Ameriprise Financial, Inc. (NYSE: AMP) has long been a pillar of stability in the ever-evolving financial services landscape. With roots dating back to 1894, this diversified financial services firm has weathered numerous economic storms, emerging stronger and more resilient with each passing decade. As the company celebrates its 130th anniversary, Ameriprise's commitment to delivering comprehensive wealth management solutions and prudent risk management has solidified its position as a trusted partner for millions of clients.
Business Overview Ameriprise Financial's journey began in 1894 when it was founded as Investors Syndicate, a small life insurance company based in Minneapolis, Minnesota. Over the next several decades, the company expanded its offerings, venturing into face-amount certificate sales and mutual fund management. A significant milestone came in 1983 when the company was acquired by American Express and subsequently renamed American Express Financial Corporation. This acquisition propelled Ameriprise's growth in wealth management and financial planning.
In 2005, a pivotal moment arrived as American Express spun off its financial planning and asset management divisions, giving birth to the independent, publicly traded Ameriprise Financial, Inc. The newly independent company faced immediate challenges during the late 2000s financial crisis, grappling with substantial losses due to exposure in the mortgage and credit markets. This tumultuous period necessitated raising additional capital and navigating increased regulatory scrutiny.
Despite these obstacles, Ameriprise demonstrated remarkable resilience. Over the past decade, the company has strategically expanded its asset management capabilities through both acquisitions and organic growth. Significant investments in technology have enhanced the client experience and improved advisor productivity, contributing to Ameriprise's ability to deliver consistent financial performance across various market cycles.
Today, Ameriprise operates through four primary business segments: Advice & Wealth Management, Asset Management, Retirement & Protection Solutions, and Corporate & Other. The firm's comprehensive suite of financial planning, investment management, and insurance products caters to a diverse client base ranging from mass affluent to high-net-worth individuals and institutions.
One of Ameriprise's key strengths lies in its integrated business model, which enables the firm to leverage synergies across its various divisions. This cohesive approach allows the company to deliver tailored solutions to clients while maintaining operational efficiency and risk management discipline.
Financial Snapshot Ameriprise's financial performance has been consistently strong, even in the face of market turbulence. As of September 30, 2024, the company reported total assets under management and administration of $1.5 trillion, reflecting a 22% increase from the prior year period. This growth was driven by strong client flows and market appreciation across the firm's Advice & Wealth Management and Asset Management segments.
For the nine months ended September 30, 2024, Ameriprise reported net income of $2.33 billion, translating to diluted earnings per share of $22.53. The company's adjusted operating earnings, which exclude certain non-recurring items, reached $2.59 billion, or $25.03 per diluted share, representing a 16% compound annual growth rate over the past five years.
For the most recent quarter, Ameriprise reported revenue of $4.56 billion and net income of $5 million. The company generated $2.876 billion in operating cash flow and $2.827 billion in free cash flow during the quarter. The company's adjusted operating net revenue increased 11% to $4.4 billion in the quarter, with earnings up 11% and earnings per share up 17%, excluding severance expense. Ameriprise achieved an excellent return on equity of 50.7% for the quarter, compared to 49.6% a year ago.
Liquidity Ameriprise's balance sheet remains rock-solid, with a debt-to-capital ratio of just 0.39 as of September 30, 2024. The firm's robust liquidity position, with $10.57 billion in cash and cash equivalents, provides ample flexibility to navigate potential economic headwinds and capitalize on growth opportunities. The company has access to a $1 billion unsecured revolving credit facility that expires in June 2026. As of September 30, 2024, the company had no outstanding borrowings under this facility and had $1 million of letters of credit issued against the facility.
Ameriprise's current ratio stands at 0.6937, while its quick ratio is -0.0039, indicating potential short-term liquidity challenges that the company will need to manage carefully.
