Q2 2022 Ameriprise Financial Inc Earnings Call
But management makes on the call today will focus on adjusted operating results.
And with that I'll turn it over to Jim.
Good morning, and welcome to our second quarter earnings call American.
Ameriprise performed well in a significantly more challenging environment and delivered a solid quarter.
Clearly high inflation in the U S and globally as well as geopolitical uncertainties continue to cause greater volatility and pressured markets with the fed raising rates and concern about a potential recession markets are experiencing headwinds and that's weighing on investor sentiment.
While the environment impacted our results, particularly in asset management, we delivered strong profitability. Good client flows and wealth management and strong results at the bank, we're continuing to serve clients well managing our expenses prudently and investing in the business to drive near and longer term growth.
Let's move to second quarter results compared to a year ago total assets under management and administration declined 3% to one two trillion.
We benefited from the BMO EMEA acquisition and the cumulative impact of Ameriprise client net inflows, but assets were affected by a negative foreign exchange and the steep decline in both equity and fixed income markets.
In terms of adjusted operating financials revenues grew 3% to $3 5 billion.
As good business performance offset market impacts.
With that earnings were up 4% with EPS up 10% to $5 81.
And ROE was very strong at 48, 8% compared to 37, 5% a year ago.
I'll turn to advice and wealth management, where we delivered another strong quarter, we had good activity in a tough market environment with serving clients well with our goal based advice driving strong engagement and earnings strong satisfaction.
Total client net inflows were $8 6 billion down 10%, but quite good in this environment. Our wrap net inflows also declined to $6 2 billion.
Cash balances were up sharply to more than 47 billion compared to more than $39 billion a year ago.
Even in a more challenging operating environment, our advisor productivity was strong up 11% to $814000 per advisor.
We recently hosted our National conference for our top advisors and the level of engagement was terrific.
They are excited about growing their practices at Ameriprise and appreciate the investments we've made and the support we provide.
We're also seeing nice engagement with advisor recruits we had another good quarter in terms of recruiting adding 99 highly productive advisors.
Our value proposition stands even taller in choppy markets when experienced advisors joined us they routinely say, our culture technology financial planning capabilities and ability to grow our key reasons they make the move.
We are driving meaningful momentum and I feel good about our pipeline.
Now I will give you some perspective on our growing cash business, which represents a significant future revenue and earnings opportunity for US first we're beginning to generate more revenue from our off balance sheet cash as the fed increase in short rates.
We continue to move more assets to Ameriprise bank, garnering additional spread including moving to $3 billion to the bank late in the second quarter.
For perspective total bank assets are now at $17 1 billion.
Assets have more than doubled since the beginning of 2021 and we're positioned to take this further.
An important takeaway for you is that as we move through the second half of 2022 and into 2023 the growth of our cash business and rising interest rates will provide an offset to equity market weakness.
That leads me to AWS financials, we continue to generate strong pre tax income up 16% to nearly $500 million and our margin continues to accrete up 250 basis points to nearly 24% even after the impact of substantial market declines.
Moving to retirement and protection solutions, the business was performing well in this environment and reflects our strategy to focus on our core products.
Start with variable annuities overall sales were down 29% given our move away from living benefit guarantees we continue to prioritize annuities without living benefits in our structured products and protection life sales declined 23% given the climate and our move away from fixed insurance.
We remain focused on our <unk> and <unk> products, which have good profitability and are appropriate for our clients.
In terms of earnings they were in line with our expectations and our financial results on free cash flow look good and our risk profile remains well managed.
Now, let's turn to asset management.
We've already referenced the challenging operating environment that has resulted in asset declines in tough retail flows for the industry.
We're experiencing that pressure however, we feel like the business is performing well and we're making appropriate adjustments as we move forward.
Assets under management was up a bit year over year as a result of the BMO acquisition and the cumulative impact of net inflows offset by market declines and a significant foreign exchange impacts in the quarter.
Revenue was essentially flat overall.
Let's start with investment performance. So long term numbers continue to show good consistency for our three five and 10 year time periods with over 75% of up funds above median on an asset weighted basis regarding one year performance. It's been a tough period in both equities and fixed income domestic equity results with good driven by a lot.
Just funds moving back above the median and international equities, our quality position has been more of a challenge in these markets and fixed income results have been solid in Europe , but in the U S were impacted by our longer duration positioning and our quality focused in credit we do feel with market conditions beginning to stabilize.
