Ameriprise Financial Reports Second Quarter 2008 Results.Net income per diluted share increases 15 percent, to $0.93 Earnings per diluted share increases 3 percent, to $1.01, excluding net realized securities gains (losses) and non-recurring separation costs in the prior-year period The Company raises quarterly dividend 13 percent, to $0.17 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 $210 million for the quarter ended June 30, 2008, a 7 percent increase from $196 million in the prior-year quarter. The second quarter of 2008 included $18 million in after-tax net realized securities losses. The second quarter of 2007 included $41 million in after-tax non-recurring separation costs. Net income per diluted share for the quarter was $0.93, a 15 percent increase compared with the prior-year period. Earnings per diluted share excluding net realized securities gains (losses) and non-recurring separation costs in the prior-year period increased 3 percent to $1.01, which included tax benefits and the negative impact of equity markets on DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter amortization. Net revenues declined 8 percent to $2.0 billion in the second quarter of 2008. The decline was primarily driven by market depreciation, prior-year period client reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. of proceeds from real estate investment trust liquidations, and reduced net investment income due to declining 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 realized securities losses in the quarter. Return on equity for the 12 months ended June 30, 2008 was 11.2 percent, compared to 9.2 percent for the 12 months ended June 30, 2007. Excluding separation costs and net realized securities gains (losses), return on equity was 12.1 percent for both periods. During the second quarter of 2008, we repurchased 5.2 million shares of our common stock for $250 million. "While the market and economic environment continues to be challenging, the Company remains in a strong operating position," said Jim Cracchiolo, chairman and chief executive officer. "Client activity began to stabilize in the second quarter, with 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 and wrap net flows increasing sequentially and 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 up both year-over-year and from the prior quarter. "The expense management initiatives we implemented in the first quarter continue to reduce general and administrative expenses. We remain focused on effective expense management to control margins, while maintaining our investments for longer-term growth. "Our balance sheet continues to perform well, and we remain in a strong capital and liquidity position. The agreement to acquire J. & W. Seligman announced earlier this month and our decision to increase the dividend are indications of both our financial strength and our commitment to generate shareholder value." Second Quarter 2008 Summary We believe the exclusion of net realized securities gains (losses), after-tax, from net income best reflects the trends in our underlying business in the current quarter. We also believe that the presentation of adjusted 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] Financial performance continued to reflect the negative impact of the challenging equity and interest rate environment, though to a lesser degree than the first quarter of 2008. This impact was offset by continued expense controls and current quarter tax benefits. Significant items included in consolidated net income for the second quarter of 2008 were: * $18 million, or $0.08 per diluted share, in after-tax net realized securities losses, primarily driven by other-than-temporary impairments to three AAA-rated Alt-A mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. . This compares to $1 million in after-tax net gains in the prior-year period. * A $7 million, or $0.03 per diluted share, after-tax impact from additional amortization of deferred acquisition costs (DAC) 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 ) driven by unfavorable market performance in the quarter. This compares to an $8 million, or $0.03 per diluted share, after-tax benefit in the prior-year period, for a net $0.06 year-over-year change. * $27 million, or $0.12 per diluted share, in lower taxes reflecting adjustments related to FIN 48 and benefits of our 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. initiatives. This compared to a $16 million, or $0.07 per diluted share, benefit from 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 prior-period audits in the prior-year period, for a net $0.05 year-over-year benefit. Second Quarter 2008 Business Highlights * Client activity began to stabilize in the quarter, and client retention remained strong, increasing to 95 percent. * Branded financial plan net cash sales increased 8 percent year-over-year to $54 million. We also launched a new financial planning tool suite that makes it easier for advisors to serve clients in ongoing financial planning relationships. * Franchisee advisor retention remained at all-time highs, and total franchisee advisors grew 3 percent year-over-year to 7,846. Employee advisor attrition Attrition The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry. Notes: slowed in the quarter, as we continued our reengineering efforts. * Owned, managed and administered assets decreased 8 percent year-over-year to $445 billion as of June 30, 2008, reflecting the 15 percent decline in the S&P 500 Index and Asset Management net outflows in the quarter. These impacts were partially offset by continued net inflows into 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. and variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. . [TABLE OMITTED] * RiverSource Equity Value Fund and RiverSource Mid Cap Value Fund received 2008 Lipper Fund Awards as the leading funds in their respective