Ameriprise Financial: Double-Digit Shareholder Yield

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AMP Ameriprise Financial Advice & Wealth Management

Source: Ameriprise Financial Presentation at the 2017 Credit Suisse Annual Financial Services Forum, slide 5

Ameriprise Financial’s Asset Management operating segment is responsible for $454 billion in assets under management.

This segment has broad exposure to both retail and institutional clients and manages 112 four- and five-star Morningstar mutual funds, giving it healthy exposure to investors looking to purchase only the best investment products.

Further, the company’s asset management segment has more than $100 billion in multi-asset managed products, which are key in attracting clients in today’s hands-off investing environment.

This segment is also highly profitable. Ameriprise Financial’s asset management segment reports profit margins in the 35%-39% range through strong expense management and dependable revenue growth.

More details about the company’s asset management segment can be seen below.

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AMP Ameriprise Financial Asset Management

Source: Ameriprise Financial Presentation at the 2017 Credit Suisse Annual Financial Services Forum, slide 6

Although previously being the company’s largest segment by far, Ameriprise Financial’s Protection and Annuities segment has not grown as quickly as its other operating segments. The company currently manages $196 billion in life insurance policies and $87 billion in annuity account balances.

The company currently manages $196 billion in life insurance policies and $87 billion in annuity account balances. While these sums are quite large on a nominal basis, they are small relative to the size of Ameriprise Financial’s Advice & Wealth Management or Asset Management segments.

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AMP Ameriprise Financial Protection and Annuities

Source: Ameriprise Financial Presentation at the 2017 Credit Suisse Annual Financial Services Forum, slide 7

Moving on, the next section will discuss Ameriprise Financial’s growth prospects in detail.

Growth Prospects

Ameriprise Financial’s business model is based on cultivating the advisor-client relationship. 

Accordingly, the firm’s growth will be driven by expanding/improving its advisor base and growing its AUM.  

The company reported 11% growth in retail assets and 100 additional advisor hires in the most recent quarter.  

Ameriprise Financial is actively expanding its advisor base and many of its advisors stay with the company for long durations of time. Importantly, the firm’s retention rate for advisors with 10+ years of tenure exceeds 95%.

The company will also benefit from an ever-improving mix of operating earnings.

The company’s Advice & Wealth Management and Asset Management segments are seen as much preferable to its Annuities and Protection segment – which, as mentioned, was previously the company’s largest segment. As time passes, Ameriprise is focusing on growing the two more attractive segment to transition its business to a recurring revenue model.

This long-term transition can be seen below. The company has a near-term objective of generating less than one-fourth of its revenue from Annuities and Protection.

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AMP Ameriprise Financial Earnings Growth & Business Mix Transition Drive Multiple Expansion

Source: Ameriprise Financial Presentation at the 2017 Credit Suisse Annual Financial Services Forum, slide 12

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