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S&P 500   5,011.12
DOW   37,775.38
QQQ   423.41
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S&P 500   5,011.12
DOW   37,775.38
QQQ   423.41
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Ameriprise Financial Q4 2022 Earnings Call Transcript


Listen to Conference Call View Latest SEC 10-K Filing

Participants

Corporate Executives

  • Alicia Charity
    Senior Vice President, Investor Relations
  • James M. Cracchiolo
    Chairman and Chief Executive Officer
  • Walter Berman
    Executive Vice President and Chief Financial Officer

Presentation

Operator

Welcome to the Q4 2022 Ameriprise Financial, Inc. Earnings Conference Call. My name is Dennis, and I will be your operator for today's call. At this, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded.

I will now turn the call over to Alicia Charity. Alicia, you may begin.

Alicia Charity
Senior Vice President, Investor Relations at Ameriprise Financial

Thank you, operator. And good morning. Welcome to Ameriprise Financial's fourth 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'll 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 the 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 fourth quarter earnings release, our 2021 annual report to shareholders and our 2021 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 fourth 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. Many of the comments that management makes on the call today will focus on adjusted operating results.

And with that, I'll turn it over to Jim.

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Good morning, everyone. And thanks for joining our fourth quarter earnings call. As you saw in our release, Ameriprise delivered a strong fourth quarter, completing an excellent year in 2022. We continue to navigate uncertainty and serve our clients exceptionally well. I'll give you an update on the business and then Walter will discuss our financials.

Let me start with the market environment. Equity markets were down 19% year-over-year, with the average equity markets down 3% sequentially. So far this year, we're starting to see markets rebound to some extent as inflation eases. However, inflation is still at a high level. The question is, will the Fed have to continue to raise rates a bit more, or will they maintain higher rates for longer if inflation remains stickier?

With that backdrop, Ameriprise continues to be in a strong position. Revenues were good at $3.6 billion, only down 2% from a year ago, relating to the impact of the equity and fixed income markets. Earnings were up nicely, with EPS up 13% for the quarter and 11% for the year. Both are new records. And ROE continued to be excellent, among the best in the industry.

Importantly, we're also managing expenses well, with total expenses down 5% compared to a year-ago. Assets under management and administration were down to $1.2 trillion, largely driven by the steep decline in equity markets, lower fixed income markets and a difficult foreign currency translation in asset management.

As in previous quarters, our combination of businesses generates a consistent level of free cash flow and good returns across market cycles. We're able to consistently invest in the business, which is strengthening our competitive position and our ability to deliver differentiated results.

Now, I will talk more about our businesses. In Advice and Wealth Management, we continue to deliver very strong results and build on our leadership positions. We had good client flows in the quarter as clients remained engaged working closely with their advisers and benefiting from our comprehensive advice and solutions.

Total client flows for the quarter were more than $12 billion, which is very strong and, in fact, the second highest quarter we had and just below our record fourth quarter last year. And I'll highlight the client flows were a record for the year at nearly $43 billion.

With the investment climate this year, we've seen an even split into the mix of flows into advisory and non-advisory accounts, which is appropriate in this environment. We're maintaining an appropriate level of cash balances with good growth in our certificate business and the Ameriprise Bank, which is a key growth area for us.

With regard to the bank, we've been consistently investing to expand our capabilities. The bank provides important flexibility in this interest rate environment and enable us to further engage and deepen our relationships with clients. Our bank has grown more than 50% this year to nearly $19 billion. We have good growth in our pledged loan business and we're on track to launch more deposit and lending based products this year.

Our certificate company has also grown to nearly $10 billion, up $4 billion for the year. Clearly, 2022 is a very challenging year for investors to navigate the market volatility. That's why our high level of engagement and advice is so important. Clients highlight the positive experience they're having with Ameriprise and our advisors, and that satisfaction leads to a strong level of trust, which we're being recognized for.

And just recently, we ranked number two for trust in 2022 in Forrester's new Financial Services Customer Trust Index, and that complements our Newsweek rating as one of America's most trusted companies last year.

Let's look at adviser productivity which also remains strong, up 4% to nearly $830,000 per adviser in a challenging market environment. One of the reasons our advisers are so productive is the level of support and tools we provide. We're making important investments, including our branding, marketing and integrated technology. We're helping advisers engage clients really well in driving growth in their practices. And for the fourth consecutive year, Ameriprise was recognized by J.D. Power for providing outstanding customer service experience for phone support for advisors.

Turning to recruiting, we had another good quarter, with 72 highly productive advisers joining the firm. The advisors are attracted to our value proposition and the strength and stability of the firm and the pipeline looks good. So, overall, we are consistently investing in the business, including the bank, which is helping to drive organic growth and continuing to generate strong results. Advice and Wealth Management continue to drive the firm's results, with earnings up 41% year-over-year.

