Walter S. Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial
Thank you, Jim. As Jim said, strong results this quarter continue to demonstrate the leverage of our diversified business model across market cycles. Underlying EPS grew 14% to $7.75 after adjusting for items in the quarter that we called out in the release. These included $0.28 of expense related to a regulatory accrual, $0.14 from severance expense, and elevated mark-to-market impacts on share-based compensation expense of $0.13 resulting from Ameriprise's substantial share price appreciation. You would not have been aware of these items and their associated magnitude.
Assets under management and administration ended the quarter at $1.4 trillion, up 15%, benefiting from $36 billion of client flows in 2023 and market appreciation. Across the firm, we continue to manage expenses tightly relative to the revenue opportunity within each segment. G&A increased only 2% normalized to the items I noted. We continue to take a disciplined approach on discretionary expenses across the firm to manage margins given the uncertainty in the macro environment as evidenced by the $26 million of severance recognized in the third and fourth quarters.
At the same time, we continue to make investments to drive business growth, particularly in Wealth Management. As we move into 2024, we will continue the same discipline and we'll maintain a flat expense base for the year at a minimum. Our consolidated margin was 26.4% excluding the items I noted. And we have a best-in-class return on equity of 48.5%. The balance sheet fundamentals remain strong. Our excess capital and liquidity positions remain strong and we've seen a significant $1.8 billion reduction in the net unrealized loss position to only $1.5 billion.
Our diversified business model benefits from significant and stable 90% free cash flow contributions across all business segments. This allowed us to return $2.5 billion of capital to shareholders in the year, a continuation of our differentiated track record. Lastly, I mentioned that Ameriprise successfully expanded its presence in the financial institutions channel. The closing on our partnership with Comerica Bank in November that added an initial $15 billion of client flows. Given the timing of the conversion, there was limited financial benefit in the quarter.
On slide 6, you'll see our strong results in 2023 were driven by business momentum across key measures. Assets grew 15%, with revenues up 8%. Pretax adjusted operating earnings grew 10%. And the pretax adjusted operating margin was 26.4%. The diversified nature of our businesses strengthens our model and drives our consistent performance. It is this balance that enables Ameriprise to consistently drive shareholder value across market cycles.
The key growth driver of Ameriprise is the Wealth Management business, as you can see on slide 7. Wealth Management client assets increased 19% year-over-year to $901 billion, driven by strong organic growth and client flows, along with higher equity markets. We had $53 billion of net inflows over the past year, with $23 billion coming in the quarter from new clients joining the firm, the deepening of existing relationships and adding experienced advisers. Revenue per adviser reached $916,000 in the quarter, up 11% from the prior year, from higher spread revenue, enhanced productivity and business growth.
On slide 8, you can see how the business performance drove strong financial results for Wealth Management. In the quarter, adjusted operating net revenues increased 8% to $2.4 billion from growth in client assets in both wrap and brokerage accounts and improved transactional activity. This included about $15 billion of initial flows related to Comerica partnership, in addition to the $8 billion of underlying client flows.
While markets were favorable in the quarter, we did not realize the full benefit of the market appreciation in the quarter given our beginning-of-month billing practice. We are starting the year with the wind at our backs with the significant market appreciation to end the year. Total cash balance, including third-party money market funds and brokered CDs reached a new high this quarter at $81.5 billion. We have seen stability in our underlying client cash positions with free cash up 4% sequentially. This stabilization has continued into January.
Additionally, we continue to see new money flowing into money market funds and brokered CDs as well as into our certificates. This creates a significant redeployment opportunities as markets normalize for clients to put money back to work in wrap and other products on our platform over time. The financial benefits from cash remain significant and will be a sustainable source of earnings going forward. Adjusted operating expenses in the quarter increased 9%, with distribution expense up 10%, reflecting higher asset balances. Excluding the regulatory accrual, G&A declined 1% in the quarter and was up only 4% for the full year. We will continue to invest in this growing business while maintaining this expense discipline in 2024.
