The following discussion and analysis of our consolidated results of operations and financial condition should be read in conjunction with the "Forward-Looking Statements" that follow and our Consolidated Financial Statements and Notes presented in Item 1. Our Management's Discussion and Analysis should be read in conjunction with our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission ("SEC") onFebruary 25, 2022 ("2021 10-K"), as well as our current reports on Form 8-K and other publicly available information. References below to "Ameriprise Financial ," "Ameriprise ," the "Company," "we," "us," and "our" refer toAmeriprise Financial, Inc. exclusively, to our entire family of companies, or to one or more of our subsidiaries. OverviewAmeriprise Financial is a diversified financial services company with a more than 125-year history of providing financial solutions. We are a long-standing leader in financial planning and advice with$1.2 trillion in assets under management and administration as ofJune 30, 2022 . We offer a broad range of products and services designed to achieve individual and institutional clients' financial objectives. The products and services we provide retail clients and, to a lesser extent, institutional clients, are the primary source of our revenues and net income. Revenues and net income are significantly affected by investment performance and the total value and composition of assets we manage and administer for our retail and institutional clients as well as the distribution fees we receive from other companies. These factors, in turn, are largely determined by overall investment market performance and the depth and breadth of our individual client relationships. We operate our business in the broader context of the macroeconomic forces around us, including the global andU.S. economies, the coronavirus disease 2019 ("COVID-19") pandemic, changes in interest and inflation rates, financial market volatility, fluctuations in foreign exchange rates, geopolitical strain, the competitive environment, client and customer activities and preferences, and the various regulatory and legislative developments. Financial markets and macroeconomic conditions have had and will continue to have a significant impact on our operating and performance results. In addition, the business, political and regulatory environments in which we operate are subject to elevated uncertainty and substantial, frequent change. Accordingly, we expect to continue focusing on our key strategic objectives and obtaining operational and strategic leverage from our core capabilities. The success of these and other strategies may be affected by the factors discussed in Item 1A, "Risk Factors" in our 2021 10-K and other factors as discussed herein. Equity price, credit market and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects they have on the asset management and other asset-based fees we earn, the value of deferred acquisition costs ("DAC") and deferred sales inducement costs ("DSIC") assets, the values of liabilities for guaranteed benefits associated with our variable annuities and the values of derivatives held to hedge these benefits and the "spread" income generated on our deposit products, fixed insurance, the fixed portion of variable annuities and variable insurance contracts and fixed deferred annuities. We have been operating in a historically low interest rate environment and though short term rates have risen, remain in a low interest rate environment today with uncertainty about where rates will go in the future. A lower interest rate environment may result in increases to our reserves and changes in various rate assumptions we use to amortize DAC and DSIC, which may negatively impact our adjusted operating earnings after tax. For additional discussion on our interest rate risk, see Item 3. "Quantitative and Qualitative Disclosures About Market Risk" and the information set forth in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk." OnJune 2, 2021 , we filed an application to convertAmeriprise Bank , FSB to a state-chartered industrial bank regulated by theUtah Department of Financial Institutions and theFederal Deposit Insurance Corporation . We also filed an application to transition the FSB's personal trust services business to a new limited purpose national trust bank regulated by theOffice of the Comptroller of the Currency . If the applications are approved, the proposed changes are not expected to impact our long-term strategy for the bank and should enable us to continue our strong lineup of banking solutions, including deposits, credit cards, mortgages and securities-based lending to our wealth management clients without interruption. We consolidate certain variable interest entities for which we provide asset management services. These entities are defined as consolidated investment entities ("CIEs"). While the consolidation of the CIEs impacts our balance sheet and income statement, our exposure to these entities is unchanged and there is no impact to the underlying business results. For further information on CIEs, see Note 4 to our Consolidated Financial Statements. The results of operations of the CIEs are reflected in the Corporate & Other segment. On a consolidated basis, the management fees we earn for the services we provide to the CIEs and the related general and administrative expenses are eliminated and the changes in the fair value of assets and liabilities related to the CIEs, primarily syndicated loans and debt, are reflected in net investment income. We include the fees from these entities in the management and financial advice fees line within our Asset Management segment.
While our consolidated financial statements are prepared in accordance with
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AMERIPRISE FINANCIAL, INC. and DAC amortization, unearned revenue amortization and the reinsurance accrual; the market impact on non-traditional long-duration products (including variable and fixed deferred annuity contracts and universal life ("UL") insurance contracts, net of hedges and the related DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual; mean reversion related impacts (the impact on variable annuity and variable universal life ("VUL") products for the difference between assumed and updated separate account investment performance on DAC, DSIC, unearned revenue amortization, reinsurance accrual and additional insurance benefit reserves); the market impact of hedges to offset interest rate and currency changes on unrealized gains or losses for certain investments; block transfer reinsurance transaction impact; gain or loss on disposal of a business that is not considered discontinued operations; integration and restructuring charges; income (loss) from discontinued operations; and the impact of consolidating CIEs, best reflect the underlying performance of our core operations and facilitate a more meaningful trend analysis. Management uses these non-GAAP measures to evaluate our financial performance on a basis comparable to that used by some securities analysts and investors. Also, certain of these non-GAAP measures are taken into consideration, to varying degrees, for purposes of business planning and analysis and for certain compensation-related matters. Throughout our Management's Discussion and Analysis, these non-GAAP measures are referred to as adjusted operating measures. These non-GAAP measures should not be viewed as a substitute forU.S. GAAP measures.
It is management's priority to increase shareholder value over a multi-year horizon by achieving our on-average, over-time financial targets.
Our financial targets are:
•Adjusted operating earnings per diluted share growth of 12% to 15%, and
•Adjusted operating return on equity excluding accumulated other comprehensive income ("AOCI") of over 30%. 57
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AMERIPRISE FINANCIAL, INC. The following tables reconcile our GAAP measures to adjusted operating measures: Per Diluted Share Three Months Ended June 30, Three Months Ended June 30, 2022 2021 2022 2021 (in millions, except per share amounts) Net income (loss) $ 756$ 591 $ 6.61$ 4.88 Less: Net realized investment gains (losses) (1) (14) 11 (0.12) 0.09
Add: Market impact on non-traditional long-duration products (1)
(305) 87 (2.67) 0.71 Add: Mean reversion related impacts (1) 161 (42) 1.41 (0.35) Add: Market impact of hedges on investments (1) - 17 - 0.14 Add: Integration/restructuring charges (1) 14 7 0.12 0.06 Less: Net income (loss) attributable to CIEs (1) (2) (0.01) (0.02) Tax effect of adjustments (2) 24 (12) 0.21 (0.10) Adjusted operating earnings $ 665$ 639 $ 5.81$ 5.27 Weighted average common shares outstanding: Basic 112.3 118.4 Diluted 114.4 121.2 Per Diluted Share Six Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (in millions, except per share amounts) Net income (loss)$ 1,517 $ 1,028 $ 13.16$ 8.45 Less: Net realized investment gains (losses) (1) 2 66 0.02 0.54
Add: Market impact on non-traditional long-duration products (1)
(439) 483 (3.81) 3.97 Add: Mean reversion related impacts (1) 220 (98) 1.91 (0.81) Add: Market impact of hedges on investments (1) - 17 - 0.14 Add: Integration/restructuring charges (1) 24 7 0.21 0.06 Less: Net income (loss) attributable to CIEs 1 (3) 0.01 (0.02) Tax effect of adjustments (2) 41 (72) 0.36 (0.59) Adjusted operating earnings$ 1,360 $ 1,302 $ 11.80$ 10.70 Weighted average common shares outstanding: Basic 113.0 119.1 Diluted 115.3 121.7 (1) Pretax adjusted operating adjustments. (2) Calculated using the statutory federal tax rate of 21%.
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AMERIPRISE FINANCIAL, INC. The following table reconciles the trailing twelve months' sum of net income to adjusted operating earnings and the five-point average of quarter-end equity to adjusted operating equity: Twelve Months Ended June 30, 2022 2021 (in millions) Net income$ 3,249 $ 1,065 Less: Adjustments (1) 467 (980) Adjusted operating earnings 2,782 2,045Total Ameriprise Financial, Inc. shareholders' equity 5,278 5,924 Less: AOCI, net of tax (426) 463
5,704 5,461 Less: Equity impacts attributable to CIEs 2 1 Adjusted operating equity
Return on equity, excluding AOCI 57.0 %
19.5 % Adjusted operating return on equity, excluding AOCI (2) 48.8 % 37.5 %
(1) Adjustments reflect the sum of after-tax net realized investment gains/losses, net of DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual; the market impact on non-traditional long-duration products (including variable and fixed deferred annuity contracts and UL insurance contracts), net of hedges and related DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual; mean reversion related impacts; block transfer reinsurance transaction impacts; the market impact of hedges to offset interest rate and currency changes on unrealized gains or losses for certain investments; gain or loss on disposal of a business that is not considered discontinued operations; integration and restructuring charges; income (loss) from discontinued operations; and net income (loss) from consolidated investment entities. After-tax is calculated using the statutory tax rate of 21%. (2) Adjusted operating return on equity, excluding AOCI is calculated using adjusted operating earnings in the numerator, andAmeriprise Financial shareholders' equity, excluding AOCI and the impact of consolidating investment entities using a five-point average of quarter-end equity in the denominator. After-tax is calculated using the statutory tax rate of 21%.
Critical Accounting Estimates
The accounting and reporting policies that we use affect our Consolidated Financial Statements. Certain of our accounting and reporting policies are critical to an understanding of our consolidated results of operations and financial condition and, in some cases, the application of these policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of our Consolidated Financial Statements. These accounting policies are discussed in detail in "Management's Discussion and Analysis - Critical Accounting Estimates" in our 2021 10-K.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements and their expected impact on our future consolidated results of operations and financial condition, see Note 2 to our Consolidated Financial Statements.
