Q4 2023 Ameriprise Financial Inc Earnings Call
Have a list of factors and risks that could cause actual results to be materially different from forward looking statements can be found in our fourth quarter 2023 earnings release.
Our 2022 annual report to shareholders.
And our 2022 10-K report.
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 fourth quarter.
Below that you see adjusted operating results, 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.
Jim: 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.
Jim Smith: Good morning, everyone I hope that 2024 started off well for each of you as you saw in our earnings release Ameriprise delivered a strong fourth quarter to complete an excellent year.
Jim Smith: I'm proud of our team and what we've accomplished we've navigated the environmental uncertainty well supported our clients and further demonstrated the strength of our value propositions.
Jim Smith: Regarding the operating environment, what was more positive in 2023 and start the new year. We know there are questions regarding the continuation of economic growth inflation and the timing of interest rate reductions.
Jim Smith: Of course markets are unpredictable.
However at Ameriprise, our expertise is preparing both our clients and the business to be successful even in an uncertain climate.
Jim Smith: Now with that backdrop, let's move to our results.
Jim Smith: For the quarter revenue growth continued to be robust up 8%, reflecting good organic growth and positive markets.
Jim Smith: We again generated strong earnings growth with EPS up 10% or 14% normalized for the items referenced in our press release.
Jim Smith: And our nearly 50% ROE is consistently among the best in the industry.
We also delivered excellent full year adjusted operating results, excluding unlocking and the items. We referenced revenue was $15 4 billion up 8% earnings increased 18% to $3 3 billion.
And our EPS was $30 46 up another 24%.
Jim Smith: In fact, these are record results for Ameriprise and assets under management and administration were near an all time high at one four trillion.
Jim Smith: Across the firm, we're very well positioned to help investors with our compelling client experience in complement of businesses capabilities and talented team.
Jim Smith: With regard to some business highlights wealth management delivered another strong quarter.
Jim Smith: Our efforts are centered on engaging more people and our advice based client experience, which helps our clients achieve more vehicles and creates higher satisfaction net flows and productivity growth.
Jim Smith: Client acquisition was up nicely in the quarter, especially in the $500 million to $5 million client segment.
Jim Smith: Total client assets increased to a new record of $901 billion up 19% and client flows were approximately $23 billion.
Jim Smith: Total transactional activity picked up a bit in the quarter.
Jim Smith: However, given the environment clients continued to maintain higher cash levels with assets in cash products growing to about $82 billion.
Jim Smith: Over time, we expect these assets will be further deployed as clients returned to the markets more fully.
Jim Smith: Year after year, our advisor productivity growth is consistently among the best in the industry.
In fact, it increased another 11% to a new high of $916000 per adviser in the quarter.
Jim Smith: Our field force is highly engaged and they value the ameriprise culture as through the experienced advisors we recruit.
In the quarter, we brought on board 166 productive advisors, which includes the co America advisers, who joined Us <unk>.
Jim Smith: Recruits tell us that associating with Ameriprise is given the strong client value proposition integrated technology and the leadership support they need to provide first class service to their clients and grow their practices.
Jim Smith: Our bank continues to provide benefits and grow nicely.
James M. Cracchiolo: <unk> and certificate assets increased 28% to $37 billion.
James M. Cracchiolo: We see good opportunity here to further deepen client relationships and bring in more of our client assets that they hold that other banking institutions.
James M. Cracchiolo: As you can see our consistent focus and investment in the business is driving strong results.
James M. Cracchiolo: And we're not standing still we continue to invest significantly drive further efficiency and organic growth.
James M. Cracchiolo: <unk> is using our integrated E meeting capability customer relationship platform, an online advisor dashboards find that these tools to enhance their ability to deliver for our clients and manage their practices as well as identify growth opportunities.
James M. Cracchiolo: We're also leveraging advanced analytics, and accelerated and enhancements to our mobile and digital experiences on our public and secure sites to engage more clients and prospects.
James M. Cracchiolo: I'd also highlight that Ameriprise brand awareness is strong and steady and our growth opportunity continues to be significant.
James M. Cracchiolo: And prospects across segments need meaningful contact and advice more than ever and that's where we're concentrated.
James M. Cracchiolo: Earlier this month I met with our field leaders to kickoff the year, they're highly engaged and energized about our position and ability to build on our success in 2024.
James M. Cracchiolo: Next in retirement and protection, we're driving good sales. These solutions help serve our clients' comprehensive needs in the business is consistently strong earnings contributor. The team is focused on providing a best in class experience with an ease of doing business and it's resulting in better sales.
James M. Cracchiolo: Variable annuity sales were up 15% with good sales and our structured product protection sales were up 6% driven by our higher margin <unk> product.
James M. Cracchiolo: In addition, we just introduced new enhancements to our core product lines to help further serve our clients' evolving protection and income needs.
James M. Cracchiolo: Moving to asset management, we continue to serve clients in an evolving market.
James M. Cracchiolo: Assets under management grew nicely in the fourth quarter up 9% to $637 billion.
James M. Cracchiolo: Driven by market appreciation and positive foreign exchange.
James M. Cracchiolo: In terms of some color on flows our U S retail mutual fund outflows were in line with the industry, though they remain pressured we had a bit of a pickup in gross sales and redemptions have slowed from a year ago.
James M. Cracchiolo: U K retail remains soft and we are seeing some improvements in Europe.
