AMP 10-K diff: FY 2023-12-31 → FY 2024-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+53 paragraphs −60 paragraphs ~53 changed
FY 2023-12-31 (earlier)
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including those described below, that could have a material adverse effect on our business, financial condition or results of operations and could cause the trading price of our common stock to decline. We believe that the following information identifies the material factors affecting our company based on the information we currently know. However, the risks and uncertainties our company faces are not limited to those described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Market Risks
Our results of operations and financial condition may be adversely affected by market fluctuations and by economic, political and other factors.Our results of operations and financial condition may be materially affected by market fluctuations and by economic and other factors. Such factors, which can be global, regional, national or local in nature, include: (i) the level and volatility of the markets, including equity prices, interest rates, commodity prices, currency values and other market indices and drivers; (ii) geopolitical strain, terrorism and armed conflicts, (iii) political dynamics or elections and social, economic and market conditions; (iv) the availability and cost of capital; (v) global health emergencies (such as the coronavirus disease 2019 (“COVID-19”) pandemic); (vi) technological changes and16
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Ameriprise Financial, Inc.events; (vii) U.S. and foreign government fiscal and tax policies; (viii) U.S. and foreign government ability, real or perceived, to avoid defaulting on government securities; (ix) the availability and cost of credit and hedge markets; (x) periods of elevated inflation; (xi) natural disasters such as weather catastrophes; and (xii) other factors affecting investor sentiment and confidence in the financial markets. Furthermore, changes in consumer economic variables, such as the number and size of personal bankruptcy filings, the rate of unemployment, decreases in property values, and the level of consumer confidence and consumer debt, may substantially affect consumer loan levels and credit quality, which, in turn, could impact client activity in all of our businesses. These factors also may have an impact on our ability to achieve our strategic objectives or to pay dividends or otherwise return capital from our subsidiaries to our holding company.
Declines and volatility in U.S. and global market conditions (such as those that resulted from the COVID-19 pandemic and subsequent economic environment, from other recent geopolitical tensions or from situations like the 2023 regional bank crisis) have impacted our businesses in the past, are impacting us now and may continue to impact us in the same, new or different ways in the future. Our businesses have been, and in the future may be, adversely affected by U.S. and global capital market and credit crises, the repricing of credit risk, equity market volatility and decline, and stress or recession in the U.S. and global economies generally. Each of our segments operates in these markets with exposure for us and our clients in securities, loans, derivatives, alternative investments, seed capital and other commitments. It is difficult to predict when, how long and to what extent the aforementioned adverse conditions will exist, which of our markets, products and businesses will be directly affected and to what extent our clients may seek to bring claims arising out of investment performance that is affected by these conditions. As a result, these factors could materially adversely impact our financial condition and results of operations.
These factors will also impact client behavior. Market downturns, stagnation, and volatility may cause, and have caused, individual investors to limit or decrease their participation in global markets negatively impacting our retail business and/or our product sales. Market conditions, regulatory actions, tax laws, and our competitive industry environment are among the reasons current shareholders in our mutual funds, OEICs, SICAVs, unit trusts, investment trusts and other pooled investment vehicles, contractholders in our annuity products and policyholders in our protection products may opt to withdraw cash values for those products (or for certain protection products, to reduce their withdrawal activity). If we are unable to offer appropriate product alternatives which encourage customers to continue purchasing in the face of actual or perceived market volatility, our sales and management fee revenues could decline.
Downturns and volatility in markets (including equity, fixed income, real estate, alternatives such as infrastructure and private equity and other markets) have had, and may in the future have, an adverse effect on the revenues and returns from our asset management services, retail advisory accounts, variable annuity contracts, banking products and other products. Because the profitability of these products and services depends on fees related primarily to the value of assets under management, declines in the markets will reduce our revenues because the value of the investment assets we manage will be reduced. In addition, a significant portion of our revenue is derived from investment management agreements with the Columbia Management family of mutual funds which are terminable on 60 days’ notice. Although some contracts governing investment management services are subject to termination for failure to meet performance benchmarks, institutional and individual clients can generally terminate their relationships with us or our financial advisors at will or on relatively short notice. Further, a number of the products and services we make available to our clients are those offered by third parties and negative perceptions of these financial products and services (or the financial industry in general) may impact the number of withdrawals and redemptions or reduce purchases made by our clients, which would adversely impact the levels of our assets under management. Our clients can also reduce the aggregate amount of managed assets or shift their funds to other types of accounts with different fee rate structures, for any number of reasons, including investment performance, changes in prevailing interest rates, changes in investment preferences or investment management strategy (for example, “active” or “passive” investing styles or the proliferation of exchange traded funds (“ETFs”) or other vehicles like separately managed accounts (“SMAs”)), changes in our (or our advisors’) reputation in the marketplace, a client’s view of ESG factors, changes in client or relationship management, loss of key investment management personnel and financial market performance. This reduction in managed assets, and the associated decrease in revenues and earnings, could have a material adverse effect on our business.
Most of our variable annuity products contain guaranteed minimum death benefits and a majority of our variable annuity products in force contain guaranteed minimum withdrawal and accumulation benefits. Decline or volatility in equity and/or bond markets could result in guaranteed minimum benefits being higher than what current account values would support, which would adversely affect our financial condition and results of operations. Discontinuing the sale of new fixed annuities and variable annuities with living benefits will lessen this risk over time. Although we have hedged a portion of the guarantees for the variable annuity contracts to mitigate the financial loss of equity and/or bond market declines or volatility, there can be no assurance that such a decline or volatility would not materially impact the profitability of certain products or product lines or our financial condition or results of operations. For example, market fluctuations will impact our statutory reserves and required capital, and that may not be aligned with the hedging impacts. Further, the cost of hedging our liability for these guarantees has increased as a result of broad-based market and regulatory-driven changes in the collateral requirements of hedge trading counterparties.
Changes in interest rates may affect our results of operations and financial condition.
Certain of our insurance, annuity, investment products, wrap fees and banking products are sensitive to interest rate fluctuations (inclusive of changes in credit spreads), which could cause future impacts associated with such fluctuations to differ from our17
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Ameriprise Financial, Inc.historical costs. In addition, interest rate fluctuations could result in fluctuations in the valuation of certain minimum guaranteed benefits contained in some of our variable annuity products, something we saw as a result of volatility that resulted from the COVID-19 pandemic. Although we typically hedge to mitigate some of the effect of such fluctuations, significant changes in interest rates (or prolonged periods of low interest rates) could have a material adverse impact on the profitability of certain products or product lines or our results of operations or financial condition. In addition, as rates increase, the posting of collateral for liquidity needs will also increase as a result of the hedging of variable annuity products. Depending on how rapidly rates increase and other factors, we may need to access liquidity sources that are more costly, which could have a material adverse impact on profitability or our results of operations or financial condition.Interest rate fluctuations also could have an adverse effect on the results of our investment portfolio. During periods of declining market interest rates or stagnancy of low interest rates, the interest we receive on variable interest rate investments decreases and we are forced to reinvest the cash we receive as interest or return of principal on our investments in lower-yielding high-grade instruments or in lower-credit instruments to maintain comparable returns. Issuers of certain callable fixed income securities also may decide to prepay their obligations in order to borrow at lower market rates, which increases the risk that we may have to reinvest the cash proceeds of these securities in lower-yielding or lower-credit instruments.
If there is a return to a period of prolonged low interest rates, our spread may be reduced or could become negative. Due to the long-term nature of the liabilities associated with certain of our businesses, such as long term care and universal life with secondary guarantees as well as guaranteed benefits on variable annuities, sustained declines in or stagnancy of low long-term interest rates may subject us to reinvestment risks and increased hedging costs. We periodically review and, where appropriate, adjust our assumptions.
As market interest rates increase or sustain at relatively higher rates, we may credit clients higher rates on interest-sensitive products, such as universal life insurance, face-amount certificates, and banking products and we may increase these rates on in force products to keep these products competitive (which could have an adverse effect on our financial condition and results of operations). Because yields on invested assets may not increase as quickly as current interest rates, we may have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In addition, increases in market interest rates would further increase the unrealized loss position of our investment portfolio and may cause outflows and other negative impacts through increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, or changes in demands of certain bank or certificate products as policyholders, contractholders and clients seek to shift assets to products with perceived higher returns. This process may lead to an earlier than expected outflow of cash from many different areas of our business. These withdrawals, surrenders and other client actions may require investment assets to be sold at a time when the prices of those assets are lower because of the increase in market interest rates, which may result in investment losses to be realized in our results of operations. Also, increases in market interest rates may result in extension of certain cash flows from structured mortgage assets. An increase in policy surrenders and withdrawals also may require us to accelerate amortization of deferred acquisition costs (“DAC”) or other intangibles or cause an impairment of goodwill, which would increase our expenses and reduce our net earnings in the period. If higher market interest rates lead to inflows into interest-sensitive products (such as face-amount certificates and certain banking products) or other changes in product behavior, our capital requirements may increase as well.
Adverse capital and credit market conditions or a downgrade in our credit ratings may significantly affect our ability to meet liquidity needs, our access to capital and our cost of capital.
Volatility, uncertainty and disruption in the capital and credit markets may decrease available liquidity, which we may need to pay our expenses and dividends. If the market conditions hinder our availability to obtain capital or liquidity, our business could suffer.Our liquidity needs are satisfied primarily through our reserves and the cash generated by our operations. We believe the level of cash and securities we maintain, combined with expected cash inflows from investments and operations, is adequate to meet anticipated short-term and long-term payment obligations. In the event current resources are insufficient to satisfy our needs, we may access financing sources such as our committed unsecured revolving credit facility or other bank debt. Additional financing depends on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity, actions by our regulators, and perceptions held by shareholders, customers or lenders.
Further, the financial strength ratings which various rating organizations publish as a measure of an insurance company’s ability to meet contractholder and policyholder obligations, are important to maintain public confidence in our products, our competitive position, and the ability to market our products. Any future downgrade in our financial strength ratings, or the announced potential for a downgrade, could potentially have a significant adverse effect on our financial condition and results of operations in many ways, including: (i) reducing new sales of insurance and annuity products and investment products; (ii) adversely affecting our relationships with our advisors and third-party distributors of our products; (iii) materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders; (iv) requiring us to reduce prices for many of our products and services to remain competitive; and (v) adversely affecting our ability to obtain reinsurance or obtain reasonable pricing on reinsurance.
Ratings agencies have and may continue to increase the frequency and scope of their credit reviews, adjust upward the capital and other requirements employed in the rating organizations’ models for maintenance of ratings levels (including adjusting the framework under which they view our Company’s business mix that drives these requirements), or downgrade ratings applied to particular classes18
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Ameriprise Financial, Inc.of securities or types of institutions, and our ratings could be changed at any time and without any notice by the rating organizations. In addition, rating agencies continually evolve their ratings and other methodologies, and these changes can be to our detriment or benefit and have a material impact on how we view our liquidity and capital.Market conditions or decisions by our ratings agencies that hinder our access to capital may limit our ability to satisfy statutory capital targets, generate fee income and market-related revenue to meet liquidity needs and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital, or bear an unattractive cost of capital which could decrease our profitability and significantly reduce our financial flexibility.
Business Risks
Intense competition and the economies of scale for larger competitors could negatively impact our ability to maintain or increase our market share and profitability.
Our businesses operate in intensely competitive industries, including broker-dealers, banks, asset managers, insurers and other financial institutions, some of which have a larger market share, greater investments in technology and analytics, greater investment in advertising and brand, less regulation or greater financial resources than we do. Furthermore, our competitors may be better able to address trends, structural changes, or movement of assets resulting from industry changes or in response to the uncertain regulatory environment in the U.S. and around the world. We could experience lower sales, higher costs, technology obsolescence or other developments that could negatively impact our results of operations.
A drop in our investment performance as compared to that of our competitors could negatively impact our revenues and profitability.Investment performance is a key competitive factor for our retail and institutional asset management products and services. Strong investment performance supports the retention of our products and services by our clients and creates opportunities for new sales of products and services. It may also result in higher ratings by ratings services such as Morningstar or Lipper, which may compound the foregoing effects. Strong investment performance and its effects are important elements to our stated goals of growing assets under management and greater economies of scale.
There can be no assurance as to how future investment performance will compare to our competitors or that historical performance will be indicative of future returns. Any drop or perceived drop in investment performance as compared to our competitors could cause a decline in sales of our mutual funds and other investment products, an increase in redemptions and the termination of institutional asset management relationships. These impacts may reduce our aggregate amount of assets under management and reduce management fees. Poor investment performance could also adversely affect our ability to expand the distribution of our products through unaffiliated third parties. Further, any drop in market share of mutual funds sales by our advisors or through third party intermediaries, may further reduce profits as sales of other companies’ mutual funds are less profitable than sales of our proprietary funds.We face intense competition in attracting and retaining key talent.Our continued success depends to a substantial degree on our ability to attract, motivate, engage and retain qualified people in a very competitive market. While we are seeing the employment market stabilize compared to recent years, the financial services industry has always been a highly competitive industry. Fewer individuals entering the labor force, increased demand for flexibility and fully remote work, and wage sensitivity due to the inflationary environment put pressure on labor costs and add complexity in recruiting and retaining talent. We continue to assess risk and invest in our employees to remain competitive and have continued to diversify our geographic footprint, however, we also recognize that the possibility of increased turnover may impact our ability to attract, support and retain clients and advisors. We are also dependent on our network of advisors to drive growth and results in our wealth management business (and for a significant portion of the sales of our products) and recruiting and retaining financial advisors is highly competitive and ever-changing. In addition, the investment performance of our asset management products and services, and the retention of our products and services by our clients, are dependent upon the strategies and decisions of our portfolio managers and analysts. From time to time there are regulatory-driven or other trends and developments within the industry, such as changes around the Protocol for Broker Recruiting or the recent proposal by the Federal Trade Commission (and similar state proposals and general scrutiny) around non-competition or non-solicitation agreements, that could potentially impact the dynamics between us and our competitors or negatively impact our business. If employees or advisors who maintain relationships with our clients leave, we may not be able to retain valuable relationships and our clients may choose to leave for a competitor. If we experience a prolonged inability to attract and retain qualified individuals or our recruiting and retention costs increase significantly, our financial condition and results of operations could be materially adversely impacted.The negative performance or default by other financial institutions or other third parties could adversely affect us.We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, hedge funds, insurers, reinsurers, investment funds and other institutions. The operations of U.S. and global financial services institutions are interconnected and a decline in the financial condition of one or more financial services institutions may expose us to credit losses or defaults, limit our access to liquidity or otherwise disrupt the operations of our businesses. While we regularly assess our exposure to different industries19
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Ameriprise Financial, Inc.and counterparties, the performance and financial strength of specific institutions are subject to rapid change, the timing and extent of which cannot be known.
Many transactions with and investments in the products and securities of other financial institutions expose us to credit risk in the event of default of our counterparty. With respect to secured transactions, our credit risk may be exacerbated when the collateral we hold cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the loan or derivative exposure. We also have exposure to financial institutions in the form of unsecured debt instruments, derivative transactions (including with respect to derivatives hedging our exposure on variable annuity contracts with guaranteed benefits), reinsurance, repurchase and underwriting arrangements and equity investments. Any such losses or impairments to the carrying value of these assets could materially and adversely impact our business and results of operations.Issuers of the fixed maturity securities that we own may default on principal and interest payments. Some of our fixed maturity securities may have ratings below investment-grade. Default-related declines in the value of our fixed maturity securities portfolio or consumer credit holdings could cause our net earnings to decline and could also cause us to contribute capital to some of our regulated subsidiaries, which may require us to obtain funding during periods of unfavorable market conditions.
Capital and credit market volatility or a sudden devaluation of a specific product or security (such as the broad impacts experienced from the 2023 regional bank crisis) can exacerbate, and has exacerbated, the risk of third-party defaults, bankruptcy filings, foreclosures, legal actions and other events that may limit the value of or restrict our access and our clients’ access to cash and investments. Although we are not required to do so, we have elected in the past, and we may elect in the future, to compensate clients for losses incurred in response to such events, provide clients with temporary credit or liquidity or other support related to products that we manage, or provide credit liquidity or other support to the financial products we manage. If we elect to provide additional support, we could incur losses from the support we provide and incur additional costs, including financing costs, in connection with the support. These losses and additional costs could be material and could adversely impact our results of operations. If we were to take such actions we may also restrict or otherwise utilize our corporate assets, limiting our flexibility to use these assets for other purposes, and may be required to raise additional capital.
We may not be able to maintain our unaffiliated third-party distribution channels and the sale of unaffiliated products may diminish sales of our own products.
We distribute many of our investment products through unaffiliated third-party advisors and financial institutions. Maintaining and deepening relationships with these unaffiliated distributors is an important part of our growth strategy, as strong third-party distribution arrangements enhance our ability to market our products or service our clients and to increase our assets under management, revenues and profitability. Access to distribution channels is subject to intense competition due to the large number of competitors and products in the investment advisory industry as well as regulatory and consumer trends driving escalating compliance, disclosure and risk management requirements for distributors. Relationships with our distributors are subject to periodic negotiation that may result in increased distribution costs and/or reductions in the amount of our products marketed.
As a result, there can be no assurance that the distribution relationships we have established will continue. Any such reduction in access to (or the economics associated with) third-party distributors may have a material adverse effect on our ability to market our products and to generate revenue in our Advice & Wealth Management and Asset Management segments. Further, any increase in the costs to distribute our products or reduction in the type or amount of products made available for sale may have a material effect on our revenues and profitability.
The sale of third-party products to our clients (and further expansion of our advisor network’s product suite to include additional products of unaffiliated insurance companies and asset managers) may lower sales of our companies’ own products, lead to higher surrenders or redemptions, or other developments which might not be fully offset by higher distribution revenues or other benefits, possibly resulting in an adverse effect on our results of operations.
Our valuation of fixed maturity and equity securities may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to investment valuations that may materially adversely impact our results of operations or financial condition.
Fixed maturity, equity, trading securities and short-term investments, which are reported at fair value on the Consolidated Balance Sheets, represent the majority of our total cash and invested assets. The determination of fair values by management in the absence of quoted market prices is based on valuation methodologies, securities we deem to be comparable, and assumptions deemed appropriate given the circumstances. The fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, current interest rates and credit spreads, and quoted market prices of comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts.During periods of market disruption, including periods of significantly rising or high interest rates and rapidly widening credit spreads or illiquidity, it may be difficult to value certain of our securities. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the financial environment. In such cases, the valuation of certain securities may20
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Ameriprise Financial, Inc.require additional subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable and may require greater estimation as well as valuation methods that are more sophisticated, which may result in values less than the value at which the investments may be ultimately sold. Further, rapidly changing and unexpected credit and equity market conditions could materially impact the valuation of securities as reported within our consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition.The determination of the amount of allowances taken on certain loans and investments is subject to management’s evaluation and judgment and could materially impact our results of operations or financial position.
The determination of the amount of allowances varies by investment type and is based upon our periodic evaluation and assessment of inherent and known risks associated with the respective asset class.
Management uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. The determination of the amount of allowances on loans is based upon the asset’s expected life, considering past events, current conditions and reasonable and supportable economic forecasts. Such evaluations and assessments are revised as conditions change and new information becomes available. Historical trends may not be indicative of future impairments or allowances.
Some of our investments are relatively illiquid and we may have difficulty selling these investments.We invest a portion of our owned assets in certain privately placed fixed income securities, mortgage loans, and limited partnership interests, all of which are relatively illiquid. These asset classes represented 7% of the carrying value of our investment portfolio as of December 31, 2023. If we require significant amounts of cash on short notice in excess of our normal cash requirements, we may have difficulty selling these investments in a timely manner or be forced to sell them for an amount less than we would otherwise have been able to realize, or both, which could have an adverse effect on our financial condition and results of operations.Insurance RisksThe failure of other insurers could require us to pay higher assessments to state insurance guaranty funds.
Our insurance companies are required by law to be members of the guaranty fund association in every state where they are licensed to do business. In the event of insolvency of one or more unaffiliated insurance companies, our insurance companies could be adversely affected by the requirement to pay assessments to the guaranty fund associations. Uncertainty and volatility in the U.S. economy and financial markets in recent years have weakened or may weaken the financial condition of numerous insurers, including insurers currently in receivership, increasing the risk of triggering guaranty fund assessments upon order of liquidation.If the counterparties to our reinsurance arrangements default or otherwise fail to fulfill their obligations, we may be exposed to risks we had sought to mitigate, which could adversely affect our financial condition and results of operations.
We use reinsurance to mitigate certain of our risks. Reinsurance does not relieve us of our direct liability to our policyholders and contractholders, even when the reinsurer is liable to us. Accordingly, we bear credit and performance risk with respect to our reinsurers, including Commonwealth and Genworth Life Insurance Company. In July 2016, we finalized various confidential enhancements with Genworth Life Insurance Company that have been shared, in the normal course of regular reviews, with our Domiciliary Regulators and rating agencies. A reinsurer’s insolvency or its inability or unwillingness to make payments under the terms of our reinsurance agreement could have a material adverse effect on our financial condition and results of operations.If our reserves for future policy benefits and claims or for future certificate redemptions and maturities are inadequate, we may be required to increase our reserve liabilities, which would adversely affect our results of operations and financial condition.
We establish reserves as estimates of our liabilities to provide for future obligations under our insurance policies, annuities and investment certificate contracts. Reserves do not represent an exact calculation of the liability but, rather, are estimates of contract benefits and related expenses we expect to incur over time. The assumptions and estimates we make in establishing reserves require certain judgments about future experience and, therefore, are inherently uncertain. We cannot determine with precision the actual amounts that we will pay for contract benefits, the timing of payments, or whether the assets supporting our stated reserves will increase to the levels we estimate before payment of benefits or claims. We monitor our reserve levels continually. If we were to conclude that our reserves are insufficient to cover actual or expected contract benefits, we would be required to increase our reserves and incur income statement charges for the period in which we make the determination, which would adversely affect our results of operations and financial condition.
Our insurance profitability relies on our assumptions including those regarding morbidity rates, mortality rates and benefit utilization as well as the future persistency of our insurance policies and annuity contracts.We set prices for RiverSource insurance products (and historically LTC insurance) as well as some annuity products based upon expected claims payment patterns, derived from assumptions we make about our policyholders and contractholders, including expenses, fees, investment returns, and morbidity and mortality rates. The long-term profitability of these products depends upon how our actual experience compares with our pricing assumptions. Actual experience can differ from our assumptions for many reasons over the time an insurance product is held. If mortality rates are higher than our pricing assumptions, we could be required to make21
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Ameriprise Financial, Inc.greater payments under our life insurance policies and annuity contracts with guaranteed minimum death benefits than we have projected.
The prices and profitability of our life insurance and deferred annuity products are based in part upon assumptions related to persistency (the probability that a policy or contract will remain in force from one period to the next). For most of our life insurance and deferred annuity products, actual persistency that is lower than our persistency assumptions could have an adverse impact on profitability, especially in the early years of a policy or contract because we would be required to accelerate the amortization of expenses we deferred in connection with the acquisition of the policy or contract.For our LTC insurance, universal life insurance policies with secondary guarantees and variable annuities with guaranteed minimum withdrawal benefits, actual persistency that is higher than our persistency assumptions could have a negative impact on profitability. If these policies remain in force longer than we assumed, we could be required to make greater benefit payments than we had anticipated when we priced or partially reinsured these products.The risk that our claims experience may differ significantly from our pricing assumptions is particularly significant for our LTC insurance products notwithstanding our ability to implement future price increases with regulatory approvals. Though we discontinued offering LTC products in 2003, LTC insurance policies provide for long-duration coverage and, therefore, our actual claims experience will emerge over many years. Our ability to forecast future claim rates for LTC insurance is more limited than life insurance. We have sought to moderate these uncertainties to some extent by partially reinsuring LTC policies at the time the policies were underwritten and limiting our present stand-alone LTC insurance offerings to policies underwritten fully by unaffiliated third-party insurers, and we have also implemented rate increases and provided reduced benefit options on certain in force policies.Because our assumptions regarding persistency experience are inherently uncertain, reserves for future policy benefits and claims may prove to be inadequate if actual persistency experience is different from those assumptions. Although some of our products permit us to increase premiums during the life of the policy or contract, we cannot guarantee that these increases would be sufficient to maintain profitability. Additionally, some of these pricing changes require regulatory approval, which may not be forthcoming. Moreover, many of our products do not permit us to increase premiums or limit those increases during the life of the policy or contract, while premiums on certain other products (primarily LTC insurance) may not be increased without prior regulatory approval. Significant deviations in experience from pricing expectations regarding persistency could have an adverse effect on the profitability of our products.
Operations Risks
A failure to protect our reputation could adversely affect our businesses.Our reputation is one of our most important assets. Our ability to attract and retain customers, investors, employees and advisors is highly dependent upon external perceptions of our company. Damage to our reputation could cause significant harm to our business and prospects. Reputational damage may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in our financial strength or liquidity, clients’ or potential clients’ perceived failure of how we address certain political, environmental, social or governance topics, technological breakdowns, cybersecurity attacks, or other security breaches (including attempted breaches, breaches impacting our vendors or their subcontractors or inadvertent disclosures) resulting in system unavailability, improper disclosure or loss of data integrity relating to client or employee personal information, unethical or improper behavior and the misconduct or error of our employees, advisors and counterparties. Additionally, a failure to develop new products and services, or successfully manage associated operational risks, could harm our reputation and potentially expose us to additional costs, or negative public relations or social media campaigns. Any negative incidents can quickly erode trust and confidence, particularly if they result in adverse mainstream and social media publicity, governmental audits or investigations or litigation. Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us.
Misconduct by our employees and advisors may be difficult to detect and deter and may damage our reputation. This can include improper use of their authorized access to sensitive information. Misconduct or errors by our employees and advisors could result in violations of law, regulatory sanctions and/or serious reputational or financial harm. Misconduct or mistakes can occur in each of our businesses. We cannot always prevent misconduct by our employees and advisors, and the precautions we take to prevent and detect this activity may not be effective in all cases. Preventing and detecting misconduct among our franchisee advisors who are not employees of our company presents additional challenges in that they control their own technology environment on a day-to-day basis and could have an adverse effect on our business. Our reputation depends on our continued identification of and mitigation against conflicts of interest. We have procedures and controls that are designed to identify, address and appropriately disclose perceived conflicts of interest, though our reputation could be damaged if we fail, or appear to fail, to address conflicts of interest appropriately.In addition, the SEC and other federal and state regulators, as well as foreign regulators, have increased their scrutiny of potential conflicts of interest and the actions we may be expected to take when a conflict is encountered. It is possible that potential or perceived conflicts could give rise to litigation or enforcement actions. Also, it is possible that the regulatory scrutiny of, and litigation in connection with, conflicts of interest will make our clients less willing to enter into transactions with us or in certain products or services we offer, which would adversely affect our businesses.
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Ameriprise Financial, Inc.
The direct and indirect effects of climate change could adversely affect our business and operations, both directly and as a result of impacts on our clients, counterparties and entities whose securities we hold.We operate in many regions, countries and communities around the world where our business, and the activities of our clients and counterparties, could be adversely affected by climate change. Climate change may increase the severity and frequency of weather-related catastrophes, or adversely affect our investment portfolio or investor sentiment. This includes the potential for an increase in the frequency and severity of weather-related disasters and pandemics. In addition, climate change regulation may affect the prospects of companies and other entities whose securities we hold, or our willingness to continue to hold their securities. Climate change may also influence investor sentiment with respect to the Company and investments in our portfolio and those available to clients through third-parties. It may also impact other counterparties, including reinsurers, and affect the value of investments, including real estate investments we hold or manage for others. Climate risks can also arise from the inconsistencies and conflicts in the manner in which climate policy and financial regulation is implemented in the many regions where we operate, including initiatives to apply and enforce policy and regulation with extraterritorial effect. Transition risks may arise from societal adjustment to a lower-carbon economy, such as changes in public policy, adoption of new technologies or changes in consumer preferences towards low-carbon goods and services. These risks could also be influenced by changes in the physical climate. Overall, we cannot predict or estimate the long-term impacts on us from climate change or related regulation.Our operational systems and networks (as well as those of our franchise advisors and third parties) are subject to evolving cybersecurity or other technological risks, which could result in the disclosure of confidential information, loss of our proprietary information, damage to our reputation, additional costs to us, regulatory penalties and other adverse impacts.Our business is reliant upon internal and third-party-controlled, developed and operated software (which includes opensource software), technology systems and networks to process, transmit and store information, including our current, potential and former clients’, employees’ and advisors’ personal information, as well as our proprietary information, and to conduct many of our business activities and transactions. Maintaining the security and integrity of our software, information and these systems and networks, and appropriately responding to any cybersecurity and privacy incidents (including attempts), is critical to the success of our business operations, including our reputation, the retention of our advisors and clients, and to the protection of our proprietary information and our clients’ personal information.
We rely on the third parties with whom we do business to identify and remediate software and other vulnerabilities before they can be exploited by bad actors, but they cannot always do so. For example, zero-day vulnerabilities in software and other technology solutions are immediately exploitable by bad actors as occasionally happens with certain of our vendors in the industry. We routinely face attacks and seek to address evolving threats of which we become aware. We have been able to identify, protect, detect, respond to and recover from these attacks to date without a material loss of client financial assets or information through the use of ongoing internal and external threat monitoring and by making continual adjustments to our security and incident response capabilities.We and our advisors, as well as our service providers and clients, have also been threatened by, among others, phishing, vishing, and spear phishing scams, social engineering attacks (such as direct voice contact and any technology or communication mechanism to contact a person), account takeovers, introductions of malware, attempts at electronic break-ins, and the submission of fraudulent payment requests. The number of threats and events has increased substantially every year, which is expected to continue, particularly as the use of artificial intelligence makes these attempts look more legitimate. Attempted or successful breaches or interference by third parties or by insiders that may occur in the future could have a material adverse impact on our business, reputation, financial condition or results of operations.On a corporate basis, various laws and regulations, and in some cases contractual obligations, require us to establish and maintain corporate policies and technical and operational measures designed to protect sensitive client, employee, contractor and vendor information, and to respond to cybersecurity incidents in certain ways and timeframes. We have established policies and implemented such technical and operational measures ourselves and have in place policies that require our service providers and franchisee advisors, each of which control locally their own technology operations, to do the same. The increase in hybrid working among our employees adds complexity to monitoring and processing procedures. Changes in our business or technological advancements may also require corresponding changes in our systems, networks and data security and response measures. While accessing our products and services, our customers may use computers and other devices that sit outside of our security control environment. In addition, the ever-increasing reliance on technology systems and networks and the occurrence and potential adverse impact of attacks on such systems and networks (including in recent well-publicized security breaches at other companies), both generally and in the financial services industry, have enhanced government and regulatory scrutiny of the measures taken by companies to protect against cybersecurity threats and report incidents they suffer. As these threats, and government and regulatory oversight of associated risks, continue to evolve, we may be required to expend additional resources (both direct financial resources and indirect costs like people) to enhance or expand upon the technical and operational security and response measures we currently maintain or that we allow franchise advisors to maintain and control locally. These regulator-driven changes may adversely impact the client experience by, for example, requiring multiple means of verifying the identity of a client before they can interact with us.
