July 8, 2005
Mail Stop 0408
By U.S. Mail and Facsimile to (212) 225-3999
James M. Cracchiolo
President and Chief Executive Officer
American Express Financial Corporation
707 2nd Avenue
Minneapolis, Minnesota 55474
Re: Ameriprise Financial, Inc.
Registration Statement on Form 10
Filed June 7, 2005
File No. 1-32525
Dear Mr. Cracchiolo:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects. We welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
General
1. To the extent the effectiveness of the registration statement
is
delayed, please update your financial statements as required by
Rule
3-12 of Regulation S-X.
Summary of Consolidated Financial Data, page 12
2. While we note you do not have a classified balance sheet,
please
revise to disclose your obligations that are long-term in nature,
including separate account liabilities. Refer to Instruction 2 of
Item 301 of Regulation S-K. Similarly revise the Selected
Consolidated Financial Data on page 42.
Capitalization, page 40
3. Please revise to delete the presentation of cash and cash
equivalents. Capitalization is represented by long-term debt and
stockholders` equity.
Unaudited Pro Forma Financial Information, page 44
4. Please revise to provide a tabular presentation of all non-
recurring charges excluded from these financial statements,
identifying the period in which they will be incurred.
5. We note on page F-18 that you have provided for income taxes on
a
separate return basis, except that, under an agreement between you
and American Express, tax benefits have been recognized for losses
to
the extent such losses can be used on American Express`
consolidated
federal income tax return. Please revise your pro forma income
statements to reflect a tax provision calculated on the separate
return basis with no exceptions. Refer to Question 3 of SAB Topic
1:B.1.
Unaudited Pro Forma Income Statement for the Year ended December
31,
2004 and the Three Months ended March 31, 2005, page 46
6. Please revise to delete adjustment (c), which assumes interest
income earned on a capital contribution. Limit your disclosure of
any assumed earnings to the footnotes.
7. Please revise footnote (d) to disclose all assumptions used to
determine the amount of the adjustment and the basis for those
assumptions.
Unaudited Pro Forma Income Statement for the Three Months ended
March
31, 2005, page 47
8. We note separation costs of $20 million included in pro forma
income for the three months ended March 31, 2005. Please revise
to
disclose income from continuing operations before nonrecurring
charges or credits directly attributable to the transaction.
Refer
to Rule 11-02(b)(5) of Regulation S-X.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 50
General
9. Please revise to specifically discuss and analyze your balance
sheet and significant changes in your balance sheet. Please
include
expanded disclosure of the amounts related to your insurance
subsidiaries, including where they are recorded in you balance
sheet.
A tabular format of the related reserves may be helpful to an
investor. Refer to Item 303(a) of Regulation S-K.
Our Results of Operations by Segment, page 71
10. For each of the periods presented, please revise to include
the
"Corporate and Other" segment in your analysis.
Consolidated Statements of Income, page F-3
11. Noting the significance of the other expenses line item to
pre-
tax income, please revise to separately report on the face of your
income statement all categories of expenses that are material.
Alternatively, provide footnote disclosure of the significant
components of this line item. Consider providing an expanded
discussion of these items in MD&A.
Note 1. Summary of Significant Accounting Policies, page F-7
General
12. Please revise here and throughout your document to disclose
how
you considered SAB Topic 1:B in preparing these financial
statements.
Revise MD&A to provide a separate section that discusses services
and
operations provided by American Express that you will have to
replace
and that discusses any financial obligations you will have to
American Express during the transition of your company to that of
a
separate entity. Please ensure that you have discussed all
associated trends on operations. For instance, clarify if there
is
any fee associated with the right you will have to use the
American
Express name for two years after the separation.
Other Revenues, page F-10
13. Please revise to disclose your revenue recognition accounting
model related to universal and variable universal life insurance.
Refer to SFAS 97.
Trading Securities, page F-12
14. Please cite the authoritative guidance you rely on to record
your
hedge fund investments at fair value with unrealized and realized
gains (losses) recorded in the income statement.
Future Policy Benefits and Claims, page F-16
15. Please revise to disclose why liabilities for equity indexed
deferred annuities are valued differently for annuities issued in
1999 or later as compared to those issued before 1999.
Note 2. Investments, page F-21
16. Please revise to disclose the aggregate fair value by category
for all investments in an unrealized loss position for which
other-
than-temporary impairments have not been recognized as of December
31, 2003. Refer to paragraph 21 of EITF 03-1.
