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10-Q 1 riversourcelifeinsuranceco.htm 10-Q Riversource Life Insurance Company 09.30.2013

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 September 30, 2013

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. 033-28976

RIVERSOURCE LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)



Minnesota	41-0823832
(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 or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



	Large Accelerated Filer o	Accelerated Filer o
	Non-Accelerated Filer x (Do not check if a smaller reporting company)	Smaller reporting company 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 November 4, 2013
Common Stock (par value $30 per share)		100,000 shares

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

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RIVERSOURCE LIFE INSURANCE COMPANY

FORM 10-Q

INDEX



Part I.	Financial Information:
	Item 1.	Financial Statements
		Consolidated Balance Sheets — September 30, 2013 and December 31, 2012	1
		Consolidated Statements of Income — Three months and nine months ended September 30, 2013 and 2012	2
		Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, 2013 and 2012	2
		Consolidated Statements of Shareholder’s Equity — Nine months ended September 30, 2013 and 2012	3
		Consolidated Statements of Cash Flows — Nine months ended September 30, 2013 and 2012	4
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Narrative Analysis	33
	Item 4.	Controls and Procedures	41
Part II.	Other Information:
	Item 1.	Legal Proceedings	42
	Item 1A.	Risk Factors	42
	Item 6.	Exhibits	42
	Signatures		43
	Exhibit Index		E-1

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RIVERSOURCE LIFE INSURANCE COMPANY

PART I. FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions, except share amounts)



	September 30, 2013		December 31, 2012
Assets
Investments:
Available-for-Sale:
Fixed maturities, at fair value (amortized cost: 2013, $22,790; 2012, $23,058)	$	24,425	$	25,932
Common stocks, at fair value (cost: 2013 and 2012, $2)	5		4
Mortgage loans, at amortized cost (less allowance for loan losses: 2013, $24; and 2012, $26)	3,332		3,389
Policy loans	768		752
Other investments	771		743
Total investments	29,301		30,820
Cash and cash equivalents	241		336
Restricted cash	—		86
Reinsurance recoverables	2,141		2,047
Other receivables	190		203
Accrued investment income	273		291
Deferred acquisition costs	2,583		2,373
Deferred sales inducement costs	412		404
Other assets	3,628		3,793
Separate account assets	74,512		69,395
Total assets	$	113,281	$	109,748
Liabilities and Shareholder’s Equity
Liabilities:
Policyholder account balances and future policy benefits	$	29,342	$	30,670
Policy claims and other policyholder funds	162		132
Short-term borrowings	500		501
Line of credit with Ameriprise Financial, Inc.	150		150
Other liabilities	4,425		4,201
Separate account liabilities	74,512		69,395
Total liabilities	109,091		105,049
Shareholder’s equity:
Common stock, $30 par value; 100,000 shares authorized, issued and outstanding	3		3
Additional paid-in capital	2,463		2,462
Retained earnings	1,016		1,000
Accumulated other comprehensive income, net of tax	708		1,234
Total shareholder’s equity	4,190		4,699
Total liabilities and shareholder’s equity	$	113,281	$	109,748

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in millions)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues
Premiums	$	106		$	111		$	320		$	333
Net investment income	350			364			1,067			1,118
Policy and contract charges	424			373			1,274			1,172
Other revenues	90			84			266			242
Net realized investment gains	5			1			3			1
Total revenues	975			933			2,930			2,866
Benefits and expenses
Benefits, claims, losses and settlement expenses	297			376			839			970
Interest credited to fixed accounts	204			206			600			621
Amortization of deferred acquisition costs	(32		)	52			102			152
Other insurance and operating expenses	182			185			555			576
Total benefits and expenses	651			819			2,096			2,319
Pretax income	324			114			834			547
Income tax provision	59			13			143			112
Net income	$	265		$	101		$	691		$	435
Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	$	(7	)	$	—		$	(10	)	$	(9	)
Portion of loss recognized in other comprehensive income (loss) (before taxes)	5			(5		)	6			(3		)
Net impairment losses recognized in net realized investment gains	$	(2	)	$	(5	)	$	(4	)	$	(12	)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Net income	$	265		$	101		$	691		$	435
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities:
Net unrealized securities gains (losses) arising during the period	(67		)	309			(811		)	486
Reclassification of net securities gains included in net income	(3		)	—			(2		)	—
Impact of deferred acquisition costs, deferred sales inducement costs, benefit reserves and reinsurance recoverables	18			(112		)	283			(174		)
Total net unrealized gains (losses) on securities	(52		)	197			(530		)	312
Net unrealized losses on derivatives:
Reclassification of net derivative losses included in net income	1			2			4			4
Total net unrealized losses on derivatives	1			2			4			4
Total other comprehensive income (loss), net of tax	(51		)	199			(526		)	316
Total comprehensive income	$	214		$	300		$	165		$	751

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (UNAUDITED)

(in millions)



	Common Shares		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income			Total
Balances at January 1, 2012	$	3	$	2,461	$	1,215		$	931		$	4,610
Comprehensive income:
Net income	—		—		435			—			435
Other comprehensive income, net of tax	—		—		—			316			316
Total comprehensive income											751
Tax adjustment on share-based incentive compensation plan	—		1		—			—			1
Cash dividend to Ameriprise Financial, Inc.	—		—		(740		)	—			(740		)
Balances at September 30, 2012	$	3	$	2,462	$	910		$	1,247		$	4,622

Balances at January 1, 2013	$	3	$	2,462	$	1,000		$	1,234		$	4,699
Comprehensive income:
Net income	—		—		691			—			$	691
Other comprehensive loss, net of tax	—		—		—			(526		)	(526		)
Total comprehensive income											165
Tax adjustment on share-based incentive compensation plan	—		1		—			—			1
Cash dividend to Ameriprise Financial, Inc.	—		—		(675		)	—			(675		)
Balances at September 30, 2013	$	3	$	2,463	$	1,016		$	708		$	4,190

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)



	Nine Months Ended September 30,
	2013			2012
Cash Flows from Operating Activities
Net income	$	691		$	435
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion, net	(17		)	(8		)
Deferred income tax benefit	(60		)	(63		)
Contractholder and policyholder charges, non-cash	(211		)	(203		)
Loss from equity method investments	11			18
Net realized investment gains	(7		)	(13		)
Other-than-temporary impairments and provision for loan losses recognized in net realized investment gains	4			12
Change in operating assets and liabilities:
Deferred acquisition costs	(98		)	(33		)
Deferred sales inducement costs	10			37
Other investments, net	—			25
Policyholder account balances and future policy benefits	(867		)	(216		)
Policy claims and other policyholder funds	30			9
Derivatives, net of collateral	1,129			325
Reinsurance recoverables	(86		)	(67		)
Other receivables	10			(31		)
Accrued investment income	18			24
Other, net	18			206
Net cash provided by operating activities	575			457
Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	171			148
Maturities, sinking fund payments and calls	2,773			2,346
Purchases	(2,668		)	(1,551		)
Proceeds from sales, maturities and repayments of mortgage loans	534			180
Funding of mortgage loans	(467		)	(144		)
Proceeds from sales of other investments	89			78
Purchase of other investments	(178		)	(215		)
Purchase of land, buildings, equipment and software	(6		)	(7		)
Change in policy loans, net	(16		)	(11		)
Other, net	30			—
Net cash provided by investing activities	262			824

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)

(in millions)



	Nine Months Ended September 30,
	2013			2012
Cash Flows from Financing Activities
Policyholder account balances:
Considerations received	$	1,020		$	1,082
Net transfers to separate accounts	(54		)	(30		)
Surrenders and other benefits	(910		)	(909		)
Change in short-term borrowings, net	(2		)	(5		)
Proceeds from line of credit with Ameriprise Financial, Inc.	—			268
Payments on line of credit with Ameriprise Financial, Inc.	—			(418		)
Tax adjustment on share-based incentive compensation plan	1			1
Cash paid for purchased options with deferred premiums	(312		)	(256		)
Cash dividend to Ameriprise Financial, Inc.	(675		)	(740		)
Net cash used in financing activities	(932		)	(1,007		)
Net increase (decrease) in cash and cash equivalents	(95		)	274
Cash and cash equivalents at beginning of period	336			828
Cash and cash equivalents at end of period	$	241		$	1,102
Supplemental Disclosures:
Income taxes paid, net	$	110		$	14
Interest paid on borrowings	3			4
Non-cash investing activity:
Affordable housing partnership commitments not yet remitted	26			16

See Notes to Consolidated Financial Statements.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.	Basis of Presentation

RiverSource Life Insurance Company is a stock life insurance company with two wholly owned subsidiaries, RiverSource Life Insurance Co. of New York and RiverSource Tax Advantaged Investments, Inc. (“RTA”). RiverSource Life Insurance Company is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”).

The accompanying Consolidated Financial Statements include the accounts of RiverSource Life Insurance Company and companies in which it directly or indirectly has a controlling financial interest (collectively, the “Company”). All intercompany transactions and balances have been eliminated in consolidation.

The accompanying Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain reclassifications of prior period amounts have been made to conform to the current presentation. 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, 2012, filed with the Securities and Exchange Commission on February 26, 2013.

The Company has reclassified certain prior year amounts in the Consolidated Statements of Cash Flows within operating activities to provide more detail related to derivatives. The Company previously classified the change in freestanding derivatives in the “Other, net” line and the change in derivatives collateral in the “Derivatives collateral, net” line within operating cash flows. The Company reclassified the changes in freestanding derivatives, as well as the change in derivatives collateral, to a new line titled “Derivatives, net of collateral” within operating cash flows.

The interim financial information in this report has not been audited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods have been made. Except for the adjustment described below, all adjustments made were of a normal recurring nature.

In the second quarter of 2012, the Company made a correction for a tax item related to prior periods, which resulted in a $32 million decrease to net income. The Company discovered it had received incomplete data from a third party service provider for securities lending activities that resulted in the miscalculation of the Company’s dividend received deduction and foreign tax credit, which resulted in an understatement of taxes payable and an overstatement of reported earnings in prior periods. Management determined that the effect of this correction was not material to the Consolidated Financial Statements for all prior periods. The Company resolved the data issue and stopped the securities lending that negatively impacted its tax position.

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.


2.	Recent Accounting Pronouncements

Adoption of New Accounting Standards

Comprehensive Income

In February 2013, the Financial Accounting Standards Board (“FASB”) updated the accounting standard related to comprehensive income. The update requires entities to provide information about significant amounts reclassified out of accumulated other comprehensive income (“AOCI”). The standard is effective for interim and annual periods beginning after December 15, 2012 and is required to be applied prospectively. The Company adopted the standard in the first quarter of 2013. The adoption of the standard did not have any effect on the Company’s consolidated financial condition and results of operations. See Note 13 for the required disclosures.

Balance Sheet

In December 2011, the FASB updated the accounting standards to require new disclosures about offsetting assets and liabilities. The standard requires an entity to disclose both gross and net information about certain financial instruments and transactions subject to master netting arrangements (or similar agreements) or eligible for offset in the statement of financial position. The standard is effective for interim and annual periods beginning on or after January 1, 2013 on a retrospective basis. The Company adopted the standard in the first quarter of 2013. The adoption of the standard did not have any effect on the Company’s consolidated financial condition and results of operations. See Note 11 for the required disclosures.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB updated the accounting standard for deferred acquisition costs (“DAC”). Under this new standard, only the following costs incurred in the acquisition of new and renewal insurance contracts are capitalizable as DAC: (i) incremental direct costs of a successful contract acquisition, (ii) portions of employees’ compensation and benefits directly related to time spent performing acquisition activities (that is, underwriting, policy issuance and processing, medical and inspection, and contract selling) for a contract that has been acquired, (iii) other costs related to acquisition activities that would not have been incurred had the acquisition of the contract not occurred, and (iv) advertising costs that meet the capitalization criteria in other GAAP guidance for certain direct-response marketing. All other acquisition related costs are expensed as incurred. The Company retrospectively adopted the new standard on January 1, 2012. The cumulative effect of the adoption reduced retained earnings by $1.4 billion after-tax and increased AOCI by $112 million after-tax, totaling to a $1.3 billion after-tax reduction in total equity at January 1, 2012.

Future Adoption of New Accounting Standards

Income Taxes

In July 2013, the FASB updated the accounting standard for income taxes. The update provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The standard is effective for interim and annual periods beginning after December 15, 2013 and should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of the standard is not expected to have a material impact on the Company's consolidated financial condition and results of operations.


3.	Variable Interest Entities

RTA, a subsidiary of RiverSource Life Insurance Company, has variable interests in affordable housing partnerships for which it is not the primary beneficiary and, therefore, does not consolidate.

RTA’s maximum exposure to loss as a result of its investments in the affordable housing partnerships is limited to the carrying values of these investments. The carrying values are reflected in other investments and were $424 million and $409 million as of September 30, 2013 and December 31, 2012, respectively. RTA has no obligation to provide financial or other support to the affordable housing partnerships in addition to liabilities already recorded for future funding commitments nor has it provided any additional support to the affordable housing partnerships. The Company had liabilities of $83 million and $144 million recorded in other liabilities as of September 30, 2013 and December 31, 2012, respectively, related to the future funding commitments for affordable housing partnerships.


