10-QPeriod: Q1 FY2019

AMERIPRISE FINANCIAL INC Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 1, 2019For Securities:AMP

Summary

Ameriprise Financial, Inc. (AMP) reported mixed financial results for the first quarter ended March 31, 2019. Total revenues saw a slight decrease of 2% year-over-year, primarily driven by a 3% decline in management and financial advice fees, reflecting lower Assets Under Management (AUM) due to net outflows and softer market conditions. However, this was partially offset by an 8% increase in premiums and a 3% rise in distribution fees. Expenses increased by 7%, largely due to a significant 36% jump in benefits, claims, losses, and settlement expenses, influenced by an unfavorable impact from nonperformance credit spread adjustments on variable annuity guaranteed benefits. Consequently, net income declined by 34% to $395 million, and diluted Earnings Per Share (EPS) fell to $2.82 from $3.91 in the prior year period. The company is actively managing its portfolio, evidenced by the announced agreement to sell its Ameriprise Auto & Home business, aligning with a strategy to focus on core growth areas like Advice & Wealth Management and Asset Management. Despite the overall revenue and net income decline, the Advice & Wealth Management segment showed resilience with an 11% increase in adjusted operating earnings, driven by net inflows and higher brokerage cash earnings. Conversely, the Asset Management segment experienced a 25% decrease in adjusted operating earnings due to net outflows and lower equity markets.

Financial Highlights

34 data points
Beta

Revenue

$3.15B

Net Income

$395.00M

12.5% Net Margin

EPS (Diluted)

$2.82

Total Assets

$144.40B

Cash & Equivalents

$5.76B

Free Cash Flow

$172.00M

Financial Statements
Beta
Revenue$3.15B
Operating Expenses$2.65B
Net Income$395.00M
EPS (Basic)$2.85
EPS (Diluted)$2.82
Shares Outstanding (Basic)138.80M
Shares Outstanding (Diluted)140.10M

Key Highlights

  • 1Total revenues for Q1 2019 decreased by 2% to $3.12 billion compared to Q1 2018, primarily due to a decline in management and financial advice fees.
  • 2Net income significantly decreased by 34% to $395 million, leading to a drop in diluted EPS to $2.82 from $3.91 in the prior year.
  • 3The company announced the planned sale of its Ameriprise Auto & Home business, signaling a strategic shift to focus on core growth segments.
  • 4The Advice & Wealth Management segment demonstrated strength, with adjusted operating earnings increasing by 11% year-over-year, driven by net inflows and higher brokerage cash earnings.
  • 5The Asset Management segment saw a substantial 25% decrease in adjusted operating earnings, impacted by net outflows and a decline in equity markets.
  • 6Total expenses increased by 7%, largely driven by a 36% rise in benefits, claims, losses, and settlement expenses, notably influenced by variable annuity guaranteed benefit adjustments.
  • 7The company ended the quarter with $3.26 billion in cash and cash equivalents, a slight increase from the prior quarter, and maintained a strong capital position, with total equity of $5.84 billion.

Frequently Asked Questions

The primary drivers for the significant decrease in net income were a 36% increase in benefits, claims, losses, and settlement expenses, largely due to unfavorable nonperformance credit spread adjustments on variable annuity guaranteed benefits, coupled with a 3% decrease in management and financial advice fees reflecting lower assets under management.

The planned sale of Ameriprise Auto & Home is part of a strategic decision to exit this business and focus on core growth areas, specifically Advice & Wealth Management and Asset Management. This move aims to streamline operations and allocate resources more effectively towards higher-growth segments.

The Asset Management segment experienced a notable 25% decrease in adjusted operating earnings due to net outflows and the impact of lower equity markets. Investors should monitor the company's ability to stem outflows and navigate market volatility to improve performance in this segment.

The company notes that the ongoing low interest rate environment is impacting its spread income and may lead to increases in reserves and changes in assumptions for amortizing certain assets. While a modest rise in interest rates could potentially widen spreads due to guaranteed minimum interest rates on liabilities, the overall low rate environment poses a challenge to earnings from interest-sensitive products.