In total, the underlying margin expanded 40 basis points to 30.3%, reflecting our revenue growth combined with expense discipline. This level is consistent with our margin for the full year. Turning to Asset Management on slide 9; financial results were very strong in the quarter, and we are managing the business well through a challenging environment for active asset managers. Total AUM increased 9% to $637 billion, primarily from higher equity markets and foreign exchange translation, partially offset by net outflows.
Like other active managers, we experienced pressure retail flows from global market volatility and a risk-off investor sentiment. In addition, we had $3 billion of institutional outflows that included $2 billion of expected breakage from portfolio management changes made as part of our reengineering initiatives. Investment performance is another critical area of focus and long-term 3-, 5- and 10-year investment performance remains strong.
We also had notable improvements in 1-year fixed income performance in the quarter from strength in mortgage opportunities, tax exempt and strategic municipal income strategies. In the quarter, operating earnings increased $194 million as a result of equity market appreciation, disciplined expense management and higher performance fees which more than offset the cumulative impact of net outflows.
Performance fees are an important part of our business and reflect excellent performance in our hedge fund and other institutional accounts, but the recognition of performance fees is uneven throughout the year. While we had $30 million in performance fees in both 2023 and '22, the fourth quarter this year included $21 million in performance fees and the fourth quarter of 2022 only included $5 million. We are finalizing the integration of BMO and are looking globally at areas where we can enhance operational efficiency and manage expenses so we are well positioned going forward.
G&A was down 4% excluding the impact from foreign exchange translation and performance fee compensation. And the margin was in our target range of 32% in the quarter. Looking ahead, as Jim said, we will continue to take further expense action in 2024 given the environment to preserve margin in our target range.
Let's turn to slide 10. Retirement & Protection Solutions continued to deliver good earnings and free cash flow generation, reflecting the high quality of the business that has been built over a long period of time. Pretax adjusted operating earnings in the quarter increased 2% to $202 million, reflecting higher investment yields. Overall, Retirement & Protection Solutions sales improved in the quarter, with protection sales up 6% to $72 million, primarily in higher-margin VUL products. Variable annuity sales grew 15% to $1.1 billion, with the majority of sales in structured variable annuities.
Turning to slide 11; Ameriprise delivered excellent growth in 2023 and has done the same over the longer term and through changing market cycles, reflecting our focus on profitable growth. In 2023, revenues grew 8% from higher interest earnings, higher equity markets and solid client net inflows. Earnings per share increased 21% from last year from revenue trends, well-managed expenses and differentiated capital return. And ROE increased 290 basis points to nearly 49%.
Over the past 5 years, we have generated 6% revenue and 15% EPS compounded annual growth and 1,170 basis points of improvement in ROE. This is differentiated performance across multiple cycles compared to our peers and speaks to the complementary nature of our business mix and the growth of our Wealth Management business.
Turning to slide 12; you can see Wealth Management was a significant contributor to Ameriprise's successful performance, driving two-thirds of the company's operating earnings. Our advisers are becoming more productive with the support of our advice model, with revenue per adviser of $916,000 in the year, up 8% on an annualized basis from 2018. And we are growing profitably with 16% growth in pretax earnings since 2018. And over that time frame, our Wealth Management margin has expanded 840 basis points to nearly 31%, putting at industry-leading levels.
Now let's finish with the balance sheet on slide 13. Our solid balance sheet fundamentals and free cash flow generation have supported our ability to execute a consistent capital return strategy, while continuing to invest for growth. In 2023, we returned $2.5 billion to shareholders, with $587 million in the fourth quarter. But over the past 5 years, we returned $12 billion to shareholders through dividends and share repurchase. This included the repurchase of 41 million shares at an average price of $215, resulting in a net reduction in our share count of 25%. Looking ahead, capital management will continue to be a point of differentiation for Ameriprise.
With that, we will take your questions.