Economic Environment
Global equity market conditions could materially affect our financial condition and results of operations. The following table presents relevant market indices: Three months ended June 30, Six Months Ended June 30, 2022 2021 Change 2022 2021 Change S&P 500 Daily average 4,110 4,182 (2)% 4,288 4,022 7% Period end 3,785 4,298 (12)% 3,785 4,298 (12)% Weighted Equity Index ("WEI") (1) Daily average 2,707 2,858 (5)% 2,829 2,761 2% Period end 2,491 2,921 (15)% 2,491 2,921 (15)% (1) Weighted Equity Index is anAmeriprise calculated proxy for equity market movements calculated using a weighted average of the S&P 500, Russell 2000,Russell Midcap and MSCI EAFE indices based onNorth America distributed equity assets. See our segment results of operations discussion below for additional information on how changes in the economic environment have and may continue to impact our results. For further information regarding the impact of the economic environment on our financial condition and results of operations, and potentially material effects, see Part 1 - Item 1A "Risk Factors" of our 2021 10-K. 59
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AMERIPRISE FINANCIAL, INC.
Assets Under Management and Administration
Assets under management ("AUM") include external client assets for which we provide investment management services, such as the assets of theColumbia Threadneedle Investments funds, institutional clients and clients in our advisor platform held in wrap accounts as well as assets managed by sub-advisors selected by us. AUM also includes certain assets on our Consolidated Balance Sheets for which we provide investment management services and recognize management fees in our Asset Management segment, such as the assets of the general account and the variable product funds held in the separate accounts of our life insurance subsidiaries and CIEs. Assets under administration ("AUA") include assets for which we provide administrative services such as client assets invested in other companies' products that we offer outside of our wrap accounts. These assets include those held in clients' brokerage accounts. We generally record revenues received from administered assets as distribution fees. We do not exercise management discretion over these assets and do not earn a management fee. These assets are not reported on our Consolidated Balance Sheets. AUA also includes certain assets on our Consolidated Balance Sheets for which we do not provide investment management services and do not recognize management fees, such as investments in non-affiliated funds held in the separate accounts of our life insurance subsidiaries.
AUM and AUA do not include assets under advisement, for which we provide advisory services such as model portfolios but do not have full discretionary investment authority.
The following table presents detail regarding our AUM and AUA:
June 30, 2022 2021
Change
(in billions) Assets Under Management and Administration Advice & Wealth Management AUM$ 396.3 $ 426.5 $ (30.2) (7) % Asset Management AUM 598.2 593.4 4.8 1 Corporate AUM 0.2 0.1 0.1 NM Eliminations (37.5) (42.0) 4.5 11 Total Assets Under Management 957.2 978.0 (20.8) (2)Total Assets Under Administration 212.9 233.3 (20.4) (9) Total AUM and AUA$ 1,170.1 $ 1,211.3 $ (41.2) (3) % Total AUM decreased$20.8 billion , or 2%, to$957.2 billion as ofJune 30, 2022 compared to$978.0 billion as ofJune 30, 2021 due to a$30.2 billion decrease in Advice & Wealth Management AUM driven by equity market depreciation, partially offset by wrap account net inflows, and a$4.8 billion increase in Asset Management AUM driven by the acquisition of the BMO Global Asset Management (EMEA) business, partially offset by equity market depreciation. See our segment results of operations discussion below for additional information on changes in our AUM.
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Consolidated Results of Operations for the Three Months Ended
The following table presents our consolidated results of operations:
Three Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees$ 2,277 $ 2,251 $ 26 1 % Distribution fees 458 452 6 1 Net investment income 287 278 9 3 Premiums, policy and contract charges 365 364 1 - Other revenues 124 75 49 65 Total revenues 3,511 3,420 91 3 Banking and deposit interest expense 3 2 1 50 Total net revenues 3,508 3,418 90 3 Expenses Distribution expenses 1,236 1,233 3 - Interest credited to fixed accounts 145 124 21 17 Benefits, claims, losses and settlement expenses 82 404 (322) (80) Amortization of deferred acquisition costs 152 63 89 NM Interest and debt expense 44 43 1 2 General and administrative expense 894 830 64 8 Total expenses 2,553 2,697 (144) (5) Pretax income 955 721 234 32 Income tax provision 199 130 69 53 Net income $ 756$ 591 $ 165 28 % NM Not Meaningful. Overall
Pretax income increased
•The market impact on non-traditional long duration products (including variable and fixed deferred annuity contracts and UL insurance contracts), net of hedges and related DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual was a benefit of$305 million for the three months endedJune 30, 2022 compared to an expense of$87 million for the prior year period.
•A favorable impact from higher short-term interest rates.
•An unfavorable impact from lower average equity markets for the three months
ended
•The mean reversion related impact was an expense of$161 million for the three months endedJune 30, 2022 compared to a benefit of$42 million for the prior year period. Net Revenues Management and financial advice fees increased$26 million , or 1%, for the three months endedJune 30, 2022 compared to the prior year period reflecting revenue associated with the acquisition of the BMO Global Asset Management (EMEA) business and continued wrap account net inflows, partially offset by lower average equity markets and an unfavorable foreign exchange impact.
Distribution fees increased
Net investment income increased
•Net realized investment losses of$15 million for the three months endedJune 30, 2022 compared to net realized investment gains of$11 million for the prior year period. Net realized investment losses for three months endedJune 30, 2022 were driven by the sale of specific Available-for-Sale securities and impairments on securities we intend to sell as we repositioned a portion of our fixed maturity bond portfolio in response to recent market conditions.
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•The favorable impact of rising interest rates on the investment portfolio yield.
•The unfavorable impact of lower average invested assets due to the sale of investments to a reinsurer as a result of the fixed deferred and immediate annuity reinsurance transaction.
Other revenues increased
Expenses
Interest credited to fixed accounts increased
•A$45 million decrease in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The favorable impact of the nonperformance credit spread was$32 million for the three months endedJune 30, 2022 compared to an unfavorable impact of$13 million for the prior year period. •A$73 million increase in expense from other market impacts on IUL benefits, net of hedges, which was an expense of$23 million for the three months endedJune 30, 2022 compared to a benefit of$50 million for the prior year period. The increase in expense was primarily due to an increase in the IUL embedded derivative in the current period, which reflected higher option costs due to a higher new money rate. Benefits, claims, losses and settlement expenses decreased$322 million , or 80%, the three months endedJune 30, 2022 compared to the prior year period primarily reflecting the following items: •A$67 million decrease in expense primarily reflecting the impact of year-over-year changes in the unhedged nonperformance credit spread risk adjustment on variable annuity guaranteed benefits. The favorable impact of the nonperformance credit spread was$130 million for the three months endedJune 30, 2022 primarily as a result of the nonperformance credit spread increasing compared to a favorable impact of$63 million for the prior year period. As the undiscounted embedded derivative liability on which the nonperformance credit spread is applied increases (decreases), the impact of the nonperformance credit spread on benefits expenses is favorable (unfavorable). Additionally, as the estimate of the nonperformance credit spread over the LIBOR swap curve tightens or widens, the embedded derivative liability will increase or decrease. •A$348 million decrease in expense from other market impacts on variable annuity guaranteed benefits, net of hedges in place to offset those risks and the related DSIC amortization. This decrease was the result of a favorable$1.1 billion change in the market impact on variable annuity guaranteed living benefits reserves, partially offset by an unfavorable$800 million change in the market impact on derivatives hedging the variable annuity guaranteed benefits. The main market drivers contributing to these changes are summarized below:
•Equity market impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
benefit for the three months ended
•Interest rate impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
higher expense for the three months ended
•Volatility impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in a benefit for the three months endedJune 30, 2022 compared to an expense for the prior year period. •Other unhedged items, including the difference between the assumed and actual underlying separate account investment performance, fixed income credit exposures, transaction costs and various behavioral items, were a net expense for the three months endedJune 30, 2022 compared to a net benefit for the prior year period. •The mean reversion related impact was an expense of$90 million for the three months endedJune 30, 2022 compared to a benefit of$25 million for the prior year period.
Amortization of DAC increased
•The DAC offset to the market impact on non-traditional long-duration products was an expense of$26 million for the three months endedJune 30, 2022 compared to an expense of$5 million for the prior year period. •The mean reversion related impact was an expense of$70 million for the three months endedJune 30, 2022 compared to a benefit of$16 million for the prior year period.
•A decrease in amortization reflecting lower than expected client exit rates.
General and administrative expense increased$64 million , or 8%, for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting the operating expenses of the acquired BMO Global Asset Management (EMEA) business, and$14 million of integration related expenses, partially offset by a favorable change in the mark-to-market impact on share-based compensation. 62
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Income Taxes
Our effective tax rate was 20.8% for the three months endedJune 30, 2022 compared to 18.1% for the prior year period. The higher effective tax rate for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 was primarily the result of higher pretax income and a decrease in low income housing tax credits compared to the prior year period. See Note 15 to our Consolidated Financial Statements for additional discussion on income taxes.
Results of Operations by Segment for the Three Months Ended
Adjusted operating earnings is the measure of segment profit or loss management uses to evaluate segment performance. Adjusted operating earnings should not be viewed as a substitute for GAAP pretax income. We believe the presentation of segment adjusted operating earnings as we measure it for management purposes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitating a more meaningful trend analysis. See Note 18 to the Consolidated Financial Statements for further information on the presentation of segment results and our definition of adjusted operating earnings.
The following table presents summary financial information by segment:
Three Months Ended June 30, 2022 2021 (in millions) Advice & Wealth Management Net revenues$ 2,056 $ 1,980 Expenses 1,564 1,557 Adjusted operating earnings $ 492$ 423 Asset Management Net revenues $ 881$ 879 Expenses 659 626 Adjusted operating earnings $ 222$ 253 Retirement & Protection Solutions Net revenues $ 760$ 808 Expenses 581 626 Adjusted operating earnings $ 179$ 182 Corporate & Other Net revenues $ 119$ 119 Expenses 172 196 Adjusted operating loss $ (53)$ (77) Advice & Wealth Management
The following table presents the changes in wrap account assets and average
balances for the three months ended
2022 2021 (in billions) Beginning balance$ 447.0 $ 399.8 Net flows 6.2 10.0
Market appreciation (depreciation) and other (53.9) 20.2 Ending balance
$ 399.3 $ 430.0
Advisory wrap account assets ending balance (1)
(1) Advisory wrap account assets represent those assets for which clients receive advisory services and are the primary driver of revenue earned on wrap accounts. Clients may hold non-advisory investments in their wrap accounts that do not incur an advisory fee.
