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Ameriprise Financial Reports Third Quarter 2018 Results

Share:

Third quarter 2018 net income per diluted
share was $3.43

Adjusted operating EPS was $3.74
Excluding
annual unlocking
(1), adjusted operating EPS was
$4.05, up 20 percent

Third quarter 2018 return on equity excluding AOCI was 29.6 percent
Adjusted
operating ROE excluding AOCI was 31.2 percent

Excluding
annual unlocking
(1), adjusted operating ROE
excluding AOCI was 32.0 percent, up 150 bps

Ameriprise Financial, Inc. (NYSE:AMP) today reported third quarter 2018
net income of $503 million, or $3.43 per diluted share. Adjusted
operating earnings were $548 million, with adjusted operating earnings
per diluted share of $3.74. Excluding the impact of annual unlocking(1)
in both periods, adjusted operating earnings were up 13 percent to $594
million in the quarter and adjusted operating earnings per diluted share
increased 20 percent to $4.05.

"Ameriprise delivered another quarter of strong results, continuing our
track record of generating profitable growth across market cycles," said
Jim Cracchiolo, chairman and chief executive officer.

"With our diversified business centered on advice, we continue to deepen
the long-term relationships clients have with their advisors and the
firm. We're gaining strong client net inflows and increasing advisor
productivity, which is driving our growth.

"In an environment of a strong U.S. economy and heightened equity market
volatility globally, our comprehensive value proposition and strong
financial foundation position Ameriprise well to serve more clients'
needs for advice and provide informed perspective. We're delivering
strong results while evolving our business mix, investing in the
business and returning capital to shareholders at attractive levels."

(1)

  Unlocking impacts reflect the company's annual review of insurance
and annuity valuation assumptions and model changes, and the Long
Term Care (LTC) gross premium valuation.

GAAP Results – Third quarter
Net
revenues of $3.3 billion increased 9 percent, or $278 million, from a
year ago primarily due to strong net revenue growth in Advice & Wealth
Management from growth in client assets and the impact of annual
unlocking.

Expenses of $2.7 billion increased 14 percent compared to a year ago
from higher expenses related to unlocking and increased distribution
expense from higher advisor productivity.

Adjusted Operating Results – Third quarter
Adjusted
operating net revenues increased 9 percent to $3.3 billion. Excluding
annual unlocking in both quarters, adjusted operating net revenues
increased 5 percent to $3.2 billion. Advice & Wealth Management net
revenues increased 11 percent driven by growth in client assets from
continued strength in client net inflows and market appreciation.

Adjusted operating expenses of $2.6 billion increased 14 percent.
Excluding annual unlocking in both quarters, adjusted operating expenses
increased 4 percent reflecting increased distribution expense from
higher advisor productivity. General and administrative expense
increased 1 percent reflecting ongoing expense discipline and growth
investments.

 

Ameriprise Financial, Inc.
Third Quarter Summary

 

(in millions, except per share amounts, unaudited)

 

Quarter Ended
September 30,

 

Per Diluted Share
Quarter Ended
September
30,

2018   2017  

% Better/
(Worse)

2018   2017    

% Better/
(Worse)

GAAP net income $ 503 $ 507 (1 )% $ 3.43 $ 3.26 5 %

Adjusted operating earnings (1)

 (see reconciliation on p.13)

$ 548 $ 552 (1 )% $ 3.74 $ 3.55 5 %
Less: Annual unlocking/loss recognition impact, net of tax (2)   (46 )   27   (0.31 )   0.17
Adjusted operating earnings, excluding annual unlocking/loss
recognition impact (3)
$ 594 $ 525 13 % $ 4.05 $ 3.38 20 %
 
Percent of pretax adjusted operating earnings from Advice & Wealth
Management, excluding Corporate & Other and annual unlocking
46 % 40 %
 
Percent of pretax adjusted operating earnings from Advice & Wealth
Management and Asset Management, excluding Corporate & Other and
annual unlocking
72 % 68 %
 
Weighted average common shares outstanding:
Basic 144.4 153.0
Diluted 146.5 155.4
 

(1) Adjusted operating earnings, after-tax, exclude the
consolidation of certain investment entities; net realized
investment gains or losses, net of deferred sales inducement costs
("DSIC") and deferred acquisition costs ("DAC") amortization,
unearned revenue amortization and the reinsurance accrual;
integration and restructuring charges; the market impact on
variable annuity guaranteed benefits, net of hedges and related
DSIC and DAC amortization; the market impact on indexed universal
life benefits, net of hedges and related DAC amortization,
unearned revenue amortization, and the reinsurance accrual; the
market impact on fixed index annuity benefits, net of hedges and
the related DAC amortization; the market impact of hedges to
offset interest rate changes on unrealized gains or losses for
certain investments; and income or loss from discontinued
operations.

 

(2) After-tax is calculated using the statutory tax
rate of 21% in 2018 and 35% in 2017.

 

(3) The company believes the presentation of adjusted
operating earnings excluding annual unlocking/loss recognition
best represents the economics of the business.

