Ameriprise Financial Inc (AMP) — Q3 2025 Earnings Call Transcript

Thank you, and good morning. Welcome to Ameriprise Financial's Third Quarter Earnings Call. On the call with me today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. Following their remarks, we'd be happy to take your questions. Turning to our earnings presentation materials that are available on our website. On Slide 2, you will see a discussion of forward-looking statements. Specifically during the call, you will hear references to various non-GAAP financial measures, which we believe provide insight into the company's operations. Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website. Some statements that we make on this call may be forward-looking, reflecting management's expectations about future events and overall operating plans and performance. These forward-looking statements speak only as of today's date and involve a number of risks and uncertainties. A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in our third quarter 2025 earnings release, our 2024 annual report to shareholders and our 2024 10-K report. We make no obligation to publicly update or revise these forward-looking statements. On Slide 3, you see our GAAP financial results at the top of the page for the third quarter. Below that, you'll see our adjusted operating results, followed by operating results excluding unlocking, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis. We completed our annual unlocking in the third quarter. Many of the comments that management makes on today's call will focus on adjusted operating results and adjusted operating results excluding unlocking. And with that, I'll turn it over to Jim.

Good morning, everyone, and thanks for joining our call. I'll begin with my perspective on the business, and Walter will follow with more detail on our third quarter metrics and financials. As you saw in our release, Ameriprise delivered another strong quarter and generated significant value as we built on our performance from the first half of the year. Regarding the operating environment, clearly, it remains fluid. We've continued to see strong bull markets, but investors still have many variables to navigate. Inflation remains elevated. In terms of interest rates, the Fed announced yesterday that they cut rates by another 0.25 points. Meanwhile, there are signs of softening in the labor market along with lingering questions around tariffs and ongoing geopolitical impacts. Our business continues to demonstrate both its relevance and resilience in that regard. In a dynamic landscape, Ameriprise consistently generates strong results driven by a diversified business and disciplined management. Our third quarter financials, excluding unlocking, reflect this momentum. Assets under management, administration and advisement grew to a new high of $1.7 trillion, up 8% year-over-year. We continue to deliver strong earnings and also generated double-digit EPS growth, up 12%. Our firm-wide margin of 27% is exceptionally strong as we continue to invest significantly in the business. I would also highlight that the Ameriprise ROE is best-in-class year after year and one of the highest in financial services at nearly 53%. In fact, Ameriprise is well-positioned even if the environment becomes more challenging. Our complementary mix of revenue streams, effective expense management, and strong margins help enable us to sustain strong financial performance. Regarding the overall business, we're driving nice progress across many areas. Our advisors are leveraging our proven advice value proposition and generating high client value satisfaction and practice growth. Overall, we have continued strong AWM client asset growth, up 11%. Wrap assets were also up nicely, up 14% year-over-year. Our adviser count is up, and adviser productivity continues to be very strong, increasing another 10%. We're back to strong recruiting levels, bringing in 90 experienced advisors in the quarter, one of our best. The Ameriprise value proposition, as well as the strength and stability of the firm, continue to differentiate us in the recruiting space, and our pipeline in the fourth quarter is strong. Across the business, we're leveraging our investments to further elevate our value proposition and drive long-term economic returns. In September, we launched new advertising that reinforces our premium brand and helps create strong awareness among our target market. We're also investing in advanced capabilities that empower our advisors to further engage clients and deepen relationships. Our digital and AI investments are creating strong experiences and streamlining workflows. We're seeing record digital adoption from our clients, and our mobile app satisfaction hit an all-time high in the quarter. Our Advice Insights is a next-generation capability that uses big data and machine learning to create client-centric insights to drive engagement and support business growth. We're also investing to enhance our comprehensive solution suite, both to broaden our offering and position the business for sustainable growth. Over the summer and into the fall, we've been working closely with advisors to integrate new capabilities. The launch of our Signature Wealth platform is proving to be quite successful. It's early, but it's already helping advisors attract new assets and manage client portfolios more efficiently. We've launched HELOCs at the bank and also began a soft launch of our checking accounts with a full rollout planned for later this year. These solutions add to our suite of savings and lending products, including CDs, mortgages, pledged lending, and credit cards. They also help to enhance our client experience and deepen relationships. We're also growing our AFIG business, partnering with banks and credit unions who can benefit from our sophisticated wealth management solutions and advisor support tailored to institutional clients. We're continuing to add new financial institutions and have a strong pipeline through year-end and 2026. In RPS, performance remains strong, driven by demand for annuities and insurance solutions that align with our clients' financial planning goals. We're seeing solid interest in variable universal life, structured annuities, and variable annuities without living benefits, highlighting the relevance of our offering in today's market. We're also pursuing growth in our disability insurance business, including streamlining the approval process for clients applying for life insurance. We're using data analytics in our digital insurance underwriting, and I'll reinforce that we built one of the most profitable insurance businesses in the industry. In Asset Management, we continue to make good progress as well as enhancements to the business. Our investment performance remains strong over all time periods. Over 65% of our funds outperformed the median on an asset-weighted basis for the 1-year period, more than 70% for the 3- and 5-year periods, and over 80% for the 10-year. We maintain a good asset base with assets under management administration up to $714 billion. Net outflows improved across the board from last quarter as redemptions slowed in both retail and institutional, and we had an increase in retail gross sales, particularly in North America. As I shared, we're investing and adding to our solutions in high-demand areas where we differentiate our capabilities. We're using data and analytics to better target and segment advisers, and we're gaining traction with SMAs and models as well as our alt business and active ETFs in the U.S. We'll soon be launching our active ETF capability in the U.K. and Europe. Our disciplined approach delivers results, and that's evident in our strong margins. Our digital transformation is not only enhancing the client-advisor experience; it is also reducing costs and positioning us for sustainable growth. Our financial strength and stability enable us to reinvest strategically and act opportunistically. We believe that what also sets Ameriprise apart are our relationships and consistent recognition we earn for how we operate. Core to our success is how our clients feel. We consistently earn top client satisfaction, which continues to be exceptional at 4.9 out of 5, and our advisors are also very engaged in being selected for top awards. We had 20 Ameriprise advisors on the Barron’s Top 100 Independent Financial Advisors list for 2025. Our employee engagement is consistently best-in-class across industries, as confirmed by our latest internal survey results. J.D. Power once again recognized Ameriprise with their outstanding customer service certification for our phone support for the seventh consecutive year for advisers and the second year for clients, which is tremendous. Forbes named Ameriprise one of America's Best Companies. Newsweek honored us as one of America's most responsible companies. Fortune listed Ameriprise among America's most innovative companies, and Newsweek recently ranked us as one of America's greatest companies. In closing, I feel very good about Ameriprise and the totality of the firm. Earlier this month, we officially marked 20 years of independence and our listing on the New York Stock Exchange. Over the last 2 decades, Ameriprise has built an exceptional track record for achieving high client satisfaction and industry-leading results guided by our proven strategy and management principles, including generating the number one total shareholder return within the S&P 500 Financials Index since our spin-off in 2005. As I look ahead, Ameriprise is well positioned and represents attractive value at these levels regardless of market momentum. With that, I'll turn it over to Walter for his perspective, and then we'll take your questions.

