Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
AMP > SEC Filings for AMP > Form 10-Q on 5-Nov-2013All Recent SEC Filings

Show all filings for AMERIPRISE FINANCIAL INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for AMERIPRISE FINANCIAL INC


5-Nov-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the "Forward-Looking Statements" that follow and our Consolidated Financial Statements and Notes presented in Item 1. Our Management's Discussion and Analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission ("SEC") on February 27, 2013 ("2012 10-K"), as well as our current reports on Form 8-K and other publicly available information. Certain reclassifications of prior year amounts have been made to conform to the current presentation. References below to "Ameriprise Financial," "Ameriprise," the "Company," "we," "us," and "our" refer to Ameriprise Financial, Inc. exclusively, to our entire family of companies, or to one or more of our subsidiaries.

Overview

Ameriprise Financial is a diversified financial services company with a 118 year history of providing financial solutions. We offer a broad range of products and services designed to achieve the financial objectives of individual and institutional clients. We are America's leader in financial planning and a leading global financial institution with more than $734 billion in assets under management and administration as of September 30, 2013.

Our strategy is centered on helping our clients confidently achieve their goals by providing advice and managing their assets and protecting their assets and income. We utilize two go-to-market approaches in carrying out this strategy:
Wealth Management and Asset Management.

Our wealth management capabilities are centered on the long-term, personal relationships between our clients and our financial advisors and registered representatives (our "advisors"). Through our advisors, we offer financial planning, products and services designed to be used as solutions for our clients' cash and liquidity, asset accumulation, income, protection, and estate and wealth transfer needs. Our focus on personal relationships, together with our discipline in financial planning and strengths in product development and advice, allow us to address the evolving financial and retirement-related needs of our clients, including our primary target market segment, the mass affluent and affluent, which we define as households with investable assets of more than $100,000. The financial product solutions we offer through our advisors include both our own products and services and the products of other companies. Our advisor network is the primary channel through which we offer our affiliated insurance and annuity products and services.

Our network of more than 9,700 advisors is the primary means through which we engage in our wealth management activities. We offer our advisors training, tools, leadership, marketing programs and other field and centralized support to assist them in delivering advice and product solutions. We believe that our nationally recognized brand and practice vision, local marketing support, integrated operating platform and comprehensive set of products and solutions constitute a compelling value proposition for financial advisors, as evidenced by our strong advisor retention rate and our ability to attract and retain experienced and productive advisors. We have and will continue to invest in and develop capabilities and tools designed to maximize advisor productivity and client satisfaction.

We are in a strong position to capitalize on significant demographic and market trends driving increased demand for financial advice and solutions. In the U.S., the ongoing transition of baby boomers into retirement, as well as recent economic and financial market crises, continues to drive demand for financial advice and solutions. In addition, the amount of investable assets held by mass affluent and affluent households, our target market, have grown and accounts for over half of U.S. investable assets. We believe our differentiated financial planning model, broad range of products and solutions, as well as our demonstrated financial strength in the face of persistent economic headwinds, will help us capitalize on these trends.

Our asset management capabilities are global in scale, with Columbia Management Investment Advisers, LLC ("Columbia" or "Columbia Management") as the primary provider of U.S. products and services and Threadneedle Asset Management Holdings Sàrl ("Threadneedle") as the primary provider of products and services outside of the U.S. We offer a broad spectrum of investment advice and products to individual, institutional and high-net worth investors. These investment products are primarily provided through third parties, though we also provide our asset management products through our advisor channel. Our underlying asset management philosophy is based on delivering consistently strong and competitive investment performance. The quality and breadth of our asset management capabilities are demonstrated by 120 of our mutual funds, including 51 Columbia Management funds and 69 Threadneedle funds, being rated as four- and five-star funds by Morningstar.


Table of Contents

We are positioned to continue to grow our assets under management and to strengthen our asset management offerings to existing and new clients. Our asset management capabilities are well positioned to address mature markets in the U.S. and Europe. We also have the capability to leverage existing strengths to effectively expand into new global and emerging markets, to which investors are increasingly looking as a source of growth and income. In the past few years, we have expanded beyond our traditional strengths in the U.S. and U.K. to gather assets in Continental Europe, Asia, Australia, the Middle East and Africa. In addition, we expect to leverage the collective investment and distribution capabilities of Columbia and Threadneedle to develop new solutions designed to manage an increasingly complex and volatile marketplace.

The financial results from the businesses underlying our go-to-market approaches are reflected in our five operating segments:
• Advice & Wealth Management;

• Asset Management;

• Annuities;

• Protection; and

• Corporate & Other.