 

Taxes

The adjusted operating effective tax rate in the quarter was 15.0
percent compared to 21.5 percent a year ago. The lower effective tax
rate reflects the reduction in the federal income tax rate and a $20
million benefit related to discrete items from prior year returns. The
company estimates that its full year 2018 adjusted operating effective
tax rate will be approximately 16 percent.

Third Quarter 2018 Highlights

Ameriprise delivered strong financial results and excess capital,
while returning $484 million to shareholders

  • Adjusted operating earnings per share, excluding unlocking increased
    20 percent in the quarter, and adjusted operating return on equity,
    excluding AOCI and unlocking reached 32 percent, up 150 basis points
    from a year ago.
  • Year to date, Ameriprise returned 90 percent of adjusted operating
    earnings, excluding unlocking to shareholders, reflecting strong
    balance sheet fundamentals, substantial free cash flow generation and
    excellent risk management discipline.
  • Excess capital was $1.4 billion, with an estimated RBC ratio of
    approximately 515 percent.
  • In the quarter, the company completed its annual unlocking, which
    resulted in a $58 million operating charge, primarily related to long
    term care insurance, which was within management's expectations.

The firm's comprehensive and personal client focus, combined with its
broad solution set, resulted in strong client flows and asset growth

  • Ameriprise assets under management and administration increased 5
    percent to $913 billion, reflecting ongoing strength in Ameriprise
    advisor client net inflows.
  • Ameriprise retail client assets grew 9 percent to $588 billion, an
    all-time high.
  • Client demand for fee-based investment advisory (wrap) products
    remains strong with net inflows of $5.7 billion in the quarter—the
    fifth consecutive quarter of wrap net inflows over $5 billion. Wrap
    assets grew to $272 billion, one of the largest platforms in the
    industry.
  • Advisor productivity increased 11 percent to $613,000 per advisor on a
    trailing 12-month basis after normalizing for the net impact from
    eliminating 12b-1 fees in advisory accounts, reflecting the
    continuation of growth in advisor productivity over multiple years,
    our comprehensive, advice-based approach to serving clients and strong
    advisor retention.
  • Columbia Threadneedle investment performance in retail and
    institutional equity, fixed income and multi-asset portfolios and
    strategies remain strong. At quarter end, the company had 108 four-
    and five-star Morningstar-rated funds.
  • Variable annuity cash sales increased 3 percent, with nearly 28
    percent of sales in products without living benefit guarantees.

Ameriprise continued to invest to drive productivity, business growth
and client satisfaction

  • Investments are being made to drive future growth, including
    enhancements to the company's digital advice position, big data
    diagnostic capabilities, relationship management tools and adding
    banking capabilities.
  • Ameriprise continues to invest in expanding its distribution network
    by adding experienced advisors with strong productivity. 87
    experienced advisors joined the firm during the quarter, bringing the
    advisor count up to 9,933.
  • Columbia Threadneedle expanded its product offering to provide greater
    access to its investment capabilities, including building on its
    legacy in tax efficient investing with the launch of Columbia Tax
    Efficient Portfolios and launching the Columbia Multi-Sector Municipal
    Income ETF, its first municipal bond ETF and one of the first
    municipal smart beta strategies available to investors and advisors.

Values-based, client-focused firm

  • The company launched new television advertising supporting both
    Ameriprise Financial and Columbia Threadneedle Investments brands. In
    September, Ameriprise debuted new television advertising supporting
    its Be Brilliant® campaign that reinforces the benefits of working
    with an Ameriprise advisor and launched two new advertisements that
    reinforce Columbia Threadneedle's consistency.
  • Ameriprise advisors continue to be recognized for the productivity and
    strength of their practices, including the 2018 Barron's Top 100
    Independent Financial Advisors ranking, the 2018 Forbes Top Wealth
    Advisors ranking, and the 2018 Financial Times 401 Top Retirement
    Advisers ranking.
  • Ameriprise continued to gain recognition as an employer, including
    being named a Best Place to Work by the Minneapolis-St. Paul Business
    Journal for the ninth year and being recognized as a military-friendly
    employer for the fifth consecutive year.
  • The company has long been committed to helping reduce hunger,
    providing millions of meals to families and individuals. As part of
    that effort, for the seventh consecutive year, Ameriprise is matching
    donations to Feeding America® now through Thanksgiving.
 

Ameriprise Financial, Inc.
Advice & Wealth
Management Segment Adjusted Operating Results

 
(in millions, unaudited)   Quarter Ended September 30,  

% Better/
(Worse)

2018   2017
Advice & Wealth Management
Net revenues $ 1,564 $ 1,410 11 %
Expenses   1,209   1,111 (9 )%
Pretax adjusted operating earnings $ 355 $ 299 19 %
 
Pretax adjusted operating margin 22.7 % 21.2 %
 
Quarter Ended September 30,

% Better/
(Worse)

2018 2017
Retail client assets (billions) $ 588 $ 539 9

%

Wrap net flows (billions) $ 5.7 $ 6.1 (8

)%(1)

Brokerage cash balance (billions) $ 24.2 $ 25.5 (5 )%
Adjusted operating net revenue per advisor normalizing for the net
impact of 12b-1 fee changes (trailing 12 months - thousands)
$ 613 $ 551 11 %
 
(1) Includes inflows from acquisitions in Q3 2017.
Excluding these inflows, wrap net flows improved 5%.
 

