Operator:

Welcome to the Q2 2024 Earnings Call. My name is Briana, and I will be your operator for today's call. [Operator Instructions] As a reminder, the conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

Jim Cracchiolo:

Good morning, everyone. As you saw in our release, Ameriprise delivered another strong quarter and first half of the year, continuing our record of delivering strong operating results over many years in operating environments. Looking at the external landscape in the quarter, markets continue to be good with the expectation that there will be a soft landing. While inflation remains sticky, people assume that it's going to come down. However, that could take longer than expected. And there is also the ongoing geopolitical instability and the upcoming U.S. election. So all of this is top of mind for our clients. With that as a backdrop, our second quarter results were excellent. In terms of our operating results, revenues were up 9% from positive business results in markets and in fact, reached a new record of $4.2 billion. Earnings were also excellent with EPS, excluding disclosed severance costs increasing 17% to $8.72. This is also a new high. We also generated free cash flow of 90% and returned another $693 million to shareholders, and our return on equity was nearly 50% and continues to be best-in-class. Our assets under management administration were $1.4 trillion, up 12% year-over-year with good client net inflows and market appreciation. We have also been adept at maintaining a significant investment agenda that is complemented by our strong reengineering discipline for reinvestment. We freed up additional resources, which is why you're seeing some additional severance costs in the quarter that we will benefit from through the year. In fact, G&A was down 2%, excluding those onetime costs. In wealth management, we're building on what we know works, quality engagement centered on advise and delivered through the Ameriprise client experience. Client satisfaction remains excellent at 4.9 out of 5 stars, and we continue to receive important industry accolades. Total client assets in wealth management was strong at $972 billion, up 17%. We're also attracting new clients in the $500,000 to $5 million range. Our most recent research underscores that our premium client value proposition continues to appeal to people who want to work with a trusted advisor and a trusted firm like Ameriprise and advise relationship. For the quarter, total client wrap assets reached $535 billion, an increase of 18%. Wrap flows also grew nicely, up 34% year-over-year to $7.5 billion, and transactional activity was also up, increasing 19% from a year ago. Cash balances though still at a higher level, are beginning to ship back to wrap and other products, which represent a future growth opportunity for us. We continue to provide exceptional support and capabilities for our advisers, both satisfaction and growth remain excellent. Productivity increased another 11% to $968,000 in the quarter. We're focused on leveraging our integrated and effective CRM engagement tools and digital capabilities for client deepening and acquisition to complement in-person interactions. We're also using automation and analytics to drive efficiency, helping advisors enhance personalization based on client needs and identifying new growth opportunities. Our advisor force grew to nearly 10,400 in the quarter. We added another 52 experienced advisers, and we feel good about our pipeline as well as our differentiated value proposition. At Ameriprise, total assets were up year-over-year, and we closed the quarter at $23 billion. Strong contributions from bank earnings drove a nice increase in net investment income. We continue to have good advisor and client interest in lending with notable growth in pledge loan volumes as our advisors engage their clients in our banking solutions. During the quarter, I've spent time with the top 10% of our advisor force at our largest recognition conference. They appreciate what we built together and that Ameriprise is not just another firm or a group of practices, but that we have a supportive and caring culture that helps them have highly successful practices. And our retirement protection businesses are consistent contributor to our positive results. As our advisors provide more advice, they're appropriately incorporating annuity insurance solutions to serve clients' complex needs. We're driving good sales in our targeted areas. For example, structured annuity sales were up 60% from a year ago, and in insurance, VUL sales were up 24%. RPS continues to add nicely to our overall earnings and free cash flow, and we continue to feel very good about our product mix and position. In asset management, clearly, the active industry remains dynamic. Our team remains focused on client needs and generate an attractive investment performance. Total assets under management increased 4% to $642 billion as market appreciation more than offset net outflows. We continue to have good investment performance across asset classes and time periods. Globally, 68% of our funds are above the median for the 3-year period on an asset-weighted basis with nearly 80% for 5 years and 90% for 10 years. We also have 114 4- and 5-star Morningstar-rated funds globally. Turning to flows. Total outflows were $4 billion, improving $1.3 billion from a year ago. Excluding the legacy insurance partner asset transfer, which came through both in retail and institutional channels. In retail, overall, we had improvement in gross sales up $1 billion from last year with a slight improvement in redemptions. Though we're in net outflows, our equity results are outpacing the industry, and we see an opportunity to gain more flows in fixed income. Institutional flows were slightly positive in the quarter, driven primarily from wins in the APAC region. And we're putting additional emphasis on models, SMAs and ETFs are beginning to gain traction. We continue to focus on transforming our global asset management business to gain greater operational efficiencies, leveraging resources and technology globally. You saw that our G&A expenses decreased 6% in the quarter, and we have a number of additional actions underway to further derive benefits throughout the year. In Asset Management, we're maintaining good fee levels and good margins. At Ameriprise, our model and overall firm has enabled us to perform very well over market and environmental cycles. We continue to leverage our global capabilities as well as steadily invest in technology, digital, analytics, AI, products and solutions across our complementary businesses. And in June, we efficiently recognized our 130th anniversary and we're one of a select number of public companies with this legacy of success and performance. Our ROE of 50% is consistently among the best. Ameriprise has been the #1 performer for TSR, among the S&P 500 Financials since our spin-off in 2005 and we continue to deliver excellent returns and returns to shareholders in a significant way. Looking forward, we have the right strategic focus, growth investments, a talented team and a meaningful opportunity to drive greater growth. Now Walter will provide additional color on our financials. Walter?

Operator:

[Operator Instructions]. Suneet Kamath from Jefferies is online with your first question.

Walter Berman:

Okay. And I guess let me start -- as you know, we operate within regulatory and fiduciary standards. I -- and therefore, we feel certainly looking at sweep in its transactional aspect of cash and motion, it's totally appropriate and aligned. I can't really comment on what is -- what's taking place with the wirehouses. I don't understand it. I really -- I think we -- all I know is what we do from that standpoint and all the actions we have taken to ensure that the money is in sweep is really for transactional purposes, and it's at the levels you know that we -- the majority of it is in under 100,000 -- account balances are under $6,000. Our rates are competitive, and we keep the appropriate level of cash that we think is necessary to operate. So that is the focus of us, and we feel very comfortable with that. And obviously, we'll evaluate things as it goes, but we -- looking at what we have today, we think it's totally appropriate.

Walter Berman:

As I remember what I said, clearly, '24 over '23, but I still believe it was slow, but yes, but the net interest income should be higher. That statement I think it's still valid.

Walter Berman:

Well, the driver is, obviously, we're investing over 6%. And so we feel that as maturities and our short duration, that it will give us that momentum. And we are adding, but we'll obviously be measured, but we're adding.

Ryan Krueger:

First one was just, can you disclose how much of your client cash is specifically held in your wrap advisory accounts?

Ryan Krueger:

Got it. Okay. Great. And then I guess another question was just on recruiting. Your experience recruits have slowed down a bit year-to-date. Can you comment on what you're seeing from a competitive environment for hiring experienced advisors? And just kind of any thoughts on why the slowdown, and your expectations for the rest of the year.

Operator:

Alex Blostein from Goldman Sachs.

Walter Berman:

So the -- if I understand, Alex, your question about -- I think our total cash is about $80 billion to $81 billion. And so therefore, in money markets and in third-party CDs is about $40-some-odd billion. And we are seeing that certainly money is still coming into, I would say -- money markets, they're probably -- money markets and -- but it's and slowed a little on the CD side. And so from that standpoint, there is -- we are seeing less in CDs and there is a shift. People are staying shorter from that standpoint as they're trying to take advantage of the yield curve. That's the trend that we're seeing about now.

Walter Berman:

Good question. We do anticipate because, obviously, from an economic standpoint, that would be beneficial to us. We've had new money go in there. And yes, as it gets redeployed, that would be beneficial, and we think that was -- certainly, will be a source of the repositioning.

Walter Berman:

On '25, I can say that we feel certainly we're -- the expenses are being well managed. And certainly, as we reposition and look at our process changes and other efficiencies that we're getting there. So I think I feel confident as we said for '24. '25, we certainly will continue. We're going to be investing in the business. So I would say you should see well-managed expenses, but we are going to be investing for growth. So I think it caught up the way you certainly have seen we've operated in prior years and certainly, especially in '24, it's -- we manage our expenses in a portion to our revenue and manage our margin.

Brennan Hawken:

Curious to drill down a little bit on the $12 billion of sweep within advisory accounts. So do you know what portion of that $12 billion would include Ameriprise as a fiduciary or investment advisor. So a little more specifically, what portion of that $12 billion would be in the employee channel and in any portfolios where Ameriprise with centrally managed or central models where Ameriprise is the advisor.

Brennan Hawken:

Great. And then you spoke to increased engagement in your banking offering. And we've heard some firms, some competitor firms of yours note that we may be seeing the beginning of improvement in pledge loan growth. So curious whether you're seeing that or perhaps even just early signs of that?

Brennan Hawken:

Okay. But no specific pickup in the pledge run yet?

Operator:

Steven Chubak with Wolfe Research is online with your next question.

Walter Berman:

So certainly, as you indicated, wrap was quite strong on the client, they were -- we saw both in certificates and annuities, some lapsing and that impacted it. And our -- we look at our growth rates, and we certainly feel that they're aligned with the industry. So from that standpoint, we are getting traction, we feel comfortable with it. And so we see that trajectory. Basically, we feel comfortable.

Steven Chubak:

That's helpful. And then just for my follow-up on the Asset Management margin, despite the pressure on fees, the operating margins continue to run above target. So certainly encouraging to see I was hoping you could speak to the margin outlook over the next few quarters, whether you believe you can sustainably run above the longer-term target of 31% to 35%, barring any negative or exogenous market shocks.

Operator:

Wilma Burdis from Raymond James is online with your next question.

Jim Cracchiolo:

So yes, we feel like -- as we continue, as you saw, there was additional severance we took in the second quarter. Part of that was in the Asset Management business. And there are continued changes that we're looking to make and improving and tightening the way we operate with our processes and efficiencies and freeing up resources and things that aren't generating the value that we need. And so we are actually pursuing those things as well, and there will be some further adjustments as we move forward.

Jim Cracchiolo:

Yes. So there's good growth in the insurance and annuities, the structured instrument and the VUL products, which are both very good products for us. And actually, the reason there wasn't more earnings for one is because when you first book that you got the distribution expense upfront that you're -- is the cost. So over time, that increase in volumes will also add to the earnings mix. We also got very good rates now as we reinvested on the investment side and the spreads there. So I think the business will be a good, strong, consistent contributor and a lot of that is free cash flow that we utilize for buyback. So we feel very good. And you also saw in the quarter, again, even in the LTC business that we had nice earnings there as we continue to make adjustments, take rate invest appropriately and invest out. So we're feeling very good about how that will add to the total of the company.

Thomas Gallagher:

Walter, just to come back, just a quick 1 on the cash sweep. Based on your answer to Suneet's question, it sounds like you aren't very focused on what the big peers are doing competitively on cash sweep crediting rates. Now to me, that just implies you probably don't really see it as a big issue for Ameriprise, either competitively, regulatory litigation-wise. Is that a fair conclusion? Or maybe you can expand a little more on that?

Jim Cracchiolo:

Yes. And Tom, as we look at it, again, we have very low balance of very low percentage and particularly in the wrap that is there. We do see the money through transactions and fees. You don't want to go where you don't have it or selling a security. At the same time, you're pulling on some of these things or clearing. So we look at institutional accounts, it's the same thing. So we're not exactly sure what the change is from the wirehouse, et cetera. But again, until we know anything different, we feel very comfortable. And from a competitive frame, the same way. I mean, this is not money. We have a lot of different places where our advisors move money to and same thing with models. And the money, if it is positional is in those other type of earning assets rather than we keep it in sweep.

Thomas Gallagher:

And you don't see any issues with the new VUL fiduciary standards related to this, nothing on that front that you're focused on? And then just for a follow-up on the RPS segment. I guess 1 thing that strikes me is your NII has been up a lot, particularly year-over-year in that segment. Even quarter-over-quarter, it's up a lot. The -- and Jim, I heard your point about distribution expenses, and that is true. I mean you could see the numbers, those are higher based on better sales. But if you would have told me a year ago that your NII would be up as much as it would, I would have thought the run rate would be a lot higher in that segment right now. So I guess my question is, what is going on with the other kind of components of your P&L in that business? Are you seeing higher mortality or disability claims? Is it the annuity earnings that have been a drag? Maybe just a little bit of perspective on kind of what's really driving the ship here because it -- for the strength in NII, it's a little surprising that we're not seeing more hitting the bottom line.

Thomas Gallagher:

That would be great.

John Barnidge:

You called out the election in your comments. Can you talk about how you're expecting that to impact operations and planning for such can imagine it can impact some asset management product demand, but do you think it has an impact on advisor recruitment or how you think about marketing expense?

John Barnidge:

My follow-up question. Can you talk about some examples of leveraging the global operational efficiencies for the Asset Management business in the way maybe you were not previously doing so?

Operator:

Michael Cyprys from Morgan Stanley is online with your next question.

Jim Cracchiolo:

Well, again, as I said, wherever you are, you have transactional activity that you want to settle and you want to -- you have to do that timely, right? But you don't want to put people on margin, you don't want to through [indiscernible] out of other securities at the wrong time. So there's always a certain low level of cash. Now what we really do is monitor and if cash is in any account at a larger level, that we really look for it to be moved. And so as you saw, as people move out of some fixed income instruments or where [indiscernible] putting further into the market, they did invest in a lot of cash instruments, money markets, CDs, various other short-term duration fixed. And so we saw that occurring in the reality of it. And actually, the sweep actually went lower rather than increase. And so that's the same thing in all of the wrap and institutional. Now within that, if there is more money sitting in that count, we don't want that cash to be a high balance even if it's invested out because that's not the purpose of the wrap account. But in so doing, if there is positional cash and they're in earning instruments, then the advisors do get paid, et cetera. But again, that's something that's monitored and we feel very comfortable with it. So as far as the future is concerned, there's always adjustments that will occur in pricing and what you would have to do to offset some of the cost of your services that we will constantly look at. But if you're asking in the near term, we feel very good about where that is right now. We're not exactly sure what some of the changes that some people are bringing in about for what reasons. So I'm not sure that was as clear as it maybe to you, but it wasn't to us.

Jim Cracchiolo:

Yes. So we mainly -- we have a small wholesaling, working with private banks, et cetera, in the region, but a lot of it is more institutional basis. And it's again, as you would imagine, some of the core products we have, both in Europe, in equities as an example, or in the U.S. and maybe even things like our fixed income, investment-grade various things like that. So we've been gaining some traction there. Same thing, a bit more that we're seeing as potential opportunities in our real estate. So those are the things that we have underway. We recently expanded a little bit in Japan. We're in Korea and places like that, Singapore, Australia. So there are different places where we are getting it mainly from larger institutions from some pension funds, some sovereign wealth, things like that.

