Ameriprise said that its first-quarter net income was $241 million, or $0.94 a share, vs. net income of $226 million, or $0.85 a share, a year ago. These results, which represent a 6% gain in net income and an 11% jump in EPS, include an after-tax charge of $77 million, or $0.30 a share, for a previously disclosed legal matter at Securities America.
Excluding the charge, the company had EPS of $1.35. Analysts had expected the company to earn $1.33 per share on sales of $2.7 billion. The company’s actual revenue grew 22% to $2.6 billion in the first quarter of 2011 from $2.1 billion last year.
In disclosing this after-tax charge, management at Ameriprise also said it “has decided to identify an appropriate buyer for [Securities America]. A sale would allow SA to focus on growth opportunities in the independent channel and would allow Ameriprise to devote its resources to the Ameriprise branded-advisor business.”
The sale of Securities America came down to a decision to eliminate “excessive risk” that did not bring the company enough “related reward,” said Chip Roame, head of Tiburon Strategic Advisors in Northern California, in an interview. “Ameriprise is a large company primarily involved in three businesses … all of which have far higher margins than an independent broker-dealer,” he explained.
On April 15, 2011, SAI and its holding company, Securities America Financial Corp., entered into settlement agreements related to the sale of private placement securities issued by Medical Capital and Provident Royalties that resulted in a $118 million pre-tax charge in the first quarter of 2011, according to Ameriprise. The $118 million charge was made in addition to a $40 million pre-tax charge in the fourth quarter of 2010.
“The [Ameriprise] sale process will not affect management's commitment to completion of the settlement on its current terms,” the company said in its first-quarter earnings release.
“We appreciate the many years Ameriprise has committed to our independent business model. Their willingness to provide the financial means for the Medical Capital and Provident Royalties settlement leaves Securities America in a strong financial position to continue operations with no disruptions,” said Janine Wertheim, spokeswoman and chief marketing officer for Securities America, in a statement.
“We believe there are many options that will afford enhanced opportunities and benefits to our advisors and employees,” Werthein added. “Our record first-quarter results make this an opportune time for an ownership change.”
Total branded retail client assets in the company’s advice-and-wealth-management unit grew 13% year-over-year to $315 billion, reflecting market appreciation and strong retail client net inflows, Ameriprise said. AUM per advisor is roughly $32.6 million.
Net client inflows totalled $2.75 billion in the first quarter of 2011 or $285,000 per rep.
Ameriprise advisor productivity, measured as operating net revenue per advisor, was $95,000 in the quarter, a 23% increase compared to a year ago. This represents about $380,000 in annualized fees and commissions.
“Growth was primarily driven by improved client activity and increased assets under management from market appreciation and retail client net inflows,” the company said in a statement.