AMERIPRISE FINANCIAL INC. $44 (New York symbol AMP; Conservative Growth Portfolio, Finance sector; WSSF Rating: Average) provides financial planning, brokerage and insurance services to over 2.7 million clients through a network of roughly 12,370 advisors. It currently owns, administers or manages assets worth $428 billion.
The company was a wholly owned subsidiary of American Express Co. (see page 75) prior to September 2005. That’s when American Express handed out all of its Ameriprise shares to its own stockholders as a special tax-deferred dividend.
In the three months ended June 30, 2006, the company earned $0.57 a share from continuing operations, down 6.6% from $0.61 a year earlier. If you disregard costs related to the spin-off and other unusual items, per-share income grew 21.5%, to $0.79 from $0.65. Revenue rose 13.9%, to $2.05 billion from $1.8 billion.
Ameriprise is now narrowing its focus to its wealth management and insurance operations, which serve individual clients. It recently sold its pension fund recordkeeping business for an undisclosed amount. This business generates lower profits than its remaining operations, so the sale should improve Ameriprise’s long-term profitability.
The company is also working on improving sales of its RiverSource family of mutual funds. Assets under management for this division fell 3% in the second quarter from the first quarter of 2006. However, redemptions fell 21%. The company hopes that several new funds will help cut outflows at this division.
Ameriprise’s insurance division has teamed up with Ford Motor Company to offer car and home insurance policies to Ford car owners. These policies give customers a lower deductible, as long as a Ford dealer repairs their vehicles, so demand could be strong.
Ameriprise’s stock fell to $32 just after the spin-off, as AmEx investors sold their new shares. It climbed to $50 in April 2006, but moved down as stock markets weakened.
The company will probably earn $3.15 a share in 2006, and the stock trades at 14.0 times that figure. The $0.44 dividend yields 1.0%. However, Ameriprise’s stock will likely make little progress until stock markets improve.
Ameriprise is a hold.