We should see some improvement.
Let's turn to flows where we had outflows of $3 1 billion in the quarter that included $1 2 billion of legacy insurance partner outflows. This reflects the pressure you've seen in retail, but was partially offset by positive institutional results in retail overall, we had lower gross sales and higher redemptions.
Resulting in $5 8 billion of net outflows. This was driven largely by weak conditions in the United States and to a lesser extent in EMEA.
In U S retail equity outflows were generally in line with the industry and in fixed income results were behind given our product mix compared to the industry. We did not participate nearly as much in short duration as interest rates stabilize and investors see opportunities, we believe our product positioning should garner improved.
Flows.
In EMEA retail flows also remained under pressure. However, we did see some improvement in continental Europe .
Turning to global institutional excluding legacy insurance partners net inflows were $3 9 billion, we had some good inflows in fixed income and other strategies.
In addition to our broad lineup of traditional institutional strategies, we're bringing more focus to multi asset solutions as well as alternatives.
I was with the team in London in June and they are feeling good about the core business the integration and the extensive capabilities we offer clients in fact.
Just a few weeks ago, we announced the rebranding of BMO strategies to Columbia, Threadneedle, which was an important step as we move forward.
I'll close asset management with the financials, our margin was 38, 5% and that incorporated the BMO business, which has lower margins based on their mix given market decline and impact on revenue, we're taking steps to continue to control discretionary expenses thoughtfully, we'll be paying close attention to market.
<unk> as we move forward.
So overall ameriprise remains in a strong position we have a proven track record of navigating tough times and we will continue to do so we're highly engaged with our clients in helping them stay on track and from a financial perspective rising interest rates will act as an offset to compressed markets as we move through the balance of the year.
Here, we will be focused on managing our discretionary expenses, even more tightly as we move forward importantly, our balance sheet fundamentals remain very good we continue to generate strong returns and substantial free cash flow, which provide flexibility in the quarter, we returned 600 million.
To shareholders and are on track to returned 90% of operating earnings to shareholders in 2022.
With that I'll turn it over to Walter to provide his perspective and more detail on the quarter and then we'll take your questions.
Thank you.
As Jim said results in the quarter were strong with earnings up 4% to 665 million and EPS up 10% to <unk> 81.
In face of substantial market declines.
This demonstrates the underlying strength of our business model and highlights the diversification benefit each segment portfolios across market cycles.
As well as initial interest rate benefits and overall expense discipline throughout the firm.
As we move into the second half of the year.
And it fits from rising rates and higher cash balances are expected to offset the realized pressures from the market volatility.
Our high quality.
Diversified investment portfolio and <unk> continued to support strong balance sheet fundamentals.
Our business is generating good free cash flow.
Despite the elevated level of market volatility in the quarter.
<unk> returned $600 million of capital to shareholders and maintain significant excess capital $1 6 billion.
We are on track to return approximately 90% of adjusted operating earnings to shareholders. This year.
Let's turn to slide six.
We ended the quarter with assets under management and administration.
Two trillion.
Down 3%.
<unk> equity and bond market depreciation.
Well as foreign exchange.
We are executing our growth strategies, including the integration of the BMO business.
The PMO business contributed to our geographic diversification with.
With international assets now represent 36%.
Asset management AUM up from 27% prior to BMO acquisition.
And we continued to benefit from strong underlying organic growth momentum.
With $69 billion in wealth and asset management flows over the last 12 months.
Total flows in the quarter were 6 billion with.
With $9 billion of inflows in wealth management offset.
By $3 billion of outflows in asset management.
Let's turn to individuals' segment performance, beginning with wealth management on slide seven.
Wealth management client assets declined 9% to 735 billion despite.
Despite the exceptional market depreciation in the quarter with equity is down 15%.
And bonds down 10%.
We generate strong client flows from new client acquisition.
Excellent experienced advisor recruiting.
And deeper client relationships.
<unk> has strong productivity growth with revenue per advisor, reaching 814000 in the quarter.
Up 11% from the prior year.
On slide eight you can see wealth management profitability benefited from organic growth and the initial rise in interest rates.
Adjusted net operating revenues increased 4% or 76 million to $2 1 billion as.
As market depreciation and lower transactional activity during the quarter was more than offset by rising interest rates and client flows.
Cash balances increased to 47 billion up 21% from last year.
At the same time, the gross fee yield doubled versus last year driving higher interest earnings in the quarter.
