Report
Michael Wong
EUR 850.00 For Business Accounts Only

Morningstar | Ameriprise Has A Lot of New Excess Capital to Put to Work

Ameriprise Financial should be unlocking value for shareholders as it puts its new excess capital to work. The company reported net income of $395 million, or $2.82 per diluted share, on $3.15 billion of net revenue in the first quarter of 2019. Net income declined 34% from the previous year on a generally accepted accounting principles basis, but on an operating basis that primarily excludes the effect of model assumption changes for the company’s insurance and annuity businesses, operating earnings only decreased 6% to $525 million. Despite the turbulence in equity markets, revenue was down only 2% from both the previous year and sequentially. We don't anticipate making a significant change to our $153 fair value estimate for narrow-moat Ameriprise.

Ameriprise has been very active on the business reorganization and capital front. The company recently announced that it's selling its auto and home insurance business to American Family Insurance and should receive net proceeds of $950 million. Ameriprise also reinsured a portion of its fixed-annuity business, which frees up about $200 million of capital. With $1.8 billion of excess capital at the end of the first quarter, the company has ample capacity to conduct additional repurchases or look for ways to expand its business. One use of capital is the federal savings bank the company plans to launch later in the second quarter. The company plans to shift $2 billion-$2.5 billion of client cash into the bank, and we think the company should generate returns on capital upward of 15%. While the company’s return on equity excluding accumulated other comprehensive income was over 30% in the first quarter, earning upward of 15% returns with its bank is still good for shareholders, especially if shares become too expensive for repurchasing.

Along with first-quarter results, Ameriprise announced a new $2.5 billion repurchase authorization and that it's increasing its quarterly dividend 8% to $0.97 per share.
Underlying
Ameriprise Financial Inc.

Ameriprise Financial is a holding company. Through its subsidiaries, the company provides a range of products and services to individual and institutional clients. The company's segments are: Advice and Wealth Management, which provides financial planning and advice, as well as brokerage services, to retail clients through its advisors; Asset Management, which provides investment management, advice and products to clients through the Columbia Threadneedle Investments? brand; Annuities, which provides variable and fixed annuity products to clients; and Protection, which provides products to address the protection and risk management needs of the company's retail clients including life, disability income insurance.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Michael Wong

Other Reports on these Companies
Other Reports from Morningstar

ResearchPool Subscriptions

Get the most out of your insights

Get in touch