~~UNITED STATES~~

~~SECURITIES AND EXCHANGE COMMISSION~~

~~WASHINGTON, D.C. 20549~~

~~FORM 10-Q~~


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

~~For the Quarterly Period Ended~~ ~~September 30, 2018~~


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~~

~~AMERIPRISE CERTIFICATE COMPANY~~

~~(Exact name of registrant as specified in its charter)~~





UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM			10-Q



	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended			September 30, 2019
OR
	☐	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

AMERIPRISE CERTIFICATE 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~~



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

~~Former name, former address and former fiscal year, if changed since last report:~~ ~~Not Applicable~~



Former name, former address and former fiscal year, if changed since last report:	Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.~~Yes~~ xNo o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ~~Yes~~ xNo o



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes	☒	No	☐



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).	Yes	☒	No	☐



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filero	☐	Non-accelerated Filer	☒	Accelerated Filer	☐	Smaller reporting companyo
~~Non-Accelerated Filer~~x		☐	Emerging growth companyo	☐


~~Accelerated Filer~~o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o	☐

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~ ~~Yes~~ oNo x

~~Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.~~



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).	Yes	☐	No	☒



Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
	Class	Outstanding at November ~~5, 2018~~12, 2019
	Common ~~Shares~~Stock (par value $10 per share)	150,000 shares

~~THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H)(1)~~

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

AMERIPRISE CERTIFICATE COMPANY

FORM 10-Q

INDEX



Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations — Three months and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018				3
Consolidated Statements of Comprehensive Income — Three months and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018				4
Consolidated Balance Sheets — September 30, ~~2018~~2019 and December 31, ~~2017~~2018				5
Consolidated Statements of Shareholder's Equity — ~~Nine~~Three months and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018				6
Consolidated Statements of Cash Flows — Nine months ended September 30, ~~2018~~2019 and ~~2017~~2018				78
Notes to Consolidated Financial Statements				89
1. Basis of Presentation				89
2. Recent Accounting Pronouncements				89
3. Investments				910
4. Commercial Mortgage, Syndicated and Certificate Loans				1314
5. Fair Values of Assets and Liabilities				1415
6. Offsetting Assets and Liabilities				1920
7. Derivatives and Hedging Activities				2021
8. Contingencies				2122
9. Shareholder’s Equity				2122
10. Income Taxes				2223
Item 2. Management’s Narrative Analysis				2324
Item 4. Controls and Procedures				2425

Part II. Other Information				2526
Item 1. Legal Proceedings				2526
Item 1A. Risk Factors				2526
Item 6. Exhibits				2526
Signatures				2627

AMERIPRISE CERTIFICATE COMPANY

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017			2019			2018			2019			2018
	(in thousands)
Investment income	$	49,215		$	37,890		$	132,596	$	106,014		$	58,613		$	49,215		$	182,603		$	132,596
Investment expenses	11,080			9,489			31,425		27,913			11,952			11,080			36,420			31,425
Net investment income before provision for certificate reserves and income taxes	38,135			28,401			101,171		78,101			46,661			38,135			146,183			101,171
Net provision for certificate reserves	23,247			11,701			56,602		32,403			32,649			23,247			100,425			56,602
Net investment income before income taxes	14,888			16,700			44,569		45,698			14,012			14,888			45,758			44,569
Income tax expense	3,937			5,479			11,499		16,225			3,472			3,937			11,475			11,499
Net investment income, after-tax	10,951			11,221			33,070		29,473			10,540			10,951			34,283			33,070

Net realized gain (loss) on investments before income taxes	(104		)	(43		)	496		8,854			(81		)	(104		)	(44		)	496
Income tax expense (benefit)	(22		)	(15		)	104		3,099			(17		)	(22		)	(9		)	104
Net realized gain (loss) on investments, after-tax	(82		)	(28		)	392		5,755			(64		)	(82		)	(35		)	392
Net income	$	10,869		$	11,193		$	33,462	$	35,228		$	10,476		$	10,869		$	34,248		$	33,462

Supplemental Disclosures:
Total other-than-temporary impairment losses on securities	$	—		$	—		$	—	$	—		$	—		$	—		$	—		$	—
Portion of loss recognized in other comprehensive income (loss) (before taxes)	—			—			—		(193		)	—			—			—			—
Net impairment losses recognized in net realized gain (loss) on investments	$	—		$	—		$	—	$	(193	)	$	—		$	—		$	—		$	—
See Notes to Consolidated Financial Statements.

AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017		2018			2017			2019			2018			2019			2018
	(in thousands)
Net income	$	10,869		$	11,193	$	33,462		$	35,228		$	10,476		$	10,869		$	34,248		$	33,462
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities:
Net unrealized securities gains (losses) arising during the period	(4,872		)	587		(28,283		)	16,110
Reclassification of net securities (gains) losses included in net income	73			37		(231		)	(5,742		)
Net unrealized gains (losses) on securities arising during the period												2,043			(4,872		)	54,234			(28,283		)
Reclassification of net (gains) losses on securities included in net income												(34		)	73			(104		)	(231		)
Total other comprehensive income (loss), net of tax	(4,799		)	624		(28,514		)	10,368			2,009			(4,799		)	54,130			(28,514		)
Total comprehensive income (loss)	$	6,070		$	11,817	$	4,948		$	45,596		$	12,485		$	6,070		$	88,378		$	4,948
See Notes to Consolidated Financial Statements.

AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	September 30, 2018			December 31, 2017			September 30, 2019		December 31, 2018
	(in thousands, except share data)
Assets
Qualified Assets
Cash and cash equivalents	$	352,867		$	68,471		$	529,821	$	405,279
Investments in unaffiliated issuers	7,381,585			6,755,381			7,775,040		7,995,637
Receivables	32,275			29,037			28,325		26,082
Derivative assets	48,605			54,346			41,729		13,179
Total qualified assets	7,815,332			6,907,235			8,374,915		8,440,177
Deferred taxes, net	2,325			736			—		2,302
Taxes receivable from parent	2,411			3,874			1,603		1,731
Total assets	$	7,820,068		$	6,911,845		$	8,376,518	$	8,444,210

Liabilities and Shareholder's Equity
Liabilities and Shareholder’s Equity
Liabilities
Certificate reserves	$	7,347,378		$	6,400,324		$	7,743,866	$	7,891,964
Deferred taxes, net							2,195		—
Taxes payable to parent	4,387			5,402			349		1,944
Derivative liabilities	38,561			46,756			29,586		8,209
Payable for investment securities purchased	10,735			56,778
Payables to brokers, dealers and clearing organizations							78,408		98,930
Due to related party and other liabilities	39,723			43,249			55,481		34,301
Total liabilities	7,440,784			6,552,509			7,909,885		8,035,348

Shareholder's Equity
Shareholder’s Equity
Common shares ($10 par value, 150,000 shares authorized and issued)	1,500			1,500			1,500		1,500
Additional paid-in capital	267,517			252,517			331,700		285,017
Total retained earnings	144,406			110,946			113,134		156,176
Accumulated other comprehensive income (loss), net of tax	(34,139		)	(5,627		)	20,299		(33,831		)
Total shareholder's equity	379,284			359,336
Total liabilities and shareholder's equity	$	7,820,068		$	6,911,845
Total shareholder’s equity							466,633		408,862
Total liabilities and shareholder’s equity							$	8,376,518	$	8,444,210
See Notes to Consolidated Financial Statements.							See Notes to Consolidated Financial Statements.

AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (UNAUDITED)



	Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Retained Earnings							Accumulated Other Comprehensive Income (Loss), Net of Tax			Total			Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Retained Earnings								Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
	Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Appropriated for Pre-Declared Additional Credits and Interest		Appropriated for Additional Interest on Advance Payments		Unappropriated			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total			Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Appropriated for Pre-Declared Additional Credits and Interest			Appropriated for Additional Interest on Advance Payments		Unappropriated			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
	(in thousands, except share data)
Balance at January 1, 2017	150,000	$	1,500	$	247,517	$	—	$	15	$	81,925		$	(5,165	)	$	325,792
Comprehensive income (loss):
Net income	—	—		—		—		—		35,228			—			35,228
Other comprehensive income (loss), net of tax	—	—		—		—		—		—			10,368			10,368
Total comprehensive income (loss)																45,596
Dividend to parent	—	—		—		—		—		(5,000		)	—			(5,000		)
Receipt of capital from parent	—	—		5,000		—		—		—			—			5,000
Balance at September 30, 2017	150,000	$	1,500	$	252,517	$	—	$	15	$	112,153		$	5,203		$	371,388

Balance at January 1, 2018	150,000	$	1,500	$	252,517	$	23	$	15	$	110,908		$	(5,627	)	$	359,336
Cumulative effect of change in accounting policies	—	—		—		—		—		(2		)	2			—
Balance at July 1, 2018																			150,000	$	1,500	$	255,517	$	651		$	15	$	132,871		$	(29,340	)	$	361,214
Comprehensive income (loss):
Net income	—	—		—		—		—		33,462			—			33,462			—	—		—		—			—		10,869			—			10,869
Other comprehensive income (loss), net of tax	—	—		—		—		—		—			(28,514		)	(28,514		)	—	—		—		—			—		—			(4,799		)	(4,799		)
Total comprehensive income (loss)																4,948																			6,070
Transfer to appropriated from unappropriated	—	—		—		642		—		(642		)	—			—			—	—		—		14			—		(14		)	—			—
Receipt of capital from parent	—	—		15,000		—		—		—			—			15,000			—	—		12,000		—			—		—			—			12,000
Balance at September 30, 2018	150,000	$	1,500	$	267,517	$	665	$	15	$	143,726		$	(34,139	)	$	379,284		150,000	$	1,500	$	267,517	$	665		$	15	$	143,726		$	(34,139	)	$	379,284

Balance at July 1, 2019																			150,000	$	1,500	$	289,517	$	620		$	15	$	179,206		$	18,290		$	489,148
Correction of the misclassification ⁽¹⁾																			—	—		42,183		—			—		(42,183		)	—			—
Comprehensive income (loss):
Net income																			—	—		—		—			—		10,476			—			10,476
Other comprehensive income (loss), net of tax																			—	—		—		—			—		—			2,009			2,009
Total comprehensive income (loss)																																			12,485
Transfer to unappropriated from appropriated																			—	—		—		(158		)	—		158			—			—
Dividend to parent																			—	—		—		—			—		(35,000		)	—			(35,000		)
Balance at September 30, 2019																			150,000	$	1,500	$	331,700	$	462		$	15	$	112,657		$	20,299		$	466,633
⁽¹⁾See Note 1 for more information.																			⁽¹⁾See Note 1 for more information.
See Notes to Consolidated Financial Statements.

AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (UNAUDITED) (continued)

	Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Retained Earnings								Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
	Number of Outstanding Shares	Common Shares		Additional Paid-In Capital		Appropriated for Pre-Declared Additional Credits and Interest			Appropriated for Additional Interest on Advance Payments		Unappropriated			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
	(in thousands, except share data)
Balance at January 1, 2018	150,000	$	1,500	$	252,517	$	23		$	15	$	110,908		$	(5,627	)	$	359,336
Cumulative effect of adoption of equity securities guidance	—	—		—		—			—		(2		)	2			—
Comprehensive income (loss):
Net income	—	—		—		—			—		33,462			—			33,462
Other comprehensive income (loss), net of tax	—	—		—		—			—		—			(28,514		)	(28,514		)
Total comprehensive income (loss)																	4,948
Transfer to appropriated from unappropriated	—	—		—		642			—		(642		)	—			—
Receipt of capital from parent	—	—		15,000		—			—		—			—			15,000
Balance at September 30, 2018	150,000	$	1,500	$	267,517	$	665		$	15	$	143,726		$	(34,139	)	$	379,284

Balance at January 1, 2019	150,000	$	1,500	$	285,017	$	910		$	15	$	155,251		$	(33,831	)	$	408,862
Correction of the misclassification ⁽¹⁾	—	—		42,183		—			—		(29,482		)	—			12,701
Cumulative effect of adoption of premium amortization on purchased callable debt securities guidance	—	—		—		—			—		(107		)	—			(107		)
Comprehensive income (loss):
Net income	—	—		—		—			—		34,248			—			34,248
Other comprehensive income (loss), net of tax	—	—		—		—			—		—			54,130			54,130
Total comprehensive income (loss)																	88,378
Transfer to unappropriated from appropriated	—	—		—		(448		)	—		448			—			—
Dividend to parent	—	—		—		—			—		(47,701		)	—			(47,701		)
Receipt of capital from parent	—	—		4,500		—			—		—			—			4,500
Balance at September 30, 2019	150,000	$	1,500	$	331,700	$	462		$	15	$	112,657		$	20,299		$	466,633
⁽¹⁾ See Note 1 for more information.
See Notes to Consolidated Financial Statements.

AMERIPRISE CERTIFICATE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2019			2018
	(in thousands)
Cash Flows from Operating Activities
Net income	$	33,462		$	35,228		$	34,248		$	33,462
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of premiums, accretion of discounts, net	(6,634		)	16,714			(26,552		)	(6,634		)
Deferred income tax expense (benefit)	(189		)	(50		)	(2,062		)	(189		)
Net realized (gain) loss on Available-for-Sale securities	(292		)	(9,026		)	(132		)	(292		)
Other net realized (gain) loss	(204		)	(21		)	176			(204		)
Other-than-temporary impairments and provision for loan loss	—			193
Changes in operating assets and liabilities:
Dividends and interest receivable	(2,326		)	(4,418		)	33,574			(2,326		)
Certificate reserves, net	3,353			1,258			7,691			3,353
Deferred taxes, net	7,580			(5,583		)	—			7,580
Taxes payable to/receivable from parent, net	448			2,678			477			448
Derivatives, net of collateral	926			(809		)	227			926
Other liabilities	(7,450		)	(2,782		)	13,697			(7,450		)
Other receivables	(85		)	(25		)	(164		)	(85		)
Payables to brokers, dealers and clearing organizations							(21,451		)	—
Other, net	(242		)	277			76			(242		)
Net cash provided by (used in) operating activities	28,347			33,634			39,805			28,347

Cash Flows from Investing Activities
Available-for-Sale securities:
Sales	360,976			90,498			9,689			360,976
Maturities, redemptions and calls	2,805,371			1,495,221			3,979,829			2,805,371
Purchases	(3,827,319		)	(1,987,024		)	(3,697,338		)	(3,827,319		)
Syndicated loans, commercial mortgage loans and real estate owned:
Syndicated loans and commercial mortgage loans:
Sales, maturities and repayments	38,630			32,423			40,313			38,630
Purchases and fundings	(80,533		)	(45,447		)	(48,798		)	(80,533		)
Equity securities:
Sales	35			—			—			35
Certificate loans, net	188			72			32			188
Net cash provided by (used in) investing activities	(702,652		)	(414,257		)	283,727			(702,652		)

Cash Flows from Financing Activities
Payments from certificate holders and other additions	4,440,456			3,594,855			4,028,659			4,440,456
Certificate maturities and cash surrenders	(3,496,755		)	(3,158,088		)	(4,184,448		)	(3,496,755		)
Capital contribution from parent	15,000			5,000			4,500			15,000
Dividend to parent	—			(5,000		)	(47,701		)	—
Net cash provided by (used in) financing activities	958,701			436,767			(198,990		)	958,701

Net increase (decrease) in cash and cash equivalents	284,396			56,144			124,542			284,396
Cash and cash equivalents at beginning of period	68,471			134,189			405,279			68,471
Cash and cash equivalents at end of period	$	352,867		$	190,333		$	529,821		$	352,867

Supplemental disclosures including non-cash transactions:
Cash paid (received) for income taxes	$	13,236		$	13,359		$	12,630		$	13,236
Cash paid for interest	56,399			34,815			101,691			56,399
See Notes to Consolidated Financial Statements.

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

Ameriprise Certificate Company (“ACC”) is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial” or the “Parent”). ACC is registered as an investment company under the Investment Company Act of 1940. The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). ACC uses the consolidation method of accounting for its wholly owned subsidiary, Investors Syndicate Development Corp. The interim financial information in this report has not been audited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods have been made. ~~All~~Except for the out-of-period correction and the correction of the misclassification described below, all adjustments made were of a normal recurring nature. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. These Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes in the Annual Report on Form 10-K of ACC for the year ended December 31, ~~2017,~~2018, filed with the Securities and Exchange Commission (“SEC”) on February ~~23,~~ 27, 2019 (“2018 ~~(“2017~~ 10-K”).

In the second quarter of 2019, ACC recorded a $1.2 million decrease to net provision for certificate reserves for an out-of-period correction related to Stock Market Certificate (“SMC”) embedded derivatives. The impact to prior period financial statements was not material.

Prior to June 2019, ACC had an agreement with Ameriprise Financial to settle with cash the change in its deferred federal income taxes on a quarterly basis. In the third quarter of 2019, it was determined that the cash settlements should have been reflected as a capital contribution for cash receipts from Ameriprise Financial and a dividend for cash payments to Ameriprise Financial. The deferred federal income taxes should have remained on ACC’s Consolidated Balance Sheet as the related assets, primarily investments, and liabilities remained on ACC’s Consolidated Balance Sheet. ACC’s Consolidated Balance Sheet as of September 30, 2019 has been adjusted to reflect the cumulative amount of cash receipts from and cash payments to Ameriprise Financial for the settlement of deferred federal income taxes as contributions and dividends, respectively. The correction of the misclassification resulted in a $42.2 million increase to additional paid-in capital and a $42.2 million decrease to retained earnings as of September 30, 2019. ACC’s payment of $12.7 million during the second quarter of 2019 to Ameriprise Financial has been reflected as a dividend and is included in the $42.2 million decrease to retained earnings. The impact to prior period financial statements was not material.

ACC evaluated events or transactions that occurred after the ~~consolidated~~ balance sheet date for potential recognition or disclosure through the date the ~~consolidated~~ financial statements were issued. No subsequent events or transactions were identified.

2. Recent Accounting Pronouncements

Adoption of New Accounting Standards

~~Financial Instruments~~Income Statement – ~~Recognition and Measurement~~Reporting Comprehensive Income – Reclassification of ~~Financial Assets and Financial Liabilities~~Certain Tax Effects from Accumulated Other Comprehensive Income

In ~~January 2016,~~February 2018, the Financial Accounting Standards Board (“FASB”) updated the accounting standards related to the presentation of tax effects stranded in accumulated other comprehensive income (“AOCI”). The update allows a reclassification from AOCI to retained earnings for tax effects stranded in AOCI resulting from the legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The election of the update was optional. The update was effective for fiscal years beginning after December 15, 2018. Entities could record the impacts either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. ACC adopted the standard on January 1, 2019 and elected not to reclassify the stranded tax effects in AOCI.

Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB updated the accounting standards to amend the hedge accounting recognition and ~~measurement~~presentation requirements. The objectives of the update are to better align the financial ~~instruments.~~reporting of hedging relationships to the economic results of an entity’s risk management activities and simplify the application of the hedge accounting guidance. The update requires entities to carry marketable equity securities, excluding investments in securities that qualify for the equity method of accounting, at fair value with changes in fair value reflected in net income each reporting period. The update affects other aspects of accounting for equity instruments, as well as the accounting for financial liabilities utilizing the fair value option. The update eliminates the requirement to disclose the methodsalso adds new disclosures and assumptions used to estimate the fair value of financial assets or liabilities held at cost on the balance sheet and requires entities to use the exit price notion when measuring the fair value of these financial instruments.amends existing disclosure requirements. The standard iswas effective for interim and annual periods beginning after December 15, ~~2017.~~2018, and was required to be applied on a modified retrospective basis. ACC adopted the standard on January 1, ~~2018 using a modified retrospective approach.~~2019. The adoption ~~of the standard~~ did not have a material impact on ACC’s consolidated results of operations or financial condition.

~~Future Adoption~~Receivables – Nonrefundable Fees and Other Costs – Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB updated the accounting standards to shorten the amortization period for certain purchased callable debt securities held at a premium. Under previous guidance, premiums were generally amortized over the contractual life of ~~New Accounting Standards~~the security. The amendments require the premium to be amortized to the earliest call date. The update applies to securities with explicit, non-contingent call features that are callable at fixed prices and on preset dates. The standard was effective for interim and annual periods beginning after December 15, 2018, and was required to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ACC adopted the standard on January 1, 2019. The adoption did not have a material impact on ACC’s consolidated results of operations or financial condition.

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Fair Value Measurement – Disclosure Framework –Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB updated the accounting standards related to disclosures for fair value measurements. The update eliminates the following disclosures: 1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) the policy of timing of transfers between levels of the fair value hierarchy, and 3) the valuation processes for Level 3 fair value measurements. The new disclosures include changes in unrealized gains and losses for the period included in other comprehensive income (“OCI”) for recurring Level 3 fair value measurements of instruments held at the end of the reporting period and the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated. The new disclosures are required on a prospective basis; all other provisions should be applied retrospectively. The update is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted for the entire standard or only the provisions ~~that~~to eliminate or modify disclosure requirements. ACC ~~is currently evaluating~~early adopted the ~~impact~~provisions of the standard ~~on its disclosures.~~to eliminate or modify disclosure requirements in the fourth quarter of 2018. The update does not have an impact on ACC’s consolidated results of operations or financial condition.

