UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

		For the Quarterly Period Ended ~~September 30, 2005~~March 31, 2006

	or

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

For the Transition Period from to

Commission file number 1-32525

AMERIPRISE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-3180631
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

55 Ameriprise Financial Center, Minneapolis, Minnesota		55474
(Address of principal executive offices)		(Zip Code)

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

None

(Former name, former address and former fiscal year, if changed since last ~~report.~~report)

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. ~~(The registrant has not been subject to such filing requirements for the past 90 days.)~~

Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, ~~(as defined~~or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange ~~Act).~~Act.

~~Yes~~

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o No ý

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

Yes o No ý

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

Class		Outstanding at ~~November 4, 2005~~May 3, 2006
Common Stock (par value $.01 per share)		~~249,957,726~~244,383,133 shares

AMERIPRISE FINANCIAL, INC.

FORM 10-Q

INDEX

			Page No.

Part I.	Financial Information:

	Item 1.	Financial Statements

		Consolidated Statements of Income – Three months ended ~~September 30,~~March 31, 2006 and 2005 ~~and 2004~~	1

		~~Consolidated Statements of Income – Nine months ended September 30, 2005 and 2004~~	23

		Consolidated Balance Sheets – ~~September 30, 2005~~March 31, 2006 and December 31, ~~2004~~2005	34

		Consolidated Statements of Cash Flows – ~~Nine~~Three months ended ~~September 30,~~March 31, 2006 and 2005 ~~and 2004~~	~~4 – 5~~5-6

		Consolidated Statements of Shareholders’ Equity – ~~Nine~~Three months ended ~~September 30,~~March 31, 2006 and 2005 ~~and 2004~~	67

		Notes to Consolidated Financial Statements	~~7 – 21~~8-19

	Item 2.	Management’s Discussion and Analysis of ~~Financial Condition and~~ Results of Operations and Financial Condition	~~22 – 45~~20-34

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4635

	Item 4.	Controls and Procedures	~~47 – 48~~35

Part II.	Other Information:

	Item 1.	Legal Proceedings	4936

	Item 4.1A.	~~Submission of Matters to Vote of Security Holders~~Risk Factors	4936

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36-37

	Item 6.	Exhibits	4937

	Signatures		5038

	Exhibit Index		E-1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(~~Millions,~~in millions, except per share amounts)

~~(Unaudited)~~

	Three Months Ended				Three Months Ended
	September 30,				March 31,
	2005		2004		2006		2005
Revenues:
Revenues
Management, financial advice and service fees	$	687	$	550	$	710	$	608
Distribution fees	296		248		301		288
Net investment income	561		520		574		548
Premiums	202		262		220		270
Other revenues	127		132		144		133
Total revenues	1,873		1,712		1,949		1,847

Expenses:
Expenses
Compensation and benefits	703		560		739		641
Interest credited to account values	337		302		324		311
Benefits, claims, losses and settlement expenses	190		205		227		218
Amortization of deferred acquisition costs	49		108		128		136
Interest and debt expense	16		13		23		17
Separation costs	92		—		67		20
Other expenses	305		263		250		258
Total expenses	1,692		1,451		1,758		1,601

Income before income tax provision and discontinued operations	181		261		191		246
Income tax provision	58		73		46		71
Income before discontinued operations	123		188		145		175
Discontinued operations, net of tax	2		11
Income from discontinued operations, net of tax					—		8
Net income	$	125	$	199	$	145	$	183

Earnings per Common Share – Basic and Diluted:
Earnings per Common Share – Basic and Diluted
Income before discontinued operations	$	0.50	$	0.77	$	0.57	$	0.71
Discontinued operations, net of tax	—		0.04
Income from discontinued operations, net of tax					—		0.03
Net income	$	0.50	$	0.81	$	0.57	$	0.74

Average Common Shares Outstanding for Earnings per Common Share (as adjusted for September 2005 stock split):
Basic and Diluted	246		246
Weighted average common shares outstanding for earnings per common share:
Basic					252.3		246.2
Diluted					253.5		246.2

Cash dividends declared per common share					$	0.11	$	—

See Notes to Consolidated Financial Statements.

~~AMERIPRISE FINANCIAL, INC.~~

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~(Millions, except per share amounts)~~

~~(Unaudited)~~

Nine Months Ended

September 30,

2005

2004

Revenues:

Management, financial advice and service fees

$
1,927

$
1,642

Distribution fees

873

834

Net investment income

1,667

1,566

Premiums

751

759

Other revenues

397

383

Total revenues

5,615

5,184

Expenses:

Compensation and benefits

1,995

1,690

Interest credited to account values

976

926

Benefits, claims, losses and settlement expenses

646

605

Amortization of deferred acquisition costs

319

312

Interest and debt expense

52

37

Separation costs

168

—

Other expenses

841

762

Total expenses

4,997

4,332

Income before income tax provision, discontinued operations and accounting change

618

852

Income tax provision

171

253

Income before discontinued operations and accounting change

447

599

Discontinued operations, net of tax

16

31

Cumulative effect of accounting change, net of tax

—

(71
)
Net income

$
463

$
559

Earnings per Common Share – Basic and Diluted:

Income before discontinued operations and accounting change

$
1.80

$
2.43

Discontinued operations, net of tax

0.07

0.13

Cumulative effect of accounting change, net of tax

—

(0.29
)
Net income

$
1.87

$
2.27

Average Common Shares Outstanding for Earnings per Common Share (as adjusted for September 2005 stock split):

Basic and Diluted

246

246

~~See Notes to Consolidated Financial Statements.~~

~~AMERIPRISE FINANCIAL, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(Millions, except share data)~~

September 30,

December 31,

2005

2004

(Unaudited)

ASSETS

Cash and cash equivalents

$
2,620

$
1,024

Investments

39,454

40,232

Receivables

2,837

2,160

Deferred acquisition costs

4,088

3,956

Separate account assets

39,840

35,901

Restricted and segregated cash

1,058

1,536

Other assets

2,377

2,431

Assets of discontinued operations

—

5,873

Total assets

$
92,274

$
93,113

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:

Future policy benefits and claims

$
32,958

$
33,253

Investment certificate reserves

6,392

5,831

Accounts payable and accrued expenses

2,516

2,456

Payable to American Express

102

1,751

Short-term debt

1,351

—

Long-term debt

360

385

Separate account liabilities

39,840

35,901

Other liabilities

1,018

1,203

Liabilities of discontinued operations

—

5,631

Total liabilities

84,537

86,411

Shareholders’ equity:

Common shares ($.01 par value, 1,250 million shares authorized; 246 million issued and outstanding as of September 30, 2005; $.01 par value, 100 shares authorized, issued and outstanding (prior to adjusting for September 2005 stock split) as of December 31, 2004)

2

—

Additional paid-in capital

4,094

2,907

Retained earnings

3,661

3,415

Accumulated other comprehensive (loss) income, net of tax:

Net unrealized securities gains

16

425

Net unrealized derivatives losses

(11
)
(28
)
Foreign currency translation adjustment

(24
)
(16
)
Minimum pension liability

(1
)
(1
)
Total accumulated other comprehensive (loss) income

(20
)
380

Total shareholders’ equity

7,737

6,702

Total liabilities and shareholders’ equity

$
92,274

$
93,113

~~See Notes to Consolidated Financial Statements.~~

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED ~~STATEMENTS OF CASH FLOWS~~BALANCE SHEETS

~~(Millions)~~

~~(Unaudited)~~(in millions, except share and per share amounts)

Nine Months Ended

September 30,

2005

2004

Cash Flows from Operating Activities

Net income

$
463

$
559

Income from discontinued operations, net of tax

16

31

Income before discontinued operations

447

528

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations:

Amortization of deferred acquisition and sales inducement costs

347

336

Capitalization of deferred acquisition and sales inducement costs

(582
)
(506
)
Depreciation, amortization, accretion and other

229

231

Other-than-temporary impairments and provision for loan losses

3

6

Deferred income taxes

65

23

Net realized investment gains

(50
)
(33
)
Changes in operating assets and liabilities:

Segregated cash

(50
)
149

Trading securities and equity method investments in hedge funds, net

114

(26
)
Future policy benefits and claims, net

7

—

Receivables

(174
)
(356
)
Other assets, other liabilities, accounts payable and accrued expenses,net

13

39

Cumulative effect of accounting change, net of tax

—

71

Net cash provided by operating activities of continuing operations

369

462

Cash Flows from Investing Activities

Available-for-Sale securities:

Proceeds from sales

3,477

1,595

Maturities, sinking fund payments and calls

2,705

2,608

Purchases

(6,428
)
(5,036
)
Open securities transactions payable and receivable, net

(466
)
(27
)
Proceeds from sales and maturities of mortgage loans on real estate

446

419

Funding of mortgage loans on real estate

(375
)
(236
)
Proceeds from sales of other investments

152

210

Purchase of other investments

(125
)
(163
)
Purchase of land, buildings, equipment and software

(94
)
(94
)
Proceeds from sale of land, buildings and equipment

—

3

Proceeds from transfer of AMEX Assurance deferred acquisition costs

117

—

Deconsolidation of AMEX Assurance

(29
)
—

Change in restricted cash

528

313

Other, net

1

2

Net cash used in investing activities of continuing operations

(91
)
(406
)

	March 31,			December 31,
	2006			2005
	(unaudited)
Assets
Cash and cash equivalents	$	1,650		$	2,474
Investments	38,100			39,100
Receivables	2,382			2,172
Deferred acquisition costs	4,280			4,182
Separate account assets	45,220			41,561
Restricted and segregated cash	1,084			1,067
Other assets	3,105			2,565
Total assets	$	95,821		$	93,121

Liabilities and Shareholders’ equity
Liabilities:
Future policy benefits and claims	$	32,200		$	32,731
Investment certificate reserves	5,180			5,649
Accounts payable and accrued expenses	2,780			2,780
Debt	1,921			1,833
Separate account liabilities	45,220			41,561
Other liabilities	1,179			880
Total liabilities	88,480			85,434

Shareholders’ equity:
Common shares ($.01 par value; shares authorized, 1,250,000,000; shares issued, 251,211,366 and 249,998,206, respectively)	3			2
Additional paid-in capital	4,208			4,091
Retained earnings	3,862			3,745
Treasury shares, at cost (6,928,819 and 122,652 shares, respectively)	(290		)	—
Accumulated other comprehensive loss, net of tax	(442		)	(151		)
Total shareholders’ equity	7,341			7,687
Total liabilities and shareholders’ equity	$	95,821		$	93,121

See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

~~(Millions)~~

~~(Unaudited)~~(in millions)

Nine Months Ended

September 30,

2005

2004

Cash Flows from Financing Activities

Investment certificates:

Payments from certificate owners

2,706

2,120

Interest credited to account values

143

84

Certificate maturities and cash surrenders

(2,291
)
(1,680
)
Policyholder and contractholder account values:

Consideration received

1,227

1,768

Interest credited to account values

833

842

Surrenders and death benefits

(2,450
)
(2,015
)
Proceeds from issuance of short-term debt

1,351

—

Principal repayments of long-term debt

(11
)
(70
)
Payable to American Express, net

(1,316
)
239

Capital transactions with American Express, net

1,202

(691
)
Dividends received from discontinued operations

—

95

Customer deposits and other, net

(62
)
(68
)
Net cash provided by financing activities of continuing operations

1,332

624

Effect of exchange rate changes on cash

(14
)
5

Net increase in cash and cash equivalents

1,596

685

Cash and cash equivalents at beginning of period

1,024

1,058

Cash and cash equivalents at end of period

$
2,620

$
1,743

Supplemental Disclosures:

Interest paid

$
74

$
35

Income taxes paid, net

$
94

$
255

Supplemental schedule of noncash transactions in connection with separation:

Non-cash dividend of AEIDC to American Express

$
164

$
—

	Three Months Ended
	March 31,
	2006			2005
Cash Flows from Operating Activities
Net income	$	145		$	183
Less: Income from discontinued operations, net of tax	—			8
Income before discontinued operations	145			175
Adjustments to reconcile income before discontinued operations to net cash provided by operating activities:
Amortization of deferred acquisition and sales inducement costs	139			147
Capitalization of deferred acquisition and sales inducement costs	(212		)	(185		)
Depreciation, amortization, accretion and other	41			80
Share-based compensation	24			14
Other-than-temporary impairments and provision for loan losses	1			1
Deferred income taxes	(5		)	39
Net realized investment gains	(4		)	(4		)
Excess tax benefits from share-based compensation	(6		)	—
Changes in operating assets and liabilities:
Segregated cash	85			43
Trading securities and equity method investments in hedge funds, net	(11		)	79
Future policy benefits and claims, net	15			9
Receivables	(183		)	(358		)
Other assets, other liabilities, accounts payable and accrued expenses, net	78			154
Net cash provided by operating activities	107			194

Cash Flows from Investing Activities
Available-for-Sale securities:
Proceeds from sales	589			647
Maturities, sinking fund payments and calls	918			635
Purchases	(983		)	(1,738		)
Open securities transactions payable and receivable, net	4			9
Proceeds from sales and maturities of mortgage loans on real estate	145			75
Funding of mortgage loans on real estate	(106		)	(82		)
Proceeds from sales of other investments	32			53
Purchase of other investments	(66		)	(45		)
Purchase of land, buildings, equipment and software	(34		)	(27		)
Change in restricted cash	(12		)	(41		)
Other, net	1			—
Net cash provided by (used in) investing activities	488			(514		)

See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)

(in millions)

	Three Months Ended
	March 31,
	2006			2005
Cash Flows from Financing Activities
Investment certificates:
Payments from certificate owners	471			1,129
Interest credited to account values	55			38
Certificate maturities and cash surrenders	(993		)	(719		)
Policyholder and contractholder account values:
Consideration received	336			443
Interest credited to account values	269			273
Surrenders and death benefits	(1,148		)	(793		)
Principal repayments of debt	(50		)	—
Payable to American Express, net	—			36
Capital transactions with American Express, net	—			8
Dividends paid to shareholders	(28		)	—
Repurchase of common shares	(290		)	—
Exercise of stock options	5			—
Excess tax benefits from share-based compensation	6			—
Customer deposits and other, net	(54		)	(10		)
Net cash provided by (used in) financing activities	(1,421		)	405

Cash Flows from Discontinued Operations
Net cash provided by operating activities	—			27
Net cash used in investing activities	—			(73		)
Net cash provided by financing activities	—			221
Net cash provided by discontinued operations	—			175

Effect of exchange rate changes on cash	2			(4		)
Net increase (decrease) in cash and cash equivalents	(824		)	256
Cash and cash equivalents at beginning of period	2,474			1,078
Cash and cash equivalents at end of period	$	1,650		$	1,334

Cash and cash equivalents of discontinued operations included above:
At beginning of period	$	—		$	54
At end of period	$	—		$	229

Supplemental Disclosures:
Interest paid	$	2		$	3
Income taxes paid, net	$	43		$	16

See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2006 AND 2005

~~NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004~~(in millions, except share amounts)

~~(Millions)~~

~~(Unaudited)~~

Total

Common
Shares

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings

Balances at December 31, 2003

$
7,288

$
—

$
2,867

$
475

$
3,946

Comprehensive income:

Net income

559

559

Change in unrealized holding gains on securities, net

11

11

Change in derivative losses, net

(11
)

(11
)

Foreign currency translation adjustment

(5
)

(5
)

Total comprehensive income

554

Dividends paid to American Express

(723
)

(723
)
Capital transactions with American Express, net

32

32

Balances at September 30, 2004

$
7,151

$
—

$
2,899

$
470

$
3,782

Balances at December 31, 2004

$
6,702

$
—

$
2,907

$
380

$
3,415

Comprehensive income:

Net income

463

463

Change in unrealized holding gains on securities, net

(409
)

(409
)

Change in unrealized derivative losses, net

17

17

Foreign currency translation adjustment

(8
)

(8
)

Total comprehensive income

63

Cash dividends paid to American Express

(53
)

(53
)
Non-cash dividends paid to American Express

(164
)

(164
)
Share-based incentive employee compensation plan

(67
)

(67
)

Stock split of common shares issued and outstanding

—

2

(2
)

Capital transactions with American Express, net

1,256

1,256

Balances at September 30, 2005

$
7,737

$
2

$
4,094

$
(20
)
$
3,661

	Number of Outstanding Shares		Common Shares		Additional Paid-In Capital		Retained Earnings			Treasury Shares			Accumulated Other Comprehensive Income (Loss)			Total
Balances at December 31, 2004	100		$	—	$	2,907	$	3,415		$	—		$	380		$	6,702

Comprehensive loss:
Net income							183						—			183
Change in unrealized holding gains on securities, net													(401		)	(401		)
Change in unrealized derivative losses, net													(7		)	(7		)
Foreign currency translation adjustment													(3		)	(3		)
Total comprehensive loss																(228		)
Capital transactions with American Express, net					8											8
Balances at March 31, 2005	100		$	—	$	2,915	$	3,598		$	—		$	(31	)	$	6,482

Balances at December 31, 2005	249,875,554		$	2	$	4,091	$	3,745		$	—		$	(151	)	$	7,687

Comprehensive loss:
Net income							145									145
Change in unrealized holding gains on securities, net													(290		)	(290		)
Change in unrealized derivative losses, net													(1		)	(1		)
Foreign currency translation adjustment													—			—
Total comprehensive loss																(146		)
Dividends paid to shareholders							(28		)							(28		)
Treasury shares	(6,806,167	)								(290		)				(290		)
Share-based compensation plans	1,213,160		1		117											118
Balances at March 31, 2006	244,282,547		$	3	$	4,208	$	3,862		$	(290	)	$	(442	)	$	7,341

See Notes to Consolidated Financial Statements.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(Unaudited)~~

1. ~~Separation and Distribution from American Express~~

Ameriprise Financial, Inc (the Company or Ameriprise) was formerly a wholly-owned subsidiary of American Express Company (American Express). On February 1, 2005, the American Express Board of Directors announced its intention to pursue the disposition of 100% of its shareholdings in the Company through a tax-free distribution to American Express Company’s shareholders. In preparation for the disposition, the Company approved a stock split of its 100 common shares entirely held by American Express into 246 million common shares. Effective as of the close of business on September 30, 2005, American Express completed the separation of Ameriprise and the distribution of the Ameriprise common shares to American Express shareholders (the Distribution). The Distribution was effectuated through a pro-rata dividend to American Express shareholders consisting of one share of Ameriprise common stock for every 5 shares of American Express common stock owned by its shareholders on September 19, 2005, the record date. Prior to August 1, 2005, Ameriprise was named American Express Financial Corporation.

~~In connection with the Distribution, Ameriprise entered into the following transactions with American Express.~~

• Effective August 1, 2005, the Company transferred its ownership interest and the related assets and liabilities of its consolidated subsidiary, American Express International Deposit Company (AEIDC), to American Express for $164 million through a non-cash dividend equal to the net book value excluding $26 million of net unrealized investment losses of AEIDC. In connection with the AEIDC transfer American Express paid the Company a $164 million capital contribution. The assets, liabilities and results of operations of AEIDC are shown as discontinued operations in the accompanying financial statements. Refer to Note 7 for further discussion.

• Effective July 1, 2005, the Company’s subsidiary, AMEX Assurance, ceded 100% of its travel and other card insurance business offered to American Express customers, to an American Express subsidiary in return for an arm’s length ceding fee. As of September 30, 2005, the Company has entered into an agreement to sell the AMEX Assurance legal entity to American Express within two years after separation for a fixed price equal to the net book value of AMEX Assurance as of the separation date, which approximates $115 million.

In connection with the Distribution, American Express provided the Company a capital contribution of approximately $1.1 billion, which is in addition to the $164 million capital contribution noted above.

~~As a result of the Distribution, Ameriprise has entered into an unsecured bridge loan in the amount of $1.4 billion. That loan was drawn in September 2005. Refer to Note 5 for further discussion.~~

Ameriprise has incurred significant non-recurring separation costs as a result of the separation from American Express. Separation costs generally consisted of expenses related to advisor retention program costs, technology costs and costs associated with establishing the Ameriprise Financial brand. During the quarter ended September 30, 2005, $92 million ($59 million after-tax) of such costs were incurred. For the nine months ended September 30, 2005 actual costs have totaled $168 million pretax ($109 million after-tax).

American Express has historically provided a variety of corporate and other support services for Ameriprise, including information technology, treasury, accounting, financial reporting, tax administration, human resources, marketing, legal, procurement and other services. American Express will continue to provide Ameriprise with many of these services pursuant to a transition services agreement for transition periods of up to two years following the separation and distribution, and Ameriprise will arrange to procure other services pursuant to arrangements with third parties or through the Company’s own employees.

~~Retirement plans are in the process of being segregated. See Note 11 for further discussion. The new plans are substantially consistent with old plans.~~

~~Additionally, a tax allocation agreement with American Express was signed effective September 30, 2005. See Note 12 for further discussion.~~

2.~~Basis of Presentation and Recent Accounting Pronouncements~~

Basis of Presentation

The ~~Company~~accompanying Consolidated Financial Statements include the accounts of Ameriprise Financial, Inc. (“Ameriprise Financial”), companies in which it directly or indirectly has a controlling financial interest, those variable interest entities (“VIEs”) in which it is the primary beneficiary and certain limited partnerships for which it is the general partner. The “Company” may refer to either Ameriprise Financial exclusively, to the consolidated group or to one or more subsidiaries of Ameriprise Financial. All material intercompany transactions and balances between or among Ameriprise Financial and its subsidiaries and affiliates have been eliminated in consolidation. Ameriprise Financial is a holding company which primarily conducts business through its subsidiaries to provide financial planning, products and ~~financial~~ services ~~company~~ that ~~offers~~are designed to offer solutions for its clients’ asset accumulation, income ~~management~~ and protection needs. The Company has two main operating segments: (i) Asset Accumulation and Income and (ii) Protection. These two operating segments are aligned with the financial solutions the Company offers to address its clients’ needs. The Asset Accumulation and Income business offers mutual funds as well as its own annuities and other asset accumulation and income management products and services to retail clients through its advisor network. The Company offers its annuity products through outside channels, such as banks and broker-dealer networks. This operating segment also serves institutional clients in the separately managed account, sub-advisory and 401(k) markets, among others. The Protection segment offers various life, disability income, long-term care, and brokered insurance products through the Company’s advisor network. The Company offers personal auto and home insurance products on a direct basis to retail clients principally through its strategic marketing alliances.

The Company has a Corporate and Other segment, which consists of income derived from corporate level assets and unallocated corporate expenses, primarily separation costs, as well as the results of its subsidiary, Securities Americaaccompanying Consolidated Financial ~~Corporation, which operates its own independent separately branded distribution platform.~~

Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The interim financial information in this report has not been audited. In the opinion of management, all adjustments necessary for a fair ~~statement~~presentation of ~~the consolidated financial position and~~ the consolidated results of operations and financial position for the interim periods have been made. 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.

~~Principles of Consolidation~~

~~The accompanying consolidated financial statements~~ These Consolidated Financial Statements and Notes should be read in conjunction with the ~~financial statements~~Consolidated Financial Statements which are ~~included~~incorporated by reference in the Annual Report on Form 10-K of Ameriprise Financial, Inc. for the year ended December 31, 2005, filed with the Securities and Exchange Commission ~~(SEC) Form 10 registration statement of Ameriprise Financial, Inc. filed~~(“SEC”) on ~~August 19, 2005. All material intercompany accounts and transactions have been eliminated in consolidation.~~ March 8, 2006.

Certain reclassifications of prior period amounts have been made to conform to the current presentation. Additionally, all share and per share information for the three months ended March 31, 2005 have been retroactively adjusted for the stock split of the Company’s common shares as of September 30, 2005 into 246.2 million common shares. The Company also revised the presentation of its previously reported segment data for the three months ended March 31, 2005 to conform to the segment reporting changes implemented by the Company as of January 1, 2006.

On February 1, 2005, the American Express Company (“American Express”) Board of Directors announced its intention to pursue the disposition of 100% of its shareholdings in the Company (the “Separation”) through a tax-free distribution to American Express shareholders. Effective as of the close of business on September 30, 2005, American Express completed the separation of the Company and the distribution of the Company’s common shares to American Express shareholders (the “Distribution”). Prior to the Distribution, the Company had been a wholly-owned subsidiary of American Express. For the periods preceding the Distribution, the Company prepared its consolidated financial statements as if it had been a stand-alone company. In the preparation of the Consolidated Financial Statements for the periods preceding the Distribution, the Company made certain allocations of expenses that its management believes to be a reasonable reflection of costs it would have otherwise incurred as a stand-alone company but were paid by American Express.

~~Recently Issued~~2.Recent Accounting Pronouncements

In February 2006,the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140.” SFAS No. 155 improves financial reporting by eliminating the exemption from applying SFAS No. 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. It also improves financial reporting by allowing a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a remeasurement (new basis) event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated. SFASNo. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company is currently evaluating the impact of SFAS No. 155 on the Company’s consolidated results of operations and financial condition.

On November 3, 2005, the ~~Financial Accounting Standards Board (FASB)~~FASB issued FASB Staff Position ~~(FSP)~~(“FSP”) FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” FSP FAS 115-1 and FAS 124-1 ~~addresses~~address the determination as to when an investment is considered impaired, whether that impairment is other-than-temporary and the measurement of loss. It also includes accounting considerations subsequent to the recognition of an

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

2.Recent Accounting Pronouncements (Continued)

other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. FSP FAS 115-1 and FAS 124-1 are effective for reporting periods beginning after December 15, 2005. The ~~Company is currently evaluating the impact~~effect of adopting FSP FAS 115-1 and FAS 124-1 on the Company’s consolidated results of operations and financial ~~position.~~condition was not material.

In September 2005, the American Institute of Certified Public Accountants ~~(AICPA)~~(“AICPA”) issued ~~Statement of Position (SOP)~~SOP 05-1, “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection With Modifications or Exchanges of Insurance Contracts” ~~(SOP 05-1)~~(“SOP 05-1”). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment

contracts other than those specifically described in ~~Statement of Financial Accounting Standards (SFAS)~~SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments.” SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006, with earlier adoption encouraged. The Company is currently evaluating the impact of SOP 05-1 on the Company’s consolidated results of operations and financial ~~position.~~condition.

In June 2005, the FASB approved Emerging Issues Task Force (“EITF”) Issue No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”). EITF 04-5 provides guidance on whether a partnership should be consolidated by one of its partners. EITF 04-5 is effective for general partners of all new limited partnerships formed and for existing limited partnerships for which the partnership agreements are modified after June 29, 2005. For general partners in all other limited partnerships, this guidance is effective no later than January 1, 2006. The adoption of EITF 04-5 resulted in the consolidation of certain limited partnerships for which the Company is the general partner. The effect of this consolidation as of January 1, 2006 was a net increase in total assets and total liabilities of $427 million, consisting of $14 million of investments (net of $153 million of investments as of December 31, 2005 previously accounted for under the equity method), $89 million of restricted cash, $324 million of other assets, $291 million of other liabilities and $136 million of nonrecourse debt. The adoption of EITF 04-5 had no net effect on consolidated net income.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). This statement replaces Accounting Principles Board (“APB”) Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The effect of adopting SFAS 154 on the Company’s consolidated results of operations and financial condition was not material.

