Walter S. Berman
Executive Vice President and Chief Financial Officer at Ameriprise Financial
Thank you, Jim. The diversified nature of our business and unique leverage points between them drives our strong, consistent, profitable growth and ability to navigate stress events. Adjusted operating EPS increased 17% to $9.02 excluding unlocking, and severance expense associated with the company's initiatives to enhance operating efficiencies and effectiveness to further strengthen the client experience and future shareholder value. In addition to the severance costs, we recognized additional expense of $0.32 per share related severance [Phonetic] program expenses and acceleration of the firm's transition to cloud-based technology platforms. Higher compensation accruals relating to strong performance and mark-to-market impacts on share-based compensation. This further demonstrates the strong underlying growth achieved in the quarter. Assets under management and administration increased 22% to $1.5 trillion, benefiting from strong client flows over the past year and equity market depreciation. This has resulted in strong 11% revenue growth across our businesses. G&A expenses continue to be well-managed and demonstrate our focus on operational efficiency and effectiveness. We continue to invest in areas that will drive future business growth, particularly in Wealth Management, while maintaining expense discipline to achieve shareholder objectives. Our returns remained strong with a consolidated margin of 27%, excluding unlocking severance expenses and a best-in-class return on equity of 51%. Balance sheet fundamentals, including excess capital and liquidity are very strong. Our diversified business model benefits from significant and stable 90% free cash flow contributions across all business segments. We returned $713 million of capital to shareholders in the quarter. In 2024, we continue to expect to return 80% of operating earnings to shareholders.
On slide six, you will see our integrated model leverages key business linkages to drive strong and consistent operating performance. Our business model is a key driver of profitable growth for our shareholders across market cycles. Ameriprise is one company with three business segments from which we gain leverage for the whole. For example, within our open network and Wealth Management, Columbia Threadneedle and RiverSource provide important solutions to AWM clients. These relationships result in high levels of adviser and client satisfaction and retention. Another example is where we are able to leverage our asset management expertise at Columbia Threadneedle to manage the general and separate account assets for RiverSource, the bank, and certificate company and they have delivered high-quality returns with strong credit performance. These segments benefit from the leverage of our corporate functions and capabilities, which include technology, Ameriprise India, and staff group. These capabilities enhance our ability to meet client needs in an efficient manner, while driving growth and consistency across market cycles. On slide seven, you see the strong results from Wealth Management. Total client assets grew 26% to an all-time high of $1 trillion with wrap assets up 28% to $569 billion from strong net flows and market appreciation over the past year. Wrap flows were strong in the quarter at $8 billion or 6% on an annualized flow rate. Pre-tax adjusted operating earnings increased 13% to $826 million, driven by quite strong year-over-year core wealth management earnings growth, offset by lower cash sweep earnings and margin remained strong at 30%.Adjusted operating net revenues increased 14% to $2.7 billion from growth in client assets, increased transactional activity, and a 6% increase in net investment income in the bank. This drove revenue per adviser to a new high of $997,000 up 11% from a year ago.
Total cash balances, including third-party money market funds and broker CDs was $83 billion, which was over 8% of the clients' assets. Clients remain heavily concentrated in yield-oriented products with highly liquid products like money market funds being more in favor than the term products like certificates and brokered CDs. We are beginning to see clients put more money back to work in wrap and other products on our platform and we expect this to continue over time as markets and rates normalize, which creates a significant opportunity. Client cash sweep balances were stable at approximately $28 billion. Bank assets grew to $23.2 billion, providing sustainable net investment income in this forecasted lower rate environment. These trends continued in October. Adjusted operating expenses in the quarter increased 14%, with distribution expenses up 19%, reflecting business growth and increased transactional activity. G&A expenses were flat at $419 million, with higher volume-related expenses in the current quarter and a regulatory accrual in the prior year quarter. Excluding the regulatory accrual in the year ago period, G&A expenses were up 5% in the quarter, consistent with expectations. Turning to Asset Management on slide eight. Financial results were very strong in the quarter. The AUM increased 14% to $672 billion, primarily from higher equity market depreciation. In the quarter, operating earnings were quite strong and increased 23% to $245 million and our margin reached 41%.Adjusted operating expenses increased 2%. With G&A expenses improving 2% from a year ago, reflecting initial benefits from the company's initiatives to enhance operational effectiveness and efficiency to further enhance our ability meet clients' needs.
