Q3 2023 Ameriprise Financial Inc Earnings Call

October 26, 2023

Welcome to the Q3 2023 earnings call My name is Chris 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.

During the question and answer session. If you have a question. Please press star one on your Touchtone phone.

As a reminder, this conference is being recorded.

I will now turn the call over to Alicia charity Alicia you may begin.

Thank you and good morning, welcome to Ameriprise Financial's third quarter earnings call on the call with me today are Jim Cracchiolo, Chairman and CEO and Walter Berman Chief Financial Officer.

Following their remarks, we'd be happy to take your questions.

Turning to our earnings presentation materials that are available on our website on slide two you see a discussion of forward looking statements.

Specifically.

During the call you will hear references to various non-GAAP financial measures.

Which we believe provides insight into the company's operations.

Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website.

Some statements that we make on this call may be forward, looking reflecting management's expectations about future events and overall operating plans and performance.

These forward looking statements speak only as of today's date and involve a number of risks and uncertainties.

Sample list of factors and risks that could cause actual results to be materially different from forward looking statements can be found in our third quarter 2023 earnings release.

Our 2022 annual report to shareholders and our 2022 10-K, we make no obligation to publicly update or revise these forward looking statements.

On slide three you see our GAAP financial results at the top of the page for the third quarter below that you'll see our adjusted operating results.

Followed by operating results, excluding unlocking which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis.

<unk> completed our annual unlocking in the third quarter. Many of the comments that 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 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.

Operator: Welcome to the Q3 2023 earnings call. My name is Chris and I'll be your operator for today's call. At this time, I'll participate in a listen only mode.

Across the firm, we're helping clients navigate external pressures with our high quality advice solutions and service.

Operator: Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star one on your touchtone phone. As a reminder, this conference is being recorded.

As you can see in our results Ameriprise continues to benefit from the complementary strengths 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'll see higher interest rates for longer.

Alicia Charity: I will now turn the call over to Alicia Charity.

Alicia Charity: Alicia, you may begin. Thank you and good morning. Welcome to a Ameriprise financial third quarter earnings call. On the call with me today are Jim Cracchiolo, Chairman and CEO, and Walter Berman, Chief Financial Officer. Following their remarks, we'd be happy to take your questions.

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.

Alicia Charity: Turning to our earnings presentation materials that are available on our website on slide two, you see a discussion of forward-looking statements. Specifically, during the call, you will hear references to various non-gap financial measures, which we believe provides insight into the company's operations. Reconciliation of non-gap numbers to their respective gap numbers can be found in today's materials and on our website. Some statements that we make on this call may be forward-looking. Reflecting management's expectations about future events and overall operating plans and performance.

Additionally, the geopolitical climate is causing further volatility.

Equity markets have been resilient and well 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 and cash products.

Our assets under management and administration reached 1.2 trillion up 12% and financials were also strong.

Alicia Charity: These forward-looking statements speak only as of today's date, and involve a number of risks and uncertainties. A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in our third quarter 2023 earnings release. Our 2022 annual report to shareholders and our 2022-10K. We make no obligation to publicly update or revise these forward-looking statements.

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 and 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% or are we on an ongoing basis.

Our complementary businesses consistently generate strong financial results.

Alicia Charity: On slide three, you see our gap financial results at the top of the page for the third quarter. Below that, you'll see our adjusted operating results. Followed by operating results excluding unlocking, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis. We completed our annual unlocking in a third quarter. Many of the comments the management makes on the call today will focus on adjusted operating 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 five stars.

Total client assets increased 15% to $816 billion with good client net flows of $8 9 billion and market appreciation.

We continue to attract more new clients and move up market as we grow our client base.

Jim Cracchiolo: And with that, I'll turn it over to Jim. Good morning, and thanks for joining our call. Yesterday afternoon, a Mara Prize reported strong third quarter earnings. The business continues to perform very well in a fluid and uncertain operating environment. Across the firm, we're helping clients navigate external pressures with our high-quality advice solutions and service. As you can see in our results, the Mara Prize continues to benefit from the complimentary strengths and flexibility of our business and our talented team.

And we know from industry research that more investors need guidance in fact, among affluent households, many investors in the marketplace still don't have a formal plan to manage assets income and expenses in retirement.

As we highlighted previously our advisors continue to hold a higher level of cash for their clients with the highest short term yields they are able to obtain in the market uncertainty.

Therefore, we continue to see a lower percentage of our assets moving into wrap with $5 4 billion in the quarter.

Jim Cracchiolo: Regarding the economic landscape, while inflation has come down a bit, it remains elevated, so it's likely we'll see higher interest rates for longer. Economic growth in the United States continues to hold up well, even with increased rates. However, consumer sediment 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 will up year over year, but down slightly in the quarter.

As market 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 go on a 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.

Jim Cracchiolo: At the same time, many investors are holding greater levels of cash and feel comfortable earning competitive yields in cash products. Our assets on the management and administration reach 1.2 trillion, up 12 percent, and financials will 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 percent to $3.9 billion. And earnings were also quite strong, up 18 percent, with EPS up considerably, an increase of 24 percent.

Activity up 11%.

As you know, we continue to invest to put great capabilities, and 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 meet.

<unk> more efficiently identify opportunities to grow their business and deepen our 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 to you.

Jim Cracchiolo: Additionally, our return on equity was 49.9 percent compared to 48 percent a year ago. Very few firms in our industry achieved nearly a 50 percent ROE on an ongoing basis. Our complementary businesses consistently generate strong financial results.

<unk> benefits of working with an Ameriprise advisor.

Jim Cracchiolo: Let's start with wealth management. Our vice value proposition is built for the current environment. Advisors are focused on ensuring clients are highly engaged in deepening relationships with them. Importantly, client satisfaction remains at an excellent 4.9 out of 5 stars. Total client assets increase 15 percent 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.

Adviser productivity increased another 10% to a new high of $901000 per adviser in the quarter.

Our advisor retention and growth of both consistently among the best in the industry.

Regarding recruiting we brought in another 64 experienced productive advisors, we had a bit of a seasonal slowdown of activity to begin the quarter, but saw a nice pick up in September and we believe that will 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 our high level of customer Trust and service.

Jim Cracchiolo: 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 advisors continue to hold the higher level of cash for 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 RAP with 5.4 billion in the quarter. As markets settle, we expect that money will ultimately be redeployed into RAP and other solutions.

We received one of the highest customer Trust index scores among financial services firms and Forest is 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%.