Despite the measures we have taken and may in the future take to address and mitigate cybersecurity, privacy and technology risks, we cannot be certain that our systems and networks, or those used by our vendors, will not be subject to successful attacks, breaches or interference. Nor can we guarantee that franchise advisors will comply with our policies and procedures in this regard, or that clients23
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Ameriprise Financial, Inc.will engage in safe and secure online practices. Furthermore, human error occurs from time to time and such mistakes can lead to the inadvertent disclosure of sensitive information. We have a vendor management process, but at times our software or service providers could push through updates that are not fully disclosed to us (or tested by them) and that could alter the control posture of their products. Any such event may result in operational disruptions, as well as unauthorized access to or the disclosure or loss of, our proprietary information or client, employee, vendor, or advisor personal information, which in turn may result in legal claims, regulatory scrutiny and liability, reputational damage, the incurrence of costs to respond to, eliminate, or mitigate further exposure, the loss of clients or advisors, or other damage to our business. While we maintain cyber liability insurance that provides both third-party liability and first-party liability coverages, it may not protect us against all cybersecurity- or privacy-related losses. Furthermore, we may be subject to indemnification costs and liability to third parties if we breach any confidentiality or security obligations regarding vendor data or for losses related to the data. In addition, the trend toward broad consumer and general-public notification of such incidents, including those where our vendors are the party being breached, could exacerbate the harm to our business, reputation, financial condition or results of operations in the event of a breach. Even if we successfully protect our technology infrastructure and the confidentiality of sensitive data and conduct appropriate incident response, we may incur significant expenses in connection with our responses to any such attacks, as well as the adoption, implementation and maintenance of appropriate security measures. In addition, our regulators may seek to hold our company responsible for the acts, mistakes or omissions of our vendors or franchise advisors even where they procure and control much of the physical office space and technology infrastructure they use to operate their businesses locally.Protection from system interruptions and operating errors is important to our business. If we experience a sustained interruption to our telecommunications or data processing systems, or other failure in operational execution, it could harm our business.Operating errors and system or network interruptions could delay and disrupt our operations. Interruptions could be caused by mistake, malfeasance or other operational failures by service provider staff, employee or advisor error or malfeasance, interference by third parties, including hackers, our implementation of new technology, maintenance of existing technology, or natural disasters, each of which may impact our ability to run our systems or encounter varying downtime. Though we plan for resiliency in our systems and test these capabilities, we could face additional downtime or data loss if our plans do not work as expected during a real event. Our financial, accounting, human resources, data processing or other operating systems and facilities may fail to operate or report data properly, experience connectivity disruptions or otherwise become disabled as a result of events that are wholly or partially beyond our control, adversely affecting our ability to process transactions or provide products and services to our clients (some of which have regulatory required response times). Further, while we require their existence by contract, we cannot control the execution of any business continuity or incident response plans implemented by our service providers or our franchise advisors.We rely on third-party service providers and vendors for certain communications, technology and business functions and other services, and we face the risk of their operational failure (including, without limitation, loss of staff due to widespread illness, failure caused by an inaccuracy, untimeliness or other deficiency in data reporting), technical or security failures, termination or capacity constraints of any of the clearing agents, exchanges, clearing houses or other third-party service providers that we use to facilitate or are component providers to our securities transactions and other product manufacturing and distribution activities. These risks are heightened by our deployment in response to both investor interest and evolution in the financial markets of increasingly sophisticated products and technological means for interacting with these products or client accounts. Any such failure, termination or constraint or flawed execution or response could adversely impact our ability to effect transactions, service our clients, manage our exposure to risk, or otherwise achieve desired outcomes.
Risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all market environments, products, vendors, or against all types of risk, including employee and financial advisor misconduct.Our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. Many of our methods of managing risk and the associated exposures are based upon our use of observed historical experience or expectations about future experience (e.g., market behavior, client/policyholder behavior, employee behavior, mortality, etc.) or statistics based on historical models. Experience may not emerge as expected and during periods of market volatility, or due to unforeseen events, the historically-derived experience and correlations may not be valid. As a result, these methods and models may not predict future exposures accurately, which could be significantly greater than what our models indicate. Further some controls are manual and are subject to inherent limitations and we have a general model risk where there is a risk of loss associated with insufficient or inaccurate models that we use to support our decision. This could cause us to incur investment losses or cause our hedging and other risk management strategies to be ineffective. Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated.
Our financial performance also requires us to develop, effectively manage, and market new or existing products and services that appropriately anticipate or respond to changes in the industry and evolving client demands. The development and introduction of new products and services, including the creation of Asset Management and other products with a focus on environmental, social and governance matters, require continued innovative effort and may require significant time, resources, and ongoing support. Further, avoiding introducing or encouraging certain new products (such as cryptocurrency) creates the risk of losing assets or new flows to competitors who encourage or support those products. Substantial risk and uncertainties are associated with the introduction and ongoing maintenance of new products and services, including the implementation of new and appropriate operational controls and24
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Ameriprise Financial, Inc.procedures, shifting and sometimes contradictory client and market preferences, the introduction of competing products or services and compliance with regulatory requirements.
Artificial intelligence (including generative artificial intelligence) presents many benefits in terms of operating efficiency, but also new risks that we need to seek to mitigate through our strategic and risk management policies, such as reliance on information that may be inaccurate or biased results. In addition, the regulatory framework and expectations relating to the use of artificial intelligence are in their early stages as is the use (and how we manage the use) of artificial intelligence in our business.Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including those associated with our key vendors. Insurance and other traditional risk-shifting tools may be held by or available to us in order to manage certain exposures, but they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.
As a holding company, we depend on the ability of our subsidiaries to transfer funds to us to pay dividends and to meet our obligations.We act as a holding company for our subsidiaries, through which substantially all of our operations are conducted. Dividends and returns of capital from our subsidiaries and permitted payments to us under our intercompany arrangements with our subsidiaries are our principal sources of cash to pay shareholder dividends and to meet our financial obligations. These obligations include our operating expenses and interest and principal on our borrowings. If the cash we receive from our subsidiaries pursuant to dividend payment or return of capital and intercompany arrangements is insufficient for us to fund any of these obligations, we may be required to raise cash through the incurrence of additional debt, the issuance of additional equity or the sale of assets. If any of this happens, it could adversely impact our financial condition and results of operations.
Insurance, banking and securities laws and regulations, including the FCA’s Investment Firms Prudential Regime and the FRB’s recent final rules for the “Building Block Approach” may regulate the ability of many of our subsidiaries (such as our insurance, banking and brokerage subsidiaries and our face-amount certificate company) to pay dividends, return capital or make other permitted payments or practically impact our capital structure and dividends or other payments from our subsidiaries. Additionally, the rating organizations effectively impose various capital requirements on our company and our insurance company subsidiaries in order for us to maintain our ratings and the ratings of our insurance subsidiaries. We must manage our business within the expectations of the patchwork of regulations and capital expectations from these parties which are not consistent with one another, use different accounting frameworks (such as GAAP, statutory accounting principles or a mix). A capital action that benefits under one framework may not be beneficial under another framework. As asset values decline or other financial drivers to our business worsen, our and our subsidiaries’ ability to pay dividends, return capital or make other permitted payments can be reduced. Additionally, the various asset classes held by our subsidiaries, and used in determining required capital levels, are weighted differently or are restricted as to the proportion in which they may be held depending upon their liquidity, credit risk and other factors. The regulatory capital requirements and dividend-paying ability of our subsidiaries may also be affected by a change in the mix of products sold by such subsidiaries. Further, the capital requirements imposed upon our subsidiaries may be impacted by heightened regulatory or rating organization scrutiny and intervention, which could negatively affect our and our subsidiaries’ ability to pay dividends or make other permitted payments. Additionally, in the past we have found it necessary and advisable to provide support to certain of our subsidiaries in order to maintain adequate capital for regulatory or other purposes and we may provide such support in the future. The provision of such support could adversely affect our capital, liquidity, and the dividends or other permitted payments received from our subsidiaries.The operation of our business in foreign markets and our investments in non-U.S. denominated securities and investment products subjects us to exchange rate and other risks in connection with international operations and earnings and income generated overseas.
While we are a U.S.-based company, a portion of our business operations occurs outside of the U.S. and some of our investments are not denominated in U.S. dollars. As a result, we are exposed to certain foreign currency exchange risks that could reduce U.S. dollar equivalent earnings as well as negatively impact our general account and other proprietary investment portfolios. Appreciation of the U.S. dollar could, and has, unfavorably affect net income from foreign operations, the value of non-U.S. dollar denominated investments and investments in foreign subsidiaries. In comparison, depreciation of the U.S. dollar could positively affect our net income from foreign operations and the value of non-U.S. dollar denominated investments, though such depreciation could also diminish investor, creditor and rating organizations’ perceptions of our company compared to peer companies that have a relatively greater proportion of foreign operations or investments.In addition, conducting and increasing our international operations subjects us to additional risks that, generally, we do not face in the U.S., including: (i) potentially adverse cross-border tax consequences, including the complexities of foreign value added tax systems and restrictions on the repatriation of earnings; (ii) the localization of our solutions and related costs; (iii) the burdens of complying with a wide variety of foreign laws and different, potentially conflicting legal standards, including laws and regulations; and (iv) social and economic situations outside of the U.S. The occurrence of any one of these risks could negatively affect our international business and, consequently, our results of operations generally. Additionally, operating in international markets also requires significant management attention and financial resources and we cannot be certain these operations will produce desired levels of revenues or25
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Ameriprise Financial, Inc.profitability. Our 2021 acquisition of the BMO Global Asset Management (EMEA) business heightened these risks as it significantly expanded our asset management business in EMEA.The occurrence of natural or man-made disasters and catastrophes could adversely affect our results of operations and financial condition.The occurrence of natural disasters and catastrophes, including earthquakes, hurricanes, floods, tornadoes, fires, blackouts, severe winter weather, explosions, pandemic disease and global health emergencies (such as COVID-19) and man-made disasters, including acts of terrorism, riots, civil unrest including large-scale protests, insurrections and military actions, could adversely affect our results of operations or financial condition. Such disasters and catastrophes may damage our facilities, preventing our service providers, employees and financial advisors from performing their roles, or otherwise disturbing our ordinary business operations and by impacting insurance claims, as described below. These impacts could be particularly severe to the extent they affect access to physical facilities, the physical well-being of large numbers of our employees, our computer-based data processing, transmission, storage and retrieval systems and destroy or release valuable data. Such disasters and catastrophes may also impact us indirectly by changing the condition and behaviors of our customers, business counterparties and regulators, as well as by causing declines or volatility in the economic and financial markets.The potential effects of natural and man-made disasters and catastrophes on certain of our businesses include but are not limited to the following: (i) a catastrophic loss of life may materially increase the amount of or accelerate the timing in which benefits are paid under our insurance policies; (ii) an increase in claims and any resulting increase in claims reserves caused by a disaster may harm the financial condition of our reinsurers, thereby impacting the cost and availability of reinsurance and the probability of default on reinsurance recoveries; (iii) widespread unavailability of staff; and (iv) declines and volatility in the financial markets that may decrease the value of our assets under management and administration, which could harm our financial condition and reduce our management fees.
We face risks arising from acquisitions and divestitures.We have made acquisitions and divestitures (including sales of insurance blocks via reinsurance transactions and other strategic partnerships) in the past and may pursue similar strategic transactions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment (including our risk management policies and procedures), difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing customers of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, difficulties with the software, technology and systems of the acquired entities that were subject to a different control posture before the acquisition (and until such time as we can replace these or make investments to uplift their capabilities), the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations or expected synergies for the acquired businesses. Fully integrating an acquired company or business into our operations (such as our 2021 acquisition of the BMO Global Asset Management (EMEA) business) takes a significant amount of time and attention and incurs both expected and unexpected integration costs over several years. Integrations, particularly larger and more global integrations, are time-consuming and expensive and could significantly disrupt our business.Risks in divestiture transactions (many of which are present in sales of insurance blocks via reinsurance) include difficulties in the separation of the disposed business, retention of obligations to indemnify for certain liabilities, the failure of counterparties to satisfy payment obligations, unfavorable market conditions that may impact any earnout or contingency payment due to us, if any, and unexpected difficulties in losing employees of the disposed business. We cannot provide assurance that we will be successful in overcoming these risks or any other problems encountered with acquisitions, divestitures and other strategic transactions. Execution of our business strategies also may require certain regulatory approvals or consents, which may include approvals of the FRB and other domestic and non-U.S. regulatory authorities. These regulatory authorities may impose conditions on the activities or transactions contemplated by our business strategies which may negatively impact our ability to realize fully the expected benefits of certain opportunities. These risks may prevent us from realizing the expected benefits from acquisitions or divestitures and could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Legal, Regulatory and Tax Risks
Legal and regulatory actions are inherent in our businesses and could result in financial losses or harm our businesses.We are, and in the future may be, subject to legal and regulatory actions in the ordinary course of our operations, both domestically and internationally. Actions brought against us may result in awards, settlements, penalties, injunctions or other adverse results, including reputational damage. In addition, we may incur significant expenses in connection with our defense against such actions regardless of their outcome. Various regulatory and governmental bodies have the authority to review our products and business practices and those of our employees and independent financial advisors and to bring regulatory or other legal actions against us if, in their view, our practices, or those of our employees or advisors, were or are deemed to be improper. Pending legal and regulatory actions include proceedings relating to aspects of our businesses and operations that are specific to us and proceedings that are typical26
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Ameriprise Financial, Inc.of the industries and businesses in which we operate. Some of these proceedings have been brought on behalf of various alleged classes of complainants.Our businesses are heavily regulated, and changes to the laws and regulations applicable to our businesses may have an adverse effect on our operations, reputation and financial condition.
Virtually all aspects of our business, including the activities of our parent company and our various subsidiaries, are subject to various federal, state and international laws and regulations. For a discussion of the regulatory framework in which we operate, see “Business - Regulation” included in Part I, Item 1 of this Annual Report on Form 10-K. Compliance with these applicable laws and regulations is expensive, time-consuming and personnel-intensive, and we have invested and will continue to invest substantial resources to ensure compliance by our parent company and our subsidiaries, directors, officers, employees, registered representatives and agents. In addition, sometimes these laws and regulations (and potential changes) are in conflict. Further, any future legislation or changes to the laws and regulations applicable to our businesses, as well as changes to the interpretation and enforcement of such laws and regulations, may affect our operations and financial condition. Legislation could require changes to our business operations or our regulatory reporting relationships which can require significant cost, effort and trade-offs. Such changes may impact our business operations and profitability, increase our costs of doing business, increase compliance costs as well as have a material effect on fee rates, interest rates and foreign exchange rates, which could materially impact our products, services, investments, results of operations, products and liquidity in ways that we cannot predict. Ongoing changes to regulation and oversight of the financial industry may generate outcomes, the full impact of which cannot be immediately ascertained as government intervention could distort customary and expected commercial behavior.Certain examples of legislative and regulatory changes that may impact our businesses are described below. Some of the changes could present operational challenges and increase costs. Ultimately the complexities and increased costs of legislative and regulatory changes could have an impact on our ability to offer cost-effective and innovative products to our clients.
Regulation of Products and Services: Any mandated reductions or restructuring of the fees we charge for our products and services resulting from regulatory initiatives or proceedings could reduce our revenues and/or earnings. For example, the DOL has proposed changes to regulations that define our advisors’ relationships with their clients, such as requiring a fiduciary relationship between our advisors and clients for assets held in qualified investment accounts.
Insurance Regulation: Changes in the state regulatory requirements applicable to our insurance companies that are made for the benefit of the consumer sometimes lead to additional expense for the insurer and, thus, could have a material adverse effect on our financial condition and results of operations. Further, we cannot predict the effect that proposed federal legislation may have on our businesses or competitors, such as the option of federally chartered insurers, a mandated federal systemic risk regulator, future initiatives of the FIO within the Department of the Treasury or by any of the Domiciliary Regulators, the NAIC or the International Association of Insurance Supervisors with respect to insurance holding company supervision, capital standards or systemic risk regulation. As discussed earlier, the FRB has finalized minimum capital requirements which will begin to take effect in 2024.
International Regulation: Potential measures taken by foreign and international authorities regarding anti-bribery, the nationalization or expropriation of assets, the imposition of limits on foreign ownership of local companies, increased environmental sustainability or governance requirements, changes in laws (including tax laws and regulations) and in their application or interpretation, imposition of large fines, political instability, capital requirements or dividend limitations, price controls, changes in applicable currency, currency exchange controls, or other restrictions that prevent us from transferring funds from these operations out of the countries in which they operate or converting local currencies we hold to U.S. dollars or other currencies may negatively affect our business.
Employment Regulation: We have a global workforce and face expansion of employment laws in various states, cities, and countries. These regulations vary from jurisdiction to jurisdiction, and we seek to provide a uniform employee experience, while simultaneously complying with unique or differing regulatory requirements. A portion of our advisor force consists of independent contractors. Legislative or regulatory action that redefines the criteria for determining whether a person is an employee or an independent contractor could materially impact our industry, our business and our relationships with (and ability to provide various types of support to) our advisors and their staff, resulting in an adverse effect on our results or operations.
Privacy, Cybersecurity and Data: Our business is subject to comprehensive legal requirements concerning the use and protection of personal information, including client and employee information, from a multitude of different functional regulators and law enforcement bodies. This regulatory framework is rapidly changing through an ever-increasing patchwork of state laws and regulation (such as the California Consumer Privacy Act and the California Privacy Rights Act) and international developments like GDPR. Further developments could negatively impact our business and operations.
Artificial intelligence and external customer data and information source: Our business is subject to state insurance laws that sets forth regulatory expectations for insurers using artificial intelligence or certain external customer data or information sources. We expect state regulatory activity to rapidly increase in 2024 with the recent adoption of the NAIC’s Model Bulletin on the Use of Artificial Intelligence Systems by Insurers. Federal and other regulators (such as the SEC) are also beginning to propose rules around artificial intelligence. These developments as well as other developments could negatively impact our business and operations.
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Ameriprise Financial, Inc.As a Savings and Loan Holding Company, we are subject to supervision by the FRB and various prudential standards that may limit our activities and strategies.Ameriprise Financial is subject to ongoing supervision by the FRB, including supervision and prudential standards, certain capital requirements, stress-testing, resolution planning, information security and privacy, and certain risk management requirements. Further, as a financial holding company, our activities are limited to those that are financial in nature, incidental to a financial activity or, with FRB approval, complementary to a financial activity. Our broker-dealers and bank subsidiary are limited in their ability to lend or transact with affiliates and are subject to minimum regulatory capital and other requirements, as well as limitations on their ability to use funds deposited with them in brokerage or bank accounts to fund their businesses. These requirements may hinder our ability to access funds from our subsidiaries. We may also become subject to a prohibition or limitations on our ability to pay dividends or repurchase our common stock. The federal banking regulators, including the OCC, FRB, FDIC, and SEC (through FINRA) have the authority and under certain circumstances, the obligation, to limit or prohibit dividend payments and stock repurchases by the banking organizations they supervise, including Ameriprise and its bank subsidiaries. Any changes to regulations or changes to the supervisory approach may also result in increased compliance costs to the extent we are required to modify our existing compliance policies, procedures and practices.Compliance with bank holding company laws and regulations, including the Volcker Rule, impacts the structure and availability of certain of our products and services and our costs in providing those products and services. Costs of compliance may be driven by how these laws and regulations and the scale of Ameriprise Bank evolves over the course of time as well as strategic acquisitions and other growth strategies we pursue in the future.
Failure to meet one or more of these requirements could, depending on the violation, limit Ameriprise’s ability to undertake new activities, continue certain activities, or make acquisitions other than those permitted generally for bank holding companies. Execution of our business strategies also may require certain regulatory approvals or consents, which may include approvals of the FRB and other domestic and non-U.S. regulatory authorities. These regulatory authorities may impose conditions on the activities or transactions contemplated by our business strategies which may negatively impact our ability to realize fully the expected benefits of certain opportunities.
Changes in corporate tax laws and regulations and changes in the interpretation of such laws and regulations, as well as adverse determinations regarding the application of such laws and regulations, could adversely affect our earnings and could make some of our products less attractive to clients.We are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have significant business operations. We must make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes and must also make estimates about when in the future certain items affect taxable income in the various tax jurisdictions. In addition, changes to the Internal Revenue Code, state or foreign tax laws, administrative rulings or court decisions could increase our provision for income taxes and reduce our earnings. Furthermore, guidance issued by the U.S. Department of Treasury and others can be critical to the application and impact of new laws and in avoiding unintended impacts from legislation. The jurisdictions we operate in may not always provide clear guidance that is responsive to industry questions and concerns. If guidance is unclear, it could increase our taxes or create a potential for disagreement about interpretation of the tax code.
Many of the products we issue or on which our businesses are based (including both insurance products and non-insurance products) receive favorable treatment under current U.S. federal income or estate tax law. Changes in U.S. federal income or estate tax law could reduce or eliminate the tax advantages of certain of our products and thus make such products less attractive to clients or cause a change in client demand and activity.
We may not be able to protect our intellectual property and may be subject to infringement claims.
We rely on a combination of contractual rights and copyright, trademark, patent registrations and trade secret laws to establish and protect our intellectual property. Although we use a broad range of measures to protect our intellectual property rights, third parties may infringe or misappropriate our intellectual property or attempt to use the same to defraud others. We may have to litigate to enforce and protect our brand and reputation, copyrights, trademarks, patents, trade secrets and know-how, or to determine their scope, validity or enforceability, which represents a diversion of resources that may be significant in amount and may not prove successful. The loss of intellectual property protection, or the inability to secure or enforce the protection of our intellectual property assets, could have a material adverse effect on our business and our ability to compete.
We also may be subject to costly litigation in the event that another party alleges our operations or activities infringe upon, or constitute misappropriation of, such other party’s intellectual property rights. Third parties may have, or may eventually be issued, patents or other protections that could be infringed by our products, methods, processes or services, or could otherwise limit our ability to offer certain product features. Any party that holds a patent could make a claim of infringement against us. The threat of patent litigation from non-practicing entities could impact financial services firms and successful resolution could still have a significant financial impact. We may also be subject to claims by third parties for breach of copyright, trademark, license rights, or misappropriation of trade secret rights. Any such claims and any resulting litigation could result in significant liability for damages. If we were found to have infringed or misappropriated a third-party patent or other intellectual property rights, we could incur substantial
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Ameriprise Financial, Inc.liability, and in some circumstances could be enjoined from providing certain products or services to our customers or utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on our business, results of operations and financial condition.Changes in and the adoption of accounting standards could have a material impact on our financial statements.Our accounting policies provide a standard for how we record and report our results of operations and financial condition. We prepare our financial statements in accordance with U.S. generally accepted accounting principles. It is possible that accounting changes could have a material effect on our results of operations and financial condition. The Financial Accounting Standards Board (“FASB”), the SEC and other regulators often change the financial accounting and reporting standards governing the preparation of our financial statements. These changes are difficult to predict and could impose additional governance, internal control and disclosure demands. In some cases, we could be required to apply a new or revised standard retrospectively, resulting in our restating prior period financial statements. As an example, in August 2018, the FASB updated the accounting standard related to long-duration insurance and annuity contracts that is effective January 1, 2023 and resulted in significant changes to how we account for and report our insurance and annuity contracts (both in force and new business), including updating assumptions used to measure the liability for future policy benefits for traditional and limited-payment contracts, measurement of market risk benefits and amortization of DAC. See Note 3 to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on recent accounting pronouncements.
FY 2024-12-31 (later)
Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including those described below, that could have a material adverse effect on our business, financial condition or results of operations and could cause the trading price of our common stock to decline. We believe that the following information identifies the material factors affecting our company based on the information we currently know. However, the risks and uncertainties our company faces are not limited to those described below. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Market Risks
Our results of operations and financial condition may be adversely affected by market fluctuations and by economic, political and other factors.Our results of operations and financial condition may be materially affected by market fluctuations and by economic and other factors (whether actual or perceived). Such factors, which can be global, regional, national or local in nature, include: (i) the level and16
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Ameriprise Financial, Inc.volatility of the markets, including equity prices, interest rates, commodity prices, currency values and other market indices and drivers; (ii) geopolitical strain, terrorism and armed conflicts, (iii) political dynamics or elections and social, economic and market conditions; (iv) the availability and cost of capital; (v) global health emergencies; (vi) technological changes and events; (vii) U.S. and foreign government fiscal and tax policies; (viii) U.S. and foreign government ability, real or perceived, to avoid defaulting on government securities; (ix) the availability and cost of credit and hedge markets; (x) periods of elevated inflation; (xi) natural disasters such as weather catastrophes; and (xii) other factors affecting investor sentiment and confidence in the financial markets. Furthermore, changes in consumer economic variables, such as the number and size of personal bankruptcy filings, the rate of unemployment, decreases in property values, and the level of consumer confidence and consumer debt, may substantially affect consumer financials, which, in turn, could impact client activity in all of our businesses. These factors also may have an impact on our ability to achieve our strategic objectives or to pay dividends or otherwise return capital from our subsidiaries to our holding company.
Declines and volatility in U.S. and global market conditions have impacted our businesses in the past, are impacting us now and may continue to impact us in the same, new or different ways in the future. Our businesses have been, and in the future may be, adversely affected by U.S. and global capital market and credit crises, the repricing of credit risk, equity market volatility and decline, and stress or recession in the U.S. and global economies generally. Each of our segments operates in these markets with exposure for us and our clients in securities, loans, derivatives, alternative investments, seed capital and other commitments. It is difficult to predict when, how long and to what extent the aforementioned adverse conditions will exist, which of our markets, products and businesses will be directly affected and to what extent our clients may seek to bring claims arising out of investment performance that is affected by these conditions. As a result, these factors could materially adversely impact our financial condition and results of operations.
These factors will also impact client behavior. Market downturns, stagnation, and volatility may cause, and have caused, individual investors to limit or decrease their participation in global markets negatively impacting our retail business and/or our product sales. Market conditions, regulatory actions, tax laws, and our competitive industry environment are among the reasons current shareholders in our mutual funds, closed-end funds, exchange traded funds (“ETFs”), hedge funds, OEICs, SICAVs, unit trusts, investment trusts and other pooled investment vehicles, contractholders in our annuity products and policyholders in our protection products may opt to withdraw cash values for those products (or for certain protection products, to reduce their withdrawal activity). If we are unable to offer appropriate product alternatives which encourage clients to continue purchasing in the face of actual or perceived market volatility, our sales and management fee revenues could decline.
Downturns and volatility in markets or the departure of a key client have had, and may in the future have, an adverse effect on the revenues and returns from our asset management services, retail advisory accounts, variable annuity contracts, banking products and other products. Because the profitability of these products and services depends on fees related primarily to the value of assets under management, declines in the markets will reduce our revenues because the value of the investment assets we manage will be reduced. In addition, a significant portion of our revenue is derived from investment management agreements with the Columbia Management family of mutual funds or other investment managers which are terminable on 60 days’ notice. Although some contracts governing investment management services are subject to termination for failure to meet performance benchmarks, institutional and individual clients can generally terminate their relationships with us or our financial advisors at will or on relatively short notice. Further, a number of the products and services we make available to our clients are those offered by third parties and negative perceptions of these financial products and services (or the financial industry in general) may impact the number of withdrawals and redemptions or reduce purchases made by our clients, which would adversely impact the levels of our assets under management. Our clients can also reduce the aggregate amount of managed assets or shift their funds to other types of accounts with different fee rate structures, for any number of reasons, including investment performance, changes in prevailing interest rates, changes in investment preferences or investment management strategy (for example, “active” or “passive” investing styles or the proliferation of ETFs or other vehicles like separately managed accounts (“SMAs”)), changes in our (or our advisors’) reputation in the marketplace, a client’s view of ESG factors, changes in client or relationship management, loss of key investment management personnel and financial market performance. This reduction in managed assets or significant redemptions, and the associated decrease in revenues and earnings, could have a material adverse effect on our business, particularly in products or services where we have less scale and a reduction in managed assets can make the product not viable or even require us to exit the product.
Most of our variable annuity products contain guaranteed minimum death benefits and a majority of our variable annuity products in force contain guaranteed minimum withdrawal and accumulation benefits. Decline or volatility in equity and/or bond markets could result in guaranteed minimum benefits being higher than what current account values would support, which would adversely affect our financial condition and results of operations. Discontinuing the sale of new fixed annuities and variable annuities with living benefits will lessen this risk over time. Although we have hedged a portion of the guarantees for the variable annuity contracts to mitigate the financial loss of equity and/or bond market declines or volatility, there can be no assurance that such a decline or volatility would not materially impact the profitability of certain products or product lines or our financial condition or results of operations. For example, market fluctuations will impact our statutory reserves and required capital, and that may not be aligned with the hedging impacts. In addition to risks from guarantees discussed above, structured variable annuity contracts contain index-linked risks that adjust the policyholder’s or contractholder’s account value based on equity movements. These risks are hedged with derivatives, which are a material component of our overall hedging program. Collateral requirements for the hedging program are market-sensitive, and certain market environments (e.g., rising interest rates) will result in increased needs for liquidity to satisfy these requirements. Depending on17
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Ameriprise Financial, Inc.how rapidly the market moves and other factors, we may need to access liquidity sources that are more costly, which could have an adverse impact on profitability or our results of operations or financial condition.
Changes in interest rates may affect our results of operations and financial condition.
Certain of our insurance, annuity, investment products, wrap fees and banking products are sensitive to interest rate fluctuations (inclusive of changes in credit spreads), which could cause future impacts associated with such fluctuations to differ from our historical results of operations. In addition, interest rate fluctuations could result in fluctuations in the valuation of certain minimum guaranteed benefits contained in some of our variable annuity products. Although we typically hedge to mitigate some of the effect of such fluctuations, significant changes in interest rates (or prolonged periods of low interest rates) could have a material adverse impact on the profitability of certain products or product lines or our results of operations or financial condition.Interest rate fluctuations also could have an adverse effect on the results of our investment portfolio. During periods of declining market interest rates or stagnancy of low interest rates, the interest we receive on variable interest rate investments decreases and we are forced to reinvest the cash we receive as interest or return of principal on our investments in lower-yielding high-grade instruments or in lower-credit instruments to maintain comparable returns. Issuers of certain callable fixed income securities also may decide to prepay their obligations in order to borrow at lower market rates, which increases the risk that we may have to reinvest the cash proceeds of these securities in lower-yielding or lower-credit instruments.
If there is a return to a period of prolonged low interest rates, our spread may be reduced or could become negative. Due to the long-term nature of the liabilities associated with certain of our businesses, such as long term care and universal life with secondary guarantees as well as guaranteed benefits on variable annuities, sustained declines in or stagnancy of low long-term interest rates may subject us to reinvestment risks and increased hedging costs. We periodically review and, where appropriate, adjust our assumptions.
As market interest rates increase or sustain at relatively higher rates, we may credit clients higher rates on interest-sensitive products, such as universal life insurance, face-amount certificates, and banking products and we may increase these rates on in force products to keep these products competitive (which could have an adverse effect on our financial condition and results of operations). Because yields on invested assets may not increase as quickly as current interest rates, we may have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In addition, increases in market interest rates would further increase the unrealized loss position of our investment portfolio and may cause outflows and other negative impacts through increased policy surrenders, withdrawals from life insurance policies and annuity contracts and requests for policy loans, or changes in demands of certain bank or certificate products as policyholders, contractholders and clients seek to shift assets to products with perceived higher returns. This process may lead to an earlier than expected outflow of cash from many different areas of our business. These withdrawals, surrenders and other client actions may require investment assets to be sold at a time when the prices of those assets are lower because of the increase in market interest rates, which may result in investment losses to be realized in our results of operations. Also, increases in market interest rates may result in extension of certain cash flows from structured mortgage assets. An increase in policy surrenders and withdrawals also may require us to accelerate amortization of deferred acquisition costs (“DAC”) or other intangibles or cause an impairment of goodwill, which would increase our expenses and reduce our net earnings in the period. If higher market interest rates lead to inflows into interest-sensitive products (such as face-amount certificates and certain banking products) or other changes in product behavior, our capital requirements may increase as well.
Adverse capital and credit market conditions or a downgrade in our credit ratings may significantly affect our ability to meet liquidity needs, our access to capital and our cost of capital.
Volatility, uncertainty and disruption in the capital and credit markets may decrease available liquidity, which we may need to pay our expenses and dividends. If the market conditions hinder our availability to obtain capital or liquidity, our business could suffer.Our liquidity needs are satisfied primarily through our reserves and the cash generated by our operations. We believe the level of cash and securities we maintain, combined with expected cash inflows from investments and operations, is adequate to meet anticipated short-term and long-term payment obligations. In the event current resources are insufficient to satisfy our needs, we may access financing sources such as our committed unsecured revolving credit facility or other bank debt. Additional financing depends on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity, actions by our regulators, and perceptions held by stakeholders, clients or lenders.
Further, the financial strength ratings which various rating organizations publish as a measure of an insurance company’s ability to meet contractholder and policyholder obligations, are important to maintain public confidence in our products, our competitive position, and the ability to market our products. Any future downgrade in our financial strength ratings, or the announced or perceived potential for a downgrade, could potentially have a significant adverse effect on our financial condition and results of operations.
