Q3 2024 Ameriprise Financial Inc Earnings Call
Okay.
Welcome to the Q3, 'twenty 'twenty four earnings call.
Audra: My name is Audra and I will be your operator for today's call at.
Audra: 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.
Audra: As a reminder, the conference is being recorded.
Speaker Change: I will now turn the call over to Alicia charity Alicia you may begin.
Alicia Charity: We're generating strong financial results as we continue to adjust the business.
Speaker Change: Assets under management increased 14% to 672 billion in the quarter.
Speaker Change: We have excellent performance across equities fixed income and multi asset strategies across three five and 10 year periods.
Alicia Charity: And we've seen a nice pickup in fixed income in both taxable and tax exempt.
And this level of performance is reflected in the 118, four and five Morningstar funds, we offer globally.
Alicia Charity: We go out to flows in the quarter net outflows improved 40% year over year to $2 4 billion, which included about $900 million of outflows from legacy insurance partners.
Alicia Charity: Retail and model delivery net outflows were better at one 5 billion due to improved gross sales in both North America, and EMEA as well as net inflows into Etfs and model delivery, we continue to evolve how we deliver our investment capabilities and over the last few years, we have successfully built out our SMA businesses.
Alicia Charity: With both traditional and tax efficient strategies, and we are a top 10 player and model delivery.
Alicia Charity: We've also been building out our ETF business just added four active etfs to leverage our investment strength in equity income and credit.
Alicia Charity: We're beginning to gain a good level of flows in these areas and we'll look to further expand our product line overtime.
Alicia Charity: And in institutional excluding legacy insurance partners flows were flat in the quarter.
Alicia Charity: As we discussed the team is very focused on positioning the business for future growth.
Alicia Charity: We're driving operational improvements and making necessary adjustments that include streamlining the organization in particular in the EMEA region. In addition, we are improving and better leveraging our processes and technology systems globally. We're redeploying these savings to invest in the areas that will drive profitable growth.
Alicia Charity: Ultimately, we're focused on better positioning asset management to adapt to changing market dynamics you can see some of the benefits in our results for the quarter that we will build upon next year.
Alicia Charity: Bringing things back to the farm level Ameriprise continues to consistently generate strong results. Our long term record is excellent as an example, just looking back over the last five years, we've delivered 16% compound annual growth in EPS and a return on equity consistently among the highest in the industry.
Alicia Charity: And our balance sheet remains a clear and important differentiator where.
Alicia Charity: We're proud of the level and consistency of our results that reflect the unique combination of capabilities that we have of course of ameriprise and the operating leverage and benefits that result from our teams working together firm wide are key to delivering our excellent client value proposition.
Alicia Charity: We're one firm using the strengths and activities of the business working together and that's reflected in the consistency of the results we've delivered.
Speaker Change: Before I close you've asked about long term care and whether there's an opportunity to do a risk transfer at this time based on market changes.
Speaker Change: And this forecasted lower rate environment.
Speaker Change: These trends continued in October.
Speaker Change: Adjusted operating expenses in the quarter increased 14% with distribution expense is up 19%.
Speaker Change: Reflecting business growth and increased transactional activity.
G&A expenses were flat at $419 million with higher volume related expenses in the current quarter and a regulatory or accrued in the prior year quarter.
Speaker Change: Excluding the regulatory accrue in the year ago period.
G&A expenses were up 5% in the quarter consistent with expectations.
Speaker Change: Turning to asset management on slide eight.
Speaker Change: Financial results were very strong in the quarter.
Speaker Change: AUM increased 14% to 672 billion, primarily from higher equity market appreciation.
Speaker Change: In the quarter operating earnings were quite strong and increased 23% to $245 million and a margin reached 41%.
Speaker Change: Adjusted operating expenses increased 2% with.
Speaker Change: With G&A expenses, improving 2% from a year ago, reflecting initial benefits from the company's initiatives to enhance operational effectiveness and efficiency to further enhance our ability to meet clients' needs.
Speaker Change: Let's turn to slide nine.
Speaker Change: Retirement and protection solutions continued 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.
Speaker Change: Pre tax adjusted operating earnings excluding unlocking in the quarter increased 2% to $208 million.
Speaker Change: Afflicting to benefit from strong markets and higher interest rates, partially offset by higher distribution expenses associated with strong sales levels.
Speaker Change: Year to date pre tax adjusted operating earnings excluding unlocking were $603 million, which is on pace with our expected level of approximately $801 million on an annual pre tax basis.
Speaker Change: We completed our annual actuarial assumption update in the quarter.
Speaker Change: Resulting in an unfavorable pretax impact of $90 million, primarily related to updates to persistency assumptions for variable annuities.
Speaker Change: Our lapse assumptions is now aligned with recent experience and we are very comfortable with this level.
Speaker Change: Overall retirement and protection solutions sales improved in the quarter.
Speaker Change: With protection sales up 25% to $99 million, primarily in higher margin <unk> products.
Speaker Change: Variable annuity sales grew 13% to $1 2 billion with strong momentum in our structured products.
