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Section 1: 10-Q (10-Q)

Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2018
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from_______________________to_______________________
Commission File No. 1-32525 
AMERIPRISE FINANCIAL, INC.
(Exact name of registrant as specified in its charter) 
Delaware
 
13-3180631
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1099 Ameriprise Financial Center, Minneapolis, Minnesota
55474
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code:  (612) 671-3131 
Former name, former address and former fiscal year, if changed since last report:  Not Applicable 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes x    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).       Yes x    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x
Accelerated Filer o
Non-Accelerated Filer o
(Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes o    No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at July 20, 2018
Common Stock (par value $.01 per share)
 
141,863,852 shares
 



AMERIPRISE FINANCIAL, INC. 

FORM 10-Q
INDEX 
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
 
Consolidated Statements of Operations — Three months and six months ended June 30, 2018 and 2017
Consolidated Statements of Comprehensive Income — Three months and six months ended June 30, 2018 and 2017
Consolidated Balance Sheets — June 30, 2018 and December 31, 2017
Consolidated Statements of Equity — Six months ended June 30, 2018 and 2017
Consolidated Statements of Cash Flows — Six months ended June 30, 2018 and 2017
Notes to Consolidated Financial Statements
1. Basis of Presentation
2. Recent Accounting Pronouncements
3. Revenue from Contracts with Customers
4. Variable Interest Entities
5. Investments
6. Financing Receivables
7. Deferred Acquisition Costs and Deferred Sales Inducement Costs
8. Policyholder Account Balances, Future Policy Benefits and Claims and Separate Account Liabilities
9. Variable Annuity and Insurance Guarantees
10. Debt
11. Fair Values of Assets and Liabilities
12. Offsetting Assets and Liabilities
13. Derivatives and Hedging Activities
14. Shareholders’ Equity
15. Regulatory Requirements
16. Income Taxes
17. Contingencies
18. Earnings per Share
19. Segment Information
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
Item 4.  Controls and Procedures
 
 
Part II.  Other Information
Item 1.  Legal Proceedings
Item 1A.  Risk Factors
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.  Exhibits
Signatures

2


AMERIPRISE FINANCIAL, INC. 

PART I. FINANCIAL INFORMATION 
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
2018
 
2017 (1)
2018
 
2017 (1)
(in millions, except per share amounts) 
Revenues
 
 
 
 
 
 
 
Management and financial advice fees
$
1,691

 
$
1,568

 
$
3,360

 
$
3,055

Distribution fees
465

 
425

 
933

 
866

Net investment income
419

 
391

 
815

 
782

Premiums
357

 
348

 
700

 
687

Other revenues
284

 
292

 
592

 
570

Total revenues
3,216

 
3,024

 
6,400

 
5,960

Banking and deposit interest expense
20

 
12

 
36

 
22

Total net revenues
3,196

 
3,012

 
6,364

 
5,938

Expenses
 
 
 
 
 
 
 
Distribution expenses
902

 
831

 
1,807

 
1,654

Interest credited to fixed accounts
180

 
171

 
321

 
333

Benefits, claims, losses and settlement expenses
635

 
611

 
1,129

 
1,178

Amortization of deferred acquisition costs
63

 
69

 
155

 
141

Interest and debt expense
80

 
52

 
131

 
102

General and administrative expense
788

 
767

 
1,577

 
1,544

Total expenses
2,648

 
2,501

 
5,120

 
4,952

Pretax income
548

 
511

 
1,244

 
986

Income tax provision
86

 
118

 
188

 
190

Net income
$
462

 
$
393

 
$
1,056

 
$
796

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
3.14

 
$
2.53

 
$
7.13

 
$
5.09

Diluted
$
3.10

 
$
2.50

 
$
7.02

 
$
5.01

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.90

 
$
0.83

 
$
1.73

 
$
1.58

 
 
 
 
 
 
 
 
Supplemental Disclosures:
 
 
 
 
 
 
 
Total other-than-temporary impairment losses on securities
$

 
$

 
$

 
$
(1
)
Portion of loss recognized in other comprehensive income (before taxes)

 

 

 

Net impairment losses recognized in net investment income
$

 
$

 
$

 
$
(1
)
(1) Certain prior period amounts have been restated. See Note 1 for more information.
See Notes to Consolidated Financial Statements.