Let's turn to slide nine. 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. Pre-tax adjusted operating earnings, excluding unlocking in the quarter increased 2% to $208 million, reflecting the benefit from strong markets and higher interest rates, partially offset by higher distribution expenses associated with strong sales levels. Year-to-date, pre-tax adjusted operating earnings, excluding unlocking, were $603 million, which is on pace with our expected level of approximately $800 million on an annual pre-tax basis. We completed our annual actuary assumption update in the quarter, resulting in an unfavorable pre-tax impact of $90 million, primarily related to updates to persistency assumptions for variable annuities. Our lapse assumptions is now aligned with recent experience and we are very comfortable with this level. Overall, Retirement & Protective Solutions sales improved in the quarter, with protection sales up 25% to $99 million, primarily in higher-margin VUL products. Variable annuity sales grew 13% to $1.2 billion with strong momentum in our structured product. Turning to the balance sheet on slide 10. Balance sheet fundamentals and free cash flow generation remained strong with $2 billion of excess capital. We have diversified sources of dividends from all our businesses, enabled by strong underlying fundamentals. This supports our ability to consistently return capital to shareholders and invest for future business growth. Ameriprise's consistent capital return strategy drives long-term shareholder value. In summary, on slide 11, Ameriprise delivered excellent growth in the third quarter, which is a continuation of our long track record to outperform our stated financial targets.
Over the last 12 months, revenues grew 10%, earnings per share increased 14%, return on equity grew 110 basis points, excluding unlocking, and we returned $2.6 billion of capital to shareholders. We had similar growth trends over the past five years with 7% of revenue growth, 16% EPS compounded annual growth, return on equity improved nearly 13 percentage points, and we returned $11.9 billion of capital to shareholders. These trends are consistent over the longer term as well. Compared to most financial services companies, this differentiated performance across multiple cycles speaks to the complementary nature of our business mix as well as our focus on profitable growth. Before we move to Q&A, let me provide some additional insight into our decision to retain long-term care on slide 12. As you are aware, we have been in the process of assessing potential risk transfer opportunities related to long-term care. In the quarter, we completed this analysis and have concluded that retaining the business is in the best interest of our shareholders. Our analysis found that there is a substantial difference in value between retaining the block and reinsuring the block. Our assessment concluded that the market for stand-alone long-term care risk transfer deals has not matured and that high-quality blocks like ours are not receiving an appropriate level of differentiation by counterparties. Our transaction will require us to include other books of business that would transfer tremendous value to a counterparty to offset unwarranted discounts applied to LTC. Let me be clear, we feel very good about the quality of our long-term care business and it has performed better than our expectations over the past several years, which we expect to continue going forward.
As you have seen, the business has generated $215 million of statutory earnings over the past five years and that trend should continue. We have already seen the size of the book declined by 70% with over 75% terminating without a claim. This business will continue to run off with over two-thirds of the remaining book expected to run off over the next 10 years. This extensive experience has supported our reserve process and that process has proven very accurate. We will also be able to capture additional upside from future enhancements related to investment portfolio repositioning, premium rate increases, and other program actions to improve performance. We will maintain a strong and differentiated capital position, and we do not need to supplement our capital position with a reinsurance transaction. In summary, given the high quality of our block with $300 million of capital as well as our credible experience and confidence in our reserves, we do not believe there is a plausible scenario that could justify executing a risk transfer deal at these levels and taking on additional counterparty exposure. In closing. We had an excellent quarter and feel good about how we are positioned going forward.
With that, we'll take your questions.