Ratings agencies have and may continue to increase the frequency and scope of their credit reviews, adjust upward the capital and other requirements employed in the rating organizations’ models for maintenance of ratings levels (including adjusting the framework under which they view our business mix that drives these requirements), or downgrade ratings applied to particular classes of securities or types of institutions, and our ratings could be changed at any time and without any notice by the rating organizations. In18
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Ameriprise Financial, Inc.addition, rating agencies continually evolve their ratings and other methodologies, and these changes can be to our detriment or benefit and have a material impact on how we view our liquidity and capital.Market conditions or decisions by our ratings agencies that hinder our access to capital may limit our ability to satisfy statutory capital targets, generate fee income and market-related revenue to meet liquidity needs and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital, or bear an unattractive cost of capital which could decrease our profitability and significantly reduce our financial flexibility.
Business Risks
Intense competition and the economies of scale for larger competitors could negatively impact our ability to maintain or increase our market share and profitability.
Our businesses operate in intensely competitive industries, including broker-dealers, banks, asset managers, insurers and other financial institutions, some of which have a larger market share, greater investments in technology and analytics, greater investment in advertising and brand, less regulation or greater financial resources than we do. Furthermore, our competitors may be better able to address trends, structural changes, or movement of assets resulting from industry changes or in response to the uncertain regulatory environment in the U.S. and around the world. We could experience lower sales, higher costs, technology obsolescence or other developments that could negatively impact our results of operations.
A drop in our investment performance as compared to that of our competitors could negatively impact our revenues and profitability.Investment performance is a key competitive factor for our retail and institutional asset management products and services and is a key driver of growing assets under management and economies of scale. Strong investment performance supports the retention of our products and services by our clients and creates opportunities for new sales of products and services. It may also result in higher ratings by ratings services such as Morningstar or Lipper, which may compound the foregoing effects.
There can be no assurance as to how future investment performance will compare to our competitors or that historical performance will be indicative of future returns. Any drop or perceived drop in investment performance as compared to our competitors could cause a decline in sales of our investment products, an increase in redemptions and the termination of asset management relationships. These impacts may reduce our aggregate amount of assets under management and reduce management fees. Poor investment performance could also adversely affect our ability to expand the distribution of our products through unaffiliated third parties. Further, any drop in market share of mutual funds sales by our advisors or through third party intermediaries, may further reduce profits as sales of other companies’ mutual funds are less profitable than sales of our proprietary funds.We face intense competition in attracting and retaining key talent.Our continued success depends on our ability to attract, motivate, engage and retain high-performing and high-potential talent in a highly competitive industry. Although the employment market is stabilizing compared to recent years, the financial services sector remains a highly competitive industry, especially for top talent. We proactively assess retention risks and invest in our employees to remain an employer of choice. Additionally, we have diversified our geographic footprint to attract and retain top talent globally, including expanding our workforce in India.
We are also dependent on our network of advisors to drive growth and results in our wealth management business (and for a significant portion of the sales of our products). Recruiting and retaining financial advisors is highly competitive and constantly evolving. The investment performance of our asset management products and services, as well as retention of our products and services by our clients, depend on the strategies and decisions of our portfolio managers and analysts.
From time to time there are regulatory-driven or other trends and developments within the industry that could potentially impact the dynamics between us and our competitors or negatively impact our business. If employees or advisors who maintain relationships with our clients leave or retire without succession plans, we may not be able to retain valuable relationships, and our clients may choose to leave for a competitor. If we experience a prolonged inability to attract and retain qualified individuals or our recruiting and retention costs increase significantly, our financial condition and results of operations could be materially adversely impacted.The negative performance or default by other financial institutions or other third parties could adversely affect us.We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, hedge funds, insurers, reinsurers, investment funds and other institutions. The operations of U.S. and global financial services institutions are interconnected and a decline in the financial condition of one or more financial services institutions may expose us to credit losses or defaults, limit our access to liquidity or otherwise disrupt the operations of our businesses. While we regularly assess our exposure to different industries and counterparties, the performance and financial strength of specific institutions are subject to rapid change, the timing and extent of which cannot be known.
Many transactions with and investments in the products and securities of other financial institutions expose us to credit risk in the event of default of our counterparty. With respect to secured transactions, our credit risk may be exacerbated when the collateral we19
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Ameriprise Financial, Inc.hold cannot be realized upon or is liquidated at prices insufficient to recover the full amount of the loan or derivative exposure. We also have exposure to financial institutions in the form of unsecured debt instruments, derivative transactions (including with respect to derivatives hedging our exposure on variable annuity contracts with guaranteed benefits and structured variable annuities), reinsurance, repurchase and underwriting arrangements and equity investments. Any such losses or impairments to the carrying value of these assets could materially and adversely impact our business and results of operations.Issuers of the fixed maturity securities that we own may default on principal and interest payments. Some of our fixed maturity securities may have ratings below investment-grade. Default-related declines in the value of our fixed maturity securities portfolio or consumer credit holdings could cause our net earnings to decline and could also cause us to contribute capital to some of our regulated subsidiaries, which may require us to obtain funding during periods of unfavorable market conditions.
Capital and credit market volatility or a sudden devaluation of a specific product or security (such as the broad impacts experienced from the 2023 regional bank crisis) can exacerbate, and has exacerbated, the risk of third-party defaults, bankruptcy filings, foreclosures, legal actions and other events that may limit the value of or restrict our access and our clients’ access to cash and investments. Although we are not required to do so, we have elected in the past, and we may elect in the future, to compensate clients for losses incurred in response to such events, provide clients with temporary credit or liquidity or other support related to products that we manage, or provide credit liquidity or other support to the financial products we manage. If we elect to provide additional support, we could incur losses from the support we provide and incur additional costs, including financing costs, in connection with the support. These losses and additional costs could be material and could adversely impact our results of operations. If we were to take such actions we may also restrict or otherwise utilize our corporate assets, limiting our flexibility to use these assets for other purposes, and may be required to raise additional capital.
We may not be able to maintain our unaffiliated third-party distribution channels and the sale of unaffiliated products may diminish sales of our own products.
We distribute many of our investment products through unaffiliated third-party advisors and financial institutions. Maintaining and deepening relationships with these unaffiliated distributors is an important part of our growth strategy, as strong third-party distribution arrangements enhance our ability to market our products or service our clients and to increase our assets under management, revenues and profitability. Access to distribution channels is subject to intense competition due to the large number of competitors and products in the investment advisory industry as well as regulatory and consumer trends driving escalating compliance, disclosure and risk management requirements for distributors. Relationships with our distributors are subject to periodic negotiation that may result in increased distribution costs and/or reductions in the amount of our products marketed.
As a result, there can be no assurance that the distribution relationships we have established will continue. Any such reduction in access to (or the economics associated with) third-party distributors may have a material adverse effect on our ability to market our products and to generate revenue in our Advice & Wealth Management and Asset Management segments. Further, any increase in the costs to distribute our products or reduction in the type or amount of products made available for sale may have a material effect on our revenues and profitability.
The sale of third-party products to our clients (and further expansion of our advisor network’s product suite to include additional products of unaffiliated insurance companies and asset managers) may lower sales of our companies’ own products, lead to higher surrenders or redemptions, or other developments which might not be fully offset by higher distribution revenues or other benefits, possibly resulting in an adverse effect on our results of operations.
Our valuation of fixed maturity and equity securities may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to investment valuations that may materially adversely impact our results of operations or financial condition.
Fixed maturity, equity, trading securities and short-term investments, which are reported at fair value on the Consolidated Balance Sheets, represent the majority of our total cash and invested assets. The determination of fair values by management in the absence of quoted market prices is based on valuation methodologies, securities we deem to be comparable, and assumptions deemed appropriate given the circumstances. The fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, current interest rates and credit spreads, and quoted market prices of comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts.During periods of market disruption, including periods of significantly rising or high interest rates and rapidly widening credit spreads or illiquidity, it may be difficult to value certain of our securities and the value of our securities as reported within our Consolidated Financial Statements and the period-to-period changes in value could vary significantly. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the financial environment. In such cases, the valuation of certain securities may require additional subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable and may require greater estimation as well as valuation methods that are more sophisticated,20
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Ameriprise Financial, Inc.which may result in values less than the value at which the investments may be ultimately sold. Decreases in value may have a material adverse effect on our results of operations or financial condition.The determination of the amount of allowances taken on certain loans and investments is subject to management’s evaluation and judgment and could materially impact our results of operations or financial position.
The determination of the amount of allowances varies by investment type and is based upon our periodic evaluation and assessment of inherent and known risks associated with the respective asset class.
Management uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. The determination of the amount of allowances on loans is based upon the asset’s expected life, considering past events, current conditions and reasonable and supportable economic forecasts. Such evaluations and assessments are revised as conditions change and new information becomes available. Historical trends may not be indicative of future impairments or allowances.
Some of our investments are relatively illiquid and we may have difficulty selling these investments.We invest a portion of our owned assets in certain privately placed fixed income securities, mortgage loans, and limited partnership interests, all of which are relatively illiquid. These asset classes represented 8% of the carrying value of our investment portfolio as of December 31, 2024. If we require significant amounts of cash on short notice in excess of our normal cash requirements, we may have difficulty selling these investments in a timely manner or be forced to sell them for an amount less than we would otherwise have been able to realize, or both, which could have an adverse effect on our financial condition and results of operations.Insurance RisksIf the counterparties to our reinsurance arrangements default or otherwise fail to fulfill their obligations, we may be exposed to risks we had sought to mitigate, which could adversely affect our financial condition and results of operations.
We use reinsurance to mitigate certain of our risks. Reinsurance does not relieve us of our direct liability to our policyholders and contractholders, even when the reinsurer is liable to us. Accordingly, we bear credit and performance risk with respect to our reinsurers, including Commonwealth and Genworth Life Insurance Company. In July 2016, we finalized various confidential enhancements with Genworth Life Insurance Company that have been shared, in the normal course of regular reviews, with our Domiciliary Regulators and rating agencies. A reinsurer’s insolvency or its inability or unwillingness to make payments under the terms of our reinsurance agreement could have a material adverse effect on our financial condition and results of operations.The failure of other insurers could require us to pay higher assessments to state insurance guaranty funds.
Our insurance companies are required by law to be members of the guaranty fund association in every state where they are licensed to do business. In the event of insolvency of one or more unaffiliated insurance companies, our insurance companies could be adversely affected by the requirement to pay assessments to the guaranty fund associations. Uncertainty and volatility in the U.S. economy and financial markets in recent years have weakened or may weaken the financial condition of numerous insurers, including insurers currently in receivership, increasing the risk of triggering guaranty fund assessments upon order of liquidation.If our reserves for future policy benefits and claims or for future certificate redemptions and maturities are inadequate, we may be required to increase our reserve liabilities, which would adversely affect our results of operations and financial condition.
We establish reserves as estimates of our liabilities to provide for future obligations under our insurance policies, annuities and investment certificate contracts. Reserves do not represent an exact calculation of the liability but, rather, are estimates of contract benefits and related expenses we expect to incur over time. The assumptions and estimates we make in establishing reserves require certain judgments about future experience and, therefore, are inherently uncertain. We cannot determine with precision the actual amounts that we will pay for contract benefits, the timing of payments, or whether the assets supporting our stated reserves will increase to the levels we estimate before payment of benefits or claims. We monitor our reserve levels continually. If we were to conclude that our reserves are insufficient to cover actual or expected contract benefits, we would be required to increase our reserves and incur income statement charges for the period in which we make the determination, which would adversely affect our results of operations and financial condition.
Our insurance profitability relies on our assumptions including those regarding morbidity rates, mortality rates and benefit utilization as well as the future persistency of our insurance policies and annuity contracts.We set prices for insurance products as well as some annuity products based upon expected claims payment patterns, derived from assumptions we make about our policyholders and contractholders, including expenses, fees, investment returns, and morbidity and mortality rates. The long-term profitability of these products depends upon how our actual experience compares with our pricing assumptions. Actual experience can differ from our assumptions for many reasons over the time an insurance product is held. If mortality rates are higher than our pricing assumptions, we could be required to make greater payments under our life insurance policies and annuity contracts with guaranteed minimum death benefits than we have projected.
The prices and profitability of our life insurance and deferred annuity products are based in part upon assumptions related to persistency (the probability that a policy or contract will remain in force from one period to the next). For most of our life insurance21
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Ameriprise Financial, Inc.and deferred annuity products, actual persistency that is lower than our persistency assumptions could have an adverse impact on profitability, especially in the early years of a policy or contract because we would be required to accelerate the amortization of expenses we deferred in connection with the acquisition of the policy or contract.For our LTC insurance, universal life insurance policies with secondary guarantees and variable annuities with guaranteed minimum withdrawal benefits, actual persistency that is higher than our persistency assumptions could have a negative impact on profitability. If these policies remain in force longer than we assumed, we could be required to make greater benefit payments than we had anticipated when we priced or partially reinsured these products.The risk that our claims experience may differ significantly from our pricing assumptions is particularly significant for our LTC insurance products notwithstanding our ability to implement future price increases with regulatory approvals. Though we discontinued offering LTC products in 2003, LTC insurance policies provide for long-duration coverage and, therefore, our actual claims experience will continue to emerge over many years. Our ability to forecast future claim rates for LTC insurance is more limited than life insurance. We have sought to moderate these uncertainties to some extent by partially reinsuring LTC policies at the time the policies were underwritten and limiting our present stand-alone LTC insurance offerings to policies underwritten fully by unaffiliated third-party insurers, and we have also implemented rate increases and provided reduced benefit options on certain in force policies.Because our assumptions regarding persistency experience are inherently uncertain, reserves for future policy benefits and claims may prove to be inadequate if actual persistency experience is different from those assumptions. Although some of our products permit us to increase premiums during the life of the policy or contract, we cannot guarantee that these increases would be sufficient to maintain profitability. Additionally, some of these pricing changes require regulatory approval, which may not be forthcoming. Moreover, many of our products do not permit us to increase premiums or limit those increases during the life of the policy or contract, while premiums on certain other products (primarily LTC insurance) may not be increased without prior regulatory approval. Significant deviations in experience from pricing expectations regarding persistency could have an adverse effect on the profitability of our products.
Operations Risks
A failure to protect our reputation could adversely affect our businesses.Our reputation is one of our most important assets. Our ability to attract and retain clients, investors, employees and advisors is highly dependent upon external perceptions of our company. Damage to our reputation could cause significant harm to our business and prospects. Reputational damage may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in our financial strength or liquidity, clients’ or potential clients’ perceived failure of how we address certain political, environmental, social or governance topics, technological breakdowns, cybersecurity attacks, or other security breaches (including attempted breaches, breaches impacting our vendors or their subcontractors or inadvertent disclosures) resulting in system unavailability, improper disclosure or loss of data integrity relating to client or employee personal information, unethical or improper behavior and the misconduct or error of our employees, advisors and counterparties. Additionally, a failure to develop new products and services, or successfully manage associated operational risks, could harm our reputation and potentially expose us to additional costs, or negative public relations or social media campaigns. Any negative incidents can quickly erode trust and confidence, particularly if they result in adverse mainstream and social media publicity, governmental audits or investigations or litigation. Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us.
Misconduct by our employees and advisors may be difficult to detect and deter and may damage our reputation. This can include improper use of their authorized access to sensitive information. Misconduct or errors by our employees and advisors could result in violations of law, regulatory sanctions and/or serious reputational or financial harm. Misconduct or mistakes can occur in each of our businesses. We cannot always prevent misconduct by our employees and advisors, and the precautions we take to prevent and detect this activity may not be effective in all cases. We seek to aid our advisors and provide certain requirements and support to protect our non-employee franchise advisors’ technology solutions to run their businesses, but they control their own technology environment on a day-to-day basis and could have an adverse effect on our business. Our reputation depends on our continued identification of and mitigation against conflicts of interest. We have procedures and controls that are designed to identify, address and appropriately disclose perceived conflicts of interest, though our reputation could be damaged if we fail, or appear to fail, to address conflicts of interest appropriately.In addition, the SEC and other federal and state regulators, as well as foreign regulators, have increased their scrutiny of potential conflicts of interest and the actions we may be expected to take when a conflict is encountered. It is possible that potential or perceived conflicts could give rise to litigation or enforcement actions. Also, it is possible that the regulatory scrutiny of, and litigation in connection with, conflicts of interest will make our clients less willing to enter into transactions with us or in certain products or services we offer, which would adversely affect our businesses.
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Ameriprise Financial, Inc.
The direct and indirect effects of climate change could adversely affect our business and operations, both directly and as a result of impacts on our clients, counterparties and entities whose securities we hold.We operate in many regions, countries and communities around the world where our business, and the activities of our clients and counterparties, could be adversely affected by climate change. Climate change may increase the severity and frequency of weather-related catastrophes, or adversely affect our investment portfolio or investor sentiment. This includes the potential for an increase in the frequency and severity of weather-related disasters and pandemics. In addition, climate change regulation may affect the prospects of companies and other entities whose securities we hold, or our willingness to continue to hold their securities. Climate change may also influence investor sentiment with respect to the Company and investments in our portfolio and those available to clients through third parties. It may also impact other counterparties, including reinsurers, and affect the value of investments, including real estate investments we hold or manage for others. Climate risks can also arise from the inconsistencies and conflicts in the manner in which climate policy, disclosure requirements and financial regulation is implemented in the many regions where we operate, including initiatives to apply and enforce policy and regulation with extraterritorial effect. Transition risks may arise from societal adjustment to a lower-carbon economy, such as changes in public policy, adoption of new technologies or changes in consumer preferences towards low-carbon goods and services. These risks could also be influenced by changes in the physical climate. Overall, we cannot predict or estimate the long-term impacts on us from climate change or related regulation.Our operational systems and networks (as well as those of our franchise advisors and third parties) are subject to evolving cybersecurity or other technological risks, which could result in the disclosure of confidential information, loss of our proprietary information, damage to our reputation, additional costs to us, regulatory penalties and other adverse impacts.Our business is reliant upon internal and third-party-controlled, -developed and -operated software (which includes opensource software), technology systems and networks to process, transmit and store information, including our current, potential and former clients’, employees’ and advisors’ personal information, as well as our proprietary information, and to conduct many of our business activities and transactions. Maintaining the security and integrity of our software, information and these systems and networks, and appropriately responding to any cybersecurity and privacy incidents (including attempts to attack or access our network), is critical to the success of our business operations, including our reputation, the retention of our advisors and clients, and to the protection of our proprietary information and our clients’ personal information.
We rely on the third parties with whom we do business to identify and remediate software and other vulnerabilities in the assets and systems they use to run their business before they can be exploited by bad actors, but the third parties cannot always do so. For example, zero-day vulnerabilities in software and other technology solutions are immediately exploitable by bad actors as occasionally happens with certain of our vendors in the industry. We routinely face attacks and seek to address evolving threats of which we become aware. We have been able to identify, protect, detect, respond to and recover from these attacks to date without a material loss of client financial assets or information through the use of ongoing internal and external threat monitoring and by making continual adjustments to our security and incident response capabilities.We and our advisors, as well as our service providers and clients, have also been threatened by, among others, phishing, vishing, and spear phishing scams, social engineering attacks (such as direct voice contact and any technology or communication mechanism to contact a person), account takeovers, introductions of malware, attempts at electronic break-ins, and the submission of fraudulent payment requests. The number of threats and events has increased substantially every year, which is expected to continue, particularly as the use of artificial intelligence makes these attempts look more legitimate. Attempted or successful breaches or interference by third parties or by insiders that may occur in the future could have a material adverse impact on our business, reputation, financial condition or results of operations.On a corporate basis, various laws and regulations, and in some cases contractual obligations, require us to establish and maintain corporate policies and technical and operational measures designed to protect sensitive client, employee, contractor and vendor information, and to respond to cybersecurity incidents in certain ways and timeframes. We have established policies and implemented such technical and operational measures ourselves and have in place policies that require our service providers and franchisee advisors, each of which control locally their own technology operations, to do the same. The hybrid work environment among our employees adds complexity to monitoring and processing procedures. Changes in our business or technological advancements may also require corresponding changes in our systems, networks and data security and response measures. While accessing our products and services, our clients may use computers and other devices that sit outside of our security control environment. In addition, the ever-increasing reliance on technology systems and networks and the occurrence and potential adverse impact of attacks on such systems and networks (including in recent well-publicized security breaches at other companies), both generally and in the financial services industry, have enhanced government and regulatory scrutiny of the measures taken by companies to protect against cybersecurity threats and report incidents they suffer. As these threats, and government and regulatory oversight of associated risks, continue to evolve, we may be required to expend significant additional resources (both direct financial resources and indirect costs like people) to enhance or expand upon the technical and operational security and response measures we currently maintain or that we allow franchise advisors to maintain and control locally. These regulator-driven changes may adversely impact the client experience by, for example, requiring multiple or new means of verifying the identity of a client before they can interact with us.
Despite the measures we have taken and may in the future take to address and mitigate cybersecurity, privacy and technology risks, we cannot be certain that our systems and networks, or those used by our vendors and franchisees, will not be subject to successful23
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Ameriprise Financial, Inc.attacks, breaches or interference. Nor can we guarantee that advisors and employees will comply with our policies and procedures in this regard, that clients will engage in safe and secure online practices, or that vendors and franchisees will effectively deploy and maintain the security measures and protocols that we impose. Furthermore, human error occurs from time to time and such mistakes can lead to the inadvertent disclosure of sensitive information. We have a vendor management process, but at times our software or service providers could push through updates that are not fully disclosed to us (or tested by them) and that could alter the control posture of their products. Any such event may result in operational disruptions, as well as unauthorized access to or the disclosure or loss of, our proprietary information or client, employee, vendor, or advisor personal information, which in turn may result in legal claims, regulatory scrutiny and liability, reputational damage, the incurrence of costs to respond to, eliminate, or mitigate further exposure, the loss of clients or advisors, or other damage to our business. While we maintain cyber liability insurance that provides both third-party liability and first-party liability coverages, it may not protect us against all cybersecurity- or privacy-related losses. Furthermore, we may be subject to indemnification costs and liability to third parties if we breach any confidentiality or security obligations regarding vendor data or for losses related to the data. In addition, the trend toward broad consumer and general-public notification of such incidents, including those where our vendors are the party being breached, could exacerbate the harm to our business, reputation, financial condition or results of operations in the event of a breach. Even if we successfully protect our technology infrastructure and the confidentiality of sensitive data and conduct appropriate incident response, we may incur significant expenses in connection with our responses to any such attacks, as well as the adoption, implementation and maintenance of appropriate security measures. In addition, our regulators may seek to hold our company responsible for the acts, mistakes or omissions of our vendors or franchise advisors even where they procure and control much of the physical office space and technology infrastructure they use to operate their businesses locally.Protection from system interruptions and operating errors is important to our business. If we experience a sustained interruption to our telecommunications or data processing systems, or other failure in operational execution, it could harm our business.Operating errors and system or network interruptions could delay and disrupt our operations. Interruptions could be caused by mistake, malfeasance or other operational failures by service provider staff, employee or advisor error or malfeasance, interference by third parties, including hackers, our implementation of new technology, maintenance of existing technology, or natural disasters, each of which may impact our ability to run our systems or encounter varying downtime. Though we plan for resiliency in our systems and test these capabilities, we could face additional downtime or data loss if our plans do not work as expected during a real event. Our financial, accounting, human resources, data processing or other operating systems and facilities may fail to operate or report data properly, experience connectivity disruptions or otherwise become disabled as a result of events that are wholly or partially beyond our control, adversely affecting our ability to process transactions or provide products and services to our clients (some of which have regulatory required response times). Further, we cannot control the execution of any business continuity or incident response plans implemented by our service providers or our franchise advisors.We rely on third-party service providers and vendors for certain communications, technology and business functions and other services, and we face the risk of their operational failure (including, without limitation, loss of staff due to widespread illness, failure caused by an inaccuracy, untimeliness or other deficiency in data reporting), technical or security failures, termination or capacity constraints of any of the clearing agents, exchanges, clearing houses or other third-party service providers that we use to facilitate or are component providers to our securities transactions and other product manufacturing and distribution activities. These risks are heightened by our deployment in response to both investor interest and evolution in the financial markets of increasingly sophisticated products and technological means for interacting with these products or client accounts. Any such failure, termination or constraint or flawed execution or response could adversely impact our ability to effect transactions, service our clients, manage our exposure to risk, or otherwise achieve desired outcomes.
Risk management policies and procedures may not be fully effective in identifying or mitigating risk exposure in all market environments, products, vendors, or against all types of risk, including employee and financial advisor misconduct.Our policies and procedures to identify, monitor and manage risks may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. Many of our methods of managing risk and the associated exposures are based upon our use of observed historical experience or expectations about future experience (e.g., market behavior, client/policyholder behavior, employee behavior, mortality, etc.) or statistics based on historical models. Experience may not emerge as expected and during periods of market volatility, or due to unforeseen events, the historically-derived experience and correlations may not be valid. As a result, these methods and models may not predict future exposures accurately, which could be significantly greater than what our models indicate. Further some controls are manual and are subject to inherent limitations and we have a general model risk where there is a risk of loss associated with insufficient or inaccurate models that we use to support our decisions. This could cause us to incur investment losses or cause our hedging and other risk management strategies to be ineffective. Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that are publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated.
Our financial performance also requires us to develop, effectively manage, and market new or existing products and services that appropriately anticipate or respond to changes in the industry and evolving client demands. The development and introduction of new products and services, including the creation of Asset Management and other products with a focus on environmental, social and governance matters, require continued innovative effort and may require significant time, resources, and ongoing support. Further, avoiding introducing or encouraging certain new products (such as cryptocurrency) creates the risk of losing assets or new flows to24
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Ameriprise Financial, Inc.competitors who encourage or support those products. Substantial risk and uncertainties are associated with the introduction and ongoing maintenance of new products and services, including the implementation of new and appropriate operational controls and procedures, shifting and sometimes contradictory client and market preferences, the introduction of competing products or services and compliance with regulatory requirements.
Artificial intelligence (including generative artificial intelligence) presents many benefits in terms of operating efficiency, but also certain risks that we need to seek to mitigate through our strategic and risk management policies, such as reliance on information that may be inaccurate or unfairly discriminatory results. In addition, the regulatory framework and expectations relating to the use of artificial intelligence are in their early stages as is the use (and how we manage the use) of artificial intelligence in our business.Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events, and these policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including those associated with our key vendors. Insurance and other traditional risk-shifting tools may be held by or available to us in order to manage certain exposures, but they are subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency.
As a holding company, we depend on the ability of our subsidiaries to transfer funds to us to pay dividends and to meet our obligations.We act as a holding company for our subsidiaries, through which substantially all of our operations are conducted. Dividends and returns of capital from our subsidiaries and permitted payments to us under our intercompany arrangements with our subsidiaries are our principal sources of cash to pay shareholder dividends and to meet our financial obligations. These obligations include our operating expenses, interest and principal on our borrowings, and any other contractual commitments. If the cash we receive from our subsidiaries pursuant to dividend payment or return of capital and intercompany arrangements is insufficient for us to fund any of these obligations, we may be required to raise cash through the incurrence of additional debt, the issuance of additional equity or the sale of assets. If any of this happens, it could adversely impact our financial condition and results of operations.
Insurance, banking and securities, and other laws and regulations may regulate the ability of many of our subsidiaries (such as our insurance, banking and brokerage subsidiaries, FCA-regulated asset management entities, and our face-amount certificate company) to pay dividends, return capital or make other permitted payments or practically impact our capital structure and dividends or other payments from our subsidiaries. Additionally, the rating organizations effectively impose various financial and capital requirements on our company and our insurance company subsidiaries in order for us to maintain our ratings and the ratings of our insurance subsidiaries. The regulatory capital requirements, rating agency financial or capital expectations, and dividend-paying ability of our subsidiaries may be affected by a variety of factors, including markets, business plans, policyholder behavior, and investment decisions and performance. These differing requirements and expectations use different accounting frameworks (such as GAAP, statutory accounting principles or a mix). Further, the financial and capital requirements imposed upon our subsidiaries may be impacted by heightened regulatory or rating organization scrutiny and intervention, which could negatively affect our and our subsidiaries’ ability to pay dividends or make other permitted payments. Additionally, in the past we have found it necessary and advisable to provide support to certain of our subsidiaries in order to maintain adequate capital for regulatory or other purposes and we may provide such support in the future. The provision of such support could adversely affect our capital, liquidity, and the dividends or other permitted payments received from our subsidiaries.The operation of our business in foreign markets and our investments in non-U.S. denominated securities and investment products subjects us to exchange rate and other risks in connection with international operations and earnings and income generated overseas.
While we are a U.S.-based company, a portion of our business operations occurs outside of the U.S. and some of our investments are not denominated in U.S. dollars. As a result, we are exposed to certain foreign currency exchange risks that could reduce U.S. dollar equivalent earnings as well as negatively impact our general account and other proprietary investment portfolios. Appreciation of the U.S. dollar could, and has, unfavorably affect net income from foreign operations, the value of non-U.S. dollar denominated investments and investments in foreign subsidiaries. In comparison, depreciation of the U.S. dollar could positively affect our net income from foreign operations and the value of non-U.S. dollar denominated investments, though such depreciation could also diminish investor, creditor and rating organizations’ perceptions of our company compared to peer companies that have a relatively greater proportion of foreign operations or investments.In addition, conducting and increasing our international operations subjects us to additional risks that, generally, we do not face in the U.S., including: (i) potentially adverse cross-border tax consequences, including the complexities of transfer pricing, foreign value added tax systems and restrictions on the repatriation of earnings; (ii) the localization of our solutions and related costs; (iii) the burdens of complying with a wide variety of foreign laws and different, potentially conflicting legal standards, including laws and regulations; and (iv) social and economic situations outside of the U.S. The occurrence of any one of these risks could negatively affect our international business and, consequently, our results of operations generally. Additionally, operating in international markets also requires significant management attention and financial resources and we cannot be certain these operations will produce desired levels of revenues or profitability.25
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Ameriprise Financial, Inc.The occurrence of natural or man-made disasters and catastrophes could adversely affect our results of operations and financial condition.The occurrence of natural disasters and catastrophes, including earthquakes, hurricanes, floods, tornadoes, fires, blackouts, severe winter weather, explosions, pandemic disease and global health emergencies and man-made disasters, including acts of terrorism, riots, civil unrest including large-scale protests, insurrections and military actions, could adversely affect our results of operations or financial condition. Such disasters and catastrophes may damage our facilities, preventing our service providers, employees and financial advisors from performing their roles, or otherwise disturbing our ordinary business operations and by impacting insurance claims, as described below. These impacts could be particularly severe to the extent they affect access to physical facilities, the physical well-being of large numbers of our employees, our computer-based data processing, transmission, storage and retrieval systems and destroy or release valuable data. Such disasters and catastrophes may also impact us indirectly by changing the condition and behaviors of our clients, business counterparties and regulators, as well as by causing declines or volatility in the economic and financial markets.The potential effects of natural and man-made disasters and catastrophes on certain of our businesses include but are not limited to the following: (i) a catastrophic loss of life may materially increase the amount of or accelerate the timing in which benefits are paid under our insurance policies; (ii) an increase in claims and any resulting increase in claims reserves caused by a disaster may harm the financial condition of our reinsurers, thereby impacting the cost and availability of reinsurance and the probability of default on reinsurance recoveries; (iii) widespread unavailability of staff; and (iv) declines and volatility in the financial markets that may decrease the value of our assets under management and administration, which could harm our financial condition and reduce our management fees.
