Ameriprise: Increasing Our Fair Value Estimate to $379 from $358, Shares Moderately Undervalued

Sector Director

Michael Wong

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Ameriprise Financial has transformed itself into an investment management powerhouse, with about $1.3 trillion in total assets under management and advisement and around 10,000 financial advisors at the end of the second quarter of 2023. The firm continues to shift away from insurance and to place more emphasis on asset and wealth management operations. In 2019, the company closed the sale of its auto and home insurance business, and in 2020 it discontinued the sale of its proprietary fixed annuities. Columbia Threadneedle Investments, the firm's global asset-management business, turned Ameriprise into a contender in the global asset management industry. Recently about 80% of revenue comes from the company's wealth and asset management segments that should help the company generate operating margins consistently in the low- to mid-20s compared with midteens to low-20s historically.

We expect Ameriprise to weather potential economic turmoil relatively well. Many life insurance companies significantly "derisked" after the global financial crisis and became more conservative with their guaranteed benefit contracts. At the end of 2022, Ameriprise had several billion dollars of capital above regulatory requirements, about 98% of the fixed income securities on its balance sheet were investment-grade with about 75% rated AA or higher, and an estimated 100% of the deposits in its bank subsidiary were within FDIC limits.

In addition to returning most of its operating earnings to shareholders with dividends and share repurchases, the company is funding incremental growth investments. Ameriprise recently increased its presence in investment management with the acquisition of Bank of Montreal's EMEA asset management business in 2021, which increased assets under management by roughly 20%. Ameriprise is also using its capital to support the growth of its bank. Wealth management firms have been able to increase their profits by housing client cash as deposits in their banks and offering loan products, such as securities-based loans.

Business Strategy & Outlook

Wealth management moats are a result of switching costs with some contribution from intangible assets. A typical client stays with their financial advisor for 10 years or more. Wealth management is about trust, and clients are often attracted to the trusted brand of a financial institution and form attachments with their financial advisor. While there may be financial advisors that choose to go to another wealth management firm or start their own independent practice, many financial advisors choose to stay with their current firm, as there are operational difficulties with setting up or learning a new wealth management technology system and significant uncertainties regarding how many of their clients would move with them if they switch firms. Industry data from Cerulli estimates that the average client assets attrition rate is around 30% when an advisor switches.

We believe Ameriprise has built a moat surrounding its asset-management and wealth management businesses. Although the switching costs might not be explicitly large, the benefits of switching from one asset manager or wealth manager to another are at times so uncertain that many clients simply stay where they are. As a result, money that flows into asset and wealth management firms tends to stay there, creating significant asset stickiness.

In our view, Ameriprise has a Morningstar Economic Moat Rating of narrow around its asset-management and wealth management operations. With one of the largest agent channels in the industry, there is no question that Ameriprise has scale. Since its 2005 spinoff from American Express, Ameriprise has gradually moved up the value chain to provide customized services and financial planning solutions to the mass affluent and affluent client groups. Ameriprise’s focus on personal relationships helps the firm build on its switching-cost advantage. The company's retention rate for advisors is over 90%, and the industry retention rate for financial advisors of their retail clients is also around 90%. By positioning itself as a one-stop shop for baby boomers, offering advice in financial planning, fund investment, and insurance purchase, the firm makes it that much harder for boomers to switch to another provider. The size and scale of its operations, the strength of its brands, and the diversity of its AUM by asset class, distribution channel, and geographic reach also provide Ameriprise with a leg up over competitors.

In general, insurers do not benefit from favorable competitive positions. They are in the business of selling commodified insurance products to consumers who attribute very little value to brand. Industry competition is fierce, and there is a high degree of cost uncertainty. Because of the long duration attached to many of the products they sell, insurers do not necessarily know their cost of goods sold for a number of years, allowing them to underprice policies without knowing it. Firms have a large incentive to chase growth without regard for profitability, a cycle that repeats itself as competitors are forced to match artificially low prices or risk losing business.

From our perspective, insurance and annuities are very mature, and insurance products are mostly commodities that can be replicated by a competitor fairly easily. In fact, most companies lose money on underwriting, and they rely heavily on investment income to make up for underwriting losses. Since the typical life insurer is operationally leveraged to the state of the capital markets, over which the company has no direct control, we think it is difficult for most life insurance companies to generate consistent excess returns, a requirement for an economic moat.

Narrow

Economic Moat

Ameriprise Financial

Ameriprise Financial, Inc. operates as a holding company. The firm provides financial planning, asset management and insurance services to individuals, businesses and institutions. It operates through the following business segments: Advice & Wealth Management, Asset Management, Retirement & Protection Solutions, and Corporate & Other. The Advice & Wealth Management segment provides financial planning and advice, as well as full-service brokerage and banking services, primarily to retail clients through the company's financial advisors. The Asset Management segment provides investment advice and investment products to retail and institutional clients. It also provides products and services on a global scale through two complementary asset management businesses: Columbia Management and Threadneedle. The Columbia Management business primarily provides U.S. domestic products and services and Threadneedle primarily provides international investment products and services. Its international retail products are primarily provided through third-party financial institutions. The segments retail products include mutual funds and variable product funds underlying insurance and annuity separate accounts. The Retirement & Protection Solutions segment offers a variety of protection products to address the protection and risk management needs of the company's retail clients, including life, DI, and property-casualty insurance. The Corporate & Other segment consists of net investment income on corporate level assets, including excess capital held in the company's subsidiaries and other unallocated equity and other revenues from various investments as well as unallocated corporate expenses. The company was founded by John Tappan in 1894 and is headquartered in Minneapolis, MN.

