10-QPeriod: Q2 FY2016

AMERIPRISE FINANCIAL INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 1, 2016For Securities:AMP

Summary

Ameriprise Financial, Inc. (AMP) reported a decrease in net income attributable to Ameriprise Financial for the second quarter of 2016, falling to $335 million ($1.97 per diluted share) from $415 million ($2.23 per diluted share) in the same period last year. This decline was primarily driven by lower net revenues across key segments like Management and Financial Advice Fees and Distribution Fees, impacted by a decrease in average Assets Under Management (AUM) and lower client activity. The company also saw a reduction in Net Investment Income due to lower invested assets and a less favorable market impact on investment hedges. Expenses also increased in certain areas, notably Benefits, Claims, Losses, and Settlement Expenses, partly due to higher auto and home insurance losses and a prior year favorable LTC reserve release. Despite the quarterly decrease, the company's financial position remains robust, with total assets of $142.7 billion as of June 30, 2016, and a solid capital base. The adoption of new accounting standards for consolidation (ASU 2015-02) led to the deconsolidation of several collateralized loan obligations and property funds, impacting reported figures but not the underlying business results. Management remains focused on strategic objectives, including growing AUM and enhancing advisor productivity, with a significant share repurchase authorization remaining. Investors should monitor the impact of evolving market conditions and regulatory changes, particularly the Department of Labor's fiduciary rule, on the company's future performance.

Financial Highlights

33 data points
Beta

Revenue

$2.88B

Net Income

$335.00M

11.6% Net Margin

EPS (Diluted)

$1.97

Total Assets

$142.68B

Cash & Equivalents

$2.82B

Free Cash Flow

$901.00M

Financial Statements
Beta
Revenue$2.88B
Operating Expenses$2.46B
Net Income$335.00M
EPS (Basic)$1.99
EPS (Diluted)$1.97
Shares Outstanding (Basic)168.30M
Shares Outstanding (Diluted)170.10M

Key Highlights

  • 1Net income attributable to Ameriprise Financial decreased by 19% to $335 million ($1.97/share) for Q2 2016, down from $415 million ($2.23/share) in Q2 2015.
  • 2Total revenues decreased by 8% to $2.87 billion for Q2 2016, primarily due to lower management/financial advice fees and distribution fees, impacted by a 6% decrease in average Assets Under Management (AUM).
  • 3Total expenses saw a slight decrease of 2% to $2.46 billion for Q2 2016, though Benefits, Claims, Losses, and Settlement Expenses increased by 10%.
  • 4The company adopted new accounting standards for consolidation (ASU 2015-02), resulting in the deconsolidation of certain investment entities, which affected segment reporting but not underlying business performance.
  • 5Advice & Wealth Management segment operating earnings remained flat year-over-year at $221 million, supported by net inflows into wrap accounts.
  • 6Asset Management segment operating earnings decreased by 25% to $148 million, driven by net outflows, equity market depreciation, and a legacy legal matter expense.
  • 7The company had $1.7 billion remaining under its share repurchase authorization as of June 30, 2016, indicating a commitment to returning capital to shareholders.
  • 8The effective tax rate for Q2 2016 decreased to 18.4% from 22.6% in the prior year period, primarily due to tax audit resolutions and tax-preferred items.

Frequently Asked Questions

The primary reason for the decrease in net income is a combination of lower net revenues, driven by a decline in average Assets Under Management (AUM) and lower client activity, and an increase in certain expenses, notably Benefits, Claims, Losses, and Settlement Expenses. A less favorable market impact on investment hedges and lower net investment income also contributed to the decline.

The adoption of ASU 2015-02 for consolidation resulted in the deconsolidation of several collateralized loan obligations (CLOs) and property funds. This change impacted the presentation of segment results and reduced consolidated assets, liabilities, and equity (specifically noncontrolling interests), but management states it did not affect the underlying business results.

As of June 30, 2016, Ameriprise Financial had $1.7 billion remaining under its share repurchase authorization, which extends through December 31, 2017. This indicates the company's continued intention to return capital to shareholders through stock buybacks, subject to market conditions.

The company acknowledges that the low interest rate environment is negatively impacting its spread income and expects portfolio income yields to continue declining. Management is managing reinvestment risk by assessing the investment portfolio and monitoring risk within its asset/liability management framework. They also have the flexibility to adjust crediting rates on fixed products, subject to guaranteed minimums.