Advice & Wealth Management pretax adjusted operating earnings
increased 19 percent to $355 million driven by asset growth and higher
earnings on cash balances. Pretax adjusted operating margin was 22.7
percent, up 150 basis points from a year ago. Advice & Wealth Management
represented 46 percent of the company's pretax adjusted operating
earnings.

Adjusted operating net revenues increased 11 percent to $1.6 billion,
reflecting strong client activity and increasing advisor productivity,
as well as higher earnings on cash balances and market appreciation.

Adjusted operating expenses increased 9 percent to $1.2 billion
primarily from higher distribution expenses related to growth in client
assets. General and administrative expenses were up 7 percent compared
to a year ago primarily due to variable expenses that are linked to
revenue growth and investments in growth initiatives.

Total retail client assets increased 9 percent to $588 billion driven by
client net inflows, client acquisition and market appreciation. Wrap net
inflows were $5.7 billion and total wrap assets increased 16 percent to
$272 billion. Client brokerage cash balances were $24.2 billion, down
slightly from a year ago as clients continue to allocate cash to other
investments.

Adjusted operating net revenue per advisor on a trailing 12-month basis
increased 11 percent to $613,000 after normalizing for the net impact
from eliminating 12b-1 fees in advisory accounts. Total advisors
increased to 9,933 and advisor retention remained strong. 87 experienced
advisors moved their practices to Ameriprise in the quarter, with higher
productivity than last year's experienced advisor recruits.

 

Ameriprise Financial, Inc.
Asset Management Segment
Adjusted Operating Results

 
(in millions, unaudited)   Quarter Ended September 30,  

% Better/
(Worse)

2018   2017
Asset Management
Net revenues $ 772 $ 784 (2 )%
Expenses   575   580 1 %
Pretax adjusted operating earnings $ 197 $ 204 (3 )%
 
Pretax adjusted operating margin 25.5 % 26.0 %
Net pretax adjusted operating margin (1) 40.0 % 40.7 %
 
Quarter Ended September 30,

% Better/
(Worse)

2018 2017
Total segment AUM (billions) $ 485 $ 484
 

Net Flows (billions)

Former parent company related net new flows $ (1.5 ) $ (3.0 ) 50 %
Global Retail net flows, excl. former parent flows (2.6 ) (1.1 ) NM
Global Institutional net flows, excl. former parent flows   (3.2 )   (0.6 ) NM
Total segment net flows $ (7.3 ) $ (4.7 ) (57 )%
 

(1) See reconciliation on p.16

 
NM Not Meaningful — variance equal to or greater than 100%
 

Asset Management reported strong pretax adjusted operating
earnings of $197 million, down 3 percent primarily related to the CLO
liquidation benefit in the prior year period. Third quarter net pretax
adjusted operating margin was strong at 40.0 percent.

Adjusted operating net revenues declined 2 percent to $772 million
driven by asset growth from market appreciation and the Lionstone
acquisition that was more than offset by the cumulative impact of net
outflows and higher CLO liquidation benefits in the year ago period.

Adjusted operating expenses of $575 million were down 1 percent compared
to a year ago, reflecting lower distribution-related expenses and
well-managed general and administrative expenses. General and
administrative expense decreased 1 percent and included the Lionstone
acquisition, investments for growth and higher regulatory expense.

AUM increased slightly to $485 billion and net outflows were $7.3
billion. Third party institutional outflows were elevated including $1.1
billion in CLO redemptions, as well as lower sales and higher
redemptions of equity and fixed income mandates. EMEA retail inflows
were $300 million in the quarter with strong results in the U.K. U.S.
retail outflows were higher primarily from unfavorable model portfolio
rebalances in the quarter.

 

Ameriprise Financial, Inc.
Annuities Segment
Adjusted Operating Results

 
(in millions, unaudited)   Quarter Ended September 30,  

% Better/
(Worse)

2018   2017
Annuities
Pretax adjusted operating earnings $ 153 $ 281 (46 )%
Annual unlocking   (1 )   120 NM
Pretax adjusted operating earnings, ex. annual unlocking $ 154 $ 161 (4 )%
 
Variable Annuities:
Pretax adjusted operating earnings $ 147 $ 262 (44 )%
Annual unlocking   5   120 (96 )%
Pretax adjusted operating earnings, ex. annual unlocking 142 142
Fixed Annuities:
Pretax adjusted operating earnings 6 19 (68 )%
Annual unlocking   (6 )   NM
Pretax adjusted operating earnings, ex. annual unlocking 12 19 (37 )%
 
Item included in adjusted operating earnings:
Market impact on DAC and DSIC (mean reversion) $ 11 $ 12 (8 )%
 
Quarter Ended September 30,

% Better/
(Worse)

2018 2017
Variable annuity ending account balances (billions) $ 79.4 $ 78.7 1 %
Variable annuity net flows (billions) $ (0.8 ) $ (0.9 ) 7 %
Fixed deferred annuity ending account balances (billions) $ 8.9 $ 9.5 (7 )%
Fixed deferred annuity net flows (billions) $ (0.2 ) $ (0.2 ) 7 %
 
NM Not Meaningful — variance equal to or greater than 100%
 

Annuities pretax adjusted operating earnings, excluding unlocking
decreased 4 percent to $154 million due to the run off of the fixed
annuity block. Client behavior experience was in line with our
expectations in the current period unlocking, and the prior year
unlocking included a $120 million benefit from market-related assumption
updates.

