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**UNITEDSTATESSECURITIES 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 March 31, 2009**

** **

**or**

** **
| **o****** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-----------|---------------------------------------------------------------------------------------------------------|

 

**For the Transition Period from              to             **

 

**Commissionfile number****033-28976**

 

**RIVERSOURCE LIFE INSURANCE COMPANY**

(Exact name ofregistrant as specified in its charter)

 

| **Minnesota**                                                 | ** ** | **41-0823832**                       |
|---------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of                               |       | (I.R.S. Employer Identification No.) |
| incorporation or organization)                                |       |                                 |
|                                                          |       |                                 |
| **1099 Ameriprise Financial Center, Minneapolis,  Minnesota** | ** ** | **55474**                            |
| (Address of principal executive offices)                      |       | (Zip Code)                           |

 

Registrant’stelephone number, including area code **(612) 671-3131**

 

**Not Applicable**

(Former name, former address and former fiscal year, if changed sincelast report)

 
| Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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  o   No  o |

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,”“accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange Act.

 
| Large  accelerated filer o                     |   | Accelerated  filer o         |
|------------------------------------------------|--------|------------------------------|
|                                           |   |                         |
| Non-accelerated  filer x                       |   | Smaller  reporting company o |
| (Do not check if  a smaller reporting company) |   |                         |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes  o   No  x

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

| **Class**                              | ** ** | **Outstanding at****May 6,  2009** |
|----------------------------------------|------------|-----------------------------------------|
| Common Stock (par value $30 per share) |       | 100,000****shares                       |

 

THE REGISTRANT MEETS THECONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1) (a) AND (b) OFFORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCEDDISCLOSURE FORMAT.

 

 

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

 

**FORM 10-Q**

 

**INDEX**

 
| ** **        | **Page No.**           |
|-------------------|-----------------------------|
| ** **        | ** **                  |
| **Part I.**  | **Financial  Information:** | ** ** |
| ** **        | ** **                  | ** ** |
|              | Item 1.                     | Financial Statements |   |
|              |                        |   |   |
|              |                        | Consolidated  Balance Sheets — March 31, 2009 and December 31, 2008 | 1 |
|              |                        |   |   |
|              |                        | Consolidated Statements of Income — Three months ended  March 31, 2009 and 2008 | 2 |
|              |                        |   |   |
|              |                        | Consolidated Statements of Cash Flows — Three months  ended March 31, 2009 and 2008 | 3 |
|              |                        |   |   |
|              |                        | Consolidated Statements of Shareholder’s Equity —  Three months ended March 31, 2009 and 2008 | 4 |
|              |                        |   |   |
|              |                        | Notes to Consolidated Financial Statements | 5-23 |
|              |                        |   |   |
|              | Item 2.                     | Management’s  Narrative Analysis | 24-32 |
|              |                        |   |   |
|              | Item 4T.                    | Controls and  Procedures | 32 |
|              |                        |   |   |
| **Part II.** | **Other Information:**      | ** ** |
| ** **        | ** **                  | ** ** |
|              | Item 1.                     | Legal Proceedings | 33 |
|              |                        |   |   |
|              | Item 1A.                    | Risk Factors | 33 |
|              |                        |   |   |
|              | Item 6.                     | Exhibits | 33 |
|              |                        |   |   |
|              | Signatures                  | 34 |
|              |                        |   |
|              | Exhibit Index          | E-1 |

 

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**PART I.  FINANCIAL INFORMATION**

**ITEM1.  FINANCIAL STATEMENTS**

 

**RIVERSOURCE****LIFE INSURANCE COMPANY**

 

**CONSOLIDATED BALANCE SHEETS**

(in millions, except share amounts)

 
| ** **                                                                                  | ** ** | **March 31,  2009** | ** ** | **December 31,  2008** | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                  | ** ** | **(unaudited)**          | ** ** | ** **                  | ** ** |
| **Assets**                                                                                  |       |                     |       |                        |       |
| Investments:                                                                                |       |                     |       |                        |       |
| Available-for-Sale:                                                                         |       |                     |       |                        |       |
| Fixed  maturities, at fair value (amortized cost: 2009, $21,019; 2008, $19,452)             |       | $                        | 19,691     |                        | $          | 18,070 |   |
| Common and  preferred stocks, at fair value (cost:  2009 and 2008, $30)                     |       | 8                        |       | 16                          |       |
| Commercial  mortgage loans, at cost (less allowance for loan losses: 2009, $16; 2008,  $17) |       | 2,707                    |       | 2,737                       |       |
| Policy loans                                                                                |       | 716                      |       | 722                         |       |
| Trading  securities and other investments                                                   |       | 764                      |       | 452                         |       |
| Total  investments                                                                          |       | 23,886                   |       | 21,997                      |       |
|                                                                                        |       |                     |       |                        |       |
| Cash and cash  equivalents                                                                  |       | 3,634                    |       | 3,307                       |       |
| Reinsurance  recoverables                                                                   |       | 1,634                    |       | 1,592                       |       |
| Amounts due from  brokers                                                                   |       | 21                       |       | 3                           |       |
| Deferred income  taxes, net                                                                 |       | 625                      |       | 599                         |       |
| Other accounts  receivable                                                                  |       | 83                       |       | 99                          |       |
| Accrued  investment income                                                                  |       | 255                      |       | 239                         |       |
| Deferred acquisition  costs                                                                 |       | 4,180                    |       | 4,324                       |       |
| Deferred sales  inducement costs                                                            |       | 477                      |       | 518                         |       |
| Other assets                                                                                |       | 2,203                    |       | 2,658                       |       |
| Separate account  assets                                                                    |       | 39,381                   |       | 41,787                      |       |
|                                                                                        |       |                     |       |                        |       |
| Total assets                                                                                |       | $                        | 76,379     |                        | $          | 77,123 |   |
| ** **                                                                                  |       |                     |       |                        |       |
| **Liabilities  and Shareholder’s Equity**                                              |       |                     |       |                        |       |
| Liabilities:                                                                                |       |                     |       |                        |       |
| Future policy  benefits                                                                     |       | $                        | 30,374     |                        | $          | 28,753 |   |
| Policy claims  and other policyholders’ funds                                          |       | 216                      |       | 172                         |       |
| Amounts due to  brokers                                                                     |       | 1,638                    |       | 1,862                       |       |
| Other  liabilities                                                                          |       | 860                      |       | 810                         |       |
| Separate account  liabilities                                                               |       | 39,381                   |       | 41,787                      |       |
| Total  liabilities                                                                          |       | 72,469                   |       | 73,384                      |       |
|                                                                                        |       |                     |       |                        |       |
| Shareholder’s  equity:                                                                 |       |                     |       |                        |       |
| Common shares,  $30 par value; 100,000 shares authorized, issued and outstanding            |       | 3                        |       | 3                           |       |
| Additional  paid-in capital                                                                 |       | 2,115                    |       | 2,116                       |       |
| Retained  earnings                                                                          |       | 2,526                    |       | 2,336                       |       |
| Accumulated  other comprehensive loss, net                                                  |       |                     |       |                        |       |
| Net unrealized  securities losses                                                           |       | (657                     | )          | (678                        | )          |
| Noncredit  related impairments on securities                                                |       | (40                      | )          | —                      |       |
| Net unrealized  derivative losses                                                           |       | (37                      | )          | (38                         | )          |
| Total  accumulated other comprehensive loss, net                                            |       | (734                     | )          | (716                        | )          |
| Total  shareholder’s equity                                                            |       | 3,910                    |       | 3,739                       |       |
|                                                                                        |       |                     |       |                        |       |
| Total  liabilities and shareholder’s equity                                            |       | $                        | 76,379     |                        | $          | 77,123 |   |

 

*See Notes to ConsolidatedFinancial Statements.*

 

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**RIVERSOURCE LIFE INSURANCE COMPANY**

 

**CONSOLIDATEDSTATEMENTS OF INCOME (UNAUDITED)**

**(inmillions)**

 
| ** **                                                                  | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                  | ** ** | **2009**                               | ** ** | **2008** | ** ** |
|                                                                        |       |                                   |       |   |   |
| **Revenues**                                                                |       |                                   |       |   |   |
| Premiums                                                                    |       | $110                                   |       | $107 |   |
| Net investment  income                                                      |       | 321                                    |       | 327 |   |
| Policy and  contract charges                                                |       | 284                                    |       | 315 |   |
| Other revenue                                                               |       | 47                                     |       | 65 |   |
| Net realized  investment gains (losses)                                     |       | 27                                     |       | (23 | ) |
|                                                                        |       |                                   |       |   |   |
| Total revenues                                                              |       | 789                                    |       | 791 |   |
|                                                                        |       |                                   |       |   |   |
| **Benefits  and expenses**                                                  |       |                                   |       |   |   |
| Benefits,  claims, losses and settlement expenses                           |       | (20                                    | )          | 190 |   |
| Interest  credited to fixed accounts                                        |       | 205                                    |       | 195 |   |
| Amortization of  deferred acquisition costs                                 |       | 267                                    |       | 135 |   |
| Other insurance  and operating expenses                                     |       | 148                                    |       | 184 |   |
|                                                                        |       |                                   |       |   |   |
| Total benefits  and expenses                                                |       | 600                                    |       | 704 |   |
|                                                                        |       |                                   |       |   |   |
| Pretax income                                                               |       | 189                                    |       | 87 |   |
| Income tax  provision (benefit)                                             |       | 37                                     |       | (15 | ) |
|                                                                        |       |                                   |       |   |   |
| Net income                                                                  |       | $152                                   |       | $102 |   |
|                                                                        |       |                                   |       |   |   |
| Supplemental  Disclosures:                                                  |       |                                   |       |   |   |
| Net realized  investment gains (losses):                                    |       |                                   |       |   |   |
| Net realized  investment gains before impairment losses on securities       |       | $47                                    |       |   |   |
| Total  other-than-temporary impairment losses on securities                 |       | (23                                    | )          |   |   |
| Portion of loss  recognized in other comprehensive income                   |       | 3                                      |       |   |   |
| Net impairment  losses recognized in net realized investment gains (losses) |       | (20                                    | )          |   |   |
| Net realized  investment gains (losses)                                     |       | $27                                    |       |   |   |

 

*See Notes to Consolidated Financial Statements.*

 

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**RIVERSOURCE LIFE INSURANCE COMPANY**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)**

**(inmillions)**

** **
| ** **                                                                                   | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                   | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| **Cash  Flows from Operating Activities**                                                    |       |                                   |       |   |   |
| Net income                                                                                   |       | $                                      | 152        |   | $ | 102 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities: |       |                                   |       |   |   |
| Capitalization  of deferred acquisition costs and deferred sales inducement costs            |       | (212                                   | )          | (173 | ) |
| Amortization of  deferred acquisition costs and deferred sales inducement costs              |       | 316                                    |       | 152 |   |
| Premium and  discount amortization on Available-for-Sale securities                          |       | 1                                      |       | 16 |   |
| Deferred income  taxes, net                                                                  |       | (37                                    | )          | (94 | ) |
| Contractholder  and policyholder charges, non-cash                                           |       | (65                                    | )          | (58 | ) |
| Net realized  investment gains                                                               |       | (47                                    | )          | (7 | ) |
| Other-than-temporary  impairments recognized in net realized investment gains (losses)       |       | 20                                     |       | 30 |   |
| Change in  operating assets and liabilities:                                                 |       |                                   |       |   |   |
| Trading  securities and equity method investments, net                                       |       | (288                                   | )          | 8 |   |
| Future policy  benefits for traditional life, disability income and long term care insurance |       | 63                                     |       | 73 |   |
| Policy claims  and other policyholders’ funds                                           |       | 45                                     |       | 7 |   |
| Reinsurance  recoverables                                                                    |       | (42                                    | )          | (87 | ) |
| Other accounts  receivable                                                                   |       | 16                                     |       | 8 |   |
| Accrued investment  income                                                                   |       | (16                                    | )          | — |   |
| Liability for  derivatives collateral held                                                   |       | (625                                   | )          | 114 |   |
| Other assets and liabilities, net                                                            |       | 129                                    |       | 103 |   |
|                                                                                         |       |                                   |       |   |   |
| **Net  cash provided by (used in) operating activities**                                     |       | (590                                   | )          | 194 |   |
| ** **                                                                                   |       |                                   |       |   |   |
| **Cash  Flows from Investing Activities**                                                    |       |                                   |       |   |   |
| Available-for-Sale  securities:                                                              |       |                                   |       |   |   |
| Proceeds from  sales                                                                         |       | 1,153                                  |       | 54 |   |
| Maturities,  sinking fund payments and calls                                                 |       | 879                                    |       | 677 |   |
| Purchases                                                                                    |       | (3,122                                 | )          | (223 | ) |
| Other  investments, excluding policy loans:                                                  |       |                                   |       |   |   |
| Proceeds from  sales, maturities, sinking fund payments and calls                            |       | 52                                     |       | 63 |   |
| Purchases                                                                                    |       | (44                                    | )          | (73 | ) |
| Change in policy  loans, net                                                                 |       | 7                                      |       | (9 | ) |
|                                                                                         |       |                                   |       |   |   |
| **Net  cash provided by (used in) investing activities**                                     |       | (1,075                                 | )          | 489 |   |
| ** **                                                                                   |       |                                   |       |   |   |
| **Cash  Flows from Financing Activities**                                                    |       |                                   |       |   |   |
| Activity related  to investment contracts and universal life-type insurance:                 |       |                                   |       |   |   |
| Considerations  received                                                                     |       | 2,417                                  |       | 350 |   |
| Net transfers  from separate accounts                                                        |       | 284                                    |       | 14 |   |
| Surrenders and  other benefits                                                               |       | (770                                   | )          | (804 | ) |
| Other                                                                                        |       | 61                                     |       | (13 | ) |
| Cash dividend to Ameriprise Financial, Inc.                                             |       | —                                 |       | (125 | ) |
| **Net  cash provided by (used in) financing activities**                                     |       | 1,992                                  |       | (578 | ) |
| ** **                                                                                   |       |                                   |       |   |   |
| **Net  increase in cash and cash equivalents**                                               |       | 327                                    |       | 105 |   |
| Cash and cash  equivalents at beginning of period                                            |       | 3,307                                  |       | 980 |   |
|                                                                                         |       |                                   |       |   |   |
| **Cash  and cash equivalents at end of period**                                              |       | $                                      | 3,634      |   | $ | 1,085 |   |
| ** **                                                                                   |       |                                   |       |   |   |
| Supplemental  Disclosures:                                                                   |       |                                   |       |   |   |
| Income taxes  paid, net                                                                      |       | $                                      | 1          |   | $ | 19 |   |

 

*See Notesto Consolidated Financial Statements.*

 

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**RIVERSOURCE LIFE INSURANCE COMPANY**

 

**CONSOLIDATEDSTATEMENTS OF SHAREHOLDER’S EQUITY (UNAUDITED)THREE MONTHS ENDED MARCH 31, 2009 AND 2008**

**(inmillions)**

** **
| ** **                                                | ** ** | **Common   Shares** | ** ** | **Additional   Paid-In   Capital** | ** ** | **Retained Earnings** | ** ** | **Accumulated Other****Comprehensive Loss** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------|------------|---------------------|------------|------------------------------------|------------|-----------------------|------------|---------------------------------------------|------------|-----------|------------|
| **Balances at January 1, 2008**                      |       | $                   | 3          |                               | $          | 2,031                 |       | $                                           | 3,188      |      | $          | (156 | ) | $ | 5,066 |   |
| Change in accounting principles, net                      |       | —              |       | —                             |       | (30                   | )          | —                                      |       | (30       | )          |
| Comprehensive income:                                     |       |                |       |                               |       |                  |       |                                        |       |      |       |
| Net income                                                |       | —              |       | —                             |       | 102                   |       | —                                      |       | 102       |       |
| Other comprehensive income (loss), net:                   |       |                |       |                               |       |                  |       |                                        |       |      |       |
| Change in net unrealized securities losses                |       | —              |       | —                             |       | —                |       | (4                                          | )          | (4        | )          |
| Total comprehensive income                                |       |                |       |                               |       |                  |       |                                        |       | 98        |       |
| Cash dividends to Ameriprise Financial, Inc.         |       | —              |       | —                             |       | (125                  | )          | —                                      |       | (125      | )          |
| **Balances at March 31, 2008**                       |       | $                   | 3          |                               | $          | 2,031                 |       | $                                           | 3,135      |      | $          | (160 | ) | $ | 5,009 |   |
|                                                      |       |                |       |                               |       |                  |       |                                        |       |      |       |
| **Balances at January 1, 2009**                      |       | $                   | 3          |                               | $          | 2,116                 |       | $                                           | 2,336      |      | $          | (716 | ) | $ | 3,739 |   |
| Change in accounting principles, net                      |       | —              |       | —                             |       | 38                    |       | (38                                         | )          | —    |       |
| Comprehensive income:                                     |       |                |       |                               |       |                  |       |                                        |       |      |       |
| Net income                                                |       | —              |       | —                             |       | 152                   |       | —                                      |       | 152       |       |
| Other comprehensive income (loss), net:                   |       |                |       |                               |       |                  |       |                                        |       |      |       |
| Change in net unrealized securities losses                |       | —              |       | —                             |       | —                |       | 21                                          |       | 21        |       |
| Change in noncredit related impairments on securities     |       | —              |       | —                             |       | —                |       | (2                                          | )          | (2        | )          |
| Change in net  unrealized derivative losses               |       | —              |       | —                             |       | —                |       | 1                                           |       | 1         |       |
| Total comprehensive income                                |       |                |       |                               |       |                  |       |                                        |       | 172       |       |
| Tax adjustment of share-based incentive compensation plan |       | —              |       | (1                                 | )          | —                |       | —                                      |       | (1        | )          |
| **Balances at March 31, 2009**                       |       | $                   | 3          |                               | $          | 2,115                 |       | $                                           | 2,526      |      | $          | (734 | ) | $ | 3,910 |   |

 

*See Notesto Consolidated Financial Statements.*

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED) (Continued)**

 

**1.****             ****Basis of Presentation**

 

The accompanyingConsolidated Financial Statements include the accounts of RiverSource LifeInsurance Company and its wholly owned subsidiaries, RiverSource Life InsuranceCo. of New York and RiverSource Tax Advantaged Investments, Inc. (“RiverSourceTax Adv. Inv.”)  RiverSource Life InsuranceCompany is a wholly owned subsidiary of Ameriprise Financial, Inc. (“AmeripriseFinancial”).  All significantintercompany accounts and transactions have been eliminated in consolidation.