Jim Cracchiolo: Our reentry back into the banking business came at the right time and is very beneficial for the firm. As it's in the bank and certificate company continue to increase substantially up 37 percent to $35 billion. With interest rates at this level, we're able to go on a 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.

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've focused on variable universal life and disability products.

Jim Cracchiolo: And overall, after a bit of a slow down last year, we saw a nice increase in transactional activity up 11 percent. As you know, we continue to invest in the great capabilities and advisors hands to drive high satisfaction and growth and deliver an exceptional experience. We're using advanced analytics to deliver an even better client and advisor 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 relations.

Our appropriate for this environment like.

Life and health sales were up nicely, increasing 22% with the majority of sales in higher margin accumulation V UL 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 are structured product continues to attract good interest combined with our variable annuities without living benefits sales were up 18% from a year ago.

Jim Cracchiolo: Partnerships. In the quarter, we are 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 advisor. Advisor, productivity increased another 10% to a new high of $901,000 per advisor in the quarter. Our advisor retention and growth are both consistently among the best in the industry. Regarding recruiting, we brought in another 64 experience productive advisors.

In the quarter a river source retirement interactive tool, which helps advisors 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 and our high quality investment portfolio excluding.

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 in the active space in particular.

Jim Cracchiolo: 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 flows were largely consistent with the industry.

Jim Cracchiolo: Our reputation is an important differentiator. We recently learned that Ameriprise is being recognized for both the high level of customer trust and service. We received one of the highest customer trust index scores among financial services firms in foresters in 2023, U.S, customer trust index. And for the fifth consecutive year, JD Power has recognized the Ameriprise for providing outstanding customer service experience, both phone support for advisors. These awards build on the external recognition we have received over the years, and are a testament to the dedication expertise of our team.

In retail as we know.

We're 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 or 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 and a number of areas, though L. D. I flows in total were down compared to a robust quarter a year ago.

In regards to our investment performance, we have strong short and long term performance across equities fixed income and asset allocation with a nice pick up in the short term fixed income and now about 70% of our asset weighted funds were above the medium for three and five year periods and more than 85% for the 10 year.

Jim Cracchiolo: Finally, in terms of profitability, wealth management continues to generate strong pretext adjusted operating margin at more than 30% and earnings growth of 23%.

Jim Cracchiolo: Now let's move to retirement and protection, which is part of our wealth management solutions offering. We're driving good sales and 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 work nicely, increasing 22% with the majority of sales in high-amodged and 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 structure product continues to attract good interest. Combined with our variable annuities without living benefits, sales are up 18% from a year ago.

<unk>.

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 and 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.

Jim Cracchiolo: In the quarter, our river source retirement interactive tool, which helps advisors 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 go on our improved yield in our high-quality investment portfolio. Excluding unlocking, pretext adjusted operating earnings were more than $200 million. Our RPS business has been highlighted as one of the most profitable in the industry.

I'd like to now come back to center stage in the total firm <unk>.

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.

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 edition of the bank, which allows us to sustain the benefit from higher rates.

Jim Cracchiolo: Let's turn to asset management. As you saw in the quarter, assets on the management were 587 billion up 7%. It remains a challenging time both in asset management and the active space in particular.

We're not standing still.

With focused on areas of opportunity for growth and at the same time, we are examining the entire expense base across the firm to further prepare if the economic environment slows as we move into and through 2024.

Jim Cracchiolo: Our flows will largely District. In retail, as we know, people are still hesitant to put money to work, so gross sales are a bit weaker. However, redemptions have improved in our overall flow rates, and the US are in line with active manages 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.

In closing, it's the totality of our complementary business and the benefits that it provides back for our excellent team that enables us to consistently achieve this level of results.

Now Walter will elaborate on our financials Walter.

Jim Cracchiolo: We're earning mandates in a number of areas, though LDI flows in total with down compared to a robust quarter a year ago. In regards 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 medium for three and five-year periods, and more than 85% for the ten-year period. This is a positive and will help our ability to garner flows in the future.

Thank you.

As Jim said strong results this quarter continued to demonstrate the leverage of our diversified business model.

Adjusted EPS, excluding unlocking and regulatory accrual up 24%.

To $7 87.

Growth in fee based and spread based revenues coupled with disciplined expense management drove excellent financial results.

Which is a continuation of a strong and sustainable trend across this market cycle.

Jim Cracchiolo: 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 target of 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.

Assets under management and administration ended the quarter at one two trillion dollars.

Up 12%.

<unk> benefited from strong client flows and market appreciation.

Across the firm we've continued to manage expenses tightly relative to the revenue opportunity within each segment.

While we continue to make investments in the bank and other growth initiatives.

Particularly in wealth management, we are taking a disciplined approach on discretionary expenses to manage margins across our businesses given the uncertainty in the macro environment.

G&A expenses were well managed in the quarter up 4%.

Excluding the regulatory accrual.

General and administrative expense grew 2% from higher business volumes and growth investments.

Jim Cracchiolo: I'd like to now come back to center stage in the total firm. Our complimentary 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%. A merit price is situated very well, including with the complimentary addition of the bank, which allows us to sustain the benefit from higher rates. We're not standing still.

Our G&A expenses remain on track with our expectations for the year.

Our consolidated margin reached a record high of 27, 5%, excluding unlocking and regulatory accrual.

Balance sheet fundamentals remain strong our.

Our portfolio is well positioned and we have strong capital and liquidity positions.

This allowed us to returned $663 million of capital to shareholders.

Strong return of 81% of our operating earnings excluding unlocking.

And a continuation of a differentiated track record.

Turning to slide six revenue growth was strong at 10% from higher interest earnings and the cumulative benefit of client net inflows.

Jim Cracchiolo: 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 complimentary business and the benefits that it provides back for our excellent team that enables us to consistently achieve this level of results.

With average equity markets up 11%.

Excluding unlocking and the regulatory accrual pre.

Pre tax operating earnings increased 20% from last year.

With meaningful benefits from strong client flows.

Your interest earnings and well managed expenses.

Let's turn to individuals' segment performance, beginning with wealth management on slide seven.

Walter Berman: Now, Walter will elaborate on our financials. Walter, thank you. As Jim said, strong results this quarter continue to demonstrate the leverage of our diversified business model. With adjusted EPS, excluding unlocking and regulatory accrual of 24% to $7.87. Growth in fee-based and spread-based revenues coupled with discipline expense management drove excellent financial results, which is a continuation of our strong and sustainable trend across this market cycle. Assets on the Management Administration ended the quarter at $1.2 trillion, up 12%. AUMA benefits from strong client flows and market appreciation. Of course, the firm would continue to manage expenses tightly relative to the revenue opportunity within each segment.