Speaker Change: Turning to the balance sheet on slide 10.
Speaker Change: Our balance sheet fundamentals have free cash flow generation remained strong with $2 billion of excess capital.
Speaker Change: We have diversified source of dividends from all our businesses enabled by strong underlying fundamentals.
Speaker Change: This supports our ability to consistently return capital to shareholders and invest for future business growth Ameriprise is consistent capital return strategy drives long term shareholder value.
Speaker Change: In summary on slide 11, Ameriprise delivered excellent growth in the third quarter, which is a continuation of a long track record to outperform.
Speaker Change: <unk> financial targets.
Speaker Change: Over the last 12 months revenues grew 10%.
Speaker Change: Earnings per share increased 14%.
Return on equity grew 110 basis points, excluding unlocking and we returned $2 6 billion of capital to shareholders.
Speaker Change: We had similar growth trends over the past five years with 7% of revenue growth, 16% EPS compounded annual growth rates.
Speaker Change: Return on equity improved nearly 13 percentage points, and we returned $11 9 billion of capital to shareholders.
Speaker Change: These trends are consistent over the longer term as well.
Speaker Change: Imperative most financial services companies.
Speaker Change: Differentiated performance across multiple cycles speaks to the complementary nature of our business mix as well as our focus on profitable growth.
Speaker Change: Before we move to Q&A.
Speaker Change: Let me provide some additional insight into our decision to retain long term care on slide 12.
Speaker Change: As you are aware.
Speaker Change: We have been in the process of assessing potential risk transfer opportunities related to long term care.
Speaker Change: In the quarter, we completed this analysis and have concluded that retain the business is in the best interest of our shareholders.
Speaker Change: Our analysis found that there is a substantial difference in value between retaining the block and reinsure the block.
Speaker Change: Our assessment concluded that the market for Standalone long term care risk transfer deals has not matured and that high quality blocks like ours are not receiving an appropriate level of differentiation by counterparties.
Speaker Change: Transaction, where required us to include other books of business that would transfer tremendous value to a counterparty to offset unwarranted discounts applied to LTC let.
Speaker Change: Let me be clear, we feel very good about the quality of our long term care business and it has performed better than our expectations over the past several years, which we expect to continue going forward.
Speaker Change: As you have seen the business has generated $215 million of statutory earnings over the past five years and that trend should continue.
Speaker Change: We have already seen the size of the book declined by 70%.
Speaker Change: With over 75% terminating without a claim.
Speaker Change: This business will continue to run off with over two thirds of the remaining book expected to run off over the next 10 years.
Speaker Change: This extensive experience has supported our reserve process and that process has proven very accurate.
Speaker Change: We will also be able to capture additional upside from future enhancements related to investment portfolio repositioning.
Speaker Change: Premium rate increases and other program actions to improve performance.
Speaker Change: We will maintain a strong and differentiated capital position and we do not need to supplement our capital position with a reinsurance transaction.
Speaker Change: In summary, given the high quality of our block with $300 million of capital.
Speaker Change: As well as a credible experience and confidence in our reserves.
Speaker Change: We do not believe there is a plausible scenario that could justify executing a risk transfer deal at these levels and taking on additional counterparty exposure in closing we had an excellent quarter and feel good about how we are positioned going forward with that we will take your questions.
Thank you we will now begin the question and answer session.
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Speaker Change: We will take our first question from Sidney come off at Jefferies.
Sidney: Thanks, Good morning, I wanted to start with the retail flows in asset management.
Sidney: I guess is there. It was interesting you have that slide that talks about the synergies across businesses. So I guess my question is is there anything that you're doing strategically structurally within asset management advice wealth management to take advantage of the fact that you have these two businesses in terms of improving the flow outlook and if you could give some examples that would be helpful as well.
Jim: Yes. This is Jim.
Jim: So as you saw are presented in the slide.
Jim: The AWS business has a large distribution partner for Colombia that are established that over many years, even in our open architecture.
Jim: And they are a valued partner and in that regard you know as we focus more on growing our third party distribution globally and as well as institutional we haven't put as much focus as we used to on the AWS business and I think there is an opportunity that Ted and team are working on now to <unk>.
Jim: More product than to gear some of that product, especially for the type of solutions that we need.
Jim: And we actually think that there is a great opportunity for him to increase his activity within the channel again and so he is working on a combination of current solutions that he has as well as well as bringing other solutions to bear.
Jim: That we think can garner flows within the channel.
Got it Okay and then just on the comment that you made about client cash moving into money market funds as opposed to the term.
Speaker Change: Products what is your read in terms of what's going on there is it that the advisors are sort of positioning for a rotation into these other longer duration sort of wealth wrap products or what what do you think is going on.
Speaker Change: So we saw like a 50% increase into wrap flows again in diversified portfolios, which includes fixed income.
Speaker Change: And so it's a nice rebalancing occurring there and flow increase and so what we did see just more broadly.
