Ameriprise Financial Reports Third Quarter Earnings; Ameriprise Financial Reports Earnings for the First Time as a Public Company Following Its Spin Off from American Express Company on September 30, 2005.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. -- Net 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. 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 Was $0.50 Adjusted Earnings Per Diluted Share Were $0.73 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 before discontinued operations of $123 million for the third quarter, down 35 percent from $188 million a year ago. Adjusted earnings - net income excluding discontinued operations, AMEX AMEX See: American Stock Exchange Assurance and non-recurring separation costs - increased 11 percent, to $179 million in 2005 from $161 million in the 2004 quarter. Net income before discontinued operations per diluted share for the third quarter of 2005 was $0.50. Adjusted earnings per diluted share for the third quarter 2005 were $0.73, up 11 percent from the comparable period last year. Included in both net income and adjusted earnings for the third quarter of 2005 is a $70 million expense, $46 million 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. , related to the comprehensive settlement of the 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: securities class action lawsuit class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax discussed later in this release. Also included in the quarter is an after-tax benefit of $44 million from the annual Deferred Acquisition Cost (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) assessment, $13 million in tax expenses related to 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 prior period tax returns and $4 million in after-tax realized net investment losses. Included in third quarter 2004 were $22 million in after-tax 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. and legal costs, an after-tax benefit of $15 million from the annual DAC assessment and $7 million in after-tax realized net investment gains. Revenues grew 9 percent to $1.9 billion in the third quarter of 2005 from $1.7 billion in the same period of 2004. Adjusted revenues - revenues excluding discontinued operations and AMEX Assurance - grew 15 percent, predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. driven by 25 percent growth in management, financial advice and service fees and 19 percent growth in distribution fees for the same period. Return on equity - calculated using net income before discontinued operations, which includes separation costs, and equity excluding both the assets and liabilities of discontinued operations - for the 12 months ended September September: see month. 30, 2005 was 9.8 percent. "Our results for the third quarter were strong, reflecting continued success in our strategies to increase financial plan penetration The successful unauthorized breach of a security perimeter. See penetration test. , target 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 and improve advisor productivity. We have succeeded in enhancing our operating performance while successfully executing a substantial number of tasks to separate 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. ," said Jim Cracchiolo, Chairman and Chief Executive Officer. "In addition to generating improved operating performance, we rebranded our company to Ameriprise Financial, established the 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 brand for our products, launched a new advertising campaign and completed the legal separation from American Express through a stock dividend paid on September 30," added Cracchiolo. 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 accounting change, discontinued operations, AMEX Assurance and non-recurring separation costs. This presentation aligns with the pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma financials contained in our Form 10, which was filed August 19, 2005 with the Securities and Exchange Commission (SEC).
Ameriprise Financial, Inc.
Summary
(Unaudited)
Dollars in millions Diluted Per Share Data
-------------------- ----------------------
3Q05 3Q04 %chg 3Q05 3Q04 %chg
------ ------ ------ ------- ------- ------
Net income $125 $199 (38)% $0.50 $0.81 (38)%
Less: Income from
discontinued operations 2 11 (87)% - 0.04 (87)%
------ ------ ------- -------
Income before discontinued
operations 123 188 (35)% 0.50 0.77 (35)%
Less: Income attributable
to AMEX Assurance, after-
tax 3 27 (90)% 0.01 0.11 (90)%
Add: Separation costs,
after-tax 59 - (a) 0.24 - (a)
------ ------ ------- -------
Adjusted earnings, after-
tax $179 $161 11% $0.73 $0.66 11%
====== ====== ======= =======
(a) - Variance of 100% or greater.
Key Operating Highlights Total clients increased 2 percent from a year ago to 2.8 million, with client retention remaining strong at 94 percent. The number of mass affluent clients increased 12 percent from the year ago period. Clients with a financial plan increased to 43 percent of our branded advisor client base, up from 42 percent in the year ago period. The company sold approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 54,500 financial plans in the third quarter of 2005, up 7 percent from the comparable year ago period. Advisor productivity showed continued improvement, with branded 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 up 14 percent, retail managed assets up 13 percent and 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 ) up 17 percent. Total advisors grew 1 percent to 12,188 from 12,071 at the end of the prior year quarter. Branded advisors of 10,480 decreased less than 1 percent from a year ago due to fewer employee advisor appointments during the second and third quarters. Advisor annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. retention was 91 percent for franchisees and 64 percent for employees. At September 30, 2005, owned, managed and administered assets increased 11 percent from September 30, 2004, or $42 billion, to over $420 billion. The growth was driven by increases of $14 billion in SPS (Standby Power System) A UPS system that switches to battery backup upon detection of power failure. See UPS. SPS - Symbolic Programming System. Assembly language for IBM 1620. wrap assets, $13 billion in higher Threadneedle managed assets and $9 billion in higher owned assets. During the quarter, the company transferred its 50 percent ownership interest in American Express International Deposit Company (AEIDC AEIDC Arctic Environmental Information and Data Center ) to American Express. All periods have been restated to remove AEIDC assets from the owned category and to report the related investment portfolio in the managed category. During the third quarter, the company received a $1.1 billion capital contribution from American Express. The impact on assets due to the AMEX Assurance transaction was immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. .