3.Separation and Distribution from American Express and Discontinued Operations

American Express has historically provided a variety of corporate and other support services for the Company, including information technology, treasury, accounting, financial reporting, tax administration, human resources, marketing, legal, procurement and other services. Following the Distribution, American Express has continued to provide the Company with many of these services pursuant to a transition services agreement for transition periods of up to two years or more, if extended by mutual agreement of the Company and American Express. The Company will generally terminate a particular service after it has completed the procurement of the designated service through arrangements with third parties or through the Company’s own employees.

The Company has incurred significant non-recurring separation costs as a result of the Distribution. These costs include advisor and employee retention program costs, costs associated with establishing the Ameriprise Financial brand and costs to separate and reestablish the Company’s technology platforms.

Effective July 1, 2005, the Company’s subsidiary, AMEX Assurance Company ~~adopted SFAS No. 123 (revised 2004)~~(“AMEX Assurance”), ~~“Share-Based Payment” (SFAS No. 123(R)). SFAS No. 123(R) requires entities~~ceded 100% of its travel insurance and card related business offered to ~~measure and recognize the cost of employee services in exchange~~American Express customers to an American Express subsidiary for an ~~award~~arm’s length ceding fee. The Company entered into an agreement to sell the AMEX Assurance legal entity to a subsidiary of equity instruments based on the grant-date fair value of the award (with limited exceptions). In January 2003, the Company adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), prospectively for all American Express ~~stock options granted~~within two years after the Distribution for a fixed price equal to the ~~Company’s employees after December 31, 2002. Substantially all stock options for which intrinsic~~net book value ~~accounting was continued under Accounting Principles Board (APB) Opinion No. 25 were vested as~~ of June 30, 2005. SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. The effect of adopting SFAS 123(R) on the Company’s results of operations and financial position, using a modified prospective application, was insignificant. In March 2005, the SEC issued Staff Accounting Bulletin (SAB) No. 107 (SAB No. 107), which summarizes the staff’s views regarding share-based payment arrangements for public companies. The Company took into account the views included in SAB No. 107 in its adoption of SFAS No. 123(R).

In June 2004, the FASB issued FSP No. 97-1, “Situations in Which Paragraphs 17(b) and 20 of FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments (SFAS No. 97), Permit or Require Accrual of an Unearned Revenue Liability” (FSP 97-1). The implementation of the AICPA SOP 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” (SOP 03-1) raised a question regarding the interpretation of the requirements of SFAS No. 97 concerning when it is appropriate to record an unearned revenue liability. FSP 97-1 clarifies that SFAS No. 97 is clear in its intent and language, and requires the recognition of an unearned revenue liability for amounts that have been assessed to compensate insurers for services to be performed over future periods. SOP 03-1 describes one situation, when assessments result in profits followed by losses, where an unearned revenue liability is required. SOP 03-1 does not amend SFAS No. 97 or limit the recognition of an unearned revenue liability to the situation described in SOP 03-1. The guidance in FSP 97-1 is effective for financial statements for fiscal periods beginning after June 18, 2004. The adoption of FSP 97-1 did not have a material impact on the Company’s consolidated financial condition or results of operations.

Effective January 1, 2004, the Company adopted SOP 03-1 which provides guidance on: (i) the classification and valuation of long-duration contract liabilities; (ii) the accounting for sales inducements; and (iii) separate account presentation and valuation. The adoption of SOP 03-1 as of January 1, 2004, resulted in a cumulative effect of accounting change that reduced first quarter 2004 results by $71 million ($109 million pretax). The cumulative effect of accounting change consisted of: (i) $43 million pretax from establishing additional liabilities for certain variable annuity guaranteed benefits ($33 million) and from considering these liabilities in valuing deferred acquisition costs (DAC) and deferred sales inducement costs associated with those contracts ($10 million) and (ii) $66 million pretax from establishing additional liabilities for certain variable universal life and single pay universal life insurance contracts under which contractual costs of insurance charges are expected to be less than future death benefits ($92 million) and from considering these liabilities in valuing DAC associated with those contracts ($26 million offset). Prior to the adoption of SOP 03-1, amounts paid in excess of contract value were expensed when payable. Amounts expensed in 2004 to establish and maintain additional liabilities for certain variable annuity guaranteed benefits were $53 million (of which $33 million was part of the adoption charges discussed earlier) as compared to amounts expensed in 2003 and 2002 of $32 million and $37 million, respectively. The Company’s accounting for separate accounts was already consistent with the provisions of SOP 03-1 and, therefore, there was no impact related to this requirement.

The AICPA released a series of technical practice aids (TPAs) in September 2004, which provide additional guidance related to, among other things, the definition of an insurance benefit feature and the definition of policy assessments in determining benefit liabilities, as described within SOP 03-1. The TPAs did not have a material effect on the Company’s calculation of liabilities that were recorded in the first quarter of 2004 upon adoption of SOP 03-1.AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. ~~Investments~~

~~The following is a summary of investments at September 30, 2005~~Separation and ~~December 31, 2004:~~

September 30,

December 31,

(Millions)

2005

2004

Available-for-Sale securities, at fair value

$
34,438

$
34,979

Mortgage loans on real estate, net

3,178

3,249

Trading securities, at fair value and equity method investments in hedge funds

765

858

Policy loans

608

602

Other investments

465

544

Total

$
39,454

$
40,232

~~Gross realized gains~~Distribution from American Express and losses on sales and losses recognized for other-than-temporary impairments of securities classified as Available-for-Sale, using the specific identification method, were as follows for the three and nine months ended September 30, 2005 and 2004:

Three Months Ended
September 30,

Nine Months Ended
September 30,

(Millions)

2005

2004

2005

2004

Gross realized gains from sales

$
13

$
15

$
107

$
46

Gross realized losses from sales

$
(20
)
$
(6
)
$
(57
)
$
(15
)
Other-than-temporary impairments

$
(1
)
$
—

$
(2
)
$
(1
)

4.~~Deferred Acquisition Costs~~

~~The balances and changes in deferred acquisition costs from January 1, 2004 through September 30, 2005 were:~~

(Millions)

Balance, January 1, 2004

$
3,743

Impact of SOP 03-1

20

Capitalization of acquisition costs

621

Amortization, excluding impact of changes in assumptions

(517
)
Amortization, impact of annual third quarter changes in DAC-related assumptions

24

Amortization, impact of other quarter changes in DAC-related assumptions

56
^(a)
Impact of change in net unrealized securities losses

9

Balance, December 31, 2004

$
3,956

Capitalization of acquisition costs

508

DAC transfer related to AMEX Assurance ceding arrangement

(117
)
Amortization, excluding impact of changes in assumptions

(386
)
Amortization, impact of annual third quarter changes in DAC-related assumptions

67

Impact of change in net unrealized securities losses

60

Balance, September 30, 2005

$
4,088

^(a)^{Primarily relates to a $66 million reduction in DAC amortization expense to reflect the lengthening of the amortization periods for certain annuity and life insurance products impacted by the adoption by the Company of SOP 03-1 on January 1, 2004, partially offset by a $10 million increase in amortization expense due to a long-term care DAC valuation system conversion.}

5.~~Short-term Debt~~

In September 2005, the Company entered into an unsecured bridge loan facility in the amount of $1.4 billion, which matures in September 2006. At September 30, 2005, $1.4 billion was outstanding under this facility. The interest rate is variable based on one month LIBOR plus a spread and was 4.275% at September 30, 2005. In September 2005, the Company also obtained an unsecured revolving credit facility for $750 million expiring in September 2010 from various third party financial institutions and as of September 30, 2005, the Company had drawn no balance on that line. Under the terms of the revolving credit facility, the Company may increase the amount of the facility to $1.0 billion. At September 30, 2005, the Company was in compliance with all debt covenants related to these facilities.

6.~~Variable Interest Entities~~Discontinued Operations (Continued)

AMEX Assurance ~~maintains the required licenses to offer insurance in various states and both IDS Property Casualty, a subsidiary~~as of the Company, and American Express utilize those licenses to offer their products in exchange for a ceding fee. AMEX Assurance has entered into separate reinsurance agreements with IDS Property Casualty and American Express to transfer insurance related risks to the respective companies. As discussed in Note 1, effective September 30, 2005, the Company entered into an agreement to sell its interest in the AMEX Assurance legal entity to American Express within two years after separation for a fixed price. This transaction, combined with ceding of all travel and other card insurance business to American Express,Distribution or approximately $115 million. These transactions created a variable interest entity under GAAP for which the Company ~~has a significant interest but~~ is not the primary ~~beneficiary based on the Company’s variability in losses and returns relative to other variable interest holders.~~beneficiary. Accordingly, the Company deconsolidated AMEX Assurance for GAAP purposes as of September 30, 2005. AMEX Assurance had $413 million of total assets as of December 31, 2004, and $215 million of total revenues and $103 million of net income for the year ended December 31, 2004. The maximum exposure to loss as a result of the Company’s interest in AMEX Assurance is represented by the agreed-upon fixed sales price, which approximates $115 million.

7.~~Discontinued Operations~~

Effective August 1, 2005, the Company transferred its 50% ownership interest and the related assets and liabilities of its ~~consolidated~~ subsidiary, ~~AEIDC,~~American Express International Deposit Company (“AEIDC”), to American Express for $164 million through a non-cash dividend equal to the net book value excluding $26 million of ~~AEIDC excluding~~ net unrealized investment losses of ~~$26 million and accordingly no gain or loss was recorded.~~AEIDC. In connection with the AEIDC transfer, American Express ~~made~~paid the Company a ~~cash capital contribution of~~ $164 million ~~to the Company.~~capital contribution. The assets, liabilities and operations of AEIDC in 2005 are shown as discontinued operations in the accompanying ~~financial statements.~~Consolidated Financial Statements. For the three months ended March 31, 2005, the discontinued operations of AEIDC included revenues and pretax income of $70 million and $13 million, respectively.

4. Investments

The ~~components~~following is a summary of ~~earnings from discontinued operations~~investments for the ~~three~~periods indicated:

	March 31, 2006		December 31, 2005
	(in millions)
Available-for-Sale securities, at fair value	$	33,171	$	34,217
Mortgage loans on real estate, net	3,106		3,146
Trading securities, at fair value and equity method investments in hedge funds	733		676
Policy loans	622		616
Other investments	468		445
Total	$	38,100	$	39,100

Investments at March 31, 2006 included $178 million of trading securities of a consolidated limited partnership for which the Company is a general partner and ~~nine months ended September 30,~~was the result of the Company’s adoption of EITF 04-5 as of January 1, 2006. At December 31, 2005, prior to the Company’s adoption of EITF 04-5, investments included $153 million of trading securities of this limited partnership accounted for under the equity method.

Gross realized gains and ~~2004 are~~losses on sales of Available-for-Sale securities and other-than-temporary impairment losses on Available-for-Sale securities included in net realized gains and losses were as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

(Millions)

2005

2004

2005

2004

Net investment income

$
24

$
56

$
165

$
161

Expenses:

Interest credited to account values

18

22

104

54

Other expenses

3

18

36

59

Total expenses

21

40

140

113

Income before income tax provision

3

16

25

48

Income tax provision

1

5

9

17

Income from discontinued operations, net of tax

$
2

$
11

$
16

$
31

	Three Months Ended March 31,
	2006			2005
	(in millions)
Gross realized gains from sales	$	12		$	12
Gross realized losses from sales	(9		)	(9		)
Other-than-temporary impairments	(1		)	(1		)

~~The assets and liabilities associated with discontinued operations included in the Company’s Consolidated Balance Sheet as of December 31, 2004 consisted of the following:~~

December 31,

(Millions)

2004

Assets:

Cash and cash equivalents

$
54

Investments, at fair value

5,752

Receivables

43

Other assets

24

Total assets

$
5,873

Liabilities:

Investment certificate reserves

$
5,501

Payable to American Express

118

Other liabilities

12

Total liabilities

$
5,631

8.~~Related Party Transactions~~

The Company has entered into various transactions with American Express in the normal course of business. The Company earned approximately $4 million and $10 million during the three month and nine month periods ended September 30, 2005, and approximately $2 million and $6 million during the three month and nine

1210

~~month periods ended September 30, 2004, respectively, in revenues from American Express.~~ AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5.Debt

Debt at March 31, 2006 was as follows:

	Outstanding Balance		Quarter-End Stated Rate
	(in millions)
Senior notes due 2010	$	800	5.4	%
Senior notes due 2015	700		5.7
Floating rate revolving credit borrowings	137		5.6
Fixed and floating rate notes due 2011:
Floating senior notes	151		5.2
Fixed rate notes	79		8.6
Fixed rate senior notes	46		7.2
Fixed rate notes	8		13.3
Total	$	1,921

The floating rate revolving credit borrowings at March 31, 2006 are nonrecourse debt of limited partnerships for which the Company ~~received approximately $8 million and $26 million for~~is the three month and nine month periods ended September 30, 2005 and $21 million and $57 million for the three month and nine month periods ended September 30, 2004, respectively, of reimbursements from American Express for the Company’s participation in certain corporate initiatives. Asgeneral partner, which was consolidated as a result of the ~~separation from American Express, the Company determined it appropriate to reflect certain reimbursements previously received from American Express for costs incurred~~Company’s adoption of EITF 04-5 as of January 1, 2006. This debt is related to certain ~~American Express-related corporate initiatives, as capital contributions rather than reductions~~property funds managed by Threadneedle Asset Management Holdings Ltd., of which $68 million is due in 2009 and $69 million is due in 2011. The debt will be extinguished with the cash flows from the sale of the investments held within the partnerships. Additionally, this debt is hedged using interest rate swaps which effectively convert the floating rates to ~~expense amounts.~~a fixed rate.

The fixed and floating rate notes are related to a consolidated variable interest entity, or collateralized debt obligation (“CDO”), and are nonrecourse. These ~~amounts were approximately $8 million and $26 million~~notes will be extinguished with the cash flows from the investments held within the portfolio of the CDO, which assets are held for the ~~three month and nine month periods ended September 30, 2005 and $13 million and $32 million for~~benefit of the ~~three month and nine month periods ended September 30, 2004, respectively.~~CDO debt holders.

9.6. Share-Based Compensation

The ~~Company approved the~~ Ameriprise Financial 2005 Incentive Compensation Plan ~~(the Plan)~~(“2005 ICP”), approved as of September 30, ~~2005. Under~~2005, allows for the ~~Plan,~~grant of stock and cash incentive awards ~~may be granted~~ to employees, directors and independent contractors, including stock options, restricted stock awards, restricted stock units, performance shares and similar ~~awards designed to comply~~awards. In accordance with the applicable federal regulations and laws of jurisdiction. Under the Plan, the maximum number of shares of common stock that may be covered by the stock-based awards shall generally not exceed 37.9 million shares.

~~At September 30, 2005, the Company also entered into an~~ Employee Benefits Agreement ~~(EBA) with~~(“EBA”) entered into between the Company and American Express as part of the ~~Distribution. In accordance with the EBA,~~Distribution, all American Express stock options and restricted stock awards held by the Company’s employees ~~and vesting~~which had not vested on or before December 31, 2005 ~~will remain~~were substituted by a stock option or restricted stock award issued under the 2005 ICP. All American Express stock options and restricted stock awards held by the Company’s employees that vested on or before December 31, 2005 remained American Express stock options or restricted stock awards. ~~However,~~

For the three months ended March 31, 2006, the Company recognized $24 million of expense related to awards under its 2005 ICP. For the three months ended March 31, 2005, the Company recognized expense of $14 million related to American Express stock options and American Express restricted stock awards granted to the Company’s employees. In addition, the Company recognized separation costs of $14 million during the three months ended March 31, 2005 related to a 2005 advisor incentive and retention bonus program. The bonuses earned under this program through December 31, 2005 were converted to 2.0 million share-based awards effective as of the vesting date of January 1, 2006.

As of March 31, 2006, total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2005 ICP was $205 million. That cost is expected to be recognized over a weighted-average period of 2.9 years. Pursuant to the 2005 ICP, restricted shares that are forfeited or, at the holder’s option, are withheld to offset tax withholding obligations that occur upon vesting and release of restricted shares, are recorded as treasury shares. At March 31, 2006 and December 31, 2005, treasury shares held for reissuance under the 2005 ICP were 513,671 shares and 107,504 shares, respectively.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

7.Retirement Plans and Other Profit Sharing Arrangements

The Company measures the obligations and related asset values for its pension and other postretirement benefit plans annually as of September 30. The components of the net periodic pension benefit cost for all defined benefit plans are as follows:

	Three Months Ended March 31,
	2006			2005
	(in millions)
Service cost	$	9		$	9
Interest cost	5			4
Expected return on plan assets	(4		)	(5		)
Amortization of prior service cost	(1		)	(1		)
Settlement/curtailment loss	1			1
Net periodic pension benefit cost	$	10		$	8

The net periodic postretirement benefit expense recognized for the three months ended March 31, 2006 and 2005 was $0.5 million and $0.6 million, respectively.

8.Income Taxes

The Company’s effective tax rate was 24.0% for the three months ended March 31, 2006 compared to an effective tax rate on income before discontinued operations of 29.3% for the three months ended March 31, 2005. The lower effective tax rate primarily reflects lower nondeductible legal and regulatory cost of $3 million for the three months ended March 31, 2006 compared with $35 million for the three months ended March 31, 2005.

The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. Included in deferred tax assets is a significant deferred tax asset relating to capital losses realized for tax return purposes and capital losses that have been recognized for financial statement purposes but not yet for tax return purposes. Under current U.S. federal income tax law, capital losses generally must be used against capital gain income within five years of the year in which the capital losses are recognized for tax purposes. The deferred tax assets include $231 million in capital loss carryforwards that expire December 31, 2009. Based on analysis of the Company’s tax position, management believes it is more likely than not that the results of future operations and implementation of tax planning strategies will generate sufficient taxable income to enable the Company to utilize all of its deferred tax assets. Accordingly, no valuation allowance for deferred tax assets was established as of March 31, 2006 and December 31, 2005.

The Company’s Tax Allocation Agreement with American Express, dated as of September 30, 2005, governs the allocation of consolidated U.S. federal and applicable combined or unitary state and local income tax liabilities between American Express and the Company for tax periods prior to September 30, 2005. In addition, this Tax Allocation Agreement provides for certain restrictions and indemnities in connection with the tax treatment of the Distribution and addresses other tax-related matters.

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

9.Earnings per Common Share

The following table presents a reconciliation of the numerators and denominators of basic and diluted earnings per share:

	Three Months Ended
	March 31,
	2006		2005
	(in millions, except per share amounts)
Numerator:
Income before discontinued operations	$	145	$	175
Income from discontinued operations, net of tax	—		8
Net income	$	145	$	183

Denominator:
Basic: Weighted average common shares outstanding	252.3		246.2
Effect of potentially dilutive nonqualified stock options and other share-based awards	1.2		—
Diluted: Weighted average common shares outstanding	253.5		246.2

Basic and Diluted EPS:
Income before discontinued operations	$	0.57	$	0.71
Income from discontinued operations, net of tax	—		0.03
Net income	$	0.57	$	0.74

Basic weighted average shares for the three months ended March 31, 2006 include 2.0 million of vested, nonforfeitable restricted stock units and 3.8 million of nonvested, restricted stock awards that are forfeitable but receive dividends. Potentially dilutive securities include non-qualified stock options and other share-based awards. The Company had no dilutive shares outstanding for the three months ended March 31, 2005, because all share-based compensation was granted on American Express common shares until September 30, 2005. Under the Company’s EBA with American Express, all American Express stock options and restricted stock awards held by the Company’s employees ~~and~~which were not ~~vesting~~vested on or before December 31, 2005 ~~will be~~were substituted ~~by a stock option or restricted stock~~with an award ~~issued under~~based on the Plan and subject to the terms and conditions after the Distribution that are substantially similar to the terms and conditions applicable to the original American Express stock options and restricted stock awards.Company’s common stock.

~~Stock options granted under~~10.Segment Information

The Company has two main operating segments: Asset Accumulation and Income (“AA&I”) and Protection, as well as a Corporate and Other (“Corporate”) segment. The two main operating segments are aligned with the ~~Plan must have an exercise price not less than 100%~~financial solutions the Company offers to address its clients’ needs. Effective January 1, 2006, the Company implemented a new automated internal business unit revenue and expense reporting process to better reflect how management reviews and evaluates the operations of its segments. These changes, which were applied retroactively to all segment information for all periods presented, had no effect on consolidated results of operations or financial position.

The new process required the ~~current fair market value of a share of common stock on~~following changes in segment information as previously presented:

• the grant date and a term of no more than ten years. Options substituted pursuant to the EBA on September 30, 2005 resulted from converting the number of American Express options and strike prices to a numberrealignment of the Company’s ~~stock options~~subsidiary, Securities America Financial Corporation (“SAFC”), under the AA&I segment from the Corporate segment;

• the reallocation of all interest on corporate debt from the AA&I and ~~strike prices in order to maintain the same intrinsic value~~Protection segments to the ~~employee. The conversion was based on~~Corporate segment;

• the ~~pre-distribution American Express closing price relative~~reallocation of investment income to segments to better reflect management’s determination of liabilities and capital required for each segment;

• the reallocation of technology expenses from the Corporate segment to the ~~post-distribution Ameriprise closing price~~AA&I and Protection segments to occur on ~~September 30, 2005. The stock options substituted maintain~~ a ~~vesting schedule which is~~quarterly rather than an annual basis;

• the ~~same~~reallocation of certain corporate overhead expenses from the AA&I and Protection segments to the Corporate segment, such as certain senior management compensation and related expense and expenses attributable to the ~~American Express stock options. Generally, these stock options had an original vesting schedule of four years~~Corporate Secretary, Public Affairs and vest ratably at 25 percent per year. A similar conversion process was completed to determine the number of the Company’s restricted stock awards granted on September 30, 2005 to replace American Express restricted stock awards. The restricted stock awards also maintain a vesting schedule which is the sameInvestor Relations departments, as ~~the American Express restricted stock awards and generally have an original vesting schedule of four years with 25 percent ratable vesting per year.~~well as other corporate-related

~~A summary of the conversion of American Express stock options~~AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10.Segment Information (Continued)

activities, as they do not directly relate to the ~~Company’s stock options under~~AA&I and Protection segments; and

• the ~~Plan as~~reallocation of ~~September 30, 2005 is presented below (shares~~excess capital not required by the AA&I and ~~intrinsic value in millions):~~Protection segments and related investment income to the Corporate segment.

Shares

Weighted
Average
Exercise
Price

Weighted
Averaged
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

American Express Non-vested Options Outstanding

4.1

$
46.45

8.5 years

$
45.2

Conversion Factor ^(a)

1.6045

.6233

Ameriprise Non-vested Options Outstanding

6.6

$
28.95

8.5 years

$
45.2

^(a)^{Conversion factor for number of shares is the ratio of the American Express pre-distribution closing stock price ($57.44) toThe AA&I segment offers products and services, both the Company’s post-distribution stock price ($35.80). Conversion factor forand other companies’, to help the strike price isCompany’s retail clients address identified financial objectives related to asset accumulation and income management. Products and services in this segment are related to financial advice services, asset management, brokerage and banking, and include mutual funds, wrap accounts, variable and fixed annuities, brokerage accounts and investment certificates. This operating segment also serves institutional clients by providing investment management services in separately managed accounts, sub-advisory, alternative investments and 401(k) markets. The Company earns revenues in this segment primarily through fees it receives based on managed assets and annuity separate account assets. These fees are impacted by both market movements and net asset flows. The Company also earns net investment income on owned assets, principally supporting the ratiofixed annuity business and distribution fees on sales of mutual funds and other products. This segment includes the results of SAFC, which through its operating subsidiary, Securities America, Inc., operates its own separately branded distribution network.}

The Protection segment offers a variety of protection products, both the Company’s and other companies’, including life, disability income, long term care and auto and home insurance to address the identified protection and risk management needs of the Company’s ~~post-distribution stock price ($35.80)~~retail clients. The Company earns revenues in this operating segment primarily through premiums, fees and charges that the Company receives to assume insurance-related risk, fees the ~~American Express pre-distribution closing stock price ($57.44).~~Company receives on owned assets and net investment income the Company earns on assets on the Company’s consolidated balance sheets related to this segment.

The ~~weighted average grant date fair value~~Corporate segment consists of ~~each American Express-related option during the nine month periods ended September 30, 2005~~income derived from financial planning fees, corporate level assets and 2004 was $12.59 and $13.27, respectively. The fair value of each American Express option granted was estimated on the date of grant using a Black-Scholes option-pricing model with assumptions determined by American Express. The Company will compare the pre-distribution fair value of the American Express options as of September 30, 2005 to the post-distribution fair value of the Company’s options using the Company’s stock volatility and other applicable assumptions to determine whether there was any incremental valueunallocated corporate expenses. This segment also includes non-recurring costs associated with the ~~substituted awards.~~

~~A summary of the conversion of~~Company’s separation from American Express non-vested shares, primarily consisting of restricted stock awards, granted to the Company’s employees to the Company’s awards under the Plan as of September 30, 2005 is presented below (shares in millions):

Shares

Weighted
Average
Grant Date
Fair Value

American Express Non-vested Awards Outstanding

1.8

$
47.48

Conversion Factor ^(a)

1.6045

Ameriprise Non-vested Awards Outstanding

2.8

$
29.59

^(a)^{Conversion factor for number of shares is the ratio of the American Express pre-distribution closing stock price ($57.44) to the Company’s post-distribution stock price ($35.80).}Express.

The Company expensed $15 million and $10 million for the three months ended September 30, 2005 and 2004, respectively, and $39 million and $30 million for the nine months ended September 30, 2005 and 2004, respectively, related to American Express stock options granted to the Company’s employees January 1, 2003 or later and all American Express restricted stock awards granted to the Company’s employees. The total income tax benefit recognizedfollowing is a summary of assets by the Company for American Express stock options and restricted stock awards granted to the Company’s employees was $5 million and $4 million for the three months ended September 30, 2005 and 2004, respectively, and $14 million and $11 million for the nine months ended September 30, 2005 and 2004, respectively.segment:

	March 31,		December 31,
	2006		2005
	(in millions)
Asset Accumulation and Income	$	77,718	$	75,382
Protection	15,079		14,492
Corporate and Other	3,024		3,247
Total assets	$	95,821	$	93,121

As of September 30, 2005, there was $106 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.6 years.AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

10. ~~Commitments~~Segment Information (Continued)

The following is a summary of segment revenues, pretax segment income (loss) and a reconciliation to income (loss) before income tax provision and consolidated net income for the three months ended March 31:

	Asset Accumulation and Income		Protection		Corporate and Other			Eliminations			Consolidated
					(in millions)
2006
Revenue from external customers	$	1,418	$	467	$	64		$			$	1,949
Intersegment revenue	4		6		—			(10		)	—
Total revenues	$	1,422	$	473	$	64		$	(10	)	$	1,949
Income (loss) before income tax provision	$	228	$	74	$	(111	)	$	—		191
Income tax provision											46
Net income											$	145

2005
Revenue from external customers	$	1,299	$	503	$	45		$			$	1,847
Intersegment revenue	—		5		1			(6		)	—
Total revenues	$	1,299	$	508	$	46		$	(6	)	$	1,847
Income (loss) before income tax provision and discontinued operations	$	174	$	113	$	(41	)	$	—		246
Income tax provision											71
Income before discontinued operations											175
Discontinued operations, net of tax											8
Net income											$	183

11.Contingencies

The Company and its subsidiaries are involved in the normal course of business in legal, regulatory and arbitration proceedings, including class actions, concerning matters arising in connection with the conduct of its activities as a diversified financial services firm. These include proceedings specific to the Company as well as proceedings generally applicable to business practices in the industries in which the Company operates. The Company can also be subject to litigation arising out of its general business activities, such as its investments, contracts, leases and employment relationships.

