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Ameriprise Financial Inc.’s (AMP - Analyst Report) fourth-quarter operating earnings of $1.71 per share significantly outpaced the Zacks Consensus Estimate of $1.48. Also, this was up 31% compared with the earnings of $1.31 in the prior-year quarter.

Better-than-expected results were primarily driven by improved top line, partially offset by a rise in operating expenses. Further, assets under management and administration showed a stark improvement in the quarter, while the company’s ongoing capital deployment activities were 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 consolidation of certain investment entities, Ameriprise’s net income from continuing operations came in at $388 million or $1.80 per share. This compares with net income of $223 million or 95 cents per share in the year-ago quarter.

For 2012, operating net income stood at $1,245 million or $5.59 per share compared with $1,274 million or $5.17 per share in 2011. Earnings per share were significantly above the Zacks Consensus Estimate of $5.37.

Performance in Detail

On an operating basis, total net revenues climbed 5.8% year over year to $2.60 billion in the reported quarter. The rise was primarily driven by strong advisor client net inflows, market appreciation and increased client activity. These were partially offset by a decline in net investment income and outflows in asset management. Moreover, it was almost in line with the Zacks Consensus Estimate.

For 2012, total net revenues (operating basis) were $10.1 billion, almost at par with 2011 levels. Yet, it was slightly below the Zacks Consensus Estimate of $10.2 billion.

Operating expenses came in at $2.2 billion, rising 5.4% from the year-ago quarter. The surge largely reflects higher benefits, claims, losses and settlement expenses as well as interest and debt expense, partly offset by lower distribution-related costs.

Total assets under management and administration were $681 billion, up 8% on a year-over year basis. The increase was mainly due to market appreciation along with advisor client net inflows.

Capital Deployment Activities

During the reported quarter, Ameriprise bought back 5.9 million shares for $350 million. Moreover, for 2012, the company bought back 27.9 million shares for $1.34 billion.

Concurrent with the earnings release, Ameriprise announced a quarterly cash dividend of 45 cents per share. The dividend is payable on Feb 22 to the shareholders of record as of Feb 11.

Peer Performances

BlackRock Inc.'s (BLK - Analyst Report) fourth-quarter adjusted earnings substantially exceeded the Zacks Consensus Estimate, while SEI Investments Co. (SEIC - Analyst Report) reported in line. For both companies, the year-over-year improvement was primarily attributable to increased top line, partly offset by higher operating expenses.

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.

Among other investment management companies, Lazard Ltd (LAZ - Analyst Report) is scheduled to declare its fourth quarter and full-year 2012 results on Feb 7, 2013.

Ameriprise currently retains a Zacks Rank #3 (Hold).
 

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