MINNEAPOLIS–(BUSINESS WIRE)–Ameriprise Financial, Inc. (NYSE: AMP):

Advice & Wealth Management delivered pretax adjusted operating earnings of $271 million in a difficult operating environment. This included an unfavorable impact of $122 million from the decline in the Federal Funds effective rate, lower transactional activity related to the pandemic and lower average equity markets. These impacts were partially offset by strong wrap net inflows and continued expense management. Pretax adjusted operating margin remained strong in this environment at 18 percent.

Adjusted operating net revenues decreased 7 percent to $1.5 billion, absorbing the expected $122 million of lower revenue from the precipitous decline in short term interest rates, as well as $37 million from lower transactional activity associated with the pandemic and $27 million from lower average equity markets. Results in the quarter benefited from 9 percent growth in wrap assets. The impact to revenue from growth in wrap assets was reduced by our methodology of billing based on beginning of month asset levels. As a result, equity market appreciation in the second quarter will benefit third quarter revenues.

Total expenses were down 1 percent year-over-year. General and administrative expense increased 1 percent, and excluding bank related expenses, decreased 1 percent. General and administrative expenses were in line with expectations as planned investments for future growth were offset by reengineering.

Total client assets grew 4 percent to $630 billion. Organic growth remained very strong with wrap flows of $4.9 billion in the quarter. Brokerage cash balances were $31.1 billion, up 28 percent year-over-year and down 5 percent sequentially as clients began to put money back to work following market volatility in March.

Adjusted operating net revenue per advisor on a trailing 12-month basis increased 5 percent to $669,000. Total advisors were 9,894, with strong advisor retention and experienced advisor recruiting. During the quarter, 75 advisors moved their practices to Ameriprise, a particularly strong result in the current virtual recruiting environment.

Asset Management pretax adjusted operating earnings were $141 million reflecting strong net inflows in the quarter and well managed expenses that were offset by a decline in average equity markets, $11 million of lower performance fees than a year ago and the impact of outflows from prior quarters. Second quarter net pretax adjusted operating margin was 34.5 percent.

Adjusted operating revenues decreased 6 percent versus last year as strong positive net inflows of $2.6 billion in the second quarter partially mitigated the impact of lower average equity markets, lower performance fees and the impact of net outflows from prior quarters.

Adjusted operating expenses improved 4 percent. General and administrative expenses declined 2 percent, reflecting disciplined expense management with reengineering initiatives funding targeted investments for growth.

In the quarter, net inflows were $2.6 billion, a $4.5 billion improvement from the prior year quarter. Retail net inflows excluding former parent flows were $2.7 billion, with $3.1 billion of net inflows in U.S. retail and $0.4 billion of net outflows in EMEA. In addition to these retail inflows, the company continues to build out its model delivery business and had $0.3 billion of AUA flows in the quarter. Global institutional net inflows excluding former parent flows improved and included $0.9 billion of outflows in low-fee assets from an insurance client. There has been significant year-over-year progress for institutional distribution reflecting continued strength in client sales, as well as lower redemptions.

Annuities pretax adjusted operating earnings were $155 million, up $26 million from the prior year.

Variable annuity pretax adjusted operating earnings increased $32 million to $151 million primarily as a result of lower surrenders and withdrawals that reduced the amortization of deferred acquisition costs, as well as lower sales and higher ending market levels. On a year-to-date basis, variable annuity pretax adjusted operating earnings were in line with expectations at $244 million.

Variable annuity sales declined 17 percent year-over-year to $0.9 billion from pandemic concerns and market volatility. More than half of variable sales in the quarter did not have living benefit guarantees, primarily driven by the recently launched, lower-risk structured variable annuity. This trend is expected to continue and meaningfully shift the mix of the business away from products with living benefit guarantees over time.

Fixed annuity pretax adjusted operating earnings were $4 million, down from $10 million a year ago, primarily reflecting continued low interest rates and continued net outflows. In the quarter, the company discontinued new sales of proprietary fixed annuities and fixed indexed annuities, reflecting the current low interest rate environment. Account balances declined 4 percent from continued lapses and discontinuing new product sales.

Protection pretax adjusted operating earnings were $70 million, up $5 million from a year ago. Overall claims were favorable. VUL/UL cash sales declined primarily reflecting a slowdown in indexed universal life product sales given pandemic concerns, market volatility and lower interest rates while VUL sales remained at consistent levels.

Corporate & Other pretax adjusted operating loss⁽¹⁾ was $77 million, down $2 million from the prior year.

Long Term Care pretax adjusted operating earnings were $17 million, primarily reflecting impacts from COVID-19, with fewer clients entering nursing homes as well as increased mortality-related terminations from clients on claim.

Taxes

The second quarter adjusted operating effective tax rate was 42.3 percent, reflecting a reversal of the NOL tax benefit realized in the first quarter. On a year-to-date basis, the adjusted operating effective tax rate was 16.4 percent.

The movement in the operating effective tax rate was a result of strong equity market appreciation in the second quarter, which was a reversal of the equity market dislocation experienced in March. As management indicated in the first quarter, the tax benefit will be adjusted quarterly for the balance of the year based upon changes in markets and our forecast and will be finalized on December 31, 2020.

(1) Excluding Long Term Care and Auto & Home

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 approximately 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.

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 of the company’s position, future performance and ability to pursue business strategy and return of capital to shareholders relative to the spread and impact of the COVID-19 pandemic and the related market, economic, client, governmental and healthcare system response environments;
• statements about the expected trend in the shift of the variable annuity sales business away from products with living benefit guarantees over time;
• 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” 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, 2019, Part 1, Item 1A of and elsewhere in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and subsequent Quarterly Reports on Form 10-Q, 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 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 Form 10-Q for the quarter ended June 30, 2020. For information about Ameriprise Financial entities, please refer to the Second Quarter 2020 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.