Lipper categories for the five-year period ending December 31, 2007. * We took steps to reengineer our institutional trust and custody business, which we expect to complete in the fourth quarter of 2008. * Life insurance in-force increased 5 percent year-over-year to $191 billion. * We maintained substantial liquidity at both the holding company and subsidiary levels and continue to hold more than $1 billion of excess capital. [TABLE OMITTED] Note: We have reclassified the mark-to-market adjustment on certain derivatives from Net investment income to various expense lines. The mark-to-market adjustment on derivatives hedging 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. living benefits, equity indexed annuities and stock market certificates were reclassified to Benefits, claims, losses and settlement expenses, Interest credited to fixed accounts and Banking and deposit interest expense, respectively. Prior period amounts have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current presentation. Second Quarter 2008 Consolidated Results Net income grew 7 percent year-over-year to $210 million. Excluding net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. and losses in both periods and $41 million in non-recurring after-tax separation costs in the second quarter of 2007, earnings declined 3 percent. Total net revenues declined 8 percent, or $174 million, to $2.0 billion, driven by difficult equity markets, lower year-over-year sales of real estate investment trusts, and less net investment income due to lower fixed annuity balances and impairments in the quarter. Revenues in the prior-year period include client reinvestment of proceeds from real estate investment trust liquidations. Management and financial advice fees declined 1 percent, or $8 million, to $780 million. The vast majority of the impact was due to lower equity markets, as well as outflows in our Asset Management business, partially offset by net inflows in wrap and annuity variable accounts. Distribution fees declined 15 percent, or $72 million, to $422 million, primarily driven by the impact of client reinvestment of proceeds from real estate investment trust liquidations in the second quarter of 2007. Net investment income decreased 22 percent, or $114 million, to $393 million, primarily due to lower fixed annuity and certificate balances, a decline in income from other investments (including seed money), and $27 million in net pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern realized investment losses. Premiums increased 1 percent, or $2 million, to $268 million, primarily due to growth in Auto & Home premiums. Other revenues declined 4 percent, or $6 million, to $158 million, primarily driven by reduced 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 reductions primarily in the General and administrative expense line. Banking and deposit interest expense declined 36 percent, or $24 million, to $42 million, primarily due to lower certificate balances and a decline in 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. . Expenses Consolidated expenses declined 9 percent, or $166 million, to $1.7 billion, in line with lower revenues and reflecting expense management initiatives. Total expenses in the second quarter of 2007 included $63 million of non-recurring separation costs. Distribution expenses declined 3 percent, or $16 million, to $517 million, primarily due to declines in advisor compensation reflecting lower year-over-year cash sales. These expenses also reflect growth in our franchisee advisor platform and product mix shift resulting in lower deferrals. As a result, we recognized a higher percentage of these expenses in the current period. Interest credited to fixed accounts decreased 11 percent, or $23 million, to $192 million, due to ongoing declines in fixed annuity balances. Benefits, claims, losses and settlement expenses increased 2 percent, or $6 million, to $294 million, primarily due to increased life insurance and long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. benefit expenses, partially offset by 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 valuation benefits due to changes in our variable annuity hedging strategy. Amortization of DAC rose 15 percent, or $19 million, to $144 million. The impact of the equity market declines during the second quarter of 2008 lowered estimated gross profit for future periods, resulting in an additional $10 million of DAC amortization. This compared to an $11 million benefit in the second quarter of 2007. General and administrative expense decreased 13 percent, or $88 million, to $567 million, reflecting cost controls, lower compensation-related expenses, and a decline in expenses from certain limited partnerships consolidated under EITF 04-5, which had corresponding revenue offsets. Taxes The effective tax rate was 11.4 percent for the quarter, compared to 20.0 percent in the prior-year period. The current quarter included $27 million of exceptional tax adjustments, which consisted of $19 million in adjustments related to FIN 48 and $8 million in benefits from effective tax planning. The second quarter of 2007 included $16 million of exceptional tax adjustments. We expect our tax rate for the remaining two quarters of 2008 to be in the 24-26 percent range. Segment Financial Highlights Our segment results reflect both the difficult market environment and our efforts to control expenses while investing for growth. 