Ameriprise Financial Reports First Quarter 2008 Results.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 increases 21 percent for the quarter, including $0.22 of non-recurring separation costs in the first quarter of 2007 Earnings per diluted share decreases 9 percent for the quarter, to $0.82, compared to adjusted earnings in the first quarter of 2007 New $1.5 billion 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. authorization announced MINNEAPOLIS -- 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 $191 million for the quarter ended March 31, 2008. The results represent a 16 percent increase from net income of $165 million in the prior-year quarter, which included $55 million in after-tax non-recurring separation costs. Net income per diluted share for the quarter was $0.82, a 21 percent increase compared with the prior-year period. Excluding $0.22 of non-recurring separation costs in the first quarter of 2007, earnings per share declined 9 percent. Net revenues increased 3 percent to $2.1 billion in the first quarter of 2008, primarily reflecting 10 percent growth in management and financial advice fees, partially offset by lower net revenues from certificates and fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. . Return on equity for the 12 months ended March 31, 2008 was 10.9 percent, an increase from 8.6 percent for the 12 months ended March 31, 2007. Excluding separation costs, return on equity was 12.2 percent for both 12-month periods. During the first quarter of 2008, we repurchased 5.2 million shares of our common stock for $270 million. We also announced today that our 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: an additional repurchase of up to $1.5 billion of our common stock over the next two years. Since 2006, we have purchased $1.7 billion of our common stock. "We were impacted by the difficult market environment in the first quarter, which is clearly reflected in our financial results," said Jim Cracchiolo, chairman and chief executive officer. "However, we are comfortable with our underlying operating results. Our balance sheet, risk management and liquidity position remain strong, and we continue to invest for growth while managing expenses to maintain margins." First Quarter 2008 Summary Management believes that the presentation of adjusted financial measures best reflects the underlying performance of our 2007 operations as it excludes non-recurring separation costs. This presentation is consistent with the non-GAAP financial information presented in our Annual Report on 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 2007, filed on February 29, 2008 with the Securities and Exchange Commission. [TABLE OMITTED] Included in consolidated net income for the first quarter of 2008 were $16 million, or $0.07 per share, in after-tax net realized investment losses, primarily driven by $20 million in after-tax impairments of three Alt-A mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. . This loss compares to $6 million, or $0.02 per share, in after-tax net realized investment gains in the first quarter of 2007. After-tax amounts are calculated using the statutory tax rate of 35 percent. Our first quarter 2008 results included a number of impacts from equity market declines. Significant items for the quarter are referenced below and discussed within the release. Combined, these items negatively impacted first quarter earnings by $0.23 per share in the first quarter of 2008, compared to a $0.06 per share benefit in the first quarter of 2007. * Declines in management fees as well as increased amortization of deferred acquisition costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) and deferred sales inducement Inducement Electra incited brother, Orestes, to kill their mother and her lover. [Gk. Myth.: Zimmerman, 92; Gk. Lit.: Electra, Orestes] Hezekiah exhorts Judah to stand fast against Assyrians. [O.T. costs (DSIC DSIC Departament de Sistemes Informàtics i Computació DSIC Digital Systems International Corporation DSIC Defense Standards Improvement Council DSIC Design and Systems Integration Contractor ) impacted results by $32 million after tax, or $0.14 per share. * Other market impacts included increased living benefit expenses (net of hedges and DAC), losses in equity sensitive investments, lower short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. on our cash positions, and a benefit from the adoption of Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 157). These impacts resulted in a net loss of $21 million after-tax, or $0.09 per share. Of this $0.23 per share market impact, $0.09 per share, related to lower asset levels and lower short-term interest rates, could be expected to continue if markets remain at current levels. In addition to the market impacts, exceptional tax adjustments in the first quarter of 2008 increased earnings by $38 million, or $0.16 per share. In total, the negative impact of net realized investment losses and declining markets combined with the benefit from the exceptional tax adjustments resulted in a $0.14 negative impact to earnings per share in the first quarter of 2008 compared to a $0.08 per share benefit in the prior-year quarter. A detailed schedule of this impact is included at the end of this release. First Quarter 2008 Business Highlights Our results reflect the impact of the difficult market environment on asset levels and client activity in the quarter as well as the strength of our business model. [TABLE OMITTED] [TABLE OMITTED] First Quarter 2008 Consolidated Results Net income grew 16 percent year-over-year to $191 million. Excluding $55 million in non-recurring after-tax separation costs in the first quarter of 2007, earnings declined 