October 26, 2011

Ameriprise Misses Estimates, but Boosts Advisor Force: Q3 Earnings

The company now has 9,714 FAs and has improved its retention levels, margins

Ameriprise Financial (AMP) said late Wednesday that its net income from continuing operations was $271 million, or $1.12 per share, compared to $346 million, or $1.33 per share, a year ago. The latest quarterly results missed analysts’ estimates of $1.21.

Third quarter results were affected by a $106 million, or $0.42 per share, “unfavorable market impact on deferred acquisition costs (DAC) and deferred sales inducement costs (DSIC), as well as the company's annual review of insurance and annuity valuation assumptions and models (unlocking),” the company explained in a press release.

“The negative unlocking impact in the third quarter of 2011 primarily reflects lower near-term interest spread assumptions,” it added.

Operating net revenues, however rose to $2.5 billion from $2.3 billion a year ago, primarily driven by double-digit growth in management and distribution fees, says Ameriprise, the former parent company of Securities America.

"We continued to demonstrate the strength and resilience of our business despite a challenging market environment," said Chairman and CEO Jim Cracchiolo in a statement. "Client acquisition and advisor recruiting remained strong, and our advisor productivity was near all-time highs.”

Total assets under management and administration were $600 billion as of September 30, down 4% from a year ago, primarily driven by the drop in the equity markets.

Wealth Management

Retail client assets in the advice and wealth management unit rose 2% year-over-year to $293 billion, primarily reflecting growth in wrap assets, including $0.8 billion in net inflows in the quarter, the company says. Along with many of its rivals, Ameriprise saw its AUM drop from the second quarter, when it had about $319 billion in assets.

The number of advisors increased by 51 sequentially to 9,714, “reflecting the strongest quarter for experienced-advisor recruiting since the second quarter of 2009,” Ameriprise notes. From a year ago, though, the number is down by nine advisors.

The number of employee advisors is now 2,182, while the franchisee or independent advisors total 7,532.

Retention stands at 90.5% for employee advisors and 94.6% for franchisee FAs, up both year over year and sequentially.

Operating net revenue per advisor expanded 14% from a year ago to $97,000 for the three months due to experienced advisor recruiting, higher average assets under management and increased client activity. (This represents an average annual production level of nearly $388,000.)

The unit’s operating net revenues were $938 million vs. $830 million a year ago and $957 million in the second quarter, while pre-tax operating income was $116 million compares with $89 million in the year-ago period and $108 million in the earlier quarter.

Overall pre-tax margins for the wealth-management business improved to 12.4% from 10.7% last year and 11.3% last quarter.

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