3


AMERIPRISE FINANCIAL, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
2018
 
2017
2018
 
2017
(in millions) 
Net income
$
462

 
$
393

 
$
1,056

 
$
796

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(44
)
 
23

 
(15
)
 
30

Net unrealized gains (losses) on securities
(130
)
 
57

 
(392
)
 
64

Net unrealized gains (losses) on derivatives

 

 

 
1

Defined benefit plans

 

 

 
5

Other

 

 

 
(1
)
Total other comprehensive income (loss), net of tax
(174
)
 
80

 
(407
)
 
99

Total comprehensive income
$
288

 
$
473

 
$
649

 
$
895

See Notes to Consolidated Financial Statements.

4


AMERIPRISE FINANCIAL, INC. 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
June 30,
2018
 
December 31, 2017 (1)
(in millions, except share amounts)
Assets
 
 
 
Cash and cash equivalents
$
2,431

 
$
2,484

Cash of consolidated investment entities
151

 
136

Investments
35,297

 
35,925

Investments of consolidated investment entities, at fair value
1,297

 
2,131

Separate account assets
85,258

 
87,368

Receivables
5,913

 
5,762

Receivables of consolidated investment entities, at fair value
17

 
25

Deferred acquisition costs
2,768

 
2,676

Restricted and segregated cash and investments
2,591

 
3,147

Other assets
7,545

 
7,826

Total assets
$
143,268

 
$
147,480

 
 
 
 
Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Policyholder account balances, future policy benefits and claims
$
29,255

 
$
29,904

Separate account liabilities
85,258

 
87,368

Customer deposits
10,428

 
10,303

Short-term borrowings
201

 
200

Long-term debt
2,875

 
2,891

Debt of consolidated investment entities, at fair value
1,416

 
2,206

Accounts payable and accrued expenses
1,749

 
1,975

Other liabilities
6,426

 
6,575

Other liabilities of consolidated investment entities, at fair value
28

 
63

Total liabilities
137,636

 
141,485

Equity:
 
 
 
Ameriprise Financial, Inc.:
 
 
 
Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 328,289,449 and 327,506,935 respectively)
3

 
3

Additional paid-in capital
8,171

 
8,085

Retained earnings
12,126

 
11,326

Treasury shares, at cost (186,069,038 and 180,872,271 shares, respectively)
(14,489
)
 
(13,648
)
Accumulated other comprehensive income (loss), net of tax
(179
)
 
229

Total equity
5,632

 
5,995

Total liabilities and equity
$
143,268

 
$
147,480

(1) Certain prior period amounts have been restated. See Note 1 for more information.
See Notes to Consolidated Financial Statements.


5


AMERIPRISE FINANCIAL, INC. 

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)
 
Number of Outstanding Shares
Common Shares
Additional Paid-In Capital
Retained Earnings
Treasury
Shares
Accumulated Other 
Comprehensive Income (Loss)
Total
(in millions, except per share data)
Balances at January 1, 2017, previously reported
154,759,904
 
$
3
 
$
7,765
 
$
10,351
 
$
(12,027
)
$
200
 
$
6,292

Cumulative effect of change in accounting policies
 
 
 
(3
)
 
 
(3
)
Balances at January 1, 2017, restated
154,759,904
 
3
 
7,765
 
10,348
 
(12,027
)
200
 
6,289

Comprehensive income:
 
 
 
 
 
 
 
Net income
 
 
 
796
 
 
 
796

Other comprehensive income, net of tax
 
 
 
 
 
99
 
99

Total comprehensive income
 
 
 
