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Ameriprise Financial (AMP)

Q3 2012 Earnings Call

October 25, 2012 9:00 AM ET


Alicia Charity - SVP and IR

Jim Cracchiolo - Chairman and CEO

Walter Berman - EVP and CFO


Jay Gelb - Barclays Capital

Eric Berg - RBC Capital Markets

Suneet Kamath - UBS

Thomas Gallagher - Credit Suisse Securities

Alex Blostein - Goldman Sachs

Jeff Schuman - KBW

John Hall - Wells Fargo Securities

John Nadel - Sterne Agee



Welcome to the third quarter 2012 earnings call. My name is Don and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. 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 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’ll 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 underlying performance of the company’s operations. Reconciliation of the non-GAAP numbers to the 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 the 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 2011 annual report to shareholders or our 2011 10-K report. We undertake no obligation to update publicly or to revise these forward-looking statements.

As a reminder, we will be conducting our annual meeting with the financial community on November 14th at 9:00 AM. Meeting details can be found on our websites.

Now let me turn it over to Jim.

Jim Cracchiolo

Good morning everyone. Thanks for joining us for our third quarter earnings discussion. I’ll begin by giving you a bit of my perspective on our results. Walter will cover more of the numbers and then we’ll take your questions.

Overall, we had a pretty good quarter. We delivered strong results in our advisory business including very good retail client net inflows. We’re generating modest revenue growth even after the impact of low interest rates.

At the same time we’re managing expenses appropriately and delivering double digit growth in operating EPS. We continue to make good progress executing our strategy in our business metrics or sounds. We’re expanding our advisory client base. Our advisor reports a strong in growing.

Assets are up across the firm and we’re improving asset management flows in maintaining good annuity in insurance books. Even with the benefit of rising equity markets over the past year, we continue to manage expenses appropriately given interest rate pressure.

Earlier this year, we stepped up our reengineering efforts; we’re seeing the benefits now and continue to invest for growth. Overall, Ameriprise continues to generate strong returns for our shareholders an important differentiator in today’s environment.

Yesterday we announced a $0.45 per share dividend representing a 29% or $0.10 per share increase, the 5th increase since early 2010, in fact, we raised our dividend a 165% over that period. Today our employed dividend yield is above 3% which puts us at the high end of the category for SMP financials.

We also repurchased $340 million worth of our stock this quarter, totaling $1 billion so far this year. And we announced a new $2 billion share repurchased program, as we accelerated our buybacks over the past two years. Through the third quarter, we returned a 138% of our operating earnings to shareholders.

Now let me talk about our advice and wealth management segment performance. Adjusting for investment income a year ago, we were able to grow underlying revenues by 3% and underlying earnings by 8% total retail client assets were up 18% to $345 billion aided by strong client inflows and equity market appreciation.

For example, net inflows into wrap accounts more than doubled from a year ago. As I mentioned, our reengineering is helping to fund our investment agenda. Our new brokerage platform was one of our largest technology undertaking since spin off.

We successfully moved our 10,000 advisors and more than 2.5 million client accounts to the new system. This last conversion completes our transition efforts. Now we’re focused on helping our advisors access the benefits of the new system and we’re hearing good feedback from them.

You’ll see the related expenses decline accordingly in the coming quarters. You may have seen we're back on the air with our award winning advertising campaign featuring Tommy Lee Jones. We feel that it is the right time to promote Ameriprise and strengthen consumers and advisors understanding of value proposition.

We expect advertising expenses in the fourth quarter will increase from the third but will remain relatively consistent with last year's level. I continue to hear positive feedback from our advisors. We got in how they feel about the company and the investments we’re making to help grow their businesses.

Retention and satisfaction rates for our tenure advisors are excellent. In regard to experience advisory recruit, our efforts here continue at a steady pace a 106 experienced advisors moved their business to the Ameriprise in the quarter.

The advisors joining Ameriprise or on average three times more productive that advisors through leave. Our plan is to continue to grow our advisor base gradually focus on adding productive advisors and maintaining higher retention.

In terms of productivity, operating net revenue per advisor was up slightly. We're seen good fee pay base business growth and increasing average assets per advisor. But low rates are lower transactional volumes continue to pressure revenues.

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