Ameriprise Financial Reports First Quarter 2006 Results; First Quarter Net Income Per Diluted Share Was $0.57; Adjusted Earnings Per Diluted Share for the Quarter Were $0.75.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- Ameriprise Financial Ameriprise Financial, Inc. (NYSE: AMP) is a company offering financial advice and products. It is the successor to American Express Financial Advisors (AEFA), which was a subsidiary of the American Express Company. , Inc. (NYSE NYSE See: New York Stock Exchange :AMP) today reported net income of $145 million for the first quarter ended March 31, 2006 versus income before discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of $175 million for the year-ago quarter. Adjusted(1) earnings increased 17 percent to $189 million in the first quarter of 2006 compared to the first quarter of 2005. Adjusted earnings do not reflect after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. non-recurring separation costs, which increased $31 million, and $27 million of AMEX AMEX See: American Stock Exchange Assurance after-tax earnings in the 2005 period. Net income per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share for the first quarter of 2006 was $0.57. Adjusted earnings per diluted share for the first quarter of 2006 were $0.75. Both per share amounts are based on an average diluted share count of 253.5 million. Revenues grew 6 percent to $1.9 billion in the first quarter of 2006. Adjusted revenues grew 10 percent, predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. driven by 17 percent growth in management, financial advice and service fees. Return on equity before discontinued operations for the 12 months ended March 31, 2006 was 7.4 percent. Adjusted return on equity increased to 10.4 percent from 10.2 percent for the 12 months ended December December: see month. 31, 2005. "We had strong performance in the quarter, as we continue to establish ourselves as an independent company," said Jim Cracchiolo, chairman and chief executive officer. "During the quarter, we made substantial progress in establishing the Ameriprise Financial brand, increasing our mass affluent Mass affluent and emerging affluent are marketing terms used to refer to the growing high end of the mass market. It is most commonly used by the financial services industry to refer to individuals with US$100,000 to US$1,000,000 of liquid financial assets,[1] clients, improving advisor productivity, introducing new innovative product solutions and continuing to deliver strong investment performance through both RiverSource RiverSource is a subsidiary of Ameriprise Financial, Inc. RiverSource is made up of RiverSource Investments, RiverSource Annuities, and RiverSource Insurance. RiverSource Funds include more than 60 retail mutual funds and more than 20 variable portfolio mutual funds sold in Investments and Threadneedle Investments." In the quarter, the Ameriprise Financial Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of up to 2 million shares of Ameriprise Financial common stock by the end of 2006. Subsequently, the board authorized an additional expenditure for up to $750 million to repurchase shares through the end of March 2008. On March 29, 2006, the Company completed a $275 million share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. representing 6.4 million shares of Ameriprise Financial common stock. (1) See definitions and reconciliations throughout the release. First Quarter 2006 Summary Management believes that the presentation of "adjusted" financial measures best reflects the underlying performance of the Company's ongoing operations. The adjusted financial measures exclude discontinued operations, non-recurring separation costs and AMEX Assurance. This presentation is consistent with the non-GAAP financial information presented in the Company's annual report and Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2005, filed March 8, 2006 with the Securities and Exchange Commission.
Ameriprise Financial, Inc.
1Q 2006 Summary
Per Diluted
(in millions, unaudited) % Share %
-------------
1Q06 1Q05 Change 1Q06 1Q05 Change
----- ----- ------ ------ ------ ------
Net income $145 $183 (21)% $0.57 $0.74 (23)%
Less: Income from
discontinued operations - 8 # - 0.03 #
----- ----- ------ ------
Income before discontinued
operations 145 175 (17) 0.57 0.71 (20)
