AllianceBernstein's CEO Discusses Q4 2011 Results - Earnings Call Transcript

AllianceBernstein Holding L.P. (AB)

Q4 2011 Earnings Conference Call

February 10, 2012 8:00 AM ET


Andrea Prochniak – Director, IR

Peter Kraus – Chairman and CEO

Ed Farrell – Controller and Interim CFO

Jim Gingrich – COO


Michael Kim – Sandler O’Neill

Bill Katz – Citigroup

Matthew Kelly – Morgan Stanley

Cynthia Mayer – Bank of America Merrill Lynch

Alex Blostein – Goldman Sachs

Chris Spahr – CLSA

Robert Lee – KBW



Thank you for standing by, and welcome to the AllianceBernstein fourth quarter 2011 earnings review.

At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session, and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be replayed for one week.

I would now like to turn the conference over to the host for this call, the Director of Investor Relations for AllianceBernstein, Ms. Andrea Prochniak. Please go ahead.

Andrea Prochniak

Thank you, Christie. Good morning, everyone, and welcome to our fourth quarter 2011 earnings review. As a reminder, this conference call is being webcast and accompanied by a slide presentation that can be found in the Investor Relations section of our website.

Our Chairman and CEO, Peter Kraus; and our Controller and Interim CFO, Ed Farrell, will present our financial results today. Our new Chief Operating Officer, Jim Gingrich, is with us as well. He’ll participate in the question-and-answer portion of this call.

Now I’d like to point out the cautions regarding forward-looking statements on slide two of our presentation. Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. You can also find our cautions regarding forward-looking statements in the MD&A of our 2011 Form 10-K, which we filed this morning.

I’d also like to remind you that under Regulation FD, management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions during this call.

Now, I’ll turn the call over to Peter.

Peter Kraus

Thanks, Andrea, and thank you all for joining us for our fourth quarter earnings call. Today, I’m going to go through our business highlights. Ed will, of course, review the financials. And as Andrea said, I’ve asked Jim Gingrich, our new COO, to join us well. The three of us of course will take any questions that you may have at the end.

Let’s start today’s presentation with slide three. In a year of extremely volatile markets and risk aversion on the part of investors, it was a difficult year for active managers to outperform. Performance in our largest equity services disappointed, and we ended up with greater net outflows in 2011 than in 2010. AUM declined by 15% in 2011 and average AUM was down about 5%. At the same time, however, we had $56 billion in gross sales in 2011 and nearly a $165 billion over the past three years. We are profitable with very little long-term debt and high credit ratings from the agencies. And we’ve returned a $146 million in distributions to our unit holders this year. Also, we finished the year with quarter-to-quarter improvement in gross sales, net outflows and end of period AUM.

Let’s look at the quarterly flow trends those are on slide four. Net outflows improved across all three channels from the third quarter to the fourth. In fact, we had our lowest quarterly outflows since the second quarter 2010, and that includes outflows we sustained as a result of asset sales by the AXA Group. During 2011, AXA sold its Canadian and Australian businesses. We managed about $16 billion for them and expect to lose most of these assets over time. In the fourth quarter, we had outflows associated with these dispositions of nearly $4 billion, representing approximately $5 million in revenues, and we expect to see another $6 billion in outflows in the first half of 2012. This morning, we released our January AUMs, and I’m sure you all saw that it was $421 billion, up 4% from year-end, reflecting a combination of stronger investment returns in performance and lower net outflows across all three channels.

Now, I’ll spend sometime on the channel specifics, starting with institutions on slide five. This business had $17 billion in gross sales in 2011, fuelled largely by ongoing strength in fixed income and customized retirement strategies. Together these two areas represented 80% of our gross sales last year. Our momentum in non-US Fixed Income shows up in our gross sales makeup. Nearly a third were in Asia and Japan. Fixed Income and CRS are the largest share of our pipeline as well.

In the fourth quarter, with several large and expected CRS fundings, our pipeline decreased by $2.7 billion. However, we also had about $1 billion in new Fixed Income mandates to come in and fund during the quarter, those included high yield, investment grade, and global bond opportunities, so these never showed up in the pipeline. Yet, investment performance we all know is what truly drives the business. And slide six shows where our performance was the strongest in last year’s extremely volatile markets.

In Fixed Income, Global Fixed Income and Global Plus beat their benchmarks in 2011. The three-year story is much stronger. More than 85% of our Fixed Income assets are in products that beat their benchmarks for the period.

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