Ameriprise Financial, Inc.
Consolidated Income Statements
Includes AMEX Assurance
(Dollars in millions, unaudited)
Three Months Ended
September 30, Percent
------------------
2005 2004 Inc/(Dec)
--------- -------- ---------
Revenues
Management, financial advice and
service fees $687 $550 25%
Distribution fees 296 248 19%
Net investment income 561 520 8%
Premiums 202 262 (23)%
Other revenues 127 132 (3)%
--------- --------
Total revenues 1,873 1,712 9%
--------- --------
Expenses
Compensation and benefits:
Field 408 311 31%
Non-field 295 249 19%
--------- --------
Total compensation and benefits 703 560 26%
Interest credited to account values 337 302 11%
Benefits, claims, losses and settlement
expenses 190 205 (8)%
Amortization of deferred acquisition
costs 49 108 (55)%
Interest and debt expense 16 13 27%
Other expense 305 263 16%
--------- --------
Total expenses before separation
costs 1,600 1,451 10%
--------- --------
Income from continuing operations before
income tax provision, separation costs
and accounting change 273 261 4%
Income tax provision before tax benefit
attributable to separation costs 91 73 25%
--------- --------
Income from continuing operations before
separation costs and accounting change 182 188 (3)%
Separation costs, after-tax (b) 59 - (a)
--------- --------
Income from continuing operations before
accounting change 123 188 (35)%
Discontinued operations 2 11 (87)%
Cumulative effect of accounting change,
net of tax - - -
--------- --------
Net income $125 $199 (38)%
========= ========
AMEX Assurance net income $3 $27
========= ========
Weighted average common shares
outstanding:
Basic (millions) 246.2 246.2 -
========= ========
Diluted (millions) 246.2 246.2 -
========= ========
Nine Months Ended
September 30, Percent
------------------
2005 2004 Inc/(Dec)
--------- -------- ---------
Revenues
Management, financial advice and
service fees $1,927 $1,642 17%
Distribution fees 873 834 5%
Net investment income 1,667 1,566 6%
Premiums 751 759 (1)%
Other revenues 397 383 4%
--------- --------
Total revenues 5,615 5,184 8%
--------- --------
Expenses
Compensation and benefits:
Field 1,141 992 15%
Non-field 854 698 23%
--------- --------
Total compensation and benefits 1,995 1,690 18%
Interest credited to account values 976 926 5%
Benefits, claims, losses and settlement
expenses 646 605 7%
Amortization of deferred acquisition
costs 319 312 2%
Interest and debt expense 52 37 41%
Other expense 841 762 10%
--------- --------
Total expenses before separation
costs 4,829 4,332 11%
--------- --------
Income from continuing operations before
income tax provision, separation costs
and accounting change 786 852 (8)%
Income tax provision before tax benefit
attributable to separation costs 230 253 (9)%
--------- --------
Income from continuing operations before
separation costs and accounting change 556 599 (7)%
Separation costs, after-tax (b) 109 - (a)
--------- --------
Income from continuing operations before
accounting change 447 599 (25)%
Discontinued operations 16 31 (49)%
Cumulative effect of accounting change,
net of tax - (71) (a)
--------- --------
Net income $463 $559 (17)%
========= ========
AMEX Assurance net income $56 $79
========= ========
Weighted average common shares
outstanding:
Basic (millions) 246.2 246.2 -
========= ========
Diluted (millions) 246.2 246.2 -
========= ========
(a) Variance of 100% or greater.
(b) Assumes 35% statutory tax rate on separation costs.