4.	Investments

Available-for-Sale securities distributed by type were as follows:



	September 30, 2013
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI⁽¹⁾
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,600	$	1,372	$	(87	)	$	15,885	$	2
Residential mortgage backed securities	3,768		156		(77		)	3,847		(23		)
Commercial mortgage backed securities	2,357		161		(8		)	2,510		—
State and municipal obligations	943		92		(36		)	999		—
Asset backed securities	842		49		(4		)	887		—
Foreign government bonds and obligations	240		19		(7		)	252		—
U.S. government and agencies obligations	40		5		—			45		—
Total fixed maturities	22,790		1,854		(219		)	24,425		(21		)
Common stocks	2		3		—			5		2
Total	$	22,792	$	1,857	$	(219	)	$	24,430	$	(19	)

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)



	December 31, 2012
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI⁽¹⁾
	(in millions)
Fixed maturities:
Corporate debt securities	$	14,881	$	2,167	$	(7	)	$	17,041	$	—
Residential mortgage backed securities	3,446		233		(58		)	3,621		(24		)
Commercial mortgage backed securities	2,717		287		—			3,004		—
State and municipal obligations	976		180		(34		)	1,122		—
Asset backed securities	808		66		(3		)	871		—
Foreign government bonds and obligations	188		36		—			224		—
U.S. government and agencies obligations	42		7		—			49		—
Total fixed maturities	23,058		2,976		(102		)	25,932		(24		)
Common stocks	2		2		—			4		1
Total	$	23,060	$	2,978	$	(102	)	$	25,936	$	(23	)


(1)	Represents the amount of other-than-temporary impairment (“OTTI”) losses in accumulated other comprehensive income. Amount includes unrealized gains and losses on impaired securities subsequent to the initial impairment measurement date. These amounts are included in gross unrealized gains and losses as of the end of the period.

At September 30, 2013 and December 31, 2012, fixed maturity securities comprised approximately 83% and 84%, respectively, of the Company’s total investments. Rating agency designations are based on the availability of ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”), including Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings Ltd. (“Fitch”). The Company uses the median of available ratings from Moody’s, S&P and Fitch, or if fewer than three ratings are available, the lower rating is used. When ratings from Moody’s, S&P and Fitch are unavailable, the Company may utilize ratings from other NRSROs or rate the securities internally. At September 30, 2013 and December 31, 2012, approximately $1.3 billion and $1.5 billion, respectively, of securities were internally rated by Columbia Management Investment Advisers, LLC using criteria similar to those used by NRSROs.

A summary of fixed maturity securities by rating was as follows:



	September 30, 2013						December 31, 2012
Ratings	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
	(in millions, except percentages)
AAA	$	5,552	$	5,809	24	%	$	5,680	$	6,198	24	%
AA	1,092		1,215		5		1,102		1,273		5
A	4,258		4,628		19		4,262		4,849		19
BBB	10,285		11,211		46		10,409		12,019		46
Below investment grade	1,603		1,562		6		1,605		1,593		6
Total fixed maturities	$	22,790	$	24,425	100	%	$	23,058	$	25,932	100	%

At September 30, 2013 and December 31, 2012, approximately 40% and 32%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities. No holdings of any other issuer were greater than 10% of total equity.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables provide information about Available-for-Sale securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position:



	September 30, 2013
	Less than 12 months						12 months or more						Total
Description of Securities	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	152	$	2,200	$	(78	)	4	$	56	$	(9	)	156	$	2,256	$	(87	)
Residential mortgage backed securities	39	969		(37		)	48	229		(40		)	87	1,198		(77		)
Commercial mortgage backed securities	19	192		(8		)	—	—		—			19	192		(8		)
State and municipal obligations	3	42		(1		)	2	94		(35		)	5	136		(36		)
Asset backed securities	11	133		(3		)	3	21		(1		)	14	154		(4		)
Foreign government bonds and obligations	22	71		(7		)	—	—		—			22	71		(7		)
Total	246	$	3,607	$	(134	)	57	$	400	$	(85	)	303	$	4,007	$	(219	)



	December 31, 2012
	Less than 12 months						12 months or more						Total
Description of Securities	Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
	(in millions, except number of securities)
Corporate debt securities	50	$	477	$	(4	)	6	$	70	$	(3	)	56	$	547	$	(7	)
Residential mortgage backed securities	6	107		—			56	293		(58		)	62	400		(58		)
State and municipal obligations	—	—		—			2	100		(34		)	2	100		(34		)
Asset backed securities	1	10		—			5	86		(3		)	6	96		(3		)
Total	57	$	594	$	(4	)	69	$	549	$	(98	)	126	$	1,143	$	(102	)

As part of the Company’s ongoing monitoring process, management determined that a majority of the change in gross unrealized losses on its Available-for-Sale securities is attributable to movement in interest rates.

The following table presents a rollforward of the cumulative amounts recognized in the Consolidated Statements of Income for other-than-temporary impairments related to credit losses on securities for which a portion of the securities’ total other-than-temporary impairments was recognized in other comprehensive income (loss):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013			2012
	(in millions)
Beginning balance	$	66	$	90	$	87		$	106
Credit losses for which an other-than-temporary impairment was not previously recognized	1		—		1			1
Credit losses for which an other-than-temporary impairment was previously recognized	—		6		2			12
Reductions for securities sold during the period (realized)	—		—		(23		)	(23		)
Ending balance	$	67	$	96	$	67		$	96

The change in net unrealized securities gains (losses) in other comprehensive income (loss) includes three components, net of tax: (i) unrealized gains (losses) that arose from changes in the market value of securities that were held during the period; (ii) (gains) losses that were previously unrealized, but have been recognized in current period net income due to sales of Available-for-Sale securities and due to the reclassification of noncredit other-than-temporary impairment losses to credit losses; and (iii) other items primarily consisting of adjustments in asset and liability balances, such as DAC, deferred sales inducement costs (“DSIC”), benefit reserves and reinsurance recoverables, to reflect the expected impact on their carrying values had the unrealized gains (losses) been realized as of the respective balance sheet dates.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table presents a rollforward of the net unrealized securities gains (losses) on Available-for-Sale securities included in accumulated other comprehensive income (loss):



	Net Unrealized Securities Gains			Deferred Income Tax			Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Securities Gains
	(in millions)
Balance at January 1, 2012	$	1,472		$	(515	)	$	957
Net unrealized securities gains arising during the period⁽¹⁾	749			(263		)	486
Impact of DAC, DSIC, benefit reserves and reinsurance recoverables	(268		)	94			(174		)
Balance at September 30, 2012	$	1,953		$	(684	)	$	1,269		⁽²⁾

Balance at January 1, 2013	$	1,930		$	(675	)	$	1,255
Net unrealized securities losses arising during the period⁽¹⁾	(1,234		)	423			(811		)
Reclassification of net securities gains included in net income	(3		)	1			(2		)
Impact of DAC, DSIC, benefit reserves and reinsurance recoverables	436			(153		)	283
Balance at September 30, 2013	$	1,129		$	(404	)	$	725		⁽²⁾


(1)	Includes other-than-temporary impairment losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income (loss) during the period.


(2)	Includes $(10) million and $(15) million of noncredit related impairments on securities and net unrealized securities losses on previously impaired securities at September 30, 2013 and 2012, respectively.

Net realized gains and losses on Available-for-Sale securities, determined using the specific identification method, recognized in net realized investment gains were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(in millions)
Gross realized investment gains	$	6		$	5		$	8		$	13
Gross realized investment losses	—			—			(1		)	(1		)
Other-than-temporary impairments	(2		)	(5		)	(4		)	(12		)
Total	$	4		$	—		$	3		$	—

Other-than-temporary impairments for the three months and nine months ended September 30, 2013 and 2012 primarily related to credit losses on non-agency residential mortgage backed securities.

Available-for-Sale securities by contractual maturity at September 30, 2013 were as follows:



	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	1,184	$	1,206
Due after one year through five years	4,837		5,226
Due after five years through 10 years	6,271		6,695
Due after 10 years	3,531		4,054
	15,823		17,181
Residential mortgage backed securities	3,768		3,847
Commercial mortgage backed securities	2,357		2,510
Asset backed securities	842		887
Common stocks	2		5
Total	$	22,792	$	24,430

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage backed securities, commercial mortgage backed securities and asset backed securities are not due at a single maturity date. As such, these securities, as well as common stocks, were not included in the maturities distribution.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Net investment income is summarized as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(in millions)
Income on fixed maturities	$	301	$	328	$	913	$	1,008
Income on mortgage loans	50		36		153		109
Other investments	8		8		25		21
	359		372		1,091		1,138
Less: investment expenses	9		8		24		20
Total	$	350	$	364	$	1,067	$	1,118


5.	Financing Receivables

The Company’s financing receivables include commercial and residential mortgage loans, syndicated loans and policy loans. Syndicated loans are reflected in other investments. Policy loans do not exceed the cash surrender value of the policy at origination. As there is minimal risk of loss related to policy loans, the Company does not record an allowance for loan losses for policy loans.

Allowance for Loan Losses

The following tables present a rollforward of the allowance for loan losses for the nine months ended and the ending balance of the allowance for loan losses by impairment method and type of loan:



	September 30, 2013								September 30, 2012
	Commercial Mortgage Loans			Syndicated Loans		Total			Commercial Mortgage Loans			Syndicated Loans			Total
	(in millions)
Beginning balance	$	26		$	4	$	30		$	32		$	5		$	37
Charge-offs	(2		)	—		(2		)	(6		)	(1		)	(7		)
Ending balance	$	24		$	4	$	28		$	26		$	4		$	30
Individually evaluated for impairment	$	7		$	—	$	7		$	5		$	—		$	5
Collectively evaluated for impairment	17			4		21			21			4			25

The recorded investment in financing receivables by impairment method and type of loan was as follows:



	September 30, 2013
	Commercial Mortgage Loans		Residential Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	45	$	—	$	3	$	48
Collectively evaluated for impairment	2,490		821		287		3,598
Total	$	2,535	$	821	$	290	$	3,646



	December 31, 2012
	Commercial Mortgage Loans		Residential Mortgage Loans		Syndicated Loans		Total
	(in millions)
Individually evaluated for impairment	$	39	$	—	$	—	$	39
Collectively evaluated for impairment	2,442		934		303		3,679
Total	$	2,481	$	934	$	303	$	3,718

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

As of September 30, 2013 and December 31, 2012, the Company’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was $16 million and $10 million, respectively.

Residential mortgage loans are presented net of unamortized discount of $58 million and $80 million as of September 30, 2013 and December 31, 2012, respectively.

Purchases and sales of syndicated loans were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(in millions)
Purchases	$	8	$	21	$	67	$	74
Sales	—		4		1		4

Credit Quality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $12 million and $4 million as of September 30, 2013 and December 31, 2012, respectively. All other loans were considered to be performing.

Commercial Mortgage Loans

The Company reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates as necessary. Commercial mortgage loans which management has assigned its highest risk rating were 2% of total commercial mortgage loans at both September 30, 2013 and December 31, 2012. Loans with the highest risk rating represent distressed loans which the Company has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. In addition, the Company reviews the concentrations of credit risk by region and property type.

Concentrations of credit risk of commercial mortgage loans by U.S. region were as follows:



	Loans				Percentage
	September 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
	(in millions)
South Atlantic	$	675	$	625	27	%	25	%
Pacific	612		565		24		23
East North Central	253		255		10		10
Mountain	249		262		10		11
Middle Atlantic	196		198		8		8
West North Central	189		216		7		9
West South Central	157		159		6		6
New England	133		135		5		5
East South Central	71		66		3		3
	2,535		2,481		100	%	100	%
Less: allowance for loan losses	24		26
Total	$	2,511	$	2,455

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Concentrations of credit risk of commercial mortgage loans by property type were as follows:



	Loans				Percentage
	September 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
	(in millions)
Retail	$	889	$	822	35	%	33	%
Office	554		597		22		24
Apartments	449		415		18		17
Industrial	439		449		17		18
Hotel	32		36		1		1
Mixed use	27		42		1		2
Other	145		120		6		5
	2,535		2,481		100	%	100	%
Less: allowance for loan losses	24		26
Total	$	2,511	$	2,455

Residential Mortgage Loans

In October 2012, the Company purchased $954 million of residential mortgage loans at fair value from an affiliate, Ameriprise Bank, FSB. The purchase price takes into account the credit quality of the loan portfolio resulting in no allowance for loan losses recorded at purchase. The Company considers the credit worthiness of borrowers (FICO score), collateral characteristics such as loan-to-value (“LTV”) and geographic concentration to determine when an amount for an allowance for loan losses for residential mortgage loans is appropriate. At a minimum, management updates FICO scores and LTV ratios semiannually. As of September 30, 2013 and December 31, 2012, no allowance for loan losses was recorded.

As of September 30, 2013 and December 31, 2012, approximately 4% and 3%, respectively, of residential mortgage loans had FICO scores below 640. At September 30, 2013 and December 31, 2012, approximately 4% and 7%, respectively, of the Company’s residential mortgage loans had LTV ratios greater than 90%. The Company’s most significant geographic concentration for residential mortgage loans is in California representing 38% of the portfolio as of both September 30, 2013 and December 31, 2012. No other state represents more than 10% of the total residential mortgage loan portfolio.

Syndicated Loans

The Company’s syndicated loan portfolio is diversified across industries and issuers. The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication. Total nonperforming syndicated loans at September 30, 2013 and December 31, 2012 were $3 million and $2 million, respectively.

Troubled Debt Restructurings

The following table presents the number of loans restructured by the Company during the period and their recorded investment at the end of the period:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	(in millions, except number of loans)
Commercial mortgage loans	3	$	12	3	$	12	6	$	21	4	$	13
Residential mortgage loans	—	—		—	—		2	—		—	—
Syndicated loans	—	—		—	—		—	—		1	1
Total	3	$	12	3	$	12	8	$	21	5	$	14

The troubled debt restructurings did not have a material impact to the Company’s allowance for loan losses or income recognized for the three months and nine months ended September 30, 2013 and 2012. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


6.	Deferred Acquisition Costs and Deferred Sales Inducement Costs

In the third quarter of the year, management conducts its annual review of insurance and annuity valuation assumptions relative to current experience and management expectations. To the extent that expectations change as a result of this review, management updates valuation assumptions. The impact in the third quarter of 2013 primarily reflected the impact of expected higher interest rates and changes in assumed policyholder behavior. The impact in the third quarter of 2012 primarily reflected the low interest rate environment and the assumption of continued low interest rates over the near-term.

