AMERIPRISE FINANCIAL SERVICES, INC. (AMP)

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Ameriprise Financial (AMP)

Q1 2013 Earnings Call

April 23, 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

Erik James Bass - Citigroup Inc, Research Division

Nigel P. Dally - Morgan Stanley, Research Division

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Suneet L. Kamath - UBS Investment Bank, Research Division

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

Eric N. Berg - RBC Capital Markets, LLC, 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

Presentation

Operator

Welcome to the first quarter 2013 earnings call. My name is Lorraine, 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 Ms. Alicia Charity. Ms. Charity, you may begin.

Alicia Charity

Thank you, and good morning. Welcome to Ameriprise Financial's first 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 various references to 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 available 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 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 take no obligation to update publicly or revise these forward-looking statements.

And with that, I will turn it over to Jim.

James M. Cracchiolo

Good morning, and thanks for joining us today. I'm going to provide my perspective on the business. Walter will follow my remarks with a review of our results, and then we'll take your questions.

Yesterday afternoon, we reported good first quarter earnings. Overall, Ameriprise is performing well. Assets are up across the firm and we're generating very strong results in our Wealth Management business. We're executing on our strategy, investing in our growth areas and strengthening our position in our core businesses.

In terms of the economic environment, I feel better than I did a year ago. Equity markets are stronger in the United States, and the economy is on a more stable ground and growing slowly.

Across Europe, the markets are a bit weaker, consistent with the economic environment there. However, we're managing the headwinds caused by very low interest rates, although this pressure has been offset by gains in the equity markets.

Walter will take you through the numbers in detail, but our financial results reflect a good start to the year.

On an operating basis, net revenues grew to $2.6 billion, due to strong growth in our fee-based businesses, offsetting the negative impact from rates in the loss of the bank-related revenues.

Our earnings were $338 million, with earnings per share of $1.59. And return on equity increased to 16.4%, which is an all-time high for us. We expect to see ROE continue to improve over the next few quarters.

In addition, our assets under management and administration grew to a record high of $708 billion.

We're maintaining our strong capital position, generating good free cash flow and increasing our capital return to shareholders.

During the quarter, we returned $454 million to shareholders, including repurchasing $360 million of our common stock.

As we've said, we intend to return the majority of our earnings to our shareholders annually, including the capital freed up from the bank. And we plan to do so in a balanced way, based on the environment and the share price.

As you saw in the earnings release, we announced that we're increasing our dividend another 15%. With regard to capital, we're focused on our core businesses and returning capital to shareholders in a prudent manner. We often look at acquisition opportunities and how they can complement our business. But at this point, we don't see any large properties in the marketplace that meet our acquisition criteria.

With that, let me turn to the business. Our highlights for the first quarter reflect our progress, opportunities for further growth and our continued focus on areas of improvement.

Advice & Wealth Management is producing excellent results as we continue our growth from 2012 into the first quarter.

Operating net revenues increased 7% to $1 billion, driven by record retail client net inflows and market appreciation.

Operating net revenues increased 10%, excluding former banking operations, and operating PTI increased 39%, and adjusted for the bank, it would have been 66%.

Operating margin increased to 12.9% due to the increase in productivity, our effective expense management and savings we targeted from our reduced technology spend. In fact, the 12.9% number included both the impact of lower interest rates on cash balances from a year ago, as well as the loss of the bank.

Ameriprise advisor client assets grew by 11% to $372 billion, driven by strong net inflows and equity market appreciation. Client activity continue to pick up with exceptionally strong wrap net inflows, growing to $4.1 billion, which is 41% higher than a year ago. Productivity is also up nicely, with operating net revenue per advisor, excluding former bank operations, growing 9%.

Importantly, our advisor force remains strong, retention and satisfaction rates are high. We continue to recruit good, productive and experienced advisors. Because of better markets in the year-end tax season, recruiting has slowed in the first quarter, which is consistent with others in the industry.

We do, however, see a good opportunity to continue to bring in more quality advisors this year. We're investing in our growth areas, building our brand through advertising, and increasing efficiency through the tools and technologies we provide advisors.

The Ameriprise name was highly visible in the first quarter. We launched the next phase of our national advertising campaign, with spots airing during high-profile sports and entertainment programming and online video ads.

In fact, our ad awareness has doubled with our campaign, so we're seeing terrific results there. We also released our latest retirement survey, a continuation of our Retirement Check-In series to provide research and support to our advisors and demonstrate our position as a retirement thought leader in the industry.

With regard to our technology platform, which includes our new brokerage platform, as well as all of our online capabilities, we're now focused on helping advisors leverage the benefits of the full suite. This is a priority for us over the next 18 to 24 months.

We invested in this system because we believe it can help our advisors grow productivity, and when utilized fully, it will lower costs and enhance our overall client and advisor experience. One of our largest opportunities for growth is in the retirement space, where we're already a leader. We're focused on serving the consumers' overall retirement goals. In fact, we brought out a more consumer-friendly approach to enhance our go-to-market positioning. We call it our Confident Retirement approach. It has tested very well with our advisors and consumers, and we've just begun to roll it out across our system. Advisors who are using it are finding it to be a very effective way of deepening current relationships and developing new ones. We're putting a concerted effort towards implementing this more broadly over the next 2 years.

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