Ameriprise Financial Inc.’s AMP third-quarter 2015 operating earnings per share of $2.35 surpassed the Zacks Consensus Estimate by a penny. Further, the figure was up 12% year over year.
Shares of Ameriprise fell nearly 1% in the after-market trading following the earnings release. Concerns regarding top-line deterioration and fall in assets under management most likely triggered the fall. Nevertheless, price reaction during the full trading session will provide a better idea about how investors accepted the results.
Results benefited from a marginal fall in operating costs, reflecting prudent expense management. However, unfavorable impact from foreign exchange and volatile equity markets during the quarter weighed on the revenues. Further, assets under management (“AUM”) and assets under administration showed a decline.
After considering the market impact on variable annuity guaranteed benefits, index universal life benefits, hedges on investments, integration/restructuring charges and net realized gains/losses, Ameriprise’s net income from continuing operations came in at $397 million or $2.17 per share compared with $420 million or $2.17 per share in the prior-year quarter.
Behind the Headlines
Net revenue (on a GAAP basis) of $2.89 billion was down 7% year over year, largely due to a decrease of 25% in net investment income and 24% fall in other revenues. The figure lagged the Zacks Consensus Estimate of $2.99 billion.
On an operating basis, net revenue declined nearly 1% year over year to $2.88 billion. This reflected impact of increased equity market volatility, a 7% fall in the U.S. equity market during the quarter, and unfavorable foreign exchange translation.
Operating expenses fell 1% year over year to $2.32 billion. The decrease was driven by the company’s ongoing expense discipline as well as a benefit from unlocking.
As of Sep 30, 2015, total AUM and assets under administration summed $766 billion, down 4% year over year. Ameriprise advisor client net inflows were more than offset by market depreciation and an unfavorable foreign exchange impact.
Share Repurchases
In the reported quarter, Ameriprise repurchased 3.8 million shares for $450 million.
Our Viewpoint
Growth at Ameriprise remained subdued due to increased volatility in equity market and continued low interest rate environment. Despite a reasonable performance from the company’s segments, profitability remained burdened with the overall weak cost management and unfavorable foreign exchange impact.
Though consistent net outflows in the Asset Management segment continue to strain Ameriprise’s overall revenue-generation capacity, we expect the top line to improve in the upcoming quarters, driven by the company’s focus on business growth and strong capital position.
At present, Ameriprise has a Zacks Rank #4 (Sell).
Performance of Other Investment Managers
BlackRock, Inc.’s BLK third-quarter 2015 adjusted earnings surpassed the Zacks Consensus Estimate. Better-than-expected results were attributable to a rise in revenues and a stable expense base.
The Blackstone Group L.P. BX reported third-quarter 2015 economic net loss, which was significantly wider than the Zacks Consensus Estimate loss. Results were adversely affected mainly by volatile markets, which led to a steep decline in revenues. However, lower expenses were an upside during the quarter.
Invesco Ltd. IVZ is scheduled to announce results on Oct 29.
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