Ameriprise Financial Inc

NYSE:AMP

Earnings Call Analysis

Ameriprise Financial Experiences Strong Quarter with Growth in Revenue and Assets

In the third quarter, Ameriprise Financial reported impressive results, with total assets under management rising 22% to $1.5 trillion. Adjusted operating net revenue increased 11% to $4.4 billion, while earnings per share climbed 17% to $9.02, excluding severance expenses. Wealth management saw total client assets reach a record $1 trillion, fueled by a nearly 50% surge in fee-based advisory flows. The company plans to return 80% of operating earnings to shareholders in 2024. Additionally, diversified sources of capital enabled a return of $713 million during the quarter, reflecting strong operating performance and a best-in-class return on equity of 51%.

Strong Financial Performance in Q3 2024

Ameriprise Financial reported a solid third quarter in 2024, showcasing a significant increase in financial metrics. Total assets under management and administration surged to $1.5 trillion, marking a 22% rise. Adjusted operating net revenue rose by 11% to $4.4 billion, and earnings per share climbed 17%, excluding severance expenses, which speaks to operational efficiency. The return on equity remained strong at 50.7%, compared to 49.6% a year prior. This robust performance underscores Ameriprise's strong positioning within the volatile financial landscape.

Wealth Management Drives Client Satisfaction

In its Wealth Management segment, Ameriprise achieved a new record in total client assets surpassing $1 trillion, a 26% year-over-year increase. Noteworthy is the nearly 50% rise in fee-based investment advisory wrap flows, reaching $8 billion in the quarter—the highest in over two years. This uptick indicates a significant recovery in client investment behavior, as many customers are opting to reinvest their cash into more productive assets.

Continued Growth in Retirement & Protection Solutions

The Retirement & Protection Solutions division also demonstrated growth, with protection sales soaring 25% to $99 million. Variable annuity sales climbed 13% to $1.2 billion, further solidifying Ameriprise’s business model in this area. These segments are showing strong free cash flow generation, reflecting the quality and profitability of the underlying business, driven by favorable market conditions.

Asset Management Shows Impressive Growth

In terms of asset management, AUM increased 14% to $672 billion, indicating favorable performance driven primarily by market appreciation. Operating earnings surged 23% to $245 million, resulting in a strong margin of 41%. This performance exemplifies how Ameriprise is effectively leveraging its diverse services to provide robust financial results, reinforcing clients' confidence.

Sustained Capital Return Strategy

Ameriprise has reaffirmed its commitment to return 80% of its operating earnings to shareholders in 2024, with a total of $2.6 billion returned in the last year alone. This consistent capital return strategy reflects a commitment to enhancing shareholder value amidst strong earnings performance.

Strategic Retention of Long-Term Care Business

Management decided to retain its long-term care business, believing it to be in shareholders' best interest after a thorough risk assessment showed little value in transferring these liabilities. Over the past five years, the long-term care business has produced $215 million in statutory earnings, and management expressed confidence in future performance driven by favorable trends.

Investment in Growth and Future Opportunities

Ameriprise continues to invest in growth, particularly in Wealth Management and technology enhancements. The company's advisers demonstrated impressive productivity levels, averaging $997,000 in revenue per adviser, which marks an 11% increase year-over-year. The future outlook suggests ongoing product expansion and clients' reallocation of investments into longer-duration assets as the market stabilizes.

Operational Efficiencies and Expense Management

Despite rising revenues, Ameriprise managed to keep its G&A expenses flat at $419 million, with a small increase in volume-related expenses. This operational discipline is crucial as the company aims for enhanced profitability while navigating potential market headwinds.

Outlook for 2025 and Beyond

Looking forward, Ameriprise remains optimistic regarding market conditions and expects to maintain high return levels. Guidance for 2025 suggests sustaining the capital return strategy while evaluating growth opportunities, particularly in areas like bank product offerings and advisor recruitment. The proactive approach to maintaining a strong balance sheet with $2 billion in excess capital shows the company's readiness to act on strategic initiatives as they align with market conditions.

Conclusion: Confidence in Growth and Stability

In conclusion, Ameriprise is demonstrating a resilient growth trajectory backed by strong financial performance across all segments. The company’s commitment to shareholder returns, combined with its strategic decisions regarding the long-term care block, positions it well for the future. As market conditions evolve, Ameriprise's diversified business model and operational efficiencies will likely continue to yield favorable outcomes and attractive returns for investors.

Earnings Call Transcript 2024-Q3

[Operator]

Welcome to the Q3 2024 Earnings Call. My name is Audra, and I will be your operator for today's call. [Operator Instructions] As a reminder, the conference is being recorded.

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

[Alicia Charity, executive]

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 reference 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 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 2024 earnings release, our 2023 annual report to shareholders and our 2023 10-K report. We make no obligation to publicly update or revise these forward-looking statements.

On Slide 3, you will see our GAAP financial results at the top of the page for the third quarter. Below that, you see our adjusted operating results, which management believes enhances the understanding of our business by reflecting the underlying performance of 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.

[Jim Cracchiolo, executive]

Good morning, everyone. As you saw, we had another very good quarter building on another strong year. The business is performing quite well. In terms of the external environment, as we know, the Fed lowered interest rates for the first time since 2020 as inflation moderated. Equity markets appreciated even with short-lived spikes of volatility that occurred in the quarter and investors continue to manage uncertainty related to the U.S. election and heightened geopolitical risk.

While the environment is fluid, Ameriprise is extremely well positioned and we're helping our clients navigate what's ahead.

For the quarter, assets under management and administration increased to $1.5 trillion, up 22%. And in terms of our financials adjusted for unlocking, total adjusted operating net revenue increased 11% to $4.4 billion. Earnings were up 11%, with earnings per share up 17%, excluding the severance expense and we again generated an excellent return on equity. It was 50.7% for the quarter compared to 49.6% a year ago. The power of Ameriprise comes from our client relationships and the consistent success of our complementary businesses that continue to deliver strong results.

