Ameriprise Financial, Inc.

Welcome to fourth quarter 2020 earnings call. My name is Sylvia and I'll be your operator for today's call. At this time, all participants in a listen-only mode. Later, we'll conduct a question and answer session. During the question and answer session, if you have a question, please press star, then one on your touchtone phone. Please note that this conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

Thank you, Sylvia, and good morning. Welcome to Ameriprise Financial's fourth quarter earnings call. On the call with me today are Jim Caracciolo, Chairman and CEO, and Walter Berman, Chief Financial Officer. Following their remarks, we'd 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. Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website at www.ir.ameriprise.com. 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 fourth quarter 2020 earnings release, our 2019 annual report to shareholders, and our 2019 10-K report. We make no obligation to publicly update or revise these forward-looking statements. On slide three, you see our GAAP financial results at the top of the page for the fourth quarter. Below that, you see our adjusted operating results, 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. Many of the comments that management makes on the call today will focus on adjusted operating results. And with that, I'll turn it over to Jim.

Good morning, and thanks for joining our fourth quarter earnings call. As you saw in our release, Ameriprise delivered an excellent quarter in a very strong year, considering the challenging operating environment. In the quarter, equity markets rallied on positive vaccine news, the outcome of the U.S. election, and the likelihood of further fiscal stimulus. The strength of our advice, value proposition, investment expertise, and solutions are translating to our business results. Client activity and flows in the quarter continue to be very strong, and we set new records, including ending the quarter with assets under management and administration of $1.1 trillion, an important milestone. Revenues in the quarter were quite good, up 3% to over $3 billion, driven by strong business fundamentals and positive equity markets, offsetting the interest rate headwinds. Earnings per share also increased nicely in the quarter, up 8%, and ROE remains very strong at 36%. During the quarter, we continue to make good investments in the business, as well as continuing to execute against our reengineering goals, resulting in a 1% decline in G&A expenses. We're always looking to drive efficiency and invest strategically to extend our position. It's core to how we operate. We also returned more than $500 million to shareholders, which was 90% of our adjusted operating earnings and among the best in financial services. For the full year, we returned close to $2 billion. Very clearly, our ability to consistently generate substantial free cash flow, as well as to reinvest and return to shareholders, are key differentiators for us. Let's turn to advice and wealth management, where we delivered a very strong quarter and good organic growth. Beginning with our clients, we're delivering a differentiated level of advice, keeping clients focused on their goals, which was key in a volatile, disruptive year. Total client assets were up 14% to $732 billion, driven by excellent client flows and positive markets. As you know, we've built a leading investment advisory business, and it continues to grow nicely. In the quarter, RAP net inflows were close to $8 billion, up 82% over last year. This was another record for us and a great indication of our excellent client-advisor engagement and focus on growth. Another highlight was transactional activity bouncing back and up 5% over last year. and client cash balances continue to grow and end of the quarter at $41.5 billion, up $2.1 billion from last quarter. Meanwhile, we're continuing to invest to make our offering even more compelling for clients and advisors. We continue to see very good engagement in our digital capabilities, allowing advisors and clients to interact and transact seamlessly, and the majority of clients now have their goals online and follow their progress. Our advisors are utilizing our tools and capabilities on our integrated technology platform. They are reporting that they're processing business more efficiently and spending more time with their clients and growing their practices. That's evident in increased financial planning and advisor productivity, which was up 8% adjusting for interest rates. You've heard me share that one of the greatest benefits of being an Ameriprise advisor is our caring culture, including truly best-in-class support and strong field leadership. I recently spoke with all of our field leaders to kick off the year. They're energized about Ameriprise and are focused on continuing to drive productivity and growth. Focused on continuing to drive productivity and growth. This high level of support is also reflected in our recruiting success. Our virtual recruiting program is extremely effective and continues to drive strong results, with 82 experienced advisors joining us in the fourth quarter. We're recruiting top advisors from across the industry who recognize that Ameriprise offers the value proposition, technology, and level of support that can help them deliver an exceptional advisor-based client experience and take their practices to the next level of success. And we have a track record of helping advisors grow two and a half times faster than peers, which is very compelling from a competitive perspective. So far in 2021, this momentum continues, and the recruiting pipeline remains strong. It was also great to see that our client service teams were once again recognized by J.D. Power for the excellent experience they deliver. This certification recognizes best practices from the highest performing contact centers across all industries, not just financial services. Regarding the bank, total assets grew to $8 billion with $7 billion of sweep deposits. We plan to move additional deposits to the bank this year. We also added pledge loans to the product portfolio in the quarter and we're seeing a good response to date. It's an appealing product for higher net worth clients