Wealth management client assets increased 15%.

$816 billion, driven by strong organic growth in client flows along with higher equity markets.

We've had 43 billion of net inflows over the past year.

With $9 billion coming in this quarter from new clients, joining the firm the deepening of existing relationships and adding experienced advisers.

Clients remains defensively positioned with a lower level of flows into wrap than we've seen historically.

Our flexible model and broad offerings allow advisors and clients to pivot as markets and client preferences shift while the money stays within the system.

Revenue per advisor reached 901000 in the quarter up 10% from the prior year from a higher spread revenue enhanced productivity and business growth.

Turning to slide eight I'd like to provide an update on client cash levels.

Walter Berman: While we continue to make investments in the bank and other growth initiatives, particularly in wealth management, we are taking a disciplined approach on discretionary expenses to manage margins across our businesses given the uncertainty in the macroenvironment. GNA expenses were well-managed in the quarter up 4%. Excluding the regulatory accrual, general administrative expense grew 2% from higher business volumes and growth investments. Our GNA expenses remain on track with our expectations for the year.

Total cash balances reached a new high this quarter at $72 5 billion.

As we continue to see new money flowing into money market funds and brokered Cds as well as into certificates. This creates a significant redeployment opportunity as markets normalize for clients to put money back to work and RAF and other products on our platform.

Cash sweep is launching working cash per our client accounts.

While there is some seasonality with cash levels cash.

Cash remains an important component of the client's asset allocation.

Walter Berman: A consolidated margin reached a record high of 27.5%, excluding unlocking and regulatory accrual, balance sheet fundamentals remain strong. A portfolio is well-positioned and we have strong capital liquidity positions. This allowed us to return $663 million of capital to shareholders. A strong return of 81% of our operating earnings excluding unlocking and a continuation of a differentiated track record. Turning to slide 6, revenue growth was strong at 10% from higher interest earnings and the cumulative benefit of client net inflows. With average equity markets up 11%. Excluding unlocking and regulatory accrual, pretext operating earnings increased 20% from last year. With meaningful benefits from strong client flows, higher interest earnings and well-managed expenses.

Cash sweep insignificant balance ended the third quarter at 45 billion down.

Down $5 8 billion from a year ago.

And down $1 5 billion sequentially.

Since the end of August cash levels have been essentially flat.

Our sweep cash has an average size of 6000 per account.

And 67% of the aggregate cash is now an accounts under $100000 and we have seen very limited movement out of these accounts.

Financial benefit from cash remains strong.

This will be an important and sustainable source of earnings going forward.

We manage our investment portfolio is prudently.

Bank portfolio is AAA rated with a three six year duration.

The overall yield on the investments in the portfolio is four 7% and rising with the new money yields on investments in the second quarter of six 5%.

Walter Berman: Let's turn to individual segment performance beginning with wealth management on slide 7, wealth management client assets increased 15% to 816 billion driven by strong organic growth and client flows along with higher equity markets. We've had 43 billion of net inflows over the past year. With 9 billion coming in this quarter from new clients joined in the firm, the deepening of existing relationships and adding experience of visors. Clients remain defensively positioned with a lower level of flows into rap than we have seen historically.

A certificate portfolio is highly liquid.

Over half of the portfolio and cash governments and agencies.

It is double a rated on average with a one year duration.

In total this.

Ticket company portfolio was now yielding five 6%.

With new purchases in the quarter at 6%.

On slide nine we delivered extremely strong financial results in wealth management.

<unk> ability, excluding the regulatory accrual increased 26% in the quarter with strong organic growth the benefit of higher interest rates and continued client net inflows.

Walter Berman: Clients remain defensively positioned with a lower level of flows into rap than we have seen historically. A flexible model and broader offerings allow a visors and clients to pivot as markets and client preferences shift while the money stays within the system. Revenue per visor reached 901,000 in the quarter of 10% from the prior year from a higher spread revenue and hands productivity and business growth.

Walter Berman: A flexible model and broader offerings allow a visors and clients to pivot as markets and client preferences shift while the money stays within the system. Revenue per visor reached 901,000 in the quarter of 10% from the prior year from a higher spread revenue and hands productivity and business growth.

Pre tax operating margin was very strong at 31, 1%, excluding the regulatory accrual adjusted operating expenses increased 9% with distribution expenses up 9%, reflecting higher asset balances.

Excluding the regulatory accrual G&A grew only 2%, which was in line with expectations, reflecting investments for growth and higher volume related activity.

Walter Berman: Turn to slide 8. I'd like to provide an update on client cash levels. Our total cash balances reached a new high this quarter at 72.5 billion. As we continue to see new money flowing into money market funds and brokerage CDs as well as anticipating. [inaudible] from a year ago, and down 1.5 billion sequentially.

We continue to expect age everyone full year 2023, G&A growth to be in the mid single digit range.

We remain on track to close the Cold Mericarp investment program partnership in November.

Which will bring approximately 100 advisors 18 billion of client assets.

Let's turn to asset management on slide 10.

Financial results were very strong in the quarter and we are managing the business well through a challenging environment that is impacting the industry.

AUM increased 7% to 587 billion, primarily from higher equity markets and foreign exchange translation, partially offset by net outflows.

Asset management like other active managers was in outflows in the quarter.

Walter Berman: Since the end of August, Cache levels have been essentially flat. A Sweep Cache has an average size of 6,000 per account, and 67% of the aggregate Cache is now in accounts under $100,000, and we have seen very limited improvement out of these accounts. The financial benefit from Cache remains strong. This will be an important and sustainable source of earnings going forward.

Others, we experienced pressure from global market volatility and a risk off of investor sentiment.

Investment performance has been in other critical area of focus and we are seeing improvement, including in fixed income strategies overall.

Long term performance remains very strong and we had improvement in one year fixed income numbers.

On slide 11 in the quarter asset management earnings increased to $199 million as a result of equity market appreciation.

Walter Berman: We can manage our investment portfolios prudently. A bank portfolio is triple-a rated with a 3.6-year duration. The overall yield on the investments in the portfolio is 4.7% and rising with the new money yield on investments in the second quarter of 6.5%. A certificate portfolio is highly liquid, with over half of the portfolio in cash, governments, and agencies. It is double-a rated on average with a 1-year duration. In total, the certificate company portfolio is now yielding 5.6%, with new purchases in the quarter at 6%.