In wealth management, our goal-based advice value proposition is helping to drive excellent client satisfaction and practice growth. Total client assets had a new record passing the $1 trillion mark, up 26% from strong flows and markets. In fact, we had $46 billion of client net inflows over the past year including $8.6 billion in the quarter. With guidance from our advisers, clients are putting money back to work. Flows into fee-based investment advisory wrap flows were up significantly, nearly 50% to $8 billion for the quarter. This marks our highest level in more than 2 years.

Total wrap assets reached $569 billion in the quarter, up 28% and transactional activity increased significantly, up 19% year-over-year. While cash balances overall are still elevated, we've seen some shift from term products to money market funds and there's additional opportunity for clients to redeploy their money into wrap and other solutions over time. At the bank, assets grew nicely, up 7% year-over-year to more than $23 billion. There are further opportunities to expand the bank and we're coming out with new savings and lending products next year.

In addition, with supporting advisers to take advantage of our powerful CRM client meeting preparation capabilities and data-driven insights from advanced analytics and AI. As advisers uptake these capabilities even more, it should provide further growth opportunities. And Ameriprise adviser productivity growth remains among the best in the industry and increased another 11% and to a new high of $997,000 per adviser.

Regarding recruiting, we had a good quarter with 71 experienced productive advisers joining the firm, and we feel good about our pipeline. I'm pleased to see Ameriprise and our advisers stand out in the industry for excellent client service, leading growth and overall quality of their practices. In fact, we had a record 21 Ameriprise advisers ranked in the Barron's Top 100 Independent Financial Advisor list that recently came out. And Ameriprise has consistently scored very well in terms of overall trust for many years.

Last month, I spent time with our top advisers at the Chairman's Advisory Council conference. They appreciate the environment we created and how it helps enable both clients and advisers alike to achieve their personal goals. They're proud to be part of Ameriprise and energized about our direction and the opportunities in front of us.

In Retirement & Protection Solutions, we again drove good sales and consistent earnings. In variable annuities, our structured annuities and variable annuities without living benefits continue to attract strong interest with combined sales up 13% for the quarter. And in our Life business, we focused on variable universal life and disability products that are appropriate for this environment. Life and health sales were up 25% with the majority of sales and accumulation-focused VUL products. We've also continued to see positive results from our automated accelerated underwriting that's driving nice efficiencies, and we've been named one of the most profitable insurers in past rankings. These high-quality books of business consistently generates strong free cash flow and return on capital with a differentiated risk profile.

Moving to Asset Management. We're generating strong financial results as we continue to adjust the business. Assets under management increased 14% to $672 billion in the quarter. We have excellent performance across equities, fixed income and multi-asset strategies across 3-, 5- and 10-year periods, and we've seen a nice pickup in fixed income in both taxable and tax exempt. And this level of performance is reflected in the 118 4 and 5 Morningstar funds we offer globally. With regard to flows in the quarter, net outflows improved 40% year-over-year to $2.4 billion, which included about $900 million of outflows from legacy insurance partners. Retail and model delivery net outflows were better at $1.5 billion due to improved gross sales in both North America and EMEA as well as net inflows into ETFs and model delivery. We continue to evolve how we deliver our investment capabilities. And over the last few years, we have successfully built out our SMA businesses with both traditional and tax-efficient strategies and we are a top 10 player in model delivery.

We've also been building out our ETF business and just added 4 active ETFs to leverage our investment strength in equity income and credit. We're beginning to gain a good level of flows in these areas, and we'll look to further expand our product line over time. And in institutional, excluding legacy insurance partners, flows were flat in the quarter.

As we discussed, the team is very focused on positioning the business for future growth. We're driving operational improvements and making necessary adjustments that include streamlining the organization, in particular in the EMEA region. In addition, we're improving and better leveraging our processes and technology systems globally. We're redeploying these savings to invest in the areas that will drive profitable growth. Ultimately, we're focused on better positioning asset management to adapt to changing market dynamics. You can see some of the benefits in our results for the quarter that we will build upon next year.

Bringing things back to the firm level, Ameriprise continues to consistently generate strong results. Our long-term record is excellent. As an example, just looking back over the last 5 years, we've delivered 16% compound annual growth in EPS and a return on equity consistently among the highest in the industry, and our balance sheet remains a clear and important differentiator. We're proud of the level and consistency of our results that reflect the unique combination of capabilities that we have across Ameriprise. And the operating leverage and benefits that result from our teams working together firm-wide are key to delivering our excellent client value proposition. We are one firm using the strength and activities of the business working together, and that's reflected in the consistency of the results we've delivered.

Before I close, you've asked about long-term care and whether there's an opportunity to do a risk transfer at this time based on market changes. We thoroughly reviewed our options and believe that keeping the book at this time is in the best interest of shareholders. Walter will discuss this in more detail.

In closing, last quarter, we shared that Ameriprise recognized 130 years in business. How we manage the firm is key to our longevity and legacy. Ameriprise regularly earns awards in the marketplace for our culture and how we operate, including being recognized among the best managed companies on the Wall Street Journal Management Top 250 list. Forbes Magazine named us as one of America's best large employers. And Ameriprise has also been ranked as one of America's Greatest Workplaces for Women by Newsweek. We also earn excellent recognition with our people internally year after year and our annual engagement scores that we received in the quarter continue to exceed external benchmarks across industries. Across Ameriprise, we're focused on serving clients well as we continue to build, invest in and take the business forward.

I'll now ask Walter to provide his perspective in more detail on the quarter, and then we'll take your questions.

