Ameriprise 2009 Annual Report Download - page 138

rates and accrued interest thereon. On certificates allowing for the deduction of a surrender charge, the cash surrender values may be less
than accumulated investment certificate reserves prior to maturity dates. Cash surrender values on certificates allowing for no surrender
charge are equal to certificate reserves. The Company generally invests the proceeds from investment certificates in fixed and variable
rate securities. The Company may hedge the interest rate risks under these obligations with derivative instruments. As of December 31,
2009 and 2008, there were no outstanding derivatives to hedge these interest rate risks.
Certain investment certificate products have returns tied to the performance of equity markets. The Company guarantees the principal for
purchasers who hold the certificate for the full 52-week term and purchasers may participate in increases in the stock market based on the
S&P 500 Index, up to a maximum return. Purchasers can choose 100% participation in the market index up to the cap or 25%
participation plus fixed interest with a combined total up to the cap. Current first term certificates have maximum returns of 4% or 5%.
The equity component of these certificates is considered an embedded derivative and is accounted for separately. The change in fair
values of the embedded derivative reserve is reflected in banking and deposit interest expense. See Note 20 for additional information
about derivative instruments used to economically hedge the equity price risk related to the Company’s stock market certificates.
14. Debt
Debt and the stated interest rates were as follows:
Outstanding Balance Stated Interest Rate
December 31, December 31,
2009 2008 2009 2008
(in millions)
Senior notes due 2010 $ 340 $ 800 5.4 % 5.4 %
Senior notes due 2015 700 700 5.7 5.7
Senior notes due 2019 300 — 7.3 —
Senior notes due 2039 200 — 7.8 —
Junior subordinated notes due 2066 322 457 7.5 7.5
Floating rate revolving credit borrowings due 2013 142 64 4.1 3.6
Floating rate revolving credit borrowings due 2014 198 — 5.9 —
Floating rate revolving credit borrowings due 2014 41 — 2.5 —
Municipal bond inverse floater certificates due 2021 6 6 0.3 2.2
Total $ 2,249 $ 2,027
On November 23, 2005, the Company issued $1.5 billion of unsecured senior notes including $800 million of five-year senior notes which
mature November 15, 2010 and $700 million of 10-year senior notes which mature November 15, 2015, and incurred debt issuance costs
of $7 million. Interest payments are due semi-annually on May 15 and November 15.
In July 2009, the Company purchased $450 million aggregate principal amount of its senior notes due 2010, pursuant to a cash tender
offer. The tender offer consideration per $1,000 principal amount of these notes accepted for purchase was $1,000, with an early tender
payment of $30. Payments for these notes purchased pursuant to the tender offer included accrued and unpaid interest from the last
interest payment date to, but not including, the settlement date. The Company also repurchased $10 million of these notes in the second
quarter of 2009 in open market transactions.
On June 8, 2009, the Company issued $300 million of unsecured senior notes which mature June 28, 2019, and incurred debt issuance
costs of $3 million. Interest payments are due semi-annually in arrears on June 28 and December 28.
On June 3, 2009, the Company issued $200 million of unsecured senior notes which mature June 15, 2039, and incurred debt issuance
costs of $6 million. Interest payments are due quarterly in arrears on March 15, June 15, September 15 and December 15.
In June 2005, the Company entered into interest rate swap agreements totaling $1.5 billion, which qualified as cash flow hedges related to
planned debt offerings. The Company terminated the swap agreements in November 2005 when the senior notes due 2010 and 2015 were
issued. The related gain on the swap agreements of $71 million was recorded to accumulated other comprehensive income (loss) and is
being amortized as a reduction to interest expense over the period in which the hedged cash flows are expected to occur. Considering the
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