Welcome to the Q4 2022 Ameriprise Financial, Inc. Earnings Conference Call. My name is Dennis, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

Thank you, operator, and good morning. Welcome to Ameriprise Financial's Fourth Quarter Earnings Call. On the call with me today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. Following their remarks, we would be happy to take your questions. Turning to our earnings presentation materials that are available on our website. On Slide 2, you will see a discussion of forward-looking statements. Specifically, during the call, you will hear references to various non-GAAP financial measures, which we believe provide insights into the company's operations. Reconciliation of the non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website. Some statements that we make on this call may be forward-looking reflecting management's expectations about future events and overall operating plans and performance. These forward-looking statements speak only as of today's date and involve a number of risks and uncertainties. A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in our fourth quarter earnings release, our 2021 annual report to shareholders, and our 2021 10-K report. We make no obligation to publicly update or revise these forward-looking statements. On Slide 3, you see our GAAP financial results at the top of the page for the fourth quarter. Below that, you'll see our adjusted operating results, followed by operating results excluding unlocking, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis. Many of the comments that management makes on the call today will focus on adjusted operating results. And with that, I'll turn it over to Jim.

Good morning, everyone, and thanks for joining our fourth quarter earnings call. As you saw in our release, Ameriprise delivered a strong fourth quarter, completing an excellent year in 2022. We continue to navigate uncertainty and serve our clients exceptionally well. I'll give you an update on the business, and then Walter will discuss our financials. Let me start with the market environment. Equity markets were down 19% year-over-year, with the average equity markets down 3% sequentially. So far this year, we're starting to see markets rebound to some extent as inflation eases. However, inflation is still at a high level. The question is, will the Fed have to continue to raise rates a bit more? Or will they maintain higher rates for longer if inflation remains stickier? With that backdrop, Ameriprise continues to be in a strong position. Revenues were good at $3.6 billion, only down 2% from a year ago relating to the impact of the equity and fixed income markets. Earnings were up nicely with EPS up 13% for the quarter and 11% for the year, both at new records, and ROE continued to be excellent among the best in the industry. Importantly, we're also managing expenses well with total expenses down 5% compared to a year ago. Assets Under Management and Administration were down to $1.2 trillion largely driven by the steep decline in equity markets, lower fixed income markets, and a difficult foreign currency translation and Asset Management. As in previous quarters, our combination of businesses generates a consistent level of free cash flow and good returns across market cycles. We're able to consistently invest in the business, which is strengthening our competitive position and our ability to deliver differentiated results. Now I'll talk more about our businesses. In Advice & Wealth Management, we continue to deliver very strong results and build on our leadership positions. We had good client flows in the quarter as clients remained engaged working closely with their advisors and benefiting from our comprehensive advice and solutions. Total client flows for the quarter were more than $12 billion, which is very strong, and in fact, the second highest quarter we had and just below our record fourth quarter last year. And I'll highlight that client flows were a record for the year at nearly $43 billion. With the investment climate this year, we've seen an even split into the mix of flows into advisory and non-advisory accounts, which is appropriate in this environment. We're maintaining an appropriate level of cash balances with good growth in our certificate business and the Ameriprise Bank, which is a key growth area for us. With regard to the bank, we've been consistently investing to expand our capabilities. The bank provides important flexibility in this interest rate environment and enables us to further engage and deepen our relationships with clients. Our bank has grown more than 50% this year to nearly $19 billion. We have good growth in our pledged loan business, and we're on track to launch more deposit and lending-based products this year. Our certificate company has also grown to nearly $10 billion, up $4 billion for the year. Clearly, 2022 was a very challenging year for investors to navigate the market volatility. That's why our high level of engagement and advice is so important. Clients highlight the positive experience they're having with Ameriprise and our advisors. And that satisfaction leads to a strong level of trust, which we've been recognized for. Just recently, we ranked #2 for trust in 2022 in Forrester's new Financial Services Customer Trust Index, and that complements our Newsweek rating as one of America's most trusted companies last year. Let's look at advisor productivity, which also remained strong, up 4% to nearly $830,000 per advisors in a challenging market environment. One of the reasons our advisors are so productive is the level of support and tools we provide. We're making important investments, including branding, marketing, and integrated technology. We're helping advisors engage clients really well in driving growth in their practices. And for the fourth consecutive year, Ameriprise was recognized by J.D. Power for providing outstanding customer service experience for phone support for advisors. Turning to recruiting, we had another good quarter with 72 highly productive advisors joining the firm. Advisors are attracted to our value proposition and the strength and stability of the firm, and the pipeline looks good. Overall, we are consistently investing in the business, including the bank, which is helping to drive organic growth and continue to generate strong results. Advice & Wealth Management continues to drive the firm's results with earnings up 41% year-over-year. Now let's turn to Retirement & Protection Solutions, where earnings were up 25% in the quarter due to the improved rate environment and our ability to invest out. As part of our strategy, we focused on products that meet our risk tolerances. Overall, sales were down consistent with the industry. We're very much focused on variable annuities without living benefits, our structured products of variable universal life and DI products given our move away from fixed products. This business is very stable and delivers very good cash flow and returns. I would note that RiverSource was recently ranked as one of the most profitable life insurers. Now I'll cover Asset Management. 2022 was a tough year navigating the volatility as we focused on our clients and executed our strategic priorities. Similar to the industry, our Asset Management business faced significant headwinds due to markets depreciating in the U.S. and globally, which pressured earnings. Equity markets were down 19%. With this, assets under management were down 23% to $584 billion, driven by market declines as well as a negative FX impact. Overall flows in the quarter were $0.4 billion out, which included $1.7 billion of legacy insurance partner outflows. In retail, overall, we were in net outflows of $3.7 billion, including reinvested dividends, which were driven by the weak market conditions that both pressured gross sales and increased redemptions. Additionally, in the U.S., we believe there was a heightened level of tax loss selling in December. Turning to Global Institutional, we were in net inflows of $5 billion, excluding legacy insurance partners, with some nice wins in LDI strategies. Regarding investment performance, we continue to have solid three, five, and ten-year numbers. However, we have weakness in one year's numbers given market volatility. In Asset Management, we are maintaining our expense discipline while continuing to invest in long-term priorities. These include our investment research, alternatives, responsible investment, globalizing our operations, and BMO integration, which is on track. We have a strong lineup of products and capabilities, a clear focus on serving our clients. As the environment improves, we will be well situated. Overall, Ameriprise is in a position of strength entering 2023, and we're very much focused on engaging our clients and continuing to execute well in this environment. With the strength and diversification of our business, including the growth of the bank, we continue to be able to invest across the firm while continuing to return capital to shareholders at a differentiated level. In the fourth quarter alone, we returned $610 million to shareholders.