 
 
 
895

Dividends to shareholders
 
 
 
(250
)
 
 
(250
)
Repurchase of common shares
(7,021,250
)
 
 
 
(877
)
 
(877
)
Share-based compensation plans
2,569,962
 
 
138
 
 
52
 
 
190

Balances at June 30, 2017
150,308,616
 
$
3
 
$
7,903
 
$
10,894
 
$
(12,852
)
$
299
 
$
6,247

 
 
 
 
 
 
 
 
Balances at January 1, 2018 (1)
146,634,664
 
$
3
 
$
8,085
 
$
11,326
 
$
(13,648
)
$
229
 
$
5,995

Cumulative effect of change in accounting policies
 
 
 
1
 
 
(1
)

Comprehensive income:
 
 
 
 
 
 
 
Net income
 
 
 
1,056
 
 
 
1,056

Other comprehensive loss, net of tax
 
 
 
 
 
(407
)
(407
)
Total comprehensive income
 
 
 
 
 
 
649

Dividends to shareholders
 
 
 
(257
)
 
 
(257
)
Repurchase of common shares
(5,978,029
)
 
 
 
(900
)
 
(900
)
Share-based compensation plans
1,563,776
 
 
86
 
 
59
 
 
145

Balances at June 30, 2018
142,220,411
 
$
3
 
$
8,171
 
$
12,126
 
$
(14,489
)
$
(179
)
$
5,632

(1) Prior period retained earnings have been restated. See Note 1 for more information.
See Notes to Consolidated Financial Statements.

6


AMERIPRISE FINANCIAL, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
Six Months Ended June 30,
2018
 
2017
(in millions)
Cash Flows from Operating Activities
 
 
 
Net income
$
1,056

 
$
796

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation, amortization and accretion, net
107

 
121

Deferred income tax expense (benefit)
53

 
6

Share-based compensation
69

 
61

Net realized investment (gains) losses
(12
)
 
(40
)
Net trading (gains) losses
(6
)
 
(3
)
Loss from equity method investments
18

 
25

Other-than-temporary impairments and provision for loan losses

 
1

Net (gains) losses of consolidated investment entities
(24
)
 
2

Changes in operating assets and liabilities:
 
 
 
Restricted and segregated investments
224

 
300

Deferred acquisition costs
(9
)
 
(4
)
Other investments, net
110

 
(107
)
Policyholder account balances, future policy benefits and claims, net
(407
)
 
(384
)
Derivatives, net of collateral
205

 
447

Receivables
(121
)
 
(168
)
Brokerage deposits
(394
)
 
(135
)
Accounts payable and accrued expenses
(220
)
 
(137
)
Other operating assets and liabilities of consolidated investment entities, net
(83
)
 
1

Other, net
(5
)
 
(46
)
Net cash provided by (used in) operating activities
561

 
736

 
 
 
 
Cash Flows from Investing Activities
 
 
 
Available-for-Sale securities:
 
 
 
Proceeds from sales
401

 
276

Maturities, sinking fund payments and calls
3,124

 
2,560

Purchases
(3,900
)
 
(2,495
)
Proceeds from sales, maturities and repayments of mortgage loans
164

 
241

Funding of mortgage loans
(97
)
 
(249
)
Proceeds from sales and collections of other investments
133

 
142

Purchase of other investments
(170
)
 
(223
)
Purchase of investments by consolidated investment entities
(228
)
 
(839
)
Proceeds from sales, maturities and repayments of investments by consolidated investment entities
870

 
864

Purchase of land, buildings, equipment and software
(69
)
 
(72
)
Other, net
(12
)
 
22

Net cash provided by (used in) investing activities
$
216

 
$
227

See Notes to Consolidated Financial Statements.