James M. Cracchiolo: For global institutional outflows were elevated as we expected due to the actions, we took to realign resources, including portfolio management changes.
James M. Cracchiolo: Our product capabilities are extensive and the team is concentrating on regaining sales momentum.
James M. Cracchiolo: Performance is critical to that and we're delivering consistent competitive investment performance that reflects our research expertise our three five and 10 year numbers are very strong and we saw a nice pickup in the one year fixed income numbers and I highlight that we continue to have 113, four and five star Morningstar rated funds in our line.
James M. Cracchiolo: Like other active managers, we're managing industry pressure and doing a great deal to refine our operating processes, while reducing expenses globally.
James M. Cracchiolo: We're enhancing our efficiency and effectiveness, while making good investments, including in data and analytics with focused on leveraging our performance as well as our global distribution and servicing capabilities.
James M. Cracchiolo: So for Ameriprise. It was another great year, and a continuation of our significant growth over many years and.
James M. Cracchiolo: In addition, we built on our record of strong financial performance, including generating one of the best <unk> in the industry.
James M. Cracchiolo: And with that we consistently demonstrate our ability to return to shareholders in the fourth quarter Ameriprise returned another $587 million for the full year, we returned $2 $5 billion to shareholders.
Over the last five years, we returned a substantial amount to shareholders that resulted in a share count reduction of 25%.
James M. Cracchiolo: As I look at Ameriprise, we continue to be well positioned.
The strong performance, we achieved is underscored by the industry accolades ameriprise consistently earns over the course of the year. This is the type of recognition we received.
Four nine out of five stars in client satisfaction from our clients, our employee and advisor engagement ranks among the best across all industries.
James M. Cracchiolo: We have one of the highest customer trust scores in financial services.
James M. Cracchiolo: Z power has awarded us for outstanding customer service experience for our advisor phone support five years in a row.
James M. Cracchiolo: Ameriprise is the winner in the wealth management category from Kipling dose. In addition, we've been recognized as a military friendly employer in nine years in a row.
James M. Cracchiolo: And as a best place to work for disability inclusion.
James M. Cracchiolo: Finally, ameriprise is among the best managed companies of 2023 on the Wall Street Journal Management Top 250 list for.
James M. Cracchiolo: But the firm overall as we enter our 130 year in the business our foundation in business are strong.
Walter: I'm immensely proud of our people and we have a great opportunity to continue our success together in 2020 for now I'll turn things over to Walter and then we'll take your questions.
Walter Smith: Thank you Jim.
Walter Smith: As Jim said strong results this quarter continue to demonstrate to leverage of our diversified business model across market cycles underlying EPS grew 14%.
Walter Smith: $7 75.
Walter Smith: After adjusting for items in the quarter that we called out in the release.
Jim: These included 28 of expense related to a regulatory accrual.
Jim: 14th from severance expense and elevated mark to market impacts on share based compensation expense of 13.
Walter Smith: Resulting from Ameriprise is substantial share price appreciation.
Walter Smith: You would not have been aware of these items and their associated magnitude.
Walter Smith: Assets under management and administration ended the quarter at one four trillion.
Walter Smith: Up 15% benefiting from $3 6 billion of client flows in 2023 and market depreciation.
Walter Smith: Across the firm, we continued to manage expenses tightly relative to the revenue opportunity within each segment.
Walter Smith: G&A increased only 2% normalized for the items I noted.
Walter Smith: We are continuing to take a disciplined approach on discretionary expenses across the firm to manage margins given the uncertainty in the macro environment as evidenced by the $26 million of severance recognized in the third and fourth quarters.
Walter Smith: At the same time, we continue to make investments to drive business growth.
Walter Smith: Particularly in wealth management.
Walter Smith: As we move into 2024, we will continue the same discipline and we'll maintain a flat expense base for the year at a minimum.
Walter Smith: Our consolidated margin was 26, 4% excluding the items I noted and we have a best in class return on equity of 48, 5%.
Walter Smith: The balance sheet fundamentals remain strong our.
Walter Smith: Our excess capital and liquidity positions remain strong and we've seen a significant $1 8 billion reduction in the net unrealized loss position to only $1 5 billion.
Walter Smith: <unk> diversified business model benefits from significant and stable, 90% free cash flow contributions across all business segments.
Walter Smith: This allowed us to return $2 5 billion of capital to shareholders in the year.
James M. Cracchiolo: A continuation of our differentiated track record.
Absolutely I mentioned at Ameriprise has successfully expanded its presence in the financial institutions channel.
Walter Smith: Closing on our partnership with Comerica Bank in November that added an initial 15 billion of client flows.
James M. Cracchiolo: Given the timing of the conversion there was limited financial benefit in the quarter.
On slide six you'll see our strong results in 2023, which driven by business momentum across key measures.
James M. Cracchiolo: Assets grew 15% with revenues up 8%.
Walter Smith: Pretax adjusted operating earnings grew 10% and the pre tax adjusted operating margin was 26, 4%.
Walter Smith: The diversified nature of our business strengths and sell model and drives our consistent performance.
Walter Smith: It is this balance that enables ameriprise to consistently drive shareholder value across market cycles.
Walter Smith: The key growth driver of Ameriprise as a wealth management business as you can see on slide seven.
