Ameriprise Financial Reports Second Quarter 2018 Results
Jul. 24, 2018
MINNEAPOLIS--(BUSINESS WIRE)--Jul 24, 2018--Ameriprise Financial, Inc. (NYSE: AMP) today reported second quarter 2018 net income of $462 million, up 18 percent compared to a year ago, or $3.10 per diluted share, up 24 percent. Adjusted operating earnings were $536 million, up 22 percent compared to a year ago, with adjusted operating earnings per diluted share of $3.60, up 29 percent.
“Ameriprise had a strong second quarter and a record first half of the year for financial results,” said Jim Cracchiolo, chairman and chief executive officer. “In the quarter, we grew earnings per share by 29 percent and delivered a return on equity of 31.1 percent. We continue to generate strong free cash flow that we invest in the business and return to shareholders at a high level.”
“We remain focused on delivering an exceptional client-advisor experience and serving more clients in personal relationships. Ameriprise was recognized as number one in trust and forgiveness in the industry, and we continue to invest to further our leading advice-based value proposition.”
GAAP Results – Second quarter Net revenues of $3.2 billion increased 6 percent, or $184 million, from a year ago primarily due to strong net revenue growth in Advice & Wealth Management from growth in client assets.
Expenses of $2.6 billion increased 6 percent compared to a year ago reflecting increased distribution expense from higher advisor productivity.
Adjusted Operating Results – Second quarter Adjusted operating net revenues increased 6 percent to $3.1 billion. Advice & Wealth Management net revenues increased 12 percent driven by growth in client assets from continued strength in client net inflows and market appreciation.
Adjusted operating expenses of $2.5 billion increased 5 percent reflecting increased distribution expense from higher advisor productivity. General and administrative expense increased 2 percent reflecting ongoing expense discipline and growth investments.
The adjusted operating effective tax rate in the quarter was 16.5 percent compared to 24.5 percent a year ago. The lower effective tax rate reflects the reduction in the federal income tax rate. The company estimates that its full year 2018 adjusted operating effective tax rate will be approximately 17 percent.
Second Quarter 2018 Highlights
Ameriprise delivered strong financial results and excess capital, while returning $532 million to shareholdersSecond quarter financial results demonstrated continued strong growth in profitability and effective capital management that delivered a 22 percent increase in adjusted operating earnings, a 29 percent increase in adjusted operating EPS and a 590 basis point increase in adjusted operating return on equity. Ameriprise returned nearly 100 percent of adjusted operating earnings to shareholders, reflecting strong balance sheet fundamentals, substantial free cash flow generation and excellent risk management discipline. The company repurchased 2.9 million shares of common stock for $400 million and paid $132 million in quarterly dividends, the 25 th consecutive quarter returning over $400 million to shareholders through share repurchases and dividends. Excess capital was $1.4 billion, with an RBC ratio of 532 percent, and a total of $470 million in dividends were paid from subsidiaries to the holding company during the quarter.
The firm’s comprehensive and personal client focus, combined with its broad solution set, resulted in strong client flows and asset growthAmeriprise assets under management and administration increased 7 percent to $891 billion, reflecting ongoing strength in Ameriprise advisor client net inflows. Ameriprise retail client assets grew 10 percent to $566 billion, an all-time high. Client demand for fee-based investment advisory (wrap) products remains strong with net inflows of $5.3 billion in the quarter – the fifth consecutive quarter of wrap net inflows over $4 billion. Wrap assets grew to $259 billion, one of the largest platforms in the industry. Advisor productivity increased 12 percent to $599,000 per advisor on a trailing 12-month basis after normalizing for the net impact from eliminating 12b-1 fees in advisory accounts. Steady growth in advisor productivity reflects our comprehensive, advice-based approach to serving clients and strong advisor retention, all while advisors shifted their practices to adjust to the elimination of 12b-1 fees in advisory accounts. Columbia Threadneedle investment performance in retail and institutional equity, fixed income and multi-asset portfolios and strategies remain strong. At quarter end, the company had 110 four- and five-star Morningstar-rated funds. Net outflows at Columbia Threadneedle improved by $7.0 billion year-over-year and $5.9 billion sequentially. Variable annuity cash sales increased 16 percent, with nearly 30 percent of sales in products without living benefit guarantees.