<unk> expense management.

Higher performance fees and $7 million of favorable timing related items.

Which more than offset the cumulative impact of net outflows.

Our margin was 36% in the quarter importantly.

Importantly, we continue to manage the areas we can control.

Expenses remain well managed total expenses declined 1% with G&A decreasing $1 million power.

However, excluding the impact from foreign exchange translation.

G&A was down 3%, reflecting early benefits from expense management initiatives.

Walter Berman: On slide 9, we delivered extremely strong financial results in wealth management. Profitability, excluding the regulatory accrual, increased 26% in the quarter, with strong organic growth, the benefit of higher interest rates, and continued coin net inflows. The pretext operating margin was very strong at 31.1%, excluding the regulatory accrual. Adjusted operating expenses increased 9%, with distribution expenses up 9%, reflecting higher asset balances. Excluding the regulatory accrual, GNA grew only 2%, which was in line with expectations, reflecting investments for growth, and higher volume related activity. We continued to expect AWN full-year 2023 GNA growth to be in the mid-single-digit range.

As Jim said, given the environment, we are taking a very focused look across the business globally to further reduce expenses.

Let's turn to slide 12.

Retirement and protection solutions continues to deliver good earnings and free cash flow generation.

Reflecting the high quality of the business in the quarter pre tax adjusted operating earnings excluding unlocking were $204 million up 4% from the prior year, primarily as a result of the higher investment yields from the portfolio repositioning we executed last year.

We continue to view normalized annual earnings of $800 million is a reasonable expectation for this business.

We completed our annual actuarial assumption update in the quarter, resulting in an unfavorable pretax impact from a $104 million.

Walter Berman: We remained on track to close the Co-America Investment Program Partnership in November, which will bring approximately 100 revises in 18 billion of coin assets.

Primarily related to updates to persistency assumptions with variable annuities.

Overall retirement and protection solutions improved in the quarter.

Walter Berman: Let's turn to asset management on slide 10. Financial results were very strong in the quarter, and we are managing the business well through a challenging environment that is impacting the industry. Total AUM increased 7% to 517 billion primaries from higher equity markets, and foreign exchange translation, partially offset by net outflows.

We're protection sales up 22% to $79 million, primarily in higher margin UL products.

Variable annuity sales grew 18% to $1 1 billion with the majority of the sales and structured variable annuities.

Our long term care business continues to perform very well.

The business is gradually running off as clients age.

Walter Berman: As a management, like other active managers, was in outflows in the quarter. Like others, we experienced pressure from global market volatility and a risk of investor sentiment. Investment performance has been another critical area of focus, and we are seeing improvement, including in fixed income strategies. Overall, long-term performance remains very strong, and we had improvement in one year fixed income, from Numbers.

Our claims experience continues to perform very well.

We remain in line with our expectations. Additionally.

Our success with both rate increases and benefit reduction strategies have exceeded our expectations.

You can see additional detail of this block and the appendix of this presentation.

Now, let's move to the balance sheet on slide 13.

Walter Berman: On slide 11 in the quarter, as the management earnings increased to $199 million, as a result of equity market appreciation, discipline expense management, higher performance fees and $7 million of favorable timing-related items, which more than offset the cumulative impact of net outflows. The margin was 36% in the quarter. Importantly, we continue to manage the areas we can control. Expenses remain well-managed, total expenses decline 1% with GNA decreasing $1 million. However, excluding the impact from foreign exchange translation, GNA was down 3% reflecting early benefits from expense management initiatives.

Balance sheet fundamentals remain strong and our diversified high quality investment portfolio remains well positioned.

In total yes.

The average credit rating of the portfolio is double a.

With less than 1% of the portfolio and below investment grade securities.

VA hedge effectiveness remained very strong at 94%.

Our diversified business model benefits from significant and stable, 90% free cash flow contributions across all business segments.

This supports the consistent and differentiated level of capital returned to shareholders.

During the quarter returned $663 million to shareholders.

And still ended the quarter with $1 4 billion of excess capital and $1 9 billion of holding company available liquidity.

Walter Berman: As Jim said, given the environment, we are taking a very focused look across the business globally to further reduce expenses.

With that we'll take your questions.

Walter Berman: Less turns to slide 12. Retirement and protection solutions contain the delivered good earnings and free cash flow generation reflecting the high quality of the business. In the quarter, pre-tax-adjusted operating earnings, excluding unlocking, were $204 million of 4% from the prior year. Primarily, as a result of the higher investment yields from the portfolio repositioning we executed last year.

Thank you we will now begin the question and answer session.

If you have a question. Please press star one on your Touchtone phone.

If you wish to be removed from the queue. Please press star one again.

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 star one on your Touchtone phone.

Our first question is from Steven <unk> with Wolfe Research Your line is open.

Walter Berman: We continue to view normalized annual earnings of 800 million as a reasonable expectation for this business. We completed our annual actuarial assumption update in the quarter resulting in an unfavorable pre-tax impact of 104 million, primary-related updates to persistency for variable nudies. Overall, retirement and protection solutions improved in the quarter. With protection sales of 22% to 79 million, primarily in higher margin, the UL products. Variable nudie sales grew 18% to 1.1 billion with the majority of the sales and structured variable nudies.

Hi, good morning.

So wanted to start with a two part question on organic growth within wealth had another solid quarter of flows but the pace didn't moderate slightly for you and frankly some of your wealth peers as well just given the challenging operating backdrop I was hoping first that you could speak to your confidence level in sustaining that mid single.

Did you flow right and then second with the Onboarding of Comerica any color you can share on the growth outlook, our backlog for new mandates within the bank channel.

Okay I'll start.

Walter Berman: Long-term care business continues to perform very well. The business is gradually running off as clients age. Our claims experience continues to perform very well and remain in line with our expectations. Additionally, our success with both rate increases and benefit reduction strategies have exceeded our expectations. You can see additional detail of this block and the appendix of this presentation.

When we look at the flow rate from our clients, but we still feel very good about the ability to bring in client flows and where we are approaching the market, particularly as we move a bit more upmarket.

As you would imagine I mean, there are some.

Blips to 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 and we see it as a more of a sustainable based on what we're doing how advisors are engaged and how they are attracting clients and activity in the marketplace. So we still feel very.

