Ameriprise Financial, Inc.

Welcome to the Q3 2019 earnings call. My name is John, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you do have a question, press star then 1 on your touchtone phone. Please note the conference is being recorded. And now I'll turn the call over to Alicia Charity.

Thank you, Operator, and good morning. Welcome to Ameriprise Financial's third quarter earnings call. On the call with me today are Jim Cracciolo, Chairman and CEO, and Walter Berman, Chief Financial Officer. Following their remarks, we'll be happy to take your questions. Turning to our earnings presentation materials that are available on our website, on slide two 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 insight into the company's operations. Reconciliations of non-GAAP numbers to their respective GAAP numbers can be found in today's materials. 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 third quarter 2019 earnings release, our 2018 annual report to shareholders, and our 2018 10-K report. You make no obligation to update publicly or revise these four looking statements. On slide three, you will see our GAAP financial results at the top of the page for the third quarter. Below that, you will 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. We completed our annual unlocking in the third quarter. The comments that management makes on the call today will focus on operating financial results excluding unlocking. And with that, I'll turn it over to Jim.

Good morning, and thank you for joining us. As you saw yesterday, Ameriprise delivered another strong quarter. We're executing well, investing for growth, and are well positioned to capture a larger share of the need for advice and solutions. This morning, I'll give you my perspective on the operating environment, then I'll highlight our results and the traction we're getting across the business. Turning to the markets, volatility increased given slower global growth and uncertainty around trade policy. The Fed cut short-term rates again, and long-term rates remain volatile. U.S. and European equity markets have been mixed, so our average weighted equity index was relatively unchanged. Next, let's review our business results in the quarter. I'll start by reinforcing three key areas of focus. First, our wealth management business continues to stand out, producing strong results quarter after quarter. In today's climate, our advice value proposition is more relevant than ever before. and we're innovating to serve more of our clients' and advisors' needs and strengthening our position further. Second, we consistently generate good returns with our asset management and insurance and annuity businesses. These are well-managed, highly profitable businesses that deliver strong free cash flow and play an important role in how we serve our clients. Third, our financial strength distinguishes Ameriprise. and we're taking steps to further increase our capital flexibility. We're investing for growth and steadily returning capital to shareholders at very attractive levels. At a consolidated level, our third quarter results were quite good compared to a year ago. On an adjusted operating basis, excluding unlocking, we delivered revenue growth of 3%, solid EPS growth of 8%, and a return on equity of 38%, which remains well above many peers. Our assets under management and administration were $921 billion. And within wealth management, AmeriPrize retail client assets rose nicely to $612 billion. And advisor productivity increased to $650,000 on a trailing 12-month basis. We're proud of our track record and how we're helping clients while consistently delivering for shareholders. That brings me to our wealth management business, our growth engine. Advice and wealth management continues to perform well, and we're investing for further growth. We delivered good revenue and earnings growth in the third quarter, and our margins increased to 23.5% among the best in wealth management. Responsible investors want relationships with an advisor and a firm they trust. They're seeking perspective to help them make informed decisions. That's what we deliver, holistic advice across a client's full investment life, not a single stock trade. Comprehensive advice is a large and growing market, and we're at the center of this opportunity. The way we deliver advice is setting us apart, particularly with investors with $500,000 to $5 million in investable assets. There are some key factors driving our traction in wealth management. First, total client assets are up and client flows into fee-based advisory business continues to be strong. This is our 10th consecutive quarter of more than $4 billion of inflows into the advisory, bringing total RAF assets to nearly $300 billion. We also saw a good pickup in transactional activity. Advisor productivity increased 5% from strong client flows and advisors leveraging the support and resources of Ameriprise. And on the recruiting front, we welcomed 96 top-performing experienced advisors from firms across the industry. Top-branded and independent advisors are attracted to our value proposition and the growth potential of bringing their practices to Ameriprise. We feel great about what we've put in place, but we're not standing still. Consumers continue to seek a personal relationship with an advisor complemented with digital capabilities that enhance the interaction and information flow. We're committed to meeting and exceeding that expectation, building off the strong capabilities we already have in place. To that end, we continue to invest significantly in our client experience, capabilities, products, and solutions. We have strong personal relationships with our clients and we're using our goal-based advice expertise to expand our base and deepen these relationships even further. Here are highlights on four of our key initiatives in these areas. Our advice experience is coming alive as we work with more clients and continue rolling out additional digital capabilities as part of our confident retirement approach. We've been training advisors to implement our integrated suite of tools, and we're hearing good initial feedback. Clients who have gone through the experience are feeling more confident and satisfied about how we're helping them track against their goals, and we believe this