Core operating earnings were $268 million in the third quarter of 2009, compared to $251 million a year ago, a 7 percent increase (see summary table below). Core operating earnings per share declined to $1.03 in the third quarter of 2009 from $1.13 a year ago. Excluding 36 million shares the company issued to pre-fund its acquisition, core operating earnings per share were $1.19, up 5 percent from the prior year.

Core operating earnings reflect lower equity markets and the cost of maintaining high liquidity levels, substantially offset by growth in spread products and re-engineering benefits. In addition, year-over-year growth reflects a net $0.02 per share benefit from favorable adjustments from updating valuation assumptions (unlocking) in both periods.

Net revenues increased 20 percent to $2.0 billion in the third quarter of 2009, compared to $1.6 billion in the third quarter of 2008. Revenue growth reflects the year-over-year improvement in net investment income, primarily driven by net investment losses in the prior year.

The company continues to achieve re-engineering expense savings. During the quarter, the company recognized approximately $120 million in re-engineering benefits and is on pace to exceed $350 million in re-engineering expense benefits for full-year 2009.

As of September 30, 2009, the company's excess capital position was more than $2 billion, including $1 billion from the company's decision to pre-fund its acquisition. As of September 30, 2009, the company had $0.8 billion in net unrealized investment gains, reflecting the quality and diversity of its investment portfolio. Book value per share increased to $34.97.

"As our results demonstrate, we're beginning to see a return of the earnings power inherent in our diversified model," said Jim Cracchiolo, chairman and chief executive officer. "The fundamentals of our business are improving slowly but steadily, with new client growth and improved asset levels and product flows. This increasing business momentum, along with our continued focus on delivering re-engineering savings to the bottom line, provides important earnings leverage for the future.

"We also expect meaningful contributions from our pending acquisition of Columbia Management's long-term asset management business. As we work through the initial phases of our integration planning, we remain confident that the acquisition will fit well with our culture, and that we will be able to generate the financial benefits that we have projected."

Third Quarter 2009 Summary

Management believes the exclusion of certain after-tax impacts, such as realized net investment gains/losses, non-recurring integration costs and other market impacts listed below best reflects the underlying performance of the business. For the non-GAAP presentation of after-tax amounts, the tax effect is calculated using the statutory tax rate of 35 percent.

Exception caught in main.

 ((1))   For this non-GAAP presentation, after-tax is calculated using the statutory tax rate of 35%.                                                   
 ((2))   Diluted shares used in this calculation represent basic shares due to the net loss. Using actual diluted shares would result in anti-dilution. 
                                                                                                                                                        


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The following items are excluded from core operating earnings in the third quarter of 2009. Each impact is presented after tax.

$9 million benefit, or $0.03 per share, in net realized investment gains, comprising $36 million in realized investment gains, partially offset by $27 million in realized investment losses and other-than-temporary impairments on corporate bonds and previously impaired non-agency residential mortgage-backed securities, as well as reserves for commercial mortgage loans.

$21 million expense, or $0.08 per share, comprising $18 million in integration costs from 2008 acquisitions and $3 million associated with the company's agreement to acquire the long-term asset management business of Columbia Management.

$18 million benefit, or $0.07 per share, from lower deferred acquisition costs (DAC) and deferred sales inducement costs (DSIC) amortization due to favorable market conditions in the quarter.

$1 million benefit from variable annuity guarantees, consisting of:

$17 million expense, or $0.07 per share, net of DAC and DSIC, resulting from the impact of the credit default spread on the SFAS 157 valuation of living benefit liabilities.

$18 million benefit, or $0.07 per share, net of DAC and DSIC, from living benefit guarantees and the favorable impact of equity market appreciation on death benefits.

$7 million expense, or $0.02 per share, in RiverSource 2a-7 money market fund support costs.

$8 million expense, or $0.03 per share, related to the early retirement of $450 million of the company's notes due in 2010.

Core operating earnings for the third quarter of 2009 included an $87 million, or $0.33 per share, after-tax unlocking benefit from updating valuation assumptions, compared to a $69 million, or $0.31 per share, after-tax unlocking benefit in the prior year from updating valuation assumptions and the implementation of a new actuarial valuation system. While the year-over-year change to pretax earnings was $28 million, the benefit was the result of a $162 million year-over-year reduction in revenues combined with a $190 million reduction in expenses.

The third quarter of 2009 also included a $7 million, or $0.03 per share, after-tax reserve related to a previously disclosed client mediation.