The balances of and changes in DAC were as follows:



	2013			2012
	(in millions)
Balance at January 1	$	2,373		$	2,413
Capitalization of acquisition costs	200			185
Amortization, excluding the impact of valuation assumptions review	(180		)	(141		)
Amortization, impact of valuation assumptions review	78			(11		)
Impact of change in net unrealized securities losses (gains)	112			(75		)
Balance at September 30	$	2,583		$	2,371

The balances of and changes in DSIC were as follows:



	2013			2012
	(in millions)
Balance at January 1	$	404		$	464
Capitalization of sales inducement costs	4			6
Amortization, excluding the impact of valuation assumptions review	(39		)	(30		)
Amortization, impact of valuation assumptions review	25			(13		)
Impact of change in net unrealized securities losses (gains)	18			(11		)
Balance at September 30	$	412		$	416

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)


7.	Policyholder Account Balances and Future Policy Benefits, Policy Claims and Other Policyholder Funds and Separate Account Liabilities

Policyholder account balances and future policy benefits and policy claims and other policyholder funds consisted of the following:



	September 30, 2013			December 31, 2012
	(in millions)
Policyholder account balances
Fixed annuities	$	13,998		$	14,420
Variable annuity fixed sub-accounts	4,912			4,833
Variable universal life (“VUL”)/universal life (“UL”) insurance	2,770			2,725
Indexed universal life (“IUL”) insurance	263			137
Other life insurance	911			943
Total policyholder account balances	22,854			23,058
Future policy benefits
Variable annuity guaranteed minimum withdrawal benefits (“GMWB”)	(109		)	799
Variable annuity guaranteed minimum accumulation benefits (“GMAB”)	(24		)	103
Other annuity liabilities	96			158
Fixed annuities life contingent liabilities	1,524			1,520
Equity indexed annuities (“EIA”)	28			33
Life, disability income and long term care insurance	4,686			4,703
VUL/UL insurance additional liabilities	287			296
Total future policy benefits	6,488			7,612
Total policyholder account balances and future policy benefits	29,342			30,670
Policy claims and other policyholder funds	162			132
Total policyholder account balances and future policy benefits and policy claims and other policyholder funds	$	29,504		$	30,802

Separate account liabilities consisted of the following:



	September 30, 2013		December 31, 2012
	(in millions)
Variable annuity variable sub-accounts	$	67,907	$	63,302
VUL insurance variable sub-accounts	6,562		6,051
Other insurance variable sub-accounts	43		42
Total	$	74,512	$	69,395


8.	Variable Annuity and Insurance Guarantees

The majority of the variable annuity contracts offered by the Company contain guaranteed minimum death benefit (“GMDB”) provisions. The Company also offers variable annuities with death benefit provisions that gross up the amount payable by a certain percentage of contract earnings, which are referred to as gain gross-up (“GGU”) benefits. In addition, the Company offers contracts with GMWB and GMAB provisions. The Company previously offered contracts containing guaranteed minimum income benefit (“GMIB”) provisions.

Certain UL policies offered by the Company provide secondary guarantee benefits. The secondary guarantee ensures that, subject to specified conditions, the policy will not terminate and will continue to provide a death benefit even if there is insufficient policy value to cover the monthly deductions and charges.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table provides information related to variable annuity guarantees for which the Company has established additional liabilities:



	September 30, 2013							December 31, 2012
Variable Annuity Guarantees by Benefit Type ⁽¹⁾	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk⁽²⁾		Weighted Average Attained Age	Total Contract Value		Contract Value in Separate Accounts		Net Amount at Risk⁽²⁾		Weighted Average Attained Age
	(in millions, except age)
GMDB:
Return of premium	$	50,219	$	48,406	$	37	63	$	45,697	$	43,942	$	61	63
Five/six-year reset	11,096		8,549		55		64	11,233		8,722		115		63
One-year ratchet	7,508		7,088		54		65	7,367		6,933		106		65
Five-year ratchet	1,712		1,657		2		62	1,616		1,563		3		61
Other	997		977		45		69	912		885		62		68
Total — GMDB	$	71,532	$	66,677	$	193	63	$	66,825	$	62,045	$	347	63

GGU death benefit	$	1,015	$	962	$	110	64	$	958	$	907	$	93	63

GMIB	$	410	$	386	$	45	66	$	425	$	399	$	72	66

GMWB:
GMWB	$	3,873	$	3,857	$	14	67	$	3,898	$	3,880	$	34	66
GMWB for life	32,290		32,143		211		65	28,588		28,462		263		64
Total — GMWB	$	36,163	$	36,000	$	225	65	$	32,486	$	32,342	$	297	64

GMAB	$	4,026	$	4,012	$	2	57	$	3,773	$	3,762	$	5	57


(1)	Individual variable annuity contracts may have more than one guarantee and therefore may be included in more than one benefit type. Variable annuity contracts for which the death benefit equals the account value are not shown in this table.


(2)	Represents the current guaranteed benefit amount in excess of the current contract value. GMIB, GMWB and GMAB benefits are subject to waiting periods and payment periods specified in the contract.

Changes in variable annuity and insurance guarantees were as follows:



	GMDB & GGU			GMIB			GMWB			GMAB			UL
	(in millions)
Balance at January 1, 2012	$	5		$	9		$	1,377		$	237		$	111
Incurred claims	5			1			(304		)	(103		)	39
Paid claims	(6		)	(1		)	—			—			(8		)
Balance at September 30, 2012	$	4		$	9		$	1,073		$	134		$	142

Balance at January 1, 2013	$	4		$	9		$	799		$	103		$	155
Incurred claims	2			(2		)	(908		)	(127		)	45
Paid claims	(3		)	—			—			—			(11		)
Balance at September 30, 2013	$	3		$	7		$	(109	)	$	(24	)	$	189

The liabilities for guaranteed benefits are supported by general account assets.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table summarizes the distribution of separate account balances by asset type for variable annuity contracts providing guaranteed benefits:



	September 30, 2013		December 31, 2012
	(in millions)
Mutual funds:
Equity	$	34,204	$	32,054
Bond	25,366		26,165
Other	7,184		3,991
Total mutual funds	$	66,754	$	62,210


9.	Short-term Borrowings

The Company enters into repurchase agreements in exchange for cash which it accounts for as secured borrowings. The Company has pledged Available-for-Sale securities consisting of agency residential mortgage backed securities and commercial mortgage backed securities to collateralize its obligation under the repurchase agreements. The fair value of the securities pledged is recorded in investments and was $156 million and $518 million at September 30, 2013 and December 31, 2012, respectively. The amount of the Company’s liability including accrued interest as of September 30, 2013 and December 31, 2012 was $150 million and $501 million, respectively. The weighted average annualized interest rate on the repurchase agreements held as of September 30, 2013 and December 31, 2012 was 0.3% and 0.4%, respectively.

RiverSource Life Insurance Company is a member of the Federal Home Loan Bank (“FHLB”) of Des Moines which provides access to collateralized borrowings. The Company has pledged Available-for-Sale securities consisting of commercial mortgage backed securities to collateralize its obligation under these borrowings. The fair value of the securities pledged is recorded in investments and was $436 million at September 30, 2013. The amount of the Company’s liability including accrued interest as of September 30, 2013 was $350 million. The weighted average annualized interest rate on the FHLB advances held as of September 30, 2013 was 0.3%.


10.	Fair Values of Assets and Liabilities

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; that is, an exit price. The exit price assumes the asset or liability is not exchanged subject to a forced liquidation or distressed sale.

Valuation Hierarchy

The Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value measurement based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:


Level 1	Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date.


Level 2	Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities.


Level 3	Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis:



	September 30, 2013
	Level 1		Level 2		Level 3			Total
	(in millions)
Assets
Available-for-Sale securities: Fixed maturities:
Corporate debt securities	$	—	$	14,362	$	1,523		$	15,885
Residential mortgage backed securities	—		3,757		90			3,847
Commercial mortgage backed securities	—		2,495		15			2,510
State and municipal obligations	—		999		—			999
Asset backed securities	—		706		181			887
Foreign government bonds and obligations	—		252		—			252
U.S. government and agencies obligations	9		36		—			45
Total Available-for-Sale securities: Fixed maturities	9		22,607		1,809			24,425
Common stocks	2		3		—			5
Cash equivalents	—		212		—			212
Other assets:
Interest rate derivative contracts	—		1,525		—			1,525
Equity derivative contracts	385		1,075		—			1,460
Foreign currency derivative contracts	—		2		—			2
Total other assets	385		2,602		—			2,987
Separate account assets	—		74,512		—			74,512
Total assets at fair value	$	396	$	99,936	$	1,809		$	102,141

Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	4	$	—		$	4
IUL embedded derivatives	—		—		96			96
GMWB and GMAB embedded derivatives	—		—		(256		)	(256		)	⁽²⁾
Total future policy benefits	—		4		(160		)	(156		)	⁽¹⁾
Other liabilities:
Interest rate derivative contracts	—		1,554		—			1,554
Equity derivative contracts	333		1,988		—			2,321
Credit derivative contracts	—		6		—			6
Total other liabilities	333		3,548		—			3,881
Total liabilities at fair value	$	333	$	3,552	$	(160	)	$	3,725


(1)	The Company’s adjustment for nonperformance risk resulted in a $238 million cumulative increase to the embedded derivatives.


(2)	The fair value of the GMWB and GMAB embedded derivatives was a net asset at September 30, 2013 and the amount is reported as a contra liability.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)



	December 31, 2012
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets
Available-for-Sale securities: Fixed maturities:
Corporate debt securities	$	—	$	15,387	$	1,654	$	17,041
Residential mortgage backed securities	—		3,598		23		3,621
Commercial mortgage backed securities	—		2,834		170		3,004
State and municipal obligations	—		1,122		—		1,122
Asset backed securities	—		715		156		871
Foreign government bonds and obligations	—		224		—		224
U.S. government and agencies obligations	10		39		—		49
Total Available-for-Sale securities: Fixed maturities	10		23,919		2,003		25,932
Common stocks	2		2		—		4
Cash equivalents	—		264		—		264
Other assets:
Interest rate derivative contracts	—		2,191		—		2,191
Equity derivative contracts	285		936		—		1,221
Foreign currency derivative contracts	—		6		—		6
Total other assets	285		3,133		—		3,418
Separate account assets	—		69,395		—		69,395
Total assets at fair value	$	297	$	96,713	$	2,003	$	99,013

Liabilities
Future policy benefits:
EIA embedded derivatives	$	—	$	2	$	—	$	2
IUL embedded derivatives	—		—		45		45
GMWB and GMAB embedded derivatives	—		—		833		833
Total future policy benefits	—		2		878		880		⁽¹⁾
Other liabilities:
Interest rate derivative contracts	—		1,486		—		1,486
Equity derivative contracts	258		1,535		—		1,793
Total other liabilities	258		3,021		—		3,279
Total liabilities at fair value	$	258	$	3,023	$	878	$	4,159


(1)	The Company’s adjustment for nonperformance risk resulted in a $398 million cumulative decrease to the embedded derivatives.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables provide a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis:



	Available-for-Sale Securities: Fixed Maturities															Future Policy Benefits
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total			IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total
										(in millions)
Balance, July 1, 2013	$	1,558		$	50		$	164		$	154		$	1,926		$	(76	)		$	(11	)		$	(87	)
Total gains (losses) included in:
Net income	—			—			—			—			—			(2		)	⁽¹⁾	322			⁽²⁾	320
Other comprehensive income	2			—			—			(2		)	—			—				—				—
Purchases	—			45			—			29			74			—				—				—
Sales	—			—			—			—			—			—				—				—
Issues	—			—			—			—			—			(17		)		(60		)		(77		)
Settlements	(37		)	(5		)	—			—			(42		)	(1		)		5				4
Transfers into Level 3	—			—			—			—			—			—				—				—
Transfers out of Level 3	—			—			(149		)	—			(149		)	—				—				—
Balance, September 30, 2013	$	1,523		$	90		$	15		$	181		$	1,809		$	(96	)		$	256			$	160
Changes in unrealized gains (losses) relating to assets and liabilities held at September 30, 2013 included in:
Benefits, claims, losses and settlement expenses	$	—		$	—		$	—		$	—		$	—		$	—			$	321			$	321
Interest credited to fixed accounts	—			—			—			—			—			(2		)		—				(2		)


(1)	Included in interest credited to fixed accounts in the Consolidated Statements of Income.


(2)	Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Income.



	Available-for-Sale Securities: Fixed Maturities																	Future Policy Benefits
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities		Other Structured Investment		Total				IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total
	(in millions)
Balance, July 1, 2012	$	1,456		$	59		$	24		$	140	$	—	$	1,679			$	—			$	(1,406	)		$	(1,406	)
Total gains (losses) included in:
Net income	(1		)	—			1			1		—		1			⁽¹⁾	1			⁽²⁾	321			⁽³⁾	322
Other comprehensive income	13			—			5			1		—		19				—				—				—
Purchases	124			—			—			—		—		124				—				—				—
Sales	—			—			—			—		—		—				—				—				—
Issues	—			—			—			—		—		—				(16		)		(49		)		(65		)
Settlements	(39		)	—			(1		)	—		—		(40		)		—				(8		)		(8		)
Transfers into Level 3	—			—			146			15		—		161				(22		)		—				(22		)
Transfers out of Level 3	—			(59		)	(8		)	—		—		(67		)		—				—				—
Balance, September 30, 2012	$	1,553		$	—		$	167		$	157	$	—	$	1,877			$	(37	)		$	(1,142	)		$	(1,179	)
Changes in unrealized losses relating to assets and liabilities held at September 30, 2012 included in:
Net realized investment losses	$	(1	)	$	—		$	1		$	1	$	—	$	1			$	—			$	—			$	—
Benefits, claims, losses and settlement expenses	—			—			—			—		—		—				—				310				310
Interest credited to fixed accounts	—			—			—			—		—		—				1				—				1


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


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


(3)	Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Income.