[Walter Berman, executive]

Thank you, Jim. The diversified nature of our business and unique leverage points between them drives our strong, consistent, profitable growth and ability to navigate stress events. Adjusted operating EPS increased 17% to $9.02, excluding unlocking, and severance expense associated with the company's initiatives to enhance operating efficiencies and effectiveness to further strengthen the client experience and future shareholder value.

In addition to the severance costs, we recognized additional expense of $0.32 per share related to severance program expenses and acceleration of the firm's transition to cloud-based technology platforms. Higher compensation accruals relating to strong performance and mark-to-market impacts on share-based compensation. This further demonstrates the strong underlying growth achieved in the quarter.

Assets under management and administration increased 22% to $1.5 trillion, benefiting from strong client flows over the past year and equity market depreciation. This has resulted in strong 11% revenue growth across our businesses. G&A expenses continue to be well managed and demonstrate our focus on operational efficiency and effectiveness. We continue to invest in areas that will drive future business growth, particularly in Wealth Management, while maintaining expense discipline to achieve shareholder objectives. Our returns remained strong with a consolidated margin of 27%, excluding unlocking severance expenses and a best-in-class return on equity of 51%. Balance sheet fundamentals, including excess capital and liquidity are very strong.

Our diversified business model benefits from significant and stable 90% free cash flow contributions across all business segments. We returned $713 million of capital to shareholders in the quarter. In 2024, we continue to expect to return 80% of operating earnings to shareholders.

On Slide 6, you will see our integrated model leverages key business linkages to drive strong and consistent operating performance. Our business model is a key driver of profitable growth for our shareholders across market cycles. Ameriprise is one company with 3 business segments from which we gain leverage for the whole. For example, within our open network and Wealth Management, Columbia Threadneedle and RiverSource provide important solutions to AWM clients.

These relationships result in high levels of adviser and client satisfaction and retention. Another example is where we are able to leverage our asset management expertise at Columbia Threadneedle to manage the general and separate account assets for RiverSource, the bank and certificate company and they have delivered high-quality returns with strong credit performance. These segments benefit from the leverage of our corporate functions and capabilities, which include technology, Ameriprise India and staff groups. These capabilities enhance our ability to meet client needs in an efficient manner while driving growth and consistency across market cycles.

On Slide 7, you see the strong results from Wealth Management. Total client assets grew 26% to an all-time high of $1 trillion with wrap assets up 28% to $569 billion from strong net flows and market appreciation over the past year. Wrap flows were strong in the quarter at $8 billion or 6% on an annualized flow rate. Pretax adjusted operating earnings increased 13% to $826 million, driven by quite strong year-over-year core wealth management earnings growth offset by lower cash sweep earnings and margin remained strong at 30%. Adjusted operating net revenues increased 14% to $2.7 billion from growth in client assets, increased transactional activity and a 6% increase in net investment income in the bank. This drove revenue per adviser to a new high of $997,000, up 11% from a year ago.

Total cash balances, including third-party money market funds and broker CDs was $83 billion which was over 8% of the clients' assets.

Clients remain heavily concentrated in yield-oriented products with highly liquid products like money market funds being more in favor than the term products like certificates and brokered CDs. We are beginning to see clients put more money back to work and wrap and other products on our platform and we expect this to continue over time as markets and rates normalize, which creates a significant opportunity. Client cash sweep balances were stable at approximately $28 billion. Bank assets grew to $23.2 billion, providing sustainable net investment income in this forecasted lower rate environment. These trends continued in October.

Adjusted operating expenses in the quarter increased 14%, with distribution expenses up 19%, reflecting business growth and increased transactional activity. G&A expenses were flat at $419 million, with higher volume-related expenses in the current quarter and a regulatory accrual in the prior year quarter. Excluding the regulatory accrual in the year ago period, G&A expenses were up 5% in the quarter, consistent with expectations.

Turning to Asset Management on Slide 8. Financial results were very strong in the quarter. The AUM increased 14% to $672 billion, primarily from higher equity market appreciation. In the quarter, operating earnings were quite strong and increased 23% to $245 million and our margin reached 41%. Adjusted operating expenses increased 2%. With G&A expenses improving 2% from a year ago, reflecting initial benefits from the company's initiatives to enhance operational effectiveness and efficiency to further enhance our ability to meet clients' needs.

Let's turn to Slide 9. Retirement & Protection Solutions continued to deliver good earnings and free cash flow generation, reflecting the high quality of the business that has been built over a long period of time. Pretax adjusted operating earnings, excluding unlocking in the quarter increased 2% to $208 million, reflecting the benefit from strong markets and higher interest rates, partially offset by higher distribution expenses associated with strong sales levels. Year-to-date, pretax adjusted operating earnings, excluding unlocking were $603 million, which is on pace with our expected level of approximately $800 million on an annual pretax basis. We completed our annual actuary assumption update in the quarter, resulting in an unfavorable pretax impact of $90 million, primarily related to updates to persistency assumptions for variable annuities. Our lapse assumptions is now aligned with recent experience, and we are very comfortable with this level.

Overall, Retirement & Protection Solutions sales improved in the quarter, with protection sales up 25% to $99 million, primarily in higher-margin VUL products. Variable annuity sales grew 13% to $1.2 billion with strong momentum in our structured product.

Turning to the balance sheet on Slide 10. Balance sheet fundamentals and free cash flow generation remained strong with $2 billion of excess capital. We have diversified sources 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 drives long-term shareholder value.

In summary, on Slide 11, Ameriprise delivered excellent growth in the third quarter, which is a continuation of our long track record to outperform our stated financial targets. Over the last 12 months, revenues grew 10%, earnings per share increased 14%. Return on equity grew 110 basis points, excluding unlocking and we returned $2.6 billion of capital to shareholders. We had similar growth trends over the past 5 years with 7% of revenue growth, 16% EPS compounded annual growth. Return on equity improved nearly 13 percentage points, and we returned $11.9 billion of capital to shareholders. These trends are consistent over the longer term as well. Compared to most financial services companies, this differentiated performance across multiple cycles speaks to the complementary nature of our business mix as well as our focus on profitable growth.