<unk> remained well managed.
G&A expenses increased $15 million or 4%.
Primarily from higher volume based expenses over the past year.
Overall wealth management profitability remains strong with pre tax adjusted operating earnings of $492 million.
Up 16% from last year.
And our pre tax operating margin reached $23 nine of 250 basis points.
As you can see on slide nine.
We are well positioned to realize significant incremental benefits from rising rates on our cash products this year and going forward.
In the quarter, we transferred $2 3 billion of brokerage sweep balances onto the bank's balance sheet in two and three year duration strategies with yields above 4% on average.
On July yields on new money purchases at the bank increased further and are in the four 5% range.
We continue to feel good about the credit quality of the portfolio with most of the portfolio in the AAA rated structured assets.
We plan to bring an additional $3 billion of assets onto the balance sheet during the third quarter.
Bringing the full year increased to $7 billion.
Our model Leverages, both broker dealer sweep program and the bank to optimize earnings from cash products. Currently we have about one third of the client cash balances at the bank and.
And we expect it to be nearly 40% by the end of the year.
In addition.
<unk> business is another area that benefits from rising interest rates.
In total we expect to generate substantially more interest related revenue in 2022 relative to 2021.
Which would offset current market related impacts.
Upon our current assumptions interest rate benefit will increase further in 2023.
Let's turn to asset management on slide 10.
Performance was in line with the macro environment.
Total assets under management increased 1% to 598 billion.
As the acquisition of BMO business.
<unk>, largely offset by market depreciation and foreign exchange translation.
Asset management flows were negative in the quarter with continued strength in our global institutional business offsetting a meaningful portion of retail outflows.
Industry, we continue to experience pressures from global market volatility.
Our risk off investor sentiment and geopolitical stream in EMEA.
Margin in the quarter declined to 38, 5%.
It should be noted that BMO reduces our margins by approximately 400 basis points going forward.
Our new margin target will be in the 31% to 35% range.
Reflecting the addition of BMO.
As primarily an institutional business.
On Slide 11, you can see asset management financial results were a reflection of the challenging market backdrop.
Adjusted operating revenues were essentially flat at $881 million.
The addition of beam offset the impact of double digit market depreciation.
Foreign exchange rates and outflows.
Likewise earnings in the quarter declined $31 million.
Importantly, we are managing the areas we can control.
The underlying fee rate remained stable in the quarter at 48 basis points.
Expenses remain well managed with G&A expenses down 6% excluding BMO.
We are currently in the process of evaluating all discretionary spending and hiring.
We remain committed to managing expenses very tightly and current revenue environment.
Let's turn to slide 12.
Retirement, and protection solutions continued to deliver stable earnings and free cash flow generation as a result of its differentiated risk profile.
Pre tax adjusted operating earnings were $179 million.
Sales in the quarter declined as a result of market dislocation and management actions to reduce the risk profile of the business.
Most notably Bourbon, new sales declined 29%, reflecting the uncertain market environment as well as our decision to exit manufacturing products with living benefit riders.
Which was completed in June .
<unk> value with living benefit riders represent less than 60% of the overall book.
Down nearly three percentage points from last year.
Our risk profile remained strong with 94% VA hedge effectiveness in the quarter and an estimated RBC ratio of 530%.
Now, let's move to the balance sheet on slide 13.
Our balance sheet fundamentals remain strong and our diversified high quality double a rated investment portfolio remains well positioned.
These strong fundamentals allow us to deliver a consistent and differentiated level of capital return to shareholders. Even during periods of market volatility that we experienced this quarter.
During the quarter, we returned $600 million to shareholders in excess capital is $1 6 billion.
We remain on track to return approximately 90% of the adjusted operating earnings to shareholders in 2022 with that we will take your questions.
Thank you we will now begin our question and answer session.
If you have a question. Please press zero then one on your Touchtone phone if you wish to be removed from the queue. Please press <unk> then Q if youre using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again, if you have a question. Please press <unk> then one on your Touchtone phone, we have our first.
Question from Brennan Hawken with UBS.
Okay.
Good morning, Thank you for taking my questions.
Love to start with the bank.
The yield provided some great color on plans to continue to shift balances.
Really attractive balances I believe Walter that you indicated that assets move to the bank in the second quarter late in the quarter.
So considering that and considering where reinvestments or how should we be calibrating for the potential yield upside not only from averaging in.
The late shift in the quarter, but then further deployment of the $3 billion that you are considering in the third quarter. Thanks.