 

RiverSource LifeInsurance Company and its subsidiaries are referred to collectively in this Form 10-Qas “RiverSource Life”.

 

The interim financialinformation in this report has not been audited. In the opinion of management,all adjustments necessary for a fair presentation of the consolidated financialposition and results of operations for the interim periods have been made. Alladjustments made were of a normal recurring nature.

 

**Restatement for Consolidation of RiverSource TaxAdv. Inv.**

 

On December 31,2008, Ameriprise Financial contributed all of the issued and outstanding sharesof RiverSource Tax Adv. Inv. to RiverSource Life Insurance Company.  The consolidated financial statements giveeffect to the RiverSource Tax Adv. Inv. transfer on December 31, 2008 as apooling of interests for entities under common control. Prior periods have beenrestated to include the accounts of RiverSource Tax Adv. Inv. using the poolingof interests method in order to be comparable to the current year. Followingare the amounts related to RiverSource Tax Adv. Inv. which are included inRiverSource Life’s consolidated financial statements:

 
| ** **                                    | ** ** | **March 31,  2008** | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|
| ** **                                    | ** ** | **(in millions)**        | ** ** |
| Total revenues                                |       | $                        | 7          |   |
| Net income                                    |       | 2                        |       |
| Shareholder’s  equity: Retained earnings |       | 349                      |       |
|                                               |            |                          |            |  |

 

**Reclassifications**

 

The accompanyingConsolidated Financial Statements are prepared in accordance with U.S.generally accepted accounting principles (“GAAP”).  Certain reclassifications of prior periodamounts have been made to conform to the current presentation.

 

In the second quarter of2008, RiverSource Life reclassified the mark-to-market adjustment on certainderivatives from net investment income to various expense lines where themark-to-market adjustment on the related embedded derivative resides. Themark-to-market adjustment on derivatives hedging variable annuity livingbenefits and equity indexed annuities were reclassified to benefits, claims,losses and settlement expenses and interest credited to fixed accounts,respectively.

 

In the first quarter of2009, RiverSource Life reclassified reinsurance allowances for coinsurancecontracts for traditional life and long term care insurance from premiums toother insurance and operating expenses to net with the associated expenses.

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED) (Continued)**

 

The following table showsthe impact of the reclassification of the mark-to-market adjustments onderivatives, the reinsurance allowances and the effect of the pooling ofinterests of RiverSource Tax. Adv. Inv. to RiverSource Life’s previouslyreported Consolidated Statements of Income.

 
| ** **                                        | ** ** | **Three Months Ended   March 31, 2008** | ** ** |
|---------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                        | ** ** | **Previously  Reported**                     | ** ** | **Restated and  Reclassified** | ** ** |
| ** **                                        | ** ** | **(in millions)**                            | ** ** |
| **Revenues**                                      |       |                                         |       |   |   |
| Premiums                                          |       | $                                            | 116        |   | $ | 107 |   |
| Net investment  income                            |       | 413                                          |       | 327 |   |
| Policy and  contract charges                      |       | 316                                          |       | 315 |   |
| Other revenue                                     |       | 66                                           |       | 65 |   |
| Net realized  investment losses                   |       | (23                                          | )          | (23 | ) |
|                                              |       |                                         |       |   |   |
| Total revenues                                    |       | 888                                          |       | 791 |   |
|                                              |       |                                         |       |   |   |
| **Benefits  and expenses**                        |       |                                         |       |   |   |
| Benefits,  claims, losses and settlement expenses |       | 294                                          |       | 190 |   |
| Interest  credited to fixed accounts              |       | 176                                          |       | 195 |   |
| Amortization of  deferred acquisition costs       |       | 135                                          |       | 135 |   |
| Other insurance  and operating expenses           |       | 188                                          |       | 184 |   |
|                                              |       |                                         |       |   |   |
| Total benefits  and expenses                      |       | 793                                          |       | 704 |   |
|                                              |       |                                         |       |   |   |
| Pretax income                                     |       | 95                                           |       | 87 |   |
| Income tax  benefit                               |       | (5                                           | )          | (15 | ) |
|                                              |       |                                         |       |   |   |
| **Net  income**                                   |       | $                                            | 100        |   | $ | 102 |   |

 

**2.****             ****Recent Accounting****Pronouncements**

 

In April 2009,the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”)FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for theAsset or Liability Have Significantly Decreased and Identifying TransactionsThat Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides guidance on estimatingthe fair value of a financial asset or liability when the trade volume andlevel of activity for the asset or liability has significantly decreasedrelative to historical levels. FSP 157-4 requires entities to disclose ininterim and annual periods the inputs and valuation techniques used to measurefair value and any changes in valuation inputs or techniques. In addition, debtand equity securities as defined by Statement of Financial Accounting Standards(“SFAS”) No. 115 “Accounting for Certain Investments in Debt and EquitySecurities” shall be disclosed by major category. This FSP is effective forinterim and annual reporting periods ending after June 15, 2009, withearly adoption permitted for periods ending after March 15, 2009, and isto be applied prospectively. RiverSource Life early adopted FSP 157-4 in thefirst quarter of 2009. The adoption did not have a material effect onRiverSource Life’s consolidated financial condition and results of operations.

 

In April 2009,the FASB issued FSP FAS 115-2 and FAS 124-2 “Recognition and Presentation ofOther-Than-Temporary Impairments” (“FSP 115-2”). FSP 115-2 amends existingguidance on other-than-temporary impairments for debt securities and requiresthat the credit portion of other-than-temporary impairments be recorded inearnings and the noncredit portion of losses be recorded in other comprehensiveincome. FSP 115-2 requires presentation of both the credit and non-creditportions of other-than-temporary impairments on the financial statements andadditional disclosures in interim and annual periods for major security types.This FSP is effective for interim and annual reporting periods ending after June 15,2009, with early adoption permitted for periods ending after March 15,2009. At the date of adoption, the portion of previously recognizedother-than-temporary impairments that represent the noncredit related losscomponent shall be recognized as a cumulative effect of adoption with anadjustment to the opening balance of retained earnings with a correspondingadjustment to accumulated other comprehensive income (loss).  RiverSource Life adopted FSP 115-2 in thefirst quarter of 2009 and recorded a cumulative effect increase to the openingbalance of retained earnings of $38 million, net of deferred acquisition costs(“DAC”) and deferred sales inducement costs (“DSIC”) amortization, certainbenefit reserves and income taxes, and a corresponding increase to accumulatedother comprehensive loss net of impacts to DAC, DSIC, certain benefit reservesand income taxes. See Note 3 for accounting policy and disclosures required bythis FSP.

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED) (Continued)**

 

In April 2009,the FASB issued FSP FAS 107-1 and APB 28-1 “Interim Disclosures about FairValue of Financial Instruments” (“FSP 107-1”). FSP 107-1 requires interimdisclosure on the fair value of financial instruments within the scope of SFAS No. 107“Disclosures about Fair Value of Financial Instruments.” This FSP is effectivefor interim and annual reporting periods ending after June 15, 2009, withearly adoption permitted for periods ending after March 15, 2009.RiverSource Life applied the disclosure requirements of FSP 107-1 in the firstquarter of 2009. See Note 7 for disclosures required by this FSP.

 

In March 2008,the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments andHedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”).SFAS 161 intends to improve financial reporting about derivative instrumentsand hedging activities by requiring enhanced disclosures about their impact onan entity’s financial position, financial performance and cash flows. SFAS 161requires disclosures regarding the objectives for using derivative instruments,the fair value of derivative instruments and their related gains and losses,and the accounting for derivatives and related hedged items. SFAS 161 iseffective for fiscal years and interim periods beginning after November 15,2008, with early adoption permitted. RiverSource Life applied the disclosurerequirements of SFAS 161 in the first quarter of 2009.  See Note 8 for disclosures required by SFAS161.

 

In December 2007,the FASB issued SFAS No. 160 “Noncontrolling Interests in ConsolidatedFinancial Statements-an amendment of ARB No. 51” (“SFAS 160”), whichestablishes the accounting and reporting for ownership interest in subsidiariesnot attributable, directly or indirectly, to a parent.  SFAS 160 requires that noncontrolling(minority) interests be classified as equity (instead of as a liability) withinthe consolidated balance sheets, and net income attributable to both the parentand the noncontrolling interests be disclosed on the face of the consolidatedstatements of income.  SFAS 160 iseffective for fiscal years beginning after December 15, 2008, and interimperiods within those years with early adoption prohibited.  The provisions of SFAS 160 are to be appliedprospectively, except for the presentation and disclosure requirements whichare to be applied retrospectively to all periods presented.  RiverSource Life adopted SFAS 160 as of January 1,2009.  The adoption did not have amaterial effect on its consolidated financial condition and results ofoperations.

 

In September 2006,the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS 157”) whichdefines fair value, establishes a framework for measuring fair value andexpands disclosures about fair value measurements.  SFAS 157 applies under other accountingpronouncements that require or permit fair value measurements. Accordingly,SFAS 157 does not require any new fair value measurements. The provisions ofSFAS 157 are required to be applied prospectively as of the beginning of thefiscal year in which SFAS 157 is initially applied, except for certainfinancial instruments as defined in SFAS 157 that require retrospectiveapplication. Any retrospective application will be recognized as a cumulativeeffect adjustment to the opening balance of retained earnings for the fiscalyear of adoption.  RiverSource Lifeadopted SFAS 157 effective January 1, 2008 and recorded a cumulativeeffect reduction to the opening balance of retained earnings of $30 million,net of DAC and DSIC amortization and income taxes. This reduction to retainedearnings was related to adjusting the fair value of certain derivativesRiverSource Life uses to hedge its exposure to market risk related to certainvariable annuity riders.  RiverSourceLife initially recorded these derivatives in accordance with EITF Issue No. 02-3“Issues Involved in Accounting for Derivative Contracts Held for TradingPurposes and Contracts Involved in Energy Trading and Risk ManagementActivities” (“EITF 02-3”).  SFAS 157nullifies the guidance in EITF 02-3 and requires these derivatives to be markedto the price RiverSource Life would receive to sell the derivatives to a marketparticipant (an exit price).  Theadoption of SFAS 157 also resulted in adjustments to the fair value ofRiverSource Life’s embedded derivative liabilities associated with certainvariable annuity riders. Since there is no market for these liabilities,RiverSource Life considered the assumptions participants in a hypotheticalmarket would make to determine an exit price. As a result, RiverSource Lifeadjusted the valuation of these liabilities by updating certain policyholderassumptions, adding explicit margins to provide for profit, risk and expensesand adjusting the rate used to discount expected cash flows to reflect acurrent market estimate of RiverSource Life’s risk of nonperformance specificto these liabilities. These adjustments resulted in an adoption impact of a $4million increase in earnings, net of DAC and DSIC amortization and incometaxes, at January 1, 2008. The nonperformance risk component of theadjustment is specific to the risk of RiverSource Life not fulfilling theseliabilities. As RiverSource Life’s estimate of this credit spread widens ortightens, the liability will decrease or increase.

 

Inaccordance with FSP FAS 157-2, “Effective Date of FASB Statement No. 157”(“FSP 157-2”), RiverSource Life deferred the adoption of SFAS 157 until January 1,2009 for all nonfinancial assets and nonfinancial liabilities, except for thosethat are recognized or disclosed at fair value in the financial statements on arecurring basis. See Note 7 for additional information regarding the fairvalues of RiverSource Life’s assets and liabilities.

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

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**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED) (Continued)**

 

**3.****             ****Investments**

 

*Available-for-SaleSecurities*

 

Effective January 1,2009, RiverSource Life early adopted FSP 115-2. This interpretationsignificantly changed RiverSource Life’s accounting policy regarding the timingand amount of other-than temporary impairments for Available-for-Salesecurities as follows. When the fair value of an investment is less than itsamortized cost, RiverSource Life assesses whether or not it has i.) the intentto sell the security (made a decision to sell) or ii.) it is more likely thannot it will be required to sell the security before its anticipated recovery.If either of these conditions are met, RiverSource Life must recognize another-than-temporary impairment for the difference between the investment’samortized cost basis and its fair value through earnings. In addition, forinvestments that do not meet the above criteria, and RiverSource Life does notexpect to recover a security’s amortized cost basis, the security is consideredother-than temporarily impaired. For these securities, RiverSource Lifeseparates the total impairment into the credit loss component and the amount ofthe loss related to other factors. The amount of the total other-than-temporaryimpairment related to credit loss is recognized in earnings. The amount of thetotal other-than-temporary impairment related to other factors is recognized inother comprehensive income, net of impacts to DAC, DSIC, certain benefitreserves and income taxes. For Available-for-Sale securities that haverecognized an other-than-temporary impairment through earnings, if throughsubsequent evaluation there is a significant increase in the cash flowexpected, the difference between the amortized cost basis and the cash flowsexpected to be collected is accreted as interest income. Subsequent increasesand decreases in the fair value of Available-for-Sale securities are includedin other comprehensive income.

 

For all securities thatare considered temporarily impaired, RiverSource Life does not intend to sellthese securities (has not made a decision to sell) and it is not more likelythan not that RiverSource Life will be required to sell the security beforerecovery of its amortized cost basis. RiverSource Life believes that it willcollect all principal and interest due on all investments that have amortizedcost in excess of fair value that are considered only temporarily impaired.

 

*Corporatedebt securities*

 

Factors RiverSource Lifeconsiders in determining whether declines in the fair value of fixed-maturitysecurities are other-than-temporary include: 1) the extent to which the marketvalue is below amortized cost; 2) the duration of time in which there has beena significant decline in value; 3) fundamental analysis of the liquidity,business prospects and overall financial condition of the issuer; and 4) marketevents that could impact credit ratings, economic and business climate,litigation and government actions, and similar external business factors. Inorder to determine the amount of the credit loss component for corporate debtsecurities considered other-than-temporarily impaired, a best estimate of thepresent value of cash flows expected to be collected discounted at the security’seffective interest rate is compared to the amortized cost basis of thesecurity.

 

*Structuredinvestments*

 

For structuredinvestments (e.g., residential mortgage backed securities, commercial mortgagebacked securities, asset backed securities and other structured investments),RiverSource Life also considers factors such as overall deal structure and itsposition within the structure, quality of underlying collateral, delinquenciesand defaults, loss severities, recoveries, prepayments and cumulative lossprojections in assessing potential other-than-temporary impairments of theseinvestments. Based upon these factors, securities that have indicators ofpotential other-than-temporary impairment are subject to detailed review bymanagement. Securities for which declines are considered temporary continue tobe carefully monitored by management. For the three months ended March 31,2009, certain non-agency mortgage backed securities are deemed other-thantemporarily impaired. Generally, the credit loss component for the non-agencymortgage backed securities is determined as the amount the amortized cost basisexceeds the present value of the projected cash flows expected to be collected.Forward interest rates are considered in the cash flow projections and are usedto calculate the discount rate used to determine the present value of theexpected cash flows when structures are supported by variable rate securities.Current effective interest rates are used to discount cash flows supported byfixed rate securities.