These proceedings are subject to uncertainties and, as such, the Company is unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the Company’s consolidated results of operations, financial condition or credit ratings.

As with other financial services firms, the level of regulatory activity and inquiry concerning the Company’s businesses remains elevated. The Company from time to time receives requests for information from, and has been subject to examination or investigation by, the SEC, ~~the~~ National Association of Securities Dealers, ~~(NASD)~~Inc. (“NASD”) and several state attorneys general have brought proceedings challenging several mutual fund industry practices, including late trading, market timing, and disclosure of revenue sharing arrangements, which are paid by fund advisors or companies to brokerage firms who agree to sell those funds. The Company has received requests for information and has been contacted byvarious other regulatory authorities concerning its ~~practices and is cooperating fully with these inquiries.~~

On March 21, 2005, the Company’s broker-dealer subsidiary entered into an agreement with the NASD to settle alleged violations of NASD rules arising from the sale to customers of B mutual fund shares between January 1, 2002 and July 31, 2003. The Company’s agreement with the NASD is one of several that the NASD entered into with certain brokerage firms regarding allegedly inappropriate sales of B shares. Under the terms of the settlement, the Company consented to the payment of a fine to the NASD in the amount of $13 million. The Company established reserves in prior quarters to cover the payment of the fine. The Company also agreed to offer certain customers who purchased B shares in any fund family from January 1, 2002 through the date of the settlement and continued to hold such shares the option of converting their B shares into a number of A shares equal to (x) the number of A shares that the customer could have purchased on the date(s) that they purchased their B shares plus (y) any shares reflecting reinvestment of dividends. The Company agreed to pay cash to certain customers who have sold a portion or all of their B shares in order to put them in substantially the same financial position (based on actual fund performance and redemption value) in which such customers would have been had the customers purchased A shares instead of B shares.

In July 2005, the Company settled an action brought by the New Hampshire Bureau of Securities Regulation (the NHBSR) alleging that the Company failed to disclose revenue sharing and directed brokerage payments received from non-proprietary mutual funds, and failed to disclose incentives for advisors to sell proprietary products and other alleged conflicts of interest. The Company has completed payment of $5 million in fines and penalties to the NHBSR and the reimbursement of the costs incurred by the NHBSR for its investigation. The Company is cooperating with the NHBSR to make payment of up to $2 million in restitution to New Hampshire customers who meet specified criteria.

~~The Company has received requests for information from the SEC, NASD and various state regulatory authorities on a variety of~~business activities and practices, ~~including~~including: sales and product or service features of, ~~other companies’ REIT shares, sales of~~or disclosures pertaining to, financial plans, its mutual funds, annuities, insurance products and brokerage services; non-cash

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

11.Contingencies (Continued)

compensation paid to its financial advisors; supervision of its financial advisors; operational and data privacy issues; and sales of, or brokerage or revenue sharing practices relating to, other companies’ REIT shares, mutual fund shares or other investment products.

Other open regulatory matters relate, among other things, to the portability (or network transferability) of the Company’s RiverSource mutual funds, the suitability of product recommendations made to retail financial planning clients, licensing matters related to sales by its financial advisors to out-of-state clients and ~~is cooperating fully~~net capital and reserve calculations. The Company has also received a number of inquiries in connection with its notification of the theft of a laptop computer containing certain client and financial advisor information. These open matters relate to the activities of various Ameriprise Financial legal entities, including Ameriprise Financial Services, Inc. (formerly known as “American Express Financial Advisors Inc.” or “AEFA”), American Enterprise Investment Services, Inc. (its clearing broker-dealer subsidiary) and Securities America, Inc. The number of regulatory reviews and investigations has increased in recent years with regard to many firms in the financial services industry, including the Company. The Company has cooperated and will continue to cooperate with the applicable regulators regarding their ~~requests for information.~~inquiries.

In March 2006, a purported class action captioned Maddox, et al. v. Ameriprise Financial, Inc. (Case No. BC349215) was filed in the Superior Court of California, County of Los Angeles. The suit alleges that certain present and former employee advisors in California are entitled to overtime pay and other wages and that the Company made wrongful deductions from their wages. Plaintiffs allege that the Company’s actions were in violation of the California Labor Code and Business & Professional Code, and seek recovery of unspecified overtime and penalties.

In March 2006, a lawsuit captioned Good, et al. v. Ameriprise Financial, Inc. et al. (Case No. 00-cv-01027) was filed in the United States District Court for the District of Minnesota. The lawsuit has been brought as a putative class action and plaintiffs purport to represent all of the Company’s advisors who sold shares of REITs and tax credit limited partnerships between March 22, 2000 and March 2006. Plaintiffs seek unspecified compensatory and restitutionary damages as well as injunctive relief, alleging that the Company incorrectly calculated commissions owed advisors for the sale of these products. The Company has moved to dismiss certain claims in the complaint.

In October 2005, the Company reached a comprehensive settlement regarding the consolidated securities class action lawsuit filed against the Company, its former parent and affiliates in October 2004 called ~~“In~~“In re American Express Financial Advisors Securities ~~Litigation.~~Litigation.” The settlement, under which the Company denies any liability, includes a one-time payment of $100 million to the class members. ~~The settlement is subject to court approval.~~ The class members include individuals who purchased mutual funds in the Company’s Preferred Provider Program, Select Group Program, or any similar revenue sharing ~~program;~~program, purchased mutual funds sold under the American Express^® or AXP^® brand; or purchased for a fee financial plans or advice from the Company between March 10, 1999 and through the date on which a formal stipulation of settlement is signed. The ~~Company’s litigation reserve is sufficient~~settlement will be submitted to ~~cover~~ the ~~contingent liability~~Court for approval. Two lawsuits making similar allegations (based solely on state causes of actions) are pending in the United States District Court for the ~~settlement.~~Southern District of New York: “Beer v. American Express Company and American Express Financial Advisors” and “You v. American Express Company and American Express Financial Advisors.” Plaintiffs have moved to remand the cases to state court. The reserve for this litigation was increased by $70 million pretax, $46 million after-tax, at September 30, 2005 from the reserve at June 30, 2005. The impact of this reserve increase is reflected as an expenseCourt’s decision on the ~~Company’s statement of operations for the quarter ended September 30, 2005.~~remand motion is pending.

In November 2002, a suit, now captioned Haritos et al. v. American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The suit was filed by plaintiffs who purport to represent a class of all persons that have purchased financial plans from the Company’s advisors from November 1997 through July 2004. Plaintiffs allege that the sale of the plans violates the Investment Advisers Act of ~~1940, or the IAA.~~1940. The suit seeks an unspecified amount of damages, rescission of the investment advisor plans and restitution of monies paid for such plans. ~~In February 2005,~~

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

11.Contingencies (Continued)

On January 3, 2006, the Court ~~denied~~granted the ~~Company’s motion to dismiss the Second Amended Complaint. The Company has filed a motion~~parties joint stipulation to stay the ~~Haritos proceedings~~action pending the approval of the proposed settlement in the putative class action described above, “In re American Express Financial Advisors Securities Litigation. ~~Plaintiffs have opposed the motion.~~”

In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express FinancialAdvisors ~~Inc.~~Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several ~~AXP~~American Express mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to ~~our~~the Company’s motion to dismiss the complaint, the Court dismissed one of plaintiffs’ four claims and granted plaintiffs limited discovery.

~~From time~~On December 1, 2005, the Company announced settlement of two SEC enforcement matters relating to ~~time,~~disclosure of certain revenue sharing programs and alleged market timing practices during periods before the Distribution. Under the terms of the settlements the Company is ~~involved in legal, regulatory and arbitration proceedings, including class actions concerning matters arising in connection~~required to develop plans of distribution with the ~~conduct~~assistance of an independent distribution consultant. Regarding revenue sharing, the plan will address how such funds will be distributed to benefit customers that purchased the particular mutual funds between January 1, 2001 through August 31, 2004. A second plan will address how funds will be distributed to benefit investors in the Company’s mutual funds for market-timing activity that took place between January 1, 2002 and September 30, 2003. The distribution plans will be subject to final approval by the SEC. As part of the settlements, the Company also agreed to certain undertakings regarding disclosure, compliance and training.

During the course of 2005 the Company reached settlements with four states in regulatory matters regarding supervisory practices, financial advisor misappropriations of customer funds, 529 plan and Class B mutual fund sales practices, incentives for AEFA’s branded financial advisors to sell both its proprietary mutual funds and other companies’ mutual funds, the sale of proprietary mutual fund products to financial planning clients, and the matters raised in the SEC and NASD enforcement actions described above. As part of these state settlements the Company agreed, in certain instances, to provide restitution and to independent consultant review of certain of its ~~business activities. These proceedings are subject to uncertainties~~practices and aspolicies, including certain of its sales and advice supervisory practices. One such review was delivered in January 2006, and the Company ~~is unable~~has commenced implementation of the recommended enhancements. The Company will continue to ~~estimate~~meet its obligations under these settlements throughout 2006. There are pending investigations and demands made by regulators of other states regarding matters substantially similar to those which have settled, as well as the ~~possible loss or range of loss~~open matters described above, and there can be no assurance that ~~may result. An adverse outcome in~~any one or more of these ~~proceedings could have~~investigations, demands and matters will settle or otherwise conclude without a material adverse effect on the Company’s consolidated ~~financial condition,~~ results of operations, financial condition or ~~liquidity.~~

~~The IRS routinely examines the Company’s federal income tax returns and recently completed its audit of the Company~~ for the 1993 through 1996 tax years. The IRS is currently conducting an audit of the Company for the 1997 through 2002 tax years. Management does not believe there will be a material adverse effect on the Company’s consolidated financial position and results of operations as a result of these audits.

~~11.~~~~Retirement Plans and Other Profit Sharing Arrangements~~

~~The components of the net pension cost for all defined benefit plans are as follows:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

(Millions)

2005

2004

2005

2004

Service cost

$
9

$
8

$
26

$
23

Interest cost

4

4

13

11

Expected return on plan assets

(5
)
(5
)
(14
)
(14
)
Amortization of prior service cost

(1
)
(1
)
(2
)
(1
)
Settlement/curtailment loss

1

1

2

2

Net periodic pension benefit cost

$
8

$
7

$
25

$
21

The net periodic postretirement benefit expense recognized for the three months ended September 30, 2005 and 2004 was $0.6 million and $0.2 million, respectively, and $1.7 million and $1.9 million for the nine months ended September 30, 2005 and 2004.

On September 30, 2005, the Company entered into an Employee Benefits Agreement (the EBA) with American Express that allocates certain liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Distribution including the general treatment of outstanding American Express equity awards, certain outstanding annual and long-term incentive awards, existing deferred compensation obligations, and certain retirement and welfare benefit obligations. The EBA provides that as of the date of the Distribution, Ameriprise generally will assume, retain and be liable for all wages, salaries, welfare, incentive compensation, and employee-related obligations and liabilities for all of its current and former employees. The EBA also provides for the transfer of qualified plan assets and transfer of liabilities relating to the pre-distribution participation of Ameriprise’s employees in American Express’ various retirement, welfare, and employee benefit plans from such plans to the applicable plans Ameriprise has adopted for the benefit of its employees.credit ratings.

12. ~~Income Taxes~~Related Party Transactions

The ~~Company’s effective tax rate was 32.2% during~~Company may engage in transactions in the three months ended September 30, 2005 compared to 27.7% during the three months ended September 30, 2004. The increased effective tax rate reflects a $20 million tax expense applicable to prior years partially offset by a $7 million tax benefit related to the finalizationordinary course of the prior year tax return, as well as relatively lower levels of pretax income compared to tax-advantaged items in 2005. The Company’s effective tax rate was 27.7% during the nine months ended September 30, 2005, which resulted from relatively lower levels of pretax income compared to tax-advantaged items in 2005, reflecting 2005 separation costs, and a $3 million tax benefit resulting from an IRS audit of previous years’ tax returns. Additionally, as noted above, there was a $20 million tax expense applicable to prior years and a $7 million tax benefit related to the finalization of the prior year tax return, as well as, non-tax deductible charges thatbusiness with significant shareholders or their subsidiaries, between the Company ~~does~~and its directors and officers or with other companies whose directors or officers may also serve as directors or officers for the Company or its subsidiaries. The Company carries out these transactions on customary terms. The transactions have not ~~expect to occur in future periods. The~~had a material impact on the Company’s ~~effective tax rate was 29.7% during the nine months ended September 30, 2004, which reflects a $16 million tax expense due to required amendments to prior year tax returns.~~consolidated results of operations or financial condition.

The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. Among our deferred tax assets is a significant deferred tax asset relating to capital losses realized for tax return purposesBerkshire Hathaway Inc. (“Berkshire”) and capital losses that have been recognized for financial statement purposes but not yet for tax return purposes. Under current U.S. federal income tax law, capital losses generally must be used against capital gain income within five years of the year in which the capital losses are recognized for tax purposes. The Company has less than $50 million in capital loss carryforwards that must be utilized by December 31, 2005, as well as additional capital loss carryforwards that expire December 31, 2009. Based on analysissubsidiaries owned approximately 12% of the Company’s tax position, management believes it is more likely than not that the results of future operations and implementation of tax planning strategies will generate sufficient taxable income to enable the Company to utilize all of its deferred tax assets. Accordingly, no valuation allowance for deferred tax assets has been established.

As a result of our separation from American Express, the Company will be required to file a short period income tax return through September 30, 2005 which will be included as part of the American Express consolidated income tax return for the year endingcommon stock at December 31, 2005. The Company will also be required to file two separate short period consolidated income tax returns for the period October 1, 2005 through December 31, 2005, one including our life insurance subsidiaries and one for all of the non-life insurance companies required to be included in a consolidated income tax return.

On ~~September 30, 2005,~~March 29, 2006, the Company entered into a ~~Tax Allocation~~Stock Purchase and Sale Agreement ~~(the Tax Allocation Agreement)~~ with ~~American Express.~~Warren E. Buffet and Berkshire to repurchase 6.4 million shares of the Company’s common stock. The ~~Tax Allocation Agreement governs~~repurchase was completed on March 29, 2006 at a price per share equal to the ~~allocation~~March 29, 2006 closing price of ~~consolidated~~$42.91 and reduced Berkshire’s ownership of the Company’s common stock to approximately 9.8% of common shares then outstanding. The Company or its subsidiaries may engage in reinsurance or other commercial transactions with Berkshire or its

U.S. federal and applicable combined or unitary state and local income tax liability as between American Express and the Company for tax periods prior to September 30, 2005, and in addition provides for certain restrictions and indemnities in connection with the tax treatment of the Distribution and addresses other tax-related matters.

~~13.~~~~Earnings per Common Share~~

Basic and diluted earnings per share are calculated by dividing historical earnings for the three months and nine months ended September 30, 2005 and 2004 by the actual shares outstanding for all periods presented as retroactively adjusted for the stock split. The Company had no dilutive shares outstanding for all periods as all share-based compensation was granted on American Express common shares and, as a result, there were no share-based awards outstanding until the September 30, 2005 conversion discussed in Note 9. The computations of basic and diluted EPS for the three and nine months ended September 30, 2005 and 2004 are as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

(Millions, except per share amounts)

2005

2004

2005

2004

Numerator:

Income before discontinued operations and accounting change

$
123

$
188

$
447

$
599

Discontinued operations, net of tax

2

11

16

31

Cumulative effect of accounting change, net of tax

—

—

—

(71
)
Net income

$
125

$
199

$
463

$
559

Denominator:

Basic and Diluted: Weighted-average shares outstanding during the period

246

246

246

246

Basic and Diluted EPS:

Income before discontinued operations and accounting change

$
0.50

$
0.77

$
1.80

$
2.43

Discontinued operations, net of tax

—

0.04

0.07

0.13

Cumulative effect of accounting change, net of tax

—

—

—

(0.29
)
Net income

$
0.50

$
0.81

$
1.87

$
2.27

~~14.~~~~Derivatives and Hedging Activities~~

During June 2005, the Company entered into $1.5 billion notional forward starting interest rate swaps to hedge its interest rate risk associated with the forecasted issuance of $1.5 billion of long-term debt. No portions of the swaps were excluded from the assessment of hedge effectiveness. The loss resulting from ineffectiveness associated with this cash flow hedge was not material and was reclassified out of other comprehensive income and reflected as an expense in the third quarter.

~~15.~~~~Segment Information~~

The Company has two main operating segments: (i) Asset Accumulation and Income and (ii) Protection. These two operating segments are aligned with the financial solutions the Company offers to address its clients’ needs. The Asset Accumulation and Income business offers mutual funds, annuities and other asset accumulation and income management products and services to retail clients through its advisor network. The Company also offers its annuity products through outside channels, such as banks and broker-dealer networks. This operating segment also serves institutional clients in the separately managed account, sub-advisory and 401(k) markets, among others. The Protection segment offers various life insurance, disability income and long-term care, and brokered insurance products through the Company’s advisor network. The Company also offers personal auto and home insurance products on a direct basis to retail clients principally through its strategic marketing alliances.

The Company also has a Corporate and Other segment, which consists of income derived from corporate level assets and unallocated corporate expenses, primarily separation costs, as well as the results of its subsidiary, Securities America Financial Corporation, which operates its own independent separately branded distribution platform. The Corporate and Other segment also includes the assets representing capital that has not been allocated to any other segment. Financial results of the corporate and other segment primarily reflect the Company’s financing activities (including interest expense), income on capital not allocated to other segments, income tax risks and certain income, expenses and other after-tax adjustments not allocated to the segments based on the nature of such items.

~~The following is a summary of assets by operating segment:~~

September 30,

December 31,

(Millions)

2005

2004

Asset accumulation and income

$
73,983

$
69,516

Protection

16,326

13,465

Corporate and other

1,965

4,259

Assets of discontinued operations

—

5,873

Total assets

$
92,274

$
93,113

~~The following is a summary of segment activity for the three months ended September 30:~~

(Millions)

Asset Accumulation and Income

Protection

Corporate and
Other

Eliminations

Consolidated

2005- Segment Data

Revenue from external customers

$
1,303

$
454

$
116

$
—

$
1,873

Intersegment revenue

2

6

—

(8
)
—

Total revenues

1,305

460

116

(8
)
1,873

Amortization expense ^(a)

83

(20
)
1

—

64

Total expenses

1,139

324

237

(8
)
1,692

Income before income tax provision and discontinued operations

$
166

$
136

$
(121
)
$
—

$
181

Income tax provision

58

Income before discontinued operations

123

Discontinued operations, net of tax

2

Net income

$
125

2004- Segment Data

Revenue from external customers

$
1,128

$
489

$
95

$
—

$
1,712

Intersegment revenue

—

—

1

(1
)
—

Total revenues

1,128

489

96

(1
)
1,712

Amortization expense ^(a)

93

29

—

—

122

Total expenses

971

355

126

(1
)
1,451

Income before income tax provision and discontinued operations

$
157

$
134

$
(30
)
$
—

$
261

Income tax provision

73

Income before discontinued operations

188

Discontinued operations, net of tax

11

Net income

$
199

^{(a) Represents the amortization expense for deferred acquisition costs, deferred sales inducement costs and intangible assets.}

AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

~~(Unaudited)~~

12.Related Party Transactions (Continued)

subsidiaries and pay or receive fees in these transactions. The Company does not believe that these transactions are material to it or to Berkshire.

The ~~following is a summary~~Company has entered into various transactions with American Express in the normal course of ~~segment activity~~business. The Company earned approximately $2 million during the three months ended March 31, 2005 in revenues from American Express. During the three months ended March 31, 2005, the Company received approximately $9 million of reimbursements from American Express for the ~~nine~~Company’s participation in certain corporate initiatives. As a result of the Separation, the Company determined it appropriate to reflect the reimbursements as a capital contribution rather than reductions to expense amounts.

13.Common Share Repurchases

In January 2006, the Company’s Board of Directors authorized the repurchase of up to 2 million shares of common stock of the Company. This authorization, effective until December 31, 2006, was fully utilized in connection with the purchase of the Company’s common stock from Berkshire, discussed in Note 12 above. In March 2006, the Company’s Board of Directors authorized the expenditure of up to $750 million for the repurchase of shares of the Company’s common stock through March 31, 2008. During the three months ended ~~September 30:~~

(Millions)

Asset
Accumulation
and Income

Protection

Corporate and
Other

Eliminations

Consolidated

2005- Segment Data

Revenue from external customers

$
3,784

$
1,466

$
365

$
—

$
5,615

Intersegment revenue

2

15

1

(18
)
—

Total revenues

3,786

1,481

366

(18
)
5,615

Amortization expense ^(a)

305

61

1

—

367

Total expenses

3,302

1,117

596

(18
)
4,997

Income before income tax provision and discontinued operations

$
484

$
364

$
(230
)
$
—

$
618

Income tax provision

171

Income before discontinued operations

447

Discontinued operations, net of tax

16

Net income

$
463

2004- Segment Data

Revenue from external customers

$
3,432

$
1,428

$
324

$
—

$
5,184

Intersegment revenue

1

—

1

(2
)
—

Total revenues

3,433

1,428

325

(2
)
5,184

Amortization expense ^(a)

268

89

—

—

357

Total expenses

2,898

1,040

396

(2
)
4,332

Income before income tax provision, discontinued operations and accounting change

$
535

$
388

$
(71
)
$
—

$
852

Income tax provision

253

Income before discontinued operations and accounting change

599

Discontinued operations, net of tax

31

Cumulative effect of accounting change, net of tax

(71
)
Net income

$
559

^{(a) RepresentsMarch 31, 2006, the amortization expense for deferred acquisition costs, deferred sales inducement costs and intangible assets.}Company completed a $275 million share repurchase representing 6.4 million shares of its common stock, as discussed in Note 12 above.

20The Company may also reacquire shares of its common stock under its 2005 ICP related to restricted stock awards. Restricted shares that are forfeited before the vesting period has lapsed are recorded as treasury shares. In addition, the holders of restricted shares may elect to surrender a portion of their shares on the vesting date to cover their income tax obligations. These vested restricted shares reacquired by the Company and the Company’s payment of the holders’ income tax obligations pursuant to the 2005 ICP are recorded as a treasury share purchase. During the three months ended March 31, 2006 and on a cumulative basis through March 31, 2006, the restricted shares forfeited under the 2005 ICP and recorded as treasury shares were 0.1 million shares. During the three months ended March 31, 2006, pursuant to the ICP, the Company reacquired 0.4 million shares of common stock through the surrender of restricted shares upon vesting and paid in the aggregate $15 million related to the holders’ income tax obligations on the vesting date.

~~16.~~AMERIPRISE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

14. Regulatory Requirements

Certain of the Company’s wholly-owned subsidiaries are subject to regulatory capital requirements. Actual capital and regulatory capital requirements for such subsidiaries were:

	Actual Capital As Of						Actual Capital as of
(Millions)	September 30, 2005		December 31, 2004		Regulatory Capital
					Requirement
							March 31, 2006		December 31, 2005		Regulatory Capital Requirement
									(in millions)
IDS Life Insurance Company⁽¹⁾⁽⁴⁾	$	3,583	$	2,651	$	746	$	3,377	$	3,270	$	751
American Enterprise Life Insurance Company⁽¹⁾⁽⁴⁾	631		585		139		586		583		125
IDS Property Casualty Ins. Company⁽¹⁾⁽⁵⁾	526		301		102
IDS Property Casualty Insurance Company⁽¹⁾⁽⁵⁾							464		448		111
Ameriprise Certificate Company⁽²⁾⁽⁵⁾	351		327		342		304		333		283
AMEX Assurance Company⁽¹⁾⁽⁴⁾	113		217		26		117		115		23
IDS Life Insurance Company of New York⁽¹⁾⁽⁴⁾	241		238		44		255		246		40
Threadneedle Asset Management Holdings Ltd⁽³⁾	141		137		125		187		187		100
American Enterprise Investment Services⁽²⁾⁽⁵⁾	122		98		7
Ameriprise Financial Services, Inc⁽²⁾⁽⁵⁾	3		83		#
American Enterprise Investment Services Inc.⁽²⁾⁽⁵⁾							99		97		7
Ameriprise Financial Services, Inc.⁽²⁾⁽⁵⁾							60		47		#
American Partners Life Insurance Company⁽¹⁾⁽⁴⁾	66		59		11		70		68		11
American Centurion Life Assurance Company⁽¹⁾⁽⁴⁾	61		53		14		64		62		13
Ameriprise Trust Company⁽⁵⁾	45		44		36		49		47		38
Ameriprise Insurance Company⁽¹⁾⁽⁵⁾							46		—		2
Securities America, Inc.⁽²⁾⁽⁵⁾	15		16		#		12		15		#

#	^#	^{Amounts are less than $1 million and are nil due to rounding.}million.
(1)	⁽¹⁾	^{Actual capital is determined on a statutory basis.}
(2)	⁽²⁾	^{Actual capital is determined on an adjusted U.S. GAAP basis.}
(3)	⁽³⁾	^{Actual capital isand regulatory capital requirements are determined on ain accordance with U.K. GAAP basis.regulatory legislation. Both actual capital and regulatory capital requirements are as of June 30,December 31, 2005, based on the most recent required U.K. filing.}
(4)	⁽⁴⁾	^{Regulatory capital requirement is based on the most recent statutory risk-based capital filing, as of December 31, 2004.}2005.
(5)	⁽⁵⁾	^{Regulatory capital requirement is based on applicable regulatory requirement, calculated as of September 30, 2005.}
		March 31, 2006.

~~17.~~15. Subsequent ~~Event~~Events

On ~~October 25, 2005,~~May 2, 2006, Ameriprise Financial and its subsidiary Ameriprise Trust Company entered into a definitive agreement with Wachovia Bank, N.A. (“Wachovia”) providing for the ~~Board~~sale to Wachovia of ~~Directors~~the Company’s defined contribution plan recordkeeping business. Consummation of the transaction is subject to certain conditions, including clearance by the U.S. Department of Justice under the Hart-Scott-Rodino Act.

