Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

** **

| **x** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

 

**For the Quarterly Period Ended September 30, 2010**

 

**or**

 

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

 

**For the Transition Period from                                            to                                            **

 

**Commission File No. 811-00002**

 

**AMERIPRISECERTIFICATE COMPANY**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                   | ** ** | **41-6009975**                       |
|----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (I.R.S. Employer Identification No.) |
|                                                           |       |                                 |
| **1099 Ameriprise Financial  Center, Minneapolis, Minnesota**  | ** ** | **55474**                            |
| (Address of principal executive offices)                       |       | (Zip Code)                           |

 

Registrant’s telephone number, including area code:  **(612) 671-3131**

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes  x  No  o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes  o  No  o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange 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 check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes  o  No  x

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practicable date.

 

| **Class**                               | ** ** | **Outstanding at November 5, 2010** |
|-----------------------------------------|------------|---------------------------------------------------------|
| Common Shares (par value $10 per share) |       | 150,000 shares                                          |

 

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

 

 

 

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**AMERIPRISE CERTIFICATE COMPANY**

 

**FORM 10-Q**

 

**INDEX**

 
| Part I.  | Financial  Information: |                                                                                                  |
|---------------|-------------------------|-------------------------------------------------------------------------------------------------------|
|          |                    |                                                                                                  |
|          | Item 1.                 | Financial Statements                                                                                  |   |
|          |                    |                                                                                                  |   |
|          |                    | Statements  of Operations – Three months and nine months ended September 30, 2010  and 2009 | 3 |
|          |                    |                                                                                                  |   |
|          |                    | Balance Sheets –  September 30, 2010 and December 31, 2009                        | 4 |
|          |                    |                                                                                                  |   |
|          |                    | Statements  of Cash Flows – Nine months ended September 30, 2010 and 2009                   | 5 |
|          |                    |                                                                                                  |   |
|          |                    | Statements  of Shareholder’s Equity – Nine months ended September 30, 2010 and 2009    | 6 |
|          |                    |                                                                                                  |   |
|          |                    | Notes to Financial Statements                                                                         | 7 |
|          |                    |                                                                                                  |   |
|          | Item 2.                 | Management’s  Narrative Analysis                                                                 | 19 |
|          |                    |                                                                                                  |   |
|          | Item 4T.                | Controls and  Procedures                                                                              | 22 |
|          |                    |                                                                                                  |   |
| Part II. | Other Information:      |                                                                                                  |
|          |                    |                                                                                                  |   |
|          | Item 1.                 | Legal Proceedings                                                                                     | 23 |
|          |                    |                                                                                                  |   |
|          | Item 1A.                | Risk Factors                                                                                          | 23 |
|          |                    |                                                                                                  |   |
|          | Item 6.                 | Exhibits                                                                                              | 23 |
|          |                    |                                                                                                  |
|          | Signatures              | 24                                                                                                    |
|          |                    |                                                                                                  |
|          | Exhibit Index      | E-1                                                                                                   |

 

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**AMERIPRISE CERTIFICATE COMPANY**

**PART I.  FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIAL STATEMENTS**

 

**STATEMENTSOF OPERATIONS (UNAUDITED)**

**(in thousands)**

 
| ** **                                                                        | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                        | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                        | ** ** | ** **                                               | ** ** | ** **                                              | ** ** | ** ** | ** ** | ** ** | ** ** |
| Investment income                                                                 |       | $                                                        | 36,120     |                                                    | $          | 57,414 |   | $ | 120,252 |   | $ | 170,693 |   |
| Investment expenses                                                               |       | 7,088                                                    |       | 9,005                                                   |       | 23,146 |   | 28,316 |   |
| Net investment income before provision for  certificate reserves and income taxes |       | 29,032                                                   |       | 48,409                                                  |       | 97,106 |   | 142,377 |   |
| Net provision for certificate reserves                                            |       | 11,343                                                   |       | 27,148                                                  |       | 42,072 |   | 99,409 |   |
| Net investment income before income taxes                                         |       | 17,689                                                   |       | 21,261                                                  |       | 55,034 |   | 42,968 |   |
| Income tax expense                                                                |       | 6,468                                                    |       | 7,876                                                   |       | 20,221 |   | 15,804 |   |
| Net investment income                                                             |       | 11,221                                                   |       | 13,385                                                  |       | 34,813 |   | 27,164 |   |
|                                                                              |       |                                                     |       |                                                    |       |   |   |   |   |
| Net realized gain on investments                                                  |       | 677                                                      |       | 6,170                                                   |       | 5,798 |   | 1,998 |   |
| Income tax expense                                                                |       | 237                                                      |       | 2,159                                                   |       | 2,029 |   | 699 |   |
| Net realized gain on investments                                                  |       | 440                                                      |       | 4,011                                                   |       | 3,769 |   | 1,299 |   |
| **Net income**                                                                    |       | $                                                        | 11,661     |                                                    | $          | 17,396 |   | $ | 38,582 |   | $ | 28,463 |   |
| Supplemental Disclosures:                                                         |       |                                                     |       |                                                    |       |   |   |   |   |
| Net realized gain on investments:                                                 |       |                                                     |       |                                                    |       |   |   |   |   |
| Net realized gain on investments before impairment  losses on securities          |       | $                                                        | 710        |                                                    | $          | 6,816 |   | $ | 8,401 |   | $ | 11,060 |   |
| Total other-than-temporary impairment losses on  securities                       |       | —                                                   |       | (167                                                    | )          | (4,662 | ) | (9,841 | ) |
| Portion of loss recognized in other comprehensive  income                         |       | (33                                                      | )          | (479                                                    | )          | 2,059 |   | 779 |   |
| Net impairment losses recognized in net realized  gain on investments             |       | (33                                                      | )          | (646                                                    | )          | (2,603 | ) | (9,062 | ) |
| Total net realized gain on investments                                            |       | $                                                        | 677        |                                                    | $          | 6,170 |   | $ | 5,798 |   | $ | 1,998 |   |

 

*See Notes to Financial Statements.*

 

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**AMERIPRISE CERTIFICATE COMPANY**

 

**BALANCESHEETS**

**(in thousands, except share data)**

 
| ** **                                                           | ** ** | **September 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|----------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                           | ** ** | **(unaudited)**                  | ** ** | ** **                      | ** ** |
| **Assets**                                                           |       |                             |       |                            |       |
| Qualified Assets                                                     |       |                             |       |                            |       |
| Cash equivalents                                                     |       | $                                | 286,983    |                            | $          | 309,183 |   |
| Investments in unaffiliated issuers                                  |       | 3,148,894                        |       | 3,960,440                       |       |
| Receivables                                                          |       | 23,028                           |       | 39,630                          |       |
| Equity derivatives, purchased                                        |       | 56,261                           |       | 166,392                         |       |
| Total qualified assets                                               |       | 3,515,166                        |       | 4,475,645                       |       |
|                                                                 |       |                             |       |                            |       |
| Deferred taxes, net                                                  |       | 34,075                           |       | 70,793                          |       |
| Current taxes receivable from parent                                 |       | —                           |       | 62                              |       |
| Total other assets                                                   |       | 34,075                           |       | 70,855                          |       |
| Total assets                                                         |       | $                                | 3,549,241  |                            | $          | 4,546,500 |   |
| ** **                                                           |       |                             |       |                            |       |
| **Liabilities and Shareholder’s  Equity**                       |       |                             |       |                            |       |
| Liabilities                                                          |       |                             |       |                            |       |
| Certificate reserves                                                 |       | $                                | 3,302,532  |                            | $          | 4,108,272 |   |
| Current taxes payable to parent                                      |       | 2,687                            |       | 18,117                          |       |
| Payable for investment securities purchased                          |       | 10,376                           |       | 1,207                           |       |
| Equity derivatives, written                                          |       | 43,957                           |       | 140,996                         |       |
| Accounts payable and accrued liabilities                             |       | 14,337                           |       | 32,710                          |       |
| Total liabilities                                                    |       | 3,373,889                        |       | 4,301,302                       |       |
| Shareholder’s Equity                                            |       |                             |       |                            |       |
| Common shares ($10 par value, 150,000 shares  authorized and issued) |       | 1,500                            |       | 1,500                           |       |
| Additional paid-in capital                                           |       | 185,173                          |       | 297,964                         |       |
| Total retained earnings (accumulated deficit)                        |       | 15                               |       | (6,358                          | )          |
| Accumulated other comprehensive loss, net of tax                     |       | (11,336                          | )          | (47,908                         | )          |
| Total shareholder’s equity                                      |       | 175,352                          |       | 245,198                         |       |
| **Total liabilities and  shareholder’s equity**                 |       | $                                | 3,549,241  |                            | $          | 4,546,500 |   |

 

*See Notes to Financial Statements.*

 

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**AMERIPRISE CERTIFICATE COMPANY**

 

**STATEMENTSOF CASH FLOWS (UNAUDITED)**

**(in thousands)**

 
| ** **                                                                         | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2010**                                                | ** ** | **2009** | ** ** |
| **Cash Flows from Operating  Activities**                                          |       |                                                    |       |   |   |
| Net income                                                                         |       | $                                                       | 38,582     |   | $ | 28,463 |   |
|                                                                               |       |                                                    |       |   |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                                                    |       |   |   |
| Interest added to certificate loans                                                |       | (124                                                    | )          | (161 | ) |
| Amortization of premiums, acccretion of discounts,  net                            |       | (2,115                                                  | )          | (5,872 | ) |
| Deferred taxes, net                                                                |       | 17,026                                                  |       | (12,067 | ) |
| Net realized (gain) loss on investments                                            |       | 323                                                     |       | (1,954 | ) |
| Provision for loan loss                                                            |       | (6,121                                                  | )          | 1,500 |   |
| Changes in other operating assets and liabilities:                                 |       |                                                    |       |   |   |
| Trading securities, net                                                            |       | —                                                  |       | 16,618 |   |
| Dividends and interest receivable                                                  |       | 7,297                                                   |       | 5,001 |   |
| Certificate reserves, net                                                          |       | (14,093                                                 | )          | 21,360 |   |
| Due to (from) parent for income taxes                                              |       | (15,368                                                 | )          | 16,777 |   |
| Derivatives, net                                                                   |       | 13,092                                                  |       | (22,815 | ) |
| Derivatives collateral, net                                                        |       | (12,084                                                 | )          | 15,848 |   |
| Other, net                                                                         |       | (5,902                                                  | )          | 15,558 |   |
| **Net cash provided by operating  activities**                                     |       | 20,513                                                  |       | 78,256 |   |
| ** **                                                                         |       |                                                    |       |   |   |
| **Cash Flows from Investing  Activities**                                          |       |                                                    |       |   |   |
| Available-for-Sale securities:                                                     |       |                                                    |       |   |   |
| Sales                                                                              |       | 62,573                                                  |       | 224,512 |   |
| Maturities and redemptions                                                         |       | 1,415,150                                               |       | 1,479,599 |   |
| Purchases                                                                          |       | (674,447                                                | )          | (2,278,532 | ) |
| Below investment grade syndicated bank loans and  commercial mortgage loans:       |       |                                                    |       |   |   |
| Sales                                                                              |       | 37,840                                                  |       | 1,223 |   |
| Maturities and redemptions                                                         |       | 52,820                                                  |       | 31,351 |   |
| Purchases                                                                          |       | (146                                                    | )          | (132 | ) |
| Certificate loans:                                                                 |       |                                                    |       |   |   |
| Payments                                                                           |       | 549                                                     |       | 688 |   |
| Fundings                                                                           |       | (405                                                    | )          | (391 | ) |
| **Net cash provided by (used in)  investing activities**                           |       | 893,934                                                 |       | (541,682 | ) |
| ** **                                                                         |       |                                                    |       |   |   |
| **Cash Flows from Financing  Activities**                                          |       |                                                    |       |   |   |
| Payments from certificate owners                                                   |       | 651,891                                                 |       | 2,034,873 |   |
| Certificate maturities and cash surrenders                                         |       | (1,443,538                                              | )          | (2,450,451 | ) |
| Capital contribution from parent                                                   |       | —                                                  |       | 35,000 |   |
| Dividend/return of capital to parent                                               |       | (145,000                                                | )          | — |   |
| **Net cash used in financing  activities**                                         |       | (936,647                                                | )          | (380,578 | ) |
| ** **                                                                         |       |                                                    |       |   |   |
| **Net decrease in cash equivalents**                                               |       | (22,200                                                 | )          | (844,004 | ) |
| Cash equivalents at beginning of period                                            |       | 309,183                                                 |       | 1,164,484 |   |
| **Cash equivalents at end of period**                                              |       | $                                                       | 286,983    |   | $ | 320,480 |   |
| ** **                                                                         |       |                                                    |       |   |   |
| **Supplemental disclosures  including non-cash transactions:**                     |       |                                                    |       |   |   |
| Cash paid for income taxes                                                         |       | $                                                       | 19,938     |   | $ | 8,420 |   |
| Certificate maturities and surrenders through loan  reductions                     |       | 966                                                     |       | 1,115 |   |