Walter Smith: Wealth management client assets increased 19% year over year to 901 billion driven by strong organic growth and client flows along with higher equity markets.
Walter Smith: We had 53 billion of net inflows over the past year with $23 billion coming in the quarter from new clients joining the firm the deepening of the <unk>.
Walter Smith: <unk> relationships and adding experienced advisers.
Revenue per advisor reached 916000 in the quarter up 11% from the prior year from higher spread revenue enhance productivity and business growth.
Walter Smith: On slide eight you can see how the business performance drove strong financial results for wealth management in.
Walter Smith: In the quarter.
Walter Smith: Adjusted operating net revenues increased 8% to $2 4 billion from growth in client assets in both RAF and brokerage accounts and improved transactional activity.
Walter Smith: This included about $15 billion of initial flows related to Cold America partnership.
James M. Cracchiolo: In addition to the $8 billion of underlying client flows.
James M. Cracchiolo: While markets were favorable in the quarter we.
James M. Cracchiolo: We did not realize the full benefit of the market depreciation in the quarter, given our beginning of month billing practice.
James M. Cracchiolo: We're starting the year with the wind at our backs with the significant market appreciation to end the year.
James M. Cracchiolo: Total cash balance, including third party money market funds and brokered Cds reached a new high this quarter at 81 $5 billion, we have seen stability in our underlying client cash positions with sweep cash up 4% sequentially.
James M. Cracchiolo: This stabilization has continued into January.
James M. Cracchiolo: Additionally, we are continuing to see new money flowing into money market funds and brokerage Cds as well as into our certificates.
James M. Cracchiolo: This creates a significant redeployment opportunities as markets normalize for clients to put money back to work and wrap and over products on our platform over time.
James M. Cracchiolo: The financial benefits from cash remains significant.
James M. Cracchiolo: And we will be a sustainable source of earnings going forward.
James M. Cracchiolo: Adjusted operating expenses in the quarter increased 9%.
James M. Cracchiolo: With distribution expense up 10%, reflecting higher asset balances.
James M. Cracchiolo: Excluding the regulatory accrual G&A declined 1% in the quarter.
James M. Cracchiolo: It was up only 4% for the full year.
Walter Smith: We will continue to invest in this growing business, while maintaining this expense discipline in 2024.
Walter Smith: Total.
James M. Cracchiolo: The underlying margin expanded 40 basis points to 33%, reflecting our revenue growth combined with expense discipline. This level is consistent with our margin for the full year.
James M. Cracchiolo: Turning to asset management on slide nine financial results were very strong in the quarter and we are managing the business well through a challenging environment for active asset managers.
James M. Cracchiolo: Total AUM increased 9% to 637 billion, primarily from higher equity markets and foreign exchange translation, partially offset by net outflows.
James M. Cracchiolo: Like other active managers, we experienced pressure retail flows from global market volatility and a risk off investor sentiment.
James M. Cracchiolo: In addition, we had $3 billion of institutional outflows.
James M. Cracchiolo: That included $2 billion of expected breakage from portfolio manager changes made as part of our reengineering initiatives.
James M. Cracchiolo: Investment performance is another critical area of focus and long term three five and 10 year investment performance remains strong.
James M. Cracchiolo: We also had notable improvements in one year fixed income performance in the quarter.
James M. Cracchiolo: From strength in mortgage opportunities tax exempt.
James M. Cracchiolo: Strategic municipal income strategies.
James M. Cracchiolo: In the quarter operating earnings increased $194 million as a result of equity market appreciation.
James M. Cracchiolo: <unk> expense management and.
James M. Cracchiolo: And higher performance fees.
James M. Cracchiolo: Which more than offset the cumulative impact of net outflows.
James M. Cracchiolo: Performance fees are an important part of our business and reflect excellent performance in our hedge funds and other institutional accounts, but the recognition of performance fees is uneven throughout the year.
James M. Cracchiolo: While we had $30 million of performance fees in both 2023 and 'twenty two.
James M. Cracchiolo: Fourth quarter. This year included $21 million in performance fees in the fourth quarter of 2022 only included.
James M. Cracchiolo: $5 million.
James M. Cracchiolo: We are finalizing the integration of BMO and are looking globally at areas, where we can enhance operational efficiency and manage expenses. So we are well positioned going forward.
James M. Cracchiolo: G&A was down 4%, excluding the impact from foreign exchange translation.
James M. Cracchiolo: And performance fee compensation.
James M. Cracchiolo: And the margin within our target range of 32% in the quarter.
James M. Cracchiolo: Looking ahead as Jim said, we will continue to take further expense action in 2024, given the environment to preserve margin and our target range.
James M. Cracchiolo: Yeah.
James M. Cracchiolo: Let's turn to slide 10.
James M. Cracchiolo: Retirement, and protection solutions, continuing to deliver good earnings and free cash flow generation, reflecting the high quality of the business that has been built over a long period of time.
Jim: Pretax adjusted operating earnings in the quarter increased 2% to 202 million.
Jim: Reflecting higher investment yields.
Jim: <unk> retirement and protection solutions sales improved in the quarter with protection sales up 6% to $72 million, primarily in higher margin <unk> products.
Jim: Variable annuity sales grew 15% to $1 1 billion.
Jim: With the majority of sales and structured variable annuities.
Jim: Turning to slide 11, Ameriprise delivered excellent growth in 2023 and has done the same over the longer term and through changing market cycles.
