Ameriprise Financial Reports Increased Earnings for Second Quarter 2007.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 42 percent to $0.81 for the quarter, including $0.17 of non-recurring separation costs; Adjusted earnings per diluted share increase 24 percent to $0.98 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 $196 million for the quarter ended June 30, 2007, an increase of 39 percent from net income of $141 million for the year-ago quarter. Adjusted earnings(1) increased 22 percent to $237 million in the second quarter of 2007 compared to the second quarter of 2006. Adjusted earnings exclude after-tax non-recurring separation costs. Net income per diluted share for the second quarter of 2007 was $0.81, an increase of 42 percent from the prior year period. Adjusted earnings per diluted share for the second quarter of 2007 were $0.98, an increase of 24 percent from the year-ago period. Revenues grew 6 percent to $2.2 billion in the second quarter of 2007. Revenues grew 10 percent excluding the proceeds from the sale of the defined contribution recordkeeping business in the prior year quarter. This reflected strong growth of fee-based businesses, including 20 percent growth in management, financial advice and service fees and 28 percent growth in distribution fees. Return on equity for the 12 months ended June 30, 2007 was 9.2 percent, or 12.5 percent when adjusted for the separation, up from 10.7 percent for the 12 months ended June 30, 2006. "This was another strong quarter for Ameriprise Financial, highlighted by continued improvements in advisor productivity and growth in our fee-based businesses," said Jim Cracchiolo, chairman and chief executive officer. "We continue to execute our growth strategy while effectively managing expenses and maintaining a strong balance sheet. The quarter also marked the achievement of two important milestones - we have essentially completed our separation from 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. and have returned to net inflows in RiverSource Funds." (1) See reconciliations throughout this news release and definitions in the Second Quarter 2007 Quarterly Statistical Supplement available on the Company's website at ir.ameriprise.com. Second Quarter 2007 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 non-recurring separation costs from all periods. This presentation is consistent with the non-GAAP financial information presented in the Company's 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 2006, filed on February 27, 2007 with the Securities and Exchange Commission. [TABLE OMITTED] Second Quarter 2007 Consolidated Highlights The Company continued to drive improvements in the profitability and productivity of its distribution network: * 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 client groups increased 12 percent from the year-ago period, with high rates of 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 penetration for newly acquired clients in this core group. * 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 20 percent from the year-ago period, reflecting strong advisor productivity gains. * Franchisee advisor retention remained strong at 93 percent. The total number of advisors decreased 2 percent over the same time period, as the Company hired fewer employee advisors and continued to focus on further strengthening advisor productivity and distribution economics. The Company successfully grew client assets: * Owned, managed and administered assets increased 13 percent from the prior-year period, reaching $484 billion at June 30, 2007. * RiverSource([R]) Funds achieved net inflows of $0.7 billion from mutual funds and annuity variable accounts, primarily due to increasing sales driven by strong investment performance, increased penetration of goal-based solutions and effective wholesaling. * $3.5 billion of net inflows in wrap accounts 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. in the quarter contributed to total ending wrap assets of $89 billion. This included more than $1.1 billion in ending assets in Active Portfolios(SM), a discretionary managed account platform launched in February 2007, which has been one of the Company's most successful product launches and further strengthens its leadership position in wrap. * Strong sales in the branded advisor and third party channels helped drive $1.5 billion in net inflows in annuity variable accounts. Overall positive annuity flows were impacted by $1.1 billion in net outflows from annuity fixed accounts during the quarter, primarily due to the interest rate environment. * Threadneedle grew revenues from higher-margin retail and alternative portfolios while effectively managing expenses. Threadneedle continued to manage outflows in lower-margin institutional assets, primarily resulting from Zurich's transfer of part of its U.K. annuity business during the quarter. * Life insurance in-force increased 8 percent year-over-year to $181 billion. The Company has essentially completed its separation from American Express on budget and on schedule. All remaining separation costs are expected to be incurred in the second half of 2007. [TABLE OMITTED] Second Quarter 2007 Consolidated Results Net income grew 39 percent to $196 million. Adjusted earnings grew 22 percent to $237 million, compared to the year-ago quarter. This reflected strong growth in fee-based businesses and expense controls resulting in 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. margin improving to 11.2 percent compared to 9.1 percent a year ago. Excluding separation costs, pretax income margin improved to 14.1 percent from 13.2 percent. Revenues Consolidated revenues rose 6 percent, or $129 million, to $2.2 billion. Revenues grew 10 percent excluding the proceeds from the sale of the recordkeeping business in the prior-year quarter. Management, financial advice and service fees grew 20 percent, or $142 million, to $863 million, reflecting continued success in gathering fee-based assets. Wrap account balances grew 34 percent and annuity variable account assets grew 35 percent year-over-year. These balances were driven by strong net inflows and market appreciation. Distribution