7


AMERIPRISE FINANCIAL, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

 
 
Six Months Ended June 30,
 
2018
 
2017
 
(in millions)
 
Cash Flows from Financing Activities
 
 
 
 
Investment certificates:
 
 
 
 
Proceeds from additions
$
2,899

 
$
2,507

 
Maturities, withdrawals and cash surrenders
(2,381
)
 
(2,211
)
 
Policyholder account balances:
 
 
 
 
Deposits and other additions
985

 
1,042

 
Net transfers from (to) separate accounts
(59
)
 
(71
)
 
Surrenders and other benefits
(977
)
 
(987
)
 
Cash paid for purchased options with deferred premiums
(129
)
 
(132
)
 
Cash received from purchased options with deferred premiums
119

 
39

 
Repayments of long-term debt
(6
)
 
(5
)
 
Dividends paid to shareholders
(253
)
 
(244
)
 
Repurchase of common shares
(829
)
 
(788
)
 
Exercise of stock options
2

 
8

 
Repayments of debt by consolidated investment entities
(518
)
 
(24
)
 
Net cash provided by (used in) financing activities
(1,147
)
 
(866
)
 
Effect of exchange rate changes on cash

 
21

 
Net increase (decrease) in cash, cash equivalents and restricted cash
(370
)
 
118

 
Cash, cash equivalents and restricted cash at beginning of period
5,144

 
5,392

 
Cash, cash equivalents and restricted cash at end of period
$
4,774

 
$
5,510

 
 
 
 
 
 
Supplemental Disclosures:
 
 
 
 
Interest paid excluding consolidated investment entities
$
101

 
$
89

 
Interest paid by consolidated investment entities
69

 
43

 
Income taxes paid, net
189

 
311

 
Non-cash investing activity:
 
 
 
 
Partnership commitments not yet remitted

 
9

 
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
 
(in millions)
 
 
Reconciliation of cash, cash equivalents and restricted cash:
 
 
 
 
Cash and cash equivalents
$
2,431

 
$
2,484

 
Cash of consolidated investment entities
151

 
136

 
Restricted and segregated cash and investments
2,591

 
3,147

 
Less: Restricted and segregated investments
(399
)
 
(623
)
 
Total cash, cash equivalents and restricted cash per consolidated statements of cash flows
$
4,774

 
$
5,144

 
See Notes to Consolidated Financial Statements.

8


AMERIPRISE FINANCIAL, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 
1. Basis of Presentation
Ameriprise Financial, Inc. is a holding company, which primarily conducts business through its subsidiaries to provide financial planning, products and services that are designed to be utilized as solutions for clients’ cash and liquidity, asset accumulation, income, protection and estate and wealth transfer needs. The foreign operations of Ameriprise Financial, Inc. are conducted primarily through Threadneedle Asset Management Holdings Sàrl and Ameriprise Asset Management Holdings GmbH (collectively, “Threadneedle”).
The accompanying Consolidated Financial Statements include the accounts of Ameriprise Financial, Inc., companies in which it directly or indirectly has a controlling financial interest and variable interest entities (“VIEs”) in which it is the primary beneficiary (collectively, the “Company”). All intercompany transactions and balances have been eliminated in consolidation.
The interim financial information in this report has not been audited. In the opinion of management, all adjustments necessary for fair statement of the consolidated results of operations and financial position for the interim periods have been made. Except for the out-of-period correction described below and the prior period adjustments for the retrospective adoption of the new revenue recognition accounting standard, all adjustments made were of a normal recurring nature.
In the first quarter of 2017, the Company recorded a $20 million decrease to income tax provision related to an out-of-period correction for a reversal of a tax reserve.
The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Results of operations reported for interim periods are not necessarily indicative of results for the entire year. These Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”) on February 23, 2018 (“2017 10-K”).
The Company evaluated events or transactions that may have occurred after the balance sheet date for potential recognition or disclosure through the date the financial statements were issued. No subsequent events or transactions were identified.
On January 1, 2018, the Company retrospectively adopted the new accounting standard for revenue recognition. See Note 2 and Note 3 for further information on the new accounting standard and the Company’s revenue from contracts with customers. The following tables present the impact to the consolidated statements of operations for the prior periods presented:
 
