Walter Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial
Thank you, Jim. Results this quarter were very strong and we continue to demonstrate the strength of the Ameriprise value proposition. Adjusted EPS increased 13% to $60.94 in the quarter and increased 11% for the full year. Our diversified business mix supports good performance across market cycles, which was certainly demonstrated in the quarter.
Fundamentals in wealth management, particularly in its cash businesses, were very strong. In total, wealth management now represents 64% of adjusted operating earnings, up from 48% a year ago. Asset management, like the industry, is facing substantial headwinds and earnings from this segment declined in the quarter.
And the Retirement & Protection Solutions business continues to generate solid financial results and free cash flow. We remain focused on the aspects of the business that we can control. We are executing our priorities, including investing for profitable business growth, expanding the bank, and completing the integration of BMO, all while meeting and exceeding client needs and maintaining a disciplined approach to managing expenses. In fact, total expenses excluding BMO were flat for the year.
Our balance sheet fundamentals and free cash flow generation remains strong. In the quarter, we returned $610 million of capital to shareholders, totaling $2.4 billion for the full year, while continuing to grow the bank and certificate company. We have dedicated significant capital to grow these businesses.
Let's turn to slide 6. As you would expect in these markets, assets under management and administration ended the quarter at $1.2 trillion, down 17%. This was driven by depreciating markets, with equity and fixed markets down 19% and 12%, respectively. Additionally, asset management AUM levels were impacted by the weakening of the pound and the euro, with 36% of asset management AUM outside the US at the end of the year.
Despite the lower AUMA levels, operating net revenues declined only 2% to $3.6 billion as a result of higher interest earnings, and pretax earnings reached a new high of $973 million, reflecting the diversified revenue dynamics I discussed, coupled with the excellent expense discipline.
Let's turn to Advice & Wealth Management on slide 7. Wealth management continues to deliver strong organic growth and business momentum, a reflection of our differentiated value proposition. With the challenging market backdrop, clients' assets declined 12% to $758 billion in 2022. However, we had sustained growth of 4% over the past two years.
Total client net flows remain very strong at over $12 billion in the quarter and reached a record $43 billion for the full year. While we continue to see a solid level of flows into wrap accounts, there has been a distinct pickup inflows going to brokerage accounts and certificates as clients navigate the market backdrop. Revenue per adviser reached $827,000, up 23% over the past two years, from continued enhanced productivity and business growth.
On slide 8, you can see wealth management profitability was exceptional, up 41% and reached a record margin of 30%, as strong organic growth and higher interest earnings exceeded pressure from market depreciation and lower transactional activity.
Adjusted operating expenses declined 5%, with distribution expenses down 10%, reflecting lower transactional activity and lower client assets. G&A increased 11% in the quarter. And for the full year, G&A grew 8%. Expense growth in the quarter was driven by continued investments in the bank and higher volume related activity from strong organic growth. Additionally, the prior year included unusually low expenses relating to staff levels and G&A.
Cash balances in the quarter increased year-over-year and sequentially to $47 billion, which included $10 billion of certificate balances. Cash sweep balances have declined slightly, bringing it closer to historic levels. However, certificates have grown 76% year-over-year as clients are laddering liquidity to garner higher yields. As a complement to our certificate offering, we are continuing to build out our savings and deposit products in the bank this year to meet the growing client appetite for yield.
As a reminder, the majority of our clients' sweep cash balances are working cash accounts, with the average account size being only $8,000 and constituting over 60% of our total cash balance. And our crediting rates continue to remain competitive with continuous benchmarking against the industry. This has translated into higher interest earnings in the quarter.
The gross fee yield in the quarter reached 373 basis points, up 300 basis points from the prior year and over 100 basis points sequentially with bank and certificates driving most of it. The bank ended the year with assets of $19 billion, with additional capacity to grow further.
This provides flexibility to capture the benefits of rising interest rates, by investing in high quality, longer duration securities. These investments will create sustainable, multiple year benefits regardless of interest rate changes over that period.
New money purchases in the quarter were approximately 250 basis points above the spreads from off balance sheet cash. This has been supplemented with strong growth within our certificate company, with assets growing to nearly $10 billion in the quarter and a gross fee yield of nearly 400 basis points.
As we move into 2023, we are on a trajectory to generate growth in interest earnings from the bank and garner incremental yield, while continuing to maintain high credit quality. In the first half of the year, we are moving $3 billion on to the bank's balance sheet. We expect to transfer additional balances in the back half of 2023. And as we previously indicated, we will reinvest approximately $3 billion of maturities into higher yielding assets throughout the course of the year.
Let's turn to asset management on slide 9. In 2022, the backdrop remained challenging for both us and the industry. AUM was $584 billion, down 23%. This decrease was driven by double-digit equity and fixed-income market depreciation as well as negative pound and euro foreign exchange impacts.
Flows during the period remained challenged as global institutional net inflows during 2022 were more than offset by ongoing retail pressure. As a reminder, 2021 net flows benefited from the $17 billion BMO US asset transfer, which had limited impact in 2022.
On slide 10, you can see asset management financials reflect the continuation of the challenging market environment and reflect deleveraging that occurs in this business. Earnings were $146 million, a 56% decline as a result of market depreciation and net outflows. In addition, the prior year period included $35 million of performance fees, while the current quarter only included $5 million, as well as $12 million of unfavorable mark-to-market adjustments. As a result, margin in the quarter declined to 29%.
Importantly, we are focused on the areas we can control and on executing our strategic priorities. Expenses remain well managed. Total expenses were down 12%, with G&A and other expenses down from continued expense disciplines, lower performance fee compensation and timing of mark-to-market expenses. As a reminder, results last year include a partial quarter of BMO-related expenses. As we move forward, we will continue to make market-driven trade-offs in discretionary spending and remain committed to managing expenses very tightly based on the revenue environment.
Let's turn to slide 11. Retirement & Protection Solutions earnings increased 25%, with strong cash flow generation and a clearly differentiated risk profile. Results in the quarter were driven by enhanced yield from repositioning of the investment portfolio, lower deferred acquisition cost amortization, and lower sales levels. We remain well capitalized, with an estimated RBC ratio of 545% at year-end.
Consistent with the industry, sales in the quarter declined as a result of the volatile market environment, as well as the impact from our actions to discontinue sales of variable annuities with living benefits. Now only $43 billion of account value is in products with living benefit guarantees, a $14 billion decline from past year.
Protection sales remain concentrated in higher margin asset accumulation VUL, which represents one-third of total insurance in-force assets. The increase in investment income was a direct result of the actions taken to reposition the investment portfolio. In the quarter, we repositioned $600 million primarily into longer duration corporate bonds, while maintaining a high-quality portfolio. These actions will generate higher investment income in 2023.
On slide 12, our balance sheet fundamentals remain strong and our diversified double-A rated investment portfolio is well-positioned. During the quarter, new money purchases were double-A plus rated at yields that were accretive to the overall portfolio. Despite continued market volatility in the quarter, VA hedging effectiveness remained very strong at 97% and excess capital and holding company liquidity remains strong. Our diversified business model generated significant and stable free cash flow. This enables the company to deliver a consistent and differentiated level of capital return to shareholders, while continuing to invest for growth.
During the quarter, we repurchased 1.6 million shares, returning a total of $610 million of capital to shareholders, bringing the total for the year to $2.4 billion. Our capital return strategy over the past five years has reduced our share count by 28%.
With that, we will take your questions.