 

*See Notes to Financial Statements.*

 

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**AMERIPRISE CERTIFICATE COMPANY**

 

**STATEMENTSOF SHAREHOLDER’S EQUITY (UNAUDITED)**

**Nine Months Ended September 30, 2010 and 2009**

 
| ** **                                                                                                                     | ** ** | ** **                                                | ** ** | ** ** | ** ** | ** **     | ** ** | **Retained Earnings (Accumulated Deficit)** | ** ** | ** **           | ** ** | ** **         | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|------------|------------|----------------|------------|------------------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                                                                                                     | ** ** | ** **                                                | ** ** | ** ** | ** ** | ** **     | ** ** | **Appropriated**                                           | ** ** | **Appropriated**     | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                                     | ** ** | ** **                                                | ** ** | ** ** | ** ** | ** **     | ** ** | **for**                                                    | ** ** | **for**              | ** ** | ** **         | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| ** **                                                                                                                     | ** ** | ** **                                                | ** ** | ** ** | ** ** | ** **     | ** ** | **Pre-Declared**                                           | ** ** | **Additional**       | ** ** | ** **         | ** ** | **Other** | ** ** | ** ** | ** ** |
| ** **                                                                                                                     | ** ** | **Number of**                                        | ** ** | ** ** | ** ** | **Additional** | ** ** | **Additional**                                             | ** ** | **Interest on** | ** ** | ** **         | ** ** | **Comprehensive** | ** ** | ** ** | ** ** |
| ** **                                                                                                                     | ** ** | **Outstanding**                                           | ** ** | **Common** | ** ** | **Paid-In**    | ** ** | **Credits and**                                       | ** ** | **Advance**          | ** ** | ** **         | ** ** | **Loss -** | ** ** | ** ** | ** ** |
| ** **                                                                                                                     | ** ** | **Shares**                                                | ** ** | **Shares** | ** ** | **Capital**    | ** ** | **Interest**                                               | ** ** | **Payments**         | ** ** | **Unappropriated** | ** ** | **Net of Tax** | ** ** | **Total** | ** ** |
| ** **                                                                                                                     | ** ** | **(in thousands, except share data)** | ** ** |
| **Balance at January 1, 2009**                                                                                            |       | 150,000                                                   |       | $          | 1,500      |           | $          | 322,964                                                    |       | $                    | 50         |               | $          | 15 |   | $ | (81,570 | ) | $ | (152,454 | ) | $ | 90,505 |   |
| Change  in accounting principle, net of tax                                                                                    |       | —                                                    |       | —     |       | —         |       | —                                                     |       | —               |       | 31,694             |       | (31,694 | ) | — |   |
| Comprehensive  income:                                                                                                         |       |                                                      |       |       |       |           |       |                                                       |       |                 |       |               |       |   |   |   |   |
| Net  income                                                                                                                    |       | —                                                    |       | —     |       | —         |       | —                                                     |       | —               |       | 28,463             |       | — |   | 28,463 |   |
| Other  comprehensive income, net of tax:                                                                                       |       |                                                      |       |       |       |           |       |                                                       |       |                 |       |               |       |   |   |   |   |
| Change  in net unrealized securities losses                                                                                    |       | —                                                    |       | —     |       | —         |       | —                                                     |       | —               |       | —             |       | 138,792 |   | 138,792 |   |
| Change  in noncredit related impairments on securities and net unrealized securities  losses on previously impaired securities |       | —                                                    |       | —     |       | —         |       | —                                                     |       | —               |       | —             |       | 410 |   | 410 |   |
| Total  comprehensive income                                                                                                    |       |                                                      |       |       |       |           |       |                                                       |       |                 |       |               |       |   |   | 167,665 |   |
| Transfer  to unappropriated/from appropriated                                                                                  |       | —                                                    |       | —     |       | —         |       | (50                                                        | )          | —               |       | 50                 |       | — |   | — |   |
| Receipt  of capital from parent                                                                                                |       | —                                                    |       | —     |       | 35,000         |       | —                                                     |       | —               |       | —             |       | — |   | 35,000 |   |
| **Balance at September 30, 2009**                                                                                         |       | 150,000                                                   |       | $          | 1,500      |           | $          | 357,964                                                    |       | $                    | —     |               | $          | 15 |   | $ | (21,363 | ) | $ | (44,946 | ) | $ | 293,170 |   |
|                                                                                                                           |       |                                                      |       |       |       |           |       |                                                       |       |                 |       |               |       |   |   |   |   |
| **Balance at January 1, 2010**                                                                                            |       | 150,000                                                   |       | $          | 1,500      |           | $          | 297,964                                                    |       | $                    | —     |               | $          | 15 |   | $ | (6,373 | ) | $ | (47,908 | ) | $ | 245,198 |   |
| Comprehensive  income:                                                                                                         |       |                                                      |       |       |       |           |       |                                                       |       |                 |       |               |       |   |   |   |   |
| Net  income                                                                                                                    |       | —                                                    |       | —     |       | —         |       | —                                                     |       | —               |       | 38,582             |       | — |   | 38,582 |   |
| Other  comprehensive income, net of tax:                                                                                       |       |                                                      |       |       |       |           |       |                                                       |       |                 |       |               |       |   |   |   |   |
| Change  in net unrealized securities losses                                                                                    |       | —                                                    |       | —     |       | —         |       | —                                                     |       | —               |       | —             |       | 33,328 |   | 33,328 |   |
| Change  in noncredit related impairments on securities and net unrealized securities  losses on previously impaired securities |       | —                                                    |       | —     |       | —         |       | —                                                     |       | —               |       | —             |       | 3,244 |   | 3,244 |   |
| Total  comprehensive income                                                                                                    |       |                                                      |       |       |       |           |       |                                                       |       |                 |       |               |       |   |   | 75,154 |   |
| Dividend/return  of capital to parent                                                                                          |       | —                                                    |       | —     |       | (112,791       | )          | —                                                     |       | —               |       | (32,209            | )          | — |   | (145,000 | ) |
| **Balance at September 30, 2010**                                                                                         |       | 150,000                                                   |       | $          | 1,500      |           | $          | 185,173                                                    |       | $                    | —     |               | $          | 15 |   | $ | — |   | $ | (11,336 | ) | $ | 175,352 |   |

 

*See Notes to Financial Statements.*

 

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**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED)**

 

**1.  Basis ofPresentation**

 

**Nature of Business**

 

AmeripriseCertificate Company (“ACC” or the “Company”), is a wholly owned subsidiary ofAmeriprise Financial, Inc. (“Ameriprise Financial”). The accompanyingFinancial Statements have been prepared in accordance with U.S. generallyaccepted accounting principles (“GAAP”). The interim financial information inthis report has not been audited. In the opinion of management,all adjustments necessary for a fair presentation of the results ofoperations and financial position for the interim periods have been made. Alladjustments made were of a normal, recurring nature. Results of operationsreported for interim periods are not necessarily indicative of results for theentire year. These Financial Statements and Notes should be read in conjunctionwith the Financial Statements and Notes in the Annual Report on Form 10-Kof ACC for the year ended December 31, 2009, filed with the Securities andExchange Commission (“SEC”) on February 23, 2010.

 

ACCevaluated events or transactions that occurred after the balance sheet date forpotential recognition or disclosure through the date the financial statementswere issued.

 

**2.  Recent Accounting Pronouncements**

 

**Adoption of New Accounting Standards**

 

*Subsequent Events*

 

InFebruary 2010, the Financial Accounting Standards Board (“FASB”) amendedthe accounting standards related to the recognition and disclosure ofsubsequent events. The amendments remove the requirement to disclose the datethrough which subsequent events are evaluated for SEC filers. The standard iseffective upon issuance, and shall be applied prospectively. ACC adopted thestandard in the first quarter of 2010. The adoption did not have anyeffect on ACC’s results of operations and financial condition.

 

*FairValue*

 

InJanuary 2010, the FASB updated the accounting standards related todisclosures on fair value measurements. The standard expands the currentdisclosure requirements to include additional detail about significanttransfers between Levels 1 and 2 within the fair value hierarchy and presentsactivity in the rollforward of Level 3 activity on a gross basis. The standardalso clarifies existing disclosure requirements related to the level ofdisaggregation to be used for assets and liabilities as well as disclosures onthe inputs and valuation techniques used to measure fair value. The standard iseffective for interim and annual reporting periods beginning after December 15,2009, except for the disclosure requirements related to the Level 3rollforward, which are effective for interim and annual periods beginning afterDecember 15, 2010. ACC adopted the standard in the first quarter of 2010,except for the additional disclosures related to the Level 3 rollforward, whichACC will adopt in the first quarter of 2011. The adoption did not have anyeffect on ACC’s results of operations and financial condition.

 

*Recognition and Presentation ofOther-Than-Temporary Impairment (“OTTI”)*

 

InApril 2009, the FASB updated the accounting standards for the recognitionand presentation of other-than-temporary impairments. The standard amendsexisting guidance on other-than-temporary impairments for debt securities andrequires that the credit portion of other-than-temporary impairments berecorded in earnings and the noncredit portion of losses be recorded in othercomprehensive income (loss) when the entity does not intend to sell thesecurity and it is more likely than not that the entity will not be required tosell the security prior to recovery of its cost basis. The standard requiresseparate presentation of both the credit and noncredit portions of other-than-temporaryimpairments on the financial statements and additional disclosures. Thisstandard is effective for interim and annual reporting periods ending afterJune 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 accumulated deficit with a correspondingadjustment to accumulated other comprehensive loss. ACC adopted the standard inthe first quarter of 2009 and recorded a cumulative effect decrease to theopening balance of accumulated deficit of $32 million, net of income taxes,and a corresponding increase to accumulated other comprehensive loss, net ofincome taxes. See Note 3 for the required disclosures.