Thank you, Jim. Results this quarter were very strong, and we continue to demonstrate the strength of the Ameriprise value proposition. Adjusted EPS increased 13% to $6.94 in the quarter and increased 11% for the full-year. Our diversified business mix supports good performance across market cycles, which was certainly demonstrated in the quarter. Fundamentals in Wealth Management, particularly in its cash businesses, were very strong. In total, Wealth Management now represents 64% of adjusted operating earnings, up from 48% a year ago. Asset Management, like the industry, is facing substantial headwinds, and earnings from this segment declined in the quarter. The Retirement & Protection Solutions business continues to generate solid financial results and free cash flow. We remain focused on the aspects of the business that we can control. We are executing our priorities, including investing for profitable business growth, expanding the bank, and completing the integration of BMO, all while meeting and exceeding client needs and maintaining a disciplined approach to managing expenses. In fact, total expenses, excluding BMO, were flat for the year. Our balance sheet fundamentals and free cash flow generation remain strong. In the quarter, we returned $610 million of capital to shareholders, totaling $2.4 billion for the full-year, while continuing to grow the bank and certificate company. We have dedicated significant capital to grow these businesses. Let's turn to Slide 6. As you would expect in these markets, Assets Under Management and Administration ended the quarter at $1.2 trillion, down 17%. This was driven by depreciating markets with equity and fixed markets down 19% and 12%, respectively. Additionally, Asset Management AUM levels were impacted by the weakening of the pound and the euro, with 36% of Asset Management AUM outside the U.S. at the end of the year. Despite the lower AUM levels, operating net revenues declined only 2% to $3.6 billion as a result of higher interest earnings, and pretax earnings reached a new high of $973 million reflecting the diversified revenue dynamics I discussed, coupled with the excellent expense discipline. Let's turn to Advice & Wealth Management on Slide 7. Wealth Management continues to deliver strong organic growth and business momentum, a reflection of our differentiated value proposition. With the challenging market backdrop, clients' assets declined 12% to $758 billion in 2022. However, we have sustained growth of 4% over the past two years. Total client net flows remain very strong at over $12 billion in the quarter and reached a record $43 billion for the full-year. While we continue to see a solid level of flows into ARAP accounts, there has been a distinct pickup in flows going to brokerage accounts and certificates as clients navigate the market backdrop. Revenue per advisor reached $827,000, up 23% over the past two years from continued enhanced productivity and business growth. On Slide 8, you can see Wealth Management profitability was exceptional, up 41% and reached a record margin of 30% as strong organic growth and higher interest earnings exceeded pressure from market depreciation and lower transactional activity. Adjusted operating expenses declined 5% with distribution expenses down 10%, reflecting lower transactional activity and lower client assets. G&A increased 11% in the quarter. And for the full year, G&A grew 8%. Expense growth in the quarter was driven by continued investments in the bank and higher volume-related activity from strong organic growth. Additionally, the prior year included unusually low expenses relating to staff levels and T&A. Cash balances in the quarter increased year-over-year and sequentially to $47 billion, which included $10 billion of certificate balances. Cash rebalances have declined slightly, bringing it closer to historic levels. However, certificates have grown 76% year-over-year, as clients are laddering liquidity to garner higher yields. As a complement to our certificate offering, we are continuing to build out our savings and deposit products in the bank this year to meet the growing client appetite for yield. As a reminder, the majority of our clients' sweep cash balances are working cash accounts, with the average account size being only $8,000 and constituting over 60% of our total cash balances. Our operating rates continue to remain competitive with continuous benchmarking against the industry. This has translated into higher interest earnings in the quarter. The gross fee yield in the quarter reached 373 basis points, up 300 basis points from the prior year and over 100 basis points sequentially, with bank and certificates driving most of it. The bank ended the year with assets of $19 billion with additional capacity