Speaker Change: Is a move out of brokered Cds and certificates, even though the cash levels didn't go down in total it moved into money markets and what that says is really that people arent going to on our.
Speaker Change: Locking less up into these.
Speaker Change: What I would call just pure interest, earning assets and into <unk>.
Speaker Change: Vehicles that then they could possibly move back into things like wrap or other fixed income products that have longer duration.
Speaker Change: Yeah.
Speaker Change: Got it okay. Thanks.
Speaker Change: We'll go next to Alex <unk> at Goldman Sachs.
Speaker Change: Hey, everybody. Good morning, Thank you for the question.
Alex <unk>: I was hoping you guys could talk about your outlook for cash revenues within AWS in totality. So I know in the past you kind of referred to bank.
Alex <unk>: On a standalone basis, and Jim you made some comments earlier. This morning regarding kind of ways you could still aimed to kind of keep NII stable to growing within the bank, but maybe just expand it a little bit and we think about the search business. The bang the broker dealer or the third party kind of putting it together given the forward curve trajectory in current.
Alex <unk>: Cash balances what are your thoughts for the revenue trends there for 25.
Alex <unk>: Well as I indicated it's Walter for.
Speaker Change: For the bank is on the revenue trends in net interest income, we do see that is going to be stable or actually increase.
Speaker Change: And we feel very good about that positioning.
We do see as Jim mentioned, certainly we were hoping that money will start moving and we believe we will from the third party money market and third party of Cds, and we all probably you'll see some continued softening in Cds.
Speaker Change: Depending on again, how drastic the rate is all but overall I think the bulk of our earnings call me.
Speaker Change: It will be from the bank and certainly sweep will be impacted as the rates come down.
Speaker Change: But on the search and then hopefully we will get that rotation out of the money market and.
Third party Cds to go back into product and.
Alex from the bank perspective, we.
Speaker Change: We will be launching a bank Cds that would be another cash alternative where clients are holding cash out and the banks will be offering a fixed loan pledge.
Speaker Change: <unk> this quarter.
Speaker Change: We will also be launching helocs are at the beginning of next year and putting in checking accounts later in the year. So again that could bring more cash activities from current bank accounts that our clients are holding to having more cash here as well.
That they can utilize or save so those things again will be gradual builds but I think there'll be nice and complementary and we think we can garner about savings as well as our lending activities from our clients because we know they have a lot out there and they have a lot of lending and our loan.
Speaker Change: Books that we can take on.
Speaker Change: I Gotcha that makes sense, thanks, guys for that.
Speaker Change: For my follow up I wanted to spend a minute on the asset management business margins in the G&A expense trajectory. There you guys are on track I think for a second year in a row.
Declining expenses in that business.
Speaker Change: Speaking to the efficiencies, obviously that you've talked about.
Speaker Change: Despite record market in your record AUM levels, pushing margins I think 40% plus now how sustainable do you think this level of profitability is in the segment, maybe give us a sense of how you think the additional efficiencies you still expecting that business to impact the G&A dollars in that segment over the next call. It several.
Speaker Change: Quarters to a year.
Speaker Change: Sure.
Walter: Again, it's Walter.
Speaker Change: Looking at the actions we've taken on transformation and the impact it's had in 'twenty four we certainly see that will continue in 'twenty five and.
Speaker Change: And again, I can't predict where the where the markets will be but based on all controllable that we've taken action on and improve.
Speaker Change: And at the same time include our client servicing with that.
Speaker Change: I think you could see margins certainly in <unk>.
Speaker Change: Market staying at the 8% levels, probably be in the 35% to 39 range for sure.
Speaker Change: Alright, thank you.
Speaker Change: Yeah.
Speaker Change: We'll move next to Curtis at Raymond James.
Speaker Change: Hey, good morning.
I guess you guys are on track for kind of 8% capital return. This year can you walk us through how you think about that level for 2025 and beyond thanks.
Speaker Change: Well right now we're talking about 24 that will be at 80% and we believe based on certainly as we protect the marks and everything that probably is a good number that you should use for next year.
Speaker Change: Okay.
Speaker Change: Okay. Thank you.
Speaker Change: Capital position the excess is built up again and so we have flexibility as we go into 'twenty five depending on market circumstances and other opportunities.
Speaker Change: Thank you.
And then what would you consider a good run rate for corporate expenses.
Speaker Change: You guys permits et cetera to nine EBIT it sounds like Theres, some cloud conversion and some other little things so maybe.
Speaker Change: Maybe just talk a little about that thanks.
Speaker Change: As we go through obviously, the severance, which we <unk>.
Speaker Change: Probably should and on the problem. We have no later than the first quarter and we made our investments in the cloud.
Speaker Change: Our mainframe to improve on that.
Speaker Change: Once we and that should last us probably another two quarters, maybe three but we should return to the probably the $90 million range and you're assuming that once we get through that.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: We'll go next to Stephen <unk> at Wolfe Research.
Speaker Change: Okay.
Speaker Change: Hi, Good morning, Jim and Walter.
