Ameriprise Financial(AMP) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues increased by 9% year-over-year, reaching a record of $4.2 billion, driven by positive business results in markets [7][14] - Earnings per share (EPS), excluding severance costs, rose by 17% to $8.72, marking a new high [7][14] - Free cash flow generation was strong at 90%, with $693 million returned to shareholders [7][15] - Return on equity (ROE) was nearly 50%, maintaining a best-in-class status [7][15] - Assets under management and administration grew by 12% year-over-year to $1.4 trillion [7][14] Business Line Data and Key Metrics Changes Wealth Management - Total client assets in wealth management increased by 17% to $972 billion [8][16] - Total client wrap assets rose by 18% to $535 billion, with wrap flows growing by 34% year-over-year to $7.5 billion [8][16] - Revenue per advisor reached a new high of $968,000, up 11% from the previous year [16] - Cash balances were reported at $81.9 billion, with a shift back to wrap and other products expected as markets normalize [16][17] Asset Management - Total assets under management increased by 4% to $642 billion, primarily due to market appreciation [10][19] - Operating earnings in asset management rose by 35% to $218 million, with a margin of 38% [19] - Net outflows improved by $1.3 billion from the previous year, with retail gross sales up by $1 billion [11][19] Retirement & Protection Solutions - Pre-tax adjusted operating earnings increased by 4% to $196 million, with protection sales up 21% [20] - Variable annuity sales grew by 45% to $1.4 billion, driven by strong momentum in structured products [20] Market Data and Key Metrics Changes - The company noted ongoing geopolitical instability and inflation concerns affecting client sentiment [6] - The advisor force grew to nearly 10,400, with 52 experienced advisors added in the quarter [9] Company Strategy and Development Direction - The company continues to focus on leveraging technology, digital capabilities, and analytics to enhance client engagement and operational efficiency [13][19] - Strategic investments are being made in wealth management and asset management to drive future growth [14][19] - The company aims to maintain expense discipline while selectively investing in growth areas [15][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate market cycles and deliver strong results [6][13] - The expectation of a soft landing in the economy was noted, with inflation anticipated to decrease over time [6] - Management highlighted the importance of client engagement and the need to adapt to changing market conditions, especially with the upcoming U.S. election [6][66] Other Important Information - The company has a strong balance sheet with excess capital of $1.7 billion, supporting ongoing capital returns to shareholders [21] - The diversified business model contributes to stable free cash flow across all segments [15] Q&A Session Summary Question: Cash sweep commentary and competitive environment - Management indicated that cash sweep practices are aligned with regulatory standards and competitive rates are monitored, but no significant changes are planned [24][26] Question: Bank net interest income (NII) growth expectations - Management expects bank NII to be higher in 2024 compared to 2023, driven by investment strategies [27][29] Question: Client cash in wrap advisory accounts - Approximately $12 billion of client cash is held in wrap advisory accounts [30] Question: Advisor recruitment environment - A slight slowdown in recruiting experienced advisors was noted, with expectations for improvement in the pipeline [31][32] Question: Client capital deployment trends - Management observed clients beginning to put capital to work, with expectations for continued shifts from cash balances to investment products [33][37] Question: Asset Management margins and fee pressures - Management expressed confidence in maintaining operating margins above long-term targets through disciplined expense management and strategic investments [50][51] Question: Insurance business growth potential - Management highlighted strong growth in insurance and annuity products, with expectations for continued contributions to earnings [54][55] Question: Impact of the upcoming election on operations - Management noted that client concerns regarding the election may influence investment behaviors but does not foresee major operational impacts [64][66]