AMERIPRISE FINANCIAL SERVICES, INC. (AMP)

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Ameriprise Financial, Inc (AMP)

Q1 2014 Earnings Conference Call

April 29, 2014 09:00 ET

Executives

Alicia Charity - IR

Walter Berman - CFO

Analysts

Suneet Kamath - UBS

Steve Fullerton - Citi

Nigel Dally - Morgan Stanley

Alex Blostein - Goldman Sachs

Presentation

Operator

Welcome to the Q1, 2014 Earnings Call. My name is Don and I will be the operator for today’s call. (Operator Instructions). 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 first quarter earnings call. Unfortunately Jim Cracchiolo, our Chairman and CEO is not feeling well and is unable to join today’s call. Walter Berman, Chief Financial Officer will review financial performance in the quarter and then take your questions.

As a reminder we will be hosting our financial community meeting on May 14th at 9 A.M. The meeting information and registration are on our website. 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 2013 Annual Report to Shareholders, and our 2013 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 Walter.

Walter Berman

Thank you Alicia. Jim sends his apologizes and looks forward to providing you with an update on our strategy and business growth initiatives in a few weeks at our Investor Day. I will touch business highlights and focus on the financial results. Ameriprise delivered excellent financial results again this quarter. Business leading indicators remain strong with solid revenue growth and disciplined expense management. Assets under management and administration increased 11% to 783 billion reflecting strong Advice client flows and positive markets.

Let’s start with operating net growth on page 3, in total operating net revenues grew 8% led by strong growth in Advice and Wealth Management up 13% and asset management up 8% versus last year. This growth coupled with effective expense management resulted in a record 15.8% margin in AWM and a 39% margin in asset management. Together Advice and Wealth Management and asset management operating earnings grew 36% from last year and now account for 61% of earnings representing substantial progress in shifting our business mix.

Turning to slide 4, operating return on equity reached an all-time high of 20.8% up over 400 basis points from last year.

Operating earnings per share reached a new record level of $2.04 up a strong 28%. The combination of our strong financial results and the level of free cash generation is a strong point of differentiation for Ameriprise that is creating clear shareholder value.

Moving to slide 5, we continue to deliver excellent metrics and financial results in Advice and Wealth Management with pretax operating earnings up 39%. This was driven by asset based activity which was up 18% and transactional based activity up 6%. Clients are engaged in activity increase again this quarter was exceptionally strong wrap net inflows.

After a record year in 2013 wrap net inflows hit another record level in quarter one of $4.2 billion. Total wrap assets are now a 159 billion up 19% from a year ago and total client assets were up 12% to a 418 billion. Importantly our advisor force remains strong and retention and satisfaction rates remain high.

We continue to recruit, good productivity people and brought in another 76 experienced advisors in the first quarter. We have also seen significant margin expansion which reached a new record high of 15.8% in the quarter up 300 basis points from last year. We delivered the strong business and financial performance in the face of an $8 million headwind from low interest rates.

The spread earned on the 19.3 billion or brokerage cash decreased to 16 basis points from 37 basis points a year ago. At the current level the downside risk from continued to low short term interest rates is marginal. That said there is substantial upside opportunities associated with an increase in short term interest rates. Overall it was another excellent quarter for AWM.

We delivered good growth and profitability in both the employee and franchise channels. The business is consistently delivering the results we indicated that we could achieve.

Turning to asset management on slide 6, revenues increased to 807 million from 746 million last year, primarily from growth in assets under management. Assets under management increased 8% from market appreciation offset by net outflows which I will cover in more detail in a moment.

We also continued to manage expenses tightly. These have resulted in strong earnings growth of 33% to a 183 million and margin expansion to 39%. In the quarter we had a total of 3.9 billion of net outflows. Outflows were concentrated in two areas, first, we had 1.8 billion of outflows from legacy relationships including a legacy insurance mandate at Threadneedle and a former parent affiliated distribution relationship at Columbia.

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