Walter Berman: Now let's move to the balance sheet on slide 13. A balance sheet fundamentals remain strong and our diversified high-quality investment portfolio remains well-positioned. In total, the average credit rating of the portfolio is double A with less than 1% of the portfolio in below investment grade securities. VA hedge effectiveness remain very strong at 94%. Our diversified business model benefits from significant and stable 90% free cash flow contributions, of course, all business segments. This supports the consistent and differentiated level of capital return to shareholders.

Good about our ability to continue on the client flow rate as far as the.

Cool.

Do you want to mentioned Coke.

Yes, obviously, we're on target for closure with the MLR in the beginning of November and yes, we do have a very active pipeline at this stage.

So yes, it's.

We feel that theres opportunity.

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 was pleasantly surprised by the margin strength. The resiliency that we saw in the quarter was hoping you could just speak to your margin outlook if flow headwinds per.

Walter Berman: During the quarter, we return 663 million Charles, and still ended the quarter with 1.4 billion of excess capital and 1.9 billion of holding company available liquidity.

Test and whether there is additional expense flexibility to defend those margins and stay within your targeted range of 31% to 35%.

Operator: With that, we'll take your questions. Thank you.

Operator: We will now begin the question and answer session. If you have a question, please press star one on your touchstone phone. If you wish to be removed from the queue, please press star one again. If you're using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star one on your touchstone phone.

So as you saw firsthand the fee level, it's been very stable, which is very positive again, you you're going to always have some adjustments based upon where the assets and the type of assets institutional retail but.

From an outlook perspective, we are just beginning our expense tightening there.

Steven Chubak: Our first question is from Steven Chubak with Wolf Research. Your line is open. Hi, good morning.

A reduction expense around 3% on an FX adjusted but we feel there's a good opportunity for us as we look at our global operating environment now that we've fully integrated the.

Jim Cracchiolo: So, I wanted to start with a two-part question on organic growth within wealth. You had another solid quarter of flows, but the pace didn't moderate slightly for you and frankly, some of your wealth peers as well. Just given the challenging operating backdrop, it was hoping first that you could speak to your confidence level and sustaining that mid-single digit flow rate, and then second, with the onboarding of Comerica, any color you can share on the growth outlook or backlog for new mandates within the bank channel.

The BMO acquisition onto our global platforms and now we're looking at how we and tighten those processes, how we improve the efficiency the operating effectiveness and where resources are located et cetera. So we're taking a very hard look at that and we're at the beginning stages of that not the end.

Really helpful color. Thanks, so much for taking my questions.

Yeah.

The next question is from Alex Blaustein with Goldman Sachs. 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 up-market. 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 some of the time, things load a bit, but we don't see that as sort of a trend line down.

Jim Cracchiolo: We see it as more of a sustainable based on what we're doing, how advisors are engaged, and how they're attracting clients and activity in the marketplace. So, we still feel very good about our ability to continue on the client flow rate.

Hey, guys. Good morning, Thanks for the question as well.

So first maybe around cash in advice and 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 in off balance sheet sweep deposits does that leave you much room to move more into the bank or the group at 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.

Okay.

As far as the Co-American, you want to mention Co-American? Yes, obviously we're in total target for our closure with them in the beginning of November, and yes, we do have a very active pipeline at the stage. So, yes, we feel that there's opportunity. That's great.

Jim Cracchiolo: As far as the Co-American, you want to mention Co-American? Yes, obviously we're in total target for our closure with them in the beginning of November, and yes, we do have a very active pipeline at the stage. So, yes, we feel that there's opportunity. That's great.

I think the question is we ended the quarter at 28 billion on sweep.

As of October 28 billion Okay.

So it is totally stabilized from that standpoint, yes, we do have a certainly a buffer to move into the bank. We are just being very measured and cautious at this stage as we're reevaluating the environment, but we do have certainly a buffer to move additional land.

Walter Berman: 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, was pleasantly surprised by the margin strength, the resiliency that we saw in the corridor, with so many you could just speak to your margin outlook if flow headwinds persist, and whether there's additional expense flexibility to defend those margins, and stay within your targeted range of 31 to 35%. So, as you saw first on the feet level, it's been very stable, which is very positive. Again, you're going to always have some adjustments based upon where the assets and the type of assets institutional retail.

Great and zooming out a little bit on given your comments around expenses in your 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 2020 for G&A growth firm wide.

Relative to what you are likely to do in 2023.

So Alex we're.

Definitely in that review now what I would say is to.

To start the G&A would be flat at best.

At worst that me and a sense of that it's not going up [laughter] got it.

Walter Berman: But from an outlook perspective, we're just beginning our expense tightening there. You saw a reduction expense around 3% on an FX adjusted. But we feel there's a good opportunity for us as we look at our global operating environment, now that we've fully integrated the BIMO acquisition onto our global platforms, and now we're looking at how we entitian those processes, how we improve the efficiency, the operating effectiveness, and where resources are located, et cetera. So, we're taking a very hard look at that, and we're at the beginning stages of that, at the end.

That's a 24 over 23 correct yep.

Okay. Thank you.

Steven Chubak: Really helpful, Collar.

And remember you got merit and other things that occur but were going to absorb all of that and we're looking for it not to be higher than.

Right.

Got it appreciate it thanks.

Yes.

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

Okay.

Thanks, Good morning, everyone. Thanks for taking the question.

So I was looking for an update on the recruiting front financial.

<unk> financial advisor head count was down in the quarter franchise retention was lower than 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 for both recruiting and head count growth over the next 12 months.

Operator: Thanks so much for taking my questions.

Alex Blostein: The next question is from Alex Blostein with Goldman Sachs. Your line is open. Hey guys, good morning. Thanks for the questions. Well, so first, maybe around cash and advice and 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 in a balance sheet sweep deposits.

So we as we mentioned recruiting was a bit slower in the third quarter, but it started to bounce back.

Towards the latter part of the quarter July started a bit slower I think people have vacations and other things as you probably saw around the country, but we saw that bounce back in September the pipeline is quite strong that we think we'll get back to our consistent rate.

And then you mentioned a little bit of an uptick in attrition the attrition really in the that channel was mainly due to assistant financial advisors, which is again the turnover there is a bit higher all the franchisees or the retention rate is still at all time highs.

Alex Blostein: 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. Okay, I think the question is, you know, we ended the quarter at $28 billion on sweep. And as of October, it's $28 billion. Okay. And so it is totally stabilized in that standpoint.

