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    Ameriprise Financial Inc (AMP)

    Q3 2024 Summary

    Published Jan 6, 2025, 8:15 PM UTC
    Initial Price$430.04July 1, 2024
    Final Price$473.14October 1, 2024
    Price Change$43.10
    % Change+10.02%

    What went well

    • Ameriprise is developing new product initiatives and solutions focused on longevity and retirement income, helping clients with optimal drawdown strategies. These investments are expected to come to market over the next year, addressing the accumulation needs of an aging population.
    • The company's integrated business model creates significant synergies across Asset Management, Wealth Management, and Insurance segments, leading to strong returns and efficient management of client assets. This complementary approach leverages capabilities and provides clients with good solutions at competitive prices.
    • Effective investment in technology and innovation, including AI, analytics, and cloud transition, is enabling Ameriprise to maintain good margins while reinvesting in solution sets and capabilities. Disciplined expense management supports growth in Wealth Management with G&A expenses expected to remain flat at the enterprise level.

    What went wrong

    • General and Administrative (G&A) expenses are expected to increase by 4-5% in Advice Wealth Management (AWM) due to growth investments and cloud technology, potentially pressuring margins.
    • Enterprise-level expenses are projected to be flat, excluding severance and cloud investments, indicating limited cost reductions and potential margin pressures.
    • Distribution expenses in AWM are increasing due to volume growth and product shifts, which may impact profitability despite efforts to maintain good margins.

    Q&A Summary

    1. Long-Term Care Block Decision
      Q: Why not sell the long-term care block despite challenges?
      A: We evaluated selling or reinsuring the LTC block but found that offers didn't add shareholder value. The book is mature, profitable, and has only $300 million of capital tied to it. Selling would require accepting significant discounts and increase counterparty risk, so we believe retaining it is the right decision now.

    2. Capital Return Outlook
      Q: Will you maintain 80% capital return in 2025?
      A: Yes, we plan to maintain the 80% capital return next year, supported by our strong capital position and earnings. We have flexibility to adjust based on market conditions and opportunities.

    3. Expense Outlook for 2025
      Q: What is the expectation for G&A expense growth in 2025?
      A: We expect total company G&A expenses to be flat in 2025, excluding severance and cloud investments. In Asset Management, margins should remain in the 35% to 39% range with continued efficiencies.

    4. Bank's Net Interest Income
      Q: How will the bank's net interest income hold up as rates decline?
      A: Despite expected rate declines, we anticipate net interest income to remain stable or increase due to repositioning the book with longer durations and launching new products like bank CDs and HELOCs. We're adding assets and earning premiums on floating rates, which should preserve income.

    5. Advisor Recruitment Costs
      Q: Do you expect recruiting costs to decrease as rates fall?
      A: Yes, as rates temper, we expect recruiting costs to adjust down. We continue to attract quality advisors with larger books, and believe current elevated costs are temporary.

    6. Capital Deployment and M&A
      Q: How will you deploy excess capital, including potential M&A?
      A: With over $2 billion in excess capital, we're considering increasing buybacks or pursuing strategic acquisitions that add value. We're investing in the bank and new products while evaluating opportunities.

    7. Integration and Synergies
      Q: Are you enhancing synergies between divisions?
      A: Yes, we're leveraging our integrated model to provide better client solutions, enhancing asset management capabilities, and developing new products tailored to client needs. This approach strengthens returns due to deeper client relationships.

    8. Products for Aging Population
      Q: How are you addressing accumulation needs for aging clients?
      A: We're developing new products focused on longevity and retirement income, helping clients manage portfolios and drawdown strategies optimally. These initiatives will come to market over the next year.

    9. Advisor Count Decline
      Q: Why did advisor count decline, and will growth resume?
      A: The decline was due to adjustments in productivity and team structures; no major issues observed. We expect advisor growth to get back on track in the next quarter.

    10. Distribution Expenses in AWM
      Q: What's the outlook for distribution expenses in AWM?
      A: Volume increases are embedded in G&A, but we've made adjustments to keep expenses flat while reinvesting in technology and capabilities to maintain margins.

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