 

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**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED) (Continued)**

 

The following is asummary of Available-for-Sale securities by type:

 
| ** **                                | ** ** | **March 31, 2009** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|
| **Description of Securities**             | ** ** | **Amortized  Cost**     | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| ** **                                | ** ** | **(in millions)**       | ** ** |
| Fixed  maturities:                        |       |                    |       |   |   |   |   |   |   |
| Corporate debt  securities                |       | $                       | 12,085     |   | $ | 92 |   | $ | (1,014 | ) | $ | 11,163 |   |
| Residential  mortgage backed securities   |       | 4,795                   |       | 79 |   | (305 | ) | 4,569 |   |
| Commercial  mortgage backed securities    |       | 2,986                   |       | 51 |   | (144 | ) | 2,893 |   |
| Asset backed  securities                  |       | 737                     |       | 19 |   | (56 | ) | 700 |   |
| U.S. government  and agencies obligations |       | 66                      |       | 7 |   | — |   | 73 |   |
| State and  municipal obligations          |       | 253                     |       | 2 |   | (74 | ) | 181 |   |
| Foreign  government bonds and obligations |       | 95                      |       | 13 |   | (4 | ) | 104 |   |
| Other structured  investments             |       | 2                       |       | 6 |   | — |   | 8 |   |
| Total fixed  maturities                   |       | 21,019                  |       | 269 |   | (1,597 | ) | 19,691 |   |
| Common and  preferred stocks              |       | 30                      |       | — |   | (22 | ) | 8 |   |
| Total                                     |       | $                       | 21,049     |   | $ | 269 |   | $ | (1,619 | ) | $ | 19,699 |   |

 
| ** **                                | ** ** | **December 31, 2008** | ** ** |
|-------------------------------------------|------------|----------------------------|------------|
| **Description of Securities**             | ** ** | **Amortized Cost**         | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| ** **                                | ** ** | **(in millions)**          | ** ** |
| Fixed  maturities:                        |       |                       |       |   |   |   |   |   |   |
| Corporate debt  securities                |       | $                          | 12,030     |   | $ | 86 |   | $ | (1,123 | ) | $ | 10,993 |   |
| Residential  mortgage backed securities   |       | 3,697                      |       | 59 |   | (220 | ) | 3,536 |   |
| Commercial  mortgage backed securities    |       | 2,582                      |       | 35 |   | (174 | ) | 2,443 |   |
| Asset backed  securities                  |       | 682                        |       | 4 |   | (60 | ) | 626 |   |
| U.S. government  and agencies obligations |       | 200                        |       | 11 |   | — |   | 211 |   |
| State and  municipal obligations          |       | 164                        |       | 1 |   | (20 | ) | 145 |   |
| Foreign  government bonds and obligations |       | 95                         |       | 16 |   | (4 | ) | 107 |   |
| Other structured  investments             |       | 2                          |       | 7 |   | — |   | 9 |   |
| Total fixed  maturities                   |       | 19,452                     |       | 219 |   | (1,601 | ) | 18,070 |   |
| Common and  preferred stocks              |       | 30                         |       | — |   | (14 | ) | 16 |   |
| Total                                     |       | $                          | 19,482     |   | $ | 219 |   | $ | (1,615 | ) | $ | 18,086 |   |

 

At both March 31, 2009 and December 31,2008, fixed maturity securities comprised approximately 82% of RiverSource Life’stotal investments.  These securities wererated by Moody’s Investors Service (“Moody’s”) and Standard & Poor’sRating Services (“S&P”), except for approximately $1.1 billion ofsecurities at both March 31, 2009 and December 31, 2008 which wererated by RiverSource Investments, LLC’s internal analysts using criteriasimilar to Moody’s and S&P.  Ratingson investment grade securities are presented using S&P’s convention and, ifthe two agencies’ ratings differ, the lower rating was used.  A summary of fixed maturity securities byrating was as follows:

 
| ** **              | ** ** | **March 31, 2009**               | ** ** | **December 31, 2008** | ** ** |
|-------------------------|------------|---------------------------------------|------------|----------------------------|------------|
| **Ratings**             | ** ** | **Amortized  Cost**                   | ** ** | **Fair  Value**            | ** ** | **Percent of  Total Fair  Value** | ** ** | **Amortized  Cost** | ** ** | **Fair  Value** | ** ** | **Percent of  Total Fair  Value** | ** ** |
| ** **              | ** ** | **(in millions, except percentages)** | ** ** |
| AAA                     |       | $                                     | 7,972      |                       | $          | 7,856 |   | 40 | % | $ | 7,038 |   | $ | 6,779 |   | 38 | % |
| AA                      |       | 948                                   |       | 850                        |       | 4 |   | 1,071 |   | 1,017 |   | 6 |   |
| A                       |       | 3,628                                 |       | 3,361                      |       | 17 |   | 4,132 |   | 3,883 |   | 21 |   |
| BBB                     |       | 6,947                                 |       | 6,431                      |       | 33 |   | 5,901 |   | 5,388 |   | 30 |   |
| Below investment  grade |       | 1,524                                 |       | 1,193                      |       | 6 |   | 1,310 |   | 1,003 |   | 5 |   |
| Total fixed  maturities |       | $                                     | 21,019     |                       | $          | 19,691 |   | 100 | % | $ | 19,452 |   | $ | 18,070 |   | 100 | % |

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

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**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED) (Continued)**

 

At March 31, 2009and December 31, 2008, approximately 37% and 44%, respectively, of thesecurities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities.  No holdings of any other issuer were greaterthan 10% of shareholder’s equity.

 

The following tablesprovide information about Available-for-Sale securities with gross unrealizedlosses and the length of time that individual securities have been in acontinuous unrealized loss position:

 
| ** **                                | ** ** | **March 31, 2009** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|
| ** **                                | ** ** | **Less than 12 months** | ** ** | **12 months or more** | ** ** | **Total** | ** ** |
| **Description of Securities**             | ** ** | **Fair  Value**         | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized  Losses** | ** ** |
| ** **                                | ** ** | **(in millions)**       | ** ** |
|                                      |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Corporate debt  securities                |       | $                       | 3,290      |   | $ | (260 | ) | $ | 4,231 |   | $ | (754 | ) | $ | 7,521 |   | $ | (1,014 | ) |
| Residential  mortgage backed securities   |       | 1,213                   |       | (144 | ) | 258 |   | (161 | ) | 1,471 |   | (305 | ) |
| Commercial  mortgage backed securities    |       | 523                     |       | (27 | ) | 1,042 |   | (117 | ) | 1,565 |   | (144 | ) |
| Asset backed  securities                  |       | 72                      |       | (7 | ) | 147 |   | (49 | ) | 219 |   | (56 | ) |
| State and  municipal obligations          |       | —                  |       | — |   | 112 |   | (74 | ) | 112 |   | (74 | ) |
| U.S. government  and agencies obligations |       | —                  |       | — |   | 11 |   | — |   | 11 |   | — |   |
| Foreign  government bonds and obligations |       | 14                      |       | (4 | ) | — |   | — |   | 14 |   | (4 | ) |
| Common and  preferred stocks              |       | —                  |       | — |   | 8 |   | (22 | ) | 8 |   | (22 | ) |
| Total                                     |       | $                       | 5,112      |   | $ | (442 | ) | $ | 5,809 |   | $ | (1,177 | ) | $ | 10,921 |   | $ | (1,619 | ) |

** **
| ** **                                | ** ** | **December 31, 2008** | ** ** |
|-------------------------------------------|------------|----------------------------|------------|
| ** **                                | ** ** | **Less than 12 months**    | ** ** | **12 months or more** | ** ** | **Total** | ** ** |
| **Description of Securities**             | ** ** | **Fair  Value**            | ** ** | **Unrealized Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized Losses** | ** ** | **Fair  Value** | ** ** | **Unrealized Losses** | ** ** |
| ** **                                | ** ** | **(in millions)**          | ** ** |
|                                      |       |                       |       |   |   |   |   |   |   |   |   |   |   |
| Corporate debt  securities                |       | $                          | 5,086      |   | $ | (372 | ) | $ | 3,309 |   | $ | (751 | ) | $ | 8,395 |   | $ | (1,123 | ) |
| Residential mortgage  backed securities   |       | 305                        |       | (85 | ) | 466 |   | (135 | ) | 771 |   | (220 | ) |
| Commercial  mortgage backed securities    |       | 387                        |       | (23 | ) | 867 |   | (151 | ) | 1,254 |   | (174 | ) |
| Asset backed  securities                  |       | 187                        |       | (31 | ) | 124 |   | (29 | ) | 311 |   | (60 | ) |
| State and  municipal obligations          |       | 17                         |       | (1 | ) | 78 |   | (19 | ) | 95 |   | (20 | ) |
| U.S. government  and agencies obligations |       | —                     |       | — |   | 11 |   | — |   | 11 |   | — |   |
| Foreign  government bonds and obligations |       | 20                         |       | (4 | ) | — |   | — |   | 20 |   | (4 | ) |
| Common and  preferred stocks              |       | —                     |       | — |   | 16 |   | (14 | ) | 16 |   | (14 | ) |
| Total                                     |       | $                          | 6,002      |   | $ | (516 | ) | $ | 4,871 |   | $ | (1,099 | ) | $ | 10,873 |   | $ | (1,615 | ) |

 

The following tables summarize theunrealized losses by ratio of fair value to amortized cost:

 
|                                       |       | **March 31,  2009**                        |       |
|--------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                 | ** ** | **Less  than 12 months**                        | ** ** | **12  months or more** | ** ** | **Total** |   |
| **Ratio of Fair Value  to Amortized Cost** | ** ** | **Number  of  Securities**                      | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Number  of  Securities** | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Number   of  Securities** | ** ** | **Fair   Value** | ** ** | **Gross  Unrealized  Losses** |   |
|                                       |       | **(in  millions, except number of securities)** |       |
| 95% - 100%                                 |       | 178                                             |       | $ | 2,999 |   | $ | (58 | ) | 91 |   | $ | 1,760 |   | $ | (47 | ) | 269 |   | $ | 4,759 |   | $ | (105 | ) |
| 90% - 95%                                  |       | 75                                              |       | 1,088 |   | (85 | ) | 65 |   | 1,335 |   | (107 | ) | 140 |   | 2,423 |   | (192 | ) |
| 80% - 90%                                  |       | 55                                              |       | 580 |   | (92 | ) | 99 |   | 1,440 |   | (233 | ) | 154 |   | 2,020 |   | (325 | ) |
| Less than 80%                              |       | 50                                              |       | 445 |   | (207 | ) | 128 |   | 1,274 |   | (790 | ) | 178 |   | 1,719 |   | (997 | ) |
| Total                                      |       | 358                                             |       | $ | 5,112 |   | $ | (442 | ) | 383 |   | $ | 5,809 |   | $ | (1,177 | ) | 741 |   | $ | 10,921 |   | $ | (1,619 | ) |

 

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 
| ** **                                  | ** ** | **December 31, 2008**                      | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                  | ** ** | **Less than 12 months**                         | ** ** | **12 months or more** | ** ** | **Total** | ** ** |
| **Ratio of Fair Value   to Amortized Cost** | ** ** | **Number  of  Securities**                      | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Number  of  Securities** | ** ** | **Fair  Value** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Number  of  Securities** | ** ** | **Fair   Value** | ** ** | **Gross  Unrealized  Losses** | ** ** |
| ** **                                  | ** ** | **(in  millions, except number of securities)** | ** ** |
| 95% - 100%                                  |       | 191                                             |       | $ | 3,181 |   | $ | (75 | ) | 69 |   | $ | 1,068 |   | $ | (23 | ) | 260 |   | $ | 4,249 |   | $ | (98 | ) |
| 90% - 95%                                   |       | 98                                              |       | 1,667 |   | (129 | ) | 48 |   | 1,001 |   | (86 | ) | 146 |   | 2,668 |   | (215 | ) |
| 80% - 90%                                   |       | 62                                              |       | 747 |   | (119 | ) | 82 |   | 1,465 |   | (271 | ) | 144 |   | 2,212 |   | (390 | ) |
| Less than 80%                               |       | 47                                              |       | 407 |   | (193 | ) | 150 |   | 1,337 |   | (719 | ) | 197 |   | 1,744 |   | (912 | ) |
| Total                                       |       | 398                                             |       | $ | 6,002 |   | $ | (516 | ) | 349 |   | $ | 4,871 |   | $ | (1,099 | ) | 747 |   | $ | 10,873 |   | $ | (1,615 | ) |

 

As part of RiverSourceLife’s ongoing monitoring process, management determined that a majority of thegross unrealized losses on its Available-for-Sale securities are attributableto changes in credit spreads across sectors. The primary driver of increasedunrealized losses during the first quarter of 2009 was related to the adoptionof FSP 115-2. RiverSource Life recorded a cumulative effect increase to theamortized cost of previously other-than-temporarily impaired investments thatincreased the gross unrealized losses on Available-for-Sale securities by $64million. This impact is due to impairment of Available-for-Sale securitiespreviously recognized through earnings for factors other than credit.

 

The change in netunrealized securities gains (losses) in other comprehensive income (loss)includes three components, net of tax: (i) unrealized gains (losses) thatarose from changes in the market value of securities that were held during theperiod (holding gains (losses)); (ii) (gains) losses that were previouslyunrealized, but have been recognized in current period net income due to salesand other-than-temporary impairments of Available-for-Sale securities(reclassification of realized gains (losses)) and (iii) other itemsprimarily consisting of adjustments in asset and liability balances, such asDAC, DSIC and annuity liabilities, to reflect the expected impact on their carryingvalues had the unrealized gains (losses) been realized as of the respectivebalance sheet dates.

 

The followingtable presents the rollforward of the net unrealized securities losses, net oftax, included in accumulated other comprehensive loss:

 
| ** **                                                                  | ** ** | **2009**          | ** ** | **2008** | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------|------------|----------|------------|
| ** **                                                                  | ** ** | **(in millions)** | ** ** |
| Net unrealized  securities losses at January 1                         |       | $                 | (678       | )        | $          | (116 | ) |
| Holding gains  (losses), net of tax of $41 and nil, respectively            |       | 77                |       | (1       | )          |
| Reclassification  of realized gains, net of tax of $26 and $3, respectively |       | (48               | )          | (5       | )          |
| DAC, net of tax  of $22 and nil, respectively                               |       | (40               | )          | —   |       |
| DSIC, net of tax  of $4 and nil, respectively                               |       | (8                | )          | —   |       |
| Benefit  reserves, net of tax of nil and $1, respectively                   |       | —            |       | 2        |       |
| Net unrealized  securities losses at March 31                          |       | $                 | (697       | )        | $          | (120 | ) |

 

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** **

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

The following tablepresents the amounts recognized in the Consolidated Statements of Income forother-than-temporary impairments related to credit losses:

 
| ** **                                                                                                                                                                        | ** ** | **2009**          | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                                                                                                        | ** ** | **(in millions)** | ** ** |
| Beginning  balance of credit losses on securities held as of January 1 for which a  portion of other-than-temporary impairment was recognized in other  comprehensive income |       | $                 | 101        |   |
| Additional  amount related to credit losses for which an other-than-temporary impairment  was not previously recognized                                                           |       | 8                 |       |
| Additional  increases to the amount related to credit losses for which an  other-than-temporary impairment was previously recognized                                              |       | 4                 |       |
| Ending balance  of credit losses on securities held as of March 31 for which a portion  of other-than-temporary impairment was recognized in other comprehensive income      |       | $                 | 113        |   |

 

Net realized gains and losses onAvailable-for-Sale securities, determined using the specific identificationmethod, recognized in net realized investment gains (losses) were as follows:

 
| ** **                       | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|
| ** **                       | ** ** | **2009**                               | ** ** | **2008** | ** ** |
| ** **                       | ** ** | **(in millions)**                      | ** ** |
| Gross realized gains from sales  |       | $                                      | 48         |   | $ | 9 |   |
| Gross realized losses from sales |       | (1                                     | )          | (2 | ) |
| Impairment losses                |       | (20                                    | )          | (30 | ) |
|                                  |            |                                        |            |  |  |  |  |

 

For the three months ended March 31, 2009,other-than-temporary impairments of $20 million recognized in net realized investmentgains (losses), primarily related to credit related losses in non-agencyresidential mortgage-backed securities and corporate debt securities primarilyin the gaming industries.

 

Available-for-Salesecurities by maturity as of March 31, 2009 were as follows:

 
| ** **                              | ** ** | **Amortized Cost** | ** ** | **Fair Value** | ** ** |
|-----------------------------------------|------------|--------------------|------------|----------------|------------|
| ** **                              | ** ** | **(in millions)**  | ** ** |
| Due within one  year                    |       | $                  | 591        |           | $          | 584 |   |
| Due after one  year through five years  |       | 7,191              |       | 6,728          |       |
| Due after five  years through 10 years  |       | 2,965              |       | 2,635          |       |
| Due after 10  years                     |       | 1,752              |       | 1,574          |       |
|                                    |       | 12,499             |       | 11,521         |       |
| Residential  mortgage backed securities |       | 4,795              |       | 4,569          |       |
| Commercial  mortgage backed securities  |       | 2,986              |       | 2,893          |       |
| Asset backed  securities                |       | 737                |       | 700            |       |
| Other structured  investments           |       | 2                  |       | 8              |       |
| Common and  preferred stocks            |       | 30                 |       | 8              |       |
| Total                                   |       | $                  | 21,049     |           | $          | 19,699 |   |

 

The expected payments onresidential mortgage backed securities, commercial mortgage backed securities,asset backed securities and other structured investments may not coincide withtheir contractual maturities.  As such,these securities, as well as common and preferred stocks, were not included inthe maturities distribution.

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

** **

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

**4****.****             ****Deferred Acquisition Costs****and Deferred Sales Inducement Costs**

 

The balances of and changes in DACwere as follows:

 
| ** **                                           | ** ** | **2009**          | ** ** | **2008** | ** ** |
|------------------------------------------------------|------------|-------------------|------------|----------|------------|
| ** **                                           | ** ** | **(in millions)** | ** ** |
| Balance at  January 1                           |       | $                 | 4,324      |     | $          | 4,334 |   |
| Cumulative  effect of accounting change              |       | —            |       | 36       |       |
| Capitalization  of acquisition costs                 |       | 190               |       | 149      |       |
| Amortization                                         |       | (267              | )          | (135     | )          |
| Impact of change  in net unrealized securities gains |       | (67               | )          | (1       | )          |
| Balance at  March 31                            |       | $                 | 4,180      |     | $          | 4,383 |   |

 

The balances of and changesin DSIC were as follows:

 
| ** **                                           | ** ** | **2009**               | ** ** | **2008** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|----------|------------|
| ** **                                           | ** ** | **(in millions)** | ** ** |
| Balance at  January 1                           |       | $                      | 518        |     | $          | 511 |   |
| Cumulative  effect of accounting change              |       | —                 |       | 9        |       |
| Capitalization  of sales inducements                 |       | 22                     |       | 24       |       |
| Amortization                                         |       | (49                    | )          | (17      | )          |
| Impact of change  in net unrealized securities gains |       | (14                    | )          | —   |       |
| Balance at  March 31                            |       | $                      | 477        |     | $          | 527 |   |

 

RiverSource Life adoptedFSP 115-2 in the first quarter of 2009. The adoption had no net impact to DAC and DSIC.