Three Months Ended June 30, 2017
Previously Reported
 
Effect of Change
 
As Adjusted
(in millions)
Revenues
 
 
 
 
 
Management and financial advice fees
$
1,561

 
$
7

 
$
1,568

Distribution fees
430

 
(5
)
 
425

Net investment income
391

 

 
391

Premiums
348

 

 
348

Other revenues
267

 
25

 
292

Total revenues
2,997

 
27

 
3,024

Banking and deposit interest expense
12

 

 
12

Total net revenues
2,985

 
27

 
3,012

Expenses
 
 
 
 
 
Distribution expenses
832

 
(1
)
 
831

Interest credited to fixed accounts
171

 

 
171

Benefits, claims, losses and settlement expenses
611

 

 
611

Amortization of deferred acquisition costs
69

 

 
69

Interest and debt expense
52

 

 
52

General and administrative expense
739

 
28

 
767

Total expenses
2,474

 
27

 
2,501

Pretax income
511

 

 
511

Income tax provision
118

 

 
118

Net income
$
393

 
$

 
$
393


9


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
Six Months Ended June 30, 2017
Previously Reported
 
Effect of Change
 
As Adjusted
(in millions)
Revenues
 
 
 
 
 
Management and financial advice fees
$
3,043

 
$
12

 
$
3,055

Distribution fees
873

 
(7
)
 
866

Net investment income
782

 

 
782

Premiums
687

 

 
687

Other revenues
523

 
47

 
570

Total revenues
5,908

 
52

 
5,960

Banking and deposit interest expense
22

 

 
22

Total net revenues
5,886

 
52

 
5,938

Expenses
 
 
 
 
 
Distribution expenses
1,655

 
(1
)
 
1,654

Interest credited to fixed accounts
333

 

 
333

Benefits, claims, losses and settlement expenses
1,178

 

 
1,178

Amortization of deferred acquisition costs
141

 

 
141

Interest and debt expense
102

 

 
102

General and administrative expense
1,491

 
53

 
1,544

Total expenses
4,900

 
52

 
4,952

Pretax income
986

 

 
986

Income tax provision
190

 

 
190

Net income
$
796

 
$

 
$
796

The impact to the consolidated balance sheet as of December 31, 2017 was a $10 million increase to total assets, a $13 million increase to total liabilities and a $3 million decrease to retained earnings.
2.  Recent Accounting Pronouncements
Adoption of New Accounting Standards
Revenue from Contracts with Customers
In May 2014, the Financial Accounting Standards Board (“FASB”) updated the accounting standards for revenue from contracts with customers. The update provides a five-step revenue recognition model for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers (unless the contracts are in the scope of other standards). The standard also updates the accounting for certain costs associated with obtaining and fulfilling a customer contract and requires disclosure of quantitative and qualitative information that enables users of financial statements to understand the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers. The standard is effective for interim and annual periods beginning after December 15, 2017. The standard may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The Company adopted the revenue recognition guidance on a retrospective basis on January 1, 2018. The update does not apply to revenue associated with the manufacturing of insurance and annuity products or financial instruments as these revenues are in the scope of other standards. Therefore, the update did not have an impact on these revenues. The Company’s implementation efforts included the identification of revenue within the guidance and the review of the customer contracts to determine the Company’s performance obligation and the associated timing of each performance obligation. The Company determined that certain payments received primarily related to franchise advisor fees should be presented as revenue rather than a reduction of expense. The adoption of the standard did not have other material impacts on the Company’s consolidated results of operations and financial condition. The impact of the change was an increase to both revenues and expenses of $27 million and $52 million for the three months and six months ended June 30, 2017, respectively. See Note 3 for new disclosures on revenue from contracts with customers.
Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities
In January 2016, the FASB updated the accounting standards on the recognition and measurement of financial instruments. The update requires entities to carry marketable equity securities, excluding investments in securities that qualify for the equity method of accounting, at fair value with changes in fair value reflected in net income each reporting period. The update affects other aspects of accounting for equity instruments, as well as the accounting for financial liabilities utilizing the fair value option. The update