Less: Income attributable to
AMEX Assurance, after-tax - 27 # - 0.11 #
Add: Separation costs, after-
tax 44 13 # 0.18 0.05 #
----- ----- ------ ------
Adjusted earnings, after-tax $189 $161 17 $0.75 $0.65 15
===== ===== ====== ======
# Variance of 100% or greater.
Included in both net income and adjusted earnings for the first quarter of 2006 was $4 million in pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta realized net investment gains, $11 million in pre-tax severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs primarily related to our technology functions and $11 million in pre-tax legal and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. costs. Included in first quarter 2005 were $10 million in pre-tax realized net investment gains and $35 million in pre-tax and after-tax legal and regulatory costs. First Quarter 2006 Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Business Highlights --Ameriprise Financial total brand awareness exceeded 40 percent in the quarter, with unaided un·aid·ed adj. Carried out or functioning without aid or assistance: made an unaided attempt to climb the sheer cliff. brand awareness at more than two times historical American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. Financial Advisor levels. --The number of mass affluent clients with $100,000 or more in assets or comparable product values with the Company increased 11 percent from the year-ago period. --Clients with a financial plan increased to 44 percent, up from 43 percent in the year-ago period. --Total advisors declined 58 from December 31, 2005 to 12,339. Branded advisors declined 91 to 10,526, primarily as a result of the Company's actions to reposition several employee advisor offices during the quarter and increase employee advisor productivity requirements, which negatively impacted employee advisor retention. The franchisee advisor force remained stable, increasing 99 to 7,491 over the same time period. --Total Gross Dealer Concession Gross Dealer Concession or GDC is the revenue to a brokerage firm when commissioned securities and insurance salespeople sell a product, whether it is an investment like stocks, bonds, or mutual funds, or insurance like life insurance or long term care insurance. (GDC GDC Game Developers Conference GDC General Dental Council GDC Gouvernement du Canada GDC Georgia Department of Corrections GDC Global Data Center GDC Guglielmi Detachable Coil GDC Global Development Center GDC Institute for Genetic Disease Control in Animals ) increased 15 percent from the year-ago period and was up more than 12 percent sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen , reflecting strong advisor productivity and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. market conditions. Per branded advisor GDC increased 17 percent from the first quarter of 2005. --At March 31, 2006, owned, managed and administered assets of $446 billion increased 11 percent from March 31, 2005 and 4 percent from December 31, 2005, reflecting market appreciation and improved flows. --Strong net flows in the quarter included $1.9 billion in wrap flows and $1.1 billion in variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. flows. --Continued strong investment results contributed to $2.5 billion in RiverSource mutual fund sales in the quarter and improved RiverSource mutual fund outflows in the advisor channel. These improvements were partially offset by an increase in RiverSource New Dimensions Fund(1) redemptions in the 401(k) channel. --Adjusted revenues were up 10 percent. Adjusted earnings increased 17 percent, and adjusted return on equity increased to 10.4 percent. --After six months as an independent company, separation activities continue to be well executed executed 1) adj. to have been completed. (Example: "it is an executed contract") 2) v. to have completed or fully performed. (Example: "he executed all the promises made in the contract") 3) v. and are on track. (1) On February February: see month. 15, 2006, shareholders of the Fund approved a proposal to merge See mail merge and concatenate. the Fund into RiverSource(SM) Large Cap Equity Fund. The merger occurred on March 10, 2006.
Ameriprise Financial, Inc.
Consolidated Income Statements Reconciled to Adjusted
AMEX
Assurance
Quarters Quarters
Ended Ended
March 31, % March 31,
------------- ------------
(in millions, unaudited) 2006 2005 Change 2006 2005
------------- ------ ------------
Revenues
Management, financial advice and
service fees $710 $608 17% $- $1
Distribution fees 301 288 5 - -
Net investment income 574 548 5 - 3
Premiums 220 270 (19) - 71
Other revenues 144 133 8 - (1)
------ ------ ------ -----
Total revenues 1,949 1,847 6 - 74
------ ------ ------ -----
Expenses
Compensation and benefits:
Field 423 362 17 - 1
Non-field 316 279 13 - -
------ ------ ------ -----
Total compensation and benefits 739 641 15 - 1
Interest credited to account values 324 311 4 - -
Benefits, claims, losses and
settlement expenses 227 218 4 - 19
Amortization of deferred
acquisition costs 128 136 (6) - 8
Interest and debt expense 23 17 35 - -
Other expenses 250 258 (3) - 6
------ ------ ------ -----
Total expenses before separation
costs 1,691 1,581 7 - 34
------ ------ ------ -----
Income before income tax provision,
discontinued operations and
separation costs (1) 258 266 (3) - 40
Income tax provision before tax
benefit attributable to separation
costs (1) 69 78 (12) - 13
------ ------ ------ -----
Income before discontinued
operations and separation costs (1) 189 188 1 $- $27
====== =====
Separation costs, after-tax (1) 44 13 #
------ ------
Income before discontinued
operations 145 175 (17)
Discontinued operations, net of tax - 8 #
------ ------
Net income $145 $183 (21)
====== ======
Weighted average common shares
outstanding:
Basic 252.3 246.2 2%
Diluted 253.5 246.2 3%
Adjusted
Quarters Ended
March 31, %
-------------------
(in millions, unaudited) 2006 2005 Change
--------- -------- -------------
Revenues
Management, financial advice and
service fees $710 $607 17%
Distribution fees 301 288 5
Net investment income 574 545 5
Premiums 220 199 11
Other revenues 144 134 7
--------- --------
Total revenues 1,949 1,773 10
--------- --------
Expenses
Compensation and benefits:
Field 423 361 17
Non-field 316 279 13
--------- --------
Total compensation and benefits 739 640 15
Interest credited to account values 324 311 4
Benefits, claims, losses and
settlement expenses 227 199 14
Amortization of deferred
acquisition costs 128 128 -
Interest and debt expense 23 17 35
Other expenses 250 252 (1)
--------- --------
Total expenses before separation
costs 1,691 1,547 9
--------- --------
Income before income tax provision,
discontinued operations and
separation costs (1) 258 226 14
Income tax provision before tax
benefit attributable to separation
costs (1) 69 65 6
--------- --------
Income before discontinued
operations and separation costs (1) $189 $161 17
========= ========
Separation costs, after-tax (1)
Income before discontinued
operations
Discontinued operations, net of tax
Net income
Weighted average common shares
outstanding:
Basic
Diluted
(1) For this non-GAAP presentation of separation costs, after-tax
is calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
# Variance of 100% or greater.
First Quarter 2006 Consolidated Results Consolidated revenues rose 6 percent and adjusted revenues rose 10 percent to $1.9 billion for the first quarter of 2006. The Asset Accumulation Accumulation 1) In the context of individual investing, it is the process of contributing cash to invest in securities over a period of time in order to build a portfolio of desired value. Dividends and capital gains are also reinvested during this process. and Income (AA&I) segment contributed 73 percent of the quarter's consolidated revenues. The Protection segment contributed 24 percent of the consolidated revenues, while the Corporate and Other and Eliminations (Corporate) segment contributed 3 percent, reflecting financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against fees. AA&I segment revenues of $1,422 million grew 9 percent or $123 million from the year-ago quarter. Growth was primarily driven by an 18 percent increase in management, financial advice and service fees resulting from strong net flows into wrap products and variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. , as well as market appreciation. On a product level, Brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. , banking and other revenue grew 27 percent to $453 million, up $97 million, primarily due to increases in wrap account Wrap Account An account in which a brokerage manages an investor's portfolio for a flat quarterly or annual fee. This fee covers all administrative, commission, and management expenses. Sometimes this also includes funds of funds. values; Variable annuity revenues grew 7 percent to $229 million, up $14 million; and Asset management, Fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. and Certificate revenues rose 2 percent, with reported revenues of $740 million, which represented 52 percent of the segment's first quarter 2006 revenues. Protection segment revenues of $473 million were up 9 percent or $39 million, after adjusting for AMEX Assurance. Growth was primarily the result of an 11 percent increase in premiums and an 11 percent increase in net investment income due to increased assets and capital supporting Auto (AUTOmatic) Refers to a wide variety of devices that perform unattended operations. and home and Variable universal life / universal life (VUL/UL) and higher income from hedge fund hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" investments. On a product level, Auto and home revenues grew 18 percent, up $22 million, due to increased premium revenues and higher net investment income; Disability income and long term care and other revenues grew 8 percent or $9 million, reflecting both higher net investment income and higher premiums; and VUL/UL revenues were up 5 percent or $8 million, primarily driven by higher face amount in-force. Consolidated expenses totaled $1.8 billion for the three months ended March 31, 2006. Adjusted expenses were $1.7 billion, up 9 percent or $144 million, from a year ago. Growth was primarily driven by a $62 million increase in field compensation and benefits and a $41 million increase in other expense lines directly associated with business activities. Increases in non-field compensation and benefits of $37 million reflected higher costs associated with being an independent company, $11 million in severance incurred during the quarter and other costs. These increases were partially offset by lower legal and regulatory costs. Overall, expenses for the quarter were prudently pru·dent adj. 1. Wise in handling practical matters; exercising good judgment or common sense. 2. Careful in regard to one's own interests; provident. 3. Careful about one's conduct; circumspect. managed. Non-recurring separation costs incurred during the quarter of $67 million pre-tax ($44 million after-tax) compares to $20 million pre-tax ($13 million after-tax) in the first quarter of 2005. Through quarter end, these costs totaled $360 million pre-tax ($235 million after-tax). Consolidated pre-tax income for the quarter was $191 million. Adjusted pre-tax income of $258 million was up 14 percent or $32 million, primarily due to a $54 million increase in the AA&I segment offset by increased losses in the Corporate segment. AA&I segment pre-tax income of $228 million was up 31 percent or $54 million, driven by strong flows into wrap products and variable annuities, as well as a $24 million decrease in pre-tax legal and regulatory costs. The contribution margin in the segment declined from 54.8 percent to 53.7 percent, primarily due to certificate spread compression compression, external stress applied to an object or substance, tending to cause a decrease in volume (see pressure). Gases can be compressed easily, solids and liquids to a very small degree if at all. . Protection segment pre-tax income of $74 million increased 1 percent after adjusting for AMEX Assurance. This growth reflected adjusted revenue growth of 9 percent primarily driven by higher auto and home insurance and