On May 5, 2006, the Company filed a “shelf” registration statement on Form S-3. The shelf filing provides the Company with the flexibility to sell any combination of debt securities, warrants, purchase contracts, securities units, preferred stock, depositary shares and common stock of the Company, ~~declared a quarterly cash dividend of $0.11 per~~as well as capital and common ~~share, payable~~ ~~November 18, 2005~~securities that may be issued by up to ~~stockholders of record at~~four Delaware statutory trusts sponsored by the ~~close of business on November 4, 2005.~~Company. The debt securities that may be offered include senior debt, senior subordinated debt and junior subordinated debt.

On October 3, 2005, the Company granted 2.4 million stock options with a $35.04 exercise price and 0.7 million restricted stock awards to certain employees pursuant to the 2005 Incentive Compensation Plan in recognition for efforts in completing the Distribution. The stock options and restricted stock awards vest ratably over four years.

2119

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF ~~FINANCIAL CONDITION AND~~ RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following ~~information~~Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) should be read in conjunction with our ~~consolidated financial statements~~Consolidated Financial Statements and related notes presented in Item ~~1 (consolidated financial statements) and Management’s Discussion and Analysis (MD&A) in our Form 10 filed August 19, 2005 with the Securities and Exchange Commission (SEC). The following~~1. This discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our 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 ~~below~~ under “Forward-Looking Statements.” We believe it is useful to read our MD&A in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2005, filed with the Securities and Exchange Commission (“SEC”) on March 8, 2006, as well as our current reports on Form 8-K and other publicly available information.

Overview

We are a leading financial planning and ~~financial~~ services company with more than 12,000 financial advisors and registered representatives that ~~offers~~provide solutions for ~~our~~ clients’ asset accumulation, income management and insurance protection needs. ~~As of September 30, 2005, we had approximately 2.8 million individual, business and institutional clients and a network of over 12,000~~Our financial advisors deliver tailored solutions to clients through a comprehensive and ~~registered representatives, including registered representatives of our Securities America Financial Corporation subsidiary (SAI), who provide~~ personalized financial planning ~~advisory~~approach built on a long-term relationship with a knowledgeable advisor. We specialize in meeting the retirement-related financial needs of the mass affluent. We also offer asset management and ~~brokerage services.~~

401(k) products and services to institutional clients. We have two main operating segments: Asset Accumulation and Income (“AA&I”) and Protection, as well as a Corporate and Other (“Corporate”) segment. Our two main operating segments are aligned with the financial solutions we offer to address our clients’ ~~needs:~~

•~~Asset Accumulation and Income.~~ ~~This segment consists of our asset accumulation and income business, which offers a broad array of asset accumulation and income management~~needs. The products and services we provide retail customers, and to ~~help~~a lesser extent, institutional customers, are the primary source of our ~~clients address identified~~revenues and net income. Revenues and net income are significantly impacted by the relative investment performance, total value and composition of assets we manage and administer for our retail and institutional clients. These factors, in turn, are largely determined by overall investment market performance and the depth and breadth of our individual client relationships.

It is our management’s priority to increase shareholder value over a multi-year horizon by achieving our financial ~~objectives. This operating segment also serves institutional clients~~targets, on average and over time. We measure progress against these goals excluding the impact of the separation from American Express Company (“American Express”), specifically, discontinued operations, non-recurring separation costs and AMEX Assurance Company (“AMEX Assurance”). Our financial targets are:

• Annual revenue growth of 6 to 8 percent,

• Annual net income growth of 10 to 13 percent, and

• Return on average equity of 12 to 15 percent.

Our revenues in the ~~separately managed account, sub-advisory~~first quarter of 2006 were $1.9 billion, an increase of 10% over the same period last year after excluding $74 million of AMEX Assurance revenues from the prior year. Income before discontinued operations, AMEX Assurance and ~~401(k) markets, among others. We earn revenues~~non-recurring separation costs rose 17% to $189 million in the first quarter of 2006 from $161 million in the first quarter of 2005. Adjusted return on equity for the trailing twelve months ended March 31, 2006 was 10.4% compared to adjusted return on equity of 10.2% for the year ended December 31, 2005. During 2006, as part of our ~~asset accumulation and income segment primarily through fees we receive based on managed assets,~~capital redeployment plan, our management may evaluate the ~~net investment income we earn on assets on our balance sheet and distribution fees we earn on sales~~use of ~~mutual funds and other products.~~an earnings per common share measure as an additional financial target.

Our results for the first quarter of 2006 were attributable to three main drivers:

• Mass affluent client acquisition,

~~Protection.~~• Improving advisor productivity, and

~~This segment consists~~• Increasing our owned, managed and administered assets.

During the first quarter of 2006, the number of mass affluent clients with $100,000 or more in assets or comparable product values with us increased 11% from the same quarter in 2005. Our marketing programs were a key driver of this increase. We believe that our ~~protection business, which offers a variety of protection products,~~focus on personal relationships, together with our strengths in financial planning and product development, allows us to better address our clients’ financial needs, including ~~life, disability income, long-term care and personal auto and home insurance to address~~ the ~~identified protection and risk management~~financial needs of our ~~retail clients.~~target market segment, the mass affluent. This focus also puts us in a strong position to capitalize on significant demographic and market trends, which we believe will continue to drive increased demand for financial planning and the other financial services we provide, particularly among the mass affluent.

For the first quarter of 2006, our gross dealer concession (“GDC”) per branded advisor, an internal measure of advisor productivity, increased by 17% over the same period last year. We ~~earn revenues~~attribute the increase in ~~this operating segment primarily through premiums~~productivity to a favorable market

environment and ~~fees that we receive~~ to ~~assume insurance-related risk~~a strong set of product and ~~net investment income we earn on assets on our balance sheet related~~service offerings and advisor support. Our franchisee advisor retention for the first quarter of 2006 was high at 91% and is consistent with the quarterly periods of 2005, which ranged from 91% to ~~this segment.~~92%.

Our ~~third operating segment, Corporate~~owned, managed and ~~Other, consists~~administered assets increased to $445.7 billion at March 31, 2006, an increase of ~~income derived~~11% since March 31, 2005, and an increase of 4% from ~~corporate level~~owned, managed and administered assets ~~results from SAI,~~of $428.2 billion at December 31, 2005. This improvement in assets reflects both market appreciation and ~~unallocated corporate expenses, primarily costs associated with~~improved flows including strong flows into our wrap program and our variable annuities. Our wrap program had $1.9 billion in inflows during the ~~separation~~first quarter of 2006, bringing total assets in wrap accounts within our branded advisor channel to $54.9 billion. This reflects our clients increasingly choosing fee-based products within their portfolios. In addition, variable annuities remain a popular choice for clients saving for retirement. Variable annuity cash sales in the first quarter of 2006 were up 44% over the same quarter in 2005, and ~~distribution.~~variable annuity inflows were $1.1 billion during the first quarter of 2006.
Significant Factors Affecting our Results of Operations and Financial Condition

Share Repurchase
In March 2006, our board of directors authorized the expenditure of up to $750 million for the repurchase of shares of our common stock through the end of March 2008. This authorization is in addition to a board authorization in January 2006 to repurchase up to 2 million shares by the end of 2006. On March 29, 2006, we completed a $275 million share repurchase representing 6.4 million shares of our common stock. We used our existing working capital to fund this share repurchase, and we currently intend to fund additional share repurchases through existing working capital, future earnings and other customary financing methods.
Segment Reporting Changes
Effective January 1, 2006, we implemented a new automated internal business unit revenue and expense reporting process to better reflect how our management reviews and evaluates the operations of our segments. These changes, which were applied retroactively to all segment information for all periods presented, had no effect on our consolidated results of operations or financial position.
The new process required the following changes in segment information as previously presented:
•
the realignment of our subsidiary, Securities America Financial Corporation (“SAFC”), under the AA&I segment from the Corporate segment;
•
the reallocation of all interest on corporate debt from the AA&I and Protection segments to the Corporate segment;
•
the reallocation of investment income to segments to better reflect management’s determination of liabilities and capital required for each segment;
•
the reallocation of technology expenses from the Corporate segment to the AA&I and Protection segments to occur on a quarterly rather than an annual basis;
•
the reallocation of certain corporate overhead expenses from the AA&I and Protection segments to the Corporate segment, such as certain senior management compensation and related expense and expenses attributable to the
Corporate Secretary, Public Affairs and Investor Relations departments, as well as other corporate-related activities, as they do not directly relate to the AA&I and Protection segments; and
•
the reallocation of excess capital not required by the AA&I and Protection segments and related investment income to the Corporate segment.
Separation from American Express
Our separation from American Express resulted in specifically identifiable impacts to our consolidated results of operations and financial condition.
Separation and Distribution

On February 1, 2005, the American Express Board of Directors announced its intention to pursue the disposition of 100% of its shareholdings in our company (the “Separation”) through a tax-free distribution to American Express shareholders. ~~The distribution was completed~~Effective as of the close of business on September 30, ~~2005.~~2005, American Express completed the separation of our company and the distribution of our common shares to American Express shareholders (the “Distribution”). Prior to the Distribution, we had been a wholly-owned subsidiary of American Express.
21

Capital Structure
Prior to the Distribution, American Express provided a capital contribution to our company of approximately $1.1 billion to fund costs related to the Separation and Distribution, to adequately support strong debt ratings for our company on the Distribution and to indemnify us for the after-tax cost of $65 million with respect to the comprehensive settlement of a consolidated securities class action lawsuit. We replaced our inter-company indebtedness with American Express, initially with a bridge loan from selected financial institutions, and on November 23, 2005 through the issuance of $1.5 billion of unsecured senior debt securities with 5- and 10-year maturities.
Non-recurring Separation Costs
Since the Separation announcement through March 31, 2006, we have incurred $360 million of pretax non-recurring separation costs, and ~~distribution related~~expect to incur a total of approximately $875 million. These costs include advisor and employee retention program costs, costs associated with establishing the Ameriprise Financial brand and costs to separate and reestablish our technology platforms. In addition, we have incurred higher ongoing expenses associated with establishing ourselves as an independent company.

22

~~Basis~~Transfer of ~~Presentation~~Businesses

~~In connection~~Effective August 1, 2005, we transferred our 50% ownership interest and the related assets and liabilities of our subsidiary, American Express International Deposit Company (“AEIDC”) to American Express. The assets, liabilities and results of operations of AEIDC are classified as discontinued operations. Effective September 30, 2005, we entered into an agreement to sell our interest in the AMEX Assurance legal entity to American Express within two years after the Distribution for approximately $115 million. This transaction, combined with the ~~separation~~ceding of all travel insurance and distribution, we prepared our consolidated financial information as if we had been a stand-alone company for the periods presented. In the preparation of our consolidated financial information, we made certain allocations of expenses that our management believescard related business to be a reasonable reflection of costs we would have otherwise incurred as a stand-alone company but that were paid by American Express. For more information regarding these allocations made in connection with the preparation of our consolidated financial statements, see Note 1 to our consolidated financial statements.
The financial information presented herein may not be indicative of our consolidated financial position, operating results or cash flows in the future or what our consolidated financial position, operating results or cash flows would have been had we been a separate, stand-alone entity during the periods presented.
~~Capital Contribution~~
~~In connection with the separation and distribution,~~ American Express ~~provided us~~effective July 1, 2005, created a ~~capital contribution of approximately $1.1 billion. The capital contribution was intended to provide adequate support~~variable interest entity for ~~a senior debt rating of our company on~~which we are not the distribution date that allows us to have efficient access to the capital markets, support the current financial strength ratings of our insurance subsidiaries and cover the separation costs described above. Subsequent to receiving capital from American Express,primary beneficiary. Accordingly, we ~~contributed $650 million to our subsidiary IDS Life.~~
~~New Financing Arrangements~~
We filed a registration statement on Form S-3 with the SEC in anticipation of issuing long-term senior debt of approximately $1.5 billion to replace the existing bridge loan, which was drawn on September 28, 2005 (see Note 5 to the consolidated financial statements) to repay American Express for inter-company loans, and for other corporate purposes. The registration statement relating to the long-term senior debt securities has been filed with the SEC and has been declared effective. This does not constitute an offer to sell or the solicitation of an offer to buy such securities. In September we also obtained an unsecured revolving credit facility for $750 million expiring in September 2010 from various third party financial institutions anddeconsolidated AMEX Assurance as of September 30, ~~2005, there was no draw on the credit facility.~~2005.

~~Replacement of~~ Services and Operations Provided by American Express

American Express has historically provided to us a variety of corporate and other support services, ~~for our businesses,~~ including information technology, treasury, accounting, financial reporting, tax administration, human resources, marketing, legal, procurement and other services. Following the Distribution, American Express ~~will continue~~has continued to provide usthe Company with many of these services pursuant to a transition services ~~agreement. Those services~~agreement for transition periods of up to two years or more, if extended by mutual agreement of the Company and American Express. The Company will generally be provided for a term that began on the date of the separation and distribution and will expire on the earlier to occur of the second anniversary of the separation and distribution date or the date of termination ofterminate a particular service ~~pursuant to~~after it has completed the ~~transition services agreement. In certain instances we will arrange to procure other services pursuant to~~procurement of the designated service through arrangements with third parties or through ~~our~~the Company’s own employees. Other than technology-related expenses, we currently expect that the aggregate costs we will pay to American Express under the transition services agreement for continuing services and the costs for establishing or procuring the services that have historically been provided to us by American Express will not significantly differ from the amounts reflected in our historical consolidated financial statements. ~~However, we do expect to incur significant non-recurring costs for advertising and marketing to establish our new brands and to build our own technology infrastructure.~~

For the periods preceding the Distribution, we prepared our consolidated financial statements as if we had been a stand-alone company. In the preparation of our consolidated financial statements for those periods, we made certain allocations of expenses that our management believes to be a reasonable reflection of costs we would have otherwise incurred as a stand-alone company but were paid by American Express. Our consolidated financial statements presented may not be indicative of our consolidated results of operations, financial condition or cash flows in the future or what our consolidated results of operations, financial condition or cash flows would have been had we been a separate, stand-alone entity during all periods presented.
~~Marketing~~Recent Accounting Pronouncements
For information regarding recent accounting pronouncements and ~~Re-Branding.~~their expected impact on our future consolidated results of operations or financial condition, see Note 2 to our consolidated financial statements.
22

Non-GAAP Financial Information ~~As part~~
We follow accounting principles generally accepted in the United States (“GAAP”). The accompanying discussion includes information on both a GAAP and non-GAAP basis. The non-GAAP presentation in this report excludes items that are a direct result of the separation ~~we have entered into a marketing and branding agreement with~~from American Express, which consist of discontinued operations, AMEX Assurance and non-recurring separation costs. Our non-GAAP financial measures, which we view as important indicators of financial performance, include:
•      Total expenses excluding separation costs and AMEX Assurance;
•      Adjusted earnings (adjusted to exclude AMEX Assurance and separation costs);
•      Income tax provision before discontinued operations and non-recurring separation costs excluding AMEX Assurance;
•      Income before discontinued operations and non-recurring separation costs excluding AMEX Assurance;
•      Separation costs, after-tax;
•      Pretax segment income excluding AMEX Assurance;
•      Pretax segment loss before separation costs; and
•      Return on average equity excluding the impact of the separation, or adjusted return on equity, using as the numerator adjusted earnings for the last twelve months and as the denominator a five point average of equity excluding both the assets and liabilities of discontinued operations and equity allocated to expected non-recurring separation costs as of the last preceding four quarters and the current quarter.
Management believes that ~~grants us~~ the ~~right to use~~presentation of these non-GAAP financial measures excluding these specific income statement impacts best reflects the ~~“American Express” brand name and logo in a limited capacity for up to two years from the distribution date in conjunction with our brand name and logo and, in the names of certain~~underlying performance of our ~~products, services~~ongoing operations and ~~subsidiaries~~facilitates a more meaningful trend analysis. These non-GAAP measures are also used for ~~transitional purposes. The agreement also provides for~~goal setting, certain compensation related to our annual incentive award program and evaluating our performance on a basis comparable to that used by securities analysts.

23

~~various reciprocal marketing arrangements and services between the parties.~~ ~~We do not expect to make any significant cash payments to American Express in connection with the marketing and branding agreement.~~
~~Technology.~~ As a stand-alone company, we are installing and implementing information technology infrastructure to support our business functions, including accounting and financial reporting, customer service and distribution, as well as other significant investments to enhance our capabilities as an independent business.
~~Other Factors Affecting our Financial Information and~~Consolidated Results of Operations

~~In addition to the separation and distribution from American Express, the~~The following ~~had a material impact on the comparability of, and are important to an understanding of,~~table presents our ~~financial condition and~~consolidated results of operations for the ~~periods~~three months ended March 31, 2006 and 2005 and the impact of the deconsolidation of AMEX Assurance effective September 30, 2005 discussed ~~below.~~previously:

Three Months Ended
March 31,

Change

AMEX Assurance
Three Months
Ended March 31,

Change
Excluding AMEX
Assurance

(in millions)

2006

2005

$

%

2005

$

%

(unaudited)

Revenues

Management, financial advice and service fees

$
710

$
608

$
102

17
%
$
1

$
103

17
%
Distribution fees

301

288

13

5

—

13

5

Net investment income

574

548

26

5

3

29

5

Premiums

220

270

(50
)
(19
)
71

21

11

Other revenues

144

133

11

8

(1
)
10

7

Total revenues

1,949

1,847

102

6

74

176

10

Expenses

Compensation and benefits:

Field

423

362

61

17

1

62

17

Non-field

316

279

37

13

—

37

13

Total compensation and benefits

739

641

98

15

1

99

15

Interest credited to account values

324

311

13

4

—

13

4

Benefits, claims, losses and settlement expenses

227

218

9

4

19

28

14

Amortization of deferred acquisition costs

128

136

(8
)
(6
)
8

—

—

Interest and debt expense

23

17

6

35

��

6

35

Separation costs

67

20

47

#

—

47

#

Other expenses

250

258

(8
)
(3
)
6

(2
)
(1
)
Total expenses

1,758

1,601

157

10

34

191

12

Income before income tax provision and discontinued operations

191

246

(55
)
(22
)
40

(15
)
(7
)
Income tax provision

46

71

(25
)
(35
)
13

(12
)
(21
)
Income before discontinued operations

145

175

(30
)
(17
)
27

(3
)
(2
)
Discontinued operations, net of tax

—

8

(8
)
#

—

(8
)
#

Net income

$
145

$
183

$
(38
)
(21
)
$
27

$
(11
)
(7
)
The following non-GAAP measures are referred to in the accompanying discussion:

Three Months Ended March 31,

Change

Non-GAAP Financial Measures (in millions)

2006

2005

$

%

Total expenses excluding separation costs and AMEX Assurance

$
1,691

$
1,547

$
144

9
%
Separation costs, after-tax

44

13

31

#

Income tax provision before discontinued operations and non-recurring separation costs excluding AMEX Assurance

69

65

4

6

Income before discontinued operations and non-recurring separation costs excluding AMEX Assurance

189

161

28

17

#       Variance of 100% or greater.
24

~~Equity Markets~~Owned, Managed and ~~Interest Rates~~Administered Assets

~~Equity markets and interest rate fluctuations can have a significant impact~~We earn management fees on our results of operations, primarily due to the effects they have on the asset management fees we earn and the “spread” income generated on our annuities, face-amount certificates and universal life-type products. Asset management fees, which we include in management, financial advice and services fees, are generallyowned separate account assets based on the market value of assets held in the separate accounts. We record the income associated with our owned investments, including net realized gains and losses associated with these investments and other-than-temporary impairments of these investments, as net investment income. For managed assets, we ~~manage. The interest spreads we earn on our annuity, protection and face-amount certificate products are the difference between the returns we earn~~receive management fees based on the ~~investments that support our obligations~~value of these assets. We generally report these fees as management, financial advice and service fees. We may also receive distribution fees based on the value of these ~~products and the amounts we must credit contractholders and policyholders.~~assets. We generally record fees received from administered assets as distribution fees.

~~Improvements in equity markets generally lead to increased value~~Fluctuations in our owned, managed and administered assets ~~while declines in equity markets generally lead to decreased value in~~impact our ~~managed assets. Average equity markets were higher in the first nine months of 2005 compared to the first nine months of 2004, resulting in a favorable impact to our management fee revenue.~~
Interest rate spreads contracted in the first nine months of 2005 compared to the first nine months of 2004, primarily due to rising short-term interest rates, which drove higher crediting rates on our base-amount certificate products.
~~For additional information regarding our sensitivity to equity risk and interest rate risk, see “Qualitative and Quantitative Disclosures about Market Risks” below.~~
~~Net Flows~~revenues.
Our owned, managed and administered assets are impacted by market movements and net flows of client assets. Net flows of client assets isare a measure of new sales of, or deposits into, our products offset by redemptions of, or withdrawals from, our products. Net flows can have a significant impact on our results of operations due to their impact on our ~~management fee~~ revenues and interest spreads we earn based on our owned, managed and administered assets. Since January 2004, in the aggregate, we have experienced net inflows in our protection, variable annuity, face-amount certificate, wrap account and other companies’ products we offer. During the same time period, we experienced significant net outflows in our proprietary mutual fund and institutional product offerings.
~~Recent Accounting Pronouncements~~
~~Refer to Recently Issued Accounting Standards in Note 2 to the consolidated financial statements.~~
24

~~Consolidated Results of Operations~~
~~Three Month Results of Operations~~
expenses. The following ~~tables present our unaudited consolidated results of operations,~~table presents information regarding our ~~cash sales~~owned assets, which are included in our consolidated balance sheets, and our ~~aggregate owned,~~ managed and administered assets, ~~for the periods indicated. We include both of these additional operating statistics as we believe they~~which are ~~useful to an understanding of~~not recorded on our results of operations. Cash sales represent cash received from clients for purchases of our asset accumulation and income products, as well as expected annual premiums for our protection products. Cash sales directly impact various revenue items in addition to being a significant factor in changes to our owned, managed and administered assets.consolidated balance sheets:

Three Months Ended
September 30,

2005

2004

% Change^(a)

Unaudited
(Dollars in Millions)

Revenues:

Management, financial advice and service fees

$
687

$
550

25
%
Distribution fees

296

248

19
%
Net investment income

561

520

8
%
Premiums

202

262

(23
)%
Other revenues

127

132

(3
)%
Total revenues

1,873

1,712

9
%
Expenses:

Compensation and benefits

Field

408

311

31
%
Non-field

295

249

19
%
Total compensation and benefits

703

560

26
%
Interest credited to account values

337

302

11
%
Benefits, claims, losses and settlement expenses

190

205

(8
)%
Amortization of deferred acquisition costs

49

108

(55
)%
Interest and debt expense

16

13

27
%
Separation costs

92

—

#

Other expenses

305

263

16
%
Total expenses

1,692

1,451

17
%
Income before income tax provision and discontinued operations

181

261

(31
)%
Income tax provision

58

73

(20
)%
Income from continuing operations

123

188

(35
)%
Income from discontinued operations

2

11

(87
)%
Net income

$
125

$
199

(38
)%
Cash sales—product:

Mutual funds *

$
6,469

$
5,634

15
%
Annuities

2,483

1,887

32
%
Investment certificates **

1,386

1,786

(22
)%
Life insurance and other protection products

273

306

(11
)%
Institutional products and services ***

846

1,664

(49
)%
Other

949

991

(4
)%
Total cash sales

$
12,406

$
12,268

1
%
Percentage of cash sales generated by branded financial advisors

49
%
44
%

March 31,

Owned, Managed and Administered Assets

2006

2005

% Change

(in billions)

Owned Assets

Separate accounts

$
45.2

$
36.0

26
%
Investments

38.1

39.9

(5
)
Other⁽¹⁾

5.8

5.5

5

Total owned assets

89.1

81.4

9

Managed Assets

Managed Assets-Retail

RiverSource (“RVS”) mutual funds

58.8

61.2

(4
)
Threadneedle mutual funds

15.3

11.9

29

Ameriprise Financial wrap account assets

54.9

39.5

39

Securities America, Inc. wrap account assets

9.1

5.8

57

Total managed assets-retail

138.1

118.4

17

Managed Assets-Institutional

Ameriprise financial separately managed accounts/sub-advisory

27.5

30.1

(9
)
Threadneedle separately managed accounts/sub-advisory

107.7

100.7

7

Total managed assets-institutional

135.2

130.8

3

Managed Assets-Retirement Services

Collective funds

10.8

11.2

(4
)
Managed Assets-Eliminations⁽²⁾

(7.9
)
(9.5
)
(17
)
Total managed assets

276.2

250.9

10

Administered Assets

80.4

68.7

17

Total Owned, Managed and Administered Assets

$
445.7

$
401.0

11

^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
^*(1)
^{Excludes non proprietary sales within our wrap accounts.}
^**
^{Includes cash sales from AEIDC through July 31, 2005 and the entire period ending September 30, 2004.}
^***
^{Includes separately managed accounts and alternative investments.}
25

As of September 30,

2005

2004

% Change^(a)

(Dollars in Billions)

Owned, Managed and Administered Assets

Owned Assets:

Managed owned assets

Separate accounts

$
39.8

$
32.4

23
%
Investments

39.5

39.1

1
%
Total managed owned assets

79.3

71.5

11
%
Other^(b)

6.8

5.8

17
%
Total owned assets

86.1

77.3

11
%

Managed Assets:

Managed Assets—Retail

RiverSource (RVS) Mutual Funds

$
59.4

$
63.3

(6
)%
Threadneedle Mutual Funds

13.4

10.8

24
%
Wrap Account Assets—Other company products

43.7

29.3

49
%
Total managed assets—retail

116.5

103.4

13
%
Managed Assets—Institutional

Separately Managed Accounts/Sub-Advisory

19.7

20.1

(2
)%
Other Institutional

7.5

9.2

(18
)%
Threadneedle Separately Managed Accounts/Sub-Advisory

102.9

92.5

11
%
Total managed assets—institutional

130.1

121.8

7
%
Managed Assets-Retirement Services

Collective Funds

11.3

12.1

(7
)%
Corporate, other

6.8

4.8

41
%
Managed Assets—Eliminations^(c)

(4.6
)
(5.9
)
25
%
Total managed assets

260.1

236.2

10
%
Administered Assets

74.4

65.2

14
%
Total Owned, Managed and Administered Assets

$
420.6

$
378.7

11
%
^(a)
^{Percentage change calculated using thousands.}
^(b)
^{Includes cash and cash equivalents, restricted and segregated cash and receivables.}
^(c)(2)
^{Includes eliminations from managed assets for owned assets invested in our managed products and separately managed accounts and among managed assets for RVS Fund assets sub-advised by Threadneedle.}
Threadneedle Asset Management Holdings Ltd. (“Threadneedle”).
25

Three Months Ended ~~September 30, 2005~~March 31, 2006 Compared to Three Months Ended ~~September 30, 2004~~March 31, 2005
Overall

~~Overall~~
Consolidated net income for the three months ended March 31, 2006 was $145 million, down $30 million from income before discontinued operations of $175 million for the three months ended March 31, 2005. Income before discontinued operations and non-recurring separation costs excluding AMEX Assurance rose $28 million to $189 million in the first quarter of 2006 from $161 million in the first quarter of 2005. The first quarter of 2006 was ~~$123~~negatively impacted by higher non-recurring pretax separation costs, which were $67 million ($44 million after-tax) in 2006 compared with $20 million ($13 million after-tax) in the first quarter of 2005.
Revenues
Consolidated total revenues for the three months ended March 31, 2006 had a net growth of $102 million, or 6% to $1.9 billion compared to $1.8 billion for the three months ended March 31, 2005. Revenues in the first quarter of 2006 increased $176 million over the same quarter in the prior year after excluding $74 million of AMEX Assurance revenues from the prior year. This revenue growth, excluding AMEX Assurance, was primarily the result of increases of $103 million in management, financial advice and service fees, $29 million in net investment income and $21 million in premiums.
Management, financial advice and service fees for the three months ended March 31, 2006 increased $102 million, or 17% to $710 million compared to $608 million for the ~~third~~three months ended March 31, 2005. Fees related to wrap products increased by $62 million, primarily due to higher net inflows into the wrap account products and market appreciation of wrap account assets. Growth in variable annuity sales since the first quarter ~~down $65~~of 2005 resulted in higher average assets and contributed to a $27 million ~~or 35% from $188 million a year ago. Included~~increase in ~~consolidated income before discontinued operations was income from AMEX Assurance~~fees. Management, financial advice and service fees of ~~$3 million and $27~~our subsidiary Securities America, Inc. (“SAI”) were up $11 million for the ~~quarters~~three months ended ~~September 30,~~March 31, 2006. The SAI growth in fees is the result of a significant increase in their sales force throughout 2005. The impact of AMEX Assurance was insignificant.
Distribution fees increased $13 million, or 5% to $301 million for the first quarter of 2006 compared to the same period in 2005, and ~~2004, respectively. Also included in~~were not impacted by AMEX Assurance. Strong flows into wrap accounts since the ~~third~~first quarter of 2005 and favorable equity and interest rate markets accounted for $16 million of the increase. The larger sales force at SAI contributed to an increase in distribution fees of $8 million. These increases were ~~non-recurring separation costs~~partially offset by a decrease of ~~$59~~$13 million ~~(after-tax)~~primarily due to declines in fees from Real Estate Investment Trust (“REIT”) products resulting from a lack of available products.
Net investment income increased $26 million, or 5% to $574 million for the three months ended March 31, 2006 compared to the same period in 2005. Growth was primarily driven by an increase of $19 million in the more variable components of net investment income comprised of pretax gains on trading securities, equity method investments in hedge funds and certain derivatives. Income related to derivatives used to hedge certain expense line items showed a net increase of $6 million as a result of increased gains of $18 million on derivatives used to hedge interest credited expenses for stock market certificates and equity indexed annuities, partially offset by a $12 million negative impact on options hedging Guaranteed Minimum Withdrawal Benefits (“GMWB”). These amounts were offset by a $6 million decline in pretax realized net investment gains. The impact of AMEX Assurance was insignificant.
Premiums declined by $50 million to $220 million in the first quarter of 2006 compared to the same period in 2005. When $71 million of AMEX Assurance premiums are excluded from the first quarter of 2005, premiums increased by $21 million in the first quarter of 2006. Our auto and home insurance generated an increase in premiums of $18 million over the first quarter of 2005, primarily driven by a 19% increase in our in force policies generated through the Costco alliance. Our total policies in force at March 31, 2006, which includes those policies generated through the Costco alliance, increased by 9% over March 31, 2005. Additionally, disability income premiums continued to trend upward, increasing by $3 million to $39 million for the three months ended March 31, 2006 compared with the same period in 2005.