Operator:

Welcome to the Q1 2024 Earnings Call. My name is Brianna, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, the conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

James M. Cracchiolo:

Good morning. Yesterday, Ameriprise reported good first quarter results to start the year. We're positioned well and focused on helping our clients emit a complex climate, and we’re also benefiting from our excellent capabilities across the business. Clearly, the operating environment remains dynamic. Equity markets have had strong year-over-year growth as the U.S. economy is proving resilient. However, inflation remains above the Fed’s target and therefore interest rates remain high. The economic picture is not as strong in the U.K. and EMEA. Overall, many investors are holding cash on the sidelines or in shorter duration products, which will eventually move to other investments. This means opportunity for our business with our quality goal-based advice and active solutions. With that backdrop, for our first quarter adjusted operating results, total revenue increased 11% to $4.1 billion. Earnings grew 10% to $878 million and earnings per diluted share was up 16% to $8.39, and our return on equity ex. AOCI remains outstanding at 49%. Ameriprise assets under the management administration were $1.4 trillion up 15% from a year ago driven by client net flows and equity market appreciation. In Wealth Management, we remain on our path to provide goal-based advice to more clients backed by a highly satisfied and referable experience. I've had the opportunity to speak to a number of our advisors at our first quarter field conferences. They consistently shared that our client value proposition and the level of support we provide are real differentiators both in terms of driving high client satisfaction and practice growth. Total client assets increased to $954 billion up 19%. We saw a nice increase in transactional activity up 17% in the quarter. Client inflows were good at $8.5 billion. While clients are still maintaining high cash holdings, money is starting to move into other products such as structured products, brokerage and back into wrap including in fixed income. Wrap inflows was $6.5 billion and the platform has grown to $522 billion up 20%. The bank is also an important complement. We're currently holding assets of more than $22 billion and generating very good spread revenue as we focus on deepening relationships and bringing in assets clients hold elsewhere. With $82 billion sitting in cash, we still have a significant opportunity to help clients reposition portfolios as markets settle. Our Ameriprise advisor force is one of the largest in the industry, and we've consistently delivered some of the highest growth rates. Productivity increased nicely again up 11% to $942,000 in adjusted operating net revenue per advisor. Regarding recruiting, we added 64 experienced advisors in the quarter and our pipeline looks good as we proceed through the year. As a long standing leader in advice, Ameriprise and our advisor practices are well-positioned to serve the growing consumer need for advisor force segments. We know that the mass affluent and affluent consumers want advice and that the opportunity continues to grow. From a recent study, 44% of affluent investors say they need even more advice today than in the past, and there are also greater need among the majority of younger investors. More people can benefit from what we offer. And in fact, in the quarter, we were proud to earn a Hudson Valley’s 2024 top performer in understands me and shares my values, unbiased puts my interest first and explains things in understandable terms. We also invest significantly to provide our advisors a fully integrated technology suite, which has proven to simplify processes, help deliver a great client experience and drive referrals. As we shared, we're also investing in advanced analytics that can help to drive further efficiency and opportunity. And in the quarter, we're also recognized with a Bank Insurance Securities Association Technology Innovation award for our exclusive e-meeting capability, which greatly simplifies and enhances client meeting preparation. Regarding financials, our margins and wealth management remain among the best-in-the-business at nearly 30%. Looking ahead, our planning model positions us to sustain strong margins as clients adjust portfolios to reflect equity market and interest rate dynamics. Regarding Retirement and Protection, we also saw a good increase in sales in the first quarter. We recently made product enhancements in both structured annuities and VUL and adjusted our wholesaling support to help more advisors deliver these solutions and increase efficiencies to the business. Variable annuity sales were up 32% with very strong results in structured annuities consistent with investor appetite. In the full-year since we launched our structured annuity product, it has become our top selling annuity and ranks among the top 10 in the industry. In our Insurance business, sales are also very good, increasing 8% with the majority of the sales in our higher margin accumulation variable universal life products where we added new features at the start of the year. Overall, our Retirement and Protection business consistently delivered strong earnings and profitability. By the way, in the quarter, long-term care continue to generate positive earnings of $16 million as we benefited from higher interest rates and consistent claim levels. We also continue to generate good earnings in asset management even with flows being pressured. The team delivered strong performance for clients and focused on fully leveraging our global capabilities to drive efficiencies. Total assets under management were up 7% to $652 billion. Regarding our investment performance, we continue to generate good short-term, medium-term and long-term performance across product lines. One weaker area was in fixed income due to a difficult year in 2022, but that's working through our medium-term numbers. With that said, we have good overall performance. In fact, the strength of our numbers was reflected in the most recent Barron's rankings of the Best Fund Families where Columbia Threadneedle ranked in the top 10. I'll also highlight that in a recent survey of top asset management firms by institutional investor, Columbia Threadneedle ranks sixth out of 330 asset managers for our active engagement with issuers. Though we remain in net outflows for the quarter, in retail, we did see improvement in gross sales. In North America, equity and fixed income flows improved. In EMEA, flows also improved and were in net inflows in Continental Europe given the nice pickup in equities. In the U.K., we remain pressured. In institutional, we were in outflows due to redemptions and lower fee mandates and impacts from previously announced portfolio manager changes as well as slower new fundings. We have a strong offering and are tailing into better serve client demand and drive flows. This includes expanding our model delivery in the U.S., advancing our real estate capabilities as well as further strengthening our bank loan CLO business. In asset management, we continue to drive synergies and efficiency gains, and you can see that in our normalized G&A expenses down 3%. In terms of overall asset management profitability, the North America region is performing well, while EMEA faced a bit more pressure based on market conditions. Now that we're through the integration in EMEA, we're very much focused on leveraging our capabilities globally, gaining better efficiencies while reducing expenses. For Ameriprise overall, the level of results we consistently achieve is driven by the totality of what we have here as well as our ability to invest for growth and manage expenses very well. This includes our excellent returns and earnings growth. And in terms of track records, our long-term track records are excellent. Just looking back over the last five years, I would highlight EPS as an example where we have delivered 15% compounded annual growth. Our return on equity of 49% is among the highest in the industry year-after-year. Also very significant, we consistently deliver a differentiated level of shareholder return, returned another $650 million in capital in the quarter, and we just announced another dividend increase of 10%. Overall, it was a great start to the year across many dimensions. What’s behind our results, our talented team. In the quarter, we received additional external recognition for who we are and how we work together. In fact, Forbes put Ameriprise on their Best America Large Employers 2024 ranking and Newsweek ranked us one of America’s Greatest Workplaces for Women. In closing, I would also like to highlight that in June, we will mark our 130th anniversary, which is a unique and significant milestone in any industry. Our priority has always been our clients. Also key to our longevity is our ability to innovate and evolve for the future. Ameriprise is going to continue to navigate for clients and invest in opportunities for growth, and I feel good about our ability to build on our position this year. Now, Walter will share additional detail on the quarter and some of the numbers. Walter?

Operator:

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Brennan Hawken from UBS is online with your first question. Please go ahead.

James M. Cracchiolo:

So, as you saw in the first quarter, we attracted 65 high-quality recruits into the business. I think the recruiting is a little slower in the first quarter with the markets that ran, people were staying put a little more. I do believe that the market is very competitive and some of the competitors are actually, I think, being a little more irrational in that regard. So, we’re much more focused on quality people that really think about where they need to associate. They want to build good practices, become more productive, want the support they need to do that, and those are the type of people that we’ve been focused on.

Walter S. Berman:

Okay. What we’ve seen in April, is basically a small amount going out before taxes out of sweep. We have started to see some actually shifting out of money market, third-party money markets. Again, I can’t say it’s taxes, but clearly the patterns there, sweep is stable and we’ve seen a little pattern on shifting on money market, third-party money markets.

Walter S. Berman:

Absolutely. Great. Thanks for that color.

Suneet Kamath:

Thanks. Just wanted to go back to the Wealth Management comments about the bank, net investment income rising 30%. Obviously, that’s not a number that we can pull out of your supplements, but just curious where you see that going in the balance of the year and into next year in terms of growth? I know you talked about growth this year over last year and growth next year over this year. But, can you just put some broad numbers around what you’re expecting? I wouldn’t guess it would be 30%, but just curious what you’re seeing there?

Suneet Kamath:

Got it. And then I guess on the cost savings, I mean, it seems to me like we’ve spent more time talking about that on this call and more recent calls. And, I guess what I want to get a handle on is what are you trying to -- what are you seeing on the revenue side? It would seem to me, given your history, you tend to talk a lot about cost savings when there’s revenue pressure. Obviously, we see it in asset management, but it sounds like there might be incremental pressure in other segments. I just want to get a sense of what are you responding to? Is it more than just pressure in the asset management business?

Suneet Kamath:

Got it. And, then just one comment I had just on the experienced advisor recruits. I think for many quarters, you’ve given us the number of recruits, which is helpful, but I think there’s also been a change in, like the size of the practices that you’ve been bringing on board. So, maybe at some point, if you can give us a look at over this period of time, this is how much assets came in from those recruits, I think that would be helpful.

Suneet Kamath:

Okay. Thank you.

Wilma Burdis:

Hey, good morning. Is there any pressure from clients to pass through more short-term interest rate benefits, especially as the rates could stay higher for longer?

Wilma Burdis:

Okay. Thank you. And then, can you talk a little bit about, how you guys think about acquisitions in AWM space, especially maybe for scale a little bit something a little bit larger? Just kind of curious what you’re seeing there. Thanks.

Wilma Burdis:

Yes.

Wilma Burdis:

AWM, yes.

Wilma Burdis:

Thank you.

Thomas Gallagher:

Good morning. First question is, can you provide some color on what kind of margin you’re getting on new flows, the $8.5 billion of net inflows overall to AWM? When I look at, Jim, I agree with your comment, 30% margin is certainly impressive. But just curious as you think about organic growth, what that’s going to do to margins assuming we keep the macro constant on kind of your in force earnings?

Thomas Gallagher:

And Jim, sorry, just a follow-up there. So, would you say or maybe this is for Walter, would you say the incremental margin you’re getting on new flows is above or below the 30% level? If you would just isolate it that way.

Thomas Gallagher:

Got you. That’s helpful. And, then just one follow-up. Long-term care risk transfer, Walter, I think you mentioned last quarter that you were sort of encouraged by bid spread narrowing. Can you talk about where your head is at with that? Is that something you’re actively pursuing? Would you have to bundle other risks to potentially transact on that?

Thomas Gallagher:

Okay. Thanks.

Ryan Krueger:

Hi, thanks. Good morning. My first question was just on the, can you give us some sense of your expectations for bank, not NII, but just bank asset growth in 2024, whether it be moving more from cash sweep or growing it organically?

Ryan Krueger:

Great. Thanks. And then, I guess, back to Tom’s question, just curious, to what extent are you, I guess, are you interested specifically in risk transfer with RiverSource? Or, I guess, would you consider something that’s a more broad strategic move with RiverSource rather than isolating to a risk transfer deal?

Ryan Krueger:

Great. Thank you.

Alex Blostein:

Hey, Jim, Walter, good morning. Just one for me. You guys talked about expense management and in your earlier comment, you suggested that there’s a little bit maybe of a broader effort that’s holding across the organization to focus on efficiencies, and it’s great to see G&A being held flat versus 2023. So, but I guess looking beyond ‘24, how do you think these efficiencies went back to G&A growth sort of like on a multiyear basis? Should we think of that being below the trend of what we see from the kind of the prior several years or sort of 2024 was a one-off benefit? Thanks.

Alex Blostein:

Great. Thank you.

Craig Siegenthaler:

Good morning, Jim, Walter. First one is on recruiting. So, I know you don’t disclose this before the Q, but advisor loans grew 20% last year. And, I’m wondering how you expect them to grow this year in 2024. And, also given your comments to an earlier question on recruiting, how have your transition assistance rates changed roughly over the last three years, just given intensifying competition on the advisory recruiting front?

Craig Siegenthaler:

Thanks. And, I have a follow-up on wealth manager operating efficiency. So, if you look at the ratio of distribution expenses relative to management fees and distribution expenses, sorry, distribution revenues, it sort of a payout ratio, but that ratio hit an all-time high this quarter. And, at the same time, G&A growth remained elevated at 7%, which was in-line with last year, but it’s above your mid-single-digit target for the year. I’m just wondering what drove up expenses in the first quarter and how should we think about the forward trajectory within the Wealth Management segment?

Craig Siegenthaler:

Great. Thank you, guys.

Michael Cyprys:

Hi, good morning. Thanks for taking the question. Wanted to circle back to your commentary on the large amounts of customer cash on the sidelines, I think over $80 billion overall, about $39 billion or so, and money fund balances and brokered CDs. I was hoping you could speak to some of the steps that you’re taking to help facilitate the movement of this cash into wrap accounts in terms of what can you do to make it as frictionless as possible, and what rate backdrop do we need to see for this cash to move more meaningfully, into wrap accounts? And if you look out over the next couple years, what would success be in your view in terms of capturing? What portion of this cash?

Michael Cyprys:

Great. And, just a follow-up question. I was hoping you could maybe update us on your lending solutions, including pledged assets, lines that you have for advisors and for their clients. Just curious how built out this lending offering is compared to where you’d like that to be. And, maybe you could speak to some of the steps and initiatives that you might be looking to take over the next, year or two, in order to drive greater uptake amongst the advisors and clients from the lending solutions?

James M. Cracchiolo:

Yes, we just came up with a segment of that fixed pledge as well. And so, that is also going to help grow. So yes, we’re probably still underpenetrated on the pledge side of it compared to some others that we think will be an opportunity for us.

Operator:

Your next question comes from Jeff Schmitt with William Blair. Please go ahead.

Walter S. Berman:

Yes. We certainly with Comerica, that has turns out to be a very good relationship. And yes, we have pipeline that we are certainly evaluating and we feel we do have the value proposition not to basically satisfy the clients and really provide them with the capabilities that we provide for basically planning and other aspects from that standpoint.

Jeff Schmitt:

Okay, great. And then, on client cash levels, how much is sitting with Comerica right now? And I guess do they, so they all have to transition to Ameriprise sweep options in the second half, is that right? So some of that cash could kind of either leave or go into the market or what have you?

Jeff Schmitt:

Okay, great. Thank you.

John Barnidge:

Good morning. Thank you for the opportunity. Can you maybe talk about the slowdown in institutional asset management mandates that was cited? Is the conversion rate being elongated along with fewer discussions and what are you hearing as the most common pushback? Thank you.

John Barnidge:

Thank you. And, then my follow-up question, I think there was a bit of severance in the quarter. Is that expected to impact flows prospectively at all?

John Barnidge:

Thank you.

Michael Anagnostakis:

Hey, good morning. This is Michael Anagnostakis on for Steven. I guess just a couple here on capital. BMO largely integrated at this point. How are you thinking about prioritizing excess capital deployment? And is strategic M&A something you’re looking at more closely? If so, where might you look to buy rather than build? Thanks.

Michael Anagnostakis:

Okay. Great. That’s super helpful. And, just on the buyback, so 80% payout is still the expectation. It sounds like you guys are more focused on the organic internal investment. But, given the bank’s largely built out, maybe M&A is less of a focus here and you’re generating strong cash flow, why not ramp the payout ratio back to the 90% to 100% zone that you historically ran at? Thanks.

Michael Anagnostakis:

Got it. Thank you.

Operator:

Welcome to the Fourth Quarter 2023 Earnings Call. My name is Krista, and I'll be your conference operator for today's call. [Operator Instructions]. I will now turn the call over to Alicia Charity. Alicia, you may begin.

James Cracchiolo:

Good morning, everyone. I hope that 2024 started off well for each of you. As you saw in our earnings release, Ameriprise delivered a strong fourth quarter to complete an excellent year. I'm proud of our team and what we've accomplished. We've navigated the environmental uncertainty well, supported our clients, and further demonstrated the strength of our value propositions. Regarding the operating environment. What was more positive to end 2023 and start the new year, we know there are questions regarding the continuation of economic growth, inflation and the timing of interest rate reductions. Of course, markets are unpredictable. However, at Ameriprise, our expertise is preparing both our clients and the business to be successful even in an uncertain climate. Now with that backdrop, let's move to our results. For the quarter, revenue growth continued to be robust, up 8%, reflecting good organic growth and positive markets. We again generated strong earnings growth with EPS up 10% or 14% normalized for the items referenced in our press release. And our nearly 50% ROE is consistently among the best in the industry. We also delivered excellent full year adjusted operating results. Excluding unlocking and the items we referenced, revenue was $15.4 billion, up 8%. Earnings increased 18% to $3.3 billion. And our EPS was $30.46, up another 24%. In fact, these are record results for Ameriprise, and assets under management and administration were near an all-time high at $1.4 trillion. Across the firm, we're very well positioned to help investors with our compelling client experience and complement the businesses, capabilities and talented team. With regard to some business highlights. Wealth Management delivered another strong quarter. Our efforts are centered on engaging more people in our advice-based client experience, which helps our clients achieve more of their goals and creates higher satisfaction, net flows and productivity growth. Client acquisition was up nicely in the quarter, especially in the $500,000 to $5 million client segment. Total client assets increased to a new record of $901 billion, up 19%, and client flows were approximately $23 billion. Total transactional activity picked up a bit in the quarter. However, given the environment, clients continued to maintain higher cash levels with assets and cash products growing to about $82 billion. Over time, we expect these assets will be further deployed as clients return to the markets more fully. Year after year, our adviser productivity growth is consistently among the best in the industry. In fact, it increased another 11% to a new high of $916,000 per adviser in the quarter. Our field force is highly engaged, and they value the Ameriprise culture. As to the experienced advisers we recruit. In the quarter, we brought on board 166 productive advisers, which includes the Comerica advisers who joined us. Recruits tell us that associating with Ameriprise has given them a strong client value proposition integrated technology and the leadership support they need to provide first-class service to their clients and grow their practices. Our bank continues to provide benefits and grow nicely. Bank and certificate assets increased 28% to $37 billion. We see good opportunity here to further deepen client relationships and bring in more of our client assets that they hold at other banking institutions. As you can see, our consistent focus and investment in the business is driving strong results. And we're not standing still. We continue to invest significantly to drive further efficiency and organic growth. Advisers using our integrated e-meeting capability, customer relationship platform and online adviser dashboards find that these tools enhance their ability to deliver for clients and manage their practices, as well as identify growth opportunities. We're also leveraging advanced analytics and accelerating enhancements to our mobile and digital experiences on our public and secure sites to engage more clients and prospects. I'd also highlight that Ameriprise brand awareness is strong and steady, and our growth opportunity continues to be significant. Clients and prospects across segments need meaningful contact and advice more than ever, and that's where we're concentrating. Earlier this month, I met with our field leaders to kick off the year. They are highly engaged and energized about our position and ability to build on our success in 2024. Next, in Retirement & Protection, we're driving good sales. These solutions help serve our clients' comprehensive needs and the business is consistently a strong earnings contributor. The team is focused on providing a best-in-class experience with an ease of doing business and it's resulting in better sales. Total variable annuity sales were up 15%, with good sales in our structured product. Protection sales were up 6%, driven by our higher-margin product. In addition, we just introduced new enhancements to our core product lines to help further serve our clients' evolving protection and income needs. Moving to Asset Management. We continue to serve clients in an evolving market. Assets under management grew nicely in the fourth quarter, up 9% to $637 billion driven by market appreciation and positive foreign exchange. In terms of some color on flows. Our U.S. retail mutual fund outflows were in line with the industry. Though they remained pressured, we had a bit of a pickup in gross sales and redemptions have slowed from a year ago. U.K. retail remained soft, and we're seeing some improvements in Europe. For global institutional, our outflows were elevated as we expected due to the actions we set to realign resources, including portfolio management changes. Our product capabilities are extensive and the team is concentrating on regaining sales momentum. Performance is critical to that, and we're delivering consistent competitive investment performance that reflects our research expertise. Our 3, 5 and 10-year numbers are very strong, and we saw a nice pickup in the 1-year fixed income numbers. And I highlight that we continue to have 113 4- and 5-star Morningstar rated funds in our lineup. Like other active managers, we're managing industry pressure and doing a great deal to refine our operating processes while reducing expenses globally. We're enhancing our efficiency and effectiveness while making good investments, including in data and analytics. We're focused on leveraging our performance as well as our global distribution and servicing capabilities. So for Ameriprise, it was another great year and a continuation of our significant growth over many years. In addition, we built on our record of strong financial performance, including generating one of the best ROEs in the industry. And with that, we consistently demonstrate our ability to return to shareholders. In the fourth quarter, Ameriprise returned another $587 million, and for the full year, we returned $2.5 billion to shareholders. Over the last 5 years, we returned a substantial amount to shareholders that resulted in a share count reduction of 25%. As I look at Ameriprise, we continue to be well positioned. The strong performance we achieved is underscored by the industry accolades Ameriprise consistently earns. Over the course of the year, this is the type of recognition we received. 4.9 out of 5 stars in client satisfaction from our clients. Our employee and adviser engagement ranks among the best across all industries. We have one of the highest customer trust scores in financial services. J.D. Power has awarded us for outstanding customer service experience for our adviser phone support 5 years in a row. Ameriprise is the winner in the Wealth Management category from Kiplinger. In addition, we've been recognized as a military-friendly employer in 9 years in a row and as a best place to work for disability inclusion. Finally, Ameriprise is among the Best Managed Companies of 2023 on the Wall Street Journal Management Top 250 list. For the firm overall, as we enter 130 year in the business, our foundation and business are strong. I'm immensely proud of our people, and we have a great opportunity to continue our success together in 2024. Now I'll turn things over to Walter, and then we'll take your questions.