(2) Average ending balances are calculated using an average of the prior
period's ending balance and all months in the current period excluding the most
recent month for the three months ended
Ending wrap account assets decreased$47.7 billion , or 11%, to$399.3 billion during the three months endedJune 30, 2022 due to market depreciation of$53.9 billion , partially offset by net inflows of$6.2 billion . Average advisory wrap account assets increased$17.9 billion , or 4%, compared to the prior year period primarily reflecting net inflows, partially offset by market depreciation. 63
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The following table presents the results of operations of our Advice & Wealth Management segment on an adjusted operating basis:
Three Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees$ 1,340 $ 1,299 $ 41 3 % Distribution fees 542 562 (20) (4) Net investment income 120 63 57 90 Other revenues 57 58 (1) (2) Total revenues 2,059 1,982 77 4 Banking and deposit interest expense 3 2 1 50 Total net revenues 2,056 1,980 76 4 Expenses Distribution expenses 1,185 1,194 (9) (1) Interest and debt expense 3 2 1 50 General and administrative expense 376 361 15 4 Total expenses 1,564 1,557 7 - Adjusted operating earnings $ 492$ 423 $ 69 16 % Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased$69 million , or 16%, for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting higher average wrap account balances due to net inflows and a benefit from higher short-term interest rates. Pretax adjusted operating margin increased to 23.9% for the three months endedJune 30, 2022 compared to 21.4% for the prior year period, reflecting the benefit of higher short-term interest rates. Client brokerage cash balances continued to increase to$47.4 billion given the market volatility.Ameriprise Bank , FSB is continuing its deposit growth trend, with cash sweep balances increasing$6.8 billion from the prior year period to$15.5 billion and brokerage client pledged asset lines of credit increasing$251 million from the prior year period to$601 million as ofJune 30, 2022 . Profitability at the bank increased compared to the prior year period reflecting deposit growth and increased interest rates.
Net Revenues
Management and financial advice fees increased$41 million , or 3%, for the three months endedJune 30, 2022 compared to the prior year period primarily due to growth in average wrap account assets. Average advisory wrap account assets increased$17.9 billion , or 4%, compared to the prior year period reflecting net inflows, partially offset by market depreciation. Distribution fees decreased$20 million , or 4%, for the three months endedJune 30, 2022 compared to the prior year period reflecting decreased transactional activity, partially offset by higher fees on off-balance sheet brokerage cash due to an increase in short-term interest rates. Net investment income, which excludes net realized investment gains or losses, increased$57 million , or 90%, for the three months endedJune 30, 2022 compared to the prior year period primarily due to higher average invested assets due to increased bank deposits and the favorable impact of increasing short-term interest rates, including higher investment yields on the investment portfolio supporting the certificate products.
Expenses
Distribution expenses decreased
General and administrative expense increased
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Asset Management
The following tables present the mutual fund performance of our retailColumbia Threadneedle Investments funds, including funds recently acquired through the BMO Global Asset Management (EMEA) acquisition, as ofJune 30, 2022 : Retail Fund Rankings in Top 2 Quartiles or Above Index Benchmark - Asset Weighted(1) 1 year 3 year 5 year 10 year Equity 50% 76% 76% 89% Fixed Income 35% 82% 73% 91% Asset Allocation 53% 60% 72% 90% 4- or 5-star Morningstar rated funds(2) Overall 3 year 5 year 10 year Number of rated funds 144 107 93 106 Percent of rated assets 66% 56% 52% 63% (1)Retail Fund performance rankings for each fund are measured on a consistent basis against the most appropriate peer group or index. Peer groupings ofColumbia funds are defined by Lipper category and are based on the Primary Share Class (i.e. Institutional if available, otherwise Advisor or Instl3 share class), net of fees. Peer groupings of Threadneedle and legacy BMO funds are defined by either IA or Morningstar index, and are based on the highest-rated share class. Comparisons to Index are measured Gross of Fees. To calculate asset weighted performance, the sum of the total assets of the funds with above median ranking are divided by total assets of all funds. Funds with more assets will receive a greater share of the total percentage above or below median.
Aggregated Asset Allocation Funds may include funds that invest in other
(2)Columbia funds are available for purchase byU.S. customers. Out of 104Columbia funds rated (based on primary share class), 18 received a 5-star Overall Rating and 41 received a 4-star Overall Rating. Out of 92 Threadneedle funds rated (based on highest-rated share class), 13 received a 5-star Overall Rating and 39 received a 4-star Overall Rating. Out of 63 BMO funds rated (based on highest-rated share class), 6 received a 5-star Overall Rating and 27 received a 4-star Overall Rating. The Overall Morningstar Rating is derived from a weighted average of the performance figures associated with its 3-, 5- and 10-year (if applicable) Morningstar Rating metrics. The following table presents global managed assets by type: Average (1) As of June 30, Three Months Ended June 30, 2022 2021 Change 2022 2021 Change (in billions)
Equity$ 306.0 $ 339.0 $ (33.0) (10) %$ 336.7 $ 330.8 $ 5.9 2 % Fixed income 216.5 202.5 14.0 7 235.6 199.5 36.1 18 Money market 19.3 5.5 13.8 NM 16.5 5.8 10.7 NM Alternative 38.4 23.3 15.1 65 39.4 23.1 16.3 71 Hybrid and other 18.0 23.1 (5.1) (22) 19.5 22.6 (3.1) (14)
Total managed assets (2)
1 %$ 647.7 $ 581.8 $ 65.9 11 % NM Not Meaningful.
(1) Average ending balances are calculated using an average of the prior period's ending balance and all months in the current period.
(2) In the fourth quarter of 2021, the definition of Alternative AUM was changed to now include real estate, CLOs, private equity, hedge funds (direct and fund of funds), infrastructure and commodities to better demonstrate our underlying business and the additional assets from the acquisition of the BMO Global Asset Management (EMEA) business. Prior periods have been restated to reflect this change. 65
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The following table presents the changes in global managed assets:
Three Months Ended June 30, 2022 2021 (in billions) Global Retail Funds Beginning assets$ 380.0 $ 340.2 Inflows 15.5 19.4 Outflows (23.8) (17.1) Net VP/VIT fund flows (1.0) (1.0) Net new flows (9.3) 1.3 Reinvested dividends 3.5 2.9 Net flows (5.8) 4.2 Distributions (3.8) (3.3) Market appreciation (depreciation) and other (43.1) 18.1 Foreign currency translation (1) (4.3) 0.3 Total ending assets 323.0 359.5 Global Institutional Beginning assets 318.6 223.9 Inflows (2) 16.1 9.3 Outflows (2) (13.4) (6.8) Net flows 2.7 2.5 Market appreciation (depreciation) and other (3) (36.4) 7.1 Foreign currency translation (1) (9.7) 0.4 Total ending assets 275.2 233.9 Total managed assets$ 598.2 $ 593.4 Total net flows $ (3.1)$ 6.7 Legacy insurance partners net flows (4) $
(1.2)
(1) Amounts represent local currency to US dollar translation for reporting purposes.
(2) Global Institutional inflows and outflows include net flows from our
RiverSource Structured Annuity product and
(3) Included in Market appreciation (depreciation) and other for Global Institutional is the change in affiliated general account balance, excluding net flows related to our structured variable annuity product andAmeriprise Bank , FSB. (4) Legacy insurance partners assets and net flows are included in the rollforwards above. Total segment AUM decreased$100.4 billion , or 14%, during the three months endedJune 30, 2022 primarily due to equity market depreciation. Net outflows were$3.1 billion in the second quarter of 2022, a$9.8 billion decrease compared to the prior year period. Global retail net outflows were$5.8 billion . Global institutional net inflows were$2.7 billion and included$1.2 billion of outflows from legacy insurance partners assets.
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The following table presents the results of operations of our Asset Management segment on an adjusted operating basis:
Three Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees $ 777$ 758 $ 19 3 % Distribution fees 100 118 (18) (15) Net investment income - 2 (2) NM Other revenues 4 1 3 NM Total revenues 881 879 2 - Banking and deposit interest expense - - - - Total net revenues 881 879 2 - Expenses Distribution expenses 252 282 (30) (11) Amortization of deferred acquisition costs 3 3 - - Interest and debt expense 1 1 - - General and administrative expense 403 340 63 19 Total expenses 659 626 33 5 Adjusted operating earnings $ 222$ 253 $ (31) (12) % NM Not Meaningful. Our Asset Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, decreased$31 million , or 12%, for the three months endedJune 30, 2022 compared to the prior year period primarily due to equity market depreciation and net outflows, partially offset by AUM from the acquisition of the BMO Global Asset Management (EMEA) business.
Net Revenues
Management and financial advice fees increased$19 million , or 3%, for the three months endedJune 30, 2022 compared to the prior year period primarily due to the acquired BMO Global Asset Management (EMEA) business, partially offset by lower average equity markets, the cumulative impact from net outflows and the impact of foreign exchange rates.
Distribution fees decreased
Expenses
Distribution expenses decreased
General and administrative expense increased$63 million , or 19%, for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting the operating expenses of the acquired BMO Global Asset Management (EMEA) business, partially offset by the cumulative impact from net outflows and the impact of foreign exchange rates.