Table of Contents

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)



	Available-for-Sale Securities: Fixed Maturities																Future Policy Benefits
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total				IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total
	(in millions)
Balance, January 1, 2013	$	1,654		$	23		$	170		$	156		$	2,003			$	(45	)		$	(833	)		$	(878	)
Total gains (losses) included in:
Net income	(1		)	—			—			1			—			⁽¹⁾	(8		)	⁽²⁾	1,246			⁽³⁾	1,238
Other comprehensive loss	(34		)	—			(6		)	5			(35		)		—				—				—
Purchases	74			87			—			29			190				—				—				—
Sales	—			—			—			—			—				—				—				—
Issues	—			—			—			—			—				(42		)		(163		)		(205		)
Settlements	(170		)	(5		)	—			(1		)	(176		)		(1		)		6				5
Transfers into Level 3	—			—			—			—			—				—				—				—
Transfers out of Level 3	—			(15		)	(149		)	(9		)	(173		)		—				—				—
Balance, September 30, 2013	$	1,523		$	90		$	15		$	181		$	1,809			$	(96	)		$	256			$	160
Changes in unrealized gains (losses) relating to assets and liabilities held at September 30, 2013 included in:
Net investment income	$	(1	)	$	—		$	—		$	1		$	—			$	—			$	—			$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—				—				1,229				1,229
Interest credited to fixed accounts	—			—			—			—			—				(8		)		—				(8		)


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


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


(3)	Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Income.



	Available-for-Sale Securities: Fixed Maturities																						Future Policy Benefits
	Corporate Debt Securities			Residential Mortgage Backed Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Other Structured Investment			Total				Common Stock			IUL Embedded Derivatives				GMWB and GMAB Embedded Derivatives				Total
	(in millions)
Balance, January 1, 2012	$	1,342		$	58		$	16		$	133		$	14		$	1,563			$	—		$	—			$	(1,585	)		$	(1,585	)
Total gains (losses) included in:
Net income	(1		)	(7		)	1			1			—			(6		)	⁽¹⁾	—			1			⁽²⁾	577			⁽³⁾	578
Other comprehensive income	18			9			5			2			1			35				—			—				—				—
Purchases	317			23			8			—			—			348				1			—				—				—
Sales	—			—			—			—			—			—				—			—				—				—
Issues	—			—			—			—			—			—				—			(16		)		(131		)		(147		)
Settlements	(133		)	(6		)	(1		)	(1		)	—			(141		)		—			—				(3		)		(3		)
Transfers into Level 3	10			5			146			22			—			183				—			(22		)		—				(22		)
Transfers out of Level 3	—			(82		)	(8		)	—			(15		)	(105		)		(1		)	—				—				—
Balance, September 30, 2012	$	1,553		$	—		$	167		$	157		$	—		$	1,877			$	—		$	(37	)		$	(1,142	)		$	(1,179	)
Changes in unrealized gains (losses) relating to assets and liabilities held at September 30, 2012 included in:
Net investment income	$	(1	)	$	—		$	1		$	1		$	—		$	1			$	—		$	—			$	—			$	—
Benefits, claims, losses and settlement expenses	—			—			—			—			—			—				—			—				544				544
Interest credited to fixed accounts	—			—			—			—			—			—				—			1				—				1


(1)	Represents a $7 million loss included in net realized investment gains and a $1 million gain included in net investment income in the Consolidated Statements of Income.


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


(3)	Included in benefits, claims, losses and settlement expenses in the Consolidated Statements of Income.

Table of Contents

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The impact to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its embedded derivatives was $(14) million and $(51) million, net of DAC, DSIC and unearned revenue amortization and the reinsurance accrual, for the three months ended September 30, 2013 and 2012, respectively. The impact to pretax income of the Company’s adjustment for nonperformance risk on the fair value of its embedded derivatives was $(104) million and $(45) million, net of DAC, DSIC and unearned revenue amortization and the reinsurance accrual, for the nine months ended September 30, 2013 and 2012, respectively.

Securities transferred from Level 3 primarily represent securities with fair values that are now obtained from a third party pricing service with observable inputs. Securities transferred to Level 3 represent securities with fair values that are now based on a single non-binding broker quote. The transfer of the IUL embedded derivatives is due to the impact of the unobservable inputs to the valuation becoming more significant. The Company recognizes transfers between levels of the fair value hierarchy as of the beginning of the quarter in which each transfer occurred. For assets and liabilities held at the end of the reporting periods that are measured at fair value on a recurring basis, there were no transfers between Level 1 and Level 2.

The following tables provide a summary of the significant unobservable inputs used in the fair value measurements developed by the Company or reasonably available to the Company of Level 3 assets and liabilities:



	September 30, 2013
	Fair Value			Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	1,495		Discounted cash flow	Yield/spread to U.S. Treasuries	1.0	%	-	5.5%	1.8	%
IUL embedded derivatives	$	96		Discounted cash flow	Nonperformance risk⁽³⁾	95			bps
GMWB and GMAB embedded derivatives	$	(256	)	Discounted cash flow	Utilization of guaranteed withdrawals⁽¹⁾	0.0	%	-	51.1%
					Surrender rate	0.1	%	-	57.9%
					Market volatility⁽²⁾	5.1	%	-	19.1%
					Nonperformance risk⁽³⁾	95			bps
					Elective contractholder strategy allocations⁽⁴⁾	0.0	%	-	50.0%



	December 31, 2012
	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	1,624	Discounted cash flow	Yield/spread to U.S. Treasuries	1.1	%	-	8.5%	2.2%
IUL embedded derivatives	$	45	Discounted cash flow	Nonperformance risk⁽³⁾	97			bps
GMWB and GMAB embedded derivatives	$	833	Discounted cash flow	Utilization of guaranteed withdrawals⁽¹⁾	0.0	%	-	56.4%
				Surrender rate	0.0	%	-	56.3%
				Market volatility⁽²⁾	5.6	%	-	21.2%
				Nonperformance risk⁽³⁾	97			bps


(1)	The utilization of guaranteed withdrawals represents the percentage of policyholders that will begin withdrawing in any given year.


(2)	Market volatility is implied volatility of fund of funds and portfolio stabilizer funds.


(3)	The nonperformance risk is the spread added to the observable interest rates used in the valuation of the embedded derivatives.


(4)	The elective allocation represents the percentage of contractholders that are assumed to electively switch their investment allocation to a different allocation model.

Level 3 measurements not included in the table above are obtained from non-binding broker quotes where unobservable inputs are not reasonably available to the Company.

Table of Contents

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs

Significant increases (decreases) in the yield/spread to U.S. Treasuries used in the fair value measurement of Level 3 corporate debt securities in isolation would result in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in nonperformance risk used in the fair value measurement of the IUL embedded derivatives in isolation would result in a significantly lower (higher) fair value measurement.

Significant increases (decreases) in utilization and volatility used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in surrender rate, nonperformance risk and elective allocation used in the fair value measurement of the GMWB and GMAB embedded derivatives in isolation would result in a significantly lower (higher) fair value measurement. Utilization of guaranteed withdrawals and surrender rates vary with the type of rider, the duration of the policy, the age of the contractholder, the distribution system and whether the value of the guaranteed benefit exceeds the contract accumulation value.

Determination of Fair Value

The Company uses valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The Company’s market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Company’s income approach uses valuation techniques to convert future projected cash flows to a single discounted present value amount. When applying either approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The following is a description of the valuation techniques used to measure fair value and the general classification of these instruments pursuant to the fair value hierarchy.

Assets

Cash Equivalents

Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash equivalents are classified as Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because of the short time between the purchase of the instrument and its expected realization.

Available-for-Sale Securities

When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from third party pricing services, non-binding broker quotes, or other model-based valuation techniques. Level 1 securities include U.S. Treasuries. Level 2 securities include corporate bonds, residential mortgage backed securities, commercial mortgage backed securities, municipal bonds, asset backed securities and U.S. agency and foreign government securities. The fair value of these Level 2 securities is based on a market approach with prices obtained from third party pricing services. Observable inputs used to value these securities can include, but are not limited to, reported trades, benchmark yields, issuer spreads and non-binding broker quotes. Level 3 securities primarily include certain corporate bonds, non-agency residential mortgage backed securities, commercial mortgage backed securities and asset backed securities. The fair value of corporate bonds, non-agency residential mortgage backed securities, commercial mortgage backed securities and certain asset backed securities classified as Level 3 is typically based on a single non-binding broker quote. The underlying inputs used for some of the non-binding broker quotes are not readily available to the Company. The Company’s privately placed corporate bonds are typically based on a single non-binding broker quote. In addition to the general pricing controls, the Company reviews the broker prices to ensure that the broker quotes are reasonable and, when available, compares prices of privately issued securities to public issues from the same issuer to ensure that the implicit illiquidity premium applied to the privately placed investment is reasonable considering investment characteristics, maturity, and average life of the investment.

In consideration of the above, management is responsible for the fair values recorded on the financial statements. Prices received from third party pricing services are subjected to exception reporting that identifies investments with significant daily price movements as well as no movements. The Company reviews the exception reporting and resolves the exceptions through reaffirmation of the price or recording an appropriate fair value estimate. The Company also performs subsequent transaction testing. The Company performs annual due diligence of third party pricing services. The Company’s due diligence procedures include assessing the vendor’s valuation qualifications, control environment, analysis of asset-class specific valuation methodologies, and understanding of sources of market observable assumptions and unobservable assumptions, if any, employed in the valuation methodology. The Company also considers the results of its exception reporting controls and any resulting price challenges that arise.

Table of Contents

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Separate Account Assets

The fair value of assets held by separate accounts is determined by the net asset value (“NAV”) of the funds in which those separate accounts are invested. The NAV represents the exit price for the separate account. Separate account assets are classified as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information.

Other Assets

Derivatives that are measured using quoted prices in active markets, such as derivatives that are exchange-traded, are classified as Level 1 measurements. The fair value of derivatives that are traded in less active over-the-counter (“OTC”) markets are generally measured using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include swaps and the majority of options. The counterparties’ nonperformance risk associated with uncollateralized derivative assets was immaterial at September 30, 2013 and December 31, 2012. See Note 11 and Note 12 for further information on the credit risk of derivative instruments and related collateral.

Liabilities

Future Policy Benefits

The Company values the embedded derivatives attributable to the provisions of certain variable annuity riders using internal valuation models. These models calculate fair value by discounting expected cash flows from benefits plus margins for profit, risk and expenses less embedded derivative fees. The projected cash flows used by these models include observable capital market assumptions and incorporate significant unobservable inputs related to contractholder behavior assumptions, implied volatility, and margins for risk, profit and expenses that the Company believes an exit market participant would expect. The fair value also reflects a current estimate of the Company’s nonperformance risk specific to these embedded derivatives. Given the significant unobservable inputs to this valuation, these measurements are classified as Level 3. The embedded derivatives attributable to these provisions are recorded in policyholder account balances and future policy benefits.

The Company uses various Black-Scholes calculations to determine the fair value of the embedded derivatives associated with the provisions of its EIA and IUL products. Significant inputs to the EIA calculation include observable interest rates, volatilities and equity index levels and, therefore, are classified as Level 2. The fair value of the IUL embedded derivatives includes significant observable interest rates, volatilities and equity index levels and the significant unobservable estimate of the Company’s nonperformance risk. Given the significance of the nonperformance risk assumption to the fair value, the IUL embedded derivatives are classified as Level 3. The embedded derivatives attributable to these provisions are recorded in policyholder account balances and future policy benefits.

The Company’s Corporate Actuarial Department calculates the fair value of the embedded derivatives on a monthly basis. During this process, control checks are performed to validate the completeness of the data. Actuarial management approves various components of the valuation along with the final results. The change in the fair value of the embedded derivatives is reviewed monthly with senior management. The Level 3 inputs into the valuation are consistent with the pricing assumptions and updated as experience develops. Significant unobservable inputs that reflect policyholder behavior are reviewed quarterly along with other valuation assumptions.

Other Liabilities

Derivatives that are measured using quoted prices in active markets, such as derivatives that are exchange-traded, are classified as Level 1 measurements. The fair value of derivatives that are traded in less active OTC markets are generally measured using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include swaps and the majority of options. The Company’s nonperformance risk associated with uncollateralized derivative liabilities was immaterial at September 30, 2013 and December 31, 2012. See Note 11 and Note 12 for further information on the credit risk of derivative instruments and related collateral.

During the reporting periods, there were no material assets or liabilities measured at fair value on a nonrecurring basis.

Table of Contents

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables provide the carrying value and the estimated fair value of financial instruments that are not reported at fair value. All other financial instruments that are reported at fair value have been included above in the table with balances of assets and liabilities measured at fair value on a recurring basis.