10


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


eliminates the requirement to disclose the methods and assumptions used to estimate the fair value of financial assets or liabilities held at cost on the balance sheet and requires entities to use the exit price notion when measuring the fair value of these financial instruments. The standard is effective for interim and annual periods beginning after December 15, 2017. The Company adopted the standard on January 1, 2018 using a modified retrospective approach. The adoption of the standard did not have a material impact on the Company’s consolidated results of operations or financial condition.
Future Adoption of New Accounting Standards
Income Statement – Reporting Comprehensive Income
In February 2018, the FASB updated the accounting standards related to the presentation of tax effects stranded in other comprehensive income (“OCI”). The update allows a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for tax effects stranded in AOCI resulting from the legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The update is optional and entities may elect not to reclassify the stranded tax effects. The update is effective for fiscal years beginning after December 15, 2018. Entities may elect to record the impacts either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. Early adoption is permitted in any period. The Company is currently evaluating whether it will elect to reclassify the stranded tax effects and the potential impact to the consolidated financial condition.
Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities
In August 2017, the FASB updated the accounting standards to amend the hedge accounting recognition and presentation requirements. The objectives of the update are to better align the financial reporting of hedging relationships to the economic results of an entity’s risk management activities and simplify the application of the hedge accounting guidance. The update also adds new disclosures and amends existing disclosure requirements. The standard is effective for interim and annual periods beginning after December 15, 2018, and should be applied on a modified retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.
Receivables – Premium Amortization on Purchased Callable Debt Securities
In March 2017, the FASB updated the accounting standards to shorten the amortization period for certain purchased callable debt securities held at a premium. Under current guidance, premiums are generally amortized over the contractual life of the security. The amendments require the premium to be amortized to the earliest call date. The update applies to securities with explicit, non-contingent call features that are callable at fixed prices and on preset dates. The standard is effective for interim and annual periods beginning after December 15, 2018, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted. The update is not expected to have a material impact on the Company’s consolidated results of operations or financial condition.
Intangibles – Goodwill and Other – Simplifying the Test for Goodwill Impairment
In January 2017, the FASB updated the accounting standards to simplify the accounting for goodwill impairment. The update removes the hypothetical purchase price allocation (Step 2) of the goodwill impairment test. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. The standard is effective for interim and annual periods beginning after December 15, 2019, and should be applied prospectively with early adoption permitted for any impairment tests performed after January 1, 2017. The update is not expected to have a material impact on the Company’s consolidated results of operations or financial condition.
Financial Instruments – Measurement of Credit Losses
In June 2016, the FASB updated the accounting standards related to accounting for credit losses on certain types of financial instruments. The update replaces the current incurred loss model for estimating credit losses with a new model that requires an entity to estimate the credit losses expected over the life of the asset. Generally, the initial estimate of the expected credit losses and subsequent changes in the estimate will be reported in current period earnings and recorded through an allowance for credit losses on the balance sheet. The current credit loss model for Available-for-Sale debt securities does not change; however, the credit loss calculation and subsequent recoveries are required to be recorded through an allowance. The standard is effective for interim and annual periods beginning after December 15, 2019. Early adoption will be permitted for interim and annual periods beginning after December 15, 2018. A modified retrospective cumulative adjustment to retained earnings should be recorded as of the first reporting period in which the guidance is effective for loans, receivables, and other financial instruments subject to the new expected credit loss model. Prospective adoption is required for establishing an allowance related to Available-for-Sale debt securities, certain beneficial interests, and financial assets purchased with a more-than-insignificant amount of credit deterioration since origination. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.
Leases – Recognition of Lease Assets and Liabilities on Balance Sheet
In February 2016, the FASB updated the accounting standards for leases. The update was issued to increase transparency and comparability for the accounting of lease transactions. The standard will require most lease transactions for lessees to be recorded on