Variable annuity adjusted operating earnings, excluding unlocking were
flat at $142 million reflecting growth in account balances from market
appreciation offset by net outflows. Variable annuity account balances
were $79 billion due to market appreciation, partially offset by net
outflows. Variable annuity sales increased 3 percent. Variable annuity
net amount at risk as a percent of account values was 0.4 percent for
living benefits and 0.1 percent for death benefits, which is one of the
lowest among major variable annuity writers.

Fixed annuity adjusted operating earnings, excluding unlocking were $12
million reflecting continued spread compression from the extended period
of low interest rates and lower account balances. Account balances
declined 7 percent from limited new product sales and continued lapses.

 

Ameriprise Financial, Inc.
Protection Segment
Adjusted Operating Results

 
(in millions, unaudited)   Quarter Ended September 30,  

% Better/
(Worse)

2018   2017
Protection
Pretax adjusted operating earnings $ 61 $ 55 11 %
Annual unlocking   (5 )   (20 ) 75 %
Pretax adjusted operating earnings, ex. annual unlocking $ 66 $ 75 (12 )%
 
 
Life and Health insurance:
Pretax adjusted operating earnings $ 60 $ 48 25 %
Annual unlocking   (5 )   (20 ) 75 %
Pretax adjusted operating earnings, ex. annual unlocking $ 65 $ 68 (4 )%
 
 
Auto and Home:
Pretax adjusted operating earnings/(loss) $ 1.4 $ 6.7 (79 )%
 
 
Items included in adjusted operating earnings:
Market impact on DAC (mean reversion) $ $ 1 NM
Modification of costs within a reinsurance contract (10 ) NM
Auto and Home catastrophe losses   (16.5 )   (14.6 ) (13 )%
Total protection impact $ (26.5 ) $ (13.6 ) (95 )%

 

Quarter Ended September 30,

% Better/
(Worse)

2018 2017
Life insurance in force (billions) $ 195 $ 196
VUL/UL ending account balances (billions) $ 12.8 $ 12.2 4 %
Auto and Home policies in force (thousands) 883 939 (6 )%
 
NM Not Meaningful — variance equal to or greater than 100%
 

Protection pretax adjusted operating earnings, excluding
unlocking were $66 million compared to $75 million a year ago.

Life and Health insurance adjusted operating earnings, excluding
unlocking were $65 million and included a one-time $10 million
unfavorable expense related to a modification of costs within a
reinsurance contract. Overall claims improved year-over-year and remain
within expected ranges. VUL/UL cash sales were $76 million, up 6 percent.

Auto and Home pretax adjusted operating earnings were $1.4 million in
the quarter. Excluding the impact of net catastrophe losses, pretax
adjusted operating earnings were down $3.4 million from the prior year
primarily due to the timing of expense reductions related to the
previously announced termination of an affinity partnership. Net
catastrophe losses in the quarter were $16.5 million, with lower
reinsurance benefit due to the size and types of storms throughout the
year. Favorable development from product management, pricing,
underwriting and claims improvements to date has not been fully
reflected in reserve estimates and management will continue to monitor
development as the year progresses.

 

Ameriprise Financial, Inc.
Corporate & Other
Segment Adjusted Operating Results

 
(in millions, unaudited)   Quarter Ended September 30,  

% Better/
(Worse)

2018   2017
Corporate & Other, Excluding Long Term Care
Pretax adjusted operating loss $ (68 ) $ (78 ) 13 %
 
Long Term Care
Pretax adjusted operating loss $ (53 ) $ (58 ) 9 %
Annual unlocking/loss recognition   (52 )   (58 ) 10 %
Pretax adjusted operating loss excluding annual unlocking/loss
recognition
$ (1 ) $ NM
 
Items included in adjusted operating loss:
DOL planning and implementation expenses $ (1 ) $ (5 ) 80 %
Affordable housing investment adjustment   (7 )   (4 ) (75 )%
Total corporate & other impact $ (8 ) $ (9 ) 11 %
 
NM Not Meaningful — variance equal to or greater than 100%
 

Corporate & Other pretax adjusted operating loss excluding
long term care improved to $68 million driven by continued lower
operating expenses, including lower accruals for performance-related
compensation compared to the year ago period.