And that book of business days, so it's more of some assistance in their practices as they make some changes.

So we don't see any change in where we were.

Alex Blostein: Yes, we do have certainly a buffer to move into the bank. We are just being very measured and cautious at this stage as we were evaluating the environment, but we do have certainly a buffer to move additional in.

Thanks, Tim and then on the client cash balances I was wondering if you could just share with the Roe's look like on the certificates business compared.

Compared to your core cash balances and products.

And just update us on if you are what are your plans to grow. This space. Further I think you have to hold about 5% capital against the asset base.

Jim Cracchiolo: Great. And zooming out a little bit on giving your comments around expenses and your early and stages of maybe doing more on the asset management side, but also managing GNA tightly across the firm. Any early thoughts on 2024, GNA grills from wide relative to what you're likely to do in 2023? So Alex, we're definitely in that review now. What I would say is to start the GNA would be flat at best.

And also I think there's probably some value and extending.

Jim Cracchiolo: I mean, at worst, that means in a sense of that, it's not going up. And that's a 24 over 23, correct? Yeah. Okay. Thank you. Okay. And remember, you got meriting other things that occur, but we're going to absorb all that, and we're looking for it not to be higher than being flat. Got it. Appreciate it. Thanks.

<unk> to third parties it helps expand your brand et cetera.

Let me take the first part of the question on certificates.

Yes.

Certificates as a regulatory item that has a 5% capital elements.

Elements associated with that but when we evaluated we obviously as I said in it.

So thats the regulatory portion of it and so we feel very comfortable with that and and the growth potential. There is certainly we have adequate.

Capital and cash to support that so that is a that is the.

Arrangements, we operate.

And then certainly.

It's been growing and we've been supporting.

The second part the second part you mentioned is the opportunity to bring in more external cash if I understood that correctly and yes, we're very much focused as we've said we initially put a savings product. We're looking at more of a preferred type of thing to bring more cash in from other <unk>.

Craig Swaginthaler: The next question is from Craig Swaganthaler with Bank of America. Your line is open. Thanks.

Operator: Good morning, everyone. Thanks for taking the question.

Jim Cracchiolo: So I was looking for an update on the recruiting front. Financial advisor head count was down in the quarter. Franchise retention was lower. And the 64 new recruit count was also below the part of run rate.

Clients other outside banking activities.

We're 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.

Jim Cracchiolo: So I was just wondering if you can give us an update for your expectation both for recruiting and FAA head count growth over the next 12 months. Yes. So as we mentioned, recruiting was a bit slower in the third quarter, but it started to bounce back towards the latter part of the quarter. July started a bit slower. I think people of vacations and other things, as you probably saw around the country, but we saw that bounce back in September.

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 with the advisors and the only thing I would add to that is that you know obviously, we have more than Nevada.

Support that sort of growth that Jim was referring to.

Jim Cracchiolo: The pipeline is quite strong. If we think we'll get back to our consistent rate. And then you mentioned a little bit of an uptick in attrition. The attrition really in the that channel would mainly due to assistant financial advisors, which is again, the turnover there is a bit higher. All the franchisees, the retention rate is still at all time highs. And that book of business stays. So it's more of some assistance in their practices as they make some changes. So we don't see any change in where we were.

Thank you.

Jim Cracchiolo: Thanks, Jim.

Yes.

The next question is from so you need canvas with Jefferies. Your line is open.

Good morning, I wanted to go to that slide.

Talked about the $32 billion of third party cash.

I guess.

That piece has grown substantially and then I guess the question is what do you think needs to happen.

In order for that to get deployed because it sounds like youre thinking some of it may go into wrap but then your offering these newer bank products that might move some of that third party cash to your own products. So maybe just give us a sense of how you think that will develop as we move forward here. Thanks.

Jim Cracchiolo: And then on the client cash balances, I was wondering if you could just share what the RREs look like on this certificate's business compared to your core cash balances and products. And just update us on what are your plans to grow this base further. I think you have to hold about 5% capital against the asset base. And also, I think there's probably some value in extending CDs to third parties. It helps expand your brand, etc.

So as the need I think that that's really the larger question right and that depends on how people feel about the market and where rates are going forward right. So I think if you saw the market over the last number of quarters.

It increased tremendously with a lot of volatility and people were concerned I had a few stocks drove that up now.

Now you see a pullback of current right. So I think if the market starts to feel like it's on a better.

Jim Cracchiolo: Let me take the first part of the question on the certificate. Yes. Certificates as a regulatory item has a 5% capital element associated with that. But when we evaluate it, we obviously assess it and it's, so that's the regulatory portion of it. So, we feel very comfortable with that. And the growth potential there is certainly we have adequate more capital and cash to support that. So, that is the range in which we operate on.

More solid footing I think people will start to deploy back I also think that as rates if they stabilize on the long term up where they are rather than continue to rise you'll see money move from the show it to the long term to lock it in right and get that appreciation and the spread so I don't have a crystal ball.

Oh God.

I think you know.

We're holding extra cash for the reason that we feel a little bit regarding the environment and where the markets are.

Jim Cracchiolo: And then certainly, it's been growing and we've been supporting it. The second part, the second part you mentioned is the opportunity to bring in more external cash if I understood that correctly. And yes, we're very much focused. As I said, we initially put a savings product. We're looking at more of a preferred type of thing to bring more cash in from clients, other outside banking activities. We're going to be putting in place a full checking account and then some various lending products as well.

But that will go back people are don't hold that amount of cash that loan at that percentage that we're seeing right now and I think that's across the industry not just in our channel.

No.

But it's good that stays with US right now and when it is ready to delight. Our advisors will definitely do that they look we're investing for the long term not just to take advantage of the market in the short term.

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

Jim Cracchiolo: So, we will look to establish a more full fledged banking activity with the ability to track more assets externally into the bank that would also help bring more assets on board in total for the client activities for the advisors. And the only thing we're able to do to that is, you know, obviously, we have more than enough adequate to support that sort of growth there. Jim was just referring to it.

Yes.

We're looking to do that over the course of the new year.

No.

We're looking to phase that in and right now we're just looking at the climate and looking at.

The operating activities for that so we feel good about getting things up and running in the bank in more of a full fledged fashion. So it'll be periodic will alert you to it as we go about it.

Makes sense and then maybe just if I could sneak one more in on expenses for Walter I think you said flat in 2024 relative to 'twenty three should we think about the segment level should we assume.

