Ameriprise Financial, Inc.

Welcome to the first quarter 2021 earnings call. My name is Sylvia and I'll be your operator for today's call. At this time, all participants are 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 1 on your touch-tone 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 first quarter earnings call. On the call with me today are Jim Cracciolo, Chairman and CEO, and Walter Berman, our 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 first quarter 2021 earnings release, our 2020 annual report to shareholders, our 2020 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 first 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. Thanks for joining our first quarter earnings call. As you saw in yesterday's release, Ameriprise is off to a strong start in 2021. We're continuing the positive momentum from the past several quarters, as you can see in our first quarter metrics and financial results. Regarding the environment, equity markets continue to rally in the first quarter as vaccinations increased and activity accelerated with the U.S. beginning to open back up. The economy is gaining strength with the further fiscal stimulus as well as better employment data. With this backdrop, key for us is that we remain focused on serving our clients. Engagement is high, activity is strong, and we're bringing in record client flows across the business. We ended the quarter with assets under management and administration up 36% to $1.14 trillion, a new high. In addition, we recently announced the strategic acquisition of the BMO EMEA asset management business. Taking a step back and looking at Ameriprise overall, I feel really good. We're executing well and delivering on a strategy for growth that we discussed with you. We continue to transform Ameriprise with wealth management and asset management now representing over 75% of operating earnings. You've seen the financials. Revenues are up 10% to over $3 billion. Earnings per share also increased nicely in the quarter of 27%, x the NOL benefit a year ago, even with low short-term interest rates this year versus last year's quarter. And ROE remains very strong at 30%. While we continue to invest strongly in the business, we are managing expenses thoughtfully. With our strong financial foundation and free cash flow generation, we returned more than $490 million to shareholders in the quarter through dividends and our ongoing repurchase program, which is comparable to the last few quarters. Yesterday, we announced another 9% increase in our quarterly dividend, our 17th increase since becoming public 16 years ago. Let's discuss advice and wealth management, where we've been executing well and driving growth. We're benefiting from the strategic investments we've been making to deliver a differentiated client advisor experience built on advice. We've been on a multi-year journey to take our client experience to the next level. A big part of that is the training and support we provide advisors in ensuring that the new digital tools and capabilities are fully integrated within their technology ecosystem. One of our more significant investments, our CRM platform, is increasingly serving as the hub for advisors, allowing them to collaborate with clients while driving efficiencies. And we've seen good uptake as advisors integrate these capabilities into their practices. This strong engagement is helping to drive good client activity, excellent flows, and new client acquisition as we continue to build on our momentum from last year. Our total client net flows were strong at $9.3 billion in the quarter, with total client assets up 36% to $762 billion. Our investment advisory business continues to grow nicely. In the quarter, RAP net inflows were more than $10 billion, up 55% over last year. This is another record for us and reinforces our excellent client advisor engagement and focus on organic growth. Transactional activity continued gaining strength in the first quarter, picking up 12% over last year, with good volume across a range of product solutions. Even with clients putting more of their cash back to work, client cash balances remain elevated at more than $40 billion. And advisor productivity was strong, up 8%, adjusting for interest rates. And we're bringing on new advisors. Our virtual recruiting program is driving good results with 93 advisors joining us in the quarter. Advisors recognize what we have to offer in terms of our culture, technology, and high level of support. And as more states reopen their businesses and economies, we're looking forward to connecting with more advisors in person as we move through the balance of the year. We also continue to build out the Ameriprise Bank, where total assets grew to $8.8 billion in the quarter. As we discussed, we plan to move additional deposits to the bank over the course of this year. Pledge and margin loan volumes increased nicely in the quarter as our advisors engaged with their clients with our lending solutions from a liquidity perspective. Wrapping up AWM, even with interest rates at all-time lows, AWM margin increased 90 basis points sequentially, ending the quarter at a strong 20.7%. Turning to our retirement and protection solutions business, we're off to a good start and continue to adapt to the low interest rate environment. We have been very proactive in this climate as we serve client needs and