Now let's turn to Retirement & Protection Solutions where earnings were up 25% in the quarter due to the improved rate environment and our ability to invest out. As part of our strategy, we're focused on products that meet our risk tolerances. Overall, sales were down consistent with the industry. We're very much focused on variable annuities without living benefits, our structured products, our variable universal life and DEI products given our move away from fixed products. This business is very stable and delivers a very good cash flow and returns. I'd note that RiverSource was recently ranked as one of the most profitable life insurers.

Now I'll cover Asset Management. 2022 was a tough year when navigating the volatility as we focused on our clients and execute our strategic priorities. Similar to the industry, our asset management business faced significant headwinds due to markets depreciating in the US and globally, which pressured earnings. Equity markets were down 19%. With this, assets under management were down 23% to $584 billion, driven by market declines as well as a negative FX impact.

Overall, flows in the quarter were $0.4 billion out that included $1.7 billion of legacy insurance partner outflows. In retail, overall, we were in net outflows of $3.7 billion, including reinvested dividends which were driven by the weak market conditions that both pressured gross sales and increased redemptions. In addition, in the US, we believe there was a heightened level of tax loss selling in December.

Turning to global institutional, we were in net inflows of $5 billion excluding legacy insurance partners, with some nice wins in LDI strategies.

With regard to investment performance, we continue to have solid 3, 5 and 10-year numbers. However, we had weakness in one year's numbers, given market volatility.

In Asset Management, we are maintaining our expense discipline, while continuing to invest in long-term priorities. They include our investment research, alternatives, responsible investment, globalizing our operations and BMO integration, which is on track. We have a strong line-up of products and capabilities, a clear focus on serving our clients and, as the environment improves, we will be well situated.

Overall, Ameriprise is in a position of strength entering 2023, and we're very much focused on engaging our clients and continuing to execute well in this environment. And with the strength and diversification of our business, including the growth of the bank, we continue to be able to invest across the firm, while continuing to return capital to shareholders at a differentiated level.

In the fourth quarter alone, we returned $610 million to shareholders.

I'll turn it over to Walter and then we'll take your questions.

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Thank you, Jim. Results this quarter were very strong and we continue to demonstrate the strength of the Ameriprise value proposition. Adjusted EPS increased 13% to $60.94 in the quarter and increased 11% for the full year. Our diversified business mix supports good performance across market cycles, which was certainly demonstrated in the quarter.

Fundamentals in wealth management, particularly in its cash businesses, were very strong. In total, wealth management now represents 64% of adjusted operating earnings, up from 48% a year ago. Asset management, like the industry, is facing substantial headwinds and earnings from this segment declined in the quarter.

And the Retirement & Protection Solutions business continues to generate solid financial results and free cash flow. We remain focused on the aspects of the business that we can control. We are executing our priorities, including investing for profitable business growth, expanding the bank, and completing the integration of BMO, all while meeting and exceeding client needs and maintaining a disciplined approach to managing expenses. In fact, total expenses excluding BMO were flat for the year.

Our balance sheet fundamentals and free cash flow generation remains strong. In the quarter, we returned $610 million of capital to shareholders, totaling $2.4 billion for the full year, while continuing to grow the bank and certificate company. We have dedicated significant capital to grow these businesses.

Let's turn to slide 6. As you would expect in these markets, assets under management and administration ended the quarter at $1.2 trillion, down 17%. This was driven by depreciating markets, with equity and fixed markets down 19% and 12%, respectively. Additionally, asset management AUM levels were impacted by the weakening of the pound and the euro, with 36% of asset management AUM outside the US at the end of the year.

Despite the lower AUMA levels, operating net revenues declined only 2% to $3.6 billion as a result of higher interest earnings, and pretax earnings reached a new high of $973 million, reflecting the diversified revenue dynamics I discussed, coupled with the excellent expense discipline.

Let's turn to Advice & Wealth Management on slide 7. Wealth management continues to deliver strong organic growth and business momentum, a reflection of our differentiated value proposition. With the challenging market backdrop, clients' assets declined 12% to $758 billion in 2022. However, we had sustained growth of 4% over the past two years.

Total client net flows remain very strong at over $12 billion in the quarter and reached a record $43 billion for the full year. While we continue to see a solid level of flows into wrap accounts, there has been a distinct pickup inflows going to brokerage accounts and certificates as clients navigate the market backdrop. Revenue per adviser reached $827,000, up 23% over the past two years, from continued enhanced productivity and business growth.

On slide 8, you can see wealth management profitability was exceptional, up 41% and reached a record margin of 30%, as strong organic growth and higher interest earnings exceeded pressure from market depreciation and lower transactional activity.

Adjusted operating expenses declined 5%, with distribution expenses down 10%, reflecting lower transactional activity and lower client assets. G&A increased 11% in the quarter. And for the full year, G&A grew 8%. Expense growth in the quarter was driven by continued investments in the bank and higher volume related activity from strong organic growth. Additionally, the prior year included unusually low expenses relating to staff levels and G&A.