Thank you, Jim. Ameriprise delivered another quarter of solid performance, underpinned by exceptional balance sheet strength. Our focus on sustainable profitable growth continues to serve us well in delivering consistently strong financial results and client satisfaction, demonstrated by adjusted operating EPS, excluding unlocking, up 12% to $9.92 with a strong margin of 27% across the firm. Adjusted operating net revenues, excluding unlocking, increased 6% to $4.6 billion, driven by asset growth. Expense discipline remains strong from our ongoing firm-wide transformation initiatives. In the quarter, G&A expenses improved 3%. It was another solid quarter driven by the sustained benefit from the leverage within our integrated business model. Our stable 90% free cash flow generation across our segments, combined with the foundation of strong balance sheet and enterprise risk management capabilities, enabled us to increase our capital return to 87% of operating earnings in the quarter. We remain committed to returning capital to shareholders at a differentiated pace and are targeting an 85% payout ratio for the fourth quarter based upon our share price and substantial free cash flow. On Slide 6, you'll see EPS growth of 12%, demonstrating the strength and leverage across our businesses. Assets under management, administration and advisement increased 8% to a record high of $1.7 trillion. We delivered strong firm-wide margins from 6% revenue growth while reducing G&A expenses by 3%. On a full-year basis, we are targeting a G&A decline of 3%. We continue to generate a best-in-class return on equity of 53%. Let's turn to Slide 7. Underlying performance metrics in Wealth Management remained strong across all measures. Client assets grew nicely to a record $1.1 trillion with $29 billion of flows over the past year. Wrap assets were up 14% to $650 billion with Wrap flows at $30 billion over the past year. In the quarter, client and Wrap flows were impacted by the departure of two large advisor teams. Excluding those departures, client flows were solid at $6.5 billion and Wrap flows were $8 billion when also adjusted for administrative changes. The flows from our legacy advisor and client base have been consistent. In addition, transactional activity levels remain strong, near record levels, reflecting the full scope of our planning model. Cash sweep balances were stable at $27.1 billion compared to $27.4 billion in the prior quarter. We are also seeing strong momentum in our experienced advisor recruiting, with 90 advisors joining Ameriprise this quarter. Our value proposition is resonating with advisors, and we remain focused on ensuring our transition packages are attractive to experienced advisors that share our values and commitment to the client experience. Importantly, advisor productivity grew 10% to a new high of $1.1 million. Let's turn to Wealth Management financial results on Slide 8. Adjusted operating net revenues increased 9% to $3 billion. The core business is performing very well. Our fee-based and transactional revenues were quite strong, increasing in the low-teen percentage range, benefiting from higher client assets and activity levels. Our cash revenues, which include net investment income, distribution fees related to off-balance sheet cash, and banking and deposit interest expense, were impacted by the Fed funds rate reduction over the past year and declined in the mid-single-digit range. Adjusted operating expenses in the quarter increased 10%. In the quarter, distribution expenses increased 11%. I would note that advisor compensation within distribution expenses increased in line with the revenues advisors generate. G&A expenses increased 5% to $439 million in the quarter, primarily driven by volume and growth-related expenses, including investments in Signature Wealth and banking products. We continue to expect low to mid-single-digit growth in G&A. Pretax adjusted operating earnings increased 7% to $881 million. We saw continued strong contributions from both core and cash earnings in the quarter. Our core earnings grew in the high-teen percentage range, benefiting from higher asset levels, strong transactional activity, and well-controlled G&A. The strong level of core earnings that we generated is unique and demonstrates our focus on profitable growth. Cash earnings had a mid-single-digit percentage decline, as expected from rates. Our strategy of leveraging Ameriprise Bank has been important in minimizing the impact from Fed funds effective rate reductions on our AWM business. In fact, net