This paragraph provides an introduction to the Ameriprise Financial Second Quarter Earnings Call. It outlines the participants, including Jim Cracchiolo, Chairman and CEO, and Walter Berman, Chief Financial Officer. It also mentions forward-looking statements and non-GAAP financial measures, and provides a reconciliation of non-GAAP numbers to their respective GAAP numbers. Lastly, it outlines the GAAP financial results and adjusted operating results for the second quarter.

In the second quarter of the year, Ameriprise experienced strong growth with assets under management and administration increasing 9% to $1.3 trillion and total adjusted operating net revenue increasing 10% to $3.8 billion. This growth was driven by a combination of strong revenue growth from the spread business and well-managed expenses, resulting in earnings of $807 million and EPS increasing 30% to $7.44. The market environment is still unfavorable with the S&P 500 international equity markets only up 2% year-over-year on average for the quarter and fixed income markets particularly unfavorable in Europe. Despite this, Ameriprise is able to benefit from its diversified business mix and higher interest rates in its bank and certificate companies.

Ameriprise achieved a record return on equity of 51% in the second quarter. The company saw strong asset growth, with total client assets reaching $833 billion and total client flows of $9.4 billion, up 10% year-over-year. The company has invested in technology to help advisers engage clients and provide a great experience, such as the ability to generate highly personalized presentations. AI and analytics are also being used to further enhance client engagement. Adviser satisfaction, retention and growth are all excellent, with productivity growth increasing by 7% to $874,000 per adviser.

Ameriprise had a successful quarter with the recruitment of 99 experienced advisers, who praised the firm's advanced capabilities and technology. Clients were cautious, preferring to keep their money in cash-oriented products, leading to an increase in cash and cash equivalents to $70 billion and wrap assets under management to $450 billion. June saw signs of clients moving back into the market, and Ameriprise Bank also performed well, with assets increasing to $22 billion and bank and certificate balances growing to $33 billion.

Ameriprise is looking to deepen client relationships by introducing new savings products and appealing to high net worth investors and millennials. The firm has also earned external accolades and recognition, such as being named by Kiplinger's Readers as the overall winner in the wealth management category and earning top performer recognition from Hearts & Wallets. The company's culture is also seen as unique and supportive, and the firm achieved a record profitability margin of 31.2%.

The company has high-quality, well-risk managed books and is generating strong consistent earnings of 13%. They are focused on accumulation products and protection sales have increased 18%. They are using intelligent document processing and robotics to make processes more efficient and have seen the benefit in sales. In Asset Management, they are facing reduced flows and have excellent longer-term performance in equities, fixed income, and asset allocation strategies. 1-year performance has also improved across the board.

Ameriprise is experiencing outflows in the global retail market, especially in North America and EMEA. In North America, there has been an improvement in fixed income, but outflow pressures in equities remain. In EMEA, retail flows remain under pressure, but there have been net inflows in institutional. Ameriprise is taking steps to reduce expenses, and they are well positioned to continue to navigate and grow despite the current environment.

Ameriprise had a successful quarter with adjusted EPS increasing 30%, and Wealth Management business increasing to 68% of the company's earnings. They returned $638 million of earnings to shareholders in the quarter, and the Board approved a new $3.5 billion share repurchase authorization. They also managed expenses tightly and Forbes Magazine named Ameriprise one of America's best large employers.

The bank has taken a disciplined approach on discretionary expenses, with G&A up only 4%. Balance sheet fundamentals remain strong, and the bank was able to return $638 million of capital to shareholders. Assets under management and administration increased 9%, with revenue growth at 10% and pretax earnings increasing 24%. Wealth Management client assets increased 13%, driven by strong organic growth and client flows, with $9.4 billion in client flows, up 10% from last year.

Client money has been allocated to both wrap and non-advisory accounts due to a defensive stance. Revenue per adviser increased 7% from the prior year and cash levels have returned to more historic levels at $42 billion. Interest rates earned at the bank and certificate business have increased by 350 basis points from a year ago and 40 basis points sequentially. Cash levels have increased to $70 billion, providing an opportunity to redeploy money as markets normalize. 65% of the aggregate cash is now in accounts under $100,000 and $1 billion has been moved from off balance sheet cash onto the bank's balance sheet.

The bank portfolio has a AAA rating and a 3.4-year duration with a yield of 4.6%. The certificate company portfolio is AA+ rated with a 1-year duration and a yield of 5.5%. Wealth management had a strong quarter with a 49% increase in profitability and a 730 basis point increase in pre-tax operating margin. Asset management had a total AUM of $617 billion, with the increase coming from higher equity markets, partially offset by lower fixed income markets.

Asset management saw outflows in the quarter, with $2 billion in reinvested dividends lower than the prior year. Investment performance has been improving, but earnings declined to $162 million due to deleveraging, net outflows, and lower performance fees. Retirement & Protection Solutions saw a 13% increase in pretax adjusted operating earnings, though it was unfavorably impacted by $7 million from a model update. Earnings are expected to normalize and the business is expected to generate $800 million in normalized annual earnings.

Overall sales declined 10% due to the discontinuation of variable annuities with living benefit riders. However, protection sales improved, with high-margin accumulation VUL representing over a third of the total insurance in force. The balance sheet fundamentals remain strong, with the average credit rating of the portfolio at AA and VA hedge effectiveness at 98%. The business model benefits from significant and stable free cash flow, which was used to return $638 million to shareholders and still left $1.3 billion of excess capital and $2.1 billion of holding company available liquidity. A new $3.5 billion share repurchase authorization was announced through September 30, 2025.

James Cracchiolo reported that client flows were up 10% from the previous year, but a significant amount of cash was withdrawn in April due to tax payments. He noted that the market had performed better than expected and if this continues, there could be a shift away from cash holdings and into fixed income and equity products. Cracchiolo believes that the current $70 billion in cash balances, which is up to 9% of total assets, could be reduced as some of the money shifts back into other products.

Walter Berman and James Cracchiolo discussed the sweep per se, noting that they expected the cash sorting to slow down in the beginning of the third quarter. They also noted that the $30 billion in July had slowed as anticipated. Alexander Blostein asked about G&A growth within the asset management business for the second half and whether it would continue into 2024, to which James Cracchiolo responded that they were adjusting the expense base to the headwinds the industry was facing and that the revenue base could grow despite flow challenges.

Walter Berman of Comerica updated the progress of the pending Comerica deal, stating that its activity levels and assets are on track. The assets are characterized by cash and other components within the ranges of the transaction. Berman also noted that the company is targeting for a fourth quarter completion. In response to a question about the potential for lower rates in 2024, Berman provided an update on the maturity profile of the CDs within the certificate company.

Walter Berman and James Cracchiolo discuss the management of certificate balances, noting that the majority of investments are in the bank, which has a yield of 4.6%. They also discuss adjusting the rate crediting rate and investments to maintain a spread in both rising and declining rate environments.

James Cracchiolo and Erik Bass discuss the target margin rate for Asset Management, with Cracchiolo confirming they are still comfortable with the rate. Cracchiolo then updates Bass on their plans to launch a brokered CD product and other bank products in the second half of the year, with incentives to bring in new cash. He also explains that they will have a suite of savings products by the end of the year, and how the margin expectation will be tiered relative to other cash products.

Walter Berman explains that the margin in the bank is good and competitive on the products. He then goes on to discuss the $1.4 billion of assets that will mature and roll into new assets in the second half of the year and the potential for 40-50 basis points of upside if the rates stay the same. He also mentions the $70 billion of cash they have, which was $60 billion last quarter, with some of it in the $42 billion range.

James Cracchiolo believes that a good amount of the incremental $28 billion could come back into the wrap type of business. He believes this because people are investing less in fixed income due to higher yields, and this money will come back into wrap accounts as they typically have a more balanced portfolio. Suneet Kamath then asked if American Express had the capabilities to capitalize on the growth opportunity of high net worth and millennial clients, to which Cracchiolo replied that they already have most of the capabilities and are deploying more around this opportunity.

The company has done research to ensure that they are considered up there with high net worth clients and private houses that cater to them. They have made investments in digital capabilities and engagement in order to target younger clients. When it comes to rate sensitivity, the company has insulation from the Fed fund reductions as they have substantial amounts in the bank. For every percentage going down, there is a straight calculation.

James Cracchiolo of Ameriprise Financial discussed the firm's G&A expenses, noting that they will remain relatively flat overall, with potential increases in the wealth management segment and decreases in the asset management segment. He also mentioned that the firm will continue to make investments in the business while absorbing inflationary expenses.

Walter Berman of Ameriprise explains that the company withdrew their application to convert to a state-chartered industrial bank and a national trust bank due to the FACA Board not wanting to expand into a state. He states that the company does not anticipate any changes to their capital requirements due to the withdrawal. Thomas Gallagher then asks for an update on risk transfer on the RPS side, to which Berman does not respond.

Walter Berman and Thomas Gallagher discussed the pricing of competitors in the life insurance space and the risk transfer deals. James Cracchiolo stated that they have a very low risk profile for the business and it will continue to generate roughly $200 million of PTI a quarter. They are comfortable with their holdings and will always entertain opportunities that arise.

Walter Berman discussed the annual insurance liability unlocking exercise, noting the large negative adjustment from the bear market effect last year. He asked if there could be a reversal due to the current bull market. Berman stated that they are navigating the situation and have the ability to adjust if they receive benefits. Craig Siegenthaler followed up by asking if they had a competitive advantage with their large distribution channel, to which Berman seemed to be pleased with their decision.

Walter Berman is discussing the implications of higher interest rates on the fixed annuity business. He explains that while the reinsurance situation is comfortable, they are constantly evaluating whether to manufacture or not. He also mentions that deposit and interest costs may go up as a result of the 40-50 basis points of yield uplift within the bank, and that certificate balances may roll off the group into the bank, with a possible margin difference between the two.

Walter Berman discussed the bank's certificate product and how they are evaluating the competitive environment to ensure they offer competitive sweep rates. He also noted that the capital return target for the year is 80%, though it may vary slightly quarter to quarter.

The speaker is informing the listener that the conversation is now over and they can end the call.

This summary was generated with AI and may contain some inaccuracies.