Cash balances in the quarter increased year-over-year and sequentially to $47 billion, which included $10 billion of certificate balances. Cash sweep balances have declined slightly, bringing it closer to historic levels. However, certificates have grown 76% year-over-year as clients are laddering liquidity to garner higher yields. As a complement to our certificate offering, we are continuing to build out our savings and deposit products in the bank this year to meet the growing client appetite for yield.

As a reminder, the majority of our clients' sweep cash balances are working cash accounts, with the average account size being only $8,000 and constituting over 60% of our total cash balance. And our crediting rates continue to remain competitive with continuous benchmarking against the industry. This has translated into higher interest earnings in the quarter.

The gross fee yield in the quarter reached 373 basis points, up 300 basis points from the prior year and over 100 basis points sequentially with bank and certificates driving most of it. The bank ended the year with assets of $19 billion, with additional capacity to grow further.

This provides flexibility to capture the benefits of rising interest rates, by investing in high quality, longer duration securities. These investments will create sustainable, multiple year benefits regardless of interest rate changes over that period.

New money purchases in the quarter were approximately 250 basis points above the spreads from off balance sheet cash. This has been supplemented with strong growth within our certificate company, with assets growing to nearly $10 billion in the quarter and a gross fee yield of nearly 400 basis points.

As we move into 2023, we are on a trajectory to generate growth in interest earnings from the bank and garner incremental yield, while continuing to maintain high credit quality. In the first half of the year, we are moving $3 billion on to the bank's balance sheet. We expect to transfer additional balances in the back half of 2023. And as we previously indicated, we will reinvest approximately $3 billion of maturities into higher yielding assets throughout the course of the year.

Let's turn to asset management on slide 9. In 2022, the backdrop remained challenging for both us and the industry. AUM was $584 billion, down 23%. This decrease was driven by double-digit equity and fixed-income market depreciation as well as negative pound and euro foreign exchange impacts.

Flows during the period remained challenged as global institutional net inflows during 2022 were more than offset by ongoing retail pressure. As a reminder, 2021 net flows benefited from the $17 billion BMO US asset transfer, which had limited impact in 2022.

On slide 10, you can see asset management financials reflect the continuation of the challenging market environment and reflect deleveraging that occurs in this business. Earnings were $146 million, a 56% decline as a result of market depreciation and net outflows. In addition, the prior year period included $35 million of performance fees, while the current quarter only included $5 million, as well as $12 million of unfavorable mark-to-market adjustments. As a result, margin in the quarter declined to 29%.

Importantly, we are focused on the areas we can control and on executing our strategic priorities. Expenses remain well managed. Total expenses were down 12%, with G&A and other expenses down from continued expense disciplines, lower performance fee compensation and timing of mark-to-market expenses. As a reminder, results last year include a partial quarter of BMO-related expenses. As we move forward, we will continue to make market-driven trade-offs in discretionary spending and remain committed to managing expenses very tightly based on the revenue environment.

Let's turn to slide 11. Retirement & Protection Solutions earnings increased 25%, with strong cash flow generation and a clearly differentiated risk profile. Results in the quarter were driven by enhanced yield from repositioning of the investment portfolio, lower deferred acquisition cost amortization, and lower sales levels. We remain well capitalized, with an estimated RBC ratio of 545% at year-end.

Consistent with the industry, sales in the quarter declined as a result of the volatile market environment, as well as the impact from our actions to discontinue sales of variable annuities with living benefits. Now only $43 billion of account value is in products with living benefit guarantees, a $14 billion decline from past year.

Protection sales remain concentrated in higher margin asset accumulation VUL, which represents one-third of total insurance in-force assets. The increase in investment income was a direct result of the actions taken to reposition the investment portfolio. In the quarter, we repositioned $600 million primarily into longer duration corporate bonds, while maintaining a high-quality portfolio. These actions will generate higher investment income in 2023.

On slide 12, our balance sheet fundamentals remain strong and our diversified double-A rated investment portfolio is well-positioned. During the quarter, new money purchases were double-A plus rated at yields that were accretive to the overall portfolio. Despite continued market volatility in the quarter, VA hedging effectiveness remained very strong at 97% and excess capital and holding company liquidity remains strong. Our diversified business model generated significant and stable free cash flow. This enables the company to deliver a consistent and differentiated level of capital return to shareholders, while continuing to invest for growth.

During the quarter, we repurchased 1.6 million shares, returning a total of $610 million of capital to shareholders, bringing the total for the year to $2.4 billion. Our capital return strategy over the past five years has reduced our share count by 28%.

With that, we will take your questions.

Questions and Answers

Operator

[Operator Instructions]. And your first question is from the line of Brennan Hawken with UBS. Please go ahead.