Segment Performance Advice & Wealth Management: This segment, which includes the company's financial planning and advisory services, has been a cornerstone of Ameriprise's success. In the third quarter of 2024, the Advice & Wealth Management business generated $2.74 billion in net revenues, a 14% increase year-over-year. Pretax adjusted operating earnings grew 13% to $826 million, driven by strong client asset growth and increased transactional activity. Notably, Ameriprise advisors achieved a new productivity high of $997,000 per advisor, underscoring the firm's ability to attract and retain top talent. For the nine months ended September 30, 2024, this segment reported net revenues of $7.95 billion, up 13% compared to the prior year period, with adjusted operating earnings of $2.41 billion, up 12%. The pretax adjusted operating margin for this period was 30.3%.
Asset Management: Ameriprise's Asset Management segment, which includes its Columbia Threadneedle Investments brand, reported net revenues of $882 million in the third quarter of 2024, a 7% increase compared to the prior-year period. Pretax adjusted operating earnings grew 23% to $245 million, as the firm continued to realize benefits from its operational efficiency initiatives. Assets under management increased 14% year-over-year to $672 billion, driven by market appreciation and improved net flows. For the nine months ended September 30, 2024, this segment reported net revenues of $2.58 billion, up 6% compared to the prior year period, with adjusted operating earnings of $669 million, up 27%.
Retirement & Protection Solutions: This segment, which encompasses Ameriprise's annuity, life insurance, and disability insurance products, generated $973 million in net revenues in the third quarter of 2024, a 10% year-over-year increase. Pretax adjusted operating earnings, excluding the impact of assumption updates, grew 6% to $513 million, reflecting the high-quality, differentiated nature of the firm's insurance business. For the nine months ended September 30, 2024, this segment reported net revenues of $2.81 billion, up 10% compared to the prior year period, with adjusted operating earnings of $513 million, up 6%.
Corporate & Other: This segment, which consists of corporate capital and other corporate level activities, as well as the company's closed blocks of long-term care insurance and fixed annuity and fixed indexed annuity businesses, reported net revenues of $347 million for the nine months ended September 30, 2024, down 17% compared to the prior year period. The segment recorded an adjusted operating loss of $351 million, up 70% compared to the prior year period.
Risks and Challenges While Ameriprise has demonstrated remarkable resilience, the company is not immune to the inherent risks of the financial services industry. Fluctuations in equity markets, interest rate changes, and regulatory developments can all have a material impact on the firm's performance. Additionally, the highly competitive nature of the wealth management and asset management landscapes presents ongoing challenges in terms of client retention and asset gathering.
Ameriprise's exposure to the long-term care insurance business, although a relatively small portion of its overall operations, has been a source of concern for investors in the past. However, the company's thorough review of potential risk transfer opportunities has reaffirmed its decision to retain the long-term care block, citing its high-quality, mature nature and the potential for further performance improvements through investment portfolio repositioning and other strategic initiatives. The company feels very good about the quality of its long-term care insurance business and has decided to retain the block rather than pursue a risk transfer transaction, as the market conditions did not justify executing a deal at this time.
Outlook and Conclusion Looking ahead, Ameriprise remains well-positioned to navigate the evolving financial services landscape. The firm's diversified business model, strong balance sheet, and commitment to operational excellence position it to capitalize on emerging trends and deliver long-term value for shareholders.
The company expects to continue its consistent capital return strategy, with plans to return 80% of operating earnings to shareholders in 2024. For 2025, Ameriprise anticipates total company G&A expenses to be relatively flat, excluding any severance costs and investments in the cloud transition. The company also sees opportunities to further grow its bank assets and offerings, including launching new savings and lending products next year.
In the words of Ameriprise Chairman and CEO Jim Cracchiolo, "Ameriprise continues to consistently generate strong results. Our long-term record is excellent, and our balance sheet remains a clear and important differentiator." With a steadfast focus on client-centricity, innovation, and risk management, Ameriprise Financial is poised to continue its legacy of stability and growth, weathering any storm that may come its way.
Disclaimer: This article is for informational purposes only and does not constitute a recommendation to buy or sell any securities. The author has no position in Ameriprise Financial (AMP) and has not been compensated by the company or a third party in relation to this article.