Other ~~significant items included in net income before discontinued operations~~revenues increased $11 million, or 8% to $144 million for the ~~third quarter of 2005 is a $70 million expense, $46 million after-tax, related~~three months ended March 31, 2006 compared to the ~~comprehensive settlement~~same period in 2005. The majority of ~~the consolidated securities class action lawsuit (see Note 10~~this increase was due to ~~consolidated financial statements). Also included~~cost of insurance and other contract charges, which increased $7 million primarily as a result of a 7% increase in the ~~quarter is an after-tax benefit~~face amount of ~~$44~~variable and fixed universal life contracts in force. The impact of AMEX Assurance was insignificant.
Expenses
Consolidated total expenses were $1.8 billion for the three months ended March 31, 2006, up $157 million from the ~~annual Deferred Acquisition Cost (DAC) assessment, $13 million~~same period in ~~tax~~2005. Total expenses ~~related to the finalization~~excluding separation costs and AMEX Assurance were $1.7 billion, an increase of prior period tax returns and $4 million in after-tax realized net investment losses. Included in third quarter 2004 were $22 million in after-tax regulatory and legal costs, an after-tax benefit of $15 million from the annual DAC assessment and $7 million in after-tax realized net investment gains.$144

26

~~Revenues~~
C~~onsolidated revenues increased $161~~ million, or 9% ~~to $1.9 billion, up~~ from ~~$1.7 billion in~~ the ~~year ago quarter. Included in consolidated revenues for the three month periods ended September 30, 2005~~first quarter of 2005. This expense increase, excluding separation costs and ~~2004 are AMEX Assurance-related revenues of $(12) million and $67 million, respectively.~~
Management, financial advice and service fees increased $137 million or 25% to $687 million, driven by higher assets under management, including the impact of market appreciation, Threadneedle hedge fund performance fees and greater SPS wrap fees. The impact of changes attributable to AMEX Assurance, was ~~immaterial.~~
Distribution fees increased $48 million or 19% to $296 million, as a result of an increase in fees from retail brokerage activity. This was primarily driven by increases in sales of other companies’ funds, increased revenue sharing due to higher sales volumes and an increase in sales from SAI. These increases were partially offset by decreases in proprietary fund sales and other companies’ real estate investment trust (REIT) products. AMEX Assurance had no impact on distribution fees.
Net investment income increased $41 million or 8% to $561 million, driven by higher asset levels. Included in net investment income are $6 million in net investment losses, which compares to $11 million of net investment gains from the third quarter of 2004. During the three months ended September 30, 2005, gross gains and losses on the sale of available-for-sale securities were $13 million and $20 million, respectively, and other-than-temporary impairments were $1 million. This compares to gross gains and losses on the sale of available-for-sale securities of $15 million and $6 million, respectively, and other-than-temporary impairments of less than $1 million for the three months ended September 30, 2004. Losses generated on sales of available-for-sale securities for the three months ended September 30, 2005 are primarily attributed to the expected run-off of certificates sold by our subsidiary Ameriprise Certificate Company through American Express Bank International, a subsidiary of American Express. The impact of changes attributable to AMEX Assurance was immaterial.
~~Premiums declined $60 million or 23% to $202 million~~ primarily due to ~~the ceding~~increases of the AMEX Assurance business to American Express effective July 1, 2005. Third quarter 2004 revenues included $62 million of premiums related to AMEX Assurance and third quarter 2005 revenues included $(15) million of premiums related to AMEX Assurance. Partially offsetting the decreases related to AMEX Assurance is a $17 million or 16% increase in our home and auto insurance sales, most notably from the Costco alliance, which is up for renewal in January 2006.
~~Expenses~~
Consolidated expenses totaled $1.7 billion for the three months ended September 30, 2005, up $241 million or 17% from $1.5 billion for the three months ended September 30, 2004. This increase includes $92$99 million in non-recurring separation costs and $70 million related to the comprehensive settlement of the consolidated securities class action lawsuit. Total expenses also include $(15) million and $27 million of AMEX Assurance-related expenses for the three months ended September 30, 2005 and 2004, respectively.
~~Compensation~~total compensation and benefits, ~~– field increased $97~~$28 million ~~or 31% to $408~~in benefits, claims, losses and settlement expenses and $13 million ~~primarily due to increased sales. Additionally, $34 million was related to ceding commissions paid by the Company for the AMEX Assurance reinsurance contracts.~~
Compensation and benefits – non-field increased $46 million or 19% to $295 million due to increased management incentives, higher benefit costs and merit adjustments. One of the principal drivers of the $27 million increase in ~~management incentives was strong hedge fund performance at Threadneedle. The impact of changes attributable to AMEX Assurance was immaterial.~~
27

Interest credited to account values increased $35 million or 11% to $337 million due to higher interest crediting rates and volume growth on investment certificate products. AMEX Assurance had no impact on interest credited to account values.

~~Benefits, claims, losses~~Compensation and ~~settlements declined $15~~benefits—field increased $61 million, or 8%17% to ~~$190~~$423 million in the first quarter of 2006 compared with the same quarter in 2005. The higher field compensation and benefits was primarily ~~reflecting~~due to increased sales force compensation driven by strong sales of wrap account, variable annuity and variable life insurance products, as well as a ~~$60 million decline from~~15% increase in SAI registered representatives since the ~~impact~~first quarter of ~~ceding~~last year. GDC per branded advisor was up 17% during the three months ended March 31, 2006 compared to the same period in 2005. The impact of AMEX Assurance ~~reserves, which~~ was offset by increases driven by higher average home and auto insurance policies in force and higher life and health expenses, due to increased in-force levels and a $13 million maintenance reserve adjustment.insignificant.

~~Amortization of DAC declined $59~~Compensation and benefits—non-field increased $37 million, or ~~55%~~13% to $49 million primarily as a result of a $67 million expense reduction resulting from the annual DAC assessment performed in the third quarter of 2005, compared to a $24 million DAC amortization expense reduction in the third quarter of 2004. As disclosed in prior periods, we annually perform a comprehensive review in the third quarter of each year and update various DAC assumptions, such as persistency, mortality rate, interest margin and maintenance expense level assumptions. The impact on results from operations of changing assumptions with respect to the amortization of DAC can be either positive or negative in any particular period. As a result of these reviews, we took actions in 2005 and 2004 that impacted the DAC balances and expenses.
~~The $67 million DAC amortization expense reduction in the third quarter of 2005 consisted of:~~
•      ~~a $32 million reduction reflecting changes in previously assumed mortality rates;~~
•      ~~a $33 million reduction reflecting lower than previously assumed surrender rates and higher associated surrender charges;~~
•      ~~a $6 million reduction from improved average fee revenues;~~
•      ~~a $5 million reduction from the annual extension of the mean reversion period by one year; and~~
•      ~~a $9 million increase reflecting changes from previously assumed interest rate spreads, modeling changes, account maintenance expenses, and other miscellaneous items.~~
~~The $24 million DAC amortization expense reduction in the third quarter of 2004 consisted of:~~
•      ~~a $4 million reduction reflecting changes in previously assumed mortality rates;~~
•      ~~a $13 million reduction reflecting changes from previously assumed surrender and lapse rates;~~
•      ~~a $3 million reduction from the annual extension of the mean reversion period by one year; and~~
•      ~~a $4 million reduction reflecting higher than previously assumed interest rate spreads and other miscellaneous items.~~
~~DAC amortization related to AMEX Assurance was nil for the third quarter of 2005 compared to $8 million for the same period one year ago.~~
Interest and debt expense increased $3 million or 27% to $16 million reflecting higher short-term interest rates and higher average levels of debt during the third quarter of 2005 compared to the third quarter of 2004. AMEX Assurance had no impact on interest and debt expense.
Other expenses increased $42 million or 16% to $305 million including the previously mentioned $70 million pretax charge related to the settlement of a class action lawsuit. Partially offsetting this was an $8 million decrease in other expenses related to AMEX Assurance, which had $1 million in other expenses for the third quarter of 2005 versus $9 million for the same period one year ago, and an approximately $24 million decrease in regulatory expenses compared to the third quarter of 2004.
Separation costs incurred during the quarter of $92 million pretax ($59 million after-tax) were primarily related to advisor retention program costs, technology costs and costs associated with establishing the Ameriprise Financial brand.
~~Income Taxes~~
~~Income taxes decreased to $58~~$316 million for the three months ended ~~September 30, 2005, down from $73~~March 31, 2006 and were not impacted by AMEX Assurance. The first quarter of 2006 includes $11 million during the three months ended September 30, 2004. Our effective tax rate increased to 32.2% in the three months ended September 30, 2005 compared to 27.7% during the three months ended September 30, 2004. The increased effective tax rate resulted from a $20 million tax expense applicable to prior years, partially offset by a $7 million tax benefitof severance costs, primarily related to ~~the finalization~~our technology functions. The remainder of ~~prior year tax returns, as well as relatively lower levels of pretax income compared to tax-advantaged items in 2005.~~
28

~~Nine Months Results of Operations~~
~~The following tables present our unaudited consolidated results of operations and information regarding our cash sales for~~ the periods indicated. For additional information refer to the table with aggregate owned, managed and administered assets under the Three Months Results of Operations. We believe these additional operating statistics are useful to an understanding of our results of operations. Cash sales represent cash received from clients for purchases of our asset accumulation and income products, as well as expected annual premiums for our protection products. Cash sales directly impact various revenue items in addition to being a significant factor in changes in our owned, managed and administered assets.

Nine Months Ended
September 30,

2005

2004

% Change^(a)

Unaudited
(Dollars in Millions)

Revenues:

Management, financial advice and service fees

$
1,927

$
1,642

17
%
Distribution fees

873

834

5
%
Net investment income

1,667

1,566

6
%
Premiums

751

759

(1
)%
Other revenues

397

383

4
%
Total revenues

5,615

5,184

8
%
Expenses:

Compensation and benefits

Field

1,141

992

15
%
Non-field

854

698

23
%
Total compensation and benefits

1,995

1,690

18
%
Interest credited to account values

976

926

5
%
Benefits, claims, losses and settlement expenses

646

605

7
%
Amortization of deferred acquisition costs

319

312

2
%
Interest and debt expense

52

37

41
%
Separation costs

168

—

#

Other expenses

841

762

10
%
Total expenses

4,997

4,332

15
%
Income before income tax provision, discontinued operations and accounting change

618

852

(27
)%
Income tax provision

171

253

(32
)%
Income before discontinued operations and accounting change

447

599

(25
)%
Income from discontinued operations

16

31

(49
)%
Cumulative effect of accounting change, net of tax

—

(71
)
#

Net income

$
463

$
559

(17
)%
Cash sales—product:

Mutual funds *

$
18,705

$
18,859

(1
)%
Annuities

6,939

5,985

16
%
Investment certificates **

5,508

4,555

21
%
Life insurance and other protection products

913

874

4
%
Institutional products and services ***

5,123

5,920

(13
)%
Other

2,955

3,400

(13
)%
Total cash sales

$
40,143

$
39,593

1
%
Percentage of cash sales generated by branded financial advisors

47
%
45
%

^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
^*^{Excludes non proprietary sales within our wrap accounts.}
^**^{Includes cash sales from AEIDC through July 31, 2005 and the entire period ending September 30, 2004.}
^***^{Includes separately managed accounts and alternative investments.}
29

~~Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004~~
~~Overall~~
Income before discontinued operations and accounting change was $447 million for the nine months ended September 30, 2005, down $152 million or 25% from $599 million the same period a year ago. Included in consolidated income before discontinued operations is income from AMEX Assurance of $56 million and $79 million for the nine months ended September 30, 2005 and 2004, respectively. Also included in 2005 are non-recurring separation costs of $109 million (after-tax).
~~Revenues~~
~~Total revenues were $5.6 billion for the nine months ended September 30, 2005, a $431 million or 8% increase compared to $5.2 billion for the nine months ended September 30, 2004. This~~ increase was ~~primarily due~~attributable to ~~increased management, financial advice and services fees and~~ higher ~~net investment income. Partially offsetting these increases was a $61 million decrease in revenues~~costs associated with ~~AMEX Assurance, which had revenues of $138 million in the nine months ended September 30, 2005, versus $199 million in the same period a year ago.~~
~~Management, financial advice~~being an independent entity, including higher management and service fees increased by $285 million or 17% to $1.9 billion in the first nine months of 2005 compared to $1.6 billion in the first nine months of 2004, primarily as a result of increased revenues from wrap accounts of $107 million, increased advisory and trust fees of $99 million, including management fees from Threadneedle, and increased fee revenues from separate account assets of $53 million, each of which reflect an increase in average levels of managed assets. The higher average managed assets in wrap accounts and separate accounts primarily resulted from net inflowsadministration costs and to a lesser extent, higher average equity values. The increase in higher average managed assets at Threadneedle is primarily due to higher average equity values and net inflows, and to a lesser extent, hedge fund performance and favorable currency translation effects due to the appreciation of the pound sterling against the U.S. dollar. The remaining increase was primarily due to a $28 million increase in financial planning fees. The impact of changes attributable to AMEX Assurance was immaterial.
Distribution fees were $873 million in the first nine months of 2005, a $39 million or 5% increase compared to $834 million in the first nine months of 2004. The increase was primarily due to an increase in fees from retail brokerage activity of $79 million, which includes increased sales of other companies’ funds, revenue sharing fees due to higher sales volumes and SAI activity. These increases were offset by a $21 million decrease in fees from sales of other companies’ REIT products and a $24 million decrease in sales of proprietary mutual funds. AMEX Assurance had no impact on distribution fees.
Net investment income increased $101 million, or 6%, to $1.7 billion in the first nine months of 2005 compared to $1.6 billion in the first nine months of 2004, due to increased net investment gains and greater interest and dividend income as a result of higher average levels of owned assets. Levels of owned assets increased principally as a result of increased sales on certificate products due to a sales promotion in the second half of 2004 that ended in the first quarter of 2005. A portion of the increase was also due to a $36 million gain related to the sale of all of our interest in a CDO securitization trust, and to a lesser extent, $14 million of pretax income related to the liquidation of two SLTs consolidated in connection with our adoption of FIN 46, compared to a $24 million charge in 2004 related to the liquidation of another SLT. During the first nine months of 2005, gross gains and losses on the sale of available-for-sale securities were $107 million and $57 million, respectively, and other-than-temporary impairments were $2 million. This compares to the first nine months of 2004 gross gains and losses on the sale of available-for-sale securities of $46 million and $15 million, respectively, and other-than-temporary impairments of $1 million. The impact of changes attributed to AMEX Assurance was immaterial.
Premiums were $751 million for the first nine months of 2005, an $8 million or 1% decrease compared to $759 million in the first nine months of 2004. This decrease was primarily due to a $70 million decrease in premiums related to AMEX Assurance, which had $117 million in premiums in the first nine months of 2005 compared to $187 million in the same period a year ago, partially offset by a $55 million, or 18%, increase in premiums from our personal
30

~~auto and home protection products, most notably from our Costco alliance, and an $8 million increase in disability income premiums.~~
Other revenues increased by $14 million or 4% to $397 million in the first nine months of 2005 compared to $383 million in the first nine months of 2004, due to a $13 million increase in cost of insurance charges received due to an overall 4% increase in inforce levels. The impact of changes attributed to AMEX Assurance was immaterial.
~~Expenses~~
Total expenses were $5.0 billion for the nine months ended September 30, 2005, a $665 million or 15% increase compared to $4.3 billion for the nine months ended September 30, 2004. This increase was largely due to $305 million in increased compensation and benefits expenses and $168 million in costs related to the separation and distribution from American Express, as well as increased interest credited to account values. Included in total expenses for the nine months ended September 30, 2005 and 2004 are $55 million and $81 million, respectively, of expenses related to AMEX Assurance.
Compensation and benefits – field increased by $149 million or 15% to $1.1 billion in the first nine months of 2005 compared to $992 million in the first nine months of 2004. The increase was primarily a result of higher commissions paid to financial advisors and registered representatives due to increased sales, as well as increased compensation and benefits costs for other field employees. In 2005, $34 million of the increase was attributed to AMEX Assurance.
Compensation and benefits – non-field increased by $156 million or 23% to $854 million in the first nine months of 2005 compared to $698 million in the first nine months of 2004. The increase is due to increased management incentives, ~~higher benefit costs and merit adjustments. The $43~~which were up $2 million ~~increase in management incentives was in part due to strong asset management performance at Threadneedle. AMEX Assurance had no impact on compensation and benefits – non-field.~~over the prior year quarter.

Interest credited to account values increased ~~by $50~~$13 million, or ~~5% from $926~~4% to $324 million in the first ~~nine months~~quarter of ~~2004 to $976 million in~~2006 compared with the first ~~nine months~~quarter of 2005. This increase ~~reflected a $59~~was primarily driven by an $18 million ~~net~~ increase in interest credited ~~on our investment~~to certificate ~~products~~holders as a result of a higher ~~crediting rates and volume growth~~short-term interest rate environment. This increase was partially offset by a $7 million decrease in ~~these products largely attributable to a recent promotion. The increases in~~the interest credited on ~~investment certificates and~~fixed annuities due to declines in related ~~reserves were partially offset by an $11 million decrease in interest credited on our fixed annuity products as a result of lower crediting rates. AMEX Assurance had~~reserve balances. There was no impact ~~on interest credited to account values.~~from AMEX Assurance.

Benefits, claims, losses and settlement expenses increased ~~by $41~~$9 million, or 7%4% to ~~$646~~$227 million in the first ~~nine months~~quarter of 2006 compared to the first quarter of 2005. Excluding $19 million of AMEX Assurance expense from the first quarter of 2005, ~~from $605~~benefits, claims, losses and settlement expenses increased $28 million, ~~in the first nine months of 2004. Of the $41 million increase, $54 million was a result of higher~~or 14%. Higher average ~~personal~~ auto and home insurance policies ~~inforce, principally due to our Costco alliance,~~in force resulted in an increase of $14 million and ~~$37 million of the~~an increase ~~was due to higher~~in benefit expenses and reserves on ~~life~~disability income and ~~long-term~~long term care insurance ~~contracts. These increases were~~contracts drove expenses up $11 million.
Amortization of deferred acquisition costs (“DAC”) in the first quarter of 2006 was $128 million, down 6% from the first quarter of last year. Excluding $8 million of AMEX Assurance DAC amortization from the first quarter of 2005, amortization of DAC in the first quarter of 2006 was unchanged from the first quarter of 2005. A $5 million decrease in DAC amortization in our AA&I segment was offset by a ~~$45~~$5 million ~~decrease related to~~increase in DAC amortization, excluding AMEX Assurance ~~which reflects $(12) million for the first nine months of 2005 compared to $33 million for the same period a year ago.~~
DAC amortization expense was $319 million in the first nine months of 2005, a $7 million or 2% increase over the $312 million DAC amortization expense in the first nine months of 2004. This increase was primarily due to a $66 million downward adjustment in the first nine months of 2004 related to the lengthening of the amortization period for certain protection and annuity products in conjunction with the adoption of SOP 03-1. This was partially offset by the impact of a $67 million DAC amortization expense reduction from the ~~third~~prior year quarter, ~~2005 annual DAC assessment, compared to a $24 million DAC amortization expense reduction~~ in the third quarter of 2004, as well as a $22 million decrease in the first nine months of 2005 compared to the same period in 2004 on mutual fund DAC amortization. DAC amortization expense related to AMEX Assurance was $17 million for the first nine months of 2005 compared to $23 million in the same period a year ago.our Protection segment.

Interest and debt expense ~~increased by $15 million or 41% to $52 million~~ in the first ~~nine~~quarter of 2006 increased $6 million to $23 million for the three months ~~of 2005~~ended March 31, 2006, from ~~$37~~$17 million for the three months ended March 31, 2005. The interest and debt expense in the first ~~nine months~~quarter of ~~2004,~~2006 is primarily ~~as a result~~related to interest on the $1.5 billion of ~~increased borrowing under our~~unsecured senior debt ~~arrangements with American Express. For additional information, see “Liquidity and Capital Resources – Description~~securities issued in November 2005. In the first quarter of ~~Indebtedness.” AMEX Assurance had no impact on~~2005, most of the interest and debt ~~expense.~~expense was attributable to our inter-company indebtedness with American Express, which was repaid just prior to the Distribution.

Separation costs incurred during the first quarter of 2006 were $67 million pretax ($44 million after-tax) compared with pretax separation costs of $20 million ($13 million after-tax) in the first quarter of 2005. We began to incur separation costs in February 2005 following the announcement of the Separation. These costs steadily increased throughout 2005, and were the highest in the quarterly periods of 2005 preceding and following the Distribution. Separation costs in the first quarter of 2005 were primarily related to advisor retention programs. For the first quarter of 2006, separation costs primarily related to separating and reestablishing our technology platforms and establishing the Ameriprise Financial brand. We have estimated that we will incur approximately $875 million in total pretax separation costs. The majority of such costs are estimated to be incurred by December 31, 2006.
Other expenses were $250 million, down $8 million from the first quarter of 2005. Excluding $6 million of other expenses of AMEX Assurance from the first quarter of 2005, other expenses in the first quarter of 2006 were relatively constant compared with the first quarter of 2005. Included in the first quarter of 2006 were $11 million in pretax legal and regulatory costs, as compared to $35 million in pretax legal and regulatory costs in the first quarter of 2005.
27

Separation costs incurred year to date were $168 million pretax ($109 million after-tax), primarily related to advisor retention program costs, technology costs and costs associated with establishing the Ameriprise Financial brand.Income Taxes

Other expenses increased by $79 million or 10% to $841 million in the first nine months of 2005 compared to $762 million in the first nine months of 2004, primarily reflecting increased costs related to accruals for various legal and securities industry regulatory matters and increased professional services costs. Partially offsetting this increase, AMEX Assurance had $14 million in other expenses during the first nine months of 2005 compared to $24 million for the same period in 2004. For additional information relating to legal and securities industry regulatory matters, see Note 10 to the consolidated financial statements.
~~Income Taxes~~
~~Income taxes decreased to $171 million in the first nine months of 2005, down from $253 million in the first nine months of 2004.~~ Our effective tax rate ~~decreased~~was 24.0% for the three months ended March 31, 2006 compared to ~~27.7%~~29.3% for the three months ended March 31, 2005. The decrease in the effective tax rate was primarily attributable to a decrease in the nondeductible portion of legal and regulatory costs, for which $3 million of total pretax expense of $11 million was nondeductible for federal income tax purposes in the first ~~nine months~~quarter of ~~2005 compared to 29.7% in~~2006 while none of the total pretax expense of $35 million was deductible for federal income tax purposes for the first ~~nine months~~quarter of 2004. The decreased effective tax rate resulted from lower levels of pretax income compared to tax-advantaged items in the first nine months of 2005 compared to the first nine months of 2004, reflecting 2005 separation costs and a $3 million tax benefit resulting from an IRS audit of previous years’ tax returns. Additionally, there was a $20 million tax expense applicable to prior years and a $7 million tax benefit related to the finalization of the prior year tax return, as well as, non-tax deductible charges in the first nine months of 2005 that are not expected to occur in future periods. Our effective tax rate in the first nine months of 2004 was negatively affected by a $16 million tax expense due to required amendments to prior year tax returns.2005.