Brennan Hawken
Analyst at UBS Group

Good morning. Thank you for taking my questions. You flagged the certificate growth in the wealth business and that's certainly consistent with what we've seen at other wealth management firms. So would you expect that as long as rates stay high that that type of shift and that type of growth should be sustainable and how should we think about the corresponding impact of that mix shift on your deposit beta? Saw that deposit beta seemed to take a step up this quarter. And so, should we continue to think that that will move higher?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Yes. This is Walter. So, the answer is yes you should, with our CDs, continue to see that sort of trend line. And certainly -- and you'll see in our bank, we are developing new products within -- and have them coming out in 2020, which will also enhance the capabilities for our advisors and their clients to certainly navigate this situation on interest rates and giving them choice.

And from a deposit beta standpoint, looking on sweep, we are certainly -- we are up. We are certainly being competitive from that standpoint. But we are offering a wide choice, and we see good significant opportunities as we move forward.

Brennan Hawken
Analyst at UBS Group

Yes. That makes sense. And like I said, that's consistent with many of your competitors in the wealth space. So when we think about -- shifting gears a little bit for the follow-up and staying in wealth, strong overall net new asset trends, certainly have been encouraging, 7% annualized growth in that business. It's been a challenging quarter for some competitors. As I understand it, it's not really recruiting driving the numbers, but rather advisers growing their practices and expanding wallet share of existing clients. So what have you done to sustain and hopefully encourage that trend into the future?

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

So, this is Jim. We are very much focused on continuing really around having the advisers engage with the client through this market cycle and really providing the advice they need. Part of the journey really is how do you think about achieving your goals over time, not just based on a quarter or the market situation in the current time.

And so, that engagement and the tools and capabilities that we provided to help them do that, I think, is paying really good dividends. And so, as you saw last year, we had a record amount of client inflows for the full year. And the fourth quarter was really strong at $12 billion. It's actually the second highest quarter we had. The highest was actually fourth quarter of last year, and that was only $0.5 billion more. So, we want to continue that journey around that advice value proposition and the engagement and helping the advisers really do that more consistently over time.

Brennan Hawken
Analyst at UBS Group

Great, thank you for taking my questions.

Operator

Your next question is from the line of Steven Chubak with Wolfe Research. Please go ahead.

Michael Anagnostakis
Analyst at Wolfe Research

Hey, good morning, Jim and Walter. This is Michael Anagnostakis on for Steven. I just wanted to start with one around AWM here. Certainly, the margin expansion in AWM was very impressive. You had 30% roughly. Assuming the Fed pause is here, what do you view as a peak pretax margin in wealth, inclusive of the ongoing sweeps you plan to make at the bank? Thanks.

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Sure. So, it's Walter. What we achieved in the fourth quarter, we certainly see as sustainable as it relates to 2023. And certainly, the cash side of it is contributing to that, but we're also having strong productivity and growth in our basically core activities.

There is a shift with us going to basically the bank, generating the earnings and certificates [Indecipherable]. So if the Fed does pause, we think we are well positioned with the sustainability of that profitability that is now basically -- has a duration play that will take it over multiple years.

So we feel comfortable. Obviously, it will have some impact. We have to evaluate as it looks not just what the Fed is doing in the short end, but what happens on the long end, but we feel we're in an excellent position as we grow those two activities to ensure that sustainability and profitability.

Michael Anagnostakis
Analyst at Wolfe Research

Got it. Thanks. So -- and for my follow-up, I just -- I wanted to shift gears maybe to Retirement & Protection here. You had noted that results in Retirement & Protection only captured a portion of the actions you had taken in the portfolio. How much incremental benefit should we expect next quarter? And what do you believe could be the new run rate for that business versus that $180 million quarterly cadence you had provided in prior quarters? Thanks.

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Yes. So, we certainly started the investments, and we weren't completed in the fourth quarter. We still have some ways -- a little ways to go in first quarter. But, yes, we will see that probably what you're estimating the run rate that we talked about, the $180 million, but it's probably with that improvement that's taking place with the yield. There's always areas going in and out. But I'm comfortable with -- I've seen people being in the $200 million range, but it's over a one-year cycle. So I would say more like the $800 million range for the year.

Michael Anagnostakis
Analyst at Wolfe Research

Okay, got it. Thanks again for taking my questions.

Operator

Your next question is from the line of Suneet Kamath with Jefferies. Please go ahead.

Suneet Kamath
Analyst at Jefferies Financial Group

Yes, thanks. So, going back to Advice & Wealth Management, again, when we think about on balance sheet deposits versus certificates, I think both had similar gross fee yields, but how do the rates that you're paying on those compare? And as we think about those two, are you fairly agnostic in terms of margin benefits to you between those two products? Or is one more favorable than the other?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Are you saying certificates on bank or -- yes, okay. Clearly, the bank has a higher margin than the certificates. And that's where certainly we're concentrating our growth, but we are getting very strong results, and we have very good margins in the CD business. And so, the answer is, we feel we have the capacity to grow those two. And that is going to take a larger and larger percentage of the profitability that's being generated. Certainly, we will be generating good earnings in the sweep activity, but the real growth potential is coming in primarily bank and we will get a lift in CDs. But the margin is better in the bank versus the CDs because of different investment strategies and liquidity strategies.