Long Term Care pretax adjusted operating loss was $53 million in the
quarter due to its annual third quarter assumption review. The loss
recognition was within expected ranges and related to higher morbidity,
partially offset by higher realized and expected premium increases. The
company continues to diligently manage this closed block of business
with a consistent strategy to obtain premium increases.

At Ameriprise Financial, we have been helping people feel confident
about their financial future for more than 120 years. With a nationwide
network of 10,000 financial advisors and extensive asset management,
advisory and insurance capabilities, we have the strength and expertise
to serve the full range of individual and institutional investors'
financial needs. For more information, visit ameriprise.com.

Ameriprise Financial Services, Inc. offers financial planning services,
investments, insurance and annuity products. Columbia Funds are
distributed by Columbia Management Investment Distributors, Inc., member
FINRA and managed by Columbia Management Investment Advisers, LLC.
Threadneedle International Limited is an SEC- and FCA-registered
investment adviser affiliate of Columbia Management Investment Advisers,
LLC based in the U.K. Auto and home insurance is underwritten by IDS
Property Casualty Insurance Company, or in certain states, Ameriprise
Insurance Company, both in De Pere, WI. RiverSource insurance and
annuity products are issued by RiverSource Life Insurance Company, and
in New York only by RiverSource Life Insurance Co. of New York, Albany,
New York. Only RiverSource Life Insurance Co. of New York is authorized
to sell insurance and annuity products in the state of New York. These
companies are all part of Ameriprise Financial, Inc. CA License
#0684538. RiverSource Distributors, Inc. (Distributor), Member FINRA.

Forward-Looking Statements

This news release contains forward-looking statements that reflect
management's plans, estimates and beliefs. Actual results could differ
materially from those described in these forward-looking statements.
Examples of such forward-looking statements include:

  • the statement that the company expects its full year 2018 adjusted
    operating effective tax rate to be approximately 16 percent;
  • statements of the company's plans, intentions, positioning,
    expectations, objectives or goals, including those relating to asset
    flows, mass affluent and affluent client acquisition strategy, client
    retention and growth of our client base, financial advisor
    productivity, retention, recruiting and enrollments, the introduction,
    cessation, terms or pricing of new or existing products and services,
    acquisition integration, general and administrative costs,
    consolidated tax rate, return of capital to shareholders, and excess
    capital position and financial flexibility to capture additional
    growth opportunities;
  • other statements about future economic performance, the performance of
    equity markets and interest rate variations and the economic
    performance of the United States and of global markets; and
  • statements of assumptions underlying such statements.

The words "believe," "expect," "anticipate," "optimistic," "intend,"
"plan," "aim," "will," "may," "should," "could," "would," "likely,"
"forecast," "on pace," "project" and similar expressions are intended to
identify forward-looking statements but are not the exclusive means of
identifying such statements. Forward-looking statements are subject to
risks and uncertainties, which could cause actual results to differ
materially from such statements.

Such factors include, but are not limited to:

  • conditions in the interest rate, credit default, equity market and
    foreign exchange environments, including changes in valuations,
    liquidity and volatility;
  • changes in and the adoption of relevant accounting standards and
    securities rating agency standards and processes, as well as changes
    in the litigation and regulatory environment, including ongoing legal
    proceedings and regulatory actions, the frequency and extent of legal
    claims threatened or initiated by clients, other persons and
    regulators, and developments in regulation and legislation, including
    the rules, exemptions and regulations implemented or that may be
    implemented or modified in connection with the Dodd-Frank Wall Street
    Reform and Consumer Protection Act or in light of the U.S. Department
    of Labor rule and exemptions pertaining to the fiduciary status of
    investment advice providers to 401(k) plans, plan sponsors, plan
    participants and the holders of individual retirement or health
    savings accounts (as well as similar SEC, Certified Financial Planner
    Board and state fiduciary rules and standards);
  • investment management performance and distribution partner and
    consumer acceptance of the company's products;
  • effects of competition in the financial services industry, including
    pricing pressure, the introduction of new products and services and
    changes in product distribution mix and distribution channels;
  • changes to the company's reputation that may arise from employee or
    advisor misconduct, legal or regulatory actions, cybersecurity
    incidents, perceptions of the financial services industry generally,
    improper management of conflicts of interest or otherwise;
  • the company's capital structure, including indebtedness, limitations
    on subsidiaries to pay dividends, and the extent, manner, terms and
    timing of any share or debt repurchases management may effect as well
    as the opinions of rating agencies and other analysts and the
    reactions of market participants or the company's regulators,
    advisors, distribution partners or customers in response to any change
    or prospect of change in any such opinion;
  • changes to the availability and cost of liquidity and the Company's
    credit capacity that may arise due to shifts in market conditions, the
    company's credit ratings and the overall availability of credit;
  • risks of default, capacity constraint or repricing by issuers or
    guarantors of investments the company owns or by counterparties to
    hedge, derivative, insurance or reinsurance arrangements or by
    manufacturers of products the company distributes, experience
    deviations from the company's assumptions regarding such risks, the
    evaluations or the prospect of changes in evaluations of any such
    third parties published by rating agencies or other analysts, and the
    reactions of other market participants or the company's regulators,
    advisors, distribution partners or customers in response to any such
    evaluation or prospect of changes in evaluation;
  • experience deviations from the company's assumptions regarding
    morbidity, mortality and persistency in certain annuity and insurance
    products, or from assumptions regarding market returns assumed in
    valuing or unlocking DAC and DSIC or market volatility underlying our
    valuation and hedging of guaranteed living benefit annuity riders, or
    from assumptions regarding interest rates assumed in our loss
    recognition testing of our Long Term Care business, or from
    assumptions regarding anticipated claims and losses relating to our
    automobile and home insurance products;
  • changes in capital requirements that may be indicated, required or
    advised by regulators or rating agencies;
  • the impacts of the company's efforts to improve distribution economics
    and to grow third party distribution of its products;
  • the ability to pursue and complete strategic transactions and
    initiatives, including acquisitions, divestitures, restructurings,
    joint ventures and the development of new products and services
  • the ability to realize the financial, operating and business
    fundamental benefits of strategic transactions and initiatives the
    company has completed, is pursuing or may pursue in the future, which
    may be impacted by the ability to obtain regulatory approvals, the
    ability to effectively manage related expenses and by market, business
    partner and consumer reactions to such strategic transactions and
    initiatives;
  • the ability and timing to realize savings and other benefits from
    re-engineering and tax planning;
  • interruptions or other failures in our communications, technology and
    other operating systems, including errors or failures caused by third
    party service providers, interference or failures caused by third
    party attacks on our systems (or other cybersecurity incidents), or
    the failure to safeguard the privacy or confidentiality of sensitive
    information and data on such systems; and
  • general economic and political factors, including consumer confidence
    in the economy and the financial industry, the ability and inclination
    of consumers generally to invest as well as their ability and
    inclination to invest in financial instruments and products other than
    cash and cash equivalents, the costs of products and services the
    company consumes in the conduct of its business, and applicable
    legislation and regulation and changes therein (such as the ongoing
    negotiations following the June 2016 U.K. referendum on membership in
    the European Union and the uncertain regulatory environment in the
    U.S. after the 2016 presidential election), including tax laws, tax
    treaties, fiscal and central government treasury policy, and policies
    regarding the financial services industry and publicly held firms, and
    regulatory rulings and pronouncements.

Management cautions the reader that the foregoing list of factors is not
exhaustive. There may also be other risks that management is unable to
predict at this time that may cause actual results to differ materially
from those in forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. Management undertakes no
obligation to update publicly or revise any forward-looking statements.
The foregoing list of factors should be read in conjunction with the
"Risk Factors" discussion under Part 1, Item 1A of and elsewhere in our
Annual Report on Form 10-K for the year ended December 31, 2017
available at ir.ameriprise.com.

The financial results discussed in this news release represent past
performance only, which may not be used to predict or project future
results. The financial results and values presented in this news release
and the below-referenced Statistical Supplement are based upon asset
valuations that represent estimates as of the date of this news release
and may be revised in the company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2018. For information about Ameriprise
Financial entities, please refer to the Third Quarter 2018 Statistical
Supplement available at ir.ameriprise.com
and the tables that follow in this news release.

Ameriprise Financial announces financial and other information to
investors through the company's investor relations website at ir.ameriprise.com,
as well as SEC filings, press releases, public conference calls and
webcasts. Investors and others interested in the company are encouraged
to visit the investor relations website from time to time, as
information is updated and new information is posted. The website also
allows users to sign up for automatic notifications in the event new
materials are posted. The information found on the website is not
incorporated by reference into this release or in any other report or
document the company furnishes or files with the SEC.

 

Ameriprise Financial, Inc.
Reconciliation Table:
Earnings

 
 

Quarter Ended
September 30,

 

Per Diluted Share
Quarter Ended
September
30,

(in millions, except per share amounts, unaudited) 2018   2017 2018   2017
Net income $ 503 $ 507 $ 3.43 $ 3.26
Less: Net income (loss) attributable to consolidated investment
entities
Add: Integration/restructuring charges (1) 9 1 0.06 0.01
Add: Market impact on variable annuity
guaranteed benefits (1)
45 55 0.31 0.35
Add: Market impact on indexed universal life benefits (1) 13 10 0.09 0.06
Add: Market impact of hedges on investments (1) (6 ) 1 (0.04 ) 0.01
Add: Net realized investment (gains) losses (1) (4 ) 3 (0.03 ) 0.02
Add: Tax effect of adjustments (2)   (12 )   (25 )   (0.08 )   (0.16 )
Adjusted operating earnings 548 552 3.74 3.55
Less: Pretax impact of annual unlocking/loss recognition (58 ) 42 (0.39 ) 0.27
Less: Tax effect of annual unlocking/loss recognition (2)   12   (15 )   0.08   (0.10 )
Adjusted operating earnings excluding annual unlocking/loss
recognition
$ 594 $ 525 $ 4.05 $ 3.38
 
Weighted average common shares outstanding:
Basic 144.4 153.0
Diluted 146.5 155.4
 

(1) Pretax adjusted operating adjustment.