 

**Future Adoption of New Accounting Standards**

 

*Receivables*

 

In July 2010, the FASB updated the accountingstandards for disclosures about the credit quality of financing receivables andthe allowance for credit losses. The standard requires additional disclosurerelated to the credit quality of financing receivables, troubled 

 

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**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

debt restructurings and significant purchases orsales of financing receivables during the period. The standard requires thatthese disclosures and existing disclosures be presented on a disaggregatedbasis, similar to the manner that the entity uses to evaluate its creditlosses. Disclosures of information as of the end of a reporting period areeffective for interim and annual periods ending after December 15, 2010and disclosures of activity that occurred during a reporting period areeffective for interim and annual periods beginning after December 15,2010. The Company’s adoption of the standard will not impact its results ofoperations and financial condition.

 

**3.  Investments**

 

Investmentsin unaffiliated issuers were as follows:

 
| ** **                                                                                                                         | ** ** | **September 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                         | ** ** | **(in thousands)**          | ** ** |
| Available-for-Sale:                                                                                                                |       |                             |       |                            |       |
| Fixed maturities, at fair value (amortized cost:  2010, $2,916,350; 2009, $3,697,972)                                              |       | $                                | 2,898,380  |                            | $          | 3,627,993 |   |
| Common and preferred stocks, at fair value (cost:  2010, $19,793; 2009, $19,646)                                                   |       | 20,288                           |       | 15,765                          |       |
| Below investment grade syndicated bank loans and  commercial mortgage loans, at cost (fair value: 2010, $230,665; 2009,  $313,021) |       | 223,859                          |       | 309,459                         |       |
| Certificate loans – secured by certificate  reserves, at cost, which approximates fair value                                  |       | 4,150                            |       | 5,136                           |       |
| Real estate owned, at fair value less cost to sell                                                                                 |       | 2,217                            |       | 2,087                           |       |
| Total                                                                                                                              |       | $                                | 3,148,894  |                            | $          | 3,960,440 |   |

 

Available-for-Salesecurities distributed by type were as follows:

 
| ** **                               | ** ** | **September 30, 2010** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|
| **Description of Securities**  | ** ** | **Amortized  Cost**              | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair Value** | ** ** | **Non-Credit  OTTI ****(1)** | ** ** |
| ** **                               | ** ** | **(in thousands)**          | ** ** | ** ** | ** ** |
| Residential mortgage backed securities   |       | $                                | 1,447,433  |   | $ | 36,667 |   | $ | (103,507 | ) | $ | 1,380,593 |   | $ | (42,560 | ) |
| Corporate debt securities                |       | 628,478                          |       | 16,587 |   | (207 | ) | 644,858 |   | 3 |   |
| Commercial mortgage backed securities    |       | 482,501                          |       | 13,253 |   | (294 | ) | 495,460 |   | — |   |
| Asset backed securities                  |       | 329,115                          |       | 20,695 |   | (1,576 | ) | 348,234 |   | (995 | ) |
| U.S. government and agencies obligations |       | 28,823                           |       | 412 |   | — |   | 29,235 |   | — |   |
| Common and preferred stocks              |       | 19,793                           |       | 907 |   | (412 | ) | 20,288 |   | — |   |
| Total                                    |       | $                                | 2,936,143  |   | $ | 88,521 |   | $ | (105,996 | ) | $ | 2,918,668 |   | $ | (43,552 | ) |

 
| ** **                               | ** ** | **December 31, 2009** | ** ** |
|------------------------------------------|------------|---------------------------------|------------|
| **Description of Securities**  | ** ** | **Amortized  Cost**             | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair Value** | ** ** | **Non-Credit  OTTI ****(1)** | ** ** |
| ** **                               | ** ** | **(in thousands)**         | ** ** | ** ** | ** ** |
| Residential mortgage backed securities   |       | $                               | 1,577,876  |   | $ | 20,736 |   | $ | (138,277 | ) | $ | 1,460,335 |   | $ | (46,683 | ) |
| Corporate debt securities                |       | 1,026,547                       |       | 24,668 |   | (976 | ) | 1,050,239 |   | 850 |   |
| Commercial mortgage backed securities    |       | 538,714                         |       | 13,247 |   | (759 | ) | 551,202 |   | — |   |
| Asset backed securities                  |       | 420,016                         |       | 17,245 |   | (6,994 | ) | 430,267 |   | (2,711 | ) |
| U.S. government and agencies obligations |       | 134,819                         |       | 1,131 |   | — |   | 135,950 |   | — |   |
| Common and preferred stocks              |       | 19,646                          |       | 82 |   | (3,963 | ) | 15,765 |   | — |   |
| Total                                    |       | $                               | 3,717,618  |   | $ | 77,109 |   | $ | (150,969 | ) | $ | 3,643,758 |   | $ | (48,544 | ) |

 

----

(1)             Represents the amount ofother-than-temporary impairment losses in Accumulated Other Comprehensive Loss.Amount includes unrealized gains and losses on impaired securities subsequentto the initial impairment measurement date. These amounts are included in grossunrealized gains and losses as of the end of the period.

 

8

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**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

AtSeptember 30, 2010 and December 31, 2009, fixed maturitysecurities comprised approximately 84% and 85%, respectively, of ACC’s totalinvestments. Rating agency designations are based on the availability ofratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”),including Moody’s Investors Service (“Moody’s”), Standard & Poor’sRatings Services (“S&P”), and Fitch Ratings Ltd. (“Fitch”). ACC uses themedian of available ratings from Moody’s, S&P and Fitch or if fewer than threeratings are available,  the lower ratingis used. When ratings from Moody’s, S&P and Fitch are unavailable ACC mayutilize ratings from other NRSROs or rate the securities internally.  At September 30, 2010 and December 31,2009 approximately $10.6 million and $15.3 million, respectively, of securitieswere internally rated by Columbia Management Investment Advisors, LLC’s(formerly known as RiverSource Investments, LLC) using criteria similar tothose used by NRSROs. A summary of fixed maturity securities by rating was asfollows:

 
| ** **             | ** ** | **September 30, 2010**                      | ** ** | **December 31, 2009** | ** ** |
|------------------------|------------|-------------------------------------------------------|------------|---------------------------------|------------|
| **Ratings**            | ** ** | **Amortized Cost**                               | ** ** | **Fair Value**             | ** ** | **Percent  of Total  Fair Value** | ** ** | **Amortized Cost** | ** ** | **Fair Value** | ** ** | **Percent  of Total  Fair Value** | ** ** |
| ** **             | ** ** | **(in thousands, except percentages)** | ** ** |
| AAA                    |       | $                                                     | 1,748,522  |                            | $          | 1,810,050 |   | 62 | % | $ | 2,026,434 |   | $ | 2,062,670 |   | 57 | % |
| AA                     |       | 100,323                                               |       | 101,199                         |       | 4 |   | 189,891 |   | 177,780 |   | 5 |   |
| A                      |       | 158,478                                               |       | 158,853                         |       | 5 |   | 346,183 |   | 342,573 |   | 9 |   |
| BBB                    |       | 546,642                                               |       | 551,501                         |       | 19 |   | 782,389 |   | 780,706 |   | 22 |   |
| Below investment grade |       | 362,385                                               |       | 276,777                         |       | 10 |   | 353,075 |   | 264,264 |   | 7 |   |
| Total fixed maturities |       | $                                                     | 2,916,350  |                            | $          | 2,898,380 |   | 100 | % | $ | 3,697,972 |   | $ | 3,627,993 |   | 100 | % |

 

AtSeptember 30, 2010 and December 31, 2009, approximately 33% and 38%,respectively, of the securities rated AAA were GNMA, FNMA and FHLMCmortgage backed securities.

 

Thefollowing tables provide information about Available-for-Sale securities withgross unrealized losses and the length of time that individual securities havebeen in a continuous unrealized loss position:

 
| ** **                              | ** ** | **September 30, 2010**                                         | ** ** |
|-----------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                              | ** ** | **Less than 12 months**                                   | ** ** | **12 months or more** | ** ** | **Total** | ** ** |
| **Description of**                 | ** ** | **Number**                                                               | ** ** | **Fair** | ** ** | **Unrealized** | ** ** | **Number** | ** ** | **Fair** | ** ** | **Unrealized** | ** ** | **Number** | ** ** | **Fair** | ** ** | **Unrealized** | ** ** |
| **Securities**                          | ** ** | **of Securities**                                                   | ** ** | **Value** | ** ** | **Losses** | ** ** | **of Securities** | ** ** | **Value** | ** ** | **Losses** | ** ** | **of Securities** | ** ** | **Value** | ** ** | **Losses** | ** ** |
| ** **                              | ** ** | **(in thousands, except number of securities)** | ** ** |
| Residential  mortgage backed securities |       | 12                                                                       |       | $ | 78,009 |   | $ | (779 | ) | 74 |   | $ | 292,058 |   | $ | (102,728 | ) | 86 |   | $ | 370,067 |   | $ | (103,507 | ) |
| Corporate  debt securities              |       | 1                                                                        |       | 1,003 |   | (1 | ) | 7 |   | 7,285 |   | (206 | ) | 8 |   | 8,288 |   | (207 | ) |
| Commercial  mortgage backed securities  |       | 5                                                                        |       | 26,357 |   | (292 | ) | 1 |   | 853 |   | (2 | ) | 6 |   | 27,210 |   | (294 | ) |
| Asset  backed securities                |       | 5                                                                        |       | 18,003 |   | (913 | ) | 5 |   | 10,540 |   | (663 | ) | 10 |   | 28,543 |   | (1,576 | ) |
| Common  and preferred stocks            |       | —                                                                   |       | — |   | — |   | 1 |   | 19,200 |   | (412 | ) | 1 |   | 19,200 |   | (412 | ) |
| Total                                   |       | 23                                                                       |       | $ | 123,372 |   | $ | (1,985 | ) | 88 |   | $ | 329,936 |   | $ | (104,011 | ) | 111 |   | $ | 453,308 |   | $ | (105,996 | ) |

 
| ** **                              | ** ** | **December 31, 2009**                                          | ** ** |
|-----------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                              | ** ** | **Less than 12 months**                                   | ** ** | **12 months or more** | ** ** | **Total** | ** ** |
| **Description of**                 | ** ** | **Number**                                                               | ** ** | **Fair** | ** ** | **Unrealized** | ** ** | **Number** | ** ** | **Fair** | ** ** | **Unrealized** | ** ** | **Number** | ** ** | **Fair** | ** ** | **Unrealized** | ** ** |
| **Securities**                          | ** ** | **of Securities**                                                   | ** ** | **Value** | ** ** | **Losses** | ** ** | **of Securities** | ** ** | **Value** | ** ** | **Losses** | ** ** | **of Securities** | ** ** | **Value** | ** ** | **Losses** | ** ** |
| ** **                              | ** ** | **(in thousands, except number of securities)** | ** ** |
| Residential  mortgage backed securities |       | 22                                                                       |       | $ | 196,113 |   | $ | (9,618 | ) | 77 |   | $ | 320,859 |   | $ | (128,659 | ) | 99 |   | $ | 516,972 |   | $ | (138,277 | ) |
| Corporate  debt securities              |       | 5                                                                        |       | 4,715 |   | (117 | ) | 28 |   | 56,063 |   | (859 | ) | 33 |   | 60,778 |   | (976 | ) |
| Commercial  mortgage backed securities  |       | 4                                                                        |       | 20,315 |   | (321 | ) | 9 |   | 29,516 |   | (438 | ) | 13 |   | 49,831 |   | (759 | ) |
| Asset  backed securities                |       | 7                                                                        |       | 34,629 |   | (766 | ) | 11 |   | 47,960 |   | (6,228 | ) | 18 |   | 82,589 |   | (6,994 | ) |
| Common  and preferred stocks            |       | —                                                                   |       | — |   | — |   | 1 |   | 15,650 |   | (3,963 | ) | 1 |   | 15,650 |   | (3,963 | ) |
| Total                                   |       | 38                                                                       |       | $ | 255,772 |   | $ | (10,822 | ) | 126 |   | $ | 470,048 |   | $ | (140,147 | ) | 164 |   | $ | 725,820 |   | $ | (150,969 | ) |

 

9

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Table of Contents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

Aspart of ACC’s ongoing monitoring process, management determined that a majorityof the gross unrealized losses on its Available-for-Sale securities areattributable to credit spreads. The primary driver of lower unrealized lossesat September 30, 2010 was the decline of interest rates during theperiod.