So.
Question, we wouldn't really shifting the $3 billion, we believe it will be in the early part of the quarter that we will do that obviously, we will continue to invest in our structured AAA investments in which currently are yielding in the four 5%.
A range and so that will make a total of about $7 billion of new funds into bank.
Deployed like I said in the second quarter to four 2% and now at current rates is for Todd.
Okay, great. Thank you.
And then when we're thinking about NII continuing to grow saw really strong margin trends here.
This quarter pre tax margin trends in AWS, despite the challenging environment. So NII clearly helpful. There.
As that continues to grow you continue to deploy more cash.
Should we be continuing to pace margin expansion at a similar level that we saw here in the second quarter, even if markets remain challenging.
Again, a lot of assumptions in there, but from the standpoint of looking at the opportunity we have on the cash side and certainly the strong flows that we are garnering in this environment you should be able to see margin.
Maintain and expand.
Great. Thanks for the color.
Thank you. Our next question is from Andrew <unk> with credit Suisse.
Hey, good morning.
Recruiting was very solid.
Thank you.
10200, plus advisers was up.
About 1% sequentially.
How does the pipeline there.
Is this a business that you think is going to continue to grow throughout the year.
Despite this market turmoil.
Andrew Yes. Thank you for the question, we continue to see good recruits actually second quarter was actually stronger than the first.
And the pipeline continues to look good.
We are speaking to more people I think people are recognizing what we bring to the plate.
In combination of the support we give the technology.
How we help them really grow their practices, we're getting really strong reviews from people who have joined us.
So we feel that this is a continued good opportunity for us and even as you go through these volatile markets based on the type of support we give.
And helping advisors to actually achieve.
More in regards to that productivity and how they manage their businesses.
We feel it's a good opportunity for us.
That's great and then just on the wrap flows.
If you'd asked me three years ago. When you were doing $4 billion to $5 billion in net flows and you said you did six to like this quarter I would've thought that was an outstanding result, and probably it still is but recently you had peak numbers around $10 billion.
My question is.
Is this six 2 billion.
Good base now or what do you think that could continue to be pressured even lower just given the market volatility.
Well.
What you are asking.
An excellent question.
And so yes, our total client activity has increased over the years as you've seen and even in this last quarter. We brought in almost $9 billion of new client inflows now with this market as you would imagine the deployment of whether it's new money or even current money.
<unk> is a little more people are a little more.
Putting on the sidelines waiting things are stable. So money is still being deployed but not to the extent, where you have rising markets. The stability in the market. So with the pullback we expense I mean, the first part of the year Youre up Youre down 20% bond markets are also down.
So I think the $6 billion is too is quite strong and this type of market environment My.
My feeling is money will continue to go back into the market as things stabilize, particularly even in the fixed side of the business. So I don't see anything changing now.
<unk> got some material.
Market dislocation occurring in the third or fourth quarter I can't tell you, but I think.
If markets aren't materially different we should still continue to see good flows.
That's great. Thanks, a lot.
Thank you. Our next question is from Alex <unk> with Goldman Sachs.
Hey, good morning, everybody. Thank you for the question. So maybe just to start with some of the cash balances dynamic within advice and wealth.
Walter I was wondering if you can give us an update on how the cash balance is holding up so far in the third quarter, given obviously, a pretty strong trends in Q2 with cash balances being up and as we think about the deposit beta is it looks like you guys pass through almost nothing to the customer.
In the second quarter.
So any updated thoughts around sustainability.
Such low deposit betas as you progress through the rest of the year would be helpful.
Alex.
They are holding up.
From that standpoint, so the trend <unk> seen is holding.
As it relates to the crediting rate for clients. We go through an extensive competitive review and on that basis, we did increase some.
The rates as it relates to based on that review and we will certainly consider continuing to evaluate them, which we do weekly.
So we see that obviously, we will start crowding.
Basically increases on the 75 basis points that we anticipate.
At the end of the month and so right now we.
We feel there is certainly opportunity as rates increase and to certainly credit and those are in our assumption base.
Got it.
And I guess as you think about just the tradeoff of growing the bank beyond 2022, you gave obviously very clear guidance of how large do you expect the bank to get.
By the end by the end of 2022, but seen how the yield on brokerage sweep balances will be fairly attractive given again, it's all it's all floating or you're kind of thinking about balancing growth of the bank versus just leaving it in third party banks, we've given given that.