 

Effective January 1,2008, RiverSource Life adopted SFAS 157 and recorded as a cumulative change inaccounting principle a pretax increase of $36 million and $9 million to DAC andDSIC, respectively.  See Note 2 and Note7 for additional information regarding SFAS 157.

 

**5.****             ****Future Policy Benefits, Policy Claimsand Other Policyholders’ Funds and Separate Account Liabilities**

 

Futurepolicy benefits and policy claims and other policyholders’ funds consisted ofthe following:

 
| ** **                                                                           | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                                                                           | ** ** | **(in millions)**  | ** ** |
| Fixed annuities                                                                      |       | $                       | 15,659     |                       | $          | 14,058 |   |
| Equity indexed  annuities accumulated host values                                    |       | 213                     |       | 228                        |       |
| Equity indexed  annuities embedded derivatives                                       |       | 15                      |       | 16                         |       |
| Variable  annuities fixed sub-accounts                                               |       | 5,918                   |       | 5,623                      |       |
| Variable annuity  guaranteed minimum withdrawal benefits (“GMWB”)          |       | 1,199                   |       | 1,471                      |       |
| Variable annuity  guaranteed minimum accumulation benefits (“GMAB”)        |       | 330                     |       | 367                        |       |
| Other variable  annuity guarantees                                                   |       | 65                      |       | 67                         |       |
| Total annuities                                                                      |       | 23,399                  |       | 21,830                     |       |
| Variable  universal life (“VUL”)/universal life (“UL”) insurance |       | 2,551                   |       | 2,526                      |       |
| Other life,  disability income and long term care insurance                          |       | 4,424                   |       | 4,397                      |       |
| Total future  policy benefits                                                        |       | 30,374                  |       | 28,753                     |       |
| Policy claims  and other policyholders’ funds                                   |       | 216                     |       | 172                        |       |
| Total future  policy benefits and policy claims and other policyholders’ funds  |       | $                       | 30,590     |                       | $          | 28,925 |   |

 

Separate accountliabilities consisted of the following:

 
| ** **                              | ** ** | **March 31, 2009** | ** ** | **December 31, 2008** | ** ** |
|-----------------------------------------|------------|-------------------------|------------|----------------------------|------------|
| ** **                              | ** ** | **(in millions)**       | ** ** |
| Variable annuity  variable sub-accounts |       | $                       | 35,550     |                       | $          | 37,657 |   |
| VUL insurance  variable sub-accounts    |       | 3,795                   |       | 4,091                      |       |
| Other insurance  variable sub-accounts  |       | 36                      |       | 39                         |       |
| Total separate  account liabilities     |       | $                       | 39,381     |                       | $          | 41,787 |   |

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

**6.****             ****Variable Annuity and InsuranceGuarantees**

 

Themajority of the variable annuity contracts offered by RiverSource Life containguaranteed minimum death benefit (“GMDB”) provisions.  RiverSource Life also offers variableannuities with death benefit provisions that gross up the amount payable by acertain percentage of contract earnings, which are referred to as GGUbenefits.  In addition, RiverSource Lifeoffers contracts with GMWB and GMAB provisions. RiverSource Life previously offered contracts containing guaranteedminimum income benefit (“GMIB”) provisions.

 

Certainuniversal life contracts offered by RiverSource Life provide secondaryguarantee benefits.  The secondaryguarantee ensures that, subject to specified conditions, the policy will notterminate and will continue to provide a death benefit even if there isinsufficient policy value to cover the monthly deductions and charges.

 

Thefollowing table provides summary information related to all variable annuityguarantees for which RiverSource Life has established additional liabilities:

 
| ** **                                             | ** ** | **March 31,  2009**       | ** ** | **December 31,  2008**                | ** ** |
|--------------------------------------------------------|------------|--------------------------------|------------|--------------------------------------------|------------|
| **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                                      |       | $                              | 21,867     |                                       | $          | 19,603 |   | $ | 5,857 |   | 61 |   | $ | 22,249 |   | $ | 20,153 |   | $ | 4,873 |   | 61 |   |
| Six-Year Reset                                         |       | 11,719                         |       | 8,982                                      |       | 3,258 |   | 61 |   | 12,719 |   | 10,063 |   | 2,802 |   | 61 |   |
| One-Year Ratchet                                       |       | 5,478                          |       | 4,747                                      |       | 2,402 |   | 63 |   | 5,770 |   | 5,061 |   | 2,163 |   | 62 |   |
| Five-Year Ratchet                                      |       | 916                            |       | 843                                        |       | 245 |   | 59 |   | 951 |   | 888 |   | 199 |   | 59 |   |
| Other                                                  |       | 447                            |       | 401                                        |       | 215 |   | 67 |   | 471 |   | 429 |   | 192 |   | 66 |   |
| Total – GMDB                                      |       | $                              | 40,427     |                                       | $          | 34,576 |   | $ | 11,977 |   | 61 |   | $ | 42,160 |   | $ | 36,594 |   | $ | 10,229 |   | 61 |   |
|                                                   |       |                           |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **GGU  death benefit**                                 |       | $                              | 661        |                                       | $          | 577 |   | $ | 65 |   | 63 |   | $ | 699 |   | $ | 619 |   | $ | 65 |   | 63 |   |
|                                                   |       |                           |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **GMIB**                                               |       | $                              | 517        |                                       | $          | 463 |   | $ | 279 |   | 63 |   | $ | 567 |   | $ | 511 |   | $ | 245 |   | 63 |   |
|                                                   |       |                           |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **GMWB:**                                              |       |                           |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| GMWB                                                   |       | $                              | 3,282      |                                       | $          | 3,173 |   | $ | 1,491 |   | 63 |   | $ | 3,513 |   | $ | 3,409 |   | $ | 1,312 |   | 63 |   |
| GMWB for life                                          |       | 9,504                          |       | 9,023                                      |       | 3,116 |   | 63 |   | 9,194 |   | 8,764 |   | 2,704 |   | 63 |   |
| Total – GMWB                                      |       | $                              | 12,786     |                                       | $          | 12,196 |   | $ | 4,607 |   | 63 |   | $ | 12,707 |   | $ | 12,173 |   | $ | 4,016 |   | 63 |   |
|                                                   |       |                           |       |                                       |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **GMAB**                                               |       | $                              | 2,021      |                                       | $          | 1,947 |   | $ | 715 |   | 56 |   | $ | 2,006 |   | $ | 1,937 |   | $ | 608 |   | 56 |   |

 

----

(1)   Individualvariable annuity contracts may have more than one guarantee and therefore maybe included in more than one benefit type. Variable annuity contracts for which the death benefit equals accountvalue are not shown in this table.

(2)   Represents thecurrent guaranteed benefit amount in excess of the current contract value.GMIB, GMWB and GMAB benefits are subject to waiting periods and payment periodsspecified in the contract.  As a resultof the recent market decline, the amount by which guarantees exceed theaccumulation value has increased significantly.

 

Changes in additionalliabilities were as follows:

 
| ** **                                 | ** ** | **GMDB &  GGU** | ** ** | **GMIB** | ** ** | **GMWB** | ** ** | **GMAB** | ** ** | **UL** | ** ** |
|--------------------------------------------|------------|--------------------------|------------|----------|------------|----------|------------|----------|------------|--------|------------|
| ** **                                 | ** ** | **(in millions)**   | ** ** |
| Liability  balance at January 1, 2008 |       | $                        | 24         |     | $          | 3        |       | $        | 136        |   | $          | 33 |   | $ | 4 |   |
| Incurred claims                            |       | 1                        |       | —   |       | 80       |       | 50       |       | 1      |       |
| Paid claims                                |       | (2                       | )          | —   |       | —   |       | —   |       | — |       |
| Liability  balance at March 31, 2008  |       | $                        | 23         |     | $          | 3        |       | $        | 216        |   | $          | 83 |   | $ | 5 |   |
|                                       |       |                     |       |     |       |     |       |     |       |   |       |
| Liability balance  at January 1, 2009 |       | $                        | 55         |     | $          | 12       |       | $        | 1,471      |   | $          | 367 |   | $ | 7 |   |
| Incurred claims                            |       | 23                       |       | 1        |       | (272     | )          | (37      | )          | 2      |       |
| Paid claims                                |       | (26                      | )          | —   |       | —   |       | —   |       | — |       |
| Liability  balance at March 31, 2009  |       | $                        | 52         |     | $          | 13       |       | $        | 1,199      |   | $          | 330 |   | $ | 9 |   |

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

**7.****             ****Fair Values of Assets andLiabilities**

 

Effective January 1, 2008,RiverSource Life adopted SFAS 157, which defines fair value, establishes aframework for measuring fair value and expands disclosures about fair valuemeasurements. SFAS 157 defines fair value as the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date; that is, an exit price.The exit price assumes the asset or liability is not exchanged subject to aforced liquidation or distressed sale.

 

**Valuation Hierarchy**

** **

Under SFAS157, RiverSource Life categorizes its fair value measurements according to athree-level hierarchy. The hierarchy prioritizes the inputs used by RiverSourceLife’s valuation techniques. A level is assigned to each fair value measurementbased on the lowest level input that is significant to the fair valuemeasurement in its entirety. The three levels of the fair value hierarchy aredefined as follows:

 

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

 

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

 

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

 

**Determination of FairValue**

** **

RiverSource Life uses valuationtechniques consistent with the market and income approaches to measure the fairvalue of its assets and liabilities. RiverSource Life’s market approach usesprices and other relevant information generated by market transactionsinvolving identical or comparable assets or liabilities. RiverSource Life’sincome approach uses valuation techniques to convert future projected cashflows to a single discounted present value amount. When applying eitherapproach, RiverSource Life maximizes the use of observable inputs and minimizesthe use of unobservable inputs.

 

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

 

**Assets**

** **

***Cash Equivalents***

* *

Cash equivalents include highlyliquid investments with original maturities of 90 days or less. Actively tradedmoney market funds are measured at their net asset value (“NAV”) and classifiedas Level 1. RiverSource Life’s remaining cash equivalents are classified asLevel 2 and measured at amortized cost, which is a reasonable estimate of fairvalue because of the short time between the purchase of the instrument and itsexpected realization.

 

***Available-for-SaleSecurities***

* *

When available, the fair value ofsecurities is based on quoted prices in active markets. If quoted prices arenot available, fair values are obtained from nationally-recognized pricingservices, broker quotes, or other model-based valuation techniques such as thepresent value of cash flows. Level 1 securities include U.S. Treasuries. Level2 securities include corporate and municipal bonds, agency mortgage backed securities,commercial mortgage backed securities, asset backed securities and U.S. andforeign government and agency securities. Level 3 securities include corporatebonds, non-agency residential mortgage backed securities and asset backedsecurities.

 

Through RiverSource Life’s ownexperience transacting in the marketplace and through discussions with itspricing vendors, RiverSource Life believes that the market for non-agencyresidential mortgage backed securities is inactive. Indicators of inactivemarkets include: pricing services’ reliance on brokers or discounted cash flowanalyses to provide prices, an increase in the disparity between pricesprovided by different pricing services for the same security, unreasonablylarge bid-offer spreads and a significant decrease in the volume of tradesrelative to historical levels. In certain cases, this market inactivity hasresulted in RiverSource Life applying valuation techniques that rely more on anincome approach (discounted cash flows using market rates) than on a marketapproach (prices from pricing services). RiverSource Life considers market observable yields for other assetclasses it considers to be of similar risk which includes nonperformance andliquidity for individual securities to set the discount rate for applying theincome approach to certain non-agency residential mortgage backed securities.

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

* *

***Separate AccountAssets***

* *

The fair value of assets held byseparate accounts is determined by the NAV of the funds in which those separateaccounts are invested. The NAV represents the exit price for the separateaccount. Separate account assets are classified as Level 2 as they are tradedin principal-to-principal markets with little publicly released pricinginformation.

 

***Derivatives***

* *

The fair value of derivatives thatare traded in certain over-the-counter markets are generally measured usingpricing models with market observable inputs such as interest rates and equityindex levels. These measurements are classified as Level 2 within the fairvalue hierarchy and include interest rate swaps and options. Derivatives thatare valued using pricing models that have significant unobservable inputs areclassified as Level 3 measurements. Structured derivatives that are used byRiverSource Life to hedge its exposure to market risk related to certainvariable annuity riders are classified as Level 3.

 

**Liabilities**

** **

***EmbeddedDerivatives***

* *

***VariableAnnuity Riders — Guaranteed Minimum Accumulation Benefit and Guaranteed MinimumWithdrawal Benefit***

* *

RiverSource Life values the embeddedderivative liability attributable to the provisions of certain variable annuityriders using internal valuation models. These models calculate fair value bydiscounting 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 capitalmarket assumptions and incorporate significant unobservable inputs related tocontractholder behavior assumptions and margins for risk, profit and expensesthat RiverSource Life believes an exit market participant would expect. Thefair value of these embedded derivatives also reflects a current estimate ofRiverSource Life’s nonperformance risk specific to these liabilities. Given thesignificant unobservable inputs to this valuation, these measurements areclassified as Level 3. The embedded derivative liability attributable to theseprovisions is recorded in future policy benefits.

 

***Equity Indexed Annuities***

* *

RiverSourceLife uses various Black-Scholes calculations to determine the fair value of theembedded derivative liability associated with the provisions of its equityindexed annuities. The inputs to these calculations are primarily marketobservable. As a result, these measurements are classified as Level 2. Theembedded derivative liability attributable to the provisions of RiverSourceLife’s equity indexed annuities is recorded in future policy benefits.

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

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

 
| ** **                                  | ** ** | **March 31, 2009** | ** ** |
|---------------------------------------------|------------|-------------------------|------------|
| ** **                                  | ** ** | **Level 1**             | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
| ** **                                  | ** ** | **(in millions)**       | ** ** |
| Assets                                      |       |                    |       |   |   |   |   |   |   |
| Available-for-Sale:                         |       |                    |       |   |   |   |   |   |   |
| Fixed  maturities:                          |       |                    |       |   |   |   |   |   |   |
| Corporate debt  securities                  |       | $                       | —     |   | $ | 10,106 |   | $ | 1,057 |   | $ | 11,163 |   |
| Residential  mortgage backed securities     |       | —                  |       | 2,829 |   | 1,740 |   | 4,569 |   |
| Commercial  mortgage backed securities      |       | —                  |       | 2,890 |   | 3 |   | 2,893 |   |
| Asset backed  securities                    |       | —                  |       | 588 |   | 112 |   | 700 |   |
| State and  municipal obligations            |       | —                  |       | 181 |   | — |   | 181 |   |
| U.S. government  and agencies obligations   |       | 11                      |       | 62 |   | — |   | 73 |   |
| Foreign government  bonds and obligations   |       | —                  |       | 104 |   | — |   | 104 |   |
| Other structured  investments               |       | —                  |       | — |   | 8 |   | 8 |   |
| Total  Available-for-Sale: Fixed maturities |       | 11                      |       | 16,760 |   | 2,920 |   | 19,691 |   |
| Common and  preferred stocks                |       | —                  |       | 8 |   | — |   | 8 |   |
| Trading  securities                         |       | —                  |       | 441 |   | — |   | 441 |   |
| Cash equivalents                            |       | 329                     |       | 3,263 |   | — |   | 3,592 |   |
| Other assets                                |       | —                  |       | 1,887 |   | 125 |   | 2,012 |   |
| Separate account  assets                    |       | —                  |       | 39,381 |   | — |   | 39,381 |   |
| Total assets at  fair value                 |       | $                       | 340        |   | $ | 61,740 |   | $ | 3,045 |   | $ | 65,125 |   |
|                                        |       |                    |       |   |   |   |   |   |   |
| Liabilities                                 |       |                    |       |   |   |   |   |   |   |
| Future policy  benefits                     |       | $                       | —     |   | $ | 15 |   | $ | 1,516 |   | $ | 1,531 |   |
| Other  liabilities                          |       | —                  |       | 658 |   | — |   | 658 |   |
| Total  liabilities at fair value            |       | $                       | —     |   | $ | 673 |   | $ | 1,516 |   | $ | 2,189 |   |

 
| ** **                                  | ** ** | **December 31, 2008** | ** ** |
|---------------------------------------------|------------|----------------------------|------------|
| ** **                                  | ** ** | **Level 1**                | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
| ** **                                  | ** ** | **(in millions)**          | ** ** |
| Assets                                      |       |                       |       |   |   |   |   |   |   |
| Available-for-Sale:                         |       |                       |       |   |   |   |   |   |   |
| Fixed  maturities:                          |       |                       |       |   |   |   |   |   |   |
| Corporate debt  securities                  |       | $                          | —     |   | $ | 9,907 |   | $ | 1,086 |   | $ | 10,993 |   |
| Residential  mortgage backed securities     |       | —                     |       | 3,016 |   | 520 |   | 3,536 |   |
| Commercial  mortgage backed securities      |       | —                     |       | 2,440 |   | 3 |   | 2,443 |   |
| Asset backed  securities                    |       | —                     |       | 531 |   | 95 |   | 626 |   |
| State and  municipal obligations            |       | —                     |       | 145 |   | — |   | 145 |   |
| U.S. government  and agencies obligations   |       | 21                         |       | 190 |   | — |   | 211 |   |
| Foreign  government bonds and obligations   |       | —                     |       | 107 |   | — |   | 107 |   |
| Other structured  investments               |       | —                     |       | — |   | 9 |   | 9 |   |
| Total  Available-for-Sale: Fixed maturities |       | 21                         |       | 16,336 |   | 1,713 |   | 18,070 |   |
| Common and  preferred stocks                |       | —                     |       | 16 |   | — |   | 16 |   |
| Trading  securities                         |       | 70                         |       | 77 |   | — |   | 147 |   |
| Cash equivalents                            |       | 432                        |       | 2,861 |   | — |   | 3,293 |   |
| Other assets                                |       | —                     |       | 2,238 |   | 200 |   | 2,438 |   |
| Separate account  assets                    |       | —                     |       | 41,787 |   | — |   | 41,787 |   |
| Total assets at  fair value                 |       | $                          | 523        |   | $ | 63,315 |   | $ | 1,913 |   | $ | 65,751 |   |
|                                        |       |                       |       |   |   |   |   |   |   |
| Liabilities                                 |       |                       |       |   |   |   |   |   |   |
| Future policy  benefits                     |       | $                          | —     |   | $ | 16 |   | $ | 1,832 |   | $ | 1,848 |   |
| Other  liabilities                          |       | —                     |       | 645 |   | — |   | 645 |   |
| Total  liabilities at fair value            |       | $                          | —     |   | $ | 661 |   | $ | 1,832 |   | $ | 2,493 |   |