 

Thefollowing table presents a rollforward of the cumulative amounts recognized inthe Statements of Operations for other-than-temporary impairments related tocredit losses on securities for which a portion of the securities’ totalother-than-temporary impairments was recognized in other comprehensive income:

 
| ** **                                                                                                                                                                       | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                                                                                       | ** ** | **September 30,**           | ** ** | **September 30,**          | ** ** |
| ** **                                                                                                                                                                       | ** ** | **2010**                         | ** ** | **2009**                        | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                                                                                                                                                       | ** ** | **(in thousands)**          | ** ** |
| Beginning balance of credit losses on securities  held for which a portion of other-than-temporary impairment was recognized in  other comprehensive income                      |       | $                                | 59,800     |                            | $          | 58,143 |   | $ | 57,446 |   | $ | 50,866 |   |
| Reductions for securities sold during the period  (realized)                                                                                                                     |       | —                           |       | (1,650                          | )          | — |   | (1,650 | ) |
| Additional amount related to credit losses for  which an other- than-temporary impairment was not previously recognized                                                          |       | —                           |       | —                          |       | 556 |   | — |   |
| Additional increases to the amount related to  credit losses for which an other-than-temporary impairment was previously  recognized                                             |       | 33                               |       | 646                             |       | 1,831 |   | 7,923 |   |
| Ending balance of credit losses on securities held  as of September 30 for which a portion of other-than-temporary impairment  was recognized in other comprehensive income |       | $                                | 59,833     |                            | $          | 57,139 |   | $ | 59,833 |   | $ | 57,139 |   |

 

Thechange in net unrealized securities gains (losses) in other comprehensiveincome includes two components, net of tax: (i) unrealized gains(losses) that arose from changes in the market value of securities thatwere held during the period and (ii) (gains) losses that werepreviously unrealized, but have been recognized in current period net incomedue to sales of Available-for-Sale securities and due to the reclassificationof noncredit other-than-temporary impairment losses to credit losses.

 

The followingtable presents a rollforward of the net unrealized securities losses onAvailable-for-Sale securities included in accumulated other comprehensive loss:

 
| ** **                                                     | ** ** | ** **              | ** ** | ** **          | ** ** | **Accumulated Other**             | ** ** |
|----------------------------------------------------------------|------------|-------------------------|------------|---------------------|------------|----------------------------------------|------------|
| ** **                                                     | ** ** | **Net**                 | ** ** | ** **          | ** ** | **Comprehensive**                      | ** ** |
| ** **                                                     | ** ** | **Unrealized**          | ** ** | ** **          | ** ** | **Loss Related to Net** | ** ** |
| ** **                                                     | ** ** | **Securities**          | ** ** | **Deferred**        | ** ** | **Unrealized Securities**         | ** ** |
| ** **                                                     | ** ** | **Gains (Losses)** | ** ** | **Income Tax** | ** ** | **Gains (Losses)**                | ** ** |
| ** **                                                     | ** ** | **(in thousands)** | ** ** |
| Balance at January 1, 2009                                |       | $                       | (234,713   | )                   | $          | 82,259                                 |       | $ | (152,454 | ) |
| Cumulative effect of accounting change                         |       | (48,760                 | )          | 17,066              |       | (31,694                                | )(1)       |
| Net unrealized securities gains arising during the  period (3) |       | 214,276                 |       | (73,465             | )          | 140,811                                |       |
| Reclassification of gains included in net income               |       | (2,476                  | )          | 867                 |       | (1,609                                 | )          |
| Balance at September 30, 2009                             |       | $                       | (71,673    | )                   | $          | 26,727                                 |       | $ | (44,946 | )(2) |
|                                                           |       |                    |       |                |       |                                   |       |
| Balance at January 1, 2010                                |       | $                       | (73,860    | )                   | $          | 25,952                                 |       | $ | (47,908 | ) |
| Net unrealized securities gains arising during the  period (3) |       | 58,059                  |       | (20,399             | )          | 37,660                                 |       |
| Reclassification of gains included in net income               |       | (1,674                  | )          | 586                 |       | (1,088                                 | )          |
| Balance at September 30, 2010                             |       | $                       | (17,475    | )                   | $          | 6,139                                  |       | $ | (11,336 | )(2) |

 

----

(1)             Amount represents thecumulative effect of adopting a new accounting standard on January 1,2009. See Note 2 for additional information on the adoption impact.

(2)             At September 30, 2010and 2009, Accumulated Other Comprehensive Loss Related to Net UnrealizedSecurities Losses included $(28.3) million and $(31.3) million, respectively,of noncredit related impairments on securities and net unrealized securitieslosses on previously impaired securities.

(3)             Net unrealized investmentgains arising during the period also include other-than-temporary impairmentlosses on Available-for-Sale securities related to factors other than creditthat were recognized in other comprehensive income during the period.

 

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Table of Contents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

Netrealized gains and losses on Available-for-Sale securities, determined usingthe specific identification method, were as follows:

 
| ** **                                         | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                         | ** ** | **2010**                                                 | ** ** | **2009**                                                | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                         | ** ** | **(in thousands)**                                  | ** ** | **(in thousands)**                                 | ** ** |
| Gross realized gains from sales                    |       | $                                                        | 993        |                                                    | $          | 5,988 |   | $ | 4,514 |   | $ | 13,288 |   |
| Gross realized losses from sales                   |       | (108                                                     | )          | (140                                                    | )          | (237 | ) | (1,749 | ) |
| Other-than-temporary impairments related to credit |       | (33                                                      | )          | (646                                                    | )          | (2,603 | ) | (9,062 | ) |
|                                                    |            |                                                          |            |                                                         |            |  |  |  |  |  |  |  |  |

 

Theother-than-temporary impairments for the three months and nine months ended September 30,2010 and 2009 primarily related to credit losses on non-agencyresidential mortgage backed securities.

 

Available-for-Salesecurities by contractual maturity as of September 30, 2010 were asfollows:

 
| ** **                             | ** ** | **Amortized Cost** | ** ** | **Fair Value** | ** ** |
|----------------------------------------|------------|-------------------------|------------|---------------------|------------|
| ** **                             | ** ** | **(in thousands)** | ** ** |
| Due within one year                    |       | $                       | 290,315    |                | $          | 295,574 |   |
| Due after one year through five years  |       | 345,088                 |       | 355,764             |       |
| Due after five years through 10 years  |       | 21,683                  |       | 22,502              |       |
| Due after 10 years                     |       | 215                     |       | 253                 |       |
|                                   |       | 657,301                 |       | 674,093             |       |
| Residential mortgage backed securities |       | 1,447,433               |       | 1,380,593           |       |
| Commercial mortgage backed securities  |       | 482,501                 |       | 495,460             |       |
| Asset backed securities                |       | 329,115                 |       | 348,234             |       |
| Common and preferred stocks            |       | 19,793                  |       | 20,288              |       |
| Total                                  |       | $                       | 2,936,143  |                | $          | 2,918,668 |   |

 

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

 

**4.  Fair Values of Assets and Liabilities**

 

GAAPdefines fair value as the price that would be received to sell an asset or paidto transfer a liability in an orderly transaction between market participantsat the measurement date; that is, an exit price. The exit price assumes theasset or liability is not exchanged subject to a forced liquidation ordistressed sale.

 

**Valuation Hierarchy**

 

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

 
| Level  1 | Unadjusted  quoted prices for identical assets or liabilities in active markets that are  accessible at the measurement date.      |
|----------|------------------------------------------------------------------------------------------------------------------------------------|
| Level  2 | Prices  or valuations based on observable inputs other than quoted prices in active  markets for identical assets and liabilities. |
| Level  3 | Prices  or valuations that require inputs that are both significant to the fair value  measurement and unobservable.               |

 

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Table of Contents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

**Determination of Fair Value**

 

ACCuses valuation techniques consistent with the market and income approaches tomeasure the fair value of its assets and liabilities. ACC’s market approachuses prices and other relevant information generated by market transactionsinvolving identical or comparable assets or liabilities. ACC’s income approachuses valuation techniques to convert future projected cash flows to a singlediscounted present value amount. When applying either approach, ACC maximizesthe use of observable inputs and minimizes the use of unobservable inputs.

 

Thefollowing is a description of the valuation techniques used to measure fairvalue and the general classification of these instruments pursuant to the fairvalue hierarchy.

 

*Cash Equivalents*

 

Cashequivalents include highly liquid investments with original maturities of 90days or less. ACC’s cash equivalents are classified as Level 2 and are measuredat amortized cost, which is a reasonable estimate of fair value because of theshort time between the purchase of the instrument and its expected realization.

 

*Investments in UnaffiliatedIssuers (Available-for-Sale Securities)*

 

Whenavailable, the fair value of securities is based on quoted prices in activemarkets. If quoted prices are not available, fair values are obtained fromnationally-recognized pricing services, broker quotes, or other model-basedvaluation techniques. Level 1 securities primarily include U.S. Treasuries.Level 2 securities include agency residential mortgage backed securities,commercial mortgage backed securities, asset backed securities, municipal andcorporate bonds, U.S. agency securities and common and preferred stock.The fair value of these Level 2 securities is based on a market approach withprices obtained from nationally-recognized pricing services.  Observable inputs used to value thesesecurities can include: reported trades, benchmark yields, issuer spreads andbroker/dealer quotes. Level 3 securities primarily include asset backedsecurities, corporate bonds and non-agency residential mortgage backedsecurities. The fair value of these Level 3 securities is typically based on asingle broker quote, except for the valuation of non-agency residentialmortgage backed securities.  Effective March 31,2010, ACC returned to using prices from nationally-recognized pricing servicesto determine the fair value of non-agency residential mortgage backedsecurities because the difference between these prices and the results of ACC’sdiscounted cash flows was not significant. ACC continues to classify itsnon-agency residential mortgage backed securities as Level 3 because ACCbelieves the market for these securities is still inactive and their valuationincludes significant unobservable inputs.

 

*Derivatives (Equity Derivatives,Purchased and Written)*

 

Thefair values of derivatives that are traded in less active over-the-countermarkets are generally measured using pricing models with market observableinputs such as interest rates and equity index levels. These measurements areclassified as Level 2 within the fair value hierarchy.  Derivatives that are valued using pricingmodels that have significant unobservable inputs are classified as Level 3measurements.

 

*Certificate Reserves*

 

ACCuses various Black-Scholes calculations to determine the fair value of theembedded derivative liability associated with the provisions of its stockmarket certificates. The inputs to these calculations are primarily marketobservable and include interest rates, volatilities, and equity index levels.As a result, these measurements are classified as Level 2.

