Ameriprise Financial, Inc.

Welcome to the fourth quarter 2021 earnings conference call. My name is Sylvia, and I'll be operating 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 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 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 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. 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 uncertainty. 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 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 fourth quarter. Below that, you'll 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 thank you for joining our fourth quarter call. I hope you're all doing well. Ameriprise delivered another strong quarter, completing an exceptional year in 2021. We continue to execute well and produced record results. Importantly, we helped our clients navigate the environment while driving profitable organic growth, advancing key strategic initiatives, and reinforcing our strong position in the marketplace. At the same time, Ameriprise continued to generate excellent shareholder returns. In terms of the environment, with the economy continuing its recovery, U.S. equity markets finished the year strong. In Europe, the environment improved but continued to lag the U.S. As we've seen, higher inflation is pressuring the Fed to move on raising short-term rates, causing greater volatility in the equity markets. Let's move to the highlights for the quarter. Total assets under management administration were up 29% over last year and reached a new high of $1.4 trillion. In the quarter, we added $136 billion from our acquisition of BMO, EMEA's asset management business, and $40 billion in total client flows, also a new record. Turning to our fourth quarter adjusted operating results, revenues were $3.7 billion, up 18%, fueled by strong organic growth I've mentioned and equity market appreciation. Earnings rose 29% with earnings per share up 36% reflecting robust business growth and sound capital management. An ROE excluding AOCI and unlocking was at a record 50.7% compared to 36.1% a year ago. Our fourth quarter results are consistent with the record results we delivered for the full year. excluding unlocking revenues what $13.8 billion up 17% earnings rose 29% to $2.7 billion with earnings per share up 35% $22 and 75 cents we continue to execute our strategy. investing strongly in our higher multiple businesses, which now represent 80% of our 2021 adjusted operating earnings for the year, while continuing to generate strong returns from our high-quality retirement protection solutions business. Let's move to advice and wealth management, where we continue to generate strong momentum and growth. It was a standout quarter. Clients were active, working closely with their advisors, benefiting from our comprehensive advice and solutions and the strategic investments we've made over many years. Engagement is high, and a large number of our clients are utilizing our extensive digital capabilities to track and achieve their goals. This is leading to robust client activity, asset flows, and client acquisition. For the quarter, total client assets were up 17% to $858 billion. Client inflows were up 29% to a record $12.5 billion, driven by strong client acquisition and deepening client relationships. WRAP net inflows remained strong at $10.5 billion, up 17%, driving WRAP assets under management to a record $465 billion. Client cash balances grew to $43.8 billion. Transactional activity grew for another quarter, up nearly 9% over the last year, with good volume across a range of product solutions. Our advisors are highly engaged. The training, coaching, and full suite of tools we provide advisors is helping them build and deepen client relationships, track prospects, and run and grow their practices on our fully integrated platform. This is driving strong advisor productivity growth up 18% to nearly $800,000 per advisor. With regard to recruiting, we added another 86 highly productive advisors in the quarter. Helping advisors grow their practices is a top priority, along with continuing to recruit experienced, productive advisors. We recently surveyed hundreds of advisors who joined Ameriprise over the last few years. Ninety percent said they had better client-facing technology, financial capabilities, and are better able to serve and acquire clients at Ameriprise than they did with their prior firms. That's terrific, and it's an example of why we feel so strongly about our value proposition and the ability to grow. The strength of our value proposition is also reflected in the recognition we're receiving. That includes being named the number one most trusted wealth manager and clients consistently rating us 4.9 out of 5 in overall satisfaction. In fact, We're showcasing this strength in our latest national advertising campaign that we launched this week called Advice Worth Talking About. It's a distinct platform that conveys how we help clients feel so confident with their experience that they're referring Ameriprise to their friends and family. Turning to the bank. Total assets grew to nearly $12.5 billion in the quarter, up from $8.1 billion a year ago, and we feel well positioned as we transition to a rising rate environment. We continue to have strong demand from our lending solutions, especially our pledged loan products. As we move through 2022, there's clearly an opportunity as interest rates rise. We would have a