17. For each of the periods presented, please revise to describe
the
main causes of the other-than-temporary impairments realized on
your
available-for-sale securities
18. We note your discussion on page F-23 of the $41 million
unrealized loss related to your retained interest in a
collateralized
debt obligation securitization trust. Please revise to disclose
the
information you considered (both positive and negative) in
reaching
the conclusion that the impairment was not other-than-temporary.
Your current disclosure supports your carrying value but does not
support your conclusion that the $41 million impairment was not
other-than-temporary. Refer to paragraph 21(b) of EITF 03-1.
Note 3. Variable Interest Entities, page F-26
19. We note your disclosure that ongoing valuation adjustments
specifically related to the consolidated CDO will be reflected in
your results of operations until maturity and that the reduction
in
the value of the assets will be absorbed by the third-party
investors. We also note your disclosure on page F-24 that the CDO
is
supported by a portfolio of high yield bond and loans which are
classified as available-for-sale. Please revise to disclose why
valuation adjustments will be reflected in your results of
operations
when the underlying investments are classified as available-for-
sale,
citing the accounting literature you relied on in determining the
appropriateness of your accounting.
Note 4. Deferred Acquisition Costs and Deferred Sales Inducement
Costs, page F-28
20. Please revise to disclose why amortization expense includes
the
impact of DAC amortization assumption changes made during periods
other than the third quarter in your roll forward of deferred
acquisition costs, citing the authoritative literature you relied
on
in determining the appropriateness of your accounting.
Note 5. Goodwill and Other Intangibles, page F-28
21. We note on page F-14 that intangible assets are amortized over
their estimated useful lives unless they are deemed to have
indefinite useful lives. For intangibles subject to amortization,
please revise to disclose the gross carrying amount and
accumulated
amortization by major intangible asset class. Refer to paragraph
45(a) of SFAS 142.
22. For intangible assets not subject to amortization, please
revise
to disclose the total carrying amount and the carrying amount for
each major intangible asset class. Refer to paragraph 45(b) of
SFAS
142.
23. Please revise to describe the foreign currency translation
adjustment and it`s affect on your goodwill balance.
Note 8. Shareholder`s Equity and Related Regulatory Requirements,
page F-32
24. Please revise to disclose, as of the most recent balance sheet
date, the actual and required amounts of regulatory capital.
Note 11. Retirement Plans and Profit Sharing Arrangements, page
F-36
Profit Sharing Arrangements, page F-40
25. Please revise to specifically state to what the 33% in 2004
and
30% in 2005 and thereafter relates in the first Threadneedle
profit
sharing arrangement.
Note 12. Derivatives and Hedging Activities, page F-41
26. To help us better understand your accounting and evaluate your
disclosures, provide us with a comprehensive analysis for each
relationship which includes a derivative instrument classified as
a
fair value or cash flow hedge. Tell us the following for each
type
of derivative hedging relationship:
a) Your strategy and purpose for each hedging relationship.
b) The critical terms of your derivative hedges and hedged items.
c) How you meet the criteria of paragraphs 20 and 28 of SFAS 133.
d) How you meet the criteria of paragraphs 21 and 29 of SFAS 133
for
each hedged item.
e) How you design effectiveness testing.
f) How you measure ineffectiveness.
g) How you meet the criteria of paragraph 68 of SFAS 133, for each
hedging relationship for which you use short cut accounting.
h) If you aggregate similar assets and liabilities and hedge as a
portfolio, please discuss the risk exposure they share and how you
test for proportionality. Clearly explain the extent to which you
are aggregating.
27. For each group of derivatives described in the derivatives not
designated as hedges section starting on page F-42, please revise
to
disclose the amount recorded on the balance sheet as of each date
presented.
28. Please revise MD&A to provide a substantially expanded
discussion
of your hedging activities, including the effects on your
financial
position, results of operations and cash flows.
Note 14. Related Party Transactions, page F-45
29. We note you recorded certain reimbursements from American
Express
for costs incurred related to American Express corporate
initiatives
as capital contributions rather than reductions to expense
amounts.
Please cite the authoritative guidance you rely on related to
these
transactions and provide expanded disclosures as to how you made
your
determinations.
Note 16. Operating Segments, page F-48
30. Please revise to disclose the amount of amortization expense
for
each reportable segment. Refer to paragraph 27 of SFAS 131.
* * *
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a state from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
You may contact Michael Volley, Staff Accountant, at (202)
551-
3437 or Paul Cline, Senior Accountant, (202) 551-3851 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Gregory Dundas at (202) 551-3436 or me at
(202) 551-3698 with any other questions.
Sincerely,
Mark Webb
Legal Branch Chief
??
??
??
??
James M. Cracchiolo
Ameriprise Financial, Inc.
July 8, 2005
Page 7