investment income in the bank was flat this quarter. We continue to take actions to build the bank investment portfolio in a way that supports stable earnings contributions going forward. The overall bank portfolio has a yield of 4.6% with a 3.7-year duration. In the quarter, new purchases at the bank were nearly $700 million at a yield of 5.3% with a 4.4-year duration. Last, our margins remain excellent at 29.5%. Turning to Asset Management on Slide 9. Financial results were solid in the quarter. Operating earnings increased 6% to $260 million. The strong quarter reflected equity market appreciation and the positive impact from expense management actions, partially offset by the impact of net outflows. Total assets under management and advisement increased to $714 billion, up both year-over-year and sequentially from higher ending market levels. Net outflows significantly improved on a sequential basis to $3.4 billion, with improvement in both retail and institutional. Retail flows benefited from higher gross sales, which included a win in model delivery. Institutional flows benefited primarily from lower redemptions in both the U.S. and EMEA. Revenues increased 3% to $906 million with a stable fee rate at 46 basis points. G&A expenses increased 1%. For the full year, we expect mid-single-digit G&A expense decline, excluding performance fees. The margin reached 42% in the quarter, which is above our target range, driven by favorable markets and continued expense discipline. Retirement & Protection Solutions continued to deliver strong earnings and free cash flow generation, reflecting the higher quality of the businesses built over a long period. Pretax adjusted operating earnings, excluding unlocking in the quarter, were $200 million, in line with expectations. The strong and consistent performance of the business reflects the benefit from strong interest earnings and higher equity markets. Overall, Retirement and Protection Solutions sales were solid at $1.4 billion, with continued demand for structured variable annuities. These high-quality books of business continue to generate strong free cash flow with excellent risk-adjusted returns and continue to be important contributors to the diversified business model. The company completed its annual actuarial assumption update in the quarter, which resulted in an unfavorable after-tax impact of $5 million. In Retirement & Protection Solutions, there was a favorable insurance model change, partially offset by unfavorable changes to variable annuity surrender and utilization assumptions. In long-term care, there was an immaterial impact from changes to morbidity and mortality assumptions. Overall, LTC policyholder behavior is in line with expectations. Before we move to the balance sheet, I’d like to take a moment to address the Corporate segment. The pretax operating loss, excluding unlocking, was $93 million, which was a significant improvement from a year ago due to lower severance and cloud migration expenses as well as favorable share-based compensation expense. Turning to balance sheet on Slide 11. Balance sheet fundamentals and free cash flow generation remain strong. We have an excellent excess capital position of $2.2 billion. We have $2.5 billion of available liquidity, and our investment portfolio is diversified and high quality. We have a diversified source of dividends from all our businesses enabled by strong underlying fundamentals. This supports our ability to consistently return capital to shareholders and invest for future business growth. Ameriprise's consistent capital return strategy is a key element of our ability to generate strong long-term shareholder value. In summary, Ameriprise delivered solid results in the third quarter, which is a continuation of our long track record navigating various market environments over the longer term. Over the last 12 months, revenues grew 7%, adjusted EPS increased 12%, return on equity grew 210 basis points, and we returned $3.1 billion of capital to shareholders. We had similar growth trends over the past five years with 9% compounded annual revenue growth, 18% compounded annual EPS growth, return on equity improving 17 percentage points, and we returned $13 billion of capital to shareholders. These trends are consistent over the long term as well. This differentiated performance across multiple cycles speaks to the complementary nature of our business mix as well as our consistent focus on profitable growth while maintaining our strong values as a company. With that, we'll take your questions.