direct benefit in wealth management, where in addition to what we currently have at the bank, we have our cash sweep deposits and certificate businesses that would benefit. To wrap up AWM, our metrics and financials are excellent. Pre-tax income was $472 million, up 34%, and margin was strong at 22.3%, up 250 basis points, which compares very well in the industry. Now I'll turn to our asset management business, where we delivered a strong year. We stayed focused on meeting our clients' needs and drove the business forward while completing a significant and complementary acquisition that added $136 billion in acquired assets, significantly expanding our capabilities and reach. Total asset management assets under management increased 38% to $754 billion, also a new record. As an active manager, we start with our research, which is excellent. It's foundational to our business as we focus on generating consistently strong investment performance for clients. That's across equity, fixed income, and asset allocation strategies. At year end, well over 80% of our funds were above the medium on an asset-weighted basis over three, five, and ten-year time periods. This is terrific performance. And when we compare it to a broad group of U.S. peers we tracked, we performed at or near the top of the LIPA ratings for multiple time periods. Overall, we had net inflows of $27.5 billion. We're able to earn a significant level of flows from BMO's U.S. clients that elected to transfer their assets to us in both retail and institutional strategies. This is a great example of the value we can realize from our strategic relationship with them. Global retail net inflows with $13.6 billion, including reinvestment dividends, as well as strong flows from U.S. BMO clients. In terms of fixed income, our results were good and in line with the industry as we've made significant progress in increasing our market share. In equities, our flow rate declined a bit and is consistent with the industry average after outperforming in recent quarters. As you've seen, there has been more volatility given concerns about monetary policy and the pandemic. In EMEA retail, we had inflows on the continent. In the UK, market conditions remain challenging, and while we experienced some net outflows, flows continued to improve over the past two quarters. Looking ahead for global retail, as we navigate this period of heightened volatility, we have a strong lineup of high-performing strategies across equities, fixed income, and asset allocation. Thirteen of our U.S. investment strategies had over a billion dollars in sales last year, and that's up from four just two years ago. We will continue to execute our successful strategies and reinforce relationships with advisors and our partner firms that have driven strong results over multiple years. Turning to global institutional, excluding legacy insurance partners, NetIn flows with $14.8 billion driven strongly by U.S. BMO client transfers as well as mandate wins and top-ups from existing clients. In terms of our BMO EMEA acquisition, I feel good about how we're tracking and the teams we have in place. Executing the integration is a top priority, and I'm encouraged by our progress in these initial months together. We've seen that BMO is now in our numbers, and Walter will take you through that further. To wrap up asset management, I feel good about the business, the progress we've made over recent years, and our priorities to drive long-term growth. Moving to retirement protection solutions, our results were strong with strong sales in the quarter. Variable annuity sales were up 15 percent, driven by our structured product and traditional rival product without living benefits. And in protection, sales were up 41 percent, driven by our VUL product, where sales nearly doubled, as it is an appropriate product in this low-rate environment. As you know, we have been taking strategic actions within the annuity business, and that continued in the quarter as we further narrowed our variable annuity offerings. As part of our focus on products without living benefits, effective January 1, we discontinued three of our four living benefit riders. These three riders represented 98% of our living benefit sales for the past year. And by the end of the second quarter of 2022, we will have stopped all new sales of our one remaining rider, which represents a very, very small part of our business. On the insurance side, we're making similar moves in the product line, where we discontinued two products in our UL lineup. We've built differentiated retirement protection solution businesses over many years that deliver superior financial results, returns, and steady free cash flow consistent with our other business lines. Overall, Ameriprise delivered a record year and were positioned exceptionally well for 2022. Listen, across our business, we're driving terrific results. We ended the year with excellent organic growth, a strong balance sheet, and a significant excess capital position. And Ameriprise continued to generate one of the highest ROEs in financial services, above 50%. And that's with our asset light and higher returning balance sheet businesses and while maintaining a strong excess capital position. So to close, our team is focused on executing our successful strategy, delivering for our clients, and continuing to drive profitable growth. Now, Walter will review the numbers in more detail, and then we'll take your questions.