~~Income Statement~~Financial Instruments – ~~Reporting Comprehensive Income – Reclassification~~Recognition and Measurement of ~~Certain Tax Effects from Accumulated Other Comprehensive Income~~Financial Assets and Financial Liabilities

In ~~February 2018,~~January 2016, the FASB updated the accounting standards ~~related to~~on the ~~presentation~~recognition and measurement of ~~tax effects stranded in OCI.~~financial instruments. The update ~~allows a reclassification from accumulated~~requires entities to carry marketable equity securities, excluding investments in securities that qualify for the equity method of accounting, at fair value with changes in fair value reflected in net income each reporting period. The update affects other ~~comprehensive income (“AOCI”) to retained earnings~~aspects of accounting for ~~tax effects stranded in AOCI resulting from the legislation commonly referred to~~equity instruments, as well as the ~~Tax Cuts and Jobs Act (“Tax Act”).~~accounting for financial liabilities utilizing the fair value option. The update ~~is optional~~eliminates the requirement to disclose the methods and assumptions used to estimate the fair value of financial assets or liabilities held at cost on the balance sheet and requires entities ~~may elect not~~ to ~~reclassify~~use the ~~stranded tax effects. The update is effective for fiscal years beginning after December 15, 2018. Entities may elect to record~~exit price notion when measuring the ~~impacts either in the period~~fair value of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. Early adoption is permitted in any period. ACC does not plan to reclassify the stranded tax effects in OCI. As such, the update will not have an impact on ACC’s consolidated results of operations andthese financial ~~condition.~~

~~Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities~~

In August 2017, the FASB updated the accounting standards to amend the hedge accounting recognition and presentation requirements. The objectives of the update are to better align the financial reporting of hedging relationships to the economic results of an entity’s risk management activities and simplify the application of the hedge accounting guidance. The update also adds new disclosures and amends existing disclosure requirements.instruments. The standard iswas effective for interim and annual periods beginning after December 15, 2017. ACC adopted the standard on January 1, 2018 ~~and should be applied on~~using a modified retrospective ~~basis. Early~~approach. The adoption ~~is permitted. ACC is currently evaluating the impact~~ of the standard did not have a material impact on ~~its~~ACC’s consolidated results of operations ~~and~~or financial condition.

~~AMERIPRISE CERTIFICATE COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)~~

Future Adoption of New Accounting Standards

Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB updated the accounting standards related to accounting for credit losses on certain types of financial instruments. The update replaces the current incurred loss model for estimating credit losses with a new model that requires an entity to estimate the credit losses expected over the life of the asset. Generally, the initial estimate of the expected credit losses and subsequent changes in the estimate will be reported in current period earnings and recorded through an allowance for credit losses on the balance sheet. The current credit loss model for Available-for-Sale debt securities does not change; however, the credit loss calculation and subsequent recoveries are required to be recorded through an allowance. The standard is effective for interim and annual periods beginning after December 15, 2019. Early adoption will be permitted for interim and annual periods beginning after December 15, 2018. A modified retrospective cumulative adjustment to retained earnings should be recorded as of the first reporting period in which the guidance is effective for loans, receivables, and other financial instruments subject to the new expected credit loss model. Prospective adoption is required for establishing an allowance related to Available-for-Sale debt securities, certain beneficial interests, and financial assets purchased with a more-than-insignificant amount of credit deterioration since origination. ~~ACC~~The update is ~~currently evaluating the~~not expected to have a material impact ~~of the standard~~ on ~~its~~ACC’s consolidated results of operations ~~and~~or financial ~~condition.~~condition upon adoption.

3. Investments

Investments in unaffiliated issuers were as follows:

September 30,
2018 December 31,
2017
(in thousands)
Available-for-Sale securities:
Fixed maturities, at fair value (amortized cost: 2018, $7,174,621; 2017, $6,556,338) $ 7,127,551
$ 6,546,761
Common stocks, at fair value⁽¹⁾ (cost: 2017, $1,002)
—
1,000
Commercial mortgage loans and syndicated loans, at cost (less allowance for loan losses: 2018, $3,120; 2017, $3,283; fair value: 2018, $251,340; 2017, $207,681) 252,829
207,187
Equity securities, at fair value⁽¹⁾ (cost: 2018, $875)
960
—
Certificate loans — secured by certificate reserves, at cost, which approximates fair value 245
433
Total $ 7,381,585
$ 6,755,381

⁽¹⁾ As of January 1, 2018, common stocks were reclassified from Available-for-Sale securities to Equity securities due to the adoption of a new accounting standard on recognition and measurement of financial instruments. See Note 2 for more information.

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

Description of Securities September 30, 2018
Amortized
Cost
Gross Unrealized Gains Gross Unrealized Losses Fair Value
Noncredit OTTI⁽¹⁾
(in thousands)
Residential mortgage backed securities $ 2,933,704
$ 7,008
$ (32,797 ) $ 2,907,915
$ —
Corporate debt securities 1,034,942
193
(9,279 ) 1,025,856
3
Commercial mortgage backed securities 950,214
605
(8,367 ) 942,452
—
Asset backed securities 698,608
3,146
(6,599 ) 695,155
—
State and municipal obligations 66,651
17
(784 ) 65,884
—
U.S. government and agency obligations 1,490,502
35
(248 ) 1,490,289
—
Total $ 7,174,621
$ 11,004
$ (58,074 ) $ 7,127,551
$ 3



	September 30, 2019		December 31, 2018
	(in thousands)
Available-for-Sale securities:
Fixed maturities, at fair value (amortized cost: 2019, $7,481,662; 2018, $7,781,708)	$	7,506,184	$	7,734,750
Commercial mortgage loans and syndicated loans, at cost (less allowance for loan losses: 2019, $3,022; 2018, $3,120; fair value: 2019, $271,071; 2018, $253,219)	268,266		260,178
Equity securities, at fair value (cost: 2019, $299; 2018, $299)	379		466
Certificate loans — secured by certificate reserves, at cost, which approximates fair value	211		243
Total	$	7,775,040	$	7,995,637

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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


Description of Securities	Description of Securities	December 31, 2017											Description of Securities	September 30, 2019
Description of Securities	Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI ⁽¹⁾		Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI⁽¹⁾
		(in thousands)												(in thousands)
Residential mortgage backed securities	Residential mortgage backed securities	$	3,259,976	$	9,020	$	(12,669	)	$	3,256,327	$	—	Residential mortgage backed securities	$	2,994,879	$	22,050	$	(6,238	)	$	3,010,691	$	—
Corporate debt securities	Corporate debt securities	1,184,360		763		(4,833		)	1,180,290		3		Corporate debt securities	643,965		5,789		(307		)	649,447		3
Commercial mortgage backed securities	Commercial mortgage backed securities	798,047		1,292		(3,876		)	795,463		—		Commercial mortgage backed securities	1,460,803		1,822		(2,466		)	1,460,159		—
Asset backed securities	Asset backed securities	758,477		3,452		(2,426		)	759,503		—		Asset backed securities	644,044		4,119		(1,282		)	646,881		—
State and municipal obligations	State and municipal obligations	58,380		166		(489		)	58,057		—		State and municipal obligations	46,562		244		(79		)	46,727		—
U.S. government and agency obligations	U.S. government and agency obligations	497,098		43		(20		)	497,121		—		U.S. government and agency obligations	1,691,409		870		—			1,692,279		—
Common stocks		1,002		168		(170		)	1,000		—
Total	Total	$	6,557,340	$	14,904	$	(24,483	)	$	6,547,761	$	3	Total	$	7,481,662	$	34,894	$	(10,372	)	$	7,506,184	$	3



Description of Securities	December 31, 2018
Description of Securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Noncredit OTTI ⁽¹⁾
	(in thousands)
Residential mortgage backed securities	$	3,073,657	$	7,639	$	(27,593	)	$	3,053,703	$	—
Corporate debt securities	1,027,462		488		(9,133		)	1,018,817		3
Commercial mortgage backed securities	1,211,468		276		(13,764		)	1,197,980		—
Asset backed securities	667,332		2,867		(7,468		)	662,731		—
State and municipal obligations	62,032		60		(502		)	61,590		—
U.S. government and agency obligations	1,739,757		250		(78		)	1,739,929		—
Total	$	7,781,708	$	11,580	$	(58,538	)	$	7,734,750	$	3

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

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, investment securities with a fair value of ~~$41~~$140 thousand and ~~$31~~$42 thousand, respectively, were pledged to meet contractual obligations under derivative contracts.

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, fixed maturity securities comprised approximately ~~92%~~90% and ~~96%~~92%, respectively, of ACC’s total investments. Rating agency designations are based on the availability of ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”), including Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”), and Fitch Ratings Ltd. (“Fitch”). ACC uses the median of available ratings from Moody’s, S&P and Fitch, or, if fewer than three ratings are available, the lower rating is used. When ratings from Moody’s, S&P and Fitch are unavailable, as is the case for many private placement securities, ACC may utilize ratings from other NRSROs or rate the securities internally. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, approximately ~~$36.1~~$8.3 million and ~~$61.5~~$36.1 million, respectively, of securities were internally rated by Columbia Management Investment Advisers, LLC (“CMIA”), an affiliate of ACC, using criteria similar to those used by NRSROs.

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

Ratings September 30, 2018 December 31, 2017
Amortized
Cost
Fair Value Percent of Total Fair Value
Amortized
Cost
Fair Value Percent of Total Fair Value
(in thousands, except percentages)
AAA $ 5,579,742
$ 5,542,705
78 % $ 4,526,696
$ 4,519,506
69 %
AA 265,650
264,822
4
367,747
368,377
5
A 534,126
529,026
7
595,445
593,421
9
BBB 758,288
754,385
10
1,029,953
1,029,082
16
Below investment grade 36,815
36,613
1
36,497
36,375
1
Total fixed maturities $ 7,174,621
$ 7,127,551
100 % $ 6,556,338
$ 6,546,761
100 %

~~As of~~ ~~September 30, 2018~~ ~~and~~ ~~December 31, 2017, approximately 31% and 37%, respectively, of the securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities.~~



Ratings	September 30, 2019						December 31, 2018
Ratings	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
	(in thousands, except percentages)
AAA	$	6,495,902	$	6,509,308	87	%	$	6,247,699	$	6,209,709	80	%
AA	149,808		151,466		2		221,126		220,466		3
A	343,192		346,943		5		497,428		493,964		6
BBB	475,440		481,139		6		782,284		777,928		10
Below investment grade	17,320		17,328		—		33,171		32,683		1
Total fixed maturities	$	7,481,662	$	7,506,184	100	%	$	7,781,708	$	7,734,750	100	%

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

As of September 30, 2019 and December 31, 2018, approximately 33% and 34%, respectively, of securities rated AAA were GNMA, FNMA and FHLMC mortgage backed securities.

