Ameriprise Financial, Inc.

Welcome to the second 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 will 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 Cherry. Alicia, you may begin.

Thank you and good morning. Welcome to Ameriprise Financial's second 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'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 reference 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. 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 second quarter 2021 earnings release, our 2020 annual report to shareholders, and 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 second quarter. Below that, you see our adjusted operating results, which management believes enhances the understanding of our business by reflecting the underlying performance of 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.

Hello, everyone, and thanks for joining us this morning. As you saw in our release, Ameriprise had another strong quarter, and I feel good about how we're performing at this point in the year. The environment in the U.S. continues to improve as the economy reopens more fully and equity markets remain strong. Recent spikes in the virus are putting some pressure on Europe's recovery. But overall, there's a lot to be hopeful for as we look ahead. As I consider this landscape, we're executing well across our businesses, driving growth through our lower capital fee-based businesses and freeing up capital to generate shareholder value. We delivered another quarter of excellent organic growth in wealth and asset management and strong productivity across our system. This included strong client flows with more than $16 billion of inflows in wealth management and asset management in the quarter. And we ended with assets under a management and administration of 28 percent to $1.2 trillion, another new high. With regard to recent strategic moves, we completed the RiverSource Life fixed annuity reinsurance transaction. This further advances our mix shift to capital light businesses and frees up approximately $700 million of excess capital. And our acquisition of BMO's EMEA asset management business which we announced in April, is on track to close in the fourth quarter. Let's turn to our adjusted operating results for the quarter. Momentum in the business continues, with revenues coming in strongly at $3.4 billion of 22 percent, fueled by organic growth in markets. Earnings increased 34 percent, excluding the reversal of the NOL a year ago, with earnings per share up 39 percent, reflecting strong business growth and capital return. And ROE remains exceptionally strong at 37.5 percent. As always, we continue to manage expenses well. Let's move to advice and wealth management, where we're consistently generating good growth. Our strategic investments continue to be an important part of what we're doing. People are coming to Ameriprise for a high-quality advice experience backed by leading-edge technology. Client satisfaction remains high, and clients are engaging with us personally and through our extensive digital capabilities. Importantly, our advisors are embracing our training, coaching, and powerful suite of tools that are fully integrated with our CRM platform. And we continue to add capabilities, including testing a new e-meeting tool that helps advisors prepare for client meetings in minutes. Our ongoing investments in the technology ecosystem are helping advisors connect with more clients and prospects and run their practices more efficiently. This high level of engagement is leading to really good client activity, asset flows, and client acquisition. Total client inflows were up 54 percent to $9.5 billion, and that continued a positive trend we're seeing over the past several quarters. Consistent with strong client flows, Wrapped net inflows were $10 billion, continuing a very strong run rate. Transactional activity also grew nicely, up nearly 30 percent over last year, with good volume across a range of product solutions. All of this momentum, along with positive markets, drove nice growth in advisor productivity, up 14 percent, adjusting for interest rates to a record of 731,000 per advisor. On the recruiting front, we have 42 experienced advisors join us in the quarter, a bit below where we've been. We're hearing that advisors have been focused on all that comes with reopening, and some held off on transitioning firms or delayed their start dates. That said, people are getting back to a more normal rhythm. We're now hosting in-person meetings that complement our virtual recruiting, and we feel good about our pipeline for the third quarter. Turning to the bank, total assets grew to $9.7 billion in the quarter. We continue to move additional deposits to the bank, and we have adjusted our investment strategy to extend duration a bit. We're also seeing a good pickup in demand for our lending solutions. Loan volumes are steadily increasing, led by a pledge product, which represents a nice opportunity for future growth. Wrapping up AWM, our metrics and financials remain very strong. Margin increased 380 basis points year-over-year, ending the quarter at 21.4 percent, showing consistent expansion since the Fed cut short-term rates a year ago. Moving to retirement and protection solutions, results were good, and we continue to advance our strategic initiatives. With regard to annuities, we had strong variable annuity sales, with total sales up 88 percent from a year ago. This was driven by increased demand for both our structured variable annuity product and our Rava product without living benefits. Together, this represented over two-thirds of sales in the quarter, a continuation of the shift that we're driving. On the insurance side, life and health insurance sales approximately doubled, driven by our VUL product, which is an appropriate product for this rate environment. Now let's discuss asset management, where we continue to grow the business consistent with our plans. Assets under management rose to $593 billion, up 25 percent over last year, from strong business results and positive markets. Regarding investment performance, the team continues to generate excellent performance for clients across equity, fixed income, and asset allocation strategies, with more than 80 percent of funds above medium over the longer-term timeframes on an asset-weighted basis. At quarter end, we had 110 four- and five-star Morningstar-rated funds representing more than 70 percent of our funds. This quarter, we had net inflows of $6.7 billion, an improvement of $4.1 billion from a year ago. Excluding legacy insurance partner outflows, net inflows were $8.1 billion. These results build upon the favorable net flows we saw over the past several quarters. Global retail net inflows were $4.2 billion, driven by another quarter of strong results in North America. Engagement with clients and intermediaries remain excellent. Sales and flows traction is broad-based, with 15 of our investment capabilities generating over $100 million of net inflows in the quarter. And in EMEA, retail sales have been weaker given the risk-off environment. As I said, We're hopeful that EMEA flows will strengthen the second half as the post-pandemic reopening and economic recovery continue. In terms of global institutional, we saw a nice improvement when NN flows of $3.9 billion ex-Legacy partner outflows with wins across equity and fixed income strategies in both North America and EMEA. I feel good about our sales pipeline. Turning to BMO, as we discussed with you, The acquisition will add important capabilities and build on our reach in EMEA. Their business remains in positive flows, and we continue to receive good feedback from clients and institutional consultants. As I mentioned, we're on track to close in the fourth quarter. In terms of the balance sheet, our capital management is excellent. The business continues to generate substantial free cash flow, and we're freeing up additional capital. In fact, the approximately 700 million of our reinsurance deal largely pays for the BMO acquisition, giving us additional flexibility to return capital to shareholders at an attractive rate. In summary, Ameriprise is in a terrific position. We're performing well and generating strong results. Our team is serving more clients and deepening relationships. We're delivering excellent organic growth in both wealth and asset management. and the BMO transaction will add an additional growth opportunity. And we're accelerating our business mix shift with the reinsurance of the fixed annuity block. I'd like to close by talking about our team. Our people have been coming back to the office a few days a week this summer and re-acclimating. It's been great to be together again in person. We're looking forward to being more fully back this fall where conditions are safe to do so while maintaining a level of flexibility. Now, I'll turn it over to Walter, and then take your questions.