Executive Summary / Key Takeaways

• Ameriprise Financial's diversified and integrated business model, spanning Advice & Wealth Management, Asset Management, and Retirement & Protection Solutions, is the core driver of its consistent, profitable growth and superior shareholder returns across varied market cycles.
• Significant investments in proprietary technology, including AI-driven tools, the PracticeTech platform, and the upcoming Signature Wealth UMA, enhance advisor productivity, client experience, and operational efficiency, providing a key competitive advantage.
• Despite market volatility and specific segment outflows (particularly in Asset Management), the company demonstrated strong Q1 2025 performance with solid revenue growth, increased earnings per share, and robust capital generation, supported by growth in Advice & Wealth Management and disciplined expense management.
• Management maintains a positive outlook, projecting continued growth in key areas like bank net investment income and wrap flows, while committing to a high rate of capital return to shareholders, underpinned by a strong balance sheet and excess capital position.
• The strategic decision to retain the Long-Term Care book, following a thorough analysis, highlights management's confidence in the book's quality and performance, viewing it as additive to shareholder value given the immaturity of the risk transfer market and the desire to avoid unfavorable terms and counterparty exposure.

The Power of Integration in a Dynamic Market

Ameriprise Financial, Inc. (NYSE:AMP), a company with a 130-year legacy, has evolved into a diversified financial services leader, strategically built around the interconnected needs of its clients. At its core is a powerful integrated business model encompassing Advice & Wealth Management (AWM), Asset Management, and Retirement & Protection Solutions (RPS). This structure is not merely a collection of disparate units but a synergistic ecosystem where capabilities are leveraged across the firm. For instance, Columbia Threadneedle Investments, the Asset Management arm, manages assets for the RiverSource insurance subsidiaries and Ameriprise Bank, generating management fees while providing the benefit of professional asset management internally. This integration is a foundational element of AMP's strategy, designed to drive consistent, profitable growth and deliver value to shareholders across various economic and market environments.

The financial services landscape is intensely competitive, populated by large, diversified players like Morgan Stanley (MS), Bank of America (BAC) through Merrill Lynch, asset management giants like BlackRock (BLK), and low-cost brokerage leaders like Charles Schwab (SCHW), alongside numerous smaller firms and disruptive fintechs. Within this arena, AMP positions itself with a strong emphasis on personalized, goal-based financial advice delivered through a dedicated network of advisors. This client-centric approach, supported by significant technological investment, is a key differentiator against competitors who may focus more heavily on institutional services, transaction volumes, or purely digital interactions. While AMP may not possess the sheer scale of a Bank of America or the asset management dominance of a BlackRock, its integrated model and advisor-led distribution create a sticky client base and operational efficiencies that underpin its financial performance.

Central to AMP's competitive stance is its commitment to technological differentiation. The company has invested heavily in building an integrated ecosystem for its advisors and clients. This includes proprietary client advisory systems, a robust CRM, digital tools, and advanced data analytics and AI capabilities. These technologies are designed to enhance advisor productivity, streamline practice management, and deepen client engagement. For example, the PracticeTech platform, an award-winning technology, integrates key practice actions, making operations more efficient. The company is also preparing for the broader launch of Signature Wealth, a comprehensive Unified Managed Account (UMA) platform aimed at providing advisors and clients with a streamlined, innovative way to manage investments across different sleeves and models, including those from Columbia Threadneedle. These investments are not just about modernization; they translate into tangible benefits. Management commentary highlights improvements in advisor productivity (up 12% year-over-year in Q1 2025), high client satisfaction scores (4.9 out of 5), and excellent system availability, particularly crucial during periods of market volatility. The strategic 'so what' for investors is clear: this technological edge strengthens the competitive moat by enhancing the value proposition for both advisors and clients, contributing to higher retention and operational leverage that supports margin expansion. Ongoing R&D focuses on leveraging emerging technologies like Generative AI for further efficiencies and enhanced client servicing, though management notes that while testing is underway, significant efficiencies from Generative AI are still in early stages.

