Why did GAAP EPS decline even though adjusted operating EPS grew 15%?

The difference is primarily due to market-driven accounting items. GAAP results in Q2 2024 included unfavorable market impacts on the valuation of derivatives and market risk benefits, while the prior-year quarter had favorable impacts. Adjusted operating earnings strip out these items, so they show the underlying business performance more clearly.

How strong were client flows and asset growth?

Client flows were solid in advice and wealth management, with total client flows of $6.6 billion and wrap net flows of $7.5 billion, up 34% year over year. Total AUM and AUA grew 12% to $1.43 trillion, aided by strong equity market appreciation as well as net inflows.

What is driving the outflows in Asset Management, and should investors be concerned?

Total segment net outflows were $12.0 billion, of which $9.1 billion came from legacy insurance partners. The company also cited an $8.0 billion previously announced asset transfer related to one legacy insurance partner. Excluding that transfer, net outflows were $4.0 billion, an improvement of $1.3 billion from a year ago. Retail outflows narrowed to $3.2 billion, though the legacy partner exposure remains a key item to monitor.

What did the company do with its capital, and how much flexibility does it have?

Ameriprise returned $693 million to shareholders through $542 million of buybacks and $151 million of dividends. Available capital for capital adequacy rose 5% to $5.2 billion, and the company described its excess capital position as strong. Total long-term debt to capital was 40.5%, down from 46.6% a year earlier.

What do the severance charges and efficiency initiatives mean for future profitability?

Severance expense of $20 million in Q2 (and $24 million year to date) relates to initiatives to enhance operational efficiency and effectiveness. Management expects these actions to drive future profitability. General and administrative expenses were flat year over year, and Asset Management G&A fell 6%, which suggests early evidence of the cost benefits.

AMP 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 24, 2024. Cited figures are marked; the original filing is the authoritative source.

Ameriprise Financial reported second-quarter 2024 results that combined strong operating momentum with a GAAP earnings decline driven by market-related accounting items.

Adjusted operating EPS rose 15% to $8.53^a (up 17% to $8.72 excluding $0.19 of severance expense), while GAAP EPS fell 2% to $8.02 from $8.21, mainly due to unfavorable market impacts on derivatives and market risk benefits. Adjusted operating earnings grew 9% to $882 million and net income declined 7% to $829 million. Total AUM and AUA reached $1.43 trillion, up 12% year over year, supported by strong client net inflows in wrap accounts and equity market appreciation.

The Advice & Wealth Management segment was the clear standout, with pretax adjusted operating earnings up 12% to a record $822 million^b and a pretax margin of 31.1%. Total client assets rose 17% to $972 billion, and wrap net flows of $7.5 billion were up 34% year over year. Retirement & Protection Solutions sales increased 40% to $1.5 billion, led by structured variable annuities.

Asset Management was a mixed picture: pretax adjusted operating earnings rose 35% on expense discipline and market gains, but the segment still recorded $12.0 billion^c of net outflows, which included $9.1 billion from legacy insurance partners and an $8.0 billion asset transfer. Capital management remained a priority. The company returned $693 million to shareholders through dividends and buybacks, diluted share count fell 4% year over year to 103.4 million, and available capital for capital adequacy rose 5% to $5.2 billion.

Management also highlighted ongoing efficiency initiatives that are expected to support future profitability, and reaffirmed an operating effective tax rate of about 21%^d for full-year 2024. Investors should weigh the strong fee-based growth and capital return against the volatility in GAAP results and the continued outflows from legacy insurance partners in Asset Management.

02—Key points

Key Highlights

Adjusted operating EPS of $8.53 rose 15% year over year; excluding $0.19 of severance expense, it was $8.72, up 17%.
GAAP EPS of $8.02 declined 2% from $8.21, mainly from unfavorable market impacts on derivatives and market risk benefits versus a favorable prior-year quarter.
Advice & Wealth Management pretax adjusted operating earnings hit a record $822 million (up 12%), with a 31.1% margin and wrap net flows of $7.5 billion (up 34%).
Total AUM and AUA reached $1.43 trillion, up 12%, with total client assets in AWM up 17% to $972 billion.
Asset Management pretax adjusted operating earnings rose 35% to $218 million, but net outflows were $12.0 billion, including $9.1 billion from legacy insurance partners.
Ameriprise returned $693 million to shareholders in the quarter, and diluted shares outstanding declined 4% year over year.
Retirement & Protection Solutions sales rose 40% to $1.5 billion, led by structured variable annuities, while pretax adjusted operating earnings grew 4% to $196 million.

03—Questions

Frequently Asked Questions

Why did GAAP EPS decline even though adjusted operating EPS grew 15%?
The difference is primarily due to market-driven accounting items. GAAP results in Q2 2024 included unfavorable market impacts on the valuation of derivatives and market risk benefits, while the prior-year quarter had favorable impacts. Adjusted operating earnings strip out these items, so they show the underlying business performance more clearly.
How strong were client flows and asset growth?
Client flows were solid in advice and wealth management, with total client flows of $6.6 billion and wrap net flows of $7.5 billion, up 34% year over year. Total AUM and AUA grew 12% to $1.43 trillion, aided by strong equity market appreciation as well as net inflows.
What is driving the outflows in Asset Management, and should investors be concerned?
Total segment net outflows were $12.0 billion, of which $9.1 billion came from legacy insurance partners. The company also cited an $8.0 billion previously announced asset transfer related to one legacy insurance partner. Excluding that transfer, net outflows were $4.0 billion, an improvement of $1.3 billion from a year ago. Retail outflows narrowed to $3.2 billion, though the legacy partner exposure remains a key item to monitor.
What did the company do with its capital, and how much flexibility does it have?
Ameriprise returned $693 million to shareholders through $542 million of buybacks and $151 million of dividends. Available capital for capital adequacy rose 5% to $5.2 billion, and the company described its excess capital position as strong. Total long-term debt to capital was 40.5%, down from 46.6% a year earlier.
What do the severance charges and efficiency initiatives mean for future profitability?
Severance expense of $20 million in Q2 (and $24 million year to date) relates to initiatives to enhance operational efficiency and effectiveness. Management expects these actions to drive future profitability. General and administrative expenses were flat year over year, and Asset Management G&A fell 6%, which suggests early evidence of the cost benefits.

04—Continue

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