 

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**RIVERSOURCE****LIFE INSURANCE COMPANY**

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

The following tables provide asummary of changes in Level 3 assets and liabilities measured at fair value ona recurring basis:

 
| ** **                                  | ** ** | ** **                          | ** ** | **Total Gains   (Losses) Included in** | ** ** | **Purchases,  Sales,**         | ** ** | ** **                           | ** ** | ** **                     | ** ** |
|---------------------------------------------|------------|-------------------------------------|------------|----------------------------------------|------------|--------------------------------|------------|--------------------------------------|------------|--------------------------------|------------|
| ** **                                  | ** ** | **Balance,  January 1,  2009** | ** ** | **Net  Income**                        | ** ** | **Other  Comprehensive  Loss** | ** ** | **Issuances  and Settlements,  Net** | ** ** | **Transfers  Out of  Level 3** | ** ** | **Balance,  March 31,  2009** | ** ** |
| ** **                                  | ** ** | **(in millions)**                   | ** ** |
| Available-for-Sale:  Fixed maturities  |       |                                |       |                                   |       |                           |       |                                 |       |                           |       |   |   |
| Corporate debt  securities                  |       | $                                   | 1,086      |                                   | $          | —                         |       | $                                    | 24         |                           | $          | (39 | ) | $ | (14 | ) | $ | 1,057 |   |
| Residential  mortgage backed securities     |       | 520                                 |       | 2                                      |       | (29                            | )          | 1,247                                |       | —                         |       | 1,740 |   |
| Commercial mortgage  backed securities      |       | 3                                   |       | —                                 |       | —                         |       | —                               |       | —                         |       | 3 |   |
| Asset backed  securities                    |       | 95                                  |       | 1                                      |       | (4                             | )          | 20                                   |       | —                         |       | 112 |   |
| Other structured  investments               |       | 9                                   |       | —                                 |       | (1                             | )          | —                               |       | —                         |       | 8 |   |
| Total  Available-for-Sale: Fixed maturities |       | 1,713                               |       | 3                                      | (1)        | (10                            | )          | 1,228                                |       | (14                            | )(3)       | 2,920 |   |
|                                        |       |                                |       |                                   |       |                           |       |                                 |       |                           |       |   |   |
| Other assets                                |       | 200                                 |       | (4                                     | )(2)       | —                         |       | (71                                  | )          | —                         |       | 125 |   |
| Future policy  benefits                     |       |                                | (1,832     | )                                      | 331        | (2)                            | —     |                                 | (15        | )(2)                           | —     |   |   | (1,516 | ) |
|                                             |            |                                     |            |                                        |            |                                |            |                                      |            |                                |            |  |  |  |  |  |  |  |  |

 

----

(1)   Represents a$4 million loss included in net realized investment gains (losses) and a $7million gain included in net investment income in the Consolidated Statementsof Income.

(2)   Included inbenefits, claims, losses and settlement expenses in the Consolidated Statementsof Income.

(3)   Represents asecurity transferred to Level 2 as the fair value is now obtained from anationally-recognized pricing service. Previously, the fair value of the security was based on broker quotes.

 
| ** **                                  | ** ** | ** **                          | ** ** | **Total Gains   (Losses) Included in** | ** ** | **Purchases,  Sales,**         | ** ** | ** **                           | ** ** | ** **                     | ** ** |
|---------------------------------------------|------------|-------------------------------------|------------|----------------------------------------|------------|--------------------------------|------------|--------------------------------------|------------|--------------------------------|------------|
| ** **                                  | ** ** | **Balance,  January 1,  2008** | ** ** | **Net  Income**                        | ** ** | **Other  Comprehensive  Loss** | ** ** | **Issuances  and Settlements,  Net** | ** ** | **Transfers  Out of  Level 3** | ** ** | **Balance,  March 31,  2008** | ** ** |
| ** **                                  | ** ** | **(in millions)**                   | ** ** |
| Available-for-Sale:  Fixed maturities       |       |                                |       |                                   |       |                           |       |                                 |       |                           |       |   |   |
| Corporate debt  securities                  |       | $                                   | 1,271      |                                   | $          | —                         |       | $                                    | 20         |                           | $          | (30 | ) | $ | — |   | $ | 1,261 |   |
| Residential  mortgage backed securities     |       | 417                                 |       | (30                                    | )          | (55                            | )          | 79                                   |       | —                         |       | 411 |   |
| Commercial  mortgage backed securities      |       | 5                                   |       | —                                 |       | —                         |       | —                               |       | —                         |       | 5 |   |
| Asset backed  securities                    |       | 115                                 |       | —                                 |       | (3                             | )          | 18                                   |       | —                         |       | 130 |   |
| Other structured  investments               |       | 2                                   |       | 3                                      |       | —                         |       | (3                                   | )          | —                         |       | 2 |   |
| Total  Available-for-Sale: Fixed maturities |       | 1,810                               |       | (27                                    | )(1)       | (38                            | )          | 64                                   |       | —                         |       | 1,809 |   |
|                                        |       |                                |       |                                   |       |                           |       |                                 |       |                           |       |   |   |
| Other assets                                |       | 280                                 |       | 52                                     | (2)        | —                         |       | —                               |       | —                         |       | 332 |   |
| Future policy  benefits                     |       |                                | (158       | )                                      | (124       | )(3)                           | —     |                                 | (13        | )(3)                           | —     |   |   | (295 | ) |
|                                             |            |                                     |            |                                        |            |                                |            |                                      |            |                                |            |  |  |  |  |  |  |  |  |  |

 

----

(1)   Represents a$30 million loss included in net realized investment gains (losses) and a $3million gain included in net investment income in the Consolidated Statementsof Income.

(2)   Included innet investment income in the Consolidated Statements of Income.

(3)   Included inbenefits, claims, losses and settlement expenses in the Consolidated Statementsof Income.

 

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**RIVERSOURCE LIFEINSURANCE COMPANY**

** **

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS (UNAUDITED) (Continued)**

 

The following table presents the changes inunrealized gains (losses) included in net income related to Level 3 assets andliabilities held at March 31:

 
| ** **                                  | ** ** | **2009**          | ** ** | **2008**   | ** ** |
|---------------------------------------------|------------|-------------------|------------|------------|------------|
| ** **                                  | ** ** | **(in millions)** | ** ** |
| Available-for-Sale:  Fixed maturities       | ** ** | ** **        | ** ** | ** ** | ** ** |
| Residential  mortgage backed securities     |       | $                 | 2          |       | $          | (30 | ) |
| Asset backed  securities                    |       | 1                 |       | —     |       |
| Total  Available-for-Sale: Fixed maturities |       | 3                 | (1)        | (30        | )(2)       |
| Other assets                                |       | —            |       | 52         | (3)        |
| Future policy  benefits                     |       | 322               | (4)        | (124       | )(4)       |
|                                             |            |                   |            |            |            |  |  |

 

----

(1)        Represents a$4 million loss included in net realized investment gains (losses) and a $7million gain included in net investment income in the Consolidated Statementsof Income.

(2)        Included innet realized investment gains (losses) in the Consolidated Statements ofIncome.

(3)        Included innet investment income in the Consolidated Statements of Income.

(4)        Included inbenefits, claims, losses and settlement expenses in the Consolidated Statementsof Income.

 

During the reportingperiod, there were no material assets or liabilities measured at fair value ona non-recurring basis.

 

The following tableprovides the carrying value and the estimated fair value of financialinstruments that are not reported at fair value. All other financialinstruments that are reported at fair value have been included in the tableabove with balances of assets and liabilities measured at fair value on arecurring basis.

 
| ** **                      | ** ** | **March 31, 2009** | ** ** |
|---------------------------------|------------|-------------------------|------------|
| ** **                      | ** ** | **Carrying Value**      | ** ** | **Fair Value** | ** ** |
| ** **                      | ** ** | **(in millions)**       | ** ** |
| **Financial  Assets**           |       |                    |       |   |   |
| Commercial  mortgage loans, net |       | $                       | 2,707      |   | $ | 2,411 |   |
| Policy loans                    |       | 716                     |       | 770 |   |
| Other  investments              |       | 256                     |       | 232 |   |
| **Financial  Liabilities**      |       |                    |       |   |   |
| Future policy  benefits         |       | 14,673                  |       | 13,334 |   |
| Separate account  liabilities   |       | 331                     |       | 331 |   |
|                                 |            |                         |            |  |  |  |  |

* *

***Commercial mortgage loans, net***

* *

The fair value of commercial mortgage loans, exceptthose with significant credit deterioration, is determined by discountingcontractual cash flows using discount rates that reflect current pricing forloans with similar remaining maturities and characteristics includingloan-to-value ratio, occupancy rate, refinance risk, debt-service coverage,location, and property condition. For commercial mortgage loans withsignificant credit deterioration, fair value is determined using the sameadjustments as above with an additional adjustment for RiverSource Life’sestimate of the amount recoverable on the loan.

 

**Policy loans**

 

The fair value of policy loans has been determinedusing discounted cash flows.

 

***Other investments***

* *

Other investments primarily consist of syndicatedloans. The fair value of syndicated loans is obtained from anationally-recognized pricing service.

 

***Future policy benefits***

* *

The fair value of fixed annuities, in deferral status,is determined by discounting cash flows using a risk neutral discount rate withadjustments for profit, expense and risk margins and for RiverSource Life’snon-performance risk specific to these liabilities. The fair value of otherliabilities including non-life contingent fixed annuities in payout status,equity indexed annuity host contracts and the fixed portion of a small numberof variable annuity contracts classified as investment contracts is determinedin a similar manner.

 

***Separate account liabilities***

* *

Certain separate account liabilities areclassified as investment contracts and are carried at an amount equal to therelated separate account assets. Carrying value is a reasonable estimate of the fair value as itrepresents the exit value as evidenced by withdrawal transactions betweencontractholders and RiverSource Life. A non-performance adjustment is notincluded as the related separate account assets act as collateral for theseliabilities and minimize non-performance risk.

 

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**RIVERSOURCE LIFEINSURANCE COMPANY**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

**8.****              Derivatives andHedging Activities**

 

Derivativeinstruments enable RiverSource Life to manage its exposure to various marketrisks. The value of such instruments is derived from an underlyingvariable or multiple variables, including equity and interest rate indices orprices. RiverSource Life primarily enters into derivative agreements for riskmanagement purposes related to RiverSource Life’s products.

 

RiverSourceLife uses derivatives as economic hedges. The following table presents thebalance sheet location and the gross fair value of derivative instruments,including embedded derivatives, at March 31, 2009:

 
| **Derivatives not designated as hedging instruments** | ** ** | **Balance  Sheet  Location** | ** ** | **Asset**         | ** ** | **Balance Sheet  Location** | ** **        | **Liability**     | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|-------------------|------------|-----------------------------|-------------------|-------------------|------------|
| ** **                                            | ** ** | ** **                   | ** ** | **(in millions)** | ** ** | ** **                  | ** **        | **(in millions)** | ** ** |
| **Interest  rate contracts**                          | ** ** | ** **                   | ** ** | ** **        | ** ** | ** **                  | ** **        | ** **        | ** ** |
| GMWB and GMAB                                         |       | Other assets                 |       | $                 | 600        |                        | Other liabilities |              | $          | (261 | ) |
|                                                  |       |                         |       |              |       |                        |              |              |       |
| **Equity  contracts**                                 |       |                         |       |              |       |                        |              |              |       |
| GMWB and GMAB                                         |       | Other assets                 |       | 1,411             |       | Other liabilities           |              | (397              | )          |
| Equity indexed  annuities                             |       | Other assets                 |       | 1                 |       |                        |              | —            |       |
| Equity indexed  annuities embedded derivatives        | ** ** | ** **                   |       | **—**        |       | Future policy benefits      |              | (15               | )          |
|                                                  |       |                         |       |              |       |                        |              |              |       |
| **Other**                                             |       |                         |       |              |       |                        |              |              |       |
| GMWB and GMAB  embedded derivatives(1)                |       |                         |       | —            |       | Future policy benefits      |              | (1,516            | )          |
| Total                                                 |       |                         |       | $                 | 2,012      |                        |              |              | $          | (2,189 | ) |

 

----

(1)   The fairvalues of GMWB and GMAB embedded derivatives fluctuate primarily based onchanges in equity and interest rate markets.

 

See Note7 for additional information regarding RiverSource Life’s fair valuemeasurement of derivative instruments.

 

***Derivatives NotDesignated as Hedges***

 

Thefollowing table presents a summary of the impact of derivatives not designatedas hedging instruments under SFAS No. 133 “Accounting for DerivativeInstruments and Hedging Activities” (“SFAS 133”) on the Consolidated Statementsof Income for the three months ended March 31, 2009:

 
| **Derivatives not designated as hedging instruments** | ** ** | **Location of Gain or (Loss)   Recognized in Income on Derivatives** | ** ** | **Amount of Gain or  (Loss) Recognized  in Income on  Derivatives** | ** ** |
|-------------------------------------------------------|------------|----------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                            | ** ** | ** **                                                           | ** ** | **(in millions)**                                                   | ** ** |
| **Interest  rate contracts**                          | ** ** | ** **                                                           | ** ** | ** **                                                          | ** ** |
| GMWB and GMAB                                         |       | Benefits, claims, losses and settlement expenses                     |       | $                                                                   | (123       | ) |
|                                                  |       |                                                                 |       |                                                                |       |
| **Equity  contracts**                                 |       |                                                                 |       |                                                                |       |
| GMWB and GMAB                                         |       | Benefits, claims, losses and settlement expenses                     |       | 61                                                                  |       |
| Equity indexed  annuities                             |       | Interest credited to fixed accounts                                  |       | (2                                                                  | )          |
| Equity indexed  annuities embedded derivatives        |       | Interest credited to fixed accounts                                  |       | 1                                                                   |       |
|                                                  |       |                                                                 |       |                                                                |       |
| **Other**                                             |       |                                                                 |       |                                                                |       |
| GMWB and GMAB  embedded derivatives                   |       | Benefits, claims, losses and settlement expenses                     |       | 316                                                                 |       |
| Total                                                 |       |                                                                 |       | $                                                                   | 253        |   |

 

RiverSourceLife holds derivative instruments that either do not qualify or are notdesignated for hedge accounting treatment. These derivative instruments areused as economic hedges of equity and interest rate risk related to variousRiverSource Life products.

 

Certainannuity products contain GMWB or GMAB provisions, which guarantee the right tomake limited partial withdrawals each contract year regardless of thevolatility inherent in the underlying investments or guarantee a minimumaccumulation value of considerations received at the beginning of the contractperiod, after a specified holding period, 

 

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**RIVERSOURCE LIFEINSURANCE COMPANY**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

respectively.RiverSource Life economically hedges the exposure related to GMWB and GMABprovisions using various equity futures, equity options, total return swaps,interest rate swaptions and interest rate swaps. The gross notional amount ofthese contracts was $35 billion at March 31, 2009. The premiumassociated with certain of these options is paid or received semi-annually overthe life of the option contract.

 

Thefollowing is a summary of the payments RiverSource Life is scheduled to makeand receive for these options:

 
| ** ** | ** ** | **Premiums  Payable** | ** ** | **Premiums  Receivable** | ** ** |
|------------|------------|-----------------------|------------|--------------------------|------------|
| ** ** | ** ** | **(in millions)**     | ** ** |
| 2009(1)    |       | $                     | (121       | )                        | $          | 15 |   |
| 2010       |       | (142                  | )          | 13                       |       |
| 2011       |       | (133                  | )          | 12                       |       |
| 2012       |       | (121                  | )          | 11                       |       |
| 2013       |       | (108                  | )          | 10                       |       |
| 2014-2023  |       | (357                  | )          | 3                        |       |
|            |            |                       |            |                          |            |  |  |

 

----

(1)   2009 amounts represent the amounts payable andreceivable for the period from April 1, 2009 to December 31, 2009.

 

Equityindexed annuities have returns tied to the performance of equity markets. As aresult of fluctuations in equity markets, the obligation incurred byRiverSource Life related to equity indexed annuities products will positivelyor negatively impact earnings over the life of these products. As a means ofeconomically hedging its obligations under the provisions of these products,RiverSource Life enters into index options and occasionally enters into futurescontracts. The gross notional amount of these derivative contracts was $201million at March 31, 2009.