That spread probably narrows a bit here, yeah listen it's a good question, but if you go back to.
The first quarter of 'twenty.
Certainly we were earning.
Good.
Short term return and then disappeared. So the bank gives us the ability to really have a steady earnings stream with high quality investments. So we're balancing that and spread we're getting right now and we feel very good with the risk profile. So we will continue to do that up in that standpoint, we feel it's a critical part of our overall cash strategy.
So we're very fortunate to have the bank not only to offer to our clients new products and capability, but also the ability to have the stabilization of having these spread income come through.
Great.
A quick one for me at the end here as.
As we think about G&A.
That's that's held up really nicely in the quarter.
Particularly we've seen you guys bring down expenses and G&A in the asset management business, but.
When you think about the firm wide G&A run rate for the back half of the year given.
Obviously fee challenges on the back of low markets. How are you thinking about the G&A run rate for the back half I heard your comments qualitatively about pausing, maybe some of the initiatives and looking for ways to save but I guess relative to like the $888 million G&A run rate, we saw in the second quarter, what does the back half look like.
And from a company standpoint, certainly we look at it we are going to be.
Very well managed on our G&A overall as you indicated is around the asset management, Jim indicated certainly they are looking at discretionary spend so overall from a company standpoint, we are going to be in the range that we talk about and we're performing well as it relates to AWS with the good revenue growth, we see and everything is going to be managed but we are certainly.
Trying to garner an increase basically and take advantage of the situation to invest so it's going to be well managed and certainly within expectations to the revenue growth that we see which we think is going to be good.
Okay. Thanks very much.
And we have our next question from Thomas Gallagher with Evercore ISI.
Good morning, Walter just wanted to come back to what.
If you can give some indication of <unk>.
Broadly what youre investing.
Banking deposits and I think you mentioned AAA structured assets.
Those close or what can.
Can you give a little more color on why you feel confident in the quality on the asset side. Okay. It is structured as an <unk>.
It is basically.
At retail MBS and the CLO.
The highest structure within the <unk> within that structure and they all triple a rated from that standpoint, 88% of what we invested in those AAA securities structured securities.
Okay. That's that's helpful.
Question on your capital I think excess capital went down by $300 million. This quarter can you talk a bit about what drove it I assume it was variable annuity related in your life insurance business.
Maybe a little bit below the surface sort of what happened there with hedging.
Is it higher required capital and.
What what kind of drove that.
Well.
<unk>.
You saw a drop of $300 million again within our router expectations here at risk tolerance reporting it was within total tolerances at reserves and basically capital on the VA side as it relates to that 15% drop in the quarter.
And so from that standpoint, the hedging was effective as at 94%. So we feel very comfortable but it was a substantial drop and certainly within our expectations from a modeling so.
It was both on the bulk reserves and on capital.
Okay. Thanks, and then.
Final question, just can you give an update on how the whole process for potential risk transfer is going whether.
I think when you started this whole process late in 2021.
You had commented that you felt like the quality.
Of your insurance business would be validated as you went through that process would you say you still feel that way.
That if you do do something it's.
It's going to be reflected in an attractive price.
Or what have you learned so far through that process maybe.
So.
Again, we're continuing to evaluate we.
Certainly of interest in that and we're evaluating that and we yet to be direct about it I think it was clear to us that.
The value and the quality of which we have is being recognized from that standpoint, but as you know these are.
Montana evaluations and they are continuing.
Okay. Thank you.
Thank you. Our next question is from Tunis cannot.
Thanks, Good morning, just a couple for me.
Walter I think last quarter, you talked about a $200 million benefit from the bank.
And I know, we talked about a bunch of moving pieces. So far on this call, but can you give us a sense at least.
Based on where we sit today kind of how youre feeling about that 200 million number did it contemplate.
Future rate hikes in that sort of thing just some color there would be helpful. Sure. So.
Sure.
Disappearing.
Based on the latest estimates from the fed there'll be an additional 175 basis point increase and we'll see where that goes certainly from that.
We also the crediting rates, we are assuming that we would start distributing it at a higher level within that so right now the number.
<unk> for the whole year.
Is the change versus last year would be in the fall.
Million dollar range plus.
So the 200 that we talked about is $400 million range plus puts us.
Yes.
And Thats for 2022, so as we think about 2000 23021.
Yes, okay.
Alright, Thats, good and then I guess.
