10-QPeriod: Q2 FY2012

AMERIPRISE FINANCIAL INC Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 8, 2012For Securities:AMP

Summary

Ameriprise Financial, Inc. reported a decrease in net income and earnings per diluted share for the second quarter and first half of 2012 compared to the prior year periods. Total net revenues declined due to lower investment income, impacted by low interest rates and market volatility, although this was partially offset by growth in fee-based revenues. The company experienced a significant increase in its effective tax rate due to a $32 million correction of a tax-related item stemming from securities lending activities. Management is focused on strengthening its position in financial planning and wealth management, with a notable announcement regarding the planned transition of its federal savings bank subsidiary to a non-depository national trust bank by year-end 2012. Key business segments, including Advice & Wealth Management, Asset Management, Annuities, and Protection, all saw shifts in revenue and profitability. Advice & Wealth Management benefited from strong wrap account asset growth, while Asset Management faced challenges from declining AUM. The Annuities segment experienced lower net investment income due to low interest rates, and the Protection segment showed growth driven by auto and home insurance. The company maintained a solid liquidity position and continued its share repurchase program.

Financial Highlights

33 data points
Beta

Revenue

$2.52B

Net Income

$223.00M

8.8% Net Margin

EPS (Diluted)

$0.99

Total Assets

$135.27B

Cash & Equivalents

$2.72B

Free Cash Flow

$293.00M

Financial Statements
Beta
Revenue$2.52B
Operating Expenses$2.21B
Operating Income$469.00M
Net Income$223.00M
EPS (Basic)$1.01
EPS (Diluted)$0.99
Shares Outstanding (Basic)221.70M
Shares Outstanding (Diluted)225.60M

Key Highlights

  • 1Net income attributable to Ameriprise Financial decreased to $223 million for Q2 2012 from $315 million in Q2 2011.
  • 2Diluted earnings per share decreased to $0.99 in Q2 2012 from $1.25 in Q2 2011.
  • 3Total net revenues declined by 4% to $2.51 billion for Q2 2012.
  • 4The effective tax rate increased significantly due to a $32 million tax correction related to securities lending activities.
  • 5The company announced its intention to transition its federal savings bank subsidiary to a non-depository national trust bank by year-end 2012.
  • 6Assets Under Management and Administration decreased by 2% to $654.8 billion as of June 30, 2012.
  • 7The company repurchased approximately 7.0 million shares of common stock under its share repurchase program during the second quarter of 2012.

Frequently Asked Questions

The decrease in net income was primarily driven by lower investment income due to continued low interest rates and volatile equity markets, a $40 million unfavorable impact from a tax-related item related to an out-of-period correction, and a $16 million negative impact from continued low interest rates. Additionally, the prior year period benefited from an $18 million after-tax gain from an interest rate hedge.

Ameriprise Financial announced its intention to transition its federal savings bank subsidiary, Ameriprise Bank, FSB, to a non-depository national trust bank by year-end 2012. This transition is expected to release approximately $375 million of required capital, which the company anticipates using for share repurchases throughout 2013. The transition is estimated to incur $20 million in one-time, non-operating expenses.

The Advice & Wealth Management segment saw a 3% increase in operating earnings, driven by growth in wrap account assets. The Asset Management segment's operating earnings decreased by 11% due to lower average assets under management. The Annuities segment experienced a 25% decline in operating earnings, mainly due to lower net investment income and market impacts on DAC/DSIC. The Protection segment's operating earnings increased by 18%, benefiting from favorable claims and an improved auto and home combined ratio. The Corporate & Other segment reported an increased operating loss.

Ameriprise Financial continued its share repurchase program, buying back approximately 7.0 million shares in the second quarter of 2012, with $822 million remaining under its authorization. The company also paid regular quarterly dividends, totaling $142 million for the first half of 2012, and declared a quarterly dividend of $0.35 per common share.