 

12

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Table of Contents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

Thefollowing tables present the balances of assets and liabilities measured atfair value on a recurring basis:

 
| ** **                               | ** ** | **September 30, 2010** | ** ** |
|------------------------------------------|------------|----------------------------------|------------|
| ** **                               | ** ** | **Level 1**                 | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | **(in thousands)**          | ** ** |
| Assets                                   |       |                             |       |   |   |   |   |   |   |
| Cash equivalents                         |       | $                                | —     |   | $ | 286,983 |   | $ | — |   | $ | 286,983 |   |
| Available-for-Sale securities:           |       |                             |       |   |   |   |   |   |   |
| Residential mortgage backed securities   |       | —                           |       | 536,973 |   | 843,620 |   | 1,380,593 |   |
| Corporate debt securities                |       | —                           |       | 636,877 |   | 7,981 |   | 644,858 |   |
| Commercial mortgage backed securities    |       | —                           |       | 495,460 |   | — |   | 495,460 |   |
| Asset backed securities                  |       | —                           |       | 242,291 |   | 105,943 |   | 348,234 |   |
| U.S. government and agencies obligations |       | 441                              |       | 28,794 |   | — |   | 29,235 |   |
| Common and preferred stocks              |       | 16                               |       | 20,023 |   | 249 |   | 20,288 |   |
| Total Available-for-Sale securities      |       | 457                              |       | 1,960,418 |   | 957,793 |   | 2,918,668 |   |
| Equity derivatives, purchased            |       | —                           |       | 56,257 |   | 4 |   | 56,261 |   |
| Total assets at fair value               |       | $                                | 457        |   | $ | 2,303,658 |   | $ | 957,797 |   | $ | 3,261,912 |   |
|                                     |       |                             |       |   |   |   |   |   |   |
| Liabilities                              | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Certificate reserves                     |       | $                                | —     |   | $ | 12,227 |   | $ | — |   | $ | 12,227 |   |
| Equity derivatives, written              |       | —                           |       | 43,957 |   | — |   | 43,957 |   |
| Total liabilities at fair value          |       | $                                | —     |   | $ | 56,184 |   | $ | — |   | $ | 56,184 |   |

 
| ** **                               | ** ** | **December 31, 2009** | ** ** |
|------------------------------------------|------------|---------------------------------|------------|
| ** **                               | ** ** | **Level 1**                | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
| ** **                               | ** ** | **(in thousands)**         | ** ** |
| Assets                                   |       |                            |       |   |   |   |   |   |   |
| Cash equivalents                         |       | $                               | —     |   | $ | 309,183 |   | $ | — |   | $ | 309,183 |   |
| Available-for-Sale securities:           |       |                            |       |   |   |   |   |   |   |
| Residential mortgage backed securities   |       | —                          |       | 714,702 |   | 745,633 |   | 1,460,335 |   |
| Corporate debt securities                |       | —                          |       | 1,038,135 |   | 12,104 |   | 1,050,239 |   |
| Commercial mortgage backed securities    |       | —                          |       | 551,202 |   | — |   | 551,202 |   |
| Asset backed securities                  |       | —                          |       | 299,683 |   | 130,584 |   | 430,267 |   |
| U.S. government and agencies obligations |       | 398                             |       | 135,552 |   | — |   | 135,950 |   |
| Common and preferred stocks              |       | —                          |       | 15,765 |   | — |   | 15,765 |   |
| Total Available-for-Sale securities      |       | 398                             |       | 2,755,039 |   | 888,321 |   | 3,643,758 |   |
| Equity derivatives, purchased            |       | —                          |       | 166,392 |   | — |   | 166,392 |   |
| Total assets at fair value               |       | $                               | 398        |   | $ | 3,230,614 |   | $ | 888,321 |   | $ | 4,119,333 |   |
|                                     |       |                            |       |   |   |   |   |   |   |
| Liabilities                              | ** ** | ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Certificate reserves                     |       | $                               | —     |   | $ | 25,796 |   | $ | — |   | $ | 25,796 |   |
| Equity derivatives, written              |       | —                          |       | 140,996 |   | — |   | 140,996 |   |
| Total liabilities at fair value          |       | $                               | —     |   | $ | 166,792 |   | $ | — |   | $ | 166,792 |   |

 

13

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Table ofContents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

Thefollowing tables provide a summary of changes in Level 3 assets and liabilitiesmeasured at fair value on a recurring basis:

 
| ** **                                                                                                   | ** ** | **Available-for-Sale Securities** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                                   | ** ** | **Residential**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **Common** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | **Mortgage**                           | ** ** | **Corporate** | ** ** | **Asset** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | **Backed**                             | ** ** | **Debt** | ** ** | **Backed** | ** ** | **Preferred** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | **Securities**                         | ** ** | **Securities** | ** ** | **Securities** | ** ** | **Stocks** | ** ** | **Derivatives** | ** ** | **Total** | ** ** |
| ** **                                                                                                   | ** ** | **(in thousands)**                | ** ** |
| ** **                                                                                                   | ** ** | ** **                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance, July 1, 2010                                                                                   |       | $                                      | 812,367    |   | $ | 7,982 |   | $ | 114,469 |   | $ | — |   | $ | 4 |   | $ | 934,822 |   |
| Total gains included in:                                                                                     |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                   |       | 718                                    | (1)        | — |   | 907 | (2) | — |   | — |   | 1,625 |   |
| Other comprehensive income                                                                                   |       | 16,250                                 |       | 20 |   | 1,397 |   | 19 |   | — |   | 17,686 |   |
| Purchases, sales, issuances and settlements, net                                                             |       | 14,285                                 |       | (21 | ) | (10,830 | ) | — |   | — |   | 3,434 |   |
| Transfers in and/or out of Level 3                                                                           |       | —                                 |       | — |   | — |   | 230 | (3) | — |   | 230 |   |
| Balance, September 30, 2010                                                                             |       | $                                      | 843,620    |   | $ | 7,981 |   | $ | 105,943 |   | $ | 249 |   | $ | 4 |   | $ | 957,797 |   |
|                                                                                                         |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Change in unrealized gains included in net income  related to Level 3 assets held at September 30, 2010 |       | $                                      | 718        | (1) | $ | — |   | $ | 907 | (2) | $ | — |   | $ | — |   | $ | 1,625 |   |

 

----

(1)             Represents a $(33) lossincluded in net realized gain on investments and a $751 gain included ininvestment income in the Statements of Operations.

(2)             Included in investmentincome in the Statements of Operations.

(3)             Represents two securitieswith a fair value of $230 that were transferred to Level 3 as the fair value ofthe securities is now based on broker quotes.

 
|                                                                                                         |   | **Available-for-Sale Securities** | ** ** |
|--------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|------------|
|                                                                                                         |   | **Residential**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **Common** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                                                                         |   | **Mortgage**                           | ** ** | **Corporate** | ** ** | **Asset** | ** ** | **and** | ** ** | **Other** | ** ** | ** ** | ** ** |
|                                                                                                         |   | **Backed**                             | ** ** | **Debt** | ** ** | **Backed** | ** ** | **Preferred** | ** ** | **Structured** | ** ** | ** ** | ** ** |
|                                                                                                         |   | **Securities**                         | ** ** | **Securities** | ** ** | **Securities** | ** ** | **Stocks** | ** ** | **Investments** | ** ** | **Total** | ** ** |
|                                                                                                         |   | **(in thousands)**                |       |
|                                                                                                         |   |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Balance, July 1, 2009                                                                                   |   | $                                      | 649,837    |   | $ | 30,579 |   | $ | 158,403 |   | $ | — |   | $ | — |   | $ | 838,819 |   |
| Total gains included in:                                                                                     |   |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                   |   | 1,919                                  | (1)        | — |   | 3,091 | (2) | — |   | — |   | 5,010 |   |
| Other comprehensive income                                                                                   |   | 22,160                                 |       | 498 |   | 2,690 |   | — |   | — |   | 25,348 |   |
| Purchases, sales, issuances and settlements, net                                                             |   | 125,639                                |       | (19,007 | ) | (18,442 | ) | — |   | — |   | 88,190 |   |
| Transfers in and/or out of Level 3                                                                           |   | —                                 |       | — |   | — |   | — |   | — |   | — |   |
| Balance, September 30, 2009                                                                             |   | $                                      | 799,555    |   | $ | 12,070 |   | $ | 145,742 |   | $ | — |   | $ | — |   | $ | 957,367 |   |
|                                                                                                         |   |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Change in unrealized gains included in net income  related to Level 3 assets held at September 30, 2009 |   | $                                      | 901        | (3) | $ | — |   | $ | 2,594 | (4) | $ | — |   | $ | — |   | $ | 3,495 |   |

 

----

(1)             Represents a $280 gainincluded in net realized gain on investments and a $1,639 gain included ininvestment income in the Statements of Operations.

(2)             Represents a $478 gainincluded in net realized gain on investments and a $2,613 gain included ininvestment income in the Statements of Operations.

(3)             Represents a $(646) lossincluded in net realized gain on investments and a $1,547 gain included ininvestment income in the Statements of Operations.

(4)             Included in investmentincome in the Statements of Operations.

 

14

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Table of Contents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 
| ** **                                                                                                   | ** ** | **Available-for-Sale Securities** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                                   | ** ** | **Residential**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **Common** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | **Mortgage**                           | ** ** | **Corporate** | ** ** | **Asset** | ** ** | **and** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | **Backed**                             | ** ** | **Debt** | ** ** | **Backed** | ** ** | **Preferred** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                   | ** ** | **Securities**                         | ** ** | **Securities** | ** ** | **Securities** | ** ** | **Stocks** | ** ** | **Derivatives** | ** ** | **Total** | ** ** |
| ** **                                                                                                   | ** ** | **(in thousands)**                | ** ** |
|                                                                                                         |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2010                                                                                |       | $                                      | 745,633    |   | $ | 12,104 |   | $ | 130,584 |   | $ | — |   | $ | — |   | $ | 888,321 |   |
| Total gains (losses) included in:                                                                            |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                   |       | 1,006                                  | (1)        | — |   | 3,515 | (2) | — |   | 4 | (4) | 4,525 |   |
| Other comprehensive income                                                                                   |       | 48,789                                 |       | (22 | ) | 8,005 |   | 19 |   | — |   | 56,791 |   |
| Purchases, sales, issuances and settlements, net                                                             |       | 48,192                                 |       | (4,101 | ) | (36,161 | ) | — |   | — |   | 7,930 |   |
| Transfers in and/or out of Level 3                                                                           |       | —                                 |       | — |   | — |   | 230 | (5) | — |   | 230 |   |
| Balance, September 30, 2010                                                                             |       | $                                      | 843,620    |   | $ | 7,981 |   | $ | 105,943 |   | $ | 249 |   | $ | 4 |   | $ | 957,797 |   |
|                                                                                                         |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Change in unrealized gains included in net income  related to Level 3 assets held at September 30, 2010 |       | $                                      | 923        | (3) | $ | — |   | $ | 3,515 | (2) | $ | — |   | $ | 4 | (4) | $ | 4,442 |   |

 

----

(1)             Represents a $(2,098) lossincluded in net realized gain on investments and a $3,104 gain included ininvestment income in the Statements of Operations.

(2)             Represents a $(289) lossincluded in net realized gain on investments and a $3,804 gain included ininvestment income in the Statements of Operations.

(3)             Represents a $(2,098) lossincluded in net realized gain on investments and a $3,021 gain included ininvestment income in the Statements of Operations.

(4)             Included in investmentincome in the Statements of Operations.

