AMERIPRISE FINANCIAL SERVICES, INC. (AMP)

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Ameriprise Financial (AMP)

Q4 2012 Earnings Call

January 31, 2013 9:00 am ET

Executives

Alicia Charity

James M. Cracchiolo - Chairman, Chief Executive Officer and Chairman of Executive Committee

Walter S. Berman - Chief Financial Officer and Executive Vice President

Analysts

John M. Nadel - Sterne Agee & Leach Inc., Research Division

Jay Gelb - Barclays Capital, Research Division

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Christopher J. Spahr - Credit Agricole Securities (USA) Inc., Research Division

Jeffrey R. Schuman - Keefe, Bruyette, & Woods, Inc., Research Division

Thomas G. Gallagher - Crédit Suisse AG, Research Division

John A. Hall - Wells Fargo Securities, LLC, Research Division

Suneet L. Kamath - UBS Investment Bank, Research Division

Presentation

Operator

Welcome to the Q4 Year-End Earnings Call. My name is Vanessa and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Alicia Charity. You may begin.

Alicia Charity

Thank you, and good morning. Welcome to Ameriprise Financial’s Fourth Quarter Earnings call. On the call with me today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. Following their remarks, we'll be happy to take your questions.

During the call, you will hear references to various non-GAAP financial measures which we believe provide insight into the company’s operations. Reconciliation of the non-GAAP numbers to the respective GAAP numbers can be found in today’s materials on our website. Some statements that we make on this call may be forward-looking, reflecting management’s expectations about future events and operating plans and performance. These forward-looking statements speak only as of today’s date and involve a number of risks factors and uncertainties. A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in today’s earnings release, our 2012 annual report to shareholders, and our 2012 10-K report. We undertake no obligation to update publicly or to revise these forward-looking statements.

And with that, I'll turn it over to Jim.

James M. Cracchiolo

Good morning, everyone. Thanks for joining us for our fourth quarter earnings discussion. I'll begin by giving you my perspective on the quarter and Walter will cover more of the numbers, then we'd take your questions. Let's get started.

For the quarter on an operating basis, net revenues were up 6% to $2.6 billion. Earnings were $367 million, up 19%, with earnings per share of $1.71, up 31%. And return on equity increased to 16.2%.

Equity market appreciation and increased client activity drove top line growth in the quarter, and we're managing interest-rate headwinds through reengineering initiatives and keeping expenses tight. I feel good about the underlying business fundamentals and our results overall.

There are a few moving pieces impacting earnings that we highlighted and Walter will cover it in more detail.

Results in our Advice & Wealth Management business led the way, it was a very good quarter for the business. In Asset Management, we continue to make progress growing our earnings, while in annuities and protection, the businesses are performing in line with our expectations when you adjust for the items noted. We also continue to benefit from our balance sheet strength and capital management, key points of differentiation for Ameriprise. We devoted $446 million in the quarter to share repurchases and dividends.

Now, let's review our segment performance starting with Advice & Wealth Management where we're generating strong earnings growth and good profitability. For the quarter, revenues were up 11%, reflecting both higher asset levels and a pickup in client activity. Total retail client assets of $353 billion were a new high, aided by market appreciation and very strong client net inflows.

Wrap net inflows of $2.1 billion were up more than 50% from a year ago. In each of the past 4 quarters, we generated strong wrap net inflows with $9.6 billion of total inflows for the year, which helped raise our wrap assets under management to $125 billion.

Clients also added to their cash positions, which may have reflected the uncertainty in the marketplace with the election and potential tax changes. At year end, brokerage cash balances reached $19 billion, up 20% from the third quarter. As clients gain confidence, I would expect they will reallocate a portion of these assets to other products in 2013.

In addition to strong client flows, we continue to track experienced and productive advisors to Ameriprise. In the quarter, 68 productive advisors joined the firm. In fact, the average productivity of the advisors who joined us in the quarter was about 40% higher than those who joined us in the first quarter of 2011.

In terms of total advisor productivity, operating net revenue per advisor increased by double digits from a year ago. We continue to invest in our brand in the fourth quarter. As we enter 2013, we just launched a new series of advertisements with Tommy Lee Jones that speak about Ameriprise and what consumers need to do to create a confident retirement.

The expenses of our ad campaign are consistent with last year and are up a bit sequentially from the third quarter, as we told you. We offset the fourth quarter advertising expenses by reducing expenses as part of our conversion to our new brokerage platform, and that expense improvement will continue through the first part of the year. Overall, we're managing expenses tightly and we'll continue to do so.

In fact, I should note that the results we delivered in the quarter reflected lower revenue in earnings because of our decision to discontinue our banking operations. That work is now complete. In fact, I want to inform you that we learned yesterday afternoon that we have been granted regulatory approval to transition the bank to a national trust institution.

Read the rest of this transcript for free on seekingalpha.com