Ameriprise Beats on Q1 Earnings, Hikes Div - Analyst Blog

Keeping alive its earnings streak of 2013, Ameriprise Financial Inc. AMP reported first-quarter 2014 operating earnings per share of $2.04, which handily surpassed the Zacks Consensus Estimate of $1.87. Moreover, the figure compared favorably with $1.59 per share in the prior-year quarter.

Results were primarily attributable to a rise in top line, driven by strong performance across all segments. Moreover, assets under management (AUM) and assets under administration continued to grow. The company's capital deployment activities were also encouraging. However, rise in expenses was a headwind in the quarter.

After taking into consideration integration and restructuring charges, market impact on variable annuity guaranteed benefits, index universal life benefits and net realized gains/losses, Ameriprise's net income from continuing operations came in at $401 million or $2.01 per share compared with $336 million or $1.58 per share in the year-ago quarter.

Behind the Headlines

On an operating basis, net revenue climbed 7.8% year over year to $2.8 billion. Further, it was in line with the Zacks Consensus Estimate.

Operating expenses shot up 5.6% year over year to $2.3 billion. The rise primarily resulted from increase in distribution expenses, costs related to benefits, claims, losses and settlement charges, amortization of deferred acquisition costs as well as interest and debt expenses.

As of Mar 31, 2014, total AUM and assets under administration were $782.8 billion, rising 10.6% year over year. The increase was mainly driven by market appreciation and advisor client net inflows.

Capital Deployment Activities

In the reported quarter, Ameriprise repurchased 3.2 million shares for $354 million. The company also returned $457 million to its shareholders as quarterly dividends.

Along with the earnings release, Ameriprise's board of directors authorized additional share repurchase of $2.5 billion through Apr 28, 2016. Further, it announced a regular dividend payout of 58 cents, reflecting a 12% hike from the prior payout. The dividend will be paid on May 23 to shareholders of record as of May 9.

Our Viewpoint

As evident from its quarterly results, Ameriprise remains buoyed on growth. Going forward, we expect the company's top-line improvement to continue on the back of a relatively strong equity market and consistent rise in AUM. However, Ameriprise's mounting expenses amid a still low interest rate scenario and intense competition keep us cautious.

At present, Ameriprise has a Zacks Rank #3 (Hold).

Performance of Other Investment Managers

Among other investment management firms, The Blackstone Group L.P. BX, BlackRock, Inc. BLK and T. Rowe Price Group, Inc. TROW beat the Zacks Consensus Estimate in their latest earnings releases. The results of these companies were driven by improvement in top line, partially offset by higher expenses. Further, all three companies recorded impressive AUM growth.