 

(2) Calculated using the statutory tax rate of 21% in
2018 and 35% in 2017.

 
 

Ameriprise Financial, Inc.
Reconciliation Table:
Total Net Revenues

 
  Quarter Ended

September 30,

(in millions, unaudited) 2018   2017
Total net revenues $ 3,292 $ 3,014
Less: CIEs revenue 22 23
Less: Net realized investment gains (losses) 4 (3 )
Less: Market impact on indexed universal life benefits (8 ) (5 )
Less: Market impact of hedges on investments   6   (1 )
Adjusted operating total net revenues 3,268 3,000
Less: Annual unlocking/loss recognition   78   (47 )
Adjusted operating total net revenues excluding annual
unlocking/loss recognition
$ 3,190 $ 3,047

 

 

Ameriprise Financial, Inc.
Reconciliation Table:
Total Expenses

 
Quarter Ended

September 30,

(in millions, unaudited) 2018 2017
Total expenses $ 2,704 $ 2,381
Less: CIEs expenses 22 23
Less: Integration/restructuring charges 9 1
Less: Market impact on variable annuity guaranteed benefits 45 55
Less: Market impact on indexed universal life benefits 5 5
Less: DAC/DSIC offset to net realized investment gains (losses)    
Adjusted operating expenses 2,623 2,297
Less: Annual unlocking/loss recognition   136   (89 )
Adjusted operating expenses excluding annual unlocking/loss
recognition
$ 2,487 $ 2,386

 

 

Ameriprise Financial, Inc.
Reconciliation Table:
Pretax Adjusted Operating Earnings

 
Quarter Ended

September 30,

(in millions, unaudited) 2018 2017
Adjusted operating total net revenues $ 3,268 $ 3,000
Adjusted operating expenses   2,623   2,297
Pretax adjusted operating earnings $ 645 $ 703
 
 

Ameriprise Financial, Inc.
Reconciliation Table:
General and Administrative Expense

 
Quarter Ended

September 30,

(in millions, unaudited) 2018 2017
General and administrative expense $ 802 $ 781
Less: CIEs expenses 3 1
Less: Integration/restructuring charges   9   1
Adjusted operating general and administrative expense $ 790 $ 779
 
 

 

Ameriprise Financial, Inc.
Reconciliation Table:
Advice & Wealth Management and Asset Management Percent of Pretax
Adjusted Operating Earnings
(1)

 
Quarter Ended

September 30,

(in millions, unaudited) 2018 2017
Advice & Wealth Management pretax adjusted operating earnings $ 355 $ 299
Less: Annual unlocking    
Advice & Wealth Management pretax adjusted operating earnings
excluding annual unlocking
$ 355 $ 299
 
Advice & Wealth Management and Asset Management pretax adjusted
operating earnings
$ 552 $ 503
Less: Annual unlocking    
Advice & Wealth Management and Asset Management pretax adjusted
operating earnings excluding annual unlocking
$ 552 $ 503
 
Annuities and Protection pretax adjusted operating earnings $ 214 $ 336
Less: Annual unlocking   (6 )   100
Annuities and Protection pretax adjusted operating earnings
excluding annual unlocking
$ 220 $ 236
 
Percent pretax adjusted operating earnings from Advice & Wealth
Management
46 % 36 %
Percent pretax adjusted operating earnings from Advice & Wealth
Management and Asset Management
72 % 60 %
Percent pretax adjusted operating earnings from Annuities and
Protection
28 % 40 %
Percent pretax adjusted operating earnings from Advice & Wealth
Management excluding annual unlocking
46 % 40 %
Percent pretax adjusted operating earnings from Advice & Wealth
Management and Asset Management excluding annual unlocking
72 % 68 %
Percent pretax adjusted operating earnings from Annuities and
Protection excluding annual unlocking
28 % 32 %
 

(1) Excludes Corporate & Other segment

 
 

Ameriprise Financial, Inc.
Reconciliation Table:
Effective Tax Rate

 
  Quarter Ended September 30, 2018
(in millions, unaudited) GAAP  

Adjusted
Operating

Pretax income $ 588 $ 645
Income tax provision $ 85 $ 97
Effective tax rate 14.4 % 15.0 %
 
 

Ameriprise Financial, Inc.
Reconciliation Table:
Effective Tax Rate

 
Quarter Ended September 30, 2017
(in millions, unaudited) GAAP  

Adjusted
Operating

Pretax income $ 633 $ 703
Income tax provision $ 126 $ 151
Effective tax rate 19.9 % 21.5 %
 
 

Ameriprise Financial, Inc.
Reconciliation Table:
Advice & Wealth Management Adjusted Operating Net Revenues
(trailing 12 months)

 
  Quarter Ended September 30,
(in millions, unaudited) 2018   2017
Adjusted operating net revenues $ 6,117 $ 5,452
Less: Net impact of transitioning advisory accounts to share classes
without 12b-1 fees
  40   111
Adjusted operating total net revenues normalized for 12b-1 impact $ 6,077 $ 5,341

 

 