Jim: Collecting our focus on profitable growth.
Jim: In 2023 revenues grew 8% from higher interest earnings higher equity markets and solid client net inflows.
Walter Smith: Earnings per share increased 21% from last year.
Walter Smith: From revenue trends, well managed expenses and.
Walter Smith: And differentiated capital return.
Walter Smith: And ROE increased 290 basis points to nearly 49%.
Walter Smith: Over the past five years, we have generated 6% revenue.
Walter Smith: 15% EPS compounded annual growth.
Walter Smith: And 1170 basis points of improvement in ROE.
Walter Smith: This is differentiated performance across multiple cycles compared to our peers and speaks to the complementary nature of our business mix and the growth of our wealth management business.
Walter Smith: Turning to slide 12, you can see wealth management was a significant contributor to our metal prices successful performance.
James M. Cracchiolo: <unk> two thirds of the company's operating earnings.
Walter Smith: Our voices are becoming more productive with the support of our advice model with revenue per advisor of 916000 in the year up 8% on an annualized basis from 2018.
Walter Smith: And we are growing profitably with 16% growth in pre tax earnings since 2018.
Walter Smith: And over that timeframe, our wealth management margin has expanded 840 basis points to nearly 31%.
Walter Smith: Putting it at industry, leading levels now, let's finish with the balance sheet on slide 13.
Walter Smith: Our solid balance sheet fundamentals and free cash flow generations have supported our ability to execute a consistent capital return strategy while.
While continuing to invest for growth.
Walter Smith: In 2023, we returned $2 5 billion to shareholders with $587 million in the fourth quarter.
Walter Smith: But over the past five years, we returned 12 million to shareholders through dividends and share repurchase.
James M. Cracchiolo: This included the repurchase of 41 million shares at an average price of $215 <unk>.
James M. Cracchiolo: Resulting in a net reduction in our share count of 25%.
James M. Cracchiolo: Looking ahead capital management will continue to be a point of differentiation for Ameriprise with.
James M. Cracchiolo: That we will take your questions.
Speaker Change: Thank you we will now begin the question and answer session. If you have a question. Please press Star Star one on your Touchtone phone.
Speaker Change: If you wish to be removed from the queue. Please press star. One if you are 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.
Speaker Change: Your first question comes from the line of Brennan Hawken from UBS.
Speaker Change: Please go ahead with your question.
Speaker Change: Hi, good morning, Thanks for taking my questions.
Speaker Change: I'd like to start with.
Speaker Change: Bank.
So we've got 3 billion, we've you've indicated that there is expectation for 3 billion of maturities expected in 2024.
Can you give a sense given where rates are in the market today, what kind of yield pick up you're likely to see on those balances and whether or not you have visibility into what those maturities might be in 2025.
Speaker Change: Sure.
Speaker Change: No.
Speaker Change: Let me as well.
Speaker Change: And 25, we anticipate it will still be 25 billion again these pay off.
Speaker Change: And from that standpoint, and when we look at it let me answer the question. This way from a net interest income standpoint.
Speaker Change: When we evaluate looking at various scenarios and using the forward curves the generation in 2024 and 'twenty five.
The higher than that in 2000 twenty's rate because again the rates, we've been adding at a very young.
Speaker Change: Rates close to 6%.
Speaker Change: And that run off will be basically coming through in our reinvestments. The differentials will still allow us to have a higher net interest income.
Speaker Change: In 2024 and 'twenty five.
Speaker Change: But it's $3 billion in both years.
Speaker Change: Okay. Thank you very much.
Speaker Change: And then what.
Speaker Change: One sort of mechanical question.
Speaker Change: Quarter over quarter off balance sheet broker dealer yields compressed pretty substantially but it's my understanding that that's tied to the $2 5 billion of cash sweep tied to comerica. So was.
Speaker Change: Is that right and was that due to like a some kind of promotional or temporary.
Speaker Change: Crediting rate.
Speaker Change: When is that expected to roll off and normalize.
Speaker Change: So if we're talking about now the off balance sheet right, yes on a sequential basis several years of referring to yes, exactly so that yet.
Speaker Change: But we did take on a $2 5 billion AUM comerica and that will transition through over the next six months.
But certainly that will work towards.
Speaker Change: Great increasing but our base rate is basically stayed the same ex co America theres been no change okay.
Speaker Change: Great. Thank you recruit driven by cohort.
Speaker Change: Your next question comes from the line of Ryan Krueger from K B W. Please go ahead with your question.
Ryan Krueger: Hey, Thanks, Good morning, first I just wanted to follow up on the comment on net interest income.
Ryan Krueger: In terms of 2024, and 2025 expecting to be higher than 2023.
What do you do with can you give us any sense of what you assumed in terms of the forward rate. When you made that comment was that using the forward curve or any more color there.
Ryan Krueger: We are using the forward curve in that and then we run sensitive with what my statement was referring to long whats the forward curve the latest forward curve.
Ryan Krueger: Okay, Great and then just in terms of.
Ryan Krueger: The size of the bank can.
Ryan Krueger: Can you give any color.
Ryan Krueger: All are on kind of expectations for potentially moving some of the cash sweep balance into the bank and how what you think the bank asset size could grow to over the course of 'twenty four.