Performance Reflecting Strategic Execution

The first quarter of 2025 provided a test of AMP's resilience amidst elevated market volatility and economic uncertainty. Despite these headwinds, the company delivered a solid start to the year. Total adjusted operating net revenues increased 5% year-over-year to $4,354 million, driven by positive asset growth, flows, and higher transactional activity. Adjusted operating earnings were up 8%, resulting in a 13% increase in adjusted operating EPS to $9.50. This performance underscores the effectiveness of the integrated model, with contributions from across the business segments.

The Advice & Wealth Management segment continued to be a primary growth engine. Total client assets reached $1.0 trillion as of March 31, 2025, a 7% increase year-over-year, fueled by market appreciation and robust client net inflows of $10.3 billion in the quarter. Wrap assets grew 10% to $573 billion, with wrap flows demonstrating significant strength, increasing 34% year-over-year to $8.7 billion, representing a healthy 6% annualized flow rate. Transactional activity also remained robust, up 6% year-over-year. While total client cash balances remained elevated at $86 billion, management noted a shift from term products into money market funds and a gradual movement back into wrap and other products, presenting a future opportunity. The Ameriprise Bank, with deposits growing 7% to $22.7 billion, contributed positively to net investment income, and management anticipates continued stability and potential improvement in bank NII going forward due to proactive portfolio management and expected new product launches like CDs, HELOCs, and checking accounts in 2025. AWM's adjusted operating earnings increased 4% to $792 million, maintaining a strong margin of 28.5%. This performance highlights the segment's ability to capture growth through advisor productivity (up 12%) and client engagement, even as spread income from cash balances faced some pressure from lower average crediting rates.

The Asset Management segment, while facing industry-wide challenges for active managers and experiencing elevated net outflows of $18.3 billion in Q1 2025 (driven by institutional repositioning and a business exit), demonstrated strong operating earnings growth of 17% to $241 million. This was primarily a result of equity market appreciation and the positive impact of ongoing expense management actions, which helped offset the revenue impact of outflows. The segment achieved a very strong adjusted operating margin of 43%. Management emphasized that transformation initiatives over the past two years have significantly improved the cost base and are expected to continue benefiting results. Strategic focus remains on leveraging strong investment performance (101 four and five-star Morningstar funds) and building momentum in growth areas like active ETFs, SMAs, and model delivery to drive future flows.

Retirement & Protection Solutions continued its role as a stable contributor of earnings and free cash flow. Adjusted operating earnings increased 8% to $215 million, reflecting the benefit from stronger interest earnings and higher equity markets. Sales trends were mixed, with significant growth in traditional variable annuities (up 28%) and strong sales in VUL (up 22%), partially offset by a decrease in structured variable annuity sales (down 8%). The segment is strategically shifting its business mix away from products with living benefit guarantees, a trend expected to continue, optimizing the risk profile over time.

The Corporate Other segment, which includes closed blocks like Long Term Care (LTC) and Fixed Annuities (FA), reported an increased adjusted operating loss of $97 million in Q1 2025, primarily due to lower net investment income. Notably, management recently concluded an assessment of potential risk transfer opportunities for the LTC book. Despite external interest, the decision was made to retain the book, as management believes it is in the best interest of shareholders. They cited the immaturity of the market for stand-alone LTC risk transfer, which does not appropriately value high-quality blocks like theirs, and the desire to avoid unfavorable terms or taking on additional counterparty exposure. Management expressed confidence in the LTC book's quality and performance, noting it has performed better than expectations, continues to generate statutory earnings ($215 million over the past five years), and is expected to run off over time (over two-thirds in the next 10 years). The book has $300 million of capital, and management believes their credible experience and reserve confidence, coupled with potential upside from investment repositioning and rate increases, make retaining it the most value-accretive path.