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


Description of Securities	Description of Securities	September 30, 2018																		Description of Securities	September 30, 2019
		Less than 12 months						12 months or more						Total							Less than 12 months						12 months or more						Total
		Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses				Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
		(in thousands, except number of securities)																			(in thousands, except number of securities)
Residential mortgage backed securities	Residential mortgage backed securities	102	$	1,425,735	$	(17,711	)	94	$	750,810	$	(15,086	)	196	$	2,176,545	$	(32,797	)	Residential mortgage backed securities	49	$	639,065	$	(1,702	)	85	$	770,774	$	(4,536	)	134	$	1,409,839	$	(6,238	)
Corporate debt securities	Corporate debt securities	61	702,998		(4,979		)	21	269,219		(4,300		)	82	972,217		(9,279		)	Corporate debt securities	1	10,132		(1		)	17	152,422		(306		)	18	162,554		(307		)
Commercial mortgage backed securities	Commercial mortgage backed securities	16	255,329		(3,460		)	20	151,940		(4,907		)	36	407,269		(8,367		)	Commercial mortgage backed securities	30	788,846		(1,409		)	21	180,011		(1,057		)	51	968,857		(2,466		)
Asset backed securities	Asset backed securities	27	386,202		(3,626		)	15	148,613		(2,973		)	42	534,815		(6,599		)	Asset backed securities	8	84,643		(29		)	13	164,333		(1,253		)	21	248,976		(1,282		)
State and municipal obligations	State and municipal obligations	12	41,168		(258		)	7	14,364		(526		)	19	55,532		(784		)	State and municipal obligations	—	—		—			1	2,731		(79		)	1	2,731		(79		)
U.S. government and agency obligations		24	1,415,908		(248		)	—	—		—			24	1,415,908		(248		)
Total	Total	242	$	4,227,340	$	(30,282	)	157	$	1,334,946	$	(27,792	)	399	$	5,562,286	$	(58,074	)	Total	88	$	1,522,686	$	(3,141	)	137	$	1,270,271	$	(7,231	)	225	$	2,792,957	$	(10,372	)


Description of Securities	Description of Securities	December 31, 2017																		Description of Securities	December 31, 2018
		Less than 12 months						12 months or more						Total							Less than 12 months						12 months or more						Total
		Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses				Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses			Number of Securities	Fair Value		Unrealized Losses
		(in thousands, except number of securities)																			(in thousands, except number of securities)
Residential mortgage backed securities	Residential mortgage backed securities	67	$	1,078,412	$	(5,833	)	89	$	664,954	$	(6,836	)	156	$	1,743,366	$	(12,669	)	Residential mortgage backed securities	97	$	1,125,780	$	(8,273	)	113	$	1,012,582	$	(19,320	)	210	$	2,138,362	$	(27,593	)
Corporate debt securities	Corporate debt securities	55	715,852		(2,161		)	23	257,891		(2,672		)	78	973,743		(4,833		)	Corporate debt securities	35	376,774		(3,027		)	43	492,955		(6,106		)	78	869,729		(9,133		)
Commercial mortgage backed securities	Commercial mortgage backed securities	12	183,428		(1,721		)	18	119,790		(2,155		)	30	303,218		(3,876		)	Commercial mortgage backed securities	39	892,856		(5,245		)	24	240,762		(8,519		)	63	1,133,618		(13,764		)
Asset backed securities	Asset backed securities	23	297,823		(1,466		)	18	110,842		(960		)	41	408,665		(2,426		)	Asset backed securities	23	296,298		(3,815		)	23	272,466		(3,653		)	46	568,764		(7,468		)
State and municipal obligations	State and municipal obligations	8	17,906		(430		)	4	5,891		(59		)	12	23,797		(489		)	State and municipal obligations	7	28,640		(103		)	9	18,482		(399		)	16	47,122		(502		)
U.S. government and agency obligations	U.S. government and agency obligations	1	49,900		(20		)	—	—		—			1	49,900		(20		)	U.S. government and agency obligations	10	721,934		(78		)	—	—		—			10	721,934		(78		)
Common stocks		1	56		(4		)	3	661		(166		)	4	717		(170		)
Total	Total	167	$	2,343,377	$	(11,635	)	155	$	1,160,029	$	(12,848	)	322	$	3,503,406	$	(24,483	)	Total	211	$	3,442,282	$	(20,541	)	212	$	2,037,247	$	(37,997	)	423	$	5,479,529	$	(58,538	)

As part of ACC’s ongoing monitoring process, management determined that the change in gross unrealized losses on its Available-for-Sale securities is ~~primarily~~ attributable to ~~an increase in~~lower interest rates as well as ~~slightly wider~~tighter credit spreads.

~~The following table presents a rollforward of the cumulative~~There were no amounts recognized in the Consolidated Statements of Operations for ~~other-than-temporary impairments~~OTTI related to credit losses on Available-for-Sale securities for which a portion of the securities’ total ~~other-than-temporary impairments~~OTTI was recognized in ~~OCI:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
(in thousands)
Beginning balance $ —
$ —
$ —
$ 46,522
Reductions for securities sold during the period (realized) —
—
—
(46,715 )
Credit losses for which an other-than-temporary impairment was previously recognized —
—
—
193
Ending balance $ —
$ —
$ —
$ —
OCI during both the three months and nine months ended September 30, 2019 and 2018.

The change in net unrealized ~~securities~~ gains (losses) on securities in ~~other comprehensive income (loss)~~OCI includes two components, net of tax: (i) unrealized gains (losses) that arose from changes in the market value of securities that were held during the period and (ii) (gains)

~~AMERIPRISE CERTIFICATE COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)~~

losses that were previously unrealized, but have been recognized in current period net income due to sales of Available-for-Sale securities and due to the reclassification of noncredit ~~other-than-temporary impairment~~OTTI losses to credit losses.

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The following table presents a rollforward of the net unrealized ~~securities~~ gains (losses) on Available-for-Sale securities included in AOCI:

Net Unrealized Investment Gains (Losses) Deferred Income Tax
Accumulated Other
Comprehensive Income (Loss) Related to Net Unrealized Investment Gains (Losses)
(in thousands)
Balance at January 1, 2017 $ (8,195 ) $ 3,030
$ (5,165 )
Net unrealized securities gains (losses) arising during the period ⁽¹⁾
25,282
(9,172 ) 16,110

Reclassification of (gains) losses included in net income (8,833 ) 3,091
(5,742 )
Balance at September 30, 2017 $ 8,254
$ (3,051 ) $ 5,203
⁽²⁾

Balance at January 1, 2018 $ (9,579 ) $ 3,952
$ (5,627 )
Cumulative effect of change in accounting policies 3
(1 ) 2

Net unrealized securities gains (losses) arising during the period ⁽¹⁾
(37,202 ) 8,919
(28,283 )
Reclassification of (gains) losses included in net income (292 ) 61
(231 )
Balance at September 30, 2018 $ (47,070 ) $ 12,931
$ (34,139 )
⁽²⁾



	Net Unrealized Gains (Losses) on Securities			Deferred Income Tax			Accumulated Other Comprehensive Income (Loss) Related to Net Unrealized Gains (Losses) on Securities
	(in thousands)
Balance at January 1, 2018	$	(9,579	)	$	3,952		$	(5,627	)
Cumulative effect of adoption of equity securities guidance	3			(1		)	2
Net unrealized gains (losses) on securities arising during the period ⁽¹⁾	(37,202		)	8,919			(28,283		)
Reclassification of net (gains) losses on securities included in net income	(292		)	61			(231		)
Balance at September 30, 2018	$	(47,070	)	$	12,931		$	(34,139	)	⁽²⁾

Balance at January 1, 2019	$	(46,958	)	$	13,127		$	(33,831	)
Net unrealized gains (losses) on securities arising during the period ⁽¹⁾	71,612			(17,378		)	54,234
Reclassification of net (gains) losses on securities included in net income	(132		)	28			(104		)
Balance at September 30, 2019	$	24,522		$	(4,223	)	$	20,299		⁽²⁾

⁽¹⁾Net unrealized ~~securities~~ gains (losses) on securities arising during the period include ~~other-than-temporary impairment~~OTTI losses on Available-for-Sale securities related to factors other than credit that were recognized in other comprehensive income (loss) during the period.

⁽²⁾ Includes $2 thousand ~~and $1.9 million~~ of noncredit related impairments on securities and net unrealized ~~securities~~ gains (losses) on previously impaired securities as of both September 30, ~~2018~~2019 and ~~2017, respectively.~~2018.

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
(in thousands)
Gross realized gains $ —
$ —
$ 910
$ 11,107
Gross realized losses (93 ) (58 ) (618 ) (2,081 )
Other-than-temporary impairments —
—
—
(193 )
Total $ (93 ) $ (58 ) $ 292
$ 8,833

~~Other-than-temporary impairments for the nine months ended September 30, 2017 are related to credit losses on non-agency residential mortgage backed securities.~~



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019			2018
	(in thousands)
Gross realized gains	$	44	$	—		$	203		$	910
Gross realized losses	—		(93		)	(71		)	(618		)
Total	$	44	$	(93	)	$	132		$	292

Available-for-Sale securities by contractual maturity as of September 30, ~~2018~~2019 were as follows:


	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(in thousands)
Due within one year	$	1,808,449	$	1,806,278	$	2,046,951	$	2,048,406
Due after one year through five years	783,436		775,513		334,776		339,786
Due after five years through 10 years	—		—		209		261
Due after 10 years	210		238		—		—
	2,592,095		2,582,029		2,381,936		2,388,453
Residential mortgage backed securities	2,933,704		2,907,915		2,994,879		3,010,691
Commercial mortgage backed securities	950,214		942,452		1,460,803		1,460,159
Asset backed securities	698,608		695,155		644,044		646,881
Total	$	7,174,621	$	7,127,551	$	7,481,662	$	7,506,184

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

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

4. Commercial Mortgage, Syndicated and Certificate Loans

ACC’s financing receivables include commercial mortgage loans, syndicated loans and certificate loans. Certificate loans do not exceed the cash surrender value of the certificate at origination. As there is minimal risk of loss related to certificate loans, ACC does not record an allowance for loan losses for certificate loans.

Allowance for Loan Losses

The following table presents a rollforward of the allowance for loan losses for commercial mortgage loans and syndicated loans for the nine months ended and the ending balance of the allowance for loan losses by impairment method:


	September 30,					September 30,
	2018			2017		2019			2018
	(in thousands)
Beginning balance	$	3,283		$	3,283	$	3,120		$	3,283
Charge-offs	(163		)	—		(98		)	(163		)
Provisions	—			—
Ending balance	$	3,120		$	3,283	$	3,022		$	3,120

Individually evaluated for impairment	$	—		$	—	$	—		$	—
Collectively evaluated for impairment	3,120			3,283		3,022			3,120

The recorded investment in commercial mortgage loans and syndicated loans by impairment method was as follows:


	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
	(in thousands)
Individually evaluated for impairment	$	2,812	$	—	$	1,818	$	3,783
Collectively evaluated for impairment	253,137		210,470		269,470		259,515
Total	$	255,949	$	210,470	$	271,288	$	263,298

As of September 30, ~~2018~~2019 and December 31, ~~2017~~2018, ACC’s recorded investment in financing receivables individually evaluated for impairment for which there was no related allowance for loan losses was ~~$2.8~~$1.8 million and ~~nil,~~$3.8 million, respectively. Unearned income, unamortized premiums and discounts, and net unamortized deferred fees and costs are not material to ACC’s total loan balance.