11


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


the balance sheet as lease assets and lease liabilities and both quantitative and qualitative disclosures about leasing arrangements. The Company discloses information related to operating lease arrangements within Note 23 of the 2017 10-K. The standard is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted. The update should be applied at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the standard on its consolidated results of operations and financial condition.
3. Revenue from Contracts with Customers
On January 1, 2018, the Company adopted the new accounting standard for revenue from contracts with customers on a retrospective basis. See Note 2 for additional information on the adoption of the new accounting standard.
The following tables present revenue disaggregated by segment on an adjusted operating basis with a reconciliation of segment revenues to those reported on the Consolidated Statements of Operations:
 
Three Months Ended June 30, 2018
Advice & Wealth Management
 
Asset Management
 
Annuities
 
Protection
 
Corporate
&
Other
 
Total Segments
 
Non-operating Revenue
 
Total
(in millions)
Management and financial advice fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
$

 
$
472

 
$

 
$

 
$

 
$
472

 
$

 
$
472

Institutional

 
109

 

 

 

 
109

 

 
109

Advisory fees
706

 

 

 

 

 
706

 

 
706

Financial planning fees
80

 

 

 

 

 
80

 

 
80

Transaction and other fees
92

 
48

 
15

 
2

 

 
157

 

 
157

Total management and financial advice fees
878

 
629

 
15

 
2

 

 
1,524

 

 
1,524

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
184

 
68

 

 

 

 
252

 

 
252

Insurance and annuity
231

 
42

 
84

 
10

 

 
367

 

 
367

Other products
147

 

 

 

 

 
147

 

 
147

Total distribution fees
562

 
110

 
84

 
10

 

 
766

 

 
766

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues
47

 
1

 

 

 

 
48

 

 
48

Total revenue from contracts with customers
1,487

 
740

 
99

 
12

 

 
2,338

 

 
2,338

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from other sources (1)
76

 
15

 
523

 
521

 
57

 
1,192

 
55

 
1,247

Total segment gross revenues
1,563

 
755

 
622

 
533

 
57

 
3,530

 
55

 
3,585

Less: Banking and deposit interest expense
20

 

 

 

 
1

 
21

 

 
21

Total segment net revenues
1,543

 
755

 
622

 
533

 
56

 
3,509

 
55

 
3,564

Less: intersegment revenues
247

 
12

 
90

 
13

 

 
362

 
6

 
368

Total net revenues
$
1,296

 
$
743

 
$
532

 
$
520

 
$
56

 
$
3,147

 
$
49

 
$
3,196


12


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
Three Months Ended June 30, 2017
Advice & Wealth Management
 
Asset Management
 
Annuities
 
Protection
 
Corporate
&
Other
 
Total Segments
 
Non-operating Revenue
 
Total
(in millions)
Management and financial advice fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
$

 
$
460

 
$

 
$

 
$

 
$
460

 
$

 
$
460

Institutional

 
106

 

 

 

 
106

 

 
106

Advisory fees
606

 

 

 

 

 
606

 

 
606

Financial planning fees
75

 

 

 

 

 
75

 

 
75

Transaction and other fees
93

 
53

 
15

 
1

 

 
162

 

 
162

Total management and financial advice fees
774

 
619

 
15

 
1

 

 
1,409

 

 
1,409

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
178

 
71

 

 

 

 
249

 

 
249

Insurance and annuity
210

 
41

 
82

 
7

 

 
340

 

 
340

Other products
119

 

 

 

 

 
119

 

 
119

Total distribution fees
507

 
112

 
82

 
7

 

 
708

 

 
708

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues
46

 

 

 

 

 
46

 

 
46

Total revenue from contracts with customers
1,327

 
731

 
97

 
8

 