Operator:

[Operator Instructions]. Your first question comes from the line of Brennan Hawken from UBS.

Walter Berman:

Sure. So the -- let me -- in '25, we anticipate it will still be $25 billion. Again, these are payoff from that standpoint. And when we look at it -- let me answer the question this way. From a net interest income standpoint, why we evaluate looking at various scenarios and using the forward curves, the generation in 2024 and '25 will be higher than that in 2023 because again, the rates we have been adding at are very -- rates close to 6%. And that runoff will be basically coming through. And our reinvestments, the differentials, will still allow us to have a higher net interest income in 2024 and '25. But it's $3 billion in both years.

Walter Berman:

So if we're talking about now the off balance sheet rate on a sequential basis, is that what you're referring to?

Walter Berman:

So that -- yes, we did take on a $2.5 billion for Comerica, and that will transition through over the next 6 months. And the use of that, certainly that will work towards the rate increasing. But our base rate has basically stayed the same ex-Comerica. There's been no change.

Ryan Krueger:

First, I just wanted to follow up on the comment on net interest income. In terms of 2024 and 2025 expecting to be higher than 2023, what did you -- can you give us any sense of what you assumed in terms of the forward rates when you made that comment? Was that using the forward curve, or any more color there?

Ryan Krueger:

Okay. Great. And then just in terms of the size of the bank. Can you give any color on kind of expectations for potentially moving some of the cash suite balance into the bank and how -- what you think the bank asset size could grow to over the course of '24?

Operator:

Your next question comes from the line of Alex Blostein from Goldman Sachs. Alex, please go ahead with your question.

Walter Berman:

Yes.

Walter Berman:

You're talking about where our cash sits today on...

James Cracchiolo:

Yes. So those balances are in money markets and brokerage CDs short term that will roll off. And so as they do, I think advisers will evaluate whether they put that back into the market. And if they did, I would probably say a portion of that would go back, a reasonable portion, will go back most likely into wrap type programs, imbalanced type portfolios, which would include both equities and fixed income, et cetera, alternatives. On the other side of it, there, we've seen a bit of a pickup in some transactional activity as well in the fourth quarter. So some of that will go back into transactional type activities as they look at longer duration type products as well. So again, that's really as advisers look at the market and they put money to work over time for their clients.

Walter Berman:

Yes. So obviously, we've been very proactive in managing the controllable aspect of that on the expenses, not just in AWM, even in AM, but across the board. So yes. Obviously, it will be dependent on several factors as it relates to markets or other things as it relates to margin. But with -- right, I'm not going to forecast exactly where it goes, but I think we feel comfortable that we have put in place our control of G&A at Asset Management and that we have the capability with the right set of conditions sets going on with markets. And certainly, if we as we get -- make progress on our flows, that is -- certainly can increase. But right now, we're comfortable with the current levels that we have, but we have the potential.

Steven Chubak:

So wanted to start off with just a question on the AWM margin. Just given some of your larger wirehouse peers have guided to lower wealth margins for the next few quarters, given the absence of NII tailwinds, incremental investments to sustain organic growth. You noted, Walter, that your spread revenues will be more resilient in '24. But do you believe you can sustain that north of 30% pretax margin in AWM even in the face of rate cuts in line with the forward curve?

Steven Chubak:

That's great. And just for my follow-up on capital return, the payout came in below the 80% target. Apologies if I missed this. But just wanted to get a sense as to how we should be thinking about the payout trajectory over the next few quarters, especially in light of the robust excess capital generation that we've been seeing.

Operator:

Your next question comes from the line of Suneet Kamath from Jefferies.

Walter Berman:

Well, from what you saw from basically the breakage that we took, it wasn't -- basically a proactive evaluation of the payback that we were getting. So that was a conscious decision on our part. Our expense plan has been basically evaluated on the basis of , but looking at process and how we can improve efficiency. So we feel very good about. There is some basically spillover effects as you get to managing that ultimate return, and some we will get breakage. We believe the breakage, certainly, we saw what we saw this year, there will be some but manageable -- taking place in 2024, but manageable. But again, it's a conscious decision on our part, and we feel we give them opportunities to certainly redeploy the money in other products that we have. So it's -- again, it's we are controlling what we can and we -- which is on the G&A expense, and it's through a conscious review of expense management.

James Cracchiolo:

Yes, Suneet. So it is sort of like double the amount that clients are holding usually compared to where they used to be. And again, advisers look at it with their clients and they're getting a 5-plus yield on it, just to sit tight, with unclear about the market moves, et cetera. So I do believe that over time, that money will be redeployed, but holding at higher rates right now, it's not an uncomfortable thing for clients that are advised us to keep extra cash there.

James Cracchiolo:

In fact, the money is at Ameriprise. The advisers have just put it into whether money market or brokered CDs, where there was a bigger lineup of brokered CDs before we had our bank and CDs that we'll be launching. So I think it's a -- vary. But they -- just as they did that, they put it into our own certificate program as well, and that grew nicely. It's up to $13 billion in total. So I think it was just the outlets for where to talk the cash. I think as we put more bank products in, as we develop the bank, some of that will go into our bank products. We think also there's an opportunity for us to capture more cash from our clients holding it at their banking institutions. But the money that's currently that $81 billion is at Ameriprise. And as that rolls over or opportunity the advisers to rebalance accounts, they'll put that money to work.

Thomas Gallagher:

First question, just on the layoffs in Asset Management, I think it was 12 PMs. Can you comment on the size of the AUM that they were managing, and what exactly happened there? Did you merge or close any funds? Did you replace them? Just a little more color there.

Thomas Gallagher:

And Walter, the total AUM related to the layoffs, are you able to provide that?

Thomas Gallagher:

Right. But of the -- I think it was 12 PMs that were let go, are you able to size that in the entirety?

Thomas Gallagher:

The redeployment out of corporate into the segments, I think it's around $15 million. Can you explain what happened there? Was it all NII or what happened on that reallocation of the segments?

Thomas Gallagher:

Right. Just a reallocation among segments, that makes sense. And then just final follow-up. This 90% sustainable free cash flow conversion, you returned to 80% in '23. Do you plan on stepping that back up to 90% in '24? Or should we expect it to remain closer to 80%? Do you have an idea of where...

Operator:

Your next question comes from the line of Kenneth Lee from RBC Capital Markets.

Walter Berman:

Yes. So what you saw with the $26 million severance and certainly our plans, that these are all actionable and, certainly, from our standpoint, have already been put into play. And so we are -- you should see the benefit of that materializing as -- we're basically looking at our expenses for 2024 will be flat at a minimum. And obviously, we continue to make substantial investments in the various businesses, especially in AWM. So it's -- we have pretty high confidence on this.

Walter Berman:

Yes. Listen, we have certainly observed the recent transactions, and we feel that it creates an opportunity. And from that standpoint, as we always said, we're always looking for the bid ask. And I think those bid asks are certainly coming in alignment and provides an opportunity.

Mark McLaughlin:

I believe in your opening remarks, you had mentioned you were seeing a stabilization of cash levels through January. I was just curious if you had any more color year-to-date on that. I would have expected more redeployments just from seasonality rebalancing and distributions and the like.

Mark McLaughlin:

Awesome. And then my other question had to do with retirement and protection. You guys had a pretty sizable pickup in the yield for your net investment income. I was curious if you could give us an update on any color on the investment profile of that book. Just trying to get a better idea of sensitivity to rates there.

Operator:

Your next question comes from the line of John Barnidge from Piper Sandler.

James Cracchiolo:

Yes. So what we did is we had some teams that we felt they're managing small levels of assets, and it wasn't economical for us in those areas. But we have good teams that could have assumed those assets and had good performance. So we made adjustments there. But in so doing, yes, we have reviewed our overall front office and all of the products and the portfolios and the capabilities that we have on the investment side. We feel there's a good opportunity. We always have that in the equity part of the arena. But we feel really that we do have a good fixed income and credit shop and that we think there's opportunity for us to actually get a greater fair share there as we continue to look at what the environment is. And so -- but we've evaluated that both domestically and internationally. And we're picking our pockets of where we really want to double down.

Walter Berman:

Well, we've looked at it, and candidly for us, probably not because of the most people enter into that for growth purposes, and we have a fairly large share. So probably not. It's not -- but we continue to look.

Unidentified Analyst:

This is [indiscernible] stepping in for Mike Cyprys of Morgan Stanley. Just wanted to ask a big picture question about the opportunity set for broadening out to affiliation options. We've clearly seen a lot of growth coming through the channel, in particular. I'm just curious how you guys are thinking about the opportunity to capture some of that growth.

Unidentified Analyst:

Excellent. And as a follow-up, somewhat related, can you tell us a little bit more about what tech initiatives you have in place at the moment for advisers in terms of what you're doing to help the Ameriprise platform stand out and differentiate itself in the marketplace, and particularly what you have coming over the next, say, 12 to 24 months in terms of the tech pipeline?

Operator:

Your next question comes from the line of Jeff Schmitt from William Blair.

Walter Berman:

Well, we're still staying in the maturity range of the 3.5 range. And it's right now, it's a tad under 6%.

Walter Berman:

Yes, there is an opportunity, it is high as a percentage. It's certainly a [indiscernible] and I think that's one of the reasons and certainly with the engaged arrangement, we give them the opportunity. But it's -- we do see it coming down.

Brennan Hawken:

I just wanted to double click on the NII expectation and confirm when you said that you expect NII to be up 2024 versus '23 and then '25 versus '24. Is that for all cash economics both on and off the balance sheet, or is that just a part of it?

Brennan Hawken:

All, okay. Excellent. And can you speak to cash trends you've seen in January? And what expectations for balances or betas underpin that growth because it's better than we were expecting.

Brennan Hawken:

It's for the bank. Okay, got it.

Brennan Hawken:

It was about the -- no, never mind. Because if it was about the bank, then that makes more sense because I could...

Operator:

We have no further questions in our queue at this time. This does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Operator:

Welcome to the Q3 2023 Earnings Call. My name is Chris and I will be your operator for today’s call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

Jim Cracchiolo:

Good morning and thanks for joining our call. Yesterday afternoon, Ameriprise reported strong third quarter earnings. The business continues to perform very well in a fluid and uncertain operating environment. Across the firm, we are helping clients navigate external pressures with our high-quality advice solutions and service. As you can see in our results, Ameriprise continues to benefit from the complementary strength and flexibility of our business and our talented team. Regarding the economic landscape, while inflation has come down a bit, it remains elevated, so it’s likely we will see higher interest rates for longer. Economic growth in the United States continues to hold up well even with increased rates. However, consumer sentiment in the United States is declining and we may see soft economic growth in the future. Additionally, the geopolitical climate is causing further volatility. Equity markets have been resilient and were up year-over-year but down slightly in the quarter. At the same time, many investors are holding greater levels of cash and feel comfortable earning competitive yields in cash products. Our assets under management and administration reached $1.2 trillion, up 12% and financials were also strong. We delivered record operating results in the quarter. Excluding unlocking and a regulatory accrual, total adjusted operating net revenue grew nicely, up 10% to $3.9 billion, and earnings were also quite strong, up 18% with EPS up considerably, an increase of 24%. Additionally, our return on equity was 49.9% compared to 48% a year ago. Very few firms in our industry achieved nearly a 50% ROE on an ongoing basis. Our complementary businesses consistently generate strong financial results. Let’s start with wealth management. Our advice value proposition is built for the current environment. Advisers are focused on ensuring clients are highly engaged and deepening relationships with them. Importantly, client satisfaction remains at an excellent 4.9 out of 5 stars. Total client assets increased 15% to $816 billion with good client net flows of $8.9 billion in market appreciation. We continue to attract more new clients and move up market as we grow our client base. And we know from industry research that more investors need guidance. In fact, among the fluent households, many investors in the marketplace still don’t have a formal plan to manage assets, income and expenses and retirement. As we highlighted previously, our advisers continue to hold a higher level of cash for their clients with the highest short-term yields they’re able to attain and the market uncertainty. Therefore, we continue to see a lower percentage of our assets moving into wrap with $5.4 billion in the quarter. As markets settle, we expect that money will ultimately be redeployed into wrap and other solutions. Our re-entry back into the banking business came at the right time and is very beneficial for the firm. Assets in the bank and certificate company continued to increase substantially up 37% to $35 billion. With interest rates at this level, we’re able to gain meaningful spread revenues that are sustainable when the Fed does start to cut rates. We will also be launching new products in the bank that will bring over additional client cash that they’re holding at other banking institutions. And overall, after a bit of a slowdown last year, we saw a nice increase in transactional activity up 11%. As you know, we continue to invest to put great capabilities in advisers’ hands to drive high satisfaction and growth and deliver an exceptional experience. We’re using advanced analytics to deliver an even better client and adviser experience. This includes a complete practice dashboard to enhance practice management, prepare for client meetings more efficiently, identify opportunities to grow their business and deepen their client relationships. In the quarter, we were back in the market with our successful Ameriprise brand advertising across TV, digital and social channels. We also redesigned our client website to even be more engaging, highlighting the unique benefits of working with an Ameriprise adviser. Adviser productivity increased another 10% to a new high of $901,000 per adviser in the quarter. Our adviser retention and growth are both consistently among the best in the industry. Regarding recruiting, we brought in another 64 experienced productive advisers. We had a bit of a seasonal slowdown of activity to begin the quarter but saw a nice pickup in September and we believe that we’ll return to more normal levels as we move through the rest of the year. Our reputation is an important differentiator. We recently learned that Ameriprise is being recognized for both a high level of customer trust and service. We received one of the highest customer trust index scores among financial services firms and foresters 2023 U.S. Customer Trust Index. And for the fifth consecutive year, J.D. Power has recognized Ameriprise for providing outstanding customer service experience for phone support for advisers. These awards build on the external recognition we have received over the years and are a testament to the dedication and expertise of our team. Finally, in terms of profitability, Wealth Management continues to generate strong pre-tax adjusted operating margin at more than 30% and earnings growth of 23%. Now let’s move to Retirement and Protection which is part of our wealth management solutions offering. We’re driving good sales in targeted focused areas that serve our clients’ comprehensive needs and generate good risk-adjusted returns. In our life business, we focused on variable universal life and disability products that are appropriate for this environment. Life and health sales were up nicely, increasing 22%, with the majority of sales in higher-margin accumulation VUL products. We’re also seeing positive initial results from our accelerated underwriting modeling, that’s highly automated and will drive further efficiencies as we roll it out more fully. In variable annuities, our structured product continues to attract good interest. Combined with our variable annuities without living benefits, sales were up 18% from a year ago. In the quarter, our RiverSource Retirement interactive tool which helps advisers create customized client presentations was recognized with several industry awards for innovation and ease of use. With the increase in rates, we’re able to garner improved yield in our high-quality investment portfolio. Excluding unlocking, pre-tax adjusted operating earnings were more than $200 million. Our RPS business has been highlighted as one of the most profitable in the industry. Let’s turn to Asset Management. As you saw in the quarter, assets under management were $587 billion, up 7%, it remains a challenging time, both in asset management and the active space in particular. Our flows were largely consistent with the industry. In retail, as we know, people are still hesitant to put money to work, so gross sales were a bit weaker. However, redemptions have improved and our overall flow rates in the U.S. are in line with active managers for the product disciplines we compete in. And in Europe, our flows have improved a bit from a year ago. Institutional mandates can be lumpy, but we were in net flows, excluding legacy insurance partners. We’re earning mandates in a number of areas, though LDI flows in total were down compared to a robust quarter a year ago. In regard to our investment performance, we have strong short- and long-term performance across equities, fixed income and asset allocation with a nice pickup in the short-term fixed income. And now about 70% of our asset-weighted funds were above the median for 3- and 5-year periods and more than 85% for the 10-year period. This is a positive and will help our ability to garner flows in the future. Also in the quarter, we completed one of the largest aspects of the EMEA integration, the transition to our global order management system. With that, we have now completed all of the large integration activities. We are now focused on adjusting our global operating model and expenses so we can continue to generate good margins in a tough climate. For Asset Management, adjusted operating margin was 36% and above our targeted range. G&A was down 3% adjusted for foreign exchange. We also have taken action to tightly manage expenses and we’re looking more fully across the business to continue to reduce expenses and leverage more operating efficiencies for the rest of this year and into 2024. I’d like to now come back to set the stage in the total firm. Our complementary businesses continue to give us the ability to deliver for our clients and generate very strong financial results over the years. Our capital strength and flexibility remain excellent. Our capital return to shareholders is among the highest in the industry and we have consistently generated strong financial returns over the years, including with our best-in-class ROE of approximately 50%. Ameriprise is situated very well, including with the complementary addition of the bank, which allows us to sustain the benefit from higher rates. We’re not standing still. We’re focused on areas of opportunity for growth and at the same time, we’re examining the entire expense base across the firm to further prepare, if the economic environment slows as we move into and through 2024. In closing, it’s the totality of our complementary business and the benefits that it provides back to our excellent team that enables us to consistently achieve this level of results. Now Walter will elaborate on our financials. Walter?