Ameriprise continued to invest to drive productivity, business growth and client satisfactionThe company continues to make multi-year investments to further develop its digital advice position and streamline the client-advisor experience, including big data diagnostic capabilities, enhancing relationship management tools and exploring adding banking capabilities. Ameriprise continues to invest in expanding its distribution network by adding experienced advisors with strong productivity. 76 experienced advisors joined the firm during the quarter. Columbia Threadneedle is executing its plans to expand product offerings and distribution in key Continental European markets to complement its strength in the U.K.
Values-based, client-focused firmDuring the quarter, Ameriprise was recognized in the 2018 Temkin Group rankings as a leader in the following categories: #1 in trust in the investment firm category, up from #2 last year#1 in consumer forgiveness in the investment firm category for the second year in a row Eight Ameriprise financial advisors were named to Barron’s® 2018 Top 100 Women Financial Advisors list. The annual ranking reflects assets under management, revenue the advisors generate for their firms and the quality of their practices. On June 15, more than 4,000 Ameriprise employees, advisors and clients worked to provide food for families and individuals in need. The volunteers prepared, sorted and served meals at over 200 company-sponsored events across the U.S. to help the 41 million Americans, including nearly 13 million children and five million seniors, struggling with hunger. The Minneapolis-St. Paul Business Journal recognized Ameriprise as a “Best Place to Work” for the ninth consecutive year.
Advice & Wealth Management pretax adjusted operating earnings increased 20 percent to $350 million driven by asset growth and higher earnings on cash balances. Advice & Wealth Management represented 50 percent of the company’s pretax adjusted operating earnings. Pretax adjusted operating margin reached a new high of 22.7 percent, up 160 basis points from a year ago.
Adjusted operating net revenues increased 12 percent to $1.5 billion, reflecting strong client activity, higher earnings on cash balances and market appreciation.
Adjusted operating expenses increased 10 percent to $1.2 billion primarily from higher distribution expenses related to growth in client assets. General and administrative expenses were up 8 percent compared to a year ago, approximately half of which were related to investments for business growth.
Total retail client assets increased 10 percent to $566 billion driven by client net inflows, client acquisition and market appreciation. Wrap net inflows were $5.3 billion and total wrap assets increased 16 percent to $259 billion. Client brokerage cash balances were $24.5 billion, down slightly from a year ago as clients allocated cash to other investments.
Adjusted operating net revenue per advisor on a trailing 12-month basis increased 12 percent to $599,000 after normalizing for the net impact from eliminating 12b-1 fees in advisory accounts. Total advisors increased to 9,906, with 76 experienced advisors moving their practices to Ameriprise in the quarter and advisor retention remained strong.
Asset Management pretax adjusted operating earnings increased 4 percent to $183 million, reflecting market appreciation and disciplined expense management, partially offset by the cumulative impact of net outflows, increased investments for business growth and higher regulatory related expense. Results in the prior year quarter included higher CLO fees. Second quarter net pretax adjusted operating margin grew to 38.0 percent from 37.7 percent a year ago.
Adjusted operating net revenues grew 1 percent to $755 million driven by asset growth from market appreciation and the Lionstone acquisition, partially offset by the cumulative impact of net outflows.
Adjusted operating expenses of $572 million were flat compared to a year ago, reflecting lower distribution-related expenses and well-managed general and administrative expenses. General and administrative expense increased 2 percent and included the Lionstone acquisition and investment for growth and higher regulatory expense.
AUM increased 2 percent to $482 billion. Total net outflows in the quarter improved by $7.0 billion to $1.7 billion of net outflows compared to $8.7 billion of net outflows a year ago. Flows in the prior year quarter included elevated former parent-related outflows. Flows in the current quarter reflect improved global retail flows and favorable rebalances in model portfolios. Third party institutional net outflows were $1.5 billion, primarily from $1.1 billion of CLO redemptions.
Annuities pretax adjusted operating earnings were $129 million compared to $142 million a year ago.
Variable annuity earnings of $117 million were lower primarily from a decline in the benefit from the market impact on DAC and DSIC compared to the year ago period, as well as higher sales. Variable annuity cash sales continued to have positive momentum, up 16 percent, with nearly 30 percent of sales without living benefit features. Variable annuity account balances increased 1 percent to $78 billion from market appreciation, partially offset by net outflows. Variable annuity net amount at risk as a percent of account values was 0.5 percent for living benefits and 0.2 percent for death benefits, which is one of the lowest among major variable annuity writers.
Fixed annuity adjusted operating earnings were $12 million reflecting continued spread compression from the extended period of low interest rates and lower account balances. Account balances declined 7 percent from limited new product sales and continued lapses.
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