Sort of a specific one but I noticed that your long term care reserves came down I think about 11 10, 11% from last year.
Is that just the benefit of higher rates could you talk about that a little bit and then to follow up on Tom's risk transfer question.
Any more activity in terms of long term care that you are hearing in the market.
Okay on the reserves I believe it is but we'll go back and confirm that.
As it relates to.
We're evaluating let me just continuing to evaluate what is the spectrum alright.
Okay and then just the last one is just on the asset management margin the new target of 31% to 35 is that entirely BMO driven or does that also is there also a piece related to the pretty significant market decline that we've seen.
Here in the second quarter and then at some point do you start to push back towards your prior range or is this just kind of the new level for that business.
400 basis points is strictly BMO, that's a normalization on the BMO.
From the.
35% to 39 is like I said going down 400 basis points strictly because in BMO does not and obviously were coming down because of the market standpoint.
But because we are in the Forty's and now it's dropping because of the deleveraging is taking place because of the equity markets and fixed income.
Sure.
So.
That's it.
Hopefully I answered it.
Yes, I got it sounds like Thats, the new level with the business okay. Thanks.
Our next question is from Steven <unk> with Wolfe Research.
Hi, Good morning, So just one follow up for me relating to that prior question on the asset management margin outlook.
Just wanted to make sure Walter It does sound like that is the new run rate, but does that 31% to 35% contemplate some of the actions you alluded to around discretionary spend and also wanted to see whether that also incorporated some of the BMO expense synergies that are not yet reflected in the run rate.
So from that standpoint, it has now normalized okay. Because we always said it would be 34 up there.
<unk> it.
It is our target range, so as the markets that we look at the marks and we evaluate the implications we are going to be looking at the expenses and it does have.
Some of the synergies that we anticipated with BMO, which was going to be more back loaded to 'twenty three.
Understood and maybe just one quick follow up can you just speak to how the flow trends are tracking in July just so we can think about some of the cadence of flows versus <unk>.
The industry is still facing some headwinds just from a flow perspective, yes.
Yes. So this is Jim.
What I would expect is more of a continuation at this point.
I think from a retail perspective, I think things are still on the asset management side.
Soft I think youll see that across the industry.
If you look at the new centers that are coming out of will come out.
I think on institutional is longer for mandates et cetera, but.
So.
I don't see a dramatic change at this point now we'll see what the fed does and we'll see what the outlook is for various things as we go forward, but that's what I would probably say.
Very helpful. Thanks, so much for taking my questions.
Thank you. Our next question is from John Barnidge with Piper Sandler.
Thank you very much.
With that new guidance around margins in the asset management segment.
Talk about the level of composition of variable expenses, maybe across the franchise and your businesses. Thanks.
Again.
Looking at our expense base, there is a reasonable portion that's variable.
<unk>.
The exact proportions it gives us the ability to certainly.
Just.
The exact percentages.
Candidly I would have to get back on that but we do have because there is investment spending that we do and certainly we have.
Evaluation of hiring and other things on open positions, so theres a reasonable amount of variable in there, but I don't have the exact percentage.
Pardon me right now.
And then maybe my follow up question is there a way to size the liability driven investing opportunity.
It seems like it's been a strong area for institutional.
Yes so.
With our BMO acquisition et cetera, they have very good capabilities.
And now we are looking at those opportunities across the franchise with our expanded level of institutional business and so we feel it will be a good channel as well as a relationship builder channel for us.
Thank you.
Thank you. Our next question is from Erik bass with Autonomous research.
Hi, Thank you can you talk about the level of foreign exchange sensitivity in the asset management business posted BMO acquisition.
Clearly impact on revenues in AUR, but how much of an offset is there on expenses and how should we think about the kind of net earnings impact.
With BMO, obviously, we shifted.
Up from 27% to 36%.
That is sensitive to so approximately <unk> elements of it was around $15 million impact to us.
$15 million in the quarter, Yes, that's net.
Got it thank you.
And then you highlighted the $1 6 billion of excess capital that you have and then in past periods of market weakness, you've sometimes the increase the level of capital return above the 90% target of earnings and lead into buybacks a bit more is that something that you would consider given the pullback in your stock year to date.
Well from.
If I understand your question certainly the one that you feel comfortable at continue as indicated.
Hitting our trend line for the 90% for the year and obviously as you look at the.
Back half of the year.
We will be able to sit with that 90% hitting buyback a lot more shares with the share price was last year versus right now hopefully we will get back to where it is but.