Ryan Krueger: Sure. So right now we are seeing the ability really no growth in our sweep accounts. So we feel very comfortable and we still have buffer. There. So we are evaluating that but will be more measured as we go forward.
Ryan Krueger: Certainly placed and shifted all substantial amount, but you would see that it will be increasing but at a slower pace.
Ryan Krueger: As we evaluate these sweet balances that support that so I would say that it will be increasing but at a slower pace.
Ryan Krueger: Okay, great. Thank you.
Ryan Krueger: Yes.
Ryan Krueger: Your next question comes from the line of Alex <unk> from Goldman Sachs. Please go ahead with your question.
Ryan Krueger: Okay.
Alex: Alex. Please go ahead with your question.
Alexander Blostein: Hey, Good morning can you guys hear me.
Alexander Blostein: Yes, hi.
Alexander Blostein: How are you. Thanks.
Alexander Blostein: So I wanted to ask you guys a question around a substantial amount of cash that you guys have on the sidelines I think it was north of $30 billion.
Alexander Blostein: No.
Alexander Blostein: Talking about some of that coming in to some of the investment product, but as you sort of think about what are the likely areas, where this capital could go into.
Ryan Krueger: With respect to wrap accounts or something else, how would you frame that and maybe talk through some of the revenue lift that you could get from that.
Alexander Blostein: So if you're talking about.
Alexander Blostein: Our cash sits today on so not not stuff thats in the sweep ride, but there has been other capital that I think is that you're learning you guys not a whole lot, whether it's <unk> or money market funds kind of where do those balances are and where that could shift yes.
Alexander Blostein: So those balances are in money markets and brokered Cds you have short term that will roll off.
Ryan Krueger: And so as they do I think advisers will evaluate whether they put that back into the market and if they did I would probably say.
Ryan Krueger: No.
Ryan Krueger: A portion of that would go back a reasonable portion of I will go back most likely into wrap type programs imbalanced.
Ryan Krueger: Imbalanced type portfolios, which would include both equities and fixed income et cetera alternatives.
Ryan Krueger: On the other side of it there we've seen a bit of a pickup in some transactional activity as well.
Ryan Krueger: In the fourth quarter. So some of that will go back into the transactional type activities as they.
Ryan Krueger: Look at lot longer duration type products as well.
Ryan Krueger: So again, that's really as advisors look at the market and they put money to work over time for their clients.
Ryan Krueger: Hi, guys. Thanks, and then my second question was just around.
Ryan Krueger: Operating leverage for the firm and obviously encouraging to hear your comments around G&A outlook.
Ryan Krueger: If you roll that through it seems like the margin in the asset management business.
Ryan Krueger: It could be materially higher than sort of your longer term ranges, obviously, not not not a terrible thing, but as you sort of think about those historical targets are these still something you are trying to manage the business to or it's really just kind of more of the output because.
Ryan Krueger: The fees are obviously off to a very good start in 2024 and expenses are going to be very tightly managed.
Ryan Krueger: Yeah. So so obviously.
Ryan Krueger: And very proactive in managing the controllable aspects of that on the expense is not just an AWS uneven.
But across the board.
So yes.
Ryan Krueger: Obviously, it will be dependent on several factors as it relates to markets or other things as it relates to margin but with.
Ryan Krueger: I'm not going to forecast exactly where it goes but I think we feel comfortable that we have.
Ryan Krueger: I've put in place are controlled G&A.
Ryan Krueger: Asset management and that we have the capability with the right set of conditions, that's going on with market.
Ryan Krueger: And certainly if we as we did make progress on our flows.
It could increase but right now we're comfortable with the current levels that we have but we have some potential.
Ryan Krueger: Okay, great. Thank you very much.
Your next question comes from the line of Steven <unk> from Wolfe Research.
Ryan Krueger: Please go ahead with your question.
Ryan Krueger: Hey, good morning.
Ryan Krueger: So wanted to start off with just a.
Ryan Krueger: Question on the AWS margin just given some of your larger wire house peers have guided to lower wealth margins for the next few quarters, given the absence of NII tailwind incremental investments to sustain organic growth you noted Walter that your spread revenues will be more resilient in 'twenty four but.
Walter Smith: You believe you can sustain that north of 30% pre tax margin in AWS.
Walter Smith: Even in the face of rate cuts in line with the forward curve yes.
Walter Smith: So I think that we have reasonable confidence that we will be able to sustain but obviously there are variables that go into that but as I indicated our net interest income.
Walter Smith: 2024 rooms will certainly be wire and then 'twenty three so yes, I think we have.
Walter Smith: Level of confidence.
Walter Smith: That's great and just for my follow up on capital return.
Alexander Blostein: <unk> came in below the 80% target.
Alexander Blostein: Apologies if I missed this but just wanted to get a sense as to how we should be thinking about the payout trajectory over the next few quarters, especially in light of the robust excess capital generation that we've been seeing.
Ryan Krueger: So yes, we came in at 79 I would agree with you for the year.
Ryan Krueger: And right now our capacity and capability.
Ryan Krueger: Certainly remains very strong as you can see from the balance sheet elements and certainly no generation. So I would think that a continuation of that strategy as well.
Ryan Krueger: I'll be a reasonable expectation.
Ryan Krueger: That's great. Thanks, so much for taking my questions.
Speaker Change: Your next question comes from the line of Sydney to come out from Jefferies. Please go ahead with your question.
