Ameriprise Financial(AMP) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue growth for Q4 2023 was robust, up 8%, driven by organic growth and positive market conditions [6] - Earnings per share (EPS) increased by 10% (14% normalized) in Q4 2023, with a nearly 50% ROE, consistently among the best in the industry [6] - Full-year 2023 revenue was $15.4 billion, up 8%, with earnings increasing 18% to $3.3 billion and EPS reaching $30.46, up 24% [6] - Assets under management and administration reached a near all-time high of $1.4 trillion [6] - Adjusted operating net revenues for Wealth Management increased 8% to $2.4 billion in Q4 2023 [20] - Asset Management AUM grew 9% to $637 billion in Q4 2023, driven by market appreciation and positive foreign exchange [22] - Retirement & Protection Solutions pretax adjusted operating earnings increased 2% to $202 million in Q4 2023 [25] Business Line Performance - Wealth Management client assets increased 19% year-over-year to $901 billion, with $23 billion in client flows in Q4 2023 [7][19] - Adviser productivity in Wealth Management increased 11% to $916,000 per adviser in Q4 2023 [8] - Bank and certificate assets grew 28% to $37 billion in Q4 2023 [8] - Variable annuity sales increased 15% in Q4 2023, with protection sales up 6% [10] - Asset Management experienced U.S. retail mutual fund outflows in line with industry trends, while global institutional outflows were elevated due to portfolio management changes [11] - Retirement & Protection Solutions sales improved, with protection sales up 6% to $72 million and variable annuity sales growing 15% to $1.1 billion in Q4 2023 [25] Market Performance - Wealth Management client assets reached a record $901 billion, driven by strong organic growth and higher equity markets [19] - Asset Management AUM growth was supported by market appreciation and foreign exchange translation, despite net outflows [22] - Retirement & Protection Solutions benefited from higher investment yields, contributing to improved sales and earnings [25] Strategic Direction and Industry Competition - The company is focused on enhancing client experience through integrated technology, advanced analytics, and digital capabilities [9] - Ameriprise continues to invest in efficiency and organic growth, leveraging its strong brand awareness and market position [9] - The company is well-positioned to navigate market uncertainty, with a diversified business model and strong financial performance [6][18] - Ameriprise is recognized for its client satisfaction, employee engagement, and industry accolades, including being named one of the Best Managed Companies of 2023 [13][14] Management Commentary on Operating Environment and Future Outlook - Management highlighted the positive operating environment at the end of 2023 and the start of 2024, despite uncertainties around economic growth, inflation, and interest rates [5] - The company expects to maintain a flat expense base in 2024 while continuing to invest in growth, particularly in Wealth Management [16] - Ameriprise anticipates higher net interest income in 2024 and 2025, driven by favorable reinvestment rates and stable cash positions [30][38] - The company remains confident in sustaining its Wealth Management margin above 30%, supported by resilient spread revenues [48] Other Important Information - Ameriprise returned $587 million to shareholders in Q4 2023 and $2.5 billion for the full year, with a 25% reduction in share count over the past five years [13][18] - The company has a strong balance sheet, with $1.8 billion in net unrealized loss reduction and 90% free cash flow contributions across all business segments [17] - Ameriprise expanded its presence in the financial institutions channel through a partnership with Comerica Bank, adding $15 billion in client flows [18] Q&A Session Summary Question: Bank Maturities and Yield Expectations [29] - The company expects $3 billion in maturities in 2024 and 2025, with higher net interest income due to favorable reinvestment rates [30] Question: Off-Balance Sheet Broker-Dealer Yield Compression [31] - The yield compression was tied to the $2.5 billion Comerica cash sweep, which will transition over the next six months [33] Question: Net Interest Income Growth Expectations [35] - Net interest income is expected to be higher in 2024 and 2025, based on forward curve assumptions [36] Question: Cash Deployment Opportunities [40] - Advisers are expected to redeploy cash into wrap accounts and other investment products as markets normalize [42][43] Question: Asset Management Margin and Expense Management [44] - The company is managing expenses tightly and expects to sustain margins in the target range, with potential for improvement based on market conditions [45] Question: Wealth Management Margin Sustainability [47] - Ameriprise is confident in sustaining its Wealth Management margin above 30%, supported by resilient spread revenues [48] Question: Capital Return Trajectory [49] - The company expects to continue its capital return strategy, with a payout ratio around 80% [50] Question: Asset Management Expense Reductions and Commercial Impacts [52] - Expense reductions in Asset Management are part of a proactive strategy to improve efficiency, with manageable commercial impacts [53] Question: Cash Balance Trends [54] - Client cash balances are currently higher than usual, but are expected to normalize over time as rates stabilize [55] Question: Layoffs in Asset Management [59] - The company reduced 12 portfolio managers, with $2 billion in AUM affected, as part of a capital review and efficiency improvement initiative [60][62] Question: Free Cash Flow Conversion [67] - Ameriprise plans to maintain its free cash flow conversion strategy, with potential for opportunistic adjustments [68] Question: Expense Management Initiatives [70] - The company has implemented $26 million in severance expenses and expects to maintain a flat expense base in 2024 [71] Question: Reinsurance Opportunities [72] - Ameriprise is evaluating reinsurance opportunities, with recent industry developments creating potential alignment [73] Question: Cash Stabilization Trends [75] - Cash levels have stabilized in January, with no significant redeployments observed [76] Question: Retirement & Protection Investment Profile [77] - The company has completed its investment profile adjustments, taking advantage of favorable rate conditions [78] Question: Asset Management Growth Opportunities [80] - Ameriprise is focusing on fixed income and credit opportunities, with potential for growth in these areas [81] Question: Risk Transfer and Third-Party Sidecars [82] - The company is not currently interested in third-party sidecars, focusing instead on traditional risk transfer opportunities [83] Question: Affiliation Options and Tech Initiatives [85][87] - Ameriprise is expanding its RIA channel and investing in technology to enhance adviser capabilities and client engagement [86][88] Question: Gross Fee Yield on Client Cash [90] - The gross fee yield on client cash is around 5%, with new money yields slightly under 6% [91] Question: Net Interest Income Growth Confirmation [92] - Net interest income growth expectations for 2024 and 2025 apply to the bank segment [93]