fees grew 28 percent, or $90 million, to $415 million, driven by strong advisor 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 , including an increase in sales of direct investments as clients reinvested proceeds from real estate investment trust liquidations. Net investment income declined 7 percent, or $37 million, to $485 million, reflecting the ongoing trend of declining annuity fixed account and certificate balances, offset by higher net investment income attributable to derivatives used to hedge certain benefits and interest credited expenses. The second quarter of 2007 also included $2 million in net realized investment gains, compared to $6 million for the second quarter of 2006. Premiums grew 6 percent, or $14 million, to $243 million, primarily driven by an increase in Auto and Home policy counts. Other revenues declined 31 percent, or $80 million, to $176 million, primarily due to the inclusion of $66 million in proceeds from the sale of the recordkeeping business and $18 million from recognizing previously deferred cost of insurance revenues in last year's quarter. Excluding these items, revenues increased 2 percent, as higher fees from 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. riders and cost of insurance for variable universal life/universal life (VUL/UL) insurance were offset by lower other revenues on certain consolidated limited partnerships. Expenses Consolidated expenses rose 5 percent, or $91 million, to $1.9 billion. Expenses grew 7 percent when excluding the costs from the sale of the recordkeeping business in the second quarter of 2006. The increase in expenses was primarily due to a $102 million increase in Compensation and benefits -- field driven by business growth and strong advisor productivity. The Company manages Compensation and benefits -- non-field and Other expenses in relation to revenue growth to drive pretax income margin expansion. Combined, these two lines increased 2 percent, or $12 million, to $646 million. Declines related to lower legal and transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). were largely offset by a number of other items in the current quarter, such as expenses for Ameriprise Bank, increased investment in the business, and higher accrued compensation in recognition of year-to-date performance. Compensation and benefits - Field increased 23 percent, or $102 million, to $538 million, due to strong advisor productivity growth. Interest credited to account values declined 1 percent, or $4 million, to $303 million, reflecting continued declines in annuity fixed account and certificate balances, partially offset by higher crediting rates. Benefits, claims, losses and settlement expenses increased 2 percent, or $5 million, to $230 million. Volume-driven increases in Auto and Home were offset by the positive impact of markets on variable annuity benefits expenses. The second quarter of 2006 included a net reserve benefit. Amortization of deferred acquisition cost (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) expenses declined 18 percent, or $28 million, to $125 million. The favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact of equity markets in the current quarter offset growth in DAC amortization from new product sales. Higher expenses in the second quarter of 2006 primarily reflected an adjustment to DAC balances in Auto and Home. Interest and debt expense increased 14 percent, or $4 million, to $32 million, reflecting additional interest costs from the $500 million of junior subordinated notes (hybrid securities Hybrid Security A security that combines two or more different financial instruments. Notes: Hybrid securities generally combine both debt and equity characteristics. ) issued in May 2006. Separation costs incurred in the quarter were $63 million. Since the announcement of the spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. , the Company has incurred $802 million in non-recurring separation costs and expects to incur all remaining costs in the second half of 2007. Taxes The effective tax rate on net income was 20.0 percent for the quarter, down from 24.3 percent in the prior year period. The effective tax rate on adjusted earnings was 23.1 percent for the quarter and 25.0 percent year to date, compared to 25.2 percent for full year 2006. The current quarter included a benefit from the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of certain income tax audits. Balance Sheet and Capital The Company maintains a very strong, high quality balance sheet. During the second quarter of 2007, the Company repurchased 2.3 million shares for approximately $142 million. Over the past six quarters, the Company repurchased 18.9 million shares for $964 million. The quarter-end basic share count was 236.6 million. The weighted average diluted share count for the second quarter of 2007 was 241.0 million, down from 248.0 million for the second quarter of 2006. The Company's commitment to maintaining the safety and soundness of its balance sheet is reflected in substantial liquidity, a high quality investment portfolio, low financial leverage and its continuing actions to manage and mitigate risk exposures. * Cash and cash equivalents were more than $3.3 billion, at June 30, 2007. * The quality of the Available-for-Sale fixed income investment portfolio, representing approximately 25 percent of balance sheet assets, remained high. * Investments with subprime exposure represented only 0.7 percent of the Company's total investment portfolio with more than 90 percent rated AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. and the remainder rated AA. * The percentage of below investment grade assets declined to 6 percent. * The residential mortgage-backed bond portfolio remains very high quality, with high credit ratings and limited interest rate and prepayment risk Prepayment Risk The uncertainty related to unscheduled prepayment in excess of scheduled principal repayment. Notes: This risk is generally associated with mortgage securities. . * Credit risk remained limited with 96 percent rated AAA and 4 percent rated AA. * Duration was 2.7 years and convexity Convexity A measure of