 

***Embedded Derivatives***

 

Certainannuities contain GMAB and non-life contingent GMWB provisions, which areconsidered embedded derivatives.  Inaddition, the equity component of the equity indexed annuity productobligations is also considered an embedded derivative.  As captured in the tables above, embeddedderivatives are bifurcated from their host contracts and reported on thebalance sheet at fair value with changes in fair value reported in income.  As noted above, RiverSource Life usesderivatives to mitigate the financial statement impact of these embeddedderivatives.

 

***Cash Flow Hedges***

 

RiverSourceLife has amounts classified in accumulated other comprehensive loss related togains and losses associated with the effective portion of previously designatedcash flow hedges. RiverSource Life reclassifies these amounts into income asthe forecasted transactions impact earnings. During the three months ended March 31,2009, RiverSource Life held no derivatives that were designated as cash flowhedges under SFAS 133. The following table shows the impact of its cash flowhedges on the Consolidated Statements of Income during the three months ended March 31,2009:

 
| **Derivatives designated as hedging instruments** | ** ** | **Location of Gain or (Loss)   Reclassified from Accumulated  Other Comprehensive   Income into Income** | ** ** | **Amount of Gain or  (Loss) Reclassified  from Accumulated  Other Comprehensive  Income into Income** | ** ** |
|---------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|------------|
| ** **                                        | ** ** | ** **                                                                                               | ** ** | **(in millions)**                                                                                     | ** ** |
| **Cash  flow hedges**                             | ** ** | ** **                                                                                               | ** ** | ** **                                                                                            | ** ** |
| Fixed annuity  products                           |       | Net investment income                                                                                    |       | $                                                                                                     | (2         | ) |
|                                                   |            |                                                                                                          |            |                                                                                                       |            |  |

 

At March 31, 2009,RiverSource Life expects to reclassify $6 million of deferred loss; thesewere originally losses on derivative instruments from accumulated othercomprehensive loss to earnings during the next 12 months related tointerest rate swaptions that will be recorded in net investment income. For anyhedge relationships that are discontinued because the forecasted transaction isnot expected to occur according to the original strategy, any related amountspreviously recorded in accumulated other comprehensive loss are recognizedin earnings immediately. No hedge relationships were discontinued during thethree months ended March 31, 2009 due to forecasted transactions nolonger expected to occur according to the original hedge strategy.

 

Currently, the longestperiod of time over which RiverSource Life is hedging exposure to thevariability in future cash flows is 10 years and relates to interestcredited on forecasted fixed premium product sales.

 

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**RIVERSOURCE LIFEINSURANCE COMPANY**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

***Credit Risk***

 

Credit risk associatedwith RiverSource Life’s derivatives is the risk that a derivative counterpartywill not perform in accordance with the terms of the applicable derivativecontract. To mitigate such risk, RiverSource Life has established guidelinesand oversight of credit risk through a comprehensive enterprise risk managementprogram that includes members of senior management. Key components of thisprogram are to require preapproval of counterparties and the use of masternetting arrangements and collateral arrangements wherever practical. As of March 31,2009, RiverSource Life held collateral consisting primarily of cash andsecurities of $1.3 billion posted by counterparties. As of March 31, 2009,RiverSource Life’s maximum credit exposure related to derivative assets afterconsidering netting arrangements with counterparties and collateralarrangements was approximately $205 million.

 

Certain of RiverSourceLife’s derivative instruments contain provisions that adjust the level ofcollateral RiverSource Life is required to post based on RiverSource Life’sfinancial strength rating (or based on the debt rating of RiverSource Life’sparent, Ameriprise Financial). Additionally, certain of RiverSource Life’sderivative contracts contain provisions that allow the counterparty toterminate the contract if RiverSource Life does not maintain a specificfinancial strength rating or Ameriprise Financial’s debt does not maintain aspecific credit rating (generally an investment grade rating).  If these termination provisions were to betriggered, RiverSource Life’s counterparty could require immediate settlementof any net liability position. At March 31, 2009, the aggregate fair valueof all derivative instruments containing such credit risk features was $34million. The aggregate fair value of assets posted as collateral for suchinstruments as of March 31, 2009 was $11 million. If the credit riskfeatures of derivative contracts that were in a net liability position at March 31, 2009were triggered, the additional fair value of assets needed to settle thesederivative liabilities would have been $23 million.

 

**9.****              Income Taxes**

 

RiverSourceLife’s effective tax rate was 20% for the three months ended March 31,2009, compared to (17%) for the three months ended March 31, 2008. Theincrease in the effective tax rate primarily reflects an increase in pretaxincome relative to a decrease of tax advantaged items, including the dividendsreceived deduction for the three months ended March 31, 2009.

 

RiverSource Life is required to establish a valuationallowance for any portion of the deferred income tax assets that managementbelieves will not be realized.  Includedin RiverSource Life’s deferred tax assets is a significant deferred tax assetrelating to capital losses that have been recognized for financial statementpurposes but not yet for tax return purposes. Under current U.S. federal incometax law, capital losses generally must be used against capital gain incomewithin five years of the year in which the capital losses are recognized fortax purposes.  Significant judgment isrequired in determining if a valuation allowance should be established, and theamount of such allowance if required. Factors used in making this determination include estimates relating tothe performance of the business including the ability to generate capitalgains.  Consideration is given to, amongother things in making this determination, a) future taxable income exclusiveof reversing temporary differences and carryforwards, b) future reversals ofexisting taxable temporary differences, c) taxable income in prior carrybackyears, and d) tax planning strategies.

 

Additionally, RiverSource Life has net operating losscarryforwards of $17 million which will expire beginning December 31, 2025as well as tax credit carryforwards of $130 million which will expire beginningDecember 31, 2025. RiverSource Life also has $20 million of foreign taxcredit carryforwards which will expire beginning December 31, 2016.  Based on analysis of RiverSource Life’s taxposition, management believes it is more likely than not that the results offuture operations and implementation of tax planning strategies will generatesufficient taxable income to enable RiverSource Life to utilize all of itsdeferred tax assets. Accordingly, no valuation allowance for deferred taxassets has been established as of March 31, 2009 and December 31,2008.

 

As of March 31, 2009 and December 31, 2008,RiverSource Life had $89 million of gross unrecognized tax expense.  If recognized, approximately $30 million, netof federal tax benefits, of unrecognized tax benefits as of March 31, 2009and December 31, 2008, would affect the effective tax rate.

 

RiverSource Life recognizes interest and penaltiesrelated to unrecognized tax benefits as a component of the income taxprovision.  RiverSource Life recognizedinterest and penalties of $0.2 million for the three months ended March 31,2009.  RiverSource Life had a $14.4million and a $14.6 million receivable related to interest and penaltiesaccrued at March 31, 2009 and December 31, 2008, respectively.

 

It is reasonably possible that the total amounts ofunrecognized tax benefits will change in the next 12 months.   However, there are a number of open auditsand quantification of a range cannot be made at this time.

 

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**RIVERSOURCE LIFEINSURANCE COMPANY**

** **

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)**

 

RiverSource Life or one or more of its subsidiariesfiles income tax returns in the U.S. federal jurisdiction and various statejurisdictions. With few exceptions, RiverSource Life is no longer subject toU.S. federal or state and local income tax examinations by tax authorities foryears before 1997. The Internal Revenue Service (“IRS”), as part of the overallexamination of the American Express Company consolidated return, completed itsfield examination of the RiverSource Life’s income tax returns for 1997 through2002 during 2008. However, for federal income tax purposes, these years continueto remain open as a consequence of certain issues under appeal.  The IRS continued its examination of 2003through 2004 which is expected to be completed during 2009.  In the fourth quarter of 2008, the IRScommenced an examination of RiverSource Life’s U.S. income tax returns for 2005through 2007.  RiverSource Life orcertain of its subsidiaries’ state income tax returns are currently underexamination by various jurisdictions for years ranging from 1998 through 2006.

 

On September 25,2007, the IRS issued Revenue Ruling 2007-61 in which it announced that itintends to issue regulations with respect to certain computational aspects ofthe Dividends Received Deduction (“DRD”) related to separate account assetsheld in connection with variable contracts of life insurance companies. RevenueRuling 2007-61 suspended a revenue ruling issued in August 2007 thatpurported to change accepted industry and IRS interpretations of the statutesgoverning these computational questions. Any regulations that the IRSultimately proposes for issuance in this area will be subject to public noticeand comment, at which time insurance companies and other members of the publicwill have the opportunity to raise legal and practical questions about thecontent, scope and application of such regulations.   As a result, the ultimate timing andsubstance of any such regulations are unknown at this time, but they may resultin the elimination of some or all of the separate account DRD tax benefit thatRiverSource Life receives.  Managementbelieves that it is likely that any such regulations would apply prospectivelyonly.

 

**10.****       Contingencies**

 

The Securities andExchange Commission, the Financial Industry Regulatory Authority, commonlyreferred to as FINRA, and several state authorities have brought proceedingschallenging several mutual fund and variable product financial practices,generally including suitability, late trading, market timing, compensation anddisclosure of revenue sharing arrangements. RiverSource Life has received requests for information and has beencontacted by regulatory authorities concerning its practices and is cooperatingfully with these inquiries.

 

RiverSource Life isinvolved in the normal course of business in a number of other legal andarbitration proceedings concerning matters arising in connection with theconduct of its business activities. RiverSource Life believes that it is not a party to, nor are any of itsproperties the subject of, any pending legal, arbitration or regulatoryproceedings that would have a material adverse effect on its consolidatedfinancial condition, results of operations or liquidity.  However, it is possible that the outcome ofany such proceedings could have a material impact on results of operations inany particular reporting period as the proceedings are resolved.

 

**11.****       VariableInterest Entities**

 

RiverSource Tax Adv.Inv., a subsidiary of RiverSource Life Insurance Company, has variableinterests in affordable housing partnerships for which it is not the primarybeneficiary and, therefore, does not consolidate.

 

RiverSource Tax Adv. Inv.’smaximum exposure to loss as a result of its investment in the affordablehousing partnerships is limited to the carrying values. RiverSource Tax Adv.Inv. has no obligation to provide further financial or other support to theaffordable housing partnerships nor has RiverSource Tax Adv. Inv. provided anyadditional support to the affordable housing partnerships. RiverSource Life hadno liabilities recorded as of March 31, 2009 and December 31, 2008related to the affordable housing partnerships.

 

RiverSource Tax Adv. Inv.is a limited partner in affordable housing partnerships which qualify forgovernment sponsored low income housing tax credit programs. In most cases,RiverSource Tax Adv. Inv. has less than 50% interest in the partnershipssharing in benefits and risks with other limited partners in proportion toRiverSource Tax Adv. Inv.’s ownership interest. In the limited cases in whichRiverSource Tax Adv. Inv. has a greater than 50% interest in affordablehousing partnerships, it was determined that the relationship with the generalpartner is an agent relationship and the general partner was most closelyrelated to the partnership as it is the key decision maker and controls the operations.The carrying values are reflected in trading securities and other investmentsand were $48 million and $54 million as of March 31, 2009 and December 31,2008, respectively.

 

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**ITEM 2.**                       MANAGEMENT’S NARRATIVE ANALYSIS

** **

The following information should be read inconjunction with RiverSource Life Insurance Company’s Consolidated FinancialStatements and Notes presented in Part I, Item 1.  RiverSource Life Insurance Company and itssubsidiaries are referred to collectively in this Form 10-Q as “RiverSourceLife”.  This narrative analysis maycontain forward-looking statements that reflect RiverSource Life’s plans,estimates and beliefs.  Actual resultscould differ materially from those discussed in these forward-lookingstatements.  Factors that could cause orcontribute to these differences include, but are not limited to, thosediscussed under “Forward-Looking Statements.” RiverSource Life believes it is useful to read this narrative analysisin conjunction with its Annual Report on Form 10-K for the year ended December 31,2008, filed with the Securities and Exchange Commission (“SEC”) on March 2,2009 (“2008 10-K”), as well as its current reports on Form 8-K and otherpublicly available information.

 

RiverSource Life follows U.S. generally acceptedaccounting principles (“GAAP”), and the following discussion is presented on aconsolidated basis consistent with GAAP. In the second quarter of 2008, RiverSource Life reclassified themark-to-market adjustments on certain derivatives from net investment income tovarious expense lines where the mark-to-market adjustment on the relatedembedded derivative resides. The mark-to-market adjustments on derivativeshedging variable annuity living benefits and equity indexed annuities werereclassified to benefits, claims, losses and settlement expenses and interestcredited to fixed accounts, respectively. In the first quarter of 2009, RiverSource Life reclassified reinsuranceallowances for coinsurance contracts for traditional life and long term careinsurance from premiums to other insurance and operating expenses to net withthe associated expenses.  Prior period amountswere reclassified to conform to the current presentation.

 

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

 

**Overview**

 

RiverSource Life Insurance Company is a stock lifeinsurance company with one wholly owned operating subsidiary, RiverSource LifeInsurance Co. of New York (“RiverSource Life of NY”).  RiverSource Life Insurance Company is awholly owned subsidiary of Ameriprise Financial, Inc. (“AmeripriseFinancial”).

 

·                          RiverSource Life InsuranceCompany is domiciled in Minnesota and holds Certificates of Authority inAmerican Samoa, the District of Columbia and all states except New York.  RiverSource Life Insurance Company issuesinsurance and annuity products.

 

·                          RiverSource Life of NY is astock life insurance company domiciled in New York, which holds Certificates ofAuthority in New York, North Dakota and Delaware.  RiverSource Life of NY issues insurance andannuity products.

 

RiverSource Life Insurance Company also ownsRiverSource Tax Advantaged Investments, Inc. which is a stock companydomiciled in Delaware and is a limited partner in affordable housingpartnership investments.

 

**CriticalAccounting Policies**

 

***Valuationof Investments***

 

Effective January 1,2009, RiverSource Life adopted FSP FAS 115-2 and FAS 124-2 “Recognition andPresentation of Other-Than-Temporary Impairments” (“FSP 115-2”). Thisinterpretation significantly changed RiverSource Life’s accounting policyregarding the timing and amount of other-than temporary impairments forAvailable-for-Sale securities.  Forinformation regarding the changes to RiverSource Life’s accounting policy, seeNote 3 to the Consolidated Financial Statements.

 

***DeferredAcquisition Costs and Deferred Sales Inducement Costs***

 

For RiverSource Life’sannuity and life, disability income (“DI”) and long term care (“LTC”) insuranceproducts, the deferred acquisition costs (“DAC”) and deferred sales inducementcosts (“DSIC”) balances at any reporting date are supported by projections thatshow that management expects there to be adequate premiums or estimated grossprofits after that date to amortize the remaining DAC and DSIC balances. Theseprojections are inherently uncertain because they require management to makeassumptions about financial markets, anticipated mortality and morbidity levelsand policyholder behavior over periods extending well into the future.Projection periods used for RiverSource Life’s annuity products are typically10 to 25 years, while projection periods for RiverSource Life’s life, DI andLTC insurance products are often 50 years or longer. Management regularlymonitors financial market conditions and actual policyholder behaviorexperience and compares them to its assumptions.

 

For annuity and universallife insurance products, the assumptions made in projecting future results andcalculating the DAC balance and DAC amortization expense are management’s best estimates.Management is required to update these assumptions 

 

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whenever it appears that,based on actual experience or other evidence, earlier estimates should berevised. When assumptions are changed, the percentage of estimated grossprofits used to amortize DAC might also change. A change in the requiredamortization percentage is applied retrospectively; an increase in amortizationpercentage will result in a decrease in the DAC balance and an increase in DACamortization expense, while a decrease in amortization percentage will resultin an increase in the DAC balance and a decrease in DAC amortization expense.The impact on results of operations of changing assumptions can be eitherpositive or negative in any particular period and is reflected in the period inwhich such changes are made.  Forproducts with associated DSIC, the same policy applies in calculating the DSICbalance and periodic DSIC amortization.

 

For other life, DI andLTC insurance products, the assumptions made in calculating the DAC balance andDAC amortization expense are consistent with those used in determining theliabilities and, therefore, are intended to provide for adverse deviations inexperience and are revised only if management concludes experience will be soadverse that DAC are not recoverable. If management concludes that DAC are notrecoverable, DAC are reduced to the amount that is recoverable based on bestestimate assumptions and there is a corresponding expense recorded in theconsolidated statements of income.

 

For annuity and life, DIand LTC insurance products, key assumptions underlying these long-termprojections include interest rates (both earning rates on invested assets andrates credited to contractholder and policyholder accounts), equity marketperformance, mortality and morbidity rates and the rates at which policyholdersare expected to surrender their contracts, make withdrawals from theircontracts and make additional deposits to their contracts. Assumptions aboutearned and credited interest rates are the primary factors used to projectinterest margins, while assumptions about equity and bond market performanceare the primary factors used to project client asset value growth rates, andassumptions about surrenders, withdrawals and deposits comprise projectedpersistency rates. Management must also make assumptions to project maintenanceexpenses associated with servicing its annuity and insurance business duringthe DAC amortization period.

 

The client asset valuegrowth rates are the rates at which variable annuity and variable universallife insurance contract values invested in separate accounts are assumed toappreciate in the future. The rates used vary by equity and fixed incomeinvestments. Management reviews and, where appropriate, adjusts its assumptionswith respect to client asset value growth rates on a regular basis. RiverSourceLife typically uses a five-year mean reversion process as a guideline insetting near-term equity asset growth rates based on a long-term view offinancial market performance as well as recent actual performance.  The suggested near-term growth rate isreviewed to ensure consistency with management’s assessment of anticipatedequity market performance.  In the firstquarter of 2009, management elected to follow the mean reversion guideline,increasing near-term equity asset growth rates and projecting that the firstquarter approximate 12% decrease in equity values will be recovered within thefive-year mean reversion period.  Atrecent equity market levels, increasing the annualized equity market returnprojected during the five-year mean reversion period by 100 basis points reducesDAC amortization and other impacted expenses by $20 — $25 million after tax.

