Ameriprise Financial(AMP) - 2023 Q2 - Quarterly Report

Part I Financial Statements (Unaudited) Unaudited financial statements as of June 30, 2023, show $890 million net income and $169.8 billion total assets, reflecting a new accounting standard adoption Consolidated Statements of Operations Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total net revenues | $3,876 | $3,486 | $7,618 | $7,111 | | Pretax income | $1,127 | $773 | $1,623 | $1,779 | | Net income | $890 | $614 | $1,307 | $1,439 | | Diluted EPS | $8.21 | $5.37 | $11.97 | $12.48 | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income Highlights (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $890 | $614 | $1,307 | $1,439 | | Other comprehensive income (loss) | $(364) | $(506) | $197 | $(1,106) | | Total comprehensive income (loss) | $526 | $108 | $1,504 | $333 | Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total assets | $169,781 | $158,852 | | Investments | $51,376 | $44,524 | | Separate account assets | $76,874 | $73,962 | | Total liabilities | $165,701 | $155,049 | | Customer deposits | $35,578 | $30,775 | | Total equity | $4,080 | $3,803 | Consolidated Statements of Equity - For the six months ended June 30, 2023, total equity increased from $3.80 billion to $4.08 billion, driven by $1.31 billion in net income and $197 million in other comprehensive income, offset by $1.16 billion in common share repurchases and $284 million in dividends[19] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,617 | $1,818 | | Net cash used in investing activities | $(6,020) | $(4,592) | | Net cash provided by financing activities | $4,352 | $2,607 | Notes to Consolidated Financial Statements - The company adopted the new accounting standard for Long-Duration Contracts (ASU 2018-12) on January 1, 2023, with a transition date of January 1, 2021, resulting in a restatement of prior periods and a $1.9 billion reduction in total equity as of the transition date[25][39] Impact of ASU 2018-12 Adoption on Equity (in millions) | Date | Retained Earnings Adjustment | AOCI Adjustment | Total Equity Adjustment | | :--- | :--- | :--- | :--- | | Jan 1, 2021 | $(900) | $(1,000) | $(1,900) | | Dec 31, 2022 | $387 | $(197) | $190 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 2023 pretax income growth to rising interest rates and product growth, while maintaining targets of 12-15% adjusted EPS growth and over 30% adjusted ROE, with AUM & AUA reaching $1.3 trillion - The company's financial targets are 12% to 15% growth in adjusted operating earnings per diluted share and an adjusted operating return on equity of over 30%[298] Reconciliation of GAAP to Adjusted Operating Earnings (Q2 2023 vs Q2 2022) | Metric (in millions, except per share) | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Net Income | $890 | $614 | | Adjusted Operating Earnings | $807 | $654 | | Diluted EPS | $8.21 | $5.37 | | Adjusted Operating Diluted EPS | $7.44 | $5.72 | - Total Assets Under Management and Administration (AUM & AUA) increased by 9% to $1.277 trillion as of June 30, 2023, compared to $1.170 trillion a year prior, driven by market appreciation and net inflows in the Advice & Wealth Management segment[313] Consolidated Results of Operations - For Q2 2023, pretax income rose 46% YoY to $1.13 billion, driven by higher net investment income from rising interest rates and growth in bank and certificate products, alongside a favorable market impact on non-traditional long-duration products[315] - Net investment income surged by $524 million in Q2 2023 compared to Q2 2022, primarily due to growth in Ameriprise Bank deposits and certificate business, and the impact of rising interest rates on the investment portfolio[316] - For the six months ended June 30, 2023, pretax income decreased 9% YoY to $1.62 billion, mainly due to an unfavorable market impact on non-traditional long-duration products and lower average equity markets compared to the prior year period[339] Results of Operations by Segment - Advice & Wealth Management: Q2 2023 adjusted operating earnings increased 49% YoY to $731 million, driven by higher short-term interest rates and growth in bank and certificate products, with pretax adjusted operating margin expanding significantly to 31.2% from 23.9%[323] - Asset Management: Q2 2023 adjusted operating earnings decreased 27% YoY to $162 million, primarily due to the cumulative impact of net outflows and lower average fixed income markets[330] - Retirement & Protection Solutions: Q2 2023 adjusted operating earnings increased 13% YoY to $189 million, driven by higher investment income from rising interest rates and portfolio repositioning[333] - Corporate & Other: The segment's adjusted operating loss was stable at $60 million in Q2 2023, with the Long-Term Care (LTC) insurance business reporting a pretax adjusted operating earning of $1 million, an improvement from a $6 million loss in the prior year period[336] Liquidity and Capital Resources - As of June 30, 2023, the company had Available Capital for Capital Adequacy of $5.0 billion and maintained substantial liquidity with $7.3 billion in cash and cash equivalents (excluding CIEs and restricted cash)[363] - The parent company held $895 million in cash, cash equivalents, and unencumbered liquid securities as of June 30, 2023, with total estimated liquidity available to the parent company at $2.1 billion[363] - During the six months ended June 30, 2023, the company repurchased 3.2 million shares for $998 million and paid $284 million in dividends, with an additional $3.5 billion authorized for share repurchases through September 2025 in July 2023[367] Quantitative and Qualitative Disclosures About Market Risk The company's market risks include interest rate, equity price, foreign currency, and credit risk, with sensitivity analysis showing potential impacts on pretax income and a comprehensive hedging program in place Market Risk Sensitivity Analysis (as of June 30, 2023) | Scenario | Estimated Net Impact on Pretax Income (in millions) | | :--- | :--- | | Equity Price Decline 10% | $(303) | | Interest Rate Increase 100 bps | $559 | - The company is primarily exposed to changes in the British Pound related to its net investment in Threadneedle, which was approximately £1.3 billion as of June 30, 2023[393] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable level of assurance as of June 30, 2023[397] - No changes were made to the internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[398] Part II. Other Information Legal Proceedings The company is involved in various legal proceedings and regulatory inquiries, establishing accrued liabilities for probable and estimable losses, noting elevated regulatory activity - The company is involved in legal proceedings and regulatory inquiries from entities like the SEC, FINRA, and the OCC, which is normal for a diversified financial services firm, and an accrued liability is established when a loss is probable and can be reasonably estimated[287] Risk Factors No material changes have occurred in the risk factors previously disclosed in the 2022 10-K report - No material changes have occurred in the risk factors previously disclosed in the 2022 10-K report[400] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2023, Ameriprise repurchased 1.6 million shares for $310.31 average, with $0.6 billion remaining for future repurchases Share Repurchases (Q2 2023) | Month | Total Shares Purchased (Program) | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2023 | 299,040 | $307.09 | | May 2023 | 665,897 | $300.30 | | June 2023 | 619,091 | $322.64 | | Q2 Total | 1,584,028 | $310.31 | - In July 2023, the Board of Directors authorized an additional $3.5 billion for share repurchases through September 30, 2025[403] Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during Q2 2023 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[404]