Business Context and Reporting Period
Ameriprise Financial, Inc. filed its Form 10-K for the fiscal year ended December 31, 2023. The company is a diversified financial services holding company operating through Advice & Wealth Management, Asset Management, Retirement & Protection Solutions, and Corporate & Other. Its principal offerings include financial planning and brokerage, banking and certificates, asset management, annuities, life insurance, and disability income insurance.
As of December 31, 2023, assets under management and administration were $1.4 trillion, including $1.1 trillion of assets under management and $279.5 billion of assets under administration. The company had more than 10,000 affiliated advisors and approximately 13,800 employees.
Key Financial Metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenues | $16.096 billion | $14.334 billion | 12% |
| Total net revenues | $15.535 billion | $14.258 billion | 9% |
| Pretax income | $3.234 billion | $3.931 billion | (18%) |
| Net income | $2.556 billion | $3.149 billion | (19%) |
| Diluted earnings per share | $23.71 | $27.70 | (14%) |
| Adjusted operating earnings | $3.111 billion | $2.885 billion | 8% |
| Adjusted operating earnings per diluted share | $28.86 | $25.37 | 14% |
| Adjusted operating return on equity | 48.5% | 48.6% | Broadly stable |
| Net cash from operating activities | $4.685 billion | $4.407 billion | 6% |
Reported net income and GAAP earnings were reduced by unfavorable market impacts on non-traditional long-duration products, including variable annuity and indexed product guarantees, as well as unfavorable assumption unlocking. Net investment income increased $1.732 billion, primarily from higher interest rates, portfolio repositioning, and growth in bank and certificate balances.
- Advice & Wealth Management: adjusted operating earnings increased 30% to $2.851 billion; adjusted operating margin was 30.3% versus 25.9%. Bank deposits increased to $21.5 billion and certificate balances to $13.5 billion.
- Asset Management: adjusted operating earnings decreased 15% to $720 million. Managed assets increased 9% to $636.9 billion, but net flows were negative $17.2 billion.
- Retirement & Protection Solutions: adjusted operating earnings decreased 21% to $685 million. Variable annuity account value increased 9% to $80.8 billion, while net outflows were $3.0 billion.
- Corporate & Other: adjusted operating loss was $320 million, compared with a $306 million loss in 2022.
Liquidity, Capital, Debt and Shareholder Returns
- Cash and cash equivalents, excluding consolidated investment entities and other restricted cash, were $7.5 billion at year-end, compared with $7.0 billion in 2022.
- Available Capital for Capital Adequacy was $5.418 billion, compared with $5.209 billion in 2022.
- Parent-company liquidity available in a volatile environment was estimated at $1.8 billion, including cash, liquid securities, an affiliate line of credit, and a portion of the committed facility.
- The company had a $1.0 billion unsecured revolving credit facility expiring in June 2026, with no borrowings outstanding and $1 million of letters of credit issued against it.
- Total long-term debt was $3.399 billion and short-term FHLB borrowings were $201 million. The company issued $750 million of 5.15% senior notes due 2033 and $600 million of 5.7% senior notes due 2028, while repaying $750 million of 4.0% notes at maturity.
- Near-term obligations include $12.3 billion of investment certificate maturities, $2.2 billion of estimated insurance and annuity benefits, and $550 million of debt maturing in 2024. Banking and brokerage deposits of $23.9 billion are payable on demand.
- The company paid $569 million of common dividends and repurchased 5.9 million shares for approximately $2.0 billion during 2023. Approximately $3.1 billion remained under the repurchase authorization at year-end.
Material Changes Versus the Prior Comparable Period
- Total AUM and AUA increased 15% to $1.361 trillion, driven primarily by market appreciation, wrap-account inflows, and growth in third-party money market funds and brokered certificates of deposit.
- Advice & Wealth Management earnings benefited from higher interest rates, client inflows, bank deposit growth, and the Comerica investment-program relationship, which added $14.7 billion of client flows, including $2.0 billion of wrap net flows.
- Asset Management earnings declined despite higher ending managed assets because cumulative net outflows and lower performance fees reduced fee revenue.
- Retirement & Protection Solutions earnings declined because of higher insurance and annuity-related expenses, unfavorable assumption unlocking, and higher market-related costs. Account values with living-benefit riders declined to 54% from 57%.
- The company recorded a $50 million accrual for a regulatory matter involving electronic communications recordkeeping. Management stated that it reached an agreement in principle with SEC staff, subject to Commission approval.
- The company adopted the long-duration insurance contract accounting standard, ASU 2018-12, effective January 1, 2023 with a January 1, 2021 transition date. The adoption reduced opening total equity by $1.9 billion and resulted in restated prior periods, but did not affect cash flows, dividend capacity, or regulatory capital requirements.
Guidance, Outlook, Risks and Unusual Items
Management’s stated multi-year financial targets are adjusted operating earnings per diluted share growth of 12% to 15% and adjusted operating return on equity above 30%. Management expects continued growth in Advice & Wealth Management, ongoing deposit growth, and a continuing shift toward lower-risk annuity products as living-benefit sales remain discontinued.
- Results remain highly sensitive to equity markets, interest rates, credit spreads, foreign exchange rates, client flows, and asset valuations. A hypothetical 10% equity-market decline was estimated to reduce pretax income by $332 million after hedging as of December 31, 2023; a hypothetical 100-basis-point rate increase was estimated to increase pretax income by $561 million.
- Variable annuity guarantees, structured variable annuities, indexed universal life products, and long-term care insurance create significant reserving, hedging, policyholder-behavior, and market risks.
- The closed-block long-term care business had approximately $2.7 billion of future policy benefit and claim reserves net of reinsurance, supported by ongoing premium-rate increases and reinsurance arrangements. Reinsurance counterparties include Genworth affiliates and Commonwealth Annuity and Life Insurance Company.
- The company faces substantial regulatory, legal, cybersecurity, privacy, artificial-intelligence, operational, reputational, and third-party counterparty risks. It reported no material cybersecurity loss of client financial assets or information to date, but warned that future incidents could materially affect results.
- Insurance subsidiaries remained well above required risk-based capital levels. RiverSource Life reported statutory capital of $3.093 billion, or 604% of its company-action-level requirement; RiverSource Life of New York reported $244 million, or 614%.
- The Federal Reserve’s Building Block Approach capital framework for insurance savings and loan holding companies became effective January 1, 2024, with reporting beginning in 2025 and potential implications for capital management and subsidiary dividends.
Most Important Facts for Investors to Verify
- Reconcile GAAP net income and diluted EPS with adjusted operating earnings and assess whether the earnings gap is recurring or primarily market-driven.
- Monitor Advice & Wealth Management wrap-account flows, advisor recruiting and retention, bank deposits, certificate balances, and the economics of the Comerica relationship.
- Evaluate the persistence of Asset Management net outflows and the effect of investment performance, fee pressure, and product mix on future revenue.
- Review variable annuity guarantee exposure, hedging effectiveness, surrender and withdrawal assumptions, and sensitivity to equity and interest-rate changes.
- Assess liquidity against certificate maturities, demand deposits, insurance benefits, debt maturities, collateral requirements, and potential market-related cash needs.
- Review the long-term care reserve adequacy, premium-rate approvals, reinsurance recoverables, and counterparty exposure to Genworth and Commonwealth.
- Confirm the resolution, financial impact, and regulatory approval status of the electronic communications recordkeeping matter.
- Consider the effects of the LDTI accounting adoption and the Building Block Approach when comparing reported equity, capital, and earnings across periods.