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Retirement & Protection Solutions
The following table presents the results of operations of our Retirement & Protection Solutions segment on an adjusted operating basis:
Three Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees $ 197$ 234 $ (37) (16) % Distribution fees 106 122 (16) (13) Net investment income 124 127 (3) (2) Premiums, policy and contract charges 329 325 4 1 Other revenues 4 - 4 - Total revenues 760 808 (48) (6) Banking and deposit interest expense - - - - Total net revenues 760 808 (48) (6) Expenses Distribution expenses 115 134 (19) (14) Interest credited to fixed accounts 96 98 (2) (2) Benefits, claims, losses and settlement expenses 233 241 (8) (3) Amortization of deferred acquisition costs 54 70 (16) (23) Interest and debt expense 9 9 - - General and administrative expense 74 74 - - Total expenses 581 626 (45) (7) Adjusted operating earnings $ 179$ 182 $ (3) (2) % Our Retirement & Protection Solutions segment pretax adjusted operating earnings, which excludes net realized investment gains or losses (net of the related DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual), the market impact on non-traditional long-duration products (including variable annuity contracts and IUL contracts, net of hedges and the related DSIC and DAC amortization, unearned amortization and the reinsurance accrual), mean reversion related impacts, and block transfer reinsurance transaction impacts decreased$3 million , or 2%, for the three months endedJune 30, 2022 compared to prior year period. Variable annuity account balances decreased 16% to$75.7 billion as ofJune 30, 2022 compared to the prior year period due to market depreciation and net outflows of$2.0 billion . Variable annuity sales decreased 29% compared to the prior year period reflecting a decrease in sales of variable annuities with living benefit guarantees. The risk profile of our in force block continues to improve, with account values with living benefit riders down to 59% as ofJune 30, 2022 compared to 62% a year ago. This trend is expected to continue and meaningfully shift the mix of business away from products with living benefit guarantees over time. We continue to optimize our risk profile and shift our business mix to lower risk offerings. During the fourth quarter of 2021, we made the decision to discontinue new sales of substantially all of our variable annuities with living benefit guarantees at the end of 2021, and have fully stopped issuing new contracts as ofJune 30, 2022 . In addition, we discontinued new sales of our universal life insurance with secondary guarantees and our single-pay fixed universal life with a long term care rider products at the end of 2021.
Net Revenues
Management and financial advice fees decreased
Distribution fees decreased
Expenses
Distribution expenses decreased$19 million , or 14%, for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting decreased variable annuity sales. Amortization of DAC, which excludes mean reversion related impacts, the DAC offset to the market impact on variable annuity contracts and IUL contracts and the DAC offset to net realized investment gains or losses, decreased$16 million , or 23%, for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting lower than expected client exit rates. 68
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Corporate & Other
The following table presents the results of operations of our Corporate & Other segment on an adjusted operating basis:
Three Months Ended June 30, 2022 2021 Change (in millions) Revenues Net investment income $ 39$ 79 $ (40) (51) % Premiums, policy and contract charges 24 25 (1) (4) Other revenues 56 16 40 NM Total revenues 119 120 (1) (1) Banking and deposit interest expense - 1 (1) NM Total net revenues 119 119 - - Expenses Distribution expenses (3) (2) (1) (50) Interest credited to fixed accounts 60 62 (2) (3) Benefits, claims, losses and settlement expenses 59 54 5 9 Amortization of deferred acquisition costs - 2 (2) NM Interest and debt expense 15 17 (2) (12) General and administrative expense 41 63 (22) (35) Total expenses 172 196 (24) (12) Adjusted operating loss $ (53)$ (77) $ 24 31 % NM Not Meaningful.
Our Corporate & Other segment includes our closed blocks of LTC insurance and fixed annuity and fixed indexed annuity ("FA") business.
Our Corporate & Other segment pretax adjusted operating loss excludes net realized investment gains or losses, the market impact on fixed deferred annuity contracts (net of hedges and the related DAC amortization), the market impact of hedges to offset interest rate and currency changes on unrealized gains or losses for certain investments, block transfer reinsurance transaction impacts, gain or loss on disposal of a business that is not considered discontinued operations, integration and restructuring charges, and the impact of consolidating CIEs. Our Corporate & Other segment pretax adjusted operating loss decreased$24 million , for the three months endedJune 30, 2022 compared to the prior year period. LTC insurance had a pretax adjusted operating loss of$1 million for the three months endedJune 30, 2022 compared to pretax adjusted operating earnings of$3 million for the prior year period. FA business had a pretax adjusted operating loss of$4 million for the three months endedJune 30, 2022 compared to a pretax adjusted operating loss of$6 million . Fixed deferred annuity account balances declined 5% to$7.4 billion as ofJune 30, 2022 compared to the prior year period as policies continue to lapse and the discontinuance of new sales of fixed deferred annuities. During the third quarter of 2021, we closed on a transaction to reinsure RiverSource Life's fixed deferred and immediate annuity policies.
Net Revenues
Net investment income, which excludes net realized investment gains or losses, the market impact of hedges to offset interest rate and currency changes on unrealized gains or losses for certain investments, block transfer reinsurance transaction impacts, integration and restructuring charges, and the impact of consolidating CIEs, decreased$40 million , or 51%, for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting lower average invested assets due to the sale of investments to a reinsurer as a result of the fixed deferred and immediate annuity reinsurance transaction and a$7 million impairment in our affordable housing partnerships in the prior year period. Other revenues increased$40 million to$56 million for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting the yield on deposit receivables arising from reinsurance transactions.
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Expenses
Benefits, claims, losses and settlement expenses, which excludes DSIC offset to net realized investment gains or losses, increased$5 million , or 9%, for the three months endedJune 30, 2022 compared to the prior year period primarily reflecting more normalized claims on LTC insurance, which benefited from COVID-19 related impacts in the prior year period.
General and administrative expense decreased
Consolidated Results of Operations for the Six Months Ended
The following table presents our consolidated results of operations:
Six Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees$ 4,736 $ 4,353 $ 383 9 % Distribution fees 904 910 (6) (1) Net investment income 548 655 (107) (16) Premiums, policy and contract charges 733 711 22 3 Other revenues 247 146 101 69 Total revenues 7,168 6,775 393 6 Banking and deposit interest expense 5 7 (2) (29) Total net revenues 7,163 6,768 395 6 Expenses Distribution expenses 2,533 2,408 125 5 Interest credited to fixed accounts 286 283 3 1 Benefits, claims, losses and settlement expenses 293 1,057 (764) (72) Amortization of deferred acquisition costs 248 68 180 NM Interest and debt expense 84 85 (1) (1) General and administrative expense 1,841 1,653 188 11 Total expenses 5,285 5,554 (269) (5) Pretax income 1,878 1,214 664 55 Income tax provision 361 186 175 94 Net income$ 1,517 $ 1,028 $ 489 48 % NM Not Meaningful. Overall
Pretax income increased
•The market impact on non-traditional long duration products (including variable and fixed deferred annuity contracts and UL insurance contracts), net of hedges and the related DSIC and DAC amortization, unearned revenue amortization and the reinsurance accrual was a benefit of$439 million for the six months endedJune 30, 2022 compared to an expense of$483 million for the prior year period.
•A
•The mean reversion related impact was an expense of$220 million for the six months endedJune 30, 2022 compared to a benefit of$98 million for the prior year period. Net Revenues Management and financial advice fees increased$383 million , or 9%, for the six months endedJune 30, 2022 compared to the prior year period reflecting revenue associated with the acquisition of the BMO Global Asset Management (EMEA) business and continued wrap account net inflows, and an increase in performance fees of$55 million . Distribution fees decreased$6 million , or 1%, for the six months endedJune 30, 2022 compared to the prior year period due to lower transactional activity, partially offset by higher fees on off-balance sheet brokerage cash primarily due to an increase in short-term interest rates.
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Net investment income decreased
•Net realized investment gains of$5 million for the six months endedJune 30, 2022 compared to net realized investment gains of$65 million for the prior year period. Net realized investment gains for the six months endedJune 30, 2021 included a$15 million gain on strategic investment. •The unfavorable impact of lower average invested assets due to the sale of investments as a result of the fixed deferred and immediate annuity reinsurance transaction.
•The favorable impact of increased bank deposits and rising short-term interest rates.
Other revenues increased$101 million , or 69%, for the six months endedJune 30, 2022 compared to the prior year period primarily reflecting the yield on deposit receivables arising from reinsurance transactions.
Expenses
Distribution expenses increased
Interest credited to fixed accounts increased$3 million , or 1%, for the six months endedJune 30, 2022 compared to the prior year period primarily reflecting the following items: •A$74 million decrease in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The favorable impact of the nonperformance credit spread was$60 million for the six months endedJune 30, 2022 compared to an unfavorable impact of$14 million for the prior year period. •An$87 million increase in expense from other market impacts on IUL benefits, net of hedges, which was an expense of$35 million for the six months endedJune 30, 2022 compared to a benefit of$52 million for the prior year period. The increase in expense was primarily due to an increase in the IUL embedded derivative in the current period, which reflected higher option costs due to a higher new money rate.
Benefits, claims, losses and settlement expenses decreased
•A$274 million decrease in expense primarily reflecting the impact of year-over-year changes in the unhedged nonperformance credit spread risk adjustment on variable annuity guaranteed benefits. The favorable impact of the nonperformance credit spread was$112 million for the six months endedJune 30, 2022 primarily as a result of the nonperformance credit spread increasing compared to an unfavorable impact of$162 million for the prior year period. As the undiscounted embedded derivative liability on which the nonperformance credit spread is applied increases (decreases), the impact of the nonperformance credit spread is favorable (unfavorable) to expense. Additionally, as the estimate of the nonperformance credit spread over the LIBOR swap curve tightens or widens, the embedded derivative liability will increase or decrease. •A$687 million decrease in expense from other market impacts on variable annuity guaranteed benefits, net of hedges in place to offset those risks and the related DSIC amortization. This decrease was the result of a favorable$489 million change in the market impact on derivatives hedging the variable annuity guaranteed benefits and a favorable$198 million change in the market impact on variable annuity guaranteed living benefits reserves. The main market drivers contributing to these changes are summarized below:
•Equity market impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
benefit for the six months ended
•Interest rate impact on the variable annuity guaranteed living benefits
liability net of the impact on the corresponding hedge assets resulted in a
higher expense for the six months ended
•Volatility impact on the variable annuity guaranteed living benefits liability net of the impact on the corresponding hedge assets resulted in a benefit for the six months endedJune 30, 2022 compared to an expense in the prior year period. •Other unhedged items, including the difference between the assumed and actual underlying separate account investment performance, fixed income credit exposures, transaction costs and various behavioral items, were a net expense for the six months endedJune 30, 2022 compared to a net benefit for the prior year period. •The mean reversion related impact was an expense of$124 million for the six months endedJune 30, 2022 compared to a benefit of$59 million for the prior year period.
•A
Amortization of DAC increased
•The DAC offset to the market impact on non-traditional long-duration products was an expense of$37 million for the six months endedJune 30, 2022 compared to a benefit of$40 million for the prior year period.
