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Ameriprise Financial Inc.’s (AMP - Analyst Report) third quarter 2012 operating earnings of $1.32 per share marginally beat the Zacks Consensus Estimate of $1.29. This was also favorable compared with the year-ago earnings of $1.19.

Better-than-expected results were primarily driven by improved top line and a slight drop in operating expenses. Moreover, assets under management and administration showed a marked improvement in the quarter. Also, the company’s ongoing capital deployment activities are impressive.

After taking into consideration net realized gains or losses, integration and restructuring charges, market impact on variable annuity guaranteed living benefits, amortization of deferred acquisition costs (DAC) and deferred sales inducement costs (DSIC) as well as income or loss from discontinued operations, Ameriprise’s net income from continuing operations came in at $174 million or 79 cents per share. This compares with net income of $322 million or $1.33 per share in the year-ago quarter.

Performance in Detail

On an operating basis, total net revenues surged 2.9% year over year to $2.56 billion. The rise was primarily driven by strong advisor client net inflows and market appreciation, partially offset by a decline in net investment income as well as outflows in asset management. Moreover, total net revenues were slightly above the Zacks Consensus Estimate of $2.55 billion.

Operating expenses came in at $2.12 billion, marginally dipping 0.4% from $2.13 billion in the year-ago quarter. The fall reflects lower DAC amortization, almost offset by higher distribution-related costs.

Total assets under management and administration were $678 billion, up 13% on a year-over year basis. The increase was mainly due to market appreciation.

Share Repurchase Update

During the third quarter, Ameriprise bought back 6.3 million shares of its common stock for $340 million. The company has $482 million remaining under its present share repurchase authorization. Additionally, the management has authorized a new $2 billion share buyback program through 2014.

Dividend Update

Concurrent with the earnings release, Ameriprise announced a 29% hike in its quarterly cash dividend to 45 cents per share. The dividend is payable on November 16 to the shareholders of record as of November 5.

This is the second dividend increase this year. Earlier in April, Ameriprise had announced a 25% rise in quarterly dividend.

Peer Performance

BlackRock Inc.'s (BLK - Analyst Report) third quarter 2012 adjusted earnings substantially beat the Zacks Consensus Estimate. The improvement in results was primarily attributable to enhanced top line and lower operating expenses. Moreover, augmented assets under management were the other positives.
 
Our Viewpoint

Ameriprise’s consistent capital deployment activities continue to boost investors’ confidence. Moreover, the company’s prudent expense management and robust balance sheet are among the positives. Further, improvement in retail client activity is expected to fuel the operating leverage in the upcoming quarters. Nevertheless, the prevailing low interest rate environment and stringent regulatory landscape will keep the company’s financials slightly strained in the near term.

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

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