Ameriprise Beats, Hikes Dividend

Ameriprise Financial Inc.(AMP - Analyst Report) reported first-quarter 2012 operating earnings of $1.45 per share surpassing the Zacks Consensus Estimate of $1.38. This also compared favorably with the year-ago quarter’s earnings of $1.33 per share.

Operating earnings totaled $335 million in the reported quarter, down 3% from $344 million in the prior-year quarter. The downfall represented elevated tax rate and impact of low interest rates.

Results improved on a modest rise in operating net revenues. Further, improvement in asset position as well as the ongoing capital deployment activities was impressive. However, elevated expenses slightly toned down the better-than-expected results. Also, sluggish growth in almost all its segments was another setback.

After taking into consideration net realized gains or losses, integration charges, market impact on variable annuity guaranteed living benefits, amortization of deferred acquisition costs (DAC) and deferred sales inducement costs (DSIC) as well as discontinued operations, net income from continuing operations attributable to Ameriprise stood at $245 million or $1.06 per share. This compares with net income of $312 million or $1.21 per share in the comparable quarter last year

Quarterly Details

On an operating basis, Ameriprise’s net revenues for the quarter under review inched up 1% year over year to $2.51 billion. The moderate rise was driven by growth in asset-based fees and market appreciation, which were mostly mitigated by a fall in net investment income. On the other hand, net revenues came in slightly below the Zacks Consensus Estimate of $2.52 billion.

GAAP expenses in the quarter climbed 4% year over year to $2.24 billion. Similarly, operating expenses increased 1% from the year-ago quarter to $2.06 billion. The surge reflects higher benefits, claims, losses and settlement costs and distribution expenses. These were partly compensated by reduction in amortization of deferred acquisition costs as well as interest and debt expense.

Asset Position

Total assets under management and administration grew 1% year over year and 7% sequentially to $675 billion as of March 31, 2012. The enhancement was attributable to net inflows from retail clients and market escalation.

Dividend Update

Concurrent with the earnings release, the company announced 25% hike in its quarterly cash dividend to 35 cents per share. The increased dividend is payable on May 18 to shareholders of record as of May 4.

Share Repurchase Update

During the first-quarter, Ameriprise repurchased 5.4 million shares of its common stock for $300 million.

Peer Performances

One of the peers of Ameriprise, BlackRock Inc.'s(BLK - Analyst Report) first-quarter adjusted earnings substantially beat the Zacks Consensus Estimate, mainly facilitated by higher operating income and improved top line. Moreover, assets under management acted as a positive contributor.

Among the other peers, Franklin Resources Inc. (BEN - Analyst Report) is expected to announce its fiscal second quarter 2012 results on May 2, whileBrookfield Asset Management Inc. (BAM - Snapshot Report) is expected to announce its first quarter 2012 results on May 10.

Our Viewpoint

Consistent capital deployment activities of Ameriprise continue to boost investors’ confidence in the stock. Though the slow market recovery is alarming, improvement in retail client activity is expected to fuel the operating leverage in the upcoming quarters.

Moreover, the completion of Securities America sale will allow the company to focus more on its core and profitable operations. However, swelling expenses, prevailing low interest rate environment and the ongoing outflows associated with the integration of Columbia Management will keep Ameriprise’s financials slightly under strain in the near term.

Ameriprise currently retains a Zacks # 2 Rank, which translates into a short-term ‘Buy’ rating. Also, considering the fundamentals, we maintain our long-term “Neutral” recommendation on the stock.