Third Quarter 2005 Consolidated Results Consolidated revenues rose 9 percent to $1.9 billion, up from $1.7 billion in the year ago quarter. Adjusted revenues, which exclude AMEX Assurance-related revenues, grew 15 percent. --Management, financial advice and service fees grew 25 percent to $687 million, driven by higher 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. , including the impact of market appreciation, Threadneedle 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" performance fees and greater SPS wrap fees. The impact of changes attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to AMEX Assurance was immaterial. --Distribution fees grew 19 percent to $296 million, as a result of an increase in fees from retail brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. activity driven by stronger sales. --Net investment income grew 8 percent to $561 million, driven by higher asset levels. Included in net investment income are the $6 million in net investment losses, which compared to $11 million of net investment gains from the third quarter of 2004. The impact of changes attributable to AMEX Assurance was immaterial. --Premiums declined 23 percent to $202 million primarily due to the ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. of the AMEX Assurance business to American Express. Third quarter 2004 revenues included $62 million of premiums related to AMEX Assurance and third quarter 2005 revenues included $(15) million of premiums related to AMEX Assurance. Excluding AMEX Assurance, adjusted premiums increased 9 percent to $217 million due to growth in our home and auto insurance sales, most notably from the 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. alliance. Consolidated expenses totaled $1.7 billion for the three months ended September 30, 2005, up 17 percent from $1.5 billion for the three months ended September 30, 2004. This increase includes $92 million in non-recurring separation costs. Adjusted expenses, excluding separation costs and expenses associated with AMEX Assurance, were $1.6 billion, up 13 percent from a year ago. --Compensation and benefits - field increased 31 percent to $408 million and includes a significant impact related to AMEX Assurance of $35 million. Adjusted for AMEX Assurance, compensation and benefits - field increased 20 percent due to higher sales and related commissions. --Compensation and benefits - non-field increased 19 percent to $295 million due to increased management incentives, higher benefit costs and merit adjustments. Increased management incentives were largely due to strong hedge fund performance at Threadneedle. The impact of changes attributable to AMEX Assurance was immaterial. --Interest credited to account values increased 11 percent to $337 million due to higher interest crediting rates and volume growth on investment certificates products. --Benefits, claims, losses and settlements declined 8 percent to $190 million, reflecting a $60 million decline from the impact of ceding of AMEX Assurance reserves, which was offset by increases driven by higher life and health in-force levels and higher average home and auto insurance policies in force. On an adjusted basis, benefits, claims, losses and settlements increased 22 percent to $241 million. --Amortization of DAC declined 55 percent to $49 million primarily as a result of a $67 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern benefit resulting from the annual DAC assessment. This compared to a $24 million pretax DAC amortization benefit in the third quarter 2004. On an adjusted basis, amortization of DAC declined 51 percent to $49 million. As disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in prior periods, Ameriprise annually performs a comprehensive review in the third quarter of each year and updates various DAC assumptions, such as persistency, mortality rate, interest margin and maintenance expense level assumptions. The impact on results from operations of changing assumptions with respect to the amortization of DAC can be either positive or negative in any particular period. As a result of these reviews, Ameriprise took actions in 2005 and 2004 that impacted the DAC balances and expenses. In the third quarter of 2005, this comprehensive review resulted in a net $67 million DAC amortization expense reduction. Protection segment DAC amortization expense was reduced by $53 million and 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 segment DAC amortization expense was reduced by $14 million. These actions primarily reflected: --a $32 million DAC amortization reduction reflecting changes in previously assumed mortality rates; and --a $33 million DAC amortization reduction reflecting lower than previously assumed surrender To give up, return, or yield. The word surrender presupposes the possession or ownership of the thing that is to be returned or given up. It indicates a transfer of title as well as possession, but it does not express or in any way suggest the transaction of a sale rates and higher associated surrender charges Surrender Charge A fee levied on a life insurance policyholder upon cancellation of his or her life insurance policy. The fee is used to cover the costs of keeping the insurance policy on the insurance provider's books. . --Interest and debt expense increased 27 percent to $16 million reflecting higher 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. . --Other expense increased 16 percent to $305 million including the previously mentioned $70 million pretax charge related to the settlement of a class action lawsuit. Adjusted for the impact of AMEX Assurance, other expense increased 20 percent to $304 million in the third quarter 2005. --Separation costs incurred during the quarter of $92 million pretax ($59 million after-tax) were primarily related to advisor retention program costs, technology costs and costs associated with establishing the Ameriprise Financial brand. To date we have incurred $168 million pretax ($109 million after-tax) of the separation costs.