	September 30, 2013
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	3,332	$	—	$	—	$	3,423	$	3,423
Policy loans	768		—		—		756		756
Other investments	310		—		271		43		314
Financial Liabilities
Policyholder account balances and future policy benefits	$	14,283	$	—	$	—	$	14,853	$	14,853
Short-term borrowings	500		—		500		—		500
Line of credit with Ameriprise Financial	150		—		—		150		150
Other liabilities	83		—		—		82		82
Separate account liabilities	377		—		377		—		377



	December 31, 2012
	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
	(in millions)
Financial Assets
Mortgage loans, net	$	3,389	$	—	$	—	$	3,568	$	3,568
Policy loans	752		—		—		725		725
Other investments	309		—		292		24		316
Restricted cash	86		86		—		—		86
Financial Liabilities
Policyholder account balances and future policy benefits	$	14,701	$	—	$	—	$	15,982	$	15,982
Short-term borrowings	501		—		500		—		500
Line of credit with Ameriprise Financial	150		—		—		150		150
Other liabilities	144		—		—		142		142
Separate account liabilities	360		—		360		—		360

Mortgage Loans, Net

The fair value of commercial mortgage loans, except those with significant credit deterioration, is determined by discounting contractual cash flows using discount rates that reflect current pricing for loans with similar remaining maturities, liquidity and characteristics including LTV ratio, occupancy rate, refinance risk, debt-service coverage, location, and property condition. For commercial mortgage loans with significant credit deterioration, fair value is determined using the same adjustments as above with an additional adjustment for the Company’s estimate of the amount recoverable on the loan.

The fair value of residential mortgage loans is determined by discounting estimated cash flows and incorporating adjustments for prepayment, administration expenses, loss severity and credit loss estimates, with discount rates based on the Company’s estimate of current market conditions.

Given the significant unobservable inputs to the valuation of mortgage loans, these measurements are classified as Level 3.

Policy Loans

Policy loans represent loans made against the cash surrender value of the underlying life insurance or annuity product. These loans and the related interest are usually realized at death of the policyholder or contractholder or at surrender of the contract and are not transferable without the underlying insurance or annuity contract. The fair value of policy loans is determined by estimating expected cash flows discounted at rates based on the U.S. Treasury curve. Policy loans are classified as Level 3 as the discount rate used may be adjusted for the underlying performance of individual policies.

Table of Contents

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Other Investments

Other investments primarily consist of syndicated loans and an investment in FHLB. The fair value of syndicated loans is obtained from a third party service or non-binding broker quotes. Syndicated loans that are priced by multiple non-binding broker quotes are classified as Level 2 and syndicated loans priced using a single non-binding broker quote are classified as Level 3. The fair value of the investment in FHLB is approximated by the carrying value and classified as Level 3 due to restrictions on transfer or lack of liquidity.

Restricted Cash

Restricted cash is generally set aside for specific business transactions and restrictions are specific to the Company and do not transfer to third party market participants; therefore, the carrying amount is a reasonable estimate of fair value. The fair value of restricted cash is classified as Level 1.

Policyholder Account Balances and Future Policy Benefits

The fair value of fixed annuities, in deferral status, is determined by discounting cash flows using a risk neutral discount rate with adjustments for profit margin, expense margin, early policy surrender behavior, a provision for adverse deviation from estimated early policy surrender behavior and the Company’s nonperformance risk specific to these liabilities. The fair value of other liabilities including non-life contingent fixed annuities in payout status, EIA host contracts and the fixed portion of a small number of variable annuity contracts classified as investment contracts is determined in a similar manner. Given the use of significant unobservable inputs to these valuations, the measurements are classified as Level 3.

Short-term Borrowings

The fair value of short-term borrowings is obtained from a third party pricing service. A nonperformance adjustment is not included as collateral requirements for these borrowings minimize the nonperformance risk. The fair value of short-term borrowings is classified as Level 2.

Line of Credit with Ameriprise Financial

The fair value of the line of credit is determined by discounting cash flows with an adjustment for the Company’s nonperformance risk specific to this liability. The fair value of the line of credit is classified as Level 3.

Other Liabilities

Other liabilities consist of future funding commitments to affordable housing partnerships. The fair value of these future funding commitments is determined by discounting cash flows and is classified as Level 3 as the discount rate is adjusted.

Separate Account Liabilities

Certain separate account liabilities are classified as investment contracts and are carried at an amount equal to the related separate account assets. The NAV of the related separate account assets represents the exit price for the separate account liabilities. Separate account liabilities are classified as Level 2 as they are traded in principal-to-principal markets with little publicly released pricing information. A nonperformance adjustment is not included as the related separate account assets act as collateral for these liabilities and minimize nonperformance risk.


11.	Offsetting Assets and Liabilities

Certain financial instruments and derivative instruments are eligible for offset in the Consolidated Balance Sheets under GAAP. The Company’s derivative instruments and repurchase agreements are subject to master netting arrangements and collateral arrangements and meet the GAAP guidance to qualify for offset. A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. The Company’s policy is to recognize amounts subject to master netting arrangements on a gross basis on the Consolidated Balance Sheets.

Table of Contents

RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following tables present the gross and net information about the Company’s assets subject to master netting arrangements:



	September 30, 2013
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
							Financial Instruments⁽¹⁾			Cash Collateral			Securities Collateral			Net Amount
							Financial Instruments⁽¹⁾			Cash Collateral			Securities Collateral			Net Amount
	(in millions)
Derivatives:
OTC	$	2,854	$	—	$	2,854	$	(2,795	)	$	(18	)	$	(35	)	$	6
OTC cleared	17		—		17		(13		)	(4		)	—			—
Exchange-traded	116		—		116		—			—			—			116
Total derivatives	$	2,987	$	—	$	2,987	$	(2,808	)	$	(22	)	$	(35	)	$	122



	December 31, 2012
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
							Financial Instruments⁽¹⁾			Cash Collateral			Securities Collateral			Net Amount
							Financial Instruments⁽¹⁾			Cash Collateral			Securities Collateral			Net Amount
	(in millions)
Derivatives:
OTC	$	3,322	$	—	$	3,322	$	(2,676	)	$	(262	)	$	(355	)	$	29
Exchange-traded	96		—		96		—			—			—			96
Total derivatives	$	3,418	$	—	$	3,418	$	(2,676	)	$	(262	)	$	(355	)	$	125


(1)	Represents the amount of assets that could be offset by liabilities with the same counterparty under master netting or similar arrangements that management elects not to offset on the Consolidated Balance Sheets.

The following tables present the gross and net information about the Company’s liabilities subject to master netting arrangements:



	September 30, 2013
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments⁽¹⁾			Cash Collateral			Securities Collateral			Net Amount
	(in millions)
OTC derivatives	$	3,866	$	—	$	3,866	$	(2,795	)	$	—		$	(1,070	)	$	1
OTC cleared derivatives	15		—		15		(13		)	(2		)	—			—
Total derivatives	3,881		—		3,881		(2,808		)	(2		)	(1,070		)	1
Repurchase agreements	150		—		150		—			—			(150		)	—
Total	$	4,031	$	—	$	4,031	$	(2,808	)	$	(2	)	$	(1,220	)	$	1



	December 31, 2012
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments⁽¹⁾			Cash Collateral			Securities Collateral			Net Amount
	(in millions)
OTC derivatives	$	3,279	$	—	$	3,279	$	(2,676	)	$	(67	)	$	(532	)	$	4
Repurchase agreements	501		—		501		—			—			(501		)	—
Total	$	3,780	$	—	$	3,780	$	(2,676	)	$	(67	)	$	(1,033	)	$	4


(1)	Represents the amount of liabilities that could be offset by assets with the same counterparty under master netting or similar arrangements that management elects not to offset on the Consolidated Balance Sheets.

In the tables above, the amounts of assets or liabilities presented in the Consolidated Balance Sheets are offset first by financial instruments that have the right of offset under master netting or similar arrangements, then any remaining amount is reduced by the amount of cash and securities collateral. The actual amounts of collateral may be greater than amounts presented in the tables.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The Company’s freestanding derivative instruments are reflected in other assets and other liabilities. Repurchase agreements are reflected in short-term borrowings. See Note 12 for additional disclosures related to the Company’s derivative instruments and Note 9 for additional disclosures related to the Company’s repurchase agreements.


12.	Derivatives and Hedging Activities

Derivative instruments enable the Company to manage its exposure to various market risks. The value of such instruments is derived from an underlying variable or multiple variables, including equity and interest rate indices or prices. The Company primarily enters into derivative agreements for risk management purposes related to the Company’s products and operations.

The Company’s freestanding derivatives are recorded at fair value and are reflected in other assets or other liabilities. The Company’s freestanding derivative instruments are all subject to master netting arrangements. The Company’s policy on the recognition of derivatives on the Consolidated Balance Sheets is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement. See Note 11 for additional information regarding the estimated fair value of the Company’s freestanding derivatives after considering the effect of master netting arrangements and collateral.

In April 2012, the Financial Stability Oversight Council approved the final rule and interpretive guidance that provides the framework it will follow to determine if a nonbank financial company is a Systemically Important Financial Institution. The framework includes a three-stage process to help narrow down the pool of nonbank financial companies for review and possible designation. Stage 1 criteria include having at least $50 billion in assets and meeting one of five additional quantitative measures. One of the five thresholds is $3.5 billion of derivative liabilities after considering the effects of master netting arrangements and cash collateral held with the same counterparty. The Company believes that after the application of master netting arrangements and cash collateral, its net derivative liability is less than the threshold based on the Company's interpretation of the rule. See Note 11 for additional information related to the impacts of master netting arrangements and cash collateral on the Company's freestanding derivative liabilities.

The Company currently uses derivatives as economic hedges and accounting hedges. The following table presents the balance sheet location and the gross fair value of derivative instruments, including embedded derivatives:



		Asset					Liability
Derivatives not designated as hedging instruments	Balance Sheet Location	September 30, 2013		December 31, 2012		Balance Sheet Location	September 30, 2013				December 31, 2012
		(in millions)					(in millions)
GMWB and GMAB
Interest rate contracts	Other assets	$	1,525	$	2,191	Other liabilities	$	1,554			$	1,486
Equity contracts	Other assets	1,441		1,215		Other liabilities	2,314				1,792
Credit contracts	Other assets	—		—		Other liabilities	6				—
Foreign currency contracts	Other assets	2		6		Other liabilities	—				—
Embedded derivatives⁽¹⁾	N/A	—		—		Policyholder account balances and future policy benefits	(256		)	⁽²⁾	833
Total GMWB and GMAB		2,968		3,412			3,618				4,111
Other derivatives:
Equity
EIA embedded derivatives	N/A	—		—		Policyholder account balances and future policy benefits	4				2
IUL	Other assets	19		6		Other liabilities	7				1
IUL embedded derivatives	N/A	—		—		Policyholder account balances and future policy benefits	96				45
Total other		19		6			107				48
Total derivatives		$	2,987	$	3,418		$	3,725			$	4,159


N/A	Not applicable.


(1)	The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.


(2)	The fair value of the GMWB and GMAB embedded derivatives was a net asset at September 30, 2013 and the amount is reported as a contra liability.

See Note 10 for additional information regarding the Company’s fair value measurement of derivative instruments.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The following table presents a summary of the impact of derivatives not designated as hedging instruments on the Consolidated Statements of Income:



		Amount of Gain (Loss) on Derivatives Recognized in Income
Derivatives not designated as hedging instruments	Location of Gain (Loss) on Derivatives Recognized in Income	Three Months Ended September 30,						Nine Months Ended September 30,
Derivatives not designated as hedging instruments	Location of Gain (Loss) on Derivatives Recognized in Income	2013			2012			2013			2012
		(in millions)
GMWB and GMAB
Interest rate contracts	Benefits, claims, losses and settlement expenses	$	(63	)	$	(12	)	$	(575	)	$	91
Equity contracts	Benefits, claims, losses and settlement expenses	(323		)	(402		)	(803		)	(909		)
Credit contracts	Benefits, claims, losses and settlement expenses	(3		)	—			5			(2		)
Foreign currency contracts	Benefits, claims, losses and settlement expenses	8			(6		)	15			(5		)
Embedded derivatives⁽¹⁾	Benefits, claims, losses and settlement expenses	267			264			1,089			443
Total GMWB and GMAB		(114		)	(156		)	(269		)	(382		)
Other derivatives:
Equity
EIA	Interest credited to fixed accounts	1			—			2			1
EIA embedded derivatives	Interest credited to fixed accounts	—			—			(1		)	—
IUL	Interest credited to fixed accounts	2			1			8			1
IUL embedded derivatives	Interest credited to fixed accounts	3			1			8			1
Total other		6			2			17			3
Total derivatives		$	(108	)	$	(154	)	$	(252	)	$	(379	)


(1)	The fair values of GMWB and GMAB embedded derivatives fluctuate based on changes in equity, interest rate and credit markets.

The Company holds derivative instruments that either do not qualify or are not designated for hedge accounting treatment. These derivative instruments are used as economic hedges of equity, interest rate and credit risk related to various products and transactions of the Company.

Certain annuity contracts contain GMWB or GMAB provisions, which guarantee the right to make limited partial withdrawals each contract year regardless of the volatility inherent in the underlying investments or guarantee a minimum accumulation value of consideration received at the beginning of the contract period, after a specified holding period, respectively. The Company economically hedges the exposure related to non-life contingent GMWB and GMAB provisions primarily using various futures, options, interest rate swaptions, interest rate swaps, total return swaps, variance swaps and credit default swaps. At September 30, 2013 and December 31, 2012, the gross notional amount of derivative contracts for the Company’s GMWB and GMAB provisions was $145.9 billion and $142.1 billion, respectively.

The deferred premium associated with certain of the above options is paid or received semi-annually over the life of the option contract or at maturity. The following is a summary of the payments the Company is scheduled to make and receive for these options:



	Premiums Payable		Premiums Receivable
	(in millions)
2013⁽¹⁾	$	101	$	19
2014	337		56
2015	310		64
2016	279		48
2017	229		42
2018-2027	714		99


(1)	2013 amounts represent the amounts payable and receivable for the period from October 1, 2013 to December 31, 2013.

Actual timing and payment amounts may differ due to future contract settlements, modifications or exercises of options prior to the full premium being paid or received.