Where it is right now gives us the ability at that level to buy back more shares.
Got it but youre not thinking of changing the percentage.
At this stage, we evaluated each quarter, but the answer is that we will be opportunistic as we assess it but were still targeting 90%.
No I think that's actually a pretty good a lot of companies are pulling back on their buybacks if they were doing them.
We're doing them at a still a very strong rate.
Yes, no very fair and obviously with the price lower youre buying more shares so I appreciate it.
Yes.
Our next question from Kenneth Lee.
Hey, good morning, and thanks for taking my question just one on the asset management side again.
Curious as to what Youre seeing in terms of net flows which can be fixed income category.
Just given the industry trends we're seeing.
So what we saw in <unk>.
Our business is.
On net flows.
Sure.
A little on a percentage basis, a little worse than where we saw on our equity side and thats, mainly because of the mix of business that we have so some of the players that might have had.
Larger areas of short duration et cetera, we have a short duration business, but it's not necessarily one that we're across all of our channels.
And so people, who had that business or a little more of the inflow in there.
Then we did because we really were in mortgages and total ban in things such as that.
Little longer duration products.
And then the other area that I think probably had some greater flows was more on the leveraged loan area, which is only a small business for us. So I think it had to do more with mix than anything else, but because of being in the type that we were in with the dislocation in the fixed income market as you would imagine redemptions would be up.
A little more than.
Flows were down municipals was another area that we had a bit of that weakness and based on the market situation, but we believe that the areas that we do have now based on the credit quality et cetera.
We'll come back we think as interest rates stabilize a little more of that as you can see on the long end, it's starting to.
Soften up a little bit.
Great very helpful. There and just one related question is my follow up more broadly speaking within the asset management side. How do you think about the overall product offerings mix of strategies out there any particular gaps that you would like to fill at this point. Thanks.
So what we have now we have a good mix with the BMO acquisition.
So, we're putting more energy and time on the ESG.
I caught in a responsible investing.
We're doing more on things like LDR and solutions, we're doing more on.
Alternatives were trying to build out a little more on our retail real estate and property businesses institutional as well and so there are certain things like that where we're focused on for what we have in place.
So we feel good about the mix that we have again, we're in a little bit of this I think youll look across the asset management industry I am not sure Youll see a lot of favorability at this point the Cros.
But I think we're in good shape, we have good businesses, we can manage our expenses.
Still investing appropriately to get some greater scale efficiencies and the integration with BMO.
So again.
A little bit of a dislocation market, but I think and Thats really one of the benefits of the firm like Ameriprise, we're very balanced.
Even where I know on one hand someone says risk transfer, but we generate some really good solid earnings and cash flow from our business activities. Our AWS now with the growth of the bank and compliment it gives us a good now offset so I think over time again, you will see the strength.
How the company really plays out.
And how we can use this opportunity to really.
Leverage against whether it's having to do with shareholder return or even flexibility.
Great very helpful. Thanks again.
Thank you. Our next question is from Ryan Krueger with K B W.
Hey, Thanks, good morning.
Just to follow up on the $400 million of upside from interest rates and full year 2022, just given that probably a fair amount of that is coming in the back half of the year are you able to comment on.
How we should how that might look.
2023 as well.
Should look pretty good.
Obviously, it's worth or youre going to get to normalization.
February increases come in which is 175 coming in in the back end and getting the normalization on calendar realizations can take place. There. It is dependent of course again, what happens to the cash balances and the crediting rates. So there is a lot of variables, but as Jim said, you're going to get an increase and certainly we anticipate there'll be an increase.
Based on our modeling so.
Again from our standpoint it is.
Going to be substantial.
Got it and then just on the asset management margin target.
So a fair amount above that new target in the second quarter is this should we just think about this as a longer term target or in the current environment would you would you anticipate.
Down to.
Within that new target.
Near term.
I think what you have to sort of factor in and again it depends on what happens with market right you had a bit more of a dislocation of the markets in the second quarter.
And so as you look at that.
Probably compared to where the averages are between the first and the second quarter going into third.
You will continue to have a little bit more of that margin compression is depreciation on the asset base, if you roll it over.
But having said that.
I would say that we still feel good about being within those margins. After you take that into account. So remember markets depreciated and it's not just equity markets. The fixed income market, which is not normal and a sense of where you get both of them depreciating at the same time.
Got it thank you.
We have no further questions.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.