Business Context and Reporting Period
Ameriprise Financial, Inc. filed its Form 10-K for the fiscal year ended December 31, 2022. The company operates through Advice & Wealth Management, Asset Management, Retirement & Protection Solutions, and Corporate & Other. Its primary businesses are financial advice, brokerage and banking, global asset management, annuities, life insurance, disability insurance, and closed blocks of long-term-care and fixed-annuity products.
Ameriprise reported $1.2 trillion of assets under management and administration at year-end 2022, down from $1.4 trillion at year-end 2021. The decline primarily reflected equity and bond market depreciation and unfavorable foreign-currency translation.
Key Financial Metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenues | $14.347 billion | $13.443 billion | +7% |
| Total net revenues | $14.271 billion | $13.431 billion | +6% |
| Pretax income | $3.182 billion | $3.350 billion | -5% |
| Net income | $2.559 billion | $2.760 billion | -7% |
| Diluted EPS | $22.51 | $23.00 | -2% |
| Adjusted operating earnings | $2.724 billion | $2.724 billion | Flat |
| Adjusted operating EPS | $23.96 | $22.70 | +6% |
| Adjusted operating ROE, excluding AOCI | 45.9% | 50.6% | Down 4.7 points |
| Net cash from operating activities | $4.407 billion | $3.325 billion | +$1.082 billion |
The effective tax rate increased to 19.6% from 17.6%. Total comprehensive income was negative $49 million, primarily due to a $2.608 billion after-tax decline in other comprehensive income, largely reflecting unrealized losses on securities and foreign-currency translation.
- Advice & Wealth Management: Adjusted operating earnings increased 26% to $2.192 billion; adjusted operating margin increased to 25.9% from 21.7%. Higher interest rates and client net inflows more than offset market depreciation and lower transaction activity.
- Asset Management: Adjusted operating earnings decreased 23% to $844 million. Managed assets declined 23% to $584.0 billion, and net flows were negative $6.6 billion versus positive $42.9 billion in 2021.
- Retirement & Protection Solutions: Adjusted operating earnings declined 14% to $630 million. Variable-annuity account values decreased 19% to $74.4 billion, while sales declined 33% to $4.0 billion.
- Corporate & Other: Adjusted operating loss increased modestly to $275 million from $270 million.
Liquidity, Capital, Debt and Shareholder Returns
- Consolidated cash and cash equivalents, excluding consolidated investment entities and other restricted cash, were $7.0 billion at December 31, 2022, compared with $7.1 billion at year-end 2021.
- Parent-company cash, cash equivalents and unencumbered liquid securities were $389 million. Management estimated parent liquidity of $1.6 billion, including available affiliate and committed credit facilities.
- The company had a $1.0 billion unsecured revolving credit facility expiring in June 2026, with no borrowings and $1 million of letters of credit outstanding at year-end. Availability may increase to $1.25 billion subject to approvals.
- Total company debt was approximately $3.0 billion, consisting of $2.821 billion of long-term debt and $201 million of Federal Home Loan Bank advances. Ameriprise issued $500 million of 4.5% senior notes due 2032 and repaid $500 million of 3.0% senior notes due 2022.
- 2023 contractual obligations included $8.9 billion of investment-certificate maturities, $1.8 billion of estimated insurance and annuity benefits, and $750 million of long-term debt maturing in October 2023. Estimated insurance and annuity benefits after 2023 totaled $49.3 billion.
- Ameriprise paid $553 million of dividends in 2022 and repurchased 6.6 million shares for approximately $1.9 billion. The remaining share-repurchase authorization was $1.6 billion at year-end.
- Insurance subsidiaries and Ameriprise Bank exceeded applicable regulatory capital requirements. RiverSource Life had statutory capital of $3.1 billion, or 543% of its company-action-level RBC requirement; RiverSource Life of NY was at 801%.
Material Changes Versus the Prior Comparable Period
- Revenue growth benefited from higher short-term interest rates, increased banking deposits and certificate activity, and the absence of the prior-year ceded premiums associated with the 2021 life-contingent immediate-annuity reinsurance transaction.