Results of Operations by Segment

Three Months Ended ~~September 30, 2005~~March 31, 2006 compared to Three Months Ended ~~September 30, 2004~~March 31, 2005

The following tables present summary financial information by ~~operating~~ segment for the periods ~~indicated.~~indicated:

Three Months Ended
September 30

Three Months Ended
March 31,

%

2005

2004

% Change^(a)

2006

2005

Change

Unaudited
(Millions)

(unaudited), (in millions)

Total revenues by segment:

Total revenues

Asset Accumulation and Income

$
1,305

$
1,128

16
%

$
1,422

$
1,299

9
%
Protection

460

489

(6
)%

473

508

(7
)
Corporate and Other

116

96

21
%

64

46

39

Eliminations

(8
)
(1
)
#

(10
)
(6
)
(67
)
Consolidated

$
1,873

$
1,712

9
%
Consolidated total revenues

$
1,949

$
1,847

6

Total expenses by segment:

Total expenses

Asset Accumulation and Income

$
1,139

$
971

17
%

$
1,194

$
1,125

6
%
Protection

324

355

(9
)%

399

395

1

Corporate and Other

237

126

91
%

175

87

#

Eliminations

(8
)
(1
)
#

(10
)
(6
)
(67
)
Consolidated

$
1,692

$
1,451

17
%
Consolidated total expenses

$
1,758

$
1,601

10

Income before income tax provision and discontinued operations by segment:

Income before income tax provision and discontinued operations

Asset Accumulation and Income

$
166

$
157

7
%

$
228

$
174

31
%
Protection

136

134

—

74

113

(35
)
Corporate and Other

(121
)
(30
)
#

(111
)
(41
)
#

Consolidated

$
181

$
261

(31
)%
Consolidated income before income tax provision and discontinued operations

$
191

$
246

(22
)

^(a)^{Percentage change calculated using thousands.}
^#^{Variance of 100% or greater.}

March 31,
2006

December 31,
2005

%
Change

(unaudited), (in millions)

Total assets

Asset Accumulation and Income

$
77,718

$
75,382

3
%
Protection

15,079

14,492

4

Corporate and Other

3,024

3,247

(7
)
Consolidated total assets

$
95,821

$
93,121

3

32
28

As of
September 30, 2005

As of
December 31, 2004

%
Change^(a)

Unaudited

Audited

(Millions)

Total assets by segment:

Asset Accumulation and Income

$
73,983

$
69,516

6
%
Protection

16,326

13,465

21
%
Corporate and Other

1,965

4,259

(54
)%
Assets of discontinued operations

—

5,873

#

Consolidated

$
92,274

$
93,113

(1
)%
^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
Asset Accumulation and Income

The following table presents financial information for our ~~Asset Accumulation and Income operating segment for the periods indicated.~~AA&I segment:

Three Months Ended
September 30,

% Change^(a)

Three Months Ended
March 31,

Change

2005

2004

Unaudited
(Millions)

Revenues:

(in millions)

2006

2005

$

%

Revenues

Management, financial advice and service fees

$
611

$
486

26
%

$
646

$
547

$
99

18
%
Distribution fees

207

176

17
%

273

262

11

4

Net investment income

479

450

7
%

475

473

2

—

Other revenues

8

16

(45
)%

28

17

11

65

Total revenues

1,305

1,128

16
%

1,422

1,299

123

9

Expenses:

Compensation and benefits—field

252

221

14
%
Expenses

Compensation and benefits-field

366

309

57

18

Interest credited to account values

299

261

15
%

288

275

13

5

Benefits, claims, losses and settlement expenses

3

16

(82
)%

4

3

1

33

Amortization of deferred acquisition costs

68

79

(16
)%

87

92

(5
)
(5
)
Interest and debt expense

12

10

18
%

3

—

3

—

Other operating expenses

505

384

32
%
Other expenses

446

446

—

—

Total expenses

1,139

971

17
%

1,194

1,125

69

6

Income before income tax provision and discontinued operations

$
166

$
157

7
%
Pretax segment income

$
228

$
174

$
54

31

^(a)Overall^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}

~~Overall~~
~~Income from continuing operations before~~Pretax segment income ~~tax provision and discontinued operations~~ was ~~$166~~$228 million for the ~~third quarter, up $9~~three months ended March 31, 2006, an increase of $54 million, or 7%31% from ~~$157~~$174 million for the same period in 2005. The income growth is a ~~year ago. The Asset Accumulation~~reflection of an 11% increase in owned, managed and ~~Income segment was not impacted~~administered assets driven by ~~the results~~strong flows in wrap products and variable annuities, market appreciation, an 18% increase in GDC as a result of ~~AMEX Assurance.~~strong advisor productivity and a $24 million decline in legal and regulatory expenses. Partially offsetting this strong performance were lower account values in both fixed annuity and certificate products and higher interest crediting rates on certificates.

Revenues

Total revenues of ~~$1.3~~$1.4 billion rose ~~$177~~$123 million, or ~~16%~~9% from ~~$1.1~~$1.3 billion in the prior year ~~ago quarter. This was~~period. The revenue growth is primarily ~~attributable to a $125~~the result of increases of $99 million ~~or 26%~~in management, financial advice and service fees, $11 million in distribution fees and $11 million in other revenues.
The 18% increase in management, financial advice and service fees in the first quarter of 2006 compared to the first quarter of 2005 was driven by strong net inflows into ~~our~~ wrap accounts ~~separate account assets~~ and ~~Threadneedle~~variable annuities and market appreciation, partially offset by outflows in RiverSource mutual funds ~~as well as market appreciation.~~ and to a lesser extent, collective funds.
Distribution fees ~~grew $31 million or 17%~~in the first quarter of 2006 rose 4% over the first quarter of 2005 primarily due to ~~$207 million, on an~~increased retail brokerage activity, mainly related to SAI and wrap accounts. This increase was partially offset by declines in fees from ~~retail~~REIT products resulting from a lack of available products and lower distribution fees on RiverSource mutual funds.

33Net investment income increased slightly in the first quarter of 2006 compared to the same quarter in the prior year, reflecting higher income on hedge fund investments and lower invested assets. The positive impact of appreciation in the S&P 500 Index on the value of options hedging stock market certificates and equity index annuities was offset by the negative impact on options hedging GMWB. Each of these fluctuations was primarily offset in the interest credited to account values or benefits, claims, losses and settlement expenses line items.
Expenses
Total expenses for the three months ended March 31, 2006 of $1.2 billion rose $69 million, or 6% from $1.1 billion compared to the same period in the prior year, primarily due to increases of $57 million in compensation and benefits-field and $13 million in interest credited to account values.
29

~~brokerage activity~~The 18% increase in compensation and benefits-field reflects higher commissions paid driven by ~~stronger sales. Net investment income increased $29 million or 7% to $479 million, driven by~~strong sales activity and higher ~~average invested~~advisor assets ~~offset by net realized investment losses of $8 million. The average yield on invested assets was the same in both periods.~~under management.

~~Expenses~~
Total expenses of $1.1 billion rose $168 million or 17% from $971 million in the year ago quarter. This was primarily due to a $121 million or 32% increase in other operating expenses on higher non-field compensation and benefits attributable to this segment, as well as the $70 million expense related to the settlement of the class action lawsuit. Additionally, interestInterest credited to account values increased ~~15%~~5% to ~~$299~~$288 million for the three months ended March 31, 2006 due to higher interest crediting rates to certificate products, partially offset by lower certificate and ~~volume~~fixed annuity account asset values.
Amortization of DAC in the first quarter of 2006 decreased $5 million to $87 million compared to $92 million for the same period in 2005, reflecting lower DAC balances and lower amortization related to RiverSource mutual funds. Amortization of DAC associated with variable annuities was up only slightly in the first quarter of 2006 compared to the first quarter of 2005. Increased amortization consistent with strong growth ~~on investment certificate products. Compensation~~of the variable annuity business was mostly offset by the impact of more favorable equity market conditions.
Other expenses, which primarily reflect allocated corporate and benefits – field rose 14% to $252 million reflecting higher commissions paid driven by stronger sales activity. Offsetting these increases were a $13 million or 82% decrease in benefits, claims, losses and settlements, primarilysupport function costs, remained constant, reflecting a decline ~~of $12 million~~ in the liability for future benefits under Guaranteed Minimum Withdrawal Benefit rider contracts as a result of changes in market conditions. Amortization of DAC declined 16% to $68 million, including a $14 million amortization expense reduction resulting from the annual DAC assessment during the third quarter of 2005. This compared to an $8 million DAC amortization expense reduction from the annual DAC assessment performed in the third quarter of 2004.legal and regulatory costs offset by higher non-field compensation and benefits.

Protection

The following table presents financial information for our Protection ~~operating~~ segment for the periods ~~indicated.~~indicated and the impact of the deconsolidation of AMEX Assurance effective September 30, 2005 discussed previously:

Three Months Ended
September 30,

Three Months Ended
March 31,

Change

AMEX Assurance
Three Months
Ended March 31,

Change
Excluding AMEX
Assurance

2005

2004

% Change^(a)

Unaudited
(Millions)

Revenues:

(in millions)

2006

2005

$

%

2005

$

%

Revenues

Management, financial advice and service fees

$
17

$
17

(1
)%

$
19

$
16

$
3

19
%
$
1

$
4

27
%
Distribution fees

27

25

4
%

28

27

1

4

—

1

4

Net investment income

90

82

9
%

89

83

6

7

3

9

11

Premiums

217

262

(17
)%

226

275

(49
)
(18
)
71

22

11

Other revenues

109

103

6
%

111

107

4

4

(1
)
3

3

Total revenues

460

489

(6
)%

473

508

(35
)
(7
)
74

39

9

Expenses:

Expenses

Compensation and benefits—field

57

23

#

23

24

(1
)
(4
)
1

—

—

Interest credited to account values

38

42

(11
)%

36

36

—

—

—

—

—

Benefits, claims, losses and settlement expenses

187

190

(1
)%

223

215

8

4

19

27

14

Amortization of deferred acquisition costs

(20
)
29

#

41

44

(3
)
(7
)
8

5

14

Interest and debt expense

9

5

75
%
Other operating expenses

53

66

(21
)%
Other expenses

76

76

—

—

6

6

9

Total expenses

324

355

(9
)%

399

395

4

1

34

38

11

Income before income tax provision and discontinued operations

$
136

$
134

—

Pretax segment income

$
74

$
113

$
(39
)
(35
)
$
40

$
1

1

^(a)Overall^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}

34Pretax segment income in the Protection segment was $74 million for the three months ended March 31, 2006, a decrease of $39 million, or 35% compared to the same period in 2005. Pretax segment income excluding AMEX Assurance increased $1 million, or 1% over the first quarter of 2005. Revenue growth of 9% reflecting higher auto and home insurance and life insurance revenues was offset by higher claims in disability income and long term care insurance, as well as an increase in amortization of DAC.
Revenues
Total revenues in the first quarter of 2006 of $473 million declined $35 million, or 7% from the first quarter of 2005. Excluding AMEX Assurance, revenues in the first quarter of 2006 increased $39 million, or 9% over the first quarter of 2005, and were primarily due to increases of $22 million in premiums and $9 million in net investment income.
30

~~Overall~~
~~Income from continuing operations before~~Net investment income ~~tax provision and discontinued operations was $136~~increased 7% to $89 million for the ~~third quarter,~~three months ended March 31, 2006 compared to ~~$134 million a year ago.~~the three months ended March 31, 2005. Net investment income excluding AMEX Assurance ~~contributed $3 million~~rose 11%, primarily due to ~~pre-tax~~increased assets and capital supporting auto and home and VUL/UL and higher income ~~for the third quarter~~from hedge fund investments.
Premiums of ~~2005, compared to $40~~$226 million for the ~~third quarter of 2004.~~
~~Revenues~~
~~Total revenues of $460~~three months ended March 31, 2006 decreased $49 million ~~decreased $29 million or 6%~~ from ~~$489~~$275 million in the ~~year ago quarter.~~same period of the prior year. Premiums excluding AMEX Assurance revenues of $67 million were included in the year ago quarter but were reduced to $(12) million in the third quarter of 2005 due to the reinsurance agreement with American Express. The primary driver of the decrease in revenues was a $45increased $22 million, or ~~17% decrease in premiums. This reflects a $62 million decrease in premiums related to AMEX Assurance, offset~~11%, primarily driven by ~~a $17 million or 16% increase~~solid growth in premiums from auto and home ~~and auto. Other increases to revenues include an $8 million or 9% growth in investment income and a $6 million or 6% increase in other revenues due to higher~~ insurance ~~in-force levels.~~products.

Expenses

Total expenses of ~~$324~~$399 million ~~decreased $31~~increased 1% for the three months ended March 31, 2006 from $395 million ~~or 9%~~for the three months ended March 31, 2005. Excluding AMEX Assurance, total expenses increased 11% from ~~$355~~total expenses of $361 million infor the ~~year ago quarter,~~three months ended March 31, 2005. The increase was primarily due to ~~the ceding~~a rise in benefits, claims, losses and settlement expenses of ~~AMEX Assurance losses to American Express and a larger DAC amortization benefit in the third quarter of 2005 compared to the same period one year ago.~~
Amortization of DAC resulted in an expense reduction of $20 million in third quarter 2005 compared to an expense of $29 million in third quarter 2004. The impact of the annual DAC assessment for third quarter 2005 was a favorable adjustment of $53 million for 2005 compared to a favorable adjustment of $16 million in 2004. AMEX Assurance related DAC amortization was nil for the third quarter of 2005, compared to $8 million the same period one year ago.$27 million.

Benefits, claims, losses and ~~settlements declined 1% to $187 million due to a $60 million decrease related to~~settlement expenses increased 4% over the ~~AMEX Assurance business ceded to American Express, which includes $(51) million during the third~~first quarter of 2005 ~~compared~~ to $9$223 million for the first quarter of 2006. Excluding AMEX Assurance, these expenses rose $27 million, or 14%, primarily due to higher claims in disability income and long term care insurance and higher average auto and home insurance policies in-force.
Amortization of DAC decreased from the first quarter of 2005 by 7% to $41 million for the first quarter of 2006. Excluding AMEX Assurance, amortization of DAC increased $5 million in the ~~same period a year ago. Partially offsetting this decrease were higher life insurance and long-term care and disability income insurance costs~~first quarter of 2006 from $36 million in the first quarter of 2005. This increase was primarily driven by an adjustment to the unearned commission balance.
Other expenses were essentially flat at $76 million in the first quarters of 2006 and 2005. Other expenses excluding AMEX Assurance increased 9% over other expenses of $70 million in the first quarter of 2005, reflecting higher ~~in-force levels,~~volume-related expenses due to higher average ~~home~~auto and ~~auto~~home insurance policies in force, an increase in the face amount of life insurance policies outstanding, and a $13 million increase in the expense for future policy benefits in third quarter 2005 related to the inclusion of an explicit maintenance reserve for long term care insurance.in-force.

Compensation and benefits – field increased by $34 million, reflecting a $34 million impact related to the AMEX Assurance reinsurance transaction. Interest and debt expense increased 75% to $9 million due primarily to higher short-term interest rates.
35

Corporate and Other

The following table presents financial information for our Corporate and Other ~~operating~~ segment for the periods ~~indicated.~~indicated:

Three Months Ended
September 30,

Three Months Ended
March 31,

Change

2005

2004

% Change^(a)

Unaudited
(Millions)

Revenues:

(in millions)

2006

2005

$

%

Revenues

Management, financial advice and service fees

$
59

$
47

27
%

$
45

$
45

$
—

—
%
Distribution fees

62

47

34
%

—

(1
)
1

#

Net investment income

(8
)
(12
)
26
%
Net investment income (loss)

10

(8
)
18

#

Premiums

(15
)
—

#

(6
)
(5
)
(1
)
(20
)
Other revenues

18

14

30
%

15

15

—

—

Total revenues

116

96

21
%

64

46

18

39

Expenses:

Expenses

Compensation and benefits—field

99

67

49
%

34

29

5

17

Interest credited to account values

—

(1
)
#

Benefits, claims, losses and settlement expenses

—

(1
)
#

Amortization of deferred acquisition costs

1

—

#

Interest and debt expense

(5
)
(2
)
(89
)%

20

17

3

18

Separation costs

92

—

#

67

20

47

#

Other operating expenses

50

63

(18
)%
Other expenses

54

21

33

#

Total expenses

237

126

91
%

175

87

88

#

Income before income tax provision and discontinued operations

$
(121
)
$
(30
)
#

Pretax segment loss

$
(111
)
$
(41
)
$
70

#

^(a)^{Percentage change calculated using thousands.}
^#^{Variance of 100% or greater.}

~~Overall~~
Loss from continuing operations before income tax provision and discontinued operations was $121 million for the third quarter, compared to $30 million a year ago. The year-over-year change was predominantly due to the inclusion of $92 million of non-recurring separation costs.
~~Revenues~~
Total revenues of $116 million increased 21% from $96 million in the year ago quarter, primarily due to increased activity at SAI, which operates its own separately branded distribution network. Management, financial advice and service fees grew 27% to $59 million, due to growth in assets managed and advice fees at SAI and distribution fees grew 34% to $62 million as a result of greater activity at SAI. There was also an $8 million loss under net investment income in 2005 compared to a $12 million loss in the year ago quarter. These losses are primarily the result of amortization of low income housing investments.
~~Expenses~~
Total expenses of $237 million increased by $111 million or 91% from $126 million in the year ago quarter primarily due to the inclusion of $92 million of non-recurring separation costs. Compensation and benefits – field rose 49% to $99 million reflecting higher commissions paid at SAI.
36

~~Nine Months Ended September 30, 2005 compared to Nine Months Ended September 30, 2004~~
~~The following tables present financial information by operating segment for the periods indicated.~~

Nine Months Ended
September 30

2005

2004

% Change^(a)

Unaudited
(Millions)

Total revenues by segment:

Asset Accumulation and Income

$
3,786

$
3,433

10
%
Protection

1,481

1,428

4
%
Corporate and Other

366

325

13
%
Eliminations

(18
)
(2
)
#

Consolidated

$
5,615

$
5,184

8
%

Total expenses by segment:

Asset Accumulation and Income

$
3,302

$
2,898

14
%
Protection

1,117

1,040

8
%
Corporate and Other

596

396

51
%
Eliminations

(18
)
(2
)
#

Consolidated

$
4,997

$
4,332

15
%

Income before income tax provision, discontinued operations and accounting change by segment:

Asset Accumulation and Income

$
484

$
535

(9
)%
Protection

364

388

(7
)%
Corporate and Other

(230
)
(71
)
#

Consolidated

$
618

$
852

(27
)%
^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
3731

~~Asset Accumulation and Income~~Overall

The ~~following table presents financial information for our Asset Accumulation and Income operating~~Corporate pretax segment ~~for the periods indicated.~~

Nine Months Ended
September 30,

2005

2004

% Change(a)

Unaudited
(Millions)

Revenues:

Management, financial advice and service fees

$
1,703

$
1,454

17
%
Distribution fees

612

586

4
%
Net investment income

1,428

1,364

5
%
Other revenues

43

29

52
%
Total revenues

3,786

3,433

10
%
Expenses:

Compensation and benefits—field

733

657

12
%
Interest credited to account values

874

822

6
%
Benefits, claims, losses and settlement expenses

24

36

(34
)%
Amortization of deferred acquisition costs

257

223

14
%
Interest and debt expense

30

21

38
%
Other operating expenses

1,384

1,139

22
%
Total expenses

3,302

2,898

14
%
Income before income tax provision, discontinued operations and accounting change

$
484

$
535

(9
)%
^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
~~Overall~~
~~Income from continuing operations before income tax provision, discontinued operations and accounting change~~loss was ~~$484~~$111 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2006, compared to $41 million for the same period in 2005. The Corporate pretax segment loss before separation costs for the three months ended March 2006 and 2005 ~~down $51~~was $44 million ~~or 9% from $535~~and $21 million, a year ago. This is primarily due to higher compensation expenses in this segment along with the $100 million expense related to the settlement of the class action lawsuit. The Asset Accumulation and Income segment was not impacted by the results of AMEX Assurance.respectively.

Revenues

Total revenues ~~were $3.8 billion~~ for the ~~nine~~three months ended ~~September 30, 2005 in our asset accumulation and income segment, a $353~~March 31, 2006 of $64 million increased $18 million, or ~~10% increase compared to $3.4 billion~~39% from revenues of $46 million for the ~~nine~~three months ended September 30, 2004. Management, financial advice and service fees increased $249 million or 17% resulting from increased net inflows into our wrap accounts and separate account assets and from market appreciation. Distribution fees increased $26 million or 4%March 31, 2005, due to ~~increased retail brokerage sales.~~ higher investment income.
Net investment income ~~increased $64~~was $10 million ~~or 5% resulting from higher average levels of owned investments.~~
~~Expenses~~
Total expenses were $3.3 billion for the nine months ended September 30, 2005, a $404 million or 14% increase compared to $2.9 billion for the nine months ended September 30, 2004. The increase is primarily due to a $245 million or 22% increase in other expenses due to higher compensation and benefits attributable to this segment, as well as the $100 million expense related to the settlement of the class action lawsuit.
38

Compensation and benefits – field increased by $76 million or 12% primarily reflecting higher commissions paid driven by stronger sales activity, as well as increased compensation and benefits paid to other field employees.
Interest credited to account values increased $52 million or 6% primarily due to higher interest crediting rates and volume growth on investment certificate products as a result of a promotion that ended in March 2005.
~~DAC amortization expense increased by $34 million or 14% primarily due to our adoption of SOP 03-1~~ in the first quarter of ~~2004, which resulted in~~2006 compared to a ~~significantly reduced amortization expense for that period as the amortization periods for certain annuity products were lengthened. Offsetting this impact was a $14~~net investment loss of $8 million ~~DAC amortization expense reduction resulting from the annual DAC assessment~~ in the ~~third~~first quarter of 2005, ~~compared to~~ an $8improvement of $18 million, ~~DAC amortization expense reduction from the third quarter of 2004.~~
~~Protection~~
~~The following table presents financial information for our Protection operating segment for the periods indicated.~~

Nine Months Ended
September 30,

2005

2004

% Change(a)

Unaudited
(Millions)

Revenues:

Management, financial advice and service fees

$
46

$
39

16
%
Distribution fees

80

78

1
%
Net investment income

256

234

10
%
Premiums

766

759

1
%
Other revenues

333

318

5
%
Total revenues

1,481

1,428

4
%
Expenses:

Compensation and benefits—field

102

66

55
%
Interest credited to account values

102

104

(3
)%
Benefits, claims, losses and settlement expenses

622

570

9
%
Amortization of deferred acquisition costs

61

89

(31
)%
Interest and debt expense

19

12

62
%
Other operating expenses

211

199

6
%
Total expenses

1,117

1,040

8
%
Income before income tax provision, discontinued operations and accounting change

$
364

$
388

(7
)%
^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
~~Overall~~
Income from continuing operations before income tax provision and accounting change was $364 million for the nine months ended September 30, 2005, a $24 million or 7% decrease compared to $388 million a year ago. AMEX Assurance contributed $82 million to pre-tax income for the nine months ended September 30, 2005, compared to $118 million for the nine months ended September 30, 2004.
~~Revenues~~
Total revenues were $1.5 billion for the nine months ended September 30, 2005, a $53 million or 4% increase compared to $1.4 billion for the nine months ended September 30, 2004. Net investment income increased by $22 million or 10%, primarily due to higher ~~average~~ levels of ~~owned~~invested assets and higher yields on short-term investments. ~~Other revenues increased $15 million~~

39

or 5% due to increased cost of insurance charges on variable annuity contracts. The $7 million increase in premiums reflects a $55 million increase from our personal auto and home protection products and an $8 million increase in disability income premiums, partially offset by a $54 million decrease in premiums related to AMEX Assurance. AMEX Assurance related premiums were $132 million and $187 million for the nine months ended September 30, 2005 and 2004, respectively. Other than premiums, AMEX Assurance had an immaterial impact on Protection segment revenues.
Expenses

Total expenses ~~were $1.1 billion~~ for the ~~nine~~three months ended ~~September 30, 2005, a $77~~March 31, 2006 of $175 million ~~or 8% increase compared to $1.0 billion~~increased by $88 million from $87 million for the ~~nine~~three months ended ~~September 30, 2004.~~March 31, 2005. Total expenses before separation costs were $108 million, an increase of $41 million from the same period in 2005. This increase was primarily due to a $52 million or 9% increase in provisions for benefits, claims, losses and settlement expenses. The increase in provisions for benefits, claims, losses and settlement expenses was primarily dueattributable to higher ~~average personal auto and home insurance policies inforce, primarily as~~other expenses, which on a result of our Costco alliance, as well as higher life and health insurance inforce levels and the $13 million long-term care maintenance reserve adjustment, offset by decreases related to AMEX Assurance as noted previously. The remaining increase in our protection segment expenses was primarily due to a $36 million or 55% increase in compensation and benefits – field, reflecting the impact of the AMEX Assurance reinsurance transaction. These increases were partially offset by a $28 million decrease in DAC amortization expense due to the impact of the annual DAC assessment for the third quarter and the reduced amortization expense attributed to AMEX Assurance, as noted above.reporting basis, include non-field compensation.

