Invesco's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Invesco (IVZ)

Q3 2011 Earnings Call

October 24, 2011 9:00 am ET

Executives

Loren M. Starr - Chief Financial Officer and Senior Managing Director

Unknown Executive -

Martin L. Flanagan - Chief Executive Officer, President and Executive Director

Analysts

Craig Siegenthaler - Crédit Suisse AG, Research Division

Michael Carrier - Deutsche Bank AG, Research Division

Jonathan E. Casteleyn - Susquehanna Financial Group, LLLP, Research Division

William R. Katz - Citigroup Inc, Research Division

Cynthia Mayer - BofA Merrill Lynch, Research Division

Glenn Schorr - Nomura Securities Co. Ltd., Research Division

Kenneth B. Worthington - JP Morgan Chase & Co, Research Division

Robert Lee - Keefe, Bruyette, & Woods, Inc., Research Division

Daniel Thomas Fannon - Jefferies & Company, Inc., Research Division

Marc S. Irizarry - Goldman Sachs Group Inc., Research Division

J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc., Research Division

Michael S. Kim - Sandler O'Neill + Partners, L.P., Research Division

Roger A. Freeman - Barclays Capital, Research Division

Presentation

Unknown Executive

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results for operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions.

In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future or conditional verbs, such as will, may, could, should, and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements, and urge you to carefully consider the risks described in our most recent form 10-K and subsequent Forms 10-Q filed with the SEC. You may obtain these reports from the SEC website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Operator

Welcome to Invesco's Third Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now I would like to turn the call over to the speakers for today, Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Martin L. Flanagan

Thank you very much, and thank you for joining us everybody. As we just mentioned, I'm on the call with Loren Starr, our CFO. And we'll be speaking to the presentation that's available on the website, if you're so inclined to follow. And this morning, as has been our practice, we'll begin by reviewing the business results for the third quarter, and then Loren will go into greater detail on our financial results, and finally, we'll open it up to Q&A.

So let's get started. I'm on Slide 3, again. And to start with, long-term investment performance remains very strong across Invesco for the third quarter with areas of absolutely exceptional performance. And our strong investment performance contributed to a trend of -- a continued trend of positive long-term net flows for the firm, in spite of very volatile markets. And also during the quarter, we saw net long-term inflows across all distribution channels.

And during the quarter, we increased cash by $136 million and reduced long-term debt by $194 million, further strengthening our balance sheet. And looking ahead, reflecting confidence in our fundamentals, we expect to purchase $100 million of Invesco shares during the fourth quarter, also bringing the total purchased shares during 2011 up to $443 (sic) [$433] million.

So taking a look at the summary of the results for the quarter. Assets under management ended the quarter at $598 billion versus $653 billion at the end of the second quarter. Invesco continued to generate strong long-term investment performance for our clients during the third quarter, which contributed to net long-term inflows of $3.3 billion. This continues the positive trend we've demonstrated over the past several quarters. Reflecting the challenges in a very volatile market during the third quarter, adjusted operating income for the third quarter was $256 million versus $285 million in the second quarter. And again, Loren will go into greater detail of these financial results in just a minute.

So now, let's take a minute and look at the investment performance during the quarter, and I am on Slide 6.

So as we've discussed many times, the key strategic priority for us is to deliver strong long-term investment performance for our clients. Our commitment to invest excellence in our work to build and maintain a very strong investment culture had helped us maintain solid investment performance across the enterprise.

Looking at the firm as a whole, 68% of the assets were ahead of peers on a 1-year basis. 78% of assets were ahead of peers on a 3-year basis, and 82% of assets were on the top half on a 5-year basis. So let's take a minute and look at these long-term results across the firm.

We think the best way to highlight the depth and breadth of the strength of investment performance over long-term is looking at some key areas by investment objective. And also, what you'll note parenthetically next to each investment objective is the percentage of assets under management that's represented as a percentage of the whole Invesco assets under management.

So at the end of the third quarter, 78% of U.S. core equities were ahead of peers on a 5-year basis. U.S. value equities, it was 96% of assets were exceeding peers on a 5-year basis. 94% of U.K. assets were at the top half of peers on a 5-year basis. And if you look on Slide 7, what you'll also see during the quarter, 78% of our global ex-U.S. and emerging markets' assets were ahead of peers on a 5-year basis. For balanced, it was 75% of assets, and for global fixed income, it was 78% of assets. So again, there's real depth and breadth of this very strong investment performance across the organization.

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