Ameriprise Misses on Lower Top Line

Ameriprise Financial Inc.(AMP - Analyst Report) reported fourth-quarter 2011 operating earnings of $1.33 per share significantly below the Zacks Consensus Estimate of $1.39. However, this compares favorably with the year-ago quarter’s earnings of $1.31 per share.

Operating results exclude net realized gains or losses, integration charges, market impact on variable annuity guaranteed living benefits and discontinued operations.

For the reported quarter, net income attributable to Ameriprise came in at $253 million or $1.08 per share compared with $280 million or $1.06 per share in the comparable quarter last year.

Quarterly results were impacted by lower net revenues and slower growth in almost all its segments. However, lower operating expenses and an increase in asset under management were the positives.

For the full year, Ameriprise recorded earnings of $5.00 per share compared with $4.53 in 2010. The earnings missed the Zacks Consensus Estimate of $5.07.

Quarterly Details

On an operating basis, Ameriprise’s net revenues for the fourth quarter fell 2% year over year to $2.46 billion. The decline mainly reflects lower hedge fund performance fees, continued low interest rate environment and market volatility, partially mitigated by a rise in asset-based fees. Net revenues also stood below the Zacks Consensus Estimate of $2.49 billion.

For the fiscal 2011, Ameriprise’s net revenues on operating basis stood at $10.05 billion, up 10% from $9.12 billion in 2010. However, net revenues were below the Zacks Consensus Estimate of $10.50 billion.

GAAP expenses in the quarter inched up 1.8% year over year to $2.23 billion, while operating expenses fell 1.4% from the year-ago quarter to $2.07 billion. The decline represents lower benefits, claims, losses and settlement costs, general and administrative expenses, and interest and debt expenses. These were partially mitigated by increase in distribution expenses.

Asset Position

Total assets under management and administration surged 5% sequentially to $631 billion as of December 31, 2011, driven by net inflows in Asset Management segment and market appreciation.

Capital Deployment Activities

During the fourth quarter, Ameriprise repurchased 5.5 million shares of its common stock for $248 million. Moreover in December 2011, the company announced 22% hike in its quarterly cash dividend to 28 cents per share. Overall, during 2011, Ameriprise returned $1.7 billion to its shareholders in the form of share repurchases and dividends.

Peer Performance

BlackRock Inc.’s (BLK - Snapshot Report) fourth-quarter adjusted earnings surpassed the Zacks Consensus Estimate, primarily aided by lower operating expenses, which was partially offset by weak revenue.

Our Viewpoint

Though there is concern over the sluggish market recovery, improvement in retail client activity as well as decent growth in Advice & Wealth Management and Asset Management businesses would drive operating leverage in the upcoming quarters.

Furthermore, Ameriprise’s capital deployment activity would also boost investors’ confidence in the stock. Moreover, following the sale of Securities America, the company will be able to concentrate more on its core and profitable operations.

Ameriprise currently retains a Zacks # 3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we maintain our long-term “Neutral” recommendation on the stock.

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