Why is GAAP EPS so much higher than adjusted operating EPS in the quarter?

The answer is not that GAAP results are weaker. GAAP EPS of $9.46 was higher than adjusted operating EPS of $8.39 because of a $140 million favorable market impact on non-traditional long-duration products (including the valuation of derivatives and market risk benefits) that was excluded from adjusted operating results. Investors generally focus on the adjusted figure, which strips out these volatile market-driven items.

Is the 10% dividend increase sustainable given the company's capital position?

Management pointed to significant free cash flow generation and a strong balance sheet. The quarter's dividends paid totaled $143 million, while share repurchases were $507 million. Available capital for capital adequacy declined 5% year over year to $5.1 billion, so the dividend increase should be weighed against that trend, but the release does not provide explicit payout guidance.

What is driving the slowdown in client flows and the Asset Management outflows?

In Advice & Wealth Management, total client net flows fell 31% to $8.5 billion, though wrap flows grew 4%. In Asset Management, net outflows were $5.7 billion: retail outflows of $2.7 billion mirrored industry-wide active management trends, while institutional outflows of $2.2 billion reflected a slowdown in funding of new mandates, lower-fee redemptions, and $0.4 billion from proactive portfolio manager actions tied to expense management.

How much should investors expect expenses to grow for the rest of 2024?

Management expects mid-single-digit growth in Advice & Wealth Management general and administrative expenses for the full year. It also expects the operating effective tax rate to be about 21%. In the Asset Management segment, general and administrative expenses were flat year over year, and management highlighted ongoing expense management initiatives.

What drove the strong revenue growth in Advice & Wealth Management?

Revenue growth came from growth in client assets across wrap and brokerage accounts, higher transactional activity (up 17%), and a 30% increase in bank net investment income. Advisory fees rose 17%, and adjusted operating net revenue per advisor (trailing 12 months) increased 11% to $942,000.

AMP 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 22, 2024. Cited figures are marked; the original filing is the authoritative source.

Ameriprise Financial (AMP) reported first quarter 2024 results on April 22, 2024, with GAAP net income of $990 million^a, or $9.46 per diluted share, versus $3.79 a year ago.

The GAAP figure was inflated by favorable market impacts on derivatives and market risk benefits. Adjusted operating earnings rose 10% to $878 million^b, or $8.39 per diluted share (up 16%), and the adjusted operating return on equity excluding AOCI was 49.0%. Management also raised the quarterly dividend 10%, and the company returned $650 million to shareholders during the quarter.

The operating picture was mixed but broadly strong. Adjusted operating net revenues grew 11% to $4.1 billion^c, driven by Advice & Wealth Management (up 13%, with bank net investment income up 30%), Retirement & Protection Solutions (up 11% on structured annuity sales up 33%), and Asset Management (up 7%). Total client assets in Advice & Wealth Management reached $954 billion, and firm-wide AUM and AUA hit a record $1.4 trillion.

Pretax adjusted operating margin was 26.3%^d, roughly flat with the prior year's 26.4%. Shares outstanding fell about 5% year over year, which supports per-share growth. The main watch items are the quality of flows and expense trends.

Total client net flows in Advice & Wealth Management slowed 31% to $8.5 billion, and Asset Management posted net outflows of $5.7 billion, driven by institutional mandate slowdowns and retail redemptions. Advice & Wealth Management adjusted operating expenses rose 14%, with distribution expenses up 17%. Management expects mid-single-digit growth in full-year general and administrative expenses in that segment and a full-year operating effective tax rate of about 21%.

02—Key points

Key Highlights

GAAP EPS of $9.46 (vs. $3.79 a year ago) and adjusted operating EPS of $8.39 (up 16%), with GAAP results boosted by favorable derivative and market risk benefit valuations
Adjusted operating net revenues up 11% to about $4.1 billion; Advice & Wealth Management revenues up 13% and Retirement & Protection Solutions up 11%
Record firm-wide AUM and AUA of $1.42 trillion, up 15% year over year, driven by market appreciation and wrap net flows of $6.5 billion
Dividend raised 10%; $650 million returned to shareholders in the quarter, including $507 million in buybacks
Net outflows of $5.7 billion in Asset Management, including $2.7 billion in retail and $2.2 billion in institutional outflows; total client net flows in Advice & Wealth Management fell 31% to $8.5 billion
Advice & Wealth Management adjusted operating expenses rose 14%, with distribution expenses up 17%, though pretax margin held near 30% at 29.8%
Adjusted operating ROE excluding AOCI of 49.0%; available capital for capital adequacy fell 5% to $5.1 billion

03—Questions

Frequently Asked Questions

Why is GAAP EPS so much higher than adjusted operating EPS in the quarter?
The answer is not that GAAP results are weaker. GAAP EPS of $9.46 was higher than adjusted operating EPS of $8.39 because of a $140 million favorable market impact on non-traditional long-duration products (including the valuation of derivatives and market risk benefits) that was excluded from adjusted operating results. Investors generally focus on the adjusted figure, which strips out these volatile market-driven items.
Is the 10% dividend increase sustainable given the company's capital position?
Management pointed to significant free cash flow generation and a strong balance sheet. The quarter's dividends paid totaled $143 million, while share repurchases were $507 million. Available capital for capital adequacy declined 5% year over year to $5.1 billion, so the dividend increase should be weighed against that trend, but the release does not provide explicit payout guidance.
What is driving the slowdown in client flows and the Asset Management outflows?
In Advice & Wealth Management, total client net flows fell 31% to $8.5 billion, though wrap flows grew 4%. In Asset Management, net outflows were $5.7 billion: retail outflows of $2.7 billion mirrored industry-wide active management trends, while institutional outflows of $2.2 billion reflected a slowdown in funding of new mandates, lower-fee redemptions, and $0.4 billion from proactive portfolio manager actions tied to expense management.
How much should investors expect expenses to grow for the rest of 2024?
Management expects mid-single-digit growth in Advice & Wealth Management general and administrative expenses for the full year. It also expects the operating effective tax rate to be about 21%. In the Asset Management segment, general and administrative expenses were flat year over year, and management highlighted ongoing expense management initiatives.
What drove the strong revenue growth in Advice & Wealth Management?
Revenue growth came from growth in client assets across wrap and brokerage accounts, higher transactional activity (up 17%), and a 30% increase in bank net investment income. Advisory fees rose 17%, and adjusted operating net revenue per advisor (trailing 12 months) increased 11% to $942,000.

04—Continue

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