Speaker Change: Great. Thanks.
Sydney Tocci: I just wanted to start with the asset management business and the expense reductions that youre doing there clearly you are trying to defend your margin, which I understand but it feels like we're starting to see potentially some commercial impacts there I think you alluded to some outflows related to.
Sydney Tocci: Head count reductions. So I guess my question is how are you thinking about sort of trying to balance that right, where you're cutting expenses, but at the same time potentially seeing some some negative commercial impact.
Sydney Tocci: Well.
Sydney Tocci: Yeah.
Ryan Krueger: From that what you saw from basically the breakage that we took.
Ryan Krueger: It wasn't a basically a proactive evaluation of the payback that we were getting so that was a conscious decision on our part our expense plan has been.
Ryan Krueger: Basically evaluated on the basis look at March, but looking at process and how we can improve efficiency. So we feel very good about there is some basically spillover effects as you get to managing that.
Ryan Krueger: Ultimate return and some of them, we will get breakage. We believe the breakage certainly you saw what we saw this year there'll be some but manageable taking place in 2024, but manageable, but again, it's a conscious decision on our part and we feel we give them opportunities to certainly redeploy that money in other products that we have.
Ryan Krueger: It's again, it's we are controlling what we can.
Walter Smith: Which is on the G&A expense and it's through a conscious review of expense management.
Walter Smith: Okay got it and then just to level set on that $82 billion of cash number that you talked about.
James M. Cracchiolo: I mean, if I think about that relative to total client assets. It seems like it's upwards around eight 9%, which is almost <unk>.
James M. Cracchiolo: I think what you guys normally would expect is.
James M. Cracchiolo: Is that the right way to think about it and then over time as rates kind of normalize that kind of 8% to 9% cash balance would probably trickle back down to somewhere in that 4% to 5% range and that's really the opportunity set that's.
James M. Cracchiolo: That's in front of you in that business.
Ryan Krueger: Yes, I need so.
Ryan Krueger: It is sort of a like double the amount that clients are holding usually where they used to be and again advisers looked at it with their clients and they're getting a 5% plus yield on it just to sit tight.
Ryan Krueger: With.
Ryan Krueger: Unclear about the market moves et cetera.
Ryan Krueger: So I do believe that over time that money will be redeployed, but holding at higher rates right now it's not an uncomfortable thing for clients our advisers to keep extra cash there.
James M. Cracchiolo: And is there any reason why that money wouldn't come to Ameriprise I mean, it sounds like it's in products outside of your firm, but obviously your advisers do holistic financial planning. So is there any reason why you did from a diversification perspective or anything why that money might want to stay outside of.
James M. Cracchiolo: In fact, the money is at Ameriprise advisors have just put it into whether money market or a broker Cds or where there was a big a lineup of brokered Cds before we had our bank in Cds that will be launched so.
James M. Cracchiolo: It's very but just as they did that they put it into our own certificate program as well and that grow nicely its up to $13 billion. In total so I think it was just the outlets where the off the cash.
James M. Cracchiolo: I think as we put more bank products and as we develop the bank. Some of that will go into our bank products. We think also there's an opportunity for us to capture more cash from our clients holding it at their banking institutions. So but the money that is currently at 81 billion here is at Ameriprise and as that rolls off.
James M. Cracchiolo: Over or opportunity the advisors C to rebalance accounts they'll put that money to work.
Jim: Okay got it thanks, Jim.
Jim: Your next question comes from the line of Tom Gallagher from Evercore ISI. Please go ahead with your question.
Thomas Gallagher: Good morning first question just on the lay offs and asset management I think it was 12 pms.
Thomas Gallagher: Can you comment on the size of the U N.
Thomas Gallagher: That they were managing.
Thomas Gallagher: What exactly happened there did you merge or close any funds did you replace them just a little more color there. Thanks.
Thomas Gallagher: Well.
Thomas Gallagher: For the breakage. It was basically on that one we have closed upon.
Thomas Gallagher: We look for alternatives that was institutional and then the other funds. We feel there are opportunities, where we can basically merge them into other products that we have.
Thomas Gallagher: The efficiencies and effectiveness.
Thomas Gallagher: It's.
Thomas Gallagher: Capital review of it.
Based on payback makes sense.
And Walter that the total AUM related to the layoffs are you able to provide that.
Thomas Gallagher: Right right now.
Walter Smith: Of the $2 billion was basically that was the amount in that one pretty much.
Walter Smith: Right, but the.
Walter Smith: I think it was 12 Pms that were let go.
Walter Smith: Are you able to size that.
Walter Smith: In the entirety.
Walter Smith: I would have to get back to you are exactly on the 12, but I think the majority of it's still related back to the breakers WC, we saw it but let me get back to you on that.
James M. Cracchiolo: Alright, Thanks afternoon.
James M. Cracchiolo: The REIT the redeployment out of corporate into the segments I think it's around $15 million can you explain what happened there was it was it all NII or or what happened on that reallocation of the segments.
James M. Cracchiolo: Yes, so what we have obviously intercompany.
James M. Cracchiolo: Cash transferring that goes between the segments and we evaluated AWS that the crediting rates that we were giving that was not really.
James M. Cracchiolo: I would say on Sunday and market driven and so we adjusted it based upon the conditions that resort today and that will be something that will remain.
James M. Cracchiolo: <unk>.
