Ameriprise’s Wealth Segment Posts Record Profit Margin

Ameriprise’s Wealth Segment Posts Record Profit Margin

Ameriprise Financial (NYSE: AMP) reported stong growth in the third quarter driven by the advice, wealth management and asset management segments, which account for an increasing portion of its overall business; firm-wide operating net revenue was up 8 percent from a year ago to $2.9 billion and operating earnings per share up 10 percent to $2.10. The firm reported a record profit margin of 16.9 percent in its advice and wealth management segment in the quarter, up 270 basis points from a year ago.

“Solid revenue growth combined with continued expense discipline resulted in a record AWM (advice and wealth management) and asset management margin of 16.9 percent and 41.3 percent, respectively,” said Chief Financial Officer Walter Berman, during an analyst call. “Together, advice and wealth management and asset management operating earnings grew 27 percent and accounted for 68 percent of earnings.”

Excluding deferred acquisition costs, advice and wealth and asset management accounted for 64 percent of pre-tax operating earnings for the firm, up from 59 percent last year.

The firm’s third quarter earnings beat analyst expectations by $0.14, while its revenue beat expectations by $50 million, according to Seeking Alpha. AMP’s stock was up 2.3 percent Wednesday as of 11:08 a.m. eastern time.

Firm assets under administration and under management increased 8 percent to $797 billion, driven by strong advisor client flows and market appreciation, said Jim Cracchiolo, chairman CEO.

Operating net revenues in advice and wealth grew 13 percent year over year to $1.2 billion, driven by the strong growth in assets. Total client assets were up 11 percent to $434 billion, with inflows of $3.8 billion into the firm’s investment advisory programs. Pre-tax operating earnings increased 35 percent from a year ago to $205 million. Operating expenses were $1 billion in the quarter, 9 percent higher than a year ago.

“The combination of strong flows, asset growth and productivity, as well as ongoing expense management lead to a 35 percent increase in operating PTI and pre-tax operating margin up significantly to 16.9 percent,” Cracchiolo said.

Advisor productivity continued its upward trend, reaching an average $483,000, up 13 percent from a year ago and 3 percent from the second quarter.

Cracchiolo said the company recruited 81 experienced advisors during the quarter, but total advisor count was down 65 from the third quarter 2013 to 9,696. That’s up slightly from 9,692 in the second quarter. 

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