to grow further. This provides flexibility to capture the benefits of rising interest by investing in high-quality, longer duration securities. These investments will create sustainable multiple year benefits regardless of interest rate changes over that period. New investments in the quarter were approximately 250 basis points above the spreads from worth balance sheet cash. This has been supplemented with strong growth within our certificate company, with assets growing to nearly $10 billion in the quarter and a gross fee yield of nearly 400 basis points. As we move into 2023, we are on a trajectory to generate growth in interest earnings from the bank and to grow on our incremental yield while continuing to maintain high credit quality. In the first half of the year, we were moving $3 billion onto the bank's balance sheet. We expect to transfer additional balances in the back half of 2023. As we previously indicated, we will reinvest approximately $3 billion of maturities into our yielding assets throughout the course of the year. Let's turn to Asset Management on Slide 9. In 2022, the backdrop remained challenging for both us and the industry. AUM was $584 billion, down 23%. This decrease was driven by double-digit equity and fixed income market depreciation as well as negative pound and euro foreign exchange impacts. Flows during the period remained challenged as global institutional net inflows during 2022 were more than offset by ongoing retail pressure. As a reminder, 2021 net flows benefited from the $17 billion BMO U.S. asset transfer, which had limited impact in 2022. On Slide 10, you can see Asset Management financials reflect the continuation of the challenging market environment and reflect deleveraging that occurs in this business. Earnings were $146 million, a 56% decline as a result of market depreciation and net outflows. In addition, the prior year period included $35 million in performance fees, while the current quarter only included $5 million as well as $12 million of unfavorable mark-to-market adjustments. As a result, margin in the quarter declined to 29%. Importantly, we are focused on the areas we can control and on executing our strategic priorities. Expenses remain well managed; total expenses were down 12% with G&A and other expenses down from continued expense disciplines, lower performance fee compensation and timing of mark-to-market expenses. As a reminder, results last year include a partial quarter of BMO-related expenses. As we move forward, we will continue to make market-driven trade-offs and discretionary spending, and remain committed to managing expenses very tightly based on the revenue environment. Let's turn to Slide 11. Retirement & Protection Solutions earnings increased 25% with strong cash flow generation and a clearly differentiated risk profile. Results in the quarter were driven by enhanced yield from repositioning of the investment portfolio, lower deferred acquisition cost amortization, and lower sales levels. We remain well capitalized with an estimated RBC ratio of 545% at year-end. Consistent with the industry, sales in the quarter declined as a result of the volatile market environment, as well as the impact from our actions to discontinue sales of variable annuities with living benefits. Now only $43 billion of account value is in products with living benefit guarantees, a $14 billion decline from last year. Protection sales remain concentrated in higher margin asset accumulation VUL, which represents one-third of total insurance in-force assets. The increase in investment income was a direct result of the actions taken to reposition the investment portfolio. In the quarter, we repositioned $600 million primarily into longer-duration corporate bonds, while maintaining a high-quality portfolio. These actions will generate higher investment income in 2023. On Slide 12, our balance sheet fundamentals remain strong and our diversified AA-rated investment portfolio is well positioned. During the quarter, new money purchases were AA+ rated at yields that were accretive to the overall portfolio. Despite continued market volatility in the quarter, VA hedging effectiveness remained very strong at 97%, and excess capital and holding company liquidity remain strong. Our diversified business model generates significant and stable free cash flow. This enables the company to deliver a consistent and differentiated level of capital return to shareholders while continuing to invest for growth. During the quarter, we repurchased 1.6 million shares returning a total of $610 million of capital to shareholders, bringing the total for the year to $2.4 billion. Our capital return strategy over the past five years has reduced our share count by 28%. With that, we'll take your questions.