We face risks arising from acquisitions and divestitures.We have made acquisitions and divestitures in the past and may pursue similar strategic transactions in the future. Risks in acquisition transactions include difficulties in the integration of acquired businesses into our operations and control environment (including our risk management policies and procedures), difficulties in assimilating and retaining employees and intermediaries, difficulties in retaining the existing clients of the acquired entities, assumed or unforeseen liabilities that arise in connection with the acquired businesses, difficulties obtaining regulatory approval or integrating into regulatory regimes, difficulties with the software, technology and systems of the acquired entities that were subject to a different control posture before the acquisition (and until such time as we can replace these or make investments to uplift their capabilities), the failure of counterparties to satisfy any obligations to indemnify us against liabilities arising from the acquired businesses, and unfavorable market conditions that could negatively impact our growth expectations or expected synergies for the acquired businesses. Fully integrating an acquired company or business into our operations (such as our 2021 acquisition of the BMO Global Asset Management (EMEA) business) takes a significant amount of time and attention and incurs both expected and unexpected integration costs over several years. Integrations, particularly larger and more global integrations, are time-consuming and expensive and could significantly disrupt our business.Risks in divestiture transactions (many of which are present in sales of insurance blocks via reinsurance) include difficulties in the separation of the disposed business, retention of obligations to indemnify for certain liabilities, the failure of counterparties to satisfy payment obligations, unfavorable market conditions that may impact any earnout or contingency payment due to us, if any, and unexpected difficulties in losing employees of the disposed business. We cannot provide assurance that we will be successful in overcoming these risks or any other problems encountered with acquisitions, divestitures and other strategic transactions. Execution of our business strategies also may require certain regulatory approvals or consents, which may include approvals of the FRB and other domestic and non-U.S. regulatory authorities. These regulatory authorities may impose conditions on the activities or transactions contemplated by our business strategies which may negatively impact our ability to realize fully the expected benefits of certain opportunities. These risks may prevent us from realizing the expected benefits from acquisitions or divestitures and could result in the failure to realize the full economic value of a strategic transaction or the impairment of goodwill and/or intangible assets recognized at the time of an acquisition. These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.
Legal, Regulatory and Tax Risks
Legal and regulatory actions are inherent in our businesses and could result in financial losses or harm our businesses.We are, and in the future may be, subject to legal and regulatory actions in the ordinary course of our operations, both domestically and internationally. Actions brought against us may result in judgements, verdicts, awards, settlements, penalties, injunctions or other adverse results, including reputational damage. In addition, we may incur significant expenses in connection with our defense against such actions regardless of their outcome. Various regulatory and governmental bodies have the authority to review our products and business practices and those of our employees and independent financial advisors and to bring regulatory or other legal actions against us if, in their view, our practices, or those of our employees or advisors, were or are deemed to be improper. Pending legal and regulatory actions include proceedings relating to aspects of our businesses and operations that are specific to us and proceedings that are typical of the industries and businesses in which we operate. Some of these proceedings have been brought on behalf of various alleged classes of complainants.26
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Ameriprise Financial, Inc.Our businesses are heavily regulated, and changes to the laws and regulations applicable to our businesses may have an adverse effect on our operations, reputation and financial condition.
Virtually all aspects of our business, including the activities of our parent company and our various subsidiaries, are subject to various federal, state and international laws and regulations. For a discussion of the regulatory framework in which we operate, see “Business - Regulation” included in Part I, Item 1 of this Annual Report on Form 10-K. Compliance with these applicable laws and regulations is expensive, time-consuming and personnel-intensive, and we have invested and will continue to invest substantial resources to ensure compliance by our parent company and our subsidiaries, directors, officers, employees, registered representatives and agents. In addition, sometimes these laws and regulations (and potential changes) are in conflict. Further, any future legislation or changes to the laws and regulations applicable to our businesses, as well as changes to the interpretation and enforcement of such laws and regulations, may affect our operations and financial condition. Legislation could require changes to our business operations or our regulatory reporting relationships which can require significant cost, effort and trade-offs. Such changes may impact our business operations and profitability, increase our costs of doing business, increase compliance costs as well as have a material effect on fee rates, interest rates and foreign exchange rates, which could materially impact our products, services, investments, results of operations, products and liquidity in ways that we cannot predict. Ongoing changes to regulation and oversight of the financial industry may generate outcomes, the full impact of which cannot be immediately ascertained as government intervention could distort customary and expected commercial behavior.Some of the legislative and regulatory changes could present operational challenges and increase costs. Ultimately the complexities and increased costs of legislative and regulatory changes could have an impact on our ability to offer cost-effective and innovative products to our clients.As a Savings and Loan Holding Company, we are subject to supervision by the FRB and various prudential standards that may limit our activities and strategies.Ameriprise Financial is subject to ongoing supervision by the FRB, including supervision and prudential standards, capital requirements, stress-testing, resolution planning, information security and privacy, and risk management requirements. Further, as a financial holding company, our activities are limited to those that are financial in nature, incidental to a financial activity or, with FRB approval, complementary to a financial activity. Our broker-dealers and bank subsidiary are limited in their ability to lend or transact with affiliates and are subject to minimum regulatory capital and other requirements, as well as limitations on their ability to use funds deposited with them in brokerage or bank accounts to fund their businesses. These requirements may hinder our ability to access funds from our subsidiaries. We may also become subject to a prohibition or limitations on our ability to pay dividends or repurchase our common stock. The federal banking regulators, including the OCC, FRB, FDIC, and SEC (through FINRA) have the authority and under certain circumstances, the obligation, to limit or prohibit dividend payments and stock repurchases by the banking organizations they supervise, including Ameriprise and its bank subsidiaries. Any changes to regulations or changes to the supervisory approach may also result in increased compliance costs to the extent we are required to modify our existing compliance policies, procedures and practices.Compliance with bank holding company laws and regulations, including the Volcker Rule, impacts the structure and availability of certain of our products and services and our costs in providing those products and services. Costs of compliance may be driven by how these laws and regulations and the scale of Ameriprise Bank evolves over the course of time as well as strategic acquisitions and other growth strategies we pursue in the future.
Failure to meet one or more of these requirements could, depending on the violation, limit Ameriprise’s ability to undertake new activities, continue certain activities, or make acquisitions other than those permitted generally for bank holding companies. Execution of our business strategies also may require certain regulatory approvals or consents, which may include approvals of the FRB and other domestic and non-U.S. regulatory authorities. These regulatory authorities may impose conditions on the activities or transactions contemplated by our business strategies which may negatively impact our ability to realize fully the expected benefits of certain opportunities.
Changes in corporate tax laws and regulations and changes in the interpretation of such laws and regulations, as well as adverse determinations regarding the application of such laws and regulations, could adversely affect our earnings and could make some of our products less attractive to clients.We are subject to the income tax laws of the U.S., its states and municipalities and those of the foreign jurisdictions in which we have significant business operations. We make judgments and interpretations about the application of these inherently complex tax laws when determining the provision for income taxes and also make estimates about when in the future certain items affect taxable income in the various tax jurisdictions. In addition, changes to the Internal Revenue Code, state or foreign tax laws, administrative rulings or court decisions could increase our provision for income taxes and reduce our earnings. Furthermore, guidance issued by the U.S. Department of Treasury and others has been critical to the application and impact of new laws and in avoiding unintended impacts from legislation. The jurisdictions we operate in may not always provide clear guidance that is responsive to industry questions and concerns. If guidance is unclear, it could increase our taxes or create a potential for disagreement about interpretation of the tax code.
Many of the products we offer or on which our businesses are based (including both insurance products and non-insurance products) receive favorable treatment under current U.S. federal income or estate tax law. Changes in U.S. federal income or estate tax law could
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Ameriprise Financial, Inc.reduce or eliminate the tax advantages of certain of our products and thus make such products less attractive to clients or cause a change in client demand and activity.
We may not be able to protect our intellectual property and may be subject to infringement claims.
We rely on a combination of contractual rights and copyright, trademark, patent registrations and trade secret laws to establish and protect our intellectual property. Although we use a broad range of measures to protect our intellectual property rights, third parties may infringe or misappropriate our intellectual property or attempt to use the same to defraud others. We may have to litigate to enforce and protect our brand and reputation, copyrights, trademarks, patents, trade secrets and know-how, or to determine their scope, validity or enforceability, which represents a diversion of resources that may be significant in amount and may not prove successful. The loss of intellectual property protection, or the inability to secure or enforce the protection of our intellectual property assets, could have a material adverse effect on our business and our ability to compete.
We also may be subject to costly litigation in the event that another party alleges our operations or activities infringe upon, or constitute misappropriation of, such other party’s intellectual property rights. Third parties may have, or may eventually be issued, patents or other protections that could be infringed by our products, methods, processes or services, or could otherwise limit our ability to offer certain product features. Any party that holds a patent could make a claim of infringement against us. The threat of patent litigation from non-practicing entities could impact financial services firms and successful resolution could still have a significant financial impact. We may also be subject to claims by third parties for breach of copyright, trademark, license rights, or misappropriation of trade secret rights. Any such claims and any resulting litigation could result in significant liability for damages. If we were found to have infringed or misappropriated a third-party patent or other intellectual property rights, we could incur substantial liability, and in some circumstances could be enjoined from providing certain products or services to our clients or utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on our business, results of operations and financial condition.Changes in and the adoption of accounting standards could have a material impact on our financial statements.Our accounting policies provide a standard for how we record and report our results of operations and financial condition. We prepare our financial statements in accordance with U.S. generally accepted accounting principles. It is possible that accounting changes could have a material effect on our results of operations and financial condition. The Financial Accounting Standards Board, the SEC and other regulators often change the financial accounting and reporting standards governing the preparation of our financial statements. These changes are difficult to predict and could impose additional governance, internal control and disclosure demands. In some cases, we could be required to apply a new or revised standard retrospectively, resulting in our restating prior period financial statements.
Item 7 · Management's Discussion & Analysis
+385 paragraphs −589 paragraphs ~385 changed
FY 2023-12-31 (earlier)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the “Forward-Looking Statements,” our Consolidated Financial Statements and Notes that follow and the “Risk Factors” included in our Annual Report on Form 10-K. References to “Ameriprise Financial,” “Ameriprise,” the “Company,” “we,” “us,” and “our” refer to Ameriprise 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 nearly 130-year history of providing financial solutions. We are a long-standing leader in financial planning and advice with $1.4 trillion in assets under management and administration as of December 31, 2023. We offer a broad range of products and services designed to achieve individual and institutional clients’ financial objectives. For additional discussion of our businesses, see Part I, Item 1 of this Annual Report on Form 10-K.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 and U.S. economies, changes in interest and inflation rates, financial market volatility, fluctuations in foreign exchange rates, geopolitical strain, pandemics, 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 of this Annual Report on Form 10-K - “Risk Factors” - 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 values of market risk benefits and embedded derivatives 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 but have recently experienced a substantial increase in rates with uncertainty about where rates will go in the future. A higher (lower) interest rate environment may result in decreases (increases) to our long-duration contract reserves, which may impact our adjusted operating earnings after tax. For additional discussion on our interest rate risk, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”In the third quarter, we conducted our annual review of life insurance, annuity and long term care (“LTC”) valuation assumptions relative to current experience and management expectations including modeling changes. These annual assumption updates are collectively referred to as unlocking. See our Consolidated and Segment Results of Operations sections for the pretax impacts on our revenues and expenses attributable to unlocking.
On July 13, 2023, we announced that we withdrew our application to convert Ameriprise Bank, FSB (“Ameriprise Bank”) to a state-chartered industrial bank and our application to establish a new limited purpose national trust bank. Ameriprise Bank will continue to operate as it does today, regulated by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. These changes are not expected to impact our long-term growth strategy for Ameriprise Bank and we will continue to offer 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 5 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 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 U.S. generally accepted accounting principles (“GAAP”), management believes that adjusted operating measures, which exclude net realized investment gains or losses, net of 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 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 the reinsurance accrual and additional insurance benefit reserves); the market impact of hedges to32
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Ameriprise Financial, Inc.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; 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.The market impact on non-traditional long-duration products includes changes in market risk benefits and embedded derivative values caused by changes in financial market conditions, net of changes in economic hedge values and unhedged items including the difference between assumed and actual underlying separate account investment performance, fixed income credit exposures, transaction costs and certain policyholder contract elections. The market impact also includes certain valuation adjustments made in accordance with FASB Accounting Standards Codification 820, Fair Value Measurements and Disclosure s, including the impact on embedded derivative values of discounting projected benefits to reflect a current estimate of our life insurance subsidiaries’ nonperformance spread.In the first quarter of 2023, management introduced an adjusted capital measure (“Available Capital for Capital Adequacy”), which management believes best reflects the available capital resources of our operations and facilitates a meaningful trend analysis. Available Capital for Capital Adequacy adjusts GAAP total equity and excludes accumulated other comprehensive income (“AOCI”); goodwill and intangibles; RiverSource Life Insurance Company’s GAAP equity excluding AOCI; and includes RiverSource Life Insurance Company’s statutory total adjusted capital prepared in conformity with accounting practices prescribed or permitted by the State of Minnesota Department of Commerce; and other adjustments, primarily certain deferred tax balances.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 for U.S. GAAP measures.
Concurrent with the adoption of Accounting Standards Update 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts , management no longer excludes adjustments for deferred acquisition costs (“DAC”), deferred sales inducement costs (“DSIC”) and unearned revenue amortization from adjusted operating earnings measures. Amortization of DAC, DSIC, and unearned revenue is no longer impacted by markets and is now amortized on a constant-level basis in accordance with GAAP.
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 of over 30%.
The following table reconciles our GAAP measures to adjusted operating measures:
Per Diluted Share
Years Ended December 31, Years Ended December 31,2023202220232022(in millions, except per share amounts)Net income $ 2,556 $ 3,149 $ 23.71 $ 27.70Less Adjustments:
Net realized investment gains (losses) (1)(32) (93) (0.30) (0.82)Market impact on non-traditional long-duration products (1)(608) 483 (5.63) 4.25Mean reversion related impacts (1)— (1) — (0.01)Integration/restructuring charges (1)(62) (50) (0.58) (0.44)
Net income (loss) attributable to CIEs — (4) — (0.04)Tax effect of adjustments (2)147 (71) 1.36 (0.61)
Adjusted operating earnings $ 3,111 $ 2,885 $ 28.86 $ 25.37Weighted average common shares outstanding:Basic 105.7 111.3
Diluted 107.8 113.7(1) Pretax adjusted operating adjustments.
(2) Calculated using the statutory tax rate of 21%.
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Ameriprise Financial, Inc.
The following table reconciles net income to adjusted operating earnings and the five-point average of quarter-end equity to adjusted operating equity:
Years Ended December 31,2023 2022(in millions)Net income $ 2,556 $ 3,149Less: Adjustments (1)(555) 264
Adjusted operating earnings $ 3,111 $ 2,885
Total Ameriprise Financial, Inc. shareholders’ equity $ 4,116 $ 4,170
Less: AOCI, net of tax (2,297) (1,769)
Total Ameriprise Financial, Inc. shareholders’ equity, excluding AOCI 6,413 5,939
Less: Equity impacts attributable to CIEs (4) —
Adjusted operating equity $ 6,417 $ 5,939
Return on equity, excluding AOCI 39.9 % 53.0 %Adjusted operating return on equity, excluding AOCI (2)48.5 % 48.6 %(1) Adjustments reflect the sum of after-tax net realized investment gains/losses, net of 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 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 and Ameriprise 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 rate of 21%.
The following table reconciles GAAP total equity to Available Capital for Capital Adequacy:
December 31, 2023 December 31, 2022
(in millions)
Ameriprise Financial, Inc. GAAP total equity $ 4,729 $ 3,803
Less: AOCI (1,766) (2,546)
Ameriprise Financial, Inc. GAAP total equity, excluding AOCI 6,495 6,349
Less: RiverSource Life Insurance Company GAAP equity, excluding AOCI 1,851 2,057
Add: RiverSource Life Insurance Company statutory total adjusted capital 3,093 3,103
Less: Goodwill and intangibles 2,622 2,485
Add: Other adjustments 303 299
Available Capital for Capital Adequacy
$ 5,418 $ 5,209Critical 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. The accounting and reporting policies and estimates we have identified as fundamental to a full understanding of our consolidated results of operations and financial condition are described below. See Note 2 to our Consolidated Financial Statements for further information about our accounting policies.
Valuation of Investments
The most significant component of our investments is our Available-for-Sale securities, which we carry at fair value within our Consolidated Balance Sheets. See Note 16 to our Consolidated Financial Statements for discussion of the fair value of our Available-for-Sale securities. Financial markets are subject to significant movements in valuation and liquidity, which can impact our ability to liquidate and the selling price that can be realized for our securities and increases the use of judgment in determining the estimated fair value of certain investments. We are unable to predict impacts and determine sensitivities in reported amounts reflecting such market movements on our aggregate Available-for-Sale portfolio. Changes to these assumptions do not occur in isolation and it is impracticable to predict such impacts at the individual security unit of measure which are predominately Level 2 fair value and based on observable inputs.34
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Ameriprise Financial, Inc.Market Risk Benefits
Market risk benefits are contracts or contract features that both provide protection to the contractholder from other-than-nominal capital market risk and expose us to other-than-nominal capital market risk. Market risk benefits include certain contract features on variable annuity products that provide minimum guarantees to policyholders. Guarantees accounted for as market risk benefits include guaranteed minimum death benefit (“GMDB”), guaranteed minimum income benefit (“GMIB”), guaranteed minimum withdrawal benefit (“GMWB”) and guaranteed minimum accumulation benefit (“GMAB”).
Variable AnnuitiesWe have approximately $81 billion of variable annuity account value that has been issued over a period of more than fifty years. The diversified variable annuity block consists of $37 billion of account value with no living benefit guarantees and $44 billion of account value with living benefit guarantees, primarily GMWB provisions. The business is predominately issued through the Ameriprise Financial ® advisor network. The majority of the variable annuity contracts currently offered by us contain GMDB provisions. We discontinued most new sales of GMWB and GMAB at the end of 2021 and new sales were completely discontinued as of mid-2022. We also previously offered contracts containing GMIB provisions. See Note 13 to our Consolidated Financial Statements for further discussion of our variable annuity contracts.In determining the assets or liabilities for market risk benefits, we project these benefits and contract assessments using actuarial models to simulate various equity market scenarios. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, surrenders (also referred to as persistency), benefit utilization and investment margins. Management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.In addition, the valuation of market risk benefits is impacted by an estimate of our nonperformance risk adjustment. This estimate includes a spread over the U.S. Treasury curve as of the balance sheet date. As our estimate of this spread over the U.S. Treasury curve widens or tightens, the liability will decrease or increase. The change in fair value due to changes in our nonperformance risk is recorded in other comprehensive income.Regarding the exposure to variable annuity living benefit guarantees, changes to reserves due to behavioral risk are driven by changes in policyholder surrenders and utilization of guaranteed withdrawal benefits. We have extensive experience studies and analysis to monitor changes and trends in policyholder behavior. A significant volume of company-specific policyholder experience data is available and provides management with the ability to regularly analyze policyholder behavior. On a monthly basis, actual surrender and benefit utilization experience is compared to expectations. Experience data includes detailed policy information providing the opportunity to review impacts of multiple variables. The ability to analyze differences in experience, such as presence of a living benefit rider, existence of surrender charges, and tax qualifications provide us an effective approach in detecting changes in policyholder behavior.
At least annually, we perform a thorough policyholder behavior analysis to validate the assumptions included in our market risk benefit reserves. The variable annuity assumptions and resulting reserve computations reflect multiple policyholder variables. Differentiation in assumptions by policyholder age, existence of surrender charges, guaranteed withdrawal utilization, and tax qualification are examples of factors recognized in establishing management’s assumptions used in market risk benefit calculations. The extensive data derived from our variable annuity block informs management in confirming previous assumptions and revising the variable annuity behavior assumptions. Changes in assumptions are governed by a review and approval process to ensure an appropriate measurement of all impacted financial statement balances. Changes in these assumptions can be offsetting and we are unable to predict their movement, sensitivities in reported amounts, offsetting impacts, or future impacts to the Consolidated Financial Statements over time or in any given future period.
Future Policy Benefits and Claims
We establish reserves to cover the benefits associated with non-traditional and traditional long-duration products. Non-traditional long-duration products include variable and structured variable annuity contracts, fixed annuity contracts and UL and VUL policies. Traditional long-duration products include term life insurance, whole life insurance, disability income (“DI”) and LTC insurance and life contingent payout annuity products. UL and VUL policies with product features that result in profits followed by losses are accounted for as insurance liabilities. The portion of structured variable annuities, indexed annuities and indexed universal life (“IUL”) policies allocated to the indexed account is accounted for as an embedded derivative.
The establishment of reserves is an estimation process using a variety of methods, assumptions and data elements. If actual experience is better than or equal to the results of the estimation process, then reserves should be adequate to provide for future benefits and expenses. If actual experience is worse than the results of the estimation process, additional reserves may be required.
Non-Traditional Long-Duration Products, including Embedded Derivatives
UL and VULA portion of our UL and VUL policies have product features that result in profits followed by losses from the insurance component of the contract. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the contract. The secondary guarantee ensures that, subject to specified conditions, the policy will not terminate and will continue to35
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Ameriprise Financial, Inc.provide a death benefit even if there is insufficient policy value to cover the monthly deductions and charges. The liability for these future losses is determined at the reporting date using actuarial models to estimate the death benefits in excess of account value and recognizing the excess over the estimated life based on expected assessments (e.g. cost of insurance charges, contractual administrative charges, similar fees and investment margin). Significant assumptions made in projecting future benefits and assessments relate to client asset value growth rates, mortality, persistency and investment margins. Changes in these assumptions can be offsetting and we are unable to predict their movement, sensitivities in reported amounts, offsetting impacts, or future impacts to the Consolidated Financial Statements over time or in any given future period. See Note 11 to our Consolidated Financial Statements for information regarding the liability for contracts with secondary guarantees.
Embedded Derivatives
The fair value of embedded derivatives related to structured variable annuities, indexed annuities and IUL fluctuates based on equity markets and interest rates and is reported within our total liabilities. In addition, the valuation of embedded derivatives is impacted by an estimate of our nonperformance risk adjustment. This estimate includes a spread over the U.S. Treasury curve as of the balance sheet date. As our estimate of this spread over the U.S. Treasury curve widens or tightens, the liability will decrease or increase.
See Note 16 to our Consolidated Financial Statements for information regarding the fair value measurement of embedded derivatives.Traditional Long-Duration Products
The liabilities for traditional long-duration products include cash flows related to unpaid amounts on reported claims, estimates of benefits payable on claims incurred but not yet reported and estimates of benefits that will become payable on term life, whole life, DI, LTC, and life contingent payout annuity policies as claims are incurred in the future. Accordingly, the claim liability (also referred to as disabled life reserves) is presented together as one liability for future policy benefits.
A liability for future policy benefits, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of estimated future net premiums to be collected from policyholders, is accrued as premium revenue is recognized. Expected insurance benefits are accrued over the life of the contract in proportion to premium revenue recognized (referred to as the net premium approach). The net premium ratio reflects cash flows from contract inception to contract termination (i.e., through the claim paying period) and cannot exceed 100%.
The liability for future policy benefits is updated for actual experience at least on an annual basis and concurrent with changes to cash flow assumptions. When net premiums are updated for cash flow changes, the estimated cash flows over the entire life of a group of contracts are updated using historical experience and updated future cash flow assumptions. Changes in these assumptions can be offsetting and we are unable to predict their movement, sensitivities in reported amounts, offsetting impacts, or future impacts to the Consolidated Financial Statements over time or in any given future period.
The cash flows used in the calculation are discounted using the forward rate curve on the original contract issue date. The discount rate represents an upper-medium-grade (i.e., low credit risk) fixed-income instrument yield (i.e., an A rating) that reflects the duration characteristics of the liability.
Derivative Instruments and Hedging Activities
We use derivative instruments to manage our exposure to various market risks. All derivatives are recorded at fair value. The fair value of our derivative instruments is determined using either market quotes or valuation models that are based upon the net present value of estimated future cash flows and incorporate current market observable inputs to the extent available. We are unable to predict impacts and determine sensitivities in reported amounts reflecting such market movements on our aggregate derivative portfolio. Changes to assumptions do not occur in isolation and it is impracticable to predict such impacts at the individual security unit of measure which are predominately Level 2 fair value and based on observable inputs.
For further details on the types of derivatives we use and how we account for them, see Note 2, Note 16 and Note 18 to our Consolidated Financial Statements. For discussion of our market risk exposures and hedging program and related sensitivity testing, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”
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 3 to our Consolidated Financial Statements.
Sources of Revenues and Expenses
Management and Financial Advice Fees
Management and financial advice fees relate primarily to fees earned from managing mutual funds, private funds, separate account and wrap account assets and institutional investments, as well as fees earned from providing financial advice, administrative services (including transfer agent and administration fees earned from providing services to retail mutual funds) and other custodial services. Management and financial advice fees include performance-based incentive management fees, which we may receive on certain management contracts. Management and financial advice fees also include mortality and expense risk fees.36
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Ameriprise Financial, Inc.Distribution Fees
Distribution fees primarily include point-of-sale fees (such as mutual fund front-end sales loads) and asset-based fees (such as 12b-1 distribution and shareholder service fees). Distribution fees also include amounts received under marketing support arrangements for sales of mutual funds and other companies’ products, such as through our wrap accounts, as well as surrender charges on annuities and UL and VUL insurance. Distribution fees also include revenue for placing clients’ deposits in its brokerage sweep program with third-party banks as well as revenue from brokerage clients for the execution of requested trades.
Net Investment Income
Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale, mortgage loans, policy loans, margin loans, pledged asset lines of credit, other investments, cash and cash equivalents and investments of CIEs; the changes in fair value of trading securities, certain derivatives and certain assets and liabilities of CIEs; the pro rata share of net income or loss on equity method investments; realized gains and losses on the sale of investments; and changes for the allowance for credit losses.
Premiums, Policy and Contract ChargesPremiums include premiums on traditional life, DI and LTC insurance and payout annuities with a life contingent feature and are net of reinsurance premiums. Policy and contract charges include variable annuity rider charges and UL and VUL insurance charges, which consist of cost of insurance charges (net of reinsurance premiums and cost of reinsurance for UL and VUL insurance products) and administrative charges.Other Revenues
Other revenues primarily include the accretion on the fixed annuities reinsurance deposit receivables and other miscellaneous revenues.
Banking and Deposit Interest Expense
Banking and deposit interest expense primarily includes interest expense related to investment certificates and banking deposits.
Distribution Expenses
Distribution expenses primarily include compensation paid to our financial advisors, registered representatives, third-party distributors and wholesalers. The portion of these costs which are incremental and direct to the acquisition of a new or renewal insurance policy or annuity contract issued by the RiverSource Life companies are deferred. The amounts capitalized and amortized are based on actual distribution costs. The majority of these costs, such as advisor and wholesaler compensation, vary directly with the level of sales. Distribution expenses also include marketing support and other distribution and administration related payments made to affiliated and unaffiliated distributors of products provided by our affiliates. The majority of these expenses vary with the level of sales, or assets held, by these distributors, and the remainder is fixed. Distribution expenses also include wholesaling costs.
Interest Credited to Fixed Accounts
Interest credited to fixed accounts represents amounts earned by contractholders and policyholders on fixed account values associated with UL and VUL insurance and annuity contracts. The changes in fair value of fixed deferred indexed annuity and IUL embedded derivatives and the derivatives hedging these products are also included within Interest credited to fixed accounts.
Benefits, Claims, Losses and Settlement Expenses
Benefits, claims, losses and settlement expenses consist of amounts paid and changes in liabilities held for anticipated future benefit payments under insurance policies and annuity contracts, along with costs to process and pay such amounts. Amounts are net of benefit payments recovered or expected to be recovered under reinsurance contracts. Benefits, claims, losses and settlement expenses exclude the impact of remeasurement of future policy benefit reserves, which is separately presented. The changes in fair value of structured variable annuity embedded derivatives and the derivatives hedging this benefit, as well as the amortization of DSIC are also included in Benefits, claims, losses and settlement expenses.
Remeasurement (Gains) Losses of Future Policy Benefit Reserves
Remeasurement (gains) losses of future policy benefit reserves represents changes to the net premium ratio for actual versus expected experience and updates to cash flow assumptions used to measure traditional long-duration and limited-payment insurance contracts.
Change in Fair Value of Market Risk Benefits
Change in fair value of market risk benefits includes the change in fair value of GMDB, GMIB, GMWB and GMAB as well as the changes in fair value of derivatives hedging these market risk benefits. Changes in fair value of market risk benefits are recognized in net income each period with the exception of the portion of the change in fair value due to a change in the instrument-specific credit risk, which is recognized in other comprehensive income (“OCI”).
Amortization of DAC
Direct sales commissions and other costs capitalized as DAC are amortized over time. DAC are amortized on a constant-level basis for the grouped contracts over the expected contract term to approximate straight-line amortization.37
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Ameriprise Financial, Inc.Interest and Debt Expense
Interest and debt expense primarily includes interest on corporate debt and CIE debt, the impact of interest rate hedging activities and amortization of debt issuance costs.
General and Administrative Expense
General and administrative expense includes compensation, share-based awards and other benefits for employees (other than employees directly related to distribution, such as financial advisors), professional and consultant fees, information technology, facilities and equipment, advertising and promotion, legal and regulatory and corporate related expenses.Economic Environment
Global equity market conditions and fluctuations affect our results of operations and financial condition. The following table presents relevant market indices:
Years Ended December 31,20232022Change
S&P 500Daily average 4,285 4,100 5%
Period end 4,770 3,840 24%Weighted Equity Index (“WEI”) (1)Daily average 2,808 2,699 4%
Period end 3,102 2,549 22%(1) Weighted Equity Index is an Ameriprise 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 on North 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 results of operations and financial condition, and potentially material effects, see Part 1 - Item 1A “Risk Factors” of this Annual Report on Form 10-K.Assets Under Management and AdministrationAssets under management (“AUM”) include external client assets for which we provide investment management services, such as the assets of the Columbia 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 include 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 include 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:December 31, Change20232022(in billions)Assets Under Management and Administration
Advice & Wealth Management AUM $ 484.8 $ 409.0 $ 75.8 19 %
Asset Management AUM 636.9 584.0 52.9 9
Corporate AUM 0.4 0.2 0.2 NM
Eliminations (41.0) (36.9) (4.1) (11)
Total Assets Under Management 1,081.1 956.3 124.8 13
Total Assets Under Administration 279.5 222.0 57.5 26
Total AUM and AUA $ 1,360.6 $ 1,178.3 $ 182.3 15 %
NM Not Meaningful - variance equal to or greater than 100%.
Total AUM increased $124.8 billion, or 13%, to $1.1 trillion as of December 31, 2023 compared to $956.3 billion as of December 31,38
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Ameriprise Financial, Inc.2022 due to a $75.8 billion increase in Advice & Wealth Management AUM driven by market appreciation and wrap account net inflows and a $52.9 billion increase in Asset Management AUM primarily driven by market appreciation. Total AUA increased $57.5 billion, or 26%, to $279.5 billion as of December 31, 2023 compared to the prior year primarily driven by equity market appreciation, and an increase in third-party money market funds and brokered CDs. See our segment results of operations discussion for additional information on changes in our AUM.Consolidated Results of OperationsYear Ended December 31, 2023 Compared to Year Ended December 31, 2022The following table presents our consolidated results of operations:
Years Ended December 31, Change2023 2022(in millions)
RevenuesManagement and financial advice fees $ 8,907 $ 9,033 $ (126) (1) %
Distribution fees 1,931 1,939 (8) —
Net investment income 3,206 1,474 1,732 NM
Premiums, policy and contract charges 1,539 1,397 142 10
Other revenues 513 491 22 4
Total revenues 16,096 14,334 1,762 12
Banking and deposit interest expense 561 76 485 NM
Total net revenues 15,535 14,258 1,277 9ExpensesDistribution expenses 5,078 4,935 143 3
Interest credited to fixed accounts 654 665 (11) (2)
Benefits, claims, losses and settlement expenses 1,350 242 1,108 NM
Remeasurement (gains) losses of future policy benefit reserves (20) 1 (21) NM
Change in fair value of market risk benefits 798 311 487 NM
Amortization of deferred acquisition costs 246 252 (6) (2)
Interest and debt expense 324 198 126 64
General and administrative expense 3,871 3,723 148 4Total benefits and expenses12,301 10,327 1,974 19Pretax income3,234 3,931 (697) (18)
Income tax provision 678 782 (104) (13)
Net income $ 2,556 $ 3,149 $ (593) (19) %NM Not Meaningful - variance equal to or greater than 100%.
OverallPretax income decreased $697 million, or 18%, for 2023 compared to the prior year. The following impacts were significant drivers of the year-over-year change in pretax income:
• The market impact on non-traditional long-duration products, net of hedges was an expense of $608 million for 2023 compared to a benefit of $483 million for the prior year.
• The unfavorable impact of unlocking was $99 million for 2023 compared to a favorable impact of unlocking of $133 million for the prior year.