Stephen: Wanted to start off with a question on the expense outlook, just imagine you're already thinking through the budgeting process for next year I was hoping you could offer a bit of a sneak peek just on how we should be thinking about the G&A growth.
Speaker Change: Outlook as well as.
Speaker Change: Both are at the AWS enterprise level and just given some signs that flows are inflicting and AWS.
Speaker Change: Are you looking to ramp up investment versus that current baseline.
Speaker Change: On the flows was I think where volume what the industry or the good news is on the rap as Jim has indicated so but on the expenses probably a good gauge.
Speaker Change: Again, like I mentioned, the severance and the investment we're making in the cloud it probably.
Speaker Change: In that flattish range, and probably again with the growth investment in AWS I'm, probably in the 4% to 5% range is a good a good thinking.
Speaker Change: And at the enterprise level and just more broadly.
Speaker Change: Enterprises will be.
Speaker Change: Probably closer to flat.
Speaker Change: Again talking about we're talking now.
Speaker Change: Mentioning the food and the severance aspect in the.
Speaker Change: And the investment in the cloud, but in that range.
Speaker Change: Got it and just for a follow up on the competitive landscape in AWS, but I know thats something that Youre flag, just as a source of pressure on flow trends certainly nice to see some inflection in the quarter.
Speaker Change: Just hoping you could just offer some perspective on the competitive landscape cost to acquire assays as rates have risen we've certainly seen ta rates move higher commensurate with that.
Speaker Change: I wanted to get your perspective, just on the cost to acquire or do you expect that to come down as rates decline do you anticipate that is going to be a potential tailwind to recruiting activity looking out to next year.
Speaker Change: So I would probably say, yes, with the extra spread I think people are utilizing in some people to actually goes up there packages et cetera, and I think it's a bit frothy.
Speaker Change: I think as that starts to temper I think you'll maybe see some adjustment and what people may be doing you know from our perspective, we continue to get good quality people.
Speaker Change: The books are a little larger even though the number of account has come down.
Speaker Change: And we feel good about what we're doing and how we're doing it.
Speaker Change: But I do say I do believe that with the markets and other things that people are paying up a bit more today.
Speaker Change: Then maybe as appropriate.
Speaker Change: That's helpful perspective, thanks, so much for taking my question my questions.
Speaker Change: Our next question comes from Craig Siegenthaler at Bank of America.
Craig Siegenthaler: Thanks, Good morning, everyone. So my first question is on the recruiting front. So the advisor count declined in the quarter, but given that retention levels look pretty strong and you felt good with the 71 adviser additions can you talk about what drove the sequential decline and if you expect advisor growth to reassess.
Speaker Change: <unk> and <unk>.
Speaker Change: Yes, we think that the.
Speaker Change: Is it growth will get back to the track.
Speaker Change: We had some additional and has we continue to work through productivity some lower Fas.
Speaker Change: On the teams and some turnover in the <unk> things as advisers start to adjust their practices a bit more but there was nothing major or abnormal there that we see.
Speaker Change: Got it.
Speaker Change: I wanted to come back to the long term care book commentary and how your view of value differs from the private markets.
Speaker Change: So I'm curious like what type of entities are would bid for re insuring or acquiring other long term care block and how robust is the market for a long term care today I can't see many public insurers bidding for that and does that market include alternative asset manager models.
Speaker Change: <unk> insurers and public life insurance.
Speaker Change: Well I can only comment.
Speaker Change: We've been exposed to so.
Speaker Change: Again, it's we.
Speaker Change: As we indicated we went through.
Speaker Change: Discussions.
Speaker Change: Certainly.
Speaker Change: Reinsurers that are well known and when we've evaluated on both fronts as I indicated looking at LTC first looking at both and then looking at <unk> alone.
Speaker Change: Can just say for it is.
Speaker Change: It's not a mature market and certainly we are seeing.
Speaker Change: On that standpoint, the results that we have.
Speaker Change: Engaged with that it's just it's just not beneficial so I rather not comment on the depth of the market. It's the ones that we dealt with are certainly.
Speaker Change: Well known in the industry and we just don't see the value creation. Yes. There are some private equity type partners et cetera are firms, but they partner with reinsurers reinsurance market is not very large for this book these type of books.
Speaker Change: And they're applying a very large gross discount because it is a very immature that's not their core type of business and they do want to match it up with good quality books that would you would have to give up good earnings for and when you put it together it looks really more positive, but its the perceived rather than the actual.
Speaker Change: Underneath.
Speaker Change: And from that don't get me wrong, there is an opportunity that people need capital or if they're there. They have the want to trade off those things from my perspective.
Speaker Change: Our value is there.
Speaker Change: Hey, even admitted that.
Speaker Change: We wouldn't necessarily looked at.
Speaker Change: Makes sense for us at this point based on that market.
Speaker Change: And we feel very good about maintaining that based on our results and on track record.
Speaker Change: Thank you.
Speaker Change: Okay.
We will go next to Thomas Gallagher with Evercore ISI.
Speaker Change: Yeah.
