Ameriprise In Line With Zacks Est. – Analyst Blog

Ameriprise Financial Inc.’s (AMP) first quarter core operating earnings per share of 81 were flat with the Zacks Consensus Estimate but higher than 60 cents recorded in the prior-year quarter. However, earnings were lower than 91 cents recorded in the prior quarter. Core operating results exclude realized net investment gains/losses, non-recurring integration costs and other market impacts.

Results for the quarter primarily benefited from increased asset-based fees from market appreciation and higher client activity, net inflows in wrap accounts and asset management, higher investment yields and higher income from spread products as a result of its re-engineering efforts.

GAAP net income came in at $214 million or 81 cents per share for the reported quarter compared to $130 million or 58 cents per share in the prior-year quarter.

Net revenues increased 32% year-over-year to $2.27 billion and was almost flat compared with the prior quarter. The year-over-year growth reflects the substantial improvement in net investment income, primarily driven by net investment losses in the earlier year. Additionally, advisory and distribution fees, wealth management, annuities and premiums also added significantly to the ascent in top-line growth.

Total advisors declined 5% to 11,837 compared to the first quarter of 2008, reflecting the continuous departure of low-producing advisors. Owned, managed and administered assets were $463 billion during the quarter, up 1% from prior quarter and 31% compared to year-ago quarter primarily due to strong product flows, bond market appreciation and recent net inflows.

Total asset management net inflows were $332 billion in the quarter, up 31% year-over-year, reflecting improved flows at both domestic and international businesses. Total wrap net inflows in the quarter were $2.5 billion, up 93% year-over-year, resulting almost entirely from market appreciation that also increased wrap assets.

 However, GAAP expenses increased 21% year-over-year to $1.91 billion, while core operating expenses increased 19% year-over-year to $1.86 billion. These reflected an increase in distribution expenses along with benefits, claims, losses and settlement expenses.

Ameriprise continues to maintain a strong liquidity, which we think will help it grow through acquisitions. During the reported quarter, Ameriprise’s excess capital position was more than $2.5 billion, including $1 billion for the company’s pending acquisition of Columbia Management’s long-term asset management business. As of March 31, 2010, the company had $1.0 billion in net unrealized investment gains.

Ameriprise’s book value per share increased to $38.52 from $35.82 at the end of prior quarter and $28.54 at the end of prior-year quarter. Cash and cash equivalents were $6.8 billion for the reported quarter, with $2.5 billion at the holding company level and $4.3 billion in free cash.

At the end of March 31, 2010, the debt-to-total capital ratio was 20.5%. The debt-to-total-capital ratio excluding non-recourse debt and with 75% equity credit for hybrid securities was 19.3%. Operating return on equity came in at 9.7% compared with 5.3% in the year-ago quarter.

 Dividend Update

On April 26, the Board of Ameriprise declared a quarterly cash dividend of 18 cents per common share, increasing its quarterly dividend by 1 cent per share. The dividend will be paid on May 21, 2010 to shareholders of record as on May 7, 2010.

 Columbia Update

Ameriprise expects to complete the acquisition of long-term asset management business of Bank of America Corporation’s Columbia Management unit on May 1, 2010. In September 2009, Ameriprise had agreed to purchase this unit for approximately $1 billion. Operational and financial expectations appear to be stable. The transaction will provide far-reaching product distribution opportunities and will be accretive to earnings and return on equity within one year.

Ameriprise reduced its expected full-year 2010 operating tax rate from approximately 28-30% to approximately 25-27% based on expected benefits from tax planning. The company expects to record a large portion of these tax planning benefits in the first and second quarters of 2010.