increased engagement will translate into higher productivity over time. In our advisory business, the rollout of our integrated customer advisory relationship is underway and will be completed in the next few months. With this program, our various advisory strategies work together on one technology platform, giving advisors more flexibility to deliver personal investments and solutions based on client goals. This is a key capability as we serve a more affluent client base. We're also moving to a new customer relationship management platform that will help advisors manage and act on client data and activity in one place. This is an important enabler of the Ameriprise client experience. This conversion is on track and will be completed by the end of the fourth quarter. And following the bank launch, we continue to add deposits in the quarter with $2.5 billion of cash sweep now transferred. In September, we launched a new line of Ameriprise Visa Signature Premium credit cards and converted the existing Ameriprise portfolio. Looking ahead, we will be adding a new mortgage program and a savings product next year. In terms of these initiatives, it takes time to go from introduction to full engagement, so we expect to see the benefits as our advisors uptake these programs and capabilities over time. And it's important to note that whenever we introduce new tools and capabilities, we fully integrate them into our ecosystem. I often hear from advisors who have joined us that this is a real point of differentiation for Ameriprise compared to other firms who simply provide advisors with individual tools. Let's turn to our I&A businesses. These are strong books that provide earnings diversification and stability. In the quarter, we delivered a combined $189 million in adjusted operating earnings, excluding unlocking. From a sales perspective, variable annuity sales were up 2% in the quarter. In protection, we had nice growth in VUL sales reflecting the launch of a new VUL product earlier this year. However, total life sales were down driven by IUL in this rate environment. Overall, sales remain stable and help to replenish the book. We're focusing on managing risk appropriately and ensuring we have the right product design for the environment. That includes our successful VA hedging program, which we continue to enhance. We've also made several product adjustments, including lowering cap rates on certain IUL products and pricing and benefit changes for our variable annuities. In regards to our closed long-term care block, the strong actions we've taken in terms of rate increases and benefit changes are driving positive results and helping to offset the rate environment. As you know, we've reinsured a portion of the fixed annuity book and look to reinsure the remainder of the blocks when rates improve. Now I'll turn to asset management, where we've delivered another quarter of solid earnings and remain focused on pursuing long-term growth opportunities. We've built a global business and have good scale as well as investment strength, and we're expanding distribution in key markets. In a highly competitive marketplace, we're competing as a long-term player and making progress. Investment performance remains quite good over one, three, and five-year timeframes. On an asset-weighted basis, More than 60% of our equity funds are outperforming, and in fixed income, the outperformance is over 80%. Turning to flows, they've improved $6 billion from a year ago, with net outflows of $1.3 billion. And if you adjust the former parent outflows in the quarter, we're slightly positive. Let me take you through the drivers. In U.S. intermediary, though there continues to be pressure from passive, when making progress and gaining share inactive with many of our large focus firms having consistently . Redemptions have slowed and we're generating good momentum and strategies. I would highlight dividend income, strategic income, strategic municipal income, and mortgage opportunities. When we look at our flow rates compared to active peers, Columbia Threadneedle retail equity rates have improved considerably. In fact, We're in the top third of active players we benchmark ourselves against. For fixed income, our flow rate continues to improve, and there's an opportunity to move this further. In EMEA, the challenges from Brexit and slowing economies have pressured retail flows for the industry. We remain focused on building on our strength in the UK market and continue to expand our presence in key markets in Europe. Importantly, our flows in the quarter were institutional, reflected the benefit of a large UK equity income mandate from an established wealth management that I mentioned last quarter. In addition, we began to pick up some other wins in high yield and other strategies. Overall, in asset management, our assets under management ended the quarter at $469 billion, and the earnings contribution to Ameriprise remained good. We're managing expenses well and delivered an adjusted margin at 38%, which is in our targeted range. As we look forward, we're working to better deliver client solutions and investment strategies, generate consistent competitive investment performance, and further improve our operational efficiency. Now I'll turn to our capital strength, a clear differentiator. As you are aware, we successfully completed the sale of Ameriprise Auto and Home earlier this month. We worked hard to ensure a smooth transition of the business, including securing all regulatory approvals. Our priority was to find a strong partner and a good fit for policyholders and employees, and we delivered. With the completion of the sale of Auto and Home on October 1st, we received over $1 billion and freed up $700 million of capital, adding to our strong excess capital position. We continue to focus on generating substantial free cash flow that we're reinvesting for growth and returning to shareholders. As we informed you, We increased our buyback in the quarter, returning nearly 120% of adjusted operating earnings in the period. Due to the share price volatility in the quarter, we were able to pick up additional shares. In summary, it was a very good quarter for Ameriprise. We're in a strong position and we're executing our plans. With that, I'll turn it to Walter before taking your questions. Walter?