Our operating segments are aligned with the financial solutions we offer to address our clients' needs. The products and services we provide retail clients and, to a lesser extent, institutional clients, are the primary source of our revenues and net income. Revenues and net income are significantly affected by investment performance and the total value and composition of assets we manage and administer for our retail and institutional clients as well as the distribution fees we receive from other companies. These factors, in turn, are largely determined by overall investment market performance and the depth and breadth of our individual client relationships.

Financial markets and macroeconomic conditions have had and will continue to have a significant impact on our operating and performance results. The economy continues to show positive but slow growth and conflict over U.S. budgetary policy persists. The full effect of these factors on client confidence and activity continues to create uncertainty. In addition, the business and regulatory environment in which we operate remains subject to elevated uncertainty and change. To succeed, we expect to continue focusing on our key strategic objectives. The success of these and other strategies may be affected by the factors discussed in "Item 1A Risk Factors" in our 2012 10-K and other factors as discussed herein.

Equity price, credit market and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects they have on the asset management and other asset-based fees we earn, the "spread" income generated on our fixed annuities, fixed insurance, deposit products and the fixed portion of variable annuities and variable insurance contracts, the value of deferred acquisition costs ("DAC") and deferred sales inducement costs ("DSIC") assets, the values of liabilities for guaranteed benefits associated with our variable annuities and the values of derivatives held to hedge these benefits.

Earnings, as well as operating earnings, will continue to be negatively impacted by the ongoing low interest rate environment. In addition to continuing spread compression in our interest sensitive product lines, a sustained low interest rate environment may result in increases to our reserves and changes in various rate assumptions we use to amortize DAC and DSIC, which may negatively impact our operating earnings. For additional discussion on our interest rate risk, see Item 3. "Quantitative and Qualitative Disclosures About Market Risk."

In the third quarter of the year, we conduct our annual review of insurance and annuity valuation assumptions relative to current experience and management expectations. To the extent that expectations change as a result of this review, we update valuation assumptions and the impact is reflected as part of our annual review of life insurance and annuity valuation assumptions and modeling changes ("unlocking"). The unlocking impact in the third quarter of 2013 primarily reflected the impact of expected higher interest rates and changes in assumed policyholder behavior. See our Consolidated and Segment Results of Operations sections below for the pretax impacts on our revenues and expenses attributable to unlocking and additional discussion of the drivers of the unlocking impact.

In January 2013, we completed the conversion of our federal savings bank subsidiary, Ameriprise Bank, FSB, to a limited powers national trust bank, which conversion included changing the name of this subsidiary to Ameriprise National Trust Bank (references herein to "Ameriprise Bank" pertain to this same subsidiary whether before or after its conversion). In connection with this conversion, deposit-taking and credit-originating activities of Ameriprise Bank were terminated. In addition, Ameriprise Financial was deregistered by the Federal Reserve as a savings and loan holding company and will no longer be subject to supervision and regulation as such. We will continue to make available to our clients certain deposit and credit products via referral arrangements with respected third party financial institutions. The transition released approximately $375 million of


Table of Contents

formerly required capital, which we have been using to repurchase shares during 2013. We estimate that the transition will reduce our annual earnings by approximately $60 million in 2013. At the enterprise level, we anticipate that the earnings per share impact will be neutralized by the end of 2013, as we redeploy the excess capital to shareholders through share repurchases.

We consolidate certain collateralized debt obligations ("CDOs") and other investment products (collectively, "investment entities") for which we provide asset management services to and sponsor for the investment of client assets in the normal course of business. These entities are defined as consolidated investment entities ("CIEs"). For further information on CIEs, see Note 3 to our Consolidated Financial Statements. Changes in the valuation of the CIE assets and liabilities impact pretax income. The net income (loss) of the CIEs is reflected in net income (loss) attributable to noncontrolling interests. The results of operations of the CIEs are reflected in the Corporate & Other segment. On a consolidated basis, the management fees we earn for the services we provide to the CIEs and the related general and administrative expenses are eliminated and the changes in the assets and liabilities related to the CIEs, primarily debt and underlying syndicated loans, are reflected in net investment income. We continue to include the fees in the management and financial advice fees line within our Asset Management segment.

While our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), management believes that operating measures, which exclude net realized gains or losses; the market impact on variable annuity guaranteed living benefits, net of hedges and the related DSIC and DAC amortization; the market impact on indexed universal life benefits, net of hedges and the related DAC amortization, unearned revenue amortization and the reinsurance accrual; integration and restructuring charges; income (loss) from discontinued operations; and the impact of consolidating CIEs, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. While the consolidation of the CIEs impacts our balance sheet and income statement, our exposure to these entities is unchanged and there is no impact to the underlying business results. Management uses certain of these non-GAAP measures to evaluate our financial performance on a basis comparable to that used by some securities analysts and investors. Also, certain of these non-GAAP measures are taken into consideration, to varying degrees, for purposes of business planning and analysis and for certain compensation-related matters. Throughout our Management's Discussion and Analysis, these non-GAAP measures are referred to as operating measures.

It is management's priority to increase shareholder value over a multi-year horizon by achieving our on-average, over-time financial targets.

Our financial targets are:
• Operating total net revenue growth of 6% to 8%,

• Operating earnings per diluted share growth of 12% to 15%, and

• Operating return on equity excluding accumulated other comprehensive income of 15% to 18%.

The following tables reconcile our GAAP measures to operating measures:

                                              Three Months Ended            Nine Months Ended
                                                  September 30,                September 30,
                                               2013           2012          2013          2012
                                                                (in millions)
Total net revenues                         $    2,813      $  2,468     $   8,253      $   7,543
Less: Revenue attributable to CIEs                114            27           208             80
Less: Net realized gains (losses)                   6           (68 )           7            (75 )
Less: Market impact on indexed universal
life benefits                                      (2 )           -            (3 )            -
Less: Integration/restructuring charges             -            (8 )           -             (8 )
Operating total net revenues               $    2,695      $  2,517     $   8,041      $   7,546


Table of Contents

                                                                                     Per Diluted Share
                                                   Three Months Ended               Three Months Ended
                                                      September 30,                     September 30,
                                                   2013              2012            2013            2012
                                                        (in millions, except per share amounts)
Net income                                  $     449             $     151
Less: Net income (loss) attributable to
noncontrolling interests                           67                   (22 )
Net income attributable to Ameriprise
Financial                                         382                   173     $    1.86         $   0.79
Less: Income (loss) from discontinued
operations, net of tax                              1                    (1 )           -                -
Net income from continuing operations
attributable to Ameriprise Financial              381                   174          1.86             0.79
Add: Integration/restructuring charges, net
of tax (1)                                          -                    11             -             0.05
Add: Market impact on variable annuity
guaranteed living benefits, net of tax (1)         13                    60          0.06             0.28
Add: Market impact on indexed universal
life benefits, net of tax (1)                       2                     -          0.01                -
Less: Net realized gains (losses), net of
tax (1)                                             4                   (44 )        0.02            (0.20 )
Operating earnings                          $     392             $     289     $    1.91         $   1.32

Weighted average common shares outstanding:
Basic                                           201.3                 215.0
Diluted                                         205.1                 219.1


(1) Calculated using the statutory tax rate of 35%.

                                                                                Per Diluted Share
                                                 Nine Months Ended              Nine Months Ended
                                                    September 30,                  September 30,
                                                2013            2012            2013            2012
                                                      (in millions, except per share amounts)
Net income                                  $    1,095       $     569
Less: Net income (loss) attributable to
noncontrolling interests                            57             (71 )
Net income attributable to Ameriprise
Financial                                        1,038             640     $    4.97         $   2.84
Less: Loss from discontinued operations,
net of tax                                          (1 )            (3 )           -            (0.01 )
Net income from continuing operations
attributable to Ameriprise Financial             1,039             643          4.97             2.85
Add: Integration/restructuring charges, net
of tax (1)                                           2              43          0.01             0.19
Add: Market impact on variable annuity
guaranteed living benefits, net of tax (1)          43             143          0.21             0.64
Add: Market impact on indexed universal
life benefits, net of tax (1)                        3               -          0.01                -
Less: Net realized gains (losses), net of
tax (1)                                              5             (49 )        0.02            (0.22 )
Operating earnings                          $    1,082       $     878     $    5.18         $   3.90

Weighted average common shares outstanding:
Basic                                            204.8           221.3
Diluted                                          208.7           225.4


(1) Calculated using the statutory tax rate of 35%.


Table of Contents

The following table reconciles the trailing twelve months' sum of net income attributable to Ameriprise Financial to operating earnings and the five-point average of quarter-end equity to operating equity:

                                                               Twelve Months Ended
                                                                   September 30,
                                                                2013          2012
                                                                   (in millions)
Net income attributable to Ameriprise Financial              $   1,427     $     876
Less: Income from discontinued operations, net of tax                -            10
Net income from continuing operations attributable to
Ameriprise Financial                                             1,427           866
Less: Adjustments (1)                                              (22 )        (320 )
Operating earnings                                           $   1,449     $   1,186

Total Ameriprise Financial, Inc. shareholders' equity        $   8,775     $   9,057
Less: Assets and liabilities held for sale                           -            21
Less: Accumulated other comprehensive income, net of tax           955           912
Total Ameriprise Financial, Inc. shareholders' equity from
continuing operations, excluding AOCI                            7,820         8,124
Less: Equity impacts attributable to CIEs                          344           406
Operating equity                                             $   7,476     $   7,718

Return on equity from continuing operations, excluding AOCI       18.2 %        10.7 %
Operating return on equity, excluding AOCI (2)                    19.4 %        15.4 %


