Ameriprise Financial, Inc.

Welcome to the Q1 2022 earnings call. My name is Sylvia, and I will 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 0 then 1 on your touchtone phone. 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 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 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 2022 earnings release, our 2021 annual report to shareholders, and our 2021 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'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 thanks for joining our first quarter call. I'll begin by sharing that Ameriprise delivered another good quarter and a solid start to the year. As you've seen, the economic environment remains strong, but the global equity markets are more volatile, both given the impacts of the Russian invasion of Ukraine and the higher inflation that we're experiencing here in the United States, as well as globally. In fact, the Bloomberg U.S. aggregate experienced its largest single quarterly loss in over 40 years. In this climate, the Fed has finally begun to raise short-term rates, which is appropriate. They've been slow to take action and signaling that they'll have to get more aggressive. Before I discuss the court, I'd like to acknowledge the horrific situation in Ukraine. Ameriprise vehemently condemns the atrocities being committed by Russia, and our thoughts are with the Ukrainian people and all who have been affected. Our focus has been on supporting humanitarian relief. I should note we don't have staff or conduct business in Ukraine or Russia, and our direct exposure is extremely limited. Let's move to the first quarter results. We're in a very good position to kick off the year, and we've been able to execute very well during this volatile time. Client activity remained very strong. We continue to generate good results. We're investing for growth and executing our plans and serving clients really well. And that resulted in good asset growth and strong financial performance. Total assets on the management administration were up 17 percent. Revenues were up double digits. Earnings per share was up 10 percent. And ROE is terrific at 49.9 percent. All in, strong results in a challenging market environment. Let me now turn to advice and wealth management. We delivered another strong quarter. With the volatility picking up, it's important for us to be engaged with our clients and advisors. They're leveraging the tools and solutions that we invested in over the last number of years that we told you about. We had strong activity and flows in the quarter and good client acquisition, particularly in our 500,000-plus markets. I know that our advisors have been doing a level of reallocation and rebalancing that's appropriate in clients' portfolios. And, in fact, we saw good flows coming in and cash balances have picked up, which is appropriate at this point. So let me give you some of the numbers. Total client assets were up 8% to $823 billion. Client inflows were strong, up 12% to $10.4 billion. Wrapped net inflows of 8.7 billion were strong in a more volatile environment, and even though they're a bit lower than a year ago, clients are holding more cash. As you would imagine, transactional activity was impacted a bit, but it's only down 6%. As markets stabilize, we expect to see more cash going back to work. High cash balances present a significant revenue opportunity for us as we move through 2022 and beyond. In total, cash balances increased to nearly $46 billion, up more than $5 billion from a year ago. And as the Fed continues to raise short-term rates, we expect to see a meaningful lift in earnings. With this backdrop, our advisor productivity growth reached another new high of 18 percent, which is terrific. With regard to recruiting, we continue to demonstrate the attractiveness of our advisor value proposition with another 80 experienced advisors joining us in the quarter. The pipeline continues to look good, and in our surveys of advisors who have joined us, over nine out of ten advisors have said they have better technology, financial planning capabilities, and the ability to acquire clients more easily than they did at their prior firms. One of the things I'm proud of is how we consistently work with our clients and our strong client satisfaction. It's great to see that Newsweek has named us one of America's most trusted companies. That complements our Investors Business Daily number one trusted wealth manager ranking. And earlier this year, we launched a new ad campaign, Advice Worth Talking About. That's telling our story even more broadly in the marketplace. We showcase that nine out of ten of our clients are likely to recommend Ameriprise to their family or friends. And a few weeks ago, we released our money and family research on generational wealth that underscores the significant need for holistic advice in the marketplace, which plays to our strength. Turning to the bank, total assets grew to $14.2 billion in the quarter, up more than $5 billion from a year ago. We continue to have good demand for our pledge loans, with balances increasing nicely in the quarter. The bank presents a significant opportunity as a long-term growth driver within wealth management and provides additional flexibility in this