The advice & wealth management division of Ameriprise Financial has reported pre-tax operating earnings of $254m for the fourth quarter of 2016, an increase of 21% compared with $210m in the year ago quarter.
The company attributed the rise in earnings to asset growth, higher earnings on cash balances and well controlled expenses.
The unit's pretax operating margin increased to 19.3% from 16.6% in the fourth quarter of 2015. Operating net revenues rose by 4% year-on-year to $1.31bn from inflows into wrap accounts and higher earnings on cash balances.
Operating expenses increased 1% to $1.06bn from $1.05bn in the prior year, mainly due to higher distribution expenses related to growth in wrap accounts. General and administrative expenses dipped 5% from the previous year, due to strong expense controls.
Total retail client assets increased to $479bn in the quarter. The company said that the increase was driven by client net inflows, client acquisition and market appreciation. Wrap net inflows stood at $3.3bn, prompting a year-over-year rise of 11% in balances to $201bn.
The company’s total advisors at the end of the quarter ended 31 December 2016 were 9,675.
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The pre-tax operating earnings at the asset management unit were $169m in the fourth quarter of 2016, a 12% decrease compared to $193m in the corresponding quarter of 2015.
The company said that the results included a benefit from market appreciation that was more than offset by the cumulative impact of net outflows, and lower performance fees and CLO liquidation benefits than a year ago.
The unit's operating net revenue dropped 9% to $761m from $833m a year ago, reflecting the impact of lower asset levels and higher performance fees and CLO liquidation benefits in the previous year.
Total segment AUM was $454bn at the end of December 2016, a fall of 4% from $472m in the prior year.
The division’s operating expenses dipped 8% year-on-year to $592m, driven by well managed general and administrative expenses, lower distribution expenses as well as the impact of foreign exchange rates. Net outflows were $2.1bn in the quarter.
Overall, Ameriprise Financial group reported net income of $400m for the fourth quarter of 2016, up 12 % compared to $357m in the year ago period.
Ameriprise chairman and CEO Jim Cracchiolo said: “Ameriprise had a strong fourth quarter and a good year in light of the operating environment. Our fee-based businesses continued to generate strong profitability. Advice & Wealth Management in particular led the way with a record high for retail client assets, strong net inflows into investment advisory accounts, as well as very good advisor productivity.
“Our capital management actions continue to reflect the strength of our financial foundation and significant free cash flow generation, as well as our consistent investment in the business and approach to capital return. We delivered a differentiated operating return on equity of 22.2 percent at year end, or 24.6 percent when excluding annual unlocking. I am pleased to add that 2016 was the sixth consecutive year where we returned more than 100 percent of our operating earnings to shareholders while consistently investing in the business.”