Thomas Gallagher: Good morning, Hey, just a.
Thomas Gallagher: First a follow up on long term care.
Thomas Gallagher: I hear what you're saying on the bid ask particularly given that it's profitable for you, but just out of curiosity. There was a precedent transaction manulife did a deal.
Thomas Gallagher: There was according to them and negative 8% seed.
Thomas Gallagher: So they actually they had to pay money to get rid of it.
Thomas Gallagher: Is that sort of aligned in the sand that you wouldn't be willing to go to go for like absorbing a loss or standalone LTC far worst than that I just wanted to get a sense for your perception of what price was too high for you because I do think.
Thomas Gallagher: From a management distraction standpoint, if it was a modest loss that might still be a reasonable trade off.
Speaker Change: Oh, Oh, Oh, let me try and address it this way.
Speaker Change: When we've analyzed all book, we're not talking about a loss we're talking about all factors considered contributing alright, and we feel very confident in that.
Speaker Change: Obviously reinsurers have different objectives sets, which again.
Speaker Change: Certainly work with them, but not for us.
Speaker Change: But the starting point is the value of our book is not a distraction is actually very additive to our shareholder value at this stage and certainly feel confident in our ability to manage it and we've been managing it for years.
Speaker Change: Certainly gone and discussed over many years and you've seen the results of it. So we feel confident it's it's a positive for us and that yes.
Speaker Change: It created a negative.
Speaker Change: With the reinsurance approach so.
Speaker Change: That's where it was basically positioning right now and Tom Youre asking a very good question you know from our perspective, the only thing wrong, we looked at the.
Speaker Change: Whether there was an opportunity to do this because we know it's always a question you and others have.
Speaker Change: And to be very honest with you as high look then even challenge to do something like this.
Speaker Change: The difference in value was just too large.
Speaker Change: The book is very mature bucket does not require a lot of management. The abstract we have the resources as far as managing the rest of the life company.
Speaker Change: We've been able to take good rate, we're adjusting how we even handle claims that we think will be greater efficiencies going forward. The book is running off it's very mature even when you. Originally some of these concerns with some other books have heard a number of years ago. There was a question our books showed improvement we actually even built this.
Speaker Change: Question on the reserves that we have not taken back.
Speaker Change: Flexibility on so what I'm just driving at is what you would have to give up on earning books on the life business as an offset that would take future earnings out in combinations, who are earning on this book plus the idea that they will take more gross discounts because it's not a market that they have a lot in it.
Speaker Change: And they'll do it as an accommodation so to speak against other books.
Speaker Change: It just doesn't make sense for us maybe some others. It does for what they need is what how theyre thinking about it but.
Speaker Change: If I had any concern about what's in that book or that there would be any potential.
Speaker Change: Potential impact I would handle that and but even if there were minor things it'll be over time very small against what we do and what we have so I really don't think it's an issue that shareholders have to worry about the only thing I would add to that is just and then of course, we were taking on counted.
Speaker Change: Party exposure, which is not even until the formula. So all things considered as Jim said, it makes sense and high confidence basis to retain.
Speaker Change: No that all makes sense to me.
Speaker Change: Everything has a price but yeah.
Speaker Change: Particularly given that it's profitable and you probably have a release of capital. In addition to that when you think about future cash flows that that all makes sense.
Speaker Change: One just one quick follow up I think the.
Speaker Change: The increase in excess capital was pretty sizable this quarter I think it went up by $300 million was there anything.
Speaker Change: Unusual going on that drove that this quarter.
Speaker Change: No. The only other thing is again paid out at a certain has drove earnings. So that was the major contributor to it there's ins and outs, but really it's on very sound footing.
Speaker Change: We feel theres nothing.
Speaker Change: Really is unique in there.
Speaker Change: Certainly tracking right, where we thought it would generate in the nineties.
Speaker Change: Paid out the <unk> and again it gives us flexibility as we move forward.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: We will take our next question from Kenneth Lee at RBC capital markets.
Kenneth Lee: Hey, Thanks for taking my question and good morning, just one quick follow up on the LTC block here.
Kenneth Lee: I'm curious if a meaningful change in the rate environment.
Kenneth Lee: Could change our thinking down the line. Thanks.
Speaker Change: Now, we've certainly invested at where right now where the books are hitting their level, where certainly it will go into more payout and on that basis. So we feel very good about that and we took advantage of that so no. The answer is no.
Speaker Change: Okay, Great very helpful and one quick follow up.
Speaker Change: On the integrated model slide that you have there.
Speaker Change: <unk> asset management advice, <unk> wealth management and the river source there.
Speaker Change: Is the is there any expectation that longer term you could potentially see more synergies for example between the various insurance products in the asset management side, perhaps even augmenting some somebody asset management capabilities over time to better capture that just curious in terms of your thinking there. Thanks.
Speaker Change: And so part of what.
Speaker Change: I don't really understand and that's really the nature of the company because everyone breaks it down to a segment, but if you look at the type of relationships, we have with the client the solutions that we provide and how we manage those assets on that behalf is all leverage together.