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AMERIPRISE FINANCIAL, INC. •The mean reversion related impact was an expense of$95 million for the six months endedJune 30, 2022 compared to a benefit of$38 million for the prior year period.
•A decrease in amortization reflecting lower than expected client exit rates.
General and administrative expense increased$188 million , or 11%, for the six months endedJune 30, 2022 compared to the prior year period primarily reflecting the operating expenses of the acquired BMO Global Asset Management (EMEA) business, and$24 million of integration related expenses, partially offset by a favorable change in the mark-to-market impact on share-based compensation.
Income Taxes
Our effective tax rate was 19.2% for the six months endedJune 30, 2022 compared to 15.4% for the prior year period. The higher effective tax rate for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 was primarily the result of higher pretax income, a decrease in low income housing tax credits and an increase in state income taxes, net of federal benefit, compared to the prior year period. See Note 15 to our Consolidated Financial Statements for additional discussion on income taxes.
Results of Operations by Segment for the Six Months Ended
The following table presents summary financial information by segment:
Six Months Ended June 30, 2022 2021 (in millions) Advice & Wealth Management Net revenues$ 4,098 $ 3,859 Expenses 3,166 3,047 Adjusted operating earnings $ 932$ 812 Asset Management Net revenues$ 1,898 $ 1,707 Expenses 1,391 1,226 Adjusted operating earnings $ 507$ 481 Retirement & Protection Solutions Net revenues$ 1,532 $ 1,595 Expenses 1,162 1,230 Adjusted operating earnings $ 370$ 365 Corporate & Other Net revenues $ 235$ 258 Expenses 364 356 Adjusted operating loss$ (129) $ (98) Advice & Wealth Management
The following table presents the changes in wrap account assets and average
balances for the six months ended
2022 2021 (in billions) Beginning balance$ 464.7 $ 380.0 Net flows (1) 14.8 20.4
Market appreciation (depreciation) and other (1) (80.2) 29.6 Ending balance
$ 399.3 $ 430.0
Advisory wrap account assets ending balance (2)
$ 435.7 $ 393.5 (1) Beginning in the first quarter of 2021, wrap net flows is calculated including dividends and interest less fees which were previously recorded in Market appreciation (depreciation) and other. Net flows excludes short-term and long-term capital gain distributions. Prior periods have been restated. (2) Advisory wrap account assets represent those assets for which clients receive advisory services and are the primary driver of revenue earned on wrap accounts. Clients may hold non-advisory investments in their wrap accounts that do not incur an advisory fee. 72
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(3) Average ending balances are calculated using an average of the prior
period's ending balance and all months in the current period excluding the most
recent month for the six months ended
Ending wrap account assets decreased$65.4 billion , or 14%, to$399.3 billion during the six months endedJune 30, 2022 due to market depreciation and other of$80.2 billion , partially offset by net inflows of$14.8 billion . Average advisory wrap account assets increased$42.2 billion , or 11%, compared to the prior year period primarily reflecting net inflows, partially offset by market depreciation.
The following table presents the results of operations of our Advice & Wealth Management segment on an adjusted operating basis:
Six Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees$ 2,720 $ 2,504 $ 216 9 % Distribution fees 1,071 1,121 (50) (4) Net investment income 198 127 71 56 Other revenues 114 114 - - Total revenues 4,103 3,866 237 6 Banking and deposit interest expense 5 7 (2) (29) Total net revenues 4,098 3,859 239 6 Expenses Distribution expenses 2,417 2,329 88 4 Interest and debt expense 5 5 - - General and administrative expense 744 713 31 4 Total expenses 3,166 3,047 119 4 Adjusted operating earnings $ 932$ 812 $ 120 15 % Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased$120 million , or 15%, for the six months endedJune 30, 2022 compared to the prior year period due to higher average wrap account balances and higher earnings on brokerage cash as a result of increasing short-term interest rates. Pretax adjusted operating margin was 22.7% for the for the six months endedJune 30, 2022 compared to 21.0% for the prior year period. Net Revenues Management and financial advice fees increased$216 million , or 9%, for the six months endedJune 30, 2022 compared to the prior year period primarily due to growth in average wrap account assets. Average advisory wrap account assets increased$42.2 billion , or 11%, compared to the prior year period primarily reflecting net inflows. Distribution fees decreased$50 million , or 4%, for the six months endedJune 30, 2022 compared to the prior year period reflecting decreased transactional activity, partially offset by higher fees on off-balance sheet brokerage cash due to an increase in short-term interest rates. Net investment income, which excludes net realized investment gains or losses, increased$71 million , or 56%, for the six months endedJune 30, 2022 compared to the prior year period primarily due to higher average invested assets due to increased bank deposits and the favorable impact of increased short-term interest rates.
Expenses
Distribution expenses increased$88 million , or 4%, for the six months endedJune 30, 2022 compared to the prior year period reflecting higher asset-based advisor compensation from higher average wrap account assets and increased investments in recruiting experienced advisors, partially offset by decreased transactional activity. General and administrative expense increased$31 million , or 4%, for the six months endedJune 30, 2022 compared to the prior year period primarily due to higher volume related expenses and investments for business growth.
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Asset Management
The following table presents global managed assets by type: Average (1) As of June 30, Six Months Ended June 30, 2022 2021 Change 2022 2021 Change (in billions) Equity$ 306.0 $ 339.0 $ (33.0) (10) %$ 357.0 $ 319.8 $ 37.2 12 % Fixed income 216.5 202.5 14.0 7 250.6 197.8 52.8 27 Money market 19.3 5.5 13.8 NM 14.3 5.9 8.4 NM Alternative 38.4 23.3 15.1 65 39.6 22.9 16.7 73 Hybrid and other 18.0 23.1 (5.1) (22) 20.9 21.8 (0.9) (4) Total managed assets (2)$ 598.2 $ 593.4 $ 4.8 1 %$ 682.4 $ 568.2 $ 114.2 20 %
(1) Average ending balances are calculated using an average of the prior period's ending balance and all months in the current period.
(2) In the fourth quarter of 2021, the definition of Alternative AUM was changed to now include real estate, CLOs, private equity, hedge funds (direct and fund of funds), infrastructure and commodities to better demonstrate our underlying business and the additional assets from the acquisition of the BMO Global Asset Management (EMEA) business. Prior periods have been restated to reflect this change.
The following table presents the changes in global managed assets:
Six Months Ended June 30, 2022 2021 (in billions) Global Retail Funds (1) Beginning assets$ 409.4 $ 323.5 Inflows 37.3 41.9 Outflows (47.0) (34.7) Net VP/VIT fund flows (2.1) (2.0) Net new flows (2) (11.8) 5.2 Reinvested dividends 4.1 3.6 Net flows (7.7) 8.8 Distributions (4.6) (4.2) Market appreciation (depreciation) and other (68.9)
31.3
Foreign currency translation (3) (5.2) 0.1 Total ending assets 323.0 359.5 Global Institutional (1) Beginning assets 344.7 223.1 Inflows (4) 28.8 17.1 Outflows (4) (24.9) (14.3) Net flows 3.9 2.8 Market appreciation (depreciation) and other (5) (58.1)
7.3
Foreign currency translation (3) (15.3) 0.7 Total ending assets 275.2 233.9 Total managed assets$ 598.2 $ 593.4 Total net flows$ (3.8) $ 11.6 Legacy insurance partners net flows (6)$ (1.9)
(1) The beginning balances as ofJanuary 1, 2022 for Global Retail Funds and Global Institutional were corrected by$8.9 billion due to a reclassification of assets. Total AUM as ofJanuary 1, 2022 remained unchanged.
(2) First quarter 2022 net flows included
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(3) Amounts represent local currency to US dollar translation for reporting purposes.
(4) Global Institutional inflows and outflows include net flows from our
RiverSource Structured Annuity product and
(5) Included in Market appreciation (depreciation) and other for Global Institutional is the change in affiliated general account balance, excluding net flows related to our structured variable annuity product andAmeriprise Bank , FSB.
(6) Legacy insurance partners assets and net flows are included in the rollforwards above.
Total segment AUM decreased$155.9 billion , or 21%, during the six months endedJune 30, 2022 primarily due to equity market depreciation. Net outflows were$3.8 billion for the six months endedJune 30, 2022 , a decrease of$15.4 billion compared to the prior year period.
The following table presents the results of operations of our Asset Management segment on an adjusted operating basis:
Six Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees$ 1,675 $ 1,471 $ 204 14 % Distribution fees 211 232 (21) (9) Net investment income 4 3 1 33 Other revenues 8 1 7 NM Total revenues 1,898 1,707 191 11 Banking and deposit interest expense - - - - Total net revenues 1,898 1,707 191 11 Expenses Distribution expenses 529 550 (21) (4) Amortization of deferred acquisition costs 6 6 - - Interest and debt expense 2 2 - - General and administrative expense 854 668 186 28 Total expenses 1,391 1,226 165 13 Adjusted operating earnings $ 507$ 481 $ 26 5 % NM Not Meaningful. Our Asset Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased$26 million , or 5%, for the six months endedJune 30, 2022 compared to the prior year period primarily due to market appreciation and disciplined expense management.
Net Revenues
Management and financial advice fees increased$204 million , or 14%, for the six months endedJune 30, 2022 compared to the prior year period primarily due to the acquired BMO Global Asset Management (EMEA) business and an increase in performance fees of$55 million , partially offset by the cumulative impact from net outflows and the impact of foreign exchange rates.