Asset Accumulation and Income
Income Statements
(Dollars in millions, unaudited)
Three Months Ended
September 30, Percent
-----------------
2005 2004 Inc/(Dec)
--------- ------- ----------
Revenues
Management, financial advice and
service fees $611 $486 26%
Distribution fees 207 176 17%
Net investment income 479 450 7%
Other revenues 8 16 (45)%
--------- -------
Total revenues 1,305 1,128 16%
--------- -------
Expenses
Compensation and benefits - field 252 221 14%
Interest credited to account values 299 261 15%
Benefits, claims, losses and settlement
expenses 3 16 (82)%
Amortization of deferred acquisition
costs 68 79 (16)%
Interest and debt expense 12 10 18%
Other expense 505 384 32%
--------- -------
Total expenses 1,139 971 17%
--------- -------
Income from continuing operations before
income tax provision and accounting
change $166 $157 7%
========= =======
Nine Months Ended
September 30, Percent
------------------
2005 2004 Inc/(Dec)
--------- -------- ---------
Revenues
Management, financial advice and
service fees $1,703 $1,454 17%
Distribution fees 612 586 4%
Net investment income 1,428 1,364 5%
Other revenues 43 29 52%
--------- --------
Total revenues 3,786 3,433 10%
--------- --------
Expenses
Compensation and benefits - field 733 657 12%
Interest credited to account values 874 822 6%
Benefits, claims, losses and settlement
expenses 24 36 (34)%
Amortization of deferred acquisition
costs 257 223 14%
Interest and debt expense 30 21 38%
Other expense 1,384 1,139 22%
--------- --------
Total expenses 3,302 2,898 14%
--------- --------
Income from continuing operations before
income tax provision and accounting
change $484 $535 (9)%
========= ========
Asset Accumulation and Income Segment - Third Quarter 2005 Results Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the before income tax provision and accounting change was $166 million for the third quarter, up 7 percent from $157 million a year ago. The Asset Accumulation and Income segment was not impacted by the results of AMEX Assurance. Pretax return on allocated equity for continuing operations was 17.6 percent at September 30, 2005, down 70 basis points from full year 2004. Total revenues of $1.3 billion rose 16 percent from $1.1 billion in the year ago quarter. --Management, financial advice and service fees grew 26 percent to $611 million, driven by net inflows into our 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. , separate account assets and Threadneedle mutual funds, as well as market appreciation. --Distribution fees grew 17 percent to $207 million, on an increase in fees from retail brokerage activity driven by stronger sales. --Net investment income grew 7 percent to $479 million, driven by higher average invested assets, offset by net realized investment losses of $8 million. The average yield on invested assets was the same in both periods. Total expenses of $1.1 billion rose 17 percent from $971 million in the year ago quarter. --Compensation and benefits - field rose 14 percent to $252 million reflecting higher commissions paid driven by stronger sales activity. --Interest credited to account values increased 15 percent to $299 million due to higher interest crediting rates and volume growth on investment certificate products. --Benefits, claims, losses and settlements declined 82 percent, reflecting a decline of $12 million in the liability for future benefits under Guaranteed Minimum Withdrawal Benefit rider contracts. --Amortization of DAC declined 16 percent to $68 million, including a $14 million pretax benefit resulting from the annual DAC assessment. This compared to an $8 million pretax DAC amortization benefit in the third quarter 2004. --Other operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. increased 32 percent to $505 million on higher non-field compensation and benefits attributable to this segment, as well as the $70 million expense related to the settlement of the class action lawsuit. Asset management product revenues increased 12 percent compared to the year ago quarter, driven by increases in managed assets. At September 30, 2005, managed assets grew 9 percent as compared to September 30, 2004, reflecting market appreciation, which was partially offset by net outflows. In retail managed assets, we continued to experience negative flows in RiverSource mutual funds, offset by positive flows in Threadneedle mutual funds and wrap accounts. Institutional managed assets experienced negative flows primarily driven by our previously announced closing of several hedge funds and the San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. office. 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. product revenues grew 11 percent compared to the year ago quarter, driven primarily by strong new flows. Variable annuity assets accounted for in owned assets continued to show strong increases with net flows of $826 million in the quarter ended September 30, 2005. 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. product revenues grew 2 percent compared to the year ago quarter, primarily as a result of 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 mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. benefits on hedges. Certificate product revenues rose 15 percent compared to the year ago quarter, due to increases in account values. Certificate revenues exclude AEIDC, which are now reported in discontinued operations. Banking, brokerage and other product revenues increased 44 percent compared to the year ago quarter, due to strong sales and growth in the SPS wrap product, as well as higher financial advice and service fees.