In the third quarter of 2013, the Company transferred net derivative liabilities with a fair value of $48 million, consisting of long-dated options, along with cash payment of the same amount to Ameriprise Financial. The transaction improves the risk management profile of statutory tail scenario risk for the Company's variable annuities.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

EIA and IUL products have returns tied to the performance of equity markets. As a result of fluctuations in equity markets, the obligation incurred by the Company related to EIA and IUL products will positively or negatively impact earnings over the life of these products. As a means of economically hedging its obligations under the provisions of these products, the Company enters into index options and futures contracts. The gross notional amount of EIA derivative contracts was $13 million and $10 million at September 30, 2013 and December 31, 2012, respectively. The gross notional amount of IUL derivative contracts was $411 million and $200 million at September 30, 2013 and December 31, 2012, respectively.

Embedded Derivatives

Certain annuities contain GMAB and non-life contingent GMWB provisions, which are considered embedded derivatives. In addition, the equity component of the EIA and IUL product obligations are also considered embedded derivatives. These embedded derivatives are bifurcated from their host contracts for valuation purposes and reported on the Consolidated Balance Sheets at fair value with changes in fair value reported in earnings. As discussed above, the Company uses derivatives to mitigate the financial statement impact of these embedded derivatives.

Cash Flow Hedges

The Company has amounts classified in AOCI related to gains and losses associated with the effective portion of previously designated cash flow hedges. The Company reclassifies these amounts into income as the forecasted transactions impact earnings. During the nine months ended September 30, 2013, the Company held no derivatives that were designated as cash flow hedges.

At September 30, 2013, the Company expects to reclassify $6 million of deferred loss on derivative instruments from AOCI to earnings during the next 12 months that will be recorded in net investment income. These were originally losses on derivative instruments related to interest rate swaptions. During the nine months ended September 30, 2013 and 2012, no hedge relationships were discontinued due to forecasted transactions no longer being expected to occur according to the original hedge strategy. For the nine months ended September 30, 2013 and 2012, amounts recognized in earnings on derivative transactions that were ineffective were not material.

The following table presents a rollforward of unrealized derivative losses related to cash flow hedges included in accumulated other comprehensive income (loss):



	2013			2012
	(in millions)
Net unrealized derivative losses at January 1	$	(21	)	$	(26	)
Reclassification of realized losses⁽¹⁾	6			5
Income tax benefit	(2		)	(1		)
Net unrealized derivative losses at September 30	$	(17	)	$	(22	)


(1)	Loss reclassified from AOCI to net investment income on the Consolidated Statements of Income.

Currently, the longest period of time over which the Company is hedging exposure to the variability in future cash flows is five years and relates to interest credited on forecasted fixed premium product sales.

Credit Risk

Credit risk associated with the Company’s derivatives is the risk that a derivative counterparty will not perform in accordance with the terms of the applicable derivative contract. To mitigate such risk, the Company has established guidelines and oversight of credit risk through a comprehensive enterprise risk management program that includes members of senior management. Key components of this program are to require preapproval of counterparties and the use of master netting arrangements and collateral arrangements whenever practical. See Note 11 for additional information on the Company’s credit exposure related to derivative assets.

Certain of the Company’s derivative contracts contain provisions that adjust the level of collateral the Company is required to post based on the Company’s financial strength rating (or based on the debt rating of the Company’s parent, Ameriprise Financial). Additionally, certain of the Company’s derivative contracts contain provisions that allow the counterparty to terminate the contract if the Company does not maintain a specific financial strength rating or Ameriprise Financial’s debt does not maintain a specific credit rating (generally an investment grade rating). If these termination provisions were to be triggered, the Company’s counterparty could require immediate settlement of any net liability position. At September 30, 2013 and December 31, 2012, the aggregate fair value of derivative contracts in a net liability position containing such credit contingent provisions was $675 million and $364 million, respectively. The aggregate fair value of assets posted as collateral for such instruments as of September 30, 2013 and December 31, 2012 was $674 million and $360 million, respectively. If the credit

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

contingent provisions of derivative contracts in a net liability position at September 30, 2013 and December 31, 2012 were triggered, the aggregate fair value of additional assets that would be required to be posted as collateral or needed to settle the instruments immediately would have been $1 million and $4 million, respectively.


13.	Shareholder’s Equity

The following table provides information related to amounts reclassified from AOCI:



		Amount Reclassified from AOCI
AOCI Reclassification	Location of Loss (Gain) Recognized in Income	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
		(in millions)
Net unrealized gains on Available-for-Sale securities	Net investment income	$	(4	)	$	(3	)
Tax expense	Income tax provision	1			1
Net of tax		$	(3	)	$	(2	)
Losses on cash flow hedges:
Swaptions	Net investment income	$	2		$	6
Tax benefit	Income tax provision	(1		)	(2		)
Net of tax		$	1		$	4

The Company made adjustments to AOCI for the impact to DAC, DSIC, benefit reserves and reinsurance recoverable on net unrealized securities losses of $18 million and $283 million, net of tax, for the three months and nine months ended September 30, 2013, respectively. See Note 4 for additional information related to the impact of DAC, DSIC, benefit reserves and reinsurance recoverable on net unrealized securities losses included in AOCI. See Note 12 for additional information regarding the Company’s cash flow hedges.


14.	Income Taxes

The Company’s effective tax rates were 18% and 11% for the three months ended September 30, 2013 and 2012, respectively. The Company’s effective tax rates were 17% and 20% for the nine months ended September 30, 2013 and 2012, respectively. The effective tax rates are lower than the statutory rate as a result of tax preferred items including the dividends received deduction, foreign tax credits and low income housing credits. The increase in the effective rate for the three months ended September 30, 2013 compared to the prior year period is primarily a result of higher pretax income. The decrease in the effective tax rate for the nine months ended September 30, 2013 compared to the prior year period is a result of a $32 million correction of tax related to securities lending activities in 2012 offset by higher pretax income in the current period.

Included in the Company's deferred income tax assets are tax benefits related to state net operating losses of $5 million which will expire beginning December 31, 2014.

The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. Included in deferred tax assets is a significant deferred tax asset relating to capital losses that have been recognized for financial statement purposes but not yet for tax return purposes as well as future deductible capital losses realized for tax return purposes. Under current U.S. federal income tax law, capital losses generally must be used against capital gain income within five years of the year in which the capital losses are recognized for tax purposes. Significant judgment is required in determining if a valuation allowance should be established, and the amount of such allowance if required. Factors used in making this determination include estimates relating to the performance of the business including the ability to generate capital gains. Consideration is given to, among other things in making this determination, (i) future taxable income exclusive of reversing temporary differences and carryforwards, (ii) future reversals of existing taxable temporary differences, (iii) taxable income in prior carryback years, and (iv) tax planning strategies. Based on analysis of the Company’s tax position, management believes it is more likely than not that the results of future operations and implementation of tax planning strategies will not allow the Company to realize all of certain state net operating losses and therefore a valuation allowance of $5 million was established as of both September 30, 2013 and December 31, 2012.

As of September 30, 2013 and December 31, 2012, the Company had $124 million and $65 million, respectively, of gross unrecognized tax benefits. If recognized, approximately $21 million and $8 million, net of federal tax benefits, of unrecognized tax benefits would affect the effective tax rate as of September 30, 2013 and December 31, 2012, respectively.

It is reasonably possible that the total amounts of unrecognized tax benefits will change in the next 12 months. Based on the current audit position of the Company, it is estimated that the total amount of gross unrecognized tax benefits may decrease by $121 million in the next 12 months.

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RIVERSOURCE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. The Company recognized a net increase of $2 million and $5 million in interest and penalties for the three months and nine months ended September 30, 2013, respectively. The Company recognized a net increase of $1 million and a net decrease of $4 million in interest and penalties for the three months and nine months ended September 30, 2012, respectively. As of September 30, 2013 and December 31, 2012, the Company had a payable of $35 million and $30 million, respectively, related to accrued interest and penalties.

The Company or one or more of its subsidiaries files income tax returns as part of its inclusion in the consolidated federal income tax returns of Ameriprise Financial, in the U.S. federal jurisdiction and various state jurisdictions. The Internal Revenue Service (“IRS”) had previously completed its field examination of the 1997 through 2007 tax returns in recent years. However, for federal income tax purposes, these years except for 2007, continue to remain open as a consequence of certain unagreed-upon issues. The IRS is in the process of completing the audit of the Company’s income tax returns for 2008 and 2009 and began auditing the Company's income tax returns for 2010 and 2011 in the fourth quarter of 2012. The Company or certain of its subsidiaries’ state income tax returns are currently under examination by various jurisdictions for years ranging from 1997 through 2008 and remain open for the years after 2008. The Company filed its 2012 tax return in the third quarter of 2013, but the IRS has not yet begun its examination of 2012.


15.	Contingencies and Guarantees

Insurance companies have been the subject of increasing regulatory, legislative and judicial scrutiny. Numerous state and federal regulatory agencies have commenced examinations and other inquiries of insurance companies regarding sales and marketing practices (including sales to older consumers and disclosure practices), claims handling, and unclaimed property and escheatment practices and procedures. With regard to an industry-wide investigation of unclaimed property and escheatment practices and procedures, the Company is responding to regulatory audits, market conduct examinations and other inquires (including inquiries from the States of Minnesota and New York and a multistate insurance department examination). The Company has cooperated and will continue to cooperate with the applicable regulators regarding their inquiries.

The Company is involved in the normal course of business in a number of other legal and arbitration proceedings concerning matters arising in connection with the conduct of its business activities. The Company believes that it is not a party to, nor are any of its properties the subject of, any pending legal, arbitration or regulatory investigation or proceeding that is likely to have a material adverse effect on its consolidated financial condition, results of operations or liquidity. Notwithstanding the foregoing, it is possible that the outcome of any current or future legal, arbitration or regulatory proceeding could have a material impact on results of operations in any particular reporting period as the proceedings are resolved.

The Company is required by law to be a member of the guaranty fund association in every state where it is licensed to do business. In the event of insolvency of one or more unaffiliated insurance companies, the Company could be adversely affected by the requirement to pay assessments to the guaranty fund associations. Uncertainty and volatility in the U.S. economy and financial markets in recent years have weakened the financial condition of numerous insurers, including insurers currently in receiverships, increasing the risk of triggering guaranty fund assessments.

The Company projects its cost of future guaranty fund assessments based on estimates of insurance company insolvencies provided by the National Organization of Life and Health Insurance Guaranty Associations (“NOLHGA”) and the amount of its premiums written relative to the industry-wide premium in each state. The Company accrues the estimated cost of future guaranty fund assessments when it is considered probable that an assessment will be imposed, the event obligating the Company to pay the assessment has occurred and the amount of the assessment can be reasonably estimated.

Executive Life Insurance Company of New York (“ELNY”) was placed into rehabilitation by a New York state court in 1991. On April 16, 2012, the court issued an order converting the rehabilitation into a liquidation proceeding under a plan submitted by the New York insurance regulator with support from NOLHGA and the industry. Closing under the liquidation plan took place in August 2013.

During the second quarter of 2012, the Company established a liability for estimated guaranty fund assessments and a related premium tax asset, primarily associated with ELNY. At September 30, 2013 and December 31, 2012, the estimated liability was $18 million and $26 million, respectively, and the related premium tax asset was $15 million and $19 million, respectively. The Company has recently received assessments related to ELNY from some of the state guaranty fund associations, however, the expected period over which all of the assessments will be made and the related tax credits recovered is not known.

Uncertain economic conditions, heightened and sustained volatility in the financial markets and significant financial reform legislation may increase the likelihood that clients and other persons or regulators may present or threaten legal claims or that regulators increase the scope or frequency of examinations of the Company or the insurance industry generally.

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ITEM 2.	MANAGEMENT’S NARRATIVE ANALYSIS

The following information should be read in conjunction with RiverSource Life Insurance Company’s Consolidated Financial Statements and Notes presented in Part I, Item 1. RiverSource Life Insurance Company and its subsidiaries are referred to collectively in this Form 10-Q as the “Company”. This narrative analysis may contain forward-looking statements that reflect the Company’s plans, estimates and beliefs. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed under “Forward-Looking Statements.” The Company believes it is useful to read this narrative analysis in conjunction with its Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on February 26, 2013 (“2012 10-K”), as well as its current reports on Form 8-K and other publicly available information.

The Company follows U.S. generally accepted accounting principles (“GAAP”), and the following discussion is presented on a consolidated basis consistent with GAAP. In addition, certain reclassifications of prior year amounts have been made to conform to the current presentation.

Management’s narrative analysis of the results of operations is presented in lieu of management’s discussion and analysis of financial condition and results of operations, pursuant to General Instructions H(2)(a) of Form 10-Q.

Overview

RiverSource Life Insurance Company is a stock life insurance company with one wholly owned stock life insurance company subsidiary, RiverSource Life Insurance Co. of New York (“RiverSource Life of NY”). RiverSource Life Insurance Company is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”).


•	RiverSource Life Insurance Company is domiciled in Minnesota and holds Certificates of Authority in American Samoa, the District of Columbia and all states except New York. RiverSource Life Insurance Company issues insurance and annuity products.


•	RiverSource Life of NY is domiciled and holds a Certificate of Authority in New York. RiverSource Life of NY issues insurance and annuity products.

RiverSource Life Insurance Company also wholly owns RiverSource Tax Advantaged Investments, Inc. (“RTA”). RTA is a stock company domiciled in Delaware and is a limited partner in affordable housing partnership investments.

Critical Accounting Policies

The accounting and reporting policies that the Company uses affect its Consolidated Financial Statements. Certain of the Company’s accounting and reporting policies are critical to an understanding of the Company’s financial condition and results of operations 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 the Consolidated Financial Statements. These accounting policies are discussed in detail in “Management’s Narrative Analysis — Critical Accounting Policies” in the Company’s 2012 10-K.