Before we move to Q&A, let me provide some additional insight into our decision to retain long-term care on Slide 12. As you are aware, we have been in the process of assessing potential risk transfer opportunities related to long-term care. In the quarter, we completed this analysis and have concluded that retaining the business is in the best interest of our shareholders. Our analysis found that there is a substantial difference in value between retaining the block and reinsuring the block.

Our assessment concluded that the market for stand-alone long-term care risk transfer deals has not matured and that high-quality blocks like ours are not receiving an appropriate level of differentiation by counterparties. Our transaction will require us to include other books of business that would transfer tremendous value to a counterparty to offset unwarranted discounts applied to LTC.

Let me be clear, we feel very good about the quality of our long-term care business and it has performed better than our expectations over the past several years, which we expect to continue going forward. As you have seen, the business has generated $215 million of statutory earnings over the past 5 years and that trend should continue. We have already seen the size of the book declined by 70% with over 75% terminating without a claim. This business will continue to run off with over 2/3 of the remaining book expected to run off over the next 10 years. This extensive experience has supported our reserve process and that process has proven very accurate.

We will also be able to capture additional upside from future enhancements related to investment portfolio repositioning, premium rate increases and other program actions to improve performance. We will maintain a strong and differentiated capital position, and we do not need to supplement our capital position with a reinsurance transaction.

In summary, given the high quality of our block with $300 million of capital as well as our credible experience and confidence in our reserves, we do not believe there is a plausible scenario that could justify executing a risk transfer deal at these levels and taking on additional counterparty exposure.

In closing. We had an excellent quarter and feel good about how we are positioned going forward. With that, we'll take your questions.

[Operator]

[Operator Instructions] We'll take our first question from Suneet Kamath at Jefferies.

[Suneet Kamath, analyst]

I wanted to start with the retail flows in Asset Management. I guess, is there -- it was interesting you have that slide that talks about the synergies across businesses. So I guess a question is, is there anything that you're doing strategically, structurally within Asset Management and Advice Wealth Management to take advantage of the fact that you have these 2 businesses in terms of improving the flow outlook? And if you could give some examples, that would be helpful as well.

[Jim Cracchiolo, executive]

Yes, Suneet, this is Jim. So as you saw and Walter presented in the slide, the AWM business is a large distribution partner for Colombia. They've established that over many years, even in our open architecture, and they are a valued partner. And in that regard, as we focus more on growing our third-party distribution globally and as well as institutional, we haven't put as much focus as we used to on the AWM business. And I think there is an opportunity that Ted and team are working on now to bring more product in to gear some of that product, especially for the type of [ solutions ] that we need. And we actually think that there is a great opportunity for him to increase his activity within the channel again. And so he's working on a combination of current solutions that he has as well as bringing other solutions to bear that we think can garner flows within the channel.

[Suneet Kamath, analyst]

Got it. Okay. And then just on the comment that you made about client cash moving into money market funds as opposed to the term products, what is your read in terms of what's going on there? Is it that the advisers are sort of positioning for a rotation into these other longer duration sort of wealth wrap products? Or what do you think is going on?

[Jim Cracchiolo, executive]

So we saw like a 50% increase into wrap flows again in diversified portfolios, which includes fixed income. And so it's a nice rebalancing occurring there and flow increase. And so what we did see just more broadly is a move out of brokered CDs and certificates, even though the cash levels didn't go down in total, it moved into money markets. And what that says is really the people aren't going to -- are locking less up into those, what I would call just pure interest-earning assets and into vehicles that then they could possibly move back into things like wrap or other fixed income products that have longer duration.

[Operator]

We'll go next to Alex Blostein at Goldman Sachs.

[Alexander Blostein, analyst]

I was hoping you guys could talk about your outlook for cash revenues within AWM in totality. So I know in the past, you kind of referred to bank more on a stand-alone basis and Jim, you made some comments earlier this morning regarding kind of ways you could still aim to kind of keep NII stable to growing within the bank. But maybe just expand that a little bit and we think about the certs business, the bank, the broker-dealer or the third party like kind of putting it together given the forward curve trajectory and current cash balances, what are your thoughts for the revenue trends there for '25?

[Walter Berman, executive]

Well, as I indicated, it's Walter. For the bank, yes, on the revenue trends and the net interest income, we do see that is going to be stable. I would actually increase. And we feel very good about that positioning. We do see, as Jim mentioned, certainly, we're hoping that money will stop moving, and we believe it will, from the money market and third-party CDs. And we are -- probably you'll see some continued softening in CDs depending on again how drastic the rate is.

But overall, I think the bulk of our earnings coming from the -- will be from the bank, and certainly sweep will be impacted as the rates come down. But and the certs, and then hopefully we will get that rotation out of the money market and third-party CDs to go back into product.

[Jim Cracchiolo, executive]

And Alex, from the bank perspective, we will be launching bank CDs that would be another cash alternative where clients are holding cash out in the banks. We'll be offering a fixed loan pledge this quarter. We'll also be launching HELOCs at the beginning of next year and putting in checking accounts later in the year.

So again, that could bring more cash activities from current bank accounts that our clients are holding to having more cash here as well that they can utilize or save. So those things, again, will be gradual builds, but I think they'll be nice and complementary. And we think we can garner both savings as well as lending activities from our clients because we know they have a lot out there, and they have a lot of lending and loan books that we can take in.

[Alexander Blostein, analyst]

I got you. That makes sense. For my follow-up, I wanted to spend a minute on the Asset Management business margins and the G&A expense trajectory there. So you guys are on track, I think, for a second year in a row of declining expenses in that business. Speaking to the efficiencies, obviously, that you talked about, despite record market and your record AUM levels pushing margins, I think, to 40% plus now. How sustainable do you think this level of profitability is in this segment? Maybe give us a sense of how you think the additional efficiencies you still expect in that business to impact the G&A dollars in that segment over the next, call it, several quarters to a year?