Sunit Kammeth: Thank you. The next question is from Sunit Kammeth with Jeffries. Your line is open. Thanks. Good morning. I wanted to go to that slide that talked about the 32, billion dollars 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're thinking some of it may go into RAP, but then you're offering these newer bank products that might move some of that third-party cash to your own product. So, maybe just give us a sense of how you think that will develop as we move forward here. Thanks.

A little bit of a decline in asset management offset by some growth in advice <unk> wealth management, just in terms of the moving pieces there.

I think thats, a reasonable assumption and obviously, we are focused on <unk> and looking to preserve margin and certainly continue to do well.

Let's take advantage of the growth opportunities in AWS, but still prudently managing expenses and Sydney I mean across the firm we're going to look for that to be pretty managed pretty tightly okay. So.

I don't have a.

Jim Cracchiolo: Yeah, so Sunit, I think that's really the logic question, right? And that depends on how people feel about the market and where rates are going forward, right? So, I think, you know, if you saw the market over the last number of quarters, it increased tremendously with a lot of volatility and people were concerned, right? A few stocks drove that up. Now, you see a pullback occurring, right? So, I think if the market starts to feel like it's on a better, more solid footing, I think people will start to deploy back.

Firm number at this point in time, but as I said I feel good to start with about G&A flat.

Jim Cracchiolo: I also think that as rates, if they stabilize on the long-term up where they are, rather than continue to rise, you'll see money move from the short to the long-term to lock it in, right, and get that appreciation and the spread. So, I don't have a crystal ball, but I think, you know, we're holding extra cash for the reason that we feel a little bit of regarding the environment and where the markets are, but that will go back.

Got it okay. Thank you.

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

Good morning first question just a follow up on the $32 billion of third party client cash do you currently earn any fee on that money at all from an administration perspective or would that all be revenue upside if that gets deployed into your wrap account.

This is <unk>.

It's marginal.

I'd say it's bigger.

Figure on four or five basis points, but the real opportunity of redeployment will provide us the op.

Certainly.

Margin and the profitability of your potential.

Gotcha.

<unk>.

Let's see the other question I had was on there.

Variable annuity reserve charge.

Jim Cracchiolo: People don't hold that amount of cash at that percentage that we're seeing right now, and I think that's across the industry, not just in our channel. So, you know, but it's good. It stays with us right now, and when it's ready to deploy, our advisors will definitely do it. They look, they're investing for the long-term, not just to take advantage of the market in the short. Time.

I know when some other companies have taken.

Reserve strengthening under the new accounting that there has been an ongoing earnings drag. In addition to the reserve charge any anything like that to consider for the variable annuity charge. Walter I think I heard you say that $200 million a quarter was still intact on guide so I presume that means probably not much but just just care.

Jim Cracchiolo: And can you just provide some timing on when you're planning on rolling out some of those other banking products that you mentioned in response to earlier questions? Yeah, we're looking to do that over the course of the new year. So we're looking to phase that in. And right now we're just looking at the climate and looking at, you know, the operating activities for that. So we feel good about getting things up and running in the bank in one of the full-fledged fashion. So it'll be periodic. We'll alert you to it as we go about. Makes sense.

If there is any impact there.

You are correct, it's probably not much in the answer is no really.

And any anything differ.

Okay. Thanks, and then any should there be a similar <unk> charge on a statutory basis for the same assumption changes or is that still TBD.

I think that's still TBD.

And then if I could sneak in a final one long term care I saw your updated disclosures, which I thought was was helpful.

Walter Berman: 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, we think about the segment level. Should we assume, you know, a little bit of a decline in asset management offset by some growth and advice and wealth management, just in terms of the moving pieces there? Yeah, I think that's a reasonable assumption. Obviously we are focusing on CTIs and looking to preserve margin and certainly continue to take advantage of the growth opportunities in AWM but still brutally managing the expenses. Yeah, and Sunni, I mean across the firm, we're going to look for that to be pretty managed pretty tightly.

I I guess.

Considering that this block continues to shrink it looks like the risk is well managed.

Is this risk transfer still a consideration here.

Or is the bid ask spreads still too wide.

Or should we really think about you most likely continuing to own it considering the risk continues to shrink.

Over the years, we certainly have been able to demonstrate that we are managing the risk very effectively so.

Sunit Kammeth: Okay, so I mean I don't have a firm number at this point in time, but as I said, I feel good to start with about DNA flat. Got it. Okay, thank you.

A risk transfer would have to consider that and really have in a very.

Balanced.

Bid ask them because the portfolio is performing quite well and.

As indicated in the observations that you made about it so yes, we feel very comfortable and retaining but if somebody comes along with something that is.

Tom Gallagher: The next question is from Tom Gallagher with Evercore. Your line is open. Morning, first question just to follow up on the 32 billion of third-party client cash. Do you currently earn any fee on that money at all from an administration perspective, or would that all be revenue upside if that gets deployed into your RAP account? It's current map statement. It's it's marginal. I would say it's, you know, bigger on four or five basis points, but it's the real opportunity of redeployment that will provide us the opposite. It's certainly the margin and profitability of potential.

Certainly the best interest of shareholders consider it.

But over the last number of years, it's performed better than we expected in many instances.

And proved in that sense, and we haven't factored in some of the other things that has affected through COVID-19 as a positive yet.

Thanks.

The next question is from Brennan Hawken with UBS. Your line is open.

Good morning, Thanks for taking my questions.

Walter Berman: Gotcha. The, let's see, the other question I had was on the variable annuity reserve charge. I know when some other companies have taken reserve strengthening under the new accounting that there's been an ongoing earnings strike, in addition to the reserve charge, anything like that to consider for the variable annuity charge. Walter, I think I heard you say the 200 million a quarter was still intact on guide. So I presume that means probably not much, but just just curious if there's any impact there. You're correct. It's probably not much, and then the answer is no really.

Thanks for all the color on the cash dynamics here intra quarter and quarter to date.

Certainly sounds encouraging.

I guess does that mean that.

We could get back to it.

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 high that period. Thanks.

Walter Berman: And anything to, okay, thanks. And then, any, should there be a similar 4Q charge on a statutory basis for the same assumption changes, or is that still TBD? I think that's still TBD.

So.

As you can see it truly has stabilized and as we bring new year's and that certainly is growth and certainly as we have organic growth that is an opportunity.

Right now I can't predict environments and things like that but we feel very good because of the stability of the sweep account as we said a substantial portion of that.

