James M. Cracchiolo
Chairman and Chief Executive Officer at Ameriprise Financial
Good morning and welcome to our second quarter earnings call. Ameriprise performed well in a significantly more challenging environment and delivered a solid quarter. Clearly high inflation in the US and globally as well as geopolitical uncertainty continued to cause greater volatility in pressured markets. With the Fed raising rates and concern about a potential recession, markets are experiencing headwinds and that's weighing on investor sentiment.
While the environment impacted our results particularly in Asset Management, we delivered strong profitability, good client flows and wealth management and strong results at the bank. We're continuing to serve clients well, managing our expenses prudently and investing in the business to drive near and longer term growth.
Let's move to second quarter results. Compared to a year ago, total assets under management and administration declined 3% to $1.2 trillion. We benefited from the BMO EMEA acquisition and the cumulative impact of Ameriprise client net inflows but assets were affected by a negative foreign exchange and the steep decline in both equity and fixed income markets.
In terms of adjusted operating financials, revenues grew 3% to $3.5 billion as good business performance offset market impacts. With that, earnings were up 4% with EPS up 10% to $5.81 and ROE was very strong at 48.8%, compared to 37.5% a year ago. I'll turn to Advice & Wealth Management where we delivered another strong quarter. We had good activity in a tough market environment. We're serving clients well with our goal-based advice, driving strong engagement and earning strong satisfaction.
Total client net inflows were $8.6 billion down 10% but quite good in this environment. Our wrap net inflows also declined to $6.2 billion. Cash balances were up sharply to more than $47 billion, compared to more than $39 billion a year ago. Even in a more challenging operating environment, our adviser productivity was strong up 11% to $814,000 per adviser. We recently hosted our national conference for our top advisers and the level of engagement was terrific. They're excited about growing their practices at Ameriprise and appreciate the investments we've made and the support we provide.
We're also seeing nice engagement with adviser recruits. We had another good quarter in terms of recruiting adding 99 highly productive advisers. Our value proposition stands even taller in choppier markets. When experienced advisers join us, they routinely say our culture, technology, financial planning capabilities and ability to grow are key reasons they make the move. We're driving meaningful momentum and I feel good about our pipeline.
Now I'll give you some perspective on our growing cash business, which represents a significant future revenue and earnings opportunity for us. First, we're beginning to generate more revenue from our off-balance sheet cash as the Fed increases short rates. Second, we continue to move more assets to Ameriprise Bank garnering additional spread including moving $2.3 billion to the bank late in the second quarter.
For perspective, total bank assets are now at $17.1 billion. Assets have more than doubled since the beginning of 2021 and we're positioned to take this further. An important takeaway for you is that as we move through the second half of 2022 and into 2023, the growth of our cash business and rising interest rates will provide an offset to equity market weakness.
That leads me to AWM's financials. We continue to generate strong pre-tax income up 16% to nearly $500 million and our margin continues to accrete up 250 basis points to nearly 24%, even after the impact of substantial market declines. Moving to Retirement & Protection Solutions. The business is performing well in this environment and reflects our strategy to focus on our core products. I'll start with variable annuities. Overall, sales were down 29% given our move away from living benefit guarantees.
We continue to prioritize annuities without living benefits in our structured products. In Protection, Life sales declined 23% given the climate and our move away from fixed insurance. We remain focused on our VUL and DI products, which have good profitability and are appropriate for our clients. In terms of earnings, they were in line with our expectations and our financial results and free cash flow look good and our risk profile remains well managed.
Now let's turn to Asset Management. We've already referenced the challenging operating environment that has resulted in asset declines and tough retail flows for the industry. We're experiencing that pressure too. However, we feel like the business is performing well and we're making appropriate adjustments as we move forward. Assets under management was up a bit year-over-year as a result of the BMO acquisition and the cumulative impact of net inflows offset by market declines and a significant foreign exchange impact in the quarter. Revenue was essentially flat overall.
Let's start with investment performance. Our long-term numbers continue to show good consistency for our three, five and 10-year time periods with over 75% of our funds above medium on an asset-weighted basis. Regarding one-year performance, it's been a tough period in both equities and fixed income. Domestic equity results were good driven by our larger funds moving back above the median.
In international equities, our quality positioning has been more of a challenge in these markets. In fixed income, results have been solid in Europe, but in the US were impacted by our longer duration positioning in our quality focus and credit. We do feel with market conditions beginning to stabilize, we should see some improvement.
Let's turn to flows, where we had outflows of $3.1 billion in the quarter that included $1.2 billion of legacy insurance partner outflows. This reflects the pressure you've seen in retail, but was partially offset by positive institutional results. In retail overall, we had lower gross sales and higher redemptions resulting in $5.8 billion of net outflows. This was driven largely by weak conditions in the United States and to a lesser extent in EMEA.
In US retail, equity outflows were generally in line with the industry and the fixed income results were behind given our product mix. Compared to the industry, we did not participate nearly as much in short duration as interest rates stabilize and investors see opportunities, we believe our product position to improve flows. In EMEA, retail flows also remained under pressure. However, we did see some improvement in Continental Europe.
Turning to Global Institutional. Excluding legacy insurance partners, net inflows were $3.9 billion. We had some good inflows in fixed income and other strategies. In addition, to our broad lineup of traditional institutional strategies, we're bringing more focus to multi-asset and solutions as well as alternatives. I was with the team in London in June, and they're feeling good about the core business the integration and the extensive capabilities we offer clients. In fact, just a few weeks ago we announced the rebranding of BMO strategies to Columbia Threadneedle, which was an important step as we move forward.
I'll close Asset Management, with the financials. Our margin was 38.5% and that incorporated the BMO business, which has lower margins based on their mix. Given market decline and impact on revenue, we're taking steps to continue to control discretionary expenses thoughtfully. We'll be paying close attention to market environment, as we move forward.
So overall, Ameriprise remains in a strong position. We have a proven track record of navigating tougher times and will continue to do so. We're highly engaged with our clients and helping them stay on track. And from a financial perspective, rising interest rates will act as an offset to compressed markets, as we move through the balance of the year. We will be focused on managing our discretionary expenses, even more tightly as we move forward.Importantly, our balance sheet fundamentals remain very good. We continue to generate strong returns and substantial free cash flow, which provides flexibility. In the quarter, we returned $600 million to shareholders and are on track to return 90% of operating earnings to shareholders in 2022.
With that, I'll turn it over to Walter, to provide his perspective in more detail on the quarter and then we'll take your questions.
