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Ameriprise Financial, Inc. Q1 2010 Earnings Call Transcript

Ameriprise Financial, Inc. Q1 2010 Earnings Call Transcript

Ameriprise Financial, Inc. (AMP)

Q1 2010 Earnings Call Transcript

April 27, 2010 9:00 am ET


Laura Gagnon – VP, IR

Jim Cracchiolo – Chairman and CEO

Walter Berman – EVP and CFO


Andrew Kligerman – UBS

Alex Blostein – Goldman Sachs

John Nadel – Sterne Agee

Suneet Kamath – Sanford Bernstein

Eric Berg – Barclays Capital

Sam Hoffman – Lincoln Square Capital

Tom Gallagher – Credit Suisse


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Welcome to the 2010 first quarter earnings call. My name is Sandra and I will be your operator

for this today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded.

I will now turn the call over to Laura Gagnon. Laura Gagnon, you may begin.

Laura Gagnon

Thank you and welcome to the Ameriprise Financial first quarter earnings call. With me on the call today are Jim Cracchiolo, Chairman and CEO and Walter Berman, Chief Financial Officer. After their remarks, we will take your question.

During the call, you will hear references to various non-GAAP financial measures, which we believe provide insight into the underlying performance of the company’s operations. Reconciliations of non-GAAP numbers to the respective GAAP numbers can be found in today's materials available on our website. Some of these statements that we make on this call may be forward-looking statements, reflecting management's expectations about future events and 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 today’s earning release, our 2009 Annual Report to shareholders and our 2009 10-K report. We undertake no obligation to update publicly or revise these forward-looking statements.

With that, I would like to turn the call over to Jim.

Jim Cracchiolo

Good morning. Thanks for joining us for our first quarter earnings discussion. During this call, I will go into give you some insight into our performance for the quarter. I’ll also provide an update on our pending Columbia acquisition and I will discuss our positioning for the rest of the year. Walter will give you more detail on the quarter and our financial statements.

Let's begin. As our first quarter results demonstrate, we’re generating positive business momentum. While client and advisory activity still have not returned to pre-crisis levels, markets have continue to strengthen and it’s evident that our clients are slowly gaining confidence in the financial environment. During the quarter, we grew our client base, our advisor productivity increased nicely and we saw continued strengthen wrap net flows.

Just as important, our client and advisory retention remained at high levels and the long lasting client relationships that define our franchise are strong. The good friends in our business and the rising markets contributed to solid results for the quarter. The $215 million in operating earnings we reported today marks our best first quarter ever.

In fact, we are approaching the earnings levels we are achieving before the financial crisis and the recession began. For the quarter, our operating net revenues were 25% compared with a year ago and our total owned, managed and administered assets increased to $463 billion, a 31% increase.

Our strong financial foundation and prudent operating principals continue to serve us well. The balance sheet remains in excellent condition and we are maintaining on capital flexibility. We have over $2.5 billion in excess capital including the capital we raced to pre-fund the Columbia acquisition and a strong liquidity pool of $4.3 billion in free cash. I should note that yesterday we announced an increase in our quarterly dividend.

In addition, we remain focused on expense control and re-engineering. We are continuing to make investments for growth. For example, we have committed resources to our marketing campaign and new brokerage platform among other important kind of initiatives, but as we invest, we are maintaining our expense discipline just as we have in the past. While distribution expenses grew as a result of our stronger sales in the quarter, our controllable expenses remain well managed.

The recovery in our client metrics continues to be gradual and clients clearly don't fully trust the economic rebound. But as we continue to build on our steady progress in combination with closing our acquisition and integrating Columbia Management into the company, I feel good about our overall positioning and our ability to execute our agenda.

Before I provide a greater context for our performance, I would like to note that we have presented operating earnings on both a consolidated basis and by segment. Operating earnings exclude the impacts of the required accounting change, which requires consolidation on our balance sheet of client assets and certain investment entities. This rule change results on no financial impact on our financial strength or business.

Operating earnings also exclude integration cost and realize investment gains or losses. We believe this measure gives you a clear picture of our performance and we will continue to provide this disclosure going forward.

Now I will move on to a discussion of the segment performance. First, in Advice and Wealth Management. We reported pretax operating income of $54 million compared with a loss in a very different market environment we faced last year. Retail client assets increased 31% over a year ago which reflects both higher markets and incremental increase in client flows. This led to an increase of 20% in segment operating net revenues and a 6% pretax operating margin in the segment for the quarter, the best margin for Advise and Wealth Management since the second quarter of 2008.

The More Within Reach advertising campaign was launched in January and which is built around our advisors has driven our brand awareness up to 62% which is an all time high. Our advisors are enthusiastic about the new exposure for the brand, which they prove as an important element of support we provide to help them grow their practices.

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