[Walter Berman, executive]

Sure. Again, it's Walter. So looking at the actions we've taken on transformation and the impact it's had in '24, we certainly see that will continue in '25. And again, I can't predict where the markets will be. But based on our controllables that we've taken action on and improve the -- and at the same time, improve our client servicing with -- I think you could see margins certainly stay with good market staying at the 8% levels, probably be in the 35% to 39% range for sure.

[Operator]

We'll move next to Wilma Burdis at Raymond James.

[Wilma Jackson Burdis, analyst]

Good morning. I guess you guys are on track for kind of 80% capital return this year. Can you walk us through how you think about that level for 2025 and beyond?

[Walter Berman, executive]

Well, right now, we're talking for '24 that we'll be at 80%, and we believe based on certainly, as we project the market and everything, that probably is a good number that you should use for next year.

[Jim Cracchiolo, executive]

We have a good capital position. The excess has built up again. And so we have flexibility as we go into '25, depending on market circumstances and other opportunities.

[Wilma Jackson Burdis, analyst]

And then what would you consider a good run rate for corporate expenses? I think it was -- you guys previously said around $85 million to $90 million, but it sounds like there's some cloud conversion and some other little things. So maybe just talk a little bit about that.

[Walter Berman, executive]

So as we go through it, obviously, the severance, which we probably should end [indiscernible] we have no later than the first quarter. And we've made our investments in the cloud and our mainframes to improve on that. Once we -- and that should last probably in over 2 quarters, maybe 3. But we should return to the probably the $90 million range, and you should assume in that once we get through that.

[Operator]

We'll go next to Steven Chubak at Wolfe Research.

[Steven Chubak, analyst]

I wanted to start off with a question on the expense outlook. Just imagine you're already thinking through the budgeting process for next year. I was hoping you could offer a bit of a sneak peek just on how we see to be thinking about the G&A growth outlook as well as both at the AWM and enterprise level. And just given some signs that flows are inflecting in AWM, are you looking to ramp up investment versus that current baseline?

[Walter Berman, executive]

Well, on the flows list, I think we're following what the industry are. The good news is on the wrap, as Jim has indicated. So but on the expenses, probably a good gauge. Again, like I mentioned, the severance and the investment we're making in the cloud, it probably in that flattish range and probably again, with the growth investment in AWM, probably in the 4% to 5% range is a good thinking.

[Steven Chubak, analyst]

And at the enterprise level, just more broadly?

[Walter Berman, executive]

Enterprise will be probably closer to flat. Again, talking about -- we're talking now -- mentioning excluding the severance aspect and the investment in the cloud, but in that range.

[Steven Chubak, analyst]

Got it. And just for a follow-up on the competitive landscape in AWM. I know that's something that you have flagged just as a source of pressure on flow trends. It's certainly nice to see some inflection in the quarter. Just hoping you could just offer some perspective on the competitive landscape, cost to acquire FAs. As rates have risen, we've certainly seen TA rates move higher commensurate with that. I want to get your perspective just on the cost to acquire. Do you expect that to come down as rates decline? Do you anticipate that's going to be a potential tailwind to recruiting activity looking on to next year?

[Jim Cracchiolo, executive]

So I would probably say, yes, with the extra spread, I think people are utilizing and some people to actually goose up their packages, et cetera. And I think it's a bit frothy. I think as that starts to temper, I think you'll maybe see some adjustment in what people may be doing.

From our perspective, we continue to get good quality people. The books are a little larger, even though the number of count has come down. And we feel good about what we're doing and how we're doing it. But I do believe that with the markets and other things that people are paying up a bit more today than maybe is appropriate.

[Steven Chubak, analyst]

That's helpful perspective.

[Operator]

Our next question comes from Craig Siegenthaler at Bank of America.

[Craig Siegenthaler, analyst]

So my first question is on the recruiting front. So the adviser count declined in the quarter, but given that retention levels look pretty strong and you felt good with the 71 adviser additions, can you talk about what drove the sequential decline? And if you expect adviser growth to reaccelerate in 4Q?

[Jim Cracchiolo, executive]

Yes. We think that the adviser growth will get back to the track. We had some additional and as we continue to work through productivity, some lower FAs, some -- on the teams and some turnover in the AFA things as advisers start to adjust their practices a bit more. But there's nothing major or abnormal there that we see.

[Craig Siegenthaler, analyst]

Got it. And then I want to come back to the long-term care book commentary and how your view of value differs in the private markets. So I'm curious, like what type of entities are or would bid for reinsuring or acquiring the long-term care block? And how robust is the market for long-term care today? I can't see many public insurers bidding for that? And does that market include alternative asset manager models, private insurers and public life insurers?

[Walter Berman, executive]

Well, I can only comment what we've been exposed to. So again, it's -- as we indicated, we went through discussions with certainly reinsurers that are well known. And we've evaluated on both fronts, as I indicated, looking at LTC -- first, looking at both and then looking at LTC alone.

I can just say for it is -- it's not a mature market. And certainly, we're seeing from that standpoint, the results that we have engaged with, that -- it's just not beneficial. So I am not going to comment on the depth of the market. It's the ones that we deal with our certainly well known in the industry, and we just don't see the value creation.

[Jim Cracchiolo, executive]

Yes. There are some private equity type partners, et cetera. firms, but they partner with reinsurers. The reinsurance market is not very large for this book, these type of books. And they're applying a very large gross discount because it is a very immature that it's not their core type of business. And they do want to match it up with good other quality books that would -- you would have to give up good earnings for. And when you put it together, it looks really more positive, but it's the proceeds rather than the actual underneath.