rising rate environment. To wrap up advice on wealth management, our financials are good. Pre-tax income was up 13%, and we generated a strong margin above 21%, up 80 basis points. Let's turn to asset management now. We, like others, have experienced the market volatility and the risk-off headwinds given the geopolitical environment. It has affected us and the industry, largely in retail. But overall, based on the strong progress we've been making over the last number of quarters, we saw good growth in assets up 24%. Our long-term investment performance continues to show good consistency with our three, five, and ten-year time periods and over 80 percent of our funds were above medium on an asset-weighted basis. Our one-year performance did slip a bit based on the volatility out there and the rotation from growth to value given our quality growth positioning in certain equity funds, especially in Europe. But our investment teams feel good about their positioning as they manage through a tough market environment. Let's turn to flows. where we were out about $700 million in the first quarter, reflecting the pressure you've seen in the industry. In retail, we were out $1.9 billion. In terms of U.S. retail, our gross sales slowed, and we saw a pickup and redemption similar to the industry. Our flow rate was slightly better in terms of active peers in equities and slightly worse in fixed income. We haven't really played in a large way in the short-duration market or the leveraged loan area. However, we benefited from the remaining piece of the U.S. asset transfer that was part of a BMO transaction and which is largely included in our retail numbers this quarter. In EMEA, retail net outflows improved a bit in the U.K. However, they worsened in continental Europe given the risk-off environment. Gross flows have certainly slowed for the industry and we're seeing similar pressure. Yes, retail flows are a bit challenged, but we have a strong lineup of funds and good engagement with distribution partners, advisors, and gatekeepers. When the markets start to stabilize, we'll be in a good position. Turning to global institutional, excluding legacy insurance partners, net inflows were $1.9 billion as investors looked through the current volatility. We had some good wins, but there were some asset allocation calls, as you would expect, and we experienced some redemptions. We've added to a number of our rated strategies, and similar to retail, we're having good engagement with clients and prospects globally. Our investment performance is key to this, and it's being recognized. We did well in recent Barron's rankings, and five Columbus strategies earned 2022 U.S. Refinitiv Lipper Fund Awards with four as repeat winners. With regard to BMO EMEA integration, we're on track. The combined senior management team is in place, and we announced that we will rebrand the BMO Global Asset Management EMEA business to Columbia Threadneedle Investments in July. So, for asset management, we're focused on our clients, executing our plans, and generating good financials and returns for Ameriprise. Pre-tax operating earnings were up 25 percent, and margins were above 40 percent, and that's with the full quarter of BMO in the numbers. Moving to retirement and protection solutions, we're seeing good results. I'll start with variable annuities. I want to mention again that we discontinued products with living benefit riders at year end. We had some sales in the pipeline that came in in January, but that tapered off as we moved through the quarter. Given the environment, we had good sales in our Rava product without living benefits as well as our structured products. Overall, our sales were down 27%, but that should be expected given the volatility and a move away from living benefit guarantees. In protection, we continue to have strong sales in the quarter coming off a positive year. We're seeing good activity. Our life sales were up 22%. We've been focused on our VUL and DI products, which are good margin and return businesses for us and appropriate for clients in this environment. In terms of earnings, we're at 4% in line with our expectations. Financial results and free cash flow were good, particularly given the volatility and our move away from living benefits. So overall, for Ameriprise, in terms of our capital positioning, We feel really good about continuing to give back to shareholders at an attractive rate. We returned $562 million in the quarter, which is substantial. And with that, we raised our dividend up 11%, our 18th increase since becoming a public company in 2005. So overall, as I began our conversation, I think Ameriprise delivered another good quarter. Even with this changing landscape, I think we're situated very well. Our advice value proposition and high-quality solutions are necessary and key in this environment. And with that, we feel very well positioned to satisfy our client objectives. In looking over the past cycles, we have consistently performed well, especially during volatile periods. I'm confident that this will continue based on our strategic investments, our focus on execution, and serving clients holistically in our balance sheet strength. Now, Walter will review the numbers in more detail, and then we'll take your questions.