Distribution fees decreased
Other revenues increased
Expenses Distribution expenses decreased$21 million , or 4%, for the six months endedJune 30, 2022 compared to the prior year period primarily due to the cumulative impact from net outflows. General and administrative expense increased$186 million , or 28%, for the six months endedJune 30, 2022 compared to the prior year period primarily reflecting the operating expenses of the acquired BMO Global Asset Management (EMEA) business and higher performance fee related compensation, partially offset by the cumulative impact from net outflows and the impact of foreign exchange rates. 75
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Retirement & Protection Solutions
The following table presents the results of operations of our Retirement & Protection Solutions segment on an adjusted operating basis:
Six Months Ended June 30, 2022 2021 Change (in millions) Revenues Management and financial advice fees $ 415$ 456 $ (41) (9) % Distribution fees 218 238 (20) (8) Net investment income 238 253 (15) (6) Premiums, policy and contract charges 654 648 6 1 Other revenues 7 - 7 - Total revenues 1,532 1,595 (63) (4) Banking and deposit interest expense - - - - Total net revenues 1,532 1,595 (63) (4) Expenses Distribution expenses 234 263 (29) (11) Interest credited to fixed accounts 192 194 (2) (1) Benefits, claims, losses and settlement expenses 463 475 (12) (3) Amortization of deferred acquisition costs 107 133 (26) (20) Interest and debt expense 18 19 (1) (5) General and administrative expense 148 146 2 1 Total expenses 1,162 1,230 (68) (6) Adjusted operating earnings $ 370$ 365 $ 5 1 % Our Retirement & Protection Solutions segment pretax adjusted operating earnings, which excludes net realized investment gains or losses (net of the related DAC amortization, unearned revenue amortization and the reinsurance accrual), the market impact on variable annuity guaranteed benefits (net of hedges and the related DSIC and DAC amortization), the market impact on IUL benefits (net of hedges and the related DAC amortization, unearned revenue amortization and the reinsurance accrual), mean reversion related impacts, and block transfer reinsurance transaction impacts increased$5 million , or 1%, for the six months endedJune 30, 2022 compared to the prior year period.
Net Revenues
Management and financial advice fees decreased$41 million , or 9%, for the six months endedJune 30, 2022 compared to the prior year period primarily due to variable annuity net outflows and market depreciation.
Distribution fees decreased
Expenses
Distribution expenses decreased
Amortization of DAC, which excludes mean reversion related impacts and the DAC offset to the market impact on variable annuity guaranteed benefits, decreased$26 million , or 20%, for the six months endedJune 30, 2022 compared to the prior year period reflecting lower than expected client exit rates.
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Corporate & Other
The following table presents the results of operations of our Corporate & Other segment on an adjusted operating basis:
Six Months Ended June 30, 2022 2021 Change (in millions) Revenues Net investment income $ 72$ 179 $ (107) (60) % Premiums, policy and contract charges 48 49 (1) (2) Other revenues 115 31 84 NM Total revenues 235 259 (24) (9) Banking and deposit interest expense - 1 (1) NM Total net revenues 235 258 (23) (9) Expenses Distribution expenses (4) (4) - - Interest credited to fixed accounts 121 123 (2) (2) Benefits, claims, losses and settlement expenses 113 67 46 69 Amortization of deferred acquisition costs 3 6 (3) (50) Interest and debt expense 31 32 (1) (3) General and administrative expense 100 132 (32) (24) Total expenses 364 356 8 2 Adjusted operating loss $ (129)$ (98) $ (31) (32) % NM Not Meaningful. Our Corporate & Other segment pretax adjusted operating loss excludes net realized investment gains or losses, the market impact on fixed index annuity benefits (net of hedges and the related DAC amortization), the market impact of hedges to offset interest rate and currency changes on unrealized gains or losses for certain investments, block transfer reinsurance transaction impact, gain or loss on disposal of a business that is not considered discontinued operations, integration and restructuring charges, and the impact of consolidating CIEs. Our Corporate & Other segment pretax adjusted operating loss increased$31 million , or 32%, for the six months endedJune 30, 2022 compared to the prior year period. LTC insurance had a pretax adjusted operating earnings of nil for the six months endedJune 30, 2022 compared to a pretax adjusted operating earnings of$49 million for the prior year period primarily reflecting the return to more normalized results compared to the COVID-19 related impacts in the prior year period.
FA business had a pretax adjusted operating loss of
Net Revenues
Net investment income, which excludes net realized investment gains or losses, the market impact of hedges to offset interest rate and currency changes on unrealized gains or losses for certain investments, integration and restructuring charges, and the impact of consolidating CIEs, decreased$107 million , or 60%, for the six months endedJune 30, 2022 compared to the prior year period primarily reflecting lower average invested assets due to the sale of investments to a reinsurer as a result of the fixed deferred and immediate annuity reinsurance transaction and a$15 million gain on a strategic investment in the prior year period.
Other revenues increased
Expenses
Benefits, claims, losses and settlement expenses, which excludes DSIC offset to net realized investment gains or losses, increased$46 million , or 69%, for the six months endedJune 30, 2022 compared to the prior year period primarily reflecting more normalized claims on LTC insurance, which benefited from COVID-19 related impacts in the prior year period. General and administrative expense, which excludes integration and restructuring charges, decreased$32 million , or 24%, for the six months endedJune 30, 2022 compared to the prior year period primarily reflecting the favorable mark-to-market impact on share-based compensation expense.
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Market Risk
Our primary market risk exposures are interest rate, equity price, foreign currency exchange rate and credit risk. Equity price and interest rate fluctuations can have a significant impact on our results of operations, primarily due to the effects they have on the asset management and other asset-based fees we earn, the spread income generated on our fixed insurance, brokerage client cash balances, banking deposits, face-amount certificate products, fixed portion of our variable annuities and variable insurance contracts, the value of DAC and DSIC assets, the value of liabilities for guaranteed benefits associated with our variable annuities and the value of derivatives held to hedge these benefits.
Our earnings from fixed insurance, the fixed portion of variable annuities and variable insurance contracts, and fixed deferred annuities are based upon the spread between rates earned on assets held and the rates at which interest is credited to accounts. We primarily invest in fixed rate securities to fund the rate credited to clients. We guarantee an interest rate to the holders of these products. Investment assets and client liabilities generally differ as it relates to basis, repricing or maturity characteristics. Rates credited to clients' accounts generally reset at shorter intervals than the yield on the underlying investments. Therefore, in an increasing interest rate environment, higher interest rates may be reflected in crediting rates to clients sooner than in rates earned on invested assets, which could result in a reduced spread between the two rates, reduced earned income and a negative impact on pretax income. While interest rates under the current environment have relieved some pressure from the liability guaranteed minimum interest rates ("GMIRs"), there are still some GMIRs above current levels. Hence, liability credited rates will move more slowly under a modest rise in interest rates while projected asset purchases would capture the full increase in interest rates. This dynamic would result in widening spreads under a modestly rising rate scenario given the current relationship between the current level of interest rates and the underlying GMIRs on the business. As a result of the current market environment, reinvestment yields are becoming more aligned with the current portfolio yield. We would expect the recent decline in our portfolio income yields to slow and begin to stabilize in future periods under the current environment. The carrying value and weighted average yield of non-structured fixed maturity securities and commercial mortgage loans that may generate proceeds to reinvest throughJune 30, 2024 due to prepayment, maturity or call activity at the option of the issuer, excluding securities with a make-whole provision, were$2.6 billion and 2.5%, respectively, as ofJune 30, 2022 . In addition, residential mortgage backed securities, which can be subject to prepayment risk under a low interest rate environment, totaled$13.3 billion and had a weighted average yield of 2.5% as ofJune 30, 2022 . While these amounts represent investments that could be subject to reinvestment risk, it is also possible that these investments will be used to fund liabilities or may not be prepaid and will remain invested at their current yields. In addition to the interest rate environment, the mix of benefit payments versus product sales as well as the timing and volumes associated with such mix may impact our investment yield. Furthermore, reinvestment activities and the associated investment yield may also be impacted by corporate strategies implemented at management's discretion. The average yield for investment purchases during the six months endedJune 30, 2022 was approximately 3.3%. The reinvestment of proceeds from maturities, calls and prepayments at rates below the current portfolio yield, which may be below the level of some liability GMIRs, will have a negative impact to future operating results. To mitigate the unfavorable impact that a low interest rate environment could have on our spread income, we assess reinvestment risk in our investment portfolio and monitor this risk in accordance with our asset/liability management framework. In addition, we may reduce the crediting rates on our fixed products when warranted, subject to guaranteed minimums. In addition to the fixed rate exposures noted above, RiverSource Life has the following variable annuity guarantee benefits: guaranteed minimum withdrawal benefits ("GMWB"), guaranteed minimum accumulation benefits ("GMAB"), guaranteed minimum death benefits ("GMDB") and guaranteed minimum income benefits ("GMIB"). Each of these benefits guarantees payouts to the annuity holder under certain specific conditions regardless of the performance of the underlying invested assets. The variable annuity guarantees continue to be managed by utilizing a hedging program which attempts to match the sensitivity of the assets with the sensitivity of the liabilities. This approach works with the premise that matched sensitivities will produce a highly effective hedging result. Our comprehensive hedging program focuses mainly on first order sensitivities of assets and liabilities: Equity Market Level (Delta), Interest Rate Level (Rho) and Volatility (Vega). Additionally, various second order sensitivities are managed. We use various options, swaptions, swaps and futures to manage risk exposures. The exposures are measured and monitored daily, and adjustments to the hedge portfolio are made as necessary. We have a macro hedge program to provide protection against the statutory tail scenario risk arising from variable annuity reserves on our statutory surplus and to cover some of the residual risks not covered by other hedging activities. We assess the residual risk under a range of scenarios in creating and executing the macro hedge program. As a means of economically hedging these risks, we may use a combination of futures, options, swaps and swaptions. Certain of the macro hedge derivatives used contain settlement provisions linked to both equity returns and interest rates; the remaining are interest rate contracts or equity contracts. The macro hedge program could result in additional earnings volatility as changes in the value of the macro hedge derivatives, which are designed to reduce statutory capital volatility, may not be closely aligned to changes in the variable annuity guarantee embedded derivatives. To evaluate interest rate and equity price risk we perform sensitivity testing which measures the impact on pretax income from the sources listed below for a 12-month period following a hypothetical 100 basis point increase in interest rates or a hypothetical 10% 78
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AMERIPRISE FINANCIAL, INC. decline in equity prices. The interest rate risk test assumes a sudden 100 basis point parallel shift in the yield curve, with rates then staying at those levels for the next 12 months. The equity price risk test assumes a sudden 10% drop in equity prices, with equity prices then staying at those levels for the next 12 months. In estimating the values of variable annuities, indexed annuities, stock market certificates, indexed universal life ("IUL") insurance and the associated hedge assets, we assume no change in implied market volatility despite the 10% drop in equity prices.