And from that, don't get me wrong, there's an opportunity that people need capital or if they have the want to trade off those things. From my perspective, our value is there. They even admitted that we wouldn't necessarily look to make sense for us at this point based on that market. And we feel very good about maintaining it based on our results and our track record.

[Operator]

We'll go next to Thomas Gallagher at Evercore ISI.

[Thomas Gallagher, analyst]

Just first a follow-up on long-term care. I hear what you're saying on the bid ask, particularly given that it's profitable for you. But just out of curiosity, there was a precedent transaction, Manulife did a deal that was according to them a negative 8% seed. So they had to pay money to get rid of it. Is that sort of a line in the sand that you wouldn't be willing to go for? Like absorbing a loss or a stand-alone LTC far worse than that? I just want to get a sense for your perception of what price was too high for you? Because I do think from a management distraction standpoint, if it was a modest loss, that might still be a reasonable trade-off.

[Walter Berman, executive]

Tom, let me try and address it this way. When we've analyzed our book, we're not talking about a loss. We're talking about all factors considered, it's contributing, right? And we feel very confident in that. Obviously, reinsurers have different objective sets, which, again, would certainly work for them, but not for us. And but the starting point is the value of our book is not a distraction, it's actually very additive to our shareholder value at this stage and certainly we feel confident in our ability to manage it, and we've been managing it for years. And as we've certainly gone over and discussed over many years, and you've seen the results of it.

So we feel confident it's a positive for us and that it created a negative with the reinsurance approach. And so we're -- that's where we're basically positioning right now.

[Jim Cracchiolo, executive]

And Tom, you're asking a very good question. From our perspective, don't get me wrong, we looked at the -- whether there was an opportunity to do this because we know it's always a question you and others have. And to be very honest with you, as I looked and even challenged to do something like this, the difference in value was just too large. The book is a very mature book. It does not require a lot of management to extract, we have the resources as far as managing the rest of the life company. We've been able to take good rate. We're adjusting how we even handle claims that we think will be greater efficiencies going forward. The book is running off, it's very mature. Even when originally some of these concerns with some other books have heard a number of years ago, there was a question, our book showed improvement. We actually even built discretionary reserves that we have not taken back and have flexibility on.

So what I'm just driving that is what you would have to give up on earning books on the life business as an offset that would take future earnings out in combinations to our earning on this book, plus the idea that they will take more gross discounts because it's not a market that they have a lot in it, and they'll do it as an accommodation, so to speak, against other books, it just doesn't make sense for us. Maybe some others, it does for what they need is what they -- how they're thinking about it. But if I had any concern about what's in that book or that there would be any potential impact, I would handle that. And -- but even if there were minor things, it will be over time, very small against what we do and what we have. So I really don't think it's an issue that shareholders have to worry about.

[Walter Berman, executive]

Yes. The only thing I would add to that is just -- and then, of course, we've been taking on counterparty exposure, which is not even into the formula. So all things considered, as Jim said, just makes sense on a high confidence basis to retain?

[Thomas Gallagher, analyst]

No, that all makes sense to me, everything has a price. But yes, I -- particularly given that it's profitable and you probably have a release of capital in addition to that, when you think about future cash flows, that all makes sense.

Just 1 quick follow-up. I think the increase in excess capital was pretty sizable this quarter. I think it went up by $300 million. Was there anything unusual going on that drove that this quarter?

[Walter Berman, executive]

No, the only thing is, again, we paid out at $80 million, certainly has strong earnings. So that was the major contributor to it, that was ins and outs. But really, it's on a very sound footing. And we feel there's nothing really unique in there. Certainly tracking the way we thought.

[Jim Cracchiolo, executive]

Yes. We're generating the $90 million, and we paid out the $80 million. And again, it gives us flexibility as we move forward.

[Operator]

We'll take our next question from Kenneth Lee at RBC Capital Markets.

[Kenneth Lee, analyst]

Just 1 quick follow-up on the LTC block here. I'm curious if a meaningful change in the rate environment could change your thinking down the line?

[Walter Berman, executive]

No. We've certainly invested out where right now where the books are hitting, the level where certainly will go into more payout on that basis. So we feel very good about that, and we took advantage of that. So no, the answer is no.

[Kenneth Lee, analyst]

Okay. Great. Very helpful there. And 1 quick follow-up. On the integrated model slide that you have there between Asset Management, Advice Wealth Management and the RiverSource there. Is the -- is there any expectation that longer term, you could potentially see more synergies, for example, between the various insurance products and the asset management side, perhaps even augmenting some of the asset management capabilities over time to better capture that? Just curious in terms of your thinking there?

[Jim Cracchiolo, executive]

Yes. And so part of what people don't really understand, and that's really the nature of the company because everyone breaks it down to a segment. But if you look at the type of relationships we have with the client, the solutions that we provide and how we manage those assets on that behalf is all leverage together in a positive way. And so from that, we have a very strong return because of the depth of the relationship and how we use those type of capabilities.

So the asset management capabilities, how we hedge all those things are part of what Walter's from a corporate does as well as with the RiverSource business management of the assets, including the bank right now are run by the fixed income department of Colombia. And so all those capabilities are there and Colombia gets management fees, the RiverSource company gets the benefit of those capabilities rather than sending them out to other players. They manage [ borrow ] portfolios. They manage our EPN and all the asset roll-ups and balancing on those different asset allocation models. And the AWM gets the benefit of a good solution with a good benefit at a very good price because of the synergies that we can put to bear there.

So for us, that's why there's a real complementary nature rather than just the separate little distinct businesses. And remember, the asset management business grew out of being a proprietary manager for Ameriprise as the AWM resource and solution set. In fact, the distribution was actually the distribution for the product manufacturers. And I turned that into a wealth manager that really lives and breathes on its own, but the solution sets embedded or complement even in an open architecture that we have.

[Operator]

We'll go next to Ryan Krueger at KBW.