Thank you. We will now begin the question-and-answer session. And your first question is from the line of Brennan Hawken with UBS. Please go ahead.

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

Yes. This is Walter. So the answer is yes, you should, with our CGs, continue to see that sort of trend line. You will see in our bank, we are going to develop new products with and have them coming out in 2020, which will also enhance the capabilities for our advisors and their clients to navigate this situation on interest rates and give them choice. And from a deposit beta standpoint, looking on sweep, we are certainly up. We are certainly being competitive from that standpoint. But we are offering a wide choice, and we see good significant opportunities as we move forward.

Yes, that makes sense, and as I mentioned, it's consistent with many competitors in the wealth space. Shifting gears a bit for the follow-up and staying in wealth, we've seen strong overall net new asset trends, with encouraging 7% annualized growth in that business. While it has been a challenging quarter for some competitors, it appears that the growth isn't primarily driven by recruiting but rather by advisors expanding their practices and increasing wallet share of existing clients. What steps have you taken to sustain and hopefully encourage that trend moving forward?

So this is Jim. We are very much focused on continuing really around having the advisors engage with the client through this market cycle and really providing the advice they need. Part of the journey really is how do you think about achieving your goals over time, not just based on a quarter or the market situation in the current time. And so that engagement and the tools and capabilities that we provided to help them do that, I think is paying really good dividends. As you saw last year, we had a record amount of client inflows for the full year. And the fourth quarter was really strong at $12 billion. It's actually the second highest quarter we had. The highest was actually fourth quarter of last year, and that was only $0.5 billion more. So we want to continue that journey around the advice value proposition and the engagement and helping the advisors really do that more consistently over time.

Great, thank you for taking my questions.

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

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

Sure. So it's Walter. What we achieved in the fourth quarter, we certainly see as sustainable and as it relates to 2023. Certainly, the cash side of it is contributing to that, but we're also having strong productivity and growth in our core activities. There is a shift with us going to the bank generating the earnings and certificates joining. If the Fed does pause, we think we are well positioned with the sustainability of that profitability that now has a duration play that will take it over multiple years. So we feel comfortable. Obviously, it will have some impact. We have to evaluate not just what the Fed is doing in the short end, but what happens on the long end, but we feel we're in an excellent position as we grow those two activities to ensure that sustainability and profitability.