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. declined 50 percent, or $50 million, to $51 million. The certificate and banking portion of the segment's results included a $24 million loss, primarily driven by $21 million of net realized securities losses. Pretax income from the wealth management business declined 27 percent, or $28 million, to $75 million, primarily driven by a decline in revenues due to market depreciation and the impact of prior-year period client reinvestment of proceeds from real estate investment trust liquidations. These impacts were partially offset by continued net inflows in wrap accounts and higher financial planning fees. Growth in sequential earnings reflects increased advisor cash sales of wrap, direct investment and certificates products, as well as continued expense controls. Asset Management pretax income declined 48 percent, or $39 million, to $42 million, primarily due to lower assets, driven by declining equity markets. Segment pretax income was also impacted by increased investment in third party distribution and a net $12 million benefit in the prior-year period from revenue related to CDO (Collaborative Data Objects) A programming interface from Microsoft for accessing MAPI-based e-mail, calendaring and scheduling servers. Originally called "OLE Messaging" and "Active Messaging," CDO wraps the Enhanced MAPI library into a COM object that provides the bond calls and investment management contract adjustments. RiverSource net outflows in the quarter were primarily due to reduced mutual fund sales in the Ameriprise channel as client activity slowed, as well as anticipated outflows of institutional assets of a former affiliate. Redemption rates for RiverSource Funds remained stable. Threadneedle experienced anticipated outflows of lower-margin institutional assets and outflows of 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" assets due to portfolio management changes. Net inflows in Threadneedle retail funds were driven by an increase in year-over-year sales. Segment expenses remained well controlled. The pending acquisition of J. & W. Seligman is expected to significantly increase our third party distribution and investment capabilities. Annuities pretax income declined 10 percent, or $9 million, to $77 million. Excluding net realized gains (losses), the segment results declined 5 percent, or $4 million, to $82 million. The current quarter reflects a $10 million negative market impact on variable annuity DAC and DSIC amortization. Our variable annuity living benefit hedging performed within tolerances, with an immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. impact to pretax income. Substantially lower net outflows in fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. reflect the market environment and sales initiatives. Protection pretax income declined 4 percent, or $5 million, to $113 million. Excluding net realized gains (losses), segment results declined 3 percent to $114 million, primarily due to a combined $17 million increase in life claims and long-term care benefits, partially offset by lower Auto & Home benefits. Corporate & Other pretax loss pretax loss A loss reported before tax benefits are considered. before separation costs and net realized securities gains (losses) improved by $33 million to $46 million, primarily reflecting our continued focus on expense management. Balance Sheet and Capital We continued to maintain a strong, high quality balance sheet. During the second quarter of 2008, we repurchased 5.2 million shares of our common stock for $250 million. We ended the quarter with more than $1 billion in excess capital. We anticipate continuing to have more than $1 billion in excess capital after the completion of our acquisition of J. & W. Seligman. The weighted average diluted share count for the quarter ended June 30, 2008 was 226.0 million compared to 241.0 million for the quarter ended June 30, 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 $27 million in pretax net realized investment losses, primarily due to other-than-temporary impairments to three AAA-rated Alt-A mortgage-backed securities. We are 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 $3.4 billion at June 30, 2008, with $1.3 billion at the holding company. * Unrealized net investment losses in the Available-for-Sale investment portfolio were $0.9 billion at quarter end, up from $0.6 billion at the end of the second quarter of 2007. * The debt-to-capital ratio as of June 30, 2008 was 21.6 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 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 17.4 percent. For the second quarter of 2008, the ratio of earnings to fixed charges was 7.4 times. Dividend The strength of our balance sheet is reflected in the 13 percent, or $0.02, increase to the Company's quarterly cash dividend. The $0.17 per common share dividend is payable on August 22, 2008 to Ameriprise Financial shareholders of record at the close of business on August 8, 2008. 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 Second 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, financial advisor retention and enrollments, general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. , consolidated tax rate; and excess capital position. * 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, and the extent, manner, terms and timing of any share repurchases 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. we may effect; * 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, 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 complete the acquisition opportunities we negotiate, and to realize the financial, operating and business fundamental benefits we plan for those opportunities; * our ability to realize benefits from reengineering and tax planning; and * general economic and political factors, including consumer confidence in the economy as well as the ability and inclination 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 for year-end 2007 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 Second Quarter 2008 Statistical Supplement available at ir.ameriprise.com and the tables that follow in this release. Tables [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [c] 2008 Ameriprise Financial, Inc. All rights reserved. |
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