Protection
Income Statements
Includes AMEX Assurance
(Dollars in millions, unaudited)
Three Months Ended
September 30, Percent
------------------
2005 2004 Inc/(Dec)
--------- -------- ---------
Revenues
Management, financial advice and
service fees $17 $17 (1)%
Distribution fees 27 25 4%
Net investment income 90 82 9%
Premiums 217 262 (17)%
Other revenues 109 103 6%
--------- --------
Total revenues 460 489 (6)%
--------- --------
Expenses
Compensation and benefits - field 57 23 (a)
Interest credited to account values 38 42 (11)%
Benefits, claims, losses and settlement
expenses 187 190 (1)%
Amortization of deferred acquisition
costs (20) 29 (a)
Interest and debt expense 9 5 75%
Other expense 53 66 (21)%
--------- --------
Total expenses 324 355 (9)%
--------- --------
Income from continuing operations before
income tax provision and accounting
change $136 $134 0%
========= ========
Nine Months Ended
September 30, Percent
------------------
2005 2004 Inc/(Dec)
--------- -------- ---------
Revenues
Management, financial advice and
service fees $46 $39 16%
Distribution fees 80 78 1%
Net investment income 256 234 10%
Premiums 766 759 1%
Other revenues 333 318 5%
--------- --------
Total revenues 1,481 1,428 4%
--------- --------
Expenses
Compensation and benefits - field 102 66 55%
Interest credited to account values 102 104 (3)%
Benefits, claims, losses and settlement
expenses 622 570 9%
Amortization of deferred acquisition
costs 61 89 (31)%
Interest and debt expense 19 12 62%
Other expense 211 199 6%
--------- --------
Total expenses 1,117 1,040 8%
--------- --------
Income from continuing operations before
income tax provision and accounting
change $364 $388 (7)%
========= ========
(a) Variance of 100% or greater.
Protection Segment - Third Quarter 2005 Results Income from continuing operations before income tax provision and accounting change was $136 million for the third quarter, compared to $134 million a year ago. Adjusted segment earnings increased 41 percent, from $94 million in the 2004 quarter to $133 million in 2005. Pretax return on allocated equity for continuing operations was 23.5 percent at September 30, 2005, down 180 basis points from full year 2004. These returns include AMEX Assurance. Total revenues of $460 million decreased 6 percent from $489 million in the year ago quarter. AMEX Assurance revenues of $67 million were included in the year ago quarter but were reduced to $(12) million in the third quarter of 2005 due to the 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. agreement with American Express. Adjusted segment revenues increased 12 percent to $472 million. --Net investment income increased 9 percent to $90 million. The impact of AMEX Assurance was immaterial. --Premiums declined 17 percent to $217 million, primarily reflecting the impact of AMEX Assurance. Adjusted segment premiums increased 16 percent to $232 million, driven by solid growth in premiums from home and auto. --Other revenues rose 6 percent to $109 million due to higher insurance in-force levels. Adjusted segment other revenues rose 8 percent to $110 million. Total expenses of $324 million decreased 9 percent from $355 million in the year ago quarter, primarily due to the ceding of AMEX Assurance losses to American Express. Adjusted segment expenses increased 3 percent to $339 million. --Compensation and benefits - field increased by $34 million, reflecting a $34 million impact related to the AMEX Assurance reinsurance transaction. --Interest credited to account values decreased 11 percent to $38 million. --Benefits, claims, losses and settlements declined 1 percent to $187 million as higher life and health in-force levels and higher average home and auto insurance policies in force were offset by a decline of $60 million related to the AMEX Assurance business ceded to American Express. Adjusted segment benefits, claims, losses and settlements increased 32 percent to $238 million due to a $13 million increase in the expense for future policy benefits in third quarter 2005 related to the inclusion of an explicit maintenance reserve for long term care insurance in Protection products. The increase is also driven by an increase in the face amount of life insurance policies outstanding. --Amortization of DAC resulted in income of $20 million in third quarter 2005 compared to an expense of $29 million in third quarter 2004. Adjusted segment amortization of DAC results in income of $20 million in the third quarter 2005 compared to an expense of $21 million in the third quarter of 2004. The impact of the annual DAC assessment for third quarter 2005 was a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. adjustment of $53 million for 2005 compared to a favorable adjustment of $16 million in 2004. --Interest and debt expense increased 75 percent to $9 million due primarily to higher short-term interest rates. Variable universal life and universal life product revenues increased 4 percent compared to the year ago quarter, driven by variable universal life sales. Term and whole life revenues declined 5 percent compared to the year ago quarter, based on flat sales and increased lapses. Home and auto revenues increased 25 percent compared to the year ago quarter, driven by increased policy counts. Disability income and other product revenues are down 35 percent compared to the year ago quarter, due to the impact of ceding premiums related to AMEX Assurance.