Suneet Kamath
Analyst at Jefferies Financial Group

Yes, and is there a way to dimension that margin differential?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

No, I don't have it, but I'm just telling you, it is better at the bank, and we can take a look at that and see if we can give more insight on to that.

Suneet Kamath
Analyst at Jefferies Financial Group

Yes. Makes sense. And then, I guess, you talked about an $800 million investment in both the bank and the certificates business over the course of the year. Is that something that you expect will continue into next year? Or any way to think about the level of capital investment that you expect for 2023?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Yes. So the short answer is yes. We will be continuing it. It's obviously a matter of equity and cash that goes in. And we have the capacity to do that. And it's really -- from our standpoint, it is giving us very good returns.

Suneet Kamath
Analyst at Jefferies Financial Group

Got it. And then maybe if I could sneak one more in. On the long-term care business, it looks like you're taking advantage of extending portfolio duration there as well. Should we read into that as a sign that maybe a risk transfer solution is less likely? Or is that reading into it too much?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Yes, possibly. Listen, for the longest time, we've kept short duration [Indecipherable]. And now we're taking advantage and both in LTC and with the protection. So we are lengthening out duration, but it's -- we're running the business from that standpoint, and you can see we're garnering good profitability, both on the claims side as we demonstrated in the fourth quarter and certainly now with the investment capabilities that it's providing us. So, no, if something comes along, it's great, we'll take a look. But right now, we're managing it and we're taking advantage of the opportunity that's there.

Suneet Kamath
Analyst at Jefferies Financial Group

Okay. Thanks, Walter.

Operator

Your next question is from the line of Erik Bass with Autonomous Research. Please go ahead.

Erik Bass
Analyst at Autonomous Research

Hi, thank you. In investment management, I think you mentioned about $12 million of negative one-time items. But you've been adjusting for these. I think the margin was at the low-end of your target range. So how are you thinking about margins for 2023? And should we be expecting some improvement given the AUM rebound that you saw in the fourth quarter and then the emergence of BMO synergies over the course of the year?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

It's an interesting situation at this stage because of the dislocation that's taking course, especially as you look at the equity markets, you look at fixed income depreciation and foreign exchange. So -- but there's a lot of actions that we're taking and managing through. But it's -- the margins are -- from that standpoint, it's deleveraging, just like the industry is. But I would say that, at this point, as we look at it, it's heavily dependent on certainly things we don't control. But the things we do control, like you mentioned, BMO, synergies and other things of that nature, we are on track. So we feel comfortable from that standpoint. So I think that's a lot of variables now, but we are certainly cognizant that the margins breach through, but that's related to a lot of market activity that we are now managing.

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

We see -- listen, again, we don't know if it will hold enough, but you've seen some pickup on the international market front as far as appreciation occur as well as the improvement in the pound, et cetera. So we think that's a little of the headwinds have relieved a bit. That will be helpful. And we're not changing our range as we move forward.

Erik Bass
Analyst at Autonomous Research

Got it, thank you. And then maybe moving to capital management. I think for the full year, you returned about 85% of earnings to shareholders in the fourth quarter. The percentage was a little bit lower. So should we still think about 90% being the right target? Or has this come down at all, given the capital being allocated to the bank and/or the uncertain macro outlook?

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

So as we look at it, we've been one of the highest returning companies out there in capital and even last year was very strong. So as we look forward, we have flexibility. But as Walter said, we're continuing to grow the bank, which is going to require some additional capital, but the returns are strong as well as our certificate company, which are all good uses of capital.

In the past years, we have freed up capital. We used some of that to purchase the BMO as well as now growing the bank tremendously. So we think that we're going to generate continuing good free cash flow that we will return to shareholders. But as far as the percentage and rate will depend on how we utilize that both our core investments in the business, as we said, as well as return to shareholders. So it is coming down from where it was because of those other growth opportunities, but will still be a strong return. So I'd leave it at that at this point in time.

Erik Bass
Analyst at Autonomous Research

Got it, makes sense. Thank you.

Operator

Your next question is from the line of Tom Gallagher with Evercore ISI. Please go ahead.

Thomas Gallagher
Analyst at Evercore ISI

Good morning. Walter, just coming with a follow-up on Retirement & Protection, the $800 million or so run rate for 2023. Does that contemplate any LDTI accounting impacts? If it doesn't, can you give us some indication, up or down, whether that will have a negative or positive impact? And if $800 million is the right number, why was your $29 million of over-earning this quarter? Was it all backed? Or maybe if you could quantify that.

