Ameriprise Financial, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Overall Performance: Assets under management and administration grew 22% to $1.5 trillion. Adjusted operating net revenue increased 11% to $4.4 billion. Earnings rose 11%, EPS up 17% excluding severance. Return on equity was 50.7% for the quarter.
• Wealth Management: Total client assets passed $1 trillion, with $46 billion of net inflows over the past year. Wrap flows strong, bank assets growing, and adviser productivity at a new high.
• Asset Management: Working on expanding product lines, leveraging synergies with Wealth Management, and streamlining operations in EMEA to drive profitable growth.
• Retirement & Protection: Good sales, positive results from automated underwriting, and strong free cash flow generation, with the book running off and expected to continue generating value.

Segment Performance

• Wealth Management: Total client assets reached a new record over $1 trillion, up 26% from strong flows and markets. Client net inflows over the past year were $46 billion, including $8.6 billion in Q3. Wrap flows were up nearly 50% to $8 billion, total wrap assets $569 billion (up 28%). Transactional activity increased 19% Y/Y. Bank assets grew 7% to over $23 billion. Adviser productivity rose 11% to $997,000 per adviser.
• Asset Management: Assets under management increased 14% to $672 billion. Net outflows improved 40% Y/Y to $2.4 billion. Strong performance across equities, fixed income, and multi-asset strategies. Focus on expanding third-party distribution, building out SMA and ETF businesses, and streamlining operations in EMEA.
• Retirement & Protection Solutions: Variable annuity sales up 13%, life and health sales up 25%. Pre-tax adjusted operating earnings up 2% to $208 million. Positive results from automated underwriting, strong free cash flow generation.

Guidance

• Capital Return: Expect to return 80% of operating earnings to shareholders in 2024. Flexibility exists for 2025 based on market circumstances.
• Expenses: G&A expenses expected to be flattish in 2025, with severance and cloud transition expenses subsiding over time.
• Asset Management Growth: Focus on expanding product offerings, leveraging synergies between businesses, and continuing to build out SMA and ETF businesses.

Risks

• Long-Term Care Reinsurance: Market for stand-alone long-term care risk transfer is immature. Retaining the block is in the best interest of shareholders as transferring it would require giving up other earnings and incurring significant counterparty exposure.
• Market Volatility: Fluid external environment with factors like U.S. election and geopolitical risk could materially impact actual results vs forward-looking statements.

Question and Answer

Q: About retail flows in Asset Management and synergies between Asset Management and Wealth Management A: Jim Cracchiolo mentioned opportunities to bring more product into the AWM channel to improve flow outlook, leveraging the long-standing partnership with Columbia Threadneedle.

Q: Client cash moving into money market funds vs term products A: Jim Cracchiolo said clients are moving cash into money market funds as a temporary position, with potential to rotate into longer-duration wealth wrap products.

Q: Outlook for cash revenues in AWM and bank A: Walter Berman and Jim Cracchiolo discussed plans to launch new bank products like fixed loan pledge, HELOCs, and checking accounts to maintain and grow cash revenues.

Q: Capital return outlook for 2025 A: Walter Berman indicated 80% capital return is likely for 2025, with flexibility based on market circumstances.

Q: Long-term care book and reinsurance considerations A: Walter Berman and Jim Cracchiolo explained the market for long-term care reinsurance is immature, and retaining the book is in the best interest of shareholders due to value difference and counterparty exposure concerns.