Ameriprise Financial, Inc.
Reconciliation Table:
Asset Management Net Pretax Adjusted Operating Margin

 
Quarter Ended September 30,

(in millions, unaudited)

2018 2017
Adjusted operating total net revenues $ 772 $ 784
Less: Distribution pass through revenues 195 197
Less: Subadvisory and other pass through revenues   90   91
Net adjusted operating revenues $ 487 $ 496
 
Pretax adjusted operating earnings $ 197 $ 204
Less: Adjusted operating net investment income 7 6
Add: Amortization of intangibles   5   4
Net adjusted operating earnings $ 195 $ 202
 
Pretax adjusted operating margin 25.5 % 26.0 %
Net pretax adjusted operating margin 40.0 % 40.7 %
 
 

Ameriprise Financial, Inc.
Reconciliation Table:
Return on Equity (ROE) Excluding Accumulated

Other
Comprehensive Income "AOCI"

 
 

Twelve Months Ended
September 30,

(in millions, unaudited)

2018   2017
Net income $ 1,736 $ 1,702
Less: Adjustments (1)   (89 )   (165 )
Adjusted operating earnings 1,825 1,867
Less: Annual unlocking/loss recognition, net of tax (2)   (46 )   27
Adjusted operating earnings excluding annual unlocking/loss
recognition
$ 1,871 $ 1,840
 
Total Ameriprise Financial, Inc. shareholders' equity $ 5,878 $ 6,367
Less: Accumulated other comprehensive income, net of tax   22   325
Total Ameriprise Financial, Inc. shareholders' equity excluding AOCI 5,856 6,042
Less: Equity impacts attributable to the consolidated investment
entities
  1   1
Adjusted operating equity $ 5,855 $ 6,041
 
Return on equity excluding AOCI 29.6 % 28.2 %
Adjusted operating return on equity excluding AOCI (3) 31.2 % 30.9 %
Adjusted operating return on equity excluding AOCI and annual
unlocking/loss recognition
32.0 % 30.5 %
 

(1) Adjustments reflect the trailing twelve months' sum
of after-tax net realized investment gains/losses, net of deferred
sales inducement costs ("DSIC") and deferred acquisition costs
("DAC") amortization, unearned revenue amortization and the
reinsurance accrual; market impact on variable annuity guaranteed
benefits, net of hedges and related DSIC and DAC amortization; the
market impact on indexed universal life benefits, net of hedges
and related DAC amortization, unearned revenue amortization, and
the reinsurance accrual; the market impact on fixed index annuity
benefits, net of hedges and the related DAC amortization; the
market impact of hedges to offset interest rate changes on
unrealized gains or losses for certain investments;
integration/restructuring charges; and the impact of consolidating
certain investment entities. After-tax is calculated using the
statutory tax rate of 21% in 2018 and 35% in 2017.

 

(2) After-tax is calculated using the statutory tax
rate of 21% in 2018 and 35% in 2017.

 

(3) Adjusted operating return on equity excluding
accumulated other comprehensive income (AOCI) is calculated using
the trailing twelve months of earnings excluding the after-tax net
realized investment gains/losses, net of deferred sales inducement
costs ("DSIC") and deferred acquisition costs ("DAC")
amortization, unearned revenue amortization and the reinsurance
accrual; market impact on variable annuity guaranteed benefits,
net of hedges and related DSIC and DAC amortization; the market
impact on indexed universal life benefits, net of hedges and
related DAC amortization, unearned revenue amortization, and the
reinsurance accrual; the market impact on fixed index annuity
benefits, net of hedges and the related DAC amortization; the
market impact of hedges to offset interest rate changes on
unrealized gains or losses for certain investments;
integration/restructuring charges; the impact of consolidating
certain investment entities; and discontinued operations in the
numerator, and Ameriprise Financial shareholders' equity excluding
AOCI and the impact of consolidating investment entities using a
five-point average of quarter-end equity in the denominator.
After-tax is calculated using the statutory tax rate of 21% in
2018 and 35% in 2017.

 
 

Ameriprise Financial, Inc.
Consolidated GAAP Results

 
(in millions, unaudited)   Quarter Ended September 30,  

% Better/
(Worse)

2018   2017
Revenues
Management and financial advice fees $ 1,739 $ 1,639 6 %
Distribution fees 470 435 8
Net investment income 386 372 4
Premiums 363 348 4
Other revenues   358   232 54
Total revenues 3,316 3,026 10
Banking and deposit interest expense   24   12 NM
Total net revenues 3,292 3,014 9
 
Expenses
Distribution expenses 920 850 (8 )
Interest credited to fixed accounts 178 176 (1 )
Benefits, claims, losses and settlement expenses 729 474 (54 )
Amortization of deferred acquisition costs 25 48 48
Interest and debt expense 50 52 4
General and administrative expense   802   781 (3 )
Total expenses 2,704 2,381 (14 )
Pretax income 588 633 (7 )
Income tax provision   85   126 33
 
Net income $ 503 $ 507 (1 )%
 
NM Not Meaningful — variance equal to or greater than 100%
 

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