James M. Cracchiolo: Profitability going forward as long as the levels stay where they are the second one was really an element of relating to.
Alexander Blostein: We looked at our models as it relates to Rps and there was it was not the right rate.
James M. Cracchiolo: Not crediting them with the right amount simple as that and.
James M. Cracchiolo: In assessing all net net interest income and it has no effect on the company the shifts.
Right, just just a reallocation among segments that make sense.
James M. Cracchiolo: And then just final follow up this 90% sustainable free cash flow conversion.
James M. Cracchiolo: You returned to 80% and 23 do you plan on step being that back up to 90% in 'twenty four or should we expect it to remain closer to 80 D. Do you have an idea of where as we said opportunistically have the capacity. We certainly as you see we generate a lot of free cash flow and we will evaluate that as looking at opportunities we are.
James M. Cracchiolo: Continuing to invest in.
James M. Cracchiolo: Our business. So that's not a constraining factor so I would say right now.
James M. Cracchiolo: It's a reasonable estimate to this assembly level that we just had and then we will adjust to be opportunistic about it.
James M. Cracchiolo: Okay. Thanks.
James M. Cracchiolo: Your next question comes from the line of Kenneth Lee from RBC Capital markets. Please go ahead with your question.
James M. Cracchiolo: Hey, good morning, Thanks for taking my question just one on the expense management initiatives are there any one wondering if you could just.
James M. Cracchiolo: Further flesh it out looking for any other areas outside of asset management and perhaps wondering if you could just give a little bit in terms of timeframes are.
James M. Cracchiolo: Are these actions to be completed within this year. Thanks.
James M. Cracchiolo: Yes, so what you saw to $26 million severance in our certainly our plans.
Walter Smith: That these are all actionable and certainly from our standpoint of already been put into play.
Walter Smith: So we are off.
Walter Smith: But you should see the benefit of that materializing as it relate we're basically looking that our expenses for 2024 will be flat at a minimum and obviously, we continue to make those financial investments in the various businesses, especially in AWS. So.
Walter Smith: So we have pretty high confidence on this.
Walter Smith: Got you very helpful. And then just one follow up.
Walter Smith: Any updated thinking in terms of potential reinsurance transaction on the Rps side.
This is especially given recent industry developments in the rate environment. Thanks, Yes, listen we are certainly observed the recent.
Walter Smith: Transactions and we feel that it's.
Walter Smith: <unk> creates an opportunity and from.
From that standpoint, as we always said, we're always looking for the bid ask and I think those bid ask has certainly come in alignment.
Alexander Blostein: It provides an opportunity.
Alexander Blostein: Got you very helpful. Thanks again.
Alexander Blostein: Your next question comes from the line of Mark Mclaughlin from Bank of America. Please go ahead with your question.
Mark Mclaughlin: Hi, Good morning, Thanks for taking my question I believe in your opening remarks, you had mentioned you were seeing a stabilization of cash levels through January I was just curious if you had any more color at year to date on that I would've expected more redeployments, just from seasonality rebalancing and distributions and the like.
Mark Mclaughlin: Industry accounts and this is as of.
Mark Mclaughlin: Two days ago, we have seen a complete stabilization from that standpoint, a little increase so we're.
Mark Mclaughlin: Obviously, you're observing and we understand the seasonality of it but certainly.
Mark Mclaughlin: What I indicated that nets through two days ago.
Awesome and then my other question had to do with retirement and protection you guys had a pretty sizeable pickup in the yield for your net investment income I was curious if you could give us an update on any color and the investment profile that book, just trying to get a better idea of sensitivity to rates there.
Mark Mclaughlin: No that's.
Mark Mclaughlin: Thats invested out now and we took advantage of the rate situation as we saw it so that is pretty much completed at this view and also as I indicated it will get to pick up all going forward certainly the intercompany O'hare.
Mark Mclaughlin: Awesome. Thank you so much.
Mark Mclaughlin: Yeah.
Mark Mclaughlin: Your next question comes from the line of John Barnidge from Piper Sandler. Please go ahead with your question.
Mark Mclaughlin: Good morning, Thank you for the opportunity.
Mark Mclaughlin: In the PM reduction in asset management and clear, we followed with thorough review and that review, where there are areas of growth identified are you looking to get larger in any specific product that maybe you have come out.
Mark Mclaughlin: Come to surface out of that team review.
Yes so.
Mark Mclaughlin: What we did is we had some <unk>.
Alexander Blostein: <unk> definitely felt theyre, managing small levels of assets and it wasn't economical for us in those areas.
Alexander Blostein: But we have good teams that could have assumed those assets and have good performance.
So we made adjustments there, but in so doing yes, we have reviewed our overall upfront the office and all of the products in the portfolios and the capabilities that we have on the investment side, we feel there's a good opportunity we always have that in the equity part of the arena, but we feel really that we do.
James M. Cracchiolo: Have a good fixed income and credit shop, and that we think there is opportunity for us to actually get a greater fair share there.
James M. Cracchiolo: As we continue to look at what the environment is.
James M. Cracchiolo: And so, but we've evaluated that both domestically and internationally.
James M. Cracchiolo: And we're picking our pockets of where we are really want to double down.
James M. Cracchiolo: Thank you for that and then my follow up question is around the risk transfer within the comment about the bid and ask you've seen the market change a little bit to include third party side cars would that be an area of interest.