The following tables present our estimate of the impact on pretax income from
the above defined hypothetical market movements as of
Equity Price Exposure to Pretax Income Equity Price Decline 10% Before Hedge Impact Hedge Impact Net Impact (in millions) Asset-based management and distribution fees (1) $ (287) $ 3$ (284) DAC and DSIC amortization (2)(3) (40) - (40) Variable annuities: GMDB and GMIB (3) (19) - (19) GMWB (3) (593) 585 (8) GMAB (37) 37 - Structured variable annuities 399 (370) 29 DAC and DSIC amortization (4) N/A N/A (3) Total variable annuities (250) 252 (1) Macro hedge program (5) - 117 117 IUL insurance 19 (22) (3) Total $ (558) $ 350$ (211) (6) N/A Not Applicable. Interest Rate Exposure to Pretax Income Interest Rate Increase 100 Basis Points Before Hedge Impact Hedge Impact Net Impact (in millions) Asset-based management and distribution fees (1) $ (54) $ -$ (54) Variable annuities: GMWB 867 (1,072) (205) GMAB 6 (8) (2) Structured variable annuities (33) 131 98 DAC and DSIC amortization (4) N/A N/A 13 Total variable annuities 840 (949) (96) Macro hedge program (5) - (148) (148)
Fixed annuities, fixed insurance and fixed portion of variable annuities and variable insurance products
43 - 43 Banking deposits 31 - 31 Brokerage client cash balances 199 - 199 Certificates 14 - 14 IUL insurance 16 2 18 Total$ 1,089 $ (1,095) $ 7 N/A Not Applicable. (1) Excludes incentive income which is impacted by market and fund performance during the period and cannot be readily estimated. (2) Market impact on DAC and DSIC amortization resulting from lower projected profits. (3) In estimating the impact to pretax income on DAC and DSIC amortization and additional insurance benefit reserves, our assumed equity asset growth rates reflect what management would follow in its mean reversion guidelines.
(4) Market impact on DAC and DSIC amortization related to variable annuities is modeled net of hedge impact.
(5) The market impact of the macro hedge program is modeled net of any related impact to DAC and DSIC amortization.
(6) Represents the net impact to pretax income. The estimated net impact to
pretax adjusted operating income is approximately
The above results compare to an estimated negative net impact to pretax income of$190 million related to a 10% equity price decline and an estimated positive net impact to pretax income of$80 million related to a 100 basis point increase in interest rates as of 79
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Net impacts shown in the above table from GMWB riders result largely from differences between the liability valuation basis and the hedging basis. Liabilities are valued using fair value accounting principles, with risk margins incorporated in contractholder behavior assumptions and with discount rates increased to reflect a current market estimate of our risk of nonperformance specific to these liabilities. Our hedging is based on our determination of economic risk, which excludes certain items in the liability valuation including the nonperformance spread risk. Actual results will differ materially from those illustrated above as they are based on a number of estimates and assumptions. These include assuming that implied market volatility does not change when equity prices fall by 10% and that the 100 basis point increase in interest rates is a parallel shift of the yield curve. Furthermore, we have not tried to anticipate changes in client preferences for different types of assets or other changes in client behavior, nor have we tried to anticipate all strategic actions management might take to increase revenues or reduce expenses in these scenarios. The selection of a 100 basis point interest rate increase as well as a 10% equity price decline should not be construed as a prediction of future market events. Impacts of larger or smaller changes in interest rates or equity prices may not be proportional to those shown for a 100 basis point increase in interest rates or a 10% decline in equity prices.
Fair Value Measurements
We report certain assets and liabilities at fair value; specifically, separate account assets, derivatives, embedded derivatives and most investments and cash equivalents. Fair value assumes the exchange of assets or liabilities occurs in orderly transactions and is not the result of a forced liquidation or distressed sale. We include actual market prices, or observable inputs, in our fair value measurements to the extent available. Broker quotes are obtained when quotes from pricing services are not available. We validate prices obtained from third parties through a variety of means such as: price variance analysis, subsequent sales testing, stale price review, price comparison across pricing vendors and due diligence reviews of vendors. See Note 11 to the Consolidated Financial Statements for additional information on our fair value measurements.
Fair Value of Liabilities and Nonperformance Risk
Companies are required to measure the fair value of liabilities at the price that would be received to transfer the liability to a market participant (an exit price). Since there is not a market for our obligations of our variable annuity riders, fixed deferred indexed annuities, structured variable annuities, and IUL insurance, we consider the assumptions participants in a hypothetical market would make to reflect an exit price. As a result, we adjust the valuation of variable annuity riders, fixed deferred indexed annuities, structured annuities, and IUL insurance by updating certain contractholder assumptions, adding explicit margins to provide for risk, and adjusting the rates used to discount expected cash flows to reflect a current market estimate of our nonperformance risk. The nonperformance risk adjustment is based on observable market data adjusted to estimate the risk of our life insurance company subsidiaries not fulfilling these liabilities. Consistent with general market conditions, this estimate resulted in a spread over the LIBOR swap curve as ofJune 30, 2022 . As our estimate of this spread widens or tightens, the liability will decrease or increase. If this nonperformance credit spread moves to a zero spread over the LIBOR swap curve, the reduction to future net income would be approximately$577 million , net of DAC, DSIC, unearned revenue amortization, the reinsurance accrual and income taxes (calculated at the statutory tax rate of 21%), based onJune 30, 2022 credit spreads.
Liquidity and Capital Resources
Overview
We maintained substantial liquidity during the six months endedJune 30, 2022 . AtJune 30, 2022 andDecember 31, 2021 , we had$7.5 billion and$7.1 billion , respectively, in cash and cash equivalents excluding CIEs and other restricted cash on a consolidated basis. AtJune 30, 2022 andDecember 31, 2021 , the parent company had$759 million and$841 million , respectively, in cash, cash equivalents, and unencumbered liquid securities. Liquid securities predominantly includeU.S. government agency mortgage back securities. Additional sources of liquidity include a line of credit with an affiliate up to$729 million and an unsecured revolving committed credit facility for up to$1.0 billion that expires inJune 2026 . Management's estimate of liquidity available to the parent company in a volatile and uncertain economic environment as ofJune 30, 2022 was$1.9 billion which includes cash, cash equivalents, unencumbered liquid securities, the line of credit with an affiliate and a portion of the committed credit facility.
Under the terms of the committed credit facility, we can increase the
availability to
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AMERIPRISE FINANCIAL, INC. In addition, we have access to collateralized borrowings, which may include repurchase agreements andFederal Home Loan Bank ("FHLB") advances. Our subsidiaries,RiverSource Life Insurance Company ("RiverSource Life"), andAmeriprise Bank , FSB are members of the FHLB ofDes Moines , which provides access to collateralized borrowings. As ofJune 30, 2022 andDecember 31, 2021 , we had$9.0 billion and$8.1 billion , respectively, under the FHLB facilities, of which$200 million was outstanding as of bothJune 30, 2022 andDecember 31, 2021 , and is collateralized with commercial mortgage backed securities and residential mortgage backed securities.
There have been no material changes to our contractual obligations disclosed in our 2021 10-K.
We repaid$500 million principal amount of our 3.0% senior notes at maturity onMarch 22, 2022 . We issued$500 million of 4.5% unsecured senior notes onMay 13, 2022 . See Note 10 to our Consolidated Financial Statements for further information about our long-term debt maturities. We believe cash flows from operating activities, available cash balances, our availability of revolver borrowings and dividends from our subsidiaries will be sufficient to fund our short-term and long-term operating liquidity needs and stress requirements. We continue to monitor and respond to the ongoing COVID-19 pandemic. Our risk management strategy is designed to provide proactive protection during stress events such as the current pandemic. We believe our process is working as intended, and our liquidity and capital resources have remained a source of balance sheet strength during the six months endedJune 30, 2022 .
Dividends from Subsidiaries
Ameriprise Financial is primarily a parent holding company for the operations carried out by our wholly-owned subsidiaries. Because of our holding company structure, our ability to meet our cash requirements, including the payment of dividends on our common stock, substantially depends upon the receipt of dividends or return of capital from our subsidiaries, particularly our life insurance subsidiary, RiverSource Life, our face-amount certificate subsidiary,Ameriprise Certificate Company ("ACC"),AMPF Holding, LLC , which is the parent company of our retail introducing broker-dealer subsidiary,Ameriprise Financial Services, LLC ("AFS") and our clearing broker-dealer subsidiary,American Enterprise Investment Services, Inc. ("AEIS"), our transfer agent subsidiary,Columbia Management Investment Services Corp. , our investment advisory company,Columbia Management Investment Advisers, LLC ,TAM UK International Holdings Ltd , which includes Threadneedle Asset Management Holdings Sàrl andAmeriprise International Holdings GmbH within its organizational structure, andColumbia Threadneedle Investments UK International Ltd. The payment of dividends by many of our subsidiaries is restricted and certain of our subsidiaries are subject to regulatory capital requirements.
Actual capital and regulatory capital requirements for our wholly owned subsidiaries subject to regulatory capital requirements were as follows:
Actual Capital Regulatory Capital Requirements June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021 (in millions) RiverSource Life (1)(2)$ 3,085 $ 3,419 N/A $
502
RiverSource Life of NY (1)(2) 210 310 N/A 42 ACC (4)(5) 303 304 $ 282 283 TAM UK International Holdings Ltd (6) 476 330 241
248
Ameriprise Bank, FSB (4) (7) 1,181 853 769 589 AFS (3)(4) 162 103 # # Ameriprise Captive Insurance Company (3) 37 39 12
10
Ameriprise Trust Company (3) 50 47 37 44 AEIS (3)(4) 168 155 31 29 RiverSource Distributors, Inc. (3)(4) 11 10 #
#
Columbia Management Investment Distributors, Inc. (3)(4) 18 14 #
#
Columbia Threadneedle InvestmentsUK International Ltd. (8) 315 348 153 170
N/A Not applicable as only required to be calculated annually.
# Amounts are less than
(1) Actual capital is determined on a statutory basis.
(2) Regulatory capital requirement is the company action level and is based on the statutory risk-based capital filing.
