Ameriprise Financial's CEO Discusses Q1 2012 Earnings Results - Earnings Call Transcript

Ameriprise Financial, Inc. (AMP)

Q1 2012 Earnings Call

April 24, 2011 9:00 am ET

Executives

Alicia A. Charity – Investor Relations

James M. Cracchiolo – Chairman of the Board & Chief Executive Officer

Walter S. Berman – Chief Financial Officer & Executive Vice President

Analyst

Andrew Kligerman – UBS

John Nadel – Sterne Agee

Alexander Blostein – Goldman Sachs & Co.

Jay Gelb – Barclays Capital

Eric Berg – RBC Capital Market

Thomas Gallagher – Credit Suisse Securities

Jeffrey Schuman – Keefe, Bruyette & Woods

John Hall – Wells Fargo Securities

Presentation

Operator

Welcome to the first quarter 2012 earnings 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. Alicia Charity.

Alicia A. Charity

Welcome to Ameriprise Financial’s first quarter earnings call. With me on the call today are Jim Cracchiolo, Chairman and CEO and Walter Berman, Chief Financial Officer. Following their remarks we’ll be happy to 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 the non-GAAP numbers to the respective GAAP numbers can be found in today’s materials available on our website.

Some statements that we make on this call may be forward-looking 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, our 2011 annual report to shareholders, or our 2011 10K Report. We undertake no obligation to update publically or to revise these forward-looking statements.

With that, I’ll turn it over to Jim.

James M. Cracchiolo

Thank you for joining us for our first quarter earnings discussion. Let’s begin with my overview of the business performance in the quarter and then Walter will discuss our financial results in more detail. Afterwards, we’ll take your questions.

As we look at the quarter the business is performing well. Fee based business growth is offsetting interest rate pressure and we continue to differentiate Ameriprise with our ability to return capital to shareholders. The fundamentals of our business are good. Client assets and retail flows are strong and we’re helping our clients manage through an unsettled economic environment.

While our clients are reentering the market a bit more in recent months, they remain cautious and continue to prioritize capital preservation. The markets while improved still present challenges. US and European average equity markets were only up slightly compared to a year ago and the low interest rate effects on the industry were evident in our results as well. On an operating basis for the quarter, net revenues were up 1% to $2.5 billion, EPS increased 9% to $1.45, and return on equity excluding AOCI rose to 16% from 14.9% a year ago.

Our balance sheet and capital remain among the strongest in the industry. With our capital position we have the flexibility to both invest for business growth and return significant capital to shareholders. During the quarter we returned 109% of our operating earnings to shareholders through share repurchases and higher dividends. We continue to buy back our shares at a healthy pace with 5.4 million shares purchased in the quarter for $300 million.

Meanwhile, we’ve been increasingly focused on raising our dividend as a portion of capital returned. As part of our plan, we declared another quarterly dividend increase yesterday boosting our quarterly dividend 25%. Over the past 12 months, we have announced three quarterly dividend increases which in total nearly doubled our dividend in a short period of time. Our dividend growth now brings our implied dividend yield to approximately 2.6% which puts us in very good company. In fact, in terms of total capital returned to shareholders, we are a leader among the S&P 500 financials.

In 2011, we were in the top quintal of the S&P financial companies for return of capital. We returned almost three times the capital of the average company. I feel very good about our capital position and our strategy to increase total shareholder return. We’re generating strong free cash flow to reinvest in the business and return to shareholders. We intend to return the majority of our earnings to shareholders annually and increase the mix between dividends and repurchases gradually as we maintain our capital strength and flexibility to navigate periods of economic and market stress.

Now, let’s review our business segment performance. First advice and wealth management; we’ve consistently invested in our advisory business transforming it into a powerful growth platform. We’ve expanded both the earnings power and the profitability of the business by serving more mass affluent and affluent clients and growing advisor productivity. Through our targeted growth investments, we’ve set a nice springboard for our advisory business.

Our national television advertising presence continues and we were recently recognized with a David Ogilvy Award for excellence in advertising research. This year, we’ll complete our new brokerage platform implementation, a significant technology project that we began over a year ago. As we proceed through the next two quarters, we expect to convert more than 6,000 advisors to the new platform with the related technology expenses wrapping up later this year.

We’re also having very good success recruiting experienced advisors with attractive books of business. Advisors are increasingly attracted to the value we offer and the values we stand for. During the quarter, 117 experienced advisors joined Ameriprise which was one of our strongest recruiting quarters yet. Combined with the excellent stability and satisfaction of our legacy advisors, our advisor force is growing.

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