During the three months and nine months ended September 30, 2019, ACC purchased $13.5 million and $32.6 million, respectively, of syndicated loans. During the three months and nine months ended September 30, 2018, ACC purchased $14.1 million and $71.5 million, respectively, of syndicated loans. During the three months and nine months endedSeptember 30, ~~2017,~~2019, ACC ~~purchased $4.3~~sold $2.5 million and ~~$33.0~~$8.5 million, respectively, of syndicated loans. During the three months and nine months endedSeptember 30, 2018, ACC sold $0.2 million and $6.6 ~~million, respectively, of syndicated loans. During the three months and nine months ended September 30, 2017, ACC sold $2.3 million and $3.5~~ million, respectively, of syndicated loans.

ACC has not acquired any loans with deteriorated credit quality as of the acquisition date.

Credit Quality Information

Nonperforming loans, which are generally loans 90 days or more past due, were $1.8 million and nil as of ~~both~~ September 30, ~~2018~~2019 and December 31, ~~2017~~2018., respectively. All other loans were considered to be performing.

Commercial Mortgage Loans

ACC reviews the credit worthiness of the borrower and the performance of the underlying properties in order to determine the risk of loss on commercial mortgage loans. Based on this review, the commercial mortgage loans are assigned an internal risk rating, which management updates as necessary. Commercial mortgage loans which management has assigned its highest risk rating were nil as of both September 30, ~~2018~~2019 and December 31, ~~2017.~~2018. Loans with the highest risk rating represent distressed loans which ACC has identified as impaired or expects to become delinquent or enter into foreclosure within the next six months. In addition, ACC reviews the concentrations of credit risk by region and property type.

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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


	Loans				Percentage				Loans				Percentage
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
	(in thousands)								(in thousands)
East North Central	$	5,740	$	6,029	5	%	5	%	$	6,551	$	5,642	5	%	5	%
East South Central	4,415		4,891		4		4		4,425		6,253		3		5
Middle Atlantic	14,596		11,887		13		11		15,690		14,443		13		13
Mountain	9,973		10,452		9		10		13,750		9,794		11		9
New England	7,442		7,586		7		7		7,243		7,392		6		6
Pacific	33,148		32,386		30		29		40,056		37,147		33		32
South Atlantic	21,839		23,694		20		22		20,947		21,479		17		19
West North Central	6,278		6,706		6		6		5,680		6,132		5		5
West South Central	6,636		6,354		6		6		8,449		6,493		7		6
	110,067		109,985		100	%	100	%	122,791		114,775		100	%	100	%
Less: allowance for loan losses	2,341		2,341						2,341		2,341
Total	$	107,726	$	107,644					$	120,450	$	112,434

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


	Loans				Percentage				Loans				Percentage
	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
	(in thousands)								(in thousands)
Apartments	$	27,186	$	23,840	25	%	21	%	$	30,687	$	26,795	25	%	23	%
Industrial	25,672		25,025		23		23		25,528		27,162		21		24
Mixed use	7,762		4,580		7		4		12,246		7,646		10		7
Office	11,553		11,872		10		11		16,883		16,087		14		14
Retail	35,428		34,934		32		32		35,771		34,814		29		30
Hotel	650		777		1		1		476		607		—		1
Other	1,816		8,957		2		8		1,200		1,664		1		1
	110,067		109,985		100	%	100	%	122,791		114,775		100	%	100	%
Less: allowance for loan losses	2,341		2,341						2,341		2,341
Total	$	107,726	$	107,644					$	120,450	$	112,434

Syndicated Loans

The recorded investment in syndicated loans as of both September 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$145.9 million and $100.5 million, respectively.~~$148.5 million. ACC’s syndicated loan portfolio is diversified across industries and issuers. The primary credit indicator for syndicated loans is whether the loans are performing in accordance with the contractual terms of the syndication.

Troubled Debt Restructurings

There were no loans restructured by ACC during both the three months and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018. There are no material commitments to lend additional funds to borrowers whose loans have been restructured.

5. Fair Values of Assets and Liabilities

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

Valuation Hierarchy

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


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

~~AMERIPRISE CERTIFICATE COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)~~


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

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


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

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


	September 30, 2018								September 30, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents	$	—	$	328,873	$	—	$	328,873	$	—	$	502,798	$	—	$	502,798
Available-for-Sale securities:
Residential mortgage backed securities	—		2,863,465		44,450		2,907,915		—		2,982,634		28,057		3,010,691
Corporate debt securities	—		984,068		41,788		1,025,856		—		635,212		14,235		649,447
Commercial mortgage backed securities	—		942,452		—		942,452		—		1,460,159		—		1,460,159
Asset backed securities	—		695,155		—		695,155		—		642,081		4,800		646,881
State and municipal obligations	—		65,884		—		65,884		—		46,727		—		46,727
U.S. government and agency obligations	1,490,289		—		—		1,490,289		1,692,279		—		—		1,692,279
Total Available-for-Sale securities	1,490,289		5,551,024		86,238		7,127,551		1,692,279		5,766,813		47,092		7,506,184
Equity securities	497		463		—		960		—		—		379		379
Equity derivative contracts	—		48,605		—		48,605		12		41,717		—		41,729
Total assets at fair value	$	1,490,786	$	5,928,965	$	86,238	$	7,505,989	$	1,692,291	$	6,311,328	$	47,471	$	8,051,090

Liabilities
Stock market certificate embedded derivatives	$	—	$	12,230	$	—	$	12,230	$	—	$	13,120	$	—	$	13,120
Equity derivative contracts	—		38,561		—		38,561		—		29,586		—		29,586
Total liabilities at fair value	$	—	$	50,791	$	—	$	50,791	$	—	$	42,706	$	—	$	42,706


	December 31, 2017								December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents	$	—	$	51,296	$	—	$	51,296	$	—	$	360,580	$	—	$	360,580
Available-for-Sale securities:
Residential mortgage backed securities	—		3,187,617		68,710		3,256,327		—		2,991,115		62,588		3,053,703
Corporate debt securities	—		1,112,949		67,341		1,180,290		—		976,975		41,842		1,018,817
Commercial mortgage backed securities	—		795,463		—		795,463		—		1,178,193		19,787		1,197,980
Asset backed securities	—		759,503		—		759,503		—		662,731		—		662,731
State and municipal obligations	—		58,057		—		58,057		—		61,590		—		61,590
U.S. government and agency obligations	497,121		—		—		497,121		1,739,929		—		—		1,739,929
Common stocks	545		427		28		1,000
Total Available-for-Sale securities	497,666		5,914,016		136,079		6,547,761		1,739,929		5,870,604		124,217		7,734,750
Equity securities									—		466		—		466
Equity derivative contracts	—		54,346		—		54,346		6		13,173		—		13,179
Total assets at fair value	$	497,666	$	6,019,658	$	136,079	$	6,653,403	$	1,739,935	$	6,244,823	$	124,217	$	8,108,975

Liabilities
Stock market certificate embedded derivatives	$	—	$	9,734	$	—	$	9,734	$	—	$	6,145	$	—	$	6,145
Equity derivative contracts	3		46,753		—		46,756		—		8,209		—		8,209
Total liabilities at fair value	$	3	$	56,487	$	—	$	56,490	$	—	$	14,354	$	—	$	14,354

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

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


	Available-for-Sale Securities																	Available-for-Sale Securities													Equity Securities
	Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total					Residential Mortgage Backed Securities			Corporate Debt Securities			Asset Backed Securities			Total				Equity Securities
	(in thousands)																	(in thousands)
Balance, July 1, 2018	$	51,065		$	41,760		$	40,000		$	12,333		$	145,158
Balance, July 1, 2019																	Balance, July 1, 2019	$	87,445		$	19,207		$	—		$	106,652			$	121
Total gains (losses) included in:																	Total gains (losses) included in:
Net income	22			(15		)	—			—			7			⁽¹⁾	Net income	(1		)	(14		)	4			(11		)	⁽¹⁾	(89		)	⁽²⁾
Other comprehensive income (loss)	42			43			—			—			85				Other comprehensive income (loss)	97			42			(32		)	107				—
Purchases	20,000			—			—			—			20,000
Settlements	(4,015		)	—			—			—			(4,015		)		Settlements	(2,039		)	(5,000		)	—			(7,039		)		—
Transfers into Level 3																	Transfers into Level 3	—			—			4,828			4,828				347
Transfers out of Level 3	(22,664		)	—			(40,000		)	(12,333		)	(74,997		)		Transfers out of Level 3	(57,445		)	—			—			(57,445		)		—
Balance, September 30, 2018	$	44,450		$	41,788		$	—		$	—		$	86,238
Changes in unrealized gains (losses) relating to assets held at September 30, 2018	$	22		$	(15	)	$	—		$	—		$	7		⁽¹⁾
Balance, September 30, 2019																	Balance, September 30, 2019	$	28,057		$	14,235		$	4,800		$	47,092			$	379
Changes in unrealized gains (losses) relating to assets held at September 30, 2019																	Changes in unrealized gains (losses) relating to assets held at September 30, 2019	$	(2	)	$	(11	)	$	4		$	(9	)	⁽¹⁾	$	(89	)	⁽²⁾


	Available-for-Sale Securities																		Available-for-Sale Securities
	Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities		Asset Backed Securities			Common Stocks			Total				Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total
	(in thousands)																		(in thousands)
Balance, July 1, 2017	$	82,214		$	143,322		$	—	$	3,049		$	268		$	228,853
Balance, July 1, 2018																			$	51,065		$	41,760		$	40,000		$	12,333		$	145,158
Total gains (losses) included in:
Net income	5			(124		)	—		1			—			(118		)	⁽¹⁾	22			(15		)	—			—			7			⁽¹⁾
Other comprehensive income (loss)	(57		)	29			—		(9		)	35			(2		)		42			43			—			—			85
Purchases	—			1,313			30,000		—			—			31,313				20,000			—			—			—			20,000
Settlements	(7,682		)	(23,000		)	—		—			—			(30,682		)		(4,015		)	—			—			—			(4,015		)
Transfers into Level 3	20,182			—			—		13,195			—			33,377
Transfers out of Level 3	(18,456		)	—			—		(3,049		)	(161		)	(21,666		)		(22,664		)	—			(40,000		)	(12,333		)	(74,997		)
Balance, September 30, 2017	$	76,206		$	121,540		$	30,000	$	13,187		$	142		$	241,075
Changes in unrealized gains (losses) relating to assets held at September 30, 2017	$	5		$	(124	)	$	—	$	1		$	—		$	(118	)	⁽¹⁾
Balance, September 30, 2018																			$	44,450		$	41,788		$	—		$	—		$	86,238
Changes in unrealized gains (losses) relating to assets held at September 30, 2018																			$	22		$	(15	)	$	—		$	—		$	7		⁽¹⁾