First question on AWM. Can you comment on the Comerica relationship given the M&A that we saw recently and maybe remind us of what the assets under management or account values are with respect to that relationship?

Sure, I can comment on the first part. I'll ask Walter about the asset level. First of all, we have an excellent relationship with Comerica since we established the arrangement and put them on our platform and capability, working with their advisors and their clients. We have received very strong favorable reviews from Comerica executives, their wealth management group, and their advisors. They appreciate the platform, the capabilities, and the tools. We feel very good about that relationship. We know an acquisition has occurred, and we'll work with them as they decide how they want to proceed. We feel very comfortable with the arrangement we have in place and the agreements. So it's more of a stay tuned while they go through their own decisions.

Suneet, on the asset side, it's around $15 billion. And like in any contract of this nature, there are protections.

Okay. And then in your prepared comments, you called out two practices that have left that were pretty sizable. Can you maybe just unpack what happened there? And is this an indication that the recruiting environment is just getting incrementally more competitive?

As we mentioned in the previous quarter, you're always going to have some one-offs. Some other firms have witnessed similar situations over the last few quarters. These two practices went RIA. There are substantial checks being given out and other incentives involved. Overall, it's fine for them. We've recruited very strongly, with 90 people joining us. Our pipeline is quite good, and our underlying organic business is very solid. Our advisor satisfaction is very strong. You're always going to have some one-offs, as we mentioned. But we look at the totality of what we're doing and how we're doing it. Environments will change, and there will always be a price to pay. We feel very good about our position.

Given your excellent track record of managing the wealth business, and I know you just touched on this a little bit, but you've seen a little bit lower flow activity this year. Is that an indicator that just maybe the market is a little too hot or pricing is a little bit irrational? Maybe just comment a little bit on that.