Got it. Thanks. For my follow-up, I wanted to shift gears to Retirement & Protection. You mentioned that the results in Retirement & Protection only reflected part of the actions taken in the portfolio. What additional benefits should we anticipate next quarter? Also, what do you think the new run rate for that business will be compared to the $180 million quarterly cadence you provided in previous quarters? Thanks.

Yes, we certainly started the investments, and we weren't completed in the fourth quarter. We still have some ways to go in the first quarter. But yes, we will see that probably what you're estimating the run rate that we talked about, the $180 million, but it's probably with that improvement taking place with the yield. There are always areas going in and out. But I'm comfortable with what I'm seeing, people being in the $200 million range for the year.

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

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

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

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

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

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

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

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

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

Yes, possibly. Listen, for the longest time, we've kept short durations where the third year was. Now we're taking advantage and both in LTC and with the protection. We are lengthening out duration, but we're running the business from that standpoint, and we are garnering good profitability, both on the claims side, as we demonstrated in the fourth quarter and certainly now with the investment capabilities that it’s providing us. If something comes along that's great, we'll take a look, but right now, we're managing it, and we're taking advantage of the opportunity that's there.

Okay, thanks, Walter.

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

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

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

We see some improvement on the international market front, particularly with recent appreciation and the strengthening of the Pound. We believe that some of the headwinds have eased, which will be beneficial. However, we are not altering our range as we move forward.

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

Okay. You go ahead.

So as we look at it, we've been one of the highest returning companies out there in capital, and even last year was very strong. As we look forward, we have flexibility. But as Walter said, we're continuing to grow the bank, which is going to require some additional capital, but the returns are strong as well as our certificate company, which are all good uses of capital. In the past years, we have freed up capital. We've used some of that to purchase the BMO as well as now growing the bank tremendously. We think that we're going to generate continuing good free cash flow that we will return to shareholders. As far as the percentage and rate will depend on how we utilize that both in our core investments in the business, as we said, as well as return to shareholders. It is coming down from where it was because of those other growth opportunities, but will still be a strong return. I'd leave it at that.

Got it, makes sense. Thank you.

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

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

No, that does not consider LDTI. We are still assessing that. Regarding the reason for the decrease, part of the profitability improvement was due to lower sales. We are evaluating related activities. This resulted in a positive PTI in that scenario, along with some anomalies seen in the significant changes in equity markets and other factors. It positively impacted SOP, so from that perspective, we are comfortable with the $800 million range you mentioned for the year, and we will maintain that as we see those benefits. There is no doubt about it for the investments we have repositioned.

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

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

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

Yes. So Erik, as we look at the business, we've had a bit slower flows into wrap but still good flows, but you also had the depreciation of the markets, which impact the wrap overall fees for the firm. I don't feel that that's permanent. As I said, we also had some transaction volume being down on the commission side. If markets settle as they are, you'll continue to see part of that going back into the wrap programs. Depending on what happens with market, you may see some appreciation of that, which really was a negative in the last few quarters. Regarding the brokerage activities, we will hopefully see some pickup in the commission side based on getting back into some of the contracts that people have again been more conservative investing in right now. I can't really piece together exactly what that shift is, but I would probably say there's a bunch of dynamics occurring over the last few quarters in that regard.

Okay, thanks.

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

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

Let me address that question. A couple of months ago, there was definitely a time when it was difficult to get deposits. Now, however, there is increased demand, and we are assessing the right balance between managing cash and integrating it back into our balance sheet. We have a strong relationship with our banks, and we have been working together for several years through various channels. We are currently evaluating our options, but overall, the situation is positive for us, considering the demand and our ability to bring more deposits back onto our balance sheet.

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

We are very cognizant of trying to give our clients the capabilities there. So that trend has been going and been evaluating as the Fed makes its shifts and other things and alternatives. You're seeing that. Yes, we will continue to do that. The important thing is we're also building that capability very shortly into the bank, which gives a different set of alternatives for them to really look at their laddering as I mentioned.