Operator:

Thank you. [Operator Instructions] Our first question is from Steven Chubak with Wolfe Research. Your line is open.

Jim Cracchiolo:

Okay. I’ll start. When we look at the flow rate from a client perspective, we still feel very good about the ability to bring in client flows and where we’re approaching the market, particularly as we move a bit more upmarket. As you would imagine, I mean, there are some blips and not blips depending on where you are in the season. I think people for the summer time things slowed a bit. But we don’t see that as sort of a trend line down. We see it as more of a sustainable based on what we’re doing, how advisers are engaged and how they are attracting clients and activity in the marketplace. So we still feel very good about our ability to continue on the client flow rate. As far as the Comerica – you want to mention…

Steven Chubak:

That’s great. And just for my follow-up on the Asset Management margins. As you noted, the business is facing secular headwinds and given some of the pressures, I was pleasantly surprised by the margin strength, the resiliency that we saw in the quarter. I was hoping you could just speak to your margin outlook if flow headwinds persist and whether there is additional expense flexibility to defend those margins and stay within your targeted range of 31% to 35%.

Steven Chubak:

Really helpful color. Thanks very much for taking my questions.

Alex Blostein:

Hey, guys. Good morning. Thanks for the questions as well. So first, maybe around cash in Advice & Wealth Management. It sounds like the trends in sorting continue to stabilize over the course of the quarter. So maybe just a quick update on where the balances stand relative to the $28 billion that you reported at the end of September. And I guess, more importantly, as you think about the mix, I think you have about $4 billion of balance sheet sweep deposits. Does that leave you much room to move more into the bank or the growth of the bank from this point on really should just be a function of reinvestment of securities and picking up some of that incremental yield that you spoke to earlier?

Alex Blostein:

Great. And zooming out a little bit on – given your comments around expenses and you’re early in stages of maybe doing more on the asset management side, but also managing G&A tightly across the firm. Any early thoughts on 2024 G&A growth firm wide relative to what you’re likely to do in 2023?

Alex Blostein:

And that’s a ‘24 over ‘23, correct?

Alex Blostein:

Okay, thank you.

Alex Blostein:

Got it. Appreciate it. Thanks.

Craig Siegenthaler:

Thanks. Good morning everyone. Thanks for taking the question. So, I was looking for an update on the recruiting front. Financial advisor headcount was down in the quarter. Franchise retention was lower. And the 64 new recruit count was also below the prior run rate. So, I was just wondering if you can give us an update for your expectation both recruiting and FA headcount growth over the next 12 months.

Craig Siegenthaler:

Thanks Jim. And then on the client cash balances, I was wondering if you could just share what the ROEs look like on the certificates business, compared to your core cash balances and products. And just update us on if you – what are your plans to grow this space further. I think you have to hold about 5% capital against the asset base and also, I think there is probably some value in extending CDs to third-parties. It helps to expand your brand, etcetera.

Jim Cracchiolo:

The second part you mentioned is the opportunity to bring in more external cash if I understood that correctly. And yes, we are very much focused. As we said, we initially put a savings product. We are looking at more of a preferred type of thing to bring one fashion [ph] from other – from the clients other outside banking activities. We are going to be putting in place a full checking account and then some various lending products as well. So, we will look to establish a more full-fledged banking activity, with the ability to attract more assets externally into the bank that would also help bring more assets onboard in total for the client activities for the advisors.

Craig Siegenthaler:

Thank you.

Suneet Kamath:

Thanks. Good morning. I wanted to go to that slide that talked about the $32 billion of third-party cash. I guess that piece has grown substantially. And I guess the question is, what do you think needs to happen in order for that to get deployed? Because it sounds like you are thinking some of it may go into wrap, but then you are offering these newer bank products that might move some of that third-party cash to our own products. So, maybe just give us a sense of how you think that will develop as we move forward here? Thanks.

Suneet Kamath:

And can you just provide some timing on when you are planning on rolling out some of those other banking products that you mentioned in response to an earlier question?

Suneet Kamath:

It makes sense. And then maybe just if I could sneak one more in on expenses for Walter. So, I think you said flat in 2024 relative to ‘23. When you think about the segment level, should we assume a little bit of a decline in asset management offset by some growth in Advice & Wealth Management just in terms of the moving pieces there?

Jim Cracchiolo:

Yes. And Suneet, I mean across the firm, we are going to look for that to be pretty – managed pretty tightly, okay. So, I mean I don’t have a firm number at this point in time. But as I have said, I feel good to start with about G&A flat.

Operator:

And the next question is from Tom Gallagher with Evercore. Your line is open.

Walter Berman:

Current math say, it’s marginal, I would say it’s bigger around 4 basis points or 5 basis points, but it’s the real opportunity of redeployment that will provide us certainly margin and profitability potential.

Walter Berman:

You are correct. It’s probably not much. And the answer is no, really.

Walter Berman:

I think that’s still TBD.

Walter Berman:

So, okay, over the years, we certainly have been able to demonstrate that we are managing the risk very effectively. So, any risk transfer would have to consider that and really have a very balance of bid-ask and because the portfolio is performing quite well, and as it’s indicated in the observations that you made about it. So, yes, we feel very comfortable in retaining it. But if somebody comes along with something that is certainly the best interest shareholder was considered.

Tom Gallagher:

Thanks.

Brennan Hawken:

Hi. Good morning. Thanks for taking my questions. Thanks for all the color on the cash dynamics here intra-quarter and quarter-to-date and it certainly sounds encouraging. I guess does that mean that we could get back to a period where we are looking at how to grow the sweep balances and it just becomes a function of net new assets, or is that sort of more organic growth trajectory still hindered by balance remixing? And when do you think we could get to that period? Thanks.

Jim Cracchiolo:

Yes. And again, I think if you start to see a change in the rate environment and the markets stabilize, there is money being held out and Mike Barker [ph] see using stuff that when they mature could possibly come back in. And when money is more active in investing, then they keep more in the sweep and the balances to deploy. So, there is a number of different variables. We can’t really predict that, but our cash rate that’s holding in sweep is pretty low. So, if anything, we think that if activity picks up, that could increase again.

Walter Berman:

Yes, we do. There is opportunity there, and we do see that we have opportunity to grow that.

Walter Berman:

For the reasons that you mentioned, and certainly, as we have the maturities coming in because of a short duration and other elements coming up on those factors, we certainly feel comfortable with saying yes on that point.

Operator:

The next question is from Ryan Krueger with KBW. Your line is open.

Walter Berman:

You are saying on buyback or...

Walter Berman:

I believe it’s again, it’s in the area of about $2 billion I believe, but we will confirm that with you.

Jim Cracchiolo:

Well, I would probably say, the first and foremost would be, as I have said, with the markets, I would think that more would go back to work in solutions like wrap that would have a balance of equities and fixed income and alternative stuff along those lines. I also feel like as we do roll out some of these other products that, it will go on to some internal cash as well rather than moving it out into other vehicles like a brokered CD and just based on the combination of the environment and the security of Ameriprise. So, we do feel comfortable about that as well. But I would probably say the larger opportunity would be moving back into the like solutions like wrap business.

Operator:

We have no further questions at this time. And this concludes today’s conference. Thank you for participating. You may now disconnect.

Operator:

Welcome to the Q2 2023 Earnings Call. My name is Chris, and I'll be your operator for today's call. [Operator Instructions]. As a reminder, the conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

James Cracchiolo:

Good morning, everyone, and thank you for joining today's call. As you saw in our press release, Ameriprise overall delivered a strong second quarter to round at a very good first half. Given our complement of businesses, we consistently generate good returns and strong earnings. Advice & Wealth Management continues to lead our growth where we had another quarter of solid client engagement and flows. We also saw good earnings from our bank, reflecting our ability to create a sustainable and attractive revenue stream in this interest rate environment. In our Asset Management business, we continue to experience headwinds in this environment and remain focused on adjusting appropriately. In terms of the market environment, the S&P 500 international equity markets have rallied more recently through the end of July. However, they were only up 2% year-over-year on average for the quarter. Fixed income markets remain unfavorable, particularly in Europe. While inflation has come down, it's still above the Fed's targeted rate. As we saw yesterday, the Fed increased 25 basis points and said it would continue to assess additional information in determining the extent of additional policy firming that may be appropriate to return to a 2% inflation rate. With that as a backdrop, Ameriprise continues to benefit from our diversified business mix as well as higher interest rates in our bank and certificate companies. Assets under management and administration increased nicely, up 9% to $1.3 trillion, reflecting our organic growth and positive markets. Total adjusted operating net revenue was up 10% to $3.8 billion. The combination of strong revenue growth, particularly from our spread business as well as well-managed expenses drove earnings to $807 million, up 23% with EPS up 30% to $7.44. And our return on equity was outstanding and reached a new record of 51%, a level that few financial firms have achieved. Now let's turn to business highlights. In Wealth Management, we delivered another excellent quarter as we serve clients well with gold-based device and deliver a highly satisfying experience. We continue to drive very good asset growth with total client assets up to $833 billion and total client flows of $9.4 billion, up 10% year-over-year. Our client acquisition growth was also strong, especially in the $500,000 to $5 million client range. This is an area where we consistently had good momentum, and it's a key growth opportunity for us. We're leveraging our strategic investments to help advisers engage clients and prospects provide a great client experience and run highly successful and efficient practices. Our fully integrated technology suite streamlines many of our advisers administrative tasks and frees up their time to go deeper with clients and to navigate the complexities within their financial situations. For example, we introduced an important capability that enables advisers to generate highly personalized presentations centered on client goal achievement. Since the launch, it has helped to build on our already strong client satisfaction net flows and practice growth for our advisers who are incorporating it into their practices. And it's reduced meeting prep time as much as 70%, and allows more time for client acquisition. We're also beginning to use AI and analytics to further enhance how we engage and work with clients. With AI, we can serve up real-time information to help advisers identify a possible next best opportunity for clients based on their needs. Backed by our exceptional support, adviser satisfaction, retention and growth are all excellent. Ameriprise advisers consistently have some of the highest productivity growth in the business. In the second quarter, it increased nicely again, up 7% to $874,000 per adviser. We're also incorporating the use of data and analytics in how we identify productive advisers who are a good fit to recruit to the firm and more likely to make the switch. It was another strong quarter for recruitment with the addition of 99 experienced advisers. We're consistently bringing in large, highly productive adviser practices from across the industry. In the spring, I spent time with our top 10% of advisers, both tenured at Ameriprise and more recently experienced advisers who have joined us. They repeatedly shared that our advanced capabilities and technology combined with our excellent leadership coaching and marketing support gives them a tremendous advantage in how they serve clients and run successful practices. They are very proud to affiliate with Ameriprise and energized about the direction of the company and the opportunities in front of us. During the quarter, clients remain cautious seeking yield as they continue to maintain higher balances in cash-oriented products. Cash continued to increase as clients continue to hold cash, and we ended the quarter with about $70 billion in cash and cash equivalents. Wrap assets under management increased 14% to over $450 billion, reflecting positive flows and market appreciation that occurred at the end of the quarter. The more recent increase in markets will be a benefit as we go through the quarter. For the first time since the beginning of the year, we saw signs in June that clients are starting to move some funds back into the market. which brings me to the bank, Ameriprise Bank continues to perform well with assets growing to nearly $22 billion. It's a strong complement to our business and an attractive way to gain spread revenue in this rate environment. Bank and certificate balances grew over 50% to $33 billion. The cash balances in these accounts are very rational today, and we feel comfortable with our position. We will continue to build out our banking capabilities and are in the process of introducing other savings products later this year. This will help advise us further deepen client relationships and bring in more assets from other banking institutions. With our latest research, in addition to our core client segments, we found that the Ameriprise value proposition and brand are very appealing to high net worth investors as well as millennials who are hungry for advice and seeking guidance from advisers who truly understand them and their priorities. These are market segments we're looking to serve more in the future. And this was also reinforced by the complement of external accolades and recognition we continue to earn. The way we work with clients defines Ameriprise, and I believe our reputation is a competitive advantage. During the quarter, Ameriprise was named by Kiplinger's Readers as the overall winner in the wealth management category. We earned the highest ratings for each of the 4 criteria, the trustworthiness of our advisers, the quality of financial advice provided, the likeliness to recommend the firm to others and we earned the highest rating in overall satisfaction. Ameriprise also ranked on Newsweek's Magazine 2023 most trustworthy companies in America list for the second consecutive year. And we earned top performer recognition and understands me and shares my values from Hearts & Wallets. And speaking of values, Ameriprise culture is another very important positive. Advisers who have joined us with decades in the business tell us that our company is unique and not like any other they've been part of. They're impressed by things like our supportive growth culture and their accessibility to senior leadership. Finally, in terms of profitability for Wealth Management, it was another strong quarter across the board, and that includes margin, which reached a new record of 31.2%. Moving to Retirement & Protection. We have high-quality, well risk managed books, and we're generating strong consistent earnings of 13%, driven by the repositioning of our investment portfolio last year given the rate climate. Our free cash flow and return on capital remain excellent. The team is concentrated on accumulation products that align with our clients' needs and the business. In our life business, we're focused on our variable universal life and disability products that are appropriate for this environment. Protection sales were up nicely, increasing 18% with the majority of sales in higher-margin accumulation VUL products. And in variable annuities, our structured product continues to attract strong interest combining with our variable annuities without living benefits. Sales are down from a year ago, in part due to the decision to exit guarantees. Here again, we're using intelligent document processing and robotics to make processes more efficient, things like automating our processes and underwriting decisions. We're seeing the benefit and the pickup in sales. As we discussed, we feel good about our product portfolio, both for clients and the business, which consistently delivers good returns. Moving to Asset Management. As you know, we manage the business prudently, like other active managers, we're facing reduced flows in this environment. The business continues to operate well and generates good fees, and we're adjusting for headwinds accordingly. In terms of investment performance, we continue to have excellent longer-term performance in equities, fixed income and asset allocation strategies with over 75% of our funds above the medium for the 5-year and over 85% for the 10-year period. Our 1-year performance has improved across the board. This includes some of our larger franchises, including in U.K. equities, where we're benefiting from our quality positioning and in fixed income given our strength in credit. In terms of flows, I'll start with global retail, where we continue to experience a level of outflows. In North America, we remain in net outflows, but we had nice improvement in fixed income. In fact, we are better than the industry and taxable bond. Meanwhile, we continue to see outflow pressures in equities, largely from lower gross sales as redemptions have improved. We continue to focus our adviser segmentation strategy to drive good engagement in North America. In EMEA, retail flows in both the U.K. and Continental Europe remain under pressure. However, in institutional, we were in net inflows, excluding legacy insurance partner flows as we garnered nice wins in high yield and investment-grade credit that more than offset large redemptions and LDI strategies given the market dislocation. Now I'd like to give you a brief update on our EMEA acquisition and executing the integration in Europe. I wanted you to know that it does take time due to the complexity of the legal entity structures as well as regulatory and employment considerations. We made it through a number of important steps, and we have now moved to the next level of consolidation including the colocation of our teams through our existing real estate and the near completion of some of the major technology migration work. Given the environment, we're taking a very focused look across the business globally to further reduce expenses, this includes identifying and stopping less growth-driven activities and also redeploying resources where we see opportunities to support our margin. In summary, we're controlling what we can control and making the necessary changes to adjust in this environment. Reflecting on the firm overall, Ameriprise delivered a strong first half of the year, and we're well positioned to continue to navigate and grow. Our complement of businesses provides nice contributions and synergies. We consistently generate good appropriate earnings in total and good cash flow to invest and return to shareholders at attractive levels. We returned $638 million of earnings to shareholders in the quarter, which represented nearly 80% of our earnings. In addition, as you saw, our Board approved a new $3.5 billion share repurchase authorization that reflects the strength of the business. Across the firm, we continue to make good investments in our businesses. And as always, we are sharply focused on execution. And while we manage expenses very well, we will be looking for additional expense opportunities as we move into 2024 to adjust to the environment. From a people perspective, our team is highly engaged. In fact, in the quarter, Forbes Magazine named Ameriprise one of America's best large employers. The list ranks the 500 U.S. companies most highly recommended as a top place to work. With that, I'll turn things over to Walter provide his perspective in more detail on the quarter, and then we'll take your questions.