Earnings data Q1 2024

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Ameriprise (AMP) continues to benefit from business-restructuring initiatives. However, higher costs will likely continue to hurt profits to an extent.

Restructuring, AUM Growth Aids Ameriprise (AMP) Amid Cost Woes

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MINNEAPOLIS--(BUSINESS WIRE)--For the fifth year in a row, Ameriprise Financial (NYSE: AMP) has received a J.D. Power certification for delivering an “outstanding customer service experience” to its financial advisors who contact the company by phone for support. The Ameriprise Advice & Wealth Management and RiverSource call centers earned the recognition after surpassing the benchmarks in the J.D. Power Certified Customer Service ProgramSM. The program certifies contact centers across all.

Ameriprise Financial Recognized by J.D. Power for its “Outstanding Customer Service Experience” for the Fifth Consecutive Year

MINNEAPOLIS--(BUSINESS WIRE)--Financial advisors Jason Kokaly and Brian Reiber recently joined the independent channel of Ameriprise Financial, Inc. (NYSE: AMP) from Edward Jones in Flint, Michigan with more than $130 million in client assets. “We moved to Ameriprise because of our clients,” Kokaly said. “After years of building outstanding client relationships, we found ourselves ready to expand and enhance the experience for the people we serve.” Kokaly and Reiber are pleased with how the int.

$130 Million Advisor Team Joins Ameriprise Financial to Enhance the Experience They Deliver to Clients

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MINNEAPOLIS & DALLAS--(BUSINESS WIRE)--Ameriprise Financial, Inc. (NYSE: AMP) and Comerica, Inc. (NYSE: CMA) today announced that Ameriprise Financial Services, LLC and Comerica (through certain affiliates) have closed the arrangement in which Ameriprise has become Comerica's new investment program provider. As such, Comerica has transitioned support of specific insurance, brokerage, and investment advisory activities to the Ameriprise Financial Institutions Group (AFIG). The new name represent.

Parties Close Arrangement for Ameriprise to Become Comerica's New Investment Program Provider

MINNEAPOLIS--(BUSINESS WIRE)--Ameriprise Financial, Inc. (NYSE: AMP) today announced it was named a 2024 Military Friendly® Employer by VIQTORY, a company that connects the military community to civilian employment and educational opportunities. This is the tenth consecutive year Ameriprise has earned the distinction in recognition of its commitment to creating meaningful career paths, community outreach, brand enthusiasm and enduring partnerships with the military community. “We understand and.

Ameriprise Financial Named a Military Friendly® Employer For Tenth Consecutive Year

OLDWICK, N.J.--(BUSINESS WIRE)-- #insurance--AM Best has assigned a Long-Term Issue Credit Rating of “a-” (Excellent) to the recently announced $600 million, 5.7% 5-year senior unsecured notes, due Dec. 15, 2028, issued by Ameriprise Financial, Inc. (Ameriprise Financial) (headquartered in Minneapolis, MN) [NYSE: AMP]. The outlook assigned to this Credit Rating (rating) is stable. All other ratings of Ameriprise Financial and its subsidiaries are unchanged. The proceeds from this debt issuance are expected.

AM Best Assigns Issue Credit Rating to Ameriprise Financial, Inc.'s New Senior Unsecured Notes

MINNEAPOLIS--(BUSINESS WIRE)--What does it take to become a millionaire? New research from Ameriprise Financial (NYSE: AMP) confirms that it comes down to practical behaviors and discipline around money. Ameriprise surveyed 580 Americans ages 27-77 who currently have a million dollars or more in investable assets to understand how they built their savings. Eighty percent cited “financial planning and investing” as the top driver behind their ability to accumulate more than $1 million. They also.

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MINNEAPOLIS--(BUSINESS WIRE)--For the 14th consecutive year, Ameriprise Financial is partnering with Feeding America®, the nation's largest domestic hunger-relief organization, to help provide meals for families and individuals facing hunger ahead of the holiday season. On Nov. 2, more than 3,300 of the firm's employees, advisors and clients are volunteering at the Feeding America network of local food banks and other nonprofits across the country to sort bulk food donations, stock shelves, ser.

Ameriprise Financial and Feeding America® Join Forces to Help People in Need Ahead of the Holidays

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Ameriprise Financial, Inc. (AMP) Q3 2023 Earnings Call Transcript

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MINNEAPOLIS--(BUSINESS WIRE)--The Board of Directors of Ameriprise Financial, Inc. (NYSE: AMP) has declared a quarterly cash dividend of $1.35 per common share payable on November 17, 2023 to shareholders of record at the close of business on November 6, 2023. At Ameriprise Financial, we have been helping people feel confident about their financial future for more than 125 years. With extensive investment advice, asset management and insurance capabilities and a nationwide network of more than.

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MINNEAPOLIS--(BUSINESS WIRE)--Ameriprise Financial, Inc. (NYSE: AMP) plans to announce its third quarter financial results on Wednesday, October 25, 2023 after the close of the New York Stock Exchange. The company will host a conference call to discuss the results on Thursday, October 26, 2023 at 9:00 a.m. (ET). Live audio of the conference call, presentation slides and an audio replay will be available on the Ameriprise Financial Investor Relations website at ir.ameriprise.com. At Ameriprise F.

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MINNEAPOLIS--(BUSINESS WIRE)--For the 12th consecutive year, Ameriprise Financial, Inc. (NYSE: AMP) will match donations to Feeding America® (up to $250,000) to help the more than 34 million people in America who lack consistent access to food to live healthy and comfortable lives. With the Ameriprise match, each dollar donated through October 31 will help provide 20 meals* (double the standard donation) to families and individuals in need. Participation is easy and open to the public: visit ww.

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