Despite a tough stock market and a $3 million bond write-off, Ameriprise Financial Inc. managed to increase its earnings substantially last quarter — thanks in part to sales of proprietary products.
The Minneapolis-based broker-dealer reported net income of $255 million, an increase of 49% from $171 million for the comparable period a year earlier. Revenue increased by 8% to $2.32 billion, driven largely by sales in the company's financial planning unit.
For the full year of 2007, Ameriprise, which American Express Co. of New York spun off in September 2005, reported net income of $814 million, up 29% from $630 million in 2006. Revenue jumped 8% to $8.7 billion.
Ameriprise did take a $3 million write-off during the fourth quarter due to its exposure to subprime mortgages.
"We've had little exposure to subprime [loans]," Walter S. Berman, chief financial officer of Ameriprise, said during the company's year-end conference call with analysts Jan 24.
But analysts are still uncertain whether Ameriprise's immediate future is all smooth sailing.
BRAND AWARENESS
"The loss of the highly recognized American Express name could negatively affect Ameriprise's ability to raise and retain assets," Matthew Albrecht, a securities analyst for Standard & Poor's in New York, wrote in a Jan. 24 research report.
Ameriprise's brand awareness is inching its way upward, said Paul Johnson, a spokesman. Company research shows that 56 out of 100 people are familiar with the Ameriprise name, he said.
"Our brand awareness is the highest it's ever been at 56%," Mr. Johnson said. "Most of the well-known brands are at 60% or more, so we're not there yet. But we feel good about it" because the spinoff from American Express oc-curred only in 2005, he added.
Mr. Albrecht rates shares of Ameriprise (AMP) as a "buy" because the firm has successfully cut the cord with American Express.
"We believe Ameriprise has completed its transition to a stand-alone company and is now focused on growing its client asset base," he wrote.
One tail wind behind the firm's rising earnings has been sales of a relatively new line of proprietary products called goal-based solutions. The lineup includes target maturity funds and fund-of-funds products with re-balancing and other advicelike features built into them. The funds are sold under the company's RiverSource Funds brand.
[More: Edward Jones’ proprietary funds are outselling nearly all active managers]
CLIMBING ASSETS
Total assets in the funds topped $26 billion at the end of last year, up from $15 billion and $6.6 billion at the end of 2006 and 2005, respectively.
"We've had a very good reception from our own advisers," Jim Cracchiolo, chairman and chief executive, said during the recent conference call.
Advisers like the products because they make it easy for them to outsource their investment management, he said.
"They fit well with the plan, and they're easy for the adviser to implement," Mr. Cracchiolo said.
Sixty-eight percent of the equity funds in the lineup beat the median return of their categories over the three-year period ended Dec. 31, and 58% beat the median over the five-year period, he said.
Adviser productivity also rose, with average net revenue per adviser climbing 11% to $315,000 in 2007, from $268,000 in 2006, according to Mr. Cracchiolo.
Ameriprise finished the year with 10, 210 financial advisers. Of those, 2,453 were Ameriprise employees, and 7,757 were franchisees.
Brooke Southall can be reached at bsouthall@crain.com.