life insurance revenues, offset by higher claims in disability income insurance and long term care insurance, as well as an increase in amortization of deferred acquisition costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ). The Corporate segment reported a pre-tax loss, before separation costs, of $44 million in the quarter, up from a loss of $21 million in the year-ago period. The increase of $23 million included $11 million in severance costs incurred during the quarter primarily related to our technology operations. Balance Sheet and Capital As noted, the Ameriprise Financial Board of Directors authorized the expenditure of up to $750 million for the repurchase of Ameriprise Financial common stock through the end of March 2008. This $750 million authorization The right or permission to use a system resource; the process of granting access. See access control. is in addition to a previous board authorization to repurchase up to 2 million shares by the end of 2006. The Company also completed a $275 million share repurchase from these authorizations representing 6.4 million shares. The repurchase of shares was funded from working capital. The Company intends to fund additional share repurchases through existing working capital, future earnings and other customary financing methods. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. as of first quarter 2006 was $7.3 billion, up $0.9 billion or 13 percent from March 31, 2005. The change reflects additional paid-in capital additional paid-in capital Stockholder contributions that are in excess of a stock's stated or par value. For example, if a firm issues stock with a par value of $1 per share but sells the stock to investors at $10 per share, the firm's financial statements of $1.3 billion and a $0.3 billion increase in retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. after dividends, offset by the impact of share repurchases of $0.3 billion and a decline in accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as of $0.4 billion. Book value per outstanding share was $30.03 as of March 31, 2006. Debt/capital ratio as of March 31, 2006 was 17.0 percent, down from 20.6 percent at March 31, 2005. The Company maintained substantial liquidity with $1.7 billion in cash and cash equivalents at March 31, 2006. Fixed charge coverage remained strong at 7.2 times. The Company's investment portfolio quality remained high.
Asset Accumulation and Income Segment
Income Statements
Quarters Ended
March 31, %
---------------
(in millions, unaudited) 2006 2005 Change
------- ------- -------
Revenues
Management, financial advice and service
fees $646 $547 18%
Distribution fees 273 262 4
Net investment income 475 473 -
Other revenues 28 17 65
------- -------
Total revenues 1,422 1,299 9
------- -------
Expenses
Compensation and benefits - field 366 309 18
Interest credited to account values 288 275 5
Benefits, claims, losses and settlement
expenses 4 3 33
Amortization of deferred acquisition costs 87 92 (5)
Interest and debt expense 3 - -
Other expenses 446 446 -
------- -------
Total expenses 1,194 1,125 6
------- -------
Pre-tax segment income $228 $174 31
======= =======
Asset Accumulation and Income Segment - First Quarter 2006 Results The AA&I segment includes Securities America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. Financial Corporation (SAFC SAFC South Australian Film Corporation SAFC Sunderland Association Football Club SAFC Securities America Financial Corporation SAFC South Australia Film Corporation SAFC Stirling Albion Football Club (UK) ), previously reported in the Corporate segment. All prior period information conforms to the current period presentation. The AA&I segment was not impacted by the results of AMEX Assurance. Pre-tax segment income was $228 million for the first quarter, up 31 percent from $174 million in the first quarter of 2005. Solid year-over-year results primarily reflected an 11 percent increase in owned, managed and administered assets driven by strong flows in wrap products and variable annuities, market appreciation, an 18 percent increase in GDC reflecting strong advisor productivity and a $24 million decline in legal and regulatory expenses. Partially offsetting this strong performance were lower account values in both fixed annuity and certificate products and higher interest crediting rates on certificates. Segment Highlights --Wrap product net flows of $1.9 billion in the quarter resulted in total ending assets of $54.9 billion. --The Company continued to see strong growth in variable annuities with sales up 60 percent year-over-year in the branded channel and 33 percent in third party distribution, driving $1.1 billion in variable net flows during the quarter. Ending annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. fixed account balances decreased 5 percent compared to the prior year period. --Sequential quarter growth of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $700 million in RiverSource mutual fund assets Fund assets The total value of a portfolio's securities, cash, and other holdings, minus any outstanding debts. under management reflected