Operator:

[Operator Instructions]. The first question is from Alex Blostein with Goldman Sachs.

James Cracchiolo:

Okay. So Alex, I think we've continued to have very good client flows quarter-to-quarter. This quarter, they were up 10% from last year. But remember, in the second quarter, you always have some adjustment because of tax payments. So if you look at even where we had some of the cash sorting in the second quarter, a significant amount was due to those tax payments coming out in April. And that also then hits your client net flows on a consistent basis like the cash. Having said that, I would say we continue to see that client flow activity being good. Our client engagement is good. But to the point you just referenced that we mentioned, consistent level has gone more into cash as a holding because of the current yield, right? Now this market has maintained itself a bit better than people expected. I think there was a surprise. Now how the market has climbed so much. Now it's starting to broaden a bit rather than just based on a few stocks. And so if that does continue, and there's a settlement in a sense of even fixed income yields feeling like they're not going to continue to rise at this point. There might be a shift back as we're beginning to see into fixed income products other than cash for a longer duration as well as in equities. And so now where does that money come from, our belief is that we've never held this amount of cash balances before, right? And so $70 billion is up to like 9% of our total assets here. And some of that will come back from those positional cash areas. Regarding the sweep per se, we all hold a certain level of cash in those accounts because of usage just like a checking account and certain things like that. So we're not thinking that a large amount or the significant amount will come back. In fact, we see the cash sorting slowing as we go into -- down through the beginning of the third quarter here. And so my belief is that it will come more from position of cash. And because of the size of the balances we're maintaining. Now I can't -- I don't have a perfect crystal ball, but when money comes back in, then more is actually held in a sweep for transactional activity that occurs. So that's really how we're thinking.

Walter Berman:

Well, in July, yes, we saw -- it has slowed the way we anticipated, we're just observing now, but we feel comfortable with the slowing that we're seeing.

James Cracchiolo:

Yes. So what we're really focused on is -- and I think if you looked at the second quarter, G&A was actually down 2%, but because of the share price appreciation and the plans, et cetera, it ended up 2%, but the underlying was actually down. And we expect that to continue. And we're taking a much more concerted effort now that we've gone through some of the major integration activities that we had to do in Europe even though that's not complete. Now we can take a more holistic view of our global expense base, which we are across all areas. And we think there is some good opportunity for us to really target for a reduction in expenses as we move forward and through 2024, and that's really our focus.

Brennan Hawken:

I'd like to start on the pending Comerica deal. So could we get an update there? Are the assets still around $18 billion? Or has that changed due to market tailwinds or otherwise? And is this base of assets similar to other bank deals that we've seen where there's more of a bias to brokerage than advisory and -- or cash allocations kind of similar to what you have in AWM.

Brennan Hawken:

Okay. So has it really changed from where...

Brennan Hawken:

Got it, perfect. Okay. And then have you -- as we start to see the sort of fluid environment and the forward look for rates and the potential for lower rates as we move into 2024. Maybe I was hoping for an update on the maturity profile of the CDs within the certificate company? And how are you thinking about managing those balances and maybe either pulling back on rate or leaning in, depending on the outlook and the idea that some of those rates and that funding would be locked in a potentially declining rate environment?

Brennan Hawken:

Yes. No, I totally appreciate that, and I hear you. I was more thinking about managing on the cost side of it.

Walter Berman:

Yes. And the spread, as I indicated, increased because, obviously, where our investments are catching up with the rate, and it's short duration is 1 year. So from that standpoint, we will adjust it both from the rate crediting rate and certainly our investments, but we feel very confident with the spread there as it's incorporated.

Walter Berman:

Yes, it certainly. We'll maintain a certain degree of spread. But obviously, just as rates go up and down.

Erik Bass:

For Asset Management, do you still think at 31% to 35% margin is the right target to think about near term? And given the expense actions you've talked about as well as the benefit from rising markets. Do you think you could get back to that level in the second half of this year?

Erik Bass:

Perfect. And then can you update us on the plans to launch a brokered CD product and any other bank products for the second half of the year and what your expectations are for the type of assets that those could attract.

Erik Bass:

And how would you sort of tier the margin expectation on that relative to the other cash products or certificates?

Walter Berman:

The margin, as we have certainly a reserve count that at search and the margin in the bank is similar. It's a little harder, but the margin is good. And then we're competitive on each one of the products as we look at the CD and obviously, the rates there are certainly being driven by regional banks and others, but we will remain competitive. But the margins there are lower as you would expect. [indiscernible].

Suneet Kamath:

Just going back to the bank for a second. So our understanding is that you'll have, I think, $1.4 billion of assets sort of maturing and rolling into new assets in the second half and then a similar amount in the first half of next year. So would it be possible to get sort of the current yields on those assets just so we can kind of think through when that reinvestment occurs, how much upside you guys would have?

Suneet Kamath:

So you're saying an incremental 40 to 50 basis points?

Suneet Kamath:

Got it. Okay. And then I guess...

Suneet Kamath:

Yes. Got it. Okay. And then I guess you're talking about this now $70 billion cash number. And I think last quarter, that was maybe $60 billion. Obviously, there's a portion of that, that you guys have kind of in that $42 billion range. So as we think about that incremental $28 billion, I know some of that's in other companies' products, but what's a reasonable expectation in terms of how much of those assets you guys think you could ultimately have in your own products?

Suneet Kamath:

Got it. And then if I could just sneak one more in. Jim, I thought your comment about high net worth and millennial opportunities sounded like it was new. Is that an opportunity something that you can attack sort of organically? Or are there capabilities that you'd need to acquire in order to capitalize on that growth opportunity?

Operator:

The next question is from Steven Chubak with Wolfe Research.

Walter Berman:

So again, from the standpoint on rate going down, we do have. Since we are now having some substantial amounts in the bank, that would give us insulation from that standpoint for the portions that would be subject to short-term of the Fed fund reductions, that -- on that basis, you can imagine it's a straight calculation for every percentage going down. So it's factored into our analysis and we've seen the cycle going up and going down, but the mathematics are -- on that basis, we have $6 billion, $7 billion sitting in -- on off balance sheet. You can do the calculation on a 1% change. As it relates to the certs, the certs really to adjust. It's a matter like on the way up, we lose them until it catches up and the way down, we'll gain. Because we'll have the investments there, and we certainly have the liquidity to cover it. So therefore, it's a positive to us on the cert side when it's going down because of the investments. And just like we've had to catch up situation now when it's been going up.

James Cracchiolo:

I would -- let me start and Walter can complement. So overall, for the firm, when we talk about G&A per se, I would say it's relative -- it's going to be relatively flat. Remember, you got merit in creating another things that are part of that, but it will be relatively flat overall based on what we're looking to do. If you think about where there may be a little more versus a little less or maybe a little more in the AWM because of the growth of that business and maybe a bit less on the asset management side, meaning that there will be expense reductions. But overall, if I look at that across the firm, including all the various groups, it will be relatively flat, absorbing the inflationary expenses that occur while we continue to make good investments in the business.

Thomas Gallagher:

First question is why did Ameriprise withdraw its application early this month to convert to a state-chartered industrial bank and a national trust bank. Have there been any changes in regulation or rules related to your current structure? Or any -- can you give some perspective on that?

Thomas Gallagher:

And Walter, do you expect there to be any changes on capital where you might have to hold more? Or is that less certain? Just any perspective on that?

Thomas Gallagher:

Got you. Next question, just can you comment on any updates on risk transfer on the RPS side? Is that still -- it sounded like you went through a more thorough process, you emerged from it saying you didn't like the pricing, yet you're seeing a lot of competitors in the life insurance space. Do further risk transfer deals so that trend continues. And it's pretty good pricing actually on some of the recent deals. So curious, if that's changed at all your perspective, whether the competitor pricing or where do you stand on overall risk transfer.

Thomas Gallagher:

But now would you say nothing's really changed on your view that there's still too wide of a bit spread relative to what you think the value of your book is versus the type of pricing that's out there.

James Cracchiolo:

Yes. I mean, we haven't gone through an in-depth of what's recently occurred and what may happen in the market. I think from our perspective right now, we have a very solid business there. We have a very low risk profile for that business, as Walter said, it's going to continue to generate roughly $200 million of PTI a quarter, $800 million for a year. Most of that is free cash flow for us. So that's how we think about it. But if there are opportunities that arise, we'll always have to entertain them.

Craig Siegenthaler:

Thanks. Good morning, everyone. So next quarter, you're going to have your annual insurance liability unlocking exercise. And last year resulted in a large negative adjustment with the bear market effect or on the variable annuity book. This year, markets are up a lot, interest rates are up a lot. So my question is, should we get a reversal on unlocking last year just given the bull market that we're in? And also, could there be a release in the long-term care block just given that interest rates are a lot higher?

Craig Siegenthaler:

Thanks, Walter. My follow-up, and I think I know your answer here, but I just kind of want to hear it anyway. You stopped some fixed annuities, you insured your book to KKR's Global Atlantic. But we've watched the all to acquire these books pretty aggressively, and now interest rates are back to healthy levels. ROEs on these portfolios are higher and the product isn't that complicated. It's really just credit quality [indiscernible]. So don't you have a competitive advantage with your large distribution channel in wealth. And you seem pretty happy with their decision. But don't higher interest rates versus the last 15-plus years, changed the calculus on the fixed annuity business, too.

Operator:

The next question is from Ryan Krueger with KBW.

Walter Berman:

That factor -- that was -- I was giving you actually the asset earning rate on that, going. And -- that was the question. That was what I was referring to. Or as that, we would just add to cost of funds for the bank as we look at the situation where it sources, which is primarily coming out of the sweep accounts.

Walter Berman:

If you look at it from that standpoint, the large bound on certificates in the bank should be comparable. And yes, we have built up. And we just -- as Jim indicated, we launched our bank certificate product. So we will certainly have that offering to people. But right now, we're not anticipating big shifts coming in, but we're certainly giving them the capability within a short product.

Jeffrey Schmitt:

I have another question on brokerage sweep rates. They appear to be pretty flat from last quarter and the deposit beta seems to have slowed for the industry. And just wondering if there's potential for you to increase your sweep rate if the Fed keeps raising interest rates? Or are competitive levels such that you may not need to raise it much anymore?

Jeffrey Schmitt:

Yes. Okay. And then just on capital return, I think it's running at 80% of operating earnings in the first half. I know in the past, you've sort of targeted 90% or at least for the full year, I mean, should we expect it to move up to that? Or is there any reason it's sort of running below that long-term target?

Operator:

We have no further questions at this time. And this concludes today's conference. Thank you for participating. You may now disconnect.

Operator:

Welcome to the Q1 2023 Earnings Call. My name is Boothe (ph) and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, the conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

James Cracchiolo:

Good morning, everyone, and thanks for joining today's call. As you saw in our release, Ameriprise had an excellent first quarter, building on a strong year in 2022. As you know, equity markets were choppy up for the quarter, but still down 9% from a year ago, and interest rates were up strongly year-over-year. However, questions around whether we'll see a hard or soft landing continues to play in the background. And the failure of certain regional banks and another large financial institution caused investor concern. To confirm, Ameriprise has no exposure to the recently affected banks. With regard to our bank, our deposit base is extremely stable, our investment portfolio is high quality with a short duration and it's all held as available for sale. In addition, all of our client cash sweep deposits in Wealth Management and the bank are FDIC or SIPC insured. As we reflect on the quarter, I'd like to reinforce some important points. Ameriprise remains strong and stable. We navigate environmental uncertainty extremely well for our clients in the business, and we demonstrated that again. Ameriprise is a diversified business with Wealth Management representing two-thirds of the firm's earnings, complemented by our Retirement & Protection Solutions and Asset Management businesses. This diversity enables us to generate strong results and multiple revenue streams across market cycles and offset pressures. We can also quickly capitalize on opportunities and deal with risk. Last and importantly, our financial foundation, risk management and expense discipline are all excellent. We're able to consistently invest in business growth across market cycles and return to shareholders at attractive levels. With that as background, I'll discuss the strong adjusted operating results we achieved in the first quarter. Revenues grew 3% to $3.7 billion, driven by double-digit growth in Advice & Wealth Management. Earnings were up nicely with pre-tax adjusted operating earnings up 20% and EPS up 25%, which is significant. And the return on equity, excluding AOCI, was 50%. Our return on equity continues to be among the best across financial services. Our assets under management and administration ended the quarter at $1.2 trillion. It's down from a year ago due to lower markets and a negative impact from foreign exchange translation, which was partially offset by our strong client flows. Let's turn to business highlights. In Advice & Wealth Management, we delivered another excellent quarter. We're bringing in strong flows as we focus on providing more advice to more clients and deepening our relationships. Client inflows continue to be robust, more than $12 billion in the quarter, up 18% and very close to an all-time high, and this builds on our record year in 2022. Both wrap flows and transactional activities were impacted due to market volatility. We expect to see a pickup in wrap and other solutions as markets and the environment settle over time. The Ameriprise client experience helps drive leading client engagement. Our advisers are supporting clients with our excellent market volatility resources and advice-based client experience. Even during this period of heightened uncertainty, client satisfaction remains very high at 4.9 out of 5 stars. Our adviser value proposition is another differentiator. Ameriprise Advisor retention is among the best, and productivity continues to grow nicely, increasing 5% to $847,000. Advisors continue to tell us that they love our technology, tools and support. For example, we're rolling out a great new capability called e-meeting that reduces adviser meeting prep time down to just a matter of minutes and generates a highly personalized professional presentation focused on client goal achievement. In addition to our legacy advisors, our experienced advisor recruits appreciate our client and advisor value propositions as well as the firm's financial strength. Another 83 experienced advisors joined us in the first quarter. The quality of the people we're bringing in continues to build in terms of practice size and productivity, and we're seeing a nice recruiting pipeline ahead. As you know, we began building the Ameriprise Financial Institutions Group channel a few years ago. Since then, we partnered with a number of quality financial institutions who want to work with a firm like Ameriprise that can provide excellent client and advisor service. In the quarter, we announced a new bank partner, Comerica Bank. This partnership will bring approximately 100 financial advisors and $18 billion in assets by the end of the year. Regarding our bank, it's growing nicely. We're adding additional deposits, have grown it to $20 billion in just a few years. It's an attractive complement to gain spread revenue in this rate environment. And we had strong growth in our certificate business with assets now close to $12 billion as well as good growth in our pledge loan business. At the end of the quarter, we launched a new savings product and we'll follow that with our home brokerage CD in May, as well as preferred savings vehicle later in the year. As we grow in the marketplace, we continue to build on our strong brand awareness. In the quarter, we launched the next phase of our advertising to further promote our referable advice value proposition and the excellent client satisfaction we consistently earn. And the Ameriprise team and I are also immensely proud to be recognized for how we operate and do business. Some of our recent awards include being ranked as one of the most trusted wealth managers by Investor's Business Daily. Ameriprise is also ranked number two in trust on Forrester's U.S. Customer Trust Index. In addition, we were named one of America's Best Customer Service companies for 2023 by Newsweek. And for the fourth consecutive year, J.D. Power's recognized Ameriprise for providing an outstanding customer service experience for our phone support for advisors. Overall, for our Wealth Management business, earnings were up strongly again, 58% year-over-year and our margin was 30.6%, a new record for Ameriprise. Turning to Retirement & Protection. We continue to perform nicely while adding value and stability in this environment. This business consistently generates good returns and strong free cash flow. We maintained solid books and our investment portfolios are high quality. With the improved interest rate environment, we're able to reposition our portfolio and as investments mature, we're able to reinvest and generate better returns. In terms of priorities, as you know, we are very much focused on asset accumulation products that align with our client needs and our risk profile, which results in a very solid liability base. Our structured annuity product is our best seller, combined with our RAVA annuities without living benefits. And in our Life business, we've shifted to concentrate on VUL and disability products that are appropriate for clients in this environment and generate strong returns. Sales are down, but we are similar to the industry. Even with slower sales, we continue to generate good earnings up 11% from a year ago. In fact, last year, our Life Company was ranked as the second highest returning company in the industry. Now let's turn to our Asset Management business. We've been impacted by market volatility and industry-wide sales pressure. However, the business continues to perform well and generated good returns and margin. Assets under management was $608 billion at the end of the first quarter, down 13% from a year ago, largely driven by lower markets and the impact of negative foreign exchange translation. Regarding flows, total outflows were $1.7 billion, excluding legacy insurance partner flows. In U.S. retail, like others in active management, we remain in net outflows as gross sales were pressured from market volatility. That said, redemptions are better sequentially. In EMEA, our flows improved a bit from a year ago. In institutional, we had another good quarter. We had inflows of $2.8 billion, excluding Legacy insurance partner flows, driven by wins and fixed income, real estate and LDI. Expanding our alternatives capability as a long-term priority, including global real estate, where we are building out the business and earned a large mandate in the quarter. With regard to investment performance, we continue to have stronger long-term performance across equities, fixed income and asset allocation strategies. While our one year numbers were impacted by market volatility, primarily in certain fixed income strategies, we're starting to see those numbers come back this year as interest rates stabilize and given our strength in credit. And we maintain 118, 4 and 5 Morningstar rated funds globally. Across regions, we're earning important recognition, including recent Lipper awards and other accolades. In addition to focusing on investment performance, we continue to work through our EMEA integration. We plan to complete much of it by the latter part of the year and look forward to deriving additional synergies. In Asset Management, we also continue to manage G&A tightly. So overall, I feel very good about the firm, how we're engaging clients and the results we're driving. We have not had to divert from our chartered costs and we're generating strong growth and returns in a rocky climate. We continue to have strong free cash flow as well as the ability to return to shareholders. In the quarter, we returned another $641 million in buyback and dividends and we just announced another dividend increase up 8%, our 19 increase since going public in 2005. To close, Ameriprise delivered an excellent quarter and we're well positioned to continue to navigate the environment, manage expenses well, while investing for growth. Now, Walter will provide further detail on our financials and we'll answer your questions after his remarks. Walter?

Operator:

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We'll take our first question this morning from Brennan Hawken of UBS. Please go ahead.

Walter Berman:

Okay. So yes, the answer is yes. What we are seeing in that -- certainly, we are looking at the way the sweep accounts have performed that we have the opportunity to shift more into the bank, and we'll be evaluating that because of -- basically, the way that it is performed right now, and that will give us additional yield as it relates to that. And also -- we also see on the search that we will -- based on timing, we will also see that the spread will increase in that. So we guess the answer is absolutely, yes, both from shifting additional funds into the bank, which has a higher profitability and also the asserts (ph) as we look at the spread increasing from a timing standpoint as we adjust. So yes, the answer is yes.

Walter Berman:

Okay. So on the first one, yes. So as we look at the [indiscernible] and certainly, in the first quarter, you always have the tax, but we -- clearly, it is performing the way we thought and is slowing, and that gives us the opportunity. We're evaluating that. But we do have additional opportunity with [indiscernible] everything we have in our sweep accounts to move more in, and that's what we're evaluating -- so that would -- is a distinct possibility.

Brennan Hawken:

Okay. Thanks for taking my questions.

Erik Bass :

Hi. Thank you. [indiscernible] broader question for advise and wealth and just how you are thinking the margin from here and do you still see potential upside to margins or is your goal more to maintain them at the current and at 30% level?

Erik Bass :

Got it. Make sense. And then maybe building on your comments about organic growth. I mean, it has accelerated. It been running at over 6% annualized the past couple of quarters and wealth management. Can you talk a little bit about what’s driven that acceleration in inflows and given the pipeline that you have and clients and advisors coming in. Do you see that as a sustainable run rate.

Operator:

Thank you. We go next now to Craig Siegenthaler at Bank of America

Walter Berman:

Yeah. So we’ve added a number of financial institutions over the last year. Now I'll comment was a bit larger so we -- it was a little bit longer to orchestrate and more comprehensive based on the nature that they had their own broker deal et cetera., but we've been winning business for other banks out there in that financial institutions. I think now we're opening it, so that we can work with a bit larger institutions like Comerica. And I think we are in a good situation. We bring a lot of good capability. They like our service. They like the ability of what we can do to support their advisors. They like the gold-based solution we provide to their clients. So this is something we think we can build upon as we move forward. So again, I can't sit here to tell you exactly when deals get orchestrated but we have a good pipeline and we think we'll be adding more business there as we move forward.

Walter Berman:

Yeah. So no, our numbers in franchisee is very strong and stable. Retention is very strong. As with anything I mean we have 7,000, so it doesn't advisors there. So you have some turnover in some of their -- assistant advisors you also have some retirements that occur in the first quarter, but there's nothing different than what we've seen in the retention rate is quite strong and the assets are here. So we're not concerned about that as we go through succession planning, et cetera. As far as the pipeline, we feel is very good. One of the things that people have told us is they value very much what we do and what we provide, but they also value the strength and the integrity of the firm and how we're positioned. I've mentioned a few accolades about how clients trust us. But when you have a very stable institution like Ameriprise, that is able to really navigate these market circumstances when I would stand-by their clients that's what advisors are looking for as well.

Operator:

Thank you. We'll go next now to Ryan Krueger of KBW.

Walter Berman:

So it's a mix of handsets as an example, advisors hold various assets that invested in the market, there is a combination of wrap type of assets, those funds, other things like that. There is insurance contracts. So it's -- and what we've been able to do is show of what we can do to help those advisors and that client deepening and expand that base and add more clients to their base for the bank. So we feel very good that the $18 billion will transfer with that. There is an opportunity for us to help them grow that and that's what they're looking to do.

Walter Berman:

We believe, actually, it will be higher based on the investment strategy and the other elements within it. So we were actually pick up the yield on that.

James Cracchiolo:

Yeah. So it would include our clients, advisors putting their clients in brokered CDs we have on the platform from financial institutions.

Operator:

We'll go next now to Alex Blostein of Goldman Sachs.

Walter Berman:

I think the best we can give you from that stand, looking at the sweep, it is totally -- it is -- the [indiscernible] is totally slowed from that standpoint. And so -- and as I indicated, we have now -- for 100,000 and under, its move, if you look at the end of the fourth quarter, it was something like 52% of the percentage of it. Now it's almost 60% of it. So basically, it's very stable at that standpoint and we feel very comfortable from that standpoint that it's performing the way we thought it would. And so on that basis, the [indiscernible] and we are growing on certs from that. And certainly, as I mentioned before, we are strongly considering transferring more back into the bank once we finish our analytics on it.

Walter Berman:

No. As I just mentioned, it's a seasonal element when you go from the fourth quarter to the first quarter because of the taxes. I can't -- I don't -- I can't give you the exact 2% or whatever, but it's certainly -- there's outflows related to that.

Walter Berman:

Yeah. So that's an interesting point because as we mentioned, we have somewhere in the area of $2.5 billion rolling off and certainly, that is going to the previous question, increase our base lease spread as it relates to it. And right now, as we assess it and certainly looking at the supply, we continue with that same strategy and mix that we will -- we currently have, which is the 3.1 year duration. So we feel very comfortable with that. And -- but that redeployment of the maturing will certainly increase the yield.

Operator:

Thank you. We go next now to Jeff Schmitt at William Blair.

Walter Berman:

The reinvestment in the bank, yes. So from that standpoint, we are -- I'm not sure I understand the question.

Walter Berman:

I just not getting your question. I'm sorry...

Jeffrey Schmitt:

Yeah. What was it in the first quarter?

Walter Berman:

The reinvestment yield in the quarter was 6%, I believe, in the first quarter, as I indicated and we're tracking at 6%. Sorry, I didn't get the question at first.

Walter Berman:

Yeah. So listen, you are seeing it certainly increase from that stand because it basically gives the clients as you get into the three and six, primarily in the three and six months. It gives them that opportunity to basically meet your objective set. So we see it still increasing there. But as Jim mentioned, we will certainly be offering the brokered products in the bank, which will certainly provide us additional yield. So I would think it will still grow and from that standpoint as -- so I think it's tracking what you see based on the alternatives that we provide to our clients.

Walter Berman:

And we've clearly seen a pattern from basically what we call the cash reserve, which is the short term. And more cash basically going into the three and six months. So people are taking advantage of that opportunity because of the competitiveness of the rates and [indiscernible].

Operator:

Thank you. We'll go next now to Suneet Kamath at Jefferies.

James Cracchiolo:

Well, Suneet, I think the way I would think about it is that that's roughly around 8% of the total assets now, which is a bit higher for our clients, right? Usually, it's around the 5% mark or something like that. So there's more cash being held right now. So I think as we go through this cycle, and people are looking for some alternatives coming from their banking institutions, et cetera., we think that we can garner some of that other cash coming in as well from bank or even as some of these CDs and other things roll over that we're holding can go into our own banking institution. But I also think over time, that some of that cash will be deployed back into wrap type programs, et cetera, as the market volatility settles or as people feel more comfortable. So it's not as though money isn't being deployed into the market, it is, right? We had over $6 billion going back into wrap in every quarter. But that could pick up as well and other transactions can pick up. So it's hard for me to say exactly, but the idea is we're helping to bring more client flows in and then some of that goes into cash type products, which we can garner our piece and then others will, over time, be deployed back in the market. So we think it's an opportunity for us.

Walter Berman:

So obviously, as Jim mentioned, the cash is up in total. And so yes, you're exactly right, we pulled into the bank. And certainly, a portion of that went into the certs. So the issue is some of that went into brokerage. But the point is we have it. It's been -- within our basic overall, it's cycling through. So I would say and we feel -- and I'm indicating again, it is clearly, as we see the pattern, that sorting is basically slowing and it is basically within a range. And the base of the fact that we have 60% in the $100,000 below and the average account balances dropped from 8,000 to 7,000 is an important factor for us as we evaluate.

Suneet Kamath:

Makes sense. And maybe just one last one on Comerica. As we think about that opportunity, should we, Walter, be expecting any incremental costs associated with that platform as we kind of move through the year?

James Cracchiolo:

Yeah. I mean you got onboarding expense and stuff and moving the clients and the advisers and stuff. But overall, we think it's a good arrangement and one that will work for both parties.

Operator:

Thank you. We go next now to Steven Chubak at Wolfe Research.

Walter Berman:

I really can't give it, but I would say it's always been a stability factor for us that portion and the working capital and the balance there. So I can't give you exact -- as I said, it just dropped from -- if you look at the previous quarter, it's dropped by 1,000. So it is -- from that standpoint, we feel very good about it. It's been a stable element within it, and it did increase a lot, certainly, as we went through the cycle coming through, and that was again in the harder balances. So I just can't give you the numbers going back that far.

Walter Berman:

I think this downside, it's a lot of variability in it as you look at rates and look at mix and you look at [indiscernible]. But certainly, the expenses are being extremely well managed from that standpoint. So that's the controllable factor in it as we look at it. And certainly, as we look at hopefully that we stop getting back on a better pattern, but we're certainly aligned with the industry where that is. And we certainly move into that 31% to 35% is basically you feel comfortable. But it's, again, a lot of variability.

Operator:

Thank you. We go next now to Tom Gallagher of Evercore.

Walter Berman:

So I can't give you an exact range, but let me be clear. The drivers of it are clearly, as we indicated, the maturity element as it relates to the bank and shifting in there. So as we get maturities on those being risk, and that's going to take the interest rate up. We certainly see [indiscernible] really slowing down on the -- the bank transfer will certainly take that up again, as we get more comfortable. The certs, looking at the timing from the standpoint where the rate is increasing, we do see an opportunity that the net spread will increase there. So I would say, certainly, it will get stable to up as we look at the elements, but please, now you have rate movements in there. You have different elements, but it's that stability factor of what is embedded today. So if everything got frozen, yes, you should feel stable to up.

Walter Berman:

We have a combination of floating rate, but we -- it is really structured and that's where we basically are and it's the highest quality. So we are being very selective there, but the yields are there, and we just -- we are patient, and that's -- but like I said, it's in the bank, especially its AAA, and we feel very comfortable, especially in this environment, sticking there. But those are the levels we are finding. We're certainly having the benefit of having CTI manage that and help us work through that. So it is strictly -- you should look at majorities in the structure.

Walter Berman:

Basically a part of AWM and that is its cost of funds, and that's why we feel comfortable with that. And certainly, as -- if rates go up and down, we will evaluate the deposit betas. But yeah, that is -- you're exactly spot on.

Walter Berman:

As the source, yes, because the source of those deposits is the spread, is coming out of the sweep.

Walter Berman:

No, I do not believe -- again, this is like any deal like you asked basically upfront and you then get the paybacks that it work through it, and we feel very comfortable with the combination. So it will, as I said, make certainly from a P&L standpoint of contribution, then we look at the cash breakeven. So we feel very good of it. As Jim said, we'll have some upfront expenses, but it's a good economic deal for both of us.

Operator:

Thank you. We go next now to John Barnidge of Piper Sandler.

James Cracchiolo:

Yeah. So if we have retail outflows, they are always of a bit higher margin than the fee rate than the institutional side. The good thing on the institutional, some of the flows we got in were real estate, which is very good fee rates. And that looks like we have a decent pipeline as well going forward. But of course, in retail is you're a bit higher fee rate. So that's where on the outflows, we're probably are net-net, a bit negative there. And so -- but hopefully, the retail will turn around. We look like Europe has actually slowed. It was almost neutral in the quarter, which is good. And if that picks up, that has positive fee rates even more than the U.S. So that would be positive for us there. But the U.S. is still a bit weaker on the growth side. But the redemptions has come down. So hopefully, we'll see a turnaround. And so I think that we see more stabilization occurring and hopefully, that will pick up as we go through the year.

Walter Berman:

So we should garner about as it relates to not realized, but certainly garner around 57% of it in that range, 50% in this year. So it's tracking and you're right, it's certainly what's going on, but we feel comfortable we're on track. Did that answer your question?

Walter Berman:

Yes. I'm talking about BMO synergies right now. If you're talking about...

Walter Berman:

Yes. So basically, as we talked about, we're talking about in the 85% range, we will have not 57%, it was $57 million, we think will probably be the number that we will certainly not realize, but certainly achieve by the end of this year.

Operator:

Thank you. We go next now to Andrew Kligerman of Credit Suisse.

Walter Berman:

I would say from looking at our direct contribution margin there is certainly within our range, and we feel very comfortable with it like I said, I distinguished the P&L and the cash but certainly from that standpoint, but the P&L side of this direct contribution is totally acceptable within as we look at this channel and it's strong. It's good. And like I said, but it's good because it's balanced between -- for them and for us and certainly what will add and the ability to grow that activity. So it's -- the contribution margins will not be denigrating to anything we have else that.

Walter Berman:

Yes. I would say, thus, we are continuing to have that track pattern of really the quality of the AUM and the GDC, the trailing GDC is stronger, and we keep on growing that. So we feel very good about that. We're being very selective to ensure that they fit into basically our relationship and approach that we have. And so it's very much aligned on that. So it's -- we feel very good about the quality of them.

Walter Berman:

I would tell you, it continues to be better than our average.

Walter Berman:

So as we said, we talked about -- from our standpoint, we are building organically, and yes, there’s capital, but we have the capacity, and we feel that the -- we’ve given an indication that it will be in that 80% range. But we really had the ability to -- as we look at opportunistically to basically take it up. But we just -- we will evaluate the market and everything from that standpoint, but the 80% is a reasonable number at this stage, as we’ve indicated. And most people have built that into their projection set.

Operator:

Thank you. And we have no further questions at this time. Ladies and gentlemen, this will conclude today's conference. Thank you for participating. You may now disconnect.

Operator:

Welcome to the Q4 2022 Ameriprise Financial, Inc. Earnings Conference Call. My name is Dennis, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

James Cracchiolo:

Good morning, everyone, and thanks for joining our fourth quarter earnings call. As you saw in our release, Ameriprise delivered a strong fourth quarter, completing an excellent year in 2022. We continue to navigate uncertainty and serve our clients exceptionally well. I'll give you an update on the business, and then Walter will discuss our financials. Let me start with the market environment. Equity markets were down 19% year-over-year, with the average equity markets down 3% sequentially. So far this year, we're starting to see markets rebound to some extent as inflation eases, However, inflation is still at a high level. The question is, will the Fed have to continue to raise rates a bit more? Or will they maintain higher rates for longer if inflation remains stickier? With that backdrop, Ameriprise continues to be in a strong position. Revenues were good at $3.6 billion, only down 2% from a year-ago relating to the impact of the equity and fixed income markets. Earnings were up nicely with EPS up 13% for the quarter and 11% for the year, both on new records, and ROE continued to be excellent among the best in the industry. Importantly, we're also managing expenses well with total expenses down 5% compared to a year-ago. Assets Under Management and Administration were down to $1.2 trillion largely driven by the steep decline in equity markets, lower fixed income markets and a difficult foreign currency translation and Asset Management. As in previous quarters, our combination of businesses generates a consistent level of free cash flow and good returns across market cycles. We're able to consistently invest in the business, which is strengthening our competitive position and our ability to deliver differentiated results. Now I'll talk more about our businesses. In Advice & Wealth Management, we continue to deliver very strong results and build on our leadership positions. We had good client flows in the quarter as clients remained engaged working closely with their advisors and benefiting from our comprehensive advice and solutions. Total client flows for the quarter were more than $12 billion, which is very strong, and in fact, the second highest quarter we had and just below our record fourth quarter last year. And I'll highlight that client flows were a record for the year at nearly $43 billion. With the investment climate this year, we've seen an even split into the mix of flows into advisory and non-advisory accounts, which is appropriate in this environment. We're maintaining an appropriate level of cash balances with good growth in our certificate business and the Ameriprise Bank, which is a key growth area for us. With regard to the bank, we've been consistently investing to expand our capabilities. The bank provides important flexibility in this interest rate environment and enables us to further engage and deepen our relationships with clients. Our bank has grown more than 50% this year to nearly $19 billion. We have good growth in our pledged loan business, and we're on track to launch more deposit and lending-based products this year. Our certificate company has also grown to nearly $10 billion, up $4 billion for the year. Clearly, 2022 was a very challenging year for investors to navigate the market volatility. That's why our high level of engagement and advice is so important. Clients highlight the positive experience they're having with Ameriprise and our advisors. And that satisfaction leads to a strong level of trust, which we're being recognized for. And just recently, we ranked #2 for trust in 2022 in Forrester's new Financial Services Customer Trust Index, and that complements our Newsweek rating as one of America's most trusted companies last year. Let's look at advisor productivity, which also remained strong, up 4% to nearly $830,000 per advisors in a challenging market environment. One of the reasons our advisors are so productive as the level of support and tools we provide, we're making important investments, including our branding, marketing and integrated technology. We're helping advisors engage clients really well in driving growth in their practices. And for the fourth consecutive year, Ameriprise was recognized by J.D. Power for providing outstanding customer service experience for phone support for advisors. Turning to recruiting. We had another good quarter with 72 highly productive advisors joining the firm. advisors are attracted to our value proposition and the strength and stability of the firm, and the pipeline looks good. So overall, we are consistently investing in the business, including the bank, which is helping to drive organic growth and continue to generate strong results. Advice & Wealth Management continue to drive the firm's results with earnings up 41% year-over-year. Now let's turn to Retirement & Protection Solutions, where earnings were up 25% in the quarter due to the improved rate environment and our ability to invest out. As part of our strategy, we focused on products that meet our risk tolerances. Overall, sales were down consistent with the industry. We're very much focused on variable annuities without living benefits, our structured products of variable universal life and DI products given our move away from fixed products. This business is very stable and delivers a very good cash flow and returns. I'd note that RiverSource was recently ranked as one of the most profitable life insurers. Now I'll cover Asset Management. 2022 was a tough year when navigating the volatility as we focused on our clients and execute our strategic priorities. Similar to the industry, our Asset Management business faced significant headwinds due to markets depreciating in the U.S. and globally, which pressured earnings. Equity markets were down 19%. With this, assets under management were down 23% to $584 billion, driven by market declines as well as a negative FX impact. Overall flows in the quarter were $0.4 billion out that included $1.7 billion of legacy insurance partner outflows. In retail, overall, we were in net outflows of $3.7 billion, including reinvested dividends, which were driven by the weak market conditions that both pressured gross sales and increased redemptions. In addition, in the U.S., we believe there was a heightened level of tax loss selling in December. Turning to Global Institutional, we were in net inflows of $5 billion, excluding legacy insurance partners with some nice wins in LDI strategies. With regard to investment performance, we continue to have solid three, five and 10-year numbers. However, we have weakness in one year's numbers given market volatility. In Asset Management, we are maintaining our expense discipline while continuing to invest in long-term priorities. They include our investment research, alternatives, responsible investment, globalizing our operations and BMO integration, which is on track. We have a strong lineup of products and capabilities, a clear focus on serving our clients. And as the environment improves, we will be well situated. Overall, Ameriprise is in a position of strength entering 2023, and we're very much focused on engaging our clients and continuing to execute well in this environment. And with the strength and diversification of our business, including the growth of the bank, we continue to be able to invest across the firm, while continuing to return capital to shareholders at a differentiated level. In the fourth quarter alone, we returned $610 million to shareholders. I'll turn it over to Walter, and then we'll take your questions.

Operator:

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question is from the line of Brennan Hawken with UBS. Please go ahead.

Walter Berman:

Yes. This is Walter. So the answer is yes you should, with our CGs, continue to see that sort of trend line. And certainly -- and you'll see in our bank, we are going to develop new products with and have them coming out in 2020, which will also enhance the capabilities for our advisors and their clients to certainly navigate this situation on interest rates and giving them choice. And from a deposit beta standpoint, looking on sweep, we are certainly -- we are up. We are certainly being competitive from that standpoint. But we are offering a wide choice, and we see good significant opportunities as we move forward.

James Cracchiolo:

So this is Jim. We are very much focused on continuing really around having the advisors engage with the client through this market cycle and really providing the advice they need. Part of the journey really is how do you think about achieving your goals over time, not just based on a quarter or the market situation in the current time. And so that engagement and the tools and capabilities that we provided to help them do that, I think is paying really good dividends. And so as you saw last year, we had a record amount of client inflows for the full-year. And the fourth quarter was really strong at $12 billion. It's actually the second highest quarter we had. The highest was actually fourth quarter of last year, and that was only $0.5 billion more. So we want to continue that journey around that advice value proposition and the engagement and helping the advisors really do that more consistently over time.

Operator:

Your next question is from the line of Steven Chubak with Wolfe Research. Please go ahead.

Walter Berman:

Sure. So it's Walter. What we achieved in the fourth quarter, we certainly see as sustainable and as it relates to 2023. And certainly the cash side of it is contributing to that, but we're also having strong productivity and growth in our basically core activities. There is a shift and going with us going to basically the bank generating the earnings and certificates joining. So if the Fed does pause, we think we are well positioned with the sustainability of that profitability that is now basically has a duration play that will take it over multiple years. So we feel comfortable. Obviously, it will have some impact. We have to evaluate as it looks not just what the Fed is doing in the short end, but what happens on the long end, but we feel we're in an excellent position as we grow those two activities to ensure that sustainability and profitability.

Walter Berman:

Yes, so we certainly started the investments, and we weren't completed in the fourth quarter. We still have some ways, a little ways to go in first quarter. But yes, we will see that probably what you're estimating the run rate that we talked about, the $180 million, but it's probably with that improvement that's taking place with the yield. There's always areas going in and out. But I'm comfortable with I've seen people being in the $200 million range, but it's over a one-year cycle. So I would say more like the $800 million range for the year.

Operator:

Your next question is from the line of Suneet Kamath with Jefferies. Please go ahead.

Walter Berman:

Are you saying certificates on bank or yes. Okay. Clearly, the bank has a higher margin than the certificates. And that's where certainly we're concentrating our growth, but we are getting very strong results, and we have very good margins in the CD business. And so the answer is, we feel we have the capacity to grow those two. And it is going to take a larger and larger percentage of the profitability that's being generated. Certainly, we will be generating good earnings in the sweep activity, but the real growth potential is coming in a primary bank, and we will get a lift in CDs. But the margin is better in the bank versus the CDs because of different investment strategies and liquidity strategies.

Walter Berman:

No, I don't have it, but I'm just telling you, it is better at the bank, and we can take a look at that and see if we can give more insight onto that.

Walter Berman:

Yes. So the short answer is yes. We will be continuing it. It's obviously a matter of equity and cash closing. And it is considering and we have the capacity to do that. And it's really, from our standpoint, it is giving us very good returns.

Walter Berman:

Yes, possibly. Listen, for the longest time, we've kept short direction case where the third year was. And now we're taking advantage and both in LTC and with the protection. So we are lengthening out duration, but it's we're running the business from that standpoint, and you can see we're garnering good profitability, both on the claims side as we demonstrated in the fourth quarter and certainly now with the investment capabilities that it's providing us. So no, if something comes along, that's great, we'll take a look. But right now, we're managing it and we're taking advantage of the opportunity that's there.

Operator:

Your next question is from the line of Erik Bass with Autonomous Research. Please go ahead.

Walter Berman:

It's an interesting situation at this stage because of the dislocation is taking course, especially as you look at the equity markets, you look at the fixed income, depreciation and foreign exchange. So -- but there's a lot of actions that we're taking. I'm managing through, but it's -- the margins are -- from that standpoint is deleveraging, just like the industry is. But I would say that at this point, as we look at it, it's heavily dependent on certainly things we don't control. But the things we do control, like you mentioned, BMO synergies and other things of that nature, we are on track. So we feel comfortable from that standpoint. So I think there's a lot of variables now, but we are certainly cognizant that the margins breach through, but that's related to a lot of market activity that we are now managing.

Erik Bass:

Got it. And then maybe moving to capital management. I think for the full-year, you returned about 85% of earnings to shareholders in the fourth quarter, the percentage was a little bit lower. So should we still think about 90% being the right target? Or has this come down at all given the capital being allocated to the bank and/or the uncertain macro outlook?

James Cracchiolo:

So as we look at it, we've been one of the highest returning companies out there in capital and even last year was very strong. So as we look forward, we have flexibility. But as Walter said, we're continuing to grow the bank, which is going to require some additional capital, but the returns are strong as well as our certificate company, which are all good uses of capital. In the past years, we have freed up capital. We used some of that to purchase the BMO as well as now growing the bank tremendously. So we think that we're going to generate continuing good free cash flow that we will return to shareholders. But as far as the percentage and rate will depend on how we utilize that both our core investments in the business, as we said, as well as return to shareholders. So it is coming down from where it was because of those other growth opportunities, but will still be a strong return. So I'd leave it at that at this point in time.

Operator:

Your next question is from the line of Tom Gallagher with Evercore ISI. Please go ahead.

Walter Berman:

No, [indiscernible] with that. That does not contemplate LDTI. We're still evaluating that. And from that standpoint, so it does not. And we'll obviously settle on the approach that we're going to take before the quarter. As it relates to the -- why it's lower, again, we're on part of that profitability improvement was lower sales. And so we're looking at activities as it relates to that. And so that gives a positive PTI in that situation, plus there was some anomalies as you basically look at what the changes and the huge change in equity markets and other things that took place, it gave a lift on SOP, so from that standpoint, we're -- I'm just saying we're comfortable with the -- what you guys are indicating in that $800 million range for the year, and we'll continue that when we're getting that lift. There's no question about it for the investments that we repositioned.

Walter Berman:

No, it's the continuation of the volume of it. But actually, at this stage, since that point, certainly since we're still investing, the spread has come down from that, but we still feel very confident in the ability to generate whether just on the $800 million for the year.

James Cracchiolo:

Yes. So Erik, I think as we -- Tom, as we look at the business, okay, we've had a bit slower flows into wrap but still good flows, but you also had the depreciation of the markets, which impact the wrap overall fees for the firm. And so I don't feel that, that's permanent. As I said, we also had some transaction volume being down on the commission side. So I would probably say, if markets settle as they are, you'll continue to see part of that going back into the wrap programs. You'll also -- depending on what happens with market, you may see some appreciation of that, which really was a negative in the last few quarters. And regarding the brokerage activities, we will hopefully see some pickup in the commission side based on getting back into some of the contracts that people have again been more conservative investing in right now. So I can't really like piece together exactly what that shift is. But I would probably say there's a bunch of dynamics occurring over the last few quarters in that regard.

Operator:

Your next question is from the line of Craig Siegenthaler with Bank of America.

Walter Berman:

Okay. So let me answer that. The answer is back about a couple of months ago, there was certainly -- you couldn't give deposits way. Now clearly, at this basis, there is more demand, but we are evaluating what is really -- from our standpoint, what is the appropriate balance for balancing cash and bringing it back on balance sheet. So we have a very good relationship. We've been doing this for multiple years through promontory, not promontory [indiscernible]. So our relationship banks, when we do have a combination and laddering of long and short. So there -- we are assessing it, but it's a good situation from our standpoint, both from the demand from coming on the suite and our capacity to bring more back on to balance sheet and the fact we are still attracting good balances in.

Walter Berman:

Into the [indiscernible]. We have -- are very cognizant trying to give our clients the capabilities there. So that trend has been going and been evaluating as the Fed makes it ships and other things and alternatives. So you're seeing that. And yes, we will continue to do that. But the important thing is we're also building that capability very shortly into the bank, which also gives a different set of alternatives for them to really look at their laddering as I mentioned. So you're just adjusting and certainly having the product capability and the capabilities to grow either our balance sheet, our balance sheet and on balance sheet in the bank and insert.

Operator:

Your next question is from the line of Alex Blostein with Goldman Sachs. Please go ahead.

Walter Berman:

Okay. So yes, we have about $3 billion maturing during the year. So right now, we are thinking in the range that will be 200 to 300 basis points, so we'll pick up from it. I don't have the exact, but I'll have stepping to get back, but we will pick up reasonably good spread from what's maturing versus what we can invest at.

Walter Berman:

Yes. Listen, we manage -- I think we've always managed, we're very disciplined in managing our expenses to ensure that we are investing for growth. At the same time, analyzing the margin capabilities as it relates to it. So we will remain disciplined as we go and we look at shifting and where that is from that standard and getting the efficiencies that we are constantly evaluating. So I would say the ranges you've seen is the ranges that we believe will certainly be sustainable, but it's situationally driven as we manage our expenses very tightly.

Operator:

Your next question is from the line of Jeff Schmitt with William Blair. Please go ahead.

James Cracchiolo:

Yes. So over the course of the year, as you would imagine, and started last year, you would have a higher level of cash from clients as they move things to the sideline or et cetera, that put it fully back in the market or even in fixed income. And so went into money markets, went into broken CDs, went into other short-duration products, just like we have the cash here going into some of our certificates. The amount of cash we're holding pretty much on transactional is pretty at the consistent levels. It's not where that has built up tremendously. We just had more client flows coming in and that just as a percentage. And then we got a piece of that into our own certificate program as an example. And now when we actually launch some of the preferred savings and deferred deposit programs within the bank, we'll start to capture even a bit more, hopefully, of that. But new cash has come in, and that has raised our levels overall, but there's been sorting all through this going into those other instruments as well. As our advisors look at what that balances, what's positional versus transactional. So that's why we feel like those levels are pretty consistent because things have already sorted as through the year.

James Cracchiolo:

Well, in our case, as I said, I think if you look at certificates, which is actually investing out a bit, and you just look at the amount in our cash sweep products, et cetera, you're actually less than 5%. And so that's consistent with our history based on the level that clients keep for both emergency and transactional activity. So I -- that's why I said, I think money has already been in all these different positional areas to garner a level of interest that the clients want with the advisors. So I actually feel comfortable. Now some of that, I think, will go back when they feel comfortable putting more back into RAP and investment programs as well or longer duration products in the fixed income market.

Walter Berman:

Well, the majority isn't fixed. But and like I said, it's in structured. The majority of construction, high AA rated and certainly at the highest levels of the security ladder.

Operator:

Your next question is from the line of John Barnidge with Piper Sandler. Please go ahead.

Walter Berman:

Sure. So yes, in the quarter, we had a combination of basically, as you indicated, a strong continued claims performance, along with basically the effects of our benefit programs and basically a premium increases. And -- but there was this one-time catch-up because a vendor did get behind. But that was not -- that was about half of it, but we are seeing good trends as it relates to the claims. And it's typical to forecast, but we think we have all the foundational elements in there. It's been within our expectations for multiple years. And so we are feeling that comfortable where it is, and we do again get the continued benefits of the programs that we have in place to basically contain and manage that effectively.

John Barnidge:

That's very helpful. Thank you. And then my follow-up question. There's been lots of G&A restraint across the franchise this year. But is there an optionality for Asset Management expense reductions, given the lower AUM. There were some other reductions that asset managers announced this morning.

John Barnidge:

Thank you.

Andrew Kligerman:

Hey, good morning Jim and Walter. Question about the advisors. You added 72 this quarter. Good, but a little light of where you were. I'm kind of curious as to your pipeline and how you see that playing out in terms of adding new experienced advisors.

Andrew Kligerman:

Got it. And then just thinking about the insurance subs RPS. Equity -- in terms of dividending capital to the parent company, the equity markets are sort of a headwind, but then you're doing this tremendous repositioning on the investment portfolio. Could you talk a little bit about expectations for dividending capital up apparently in '23?

Andrew Kligerman:

Awesome. Can I sneak one last one. Just on M&A, last quarter, you seem to think that you were going to kind of maintain the status quo in terms of divesting of blocks. Any change in that?

Andrew Kligerman:

Awesome. Thanks.

Ryan Krueger:

Hi, thanks. Good morning. I think we've often seen some level of seasonality with cash balances within AWM to come down some sequentially from the fourth quarter to the first quarter. Is that something you would expect to occur in this year.

Ryan Krueger:

Okay. Got it. And then just -- I know there was a question on overall G&A expenses. Perhaps AWM is a little bit -- you have maybe more insight into the outlook there, given the backdrop from an earnings standpoint. Can you give any sense of your expectation for growth in AWM, G&A expenses in '23?

Ryan Krueger:

Okay. Thank you.

Operator:

We have no further questions at this time. This concludes today's conference. Thank you all for participating. You may now disconnect.

Operator:

Welcome to the Third Quarter 2022 Earnings Call. My name is Lisa, and I will be your operator for today's call. At this, all participants are in a listen-only mode. [Operator Instructions] As a reminder this conference is being recorded. I would now turn the call over to Alicia Charity. You may begin.

Jim Cracchiolo:

Good morning and welcome to our third quarter earnings call. What I'd like to do is give you my perspective on the environment and how Ameriprise is performing. Then Walter will cover the financials. In terms of the market environment both equity and fixed income markets continued to decline in the third quarter both here and in Europe. Inflation remains high and sticky and geopolitical risk is elevated. This is causing a high level of volatility keeping investors on the sidelines a bit more. With that short-term interest rates were up 300 basis points so far this year with 150 basis points raised just in the third quarter. I believe that the Fed and other central banks have been playing catch up, and that they will have to continue in increasing rates to get inflation under control. Having said that, it will lead to a slowing of the US and European economies and at this juncture, it looks more like we're heading for a mild recession. Therefore, I expect there will be more volatility ahead. So for Ameriprise the diversity and strength are our business allows us to deliver good outcomes even in challenging times. And you certainly saw that in our results this quarter. We continue to remain in strong client inflows and wealth management and the rise in interest rates, the growth of the bank and the stability of the retirement protection businesses helped to more than offset the effect of depreciating markets and foreign exchange that impacted our asset management business. The investments we made in our business over the years in our technology, client service, product solutions and advice value proposition are paying dividends as we continue our strong focus on our clients and helping our advisors navigate a difficult environment. Now I like to discuss our third quarter results in more detail. Total assets under management administration were $1.1 trillion, which is down 9% from a year ago, assets were impacted by the steep decline in both equity and fixed income markets and the strength of the dollar, which affected the foreign exchange rate and our European business. In terms of adjusted operating financials excluding unlocking revenues were $3.5 billion up 1%. With that earnings per share were up 9% to $6.43. And the return on equity was strong at 47.9%, which is consistent with this time last year. Now let's talk a bit more about our businesses. Our stock with advice and wealth management where we continue to deliver strong results. Despite the environment we had good client flows as clients remained engaged. Total client flows were up 11% in the quarter to more than $11 billion. The mix about flows reflect the environment we're in. We saw strong growth and brokerage cash, certificates and other products. As we expected cash balances continued to be up sharply to more than $46 billion, compared to more than $40 billion just a year ago. We're seeing good growth across our cash offerings. Very importantly, our advisor productivity remained strong as we continue to reinforce a personal relationship in the value of advice. It was up 7% to $819,000 per advisor. We recently met with our top advisors to recognize their success and discuss growth opportunities at Ameriprise. Engagement was terrific, advisors are highly satisfied with the firm and the support we provide. And they liked the technology and the capabilities we've added which is helping them grow. Which brings me to recruiting. We had another very good quarter adding 89 highly productive advisors. Advisor consistently tell us they recognize the strength of our value proposition, our brand, and the stability of the firm. It's a competitive marketplace, and I feel good about our pipeline. In the third quarter, as we have all year, we continue to invest steadily in the business. We continue to release additional tools, capabilities and enhancements that help our advisors engage and meet with clients, deliver actionable advice, and improve efficiency of their practices. As part of our investment agenda, we've been very much focused on expanding our cash offering and growing our bank. The bank provides important flexibility in this rising interest rate environment, and will continue to be a good opportunity for us to further engage and deepen our relationships with clients. We continue to move cash to the bank adding $3.1 billion in the third quarter. And with that we've been able to invest appropriately to garner additional spread. Today, our bank has grown to nearly $19 billion. We also continue to see good growth in our pledge loan business, and we'll be launching more products in the bank as we move forward. Overall, the advice and wealth management business continue to generate strong profitable growth and margins reached 27.8%, up 540 basis points. Now let's turn to retirement and protection solutions. Starting with variable annuities, we have narrowed our focus to concentrate on products that are good for clients in this environment and for the firm. And with that strategy in place, we have continued to generate solid sales and variable annuities without living benefits, as well as our structured products. As we have shifted away from annuities with guarantees. Therefore, our sales are down but in line with the industry. We also made a shift in protection away from fixed insurance to focus on VUL and DI products. Live sales will also down give the climate but again, results were in line with the industry. Based on what we've done to appropriately risk adjust these businesses. They continue to generate good earnings, stability, and solid returns in cash flow as a complement to our other businesses. Now we'll cover asset management. As you've seen across the industry markets have impacted asset levels from an equity and fixed income perspective. As a global asset manager with sizable presence in Europe, we were also affected by the appreciation of the Sterling and the Euro versus the Dollar. Assets under management were down 6% to $546 billion given the equity and fixed income markets and the FX impact I've mentioned more than offsetting the BMO acquisition. Consistent with what you've seen in the industry, investors have more of a risk off perspective and you have a level of tax loss harvesting taking place based on market depreciation. Very critically in this environment, we are maintaining good investment performance and we're continuing to maintain good three-, five- and 10-year track records. While there's been a lot of volatility over the course of the year, over 70% of our funds are above meaning on an asset weighted basis. Our short-term performance has been impacted in some of our fixed income strategies based on the spike in interest rates. And in Europe, some of our equity strategies were impacted because of quality growth positioning. Let's turn to flows; in the quarter, we had outflows of $2.4 billion, that included $1 billion of legacy insurance partner outflows, positive flows and institutional were more than offset by the ongoing pressure we've seen in retail. In retail, overall, we're in net outflows, but it improved a bit from a toughest second quarter for us in the industry. We ended the third quarter with lower gross sales and higher redemptions than a year ago given the markets. This resulted in $5.3 billion of net outflows driven by weak conditions. In US retail, equity outflows remain generally in line with the industry and fixed income results were behind given our product mix. In EMEA, the retail flows remained under pressure, we did see some improvements in continental Europe, and overall flows were a bit better than the industry for the quarter. Turning to global institutional, excluding legacy insurance partners, net inflows with $3.9 billion and we've seen fundings get extended given the markets and some asset allocation calls. In asset management, we expect the environment will remain challenging. However, we think there will be opportunities as markets settle down over time and interest rates stabilize. At the same time, BMO EMEA business, and that's going well. We continue to make good investments in the business overall, ensuring that we have the right focus to move forward in distribution, as well as servicing and platform capabilities. But we also have a very strong eye towards managing expenses in this market, and adjusted for the BMO EMEA acquisition, we brought G&A expenses down by 7% and we'll continue to be very focused there. As I look ahead for Ameriprise, I believe we will continue to be operating in these markets for a while. So as you expect from us, we're very much focused on what we can control. That includes continuing our strong engagement with clients and advisors, as well as leveraging our investments as we continue to manage our expenses tightly moving forward. Importantly, I feel like the strength of our businesses and the growth of the bank will allow us to navigate these markets very well and generate a consistent level of free cash flow and good returns for our shareholders. And what's very important and critical for the firm. And what we deliver is the engagement of our people and advisors. I feel very good about the team. We just conducted our employee and advisor surveys and we continue to see high levels of engagement and satisfaction industry leading. And we know how important this is going through a challenging environment to keep our focus on our clients. In total, I feel really good about the mix of our business, the flexibility we have and how we are positioned for both the challenges and the opportunities ahead. Now I'll turn it over to Walter and then I'll take your questions.

Operator:

[Operator Instructions] We'll take our first question from Ryan Krueger with KBW

Walter Berman:

Sure. I'll take that. The number is $1.3 billion. And it's down $300 million from last quarter and the main drivers on that is the market dislocation and the growth in the bank and the remainder is coming from the unlocking.

Walter Berman:

Yes, I would say that yes, it did increase a little bit. But I think the run rate you are talking about between 180 range is certainly one two, that's we anticipate going forward. And yes, the interest rates, we'll take that up again, as we do it, because we are reinvesting out. As we looked at the portfolio and the opportunities because we basically say short duration now, we're taking advantages we move out. But it will go off, but I would say I would start with 180 ranks.

Brennan Hawken:

Good morning, Jim and Walter, thanks for taking my question. I'd love to start with some of the comments on the bank. I believe you indicated that you'd be moving about $3 billion in balances in 2023. Why not accelerate that we saw more than that move in 2022, rate environment is certainly attractive. And it seems like a good place to utilize some of that capital. So that's number one. And then number two, when you think about the pledge loan book within the bank, are you seeing any change in demand or growth as a result of higher rates where maybe the demand is eased up.

Brennan Hawken:

Okay, thanks for that clarification, and then pledge loans. Have you seen any shifts in demand with higher rates? Or is those continued to grow?

Walter Berman:

On the pledge, I am sorry, I didn't hear, in pledge loan is actually, right now it's adjusting with markets, but it's growing steadily. And we feel very comfortable with it. And from that standpoint, it's a total of that is an over the $1 billion range for total standpoint with our program. So we feel very comfortable with it.

Jim Cracchiolo:

Yes, we, so we're very much focused on continuing to bring in quality recruits, we just don't want to associate people to us and have been a processing platform per se. As you can see, we have a very good strong client value proposition. That's very important. That's why we generate good returns good margins, good retention of assets, we ensure that we have an excellent client experience, keeping our client satisfaction really high. And we really focus on helping good quality advisors grow their practices, and retain and build. So we're going to continue to look and attract good advisors in. We're spending a bit more time on bringing in some younger people again, and building succession in their practices and helping advisors extend their teams. And we're also building out our IPI group which is our institutional business and we're winning some nice accounts there and grow in the advisor force. And we're also doing some work on our remote channels and expanding that activity that we think will also be a compliment. So along those lines, we are putting money to work we are investing et cetera. So it's not so much about the use of capital, it's more about continuing to drive in the areas that areas that we think we can generate both good returns, but more importantly, continue to build out against our value proposition.

Suneet Kamath:

Great, thanks. Just wanted to go back to the bank, if I could. I guess in addition to adding more deposits, we're thinking another lever you guys have is to reinvest some assets that are maturing that the deposits are currently supporting. So can you frame maybe how much of those assets are rolling off in 2023? And if possible, what the yield was on those assets relative to where you're able to invest your money today.

Suneet Kamath:

Okay, that's helpful. Thanks. And then I guess for Jim, towards as the quarter progressed, we're getting quite a few questions on LDI in the UK, and what's going on there? And what any impact on your UK asset management business there could be? So could you maybe frame that out? Well, how you're thinking about that, as an opportunity or where the risks are, just want to make sure that it's clear in terms of where your exposure is, if possible. Thanks.

Suneet Kamath:

So just to summarize, near term more of a kind of AUM, potentially earnings issue, as opposed to anything more significant than that.

Operator:

We'll take our next question from Alex Blostein with Goldman Sachs.

Walter Berman:

So as far as third-party demand, certainly we have an extensive program, and we do not have an issue on the placement of the funds from that standpoint. And we also, again the bank allows us to capability as I talked about growing and certainly reinvesting more directly with our bank institution. As far as the deposit beta, look, we do a competitive scan each week, we certainly evaluated certain as rates go up and we look at the competitive elements, because you look at the per account compensation or client crediting rates, they will change and I'm sure they will be going up as relates to this. Of course, our main focus is to ensure that our clients are getting appropriate rates that are competitive.

Walter Berman:

I would say this is a healthy environment, but it's a healthy environment. And certainly we saw back a couple of months ago from that standpoint. Absolutely.

Jim Cracchiolo:

So, again, I think markets going through a level of dislocation right now and some pressure from as you can see the appreciation of the market and flows, we are very much focused on really the business that we have right now. We're integrating the BMO and international and that's going well, and that's consuming in some time and attention. At the same time, we know that this is a time for us to really engage our clients and maintain it. And we have a lot of good new stuff going on in some of the areas and disciplines that we've been investing in from ESG to some of the institutional and OCIO and et cetera, et cetera and some alternatives. So we feel good about the hand, we don't know that down the road, if there's more significant dislocation, and it makes some sense. Maybe we'll play but right now it's not as something we have on the plate.

Andrew Kligerman:

Hey, good morning. Maybe staying on the topic of M&A but on the divestiture end, the markets been pretty volatile. And just in general, locked transactions of insurance assets have not been as robust as we would have thought. And I had some optimism that maybe Ameriprise would do some transactions? Could you give a little coloron types of talks you're having about long-term care, variable annuities and life insurance blocks respectively, and the potential to divest?

Andrew Kligerman:

That's really helpful. And Jim, maybe just shifting over to asset management for presentations clearly in retail-, three-, five- and 10-year numbers are excellent versus peers. But the one-year numbers seem to have deteriorated in both retail equity and retail fixed income. Could you kind of give a little color on why those figures have deteriorated versus peers, and strategically what you might do to turn around that performance.

Operator:

We'll take our next question from Craig Siegenthaler with Bank of America.

Jim Cracchiolo:

So let me start and if Walter wants to complement. So we already have an in what you've seen in the growth of all cash, there's already had the catch of cash sorting occurring. So the growth of cash itself, if you'd call it in a logic category is higher than $46 billion because money has gone into money markets, and they have gone into shorter duration funds and some brokerage activities. And so with the growth that we have, this is more of the continuation of the growth that's more in the transactional health of the cash or in our certificate programs. And so we saw some of that cash sorting occur in the third quarter, as you said, we may see some more of it. But the ties of the cash have grown because people have moved money to the sidelines.

Craig Siegenthaler:

Thank you, Walter. Then sticking with that brokerage cash, what are your longer-term targets for both off balance sheet cash, and then on balance sheet cash inside of the bank. And I'm thinking when you reach more of an equilibrium in your cash mix as opposed to the bulk transfer effort.

Jim Cracchiolo:

It will be launched in a number of deposit products in the bank, starting in the first quarter and then high yielding types of deposits and other things that you see in some of the other types of institutions later in the year. So we feel there's an opportunity to not just transfer money in but to absolutely grow the deposit base.

Kenneth Lee:

Hi, thanks for taking my questions and good morning. Just one on the asset management business in terms of the margins, obviously, above the target range this past quarter wondering if there's any specific factors driving that any potential benefits that are nonrecurring. And in terms of the outlook for margins, you mentioned potential erosion based on FX. Just wondered, if you could just further expand that. Thanks.

Jim Cracchiolo:

And foreign exchange we have 40% of our assets. And a year ago with the BMO acquisition in Europe, in the UK, and you can see the size of that depreciation of the pound and the euro. And that had a sizable effect. Now, hopefully, that will stabilize and over time because the dollar so strong, maybe start to come back in a fashion that would be a positive. But the combination of that and appreciating markets have really squeezed that a bit.

Walter Berman:

Okay, the key elements that drove it from the actuarial net was that we adjusted our mortality tables, and from the standpoint we looked at our experience and so that was one and then we also saw our lower laps is coming in and therefore extending a living benefit only those that are partner. Again, nothing out of pattern. It was just -- that was the trendline.

Operator:

We'll take our next question from Tom Gallagher with Evercore ISI.

Walter Berman:

Well, it's interesting, because listen, I think, as you look at the amount of free cash flow, we generate in the amount of excess capital we have, and our ability to does not inhibited in any manner, shape or form our ability to continue to grow and invest in a bank to garner the benefits of both and we constantly are making that evaluation accessing our access as it is the situation and the generation that we have. So I would say the return to the bank are certainly getting to very respectful levels. And the buyback from that standpoint is an element that we look at, certainly our excess, looking at the opportunity to return to shareholders, and then other opportunities, but one of the things that we constantly do is the ability that we are not basically stopping or reducing our impact of investing in the business. And that is a key to us. So I would say they're not mutually exclusive. We can't --

Thomas Gallagher:

Okay, thanks. And then just a follow up on the whole cash benefit that you would still expect to see heading into 2023. I just want to make sure I'm thinking about this correctly, or at least directionally correctly. If I add, look at the $46 billion all-in a balance and listen to everything you've said so far, on the revenue side, I can and I'm going to compare it to the run rate you had in 3Q to then where this should go to in 2023. But on the revenue side, I can get somewhere in the $300 million to $400 million pretax earnings, revenue pickup headed into 2023. But then it's a little less clear to me how much of a give up, you would expect to have on cost of crediting, whether that's 20%, 50% any. So, Walter, curious if you can give me some idea whether I'm in the right directional place on the revenue pickup and then also credit.

Thomas Gallagher:

Okay, for Walter, sorry, just a follow up on that anything you can offer, it doesn't look like you've had to give much up on cost of crediting so far. Any sense for how that might change? Do you think that's still going to be a fairly low impact? Whether you think that might move off, I am just curious.