 

Management monitors otherprincipal DAC and DSIC amortization assumptions, such as persistency,mortality, morbidity, interest margin and maintenance expense levels each quarterand, when assessed independently, each could impact RiverSource Life’s DAC andDSIC balances.

 

The analysis of DAC andDSIC balances and the corresponding amortization is a dynamic process thatconsiders all relevant factors and assumptions described previously. Unlessmanagement identifies a significant deviation over the course of the quarterlymonitoring, management reviews and updates these DAC and DSIC amortizationassumptions annually in the third quarter of each year.  An assessment of sensitivity associated withchanges in any single assumption would not necessarily be an indicator offuture results.

 

**Recent Accounting Pronouncements**

 

For information regarding recent accountingpronouncements and their expected impact on future consolidated financialcondition or results of operations, see Note 2 to the Consolidated FinancialStatements.

 

***Resultsof Operations for the ThreeMonths Ended March 31, 2009 compared to the Three Months Ended March 31,2008***

 

*Overview*

 

Consolidated netincome was $152 million for the three months ended March 31, 2009 compared to $102 million for the threemonths ended March 31, 2008,an increase of $50 million or 49%. Pretax income increased $102 million to $189 million for the threemonths ended March 31, 2009 from $87 million for the three months ended March 31,2008. The increase was driven by decreased benefits, claims, losses andsettlement expenses for the three months ended March 31, 2009 due tofavorable changes in the variable living benefit reserves, as well as adecrease in other insurance and operating expenses partially offset by anincrease in amortization of DAC of $132 million.

 

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*Revenues*

 

Totalrevenues decreased $2 million to $789 million for the three months ended March 31, 2009.

 

Premiumsincreased $3 million or 2.8% to $110 million for the three months ended March 31,2009, primarily due to higher sales of immediate annuities with lifecontingencies.

 

Netinvestment income decreased $6million or 1.8% to $321 million for the three months ended March 31, 2009.  The decrease is due to higher average volumesof short term investments earning a lower yield than in the prior year periodpartially offset by volume-related increases in investments supporting fixedannuities and the fixed portion of variable annuities.

 

Policy and contract chargesdecreased $31 million or 9.8% to $284 million for the three months endedMarch 31, 2009 primarily reflecting decreased separate account fee revenueas a result of the decrease in average separate account assets.

 

Other revenue decreased$18 million or 27.7% to $47 million forthe three months ended March 31,2009 reflecting lower marketing support and administrative fees due tolower average underlying separate account asset values.

 

Net realized investmentgains were $27 million for the threemonths ended March 31, 2009compared to net realized investment losses of $23 million for the three months ended March 31, 2008.  In the first quarter of 2009, net realizedgains from sales of Available-for-Sale securities were $47 million andother-than-temporary impairments recognized in earnings were $20 million.  In the first quarter of 2008, net realizedgains from sales of securities were $7 million and other-than-temporaryimpairments recognized in earnings were $30 million.

 

*Benefitsand Expenses*

 

Total benefits andexpenses for the three months ended March 31, 2009 were $600 million, adecrease of $104 million or 14.8% from the three months ended March 31,2008 total of $704 million.   Thisdecrease is primarily due to market-driven impacts to variable annuity benefitexpense partially offset by an increase in amortization of DAC.

 

Benefits,claims, losses and settlement expenses decreased $210 million or 110.5% to abenefit of $20 million for the threemonths ended March 31, 2009 compared to an expense of $190 millionin the prior year period.  Benefits,claims, losses and settlement expenses in the first quarter of 2009 included a$231 million benefit related to the market impact on variable annuityguaranteed living benefits, net of hedges and DSIC and a $31 million expenserelated to the equity market’s impact on guaranteed minimum death benefits (“GMDB”)and other unhedged variable annuity guaranteed benefits.  The net gains from benefits associated withvariable annuity guarantees in the first quarter of 2009 were largelyattributable to the impact of credit spread widening on Statement of FinancialAccounting Standards No. 157 “Fair Value Measurements” (“SFAS 157”)liability values and were substantially offset by a related increase in DACamortization.  Benefits, claims, lossesand settlement expenses in the first quarter of 2008 included $12 million ofexpense related to the unfavorable market impact on variable annuity guaranteedliving benefits, net of hedges and DSIC.

 

Interest credited tofixed accounts increased $10 million or 5.1% to $205 million for the three months ended March 31, 2009primarily due to higher average fixed annuity account balances and higheraverage rates paid to clients compared to the prior year period.  Average fixed annuities contract accumulationvalues increased $775 million, or 6% compared to the prior year period. Theaverage crediting rate excluding capitalized interest increased to 3.8% in thefirst quarter 2009 compared to 3.7% in the same period one year ago.

 

The amortization of DACincreased $132 million or 97.8% to $267 million for the three months ended March 31,2009. Amortization of DAC in the first quarter of 2009 included a $146 millionexpense related to variable annuity guaranteed living benefits, net of hedges,compared to a benefit of $17 million for the three months ended March 31,2008.  In addition, the impact of equitymarket depreciation on ending account values increased DAC amortization by $40million in the first quarter of 2009 compared to $24 million in the firstquarter of 2008.  These increases werepartially offset by a decrease in variable annuity amortization driven by lowerperiod-over-period account values and associated asset fees.

 

Otherinsurance and operating expenses decreased $36 million or 19.6% to $148 million for the three months ended March 31,2009 primarily due to decreased sales and marketing expenses and lowercorporate overhead expenses.

 

*IncomeTaxes*

 

RiverSource Life’seffective tax rate was 20% for the threemonths ended March 31, 2009, compared to (17 %) for the threemonths ended March 31, 2008.  Theincrease in the effective tax rate primarily reflects an increase in pretaxincome relative to a decrease of tax advantaged items, including the dividendsreceived deduction for the three months ended March 31, 2009.

 

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On September 25,2007, the Internal Revenue Service (“IRS”) issued Revenue Ruling 2007-61 inwhich it announced that it intends to issue regulations with respect to certaincomputational aspects of the Dividends Received Deduction (“DRD”) related toseparate account assets held in connection with variable contracts of lifeinsurance companies. Revenue Ruling 2007-61 suspended a revenue ruling issuedin August 2007 that purported to change accepted industry and IRSinterpretations of the statutes governing these computational questions. Anyregulations that the IRS ultimately proposes for issuance in this area will besubject to public notice and comment, at which time insurance companies andother members of the public will have the opportunity to raise legal andpractical questions about the content, scope and application of suchregulations. As a result, the ultimate timing and substance of any suchregulations are unknown at this time, but they may result in the elimination ofsome or all of the separate account DRD tax benefit that RiverSource Lifereceives. Management believes that it is likely that any such regulations wouldapply prospectively only.

 

***Market Risk***

 

Equity market andinterest rate fluctuations can have a significant impact on RiverSource Life’sresults of operations, primarily due to the effects on asset-based fees andexpenses, the “spread” (the difference between the returns earned oninvestments that support obligations and the amounts that must be paid topolicyholders and contractholders) income generated on its annuities anduniversal life (“UL”) insurance products, the value of DAC and DSIC, assetsassociated with variable annuity and variable UL products, the values ofliabilities for guaranteed benefits associated with its variable annuities andthe values of derivatives held to hedge these benefits.

 

The guaranteedbenefits associated with RiverSource Life’s variable annuities are guaranteedminimum withdrawal benefit (“GMWB”), guaranteed minimum accumulation benefit (“GMAB”),GMDB and guaranteed minimum income benefit (“GMIB”) options. Each of theseguaranteed benefits guarantees payouts to the annuity holder under certainspecific conditions regardless of the performance of the underlying investmentassets.

 

To evaluateinterest rate and equity market risk, RiverSource Life performs sensitivity testingwhich measures the impact on pretax income from the sources listed below for a12 month period following a hypothetical 100 basis point increase in interestrates and a hypothetical 10% decline in equity markets.  The interest rate risk test assumes a sudden100 basis point parallel shift in the yield curve, with rates then staying atthose levels for the next 12 months. The equity market risk test assumes asudden 10% drop in equity prices, with equity prices then staying at thoselevels for the next 12 months. In estimating the values of variable annuityriders, equity indexed annuities and the associated hedge assets, RiverSourceLife assumed no change in implied market volatility despite the 10% drop inequity markets.

 

The numbers belowshow RiverSource Life’s estimate of the pretax impacts on income from thesehypothetical market movements, net of hedging as of March 31, 2009.

 
| ** **                     | ** ** | **Equity Market Exposure to Pretax Income** | ** ** |
|--------------------------------|------------|---------------------------------------------|------------|
| **Equity Market Decline 10%**  | ** ** | **Before  Hedge  Impact**                   | ** ** | **Hedge  Impact** | ** ** | **Net Impact** | ** ** |
| ** **                     | ** ** | **(in millions)**                           | ** ** |
| Asset-based fees  and expenses |       | $                                           | (38        | ) | N/A |   | $ | (38 | ) |
| DAC and DSIC  amortization(1)  |       | (212                                        | )          | N/A |   | (212 | ) |
| Variable annuity  riders:      |       |                                        |       |   |   |   |   |
| GMDB and GMIB                  |       | (88                                         | )          | N/A |   | (88 | ) |
| GMWB                           |       | (160                                        | )          | $ | 234 |   | 74 |   |
| GMAB                           |       | (38                                         | )          | 16 |   | (22 | ) |
| DAC and DSIC  amortization(2)  |       | N/A                                         |       | N/A |   | (16 | ) |
| Total variable  annuity riders |       | (286                                        | )          | 250 |   | (52 | ) |
| Equity indexed  annuities      |       | —                                      |       | — |   | — |   |
| Total                          |       | $                                           | (536       | ) | $ | 250 |   | $ | (302 | ) |
|                                |            |                                             |            |  |  |  |  |  |  |  |  |

 

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| ** **                                                                         | ** ** | **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                                                     |       | $                                           | (10        | ) |   | N/A |   | $ | (10 | ) |
| Variable annuity  riders:                                                          |       |                                        |       |   |   |   |   |
| GMWB                                                                               |       | 340                                         |       | $ | (480 | ) | (140 | ) |
| GMAB                                                                               |       | 71                                          |       | (26 | ) | 45 |   |
| DAC and DSIC  amortization(2)                                                      |       | N/A                                         |       | N/A |   | 38 |   |
| Total variable  annuity riders                                                     |       | 411                                         |       | (506 | ) | (57 | ) |
| Fixed annuities,  fixed portion of variable annuities and fixed insurance products |       | —                                      |       | N/A |   | — |   |
| Total                                                                              |       | $                                           | 401        |   | $ | (506 | ) | $ | (67 | ) |
|                                                                                    |            |                                             |            |  |  |  |  |  |  |  |  |

 

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N/A    Not Applicable.

 

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

(2) Marketimpact on DAC and DSIC amortization related to variable annuity riders ismodeled net of hedge impact.

 

In evaluating equity marketrisk, the estimated impact on DAC and DSIC amortization resulting from lowerprojected profits as a result of the equity market decline is shown separatelyfrom the estimated impact on DAC and DSIC amortization resulting from changesin the values of GMWB and GMAB riders net of hedges. In estimating the impacton DAC and DSIC amortization resulting from lower projected profits,RiverSource Life has not changed its assumed equity asset growth rates. This isa significantly more conservative estimate than if RiverSource Life assumedmanagement follows its mean reversion guideline and increased near-term ratesto recover the drop in equity values over a five-year period. See CriticalAccounting Policies for additional discussion on RiverSource Life’s DAC andDSIC accounting policies. RiverSource Life makes this same conservativeassumption in estimating the impact from GMDB and GMIB riders.

 

Net impacts shown inthe above table from GMWB and GMAB riders result largely from differencesbetween the liability valuation basis and the hedging basis. Liabilities arevalued under SFAS 157, with key policyholder behavior assumptions loaded toprovide risk margins and with discount rates increased to reflect a currentmarket estimate of RiverSource Life’s risk of nonperformance specific to theseliabilities. Management has elected to hedge based on best estimatepolicyholder assumptions and explicitly does not hedge nonperformance spreadrisk.

 

Actual results coulddiffer materially from those illustrated above as they are based on a number ofestimates and assumptions. These include assuming that implied marketvolatility does not change when equity values fall by 10%, that management doesnot increase assumed equity asset growth rates to anticipate recovery of thedrop in equity values when valuing DAC, DSIC and GMDB and GMIB liability valuesand that the 100 basis point increase in interest rates is a parallel shift ofthe yield curve. Furthermore, RiverSource Life has not tried to anticipate changesin client preferences for different types of assets or other changes in clientbehavior, nor has RiverSource Life tried to anticipate actions management mighttake to increase revenues or reduce expenses in these scenarios.

 

The selection of a 100basis point interest rate increase as well as a 10% equity market declineshould not be construed as a prediction of future market events.  Impacts of larger or smaller changes ininterest rates or equity prices may not be proportional to those shown for a 100basis point increase in interest rates or a 10% decline in equity prices.

 

***Credit Risk***

 

RiverSource Life isexposed to credit risk within its investment portfolio, which includes loans,and through derivative and reinsurance counterparties. Credit risk relates tothe uncertainty of an obligor’s continued ability to make timely payments inaccordance with the contractual terms of the instrument or contract.RiverSource Life’s potential derivative credit exposure to each counterparty isaggregated with all of its other exposures to the counterparty to determinecompliance with established credit guidelines at the time it enters into aderivative transaction. RiverSource Life manages credit risk throughfundamental credit analysis, issuer and industry concentration guidelines, anddiversification requirements. These guidelines and oversight of credit risk aremanaged through its comprehensive enterprise risk management program thatincludes members of senior management.

 

RiverSource Lifemanages the risk of adverse default experience on these investments by applyingdisciplined fundamental credit analysis and underwriting standards, prudentlylimiting exposures to lower-quality, higher-yielding investments, anddiversifying exposures by issuer, industry, region and property type. For eachcounterparty or borrowing entity and its affiliates, RiverSource 

 

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Life’s exposures fromall types of transactions are aggregated and managed in relation to guidelinesset by risk tolerance thresholds and external and internal rating quality.RiverSource Life remains exposed to occasional adverse cyclical economicdownturns during which default rates may be significantly higher than thelong-term historical average used in pricing.

 

Credit exposures onderivative contracts may take into account netting arrangements and collateralarrangements. Before executing a new type of structure of derivative contract,RiverSource Life determines the variability of the contract’s potential marketand credit exposures and whether such variability might reasonably be expectedto create exposure to a counterparty in excess of established limits.   As of March 31, 2009, any deteriorationin RiverSource Life’s derivative counterparties’ credit would not materiallyimpact RiverSource Life’s financial statements.

 

Additionally, RiverSource Lifereinsures a portion of the insurance risks associated with its life, disabilityincome and long term care insurance products through reinsurance agreementswith unaffiliated reinsurance companies. Reinsurance is used in order to limitlosses, reduce exposure to large risks and provide additional capacity forfuture growth. To manage exposure to losses from reinsurer insolvencies, thefinancial condition of reinsurers is evaluated prior to entering into newreinsurance treaties and on a periodic basis during the terms of the treaties.RiverSource Life remains primarily liable as the direct insurer on all risksreinsured.  As of March 31, 2009,RiverSource Life’s largest reinsurance credit risk related to a long term carecoinsurance arrangement between RiverSource Life and a life insurancesubsidiary of Genworth Financial, Inc.

 

For additionalinformation regarding our sensitivity to market and credit risk, see “Management’sNarrative Analysis—Risk Management” in RiverSource Life’s 2008 10-K.

 

***Fair ValueMeasurements***

 

RiverSource Lifereports certain assets and liabilities at fair value; specifically, separateaccount assets, derivatives, embedded derivatives, most investments and cashequivalents.  SFAS 157 defines fairvalue, provides a framework for measuring fair value and expands disclosuresabout fair value measurements.  Fairvalue assumes the exchange of assets or liabilities occurs in orderlytransactions.  SFAS 157 does not requirethe use of market prices that are the result of a forced liquidation ordistressed sale.  RiverSource Lifeincludes actual market prices, or observable inputs in its fair valuemeasurements to the extent available. Broker quotes are obtained when quotesfrom pricing services are not available. RiverSource Life validates prices obtained from third parties through avariety of means such as: price variance analysis, subsequent sales testing,stale price review, price comparison across pricing vendors and due diligencereviews of vendors.

 

Inactive Markets

 

Through RiverSourceLife’s own experience transacting in the marketplace and through discussionswith its pricing vendors, RiverSource Life believes that the market fornon-agency residential mortgage backed securities is inactive. Indicators ofinactive markets include: pricing services’ reliance on brokers or discountedcash flow analyses to provide prices, an increase in the disparity betweenprices provided by different pricing services for the same security,unreasonably large bid-offer spreads and a significant decrease in the volumeof trades relative to historical levels. In certain cases, this marketinactivity has resulted in RiverSource Life applying valuation techniques thatrely more on an income approach (discounted cash flows using market rates) thanon a market approach (prices from pricing services).  RiverSource Life considers market observableyields for other asset classes it considers to be of similar risk whichincludes nonperformance and liquidity for individual securities to set thediscount rate for applying the income approach to certain non-agencyresidential mortgage backed securities. The discount rates used for thesesecurities at March 31, 2009 ranged from 12% to 22%.