Corporate and Other and Eliminations
Statements of Operations
Includes the impact of Separation Costs
(Dollars in millions, unaudited)
Three Months Ended
September 30, Percent
------------------
2005 2004 Inc/(Dec)
--------- --------
Revenues
Management, financial advice and
service fees $59 $47 27%
Distribution fees 62 47 34%
Net investment income (8) (12) (26)%
Premiums (15) - (a)
Other revenues 10 13 (26)%
--------- --------
Total revenues 108 95 14%
--------- --------
Expenses
Compensation and benefits - field 99 67 49%
Interest credited to account values - (1) (a)
Benefits, claims and settlement
expenses - (1) (a)
Amortization of deferred acquisition
costs 1 - (a)
Interest and debt expense (5) (2) 89%
Other expense 42 62 (30)%
--------- --------
Total expenses 137 125 11%
--------- --------
Income/(loss) from continuing operations
before income tax provision, separation
costs and accounting change (29) (30) 0%
Separation costs, pretax 92 - (a)
--------- --------
Income/(loss) from continuing operations
before income tax provision and
accounting change $(121) $(30) (a)
========= ========
Nine Months Ended
September 30, Percent
------------------
2005 2004 Inc/(Dec)
--------- --------
Revenues
Management, financial advice and
service fees $178 $149 21%
Distribution fees 181 170 7%
Net investment income (17) (32) (47)%
Premiums (15) - (a)
Other revenues 21 36 (46)%
--------- --------
Total revenues 348 323 8%
--------- --------
Expenses
Compensation and benefits - field 306 269 14%
Interest credited to account values - - -
Benefits, claims and settlement
expenses - (1) (a)
Amortization of deferred acquisition
costs 1 - (a)
Interest and debt expense 3 4 (6)%
Other expense 100 122 (19)%
--------- --------
Total expenses 410 394 4%
--------- --------
Income/(loss) from continuing operations
before income tax provision, separation
costs and accounting change (62) (71) (14)%
Separation costs, pretax 168 - (a)
--------- --------
Income/(loss) from continuing operations
before income tax provision and
accounting change $(230) $(71) (a)
========= ========
(a) Variance of 100% or greater.
Corporate and Other and Eliminations Segment - Third Quarter 2005 Results Loss from continuing operations before income tax provision and accounting change was $121 million for the third quarter, compared to $30 million a year ago. The Corporate and Other and Eliminations segment was not impacted by the results of AMEX Assurance. The year-over-year change was predominantly due to the inclusion of $92 million of non-recurring separation costs. Total revenues of $108 million increased 14 percent from $95 million in the year ago quarter. --Management, financial advice and service fees grew 27 percent to $59 million, due to growth in assets managed and advice fees at 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 (SAI), which operates its own separately branded distribution network. --Distribution fees grew 34 percent to $62 million as a result of greater activity at SAI. --Net investment income was a loss of $8 million compared to a loss of $12 million in the year ago quarter. These losses are primarily the result of amortization of low income housing investments. --Other revenues decreased from $13 million to $10 million. Total expenses of $229 million increased from $125 million in the year ago quarter primarily due to the inclusion of $92 million of non-recurring separation costs. --Compensation and benefits - field rose 49 percent to $99 million reflecting higher commissions paid at SAI. Balance Sheet and Capital 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. was $7.8 billion up 17 percent from 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. 2004. The change reflects the capital contribution from American Express of $1.1 billion, a decline in other comprehensive income of $400 million, primarily driven by interest rate increases. Book value per share was $31.83. The debt/capital ratio declined from 19.7 percent at December December: see month. 31, 2004 to 15.2 percent at September 30, 2005. The company maintains substantial liquidity, with $2.6 billion in cash and cash equivalents at September 30, 2005. The company's investment portfolio quality remains high, with 49 percent of available for sale bonds rated double-A or higher and below investment grade bonds at 7 percent. Reserve coverage of non-performing assets increased to 8.8 times at September 30, 2005 from 6.6 times at June June: see month. 30, 2005. The company has filed a registration statement on Form S-3 with the SEC in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of issuing 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. senior debt of approximately $1.5 billion to replace the existing bridge loan, which was drawn on September 28, 2005 to repay American Express for inter-company loans, and for other corporate purposes. The registration statement relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the long-term senior debt securities has been filed with the SEC but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful Contrary to or unauthorized by law; illegal. When applied to promises, agreements, or contracts, the term denotes that such agreements have no legal effect. The law disapproves of such conduct because it is immoral or contrary to public policy. prior to registration or qualification under the securities laws of any such State. Settlement of Class Action Lawsuit Ameriprise Financial has reached a comprehensive settlement regarding the consolidated securities class action lawsuit filed against the company, its former parent and affiliates in October October: see month. 