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Ameriprise Financial Inc. (



Q3 2010 Earnings Call

October 28, 2010 9:00 am ET


James Cracchiolo – Chairman, Chief Executive Officer

Walter Berman – Executive Vice President, Chief Financial Officer

Laura Gagnon – Vice President, Investor Relations


Tom Gallagher – Credit Suisse Securities

John Nadel – Sterne Agee

Andrew Kligerman – UBS

Suneet Kamath – Sanford Bernstein

Colin Devine – Citigroup

John Hall – Wells Fargo Securities

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Welcome to the 2010 Third Quarter Earnings call. My name is Sandra and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Please note that this conference is being recorded.

I will now turn the call over to Ms. Laura Gagnon. Ms. Gagnon, you may begin.

Laura Gagnon

Thank you and welcome to the Ameriprise Financial Third Quarter Earnings call. With me on the call today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. After their remarks, we will take your questions.

During the call, you will hear references to various non-GAAP financial measures which we believe provide insight into the underlying performance of the Company’s operations. Reconciliations of non-GAAP numbers to the respective GAAP numbers can be found in today’s materials, available on our website.

Some of the statements that we make on this call may be forward-looking statements reflecting management’s expectations about future events and operating plans and performance. These forward-looking statements speak only as of today’s date and involve a number of risks and uncertainties. A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in today’s earnings release and related presentation slides, our 2009 annual report to shareholders and our 2009 10-K report. We undertake no obligation to update publicly or revise these forward-looking statements.

With that, I’d like to turn the call over to Jim.

James Cracchiolo

Good morning. Thanks for joining us for our third quarter earnings call. This morning Walter and I will give you our thoughts on the Company’s performance for the quarter and the progress we’re making across the business. We’ll also provide (audio interference). Let’s get started.

This was another strong quarter for us. In fact, despite the continuing challenges in the environment, we achieved our highest quarterly revenues and earnings since we’ve been a public company with $2.4 billion of net operating revenues and $355 million of operating earnings. Operating earnings per share of $1.37 represent an increase of 32% compared with a year ago, and 25% compared with last quarter. Our operating return on equity reached 12% which is up nicely compared with the last couple of years.

While we realized benefits from DAC in the quarter, strong business fundamentals drove these results. We continue to generate higher margins in our more fee-based segments - advice and wealth management and asset management - and our client base and advisor productivity continued to improve. We are realizing the benefits of the Columbia transaction and our other acquisitions which helped drive owned, managed and administered assets to an all-time high of $649 billion.

Our strong financial foundation and prudent operating principles continue to serve us well. The balance sheet remains very strong and we continue to hold considerable excess capital and liquidity positions which gives us significant flexibility to invest for growth, to manage through a difficult environment, and to return capital to shareholders. In fact, I believe we are one of the few firms in the industry that had the strength to repurchase shares. During the quarter, we bought back an additional 3.6 million shares for $153 million, bringing our total buyback for the year to 9.3 million shares for $373 million.

We’re also maintaining our commitments through reengineering and expense control, and we’re continuing to fund our investments with a portion of our reengineering savings. Expenses remain well-managed with general and administrative expenses down in every segment except asset management due to the Columbia acquisition.

Now I’d like to discuss our segment performance. First, advice and wealth management generated strong results. We reported pretax operating earnings of $88 million compared with 28 million a year ago. Our pretax operating margin in this segment was 9.3% for the quarter, up from 3.4% a year ago and up slightly over the sequential quarter. Our advisor retention rates remain very high with retention of our most productive advisors rising to well above 95%. Employee advisor retention is also up significantly, and that was a primary goal of our long-term work to reengineer the employee force with a focus on productivity.

We orchestrated a transformation of the advisor system. Lower producing advisors have left and we’ve reduced costs significantly while continuing to invest in the business. And even with the S&P 500 still 25% below all-time highs, advisor productivity is near our all-time highs; so we feel good about the economics we’re generating and the leverage we’ve created in the advisor system. Lower costs and higher productivity were our goals, and we are achieving them.

In the quarter, operating revenue per advisor increased 21% over a year ago. While we’re seeing some improvement in client activity compared to this time last year, advisor productivity was off slightly compared with the sequential quarter, mostly due to the slower summer months. Clients are more confident now than they were a year ago, but doubts and concerns are persisting; and as a result, investing behavior continues to show a fairly high level of risk aversion.

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