10-QPeriod: Q3 FY2016

AMERIPRISE FINANCIAL INC Quarterly Report for Q3 Ended Sep 30, 2016

Filed November 2, 2016For Securities:AMP

Summary

Ameriprise Financial, Inc. (AMP) reported its financial results for the nine months and third quarter ended September 30, 2016. The company experienced a significant decrease in pretax income for both periods compared to the prior year, largely due to the impact of 'unlocking' related to updated valuation assumptions, particularly in the Annuities segment. While total net revenues saw a slight decrease for the nine months, they increased for the third quarter. Expenses, however, rose in both periods, primarily driven by the aforementioned unlocking impacts and increased benefits, claims, losses, and settlement expenses. Key segments like Advice & Wealth Management showed modest growth in operating earnings, while Asset Management and Annuities experienced declines. The Protection segment's operating earnings also decreased. The company continued its share repurchase program and paid dividends to shareholders, reflecting a commitment to capital return. Management highlighted ongoing efforts to adapt to the low interest rate environment and regulatory changes, such as the Department of Labor's fiduciary rule.

Financial Highlights

32 data points
Beta

Revenue

$3.01B

Net Income

$215.00M

7.1% Net Margin

EPS (Diluted)

$1.30

Total Assets

$143.62B

Free Cash Flow

$505.00M

Financial Statements
Beta
Revenue$3.01B
Operating Expenses$2.76B
Net Income$215.00M
EPS (Basic)$1.31
EPS (Diluted)$1.30
Shares Outstanding (Basic)164.00M
Shares Outstanding (Diluted)165.80M

Key Highlights

  • 1Net income attributable to Ameriprise Financial decreased by 46% to $215 million for the three months ended September 30, 2016, compared to $397 million in the prior year.
  • 2Pretax income for the nine months ended September 30, 2016, decreased by 34% to $1.123 billion compared to $1.696 billion in the prior year.
  • 3Total net revenues increased by 4% to $3.0 billion for the three months ended September 30, 2016, primarily driven by increases in net investment income and other revenues.
  • 4Total net revenues decreased by 5% to $8.6 billion for the nine months ended September 30, 2016, primarily due to decreases in management and financial advice fees, distribution fees, and net investment income.
  • 5Total expenses increased by 14% to $2.8 billion for the three months ended September 30, 2016, primarily due to the impact of unlocking and higher benefits, claims, losses and settlement expenses.
  • 6Total expenses increased by 2% to $7.5 billion for the nine months ended September 30, 2016, primarily due to the impact of unlocking, partially offset by the deconsolidation of certain investment entities.
  • 7The company paid $368 million in dividends to shareholders for the nine months ended September 30, 2016, and repurchased $1.3 billion of common stock during the same period.

Frequently Asked Questions

The decline in net income and pretax income is primarily attributed to the 'unlocking' process, which reflects updated valuation assumptions for insurance and annuity products. This, combined with factors like asset management net outflows, lower transactional volume, and impacts from the low interest rate environment, contributed to the reduced profitability.

The Advice & Wealth Management segment showed modest growth in operating earnings. However, the Asset Management and Annuities segments experienced declines in operating earnings. The Protection segment's operating earnings also decreased, impacted by higher catastrophe losses and an increase in long-term care reserves. The Corporate & Other segment reported an increased operating loss.

Ameriprise is managing the impact of the low interest rate environment through various strategies, including assessing reinvestment risk in its investment portfolio, monitoring this risk within its asset/liability management framework, and potentially reducing crediting rates on fixed products when warranted and subject to guaranteed minimums. The company also utilizes hedging programs to manage risks associated with variable annuity guarantees.

'Unlocking' refers to the process where the company updates its market-related inputs and valuation assumptions for insurance and annuity products. This process can significantly impact revenues and expenses, as seen in the current report where it negatively affected profitability, primarily due to continued low interest rates and changes in persistency and withdrawal assumptions.