Speaker Change: In a positive way and so from that we have a very strong return because of that depth of the relationship and how we use those type of capabilities. So the asset management capabilities, how we hedge all of those things are part of what Walt is from a corporate does as well as.
Speaker Change: With the <unk> business management of the assets, including the bank right now are run by the fixed income department of Colombia, and so all of those capabilities are there and Columbia gets management fees.
Speaker Change: The <unk>.
Speaker Change: <unk> company gets the benefit of those capabilities, rather than sending them out as other players.
Speaker Change: They manage the managed vol portfolios, they manage our <unk> and all of the asset roll ups in.
Balancing on those different asset allocation models.
Speaker Change: The AWS gets the benefit of a good solution with a good benefit at a very good price because of the synergies that we can put to bear there. So for US. That's why there is a real complementary nature, rather than just the separate little distinct businesses and remember the asset management business grew up.
Speaker Change: Out of being a proprietary manager for Ameriprise as the AWS resource and solution set in fact the.
Speaker Change: The distribution was actually the distribution for the product manufacturers and I turn that into a wealth manager.
Speaker Change: That really lives and breathes on its own but the solution sets embedded or a compliment even in an open architecture that we have.
Speaker Change: Gotcha very helpful. There. Thanks again.
Speaker Change: We'll go next to Ryan Krueger at K B W.
Ryan Krueger: Hey, Thanks, Good morning, I had a couple of follow ups one Walter when you said you expected total company G&A expenses to be.
Ryan Krueger: Flattish is that a 2024 comment or is that a 2025 comment.
Speaker Change: 195 comment, but it actually for 2024, it's going to be the same pretty much.
Speaker Change: Okay, and then I guess, when we think about 'twenty five.
Speaker Change: Is that on a headline basis flat, including <unk>.
Speaker Change: 2024 that includes the severance costs and other things like that.
Speaker Change: In 2025, yes.
Speaker Change: That was including the severance but in 2025, there will be some severance, but it will be a lower level.
Speaker Change: Then I anticipate will be at a lower level, but those numbers are again, that's why I'm hedging a little because it did.
Speaker Change: In the main it should be in that range.
Speaker Change: Okay, and then just coming back to the.
Speaker Change: Just wanted to come back to the bank I believe about a third of the assets are floating rate.
Speaker Change: So I would think with.
Speaker Change: With short term rates coming down and expected to come down further that would at least be some some pressure on the spread income from the bank is the offset just growing growing the assets or can you talk a little bit more.
Speaker Change: Thank you.
Speaker Change: So confident that it can still be stable.
Speaker Change: Well it will come down, but yes, we've repositioned the book and we recently repositioned to book with the long term its duration was saying over three and from that standpoint, So yes, it will come down but the what we're on the floating we're earning.
Speaker Change: Pretty large premium on so it will still preserve itself and I think.
Speaker Change: Our net interest income should be higher.
Speaker Change: Okay, well, thank you everybody and maturities coming through and we will be adding out.
Speaker Change: Adding to it.
Speaker Change: Yeah.
Speaker Change: Got it thanks.
Speaker Change: We'll move next to Michael Cyprus at Morgan Stanley.
Michael Cyprus: Hi, Good morning, Thanks for taking the question just coming back to the 2 billion excess capital position.
Michael Cyprus: Available for deployment I imagine that continues to build up the expectation is that youll pay out 80% of earnings. So maybe you could speak to some of the priorities of how youre thinking about potentially deploying that excess over what period of time, what's the sort of appetite to sit with that excess capital position for how long and maybe you could comment on some of the strategic type of M&A conversations youre, having and where M&A.
Could be most additive to the business today.
Speaker Change: We have a lot of parts to that question [laughter].
Speaker Change: So what we have done really is.
Speaker Change: Going through this.
Speaker Change: Market cycle, not knowing exactly the environment, we feel like actually we're one of the highest return is out there compared to anybody.
Speaker Change: Today, and 80% is a substantial amount.
Speaker Change: What we've just done is looked at the environment we.
Speaker Change: Replenished some of the excess capital at that level.
Speaker Change: We have the alternative as we move into 'twenty five of weather.
Speaker Change: If the market environment is good whether we take up that.
Speaker Change: Buyback a bit more whether we look at some opportunities depending on what happens in the market and values are.
Speaker Change: For inorganic.
Speaker Change: Or.
Speaker Change: We will further look at how we adjust.
Speaker Change: Adjusted the business and redeploy in other ways. So it gives us a good level of flexibility, but we're not at a low level of return.
Speaker Change: And so let's look at it as an opportunity.
Speaker Change: And then we can decide how we utilize that based on a combination of factors, including the environment.
Speaker Change: It is obviously.
Speaker Change: Well to the previous question.
Speaker Change: Increased bank, which obviously will require capital all.
We're certainly investing as we've incurred $73 million of severance and and also probably $25 million to $30 million of additional expense to draw that so that's investments, which will get payback for from that standpoint, and we are also investing in seat.