	Available-for-Sale Securities																Equity Securities			Available-for-Sale Securities																Equity Securities
	Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total				Equity Securities			Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total				Equity Securities
	(in thousands)																			(in thousands)
Balance, January 1, 2018	$	68,710		$	67,341		$	—		$	—		$	136,051			$	28
Balance, January 1, 2019																				$	62,588		$	41,842		$	19,787		$	—		$	124,217			$	—
Total gains (losses) included in:
Net income	(3		)	(214		)	—			—			(217		)	⁽¹⁾	—			21			(45		)	—			4			(20		)	⁽¹⁾	(86		)	⁽²⁾
Other comprehensive income (loss)	(444		)	(339		)	—			—			(783		)		—			116			438			—			(32		)	522				—
Purchases	20,000			—			40,000			12,333			72,333				—			72,883			—			—			—			72,883				—
Settlements	(18,879		)	(25,000		)	—			—			(43,879		)		—			(6,881		)	(28,000		)	—			—			(34,881		)		—
Transfers into Level 3																				—			—			—			4,828			4,828				465
Transfers out of Level 3	(24,934		)	—			(40,000		)	(12,333		)	(77,267		)		(28		)	(100,670		)	—			(19,787		)	—			(120,457		)		—
Balance, September 30, 2018	$	44,450		$	41,788		$	—		$	—		$	86,238			$	—
Changes in unrealized gains (losses) relating to assets held at September 30, 2018	$	55		$	(46	)	$	—		$	—		$	9		⁽¹⁾	$	—
Balance, September 30, 2019																				$	28,057		$	14,235		$	—		$	4,800		$	47,092			$	379
Changes in unrealized gains (losses) relating to assets held at September 30, 2019																				$	(2	)	$	(34	)	$	—		$	4		$	(32	)	⁽¹⁾	$	(86	)	⁽²⁾

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


	Available-for-Sale Securities																		Available-for-Sale Securities																Equity Securities
	Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities		Asset Backed Securities			Common Stocks			Total				Residential Mortgage Backed Securities			Corporate Debt Securities			Commercial Mortgage Backed Securities			Asset Backed Securities			Total				Equity Securities
	(in thousands)																		(in thousands)
Balance, January 1, 2017	$	153,183		$	154,156		$	—	$	30,788		$	717		$	338,844
Balance, January 1, 2018																			$	68,710		$	67,341		$	—		$	—		$	136,051			$	28
Total gains (losses) included in:
Net income	94			(348		)	—		2			64			(188		)	⁽²⁾	(3		)	(214		)	—			—			(217		)	⁽¹⁾	—
Other comprehensive income (loss)	105			(249		)	—		1			263			120				(444		)	(339		)	—			—			(783		)		—
Purchases	65,138			13,481			30,000		—			—			108,619				20,000			—			40,000			12,333			72,333				—
Sales	—			—			—		—			(151		)	(151		)
Settlements	(29,077		)	(45,500		)	—		—			—			(74,577		)		(18,879		)	(25,000		)	—			—			(43,879		)		—
Transfers into Level 3	20,182			—			—		16,232			3,568			39,982
Transfers out of Level 3	(133,419		)	—			��		(33,836		)	(4,319		)	(171,574		)		(24,934		)	—			(40,000		)	(12,333		)	(77,267		)		(28		)
Balance, September 30, 2017	$	76,206		$	121,540		$	30,000	$	13,187		$	142		$	241,075
Changes in unrealized gains (losses) relating to assets held at September 30, 2017	$	(7	)	$	(345	)	$	—	$	1		$	—		$	(351	)	⁽¹⁾
Balance, September 30, 2018																			$	44,450		$	41,788		$	—		$	—		$	86,238			$	—
Changes in unrealized gains (losses) relating to assets held at September 30, 2018																			$	55		$	(46	)	$	—		$	—		$	9		⁽¹⁾	$	—

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

⁽²⁾ ~~Represents a $253 thousand loss included in investment income and a $65 thousand gain included~~Included in net realized gain (loss) on investments before income taxes in the Consolidated Statements of Operations.

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

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

September 30, 2018

September 30, 2019

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

(in thousands)

Corporate debt securities

(private placements)

41,786

Discounted cash flow

Yield/spread to U.S. Treasuries

0.9% - 1.2%

1.0%

14,232

Discounted cash flow

Yield/spread to U.S. Treasuries

1.1% - 1.2%

1.1%

December 31, 2017

December 31, 2018

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

(in thousands)

Corporate debt securities

(private placements)

67,338

Discounted cash flow

Yield/spread to U.S. Treasuries

0.8% - 1.1%

0.9%

41,839

Discounted cash flow

Yield/spread to U.S. Treasuries

1.2% - 1.6%

1.3%

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

~~Sensitivity~~Uncertainty of Fair Value Measurements ~~to Changes in Unobservable Inputs~~

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

Determination of Fair Value

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

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

~~AMERIPRISE CERTIFICATE COMPANY~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)~~

Cash Equivalents

Cash equivalents include highly liquid investments with original or remaining maturities at the time of purchase of 90 days or less. ACC’s cash equivalents are classified as Level 2 and measured at amortized cost, which is a reasonable estimate of fair value because

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

of the short time between the purchase of the instrument and its expected realization.

Available-for-Sale and Equity Securities

When available, the fair value of securities is based on quoted prices in active markets. If quoted prices are not available, fair values are obtained from third-party pricing services, non-binding broker quotes, or other model-based valuation techniques.

Level 1 securities include U.S. ~~Treasuries and equity securities.~~ Treasuries.

Level 2 securities include residential mortgage backed securities, corporate bonds, commercial mortgage backed securities, asset backed securities, state and municipal obligations and equity securities. The fair value of these Level 2 securities is based on a market approach with prices obtained from third-party pricing services. Observable inputs used to value these securities can include, but are not limited to, reported trades, benchmark yields, issuer spreads and non-binding broker quotes.

Level 3 securities include certain non-agency residential mortgage backed securities, corporate bonds, commercial mortgage backed securities, asset backed securities and equity securities. The fair value of these Level 3 securities is typically based on a single non-binding broker quote. The underlying inputs used for some of the non-binding broker quotes are not readily available to ACC. ACC’s privately placed corporate bonds are typically based on a single non-binding broker quote. In addition to the general pricing controls, ACC reviews the broker prices to ensure that the broker quotes are reasonable and, when available, compares prices of privately issued securities to public issues from the same issuer to ensure that the implicit illiquidity premium applied to the privately placed investment is reasonable considering investment characteristics, maturity, and average life of the investment.

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

Derivatives

The variation margin on futures contracts is classified as Level 1. The fair value of derivatives that are traded in less active over-the-counter (“OTC”) markets is generally measured using pricing models with market observable inputs such as interest rates and equity index levels. These measurements are classified as Level 2 within the fair value hierarchy and include options. The counterparties’ nonperformance risk associated with uncollateralized derivative assets was immaterial as of both September 30, ~~2018~~2019 and December 31, ~~2017.~~2018. See Note 6 and Note 7 for further information on the credit risk of derivative instruments and related collateral.

Stock Market Certificate Embedded Derivatives

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

Fair Value on a Nonrecurring Basis

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

Assets and Liabilities Not Reported at Fair Value

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


	September 30, 2018										September 30, 2019
	Carrying Value		Fair Value								Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total				Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Syndicated loans	$	145,103	$	—	$	140,433	$	4,941	$	145,374	$	147,816	$	—	$	139,164	$	7,722	$	146,886
Commercial mortgage loans	107,726		—		—		105,966		105,966		120,450		—		—		124,185		124,185
Certificate loans	245		—		245		—		245		211		—		211		—		211
Financial Liabilities
Certificate reserves	$	7,335,148	$	—	$	—	$	7,302,672	$	7,302,672	$	7,730,746	$	—	$	—	$	7,716,054	$	7,716,054

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


	December 31, 2017										December 31, 2018
	Carrying Value		Fair Value								Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total				Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Syndicated loans	$	99,543	$	—	$	95,769	$	4,242	$	100,011	$	147,744	$	—	$	130,007	$	11,444	$	141,451
Commercial mortgage loans	107,644		—		—		107,670		107,670		112,434		—		—		111,768		111,768
Certificate loans	433		—		433		—		433		243		—		243		—		243
Financial Liabilities
Certificate reserves	$	6,390,590	$	—	$	—	$	6,374,247	$	6,374,247	$	7,885,819	$	—	$	—	$	7,844,724	$	7,844,724

See Note 4 for additional information on syndicated, commercial mortgage and certificate loans. Certificate reserves represent customer deposits for fixed rate certificates and stock market certificates.

6. Offsetting Assets and Liabilities

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

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


	September 30, 2018														September 30, 2019
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments⁽¹⁾			Cash Collateral			Net Amount		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments⁽¹⁾			Cash Collateral			Net Amount
	(in thousands)
Derivatives:
OTC	$	48,605	$	—	$	48,605	$	(38,561	)	$	(10,044	)	$	—	$	41,717	$	—	$	41,717	$	(29,586	)	$	(11,953	)	$	178
Exchange-traded															12		—		12		—			—			12
Total	$	48,605	$	—	$	48,605	$	(38,561	)	$	(10,044	)	$	—	$	41,729	$	—	$	41,729	$	(29,586	)	$	(11,953	)	$	190


	December 31, 2017														December 31, 2018
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets						Net Amount
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments ⁽¹⁾			Cash Collateral			Net Amount		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments ⁽¹⁾			Cash Collateral			Net Amount
	(in thousands)
Derivatives:
OTC	$	54,346	$	—	$	54,346	$	(46,753	)	$	(6,883	)	$	710	$	13,173	$	—	$	13,173	$	(8,209	)	$	(4,553	)	$	411
Exchange-traded															6		—		6		—			—			6
Total	$	54,346	$	—	$	54,346	$	(46,753	)	$	(6,883	)	$	710	$	13,179	$	—	$	13,179	$	(8,209	)	$	(4,553	)	$	417

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

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


	September 30, 2018													September 30, 2019
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets					Net Amount		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets					Net Amount
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments ⁽¹⁾			Cash Collateral		Net Amount		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments ⁽¹⁾			Cash Collateral		Net Amount
	(in thousands)
Derivatives:
OTC	$	38,561	$	—	$	38,561	$	(38,561	)	$	—	$	—	$	29,586	$	—	$	29,586	$	(29,586	)	$	—	$	—
Total	$	38,561	$	—	$	38,561	$	(38,561	)	$	—	$	—	$	29,586	$	—	$	29,586	$	(29,586	)	$	—	$	—

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)


	December 31, 2017													December 31, 2018
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets					Net Amount		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Amounts of Liabilities Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets					Net Amount
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments ⁽¹⁾			Cash Collateral		Net Amount		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets				Financial Instruments ⁽¹⁾			Cash Collateral		Net Amount
	(in thousands)
Derivatives:
OTC	$	46,753	$	—	$	46,753	$	(46,753	)	$	—	$	—	$	8,209	$	—	$	8,209	$	(8,209	)	$	—	$	—
Exchange-traded	3		—		3		—			—		3
Total	$	46,756	$	—	$	46,756	$	(46,753	)	$	—	$	3	$	8,209	$	—	$	8,209	$	(8,209	)	$	—	$	—

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

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

When the fair value of collateral accepted by ACC is less than the amount due to ACC, there is a risk of loss if the counterparty fails to perform or provide additional collateral. To mitigate this risk, ACC monitors collateral values regularly and requires additional collateral when necessary. When the value of collateral pledged by ACC declines, it may be required to post additional collateral.