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

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

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

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

Yes. We have always been disciplined in managing our expenses to ensure we are investing for growth. At the same time, we are analyzing our margin capabilities. We will maintain this disciplined approach as we assess our strategies and seek efficiencies. I believe the ranges we mentioned will be sustainable, though they will depend on the situation as we tightly manage our expenses.

Great. Thank you.

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

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

Yes. So over the course of the year, as you would imagine, and started last year, you would have a higher level of cash from clients as they move things to the sideline or et cetera, that put it in the market or even in fixed income. So went into money markets, broke CDs, and other short-duration products, just like we have the cash here going into some of our certificates. The amount of cash we're holding pretty much at transactional levels is consistent. It’s not where that has built up tremendously. More client flows have come in, and that just as a percentage. We got a piece of that into our certificate program as an example. Now when we actually launch some of the preferred savings and deferred deposit programs within the bank, we will start to capture even a bit more hopefully of that. But new cash has come in, and that has raised our levels overall, but there's been sorting all through this going into those other instruments as well. As our advisors look at what that balances, what's positional versus transactional. That's why we feel that those levels are pretty consistent because things have already sorted as through the year.

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

In our case, as I said, I think if you look at certificates, which is actually investing out a bit, and you just look at the amount in our cash sweep products, et cetera, you're actually less than 5%. That's consistent with our history based on the level that clients keep for both emergency and transactional activity. That's why I said, I think money has already been in all these different positional areas to garner a level of interest that the clients want with the advisors. I feel comfortable. Some of that will go back when they feel comfortable putting more back into RAP and investment programs as well or longer-duration products in the fixed income market.

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

The majority isn't fixed. It's in structure. The majority of construction, high AA rated, and certainly at the highest levels of the security ladder.

Okay. Thank you.

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

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

Sure. Yes, in the quarter, we had a combination of basically, as you indicated, a strong continued claims performance, along with basically the effects of our benefit programs and premium increases. There was this one-time catch-up because a vendor did get behind. That was about half of it, but we are seeing good trends as it relates to the claims. It's typical to forecast, but we think we have all the foundational elements in there. It's been within our expectations for multiple years. We feel comfortable where it is, and we do again get the continued benefits of the programs that we have in place to manage that effectively.

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

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

Yes. As you saw in our Asset Management business, we have brought expenses down, and we will continue to really manage expenses tightly there. We see opportunities in areas like real estate and other areas and responsible investing. We have tightened the range a bit based on the appreciation of the markets. That is necessarily inappropriate. We are also going to have merit increases, other things, et cetera, but we're going to look at areas of opportunity to tighten if necessary based on the market conditions. Asset Management is one of those areas that we will be a bit more disciplined in.

Thank you.

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

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

Yes, we did add a few fewer advisors compared to the previous quarter, but that's often influenced by year-end timing and market conditions, along with advisor volatility. The advisors we brought on board have shown strong productivity. Overall, our production is higher than the number of advisors we added. The pipeline looks promising. Advisors are attracted to us because of our excellent integrated technology platform and strong support. They have trust in the firm and its quality, which they believe is important for their practices. We are optimistic about our continuing opportunities in this area.

Got it. In regards to the insurance subsidiary RPS, there are some challenges in the equity markets affecting the ability to transfer capital to the parent company, but the investment portfolio is undergoing significant changes. Can you share your expectations for transferring capital in 2023?

Sure, Walter. As we assess the situation, particularly regarding earnings linked to 2022 and 2023, we are committed to maintaining our ratio. We are confident in our ability to manage dividends from RPS, especially with the growth and stability we are experiencing in AWM. There's also the potential for increased dividend flows to the parent from AWM, despite some pressures in Asset Management, which continues to generate a reasonable dividend amount. We are optimistic about the cash flow from our different segments, including RPS, and we see it as a strong funding source for the parent in 2023.

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

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

Awesome. Thanks.

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

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

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

Okay, understood. I know there was a question about overall G&A expenses. AWM may have more insight into the outlook there, especially considering the earnings perspective. Can you share your expectations for growth in AWM's G&A expenses in 2023?

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

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

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