(5)             Represents two securitieswith a fair value of $230 that were transferred to Level 3 as the fair value ofthe securities is now based on broker quotes.

 
| ** **                                                                                                            | ** ** | **Available-for-Sale Securities** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                                            | ** ** | **Residential**                        | ** ** | ** ** | ** ** | ** ** | ** ** | **Common** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                                            | ** ** | **Mortgage**                           | ** ** | **Corporate** | ** ** | **Asset** | ** ** | **and** | ** ** | **Other** | ** ** | ** ** | ** ** |
| ** **                                                                                                            | ** ** | **Backed**                             | ** ** | **Debt** | ** ** | **Backed** | ** ** | **Preferred** | ** ** | **Structured** | ** ** | ** ** | ** ** |
| ** **                                                                                                            | ** ** | **Securities**                         | ** ** | **Securities** | ** ** | **Securities** | ** ** | **Stocks** | ** ** | **Investments** | ** ** | **Total** | ** ** |
| ** **                                                                                                            | ** ** | **(in thousands)**                | ** ** |
| ** **                                                                                                            | ** ** | ** **                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance, January 1, 2009                                                                                         |       | $                                      | 465,234    |   | $ | 33,653 |   | $ | 67,552 |   | $ | — |   | $ | — |   | $ | 566,439 |   |
| Total gains (losses) included in:                                                                                     |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                            |       | (4,995                                 | )(1)       | — |   | 6,043 | (2) | — |   | 8 | (4) | 1,056 |   |
| Other comprehensive income                                                                                            |       | 16,700                                 |       | 1,690 |   | 3,379 |   | — |   | — |   | 21,769 |   |
| Purchases, sales, issuances and settlements, net                                                                      |       | 322,616                                |       | (23,273 | ) | 68,768 |   | — |   | (8 | ) | 368,103 |   |
| Transfers in and/or out of Level 3                                                                                    |       | —                                 |       | — |   | — |   | — |   | — |   | — |   |
| Balance, September 30, 2009                                                                                      |       | $                                      | 799,555    |   | $ | 12,070 |   | $ | 145,742 |   | $ | — |   | $ | — |   | $ | 957,367 |   |
|                                                                                                                  |       |                                   |       |   |   |   |   |   |   |   |   |   |   |
| Change in unrealized gains (losses) included in  net income related to Level 3 assets held at September 30, 2009 |       | $                                      | (4,266     | )(3) | $ | — |   | $ | 5,543 | (4) | $ | — |   | $ | — |   | $ | 1,277 |   |

 

----

(1)             Represents a $(8,437) lossincluded in net realized gain on investments and a $3,442 gain included ininvestment income in the Statements of Operations.

(2)             Represents a $478 gainincluded in net realized gain on investments and a $5,565 gain included ininvestment income in the Statements of Operations.

(3)             Represents a $(7,923) lossincluded in net realized gain on investments and a $3,657 gain included ininvestment income in the Statements of Operations.

(4)             Included in investmentincome in the Statements of Operations.

 

ACCrecognizes transfers between levels of the fair value hierarchy as of thebeginning of the quarter in which each transfer occurred. There were notransfers between Level 1 and Level 2 during the nine months ended September 30,2010.

 

Duringthe reporting periods, there were no material assets or liabilities measured atfair value on a nonrecurring basis.

 

15

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**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

Thefollowing table provides the carrying value and the estimated fair value offinancial instruments that are not reported at fair value. All other financialinstruments that are reported at fair value have been included above in thetable with balances of assets and liabilities measured at fair value on arecurring basis.

 
| ** **                                   | ** ** | **September 30, 2010** | ** ** | **December 31, 2009** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                   | ** ** | **Carrying Value**          | ** ** | **Fair Value**             | ** ** | **Carrying Value** | ** ** | **Fair Value** | ** ** |
| ** **                                   | ** ** | **(in thousands)**          | ** ** |
| **Financial Assets**                         |       |                             |       |                            |       |   |   |   |   |
| Below investment grade syndicated bank loans |       | $                                | 110,417    |                            | $          | 109,544 |   | $ | 179,176 |   | $ | 179,579 |   |
| Commercial mortgage loans                    |       | 113,442                          |       | 121,121                         |       | 130,283 |   | 133,442 |   |
| Certificate loans                            |       | 4,150                            |       | 4,150                           |       | 5,136 |   | 5,136 |   |
|                                         |       |                             |       |                            |       |   |   |   |   |
| **Financial Liabilities**                    |       |                             |       |                            |       |   |   |   |   |
| Certificate reserves                         |       | $                                | 3,290,305  |                            | $          | 3,271,805 |   | $ | 4,082,476 |   | $ | 4,052,657 |   |

 

The fair value of below investment grade syndicatedbank loans is obtained from a nationally-recognized pricing service.

 

Thefair value of commercial mortgage loans, except those with significant creditdeterioration, has been determined by discounting contractual cash flows usingdiscount rates that reflect current pricing for loans with similar remainingmaturities and characteristics including loan-to-value ratio, occupancy rate,refinance risk, debt-service coverage, location, and property condition. Forcommercial mortgage loans with significant credit deterioration, fair value isdetermined using the same adjustments as above with an additional adjustmentfor ACC’s estimate of the amount recoverable on the loan.

 

Thefair value of investment certificate reserves is determined by discounting cashflows using discount rates that reflect current pricing for assets with similarterms and characteristics, with adjustments for early withdrawal behavior,penalty fees, expense margin and ACC’s nonperformance risk specific to theseliabilities.

 

**5.  Derivatives and HedgingActivities**

 

Derivativeinstruments enable ACC to manage its exposure to various market risks.The value of such instruments is derived from an underlying variable ormultiple variables, including equity and interest rate indices or prices. ACCprimarily enters into derivative agreements for risk management purposesrelated to ACC’s products.

 

ACCuses derivatives as economic hedges of equity and interest rate risk related tostock market certificates. ACC does not designate any derivatives for hedgeaccounting. The following table presents the balance sheet location and thegross fair value of derivative instruments, including embedded derivatives, bytype of derivative and product:

 

 
| ** **                                       | ** ** | ** **                     | ** ** | **Asset**               | ** ** | ** **            | ** ** | **Liability**                | ** ** |
|--------------------------------------------------|------------|--------------------------------|------------|-------------------------|------------|-----------------------|------------|------------------------------|------------|
| **Derivatives not designated as** | ** ** | **Balance Sheet **   | ** ** | **September 30,**  | ** ** | **December 31,** | ** ** | **Balance Sheet**       | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| **hedging instruments**                     | ** ** | **Location**                   | ** ** | **2010**                | ** ** | **2009**              | ** ** | **Location**                 | ** ** | **2010** | ** ** | **2009** | ** ** |
| ** **                                       | ** ** | ** **                     | ** ** | **(in thousands)** | ** ** | ** **            | ** ** | **(in thousands)**      | ** ** |
| **Equity**                                       |       |                           |       |                    |       |                  |       |                         |       |   |   |   |   |
| Stock market certificates                        |       | Equity  derivatives, purchased |       | $                       | 55,929     |                  | $          | 166,392                      |       | Equity  derivatives, written |   | $ | 43,957 |   | $ | 140,996 |   |
| Equity warrants                                  |       | Equity  derivatives, purchased |       | 332                     |       | —                |       | Equity  derivatives, written |       | — |   | — |   |
| Stock market certificates embedded derivatives   |       |                           |       | —                  |       | —                |       | Certificate  reserves        |       | 12,227 |   | 25,796 |   |
| Total                                            |       |                           |       | $                       | 56,261     |                  | $          | 166,392                      |       |   |   | $ | 56,184 |   | $ | 166,792 |   |

 

SeeNote 4 for additional information regarding ACC’s fair value measurement ofderivative instruments.

 

16

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Table of Contents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

Thefollowing table presents a summary of the impact of derivatives not designatedas hedging instruments on the Statements of Operations:

 
| ** **                                       | ** ** | ** **                                          | ** ** | **Amount of Gain (Loss) on**    | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                       | ** ** | ** **                                          | ** ** | **Derivatives Recognized in Income** | ** ** |
| **Derivatives Not Designated as** | ** ** | **Location of Gain (Loss) on**  | ** ** | **Three Months Ended**                    | ** ** | **Three Months Ended** | ** ** |
| **Hedging Instruments**                     | ** ** | **Derivatives Recognized in Income** | ** ** | **September 30, 2010**                    | ** ** | **September 30, 2009** | ** ** |
| ** **                                       | ** ** | ** **                                          | ** ** | **(in thousands)**                             | ** ** |
| **Equity**                                       |       |                                                |       |                                                |       |   |   |
| Stock market certificates                        |       | Net  provision for certificate reserves             |       | $                                                   | 6,261      |   | $ | 8,995 |   |
| Equity warrants                                  |       | Investment  income                                  |       | (65                                                 | )          | — |   |
| Stock market certificates embedded derivatives   |       | Net  provision for certificate reserves             |       | (5,850                                              | )          | (10,839 | ) |
| Total                                            |       |                                                |       | $                                                   | 346        |   | $ | (1,844 | ) |

 
| ** **                                       | ** ** | ** **                                          | ** ** | **Amount of Gain (Loss) on**    |
|--------------------------------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|
| ** **                                       | ** ** | ** **                                          | ** ** | **Derivatives Recognized in Income** | ** ** |
| **Derivatives Not Designated as** | ** ** | **Location of Gain (Loss) on**  | ** ** | **Nine Months Ended**                     | ** ** | **Nine Months Ended** | ** ** |
| **Hedging Instruments**                     | ** ** | **Derivatives Recognized in Income** | ** ** | **September 30, 2010**                    | ** ** | **September 30, 2009** | ** ** |
| ** **                                       | ** ** | ** **                                          | ** ** | **(in thousands)**                             | ** ** |
| **Equity**                                       | ** ** | ** **                                          | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Stock market certificates                        |       | Net  provision for certificate reserves             |       | $                                                   | 4,219 |   | $ | 10,416 |   |
| Equity warrants                                  |       | Investment  income                                  |       | 328                                                 |   | — |   |
| Stock market certificates embedded derivatives   |       | Net  provision for certificate reserves             |       | (4,036                                              | ) | (12,911 | ) |
| Total                                            |       |                                                |       | $                                                   | 511 |   | $ | (2,495 | ) |

 

AmeripriseStock Market Certificates (“SMC”) offer a return based upon the relative changein a major stock market index between the beginning and end of the SMC’s term.The SMC product contains an embedded derivative. The equity based return of thecertificate must be separated from the host contract and accounted for as aderivative instrument. As a result of fluctuations in equity markets, and thecorresponding changes in value of the embedded derivative, the amount ofexpenses incurred by ACC related to the SMC product will positively or negativelyimpact reported earnings. As a means of hedging its obligations under theprovisions for these certificates, ACC purchases and writes call options on theS&P 500 Index. ACC views this strategy as a prudent management of equitymarket sensitivity, such that earnings are not exposed to undue risk presentedby changes in equity market levels. The gross notional amount of thesederivative contracts was $1.4 billion and $1.5 billion at September 30,2010 and December 31, 2009, respectively. ACC also purchases futures onthe S&P 500 Index to economically hedge its obligations. The futures aremarked-to-market daily and exchange traded, exposing ACC to no counterpartyrisk. The gross notional amount of these contracts was $0.1 million andnil at September 30, 2010 and December 31, 2009, respectively.

 

Equitywarrants were received as part of a syndicated bank loan restructure and do notconstitute a hedge of underlying assets or liabilities.

