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Ameriprise beats expectations

Strong growth in fees for asset management and advice helped push adjusted earnings up 9 percent for the quarter. It helped that it had little subprime exposure.

By KARA McGUIRE, Star Tribune

Last update: January 24, 2008 - 9:43 PM

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Minnesota business by the numbers

See Minnesota's top earning companies, CEOs and non-profits

4th quarter FY2007, 12/31

2007 2006 % chg. Revenue $2,368.0 $2,220.0 +6.7 Income 255.0 171.0 +49.1 Earn/share 1.08 0.69 +56.5 12 months Revenue $8,815.0 $8,199.0 +7.5 Income* 814.0 631.0 +29.0 Earn/share* 3.39 2.54 +33.5 Figures in millions except earnings per share. * Adjusted income after taxes for the quarter and the 12 months ended Dec. 31 was $274 million, or $1.16 per share, and $968 million, or $4.03 per share, respectively. Adjusted income after taxes for the quarter and 12 months ended Dec. 31, 2006, was $251 million, or $1.02 per share, and $866 million, or $3.48 per share, respectively.

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Strong growth in financial advice and management fees helped Minneapolis-based Ameriprise Financial Inc. beat analysts' expectations for the fourth quarter.

The company reported Thursday that adjusted earnings rose 9 percent, to $274 million, compared with the fourth quarter of 2006. Adjusted earnings exclude separation costs from the company's 2005 spinoff from American Express.

Adjusted earnings per share were $1.16, a 14 percent increase from the same period in 2006. Analysts polled by Bloomberg had expected earnings of $1.03 a share.

For all of 2007, adjusted earnings increased 12 percent, to $968 million, with adjusted earnings per share up 16 percent, to $4.03.

Financial advice is needed "across market cycles, but perhaps most when markets are challenging," Ameriprise Chairman and CEO Jim Cracchiolo said during a conference call.

Ameriprise, which aims its comprehensive financial planning services and investment products at individuals who have more than $100,000 to invest in mutual funds or annuities, saw fourth-quarter net revenue rise 8 percent, to $2.32 billion. Revenue for fee and management advice was up 25 percent, to $930 million during the quarter. Net inflows in variable annuities hit $1.1 billion, as an aging population seeking security looks for guaranteed retirement income. Assets in wrap accounts, a bundle of investments that are managed for a fee, grew 23 percent.

Despite the move toward more conservative assets by investors bracing for the stock market's bull run to end, more money was invested in Ameriprise's RiverSource mutual funds than was taken out in the quarter, with an inflow of $200 million. The company is making progress with its plans to distribute the funds outside of its network, with "a good number" of agreements signed by broker-dealers and banks, Cracchiolo said.

But a down market could mean challenging times for the company. Cracchiolo confirmed that a 10 percent drop in the equity markets could mean a pretax loss of roughly $127 million because of declining asset values and investment income. He said Ameriprise plans to slow its level of new business investment and closely watch expenses because of the current economic and market climate.

Ameriprise has avoided the massive write-downs plaguing some financial companies, thanks to the company's "strict risk discipline," Cracchiolo said. The company has little exposure to subprime mortgages, with write-downs of less than $3 million of its $35 billion investment portfolio, Chief Financial Officer Walter Berman said during the conference call. But in an earnings preview, Citigroup analyst Colin Devine said that he had concerns about the one-third of Ameriprise's portfolio invested in mortgage-backed and asset-backed securities.

Ameriprise announced earnings Thursday after the market closed. Shares dropped from $50.23 to $50.19 in after-hours trading.

Kara McGuire • 612-673-7293

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