01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Ameriprise Financial's 2010 10-K shows a company that rebounded strongly from the 2008-2009 market dislocation, with total net revenues up 28% to $10.0 billiona and net income attributable to Ameriprise Financial up 52% to $1.1 billion (diluted EPS $4.18 vs. $2.95).
Operating net income, which excludes realized gains/losses, integration costs and the consolidation of certain investment entities, rose 53% to $1.1 billionb. Growth was driven by market appreciation, net inflows into wrap accounts and variable annuities, and the April 30, 2010 acquisition of the long-term asset management business of Columbia Management from Bank of America, which pushed total owned, managed and administered assets up 47% to $672.7 billion. Management also reports client retention of 93% and a network of more than 11,400 affiliated financial advisors.
The company is organized into five segments: Advice & Wealth Management (30% of external revenue), Asset Management (23%), Annuities (23%), Protection (20%), and Corporate & Other. The Columbia integration is expected to finish in 2011, with $130c–160 million in total integration costs and $150–190 million in annualized synergies targeted for 2012. Shareholders' equity rose to $10.7 billion, and the board authorized up to $1.5 billion in share repurchases through the 2012 annual meeting, with $927 million remaining at year-end.
The filing also flags material risks. Variable annuity guaranteed benefits remain a sensitivity to equity market declines and interest rates.
The company faces regulatory change under the Dodd-Frank Act, including the abolition of the OTS and the transfer of oversight to the OCC and Federal Reserve. Pending litigation includes the Medical Capital and Provident Shale private placement class actions and arbitrations involving Securities America, with roughly $400 milliond of client investments in default, and the company recorded an additional roughly $40 million legal reserve after year-end.
02—Key points
Key Highlights
- Total net revenues rose 28% to $9.976 billion in 2010 from $7.805 billion in 2009, with operating net revenues up 24% to $9.6 billion.
- Net income attributable to Ameriprise Financial increased 52% to $1.097 billion; diluted EPS was $4.18 versus $2.95 a year earlier.
- Total owned, managed and administered assets reached $672.7 billion, up 47% from $457.8 billion, largely reflecting the Columbia Management acquisition completed April 30, 2010.
- Columbia Management acquisition (about $927 million initial purchase price) is expected to be fully integrated in 2011, with $130–160 million of total integration costs and $150–190 million of annualized synergies targeted for 2012.
- Wrap account assets grew 19% to $112.7 billion on $8.5 billion of net inflows and $9.3 billion of market appreciation; the company's client retention rate is 93%.
- Board authorized up to $1.5 billion in share repurchases through the 2012 annual meeting; $927 million remained available at December 31, 2010, and the quarterly dividend was $0.18 per share.
- Material legal exposure: Medical Capital and Provident Shale private placement litigation and arbitrations involving Securities America (about $400 million of client investments in default), with an additional ~$40 million legal reserve recorded after year-end.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $9.58B$7.54B | +27.1% |
| Operating Expenses | $8.04B$6.48B | +24.2% |
| Operating Income | $1.01B$721.00M | +40.5% |
| Net Income | $1.10B$722.00M | +51.9% |
| EPS (Basic) | $3.84$2.98 | +28.9% |
| EPS (Diluted) | $3.77$2.95 | +27.8% |
| Shares Outstanding (Basic) | 257.40M242.20M | +6.3% |
| Shares Outstanding (Diluted) | 262.30M244.40M | +7.3% |
05—Questions
Frequently Asked Questions
How profitable was Ameriprise Financial in 2010 compared with 2009?
Net income attributable to Ameriprise Financial rose 52% to $1.097 billion in 2010, from $722 million in 2009. Diluted EPS increased to $4.18 from $2.95. Operating net income, which excludes realized gains or losses, integration costs and the consolidation of certain investment entities, grew 53% to $1.148 billion. Growth came from higher asset-based fees as markets recovered, net inflows, and the Columbia Management acquisition.
What drove the increase in revenue and assets under management?
Total net revenues increased 28% to $9.976 billion, led by management and financial advice fees (up 46% to $3.96 billion) and distribution fees (up 20% to $1.71 billion). The S&P 500 daily average rose 20%, and the April 2010 Columbia Management acquisition added substantial managed assets. Managed assets grew 68% to $546.4 billion, while owned assets fell 40% to $22.1 billion.
What are the main risks flagged in the filing?
Key risks include equity market declines and interest rate changes, which affect variable annuity guaranteed benefit liabilities, the value of deferred acquisition costs and asset-based fees. Other risks include credit ratings downgrades, regulatory changes under the Dodd-Frank Act (including the shift of supervision from the OTS to the OCC and Federal Reserve), the reliance on independent advisors and their misconduct, the risk of reduced Rule 12b-1 fees, and pending litigation tied to private placement sales through Securities America.
How is the company returning capital to shareholders?
In 2010 Ameriprise paid $183 million in dividends ($0.71 per share for the year) and repurchased 13.1 million shares at an average price of $43.73, or about $573–597 million in total. The board authorized up to $1.5 billion of repurchases through the 2012 annual meeting, leaving $927 million available at year-end. On February 3, 2011 the board declared a $0.18 quarterly dividend, payable February 25, 2011.
What is the outlook for the Columbia Management integration?
Management expects the integration to be completed in 2011. Total pretax integration costs are estimated at $130–160 million, of which $107 million had been incurred through December 31, 2010. Management has realized about $75 million of gross expense synergies in 2010 and targets annualized synergies of $150–190 million by 2012. The company also states that it expects the integrated business to enhance the scale and performance of its retail mutual fund and institutional asset management operations.
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