Financial Strength and Shareholder Returns

Ameriprise maintains a robust balance sheet and strong liquidity, providing significant financial flexibility. As of March 31, 2025, the company held $7.8 billion in cash and cash equivalents (excluding CIEs and restricted cash). The parent company's estimated available liquidity in a volatile environment was $2.5 billion, including cash, liquid securities, an affiliate line of credit, and a portion of its $1.0 billion committed revolving credit facility (expiring November 2029). Access to collateralized borrowings from the FHLB ($10.4 billion estimated capacity) and the Federal Reserve ($11.4 billion estimated capacity) further enhances liquidity.

The company's strong cash flow generation (net cash provided by operating activities was $1.7 billion in Q1 2025) supports its capital return strategy. Management is committed to returning capital to shareholders at a differentiated pace, targeting approximately 80% of operating earnings. In Q1 2025, AMP returned $765 million through dividends and share repurchases. Demonstrating confidence in future cash flow and capital generation, the Board announced an 8% increase in the quarterly dividend to $1.60 per share on April 24, 2025, and authorized an additional $4.5 billion for share repurchases through June 30, 2027, supplementing the $271 million remaining under the prior authorization as of March 31, 2025. The company also actively manages its debt profile, issuing $750 million of 5.20% senior notes in February 2025 and repaying $500 million of 3.00% senior notes at maturity in April 2025.

Competitive Dynamics and Outlook

AMP operates in a competitive environment where rivals like Morgan Stanley and Bank of America's Merrill Lynch leverage vast banking networks and institutional relationships, while firms like BlackRock dominate in scale in asset management, and Charles Schwab excels in low-cost digital brokerage. AMP differentiates through its integrated model, advisor network, and technology-enhanced client experience. While competitors may have larger market shares in specific niches (e.g., BLK in ETFs, BAC in retail banking integration), AMP's focus on the affluent and mass affluent segments through personalized advice provides a strong foundation. Its proprietary technology, while perhaps not always the lowest cost per transaction compared to a Schwab, aims for higher efficiency in managing complex client portfolios and enhancing advisor productivity, contributing to AMP's superior profitability metrics (e.g., ROE consistently among the best in the industry). The competitive landscape for advisor recruiting remains active and "a bit more competitive," though AMP feels its value proposition continues to attract quality advisors.

Looking ahead, management's outlook is grounded in the expectation that the diversified model will continue to deliver resilient performance. They anticipate continued growth in AWM, driven by market appreciation, ongoing client inflows into wrap accounts, and increased transactional activity, alongside contributions from the expanding bank offerings. While Asset Management flows may remain dynamic, the focus on strategic initiatives (active ETFs, SMAs, model delivery) and expense management is expected to support margins (targeting 35-39%). RPS is projected to continue providing stable earnings and free cash flow. Consolidated G&A expenses are expected to be flatter, reflecting the benefits of transformation efforts. The commitment to returning approximately 80% of operating earnings reflects confidence in future profitability and cash flow generation. Key risks to monitor include sustained market volatility, changes in interest rates (impacting spread income and liability valuations), competitive pressures (particularly in advisor recruiting and asset management flows), and potential regulatory developments. However, AMP's proven risk management framework and strong balance sheet are positioned to mitigate these factors.

Conclusion

Ameriprise Financial's Q1 2025 results underscore the strength and resilience of its integrated business model in a challenging market. The company's strategic focus on client-centric advice, powered by significant investments in proprietary technology, continues to drive growth in its core Advice & Wealth Management segment and support strong profitability across the firm. While facing competitive pressures and navigating dynamic market conditions, particularly in Asset Management, AMP's diversified structure provides stability and consistent free cash flow generation. The decision to retain the Long-Term Care book, based on a thorough analysis of its value and the external market for risk transfer, further highlights management's disciplined approach to capital and risk management. With a strong balance sheet, a commitment to enhancing its technological capabilities, and a clear strategy for capital return, Ameriprise Financial appears well-positioned to continue delivering value to shareholders by leveraging the unique synergies of its integrated platform.