2004 called, "In re American Express Financial Advisors Securities 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. ." The settlement, under which the company denies any liability, includes a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. payment of $100 million to the class members. The settlement is subject to court approval. The class members include individuals who purchased mutual funds in the company's Preferred Provider Program, Select Group Program, or any similar revenue sharing revenue sharing Funding arrangement in which one government unit grants a portion of its tax income to another government unit. For example, provinces or states may share revenue with local governments, or national governments may share revenue with provinces or states. program; purchased mutual funds sold under the American Express(R) or AXP The brand name Digital gave to its first family of Alpha-based computers. In 1998, Digital was acquired by Compaq. See Alpha. (R) brand; or purchased for a fee financial plans or advice from the company between March 10, 1999 and through the date on which a formal stipulation An agreement between attorneys that concerns business before a court and is designed to simplify or shorten litigation and save costs. During the course of a civil lawsuit, criminal proceeding, or any other type of litigation, the opposing attorneys may come to an agreement of settlement is signed. The company's litigation reserve is sufficient to cover the contingent liability Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. for the settlement. The reserve for this litigation was increased by $70 million pretax, $46 million after-tax, at September 30, 2005 from the reserve at June 30, 2005. The impact of this reserve increase is reflected as an expense on the company's statement of operations See Income statement. for the quarter ended September 30, 2005. While the company denies the allegations in this lawsuit lawsuit: see procedure; tort. , the Company made the determination to settle this litigation and obtain the broad release from these claims so that it can move forward as a newly independent company unencumbered Unencumbered Property that is not subject to any creditor claims or liens. Notes: For example, if a house is owned free and clear (meaning the owner owes no mortgage to anyone), it is unencumbered. by the distraction Distraction Divination (See OMEN.) Porlock a “person from Porlock” interrupted Coleridge while he was recollecting the dream on which he based “Kubla Khan”. [Br. Lit.: Poems of Coleridge in Magill IV, 756] , expense and uncertainty that accompanies such litigation. The company believes doing so is in the best interests of the company, its shareholders and its clients. 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 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 , to the company's operating segments for purposes of measuring segment return on allocated equity. Allocated equity does not reflect 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 - is a legal entity owned by IDS Property Casualty Company that offers travel and other card insurance to American Express customers. This business has historically been reported in the TRS See traffic engineering methods. TRS - term rewriting system segment of American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Express's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial statements. Under the separation agreement, 100 percent of this business will be 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 fee. Ameriprise Financial expects to sell the legal entity of AMEX Assurance to American Express within two years after separation for a fixed price equal to the net book value of AMEX Assurance as of the separation date. See the company's Form 10 filed with the SEC. Gross Dealer Concession - 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 excluding SAI. Mass Affluent Clients - individuals with $100,000 to $1 million in investable assets. The company tracks clients with $100,000 or more in assets with the company as a proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. for Mass Affluent Clients acquired. Total clients - the sum of all individual, business and institutional clients.
Reconciliation table: Protection Segment Income Statements to
Adjusted
Reported AMEX Pro forma
Income for Assurance Income for
Quarters Quarters Quarters
Ended Ended Ended
September September September Percent
30, 30, 30,
2005 2004 2005 2004 2005 2004 Inc(Dec)
----- ----- ----- ----- ----- ----- --------
(Dollars in millions, unaudited)
Revenues
Management, financial
advice and service
fees $17 $17 $1 $1 $16 $16 (1)%
Distribution fees 27 25 - - 27 25 4%
Net investment income 90 82 3 3 87 79 9%
Premiums 217 262 (15) 62 232 200 16%
Other revenues 109 103 (1) 1 110 102 8%
----------- ----------- -----------
Total revenues 460 489 (12) 67 472 422 12%
Expenses
Compensation and
benefits - field 57 23 35 1 22 22 (2)%
Interest credited to
account values 38 42 - - 38 42 (11)%
Benefits, claims,
losses and settlement
expenses 187 190 (51) 9 238 181 32%
Amortization of
deferred acquisition
costs (20) 29 - 8 (20) 21 (a)
Interest and debt
expense 9 5 - - 9 5 75%
Other expense 53 66 1 9 52 57 (10)%
----------- ----------- -----------
Total expenses 324 355 (15) 27 339 328 3%
Income from continuing
operations before income
tax provision, separation
costs and accounting
change $136 $134 $3 $40 $133 $94 41%
=========== =========== ===========
(a) Variance of 100% or greater.