seeking liquidity. Wrapping up AWM, margin was strong at 19.8% and was up 60 basis points sequentially. As I mentioned earlier, expenses continue to be well managed with G&A up only 2%, and that includes investments in the bank. Next, retirement and protection solutions. This business is performing well and in line with our expectations. We're executing our plan to drive a mixed shift in the business, focusing on higher returning products given the rate environment, which is further reducing our risk. Variable annuity sales increased nicely, up 20%, driven by the success of the structured product we introduced earlier in the year, more than offsetting reduced sales of living benefit products. Very importantly, this increased the percentage of VA sales without living benefits. which grew to 58% of total sales in the quarter. In protection, while sales were down 4% year-over-year, we've seen improvement quarter-to-quarter. Sales of our flagship VUL product doubled in the quarter, offsetting the reduced sales from IUL products. This product both better meets clients' needs in this rate environment while generating good returns for the firm. As Ameriprise continues to grow overall, the retirement and protection solution segment will represent a smaller part of our business mix over time. With regard to fixed annuities, I know some of you are interested in our progress regarding a reinsurance transaction. We are actively looking to execute a transaction this year and are encouraged by the recent uptick in the 10-year rate. Turning to asset management, we continue to build on our progress and have a great story to share as an active manager. The team is serving clients well and driving profitable growth. We continue to have excellent client engagement and investment performance. The investments we're making, including in data and digital, are helping to drive organic growth at Columbia Threadneedle with strong results in North America. We're targeting advisors better and delivering a compelling experience. And importantly, we strengthen our relationship with our distribution partners across regions, including with the large broker-dealer firms and independents in the U.S., We're also investing in our operating platform, including important work to reduce duplicate legacy systems. In the quarter, we completed the final phase of the installation of our global trading portfolio management system, which will help our investment teams and drive additional efficiency and scale globally. With a continuation of positive flows and positive markets, assets under management grew 11% to $547 billion. Our asset management business is making strong contributions to our overall earnings and free cash flow. And margin for the quarter was nearly 40%. Looking ahead, we expect to remain in the 35% to 39% range. However, if these market levels hold, we should come in at the higher end. Strong investment performance has been essential to our success, and our teams have been collaborating really well through this pandemic. We have steadily invested to build a strong global platform with a disciplined research focus, and our people are delivering exceptional performance across all categories, equities, fixed income, and multi-asset strategies. At year end, Columbia Threadneedle had 108 four- and five-star funds, which shows the breadth and strength of our product lineup. In equities on a global basis, over 70% of our funds In equities, on a global basis, over 70% of our funds on an asset-weighted basis were above medium or beating benchmarks over one, three, and five-year periods, and that's across domestic and international strategies. With regard to fixed income, we also had great performance. More than 75% of our taxable funds on an asset-weighted basis were above medium or beating benchmarks over the same timeframes. So with this type of investment performance and the growth focus across the business, flows continue to be strong. Overall, excluding former parent outflows, we were net positive $8.3 billion for the quarter, an improvement of $4.1 billion from a year ago. In terms of total retail flows, excluding former parent, we were net positive by $7.7 billion, including reinvested dividends. These positive flows were driven by continued momentum in the U.S., where we were in net inflows for 10 months of the year, and that included this location in March. Before the quarter, U.S. retail had $7.1 billion of net inflows. In fact, 30 Columbia strategies were in net inflows, and 10 had gross sales in excess of $1 billion in 2020, and that's across equities, fixed income, and our multi-manager lineup. In EMEA retail, we were in net inflows of more than 600 million in the quarter with particular strength in continental Europe, which more than offset outflows in the UK. We're optimistic that the resolution of Brexit and the gradual reopening of the UK economy will be positive in terms of investor sentiment. And in terms of global institutional, we continue to gain traction, have a significant opportunity and platform to grow. We have a compelling lineup of capabilities and excellent investment performance. We recently added to our consultant relations team and strengthened client service. In the quarter, we had NetInflow's ex-former parent of about $500 million, driven by continued strength in EMEA. The pipeline looks attractive across our regions. But when I look across asset management, I'm very pleased with the momentum over the last number of quarters and our ability to sustain it. Stepping back to Ameriprise overall, we're in a terrific position. We're delivering strong results and further reinforcing our record of navigating uncertain times. I'm incredibly proud of our employees and advisors and the resilience that they've shown during this pandemic. They've stayed focused on our clients while continuing to drive the strong results you're seeing. Nearly a month into 2021, I feel very good about the high level of client engagement and business activity that we're generating. From a capital perspective, we're continuing to deliver a differentiated level of return. Our balance sheet fundamentals are excellent, and we're generating strong free cash flow. With that, Walt will cover the quarter in more detail, and then I'll take your questions.