(3) Regulatory capital requirement is based on the applicable regulatory
requirement, calculated as of
(4) Actual capital is determined on an adjusted GAAP basis.
(5) ACC is required to hold capital in compliance with the
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(6) Actual capital and regulatory capital requirements are determined in
accordance with
(7) Regulatory capital requirement is based on minimum requirements for well
capitalized banks in accordance with the
(8) Actual capital and regulatory capital requirements are determined in
accordance with
In addition to the particular regulations restricting dividend payments and establishing subsidiary capitalization requirements, we take into account the overall health of the business, capital levels and risk management considerations in determining a strategy for payments to our parent holding company from our subsidiaries, and in deciding to use cash to make capital contributions to our subsidiaries.
During the six months endedJune 30, 2022 , the parent holding company received cash dividends or a return of capital from its subsidiaries of$1.4 billion (including$500 million from RiverSource Life) and contributed cash to its subsidiaries of$294 million (including$245 million toAmeriprise Bank , FSB). During the six months endedJune 30, 2021 , the parent holding company received cash dividends or a return of capital from its subsidiaries of$1.6 billion (including$750 million from RiverSource Life) and contributed cash to its subsidiaries of$71 million (including$7 million toAmeriprise Bank , FSB). In 2009, RiverSource Life established an agreement to protect its exposure toGenworth Life Insurance Company ("GLIC") for its reinsured LTC. In 2016, substantial enhancements to this reinsurance protection agreement were finalized. The terms of these confidential provisions within the agreement have been shared, in the normal course of regular reviews, with our domiciliary regulator and rating agencies. GLIC is domiciled inDelaware , so in the event GLIC was subjected to rehabilitation or insolvency proceedings, such proceedings would be located in (and governed by)Delaware laws.Delaware courts have a long tradition of respecting commercial and reinsurance affairs as well as contracts among sophisticated parties. Similar credit protections to what we have with GLIC have been tested and respected inDelaware and elsewhere inthe United States , and as a result we believe our credit protections would be respected even in the unlikely event that GLIC becomes subject to rehabilitation or insolvency proceedings inDelaware . Accordingly, while no credit protections are perfect, we believe the correct way to think about the risks represented by our counterparty credit exposure to GLIC is not the full amount of the gross liability that GLIC reinsures, but a much smaller net exposure to GLIC (if any that might exist after taking into account our credit protections). Thus, management believes that our agreement and offsetting non-LTC legacy arrangements with Genworth will enable RiverSource Life to recover on all net exposure in all material respects in the event of a rehabilitation or insolvency of GLIC.
Dividends Paid to Shareholders and Share Repurchases
We paid regular quarterly dividends to our shareholders totaling$275 million and$263 million for the six months endedJune 30, 2022 and 2021, respectively. OnJuly 26, 2022 , we announced a quarterly dividend of$1.25 per common share. The dividend will be paid onAugust 19, 2022 to our shareholders of record at the close of business onAugust 8, 2022 . InAugust 2020 , the Company's Board of Directors authorized us to repurchase up to$2.5 billion of our common stock throughSeptember 30, 2022 , which was exhausted in the second quarter of 2022. InJanuary 2022 , the Company's Board of Directors authorized an additional$3.0 billion for the repurchase of the Company's common stock throughMarch 31, 2024 . As ofJune 30, 2022 , we had$2.5 billion remaining under the share repurchase authorization. We intend to fund share repurchases through existing working capital, future earnings and other customary financing methods. The share repurchase program does not require the purchase of any minimum number of shares, and depending on market conditions and other factors, these purchases may be commenced or suspended at any time without prior notice. Acquisitions under the share repurchase program may be made in the open market, through privately negotiated transactions or block trades or other means. During the six months endedJune 30, 2022 , we repurchased a total of 3.2 million shares of our common stock at an average price of$279.74 per share. Cash Flows Cash flows of CIEs and restricted and segregated cash and cash equivalents are reflected in our cash flows provided by (used in) operating activities, investing activities and financing activities. Cash held by CIEs is not available for general use byAmeriprise Financial , nor isAmeriprise Financial cash available for general use by its CIEs. Cash and cash equivalents segregated under federal and other regulations is held for the exclusive benefit of our brokerage customers and is not available for general use byAmeriprise Financial .
Operating Activities
Net cash provided by operating activities increased$887 million to$1.8 billion for the six months endedJune 30, 2022 compared to$931 million for the prior year period primarily reflecting a$489 million increase in net income, a$327 million increase in current income tax, net and a$318 million increase in deferred taxes, net, partially offset by a$224 million decrease in policyholder account balances, future policy benefits and claims, net.
Investing Activities
Our investing activities primarily relate to our Available-for-Sale investment portfolio. Further, this activity is significantly affected by the net flows of our investment certificate, fixed annuity and universal life products reflected in financing activities. 82
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AMERIPRISE FINANCIAL, INC. Net cash used in investing activities increased$3.7 billion to$4.6 billion for the six months endedJune 30, 2022 compared to$909 million for the prior year period primarily reflecting a$2.7 billion increase in cash used for purchases of Available-for-Sale securities and a$1.7 billion decrease in proceeds from maturities, sinking fund payments and calls of Available-for-Sale securities, partially offset by a$567 million decrease in net cash flows used related to investments of consolidated investment entities.
Financing Activities
Net cash provided by financing activities increased$2.7 billion to$2.6 billion for the six months endedJune 30, 2022 compared to net cash used in financing activities of$101 million for the prior year period primarily reflecting a$2.8 billion increase in banking deposits, a$995 million reduction in net cash outflows from investment certificates and$491 million increase in issuance of long-term debt, partially offset by a$1.4 billion decrease in borrowings by CIEs and a$501 million increase in repayments of long-term debt.
Forward-Looking Statements
This report contains forward-looking statements that reflect management's plans, estimates and beliefs. Actual results could differ materially from those described in these forward-looking statements. Examples of such forward-looking statements include: •statements of the Company's plans, intentions, positioning, expectations, objectives or goals, including those relating to asset flows, mass affluent and affluent client acquisition strategy, client retention and growth of our client base, financial advisor productivity, retention, recruiting and enrollments, the introduction, cessation, terms or pricing of new or existing products and services, acquisition integration, benefits and claims expenses, general and administrative costs, consolidated tax rate, return of capital to shareholders, debt repayment and excess capital position and financial flexibility to capture additional growth opportunities;
•statements about the expected trend in the shift to lower-risk products, including the exit from variable annuities with living benefit riders and the discontinuance of new sales of universal life insurance with secondary guarantees;
•statements about the outcomes from the application to convertAmeriprise Bank , FSB to a state-chartered bank and national trust bank or the anticipated deposit growth or impacts from possible future interest rate increases; •other statements about future economic performance, the performance of equity markets and interest rate variations and the economic performance ofthe United States and of global markets; and
•statements of assumptions underlying such statements.
The words "believe," "expect," "anticipate," "optimistic," "intend," "plan," "aim," "will," "may," "should," "could," "would," "likely," "forecast," "on track," "project," "continue," "able to remain," "resume," "deliver," "develop," "evolve," "drive," "enable," "flexibility," "scenario," "case", "appear", "expand" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from such statements.
Such factors include, but are not limited to:
•the impacts on our business of the COVID-19 pandemic and the related economic, client, governmental and healthcare system responses;
•market fluctuations and general economic and political factors, including
volatility in the
•changes in interest rates and periods of low interest rates;
•adverse capital and credit market conditions or any downgrade in our credit ratings;
•effects of competition and our larger competitors' economies of scale;
•declines in our investment management performance;
•our ability to compete in attracting and retaining talent, including financial advisors;
•impairment, negative performance or default by financial institutions or other counterparties;
•the ability to maintain our unaffiliated third-party distribution channels and the impacts of sales of unaffiliated products;
•changes in valuation of securities and investments included in our assets;
•the determination of the amount of allowances taken on loans and investments;
•the illiquidity of our investments;
•effects of the elimination of LIBOR on, and value of, securities and other assets and liabilities tied to LIBOR;
•failures by other insurers that lead to higher assessments we owe to state insurance guaranty funds;
•failures or defaults by counterparties to our reinsurance arrangements;
•inadequate reserves for future policy benefits and claims or for future redemptions and maturities;
•deviations from our assumptions regarding morbidity, mortality and persistency affecting our insurance profitability;
•changes to our reputation arising from employee or advisor misconduct or otherwise;
•direct or indirect effects of or responses to climate change;
•interruptions or other failures in our operating systems and networks, including errors or failures caused by third-party service providers, interference or third-party attacks;
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•interruptions or other errors in our telecommunications or data processing systems;
• identification and mitigation of risk exposure in market environments, new products, vendors and other types of risk;
• ability of our subsidiaries to transfer funds to us to pay dividends;
• changes in exchange rates and other risks in connection with our international operations and earnings and income generated overseas;
• occurrence of natural or man-made disasters and catastrophes;
• risks in acquisition transactions, such as the integration of the BMO Global Asset Management (EMEA) business, or other potential strategic acquisitions or divestitures;
• legal and regulatory actions brought against us;
• changes to laws and regulations that govern operation of our business;
• supervision by bank regulators and related regulatory and prudential standards as a savings and loan holding company that may limit our activities and strategies;
• changes in corporate tax laws and regulations and interpretations and determinations of tax laws impacting our products;
• protection of our intellectual property and claims we infringe the intellectual property of others; and
•changes in and the adoption of new accounting standards.
Management cautions the reader that the foregoing list of factors is not exhaustive. There may also be other risks that management is unable to predict at this time that may cause actual results to differ materially from those in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Management undertakes no obligation to update publicly or revise any forward-looking statements. The foregoing list of factors should be read in conjunction with the "Risk Factors" discussion included in Part I, Item 1A of our 2021 10-K.Ameriprise Financial announces financial and other information to investors through the Company's investor relations website at ir.ameriprise.com, as well asSEC filings, press releases, public conference calls and webcasts. Investors and others interested in the company are encouraged to visit the investor relations website from time to time, as information is updated and new information is posted. The website also allows users to sign up for automatic notifications in the event new materials are posted. The information found on the website is not incorporated by reference into this report or in any other report or document the Company furnishes or files with theSEC .
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