• A favorable impact from the trend in rising interest rates on the investment portfolio yield, including from investment portfolio repositioning in our insurance business in the fourth quarter of 2022, along with higher balances in bank and certificate products.39
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Ameriprise Financial, Inc.The following table presents the total pretax impacts on our revenues and expenses attributable to our annual assumption updates, referred to as unlocking, for the years ended December 31:
Pretax Increase (Decrease) 2023 2022(in millions)Premiums, policy and contract charges $ 1 $ (1)
Total revenues 1 (1)
Benefits, claims, losses and settlement expenses (17) 7Remeasurement (gains) losses of future policy benefit reserves:LTC unlocking (5) (6)
Unlocking impact, excluding LTC (6) 6
Total remeasurement (gains) losses of future policy benefit reserves (11) —
Change in fair value of market risk benefits 128 (139)
Amortization of DAC — (2)
Total benefits and expenses 100 (134)Pretax income (loss) (1)$ (99) $ 133
(1) Includes a $2 million net expense related to the market impact on IUL benefits for 2022, which is excluded from adjusted operating earnings. Refer to Results of Operations by Segment for the impact to pretax adjusted operating earnings attributable to unlocking.
The primary drivers of the year-over-year unlocking impact include the following items:
• We lowered our surrender assumptions on variable annuities with living benefits resulting in an expense in 2023.
• Interest rate assumptions resulted in a benefit in 2022, partially offset by lower surrender assumptions and updated mortality assumptions for variable annuities with living benefits.Net RevenuesManagement and financial advice fees decreased $126 million, or 1%, for 2023 compared to the prior year primarily reflecting the cumulative impact of Asset Management and variable annuity net outflows, partially offset by continued wrap account net inflows.
Net investment income increased $1.7 billion for 2023 compared to the prior year primarily due to the following impacts:
• The favorable impact of growth in Ameriprise Bank customer deposits and certificate business as a result of the market environment and our strategic decision to continue to invest in these businesses.
• The favorable impact of the trend in rising interest rates on the investment portfolio yield, including from investment portfolio repositioning in our insurance business in the fourth quarter of 2022.
• The favorable impact of higher net investment income of CIEs.
• Net realized investment losses of $27 million for 2023 compared to net realized investment losses of $87 million for the prior year. Net realized investment losses for 2023 and 2022 were primarily driven by the fixed maturity investment portfolio repositioning in response to market conditions.
Premiums, policy and contract charges increased $142 million, or 10%, for 2023 compared to the prior year primarily due to higher sales of life contingent payout annuities.
Banking and deposit interest expense increased $485 million for 2023 compared to the prior year primarily reflecting higher average crediting rates and higher average volumes on certificates and Ameriprise Bank cash deposits.ExpensesDistribution expenses increased $143 million, or 3%, for 2023 compared to the prior year primarily reflecting higher advisor compensation from higher average wrap account assets and increased transactional activity, as well as investments in recruiting experienced advisors, partially offset by the cumulative impact of Asset Management net outflows.
Interest credited to fixed accounts decreased $11 million, or 2%, for 2023 compared to the prior year primarily reflecting the following items:
• A $28 million increase in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The unfavorable impact of the nonperformance credit spread was $15 million for 2023 compared to a favorable impact of $13 million for the prior year.
• A $17 million decrease in expense from other market impacts on IUL benefits, net of hedges, which was an expense of $34 million for 2023 compared to an expense of $51 million for the prior year. The decrease in expense was primarily due to an increase in the IUL embedded derivative in the prior year, which reflected higher option costs due to a higher new money rate, offset by more discounting due to higher Treasury rates.• A decrease in expense driven by variable annuity net outflows.40
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Ameriprise Financial, Inc.Benefits, claims, losses and settlement expenses increased $1.1 billion for 2023 compared to the prior year primarily reflecting the following items:
• An $824 million increase in expense from market impacts on structured variable annuities (“SVA”) embedded derivative, net of hedging activity. This increase was the result of a favorable $955 million change in the market impact on derivatives hedging the SVA embedded derivative and an unfavorable $1.8 billion change in the market impact on the SVA embedded derivative. The main market driver contributing to these changes was the equity market impact on the SVA embedded derivative net of the impact on the corresponding hedge assets resulted in an expense for the 2023 compared to a benefit in the prior year.
• The impact of higher sales of life contingent payout annuities and increased volume in SVAs.
Change in fair value of market risk benefits increased $487 million for 2023 compared to the prior year primarily reflecting the following items:
• The impact of unlocking was an expense of $128 million for 2023 primarily reflecting the impact of lower surrender assumptions on variable annuities with living benefits compared to a benefit of $139 million for the prior year primarily reflecting the impact of interest rate assumptions, partially offset by continued lower surrender assumptions and updated mortality assumptions for variable annuities with living benefits.
• A $191 million increase in expense from market impacts on variable annuity guaranteed benefits, net of hedges in place to offset those risks. This increase was the result of an unfavorable $132 million change in the market impact on variable annuity guaranteed benefits reserves and an unfavorable $59 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 benefits liability net of the impact on the corresponding hedge assets resulted in a benefit for 2023 compared to an expense in the prior year.
• Interest rate and bond impact on the variable annuity guaranteed benefits liability net of the impact on the corresponding hedge assets resulted in a lower benefit for 2023 compared to the prior year.
• Volatility impact on the variable annuity guaranteed benefits liability net of the impact on the corresponding hedge assets resulted in a lower expense for 2023 compared to the prior year.
• Other unhedged items, including the difference between the assumed and actual underlying separate account investment performance, transaction costs and various behavioral items, were a lower net expense for 2023 compared to the prior year.
Interest and debt expense increased $126 million, or 64%, for 2023 compared to the prior year primarily reflecting higher interest expense of CIEs and the issuance of $750 million of unsecured senior notes in March 2023 and $600 million of unsecured senior notes in November 2023, partially offset by the maturity of $750 million of unsecured senior notes in October 2023.
General and administrative expense increased $148 million, or 4%, for 2023 compared to the prior year primarily reflecting a $50 million accrual for a regulatory matter relating to electronic communication recordkeeping requirements, increased severance expense related to our expense management initiatives, $12 million of higher integration related expenses, higher volume related expenses and investments for business growth and a larger unfavorable change in the mark-to-market impact on share-based compensation due to share price appreciation. A portion of the higher integration related expenses was driven by the consolidation of the majority of our London-based teams into a single location following the acquisition of the BMO Global Asset Management (EMEA) business.Income TaxesOur effective tax rate was 21.0% for 2023 compared to 19.9% for the prior year. See Note 24 to our Consolidated Financial Statements for additional discussion on income taxes.Results of Operations by SegmentYear Ended December 31, 2023 Compared to Year Ended December 31, 2022Adjusted 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 28 to the Consolidated Financial Statements for further information on the presentation of segment results and our definition of adjusted operating earnings.41
Index
Ameriprise Financial, Inc.The following table presents summary financial information by segment:
Years Ended December 31,2023 2022(in millions)
Advice & Wealth ManagementNet revenues $ 9,418 $ 8,461
Expenses 6,567 6,269
Adjusted operating earnings $ 2,851 $ 2,192Asset ManagementNet revenues $ 3,278 $ 3,506
Expenses 2,558 2,662
Adjusted operating earnings $ 720 $ 844Retirement & Protection SolutionsNet revenues $ 3,476 $ 3,124
Expenses 2,791 2,257
Adjusted operating earnings $ 685 $ 867Corporate & OtherNet revenues $ 533 $ 479
Expenses 853 785
Adjusted operating loss $ (320) $ (306)The following table presents the segment pretax adjusted operating impacts on our revenues and expenses attributable to our annual assumption updates, referred to as unlocking, for the years ended December 31:Segment Pretax Adjusted Operating Increase (Decrease) 2023 2022Retirement & Protection Solutions Corporate Retirement & Protection Solutions Corporate
(in millions)Premiums, policy and contract charges $ 1 $ — $ 1 $ (2)
Total revenues 1 — 1 (2)
Benefits, claims, losses and settlement expenses (17) — 6 (1)Remeasurement (gains) losses of future policy benefit reserves:LTC unlocking — (5) — (6)
Unlocking, excluding LTC (6) — 6 —
Total remeasurement (gains) losses of future policy benefit reserves (6) (5) 6 (6)
Change in fair value of market risk benefits 128 — (139) —
Amortization of DAC
— — — (2)
Total benefits and expenses 105 (5) (127) (9)
Pretax income (loss) $ (104) $ 5 $ 128 $ 7
42
Index
Ameriprise Financial, Inc.Advice & Wealth ManagementThe following table presents the changes in wrap account assets and average balances for the years ended December 31:2023 2022(in billions)Beginning balance $ 412.1 $ 464.7
Net flows 24.2 27.5
Market appreciation (depreciation) and other 51.9 (80.1)
Ending balance $ 488.2 $ 412.1Advisory wrap account assets ending balance (1)$ 483.3 $ 407.8Average advisory wrap account assets (2)$ 437.8 $ 419.9(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 twelve months ended December 31, 2023 and 2022, which is reflective of our billing cycle.
Wrap account assets increased $76.1 billion, or 18%, during 2023 primarily due to market appreciation of $51.9 billion and net inflows of $24.2 billion. Average advisory wrap account assets increased $17.9 billion, or 4%, compared to the prior year primarily reflecting continued net inflows and market appreciation.The following table presents the results of operations of our Advice & Wealth Management segment on an adjusted operating basis:
Years Ended December 31, Change2023 2022(in millions)
RevenuesManagement and financial advice fees $ 5,485 $ 5,308 $ 177 3 %
Distribution fees 2,273 2,249 24 1
Net investment income 1,956 748 1,208 NM
Other revenues 265 232 33 14
Total revenues 9,979 8,537 1,442 17
Banking and deposit interest expense 561 76 485 NM
Total net revenues 9,418 8,461 957 11ExpensesDistribution expenses 4,888 4,719 169 4
Interest and debt expense 27 10 17 NM
General and administrative expense 1,652 1,540 112 7
Total expenses 6,567 6,269 298 5
Adjusted operating earnings $ 2,851 $ 2,192 $ 659 30 %
NM Not Meaningful - variance equal to or greater than 100%.
Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased $659 million, or 30%, for 2023 compared to the prior year primarily reflecting the benefit from higher interest rates and client net inflows. Pretax adjusted operating margin was 30.3% for 2023 compared to 25.9% for the prior year. Adjusted operating net revenue per advisor increased to $916,000 for 2023, up 11%, from $827,000 for the prior year.
Ameriprise Bank is continuing its deposit growth trend, with bank deposit balances increasing $3.2 billion from the prior year to $21.5 billion as of December 31, 2023. The daily average interest-bearing deposit balance increased to $20.4 billion for 2023 compared to $15.3 billion for the prior year with the average interest rate paid on deposits increasing to 0.41% for 2023 from 0.12% for 2022. Profitability at the bank increased compared to the prior year primarily reflecting increased interest rates along with the trend in deposit growth. The Ameriprise Certificate Company experienced strong growth given the current market environment with client deposits increasing $4.2 billion from the prior year to $13.5 billion as of December 31, 2023.
In November 2023, we successfully closed on our partnership with Comerica Bank to become Comerica’s new investment program provider, adding $14.7 billion of client flows, including $2.0 billion of wrap net flows.
43
Index
Ameriprise Financial, Inc.Net RevenuesManagement and financial advice fees increased $177 million, or 3%, for 2023 compared to the prior year 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 reflecting net inflows and market appreciation.
Net investment income increased $1.2 billion for 2023 compared to the prior year primarily due to higher average invested assets due to increased bank and certificate deposits and the favorable impact of increased short-term rates, including higher investment yields on the investment portfolio supporting the bank and certificate products.
Banking and deposit interest expense increased $485 million for 2023 compared to the prior year primarily reflecting higher average crediting rates and higher average balances on certificates and bank cash deposits.ExpensesDistribution expenses increased $169 million, or 4%, for 2023 compared to the prior year primarily reflecting higher advisor compensation from higher average wrap account assets and increased transactional activity, as well as investments in recruiting experienced advisors.
Interest and debt expense increased $17 million for 2023 compared to the prior year due to the increase in capital supporting the growth in the bank and certificate products.
General and administrative expense increased $112 million, or 7%, for 2023 compared to the prior year primarily reflecting a $50 million accrual for a regulatory matter relating to electronic communication recordkeeping requirements, higher volume related expenses and investments for business growth.Asset ManagementThe following tables present the mutual fund performance of our retail Columbia Threadneedle Investments funds as of December 31, 2023:Retail Fund Rankings in Top 2 Quartiles or Above Index Benchmark - Asset Weighted (1)
1 year 3 year 5 year 10 yearEquity 43% 69% 79% 89%
Fixed Income 84% 68% 77% 90%
Asset Allocation 90% 54% 83% 90%4- or 5-star Morningstar Rated Funds (2)
Overall 3 year 5 year 10 yearNumber of rated funds 113 73 95 102
(1) Retail Fund performance rankings for each fund are measured on a consistent basis against the most appropriate peer group or index. Peer groupings of Columbia 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 funds are defined by either IA or Morningstar index and are based on the Primary 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 Columbia or Threadneedle branded mutual funds included in both equity and fixed income.(2) Columbia funds are available for purchase by U.S. customers. Out of 89 Columbia funds rated (based on primary share class), 5 received a 5-star Overall Rating and 35 received a 4-star Overall Rating. Out of 149 Threadneedle funds rated (based on highest-rated share class), 21 received a 5-star Overall Rating and 52 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 managed assets by type:
December 31, Change Average (1)
Change
December 31,2023 2022 2023 2022(in billions) (in billions)Equity $ 323.0 $ 301.2 $ 21.8 7 % $ 309.2 $ 333.1 $ (23.9) (7) %
Fixed income 238.4 210.0 28.4 14 221.7 232.0 (10.3) (4)
Money market 23.8 21.9 1.9 9 22.6 17.1 5.5 32
Alternative 33.5 33.7 (0.2) (1) 34.5 37.3 (2.8) (8)
Hybrid and other 18.2 17.2 1.0 6 17.3 19.8 (2.5) (13)
Total managed assets $ 636.9 $ 584.0 $ 52.9 9 % $ 605.3 $ 639.3 $ (34.0) (5) %(1) Average ending balances are calculated using an average of the prior period’s ending balance and all months in the current period.44Index
Ameriprise Financial, Inc.The following table presents the changes in global managed assets:Years Ended December 31,2023 2022(in billions)
Global Retail FundsBeginning assets $ 309.3 $ 409.4
Inflows 47.9 60.9
Outflows (65.2) (84.7)
Net VP/VIT fund flows (5.0) (4.3)
Net new flows (22.3) (28.1)
Reinvested dividends 8.1 11.4
Net flows (14.2) (16.7)
Distributions (9.4) (12.9)
Market appreciation (depreciation) and other 45.1 (65.6)Foreign currency translation (1)4.1 (4.9)
Total ending assets 334.9 309.3Global InstitutionalBeginning assets 274.7 344.7Inflows (2)42.7 59.1Outflows (2)(45.7) (49.0)
Net flows (3.0) 10.1Market appreciation (depreciation) and other (3)21.9 (65.0)Foreign currency translation (1)8.4 (15.1)
Total ending assets 302.0 274.7
Total managed assets $ 636.9 $ 584.0
Total net flows $ (17.2) $ (6.6)
Legacy insurance partners net flows (4)
$ (4.3) $ (4.6)(1) Amounts represent local currency to U.S. dollar translation for reporting purposes.(2) Global Institutional inflows and outflows include net flows from our structured variable annuity product and Ameriprise Bank.(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 and Ameriprise Bank.(4) Legacy insurance partners assets and net flows are included in the rollforwards above.
Total segment AUM increased $52.9 billion, or 9%, during 2023 primarily driven by equity and fixed income market appreciation, partially offset by net outflows.
45Index
Ameriprise Financial, Inc.
The following table presents the results of operations of our Asset Management segment on an adjusted operating basis:
Years Ended December 31, Change2023 2022(in millions)
RevenuesManagement and financial advice fees $ 2,844 $ 3,086 $ (242) (8) %
Distribution fees 363 397 (34) (9)
Net investment income 44 9 35 NM
Other revenues 27 14 13 93
Total revenues 3,278 3,506 (228) (7)Banking and deposit interest expense — — — —Total net revenues 3,278 3,506 (228) (7)ExpensesDistribution expenses 925 995 (70) (7)
Amortization of deferred acquisition costs 6 9 (3) (33)
Interest and debt expense 7 5 2 40
General and administrative expense 1,620 1,653 (33) (2)
Total expenses 2,558 2,662 (104) (4)
Adjusted operating earnings $ 720 $ 844 $ (124) (15) %
NM Not Meaningful - variance equal to or greater than 100%.
Our Asset Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, decreased $124 million, or 15%, for 2023 compared to the prior year primarily due to the cumulative impact of net outflows.Net RevenuesManagement and financial advice fees decreased $242 million, or 8%, for 2023 compared to the prior year primarily driven by the cumulative impact of net outflows and a decrease in performance fees.
Distribution fees decreased $34 million, or 9%, for 2023 compared to the prior year primarily due to the cumulative impact from net outflows.
Net investment income increased $35 million for 2023 compared to the prior year primarily driven by higher interest rates.ExpensesDistribution expenses decreased $70 million, or 7%, for 2023 compared to the prior year primarily due to the cumulative impact of net outflows.
General and administrative expense decreased $33 million, or 2%, for 2023 compared to the prior year primarily reflecting $11 million of lower performance fee related compensation and disciplined expense management.
46Index
Ameriprise Financial, Inc.
Retirement & Protection Solutions
The following table presents the results of operations of our Retirement & Protection Solutions segment on an adjusted operating basis:
Years Ended December 31, Change2023 2022(in millions)
RevenuesManagement and financial advice fees $ 735 $ 788 $ (53) (7) %
Distribution fees 398 418 (20) (5)
Net investment income 858 569 289 51
Premiums, policy and contract charges 1,475 1,337 138 10
Other revenues 10 12 (2) (17)
Total revenues 3,476 3,124 352 11Banking and deposit interest expense — — — —Total net revenues 3,476 3,124 352 11ExpensesDistribution expenses 464 448 16 4
Interest credited to fixed accounts 369 386 (17) (4)
Benefits, claims, losses and settlement expenses 744 469 275 59
Remeasurement (gains) losses of future policy benefit reserves (19) 1 (20) NM
Change in fair value of market risk benefits 628 372 256 69
Amortization of deferred acquisition costs 229 233 (4) (2)
Interest and debt expense 51 39 12 31
General and administrative expense 325 309 16 5
Total expenses 2,791 2,257 534 24
Adjusted operating earnings $ 685 $ 867 $ (182) (21) %
NM Not Meaningful - variance equal to or greater than 100%.
Our Retirement & Protection Solutions segment pretax adjusted operating earnings, which excludes net realized investment gains or losses (net of the reinsurance accrual), the market impact on variable annuity guaranteed benefits (net of hedges), the market impact on IUL benefits (net of hedges and the reinsurance accrual), mean reversion related impacts, and block transfer reinsurance transaction impacts decreased $182 million, or 21%, for 2023 compared to the prior year.
Variable annuity account balances increased 9% to $80.8 billion as of December 31, 2023 compared to the prior year due to market appreciation, partially offset by net outflows of $3.0 billion. Variable annuity sales decreased 1% to $4.0 billion for 2023 compared to the prior year reflecting a decrease in sales of variable annuities with living benefit guarantees, mostly offset by an increase in sales of SVAs. Account values with living benefit riders declined to 54% as of December 31, 2023 compared to 57% a year ago reflecting our actions to optimize our business mix. This trend is expected to continue and meaningfully shift the mix of business away from products with living benefit guarantees over time.Net RevenuesManagement and financial advice fees decreased $53 million, or 7%, for 2023 compared to the prior year primarily reflecting variable annuity net outflows.
Distribution fees decreased $20 million, or 5%, for 2023 compared to the prior year primarily reflecting lower sales.
Net investment income, which excludes net realized investment gains or losses, increased $289 million, or 51%, for 2023 compared to the prior year reflecting higher interest rates, investment portfolio repositioning resulting in higher yields and increased SVA balances.
Premiums, policy and contract charges increased $138 million, or 10%, for 2023 compared to the prior year due to higher sales of life contingent payout annuities.ExpensesBenefits, claims, losses and settlement expenses, which exclude the market impact on SVA indexed account embedded derivative (net of hedges) and mean reversion related impacts, increased $275 million, or 59%, for 2023 compared to the prior year primarily reflecting the impact of higher sales of life contingent payout annuities and increased volume in SVAs.
47Index
Ameriprise Financial, Inc.Change in fair value of market risk benefits, which exclude the market impact on variable annuity guaranteed benefits (net of hedges), increased $256 million, or 69%, for 2023 compared to the prior year primarily reflecting the impact of unlocking. The unlocking impact for 2023 was an expense of $128 million primarily reflecting continued lower surrender assumptions on variable annuities with living benefits compared to a benefit of $139 million for the prior year period primarily reflecting continued lower surrender assumptions and updated mortality assumptions for variable annuities with living benefits.Corporate & Other
The following table presents the results of operations of our Corporate & Other segment on an adjusted operating basis:
Years Ended December 31, Change2023 2022(in millions)
RevenuesDistribution fees $ 1 $ — $ 1 — %
Net investment income 247 155 92 59 %
Premiums, policy and contract charges 96 99 (3) (3)
Other revenues 209 230 (21) (9)
Total revenues 553 484 69 14
Banking and deposit interest expense 20 5 15 NM
Total net revenues 533 479 54 11Expenses
Distribution expenses (10) (10) — —Interest credited to fixed accounts 234 242 (8) (3)
Benefits, claims, losses and settlement expenses 236 247 (11) (4)
Remeasurement (gains) losses of future policy benefit reserves (1) — (1) —
Amortization of deferred acquisition costs 11 10 1 10
Interest and debt expense 97 70 27 39
General and administrative expense 286 226 60 27
Total expenses 853 785 68 9
Adjusted operating loss $ (320) $ (306) $ (14) (5) %NM Not Meaningful - variance equal to or greater than 100%.
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 annuity benefits (net of hedges), 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 increased $14 million, or 5%, for 2023 compared to the prior year, reflecting higher severance expense.
LTC insurance had pretax adjusted operating earnings of $29 million for 2023 compared to pretax adjusted operating loss of $10 million for the prior year primarily reflecting the benefit of investment portfolio repositioning and higher interest rates on cash positions compared to the prior year.
FA business had a pretax adjusted operating loss of $29 million for 2023 compared to a pretax adjusted operating loss of $22 million for the prior year. Fixed deferred annuity account balances declined 12% to $6.3 billion as of December 31, 2023 compared to the prior year as policies continue to lapse and we previously discontinued new sales of fixed deferred annuities.Net RevenuesNet 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, increased $92 million, or 59%, for 2023 compared to the prior year primarily reflecting the benefit of investment portfolio repositioning and higher interest rates on cash positions.
Other revenues decreased $21 million, or 9%, for 2023 compared to the prior year primarily reflecting the yield on deposit receivables arising from reinsurance transactions.
48Index
Ameriprise Financial, Inc.
ExpensesInterest and debt expense increased $27 million, or 39%, for 2023 compared to the prior year primarily reflecting the issuance of $750 million of unsecured senior notes in March 2023 and $600 million of unsecured senior notes in November 2023, partially offset by the maturity of $750 million of unsecured senior notes in October 2023.
General and administrative expense, which excludes integration and restructuring charges and expenses attributable to CIEs, increased $60 million, or 27%, for 2023 compared to the prior year primarily due to increased severance expense related to our expense management initiatives and a larger unfavorable change in the mark-to-market impact on share-based compensation expense due to share price appreciation.Closed Block LTC InsuranceAs of December 31, 2023, our nursing home indemnity LTC block had approximately $68 million in gross in force annual premium and future policyholder benefits and claim reserves of approximately $1.4 billion, net of reinsurance, which was 51% of GAAP reserves. This block has been shrinking over the last few years given the average attained age is 84 and the average attained age of policyholders on claim is 89. Fifty-four percent of daily benefits in force in this block are lifetime benefits.
As of December 31, 2023, our comprehensive reimbursement LTC block had approximately $113 million in gross in force annual premium and future policyholder benefits and claim reserves of approximately $1.3 billion, net of reinsurance. This block has higher premiums per policy than the nursing home indemnity LTC policies. The average attained age is 79 and the average attained age of policyholders on claim is 86. Thirty-four percent of daily benefits in force in this block are lifetime benefits.
We utilize three primary levers to manage our LTC business. First, we have taken an active approach of steadily increasing rates since 2005, with cumulative rate increases of 251% on our nursing home indemnity LTC block (excluding home care riders) and 154% on our comprehensive reimbursement LTC block as of December 31, 2023. Second, we have a reserving process that reflects the policy features and risk characteristics of our blocks. As of December 31, 2023, we had 43,000 policies that were closed with claim activity, as well as 8,000 open claims. We apply this experience to our in force policies, which were 80,000 as of December 31, 2023, at a very granular level by issue year, attained age and benefit features. Our statutory reserves are $265 million higher than our GAAP reserves and include margins on key assumptions for morbidity and mortality, as well as $345 million in asset adequacy reserves as of December 31, 2023. Lastly, we have prudently managed our investment portfolio primarily through a liquid, investment grade portfolio.We undertake an extensive review of the cash flow and expense assumptions supporting the liability for future policy benefits annually during the third quarter of each year, or more frequently if appropriate, using current best estimate assumptions as of the date of the review. Our annual review process includes an analysis of our key reserve assumptions, including those for morbidity, terminations (mortality and lapses), and premium rate increases.49
Index
Ameriprise Financial, Inc.
Consolidated Results of Operations
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
The following table presents our consolidated results of operations:
Years Ended December 31, Change
2022 2021
(in millions)
Revenues
Management and financial advice fees $ 9,033 $ 9,275 $ (242) (3) %
Distribution fees 1,939 1,828 111 6
Net investment income 1,474 1,683 (209) (12)
Premiums, policy and contract charges 1,397 221 1,176 NM
Other revenues 491 382 109 29
Total revenues 14,334 13,389 945 7
Banking and deposit interest expense 76 12 64 NM
Total net revenues 14,258 13,377 881 7
Expenses
Distribution expenses 4,935 5,028 (93) (2)
Interest credited to fixed accounts 665 600 65 11
Benefits, claims, losses and settlement expenses 242 (156) 398 NM
Remeasurement (gains) losses of future policy benefit reserves 1 (52) 53 NM
Change in fair value of market risk benefits 311 (113) 424 NM
Amortization of deferred acquisition costs 252 259 (7) (3)
Interest and debt expense 198 191 7 4
General and administrative expense 3,723 3,435 288 8
Total expenses 10,327 9,192 1,135 12
Pretax income
3,931 4,185 (254) (6)
Income tax provision 782 768 14 2
Net income $ 3,149 $ 3,417 $ (268) (8) %
NM Not Meaningful - variance equal to or greater than 100%.
Overall
Pretax income decreased $254 million, or 6%, for 2022 compared to the prior year. The following impacts were significant drivers of the year-over-year change in pretax income:
• The prior year impact of the block transfer reinsurance transaction resulted in $524 million of pretax income for 2021 primarily reflecting the net realized gains on investments sold to the reinsurer.
• A negative impact from lower average equity markets compared to the prior year. Our average WEI, which is a proxy for equity movements on AUM, decreased 7% in 2022 compared to the prior year. The average S&P 500 index was 4% lower for 2022 compared to the prior year.
• The favorable impact of unlocking was $133 million for 2022 compared to an unfavorable impact of $113 million for the prior year.
• A favorable impact from the increase in short-term interest rates compared to the prior year.
• 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 reinsurance accrual was a benefit of $483 million for 2022 compared to a benefit of $464 million for the prior year.50
Index
Ameriprise Financial, Inc.The following table presents the total pretax impacts on our revenues and expenses attributable to unlocking and LTC loss recognition for the years ended December 31:
Pretax Increase (Decrease) 2022 2021
(in millions)
Premiums, policy and contract charges $ (1) $ 16
Total revenues (1) 16
Benefits, claims, losses and settlement expenses 7 6
Remeasurement (gains) losses of future policy benefit reserves:
LTC unlocking
(6) —
Unlocking impact, excluding LTC 6 —
Total remeasurement (gains) losses of future policy benefit reserves — —
Change in fair value of market risk benefits (139) 123
Amortization of DAC (2) —
Total benefits and expenses (134) 129
Pretax income (loss) (1)
$ 133 $ (113)
(1) Includes a $2 million net expense related to the market impact on IUL benefits for 2022, which is excluded from adjusted operating earnings. Refer to Results of Operations by Segment for the impact to pretax adjusted operating earnings attributable to unlocking.
The primary drivers of the year-over-year unlocking impact include the following items:
• Interest rate assumptions resulted in a benefit in 2022.
• Mortality assumption on variable annuities with living benefit guarantees resulted in a higher expense in 2022 compared to the prior year.
Net Revenues
Management and financial advice fees decreased $242 million, or 3%, for 2022 compared to the prior year primarily reflecting market depreciation, an unfavorable foreign exchange impact, and a decrease in performance fees of $39 million, partially offset by revenue associated with the acquisition of the BMO Global Asset Management (EMEA) business and continued wrap account net inflows.
Distribution fees increased $111 million, or 6%, for 2022 compared to the prior year due to $264 million of higher fees on off-balance sheet brokerage cash primarily due to an increase in short-term interest rates, partially offset by lower average equity markets and decreased transactional activity.
Net investment income decreased $209 million, or 12%, for 2022 compared to the prior year primarily due to the following impacts:
• Net realized investment losses of $87 million for 2022 compared to net realized investment gains of $636 million for the prior year period. Net realized losses for 2022 were primarily driven by the fixed maturity investment portfolio repositioning in the fourth quarter of 2022. Net realized gains for 2021 included net realized gains of $561 million on Available-for-Sale securities and a $58 million net gain related to commercial mortgage loans primarily due to the sale of securities and loans to the reinsurer as a result of the fixed deferred and payout annuity reinsurance transaction that closed in the third quarter 2021, as well as a $15 million gain on a strategic investment.
• The favorable impact of the recent trend in rising interest rates on the investment portfolio yield, including the fourth quarter of 2022 impact of portfolio repositioning.
• The favorable impact of growth in Ameriprise Bank and certificate businesses as a result of the market environment and our strategic decision to invest in the businesses.
• The unfavorable impact of lower average invested assets due to the sale of investments as a result of the fixed deferred and payout annuity reinsurance transaction in the prior year.
• The $22 million unfavorable market impact of hedges to offset interest rate and currency changes on certain investments in the prior year.
Premiums, policy and contract charges increased $1.2 billion for 2022 compared to the prior year primarily reflecting ceded premiums of $1.2 billion associated with the reinsurance transaction for life contingent payout annuity policies in the prior year.
Other revenues increased $109 million, or 29%, for 2022 compared to the prior year primarily reflecting the yield on deposit receivables arising from the reinsurance transactions.
Banking and deposit interest expense increased $64 million for 2022 compared to the prior year primarily due to higher average crediting rates on certificates and bank cash deposits and increased cash deposits at the bank.
51
Index
Ameriprise Financial, Inc.
Expenses
Distribution expenses decreased $93 million, or 2%, for 2022 compared to the prior year primarily lower average equity markets and decreased transactional activity.
Interest credited to fixed accounts increased $65 million, or 11%, for 2022 compared to the prior year primarily reflecting the following items:
• An $23 million decrease in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The favorable impact of the nonperformance credit spread was $13 million for 2022 compared to an unfavorable impact of $10 million for the prior year.
• A $105 million increase in expense from other market impacts on IUL benefits, net of hedges, which was an expense of $51 million for 2022 compared to a benefit of $54 million for the prior year. The increase in expense was primarily due to an increase in the IUL embedded derivative in the current year period, which reflected higher option costs due to a higher new money rate, compared to a decrease in the IUL embedded derivative in the prior year period, which reflected lower option costs due to higher discount rates.
Benefits, claims, losses and settlement expenses increased $398 million for 2022 compared to the prior year primarily reflecting the following items:
• A $1.2 billion decrease in expense associated with the reinsurance transaction for life contingent payout annuity policies in the prior year.
