Ameriprise profit beats expectations

  • Article by: JENNIFER BJORHUS , Star Tribune
  • Updated: April 23, 2012 - 11:37 PM

The insurer's shares jumped more than 10 percent after it announced a dividend increase.

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CEO Jim Cracchiolo called Ameri­prise Financial’s results “solid.”

Photo: Glen Stubbe, Star Tribune

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Ameriprise Financial Inc. started the year on a mixed note, reporting operating earnings that dropped 3 percent from a year earlier but topped Wall Street estimates by a nickel.

The company blamed the profits nick on the prolonged environment of low interest rates and an increase in its operating tax rate to 26.5 percent, up from 24.1 percent a year earlier. Operating earnings came in at $335 million, or $1.45 a share.

Operating revenue rose 1 percent from a year ago to $2.5 billion as growth in fee-based retail brokerage accounts helped offset the negative interest rate environment.

The Minneapolis-based insurer and money manager reported earnings after markets closed Monday. Ameriprise shares closed down 1.1 percent at $52.84, but rose more than 10 percent in after-hours trading.

In a news release, CEO Jim Cracchiolo called the results "solid."

"While client investment activity improved during the quarter, clients continued to increase cash balances and remained cautious about the slow pace of economic recovery," he said.

Cracchiolo's long-term strategy is to ease the company's reliance on its lower-profit margin insurance and annuities business, and grow business in asset management and financial planning.

Of Ameriprise's four business lines, only its old-line annuities business posted operating earnings growth in the first quarter, rising 10 percent on growth in variable annuity earnings plus a $44 million benefit from the market impact on deferred acquisition costs and deferred sales inducement costs.

Ameriprise is sitting on a lot of cash. It has more than $2 billion in excess capital, even after spending $300 million to buy back 5.4 million shares of common stock during the quarter. It said Monday that it is boosting its quarterly dividend by 7 cents per share to 35 cents, a hike of 25 percent.

Market speculation is that the company could be in position for another acquisition. Its last acquisition was two years ago, when it bought Columbia Management Co. for about $1 billion from Bank of America, vaulting Ameriprise into the leagues of the largest mutual fund managers in the country.

Eric Berg, a managing director at RBC Capital Markets in New York, called the first-quarter results "mixed."

"The main challenge for the company continues to be outflows from the coffers of Columbia," Berg said.

The company posted a net outflow from Columbia of $5.1 billion -- better than the outflows in the preceding quarter, but more than double the outflows a year ago -- as Ameriprise loses business from Columbia's former parent.

Company spokesman Paul Johnson said the outflows were expected as part of Columbia's ongoing integration into the company.

Jennifer Bjorhus • 612-673-4683

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