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Ameriprise Financial (AMP)

Q3 2013 Earnings Call

October 30, 2013 9:00 am ET


Alicia Charity

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

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


Alexander Blostein - Goldman Sachs Group Inc., Research Division

Suneet L. Kamath - UBS Investment Bank, Research Division

David Motemaden



Welcome to the Ameriprise Financial Third Quarter 2013 Earnings Call. My name is Paulette, 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 Third 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 will be happy to take your questions.

During the call, you will hear references to various non-GAAP financial measures, which we believe provides insight into the company's operations. Reconciliation of the non-GAAP numbers to the respective GAAP numbers can be found in today’s materials that are 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 make 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 third quarter earnings call. I'll begin with my perspective on what was a strong quarter for Ameriprise and share how I'm feeling about the business. Walter will discuss the numbers in more detail, and then we'll take your questions.

As you saw yesterday, we reported record third quarter results with operating earnings at a strong 36%. I'm feeling good about how Ameriprise is positioned and the progress we're making. Activity is picking up, assets are up across the firm and we're maintaining expense levels as we continue to invest for growth.

Our Wealth Management business had another terrific quarter. And our assets under management and administration increased 8% to $735 billion, reflecting good advisor client flows and market appreciation.

Our capital and financial foundation, essential to our ability to grow and to navigate the environment remains in great shape. We have the capital strength, free cash flow and ability to return the majority of our operating earnings to shareholders annually, which we will continue to do. During the quarter, we returned $475 million to shareholders through share repurchases and dividends. Over the last 4 quarters, we returned 129% of our operating earnings to shareholders. With our strong earnings and capital return, we delivered a record high operating return on equity of 19.4% and we're moving forward on our path with purpose, executing the strategy we regularly discussed with you and achieving the returns that we've targeted.

Let's talk about our segments beginning with Advice & Wealth Management. As I mentioned, our AWM business is performing very well. Our strategy is working. We're continuing the progress we've made in delivering excellent financial results with room to grow. Operating net revenue is up 12% to $1.1 billion, and that's including the weight of low interest rates in our decision to exit the banking business.

Client and advisors are engaged and we're bringing in good client flows. As an example, this is the third consecutive quarter that we've seen at least $3 billion come in through our RAP program, which is on pace for a record year. Total client assets are up 13% to $389 billion. Our advisors are increasingly productive. Adjusting for the bank, per advisor productivity increased 16% from good asset growth and strong transactional activity. We continue to manage our overall expense base well. Margins grew nicely to 14.2%, close to a 200-basis-point improvement from a year ago, even after the loss of the bank earnings and lowest spread revenues on our large cash business. We're focused on what we believe are significant opportunities to strengthen our position, drive productivity and improve efficiencies as we help advisors use the resources and the capabilities that we have invested in for them.

Our priority is to continue to bring in new clients and assets and we're energized about how our Confident Retirement approach can help do that. Our advisors are telling us how effective it is and simplifying the conversation with clients and prospects to help them better understand what they need to think about for a secure and confident retirement. We're seeing good results. Our latest surveys show very high levels of client and advisor satisfaction, confidence and value provided. Our goal is to engage even more of our advisors through field training to take advantage of the Confident Retirement approach in their practices. And we want to continue to attract new people, both clients and experienced advisors to Ameriprise.

In terms of our brand and advertising, we're working with Tommy Lee Jones again, because we like the way he conveys our story and consumers and advisors have responded well. We're currently filming new ads that you'll see early next year. We're also helping advisors benefit from the investments we've made, included in technology with the brokerage platform and our e-tools and online. Our advisors are finding that our technology platform helps them increase efficiency and drive productivity.

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