Reconciliation table: Reported Consolidated Income Statements to
Adjusted
Reported AMEX Pro forma
Income for Assurance Income for
Quarters Ended Quarters Quarters
Ended Ended
September 30, September 30, September 30, Percent
2005 2004 2005 2004 2005 2004 Inc(Dec)
-------------- ------------- ------------- --------
(Dollars in millions, unaudited)
Revenues
Management,
financial
advice and
service fees $687 $550 $1 $1 $686 $549 25%
Distribution
fees 296 248 - - 296 248 19%
Net investment
income 561 520 3 3 558 517 8%
Premiums 202 262 (15) 62 217 200 9%
Other revenues 127 132 (1) 1 128 131 (1)%
-------------- ------------- -------------
Total
revenues 1,873 1,712 (12) 67 1,885 1,645 15%
Expenses
Compensation
and benefits:
Field 408 311 35 1 373 310 20%
Non-field 295 249 - - 295 249 19%
-------------- ------------- -------------
Total
compensation
and benefits 703 560 35 1 668 559 20%
Interest
credited to
account values 337 302 - - 337 302 11%
Benefits,
claims, losses
and settlement
expenses 190 205 (51) 9 241 196 22%
Amortization of
deferred
acquisition
costs 49 108 - 8 49 100 (51)%
Interest and
debt expense 16 13 - - 16 13 27%
Other expense 305 263 1 9 304 254 20%
-------------- ------------- -------------
Total
expenses 1,600 1,451 (15) 27 1,615 1,424 13%
Income from
continuing
operations before
income tax
provision,
separation costs
and accounting
change 273 261 3 40 270 221 22%
Income tax
provision 91 73 - 13 91 60 53%
-------------- ------------- -------------
Income from
continuing
operations before
separation costs
and accounting
change 182 188 3 27 179 161 11%
Separation costs,
after-tax 59 - - - 59 - (a)
-------------- ------------- -------------
Income from
continuing
operations before
accounting change 123 188 3 27 120 161 (26)%
Discontinued
operations 2 11 - - 2 11 (87)%
Cumulative effect
of accounting
change, net of
tax - - - - - - 0%
-------------- ------------- -------------
Net income $125 $199 $3 $27 $122 $172 (30)%
============== ============= =============
(a) Variance of 100% or greater.
Reconciliation table: Selected Adjusted Consolidated Income Data
to GAAP
(Dollars in millions, unaudited)
Three Months Ended
September 30, 2005
-----------------------------------
Line item in Presented Difference GAAP GAAP
Reported non-GAAP before Attributable Equivalent Equivalent
presentation separation to
cost Separation
impacts in Costs
Reported
Financials
-------------------- ------------ ------------ ---------- ------------
Total revenues (GAAP Total
measure) $1,873 $1,873 revenues
Total expenses
before separation Total
costs 1,600 $92 1,692 expenses
----------- ----------
Income from Income from
continuing continuing
operations before operations
income tax before
provision, income tax
separation costs provision
and and
accounting accounting
change 273 (92) 181 change
Income tax provision
before tax benefit
attributable to Income tax
separation costs(a) 91 (33) 58 provision
----------- ----------
Income from
continuing
operations before
separation costs and
accounting change 182
Separation costs,
after-tax(a) 59
-----------
Income from Income from
continuing continuing
operations before operations
accounting change before
(GAAP measure) accounting
$123 $123 change
Nine Months Ended
September 30, 2005
-----------------------------------
Line item in Presented Difference GAAP GAAP
Reported non-GAAP before Attributable Equivalent Equivalent
presentation separation to
cost Separation
impacts in Costs
Reported
Financials
-------------------- -------------------------------------------------
Total revenues (GAAP Total
measure) $5,615 $5,615 revenues
Total expenses
before separation Total
costs 4,829 $168 4,997 expenses
----------- ----------
Income from Income from
continuing continuing
operations before operations
income tax before
provision, income tax
separation costs provision
and and
accounting accounting
change 786 (168) 618 change
Income tax provision
before tax benefit
attributable to Income tax
sepration costs(a) 230 (59) 171 provision
----------- ----------
Income from
continuing
operations before
separation costs and
accounting change 556
Separation costs,
after-tax(a) 109
-----------
Income from Income from
continuing continuing
operations before operations
accounting change before
(GAAP measure) accounting
$447 $447 change
(a) Assumes 35% statutory tax rate on separation costs.
Ameriprise Financial Ameriprise Financial is one of the nation's leading 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 , asset management and insurance companies. Through its nationwide network of more than 10,000 financial advisors, Ameriprise Financial delivers 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. For more information, visit www.ameriprise.com. 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 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. . RiverSource insurance and annuities issued by IDS 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, IDS Life Insurance Company 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. . These companies are part of Ameriprise Financial, Inc. Investments are not insured The person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. insured n. by the FDIC FDIC See: Federal Deposit Insurance Corporation FDIC See Federal Deposit Insurance Corporation (FDIC). , are not deposits or obligations of or guaranteed by a financial institution, and involve investment risks, including possible loss of principal and may fluctuate in value. You should consider the investment objectives, risks, charges and expenses of annuities and mutual funds carefully before investing. For a copy of a mutual fund or 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. prospectus A document, notice, circular, advertisement, letter, or communication in written form or by radio or television that offers any security for sale, or confirms the sale of any security. , which contains this and other information, call (800) 297-FUND, TTY (TeleTYpewriter) See teletypewriter and TDD/TTY. (hardware) tty - /tit'ee/ (ITS pronunciation, but some Unix people say it this way as well; this pronunciation is not considered to have sexual undertones), /T T Y/ 1. teletypewriter. 2. : (800) 846-4852. Read the prospectus carefully before you invest. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion