The operator introduces the Q3 2023 Earnings Call and turns it over to Alicia Charity. She introduces the speakers and reminds listeners that the call is being recorded. She also mentions that the presentation materials and a discussion of forward-looking statements are available on the company's website. She cautions that some statements may be forward-looking and involve risks and uncertainties. The company's GAAP financial results and adjusted operating results are presented on Slide 3, along with a discussion of operating results excluding unlocking, which is believed to provide a better understanding of the company's core operations.

In the third quarter, Ameriprise completed their annual unlocking and reported strong earnings. The company is benefiting from the strength and flexibility of their business and team in an uncertain economic environment. While inflation remains elevated and interest rates are expected to stay high, the US economy is holding up well. Ameriprise's assets under management and administration have increased, and their financial results were strong, with record operating revenue and earnings. The company's return on equity was nearly 50%, which is rare in the industry. Their wealth management business is consistently performing well.

The company's advice value proposition is suitable for the current market environment, with a focus on client engagement and satisfaction. Total client assets and net flows have increased, and the company continues to attract new clients. There is a growing need for guidance among investors, and the company's advisers hold a higher level of cash for clients. The company's re-entry into the banking business has been beneficial, with a substantial increase in assets. Transactional activity has also increased, and the company continues to invest in advanced analytics to improve the client and adviser experience.

Ameriprise offers a complete practice dashboard to improve practice management and client meetings. The company saw success with their advertising and website redesign, resulting in increased adviser productivity and retention. They also recruited 64 experienced advisers and received recognition for customer trust and service. Wealth Management continues to have strong profitability and earnings growth, while Retirement and Protection is focused on generating good sales and returns for clients.

In this paragraph, the author discusses the success of their business in the life and health sector, with sales increasing 22% and positive results from their automated underwriting system. They also mention the success of their variable annuities and retirement planning tool. In asset management, they saw a 7% increase in assets under management, but acknowledge the challenges in the industry. Retail sales were weaker, but redemptions improved and overall flow rates were in line with the industry. Institutional mandates were earned in various areas, but LDI flows were down compared to the previous year.

The company has strong short- and long-term investment performance across equities, fixed income, and asset allocation. They have completed all major integration activities and are now focused on adjusting their global operating model and expenses to maintain good margins in a tough climate. The Asset Management division has a 36% adjusted operating margin and has taken action to reduce expenses and increase operating efficiencies. The company's complementary businesses have consistently generated strong financial results and their capital strength and flexibility are excellent. They are also focused on areas of growth and examining their entire expense base to prepare for a potential economic slowdown in the future.

In conclusion, the success of our business is due to our diversified model and the benefits it provides to our team. Our financial results continue to show strong growth, with adjusted EPS up 24% and assets under management and administration increasing by 12%. We are managing expenses tightly and making strategic investments in our growth initiatives. Our G&A expenses were well managed, and our consolidated margin reached a record high. Our balance sheet is strong, allowing us to return a significant amount of capital to shareholders.

The company experienced strong revenue growth of 10% due to higher interest earnings and client net inflows. Pretax operating earnings also increased by 20% due to strong client flows, higher interest earnings, and well-managed expenses. In the Wealth Management segment, client assets increased by 15% and revenue per adviser increased by 10%. The company also saw a new high in total cash balances, providing a redeployment opportunity for clients to invest in other products on the platform. However, cash levels have decreased compared to the previous year.

The cash levels have remained stable since August, with most of the cash being in accounts under $100,000. The company's investment portfolios are performing well, with a high yield and strong credit ratings. In the wealth management sector, the company saw a 26% increase in profitability and strong growth in client inflows. Operating expenses increased, but the company remains on track for future growth. In the asset management sector, financial results were strong despite industry challenges.

The total assets under management for the company increased by 7% to $587 billion, mainly due to higher equity markets and foreign exchange translation. The asset management sector experienced net outflows due to global market volatility and risk-off investor sentiment, but the company has seen improvement in investment performance, particularly in fixed income strategies. Asset management earnings increased to $199 million in the quarter, with a margin of 36%. Expenses remain well managed, with G&A decreasing $1 million and a further focus on reducing expenses globally. The Retirement & Protection solutions sector also showed good earnings and free cash flow generation, with pretax adjusted operating earnings of $204 million in the quarter. The company expects normalized annual earnings of $800 million for this sector.

The company's annual actuarial assumption update resulted in an unfavorable pretax impact of $104 million. However, Retirement & Protection Solutions improved, with protection sales up 22% and variable annuity sales up 18%. The long-term care business is performing well and claims experience is in line with expectations. The balance sheet remains strong and the company returned $663 million to shareholders in the quarter. The first question from an analyst was about organic growth within wealth.

The company had a solid quarter of flows, but the pace did moderate slightly due to the challenging operating backdrop. The CEO is confident in sustaining the mid-single-digit flow rate and sees potential for growth in the bank channel with the onboarding of Comerica. The company also expects to stay within their targeted margin range despite secular headwinds, as seen in the stable fee level.

The company is planning to tighten expenses and improve efficiency after integrating BMO acquisition onto global platforms. The trend in cash balances in Advice & Wealth Management has stabilized and there is room for growth in the bank through reinvestment of securities.

The speaker discusses the firm's plans for managing expenses and G&A growth in the coming years. They mention that G&A growth is expected to be flat at best in 2024 compared to 2023, with the possibility of some merit increases. The speaker also addresses slower recruiting and FA headcount growth in the third quarter, but expects it to bounce back in the coming months. They note that attrition in the assistant financial advisor channel was a factor in lower headcount.

The franchisees have a high retention rate and there is no change in their book of business. The company is looking to grow their certificates business and bring in more external cash through savings, checking, and lending products.

The speaker, Walter Berman, adds that there is sufficient cash available to support the expected growth, as mentioned by Jim. Craig Siegenthaler thanks the speaker and the next question is from Suneet Kamath who asks about the $32 billion of third-party cash and how it will be deployed. Jim responds by saying that it depends on the market and interest rates, and if the market stabilizes and rates remain steady, the cash will be moved to longer-term investments. He also mentions that the industry as a whole is holding extra cash due to market concerns.

The company plans to deploy new banking products in the coming year and will alert investors as they are phased in. They expect expenses to remain flat in 2024, with a decline in asset management and growth in Advice & Wealth Management. The company is focused on managing expenses tightly. There is $32 billion of third-party client cash currently held.

The speaker is discussing the potential revenue upside if money is deployed into a wrap account, as well as the impact of a variable annuity reserve charge. They also mention that a 4Q charge on a statutory basis is still to be determined. The speaker also addresses the risk management of the long-term care block and the consideration of a potential risk transfer.

The speaker is answering a question about the company's cash dynamics and whether they expect to see growth in sweep balances. They mention that the sweep count has stabilized and there is potential for growth as new years come in and as the company experiences organic growth. However, they also acknowledge that there are variables and uncertainties in the market that could affect this growth.

The speaker discusses the potential impact of increased investment activity on cash balances and NII. They mention that the cash rate in the sweep is low and could increase if activity picks up. They also believe there is opportunity for growth in NII due to upcoming maturities and short duration. The speaker also mentions that around $2 billion in bank assets will mature next year and confirms that there is currently $32 billion in third-party cash.

The speaker, Jim Cracchiolo, believes that the primary opportunity for clients to move more money back into the market is through wrap solutions, which offer a balance of equities, fixed income, and alternative investments. He also believes that some money may be kept in internal cash due to the current market environment and the security of Ameriprise. Overall, he sees the potential for a larger opportunity in the wrap business rather than bank products.

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