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AMERIPRISE FINANCIAL: Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

Third quarter 2015 net income

per diluted share was $2.17, operating EPS up 12 percent to $2.35

Third quarter 2015 return on equity excluding AOCI was 22.0 percent

Operating ROE excluding AOCI increased 190 bps to a record high 24.0 percent

MINNEAPOLIS October 21, 2015 Ameriprise Financial, Inc. (NYSE: AMP) today reported third quarter 2015 net income

of $397 million, or $2.17 per diluted share. Operating earnings were $429 million, with operating earnings per diluted share increasing 12 percent to $2.35.

Operating net revenues were $2.9 billion, a decrease of 1 perc ent compared to last year. Results in the quarter were negatively impacted by increased equity market volatility, a 7 percent decline in the U.S. equity market in the quarter, and unfavorable foreign exchange translation.

Operating expenses decreased 1 percent to $2.3 billion, including a 4 percent decline in general and administrative expenses reflecting the companys ongoing expense discipline, as well as a benefit from unlocking

In the quarter, the company increased its return to shareholders through share repurchases and dividends to $571 million.

Ameriprise had a solid third quarter given the backdrop of declining and volatile equity markets, unfavorable foreign exchange and persistently low interest rates, said Jim Cracchiolo, chairman and chief executive officer. In Advice and Wealth Management, were serving more clients and delivered another strong quarter for experienced advisor recruiting, both of which contributed to good client flows and helped balance market-related impacts in our other businesses.

We continue to differentiate Ameriprise with our capital strength. Return on equity reached 24 percent at quarter end one of the best in the industry. With the pull back in our valuation, we increased our share repurchases, and with dividends, returned more than $570 million to shareholders in the quarter.

Net income represents net income from continuing operations attributable to Ameriprise Financial.

Unlocking represents the companys annual review of insurance and annuity valuation assumptions and model changes.

Third Quarter Summary

Quarter Ended

September 30,


Per Diluted Share

Quarter Ended

(in millions, except per share amounts, unaudited)


Net income from continuing operations attributable to Ameriprise Financial

Adjustments, net of tax

(see reconciliation on p. 11)

Operating earnings

Weighted average common shares outstanding: Basic

After-tax is calculated using the statutory tax rate of 35%.

The company believes the presentation of operating earnings best represents the economics of the business. Operating earnings, after-tax, exclude the consolidation of certain investment entities; net realized investment gains or losses, net of deferred sales inducement costs (DSIC) and deferred acquisition costs (DAC) amortization, unearned revenue amortization and the reinsurance accrual; integration and restructuring charges; the market impact on variable annuity guaranteed benefits, net of hedges and related DSIC and DAC amortization; the market impact on indexed universal life benefits, net of hedges and related DAC amortization, unearned revenue amortization, and the reinsurance accrual; the market impact of hedges to offset interest rate changes on unrealized gains or losses for certain investments; and income or loss from discontinued operations.

In the third quarter of the year, the company conducts its 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, the company updates valuation assumptions and models and the impact is reflected as part of annual unlocking. As discussed in the segment commentary to follow, the favorable impact in the current quarter reflects improved policyholder behavior and model updates that more than offset the continued low interest rate environment, which the company estimated would increase over the past year.

In addition, the annual review of the closed long term care book resulted in no loss recognition, as better-than-expected premium increases offset higher morbidity and lower interest rates.

Third quarter operating earnings included the following after-tax items

Valuation Assumptions and Model Changes (unlocking)

Market Impact on DAC/DSIC

The third quarter 2015 operating effective tax rate was 23.1 percent. The company estimates that its full year 2015 operating effective tax rate will be approximately 25 percent.

Third Quarter 2015 Business Highlights

Total assets under management and administration were $766 billion as Ameriprise advisor client net inflows were more than offset by market depreciation and an unfavorable foreign exchange impact of approximately $10 billion.

Advice & Wealth Management advisor client assets of $433 billion were essentially flat from a year ago as lower equity markets were partially offset by continued strength in fee-based investment advisory net inflows, including $3.0 billion of net inflows in the quarter.

On a trailing 12-month basis, operating net revenue per advisor grew 6 percent to a record $514,000 reflecting consistent growth in advisor productivity.

Total advisors increased to 9,814 reflecting strong advisor retention and ongoing experienced advisor recruiting. The company completed the acquisition of the retail assets of JHS Capital Advisors that added 53 advisors and $1.0 billion of client assets. In addition, the company added 95 experienced, highly productive advisors in the quarter.

The company debuted its Be Brilliant

brand platform that highlights the long-term benefits investors can gain by working with Ameriprise advisors. The accompanying national advertising illustrates how personal, comprehensive financial planning can help investors achieve moments of brilliance in their everyday lives and in retirement.

Asset Management segment AUM declined to $471 billion, primarily driven by net outflows of $7.4 billion in the quarter and an unfavorable foreign exchange impact of approximately $10 billion year-over-year. Outflows were driven by former parent related flows and $3.3 billion from two clients decisions to exit strong performing portfolios due to either asset allocation or specific liquidity needs related to geopolitical issues.

Investment performance remained strong with 114 four- and five-star funds at Columbia Threadneedle Investments.

Variable annuity policyholder account balances were $73 billion and included $1.3 billion in new sales, up 11 percent driven by new benefit riders and increased sales of non-living benefit policies.

Excess capital was approximately $2.5 billion after the company repurchased 3.8 million shares of common stock in the quarter for $450 million and paid $121 million in quarterly dividends. The company also holds $250 million of additional capital above required levels, primarily for variable annuity products.

The company returned 133% of operating earnings to shareholders in the quarter, reflecting its strategy of adjusting the level of share repurchases based on valuation.

October 2015 marked the 10-year anniversary of our successful spin-off of Ameriprise Financial as an independent public company. During that time, we have transformed the company into a diversified financial services leader. We are proud of our strong record of delivering for our clients, advisors and shareholders and remain focused on continuing to serve our clients needs and advance the firm.

Advice & Wealth Management Segment Operating Results

Quarter Ended September 30,

% Better/

(in millions, unaudited)

Advice & Wealth Management

Net revenues


Pretax operating earnings

Pretax operating margin

Retail client assets (billions)

Mutual fund wrap net flows (billions)

Operating net revenue per branded advisor (trailing 12 months - thousands)

pretax operating earnings increased 7 percent to $219 million despite volatile equity markets. Given the operating environment, revenue growth was good and we continued our disciplined expense controls. Third quarter 2015 pretax operating margin reached a record high of 17.6 percent compared to 16.9 percent a year ago.

Operating net revenues grew 3 percent to $1.2 billion driven by growth in fee-based accounts from client net inflows partially offset by the negative impact of $20 billion of lower asset levels from market declines during the quarter.

Operating expenses increased 2 percent to $1.0 billion as business growth resulted in higher distribution expenses. General and administrative expenses declined 1 percent compared to a year ago.

Total retail client assets of $433 billion were essentially flat compared to the prior year as client net inflows and client acquisition were offset by year-over-year market depreciation. Underlying business metrics remained strong in the quarter. Wrap net inflows were $3.0 billion with wrap balances increasing 3 percent to $174 billion. Total advisors increased to 9,814 reflecting strong advisor retention and ongoing experienced advisor recruiting with 95 experienced advisors moving their practices to Ameriprise in the quarter. The combination of asset growth and client activity drove a 6 percent increase in operating net revenue per advisor on a trailing 12-month basis to $514,000.

Asset Management Segment Operating Results

Asset Management

Adjusted net pretax operating margin

Total segment AUM


Columbia Management AUM

Threadneedle AUM