Deferred Acquisition Costs and Deferred Sales Inducement Costs

A decrease of 100 basis points in various rate assumptions is likely to result in an increase in deferred acquisition costs (“DAC”) and deferred sales inducement costs (“DSIC”) amortization and an increase in benefits and claims expense from variable annuity guarantees. The following table presents the estimated impact to current period pretax income:



	Estimated Impact to Pretax Income⁽¹⁾
	(in millions)
Decrease in future near and long-term fixed income returns by 100 basis points	$	(47	)

Decrease in future near-term equity fund growth returns by 100 basis points	$	(36	)
Decrease in future long-term equity fund growth returns by 100 basis points	(27		)
Decrease in future near- and long-term equity fund growth returns by 100 basis points	$	(63	)


(1)	An increase in the above assumptions by 100 basis points would result in an increase to pretax income for approximately the same amount.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements and their expected impact on the Company’s future consolidated financial condition or results of operations, see Note 2 to the Consolidated Financial Statements.

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Consolidated Results of Operations for the Nine Months Ended September 30, 2013 and 2012

The following table presents the Company’s consolidated results of operations (unaudited):



	Nine Months Ended September 30,
	2013		2012		Change
			(in millions)
Revenues
Premiums	$	320	$	333	$	(13	)	(4	)%
Net investment income	1,067		1,118		(51		)	(5	)
Policy and contract charges	1,274		1,172		102			9
Other revenues	266		242		24			10
Net realized investment gains	3		1		2			NM
Total revenues	2,930		2,866		64			2
Benefits and expenses
Benefits, claims, losses and settlement expenses	839		970		(131		)	(14	)
Interest credited to fixed accounts	600		621		(21		)	(3	)
Amortization of deferred acquisition costs	102		152		(50		)	(33	)
Other insurance and operating expenses	555		576		(21		)	(4	)
Total benefits and expenses	2,096		2,319		(223		)	(10	)
Pretax income	834		547		287			52
Income tax provision	143		112		31			28
Net income	$	691	$	435	$	256		59	%

NM Not Meaningful.

Overview

In the third quarter of the year, management conducts its annual review of insurance and annuity valuation assumptions, relative to current experience and management expectations. To the extent that expectations change as a result of this review, management updates valuation assumptions and the impact is reflected as part of its annual review of life insurance and annuity valuation assumptions and modeling changes (“unlocking”). The unlocking impact in the third quarter of 2013 primarily reflected the impact of expected higher interest rates and changes in assumed policyholder behavior.

Net income increased $256 million or 59% to $691 million for the nine months ended September 30, 2013 compared to $435 million for the prior year period. Pretax income increased $287 million or 52% to $834 million for the nine months ended September 30, 2013 compared to $547 million for the prior year period primarily reflecting a favorable impact from unlocking and model changes, the impact of market appreciation and the market impact on variable annuity guaranteed living benefits (net of hedges and the related DAC and DSIC amortization) and net realized losses on securities recognized in the prior year period, partially offset by the negative impact from spread compression in the Company's fixed annuities, fixed insurance and the fixed portion of variable annuities and variable insurance contracts. The market impact on variable annuity guaranteed living benefits (net of hedges and the related DAC and DSIC amortization) was an expense of $68 million for the nine months ended September 30, 2013 which included a $17 million benefit associated with unlocking. This compares to an expense of $220 million for the prior year period, which included a $12 million expense associated with unlocking and model changes. Results for the prior year period included a $32 million unfavorable impact from a tax-related item for an out-of-period correction in the second quarter of 2012.

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The following table presents the total pretax impacts on the Company’s revenues and expenses attributable to unlocking and model changes for the nine months ended September 30:



Pretax Increase (Decrease)	2013			2012
	(in millions)
Policy and contract charges	$	(18	)	$	(41	)

Benefits, claims, losses and settlement expenses	(5		)	22
Interest credited to fixed accounts	—			2
Amortization of DAC	(79		)	14
Total benefits and expenses	(84		)	38
Total⁽¹⁾	$	66		$	(79	)


(1)	Includes a $17 million benefit and a $12 million expense related to the market impact on variable annuity guaranteed living benefits for the nine months ended September 30, 2013 and 2012, respectively.

Revenues

Total revenues increased $64 million or 2% compared to the prior year period.

Net investment income decreased $51 million or 5% compared to the prior year period reflecting a decrease in investment income on fixed maturities primarily due to lower invested assets and continued low interest rates.

Policy and contract charges increased $102 million or 9% to $1.3 billion for the nine months ended September 30, 2013 compared to $1.2 billion for the prior year period. The increase is primarily due to higher separate account fees driven by higher average separate account balances and higher fee rates.

Other revenues increased $24 million or 10% to $266 million for the nine months ended September 30, 2013 compared to $242 million for the prior year period reflecting higher marketing support due to higher average separate account balances.

Net realized investment gains were $3 million for the nine months ended September 30, 2013 compared to $1 million for the prior year period. In the nine months ended September 30, 2013, net realized gains on Available-for-Sale securities due to sales, calls and tenders were $7 million partially offset by other-than-temporary impairments recognized in earnings of $4 million which primarily related to credit losses on non-agency residential mortgage backed securities. In the nine months ended September 30, 2012, net realized gains on Available-for-Sale securities due to sales, calls and tenders were $12 million offset by other-than-temporary impairments recognized in earnings of $12 million which were primarily related to credit losses on non-agency residential mortgage backed securities.

Benefits and Expenses

Total benefits and expenses decreased $223 million or 10% to $2.1 billion for the nine months ended September 30, 2013 compared to $2.3 billion for the prior year period primarily due to a decrease in benefits, claims, losses and settlement expenses and amortization of DAC.

Benefits, claims, losses and settlement expenses decreased $131 million, or 14% to $839 million for the nine months ended September 30, 2013 compared to $970 million for the prior year period primarily reflecting the following items:

•

The nine months ended September 30, 2013 included a $5 million benefit from unlocking which included a $22 million benefit related to the market impact on variable annuity guaranteed living benefits, and the prior year period included a $22 million expense, which included a $15 million expense related to the market impact on variable annuity guaranteed living benefits. The market impact on variable annuity guaranteed living benefits is discussed below. The unlocking impact for the nine months ended September 30, 2013 reflected the impact of expected higher interest rates and changes in assumed policyholder behavior, partially offset by the impact of variable annuity model changes. The unlocking impact for the prior year period primarily reflected lower bond fund returns related to the life contingent benefits associated with variable annuity guaranteed minimum withdrawal benefits ("GMWB").


•	An increase in expenses of approximately $30 million related to higher reserve funding driven by the impact of higher fees from prior year sales with variable annuity guarantees.


•	An $8 million increase in disability income reserves in the second quarter of 2013 related to prior periods and a $9 million benefit from a life insurance reserve release in the prior year period.


•	A $93 million increase in expense compared to the prior year period from the unhedged non-performance credit spread risk adjustment on variable annuity guaranteed living benefits.

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•

A $290 million decrease in expense from other market impacts on variable annuity guaranteed living benefits, net of hedges in place to offset those risks and the related DSIC amortization. The $290 million decrease was the result of a favorable $835 million change in the market impact on variable annuity guaranteed living benefits reserves, partially offset by an unfavorable $533 million change in the market impact on derivatives hedging the variable annuity guaranteed living benefits and an unfavorable $12 million DSIC offset. The main market drivers contributing to these changes are summarized below:


•	Interest rates were up for the 2013 period and down for the 2012 period resulting in a favorable change in the variable annuity guaranteed living benefits liability, partially offset by an unfavorable change in the related hedge assets.


•	Equity market and volatility impacts on the hedge assets for the 2013 period were a lower expense than the impacts in the 2012 period, offset by the year over year corresponding liability result.


•	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 favorable impact compared to the prior year period.

Amortization of DAC decreased $50 million or 33% to $102 million for the nine months ended September 30, 2013 compared to $152 million for the prior year period primarily due to the impact of unlocking and model changes, partially offset by the DAC offset to the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC amortization). Amortization of DAC for the nine months ended September 30, 2013 included a $79 million benefit from unlocking, which included a $5 million expense related to the DAC offset to the market impact on variable annuity guaranteed living benefits, primarily driven by the impact of expected higher interest rates and changes in assumed policyholder behavior. Amortization of DAC for the prior year period included a $14 million expense from unlocking and model changes, which included a $3 million benefit related to the DAC offset to the market impact on variable annuity guaranteed living benefits, primarily reflecting a decrease in income earned on assets due to the low interest rate environment compared to the interest credited to the contractholders, which in many instances are at their minimum guarantees, and lower bond fund growth rates, partially offset by a benefit from improved persistency and lowered mortality assumption. The DAC offset to the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC amortization) was a benefit of $12 million for the nine months ended September 30, 2013, compared to a benefit of $57 million in the prior year period. The market impact on DAC was a benefit of $13 million for the nine months ended September 30, 2013 compared to a benefit of $23 million in the prior year period as a result of favorable equity market returns largely offset by unfavorable bond fund returns in the nine months ended September 30, 2013 compared to favorable equity and bond fund returns in the prior year period.

Income Taxes

The Company’s effective tax rate was 17% for the nine months ended September 30, 2013, compared to 20% for the nine months ended September 30, 2012. The effective tax rate for both periods is lower than the statutory rate as a result of tax preferred items including the dividends received deduction, foreign tax credits and low income housing credits. The decrease in the effective tax rate for the nine months ended September 30, 2013 compared to the prior year period is a result of a $32 million correction of tax related to securities lending activities in 2012 offset by higher pretax income in the current period.

It is possible there will be corporate tax reform in the next few years. While impossible to predict, corporate tax reform is likely to include a reduction in the corporate tax rate coupled with reductions in tax preferred items. Any changes could have a material impact on the income tax expense and the deferred tax balances of the company.

Market Risk

The Company’s primary market risk exposures are interest rate, equity price and credit risk. Equity price and interest rate fluctuations can have a significant impact on the Company’s results of operations, primarily due to the effects on asset-based fees and expenses, the “spread” income generated on its fixed annuities, fixed life insurance and fixed portion of its variable annuities and variable insurance contracts, the value of DAC and DSIC assets, the value of liabilities for guaranteed benefits associated with its variable annuities and the value of derivatives held to hedge these benefits.

The Company's earnings from fixed annuities, fixed insurance, and the fixed portion of variable annuities and variable insurance contracts are based upon the spread between rates earned on assets held and the rates at which interest is credited to accounts. The Company guarantees an interest rate to the holders of these products. The Company primarily invests in fixed rate securities to fund the rate credited to clients. As a result of the low interest rate environment, the Company's current reinvestment yields are generally lower than the current portfolio yield. The Company expects its 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 2015 due to

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prepayment, maturity or call activity at the option of the issuer, excluding securities with a make-whole provision, was $3.0 billion and 4.9%, respectively, as of September 30, 2013. In addition, residential mortgage-backed securities, which are subject to prepayment risk as a result of the low interest rate environment, totaled $3.8 billion and had a weighted average yield of 4.4% as of September 30, 2013.

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 guaranteed minimum interest rates, will have a negative impact to future operating results. To mitigate the unfavorable impact that the low interest rate environment has on the Company's spread income, it assesses reinvestment risk in its investment portfolio and monitors this risk in accordance with its asset/liability management framework. In addition, the Company may reduce the crediting rates on its fixed products when warranted, subject to guaranteed minimums.

The following table presents the account values of fixed annuities, fixed insurance, and the fixed portion of variable annuities and variable insurance contracts by range of guaranteed minimum crediting rates and the range of the difference between rates credited to contractholders as of September 30, 2013 and the respective guaranteed minimums:



	Account Values with Crediting Rates
	At Guaranteed Minimum			1-49 bps Above Guaranteed Minimum			50-99 bps Above Guaranteed Minimum			100-150 bps Above Guaranteed Minimum			Greater than 150 bps Above Guaranteed Minimum			Total
Range of Guaranteed Minimum Crediting Rates	(in billions)
Range of Guaranteed Minimum Crediting Rates
1% - 1.99%	$	0.4		$	0.4		$	0.4		$	0.4		$	3.0		$	4.6
2% - 2.99%	0.5			0.1			—			—			—			0.6
3% - 3.99%	9.1			0.1			—			0.1			0.6			9.9
4% - 5.00%	5.8			—			—			—			—			5.8
Total	$	15.8		$	0.6		$	0.4		$	0.5		$	3.6		$	20.9
Percentage of total	76		%	3		%	2		%	2		%	17		%	100		%

In addition to the fixed rate exposures noted above, the Company also has the following variable annuity benefits: GMWB, guaranteed minimum accumulation benefits (“GMAB”), guaranteed minimum death benefits (“GMDB”) and guaranteed minimum income benefits (“GMIB”). Each of these guaranteed benefits guarantees payouts to the annuity holder under certain specific conditions regardless of the performance of the underlying investment 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. The Company’s 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. The Company uses various index options across the term structure, interest rate swaps and swaptions, total return swaps and futures to manage the risk exposures. The exposures are measured and monitored daily and adjustments to the hedge portfolio are made as necessary.

To evaluate interest rate and equity price risk, the Company performs 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 annuity riders, equity indexed annuities, indexed universal life insurance and the associated hedge assets, the Company assumed no change in implied market volatility despite the 10% drop in equity prices.

