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Affiliated Managers Group Inc.’s (AMG - Analyst Report) second-quarter 2013 economic net income (ENI) came in at $2.18 per share, beating the Zacks Consensus Estimate of $2.10. Moreover, this compared favorably with ENI of $1.66 recorded in the year-ago quarter.

Better-than-expected results were aided by growth in top line and a decline in operating expenses. Moreover, continued improvement in asset under management (AUM) and a strong balance sheet were the other positives for the quarter.
Affiliated Managers’ ENI came in at $121.1 million, surging 38.2% from $87.6 million in the year-ago quarter.

Behind the Headlines

Affiliated Managers’ total revenue augmented 25.9% year over year to $541.0 million. Moreover, it surpassed the Zacks Consensus Estimate of $528.0 million by 2.5%. EBITDA was $173.0 million, rising 52.2% compared with $113.7 million in the prior quarter.

Total operating expenses declined 6.2% year over year to $379.6 million. The fall was primarily due to a sizeable decline in intangible amortization and impairment costs, depreciation and other amortizations expenses as well as other operating expenses, partially offset by a rise in compensation and related expenses along with selling, general and administrative expenses.  

Assets Under Management

As of Jun 30, 2013, total AUM reached $469.5 billion, reflecting net client cash flow of $13.2 billion. This compared favorably with $462.5 billion recorded in the prior quarter.

As of Jun 30, 2013, mutual fund AUM stood at $142.8 billion, up 6.0% sequentially. However, institutional AUM came in at $267.5 billion, down 0.4% sequentially. Further, high net worth AUM were $59.2 billion, almost flat sequentially.

Capital and Liquidity

As of Jun 30, 2013, Affiliated Managers had $413.8 million in cash and cash equivalents compared with $430.4 million as of Dec 31, 2012. Moreover, the company had $100.0 million as senior bank debt at the end of the quarter compared with $325.0 million as of Dec 31, 2012. Furthermore, the company had shareholders’ equity of $2.2 billion compared with $2.1 billion as of Dec 31, 2012.

Performance of Other Asset Managers

Ameriprise Financial, Inc. (AMP - Analyst Report), The Blackstone Group L.P. (BX - Analyst Report) and BlackRock, Inc. (BLK - Analyst Report) reported better-than-expected second-quarter earnings. Results for all three companies were driven by top-line growth, partially offset by higher operating expenses.

Our Viewpoint

Affiliated Managers is expected to benefit from investment appreciation in the near term. Moreover, growing need for risk management and alternative investment solutions within the financial service industry is anticipated to prove accretive to the financials of the company going forward. However, a slow economic recovery is expected to keep the company’s financials under pressure.

Affiliated Managers currently carries a Zacks Rank #4 (Sell).


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