 

**Credit Risk**

 

Creditrisk associated with ACC’s derivatives is the risk that a derivativecounterparty will not perform in accordance with the terms of the applicablederivative contract. To mitigate such risk, ACC has established guidelines andoversight 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 whenever practical. As of September 30,2010 and December 31, 2009, ACC held $3.5 million and $15.6 million,respectively, in cash and recorded a corresponding liability in accountspayable and accrued liabilities for collateral ACC is obligated to return tocounterparties. As of September 30, 2010 and December 31, 2009, ACC’smaximum credit exposure related to derivative assets after considering nettingarrangements with counterparties and collateral arrangements was approximately$8.5 million and $9.9 million, respectively.

 

17

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Table of Contents

 

**AMERIPRISE CERTIFICATE COMPANY**

 

**NOTES TO FINANCIAL STATEMENTS(UNAUDITED) (continued)**

 

**6.  Contingencies**

 

ACCis not aware that it is a party to any pending legal, arbitration, orregulatory proceedings that would have a material adverse effect on itsfinancial condition, results of operations or liquidity. However, it ispossible that the outcome of any such proceedings could have a material adverseeffect on results of operations in any particular reporting period as theproceedings are resolved.

 

**7.  Income Taxes**

 

Theeffective tax rate was 36.5% and 36.6% for the three months and nine monthsended September 30, 2010, respectively, compared to 36.6% and 36.7% forthe three months and nine months ended September 30, 2009. Theeffective tax rates for both nine month periods reflected the level of currentperiod tax advantaged items relative to the level of pretax income.

 

Asof September 30, 2010 and December 31, 2009, ACC had nil and$4.4 million, respectively, of gross unrecognized tax benefits. Ifrecognized, approximately nil and $1.2 million, net of federal taxbenefits, of the unrecognized tax benefits as of September 30, 2010 andDecember 31, 2009, respectively, would affect the effective tax rate.

 

ACCrecognizes interest and penalties related to unrecognized tax benefits as acomponent of the income tax provision. ACC recognized nil and $0.3 million ininterest for the three months and nine months ended September 30, 2010,respectively.  ACC had $1.7 million and$1.4 million for the payment of interest and penalties accrued at September 30,2010 and December 31, 2009, respectively.

 

Itis not expected that the total amounts of unrecognized tax benefits will changematerially in the next 12 months.

 

ACCfiles income tax returns in the U.S. federal jurisdiction, and various statejurisdictions. With few exceptions, ACC is no longer subject to U.S. federal orstate and local income tax examinations by tax authorities for years before1997. The Internal Revenue Service (“IRS”), as part of the overall examinationof the American Express Company consolidated return, completed its fieldexamination of ACC’s U.S. income tax returns for 1997 through 2002 during 2008and completed its field examination of 2003 through 2004 in the third quarterof 2009. However, for federal income tax purposes these years continue toremain open as a consequence of certain issues under appeal. In the fourthquarter of 2008, as part of the overall examination of Ameriprise Financial, Inc.’sconsolidated return, the IRS commenced an examination of ACC’s U.S. income taxreturns for 2005 through 2007.  Duringthe second quarter of 2010, the IRS completed its examination of the secondstub period 2005 through 2007, and the first stub 2005 period is expected to becompleted in the fourth quarter of 2010. In the fourth quarter of 2010, the IRScommenced an examination of ACC’s U.S. income tax returns for 2008 and 2009.ACC’s state income tax returns are currently under examination by variousjurisdictions for years ranging from 1998 through 2008.

 

18

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**ITEM 2.  MANAGEMENT’SNARRATIVE ANALYSIS**

 

The following information should be read in conjunction with AmeripriseCertificate Company’s (“ACC”) Financial Statements and related notes presentedin Part I, Item 1. This discussion may contain forward-lookingstatements that reflect ACC’s plans, estimates and beliefs. Actual resultscould differ materially from those discussed in these forward-lookingstatements. Factors that could cause or contribute to these differencesinclude, but are not limited to, those discussed under “Forward-LookingStatements.” ACC believes it is useful to read its management’s narrativeanalysis in conjunction with its Annual Report on Form 10-K for the yearended December 31, 2009, filed with the Securities and Exchange Commission(“SEC”) on February 23, 2010 (“2009 10-K”), as well as its currentreports on Form 8-K and other publicly available information.

 

ACC is a wholly owned subsidiary of Ameriprise Financial, Inc. (“AmeripriseFinancial”). ACC is registered as an investment company under the InvestmentCompany Act of 1940 and is in the business of issuing face-amount investmentcertificates. Face-amount investment certificates issued by ACC entitle thecertificate owner to receive at maturity a stated amount of money and interestor credits declared from time to time by ACC, at its discretion. Thecertificates issued by ACC are not insured by any government agency. ACC’scertificates are sold primarily by Ameriprise Financial Services, Inc., anaffiliate of ACC. Ameriprise Financial Services, Inc. is registered as abroker-dealer in all 50 states, the District of Columbia and PuertoRico.  ACC’s investment portfolio ismanaged by Columbia Management Investment Advisers, LLC (“CMIA”), a whollyowned subsidiary of Ameriprise Financial, pursuant to an investment managementagreement effective as of January 1, 2010. CMIA, formerly known as RiverSource Investments, LLC, changed its namefollowing Ameriprise Financial’s acquisition of Columbia Management Group’slong-term asset management business.

 

ACC’s future profitability is dependent upon changes in the economic,credit and equity environments, as well as the competitive environment. AmeripriseFinancial and unaffiliated third parties offer certain competing products whichhave demonstrated strong appeal to investors.

 

Management’s narrative analysis of the results of operations ispresented in lieu of management’s discussion and analysis of financialcondition and results of operations, pursuant to General Instructions H(2)(a) ofForm 10-Q.

 

**Critical Accounting Policies**

 

ACC’s critical accounting policies arediscussed in detail in “Management’s Narrative Analysis — Critical AccountingPolicies” in its 2009 10-K.

 

**RecentAccounting Pronouncements**

 

For information regarding recent accounting pronouncements and theirexpected impact on ACC’s future results of operations or financial condition,see Note 2 to the financial statements.

 

**Resultsof Operations for the Nine Months Ended September 30, 2010 and 2009**

 

Net income for the nine months ended September 30, 2010 was$38.6 million compared to $28.5 million for the nine months endedSeptember 30, 2009, an increase of $10.1 million, due primarilyto decreased expenses related to certificate reserves as a result of netoutflows due to the run-off of certificate rate promotions and a decrease ininterest crediting rates, partially offset by a decrease in net investmentincome before provision for certificate reserves and income taxes.

 

For the nine months ended September 30, 2010, investment incomedecreased $50.4 million, or 30%, to $120.3 million compared to $170.7million for the same period in the prior year. This decrease is primarily theresult of lower asset balances due to net outflows driven by the run-off ofcertificate rate promotions.

 

Investment expenses for the nine months ended September 30, 2010decreased $5.2 million, or 18%, to $23.1 million compared to $28.3million for the same period in 2009. This decrease is due to lower distributionfees as a result of declining certificate reserve balances in the first ninemonths of 2010 compared to the first nine months of 2009.

 

The provision for certificate reserves decreased $57.3 million, or58%, to $42.1 million for the nine months endedSeptember 30, 2010 compared to $99.4 million for the same period in2009. This decrease is a result of lower certificate balances primarily drivenby lower interest crediting rates compared to the prior year period.

 

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Net realized gain on investments for the nine months ended September 30,2010 was $5.8 million compared to $2.0 million for the nine months endedSeptember 30, 2009. Included in the net investment gains for the ninemonths ended September 30, 2010 was a $7.7 million decrease in the belowinvestment grade syndicated bank loans reserve primarily due to improvement ofunderlying credit.  This was partiallyoffset by an increase in the commercial mortgage loan reserve andother-than-temporary impairment losses on non-agency residential mortgagebacked securities. Included in net investment gains for the nine months endedSeptember 30, 2009 were net realized gains of $13.3 million offsetpartially by $9.1 million of other-than-temporary impairment losses oninvestments. These other-than-temporary impairment charges primarily related tocredit losses on non-agency residential mortgage backed securities.

 

The effective tax rate was 36.6% for the nine months ended September 30,2010 compared to 36.7% for the nine months ended September 30, 2009.

 

**FairValue Measurements**

 

ACC reports certain assets and liabilities at fair value; specificallyderivatives, embedded derivatives, and most investments and cash equivalents.Fair value assumes the exchange of assets or liabilities occurs in orderlytransactions. Companies are not permitted to use market prices that are theresult of a forced liquidation or distressed sale. ACC includes actual marketprice or observable inputs in its fair value measurements to the extentavailable. Broker quotes are obtained when quotes from pricing services are notavailable. ACC validates prices obtained from third parties through a varietyof means such as: price variance analysis, subsequent sales testing, staleprice review, price comparison across pricing vendors and due diligence reviewsof vendors.

 

*Non-agency Residential Mortgage Backed and AssetBacked Securities Backed by Subprime, Alt-A or Prime Collateral*

 

Subprime mortgage lending is the origination of residential mortgageloans to customers with weak credit profiles. Alt-A mortgage lending is theorigination of residential mortgage loans to customers who have credit ratingsabove subprime but may not conform to government-sponsored standards. Primemortgage lending is the origination of residential mortgage loans to customerswith good credit profiles. ACC has exposure to these types of loanspredominantly through mortgage backed and asset backed securities. The slowdownin the U.S. housing market, combined with relaxed underwriting standards bysome originators, has led to higher delinquency and loss rates for some ofthese investments. Market conditions have increased the likelihood ofother-than-temporary impairments for certain non-agency residential mortgagebacked securities. As a part of ACC’s risk management process, an internalrating system is used in conjunction with market data as the basis for analysisto assess the likelihood that ACC will not receive all contractual principaland interest payments for these investments. For the investments that are moreat risk for impairment, ACC 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.

 

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The following table presents as of September 30, 2010, ACC’snon-agency residential mortgage backed and asset backed securities backed bysubprime, Alt-A or prime mortgage loans by credit rating and vintage year (inthousands):

