our investments;
•effects of the elimination of LIBOR on, and value of, securities and other
assets and liabilities tied to LIBOR;
•failures by other insurers that lead to higher assessments we owe to state
insurance guaranty funds;
•failures or defaults by counterparties to our reinsurance arrangements;
•inadequate reserves for future policy benefits and claims or for future
redemptions and maturities;
•deviations from our assumptions regarding morbidity, mortality and persistency
affecting our insurance profitability;
•changes to our reputation arising from employee or advisor misconduct or
otherwise;
•interruptions or other failures in our operating systems and networks,
including errors or failures caused by third-party service providers,
interference or third-party attacks;
•interruptions or other errors in our telecommunications or data processing
systems;
• identification and mitigation of risk exposure in market environments, new
products, vendors and other types of risk;
• ability of our subsidiaries to transfer funds to us to pay dividends;
• changes in exchange rates and other risks in connection with our international
operations and earnings and income generated overseas;
• occurrence of natural or man-made disasters and catastrophes;
• legal and regulatory actions brought against us;
• changes to laws and regulations that govern operation of our business;
• supervision by bank regulators and related regulatory and prudential standards
as a savings and loan holding company that may limit our activities and
strategies;
• changes in corporate tax laws and regulations and interpretations and
determinations of tax laws impacting our products;
• protection of our intellectual property and claims we infringe the
intellectual property of others;
•changes in and the adoption of new accounting standards;
•changes that could give rise to our ability to recognize the expected benefits
from the transaction with BMO Financial Group ; and
•regulatory, political, or business changes that could reduce our desire to
convert Ameriprise Bank FSB to a state industrial bank and a national trust
bank.
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. The foregoing list of factors should be read in
conjunction with the "Risk Factors" discussion included in Part I, Item 1A of
our 2020 10-K.
Ameriprise Financial announces financial and other information to investors
through the Company's investor relations website at ir.ameriprise.com, as well
as SEC filings, press releases, public conference calls and webcasts. Investors
and others interested in the company are encouraged to visit the investor
relations website from time to time, as information is updated and new
information is posted. The website also allows users to sign up for automatic
notifications in the event new materials are posted. The information found on
the website is not incorporated by reference into this report or in any other
report or document the Company furnishes or files with the SEC .
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