Ameriprise Financial, Inc. (AMP)

Ameriprise Financial is a financial planning company spun off from American Express. The separation remains right on track with 75% of the process completed and has been able to establish the Ameriprise financial brand with its market campaign. It has organized itself into 2 operating divisions as asset accumulation and income, and protection accounting for 70% and 30% of the revenues respectively. Ameriprise has a deep-rooted advice centric model facilitated by its strong talent pool of Certified Financial Planners. These help in creating a loyal customer base, acting as a one stop financial house.

Much focus is on improving the return on equity, balance sheet optimization and risk management. Endorsing the same, consolidation of its five life insurance entities into two has freed up capital of over $120 million. In protection segment it finished as the leader in variable universal life insurance and asset accumulation products. However the management expects continuous revenue pressure from declining spread income based on declining trends relating to fixed annuity and certificate account balances for 2007.

Ameriprise sees huge growth potential in the mass affluent segment of population who mainly constitute the baby boomer nearing retirement. The strong equity environment has helped its earning growth in 2006. Though assets under management increased 14%, redemptions in RiverSource mutual funds and poor investment returns seem to be an area of concern. The firm has strengthened its distribution reach through institutional and other third party channels like banks and banks to attract fund inflows.

In spite of having an excellent distribution channel, supported by a good employee retention metrics the fund outflow, regulatory and fierce competition makes life difficult for Ameriprise and chances of double-digit growth look dim.