I think it's a combination of those factors. As we assess our client base and their activity, it's still quite good. People have made significant rebalancing and allocation moves. Transaction levels are very strong. Our clients are highly engaged. However, the market has seen substantial growth. There is still a lot of money on the sidelines, and our cash balances are very high. So, it is partly what you've indicated about the competitive recruiting environment. Over time, I believe there will be a rationalization. We've historically maintained a balanced approach, which is beneficial for us, our advisors, and clients in the long run.

I guess kind of a follow-up, and you mentioned the high cash balances, but some of these advisor roll-up operations seem potentially a little over-levered, and maybe they're getting a bit aggressive. Do you see that as something that could present an opportunity in the future?

The answer to that is absolutely yes. People forget that downturns and market changes occur. I've been in the industry for many years, and I understand that. That's why we focus on strong fundamentals, maintain solid margins, invest for the long term, and ensure excellent client satisfaction. We have a strong premium value proposition in the marketplace. These are important factors as we navigate through events that seem favorable until they aren't.

I just wanted to do a quick follow-up on net new assets. Additionally on the two teams that you mentioned were leaving, you also stated that there were some administrative changes. Could you just dive into a little bit about what those are? Also, the advisor headcount was 10,427 at year-end 2024. Could you provide an update on the current number?

As far as the adjustment, we went through all our Wrap programs and set things up consistently. Certain clients were adjusted out of various programs. Some of those adjustments will come back in, so we feel good. This is a one-time adjustment that made sense for us and the clients. Regarding the advisor count, it is up nicely year-over-year. We have stopped providing specific numbers, but there has been no change in our normal growth pattern.

Great. And then I had one quick follow-up. Do you expect the risk from the regional bank M&A to limit deals in the bank channel? Does any uncertainty provide maybe an opportunity?

I think you see some recent mergers in the banks as they feel the regulatory environment has eased a bit. So I think this regional activity will continue. Yes, that always presents adjustments in the marketplace. From our perspective, we view it more as growing our organic wealth management business for our clients. We're not looking to enter the banking business beyond our current scope at this time.

In Asset Management, could you discuss some of the expense actions you've taken over the last year or two? And when do you expect those initiatives to be complete?

We have undertaken a comprehensive review of our operating environment globally. Over the past two years, we've made numerous adjustments that streamlined operations, especially after our integration of the BMO acquisition. We've aligned our platforms, systems, technology, and trading while also reviewing geographical locations to ensure we achieve efficiency and lower costs. We're completing that transformation with our back-office arrangements, which positions us favorably moving forward. Savings from these actions are already evident, as we see reductions in G&A expenses whilst investing in new products and capabilities to support the asset management business.

Okay. Is there any guidance you could provide on how to think about crediting rates coming down for both the bank and certificates as the Fed cuts rates?

Of course, those will be adjusted in light of the environment. The same goes for CDs; you would modify the rates you offer to clients. Walter, do you have anything else?

In the service business, which operates on a spread basis, we will manage that as rates decline. Our core investments are now longer-dated due to our restructured portfolio, so they will be less affected by dropping interest rates.

To start, regarding the investment philosophy. Despite strong top and bottom-line results, aided by good expense discipline, core brokerage KPIs, including NNA and sweep cash have lagged peers. I was hoping you could elaborate on the factors driving softer organic growth. Bigger picture, are you willing to invest to help reaccelerate growth, which might eat into margins?

I can't speak to the competitors you're referencing. There has been significant activity involving roll-ups, acquisitions, and advisors being offered top-dollar compensation. This may be part of the growth narrative. We focus on bringing in quality advisors who can generate good long-term value. Our flow rates are competitive; you can't analyze it based on a single quarter but rather on longer trends. We are making strong investments in capabilities, technology, and solutions, and I would compare our platform favorably against most in the industry. Those investments will continue to enhance our overall position. We've slightly increased our recruiting packages in this competitive landscape but remain focused on long-term profitability while adjusting to fit the market.

From our perspective, the cash situation is stable, and we do expect it to grow in its normal pattern through the fourth quarter.