(1) Adjustments reflect the trailing twelve months' sum of after-tax net realized gains/losses; the market impact on variable annuity guaranteed living benefits, net of hedges and related DSIC and DAC amortization; the market impact on indexed universal life benefits, net of hedges and the related DAC amortization, unearned revenue amortization, and the reinsurance accrual; and integration and restructuring charges. After-tax is calculated using the statutory tax rate of 35%.
(2) Operating return on equity, excluding accumulated other comprehensive income ("AOCI"), is calculated using the trailing twelve months of earnings excluding the after-tax net realized gains/losses; market impact on variable annuity guaranteed living benefits, net of hedges and related DSIC and DAC amortization; the market impact on indexed universal benefits, net of hedges and the related DAC amortization, unearned revenue amortization, and the reinsurance accrual; integration and restructuring charges; and discontinued operations in the numerator, and Ameriprise Financial shareholders' equity, excluding AOCI; the impact of consolidating investment entities; and the assets and liabilities held for sale using a five-point average of quarter-end equity in the denominator.

Critical Accounting Policies

The accounting and reporting policies that we use affect our Consolidated Financial Statements. Certain of our accounting and reporting policies are critical to an understanding of our consolidated results of operations and financial condition and, in some cases, the application of these policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of our Consolidated Financial Statements. These accounting policies are discussed in detail in "Management's Discussion and Analysis - Critical Accounting Policies" in our 2012 10-K.

Deferred Acquisition Costs and Deferred Sales Inducement Costs

A decrease of 100 basis points in various rate assumptions is likely to result in an increase in DAC and DSIC amortization and an increase in benefits and claims expense from variable annuity guarantees. The following table presents the estimated impact to current period pretax income:

Estimated
Impact to
Pretax
Income(1)
(in millions)

Decrease in future near and long-term fixed income returns by 100 basis points $ (47 )

Decrease in future near-term equity fund growth returns by 100 basis points $ (36 ) Decrease in future long-term equity fund growth returns by 100 basis points (27 ) Decrease in future near and long-term equity fund growth returns by 100 basis points $ (63 )
(1) An increase in the above assumptions by 100 basis points would result in an increase to pretax income for approximately the same amount.


Table of Contents

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements and their expected impact on our future consolidated results of operations and financial condition, see Note 2 to our Consolidated Financial Statements.

Assets Under Management and Administration

Assets under management ("AUM") include external client assets for which we provide investment management services, such as the assets of the Columbia funds and Threadneedle funds, assets of institutional clients and assets of clients in our advisor platform held in wrap accounts as well as assets managed by sub-advisers selected by us. AUM also includes certain assets on our Consolidated Balance Sheets for which we provide investment management services and recognize management fees in our Asset Management segment, such as the assets of the general account and the variable product funds held in the separate accounts of our life insurance subsidiaries and client assets of CIEs. These assets do not include assets under advisement, for which we provide model portfolios but do not have full discretionary investment authority. Corporate & Other AUM primarily includes former bank assets that are managed within our Corporate & Other segment.

Assets under administration ("AUA") include assets for which we provide administrative services such as client assets invested in other companies' products that we offer outside of our wrap accounts. These assets include those held in clients' brokerage accounts. We generally record revenues received from administered assets as distribution fees. We do not exercise management discretion over these assets and do not earn a management fee. These assets are not reported on our Consolidated Balance Sheets. AUA also includes certain assets on our Consolidated Balance Sheets for which we do not provide investment management services and do not recognize management fees, such as investments in non-affiliated funds held in the separate accounts of our life insurance subsidiaries. These assets do not include assets under advisement, for which we provide model portfolios but do not have full discretionary investment authority.

The following table presents detail regarding our AUM and AUA:

                                               September 30,
                                             2013        2012           Change
                                                    (in billions)
Assets Under Management and Administration
Advice & Wealth Management AUM             $ 144.5     $ 121.7     $ 22.8     19  %
Asset Management AUM                         479.3       460.9       18.4      4
Corporate & Other AUM                          1.0           -        1.0     NM
Eliminations                                 (19.7 )     (18.1 )     (1.6 )   (9 )
Total Assets Under Management                605.1       564.5       40.6      7
Total Assets Under Administration            129.8       114.0       15.8     14
Total AUM and AUA                          $ 734.9     $ 678.5     $ 56.4      8  %

Total AUM increased $40.6 billion, or 7%, to $605.1 billion as of September 30, 2013 compared to $564.5 billion as September 30, 2012 due to a $22.8 billion increase in Advice & Wealth Management AUM driven by wrap account net inflows and market appreciation and an $18.4 billion increase in Asset Management AUM driven by market appreciation, partially offset by net outflows. See our segment . . .

  Add AMP to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for AMP - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.