Ameriprise Financial, Inc. Q2 2010 Earnings Call Transcript

Ameriprise Financial, Inc. (AMP)

Q2 2010 Earnings Call Transcript

July 29, 2010 9:00 am ET


Laura Gagnon – IR

Jim Cracchiolo – Chairman and CEO

Walter Berman – EVP and CFO


Alex Blostein – Goldman Sachs

Andrew Kligerman – UBS

Suneet Kamath – Sanford Bernstein

Jeff Schuman – KBW

Eric Berg – Barclays Capital

Thomas Gallagher – Credit Suisse

John Nadel – Sterne Agee

Colin Devine – Citi



Welcome to the 2010 second 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 second 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.

Jim Cracchiolo

Good morning. Thanks for joining us for our second quarter earnings discussion. Today, Walter and I will give you some insight into our results for the quarter. We’ll discuss the progress we’re making across our businesses and we’ll give you an update on the Columbia acquisition. Let’s get started.

This was a strong quarter for us. Despite the market declines we experienced in May and June, all four of our business segments performed well highlighted by continued margin improvement in our more fee-based segments – Advice & Wealth Management and Asset Management. We drove stronger client activity and advisor productivity. We made solid progress in our integration of Columbia Management and we experienced good sales trends in both production and annuities.

The positive momentum in the business contributed to operating earnings of $291 million for the quarter, an increase of a 172% compared to a year ago. Operating net revenues were $2.4 billion, a 27% increase over a year ago.

Our operating earnings and revenues, both reached all-time high, which of course reflects the benefits of the acquisitions we’ve made but also demonstrates that the business is returning to its pre-crisis profitability levels.

Total owned, managed, and administered assets increased to a highest level ever at $600 billion, which includes the Columbia assets. Our strong financial foundation and prudent operating principles continue to serve us well. The balance sheet remains in excellent condition, and our capital and liquidity positions continue to provide a great deal of flexibility.

In fact, during the quarter, we received a new stock repurchase authorization from our Board. We subsequently took advantage of the market opportunity and bought back 5.7 million shares for approximately $220 million. Going forward, we’ll continue to balance opportunities to buy shares with external factors.

In addition, we are maintaining our reengineering and expense focus, and we continue to reinvest the portion of our savings to drive growth initiatives. In the quarter, while distribution expenses increased along with advisor productivity, our controllable expenses remained well managed.

Now I’ll discuss our segment performance. First, in Advice & Wealth Management, we reported pre-tax operating earnings of $88 million compared with $21 million a year ago and $54 million last quarter. Our pre-tax operating margin in the segment was up 3% sequentially to 9.1%.

Our advisors remain satisfied and engaged and our retention rates remain high, especially among our most productive advisors. We continue to provide a high standard of advisor support, technology and tools as well as marketing and training.

We’re continuing the phased rollout of our new brokerage platform, which is one of our largest current investments. It provides advisors with important additional capabilities. Advisor productivity continues to rebound in the quarter, with operating revenue per advisor increasing 32% over a year ago and 12% sequentially.

At $83,000 of operating revenue per advisor for the quarter, our productivity has returned to pre-crisis levels. During the quarter, clients continued to increase their activity.

For example, in our wrap business we recorded another quarter of net inflows of more than $2 billion, and brokerage volumes increased. Of course, more recent market conditions could be worst as positive trend. If the downward market movement continues, clients can once again seek safety. Client confidence has rebounded somewhat, but given the depth and duration of the recession, we believe confidence is still quite fragile.

You’ll notice that our advisor count declined again this quarter. As we’ve told you in the past, we strongly focused on productivity and less productive advisors are leaving the system. While experienced advisor recruiting slowed in the quarter, we remained focused on bringing in more productive advisors and we believe we have a compelling offer and value proposition.

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