~~Corporate and Other~~
~~The following table presents financial information for our Corporate and~~ Other ~~operating segment for the periods indicated.~~

Nine Months Ended
September 30,

2005

2004

% Change(a)

Unaudited
(Millions)

Revenues:

Management, financial advice and service fees

$
178

$
149

21
%
Distribution fees

181

170

7
%
Net investment income

(17
)
(32
)
47
%
Premiums

(15
)
—

#

Other revenues

39

38

3
%
Total revenues

366

325

13
%
Expenses:

Compensation and benefits—field

306

269

14
%
Interest credited to account values

—

—

—

Benefits, claims, losses and settlement expenses

—

(1
)
#

Amortization of deferred acquisition costs

1

—

#

Interest and debt expense

3

4

(6
)%
Separation costs

168

—

#

Other operating expenses

118

124

(5
)%
Total expenses

596

396

51
%
Income before income tax provision, discontinued operations and accounting change

$
(230
)
$
(71
)
#

^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
40

~~Overall~~
Loss from continuing operations before income tax provision, discontinued operations and accounting change was $230 million for the nine months ended September 30, 2005, compared to $71 million a year ago. The year-over-year change was predominantly due to the inclusion of $168 million of non-recurring separation costs.
~~Revenues~~
~~Total revenues were $366 million for the nine months ended September 30, 2005, a $41 million or 13% increase compared to $325 million for the nine months ended September 30, 2004. The increase~~expenses in revenues primarily resulted from a $29 million increase in management, financial advice and service fees and an $11 million increase in distribution fees, both driven by increased activity at SAI, and to a lesser extent, the improvement in net investment income as a result of decreased losses on our low income housing investments.
~~Expenses~~
Total expenses were $596 million for the nine months ended September 30, 2005, a $200 million or 51% increase compared to $396 million for the nine months ended September 30, 2004. The principal reason for the increase was the incurrence of $168 million in separation costs for the first ~~nine months~~quarter of ~~2005. We also experienced a $37~~2006 of $54 million ~~increase in compensation and benefits – field reflecting higher commissions paid at SAI. The increases in these expenses were partially offset by a $6~~increased $33 million ~~decrease in other expenses.~~
41

~~Financial Condition~~
~~The following table presents selected information~~ from ~~our consolidated balance sheet as of~~ the ~~dates indicated.~~

As of September 30,
2005

As of December 31,
2004

%
Change(a)

Unaudited

Audited

(Millions of $ except percentages)

Investments⁽¹⁾

$
39,454

$
40,232

(2)%

Separate account assets⁽²⁾

39,840

35,901

11%

Total assets

92,274

93,113

(1)%

Future policy benefits and claims⁽²⁾

32,958

33,253

(1)%

Investment certificate reserves

6,392

5,831

10%

Payable to American Express

102

1,751

(94)%

Short-term debt

1,351

—

#

Long-term debt

360

385

(6)%

Separate account liabilities⁽²⁾

39,840

35,901

11%

Total liabilities

84,537

86,411

(2)%

Total shareholders’ equity

7,737

6,702

15%

⁽¹⁾^{Includes $35,523 million and $33,153 million as of September 30, 2005 and December 31, 2004, respectively, of investments held by our insurance subsidiaries.}
⁽²⁾^{All amounts are held by our insurance subsidiaries.}
^(a)^{Percentage change calculated using thousands.}
^#^{Variance 100% or greater.}
Our total assets and liabilities decreased as of September 30, 2005 from December 31, 2004 levels primarily due to the transfer of American Express International Deposit Company (AEIDC) to American Express on August 1, 2005. AEIDC had total assets and liabilities of $5.9 billion and $5.6 billion, respectively, as of December 31, 2004. The decrease attributed to the AEIDC transfer was partially offset by an increase in separate account assets and liabilities, which increased primarily as a result of net client inflows and market appreciation.
Investments primarily include corporate debt and mortgage-backed securities. At September 30, 2005, our corporate debt securities comprise a diverse portfolio with the largest concentrations, accounting for approximately 68% of the portfolio, in the following industries: banking and finance, utilities, and communications and media. Investments also include $3.2 billion of mortgage loans on real estate as of September 30, 2005 and December 31, 2004. Investments are principally funded by sales of insurance, annuities and investment certificates and by reinvested income. Maturities of these investments are largely matched with the expected future payments of insurance and annuity obligations.
Investments include $2.8 billion of below investment grade securities (excluding net unrealized appreciation and depreciation) at September 30, 2005 and $3.0 billion at December 31, 2004 . These investments represent 7.3% and 7.8% of our investment portfolio at September 30, 2005 and December 31, 2004, respectively. Non-performing assets relative to invested assets (excluding short-term cash positions) were 0.02% at September 30, 2005 and 0.03% at December 31, 2004.
Our management believes a more relevant measure of exposure of our below investment grade securities and non-performing assets should exclude $221 million and $230 million at September 30, 2005 and December 31, 2004, respectively, of below investment grade securities (excluding net unrealized appreciation and depreciation), which were recorded as a result of the adoption of FIN 46. These assets are not available for our general use as they are for the benefit of the CDO-debt holders, and reductions in value of such investments will be fully absorbed by the third party investors. Excluding the impacts of FIN 46, investments include $2.6 billion at September 30, 2005 and $2.8 billion at December 31, 2004 of below investment grade securities (excluding net unrealized appreciation and depreciation). They represent 6.8% of our investment portfolio at September 30, 2005, down from 7.2% at December 31, 2004. Non-performing assets relative to invested assets (excluding short-term cash positions) were nil at both September 30, 2005 and December 31, 2004.
42

As of September 30, 2005, we continued to hold investments in CDOs that we manage that were not consolidated pursuant to the adoption of FIN 46 as we were not considered the primary beneficiary. As a condition to managing certain CDOs, we are generally required to invest in the residual or “equity” tranche of the CDO, which is typically the most subordinated tranche of securities issued by the CDO entity. As an investor in the residual tranche of CDOs, our return correlates to the performance of portfolios of high-yield bonds and/or bank loans comprising the CDOs. Our exposure as an investor is limited solely to our aggregate investment in the CDOs, and we have no obligations or commitments, contingent or otherwise, that could require any further funding of such investments. As of September 30, 2005, the carrying values of the CDO residual tranches we manage were $36 million.
~~Our exposure to CDOs and other structured investments, namely secured loan trusts (SLTs), was significantly higher in prior periods. During the second~~first quarter of 2005 ~~we sold all of our retained interest in a CDO-related securitization trust~~reflecting higher costs associated with being an independent entity and realized a pretax gain of $36 million. The carrying value of this retained interest was $705 million at December 31, 2004, of which $523 million was considered investment grade. Additionally, we have liquidated our interest in all three SLTs which were previously consolidated under FIN 46. One SLT was liquidated in 2004, resulting in a cumulative net pretax charge of $24 million during the year ended December 31, 2004 and the other two SLTs were liquidated in 2004 and 2005 resulting in a $4 million pretax charge in 2004 and a $14 million pretax gain for the nine months ended September 30, 2005. There is no remaining exposurehigher expenses related to ~~these SLTs as of September 30, 2005.~~
Separate account assets represent funds held for the exclusive benefit of variable annuity and variable life insurance contract holders. These assets are generally carried at market value, and separate account liabilities are equal to separate account assets. We earn investment management, administrationcorporate projects and other ~~fees from~~corporate activities. In addition, other expenses in the ~~related accounts. The increase~~first quarter of 2006 include $11 million in separate account assets and liabilities to $39.8 billion as of September 30, 2005 compared to $35.9 billion as of December 31, 2004, resulted from net inflows of $2.5 billion and market appreciation and foreign currency translation of $1.4 billion.
~~We hold reserves for current and future obligations that are~~severance costs, primarily related to fixed annuities, certain guaranteed payments under variable annuities, face-amount certificates and life, disability and long-term care insurance. Reserves related to fixed annuities, guarantees under variable annuities and life, disability and long-term care insuranceour technology functions, which are ~~reflected~~recorded in future policy benefits and claims in our consolidated balance sheet. We record reserves associated with our obligations related to face-amount certificates under investment certificate reserves in our balance sheet. Reserves for fixed annuities, universal life contracts and face-amount certificates are equal to the underlying contract accumulation values. Reserves for other life, disability and long-term care insurance products are based on various assumptions, including mortality rates, morbidity rates and policy persistency.non-field compensation.

Liquidity and Capital Resources

~~Our legal entity organizational structure has~~We maintained substantial liquidity during the first quarter of 2006, ending the quarter with $1.7 billion in cash and cash equivalents at March 31, 2006. In addition to available cash balances and cash flows from operations, we have an ~~impact on~~unsecured revolving credit facility for $750 million available through September 2010. Under the terms of the underlying credit agreement, we can increase this facility to $1.0 billion. We had no borrowings under this facility during the three months ended March 31, 2006. We believe cash flows from operating activities, available cash balances and our ~~ability~~availability of revolver borrowings will be sufficient to ~~meet cash flow needs as an organization. Following is a simplified organizational structure. Names reflect current legal entity names of subsidiaries.~~fund our operating liquidity needs.
43

We are primarily a parent holding company for the operations carried out by our subsidiaries. Because of our holding company structure, our ability to meet our cash requirements, including the payment of dividends on our common stock, substantially depends upon the receipt of dividends from our subsidiaries, particularly our life insurance subsidiary, IDS Life Insurance Company (��IDS Life”), our face-amount certificate subsidiary, Ameriprise Certificate Company, ~~(formerly~~our retail introducing broker-dealer subsidiary, Ameriprise Financial Services, Inc., our clearing broker-dealer subsidiary, American ~~Express Certificate Company)~~Enterprise Investment Services, Inc., ~~or ACC,~~our auto and home insurance subsidiary, IDS Property Casualty Insurance Company (doing business as Ameriprise Auto & Home) and our investment advisory company, RiverSource Investments LLC, our retail broker-dealer subsidiary, Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.), or AFSI, and our broker-dealer subsidiary, American Enterprise Investment Services, or AEIS.LLC. The payment of dividends by many of our subsidiaries ~~including IDS Life, IDS Property Casualty, ACC, AFSI and AEIS,~~ is restricted. In addition to the particular regulations restricting dividend payments and establishing subsidiary capitalization requirements, we take into account the overall health of the business, capital ~~quality~~levels and risk management considerations in determining a dividend strategy for payments to our company from our subsidiaries, and in deciding to use cash to make capital contributions to our subsidiaries.

~~Cash Flows~~In April 2006, IDS Life declared an extraordinary dividend of $100 million and has made the required advance notice to the Minnesota Department of Commerce, its primary state regulator. IDS Life received a response from the Minnesota Department of Commerce stating that they do not object to the payment of this dividend.

~~We had $2.6 billion in~~On April 25, 2006, our Board of Directors declared a regular quarterly cash ~~and cash equivalents~~dividend of $0.11 per common share. The dividend is payable on May 19, 2006 to our shareholders of record at September 30, 2005, up from $1.0 billion at December 31, 2004, primarily due to $1.1 billion capital contribution from American Express. We believe cash flows from operations, available cash balances and short-term borrowings will be sufficient to fund our operating liquidity needs.the close of business on May 10, 2006.

Operating ~~Cash Flows~~Activities

For the ~~nine~~three months ended ~~September 30, 2005,~~March 31, 2006, net cash provided by operating activities was ~~$369~~$107 million compared to ~~$462~~$194 million for the same period in ~~2004.~~2005, a decrease of $87 million. This decrease ~~reflects lower net~~was primarily attributable to a $30 million
32

decline in income ~~coupled with changes~~before discontinued operations and an increase in ~~various operating~~capitalization of deferred acquisition and sales inducement costs of $27 million.
Other assets and other liabilities ~~partially offset by net cash provided by~~at March 31, 2006 include $331 million and $297 million, respectively, of other assets and other liabilities of a limited partnership for which we are the ~~return~~general partner, which we consolidated pursuant to our adoption as of ~~seed money from our mutual funds and equity method investments in hedge funds.~~January 1, 2006 of Emerging Issues Task Force (“EITF”) Issue 04-5, “Determining whether a General Partner, or the General partners as a Group, Controls a Limited partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”).

Investing ~~Cash Flows~~Activities

Our investing activities primarily relate to our ~~available-for-sale~~Available-for-Sale investment portfolio. Further, this activity is significantly affected by the net flows of our investment certificate, fixed annuity and universal life products reflected in financing activities. For the ~~nine~~three months ended ~~September 30, 2005,~~March 31, 2006, net cash provided by investing activities was $488 million compared to $514 million used in investing activities ~~was $91 million compared to $406 million from~~during the same period in ~~2004.~~2005, a cash flow improvement of $1.0 billion. This ~~change resulted~~improvement was primarily attributable to less cash used for purchases of Available-for-Sale securities and an increase in cash inflows from ~~$3.5 billion in proceeds from the sales~~maturities, sinking fund payments and calls. Purchases of ~~available-for-sale~~Available-for-Sale securities ~~for the nine months ended September 30, 2005, compared~~decreased $755 million to ~~$1.6~~$1.0 billion in the ~~same period one year ago. This was partially offset by $6.4~~three months ended March 31, 2006 compared to $1.7 billion in ~~purchases of available-for-sale securities during~~ the ~~nine~~three months ended ~~September 30, 2005 compared~~March 31, 2005. Maturities, sinking fund payments and calls of Available-for-Sale securities increased $283 million, to ~~$5.0 billion in purchases~~$918 million for the ~~same period in 2004.~~
~~Financing Cash Flows~~
~~Our financing activities primarily include the issuance of debt and our sale of annuities and face-amount certificates. We generated $1.3 billion net cash~~three months ended March 31, 2006 from ~~financing activities as of September 30, 2005, compared to $624~~$635 million for the same period ~~in 2004. This change primarily reflects the $1.1 billion capital contribution from American Express, as well as other debt and capital settlements described below.~~of 2005.

~~Description~~Our Available-for-Sale investments primarily include corporate debt securities and mortgage and other asset-backed securities, which had a fair value of ~~Indebtedness~~$18.3 billion and $13.4 billion, respectively, at March 31, 2006 compared to $18.8 billion and $13.9 billion, respectively, at December 31, 2005. Our Available-for-Sale corporate debt securities comprise a diverse portfolio, with the largest concentrations of the portfolio in the following industries: 35% in banking and finance, 20% in utilities and 13% in media. Investments also include $3.1 billion of mortgage loans on real estate as of both March 31, 2006 and December 31, 2005. At March 31, 2006 and December 31, 2005, 70% of our Available-for-Sale investment portfolio was rated A or better, while 7% of our Available-for-Sale investment portfolio was below investment grade.
Our total investments at March 31, 2006 and December 31, 2005 included investments held by our insurance subsidiaries of $31.8 billion and $32.5 billion, respectively. Investments are principally funded by sales of insurance, annuities and investment certificates and by reinvested income. Maturities of these investments are largely matched with the expected future payments of insurance and annuity obligations.

~~On September 28, 2005,~~Investments at March 31, 2006 include $178 million of trading securities (of which $160 million had previously been accounted for under the ~~Company entered into~~ equity method)~~an unsecured bridge loan facility~~ of a limited partnership for which we are the general partner, which we consolidated pursuant to our adoption as of January 1, 2006 of EITF 04-5.
Financing Activities
For the three months ended March 31, 2006, cash used in ~~the amount~~ offinancing activities was $1.4 billion compared to cash provided by financing activities of $405 million for the three months ended March 31, 2005, a decrease of $1.8 billion. This decline in cash flow was primarily due to lower sales of certificate products, higher amounts of maturities and ~~paid~~cash surrenders related to certificates and higher surrenders and death benefits related to fixed annuities.
For the three months ended March 31, 2006 compared to the same period in 2005, cash flows related to payments we receive from certificate holders declined $658 million while cash used for certificate maturities and cash surrenders increased $274 million. The reduction in sales and increase in maturities is the result of the American Express ~~$1.5 billion~~Bank Limited and American Express Bank International business wind-down and a sales promotion that was in effect during the first quarter of 2005 and not in 2006. We received our federal savings bank charter, and we expect to ~~close out a $1.1 billion revolving credit facility, payoff a $253 million fixed rate loan~~launch our Ameriprise FSB mid-year.
Cash used for surrenders and ~~settle a $136 million net intercompany payable. On August 5, 2005, we repaid $270 million~~death benefits on policyholder and contractholder account values, most of ~~intercompany debt and accrued interest~~which related to ~~construction financing using~~fixed annuities, increased $355 million for the first three months of 2006 compared to the same period in 2005. During the three months ended March 31, 2006, we also used cash ~~received from transfer~~of $275 million for the purchase of 6.4 million treasury shares. In addition, pursuant to the Ameriprise Financial 2005 Incentive Compensation Plan, we used cash of $15 million and reacquired 0.4 million shares of our ~~50% ownership interest~~common stock in ~~AEIDC~~connection with restricted shares withheld to ~~American Express,~~offset tax withholding obligations that occur upon vesting and ~~proceeds from the sale~~release of restricted shares.
The 6.4 million treasury share purchase was part of our ~~interest in a CDO securitization trust.~~share repurchase programs and was funded from working capital. In March 2006, our Board of Directors authorized the expenditure of up to $750 million for the repurchase of our common stock

On September 30, 2005, the Company also obtained an unsecured revolving credit facility for $750 million expiring in September 2010 from various third party financial institutions and as of September 30, 2005, the Company had drawn no balance on that line. Under the terms of the revolving credit facility, the Company may increase the amount of the facility to $1.0 billion.
4433

~~Sale-and-Leaseback Transaction~~through the end of March 2008. This authorization is in addition to a previous board authorization to repurchase up to 2 million shares by the end of 2006. We intend to fund additional share repurchases through existing working capital, future earnings and other customary financing methods.

~~In December 2004,~~We repaid our ~~subsidiary, IDS Property Casualty, engaged~~$50 million medium-term notes in ~~a sale-and-leaseback~~the first quarter of one of its facilities for an initial term of ten years, with up to six renewal terms of five years each. We initially accounted for this transaction as a financing due to uncertainties surrounding our level of ongoing occupancy. As a result, we included the $18 million in proceeds from this transaction in long-term debt. As of September 30, 2005, the uncertainties surrounding our level of occupancy have been resolved resulting in accounting for this transaction as a sale-leaseback rather than a financing.
~~CDOs~~
~~As of September 30, 2005 we had $310~~2006. Debt at March 31, 2006 includes $137 million of ~~non-recourse long-term debt relating~~floating rate revolving credit borrowings of limited partnerships for which we are the general partner, which we consolidated pursuant to ~~a CDO securitization trust that was consolidated beginning December 31, 2003, compared to $317 million at December 31, 2004. We consolidated this CDO securitization trust effective with~~ our adoption as of ~~FIN 46.~~January 1, 2006 of EITF 04-5. This debt, which is related to certain property funds managed by Threadneedle, is nonrecourse and will be ~~repaid from~~extinguished with the cash flows from the sale of investments held within the partnerships. We also had nonrecourse fixed and floating rate notes due 2011 related to a consolidated collateralized debt obligation (“CDO”) of $283 million at March 31, 2006 and December 31, 2005, which will be extinguished with the cash flows from the investments held within the portfolio of the ~~CDO, which assets are held for the benefit of the CDO debt holders.~~
~~Medium-Term Notes~~CDO.

On ~~February 8, 1994,~~May 5, 2006, we ~~issued $50 million aggregate principal amount~~filed a “shelf” registration statement on Form S-3. The shelf filing provides us with the flexibility to sell any combination of ~~6.625% fixed-rate unsecured medium-term notes due February 15, 2006 in a private placement to institutional investors. The medium-term notes do not impose financial covenants on~~debt securities, warrants, purchase contracts, securities units, preferred stock, depositary shares and common stock of our company, ~~other than an agreement~~as well as capital and common securities that may be issued by up to ~~maintain at all times a consolidated net worth of at least $400 million. Under the medium-term notes, we have agreed not to pledge the shares of~~four Delaware statutory trusts sponsored by our ~~principal subsidiaries. Events of default under the medium-term notes~~company. The debt securities that may be offered include ~~a default in payment~~senior debt, senior subordinated debt and ~~certain defaults or acceleration of certain other financial indebtedness.~~junior subordinated debt.

Off-Balance Sheet Arrangements

~~Retained Interests~~During the three months ended March 31, 2006, we closed a $700 million CDO issuance. As a condition to managing the CDO, we were required to invest $5.0 million in ~~Assets Transferred~~the residual or “equity” tranche of the CDO, which is the most subordinated tranche of securities issued by the CDO entity. As an investor in the residual tranche, our return correlates to ~~Unconsolidated Entities~~the performance of the portfolio of high-yield investments comprising the CDO. Our exposure as an investor is limited solely to our aggregate investment in the CDO and we have no obligation, contingent or otherwise, that could require any further funding of the investment. The CDO is considered a variable interest entity under FIN 46 but we were not required to consolidate the CDO entity as we were not considered the primary beneficiary.

In 2001, we placed a majority of our rated CDO securities and related accrued interest, as well as a relatively minor amount of other liquid securities, having an aggregate book value of $905 million into a securitization trust. We sold interests in the trust to institutional investors for $120 million in cash (excluding transaction expenses), and retained an aggregate allocated book amount of $785 million. We sold our interest in the securitization trust in the second quarter of 2005 for a net gain of $36 million.
~~Investment Portfolio~~
Our investment portfolio is a high-quality and diversified portfolio, both by sector and issuer, with 7.3% rated below investment grade as of September 30, 2005. We manage our investment portfolio with an emphasis on investment income and capital preservation. Our current strategy focuses on cash-flow certainty and credit quality as interest rates have declined and risk premiums have narrowed.
4534

ITEM 3. ~~QUALITATIVE~~QUANTITATIVE AND ~~QUANTITATIVE~~QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISKS~~RISK

~~Except as described below, there~~There have been no material changes in ~~the Company’s~~our market risk during the three months ended ~~September 30, 2005.~~March 31, 2006. For additional information, refer to “Management’s Discussion and Analysis ~~of Financial Condition~~- Quantitative and ~~Results of Operations -~~ Qualitative ~~and Quantitative~~ Disclosures About Market Risks” ~~beginning on page 90~~ of ~~our~~the Ameriprise Financial, Inc. 2005 Annual Report to Shareholders filed ~~Information Statement included~~ as an Exhibit 13 to our ~~Registration Statement~~Annual Report on Form 1010-K filed with the SEC on ~~August 19, 2005.~~March 8, 2006.
Previously, we entered into interest rate swaps to hedge the change in fair value of specific investment assets, generally corporate bonds, due to changes in interest rates within our previously consolidated subsidiary, American Express International Deposit Company. This entity was transferred to American Express effective August 1, 2005, so there are no longer any such hedges outstanding.
46

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

~~The Company maintains~~We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to provide reasonable assurance that the information required to be reported in the Exchange Act filings is recorded, processed, summarized and reported within the time periods specified and pursuant to the regulations of the Securities and Exchange Commission, including controls and procedures designed to ensure that this information is accumulated and communicated to ~~the Company’s~~our management, including ~~its~~our 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, ~~the Company’s~~our 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.

~~The Company’s~~Our management, with the participation of ~~the its~~our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, ~~the Company’s~~our Chief Executive Officer and Chief Financial Officer have concluded that ~~the Company’s~~our disclosure controls and procedures were effective at a reasonable level of assurance as of ~~September 30, 2005.~~March 31, 2006.

Changes in Internal Control over Financial Reporting

American Express Company (“American Express”) has historically provided a variety of corporate and other support services for ~~the Company,~~our company, including information technology, treasury, accounting, financial reporting, tax administration, human resources, marketing, legal, procurement and other services. American Express ~~will continue~~continues to provide ~~the Company~~us with ~~many~~some of these services pursuant to a transition services agreement for a transition period of up to two years following the ~~separation and distribution. The Company is now relying upon~~Distribution. For the quarter ended December 31, 2005, we noted that many of these services performed by American Express ashad an impact on our financial reporting processes, which we considered a ~~third party~~material change in our internal control over financial reporting. Since the quarter ended December 31, 2005, our company has increased the staffing of its accounting and reporting functions and has taken steps to perform these ~~services, many of which may impact our~~functions on a basis independent from American Express. We consider this reduction in reliance on American Express to perform accounting and financial reporting ~~processes.  During this transition there have been some changes in personnel and in relative responsibility for oversight of the processes. We consider this~~related services a material change in our internal control over financial reporting.

Other than the changes mentioned above, no other changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

35

Forward-Looking Statements

This report contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those described in these forward-looking statements. We have made various forward-looking statements in this report. Examples of such forward-looking statements include:

•       statements of our plans, intentions, expectations, objectives or goals, including those relating to the establishment of our new brands, our mass affluent client acquisition strategy and our competitive environment;
•       statements about our future economic performance, the performance of equity markets and interest rate variations and the economic performance of the United States; and
•       statements of assumptions underlying such statements.

The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” 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,
47

which could cause actual results to differ materially from such statements. Such factors ~~some of which are discussed under “Risk Factors,”~~ include, but are not limited to:

•      the impact of the separation from American ~~Express Company;~~
Express;
•      our ability to establish our new brands;
•      our capital structure as a stand-alone company, including our ratings and ~~indebtedness;~~
indebtedness, and limitations on our subsidiaries to pay dividends;
•      changes in the interest rate and equity market environments;
•changes in the regulatory environment, including ongoing legal proceedings and regulatory actions; ~~and~~
•      our investment management ~~performance.~~performance;
•      effects of competition in the financial services industry and changes in our product distribution mix and distribution channels;
•      risks of default by issuers of investments we own or by counterparties to derivative or reinsurance arrangements;
•      experience deviations from our assumptions regarding morbidity, mortality and persistency in certain of our annuity and insurance products; and
•      general economic and political factors, including consumer confidence in the economy.

~~We caution you that the~~The foregoing list of factors isshould be read in conjunction with our “Risk Factors” discussion included as Part 1, Item 1A of our Annual Report on Form 10-K filed with the SEC on March 8, 2006. These lists of factors are not ~~exclusive.~~exhaustive. There may also be other risks that we are unable to predict at this time that may cause actual results to differ materially from those in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statements.

48

PART II. OTHER INFORMATION

Item 1.      Legal Proceedings

The information set forth in Note 1011 to ~~consolidated financial statements~~Consolidated Financial Statements in Part I, Item 1 ~~Part I~~ is incorporated herein by reference.

Item 4.1A.   ~~Submission of Matters to a Vote of Security Holders~~Risk Factors

~~Effective September 30, 2005, American Express, as~~There have been no material changes in the ~~sole stockholder~~risk factors provided in Part I, Item 1A of the ~~Company, took action by written consent to:~~Company’s Annual Report on Form 10-K for the year ended December 31, 2005 filed with the SEC on March 8, 2006.

•Item 2.      ~~approve an Amended~~Unregistered Sales of Equity Securities and ~~Restated Certificate~~Use of ~~Incorporation of the Company,~~
•~~approve Amended and Restated Bylaws of the Company, and~~
•~~approve the Company’s 2005 Incentive Compensation Plan.~~Proceeds

~~Effective September 30, 2005, American Express, as~~Our Board of Directors authorized a 2 million share repurchase program in January 2006. This authorization is effective until the ~~sole stockholder~~end of 2006. In March 2006, our Board of Directors authorized an additional expenditure for up to $750 million to repurchase shares of our common stock through the ~~Company, took action by written consent to:~~end of March 2008. These share repurchase programs do not require the purchase of any minimum number of shares, and depending on market conditions and factors, these purchases may be commenced or suspended at any time without prior notice. Acquisitions under these

•~~accept~~36

share repurchase programs may be made in the ~~resignation~~open market, through block trades or other means. We currently intend to fund these share repurchases through existing working capital, future earnings and other customary financing methods.
The following table presents the total number of ~~Walter S. Berman~~shares purchased during the first quarter of 2006, the average price paid per share, the total number of shares purchased as ~~a director~~part of ~~the Company, and~~
•appoint Ira D. Hall, W. Walker Lewis, Siri S. Marshall, Jeff Noddle, Richard F. Powers III, H. Jay Sarles, Robert F. Sharpe, Jr. and William H. Turner as directors, with the term of Messrs. Hall, Noddle and Powers expiring at the 2006 annual meeting of stockholders, the term of Messrs. Cracchiolo, Sharpe and Sarles expiring at the 2007 annual meeting of stockholderspublicly announced repurchase programs and the ~~term~~maximum number or approximate dollar value of ~~Ms. Marshall and Messrs. Lewis and Turner expiring at~~shares that may yet be purchased pursuant to the ~~2008 annual meeting of stockholders.~~share repurchase programs.
Period

Total Number
of
Shares
Purchased

Average Price
Paid
per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or
Programs(1)(2)

Maximum Number/Approximate
Dollar Value of
Shares that May Yet Be
Purchased Under the Plans or
Programs(1)(2)

January 1 - 31, 2006

Share repurchase program ⁽¹⁾

—

—

—

2,000,000

Employee transactions ⁽³⁾

5,643

N/A

N/A

N/A

Employee transactions⁽⁴⁾

340,222

$
43.05

N/A

N/A

February 1 - 28, 2006

Share repurchase program ⁽¹⁾

—

—

—

2,000,000

Employee transactions⁽³⁾

22,623

N/A

N/A

N/A

Employee transactions⁽⁴⁾

16,933

$
46.21

N/A

N/A

March 1 - 31, 2006

Share repurchase program⁽¹⁾

2,000,000

$
42.91

2,000,000

—

Share repurchase program ⁽²⁾

4,400,000

$
42.91

4,400,000

$
561,196,000

Employee transactions ⁽³⁾

20,530

N/A

N/A

N/A

Employee transactions⁽⁴⁾

216

$
43.30

N/A

N/A

⁽¹⁾
Pursuant to the share repurchase program announced January 26, 2006, for the purchase of up to 2 million shares of our common stock, expiring on December 31, 2006.
⁽²⁾
Pursuant to the share repurchase program announced March 29, 2006, for the purchase of up to $750 million worth of our common stock, expiring on March 31, 2008.
⁽³⁾
Restricted shares forfeited and held in treasury for reissuance under the Ameriprise 2005 Incentive Compensation Plan (“2005 ICP”).
⁽⁴⁾
Restricted shares withheld (pursuant to the terms of awards under the 2005 ICP) to offset tax withholding obligations that occur upon vesting and release of restricted shares. The 2005 ICP provides that the value of the shares withheld shall be the average of the high and low prices of common stock of Ameriprise Financial, Inc. on the date the relevant transaction occurs.