In addition, compared to the third quarter of 2008, core operating earnings included estimated negative impacts of $0.18 per share from the market-driven decline in asset-based fees and $0.11 per share from maintaining high liquidity levels and lower cash product spreads.

Liquidity and Balance Sheet as of September 30, 2009

The company continues to maintain strong balance sheet fundamentals, excess capital and financial flexibility to capture additional growth opportunities.

Conservative capital management

The company's excess capital position was more than $2 billion, including $1 billion from the company's decision to pre-fund its acquisition and expected year end changes to capital requirements for the variable annuity business.

The company will continue to use enterprise risk management capabilities and product hedging to anticipate and mitigate risk. The variable annuity hedging program continues to perform well.

Substantial liquidity

Cash and cash equivalents were $3.6 billion, with $1 billion at the holding company level and $2.1 billion in free cash.

The company continues to generate substantial business and portfolio cash flow and invested $4 billion in long-term investments during the quarter.

High-quality investment portfolio

The $32.6 billion available-for-sale portfolio is both well diversified and high quality.

The company reported a net unrealized gain of $0.8 billion, which improved from a net unrealized loss position of $0.6 billion at June 30, 2009.

The total investment portfolio, including cash and cash equivalents, increased to $40.4 billion from $39.3 billion at June 30, 2009, and remains well positioned. Detailed information about the portfolio is available online at ir.ameriprise.com.

Conservative capital ratios

The debt-to-total capital ratio was 18.7 percent. The debt-to-total capital ratio excluding non-recourse debt and with 75 percent equity credit for hybrid securities was 14.8 percent.

Third Quarter 2009 Highlights

The company announced a definitive agreement to acquire the long-term asset management business of Columbia Management for approximately $1 billion. The transaction is expected to be completed in the spring of 2010. The transaction is expected to be accretive to earnings and ROE within one year, based on Institutional Brokers' Estimate System (I/B/E/S) estimates just prior to the announcement.

Total advisors increased 8 percent to 12,314 compared to the third quarter of 2008, reflecting acquisitions, experienced advisor recruiting and continued strong advisor retention rates.

Owned, managed and administered assets were $440 billion as of September 30, 2009, up 12 percent compared to September 30, 2008, primarily due to strong product flows, bond market appreciation and recent acquisitions, partially offset by the 9 percent decline in the S&P 500 compared to the prior year. On a sequential basis, owned, managed and administered assets grew 11 percent, primarily reflecting equity and bond market appreciation during the quarter and retail net inflows.

Client activity continued to improve, with solid asset flows across product lines.

Wrap net inflows of $2.7 billion in the quarter and market appreciation increased total wrap assets to more than $89 billion, a 7 percent increase compared to the prior year.

Total Asset Management net inflows were $2.3 billion in the quarter, reflecting improved flows at both RiverSource and Threadneedle. Year-to-date 2009 Asset Management net inflows reached $2.2 billion, compared to net outflows of $19.3 billion for the first three quarters of 2008.

Total annuity net inflows in the quarter were $0.5 billion, resulting almost entirely from variable annuity net inflows.

The company introduced new product solutions in the quarter, including

AdvanceSourceSM, an optional rider available on permanent single-life insurance policies to help clients with a life insurance need manage the cost of chronic care services.

Active Diversified Portfolios, the next generation of Active Portfolios® investments, which provide individuals access to alternative strategies often reserved for institutional investors.

Life insurance in force was $193 billion as of the end of the third quarter of 2009, which was essentially flat compared to a year ago, consistent with the slow sales environment for the industry. Over the past two quarters, universal life sales have increased steadily, offsetting flat sales in variable universal life.

Ameriprise Auto & Home premiums increased 6 percent from the prior year, primarily due to growth in policy counts.

The company generated approximately $120 million in re-engineering expense savings in the quarter, primarily from enhanced operational efficiencies. As of the end of the third quarter, the company generated approximately $290 million in year-to-date re-engineering expense savings and is on pace to exceed $350 million in savings for full-year 2009.

Exception caught in main.

Third Quarter 2009 Consolidated Results

The company reported net income of $260 million for the third quarter of 2009, compared to a net loss of $70 million for the third quarter of 2008. Core operating earnings increased $17 million, or 7 percent, to $268 million.

Revenues

Total net revenues increased 20 percent, or $321 million, to $2.0 billion compared to a year ago. Core net revenues declined $38 million, or 2 percent, driven by a $162 million decline in revenues from unlocking, which were more than offset by reduced expenses from unlocking.