• An $806 million decrease in expense from market impacts on SVA embedded derivative, net of hedges in place to offset those risks. This decrease was the result of a favorable $1.0 billion change in the market impact on the SVA embedded derivative, partially offset by an unfavorable $224 million change in the market impact on derivatives hedging the SVA embedded derivative. The main market driver contributing to these changes was the equity market impact on the SVA embedded derivative net of the impact on the corresponding hedge assets, which resulted in a benefit for 2022 compared to an expense in the prior year.
Remeasurement (gains) losses of future policy benefit reserves increased $53 million for 2022 compared to the prior year primarily reflecting an increase in expense on LTC insurance as policy and claim terminations returned to more normalized levels compared to the prior year period which benefited from COVID-19 related impacts.
Change in fair value of market risk benefits increased $424 million for 2022 compared to the prior year primarily reflecting the following items:
• A $769 million increase in expense from other market impacts on variable annuity guaranteed benefits, net of hedges in place to offset those risks. This decrease was the result of an unfavorable $865 million change in the market impact on variable annuity guaranteed benefits reserves, partially offset by a favorable $96 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 benefits liability net of the impact on the corresponding hedge assets resulted in an expense for 2022 compared to a benefit in the prior year.
• Interest rate and bond impact on the variable annuity guaranteed benefits liability net of the impact on the corresponding hedge assets resulted in a benefit for 2022 compared to an expense in the prior year.
• Volatility impact on the variable annuity guaranteed benefits liability net of the impact on the corresponding hedge assets resulted in a higher expense for 2022 compared to the prior year.
• Other unhedged items, including the difference between the assumed and actual underlying separate account investment performance, transaction costs and various behavioral items, were a higher net expense for 2022 compared to the prior year.
General and administrative expense increased $288 million, or 8%, 2022 the prior year primarily reflecting the operating expenses of the acquired BMO Global Asset Management (EMEA) business and higher integration related expenses, partially offset by disciplined expense management and reengineering, lower performance fee related compensation and a favorable foreign exchange impact.
Income Taxes
Our effective tax rate was 19.9% for 2022 compared to 18.3% for the prior year. See Note 24 to our Consolidated Financial Statements for additional discussion on income taxes.
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Ameriprise Financial, Inc.
Results of Operations by Segment
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
The following table presents summary financial information by segment:
Years Ended December 31,
2022 2021
(in millions)
Advice & Wealth Management
Net revenues $ 8,461 $ 8,021
Expenses 6,269 6,278
Adjusted operating earnings $ 2,192 $ 1,743
Asset Management
Net revenues $ 3,506 $ 3,682
Expenses 2,662 2,586
Adjusted operating earnings $ 844 $ 1,096
Retirement & Protection Solutions
Net revenues $ 3,124 $ 3,230
Expenses 2,257 2,612
Adjusted operating earnings $ 867 $ 618
Corporate & Other
Net revenues $ 479 $ 487
Expenses 785 776
Adjusted operating loss $ (306) $ (289)
The following table presents the segment pretax adjusted operating impacts on our revenues and expenses attributable to unlocking for the years ended December 31:
Segment Pretax Adjusted Operating Increase (Decrease) 2022 2021
Retirement & Protection Solutions Corporate Retirement & Protection Solutions Corporate
(in millions)
Premiums, policy and contract charges $ 1 $ (2) $ 16 $ —
Total revenues 1 (2) 16 —
Benefits, claims, losses and settlement expenses 6 (1) 6 —
Remeasurement (gains) losses of future policy benefit reserves:
LTC unlocking and loss recognition — (6) — —
Unlocking impact, excluding LTC 6 — — —
Total remeasurement (gains) losses of future policy benefit reserves 6 (6) — —
Change in fair value of market risk benefits (139) — 123 —
Amortization of DAC — (2) — —
Total expenses (127) (9) 129 —
Pretax income (loss) $ 128 $ 7 $ (113) $ —
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Ameriprise Financial, Inc.
Advice & Wealth Management
The following table presents the changes in wrap account assets and average balances for the years ended December 31:
2022 2021
(in billions)
Beginning balance $ 464.7 $ 380.0
Net flows 27.5 40.4
Market appreciation (depreciation) and other (80.1) 44.3
Ending balance $ 412.1 $ 464.7
Advisory wrap account assets ending balance (1)
$ 407.8 $ 459.5
Average advisory wrap account assets (2)
$ 419.9 $ 415.3
(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 twelve months ended December 31, 2022 and 2021, which is reflective of our billing cycle.
Wrap account assets decreased $52.6 billion, or 11%, during 2022 due to market depreciation of $80.1 billion, partially offset by net inflows of $27.5 billion. Average advisory wrap account assets increased $4.6 billion, or 1%, compared to the prior year primarily reflecting continued 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:
Years Ended December 31, Change
2022 2021
(in millions)
Revenues
Management and financial advice fees $ 5,308 $ 5,297 $ 11 — %
Distribution fees 2,249 2,253 (4) —
Net investment income 748 257 491 NM
Other revenues 232 226 6 3
Total revenues 8,537 8,033 504 6
Banking and deposit interest expense 76 12 64 NM
Total net revenues 8,461 8,021 440 5
Expenses
Distribution expenses 4,719 4,842 (123) (3)
Interest and debt expense 10 10 — —
General and administrative expense 1,540 1,426 114 8
Total expenses 6,269 6,278 (9) —
Adjusted operating earnings $ 2,192 $ 1,743 $ 449 26 %
NM Not Meaningful - variance equal to or greater than 100%.
Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased $449 million, or 26%, for 2022 compared to the prior year primarily reflecting the benefit from higher interest rates and client net inflows, partially offset by market depreciation and decreased transactional activity. Pretax adjusted operating margin was 25.9% for 2022 compared to 21.7% for the prior year. Adjusted operating net revenue per advisor increased to $827,000 for 2022, up 4%, from $796,000 for the prior year.
Ameriprise Bank is continuing its deposit growth trend, with bank deposits balances increasing $6.9 billion from the prior year period to $18.3 billion and brokerage client pledged asset lines of credit increasing $122 million from the prior year to $589 million as of December 31, 2022.
Net Revenues
Management and financial fees increased $11 million for 2022 compared to the prior year primarily due to an increase in financial planning fees, offset by lower advisory fees. Average advisory wrap account assets increased $4.6 billion, or 1%, compared to the prior year reflecting net inflows, partially offset by market depreciation.
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Ameriprise Financial, Inc.
Distribution fees decreased $4 million for 2022 compared to the prior year reflecting lower average equity markets and decreased transactional activity mostly offset by $264 million of higher fees on off-balance sheet brokerage cash due to an increase in average short-term interest rates.
Net investment income increased $491 million for 2022 compared to the prior year primarily due to higher average invested assets due to increased bank deposits and higher investment yields on the investment portfolio supporting the bank and certificate products.
Banking and deposit interest expense increased $64 million for 2022 compared to the prior year primarily due to higher average crediting rates on bank cash deposits and certificates and increased cash deposits at the bank.
Expenses
Distribution expenses decreased $123 million, or 3%, for 2022 compared to the prior year reflecting market depreciation and decreased transactional activity.
General and administrative expense increased $114 million, or 8%, for 2022 compared to the prior year primarily due to higher volume related expenses and investments in business growth as well as lower staffing levels and limited travel and entertainment expenses in the prior year.
Asset Management
The following table presents managed assets by type:
December 31, Change Average (1)
Change
December 31,
2022 2021 2022 2021
(in billions)
Equity $ 301.2 $ 402.9 $ (101.7) (25) % $ 333.1 $ 338.3 $ (5.2) (2) %
Fixed income 210.0 277.0 (67.0) (24) 232.0 211.8 20.2 10
Money market 21.9 10.1 11.8 NM 17.1 6.5 10.6 NM
Alternative 33.7 39.9 (6.2) (16) 37.3 25.8 11.5 45
Hybrid and other 17.2 24.2 (7.0) (29) 19.8 22.6 (2.8) (12)
Total managed assets
$ 584.0 $ 754.1 $ (170.1) (23) % $ 639.3 $ 605.0 $ 34.3 6 %
NM Not Meaningful - variance equal to or greater than 100%.
(1) Average ending balances are calculated using an average of the prior period’s ending balance and all months in the current period.
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Ameriprise Financial, Inc.
The following table presents the changes in global managed assets:
Years Ended December 31,
2022 2021
(in billions)
Global Retail Funds
Beginning assets $ 409.4 $ 323.5
Inflows 60.9 78.5
Outflows (84.7) (68.8)
Net VP/VIT fund flows (4.3) (4.2)
Net new flows (1)
(28.1) 5.5
Reinvested dividends 11.4 19.0
Net flows (16.7) 24.5
Distributions (12.9) (21.5)
Acquired assets (2)
— 37.0
Market appreciation (depreciation) and other (65.6) 47.5
Foreign currency translation (3)
(4.9) (1.6)
Total ending assets 309.3 409.4
Global Institutional
Beginning assets 344.7 223.1
Inflows (4)
59.1 50.9
Outflows (4)
(49.0) (32.5)
Net flows (1)
10.1 18.4
Acquired assets (2)
— 99.2
Market appreciation (depreciation) and other (5)
(65.0) 6.7
Foreign currency translation (3)
(15.1) (2.7)
Total ending assets 274.7 344.7
Total managed assets $ 584.0 $ 754.1
Total net flows $ (6.6) $ 42.9
Legacy insurance partners net flows (6)
$ (4.6) $ (4.9)
(1) Included in net flows are the amounts from the U.S. asset transfer from the BMO acquisition of $2.6 billion ($2.5 billion retail and $0.1 billion institutional) in 2022 and $16.9 billion ($2.9 billion retail and $14.0 billion institutional) in 2021.
(2) Reflects the acquisition of the BMO Global Asset Management (EMEA) business that closed on November 8, 2021.
(3) Amounts represent local currency to US dollar translation for reporting purposes.
(4) Global Institutional inflows and outflows include net flows from our structured variable annuity product and Ameriprise Bank.
(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 and Ameriprise Bank
(6) Legacy insurance partners assets and net flows are included in the rollforwards above.
Total segment AUM decreased $170.1 billion, or 23%, during 2022 driven by equity and bond market depreciation and an unfavorable foreign exchange impact. Net outflows were $6.6 billion for 2022, compared to net inflows of $42.9 billion in the prior year which included the transfer of $16.9 billion of retail and institutional assets from U.S. BMO asset management clients that elected to move their assets to us during the fourth quarter of 2021, resulting from the transition of investment advisory services as part of an arrangement with BMO Financial Group for their U.S. business.
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The following table presents the results of operations of our Asset Management segment on an adjusted operating basis:
Years Ended December 31, Change
2022 2021
(in millions)
Revenues
Management and financial advice fees $ 3,086 $ 3,202 $ (116) (4) %
Distribution fees 397 471 (74) (16)
Net investment income 9 6 3 50
Other revenues 14 3 11 NM
Total revenues 3,506 3,682 (176) (5)
Banking and deposit interest expense — — — —
Total net revenues 3,506 3,682 (176) (5)
Expenses
Distribution expenses 995 1,132 (137) (12)
Amortization of deferred acquisition costs 9 12 (3) (25)
Interest and debt expense 5 5 — —
General and administrative expense 1,653 1,437 216 15
Total expenses 2,662 2,586 76 3
Adjusted operating earnings $ 844 $ 1,096 $ (252) (23) %
NM Not Meaningful - variance equal to or greater than 100%.
Our Asset Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, decreased $252 million, or 23%, for 2022 compared to the prior year primarily due market depreciation, an unfavorable foreign exchange impact and the cumulative impact of net outflows.
Net Revenues
Management and financial advice fees decreased $116 million, or 4%, for 2022 compared to the prior year primarily driven by lower average markets, the cumulative impact of net outflows, the impact of foreign exchange rates and a decrease in performance fees, partially offset by revenue associated with the acquired BMO Global Asset Management (EMEA) business.
Distribution fees decreased $74 million, or 16%, for 2022 compared to the prior year primarily due to lower average markets and the cumulative impact from net outflows.
Other revenues increased $11 million for 2022 compared to prior year primarily due to the acquired BMO Global Asset Management (EMEA) business.
Expenses
Distribution expenses decreased $137 million, or 12%, for 2022 compared to the prior year primarily due to market depreciation and the cumulative impact of net outflows.
General and administrative expense increased $216 million, or 15%, for 2022 compared to the prior year primarily reflecting the operating expenses of the acquired BMO Global Asset Management (EMEA) business, partially offset by the impact of foreign exchange rates and $17 million in lower performance fee related compensation.
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Ameriprise Financial, Inc.
Retirement & Protection Solutions
The following table presents the results of operations of our Retirement & Protection Solutions segment on an adjusted operating basis:
Years Ended December 31, Change
2022 2021
(in millions)
Revenues
Management and financial advice fees $ 788 $ 932 $ (144) (15) %
Distribution fees 418 485 (67) (14)
Net investment income 569 480 89 19
Premiums, policy and contract charges 1,337 1,326 11 1
Other revenues 12 7 5 71
Total revenues 3,124 3,230 (106) (3)
Banking and deposit interest expense — — — —
Total net revenues 3,124 3,230 (106) (3)
Expenses
Distribution expenses 448 544 (96) (18)
Interest credited to fixed accounts 386 389 (3) (1)
Benefits, claims, losses and settlement expenses 469 427 42 10
Remeasurement (gains) losses of future policy benefit reserves 1 (6) 7 NM
Change in fair value of market risk benefits 372 680 (308) (45)
Amortization of deferred acquisition costs 233 239 (6) (3)
Interest and debt expense 39 37 2 5
General and administrative expense 309 302 7 2
Total expenses 2,257 2,612 (355) (14)
Adjusted operating earnings $ 867 $ 618 $ 249 40 %
NM Not Meaningful - variance equal to or greater than 100%.
Our Retirement & Protection Solutions segment pretax adjusted operating earnings, which exclude net realized investment gains or losses (net of the reinsurance accrual), the market impact on variable annuity guaranteed benefits (net of hedges), the market impact on IUL benefits (net of hedges and the reinsurance accrual), mean reversion related impacts, and block transfer reinsurance transaction impacts increased $249 million, or 40%, for 2022 compared to the prior year.
Variable annuity account balances decreased 19% to $74.4 billion as of December 31, 2022 compared to the prior year due to market depreciation and net outflows of $2.1 billion. Variable annuity sales decreased 33% to $4.0 billion for 2022 compared to the prior year reflecting a decrease in sales of variable annuities with living benefit guarantees. Account values with living benefit riders declined to 57% as of December 31, 2022 compared to 61% a year ago reflecting our actions to optimize our business mix. 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 our variable annuities with living benefit guarantees at the end of 2021, and have stopped issuing new contracts as of mid-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 $144 million, or 15%, for 2022 compared to the prior year primarily reflecting lower average equity markets and variable annuity net outflows.
Distribution fees decreased $67 million, or 14%, for 2022 compared to the prior year reflecting lower average equity markets and lower sales.
Net investment income, which excludes net realized investment gains or losses, increased $89 million, or 19%, for 2022 compared to the prior year reflecting higher fixed maturity investment yields and increased volume of invested assets partially driven by our portfolio repositioning in the fourth quarter.
Expenses
Distribution expenses decreased $96 million, or 18%, for 2022 compared to the prior year primarily reflecting lower variable annuity and insurance sales and market depreciation.
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Benefits, claims, losses and settlement expenses, which exclude the market impact on structured variable annuities indexed account embedded derivative (net of hedges) and mean reversion related impacts, increased $42 million, or 10%, for 2022 compared to the prior year primarily reflecting the impacts of equity market depreciation and higher interest rates, as well as increased volume in SVAs.
Change in fair value of market risk benefits, which exclude the market impact on variable annuity guaranteed benefits (net of hedges), decreased $308 million, or 45%, for 2022 compared to the prior year period primarily reflecting the impact of unlocking, equity market depreciation and variable annuity net outflows. The unlocking impact for 2022 was a benefit of $139 million primarily reflecting the impact of interest rate assumptions, partially offset by lower surrender assumptions and updated mortality assumptions for variable annuities with living benefits compared to an expense of $123 million for the prior year which was driven by lower surrender assumptions.
Corporate & Other
The following table presents the results of operations of our Corporate & Other segment on an adjusted operating basis:
Years Ended December 31, Change
2022 2021
(in millions)
Revenues
Distribution fees $ — $ 1 $ (1) NM
Net investment income 155 242 (87) (36)
Premiums, policy and contract charges 99 100 (1) (1)
Other revenues 230 146 84 58
Total revenues 484 489 (5) (1)
Banking and deposit interest expense 5 2 3 NM
Total net revenues 479 487 (8) (2)
Expenses
Distribution expenses (10) (9) (1) 11
Interest credited to fixed accounts 242 250 (8) (3)
Benefits, claims, losses and settlement expenses 247 245 2 1
Remeasurement (gains) losses of future policy benefit reserves — (46) 46 NM
Amortization of deferred acquisition costs 10 8 2 25
Interest and debt expense 70 63 7 11
General and administrative expense 226 265 (39) (15)
Total expenses 785 776 9 1
Operating loss $ (306) $ (289) $ (17) (6) %
NM Not Meaningful - variance equal to or greater than 100%.
Our Corporate & Other segment pretax adjusted operating loss excludes net realized investment gains or losses, the market impact on fixed annuity benefits (net of hedges), 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 $17 million, or 6%, for 2022 compared to the prior year.
Our LTC insurance had a pretax adjusted operating loss of $10 million for 2022 compared to pretax adjusted operating earnings of $29 million for the prior year primarily reflecting the favorable impacts in 2021 from COVID-19 effects on policyholder expenses.
FA business had a pretax adjusted operating loss of $22 million for 2022 compared to a pretax adjusted operating loss of $20 million for the prior year. Fixed deferred annuity account balances declined 6% to $7.1 billion as of December 31, 2022 compared to the prior year period as surrender trends continued. During the third quarter of 2021, we closed on a transaction to reinsure RiverSource Life’s fixed deferred and payout 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 $87 million, or 36%, for 2022 compared to the prior year primarily reflecting lower average invested assets due to the sale of investments to the reinsurer as a result of the fixed deferred and payout annuity reinsurance transaction and a $15 million gain on a strategic investment in the prior year.
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Ameriprise Financial, Inc.
Other revenues increased $84 million, or 58%, for 2022 compared to the prior year primarily reflecting the yield on deposit receivables arising from reinsurance transactions.
Expenses
Remeasurement (gains) losses of future policy benefit reserves increased $46 million for 2022 compared to the prior year primarily reflecting an increase in expense on LTC insurance as policy and claim terminations returned to more normalized levels compared to the prior year which benefited from COVID-19 related impacts.
General and administrative expense, which excludes integration and restructuring charges and expenses attributable to CIEs, decreased $39 million, or 15%, to 2022 compared to the prior year primarily due to a larger unfavorable change in the mark-to-market impact on share-based compensation expenses in the prior year due to share price appreciation.
Fair Value Measurements
We report certain assets and liabilities at fair value; specifically, separate account assets, derivatives, market risk benefits, 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 16 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 market risk benefits, 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 market risk benefits, fixed deferred indexed annuities, structured variable 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 U.S. Treasury curve as of December 31, 2023. As our estimate of this spread widens or tightens, the liability will decrease or increase, respectively. If this nonperformance credit spread moves to a zero spread over the U.S. Treasury curve, the reduction to future total equity would be approximately $795 million, net of the reinsurance accrual and income taxes (calculated at the statutory tax rate of 21%), based on December 31, 2023 credit spreads.Liquidity and Capital Resources
OverviewAs of December 31, 2023 and 2022, we had Available Capital for Capital Adequacy of $5.4 billion and $5.2 billion, respectively. Available Capital for Capital Adequacy best reflects the available capital resources of our operations.
We maintained substantial liquidity during the year ended December 31, 2023. At December 31, 2023 and 2022, we had $7.5 billion and $7.0 billion, respectively, in cash and cash equivalents excluding CIEs and other restricted cash on a consolidated basis.
At December 31, 2023 and 2022, the parent company had $544 million and $389 million, respectively, in cash, cash equivalents, and unencumbered liquid securities. Liquid securities predominantly include U.S. government agency mortgage back securities. Additional sources of liquidity include a line of credit with an affiliate up to $727 million and an unsecured revolving committed credit facility for up to $1.0 billion that expires in June 2026. Management’s estimate of liquidity available to the parent company in a volatile and uncertain economic environment as of December 31, 2023 was $1.8 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 $1.25 billion upon satisfaction of certain approval requirements. Available borrowings under this facility are reduced by any outstanding letters of credit. At December 31, 2023, we had no outstanding borrowings under this credit facility and had $1 million of letters of credit issued against the facility. Our credit facility contains various administrative, reporting, legal and financial covenants. We remain in compliance with all such covenants at December 31, 2023.
In addition, we have access to collateralized borrowings, which may include repurchase agreements and Federal Home Loan Bank (“FHLB”) advances, and advances at the Federal Reserve. Our subsidiaries, RiverSource Life Insurance Company (“RiverSource Life”), and Ameriprise Bank are members of the FHLB of Des Moines, which provides access to collateralized borrowings. As of December 31, 2023 and 2022, we had an estimated maximum borrowing capacity of $8.6 billion and $8.0 billion, respectively, of borrowing capacity under the FHLB facilities, of which $201 million was outstanding as of both December 31, 2023 and 2022, and is collateralized with commercial mortgage backed securities. In addition, Ameriprise Bank maintains access to borrowings from the Federal Reserve which are collateralized with residential mortgage backed securities, commercial mortgage backed securities and
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Ameriprise Financial, Inc.corporate debt securities. As of December 31, 2023 and 2022, we estimated $12.3 billion and $9.0 billion, respectively, of borrowing capacity from the Federal Reserve in addition to the FHLB capacity and there were no outstanding obligations.
Short-term contractual obligations for the year 2024 include investment certificate maturities of $12.3 billion and estimated insurance and annuity benefits of $2.2 billion in addition to operating liquidity needs and maturing long-term debt in October 2024 of $550 million. We also hold banking and brokerage deposits of $23.9 billion that are payable on demand. Long-term contractual obligations for years after 2024 include estimated insurance and annuity benefits of $55.2 billion.
On March 9, 2023, we issued $750 million of 5.15% unsecured senior notes due May 15, 2033. We repaid $750 million principal amount of our 4.0% senior notes at maturity on October 16, 2023. On November 9, 2023, we issued $600 million of 5.7% unsecured senior notes due December 15, 2028. See Note 15 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 internal and external borrowings, access to debt markets and dividends from our subsidiaries will be sufficient to fund our short-term and long-term operating liquidity needs and stress requirements.
On August 16, 2022, federal legislation commonly referred to as the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax provisions of the IRA, the most significant of which are the corporate alternative minimum tax (“CAMT”) and the share repurchase excise tax. Both the CAMT and share repurchase tax were effective beginning in 2023. We are an applicable corporation required to compute the CAMT; however, based on current estimates we do not expect to be liable for the CAMT in 2023 and therefore a liability has not been recorded. We are a covered corporation subject to the 1% excise tax on the net shares repurchased. We have recorded in shareholders’ equity an estimate of the excise tax liability based on our interpretation of the current guidance. As the Internal Revenue Service issues additional guidance related to the IRA, we will continue to evaluate any impact to our consolidated financial statements.
In December 2021, the Organization for Economic Co-operation and Development (“OECD”) published the Pillar Two model rules which introduce new taxing mechanisms aimed at ensuring multinational enterprises (“MNEs”) pay a minimum level of tax on profits from each jurisdiction in which they operate. Various jurisdictions in which we operate have enacted or substantively enacted Pillar Two legislation that became effective beginning January 1, 2024. We continue to monitor the adoption and implementation of these rules and evaluate the potential impact on our consolidated financial statements.Dividends from SubsidiariesAmeriprise 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”), Ameriprise Bank, 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. (“CMIS”), our investment advisory company, Columbia Management Investment Advisers, LLC (“CMIA”), TAM UK International Holdings Ltd., which includes Ameriprise International Holdings GmbH within its organizational structure, and Columbia 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. For example, RiverSource Life payments in excess of statutory unassigned funds require advanced notice to the Minnesota Department of Commerce (“MN DOC”), RiverSource Life’s primary regulator, and are subject to potential disapproval. In addition, dividends and other distributions whose fair market value, together with that of other dividends or distributions made within the preceding 12 months, exceeds the greater of the previous year’s statutory net gain from operations or 10% of the previous year-end statutory capital and surplus are referred to as “extraordinary dividends.” Extraordinary dividends also require advanced notice to MN DOC, and are subject to potential disapproval.Our broker-dealer subsidiaries are subject to the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. Rule 15c3-1 provides an “alternative net capital requirement” which AEIS and AFS (significant broker dealers) have elected. Regulations require that minimum net capital, as defined, be equal to the greater of $250 thousand or 2% of aggregate debit items arising from client balances. The Financial Industry Regulatory Authority (“FINRA”) may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements.Ameriprise Bank is subject to regulation by the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation in its role as insurer of its deposits. Ameriprise Bank is required to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), Tier 1 Capital to average assets (as defined), and under rules defined under the Basel III capital framework, Common equity Tier 1 capital (“CEIT”) to risk-weighted assets. Ameriprise Bank calculates these ratios under the Basel III standardized approach in order to assess compliance with both regulatory requirements
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Ameriprise Financial, Inc.and Ameriprise Bank’s internal capital policies. As permitted under the rules of the Basel III capital framework, we have elected to exclude AOCI from the calculation of regulatory capital.
ACC is registered as an investment company under the Investment Company Act of 1940 (the “1940 Act”). ACC markets and sells investment certificates to clients. ACC is subject to various capital requirements under the 1940 Act, laws of the State of Minnesota and understandings with the SEC and the Minnesota Department of Commerce. The terms of the investment certificates issued by ACC and the provisions of the 1940 Act also require the maintenance by ACC of qualified assets.
Required capital for Columbia Threadneedle Investments UK International Ltd. is predominantly based on the requirements specified by its regulator, the FCA, under its Capital Adequacy Requirements for investment firms.Actual capital and regulatory capital requirements for our wholly owned subsidiaries subject to regulatory capital requirements were as follows:
Actual Capital Regulatory Capital Requirements
December 31, December 31,2023 2022 2023 2022(in millions)
RiverSource Life (1)$ 3,093 $ 3,103 $ 512 $ 571RiverSource Life of NY (1)244 320 40 40ACC (3)(4)765 534 717 496
TAM UK International Holdings Ltd. (5)(7)
706 437 317 214Ameriprise Bank, FSB (6)1,715 1,542 1,153 999AFS (2)(3)101 90 # #Ameriprise Captive Insurance Company (2)39 38 11 10Ameriprise Trust Company (2)62 54 45 38AEIS (2)(3)171 208 29 26RiverSource Distributors, Inc. (2)(3)13 12 # #Columbia Management Investment Distributors, Inc. (2)(3)17 17 # #
Columbia Threadneedle Investments UK International Ltd. (5)(7)
N/A 330 N/A 152N/A Not applicable.
# Amounts are less than $1 million.
(1) Actual capital is determined on a statutory basis. Regulatory capital requirement is the company action level and is based on the statutory risk-based capital filing.(2) Regulatory capital requirement is based on the applicable regulatory requirement, calculated as of December 31, 2023 and 2022.(3) Actual capital is determined on an adjusted GAAP basis.
(4) ACC is required to hold capital in compliance with the Minnesota Department of Commerce and SEC capital requirements.
(5) Actual capital and regulatory capital requirements are determined in accordance with U.K. regulatory legislation.
(6) Actual capital and regulatory capital requirements are determined in accordance with rules defined under Basel III capital framework. As permitted, AOCI is excluded from the calculation of regulatory capital.(7) In accordance with U.K. regulatory legislation, and on a prospective basis as of December 31, 2023, actual capital and the regulatory capital requirement for TAM UK International Holdings Ltd. and Columbia Threadneedle Investments UK International Ltd. are calculated and reported as a single consolidated group under TAM UK International Holdings Ltd..
In October 2023, the Federal Reserve Board (“FRB”) issued its final rule establishing a consolidated capital framework termed the “Building Block Approach” for savings and loan holding companies like Ameriprise Financial that are significantly engaged in insurance activities. The rule is effective January 1, 2024, with reporting to the FRB beginning in 2025.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.62
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Ameriprise Financial, Inc.The following table presents dividends paid or return of capital to the parent holding company, net of capital contributions made by the parent holding company for the following subsidiaries for the years ended December 31:2023 2022 2021(in millions)RiverSource Life $ 600 $ 600 $ 1,900
Ameriprise Bank 475 (395) (142)
ACC (131) (168) 109
CMIA 435 480 510
CMIS 20 — —TAM UK International Holdings Ltd.184 — 256
Ameriprise Advisor Capital, LLC (178) 78 (172)
Ameriprise Captive Insurance Company 5 — 5
AMPF Holding, LLC 1,370 1,375 1,284
Ameriprise India 13 6 2
RiverSource Distributors, Inc. — — (3)
Columbia Threadneedle Investments UK International Ltd. — — (966)
Ameriprise Holdings, Inc. (15) — —
Ameriprise Asset Management Holdings Singapore Ltd. — — (7)
Total $ 2,778 $ 1,976 $ 2,776
In 2009, RiverSource Life established an agreement to protect its exposure to Genworth 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 in Delaware, so in the event GLIC were 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 in Delaware and elsewhere in the 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 in Delaware. 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 RepurchasesWe paid regular quarterly dividends to our shareholders totaling $569 million and $553 million for the years ended December 31, 2023 and 2022, respectively. On January 24, 2024, we announced a quarterly dividend of $1.35 per common share. The dividend will be paid on February 27, 2024 to our shareholders of record at the close of business on February 9, 2024.
In January 2022, our Board of Directors authorized us to repurchase up to $3.0 billion for the repurchase of our common stock through March 31, 2024, which was exhausted in the fourth quarter of 2023. In July 2023, our Board of Directors authorized an additional $3.5 billion for the repurchase of our common stock through September 30, 2025. As of December 31, 2023, we had $3.1 billion remaining under this 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 year ended December 31, 2023, we repurchased a total of 5.9 million shares of our common stock at an average price of $330.94 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 by Ameriprise Financial, nor is Ameriprise 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 by Ameriprise Financial.63
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Ameriprise Financial, Inc.Operating ActivitiesNet cash provided by operating activities increased $278 million to $4.7 billion for the year ended December 31, 2023 compared to $4.4 billion for the prior year primarily reflecting higher investment income on fixed maturity securities, partially offset by higher income taxes paid and higher cash outflows in brokerage deposits. The higher investment income is driven by higher yields and the growth in Ameriprise Bank customer deposits and certificate business growth.Investing Activities
Our investing activities primarily relate to our Available-for-Sale investment portfolio and in recent quarters is significantly affected by the net flows of our face amount certificates and bank deposit activity.Net cash used in investing activities decreased $4.3 billion to $9.3 billion for the year ended December 31, 2023 compared to $13.6 billion for the prior year primarily reflecting a $2.3 billion decrease in purchases of Available-for-Sale securities and a $1.6 billion increase in proceeds from maturities, sinking fund payments and calls of Available-for-Sale securities.Financing ActivitiesNet cash provided by financing activities decreased $4.0 billion to $4.4 billion for the year ended December 31, 2023 compared to $8.4 billion for the prior year primarily reflecting a $3.7 billion decrease in the change in banking deposits, net.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;• statements about the strategic and regulatory outcome from the withdrawal of our application to convert Ameriprise Bank to a state-chartered bank and national trust bank;• statements about the anticipated deposit growth or statements about rising interest rates and the impacts on investment portfolio yield;
• other statements about future economic performance, the performance of equity markets and interest rate variations and the economic performance of the 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:
• market fluctuations and general economic and political factors, including volatility in the U.S. and global market conditions, client behavior and volatility in the markets for our products;
• changes in 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 some of our investments;• 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;64
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Ameriprise Financial, Inc.• 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;
• damage 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;
• 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, 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 Item 1A of this Annual Report on Form 10-K - “Risk Factors”.Ameriprise Financial announces financial and other information to investors through the Company’s investor relations website at ir.ameriprise.com, as well as SEC 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 the SEC.
