Ameriprise Financial, Inc.

Welcome to third quarter 2021 Earnings Conference Call. My name is Sylvia and I'll be the 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 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 first 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 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 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 third 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 third quarter. Below that, you'll 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. 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 us. As you saw, Ameriprise delivered another excellent quarter building on a strong year. We continue to perform extremely well. The environment in the U.S. is largely positive as the economy continues to show solid growth. Equity markets remain strong and have recovered from a weaker September. Inflation has picked up given demand, and there remain some headwinds due to pandemic. In Europe, conditions continue to improve. As you consider this backdrop, We're executing well and consistently generating important organic growth and shareholder value. Our differentiated results reflect the strategic investments we've made in the business and a culture built on performance and a high level of care for our clients and team. Our growth businesses are delivering strong client flows and nearly $14 billion of inflows in the wealth management and asset management businesses in the quarter. So with these positive flows and markets, assets under management and administration are up 21% to $1.2 trillion. Turning to our financials, the excellent results we delivered in the quarter reflect the high level of performance we've generated this year. Adjusted operating results for the quarter, excluding unlocking, revenues came in strongly, at $3.5 billion, up 17%, fueled by continued organic growth and attractive markets. Earnings rose 32%, with earnings per share up 38%, reflecting strong business growth and capital management. And ROE is exceptional at nearly 48% compared to 35.5% a year ago. Let's move to advice and wealth management, where we continue to deliver meaningful and consistent growth. With the strategic investments we've made over many years, coupled with our expertise in planning, we're delivering a differentiated and referable advice experience. Clients are actively engaged with us. They're turning to Ameriprise and our advisors for comprehensive advice and solutions. And they're leveraging our extensive digital capabilities to track and achieve their goals. Our client experience is sophisticated, personalized, and supported by our integrated digital technology and backed by our strong reputation. In fact, Investors Business Daily recently named Ameriprise the number one most trusted wealth manager. We've earned this impressive credential based on how consumers rate Ameriprise for how we serve them, the quality of our products and services, our commitment to ethical practices, fair prices, and protecting personal data. To be number one in trust is high praise, and we're honored. This type of recognition and client satisfaction doesn't happen without an industry-leading advisor force that's highly engaged. Our advisors are benefiting from our training, coaching, and suite of tools to build and deepen client relationships, track prospects, and run and grow their practices through our fully integrated platform. This positive momentum and engagement are leading to robust client activity, asset flows, and client acquisition. Our results reflect the traction and organic growth that we've consistently demonstrated. Total client inflows were up 64% to $10 billion, continuing the positive trend we've seen over the past several quarters. Revenue inflows were excellent at $9.4 billion, up 65%. Transactional activity grew for another quarter, up nearly 16% over last year, with good volume across a range of product solutions. Advisor productivity reached another new high, up 18%, adjusted for interest rates to a record $766,000 per advisor. I'd highlight that our advisors continue to be recognized across the industry, including in top national rankings from Barron's, Forbes, and Working Mother. We have long focused on driving productivity growth for advisors, and we're generating some of the highest growth rates in the industry. At the same time, we complement this with targeted recruiting of experienced, productive advisors who are attracted to our brand and value proposition. In the quarter, recruiting picked up nicely, and another 104 experienced advisors joined us. We're getting a great response from our in-person events and virtual recruiting activities. And importantly, the quality of our recruits is very good. Let's turn to the bank, where total assets grew to nearly $11 billion in the quarter. The trends we've been discussing with you remain consistent. We continue to move additional deposits to the bank, and we're seeing a growing demand for our recently introduced lending solutions, especially our pledged loan product that is getting good initial traction. To wrap up, advice and wealth management, our metrics and financials are very strong. Pre-tax income was $459 million of 43%. And margin was strong at 22.4%, up 320 basis points, which compares very well in the industry. Now I'll turn to asset management, where we continue to build on our momentum and results. Assets