Why did GAAP earnings fall so sharply when adjusted operating earnings grew?

GAAP net income fell 41% to $511 million mainly because of unfavorable market impacts on derivatives and market risk benefits, which swung from a favorable impact in the prior-year quarter. Ameriprise excludes these market-driven items from its adjusted operating measures, which rose 11% in net income terms and 16% per share, so the gap largely reflects volatility in liabilities and hedges rather than core business performance.

What is driving growth in the Advice & Wealth Management segment?

Adjusted operating net revenues rose 14% to $2.7 billion, driven by client asset growth, higher transactional activity (up 19%), and a 6% increase in net investment income at the bank. Wrap net flows of $8.0 billion and rising advisor productivity, with net revenue per advisor up 11% to $997,000 on a trailing 12-month basis, supported the results. Advisor headcount rose to 10,368.

Are there any one-time or unusual items affecting the quarter?

Yes. The annual actuarial assumption update reduced after-tax earnings by $74 million ($0.73 per share), mainly from updated persistency assumptions for variable annuities. Severance expenses of $19 million after tax ($24 million pretax) were tied to the company's efficiency initiatives. Results excluding unlocking and severance are presented to give a cleaner view of the underlying trend.

How is Ameriprise managing capital and shareholder returns?

The company returned $713 million to shareholders in the quarter, up 8% year over year, including $563 million of share repurchases and $150 million of dividends. Diluted shares fell 4% to 101.6 million, and available capital for capital adequacy increased 5% to $5.5 billion, which management cites as evidence of balance sheet strength and free cash flow generation.

What should investors watch going forward?

Investors should monitor whether wrap flows and advisory account growth can offset ongoing net outflows in Asset Management, whether the efficiency program delivers the expected G&A savings, and how sensitive GAAP results remain to equity and interest-rate moves through derivatives and market risk benefits. Management also expects a full-year 2024 operating effective tax rate of 20% to 21%, and the bank's net investment income depends on the forecast lower rate environment.

AMP 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed October 23, 2024. Cited figures are marked; the original filing is the authoritative source.

Ameriprise Financial (AMP) reported third-quarter 2024 results on October 23, 2024 that were strong at the operating level but noisy at the GAAP level.

GAAP net income fell 41% year over year to $511 million^a, or $5.00 per diluted share versus $8.14, driven mainly by unfavorable market impacts on derivatives and market risk benefits. Adjusted operating earnings rose 11% to $828 million ($8.10 per diluted share, up 16%), and adjusted operating earnings excluding unlocking and severance rose 17% to $9.02 per diluted share. Results were supported by a 22% increase in total AUM and AUA to $1.5 trillion, driven by market appreciation and net inflows, and by 11% growth in adjusted operating net revenues.

The Advice & Wealth Management segment was the main driver, with pretax adjusted operating earnings of $826 million^b (up 13%) and a 30.1% margin. Wrap net flows were $8.0 billion, up 48%, and total client assets reached an all-time high of $1.0 trillion. Asset Management pretax adjusted operating earnings rose 23% to $245 million despite $2.4 billion of total net outflows, which improved 40% from the prior year.

Retirement & Protection Solutions earnings excluding unlocking increased 2%, and the company's annual actuarial assumption update, which was primarily tied to variable annuity persistency, reduced after-tax earnings by $74 million^c, or $0.73 per share. Management continued to return capital, with $713 million returned to shareholders in the quarter, including $563 million of buybacks and $150 million of dividends. Available capital for capital adequacy rose 5% to $5.5 billion.

Severance and related expenses of $19 million^d after tax (about $24 million pretax) reflect an ongoing efficiency program, and management pointed to early benefits in Asset Management G&A. Investors should weigh the strong fee-based flows and margin discipline against the GAAP volatility from market-sensitive liabilities and the modest but continuing net outflows in retail and institutional asset management.

02—Key points

Key Highlights

GAAP EPS of $5.00 fell 39% from $8.14, mainly from unfavorable market impacts on derivatives and market risk benefits; adjusted operating EPS rose 16% to $8.10.
Adjusted operating EPS excluding unlocking and severance rose 17% to $9.02, with adjusted operating ROE excluding AOCI of 51% (50.7% excluding unlocking).
Total AUM and AUA reached $1.5 trillion, up 22% year over year, with total client assets in Advice & Wealth Management at an all-time high of $1.0 trillion.
Wrap net flows of $8.0 billion were up 48% year over year, an early sign of client preference returning to advisory products.
AWM pretax adjusted operating margin held above 30% at 30.1%, while Asset Management net pretax margin reached 40.9%, above the company's target range.
Asset Management still recorded $2.4 billion of total net outflows, though this was a 40% improvement from the prior year; retail and model delivery outflows narrowed to $1.5 billion.
The company returned $713 million to shareholders, including $563 million in buybacks and $150 million in dividends, and available capital for capital adequacy rose 5% to $5.5 billion.

03—Questions

Frequently Asked Questions

Why did GAAP earnings fall so sharply when adjusted operating earnings grew?
GAAP net income fell 41% to $511 million mainly because of unfavorable market impacts on derivatives and market risk benefits, which swung from a favorable impact in the prior-year quarter. Ameriprise excludes these market-driven items from its adjusted operating measures, which rose 11% in net income terms and 16% per share, so the gap largely reflects volatility in liabilities and hedges rather than core business performance.
What is driving growth in the Advice & Wealth Management segment?
Adjusted operating net revenues rose 14% to $2.7 billion, driven by client asset growth, higher transactional activity (up 19%), and a 6% increase in net investment income at the bank. Wrap net flows of $8.0 billion and rising advisor productivity, with net revenue per advisor up 11% to $997,000 on a trailing 12-month basis, supported the results. Advisor headcount rose to 10,368.
Are there any one-time or unusual items affecting the quarter?
Yes. The annual actuarial assumption update reduced after-tax earnings by $74 million ($0.73 per share), mainly from updated persistency assumptions for variable annuities. Severance expenses of $19 million after tax ($24 million pretax) were tied to the company's efficiency initiatives. Results excluding unlocking and severance are presented to give a cleaner view of the underlying trend.
How is Ameriprise managing capital and shareholder returns?
The company returned $713 million to shareholders in the quarter, up 8% year over year, including $563 million of share repurchases and $150 million of dividends. Diluted shares fell 4% to 101.6 million, and available capital for capital adequacy increased 5% to $5.5 billion, which management cites as evidence of balance sheet strength and free cash flow generation.
What should investors watch going forward?
Investors should monitor whether wrap flows and advisory account growth can offset ongoing net outflows in Asset Management, whether the efficiency program delivers the expected G&A savings, and how sensitive GAAP results remain to equity and interest-rate moves through derivatives and market risk benefits. Management also expects a full-year 2024 operating effective tax rate of 20% to 21%, and the bank's net investment income depends on the forecast lower rate environment.

04—Continue

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