Tax problem saps Ameriprise results

  • Article by: JENNIFER BJORHUS
  • Star Tribune
  • July 25, 2012 - 8:15 PM

Ameriprise Financial Inc. missed Wall Street estimates for the second quarter, largely because of a surprise $40 million tax snafu it blamed on a third-party vendor.

Ameriprise operating earnings of $254 million, or $1.13 per share, in the second quarter were down 24 percent from a year ago, and missed Wall Street expectations by 19 cents, according to a Thomson Reuters poll of analysts.

The $40 million tax-related hit plus three other smaller unfavorable items together amounted to 26 cents per share. Excluding those items, earnings would have been $1.39 per share.

The Minneapolis company, one of the New York Stock Exchange's largest investment services companies by market capitalization, released earnings late Wednesday. The firm continues to battle low interest rates and market volatility.

Overall operating net revenue of $2.5 billion was down 3 percent from a year ago, with net revenue largely flat or declining in all four of its business lines.

The asset management line, which oversees $446 billion in assets and includes the Columbia Management stock and bond mutual fund business it bought from Bank of America, sagged with the unit's pretax income dropping 11 percent to $130 million from $146 million a year earlier. The company posted a net outflow from Columbia of $5.4 billion.

Another business line Ameriprise has targeted for growth, advice and wealth management, posted mixed results. The unit's net revenue was flat, with pretax income growing 3 percent to $111 million from $108 million a year ago. The firm added more than 400 advisers to the unit in the past year, including 91 in the second quarter.

In the company's release after markets closed, Ameriprise CEO Jim Cracchiolo called the results "solid considering the difficult markets during the quarter."

Cracchiolo will discuss results with industry analysts Thursday morning.

Ameriprise said that during the quarter it discovered that a third-party vendor involved in securities lending gave it incomplete data that resulted in a miscalculation of Ameriprise's tax position and earnings in prior periods. That translated into a $40 million impact on earnings.

"The company has resolved the data issue and stopped the securities lending that negatively impacted its tax position," it said in its release.

Shares closed Wednesday at $47.98, off a 52-week high of about $58. Ameriprise repurchased 7 million shares in the quarter for $350 million.

Jennifer Bjorhus • 612-673-4683

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