13 percent. Total net revenues rose 3 percent, or $59 million, to $2.1 billion, reflecting continued growth in management and financial advice fees driven by asset inflows partially offset by market depreciation of assets. Declines in net investment income were driven by lower certificate and 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. balances and net realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. , which were partially offset by higher investment income from variable annuity-related hedges. Management and financial advice fees grew 10 percent, or $69 million, to $791 million, reflecting continued success in growing assets and generating 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 fee revenue. * 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. balances grew 10 percent, increasing management and financial advice fees in the Advice & Wealth Management segment by $61 million, or 20 percent. * 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. balances grew 6 percent, resulting in an increase in fees in the Annuities segment of $11 million, or 10 percent. * Asset Management segment management and financial advice fees were impacted by market depreciation and were essentially flat. Distribution fees increased 4 percent, or $15 million, to $433 million, primarily driven by net inflows in wrap accounts and variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. . Within the Advice & Wealth Management segment, distribution fees declined primarily as a result of lower cash sales sales made for ready, money, in distinction from those on which credit is given; stocks sold, to be delivered on the day of transaction. See also: Cash . Net investment income decreased 14 percent, or $72 million, to $460 million, primarily due to lower fixed annuity and certificate balances; declines of $36 million in other investment income, which included owned 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" and seed money investments; and $24 million in net realized investment losses. These declines were partially offset by living benefit hedge-related income. * Advice & Wealth Management segment net investment income declined $56 million, or 52 percent, primarily due to the impact of hedges for stock market certificates as well as lower certificate balances. * Asset Management segment net investment income declined $21 million, due primarily to losses on seed money and other investments. * Annuities segment net investment income increased $12 million, or 4 percent, primarily due to increased income from variable annuity-related hedges, partially offset by declines in fixed annuity account balances, net realized investment losses and hedges related to equity indexed annuities. Premiums increased 3 percent, or $8 million, to $265 million, primarily due to volume-related business growth. Protection segment premium growth of 5 percent, or $11 million, was driven by a 6 percent year-over-year increase in Auto & Home policy counts. Other revenues declined 6 percent, or $10 million, to $157 million, due to the decline in revenues from certain limited partnerships consolidated under EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 04-5. These partnerships had corresponding expense impacts primarily in the general and administrative expense line. This was partially offset by growth in cost-of-insurance fees for variable universal life/universal life insurance and increased revenue from variable annuity guarantee benefit riders. Banking and deposit interest expense declined 71 percent, or $49 million, to $20 million, primarily due to lower crediting rates on certificate and banking products. Expenses Consolidated expenses before separation costs increased 10 percent, or $165 million, to $1.9 billion, as a result of business activity, the impact of market volatility on variable annuity living benefit riders and higher amortization of DAC. Distribution expenses increased 13 percent, or $63 million, to $541 million, primarily driven by higher sales compensation due to faster growth in our franchisee advisor platform, as well as product mix shift. Interest credited to fixed accounts decreased 18 percent, or $39 million, to $178 million, due to ongoing declines in fixed annuity balances and lower crediting rates on equity indexed annuities. Benefits, claims, losses and settlement expenses increased 62 percent, or $156 million, to $407 million. This increase was largely due to a $118 million increase in first quarter 2008 expenses from the mark-to-market of variable annuity living benefit riders, compared to a $28 million decline in the prior-year period. Protection segment benefit expenses increased 4 percent, or $8 million, primarily due to higher volume-related Auto & Home claims and reserves. Amortization of DAC rose 15 percent, or $20 million, to $154 million. The impact of the equity market decline during the quarter lowered estimated gross profit for future periods, which resulted in an additional $24 million of DAC amortization compared to a $2 million benefit in the first quarter of 2007. General and administrative expense decreased 5 percent, or $32 million, to $585 million, reflecting cost controls, lower legal and regulatory expenses, and a decline in expenses from certain limited partnerships consolidated under EITF 04-5, which had corresponding revenue offsets. These declines were partially offset by increased expenses from technology enhancements. Taxes The effective tax rate was 2.1 percent for the quarter, down from 23.6 percent in the prior-year period, primarily due to $38 million of exceptional tax adjustments. We expect our full-year 2008 tax rate to be in the 20-22 percent range, or 24-26 percent for the remaining three