AMERIPRISE FINANCIAL SERVICES, INC. (AMP)

AMP 
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Ameriprise Financial, Inc. (AMP)

Q2 2013 Earnings Call

July 25, 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

Suneet L. Kamath - UBS Investment Bank, Research Division

Erik James Bass - Citigroup Inc, Research Division

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Jay Gelb - Barclays Capital, Research Division

Thomas G. Gallagher - Crédit Suisse AG, Research Division

Eric N. Berg - RBC Capital Markets, LLC, Research Division

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

Presentation

Operator

Welcome to the second quarter 2013 earnings call. My name is Larisa and I will be your operator for today's call. [Operator Instructions] Please note this conference is being recorded. Now I'd like to turn the call over to Alicia Charity. Alicia, you may begin.

Alicia Charity

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

During the call, you will hear reference to various non-GAAP financial measures, which we believe provide insight into the company's operations. Reconciliation of non-GAAP numbers to their 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 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'll turn it over to Jim.

James M. Cracchiolo

Good morning and thanks for joining us for our second quarter earnings call. I'll provide my perspective on our results in the business. Walter will review the numbers more fully, and then we'll take your questions.

Yesterday afternoon, we reported strong second quarter earnings. We're making significant progress across the firm and we delivered record results in our Advice & Wealth Management business.

In terms of the economic environment that we've been operating in, U.S. and European equity markets moved around quite a bit during the quarter. They rose significantly in the early part of the quarter before hitting a rough patch in June and have since come back. Investments are beginning to get back into the markets and the economy is on more stable ground. The bond market backed up a bit increasing long-term interest rates. However, short-term interest rates remain at an all-time low.

Overall, I'm pleased with how Ameriprise is performing. We're moving forward with purpose and executing our consistent strategy.

Walter will discuss the numbers in detail, but our financial results demonstrate a strong quarter. On an operating basis, net revenues grew to $2.7 billion from significant growth in our fee-based businesses and a pickup in client and advisor activity. Our earnings were $352 million, with diluted earnings per share of $1.69. And return on equity, excluding AOCI reached a new level, increasing to 17.9%, which is an all-time high for us.

In addition, our assets under management and administration increased to $703 billion.

Maintaining an excellent financial foundation is core to how we operate the company. We continue to demonstrate the strength of our capital position and ability to generate significant free cash flow to return to shareholders. During the quarter, we returned $488 million to shareholders through share repurchases and dividends. Over the last 4 quarters, we returned 134% of our operating earnings to shareholders. As we said, we intend to return the majority of our earnings to our shareholders, annually.

With that, let's talk about our Advice & Wealth Management performance. As I mentioned at the start, Advice & Wealth Management had excellent financial results, even after the banking last year and the pressure from low interest rates. Operating net revenues increased 13% to $1.1 billion, driven by significant retail client net inflows, more client activity and market growth.

Excluding former bank operations in 2012, operating net revenues increased 17% and operating margin increased to 14.1% due to the growth in productivity and our expense management efforts.

We also had very good client flows and asset growth. Ameriprise advisor client assets grew by 13% to $373 billion because of strong net inflows, good results in client acquisition and equity market appreciation. Client activity continued to increase and wrap net inflows were up 18% to more than $3 billion. Advisor productivity is also up nicely, with operating net revenue per advisor, excluding former bank operations growing 17%.

Importantly, our advisor retention remains high. And in terms of experienced advisory recruiting, we saw a meaningful improvement in bringing in another 88 experienced advisors in what was generally a slower recruiting quarter for the industry. I'm pleased with both the number and the quality of advisors joining our firm. We're building on our leadership presence in the retirement space, and driving advisor efficiency through our tools and capabilities.

During the quarter, we formally launched our exclusive Confident Retirement approach, which helps clients to feel more confident about their retirement by addressing all of their needs comprehensively. Our advisors say it makes difficult conversations easier and helps to deepen relationships. We're putting a concerted effort towards implementing this program more broadly over the next 18 months. This year is about continuing to educate and engage advisors through field training and focus groups so they can utilize the Confident Retirement approach in their practices.

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