- Reported net income and pretax income declined because 2021 included substantial gains from the block-transfer reinsurance transaction, while 2022 included unfavorable mean-reversion impacts, lower average equity markets, and unfavorable insurance-and-annuity assumption unlocking.
- The 2022 market impact on non-traditional long-duration products was a $211 million benefit, compared with a $656 million expense in 2021. Mean-reversion impacts were a $268 million expense in 2022 versus a $152 million benefit in 2021.
- General and administrative expense increased 8%, partly due to the acquired BMO Global Asset Management EMEA business and higher integration expenses.
- Advice & Wealth Management continued to generate net inflows, but wrap-account assets fell 11% to $412.1 billion because $80.1 billion of market depreciation exceeded $27.5 billion of net inflows.
- The company discontinued new sales of variable annuities with living-benefit guarantees by mid-2022, continuing its shift toward lower-risk accumulation products. Variable-annuity account value with living-benefit riders declined to 57% from 61%.
- Ameriprise revised prior-period financial statements for an error involving shadow unearned-revenue liabilities associated with universal-life products. Management stated the error was not material to prior-period results, but cumulative correction was material to 2022 total comprehensive income.
Guidance, Outlook, Commentary and Risks
Management’s stated long-term financial targets are adjusted operating diluted EPS growth of 12% to 15% and adjusted operating ROE excluding AOCI of more than 30%. The filing does not provide specific 2023 revenue or earnings guidance.
Management expects continued strategic emphasis on Advice & Wealth Management, growth in banking and advice capabilities, integration of the BMO Global Asset Management EMEA acquisition, and a shift toward lower-capital, fee-based businesses. The company expects to continue reducing exposure to variable-annuity living-benefit guarantees and pursuing premium-rate increases for its closed long-term-care block, subject to regulatory approval.
- Results remain sensitive to equity and fixed-income market performance, interest rates, credit spreads, foreign-exchange movements, client flows and investor behavior.
- Variable-annuity guarantees, insurance reserves, deferred acquisition costs and embedded derivatives depend on assumptions regarding market returns, mortality, persistency, surrender behavior, benefit utilization, volatility and nonperformance risk.
- The closed long-term-care block remains a material contingency. Net future policy benefits and claim reserves were approximately $2.6 billion, with statutory reserves exceeding GAAP reserves by $374 million and $345 million of asset-adequacy reserves.
- Ameriprise retains counterparty exposure to reinsurance providers, including Commonwealth and Genworth subsidiaries. Reinsurance does not eliminate the company’s direct obligation to policyholders.
- Legal, regulatory, cybersecurity, privacy, operational, technology, tax and accounting-standard changes could increase costs or restrict activities. The company disclosed numerous ordinary-course regulatory inquiries, examinations, arbitrations and litigation matters, but stated that outcomes are generally difficult to estimate.
- The Inflation Reduction Act’s corporate alternative minimum tax and share-repurchase excise tax became effective in 2023; the company expected to be subject to the latter but had not determined whether it would owe the corporate alternative minimum tax.
- Ameriprise Bank conversion applications to a Utah industrial bank and a separate national trust bank remained pending.
Investor Verification Priorities
- Verify the reconciliation between GAAP net income of $2.559 billion and adjusted operating earnings of $2.724 billion, including market, mean-reversion, unlocking, reinsurance and restructuring adjustments.
- Review the sustainability of Advice & Wealth Management earnings growth, particularly the contribution from higher interest rates and the level of ongoing client net inflows.
- Monitor Asset Management net flows, investment performance, fee pressure, foreign-exchange exposure and progress integrating the BMO EMEA business.
- Assess the remaining variable-annuity living-benefit exposure, hedge effectiveness and sensitivity to equity-market declines and interest-rate changes.
- Evaluate long-term-care reserve adequacy, approved versus requested premium increases, claims experience and Genworth reinsurance credit exposure.
- Review parent-company liquidity, subsidiary dividend capacity, the October 2023 debt maturity and the company’s planned share repurchases and dividends.
- Consider the effect of the 2023 long-duration insurance accounting standard adoption, which management estimated could increase total equity by $400 million to $600 million at December 31, 2022 relative to the transition-date impact, subject to change.