FY 2024-12-31 (later)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the “Forward-Looking Statements,” our Consolidated Financial Statements and Notes that follow and the “Risk Factors” included in our Annual Report on Form 10-K. References to “Ameriprise Financial,” “Ameriprise,” the “Company,” “we,” “us,” and “our” refer to Ameriprise 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 130-year history of providing financial solutions. We are a long-standing leader in financial planning and advice with $1.5 trillion in assets under management, administration, and advisement as of December 31, 2024. We offer a broad range of products and services designed to achieve individual and institutional clients’ financial objectives. For additional discussion of our businesses, see Part I, Item 1 of this Annual Report on Form 10-K.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 and U.S. economies, changes in interest and inflation rates, financial market volatility, fluctuations in foreign exchange rates, geopolitical strain, pandemics, 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 of this Annual Report on Form 10-K - “Risk Factors” - 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 values of market risk benefits and embedded derivatives 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 but have recently experienced a substantial increase in rates with uncertainty about where rates will go in the future. A higher (lower) interest rate environment may result in decreases (increases) to our long-duration contract reserves, which may impact our adjusted operating earnings after tax. For additional discussion on our interest rate risk, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”In the third quarter, we conducted our annual review of life insurance, annuity and long term care (“LTC”) valuation assumptions relative to current experience and management expectations including modeling changes. These annual assumption updates are collectively referred to as unlocking throughout this document. See our Consolidated and Segment Results of Operations sections for the pretax impacts on our revenues and expenses attributable to unlocking.
The following discussion includes a comparison of our 2024 and 2023 results. For a discussion of our 2022 results and for a comparison of results for 2023 and 2022, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2023 , which was filed with the SEC on February 22, 2024.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 5 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 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 U.S. generally accepted accounting principles (“GAAP”), management believes that adjusted operating measures, which exclude net realized investment gains or losses, net of 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 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 the 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 impacts; gain or loss on disposal of a business that is not considered discontinued operations; integration and restructuring charges;32
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Ameriprise Financial, Inc.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.The market impact on non-traditional long-duration products includes changes in market risk benefits and embedded derivative values caused by changes in financial market conditions, net of changes in economic hedge values and unhedged items including the difference between assumed and actual underlying separate account investment performance, fixed income credit exposures, transaction costs and certain policyholder contract elections. The market impact also includes certain valuation adjustments made in accordance with FASB Accounting Standards Codification 820, Fair Value Measurements and Disclosure s, including the impact on embedded derivative values of discounting projected benefits to reflect a current estimate of our life insurance subsidiaries’ nonperformance spread.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 for U.S. GAAP measures.
Concurrent with the adoption of Accounting Standards Update 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts , management no longer excludes adjustments for deferred acquisition costs (“DAC”), deferred sales inducement costs (“DSIC”) and unearned revenue amortization from adjusted operating earnings measures. Amortization of DAC, DSIC, and unearned revenue is no longer impacted by markets and is now amortized on a constant-level basis in accordance with GAAP.
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 of over 30%.
The following table reconciles our GAAP measures to adjusted operating measures:
Per Diluted Share
Years Ended December 31, Years Ended December 31,2024202320242023(in millions, except per share amounts)Net income $ 3,401 $ 2,556 $ 33.05 $ 23.71Less Adjustments:
Net realized investment gains (losses) (1)(21) (32) (0.20) (0.30)Market impact on non-traditional long-duration products (1)(153) (608) (1.49) (5.63)Mean reversion related impacts (1)1 — 0.01 —Integration/restructuring charges (1)— (62) — (0.58)
Net income (loss) attributable to CIEs 3 — 0.03 —Tax effect of adjustments (2)36 147 0.35 1.36
Adjusted operating earnings $ 3,535 $ 3,111 $ 34.35 $ 28.86Weighted average common shares outstanding:Basic 101.0 105.7
Diluted 102.9 107.8(1) Pretax adjusted operating adjustments.
(2) Calculated using the statutory tax rate of 21%.
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Ameriprise Financial, Inc.
The following table reconciles net income to adjusted operating earnings and the five-point average of quarter-end equity to adjusted operating equity:
Years Ended December 31,2024 2023(in millions)Net income $ 3,401 $ 2,556Less: Adjustments (1)(134) (555)
Adjusted operating earnings $ 3,535 $ 3,111
Total Ameriprise Financial, Inc. shareholders’ equity $ 5,109 $ 4,116
Less: AOCI, net of tax (1,739) (2,297)
Total Ameriprise Financial, Inc. shareholders’ equity, excluding AOCI 6,848 6,413
Less: Equity impacts attributable to CIEs (3) (4)
Adjusted operating equity $ 6,851 $ 6,417
Return on equity, excluding AOCI 49.7 % 39.9 %Adjusted operating return on equity, excluding AOCI (2)51.6 % 48.5 %(1) Adjustments reflect the sum of after-tax net realized investment gains/losses, net of 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 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 accumulated other comprehensive income (“AOCI”) is calculated using adjusted operating earnings in the numerator and Ameriprise 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 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. The accounting and reporting policies and estimates we have identified as fundamental to a full understanding of our consolidated results of operations and financial condition are described below. See Note 2 to our Consolidated Financial Statements for further information about our accounting policies.
Valuation of Investments
The most significant component of our investments is our Available-for-Sale securities, which we carry at fair value within our Consolidated Balance Sheets. See Note 16 to our Consolidated Financial Statements for discussion of the fair value of our Available-for-Sale securities. Financial markets are subject to significant movements in valuation and liquidity, which can impact our ability to liquidate and the selling price that can be realized for our securities and increases the use of judgment in determining the estimated fair value of certain investments. We are unable to predict impacts and determine sensitivities in reported amounts reflecting such market movements on our aggregate Available-for-Sale portfolio. Changes to these assumptions do not occur in isolation and it is impracticable to predict such impacts at the individual security unit of measure which are predominately Level 2 fair value and based on observable inputs.Market Risk Benefits
Market risk benefits are contracts or contract features that both provide protection to the contractholder from other-than-nominal capital market risk and expose us to other-than-nominal capital market risk. Market risk benefits include certain contract features on variable annuity products that provide minimum guarantees to policyholders. Guarantees accounted for as market risk benefits include guaranteed minimum death benefit (“GMDB”), guaranteed minimum income benefit (“GMIB”), guaranteed minimum withdrawal benefit (“GMWB”) and guaranteed minimum accumulation benefit (“GMAB”).
Variable AnnuitiesWe have approximately $86 billion of variable annuity account value that has been issued over a period of more than fifty years. The diversified variable annuity block consists of $43 billion of account value with no living benefit guarantees and $43 billion of account value with living benefit guarantees, primarily GMWB provisions. The business is predominately issued through the Ameriprise Financial ® advisor network. The majority of the variable annuity contracts currently offered by us contain GMDB provisions. We also previously offered contracts containing GMWB, GMAB or GMIB provisions. See Note 13 to our Consolidated Financial Statements for further discussion of our variable annuity contracts.
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Ameriprise Financial, Inc.In determining the assets or liabilities for market risk benefits, we project these benefits and contract assessments using actuarial models to simulate various equity market scenarios. Significant assumptions made in projecting future benefits and assessments relate to customer asset value growth rates, mortality, surrenders (also referred to as persistency), benefit utilization and investment margins. Management reviews, and where appropriate, adjusts its assumptions each quarter. Unless management identifies a material deviation over the course of quarterly monitoring, management reviews and updates these assumptions annually in the third quarter of each year.In addition, the valuation of market risk benefits is impacted by an estimate of our nonperformance risk adjustment. This estimate includes a spread over the U.S. Treasury curve as of the balance sheet date. As our estimate of this spread widens or tightens, the liability will decrease or increase, respectively. The change in fair value due to changes in our nonperformance risk is recorded in other comprehensive income.Regarding the exposure to variable annuity living benefit guarantees, changes to reserves due to behavioral risk are driven by changes in policyholder surrenders and utilization of guaranteed withdrawal benefits. We have extensive experience studies and analysis to monitor changes and trends in policyholder behavior. A significant volume of company-specific policyholder experience data is available and provides management with the ability to regularly analyze policyholder behavior. On a monthly basis, actual surrender and benefit utilization experience is compared to expectations. Experience data includes detailed policy information providing the opportunity to review impacts of multiple variables. The ability to analyze differences in experience, such as presence of a living benefit rider, existence of surrender charges, and tax qualifications provide us an effective approach in detecting changes in policyholder behavior.
At least annually, we perform a thorough policyholder behavior analysis to validate the assumptions included in our market risk benefit reserves. The variable annuity assumptions and resulting reserve computations reflect multiple policyholder variables. Differentiation in assumptions by policyholder age, existence of surrender charges, guaranteed withdrawal utilization, and tax qualification are examples of factors recognized in establishing management’s assumptions used in market risk benefit calculations. The extensive data derived from our variable annuity block informs management in confirming previous assumptions and revising the variable annuity behavior assumptions. Changes in assumptions are governed by a review and approval process to ensure an appropriate measurement of all impacted financial statement balances. Changes in these assumptions can be offsetting and we are unable to predict their movement, sensitivities in reported amounts, offsetting impacts, or future impacts to the Consolidated Financial Statements over time or in any given future period.
Future Policy Benefits and Claims
We establish reserves to cover the benefits associated with non-traditional and traditional long-duration products. Non-traditional long-duration products include variable and structured variable annuity contracts, fixed annuity contracts and UL and VUL policies. Traditional long-duration products include term life insurance, whole life insurance, disability income (“DI”) and LTC insurance and life contingent payout annuity products. UL and VUL policies with product features that result in profits followed by losses are accounted for as insurance liabilities. The portion of structured variable annuities, indexed annuities and indexed universal life (“IUL”) policies allocated to the indexed account is accounted for as an embedded derivative.
The establishment of reserves is an estimation process using a variety of methods, assumptions and data elements. If actual experience is better than or equal to the results of the estimation process, then reserves should be adequate to provide for future benefits and expenses. If actual experience is worse than the results of the estimation process, additional reserves may be required.
Non-Traditional Long-Duration Products, including Embedded Derivatives
UL and VULA portion of our UL and VUL policies have product features that result in profits followed by losses from the insurance component of the contract. These profits followed by losses can be generated by the cost structure of the product or secondary guarantees in the contract. The secondary guarantee ensures that, subject to specified conditions, the policy will not terminate and will continue to provide a death benefit even if there is insufficient policy value to cover the monthly deductions and charges. The liability for these future losses is determined at the reporting date using actuarial models to estimate the death benefits in excess of account value and recognizing the excess over the estimated life based on expected assessments (e.g. cost of insurance charges, contractual administrative charges, similar fees and investment margin). Significant assumptions made in projecting future benefits and assessments relate to client asset value growth rates, mortality, persistency and investment margins. Changes in these assumptions can be offsetting and we are unable to predict their movement, sensitivities in reported amounts, offsetting impacts, or future impacts to the Consolidated Financial Statements over time or in any given future period. See Note 11 to our Consolidated Financial Statements for information regarding the liability for contracts with secondary guarantees.
Embedded Derivatives
The fair value of embedded derivatives related to structured variable annuities, indexed annuities and IUL fluctuates based on equity markets and interest rates and is reported within our total liabilities. In addition, the valuation of embedded derivatives is impacted by an estimate of our nonperformance risk adjustment. This estimate includes a spread over the U.S. Treasury curve as of the balance sheet date. As our estimate of this spread widens or tightens, the liability will decrease or increase, respectively.
See Note 16 to our Consolidated Financial Statements for information regarding the fair value measurement of embedded derivatives.35
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Ameriprise Financial, Inc.Traditional Long-Duration Products
The liabilities for traditional long-duration products include cash flows related to unpaid amounts on reported claims, estimates of benefits payable on claims incurred but not yet reported and estimates of benefits that will become payable on term life, whole life, DI, LTC, and life contingent payout annuity policies as claims are incurred in the future. Accordingly, the claim liability (also referred to as disabled life reserves) is presented together as one liability for future policy benefits.
A liability for future policy benefits, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of estimated future net premiums to be collected from policyholders, is accrued as premium revenue is recognized. Expected insurance benefits are accrued over the life of the contract in proportion to premium revenue recognized (referred to as the net premium approach). The net premium ratio reflects cash flows from contract inception to contract termination (i.e., through the claim paying period) and cannot exceed 100%.
The liability for future policy benefits is updated for actual experience at least on an annual basis and concurrent with changes to cash flow assumptions. When net premiums are updated for cash flow changes, the estimated cash flows over the entire life of a group of contracts are updated using historical experience and updated future cash flow assumptions. Changes in these assumptions can be offsetting and we are unable to predict their movement, sensitivities in reported amounts, offsetting impacts, or future impacts to the Consolidated Financial Statements over time or in any given future period.
The cash flows used in the calculation are discounted using the forward rate curve on the original contract issue date. The discount rate represents an upper-medium-grade (i.e., low credit risk) fixed-income instrument yield (i.e., an A rating) that reflects the duration characteristics of the liability.
Derivative Instruments and Hedging Activities
We use derivative instruments to manage our exposure to various market risks. All derivatives are recorded at fair value. The fair value of our derivative instruments is determined using either market quotes or valuation models that are based upon the net present value of estimated future cash flows and incorporate current market observable inputs to the extent available. We are unable to predict impacts and determine sensitivities in reported amounts reflecting such market movements on our aggregate derivative portfolio. Changes to assumptions do not occur in isolation and it is impracticable to predict such impacts at the individual security unit of measure which are predominately Level 2 fair value and based on observable inputs.
For further details on the types of derivatives we use and how we account for them, see Note 2, Note 16 and Note 18 to our Consolidated Financial Statements. For discussion of our market risk exposures and hedging program and related sensitivity testing, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.”
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 3 to our Consolidated Financial Statements.
Sources of Revenues and Expenses
Management and Financial Advice Fees
Management and financial advice fees relate primarily to fees earned from managing mutual funds, private funds, separate account and wrap account assets and institutional investments, as well as fees earned from providing financial advice, administrative services (including transfer agent and administration fees earned from providing services to retail mutual funds) and other custodial services. Management and financial advice fees include performance-based incentive management fees, which we may receive on certain management contracts. Management and financial advice fees also include mortality and expense risk fees.Distribution Fees
Distribution fees primarily include point-of-sale fees (such as mutual fund front-end sales loads) and asset-based fees (such as 12b-1 distribution and shareholder service fees). Distribution fees also include amounts received under marketing support arrangements for sales of mutual funds and other companies’ products, such as through our wrap accounts, as well as surrender charges on annuities and UL and VUL insurance. Distribution fees also include revenue for placing clients’ deposits in its brokerage sweep program with third-party banks as well as revenue from brokerage clients for the execution of requested trades.
Net Investment Income
Net investment income primarily includes interest income on fixed maturity securities classified as Available-for-Sale, mortgage loans, policy loans, margin loans, pledged asset lines of credit, other investments, cash and cash equivalents and investments of CIEs; the changes in fair value of trading securities, certain derivatives and certain assets and liabilities of CIEs; the pro rata share of net income or loss on equity method investments; realized gains and losses on the sale of investments; and changes for the allowance for credit losses.
Premiums, Policy and Contract ChargesPremiums include premiums on traditional life, DI and LTC insurance and payout annuities with a life contingent feature and are net of reinsurance premiums. Policy and contract charges include variable annuity rider charges and UL and VUL insurance charges,
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which consist of cost of insurance charges (net of reinsurance premiums and cost of reinsurance for UL and VUL insurance products) and administrative charges.Other Revenues
Other revenues primarily include the accretion on the fixed annuities reinsurance deposit receivables and other miscellaneous revenues.
Banking and Deposit Interest Expense
Banking and deposit interest expense primarily includes interest expense related to investment certificates and banking deposits.
Distribution Expenses
Distribution expenses primarily include compensation paid to our financial advisors, registered representatives, third-party distributors and wholesalers. The portion of these costs which are incremental and direct to the acquisition of a new or renewal insurance policy or annuity contract issued by the RiverSource Life companies are deferred. The amounts capitalized and amortized are based on actual distribution costs. The majority of these costs, such as advisor and wholesaler compensation, vary directly with the level of sales. Distribution expenses also include marketing support and other distribution and administration related payments made to affiliated and unaffiliated distributors of products provided by our affiliates. The majority of these expenses vary with the level of sales, or assets held, by these distributors, and the remainder is fixed. Distribution expenses also include wholesaling costs.
Interest Credited to Fixed Accounts
Interest credited to fixed accounts represents amounts earned by contractholders and policyholders on fixed account values associated with UL and VUL insurance and annuity contracts. The changes in fair value of fixed deferred indexed annuity and IUL embedded derivatives and the derivatives hedging these products are also included within Interest credited to fixed accounts.
Benefits, Claims, Losses and Settlement Expenses
Benefits, claims, losses and settlement expenses consist of amounts paid and changes in liabilities held for anticipated future benefit payments under insurance policies and annuity contracts, along with costs to process and pay such amounts. Amounts are net of benefit payments recovered or expected to be recovered under reinsurance contracts. Benefits, claims, losses and settlement expenses exclude the impact of remeasurement of future policy benefit reserves, which is separately presented. The changes in fair value of structured variable annuity embedded derivatives and the derivatives hedging this benefit, as well as the amortization of DSIC are also included in Benefits, claims, losses and settlement expenses.
Remeasurement (Gains) Losses of Future Policy Benefit Reserves
Remeasurement (gains) losses of future policy benefit reserves represents changes to the net premium ratio for actual versus expected experience and updates to cash flow assumptions used to measure traditional long-duration and limited-payment insurance contracts.
Change in Fair Value of Market Risk Benefits
Change in fair value of market risk benefits includes the change in fair value of GMDB, GMIB, GMWB and GMAB as well as the changes in fair value of derivatives hedging these market risk benefits. Changes in fair value of market risk benefits are recognized in net income each period with the exception of the portion of the change in fair value due to a change in the instrument-specific credit risk, which is recognized in other comprehensive income (“OCI”).
Amortization of DAC
Direct sales commissions and other costs capitalized as DAC are amortized over time. DAC are amortized on a constant-level basis for the grouped contracts over the expected contract term to approximate straight-line amortization.Interest and Debt Expense
Interest and debt expense primarily includes interest on corporate debt and CIE debt, the impact of interest rate hedging activities and amortization of debt issuance costs.
General and Administrative Expense
General and administrative expense includes compensation, share-based awards and other benefits for employees (other than employees directly related to distribution, such as financial advisors), professional and consultant fees, information technology, facilities and equipment, advertising and promotion, legal and regulatory and corporate related expenses.37
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Ameriprise Financial, Inc.Economic Environment
Global equity market conditions and fluctuations affect our results of operations and financial condition. The following table presents relevant market indices:
Years Ended December 31,20242023Change
S&P 500Daily average 5,428 4,285 27%
Period end 5,882 4,770 23%Weighted Equity Index (“WEI”) (1)Daily average 3,456 2,808 23%
Period end 3,676 3,102 19%(1) Weighted Equity Index is an Ameriprise 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 on North 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 results of operations and financial condition, and potentially material effects, see Part 1 - Item 1A “Risk Factors” of this Annual Report on Form 10-K.Assets Under Management, Administration, and AdvisementAssets under management (“AUM”) include external client assets for which we provide investment management services, such as the assets of the Columbia 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 include 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 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. Assets under administration also include 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.
Assets under advisement includes assets 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 Assets Under Management, Administration, and Advisement:December 31, Change20242023(in billions)Assets Under Management, Administration, and Advisement
Advice & Wealth Management AUM $ 570.1 $ 484.8 $ 85.3 18 %
Asset Management AUM 644.9 636.9 8.0 1
Corporate AUM 0.6 0.4 0.2 50
Eliminations (44.8) (41.0) (3.8) (9)
Total Assets Under Management 1,170.8 1,081.1 89.7 8
Total Assets Under Administration 317.2 279.5 37.7 13
Total Assets Under Advisement (net of eliminations)
34.0 25.4 8.6 34
Total Assets Under Management, Administration, and Advisement
$ 1,522.0 $ 1,386.0 $ 136.0 10 %
Total AUM increased $89.7 billion, or 8%, to $1.2 trillion as of December 31, 2024 compared to $1.1 trillion as of December 31, 2023 due to a $85.3 billion increase in Advice & Wealth Management AUM driven by market appreciation and wrap account net inflows and an $8.0 billion increase in Asset Management AUM primarily driven by market appreciation, partially offset by net outflows. Total Asset Under Administration increased $37.7 billion, or 13%, to $317.2 billion as of December 31, 2024 compared to the prior year primarily driven by equity market appreciation and an increase in third-party money market funds. Total Assets Under Advisement increased $8.6 billion, or 34%, to $34.0 billion as December 31, 2024 due to market appreciation and net inflows. See our segment results of operations discussion for additional information on changes in our AUM.38
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Ameriprise Financial, Inc.Consolidated Results of OperationsYear Ended December 31, 2024 Compared to Year Ended December 31, 2023The following table presents our consolidated results of operations:
Years Ended December 31, Change2024 2023(in millions)
RevenuesManagement and financial advice fees $ 10,143 $ 8,907 $ 1,236 14 %
Distribution fees 2,060 1,931 129 7
Net investment income 3,648 3,206 442 14
Premiums, policy and contract charges 1,559 1,539 20 1
Other revenues 516 513 3 1
Total revenues 17,926 16,096 1,830 11
Banking and deposit interest expense 662 561 101 18
Total net revenues 17,264 15,535 1,729 11ExpensesDistribution expenses 6,024 5,078 946 19
Interest credited to fixed accounts 616 654 (38) (6)
Benefits, claims, losses and settlement expenses 1,299 1,350 (51) (4)
Remeasurement (gains) losses of future policy benefit reserves (44) (20) (24) NM
Change in fair value of market risk benefits 628 798 (170) (21)
Amortization of deferred acquisition costs 242 246 (4) (2)
Interest and debt expense 329 324 5 2
General and administrative expense 3,903 3,871 32 1Total benefits and expenses12,997 12,301 696 6Pretax income4,267 3,234 1,033 32
Income tax provision 866 678 188 28
Net income $ 3,401 $ 2,556 $ 845 33 %NM Not Meaningful - variance equal to or greater than 100%.
OverallPretax income increased $1.0 billion, or 32%, for 2024 compared to the prior year. The following impacts were significant drivers of the year-over-year change in pretax income:
• The favorable impact from the cumulative impact of wrap net inflows and improved transactional activity.
• A favorable impact from higher investment portfolio yields, along with higher investment balances driven by increased Ameriprise Bank, FSB (“Ameriprise Bank”) customer deposits, as well as higher structured variable annuities (“SVA”) balances.
• A favorable impact from higher average equity markets compared to the prior year period. Our average WEI, which is a proxy for equity movements on AUM, increased 23% in 2024 compared to the prior year.
• The market impact on non-traditional long-duration products, net of hedges was an expense of $153 million for 2024 compared to an expense of $608 million for the prior year.
• The unfavorable impact from the cumulative impact of Asset Management net outflows.39
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Ameriprise Financial, Inc.The following table presents the total pretax impacts on our revenues and expenses attributable to unlocking, for the years ended December 31:
Pretax Increase (Decrease) 2024 2023(in millions)Premiums, policy and contract charges $ (4) $ 1
Total revenues (4) 1
Interest credited to fixed accounts
(10) —
Benefits, claims, losses and settlement expenses (4) (17)Remeasurement (gains) losses of future policy benefit reserves:LTC unlocking 4 (5)
Unlocking impact, excluding LTC (24) (6)
Total remeasurement (gains) losses of future policy benefit reserves (20) (11)
Change in fair value of market risk benefits 107 128
Total benefits and expenses 73 100Pretax income (loss) (1)$ (77) $ (99)
(1) Includes a $17 million net benefit related to model changes associated with the market impact on IUL and SVA embedded derivatives for 2024, which is excluded from adjusted operating earnings. Refer to Results of Operations by Segment for the impact to pretax adjusted operating earnings attributable to unlocking.
The primary driver of the unlocking impact was lowered surrender assumptions on variable annuities with living benefits resulting in an expense in 2024, partially offset by the updated claims incident rates on disability insurance. In the prior year, the primary driver of the unlocking impact was lowered surrender assumptions on variable annuities with living benefits resulting in an expense.Net RevenuesManagement and financial advice fees increased $1.2 billion, or 14%, for 2024 compared to the prior year primarily reflecting market appreciation and continued wrap account net inflows, partially offset by the cumulative impact of Asset Management and variable annuity net outflows.
Distribution fees increased $129 million, or 7%, for 2024 compared to the prior year primarily due to higher transactional activity and market appreciation, partially offset by $162 million of lower fees on off-balance sheet brokerage cash.
Net investment income increased $442 million, or 14%, for 2024 compared to the prior year primarily due to the following impacts:
• The favorable impact of growth in Ameriprise Bank customer deposits and SVA products.
• The favorable impact of higher investment portfolio yields.
Banking and deposit interest expense increased $101 million, or 18%, for 2024 compared to the prior year primarily reflecting higher average crediting rates and higher average balances on certificates and Ameriprise Bank cash deposits.ExpensesDistribution expenses increased $946 million, or 19%, for 2024 compared to the prior year primarily reflecting higher advisor compensation from higher average wrap account assets and increased transactional activity, as well as investments in recruiting experienced advisors, partially offset by the cumulative impact of Asset Management net outflows.
Interest credited to fixed accounts decreased $38 million, or 6%, for 2024 compared to the prior year primarily reflecting the following items:
• A $22 million decrease in expense from other market impacts on IUL benefits, net of hedges, which was an expense of $12 million for 2024 compared to an expense of $34 million for the prior year. The decrease in expense was primarily due to a decrease in the IUL embedded derivative in the current year, which reflected model changes and more discounting due to higher Treasury rates.
• A $4 million increase in expense from the unhedged nonperformance credit spread risk adjustment on IUL benefits. The unfavorable impact of the nonperformance credit spread was $19 million for 2024 compared to an unfavorable impact of $15 million for the prior year.• A decrease in expense driven by variable annuity net outflows.Benefits, claims, losses and settlement expenses decreased $51 million, or 4%, for 2024 compared to the prior year primarily reflecting an $196 million decrease in expense from market impacts on SVA embedded derivative, net of hedging activity. This decrease was the result of a favorable $644 million change in the market impact on derivatives hedging the SVA embedded derivative and an unfavorable $448 million change in the market impact on the SVA embedded derivative. This decrease was partially offset by the impact of higher sales of life contingent payout annuities and increased volume in SVAs.40
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Ameriprise Financial, Inc.Change in fair value of market risk benefits decreased $170 million, or 21%, for 2024 compared to the prior year primarily reflecting the following items:
• A $227 million decrease in expense from market impacts on variable annuity guaranteed benefits, net of hedges. This decrease was the result of a favorable $538 million change in the market impact on variable annuity guaranteed benefits reserves and an unfavorable $311 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 benefits liability net of the impact on the corresponding hedge assets resulted in a higher benefit for 2024 compared to the prior year.
• Interest rate and bond impact on the variable annuity guaranteed benefits liability net of the impact on the corresponding hedge assets resulted in a higher benefit for 2024 compared to the prior year.
• Volatility impact on the variable annuity guaranteed benefits liability net of the impact on the corresponding hedge assets resulted in a higher expense for 2024 compared to the prior year.
• Other unhedged items, including the difference between the assumed and actual underlying separate account investment performance, transaction costs and various behavioral items, were a lower net expense for 2024 compared to the prior year.
• An increase in expense due to market appreciation on contractual fees.
General and administrative expense increased $32 million, or 1%, for 2024 compared to the prior year primarily reflecting higher volume related expenses and investments for business growth, increased severance expense related to our expense management initiatives and higher performance fee related compensation, partially offset by ongoing benefits from our initiatives to enhance operational efficiency and effectiveness, as well as prior year expenses including a $50 million accrual for a regulatory matter relating to electronic communication recordkeeping requirements and $62 million of integration related expenses associated with the acquisition of the BMO Global Asset Management (EMEA) business.Income TaxesOur effective tax rate was 20.3% for 2024 compared to 21.0% for the prior year. See Note 24 to our Consolidated Financial Statements for additional discussion on income taxes.Results of Operations by SegmentYear Ended December 31, 2024 Compared to Year Ended December 31, 2023Adjusted 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 28 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:
Years Ended December 31,2024 2023(in millions)
Advice & Wealth ManagementNet revenues $ 10,780 $ 9,418
Expenses 7,547 6,567
Adjusted operating earnings $ 3,233 $ 2,851Asset ManagementNet revenues $ 3,515 $ 3,278
Expenses 2,595 2,558
Adjusted operating earnings $ 920 $ 720Retirement & Protection SolutionsNet revenues $ 3,773 $ 3,476
Expenses 3,047 2,791
Adjusted operating earnings $ 726 $ 685Corporate & OtherNet revenues $ 454 $ 533
Expenses 897 853
Adjusted operating loss $ (443) $ (320)
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Ameriprise Financial, Inc.The following table presents the segment pretax adjusted operating impacts on our revenues and expenses attributable to our annual assumption updates, referred to as unlocking, for the years ended December 31:Segment Pretax Adjusted Operating Increase (Decrease) 2024 2023Retirement & Protection Solutions Corporate Retirement & Protection Solutions Corporate
(in millions)Premiums, policy and contract charges $ (5) $ — $ 1 $ —
Total revenues (5) — 1 —
Benefits, claims, losses and settlement expenses 4 — (17) —Remeasurement (gains) losses of future policy benefit reserves:LTC unlocking — 4 — (5)
Unlocking, excluding LTC (24) — (6) —
Total remeasurement (gains) losses of future policy benefit reserves (24) 4 (6) (5)
Change in fair value of market risk benefits 105 — 128 —
Total benefits and expenses 85 4 105 (5)
Pretax income (loss) $ (90) $ (4) $ (104) $ 5Advice & Wealth ManagementThe following table presents Advice & Wealth Management total client assets as of December 31:
2024 2023
(in billions)
Wrap assets (1)
$ 573.9 $ 488.2
Brokerage and other assets (1)
455.0 412.3
Total client assets
$ 1,028.9 $ 900.5
(1) Total cash balances (included in the wrap and brokerage and other assets above)
$ 85.4 $ 81.5
Total client assets increased $128.4 billion, or 14%, to $1.0 trillion compared to a year ago primarily due to market appreciation and client net inflows.The following table presents the changes in wrap account assets and average balances for the years ended December 31:2024 2023(in billions)Beginning balance $ 488.2 $ 412.1
Net flows 33.1 24.2
Market appreciation (depreciation) and other 52.6 51.9
Ending balance $ 573.9 $ 488.2Advisory wrap account assets ending balance (1)$ 568.3 $ 483.3Average advisory wrap account assets (2)$ 528.3 $ 437.8(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 advisory wrap account assets 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 twelve months ended December 31, 2024 and 2023, which is reflective of our billing cycle.
Wrap account assets increased $85.7 billion, or 18%, to $573.9 billion during 2024 primarily due to market appreciation of $52.6 billion and net inflows of $33.1 billion. Average advisory wrap account assets increased $90.5 billion, or 21%, compared to the prior year primarily reflecting market appreciation and continued net inflows.
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The following table presents client cash balances as of December 31:
Cash and Certificates Balances
2024 2023
(in billions)
On-balance sheet - Ameriprise Bank
$ 22.3 $ 21.5
On-balance sheet - Ameriprise Certificate Company
11.2 13.5
On-balance sheet - broker dealer
2.3 2.4
Total on-balance sheet
$ 35.8 $ 37.4
Off-balance sheet - broker dealer
5.8 7.1
Total cash and certificate balances
$ 41.6 $ 44.5
Third party cash products (money market funds and brokered CDs)
43.8 37.0
Total client cash balances
$ 85.4 $ 81.5
Ameriprise Bank is continuing its deposit growth trend, with bank deposit balances increasing 4% from the prior year to $22.3 billion as of December 31, 2024. Ameriprise Certificate Company (“ACC”) client deposits decreased $2.3 billion from the prior year to $11.2 billion. After a period of strong growth during a rising interest rate environment, ACC has experienced net outflows during 2024. Third party cash products increased $6.8 billion to $43.8 billion driven by an increase of money market funds of $9.1 billion, partially offset by a decline in brokered CDs.
The following table presents assets supporting Ameriprise Bank deposits and ACC certificates as of December 31:
Ameriprise Bank
ACC
2024 2023 2024 2023
(in millions)
Investments
Fixed and adjustable rate (1)
$ 16,766 $ 14,808 $ 6,769 $ 7,566
Floating rate (1)
3,463 5,354 4,253 5,569
Total Available-for-Sale securities
20,229 20,162 11,022 13,135
Cash and cash equivalents
2,537 2,001 824 913
Loans and other assets
1,316 944 150 183
Total assets supporting deposits or certificates
$ 24,082 $ 23,107 $ 11,996 $ 14,231
(1) Presented on an amortized cost basis.