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The following tables present the Company’s estimate of the impact on pretax income from the above defined hypothetical market movements as of September 30, 2013:



	Equity Price Exposure to Pretax Income
Equity Price Decline 10%	Before Hedge Impact			Hedge Impact			Net Impact
	(in millions)
Asset-based fees and expenses	$	(79	)	$	—		$	(79	)
DAC and DSIC amortization^(1) (2)	(96		)	—			(96		)
Variable annuity riders:
GMDB and GMIB⁽²⁾	(79		)	—			(79		)
GMWB	(161		)	163			2
GMAB	(40		)	39			(1		)
DAC and DSIC amortization⁽³⁾	N/A			N/A			1
Total variable annuity riders	(280		)	202			(77		)
Equity indexed annuities	1			(1		)	—
Indexed universal life insurance	5			(7		)	(2		)
Total	$	(449	)	$	194		$	(254	)



	Interest Rate Exposure to Pretax Income
Interest Rate Increase 100 Basis Points	Before Hedge Impact			Hedge Impact			Net Impact
	(in millions)
Asset-based fees and expenses	$	(22	)	$	—		$	(22	)
Variable annuity riders:
GMDB and GMIB	—			—			—
GMWB	470			(548		)	(78		)
GMAB	27			(30		)	(3		)
DAC and DSIC amortization⁽³⁾	N/A			N/A			15
Total variable annuity riders	497			(578		)	(66		)
Fixed annuities, fixed insurance and fixed portion of variable annuities and variable insurance products	57			—			57
Indexed universal life insurance	5			—			5
Total	$	537		$	(578	)	$	(26	)

N/A Not Applicable.


(1)	Market impact on DAC and DSIC amortization resulting from lower projected profits.

(2)

In estimating the impact on DAC and DSIC amortization resulting from lower projected profits, the Company has not changed its assumed equity asset growth rates. This is a significantly more conservative estimate than if the Company assumed management follows its mean reversion guideline and increased near-term rates to recover the drop in equity values over a five-year period. The Company makes this same conservative assumption in estimating the impact from GMDB and GMIB riders.


(3)	Market impact on DAC and DSIC amortization related to variable annuity riders is modeled net of hedge impact.

The above results compare to an estimated negative net impact to pretax income of $203 million related to a 10% equity price decline and an estimated positive net impact to pretax income of $78 million related to a 100 basis point increase in interest rates as of December 31, 2012. The change in the interest rate exposure related to GMWB liabilities is from a refinement in the Company's hedging strategy.

Net impacts shown in the above table from GMWB and GMAB riders result largely from differences between the liability valuation basis and the hedging basis. Liabilities are valued using fair value accounting principles, with key policyholder behavior assumptions loaded to provide risk margins and with discount rates increased to reflect a current market estimate of the Company’s risk of nonperformance specific to these liabilities. For variable annuity riders introduced prior to mid-2009, management elected to hedge based on best estimate policyholder behavior assumptions. For riders issued since mid-2009, management has been hedging on a basis that includes risk margins related to policyholder behavior. The nonperformance spread risk is not hedged.

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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%, that management does not increase assumed equity asset growth rates to anticipate recovery of the drop in equity values when valuing DAC, DSIC and GMDB and GMIB liability values and that the 100 basis point increase in interest rates is a parallel shift of the yield curve. Furthermore, the Company has not tried to anticipate changes in client preferences for different types of assets or other changes in client behavior, nor has the Company tried to anticipate 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

The Company reports certain assets and liabilities at fair value; specifically, separate account assets, derivatives, embedded derivatives, 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. The Company includes actual market prices, or observable inputs, in its fair value measurements to the extent available. Broker quotes are obtained when quotes from pricing services are not available. The Company validates 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 10 to the Consolidated Financial Statements for additional information on the Company’s 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 the Company’s obligations of its variable annuity riders and indexed universal life insurance, the Company considers the assumptions participants in a hypothetical market would make to reflect an exit price. As a result, the Company adjusts the valuation of variable annuity riders and indexed universal life insurance by updating certain contractholder assumptions, adding explicit margins to provide for profit, risk and expenses, and adjusting the rates used to discount expected cash flows to reflect a current market estimate of the Company’s nonperformance risk. The nonperformance risk adjustment is based on broker quotes for credit default swaps that are adjusted to estimate the risk of the Company not fulfilling these liabilities. Consistent with general market conditions, this estimate resulted in a spread over the LIBOR swap curve as of September 30, 2013. As the Company’s estimate of this spread widens or tightens, the liability will decrease or increase. If this nonperformance credit spread moves to a zero spread over the LIBOR swap curve, the reduction to net income would be approximately $124 million, net of DAC, DSIC, unearned revenue amortization, the reinsurance accrual and income taxes (calculated at the statutory tax rate of 35%), based on September 30, 2013 credit spreads.

Liquidity and Capital Resources

Liquidity Strategy

The liquidity requirements of the Company are generally met by funds provided by investment income, maturities and periodic repayments of investments, deposits, premiums and proceeds from sales of investments as well as capital contributions from Ameriprise Financial. Other liquidity sources the Company has established are short-term borrowings and available lines of credit with Ameriprise Financial aggregating $1 billion.

The Company enters into short-term borrowings, which may include repurchase agreements and Federal Home Loan Bank (“FHLB”) advances to reduce reinvestment risk from higher levels of expected annuity net cash flows. Short-term borrowings allow the Company to receive cash to reinvest in longer-duration assets, while paying back the short-term debt with cash flows generated by the fixed income portfolio. The balance of repurchase agreements at September 30, 2013 and December 31, 2012 was $150 million and $501 million, respectively, which is collateralized with agency residential mortgage backed securities and commercial mortgage backed securities from the Company’s investment portfolio. RiverSource Life Insurance Company is a member of the FHLB of Des Moines, which provides RiverSource Life Insurance Company access to collateralized borrowings. At September 30, 2013 and December 31, 2012, the Company had borrowings of $350 million and nil, respectively, from the FHLB which is collateralized with commercial mortgage backed securities.

The outstanding balance under the lines of credit with Ameriprise Financial was $150 million at both September 30, 2013 and December 31, 2012.

The primary uses of funds are policy benefits, commissions, other product-related acquisition and sales inducement costs, operating expenses, policy loans, dividends to Ameriprise Financial and investment purchases. The Company routinely reviews its sources and uses of funds in order to meet its ongoing obligations.

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Capital Activity

Dividends paid and received by RiverSource Life Insurance Company were as follows:



	Nine Months Ended September 30,
	2013		2012
	(in millions)
Cash dividends paid to Ameriprise Financial	$	675	$	740
Cash dividends received from RiverSource Life of NY	25		30

During the nine months ended September 30, 2013 and 2012, RiverSource Life Insurance Company made a cash contribution to RTA of $30 million and $53 million, respectively, for ongoing funding commitments related to affordable housing partnership investments.

Regulatory Capital

RiverSource Life Insurance Company and RiverSource Life of NY are subject to regulatory capital requirements as follows:



	Actual Capital^(a)				Regulatory Capital Requirement^(b)
	September 30, 2013		December 31, 2012		December 31, 2012
			(in millions)
RiverSource Life Insurance Company	$	2,872	$	3,257	$	620
RiverSource Life Insurance Co. of New York	249		256		44


(a)	Actual capital, as defined by the National Association of Insurance Commissioners for purposes of meeting regulatory capital requirements, includes statutory capital and surplus, plus certain statutory valuation reserves.


(b)	Regulatory capital requirement is based on the statutory risk-based capital filing.

Contractual Commitments

There have been no material changes to the Company’s contractual obligations disclosed in the Company’s 2012 10-K.

Forward-Looking Statements

This report contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s 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, expectations, objectives, or goals, including those related to the introduction, cessation, terms or pricing of new or existing products and services and the consolidated tax rate;


•	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 pace,” “project” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from such statements.

Such factors include, but are not limited to:


•	conditions in the interest rate, credit default, equity market and foreign exchange environments, including changes in valuations, liquidity and volatility;

•

changes in and the adoption of relevant accounting standards and securities rating agency standards and processes, as well as changes in the litigation and regulatory environment, including ongoing legal proceedings and regulatory actions, the frequency and extent of legal claims threatened or initiated by clients, other persons and regulators, and developments in regulation and legislation, including the rules and regulations implemented or to be implemented in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act;


•	the Company’s investment management performance and consumer acceptance of the Company’s products;


•	effects of competition in the financial services industry, including pricing pressure, the introduction of new products and services and changes in product distribution mix and distribution channels;


•	changes to the Company’s reputation that may arise from employee or Ameriprise Financial Services, Inc. advisor misconduct, legal or regulatory actions, improper management of conflicts of interest or otherwise;

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•	the Company’s capital structure as a subsidiary of Ameriprise Financial, including the ability of its parent to support its financial strength and ratings, as well as the opinions of rating agencies and other analysts or the Company’s regulators distributors or policyholders and contractholders in response to any change or prospect of change in any such opinion;

•

risks of default, capacity constraints or repricing by issuers or guarantors of investments the Company owns or by counterparties to hedge derivative, insurance or reinsurance arrangements, experience deviations from the Company’s assumptions regarding such risks, the evaluations or the prospect of changes in evaluations of any such third parties published by rating agencies or other analysts and the reactions of other market participants or the Company’s regulators, distribution partners or customers in response to any such evaluation or prospect of changes in evaluation;


•	experience deviations from the Company’s assumptions regarding morbidity, mortality and persistency in certain annuity and insurance products, or from assumptions regarding market returns assumed in valuing or unlocking DAC and DSIC or market volatility underlying the Company’s valuation and hedging of guaranteed living benefit annuity riders;


•	successfully cross-selling insurance and annuity products and services to Ameriprise Financial’s customer base;


•	the Company’s ability to effectively hedge risks relating to guaranteed benefit riders and certain other products;


•	the impact of intercompany allocations to the Company from Ameriprise Financial and its affiliates;


•	Ameriprise Financial’s ability to attract, recruit and retain qualified advisors and employees and its ability to distribute the Company’s products through current and future distribution channels;


•	changes in capital requirements that may be indicated, required or advised by regulators or rating agencies;


•	the impacts of Ameriprise Financial’s efforts to improve distribution economics and realize benefits from reengineering and tax planning;


•	interruptions or other failures in the Company’s communications, technology and other operating systems, including errors or failures caused by third party service providers, interference or failures caused by third party attacks on the Company’s systems, or the failure to safeguard the privacy or confidentiality of sensitive information and data on such systems; and

•

general economic and political factors, including consumer confidence in the economy, the ability and inclination of consumers generally to invest, as well as their ability and inclination to invest in financial instruments and products other than cash and cash equivalents, the costs of products and services the Company consumes in the conduct of its business, and applicable legislation and regulation and changes therein, including tax laws, tax treaties, fiscal and central government treasury policy, and policies regarding the financial services industry and regulatory rulings and pronouncements.

The Company cautions the reader that the foregoing list of factors is not exhaustive. There may also be other risks that the Company 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. The Company 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 as Part I, Item 1A in the Company’s 2012 10-K.


ITEM 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to provide reasonable assurance that the information required to be reported in the Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in and pursuant to Securities and Exchange Commission regulations, including controls and procedures designed to ensure that this information is accumulated and communicated to the Company’s management, including its principal executive officer and chief financial officer, as appropriate, to allow timely decisions regarding the required disclosure. It should be noted that, because of inherent limitations, the Company’s disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the disclosure controls and procedures are met.

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The Company’s management, under the supervision and with the participation of the Company’s principal executive officer and chief financial officer, evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures were effective at a reasonable level of assurance as of September 30, 2013.

Changes in Internal Control over Financial Reporting

There have not been any changes in RiverSource Life Insurance Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, RiverSource Life Insurance Company’s internal control over financial reporting.


PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

The information set forth in Note 15 to the Consolidated Financial Statements in Part I, Item 1 is incorporated herein by reference.


ITEM 1A.	RISK FACTORS

There have been no material changes in the risk factors provided in Part I, Item 1A of RiverSource Life Insurance Company’s 2012 10-K.


ITEM 6.	EXHIBITS

The list of exhibits required to be filed as exhibits to this report are listed on page E-1 hereof, under “Exhibit Index,” which is incorporated herein by reference.

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RIVERSOURCE LIFE INSURANCE COMPANY

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		RIVERSOURCE LIFE INSURANCE COMPANY
		(Registrant)

Date:	November 4, 2013	By	/s/ John R. Woerner
			John R. Woerner
			Chairman and President


Date:	November 4, 2013	By	/s/ Brian J. McGrane
			Brian J. McGrane
			Executive Vice President and
			Chief Financial Officer

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RIVERSOURCE LIFE INSURANCE COMPANY

EXHIBIT INDEX

The following exhibits are filed as part of this Quarterly Report:



Exhibit		Description


3.1	Copy of Certificate of Incorporation of IDS Life Insurance Company, filed as Exhibit 3.1 to Post-Effective Amendment No. 5 to Registration Statement No. 33-28976, is incorporated by reference.


3.1.1	Copy of Certificate of Amendment of Certificate of Incorporation of IDS Life Insurance Company dated June 22, 2006, filed as Exhibit 3.1 to Form 8-K filed on January 5, 2007, is incorporated by reference.


3.2	Copy of Amended and Restated By-Laws of RiverSource Life Insurance Company dated June 22, 2006, filed as Exhibit 27(f)(2) to Post-Effective Amendment No. 28 to Registration Statement No. 333-69777, is incorporated by reference.


31.1*	Certification of John R. Woerner, Chairman and President, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.


31.2*	Certification of Brian J. McGrane, Chief Financial Officer, pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.


32*	Certification of John R. Woerner, Chairman and President, and Brian J. McGrane, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*

The following materials from RiverSource Life Insurance Company's Quarterly Report on Form 10-Q for the period ended September 30, 2013, formatted in XBRL: (i) Consolidated Balance Sheets at September 30, 2013 and December 31, 2012; (ii) Consolidated Statements of Income for the three months and nine months ended September 30, 2013 and 2012; (iii) Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2013 and 2012; (iv) Consolidated Statements of Shareholder's Equity for the nine months ended September 30, 2013 and 2012; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012; and (vi) Notes to the Consolidated Financial Statements.

______________________________________


*	Filed electronically herewith.

E-1