prudently manage the business. Variable annuity sales increased nicely, up 33% driven by our success of structured product, as well as our annuities without living benefits. As a result, the percentage of VA sales without living benefits grew to 64% of total sales in the quarter. With regard to insurance, our focus has been on our flagship VUL product rather than IUL. In fact, VUL sales were up 76%. We're focused on making sure we have the right product for this right environment while maintaining strong underwriting. Overall, I feel good about how the retirement protection solutions business is performing in this challenging environment. As part of this strategy, we are actively pursuing a reinsurance transaction for the remaining closed block of fixed annuities, and we feel we can execute it in the near term. Turning to asset management, we're generating strong results. Our team is engaged, serving clients evolving needs well and driving profitable growth. I'll speak to the strength of the quarter and then comment on BMO's EMEA acquisition. With the continuation of positive flows in markets, assets under management were up significantly, increasing 32% to $564 billion. We're investing in the business, including in transforming how we use data. This is both within investments in terms of our use of data in our research, as well as in distribution. In addition, And also key is the thought leadership we provide and how we are targeting the right advisors to drive meaningful engagement. Regarding investment performance, our teams consistently generate strong performance for our clients. It's across all categories, equities, fixed income, and asset allocation strategies. As an active manager, our research expertise is a key differentiator. I'd highlight that Columbia Threadneedle ranked in the top 10 over the 1, 5, and 10-year timeframes in the recent Barron's Best Fund Family ranking, one of only two firms that ranked in the top 10 across all time periods. We also won seven LIPA awards in the U.S. this year and over 22 awards in EMEA over the last year. This level of performance bodes very well in terms of earning future flows. At quarter end, Columbia Threadneedle had 103 four and five star Morningstar rated funds globally, which represented close to 70% of our assets. This shows the breadth and strength of our product lineup. So with this type of investment performance and the strong execution, of our plan, you saw that flows continue to be quite strong. In the quarter, we had net inflows of $4.9 billion, an improvement of $7.3 billion from a year ago. Excluding legacy insurance partner outflows, net inflows were $6.2 billion. Global retail net inflows were $4.6 billion, largely driven by the traction we're seeing in North America. We're driving high engagement with clients and intermediaries, including with the larger broker-dealers and independents. Sales and flows traction is broad, and we're working hard to maintain that. In the quarter, we had nine funds that generated over $250 million in net inflows, including five equity and four fixed income funds. In EMEA, we've seen good flows in continental Europe and a number of key markets. In the U.K., we remained in outflows. However, we saw improvement in the quarter as the economy started to reopen there more fully, and we're hopeful that investor settlement will strengthen. In terms of global institutional, we had net inflows of $1.6 billion ex-legacy partner outflows, driven by our results in EMEA. We've made considerable progress in strengthening our consultant relations and client service globally. Consultants have increased their ratings on a number of key strategies in recent quarters. This is important in terms of our ability to gain additional mandates from existing clients and grow our sales pipeline. As you saw earlier this month, we announced our strategic acquisition of BMO's EMEA asset management business. The acquisition is right in line with our strategy that we consistently discussed with you. It will add complementary capabilities and solutions with their established strengths in responsible investing, liability-driven investing, fiduciary outsource management, and European real estate. It will also expand our scale in other traditional asset classes, especially in European fixed income. And recent flow trends in their EMEA business have been favorable. In addition, post-close, BMO's North American wealth management clients will have the opportunity to access a broad range of Columbia Threadneedle investment management solutions. From an asset management perspective, we gain important geographic diversity. Upon close, EMEA's AUM will increase significantly to 40% of total AUM at Columbia Threadneedle, which provides a good balance to the U.S. business. We've always been a disciplined acquirer, and we expect this transaction will add to our strategic growth and generate a good return over time. Importantly, as we execute it, the team will remain focused on maintaining our strong business momentum. So, for Ameriprise overall, we're in an excellent position. The business is performing really well and delivering strong results. Based on the current environment, we feel comfortable that we'll continue to generate strong returns with a strong balance sheet and substantial free cash flow. With that, Walt will cover the quarter in more detail, and then we'll take your questions.