Speaker Change: As Jim has mentioned asset management is certainly launching multiple products and so there is investments being made.
Speaker Change: Even though we're growing the access and we will just keep on evaluating that as we deploy.
Speaker Change: Great and then just a bigger picture follow up question, just as we think about longevity trends and people living longer concerns that people may outlive. There I'm just curious how you see the opportunity set for your integrated business, how your product set might evolve and change to better address the accumulation needs from an aging population and how.
Speaker Change: The client experience May also continue to evolve.
Speaker Change: Excellent question.
Speaker Change: We have a number of new product initiatives and solutions underway.
That we think will both help our advisors to manage the totality of their portfolios with client offering and a lot more flexibility in how they they manage reallocate balance et cetera. We are in the process of the bill being products for longevity to your point for retirement income and.
Speaker Change: How they will draw down and what gives them the optimal formula for that.
Speaker Change: And again those will come from the combination of our capabilities that we have and the knowledge we have.
Speaker Change: With the relationships with our clients. So those are actually things that we're investing in that we're developing and we will come to market with over the next year or so so I think there'll be good opportunity based on how we actually go to market with the advice value proposition and our solution set.
Speaker Change: And how we look at the client's life goals as well as factoring in their longevity, what they need to accumulate what's appropriate from a qualified unqualified as well as from a tax benefit for.
Speaker Change: Or how they can draw down.
Speaker Change: Great. Thank you.
Speaker Change: Next we'll go to John Barnidge at Piper Sandler.
Speaker Change: Yeah.
John Barnidge: Good morning, Thank you for the opportunity appreciate the slide.
Speaker Change: Slides on the risk transfer analysis.
John Barnidge: In the presentation. My question is focused there when you talk about with couple of another business does that consider a wholesale of river sourced within that analysis or was it limited to the liabilities in the corporate segment only.
Speaker Change: The analysis that we did on long hair on long term care that was only for a reinsurance with long term care question and it was.
Speaker Change: Again, it would have included or thought about some transfer on the life of books.
Speaker Change: Yes, those but those all were basically reinsurance transaction.
Speaker Change: That's helpful. Thank you and then my follow up can you talk about the directionality of distribution expense and AWS with the rate cycle, having change in expected.
Speaker Change: Maybe shifting and products over the.
Speaker Change: Near and intermediate term thank you.
Speaker Change: Yes.
Speaker Change: So from a distribution expense really embedded in our G&A is the actually volume increases.
Speaker Change: <unk>, where we run SMA and pay for asset managers and other things. So that's all in the G&A. So if we strip that out G&A is actually quite good flat. So the volume increases are in the G&A.
Speaker Change: <unk> things like FDIC insurance I mean, you name it so what I would probably say is we feel very good about the G&A based on what we've made as adjustments.
Speaker Change: That includes that we are reinvesting nicely and solutions and capability and technology et cetera, So we've been able to actually redeploy.
Speaker Change: Reengineer transform in a sense of how we're using technology AI analytics et set of robotics.
Speaker Change: <unk> of India et cetera. So.
Speaker Change: We are very active in what we're doing so we continue to make good investments and maintain good margins.
Speaker Change: Thank you.
Speaker Change: We will take our last question from Brennan Hawken at UBS.
Speaker Change: Sneaking in under the wire thanks for taking my questions. This morning.
Speaker Change: So a couple of questions thinking about bank. So you know when I when I think about ways to protect spread regardless of the rate environment, often think of lending and we've seen other wealth management firms note a pickup in particularly.
Speaker Change: I, just one product with rates coming down.
Speaker Change #100: We know that you've seen some decent growth and pledge loans since they bottomed in mid 2023, but have you seen an acceleration in engagement and that product since the fed cut rates recently and should we also continue to expect these strong <unk> mortgage growth that you've been seeing in reach.
Speaker Change: Some quarters to continue.
Speaker Change #101: Yes, so we do see.
Speaker Change #101: Nice pickup and pledge.
Speaker Change #101: We are launching even a fixed pledge product in complement to what we had which we also know was our advisers were asking for.
Speaker Change #101: And that's out in the marketplace and a good portion of what's done in the business. We know that this was a new business for us and we're underpenetrated compared to others that have those products and solutions and so we think that that can continue to further expand we will be launching he locks next year and.
Speaker Change #101: And we think there's a good opportunity years ago. When we had the bank we launched he locks we built a nice portfolio in that so we think we can continue to do that we're actually working with another provider of mortgages that were transferring that we think again that could further expand so there are a number of things that we feel good about to grow the lending part of.
Speaker Change #101: The book.
Speaker Change #102: Great. Thanks for that Yeah, I remember your comments on the new products helpful. Okay.
Speaker Change #103: For my second question.
Speaker Change #104: Just basically closing out with one final one here on the long term care decision.
Speaker Change #105: I'd like to take a different perspective here.
Speaker Change #105: The business model that you guys have is different than other wealth management firms and that you have this insurance business and from my perspective in talking with capital market investors.