market appreciation and increased sales in the advisor channel, offset by increased redemptions in the 401(k) channel from RiverSource New Dimensions Fund. While RiverSource Funds continued to experience net outflows, total net flows improved by approximately 29 percent compared to the prior year quarter. --Threadneedle continued to experience positive net flows, excluding outflows of lower margin Zurich-related assets, driven by strong retail activity. --73 percent of RiverSource equity mutual funds that are actively managed by RiverSource Investments were above the median of their respective Lipper Business Description Lipper, Inc., a subsidiary of Reuters provides mutual and hedge fund information, analytical tools, data and commentary. Lipper's benchmarking provides a guidepost to asset managers, fund companies, financial intermediaries, traditional media, peer groups for one-year adj. 1. completing its life cycle within a year. Adj. 1. one-year - completing its life cycle within a year; "a border of annual flowering plants" annual phytology, botany - the branch of biology that studies plants performance as of March 31, 2006. --78 percent of taxable RiverSource fixed income funds and 50 percent of all RiverSource fixed income funds were above the median of their respective Lipper peer groups for one-year performance for the same period. --84 percent of Threadneedle equity mutual funds that are actively managed by Threadneedle Investments were above the median of their respective S&P peer groups for one-year performance as of March 31, 2006. --78 percent of Threadneedle fixed income mutual funds were above the median of their respective S&P peer groups for one-year performance for the same period. --For the second consecutive year, RiverSource(SM) Diversified diversified (di·verˑ·s Equity Income Fund (Y-share) received a Lipper Fund Award for being the top-performing mutual fund in Lipper's equity income category for three-year performance as of year-end. Please refer to Exhibit A of the Ameriprise Financial Quarterly Statistical Supplement as of March 31, 2006 available on ir.ameriprise.com for individual RiverSource Funds investment performance and important disclosures. --In the quarter, the Company closed a $700 million collateralized debt obligation Collateralized Debt Obligation (CDO) A general inclusive term which covers Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations, issuance. --RiverSource Funds introduced six new mutual funds including the innovative product solution - RiverSource(SM) Income Builder Series. --The Company continued to hedge long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. equity market exposure through tailored long-dated adj. 1. (Finance) of a gilt-edged security: having more than 15 years to run before redemption. Adj. 1. long-dated - of a gilt-edged security; having more than 15 years to run before redemption Britain, Great Britain, U.K. put options against Guaranteed Minimum Withdrawal Benefits (GMWB GMWB Guaranteed Minimum Withdrawal Benefit ), which represent the majority of the Company's variable annuity living benefit exposure. Total revenues of $1.4 billion were up 9 percent from the year-ago quarter. --Management, financial advice and service fees grew 18 percent to $646 million, driven by strong net inflows into wrap accounts and variable annuities and market appreciation, partially offset by outflows in RiverSource mutual funds and collective funds. --Distribution fees increased 4 percent to $273 million, primarily due to increased retail brokerage activity, partially offset by declines in fees from Real Estate Investment Trust products resulting from a delay in available products and lower distribution fees on RiverSource mutual funds. --Net investment income was essentially flat, reflecting higher income on hedge fund investments and lower invested assets. The positive impact of appreciation in the S&P 500 Index on the value of options hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. stock market certificate and equity index annuities was offset by the negative impact on options hedging GMWB. Each of these fluctuations was primarily offset in the Interest Credited to Account Values or Benefits, Claims, Losses and Settlement expense line items. Total expenses of $1.2 billion increased 6 percent from the year-ago quarter. --Compensation and benefits - field rose 18 percent to $366 million reflecting higher commissions paid driven by strong sales activity and higher advisor assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. . --Interest credited to account values increased 5 percent to $288 million due to higher interest crediting rates on certificate products, partially offset by lower certificate and fixed annuity account asset values. --Amortization of DAC declined 5 percent to $87 million, primarily reflecting lower DAC balances and lower amortization related to RiverSource mutual funds. --Other expenses, which primarily reflect allocated corporate and support function costs, were flat, reflecting a decline in legal and regulatory costs offset by higher non-field compensation and benefits.
Protection Segment
Income Statements Reconciled to Adjusted
AMEX
Assurance
Quarters Quarters
Ended Ended
March 31, % March 31,
------------- ------------
(in millions, unaudited) 2006 2005 Change 2006 2005
------ ------ ------ ------ -----
Revenues
Management, financial advice and
service fees $19 $16 19% $- $1
Distribution fees 28 27 4 - -
Net investment income 89 83 7 - 3
Premiums 226 275 (18) - 71
Other revenues 111 107 4 - (1)
------ ------ ------ -----
Total revenues 473 508 (7) - 74
------ ------ ------ -----
Expenses
Compensation and benefits - field 23 24 (4) - 1
Interest credited to account
values 36 36 - - -
Benefits, claims, losses and
settlement expenses 223 215 4 - 19
Amortization of deferred
acquisition costs 41 44 (7) - 8
Other expenses 76 76 - - 6
------ ------ ------ -----
Total expenses 399 395 1 - 34
------ ------ ------ -----
Pre-tax segment income $74 $113 (35) $- $40
====== ====== ====== =====
Adjusted
Quarters Ended
March 31, %
--------------------
(in millions, unaudited) 2006 2005 Change
---------- --------- -----------
Revenues
Management, financial advice and
service fees $19 $15 27%
Distribution fees 28 27 4
Net investment income 89 80 11
Premiums 226 204 11
Other revenues 111 108 3
---------- ---------
Total revenues 473 434 9
---------- ---------
Expenses
Compensation and benefits - field 23 23 -
Interest credited to account
values 36 36 -
Benefits, claims, losses and
settlement expenses 223 196 14
Amortization of deferred
acquisition costs 41 36 14
Other expenses 76 70 9
---------- ---------
Total expenses 399 361 11
---------- ---------
Pre-tax segment income $74 $73 1
========== =========
Protection Segment - First Quarter 2006 Results AMEX Assurance results are included in the Protection segment. Adjusted financial information excludes AMEX Assurance. Pre-tax segment income was $74 million for the first quarter of 2006. Adjusted segment earnings increased 1 percent from $73 million in the prior year quarter. Adjusted revenue growth of 9 percent reflecting higher auto and home insurance and life insurance revenues was offset by higher claims in disability income insurance and higher long term care insurance claims, as well as an increase in amortization of DAC. Segment Highlights --Life insurance in-force of $164 billion increased 10 percent from the prior period. --Ameriprise Auto & Home Insurance announced the renewal of its alliance with Costco Costco Wholesale Corporation (NASDAQ: COST) is the largest membership warehouse club chain in the world based on sales volume, headquartered in Issaquah, Washington, United States,[1] with its flagship warehouse in nearby Seattle. and a new alliance with Ford Credit during the quarter. --RiverSource Insurance introduced two new universal life products to its broad range of life insurance product solutions - RiverSource Foundations Protector protector /pro·tec·tor/ (-tek´ter) a substance in a catalyst that prolongs the rate of activity in the latter. (SM) and RiverSource Foundations(SM) Universal Life. Total revenues of $473 million decreased 7 percent from the year-ago quarter. Adjusted segment revenues increased 9 percent. --Net investment income increased 7 percent to $89 million. Adjusted segment net investment income increased 11 percent due to increased assets and capital supporting auto and home and VUL/UL and higher income from hedge fund investments. --Premiums declined 18 percent to $226 million. Adjusted segment premiums increased 11 percent, primarily driven by solid growth in premiums from auto and home. Total expenses of $399 million increased 1 percent from $395 million in the year-ago quarter. Adjusted segment expenses increased 11 percent. --Benefits, claims, losses and settlement expenses increased 4 percent to $223 million. Adjusted segment benefits, claims, losses and settlement expenses increased 14 percent, primarily due to higher claims in disability income insurance, higher long term care insurance claims and higher average auto and home insurance policies in-force. --Amortization of DAC decreased 7 percent to $41 million. Adjusted segment amortization of DAC grew 14 percent compared to the first quarter of 2005. This increase was primarily driven by an adjustment to the unearned commission balance. Other expenses were essentially flat at $76 million. Adjusted other expenses increased 9 percent reflecting higher volume-related expenses due to higher average auto and home insurance policies in-force.
Corporate and Other and Eliminations Segment
Income Statements
Quarters Ended
March 31, %
----------------
(in millions, unaudited) 2006 2005 Change
-------- ------- ------
Revenues
Management, financial advice and service
fees $45 $45 -
Distribution fees - (1) #
Net investment income (loss) 10 (8) #
Premiums (6) (5) (20)
Other revenues 5 9 (44)