quarters of 2008 and for full-year 2009. Segment Financial Highlights Our segment results reflect both the difficult market environment and our efforts to control expenses while investing for growth. Detailed schedules of the market impact are included at the end of this release. Segment results do not include income taxes. Advice & Wealth Management pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. grew 14 percent, or $8 million, to $64 million, primarily driven by growth in wrap products, as continued net inflows were partially offset by market declines. We also generated pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern margin improvements primarily driven by re-engineering resulting in increased advisor productivity. Asset Management pretax income declined 61 percent, or $28 million, to $18 million, primarily reflecting $10 million in losses on seed money investments in the quarter. In addition, market declines on asset values negatively impacted revenues. Expenses remained well controlled, and we continue to invest in expanding our distribution capabilities. Annuities pretax income declined 64 percent, or $76 million, to $42 million. The current quarter reflects a $25 million negative market impact on variable annuity DAC and DSIC amortization and $20 million in net realized investment losses. Our living benefit hedging performed well with negative impacts mostly offset by the benefit of implementation of SFAS 157. Growth in variable annuity account values were offset by continued outflows in fixed annuities. Protection pretax income declined 15 percent, or $18 million, to $102 million, due to a $17 million increase in amortization of DAC. We also had an $8 million benefit expense increase primarily due to higher volume-related Auto & Home claims and reserves. Corporate & Other pretax loss pretax loss A loss reported before tax benefits are considered. before separation costs improved $8 million, to $31 million, which reflected our continued focus on expense management. Balance Sheet and Capital We continued to maintain a strong, high quality balance sheet. During the first quarter of 2008, we repurchased 5.2 million shares of our common stock for $270 million, essentially completing our third share repurchase authorization. In addition, the board of directors of Ameriprise Financial announced a new authorization for up to $1.5 billion through April 23, 2010. We ended the quarter with more than $1 billion in excess capital. The weighted average diluted share count at March 31, 2008 was 231.5 million compared to 244.1 million as of March 31, 2007. Our commitment to maintaining the safety and soundness of our balance sheet is reflected in substantial liquidity, a high quality investment portfolio, low financial leverage and our continuing actions to manage risk exposures appropriately. * We recognized $24 million in pretax net realized investment losses, primarily due to other than temporary impairments to fair value of three Alt-A mortgage-backed securities. We're comfortable with the valuation of our subprime and Alt-A positions and continue to monitor our portfolio as credit markets evolve. * Cash and cash equivalents were approximately $3.9 billion at March 31, 2008. * Unrealized net investment losses in the Available-for-Sale investment portfolio were $0.5 billion at quarter end, up from $0.2 billion at the end of the first quarter of 2007. * The debt-to-capital ratio as of March 31, 2008 was 21.0 percent. The debt-to-capital ratio excluding non-recourse debt Non-Recourse Debt A loan that is secured by some sort of collateral, usually property. The issuer can seize the collateral if the borrower defaults. Notes: These types of projects are characterized by high capital expenditures, long loan periods, and uncertain revenue and with 75 percent equity credit for the hybrid securities Hybrid Security A security that combines two or more different financial instruments. Notes: Hybrid securities generally combine both debt and equity characteristics. was 17.0 percent. For the first quarter of 2008, the ratio of earnings to fixed charges was 6.2 times. Excluding interest on non-recourse debt, the ratio of earnings to fixed charges was also 6.2 times. Ameriprise Financial, Inc., is a diversified financial The diversified financial services segment includes a range of consumer and commercially-oriented companies offering a wide variety of products and services, including various lending products (such as home equity loans and credit cards), insurance, and securities and investment services company serving the comprehensive financial planning needs of the 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] and affluent. For more information, visit ameriprise.com. RiverSource mutual funds are distributed by RiverSource Distributors, Inc. and Ameriprise Financial Services, Inc. Members FINRA FINRA Financial Industry Regulatory Authority (formerly Securities Industry Regulatory Authority) and managed by RiverSource Investments, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control . For complete mutual fund ranking data and other important disclosures please refer to Exhibit A "RiverSource Mutual Fund Performance and Lipper Ranking" in the First Quarter 2008 Statistical Supplement available at ir.ameriprise.com. The Threadneedle group of companies constitutes the Ameriprise Financial international investment platform. The group consists of wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Ameriprise Financial, Inc. and provides services independent from Ameriprise Financial Services, Inc., including Ameriprise Financial Services' broker-dealer business. Ameriprise Certificates are issued by Ameriprise Certificate Company and distributed by Ameriprise Financial Services, Inc. Member FINRA. Ameriprise Financial Services, Inc. offers financial planning services, investments, insurance and annuity products. RiverSource insurance and annuity products are issued by RiverSource Life Insurance Company, and in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of only by RiverSource Life Insurance Co. of New York, Albany, New York For other uses, see Albany. Albany is the capital of the State of New York and the county seat of Albany County. Albany lies 136 miles (219 km) north of New York City, and slightly to the south of the juncture of the Mohawk and Hudson Rivers. . Only RiverSource Life Insurance Co. of New York is authorized to sell insurance and annuity products in the state of New York. These companies are all part of Ameriprise Financial, Inc. CA License #0684538. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This news release contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ materially from those described in these forward-looking statements. We have made various forward-looking statements in this report. Examples of such forward-looking statements include: * statements of our plans, intentions, expectations, objectives or goals, including those relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc asset flows, mass affluent and affluent client acquisition strategy and consolidated tax rate; * statements about future economic performance, the performance of equity markets and interest rate variations and the economic performance of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and of global markets; and * statements of assumptions underlying such statements. The words "believe," "expect," "anticipate," "optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op ," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from such statements. Such factors include, but are not limited to: * changes in the valuations, liquidity and volatility in the interest rate, equity market, and foreign exchange environments; * changes in the litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and regulatory environment, including ongoing legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. and regulatory actions, the frequency and extent of legal claims threatened or initiated by clients, other persons and regulators, and developments in regulation and legislation; * our investment management performance and consumer acceptance of our products; * effects of competition 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 and changes in product distribution mix and distribution channels; * our capital structure including ratings and indebtedness, and limitations on subsidiaries to pay dividends; * risks of default by issuers or guarantors of investments we own or by counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. to hedge, derivative, insurance or reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. arrangements; * experience deviations from our assumptions regarding morbidity morbidity /mor·bid·i·ty/ (mor-bid´it-e) 1. a diseased condition or state. 2. the incidence or prevalence of a disease or of all diseases in a population. mor·bid·i·ty n. , mortality and persistency in certain annuity and insurance products, or from assumptions regarding market volatility underlying our hedges on guaranteed benefit annuity riders; * the impacts of our efforts to improve distribution economics and to grow third-party distribution of our products; * our ability to realize benefits from tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. ; and * general economic and political factors, including consumer confidence in the economy as well as the ability and inclination inclination, in astronomy, the angle of intersection between two planes, one of which is an orbital plane. The inclination of the plane of the moon's orbit is 5°9' with respect to the plane of the ecliptic (the plane of the earth's orbit around the sun). of consumers generally to invest, the costs of products and services we consume in the conduct of our business, and applicable legislation and regulation, including tax laws, tax treaties, fiscal and central government treasury policy, and regulatory rulings and pronouncements. We caution you that the foregoing list of factors is not exhaustive. There may also be other risks that we are unable to predict at this time that may cause actual results to differ materially from those in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statements. The foregoing list of factors should be read in conjunction with the "Risk Factors" discussion included as Part 1, Item 1A of our Annual Report on Form 10-K filed with the SEC on February 29, 2008. The financial results discussed in this release represent past performance only, which may not be used to predict or project future results. For information about Ameriprise Financial entities, please refer to the First Quarter 2008 Statistical Supplement available at ir.ameriprise.com and the tables that follow in this release. Tables Due to the magnitude of the market decline in the quarter, we have provided the following table to help the reader understand the impact on our first quarter results. [TABLE OMITTED] Due to the magnitude of the market decline in the quarter, we have provided the following table to help the reader understand the impact on our first quarter results. [TABLE OMITTED] Due to the magnitude of the market decline in the quarter, we have provided the following table to help the reader understand the impact on our first quarter results. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] (c) 2008 Ameriprise Financial, Inc. All rights reserved. |
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