July 25, 2013

Ameriprise Lifts Profits 44% on Strong Wealth Results

Flows of client assets into advisor wrap programs were $3.1 billion in Q2, down from $4.1 billion in Q1

Ameriprise Financial (AMP) said late Wednesday that its second-quarter net income rose 44%, to $322 million, or $1.54 per share, versus $224 million, or $0.99 per diluted share, a year ago. Adjusted earnings were $352 million, or $1.69 per share, compared with $254 million, or $1.13 per share, a year ago.

Operating net revenues grew 9% to $2.75 billion, “primarily driven by robust client net inflows, increased client activity and market appreciation, partially offset by the decline in net investment income from low interest rates,” the company says.

Analysts had expected adjusted earnings to be $1.62 per share and revenue to hit $2.77 billion.

Ameriprise’s operating expenses grew 6% to $2.3 billion, mainly due to higher distribution costs from business growth, though general and administrative expenses remaining flat compared to a year ago.

“Ameriprise delivered another quarter of strong financial results,” said Chairman and CEO Jim Cracchiolo (left), in a statement. “Revenues and earnings were up nicely; in fact, our operating return on equity reached an all-time high of 17.9%.

“All of our business segments performed well, most notably Advice and Wealth Management,” Cracchiolo explained. “We’re experiencing good growth in client acquisition and strong client net inflows, which are key drivers of advisor productivity gains. Even with the pressure of low interest rates, we’re delivering meaningful growth in profitability.”

Wealth Management

Revenue in the Advice & Wealth Management unit grew 6% from last quarter and 13% from the prior year to $1.08 billion. The unit accounts for about 40% of Ameriprise’s total revenue.

Pre-tax earnings for the division hit $152 million, a jump of 16% from the second quarter and an increase of 37% from the year-ago period.

Its pre-tax margin was 14.1% in Q2 ’13 vs. 12.0% in Q1 ’13 and 11.6% in Q2 ’12.

The average quarterly amount of fees and commission per advisor (or production) was $110,000, up 6% from the first quarter and 13% from the year-ago period. For the first six months of 2013, production per rep stood at $214,000 vs. $195,000 a year ago.

The total number of financial advisors stands at 9,788 – up slightly from 9,777 on March 31 and down a bit from 9,803 a year ago. The number of franchisee advisors is 7,499, while the headcount for employee reps is 2,289.

Ameriprise says retention levels for these two groups were 91% and 94%, respectively, in the second quarter.

Asset Update

Overall client assets in the advice and wealth-management business were $136.3 billion as of June 30, up 2% from the prior quarter and 19% from a year ago. Total Ameriprise client assets stand at $373.1 billion.

In terms of asset flows, advisor wrap accounts experienced inflows of $3.1 billion in the most-recent period, a decline of 24% from $4.1 billion in Q1 ’13 and an increase of 18% from $2.6 billion in Q2 ’12.

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