-------- -------
Total revenues 54 40 35
-------- -------
Expenses
Compensation and benefits - field 34 29 17
Interest and debt expense 20 17 18
Other expenses 44 15 #
-------- -------
Total expenses before separation costs 98 61 61
-------- -------
Pre-tax segment loss before separation costs (44) (21) #
Separation costs, pre-tax 67 20 #
-------- -------
Pre-tax segment loss $(111) $(41) #
======== =======
# Variance of 100% or greater.
Corporate and Other and Eliminations Segment - First Quarter 2006 Results The Corporate segment excludes SAFC, now reported in the AA&I segment. In addition, this segment includes all corporate-related interest and debt expenses, as well as certain expenses that do not directly relate to the operations of the AA&I and Protection segments. All prior period information conforms to the current period presentation. Business activities in this segment reflect financial planning fees and associated compensation. This activity is considered core to both the AA&I and Protection segments. Loss before income tax provision was $111 million for first quarter 2006, compared to a loss of $41 million in the year-ago quarter. The Corporate segment was not impacted by the results of AMEX Assurance. The year-over-year charge was predominantly due to an increase in pre-tax non-recurring separation costs and higher other expenses. --Pre-tax non-recurring separation costs of $67 million increased $47 million from the prior year's quarter. --Other expenses of $44 million increased $29 million from the first quarter of 2005 reflecting higher costs associated with being an independent entity, $11 million in severance costs and higher expenses related to corporate projects and other corporate activities. Definitions Allocated Equity - The internal allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of consolidated shareholders' equity, excluding accumulated other comprehensive income (loss), to the Company's operating segments for purposes of measuring segment return on allocated equity. Allocated equity does not represent insurance company risk-based capital or other regulatory capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. applicable to the Company and certain of its subsidiaries. AMEX Assurance Company - A legal entity owned by IDS Property Casualty Insurance Company that offers travel and other card insurance to American Express customers. This business had historically been reported in the Travel Related Services segment of American Express Company (American Express). Under the separation agreement with American Express, 100 percent of this business was ceded to an American Express subsidiary in return for an arm's length arm's length adj. the description of an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other. ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. fee. Ameriprise Financial expects to sell the legal entity of AMEX Assurance to American Express within two years after September September: see month. 30, 2005 for a fixed price equal to the net book value of AMEX Assurance. Clients With a Financial Plan Percentage - The period-end number of our current clients who have received a financial plan, or have entered into an agreement to receive and have paid for a financial plan, divided by the number of active retail client groups, serviced by branded employees, franchise advisors and the Company's customer service organization. Contribution Margin - Total revenues less compensation and benefits - field, interest credited to account values and benefits, claims, losses and settlement expenses as a percentage of total revenues. Debt to Capital Ratio - A ratio comprised of total debt, excluding other debt (debt of consolidated variable interest entities and property funds), divided by total capital, defined as total shareholders' equity and total debt, excluding other debt. Deferred Acquisition Costs (DAC) - DAC represents the costs of acquiring new protection, annuity and certain mutual fund business, principally direct sales commissions and other distribution and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. costs that have been deferred on the sale of annuity, life, disability income and long term care insurance and, to a lesser extent, deferred marketing and promotion expenses on auto and home insurance and deferred distribution fees on certain mutual fund products. These costs are deferred to the extent they are recoverable from future profits. Fixed Charge Coverage - A ratio comprised of earnings divided by fixed charges. Earnings are defined as income before income tax provision, discontinued operations and accounting change plus interest and debt expense, interest portion of rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. expense, amortization of capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. and adjustments related to equity investees and minority interests in consolidated entities. Fixed charges are defined as interest and debt expense, interest portion of rental expense and capitalized interest. Gross Dealer Concession (GDC) - An internal measure, commonly used in the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industry, of the sales production of the advisor channel. Mass Affluent - Individuals with $100,000 to $1 million in investable assets. Non-Recurring Separation Costs - The Company has incurred significant non-recurring separation costs as a result of the separation from American Express. Separation costs generally consist of costs associated with separating and reestablishing the Company's technology platforms, establishing the Ameriprise Financial brand and advisor and employee retention programs. Segments: Asset Accumulation and Income Segment - This segment offers products and services, both the Company's and other companies', to help the Company's retail clients address identified financial objectives related to asset accumulation and income management. Products and services in this segment are related to financial advice, asset management, brokerage and banking, and include mutual funds, wrap accounts, variable and fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. , brokerage accounts Brokerage Account An arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor's behalf. , financial advice services and investment certificates. This operating segment also serves institutional clients by providing investment management services in separately managed accounts, sub-advisory, alternative investments and 401(k) markets. The Company earns revenues in this segment primarily through fees we receive based on managed assets and annuity separate account assets. These fees are impacted by both market movements and net asset flows. The Company also earns net investment income on owned assets, principally supporting the fixed annuity business and distribution fees on sales of mutual funds and other products. This segment includes SAFC, which through its operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , Securities America, Inc., operates its own separately branded distribution network. Protection Segment - This segment offers a variety of protection products, both the Company's and other companies', including life, disability income, long term care and auto and home insurance to address the identified protection and risk management needs of the Company's retail clients. The Company earns revenues in this operating segment primarily through premiums and fees that the Company receives to assume insurance-related risk, fees the Company receives on owned and administered assets and net investment income the Company earns on assets on the Company's consolidated balance sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. related to this segment. Corporate and Other and Eliminations Segment - This segment consists of income derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from financial planning fees, corporate level assets and unallocated corporate expenses. This segment also includes non-recurring costs associated with the Company's separation from American Express. For purposes of presentation in this earnings release and statistical supplement, this segment also includes eliminations. Total Clients - The sum of all clients, individual, business and institutional, that receive investment management and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. other services, excluding those clients serviced by SAFC and Threadneedle. Ameriprise Financial, Inc. is a leading financial planning and services company with more than 12,000 financial advisors and registered representatives that provides solutions for clients' asset accumulation, income management and insurance protection needs. The Company's financial advisors deliver tailored solutions to clients through a comprehensive and personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. financial planning approach built on a long-term relationship with a knowledgeable advisor. The Company specializes in meeting the retirement-related financial needs of the mass affluent. Financial advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal and investments are available through Ameriprise Financial Services, Inc. Member NASD NASD See: National Association of Securities Dealers NASD See National Association of Securities Dealers (NASD). and SIPC (Simply Interactive PC) An earlier umbrella term from Microsoft and Intel for a PC that works like a home appliance. For example, it has a sealed case, uses external connectors for expansion and boots in just a couple of seconds. . For more information, visit www.ameriprise.com.
