10-QPeriod: Q1 FY2020

AMERIPRISE FINANCIAL INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 11, 2020For Securities:AMP

Summary

Ameriprise Financial, Inc. reported a significant increase in net income to $2,036 million for the first quarter of 2020, up from $395 million in the same period last year. This substantial growth was largely driven by a favorable market impact on variable annuity guaranteed benefits, which swung from an expense to a significant benefit, along with positive market impacts on other insurance benefits. Despite a 4% decrease in total net revenues to $3,001 million, primarily due to lower net investment income and premiums (impacted by the sale of Ameriprise Auto & Home Insurance), the company demonstrated strong operational performance in its Advice & Wealth Management segment, which saw an 8% increase in adjusted operating earnings. The company maintained a solid liquidity position with $8.7 billion in cash and cash equivalents at the end of the quarter. However, the report highlights the considerable uncertainty and potential adverse effects stemming from the ongoing COVID-19 pandemic, which is expected to continue impacting financial markets and the company's operations. Management is focused on navigating these challenges while continuing to pursue strategic objectives.

Financial Statements
Beta
Revenue$3.03B
Operating Expenses$650.00M
Net Income$2.04B
EPS (Basic)$16.11
EPS (Diluted)$15.88
Shares Outstanding (Basic)126.40M
Shares Outstanding (Diluted)128.20M

Key Highlights

  • 1Net income surged to $2,036 million ($15.88 diluted EPS) for Q1 2020, a significant increase from $395 million ($2.82 diluted EPS) in Q1 2019.
  • 2Total net revenues decreased by 4% to $3,001 million, primarily impacted by lower net investment income and premiums, the latter influenced by the sale of the Auto & Home Insurance business.
  • 3The Advice & Wealth Management segment showed resilience, with adjusted operating earnings increasing by 8% to $378 million, supported by higher average wrap account assets and increased transactional activity.
  • 4The company maintained a strong liquidity position, with cash and cash equivalents totaling $8.7 billion at the end of the quarter.
  • 5A substantial portion of the net income increase was driven by a significant positive swing in the market impact on variable annuity guaranteed benefits, which was a benefit of $1.7 billion in Q1 2020 compared to an expense of $142 million in Q1 2019.
  • 6Total expenses decreased by 75% to $650 million, largely due to the significant positive impact from variable annuity guaranteed benefit adjustments and the sale of the Auto & Home Insurance business.
  • 7The company acknowledges the significant ongoing uncertainty and potential adverse impacts from the COVID-19 pandemic on its operations and financial results.

Frequently Asked Questions

Ameriprise Financial reported a net income of $2,036 million for the first quarter of 2020, a substantial increase from $395 million in the first quarter of 2019. Diluted earnings per share were $15.88 for Q1 2020, compared to $2.82 for Q1 2019.

The significant increase in net income was primarily driven by a large positive market impact on variable annuity guaranteed benefits. This benefit of $1.7 billion in Q1 2020, compared to an expense of $142 million in Q1 2019, was the main contributor to the earnings growth. Other factors included a positive market impact on IUL benefits and higher client activity.

The company acknowledges that the COVID-19 pandemic created significant market volatility and disruption. While it generated a substantial positive accounting impact on variable annuity guaranteed benefits, the company anticipates ongoing negative effects on its business, operations, and financial condition due to market volatility, reduced client activity, and broader economic impacts.

Ameriprise Financial maintained a strong liquidity position, with cash and cash equivalents totaling $8.7 billion at the end of the first quarter of 2020. They also have access to an unsecured revolving credit facility.