the curvature in the relationship between bond prices and bond yields. Notes: Positive convexity corresponds to curvature that opens upward. Negative convexity corresponds to curvature that opens downward. was a favorable -0.5. * Unrealized net investment losses in the Available-for-Sale investment portfolio were $0.6 billion at quarter end. * The debt to capital ratio as of June 30, 2007 was 22.4 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 was 16.9 percent. For the second quarter of 2007 the ratio of earnings to fixed charges was 6.9 times. Excluding interest on non-recourse debt, the ratio of earnings to fixed charges was 7.6 times. [TABLE OMITTED] Second Quarter 2007 Segment Results The AA&I segment reported pretax income growth of 25 percent, or $56 million, to $278 million, due to strong wrap and variable annuity inflows, strong advisor cash sales, and market appreciation. The segment represented 74 percent of consolidated revenues and 90 percent of pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern adjusted earnings. Revenues grew 8 percent, or $123 million, to $1.6 billion. Excluding the proceeds from the sale of the recordkeeping business in the second quarter of last year, revenue growth was 13 percent. Revenues also reflected declining net investment income from lower annuity fixed account and certificate balances. The Protection segment reported pretax income growth of 11 percent, or $10 million, to $102 million, primarily due to continued business growth in VUL/UL and Auto and Home. The segment represented 23 percent of consolidated revenues and 33 percent of pretax adjusted earnings. Revenues grew 2 percent, or $12 million, to $508 million, primarily reflecting growth in Auto and Home premiums. The prior year quarter included $18 million from recognizing previously deferred cost of insurance revenues. Excluding this item, revenues grew 6 percent. The Corporate segment revenue decrease of 9 percent, or $6 million, primarily reflected lower net investment income from the mark-to-market of equity market hedges. The pretax loss pretax loss A loss reported before tax benefits are considered. in this segment increased $7 million to $135 million. Adjusted for non-recurring separation costs, the pretax loss increased $28 million to $72 million, primarily reflecting an increase in Other expenses. The second quarter of 2006 included $11 million in severance charges. 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 and 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 ameriprise.com. RiverSource mutual funds are distributed by RiverSource Distributors, Inc. and Ameriprise Financial Services, Inc., Members NASD, and managed by RiverSource Investments, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control . 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 NASD. Ameriprise Financial Services, Inc. offers financial advisory 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 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: to sell insurance and annuity products in the state of New York. These companies are all part of Ameriprise Financial, Inc. You should consider the investment objectives, risks, charges and expenses of a mutual fund before investing. For a free copy of a prospectus, which contains this and other information about the mutual fund, call (800) 862-7919. Read the prospectus carefully before investing. Investment products, including shares of mutual funds, are not federally or FDIC FDIC See: Federal Deposit Insurance Corporation FDIC See Federal Deposit Insurance Corporation (FDIC). insured, are not deposits or obligations of, or guaranteed by, any financial institution and involve investment risks including possible loss of principal and fluctuation in value. 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 the Company's plans, estimates and beliefs. Actual results could differ materially from those described in these forward-looking statements. The Company has made various forward-looking statements in this news release. Examples of such forward-looking statements include: * statements of 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, the establishment of the Company's new brands and competitive environment; * 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 * 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 interest rate and equity market 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; * investment management performance and consumer acceptance of the Company's 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; * the Company's capital structure as a stand-alone company stand-alone company An independent operating firm. For example, a large diversified firm may consider spinning off a subsidiary because, as a stand-alone company, the subsidiary would command a higher price-earnings ratio than the parent. , including ratings and indebtedness, and limitations on subsidiaries to pay dividends; * risks of default by issuers of investments the Company owns 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 derivative 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 assumptions regarding morbidity, mortality and persistency in certain annuity and insurance products; * the impact of the separation from American Express; * the impacts of the Company's efforts to improve distribution economics and to grow third-party distribution of its products, and the ability to establish the Company's new brands; and * general economic and political factors, including consumer confidence in the economy. Readers are cautioned that the foregoing list of factors is not exhaustive. There may also be other risks that the Company is 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. The Company undertakes 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 the Company's Annual Report on Form 10-K filed with the SEC on February 27, 2007. 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 Second Quarter 2007 Statistical Supplement available at ir.ameriprise.com. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] (c) 2007 Ameriprise Financial, Inc. All rights reserved. |
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