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

No, [Indecipherable]. That does not contemplate LDTI. We're still evaluating that. And -- from that standpoint. So, it does not. And we'll obviously settle on the approach that we're going to take before the quarter. As it relates to the -- why it's lower, again, we're on -- part of that profitability improvement was lower sales. And so, we're looking at activities as it relates to that. And so, that gives a positive PTI in that situation, plus there was some anomalies as you basically look at what the changes and the -- huge change in equity markets and other things that took place, it gave a lift on SOP. So, from that standpoint, we're -- I'm just saying we're comfortable with the -- what you guys are indicating in that $800 million range for the year, and we'll continue that and we're getting that lift. There's no question about it for the investments that we repositioned.

Thomas Gallagher
Analyst at Evercore ISI

And, Walter, does the $800 million contemplate a little bit of extra spread that you would expect to still get? Or is that more of a 4Q static look at it?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

No, it's the continuation of the volume of it. Actually, at this stage -- since that point -- certainly since we're still investing, the spread has come down from that, but we still feel very confident in the ability to generate whether -- just on the $800 million for the year.

Thomas Gallagher
Analyst at Evercore ISI

Okay. And then, my follow-up is, how should we think about the fees and margins of the wrap versus the brokerage flows in AWM. I think your wrap has a little over 100 basis points of fees. The non-wrap is more commission-based. But just curious, how do you compare the economics of the two, particularly now if we're going to see stronger flows into brokerage, I just want to understand how that's going to impact your overall margins?

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Yes. So, Erik, I think as we -- Tom, as we look at the business, okay, we've had a bit slower flows into wrap, but still good flows, but you also had the depreciation of the markets, which impact the wrap overall fees for the firm. And so, I don't feel that that's a permanent. As I said, we also had some transaction volume being down on the commission side.

So, I would probably say, if markets settle as they are, you'll continue to see part of that going back into the wrap programs. You'll also -- depending on what happens with market, you may see some appreciation of that, which really was a negative in the last few quarters. And regarding the brokerage activities, we will hopefully see some pickup in the commission side based on getting back into some of the contracts that people have again been more conservative investing in right now. So I can't really like piece together exactly what that shift is. But I would probably say there's a bunch of dynamics occurring over the last few quarters in that regard.

Thomas Gallagher
Analyst at Evercore ISI

Okay, thanks.

Operator

Your next question is from the line of Craig Siegenthaler with Bank of America.

Mark McLoughlin
Analyst at Bank of America

Hi. This is Mark McLoughlin filling in for Craig. I had a question within AWM. I was curious if you were seeing any incremental demand from third-party bank suites for deposits and what that environment looked like? And then kind of following up on that too. I believe your contracts were historically priced on kind of floating with a spread. Is there any possibility of extending the duration on those contracts, which would let you capture higher yield and also offer some more visibility into cash flow, while also taking pressure off of your bank?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Okay. So, let me answer that. The answer is back about a couple of months ago, there was certainly -- you couldn't give deposits away. Now clearly, at this basis, there is more demand, but we are evaluating what is really -- from our standpoint, what is the appropriate balance for off balance sheet cash and bringing it back on balance sheet. So we have a very good relationship. We've been doing this for multiple years through promontory -- not promontory...

So, our relationship with banks, when we do have a combination and laddering of long and short, so there -- we are assessing it, but it's a good situation from our standpoint, both from the demand coming on sweep and our capacity to bring more back on to balance sheet and the fact we are still attracting good balances in.

Mark McLoughlin
Analyst at Bank of America

Great, thank you. And just for a quick follow-up and kind of switching gears a little bit. Really like your significant program, that's a great cash management solution for clients with competitive rates. I was curious, looking at the historical allocations from past cycles, is there anything different this cycle that you would say that would affect allocation that we should be taking into consideration?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Into the CD -- we are very cognizant trying to give our clients the capabilities there. So that trend has been going and been evaluating as the Fed makes it shifts and other things and alternatives. So you're seeing that. And yes, we will continue to do that. But the important thing is we're also building that capability very shortly into the bank, which also gives a different set of alternatives for them to really look at their laddering, as I mentioned. So, yeah, you're just adjusting and certainly having the product capability and the capabilities to grow either off balance sheet, on balance sheet and on balance sheet in the bank and in certs.

Mark McLoughlin
Analyst at Bank of America

Great. Thank you so much.

Operator

Your next question is from the line of Alex Blostein with Goldman Sachs. Please go ahead.

Luke
Analyst at The Goldman Sachs Group

Hey all. This is Luke [Phonetic] on behalf of Alex. Thanks for taking the question. So, keeping on topic of the bank, you had a few billion of securities maturing in 2023. What kind of incremental reinvestment spread are you looking at picking up here relative to what's rolling off?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Okay. So, yes, we have about $3 billion maturing during the year. So, right now, we are thinking in the range that will be 200 to 300 basis points, so we'll pick up from it. I don't have the exact, but I'll have Alicia and Stephanie get back, but we will pick up reasonably good spread from what's maturing versus what we can invest out.