James M. Cracchiolo: No.
James M. Cracchiolo: Well, we've looked at it and candidly for us probably not because of the.
James M. Cracchiolo: Most people enter enter into that for growth purposes, and we have a fairly logical sure. So probably not it's not but we continue to work.
James M. Cracchiolo: Thank you.
James M. Cracchiolo: Your next question comes from the line of Michael Cyprus from Morgan Stanley. Please go ahead with your question.
James M. Cracchiolo: Hey, good morning. Thank you for taking my question. This is <unk> stepping in for Mike Cyprus Stanley.
James M. Cracchiolo: Just wanted to ask a bigger picture question about the opportunity set for broadening out your affiliation options.
James M. Cracchiolo: <unk> seen a little growth coming through the RIAA channel in particular I'm. Just curious how you guys are thinking about the opportunity to capture some of that growth.
Ryan Krueger: Yes. The team is focused on the RIAA channel as well and developing our distribution platform.
Ryan Krueger: Capabilities there.
Ryan Krueger: And we will put some emphasis there as we move forward.
Ryan Krueger: As part of our intermediary distribution capabilities.
Ryan Krueger: Excellent. Thank you and as a follow up somewhat related.
Ryan Krueger: Tell us a little bit more about what tech initiatives you have in place at the moment for advisors in terms of what you're doing to help the b ameriprise platform standouts and differentiate itself in the marketplace and particularly what you have coming over the next say 12 to 24 months in terms of the.
Ryan Krueger: Tech pipeline.
Ryan Krueger: Yes, we feel unbelievably good about our total platform for the advisors.
Ryan Krueger: From a combination of CRM platform, which is the latest and the greatest of all the capabilities with all of the integrated technology and data that they can use on their volume.
Ryan Krueger: Portfolios and engagement.
Ryan Krueger: <unk> E meeting capabilities that actually help them actually put together their actual proposals for clients and the engagement of our meeting.
James M. Cracchiolo: Meeting with them regarding their needs.
To even our AI capabilities, helping them identify opportunities in their book.
James M. Cracchiolo: So we feel really good about the suite of capabilities that we have but those capabilities are all integrated.
Sydney Tocci: Which makes the adviser much easier with the dashboards to engage their clients to manage their books and too.
Have that deeper engagement with them through the advice planning models. So we feel really good and we're continuing to invest heavily in that complement that by all the mobile and the web.
Sydney Tocci: Web capabilities that we have for them to do business.
Sydney Tocci: So we feel that we have a state of the art type of system.
Sydney Tocci: Our availability is very strong.
Sydney Tocci: And so we feel it is a differentiating point for us.
Sydney Tocci: Excellent. Thank you for taking the questions.
Sydney Tocci: Your next question comes from the line of Jeff Schmidt from William Blair. Please go ahead with your question Hi.
Sydney Tocci: Hi, good morning.
Jeff Schmitt: The gross yield on client cash looks to be around 5% or maybe five in a quarter, but what are new money yields at right now I guess on that $3 billion that will rollover.
And what type of maturities are you investing in there.
Jeff Schmitt: Well, we're still seeing in the maturity range of $3 five range right.
Jeff Schmitt: Right now.
Ted under 6%.
Jeff Schmitt: Under 6% Okay.
Jeff Schmitt: And then any sense on why that Comerica bank cash was so high as a percentage of assets and I guess, where your advisors.
Jeff Schmitt: Advising them to put more of that to work. So we could see that come down.
Ryan Krueger: Yes, there is an opportunity.
Ryan Krueger: It is high as a percentages and certainly that's important I think thats one of the reasons.
Ryan Krueger: Certainly with the engaged.
Ryan Krueger: <unk>.
Ryan Krueger: The opportunity, but it's we do see it coming down.
Ryan Krueger: Yeah, Okay. Thank you.
Ryan Krueger: Okay.
Your final question comes from the line of Brennan Hawken from UBS. Please go ahead with your question.
Brennan Hawken: Brendan Your line is open.
Brennan Hawken: Thank you and thanks for taking my follow up.
Brennan Hawken: So.
Just wanted to double click on the NII expectation and confirm when you said that you expect NII to be up 2024 versus 23, and then 25 versus 24 is that for all cash economics, both on and off the balance sheet or is that just.
Brennan Hawken: Part of it.
Brennan Hawken: That was for all.
Alexander Blostein: Oh, Okay excellent and can you speak to cash trends, you've seen in January and what expectations for balances or beta is underpinned.
Alexander Blostein: That growth because it's better than we were expecting.
Alexander Blostein: So I don't know if you go back to <unk> for the back I was giving you the math on that one I apologize.
Alexander Blostein: For the back Okay. Okay got it second question was.
Alexander Blostein: It was about the node never mind, because if it was about the bank then that makes more sense because I could.
Alexander Blostein: Got it.
Alexander Blostein: Definitely.
Alexander Blostein: Perfect. Thank you very much.
Alexander Blostein: And we have no further questions our queue at this time. This does conclude today's conference call. Thank you for your participation and you may now disconnect.
Alexander Blostein: Okay.
Alexander Blostein:
Alexander Blostein: Yeah.
Alexander Blostein: Okay.
Alexander Blostein: Yeah.
Alexander Blostein: Yeah.
Alexander Blostein: Yeah.
Alexander Blostein: Yeah.