[Ryan Krueger, analyst]

I had a couple of follow-ups. One, Walter, when you said you expected total company G&A expenses to be flattish. Was that a 2024 comment? Or is that a 2025 comment?

[Walter Berman, executive]

That was a 2025 comment but actually, for 2024, it's going to be the same pretty much.

[Ryan Krueger, analyst]

Okay. And then I guess when we think about '25, is that on a headline basis, flat, including 2024 that includes the severance costs and other things like that?

[Walter Berman, executive]

Well, in 2025 -- yes, that was including the severance. But in 2025, there will be some severance, but it will be a lower level than -- I anticipate, it will be at a lower level. But those numbers, again, that's why I'm hedging a little because it -- in the main, it should be in that range.

[Ryan Krueger, analyst]

Okay. And then just coming back to the -- just wanted to come back to the bank. I believe about 1/3 of the assets are floating rate. So I would think with short-term rates coming down and expected to come down further, there would at least be some pressure on the spread income from the bank. Is the offset just growing the assets? Or can you talk a little bit more what makes you feel confident that it can still be stable?

[Walter Berman, executive]

Well, it will come down. But yes, we've repositioned the book and we've recently repositioned the book with a long-term. Its duration is saying over 3 and from that standpoint. So yes, it will come down, but the what we're on the floating, we're earning a pretty large premium on. So it will still preserve itself. And I think we -- like I said, we will -- our net interest income should be higher. I mean we'll get certainly maturities coming through, and we will be adding to it.

[Operator]

We'll move next to Michael Cyprys at Morgan Stanley.

[Michael Cyprys, analyst]

Just coming back to the $2 billion excess capital position available for deployment. I imagine that continues to build if the expectation is that you'll pay out 80% of earnings. So maybe you could speak to some of the priorities for how you're thinking about potentially deploying that excess over what period of time? What's the sort of appetite to sit that excess capital position for how long? And maybe you could comment on some of the strategic type of M&A conversations you're having and where M&A could be most additive to the business today?

[Jim Cracchiolo, executive]

Have a lot of parts to that question. So what we have done really is we were going through this market cycle, not knowing exactly the environment. We feel like actually, we're one of the highest returners out there compared to anybody today and 80% is a substantial amount. What we've just done is looked at the environment. We replenished some of the excess capital at that level. We have the alternative as we move into '25 of whether we -- if the market environment is good, whether we take up that buyback a bit more, whether we look at some opportunities depending on what happens in the market and values for inorganic or we will further look at how we adjust the business and redeploy in other ways.

So it gives us a good level of flexibility, but we're not at a low level of return. And so let's look at it as an opportunity, and then we can decide how we utilize it based on a combination of factors, including the environment.

[Walter Berman, executive]

Yes. So the only thing I would add is, obviously, to the previous, we'll increase the bank, which obviously will require capital. We're certainly investing as we've incurred $73 million of severance and also probably $25 million, $30 million of additional expense to drive that. So that's investments which we'll get paid back for from that standpoint. And we are also investing in seed. As Jim has mentioned, the Asset Management is certainly launching multiple products. And so there's investments being made even though we're growing the excess, and we'll just keep on evaluating that as we deploy.

[Michael Cyprys, analyst]

Great. And then just a bigger picture follow-up question. Just as we think about longevity trends, people living longer concerns that people may outlive their [indiscernible]. Just curious how you see the opportunity set for your integrated business? How your product set might evolve and change to better address accumulation needs from an aging population and how the client experience may also continue to evolve?

[Jim Cracchiolo, executive]

Excellent question. We have a number of new product initiatives and solutions underway that we think will both help our advisers to manage the totality of their portfolios with clients, offering a lot more flexibility in how they manage, reallocate, balance, et cetera. We are in the process of developing products for the longevity to your point, for retirement income and how they will draw down and what gives them the optimal formula for that.

And again, those will come from the combination of our capabilities that we have and the knowledge we have with the relationships with our clients. So those are actually things that we're investing in, that we're developing and we'll come to market with over the next year or so. So I think there will be good opportunity based on how we actually go to market with the advice value proposition and the solution set and how we look at the clients' life goals and as well as factor in their longevity. What they need to accumulate, what's appropriate from a qualified, unqualified as well as from a tax benefit for how they can draw down.

[Operator]

Next, we'll go to John Barnidge at Piper Sandler.

[John Barnidge, analyst]

Appreciate the slides on the risk transfer analysis in the presentation. My question is focused there. When you talk about with coupling other business, did that consider a full sale of RiverSource within that analysis? Or was it limited to liabilities in the corporate segment only?

[Walter Berman, executive]

The analysis that we get on long-term care, that was only for a reinsurance of long-term care. I'm sorry, I answered your question.

[Jim Cracchiolo, executive]

Yes. And it was -- again, it would have included or thought about some transfer on the life books.

[Walter Berman, executive]

Yes. The -- but those all were best reinsurance transaction.

[John Barnidge, analyst]

That's helpful. And then my follow-up, can you talk about the directionality of distribution expense in AWM, with the rate cycle having changed and expected maybe shifting in products over the near and intermediate term?

[Jim Cracchiolo, executive]

So from a distribution expense really embedded in our G&A is the actual volume increases including where we run SMAs and pay for asset managers and other things. So that's all in the G&A. So if we strip that out, G&A is actually quite good, flat. So the volume increases are in the G&A, including things like FDIC insurance, I mean, you name it. So what I would probably say is we feel very good about the G&A based on what we've made as adjustments. That includes that we are reinvesting nicely in solution set and capability and technology, et cetera. So we've been able to actually redeploy, re-engineer, transform in a sense of how we're using technology, AI, analytics, et cetera, robotics, use of India, et cetera. So we're very active in what we're doing, so that we continue to make good investments and maintain good margins.

[Operator]

We'll take our last question from Brennan Hawken at UBS.

