AMERIPRISE FINANCIAL SERVICES, INC. (AMP)

AMP 
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Ameriprise Financial (AMP)

Q4 2013 Earnings Call

February 05, 2014 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

Alexander Blostein - Goldman Sachs Group Inc., Research Division

Erik James Bass - Citigroup Inc, Research Division

Presentation

Operator

Welcome to the Fourth Quarter 2013 and Year End Earnings Call. My name is Ellen, 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. Ms. 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 will 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 their 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'll turn it over to Jim.

James M. Cracchiolo

Good morning, and thanks for joining us for our fourth quarter earnings call. Ameriprise achieved significant growth across many dimensions with a strong fourth quarter capping off an excellent year. As you saw, yesterday we reported revenue growth of 8% for the quarter and 7% for the year on an operating basis. Operating earnings per diluted share were up 9% for the quarter and 26% for the year. Our 2 growth businesses performed strongly. Fourth quarter pretax operating earnings in Advice & Wealth Management and Asset Management were $356 million, up 37% from a year ago. And for the year, we generated $1.3 billion in pretax operating earnings from these 2 businesses, up a very strong 31%. Because of the significant growth we've experienced in these businesses, they now represent 56% of our full year total business segment pretax operating earnings, and we're looking to take that number higher.

This morning, I'd like to cover how I'm feeling about the business, as well as my perspective on the quarter and the year overall. Walter will discuss the numbers in more detail and then we'll take your questions.

There are 4 highlights that I want you to take away. We're seeing good growth and profitability. Our results and progress demonstrate that we're executing our strategy, growing strongly and building off a solid foundation. Activity and assets continued to increase. Assets under management administration hit a record $771 billion. We feel good about our ability to capitalize on our opportunities in the financial services marketplace, and we've demonstrated that we can continue to invest while maintaining excellent expense levels. Our financial foundation remains one of the best in the industry. It provides important strategic flexibility and enables us to generate strong returns. In terms of our level of shareholder and capital return, we're at the higher end of the scale for a large cap financial firm. We have the capital strength, free cash flow and ability to return the majority of our operating earnings to shareholders annually.

During the quarter, we returned $475 million to shareholders through share repurchases and dividends. And for the year, we've returned $1.9 billion or 130% of our full year operating earnings. With strong business results in capital return, we delivered another record high operating return on equity, excluding AOCI of 19.7%, setting ourselves apart from many of our competitors.

Let's talk about our segments beginning with Advice & Wealth Management. Advice & Wealth had another terrific quarter. We continue to build on our reputation as the company with the right expertise to help clients feel confident about their retirement and financial future, as well as a place where productive experienced advisors can grow even stronger practices. At the same time, we're delivering excellent financial results. Revenues, earnings, client assets and advisor productivity all grew by double digits. Operating net revenue was up 12% to $1.1 billion reflecting good fundamentals and positive markets. Clients continue to return to the markets and we're bringing in good client flows. Total client assets grew 16% to $409 billion, aided by a record year for our wrap business. Wrap net inflows were up 38% with clients investing another $2.8 billion during the quarter. For the year, we were north of $13 billion of net inflows, which helped grow the platform to more than $153 billion. Our advisors are very engaged and productivity continues to grow nicely. Adjusting for the loss of bank earnings per advisor productivity increased 14% from good asset growth and strong transactional activity, generating a yearly rate of $440,000 per advisor. We continue to effectively manage our overall expense base well. Walter will give you the details, but margin grew, again, even after adjusting for the bank and with lower spread revenues on our large cash business.

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