under management increased 17% to $583 billion. Our outstanding research has quartered our business and our ability to consistently generate excellent investment performance for clients. That's across equity, fixed income, and asset allocation strategies, with more than 85% of our funds above the median on an asset-weighted basis on a 3-, 5-, and 10-year basis. In fact, compared to the broad group of U.S. peers we tracked, we perform at or near the top of the LIPA rankings for multiple time periods. Inflows remain strong given our excellent investment performance, client experience, and continued support we provide advisors and our partner firms. We had net inflows of $3.9 billion in the quarter. This is an improvement of nearly $5.5 billion from a year ago. Global retail net inflows were $1.8 billion, driven by North America. While overall industry sales were a bit weaker in the quarter given the summer months, Overall, our flow traction is good. We continue to have good sales and equity strategies. And consistent with our plans, we're gaining traction within fixed income. And that's across multiple channels and structures. I'd note that we expanded our successful suite of strategic beta fixed income ETFs in the quarter with the launch of the Columbia Short Duration Bond ETF. In EMEA retail, market conditions remain challenging And while we experienced some net outflows, flows have improved from the second quarter. In terms of global institutional, excluding legacy insurance partners, net inflows were $3.5 billion. The team is working hard to generate wins across equity and fixed income strategies in each of our three regions. In fact, we're seeing a number of current clients adding to their positions. Of course, we recognize there will be shifts and flows quarter to quarter given the size of certain institutional mandates. Our client service and consultant relation teams have good traction, and we're making considerable progress expanding our consultant ratings, which position us well for growth. As I look at the year thus far for institutional, we're making good progress. That includes expanding our presence in APAC where we announced the opening of our new Japan office that complements our other locations in the region. Turning to our BMO EMEA acquisition, we look forward to closing the transaction shortly pending final regulatory approval. I feel good about how we're tracking. We'll be able to provide more details after we close and when we release fourth quarter results in January. To wrap up asset management, we're serving clients well while maintaining our attractive organic growth and profitability. Moving to retirement and protection solutions, our results continue to be strong. These are high-quality businesses that generate solid earnings and excellent free cash flow. We continue to focus on non-guaranteed retirement and asset accumulation protection products that deliver benefits for clients and our shareholders. Consistent with this strategy, The majority of our annuity sales in the quarter did not include living benefit guarantees. Sales increased 28% and have shifted to both our structured variable annuity product and our Rava product without living benefits. On the insurance side, life and health insurance sales increased 77% driven by our VUL product, appropriate given the current low rates. We've also seen good response to our DI products reflecting our financial planning approach. To summarize, Ameriprise has built a differentiated book of business over many years that delivers superior financial results that are sustainable. It starts with providing clients with solutions that meet their long-term retirement needs, have appropriate benefits, and generate good risk-adjusted returns for the company. Now, let me highlight why Ameriprise is clearly differentiated in financial services. In terms of our balance sheet, our capital management remains a real strength. Our advice and wealth management and asset management businesses are performing very well in generating excellent growth, margins, and returns. We compare quite favorably across the industry. And our retirement and protection business is valuable and high quality, generating good free cash flow and returns. It's entirely focused on our channel and differentiated from anything else out there. Listen, we're generating some of the strongest returns in the industry and have been for quite some time, and we're able to do it with lower volatility. Importantly, we've returned capital to shareholders at very attractive levels. In fact, we consistently return nearly all of our operating earnings to shareholders annually. And if you look at that, over the last five years, we reduced our average weighted diluted share count by 28%. This is all while we're consistently investing in the business and maintaining a sizable excess capital position that gives us flexibility. In closing, Ameriprise is positioned well. Our team is focused on key priorities to drive organic growth and we're delivering for our clients. In fact, I was just with our top advisors last week to recognize their achievements and discuss our growth priorities. It was terrific being together. As I think about all of AmeriPrize, it's great to have people back in the office more in person again as we focus on finishing the year strong. Now, Walter will review the numbers in more detail, and then we'll take your questions.