Ameriprise Financial Inc. (NYSE: AMP), one of the nation’s largest independent broker-dealers, reported strong growth during the first quarter of 2018 across a number of metrics and raised its quarterly dividend.
Ameriprise reported first quarter 2018 net income of $594 million, up 47 percent compared to a year ago, or $3.91 per diluted share, up 55 percent. Adjusted operating earnings were $563 million, up 30 percent compared to a year ago, with adjusted operating earnings per diluted share of $3.70, up 37 percent.
The company announced that it was increasing its regular quarterly dividend from $0.83 per diluted share to $0.90 per diluted share – an 8 percent increase. This is the eleventh increase over the past nine years.
On yesterday’s company earnings call, chairman and CEO Jim Cracchiolo indicated his support of the Securities and Exchange Commission’s proposed investment advice rule, which spans more than 1,000 pages.
“On the surface, it looks very good in a sense that it is a bit more principles-based, it’s a more appropriate against what would be supportable regulation…for us and the industry to conduct business, but still serving people in their best interest which we fully support,” said Cracchiolo.
He added, “We’ve very encouraged by it…You’ve got to read the details and figure out how that looks in reality, but we think it is appropriate for the SEC to take the broader role and have it consistent across all of our activities. So, we’re very favorable to that.”
Cracchiolo also mentioned the likely death of the Department of Labor’s fiduciary rule following the Fifth Circuit Court of Appeals ruling last month to vacate the rule. “Unless the DOL appeals it then the rule will be out,” he said.
First Quarter Highlights
During the first quarter of 2018, net revenues of $3.2 billion increased 8 percent, or $242 million, from a year ago, which the company noted is primarily due to strong net revenue growth in advice and wealth management from growth in client assets.
Expenses of $2.5 billion increased 1 percent compared to a year ago.
First quarter profitability was strong, with a 30 percent increase in adjusted operating earnings and a 29.3 percent adjusted operating return on equity, excluding accumulated other comprehensive income, up 570 basis points compared to the prior year.
Ameriprise returned over 90 percent of adjusted operating earnings to shareholders. The company repurchased 2.4 million shares of common stock for $387 million and paid $125 million in quarterly dividends.
Excess capital increased to $1.4 billion, the risk-based capital ratio increased to over 500 percent, and a total of $484 million in dividends were paid from subsidiaries to the holding company during the quarter.
Total assets under management and administration increased 9 percent to $887 billion.
Ameriprise retail client assets grew 12 percent to $557 billion.
Client demand for fee-based investment advisory (wrap) products had net inflows of $5.7 billion in the quarter. Wrap assets reached $251 billion, one of the largest platforms in the industry.
Advisor productivity increased 13 percent to $586,000 per advisor on a trailing 12-month basis after normalizing for the net impact from eliminating 12b-1 fees in advisory accounts.
Ameriprise recruited 79 advisors during the quarter.
Ameriprise advisors were recognized in multiple top advisor rankings, including 59 advisors named to Barron’s annual Top 1,200 State-by-State Advisors list, 125 advisors named to Forbes’ inaugural Best-in-State Wealth Advisors ranking and 39 advisors named to the Financial Times Top 400 Advisers list.
Advice and Wealth Management
• Advice and wealth management pretax adjusted operating earnings increased 27 percent to $316 million driven by asset growth and higher earnings on cash balances. Pretax adjusted operating margin was 21.1 percent, up 230 basis points from a year ago. Pretax adjusted operating margin in both periods reflects the adoption of a new accounting standard, which decreased margin by approximately 40 basis points in each period.
• The company noted that first quarter earnings tend to be seasonally lower than other quarters because the first quarter has two fewer fee days and includes higher payroll tax expenses. These items reduced earnings by $12 million and $7 million respectively in the quarter.
• Adjusted operating net revenues increased 16 percent to $1.5 billion after normalizing for the 12b-1 fee net impacts.
• Adjusted operating expenses increased 10 percent to $1.2 billion primarily from higher distribution expenses related to growth in client assets.
• General and administrative expenses were up 6 percent compared to a year ago, reflecting the addition of independent broker-dealer IPI and investments for business growth, including additional advertising as well as higher volume-related expenses.
• Client brokerage cash balances were $25.4 billion, down slightly from a year ago as clients allocated cash to other investments.
Ameriprise Financial oversees a nationwide network of approximately 10,000 financial advisors and has $887 billion in assets under management.