On the bank's average earning assets and focusing on the securities portfolio, the earning yield is running around 5%, maybe high 4s. Help us think about reinvestment yields expected on the book as it rolls off over the next quarters or years relative to the existing base.

We anticipate that with roll-offs and certain maturities, we will likely reinvest in the high 4s to low 5s. Therefore, we should maintain our net interest income at the bank under that strategy. We feel quite good about it for the next three quarters. Beyond that, it becomes more variable depending on Fed actions and long-term rates.

Looking at the certificates business, those balances have been decreasing for several quarters. Where do you expect these balances to ultimately stabilize?

Directionally, we expect balances will decrease, but not significantly. It will depend on interest movements. It follows a pattern based on spread management, and balances will be recirculated. There shouldn't be a drastic drop.

With competitors in asset management and life insurance forming new product creation partnerships or even launching evergreens, is this something under consideration for Ameriprise?

There are several arrangements to consider. Many products have yet to reach the market. We're exploring various partnerships ourselves while launching our Interval fund. We also continue to work on alternative spaces. Some initiatives will come from partners, while others we will develop in-house. Yes, this presents us with opportunities.

My question is about AWM and the competitive environment. There's seen a deceleration in inflows since the $11.1 billion high watermark in the fourth quarter. Are you currently outflowing more from teams leaving than you're adding?

In the past, we have experienced higher inflow than outflow. As we mentioned, losing a large team or two temporarily increases outflow, and that’s what we are currently seeing. Now our pipeline is robust. For example, we've recently onboarded a client with $1.7 billion. Overall, we are in a good place. Short-term outflows can happen, but our organic growth remains crucial. We focus on driving productivity and maintaining long-term relationships, emphasizing fundamentals over fleeting trends. While the market may look grass green, we prioritize our consistent performance management.

Just a follow-up on the two large advisor teams that left. Will that have any continued impact? Do you expect Wrap flows to bounce back closer to $8 billion in Q4?

In relation to those advisors' movement, we will experience some carryover into Q4. Regarding our attrition patterns, they are stable, and we feel confident about that.

I see. Lastly, Jim, I think you mentioned you're increasing some packages for new recruits. How about payouts for existing advisers? Are there any adjustments to those being considered?

Yes, we constantly evaluate and consider adjustments based on competitive dynamics while maintaining a balanced equation regarding payout and support provided. We prioritize the value of our advisors as we enhance the support they receive.

One on asset management. It seems like there's some benefit from operating leverage this quarter. Can you elaborate on any variable expenses that might rise as markets or AUM grow?

We are managing volume-related variable expenses well. We believe our transformations will allow these adjustments to continue effectively. So, expenses tied to growth will remain manageable.

Got it. Thanks. One follow-up if I may about AWM. Could you confirm that the distribution expense ratio outlook remains in your previous range of 66%, 67%?

That is indeed correct.

On the client cash within the wealth management platform that is in non-Ameriprise products, have you started to see any movement there as the Fed enters a cutting cycle? Or has it remained stable?

No, the cash has remained stable, as I indicated previously.

After a recent rate cut, we don’t expect any significant fundamental change.

Just any update on the Signature Wealth rollout and how that's been going so far? I know it's probably in early stages.

It's still early, but it's going very well. We're getting advisors to really engage with that platform and understand its capabilities. Those who have opened accounts are pleased and starting to transition assets. We’re seeing both new assets and some migrations from existing Wrap programs. This rollout is potentially one of our best launches. It's early, but we have high hopes for its future.

My first question is on the Asset Management business. It was nice to see the deceleration in growth redemptions on the institutional side year-to-date. I was wondering if you could unpack the deceleration in outflows, is it mostly from Lionstone? Are there remaining assets that will be off-boarded relating to Lionstone in the fourth quarter?

No, Lionstone is still in the mix, but the majority of outflows currently stand around $0.5 billion.

Got it. Then, my final question is on the wealth side. In light of the disruption in M&A consolidation, can we assume that this level of competitive aggression will persist over the next 6 to 12 months?

It's difficult to predict that accurately. Currently, the favorable markets and spread revenue are driving certain industry perceptions. If conditions change, the environment may shift as well.