Luke
Analyst at The Goldman Sachs Group

Got you. Helpful. That's awesome. Thank you. And then switching gears to firm-wide. Do you have any thoughts on how you're thinking about firmwide G&A growth in 2023 off of the $3.6 billion, $3.7 billion base, if this is the right base to think about?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Yes. Listen, we manage -- I think we've always demonstrated, we're very disciplined in managing our expenses to ensure that we are investing for growth. At the same time, analyzing the margin capabilities as it relates to it. So we will remain disciplined as we go and we look at shifting and where that is from that standpoint and getting the efficiencies that we are constantly evaluating. So I would say the ranges you've seen is the ranges that we believe will certainly be sustainable, but it's situationally driven as we manage our expenses very tightly.

Luke
Analyst at The Goldman Sachs Group

Great. Thank you.

Operator

Your next question is from the line of Jeff Schmitt with William Blair. Please go ahead.

Jeffrey Schmitt
Analyst at William Blair

Hi, good morning. in wealth management, just thinking about cash sorting and, I guess, you may be capturing some of that, if that's being shifted into the certificates business. But do you have a sense on how much has sort of shifted maybe in the sort of third-party mutual funds or some other investments?

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Yes. So over the course of the year, as you would imagine, and [Indecipherable] started last year, you would have a higher level of cash from clients as they move things to the sideline, et cetera, and put it fully back in the market or even in fixed income. And so, went into money markets, went into brokered CDs, went into other short-duration products, just like we have the cash here going into some of our certificates. The amount of cash we're holding pretty much on transactional is pretty -- at the consistent levels. It's not where that has built up tremendously. We just had more client flows coming in and that's just as a percentage.

And then, we've got a piece of that into our own certificate program as an example. And now when we actually launch some of the preferred savings and deferred deposit programs within the bank, we'll start to capture even a bit more, hopefully, of that.

But new cash has come in and that has raised our levels overall, but there's been sorting all through this going into those other instruments as well as our advisers look at what that balances, what's positional versus transactional. So that's why we feel like those levels are pretty consistent because things have already sorted as through the year.

Jeffrey Schmitt
Analyst at William Blair

Okay. Is that lower than some peers maybe just because of the client mix? Is there a greater concentration maybe of lower account value that would...

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Well, in our case, as I said, I think if you look at certificates, which is actually investing out a bit, and you just look at the amount in our cash sweep products, et cetera, you're actually less than 5%. And so, that's consistent with our history based on the level that clients keep for both emergency and transactional activity.

So I -- that's why I said, I think money has already been in all these different positional areas to garner a level of interest that the clients want with the advisers. So, I actually feel comfortable. Now some of that, I think, will go back when they feel comfortable putting more back into wrap and investment programs as well or longer duration products in the fixed income market.

Jeffrey Schmitt
Analyst at William Blair

Okay. And then just one on the bank portfolio. I think that's mainly invested in MBS securities. But how much -- what percentage of that book is in fixed rate investments?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

The majority is in fixed. But like I said, it's in structured. The majority is construction, high AA rated and certainly at the highest levels of the security ladder.

Jeffrey Schmitt
Analyst at William Blair

Okay. Thank you. Your next question is from the line of John Barnidge with Piper Sandler. Please go ahead.

John Barnidge
Analyst at Piper Sandler Companies

Good morning. Thank you very much for the opportunity. My question was on long-term care. I know third-party claims administration accelerated the pace of terminations. Is that anticipated to persist? And how should we think of run rate within that now?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Sure. So, yes, in the quarter, we had a combination of basically, as you indicated, a strong continued claims performance, along with basically the effects of our benefit programs and basically our premium increases. But there was this one-time catch-up because a vendor did get behind. But that was not -- that was about half of it, but we are seeing good trends as it relates to the claims.

And it's typical to forecast, but we think we have all the foundational elements in there. It's been within our expectations for multiple years. And so, we are feeling that -- comfortable where it is, and we do again get the continued benefits of the programs that we have in place to basically contain and manage that effectively.

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

And we've been able to now start investing out, which is garnering a higher spread for the portfolio, which is good.

John Barnidge
Analyst at Piper Sandler Companies

That's very helpful. Thank you. And then my follow-up question. There's been lots of G&A restraint across the franchise this year. But is there an optionality for asset management expense reductions, given the lower AUM. There were some other reductions that asset managers announced this morning.

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Yes. So, as you saw in our asset management business, we have brought expenses down, and we will continue to really manage expenses tightly there. Now we are making good investments in certain areas. We see opportunity like in some of our real estate and other areas and responsible investing. But we have tightened the range a bit based on the appreciation of the markets. And we feel that that is necessarily inappropriate.

Now on the other side, like the Advice & Wealth, as we build up more capabilities in the bank, we're making some investments. But overall for the company, we've managed expenses quite tightly, not just the current year but over the years, and it is actually favorable.