Cash collateral accepted by ACC is reflected in other liabilities. See Note 7 for additional disclosures related to ACC’s derivative instruments.

7. Derivatives and Hedging Activities

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

ACC uses derivatives as economic hedges of equity risk related to ~~Stock Market Certificates (“SMC”).~~SMC. ACC does not designate any derivatives for hedge accounting. The following table presents the notional value and the gross fair value of derivative instruments, including embedded derivatives:


	September 30, 2018						December 31, 2017							September 30, 2019									December 31, 2018
	Notional		Gross Fair Value				Notional		Gross Fair Value					Notional			Gross Fair Value						Notional			Gross Fair Value
			Assets		Liabilities				Assets		Liabilities						Assets			Liabilities						Assets			Liabilities
	(in thousands)
Derivatives not designated as hedging instruments
Equity contracts⁽¹⁾	$	828,140	$	48,605	$	38,561	$	871,895	$	54,346		$	46,756		$	786,268		$	41,729		$	29,586		$	828,182		$	13,179			$	8,209
Embedded derivatives
Stock market certificates⁽²⁾	N/A		—		12,230		N/A		—		9,734			N/A			—			13,120			N/A			—				6,145
Total derivatives	$	828,140	$	48,605	$	50,791	$	871,895	$	54,346	$	56,490		$	786,268		$	41,729		$	42,706		$	828,182		$	13,179		$	14,354

N/A Not applicable


⁽¹⁾	The gross fair value of equity contracts is included in Derivative assets and Derivative liabilities on the Consolidated Balance Sheets.


⁽²⁾	The gross fair value of SMC embedded derivatives is included in Certificate reserves on the Consolidated Balance Sheets.

See Note 5 for additional information regarding ACC’s fair value measurement of derivative instruments.

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The following tables present a summary of the impact of derivatives not designated as hedging instruments, including embedded derivatives, on the Consolidated Statements of Operations:


Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments	Location of Gain (Loss) on Derivatives Recognized in Income	Amount of Gain (Loss) on Derivatives Recognized in Income												Derivatives not designated as hedging instruments	Location of Gain (Loss) on Derivatives Recognized in Income	Amount of Gain (Loss) on Derivatives Recognized in Income
			Three Months Ended September 30,						Nine Months Ended September 30,								Three Months Ended September 30,						Nine Months Ended September 30,
			2018			2017			2018			2017					2019			2018			2019				2018
			(in thousands)														(in thousands)
Equity contracts	Equity contracts														Equity contracts
Stock market certificates	Stock market certificates	Net provision for certificate reserves	$	1,898		$	956		$	2,412		$	2,975		Stock market certificates	Net provision for certificate reserves	$	828		$	1,898		$	8,269			$	2,412
Stock market certificates embedded derivatives	Stock market certificates embedded derivatives	Net provision for certificate reserves	(1,904		)	(1,024		)	(2,357		)	(2,889		)	Stock market certificates embedded derivatives	Net provision for certificate reserves	(779		)	(1,904		)	(6,618		)	⁽¹⁾	(2,357		)
Total	Total		$	(6	)	$	(68	)	$	55		$	86		Total		$	49		$	(6	)	$	1,651			$	55

⁽¹⁾This amount includes the impact of an out-of-period correction recorded in the second quarter of 2019. See Note 1 for more information.

Ameriprise SMC offers a return based upon the relative change in a major stock market index between the beginning and end of the certificate’s term. The SMC product contains an embedded derivative. The equity based return of the certificate must be separated from the host contract and accounted for as a derivative instrument. As a result of fluctuations in equity markets, and the corresponding changes in value of the embedded derivative, the amount of expenses incurred by ACC related to the SMC product will positively or negatively impact reported earnings. As a means of hedging its obligations under the provisions for these certificates, ACC purchases and writes call options on the S&P 500 ~~Index~~^®.Index. ACC views this strategy as a prudent management of equity market sensitivity, such that earnings are not exposed to undue risk presented by changes in equity market levels. ACC also purchases futures on the S&P 500^® Index to economically hedge its obligations. The futures are marked-to-market daily and exchange traded, exposing ACC to minimal counterparty risk.

Ameriprise Step-Up Rate Certificates (“SRC”) offer the ability to step up to a higher crediting rate based upon the then-current rate for a new SRC with the same term. ACC does not currently hedge the interest rate risk related to the SRC product. The SRC product contains an embedded derivative, which was not material as of both September 30, ~~2018~~2019 and December 31, ~~2017.~~2018.

Credit Risk

Credit risk associated with ACC’s derivatives is the risk that a derivative counterparty will not perform in accordance with the terms of the applicable derivative contract. To mitigate such risk, ACC has established guidelines and oversight of credit risk through a comprehensive enterprise risk management program that includes members of senior management. Key components of this program are to require preapproval of counterparties and the use of master netting and collateral arrangements whenever practical. See Note 6 for additional information on ACC’s credit exposure related to derivative assets.

8. Contingencies

The level of regulatory activity and inquiry in the financial services industry remains elevated. From time to time, ACC receives requests for information from, and/or has been subject to examination by, both the SEC and the Minnesota Department of Commerce concerning its business activities and practices.

ACC may in the normal course of business be a party to legal, regulatory or arbitration proceedings concerning matters arising in connection with the conduct of its business activities. The outcome of any such proceeding cannot be predicted with any certainty. ACC believes that it is not a party to, nor are any of its properties the subject of, any pending legal, regulatory or arbitration proceedings that are reasonably likely to have a material adverse effect on ACC’s financial condition, results of operations or liquidity. Notwithstanding the foregoing, it is possible that the outcome of any such legal, arbitration or regulatory proceedings could have a material impact on ACC’s results of operations in any particular reporting period as the proceedings are resolved.

9. Shareholder’s Equity

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


Accumulated Other Comprehensive Income (Loss) Reclassification	Accumulated Other Comprehensive Income (Loss) Reclassification	Location of (Gain) Loss Recognized in Income	Three Months Ended September 30,						Nine Months Ended September 30,						Accumulated Other Comprehensive Income (Loss) Reclassification	Location of (Gain) Loss Recognized in Income	Three Months Ended September 30,						Nine Months Ended September 30,
		Location of (Gain) Loss Recognized in Income	2018			2017			2018			2017				Location of (Gain) Loss Recognized in Income	2019			2018			2019			2018
			(in thousands)														(in thousands)
Unrealized net (gains) losses on Available-for-Sale securities	Unrealized net (gains) losses on Available-for-Sale securities	Net realized gain (loss) on investments	$	93		$	58		$	(292	)	$	(8,833	)	Unrealized net (gains) losses on Available-for-Sale securities	Net realized gain (loss) on investments	$	(44	)	$	93		$	(132	)	$	(292	)
Tax expense (benefit)	Tax expense (benefit)	Income tax expense (benefit)	(20		)	(21		)	61			3,091			Tax expense (benefit)	Income tax expense (benefit)	10			(20		)	28			61
Net of tax	Net of tax		$	73		$	37		$	(231	)	$	(5,742	)	Net of tax		$	(34	)	$	73		$	(104	)	$	(231	)

AMERIPRISE CERTIFICATE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

During the three months and nine months ended September 30, ~~2018,~~2019, ACC received cash contributions from Ameriprise Financial of ~~$12~~nil and $4.5 million, ~~and $15 million.~~respectively. During the three months and nine months ended September 30, ~~2017,~~2018, ACC received cash contributions from Ameriprise Financial of ~~nil~~$12.0 million and $5$15.0 million, respectively. ACC received these contributions to maintain compliance with capital requirements due to growth of the business, and these contributions were outside of the Capital Support Agreement between Ameriprise Financial and ACC. See additional discussion on the Capital Support Agreement in ACC’s ~~2017~~2018 10-K.

During the three months and nine months ended September 30, 2019, ACC paid dividends to Ameriprise Financial of $35.0 million and $47.7 million, respectively. The dividends for the nine months ended September 30, 2019 include ACC’s payment of $12.7 million to Ameriprise Financial in the second quarter of 2019 for the settlement of deferred federal income taxes. See Note 1 for more information. ACC did not pay any dividends to Ameriprise Financial during the three months and nine months endedSeptember 30, ~~2018. During both the three months and nine months ended September 30, 2017, ACC paid dividends to Ameriprise Financial of $5 million.~~2018.

10. Income Taxes

~~In December of 2017, the Tax Act reduced federal income tax rates from 35% to 21% for tax years after 2017.~~ ACC’s effective tax rate was ~~26.5%~~24.8% and ~~32.8%~~26.5% for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. ACC’s effective tax rate was ~~25.7%~~25.1% and ~~35.4%~~25.7% for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~lower~~ effective tax ~~rates~~rate for the three months ended September 30, 2019 is higher than the statutory rate primarily as a result of uncertain tax positions and state income taxes, net of federal benefit. The effective tax rate for the nine months ended September 30, ~~2018 compared to~~2019 is higher than the ~~prior year periods are~~statutory rate primarily ~~due to the reduced~~as a result of state income ~~tax rate offset by higher state~~ taxes, ~~and taxes applicable to prior years.~~net of federal benefit. The effective tax rates for the three months and nine months ended September 30, 2018 are higher than the statutory rate primarily as a result of state income ~~taxes.~~

Astaxes, net of ~~December 31, 2017, ACC had not fully completed its accounting~~federal benefit. The decrease in the effective tax rate for the tax effects of the enactment of the Tax Act. However, ACC was able to provide reasonable estimates of the Tax Act’s impact; accordingly, the Company recorded a provisional tax amount of $3 million to remeasure certain deferred tax assets and liabilities as of December 31, 2017. In the third quarter of 2018, ACC finalized its accounting relatedthree months ended September 30, 2019 compared to the ~~Tax Act and determined no adjustments were necessary.~~prior year period is primarily due to a reduction in uncertain tax positions.