Item 6.      Exhibits

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

4937

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.

AMERIPRISE FINANCIAL, INC.

(Registrant)

Date: ~~November 14, 2005~~May 8, 2006

By
/s/ Walter S. Berman

Walter S. Berman

Executive Vice President and

Chief Financial Officer

Date: ~~November 14, 2005~~May 8, 2006

By
/s/ David K. Stewart

David K. Stewart

Senior Vice President and

Controller

(Principal Accounting Officer)

5038

EXHIBIT INDEX
Pursuant to the rules and regulations of the Securities and Exchange Commission, Ameriprise Financial, Inc. has filed certain agreements as exhibits to this Quarterly Report on Form 10-Q. These agreements may contain representations and warranties by the parties. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in Ameriprise Financial, Inc.’s public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe Ameriprise Financial, Inc.’s actual state of affairs at the date hereof and should not be relied upon.

The following exhibits are filed as part of this ~~quarterly report:~~Quarterly Report on Form 10-Q. The exhibit numbers followed by an asterisk (*) indicate exhibits electronically filed herewith. All other exhibit numbers indicate exhibits previously filed and are hereby incorporated herein by reference.

Exhibit

Description

3.1*3.1

Amended and Restated Certificate of Incorporation of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

3.2*3.2

Amended and Restated Bylaws of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

4.1*4.1

Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to Form 10 Registration Statement, File No. 1-32525, filed on August 19, 2005).

10.1*

~~Separation~~Other instruments defining rights of holders of long-term debt securities of the registrant are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The registrant agrees to furnish copies of these instruments to the SEC upon request.
10.1
2006 Annual Incentive Awards (incorporated by reference to Item 1.01 of the Current Report on Form 8-K, File No. 1-32525, filed on March 21, 2006).
10.2
Stock Purchase and ~~Distribution~~Sale Agreement, ~~between American Express Company~~dated as of March 29, 2006, by and among Warren E. Buffet, Berkshire Hathaway Inc. and Ameriprise Financial, Inc.~~, dated August 24, 2005~~ (incorporated by reference to Exhibit ~~10.1~~99.1 to the Current Report on Form 8-K, File No. 1-32525, filed on ~~August~~March 30, ~~2005)~~2006).

10.1*
Transition Services Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).
10.2*
Tax Allocation Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).
10.3*
Employee Benefits Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).
10.4*
~~Ameriprise Financial 2005 Incentive Compensation Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~
10.5*
~~Ameriprise Financial Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~
10.6*
~~Ameriprise Financial Senior Executive Severance Plan (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~
10.7*
~~Ameriprise Financial Supplemental Retirement Plan (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~
10.8*
Form of Ameriprise Financial 2005 Incentive Compensation Plan Master Agreement for Substitution Awards (incorporated by reference to Exhibit 10.8 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)
10.9*
Form of Ameriprise Financial 2005 Incentive Compensation Plan Agreement for Assumed Portfolio Grant Awards (incorporated by reference to Exhibit 10.9 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)
~~E-1~~

10.10*
Form of Ameriprise Financial 2005 Incentive Compensation Plan Agreement for Assumed Performance Grants (incorporated by reference to Exhibit 10.10 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)
10.11*
~~Key Employee Retention Award for Mr. Berman (incorporated by reference to Exhibit 10.11 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~
10.12*
~~Key Employee Retention Award for Mr. Heath (incorporated by reference to Exhibit 10.12 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~
10.13*
~~Key Employee Retention Award for Mr. Truscott (incorporated by reference to Exhibit 10.13 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~
10.14*
~~Letter sent by American Express Company to Mr. Cracchiolo (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, File No. 1-32525, filed on August 30, 2005).~~
10.15*
Ameriprise Financial Form of Award Certificate – Non-Qualified Stock Option Award (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).
10.16*
Ameriprise Financial Form of Award Certificate – Restricted Stock Award (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).
10.17*
Ameriprise Financial Form of Award Certificate – Restricted Stock Unit Award (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).
10.18*
~~Ameriprise Financial Form of Agreement – Cash Incentive Award (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).~~
10.19*
~~Ameriprise Financial Long-Term Incentive Award Program Guide (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).~~
10.20*
~~Ameriprise Financial Deferred Share Plan for Outside Directors (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).~~
~~31.1~~31.1*

Certification of James M. Cracchiolo pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

~~31.2~~31.2*

Certification of Walter S. Berman pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

~~32.1~~32*

Certification of James M. Cracchiolo and Walter S. Berman pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

E-1
*~~Exhibit has been previously filed as noted herein.~~
~~E-2~~

	Nine Months Ended
	September 30,
	2005		2004
Revenues:
Management, financial advice and service fees	$	1,927	$	1,642
Distribution fees	873		834
Net investment income	1,667		1,566
Premiums	751		759
Other revenues	397		383
Total revenues	5,615		5,184

Expenses:
Compensation and benefits	1,995		1,690
Interest credited to account values	976		926
Benefits, claims, losses and settlement expenses	646		605
Amortization of deferred acquisition costs	319		312
Interest and debt expense	52		37
Separation costs	168		—
Other expenses	841		762
Total expenses	4,997		4,332

Income before income tax provision, discontinued operations and accounting change	618		852
Income tax provision	171		253
Income before discontinued operations and accounting change	447		599
Discontinued operations, net of tax	16		31
Cumulative effect of accounting change, net of tax	—		(71		)
Net income	$	463	$	559

Earnings per Common Share – Basic and Diluted:
Income before discontinued operations and accounting change	$	1.80	$	2.43
Discontinued operations, net of tax	0.07		0.13
Cumulative effect of accounting change, net of tax	—		(0.29		)
Net income	$	1.87	$	2.27

Average Common Shares Outstanding for Earnings per Common Share (as adjusted for September 2005 stock split):
Basic and Diluted	246		246

	Three Months Ended September 30,						Nine Months Ended September 30,
(Millions)	2005			2004			2005			2004

Gross realized gains from sales	$	13		$	15		$	107		$	46
Gross realized losses from sales	$	(20	)	$	(6	)	$	(57	)	$	(15	)
Other-than-temporary impairments	$	(1	)	$	—		$	(2	)	$	(1	)

(Millions)
Balance, January 1, 2004	$	3,743
Impact of SOP 03-1	20
Capitalization of acquisition costs	621
Amortization, excluding impact of changes in assumptions	(517		)
Amortization, impact of annual third quarter changes in DAC-related assumptions	24
Amortization, impact of other quarter changes in DAC-related assumptions	56		^(a)
Impact of change in net unrealized securities losses	9
Balance, December 31, 2004	$	3,956
Capitalization of acquisition costs	508
DAC transfer related to AMEX Assurance ceding arrangement	(117		)
Amortization, excluding impact of changes in assumptions	(386		)
Amortization, impact of annual third quarter changes in DAC-related assumptions	67
Impact of change in net unrealized securities losses	60
Balance, September 30, 2005	$	4,088

	Three Months Ended September 30,				Nine Months Ended September 30,
(Millions)	2005		2004		2005		2004
Net investment income	$	24	$	56	$	165	$	161

Expenses:
Interest credited to account values	18		22		104		54
Other expenses	3		18		36		59
Total expenses	21		40		140		113

Income before income tax provision	3		16		25		48
Income tax provision	1		5		9		17
Income from discontinued operations, net of tax	$	2	$	11	$	16	$	31

	Shares	Weighted Average Exercise Price		Weighted Averaged Remaining Contractual Term	Aggregate Intrinsic Value
American Express Non-vested Options Outstanding	4.1	$	46.45	8.5 years	$	45.2
Conversion Factor ^(a)	1.6045	.6233
Ameriprise Non-vested Options Outstanding	6.6	$	28.95	8.5 years	$	45.2

	Shares	Weighted Average Grant Date Fair Value
American Express Non-vested Awards Outstanding	1.8	$	47.48
Conversion Factor ^(a)	1.6045
Ameriprise Non-vested Awards Outstanding	2.8	$	29.59

	Three Months Ended September 30,				Nine Months Ended September 30,
(Millions, except per share amounts)	2005		2004		2005		2004
Numerator:
Income before discontinued operations and accounting change	$	123	$	188	$	447	$	599
Discontinued operations, net of tax	2		11		16		31
Cumulative effect of accounting change, net of tax	—		—		—		(71		)
Net income	$	125	$	199	$	463	$	559

Denominator:
Basic and Diluted: Weighted-average shares outstanding during the period	246		246		246		246

Basic and Diluted EPS:
Income before discontinued operations and accounting change	$	0.50	$	0.77	$	1.80	$	2.43
Discontinued operations, net of tax	—		0.04		0.07		0.13
Cumulative effect of accounting change, net of tax	—		—		—		(0.29		)
Net income	$	0.50	$	0.81	$	1.87	$	2.27

(Millions)	Asset Accumulation and Income		Protection			Corporate and Other			Eliminations			Consolidated

2005- Segment Data
Revenue from external customers	$	1,303	$	454		$	116		$	—		$	1,873
Intersegment revenue	2		6			—			(8		)	—
Total revenues	1,305		460			116			(8		)	1,873
Amortization expense ^(a)	83		(20		)	1			—			64
Total expenses	1,139		324			237			(8		)	1,692
Income before income tax provision and discontinued operations	$	166	$	136		$	(121	)	$	—		$	181
Income tax provision												58
Income before discontinued operations												123
Discontinued operations, net of tax												2
Net income												$	125

2004- Segment Data
Revenue from external customers	$	1,128	$	489		$	95		$	—		$	1,712
Intersegment revenue	—		—			1			(1		)	—
Total revenues	1,128		489			96			(1		)	1,712
Amortization expense ^(a)	93		29			—			—			122
Total expenses	971		355			126			(1		)	1,451
Income before income tax provision and discontinued operations	$	157	$	134		$	(30	)	$	—		$	261
Income tax provision												73
Income before discontinued operations												188
Discontinued operations, net of tax												11
Net income												$	199

•		the realignment of our subsidiary, Securities America Financial Corporation (“SAFC”), under the AA&I segment from the Corporate segment;
•		the reallocation of all interest on corporate debt from the AA&I and Protection segments to the Corporate segment;
•		the reallocation of investment income to segments to better reflect management’s determination of liabilities and capital required for each segment;
•		the reallocation of technology expenses from the Corporate segment to the AA&I and Protection segments to occur on a quarterly rather than an annual basis;
•		the reallocation of certain corporate overhead expenses from the AA&I and Protection segments to the Corporate segment, such as certain senior management compensation and related expense and expenses attributable to the
		Corporate Secretary, Public Affairs and Investor Relations departments, as well as other corporate-related activities, as they do not directly relate to the AA&I and Protection segments; and
•		the reallocation of excess capital not required by the AA&I and Protection segments and related investment income to the Corporate segment.

	Three Months Ended March 31,				Change					AMEX Assurance Three Months Ended March 31,			Change Excluding AMEX Assurance
(in millions)	2006		2005		$			%		2005			$			%
	(unaudited)
Revenues
Management, financial advice and service fees	$	710	$	608	$	102		17	%	$	1		$	103		17	%
Distribution fees	301		288		13			5		—			13			5
Net investment income	574		548		26			5		3			29			5
Premiums	220		270		(50		)	(19	)	71			21			11
Other revenues	144		133		11			8		(1		)	10			7
Total revenues	1,949		1,847		102			6		74			176			10

Expenses
Compensation and benefits:
Field	423		362		61			17		1			62			17
Non-field	316		279		37			13		—			37			13
Total compensation and benefits	739		641		98			15		1			99			15
Interest credited to account values	324		311		13			4		—			13			4
Benefits, claims, losses and settlement expenses	227		218		9			4		19			28			14
Amortization of deferred acquisition costs	128		136		(8		)	(6	)	8			—			—
Interest and debt expense	23		17		6			35		��			6			35
Separation costs	67		20		47			#		—			47			#
Other expenses	250		258		(8		)	(3	)	6			(2		)	(1	)
Total expenses	1,758		1,601		157			10		34			191			12

Income before income tax provision and discontinued operations	191		246		(55		)	(22	)	40			(15		)	(7	)
Income tax provision	46		71		(25		)	(35	)	13			(12		)	(21	)
Income before discontinued operations	145		175		(30		)	(17	)	27			(3		)	(2	)
Discontinued operations, net of tax	—		8		(8		)	#		—			(8		)	#
Net income	$	145	$	183	$	(38	)	(21	)	$	27		$	(11	)	(7	)

	Three Months Ended March 31,				Change
Non-GAAP Financial Measures (in millions)	2006		2005		$		%
Total expenses excluding separation costs and AMEX Assurance	$	1,691	$	1,547	$	144	9	%
Separation costs, after-tax	44		13		31		#
Income tax provision before discontinued operations and non-recurring separation costs excluding AMEX Assurance	69		65		4		6
Income before discontinued operations and non-recurring separation costs excluding AMEX Assurance	189		161		28		17

	March 31,
Owned, Managed and Administered Assets	2006				2005				% Change
	(in billions)
Owned Assets
Separate accounts	$	45.2			$	36.0			26	%
Investments	38.1				39.9				(5	)
Other⁽¹⁾	5.8				5.5				5
Total owned assets	89.1				81.4				9

Managed Assets
Managed Assets-Retail
RiverSource (“RVS”) mutual funds			58.8				61.2		(4	)
Threadneedle mutual funds	15.3				11.9				29
Ameriprise Financial wrap account assets	54.9				39.5				39
Securities America, Inc. wrap account assets	9.1				5.8				57
Total managed assets-retail	138.1				118.4				17
Managed Assets-Institutional
Ameriprise financial separately managed accounts/sub-advisory	27.5				30.1				(9	)
Threadneedle separately managed accounts/sub-advisory	107.7				100.7				7
Total managed assets-institutional	135.2				130.8				3
Managed Assets-Retirement Services
Collective funds	10.8				11.2				(4	)
Managed Assets-Eliminations⁽²⁾	(7.9			)	(9.5			)	(17	)
Total managed assets	276.2				250.9				10
Administered Assets	80.4				68.7				17
Total Owned, Managed and Administered Assets	$	445.7			$	401.0			11

^(a)^{Percentage change calculated using thousands.}

^#^{Variance 100% or greater.}

^*(1)		^{Excludes non proprietary sales within our wrap accounts.}
^**		^{Includes cash sales from AEIDC through July 31, 2005 and the entire period ending September 30, 2004.}
^***		^{Includes separately managed accounts and alternative investments.}

	As of September 30,
	2005			2004			% Change^(a)
	(Dollars in Billions)
*Owned, Managed and Administered Assets*

Owned Assets:
Managed owned assets
Separate accounts	$	39.8		$	32.4		23	%
Investments	39.5			39.1			1	%
Total managed owned assets	79.3			71.5			11	%
Other^(b)	6.8			5.8			17	%
Total owned assets	86.1			77.3			11	%

Managed Assets:
Managed Assets—Retail
RiverSource (RVS) Mutual Funds	$	59.4		$	63.3		(6	)%
Threadneedle Mutual Funds	13.4			10.8			24	%
Wrap Account Assets—Other company products	43.7			29.3			49	%
Total managed assets—retail	116.5			103.4			13	%
Managed Assets—Institutional
Separately Managed Accounts/Sub-Advisory	19.7			20.1			(2	)%
Other Institutional	7.5			9.2			(18	)%
Threadneedle Separately Managed Accounts/Sub-Advisory	102.9			92.5			11	%
Total managed assets—institutional	130.1			121.8			7	%
Managed Assets-Retirement Services
Collective Funds	11.3			12.1			(7	)%
Corporate, other	6.8			4.8			41	%
Managed Assets—Eliminations^(c)	(4.6		)	(5.9		)	25	%
Total managed assets	260.1			236.2			10	%
Administered Assets	74.4			65.2			14	%
Total Owned, Managed and Administered Assets	$	420.6		$	378.7		11	%

^(a)	^{Percentage change calculated using thousands.}
^(b)	^{Includes cash and cash equivalents, restricted and segregated cash and receivables.}
^(c)(2)	^{Includes eliminations from managed assets for owned assets invested in our managed products and separately managed accounts and among managed assets for RVS Fund assets sub-advised by Threadneedle.}
	Threadneedle Asset Management Holdings Ltd. (“Threadneedle”).

	Three Months Ended September 30								Three Months Ended March 31,						%
	2005			2004			% Change^(a)		2006			2005			Change
	Unaudited (Millions)								(unaudited), (in millions)
*Total revenues by segment:*
Total revenues
Asset Accumulation and Income	$	1,305		$	1,128		16	%	$	1,422		$	1,299		9	%
Protection	460			489			(6	)%	473			508			(7	)
Corporate and Other	116			96			21	%	64			46			39
Eliminations	(8		)	(1		)	#		(10		)	(6		)	(67	)
Consolidated	$	1,873		$	1,712		9	%
Consolidated total revenues									$	1,949		$	1,847		6

*Total expenses by segment:*
Total expenses
Asset Accumulation and Income	$	1,139		$	971		17	%	$	1,194		$	1,125		6	%
Protection	324			355			(9	)%	399			395			1
Corporate and Other	237			126			91	%	175			87			#
Eliminations	(8		)	(1		)	#		(10		)	(6		)	(67	)
Consolidated	$	1,692		$	1,451		17	%
Consolidated total expenses									$	1,758		$	1,601		10

*Income before income tax provision and discontinued operations by segment:*
Income before income tax provision and discontinued operations
Asset Accumulation and Income	$	166		$	157		7	%	$	228		$	174		31	%
Protection	136			134			—		74			113			(35	)
Corporate and Other	(121		)	(30		)	#		(111		)	(41		)	#
Consolidated	$	181		$	261		(31	)%
Consolidated income before income tax provision and discontinued operations									$	191		$	246		(22	)

	March 31, 2006		December 31, 2005		% Change
	(unaudited), (in millions)
Total assets
Asset Accumulation and Income	$	77,718	$	75,382	3	%
Protection	15,079		14,492		4
Corporate and Other	3,024		3,247		(7	)
Consolidated total assets	$	95,821	$	93,121	3

	As of September 30, 2005		As of December 31, 2004		% Change^(a)
	Unaudited		Audited
	(Millions)
*Total assets by segment:*
Asset Accumulation and Income	$	73,983	$	69,516	6	%
Protection	16,326		13,465		21	%
Corporate and Other	1,965		4,259		(54	)%
Assets of discontinued operations	—		5,873		#
Consolidated	$	92,274	$	93,113	(1	)%

	Nine Months Ended September 30
	2005			2004			% Change^(a)
	Unaudited (Millions)
*Total revenues by segment:*
Asset Accumulation and Income	$	3,786		$	3,433		10	%
Protection	1,481			1,428			4	%
Corporate and Other	366			325			13	%
Eliminations	(18		)	(2		)	#
Consolidated	$	5,615		$	5,184		8	%

*Total expenses by segment:*
Asset Accumulation and Income	$	3,302		$	2,898		14	%
Protection	1,117			1,040			8	%
Corporate and Other	596			396			51	%
Eliminations	(18		)	(2		)	#
Consolidated	$	4,997		$	4,332		15	%

*Income before income tax provision, discontinued operations and accounting change by segment:*
Asset Accumulation and Income	$	484		$	535		(9	)%
Protection	364			388			(7	)%
Corporate and Other	(230		)	(71		)	#
Consolidated	$	618		$	852		(27	)%

	As of September 30, 2005		As of December 31, 2004		% Change(a)
	Unaudited		Audited
	(Millions of $ except percentages)
Investments⁽¹⁾	$	39,454	$	40,232	(2)%
Separate account assets⁽²⁾	39,840		35,901		11%
Total assets	92,274		93,113		(1)%
Future policy benefits and claims⁽²⁾	32,958		33,253		(1)%
Investment certificate reserves	6,392		5,831		10%
Payable to American Express	102		1,751		(94)%
Short-term debt	1,351		—		#
Long-term debt	360		385		(6)%
Separate account liabilities⁽²⁾	39,840		35,901		11%
Total liabilities	84,537		86,411		(2)%
Total shareholders’ equity	7,737		6,702		15%

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2)	Maximum Number/Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)(2)
January 1 - 31, 2006
Share repurchase program ⁽¹⁾	—	—		—	2,000,000
Employee transactions ⁽³⁾	5,643	N/A		N/A	N/A
Employee transactions⁽⁴⁾	340,222	$	43.05	N/A	N/A

February 1 - 28, 2006
Share repurchase program ⁽¹⁾	—	—		—	2,000,000
Employee transactions⁽³⁾	22,623	N/A		N/A	N/A
Employee transactions⁽⁴⁾	16,933	$	46.21	N/A	N/A

March 1 - 31, 2006
Share repurchase program⁽¹⁾	2,000,000	$	42.91	2,000,000	—
Share repurchase program ⁽²⁾	4,400,000	$	42.91	4,400,000	$	561,196,000
Employee transactions ⁽³⁾	20,530	N/A		N/A	N/A
Employee transactions⁽⁴⁾	216	$	43.30	N/A	N/A

⁽¹⁾	Pursuant to the share repurchase program announced January 26, 2006, for the purchase of up to 2 million shares of our common stock, expiring on December 31, 2006.
⁽²⁾	Pursuant to the share repurchase program announced March 29, 2006, for the purchase of up to $750 million worth of our common stock, expiring on March 31, 2008.
⁽³⁾	Restricted shares forfeited and held in treasury for reissuance under the Ameriprise 2005 Incentive Compensation Plan (“2005 ICP”).
⁽⁴⁾	Restricted shares withheld (pursuant to the terms of awards under the 2005 ICP) to offset tax withholding obligations that occur upon vesting and release of restricted shares. The 2005 ICP provides that the value of the shares withheld shall be the average of the high and low prices of common stock of Ameriprise Financial, Inc. on the date the relevant transaction occurs.

	AMERIPRISE FINANCIAL, INC.
	(Registrant)


Date: ~~November 14, 2005~~May 8, 2006	By	/s/ Walter S. Berman
		Walter S. Berman
		Executive Vice President and
		Chief Financial Officer


Date: ~~November 14, 2005~~May 8, 2006	By	/s/ David K. Stewart
		David K. Stewart
		Senior Vice President and
		Controller
		(Principal Accounting Officer)

Exhibit		Description

3.1*3.1		Amended and Restated Certificate of Incorporation of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

3.2*3.2		Amended and Restated Bylaws of Ameriprise Financial, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

4.1*4.1		Form of Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 3 to Form 10 Registration Statement, File No. 1-32525, filed on August 19, 2005).

10.1*		~~Separation~~Other instruments defining rights of holders of long-term debt securities of the registrant are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The registrant agrees to furnish copies of these instruments to the SEC upon request.

10.1		2006 Annual Incentive Awards (incorporated by reference to Item 1.01 of the Current Report on Form 8-K, File No. 1-32525, filed on March 21, 2006).

10.2		Stock Purchase and ~~Distribution~~Sale Agreement, ~~between American Express Company~~dated as of March 29, 2006, by and among Warren E. Buffet, Berkshire Hathaway Inc. and Ameriprise Financial, Inc.~~, dated August 24, 2005~~ (incorporated by reference to Exhibit ~~10.1~~99.1 to the Current Report on Form 8-K, File No. 1-32525, filed on ~~August~~March 30, ~~2005)~~2006).

10.1*		Transition Services Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

10.2*		Tax Allocation Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

10.3*		Employee Benefits Agreement by and between American Express Company and Ameriprise Financial, Inc., dated as of September 30, 2005 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

10.4*		~~Ameriprise Financial 2005 Incentive Compensation Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~

10.5*		~~Ameriprise Financial Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~

10.6*		~~Ameriprise Financial Senior Executive Severance Plan (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~

10.7*		~~Ameriprise Financial Supplemental Retirement Plan (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~

10.8*		Form of Ameriprise Financial 2005 Incentive Compensation Plan Master Agreement for Substitution Awards (incorporated by reference to Exhibit 10.8 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)

10.9*		Form of Ameriprise Financial 2005 Incentive Compensation Plan Agreement for Assumed Portfolio Grant Awards (incorporated by reference to Exhibit 10.9 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)

10.10*		Form of Ameriprise Financial 2005 Incentive Compensation Plan Agreement for Assumed Performance Grants (incorporated by reference to Exhibit 10.10 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)

10.11*		~~Key Employee Retention Award for Mr. Berman (incorporated by reference to Exhibit 10.11 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~

10.12*		~~Key Employee Retention Award for Mr. Heath (incorporated by reference to Exhibit 10.12 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~

10.13*		~~Key Employee Retention Award for Mr. Truscott (incorporated by reference to Exhibit 10.13 to Amendment No. 2 to Form 10 Registration Statement, File No. 1-32525, filed on August 15, 2005)~~

10.14*		~~Letter sent by American Express Company to Mr. Cracchiolo (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, File No. 1-32525, filed on August 30, 2005).~~

10.15*		Ameriprise Financial Form of Award Certificate – Non-Qualified Stock Option Award (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

10.16*		Ameriprise Financial Form of Award Certificate – Restricted Stock Award (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

10.17*		Ameriprise Financial Form of Award Certificate – Restricted Stock Unit Award (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).

10.18*		~~Ameriprise Financial Form of Agreement – Cash Incentive Award (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).~~

10.19*		~~Ameriprise Financial Long-Term Incentive Award Program Guide (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).~~

10.20*		~~Ameriprise Financial Deferred Share Plan for Outside Directors (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K, File No. 1-32525, filed on October 4, 2005).~~

~~31.1~~31.1*		Certification of James M. Cracchiolo pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

~~31.2~~31.2*		Certification of Walter S. Berman pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.

~~32.1~~32*		Certification of James M. Cracchiolo and Walter S. Berman pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.