 
| ** **             | ** ** | **AAA**       | ** ** | **AA**     | ** ** | **A**         | ** ** | **BBB**    | ** ** | **BB & Below** | ** ** | **Total**  | ** ** |
|------------------------|------------|---------------|------------|------------|------------|---------------|------------|------------|------------|------------------------------|------------|------------|------------|
| ** **             | ** ** | **Amortized** | ** ** | **Fair**   | ** ** | **Amortized** | ** ** | **Fair**   | ** ** | **Amortized**                | ** ** | **Fair**   | ** ** | **Amortized** | ** ** | **Fair** | ** ** | **Amortized** | ** ** | **Fair** | ** ** | **Amortized** | ** ** | **Fair** | ** ** |
| ** **             | ** ** | **Cost**      | ** ** | **Value**  | ** ** | **Cost**      | ** ** | **Value**  | ** ** | **Cost**                     | ** ** | **Value**  | ** ** | **Cost** | ** ** | **Value** | ** ** | **Cost** | ** ** | **Value** | ** ** | **Cost** | ** ** | **Value** | ** ** |
| **Subprime**           | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** | ** ** | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| 2003 &  prior |       | $             | 1,609      |       | $          | 1,668         |       | $          | —     |                         | $          | —     |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 1,609 |   | $ | 1,668 |   |
| 2004                   |       | 8,682         |       | 8,724      |       | —        |       | —     |       | 6,714                        |       | 6,533      |       | — |   | — |   | 8,689 |   | 7,694 |   | 24,085 |   | 22,951 |   |
| 2005                   |       | 8,151         |       | 8,257      |       | 23,924        |       | 26,667     |       | 4,300                        |       | 4,103      |       | 934 |   | 928 |   | 5,171 |   | 5,424 |   | 42,480 |   | 45,379 |   |
| 2006                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | 6,132 |   | 6,191 |   | 3,158 |   | 3,113 |   | 9,290 |   | 9,304 |   |
| 2007                   |       | —        |       | —     |       | —        |       | —     |       | 3,727                        |       | 3,802      |       | — |   | — |   | — |   | — |   | 3,727 |   | 3,802 |   |
| 2008                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Re-Remic(1)            |       | —        |       | —     |       | —        |       | —     |       | 4,121                        |       | 4,124      |       | 8,763 |   | 9,011 |   | — |   | — |   | 12,884 |   | 13,135 |   |
| Total  Subprime        |       | $             | 18,442     |       | $          | 18,649        |       | $          | 23,924     |                         | $          | 26,667     |       | $ | 18,862 |   | $ | 18,562 |   | $ | 15,829 |   | $ | 16,130 |   | $ | 17,018 |   | $ | 16,231 |   | $ | 94,075 |   | $ | 96,239 |   |
| ** **             | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** | ** ** | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Alt-A**              | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** | ** ** | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| 2003 &  prior |       | $             | 4,619      |       | $          | 4,424         |       | $          | —     |                         | $          | —     |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 4,619 |   | $ | 4,424 |   |
| 2004                   |       | 4,148         |       | 3,808      |       | 2,622         |       | 2,184      |       | 15,634                       |       | 13,928     |       | 10,333 |   | 5,414 |   | 3,274 |   | 1,260 |   | 36,011 |   | 26,594 |   |
| 2005                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | 91,072 |   | 62,758 |   | 91,072 |   | 62,758 |   |
| 2006                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | 33,386 |   | 25,305 |   | 33,386 |   | 25,305 |   |
| 2007                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | 48,024 |   | 26,963 |   | 48,024 |   | 26,963 |   |
| 2008                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   |
| 2009                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   |
| 2010                   |       | 37,000        |       | 37,000     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | 37,000 |   | 37,000 |   |
| Re-Remic(1)            |       | 46,694        |       | 47,309     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | 46,694 |   | 47,309 |   |
| Total  Alt-A           |       | $             | 92,461     |       | $          | 92,541        |       | $          | 2,622      |                         | $          | 2,184      |       | $ | 15,634 |   | $ | 13,928 |   | $ | 10,333 |   | $ | 5,414 |   | $ | 175,756 |   | $ | 116,286 |   | $ | 296,806 |   | $ | 230,353 |   |
| ** **             | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** | ** ** | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Prime**              | ** ** | ** **    | ** ** | ** ** | ** ** | ** **    | ** ** | ** ** | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| 2003 &  prior |       | $             | 39,395     |       | $          | 40,192        |       | $          | —     |                         | $          | —     |       | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 39,395 |   | $ | 40,192 |   |
| 2004                   |       | 38,265        |       | 38,308     |       | 25,916        |       | 24,086     |       | 5,762                        |       | 4,819      |       | 20,114 |   | 15,712 |   | 22,234 |   | 7,077 |   | 112,291 |   | 90,002 |   |
| 2005                   |       | 3,528         |       | 3,440      |       | 12,611        |       | 11,542     |       | —                       |       | —     |       | 17,425 |   | 16,848 |   | 77,189 |   | 66,446 |   | 110,753 |   | 98,276 |   |
| 2006                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | 3,636 |   | 3,346 |   | 3,636 |   | 3,346 |   |
| 2007                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   |
| 2008                   |       | —        |       | —     |       | —        |       | —     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Re-Remic(1)            |       | 336,088       |       | 348,682    |       | 10,015        |       | 11,264     |       | —                       |       | —     |       | — |   | — |   | — |   | — |   | 346,103 |   | 359,946 |   |
| Total  Prime           |       | $             | 417,276    |       | $          | 430,622       |       | $          | 48,542     |                         | $          | 46,892     |       | $ | 5,762 |   | $ | 4,819 |   | $ | 37,539 |   | $ | 32,560 |   | $ | 103,059 |   | $ | 76,869 |   | $ | 612,178 |   | $ | 591,762 |   |
| **Grand Total**        |       | $             | 528,179    |       | $          | 541,812       |       | $          | 75,088     |                         | $          | 75,743     |       | $ | 40,258 |   | $ | 37,309 |   | $ | 63,701 |   | $ | 54,104 |   | $ | 295,833 |   | $ | 209,386 |   | $ | 1,003,059 |   | $ | 918,354 |   |

 

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(1)             Re-Remics of mortgage backed securities are priorvintages with cash flows structured into senior and subordinated bonds. Creditenhancement on senior bonds is increased through the Re-Remic process. ACC didnot have any exposure to subordinate tranches as of September 30, 2010.

 

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**Forward-Looking Statements**

 

This report contains forward-looking statements that reflect management’splans, estimates and beliefs. Actual results could differ materially from thosedescribed in these forward-looking statements. The words “believe,” “expect,” “anticipate,”“optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,”“likely,” “forecast,” “on pace,” “project” and similar expressions are intendedto identify forward-looking statements but are not the exclusive means ofidentifying such statements. Forward-looking statements are subject to risksand uncertainties which could cause actual results to differ materially fromsuch statements. Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of the date on which they aremade. ACC undertakes no obligation to update or revise any forward-lookingstatements.

 

**ITEM4T.  CONTROLS AND PROCEDURES**

 

**DisclosureControls and Procedures**

 

ACC maintains 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 in and pursuant to SECregulations, including controls and procedures designed to ensure that thisinformation is accumulated and communicated to ACC’s management, including itsChief Executive Officer and Chief Financial Officer, as appropriate, to allowtimely decisions regarding the required disclosure. It should be noted that,because of inherent limitations, ACC’s disclosure controls and procedures,however well designed and operated, can provide only reasonable, and notabsolute, assurance that the objectives of the disclosure controls andprocedures are met.

 

ACC’s management, under the supervision and with the participation ofits Chief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of ACC’s disclosure controls and procedures as of the end of theperiod covered by this report. Based upon that evaluation, ACC’s ChiefExecutive Officer and Chief Financial Officer have concluded that ACC’sdisclosure controls and procedures were effective at a reasonable level ofassurance as of September 30, 2010.

 

**Changesin Internal Control over Financial Reporting**

 

There have not been any changes in ACC’s internal control overfinancial reporting (as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the fiscal quarter to which thisreport relates that have materially affected, or are reasonably likely tomaterially affect, ACC’s internal control over financial reporting.

 

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**PART II.  OTHER INFORMATION**

 

**ITEM1.  LEGAL PROCEEDINGS**

 

The information set forth in Note 6 to the Financial Statements in Part I, Item1 is incorporated herein by reference.

 

**ITEM1A.  RISK FACTORS**

 

Part I, Item 1A of ACC’s 2009 10-K sets forth informationrelating to the material risks and uncertainties that affect our business andcommon stock. In addition, the following factors should be read in conjunctionwith and supplement and amend the risk factors set forth in our 2009 10-K thatmay affect ACC’s business, financial condition and results of operations.

 

***Changes in accounting standards could have amaterial impact on ACC’s financial statements.***

 

From time to time, the FASB, the SEC, and other regulators change thefinancial accounting and reporting standards governing the preparation of ourfinancial statements. In some cases, ACC could be required to apply a new orrevised standard retroactively, resulting in ACC restating prior periodfinancial statements. These changes are difficult to predict and can materiallyimpact how we record and report ACC’s financial condition and results ofoperations and other financial data, even in instances where they may not havean economic impact on ACC’s business.

 

***Changes in the supervision and regulation ofthe financial industry, including those set forth under the Dodd-Frank WallStreet Reform and Consumer Protection Act, could materially impact ACC’sresults of operations, financial condition and liquidity.***

 

On July 21, 2010, the Dodd-Frank Wall Street Reform and ConsumerProtection Act (the “Act”) was enacted into law.  The Act calls for sweeping changes in thesupervision and regulation of the financial industry designed to provide forgreater oversight of financial industry participants, reduce risk in bankingpractices and in securities and derivatives trading, enhance public companycorporate governance practices and executive compensation disclosures, andprovide greater protections to individual consumers and investors.  Certain elements of the Act became effectiveimmediately, though the details of many provisions are subject to additionalstudies and will not be known until final rules are adopted by applicableregulatory agencies.  The impact of theAct on ACC, the financial industry and the economy cannot be known until allsuch rules and regulations called for under the Act have been finalized,and, in some cases, implemented over time.

 

Accordingly, while the final contours of these reforms are not yetknown, the Act is expected to impact the manner in which ACC markets itsproducts and services, manages itself and its operations and interacts withregulators, all of which could materially impact ACC’s results of operations,financial condition and liquidity. Certain provisions of the Act that may impact ACC’s business include butare not limited to restrictions on proprietary trading, the imposition ofcapital requirements on financial holding companies and greater oversight overderivatives trading.  Further, ACC willneed to respond to changes to the framework for the supervision of U.S.financial institutions, including the creation of the Financial StabilityOversight Counsel. Moreover, to the extent the Act impacts the operations,financial condition, liquidity and capital requirements of unaffiliatedfinancial institutions with whom ACC transacts business, those institutions mayseek to pass on increased costs, reduce their capacity to transact, or otherwisepresent inefficiencies in their interactions with ACC.

 

**ITEM6.  EXHIBITS**

 

The list of exhibits required to be filed as exhibits to this reportare listed on page E-1 hereof, under “Exhibit Index,” which isincorporated 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 theundersigned, thereunto duly authorized.

 
|                                    | AMERIPRISE  CERTIFICATE COMPANY |
|-----------------------------------------|---------------------------------|
|                                    | (Registrant)                    |
|                                    |                            |
|                                    |                            |
| Date:  November 5,  2010 | /s/  William F. Truscott        |
|                                    | William  F. Truscott            |
|                                    | Chief  Executive Officer        |
|                                    |                            |
|                                    |                            |
| Date:  November 5, 2010  | /s/ Ross P. Palacios            |
|                                    | Ross P. Palacios                |
|                                    | Chief  Financial Officer        |

 

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**EXHIBIT INDEX**

 

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

 
| **Exhibit**      | ** ** | **Description**                                                                                                                                                                                                                                                          |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                                                                                                                                                                     |
|   3(a) |       | Amended and Restated  Certificate of Incorporation of American Express Certificate Company, dated  Aug. 1, 2005, filed electronically on or about March 10, 2006 as  Exhibit 3(a) to Registrant’s Form 10-K is incorporated by  reference. |
|             |       |                                                                                                                                                                                                                                                                     |
| * 3(b)      |       | By-Laws of Ameriprise  Certificate Company, as amended on September 20, 2010.                                                                                                                                                                                            |
|             |       |                                                                                                                                                                                                                                                                     |
| *  31.1          |       | Certification  of William F. Truscott pursuant to Rule 13a-14(a) promulgated under  the Securities Exchange Act of 1934, as amended.                                                                                                                           |
|             |       |                                                                                                                                                                                                                                                                     |
| *  31.2          |       | Certification  of Ross P. Palacios pursuant to Rule 13a-14(a) promulgated under  the Securities Exchange Act of 1934, as amended.                                                                                                                              |
|             |       |                                                                                                                                                                                                                                                                     |
| *  32.1          |       | Certification  of William F. Truscott and Ross P. Palacios 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 electronically herewithin.*

 

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