Walter Berman: And then, and then if I get to meet in a final one, long-term care, I saw your updated disclosures, which I thought was, was helpful. I guess considering that this block continues to shrink, it looks like the risk is well managed.

Close to 70%, 67% is in account balances that are under 100000 average compounds things X I think so it's very stable, it's working working capital and working cash that's deployed so yes, we certainly as we grow we anticipate outgrowing, but again there is a lot of variables here yes.

Walter Berman: Is risk transfer still a consideration here, or is the bid-ass spread still too wide, or should we really think about you most likely continuing to own it, considering the risk continues to shrink? Also, 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 balanced bid-ass and because the papolio is performing quite well, and as it's indicated in the observations that you made about it.

And again I think if you start to see a change in the rate environment and the market stabilized there there's money being held out and Mike brokered Cds and 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 again.

There is a number of different variables, we can't really predict that but our our.

Cash rate, that's holding and sweep is pretty low so if anything we think that if activity picks up that could increase again.

Walter Berman: So, yes, we feel very comfortable and retained, but if somebody comes along with something that is certainly the best interest, your hold will consider it. So, over the last number of years, it's performed better than we expected in many instances, and improved in that sense, and we haven't factored in somebody other things that has affected true COVID as a positive yet.

Got it and so do you think that.

Now that we've had stability in the sweep.

Likewise, we can think about.

Operator: Thanks.

Maybe there's a little bit of a lag or whatnot, but there is some stability in NII when we sum up both the on balance sheet and off balance sheet, which has been a quarterly kind of.

Slide in a little bit here year to date are we at a period, where maybe that's going to get to flat.

Flat line and return to the algorithm of growing with cash balances.

Brennan Hawken: The next question is from Brennan Hawken with UBS. Your line is open. Good morning. Thanks for taking my questions. Thanks for all the color on the cash dynamics here, intra-quarter and quarters of date, and 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 sweet 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?

Rates all else equal of course.

Yes, we do there is opportunity there and we do see that.

We have opportunity to grow.

No no no.

Outstanding. Thank you with the reasons that you mentioned and certainly as we have the maturities coming in because of the short duration of our elements coming from those factors.

We feel comfortable with.

Brennan Hawken: And when do you think we could get to that period? Thanks. So, obviously, as you can see, it truly has stabilized, and yes, as we bring new years in, and that certainly is growth, and certainly as we have organic growth, that is an opportunity. Right now, I can't predict environments and things like that, but we feel very good because of the stability of the sweet count, as we said, the substantial portion of that's close to 70% to 67%, is in account the balances that are under 100,000, the average count balance being 6, I think.

Yes, one of them.

Great.

Great. Thanks very much.

The next question is from Ryan Krueger with <unk>. Your line is open.

Thanks. Good morning first question was can you give a sense of how much bank assets.

We'll roll out will mature next year to reinvest that potentially higher rate.

So you're saying on buyback now maturing bank assets that would be reinvested.

Brennan Hawken: So, it's very stable. It's working. Working capital and working cash that's employed. So, yes, certainly, as we grow, we anticipate that growing, but again, there's a lot of variables here. Yeah. And again, I think if you start to see a change in the rate environment and the market stabilized, there's money being held out, and Mike Berkett see these and stuff, that when they mature, it could possibly come back in. And when money is more active and investing, then they keep more in the sweep and the balances to deploy.

Oh.

I believe it's.

It's in the area of about $2 billion I believe but.

Brennan Hawken: So, again, there's 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. Got it. And so, do you think that, now that we've had stability in the sweep, likewise, we can think about, you know, maybe there's a little bit of a lag or whatnot, but there's some stability in NII, you know, when we sum up both the on balance sheet and off balance sheet, which has been, you know, quarterly kind of sliding a little bit here, year to date, are we going to, at a period where maybe that's going to begin to flatline and return to the algorithm of growing with cash balances?

We will confirm that with you.

Okay. Thanks, and then I guess I had one more question on the $32 billion of third party cash.

Do you view the opportunity primarily.

As clients move more money back into the market to capture some of that through RAF or do you think theres some opportunity to capture some of the 32 billion with the bank products that you're rolling out.

Well I would probably say the.

First and foremost would be you know as I said with the markets I would think that more will go back to work and solutions like rap that would have a balance of equities and fixed incomes and alternatives.

Along those lines.

I also feel like as we do rollout some of these other products that yes. It will go on us.

Internal cash as well.

Rather than moving it out into other vehicles like a brokered CD.

And just based on a combination of the environment and the security of Ameriprise. So 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.

Understood. Thank you.

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

Yeah.

Brennan Hawken: Rates, all else equal, of course. Yes, we do. There is opportunity there. We do see that we have opportunity to grow, and so on. Thank you. The reason that you mentioned, Dan certainly has, as we have the maturities coming in because of us, we're doing some other elements coming up in those factors. We certainly feel comfortable with what I was saying, yes, on that point. Great. Thanks very much.

Yeah.

Okay.

Yeah.

Okay.

Yeah.

Ryan Krueger: The next question is from Ryan Krueger with KVW. You're going to see how much bank assets will mature next year to reinvest that potentially higher rate. Just saying I'm going back where we're going to now, maturing bank assets that would be reinvested.

Jim Cracchiolo: I believe it's, again, it's in the area of about $2 billion, I believe, but we'll confirm that with you. Okay, thanks. And then, I guess I had one more question on the 32 billion of third-party cash. Do you view the opportunity primarily just as clients get, you know, move more money back into the market to capture some of that through RAF, or do you think there's some opportunity to capture some of the 32 billion with the bank products that you're rolling out?

Jim Cracchiolo: Well, I would probably say, you know, the first and foremost would be, you know, as I said, with the markets, I would think that more would go back to work in solutions like RAF that would have a balance of equities and fixed incomes and alternative stuff that has since along those lines. I also feel like as we do roll out some of these other products that, yes, it will go on as some internal cash as well, rather than moving it out into other vehicles like a broken CD.

Jim Cracchiolo: And just based on the combination of the environment and the security of a merit prize. 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 RAF business.

Jim Cracchiolo: Understood. Thank you.

Operator: We have no further questions at this time.

Operator: This concludes today's conference. Thank you for participating.

Operator: You may now disconnect.

Q3 2023 Ameriprise Financial Inc Earnings Call

Request a DemoDemo

AMP

Ameriprise Financial

Earnings