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Ameriprise Financial Inc. Reports Operating Results (10-Q)

November 05, 2012 | About:
10qk

10qk

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Ameriprise Financial Inc. (AMP) filed Quarterly Report for the period ended 2012-09-30.

Ameriprise Financial Inc has a market cap of $12.5 billion; its shares were traded at around $60.1399 with a P/E ratio of 11.3 and P/S ratio of 1.2. The dividend yield of Ameriprise Financial Inc stocks is 2.4%.

Highlight of Business Operations:

Income from continuing operations before income tax provision decreased $127 million, or 39%, to $199 million for the third quarter of 2012 compared to the prior year period primarily reflecting an unfavorable impact from unlocking, the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC and DAC amortization), net realized losses on securities primarily associated with the Ameriprise Bank transition and $40 million of additional investment income recognition in the prior year period, net of DAC and DSIC amortization, partially offset by a favorable market impact on DAC and DSIC, market appreciation and an increase in revenues of CIEs. The market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC and DAC amortization) was a decrease to pretax earnings of $91 million for the third quarter of 2012, which included a $10 million negative impact associated with unlocking. This compares to an increase of $77 million for the prior year period, which included a $4 million negative impact associated with unlocking. The market impact on DAC and DSIC was a benefit of $15 million for the third quarter of 2012 compared to an expense of $42 million for the prior year period. The negative impact of the continued low interest rate environment was $16 million pretax for the third quarter of 2012 compared to the prior year period.

Net revenues increased $28 million, or 4%, to $733 million for the three months ended September 30, 2012 compared to $705 million for the prior year period primarily due to an increase in management and financial advice fees. Management and financial advice fees increased $21 million, or 4%, to $620 million for the three months ended September 30, 2012 compared to $599 million for the prior year period due to $17 million of redemption-driven hedge fund performance fees, as well as an increase in assets under management, partially offset by the impact of the industry shift in flows from equity to fixed income, which has a lower fee. Average assets under management increased 3% compared to the prior year period driven by market appreciation, partially offset by net outflows. See our discussion above on the changes in assets under management.

Benefits, claims, losses and settlement expenses, which exclude the market impact on variable annuity guaranteed living benefits, net of hedges and the related DSIC amortization, increased $47 million, or 49%, to $143 million for the three months ended September 30, 2012 compared to $96 million for the prior year period primarily due to the impact of unlocking, as well as higher reserves related to higher fees from variable annuity guarantees, partially offset by the market impact to DSIC and lower reserves resulting from lower sales of immediate annuities with life contingencies. Benefits, claims, losses and settlement expenses for the third quarter of 2012 included a $32 million expense from unlocking, primarily reflecting lower bond fund returns related to liabilities for the life contingent benefits associated with GMWB. Benefits, claims, losses and settlement expenses for the third quarter of 2011 included a $40 million benefit from unlocking, primarily reflecting a positive impact from enhancements made to the valuation of variable annuities with living benefits. The market impact to DSIC was a benefit of $3 million in the third quarter of 2012 compared to an expense of $9 million in the prior year period as a result of favorable equity and bond fund returns in 2012 compared to unfavorable markets in 2011.

Income from continuing operations before income tax provision decreased $301 million, or 27%, for the nine months ended September 30, 2012 compared to the prior year period reflecting an unfavorable impact from unlocking and model changes, the market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC and DAC amortization), net realized losses on securities primarily associated with the Ameriprise Bank transition, $40 million of additional investment income recognition in the prior year period, net of DAC and DSIC amortization, a $73 million negative pretax impact from continued low interest rates, and a $27 million gain from an interest rate hedge that benefited revenues in the prior year period, partially offset by a favorable market impact on DAC and DSIC, market appreciation and an increase in revenues of CIEs. The market impact on variable annuity guaranteed living benefits (net of hedges and the related DSIC and DAC amortization) was a decrease to pretax earnings of $220 million for the nine months ended September 30, 2012, which included a $10 million negative impact associated with unlocking. This compares to an increase of $49 million for the prior year period, which included a $4 million negative impact associated with unlocking. The market impact on DAC and DSIC was a benefit of $29 million for the nine months ended September 30, 2012 compared to an expense of $28 million for the prior year period.

Net revenues decreased $44 million, or 2%, to $2.2 billion for the nine months ended September 30, 2012 compared to the prior year period driven by a decrease in management and financial advice fees. Management and financial advice fees decreased $48 million, or 3%, to $1.8 billion for the nine months ended September 30, 2012 primarily due to lower fees on our Columbia funds driven by lower average AUM, as well as the impact of the industry shift in flows from equity to fixed income, which has a lower fee, partially offset by $22 million of redemption-driven hedge fund performance fees. Average Columbia AUM decreased $15.8 billion, or 4%, compared to the prior year period driven by net outflows, partially offset by market appreciation. See our discussion above on the changes in assets under management.

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