• In Ameriprise Bank, interest-bearing assets included $20.2 billion of Available-for-Sale securities, $2.5 billion of cash and cash equivalents, and $1.3 billion of other assets, primarily loans. The Ameriprise Bank investment portfolio securities are mostly rated AAA and primarily consist of structured assets, of which 17% were floating rate and sensitive to changes in short-term interest rates as of December 31, 2024. We took action to reduce the floating rate allocation from 27% as of December 31, 2023. The duration of Ameriprise Bank investments was 3.6 years as of December 31, 2024 compared to 3.4 years as of December 31, 2023. In 2024, we purchased $5.3 billion of investments, which was primarily sourced from maturities and prepayments.
• In ACC, interest-bearing assets include $11.0 billion of Available-for-Sale securities, $0.8 billion of cash and cash equivalents, and $0.2 billion of loans and other assets. The ACC investment portfolio securities are mostly rated AAA and primarily consist of structured assets and government bonds, of which 39% were floating rate and approximately 23% were 6-month Treasury Bills as of December 31, 2024. The duration of ACC investments was 1.1 years as of December 31, 2024 compared to 0.9 years as of December 31, 2023.
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Ameriprise Financial, Inc.The following table presents the results of operations of our Advice & Wealth Management segment on an adjusted operating basis:
Years Ended December 31, Change2024 2023(in millions)
RevenuesManagement and financial advice fees $ 6,492 $ 5,485 $ 1,007 18 %
Distribution fees 2,453 2,273 180 8
Net investment income 2,195 1,956 239 12
Other revenues 302 265 37 14
Total revenues 11,442 9,979 1,463 15
Banking and deposit interest expense 662 561 101 18
Total net revenues 10,780 9,418 1,362 14ExpensesDistribution expenses 5,823 4,888 935 19
Interest and debt expense 38 27 11 41
General and administrative expense 1,686 1,652 34 2
Total expenses 7,547 6,567 980 15
Adjusted operating earnings $ 3,233 $ 2,851 $ 382 13 %
Our Advice & Wealth Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased $382 million, or 13%, for 2024 compared to the prior year. This growth reflected the benefit from market appreciation and increased advisor productivity through the cumulative impact of client net inflows and higher transactional revenue, as well as a $138 million increase in Net investment income, net of Banking and deposit interest expense. Pretax adjusted operating margin was 30.0% for 2024 compared to 30.3% for the prior year. Adjusted operating net revenue per advisor increased to $1,037,000 for 2024, up 13%, from $916,000 for the prior year.Net RevenuesManagement and financial advice fees increased $1.0 billion, or 18%, for 2024 compared to the prior year primarily due to growth in average wrap account assets. Average advisory wrap account assets increased $90.5 billion, or 21%, compared to the prior year reflecting net inflows and market appreciation.
Distribution fees increased $180 million, or 8%, for 2024 compared to the prior year as non-brokerage cash revenue increased $342 million from strong transactional activity, including strong annuity sales and retail trading, along with market appreciation, while brokerage cash revenue decreased $162 million due to lower off-balance sheet brokerage cash balances and a lower average fee yield.
Net investment income increased $239 million, or 12%, for 2024 compared to the prior year primarily due to higher average invested assets and the favorable impact of higher average investment yields on the investment portfolios supporting the bank and certificate products. The Federal Reserve reduced rates in September, November, and December of 2024, lowering the federal funds effective rate an average of 67 basis points in the fourth quarter compared to the year ago quarter. These rate cuts also impacted various short-term benchmark rates, upon which our floating rate securities and cash rates are indexed, which unfavorably impacted net investment income in the second half of 2024.
Banking and deposit interest expense increased $101 million, or 18%, for 2024 compared to the prior year primarily reflecting higher average crediting rates and higher average balances on certificates and bank cash deposits.
• The average certificate reserve balance for ACC was $12.5 billion for 2024 compared to $11.8 billion for the prior year with the average crediting rate of 4.40% for 2024 compared to 3.96% for 2023.
• The daily average interest-bearing deposit balance for the Ameriprise Bank increased to $21.5 billion for 2024 compared to $20.4 billion for the prior year with the average interest rate paid on deposits increasing to 0.44% for 2024 from 0.41% for 2023, which included both cash sweep and savings products.ExpensesDistribution expenses increased $935 million, or 19%, for 2024 compared to the prior year primarily reflecting higher advisor compensation from higher average wrap account assets and increased transactional activity, as well as continued investments in recruiting experienced advisors.
General and administrative expense increased $34 million, or 2%, for 2024 compared to the prior year primarily reflecting higher volume related expenses and investments for business growth, partially offset by a $50 million accrual for a regulatory matter relating to electronic communication recordkeeping requirements in the prior year.
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Ameriprise Financial, Inc.Asset ManagementThe following tables present the mutual fund performance of our retail Columbia Threadneedle Investments funds as of December 31, 2024:Retail Fund Rankings in Top 2 Quartiles or Above Index Benchmark - Asset Weighted (1)
1 year 3 year 5 year 10 yearEquity 68% 69% 79% 87%
Fixed Income 69% 69% 80% 93%
Asset Allocation 89% 67% 82% 91%4- or 5-star Morningstar Rated Funds (2)
Overall 3 year 5 year 10 yearNumber of rated funds 108 73 79 99
(1) Retail Fund performance rankings for each fund are measured on a consistent basis against the most appropriate peer group or index. Peer groupings of Columbia funds are defined by Lipper category and are based on the Primary Share Class (i.e., Institutional if available, otherwise Institutional 3 share class), net of fees. Peer groupings of Threadneedle funds are defined by either IA or Morningstar index and are based on the Primary 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 Columbia or Threadneedle branded mutual funds included in both equity and fixed income.(2) Columbia funds are available for purchase by U.S. customers. Out of 89 Columbia funds rated (based on primary share class), 5 received a 5-star Overall Rating and 35 received a 4-star Overall Rating. Out of 137 Threadneedle funds rated (based on highest-rated share class), 20 received a 5-star Overall Rating and 48 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 managed assets by type:
December 31, Change Average (1)
Change
December 31,2024 2023 2024 2023(in billions) (in billions)Equity $ 343.0 $ 323.0 $ 20.0 6 % $ 340.1 $ 309.2 $ 30.9 10 %
Fixed income 231.5 238.4 (6.9) (3) 234.3 221.7 12.6 6
Money market 20.3 23.8 (3.5) (15) 21.9 22.6 (0.7) (3)
Alternative 30.9 33.5 (2.6) (8) 32.7 34.5 (1.8) (5)
Hybrid and other 19.2 18.2 1.0 5 19.0 17.3 1.7 10
Total managed assets $ 644.9 $ 636.9 $ 8.0 1 % $ 648.0 $ 605.3 $ 42.7 7 %(1) Average ending balances are calculated using an average of the prior period’s ending balance and all months in the current period.45Index
Ameriprise Financial, Inc.The following table presents the changes in global assets under management and advisement:Years Ended December 31,2024 2023(in billions)
Global Retail FundsBeginning managed assets
$ 334.9 $ 309.3
Inflows 54.9 47.9
Outflows (68.5) (65.2)
Net VP/VIT fund flows (6.6) (5.0)
Net new flows (20.2) (22.3)
Reinvested dividends 14.3 8.1
Net flows (5.9) (14.2)
Distributions (16.2) (9.4)
Market appreciation (depreciation) and other 41.2 45.1Foreign currency translation (1)(1.3) 4.1
Total ending managed assets
352.7 334.9Global InstitutionalBeginning managed assets
302.0 274.7Inflows (2)35.8 42.7Outflows (2)(50.3) (45.7)
Net flows (14.5) (3.0)Market appreciation (depreciation) and other (3)7.4 21.9Foreign currency translation (1)(2.7) 8.4
Total ending managed assets
292.2 302.0
Total managed assets 644.9 636.9
Total assets under advisement (4)
35.6 26.2
Total assets under management and advisement
$ 680.5 $ 663.1
Total assets under management net flows
$ (20.4) $ (17.2)
Model delivery assets under advisement flows (5)
2.8 0.7
Total assets under management and advisement flows (5)
$ (17.6) $ (16.5)
Legacy insurance partners net flows (6)
$ (11.7) $ (4.3)(1) Amounts represent local currency to U.S. dollar translation for reporting purposes.(2) Global Institutional inflows and outflows include net flows from our SVA product and Ameriprise Bank.(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 and Ameriprise Bank.(4) Assets under advisement are presented on a one-quarter lag.
(5) Assets under advisement flows are estimated flows based on the period-to-period change in assets less calculated performance based on strategy returns on a one-quarter lag.
(6) Legacy insurance partners assets and net flows are included in the rollforwards above.
Total segment AUM increased $8.0 billion, or 1%, during 2024 primarily driven by equity market appreciation, partially offset by net outflows. Net outflows were $20.4 billion for 2024 and included an $8.0 billion asset transfer related to a legacy insurance partner. Model delivery assets under advisement increased $9.4 billion, or 36%, with net inflows of $2.8 billion for 2024 compared to $0.7 billion for the prior year.
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The following table presents the results of operations of our Asset Management segment on an adjusted operating basis:
Years Ended December 31, Change2024 2023(in millions)
RevenuesManagement and financial advice fees $ 3,051 $ 2,844 $ 207 7 %
Distribution fees 388 363 25 7
Net investment income 55 44 11 25
Other revenues 21 27 (6) (22)
Total revenues 3,515 3,278 237 7Banking and deposit interest expense — — — —Total net revenues 3,515 3,278 237 7ExpensesDistribution expenses 989 925 64 7
Amortization of deferred acquisition costs 7 6 1 17
Interest and debt expense 7 7 — —
General and administrative expense 1,592 1,620 (28) (2)
Total expenses 2,595 2,558 37 1
Adjusted operating earnings $ 920 $ 720 $ 200 28 %
Our Asset Management segment pretax adjusted operating earnings, which exclude net realized investment gains or losses, increased $200 million, or 28%, for 2024 compared to the prior year primarily due to equity market appreciation and the positive impact from expense management actions, partially offset by the cumulative impact of net outflows.Net RevenuesManagement and financial advice fees increased $207 million, or 7%, for 2024 compared to the prior year primarily driven by market appreciation and an increase in performance fees, partially offset by the cumulative impact of net outflows.
Distribution fees increased $25 million, or 7%, for 2024 compared to the prior year primarily due to market appreciation, partially offset by the cumulative impact from net outflows.ExpensesDistribution expenses increased $64 million, or 7%, for 2024 compared to the prior year primarily due to market appreciation, partially offset by the cumulative impact of net outflows.
General and administrative expense decreased $28 million, or 2%, for 2024 compared to the prior year primarily reflecting the benefits from our initiatives to enhance operational efficiency and effectiveness, partially offset by $17 million of higher performance fee related compensation and an impairment of intangible assets primarily related to certain customer relationships.
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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:
Years Ended December 31, Change2024 2023(in millions)
RevenuesManagement and financial advice fees $ 768 $ 735 $ 33 4 %
Distribution fees 422 398 24 6
Net investment income 1,080 858 222 26
Premiums, policy and contract charges 1,496 1,475 21 1
Other revenues 7 10 (3) (30)
Total revenues 3,773 3,476 297 9Banking and deposit interest expense — — — —Total net revenues 3,773 3,476 297 9ExpensesDistribution expenses 515 464 51 11
Interest credited to fixed accounts 367 369 (2) (1)
Benefits, claims, losses and settlement expenses 927 744 183 25
Remeasurement (gains) losses of future policy benefit reserves (36) (19) (17) (89)
Change in fair value of market risk benefits 684 628 56 9
Amortization of deferred acquisition costs 227 229 (2) (1)
Interest and debt expense 45 51 (6) (12)
General and administrative expense 318 325 (7) (2)
Total expenses 3,047 2,791 256 9
Adjusted operating earnings $ 726 $ 685 $ 41 6 %
Our Retirement & Protection Solutions segment pretax adjusted operating earnings, which excludes net realized investment gains or losses (net of the reinsurance accrual), the market impact on variable annuity guaranteed benefits (net of hedges), the market impact on IUL benefits (net of hedges and the reinsurance accrual), mean reversion related impacts, and block transfer reinsurance transaction impacts increased $41 million, or 6%, for 2024 compared to the prior year.
Variable annuity account balances increased 6% to $85.7 billion as of December 31, 2024 compared to the prior year due to market appreciation, partially offset by net outflows of $3.7 billion. Variable annuity sales increased 26% to $5.0 billion for 2024 compared to the prior year reflecting an increase in sales of SVAs. Account values with living benefit riders declined to 50% as of December 31, 2024 compared to 54% a year ago reflecting our actions to optimize our business mix. This trend is expected to continue and meaningfully shift the mix of business away from products with living benefit guarantees over time.Net RevenuesManagement and financial advice fees increased $33 million, or 4%, for 2024 compared to the prior year primarily reflecting market appreciation, partially offset by the impact from variable annuity net outflows.
Distribution fees increased $24 million, or 6%, for 2024 compared to the prior year primarily reflecting market appreciation and higher sales, partially offset by variable annuity net outflows.
Net investment income, which excludes net realized investment gains or losses, increased $222 million, or 26%, for 2024 compared to the prior year primarily due to increased SVA balances and higher investment portfolio yields from investment portfolio repositioning.
Premiums, policy and contract charges increased $21 million, or 1%, for 2024 compared to the prior year due to higher sales of life contingent payout annuities.ExpensesDistribution expenses increased $51 million, or 11%, for 2024 compared to the prior year primarily reflecting higher sales of SVAs and market appreciation.
Benefits, claims, losses and settlement expenses, which exclude the market impact on SVA indexed account embedded derivative (net of hedges) and mean reversion related impacts, increased $183 million, or 25%, for 2024 compared to the prior year primarily reflecting increased volume in SVAs and the impact of higher sales of life contingent payout annuities.
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Ameriprise Financial, Inc.Change in fair value of market risk benefits, which exclude the market impact on variable annuity guaranteed benefits (net of hedges), increased $56 million, or 9%, for 2024 compared to the prior year primarily reflecting market appreciation on contractual fees.Corporate & Other
The following table presents the results of operations of our Corporate & Other segment on an adjusted operating basis:
Years Ended December 31, Change2024 2023(in millions)
RevenuesDistribution fees $ 1 $ 1 $ — — %
Net investment income 203 247 (44) (18)
Premiums, policy and contract charges 94 96 (2) (2)
Other revenues 186 209 (23) (11)
Total revenues 484 553 (69) (12)
Banking and deposit interest expense 30 20 10 50
Total net revenues 454 533 (79) (15)Expenses
Distribution expenses (10) (10) — —Interest credited to fixed accounts 216 234 (18) (8)
Benefits, claims, losses and settlement expenses 217 236 (19) (8)
Remeasurement (gains) losses of future policy benefit reserves (8) (1) (7) NM
Amortization of deferred acquisition costs 8 11 (3) (27)
Interest and debt expense 108 97 11 11
General and administrative expense 366 286 80 28
Total expenses 897 853 44 5
Adjusted operating loss $ (443) $ (320) $ (123) (38) %NM Not Meaningful - variance equal to or greater than 100%.
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 annuity benefits (net of hedges), 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 increased $123 million, or 38%, for 2024 compared to the prior year, reflecting lower net investment income along with higher severance and technology expenses.
LTC insurance had pretax adjusted operating earnings of $58 million for 2024 compared to pretax adjusted operating earnings of $29 million for the prior year primarily reflecting improved claims experience and the benefit of investment portfolio repositioning.
FA business had a pretax adjusted operating loss of $28 million for 2024 compared to a pretax adjusted operating loss of $29 million for the prior year. Fixed deferred annuity account balances declined 10% to $5.7 billion as of December 31, 2024, compared to the prior year as policies continue to lapse.Net RevenuesNet 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 $44 million, or 18%, for 2024 compared to the prior year primarily due to a $12 million benefit in our affordable housing partnerships in the prior year, as well as adjustments and updates made in the fourth quarter of 2023 to the allocation of investment income across business segments that reflected increased market volatility and the interest rate environment.
Other revenues decreased $23 million, or 11%, for 2024 compared to the prior year primarily reflecting the yield on deposit receivables arising from reinsurance transactions.
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ExpensesGeneral and administrative expense, which excludes integration and restructuring charges and expenses attributable to CIEs, increased $80 million, or 28%, for 2024 compared to the prior year primarily reflecting $32 million of higher severance expenses associated with our initiatives to enhance operational efficiency and effectiveness and expenses to accelerate our transition to cloud-based technology.Closed Block LTC InsuranceAs of December 31, 2024, our nursing home indemnity LTC block had approximately $63 million in gross in force annual premium and future policyholder benefits and claim reserves of approximately $1.3 billion, net of reinsurance, which was 50% of GAAP reserves. This block has been shrinking over the last few years given the average attained age is 84 and the average attained age of policyholders on claim is 89. Fifty-four percent of daily benefits in force in this block are lifetime benefits.
As of December 31, 2024, our comprehensive reimbursement LTC block had approximately $111 million in gross in force annual premium and future policyholder benefits and claim reserves of approximately $1.3 billion, net of reinsurance. This block has higher premiums per policy than the nursing home indemnity LTC policies. The average attained age is 80 and the average attained age of policyholders on claim is 86. Thirty-four percent of daily benefits in force in this block are lifetime benefits.
We utilize three primary levers to manage our LTC business. First, we have taken an active approach of steadily increasing rates since 2005, with cumulative rate increases of 268% on our nursing home indemnity LTC block (excluding home care riders) and 164% on our comprehensive reimbursement LTC block as of December 31, 2024. Second, we have a reserving process that reflects the policy features and risk characteristics of our blocks. As of December 31, 2024, we had 46,000 policies that were closed with claim activity, as well as 7,000 open claims. We apply this experience to our in force policies, which were 75,000 as of December 31, 2024, at a very granular level by issue year, attained age and benefit features. Our statutory reserves are $346 million higher than our GAAP reserves as they include margins on key assumptions for morbidity and mortality and include $330 million in asset adequacy reserves as of December 31, 2024. Lastly, we have prudently managed our investment portfolio primarily through a liquid, investment grade portfolio.We undertake an extensive review of the cash flow and expense assumptions supporting the liability for future policy benefits annually during the third quarter of each year, or more frequently if appropriate, using current best estimate assumptions as of the date of the review. Our annual review process includes an analysis of our key reserve assumptions, including those for morbidity, terminations (mortality and lapses), and premium rate increases.Fair Value Measurements
We report certain assets and liabilities at fair value; specifically, separate account assets, derivatives, market risk benefits, 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 16 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 market risk benefits, 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 market risk benefits, fixed deferred indexed annuities, structured variable 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 U.S. Treasury curve as of December 31, 2024. As our estimate of this spread widens or tightens, the liability will decrease or increase, respectively. If this nonperformance credit spread moves to a zero spread over the U.S. Treasury curve, the reduction to future total equity would be approximately $496 million, net of the reinsurance accrual and income taxes (calculated at the statutory tax rate of 21%), based on December 31, 2024 credit spreads.50
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Ameriprise Financial, Inc.Liquidity and Capital Resources
OverviewWe maintained substantial liquidity during the year ended December 31, 2024. At December 31, 2024 and 2023, we had $8.1 billion and $7.5 billion, respectively, in cash and cash equivalents excluding CIEs and other restricted cash on a consolidated basis.
At December 31, 2024 and 2023, Ameriprise Financial, Inc. had $856 million and $544 million, respectively, in cash, cash equivalents, and unencumbered liquid securities. Liquid securities predominantly include U.S. government agency mortgage back securities. Additional sources of liquidity for Ameriprise Financial, Inc. include a line of credit with an affiliate up to $714 million and an unsecured revolving committed credit facility for up to $1.0 billion that expires in November 2029. Management’s estimate of liquidity available to the Ameriprise Financial, Inc. in a volatile and uncertain economic environment as of December 31, 2024 was $2.1 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 $1.25 billion upon satisfaction of certain approval requirements. Available borrowings under this facility are reduced by any outstanding letters of credit. At December 31, 2024, we had no outstanding borrowings under this credit facility and had $1 million of letters of credit issued against the facility. Our credit facility contains various administrative, reporting, legal and financial covenants. We remained in compliance with all such covenants as of December 31, 2024.
In addition, we have access to collateralized borrowings, which may include repurchase agreements, Federal Home Loan Bank (“FHLB”) advances, and advances at the Federal Reserve. Our subsidiaries, RiverSource Life Insurance Company (“RiverSource Life”), and Ameriprise Bank are members of the FHLB of Des Moines, which provides access to collateralized borrowings. As of December 31, 2024 and 2023, we had $8.5 billion and $8.6 billion, respectively, of estimated borrowing capacity under the FHLB facilities, of which $201 million was outstanding as of both December 31, 2024 and 2023, and is collateralized with commercial mortgage backed securities and residential mortgage backed securities. In addition, Ameriprise Bank maintains access to borrowings from the Federal Reserve which are collateralized with residential mortgage backed securities, commercial mortgage backed securities and corporate debt securities. As of December 31, 2024 and 2023, we estimated $11.9 billion and $12.3 billion, respectively, of borrowing capacity from the Federal Reserve in addition to the FHLB capacity and there were no outstanding obligations.
Short-term contractual obligations for the year 2025 include investment certificate maturities of $10.8 billion and estimated insurance and annuity benefits of $2.8 billion in addition to operating liquidity needs and maturing long-term debt in April 2025 of $500 million. We also hold banking and brokerage deposits of $24.6 billion that are payable on demand. Long-term contractual obligations for years after 2025 include estimated insurance and annuity benefits of $57.7 billion.
See Note 15 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 internal and external borrowings, access to debt markets, and dividends from our subsidiaries will be sufficient to fund our short-term and long-term operating liquidity needs and stress requirements.
In October 2023, the Federal Reserve Board (“FRB”) issued its final rule establishing a consolidated capital framework termed the “Building Block Approach” (“BBA”) for savings and loan holding companies like Ameriprise Financial that are significantly engaged in insurance activities. For information on the impact of the BBA, see “Business - Regulation - Federal Banking and Financial Holding Company Regulation” included in Part I, Item 1 of this Annual Report on Form 10-K.
On August 16, 2022, federal legislation commonly referred to as the Inflation Reduction Act of 2022 (“IRA”) was enacted. We have evaluated the tax provisions of the IRA, the most significant of which are the corporate alternative minimum tax (“CAMT”) and the share repurchase excise tax. Both the CAMT and share repurchase tax were effective beginning in 2023. We are an applicable corporation required to compute CAMT; and, based on current estimates, we recorded a CAMT liability for 2024. The U.S. Department of the Treasury issued proposed CAMT regulations in the third quarter of 2024. The proposed regulations are subject to public review and comment prior to finalizing. The Company is evaluating the potential impact of the proposed regulations. We are a covered corporation subject to the 1% excise tax on the net shares repurchased. We have recorded in shareholders’ equity an estimate of the excise tax liability based on our interpretation of the current guidance. As additional guidance is issued related to the IRA, we will continue to evaluate any impact to our consolidated financial statements.
In December 2021, the Organization for Economic Co-operation and Development published the Pillar Two model rules which introduce new taxing mechanisms aimed at ensuring multinational enterprises pay a minimum level of tax on profits from each jurisdiction in which they operate. Various jurisdictions in which we operate have enacted or substantively enacted Pillar Two legislation that became effective beginning January 1, 2024. We intend to rely on Pillar Two transitional safe harbors where available, and based on the current estimate, the tax impact is not material to the consolidated financial statements. We continue to monitor the adoption and implementation of these rules and evaluate the potential impact on our consolidated financial statements.
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Ameriprise Financial, Inc.Dividends from SubsidiariesAmeriprise Financial, Inc. 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, ACC, Ameriprise Bank, 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. (“CMIS”), our investment advisory company, Columbia Management Investment Advisers, LLC (“CMIA”), TAM UK International Holdings Ltd., which includes Ameriprise International Holdings GmbH within its organizational structure, and Columbia 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. For example, RiverSource Life payments in excess of statutory unassigned funds require advanced notice to the Minnesota Department of Commerce (“MN DOC”), RiverSource Life’s primary regulator, and are subject to potential disapproval. In addition, dividends and other distributions whose fair market value, together with that of other dividends or distributions made within the preceding 12 months, exceeds the greater of the previous year’s statutory net gain from operations or 10% of the previous year-end statutory capital and surplus are referred to as “extraordinary dividends.” Extraordinary dividends also require advanced notice to MN DOC, and are subject to potential disapproval.Our broker-dealer subsidiaries are subject to the Uniform Net Capital Rule (Rule 15c3-1) under the Securities Exchange Act of 1934. Rule 15c3-1 provides an “alternative net capital requirement” which AEIS and AFS (significant broker dealers) have elected. Regulations require that minimum net capital, as defined, be equal to the greater of $250 thousand or 2% of aggregate debit items arising from client balances. The Financial Industry Regulatory Authority (“FINRA”) may impose certain restrictions, such as restricting withdrawals of equity capital, if a member firm were to fall below a certain threshold or fail to meet minimum net capital requirements.Ameriprise Bank is subject to regulation by the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation in its role as insurer of its deposits. Ameriprise Bank is required to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), Tier 1 Capital to average assets (as defined), and under rules defined under the Basel III capital framework, Common equity Tier 1 capital (“CEIT”) to risk-weighted assets. Ameriprise Bank calculates these ratios under the Basel III standardized approach in order to assess compliance with both regulatory requirements and Ameriprise Bank’s internal capital policies. As permitted under the rules of the Basel III capital framework, we have elected to exclude AOCI from the calculation of regulatory capital.
ACC is registered as an investment company under the Investment Company Act of 1940 (the “1940 Act”). ACC markets and sells investment certificates to clients. ACC is subject to various capital requirements under the 1940 Act, laws of the State of Minnesota and understandings with the SEC and MN DOC. The terms of the investment certificates issued by ACC and the provisions of the 1940 Act also require the maintenance by ACC of qualified assets.
Actual capital and the regulatory capital requirement for TAM UK International Holdings Ltd. and Columbia Threadneedle Investments UK International Ltd. are calculated and reported as a single consolidated group under TAM UK International Holdings Ltd. Required capital for these entities is predominantly based on the requirements specified by its regulator, the Financial Conduct Authority (“FCA”), under its Capital Adequacy Requirements for investment firms. Required capital reflects 110% of the Own Funds Threshold Requirement (“OFTR”) and is determined by the group through its ongoing Internal Capital Adequacy and Risk Assessment (“ICARA”) process.
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Ameriprise Financial, Inc.Actual capital and regulatory capital requirements for our wholly owned subsidiaries subject to regulatory capital requirements were as follows:
Actual Capital Regulatory Capital Requirements
December 31, December 31,2024 2023 2024 2023(in millions)
RiverSource Life (1)$ 2,700 $ 3,093 $ 489 $ 512RiverSource Life of NY (1)219 244 38 40ACC (3)(4)644 765 596 717
TAM UK International Holdings Ltd. (5)
692 706 265 317Ameriprise Bank, FSB (6)1,763 1,715 1,199 1153AFS (2)(3)113 101 # #Ameriprise Captive Insurance Company (2)36 39 13 11Ameriprise Trust Company (2)74 62 51 45AEIS (2)(3)141 171 30 29RiverSource Distributors, Inc. (2)(3)13 13 # #Columbia Management Investment Distributors, Inc. (2)(3)19 17 # #N/A Not applicable.
# Amounts are less than $1 million.
(1) Actual capital is determined on a statutory basis. Regulatory capital requirement is the company action level and is based on the statutory risk-based capital filing.(2) Regulatory capital requirement is based on the applicable regulatory requirement, calculated as of December 31, 2024 and 2023.(3) Actual capital is determined on an adjusted GAAP basis.
(4) ACC is required to hold capital in compliance with the Minnesota Department of Commerce and SEC capital requirements.
(5) Actual capital and regulatory capital requirements are determined in accordance with U.K. regulatory legislation.
(6) Actual capital and regulatory capital requirements are determined in accordance with rules defined under Basel III capital framework. As permitted, AOCI is excluded from the calculation of regulatory capital.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.The following table presents dividends paid or return of capital to the parent holding company, net of capital contributions made by the parent holding company for the following subsidiaries for the years ended December 31:2024 2023 2022(in millions)RiverSource Life $ 600 $ 600 $ 600
Ameriprise Bank 675 475 (395)
ACC 225 (131) (168)
CMIA 490 435 480
CMIS — 20 —TAM UK International Holdings Ltd.(20) 184 —
Ameriprise Advisor Capital, LLC 225 (178) 78
Ameriprise Captive Insurance Company 10 5 —
AMPF Holding, LLC 1,685 1,370 1,375
Ameriprise India — 13 6
Columbia Threadneedle Investments UK International Ltd. 46 — —
Columbia Threadneedle Canada, Inc. 1 — —
Ameriprise Holdings, Inc. — (15) —
Total $ 3,937 $ 2,778 $ 1,976
In 2009, RiverSource Life established an agreement to protect its exposure to Genworth 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
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and rating agencies. GLIC is domiciled in Delaware, so in the event GLIC were 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 in Delaware and elsewhere in the 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 in Delaware. 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 RepurchasesWe paid regular quarterly dividends to our shareholders totaling $593 million and $569 million for the years ended December 31, 2024 and 2023, respectively. On January 29, 2025, we announced a quarterly dividend of $1.48 per common share. The dividend will be paid on February 28, 2025 to our shareholders of record at the close of business on February 10, 2025.
In July 2023, our Board of Directors authorized an additional $3.5 billion for the repurchase of our common stock through September 30, 2025. As of December 31, 2024, we had $888 million remaining under this share repurchase authorization. We intend to fund share repurchases through existing excess capital, future free cash flow generation 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 year ended December 31, 2024, we repurchased a total of 4.9 million shares of our common stock at an average price of $453.15 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 by Ameriprise Financial, nor is Ameriprise 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 by Ameriprise Financial.Operating ActivitiesNet cash provided by operating activities increased $1.9 billion to $6.6 billion for the year ended December 31, 2024 compared to $4.7 billion for the prior year primarily reflecting earnings from our fee based business operations, reduced net cash outflows in brokerage deposits, lower income taxes paid, and higher investment income.Investing Activities
Our investing activities primarily relate to our Available-for-Sale investment portfolio and in recent quarters is significantly affected by the net flows of our face amount certificates and bank deposit activity.Net cash used in investing activities decreased $8.7 billion to $551 million for the year ended December 31, 2024 compared to $9.3 billion for the prior year driven by a $6.5 billion increase in proceeds from maturities, sinking fund payments and calls of Available-for-Sale securities, a $1.6 billion increase in proceeds from sales of Available-for-Sale securities and a $1.2 billion decrease in purchases of Available-for-Sale securities.Financing ActivitiesNet cash used in financing activities was $5.2 billion for the year ended December 31, 2024 compared to net cash provided by financing activities of $4.4 billion for the prior year. The decrease in net cash provided by financing activities primarily reflects a $6.4 billion decrease in net cash flows from investment certificates and a $2.4 billion decrease in the change in banking deposits, net. After a period of growth during a rising interest rate environment, our face amount certificates experienced net outflows during 2024.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
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opportunities;• statements about the expected trend in the shift to lower-risk products, including the exit from variable annuities with living benefit riders;• statements about the anticipated deposit growth or statements about rising interest rates and the impacts on investment portfolio yield;
• other statements about future economic performance, the performance of equity markets and interest rate variations and the economic performance of the 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:
• market fluctuations and general economic and political factors, including volatility in the U.S. and global market conditions, client behavior and volatility in the markets for our products;
• changes in 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 some of our investments;• failures or defaults by counterparties to our reinsurance arrangements;• failures by other insurers that lead to higher assessments we owe to state insurance guaranty funds;• 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;
• damage 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;
• 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, 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
55
Index
Ameriprise Financial, Inc.
should be read in conjunction with the “Risk Factors” discussion included in Item 1A of this Annual Report on Form 10-K - “Risk Factors”.Ameriprise Financial announces financial and other information to investors through the Company’s investor relations website at ir.ameriprise.com, as well as SEC 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 the SEC.