ACC is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. Significant judgment is required in determining if a valuation allowance should be established and the amount of such allowance if required. Factors used in making this determination include estimates relating to the performance of the business. Consideration is given to, among other things in making this determination, i) future taxable income exclusive of reversing temporary differences and carryforwards, ii) future reversals of existing taxable temporary differences, iii) taxable income in prior carryback years, and iv) tax planning strategies. Based on analysis of ACC’s tax positions, management believes it is more likely than not that ACC’s results of future operations and implementation of tax planning strategies will generate sufficient taxable income to enable ACC to utilize all of the deferred tax assets. Accordingly, no valuation allowance for deferred tax assets has been established as of both September 30, ~~2018~~2019 and December 31, ~~2017.~~2018.

In June 2019, ACC terminated its agreement with Ameriprise Financial to settle with cash the change in its deferred federal income taxes on a quarterly basis. The final settlement was paid during the second quarter of 2019 and effectively repaid all previous deferred federal income tax settlements that ACC had received. During the six months ended June 30, 2019, ACC paid Ameriprise Financial $12.7 million for the settlement of deferred federal income taxes. See Note 1 for more information.

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, ACC had ~~$3.4~~$4.4 million and ~~$2.5~~$3.8 million, respectively, of gross unrecognized tax benefits. If recognized, approximately ~~$2.7~~$3.5 million and ~~$2.0~~$3.0 million, net of federal tax benefits, of the unrecognized tax benefits as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, would affect the effective tax rate.

It is reasonably possible that the total amount of unrecognized tax benefits will change in the next 12 months. ACC estimates that the total amount of gross unrecognized tax benefits may decrease by ~~$94~~$233 thousand in the next 12 months primarily due to state exams.

ACC recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. ACC recognized a net increase of $55 thousand and $153 thousand in interest and penalties for the three months and nine months ended September 30, 2019, respectively. ACC recognized a net increase of $33 thousand and $85 thousand in interest and penalties for the three months and nine months ended September 30, 2018, respectively. ~~ACC recognized a net increase of $18 thousand and a net decrease of $100 thousand in interest and penalties for the three months and nine months ended September 30, 2017, respectively.~~ As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, ACC had a payable of ~~$177~~$377 thousand and ~~$92~~$224 thousand, respectively, related to accrued interest and penalties.

ACC files income tax returns as part of its inclusion in the consolidated federal income tax returns of Ameriprise Financial in the U.S. federal jurisdiction and various states jurisdictions. In the ~~first quarter of 2018, Ameriprise Financial received cash settlements for final resolution of the 2008 through 2010 Internal Revenue Service (“IRS”) audits. In the~~ third quarter of ~~2018, Ameriprise Financial reached an agreement with IRS appeals to resolve~~2019, the ~~2012~~federal statutes of limitation closed for the 2014 and ~~2013 audit. Accordingly,~~2015 tax years. Ameriprise Financial’s ~~IRS audits~~tax returns for 2014 and 2015 are effectively settled ~~through 2013.~~except for one issue which Ameriprise Financial had filed amended returns in the second quarter of 2019. The IRS is currently auditing Ameriprise Financial’s U.S. income tax returns for ~~2014~~2016 and ~~2015.~~2017. Ameriprise Financial’s or its subsidiaries’, including ACC’s, state income tax returns are currently under examination by various jurisdictions for years ranging from 2009 through ~~2016.~~

2017.

AMERIPRISE CERTIFICATE COMPANY

ITEM 2. MANAGEMENT’S NARRATIVE ANALYSIS

The following information should be read in conjunction with Ameriprise Certificate Company’s (“~~ACC”~~ACC’s”) Consolidated Financial Statements and ~~related notes~~Notes presented in Part I, Item 1. This discussion may contain forward-looking statements that reflect ACC’s plans, estimates and beliefs. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed under “Forward-Looking Statements.” ACC believes it is useful to read its management’s narrative analysis in conjunction with its Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the Securities and Exchange Commission (“SEC”) on February ~~23,~~ 27, 2019 (“2018 ~~(“2017~~ 10-K”), as well as its current reports on Form 8-K and other publicly available information.

ACC is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”). ACC is registered as an investment company under the Investment Company Act of 1940 and is in the business of issuing face-amount investment certificates. Face-amount investment certificates issued by ACC entitle the certificate owner to receive at maturity a stated amount of money and interest or credits declared from time to time by ACC, at its discretion. The certificates issued by ACC are not insured by any government agency. ACC’s certificates are sold primarily by Ameriprise Financial Services, Inc. (“AFSI”), an affiliate of ACC. ~~Ameriprise Financial Services, Inc.~~AFSI is registered as a broker-dealer in all 50 states, the District of Columbia and Puerto Rico. ACC’s investment portfolio is managed by Columbia Management Investment Advisers, LLC (“CMIA”), a wholly owned subsidiary of Ameriprise Financial.

In 2018, Ameriprise Financial made the strategic decision to seek to expand the banking products and services it can provide directly to its clients, and commenced the process to convert Ameriprise National Trust Bank into a federal savings bank with the capabilities to offer FDIC insured deposits and a range of lending products. Ameriprise Financial completed that process in May 2019, and therefore ACC (as a subsidiary of Ameriprise Financial) is now (absent exclusion or exemption) required to comply with investment limitations on its portfolio and other limitations under applicable banking laws, including what is commonly referred to as the Volcker Rule.

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

~~Critical~~Significant Accounting Policies

ACC’s ~~critical~~significant accounting policies are discussed in detail in ~~“Management's~~“Management’s Narrative Analysis — ~~Critical~~Recent Accounting Pronouncements and Significant Accounting Policies” in ~~its 2017~~ACC’s 2018 10-K.

Recent Accounting Pronouncements

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

Results of Operations for the Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018

ACC’s net income is derived primarily from the after-tax yield on investments and realized investment gains (losses), less investment expenses and interest credited on certificate reserve liabilities. Net income trends occur largely due to changes in returns on ACC’s investment portfolio, from realization of investment gains (losses) and from changes in interest credited to certificate products. ACC follows U.S. generally accepted accounting principles (“GAAP”).

Net income ~~decreased $1.7~~increased $0.7 million, or 5%2%, to ~~$33.5~~$34.2 million for the nine months ended September 30, ~~2018~~2019 compared to ~~$35.2~~$33.5 million for the prior year period primarily due to higher investment income, partially offset by higher net provision for certificate reserves and investment ~~expenses and lower net realized gains on investments in the current year period, partially offset by higher investment income and lower income tax expense in the current year period.~~expenses.

Investment income increased ~~$26.6~~$50.0 million, or ~~25%~~38%, to ~~$132.6~~$182.6 million for the nine months ended September 30, ~~2018~~2019 compared to ~~$106.0~~$132.6 million for the prior year period reflecting ~~higher average investment balances from certificate net inflows and~~ an increase in the average invested asset ~~yield.~~yield and higher average investment balances.

Investment expenses increased ~~$3.5~~$5.0 million, or ~~13%~~16%, to ~~$31.4~~$36.4 million for the nine months ended September 30, ~~2018~~2019 compared to ~~$27.9~~$31.4 million for the prior year period primarily due to volume-driven increases in distribution, investment advisory and transfer agent fees.

Net provision for certificate reserves increased ~~$24.2~~$43.8 million, or ~~75%~~77%, to ~~$56.6~~$100.4 million for the nine months ended September 30, ~~2018~~2019 compared to ~~$32.4~~$56.6 million for the prior year period primarily due to higher average ~~certificate balances from certificate net inflows and~~client crediting rates as well as higher average ~~client crediting rates.~~certificate balances.

~~Net realized gain on investments before income taxes~~ACC’s effective tax rate was ~~$0.5 million~~25.1% for the nine months ended September 30, ~~2018~~2019 compared to ~~net realized gain on investments before income taxes of $8.9 million~~25.7% for the prior year period. Net realized gain on investments for the nine months ended September 30, 2018 included net realized gains from sales, tenders and calls of Available-for-Sale securities of $0.3 million and net realized gains from sales of syndicated loans of $0.2 million. Net realized gain on investments for the nine months ended September 30, 2017 included net realized gains from sales, tenders and calls of Available-for-Sale securities of $9.0 million primarily due to the sale of non-agency residential mortgage backed securities as well as common stock, partially offset by other-than-temporary impairments of $0.2 million. The other-than-temporary impairments for the nine months ended September 30, 2017 related to credit losses on non-agency residential mortgage backed securities.

ACC’s effective tax rate was 25.7% for the nine months ended September 30, 2018 compared to 35.4% for the prior year period. In December of 2017, the Tax Act reduced federal income tax rates from 35% to 21% for tax years after 2017. The lower effective tax rate for the nine months ended ~~September 30, 2018~~ ~~compared to the prior year period is primarily due to the reduced income tax rate offset by higher state taxes and taxes applicable to prior years.~~

AMERIPRISE CERTIFICATE COMPANY

Fair Value Measurements

ACC reports certain assets and liabilities at fair value; specifically, derivatives, embedded derivatives, and most investments and cash equivalents. Fair value assumes the exchange of assets or liabilities occurs in orderly transactions. Companies are not permitted to use market prices that are the result of a forced liquidation or distressed sale. ACC includes actual market prices or observable inputs in its fair value measurements to the extent available. Non-binding broker quotes are obtained when quotes from third-party pricing services are not available. ACC validates prices obtained from third parties through a variety of means such as: price variance analysis, subsequent sales testing, stale price review, price comparison across pricing vendors and due diligence reviews of vendors. See Note 5 to the ~~consolidated financial statements~~Consolidated Financial Statements for additional information regarding ACC’s fair value measurements.

Forward-Looking Statements

This report contains forward-looking statements that reflect management’s plans, estimates and beliefs. Actual results could differ materially from those described 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 intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. ACC undertakes no obligation to update or revise any forward-looking statements.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

ACC’s management, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of ACC’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, ACC’s Chief Executive Officer and Chief Financial Officer have concluded that ACC’s disclosure controls and procedures were effective at a reasonable level of assurance as of September 30, ~~2018.~~2019.

Changes in Internal Control over Financial Reporting

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

AMERIPRISE CERTIFICATE COMPANY

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 8 to the Consolidated Financial Statements in Part I, Item 1 is incorporated herein by reference.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors provided in Part I, Item 1A of ACC’s ~~2017~~2018 10-K.

ITEM 6. EXHIBITS

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 August 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, filed electronically on or about November 5, 2010 as Exhibit 3(b) to Registrant’s Form 10-Q, are incorporated herein by reference.
31.131.1	Certification of Abu M. Arif pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.231.2	Certification of Jason S. Bartylla pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
3232	Certification of Abu M. Arif and Jason S. Bartylla pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed electronically herewithin.

AMERIPRISE CERTIFICATE COMPANY

SIGNATURES

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


				~~(Registrant)~~



Date:	November ~~5, 2018~~	12, 2019	By:	/s/ Abu M. Arif
Date:			By:		Abu M. Arif
				Chief Executive Officer




Date:	November ~~5, 2018~~	12, 2019	By:	/s/ Jason S. Bartylla
Date:			By:		Jason S. Bartylla
				Chief Financial Officer

AMERIPRISE CERTIFICATE COMPANY

(Registrant)