 
2,163

 

 
2,163

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from other sources (1)
61

 
16

 
530

 
509

 
56

 
1,172

 
39

 
1,211

Total segment gross revenues
1,388

 
747

 
627

 
517

 
56

 
3,335

 
39

 
3,374

Less: Banking and deposit interest expense
12

 

 

 

 
1

 
13

 

 
13

Total segment net revenues
1,376

 
747

 
627

 
517

 
55

 
3,322

 
39

 
3,361

Less: intersegment revenues
231

 
12

 
87

 
15

 

 
345

 
4

 
349

Total net revenues
$
1,145

 
$
735

 
$
540

 
$
502

 
$
55

 
$
2,977

 
$
35

 
$
3,012


13


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
Six Months Ended June 30, 2018
Advice & Wealth Management
 
Asset Management
 
Annuities
 
Protection
 
Corporate
&
Other
 
Total Segments
 
Non-operating Revenue
 
Total
(in millions)
Management and financial advice fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
$

 
$
952

 
$

 
$

 
$

 
$
952

 
$

 
$
952

Institutional

 
220

 

 

 

 
220

 

 
220

Advisory fees
1,397

 

 

 

 

 
1,397

 

 
1,397

Financial planning fees
148

 

 

 

 

 
148

 

 
148

Transaction and other fees
181

 
96

 
29

 
4

 

 
310

 

 
310

Total management and financial advice fees
1,726

 
1,268

 
29

 
4

 

 
3,027

 

 
3,027

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
374

 
137

 

 

 

 
511

 

 
511

Insurance and annuity
453

 
87

 
168

 
18

 

 
726

 

 
726

Other products
292

 

 

 

 

 
292

 

 
292

Total distribution fees
1,119

 
224

 
168

 
18

 

 
1,529

 

 
1,529

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues
88

 
2

 

 

 

 
90

 

 
90

Total revenue from contracts with customers
2,933

 
1,494

 
197

 
22

 

 
4,646

 

 
4,646

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from other sources (1)
147

 
39

 
1,038

 
1,030

 
115

 
2,369

 
116

 
2,485

Total segment gross revenues
3,080

 
1,533

 
1,235

 
1,052

 
115

 
7,015

 
116

 
7,131

Less: Banking and deposit interest expense
36

 

 

 

 
2

 
38

 

 
38

Total segment net revenues
3,044

 
1,533

 
1,235

 
1,052

 
113

 
6,977

 
116

 
7,093

Less: intersegment revenues
487

 
24

 
180

 
29

 
(1
)
 
719

 
10

 
729

Total net revenues
$
2,557

 
$
1,509

 
$
1,055

 
$
1,023

 
$
114

 
$
6,258

 
$
106

 
$
6,364


14


AMERIPRISE FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


 
Six Months Ended June 30, 2017
Advice & Wealth Management
 
Asset Management
 
Annuities
 
Protection
 
Corporate
&
Other
 
Total Segments
 
Non-operating Revenue
 
Total
(in millions)
Management and financial advice fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
$

 
$
900

 
$

 
$

 
$

 
$
900

 
$

 
$
900

Institutional

 
207

 

 

 

 
207

 

 
207

Advisory fees
1,176

 

 

 

 

 
1,176

 

 
1,176

Financial planning fees
139

 

 

 

 

 
139

 

 
139

Transaction and other fees
182

 
104

 
28

 
3

 

 
317

 

 
317

Total management and financial advice fees
1,497

 
1,211

 
28

 
3

 

 
2,739

 

 
2,739

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution fees:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual funds
386

 
151

 

 

 

 
537

 

 
537

Insurance and annuity
409

 
82

 
160

 
15

 

 
666

 

 
666

Other products
228

 

 

 

 

 
228

 

 
228

Total distribution fees
1,023

 
233

 
160

 
15

 

 
1,431

 

 
1,431

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other revenues
83

 
1