[Brennan Hawken, analyst]

Sneaking in under the wire. So a couple of questions thinking about the bank. So when I think about ways to protect spread regardless of the rate environment, I often think of lending. And we've seen other wealth management firms note a pickup and particularly the pledge loan product with rates coming down. We know that you've seen some decent growth in pledge loans since they bottomed in mid-2023. But have you seen an acceleration in engagement in that product since the Fed cut rates recently? And should we also continue to expect the strong resi mortgage growth that you've been seeing in recent quarters to continue?

[Jim Cracchiolo, executive]

Yes. So we do see a nice pickup in pledge. We are launching even a fixed pledge product in complement to what we had, which we also know was our advisers were asking for, and that's out in the marketplace and a good portion of what's done in the business. We know that this was a new business for us, and we're underpenetrated compared to others that have those products and solutions. And so we think that, that can continue to further expand. We will be launching HELOCs next year, and we think there's a good opportunity years ago when we had the bank, we launched HELOCs. We built a nice portfolio in that so we think we can continue to do that. We're actually working with another provider of mortgages that we're transferring that we think, again, that could further expand. So there are a number of things that we feel good about to grow the lending part of the book.

[Brennan Hawken, analyst]

Great, yes. I remember your comments on new products. Helpful. Okay. For my second question, just basically closing out with one final one here on the long-term care decision. So I'd like to take a different perspective here. The business model that you guys have is different than other wealth management firms, in that you have this insurance business. And from my perspective in talking with capital markets investors, the insurance business is not one where they're focused on the return profile or the cash flows or whatever. It's very often an obstacle to buy the stock.

And so what I would say and ask intended and utterly the most respectful way, is whether or not you considered the idea that eating a bit of a loss on this and sure, you got to take some counterparty risk correspondingly, but it reduces what can be a hurdle to a lot of investors when they consider investing in Ameriprise versus considering other wealth management firms, firms like Raymond James, LPL, Stifel that might have different risks, but they are lacking this long-term care book that is so challenging.

And while I get it yours is the best house, it is still a really bad block. So how did that come into the equation and the mathematics behind that consideration?

[Walter Berman, executive]

So very clearly, I think, again, and that may be what is not fully understood. So at Ameriprise as you look at the total of the company, and we've looked at this since we've been public, we have been the best performing shareholder return in financials of the S&P 500. We have over all these cycles, including through financial crisis outperformed. Any segment, individual asset managers, individual wealth managers, individual life companies. You put it all together, you get a very strong consistent return at lower volatility.

In addition to that, our insurance businesses that generate over $800 million of free cash flow every year used to buy back stock has not been in any way or hurt or hindrance or a roadblock to generate good returns. In addition to that, it's a very clear and appropriate solution for our client that actually keeps good retention of the client. And even where you would say, okay, long-term care is not a good segment of it. We closed that book over 25 years ago roughly. It's a mature book, it's generating value. And having said that, there's only $300 million of capital to it, okay? And we have extra discretionary that came up through the combination of the last few years.

So what I would just say is if someone is looking at that as a hindrance, let me just go, you have some pressure in markets, you have some pressure in interest rates, et cetera, from where it is, wealth managers aren't going to hurt. We're not going to hurt as a company. We're going to outperform. So I would just say you've got a strong growth business, high returns. You've got a 50% return on equity compare it to some of your wealth managers that you're talking about, look at taking cash spread around away and see what you get. So I would say, I would probably have that discussion with your investors, and I'm happy to do it personally.

[Jim Cracchiolo, executive]

Walter, let me -- what you started your premise on was exactly the basis in which we entered into the evaluation. About the drag that would have on potential shareholder reaction. So we looked at every aspect, knowing that factor. And all the elements that I listed in the presentation and evaluating that bid ask and the fact these are our clients and the counterparty exposures that are created, which, again, certainly is an issue that we have to consider. We could not, in clear conscience really take an action that in every aspect we analyze it would generate shareholder value in the long run. It really would.

[Walter Berman, executive]

Let me add one other thing. We didn't do this on our own. We worked with very well-known bankers, I won't mention the names, a number of firms, and I will tell you that was their also recommendation that we keep it compared to what it is, what's out there and from a shareholder perspective to you behind because I've asked those questions explicitly.

[Jim Cracchiolo, executive]

Hopefully, that answers your question.

[Brennan Hawken, analyst]

It does. I didn't mean to kick the hornet's nest, right, with the last question on the call...

[Jim Cracchiolo, executive]

Not kicking, I think, honestly, we understand that perceive, but I would just ask people to look through the perceive to the reality of it. And to be very honest, I am here to generate excellent returns for shareholders. I'm here to keep my people highly engaged and give them an opportunity, and I'm here for my clients. And so I -- 130 years, I don't take lightly. I've been running the company for over 25 now. And I've done everything in that regard, not for the idea that I have invested opinion on something that I would not challenge.

[Walter Berman, executive]

So the only thing I'll add because what your premise was is certainly valid. But when we look at auto and home, and we disposed of that. We did our fixed annuity. We went in on the premise of ensuring shareholder value. So we have certainly taken risk off. This is one when analyzing, it made no sense to do.

[Jim Cracchiolo, executive]

And let me -- if the market matures in a way or there's more of an appetite from reinsurers, Walter and I will be the first one that will evaluate that for an opportunity. I will look strategically at the business and I do that every year, every quarter. So I'm not fighting you. I've asked the same questions. I'm challenged with the same, but I would just tell you, I'm not making this decision because I don't think it's the right decision to make. I'm making it because I think it is the right decision at this juncture, at this time.

[Brennan Hawken, analyst]

Yes. That was the spirit of the question, and I think you addressed it thoroughly. So thanks for sharing.

[Operator]

And we have no further questions at this time. This concludes today's conference. Thank you for participating. You may now disconnect.