Ameriprise Financial, Inc.
Reconciliation Table: Selected Adjusted Consolidated Income Data to
GAAP
(in millions,
unaudited) Three Months Ended March 31, 2006
-------------------------------------
Presented
Before
Separation Difference
Cost Attributable
Line item in non- Impacts in to
GAAP Reported Separation GAAP
presentation Financials Costs Equivalent GAAP Line Item
----------------- ----------- ------------- ----------- --------------
Total revenues
(GAAP measure) $1,949 $- $1,949 Total revenues
Total expenses
before
separation costs 1,691 67 1,758 Total expenses
----------- -----------
Income before
income tax Income before
provision income tax
and separation provision
costs 258 (67) 191
Income tax
provision before
tax benefit
attributable to
separation costs Income tax
(1) 69 (23) 46 provision
----------- -----------
Income before
separation costs 189
Separation costs,
after-tax (1) 44
-----------
Net income
(GAAP measure) $145 $145 Net income
=========== ===========
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
Ameriprise Financial, Inc.
Reconciliation Table: Selected Adjusted Consolidated Income Data to
GAAP
(in millions,
unaudited) Three Months Ended March 31, 2005
-------------------------------------
Presented
Before
Separation Difference
Cost Attributable
Line item in non- Impacts in to
GAAP Reported Separation GAAP
presentation Financials Costs Equivalent GAAP Line Item
----------------- ----------- ------------- ----------- --------------
Total revenues
(GAAP measure) $1,847 $- $1,847 Total revenues
Total expenses
before
separation costs 1,581 20 1,601 Total expenses
----------- -----------
Income before
income tax Income before
provision, income tax
discontinued provision and
operations and discontinued
separation costs 266 (20) 246 operations
Income tax
provision before
tax benefit
attributable to
separation costs Income tax
(1) 78 (7) 71 provision
----------- -----------
Income before
discontinued
operations and
separation costs 188
Separation costs,
after-tax (1) 13
-----------
Income before
discontinued Income before
operations discontinued
(GAAP measure) $175 $175 operations
=========== ===========
(1) For this non-GAAP presentation of separation costs, after-tax is
calculated using the statutory tax rate of 35%, adjusted for
permanent differences, if any.
Ameriprise Financial, Inc.
Return on Equity Calculation for the 12 Months Ended March 31, 2006
ROE excluding
Discontinued
Adjusted
(in millions, unaudited) Operations (1) Adjustments ROE (2)
--------------- ------------ ----------
Return $528 $192 $720
Equity $7,155 (236) $6,919
--------------- ----------
Return on Equity 7.4% 10.4%
=============== ==========
Ameriprise Financial, Inc.
Return on Equity Calculation for the 12 Months Ended December 31, 2005
ROE excluding
Discontinued
Adjusted
(in millions, unaudited) Operations (1) Adjustments ROE (2)
--------------- ------------ ----------
Return $558 $135 $693
Equity $6,992 (168) $6,824
--------------- ----------
Return on Equity 8.0% 10.2%
=============== ==========
(1) Return on equity calculated using the 12 month trailing income
before discontinued operations in the numerator and the average of
shareholders' equity before the assets and liabilities of
discontinued operation as of the last day of the preceding four
quarters and the current quarter in the denominator.
(2) Adjusted return on equity calculated using adjusted earnings
(income before discontinued operations excluding non-recurring
separation costs and AMEX Assurance) in the numerator, and equity
excluding both the assets and liabilities of discontinued
operations and equity allocated to expected non-recurring
separation costs as of the last day of the preceding four quarters
and the current quarter in the denominator.
Both return on equity calculations use the trailing twelve months'
return, and equity calculated using a five point average of
quarter-end equity.
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