 

Non-agency ResidentialMortgage Backed Securities Backed by Subprime, Alt-A or Prime Collateral

 

Subprime mortgagelending is the origination of residential mortgage loans to customers with weakcredit profiles. Alt-A mortgage lending is the origination of residentialmortgage loans to customers who have credit ratings above subprime but may notconform to government-sponsored standards. Prime mortgage lending is theorigination of residential mortgage loans to customers with good creditprofiles.  RiverSource Life has exposureto these types of loans predominately through mortgage backed and asset backedsecurities. The slow down in the U.S. housing market, combined with relaxedunderwriting standards by some originators, has recently led to higherdelinquency and loss rates for some of these investments. Recent marketconditions have increased the likelihood of other-than-temporary impairments forcertain non-agency residential mortgage backed securities.  As a part of RiverSource Life’s riskmanagement process, an internal rating system is used in conjunction withmarket data as the basis of analysis to assess the likelihood that RiverSourceLife will not receive all contractual principal and interest payments for theseinvestments. For the investments that are more at risk for impairment,RiverSource Life performs its own assessment of projected cash flowsincorporating assumptions about default rates, prepayment speeds, lossseverity, and geographic concentrations to determine if an other-than-temporaryimpairment should be recognized. Other than non-agency

 

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mortgage backedsecurities that had credit-related impairments recorded in the first quarter of2009, all contractual payments are expected to be received.

 

The following tablepresents, as of March 31, 2009, RiverSource Life’s non-agency residentialmortgage backed and asset backed securities backed by subprime, Alt-A or primemortgage loans by credit rating and vintage year  (in millions):

 
| ** **             | ** ** | **AAA**             | ** ** | **AA**          | ** ** | **A**               | ** ** | **BBB**         | ** ** | **BB &  Below** | ** ** | **Total**       | ** ** |
|------------------------|------------|---------------------|------------|-----------------|------------|---------------------|------------|-----------------|------------|--------------------------|------------|-----------------|------------|
| ** **             | ** ** | **Amortized  Cost** | ** ** | **Fair  Value** | ** ** | **Amortized  Cost** | ** ** | **Fair  Value** | ** ** | **Amortized  Cost**      | ** ** | **Fair  Value** | ** ** | **Amortized  Cost** | ** ** | **Fair  Value** | ** ** | **Amortized  Cost** | ** ** | **Fair  Value** | ** ** | **Amortized  Cost** | ** ** | **Fair  Value** | ** ** |
| **Subprime**           |       |                |       |            |       |                |       |            |       |                     |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| 2004 &  prior |       | $                   | 5          |            | $          | 4                   |       | $               | 7          |                     | $          | 3               |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 12 |   | $ | 7 |   |
| 2005                   |       | 49                  |       | 45              |       | 18                  |       | 11              |       | —                   |       | —          |       | — |   | — |   | 20 |   | 7 |   | 87 |   | 63 |   |
| 2006                   |       | 3                   |       | 3               |       | 8                   |       | 7               |       | —                   |       | —          |       | 8 |   | 7 |   | — |   | — |   | 19 |   | 17 |   |
| 2007                   | ** ** | —              |       | —          |       | —              |       | —          |       | —                   |       | —          |       | — |   | — |   | — |   | — |   | — |   | — |   |
| 2008                   | ** ** | —              |       | —          |       | 9                   |       | 6               |       | —                   |       | —          |       | — |   | — |   | — |   | — |   | 9 |   | 6 |   |
| Total   Subprime  |       | $                   | 57         |            | $          | 52                  |       | $               | 42         |                     | $          | 27              |       | $ | — |   | $ | — |   | $ | 8 |   | $ | 7 |   | $ | 20 |   | $ | 7 |   | $ | 127 |   | $ | 93 |   |
| ** **             |       |                |       |            |       |                |       |            |       |                     |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Alt-A**              |       |                |       |            |       |                |       |            |       |                     |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| 2004 &  prior |       | $                   | 156        |            | $          | 143                 |       | $               | 14         |                     | $          | 10              |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 9 |   | $ | 4 |   | $ | 179 |   | $ | 157 |   |
| 2005                   |       | 33                  |       | 19              |       | 52                  |       | 27              |       | 40                       |       | 22              |       | 28 |   | 16 |   | 154 |   | 94 |   | 307 |   | 178 |   |
| 2006                   | ** ** | —              |       | —          |       | —              |       | —          |       | —                   |       | —          |       | — |   | — |   | 18 |   | 15 |   | 18 |   | 15 |   |
| 2007                   |       | 31                  |       | 16              |       | —              |       | —          |       | —                   |       | —          |       | — |   | — |   | — |   | — |   | 31 |   | 16 |   |
| 2008                   | ** ** | —              |       | —          |       | —              |       | —          |       | —                   |       | —          |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Total Alt-A       |       | $                   | 220        |            | $          | 178                 |       | $               | 66         |                     | $          | 37              |       | $ | 40 |   | $ | 22 |   | $ | 28 |   | $ | 16 |   | $ | 181 |   | $ | 113 |   | $ | 535 |   | $ | 366 |   |
| ** **             |       |                |       |            |       |                |       |            |       |                     |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| **Prime**              |       |                |       |            |       |                |       |            |       |                     |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| 2004 & prior       |       | $                   | 161        |            | $          | 141                 |       | $               | 16         |                     | $          | 13              |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 177 |   | $ | 154 |   |
| 2005                   |       | 191                 |       | 150             |       | 90                  |       | 57              |       | —                   |       | —          |       | 20 |   | 12 |   | 10 |   | 7 |   | 311 |   | 226 |   |
| 2006                   |       | 70                  |       | 63              |       | 6                   |       | 2               |       | —                   |       | —          |       | — |   | — |   | — |   | — |   | 76 |   | 65 |   |
| 2007                   |       | 44                  |       | 43              |       | —              |       | —          |       | 17                       |       | 12              |       | — |   | — |   | — |   | — |   | 61 |   | 55 |   |
| 2008                   |       | 18                  |       | 24              |       | —              |       | —          |       | —                   |       | —          |       | — |   | — |   | — |   | — |   | 18 |   | 24 |   |
| 2009                   |       | 851                 |       | 850             |       | —              |       | —          |       | —                   |       | —          |       | — |   | — |   | — |   | — |   | 851 |   | 850 |   |
| Total Prime(1)    |       | $                   | 1,335      |            | $          | 1,271               |       | $               | 112        |                     | $          | 72              |       | $ | 17 |   | $ | 12 |   | $ | 20 |   | $ | 12 |   | $ | 10 |   | $ | 7 |   | $ | 1,494 |   | $ | 1,374 |   |
| **Grand  Total**       |       | $                   | 1,612      |            | $          | 1,501               |       | $               | 220        |                     | $          | 136             |       | $ | 57 |   | $ | 34 |   | $ | 56 |   | $ | 35 |   | $ | 211 |   | $ | 127 |   | $ | 2,156 |   | $ | 1,833 |   |

 

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(1)        Prime 2008 and 2009 vintages are re-remics of mortgage backedsecurities. These were originally 2003-2007 vintage prime securities with cashflows structured into senior and subordinated bonds. Credit enhancement onsenior bonds is increased through the re-remic process with an averageincremental enhancement of 16%. All senior bonds are AAA-rated by Moody’sInvestors Service, Standard &Poor’s Rating Services or Fitch Ratings and RiverSource Life does not have anyexposure to subordinate tranches.

 

Fair Value ofLiabilities and Nonperformance Risk

 

SFAS 157 also requirescompanies to measure the fair value of liabilities at the price that would bereceived to transfer the liability to a market participant (an exit price).Since there is not a market for RiverSource Life’s obligations of its variableannuity riders, RiverSource Life considers the assumptions participants in ahypothetical market would make to reflect an exit price. As a result,RiverSource Life adjusts the valuation of variable annuity riders by updatingcertain contractholder assumptions, adding explicit margins to provide forprofit, risk and expenses, and adjusting the rates used to discount expectedcash flows to reflect a current market estimate of RiverSource Life’snonperformance risk. The nonperformance risk adjustment is based on brokerquotes for credit default swaps that are adjusted to estimate the risk ofRiverSource Life not fulfilling these liabilities. Consistent with generalmarket conditions, this estimate resulted in a spread over the LIBOR swap curveas of March 31, 2009. As RiverSource Life’s estimate of this spread widensor tightens, the liability will decrease or increase. If this nonperformancecredit spread moves to a zero spread over the LIBOR swap curve, the reductionto net income would be approximately $181 million, net of DAC and DSICamortization and income taxes, based on March 31, 2009 credit spreads.

 

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**Liquidityand Capital Resources**

 

***LiquidityStrategy***

 

The liquidityrequirements of RiverSource Life are generally met by funds provided byinvestment income, maturities and periodic repayments of investments, deposits,premiums and proceeds from sales of investments as well as capitalcontributions from Ameriprise Financial. Other liquidity sources RiverSource Life has established are repurchaseagreements and an available line of credit with Ameriprise Financialaggregating $200 million.  In March 2009,RiverSource Life Insurance Company became a member of the Federal Home LoanBank of Des Moines (“FHLB of Des Moines”), which provides RiverSource LifeInsurance Company access to collateralized borrowings.  As of March 31, 2009, there have been noborrowings from the FHLB of Des Moines. The primary uses of funds are policy benefits, commissions, otherproduct-related acquisition and sales inducement costs, operating expenses,policy loans, dividends to Ameriprise Financial and investment purchases.  RiverSource Life routinely reviews itssources and uses of funds in order to meet its ongoing obligations.

 

There were nodividends paid to Ameriprise Financial during the three months ended March 31,2009.  On March 26, 2008,RiverSource Life paid cash dividends of $125 million to Ameriprise Financial.

 

RiverSource LifeInsurance Company and RiverSource Lifeof NY are subject to regulatory capital requirements as follows:

 
| ** **                                  | ** ** | **Actual Capital as of (a)** | ** ** | **Regulatory Capital  Requirement(b)** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|----------------------------------------|------------|
| ** **                                  | ** ** | **March 31,****2009**   | ** ** | **December 31,  2008**            | ** ** | **December 31,  2008** | ** ** |
| ** **                                  | ** ** | **(in millions)**            | ** ** |
| RiverSource Life  Insurance Company         |       | $                            | 2,670      |                                   | $          | 2,722 |   | $ | 551 |   |
| RiverSource Life  Insurance Co. of New York |       | 208                          |       | 229                                    |       | 58 |   |
|                                             |            |                              |            |                                        |            |  |  |  |  |  |

 

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

(b)        Regulatory capital requirement is based on the most recent statutoryrisk-based capital filing.

 

**Forward-LookingStatements**

 

This report containsforward-looking statements that reflect RiverSource Life’s plans, estimates andbeliefs.  RiverSource Life’s actualresults could differ materially from those described in these forward-lookingstatements.

 

RiverSource Life hasmade various forward-looking statements in this report. Examples of suchforward-looking statements include:

 

·                  statements about future economicperformance, the performance of equity markets and interest rate variations andthe economic performance of the United States and of global markets; and

·                  statements of assumptions underlyingsuch statements.

 

The words “believe,” “expect,”“anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,”“would,” “likely” and similar expressions are intended to identifyforward-looking statements but are not the exclusive means of identifying suchstatements.  Forward-looking statementsare subject to risks and uncertainties which could cause actual results todiffer materially from such statements.

 

Such factors include, butare not limited to, the following:

 

·                  changesin the valuations, liquidity and volatility in the interest rate, creditdefault equity market, and foreign exchange environments;

·                  changesin the litigation and regulatory environment, including ongoing legalproceedings and regulatory actions, the frequency and extent of legal claimsthreatened or initiated by clients, other persons and regulators, anddevelopments in regulation and legislation;

·                  RiverSourceLife’s investment management performance and consumer acceptance of RiverSourceLife’s products;

·                  effectsof competition in the financial services industry and changes in RiverSourceLife’s product distribution mix and distribution channels;

·                  RiverSourceLife’s capital structure as a subsidiary of Ameriprise Financial, including theability of its parent to support its financial strength and ratings, as well asthe opinions of rating organizations and other analysts or RiverSource Life’s 

 

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regulators, distributorsor policyholders and contractholders in response to any change or prospect ofchange in such opinion;

·                  risksof default by issuers or guarantors of investments RiverSource Life owns or bycounterparties to hedge derivative, insurance or reinsurance arrangements,experience deviations from RiverSource Life’s assumptions regarding such risksand the evaluations or the prospect of changes in evaluations of such thirdparties published by rating organizations or other analysts;

·                  experiencedeviations from RiverSource Life’s assumptions regarding morbidity, mortalityand persistency in certain annuity and insurance products, or from assumptionsregarding market returns assumed in valuing DAC and DSIC or market volatilityunderlying RiverSource Life’s valuation and hedging of guaranteed livingbenefit annuity riders;

·                  successfullycross-selling insurance and annuity products and services to AmeripriseFinancial’s customer base;

·                  RiverSource Life’sability to effectively hedge risks relating to guaranteed benefit riders andcertain other products;

·                  theimpact of intercompany allocations to RiverSource Life from AmeripriseFinancial and its affiliates;

·                  AmeripriseFinancial’s ability to attract, recruit and retain qualified advisors andemployees and its ability to distribute RiverSource Life’s products throughcurrent and future distribution channels;

·                  theimpact of Ameriprise Financial’s efforts to improve distribution economics andof RiverSource Life’s efforts to grow third party distribution and to realizebenefits from reengineering and tax planning;

·                  changes in U.S.federal income or estate tax laws potentially making RiverSource Life’sproducts less attractive to clients;

·                  RiverSource Life’sability to recover from catastrophes, both natural and man-made;

·                  changes in thecapital markets and competitive environments induced or resulting from thepartial or total ownership or other support by central governments of certainfinancial services firms of financial assets; and

·                  generaleconomic and political factors, including consumer confidence in the economy,the ability and inclination of consumers generally to invest, as well as theirability to and inclination to invest in or purchase insurance and otherproducts other than cash and cash equivalents, the costs of products andservices RiverSource Life consumes in the conduct of its business, and applicablelegislation and regulation, including tax law, tax treaties, fiscal and centralgovernment treasury policy, and regulatory rulings and pronouncements.

 

RiverSource Life cautionsthe reader that the foregoing list of factors is not exhaustive.  There may also be other risks thatRiverSource Life is unable to predict at this time that may cause actualresults to differ materially from those in forward-looking statements.  Readers are cautioned not to place undue relianceon these forward-looking statements, which speak only as of the date on whichthey are made.   RiverSource Lifeundertakes no obligation to update or revise any forward-looking statements.

 

The foregoing list offactors should be read in conjunction with the “Risk Factors” discussion as Part I,Item 1A of RiverSource Life’s 2008 10-K.

 

**ITEM 4T. CONTROLS AND PROCEDURES**

** **

**Disclosure Controls andProcedures**

 

RiverSource Lifemaintains disclosure controls and procedures (as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”)) designed to provide reasonable assurance that the information requiredto be reported in the Exchange Act filings is recorded, processed, summarizedand reported within the time periods specified and pursuant to SEC regulations,including controls and procedures designed to ensure that this information isaccumulated and communicated to RiverSource Life’s management, including itsprincipal executive officer and chief financial officer, as appropriate, toallow timely decisions regarding the required disclosure.  It should be noted that, because of inherentlimitations, RiverSource Life’s disclosure controls and procedures, howeverwell designed and operated, can provide only reasonable, and not absolute, assurancethat the objectives of the disclosure controls and procedures are met.

 

RiverSource Life’smanagement, with the participation of RiverSource Life’s principal executiveofficer and chief financial officer, evaluated the effectiveness of the disclosurecontrols and procedures as of the end of the period covered by thisreport.  Based upon that evaluation,RiverSource Life’s principal executive officer and chief financial officer haveconcluded that RiverSource Life’s disclosure controls and procedures wereeffective at a reasonable level of assurance as of March 31, 2009.

 

**Changes in Internal Control OverFinancial Reporting**

 

There have been nochanges in RiverSource Life’s internal control over financial reporting (assuch term is defined in Rules 13a-15(f) and 15d-15(f) under theExchange Act) during the fiscal quarter to which this report relates that havematerially affected, or are reasonably likely to materially affect, RiverSourceLife’s internal control over financial reporting.

 

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**PART II.**                  OTHER INFORMATION

** **

**ITEM 1.**                       LEGAL PROCEEDINGS

** **

The information set forthin Note 10 to the Consolidated Financial Statements in Part I, Item 1 isincorporated herein by reference.

 

**ITEM 1A.     RISKFACTORS**

 

There have been nomaterial changes in the risk factors provided in Part I, Item 1A ofRiverSource Life’s 2008 10-K.

 

**ITEM 6.**                       EXHIBITS

** **

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

 

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**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: May 6, 2009 | By                                 | /s/ Timothy V. Bechtold |
|                   |                               | Timothy V. Bechtold |
|                   |                               | President |
|                   |                               |   |
|                   |                               |   |
| Date: May 6, 2009 | By                                 | /s/ Brian J. McGrane |
|                   |                               | Brian J. McGrane |
|                   |                               | Executive Vice President and |
|                   |                               | Chief Financial Officer |
|                        |                                    |  |  |

 

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**EXHIBITINDEX**

 

The following exhibits are filed as part of thisQuarterly Report:

 
| **Exhibit** | ** ** | **Description**                                                                                                                                                                                                        |
|-------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **  | ** ** | ** **                                                                                                                                                                                                             |
| * 31.1      |       | Certification of Timothy V. Bechtold, 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.                                                 |
| ** **  | ** ** | ** **                                                                                                                                                                                                             |
| * 32.1      |       | Certification of Timothy V. Bechtold, 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. |

 

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*                                                     Filed electronicallyherewith.

 

E-1

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