Ameriprise Financial Reports Third Quarter 2021 Results

Ameriprise Financial, Inc. (NYSE: AMP):

Third quarter 2021 GAAP results were positively impacted by the net realized gains on investments transferred as part of the fixed annuity reinsurance transaction that closed in the quarter, as well as market changes that affected credit spreads and the valuation of derivatives.

Advice & Wealth Management pretax adjusted operating earnings increased 43 percent to $459 million driven by robust client net flows, higher transactional activity, market appreciation and disciplined expense management. Pretax adjusted operating margin was 22.4 percent, up 320 basis points, and continues to demonstrate our strategy to deliver profitable growth. On a sequential basis, pretax operating earnings increased 9 percent and pretax adjusted operating margin expanded 100 basis points.

Adjusted operating net revenues grew 23 percent to $2.0 billion, reflecting strong client net flows and market appreciation.

Total expenses were $1.6 billion, reflecting higher distribution expense associated with robust organic growth. General and administrative expense was up 1 percent from the prior year, as higher activity-based expense and performance-based compensation were partially offset by expense discipline.

Total client assets grew 22 percent to $811 billion. The substantial organic growth was driven primarily by our advisor base with deeper client relationships from existing clients, as well as increased new client acquisition. Total client flows were a robust $10.0 billion in the quarter, representing a 65 percent increase in investment advisory flows and a 16 percent increase in transactional activity. Wrap net flows were $9.4 billion, representing the fourth consecutive quarter at or above $9.0 billion. Cash balances remain elevated at $40.1 billion with an opportunity for clients to put cash back to work in the future.

Adjusted operating net revenue per advisor on a trailing 12-month basis was $766,000. Excluding the decline in short-term interest rates, adjusted net revenue per advisor increased 18 percent. The advisor count increased 2 percent to 10,073, with excellent advisor retention and the addition of 104 experienced advisors in the quarter.

Asset Management pretax adjusted operating earnings increased 44 percent to $285 million reflecting the cumulative benefit of net inflows, higher performance fees and market appreciation. Net pretax adjusted operating margin was 48.9 percent. On a sequential basis, pretax operating earnings increased 13 percent and pretax adjusted operating margin expanded 350 basis points.

Adjusted operating revenues increased 24 percent to $915 million from the cumulative benefit of inflows, as well as higher performance fees and equity markets. The fee rate remained strong at 53 basis points. On a sequential basis, revenues increased 4 percent.

Adjusted operating expenses increased 16 percent. General and administrative expense grew 14 percent driven primarily from strong business performance that drove higher compensation expense and other volume-related costs, as well as foreign exchange translation.

Total assets under management increased 17 percent to $583 billion reflecting equity market appreciation and net inflows. Long term investment performance remained very strong across equity, fixed income and asset-allocation strategies.

In the quarter, net inflows were $3.9 billion, an improvement of $5.5 billion from a year ago. Net inflows were $5.3 billion, excluding legacy insurance partners outflows, reflecting a continuation of positive flow trends across multiple distribution channels and strategies.

• Retail net inflows were $1.8 billion. Net inflows in North America were $2.2 billion with notable inflows in the broker-dealer channel that were partially offset by outflows in EMEA.
• Global institutional net inflows were $3.5 billion, with gross sales across multiple strategies.

Retirement & Protection Solutions pretax adjusted operating earnings excluding unlocking was $192 million versus $206 million last year, with continued strong free cash flow generation and high return on capital. Unlocking was an unfavorable $5 million, reflecting strong performance of the blocks that was consistent with expectations.

During the quarter, we continued to focus sales on non-guarantee retirement solutions and accumulation products, including variable annuities without living benefit riders, structured annuities and variable universal life. Retirement sales increased 28 percent to $1.4 billion in the quarter, with 72 percent in products without living benefit riders compared to 56 percent in the prior year quarter. Sales of higher-margin accumulation VUL products increased 167 percent and sales of indexed UL products declined 63 percent as expected given pricing changes made to reflect low interest rates.

We maintain a differentiated book of business with strong returns and free cash flow generation, with a very limited risk profile as evidenced by variable annuity net amount at risk as a percent of account value of 0.4 percent for living benefits and 0.1 percent for death benefits, which we believe is well below the industry.

Corporate & Other pretax adjusted operating loss was in line within expectations at $73 million.

Closed Blocks of long term care and fixed annuities had a pretax adjusted operating loss of $5 million excluding unlocking. Our closed long term care block continued to perform in line with our expectations, with pretax adjusted operating earnings of $2 million. Results included a favorable $8 million from an adjustment to our long term care claim reserves.

Fixed annuities pretax adjusted operating loss excluding unlocking was $7 million, reflecting the amortization of the reinsurance ceding commission. In July, the company closed its fixed annuity reinsurance transaction for RiverSource Life Insurance Company with Global Atlantic’s subsidiary, Commonwealth Annuity and Life Insurance Company.

Taxes

The third quarter adjusted operating effective tax rate was 17.8 percent. On a year-to-date basis, the adjusted operating effective tax rate was 17.0 percent.

About Ameriprise Financial

At Ameriprise Financial, we have been helping people feel confident about their financial future for more than 125 years. With extensive advisory, asset management and insurance capabilities and a nationwide network of over 10,000 financial advisors, we have the strength and expertise to serve the full range of individual and institutional investors' financial needs. For more information, or to find an Ameriprise financial advisor, visit ameriprise.com.

Ameriprise Financial Services, LLC 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. 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.

Non-GAAP Financial Measures

The company believes the presentation of adjusted operating earnings and other non-GAAP financial measures, and the corresponding ratios, best represents the underlying performance of our core operations and facilitates a more meaningful trend analysis without the distortion of various adjustment items. Management uses non-GAAP financial measures to evaluate our financial performance on a basis comparable to that used by some securities analysts and investors and to provide a valuable perspective for investors. These non-GAAP financial measures are taken into consideration, to varying degrees, for purposes of business planning and analysis and for certain compensation-related matters. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures. Non-GAAP financial measure reconciliations can be found on the subsequent pages.

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:

• 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;
• statements about the expected trend in the shift away from products with living benefit guarantees and resulting expected impact to the business;
• 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 track,” “project,” ”continue,” “able to remain”, “resume,” “deliver,” “develop,” “evolve,” “drive,” ”enable,” “flexibility,” “scenario,” “case,” “appear,” “expands” 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.

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 cautions readers to carefully consider the risks described in 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, 2020 available at ir.ameriprise.com. Management undertakes no obligation to update publicly or revise any forward-looking statements.

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 are based upon asset valuations that represent estimates as of the date of this news release and may be revised in the company’s Form 10-Q for the quarter ended September 30, 2021.

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.