Now we're going to have merit increases, other things, et cetera, but we're going to look at areas of opportunity to tighten if necessary based on the market conditions. But asset management is one of those areas that we will be a bit more disciplined in.

John Barnidge
Analyst at Piper Sandler Companies

Thank you.

Operator

Your next question is from the line of Andrew Kligerman with Credit Suisse. Please go ahead.

Andrew Kligerman
Analyst at Credit Suisse Group

Hey, good morning Jim and Walter. Question about the advisers. You added 72 this quarter. Good, but a little light of where you were. I'm kind of curious as to your pipeline and how you see that playing out in terms of adding new experienced advisers.

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Yes. So we did add -- it's a little less than the previous quarter, et cetera, but there's always timing with year-end and activities that occur, as you would imagine with market conditions, the volatility there with advisers. But I would say the advisers we added actually had very strong productivity. So actually, from a production perspective, the amount in total was higher and what we brought in.

And the pipeline looks very good. So I think as you see some of the advisers being added -- they're really coming over because we do have a really great integrated technology platform. We give a lot of great support. The types of -- they're even coming because they trust the firm and the quality of the firm. And they really think that that's really a benefit for them for their practices. So, we feel very good about what the opportunity to continue there.

Andrew Kligerman
Analyst at Credit Suisse Group

Got it. And then, just thinking about the insurance subs, RPS. Equity -- in terms of dividending capital to the parent company, the equity markets are sort of a headwind, but then you're doing this tremendous repositioning on the investment portfolio. Could you talk a little bit about expectations for dividending capital up at the parent in 2023?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Sure. So it's Walter. We have -- and certainly, as we look at it, and I mentioned as related to the earnings [Indecipherable] 2023, we will manage and keep our RBC ratio. And so, we feel very good about the dividend capability coming out of RPS, but the thing with the change and certainly in our growth going on in AWM, the bank, the stability of that, we also have opportunity -- and that increase in the flows of dividends to this parent from AWM and still get dividends coming out because even though they're under pressure for asset management, they still are dividending a reasonable amount. So, our cash flow coming out of the various segments, including RPS, is really -- we are feeling very good about its capabilities in 2023 as a source of funding for us at the parent.

Andrew Kligerman
Analyst at Credit Suisse Group

Awesome. Can I sneak one last one? Just on M&A, last quarter, you seem to think that you were going to kind of maintain the status quo in terms of divesting of blocks. Any change in that?

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Yes. So, as we looked at the environment, et cetera, and the market, let me put it this way. You probably saw a thing that was reported out even this week. RiverSource has -- it's like the second highest -- and it's only off by a few basis points, second highest return out there of any insurer -- a large insurer. And so, I think you've got to look at it in a sense, as Walter just said, the free cash flow, how we de-risk the business, how even what we have on the balance sheet with guarantees is coming down. The products we're selling are lower risk, appropriate for the client. And we have a lot of other alternatives on the shelf for the client. So, we feel like this is a good hand that we have. And now that the spreads have gone back up, we're able to invest out a bit more and garner some. So, listen, there may be some opportunities that come along, and we will continue -- we'll look at them as they do. But this is a comfortable hand to have as a complement, particularly with depreciating markets.

Andrew Kligerman
Analyst at Credit Suisse Group

Awesome. Thanks.

Operator

Today's final question will come from the line of Ryan Krueger with KBW. Please go ahead.

Ryan Krueger
Analyst at KBW

Hi, thanks. Good morning. I think we've often seen some level of seasonality with cash balances within AWM to come down some sequentially from the fourth quarter to the first quarter. Is that something you would expect to occur in this year.

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

Absolutely. Yes. I think we do expect and we will probably experience the same seasonality and that's been part of our overall planning. So, it's -- we don't see any change.

Ryan Krueger
Analyst at KBW

Okay. Got it. And then, just -- I know there was a question on overall G&A expenses. Perhaps AWM is a little bit -- you have maybe more insight into the outlook there, given the backdrop from an earnings standpoint. Can you give any sense of your expectation for growth in AWM G&A expenses in 2023?

Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial

I think, again, we'll go back to -- it is geared towards making sure we get the payback on that with discipline as we focus. And so, we'll manage it relative to the revenue and the growth opportunities we see, but we will be very disciplined in it. And I think it will be in ranges that you've seen in the past. But, again, it's situational.

Ryan Krueger
Analyst at KBW

Okay. Thank you.

James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial

Yes. AWM this year, remember, we had a bounce back in meetings and other travel and T&E, again, coming back from a pandemic sort of thing where we cut all those things out as well as we may continue to make good investments in the growth of the bank and bringing in advisers, et cetera. So you're going to have merit and other things that are there. But I think on a balance basis, our expenses will be managed pretty well. And we don't see that accelerating in any way. But as Walter said, whatever we're making investments, we'll get good returns on, but I don't think that will be at a high level.

Operator

[Operator Closing Remarks]

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