Speaker Change #105: The insurance business is not one where they're focused on the return profile or cash flows or whatever it's very often an obstacle.
Speaker Change #105: Buy the stock.
Speaker Change #105: And so what I would say and ask.
Speaker Change #105: Intended and utterly the most respectful way is whether or not you've considered.
Speaker Change #105: The idea that eating a bit of a loss on this.
Speaker Change #105: And sure you got to take some counterparty risk correspondingly, but it reduces what what can be a hurdle.
Speaker Change #105: Two a lot of investors when they consider investing in ameriprise versus considering other wealth management firms from say quiet Raymond James L. P O Stifel that might have different risks, but they are lacking this long term care book that is so challenging and while I get at yours is the best House.
Speaker Change #105: It is still a really bad block so how did that come into the equation and the mathematics behind that consideration. So very clearly I think again and that's maybe what is not fully understood.
Speaker Change #106: So at Ameriprise as you look at the total of the company and we've looked at this since we've been public we have been the best performing shareholder return and financials of the S&P 500.
Speaker Change #106: We have over all these cycles, including through financial crisis outperformed any segment individual asset managers and the third the oil wealth managers individual life companies you put it all together you get a very strong consistent return at lower volatility in addition to that our insurance business.
Speaker Change #106: Those that generate over $800 million of free cash flow every year used to buy back stock has not been in any way hurt or hindrance or a roadblock to generate good returns. In addition to that it's a very clear and appropriate solution for our client that actually keeps good retention.
Speaker Change #106: And of the client and even where you would say okay long term care is not a good segment of it we closed that book over 25 years ago, roughly it's a mature book, it's generating value and having said that there was only $300 million of capital to it okay and we have expressed discretionary.
Speaker Change #106: That came up through the combination of the last few years.
Speaker Change #106: So what I would just say is if someone's looking at that as a hindrance. So let me just go you have some pressure in markets you have some pressure in interest rates et cetera from where it is wealth managers that kind of hurt we're not going to hurt as a company we're going to outperform.
Speaker Change #106: So I would just say you got a strong growth business.
Speaker Change #106: High returns you got a 50% return on equity to compare it to some of your wealth managers that you are talking about look at taking cash spread around away and see what you get so I would say I would probably have that discussion with your investors and I am happy to do it personally.
Speaker Change #107: Its Walter let me what you started your parmesan was exactly the basis on which we entered into the evaluation.
Speaker Change #106: The drag that would have on potential shareholder.
Reaction. So we looked at every aspect knowing that factor.
Speaker Change #106: <unk>.
Speaker Change #106: All the elements that I listed in the presentation and evaluating that bid ask and the fact these are our clients and the counterparty exposures that are created which again certainly is an issue that we have to consider.
Speaker Change #106: We could not.
Speaker Change #106: Clear conscience really taken action that pushed in every aspect, we analyze it with denigrate shareholder value in the long run it really wouldn't let me add one other thing we didn't do this on our own we worked with very well.
Speaker Change #106: Well I think it's I won't mention their names.
Speaker Change #106: The number of firms and I will tell you that was there also.
Speaker Change #106: Recommendation that we keep it compared to what it is what's out there and from a shareholder perspective to your opening line because I've asked those questions explicitly.
Speaker Change #106: Okay.
Speaker Change #108: Got it hopefully that answers your question. It does it didn't mean to kick the Hornets nest strategy.
Speaker Change #108: Question on the call.
Speaker Change #108: Okay.
Speaker Change #108: Now kicking I think honestly.
Speaker Change #109: We understand that the perceived but I would just ask people to look through the perceived through the reality of it and to be very honest I am here to generate excellent returns for shareholders I am here to keep my people highly engaged and then gives them an opportunity and I'm here for my clients and.
Speaker Change #109: I 130 years, I don't take lightly I've been running the company for over 25 now.
Speaker Change #109: And I have done everything in that regard not for the idea that I haven't invested opinion on something that I will not challenge. So the only to Elliot because what youre premise was certainly valid but when we look at order went home and we disposed of that we did our fixed annuity we went in on the premise of ensuring shareholder value.
Speaker Change #109: So we have certainly taken risk off this is juan when analyzing it made no sense to Jim and let me if the market matures in a way where there's more of an appetite from reinsurers Walter and I will be the first one.
Speaker Change #109: We'll evaluate that for an opportunity.
Speaker Change #109: We'll look strategically at the business and I do that every year every quarter. So I'm not guiding you I'd ask the same questions I'm challenged with the same but I would just tell you I'm not making this decision because I don't think it's the right decision to make making it because I think it is the right at this juncture at this time.
Speaker Change #109: Yeah.
Speaker Change #110: That was the spirit of the question and I think you addressed it through it so thanks for sharing your thoughts I shared.
Speaker Change #111: And we have no further questions at this time. This concludes today's conference. Thank you for participating you may now disconnect.
Speaker Change #110: Yeah.
Speaker Change #110: Yeah.
Speaker Change #110:
Speaker Change #110:
Speaker Change #110: Yeah.